Hitting the fan

COAL HARBOUR BC BENCH

Bench art at Coal Harbour park, Vancouver. Blog Dog photo. (Click to enlarge)

There were open houses this weekend at 2348 Oliver Crescent, a few blocks in from Granville in the Arbutus hood of Vancouver. It’s a demand area, close to downtown, but it’s also a symbol. At least this house is.

“What a piece of crap,” says Leslie, who lives nearby. “This has to be the end…”

The bungalow was built in 1951, is unrenovated, sits on a 50-foot lot, has two bedrooms and 2,118 square feet, including the basement. “A fully developed basement to help reduce those mortgage payments,” says realtor David Richardson. Which is a good thing. Because at $3,888,000 most people would probably want a big $1,500 coming in from downstairs to help offset the $15,000 monthly payments.

Taxes are $8,500 and David lists these stunning features: “Shared laundry, Frdg, Stve & DW.” So, here it is:

BUNG

For those who don’t know Vancouver, and think a chunk of this insane price might be justified by the stunning views across the ocean, or up the mountains, think again. No water. No hills. This is a flat, boring neighbourhood of non-descript streets, uninspired vegetable and unbridled house lust. Here’s the view outside:

STREETVIEW BUNG

As this pathetic blog articulated in a three-parter last week, the market has truly reached a point of self-destruction. Prices are detached from fundamentals. Household debt is off the charts with 30% of buyers in Vancouver now taking mortgages worth 450% of their incomes (the number is even worse in Toronto, at 40%). Almost six in 10 mortgages on houses selling for over a million have 30 or 35-year amortizations and, of course, are not insured.

So no wonder bank bosses are worried, as are mortgage brokers, the central bank and now the prime minister and his finance guy. Anyone going long on a house in YVR or most of 416, or spending $3.8 million on a beater on Oliver Crescent, are setting themselves up for a world of hurt.

Which brings us to the topic du jour: what happens if the market crashes? Like in America in 2007, will it start taking down everything else with it? What about your RRSP, or tax-free account, or all those ETFs and preferreds in your no-registered portfolio? Will the Toronto stock market crater along with residential prices? And real estate trusts? Is there no place to hide?

Well, the first thing to realize is that Canadian mortgages have not been turned into collateralized debt obligations (CDOs) and sold in tranches of risk to unsuspecting investors and institutions as happened in the US. True, our banks and CUs have a ton of exposure to billions in dodgy loans, but CMHC is a huge backstopper. Yes, a housing collapse in Van and the GTA will scare investors, impact earnings and likely wound the common share values of the banks, but nothing like 2008 – from which they recovered massively.

In other words, there is less correlation between the Canadian stock market and the housing market than between the TSX and oil. When crude collapsed, taking Alberta with it, Canadian stocks lost about 11% of their value (last year). But people with fully-invested, balanced and diversified portfolios lost nothing. In fact, they were mildly positive.

This is exactly what portfolios like that, with 40% safe stuff and 60% growth assets, are supposed to do – preserve capital in lousy years and deliver growth otherwise. So the key is to ensure you actually have a broad diversification among asset classes (bonds, preferreds, REITs, equity ETFs etc.) and that too many eggs are not in one geographic basket. Like Canada. As stated here often, of the 60% growth component, keep no more than 17% in maple, 20%+ in the US and an equal amount internationally.

What about preferred shares? Actually rate-reset prefs love rising interest rates, which are 100% on the agenda going forward. Plus they churn out a steady 5% dividend and dish up the dividend tax credit to boot.

REITs? Won’t real estate trusts be clobbered if house fade? Nope. Most REITs own office towers, shopping malls and other income-producing assets, and the economy would have to collapse and go depressionary for the bank towers to start emptying. As for apartment-owning REITs, they flourish when house prices tank, since demand for rental accommodation increases.

But don’t higher rates man lower bond prices? Indeed, which is why only 8% of a balanced portfolio should be in government bonds – and ones with short durations which will be affected little. Add in some better-paying corporate and high-yield debt, and you have a nice counterweight to equities. Remember that when stock markets swoon (it happens), fixed-income assets grow more valuable as investors seek safe havens. So own both. That’s what balance means.

There is risk everywhere, as you know. Trying to avoid it, parking your money with the jam people or in a laughable bank HISA, just means you’re augmenting the chances of outliving your capital. Meanwhile keeping windfall gains in a house in the GTA or Vancouver, thinking prices will go up forever, could be a mistake of epic proportion.

So, be like the smart owner of 2348 Oliver. Seek a greater fool.

169 comments ↓

#1 For those about to flop... on 06.12.16 at 4:21 pm

I took some liberties and assigned some of the regulars on this blog a team in Euro 2016.
There are some stereotypes and some interblog politics mixed in.
It was done for fun so please don’t get offended …

Jimmy- Poland…..seems to like Pole position.
Freedom First – Switzerland…..wants to keep to himself.
Smoking Man- Ireland….Scotland didn’t make it and likes a drink.
For those about to flop- England…my forefathers were the scraps of these guys.
Mark- Belgium ….full of chocolate.
Brwy Skrtn- Hungary …..seems hungry for real estate.
Brazil Ex pat- Portugal…will speak the lingo.
Crowdedelevator- Spain….doesn’t always get on with Portugal .
Garth-France….the host nation.
Billybob-Turkey…..enough said.
O.L.C- Croatia……a hidden gem.
WalMark of Sadkatoon -Italy..likes to give Mark the boot.
Toothless Measures- Romania…..has the fangs.
Gut Check-Northern Ireland…when picked on proud and feisty.
V.R.E.U- Russia…full of gas.
Boom!- Sweden…puts things together like IKEA.
WUL-Iceland…..has had enough of fire.
Andrew Woburn-Austria….seems pretty stable.
Lee-Albania….seems pretty unstable.
Ace Goodheart-Wales….real estate dragon.
IHctD9-Slovakia…lots of wide open spaces.
Common sense- Germany….what it’s famous for.
Brian Ripley- Czech Rep….his charts are as busy as Prague.
No Name- Ukraine…possibly home?

Support your new team…

M41BC

#2 Bill Beaman on 06.12.16 at 4:24 pm

First!

#3 JakeR on 06.12.16 at 4:28 pm

“But don’t higher rates man lower bond prices? Indeed, which is why only 8% of a balanced portfolio should be in government bonds”

I was under the impression that you thought government debt was “riskless”.

“Even bonds have continued to race ahead. The fund called XGB holds riskless government debt, and has advanced 7% since last March, plus its modest 2.6% distribution.”

Link: http://www.greaterfool.ca/2015/03/02/balance-2/

Given such lack of risk, I would have thought a large portion of the bond portion of a portfolio should have been government bonds.

#4 Nemesis on 06.12.16 at 4:33 pm

#TheNativesAreGettingRestless,Or… #WhatDidAbrahamLincolnSay… #AboutFoolin’ThePeople?

[CBC] – B.C. affordability crisis has citizens angry, survey suggests: New survey shows 80% of respondents support a tax on absentee foreign owners

…”Respondents also expressed a high degree of anger at how all three levels of government are dealing — or not dealing — with the housing affordability crisis, with most of the blame directed at the provincial government.”…

http://www.cbc.ca/news/canada/british-columbia/b-c-affordability-crisis-has-citizens-angry-survey-suggests-1.3628736

[G&M] – The housing problem isn’t supply, it’s unsustainable foreign demand

…”During his talk, Mr. Rennie suggested that opponents of densification and condo building forfeit their right to talk to young people about affordability in Vancouver. I suggest, tongue in cheek, a different rule: If you’re not willing to recognize the emerging consensus about the role of foreign capital and are not willing to propose steps to address its impact, then you have no business talking to the younger generation about affordability.”…

http://www.theglobeandmail.com/report-on-business/rob-commentary/housing-costs-are-rising-but-its-not-a-supply-issue/article30380106/

#5 Jonny boy on 06.12.16 at 4:41 pm

I had a funny conversation with my brother the other day. We have sold out condo in Kits for 70%more than the last unit sold in our building back in October.
Brother: “A 70% bump in less than a year in your building is a sure sign that the end of days has come … That and the return of Gozor the Gozarian”
Me “from Ghostbusters?”
Brother:” Clearly when someone thought of there destructor they thought of a nice little bungalow on a 33ft lot!”
And now I think someone has thought of that….

#6 JSS on 06.12.16 at 4:43 pm

Wow
Imagine a $3.8M windfall. Tax free. Once in century opportunity.

Re. Common shares – I’d say an opportunity is coming to buy bank common shares, if they tumble due to the real estate market. And hold long.

#7 fleabitten monkey on 06.12.16 at 4:47 pm

As much of a joke the price is (and someone will buy it) it always makes me chuckle when I see the sequential stream of 8s in Vancouver sticker prices. Like they’re advertising for certain cultures who will buy it because of what great fortune awaits simply because there are 8s in the price lol. Talk about stereotyping folks. Give us a break.

#8 Kenny on 06.12.16 at 4:49 pm

Because I may win this dumb game
Today….

First?

#9 the other white meat (pork) on 06.12.16 at 4:49 pm

Never been first before, what a heady sensation!

How much income would a person need to qualify for a 15k/month mortgage payment? My peasant mind is boggled. I would imagine that such a high roller wouldn’t need an extra 1500 for the headache of being a landlord.

#10 Sideshow Rob on 06.12.16 at 4:52 pm

This post has butt coverage written all over it. Shit is about to get real. Buckle up boys!

#11 Victoria Real Eatate Update on 06.12.16 at 4:53 pm

Canada’s housing market is extremely vulnerable to a crash. That’s been the case since 2006 when Canada and the US had equal-sized housing bubbles. By 2011, The Economist noted that Canada’s housing bubble was larger than the US bubble at its peak.

When talking about housing crashes, it’s short-sighted to not talk about to leave out all of the other 50 countries that experienced housing crashes after housing values reached bubble levels and only talk about the US experience and how it’s different from Canada.

Exactly how the Canadian housing bubble inflated was different than the US, that certainly is true. However, Japan’s bubble inflated for different reasons than the US and Canadian bubbles , but their market crashed.

Ireland was different than the US as well, but their market crashed. Greece was different than Japan, the US, Iceland, etc., but their market crashed also. Indeed all of those markets crashed.

It doesn’t matter how a bubble got to be a bubble. All that matters is that it’s a bubble and there is no bubble that can be pointed out that had a soft landing.

If you think CMHC will make it different in Canada then you must have forgotten that CMHC was around in the 80s when all major housing markets in Alberta and BC crashed. CMHC was also around in the 90s when Toronto’s market crashed.

Also, in the US experience, both recourse and non recourse states experienced housing crashes. The recourse argument doesn’t work either.

Note that I’m not predicting a crash. Is a crash possible? Absolutely.

However, it isn’t different in Canada and Canada’s housing bubble is much bigger than the 2006 US bubble.

#12 JoJo on 06.12.16 at 4:55 pm

Hi Garth (or dawgs),

Quick question…I recently opened a TFSA and started buying TD e-series 40% bonds, 20%Cdn, 20%US, 20%Int’l. Is it okay to hold all of these in the TFSA? Should the US & Int’l be put into an RRSP? I find this kind of confusing. Also, I just bought $5K of Enbridge stock to store my emergency fund (in a TFSA – figured it might earn me more than sitting in a savings account). Am I on the right track here? Your explanation sounds a little more complex (I’m not even sure what preferred shares are).

#13 jay on 06.12.16 at 5:02 pm

Thank’s Chrusty Clark. http://www.theprovince.com/business/squeezed+renters+losing+homes+lower+mainland+owners+cash+market/11981185/story.html

#14 waiting on the westcoast on 06.12.16 at 5:05 pm

From #169 yesterday….

Mark says “If Vancouver housing really went up the 30% or so that is claimed in the past few months, the supply onslaught to market would be enormous. Simple laws of supply and demand in economics. Yet we don’t see this supply onslaught. The reason being, there was no appreciation, and Realtors, the honest ones (which are most of them) are rightly advising their clients, in private, that if they list, they won’t get anything more than they would have received a few years ago.”

The law of supply and demand… is a theoretical model of expected behavior in ideal circumstance. Note – price is defined as where supply and demand meet. Price is resultant… not causal. In housing, people are even less likely to follow ideal parameters as emotion is involved.

From investopedia… “The law of supply and demand is the theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be.”

Read more: Law Of Supply And Demand Definition | Investopedia http://www.investopedia.com/terms/l/law-of-supply-demand.asp#ixzz4BOwATl2L
Follow us: Investopedia on Facebook

#15 Bobby on 06.12.16 at 5:18 pm

Interesting article Garth. The real concerns if there is a significant market correction, are the political risks. Whatever party is in power, at whatever level, will be the party that is blamed by the electorate regardless of what triggers the correction. Sure, the parties in power are addicted to the revenue generated by the runaway property market, but at the same time they want to avoid doing anything that will trigger a correction on their watch. This issue really wasn’t on the political radar until the G&M article on shadow flipping. Now every politician has an opinion but each has no clue what to do. If there is a correction those stuck with underwater homes will want to blame someone and that will be done at the ballot box. Sure JT and crew are going to deep dive into the data to see what is really behind the runaway prices. What it really means is they will go to ground and do nothing. This will be fun to watch.

#16 malik on 06.12.16 at 5:22 pm

Interest rate rise is not going to happen, at least in my life time here in Canada when rest of the world going to negative interest rates. Please stop the excuse of US interest rate rise and Canada following the suit in 90% of time. Canadians have never been more indebted than ever in history, so I can bet my life that interest rate will not go up here and money will be cheap, almost forever.
We all know what cheap money does, inflate the bubble more and inflate the prices of assets, so keep enjoying the house price rise here as it is a one big organised crime by organized Cartel, designed to make fool out of common man as Gove enjoy higher taxes on highly appraised home prices, banks enjoy fat interest payment and realtors enjoy bigger commission. Welcome to a world of organized crime

#17 malik on 06.12.16 at 5:28 pm

And off course I forgot to add the a#sho##s builders who are only releasing 10 or 12 new homes every week and raising 20000 in every week on same homes, where as lots of free space is available of new homes and has been allotted already by Govt. This is pure theft and nothing else as it is blessed by Govt and bankers and realtors as they all are same in this game. To hell with them I am not retiring here. I and my wife will collect cpp and OAS and pensions abd will retire in some third world country where we can live like kings and have multiple people at our service to do our daily chores

#18 paulo on 06.12.16 at 5:28 pm

WOW this house would be a 150-175K starter in most parts of the developed world 3.88 m mind boggling woe the greater fool and idiot that even considers it seems that the real-estate casino in Vancouver is completely delusional the outcome will be interesting to watch even if the blood,gore and pain is epic and x rated

#19 Ole Doberman on 06.12.16 at 5:36 pm

DELETED

#20 Directm on 06.12.16 at 5:52 pm

My question: Since CMHC is backstopping these dodgy loans, what is the the outlook on our future Federal debt? How much will be added to our deficit and how would this impact the loonie? Should your readers move their portfolios into US equities?

#21 For those about to flop... on 06.12.16 at 5:52 pm

As I sit out on my back patio on this day of rest I look at the house two doors down.

It sold around 2 months ago for around 1.6 million and was formally a family home but is now a rental.

I don’t see the attraction…

M41BC

#22 the original Dave on 06.12.16 at 5:59 pm

I’ve been bearish on real estate for many years…comfortably. It hasn’t agitated me. Any agitation that I had has dissipated. Something reeks and it seems to be getting stinkier. As of late though, people keep talking about a supply shortage in Toronto. Is there really a supply shortage for housing? Is it true that not enough houses have been built and that there hasn’t been enough service able land? 95 out of 100 people have been bullish all these years and that has been sufficient evidence for me to stay clear, but I am wondering if there is any legitimacy to that claim. I know people are afraid to sell because they then would have to buy. Things like apartment complexes and such – has there been a shortage of them being built that has contributed to this insane run?

The immigration argument I believe is bullshit. We’ve seen bigger immigration numbers in previous decades.

Even if supply is tight for an asset, I do know that that doesn’t matter as soon as there’s a price drop on an asset.

Regardless, my position hasn’t changed. Average incomes are nowhere near where they have to be to warrant the price of a house.

#23 S.Bby on 06.12.16 at 6:04 pm

I’m sitting on my back deck overlooking my elderly neighbour’s house which has just hit the market here in South Burnaby. There have been two open houses this weekend Sat and Sun with a steady stream of mostly Asians wandering through. Priced at $1,628,800 for a basic 1955 tear down. Until sentiment changes and RE is not seen as a sure thing I think this market still has legs, especially if interest rates decline yet again.

#24 North Burnaby on 06.12.16 at 6:04 pm

The stock market hasnt generated any profit for you YTD, Gartho

The TSX is up 7.9% YTD. — Garth

#25 Goldie on 06.12.16 at 6:07 pm

#7:
Oh, I didn’t even notice that. Good call, and most likely correct.
I drove by an open house several blocks east of the place in this article yesterday. Let’s just say that no English was being spoken by any of the viewers…

#26 common sense on 06.12.16 at 6:10 pm

Seeing the price tag and condition of the house made me immediately think..

“IS ANYONE EVEN THINKING OF BUYING THIS AT THE LIST PRICE TOTALLY AND COMPLETELY OUT OF THEIR [email protected]#$%^&*((()_ MIND?”

Please people…seek psycholatric help immediately.

#27 Aggregator on 06.12.16 at 6:15 pm

Well, the first thing to realize is that Canadian mortgages have not been turned into collateralized debt obligations (CDOs) and sold in tranches of risk to unsuspecting investors and institutions as happened in the US. True, our banks and CUs have a ton of exposure to billions in dodgy loans, but CMHC is a huge backstopper. Yes, a housing collapse in Van and the GTA will scare investors, impact earnings and likely wound the common share values of the banks, but nothing like 2008 – from which they recovered massively.

Well, not really. Canadian banks do trade CDOs, Credit Default Swaps and other structured derivative products linked to consumer credit (which is why the Bank of Canada explicitly stated it would not repo/trade any assets linked to these types of instruments). How much is unknown since these products are traded in the OTC market on a principle-to-principle basis, and not centrally cleared. However, we do have a large market for Mortgage Backed Securities (MBS) that are structured into tranches of risk levels and sold to international investors. Many of these MBSs are also guaranteed by the Government of Canada via CMHC as its operational agent. This is on top of CMHC's $600 billion mortgage insurance cap.

A US versus Canada housing crash is noncomparable because the US is a world reserve currency. One big phenomenon about the GFC was how the US dollar soared while the crisis unfolded on US soil. This would have never happened if the crisis unfolded in another country who has a tradable currency.  If Canada had an equivalent banking crisis and the government needed to bail-out the banks, you're not going to see the loonie rising, rather selling off sharply as investors dump CAD denominated assets. We're talking 30-50% depreciation depending on how bad the situation is.

No matter what scenario you imagine, at some point the accumulation of Canadian household debt (private) will be transferred to the government's balance sheet (public), and when it does the loonie will be paying for it. This will exacerbate the situation even more as much of that debt is denominated in bonds issued in USD. Reinhart and Rogoff showed this same result numerous times with empirical data when totaling private and public debt as a percent of GDP. It's not if it can happen, but when.

#28 Keith in Calgary on 06.12.16 at 6:18 pm

http://www.zerohedge.com/news/2016-06-12/royal-mint-allows-british-pensioners-save-gold-bullion

The Royal Mint in the UK is allowing pensioners to invest their money in physical gold. Of course, the british stock brokers are up in arms about it.

Too bad gold isn’t actually money eh Garth.

#29 Hanging on Like Grim Death on 06.12.16 at 6:20 pm

So by rough calculation, a 3,000,000.00 dollar principle, at approximately 2.5 percent interest, would take about 21 years to pay off with the interest paid being about 900,000.00 dollars. If (when) interest rates rise, the interest paid could be a lot more. It is possible that the buyer will pay double this amount. Imagine having to pay 5,000,000.00 dollars for this?

In truth, factoring in taxes and other costs, it is probably closer to 6,000,000.00 dollars. One consolation though is that one would not have to worry about retirement. The stress of having to pay off this debt would put one in an early grave. Problem solved.

If, as some suggest, the money is coming from overseas, then surely that sort of drain of funds would be detected at source and the evil-doers would be prosecuted. I do not accept for a second that an illegal cash flow of that magnitude could go undetected.

#30 Tony on 06.12.16 at 6:23 pm

Re: #12 JoJo on 06.12.16 at 4:55 pm

When the TSX opens at 9:30am this Monday sell ALL of your Enbridge. Whose stupid idea was it to buy Enbridge? Buying a stock that just run from 6 bucks to 10 dollars with oil topping out at 50 dollars U.S. and natural gas having bounced sharply off its lows is a surefire way to lose a lot of money fast. Both the TSX and the American stock indexes have likely peaked for the next 6 to 8 years at the very start of this month.

#31 Estrella on 06.12.16 at 6:25 pm

Interesting to note that Canadians are 4th on this list. A sobering thought for everyone.

Furthermore, #1 M41BC, very disappointed you didn’t give me Portugal. Not inviting you for Sangria anytime soon.

#32 BS on 06.12.16 at 6:30 pm

For those who don’t know Vancouver, and think a chunk of this insane price might be justified by the stunning views across the ocean, or up the mountains, think again. No water. No hills. This is a flat, boring neighbourhood of non-descript streets, uninspired vegetable and unbridled house lust.

Most houses in Vancouver are just like this. Ugly little houses in boring neighbourhood of non-descript streets. You can rent them for $3500 per month. How can anyone justify owning something like this? You certainly wouldn’t want to live in such a dump if you had $3.8 million. If you rented it out at $3500 per mouth it would take 116 years to get your principal back. That is if the money was free. If you factored in the cost of capital using a 2.5% interest rate you could only recover about 1/3 of the interest in rent. The rush to the exits has to be near.

#33 Smoking Man on 06.12.16 at 6:36 pm

The Bilderbergs and Divos crowed must be in all out panic mode.

With Donald certain to become the 45 president because this mornings act of barbarianizm. Hillary can’t even say radical Islam. Pheniox LGBT community has just backed Trump. Others to follow. Most of victims where Latino. Watch support come from that community.

Brexit. What do you think the british are thinking about open EU boarders after today.

Short Cable dogs.

Ah the globalists? What to do now…

#34 young & foolish on 06.12.16 at 6:41 pm

“headache of being a landlord”

I hear/read this a lot … especially from people who have never owned rental property. Of course, when you super smart blog dogs sell your bloated houses and decide to rent, then you learn to appreciate a good landlord.

Like my garndpappy says : “No one will give you something for nothing”.

#35 Frank on 06.12.16 at 6:43 pm

If it crashes my only regret will be not having made a buck in it.

#36 WalMark of Sadkatoon on 06.12.16 at 6:49 pm

@ Mark

Some people spend their time trying to figure out all the reasons something can’t be done. Others spend all their time coming up with ways to solve those problems. No wonder engineering firms won’t hire you.

that’s cold man. cold.

at least you’re honest. ill give u that.

anyway YYZ and YVR home prices are becoming asymptotic/vertical. no way this continues. beyond stupid now. ludicrous speed

#37 Ole Doberman on 06.12.16 at 6:51 pm

#18 paulo on 06.12.16 at 5:28 pm

WOW this house would be a 150-175K starter in most parts of the developed world 3.88 m mind boggling woe the greater fool and idiot that even considers it seems that the real-estate casino in Vancouver is completely delusional the outcome will be interesting to watch even if the blood,gore and pain is epic and x rated
——————————————————-
Garth’s analysis is purely on domestic fundamentals, and in that sense it is delusional.

However, Garth like many analysts completely discounts international capital flows i.e money from mainland China and it’s impact. And it’s sad that this won’t be reversing, definitely not in the generation.

Why? Cause the government is too late in cracking down in it – the damage is done. There is more HAM on the way, and even if there is regulation to curb them, the ones who are here will be buying more property.

Now that’s insane.

#38 Seeking Balance on 06.12.16 at 6:54 pm

Bought XQB -> seems XSB is a better choice. is it?
XSH -> might have a liquidity issue->am I wrong

what about XBB instead of XQB or XSB?
what if I replace bonds with Preferreds only or pref+REIT
———-
I kept Preferreds in Fixed income.
80 or 85% of fixed are in Preferreds.
considering 60/40 for CPD and XPF. or sticking to CPD is enough
All this is for RESP account

Where does REIT go?
I kept under growth portion.
seems REIT is 8% of total portfolio (13% of growth stuff)
For REIT -> ZRE is selected. can I include XRE or VRE in REIT. however, the fund is under 10K for now.
I might have to adjust % with other accts such as TFSA or Corp/Personal Margin. not there yet

for corp margin: thinking only pref and REITS. Bonds trying to avoid. is it a good idea? Want liquidity for the acct and want to start with 10k.

how can I make Corp Margin -> tax efficient?

#39 For those about to flop... on 06.12.16 at 6:56 pm

The added bonus which you cannot put a price on with the Oliver Cresent house is that you get young drivers taking driving lessons or even their tests practicing parallel parking on your car from the nearby ICBC license facilities nearby on MacDonald st.

Also they drive around King Edward Ave doing 30km.
I thought the young were speed demons?

These cars have two steering wheels,and yet no one in the car is in control…

M41BC

#40 WalMark of Sadkatoon on 06.12.16 at 7:01 pm

Given such lack of risk, I would have thought a large portion of the bond portion of a portfolio should have been government bonds.

default risk sure

risk of eating cat food in your future is high tho

#41 Look Out Below? on 06.12.16 at 7:06 pm

“This has to be the end…”

————————————————————–

How many times have we heard these kind of dire prognostications these last few years? Many, many times. Unfortunately, RE has just continued to escalate in price.

#42 45north on 06.12.16 at 7:23 pm

so the Vancouver housing market is detached from reality and the question is how can it be reattached painlessly?

it can’t

economic tsunami posted a link to an article by Romana King: As of January 2016, only 13,216, or 0.28% of Canadian mortgages, were in arrears (compared to almost 4.7-million mortgages on lenders’ books).

http://www.msn.com/en-ca/money/real-estate/the-canadian-housing-market-puts-us-all-at-risk/ar-BBtUWR7

Roman King thinks at some point there could be a halt to mortgage lending. Well even if mortgage lending significantly slowed down the effect on the housing market would be immediate. Like instantaneous. Half of the people in the country would be underwater.

Bobby: The real concerns if there is a significant market correction, are the political risks.

political risks Bobby! political risks if half of the Canadian population owed more on their mortgage than their house was worth! we’re talking political massacre

#43 Contrarian Coyote on 06.12.16 at 7:29 pm

#18 paulo on 06.12.16 at 5:28 pm
WOW this house would be a 150-175K starter in most parts of the developed world 3.88 m mind boggling woe the greater fool and idiot that even considers it seems that the real-estate casino in Vancouver is completely delusional the outcome will be interesting to watch even if the blood,gore and pain is epic and x rated

—-

This. I was stunned seeing this after #89 CA on 06.11.16 at 2:10 am posted it in the previous day’s bog post.

Props to the seller if they bought this years and years ago and are now cashing out. Once in a lifetime opportunity. Hopefully the seller does the smart thing and takes the cash and invest and rents and lives happily ever after.

#44 Smoking Man on 06.12.16 at 7:34 pm

#37 Look Out Below? on 06.12.16 at 7:06 pm
“This has to be the end…”

————————————————————–

How many times have we heard these kind of dire prognostications these last few years? Many, many times. Unfortunately, RE has just continued to escalate in price.
………

From my Nictonite observational prospective. Human nature is irrational and un predictable. It’s even my last report to the Nictonite rulling council.

Never bet against the herd and you will be fine. Play the player not the cards.

It’s how I’ve made by last check. Slightly above this week’s loto max jackpot.

And my home, still turning on the shower with vise grips. More of a prop for my annual cra audits. The cracked windshield in my ranger also adds to the brand.

How to get rich.

1 build a un crackable text encryption tool.
2 learn to trade the herd.
3 Channel islands.
4 Camen Islands.
5 Bi weekly trips to casinos, no more than 9999.99 when funding your trading accounts and separating your loot from thieving socialists .
6 Get a gig that pays huge as an means of explanation for your auditor. Always leave a bit for her to find.

I sould be a full time fiction writer.

How’s that for an imagination dogs.

#45 Shawn on 06.12.16 at 7:40 pm

Mortgage Securitization in Canada

Aggregator at 23 Said:

“Many of these MBSs are also guaranteed by the Government of Canada via CMHC as its operational agent.”

************************************
I think it may be ALL Canadian MBS that guaranteed by CMHC. CMHC will only allow securitisation of insured mortgages. And they (or a related government entity)do the securitization for the banks as middle man.

I believe the banks are prohibited from securitising other mortgages or doing it directly.

It all works TOTALLY different from the U.S.

The U.S. actually works extremely well for borrowers and allows locking in low rates for 30 years. Just because the U.S. system got out of control about ten years ago and caused huge problems does not mean the whole U.S. securitisation baby had to be thrown out with the weak lending standards bathwater. They STILL do much the same style securitisation in the U.S. as before and it works great. They got rid of most of the really weak lending standards and liar loans and low teaser rates.

#46 Estrella on 06.12.16 at 7:41 pm

Forgot to add link to the 4th place comment. I got so riled at M41BC
::::

http://www.forbes.com/sites/niallmccarthy/2016/06/07/some-millennials-expect-to-work-until-they-die-infographic/?linkId=25314607#2a41ddb65ffe

#47 Rural Rick on 06.12.16 at 7:42 pm

Just heard on the radio that some new homes in Toronto are being built with 60 amp service. The new LED lights are the supposed reason for this. Anybody heard anything about this?

#48 earthboundmisfit on 06.12.16 at 7:45 pm

“CMHC is a huge backstopper” …… read “the taxpayer is a huge backstopper”…..
We are so f*****.

#49 Shawn on 06.12.16 at 7:46 pm

American house prices are very likely to continue to rise as they are a bargain at these low interest rates.

I well remember in 2009 and 2010 when many blog dogs said American house prices would continue to fall and meanwhile Garth and some others said Buy America and some said Sell Canada. (Well, half of that worked out) A family member of mine swooped in to pick up a short-sale in Florida. The place was an obvious bargain. It would not have even mattered if the price went lower as the house was for personal use, but it is in fact worth WAY more now.

#50 For those about to flop... on 06.12.16 at 7:47 pm

#31 Estrella on 06.12.16 at 6:25 pm
Interesting to note that Canadians are 4th on this list. A sobering thought for everyone.

Furthermore, #1 M41BC, very disappointed you didn’t give me Portugal. Not inviting you for Sangria

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

Sorry Estrella,I had to use Portugal up to get the BrazilEx pat/Crowdedelevator joke in

I did however have a few beers last night with your name on them after my wife bought them for me as a treat.

Estrella….fine blog dog….even better beer…

M41BC

#51 Ronaldo on 06.12.16 at 7:48 pm

#25 Hanging on Like Grim Death on 06.12.16 at 6:20 pm

”I do not accept for a second that an illegal cash flow of that magnitude could go undetected.”

What if there is no actual money changing hands? Nothing to detect. My own personal belief is that we will eventually discover that what has been going on is one of the biggest scams in real estate history and then watch prices come down. It is going to get very nasty.

Just got back from the sunny Okanagan. Real estate is doing well in some areas but not screaming hot. Only the temperature. Great to be back on the island where the temperature is bearable.

#52 Shawn on 06.12.16 at 7:51 pm

Smoking Man and Casinos and Taxes

So, some people choose to pay the idiot tax rather than the income tax, have at it. At least it is more enjoyable.

Not sure many day traders have to worry about income tax. Most lose. But yes some win.

Tax evaders are being caught. Rightly so.

Watch for the Canadian banks to pull out of the business of assisting tax evaders. (RBC has operations in channel islands for example) Watch for them to pay fines over this and express remorse. It will come.

Most of the Canadian banks have large operations in the Caribbean. My assumption is that a good bit of that business is tax evasion related.

#53 Smoking Man on 06.12.16 at 7:52 pm

I’ve reached a new low. Wine in the morning. Well truth be told I dident go to bed last night. Thought I would take shot at painting. Obviously I’m a shitty with a no work ethic as writer.

This is what I painted at 2 am . Look out gut check.

Wondering why I went with so much red. Perhaps the UCC connected to Orlando.

Should I just stick to financial predictions. I’m good at that as demonstrated in the archives.

http://dyslexicsmokingman.blogspot.ca/2016/06/sunday-morning.html

#54 45north on 06.12.16 at 7:56 pm

Border Security” TV show canned after federal watchdog finds privacy violation

https://ca.news.yahoo.com/border-security-tv-show-canned-federal-watchdog-finds-170008515.html

how about a vote on the Privacy Act

#55 dutch4505 on 06.12.16 at 8:17 pm

which CDN big five bank is the first to fail? my guess is either CIBC or BNS. the bad mortages notes will decimate the credit unions first, then CIBC or BNS and then….

time frame will be mid 2017 to early 2018.

None will fail. Silly comment. — Garth

#56 Boom! on 06.12.16 at 8:17 pm

#1 Flopper

IKEA… I guess a decent comparison, though I have never been in an “IKEA” store, nor am I thrilled with the lines of their crap, but that is merely me.

I like the lines of a 1957 Ford Failane 2 dr HT, or retractable better than ANY automobile before (except possibly a ’39 Cord) or since. I owned one, a mechanical shit-box of the 1st order, but the lines were spectacular! When you buy a used car from out front of a bone yard for $60 one need understand WHAT they just bought. -junk-

That said, I have been on a 3 day trip, and away from all electronic devices! A VERY refreshing experience!! Now back at the home, and catching up on stuff since Friday.

I see neither RE nor the Stock Market hasn’t yet crashed and burned, but one can always hope!

Monday is a new week. Took profits off the table on Thursday. New roof and patio door await!

M64WI

#57 Smoking Man on 06.12.16 at 8:19 pm

#52 Shawn on 06.12.16 at 7:51 pm
Smoking Man and Casinos and Taxes

So, some people choose to pay the idiot tax rather than the income tax, have at it. At least it is more enjoyable.

Not sure many day traders have to worry about income tax. Most lose. But yes some win.

Tax evaders are being caught. Rightly so.

Watch for the Canadian banks to pull out of the business of assisting tax evaders. (RBC has operations in channel islands for example) Watch for them to pay fines over this and express remorse. It will come.

Most of the Canadian banks have large operations in the Caribbean. My assumption is that a good bit of that business is tax evasion related.

Who wants to support T2s madness and Wynees crony pay offs.

Good luck burning the machine. Building 7 is all I’m saying.

#58 BOOM! on 06.12.16 at 8:21 pm

On the matter of BREXIT. If they are smart, they will tell the EU ‘goodbye’ and do it themselves.

Oh, that’s right, they’re British…. Well, maybe they, like their cousins the Americans will do the right thing, after everything else they tried has failed…
M64WI

#59 Zen Headspace on 06.12.16 at 8:22 pm

Stop panicking. There are greater forces at work here that will resolve this whole insane housing situation naturally. It does not matter what you do or what you think. The end result is already predetermined. This unceasing flow of change manifests itself as a natural order governed by unalterable, yet perceivable laws. Paradoxically, it is the constancy of these governing principles (like the rising and setting of the sun and moon and the changing of the seasons) that allows people to recognize and utilize them in their own process of transformation. Gaining an awareness of life’s essential unity and learning to cooperate with its natural flow and order enables people to attain a state of being that is both fully free and independent and at the same time fully connected to the life flow of the Universe – being at one with the Tao. A key principle in realizing our oneness with the Tao is that of wu-wei, or “non-doing.” Wu-wei refers to behavior that arises from a sense of oneself as connected to others and to one’s environment. It is not motivated by a sense of separateness. It is action that is spontaneous and effortless. At the same time it is not to be considered inertia, laziness, or mere passivity. Rather, it is the experience of going with the grain or swimming with the current. Our contemporary expression, “going with the flow,” is a direct expression of this fundamental Taoist principle, which in its most basic form refers to behaviour occurring in response to the flow of the Tao.

The principle of wu-wei contains certain implications. Foremost among these is the need to consciously experience ourselves as part of the unity of life that is the Tao. Lao Tzu writes that we must be quiet and watchful, learning to listen to both our own inner voices and to the voices of our environment in a non-interfering, receptive manner. In this way we also learn to rely on more than just our intellect and logical mind to gather and assess information. We develop and trust our intuition as our direct connection to the Tao. We heed the intelligence of our whole body, not only our brain. And we learn through our own experience. All of this allows us to respond readily to the needs of the environment, which of course includes ourselves. And just as the Tao functions in a manner to promote harmony and balance, our own actions, performed in the spirit of wu-wei, produce the same result.
You can keep striving, grasping, coveting, scheming, planning, and analyzing. Your fate is already predetermined.
Follow the signs.
Heed Garth.
He is the Zen Master of residential real estate, and his wisdom knows no bounds.

#60 BOOM! on 06.12.16 at 8:24 pm

I generally speak three languages:

English, sarcasm , and profanity.

#61 TRON on 06.12.16 at 8:25 pm

Most of these old shacks are torn down and a big box house using as much land as legally possible is built.

Someone needs to go back in 6 months from now and take another picture.

#62 Alex on 06.12.16 at 8:27 pm

Garth check out this Realtor from the Fraser Valley and his lovely charts and advice…

https://m.facebook.com/Grant4Land/

#63 Squish on 06.12.16 at 8:27 pm

#45 Shawn

I believe you’re right; all under the National Housing Act MBS program.

#64 Life among the Stars on 06.12.16 at 8:31 pm

#53 Smoking Man on 06.12.16 at 7:52 pm

I’ve reached a new low. Wine in the morning. Well truth be told I dident go to bed last night. Thought I would take shot at painting. Obviously I’m a shitty with a no work ethic as writer.

This is what I painted at 2 am . Look out gut check.

Wondering why I went with so much red. Perhaps the UCC connected to Orlando.

Should I just stick to financial predictions. I’m good at that as demonstrated in the archives.

http://dyslexicsmokingman.blogspot.ca/2016/06/sunday-morning.html

Alien vomit motif? Performance art?

#65 acdel on 06.12.16 at 8:37 pm

I clap my hands to the owner that could possibly sell that piece of crap for 3.8 million, how pathetic!

#66 For those about to flop... on 06.12.16 at 8:42 pm

#56 Boom! on 06.12.16 at 8:17 pm
#1 Flopper

IKEA… I guess a decent comparison, though I have never been in an “IKEA” store, nor am I thrilled with the lines of their crap, but that is merely me.

I like the lines of a 1957 Ford Failane 2 dr HT, or retractable better than ANY automobile before (except possibly a ’39 Cord) or since. I owned one, a mechanical shit-box of the 1st order, but the lines were spectacular! When you buy a used car from out front of a bone yard for $60 one need understand WHAT they just bought. -junk-

That said, I have been on a 3 day trip, and away from all electronic devices! A VERY refreshing experience!! Now back at the home, and catching up on stuff since Friday.

I see neither RE nor the Stock Market hasn’t yet crashed and burned, but one can always hope!

Monday is a new week. Took profits off the table on Thursday. New roof and patio door await!

M64WI

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

Hey Boom,yeah I gave you Sweden and along with that IKEA because you break things down and make them more manageable for me.

I’ve had some of their products…some good ,some bad quality wise.

As far as finding ways to save space they are like you…top notch…

M41BC

#67 Smoking Man on 06.12.16 at 8:47 pm

What a waste of Tallent. Gartho writes housing. Go fiction man. Emaculated word smith skills.

And he wastes it on this shit.

Am I the only one who sees it…. the bastard frightend abuot judgment. This tiger who took on evil Harpo won’t cross the line.

Dorathy it’s your fault.. I know how chics think.

Let him free.

#68 Grey Dog on 06.12.16 at 8:53 pm

Rural Rick,
No way can homes be built for 60amp, hubby says to think about the oven, dryer, AC, furnace motor, convection microwave. (Hubby’s life is Standards.)

#69 dutch4505 on 06.12.16 at 8:57 pm

comment no 55

you are right Garth….. no bank will fail. If you expand the definition of failure to government assistance in order to keep operating then I believe my original comment is correct. (even you commented on some banks requiring assistance in the last recession)

#70 Dolly Freeman on 06.12.16 at 9:00 pm

Real estate in Canada cannot crash. Interest rate hikes have already been canceled in the US, and it’s clear that low interest rates are here to stay for at least a couple of decades. Janet has threatened to raise rates 5 times in the past, and she will continue doing that. But there is no fundamental reason for a rate hike to actually happen. Even if they do increase the rate, they’ll do it by .25%, and that too, so that they can decrease it during the next mini-recession. No interest rate hikes in US = No interest rate hikes in Canada.

Real estate crash is wishful thinking of those who were not smart enough to take risks at the right time. At worst, the only ‘downturn’ we will see is that prices will increase 5-6% per year instead of the crazy 20+%. At best, the Universal Basic Income (to be introduced by Trudeau) will increase inflation, and the prices will continue to increase by 20-40%.

#71 New West on 06.12.16 at 9:05 pm

#32 BS

I think what many people outside the zone of real estate madness in YVR don’t understand is that these older houses (or “teardowns” as we call them in Vancouver) are just that – teardowns. No one is buying these houses to live in.

The transaction is for the lot. In this case, for whatever reason, the West Side is still a preferred neighbourhood and the lots are going for stupid prices as a builder or speculator decides he can make more once he puts a new build on it. Lovely old Shaughnessy mansions, original Vancouver specials, tiny post war veterans houses – all the same, just a lot. The house goes.

For the past ten years in the lower mainland the people who buy these “old” houses are builders. Depending on the zoning, the lot is combined with others for a condo development, or is slated for a new SFH. There are a few neighbourhoods (Main Street, the Drive) where families still buy houses to renovate and live in, but nearly everywhere else in the lower mainland, the drill goes something like this:

1. House sells, cash, local builder. Sits empty for a year while permits are pulled. Very seldom rented, not worth the trouble.

2. House torn down, new build takes a year or two to go up depending on how many others the builder has going. Sometimes the house will be custom for a client, but usually these are spec houses and are built accordingly. Barely code, 2 x 4 framing, chipboard sheathing, tyvek, vinyl siding or a thin coast of stucco.

3. Everything is done to maximize the square footage of the house. Lately builders have been going down, excavating way below the hardpan, meaning that the requisite basement suites are below ground too. A friend of mine lives in a basement suite in White Rock. 6 feet from the entrance is a 14 foot cement wall that boxes in the entire basement. That’s where the “yard” is – 14 foot up. The other thing you’ll see is big dormers that push above the peak of the roof, which look oddly disproportionate but increase the usable sq footage of the house.

The interior will also be divided into as many bedrooms and bathrooms as possible, meaning that a 4000 sq foot house might have 9 small bedrooms, each with it’s own bathroom. The “yard”, what there is of it, will be 90% paved, to minimize yardwork.

3. Once the bit of turf is rolled out in front, the house will be listed for some multiple of the lot. One house in my old neighbourhood sold for a million two years ago. The new build was listed for 2.88 in March this year. It sits, no offers, no open houses now, not selling. Just like many of the new builds will sit. And if they do sell, because it’s a good “investment” they will still sit empty, or maybe one of the basement suites will be rented out. Think about it – would you want to live in one? (oh, and the “8888s” make me laugh. Thirty years ago the code in the real estate ads was “European builder, and European craftsmanship”.)

4. A sad corollary to all this is that now these old houses are being neglected and looking more and more run down. Why put any work into keeping the place up when it is just going to be torn down anyway? No one cares about the house.

Not the first time this has happened in Vancouver. Won’t be the last. Some people will make money, most won’t. Many of these houses will turn into boarding houses, or be split up for suites, like the old Edwardian places build during the boom of 1911. Many will be torn down in the next 20 years as the rain infiltrates the siding or the basement, or the crappy two-bys start to twist and warp (I’ve seen drywall seams in some of these new builds popping, joins between ceilings and walls tearing apart). Still, it’ll keep the builders busy repairing them for a time, just like the leaky condos still do.

What’s that old saying – History may not repeat itself, but it sure does rhyme?

#72 Sheane Wallace on 06.12.16 at 9:06 pm

Not if, but when the house prices correct.

This house has ‘appreciated’ 10 times in the last 15 years, we evidently have the biggest housing bubble in the history of mankind.

But apparently according to the selfie guy there is nothing the government can do, should we expect a price tag of 5 mil. + soon for such piece of crap?

Too bad that the selfie guy currency is not good even for use as toilet paper.

#73 Smoking Man on 06.12.16 at 9:07 pm

If your wondering how I got to Seneca today with out sleep and a liver screaming for water.

I drove….the wife sucks at stick. Yes a few moments of on the breaks a bit late but no one died.

Breaken rules forced on you by thieves feels pretty good. Up there with sex.

Who are these tools infringing on freedom.

The world of the mind fkd is what I’m thinking.

I’m getting a Harley. But then how do I explane that to an auditor. .

Probably a bad idea…….

#74 NoName on 06.12.16 at 9:15 pm

@Estrella

estrela you’ll spell better “estrella” portuguise if you have 1l of jameson near by to serve you as reminder. hope this will help.
https://flic.kr/p/8AJD5E

@floppy
yellow jersy is ok-ish, my team wears red and white checkered jersey.

#75 Steerage Bilge on 06.12.16 at 9:28 pm

#73 Smoking Man on 06.12.16 at 9:07 pm

If your wondering how I got to Seneca today with out sleep and a liver screaming for water.

I drove….the wife sucks at stick. Yes a few moments of on the breaks a bit late but no one died.

Breaken rules forced on you by thieves feels pretty good. Up there with sex.

Who are these tools infringing on freedom.

The world of the mind fkd is what I’m thinking.

I’m getting a Harley. But then how do I explane that to an auditor. .

Probably a bad idea…….

Seneca again….. wow for a writer you sure have zero imagination on how to amuse yourself.. get shit faced …go to shitty casino.. repeat ad nauseum then bitch about teachers and building 7 beotches building 7 lol I’m a f’cking alien

#76 Russ on 06.12.16 at 9:30 pm

Smoking Man on 06.12.16 at 7:52 pm
I’ve reached a new low. Wine in the morning. Well truth be told I didn’t go to bed last night. Thought I would take shot at painting. Obviously I’m a shitty with a no work ethic as writer.

This is what I painted at 2 am . Look out gut check.

Wondering why I went with so much red. Perhaps the UCC connected to Orlando.
===============================

Hey Smok’

Maybe it was the white wine that took you red.

I find that Guinness beer is pretty good for breakfast, smooth without the acidic finish that wine can give at that hour.

#77 WalMark of Sadkatoon on 06.12.16 at 9:33 pm

this is what negative interest rates look like. where ppl are paid to borrow and charged to save

http://www.dawn.com/news/1264268

#78 the other white meat(pork) on 06.12.16 at 9:35 pm

#34: young and foolish

“headache of being a landlord”

I hear/read this a lot … especially from people who have never owned rental property. Of course, when you super smart blog dogs sell your bloated houses and decide to rent, then you learn to appreciate a good landlord.

You’re right, I opted to sell my place rather than rent it out. I do appreciate a good landlord which is why I rent in a designated rental building, professionally run by a REIT.

Living in a professionally run place costs more but is worth every penny of it.

#79 Directm on 06.12.16 at 9:42 pm

Thanks Aggregator, you explanation makes the most sense to me. Interest rates would edge up slightly but our lonnie would crater. A house would lose half it’s value in US dollars…I know what to do. Thanks again.

#80 White Crock BC on 06.12.16 at 10:01 pm

Good post Garth,

You don’t however say what might happen to the CAD in that scenario…

#81 Ole Doberman on 06.12.16 at 10:04 pm

#19 Ole Doberman on 06.12.16 at 5:36 pm

DELETED
———————————————————
Not cool Garth. I guess you can’t tell the truth either, just like our crooked politicians – oh ya you got some of their blood in you.
Just can’t admit you’re wrong, guess you’ll be singing the same tune next year then the year after still denying the Quebec back door.

This is not an anti-immigrant blog. Go join the bigots over at the Globe or HuffPost. — Garth

#82 I like cookies on 06.12.16 at 10:09 pm

In the interests of the sharing economy, here’s my portfolio allocation (I’m 41, married with furry dependents): bonds 20% (a third in short-term, a third in real-return, the remainder in broad-market high-quality); Canadian equities 23%; US equities 23%; international developed 17.5% (3:2 ratio EAFE to Pacific); 5.5% emerging markets; 11% Canadian REITs. I’m up 8% this year, and anticipating buying lots more European stuff as BREXIT implodes.

#83 For those about to flop... on 06.12.16 at 10:13 pm

#74 NoName on 06.12.16 at 9:15 pm
@Estrella

estrela you’ll spell better “estrella” portuguise if you have 1l of jameson near by to serve you as reminder. hope this will help.
https://flic.kr/p/8AJD5E

@floppy
yellow jersy is ok-ish, my team wears red and white checkered jersey.

/////////////////////////////
You know I was gonna give you Croatia because your cryptic clue last week was your country had been broken up.
Croatia is stunning.

O.k you take Croatia and my buddy OLC will take Ukraine as he seems pretty easy going.

We will see in a months time who ‘s team on the blog wins…

M41BC

#84 Ontario's Left Coast on 06.12.16 at 10:18 pm

#1 Flopper

Croatia, I love it! Thanks buddy, I haven’t been around as much lately but still deeply interested in this hot mess that seems to be forming all around us.

Cheers and keep up the great observations!

#85 Totalchaos on 06.12.16 at 10:23 pm

I’m so tired of the “blame the asians” game. I live in the lower mainland and on my block there are only two white families and the rest are asian. All of the asians on my block are Canadian born with the exception of one elderly couple who have been here over 40 years. People of asian desent are Canadian too. From what I understand, they even allow foreign born asians get citizenship now.

#86 common sense on 06.12.16 at 10:29 pm

Flopper..

What gives buddy? I feel isolated and country less…

#87 For those about to flop... on 06.12.16 at 10:33 pm

#84 Ontario’s Left Coast on 06.12.16 at 10:18 pm
#1 Flopper

Croatia, I love it! Thanks buddy, I haven’t been around as much lately but still deeply interested in this hot mess that seems to be forming all around us.

Cheers and keep up the great observations!

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

Sorry brother,as you will see I just switched you with NoName.

He told me last week that his country had been broken up and I guessed one of the Slavic countries but for some reason I gave him Ukraine.

I know you will take Ukraine because you know how to compromise.

I owe you a beer.

It’s just a bit of added fun after all…

M41BC

#88 TurnerNation on 06.12.16 at 10:34 pm

We know about the condition of FOMO.

What about ‘GARTHO’: Greaterfools Always React and Think Houses Overshoot.

#89 Smoking Man on 06.12.16 at 10:34 pm

DELETED

#90 Joe2.0 on 06.12.16 at 10:39 pm

I can’t count the number of Americans who have said they are moving to Canada if Trump wins, loving the 73%cdn peso.

#91 For those about to flop... on 06.12.16 at 10:40 pm

#86 common sense on 06.12.16 at 10:29 pm
Flopper..

What gives buddy? I feel isolated and country less…

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

Isolated? I gave you Germany.

Right in the middle of everything.

Two reasons,Germans are known for practicality and because Merkel and your buddy Janet Yellen are powerful women.

I can’t believe you thought I forgot you…

M41BC

#92 WUL on 06.12.16 at 10:45 pm

FLOP:

Thanks for Iceland. Good choice. We need to cool off here in the northern frontier town of Fort Mac. Now I have to bone up on its roster, history, prospects and betting line.

One other reason it is appropriate. If Alberta had any brains (sometimes questionable) it would go hard on geothermal energy. The province is riddled with out of work drillers, rig hands, rigs, top shelf engineers, rock hounds and drilling service companies. But we won’t. We will sit around on a hope and a prayer that oil prices go up.

Go Iceland!!!

#93 Aggregator on 06.12.16 at 10:47 pm

#63 Squish

Private securitization of uninsured mortgages can be securitized under asset-backed commercial paper (ABCP), residential mortgage-backed securities (RMBS) or covered bonds. Together they make up about 15-20% of outstanding residential mortgage loans in Canada.

#79 Directm – A house would lose half it’s value in US dollars

Anything denominated in CAD would lose half its value against dollars, including income and wages. It all depends on what you're measuring against and what your benchmark is, otherwise you're just counting inflation.

#94 Smoking Man on 06.12.16 at 10:49 pm

So Kessel is going to get a ring . You puppies have no idea of how much loot I bet on that a year ago.

Ah: live one day I’m my life you can dye happy.

The Ballard curse..

#95 Ole Doberman on 06.12.16 at 10:52 pm

#19 Ole Doberman on 06.12.16 at 5:36 pm

DELETED
———————————————————
Not cool Garth. I guess you can’t tell the truth either, just like our crooked politicians – oh ya you got some of their blood in you.
Just can’t admit you’re wrong, guess you’ll be singing the same tune next year then the year after still denying the Quebec back door.

This is not an anti-immigrant blog. Go join the bigots over at the Globe or HuffPost. — Garth
———————————————————
The article is not anti-immigrant and points out many domestic Chinese people are also suffering as a result of what Quebec and others have done.

It refers to what we call HAM here.

I hope you will be right and that it’s speculative low interest rate money that has brought us to this point.

But it’s hard to imagine anyone mortgaging this home for $3.8 – and sadly we won’t here who buys this house after another bidding war – coincidence I’m sure, you betcha. People have every right to be livid, and I’m from Calgary!

#96 Smoking Man on 06.12.16 at 10:55 pm

To my wife. Addicited to slots..
https://youtu.be/G5NtzB-voZo

Your rock. ..10 lbs lighter for a wedding.

Shit walks I got to do….

I would not walk like this for anyone but you….against a smoking man’s religion.

#97 M on 06.12.16 at 10:59 pm

Q: “Which brings us to the topic du jour: what
happens if the market crashes? ”

A: Not much. Morons go bust. The greedy ones and the
ones watching TV. World will be a better place.

Q: “Like in America in 2007, will it start taking down
everything else with it? ”

A: Yes. Much worse considering the lack of liquidity
in CND.

Q: “What about your RRSP, or tax-free account, or all
those ETFs and preferreds in your no-registered
portfolio? ”

A: Busted since all morons are long market.

Q: “Will the Toronto stock market crater along with
residential prices? ”
A: Yes Virginia. There is a big bad wolf out there.
http://www.torontocondobubble.com/2013/02
/toronto-housing-bubble-in-1980s.html
Housing will lose 50-70% and canadian market will
fall 50%
1987-1989 again..just worse in Canada and
Aussies.

Q “And real estate trusts?”
A: ESPECIALLY the RE trusts

Q: “Is there no place to hide?”
A: Yes Virginia. Short the crap out of market, especially banks, RE, sweet-grand-boyz like AAPL, TSL, FB…
Long Precious Metals :)

#98 Brydle604 on 06.12.16 at 11:08 pm

The World is becoming a very tense place.

Are you ready to make some bets ????

Has Vancouver and Toronto finally seen the peak of rising housing prices?
Will Trump become President of the United States
Will Crooked Hillary be indited?
Will the real truth come out about 911?
Britex, Will the UK leave the EU?
Will Yellen continue to raise American interest rates?
Will T2 become a one term Prime Minister?
Will the B.C. Liberal, Clark Government be re-elected
Will Ontario Wynn Government lose the next election ?
Will Vancouver Mayor (MoonBeam) Gregor Robertson lose the next civic election?
Will the Alberta NDP make a second term?
Will the EU fail?
Will China survive politically, watch Hong Kong.
Will the corrupt Putin continue as leader of the Russians?
Is the PC, Socialist, World Government, Liberal, Social Engineering, Nanny State about the change or get worse?

#99 M on 06.12.16 at 11:08 pm

oh yes… Interest rates will go through the roof pushed by market. Justin boy won’t be able to print enough, for no paper in the world would be enough :)
Once it’s starting “down” ..it will go down for the next 20 years. Markets will recover in a few years but the concept of “investing” will be dramatically upgraded.

#100 Mark on 06.12.16 at 11:12 pm

I believe the banks are prohibited from securitising other mortgages or doing it directly.

I’ve never heard of this being the case. Canadian banks can, and do securitize basically everything else where it makes sense.

The difference between Canada and the US, is that with the Canadian dollar, nearly all Canadian dollars are held in Canada by Canadians, and transacted by/through Canadian banks. Leave the borders of Canada, and the Canadian dollar is basically a non-entity. Hence, there is no need to sell securities overseas to obtain CAD$ back into Canada to fund mortgage finance.

Contrast this with the US dollar, which is held around the world, particularly in the OPEC nations, Japan, China, etc. Securitization allowed those offshore pools to be tapped for funding, as inadequate funding existed in the United States itself. This is why we do not have the securitization “culture” in Canada to anywhere the same extent as seen in the US.

Securitization fundamentally doesn’t change anything about the housing market anyways. It is just a special legal arrangement applicable to the owners of mortgage debt

It all works TOTALLY different from the U.S.

Yes and no. Fannie/Freddie have a role similar to that of the CMHC. The CMHC is, in some ways, more aggressive though, and the CMHC book of guarantees is, at ~$900B, dramatically larger, per capita, than the Fannie/Freddie book of guarantees that peaked at ~$5-$6T at the peak of the US housing market. CMHC also participates in far more aggressive subprime activity than ever allowed/contemplated at Fannie/Freddie.


The U.S. actually works extremely well for borrowers and allows locking in low rates for 30 years.

I agree, at the cost of systemic stability as interest rate risk is hence concentrated amongst institutions that end up buying the long-duration paper and/or taking the risk otherwise. While Canada vests most of the risk with the borrower, especially as nearly all Canadian mortgages rapidly re-price themselves with interest rate changes. 40%+, on “Prime”-linked adjustable rate mortgages, overnight in fact.

Just because the U.S. system got out of control about ten years ago and caused huge problems does not mean the whole U.S. securitisation baby had to be thrown out with the weak lending standards bathwater. They STILL do much the same style securitisation in the U.S. as before and it works great.

Agree. Securitization is/was *not* the problem. Securitization didn’t have any meaningful role in the collapse either. There is nothing wrong with investors getting together and pooling risk, which is exactly what securitization is.

They got rid of most of the really weak lending standards and liar loans and low teaser rates.

Not sure I totally agree. A lot of the really weak lending standards merely moved into the public sector entities. The FHA for instance. And various other entities. Make no mistake, subprime is alive and well in the USA in the housing sector, not just the publicized auto sector.

#101 Timmy on 06.12.16 at 11:14 pm

When you have bozos like our money grubbing, dim-witted premier Christy Clark taking realtors and developers to China on trade missions to sell our land to the highest bidder and the finance minister Mike Dejong with 8 investment properties this is what you get.

#102 No Canada, No on 06.12.16 at 11:23 pm

Bonds are in epic bubble as well. “Negative yields” is even more ridiculous that Van houses for 3.8 mil.

As a money manager shouldn’t you notice that and warn people accordingly?

#103 Arfmooocat on 06.12.16 at 11:23 pm

I wouldn’t even pay 350G for that POS

#104 NoName on 06.12.16 at 11:25 pm

“I drove….the wife sucks at stick. Yes a few moments of on the breaks a bit late but no one died.”

https://youtu.be/vO2jvLIyIV4

#105 Mark on 06.12.16 at 11:27 pm

“American house prices are very likely to continue to rise as they are a bargain at these low interest rates.”

Interest rates are low, so why would that magically make houses a ‘bargain’, but not other consumer goods?

Would you pay $10k for a computer because interest rates are low? Of course not. You pay a market price which is based on supply and demand.

Low interest rates have stimulated huge amounts of additional housing supply. There is only a finite amount of demand for housing, especially in an economy that is so weak that interest rates cannot be meaningfully raised. Hence, US houses probably are not a bargain. They might be a bargain relative to Canadian houses at current prices, but I think we’re all certain that Canadian housing has a long ways to go down.

Besides, US housing is at levels that is close to its long-term average, of around 3X average household income (~188k versus an average household income of $52k). Neither a bargain, nor expensive. Most value investors aren’t really interested in assets that are trading at their long-term averages. The long-term average return of housing is roughly that of inflation. Hardly something worth getting too excited over.

#106 paulo on 06.12.16 at 11:40 pm

#38
i assume you are referring Chinese dudes with suitcases of money that according to most accounts may account for 6% of sales in Vancouver they will be short lived, as the Chinese government has put a virtual moratorium on its citizens moving large chunks of cheese out of the country
call it as it is a casino frenzy powered by greed, speculation,stupidity,poor underwriting of mortgages,and lenders reliance on the government backstopping the losses when the dealer calls the game
the real looser’s here will be that tax payer whom will have to anti up to cover CHMC losses and the bank of mom lets watch it play out

#107 West Coast Woman on 06.12.16 at 11:49 pm

I think you’re missing the point, Garth, of why that bungalow is listed for $3,888,000.

Two years ago, a very similar house on a similar sized lot about three blocks away from the one on Oliver Crescent sold for $2,700,000. The new house built on that lot just sold for $6,300,000. Since the cost to rebuild the new house was about $1.5 million, that’s a two plus million dollar tax-free profit.

I say “tax-free”, because the biggest game here in the Vancouver real estate market is to claim that the new house was a principal residence by some member of the family. If that’s not possible, it will be claimed as a “capital gain” rather than an income gain, netting a $1 million after tax profit for the owner.

#108 BOOM! on 06.12.16 at 11:50 pm

#104 NO NAME

TOO GOOD!!!!

#109 Spectacle on 06.13.16 at 12:06 am

Dorathy it’s your fault.. I know how chics think.

Regarding:

“#68 Grey Dog on 06.12.16 at 8:53 pm
“Rural Rick,”
No way can homes be built for 60amp, hubby says to think about the oven, dryer, AC, furnace motor, convection microwave. (Hubby’s life is Standards.)”
*********************
New homes are ( YVR) required in some district/municipalities to install a wired in box for electric car charging . Future thing they think. Perhaps that’s the 60 amp reference??

LED lighting, new appliances etc are very power efficient at this time. A dryer however uses power like an oven!!

Regarding that house tonight. Know the area well in YVR: My guess is that there is still some lift in that area. Very strange price escalations, it will be dozed over, will be sold one to three times before the grass goes on. Lastly, taxes will only be paid on 1/2 of the sales…….
More on that another time .

#110 Spectacle on 06.13.16 at 12:09 am

Wow, ignore that cut and paste part on my previous post… Re chicks and Dorothy . How did that get there.

Peace out

#111 Damifino on 06.13.16 at 1:26 am

#78 the other white meat(pork)

“Living in a professionally run place costs more but is worth every penny of it.”
—————————–

Truer words were never spoken.

#112 How to buy bonds? on 06.13.16 at 1:52 am

Garth or others — how best to buy the various types of bonds for the portfolio? Do you buy a bond ETF? Or do you buy actual bonds through the secondary market?

And within bonds, what’s the allocation, e.g. govt, inflation, corporate, etc.?

Thanks!

#113 sue on 06.13.16 at 2:19 am

@30 Tony
i think you are thinking Encana?
Enbridge is trading around 53 bucks on tsx
you had me worried i missed something uge;)

#114 Jenmick on 06.13.16 at 3:43 am

Wouldn’t it be interesting to track the sale of this place, see what ,if any ,morgage is taken out against it and where the buyer is from….let’s see

#115 Brazil ex-pat on 06.13.16 at 4:41 am

#1 For those about to flop… on 06.12.16 at 4:21 pm
I took some liberties and assigned some of the regulars on this blog a team in Euro 2016.
There are some stereotypes and some interblog politics mixed in.
It was done for fun so please don’t get offended …

Jimmy- Poland…..seems to like Pole position.
Freedom First – Switzerland…..wants to keep to himself.
Smoking Man- Ireland….Scotland didn’t make it and likes a drink.
For those about to flop- England…my forefathers were the scraps of these guys.
Mark- Belgium ….full of chocolate.
Brwy Skrtn- Hungary …..seems hungry for real estate.
Brazil Ex pat- Portugal…will speak the lingo.
Crowdedelevator- Spain….doesn’t always get on with Portugal .
Garth-France….the host nation.
Billybob-Turkey…..enough said.
O.L.C- Croatia……a hidden gem.
WalMark of Sadkatoon -Italy..likes to give Mark the boot.
Toothless Measures- Romania…..has the fangs.
Gut Check-Northern Ireland…when picked on proud and feisty.
V.R.E.U- Russia…full of gas.
Boom!- Sweden…puts things together like IKEA.
WUL-Iceland…..has had enough of fire.
Andrew Woburn-Austria….seems pretty stable.
Lee-Albania….seems pretty unstable.
Ace Goodheart-Wales….real estate dragon.
IHctD9-Slovakia…lots of wide open spaces.
Common sense- Germany….what it’s famous for.
Brian Ripley- Czech Rep….his charts are as busy as Prague.
No Name- Ukraine…possibly home?

Support your new team…

M41BC

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

Obrigado…….Espanha pode suga bolas

#116 NoName on 06.13.16 at 7:20 am

#108 BOOM! on 06.12.16 at 11:50 pm

i have to admit i didn’t get 73 at first reading, than it hit me on 75…

#117 fancy_pants on 06.13.16 at 7:35 am

Unfolding events are truly stunning. The US is on the cusp of war with Russia and China, the two main political parties are self-destructing, there is a drug pandemic, the economy is a shambles and yet the big news is the govt is pressuring states to allow men to use female toilets. I’d say the end is near one way or another.

#118 Grey Dog on 06.13.16 at 7:39 am

Spectacle, re chargers to power up electric cars.
Stage 1 slow charge is 15 amps
Stage 2 faster charge is 30 amps
Above for home use.
Stage 3 600 volt commercial grade, they are now discussing a Stage 4 as well.

#119 common sense on 06.13.16 at 7:43 am

Flopper

My sincere apologies…

Sorry, eye kant reed.

Go Deutschland!

#120 Sheane Wallace on 06.13.16 at 8:06 am

https://ca.finance.yahoo.com/news/canadas-major-banks-hiking-fees-090000771.html

It seems records profits due to zero interest rates and outsourcing of risk to CMHC is not enough, the want more.

#121 Estrella on 06.13.16 at 8:19 am

If you needed more proof that the readers of you blog are indeed globe trotters look no further than the debate about one or 2 “L”‘s in my name..

Suffice to say Portugal and Spain were one country for many years. My family traces as far back as the 1400’s and many marriages were multi cultural.

This combined with an elementary school teacher who thought the extra “l” made it easier to pronounce combined to make my name a Portuguese name with 2 l’s.

Enjoy your beers! It has a lot of tradition behind it.

VIVA PORTUGAL!

#122 Snoopy on 06.13.16 at 9:33 am

For each house sold at a similar eye-popping valuation like this, there is… a lender. If these house valuations make no sense to us, why are they making sense to the lender? Who is the lender in this case?

Canadians who work in the finance industry please report transactions you find suspect. Blow the whistle. Anonymously on Twitter, or to Garth.

You might prevent an implosion.

The next generation will thank you for it.

#123 Dan Duran on 06.13.16 at 10:11 am

Similar housing bubbles in 2006 in Canada and US? Loughable. Example: 1987 in L.A. a modest bungalow in Van Nuys (not the best area) would cost 160k USD. Shoddy construction, no basement, nothing done in 40 years. A much nicer one in Leaside (a better area, comparatively and better construction), around 350k CAD. In 2006 same house in LA sells for 500k. In Leaside – 600k. Today the Leaside house would be 1.5 mil (1.1 USD) double the price of the LA bungalow (price fully recovered after 2009 dip). I have no doubt 2:1 is the right price differential.

#124 For those about to flop... on 06.13.16 at 10:16 am

Good to see you guys embrace Euro2016.

We will have some fun with it over the next month.

Apologies to the guys who weren’t included as there are only 24 teams in the competition.

Just to clarify.

NoName ….you now have your homeland CROATIA

O.L.C. ….you now have UKRAINE

Garth….you now have PATIENCE…

M41BC

#125 Noel on 06.13.16 at 10:29 am

First of all, who cares what the house looks like, its only the land value that matters.

Second, you keep saying that prices are out of line with fundamentals, but you’ve been saying that for years. So maybe you’re looking at the wrong fundamentals?

Over $100bn leaves China every month.

2+2 = capital outflows from China are having an outsized effect on Vancouver house prices.

http://www.bloomberg.com/news/articles/2016-01-25/china-capital-outflows-climb-to-estimated-1-trillion-in-2015

Obsessed. — Garth

#126 Ole Doberman on 06.13.16 at 11:02 am

#107 West Coast Woman on 06.12.16 at 11:49 pm

I think you’re missing the point, Garth, of why that bungalow is listed for $3,888,000.

Two years ago, a very similar house on a similar sized lot about three blocks away from the one on Oliver Crescent sold for $2,700,000. The new house built on that lot just sold for $6,300,000. Since the cost to rebuild the new house was about $1.5 million, that’s a two plus million dollar tax-free profit.

I say “tax-free”, because the biggest game here in the Vancouver real estate market is to claim that the new house was a principal residence by some member of the family. If that’s not possible, it will be claimed as a “capital gain” rather than an income gain, netting a $1 million after tax profit for the owner.
——————————————————–

And who bought it for $6.3? An average family making 80K that walked down to the credit union and were approved!

Your obsession is trumped only by your ignorance. People who buy the top 2% of properties usually have the top 2% of incomes and assets, and move up from strong equity positions in other real estate holdings. They do not dive buses and bank at the CU. Just spare us all your embarrassing comments and go away. — Garth

#127 gut check on 06.13.16 at 11:09 am

“when picked on proud and fiesty!”

I will take that.
:)

#128 rosie on 06.13.16 at 11:10 am

Excellent advice for fiscally challenged millenials and others.

http://www.salon.com/2016/06/13/john_oliver_explains_the_big_401k_scam_fees_are_eating_up_your_retirement_like_termites/

#129 Damifino on 06.13.16 at 11:25 am

#116 fancy_pants

….and yet the big news is the govt is pressuring states to allow men to use female toilets.
—————————-

Better check the news again.

#130 Shawn on 06.13.16 at 11:56 am

To Mark:

“Git”

#131 IHCTD9 on 06.13.16 at 12:09 pm

Which is a good thing. Because at $3,888,000 most people would probably want a big $1,500 coming in from downstairs to help offset the $15,000 monthly payments
___________________________________________

Been dazed and confused for so long it’s not true.

Wanted some real estate, never bargained for you.

Lots of people talkin’, few of them know

Soul of a realtor was created below, yeah.

#132 Hot Nanaimo Market on 06.13.16 at 12:09 pm

Old neighbours house just sold $30k over asking (up for $410k). 3 sfh on my subdivision all sold within a week of listing……

Nanaimo market has been stagnant for years…..now this….

#133 Ace Goodheart on 06.13.16 at 12:39 pm

RE: 2348 Oliver Crescent, Vancouver for $3,888,000.00

For the same price in Toronto, Ontario, you could buy this:

https://www.realtor.ca/Residential/Single-Family/16610235/80-NORTH-DR-Toronto-Ontario-M9A4R2-Edenbridge-Humber-Valley

Or this:

https://www.realtor.ca/Residential/Single-Family/16868855/9-SHERBOURNE-ST-N-Toronto-Ontario-M4W2S9-Rosedale-Moore-Park

Or maybe this is more to your taste:

https://www.realtor.ca/Residential/Single-Family/17060153/96-OWEN-BLVD-Toronto-Ontario-M2P1G3-St-Andrew-Windfields

Come to Toronto. For the price of a Vancouver crap shack, you can live in a Palace.

#134 Ole Doberman on 06.13.16 at 12:53 pm

And who bought it for $6.3? An average family making 80K that walked down to the credit union and were approved!

Your obsession is trumped only by your ignorance. People who buy the top 2% of properties usually have the top 2% of incomes and assets, and move up from strong equity positions in other real estate holdings. They do not dive buses and bank at the CU. Just spare us all your embarrassing comments and go away. — Garth
———————————————————
My comment using this as an example is extreme, nevertheless, just pointing out the fallacious thinking here that undermines the impact of HAM.

Garth you’re one of the best, as I’ve said before, but you continue to be dodgy on this topic.

#135 Ace Goodheart on 06.13.16 at 12:57 pm

Just looking at MLS for Vancouver right now. Have never seen anything like that before. Millions of dollars for houses that couldn’t even be lived in.

Toronto is not like that. Here, a million dollar house looks like this:

https://www.realtor.ca/Residential/Single-Family/17047538/7-GLEN-GORDON-RD-Toronto-Ontario-M6P1B7-High-Park-North

This is right across the street from High Park in one of Toronto’s most popular neighbourhoods.

There are many more examples. Tons of nice stuff for sale between 600K and 900K.

I see now what is happening on this blog. Toronto is getting tarred with the same brush as Vancouver.

Really, Vancouver real estate refugees need to come to Toronto. We have much better prices here. Nicer houses, for way, way, way less money.

#136 Sheane Wallace on 06.13.16 at 1:12 pm

And one more tax on stupidity:

https://ca.finance.yahoo.com/blogs/insight/if-you-think-1545-is-expensive-for-a-domestic-130944918.html

#137 A Canadian Abroad on 06.13.16 at 1:20 pm

“Bulls do well. Bears do well. Pigs get slaughtered.”

#138 Neil M on 06.13.16 at 1:23 pm

To comment #134

I have been living in the lower maintain for 5 years after spending my first 30 in Toronto and the difference in real estate between the two cities is land value. In Toronto buyers look at the renovations and how livable a home is, this makes sense to me. Out here every buyer values land, could be a dated home that has not seen a Reno since the 80’s but they just tear it down and build new. Your home depreciates out here while land goes up. Toronto market is overvalued but people out here are insane when it comes to real estate.

#139 WallOfWorry on 06.13.16 at 1:24 pm

Garth…is Bill Gross a hack? He certainly doesn’t share your views that all is fine in the markets, and references some interesting facts that seem as interesting as the housing bubble in Canada? Why are you so dismissive of this perspective?

http://www.marketwatch.com/story/bill-gross-negative-yields-will-lead-to-supernova-like-market-implosion-2016-06-10?link=sfmw_tw

Check out what he’s selling. — Garth

#140 Ole Doberman on 06.13.16 at 1:32 pm

#134 Ace Goodheart on 06.13.16 at 12:57 pm

Just looking at MLS for Vancouver right now. Have never seen anything like that before. Millions of dollars for houses that couldn’t even be lived in.
————————————————————
Excellent point which brings a thought to mind that has never been mentioned here:

Why doesn’t the City of Vancouver start building more houses and expanding the city – you know increase one side of the equation – the supply side!

Likely cause the evil trinity of banks, government and RE cartels won’t allow cutting into their bottom line $$$.

Blame the evil cartels of water and mountains. — Garth

#141 Dana Samuel on 06.13.16 at 1:33 pm

The Toronto TSX or TSE it was called years back was 15,000 in 2007.

It is 14,001 today. Adding dividends and taking away annual index fees of just 0.6% then leaves around 15% total net return in almost 10 years.

That totally ignores rebalancing. The index is up 84% from March, 2009. — Garth

#142 BOOM! on 06.13.16 at 1:34 pm

#127 Rosie

The link was hysterical, the advice quite sound!

Garth has been preaching essentially this for years! Who am I to argue with that?

M64WI

#143 Lee on 06.13.16 at 1:42 pm

#134 Ace,

That house on Glen Gordon is priced by the agent to attract a bidding war. The house will sell for no less than $1.7 M, if you’re lucky.

I hope this blog is still around in seven years after the Toronto real estate crash has not happened, just so I can hear you all continue to harp “this won’t end well.”

All you get in Toronto for $600-$700 K is a crap shack at Keele and Eglinton, where some houses actually list for under $450,000.

If you keep listening to people who tell you prices will fall in Toronto, you’ll be sitting on the couch forever.

#144 WallOfWorry on 06.13.16 at 1:47 pm

Garth….#138….he is selling fixed income investments…
and the firm is a financial services firm…kind of like yours? Is that why you focus unrelentingly on the real estate market and the need to diversify into other financial assets that you sell?

Gross sells a bond fund, so he dises equity markets. I sell nothing. So I dis everything. — Garth

#145 TurnerNation on 06.13.16 at 1:47 pm

MIC.TO the bloodening is upon us. Et tu, US hedge fund guys?

#146 gladiator on 06.13.16 at 1:54 pm

4 is a bad number in the Vancouver local community.
Expect this house to go straight to 5,888,000 and bought will cash, of course.

If it got from overpriced to crazy, from crazy to ridiculous, from ridiculous to stupid – what will stop it go from stupid to ludicrous?
That’s right – nothing.

#147 Ace Goodheart on 06.13.16 at 2:32 pm

RE: #142 Lee:

“That house on Glen Gordon is priced by the agent to attract a bidding war. The house will sell for no less than $1.7 M, if you’re lucky.”

That may be true. I still find it impossible to find out what the houses actually sell for (unless they sell in my immediate neighbourhood, in which case I just ask the seller or the new owner).

What I would like is some sort of “online” service so I could track the actual sale prices. All I know is the list prices.

#148 Ole Doberman on 06.13.16 at 2:53 pm

Excellent point which brings a thought to mind that has never been mentioned here:

Why doesn’t the City of Vancouver start building more houses and expanding the city – you know increase one side of the equation – the supply side!

Likely cause the evil trinity of banks, government and RE cartels won’t allow cutting into their bottom line $$$.

Blame the evil cartels of water and mountains. — Garth
——————————————————–
So then you agree there is indeed limited land in Van?

As for mountains you can blast’em, same as they do with a coal mine discovery like Elkford in BC.

Rivers, you can change land structures.

#149 Shortymac on 06.13.16 at 2:53 pm

@Hot Nanamino Market

It’s a result of people being priced out of the central area.

In Ontario houses an hour north of Toronto have rapidly increased in price over the past year. Innisfil has about a 50-100k price jump and it’s all Toronto escapees fueling the jump.

#150 steven happier on 06.13.16 at 2:59 pm

Why is everyone assuming the 2348 Oliver St property will sell at $3.9 million (asking price). BC assessment authority has it assessed at $2.4 million.

Anyone can ask for $1.5 million higher, but will you get a buyer.

My friend listed his house in Vancouver for $400k above assessed value and it has been sitting for 3 months now. He just lowered asking by $100k.

#151 Drake Hayes on 06.13.16 at 3:00 pm

What about from 2007. It is sure not up 84%. Compare the same time periods not from the lows.

Pick whatever date you want. That’s what rebalancing is all about. — Garth

#152 WallOfWorry on 06.13.16 at 3:37 pm

“That totally ignores rebalancing. The index is up 84% from March, 2009. — Garth”

An equally ridiculous comment. A more balanced perspective is required. I am not suggesting doomsday but to suggest that the recovery is proceeding well lacks credibility. I know that Ross Kay is the only perspective that you value but here is one for you:

http://www.cnbc.com/2016/06/13/12-trillion-of-qe-and-the-lowest-rates-in-5000-years-for-this.html

#153 Brazil ex-pat on 06.13.16 at 4:24 pm

DELETED

#154 Lilly Hong on 06.13.16 at 4:39 pm

Interest rates keep hitting the lows or new lows daily.

Canada’s 30 year bond is 1.78%. It was double this just 6 years ago.

There is no sustainable reason for interest rates to rise. All the Canadian major banks analysts projections on interest rates are way off.

#155 Ole Doberman on 06.13.16 at 4:47 pm

Any constructions guys out there or contractors?

What does it cost to build an average house in Calgary?

Just got into a big fight with a bud who says homes will never go below $400K cause it costs so much to build them.

Thats good point I’ve never heard addressed – anyone have input on this?

#156 bill on 06.13.16 at 5:01 pm

#111 Damifino on 06.13.16 at 1:26 am

#78 the other white meat(pork)

“Living in a professionally run place costs more but is worth every penny of it.”
—————————–

Truer words were never spoken.

Yes indeed -we use professional maintenance personnel and fix ,repair or replace stuff quickly.
-prompt replacement of a dead fridge ..and we have two in the basement to take over till your brand new fridge arrives a day or to later. which we place and remove with the arrival of the new one.
and that new roof? all the balconies are getting a new coat of paint this summer.
costs a bit more but you get the service .

#157 Caught on 06.13.16 at 5:08 pm

I’m with Garth on this. Bill Gross has an ego the size of the US economy. If you want integrity, look to Buffett. He has been reducing his bond holdings and increasing his equity position for the last 3 years. He has famously said, “If there was a practical way we (BRK) could sell short 20 & 30 year government bonds, we would.”. He thinks the bond market is extremely overvalued.

#158 Alberta Ed on 06.13.16 at 5:17 pm

One reason houses are so expensive is the medieval construction methods and materials still in use. Modular, high quality construction (not factory-built homes like Mattamy) can dramatically reduce costs, although that would require contractors to start thinking outside the box. SIPs (Structural Insulated Panels), fire resistant concrete composite siding with high insulation values, steel roofs, designs that absorb sun and heat in the winter, are available today. However, more than likely we will see contractors in Fort McMurray and elsewhere continue to throw up more pressed cornflake and vinyl firetraps.

#159 Penny Henny on 06.13.16 at 5:35 pm

#146 Ace Goodheart on 06.13.16 at 2:32 pm
RE: #142 Lee:

“That house on Glen Gordon is priced by the agent to attract a bidding war. The house will sell for no less than $1.7 M, if you’re lucky.”

That may be true. I still find it impossible to find out what the houses actually sell for (unless they sell in my immediate neighbourhood, in which case I just ask the seller or the new owner).

What I would like is some sort of “online” service so I could track the actual sale prices. All I know is the list prices.

———————————————

Sign up at tosolds.ca

#160 YVR update on 06.13.16 at 5:42 pm

Burnaby prices went up by 10% in 1 month!!! That’s $200,000 on a detached in 30 days. Almost $8000 per day!!!

I don’t think we can convince the masses here that it’s all Canadian money. Mutiny brewing and maybe better to shut blog down before they can get to us. Good while it lasted. Freedom 40!!

#161 whybankceos_aresovocal on 06.13.16 at 5:42 pm

I work for a foreign Canadian bank. I am friends with coworkers in risk, more specifically credit risk. Latests stress test shows that if house prices drop 10 to 15% in Canada, this particular bank Is looking at upto 25% underwater mortgages. This is straight from the risk department as of last Friday.

#162 whybankceos_aresovocal on 06.13.16 at 5:45 pm

It should also be noted that our Mortgage lending is much more strict than the domestic Canadian banks, this I know from coworkers who have tried to get staff mortgages and ended up getting more $$ from the others..

#163 Tiger on 06.13.16 at 6:25 pm

steven happier on 06.13.16 at 2:59 pm

My friend listed his house in Vancouver for $400k above assessed value and it has been sitting for 3 months now. He just lowered asking by $100k
——————–
I called this B.S there is no way in Vancouver a property sitting with out selling for 3 months,In Vancouver any property will sell no matter what the price is

Link the listing for the house then i will believe it.

#164 Dan Duran on 06.13.16 at 7:26 pm

@whybankceos_aresovocal I call bull on that. 15% would just take us to last year’s level. Do you know how many homes change hands in the last year? Far fewer than 25%, maybe 2 %. And even all those mortgages won’t all be underwater. Where do you people come up with stuff like that??

#165 crowdedelevatorfartz on 06.13.16 at 7:44 pm

@ Brazil ExPat

I’ll take Spain’s Bullfighting over Pork and Cheese any day.

#166 steven happier on 06.13.16 at 10:16 pm

steven happier on 06.13.16 at 2:59 pm

My friend listed his house in Vancouver for $400k above assessed value and it has been sitting for 3 months now. He just lowered asking by $100k
——————–
Tiger.
I called this B.S there is no way in Vancouver a property sitting with out selling for 3 months,In Vancouver any property will sell no matter what the price is

Link the listing for the house then i will believe it.
—————————-
Google and you’ll see it was first listed March 11, 2016 for $1,495,000.

After 3 months, just lowered asking price to $1,395,000.

http://www.davejarvisrealestate.com/r2078304-719-durward-avenue

Apparently price is still a factor contrary to your claim that it isn’t.
Any more questions?

#167 Tiger on 06.13.16 at 10:32 pm

steven happier on 06.13.16 at 10:16 pm

Google and you’ll see it was first listed March 11, 2016 for $1,495,000.After 3 months, just lowered asking price to $1,395,000.

http://www.davejarvisrealestate.com/r2078304-719-durward-avenue

Apparently price is still a factor contrary to your claim that it isn’t.Any more questions?
————-

UR right my apology.

House around fraser area selling so fast after one showing, that is strange it is taking so long to sell.

#168 Tiger on 06.13.16 at 10:39 pm

http://www.davejarvisrealestate.com/r2078304-719-durward-avenue#

Sale Date – May 26, 2007
Sale Price – $676,500

IF IT SELL FOR $1,395,000 THAT WILL BE $500,000 TAX FREE PROFIT.

Less closing costs, commission, nine years of property taxes and carrying costs, plus a decade of inflation. — Garth

#169 ponerology on 06.14.16 at 5:07 pm

Time to buy some farmland and lease it out to a farming corp. At least if the value of that property crashes you can still eat… maybe:)