What could go wrong? Part deux.

GAY

Tim and Steph have the hots. “Face it,” she told me two days ago, “there’s just no way a balanced portfolio of anything is gonna compete with the housing market. So stop trying to tell me otherwise.” And I did. I even said, good luck. Without smirking.

The two of them, late thirties, own four condos, all in negative cash flow. Not seriously – a couple hundred bucks each, monthly – but enough to make one wonder why they’d want to ditch financial assets, making money, to buy more property. Like I said, they’ve got the hots. The house they own doubled in the past decade, so they think they’ve a Midas touch. “The condos,” Tim assured me, “will be golden in a few years. We’re willing to wait.”

It’s interesting how people expect financial assets to give positive returns at once and consistently, or they get dumped. Real estate, however, plays by other rules – because it exists, can be touched and has social status. “We own four condos,” is something your mom understands. “Attsa my boy,” she coos. Telling her you have a balanced and globally diversified, tax-efficient and liquid portfolio of ETFs just doesn’t cut it. They never covered that in Mom School.

Anyway, these guys (Tim & Steph) now lust to purchase s duplex on the east side of the city for $1.8 million. With luck, rents will barely cover the overhead, which means it has a cap rate of almost zero. And they’re out of cash. So, the portfolio is being sold, putting 100% of their net worth into one asset class. Worse, they’ve talked her parents into “investing” seven hundred grand in the project.

The wrinklies can hardly afford it, with a total nestegg of $800,000 after selling their home. The pension income’s too scrawny to live on, so they need investment cash flow. Steph told them they can have a 3% return on their money and no risk. They bought it. Too bad the pittance will be 100% taxable in their hands, and the risk substantial. After all, if the younger ones could have landed enough bank financing, they wouldn’t need to emotionally extort 70-year-olds.

Stories like this are so common. A decade of real estate appreciation and cheap money, combined with the fear that the 2008-9 stock market mayhem engendered, has profoundly affected our nation. Debt’s exploded. We’ve become less diversified. Recency bias has made us think property is invincible. Risk is now misunderstood.

Of course the biggest factor, so far, is that real estate has not disappointed. Sure, most markets are currently stagnant or slipping a little. But there’s been no Big Short moment when the gates opened and the whole friggin’ bottom fell out of our expectations. With everyone so invested in a single thing, bad is impossible.

Young Americans thought the same. Until real estate reached a bubble state and corrected, of course. Because kids are always so much more heavily leveraged when they buy a house, they bear the greatest pain when markets revert to the norm (they always do). So today GenXers – millions of them – are truly struggling after investing in houses (because they’re always safe) and subsequently getting whacked.

Like here, people in their thirties and forties put everything they had in property, taking on significant debt when houses had hit inflated values. When rates went up and the economy went down, many slipped underwater, then into foreclosure. Today there are 19 million American renters who used to be homeowners, over four million of whom faced a foreclosure. Over half are under the age of 45. See the evidence below.

FORECLOSURES

The American housing correction changed the lives of millions of people. They gambled and lost. They believed what they were told by their parents, the media, the government, the real estate industry and the lenders – that houses always go up. Safe. Predictable. And when assessments were rising faster than the value of anything else, they believed it was the new normal. It would last. The best possible chance for the little guy to catapult ahead without the stress or sacrifice of saving and investing.

Now so many are middle-aged renters with crap credit scores.

The lesson here is simple. People forming households, traditionally in their mid-twenties to late-thirties, using big leverage to do so, are always at risk. But when doing so in the apex of time when prices have never been higher and after years of asset inflation – and with money which cannot get cheaper – the risk is extreme. Far in excess of anything their parents faced when the economy was expanding, rates were normal and houses were just homes.

To think today’s conditions are normal – when wages are slack and a million buys a shack – is to delude yourself. Do not allow your daughter to believe it. And reject the compromised beliefs of those who tell you otherwise.

Like Stefane Marion. The National Bank chief economist this week dropped a few jaws by justifying prices in Vancouver – which increased 22% in the last twelve months, or ten times the rate of inflation and wage growth. Why worry, he asks, when there’s a greater expansion in the working age population in places like Van or the GTA?

“The underlying force for housing demand is household formation. If your population aged 20 to 44 is growing, you have it. If it’s not, home price inflation is not sustainable,” he said.

There ya go. The slaughter of the innocents.

238 comments ↓

#1 truth on 03.31.16 at 5:04 pm

“Global money is boosting Vancouver’s prices, and local dollars can’t compete.”

The fact remains 95% of trades are done local-to-local. — Garth

#2 True... but also False on 03.31.16 at 5:06 pm

What you espouse is true.
BUT, with the same logic, those renting for the last several years have been burned badly, in that they are now priced out of the housing market.

Call it dumb luck

Or perhaps, we the blog readers have failed to realize one important thing. Governments are not going to let housing bubble pop. Just look at BC’s Christie Clark.

#3 truth on 03.31.16 at 5:12 pm

“The fact remains 95% of trades are done local-to-local. — Garth”

Source please?

Done. — Garth

#4 Frank on 03.31.16 at 5:12 pm

If we’re living in unprecedented times then why use precedented risk models? The debt gobblers have been right for a decade and there is nothing that says this year or next will be different so why bother changing?

Risk is a concern but results are what matters.

#5 Toronto Dweller on 03.31.16 at 5:20 pm

Millennial checkin here. This is not house horniness but stupidity pure and simple, so
Much negative net worth and still buying house. Even all the newly arrived immigrants that come to Tdot every year and number 100k a year won’t be able to support this bubble. When this thing pops CMHC and us taxpayers will be on the hook for all those gamblers.

#6 Bank of Millennial on 03.31.16 at 5:22 pm

What are your thoughts on the high yield preferred issues? Doesn’t it point to a pretty big problem at some banks?

http://www.marketwired.com/press-release/cwb-announces-nvcc-preferred-share-offering-tsx-cwb-2104847.htm

That issue sold out in mere minutes. — Garth

#7 WillD on 03.31.16 at 5:26 pm

I’m interested if anyone knows how big cities in the U.S. (N.Y., SanFran, etc) faired after the housing crash. Did they drop as much as the rest of the U.S.? Have they since recovered? Are those cities a better reflection of what could happen in T.O?

#8 Penny Henny on 03.31.16 at 5:31 pm

Suddenly, the Canadian economy has managed to post a rip-roaring annualized growth rate of 5% over the past three months (and who could have believed earlier this year that the phrases “Canadian economy” and “rip-roaring” would be seen in the same sentence?).

http://business.financialpost.com/news/economy/wow-suddenly-canadas-economy-is-looking-not-so-shabby-heres-what-the-economists-say

See! It just took T2 a few months to get his mojo going.

#9 Andres on 03.31.16 at 5:31 pm

Hey Garth, I thought you were going to stop being so hard on the ‘bank of Mom’ and hammering the wives’ hormonal decision making, and spread the blame a little more evenly and fairly?

#10 Canadian on 03.31.16 at 5:32 pm

“atssa my boy”

Italophobia eh Garth? And you just lectured us on racism!

Italian is a race? — Garth

#11 waiting on the westcoast on 03.31.16 at 5:33 pm

#4 Frank on 03.31.16 at 5:12 pm says… “If we’re living in unprecedented times then why use precedented risk models? The debt gobblers have been right for a decade and there is nothing that says this year or next will be different so why bother changing?
Risk is a concern but results are what matters.”

Hindsight… Easy to say now that buying was the correct result.

Let’s go back to 2008… the US blows up and Canada prepares to follow suit (it normally would have blown up with it). But wait, what happens… China decides to but up commodities on a massive stimulus to keep its industrial led economy alive. Boom – both Canada and Australia hit the jackpot.

Had China not done so… All of those people would have been burned. Worse, advocating that you should stay the course, especially as the ratios make less and less sense is reckless.

It’s like stocks… Your can buy a stock when the market is at very high multiples but you are taking on more risk of a correction. Just because it didn’t correct at the typical time doesn’t mean the world has changed… It means those people have been lucky. It’s not a “new day”…

#12 Jimmy on 03.31.16 at 5:33 pm

Do you really meet in person with common folk like Tim and Steph?

All. Day. Long. Then I come home to you. — Garth

#13 Mark on 03.31.16 at 5:34 pm

Negative cash flow = the “asset” really isn’t an asset, its a liability. Worth less than zero.

Meanwhile its trivial to buy the TSX stocks for 8X cashflow and 14X after-tax GAAP reconciled earnings.

When you look at all the facts here, no wonder the sell-side has concocted this “prices are still rising” narrative. There’s an awful lot of speculators, trapped in assets which are burning whatever little equity they have away. “Chinese” may be convenient scapegoats, but as Garth points out repeatedly, backed by mountains of evidence, they’re not a statistically meaningful force in the marketplace and do not deserve the sort of hate speech that is dished out almost daily in the public discourse concerning Vancouver/Toronto real estate.

The debt gobblers have been right for a decade and there is nothing that says this year or next will be different so why bother changing?

They actually stopped being right about 3 years ago. The balanced portfolio has outperformed since.

BUT, with the same logic, those renting for the last several years have been burned badly, in that they are now priced out of the housing market.

Not true at all.

#14 Vundo on 03.31.16 at 5:38 pm

Whoa, hang on a second. You are telling me that a young Canadian couple can take 88% of their elderly parents’ nestegg to bet on real estate, and this is a “common” story? This is normal? What are we?

#15 Penny Henny on 03.31.16 at 5:39 pm

“Attsa my boy,” she coos.-GT

Making fun of Italians? If Big Rider said that you would accuse him of stereotyping.

Uppa, uppa, uppa.

It’s Armenian. — Garth

#16 Jan. 2016 GDP +0.6% on 03.31.16 at 5:46 pm

As all generations exhibit, hubris…believing they are smarter than those that came before them. What is happening now is the same run-up to the early/mid 80s and 2009 crashes except this time the fall will be greater as the run-up has been much larger.

Jan 2016 GDP up 0.6% yet Jan/Feb 2016 Jobs slightly negative and unemployment up.

Just means fewer inputs (job losses), same outputs…there, a 0.6% Jan 2016 jump; rather than, the 0.2% or so expected. All cheering this unexpected increase. Hard to believe Economists have forgotten the Productivity formula and its economic effect (e.g., Brian DePratto from TD and of course, CBC).

If job losses or job stagnation continues, early/mid 80s, 2009 will repeat yet again…sooner than later.

Hey, Canadian Banks are in the top 20 TSX Short Positions as of March 18, 2016. CMHC cannot replace lost cash flow from defaulting mortgages or foreclosures, or heaven forbid…depreciated assets (i.e., underwater mortgages).

Sooner, than later.

#17 Gary White on 03.31.16 at 5:55 pm

The fact remains 95% of trades are done local-to-local. — Garth

It is not a fact, there is no hard evidence… Something is rotten in the state of Denmark.

There is more evidence to support that number than any other. But feel free to provide your stats. — Garth

#18 SunShowers on 03.31.16 at 6:00 pm

“Why worry, he asks, when there’s a greater expansion in the working age population in places like Van or the GTA?

“The underlying force for housing demand is household formation. If your population aged 20 to 44 is growing, you have it. If it’s not, home price inflation is not sustainable,” he said.”

He must have missed your March 15 blog post.

#19 Panhead on 03.31.16 at 6:00 pm

Man … if I was a believer I’d be saying a prayer for Tim and Steph’s wrinklies. Talk about HIGH RISK … at an age you can’t recover from too. Jeez … just hope T & S remember what risk they put the wrinklies in if the shite does hit the fan. But I doubt it. Bud up north figures the ice will be off the lakes next week here in BC … fly fishing season … ahhhh …

#20 JSS on 03.31.16 at 6:06 pm

I am happy to see many Canadians are dumb with their money, and have gambled their entire future with a signature on a bank mortgage contract.

For it is this stupidity that helps pay increasing dividends on Canadian bank shares, and continually transfers wealth from the dumb to investors of various financial instruments.

In other words, carry on!

#21 Don't Believe The Hype on 03.31.16 at 6:06 pm

The more I read Tim and Steph’s story, the more I kept repeating “Oh my God….oh my God!” And then they got her parents nest egg back into real estate? All I could think of was the $1,346 bi-weekly that $700K at a reasonable 5% return would spit out. Oh my God. This cannot end well…

#22 Vers on 03.31.16 at 6:07 pm

Wait a minute, I’m three glasses behind.

I saw a new study claiming to have identified why there are so many empty condos in downtown Vancouver…

It’s because no one is coming to the city to watch the Canucks anymore.

#23 Don't Believe The Hype on 03.31.16 at 6:11 pm

#7 WillD on 03.31.16 at 5:26 pm

The foreclosure mess was centered in places like Florida, Georgia, Ohio and Nevada where predatory lending practices were more prevalent . So the big cities you mention NYC, San Fran didn’t suffer as much. There were still foreclosures in those cities as well, but certainly not as much as in Las Vegas, for example. Housing prices did drop everywhere in the U.S. but not to the same magnitude.

#24 nubbers on 03.31.16 at 6:14 pm

I know so many otherwise intelligent people who behave as if property can only ever increase in value. I meet very few (2) who think it is a bad time to buy.

Sometimes I wonder if everyone else is right and I am wrong. I have been known to be wrong on multiple occasions, after all. Then I remember what happened when I gave in at the peak of the last house price bubble.

This blog, coupled with the above mention effects of wine is what keeps me going right now.

#25 Jason on 03.31.16 at 6:15 pm

I’m a portfolio manager in Vancouver and own 2.5 houses as well as a slew of financial assets. I’ve done well both in real estate and the financial markets. While I believe that Vancouver real estate is overpriced, I find it odd that you don’t concede that all risk assets have been bid up as a result of worldwide central bank led ZIRP and QE. How is it that real estate is overpriced but stocks and bonds aren’t??? The Case Schiller PE ratio of the S&P500 has only been higher than today in 1929 and 2000. The bond market is more or less at an all time high. Art, yep… wine, of course, collectible cars… I could go on and on. The point is that ALL risk assets have been affected by the same factor; namely loose monetary policy. To suggest one shouldn’t invest in real estate but rather should hold a ‘balanced portfolio’ simply reeks of talking one’s book… and as a PM this is also my book so I get where you’re coming from.
Tell the whole story Garth: you and I make money selling investment assets and not real estate… furthermore, stocks, bonds and pretty much all risk assets have been artificially bid up due to stupidly low interest rates. This of course begs the question, where should one invest their money?… and that’s a whole other discussion but let’s be honest here… everything is richly valued right now… except maybe Syrian, Greek and Russian assets. Enjoy your blog. Cheers.

You may sell investments assets. I do not. Moreover, if you don’t see exaggerated risk in assets (residential real estate) which have no income stream, hyperbolic valuations and are priced essentially on emotion – greed and fear – I’m really glad you’re not my portfolio manager. — Garth

#26 BOOM! on 03.31.16 at 6:19 pm

Today I sold 75% of my holdings in VPU at their high of $107.53 I bought in a few years back, and this seemed a good exit point, higher than my buy-in, and I collected juicy dividends.

Why? Simple, trees do not grow endlessly. It had grown to too large a portion of my holdings!

Harvest the gains at their top, buy back in later should the entry price be compelling. It will, just be patient.

Buy low, sell high. Easy to say, really much tougher to do. Who wants to sell a “winner” at its high for the year?
Could go higher tomorrow. Could go lower, too. Too many hold a loser hoping for a recovery.

Some smart people will do much the same with RE in over-hot markets. I don’t live in one.

Oh, I’ll probably spend the profit, and re-invest the principal somewhere else. My office could use a re-do.

#27 Balanced enough? on 03.31.16 at 6:21 pm

Interesting that they wanna cash out.
So out of curiosity, how much should a balanced and diversified portfolio have gone up by if the inception was 24 months ago (net of fees).
March 2014 is when ours portfolio was out together and I personally have second thoughts often that it may not be returning what a proper balanced one should…
I think our has mostly recovered back to Dec.31/2015 and I believe overall it is 6% higher net of fees since the beginning. Is that what good or bad? What are others out there seeing if you can share. Thank you.

Concentrate on a longer-term goal. Two years is inconsequential in most life plans. — Garth

#28 kommykim on 03.31.16 at 6:22 pm

RE:

#6 Bank of Millennial on 03.31.16 at 5:22 pm
What are your thoughts on the high yield preferred issues? Doesn’t it point to a pretty big problem at some banks?

http://www.marketwired.com/press-release/cwb-announces-nvcc-preferred-share-offering-tsx-cwb-2104847.htm

That issue sold out in mere minutes. — Garth

The reason those shares have a high yield is because they are NVCC (non-viable contingent capital). This is what will be “bailed in” instead of deposits if the bank fails.

Incorrect. Those securities are not yet issued. Preferred owners will never be in a forced bail-in situation. — Garth

#29 Bytor the Snow Dog on 03.31.16 at 6:25 pm

I could NEVER take advantage of my parents like that. Dog rest their souls.

#30 Kilt on 03.31.16 at 6:31 pm

Where is the proof that you have an increase in young people in Vancouver? I don’t see many young people coming here from other parts of Canada and buying houses. Especially million dollar ones. I do know there is an outflux to the suburbs. Traffic snarls and the cost to commute will make those folks miserable quick.
Kilt.

#31 Willy H on 03.31.16 at 6:31 pm

Agree with much of what has been said in this article, and said many times before I might add.

However of late I wonder if the GTA, in particular, will ever succumb to a market correction of any real consequence. To drop 10%, heck even 15% would only represent less than a few years appreciation and would do little to increase affordability in any meaningful way. Many would just attempt to wait it out.

1st gen Canadians and their offspring in the GTA have no interest in retiring to the hinterland and they will hold onto their homes at all costs because they want to be with their diaspora. Combined with a migration of well heeled seniors to urban centres (including the GTA) you have a pretty resilient demand mix.

I guess I just have to hope against hope that things really aren’t different here. ☺

#32 jaybee on 03.31.16 at 6:33 pm

I can’t believe that people could be as stupid as Steph and Tim. Even if all of the properties had a decent cap rate it would be incredibly an incredibly dumb strategy for them and the parents. God help them.

#33 Mark on 03.31.16 at 6:35 pm

” How is it that real estate is overpriced but stocks and bonds aren’t??? “

The CAPE ratio being at all-time highs (or close to it) applies to the US stocks, not the Canadian stocks. There is an argument to be made that the US stock market is in a bubble. I understand that, and somewhat agree. However, the US housing market, compared to that of the Canadian housing market, is in no bubble.

If you apply all of the same “CAPE” logic to the Canadian TSX, which is of far more relevance to Canadians than the S&P500, you’ll see that the CAPE is actually quite low. The cyclicals, such as O&G, mining, etc., barely have any earnings and aren’t really contributing to the index earnings much. If you put the S&P500 CAPE onto the TSX, you’d have the TSX index level in the mid 20s, even low 30s at this point. Today we’re sitting just shy of 13,500 on the TSX index, meaning that not only is there not a bubble in Canadian stocks, but they’re dirt cheap relative to Canadian housing, and definitely relative to the S&P 500.

“The point is that ALL risk assets have been affected by the same factor; namely loose monetary policy. “

Monetary policy has served to suppress inversely correlated asset prices. And those assets happen to be significantly represented in the Canadian stock market.

everything is richly valued right now… except maybe Syrian, Greek and Russian assets. Enjoy your blog. Cheers.

Canadian telecoms, railways, miners, pipelines, O&G firms, are mostly trading well beneath the replacement cost of their assets at this point. And dramatically, by a country mile, cheaper than real estate (P/E = 35 nationally, and so bad in Vancouver as Garth’s article points out today that one can’t even calculate a P/E on those condos!).

Seriously, you claim to be a portfolio manager. Would you advise that your clients buy and hold, on margin, an asset with a high P/E (or infinite in Vancouver), and historic earnings growth at the rate of inflation? Because that’s exactly what you appear to be doing with your holding of “2.5” houses. If that was one of your client assets under your management, I bet you’d be dumping that like yesterdays’ newspaper.

#34 Damifino on 03.31.16 at 6:38 pm

“…these guys (Tim & Steph) now lust to purchase s duplex on the east side of the city for $1.8 million. With luck, rents will barely cover the overhead…”

You’d need a lot more than luck to do the same thing in Vancouver.

#35 kommykim on 03.31.16 at 6:39 pm

RE:

#28 kommykim on 03.31.16 at 6:22 pm
RE:
#6 Bank of Millennial on 03.31.16 at 5:22 pm
What are your thoughts on the high yield preferred issues? Doesn’t it point to a pretty big problem at some banks?

http://www.marketwired.com/press-release/cwb-announces-nvcc-preferred-share-offering-tsx-cwb-2104847.htm

That issue sold out in mere minutes. — Garth

The reason those shares have a high yield is because they are NVCC (non-viable contingent capital). This is what will be “bailed in” instead of deposits if the bank fails.

Incorrect. Those securities are not yet issued. Preferred owners will never be in a forced bail-in situation. — Garth

Did you read the article in the link above?

Canadian Western Bank (TSX:CWB) today announced its intent to issue $100 million non-cumulative 5-year rate reset First Preferred Shares Series 7 [b](Non-Viability Contingent Capital (NVCC))[/b] (the “Series 7 Preferred Shares”). The offering will be underwritten on a bought deal basis by a syndicate led by National Bank Financial Inc. The expected closing date is on or about March 31, 2016.

#36 Dave in Kincardine on 03.31.16 at 6:42 pm

Being in the investment business and reviewing someones finances who has a life: exercise, beautiful children, caring husband, nice affordable house, retirement plans, time to enjoy all the beauty life has to offer, is so refreshing, than to see money grubbing people trying to debate the big win with real estate vs equities. This saddens me sometimes when people get it so wrong.

#37 Lulu on 03.31.16 at 6:47 pm

Even if i starve or got to beg for money, I’ll NEVER use my parent nest money, especially it’s their retirement money, I’m sick to my stomach when i read this couple did to their parent, just blow my mind people can be so irrational when it comes to greed! It will come haunt you later, every time!

#38 Nemesis on 03.31.16 at 6:49 pm

“There is more evidence to support that number than any other. But feel free to provide your stats.” — HonGarth

#ConfuciusSay… #”Real knowledge is to know the extent of one’s ignorance.” #ConfuciusAlsoSay… #”Never give a sword to a man who can’t dance.”

[TheProvince] – Vancouver real estate is a Mainland Chinese buyers’ market, study says: Groundbreaking study shows 70 per cent of detached homes sold in a six-month period on Vancouver’s west side went to Mainland Chinese buyers; many of them housewives or students with little income

“The dominant influence of Chinese investors in Vancouver has finally been proven with comprehensive data.

In a recent six-month period about 70 per cent of all detached homes sold on Vancouver’s west side were purchased by Mainland China buyers, an academic case study shows.

Even more stunning, the study shows that of all self-declared occupations among owners — on homes worth an average $3.05 million — 36 per cent were housewives or students with little income…

…Yan said his findings show major migration forces are at work, and real estate in Metro Vancouver is now a global commodity.

“I think the bigger question to be studied is what happens when the driver for your residential market is wealth, not wages? That is a major public policy issue.”

Yan’s findings add weight to a report this summer from Macdonald Realty Ltd. that said Mainland China cash accounted for 70 per cent of the company’s sales of homes worth $3 million or more in Vancouver’s west side, east side, and downtown core.”…

http://www.theprovince.com/business/vancouver+real+estate+mainland+chinese+buyers+market+study+says/11485289/story.html

#39 A Canadian Abroad on 03.31.16 at 6:51 pm

I’d like to challenge the investment/rental RE myth. Last year our sub-penthouse rental costs:

2014: New building, unlived in unit. $500k purchase cost. Landlord asking $2400/mo. Condo fees: $487/mo.
2015: After several months and no renters, landlord reduces price to $2200, then $2000/mo
2015: We come along, negotiate for $1800/mo
2016: Renegotiate for $1600/mo.

While we could buy a house outright with cash we use our cash in a balanced 60/40 mutual fund: ATB203 which returns more than owning the same unit vs renting it.

We have owned 3 homes (paid in full) in the past. Now we have realized renting is actually financially superior to owing and without the RE fees, maintenance hassle, upgrades, property tax, etc!

#40 Dynex on 03.31.16 at 6:54 pm

Why did the Italian thing have to get mentioned. Why couldn’t have just been ” a young Canadian couple with Canadian parents? Sick of it!!!

Where did I say anything about Italians? Although it is a pleasant change… — Garth

#41 Weedeater on 03.31.16 at 6:58 pm

Interesting that graph 3% previously home owners are under 25. Pretty much explains how the US house market was in trouble. Or maybe Bank of Mom & Dad ducked up the loss. People really need to get in touch with the *fact* they’re buying debt and it will be decades in done cases, before any significant percentage of their “mortgage payment” goes to actually paying for the house.

#42 Sheane Wallace on 03.31.16 at 7:04 pm

Very interesting article about banks exposure to oil/gas loans.

http://www.zerohedge.com/news/2016-03-31/canadas-banks-next-shoe-drop-and-it-drops-spring

In Italy the biggest banks almost went underwater due to oil/gas sector exposure which is probably much lower (in terms of percentage of loans) and to much less riskier companies and projects.

#43 Timothy on 03.31.16 at 7:06 pm

Those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction.

1 Timothy 6:9

#44 Confusedish on 03.31.16 at 7:07 pm

6 Bank of Millennial on 03.31.16 at 5:22 pm
What are your thoughts on the high yield preferred issues? Doesn’t it point to a pretty big problem at some banks?
http://www.marketwired.com/press-release/cwb-announces-nvcc-preferred-share-offering-tsx-cwb-2104847.htm

That issue sold out in mere minutes. — Garth

The reason those shares have a high yield is because they are NVCC (non-viable contingent capital). This is what will be “bailed in” instead of deposits if the bank fails.

Incorrect. Those securities are not yet issued. Preferred owners will never be in a forced bail-in situation. — Garth

*** Can someone explain that article in laymans terms and why it is supposed to be concerning and/or interesting?

Thanks!

#45 JG on 03.31.16 at 7:09 pm

you are bang on with this statement. Garth.

“It’s interesting how people expect financial assets to give positive returns at once and consistently, or they get dumped. Real estate, however, plays by other rules – because it exists, can be touched and has social status. “We own four condos,” is something your mom understands. “Attsa my boy,” she coos. Telling her you have a balanced and globally diversified, tax-efficient and liquid portfolio of ETFs just doesn’t cut it. “

#46 Sheane Wallace on 03.31.16 at 7:10 pm

#35 kommykim

Should we be running for the exit?

Just asking. It seems at moments that we are sitting on a powder keg with sparks coming out from our behinds…

I can sense something very fishy in the whole environment and what enrages me is the total ignorance and rejection of reality and facts, of any potential bad outcome.

When it (housing) really hits the fan it would be epic by any measures, probably incomparable in history.

#47 Rick Stevens on 03.31.16 at 7:11 pm

People who keep buying real estate and trading up are morons. Ask the morons in the U.S. how 2007 has made them poor morons.

#48 Rob on 03.31.16 at 7:12 pm

“The underlying force for housing demand is household formation. If your population aged 20 to 44 is growing, you have it. If it’s not, home price inflation is not sustainable,”

It’s been reported that by 2020 those aged 65 and over will exceed those aged 5 and under. Whether the housing market / economic outlook takes a significant dive or not in the not so distant future, this looming demographic impact will certainly impact future housing demand. By then it will be way too late for the “Steph and Tims” of this world.

#49 Victoria Real Estate Update on 03.31.16 at 7:12 pm

House prices in the US fell substantially in 2008-09. West coast cities saw some of the biggest price declines (more than 50% total in some cases ).

That interest rates were suddenly dropped from near normal to emergency levels in 2009 prevented prices in the US from falling even more and have fuelled the price recovery.

Housing markets in Victoria, Vancouver, Edmonton and Calgary also saw price declines (10-20%) by 2009. That rates were suddenly dropped from near normal to emergency levels stopped the price declines in the Canadian cities that were experiencing falling prices.

Some real estate “professionals” who post on this site claim that it was commodity demand created by China that prevented house prices from correcting in Canada. There is no evidence that this is true. If commodity demand pushed Canadian house prices higher for some time starting in 2008, then crashing commodity prices would have pushed house prices down in Canada over the last 2 years approx. That obviously didn’t happen. Commodity prices have had a lot less of an effect on Canadian house prices than what most people think.

Canada’s lax mortgage lending standards and falling interest rates have pushed house prices higher since 2008 in most Canadian cities (house prices in Victoria are only 6% higher than in 2008 based on Teranet’s data).

Canada’s housing bubble is, perhaps, the biggest the world has seen.

The longer housing bubbles are maintained the deeper the correction, according to Wolf Richter.

There will be no US style price recovery after prices fall in Canada. Interest rates won’t be slashed the way they were in 2009.

Canada faces a major price correction and a difficult price recovery.

Prices in the US remain well below peak levels despite 7 years of emergency rates.

There hasn’t been an example of a national (bubble) housing market anywhere in the world that didn’t go through a major price correction.

It isn’t different in debt-bloated Canada.

#50 Sheane Wallace on 03.31.16 at 7:19 pm

#44 Confusedish on
*** Can someone explain that article in laymans terms and why it is supposed to be concerning and/or interesting?

Thanks!
——————————-

Banks trying to raise capital.

Which means their is insufficient or they lack sufficient reserves on loans. If it was routine offering there would be not that much noise. The devil is in the details as always.

Our banks are not Bazel 3 compliant in terms of reserves, only in terms of capital. It seems they need more capital.

Why is the question if they are prudent lenders?
Jim Flaherty could shed some lights on the topic with his purchase of 125 billion in BAD mortgages from the banks. If they would GOOD mortgages they would have been purchased by other financial institution. Hell, Warren Buffet would be the first to line up.

Here is where the panic is coming from.

Personally I think that banks are very stable. No more than 5 % chance of major disruption.

It is not probable but it is possible. The chance for your house to burn is probably less than that( 5 %). But you still buy insurance.

The most expensive coverage in a house insurance is for sewer backup.

Here comes the really smelly part of the discussion with CMHC in focus. When it hits the fan….

Best stop posting before you embarrass yourself further. The mortgages taken over by CMHC were not ‘bad’ in any way, and fully-performing. The move was a preemptive defence against a further deterioration in credit markets. It worked. — Garth

#51 tundra pete on 03.31.16 at 7:23 pm

They are thinking about their future by owning four condos. It will be easier for knowing the whereabouts of their grandkids. They will be down at the leaky condo project where the crack dealers are subsidized by the owners who cant afford the special assessments.

The things we have to look forward to. All the fancy condos turning into those parts of town that most people dont go to anymore.

#52 Pinky Has A Cane on 03.31.16 at 7:24 pm

#38 nemesis.
Another bogus report. Where’s this guy getting his information from. I went to an open house once in Vancouver’s west side. All white mostly working class people (blue collar) bidding the house up. Lies!

#53 waiting on the westcoast on 03.31.16 at 7:27 pm

“Where did I say anything about Italians? Although it is a pleasant change… — Garth”

It is always great to talk about Italians… for good or ill. We (even us half-Italians) thrive on the attention… ;-)

I like Tom and Steph’s strategy. I have been thinking about day trading. Going to hit up my parents for a little grubstake…

#54 crowdedelevatorfartz on 03.31.16 at 7:28 pm

Oh my God we’ve offended the Italian Canadians. Those racist mangia cakes ! How dare they!
I have many Canadian born italian heritage friends (Canadians?????)and ALL of them consider real estate and ONLY real estate the safest way to save and make money…….
Attempt to focus on the Big picture all you offended politically correct people out there……
Momma and Poppa financial future may be royaly screwed by their kids crappy advice
They put all their money into one type of “investment” and then sucked their poor parents in with them.
One wonders when this whole house of cards goes sideways and Momma, Pappa, Tim and Steph are living under the same roof in the basement who will do the dishes…….methinks it will be the parents who let 700k flush away via their kids’ bad investments…..
Time will tell.

#55 Sheane Wallace on 03.31.16 at 7:31 pm

#25 Jason

It is the DEGREE of over-pricing my friend that matters.

Do you believe gold is overpriced? Then short sell it damn it!
I will short-sell CAD housing in ANY POSSIBLE way.

See the Big Short, we are in 3 times worse shape in Van and To. In Miami at the pack of the real estate bubble prices were 1/3-1/4 of the current prices in Van and To.

#56 jaybee on 03.31.16 at 7:32 pm

To Jason the so called “Portfolio Manager” from Vancouver.

If you think that RE in Vancouver is not comically over-valued, then I’m afraid you don’t have much of a nose for value. Scary, that you’re peddling investment products to people when you can’t recognize such an asset bubble.

#57 Oceanside on 03.31.16 at 7:35 pm

#17 Gary White on 03.31.16 at 5:55 pm
The fact remains 95% of trades are done local-to-local. — Garth

It is not a fact, there is no hard evidence… Something is rotten in the state of Denmark.

There is more evidence to support that number than any other. But feel free to provide your stats. — Garth

Interesting real estate market here on mid Vancouver Island and Victoria is virtually “cooking”. Homes going for over asking, builders booked for years and not enough for sale.
Big difference this year besides the usual Prairie folk, Island residents and some lower mainland is the huge number of people from Vancouver showing up with millions in their pockets from selling to what they describe as “buyers from China” with unlimited funds. The politically correct may dispute this but it is happening.

#58 Frank on 03.31.16 at 7:36 pm

All this future risk talk is interesting but what I’d really like to know more about is how Victoria real estate declined slightly 3 years ago and how that’s relevant today. If I could get that in the form of a shitty ASCII chart that’d be even better. Any takers?

#59 Brazil ex-pat on 03.31.16 at 7:40 pm

#3 truth on 03.31.16 at 5:12 pm
“The fact remains 95% of trades are done local-to-local. — Garth”

Source please?

Done. — Garth
++++++++++++++++++++++++++++++++++++

Muito confuso……..we keep getting told there is “no data”. So which is it?

#60 Down and Out on 03.31.16 at 7:41 pm

The American housing bubble popped with the assistance of the sub prime loan disaster,here in Canada there is a better stewardship of loans .Now the paradox is this is allowing a bigger housing bubble to form until it too runs into some kind of economic pin .The very thing our system is trying to protect us from with regulations unlike the American banking system which allowed fraudulent loaning of money is putting the Canadian borrowers at risk by creating an atmosphere of safety when mortgaging a house . .Ironic

#61 boonerator on 03.31.16 at 7:45 pm

Thankfully my children are not in a position to extort money from me. That is so sad.

As someone who has received a great deal of education from this blog, I wonder if those RE obsessed people are scared of financial markets by stories of how a particular stock cratered. I did not know about ETF’s and the psychological security they provide is priceless.

A stock can crater, but a whole sector, not so likely.

If you are trying to convince someone not to commit financial suicide, then a short primer on ETF’s might help. Although whether it can overcome hormones is a moot question.

#62 TRUMP on 03.31.16 at 7:46 pm

Garth or Warren Buffet
—————————-

I think you guys went to the same school.

#63 bigtowne on 03.31.16 at 7:54 pm

Canada has decided the future prosperity of our nation is not in fossil fuels. The election of the liberal regime is handing out their new agenda explaining the green energy success story. There seems to be no apology or nod of thanks to Alberta; Saskatchewan; B.C. or Newfoundland for their great contribution in tax revenue and jobs in the last decade. Of course, an additional five weeks of unemployment insurance is a tweek but meaningless when considered the Americans got five additional months and the long term jobless got up to two years unemployment insurance.

Garth is the book on Canadiana and the bureaucracy therein…I am at a loss that the new regime can punt out half the country with a hand-shake and a boot. I guess you have to be a selfie kinda type to behave with such calculated arctic indifference.

Maybe I am sensitive…is it really PC to tell half your oversize country that their work; vision; time; and investment is now part of their past? I must be missing something here. I see a country unable to respect their citizens or their environment. I must have missed the juncture where it was acceptable to remove respect for any and all Canadians.

#64 Chaddywack on 03.31.16 at 7:55 pm

The Italians bought up all of the property in East Vancouver in the 60s and 70s. Built Vancouver Specials with ugly lion statues on the fences. People were complaining back then about the Italians.

I guess the good thing is we got good barbers and pasta/pizza joints in Vancouver though.

#65 Millmech on 03.31.16 at 7:59 pm

#2
As a renter I feel bad by being burn by not owning ,although the $2000/mth that I’m saving and investing by not owning kind of offsets the deep dark depression.Maybe I’ll go to Europe or Asia for a month and think about where I went wrong!

#66 WalMark of Sadkatoon on 03.31.16 at 8:00 pm

WalMark finally got a job?

at National Bank?

the logic fits

#67 dr talc on 03.31.16 at 8:02 pm

‘ Governments are not going to let housing bubble pop. ‘

—–
total nonsense
all goverments have overlords- central banks,
they have a long history of boom bust creation
that’s how the system works
the governments job is spend money they don’t have on stuff no one asked for

#68 A blog dogs' dog on 03.31.16 at 8:05 pm

Garth, for the Belfountain Store you should look into Kawartha Dairy ice cream. Hard to get in most places but it’s delicious, if you have never tried it there is a little shop on the main strip of Oakville that sells it. I think they sold it at belfountain way back when.

#69 Ponzius Pilatus on 03.31.16 at 8:05 pm

#40 Dynex on 03.31.16 at 6:54 pm
Why did the Italian thing have to get mentioned. Why couldn’t have just been ” a young Canadian couple with Canadian parents? Sick of it!!!
———-
Maybe they are Permanent Residents. I am.
Just got him German Citizenship.
Just in case.

#70 Rube Goldberg on 03.31.16 at 8:08 pm

#56 Ocean Side.

Chinese with unlimited funds? I highly doubt it! China is a country with mostly poor farmers. Unlimited funds , come on lets get real.

#71 Flight of the Families on 03.31.16 at 8:09 pm

It took 8% of homeowners in the US to prompt a 32% decline in national house prices.

If 95% of Vancouver’s market is local to local buyers and sellers, that leaves 5% of transactions involving foreign buyers.

If 8% can move a market downwards significantly, 5% can move the market up significantly. You cannot suck and blow at the same time.

And if there is only a mild correction, anyone putting down 20% or more will weather the little storm. Sure, you will lose your equity, and sure it will take several years to recoup those loses. But you will not be devastated.

When looking at the US example, there are two sides – yes, prices cratered 32% but in may places, prices have risen back up. If you waited it out, you were fine.

Besides, if there is no big price crash coming, only a mild one, then buyers weigh the options – wait for a 20% or 30% correction or ride the market up another 20% increase and call it a wash when the market ‘corrects.’

Besides, as long as that 5% of the market keeps driving prices up in Vancouver, the contagion of Vancouver price increases will spread like the disease it is.

People in BC often say, why focus only on the affordability of Vancouver – it does not affect us. Guess what, that flight of boomers cashing out of Vancouver and the flight of families from Vancouver that have become desensitized to prices have no problem bidding prices up in the rest of the province. When you were looking at a million for a tear down, a 500k house looks great…

As Vancouver continues with its conversion into a luxury bedroom community and resort town for those parking their ill-gotten gains, the rest of the Province will suffer. As the Fraser Valley and Vancouver Island are now witnessing with their markets, the contagion is spreading and this will soon become a provincial issue. It might be 3 years, it might be 5 or 10, but the end result will be the same – the flight of local capital and families and dramatic increases in prices across BC

#72 BOOM! on 03.31.16 at 8:09 pm

Tonight the home phone rang, caller ID showed an 800 number….my son grabs the phone, answering it “Aardvark Farts”… silence for a moment, before a young lady inquires if we were planning to vote for Trump, Cruz, or Katich…

My son says, “None of the above”…

The young lady, “Well, may I tell you some facts about Ted Cruz?”

My son, “Only if you want to waste my time.”

She says, “No, … thanks for answering the phone.”

Political Season… when listing on the “Do NOT call list is over ruled. (sigh)

usually I just ignore the phone whether I know the number, or not. That’s why the answering machine.

#73 WalMark of Sadkatoon on 03.31.16 at 8:09 pm

However of late I wonder if the GTA, in particular, will ever succumb to a market correction of any real consequence.

it will eventually.

Toronto real estate prices, for whatever reason, have increased for so long that nobody remembers anything different. but they will be reminded. sooner or later.

the increase in Vancouver and Toronto real estate is inceasing despite the sales mix (confirmed by Google) but unsustainable. GenX will become the wrinkles that see it fall

#74 Inflating our way out coming soon on 03.31.16 at 8:12 pm

The thing is all levels are investing in the rising city. All levels being; citizens, businesses and governments. As this couple is investing in a rising city, that the other levels are, really helps secure their investments. With the Federal Governments eventual application of Billions & Billions the appreciation of the assets may even pick up in specific areas. Selling and renting, then like those who did 2 – 5 years ago, looking back at what you could have had, that’s gotta hurt.

Say what you will,, the last 5 years owning real estate (your own big home) compared to your balanced fund, even without factoring in the zero taxes on the gains has been the place to be…

#75 WalMark of Sadkatoon on 03.31.16 at 8:12 pm

#38 Nemesis on 03.31.16 at 6:49 pm

bogus study using last names, not citizenship docs

#76 Ponzius Pilatus on 03.31.16 at 8:13 pm

#63 Chaddywack on 03.31.16 at 7:55 pm
The Italians bought up all of the property in East Vancouver in the 60s and 70s. Built Vancouver Specials with ugly lion statues on the fences. People were complaining back then about the Italians.

I guess the good thing is we got good barbers and pasta/pizza joints in Vancouver though.
—————
Nowadays many barbers are of Arabian descent.
Mine is the Barber of Bagdad.
He says business is getting slower, due to tensions in Europe.
White guys are afraid.

#77 Sheane Wallace on 03.31.16 at 8:16 pm

Best stop posting before you embarrass yourself further. The mortgages taken over by CMHC were not ‘bad’ in any way, and fully-performing. The move was a preemptive defence against a further deterioration in credit markets. It worked. — Garth

————————
Two devils reading the bible.
.
Sure,

#78 Move on VREU on 03.31.16 at 8:17 pm

Hey VREU,

I see that you are still regurgitating the same statements about market strength and ‘realtors’ posting, doing your best to raise awareness of the dangers of real estate amongst the converted.

I take it that you are finally in tune with what is happening around you in Victoria as you no longer comment on the market? Perhaps you have seen sold signs put on houses in less than 24 hours; mild bidding wars; housing with ‘fishing’ prices that would be laughed at a year ago actually selling now?

Maybe you are seeing all the new sports cars, BMWs and Mercedes being driven around in a town that traditionally likes to downplay wealth?

Golly gee, is the market not behaving like my fundamental analysis tells me it should?

You are still very young, so you can benefit from the Vancouverization of Victoria.

#79 IKnow on 03.31.16 at 8:17 pm

In the past 10 years YVR Canadians have been learning the Chinese model of real estates wealth. The model only and only works if there’s a tremendous interest from Chinese.

What many Canadians have failed to comprehend is the humongous value and prestige done ethnic groups particularly the Chinese are willing to place on real estates.

In Hong Kong and Shanghai there are many very wealthy people locally dubbed as “invisible” micro billionaires, they accumulate their wealth mostly through ownership and flipping of flats.

It’s like people here may think $10 for a pound of crab us too much, because the culture had been to value crab at $2 a pound say. But the Chinese culture would buy crab at $100 a pound.
So anyone long crabs become micro billionaires.

Collision of cultural values can bring opportunities, but may also the worst in human behavior.

#80 Ponzius Pilatus on 03.31.16 at 8:19 pm

Grew up in Austria close to the Italian border.
We called them spagetti, they called us patate.
Now one got hurt.
People too sensitive these days.

#81 Timmy on 03.31.16 at 8:28 pm

Multimillion dollar houses in Vancouver cannot be explained by the assertion that 95% of transactions are local to local. FIrst of all they say there is no data on foreign ownership, then how can they prove 95% of transactions are local to local? Secondly, we have to assume income distributions of Canadian cities should be reasonably similar–if anything, Vancouver would have lower incomes because there is no manufacturing base, very few large companies and salaries are generally lower than those in Toronto. So there is no way prices can be explained by local transactions.

Stop beating this drum. Prices rise, people trade up. Rates fall, people assume more debt. Outside of select areas, offshore buyers only add the sauce of envy and fear, leading to more panic buying. There’s a good reason BC has a negative savings rate. — Garth

#82 For those about to flop... on 03.31.16 at 8:32 pm

#76 Ponzius Pilatus on 03.31.16 at 8:13 pm
#63 Chaddywack on 03.31.16 at 7:55 pm
The Italians bought up all of the property in East Vancouver in the 60s and 70s. Built Vancouver Specials with ugly lion statues on the fences. People were complaining back then about the Italians.

I guess the good thing is we got good barbers and pasta/pizza joints in Vancouver though.
—————
Nowadays many barbers are of Arabian descent.
Mine is the Barber of Bagdad.
He says business is getting slower, due to tensions in Europe.
White guys are afraid.

//////////////////////////////////
Geez ,I’m lucky I only rent or else I guess my Chinese hairdresser would have stabbed me in the neck to take over any real estate I own.

Phew,I was lucky to survive,sooo scary…

M41BC

#83 crowdedelevatorfartz on 03.31.16 at 8:36 pm

@#59 Brazil Ex pat

I just wanna know when President Dilma gets impeached and the markets realize how truly screwed the Brazilian economy really is…………..will the Real devaluation, rampant inflation, depression and failing banks in Rio and San Paulo wipe out your 13% per annum savings account gains?
Perhaps a better investment “strategy” might be…..you should invest in Zika mosquito spray for the one or two foreign tourists that venture down to the beach during the “Owe-Limp-icks”………… I hear Deep Woods Off is quite popular in the illegal gold mines and illegal logging operations waaaaaay up the Amazon river…….. “Pave paradise and put up a parking loooooooot”

#84 Rube Goldberg on 03.31.16 at 8:36 pm

#71 Flight of the Families.
Easy there trigger. Words like contagion, spreading.Kinda got my meter up into the red line. They are people not a disease. Tired, tired, tired.

#85 crowdedelevatorfartz on 03.31.16 at 8:42 pm

@#76 Pontius Pilate
“Mine is the Barber of Bagdad”
*******************************************
A friend and his wife just got back from 2 weeks in Morrocco. Loved it. Drank beer or wine in the restaurants and hotels.
But not on the beach in public(just like no fun Vancouver).
Got a haircut and a STRAIGHT RAZOR shave from a street side vendor. The guy couldnt speak a word of english except, “No worry, good job”.
$5 bucks and boom. Best shave he’s ever had.

#86 Nemesis on 03.31.16 at 8:45 pm

@WalmarkOfSadkatoon…

#ImmigrationDocuments?…

[VancouverSun] – Biggest immigration fraud “adversely impacts Canadian society”

“A Metro Vancouver man who made millions producing fraudulent documents for Mainland Chinese and helped them avoid paying taxes should be locked behind bars for the rest of his life, says Rong Chen.

Richmond resident Xun Wang’s companies hauled in $10 million over eight years by producing altered Chinese passports and fraudulent identities for up to 1,200 clients in arguably the largest immigration fraud case in Canadian history.

“How could Wang have done this so easily for 1,000 people? It’s ridiculous,” says Vancouver-based Chen, a real estate consultant raised in China who now helps wealthy Chinese invest in properties along the West Coast of North America.

Instead of life in prison, Richmond provincial court Judge Reg Harris last month sentenced “mastermind” Wang to seven years. He also has to pay a fine of $188,000 for falsely claiming unearned tax rebates, plus another $730,000 for evading Canadian taxes.

Seven illegal immigration consultants who worked for Wang also face charges, prosecutor Jessica Patterson said Wednesday. Arrest warrants remain out for two of them. Others remain under investigation by the Canada Border Services Agency.

The prime purpose of Wang’s operation was to convince Canadian officials his many clients resided in Canada for immigration purposes when they actually lived in China.”…

http://blogs.vancouversun.com/2015/11/21/mass-immigration-fraud-adversely-impacts-canadian-society/

#87 Hotdogs from Heaven on 03.31.16 at 8:47 pm

#68 A blog dogs’ dog on 03.31.16 at 8:05 pm
Garth, for the Belfountain Store you should look into Kawartha Dairy ice cream. Hard to get in most places but it’s delicious, if you have never tried it there is a little shop on the main strip of Oakville that sells it. I think they sold it at belfountain way back when.

————————————————–

Garth lives in Leaside so he doesn’t have to go that far. It’s available in a little strip mall a couple of hundred feet from the Leaside arena. You can also get it at the Summerhill market. Still, there’s nothing like taking your massive cone and lying on the hood of your car beside the highway just outside Minden and watching the clouds go by.

You only think I live there. — Garth

#88 Ace Goodheart on 03.31.16 at 8:48 pm

Still think you’re a bit off base here. You put a semi up in your previous post, for 1.9 mil and say that this is an inflated price. But the thing is located right smack in the middle of Summerhill, one of the most posh neighbourhoods in Toronto. The same semi, in a less prestigious address, would be worth around 600K in the City. In my neighbourhood it would be around 500K (and I live in Toronto).

The whole city is not like that, just the rich spots.

Summerhill is uber posh? You should get out more. — Garth

#89 Sad Stories From YYC on 03.31.16 at 8:51 pm

Had lunche with a former cow-orker today and we traded a few stories.

She sold her investment condo at the beginning of2014 because she works in fundamentals and could see hat was coming. She got $35k more than the neighboring condo got recently.

Word from realtors is that any negotiations that are taking place are not pleasant because the only buyers in the market are scalpers who assume the seller is being forced to sell due to financial difficulties. The bid and the ask are so far apart the parties are literally insulting each other.

I have a friend who just bought a brand new infill because it’s time for him to abandon the family home now that the kids are gone and he got it for nearly 25% off the builder’s original list.

Word is even minor sports registration is down across the board and the bankers are saying all they are doing all day long is helping unemployed people with debt management advice.

It’s going slow like a train wreck but the SHTF moment is arriving, just in partial shipments. By summer or possibly winter of this year the bad news will be acknowledged.

#90 Millenial Scrroge on 03.31.16 at 8:56 pm

http://www.zerohedge.com/news/2016-03-31/worst-case-scenario-73-down-here

Maybe they saw the above article on The Zero Guy and decided stocks weren’t for them.

Serious people do not read zero. — Garth

#91 Techno Bill on 03.31.16 at 8:58 pm

Basic rule of rental property – puchase price should be no more than 10 times the annual rental income to be a viable investment. That means a $1.8 M duplex should have a monthly rental of $7500 per unit. Must be a pretty dam fine place to command a rent like that!

#92 Lea on 03.31.16 at 9:02 pm

#71 Flight of the Families

In your scenario, what if you have an adjustable rate mortgage or it is time to renew @ 5 year mark (not sure what you call that in Canada)?

When prices drop, you lose your equity. Will the banks renew a loan if you have no equity or negative equity? If interest rates are higher can you afford the higher payment? This is what caused some of our neighbors to sell at a huge loss or default on their loan.

Your scenario was our case in 2008 in Los Angeles. We had a 30 year fixed rate mortgage. When prices dropped we were unaffected. We did refinance after the carnage for a 15yr fixed loan at a low rate.

#93 Dynex on 03.31.16 at 9:06 pm

#85 Nemisis. The Sun is the biggest lying piece of rag out there. Don’t believe anything it says. Just when I thought this blog was getting cleaned up from all this racial stuff. “Here we go again”. You my friend need to open the window in Mommies basement and get some fresh air and stop reading that piece of crap rag. And what do you mean, west coast of north America? Like places like Bella Bella?

#94 For those about to flop... on 03.31.16 at 9:11 pm

Nemesis,do you remember this happening as well…

M41BC

http://www.canada.com/theprovince/story.html?id=c193977c-556f-4e99-bd7a-8c01c3435abb

#95 A blog dogs' dog on 03.31.16 at 9:12 pm

I don’t where leaside, TO? Either way Oakville is the closest place for me to get kawartha dairy and it’s too far. TO would be waayyy too far…..it’s not that good but it’s still pretty good.

plus I’m a dog and I don’t drive and I already forgot what we were talking about. Where’s felix that little rascal? I’m gonna lick ’em.

#96 IHCTD9 on 03.31.16 at 9:14 pm

Anyway, these guys (Tim & Steph) now lust to purchase s duplex on the east side of the city for $1.8 million. With luck, rents will barely cover the overhead, which means it has a cap rate of almost zero. And they’re out of cash. So, the portfolio is being sold, putting 100% of their net worth into one asset class. Worse, they’ve talked her parents into “investing” seven hundred grand in the project
———–

T&S are borrowing the money, so they are making a 25 year bet that rates will not climb to unaffordability, and that appreciation will be the payback seeing as rent will not reliably cover their carrying costs, much less put anything in their pockets every month.

If you run some reasonable numbers, you’ll find their total carrying costs after 25 years to be no less than 3.5 million. They must be expecting some pretty serious payback to take massive risks like this rather than just investing and saving.

So what’s that duplex going to be worth in 2041? Well, it had better be going for no less than 5 million, and that’s assuming rents carried every last dime of interest, taxes, maintenance, and insurance, all of which are wild card numbers. That also assumes 1.8 mil invested never did any better than 4.5% average over 25 years, and if it did, crank that 5 mil sell price up or they’ve lost.

But they took a huge risk on RE to get rich after 25 years, IMHO, they better DOUBLE what they would do on simply investing the 1.8, so it’s going to need to be 10 million for that duplex in 2041 before I’d admit it was worth the risk.

10 million dollars for a duplex?

Not in 25 years, not in 100 years.

#97 acdel on 03.31.16 at 9:17 pm

#29 Bytor the Snow Dog

I was thinking the same thing. How could a young couple owning four condo’s ask for help from there parents for such a risky maneuver?
Personally I find it disgusting! I guess I am old school..

#98 DM in C on 03.31.16 at 9:18 pm

Cripes, I have evil in my heart because I want things to bust so bad for those two, but they’ll take her parents down with them. Hope they will like co-habitating.

70 years old and putting their money back INTO real estate? She must be an only child, used to getting her way. Oy vey.

#99 james on 03.31.16 at 9:20 pm

#7

“I’m interested if anyone knows how big cities in the U.S. (N.Y., SanFran, etc) faired after the housing crash. Did they drop as much as the rest of the U.S.? Have they since recovered? ”

Some cities dropped very very hard (e.g., Miami, Phoenix, Sacramento).

In general, prices in the big cities with jobs (e.g., SF, Seattle, etc) are back to their peak in 2007, 2008 or whenever it was in that local area. That is not adjusted for inflation, however.

Interest rates actually went lower over the last while, and inventory is very low in the major cities.

Smaller towns differ widely. Pittsburgh never really ramped up much, and hasn’t inflated a ton over the last couple of years. Some cities are outright in dismal territory.

#100 james on 03.31.16 at 9:22 pm

4 condos…. sheesh.

Well, this is confirmation bias. They think real estate never goes down, so they leverage themselves to the hilt to afford a bunch of it. My sister did the same thing.

When it works, you look like a genius. Had a landlord about 8 years ago who did the same thing on westside houses. He had a 60k income and managed to get mortgages on 4 rental houses. He is worth a LOT of money today, if he is still alive.

Leverage cuts both ways, though. For the past 10 years the trend line is up. That means it is probably not time to jump in.

When I see everyday people on the street talking frantically about stocks or bonds I will believe there is a mania in other asset classes to rival Canadians and their obsession with housing. I think many stocks are overvalued compared to historical price/earnings ratios, but nothing compared to housing in Vancouver.

#101 Frank on 03.31.16 at 9:23 pm

Rates are the same as they were in 2011. Why are houses 40% more?

Pumpers like you help. — Garth

#102 Sheane Wallace on 03.31.16 at 9:23 pm

Serious people do not read zero. — Garth
……………………
That is very interesting statement considering the fact that everyone on Wall Street read zero, and the FED themselves felt obligated to respond to zero comments:

http://www.zerohedge.com/news/2016-01-18/fed-responds-zero-hedge-here-are-some-follow-questions

But I guess the FED is not really a serious institution…

#103 Rube Goldberg on 03.31.16 at 9:23 pm

DM c. Oy vey? What’s that supposed to mean? My Dad was a Holocaust survivor.

#104 Confusedish on 03.31.16 at 9:27 pm

Sheane Wallace

Thank you for explaining!

#105 WalMark of Sadkatoon on 03.31.16 at 9:32 pm

#86 Nemesis on 03.31.16 at 8:45 pm

immigration scams get busted. good to know.

…and still no citizenship documents to prove foreign buying.

#106 Sharon Teague on 03.31.16 at 9:35 pm

DELETED

#107 DM in C on 03.31.16 at 9:39 pm

It’s an expression, Rube. My Dad served on the Bonnaventure. What’s your point?

#108 Fleurdelis on 03.31.16 at 9:39 pm

That’s funny, I think we should talk more about Italy, and how a public debt can destroy a country.
Also, how people loved RE with 0 diversification. But unlike Canada personal debts are way lower.

I still think the biggest issue with Van prices is: many jobs with an average salary will sit empty for long. No one will move in Vancouver (or at least stay long) just to get an average salary: with the current housing market.

Cheers.

PS T2 will extend mortgages to 40y.

#109 For those about to flop... on 03.31.16 at 9:39 pm

Hey Rube Goldberg,welcome to the blog ….you don’t seem interested in making any friends,either that or your underpants are too tight.

I have supplied an international sizing chart,just in case it’s the latter…

M41BC

http://pages.ebay.com/sell/sizechart.html

#110 GTAGirl on 03.31.16 at 9:40 pm

Vaughan, N/W corner of Weston and Major Mackenzie. Site was supposed to be a 12 storey condo, but developer thought they’d make more by selling town homes and singles.

Sales office last weekend had people fighting to give deposit cheques. Absolute insanity. Some have said there was a mortgage broker on spot offering mortgages and loans for the deposit.

20ft frontage town homes 1100 sqft $869k to start.

40 ft front single homes (not sure of square footage, but hey, it’s 40 ft wide) asking …$1.289 million to start.

The debt ponzi is growing by another development of idiots.

#111 IHCTD9 on 03.31.16 at 9:48 pm

#79 IKnow on 03.31.16 at 8:17 pm
In the past 10 years YVR Canadians have been learning the Chinese model of real estates wealth. The model only and only works if there’s a tremendous interest from Chinese.

What many Canadians have failed to comprehend is the humongous value and prestige done ethnic groups particularly the Chinese are willing to place on real estates.

In Hong Kong and Shanghai there are many very wealthy people locally dubbed as “invisible” micro billionaires, they accumulate their wealth mostly through ownership and flipping of flats.
——–

I’ve always assumed the top end of YVR RE traded hands almost exclusively between Chinese folks – including all the consignments in between. Buying and selling amongst themselves while the price climbs higher and higher.

I’ve also sensed a bit of competition amongst Chinese folks, to be more successful, or to at least LOOK more successful than the next dude.

I see this in the cars they drive, A Chinese guy will spend every cent he has and more to cruise around in a brand new Benz. I’ve known a few where I also happened to know what they make, and believe you me, they must be saving their grass clippings for supper and keeping the leftovers…

#112 Rube Goldberg on 03.31.16 at 9:49 pm

#107 Dm in c Really! I used to go to the Bonnaventure when I lived in Edmonton. The place was rockin! Those were the good old days when bars held 500 people and beers were 20 cents a glass. Ages ago. Maybe your dad served me.

#113 ROCK BEATS PAPER on 03.31.16 at 9:51 pm

“Global money is boosting Vancouver’s prices, and local dollars can’t compete.”

The fact remains 95% of trades are done local-to-local. — Garth
_____________________________________________

I believe you Garth, but unfortunately we do not have the facts, or proper measurements. Your argument that it may only be 5% suggests that your detractors would have a point if it were 10, 15 or 20%.

Nothing could be further from the truth, we should be arguing that the more foreign investment the better, especially at the nose bleed prices. As a side benefit, foreigners often pay property taxes but use very few resources….

#114 joblo on 03.31.16 at 9:54 pm

Tim and Steph, stupid

#115 Timberrrr on 03.31.16 at 9:54 pm

Ummm…2L tubs of Kawartha Dairy ice cream at Costco for $5.99 Had some with my Easter apple pie.

#116 joblo on 03.31.16 at 9:58 pm

Tim and Steph, I’m really sorry if I hurt your feelings when I called you stupid.
I really thought you already knew

#117 Panhead on 03.31.16 at 10:01 pm

#97 acdel on 03.31.16 at 9:17 pm
#29 Bytor the Snow Dog
I was thinking the same thing. How could a young couple owning four condo’s ask for help from there parents for such a risky maneuver?

Let’s just call it the Timph maneuver and hope it doen’t catch on …

#118 Victoria Real Estate Update on 03.31.16 at 10:02 pm

# 78 Move on VREU

You still can’t read. I guess you don’t need to be able to do that in your “profession”.

Where did I use the word “realtor” in my post today? Please find the exact quote and post it. You have zero credibility. All you seem to be capable of is repeating the propaganda that is used by real estate “professionals” that is false and will probably help lead some local families into bad buying decisions.

You claim that I don’t update the Victoria market. Another false claim. I did that again today by stating that house prices in Victoria are only 6% higher than in 2008. That’s pathetic.

Think about it. We’ve had emergency interest rates since 2009 and prices in Victoria have only increased by 6% while prices across the rest of Canada have increased dramatically. I’ll post more charts for you showing this.

It seems more local “professionals” are trying to convince potential buyers that Vancouverites are moving to Victoria in numbers and buying houses. There is no evidence to support that claim. I like your phrase “the Vancouverizartion of Victoria”. Based on that you think you’ve seen more expensive cars on the streets lately. That’s ridiculous.

Almost as ridiculous as the industry’s claim that wealthy buyers from China had recently discovered Victoria. The stats show only 0.6% of sales in Victoria were to buyers from Asia. What was that based on? I heard a “professional” like you saw more Asians in the malls in Victoria, at least that’s what some commenters claimed on this site in the past year.

What name will you post under next? You’ve lost any credibility that you had.

#119 crappy armchair economist on 03.31.16 at 10:04 pm

200+ years of historical US interest rates suggests that we are at a generational bottom and expect rising rates long-term:

http://finance.yahoo.com/blogs/talking-numbers/222-years-interest-history-one-chart-173358843.html

or is this data irrelevant b/c globalization, gold standard, technology, boomers, etc.? but it does point to a possible long-term average of 4-5%. any significance in the 4-5% number?

#120 IHCTD9 on 03.31.16 at 10:07 pm

#110 GTAGirl on 03.31.16 at 9:40 pm

40 ft front single homes (not sure of square footage, but hey, it’s 40 ft wide) asking …$1.289 million to start.

———–

Good Grief, I’ve got a couple of Norway Spruce out in my front yard, if they fell over, they’d take out two houses each LOL!

The drive shed I park my dozers and tractors in is 75′ long.

My gramps had an old Lincoln Mk IV that probably couldn’t park out in front of these houses…

I just can’t fathom what needs to take place in someone’s head to pay 1.3 mil for a lot the size of my stinking barn. Are they making 350-400 k a year? I don’t get it.

#121 John in Mtl on 03.31.16 at 10:08 pm

#48 Rob on 03.31.16 at 7:12 pm

… “Whether the housing market / economic outlook takes a significant dive or not in the not so distant future, this looming demographic impact will certainly impact future housing demand.”

Not to worry, apparently refugees and HAM are going to fix this, or so I keep hearing.

#122 S.Bby on 03.31.16 at 10:15 pm

#60 Down
It’s called “moral hazard”.

#123 Pinky Has A Cane on 03.31.16 at 10:15 pm

#118 Victoria Real Estate Update.

Wow! You Da man MAN. Wowee you sure told him! You must feel good? YEEE OUUUUCH!!!!! That’s gonna leave a burn!!!

#124 ROCK BEATS PAPER on 03.31.16 at 10:17 pm

#25 Jason on 03.31.16 at 6:15 pm

Garth, stocks and bonds are at exaggerated prices.

Some investment grade bonds are at close to zero and 1/3 of Europe is at negative rates. So, big time negative real yield where it counts across investment grade.

There is definitely fear (lately termed reach for yield) and greed, with stocks to GDP ratio at all time highs (double the average just like real estate). This is the single most important measure for Warren Buffet.

So, Jason’s point about all asset classes (save prefs and commodities) are at obscene levels is well taken.

Everything is going to come down when interest rates rise, except a few select areas.

Disagree. US rates will only rise with economic data that supports them. It will also support growth, corporate profitability and therefore equity values. Your premise is flawed. — Garth

#125 cramar on 03.31.16 at 10:20 pm

Tim & Steph don’t deserve sympathy when then end up in poverty. They will be slaughtered, as well as her parents. She will be inconsolable when they realize they also destroyed her parent’s lives. The parents have my tears.

#126 data on 03.31.16 at 10:29 pm

Hi Garth,

As mentioned in the past, comparing

1) Borrowed Money with no margin call to purchase condo’s, etc

VS

2) Borrowing money to buy stocks with margin calls

This is not a fluid comparison by any measure! Also, remember the US example is again not a fair comparison as the debt cycle broke as it was teaser loans that came up for reset and payments on those 4 condo’s went up 200-300% in the US, that simply cannot happen in Canada as we don’t offer that. The US created a margin call system on housing to housing bond holders with financial engineering. Canada has fairly plain vanilla mortgage market.

In your post today, let’s say the values of the condo + house drops by 50%. NOBODY cares or will sell, because as long as the homes are rented and payments can be supported, the banks will let you keep them and you can ride it out overtime with renters covering most of the burden. The key is that they are rented and your example is not clear if the loss is a cash flow loss or non cash flow loss ( are you including loss on downpayment, etc) If the hard dollar loss covers the monthly, nobody will sell the property at a loss while renters cover the bill.

Now with a mixed basket of stocks, etc, dropping 50%, you would not even make it to that point as the broker would have liquidated you before that and you would left with a full loss of your invested capital. Sure the stocks pay divs and could raise further in the future, but that doesn’t matter as the market will removed you from the game and you will need even more money to stay in it.

Making this a core argument over the years is weak. In the worst times in Canada, housing still continues to go parabolic – the loonie was 1.46 at some point, we had full on panic and sure it recovered, but housing didn’t even blink for a second. Comparing investing vs owning real estate is not going to work. In your example today, if the four condo’s are rented out with folks from different type of employment, then he could be technically diversified better then stocks as stocks all go down at once, not unemployment in every sector and EI still to buffer it if they do.

These are the real cash flows of people daily, not waiting for that monthly pref payment to pay for rent

Nowhere did I mention buying stocks, nor doing so on credit. An argument that relies on the extreme example, as does yours, is failed. Moreover (again) this is not a context between real estate and financial assets. Smart people have a balance. Go find one and ask. — Garth

#127 family beagle on 03.31.16 at 10:31 pm

Condos…meh. You do know that ‘human’ in dog speak means ‘dim’? When I meet people I see all the baggage they’ve accumulated throughout their lives: the crap, the junk, decor, bricabrac, flotsam, trash, appliances, packaging, condos, cars, toys, wasted efforts, self gratifying joy filler. It’s their aura. Every year we have a stream clean and I see up close the true value of human investment. They have dirty faces and dirty hands and they prance around oblivious. Long on landfills.

#128 WalMark of Sadkatoon on 03.31.16 at 10:36 pm

#110 GTAGirl on 03.31.16 at 9:40 pm

that. is. insane.

#129 Smoking Man on 03.31.16 at 10:37 pm

Post of the century in my head. Bad ass Fever and uncoordinated thumbs means it’s got wait another day

Mark this day in the calender. MAR 31 2016 Smokey had dry night. Green tea a Tylenol.

#130 acdel on 03.31.16 at 10:38 pm

#117 Panhead

Let’s just call it the Timph maneuver and hope it doen’t catch on …

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

If it does attempt to catch on I probably suspect that this would be the usual outcome throughout Canada. :)

http://www.cbc.ca/news/canada/saskatchewan/massive-hockey-brawl-1.3514803

#131 BK on 03.31.16 at 10:40 pm

Garth, maybe your right by saying 95% of purchases are local… But it only takes one person from the global market to inflate a whole block of houses.

I’ve seen this on my street and many others in Van. Houses worth roughly $850,000. Global investor comes in, dumps 1.1 million now the whole block is worth that.

It only takes one for the rest to follow. It’s unfortunate that so many follow…

Hopefully this can work in the reverse direction.

We can only hope

Yours is a good example of why real estate can grow toxic and, in YVR, has done so. — Garth

#132 kommykim on 03.31.16 at 10:41 pm

RE:

#46 Sheane Wallace on 03.31.16 at 7:10 pm
#35 kommykim
Should we be running for the exit?

Not regarding NVCC Bank Preferred Shares. The spread isn’t that large over what’s already out there (non NVCC) which implies that the market doesn’t think that a “bail in” is anything more than a very remote possibility. The banks are just doing what the regulator has ordered them to do under Basel III. I don’t think they enjoy having to pay a premium to raise this extra capital.

I think that the day of reckoning is coming for Canada’s housing market though. Just when that will be is anyone’s guess. I’m amazed that the bull market has lasted this long.

#133 Bottoms_Up on 03.31.16 at 10:52 pm

#97 acdel on 03.31.16 at 9:17 pm
—————————
Well it sounds like the kids are guaranteeing 3% a year which is $21,000, so the parents likely see that as stable income for the rest of their lives.

Interestingly, they could instead put that money under the mattress and instead take $35,000 (tax free) for the next 20 years….

#134 Sheane Wallace on 03.31.16 at 10:53 pm

If there is indeed overwhelming foreign interest in acquiring real estate in Van/To due to their fantastic climate/location (in the middle of nowhere), vibrant lifestyle (specially the druggies in Van) etc. could we please:

1. Stop ‘insuring’ residential mortgages through CMHC (what is the need for it if buyers are foreigners who pay in cash?).
2. Transfer all outstanding montage ‘insurance’ back to the banks (let’s not forget that they are prudent lenders) or sell CHMC, including it’s liabilities (hint: that is not really possible)

———————-

CMHC puts a floor of 1 mln on crappy shacks, idiots buy them, build ‘equity’ and then sell and move to a more expensive crap.

If not for CMHC houses in Van/To would cost 350-400 k max. At normal interest rates, maybe 250 k.

#135 jane 24 on 03.31.16 at 10:53 pm

I got out of RE investment in TO in the late 1980’s when a guy that I hired to lay some carpet told me he had three investment houses. I exited just in time.

Start to look for and listen to the coal mine canaries. They will be out there. Steph and Tim are two of them!!

#136 Sheane Wallace on 03.31.16 at 10:55 pm

#132 kommykim
——————————-
Thanks.

But our banks are already compliant with Basel 3 in terms of capital. Pretty sure of it.

Compliance with regards to reserves is coming (it is still optional, subject to rule of national regulators /still, I think until 2021)

#137 barnz0rz on 03.31.16 at 10:57 pm

“The underlying force for housing demand is household formation. If your population aged 20 to 44 is growing, you have it. If it’s not, home price inflation is not sustainable.”

Wasn’t it a couple of weeks ago where it was said that a good sized portion of this age group has got the hell out of Vancouver, with (according to people I know in this, my age group) more looking to get out if they get the opportunity?

Define growth. People getting raises to join the next tax bracket at just over $45K a year isn’t going to cut it in this market.

#138 Sheane Wallace on 03.31.16 at 11:01 pm

#110 GTAGirl

20ft frontage town homes 1100 sqft $869k to start.

40 ft front single homes (not sure of square footage, but hey, it’s 40 ft wide) asking …$1.289 million to start.
—————————

Weston and Major Mac? Really?

If what you are saying is even remotely true (even 70 % of this prices), I would consider this as first stages of hyperinflation.

Good luck in convincing anyone that 10 % decline will fix things.

Time to transfer assets offshore.

#139 jane 24 on 03.31.16 at 11:01 pm

As someone who spends summers in a small village in Italy, something very weird must happen to Italians when they hit North America.

In their home country they tend to have small houses that they own for life, that can look totally crap on the outside but very posh on the inside and they spend their considerable disposable money on family, clothes and living their life. In Italy they are also very happy to rent urban flats for life too, none of this trade-up to mini-castles in Woodbridge.

I know which of these two alternate lives I prefer.

#140 Smoking Man on 03.31.16 at 11:06 pm

DELETED

#141 Mark on 03.31.16 at 11:07 pm

“The US created a margin call system on housing to housing bond holders with financial engineering. Canada has fairly plain vanilla mortgage market.”

Actually there’s nothing “plain vanilla” about Canada’s mortgage market at all. 40% of it is fully adjustable rate (on an overnight basis) *at the bank’s sole discretion*. The other 60% consists of maturities 5 years or less. So basically, the entire Canadian housing finance market, should the conditions exist that the bankers want their money back (for whatever reasons, whether it be confidence, better investing opportunities, or a change in the regulatory environment), can be liquidated rapidly.

If anything, I’d argue that this sort of setup may very well, on an overall basis, be less stable than that of the USA. Certainly it has given rise to an even larger bubble, so logically, it may very well give rise (err, fall) to an even larger bust!

I’ve seen this on my street and many others in Van. Houses worth roughly $850,000. Global investor comes in, dumps 1.1 million now the whole block is worth that.

The same ‘logic’ can be said of local speculators. Like that “Khalid” dude I quote periodically, who owns 15 to 20 houses. Probably replicated several hundred times over throughout Vancouver. They have an awfully huge interest in having people “think” that Vancouver prices are still rising, even though the peak of the Vancouver housing market was really around 3 years ago.

or is this data irrelevant b/c globalization, gold standard, technology, boomers, etc.? but it does point to a possible long-term average of 4-5%. any significance in the 4-5% number?

Rates cannot sustainably exceed nominal economic growth over the long run, and of course, some of the output of the economy must be accorded to those who put up equity capital. The economy’s long-run growth rate is approximately 4-5% nominally. We know that there was a considerable period of rates much higher than 4-5% nominally, so the concept of mean reversion tells us that there must be a considerable period of rates beneath 4-5% nominally. Additionally, the equity risk premium has largely been non-existent for the past 35 years, hence, the equity risk premia will necessarily need to mean-revert by being much higher than historically normal.

Basically this means that people with excess allocations to fixed income or assets that derive their valuations from fixed income, such as RE, are going to be in for a very long haul of returns that severely lag (probably by 6-8%/annum) that of business equity investment. Considering that RE has a P/E of 35 in Canada, while the TSX has a P/E of 13, its pretty much a slam dunk which one will outperform for decades to come as historically abnormal RE returns are mean-reverted.

#142 Bank of Millennial on 03.31.16 at 11:08 pm

#131 BK

Let me introduce you to the concept of “Mark to Market”

“denoting or relating to a system of valuing assets by the most recent market price.”

Let those other greater fools roll the dice.

#143 Harvey Eagle- Child on 03.31.16 at 11:12 pm

All you people on here think you have problems. I live in a 15 x 30 with poisoned water. You stole all the land off of us and now you sell it to the next occupiers. Shame shame shame on you’s.Your judgement day is coming.

#144 Bank of Millennial on 03.31.16 at 11:15 pm

#132 kommykim

6.25% is getting closer to cockroach in the kitchen region. Where is CWB lending to yield higher then 6.25%, sub-prime?

Maybe they got caught short for capital, perhaps they took losses on their loans? Time will tell all :)

#145 Ching on 03.31.16 at 11:22 pm

DELETED

#146 Mark on 03.31.16 at 11:39 pm

“6.25% is getting closer to cockroach in the kitchen region. Where is CWB lending to yield higher then 6.25%, sub-prime? “

Remember that “preferred shares” are not debt, they are equity. Basically preferred shares, in the context of a bank, are issued to facilitate greater leverage for common shareholders. Basically preferred shareholders provide leverage for the common, in exchange for a “preference” (hence the term “preferred”) of a fixed dividend instead of the common shares’ return which is highly variable.

In a hypothetical resolution of a Canadian bank, it logically follows that the equity of the institution in need of resolution is wiped out, and the most junior debt remaining in the capital structure is converted or “bailed-in” to equity in amounts sufficient to recapitalize the bank adequately for regulatory purposes. An even with a very remote possibility of occurrence, for various reasons, but if it occurred, no forms of equity, whether common or preferred would be safe.

but unfortunately we do not have the facts, or proper measurements.

We have tons of facts and proper measurements. We just have a bunch of speculators who want to throw most of that out the window and concoct their own narrative to push a well-past-its-prime asset class, RE in Toronto/Vancouver, out the door while there’s still a few suckers left.

#147 ROCK BEATS PAPER on 03.31.16 at 11:39 pm

Disagree. US rates will only rise with economic data that supports them. It will also support growth, corporate profitability and therefore equity values. Your premise is flawed. — Garth
_____________________________________________

The data the FED used to say it looks at is employment, which is practically at full in the US and inflation which is practically at their target of 2 %, and yet here we are with rates close to zero (ie. multi century lows).

The markets recently experienced a dramatic rise, due to coordinated central bank policy, with Japan going negative, European bazooka, China ease, and FED backpedalling. They did not rise due to earnings which are now down for 3 quarters in a row.

You have the correct premise for normal times such as we have experienced for the last 5 decades. Now, the FED cannot “normalize” and we are not in normal times. We are in the time of massive government intervention to “save” us, attempting to repeal the business cycle.

#148 Tony on 03.31.16 at 11:40 pm

Re: #6 Bank of Millennial on 03.31.16 at 5:22 pm

Steer clear of anything to do with the Canadian Western bank. They’d be in the top 3 for a major bank default.

#149 DON on 04.01.16 at 12:05 am

#120 IHCTD9 on 03.31.16 at 10:07 pm

…I just can’t fathom what needs to take place in someone’s head to pay 1.3 mil for a lot the size of my stinking barn. Are they making 350-400 k a year? I don’t get it.

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

I don’t get it either. If I am spending a million at the very least I want a pool, some land distance between neighbors, and perhaps a neat view. But not an old house or cheaply built new house on a postal stamp in a traffic jam of a city.

But it is all about perception when you live in the trendy neighborhoods. Nutty.

#150 AfterTheHouseSold on 04.01.16 at 12:28 am

#68 A blog dog’s dog
#87 Hotdogs from Heaven
Kawartha Dairy icecream

Yes, the absolute best!

#151 Brazil ex-pat on 04.01.16 at 12:35 am

#83 crowdedelevatorfartz on 03.31.16 at 8:36 pm
@#59 Brazil Ex pat

I just wanna know when President Dilma gets impeached and the markets realize how truly screwed the Brazilian economy really is…………..will the Real devaluation, rampant inflation, depression and failing banks in Rio and San Paulo wipe out your 13% per annum savings account gains?
Perhaps a better investment “strategy” might be…..you should invest in Zika mosquito spray for the one or two foreign tourists that venture down to the beach during the “Owe-Limp-icks”………… I hear Deep Woods Off is quite popular in the illegal gold mines and illegal logging operations waaaaaay up the Amazon river…….. “Pave paradise and put up a parking loooooooot”

+++++++++++++++++++++++++++++++++

Certainly Mr Brain Fart I will answer your questions as best I can.

To answer your first question the answer is no. Europe, Canada, Japan and China are just as screwed as Brazil so its a race to the bottom. An as we all have noted in this blog, the USA and it’s 19 trillion of debt. Don’t think that hurts Brazil.

Zika is a scam like climate change (which everyone around the world laughs at). There are 12,000 cases of microcephaly in the USA every year – no Zika.

Yes…..many countries “barely” pull off the Owe Lim Pics. BC/Canada is one of them. We did not go to the 2012 Olympics in fact we boycotted them because we felt pissing away 3 billion dollars for a two week party for rich people was not right. And now the lower Mold land has a 3 billion dollar bridge that has tolls and take 25 years to pay for by taxpayers. Ironic.

I suggest you do an “In Ter Net” search on Canadian Gold Mining companies and all the death and destruction they are responsible for in Afrika, Asia and Europe (Romania and Argentina where they spilled millions of liters of Cyanide into the rivers there). Maybe you Canadian Miners can clean up your own act before you preach to the world.

I have said several times now (but crickets from Mr Brain Fart Gas) BOTH countries have their problems. But I would rather be in a place where the women are hot, the food is way yummier and the weather is warm (unlike the COLD Canadian “global warming” weather). How was that -35 Da Gree Celseeus weather recently in the east boys and girls?
Cheers…..

#152 Brazil ex-pat on 04.01.16 at 12:38 am

#147 ROCK BEATS PAPER on 03.31.16 at 11:39 pm
Disagree. US rates will only rise with economic data that supports them. It will also support growth, corporate profitability and therefore equity values. Your premise is flawed. — Garth
_____________________________________________

The data the FED used to say it looks at is employment, which is practically at full in the US and inflation which is practically at their target of 2 %, and yet here we are with rates close to zero (ie. multi century lows).

The markets recently experienced a dramatic rise, due to coordinated central bank policy, with Japan going negative, European bazooka, China ease, and FED backpedalling. They did not rise due to earnings which are now down for 3 quarters in a row.

You have the correct premise for normal times such as we have experienced for the last 5 decades. Now, the FED cannot “normalize” and we are not in normal times. We are in the time of massive government intervention to “save” us, attempting to repeal the business cycle.

+++++++++++++++++++++++++++++++++

60 million people on food stamps but there is full employment. Really? You must be reading government statistics.

#153 Billy Bob on 04.01.16 at 12:42 am

Ive mentioned on this blog that Chinese ARE driving house prices to ridiculous level. NOT locals.
My Hedge fund buddy say ABSOLUTLY!
Heres his comments:

China’s foreign currency reserves dropped by $28.6 billion to $3.20 trillion in February. China’s reserves also fell $99.5 billion in January and $107.9 billion in December.
For 2015 as a whole, its reserves fell $513 billion, the largest annual drop on record. The $3.20 trillion at the end of February was the lowest level since December
2011.
Money continues to flow out of China and into assets all around the world, pushing up prices globally. Just look at what’s happening to residential real estate in
Toronto and Vancouver. The B.C. Real Estate Association recently stated that housing sales in February were +44.7% compared to the same month last year. This
was 1,480 units higher than the previous sales record for February which was set in 1992. It’s really tough to pinpoint exactly what the end result will be here, but in
our opinion, these types of actions are extraordinary. Dealogic notes that just one month into 2016, Chinese firms have already announced plans to buy 66 foreign
companies worth $68bln which is equivalent to 60% of the value of all such deals last year.
Here are some of the deals that have been announced publicly so far in 2016:
• March 14th , 2016: China’s Anbang Insurance Group consortium bids $12.9 billion for Starwood Group, a U.S. hotel operator. Starwood has previously agreed
to a merger with Marriott International.
• March 12th, 2016: China’s Anbang Insurance Group acquires Strategic Hotels & Resorts from Blackstone Group for $6.5 billion.
• March 9th, 2016: China Three Gorges Corp, the nation’s largest hydropower operator, and state-owned electricity supplier China Guodian Corp is rumoured
to be bidding for Blackstone Group’s German offshore wind farms. The companies are in the second round of auction, which could be valued at $1.8 billion.
• March 3rd, 2016: As per the Financial Times article on March 3rd, 2016, Pengxin, a Shanghai real-estate developer is trying to acquire S. Kidman & Co. cattle
empire to become the world’s largest private land-owner. The group is the lead bidder for 77,000 sq km of Kidman grazing lands. Last November, Australia
blocked the $350m AUD sale but Pengxin rebid after excluding lands near an international weapons testing ground.
• February 17th, 2016: Tianjin Tianhai Investment Co announced the acquisition of Ingram Micro for $6.1 billion. Ingram Micro is the largest distributor of IT
products in the world. The deal is pending regulatory approval.
• February 3rd, 2016: China National Chemical Corporate or ChemChina, offered $43 billion for Switzerland’s Syngenta, a global supplier of pesticides and
seeds. If approved by regulators, this purchase would be the largest ever by Chinese Corporation.
• January 26th, 2016: Zoomlion Heavy made a $3.3 billion bid for Terex Corporation, a U.S. manufacturer of aerial work platforms, construction cranes and
materials processing equipment. Terex had previously announced a merger with Konecranes. The deal is pending regulatory approval.
• January 14th, 2016: China’s Qingdao Haier Group agreed to buy GE’s appliance unit for $5.4 billion. The deal is targeted to close in mid-2016, according to
company statements. It is still subject to shareholder and regulatory approval. Haier’s purchase price is $2 billion more than the $3.3 billion Electrolux had
agreed to pay for the business.

We can all agree that the pace of acquisitions by Chinese companies has accelerated so far in 2016 as evidenced by the flurry of transactions listed above. Foreign
money continues to pour into residential real estate as well. In our opinion, as long as this pace of investment continues, prices should continue to go up. That said,
it’s really tough to see this trend as being sustainable long term. When this flow of money stops, and we do say when, we do see the possibility of downside to assets
which have benefitted from this extraordinary flow.

#154 Blacksheep on 04.01.16 at 1:08 am

Harvey # 143,

“All you people on here think you have problems. I live in a 15 x 30 with poisoned water. You stole all the land off of us and now you sell it to the next occupiers. Shame shame shame on you’s. Your judgement day is coming.”
——————————————-
There were no humans in North America, 15,000 years ago. We are ALL immigrants, your ancestors just got here, before mine.

http://www.athenapub.com/10Dixon.htm

Liberate your mind and leave the res-system behind.

#155 Fed-up on 04.01.16 at 1:10 am

http://www.grrrgraphics.com/images/janet_yellen_wolf.jpg

#156 ILoveCharts on 04.01.16 at 1:19 am

Re: #147 ROCK BEATS PAPER

The fed has backed off QE and started raising rates and indicated that they will keep raising rates?

What more do you want?

#157 steerage steward on 04.01.16 at 1:53 am

Is this the most obvious bubble in history?

Certainly there have been many bubbles, but as Garth mentioned, everyone and their dog is ringing the gong on this one. Perspective home owners in 604 tell me they know homes are ridiculously overpriced, but some one will pay more later.

Everyone seems to know, they just think there is a greater fool

#158 pwn3d on 04.01.16 at 2:03 am

So, I sold my current place in the GTA today. Calculated my annual return including compounding to be 10% over 11 years. Yup, almost 3x the original sale price in 11 years. Sales mix, lol.

The market right now is insane. Tons of shoppers, not enough inventory. Many people wanting to downsize but would not sell first, they wanted a place bought before selling as they were afraid they couldn’t find something after they sold. And I will say that the vast majority were local. One or two sniffing around were self admittedly HAM but no offers from them. Too small I guess.

#159 Chris on 04.01.16 at 2:05 am

What is going to happen to oil price? Tesla jist unveiled its model 3 which starts at $35k. It is going to be a revolution. Have you reserved yours?

#160 Freedom First on 04.01.16 at 2:06 am

#126 data

Smart people have a balance. Go find one and ask -Garth

………………………………………………………

Now that, is perfection.

#161 Randy Randerson on 04.01.16 at 2:13 am

Yup, bragging you have 4 condos, or 4 cars, or 4 whatever touchable items, will always sounds a lot better than saying you have a 6 figures balanced portfolio that churns out dividends. Human beings are still stuck in the caveman mentalities.

#162 Mark on 04.01.16 at 2:30 am

“The data the FED used to say it looks at is employment, which is practically at full in the US”

The ‘problem’ with the ‘data’ is that nobody believes it. Its not credible. Unemployment in the US is rampant, with even basic entry-level positions receiving hundreds, sometimes thousands and resumes. With the STEM sector having unemployment/underemployment at extreme levels. It would be a giant policy mistake for the Fed to raise rates when the economy is so weak.

#163 Mark on 04.01.16 at 2:31 am

Ross Kay talking at length about what essentially amounts to the “sales mix” and its profoundly distorting influence on the “Canadian” RE market.

https://www.youtube.com/watch?v=wvFtTOrNb5E

#164 JSS on 04.01.16 at 3:02 am

^ #148 Tony

Give cold hard facts that CWB will be “in the top 3 for a major bank default”.

Fact: CWB’s Payout ratio for their common shares is ~ 35%, lower than any other Canadian bank. They’ve increased their dividend every year since the early 90’s.

#165 Oswald Campbell on 04.01.16 at 3:35 am

DELETED

#166 Shane on 04.01.16 at 4:06 am

So let me get this straight. Vancouver people are different and crazy and that’s what’s causing runaway prices. Calgary people are smart and not crazy so their real estate is stable.

I think I got it now. But this frenzy bugs me.

#167 LP on 04.01.16 at 5:47 am

#68 A blog dogs’ dog on 03.31.16 at 8:05 pm
************************

W-a-a-y back, they sold Steen’s Dairy ice cream, made in the nearby town of Erin. Yum!!!

#168 Cottingham house a bargain . Will change my handle soon on 04.01.16 at 7:22 am

16 at 5:32 pm
“atssa my boy”

Italophobia eh Garth? And you just lectured us on racism!

Italian is a race? — Garth
——

The behavior Garth highlights among the Italian community is far from racist. It is a well known fact that the community leads the obsession for real estate like none other including Asians , who , for the most part ,are “Johnny come latelys ” paying top dollar . The need to own RE is so deep seeded among Italians you might as well try to convince the Pope that there is no God.

Whether the Asians make out as well as the Italians have remains to be seen

#169 bigrider on 04.01.16 at 7:30 am

#15 Penny Henny on 03.31.16 at 5:39 pm

“Attsa my boy,” she coos.-GT

Making fun of Italians? If Big Rider said that you would accuse him of stereotyping.

Uppa, uppa, uppa.

It’s Armenian. — Garth
—————-

So good to see that my “uppa Uppa UPPA” stands the test of time on this blog. I haven’t posted in a very long time.

As for the ‘attsa my boy’ coming from an Armenian as Garth highlights, the saying must have been adopted from the Italian community into the Armenian one as there simply is not another community so absolutely obsessed with real estate as Italians.

Asians are very late comers.

#170 Willdaman on 04.01.16 at 7:46 am

#28 kommykim
The reason those shares have a high yield is because they are NVCC (non-viable contingent capital). This is what will be “bailed in” instead of deposits if the bank fails.

Incorrect. Those securities are not yet issued. Preferred owners will never be in a forced bail-in situation. — Garth

———————–
Being NVCC compliant means that these prefs are subject to “bail-in” (in this case, the prefs are converted into commons, which essentially knocks you down in the pecking order in the unlikely scenario that winding down/liquidation occurs since prefs outrank commons).

Not sure where Garth is getting his information from.

Here is the exact wording from the prospectus:

Effective January 1, 2013 in accordance with capital adequacy requirements adopted by the Office of the Superintendent of Financial Institutions Canada (“OSFI”), non-common capital instruments issued after January 1, 2013, including the Series 7 Preferred Shares and the Series 8 Preferred Shares, must include terms providing for the full and permanent conversion of such securities into Common Shares upon the occurrence of certain trigger events relating to financial viability (the “Non-Viable Capital Contingency Provisions”) in order to qualify as regulatory capital.

Upon the occurrence of a Trigger Event (as defined herein), each Series 7 Preferred Share and, if issued, each Series 8 Preferred Share will be and will be deemed, for all purposes, to be, automatically converted (a “Contingent Conversion”), without the consent of the holders thereof, into that number of fully-paid common
shares of the Bank (“Common Shares”) determined by dividing a multiplier of the Preferred Share Conversion Value (as defined herein) by the Conversion Price (as defined herein).

“Trigger Event” has the meaning set out in the OSFI Guideline for Capital Adequacy Requirements
(CAR), Chapter 2 ─ Definition of Capital, dated December 2014, as such term may be amended or superseded by OSFI from time to time, which term currently provides that each of the following constitutes a Trigger Event:

(a) the Superintendent publicly announces that the Bank has been advised, in writing, that the Superintendent is of the opinion that the Bank has ceased, or is about to cease, to be viable and that, after the conversion of the Series 7 Preferred Shares, the Series 8 Preferred Shares and all other contingent instruments issued by the Bank and taking into
account any other factors or circumstances that are considered relevant or appropriate, it is reasonably likely that the viability of the Bank will be restored or maintained; or

(b) a federal or provincial government in Canada publicly announces that the Bank has accepted or agreed to accept a capital injection, or Equivalent Support, from the federal government or any provincial government or political subdivision or agent or agency thereof without which the Bank would have been determined by the Superintendent to be non-viable.

#171 Everybody does it on 04.01.16 at 7:47 am

Saudi Arabia wants to build a $2 trillion mega-fund — and fundamentally change its economy

http://www.businessinsider.com/saudi-arabia-plans-huge-sovereign-wealth-fund-2016-4

Time to stop betting against the flow?

#172 Count me in on 04.01.16 at 7:57 am

#159 Chris on 04.01.16 at 2:05 am

What is going to happen to oil price? Tesla just unveiled its model 3 which starts at $35k. It is going to be a revolution. Have you reserved yours?

======

Demand for Teslas has always been high, but now it has officially gone through the roof. If Model 3 preorders are any indication, the automaker has a hefty workload on its hands.

In the 24 hours leading up to the debut, Tesla took more than 125,000 preorders worldwide.

http://www.businessinsider.com/the-model-3-is-teslas-biggest-gamble-here-are-the-risks-2016-3

#173 Natives on 04.01.16 at 8:04 am

#143 Harvey Eagle- Child on 03.31.16 at 11:12 pm

All you people on here think you have problems. I live in a 15 x 30 with poisoned water. You stole all the land off of us and now you sell it to the next occupiers. Shame shame shame on you’s.Your judgement day is coming.

===

I am an immigrant and truly ashamed to see the living conditions of the native people in this country. It’s beyond shame.

#174 SI2K on 04.01.16 at 8:07 am

Gen Xers are an average of forty-five. It’s pretty much buy now or live with our emphysema and adult children in smoky rooming houses forever. We mitigated the risk by doing our move-up buy outside of a large urban centre, but we did feel railroaded into buying after dealing with the rental market for a few months. We even part-own a paid-for house in upstate NY already, but it’s a dying industrial town – no jobs – my family has long since scattered to more employment-rich regions.

Someone should do a study on the rental market near big job hubs, because it’s abysmal for Gen-X and millennial families. We were paying $3000 smackaroos in Toronto for a three-bedroom in a nice ‘hood near the subway sandwiched between three groups of smoketastic party students. (Yes, our lease is non-smoking. A very funny joke in a landlord’s market, apparently.) In one of the crappiest ‘hoods friends of ours pay $2800 for a proper three bedroom condo (i.e., more than 800 sq. ft.) for their family of five. There are no affordable units big enough for medium to larger families. These poor 8-person-family Syrians sitting in hotels, we could have told them that. We considered the Staybridge Suites ourselves after seeing the rental market in our chosen suburb!

I read a blog by a young person recently that talked about how we don’t have the ‘choices’ in jobs and housing that the boomers and silent gen took for granted, and that they don’t appear to be aware of that. Usually when it looks like entire swathes of people are making similar not-ideal choices, there’s an economic force behind that. We’re doing the best we can to raise kids in the economic recession we were given. I cried when we bought our new house for the price we paid ($489K in a satellite market, not bad all things considered,) but we’ve got to put these teens somewhere. Hopefully at least they’ll launch at twenty unlike the previous cohort.

#175 crowdedelevatorfartz on 04.01.16 at 8:12 am

@#159 Chris

Lets look at the Tesla car “sale” shall we?

People lined up for days to be able to put a $1000 “reserve bid” sight unseen on a vehicle that may be delivered in late 2017.
So Tesla gets thousands of people to give him millions of dollars for something that hasnt even been built yet……………

Sound vaguely familiar?

#176 Willdaman on 04.01.16 at 8:17 am

#132 kommykim
The spread isn’t that large over what’s already out there (non NVCC) which implies that the market doesn’t think that a “bail in” is anything more than a very remote possibility.
——————————
The CWB spread at 5.47% is huge (as is the yield). If the bail-in was only a remote possibility, then why would the spreads for NVCC be getting bigger?

I’ve been watching new pref issues closely, and both the spreads (and the yields) have been getting bigger (depending on the creditworthiness of the issuer of course).

Regarding spreads, they were decreasing since the GFC, going from the 4%+ neighbourhood which the banks bought back already, and replaced with lower spreads, down to ~2% range for bank issues.

These lower spread issues have been NVCC. e.g. TD.PF.A issued ~June 2014 at 3.9% +2.24% spread.

In the last 4 months or so, banks have been issuing these crazy high spreads again (all NVCC). e.g. TD.PF.G issued ~Jan 2016 at 5.5% + 4.66% spread.

If you look at the 2 most recent Royal Bank prefs, issued within 3 months of each other, you’ll see that they actually increased the spread in the later issue.
RY.PR.O (Dec 2015) – 5.5% + 4.53% spread
RY.PR.R (Mar 2016) – 5.5% + 4.8% spread

So obviously the sentiment has changed in the past couple years about the risks involved in NVCC prefs and bail in possibilities, that’s why the spreads have been getting higher. I think the risk is very small so I’ve been gobbling up as much of these new issues as I can.

Pref yields are rising for the reasons given here some time ago. Rates will be rising steadily and slowly as the months and years roll by. This is unrelated to any mythical, fabricated, imagined and non-existent bail-in. — Garth

#177 Tony on 04.01.16 at 8:26 am

Guess on U.S. jobs report: 169,000.

Wrong again. It was 215,000. Another outstanding month for American workers. — Garth

#178 Ace Goodheart on 04.01.16 at 8:26 am

RE: “Summerhill is uber posh? You should get out more. — Garth”

You and I obviously have a very different idea of what “Posh” means. Yes, to me, Summerhill is quite the dish, if one could afford it (I cannot). But as I said, I do live in Toronto, and if that semi was listed in my neighbourhood, it would be selling for slightly over 500K.

It is not remotely necessary to pay 1.9 million for a semi in Toronto. But it is, if you want to live in Summerhill (or any of the other popular spots).

You could not build that structure for $500,000, including 26 feet of dirt, anywhere in the GTA. And, no, Summerhill is no Rosedale, Lawrence Park or even Leaside. — Garth

#179 crowdedelevatorfartz on 04.01.16 at 8:27 am

@#153 My name is Brazil I used to be Pat
“60 million people on food stamps but there is full employment. Really? You must be reading government statistics.
*******************************************

No they just live on planet earth and dont have to worry about Zika infested mosquitos swarming all around a feces laden Olympic rowing venue while millions of protesters bang pots and pans to protest a corrupt President that refuses to resign while the economy sinks to its worse levels since the 1930’s
Enjoy the beach but wait at least 6 months before having baby making “boom boom” with one of the local gals. You may have been bitten and not even know it.
I went golfing in Vancouver yesterday , 21 cel and no mosquitos, my car wasnt jacked while driving home, the police didnt demand a bribe, mudslides in the favelas didnt unlease a muddy tsunami of dead into the streets below, and the banks will proclaim record profits once again.
Hows that 13% savings account doing? Reposessed yet? Enjoy the elevator rides of life. They go UP and DOWN. The smell is just karma

#180 TurnerNation on 04.01.16 at 8:28 am

What housing market? Several coworkers – with household income of 200k+ – state they’d never be able to afford their houses at current levels.

In Markham, North York, N. Toronto.

Anyone can afford to get started on a balanced port. Sustainability. (Isn’t that a buzzword of Millenial teaching? )

#181 jess on 04.01.16 at 8:39 am

http://www.bloomberg.com/features/2016-how-to-hack-an-election/

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

#182 Grey Dog on 04.01.16 at 9:01 am

Kawartha Lakes ice cream sold in Costco is INFERIOR!!! Do your own blindfolded taste test with a friend with the authentic original ice cream. I never buy KL ice cream in Costco after that. I buy a tub of it elsewhere in grocery stores around Unionville.

#183 Brazil ex-pat on 04.01.16 at 9:03 am

#179 crowdedelevatorfartz on 04.01.16 at 8:27 am
@#153 My name is Brazil I used to be Pat
“60 million people on food stamps but there is full employment. Really? You must be reading government statistics.
*******************************************

No they just live on planet earth and dont have to worry about Zika infested mosquitos swarming all around a feces laden Olympic rowing venue while millions of protesters bang pots and pans to protest a corrupt President that refuses to resign while the economy sinks to its worse levels since the 1930’s
Enjoy the beach but wait at least 6 months before having baby making “boom boom” with one of the local gals. You may have been bitten and not even know it.
I went golfing in Vancouver yesterday , 21 cel and no mosquitos, my car wasnt jacked while driving home, the police didnt demand a bribe, mudslides in the favelas didnt unlease a muddy tsunami of dead into the streets below, and the banks will proclaim record profits once again.
Hows that 13% savings account doing? Reposessed yet? Enjoy the elevator rides of life. They go UP and DOWN. The smell is just karma

++++++++++++++++++++++++++++++++++++

Hello Mr I smell like farts

I see you still believe the Zika scam. No one in Brazil does.

Ummm….you know Brazil is the 5th largest country on earth right? There are zillions of beautiful clean beaches.

13% savings doing fine. How is that 2 million dollar moldy shack you will never afford to buy doing? How’s the free healthcare $250 a month MSP with the 26 page list of “whats not covered in BC’s FREE healthcare system working for you? My friend is all better with the physio and drugs she got everyday along with the FREE parking at the hospital. Unlike the one day a week and pay for drugs and pay for parking you get in Bring Cash.

Going to go eat a beautiful $4 steak now with fresh veggies and giant avocado salad while my wife and I watch all the hot beautiful people walk by.

Yeah….I looked at the forecast. Two days of sunny weather in Moldcouver. Now back down to clouds, rain and 6 degrees at night. Enjoy !!

#184 Brazil ex-pat on 04.01.16 at 9:07 am

#175 crowdedelevatorfartz on 04.01.16 at 8:12 am
@#159 Chris

Lets look at the Tesla car “sale” shall we?

People lined up for days to be able to put a $1000 “reserve bid” sight unseen on a vehicle that may be delivered in late 2017.
So Tesla gets thousands of people to give him millions of dollars for something that hasnt even been built yet……………

Sound vaguely familiar?

+++++++++++++++++++++++++++++++++++

yeah….sounds like Bumbardier. Whom still owes the taxpayers 1.5 billion dollars for 20 years of free public money. Your KeeBec tax dollars at work.

#185 WalMark of Sadkatoon on 04.01.16 at 9:12 am

America jobs booming

http://www.businessinsider.com/us-jobs-report-march-2016-2016-4

USA! USA! USA!

#186 Grey Dog on 04.01.16 at 9:16 am

Garth, speaking of Unionville, if you are wanting some guidance in what to stock in your Belfountain store, you must visit The Village Grocer in Unionville on 16th between Warden and Kennedy, north side. You must bring Dorothy too. Ask to speak to Evan it is all his vision. He is brilliant and certainly knows what to stock shelves with.
If you see a Grey Dog hitched to the patio post that won’t let you touch her cause she is waiting for her Mother running an errand inside, it’s mine.

#187 Andrewt on 04.01.16 at 9:21 am

#2 True… but also False on 03.31.16 at 5:06 pm
What you espouse is true.
BUT, with the same logic, those renting for the last several years have been burned badly, in that they are now priced out of the housing market.

Call it dumb luck

Or perhaps, we the blog readers have failed to realize one important thing. Governments are not going to let housing bubble pop. Just look at BC’s Christie Clark.

Oh man. There’s always comments like this one that assume there are only two types of people in this country; those who own houses and those who don’t but wish they did, and will always remain unfulfilled so long as they remain renters. Sure, there’s a mania with regards to owning property in Canada, but it’s not affecting everybody.

#188 Dups on 04.01.16 at 9:28 am

CAD dollar is in the way down for new records.
Happy April Fool$

#189 preet89 on 04.01.16 at 9:31 am

Justin gains in popularity every day! Perez Hilton is even tweeting about him now!! No other world leader can plank like our Justin can!!!

#190 Willdaman on 04.01.16 at 9:41 am

#176
Pref yields are rising for the reasons given here some time ago. Rates will be rising steadily and slowly as the months and years roll by. This is unrelated to any mythical, fabricated, imagined and non-existent bail-in. — Garth
___________________

Not sure if you’re confusing yields vs spreads, or just not understanding how this works (specifically what the implication of NVCC is that is being built into all new bank prefs).

The actual potential of rising interest rates have of course impacted what the banks have set as the initial yield of new prefs. Couple years ago, the yields were like 3% at issuance, whereas now they’re 5%+.

I was focused on the spread premium at reset. i.e. by how much % higher above the 5yr Bank of Canada bond rate that a pref would reset in 5yrs from issue date.

The spread premiums have been rising in the past couple of years for NVCC prefs. If you have an explanation for that, I’m all ears.

IMHO the spreads have been getting bigger because there has been fear in the Cdn economy, with people laden with crazy debt. Debt defaults impact banks, and however infinitesimally small a risk, the risk of the NVCC trigger being pulled has inched higher over the past couple of years (again, however small that risk is). This is why the spreads for bank NVCC’s have been getting bigger, and dragging new pref resets for non-bank non-NVCC issuers with it (e.g. MFC).

#191 Down and out on 04.01.16 at 9:52 am

Windsor-area real estate market ‘feeding frenzy’ Today’s headline in the Windsor Star .This is the end.

#192 Bat Flipper on 04.01.16 at 10:01 am

Green Belt? What Green Belt!
In the last few months a few stories have gone under the radar.

Golf courses being sold for real estate development:
http://globalnews.ca/news/1692175/toronto-area-golf-club-to-sell-for-more-than-400-million/

**These golf courses aren’t all in downtown Toronto either. Some of them are surrounded by farms leading one to believe that the farms around the golf courses are also on course for future developments.

A new city coming soon, Seaton:
https://www.newseaton.com/

It’s said the population could be close to 70K.

What this all adds up to is that there is no limit on sprawl, so obviously prices aren’t going up because lack of development room, there is plenty.

#193 A blog dogs' dog on 04.01.16 at 10:39 am

#167 LP on 04.01.16 at 5:47 am
#68 A blog dogs’ dog on 03.31.16 at 8:05 pm
************************

W-a-a-y back, they sold Steen’s Dairy ice cream, made in the nearby town of Erin. Yum!!!
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

steen’s for milkshakes but kawartha for ice cream. Steen’s isn’t made in erin anymore, production shifted to guelph a few years ago, big plant in the southend.

#194 cramar on 04.01.16 at 10:48 am

#171 Everybody does it on 04.01.16 at 7:47 am

Saudi Arabia wants to build a $2 trillion mega-fund — and fundamentally change its economy

http://www.businessinsider.com/saudi-arabia-plans-huge-sovereign-wealth-fund-2016-4

Time to stop betting against the flow?

———————–

Talk about shutting the barn door long after the horse is gone and died! If they had the brains to do this 40 years ago, they would rule the world financially today.

#195 cramar on 04.01.16 at 10:50 am

#191 Down and out on 04.01.16 at 9:52 am

Windsor-area real estate market ‘feeding frenzy’ Today’s headline in the Windsor Star .This is the end.

—————————

BRING IT ON!!!

http://windsorstar.com/business/local-business/windsor-area-real-estate-market-feeding-frenzy

#196 Ace Goodheart on 04.01.16 at 11:01 am

RE: “You could not build that structure for $500,000, including 26 feet of dirt, anywhere in the GTA. And, no, Summerhill is no Rosedale, Lawrence Park or even Leaside. — Garth”

I think you might need to “get out more”. You wouldn’t need to build that structure for 500- 600K, you could purchase something better (a detached structure, similar size) right here:

https://www.realtor.ca/Residential/Single-Family/16756254/48-MAHONEY-AVE-Toronto-Ontario-M6M2H4-Mount-Dennis

https://www.realtor.ca/Residential/Single-Family/16676131/63-MAHONEY-AVE-Toronto-Ontario-M6M2H5-Mount-Dennis

https://www.realtor.ca/Residential/Single-Family/16746751/72-GREENDALE-AVE-Toronto-Ontario-M6N4P6-Rockcliffe-Smythe

https://www.realtor.ca/Residential/Single-Family/16684092/3-HUMBER-BLVD-S-Toronto-Ontario-M6N2H2-Mount-Dennis

Here is a little primer on Summerhill real estate. It has its own spot in popular real estate magazines:

http://torontolife.com/real-estate/houses/house-of-the-week-154-cottingham-street/

Yes it’s ritzy. Not the most ritzy, but posh enough to be out of a lot of people’s ball parks.

Fortunately as I have shown above, you don’t need to live there and you can buy a detached house, with a driveway, for much cheaper, provided you don’t mind compromising on your “90210” address.

Funny that you call those comparables. Sure hope you are not a realtor. — Garth

#197 waiting on the westcoast on 04.01.16 at 11:20 am

From the jobs report…

“Average hourly earnings rose 0.3% from February’s and 2.3% compared with the same period last year, beating forecasts.”

This is a really good sign as not only did the number of jobs exceed estimates again but there is pressure to increase wages. This will hurt company profits short term but help the economy overall as more workers making more money means more spending…

#198 TRT on 04.01.16 at 11:25 am

The worsening ‘economy’ means some families Exeter depressionary times. Most continue to enjoy the good life. Just like most did in 2008/2009.

#199 Damifino on 04.01.16 at 11:53 am

#64 Chaddywack

“The Italians bought up all of the property in East Vancouver in the 60s and 70s. Built Vancouver Specials with ugly lion statues on the fences. People were complaining back then about the Italians.”

That’s my favorite part of town. I even lived there for a while back in the early 80s. The people are very house proud. They grow grapes in their backyards and make wine. Their places are neat as a pin. Quiet, spotless neighborhoods where you can still park on the street.

To experience a sobering contrast, take a walk past the extremely ugly condo carnage surrounding the Olympic Village.

I’m thankful the Italians preserved at least a little piece of the old city.

#200 For those about to flop... on 04.01.16 at 12:00 pm

As you all can tell by my GAP code I was born in the mid 70’s ,on the island state of Australia.Tasmania
In primary school ,I think you guys call it elementary k-6 there were no coloured people at the school.
In high school there were two African kids and two Asian kids belonging to the same adopted family with white parents.
The whole city I grew up in was white ,except for a few aboriginals who unfortunately were looked down on as second class citizens.
Fast forward 30 odd years I live in the South Hill area of Vancouver and my life is now the opposite,white people are in the minority but life just bumbles on.
The area is full of Indians,Phillpinos,Chinese and Europeans and in the last 14 years I have seen no racial conflict in the neighborhoods.
My next door neighbor is Chinese,across the road same sex couple Caucasian,across the back ally…Muslims,two doors down Phillpinos.
I am surrounded by diversity and there is nothing but respect for one another.
As I jokingly stated yesterday that my hairdresser is Chinese ,it got me thinking about all the other immigrants I have to co – exist with and the businesses I frequent.
I might as well start of with the most important person:

My wife …Hindu
Doctor….Muslim
Dentist….Chinese
Hairdresser….Chinese
Financial Adviser….Chinese
Tax Accountant….Hindu
Member of parliament…Phillpino( I live in a different riding) by a couple of blocks.
All the restaurants….Chinese,Vietnamese,Phillpinos.
All the Fruit and Veg stands(11 in 5 blocks) Chinese and Muslim ,Indians.

There is a supermarket that has mainly white workers that’s it .

If you are racist than this hood is not for you.

Some people stated the other day that multiculturalism dosen’t work,well my hood is blue collar and it’s working just fine.
I’m sure things have changed in Tasmania and I bet you there are a lot more immigrants,but if I went back and it was all still Caucasian that would just be weird to me now.
The world is changing and you should embrace it not be bitter about it,you can’t be friends with everyone and I don’t have any social media accounts but if I did I would like to be the first person with 7.5 Billion friends…

M41BC

#201 Robert on 04.01.16 at 12:08 pm

Land rush or land grab, it’s an under-regulated commodity market that has attracted the attention of the overseas mercantile class. It’s intensifying, not diminishing. Will the tide subside when millions of millionaires are in the game? Think not
http://www.theglobeandmail.com/life/home-and-garden/real-estate/vancouver-homeowners-cashing-out-for-smaller-markets-with-more-space/article29492020/

#202 Rational Optimist on 04.01.16 at 12:27 pm

152 Brazil ex-pat on 04.01.16 at 12:38 am

“60 million people on food stamps but there is full employment. Really? You must be reading government statistics.”

Most Americans receiving food stamps are employed. One is eligible until income exceeds 130% of the poverty line.

The Supplemental Nutrition Assistance Program is intended for employed families, to supplement their income. Try again.

#203 bdy sktrn on 04.01.16 at 12:33 pm

#64 Chaddywack on 03.31.16 at 7:55 pm
The Italians bought up all of the property in East Vancouver in the 60s and 70s. Built Vancouver Specials with ugly lion statues on the fences.
————————————————–
lion statues? aren’t those chinese?

itals like their cement.brick,tile but i think the lions are newer with the hk migration in the 80s

i can ask my neighbour of 20 years, Giovanni, he’ll tell me. he still grows and crushes grapes every year.

————
otherwise last night was a school fundraising dinner for the local HS. Used to be mostly ital. Then went heavily chinese . These days it’s the UN. At our table of parents a cpl of immigrants from palestine(a first for me and so wonderful people) , a cpl who were vietnam ‘boat people’ refugees (at the age of 16) , all awsome ppl who are quite successful here in van through hard work it seems.

people just keep coming. a few younger ones left (many will return after a winter elsewhere) but way more with cash keep on flooding in.

the newest guy(wife 3 kids) on the block (paid well over a mil for an old timer) is moving in soon, he’s a failed 604 refugee – he tried victoria but couldn’t stomach it and came back to van.

#204 Doug in London on 04.01.16 at 12:36 pm

Yesterday I saw The Big Short and, wow, did I ever see some strong parallels with what’s going on here, especially in Toronto and Vancouver. You would think that, in a country where we get a lot of information and influence from our nearest neighbour, namely the USA, and have seen what happened there we should know better.
At the end of the movie the main character said: most of the blame for what happened was put on immigrants and poor people. Does that idea appear at all familiar?

#205 american in Victoria on 04.01.16 at 12:38 pm

Just a personal story – we owned a cute little 2-bedroom house in North Carolina (Durham/Chapel Hill area) from 1998 to 2009. We bought for 113K and sold for 220k. Prices in our neighborhood of 1920-1950’s bungalows and craftsmen did not drop at all in the crash.

#206 common sense on 04.01.16 at 12:46 pm

Great US jobs report…

Let’s see the real number revised next month.

It’s all perception..See D. Trump for details.

#207 Ace Goodheart on 04.01.16 at 12:56 pm

RE: “Funny that you call those comparables. Sure hope you are not a realtor. — Garth”

Nope not a realtor.

If they are not comparable, then there could be two reasons. First, they are in a crappy location (admitted, that is why single family homes can be purchased there for under 600K)

Second, they are not as nice inside, not as well renovated, not as fancy. If that is true, then again, the 1.9 million dollar semi you featured, is different than a regular, detached house in one of Toronto’s less popular neighbourhoods.

So, what I am saying is, why not post in your blog that people are buying detached houses in Toronto for under 600K, with driveways, leafy backyards, three or four bedrooms, nicely renovated…?

Because they are.

Many of the houses I posted, have been on “Realtor.com” for more than two weeks. They are not being sold in bidding wars. They likely are being sold at or slightly below asking.

#208 IHCTD9 on 04.01.16 at 1:06 pm

#171 Everybody does it on 04.01.16 at 7:47 am
Saudi Arabia wants to build a $2 trillion mega-fund — and fundamentally change its economy

http://www.businessinsider.com/saudi-arabia-plans-huge-sovereign-wealth-fund-2016-4

Time to stop betting against the flow?

____________________________________________

There is no reliable info on reserves from OPEC, they keep pumping but the reserve levels as reported never drop. Their agreements limits how much they can sell based on their reserves, so the reserves end up being depletion-proof :).

One thing we do know about SA is that they have been pumping water into their fields to maintain pressure for decades, and anecdotal evidence says water cut is 30%+, and that was stated 10+ years ago.

When an Oil field becomes unprofitable, it is depressurized and a lot of gas is released as the pressure drops. This is typically siphoned off and sold these days. You could watch for increased NG production coming from SA as a canary.

Or they could carry on like some ancient US wells that have been pumping Oil at 95+% water cut for decades on end, although they’d be broke long before that.

#209 Nemesis on 04.01.16 at 1:20 pm

#ChristyClarkResignsPremiership,JoinsArmstrongBCDiscalcedCarmeliteOrder…

#[email protected]

#ChinaDeclaresNewEastPacificAirDefenceIdentificationZone:[email protected]

#JustKidding… #InOtherBCNewsAPR01…

(CBC) – School closures in Penticton, Osoyoos, Summerland trigger protests

http://www.cbc.ca/news/canada/british-columbia/okanagan-school-closures-osoyoos-penticton-1.3511801

(Tyee) – ‘Devastating’ Cuts Recommended for Vancouver Schools: Board Chair: District staff propose cutting supports for students, teachers, to save $27 million.

http://www.thetyee.ca/News/2016/04/01/Vancouver-School-Cuts/

(Tyee) – BC Now Has Lowest Minimum Wage in Canada

http://www.thetyee.ca/News/2016/04/01/BC-Minimum-Wage/

(CBC) – Premiers’ exclusive fundraisers violate conflict of interest rules, says Democracy Watch

http://www.cbc.ca/news/canada/british-columbia/premiers-exclusive-fundraisers-violate-conflict-of-interest-rules-says-democracy-watch-1.3516189

#210 IHCTD9 on 04.01.16 at 1:25 pm

#189 preet89 on 04.01.16 at 9:31 am
Justin gains in popularity every day! Perez Hilton is even tweeting about him now!! No other world leader can plank like our Justin can!!!
___________________________________________

Having a gutter wallowing, waste of skin douchebag like Hilton associating himself with you is bad – not good.

#211 Huuk on 04.01.16 at 1:44 pm

Garth,

This statement –

“But when doing so in the apex of time when prices have never been higher and after years of asset inflation – and with money which cannot get cheaper – the risk is extreme.”

Is literally what has been said by those predicting a market crash in Toronto since at least 2010. I think we all agree after Q1 that 2016 is not the year of the crash/shrink/flatten.

Why is the risk more extreme today then anytime in the last 5 years?

#212 Nemesis on 04.01.16 at 1:45 pm

#Addendum…

(CBC) – Chicken rental business expanding into Premier’s Okanagan Riding

…Tompkins’s wife Marie, co-founder of Rent The Chicken, drew her inspiration from a recent BC Liberal fundraising dinner, saying, “Expansion into the Okanagan makes sense because people there are looking for food sources closer to their table.”…

The two-hen starter package runs at $425 plus tax, while the deluxe four-hen package is $600 plus tax.”…

http://www.cbc.ca/news/canada/british-columbia/chicken-rental-okanagan-1.3515647

#213 IM in C on 04.01.16 at 2:21 pm

Garth. The great housing crash occurred because, in America, they gave NINJA loans, in 10 states they have non recourse mortgages, and finally, a lot of those mortgages had ‘teaser rates’ which after 2 or 3 years re-set to 13 %. Oh, and an American, unlike a Canadian , will walk away much, much sooner, rather then later.

#214 No property on 04.01.16 at 2:29 pm

RE the graph and its interpretation. “Over half are under the age of 45. See the evidence below.”
According to the report less than half are under 45 and the biggest category were middle-aged dudes and dudettes between 36 and 55, accounting for 2.5 of the 4.2 million foreclosed renters who onced own. Less than 0.5% were 18 to 25 but 8.5% over 65.
The % on the graph is the foreclosure rate per age group, not the percent of all foreclosed renters who once owned.
The data is in Table 3 here http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000652-Comparing-Credit-Profiles-of-American-Renters-and-Owners.pdf

#215 eetlim on 04.01.16 at 2:31 pm

Garth with all due respect, though you have really sound arguments as to why housing prices in the GTA will drop: high debt, worsening economy, low incomes given housing prices etcetc, you’ve been holding this same position since 2010 when I refused to buy on those using those same arguments. Yet housing prices keep going up. I somehow think it’s fueled way more by foreign buyers, not people who actually make a living here. I feel I’m in a worse position now to buy than I was back in 2010, something I would’ve never thought. How are we so sure this pattern won’t continue?

#216 Herb on 04.01.16 at 2:44 pm

#203 bdy sktrn,

trying to never miss an opportunity to contribute to your education, I must tell you that lions are very much a European (and Italian) heraldic figure, art object and symbol, and were in common use there before Chinese lions or fu dogs were known in the Western world.

#217 Move On VREU on 04.01.16 at 2:58 pm

Hey VREU,

Young woman, I am seeing first hand what you fail to acknowledge – the market in Victoria and associated bedroom communities are on fire.

In my bedroom community, we went from a stagnant market since 2007 to a warmed up one in 2015 to a hot one in 2016. Houses are actually selling for inflated list prices, and usually within days. One year ago, those same houses could have 50 open houses and nothing but crickets.

Can you please tell me what EXACTLY is causing the surge is sales and prices? I will wait with baited breathe.

Please be specific so that you can be held accountable in a few years time when the market has changed to such a degree it will not be recognizable. It all about establishing credibility right? So lets get you on the path towards said credibility.

Is it is declining interest rates? No, they are the same. Is it the massively growing economy? No, its still a government town for the newly wed and nearly dead. Is it the massive population growth on this bustling Island? No,actual population growth is anemic.

Hmmmm…lets try to things of some reason as to why the sudden surge is sales. Could it be the rush to beat the new down payment rules? Na, that ended February 15th and the market is still hot. Could it be everyone just realized that we have low interest rates and have decided to catch up? As you have pointed out, we have had rates low for almost a decade now, so no.

The ‘Vancouver refugees’ have arrived whether you like it or now.

Where exactly are all those cash rich boomers selling their homes for millions on the West Side moving to? Do you really think that they are all downsizing and staying in Vancouver? Please, they have an opportunity to move into a new home instead of their crappy 40 year old house and pocket millions at the same time.

Again, please be sure to tell us EXACTLY what is behind the rise in prices and sales…

#218 Herb on 04.01.16 at 3:09 pm

#202 Rational Optimist,

The Supplemental Nutrition Assistance Program is intended for employed families, to supplement their income.

Does that (and the sentence preceding it) not tell you something about wages and business profitability in the USA?

Business (I assume only small) cannot pay for labour at rates that would meet living expenses and leave sufficient profit, so individual wages must be supported by the state from general revenue.

Where does this fit into the economic theory of capitalism?

#219 Flight of the Families on 04.01.16 at 3:15 pm

71 Flight of the Families.
Easy there trigger. Words like contagion, spreading.Kinda got my meter up into the red line. They are people not a disease. Tired, tired, tired.
——————-

I fail to see what you take offence to in the words ‘spreading’ and ‘contagion.’

Massively rising house prices are a contagion and a disease.

They misallocate capital away from productive investments in the economy. They strain pocket books and push more Canadians into living paycheque to paycheque. They place undue pressure on the physical and mental well-being of Canadians as they stress about being priced out, not having enough money to pay the mortgage or not enough to retire on. They solidify the stratification of society into the haves and have nots. They can lead to the decimation of local neighbourhoods and economies. They split families apart as children are forced to move away from their families to new areas of affordability. It amplifies generational divides between the youth that take on unprecedented debt and the baby boomers who did nothing but sit in their homes has interest rates declined for decades as their equity went through the roof.

Gee, these sure sound like things we don’t want to label as something negative like a contagion.

Be sure to cheer the rise of gas, the price of a car, the cost of your next imported iPhone, because the ‘spread’ of those inflationary increases should trumpeted if you like the spreading of RE price increases across BC.

People from all walks of life and in every sector have lamented the decline of Vancouver as a city. Why would you want that lamentation to spread to other parts of the province with the outflow of capital from that city causing the same destructiveness in other communities.

#220 oil-less economy on 04.01.16 at 3:21 pm

#207 IHCTD9 on 04.01.16 at 1:06 pm

What has your comment anything to do with Saudi Arabia wanting to build a $2 trillion mega-fund — and fundamentally change its economy?

#221 Rational Optimist on 04.01.16 at 3:30 pm

211 Nemesis on 04.01.16 at 1:45 pm

I read that and had a good laugh. But then, it turns out that’s NOT an April Fool’s joke? Is it possible that it’s not?

#222 Tesla car “sale” on 04.01.16 at 3:35 pm

#184 Brazil ex-pat on 04.01.16 at 9:07 am

#175 crowdedelevatorfartz on 04.01.16 at 8:12 am
@#159 Chris

Lets look at the Tesla car “sale” shall we?

People lined up for days to be able to put a $1000 “reserve bid” sight unseen on a vehicle that may be delivered in late 2017.
So Tesla gets thousands of people to give him millions of dollars for something that hasnt even been built yet……………

Sound vaguely familiar?

+++++++++++++++++++++++++++++++++++

yeah….sounds like Bumbardier. Whom still owes the taxpayers 1.5 billion dollars for 20 years of free public money. Your KeeBec tax dollars at work

====

Sounds pretty good achievement to me from a young entrepreneur, who is willing to put all his chips on the table.

What have you done lately?

On Friday, Musk announced on Twitter that his company generated roughly 180,000 orders in 24 hours. Less than two hours later, he said that the total is closer to 200,000.

By Musk’s math, 180,000 orders means that the automaker has booked about $7.5 billion in future sales. It’s based on a price of $42,000 a car.

The car’s base price is about $35,000, but it is expected to launch with versions that cost well above that.

Venture capitalist David Pakman, however, tweeted a different take that still leads to some impressive numbers. If the company books 200,000 preorders and actually sells cars to 70% of those buyers at the lowest-possible price, then it means the company has just locked in $4.9 billion in future sales, with little money spent on marketing.

And regardless of the eventual sell-through, what is already clear is that — with the 200,000 preorders that Musk announced — Tesla has raked in $200 million in interest-free cash.

#223 ROCK BEATS PAPER on 04.01.16 at 3:37 pm

#152 Brazil ex-pat on 04.01.16 at 12:38 am

+++++++++++++++++++++++++++++++++

60 million people on food stamps but there is full employment. Really? You must be reading government statistics.
____________________________________________

It does not matter what I or you think. Nor does the extremely low participation rate. The point is that the FED is “sucking and blowing” as Garth says. They say they will raise if unemployment is full (ie. their mandate). And the govt stats say unemployment is full, so why aren’t we several hundred basis points higher.

_____________________________________________

#156 ILoveCharts on 04.01.16 at 1:19 am

Re: #147 ROCK BEATS PAPER

The fed has backed off QE and started raising rates and indicated that they will keep raising rates?

What more do you want?
____________________________________________

They totally backpedalled from their indication (ie dot plot) and used the silly words “negative” interest rates in their jawboning.

What I would like is for the FED and all interventionists to go away until the next Crashing Crisis (hopefully not in your life time). Let the markets work, let capitalism flourish, and let the business cycle reassert itself. Thanks for asking.

#224 bill on 04.01.16 at 3:40 pm

#64 Chaddywack
#203 bdy sktrn
…as I recall the Italians went for ‘classical statuary’ and the lions were more Punjabi thing [I think]….
ie Singh = lion
not sure about the Chinese ever having a lot of ‘masonry’ about the place…our neighbours dont.

#225 james on 04.01.16 at 3:46 pm

Well you have to live somewhere Garth, better in a piece of your own personal heaven where you can plant crops and dig a well. When the great Apocalypse happens I’ll be ready. Better than bushing it down under the Granville Street Bridge in a rusty old Toyota Yaris.

#226 LP on 04.01.16 at 4:27 pm

#200 For those about to flop… on 04.01.16 at 12:00 pm
*************************

Boy, you are a breath of fresh air!

F68ON

#227 LP on 04.01.16 at 4:34 pm

And FTATF – I forgot to add that, just before coming here to the blog, I read an e-mail from the chair of a committee I sit on that hopes to sponsor a 3-person Syrian family.

Our application was submitted at 11:35PM last night, just under the wire. It’s a private sponsorship, no government money involved (for those who gripe about stuff like that).

All that hard work, prayers, filling out forms – you wouldn’t believe the forms! – and now we get to sit and wait. But for our 3 hopefuls, they will sit and wait in a refugee camp in Lebanon.

And yes, Garth; I know this isn’t a refugee blog.

F68ON

#228 cramar on 04.01.16 at 4:39 pm

I haven’t seen this mentioned on this blog. Garth is not the only one sounding the alarm:

http://www.canadianbusiness.com/investing/boomer-aged-investors-are-dangerously-overexposed-on-real-estate/

Hillard MacBeth is echoing Garth, except for calling a 40%-50% drop in residential values from the peak.

#229 hope & ruin on 04.01.16 at 4:48 pm

#216 Herb on 04.01.16 at 2:44 pm
#203 bdy sktrn

Lions at the end of a driveway or outside a house signifies that the house is paid-off and fully-owned. It’s an italian thing, sort of a status symbol.

source: went to school with a bunch of italians.

#230 Brazil ex-pat on 04.01.16 at 4:52 pm

#202 Rational Optimist on 04.01.16 at 12:27 pm
152 Brazil ex-pat on 04.01.16 at 12:38 am

“60 million people on food stamps but there is full employment. Really? You must be reading government statistics.”

Most Americans receiving food stamps are employed. One is eligible until income exceeds 130% of the poverty line.

The Supplemental Nutrition Assistance Program is intended for employed families, to supplement their income. Try again.

++++++++++++++++++++++++++++++++++++

So your suggesting making “mc wages” that are so low that you need to be part of SNAP full employment?

How about you try again.

#231 hope & ruin on 04.01.16 at 5:09 pm

#220 oil-less economy on 04.01.16 at 3:21 pm
#207 IHCTD9 on 04.01.16 at 1:06 pm

I don’t think that the Saudi’s move should be interpreted as moving towards an “oil-less” economy. Although lots of people like to put that spin on it.

Trying to position themselves to take advantage of an increase in industrial consumption, that long term means an increase in oil consumption. Ya they will re-structure their economy but not an “oil-less” economy. If anything more oil consumption.

#232 Mark on 04.01.16 at 5:28 pm

“Again, please be sure to tell us EXACTLY what is behind the rise in prices and sales…”

Please, for the love of whatever deity you worship (or don’t), listen to the Ross Kay interview concerning the sales mix and the sales chain that I pointed to up-thread.

Can’t say I agree 100% with Ross, but he generally has a pretty good head on his shoulders and remarkably our views on the RE market, derived almost entirely independently from each other, mesh almost to a “T”. He uses micro datasets. I use macro datasets. I hadn’t even heard of him until recently, so I was quite surprised at what essentially was a guy willing to go on record with his proprietary research into the Canadian RE marketplace.

#233 Calgary Rip Off on 04.01.16 at 5:29 pm

It really isnt the buy or rent dilemma that matters.

To many of the angry people that post here, myself included in the past, there are couple of ideas that are freeing:

1)Dont believe you are a victim. Things happen. Good things. Bad things. Sometimes it happens to you. Guess what? Eventually there will come a time when you cant breathe, and your heart doesnt beat. Cant deny it. Not if. When. So stop thinking that someone else is to blame for whatever.

2) It is not mortgage ownership or renting that brings happiness. What brings happiness is the ability to solve problems. Donald Trump once wrote that he always expected more of himself than anyone else, and instead of doing the minimum to get by at Wharton, he studied real estate as a hobby and read books on finance when he had time, as in daily, for hours. There are other things related to decision making where a person can study: Poker: In it you must make real decisions based on risk. Go(wei-chi): The new frontier in artificial intelligence, in which companies that have stock in this idea are soon to take off. Go or wei chi teaches deep strategy of warfare. If you master this game, you will master the world. There are more moves in this game than atoms in the universe. So read on finance, trades, whatever, and study these two games as if your life depended on it, so when problems arise, big little or small, you can act in confidence.

It may seem to mortgage owners or renters that they each have the “answer”. Let each be convinced in his own mind. And neither apply because there are so many factors related to each which are not in the persons control. So focus on the ability to solve problems as a skill, not the end goal of renting or ownership because those are outcomes, not something part of you which will determine those outcomes.

#234 crowdedelevatorfartz on 04.01.16 at 6:33 pm

@#222 Tesla.
Tesla factories cant handle the orders they already have…..what makes you think they can deal with another 200,000 widgets?

#235 crowdedelevatorfartz on 04.01.16 at 6:38 pm

@#183 Brazilian exwax
“Yeah….I looked at the forecast. Two days of sunny weather in Moldcouver. Now back down to clouds, rain and 6 degrees at night. Enjoy !!”
*******************************************

It wasnt 2 days of sun it was THREE! And not to fret. When the temp dips below 0 c it kills the mosquitos.
Are the killer bees there yet?

#236 Tesla on 04.01.16 at 7:51 pm

#234 crowdedelevatorfartz on 04.01.16 at 6:33 pm
@#222 Tesla.
Tesla factories cant handle the orders they already have…..what makes you think they can deal with another 200,000 widgets?

—-

If Musk managed to pull off PayPal, Tesla and SpaceX I have no doubt he will manage to deal with the 200,000 “widgets”. I am excited to get one, it will be a nice addition to the Benz and BMW.

#237 TCContrarian on 04.01.16 at 8:27 pm

Surging rents, skyrocketing real-estate prices and a booming tech sector. Sounds like San Francisco in 2016, right? It also describes the city just before the tech bust of 2000, according to a recent report.

John Burns Real Estate Consulting of Irvine, Calif., and Pacific Union, a San Francisco real-estate brokerage, say that based on the appreciation (and apparent correlation) of venture-capital deals and rent prices, the Bay Area’s rapid property-value and rental-cost appreciation today is looking more like a repeat of the dot-com bust of 2000.

http://www.marketwatch.com/story/san-francisco-real-estate-looking-like-it-did-before-dotcom-crash-in-2000-2015-11-20

#238 jess on 04.02.16 at 7:22 pm

The Law Firm That Works with Oligarchs, Money Launderers, and Dictators

By Ken Silverstein
December 3, 2014
http://www.vice.com/author/ken-silverstein

http://www.taxjustice.net/2016/03/30/panama-the-making-of-a-tax-haven-and-rogue-state/