The competition

2STAMINA

He’s 55, a 1%er and owns a $1.5 million house, no financing. Also been a customer of the same bank for three decades. “Actually,” he pointed out to me, “I pay these guys $200 a month for the privilege of being a private banking client. Fat lotta good that did me.”

So Jeff is moving up, against my better advice, buying a $2.2 million pile in mi-town Toronto’s Leaside, where real estate values for skinny faux-baronial, fake-stone mini castlettes have swollen like a dead hippo in a hot sun. After all, the lots are still only thirty feet wide, the traffic’s intense and the city is boring a subway line through the north boundary, meaning five more years of grinding dust.

But here’s the thing: Jeff wisely wants to borrow $800,000 at today’s cheap mortgage rates instead of sucking the capital out of his investment portfolio, where it’s averaged a 6.9% return over the last five. “Besides,” he adds wisely, like a dude with assets, “why would I want to sell stuff and trigger cap gains? Why not use their cash?”

His Private Banker responded by assuring Jeff a five-year fixed mortgage for that amount would be a no-brainer approval, given his wealth and 30 years’ of loyalty. The rate: 2.79%. Sign here.

In curiosity, he went across the street to the green one, wandered in, met the loans officer, presented his case and asked for a quote. It came the next day: 2.49%. It’s only a 30-bip difference, but over 60 months it means enough. The payment will drop from  $3,700 to $3,579, which means a saving of $7,260. At the end of the term, as a bonus, Jeff will have paid off an addition $4,050 in principal, with a remainder of $676,971.

So, he shells out $7,260 less and pays off $4,050 more. That is precisely the benefit of borrowing in a low-rate, low-yield, low-inflation, low-return, low-growth world. It helps offset the ever-escalating risk in Canadian residential real estate. Of course, he’s still a fool. The $2.2 million Leaside house will cost less in five years, and will no longer be a sparkling new-build.

These days home loans have never cost less. Diddle around with sites like RateHub or RateSpy and you can find a fiver available for as little as 2.2%, with short-term mortgages at a buck-sixty-nine. These ridiculously cheap rates are often promotional, come with less favourable repayment terms, or are backed by some guy who also buys used gold and sells mortgages out of his van. Nonetheless, the combination of aggressive small lenders and rate-searching web sites is powerful. They move the market.

Bankers are forced to react – but only (as Jeff found) if you ask, dicker and negotiate. However, you might have but a few months left to enjoy this kind of Wild West lending environment. The regs are changing. Again.

At the end of June the feds will alter the lending landscape for the little guys, taking rate-matching pressure off the big guys. The changes are complicated, but go something like this: the fees charged lenders who need to sell their mortgages to investors in order to fund new loans are going up. These will be passed through in the form of higher rates. Second, it will soon become harder and more costly for smaller lenders to securitize (or sell) their loans. Most costs passed through to borrowers. And finally, lenders will soon have to sell their insured mortgages within six months or lose CMHC insurance. But small lenders will have a far harder time than the big banks, meaning many won’t be able to offer a full-range of competitive products (short or long-term, variable or fixed).

Those most impacted will be people renewing mortgages from the non-bank dudes, refinancers or variable-rate borrowers wanting to go fixed. The biggest hit, however, will be a general rate increase as Big Banks find fewer competitors nipping at their heels. Less competition, higher prices.

Now, here’s something else you might not wish to hear as you shop for money. US-based rating agency Fitch says it “expects the cost of credit to rise in Canada as banks feel continued pressure.” The pressure they reference will come from lower earnings thanks to bank exposure to our slagging energy sector and increasingly tapped-out consumers. Says Fitch: “Consumer credit health is a concern due to the record household debt levels and … pressure on consumer loan portfolios in oil provinces, which is pushing up delinquencies in auto lending and credit cards.”

So deteriorating  credit, more bankruptcies and less being saved on the consumer side combined with collapsed energy sector revenue on the other – and new federal capital requirements – will all (says Fitch) means higher borrowing rates. Of course you can add in some bond market pressure given the fact US rates will be higher by the end of the year (bond yields have already doubled). Remember that this will be independent of the Bank of Canada – which does not set mortgage rates. The central bank can sit on its thumb for years, and homeowners can still see steadily increasing costs.

In fact, it’s a given.

Five years of borrowing for less than two and a half per cent? Beauty. Shopping around while you can? Priceless.

143 comments ↓

#1 JSS on 05.11.16 at 6:47 pm

who is the attractive woman in the pic?

#2 Gabe on 05.11.16 at 6:49 pm

(bond yields have already doubled)

Over which time period are you referring to? Which bond ETFs?

#3 Mark on 05.11.16 at 6:50 pm

“Of course you can add in some bond market pressure given the fact US rates will be higher by the end of the year” – Garth

No. Not even a remote possibility. One and done Garth. Better figure out how to explain it.

#4 fudge on 05.11.16 at 6:52 pm

This article is useless to me…

#5 ARP on 05.11.16 at 6:53 pm

who is the attractive woman in the pic?

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

[email protected]….

#6 paul on 05.11.16 at 6:54 pm

#1 JSS on 05.11.16 at 6:47 pm

who is the attractive woman in the pic?
————————————————————-
Your Sister

#7 Parksville Prankster on 05.11.16 at 7:01 pm

What about taking out a fiver on a paid off house and then using the cash to add to an already diversified portfolio? Do the spreads make sense?

#8 Jimmy on 05.11.16 at 7:08 pm

M&M all done with?

What happened to retired Wisconsin dude?

#9 BOOM! on 05.11.16 at 7:10 pm

I wish the US FED would tighten its monetary policy, but I honestly do NOT see that happening this year. They lost the ‘prime time opportunity’ LAST year, and then did that face saving Dec .25% jump.

Let’s face reality. We are at, or about 5% unemployment. We still have those who prefer not to work -under any circumstances- a small lot, but present, as well as those who have enough, and prefer NOT to work.

With an aging population it seems natural for the labor participation rate to fall – I guess…

The Bull is obviously old now, if we are going to raise rates, the times is short… or maybe never…

Markets puked up a Bear day today, why, who cares? The Casino in NY opens tomorrow at 9:30 place your bets, their HOUSE always wins… if you trade.

Me, I am watching this parade with little effect. Have sideline cash just waiting for a great buy!

So far, no decent fishing there. Need a decent PANIC!!

#10 crowdedelevatorfartz on 05.11.16 at 7:10 pm

@#1JSS
You’ll have to pay Garth a finders fee to find out.

#11 NoName on 05.11.16 at 7:16 pm

just got of the phone with bank talking about mrtg renewal and rates…

bank send us renewal in a mail, wife and i signed, and i just in case called 1 800… to make sure that i “exed, circled, initialed and signed” what we “supposed” to.

so conversation with someone from bank went like this…

Me:
Hello, mrtg renewal papes some info blah blah blah…

Bank person:
As a valued customer i can offer you our best rate, 2.62

Me:
But that rate that you offering me is actually higher that what i have here in a tables send by you guys?

Bank person:
Can i put you on a hold for brief moment?

Me:
NO! ill call you guys tomorow when i have more time, click.

no word of the lie here!

#[email protected]$$

#12 Cottingham a bargain on 05.11.16 at 7:16 pm

I hope I am not the only one who thinks Jeff is making the right move. 5 years out and completion of subway line means 3 million is an easy layup for the house.

Could be a lot higher if Vancouver mania sets in over here in the most important Canadian city

#13 MSM-Free Zone on 05.11.16 at 7:20 pm

#1 JSS on 05.11.16 at 6:47 pm
“…..who is the attractive woman in the pic?…..”
_________________________

Thought the same, until I noticed the black nail polish. A dead giveaway….

“Danger, Danger, Will Robinson!”

#14 ROCK BEATS PAPER on 05.11.16 at 7:36 pm

Sounds serious when you say yields doubled. Scary even.
Would that be the 30 year or the 10 year?

The market is not concerned about the FED, which is why bonds are up, hard assets are strongly performing.

#15 Brian Ripley on 05.11.16 at 7:37 pm

Low interest rates are great for the credit worthy; but timing is everything.

Since the start of ZIRP after the 2009 crash, figuring out what to buy on margin has been a tough call in the cash markets. According to my TSX chart, real estate and financials have been steady winners, but both are looking “toppy” now:
http://www.chpc.biz/tsx-indexes.html

#16 Freedom First on 05.11.16 at 7:38 pm

I hope everyone had a sssuuuuuper duuuuuuper Alberta day today, I know I did. Me, I went out shopping down the “road less traveled.” I loved every minute of it. Mom bought me a DQ treat, and I saw one of my “old” girlfriends, which was great! She told me how she missed me and what great times we had together. I was a little freaked out when I realized I couldn’t remember her name, but she didn’t mind. She knows that I have enough love for her and me and the whole world. I’m just full of love for everybody. Thanks for loving me just the way I am blog pooches. I love myself. I’m the bestest ever.

FF007

#17 Bob on 05.11.16 at 7:43 pm

Home prices will continue to rise over the long term. The millennial generation is a much larger demographic wave than the boomer wave.

Prices will always fluctuate but the the long term demonstrates that rising home prices will go on forever.

#18 tundra pete on 05.11.16 at 7:44 pm

Right, and we all think money will be cheap forever. Rates will never go up and banks like their customers.

Throw in a fault in some countries dollar and watch rates climb. Some fools are really………fools.

#19 Freedom First on 05.11.16 at 7:45 pm

Bob the builder, on the couch, with my Mom. Face…all you haters!

#20 takla on 05.11.16 at 7:49 pm

the sheep are locked in and have drank the poison,just about ready for a good shearing..

same old same old

#21 For those about to flop... on 05.11.16 at 7:53 pm

I’ve been waiting out the whole Gyorigate scandal.
It reminded me why I don’t have any social media accounts.
I’d rather spend time with the unsocial people on here any day…

M41BC

#22 Shawn on 05.11.16 at 7:54 pm

Do Millionaires Take the Subway?

#12 Cottingham a bargain on 05.11.16 at 7:16 pm said:

I hope I am not the only one who thinks Jeff is making the right move. 5 years out and completion of subway line means 3 million is an easy layup for the house.

****************************************
People who buy $1.5 million and even $3 million dollar houses value having a subway line nearby? Don’t they drive their own cars despite the parking cost? Who else might a subway line attract to the neighborhood? (Giant apartment building?)

You sure you want a subway line nearby?

What will become of the Chauffeur?

#23 bigtowne on 05.11.16 at 7:55 pm

The banks have had to reinvent their profit margin in this low interest rate economy without end. The reckoning is upon us.

#24 Renter's Revenge! on 05.11.16 at 7:59 pm

Does anyone else find it weird that Jeff didn’t write a Facebook post or ask for Garth’s approval before buying this house? It almost sounds like he’s a real man. Maybe we should report him to Femi-Stasi for re-education.

#25 gladiator on 05.11.16 at 8:03 pm

That house will easily go to 4 mill as soon as the subway is ready.
Jeff knows what he’s doing. Smart lad.

#26 Suede on 05.11.16 at 8:19 pm

The all important dictator of housing prices is the herd.

Herd can’t understand what all those changes mean. That’s for a grade 7+ reading level.

The herd hears this…

“oh, mortgage rates are going up? They’re still lower than 2 years ago”

More house horniness ensues.

They only read gr 5 level.

This is not a blow off top yet. Lots of greater fools left, you can see them at all open houses in YVR.

Risk still on.

#27 the Jaguar on 05.11.16 at 8:20 pm

Before you completely ditch your present banking relationship in favour of one of the new lenders nobody has ever heard of ask yourself a really important question. And it isn’t about rate. Get those rate stars out of your eyes. Ask yourself what does it cost to get out of the contract. What kind of penalty will apply if you must sell your house. ( there are any number of scenarios where this can present itself). Is that mortgage portable? Your small credit union, ATB, etc probably don’t exist in the new province you are being transferred to…. Or maybe your lender will sell their entire mortgage portfolio ( including your mortgage) to some other unknown entity. Who knows what that looks like…..What about fees to renew, discharge, etc.
Maybe these new kids on the block don’t have to play by the same rules you are used to…

#28 Sc on 05.11.16 at 8:23 pm

The BC NDP recently announced that housing is their primary election platform in 2017. They came close to winning in 2013, so if they run on a “speculation tax” platform they will likely get elected. This tax will pop the bubble and we will get a 50% real estate price drop and a recession. Which is actually good for us in the long-term. Need to spank people who were wreckless.

#29 TurnerNation on 05.11.16 at 8:31 pm

I want to dicker.

#30 Pierre on 05.11.16 at 8:33 pm

Sc #28: “This tax will pop the bubble and we will get a 50% real estate price drop and a recession. Which is actually good for is in the long-term.”

Now there’s a winning platform. Sounds like the NDP alright. Hope you get some credit for it. Holy Moses.

#31 Metaxa on 05.11.16 at 8:42 pm

@ #27 the Jaguar who writes:
Before you completely ditch your present banking relationship in favour of one of the new lenders nobody has ever heard of ask yourself a really important question. And it isn’t about rate. Get those rate stars out of your eyes. Ask yourself what does it cost to get out of the contract….

Bang on.
Rate is third or fourth in most numerate folk’s list…terms and conditions are and remain the number one thing to worry about, change, eliminate or modify in your mortgage document.

In today’s environment I’d rather a 7% mortgage at my terms/conditions than a 2.2% at theirs.

#32 Freedom First on 05.11.16 at 8:48 pm

Who wants to bet a team from Alberta will win the cup this year? Go Flames. Go Oilers. You can do it.

#33 Mak the investor on 05.11.16 at 8:50 pm

I have been declared the village idiot for saying that rates can go up. So now I just listen to everybody about why the rates can never go up. I hope to say ” I told you so ” someday … .

#34 Hotdogs from Heaven on 05.11.16 at 8:51 pm

There is NO new subway going in anywhere near Leaside. There IS a Light Rail Transit line going along Eglinton ave.

Since we don’t know where in Leaside this house is (it could be a half hour walk to Eglinton if it’s on the edge of the neighborhood) why do some of you assume that it will raise the price so dramatically.

Leasiders like their beemers and benzes, not schlepping through the winter slush for the inconvenience of Toronto’s mediocre transit system, no matter how new.

The LRT line actually runs underground through that hood. Ergo, it’s a subway. — Garth

#35 Cottingham a bargain on 05.11.16 at 8:52 pm

#22 Shawn on 05.11.16 at 7:54 pm
Do Millionaires Take the Subway?

#12 Cottingham a bargain on 05.11.16 at 7:16 pm said:

I hope I am not the only one who thinks Jeff is making the right move. 5 years out and completion of subway line means 3 million is an easy layup for the house.

****************************************
People who buy $1.5 million and even $3 million dollar houses value having a subway line nearby? Don’t they drive their own cars despite the parking cost? Who else might a subway line attract to the neighborhood? (Giant apartment building?)

You sure you want a subway line nearby?

What will become of the Chauffeur?
——

Subway close enough to be an advantage far enough to keep the plebes away. 3 mill home does not a chauffeur drive make anyway.

Think hogs hollow . Plenty of 10 mill plus and subway nearby .

Anyhow keep buying . Nothing gonna stop this freight train

#36 Smoking Man on 05.11.16 at 9:01 pm

How do you expect the newly schooled to know about a housing bubble, or to manage money when they don’t know the difference between boys and girls.

Herd drives the market. I give you the new herd.

Clip is halarious.

College Kids Say the Darndest Things: On Gender https://youtu.be/-4S0gHlKiho via @YouTube

#37 Cottingham a bargain on 05.11.16 at 9:03 pm

By the way, just want to go on record that I’m not here to knock financial asset investing . It’s just that I don’t know anyone who created their wealth using stocks and bonds, other than Buffett and Soros I suppose.

I do know a lot of people however, a pile of Scott mcgillvray types, builders , re agents, infill investors , developers and they have made theirespective fortunes without ever having touched an etf or having the formal education required to understand them fully

They’ve lost more fortunes, too. — Garth

#38 bigrider on 05.11.16 at 9:13 pm

Cottingham a bargain- all comments

Not a shred of doubt in my mind that you are either born or of Italian decent, regardless of whether you deny it or not.

uppa Uppa UPPA ! all the time for da real estata right ?

You seem to have no idea how lucky we have been as a group and culture , to have fallen into the right line of work our parents and grandparents that it is , in the right place and at the right time all these years.

Lets take the blinders off a bit paesano.

#39 TurnerNation on 05.11.16 at 9:14 pm

#13 MSM interesting to hear that as I added black nail polish to my Red Flags list a few years ago. On anyone for that matter..

#40 Cottingham a bargain on 05.11.16 at 9:21 pm

” they’ve lost more fortunes too” – Garth.

For sure . There have been some wipeouts here and there but on balance the success stories far outnumber the complete failures.

In any event, responsible RE purchases with Responsible use of leverage , held over longer periods of time seems to yield positive surprises to the upside time and time again. Hence the ” obsession ” with RE I suppose.

#41 BOOM! on 05.11.16 at 9:22 pm

#8 Jimmy

Retired Boomer WI… still here…just changed my name to accompany the coming Real Estate changes….BOOM!

M64WI

#42 Cottingham a bargain on 05.11.16 at 9:25 pm

Bigrider at #38.

Nope no denial here . Born in Italy . Came over when I was very small.

Not sure if we are “paisanos ” but if you have relatives that have made a success with RE investing, then you should relish in that and not condescend.

#43 Wog on 05.11.16 at 9:35 pm

I have to agree with Mark on this one. A lot of emphasis is put on the US “recovery” with coming rate hikes and Canada following suit. Grab your popcorn, no more rate hikes this year, US dollar falls on poor data.

#44 IHCTD9 on 05.11.16 at 9:43 pm

#37 Cottingham a bargain on 05.11.16 at 9:03 pm
By the way, just want to go on record that I’m not here to knock financial asset investing . It’s just that I don’t know anyone who created their wealth using stocks and bonds, other than Buffett and Soros I suppose.

I do know a lot of people however, a pile of Scott mcgillvray types, builders , re agents, infill investors , developers and they have made theirespective fortunes without ever having touched an etf or having the formal education required to understand them fully.
——-

Big deal, lots of folks make lots of money, lots of different ways.

I know many rich folks who made millions in the steel industry, that doesn’t mean no one ever got rich investing in financial assets.

Incidentally, a lot of these rich old school steel guys have/are exiting the industry right now. That, or they’re busy losing their millions in the steel industry.

Keep that in mind.

If all the rich builders croak broke because the market tanked, they lost it all, and never lived to recover, then yes – they were once rich, but never were they wealthy…

#45 Harbour on 05.11.16 at 9:44 pm

#37 Cottingham a bargain

I don’t know anybody that made their wealth in the stock market… but I can name every one of my boomer friends and more that made their wealth in real estate. House, second house, cottage, whatever…

Like the rich retired guy and his wife I met the other night at the local over a beer… Filthy rich all from real estate. Hawaii was his lottery… 2 properties

I mentioned the stock market to him… his reply was “that’s just gambling”

#46 crowdedelevatorfartz on 05.11.16 at 9:44 pm

@ #16,19 &32 Freedom First

Hilarious and yet………disturbing…….all at the same time.
Ride that Alberta wave.

#47 TurnerNation on 05.11.16 at 9:55 pm

Show that subway line and its name some respeck man! It all about respeck.

#48 daivey on 05.11.16 at 9:59 pm

Garth, can you go over the new mortgage changes and explain it better?

#49 WalMark of Sadkatoon on 05.11.16 at 10:00 pm

So Jeff is moving up, against my better advice, buying a $2.2 million pile in mi-town Toronto’s Leaside

hey gartho out of curiosity did this adhere to your rule of 90 for jeffo?

#50 common sense on 05.11.16 at 10:04 pm

On the road across The Niagara District and S/W Ontario the past month meeting a wide cross section of business owners peddling a book I wrote…when asked “How’s business?” ALL have replied, “Just great, very happy.”

All seemed busy, what’s driving all the business? Credit? More stay at home vacations? US tourists?

#51 WalMark of Sadkatoon on 05.11.16 at 10:04 pm

It’s just that I don’t know anyone who created their wealth using stocks and bonds

u know what they say. just look at your 6 closest friends and u know where u stand financially and economically. basically u are in a middle class wage slave demographic but I think that’s obvious

#52 tundra pete on 05.11.16 at 10:05 pm

Do millionaires take the subway? Doesn’t matter, with the completion of the subway/lrt comes public housing apartments. Hundreds of units for low income and welfare. As well as the “crack riders” who ride from one hood to the next doing b and e’s. Sounds like a winner to me.

#53 TnT on 05.11.16 at 10:18 pm

#36 Smoking Man on 05.11.16 at 9:01 pm

Heh… You constantly talk about the “herd” yet you are part of the “herd” who still thinks there’s just 2 genders. Wake up SM, look beyond your “herd” mentality and go discover just how many genders actually exist in the human race.

#54 Renter's Revenge! on 05.11.16 at 10:29 pm

#37 Cottingham a bargain on 05.11.16 at 9:03 pm
” By the way, just want to go on record that I’m not here to knock financial asset investing . It’s just that I don’t know anyone who created their wealth using stocks and bonds, other than Buffett and Soros I suppose.
I do know a lot of people however, a pile of Scott mcgillvray types, builders , re agents, infill investors , developers and they have made theirespective fortunes without ever having touched an etf or having the formal education required to understand them fully

They’ve lost more fortunes, too. — Garth”

____________________________________

Hmm, 5 minutes of attending the University of Google reveals that:

Total value of US land estimated at $14.5T

source:
http://www.slate.com/blogs/moneybox/2013/12/20/value_of_all_land_in_the_united_states.html

Total value of US stocks = $60T

source:
https://www.ftportfolios.com/Commentary/MarketCommentary/2014/10/21/u.s.-equities-share-of-total-global-market-capitalization-is-growing

Much is the US (land) worth? $23T

source:
http://blogs.wsj.com/economics/2015/04/22/how-much-is-the-u-s-worth-economist-values-the-land-alone-at-23-trillion/

Total US non-financial assets = $72.4T
Total US financial assets = $197T
Total US debt = $146T
Total US net worth = $124T

source:
https://en.wikipedia.org/wiki/Financial_position_of_the_United_States

Sounds like a lot more wealth has been created by financials assets than by real estate.

#55 Fed-up on 05.11.16 at 10:35 pm

Spring 2000:

S&P 500…1500
TSX…10,000
DOW…15,000
FTSE…6000
DAX…8000
NIKKEI…18000

Spring 2016:

S&P 500…2050
TSX…13,700
DOW…17,700
FTSE…6100
DAX…9900
NIKKEI…16500

Bond and preferred yields down considerably since 2000 as well.

Perhaps this less than blistering performance may have contributed to Jeff’s decision to invest in Toronto real estate even at these insane valuations. It has matched those returns in the last 2 years alone without the huge capital requirements.

Just a wild guess.

Never heard of rebalancing? Just a wild guess. (And Jeff has three times more money in his portfolio than his real estate.) — Garth

#56 Nasty Bender on 05.11.16 at 10:43 pm

Debt has always been the cornerstone of every Liberal government, why should the Trudeau Liberal years be any different? The downside to the Liberal strategy is always higher taxes…gee…aren’t you lucky you voted for Selfie Boy…who by the way missed a great photo op to do a strip tease for the fire fighters of Ft Mac.

#57 Harbour on 05.11.16 at 10:55 pm

#54 Renter’s Revenge

And in your middle class peer group? Real estate rules bar none.

#58 Toronto Dweller on 05.11.16 at 10:58 pm

#50 Common sense
“All seemed busy, what’s driving all the business? Credit? More stay at home vacations? US tourists?”
Depends on the business really, but lots of seasonal business (read summer) is doing good right now. Ask us in November and it might be a different story.

#59 jay on 05.11.16 at 10:59 pm

Garth ,I don’t think houses are that expensive in Vancouver ,even a student can afford $31,000,000 to buy one.http://www.theprovince.com/business/real-estate/million+point+grey+mansion+owned+student/11912936/story.html

#60 Sheane Wallace on 05.11.16 at 11:25 pm

And finally, lenders will soon have to sell their insured mortgages within six months or lose CMHC insurance.
———————–
That’s it folks: Forced Securitization of super-submrpime mortgages (risk vs. preimium) that would have never be issued if not for CMHC’s largesse, coming to your pension plan. And when they fail, don;t forget that you are on the hook as taxpayer.

The mortgage fraud in US was nothing compared to what we are facing here.

#61 steerage steward on 05.12.16 at 12:02 am

As always the “email Garth” posts are interesting, but more importantly entertaining. Of course most people are financially illiterate, agonizing over the best way to get into as much debt as the CMHC backed lenders will let them.

The more interesting ones are those like today, and some recent ones. Obviously more then literate, high net worth, but still compelled to join the herd.

What drives these well setup people to gamble it all?

#62 Chopper Dude on 05.12.16 at 12:05 am

A little off topic but……

I am helping fight the forest fire up in Ft Mac. Been a busy time. Watching the news I see THOUSANDS of people, lining up for financial help from the Gov’t. They interview the first few and I hear stuff like: “I so need this money, we have nothing.” … “Thank God cuz we are ready to starve” ….

I thought, hang on, aren’t these the people that have been making the huge dollars up north? WTF do you mean you have nothing??? Did they leave without their wallets?

I don’t mean to be crass, my heart breaks when I fly over and see the destruction… but for the love of Mary and Joseph….did no one save a penny????

In aviation we have a saying, learn from the mistakes of others cuz you won’t live long enough to make them all yourself. I hope some people will learn a valuable lesson with this crisis.

You should always have tucked away a minimum of 3 months salary. JUST IN CASE….

God bless the evacuees….you have a long road ahead you. Be strong, you can make it!

Chopper Dude

#63 NEVER GIVE UP on 05.12.16 at 12:18 am

At the end of June the feds will alter the lending landscape for the little guys, taking rate-matching pressure off the big guys.
———————————————————-
MORE OF SAME HOSTILITY TO SMALL BUSINESS.

If the competition gets too hot then tell the gov to shut down the little guys. Simple Easy.

The Banks and the Gov and the Markets…..RIGGED!

#64 M-F on 05.12.16 at 1:02 am

Moody’s says rates aren’t going up any time soon. Could be 10-20 years. The US just isn’t going to raise rates. Garth you should stop saying they will. Too much slack in the US and global economy. It just isn’t going to happen.

Furthermore, I think, even if the US were to raise rates, the Bank of Canada would let the Loonie slide rather than raise rates enough to kill the consumer and housing sectors. They would stop long before a housing ‘disaster’.

I am not saying people should load up on debt to buy housing, but I think prices will remain fairly stable based on the impact of interest rates alone. Home prices could certainly drop in the case of a big stock market correction coupled with a serious global economic slowdown.

http://www.businessinsider.com/moodys-report-normal-interest-rates-may-never-come-back-2016-5

#65 Duygle on 05.12.16 at 1:18 am

You referred to US rates going up and suggested that bond yields have already doubled. If you are talking about American bonds please provide a link as all the government bonds are close to their lows. For example the ten year hit 1.75 today. It’s low was 1.5 so it needs to hit 3.0 to double. It looks like The Donald’s fact checker is moonlighting for you.

Canada bonds, of course. — Garth

#66 Freeman on 05.12.16 at 1:19 am

Remember a few years ago there was a regular idiot here on this blog that was saying that soon a $500,000 house would be $800,000 and a $800,000 house will soon be $1,000,000. ?? Well, guess what; In Toronto the average house is now $1,000,000 plus and skyrocketing.

I think that guy was being way overly reserved, he should have said that $800,000 house will soon be $20 Million in 5 years time because that’s where the Toronto market really is heading.

To the MOON.

#67 macroman on 05.12.16 at 1:57 am

#29 Turner Nation…

Dicker, you don’t even know her.

boom bam tish and don’t forget to tip your waitress…

#68 Ponzius Pilatus on 05.12.16 at 1:59 am

Satire at its best regarding the Endowed Chinese Student:

I can understand why students are are buying houses on Belmont Avenue. It’s conveniently close to UBC. Living on Belmont Avenue is better than taking the bus to school from from Burnaby (the B-Line bus to UBC is SO overcrowded it’s the world champion of pass-ups). I am a little concerned about that $10 million CIBC mortgage, however. The house-buying student must have obtained that mortgage from the CIBC branch on the UBC campus, which is my branch. $10 million seems a bit much for someone in school but who am I to say. It’s Vancouver after all. Best place on earth.

#69 Fortune500 on 05.12.16 at 2:21 am

Cottingham a bargain, remember that we are combination of the 5 people we spend the most time with. If you are a Canadian in Canada, listening to the media and your general associates, you need to consider the impact of two fundamental psychology principals that are at play, Recency Bias and ‘Group Think’.

That is not to say that people do not make money and sustain themselves in real ways using real estate. See BiggerPockets for examples of how this works successfully over the long term. This is quite different from benefiting from speculation during a rising tide.

Anyways, for ample examples of thousands of regular people who have successfully built fortunes using ETFs, Stocks, ‘the market’ spend some time visiting:

Reddit Financial Independence
Reddit Personal Finance
Mr Money Mustache forum
Financial Webring
Early-Retirement.org
Bogleheads

The point I want to make is that the fact that you see people mainly making fortunes on Real Estate is a perception fallacy. Nothing more.

PS. I currently have an Irish Colleague overseas who is making a study of the Canadian Real Estate Bubble. He finds it fascinating and just can’t get over the attitudes and miss-allocation of resources going on in Canada right now.

Now he has the Celtic Tiger housing collapse to compare too, but it amazes me just how horrified an outsider is when I just share the local news sites with him via greatcanadianbubble.com

#70 Freedom First on 05.12.16 at 3:59 am

#36 Smoking Man

Thanks. Enjoyed the clip. I see a lot of people today doing whatever they have to do to make sure they remain politically correct at all times. Where is Archie Bunker when you need him?

I am so glad I am single and live alone. No insanity allowed in my sanctuary. I call the shots.
“Compromise”, “give and take”, and “discussion”, do not take place. I rule. No exception.

Also, thank you to my fan club Freedom First impersonators #’s 16, 19, & 32.

#71 Fortune500 on 05.12.16 at 5:17 am

Oh, and Confirmation Bias. Can’t forget that old chestnut …

#72 Free falling on 05.12.16 at 6:03 am

http://www.bloomberg.com/news/articles/2016-05-11/hayman-s-bass-says-hong-kong-property-market-is-in-free-fall

#73 Hardog Frims on 05.12.16 at 6:28 am

DELETED

#74 Bytor the Snow Dog on 05.12.16 at 8:04 am

@TnT #53-

Your post is sarcasm, right?

Right?

#75 crowdedelevatorfartz on 05.12.16 at 8:05 am

@#62 Chopper Dude
“I thought, hang on, aren’t these the people that have been making the huge dollars up north? WTF do you mean you have nothing??? Did they leave without their wallets?

I don’t mean to be crass, my heart breaks when I fly over and see the destruction… but for the love of Mary and Joseph….did no one save a penny????
*******************************************

My EXACT reaction.
But then I realized that most Canadians are one paycheque from living on the street.

#76 crowdedelevatorfartz on 05.12.16 at 8:16 am

Ho Hum.
Brazil’s President is impeached. Q’uelle surprise.

On a vastyly more important note.
The US “ups” the chances of nuclear war with the “Rooskis”

http://www.reuters.com/article/us-nato-shield-idUSKCN0Y30JX

#77 TripleLeftField on 05.12.16 at 8:56 am

#1 JSS on 05.11.16 at 6:47 pm

you just offended the guy holding up the sign.

ps. to anyone, my sisters wife was wondering if three lefts make a right? till debt to us part. hugs to all

#78 cramar on 05.12.16 at 9:01 am

#36 Smoking Man on 05.11.16 at 9:01 pm
How do you expect the newly schooled to know about a housing bubble, or to manage money when they don’t know the difference between boys and girls.

Herd drives the market. I give you the new herd.

Clip is halarious.

College Kids Say the Darndest Things: On Gender https://youtu.be/-4S0gHlKiho via @YouTube

—————–

We can thank the super-liberal eduction system for this. This generation doesn’t know their left hand from their right. Society will be totally screwed when they get into positions of power and authority.

#79 lee on 05.12.16 at 9:01 am

If you read the papers today you’ll see that all the experts are saying that interest rates will remain where they are for the next 20 years. At that time the real estate vultures can line up for their deals on real estate when rates rise. Until then, you can just keep telling people this won’t end well. Neither however will civilization, eventually.

No ‘expert’ has made any such prediction. — Garth

#80 WUL on 05.12.16 at 9:07 am

#62 CHOPPER DUDE:

First of all, thank you for your fire fighting efforts in the hinterland. Your work requires courage.

I wanted to inject a couple of thoughts into your comment. There is great income disparity in Fort McMurray with the oil field wages vastly outstripping the service sector. So while a couple both engaged in the bitumen biz would surpass the median family income (~ $170K) the cab driver married to the Tim’s server would come in at, say, $70K. The patch incomes lead to the very expensive housing and high rents. A handful of years back, Fort Mac average house prices were the second highest in the country (now exceeded in Hogtown) behind Vancouver. The Mac lacks a Point Grey.

If requested, I will supply citations for the facts relied upon herein but my sources are in Ft. McM and can only follow when I am summoned north.

Add in the high cost of living (food, booze, snowmobile parts) and the fact that “our Costco” is a 4 and ½ hour drive away in St. Albert, you have a good swath of folks that are financially stressed and it is not due to woeful spending and saving habits.

As for evacuees forgetting their wallets, witness me. This Evac Einstein left his wallet in my pants in my rental in the northern outpost.

WUL

#81 Bat Flipper on 05.12.16 at 9:25 am

Like all the changes made to government regulations, within the past 5 years, many have gone to help big banks. so much for competition.

Cost of funding rising on broker channels, document changes, ficom disclosure changes, etc. It all appears to be an attempt for the banks to remove competition and charge higher rates and get better spreads.

Obviously, a bank can compete with almost any rate. Mortgages are generally seen as a high profit, low risk investment, so why not lobby for higher spreads.

Best that they make their money now before they have that ‘uber’ moment in a few years. Unregulated, digital peer to peer lending could very well be a reality before you know it in Canada. Not to mention all the fintech firms coming online almost daily.

#82 Sharom Little on 05.12.16 at 9:25 am

The evidence is enough already Garth…for Christs sake. Would you stop puking up denial.

http://www.bnn.ca/News/2016/5/12/Foreign-buyers-gobbling-up-more-of-Canadas-luxury-homes.aspx

Wow. A Royal LePage survey of its own agents, which the Globe regurgitated. Impressive evidence (that reporters no longer report). — Garth

#83 lee on 05.12.16 at 9:55 am

Many news outlets today reporting interest rates are staying where they are for the next twenty years. For those of you who say this won’t end well, that is probably true for those who want into the housing market, at least for another generation.

#84 Duygle on 05.12.16 at 10:12 am

http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/
You said that Canada bonds have doubled. You may have a very strong recency bias and only look at the shorter term bonds. Ten year and up are no where near doubling. Year over year, no duration has doubled. So qualifying your comment it seems the you talk of American rate increases and then state that the yields have already doubled you actually mean that the shorter term canadian

#85 Bottoms_Up on 05.12.16 at 10:16 am

With this blog post Garth, you’ve made it sound like “standard of living” must be through the roof!!

#86 Rainclouds on 05.12.16 at 10:26 am

Come to the YVR/Taranna get a job, live in a hovel.

When this creaky, overblown, one sector, self perpetuating gasbag implodes it is going to be brutal.

The mensa nominee we call a Premier in BC will be hiding in a dumpster in Pouce Coupe…………

http://www.cbc.ca/news/business/housing-jobs-toronto-vancouver-1.3577061

#87 Noel on 05.12.16 at 10:42 am

Mortgage rates will increase and house prices in Toronto and Vancouver will fall in only a few short months, just like they did after the changes earlier this year!

Wait, the changes did nothing and prices continued to climb… just like what will happen in a few months.

#88 Atrate on 05.12.16 at 10:53 am

Did anyone see this in today’s Globe and Mail?

http://www.theglobeandmail.com/real-estate/the-market/foreign-buyers-gobbling-up-more-of-canadas-luxury-homes/article29988627/

It looks like the media are buying into the fairy tale…

#89 Nick on 05.12.16 at 11:00 am

The reader the other day who commented this is a blog for the affuent is bang on. Today’s blog crystallizes that. The nub of garth’s whole spiel, the rule of 90, only applies to those with the wherewithall to buy a home for a mil and still have 50%/60% of your loot left over to invest at a return of 7%. Yeah right. I’m done with this blog, it’s not for your average workin shmoe.

Then you’ll likely stay a shmoe. I’ve tried repeatedly to provide investing, tax-saving and balanced financial advice. If you want stories about how the Chinese are screwing you, or picking winning lottery tickets, try the Globe and HuffPost. — Garth

#90 TurnerNation on 05.12.16 at 11:02 am

For those buying million dollar boxes in ON…Ontario to be mostly de-industrialized (save for losing ‘green’ tech) by 2020. Hellish few years coming up hold on…

They tried to halt the march toward an economic gulag:

http://www.cp24.com/news/ontario-chamber-of-commerce-urging-province-to-delay-cap-and-trade-plan-1.2898851

“TORONTO — The Ontario Chamber of Commerce is urging the provincial government to delay the implementation of its cap-and-trade plan for one year, saying key questions remain unanswered.
The plan to reduce greenhouse gas emissions is set to take effect next year, but Ontario’s Liberal government has not released an analysis of the economic impact of cap and trade, and businesses are still seeking details on how the revenue will be invested and administered, said the chamber’s president and CEO, Allan O’Dette

#91 IM in C on 05.12.16 at 11:10 am

Buy now or your grandchildren will be serfs

#92 Ronaldo on 05.12.16 at 11:12 am

#61 steerage steward on 05.12.16 at 12:02 am

”What drives these well setup people to gamble it all?”

G R E E D

#93 Smoking Man on 05.12.16 at 11:12 am

#70 Freedom First on 05.12.16 at 3:59 am
#36 Smoking Man

Thanks. Enjoyed the clip. I see a lot of people today doing whatever they have to do to make sure they remain politically correct at all times. Where is Archie Bunker when you need him?

I am so glad I am single and live alone. No insanity allowed in my sanctuary. I call the shots.
“Compromise”, “give and take”, and “discussion”, do not take place. I rule. No exception.

Also, thank you to my fan club Freedom First impersonators #’s 16, 19, & 32.
……………………

You just haven’t found the right one yet.

And judging by the cultural mind fking taking place all around us. The selection pool to find one here is extremely limited.

Watching my older son get destroyed by his x wife 3rd wave feminist tells me all I need to know.

I’m thinking your soul mate resides somewhere in Thailand, small village up north where they don’t have TV or Internet.

Whats all this crap about gender neutral washrooms. What a disaster that will be.

Back in the day in my late teens, with raging hormones, I had to wear special trousers and devises to conceal my massive enthusiasm whenever I passed within 10 feet of a female.

Now we are going to unleash hormonal nuke anything in sight young boys into female washrooms.

Lock up your daughters is all I’m saying.

The LGBT gang will be doing the happy dance once they implement this and start the big gender war.

Rapes, hidden cameras, groping will skyrocket in the toilets of North America.

And who will be the villain. Us evil men and boys.

Trump needs to win to bitch slap this madness.

Dr Smoking Man
PhD Herdonomics

#94 Ronaldo on 05.12.16 at 11:19 am

#64 M-F

”Furthermore, I think, even if the US were to raise rates, the Bank of Canada would let the Loonie slide rather than raise rates enough to kill the consumer and housing sectors. They would stop long before a housing ‘disaster’.”

I am willing to bet that most parts of Canada could stand a 2% hike in rates on mortgages. The two danger zones of Vancouver and Toronto are already well over the limit where even zero percent is too much.
Besides the BOC does not determine mortgage rates. The bond market does.

#95 FWIW on 05.12.16 at 11:22 am

Victoria BC makes it to #3 in Christie’s hottest luxury market list. Note that this list is different than the overall luxury market. http://www.businesswire.com/news/home/20160512005863/en/Emerging-Luxury-Property-Markets-Reshaping-Global-Landscape

Toronto is on both lists….

#96 Alistair McLaughlin on 05.12.16 at 11:29 am

Apparently nobody taught some of the RE experts commenting here that prices already reflect future expected values. If people are buying houses in that neighbourhood today with the expectation that a subway line will increase the value, then that expectation is already built into the price. Appreciation may or may not happen, but it won’t be because of some future development that is already known – and therefore priced in – today.

#97 Josh in Calgary on 05.12.16 at 11:33 am

#37 Cottingham a bargain,

Get yourself a copy of “The Black Swan” or “Fooled by Randomness” by Nassim Taleb. He goes over in detail the fallacies we use to back up risky investment. That’s the danger of using anecdotes to back up your position. You’re falling victim to confirmation bias. You find a story that backs up what you already believe to be true and hold it up as proof, yet ignore other equally valid evidence.

Then there’s the Casanova fallacy. Someone making risky investments is right 10 times in a row and becomes obscenely rich. They believe they are blessed and can do no wrong. But statistically speaking if 1000 people flipped a coin 10 times one of them would get heads ten times in a row. It doesn’t mean they’ve solved the secret to flipping heads every time.

Then there’s the turkey Fallacy or as Garth calls it recency bias. The turkey believes that because the farmer has fed him 363 days in a row tomorrow the farmer will come in and feed him. What he doesn’t know is tomorrow he will be thanks giving dinner.

For the record Taleb is talking about risky financial trading, but it applies equally to any risky behavior. Humans are not naturally good at assessing abstract risk.

#98 Larry B on 05.12.16 at 11:33 am

I guess Garth doesn’t know that the Green Guy only offers collateral mortgages. If you don’t know the implications of this type of loan, you need to get educated. It basically traps you with that lender until the loan is paid in full. Come renewal time, they own your butt unless you are willing to pay big legal fees to transfer the mortgage. Good luck getting a “deal” come renewal.

This blog analyzed said mortgages when they were introduced, and still news. — Garth

#99 A Canadian Abroad on 05.12.16 at 11:38 am

#44 IHCTD9 “It’s just that I don’t know anyone who created their wealth using stocks and bonds”

If you do not have contacts/friends in the stock trading/investing channels then you wouldn’t I guess. But there are a lot of successful investors out there, many more than you might think.

I find those who are very successful at stock/portfolio investing are more conservative in talking about their successes openly than those who own real estate.

As a financial trader/investor, I’ve done better in the markets than owning 3 homes and it might surprise you but we currently rent.

Buy when others are fearful (stocks) and sell when they are greedy (real estate).

#100 Smoking Man on 05.12.16 at 11:43 am

The Destruction of the American dream.

Lest face it, its hard for most people to get by these days, in the fifties and sixties anyone wanting that white picket fence, the beautiful family and home needed only to get a job, any job.

Since then there has been a slow decline in the standard of living, where today for most people without a couple making professional wages that dream is just a dream with no chance of frouishion.

The cleaver little machine knows the herd is growing restless, terrified at the prospect of them banning together and coming for it’s head it has found a temporary solution.

Lets get them fighting with each other. Lets find ways to have Race Wars, Gender Wars, Young vs Old wars. They will be too busy attacking each other and we can still have good times at our get together s at Bilderburg and Davos.

Race Wars: http://dailycaller.com/2016/03/10/shocker-after-caving-to-protests-mizzou-has-huge-budget-gap/

I give you the birth of Cultural Marxism.

Audit the Fed and everything will be understood.

#101 lee on 05.12.16 at 11:57 am

#66 Freeman,

Could not agree with you more, although I think you are exaggerating a bit at $20M. I think an average SFH in Toronto in 5-7 years will be about $2.5M. An adjustment will take us down to about 2M for about 2 years, just like in the 1990’s when the “crash” of 1993/1994 pretty much began to back track by mid-1996. People have long memories when it comes to money, and they are living longer. They won’t be stupid enough to dump their properties at the first sign of trouble, as some would have you believe, knowing what they know about the 90s. Values eventually return just like they do in the stock market.

Save these forecasts. They will become amusing. — Garth

#102 IHCTD9 on 05.12.16 at 12:13 pm

#96 Alistair McLaughlin on 05.12.16 at 11:29 am
Apparently nobody taught some of the RE experts commenting here that prices already reflect future expected values. If people are buying houses in that neighbourhood today with the expectation that a subway line will increase the value, then that expectation is already built into the price. Appreciation may or may not happen, but it won’t be because of some future development that is already known – and therefore priced in – today.
___________________________________________

Good Point, same as the stock market.

#103 IHCTD9 on 05.12.16 at 12:28 pm

#90 TurnerNation on 05.12.16 at 11:02 am
For those buying million dollar boxes in ON…Ontario to be mostly de-industrialized (save for losing ‘green’ tech) by 2020. Hellish few years coming up hold on…
___________________________________________

Ontario is done like dinner.

Manufacturing will keep leaving, and the rest of us will get more sex ed revamps for our 2 year olds, and more taxes, fees, and revenue tools to pay for gender neutral government forms.

Most of Ontario evidently wants a financial meltdown, and from where I am sitting – it is well under way.

#104 Nick, proud workin shmoe on 05.12.16 at 12:28 pm

Nice straw man Garth. Where did I mention the Chinese or lottery tickets? All Garth did with his reply was confirm his blog’s apparent disdain for working class people, epitomized by its #1 fan Smokin Man who just wrote,
” Lets get them fighting with each other. Lets find ways to have Race Wars, Gender Wars, Young vs Old wars. They will be too busy attacking each other and we can still have good times at our get together s at Bilderburg and Davos.”
That says it all. I doubt you will publish this post but that would be your problem.

Good attitude. That will serve you well. — Garth

#105 Chopper Dude on 05.12.16 at 12:29 pm

“As for evacuees forgetting their wallets, witness me. This Evac Einstein left his wallet in my pants in my rental in the northern outpost.

WUL”

I apologize if my comments offended. I had a tough day as many have and I am getting exhausted. I hear your point and understand. I guess I can only end by saying let’s all learn from this. It can happen to us next….

#106 Noel on 05.12.16 at 12:29 pm

Save these forecasts. They will become amusing. — Garth

_____________________

Lol! How have your real estate price forecasts worked out over the last few years?

Funny when I try to reference a forecast you’ve made in a previous blog entry you don’t publish my comment… don’t want to defend what you’ve written in the past?

Seven in ten Canadian markets are in limbo or various stages of decline, so the advice has been reasonable. The key points are (a) smart people do not concentrate their net worth in a single asset as that augments risk. That’ll become clear when it’s too late. (b) every word of this blog’s archives – all 2,300 posts and 418,000 comments – are visible. — Garth

#107 Mixed Bag on 05.12.16 at 12:31 pm

Looked at RateHub and RateSpy. The best rates were for High Ratio, CMHC-insured mortgages. If you have more than 20% paid off, add another 10 bps.

Ass-backwards.

#108 IHCTD9 on 05.12.16 at 12:37 pm

#89 Nick on 05.12.16 at 11:00 am
The reader the other day who commented this is a blog for the affuent is bang on. Today’s blog crystallizes that. The nub of garth’s whole spiel, the rule of 90, only applies to those with the wherewithall to buy a home for a mil and still have 50%/60% of your loot left over to invest at a return of 7%. Yeah right. I’m done with this blog, it’s not for your average workin shmoe.
______________________________________

I’m an average working shmoe.

Many here not only lack million dollar digs, but own zero RE and rent. GT advises as much

If houses cost 7 figures where you live – MOVE.

Lot’s of rich folks here – I’m not one of them, GT and Dogs advice is great, even for me.

So Nick, if you make minimum wage, rent, and are investing for the future as best you can, you are doing the rule of 90 better than a couple who makes 100K, dumps all their money into a house, and invests nothing.

#109 Damifino on 05.12.16 at 12:44 pm

Heard on the CBC the morning: Saudi Arabia’s and OPEC’s policy of overproduction is finally starting to work for them.

The non-OPEC producers are beginning to cut back. It will take some time yet to reduce bloated inventories but it seems OPEC will retain market share with a bottom forming for oil probably somewhere around $50

On the same show a guy from the UBC’s School of Business believes the solution to Vancouver’s housing crunch is only a few simple tax changes away.

Anyone who owns a home in Vancouver but does not live in it or rent it would be subject to a 1.5% annual speculation tax. He says it will either drive a change in behavior or it will provide the revenue for government to build more affordable housing. Win-win, so to speak.

It all sounds a little too neat a package. Perhaps those academics should get out a little more. Maybe take a field trip once in a while.

#110 IHCTD9 on 05.12.16 at 12:47 pm

#104 Nick, proud workin shmoe on 05.12.16 at 12:28 pm
Nice straw man Garth. Where did I mention the Chinese or lottery tickets? All Garth did with his reply was confirm his blog’s apparent disdain for working class people,
__________________________________

Nick, make a plan. Sounds like you might need to move out of the big city. Find a woman that makes as much or more than you. A couple in a smaller town each making minimum wage have a better standard of living than a couple in a metropolis that makes 100K.

If you are young, start investing – and get on it now.

Get medieval about it.

If a guy hasn’t got a lot of cash to throw around but he’s 20 years old – that’s just as good, use it to invest before it’s gone. Time is definitely money.

#111 brian on 05.12.16 at 12:49 pm

Interesting observation…
Crea owns the URL mls.ca (whois says so) .

I often used mls.ca to reach the crea sponsored mls listings.

Although crea still owns the mls.ca URL, if you visit mls.ca now you are delivered to a page where crea goes to great effort to distance what crea does/is as opposed to what mls.ca is.

I wonder why crea has decided to attempt to distance crea from mls.ca, given that they own mls.ca?

Does this perhaps have something to do with the competition tribunal decision in respect to the treb?

#112 Mixed Bag on 05.12.16 at 12:54 pm

A couple years back in the comments this exchange occurred:

———————————————–
#254 Mixed Bag on 07.17.14 at 4:34 pm

#250 Mixed Bag on 07.17.14 at 4:12 pm

You renewed for two years? Probably the worst choice possible. — Garth

—————-

We’ll see.

———————————-

Probably was the BEST choice possible.
Now I’ve been quoted an even LOWER rate for renewal. Haven’t even dickered yet.

Around that time you were exhorting people to take the ten year term at about 4 %. Ironic, the title of that post was “The Gullible”. I went with my gut.

Risk-averse people locking into a 10-year term will look like geniuses in a decade. Not for everyone, but a two-year term is just dumb. — Garth

#113 Nick, proud workin shmoe on 05.12.16 at 12:55 pm

Being a workin shmoe has served me fine thanks. I won’t be following your advice to folks to cash out the company pension and invest it according to your system. If it sounds too good to be true, it is. I don’t buy all your rationalizations when returns plummet. I’m glad I’ve plodded on with guaranteed investments as a lot of ordinary folks you mock do.

And you envy people with more wealth than you? Hey, I thought you were leaving anyway. — Garth

#114 Diogenes on 05.12.16 at 1:31 pm

I leave you and Smoking Man with this thought:

“The Great Cynic Diogenes received an invitation to dine with one whose house was splendidly furnished, in the highest order and taste, and nothing therein wanting. Diogenes, hawking, and as if about to spit, looked in all directions, and finding nothing adapted thereto, spat right in the face of the master. He, indignant, asked why he did so? “Because,” Diogenes, “I saw nothing so dirty and filthy in all your house.”

#115 Prairieboy43 on 05.12.16 at 1:37 pm

Gambling on B.C.??
http://www.financialwisdomforum.org/forum/viewtopic.php?f=34&t=119255#p575901

PB43

#116 Dups on 05.12.16 at 1:50 pm

Here comes the US rate increase. Canada will follow shortly. Lock in before they go up.

http://www.bloomberg.com/news/articles/2016-05-12/fed-s-rosengren-sounds-another-hawkish-note-over-rate-outlook

#117 lee on 05.12.16 at 1:53 pm

#101, Garth

I don’t see how you can say these forecasts are comical. Price ups in Toronto for SFHs have been averaging 10% the last few years. Demand is nowhere near quenched. A decent SFH goes for $1.2M or more in TO. At 10% a year compounded, in six to seven years it’ll cost $2.3M to $2.5M. As more and more old stock gets torn down, there will be ever greater upward pressure on average prices. If $2.5M is a stretch, $2.2M is not. Even a 1-2% rate increase will not impact on this prediction. The ammos will just go back to 30 or 35 years.

Cute. Recency bias unbridled. — Garth

#118 Gordon McCallum on 05.12.16 at 2:22 pm

Some of us in the mortgage biz that wear tinfoil hats feel that the banks don’t really want to compete, and that their stellar lobbying efforts are behind the rash of new (over?)regulations in our industry recently.

I personally see this as an attempt by the banks not to lower their costs to compete, but to increase the broker channel’s cost to compete – to the banks’ benefit and the detriment of the consumer.

They’ve lost substantial market share to the broker channel over the years and I think they’re tired of it.

#119 wrong on 05.12.16 at 2:26 pm

Risk-averse people locking into a 10-year term will look like geniuses in a decade. Not for everyone, but a two-year term is just dumb. — Garth

We said this 8 years ago. We were wrong then, and probably wrong now. If rates exceed 4%, a sizable percentage of the market would not be able to handle the added monthly debt, and rates would need to go back down to prevent a crash.

They won’t. — Garth

#120 WUL on 05.12.16 at 2:28 pm

#105 CHOPPER DUDE:

Oh, no offence taken at all. I have laughed at myself and allowed other people to laugh with tales of my predicament over the last 9 days without a wallet. Urban survival skills emerge.

Retailers all over Calgary are offering 15, 20 and 30% discounts to evacuees (Bed, Bath and Beyond – 30%). All I have to say is that my billfold is in the Fort and they trot out a discount. My debit card was replaced in 5 minutes and VISA got me a replacement card in a day and a half.

My writing should not have connoted that I was not taking a shot at your comment.

Cheers and hang in there on the front lines.

WUL

#121 WUL on 05.12.16 at 2:30 pm

Correction.

One too many “nots” in my response to CHOPPER DUDE.

#122 Nemesis on 05.12.16 at 2:42 pm

“If you want stories about how the Chinese are screwing you, or picking winning lottery tickets, try the Globe…” — HonGarth

#FunnyYouShouldSayThat,Or… #HoneyBooBooFearsElectionLottery… #BegsFedsToPoliceChineseLaundry… #SaysGlobe

[G&M] – Christy Clark calls on Ottawa to boost tracking of real estate transactions

http://www.theglobeandmail.com/news/british-columbia/christy-clark-calls-on-ottawa-to-boost-tracking-of-real-estate-transactions/article29988214/

#ElPrimoMinisterResponds…

[CBC] – House listings: the final frontier? Meet the ‘Gold Broker’

http://www.cbc.ca/news/canada/british-columbia/real-estate-vancouver-christopher-lee-1.3574282

#WhileJusticeMinisterStudies’Briefing’Notes…

[CBC] – Jody Wilson-Raybould defends $500-a-plate fundraiser

http://www.cbc.ca/news/politics/justice-minister-bay-street-fundrasier-1.3530707

[NoteToGT: What was Jody thinking?… After all, if seats at one of HoneyBooBoo’s intimate soirees average $10,000 a plate…]

#123 Cottingham a bargain on 05.12.16 at 2:42 pm

Seems my comments have attracted a lot of responses . Some seem somewhat angered or annoyed.

#99 a Canadian abroad- earlier posts of mine clearly state that I have no problem with financial asset investing it’s just that I don’t feel confident enough to do it myself, nor do I need to . No I’m not Interested in hiring an expert to do it for me either. I’m happy for you that you have had much success as have those around you.

Garth you mention that Jeff has three times as much in his financial portfolio than his RE. Does the rule of 90 kind of work in reverse too? I mean , maybe he is under exposed to RE and needs to re balance higher ??

#124 triplenet on 05.12.16 at 2:43 pm

#111 Brian
Major League Soccer ?

#125 IHCTD9 on 05.12.16 at 2:48 pm

#101 lee on 05.12.16 at 11:57 am

Could not agree with you more, although I think you are exaggerating a bit at $20M. I think an average SFH in Toronto in 5-7 years will be about $2.5M. An adjustment will take us down to about 2M for about 2 years, just like in the 1990’s when the “crash” of 1993/1994 pretty much began to back track by mid-1996. People have long memories when it comes to money, and they are living longer. They won’t be stupid enough to dump their properties at the first sign of trouble, as some would have you believe, knowing what they know about the 90s. Values eventually return just like they do in the stock market.
____________________________________________

Doubt it. 99.9% of all Canadians can not get financing for a 2 million dollar house without massive help.

Boomers are the fuel for most of the market. They won the house lottery, and their kids are benefiting with wealth transfers to afford housing.

40% of Millennials are in the market only because of this help. Once the Boomer lottery winners are tapped out, that’s it for the gravy train. The GenXers will probably be retiring en masse with mortgages still in effect, their kids get nothing unless the bank of Mom and Dad can borrow it (maximum stupid).

Millennials kids may never have lived in a house, and are children of what will be the most brokeass, indebted generation in Canadian history. Many are not even having kids at all. In fact, many millenials are not even marrying – which means one income, which means no house – period.

I don’t see a long term pool of buyers in the GTA for 2 Mil houses unless you are expecting foreign money to drive the entire market almost exclusively. Statscan says the average amount of money that immigrants bring to Canada is less than 40K, income for males (women not taken into account), and essentially within the GTA is 48K after a few years in Canada. These aren’t house buying numbers.

The GTA will have to have to attract hundreds of thousands of millionaires from outside the country, to what amounts to a shithole city so they can buy 2 million dollar houses. This ain’t going to happen.

#126 Ronaldo on 05.12.16 at 2:51 pm

#78 Cramer

”We can thank the super-liberal eduction system for this. This generation doesn’t know their left hand from their right. Society will be totally screwed when they get into positions of power and authority.”

You must be referring to the ‘We’re pregnant’, crowd.

#127 TnT on 05.12.16 at 2:59 pm

#74 Bytor the Snow Dog on 05.12.16 at 8:04 am

Not being sarcastic

SM is just part of the old ‘herd”

http://web.uvic.ca/~ahdevor/HowMany/HowMany.html

#128 Cottingham a bargain on 05.12.16 at 3:00 pm

#51 WalMark of Sadkatoon on 05.11.16 at 10:04 pm
It’s just that I don’t know anyone who created their wealth using stocks and bonds

u know what they say. just look at your 6 closest friends and u know where u stand financially and economically. basically u are in a middle class wage slave demographic but I think that’s obvious.

—–

Not that it matters , but if I stood with my six closest friends I would be standing among the 1% of the 1 % ers.

#129 Willy on 05.12.16 at 3:29 pm

#100 Smoking Man on 05.12.16 at 11:43 am

The Destruction of the American dream.
Lest face it, its hard for most people to get by these days, in the fifties and sixties anyone wanting that white picket fence, the beautiful family and home needed only to get a job, any job.
Since then there has been a slow decline in the standard of living, where today for most people without a couple making professional wages that dream is just a dream with no chance of frouishion.
The cleaver little machine knows the herd is growing restless, terrified at the prospect of them banning together and coming for it’s head it has found a temporary solution.
Lets get them fighting with each other. Lets find ways to have Race Wars, Gender Wars, Young vs Old wars. They will be too busy attacking each other and we can still have good times at our get together s at Bilderburg and Davos.
Race Wars: http://dailycaller.com/2016/03/10/shocker-after-caving-to-protests-mizzou-has-huge-budget-gap/
I give you the birth of Cultural Marxism.
Audit the Fed and everything will be understood.
…………………………………………………………
Pal, I’m old and you’re no expert on Cultural Marxism. What the hell is “frouishion” is that a word you just made up?

#130 genbizx on 05.12.16 at 3:38 pm

onward with the cartel…couldn’t let good old fashioned competition get in the way of some government assured profits…

#131 Chris in Nanaimo on 05.12.16 at 3:57 pm

#36 Smoking Man on 05.11.16 at 9:01 pm
How do you expect the newly schooled to know about a housing bubble, or to manage money when they don’t know the difference between boys and girls.

Herd drives the market. I give you the new herd.

Clip is halarious.

College Kids Say the Darndest Things: On Gender https://youtu.be/-4S0gHlKiho via @YouTube

—————–

OMFG…….

You can almost see these ‘young adults’ tying themselves in knots to remain politically correct in their answers, getting ever more absurd…

Waiting to see how long before Apotemnophilia gets reclassified from a mental issue to a ‘Body indentity integrity’ issue and doctors start chopping off perfectly healhy body parts…a’la Transgenderism.

Shitlibs…..all of them.

#132 Nemesis on 05.12.16 at 3:58 pm

“Impressive evidence (that reporters no longer report).” — HonGarth

#Oooops,Or… #WhatWasThatAboutJournosAgain?…

[MACLEANS] – China is buying Canada: Inside the new real estate frenzy: How China’s affection for Canada’s real estate is reshaping the nation’s housing market well beyond Vancouver

http://www.macleans.ca/economy/economicanalysis/chinese-real-estate-investors-are-reshaping-the-market/

#133 family beagle on 05.12.16 at 3:59 pm

It doesn’t matter what Jeff and ilk pay for RE or how they finance it. It only matters that they stay contained and concentrated in urban centers. The fact they pay so much is a bonus for those cities. I encourage more people to join the dogpile, and when not in commute, recline on wifi oggling home shows. If a person can’t afford a house, then buy that inner city condo.

If urban RE prices do start to drop, just run more ads and plug in more neon. Be steadfast. Don’t sell until you cover all costs and make a tidy profit, at any expense over any timeframe.

Signed,
Rural Hectare Club
(Where one of our loons is worth ten of yours.)

#134 Chris on 05.12.16 at 4:18 pm

Dear Garth and Dogs,

Off-topic from the latest post– I’m a median-income earner (working shmoe), with an unskilled stay-at-home wife (potential working income of which would only cover daycare costs), and a one-year-old girl. We plan on soon having a second.

We rent a one-bedder on St. Clair, 20 mins from my office, but would soon be in need of more space should we be blessed with a second baby. Upgrading to a two-bedroom rental in Toronto would substantially impact income otherwise dedicated to our diversified investments, kids’ future tuition, and retirement. Likewise for a larger rental outside of the city, as that would then require a car and higher transit costs.

Regardless, our frugal lifestyle over the past 12 years has led to savings in excess of $200k, spread across diversified investments. Zero RE or debt.

What exactly does someone in my situation DO? (Median earner with stay-at-home wife and dependents, in need of more space and with substantial savings.)

Chris

#135 Rexx Rock on 05.12.16 at 4:31 pm

We all know the banks and government colluded with each other by lowering interest rates to get all Canadians owning real estate. With only old and decrepit rental apartments,people were basically forced into real estate to have a decent roof over their head.The bank wins with bigger and longer mortgages and higher tax revenue for the governments.Add to lax money laundering laws and massive yearly immigration it has created the perfect storm for real estate.This will continue because both are addicted to easy money.

#136 Mixed Bag on 05.12.16 at 4:52 pm

#112 Mixed Bag on 05.12.16 at 12:54 pm

Risk-averse people locking into a 10-year term will look like geniuses in a decade. Not for everyone, but a two-year term is just dumb. — Garth

—————-

The two-year term is not dumb when it’s been ridiculously low at each renewal.

Sure, risk-averse people might take the safety of the 10-year term. They may also take the annual pension instead of commuting.

When the two- or -five year rate reaches that earlier ten-year rate, I’m still ahead, as I had lower payments in the interim, and was able to invest the difference.

When rates shoot higher than the return on my investments, then I’ll be more aggressive with paying down the principal, but in the meantime, I invest what I save.

How could I have not guess it’s all about you? — Garth

#137 Dan on 05.12.16 at 5:01 pm

This is like Hong Kong, now. If you are connected you borrow money, buy condos on assignment and sell it
during construction. You leverage other people money with saving on which they get 0.5% interest.
Do that instead of buying stocks or options on margins.
Real estate in Canada is still less rigged than wall street…

#138 Vundo on 05.12.16 at 5:03 pm

#89 Nick: you aren’t wrong that Garth sometimes says some stuff that working class people ought to take offense to, but you are 100% wrong to suggest that the rule of 90 is one of those things. You are welcome to disagree on what the number should be, but I get the impression that you aren’the quibbling about the numbers. I suspect that you are mad because you don’t own a house, you see owning a house as a sign of success in life, and here is mean old Garth Turner telling you not just that you shouldn’t own a house right now because you can’t afford it right now, but that you are unlikely to be able to afford it in the foreseeable future and therefore you need to resign yourself to being a renter. Meanwhile, you see homeowners bragging about their equity and mortgage brokers telling you that there might just be a way to get in.

There is a lesson to be learned here, Nick. It is that you need to let go of the notion that success depends on owning a house. Go ahead and get offended when Garth calls a woman with over $100k in savings a “financial cripple” but don’t cry here about being told you should not put every last one of your eggs in the real estate basket. Any person with $2000 in a savings account can afford to embrace the principles of balance and diversity even if the absolute amount of their gains are peanuts at first.

#139 Ogopogo on 05.12.16 at 5:57 pm

God there are lot of whiny comments here today. Troll “lee” and SJW Nick” are two cases in point. After all the entertainment we had these past two days with the Gyori Circus Show.

If and when the wife and I decide to forego our child-free status, I will refuse to ever say “we’re pregnant.” It makes me sick to my stomach whenever I hear the words coming out of a mangina with that typical aw-shucks look of a beaten cuck.

I hope I’ve triggered a special snowflake.

#140 A box in the sky on 05.12.16 at 6:13 pm

#125 IHCTD9 on 05.12.16 at 2:48 pm

The GTA will have to have to attract hundreds of thousands of millionaires from outside the country, to what amounts to a shithole city so they can buy 2 million dollar houses. This ain’t going to happen

———-

Toronto is a shithole? What an absolute joke. If that’s how you feel chances are good that you lack the financial capability to compete with people who live in the desirable areas of this city.

Toronto isn’t NYC but it’s a damn good city.

#141 TCContrarian on 05.12.16 at 6:43 pm

#37 Cottingham a bargain on 05.11.16 at 9:03 pm

By the way, just want to go on record that I’m not here to knock financial asset investing . It’s just that I don’t know anyone who created their wealth using stocks and bonds, other than Buffett and Soros I suppose.

I do know a lot of people however, a pile of Scott mcgillvray types, builders , re agents, infill investors , developers and they have made theirespective fortunes without ever having touched an etf or having the formal education required to understand them fully
********************************************

Buying with leverage (ie. a mortgage or margin account), amplifies gains in a bull market – which we’ve had in RE since the ’80s.
When the trend reverses, and it will, leverage will work against you and amplify losses.
I’ve found this out first-hand with my margin debt, so I understand this viscerally (not just arithmetically).

When (not ‘if’), the RE bull stalls and reverses into a bear, watch-out below! It’s gonna get ugly. I think there are many out there who have taken too much leverage, as they’ve never experienced a bear in RE.

#142 Freedom First on 05.12.16 at 7:44 pm

#141 TCContrarion

I am from the East, and Alberta is the 4th Province I have lived in. However, I have been here long enough to learn the local lingo.

“Leverage”. I like your take on it. In Alberta, Albertan’s refer to it as “Leveraged to the truck nutz”. And it doesn’t matter what you’re leveraged for.

#143 Tony on 05.12.16 at 7:54 pm

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