When they started trading stocks on Bay Street Tuesday morning the word was out. “Real estate’s pooched,” said a suspender-snapping, Carrera-driving dandy. “It’s risk on.”
Within moments shares in Genworth, the country’s biggest private mortgage insurance company, were on the skids. By noon they’d collapsed a stunning 11%, and barely moved by the closing bell, when the day’s loss amounted to about 10% of the company’s market capitalization. Ouch.
In a statement Genworth had this to say about what happened on Monday: “First-time homebuyers will have difficulty meeting the required debt service ratios and homebuyers would need to consider buying a lower-priced property or increase the size of their down payment.” In fact about half (!) of Genworth’s portfolio of $370 billion in residential mortgages (of the $1.2 trillion in the nation) would no longer be eligible for mortgage insurance, Genworth said, under the new rules popped by money minister Bill Morneau.
“The Feds clearly want to crack the housing market,” lamented trade site Canadian Mortgage Trends, “and they may have finally done it, with a sledgehammer.”
“It seems like the knee jerk reaction is to RUN OUT AND BUY A HOUSE in the next 13 days! That is the last thing I’d be doing right now!” mortgage broker Ryan Kirwan commented to another industry publication. “With this new policy, housing prices WILL fall in the next 2-4 years. Meaning if you purchase a home now with 5% down payment, in 2-4 years’ time, you’ll owe more than what your house is worth! If you do decide to purchase a house, you better make sure it’s a home you’ll be staying in for at least the next decade!”
In addition to making every Canadian prove their house is their principal residence when they come to sell – or pay capital gains tax – the feds have seriously kneecapped the entire mortgage business. This happened just a day before the latest news that the Vancouver market’s falling apart, at least in terms of sales and confidence, thanks to the province’s Chinese Dudes super-tax. The pace of deals was down last month by a third, year/year, after an equally disastrous August. Listings, predictably, are starting to inflate. You can figure out what comes next.
The changes are legion and by Tuesday the impact was hitting home in the bank towers and the mom-and-pop mortgage shops across the country. Most significant is a giant increase in the effective mortgage rate for first-time buyers with less than 20% to put down. Until now the kids could get a cheapo mortgage by agreeing to take a five-year term at a fixed rate (about 2.5%), and thus avoid having to qualify for lending at the far higher Bank of Canada’s fixed five-year posted rate (4.6%). But the week after next, no more. It’s as if mortgage rates went up 200 basis points in 13 days.
In fact all insured mortgage borrowers have to meet that threshold. Worse, mortgage insurance won’t be available if you want a 30-year amortization, or have a rental suite in your house.
“Housing prices will tumble as a sizable minority of first-time buyers and those with higher (debt service) ratios no longer qualify for the mortgage amount they want,” predicts Canadian Mortgage Trends. “Forcing all insured borrowers to prove they can afford a payment at the posted rate (4.64%) will remove up to 15-20% of buyers from the market, say lenders.”
Other predictions making the rounds: the availability of mortgage financing will start to diminish almost immediately in Toronto and Vancouver. While buyers rush to meet the October 17th deadline, many lenders will stop doing deals within a few days. Mortgages with longer amortizations will start costing more – maybe a lot more. That’s a big deal since this is a huge chunk of the business these days. And there’s more speculation the Bank of Canada will cut its key rates since two of the nation’s biggest economic pillars – oil and houses – are seriously under pressure. After having allowed the bubble to inflate so wildly that up to 25% of the nation’s GDP is real estate-related, the ride back down could be painful.
Well, there you go. The catalysts required to pierce an inflated, bilious, dangerous Hindenbubble have been delivered by government. First BC, then the feds and soon (I hear) Ontario. Interest rates did not have to rise. The jobless rate did not have to swell further. The economy did not have to contract into negative growth. All it took were politicians reacting to a situation which government itself created. By offering ultra-cheap money and endless buying incentives to a population devoid of self-discipline, the inevitable occurred. We find ourselves over-housed, over-indebted and naked to risk.
“This market is now toast – too many changes at once,” a Vancouver insider told me hours ago. “Just get the popcorn and watch.”
214 comments ↓
Thanks Garth for all you do!
Can anyone link Ross Kay, I only seem to be able to find him on twitter. Does he have a blog?
Thanks!
Keep paying those rich property taxes
Next year a fixed 5er will be under 2%.
Sure people have to qualify at a higher amount, but the carrying costs will continue to fall.
300K immigrants coming to Canada every year, majority of which go to Vancouver and Toronto.
The trend is your friend. Expect prices to wiggle around, but no collapse.
Perhaps Julian Assange has the answers!
Time shift?
So all new insured mortgages or all new and existing insured mortgages will be effected?
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A 5pm post by Garth means shit hit the fan! I have my popcorn ready, just waiting for the show to start!
Lower house prices benefit everyone…we need to get prices back to 2 1/2x annual income.
Been there. No fun..
https://youtu.be/_gBYkPgmrP4
I’m happy that the Federal Government stepped into cool this market down. Unbelievable that they let this go on for so long.
Let the good times roll!
Yesterday you said, “The changes announced by money minster Bill Morneau yesterday are unlikely to have much of a cooling effect on the market.”
Today you change your tune. What changed your opinion between now and then?
Research, interviews and analysis. Got a problem with that? — Garth
As i said yesterday, the gravy train is STOP at this station and this is IT. I felt so sorry for those that bought for speculation and flipping. They never know the needle is our own government, a very sharp one. Now we have to see how this play out, for sure those who bought at the peak will lose equity if they are gonna think this is their retirement nest. Unless the government have a change of heart or wait till the next election vote the Lib out and see what the next in charge has in mind, either way, lots of headache and sleepless night for a LOTS of folks and a very unhappy Christmas and New Year ahead. OMG!!!!
OUCH!!!!!
Super Tax
Ha! Glad to see you agreed with my comment on calling it ‘Surtax’ and not ‘tax.’
su·per·tax
noun
an additional tax on something already taxed.
sur-tax
noun
an additional tax on something already taxed, such as a higher rate of tax on incomes above a certain level.
Yeah, I think super tax is even more apt. Hitting foreigners not once, but twice for the same ‘service’ of transferring a property title.
Oh so very happy to be renting right now!
“Interest rates did not have to rise” You forgot to add that they won’t rise either.
#3 dsw – the trend is going down, amigo. This sucker is done.
The new rule of qualification at non discounted rate is sure huge. We have to also stop to blame this to foreign investors for good. commodification of housing is a global problem occuring in a lot of urban centers. But I am afraid house prices will go down in rural areas first
It is amazing how long this housing bubble could last and equally amazing how fast it could deflate. Economic events have a time scale that defies human reason. One thinks of the national economy as a vast system with huge inertia. In fact it is a kite blown by winds of fear and greed and almost impossible to control.
Hard to see a meaningful correction in van when Noone would need to sell. People living in vans and couch surfing due to ultra low vacancy , rents are huge and if U even have a goldfish you have no chance of finding a place to rent. Can’t make ur payments ? There’s someone ready to move in who can …
What about REIT price falling so fast? Is it a side effect of the residential real estate market situation?
When a recovery is expected for REIT? Will future interest rate increase will take it to worse? for good or for bad?
Great breakdown once again Garth.
Wow different tone now that BOC will cut rates? A few posts ago it seems like Canada will increase.. I don’t see this happening and would think it would be foolish for BOC on increase. We are NOT the USA.
Also MIC still up 21.92% YTD.
5 year GAGR 14.98%! if you can handle the ride..
Back in the day if the economy was bad in the east one could go west and vice versa. Now, Canadians must stew at home in the mess they created. Hide your popcorn.
Wynne will introduce a 10-20% tax for foreign purchases in Ontario, she needs to appeal to the far left who is her large fanbase.
Spring 2017 will finally show YoY declines! Real estate agents should return their Audi leases for a Toyota Yaris.
Well it seems like the long awaited “Black Swan” has arrived. What a shocking change in the political wind from just a few months ago. In Vancouver at all 3 levels. Until then increasing house prices were seen as nothing but good. This was never going to have a happy ending.
I’m saying as predicted in this comment section in the past, that the GTA market finally will top when Smoking man got together with Gartho for that beer.
It was on Sunday (coffee)!
Garth
How is that Deutsche Bank play working for ya?
http://www.zerohedge.com/news/2016-10-04/deutsche-bank-%E2%80%9C-probably-insolvent%E2%80%9D
I know you gushed over a one day rebound last week, but lots of “long-term” investors are getting pounded by this Nortel…style…..let me invent a new german word…shaden-nortel-freude
yes yes yes
Opening the bag of Orvilles best, putting the olive oil in the pot, butter waiting. Pass the Vancouver special salt please, thanks Vancouver.
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The only thing growing the economy right now is housing…. Unlikely it will collapse as you so direly predict….
Bubble, meet pin.
“This market is now toast – too many changes at once”
… the same could be said as the Harper government goosed the housing bubble in the years immediately after financial crisis as a way to (effectively) fool Canadians in to thinking the economy was OK. Too many changes in too short a time without good metrics for feedback and careful decision making. Dogma and panic won over practicality.
I guess it’s about time I really push for a TN visa and wait this one out in sunny California.
Research, interviews and analysis. Got a problem with that? — Garth
No wonder you didn’t fit in with the Harperites Garth. You change your views on things in light of new data.
It’s like you have brains to go along with the brawn. No wonder the Amazons keep you around.
Finally sanity will prevail.
I’d gamble that the economy having “negative growth” part is still waiting in the wings though..
For those of you who are skeptical of the impact this will have on house prices, consider this:
Someone who could qualify for a $1,000,000 mortgage @ 2.5% will now only qualify for $800,000 (@4.64%). That’s an astonishing 20% decline in the total available supply of RE financing.
Do the math. This is enough to crash RE across all markets in Canada!
http://vignette2.wikia.nocookie.net/looneytunes/images/e/e1/All.jpg/revision/latest?cb=20150313020828
Finally. Let’s see who’s still wearing pants when the tide rolls out. Extra buttery popcorn, please.
>> Worse, mortgage insurance won’t be available if you … have a rental suit in your house.
This is the first I’m hearing of this. Can you link to an article or news release that supports this?
Everything I’ve read to date says that only income properties and vacation homes that aren’t your principal residence are affected.
Huh. I guess shift does happen.
this should be cute!
Silver
The confluence of factors pushing down the market has finally started to gain critical mass and momentum. Time for popcorn indeed.
Can’t wait for Vancouver real estate to turn into a smoking crater with broken tail fin sticking out. Long overdue.
Undisciplined but well intentioned people who bought on emotion are about to find out (painfully) that leverage works both ways.
3639 Oxford street in Vancouver (Burnaby heights area near PNE) was listed Aug 10 for $2.28M. No sale. It was pulled and relisted yesterday for $1.58M. That’s a $700K (30%) price drop. This is just the beginning people…look out below. With price drops like this what buyer would try to catch a falling knife?
As a prospective buyer the obvious play is to sit back and watch while listings pile up putting further pressure on prices. Some people will eventually be forced to sell due to life events, job transfers, job loss, divorce, etc.
Those forced sales will set the comps much lower for the whole neighborhood and anyone else who wants (or is forced) to sell will suddenly find themselves in a pricing reality that does not jive with what they “know” their house is worth.
Sorry owners of million dollar dumps who thought they won the lottery. The millions of dollars was only illusory, but hey at least you got the dump part right.
Crap! This will trigger a recession in the housing industry.
Realtors
Mortgage brokers
Bankers
Home inspectors
Appraisers
Painters
Framers
Roofers
Drywallers
Flooring installers
Masons
Building inspectors
plumbers
Electricians
Lawyers
Heating and air installers
Plus many others
This is not going to end well!!!
So
What are the odds of Ontario doing the foreign dude tax ?
I sold my house and was going to buy in a smaller market but now I think it may be rent time??
There will be no top. House price only goes up… everyone knows it.
up up up… 2mil…3mil…4mil… up up up… 10 mil…
Stick a fork in it folks, it’s done. And right on time for Thanksgiving too.
First time poster, long time reader. I live here in Vancouver, BC with my wife. We moved here from Alberta six years ago for her residency. We are both well-paid healthcare practitioners with no debt and good savings (unfortunately no tap to the bank of mom and pop – they are poor immigrants).
We are renting a 2BDR condo downtown. We pay $3250/mth. Been here in the apartment ever since we landed in Vancouver. Happily renting, we love our landlord and she loves us (of course she does, rent paid on the dot, rarely home, eat out most nights of the week).
If you asked me a couple years ago, I would tell you we were depressed that houses were so expensive and we missed the boat. Now looking back, we are happy we didn’t get caught up in the FOMO. Went to an open house back in February and 22 people lined up outside talking about bids – the place sold for 100K over asking with no conditions. We gave up then and glad we did.
With a kid on the way next year, we will continue to save and see how things pan out. We hope what goes too far up surely will come down. Keep up the great work with the blog – love it.
From Mortgage Trends… http://canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
CBC News:
”Mortgage rule changes could lead to growth in shadow banking: experts
Gauging the true size of the shadow lending market is difficult”
http://www.cbc.ca/news/business/mortgage-rules-shadow-banking-1.3791244
I am curious if any of this finally translates to price reductions in YVR.
The reality thus far is a collapse in SFH sales, strong attached sales, strong condo sales.
The huge reduction in SFH volume has not yet resulted in discounting, or any noticeable panic.
Hundredths of listings expired end of September, so inventory is under 10,000 once again.
The market here is definitely not in “collapse” mode by any means.
Though I eagerly anticipate the new developments, it would be amazing for it to return to some reasonable cap rates. Justifying purchases on cash-flow and not future cap gains.
Why are renters so obsessed with reading about the housing market day after day? What’s in it for you?
Realtors on Facebook already huffing in a panic, telling friends to go get pre approved so they have more time to buy. LOL what a circus.
In case you missed, back in July 5 big banks bet 13.7 billion against real estate, they all new about new regulations or they hired Nostradamus. Most of stocks sold to US banks. https://betterdwelling.com/the-really-big-short-the-13-7-billion-dollar-bet-against-canadian-banks-over-housing-and-insider-sales/
I visited my old workplace today in Vancouver. Sadly my colleague who mortgaged his west van house to buy 3 east van houses was off today (stress leave probably).
However, one of my old colleagues was VERY defensive toward me. I said to her “I guess prices are dropping soon” and she SNAPPED at me “No, SALES have dropped, but prices keep going up, so good luck buying a place here anytime soon, it just keeps going up.”
She’s a homeowner counting on her “equity.” Figures.
Serious question though for the dogs. I am thinking about buying a place in Vancouver, but I’m worried that my 2-3 year window in the future might cause me to miss the downturn. Afterall in 2009 prices started going up again. I’ve also heard though that once real estate starts to fall it’s generally a multi-year process…..any thoughts on timing to pounce on a fall?
Well Garth, you got you interest rate increase without the BoC raising interest rates.
Not bad Morneau.
So much for the crowd here that likes to post about the mortg. rate Cdn 5 yr T-Bill predictor…Morneau is the BILL you want to watch nowadays…sorry, could not resist.
Next up, Morneau stress testing Consumer Debt. Then we are truly copulated as a country.
Time to short the Big 6.
___________________________
#1 NTH – He’s a nice guy, will respond to your Tweets as long as they are rational (as of 6:55 PM EST he has not yet tweeted about Morneau measues):
https://twitter.com/rosskay?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
bsant54
This is great news. At last the Ponzi economy based on consumerism and cheap credit is over. There were no real jobs left in this once great country. Our adorable PM, Dear Selfie Leader is imposing a carbon tax while Morneau has the fix for RE.
Awesome. My cash deposits and TFSA and having no debt speak louder than stupid millenials with 4 maxed credit cards, a $400k mortgage and an Audi car loan.
Meanwhile the MSM is a sham, especially the CBC still in a T2 circle jerk. This will not end well…
Bring it on!
As long as interest rates remain low prices will remain high. The real purpose here is taxation. And catching tax cheats. When you sell a house: if u declare it is not your primary residence you will be taxed on capital gains and that is ok. The next question will be did u declare the rent as income ? It will be easy for them to check.
House values in my immediate area of Burnaby continue to drop by $1,000 a day, meanwhile there are now 15 houses for sale with only one recently sold. No buyer wants to catch this falling knife.
Back in the day if the economy was bad in the east one could go west and vice versa. Now, Canadians must stew at home in the mess Stephen Harper’s policies created. Hide your popcorn.
there, fixed that for you.
You don’t eat next year’s seed grain but that, in essence, is what the post 2008 meltdown policies of the Conservative government did.
Now we all pay a price. What bothers me most of all is the Liberals seem to be all to ready to provide optics without the due diligence needed to supplant or reverse bad policy.
So I am afraid it will be a slightly different neo-liberal path but similar outcome.
Time will tell.
Glad I’m old.
I guess that means we will see the massive economic impact on GDP that has been suggested here. Nothing to celebrate with this news.
Crack boom bang – and the dollar will continue losing ground well trough 2017 – when u surf u know when to bale before u get smashed
Rage against the machine
Common sense has prevailed though long overdue. I’m looking forward to seeing those who exuded so much smugness and arrogance towards their family/ friends and associates while they sweat some major bullets as this disaster unwinds.
These new requirements pushed forth are long overdue. I have no problem with submitting a little paperwork proving at sale time that my house is my principal residence. Only those local or foreign buyers who have been involved with shady flips or purchasing houses as if on a large monopoly board, should be concerned. I am hopeful that in the end prices will lower significantly in Vancouver so as to make a much better future for our kids. Free-for-all wild west capitalism does not make for a good society. Collect those unpaid CRA taxes by real estate cowboys and turn it into something useful for society as a whole such as funding education, incentives for new innovative companies to create good jobs in BC etc..
Now we get a taste of poor. By the barrel.
http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/personal-finance/mortgages-real-estate/ottawas-moves-to-tighten-mortgage-market-will-squeeze-some-consumers-out&pubdate=2016-10-04
Paul Hickey, a tax partner at KPMG, said the new rules will create a rich database of everybody who sold their principal residence. There’s a penalty for not disclosing it and a forfeiture of the tax break if it’s later found out you didn’t reveal a sale.
“They’ll be able to do some matching and say ‘you’re a contractor, you’re a real estate agent,’ ” he said. “They are going to be able to mine that data. If you buy and sell three houses in three years, that’s going to show you are very active.”
De-leveraging.
“As it was done, only thus can it be undone”
Is that from Lord of the Rings? Whatever…it applies to our state of affairs today in the mortgage biz.
Talked to a mortgage broker at Northwood mortgages and the person said this will affect refinancing
The persons said she has seen a lot of credit card debt being absorbed into their home equity is her feeling that credit card that will rise because most people will not be able to refinance or get a HELOC
The fed called everyones bluff, it is time to gradually see who is swimming naked.
For our sake I hope it’s not smoking man… I dont think we have to worry though, they don’t insure mortgages on Mars.
Janus Bond King Bill Gross makes a reference to the Martingale System and Fed Bank policy of zero or negative interest rates in his October column. Basically the Martingale System allows and encourages the gambler to keep loosing until he wins…possible only for Central Bankers.
The financialization of our housing economy will furnish some algorithmic derivative formula to satisfy the bankers and the real estate sector…somewhere in Canada there is a financial engineer able to overcome this speed bum.
Wow !
The T2 regime tosses his millennials under the bus then light’s them on fire, then runs them over twice.
Thinking about those young kids who two weeks ago lined up around the block to by these low-rise townhomes in Shlong Branch. Burned!!!!!!
Two weeks and the new rules kick in. What a marvelous maneuver favoring the right minded, all those deals about to close… He’s going to be losing friends fast in his urban stronghold.
If you’re outside the 416, Hamilton, Stoney Creek. Niagara, Brampton, well no more bidding wars for you.
Inside the 416, rather than having 20 bids, your going to have 15 with conditions. The good jobs are downtown and people hate the commute and will always pay a premium.
Dr. Smoking Man
Phd Herdonomics
Just like that, and just as many had predicted, they have indeed induced the inevitable RE crash in T2’s first year.
♫♫♫ (Burn baby burn) burn that mother down ♫♫♫
https://www.youtube.com/watch?v=A_sY2rjxq6M
WOW, you can even say it backwards WOW …and if the Fed should move rates and Canada dose follow, say 2yrs after …double ouch?! what a gong show!! wishing everyone the best and a thankful Thanksgiving.
Rock on Garth!
:)
Housing prices from coast to coast across bubbly Canada will crumble. Many of those I’ve spoken with about this say it will be an all-out crash.
Over the past year, dozens of recent “buyers” (mortgage debt owners) in Victoria have told me that they “got in just in time”.
I probably won’t bother telling them that they did indeed get in just in time, just in time, that is, to be a part of what may be the biggest and most severe housing bust the world has seen.
#21 Westvan
Hard to see a meaningful correction in van when Noone would need to sell. People living in vans and couch surfing due to ultra low vacancy , rents are huge and if U even have a goldfish you have no chance of finding a place to rent. Can’t make ur payments ? There’s someone ready to move in who can …
_______________________________________
Whilst rent’s are high in Vancouver they are nowhere near high enough to cover the butts of anybody buying now or who has bought recently. The apartment I rent just sold to a new owner (who kept renting it to us at the same price as the previous owner). I know what it sold for ($100,000 over asking) and he is paying over $3,000 a month in mortgage costs, condo fees, property taxes and maintenance. We pay him $1,800 in rent.
He owns several Vancouver properties and I asked him if he thought the market would hold when he bought (June) and he was positive the market would be powering forward for the foreseeable future. I chuckled to myself, wondering how somebody who had so much “knowledge” in real estate could make such a stupid, risky investment for what is a very average 1 bedroom apartment in the West End.
It didn’t take long before the foreign tax was announced and now this bombshell. Not only is he losing over $1,200 a month just owning the place, the value of the apartment has probably already fell and will certainly be falling over the coming months/years. He couldn’t have timed it any worse.
Now I’m just concerned he will try and flip it and we will be shunted, or he just kicks us out altogether. I won’t lie I don’t fancy looking for rentals in VanCity, especially with a pup.
Cosmic harmony for the housing messy. It’s the major snow hits in Saskatchewan and Manitobas you read. Must be that carbon tax wisdom. Governments always mess things up.
Yes. I saw this pattern when I was a young man. Lead the
financially illiterate into debt debt and more debt. Times were good. Everyone was in a borrowing frenzy. Then it changed. Turned bad. And no one saw it coming.
It’s been happening world wide again, and recently. Masses never learn.
As a young man, I put a name to what I was seeing. I called it a game of “Takeaway”.
One asset strategies are high risk. Like marriage.
Most unfortunate the majority have to learn only through pain. Makes the minority the rich.
Cue the “yeah buts” & the “I know I knows” from the entitled.
Not one good reason for insane behavior, just a million excuses.
I don’t know if anyone noticed a couple of weeks ago a bunch of houses hit the market all at the same time. People in the know we’re bailing out of the GTA as fast as they could before the new rules. WORD behide closed doors at the realtors office is that prices are going to fall 20% min. With an outside chance of a crash of 40% If you haven’t gotten out of GTA its to late now. You can see the fear from loser realtors on this blog
I got this e- mail from First National today (i’m a part-time mortgage agent):
We have had a number of inquiries about the federal government’s announcement on October 3rd about the new mortgage requirements.
Effective immediately, we have temporarily suspended our Conventional Rental and Stated Income programs.
WOW, i had no idea how “subprime” our housing market was.
its going to get ugly. The govt just removed 15-20% of the perspective buyers, that in itself would be a massive hit, simultaneously they reduced the purchasing power of the remaining 80-85% of the market by 25%.
there will likely be a buyer vs seller stand off, but it will be short lived, gone are the no finance conditions offers, the herds mentality just changed, like someone turned of a light switch. As homes that must sell (divorce, estate sales, elderly owners who can no longer care for themselves, job loss etc..) start to make newer lows, those become the precedent just like higher highs make higher highs, lower lows make lower lows………
i remember back in 08, RE deals falling through like nothing ever seen before because the banks pulled back liquidity.
the last time the BoC rate was 4.6% was back in 2009, when the average home price in the GTA was 395K.
For years we have had a front seat to the rampant deregulating of mortgage qualifications and dropping interest rates, both circling the drain lo these many years as the herd proved time and again that fear and greed are the prime controllers in our lives. WAAY past time the government did something about this.
“Next year a fixed 5er will be under 2%.”
I agree. But with 30% equity chopped away from 2013 peak prices, very few people will qualify for that ‘best rate’.
More likely is legions of people who bought in 2011 with minimal downpayments complaining that the best they can muster from their bank, rate-wise, is the ‘posted rate’.
“I guess it’s about time I really push for a TN visa and wait this one out in sunny California.”
Good luck with that. Getting the TN is trivial. Actually finding a job in the US is the dramatically more difficult part. Especially given how poor the economy is there these days. TN issuance has collapsed for good reason. Maybe Trump will help, if shuts down some of the other visas.
Don’t worry … the realtors worth their salt will be fine .. they make money when prices go up AND down!
I gotta admit I think this is mostly a good thing. Having housing (rent and “owning”) so skewed and out of reach for so many is ridiculous and should never have happened. The wealth effect that people felt from rising house prices was never real.
I can’t disagree with these changes. I also think it took some guts to do this but I also think it was a good political move to do it earlier in their mandate so the dust will long settle amongst the affected by the time the next election surfaces.
Quite simply, this was the right move for the country in many ways. finally.
Any idea where the loonie will go once FED increases and BOC decreases?
One thing I haven’t seen talked about much is mortgage renewals. I assume they’ll have to qualify under the new ratios? Does that mean a lot of these kids who bought recently are super screwed–unable to renew their mortgage–especially if (when) property values fall during their first five years?
I was concerned about you yesterday, this was an early Christmas gift brought to you by JT, and yet, you didn’t say a word. I was wondering why the monolines and Genworth didn’t get roasted even more than they did. I take that a lot of lenders should be shutting down lending right away until the news gets fully digested. Yesterday, the news outlets were all cheering, today they are singing a different tune.
Finally….now that ‘the bloom is off the rose’ ,we should look forward in YVR to sad tales of woe when people actually take a look at the crap they’ve dished out millions for.
I foresee 1980/90’s style ‘leaky condo angst’ all over again. This time with the high rises. BTW this is not ‘news’. Anyone who has lived in YVR for more than a few decades knows that many ‘excellent’ high-rises built in the ’80’s and 90’s are currently undergoing massive envelope/ interior/plumbing repairs. These are paid for by ‘special levies’. Forget ‘contingency funds’, which don’t cover the cost of floor polish in this part of the country. Try $100,000 per suite and up for major work?
How do you think the banks / insurance companies etc. are going to deal with massive failures of these buildings?
You guessed it!
Anyway Garth – this upcoming scene in YVR is good for more than a few posts. I’m sure Toronto has more of the same.
http://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/operating-a-strata/finances-and-insurance/special-levies
What is stopping banks from lowering their posted rates to the actual mortgage rate people are signing up for?
People always seem to find work arounds to keep this thing going, I don’t think this is the end just a pause until springtime. On the other hand I thought real estate inflation was set to end 12 years ago.
BOC will cut rates..more legs for real estate to run on.. new buyers will just opt to go from fixed to variable…cos people still have to by homes..
Approx. 10% shaved off my gold and precious metal miners today. What gives?!
Luv the pic,
not sure who the hound is but
the sly fox with that grin must be Bill Mourno
GTA realtor friends tell me people today tried to back out of deals and offers. FYI.
#3 dsw – so I expect you’ll go buy some in YVR? If so, good luck with that.
With it already virtually impossible for first time buyers to afford a home in Vanvouver, the Federal government has just made it much harder for this group. Essentially, now prices will have to fall by 20% just to get even for insured mortgage purchasers. For homes to approach affordibility, they’d have to drop anothef 20% from there.
If homeowners lose 40% of their equity, the provincial or federal Liberals will never get in power again. No wonder the provincial NDP party is cheering this latest move.
Crocodile tears from a crocodile industry.
Looks like someone finally had the balls to take the Halloween candy bag away from the kiddies before all their teeth rotted out.
Suck it up, Vancity. Now go brush your teeth.
http://www.theglobeandmail.com/real-estate/the-market/vancouver-home-sales-drop-nearly-33-in-september/article32229083/
According to the link above, there were 666 detached sales in greater Vancouver in September, a decrease of 47.6% over September, 2015. I am a licensed Realtor in Vancouver and when I search Paragon (the program which allows us to access and search MLS) it shows 537 sales for all of Sept. The reason the discrepancy is the 666 sales is sales completed whereas 537 is the number of deals where all subjects have been removed (they show as sold on Paragon and no longer listed on Realtor.ca once subjects are removed but they can take a couple of months to complete – the 666 number is still counting some deals that happened before the foreign buyer’s tax of August 2nd). According to Paragon there were 1,295 sales in Sept, 2015 so the difference is actually a decline of 58.5%, not 47.6%. Greater Vancouver also includes Whistler, Squamish and the Sunshine Coast. On the West side of Vancouver, the number of sales in Sept on Paragon is actually off 65% year over year – almost 2/3rds. In West Vancouver the decline in the number of detached sales is 74%. Watch for the decline in sales to look a lot worse over the next 2 to 3 months as the number of completions drops even more. If you have been on the fence about selling your home in YVR, you can still do it, especially if it is a townhouse or apartment. List it now – this weekend -and about 10% below what you thought it would have sold for two months ago. There are still fools out there who don’t need a mortgage as they have cash from the sale of their home and who don’t read the news or this blog.
We still have 300k newcomers coming every year. Lets say 10% of them have $$$ brought in after selling all their houses and stuff. Thats 30k cash buyers.
That’s 300,000 men, women and children in about 58,000 families. Ten per cent of that is 5,800, spread across Montreal, the GTA and Vancouver. Math is hard. — Garth
“After having allowed the bubble inflate so wildly that up to 25% of the nation’s GDP is real estate-related, the ride back down could be painful.”
Just ask those in Japan, the US, Ireland, Iceland, Spain, Greece, etc. how unpleasant the ride back down was for them.
As I’ve said many times, lowering mortgage lending standards and keeping them low (and allowing mortgage fraud) to inflate housing prices is only a short-term fix for a failing economy.
Rising house prices mask the growing problems of non-housing related industries, making that policy look like a good idea. However, behind the scenes, it hurts the rest of the economy as higher house prices cause the cost of production/operation of other industries to skyrocket, leaving them unable to compete on the world stage.
Canada was the only G7 nation to be in recession in 2015 and it looks like we’re headed there again.
The removal of some of the stimulus from the housing market will dramatically lower the contribution to the economy of (overactive) housing-related industries, causing problems for an already moribund Canadian economy.
This will expose the problems and weaknesses of industries not related to housing.
The direct effect of the new rules will be lower house prices. That’s obvious.
An indirect effect will be a slower economy which will also put downward pressure on house prices.
Another indirect effect will be the loss of confidence that the new rules will bring to housing markets from coast to coast. Fear and greed acted to push house prices higher, but they also push house prices lower.
A new era begins in Canada. Bringing in lax mortgage lending standards may have pushed Canada’s economic problems down the road for some time, but that was always only a temporary thing.
Now Canada will be forced to face reality – it isn’t different here.
Reading posts here from YVR delusionally thinking prices have not dropped, are you kidding me?
For starters, go to this Twitter address and peruse real MLS listings from the 1st week in September and the massive price drops (upper right corner, take note of red bold faced numbers, there are 100’s posted not only for homes, but townhouses and condos (ignore the guys postings, acerbic, enjoy your so called prices hot having changed – scroll way, way down):
https://twitter.com/timberjrackie
Then there is the realtor web site by Ron Chipman, not one avg. selling price over $1MM since early July and feast upon List vs. Sell Pirce, ALWAYS LESS and by quite a bit (avg. price is for all types of properties):
http://www.robchipman.net/
And now Garth posts what the Mortgage Industry knows will happen, the market has eviscerated Genworth’s market cap on Morneau’s Frankenmeasures and you still think RE prices in YVR are going up?
Lay off the 420 and wake up.
For fun, phone up your realtor and ask him/her to value your property and for certain ask for listings in your area that have sold and peruse the sell prices…just for fun.
_________________________________
Garth, so much for the “barn-burner” 3rd Qtr GDP we were supposed to have. Pray that oil props up GDP for the rest of the quarter as it did in July. I cannot believe Morneau did what he did. Pure carnage is an understatement.
__________________________________
#72 Smoking Man…THAT was too funny…LOL:
The T2 regime tosses his millennials under the bus then light’s them on fire, then runs them over twice.
Still killing myself laughing…
bsant54
While everyone is rejoicing at the prospect of a much need crash. The elephant in the room is farting loudly and no is noticing.
Russin military doctrine: when it comes to nukes, shoot, then aim. The first strike is preferable to retaliation.
https://consortiumnews.com/2016/10/02/obama-warned-to-defuse-tensions-with-russia/
Gold is junk. In free fall.
http://www.bloomberg.com/news/articles/2016-10-04/gold-investors-race-to-exit-in-biggest-price-slump-since-2013
It’s all about supply and demand girls and boys
All the demand for gold is drying up… and moving to US dollars
Holla!
#79. Gta homes for sale
Funny you mentioned that, was actually thinking about that today, due to work and other committments (family) i have been driving a lot to the east and west end of the city, central etobicoke, royal york and eglinton area, kingsway, princess margret etc.. As well as the leslie, lawrence, bayview area. Pretty much at least once week over the last few months.
Noticed a lot more then normal for sale and sold signs then ever before Was actually thinking the stock market was going to take hit in nov dec as last time i saw that many homes for sale in both areas was right before the 08 crash.
Unusual as usually homes in those areas dont come up in that volume, and the most were modest( as modest as it gets in those areas) they were not quick renos or new builds.
Guess some people knew something, follow the “old money” crowd and you can never go wrong.
Will believe it when I see it! I thought this should end long time ago. Politicians usually cave in under pressure, like the most people do, any way. If market does collapse, it will be quit bad for Canadian economy and lot of people, but only because it wasn’t done earlier.
Nice set up by Bill Moreau to give the BoC the green light to lower rates. Fantastic! CAD to fall further! And if Yellen hikes in Dec it’ll be a double whammy!
Any idea where the loonie will go once FED increases and BOC decreases?
Loonie goes into the toilet.
Along with gold
Mortgage rule changes could lead to growth in shadow banking, experts say
http://www.bnn.ca/mortgage-rule-changes-could-lead-to-growth-in-shadow-banking-experts-say-1.579471?hootPostID=666b93fc0f4a85cc2868c1ac8a716d2a
The Canadian government has been mis-directing its citizens (the herd, as SM would suggest) and has avoided the elephant in the room for a good 10 years.
-low interest rates
-insured high risk mortgages
-government insured mortgages
-40 year amortizations at one point
-teaser rates
-abundant credit for caesar stone counters
-information asymmetry between the realtor and buyer
and now they want to fix it by slowly shutting out foreign investment, adding a foreigner flippers tax and slowly shutting off the credit spigot for people that should never have bought a house in the first place.
Looks like I am buying “Newman’s own” popcorn tomorrow.
Personally, I think the rules announced are all fine.
These rules will also be good for the TSX, as many investors will begin looking at investing in the stock market for good quality ETFs and Blue chip dividend growth stocks, which are simpler to gain income from and to purchase as opposed to rental properties.
#84 Yupkime “Don’t worry … the realtors worth their salt will be fine .. they make money when prices go up AND down!”
I am not worried in the least. In fact, I hope 50% of them lose their own houses due to bankruptcy. They, along with the banks, were largely responsible for this.
step 1- hst rebates for homeowners doing renos and additions
step 2- oct 3 rule changes
step 3- tax portion of gain associated with previously given hst rebates
step 4- elliminate pr exemption altogether
step 5- tax net worth annually, just like Switzerland where only ‘aristocrats’ own houses, everyone else rents
https://www.youtube.com/watch?v=Sm9tqaLfPig
My daughter is in Ireland as we speak. I am so glad she listened and stayed OUT of the housing market.
Are we to follow Ireland? Here we go.
https://www.youtube.com/watch?v=Sm9tqaLfPig
Seems a bit early to call this bird done. It’s been like 36 hours since the announcement.
However I am extremely worried about a close friend that just bought a place in Hamilton. Bid over asking, 5% down. Young couple trying to get ahead. As much as we’d all like a fix it can really hurt a lot of people.
well garth looks like you called the ball, silly season is over
i think you have Ontario pegged but also hearing that the fed after pulling the bandage fix is getting to launch the real cruise missile and look out its going to hurt when it hits sooner than you think. hint: massive changes in Mortgage insurance liability. significant CRA changes and a big brother approach to watching the dealings related to real estate transactions including integrated cross referencing of tax records between the feds and provinces and individual renters tax returns i think you understand so its a new game lets hope the sledge hammer doesn’t totally fry the economy short term
I have the latest provincial earnings charts up now:
http://www.chpc.biz/earnings-employment.html
July 2016 Provincial Earnings Release
Average employment earnings in Alberta are 5% below their October 2014 $60,961 peak, but are still:
15% above Ontario,
17% above the national Canadian average,
22% above BC and
28% above Quebec (no typo).
Well, wouldn’t ya know it! It’s finally happened.
One thing I haven’t seen talked about much is mortgage renewals. I assume they’ll have to qualify under the new ratios? Does that mean a lot of these kids who bought recently are super screwed–unable to renew their mortgage–especially if (when) property values fall during their first five years?
All explained in the technical backgrounder on the Department of Finance webpage. Insured borrowers renewing do not need to qualify under the new rules related to qualifying at a higher rate. What’s a little murkier is whether one would need to qualify under the new rules if one changes lender at renewal. On the other hand a low-ratio mortgage that the lender wants insured through portfolio insurance (by the lender at his discretion) needs to meet more stringent criteria than before at issue and at renewal. One would guess that is going to have some impact on the terms available to low-ratio borrowers.
http://www.fin.gc.ca/n16/16-117-eng.asp
yupkime on 10.04.16 at 7:56 pm
Don’t worry … the realtors worth their salt will be fine ..
============
No such animal.
Paid the monthlies today . Telephone bill up 30% for a phone I can`t answer because of the telemarketing zombie plague. Electricity bill
approaching .25 kwh up 50% over a year or so. Water and crap disposal
up 20% and climbing every bill. Beef running around $40 a kilo. On and on it goes, use less pay more.
Official 1.5% inflation, is there anyone in the country who actually believes this BS ?
Kneecapped and slowly strangled, sure signs the party is over.
With rate cuts from the BoC on the way are the 20% of client’s portfolios in Preferred Shares about to become bonafide bagholders or ar the Preffies still ok?
It is unlikely the BofC will cut. If you buy prefs for yield and tax breaks, then sit back and enjoy them. — Garth
Another twist to all this are presales where the buyer had the assumption they would qualify for a mortgage and now won’t. Add in all the foreign buyers in YVR who must bail prior to completion to avoid the 15% tax and the “assignment” market could be flooded.
“Forcing all insured borrowers to prove they can afford a payment at the posted rate (4.64%) will remove up to 15-20% of buyers from the market, say lenders.”
+++++++++++++++++++++++++++++++++++++
Again, all it took was 10% of the homeowners in US to get into trouble. This eviscerated the US economy and destroyed the middle class.
If our lenders are saying almost double that number will be removed from our RE market, this is going to leave a mark that could last a decade or more. Nothing to be proud of seeing this coming, though.
I’m just glad my wife and I decided to sit this one out.
BOC will cut rates..more legs for real estate to run on.. new buyers will just opt to go from fixed to variable…cos people still have to by homes..
New rules require them to qualify at higher fixed rates.
Good luck to them
Condo owners are getting less cocky with their listings in Montreal.
A couple of years ago, every single condo in a trendy area was listed way above municipal assessment and selling reasonably fast.
But this year multiple areas saw widespread decrease in municipal assessments.
And the same kind of trendy condos listing prices above assessment tend to linger on the market for a while.
One big non-bank lender didn’t mince words when describing today’s DoF’s announcement. “This is a crisis,” the executive told CMT. The lender estimates that up to 40% of its insured volume could vaporize near-term because of these rules. Even if it’s half that among non-banks industry-wide, this appears to be a devastating blow to mortgage competition in Canada.
http://canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
Could you imagine how many people would qualify if the banks had to take all the risk? Banks would not be lending to 90% of today’s buyers. Realtors and bankers talk about a strong market which is based on a lie and cheap and easy credit. Let the free markets dictate what rate the banks will lend since taxpayers should not be taking any risk. Realtors and mortgages brokers are useless eaters who lie for money.
#1 NTH re Ross Kay
http://www.rosskay.com/
http://www.howestreet.com/tag/ross-kay/
there is nothing wrong with re bubbles. it’s the bursting of those bubbles that hurts.
well, it’s the only way bubbles end. no exceptions.
plain, butter, or caramel popcorn?
oh, carbon tax is coming, so households should get ready to pay more for gas, heating, electricity, and anything that is shipped using gas / diesel.
no money? well …
#52 obsessed renters
“Why are renters so obsessed with reading about the housing market day after day? What’s in it for you?”
———————————–
I do it to revel in the wisdom of my decision to cash in my RE a few years back and begin to invest properly.
It’s a pat-yourself-on-the-back, self congratulatory, smirky kind of thing. That’s all that’s in it for me.
Sorry about that. (Not really).
#83
“Getting the TN is trivial. Actually finding a job in the US is the dramatically more difficult part. Especially given how poor the economy is there these days. TN issuance has collapsed for good reason.”
Well, it is region by region.
There is a hiring slowdown in my industry right now. We were on a blitz for a while, but it was unsustainable. I’m down about 1/2 on interview frequency this year.
That Husky on the right is me.
The fox on the left is my wife.
Why is everyone thinking this is the end?
We have had many a toothless measure by the feds and this is just another one – diddling on the edges of the problem without really tackling it.
Just like when the down payment rules increase to a whopping (sarcasm) 7%, that was fixed by BC increasing the property transfer tax on new builds. And also, the bank of mom and dad helped out.
Just wait – the provinces and the banks of mom and dad will shore up the funds of junior so he can buy, just as they have always done.
After putting 6 offers in over ask on houses in Victoria back in the spring and losing every single one of them my partner and I realized how crazy we were being (in part thanks to this blog) and decided to wait until we could spend more than 24 hours deciding on the biggest purchase of our lives.. I am sure glad we did. Things are still going for over ask here in Victoria but it seems as though it is only a matter of time before it follows Vancouver especially with the new rules put in place yesterday. I have lots of friends who aren’t so lucky and gave into the FOMO putting 5% down and bidding whatever they had to to get in because real estate always goes up. It will be interesting to see how this plays out…
The housing bubble presents a dilemma the way a pimple on your face does – do I pop it or let it burst on its own? The government has chosen, albeit far too late, to manage it, hoping it won’t pop due to their initiatives. Canadians are not any smarter than Americans, having watched them experience a systemic crash due to elevated house prices, experience the same thing AND DID NOT ACT TO PREVENT IT. Two years ago they were saying “what bubble”. Anyone who jumped on that band wagon deserves what they get, sorry. Now that interest rates are .5 percent for overnight lending, and a recession could well be in the works, what will they do now? I see a bank failure or two in our future. Canadians can’t walk away from a mortgage the way Americans did, the only way to discharge it is through foreclosure, and the only way not to be on the hook for the difference between what the bank recovers and what you owe is bankruptcy. Even a mild correction will wipe out billions in bank profits, a strong correction will cause bank failures (so you better review CDIC deposit insurance) and a crash will bankrupt the country like Iceland, Greece, Thailand, Spain. Stock up on tuna and macaroni, cuz the Ponzi scheme has come to an end.
I sure hope you’re right Garth. I’m not remotely comfortable living in a million dollar house (that I paid $329,000 for). Every year my tax assessment goes up. I hate gentrification. If this old pile of bricks would lose half of its value, back down to 500K or so, I would be very happy. I have no mortgage anyway. I don’t care what it’s worth. Just sick of the gentrification, constant construction and tear-down of all the old houses around here, and the endless property tax increases. This is looking very good for me……
Hilarious!! “Look up, a bit higher, above the clouds. That’s rock bottom. And we’re down here.”
John Oliver.
https://www.youtube.com/watch?v=zaD84DTGULo
The legal definition of principal residence is vague. If the owner rents out 75% of his house to other families, and if he sells his house, part of the 75% of capital gain should be regarded as his investment gains as he does not reside in these rooms of his house.
#137 Karma on 10.04.16 at 11:50 pm
Hilarious!! “Look up, a bit higher, above the clouds. That’s rock bottom. And we’re down here.”
John Oliver.”
Sorry, this is the correct link:
https://www.youtube.com/watch?v=LXb0dui43dA
Rest of the episode:
https://www.youtube.com/watch?v=zaD84DTGULo
Well with the Jays win. It will dominate the news cycle tomorrow.
A day when talk radio tv and newspapers will be dancing for the Jays.
I’m keeping this market alive till the spring.
Then it’s
It’s Equidor or Panama city.
Go Jays…
I’ve been saying it for years.
The banks will get everyone possible indebt and then up the ante.
They win either way.
Take Dueste Bank as an example, it’s heavily invested in the FAZ inverse fund.
It’s a sheeple trap.
Anyone out there aware that Russia’s doing nuclear preparedness drills over the next 4 days comprised of efficiency getting 40 MILLION people into nuclear bunkers??
Baaaaa Baaaaa
Garth, any idea if these new rules will apply to people as they renew their mortgages? Will mortgage renewals also have to qualify at the 5 year fixed rate?
“Any idea where the loonie will go once FED increases and BOC decreases?”
The Fed would be raising rates to fight US inflation and capital flight. Inflation implies a loss of value in the currency. The BoC would be dropping to fight deflation, ie: an increase in the value of the currency.
So the expectation would be for the CAD$ to rise against the USD$.
However, speculators, at least in the short term, can attempt to move things in ways that are inconsistent with the fundamentals.
As the Canadian consumer crash plays itself out, the CAD$ is likely to go dramatically higher on account of demand for CAD$ to repay CAD$-denominated debt.
You obviously do not understand how property taxes are assessed. They do not go up or down with the aggregate real estate market valuation. They go up because the government increases its spending and budget. The only way your taxes will go down is if your house goes down significantly more than other properties in your area or if the local government reduces its spending and budget. A RE crash will not help with property taxes.
T2 govt have done the right thing. How else can you save people from themselves. The warnings were there for so long. But who cares, they bid even more ferociously. The previous govt watched and did nothing. Why blame T2 now. There can never be self correction in this mkt. It has to come from outside.
Check out this street.
https://www.youtube.com/watch?v=wf_pJo45BAY
If this is all so. Then why has Nanaimo just experienced 40%+ yr over yr sales and a price increase of 22% plus?
The housing trubbles continue here on Fantasy Island.
It’s going to be hard to see your fellow men/women stressed out to the max because of this but greed has its price. All we had here for 8 years is greed.
Shaka, When the Walls Fell!
Even 35-year fixed-interest mortgages as low as 1.06 percent can save Tokyo condo sales
http://www.japantimes.co.jp/news/2016/10/04/business/tokyo-condo-sales-plunge-to-24-year-low/
Long story short, Morons move screws Canadians and money laundering ham using proxy buyers don’t care. It’s a hell of a price for being so politically correct you can’t admit you had a big problem with a small group of foreign nations and let them run amok at the expense of the rest of us. Sad outcome….typically liberal.
Re: #21 Westvan on 10.04.16 at 5:53 pm
When home prices fall big rents also fall big. That’s why the prudent thing to have done was to rent and not buy.
Re: #114 Ryan on 10.04.16 at 9:30 pm
The airheads that bought recently in Hamilton and Barrie will get what’s coming to them. Places where everyone is broke like Lindsay will also be hit hard by today’s changes.
Born in AB, live in Italy, still keep in touch regularly with friends/family in the ‘Chuck and Cow Town. Their take: ugly and have never seen it this bad – and these are Boomer’s that made it thru the RE crash of the early 80s and 90s.
Right about now severance’s have largely run out, EI not paying the bills/running out as well and people are taking jobs well below their pay grade just to survive (or moving out of Province).
Add this to your stats:
“From July to August, the unemployment rate climbed from 8.6 per cent in the wider metropolitan Calgary area to nine per cent, the highest level recorded so far this century in the city.”
I admire your upbeat posting but it is ugly in AB right now unless the oil price spikes back up, even then, it will take a long time for oil companies to rehire and will people risk working for a topsy turvy industry again after being stung so badly?
bsant54
Re: #99 bb
Math is hard. — Garth
—————
No, bb is just an example of the lousy quality of our public education system.
It would appear that our Fed govt has admitted to us that high house prices are a result of them insuring each and every mortgage, no matter how ridiculous the terms or the price paid.
At any rate they’ve just gutted the mortgage market. This one is going to be bloody. I’m thinking failure of monolines in the near future. Around 40% of the business of a certain group of lenders has been vapourized.
Popcorn, sweet and salty!
You can resolve great rancor, but rancor always lingers on.
Understanding the more noble way, a sage holds the creditor’s half of contracts and yet asks nothing of others.
Those with Integrity tend to such contracts; those without Integrity tend to the collection of taxes.
The Way of heaven is indifferent, always abiding with people of nobility.
-Tao Te Ching #78
It is hard to overcome the resentments and rancor created by a sense of unresolved indebtedness. The Tao Te Ching is not denying the inevitability of debtor-creditor interdependence in all facets of human life. It is simply telling us to take care of how we manage our debts. Doing so is a reflection of our Integrity; not doing so leads us to rely upon extracting things from others, in the manner of demanding taxes – certainly not the best way to engage in human interactions.
http://uselesstree.typepad.com/useless_tree/2008/10/the-tao-of-debt.html
The rule change may likely change demand but lets not forget supply.
Last time I checked Canada had a lot of land outside of GTA and Vancouver, both of which have a supply shortage. So maybe buyers will consider other cities where life may be just as good but housing is much more affordable.
Despite the the rule changes are just being nudged back to the long established prudent rules of thumb. So far interest rates have not yet changed. When they go up again then we will see real change.
#143 Mark on 10.05.16 at 12:39 am
“Any idea where the loonie will go once FED increases and BOC decreases?”
The Fed would be raising rates to fight US inflation and capital flight. Inflation implies a loss of value in the currency. The BoC would be dropping to fight deflation, ie: an increase in the value of the currency.
So the expectation would be for the CAD$ to rise against the USD$.
However, speculators, at least in the short term, can attempt to move things in ways that are inconsistent with the fundamentals.
As the Canadian consumer crash plays itself out, the CAD$ is likely to go dramatically higher on account of demand for CAD$ to repay CAD$-denominated debt.
……
Mark you nearly gave me a heart attack. I’ve never laughed so hard this early in the morning. Keep them coming pal. Are you parody of some kind?
Thanks for the info Garth, that is good journalism, frankly I had missed it, reading the MSM I thought the measures were insignificant.
We should never forget that it was government that provided the easy credit in the first place, now a bit less, they are only correcting (a little) a situation that they created themselves.
Now the big slide begins, let’s just hope we don’t hit a big rock on the way down!
#43 DQ on 10.04.16 at 6:32 pm
listed Aug 10 for $2.28M. No sale. It was pulled and relisted yesterday for $1.58M. That’s a $700K (30%) price drop.
__________________
So if it had of been listed at 3.28M then it would be a 1.7M price drop? No. The listing price is irrelevant. Prices may be falling but you can’t tell from this piece of data. The first listing price may have been wildly high.
Im convinced now that the big 5 banks conned the government to make this rule change move, in order to squash all the lenders out there that were taking market share away from them. Oh wait they had 93% already, guess they want 100%.
Banks control the government, period.
http://www.canadianrealestatemagazine.ca/market-update/ottawa-should-do-more-to-support-smaller-lenders-says-report-214945.aspx
Very well written article here also…
http://canadianmortgagetrends.com/canadian_mortgage_trends/2016/10/is-this-the-last-nail-in-the-coffin.html
#129 ShawnG in TO on 10.04.16 at 10:33 pm
oh, carbon tax is coming, so households should get ready to pay more for gas, heating, electricity, and anything that is shipped using gas / diesel.
no money? well …
————
So, everything? Jesus, people should be pissed..
#24 Jungle on 10.04.16 at 5:54 pm
“Wow different tone now that BOC will cut rates? A few posts ago it seems like Canada will increase.. I don’t see this happening and would think it would be foolish for BOC on increase. We are NOT the USA.”
Nor are we an island.
We are not of market size to dictate global fiscal policy, nor to insulate ourselves in any meaningful way.
We may participate and potentially influence, but we certainly don’t hold court.
Black swan headwinds and diplomacy make it a slam dunk.
The BOC can diddle all it wants, but it can only screw up locally, the rest of the world will pay little heed, apart from hedging our re market.
And if Canada is to ever begin growing again, rates must go up, because the wrong people are being punished. Way wrong.
I guess I could be grateful that some members of society are insulated, through their ability to save, from trickle-down stupidity.
foreign seller is in his lawyers office signs a declaration that he is a not a Canadian non resident, and will not be a non resident on closing, If not the buyer side withholds 25% for cra
if some ‘dudes’ are signing false declarations They should be prosecuted
“There’s also been anecdotal evidence that some foreign buyers have shifted their focus from Vancouver to other cities, including Toronto. ”
http://toronto.ctvnews.ca/average-price-of-detached-home-in-toronto-area-now-1-29m-1.3102422
“Anecdotal evidence.” Journalists have forgotten their craft. — Garth
Toronto real estate prices continue to climb.
http://www.cp24.com/mobile/news/toronto-housing-prices-sales-volume-soar-in-september-treb-1.3102451
Nothing to see here. Just years of mindless irrationality
Hope the new rules curb the Toronto property market. It’s getting stupid
Mark you nearly gave me a heart attack. I’ve never laughed so hard this early in the morning. Keep them coming pal. Are you parody of some kind?
Be nice. Unemployment and poverty isn’t funny
I’m really so sick and tired of the housing market BS. It’s everything but what it should be. It’s all so Kardashian and now the government is treating it like a monetary tool.
I remember what I grew up in, it was standard fare in those days but wouldn’t be given a second look today. If it doesn’t have an ensuite for each kid, a man cave, a home gym, a home theatre, a 2+ car garage, granite, stainless and hardwood it’s apparently not worthy enough. And people wonder why house prices are what they are???
I see no link to houses with suites being excluded from mortgage insurance. This would preclude every house being built in Victoria from a first time buyer
To qualify homes need to have mortgages with amortizations of 25 years or less, sell for under $1 million to people with a decent credit score (over 600) and be only “owner-occupied.” Already many brokerages have ceased (yesterday) insuring homes containing suites. — Garth
Can someone clear something up for me ? I thought this whole you have to be approved at the 5 year posted rate was already implemented ages ago ? I know when I went in for my last pre approval that was the case.
That was only for variable-rate mortgages or fixed-rate loans with terms under 5 years. Now it is everyone. — Garth
Dear prudence.
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Having been a part of the public education system, at the university level teaching business school and engineering for about 20 years, here is something that you learn very quickly:
You can lead them to the watering trough, but you can’t make them drink.
Why life is a pyramid of people when it comes to earning potential.
BTW, I was in business for myself and also worked for billion dollar revenue corporations doing mergers, acquisitions, divestitures, new business start-ups etc. for another 20 years. The public ed was to put something back into society since it had been kind to me for so many years.
Not all those that teach are losers as you might think.
Garth has an inquisitive mind and did some basic math to refute your typical off the cuff unthinking comment – try 20 years of that on a near daily basis.
Trust me, he is a rare commodity from those that I have taught (about 8,000 to 10,000 “Moisters” over those 20 or so years).
Why I love reading his blog so much.
bsant54
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Re Foreign buyers of real estate and collecting tax on the capital gains. Why would a foreign buyer submit a income tax return to the CRA?
#170 };-) aka Devil’s Advocate on 10.05.16 at 10:08 am
Shift happens buddy…
Time to get a new gig…
Garth,
Ah yes, thanks for the explanation.
Garth please enlighten us how the new rule of having all new insured borrowers get qualified at posted rate of 4.64% effect the market.
Also with these changes it seems the rules have become stringent for new buyers.
Also how does it effect the people renewing.
Will this have an upwards ripple effect to bring the all over prices down on and by when can this be felt in GTA.
Garth, can you guess the approximate percentage of the market that mortgage brokers tap into, that will “vanish”? Brokers seem angry on social media.
I speculate 25% of brokers’ clients are under target by the new 4.6% qualification metric, since those who use mortgage brokers don’t usually qualify at the big-banks.
However, what would be interesting to find out is what percentage of of borrowers who are clients of the following alternate lenders ALREADY pay 4.6%:
1. First National
2. MCAP
3. Partner Mortgage
4. Street Capital
5. First Ontario Credit Union
6. CMLS Financial
7. Wealthline
8. RMG Mortgages
9. Meridian Credit Union
10. Optimum Mortgage
11. Duca Credit Union
12. MERIX Financial
13. Alterna Savings
So which lender has the most borrowers that only can afford 2-4%… is the 1 million dollar question.
As far as BC Assesment is concerned, owner occupied means the home thebowner claims his principal residence allowance on. This would exclude rental primary properties but not someones home with a suite?
#166 CTV article on 10.05.16 at 9:31 am
“There’s also been anecdotal evidence that some foreign buyers have shifted their focus from Vancouver to other cities, including Toronto. ”
http://toronto.ctvnews.ca/average-price-of-detached-home-in-toronto-area-now-1-29m-1.3102422
“Anecdotal evidence.” Journalists have forgotten their craft. — Garth
………………
Real Journalism died with Gery Webb. Found dead with two bullet holes to the head with a 38, Ruled a Suicide.
http://www.rense.com/general60/move.htm
#140 Smoking Man on 10.05.16 at 12:07 am
Well with the Jays win. It will dominate the news cycle tomorrow.
A day when talk radio tv and newspapers will be dancing for the Jays.
I’m keeping this market alive till the spring.
Then it’s
It’s Equidor or Panama city.
Go Jays…
………………………………………………………………..
Its Ecuador and since you can not even spell in English how do you figure to make it in Spanish?
Eres un gran bolsa de viento.
#171 Kelly Wagner on 10.05.16 at 10:09 am
I see no link to houses with suites being excluded from mortgage insurance. This would preclude every house being built in Victoria from a first time buyer
To qualify homes need to have mortgages with amortizations of 25 years or less, sell for under $1 million to people with a decent credit score (over 600) and be only “owner-occupied.” Already many brokerages have ceased (yesterday) insuring homes containing suites. — Garth
———————————————————-
Years ago it was the same,to get around it have the seller take out the second kitchen sink and call it a finished basement.
The biggest issue in my opinion is going to be qualifying as mortgage brokers would allow 50% or more of the rent to be added to the buyers income for qualification.
Either way it’s going to be interesting.
Why does Mark struggle with reality so much?
BTW, my Inverse Mark 9000 ETF is doing astonishingly well. By betting against everything he said, we’re up 12% YTD and beating the main indexes in every imaginable way.
And with these new revelations, our fund managers have been advised to take required positions and make bank in the coming weeks.
Anyone have tips on how to list my ETF on the TSX? I have saved up well north of $1,000 CAD of my own funds for this.
BTW, I found my truck battery. It was buried in my backyard, must be the damn squirrels. So apologies to Cancer Man.
This summer I caught up with an old girlfriend. Despite still having a lot of student debt, she had just bought a house in Toronto, along with her mother. I didn’t say anything, not because I’m bitter about how things ended, but because I know when advice wouldn’t change anything.
It’s easy to forget that there are people on the other side of all this. A lot of them are intelligent, hardworking people who just didn’t have all the facts. Better it happen sooner than later, but I wish it didn’t have to happen at all.
Interesting read… Spotify is the problem…
http://uk.businessinsider.com/spotify-problem-for-economists-2016-9
#48 Tuna Maki on 10.04.16 at 6:50 pm
…..”Now looking back, we are happy we didn’t get caught up in the FOMO. Went to an open house back in February and 22 people lined up outside talking about bids – the place sold for 100K over asking with no conditions. We gave up then and glad we did.”
Only Canucks are dumb enough to “line up”, sit in lawn chairs for days, “go back and do their best”, put in unconditional offers, pee in jars, engage in bidding wars and prance around in ecstasy when they “won” a “bidding war”. Idiots.
The saddest weirdos are the ones who “pee in jars”. Imagine having those for neighbours.
“With a kid on the way next year, we will continue to save and see how things pan out.”
I can tell you how things will pan out- you’ll become filthy rich, especially if you don’t fall into the trap of spending “according to your means”. Shovel that loot as fast and hard as you can into your accounts and enjoy the sunny view of rising wealth.
Forget the popcorn, this is the stuff of which blinis are topped.
149 Darmok-
Darmok and Jalad at Tanagra.
The new rules: We have a house (owned for 30 yrs) with a basement suite our kids used to occupy (rent-free) before they moved on (years ago). It’s where they lived as teenagers. If we sell, will there be a capital gains tax on this currently unused suite area of the house?
No. — Garth
VR East Side Property 33X122 15yr old VR Special
475 East 46th AVE.
One of the largest price drops, I have seen for the East Side to date.
Asking $2,498,888
Now $1,798,000
Hey Garth! How will it affect us renters who rent houses? Do you think our landlords will be forced to sell seeing as their rental properties are not their primary residences??
Will this affect the number of people who buy homes to rent them out to chicks like me?
#170 };-) aka Devil’s Advocate on 10.05.16 at 10:08 am
I’m really so sick and tired of the housing market BS. It’s everything but what it should be. It’s all so Kardashian and now the government is treating it like a monetary tool.
I remember what I grew up in, it was standard fare in those days but wouldn’t be given a second look today. If it doesn’t have an ensuite for each kid, a man cave, a home gym, a home theatre, a 2+ car garage, granite, stainless and hardwood it’s apparently not worthy enough. And people wonder why house prices are what they are???
——–
You kidding? Families of 5 are living in two bedroom apartments, ubc students living in vans in alleys ,
Why ? Because if you don’t make 300k a year your not worthy of a house your government decided someone from another country is.
Canada’s dependence on housing looks a lot like the U.S. in 2005
http://business.financialpost.com/investing/trading-desk/canadas-dependence-on-housing-looks-a-lot-like-the-u-s-in-2005?__lsa=fd06-b62a
Canada’s dependence on housing appears to be as stretched as it was in the U.S. back in 2005, and the degree to which new mortgages rely on risky borrowers is equally as troubling, a new report warns.
David Doyle, Canadian economist and strategist at Macquarie Capital Markets, tracked residential investment as a share of GDP in both countries. He found that the standard deviation from the long-term average in Canada from 2001 to 2016, is similar to what took place in the U.S. between 1991 and 2006.
Based on this analysis, Canada is poised for a sharp downturn if it continues to track the U.S.
Re: #186 South Etobicoke Trump Campaign Field HQ
Marks states commodities have bottomed out. I state the opposite that commodities have topped out. I have a heavy short on Teck Corporation and still believe it will fall to 5 dollars Canadian by the end of February 2017.
BC NDP housing critic David Eby explains below what has been going on since I was a kid over 30 years ago. It also explains the main motivation behind the BANK OF MOM and DAD.
“… CRA auditors can investigate when people are breaking the rules for example declaring more than one primary residence in one family.”
“If somebody is continually buying and flipping houses in our real estate market, they may no longer be able to claim the capital gain because it’s not a principal residence anymore. It’s actually a business they’re running. The second reason is we need better data about what’s happening in our real estate market and it’s only by collecting this information that we can know actually whether a family, for example, is purchasing multiple properties under the names of different family members in order to run an investment style scheme instead of using the principal residence exemption as it was intended.”
It’s worth mentioning again that I’ve had a neighbour tell me that he bought the house as a “cash grab”. I’ve had an in-law tell me straight up “I believe in housing”.
Like almost an official religion in Canada. And they will now have their Apocalypse, it would appear.
#188 Karma…. brilliant article. The way we measure GDP is absolutely wrong, and is creating BAD policy, like low interest rates and capital mis-allocation, not acknowledging the increased Efficiency in the marketplace.
This is also the source of the Disconnect between those who think the US (and global) economy is dying a slow death, and those who see it as actually growing. You are measuring different things, and so is the stock market.
The smartphone changed EVERYTHING starting back in 2007. The initial Disruption that laid to waste thousands of products, hundreds of industries, many that we will never want or need again. Remember CDs? And it continues at a lightning pace – industrial drones replacing workers across Ontario -http://www.cbc.ca/news/canada/kitchener-waterloo/clearpath-robotics-kitchener-30-million-us-investment-1.3792051
The media is trying to spin it as a good thing that the company will double its workforce, completely ignoring the fact that it would eliminate so many factors of more jobs in the coming years. Only beginning.
Every company now is a technology company, whether they realize it or not. Time to come to grips with this.
Even China has frozen over, shipping companies not shipping enough to stay afloat, electric utilities not selling enough electricity, etc… because the new global economy is a tech economy, rather than what it used to be: a commodity-driven manufacturing one. Interesting times indeed.
That was your Daily Dose of Disruption, with Neil Armstrong…
End of Canada’s ‘unique’ mortgage system means higher bank costs
http://business.financialpost.com/personal-finance/mortgages-real-estate/end-of-canadas-unique-mortgage-system-means-higher-bank-costs
While it’s not clear what form that risk-sharing will take — a deductible on mortgage insurance may be one option — any move will likely require Canadian banks to boost capital levels and result in higher mortgage rates, according to analysts. The banks’ industry group, which includes Royal Bank of Canada and Toronto-Dominion Bank, is already fighting back.
“This could have profound impacts on the insured mortgage funding market and the equity market’s perception of credit risk in the banking sector,” Jason Bilodeau, an analyst with Macquarie Capital Markets, said in an Oct. 4 note to clients.
Any idea how much it could drop in Victoria and when it might be a good time to buy there?
End of Canada’s ‘unique’ mortgage system means higher bank costs
“The days when Canada’s banks could offload much of the risk of underwriting mortgages onto taxpayers may be drawing to a close.”
http://business.financialpost.com/personal-finance/mortgages-real-estate/end-of-canadas-unique-mortgage-system-means-higher-bank-costs
Many GTA developers are having meetings today. If you drive by their head offices in Vaughan, you’ll see all the Maseratis/Lambos parked in corp parking.
Its harder now to justify a $1mill townhouse and $1.8 mill 40ft single lot in a farmers field under electrical towers not even walking distance to Kleinburg. Or a 6,000sqft McMansion for $2.5 in King City on a stamp sized lot. The bank of Mom & Dad will now have to co-sign loans.
Garth, could you do a post on Shadown banking in Canada? Im curious what you think of the loans taken from those “we sell gold” guys, and CHIP Home equity loans? If RE values fall, I can see a surge in Power of Sales
Home sales in Canada could fall 8% on new mortgage rules, Finance Department projects
http://business.financialpost.com/personal-finance/mortgages-real-estate/home-sales-in-canada-could-fall-8-on-new-mortgage-rules-finance-department-projects
#129 ShawnG in TO on 10.04.16 at 10:33 pm
oh, carbon tax is coming, so households should get ready to pay more for gas, heating, electricity, and anything that is shipped using gas / diesel.
no money? well …
—————-
Just got my gas bill today, and there was a notice in there about the Ontario Gov’ts “cap-and-trade” program. It said the total increase to the natural gas bill is expect to be about $70-$80 in 2017 for customers in my area. It will add 3.3 cents/cu. m., plus an included cost to the delivery charge.
I assume any of the latest T2 idiocy will be on top of this.
interesting read
http://www.wsj.com/articles/powerful-market-indicator-flashes-sell-heres-why-it-can-be-ignored-1475687806?mod=rss_Heard_on_the_Street
198 Neil Armstrong
…because the new global economy is a tech economy, rather than what it used to be: a commodity-driven manufacturing one.
—————————————–
So… we’ll no longer be needing bricks, lumber, windows, furniture, electric motors, headphones, TV’s, saws, wrenches, curtains, shirts, pants, underwear, doorknobs, mops, brooms, dishes, shingles, lights, fridges, microwave ovens, structural steel, kitchen sinks, musical instruments, boats, carpets, toilets…
In my first job out of technical school (circa 1984) an engineer told me this: “Son, one day there will only be software”. In time, I became a firmware engineer. I never wrote any code that didn’t need some hardware upon which to run.
I still await the great singularity…
#194 Westvan
“Because if you don’t make 300k a year your not worthy of a house your government decided someone from another country is.”
Well, my friend, as the biggest bubble in Canada’s history blows up, then we can all be grateful that Canadians didn’t buy any of these overpriced homes and they won’t be affected.
We are about to find out where the real problem was and it sounds to me like a lot of people will be looking in the mirror.
Good luck to all.
Agree with #64 and “bring it on” as most of us have nothing to fear.
Made “Crackle Jack” style popcorn…does this have a meaning of some kind?
I have to agree with #146 Sheane Wallace…”So in the last decade or two could be sponsored by CMHC and guaranteed rising market…tax free out of the country, indebting locals to additional over-heating?” So true and so sad, the power tripping parties to get elected and the economy looks good.
Took so long to put the fire out on the housing market but now the carbon tax will be implemented for climate change. Somehow I do not feel secure!?!
Just keep on extracting, removing, taxing, and add automation. I am really feeling secured!?!
robert james: from your link: In the long run, the Department of Finance’s move adds housing stability
Bill Morneau has done well. His knowledge of Canada’s financial system has allowed him to put in place rules that will add to Canada’s financial stability.
Chaddywack: I am thinking about buying a place in Vancouver, but I’m worried that my 2-3 year window in the future might cause me to miss the downturn. Afterall in 2009 prices started going up again. I’ve also heard though that once real estate starts to fall it’s generally a multi-year process…..any thoughts on timing to pounce on a fall?
I’d say milk your colleague for all he’s worth. I mean get as much knowledge and insight as you can. Very privately ask him if he has any space he can rent. To you. Be ready to follow through.
Shaun of the debt: What is stopping banks from lowering their posted rates to the actual mortgage rate people are signing up for?
The way I understand it the mortgages the bank holds sit in a big database that is subject to government regulation. It’s not a filing cabinet.
Boo Liberals: With it already virtually impossible for first time buyers to afford a home in Vanvouver, the Federal government has just made it much harder for this group. Essentially, now prices will have to fall by 20% just to get even for insured mortgage purchasers. For homes to approach affordibility, they’d have to drop anothef 20% from there.
If homeowners lose 40% of their equity, the provincial or federal Liberals will never get in power again.
the BC Liberals are in more trouble than the Federal Liberals because the BC Liberals face an election in May next year.
RE: #204 Cramar:
“Just got my gas bill today, and there was a notice in there about the Ontario Gov’ts “cap-and-trade” program. It said the total increase to the natural gas bill is expect to be about $70-$80 in 2017 for customers in my area. It will add 3.3 cents/cu. m., plus an included cost to the delivery charge.
I assume any of the latest T2 idiocy will be on top of this.”
Will be going geo-thermal soon. That and a couple of all electric Teslas as soon as they start selling them (model 3s).
The future appears to favour avoiding carbon burning.
Apparently I will be able to charge a Tesla at night for free, then drive it almost 400km, again absolutely for free, lather, rinse and repeat…
No oil changes either.
I am kind of warming up (no pun intended) to this carbon-free lifestyle…..
Since about a month or two, the local Asian housing market seems to in full swing in Montreal/Brossard with agents full time busy bringing in Chinese Nationals for house visits(news I get from local Asian newspapers which are translated for me and for which there is no mention in the mainstream news + my contacts). The house i sold last year, just sold for an extra $25k all between Chinese nationals. I think the Vancouver and impending Toronto tax laws are starting to have a trickle effect here, of course the minute the locals catch on to this we’re going to have an upswing effect? Keeping in mind this is Qc and not BC.
Risk on
https://youtu.be/EYyarcp5LtU
Headline:
Shiller’s Powerful Market Indicator Is Sending a False Signal About Stocks This Time
Scary article until you read the most important point:
He fiddled with it, allowing for different overvaluation and undervaluation thresholds, changing target allocations. And over the past 50-odd years, he couldn’t find a single way he could make CAPE beat a simple buy-and-hold strategy. In the end, he doesn’t think it represents an improvement over using conventional PEs to value stocks.
http://www.wsj.com/articles/powerful-market-indicator-flashes-sell-heres-why-it-can-be-ignored-1475687806?mod=rss_Heard_on_the_Street