Too scary

SCARY modified

So, what happens to society, the economy, financial assets and houses when things change? It’s time we started thinking about it. Change is in the air.

You know conditions cannot stay as they are. A third of all kidults live at home. Most ever. Many are over-educated, under-employed and pissed. Real estate’s basically unaffordable. Wages are stuck. Everybody’s in debt. The wealth divide yawns larger daily. Savings are falling. Taxes are rising. Government’s growing. Jobs are scant. Now we’re blaming immigrants. And most of us walk around like fools in a fog.

“Just don’t understand how people can extend themselves the way that they are,” says Matt from a God-forsaken burb north of the Big Smoke. “We have walked away from houses we like because (we make decent money) we do not want to get into a bidding war and overpay.  One house listed at $800,000 and went for 1.15 million.  Another was listed at $750K, had 2 bids at $850K and the owner would not take less than $1 million. All in Thornhill.

“Anyway, I am interested  in your vision of the future.  When conditions change, (interest rates go up), and people can’t make their payment commitments, what happens?  Will there be a mass retraction in price, will people lose their homes, can mortgage lenders afford defaults, will the government have to intercede?  Will it be like the US in 2008 but not to the same degree?  What does the future look like in your world?”

Good questions. Most folks are afraid to ask ‘em, let alone answer. Every day I’m pilloried for suggesting people should prepare for altered circumstances – which is certainly hard for a sensitive, brooding, feminine-type, bleeding heart like me to take. However, I’ll struggle on. Here’s why: a lot of us are pooched.

Look no further than a BDO (the accounting guys) survey out today. It’s scary.

  • 73% of people have debt, with the worst stats in the 35-54 age category.
  • Over half of us (55%) would have trouble paying routine bills if rates rose. At all.
  • Almost four in ten (36%) say it will take between 20 years and never to pay off what they currently owe.
  • Almost 60% believe their houses will go up in value forever, and save them.

Yikes. So what this pathetic blog’s been warning about for a dog’s age has finally come true. A majority have rolled the dice, absorbed debt, gambled on a one-asset strategy, stopped saving or investing and now live so close to the edge that higher interest costs would push them over. Just like Matt conjectures.

But what are the odds of rates augmenting, which would mean real estate flatlines or sinks? (Remember that the cost of money and the sale price of houses are inversely related.) Apparently they now stand between 34% and 80%. Oops.

Futures markets give 34% odds of a US rate increase in three weeks, a 58% probability of one in July and an 80% weighting for another in the autumn. In the past couple of weeks, these numbers have tripled in some cases, thanks to robust inflation stats, the best-in-eight-years new housing numbers and wall-to-wall indications by the Fed that they have an itchy finger on the trigger. How soon will it happen? We’ll know that next Friday morning, when the latest jobs numbers are released.

But, happen it will. That’s why the US dollar is rising, ours is falling and gold is tanking. Fed officials have been busy prepping the markets for the normalization of interest – a process we should expect to occur over at least the next two years. On Monday San Francisco Fed governor John Williams said two or three more increases this year are “about right” and last week influential New York Fed boss William Dudley said we should expect the kick-off in June or July. More confirmation could come Friday when Fed czar Janet Yellen gives a speech.

If you think this doesn’t matter, good luck. In reality, it’s a watershed moment – confirmation the only central bank in the world that matters is decreeing the days of ridiculously low rates and artificial stimulus must end. Why? Because they create asset bubbles, encourage lousy, greedy, irresponsible behavior and end in tears. Vancouver may be the best example on the planet, where two of the three outcomes are already in evidence.

So, add it up. A third of young adults are launch failures in the family basement, half the population’s unable to cope with higher costs, four in ten have lifetime debt, yet there’s a 70% home ownership rate and surging buyer demand – while change barrels down upon us. How does this end?

Well, it’s unlikely to be a widespread US-style debacle since mortgage securitization has been better regulated here and CHMC backstops a ton of lender risk. So, no banks will topple. Plus, lots of markets in Canada are already slowly deflating. Additionally, most of the country has recourse mortgages, so borrowers can’t just throw the keys to underwater houses at their bankers, and walk. Not only do you lose the house, but you’re personally liable to make the lender whole. Sucks.

Would T2 intervene and bail out the debt-laced derrieres of the house-lusty? Unlikely. After all, the feds will be plunging at least $100 billion into deficit just trying to pay for a few promises and to get the economy kick-started. Besides, even with the trillions it spent trying to reverse the real estate bust in the US, and rescue the middle class, Washington failed. The lesson is simple – once markets turn, the momentum is massive. Finally, trying to reflate a bursting bubble would only risk creating the same conditions for collapse. In other words, when the US raises rates, the Bank of Canada will not drop them. Count on it.

So, a likely scenario is a rapidly decelerating housing market in select cities and regions. You know where. Toronto will be far less impacted than Vancouver, since prices have been somewhat less insane, and the population base is quadruple. Some regional financial institutions, like credit unions, with unprecedented residential mortgage exposure, may need a provincial bailout. Bankruptcy levels will rise. Local economies will be wounded. Audi dealerships will be flooded with lease returns. The decline in land values could be as breathtaking as was the advance.

But, seriously Matt, nobody knows the true consequences. It all seemed somewhat manageable when a Van house cost only a million and F was spanking lenders for too-cheap loans. But lately all market controls have been defeated, as we stare at the biggest changes in monetary policy in a decade.

Oh, by the way, 40% of Canadians currently think their kids (in the basement) will be better off than them. Go figure.

Letter of the Day! From Tracy in Van...

VANCOUVER MAP

“I emailed you back in 2012.  I have always been a fan of your blog.  Unlike other Vancouver doctors you have featured recently, I have not asked my parents to re-mortgage their home in Burnaby so that I can have a nice “doctor” house on the west side close to where my husband and I work.  After losing out on 5 bidding wars back in 2012, I started reading your blog and decided to find a nicer house to rent.  And here we are 5 years later still renting the same house (for the same price.) We save money every month, we have a well balanced portfolio with an investment adviser we trust.  Our portfolio pays dividends and is growing.

“Lately the daily hype of escalating real estate prices is ridiculous.  I feel like CBC has a vested interest in fueling the “fear of missing out”.  So after reading some ridiculous article on CBC, I then read your blog for some balance.  So after reading today’s blog, I calculated our price to rent ratio.  The most reasonably priced house that we could possibly buy that would somewhat compare to our current rental would be at least $2.5M.  (our rent is $4200).  The actual house we rent was assessed this year at $3.6M but the house 3 doors down of the same vintage just sold for $5.2, so assuming our rental could sell for about $4M in today’s market, our price-to-rent ratio is 79.  I guess we will keep renting.”

185 comments ↓

#1 Harrold Hemsworth Sr. on 05.26.16 at 5:26 pm

First!

#2 Tony on 05.26.16 at 5:29 pm

You know what? Parents helping their kids seems to be all the rage nowadays. Parents helping with homework, parents complaining to professors about marks, parents asking employers why their children weren’t hired. Parents who leverage their own homes to help their children with a downpayment. Parents, there is a time to just “let go” and let your kids grow up, ok?

#3 For those about to flop... on 05.26.16 at 5:33 pm

Here is a good chart about debt and financial stress in the U.S.

If we are spending 164% of what we are earning than we are winning the competition…

M41BC

https://imgur.com/IpnJpFH

#4 Roial1 on 05.26.16 at 5:36 pm

Ahhhhhh, the joy of no debts. I am all set for the discounted cruises and air fairs that are on the way.

#5 Life among the Stars on 05.26.16 at 5:37 pm

Increase the rates and let the tide go out. People are nuts.

#6 pathcontrolmonk on 05.26.16 at 5:46 pm

You forgot to mention how municipal coffers will be impacted. I remember growing up in Vancouver and everyone collectively thumbing their noses at the US education infrastructure. Now you look at the schools in the Lower Mainland and for all the taxes the city halls are collecting, the schools are decrepit and decaying. When I was in YVR last weekend, there were 3 separate stories on Global about schools: 1. A Saanich school that had a leaky moldy roof for 20 years that made the kids sick, 2. How Richmond was going to be selling half a dozen elementaries because of cuts, 3. Surrey being overcrowded with teacher/student ratios at 40:1. Then drive down to WA state and take a look at the schools, they look like frigging 4 star resorts and in urban areas are mostly rated at between 7-10 on greatschools.org .

Yet HAMs are moving to YVR in droves because of the excellent education system? Puhleez.

#7 WalMark of Sadkatoon on 05.26.16 at 5:47 pm

BDO survey.

Brutal

#8 Randy on 05.26.16 at 5:48 pm

Sorry Garth. The Fed are political hacks with almost zero credibility. They will drag their butts to support their political masters, just like the BOC

#9 Get on the Trump Train on 05.26.16 at 5:50 pm

Commie Bernie wants a piece of the Donald… mano-a-mano.. let the show begin.. Billary has been chucked aside.

#10 Scumop on 05.26.16 at 5:54 pm

Many an “I told you so” moment coming to a lot of people.

Presumably will be accompanied by some job loss. But interesting that is not already factored into the job market by people so mortgaged up they cannot afford furniture and other goodies which provided some real economic benefit. Or have the credit cards not yet been maxed?

#11 Ed on 05.26.16 at 5:56 pm

On Vancouver Island, I can see 9/10 bus stop bench ads are for realtors. 12/3 the pickup trucks at Home depot are for home building contractors. I think the correction will be slow & steady, yes, but the influence massive, massive. It will bring a fundamental realignment of our economy at the same time that the shift in thinking towards home ownership happiness. I wonder if there is an ETF that covers dollar stores and KD?

#12 OttawaGuyRenting on 05.26.16 at 6:10 pm

A stroll through my hood and the signs went up in Early Spring and yes some came down without a sold sign on it and everyone stayed put (2 on my street and one around the corner) Welcome to Ottawa – what a normal buyers market looks like I would guess.

I constantly tell my Union-Gov-Never Lose her job wife – keep saving is the answer

Listen to Garth. Roll the money into long term and keep renting a 3 beddy 2 bath from easy going landlord for $1100 plus utilities

I want to have money when I retire. I want to have fun now as well.

I can count 7 friends their late 30s and early 40s like me that I know only get by on Bank of Mom. I have no idea how that would work. It is scary. Imagine your parents paying for you travel to Asia with your wife? Or pay for a car?
OR as I see in one case – cover the entire mortgage for a year because you spit out a baby and she was a cashier?

These like that Millen Video the other day are all antidote drivel – but paint the landscape around me

I feel like the insane one sometimes.

#13 JSS on 05.26.16 at 6:13 pm

Garth – any commentary Re. dividend increases from CIBC, and BMO? Yet economy is struggling?

Amazing what you can give back to shareholders when you fire 2,000 more employees, eh? — Garth

#14 F on 05.26.16 at 6:15 pm

I don’t usually fall into the schadenfreude category but at this point I’m desperate for this to happen. I’m a millennial (hold your pitchforks) who, in 2010 bought a modest detached house because I fell for the “live within your means” adage. Yes I’m lucky to have bought when I did. I purchased it as a starter house and never intended to live here forever, but I’m now priced out of a 4 bed, 2 car garage mainly because I’m just not willing to take on that level of debt. I’m about 7 years old from paying the house off completely… again, because I purchased within my means and was lucky enough to climb the corporate ladder and pay down the debt responsibly. First world problems right? Well here’s why I want to see some changes…

Over the past few years, I’ve seen my peers purchase enormous homes on 5 figure salaries, purchase or lease 80k vehicles and live responsibility for you with this bottom of the barrel interest rates with their heads in the sand. I’d say 90% of the time I get looked down upon to have purchased a modest home. Women especially bad with this – I say this as a woman. I can’t go to a shower or other gathering without hearing ” but you won’t be happy in that home forever… Right?” As though I’m making a mistake for listening to financial reason over house lust & emotion. This makes me crazy and I’m desperate to see these people go under with increased interest rates. Maybe that sounds vindictive but these are the same people who boast that their houses increased two or three fault when they don’t even own 20% of it yet. At the same time, while I’d love to see interest rates go up, I’m not as hopeful as Garth here, I’ve seen savers be punished and the reckless be rewarded for too long. Just going to keep on my path with the knowledge that I’m doing the right thing even if I don’t have the shiny visual representation of wealth that others do.

#15 understood by few on 05.26.16 at 6:16 pm

So.. hold off on the Audi for now and wait until someone pays me to take over their lease?

For whatever reason, we live in an era of instant self gratification. It’s all YOLO and FOMO and Netflix binging. Crazy thing is it isn’t just the Millenials or GenXers.. I know plenty of Boomers falling into it. Financed RVs, cars they can’t afford, spending money they don’t have to make a lateral move in their real estate holdings.. all because, “I can enjoy it now.” Implying tomorrow may be too late or too long to wait.

What happened to delayed gratification? What happened to living within your means? Every idiot is trying to keep up with the joneses and while the joneses may make more, they’ve leveraged themselves to the limit as well.

This can’t end well.

#16 OttawaGuyRenting on 05.26.16 at 6:17 pm

Garth is awesome and deserves a great deal of praise for putting up this blog.
I remember the first time talking to someone with some sense of economic prowess – talking interest rates about 4 months ago
“they will go up – and they will not come down like this for a cycle that will mimic this one”
He is a big shot. Knows his stuff. Him and I only disagree on one thing – me owning a house without having $200K in the bank

Chit chat back and forth and he says…no word of a lie
“do you read Garth Turner?”
– the blog?
“ya”

We are now GarthHeads together.

This guy is an Ottawa powerhouse – so when I see people talk about how Garth helps the 1% and talks their language….HELL I agree

I’ve watched this guy scrape and scrap to the top. FROM NOTHING.

That is my blog for the day

#17 AR on 05.26.16 at 6:17 pm

What are the short and long term effects on the balanced portfolio when the debt hits the fan.

Rising rates actually support such portfolios with higher preferred values, for example. Also the Fed’s move shows confidence in a swelling US economy, good for most equity markets. Financial assets have a history of advance during Fed tightening cycles. — Garth

#18 Big English on 05.26.16 at 6:18 pm

Garth, your just plain awesome.

You bring light to darkness.

#19 F on 05.26.16 at 6:18 pm

Sorry for the typos Garth, I won’t do voice to text anymore when posting comments!

#20 inflate - inflate on 05.26.16 at 6:20 pm

So world economies are in STUCK gear… Will rasing rates unstuck them,,, um dah…. NO…. Do you really think 1/4 or 1/2 point rise in rates will normalize rates.. Normalizing rates is said to be required as the whole world is nearing yet another recession of which economies used interest rate drops of 3% to 5% to get them thru the recessions. The 1/4 or 1/2 points they’re discussing right now will not normalize rates…. In today’s world the only thing that will normalize rates is finally admitting that we have a new normal and this new normal requires big doses of inflation to heave us out of the mess the thieves dropped us into. Today’s governments have to behave as does our new government and create, create, create, jobs, jobs, jobs. The rest of the world will eventually follow our young new leader. Thank goodness we finally shed that oily puke of a PM with all the rest of his criminals…. Canada is so much better off….

#21 tundra pete on 05.26.16 at 6:25 pm

It will be so pathetic soon to see the bonehads who overpaid on real estate, whining on Global T. V , crying up a storm about it being everybody elses fault that they overpaid. They will be demanding handouts from everywhere and blaming everyone but themselves for their irresponsible financial literacy.

Some people are truly beyond help and wouldn’t listen to anything they were told. As they say; youcan lead a horse to water but you cant make him drink.

#22 Fred on 05.26.16 at 6:39 pm

Saw on TVO last night a movie called “The Forecaster”, about Martin Armstrong. It was interesting. Garth, have you heard of him? What’s your take?

#23 crowdedelevatorfartz on 05.26.16 at 6:39 pm

@#2 Tony

Those parents are called “Helicopter Parents” ….constantly hovering around to bail out junior whenever they need it.

What economists are now talking about is even worse.
Helicopter money…..bags of money dropped from the sky to stimulate the economy……

Makes helicopter parents…. not so bad….

#24 crowdedelevatorfartz on 05.26.16 at 6:42 pm

@#11 Ed
“I wonder if there is an ETF that covers dollar stores and KD?’
*******************************************

Classic.

#25 crowdedelevatorfartz on 05.26.16 at 6:55 pm

The Judgemental map of Vancouver is out of date.
The area formerly known as West Van and renamed “Mostly old white Money” is somewhat incorrect.
It should be called “West Persia”
Just sayin’

#26 For those about to flop... on 05.26.16 at 6:56 pm

According to the judgemental map of Vancouver in the blog posting I live in the” Stroller and rescue dog” part of town.

I’ll take that as a win…

M41BC

#27 Just in on 05.26.16 at 6:57 pm

Fed should never have dropped rates so low to begin with, and should have raised 5 years ago. I should be running the show.

#28 Cory on 05.26.16 at 7:00 pm

I say rates rise in June and it’s about time. I’ve had enough of subsidizing irresponsibility of the dumb ones.

#29 Doug t on 05.26.16 at 7:00 pm

Really is gonna bitchslap a lot of people – it’s different this time NOT

#30 YVR Update on 05.26.16 at 7:06 pm

Alert!

“Cracks are starting to show..how long can media and the fininacial world contain the truth behind the dam regarding the real reason behind the event price increases”

Keep up the good work here!

#31 John B on 05.26.16 at 7:07 pm

And yet, house will be more expensive next year and the year after…

One day, maybe one day we will see a 10% correction… The media will be silent about it but then once it recover you will sure hear about the 10% rise in a month in all news… and the price will start escalating again for 5-10 years.

This is how it works

#32 For those about to flop... on 05.26.16 at 7:09 pm

Well I learnt something about this blog the last day or so.
I posted a map of the richest people in each state of America and got over 550 views

Then I posted a map of the world with the words” humorous” less than 50 people viewed it.

Which leads me to believe that there are a lot of super serious lurkers here that don’t have time for a laugh.

Pity…

M41BC

#33 rk usa on 05.26.16 at 7:19 pm

re: borrowers can’t just throw the keys to underwater houses at their bankers, and walk. Not only do you lose the house, but you’re personally liable to make the lender whole. Sucks.

if your only asset is your home whci hwould be the case for the cash strapped then you declare bankruptcy and walk and then rent

your credit record is clean in 7 years and you buy a new home for 40% less

it is called strategic default

#34 Get on the Trump train on 05.26.16 at 7:22 pm

Celebrating my victory so far. I’m just a burger and coke dude telling it like it is. GO USA.

https://www.instagram.com/p/BF4raEHmhag/

#35 Smoking Man on 05.26.16 at 7:32 pm

Change is good.
New opportunities to exploit.

#36 Harley Smitts on 05.26.16 at 7:33 pm

What rates rising? The Canada 30 year bond is below 2.00% again at 1.98%.

This is not for 5 years or 10 years but for 30 years, 1.98%.

It was 3.8% just 6 years ago and close to 4.8%+ before 2008 financial, global economic meltdown.

Anything that the Fed does will just put more pressure on lower interest rates in the bond market.

Wait when another recession and economic, financial downturn comes in the next 6 to 18 months. Remember when Bush’s term was finishing and Obama got in.

Now ECB, Bank of Japan and others are gong to keep interest rates lower for longer.

Anytime there is an increased bond rates, yields they are short lived and not sustained. The 2013, 3.92% 30 year U.S. bond yield and 2013 Canada 30 year 3.2% bond yield did not last too long.

They are 30% to 40% lower 3 years later guys! Inflation, user and other fees, auto, home insurance, real estate prices, water rates, electricity and utility costs, food costs etc. etc. are higher anywhere from 15% to 30% than 3 years ago.

They have all this going their way. Pay more, get less and get poorer!

#37 Smoking Man on 05.26.16 at 7:38 pm

#34 Get on the Trump train on 05.26.16 at 7:22 pm
Celebrating my victory so far. I’m just a burger and coke dude telling it like it is. GO USA.

https://www.instagram.com/p/BF4raEHmhag/
………………

Trump clinched the nomination today, hes going to totally eviscerate the Marxist.

I see Alberta wanting to cussed from Canada and become a US state after he wins in a landslide. That would be a good deal for him.

Then watch all the hipsters in Toronto celibate till they realize they need to pay Wynne’s and T2 bill.

Freedom party of Alberta.

Who’s in.

#38 AK on 05.26.16 at 7:39 pm

“On Monday San Francisco Fed governor John Williams said two or three more increases this year are “about right””
====================================
I will go on a limb and say: June, September and November…

#39 Valleyboy on 05.26.16 at 7:41 pm

I’m afraid that by not having massive amounts of debt that I will not benefit from the massive correction that may come. And the people with the most debt will be rewarded the most. Should I just quite caring buy a 60 k truck, buy a 50k boat and just make the minimum payment. And join in on the Canadian party I’m obviously missing out on.

#40 common sense on 05.26.16 at 7:41 pm

Riddle me this…

So the US with low rates and BILLIONS of trying to goose the economy has had hardly any impact.

So now IF they raise rates, markets tank, MORE people become desperate and all hell breaks loose.

And please tell me it’s all just one big F-ING coincidence that they will set off the bomb right at the end of Obama’s term, so Barry can go off in the sunset and create a nice new library…

And you wonder why Trump and Bernie are popular.

What a complete and total Mongolian……

#41 down and out on 05.26.16 at 7:44 pm

#22 I too watched “The Forecaster” ,my take was the current use of the word normalizing of rates is a farce .The show presents a good case of the pendulum swinging back fast and quick ,pass the mean or normalized rates of interest that the fed and the world all hope for. Not to be a doom and gloom guy but like today’s blog states ,change is in the air. Remember the same Fed that brought this mess upon us is going to steer us back to normal ,what kind of fool do they take us for. WOW seat belt yourself in.

#42 Andrew Woburn on 05.26.16 at 7:44 pm

President Chump is going to bring back the jobs from Asia.

What jobs?

– Reboot: Adidas to make shoes in Germany again – but using robots. Company unveils new factory in Germany that will use machines to make shoes instead of humans in Asia.

http://www.theguardian.com/world/2016/may/25/adidas-to-sell-robot-made-shoes-from-2017

– Foxconn replaces ‘60,000 factory workers with robots’

Apple and Samsung supplier Foxconn has reportedly replaced 60,000 factory workers with robots.One factory has “reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots”, a government official told the South China Morning Post. Xu Yulian, head of publicity for the Kunshan region, added: “More companies are likely to follow suit.” China is investing heavily in a robot workforce.

http://www.bbc.com/news/technology-36376966

#43 Matt on 05.26.16 at 7:54 pm

“Some regional financial institutions, like credit unions, with unprecedented residential mortgage exposure, may need a provincial bailout. Bankruptcy levels will rise. Local economies will be wounded. Audi dealerships will be flooded with lease returns. The decline in land values could be as breathtaking as was the advance.”

So that’s it, nothing else happens in an economy when rates rise…armegedon is our only choice…what about the Garth Turner diversified portfolio we’re all invested in…and don’t banks start to pick up a little NIM and eventually pass it on…eventually begin competing for your savings… and what about reflation…aren’t rates rising a positive signal…employment looking better…jobs coming back commods picking up steam.
Don’t disagree with your mantra, but hard to read the same stuff every day…it’s not a “keep all else equal” kind of equation.

#44 cto on 05.26.16 at 7:55 pm

Garth
I am very concerned that when this thing starts to unravel, T2 is going to find the ways to extract the savi gs of.the haves and bail.out the sorry asses of.the masses of irresponsible idiots. This is what he does best.
Are you sure this will not happen?

#45 For those about to flop... on 05.26.16 at 7:59 pm

Just to prove my point about lurkers on this blog.

In the first hour my post at number 3 had 111 visits.

In that same time only 21 people left a comment here and one of them was by WalMark so that one dosen’t even really count.( I will go easy on Tony tonight!)

We ARE the car crash…and we have a lot of onlookers…

M41BC

#46 White Crock BC on 05.26.16 at 7:59 pm

F on 05.26.16 at 6:15 pm

I’m desperate to see these people go under with increased interest rates. Maybe that sounds vindictive …..

Do you think?

Desperate, really?

If it happens , it happens… what do you stand to gain from other people’s misery?

News Flash: You are a schadenfreude kinda guy.

#47 ptbobman on 05.26.16 at 8:05 pm

Ponzi scheme for Vancouver real estate http://www.rosskay.com/vancouvers-ponzi-scheme.html

#48 Shawn on 05.26.16 at 8:08 pm

Common Sense?

common sense on 05.26.16 at 7:41 pm said:
Riddle me this…

So the US with low rates and BILLIONS of trying to goose the economy has had hardly any impact.

******************************************
Hardly any impact… well other than unemployment down by HALF from the peak.

… and other than the stock market being more than TRIPLE what it closed at on March 9, 2009.

People believe what they want to believe.

#49 Fed-up on 05.26.16 at 8:13 pm

But what are the odds of rates augmenting, which would mean real estate flatlines…

—————————————————————————————-

If real estate only flatlines and doesn’t correct by at least 40%-50% in YVR and the GTA, those who want to live there and didn’t buy in the last 10-12 years will be priced out of those markets forever, and will have been royally screwed.

Looking at Tracy’s case, paying an astonishing $4200, plus annual increases, per month in rent for the rest of your life in order to live close to your work and family, is nothing to be thrilled about. If you choose to retire with a $1 million balanced portfolio, you’d have to leave the $1 million intact and at work in your portfolio in order to have most, if not all of your returns paying your rent in that same house. You’d need far more than this for other monthly expenses in life.

Meanwhile Tracy’s landlord, will have most likely finished with his/her mortgage payments on a property that tripled in value in the last 12 years, then “flatlined” at $4-5 million, long before she retires, with a lot of help from Tracy BTW.

Hard to feel sorry for the landlord who may have achieved all this by leveraging as little as 5% when this house was selling for about $1.5 million 10-12 years ago.

#50 Linda on 05.26.16 at 8:27 pm

Tony & #14 – Bank of Mom (& Pop) – what seems to be happening here is another version of ‘oh, I just jetted back from Aruba 5 star resort where I saw (insert famous name here) & they were really nice’ etc. This version is ‘I can afford to buy all my children upscale houses, you loser’ to those less fortunately circumstanced. Or as I prefer to think of it, less brain dead. Because no way do all those loaners have the financial chops to loan their offspring all that cash when they themselves are either retired or about to retire.

#14 – I too have seen big homes, fancy cars, flashy clothes, expensive vacations galore & much gloating over how well they are doing. Then the job is lost or the bank of Mom/Pop closes the doors (lest they be eating cat food forever) & the formerly gloating are the currently sobbing. Those looks of pity? That is just the facade of people who want you to drink the Kool Aid too so that they won’t be alone at the self pity party when the music stops. Just another version of ‘have another drink’ so no one notices that THEY are drunk (everyone notices but politely do not comment); have another toke ditto, have another slice of (insert sinfully rich yummy goodie here) so no one notices they have packed on a few pounds etc. Misery loves company, enough said.

However, this interest rising thing. Yes, I can see rates going up from the current super lows but – maybe a lot slower & not so high as some might predict. Why? Demographics. A rapidly increasing elderly population percentage does seem to go hand in hand with slowed economic growth or even deflation. Why? Because older people have usually acquired most of the expensive stuff that super charges the economic engine. Have the car, the house, the exotic vacations, have every possible toy & usually more than one of each. So buying MORE stuff is not usually the issue. Getting rid of the mass of stuff filling every possible storage space is. Even with trading up & keeping only the most choice or sentimental items usually leaves more stuff than actually wanted or needed. So this meltdown is likely to be different from previous ones & add more than a few twists to the old plot.

#51 liquidincalgary on 05.26.16 at 8:29 pm

Garth,

congrats on 3MACS!

#52 Smoking Man on 05.26.16 at 8:35 pm

Ba hahahaha

Sure…………………

https://www.youtube.com/watch?v=RB7VMIw3JXU

#53 NoName on 05.26.16 at 8:45 pm

#42 Andrew Woburn on 05.26.16 at 7:44 pm

China is investing heavily in a robot workforce.
——————————

funny thing 4-5 yrs ago i went for week long training, so everyone was assigned to ther “table”, i got to seet with people that tend to laugh at their own jokes, while everyone elese is like ______… that week, group i was assigned to, laughed the most and loudest, and we managed to come up with craziest and best problem solving ideas. who knew
While i was there i was talking to some dude from alberta, and he was saying how “chanise” companies are cutting a cost buy aggressivly deploying lean and just in time manufacturing, and introducing technology to replace as much of the labour as they can. if companies are reluctant to pay an average fxcn worker 2$ an hour and they find that expencive i often wonder what tey think about hourly wages here…

http://orig13.deviantart.net/81ba/f/2009/101/6/e/megasxlr_and_alan_ford_by_ritualist.png

#54 Lee on 05.26.16 at 8:49 pm

#39

What the hell are you talking about? Now I know how Garth feels.

#55 Lee on 05.26.16 at 8:51 pm

Doug tee,

Keep dreaming. Any correction won’t even equal the real estate commission on the increases in the interim. This is a new world buddy.

#56 45north on 05.26.16 at 8:52 pm

Anyway, I am interested in your vision of the future. When conditions change, (interest rates go up), and people can’t make their payment commitments, what happens? Will there be a mass retraction in price, will people lose their homes, can mortgage lenders afford defaults, will the government have to intercede? Will it be like the US in 2008 but not to the same degree? What does the future look like in your world?”

as I’ve said there are two reasons to think that the crash here ( in Canada ) will be worse than the US
– as US prices declined ( 33% average ) the US Fed reduced interest rates from 5% to 0%
– standard US mortgage is 30 years! Fixed! standard Canadian mortgage is 5 years.

Look when we’ve borrowed to the absolute max there is no leeway. no back up. Consider Chaddywack’s guy:

A guy at my work just bought his 4th house this year. anyway he mortgaged his house in West Van worth about $3M to buy 2 houses earlier this year, then a third, now a fourth!!! Yes he has a ton of equity in the fully paid off West Van house, but wow.

http://www.greaterfool.ca/2016/04/11/cruel-april/#comment-443742

I’m guessing when the guy misses a payment, the bank is not going to be in a mood to wait. By the time the guy misses a payment it won’t be up to the local loan officer , it’ll go right up to head office and back down in a day. Next day the bank starts proceedings.

#57 Presumptive President Trump on 05.26.16 at 8:55 pm

Welp, I purchased 20k worth of gold ETFs, some ABX (Barrick Gold) and 7-10-year US treasury ETFs.

What are other good positions to take for the coming volatility?

#58 WallOfWorry on 05.26.16 at 9:05 pm

Finally a post that at least starts promising. Change is in the air. However, it is utterly disappointing that you quickly revert to the one asset real estate is going to implode. Garth….you must see that all is not right in the US economy? GDP growth at 2% with a $21 T debt is a problem. Have you looked at the bond market? What is that telling you Garth? And….you really should get your facts straight? The rate increase is not 80% for two hikes. Better go back and check the bond market…or that would be just too inconvenient because you would see that the traditional model that you myopically embrace does not compute on this new market reality. Do you remember when the markets would care that Greece is going to default?

#59 Rexx Rock on 05.26.16 at 9:06 pm

Just listened to a realtor on the web and he said Victoria will see strong price growth for the next 5 to 6 years.Say no to a gic and buy a house in Oak Bay,Fairfield,Gordon Head and Royal Oak.Easy money and flip and flip Baby.Also add in a few 8 for good measure as one realtor says.Good times in Victoria.

#60 Estrella on 05.26.16 at 9:07 pm

http://www.ctvnews.ca/mobile/politics/ontario-premier-ridiculed-by-wildrose-in-alberta-legislature-1.2919075?hootPostID=5dd933bb946ac66ce6e70fd79c5e3ef4

The link above will interest fellow Dawgs. Apparently ligislature in Alberta doesn’t take nicely to attempting to emulate Ontario’s PM….Not a warm welcome to Winney. I thought the article quiet humorous until I got to the part where they comment on Harpey’s integrity. …lmfao…

#61 Joe2.0 on 05.26.16 at 9:07 pm

Shake your heads people, banks are inflating their books via cheap money.
Price of money goes down and house prices continue to go up – with every thing else.
Looks good in the + vs – columns.
Hello higher interest rates in the future, once everyone’s leveraged up the ying yang.
History repeats it self.

#62 Ole Doberman on 05.26.16 at 9:12 pm

Gartho are you sure its finally here, lets not kid our selves we’ve been singing the same tune since 2008.

Can we start low balling offers in Calgary?

This is nothing like the past eight years. — Garth

#63 Shortymac on 05.26.16 at 9:14 pm

I think it’s already starting, I’ve noticed a huge uptick in people trying to sell vehicles on kijiji/their front lawn.

I went out today and saw about 15 for sale in the Yorkdale Mall area of Toronto. Considering the homes around me cost close to a million dollars I was shocked at this recent development.

Considering the my 99 nissan pathfinder is giving up the ghost, I might end up lucking out.

#64 Grey Dog on 05.26.16 at 9:27 pm

Roll with the times you’re in….31 years ago when we bought in Uville, our lawyer told us we were nuts buying a home so expensive…$220,000. as husband was on track for climbing ladder to bigger and better things, 2 incomes, it was paid off within 8 years! Priority at that time among friends was getting rid of the mortgage. No restaurants, and lots of home parties.
The only investments we had were thanks to topping up RRSPs through [email protected]
Now sitting in an asset that will pay for life in a Chartwell once we turn old enough to worry about that…80? Or when we start wearing diapers. (That includes being devalued at 30 to 50% of current insane value.)

Meanwhile getting into an investment advisor and divorcing [email protected] made all the difference…Saving versus investing. Get YOUR MONEY WORKING FOR YOU. But you dogs all know this, otherwise why show up every night? (We do not possess the aptitude to do this ourselves, some of you dogs do, good for you.)

History lesson; Sometimes at certain stages, going into debt is the right thing to do. Entering the retirement years, there should be absolutely NO debt.

#65 Shortymac on 05.26.16 at 9:31 pm

I don’t usually fall into the schadenfreude category but at this point I’m desperate for this to happen. I’m a millennial (hold your pitchforks) who, in 2010 bought a modest detached house because I fell for the “live within your means” adage. Yes I’m lucky to have bought when I did. I purchased it as a starter house and never intended to live here forever, but I’m now priced out of a 4 bed, 2 car garage mainly because I’m just not willing to take on that level of debt. I’m about 7 years old from paying the house off completely… again, because I purchased within my means and was lucky enough to climb the corporate ladder and pay down the debt responsibly. First world problems right? Well here’s why I want to see some changes…

Over the past few years, I’ve seen my peers purchase enormous homes on 5 figure salaries, purchase or lease 80k vehicles and live responsibility for you with this bottom of the barrel interest rates with their heads in the sand. I’d say 90% of the time I get looked down upon to have purchased a modest home. Women especially bad with this – I say this as a woman. I can’t go to a shower or other gathering without hearing ” but you won’t be happy in that home forever… Right?” As though I’m making a mistake for listening to financial reason over house lust & emotion. This makes me crazy and I’m desperate to see these people go under with increased interest rates. Maybe that sounds vindictive but these are the same people who boast that their houses increased two or three fault when they don’t even own 20% of it yet. At the same time, while I’d love to see interest rates go up, I’m not as hopeful as Garth here, I’ve seen savers be punished and the reckless be rewarded for too long. Just going to keep on my path with the knowledge that I’m doing the right thing even if I don’t have the shiny visual representation of wealth that others do.

—————————————————————

I’m a millennial (high 5!) and I’m just as shocked as you are at the state of things.

However, I’ve found that most of my peers are currently too broke to actually afford anything, only 1 has a house but that was because she bought 13 years ago in Parkdale with family help (which she has since paid back, it wasn’t a freebie loan). House has doubled in price since then.

I’ve noticed a lot of boomers have this whole “if you can afford the payment, get it!” and I’ve guess this has rubbed off on the upper middle class kids (who are only able to get it with a loan, bailout, or parents financing their university education, etc).

My in-laws and their friends are basically bankrolling their kids lives way into adulthood. BIL got a house with his parents and fiancee’s parents help. Another friend is acting as a daycare for their daughter and financed their condo and house purchases! It’s insane!

#66 Shawn on 05.26.16 at 9:34 pm

Robot got your Job?

The ONLY solution is to own the robots. That is, own companies. That is, invest in equities. Get good exposure to equities as part of your portfolio.

DO try this at home.

#67 Mark on 05.26.16 at 9:49 pm

“Hardly any impact… well other than unemployment down by HALF from the peak.”

Against a collapsing participation rate. “unemployment rates” aren’t all that meaningful.

An example I’ve given often is that an unemployed engineer is considered to be an “employed pizza driver” if he/she delivers even one pizza. Employment quality, not quantity, is what’s more important. And most evidence points to employment quality having diminished significantly in the so-called period of ‘recovery’. The participation rate is extremely poor as well, and large numbers of very capable people are either underemployed or unemployed.

… and other than the stock market being more than TRIPLE what it closed at on March 9, 2009

But what is it, barely a few thousand points above that of its 2008 levels. And not even fully recovered in Canada after 8 years. Historically quite an abnormally poor performance despite almost unprecedented retention of earnings and share buybacks.

#68 Mark on 05.26.16 at 9:52 pm

“The ONLY solution is to own the robots. That is, own companies. That is, invest in equities. Get good exposure to equities as part of your portfolio.”

Agree fully. Or own companies in industries that cannot be improved with robots (ie: have a huge moat against new capacity being made available on account of the robots).

For instance, robots cannot conjure new gold reserves into existence. Robots cannot come up with brand-names that people will irrationally pay huge sums of money for (ie: $30 purses selling for $500).

#69 jay on 05.26.16 at 9:53 pm

No sign of bubble popping in Vancouver . https://vancouverhousingblog.com/

That blog has Millennial house drool all over it. — Garth

#70 family beagle on 05.26.16 at 9:57 pm

Hey Boss,

So US unemployment numbers hit bottom:
https://research.stlouisfed.org/fred2/series/UNRATE
in a predictable, cyclical undulation that will rise in the dramatic fashion it always does. Chart agrees, all abrupt peaks and valleys with little time in the median, however, this time there’s no positive economic effect to carry forward:
http://www.reuters.com/article/us-usa-state-taxation-idUSKCN0YG2K1
because job increases are food service related, with higher paying jobs fading.
Alas, and ironically, fast food service is destined to be automated:
http://www.businessinsider.com/mcdonalds-ex-ceo-takes-on-minimum-wage-2016-5
I’m going on a limb and saying a US interest rate increase ‘deserves discussion’, using ambiguous Fed speak. Let us goose asset speculation by spritzing mere words and loft this folly higher.

#71 For those about to flop... on 05.26.16 at 9:58 pm

Mark Farquar 67 & 68

Ahhh shit….

M41BC

#72 Jasmine the Rottweiler on 05.26.16 at 9:58 pm

Noticed the same slow down. Houses on MLS (Toronto) listed for weeks rather than days. The buzz is fading away. Porn addicts act with grand assault and denial . . . . crickets now, tears to follow.

#73 Smoking Man on 05.26.16 at 10:08 pm

What I find hilarious:

Humans, so many of you are delighted at the prospect of fellow Canadian Home owners getting crushed with the prospect of rates going up and destroying the housing Market. There are other ways to compete with your rivals.

You people miss the elephant in the room.

Forex. 400% leverage.

This is what I got on now. Cost me around 65k in real money.

I stagger in 50 contacts with every cent.

QTY Price
50 1.26753
50 1.27655
50 1.2897
50 1.3025
50 1.3130

Average Bet = 1.28986
P & L right now 217,350.00 with a price of 1.29855

It was 600k a few days ago. went down to about 35k today then a bounce. Typicaly I would unload at the 50% level 300k I’m out. Not this time

I’m betting Yellen goes bullish on a June rate hike talk tomorrow at 1:15. P & L might hit 700k by end of day.

Don’t mean she’s going to do it.

This is a more civilized righteous way of competing with loved ones than wishing then get crushed in real estate.

fking Communists. The victim
vs.
Brains

#74 common sense on 05.26.16 at 10:10 pm

#48 Shawn

What type of employment? How many out of the labour force and not looking counted? Lots of great, high paying mfg jobs created or lots of part time minimum wage jobs? I guess that’s why debt levels are huge, and record number of kids are still at home living with the folks…

Market up triple…With interest rates near zero, where else do you put your money? Oh yeah, Canadian real estate.

Talk to me how high the market is and how great the unemployment numbers are when rates rise and a thing called reality or “normal” sets in..that is IF we see normalization in the next 2 years as Mr. Turner says.

#75 common sense on 05.26.16 at 10:11 pm

#71 Flopper

Mark welcome back!

It hasn’t been the same without you and Flopper was getting rusty.

#76 AB Boxster on 05.26.16 at 10:12 pm

Yes but while T2 will not be able to financially help you, he will be sure to express his deep regret at how tough things are and likely apologize for the terrible interest rate wrongs of history.
You may even get a selfie for your collection.

The media of course will pillory anyone right of centre for their evil unfeeling belief in fiscal responsibility and personal accountability and responsibility, and the CBC will lobby hard on behalf of their liberal benefactors to massively increase taxes on the wealthy, for redistribution to the Mother Ship.

Ultimately, Canada (or what remains of it after provinces west of Ontario decide to abandon the sinking ship) will seek salvation in the NDP Leap manifesto, where all highly indebted unemployed millennials become Energy Audit Specialists/Postal Workers on the government payroll as well as driving intermittantly for Uber in order to pay for their excessive pot use.

Canada truly has a bright future under T2 rule.

#77 common sense on 05.26.16 at 10:13 pm

#67 Mark

Thank you and well said!

#78 Ace Goodheart on 05.26.16 at 10:30 pm

RE: Vancouver Doctor: “The actual house we rent was assessed this year at $3.6M but the house 3 doors down of the same vintage just sold for $5.2, so assuming our rental could sell for about $4M in today’s market, our price-to-rent ratio is 79. I guess we will keep renting.”

– Yup makes sense. Could have bought the rented house in 2012 for $1 million, and then sold it in 2016 for $5.2 million, which works out to slightly more than a million a year profit, tax free (no tax on sale of a principal residence).

Totally makes sense. I hear you.

#79 For those about to flop... on 05.26.16 at 10:41 pm

#77 common sense on 05.26.16 at 10:13 pm
#67 Mark

Thank you and well said.

////////////////////////////

I see what you are trying to do!

I’m not going to bite….maybe just a little nibble…

Did anyone else notice that Walmark was absent too?

Honeymoon?…

M41BC

#80 Lorne on 05.26.16 at 10:42 pm

#6 pathcontrolmonk on 05.26.16 at 5:46 pm
You forgot to mention how municipal coffers will be impacted. I remember growing up in Vancouver and everyone collectively thumbing their noses at the US education infrastructure. Now you look at the schools in the Lower Mainland and for all the taxes the city halls are collecting, the schools are decrepit and decaying. When I was in YVR last weekend, there were 3 separate stories on Global about schools: 1. A Saanich school that had a leaky moldy roof for 20 years that made the kids sick, 2. How Richmond was going to be selling half a dozen elementaries because of cuts, 3. Surrey being overcrowded with teacher/student ratios at 40:1. Then drive down to WA state and take a look at the schools, they look like frigging 4 star resorts and in urban areas are mostly rated at between 7-10 on greatschools.org .

Yet HAMs are moving to YVR in droves because of the excellent education system? Puhleez.
……………..
The building is important, but what goes on inside the building is even more important….and teachers in the US are paid poorly so attracting top talent is difficult. As well, the curriculum comes nowhere near matching Canada’s, so our education system, despite being underfunded, is still far superior to the US

#81 Smoking Man on 05.26.16 at 10:43 pm

The trick to Forex CFD’s is picking tops and bottoms. The secret sauce so to speak.

Like I told you dogs back on April 29th USDCAD hit a bottom.

Mark would be bankrupt in 2 days if he tried this.
It’s Dangerous as shit. But then who wants to die in a nursing home without a bit of fun.

I don’t give out the secret sauce that easily. Get my drunk I might share.

I always share with sort term rentals, bragging sort of, knowing that they will never try this my conscious is clear.

I can honestly say to god, see you bastard, I am capable of good deeds.

#82 BS on 05.26.16 at 10:45 pm

So, what happens to society, the economy, financial assets and houses when things change?

Take your pick. We could get all of these things with the T2 spending spree plus a housing bubble.

Japan house prices crashed by 70% and are still hovering at that level 30 years later even after dropping and keeping rates low.

Spain youth unemployment rate of over 50% when the house building stopped.

Ireland house sales plummet by 85% within 1 year and 31% of mortgaged properties are underwater and negative equity.

Greece government pensions and entitlements cut 10 times in 6 years and counting. There is no end in sight to the cutting of social programs and government pensions.

Of course Canada will be different. Just because our economy is 50% based on housing, we have a housing bubble bigger than the others, we have a consumer debt bubble hitting all time highs and a government that is spending every penny they can borrow doesn’t mean we will suffer the same fate.

#83 Investx on 05.26.16 at 10:46 pm

“it’s unlikely to be a widespread US-style debacle since mortgage securitization has been better regulated here and CHMC backstops a ton of lender risk.”

Good to see that “it’s different here.”

#84 Wild Albertan Gonads on 05.26.16 at 10:48 pm

#73 Smoking Man on 05.26.16 at 10:08 pm

What I find hilarious:

Humans, so many of you are delighted at the prospect of fellow Canadian Home owners getting crushed with the prospect of rates going up and destroying the housing Market. There are other ways to compete with your rivals.

You people miss the elephant in the room.

Forex. 400% leverage.

This is what I got on now. Cost me around 65k in real money.

I stagger in 50 contacts with every cent.

QTY Price
50 1.26753
50 1.27655
50 1.2897
50 1.3025
50 1.3130

Average Bet = 1.28986
P & L right now 217,350.00 with a price of 1.29855

It was 600k a few days ago. went down to about 35k today then a bounce. Typicaly I would unload at the 50% level 300k I’m out. Not this time

I’m betting Yellen goes bullish on a June rate hike talk tomorrow at 1:15. P & L might hit 700k by end of day.

Don’t mean she’s going to do it.

This is a more civilized righteous way of competing with loved ones than wishing then get crushed in real estate.

fking Communists. The victim
vs.
Brains

Nice!…. look out liver.. Seneca bound tomorrow.

#85 Investx on 05.26.16 at 10:51 pm

“futures markets give 34% odds of a
US rate increase in three weeks, a 58% probability
of one in July and an 80% weighting for another in the autumn.”

With all these estimates, it’s amazing how wrong this blog has been on rates for so many years now (not to say that rates won’t go up).

Interesting times ahead when rates do start going up.

#86 DON on 05.26.16 at 10:53 pm

#42 Andrew Woburn on 05.26.16 at 7:44 pm

President Chump is going to bring back the jobs from Asia.

What jobs?

– Reboot: Adidas to make shoes in Germany again – but using robots. Company unveils new factory in Germany that will use machines to make shoes instead of humans in Asia.

http://www.theguardian.com/world/2016/may/25/adidas-to-sell-robot-made-shoes-from-2017

– Foxconn replaces ‘60,000 factory workers with robots’

Apple and Samsung supplier Foxconn has reportedly replaced 60,000 factory workers with robots.One factory has “reduced employee strength from 110,000 to 50,000 thanks to the introduction of robots”, a government official told the South China Morning Post. Xu Yulian, head of publicity for the Kunshan region, added: “More companies are likely to follow suit.” China is investing heavily in a robot workforce.

http://www.bbc.com/news/technology-36376966
*******************************

Perhaps Trump has his eye on producing the robots in the USA.

Canada should be doing this, put those oil field engineers to work, create all types of support jobs, fabricators etc. Then again you may have to give out free money to support your customer…

#87 Smoking Man on 05.26.16 at 10:53 pm

P & L now at 244k

Can’t wait for the close

#88 Smoking Man on 05.26.16 at 10:55 pm

#82 Wild Albertan Gonads on 05.26.16 at 10:48 pm

Seneca on Saturday, Good I’m too hammered to find the car keys or I’d be heading there now.

#89 Smoking Man on 05.26.16 at 11:01 pm

Something is up 252,850.00 now

#90 cramar on 05.26.16 at 11:06 pm

66 Shawn on 05.26.16 at 9:34 pm
Robot got your Job?

The ONLY solution is to own the robots. That is, own companies. That is, invest in equities. Get good exposure to equities as part of your portfolio.

DO try this at home.

—————

For sure!

But someone needs to compile a list of public companies into robotics, both in Canada and the U.S. that people can invest in. Most of them are not household names as are companies who made it big in the previous digital revolution (i.e. Microsoft, Intel, Cisco, NVIDA, etc.).

#91 DON on 05.26.16 at 11:17 pm

#63 Shortymac on 05.26.16 at 9:14 pm

I think it’s already starting, I’ve noticed a huge uptick in people trying to sell vehicles on kijiji/their front lawn.

I went out today and saw about 15 for sale in the Yorkdale Mall area of Toronto. Considering the homes around me cost close to a million dollars I was shocked at this recent development.

Considering the my 99 nissan pathfinder is giving up the ghost, I might end up lucking out.
**************************************

I am seeing the same thing on Vancouver Island, mecca of fly in and fly out and land of the older.

Was searching the used mid island websites and there were hundreds of trucks for sale. A lot in the 30K to 79K range. One was 5 years old asking for 78,900K “only one owner’. Most of the trucks were in the 50, 60’s at least four years old, surprisingly some were even older asking for 30 – 40K. Did i mention these were all used trucks. I got tired off looking at what seemed to be endless pages. Lots of “only one owner” ads.

#92 Mark on 05.26.16 at 11:19 pm

“Mark welcome back!”

I’ve always sorta been here. Just posting less. I hope to post less this summer and enjoy life more. Time in DC was pretty fun, but the sense I got was that there is an unbelievable amount of frustration within the political system that is boiling to the surface. Recovery, well, that’s a thing of delusion, that’s for sure.

#93 kik on 05.26.16 at 11:34 pm

Garth you made mistake…..and now people are renting ….
the smarts bought 2-3 years ago and they are ahead!!!!!

#94 Mark on 05.26.16 at 11:39 pm

““it’s unlikely to be a widespread US-style debacle since mortgage securitization has been better regulated here and CHMC backstops a ton of lender risk.””

But what if Justin opens his mouth and starts implying that the CMHC won’t be paying the owners of those CMHC-backed MBS or CMHC-insured loans in full?

Sounds like something that could set off a sort of earthquake in the Canadian mortgage finance system. Much like Flaherty’s crack-down on the CMHC subprime lending authority in 2013 marked the peak of the Canadian housing market.

Think about it for a while… Remember we’re talking about a PM who justified certain policy decisions with the simple phrase, “because its 2015”. Maybe “because its 2016”, CMHC guarantees won’t be paid in full.

#95 Rental Peter on 05.26.16 at 11:55 pm

Gartho, your meltdown scenario will happen. Guaranteed. 25% of of all residents in York Region…Markham, Thornhill, Aurora, Newmarket and Richmond Hill are one year behind in their property tax payments to the city. What’s it like for all other major municipalities in Canada?

#96 Love My Kia on 05.27.16 at 12:31 am

Garth – any commentary Re. dividend increases from CIBC, and BMO? Yet economy is struggling?

Amazing what you can give back to shareholders when you fire 2,000 more employees, eh? — Garth
==============================

You can only give back to shareholders for so long until no one has a job and the system collapses on itself.

The market isn’t exactly making its earnings on healthy consumer spending either, its cutting jobs and in the end it is biting the hand that feeds.

Stock market ponzi scheme. Fair enough rebuttal since Garth is being a doomer today with RE (and rightfully so).

#97 A Yank in BC on 05.27.16 at 12:59 am

The bottom line on that off-the-charts price to rent ratio of 79 is that they would have done better buying the house they have been renting for the last 5 years. Of course, they would have to actually sell it and move elsewhere to realize the gain.. but still.

#98 BillyBob on 05.27.16 at 1:02 am

#32 For those about to flop… on 05.26.16 at 7:09 pm
Well I learnt something about this blog the last day or so.
I posted a map of the richest people in each state of America and got over 550 views

Then I posted a map of the world with the words” humorous” less than 50 people viewed it.

Which leads me to believe that there are a lot of super serious lurkers here that don’t have time for a laugh.

Pity…

M41BC

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

Nah. You’re just not that funny. And posting 8 times a day doesn’t make up for that fact.

#99 OffshoreObserver on 05.27.16 at 1:18 am

I cannot understand the morons.

OK, I downsized from my hotel room costing me $1,600/month at http://www.serenehoteldanang.com/

I moved to a motel across the road from the beach. This costs me $250/month and $50/month for fibre optic internet.

Look at what lunch costs: https://youtu.be/eTKEUDoAfkI

And I get the girls!

#100 TRT on 05.27.16 at 1:33 am

For the life of me, I can’t understand why this blog dwells on the USA for rates.

Canada is a sovereign country and has been infiltrated at all levels (including BoC) by vested interests. Canada will not follow the USA or Zimbabwe in raising rates. Think about this: Canada DROPPED rates while the USA stand pat!

Low rates in Canada for a decade to come. The RE market has already priced that in.

#101 TRT on 05.27.16 at 1:38 am

#80 Lorne

“As well, the curriculum comes nowhere near matching Canada’s, so our education system, despite being underfunded, is still far superior to the US”

Hahahaha. Couldn’t stop laughing at your comment. Our education system is designed to produce obedient units who help the ruling classes stay at the top. Some are purposely thrown in the gutters so that the obedient class (Lorne)can feel good about themselves.

#102 RayofLight on 05.27.16 at 3:17 am

Winston Churchill said” Democracy is a horrible way to run a country, but the alternatives are worse”.
To my friends in the USA, Please be careful what you ask for…
Donald Trump has a narcissistic personality disorder. This will make dealing with him in international affairs more reactive and less meditative. Putin will be able to “Bate and Trap” Trump easily. In international affairs. the experienced,” World leaders against the US policies,will have their way with Trump. Trump will be so reactive, nonstrategic or long term planner, and hence will become very predictable in crisis situations. Crisis that are brought on be Trump’s watch because he loudly barks out conflicting opposing policy depending on the specific audience we wants them to like him . I predict there will be a, or close to , a third world war before Trump,s first term is complete. People who voted for Trump will soon be asking themselves “What have we done”?”

http://www.rawstory.com/2016/01/a-neuroscientist-explains-trump-has-a-mental-disorder-that-makes-him-a-dangerous-world-leader/

#103 George Oaks on 05.27.16 at 3:59 am

I have to differ on the idea that T2 will not bail out the house horny mills. These are his constituency, those who relie on free everything and think that a secret cave underneath Ottawa has trillions of dollars in cash dripping from magic stalactites.

The Mills demand free education, housing, daycare, trans. If Junior doesn’t give in, he’s out. You’d have to have been under thirty and tres stupid to vote for Bucket Head T in the first place. So why not continue the fantasy until the country’s so far in debt we have to move to 100% taxation? Isn’t that the Trudeau Liberal dream?

This is also why Poloz won’t raise rates for years to come. It would destroy the failed lies of the Trudeau Liberals and simultaneously bankrupt every city, municipality and fed in days to even raise a 1/4 point, unless they move instantly to 100% taxation.

Money doesn’t grow on tree’s or bubble up from the ground, unless you vote Libbbbbbberal that is.

#104 Tony on 05.27.16 at 4:19 am

Re: #22 Fred on 05.26.16 at 6:39 pm

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

#105 Tony on 05.27.16 at 4:30 am

Re: #84 Wild Albertan Gonads on 05.26.16 at 10:48 pm

Of course Yellen will be bullish on rate increases. Talk of course means nothing. When the time comes it’ll be the same old story like a broken record or the boy who cried wolf. I still think the next move in interest rates in America is downward and negative interest rates around the second quarter of 2017.

#106 Calvin Otter on 05.27.16 at 4:32 am

If rates don’t kill the market, socialism will.

100% taxation, here we come.

http://www.calgaryherald.com/news/alberta-politics/alberta+government+introduces+controversial+climate/11939580/story.html

In Ont the gov will force every homeowner to convert to the electric grid owned by Liberal backers) hugely more expensive than gas) by 2030 when it plans to ban nat gas to heat homes.

#107 Son of a Gun on 05.27.16 at 5:47 am

Canadian banks increasing provisions for credit defaults:

http://www.huffingtonpost.ca/2016/05/26/canadian-bank-loan-loss-provisions_n_10151778.html

#108 3s on 05.27.16 at 6:16 am

Interesting read on foreign investment effects on the world. Can’t think why Canada should be unaffected by it – perhaps people would rather just not talk about it?

http://www.macrobusiness.com.au/2016/05/more-backlash-from-londons-empty-towers/

#109 Julia on 05.27.16 at 6:16 am

#56 45north
“I’m guessing when the guy misses a payment, the bank is not going to be in a mood to wait. By the time the guy misses a payment it won’t be up to the local loan officer , it’ll go right up to head office and back down in a day. Next day the bank starts proceedings.”

I’m guessing that banks will come up with some programs to “help” people by allowing principal payments to be suspended for a period of time, therefore not having the loans stay in default, and then be patient as long as interest is kept current.

#110 Son of a Gun on 05.27.16 at 6:37 am

#87 Smoking Man on 05.26.16 at 10:53 pm
P & L now at 244k

Can’t wait for the close

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

Do you trade spot FX or Futures?

#111 Smoking Man on 05.27.16 at 7:27 am

#109 Son of a Gun on 05.27.16 at 6:37 am
#87 Smoking Man on 05.26.16 at 10:53 pm
P & L now at 244k

Do you trade spot FX or Futures?
http://www.avatrade.com

Not for amateurs. This shit is pure crazy gambling.

#112 Herb on 05.27.16 at 8:05 am

#101 TRT,

say you and Smoking Man, so it must be true.

#113 farsyd on 05.27.16 at 8:08 am

Garth, Appreciate your thoughts on the future and all. If a reckoning comes, the banks will need help (recourse or not) and every party will want them bailed out. I am actually making the foolish call (not the first ever) that Toronto housing appreciation is over. Not just because of rates rising, but at these levels the majority (of rational people) in Toronto are priced out of trading up. Going up a lot size in subway line hoods is now a cool million+ more. Used to be a few hundo K (amortized over 30 years) and low rates got you a bigger pad. I suspect similar less egregious levels off subway line. Anecdotally I know 4 folks doing renos. Too expensive to move. Also we see a dearth of supply, drying volumes and providing the last spike up. Not saying things go down (but gravity does) but up is over.

#114 maxx on 05.27.16 at 8:13 am

“How does this end?”

With the uber-stupid Bank of Mom and Dad lamenting the dumbest investment in its history.

Times are indeed tough – for many people, not just the young. They’ve been tough in the past and many have come out of it smarter and stronger because of it.

Low rates have shaped far too many into soft, entitled, dependent and weak people – in many cases, irretrievably indebted.

Not good at all for the economy at large.
Not good at all for additional and otherwise unnecessary strain on the public purse due to stress illness and severe lack of life funding.
Not good at all for a (formerly?) great country’s morale – which is the basis for greatness. Better morale brings people together, it doesn’t morph inter-generational warfare nor hatred of those who’ve succeeded financially. It propels people forward in their lives, it does not stall them.

Unfortunately, what makes tough times far more revolting, fearful and painful an experience is that far too many young have been weaned on overly protective boomer parents, designer everything, hyper-convenience and fulfillment of every little desire practically on demand. Entitlement is no longer something that conveys a deep sense of enjoyment after having earned it. It is now taken for granted and when it’s not forthcoming, the reaction is equivalent to a blindingly enraged child. Instead of developing instinct for facing challenges head-on, many simply (repeatedly) indulge their frustration and rage. When life is hard, there is no time for self-indulgence. At all. It’s all hands on deck to dig yourself out of the pit. Short-term sacrifice is not mortally wounding. It is one, if not the most important component of achieving vision.

The successful understand this and their sense of entitlement has a different quality altogether.

#115 Estrella on 05.27.16 at 8:14 am

Armageddon coming. It’s happening.

http://www.cbc.ca/beta/news/business/toronto-housing-plea-privacy-1.3597317

#116 IHCTD9 on 05.27.16 at 8:15 am

#14 F on 05.26.16 at 6:15 pm
This makes me crazy and I’m desperate to see these people go under with increased interest rates. Maybe that sounds vindictive but these are the same people who boast that their houses increased two or three fault when they don’t even own 20% of it yet. At the same time, while I’d love to see interest rates go up, I’m not as hopeful as Garth here, I’ve seen savers be punished and the reckless be rewarded for too long. Just going to keep on my path with the knowledge that I’m doing the right thing even if I don’t have the shiny visual representation of wealth that others do.

____________________________________________

That is one most honest posts I’ve read in a while, and most of us practicing restraint can relate to how you feel for sure.

Years ago, I developed the ability to extract myself emotionally from these types of situations. It was not worth the anger, and I practiced restraint for my own life, and my own affairs. It took quite a while, but eventually I did find peace in working on my own finances, and setting my own goals; and I genuinely did not care what others were doing. This works for all situations: government, family, relationships, and money, in short one of the most beneficial accomplishments of my life.

You might take solace in the fact that by the time you’re 40, you are going to naturally care a lot less about a lot of things that currently get under your skin. You’ll also have put in the time to see a few of those “shiny visual representations of wealth” eat their owners alive.

If everyone had their net worth stamped on their foreheads, just imagine how much bullshit would disappear overnight lol.

At my age after surviving my 30’s, I can look at these guys I used to work with and see that I am winning :). My mortgage is gone, I have no debt, I have a nice chunk saved up, I might be able to retire a little bit early. These other guys still have mortgages (even one turning 60), they all lost their jobs the same time I did, ALL ended up in lesser positions. One hasn’t worked since at all. Quite a few appear to have turned over a new leaf finance wise, but eliminating debts and mortgages to start saving in your 40’s is way, waay too late. Most of these guys are even surprised to learn my mortgage is gone!

Keep doing what you’re doing, it’s tough – but starting at 40, you will appreciate it more and more as you get older.

#117 Penny Henny on 05.27.16 at 8:20 am

Bidding wars and holdback on offers in Niagara Falls and Welland.
Torontonians are taking there big bag of cash from the sale of their homes and buying at a third of the cost in Niagara.
Locals from the Niagara region are pissed off that this influx of Torontonians is making their dream of home ownership unaffordable.

#118 WUL on 05.27.16 at 8:41 am

Well, I have been summoned back to Fort McScorched for Tuesday morning to join the ‘recovery team’ at the tax farm. The month long paid evac vacay has come to an end but continued steady employment is kinda a good thing. Also, my wife can green light the bathroom reno.

What a groovy assignment. Maybe the lecture circuit will beckon in years to come.

As there are no possibilities of a flight or bus ride, I will have my son drive me to the Taiga. I am blessed to be able to enjoy 9 hours of windshield time with the 22 year old kid. Sadly, each residence will be supplied with only one respirator and the Boomtown Casino and Showgirls stripjoint are not up and running.

Into each life will be delivered a cup of gall and a cup of balm. (“Biography of a Grizzly” – Ernest Thomson Seton)

#119 Estrella on 05.27.16 at 8:53 am

http://thereformedbroker.com/2016/05/27/were-off-to-the-races/

We’re off to the races…let the games begin.

#120 Rays "RayofLight" on 05.27.16 at 8:56 am

#102 RayofLight on 05.27.16 at 3:17 am

Winston Churchill said” Democracy is a horrible way to run a country, but the alternatives are worse”.
To my friends in the USA, Please be careful what you ask for…
Donald Trump has a narcissistic personality disorder. This will make dealing with him in international affairs more reactive and less meditative. Putin will be able to “Bate and Trap” Trump easily. In international affairs. the experienced,” World leaders against the US policies,will have their way with Trump. Trump will be so reactive, nonstrategic or long term planner, and hence will become very predictable in crisis situations. Crisis that are brought on be Trump’s watch because he loudly barks out conflicting opposing policy depending on the specific audience we wants them to like him . I predict there will be a, or close to , a third world war before Trump,s first term is complete. People who voted for Trump will soon be asking themselves “What have we done”?”

http://www.rawstory.com/2016/01/a-neuroscientist-explains-trump-has-a-mental-disorder-that-makes-him-a-dangerous-world-leader/

________________________________________
Sounds like another narcissistic asshole (SM) on this blog! He is so predictable too!

#121 TnT on 05.27.16 at 8:59 am

#99 OffshoreObserver on 05.27.16 at 1:18 am

And I get the girls!

Probably the most disturbing post with video proof of when one human exploits another via money.

#122 Bottoms_Up on 05.27.16 at 9:12 am

#105 Calvin Otter on 05.27.16 at 4:32 am
——————————
Actually they will be subsidizing the cost of electric heating with proceeds from cap-and-trade permits and penalties. So no, it won’t be hugely more expensive.

#123 Bottoms_Up on 05.27.16 at 9:15 am

#97 A Yank in BC on 05.27.16 at 12:59 am
—————————-
No the bottom line of a PR ratio of 79 is the risk level is off the charts and no one should be buying. It indicates a massive, MASSIVE bubble, and extreme unaffordability of housing.

#124 Smoking Man on 05.27.16 at 9:34 am

#121 Bottoms_Up on 05.27.16 at 9:12 am
#105 Calvin Otter on 05.27.16 at 4:32 am
——————————
Actually they will be subsidizing the cost of electric heating with proceeds from cap-and-trade permits and
penalties. So no, it won’t be hugely more expensive.
……

Oh man you are so doomed. Giant elephant in the room and you can’t see it.

#125 Smoking Man on 05.27.16 at 9:41 am

#119 Rays “RayofLight” on 05.27.16 at 8:56 am
________________________________________
Sounds like another narcissistic asshole (SM) on this blog! He is so predictable too!
………………

Nothing wrong with being narcissistic.

The Phd who’s calling out Trump has spent two many years in school getting mind fkd.

Long time ago I was into the group thing till one day I blew all my loot, all of a sudden, the group vanished. No one around to help.

Naked and all alone I made a come back, a huge come back. I don’t even consider my bet from yesterday 35K up to 400k overnight a big deal just to give you some scale.

You buggers relay have a problem with people who are self reliant.

It’s called communism. Now go have a marsh mellow roast with other like minded morons.

#126 Response to Linda - Post # 50 on 05.27.16 at 9:53 am

Your comment is accurate. I scratch my head as to the willingness of people to take the tremendous risks that you describe and their apparent need to talk about it.

Misery loves company indeed and it hides best when it hides in plain sight.

#127 Life among the Stars on 05.27.16 at 9:59 am

#99 OffshoreObserver on 05.27.16 at 1:18 am

I cannot understand the morons.

OK, I downsized from my hotel room costing me $1,600/month at http://www.serenehoteldanang.com/

I moved to a motel across the road from the beach. This costs me $250/month and $50/month for fibre optic internet.

Look at what lunch costs: https://youtu.be/eTKEUDoAfkI

And I get the girls!

Classy Boyd… now what could she see in a fat ruddy faced old white westerner from Van.

#128 AB Boxster on 05.27.16 at 10:11 am

#108 Julia on 05.27.16 at 6:16 am

“I’m guessing that banks will come up with some programs to “help” people by allowing principal payments to be suspended for a period of time”

—————————————————

The banks do this now.
Confirmed by my [email protected] a few weeks ago.
She said that they allow skip payments, interest payments only, etc.

Anything to keep the credit bubble going and anything so that the bank does not own your home.

For the bank to foreclose on defaulted homeowners means owning assets that pose an unacceptable amount of risk for them. Banks may be evil, but they are not stupid.

They know that the Canadian housing market is in a huge bubble, and have no interest actually ‘owning’ these massively overpriced tinder boxes.

Unlike the majority of Canadians, the banks actually understand finance. As long as they are backstopped by CMHC and government they will continue to lend to the greater fools.

They have no desire to own your home, they are more happy to own you and all your future earnings.

#129 Life among the Stars on 05.27.16 at 10:12 am

DELETED

#130 Ole Doberman on 05.27.16 at 10:13 am

#105 Calvin Otter on 05.27.16 at 4:32 am

If rates don’t kill the market, socialism will.

100% taxation, here we come.

http://www.calgaryherald.com/news/alberta-politics/alberta+government+introduces+controversial+climate/11939580/story.html

In Ont the gov will force every homeowner to convert to the electric grid owned by Liberal backers) hugely more expensive than gas) by 2030 when it plans to ban nat gas to heat homes.
——————————————————–
Ya interesting topic. I figure these could be our last gasoline powered cars and natural gas heated homes.

From here it’s all green, electric cars and solar powered homes is the next paradigm shift.

We should be holding off on these purchases till the technology gets established.

Gartho what are your thoughts here?

#131 For those about to flop... on 05.27.16 at 10:14 am

#98 BillyBob on 05.27.16 at 1:02 am
#32 For those about to flop… on 05.26.16 at 7:09 pm
Well I learnt something about this blog the last day or so.
I posted a map of the richest people in each state of America and got over 550 views

Then I posted a map of the world with the words” humorous” less than 50 people viewed it.

Which leads me to believe that there are a lot of super serious lurkers here that don’t have time for a laugh.

Pity…

M41BC

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

Nah. You’re just not that funny. And posting 8 times a day doesn’t make up for that fact.

/////////////////////////////////////

I am starting to understand why the place you work is called a cockpit…

M41BC

#132 Noel on 05.27.16 at 10:16 am

Am I missing something? Wouldn’t have Tracey been much better off not following your advice and ‘overpaying’ for a detached home in Vancouver in 2012? What is she thanking you for? Missing out on a million dollars in appreciation?

#133 Gonkman on 05.27.16 at 10:33 am

@ #126 Life among the Stars on 05.27.16 at 9:59 am

Classy Boyd… now what could she see in a fat ruddy faced old white westerner from Van.

————————————————–

It’s probably about the $$$ and so what? Good on him. Better than having a Western Wife who will take half his $$$ whenever she feels like it and split.

Maybe it is Love? Maybe not? As long as it is a mutual agreement between two adults does it matter?

Is it any different than a typical Western Husband pandering to his Western Wife’s need for Granite Counter tops and Flashy Clothes etc? You are still Paying for “IT”.

As the saying goes…

“If it floats, flies or fcks, it’s cheaper to rent.”

#134 Alistair McLaughlin on 05.27.16 at 10:41 am

@ #20, inflate – inflate:

You’re either too young or two dumb to remember the inflation of the 1970s and 1980s I guess. Well here’s how that ended – with 20%+ interest rates, and the most severe recession since the Great Depression, with unemployment peaking in Canada in 1982 at 13.1%. It was all repeated (to a lesser extent, but over a longer period of time) in the early to mid-1990s, with interest rates in the teens, and unemployment peaking at 12% in November 1992. Both times rates were forced up because inflation had gotten out of hand, and the BoC (and Fed to the south of us) had no choice but to rein it in with higher rates. Yet someone like you comes along and tells us inflation is the pain-free way of getting out of this mess we’re in? You have no idea. You really have no clue. Go back to your Krugman articles and leave us alone. Please.

#135 Just in on 05.27.16 at 10:42 am

More house begging:

http://www.cbc.ca/news/business/toronto-housing-plea-privacy-1.3597317

#136 lee on 05.27.16 at 10:43 am

According to the Post today nobody can afford to buy because prices they keep going up, up, up. Pretty soon, SFH average in Toronto will be $2M. May even happen by August if sales volume low enough that month.

#137 Just in on 05.27.16 at 10:44 am

CTF Honours Irvin Leroux:

http://www.250news.com/2016/05/27/ctf-honours-irvin-leroux/

#138 april on 05.27.16 at 10:59 am

Don’t believe the Post. It’s over. People just don’t see it yet. End of summer into Fall, watch out……

#139 bill on 05.27.16 at 11:00 am

#132 Alistair McLaughlin on 05.27.16 at 10:41 am
ahh yes! I remember that inflationary period well.
the mill was closed for extended periods , some people lost everything due to the real estate price drop and the fact they had no job.
and to top it off: now Garth thinks it will end in a smoking crater….[as opposed to a long slow grind down in house prices.]

#140 Lorne on 05.27.16 at 11:01 am

#101 TRT on 05.27.16 at 1:38 am
#80 Lorne

“As well, the curriculum comes nowhere near matching Canada’s, so our education system, despite being underfunded, is still far superior to the US”

Hahahaha. Couldn’t stop laughing at your comment. Our education system is designed to produce obedient units who help the ruling classes stay at the top. Some are purposely thrown in the gutters so that the obedient class (Lorne)can feel good about themselves.
………
And which system produced you??

#141 housejet on 05.27.16 at 11:06 am

…. 25% of of all residents in York Region…Markham, Thornhill, Aurora, Newmarket and Richmond Hill are one year behind in their property tax payments to the city…
— Rental Peter

——————————————————

May I ask where you got this from?

#142 Cici on 05.27.16 at 11:09 am

Bubble bubble, toil and trouble…

http://www.cbc.ca/news/business/toronto-condo-construction-1.3602950

#143 Renter's Revenge! on 05.27.16 at 11:15 am

#127 AB Boxster on 05.27.16 at 10:11 am

“They have no desire to own your home, they are more happy to own you and all your future earnings.”

As a bank shareholder, I concur wholeheartedly! Or is it heartlessly? I’m never sure.

#144 Life among the Stars on 05.27.16 at 11:17 am

#131 Gonkman on 05.27.16 at 10:33 am

@ #126 Life among the Stars on 05.27.16 at 9:59 am

Classy Boyd… now what could she see in a fat ruddy faced old white westerner from Van.

————————————————–

It’s probably about the $$$ and so what? Good on him. Better than having a Western Wife who will take half his $$$ whenever she feels like it and split.

Maybe it is Love? Maybe not? As long as it is a mutual agreement between two adults does it matter?

Is it any different than a typical Western Husband pandering to his Western Wife’s need for Granite Counter tops and Flashy Clothes etc? You are still Paying for “IT”.

As the saying goes…

“If it floats, flies or fcks, it’s cheaper to rent.”

Yeah ok… The Boyd dude’s a douchebag.. Gartho seems to have deleted my post of his 1st GF he had posted …. Understandable it was more disturbing.

#145 cramar on 05.27.16 at 11:23 am

#14 F on 05.26.16 at 6:15 pm

“Over the past few years, I’ve seen my peers purchase enormous homes on 5 figure salaries, purchase or lease 80k vehicles and live responsibility for you with this bottom of the barrel interest rates with their heads in the sand. I’d say 90% of the time I get looked down upon to have purchased a modest home. Women especially bad with this – I say this as a woman. I can’t go to a shower or other gathering without hearing ” but you won’t be happy in that home forever… Right?” As though I’m making a mistake for listening to financial reason over house lust & emotion. This makes me crazy and I’m desperate to see these people go under with increased interest rates.”

—————-

Seems beside teenagers, Millennials are also inclined to feel and succumb to peer pressure.

I’m reminded of the words of a Chinese sage from 600 BCE:

“Care about what other people think and you will always be their prisoner.”
― Lao Tzu

#146 Benny German on 05.27.16 at 11:30 am

DELETED

#147 Rainclouds on 05.27.16 at 11:33 am

Meanwhile in Miami…………….

http://www.bloomberg.com/news/articles/2016-05-27/miami-s-condo-frenzy-ends-with-inventory-piling-up-in-new-towers

#148 Benny German on 05.27.16 at 11:34 am

Miami condo craze crash

http://www.bloomberg.com/news/articles/2016-05-27/miami-s-condo-frenzy-ends-with-inventory-piling-up-in-new-towers

#149 Lee on 05.27.16 at 11:37 am

I think according to front page story in Financial Post today, property demand is so high that we will be looking at $2M average for SFHs by end of 2016 in Toronto.

Sure. A 65% price increase in seven months. Pump away. — Garth

#150 CHERRY BLOSSOM on 05.27.16 at 12:05 pm

Garth I do not feel our millennial are over educated. They may have degrees but not deep education.
Amongst all the terrifying elements conspiring to ruin our country you forgot to mention OVERPOPULATION and FOOD SHORTAGES We should put something in the water to slow down birth. I went to Vancouver the other day and it was upsetting. Tall condos blocking out the sun, pavement everywhere, cars, cars, cars, cars and tons of unhappy angry people pushing and rushing somewhere. It was a disgusting sight. Why are we Canadians blaming immigrants. Because there are too may of them . Our government is to blame for that. TOO LATE

#151 Fed-up on 05.27.16 at 12:23 pm

#149 CHERRY BLOSSOM on 05.27.16 at 12:05 pm

Why are we Canadians blaming immigrants. Because there are too may of them . Our government is to blame for that. TOO LATE
——————————————————————————————

No, no, no sorry. 300,000+ new arrivals each and every year massively assisting the more than doubling the population of the infrastructurally ill prepared YVR, the GTA and even Calgary in less than 20 years, is totally sustainable, or so we’re told.

#152 Get on the Trump Train on 05.27.16 at 12:33 pm

That map needs WALLS… I’m that man.. I can build you some walls. I’ll make China pay for it as well. They do a great job making my Trump ties. USA.

#153 Rays “RayofLight” on 05.27.16 at 12:39 pm

#124 Smoking Man on 05.27.16 at 9:41 am

#119 Rays “RayofLight” on 05.27.16 at 8:56 am
________________________________________
Sounds like another narcissistic asshole (SM) on this blog! He is so predictable too!
………………
Nothing wrong with being narcissistic.
The Phd who’s calling out Trump has spent two many years in school getting mind fkd.
Long time ago I was into the group thing till one day I blew all my loot, all of a sudden, the group vanished. No one around to help.
Naked and all alone I made a come back, a huge come back. I don’t even consider my bet from yesterday 35K up to 400k overnight a big deal just to give you some scale.
You buggers relay have a problem with people who are self reliant.
It’s called communism. Now go have a marsh mellow roast with other like minded morons.
_______________________________________
We don’t have any issues with self reliance. BTW I’m 100% Conservative and despise communism. Being an Narcissistic Asshole appears to come easy to both you and your boy Trump. “If you cant defend your position then you will just try to bully someone or call them names” Spot on SM, just what I would expect from the likes of you. Tell us more about yourself, blah, blah, blah, blah, me, me, me, me, look what I did, look what I did, I’m the best, I’m the best. Try defending your pathetic low life shtick with some real rebuttal, not the lame stuff you try to feed us. BTW Given an infinite length of time, a chimpanzee punching at random on a typewriter would almost surely type out all of Shakespeare’s plays. So get typing chimp!

#154 IHCTD9 on 05.27.16 at 12:40 pm

#144 cramar on 05.27.16 at 11:23 am

Seems beside teenagers, Millennials are also inclined to feel and succumb to peer pressure.

I’m reminded of the words of a Chinese sage from 600 BCE:

“Care about what other people think and you will always be their prisoner.”
― Lao Tzu
__________________________________

Amen to that, evidently folks had this one figured out a long time ago.

It’s tougher than ever to do, but minding your own business, not worrying about the future, and not being covetous of, or even caring what others are up to really improves the quality of life.

Once you let go, outside of money matters; you will also be able to stop trying to help folks that don’t want help – without anxiety. You can watch bad decision making at work, and in government – without anger. You can truly live and let live, why? Because you mind your own condition first, understand your personal limitations on this planet, and you focus on what you can actually somewhat control.

#155 JAM on 05.27.16 at 12:42 pm

Hello Garth,

Not sure where to put this request but here goes…..

I have been following your blog for some time now. I have been waiting for the crash in the housing market as I too believe that it is inevitable. My goal is to save like crazy and eliminate the debt and then hopefully be in a position to capitalize on the crash.

In the meantime however, I have turned my attention to life insurance. Do you have any advice to give on this topic? I presently have term but as I age the prices are escalating. I am now considering a fixed term (15 years) and a par insurance policy (basically a part of it truns into investment along the way, seems like a long way but at least it does not throw the money away as with a term policy.

Any advice?

Thanks in advance.

#156 family beagle on 05.27.16 at 12:53 pm

Another stellar day on the second largest land mass on earth. Might take a 15 minute drive out of 604 to the zone of 4.3 people per square km.
It’d be nice to get out of ‘batshit crazy land’ where I rent five acres for $900/mo. (That’s a price/rent ratio of something like 231.)

#157 salonist on 05.27.16 at 12:56 pm

could this be true

“smokey and the bandit”

smokey…….sm
bandit……. garth’s dog
turner classic movies…..producer

could sm be really br
https://www.youtube.com/watch?v=OH5KNcFRZLQ

could this be garth
https://www.youtube.com/watch?v=TVRzk3VWOKY

#158 Noel on 05.27.16 at 1:03 pm

Sure. A 65% price increase in seven months. Pump away. — Garth

_________________

Of course that’s ridiculous, but they’ll likely be higher by the end of the year.

Toronto home prices are up 21% over the last seven months — it took about 50 months to increase by 65%.

In another 50 months it’ll be 2020, and I’d wager that detached homes will be over $2mn by then. There simply isn’t enough supply to cover demand.

Oh, and chance of a hike by the Fed a week before the Brexit vote is zero. Not going to happen. And Ms Yellen will cite ‘ongoing external factors’ as a reason for holding steady.

#159 lee on 05.27.16 at 1:09 pm

Look at the MLS. Almost no SFH is listed under $900,000, and most of those prices are set low to start bidding wars. I am not saying it is rational to buy an average SFH for $2M in Toronto, but the real estate industry media machine is winning, and it holds all the cards. Your blog only gets out to your blog followers. The Star, Globe, Post, etc. get out to many more people. We are not going to see a day in the future where that average price of a SFH in Toronto drops under $1M. This is getting close to what the average is in Aurora right now. It’ll get to $2M in Toronto well before it ever drops again.

#160 family beagle on 05.27.16 at 2:11 pm

Did anyone here see the movie Paper Moon with Ryan O’Neal and his daughter Tatum? There’s a scene where Ryan has to ditch his car, so he pulls into a hick farmstead and attempts to swap his fancy ride for a beater p/u truck. The bucktooth, barefoot clan make him rassle for it.

Could have filmed here, between batshit crazy and grewsome meadows. Must be ten cars in the driveway, some from past renters. Basically, if you show up in these parts, you’re lost and missed the ‘No Exit’ sign. One day, this Asian speaking minimal English walks up the drive. I glean that he has run out of gas and needs to pick up daughter from school. So I grab the jerry can and walk with him. No kidding, nice polished beemer is on the shoulder with the thirsty flap open. Pour five litres in there and tell him to prime it a couple times with the key, then start it. Voila! He’s overjoyed begins to peel some Wilfreds off his wad. Na, I say, just pass it on. My Fijian neighbour shows up on his tractor and asks, “wtf did he want?” Just gas, I say. “City asshles,” says my neighbour. Welcome to Canada, brother, this ain’t Kansas.

#161 rate hike incoming on 05.27.16 at 2:19 pm

Everyone has a plan ’till they get punched in the mouth. Mike Tyson

#162 Smoking Man on 05.27.16 at 2:20 pm

#152 Rays “RayofLight” on 05.27.16 at 12:39 pm
#124 Smoking Man on 05.27.16 at 9:41 am

#119 Rays “RayofLight” on 05.27.16 at 8:56 am
________________________________________
Sounds like another narcissistic asshole (SM) on this blog! He is so predictable too!
………………
Nothing wrong with being narcissistic.
The Phd who’s calling out Trump has spent two many years in school getting mind fkd.
Long time ago I was into the group thing till one day I blew all my loot, all of a sudden, the group vanished. No one around to help.
Naked and all alone I made a come back, a huge come back. I don’t even consider my bet from yesterday 35K up to 400k overnight a big deal just to give you some scale.
You buggers relay have a problem with people who are self reliant.
It’s called communism. Now go have a marsh mellow roast with other like minded morons.
_______________________________________
We don’t have any issues with self reliance. BTW I’m 100% Conservative and despise communism. Being an Narcissistic Asshole appears to come easy to both you and your boy Trump. “If you cant defend your position then you will just try to bully someone or call them names” Spot on SM, just what I would expect from the likes of you. Tell us more about yourself, blah, blah, blah, blah, me, me, me, me, look what I did, look what I did, I’m the best, I’m the best. Try defending your pathetic low life shtick with some real rebuttal, not the lame stuff you try to feed us. BTW Given an infinite length of time, a chimpanzee punching at random on a typewriter would almost surely type out all of Shakespeare’s plays. So get typing chimp!
………………

Do you ever ask yourself why you hate Narcissist.

It’s learned feeling by your programmers, ak teachers. Think of a work place where all the workers are Narcissist, nothing would get done.

What is wrong with loving yourself, and telling the world how great you are?

#163 Shortymac on 05.27.16 at 2:20 pm

@PennyHenny

Bidding wars and holdback on offers in Niagara Falls and Welland.
Torontonians are taking there big bag of cash from the sale of their homes and buying at a third of the cost in Niagara.
Locals from the Niagara region are pissed off that this influx of Torontonians is making their dream of home ownership unaffordable.

—————————————–

I’ve noticed this north of the city as well. A lot of young couples getting priced out of the market and/or toronto retirees selling and “moving to the country” are moving north.

House prices in Innisfil, Alcona, Alliston, Cookstown, etc have gotten insane. I went to visit a new development in Innisfil where the bungalows where starting at 490k (San Diego Homes)! It’s all faux luxury builds. The tiny townhomes start at about 350k.

Hubby’s family is up there so we thought about buying a small house within Garth’s Rule of 90 range (about 300kish for our ages and income) when we want to start having kids. Seems impossible now.

Still glad I haven’t bought in, I lived through the US crisis and we’re in for a hurting.

#164 Shortymac on 05.27.16 at 2:23 pm

@lee

Look at the MLS. Almost no SFH is listed under $900,000, and most of those prices are set low to start bidding wars. I am not saying it is rational to buy an average SFH for $2M in Toronto, but the real estate industry media machine is winning, and it holds all the cards. Your blog only gets out to your blog followers. The Star, Globe, Post, etc. get out to many more people. We are not going to see a day in the future where that average price of a SFH in Toronto drops under $1M. This is getting close to what the average is in Aurora right now. It’ll get to $2M in Toronto well before it ever drops again.

—————————————-

I have seen SFH in toronto on the MLS for less than 900k. They tend to be in the very north – west part (on the border to Vaughn, and the cheaper towards jane and finch the cheaper you get).

#165 Interstellar Star Stuff on 05.27.16 at 3:01 pm

#73 Smoking Man on 05.26.16 at 10:08 pm

What I find hilarious:

Humans, so many of you are delighted at the prospect of fellow Canadian Home owners getting crushed with the prospect of rates going up and destroying the housing Market. There are other ways to compete with your rivals.

You people miss the elephant in the room.

Forex. 400% leverage.

This is what I got on now. Cost me around 65k in real money.

I stagger in 50 contacts with every cent.

QTY Price
50 1.26753
50 1.27655
50 1.2897
50 1.3025
50 1.3130

Average Bet = 1.28986
P & L right now 217,350.00 with a price of 1.29855

It was 600k a few days ago. went down to about 35k today then a bounce. Typicaly I would unload at the 50% level 300k I’m out. Not this time

I’m betting Yellen goes bullish on a June rate hike talk tomorrow at 1:15. P & L might hit 700k by end of day.

Don’t mean she’s going to do it.

This is a more civilized righteous way of competing with loved ones than wishing then get crushed in real estate.

fking Communists. The victim
vs.
Brains

………

So did SM make another million?

#166 westcdn on 05.27.16 at 3:06 pm

I saw someone mentioned Sorrento. I loved the place as well the isle of Capri. Naples was bit tough but I will visit Italy again – liked the northern half of Italy best. Verona and Venice also stick in my mind, Rome was fascinating. The Italians were treated me well.

My eldest daughter took up snowboarding (she liked a snowboarding dude for a while). After watching her pick up her butt many a time, she got very good. She would lead me down on blues and blacks. She called me a wuss more than a few times. Christ, I would be looking at air between my skis.

Good times – back to investing and hoping my recent success continues to run. But I know it won’t last.

#167 jess on 05.27.16 at 3:19 pm

Toronto condo market is in ‘high risk zone’ of overbuilding, RBC says
Royal Bank says glut of new units may combine with unsold existing ones to cause a problem later

By Pete Evans, CBC News Posted: May 27, 2016 10:26 AM ET Last Updated: May 27, 2016 1:32 PM ET

======
uk
KPMG dodge questions about the sale and leaseback of properties from BHS to Carmen Properties Ltd, a company registered in Jersey (26 May 2016)

=========
http://www.marketwatch.com/story/foxconn-replaces-60000-humans-with-robots-in-china-2016-05-25

#168 bill on 05.27.16 at 3:33 pm

Hi Garth -will you be busy at the store or will you get out for a ride? Have a nice weekend man…
more TT Vicar?
Bruce Anstey is set to race a Honda RC213V-S at the 2016 Isle of Man TT

#169 Rays “RayofLight” on 05.27.16 at 4:10 pm

#161 Smoking Man on 05.27.16 at 2:20 pm

#152 Rays “RayofLight” on 05.27.16 at 12:39 pm
#124 Smoking Man on 05.27.16 at 9:41 am

#119 Rays “RayofLight” on 05.27.16 at 8:56 am
________________________________________
Sounds like another narcissistic asshole (SM) on this blog! He is so predictable too!
………………
Nothing wrong with being narcissistic.
The Phd who’s calling out Trump has spent two many years in school getting mind fkd.
Long time ago I was into the group thing till one day I blew all my loot, all of a sudden, the group vanished. No one around to help.
Naked and all alone I made a come back, a huge come back. I don’t even consider my bet from yesterday 35K up to 400k overnight a big deal just to give you some scale.
You buggers relay have a problem with people who are self reliant.
It’s called communism. Now go have a marsh mellow roast with other like minded morons.
_______________________________________
We don’t have any issues with self reliance. BTW I’m 100% Conservative and despise communism. Being an Narcissistic Asshole appears to come easy to both you and your boy Trump. “If you cant defend your position then you will just try to bully someone or call them names” Spot on SM, just what I would expect from the likes of you. Tell us more about yourself, blah, blah, blah, blah, me, me, me, me, look what I did, look what I did, I’m the best, I’m the best. Try defending your pathetic low life shtick with some real rebuttal, not the lame stuff you try to feed us. BTW Given an infinite length of time, a chimpanzee punching at random on a typewriter would almost surely type out all of Shakespeare’s plays. So get typing chimp!
………………

Do you ever ask yourself why you hate Narcissist.

It’s learned feeling by your programmers, ak teachers. Think of a work place where all the workers are Narcissist, nothing would get done.

What is wrong with loving yourself, and telling the world how great you are?
__________________________________
I don’t hate narcissists, just assholes like you. You truly are delusional now?

#170 Pierre on 05.27.16 at 4:28 pm

Whoa! Tracy should have bought the house!

At least she’s in good shape, comfortable with her decision, and not salivating over the choice buying opportunities that await.

Not gonna happen. Now Drs are priced out of Kits.

#171 TRT on 05.27.16 at 5:15 pm

Sitting at a Starbucks here in YVR.

Young moms talking RE at table next to me. “1.4 this…$1.5 that”. Won’t even mention the million or thousands.

Hahaha. They couldn’t even earn that in their working lives by the sounds of their talk.

When (and if) China money inflows end, look out below.

Not likely to end soon. BC lib provincial govt just ended all standardized testing aka provincial exams. Immigrant students Were not passing English. Now path all clear to graduation and beyond.

Unbelievable.

#172 Shawn on 05.27.16 at 5:17 pm

Isle of Man TT.

Bill at 167 mentioned the TT.

Bill I am on my way there will see practice week and one race day.

#173 TRT on 05.27.16 at 5:21 pm

#148 Lee

I think according to front page story in Financial Post today, property demand is so high that we will be looking at $2M average for SFHs by end of 2016 in Toronto.

Get smart. Buy your fresh water contracts. Whoever owns water is gonna be rich. Taking showers and washing cars is a luxury. Gov can provide subsidized drinking water.

Wait and see this bubble. Will be more epic than housing.

#174 Zed in Geneva on 05.27.16 at 5:27 pm

Re comment #116

Do the Niagara people feel the same way about Toronto money as the Vancouver people feel about HAM?

Should the canadian government prohibit people from out of town from buying?

What is good for a canadian is probably also good for another person from wherever to purchase. A few canadians bought low in the U.S. a few years back when Garth recommended buying in AZ and FL.

Freedom. You can buy, you can sell, you can rent and can be balanced in your life.

#175 Chickenhawk Trump on 05.27.16 at 5:28 pm

Scared to face the Bern..

http://www.theglobeandmail.com/news/world/trump-pulls-out-of-debate-showdown-with-sanders/article30192497/

#176 WalMark of Sadkatoon on 05.27.16 at 5:54 pm

clever move by Trump. by renegging on Bernie he makes Bernie look more ‘dangerous’, further weakening Clinton

#177 Jay on 05.27.16 at 7:14 pm

With respect to comment #76, don’t you dare make this partisan. Both parties are more than happy to press the accelerator pedal, and both are more than happy to ‘save’ you with your grandkids money afterwards. The only difference is who ‘you’ are.

The people who promise to cut spending and really push fiscal responsibility at all levels simply don’t get into politics, because they can’t win elections. Or they get kicked out by the PM for not following the party line. (Hi Garth! Love the blog!)

#178 bill on 05.27.16 at 7:19 pm

#171 Shawn on 05.27.16 at 5:17 pm
looking forward to doing that myself.
https://www.youtube.com/watch?v=21sXWXVBTZM

#179 Gerald Munchapeach on 05.28.16 at 8:58 am

G, didn’t you ‘poo poo’ the crrrrrraaazzzzzy conspiracy theory that the gold and silver markets were being manipulated?

Turns out, they were.

http://business.financialpost.com/fp-comment/joe-oliver-the-liberals-spent-9b-in-a-single-month-just-so-they-could-say-there-was-a-deficit

#180 Rainclouds on 05.28.16 at 10:51 pm

Woah

Just checked Realtor.ca

Listings in Van have popped quite a bit in a week!

#181 steerage steward on 05.28.16 at 11:03 pm

Two coworkers that are home owners came up to me this week and asked what an “ETF” is. These people are not idiots, in fact some of the best workers in the office.

Gave them some advice. Walked them through a retirement calculator. Ruined their day.

Never fails to amaze me that smart people haven’t thought this thing called life through

#182 steerage steward on 05.29.16 at 1:17 am

Quite accurate that image letter

We cornered the wedding dress market and I’ll be damned if anyone can do it better

#183 Andy on 05.29.16 at 5:56 pm

At one time, you could have 200 to 300K in the bank at retirement and with 6 to 8%, live modestly on your interest and leave the principle to your children. I live in a small, Northern Ontario town.

Today, we find that the savers, are being severely punished for doing the right thing.

How, why did this happen? Who is responsible? No, I don’t mean one nefarious individual. Might I suggest the entire system of central banking? Am I a conspiracy nut?

Could we not, at one time, as a country, create our own money out if thin air and not owe it to anyone? Isn’t that how Universal Health care was created?

Don’t commercial banks do just that, create money out of thin air and then lend it to our government (us) at interest? As well as to us, directly?

Why did Canada sell off the last of its gold? Why is China, Russia, India buying PMs hand over fist? What do they know that we don’t?

And don’t invoke, the meme, it’s those damn Liberals (or NDP) or Conservatives. None have ever done anything much different from the other.

Can a 12 year old Canadian girl have the answer?
https://www.youtube.com/watch?v=Cq5364QMh24

Are any of you aware of these facts? Do you trade the markets? https://www.youtube.com/watch?v=-zzSAoD2mzU

Please, no sarcasm. Some of you folks have a smarter than though complex. I’m really trying to understand WHY we are where we are.

#184 Andy on 05.29.16 at 9:11 pm

Could this happen here?
https://www.youtube.com/watch?v=jwjCVVWQkOU
Is our bail-in model different?

#185 Andy on 05.29.16 at 9:14 pm

Sorry, can’t help myself.

https://www.youtube.com/watch?v=-DT7bX-B1Mg