We might as well let Wild Bill pooch this entire week. So here ya go: the fifth pathetic post in a row on how everything you thought you knew about residential real estate just changed.
The bubble’s done. Not over, but pricked. The next few months will see the air whizzing out of the upper end of the GTA’s gasbag, while Vancouver turns into T2 roadkill. Between now and October 17th there’ll surely be a surge of moisters trying to beat the new rules, but after that expect sales to crater and realtors to turtle.
The extent of the correction will be unknown for some time. Maybe a year. Sales can collapse but prices stay sticky since most people live their lives in disbelief (just look at Calgary). But as listings augment, there’s but one direction for house values to go. That’s exactly what the current crop of politicians want, since housing, now dangerously a quarter of the entire economy, is out of control.
In the past four days we’ve examined many implications of what happened Monday, including stress tests, new foreign dudes taxes, vacancy taxes, higher property taxes, principal residence tax changes and the certainty Ottawa will start to wiggle out of the mortgage insurance business, heaping risk upon the lenders. All of this is somewhat historic. Those who think the real estate market will continue to march ever higher have been watching way too much W network.
Here are some of the latest voices worth noting:
From two despondent, wrist-slashing mortgage brokers in Calgary. They see higher rates and lower prices:
“The main change that will kick in on October 17th will require borrowers to qualify for a mortgage at the National benchmark rate (currently 4.64%) instead of the actual contract rate that is being offered. This significantly lowers the mortgage amount borrowers would be approved for.
“We are still uncertain on how each individual bank/lender will accommodate these changes with some of their other lending programs but to give you a quick example, one of our lenders have already responded and they are going to increase their interest rate 0.15% for any refinances and limiting amortization to 25 years. So it is still early to tell you exactly what each bank/lender is going to be changing, but according to many professional opinions, it is sure to lower property values over time as well as the probability of increased interest rates due to the higher risk to the banks/lenders needing to limit the amount of insured mortgages they are holding.”
From another mortgage broker, in an open letter to clients (reprinted in the awful Huffington Post). Forget your pre-approval, she says.
“If you were pre-approved prior to the rule change, this does NOT mean you will still be approved for the same amount and/or rate, especially if your lender based their pre-approval on a fixed rate, as that rate will no longer be available. For example, if a potential homebuyer was pre-approved for a mortgage at a fixed rate somewhere around 2.49%, that rate will now be closer to 4.64% for qualification purposes. Put differently, if a potential homebuyer with a combined family income of approximately $125,000 was told they could afford something in the $630,000 range, they may now be restricted to the $500,000 range, based on the new rules.
“…Over time, there simply will no longer be a market for over-priced homes. The long-running seller’s market will slowly become a buyer’s market due to lack of affordability, which in turn could result in decreased housing prices — as people will no longer be able to afford homes in what were previously known as “hot markets.” We may not see these effects right away — most likely not until the spring market — but we will see them.”
From Rob McLister, editor of Canadian Mortgage Trends. He sees his loan-selling colleagues running away from risk:
“It’s unclear which insured-lenders will still do refinances, rentals, super-jumbos ($1 million+) and 26- to 35-year amortizations come December. As we’ve seen, some lenders have already announced their (hopefully temporary) withdrawal from these categories. Lenders I spoke with today were scurrying to arrange purchase agreements with balance sheet lenders to create liquidity for these mortgages. It’s going to be a week or two before we know the bank’s appetite. They won’t rush to load up their balance sheets with non-standard mortgages. That, we know.
“Some lenders may die off or consolidate if the Department of Finance doesn’t relent on its decree, but many will find a way to keep doing these uninsurable deals at higher interest rates.”
From Sherry Cooper, former bank poohbah, now economist-spokesgirl for Dominion Lending Centres. Rates, she says, are going up as bankers are forced to eat risk:
“I believe that the ultimate proposal for lenders to take on the burden of more risk could … have a far reaching impact; this is something that CMHC proposed a number of months ago, almost a year ago, and it does appear that it’s going to happen, and it means the banks will probably have to cover 5-10% of the potential loss in their mortgage book.
“The risk of their mortgage book moves up, that means they have to hold more capital against their mortgage lending which makes the cost of capital more expensive and you better believe they’re going to try to pass that off to the consumer.”
We could blather on. Few saw this coming. Even fewer were consulted. It’s now evident the feds were working on this comprehensive package of bladder-piercing policies for months, careful not to tip their hand, to achieve maximum market impact. Just as BC did with its bombshell Chinese Dudes levy on July 25th.
That’s politics. When logic and caution fail, just shoot ‘em.
159 comments ↓
You see mortgage brokers will not risk a single penny in this monster of a housing Ponzi since it’s obvious to everyone Canada is beyond a bubble. I think prices come crashing down. Why? During the 2008-09 it just took a few months and houses that were selling for 500k in September; later sold for 350k in February. It’s going to be a nasty crash that much is obvious. Remove CMHC And prices crash 50-70% overnight.
Why won’t lenders take all the risk in this lol hot market? It’s a hot market so why won’t they take all the risk? Tell us why not? TELL US ALL you useless eaters.
Vancouver is going to get CREAMED. In fact, it has already begun.
It’s about time. Canada sorely needed this years ago!
There are so many folks living way beyond their means. Maxed out credit cards, everything in the entitled Millenial brain is about I want it and I want it now, I want that new Audi, I want that 4 bedroom $600k house right now. Etc etc etc.
The bank told my friend he “was good for it” even though he told the mortgage dude he felt financially uncomfortable… True story.
We are all to blame for this mess.
Unless you sold, now rent and have the money aside.
Because bs walks.
This will be a bloodbath. I’m glad I’m a renter.
Ooohhh how I would have loved to be a fly on the wall when they were planning these changes.
*sniff*….tears of joy…. that we actually have politicians with some guts to make such changes in this country. This did take some guts to do but it was the right thing to do.
As I previously said, I am very sceptical of the impact of ‘new’ mortgage changes on the market. Every change announced since 2010 has been heralded as the beginning of the end – and each measure simply fanned the flames more. It does not matter what the change was – elimination of the 40 year, down payment changes, pulling out equity changes, 5 year qualifying rates, etc
I spent an hour with my banker this afternoon completing another pre-approval (because rentals are so rare where I live I might have to buy at the worst possible time).
After discussing the ‘new’ changes in great detail, it became painfully clear that the banks are operating as business as usual. In my last pre-approval, I had been qualified at the 5 year fixed rate and given the nice 2.5% discount – and at this approval it was the exact same thing. Same amount approved. My banker confirmed that it would be the exact same after October 17th.
One poster here suggested that those that are renewing would likely to have to pay more than the 5 year discounted rate they would have previously got. Yes, it seems that that will be the case as they will have to pay the new ‘premium’ or else they can shop around and get re-qualified at the 5 year 4.64% rates. I suspect that they will just pay a small premium.
So sorry, this is just another toothless measure in my books that will be forgotten in a week as people go about their business of buying the only asset that has been making the average person richer than the renter. I was really really hoping that this would have been meaningful but its not – ponzi scheme back on.
My Monthly Absorption rate chart is of interest this month:
http://www.chpc.biz/mar-moi.html
Toronto buyers are acting much later than the folks in Vancouver where the sales trend has rolled over.
The sales uptrend began in earnest in both markets in 2015 when the siren call of easy money was the loudest. But now there is only Toronto.
With all these changes people are going to have a lot more to chew on this weekend than Ham or Turkey. The shift to accepting a life of lower expectations will be challenging. Less painful I think though than the future pain as unrealized equity values slip away.
Our finance guy this week just took a good portion of our investments (55%) to cash from the individual company stocks guessing game in order to time the market potential drop and plans a re-enter into ETF’s. At least he did it while we had recovered most past gains and the recent drop. Actually bought us into CPG:TSE just before the OPEC oil announcement and thinks now he can time the market !!
I’m starting to feel like without bad luck we wouldn’t have much luck at all.
At least we were able to pursuade my house rich & cash poor mother in-law to sell in January so she’s now got options for how she wants to live and the cash to do it.
Thanks for all the great advice on here Garth. Makes for interesting reading and a pragmatic reference to fall back when I hear so many people talking up the ever expanding and improving real estate market in Vancouver. Most don’t see what’s coming or even what was just served up this week.
NO ONE believed nortel would go bankrupt just like no one now believes a large number of cough cough home owners will go bankrupt. The chain reaction will happen soon enough . Hint how many people are working on your street fixing houses? Think of the Thousands and thousands of street in the GTA . They had to crash the market now and yes it will crash. No talking will stop it realtors
Ugh. The mewling and puking evident in these letters has only just begun.
Once the changes get through to those who have chosen to bury their heads in the sand (or who have their heads lodged elsewhere), the bleating of the sheeple will tip into hysterics.
Look for the rise of a ‘common sense’ populist, weak on facts, but full of ‘easy’ answers, as the Cons seek to nominate a new leader, and capitalize on people’s broken hopes and dreams.
I am feeling deja vu from January when the new mortgage down payment rules were supposed to cause a rush before the rule and then deflation and if you don’t believe it, look at Calgary prices. Meanwhile nothing has changed. So why is this different.
Even Alberta is on the rebound now.
Thank God I had the sense to buy the 3800 sq ft duplex in the village ( Tofino ) in 2001for 225,000.00 and just qualified as a single one income mature female with an income of 75000. Today, same house, upgrades to drainage, yard and rental apartment..I would have to show an income of 135,000 yr. to qualify And pay 2.5 time the mortgage pymnt. While insurance and prop tax, utilities have doubled. Has income doubled? hell no. Would I buy another house in this market? hell no.
Good thing I like the neighbourhood, cause I’m not moving. I bought the business I was managing in 2012… much bigger commercial mortgage but as Buffet said, buy a good business at a fair price…with a solid cash flow. My motto…don’t finance anything that doesn’t make you money.
Great wrap up to a stunning week of announcements!
Paragraph 4 pretty much sums it up. I know so many people that preach “houses always go up”… we will certainly see about that. Plenty of home owners are in total denial.
I’ve noticed that the mid-housing point has definitely leveled off. Lots of houses are taken off the market and re-listed at a lower price. If you study the pockets, you will see the REAL EXTENT of what’s going on: Empty Open Houses, costly staging elements, several Days on Market, and price adjustments. Lots of time, money and effort at the sellers expense, all with guidance provided by their Agents.
It’s going to be a buyers market in 6 months.
Another thing a lot of proud home owners NEVER ADMIT is how much they spend on home ownership. It’s almost always because they fail to see the big picture: Property taxes, City utilities, strata fees, insurance, maintenance, and upgrades, and the countless receipts from Home Depot and Rona for tools, wood, screws, nails, caulk, etc.
The days of making money on home ownership are over. Sell. Rent. Get out of it what you put in.
it’s so obvious now – tighten up mortgage standards
“The risk of their mortgage book moves up, that means they have to hold more capital against their mortgage lending which makes the cost of capital more expensive and you better believe they’re going to try to pass that off to the consumer.”
what about the “skip a payment” offer? I betchya we’re not going to see that again
People next dore just bought a fixer upper. $450k, 30 years old…..starter house. Yikes!!
Door. Not Dore….
If we’ve got buyers who can’t deal with a “high” interest rate like 4.64%, we’ve got too many people buying who shouldn’t be.
We need more gubberment involvement in ALL aspects of our lives cause they is soooooo smart – I’m still amazed that with this crazy technology known as the worldwide web that the masses can’t get their sh*t together and shut these idiots up via worldwide mass protests organized via the web.
Rage against the machine
Garth:
Can you EVER recall a time when a Big 5 bank in Canada was caught off guard with a bad risk assessment on anything?
To put it bluntly, the party is already over in Vancouver and about to get over in Toronto in next couple of weeks, we will be seeing situations like below everywhere. None of it will be reported by Real Estate Groups, Mortgage Groups, if you catch my drift, fun times ahead !! Keep your eyes and ears wide open as the ‘Hurricane Real Estate Bust’ makes landfall in Canada.
http://www.cbc.ca/news/canada/calgary/alberta-mansions-sell-for-bargain-1.3302103
Morneau has gone to territories that his predecessors feared to tread upon.Well it was high time as well. Canadians were talking about nothing, but real estate.
It is high time when established Telecom companies like Rogers jumps into real estate.
http://www.bloomberg.com/news/articles/2016-09-26/edward-rogers-to-unveil-10-tower-condo-project-near-toronto
Decent , affordable housing should be a right for Canadian’s. If investor’s want to earn money on their investment’s they should call Garth and invest in building a better mousetrap ,not taking advantage of people’s basic need’s. http://www.theglobeandmail.com/real-estate/vancouver/vancouvers-housing-boom-sets-off-human-rights-alarm-at-un/article32298690/
Shelter is a right. A house is not. — Garth
a fixed rate somewhere around 2.49%, that rate will now be closer to 4.64%
That broker is a bit of a drama queen.
Higher rates because of recent changes?
Maybe. I’m not sure. Could be, I guess.
But if banks will charge more, it will be nowhere as drastic as 2 full points.
It will be too small to offset the coming rate-cut by Bank of Canada.
BoC is in a much better position to cut now, as RE inflation is reigned in by Vancouver/Toronto super tax.
Bram
In reading comments where there is hope of a repeal of some of these new rules, whether at the local or Provincial or Federal level, it’s not clear to me the politicians will be ale to put the genie back in the bottle.
Considering the size of the real estate sector and how important it has become to our economy it is hard to imagine any quick or meaningful reversal.
I think the politicians want to show they are doing something but the trust is lost just as what happened in the US. In the US robosigning was a big issue that destroyed trust for years. The Canuckistan version is “Canadian politicians gone wild”
As someone who saw GIC rates fall from 8% to 9% range about 20 years ago or so to 2% to 2.75% these days, we have no sympathy for people that have alot of debt and real estate leveraged to the sky.
We used to save $2,000 a month for our RRSP’s, cash investments, TFSA’s etc. but are now saving more than double that $4,900 a month. We have no debt and not even a credit card because we don’t need it.
If they did not take their profits or buy in when real estate prices were much lower than tough luck for them.
The tables have turned or soon will turn now and they better get used to it. It has been 20+ years of party time for real estate and debt junkies.
Is Ontario foreign buyer tax a certainity?
When it’s announced it will be. — Garth
Hi Garth,
Long time reader and first time poster. I have a few questions that I’m hoping you could help with – and I don’t mean this in a snarky way – I’m genuinely curious what your(and other posters who wish to weigh in) thoughts are to these questions.
First, and most importantly (and I would appreciate if we could use detailed figures as opposed to ballparking it if you don’t mind) why specifically do you think these changes will bring about a *massive* effect on the housing market? Canada and its housing market certainly has a fondness for debt, but from where I’m sitting I can’t quite wrap my head around all the doom and gloom by the posters around here. I acknowledge that I am coming to a blog where pessimism is the defining narrative, but what I’m seeing is a lack of and concrete and useful facts and data supporting this ‘evisceration’ of the housing market.
Canadians are overleveraged and many are simply in a fantasy about their wealth or future financial prospects with the majority of their wealth tied up in a single asset.
Low rates and generally easy credit are significant factors to be sure. However, a large part of the uptrend in housing is a function of supply and demand(and fairly strong and stable employment). As another poster noted, Canada is seeing 300,000+ immigrants each year (the bulk of which end up in the GTA in particular) who require housing, driving the demand and competition for property. It’s no secret that the lack of housing supply is a large factor in the bidding wars that have become the norm. Mortgage rules have been tightened a number of times over the last few years and the housing market has not suffered so much as a hiccup.
Let’s also note that the principal residence exemption is likely to continue to strangle the supply of housing as landlords will have little to no incentive to unload their investment properties because of the added costs now.
Properties are typically seeing 10-20 offers(often even more) if the property is even remotely attractive. Even if half of these buyers could no longer play at this price point, what makes you think that they’re not going to just scale down their price range and continue buying at a lower bracket? Or just delay their purchase until their financials are stronger? Canadian Mortgage Trends has pegged this effect as potentially removing 15-20% of buyers from the housing market. Hardly a crippling effect considering what we have been witnessing, no?
At best these measures seem to accomplish two things(in my opinion): prevent buyers from maxing out on a mortgage that would leave them with less disposable income, as well as being at risk against a rise in interest rates in 5 years; and adding some much needed stability to a housing market absolutely begging for it. Both seemingly sensible changes – I can’t see this being the straw that breaks the camels back, but I’m open to being persuaded otherwise.
Please convince me – more than anything I’d like to make sure my family and friends don’t suffer disaster but I don’t see a strong or convincing enough argument to make me believe that this really is the big one.
We are talking about putting some common sense restraints on a market that looked poised to runaway from all sensibility. This was long overdue, not a catalyst for catastrophe.
I realize I may be coming to the wrong place if I’m looking for a balanced perspective on this issue, as most posters here are already completely convinced this is a colossal collapse waiting to happen. What I’m not seeing is any rational or well-supported justification. Despite many efforts to curb the overheated market, it continues to chug on and has for years. This might finally put the brakes on.
T2 was just canvassing in China for more imigrants. That was probably pre meditated due to the introduction of these new rules to give some home owners a buyer so they can get out of their major indebtedness.
Garth, I understand that foreign ownership may be 10% but that doesn’t include landed wealthy imigrants that have become Canadians already and purchasing.
I suspect when you add the two groups you probably get 35%.
Thanks for all your work… This book started with F and the conservatives and is being corrected by T2. I don’t know how you say it was the same government.
Best,
$
Dang Gummint!
It may very well be that prices are going to head lower. If you listen to news reported by some realtors and Mr. GT the average price of a home is already off by around 15% in Vancouver. So if you’re a foreign buyer, you’ve already made up for the extra ppt being asked for.
I took off the last couple of days from work to show around a relative who has never been to Vancouver. We went to Gastown, Stanley Park including Prospect Point, Granville Island, Lynn Valley, Grouse Mountain, Museum of Anthropology, etc… My anecdotal observations, were that in each place, by far the majority of visitors (more than 80%) were Chinese. Yes, I know the difference between Mandarin, Japanese, Korean, etc… I’m Chinese myself.
Now I’m not suggesting that every Foreign Chinese Vistor is moving to Vancouver, but I know that Vancouver is still viewed as one of the most desirable cities to live and invest in for the future. The situation in China is there are literally hundreds of thousand of new Chinese millionaires who want to get some of their money out of China.
Since the new BC and Canadian rules, the 15% foreigners tax or the disclosure of residency for capital gains, do little to prevent the ability for foreigners to buy real estate through family, friends or foreign students (walk around UBC sometime, it’s rare to see a non Asian), this slowdown in sales in Vancouver is temporary. Will it be weeks or months – I don’t know? But you can’t put the genie back in the bottle.
Whether they buy houses or pre-construction condos, the Chinese will find a way.
CMHC won’t currently insure properties over a million anyway. So that diaqualifies almost all houses and many condos. All that it will mean is that as some young people find it harder to buy, they will rent instead and further strain the rental market.
So the market might slow or level off in Vancouver, but it won’t be road kill like you suggest. There is a floor established in prices. If they go down here, there will be an army waiting in the wings ready to buy.
But, the new rules are more likely to effect young home buyers in other parts of the country rather than Vancouver or Toronto.
Just my opinion. Thanks.
Why, we consider our fully paid off house as neither an asset or liability. The cost of running the household is the cost of ownership. We have no interest in chasing a “better” home. This marketing driven greed is a great part of the housing problem. The “Granite and Stainless” and HGTV meme capitalizing on peoples’ envy and insecurity and has caused far too much suffering. People, wake the F up…. You are being manipulated (screwed)
What about the bogus carbon tax too?
Didn’t you once say punishing people was the wrong way to govern?
Maybe I will be able to afford to move back to Toronto in a few years.
The more I think about these changes the more I think that CMHC is eventually going to exit the business.
Mortgage rates will have didley to do with Bank of Canada rates. It is all now going to be tied to risk and the banks who will do whatever to profit from this new risk.
So Garth, with the banks having to assume more risk in the mortgage dept, do you see this affecting shareholders of the big 5?
Garth banks knew from summer, how do you explain this:
https://betterdwelling.com/the-really-big-short-the-13-7-billion-dollar-bet-against-canadian-banks-over-housing-and-insider-sales/
I heard a saying not long ago, “the market is designed to take away as much money from as many people, as much of the time possible.
I guess that applies to housing market as well. Anyone who really thought the Canadian housing market was sustainable should give their head a shake.
Being away from Canada but watching from a far, I remember thinking it was nuts in 2006, then crazy in 2010, thought ok, this is gonna end bad in 2012, ok apparently not, I guess Canadians are really delusional, 2016 and it took drastic measures to finally prick this insane gasbag.
By the way, every time I would come back to visit BC, my question was always, “I don’t understand- why are super crazy house prices a good thing for locals and the economy?” Why is having to mortgage yourself to the max a good thing?
People who simply bought a place to live all of a sudden where acting like Donald Trump, thinking they were all clever “investors” as lax lending, low rates, FOMO, and bubble mentality proved them right- I hoped they all cashed out.
Maybe in a few years real estate won’t be the only topic of discussion. Actually, I doubt it, it’s so ingrained in the culture it’ll probably take a decade or more.
Got a hand it to the feds, that was one hell of a curve ball, just way too long overdue.
This year the RE market has been hot in Windsor. Now the unemployment rate confirms why. Gone from the highest in Canada to 8th lowest! Amazing change in just 1 year!!
I expect to see a lot of Alberta licence plates in Essex County this fall. No brainer. You can still get a starter home for $150k in this part of the Country. And the day Sask. got snow, we were in the upper 20s under week-long sunshine. Just stay outta the flood zones.
http://www.cbc.ca/news/canada/windsor/windsor-unemployment-rate-down-to-5-7-1.3795611
“Windsor’s unemployment rate inched down again, dropping to 5.7 per cent in September, according to Statistics Canada.
“That is a drop from 6.1 per cent recorded in August.
“In September 2015, the unemployment rate was 9.7 per cent. At the time it was the highest in Canada.
“Now, Windsor has the eighth lowest unemployment rate in the country.
“The continuing drop in the unemployment rate in Windsor is ‘absolutely remarkable.’ Mike Moffatt, an economist at Western Univeristy wrote in an email to CBC News.”
Shoot em all and let God sort em out
#7 $fromA$ia
“Garth, I understand that foreign ownership may be 10% but that doesn’t include landed wealthy imigrants that have become Canadians already and purchasing.”
……………………………….
It also does not include the homes being purchased by a family member or foreign student who get residency. That is the way many of my acquaintances have purchased homes here.
Even the demand now to disclose your residency for capital gains, will have a limited impact on foreigners. Most foreign Chinese will buy a home for solely a piece of the security of Canada. Profits are not their main concern.
What it might slowdown is the speculators, flippers, developers or realtors preying on this group. The foreign Chinese buyer would like nothing better than to see prices in Vancouver slow and stabilize.
Politics. The Art of saying one thing and doing the exact opposite.
I’m on the family shit list again. Family member a city bull shitter politician on my face book with mr sunny ways himself. Well I unload with the bravery of Uncle Jack who always has my back.
Starting early tonight at Son number 2 stag. My second beer you would think I would be inside socializing , nope , outside typing my thoughts and here I go.
The machines plan B
Globalism is has a lot of momentum but it’s facing serious resistance Brexit, and now Donald Trump.
This week the USA ratcheted it up it’s Russia bad guy rhetoric.
MH17 Bull shit report
No-fly zone in Syria.
Possible US ground troops.
and just today. It was Russia who hacked the DNC emails.
Plan B if it becomes apparent that Trump will win this in a landslide. The USA is going to sacrifice a few pilots that will venture into Syrian airspace and swiftly get taken down by Russian S400 missiles.
The PR machine is already setting the stage.
Trump who is seen as liking Putin will get the back draft of that scenario. These globalist have spent generations of slow steps to push this idiotic idea on all of us. There not going to go quietly into the night and just let Trump go in and smash everything they achieve.
Russia has underground bankers in all their cities in the event of a nuke fight. We got nothing.
Remember kids. Before globalism you could afford a family home on one income.
Now……..jokes on you.
Dr Smoking Man
PhD Herdonomics
Yep, yep and yep!!!If I just bought my property in the last two to three years, I’ll put my property on the market ASAP, even i have to slash 5-10% to get it sold, I’ll still coming ahead down the road in a year or two, this is a serious business, for those who think this is not a big deal, I suggest they go consult therapy. WAKE UP!!! Get out before you got burn big time!! Burn baby burn is not fun!!!
Looking forward to our gasbags and Trump deflate…
I’m as anti T2 as they come, but I do have to say that I never agreed with the overly generous lending policies that were in place with the previous government for the last ten years.
When my brother who has poor credit and no downpayment was able to qualify for the same house as me (a prudent saver) I lost faith in the regulations. I was even more annoyed that my tax dollars were backstopping his mortgage via CMHC.
At the end of the day he has a house in the Whalley area of Surrey that he bought for $425k that he still thinks he can “flip” for about $900k.
We shall soon see……
Yes. Sherry Cooper. Garth wrote all about her on this pathetic Blog. Along with Brad Lamb and many others who were publicly undressed for their lack of ethics.
Garth also met with them in conferences face to face, and standing alone too, armed with only the truth, facts, and gonads of steel. I am sure Sherry, Brad, H, and many others are still not yet members of the GT fan club. What is done in the dark will always be revealed in the light. Garth is living in the light. Always has.
Now. The RE changes. From Flooding the RE market a few years ago with historic low rates/amortization periods, to tightening the noose around the now highly leveraged masses in many different ways, and during an economic slow down, the vulnerable are now in a dangerously precarious position.
Most certainly, high risk can pay off handsomely. But ALWAYS, for the majority, they are invariably crushed. Truth and Fact. No exception.
Freedom First
007
PHD/Freeodmonics
Isn’t that a good thing though? If this bubble was caused by people who bought more than they could afford, and banks who were willing to lend them the money because they shouldered no risk, will these new measures not prevent people from over-extending themselves?
I’m going to call a few realtors tomorrow and feign interest in a property as a first time buyer. Gauge the sentiments and such. Teehee.
Oh, and Hillary for Prison, 2016.
A good time to be renting…….. :)
Sir Garth:
Blame Harper!!!
Re Calgary: if inventory has been increasing for over 20 months and prices have barely budged and we have passed the worst of the downturn, then what is the likelihood of a significant drop in price for single family homes? I’ve been waiting two years and I haven’t seen much more than a 5% drop in price.
Hopefully these new measure achieve what they’re supposed to do. Bidding wars on mediocre properties and a complete lack of ethics from realtors needs to end.
This is all still CMHC though. That’s the crap lower end market of sub primers. None of these new rules change anything for the majority of home buyers. They just off loaded the junk.
I don’t see the radical change in the market or the falling prices you’re talking about. If everyone used CMHC to buy a house maybe. But if that is really the case then yes we are screwed. I don’t think it is though.
Most people will just keep putting 20% down and borrowing through regular channels.
Lots of hype over nothing.
http://www.nationalpost.com/m/wp/arts/blog.html?b=news.nationalpost.com/arts/a-world-class-address-nowhere-else-will-you-find-such-desolation-and-gloom-as-in-the-solitude-of-the-shops-at-aura
Across Toronto and Vancouver deluxe high-rises loom imposingly, half-empty and ready to rent; their balconies tumble to the ground, their power fails en masse, their waterlines burst and their appliances sputter. The Aura condo itself, that paragon of “luxury and sophistication,” has been plagued by misfortune: its nine elevators have broken down so frequently and for such lengths that the residents took to the local media to express their indignation: “It’s a little outrageous,” a tenant told the Toronto Star in August, after a rash of technical problems paralyzed the elevator banks. “It’s just too big a building. They haven’t accommodated.”
“….The long-running seller’s market will slowly become a buyer’s market due to lack of affordability, which in turn could result in decreased housing prices…….”
________________________
And this is a bad thing in the long term?
Again, it’s refreshing to see a finance minister showing some spine in doing what’s best for Canadians in the long term instead of being lobbied into what’s best for the Big Five and REALTURDS® in the short term.
The CMHC risk transfer is only icing on the cake.
#28 Curious on 10.07.16 at 6:47 pm
Is Ontario foreign buyer tax a certainity?
When it’s announced it will be. — Garth
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Josef loves when Garth is smart ass!!! Oh Yeah BABY!!! YEAH!!!
Hi Garth,
A big fan of your site for many, many years. I think I was one of the first to suggest that this will not end well at all.
But that was years ago.
And now we are here. I thought, like many on this site that common sense would prevail. That politicians would do their duty and lead by example. Not so.
It is greed pure and simple, like all the bubbles before.
Greed rules all, no matter the denomination. I am ashamed. I thought that many more would share a vision of us all together. Not opportunists. Not sure that any party has claim to this.
I want to thank you for providing an atypical Canadian viewpoint. With a great deal of latitude in terms of commentary. This is surely second to none.
Given we’re sharing anecdotes from insiders, he’s an e-blast just received from Toronto mortgage guru Monty Sands offering a “solution”.
======
Hi Subscriber:
http://www.theglobeandmail.com/real-estate/four-major-changes-to-canadas-housing-rules/article32223470/
What this means for you – Your income doesn’t qualify you for the same loan amount
Solution – We will get around this qualification challenge through combing Bank Mortgage Financing with affordable private mortgage financing. If you can afford the payment, we will get you approved.
Email me – with any questions or concerns and I will try and respond withing 24 hours, experiencing a higher than normal volume of questions pertaining to this issue.
What to do if your mortgage falls apart – DO NOT START SHOPPING AROUND as this limits my ability to properly structure and present your sitaution to or our banks, credit unions, and trust companies.
Sincerely,
Monty
======
Bought house in 1988 watched price sit stagnate for 10 years, the LOWEST interest rate we ever paid was 9.75%. These changes are long overdue. as much as I detest the modern day Lieberals (Ontario should ship all theirs to the left coast) this may save some of the idiots that believe “real estate always goes up” ” interest rates never will” and “it’s different now” from themselves
Waiting for Smoking Man to weigh in….I still think there is a supply vs. demand issue in GTA, based on a demographic philosophy ie. Millenia population against the number of Boomers…Not sure if we’ll see a major change in pricing.
As of Oct 17th buyers will have to qualify at the current 5 year rate of 4.64%….once the fed raises rates Dec 14th (assuming .25%) and it has its effect on the bond market to the mortgage lending market, then once the banks here change their posted rate (to 4.75% for example), and only once the banks here actually make changes to their posted rate, then buyers have to qualify at the higher rate.
That is a pretty big bump in rates in a 2 month period. Pretty big bump on the 17th for that matter.
Absolutely banks are going to pass the risk on to consumers. Banks have a mandate to reward holders of bank stocks, not the clients who are requesting a loan (unless the two are the same, in which case maybe a deal might be done). Though one would presume the client might not actually ‘need’ to borrow the funds to buy as banks are very fond of zero risk (on their side of the deal, obviously).
I can definitely state that banks have been tightening up the loans & lines of credit towards corporate clients since at least the beginning of 2016 (my job involves those areas for corporate clients & thus I know whereof of which I speak). As a result, I’ve been spending a great deal of time adjusting client files as they switch to lenders who offer a better deal (or at least will secure the client). These corporate clients are not dealing in small sums – certainly the amounts are far greater than most will ever have to secure for a mortgage – so I don’t hold much hope that the banks are going to be less demanding in their requirements for John & Jane citizen than they are for corporations. In fact, I’d imagine they are going to be far more stringent. Just saying.
Logan: First, and most importantly (and I would appreciate if we could use detailed figures as opposed to ballparking it if you don’t mind) why specifically do you think these changes will bring about a *massive* effect on the housing market?
Please convince me – more than anything I’d like to make sure my family and friends don’t suffer disaster but I don’t see a strong or convincing enough argument to make me believe that this really is the big one.
okay at one point I had to sell my house and couldn’t. If you had a similar experience or know someone who did then you are qualified to “make sure your family and friends don’t suffer disaster”. If you didn’t or don’t then you’re not qualified because who cares about figures – average selling price, number of houses sold – who cares – your house isn’t sold!
If you don’t know the gut wrenching feeling of knowing that you are in a bind then don’t try to set yourself up as an expert.
I had initially thought that this move was too little to accomplish the flattening the big air bag that was Canadian real estate. But it seems that the finance dept has achieved their goals without a bank of Canada rate increase that could have had negative effects in the “real” economy.
The “over listing” bids just made it to Victoria this spring and slowly made it up Island till it began to happen in Parksville by September—but guess what — the party is over as of this week people.
New listings are flooding the market this week and repricing is occurring (downward).
Feel sorry for the people who just bought on the other side of the neighbourhood-paid a premium above listing price for BASIC unmaintained 12 yr oldstarter home on a street full of illegal basement/garage suites.
But like most buyers on the Island, they come from somewhere else and like most home buyers, they left their brains on the prairies and didn’t do their due diligence.
Some are even gullible enough to trust their real estate agent!
But like college kids say, the cost of an education has got a lot higher.
Lee on 10.07.16 at 6:50 pm
It may very well be that prices are going to head lower. If you listen to news reported by some realtors and Mr. GT the average price of a home is already off by around 15% in Vancouver. So if you’re a foreign buyer, you’ve already made up for the extra ppt being asked for.
——————–
It doesn’t work that way. The prospective foreign buyer is not looking for shelter (a commodity with a simple price tag). They have shelter at home. They are looking for an investment. If they pay the 15% tax, then the investment has to go up by 15% before they break even. That’s true no matter what the price is when they buy. In a falling market where a 15% gain looks unlikely, few investors will agree to take that kind of hit on day one.
#32
Lee, what about Chinese capital flight laws? How can all of these newly minted Chinese millionaires get around their own govt.’s restrictive laws?
In the past, it seems the Chinese govt. looked the other way. It seems there is a new sensitivity to this issue and money laundering through real estate, in China.
I personally don’t feel any of the Canadian or provincial govt’s attempts to put off foreign investment will damp down desire for home ownership, on the part of the mainland Chinese.
But….it certainly seems like China wants an extradition treaty with Canada before inking a major trade deal. And this, to me, is going to keep many Chinese at home.
Those caught simply using schemes to get around capital flight laws, could very likely fall under the rubric of ‘gangster, criminal, money launderer,’ in the future, in the eyes of and under the laws of their own country. Sad for them — but all of the red flags appear to be there.
Trudeau is not a soft leader. He is, like his father, a law and order guy. Remember his Dad’s famous line, “watch me?” Well, as far as T2 goes…watch him, too.
A very serious matter, perhaps the RE “bubble” is done and there will be lots of collateral damages. But, on the lighter side, in this holiday long weekend. Thanks to Mr. Trump’s lewd video comments. Our cousins to the south, have got an early Thanksgiving. This turkey is done. His handlers, trying to justify and spin it, are making more faces than a monkey eating a lemon. Perhaps, they could say he (Mr. Trump) was talking about grabbing felines.
#25 Bram on 10.07.16 at 6:40 pm
a fixed rate somewhere around 2.49%, that rate will now be closer to 4.64%
That broker is a bit of a drama queen.
Higher rates because of recent changes?
Maybe. I’m not sure. Could be, I guess.
But if banks will charge more, it will be nowhere as drastic as 2 full points.
It will be too small to offset the coming rate-cut by Bank of Canada.
BoC is in a much better position to cut now, as RE inflation is reigned in by Vancouver/Toronto super tax.
Bram
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I don’t think you quite have it. It’s not that your rate will change from 2.5% to 4.64% but rather that in order to get a mortgage you have to QUALIFY for 4.64% before they give you the 2.5%. It’s a stress test to weed out people who would get a loan at 2.5% and default when it goes up to 3%
Well, the previous Conservative government started this bubble, and the present government is going to end it. It’s long overdue.
A lot of readers dont understand the supply vs demand dynamic. Its all a function of credit and nothing else. Prices are realtive to the amount of credit a lender is willing to extend. Period. Full stop.
If banks and lenders will only grant x amount thats where the price will go as there is a finite limit to most peoples earning capability. The govt understands this hence the new regs.
the banks tighten ratios and there goes the market….. CHMC says they wont insure homes there goes the market.
Look back to 08, countless RE deals, business ventures, commercial deals were falling through due to lack of liquidity.
RE prices will drop to whatever the median income in that region can support, as crazy as it sounds that will be the end result of these reg changes in due time.
Does that guy with the really nice hair get to keep his TV show?
So now in the GTA we ger to see what developments have been funded by illicit drug money. Its been very frothy in laundered money. Some idiot sons of ‘developers’ have been so bold to fly their newly bussomed escorts in hot air balloons over King City this summer. Sadly, i am not kidding. After being called out on it by many in a municipal meeting in a local library, idiot-son removed all the x-rated shots from an open Instagram account. But if you look carefully on social media the hard working ladies still post pics from his dad’s palatial Tuscan inspired mansion near King City. Just look past the boobs, Louboutins and Hennessy bottles. His dad has zero taste in home design.
Don’t worry though, idiot-son is selling a townhouse development in a small village, beloved by a Canadian writing legend, for $1.8 a pop. If it gets approval.
I don’t think you can predict yet whether these measures will burst the bubble, cause a slow leak, or a big crash. It all depends upon psychology.
IF (and it’s a big IF) the rampant speculator ‘prices can only go up’ psychology is broken, then as buyers sit things out the over-leveraged borrowers and over-extended lenders will be forced to start selling properties.
That will force prices down and a deadly spiral begins, just the opposite of the mania that drove prices to insane heights. As prices fall, more leveraged parties are forced to sell.
And it could easily go down a lot further than it went up, as people lose jobs. Once it starts, it’s very hard to stop.
I think we won’t see that for another year or two.
But no one can predict the timing of it. I’m just giving my best guestimate, having witnessed up close several house crashes in Canada and a big one in Tokyo that continues to this day.
People waiting to jump in and buy will do so far too early, and will regret it. I’ve done it myself.
We are in a bubble. When you have a bubble it only takes one pin prick to pop it. There have been multiple pin pricks so far in YVR and now one big one across the country. You need to read up on bubbles if you want to understand how what may seem like a small change can have a *massive* effect.
#25
The change seems to be that people have to qualify at the posted rate, not the discounted rate.
To me, that’s entirely reasonable. There’s no guarantee you’ll get the same discounted rate next time, so basing qualification on that seems like a sure fire way to set people up to fail.
I recently bought in a cheap area, and locked in for 10 years. Glad I did. Looks like it might be an interesting decade.
No, they have not made up the extra tax because the 15% is not refundable when they sell. The foreigners like everyone else want their money back when they sell. That is not going to happen with a 15% plus tax and prices trending down.
Trump is an authoritarian, he’s vindictive, immature, lacking principles and it’s hard to believe that he’s one of the two choices to lead the most powerful nation on earth.
But someone spouting off about Trump’s locker room talk (compare that to Bill’s frequenting of ‘orgy island’-google it) while the same day more of Hillary’s ‘lost’ emails are released showing her brazen selling out of the US for her own personal gain, is a perfect example of the old adage: ‘better to keep quiet and let people think you are a complete fool than open your mouth and remove all doubt’.
#42 Lee on 10.07.16 at 7:08 pm
Is that the same Canada that just imposed a 15% tax on purchases with 1 weeks notice? The same Canada that is sending a team of CRA auditors out to go over the taxes on these foreigners? The same Canada that will tax “empty” homes of foreigners at a much higher rate? The same Canada that will now charge capital gains on foreigners houses? The same Canada that will allow China to seize assets in Canada? The same Canada that is in talks for an extradition treaty with China?
Doesn’t sound like security to me for foreign capital. Money will go to the path it is most welcome. That is no longer Canada.
So you can’t crash this real estate Canadian ponzi
Raise interest rates… that will kill it instantly
I wonder if the next shoe to drop will be a little greener.
At some point won’t owners have to disclose how heavily radiated their properties are from Fukushima?
I don’t think people will want their children playing in the dirt here in BC.
3 failed reactors have savaged the landscape with up to 2000 poisons arriving daily via the Jetstream.
Most of the delicate foliage is in the process of turning yellow now. Cedars are gone, its in the Pines now. The Pacific shores appear devoid of life. 5600 known species now hovering around 25.
How could family homes ever again be marketed on the West Coast if children are involved? I spoke to a recent purchaser up the street and pointed out the damage from Fukushima. Most of his plants turned yellow and there were no insects on his property.
I know the realtor who sold the home and he was aware of the fallout situation. Needless to say the uneducated buyer spiraled through a cycle in front of me during our chat. Puzzled, followed by rage and flipping through the yellow pages lawyer hunting no doubt.
Ethics, morals, all in short supply here in Canada.
#61 Gasbag Boomer on 10.07.16 at 8:09 pm
Waiting for Smoking Man to weigh in….I still think there is a supply vs. demand issue in GTA, based on a demographic philosophy ie. Millenia population against the number of Boomers…Not sure if we’ll see a major change in pricing.
……
I’m calling at top in GTA July 18th 2017 going to be a nice ride till theñ. +100k between now and July
Hey realtors who post lies about how these mortgage changes will have no effect. Can you explain why lenders SP are getting hit hard with some falling 20% in some cases? I guess you didn’t learn anything before dropping out of high school?
Won’t the biggest beneficiaries will be the Immigration Lawyers? I bet the Foreigners will simply pay the lawyers and do what is needed to become Canadian citizens?
Cramer:
In response to your comment about the unemployment rate in Windsor. Calgary at 9.5%. Fort Mac has not been measured since the spring because of our unfortunate series of events. It had increased from about 4.5% to about 9% pre-conflagration because of the plunge in oil price July ’14 onward. And Cowtown has the highest rate of any major city in Canada according to the gnus. The country has been flipped on its head. Remarkable. Go Jays and Windsor!
nice write-up about girl on picture, cousin of mine.
http://www.glas-slavonije.hr/vijest.aspx?id=236555
right click there is translate somewhere in there (chrome has it)
to all the people who come here to type support for the liars in Ottawa, I have one wish for you…….
…….
…….
HST on resale homes,
that’s right. that’s what you deserve
in fact you deserve everything that’s coming to you
and everything that’s not coming to you
Do you even read Garth’s blog entries?
have you noticed that he’s not gloating?
that’s because he’s disgusted, as we all should be
legislation based on lies, that’s what we got
“So the market might slow or level off in Vancouver, but it won’t be road kill like you suggest. There is a floor established in prices. If they go down here, there will be an army waiting in the wings ready to buy.”
An army? Buying with what? A floor established in prices? Look, the Vancouver house buying population largely was broke, and is likely to be even more broke as prices fall. The landlord families who were “pac-manning” housing as fast as they could obtain subprime credit will be out of the game. The foreign owners, the few of them that exist, will be looking to accelerate their selling before their losses become even more extreme. The last thing that exists in Vancouver is latent demand. Throw in a rotation to another speculative bubble, and Vancouver housing will drop to unfathomable depths before staging a recovery.
Interesting week indeed. As always thanks for the informative commentary Garth.
Been wanting a downturn in real estate for some time, but now that it may be at hand I’m feeling only trepidation. What happens to the economy when this ends? The average person is in no way prepared. Never as simple as just a few fools learning a lesson.
Happy long weekend anyway dogs.
“RE prices will drop to whatever the median income in that region can support, as crazy as it sounds that will be the end result of these reg changes in due time.”
RE will drop further than what’s supportable by median income as there is a very large debt overhang that needs to be liquidated. Mean reversion implies that not only do prices eventually revert to the mean, but that periods spent above the mean, are matched by periods spent below the mean.
Given that Canadian housing is priced roughly 3X that of the stock market (35X earnings vs. 15X earnings), with even higher extremities in the major cities of Vancouver/Toronto, relative price decreases of 60-70% aren’t out of the question. In the 1990s GTA, a relative price decrease of around 75% was achieved 1990-2000.
i am so so sick of living in a real estate economy. for god’s sake bring it on already, and hurry up.
Why hasn’t the government also minimized the use of CMHC, by lowering the maximum mortgage they will insure to let’s say 500K – 700K instead of the current 1M$ ? Would that also have helped deflate this giant RE gasbag?
This should be a celebration of Wild Bill Week.
T2 has done in his first year what the Cons weren’t able to do in 12, and no one saw it coming.
Like an earlier poster here has stated, T2’s actions are reminiscent of his dad, ‘just watch me’.
Is this a joke? Lamb kando to be built on stilts along King St W.
https://www.instagram.com/p/BKa1ENnj5Wa/
Don’t know why everyone is so happy about a crash. I agree, market is over priced, people extended themselves but to be glad that people are gonna lose their home seems a little rough. Don’t forget bad policy brought this on, people will borrow as long as someone will give them money, it’s human nature. Take advantage of the lower prices, but be considerate of people who could face hardship.
Get ready for several months to a year of bulls saying ‘See prices aren’t dropping’, therefore there is no bubble. The idea that real estate is emotional and sticky is hard for people to grasp.
#69 SoggyShorts on 10.07.16 at 8:40 pm
I don’t think you quite have it
Ah, quite right.
I missed the “for qualification purposes” line.
That makes sense.
So if you can pay 4.6% then they let you borrow at 2.49%
I guess that may not be a bad idea.
Instead of leaning on insurance, let the banks just be a bit more careful.
Seems rational to me.
Bram
The realtors that everybody loves to hate are going to be the key administrators of the coming price declines. Realtors have one thing in common, they all need to put food on the table (Beamer leasing) and when the sales collapse and they know the only transactions are going to be transacted at lower prices (because of the increase in the cost of money and lack of foreign buying power) the realtors will begin pushing their clients to list houses at ever declining prices because they work in a commission based business where you eat what you kill. The realtors will push this market down quicker than you can say “I sincerely recommend you take this low ball offer.”
#91 Mark on 10.07.16 at 10:40 pm
A 75% decrease in price of housing would be “terminal” for Canada’s economy, it would not just affect only bankrupt home owners, but everyone, as there are a myriad number of businesses and occupations that one way or the other are linked to real estate. Won’t happen.
This should be of interest in light of the recent changes and the questions people had about Garth’s assertion that suites would be taxable (what would Garth know about tax anyway):
http://househuntvictoria.ca/2016/10/07/do-you-have-to-pay-capital-gains-tax-on-your-suite/
“In deciding to apply the gross negligence penalty on the unreported taxable capital gain (which is equal to 100% of the income not reported), the judge took into account the fact that Mr. Boulet built the house so that it would have two separate housing units and sold it on the basis that it had two separate housing units. “
Now as the bloodletting begins in Vancouver and you start to hear about moisters losing their shoeboxes they paid 600K for, watch said moisters start this retarded hashtag:
#VREM (Vancouver Real Estate Matters)
I haven’t heard it repeated but I doubt I came up with it, “standing still as everyone takes a step back is the same as moving forward”.
#93 John in Mtl on 10.07.16 at 11:15 pm
Why hasn’t the government also minimized the use of CMHC, by lowering the maximum mortgage they will insure to let’s say 500K – 700K instead of the current 1M$ ? Would that also have helped deflate this giant RE gasbag?
————————————–
I like it. It could be the next trick Wild Bill pulls out of his magic bag. Would require buyer to have 20%. While he’s at it, change the DP rules again. The current rules are a joke.
If I were Morneau for a day… I would do something like this:
First time home buyer “Starter” pack: $0.00 – 249,999.99
– min. 5% down
– CMHC eligible (must qualify at posted bank rate)
Struggling middle-class Medicine pack: $250,000.00 – 749,999.99
– min 10% down
– CMHC eligible (must qualify at posted bank rate)
– if a 2 income family can’t scrap together 10%, boo hoo. See Starter Pack
Good Luck You’re on your own pack: 750,000.00+
– min. 20% down
– No CMHC allowed
– clearly you have bank of Mom, or you are moving up, or you have the income. Either way, the risk is all yours, or Mom’s (and the banks)
This would push more first time buyers into condos instead of houses (where they should be… what they deserve). You are not entitled to have granite and stainless, it is a privilege that must be earned.
Born and raised in AB. Calgary is going nowhere right now – it reads more down than up:
-Excluding natural births/deaths (unlikely newborns will be in the Calgary RE market any time soon), Calgary lost 6,500 people to the end of July 2016.
-9.5% unemployment rate, highest in the nation as of yesterday (ATB reckons it may hit 10% by year end).
-Calgary home sales have dropped 20 consecutive months as of early August 2016.
The point here it that your observation that nothing has changed in Calgary is BECAUSE its RE market is at rock bottom (kicking an already dead horse will not kill it anymore); however, still breathing markets like YVR and 416 will be affected by Morneau’s measures.
-bsant54
I read a lot of praise here for the actions of Wild Bill, but you seem to fall short of doing the same thing.
Do you have a problem with what he’s done?
So 15-33% of 1st time existing/buyers out of the market or buying a lower priced property = cheapest properties will sell fast.
All Morneau has done then is to exact a Federal pound of flesh from Foreign RE Investors and forced the Banks to lend responsibly (stress test and mortgage deductible) since Cdn’s (and the Banks) cannot act responsibly themselves when it comes to mortgage debt.
____________________________________
Garth, we are still back to the economy and jobs.
September job increases largely “self-employed” [unlikely Canada in 1 month hatched 50,000 new entrepreneurs and contractors].
Most of these jobs [42,000 part time] went to the +55 age crowd that do not make major purchases nor can afford to retire.
August was mostly Public sector job increases, very few Private sector jobs created.
Prior to August a dismal 13,200, in total, jobs created (Jan to Jul 2016).
Cdn. Private Sector operating profits are down 3.4% for the 1st Qtr.
Current account balance -$20 billion.
July GDP gain due solely to oil production recovering from Ft. McMurray.
Now, RE et al GDP (incl. finance, construction) will be taking a hit with fewer buyers and lower priced property sales.
All of the above do not look good, at all for Canada. There has been literally no good news in the Cdn economy since the start of 2016.
One economic shock away from a 2009 Great Recession?
…probably why Morneau did what he did, to lessen the recovery time of such a highly indebted population (took 10 years for the Americans to bail themselves out from debt as a result of the Great Recession).
bsant54
Look at my posts of RE price drops from early Sept for just Burnaby and Coquitlam, posts prior 2 days.
Nothing sticky there and they have gone down even more since then.
Learn to use Zolo.ca for actual MLS listings.
Calgary RE is sticky because it is a dead horse at rock bottom…no where to go but up, yet not moving at all for about 20 consecutive months and it will not move with net migration out of town and the highest unemployment rate in the country.
Morneau measures will cool mid to upper priced RE sales and probably prices, Canada wide…even in the Kingdom of 416 unless they are all made of money…no longer, since Morneau has taken their candy away from them.
Sticky…as if. Less 420 if you are from YVR.
bsant54
Heard all this and believed all this in 2008, then prices fell 15% so they dropped the rates and prices climbed again.
Now, if RE tanks, the economy will tank, and then they’ll drop interest rates even lower.
There might be a correction. There won’t be a crash.
Money will be so tight there will be little to buy with.
Those with money to burn won’t buy into the market until real estate values come down 75%
They can smell blood now and they can and will wait it out because they know its coming like always.
The changes announced this week were long overdue, but I credit Morneau & co. for doing them. Some of it (i.e. having to declare the sale of a principal residence) is obviously the start of enhanced wealth tracking – laying the groundwork for an asset vs. income-based MSP/health care formula down the line – but for now…
I can’t help but feel that this is musical chairs and the music has stopped – in Vancouver especially. So many people with home equity LOCs with significant balances, maxed credit cards, etc. Once it sinks in that their house has peaked and they might *not* become multimillionaires after all, the problems will really start. Debt collection, divorce, bankruptcy.
How worried are Vancouverites? This Xmas will tell the tale. If people cut way back on shopping and the malls are quieter, you’ll know they’re paying down balances instead.
Expect a 75% price drop on foreclosures.
A 55% price drop on the urgent high stressed sellers.
And a 35% percent price drop across the board for the all the rest of the homeowners in debt who can hold on.
I was a realtor ( I refuse to add a registration mark to an ordinary English word) in TO during the 1980’s crash. It all came down to how potential buyers thought and had nothing to do with numbers. If folk feel that they will make money’ then they buy due to human greed. If they think they will lose money then they won’t, human fear. All very basic. In the late 1980’s the market turned in a week to nothing.
I went on closing a deal from calculating how much profit vendors will make to how much they will lose if they moved. Literally how much they would have to pay the lawyer on top of all their equity to get out. Couples sat at their kitchen tables and cried. It was hard to take for all of us. So been there and got the t-shirt.
Most vendors in Canada have never had this experience, they truly do believe that houses go up without end so one cannot blame them for being naive. Not being able to sell a house is totally out of their experience.
Next week will not be an orgy of buying as the mindset has changed and banks will not cover ‘business as usual’ as they know the rules are changing against them. Banks are not stupid. Buyers are now not stupid either.
Based on my 1980’s RE experience the only way out now is to price BELOW the competition so you will get that one active buyer. If you sell low and buy low it makes no difference overall. Hard though to accept selling low.
The folk really screwed are the ones that brought a second home without selling the first or have brought a pre-build at a high set price. My experience from the 1980’s was that buyers DID get their deposits back as vendors wanted to get their property back on the market and they couldn’t do this without releasing the first buyer even if they didn’t want to. Faced with returning the deposit and cancelling the deal and getting back up for sale in a falling market OR holding the first buyer and facing a court date in 3 years, all my clients went for number one. The TO RE Board then forbid any parties of the failed deal from talking about it!!
#5 The Nature Boy
“We are all to blame for this mess.”
——————————————————————
We always hear the masses say: “Our government is in so much debt. I don’t think they know how to get out of it.”
It has become so bad that what the masses say may be true. But our government did not get into debt simply because it did not understand how to balance its books.
It is in debt because our government’s economic policies are based on an ancient principle that tells leaders to keep the people’s stomachs full and their heads empty, and they will be easy to govern.
It is easier to go into debt and fatten up the lambs, than to engage in the art of real government.
As long as the people are able and content to only ask, “What is for dinner?” and “What is on Netflix?” and “Let’s buy a bigger house.” and “I need the new iPhone.” and “We should get that Audi.”, the wrongs of the government cannot be challenged.
Like The Nature Boy says, we are all to blame.
#113 jane24
Next week will not be an orgy of buying as the mindset has changed and banks will not cover ‘business as usual’ as they know the rules are changing against them.
……………………………………………………………………….
Why would there be an orgy of buying if you know the party is over?
As that girl and her dog in your pic can tell you, Garth, I am groping and molesting my way up the coast into the Carolinas right now.
Your people in this comment section love me and you know it.
After today I am moving up into the northeast and Canada’s next, buddy.
I will make you all wet. I’m gonna pop some tic tacs and kiss Dorothy, and grope Bandit, too.
When you’re a star, they can’t stop you, you can do anything!
I love my life, and so do your readers!
I’m a Category 5 stud. And you all love it :)
Make America Great Again!!!
Now who here is with me in looking forward to GARTH’s 2017 Predictions?? (Coming to a Dog Blog near you in very late 2016/2017) With the new Morneau Regulations in place, dust having settled for a few months, the predictions will be fresh and will be set after more gas has leaketh out of the bahg! Side request for Garth, can we get a few predictions from Lewanza and Rowat and as a Wildcard, Smoking man please submit yours as well for 2017 could be a year to remember in the History Journals!!
Public Service Announcement if you are following American Politics: (in Ontario) Sunday 7:00pm PBS FRONTLINE: a repeat of that VERY INSIGHTFUL biography on Hillary and Trump.
Quick question that requires a bit of speculation: If mortgage rates go up along with some other banking fees and costs anyone here tempting to think that interest rates on savings/investments will stay basement low low low?
Then even renters such as myself who sold his house and sits on cash at 0,08% will also pay…
Thoughts?
#27 Saul Bennett on 10.07.16 at 6:46 pm
As someone who saw GIC rates fall from 8% to 9% range about 20 years ago or so to 2% to 2.75%..”
Is that what you call falling up?
#28 Curious on 10.07.16 at 6:47 pm
Is Ontario foreign buyer tax a certainity?
When it’s announced it will be. — Garth”
Garth, I can see those eastern roots shining through…..just don’t stay “stay where you be and I’ll come where yous at”
I keep saying rural Ontario property prices will get destroyed by coming Agenda 21 plan. Today’s Financial Post has rural owners literally shivering under blankets and still getting $1500-2000 electric bills.
Only solution is joining the Kanadian Kommunist party…and party elite and faithful earn Sunshine List salaries.
Our head entertainer/drama teacher stood up and shed tears over his kids – destined to become multi millionaires too – as the elites want another 5-10% of our income over “carbon taxes’ scam.
Why do they hate our freedoms so?
#40 cramar on 10.07.16 at 7:05 pm
This year the RE market has been hot in Windsor. Now the unemployment rate confirms why. Gone from the highest in Canada to 8th lowest! Amazing change in just 1 year!!
I expect to see a lot of Alberta licence plates in Essex County this fall. No brainer. You can still get a starter home for $150k in this part of the Country. And the day Sask. got snow, we were in the upper 20s under week-long sunshine. Just stay outta the flood zones.”
Windsor???Good lord…do people really move across country just to take advantage of low housing prices and live in such an awful place….why not go full out monty, cross the river and buy in Detroit since it is even cheaper…..
Lots of Justin groupies and trolls on here of late…
In case Wynne’s post Thanksgiving expected announcement includes more than the City of Toronto, the following are commonly-officially included in the GTA: Any and all parts of the Regions of Halton, Peel, York, and Durham and the City of Toronto.
The best job in this New World Order will be as a police officer. To surpress the uprising of poverty, hopelessness and drug use. Already, Hamilton ON has a poverty rate of 18%. How long until a 1/3 of us are begging for alms in streets.
As a NWO officer you will enjoy the Sunshine list and unassailable gold plated benefits.
You might have to wear a body camera but of course when it’s needed it will “malfunction” or “not be turned on” for which you will receive a minor administrative slap on the wrist. Hey beats a real charge. The union will back you on this.
Gov is doing all this not to help citizens with home affordability but collect taxes as they are going BROKE
Same with carbon tax gig
It will get worse
@#113 jane24
“Most vendors in Canada have never had this experience, they truly do believe that houses go up without end so one cannot blame them for being naive. Not being able to sell a house is totally out of their experience….”
********************************************
Truer words never spoken.
I have many millenial friends in denial.
‘It always goes up” is their mantra.
My reply,
” I remember the 1980’s…you dont..it was ugly”
Couple of things worth noting…
1. I deal with one of the largest trustees in BC and experience shows, it’s not secured debt that is causing the problem, it’s unsecured debt aka credit cards, car loans, leases etc. What many don’t realize, you can implement stress tests, increase rates, reduce risk etc etc, but after the purchase is complete, nobody monitors debt. What was once a qualifying household income, has now ballooned out of control with unsecured debt.
2. Most don’t realize, the majority of mortgages generated through the mortgage broker channel are placed primarily with mono-line lenders. Lenders who do mortgages exactly like the banks, EXCEPT… they have to securitize/insure EVERYTHING, not just high ratio mortgages like the banks (some banks do a bit). SO this new rule placed on ALL insured mortgages will affect ALL mono-line mortgages, BUT just insured ‘bank’ mortgages. Banks just got a lot more powerful. I’m sure manliness will figure something out, but sounds like once again, the powers that be shot before aiming. Well done…
Hello,
Read some comments and article. I follow up what is going on. I live in GTA.
My 2 cents in this: Market will be going to correction, no question about it. First, sale will stop, than prices will go down. But, they will not go down fast. Let’s say, you lose your job. You have severance, EI, credit cards, line of credit. It will take some time to dry everything up. Few years at least, for some families. Another problem is income, which is decreasing constantly. So, noose will be tighter.
Some people have extra condo. When prices go down, they will try to rent it. If they walk away from it, it will be pure loss. So, they will rent it and subsidize the rent. Losing 400 dollars a month will be much more acceptable for them compared to writing off 100k right away. And, they will hope the market will recover again (happened to few families I know).
So, people who had let’s say 100k deposit bought house of 500k. So, mortgage is 400k. When price goes to 300k, they will pay mortgage for 400k. Those are the people banks and government benefit from. Best for them would be to walk away and recover, but they will not do that (if they can). They will struggle for next 20 years.
When new mortgage rules will come, banks will jack up rates slightly, just enough for people to be able to pay and hold them on short leash for long period of time. They don’t need jingle mail…
Market will recover, to certain extent. But, it will take more than 20 year, IMHO. So, in the meantime, sit back and relax.
Re picture: Indebted home owner needs to wear a wetsuit while trying to stay above water while her blog dog is dry and toasty!
I agree with those who are warning that people hoping for a crash might want to be careful what they wish for.
A soft landing seems unlikely, to say the least. If house prices crash 50% (very likely, at some point) then a deadly spiral downwards will mean a lot of very serious pain for a lot of people, and not just those who over extended (those people will no doubt be bailed out by taxpayers).
A lot of jobs will be lost. I recall the early 70’s seeing friends and family in deep depressions.
And if you think you will be able to buy a home at a low price, you better have all cash, as bank credit will dry up completely.
We all know banks will only ever lend you an umbrella when it’s not raining.
@Justaguy, post #96:
Why would anyone be happy about a crash, or at least a correction? High housing costs have driven up wage demands and , ultimately, the cost of doing business. In the short term a correction will cause a lot of hardship, but in the long run it will bring down the cost of doing business and result in more investment and more jobs in Canada. It’s LONG overdue. Do you ever wonder why the economic recovery in the United States powers ahead while other countries, including Canada, are still struggling? It’s because they got the real estate correction overwith and brought down the cost of doing business there.
#91 Mark
I agree about the debt overhang but cabt see a massive RE drop like you predict.
Last time the discount mortgage rate was 4.6% was back in Q1 2009. In the GTA the average selling home was at approx 400k back then. Factor in approx 10% inflation and 10% increase in median income so my back of enevelope calculation for GTA is median home price in the 480k range. Assume buyers and credit worthiness stays relative.
Current median price in gta is approx 750k now expect a roughly 35-40% drop. Similar in scope and velocity of what happened from Q2 2008 to Q2 2009.
That is the most recent data points of what happens when liquidity dries up.
#100 Hawk on 10.08.16 at 12:43 am
#91 Mark on 10.07.16 at 10:40 pm
A 75% decrease in price of housing would be “terminal” for Canada’s economy, it would not just affect only bankrupt home owners, but everyone, as there are a myriad number of businesses and occupations that one way or the other are linked to real estate. Won’t happen.
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Exactly. It will be terminal.
Maybe you can point out to me which other country in the world has 25 % official but in reality 40-50 % of economic activity related to housing?
With the rest retails and services (mostly financial)?
It will happen one way or another.
Through decline in prices and destruction of the currency at the same time. Accompanied with new taxes and frozen or declining incomes.
You need to understand that in open world, open trade, competitive environment the abilities of individual governments to influence economy are severely limited.
You can’t make economy competitive by decree.
Here is what our economy looks like:
– The biggest housing bubble in the history of the world. This is what kept our ‘economy’ ‘going’ for the last 8 years. Now clearly we are starting to come out of it.
– Record indebtedness – federal (including CMHC liabilities), provincial, municipal, personal.
– destroyed manufacturing
– declining commodities with our oil least competitive in the world.
– diminishing wages
– no savings
– increasing budget, trade, current account deficit.
– lack of infrastructure.
And as I was branded as being too negative, let’s focus on the fun part – Oktoberfest:
https://www.thestar.com/news/canada/2016/10/07/justin-trudeau-taps-into-kitcheners-oktoberfest-spirits.html
Cheers/Prost.
Next year in Munich/Munchen.
When you do not have to report something like the sale of a principal residence it is easy for people to make the decision to evade taxation on things like suits. Just claim ignorance.
Going forward there will be tax forms to fill out which will have line items that you report percent of house used as a suit and ask specific questions if rental income was received at anytime during ownership. Big difference not reporting this going forward when you must sign off on all the specifics on your tax forms.
The biggest impact this will have is on the move up buyer where they will have a huge tax bill to pay upon the sale and significantly less to use to buy the more expensive house. Just adds to the already huge transaction costs to buy and sell RE.
#123 lastchanceyou
Windsor???Good lord…do people really move across country just to take advantage of low housing prices and live in such an awful place…
—————————————
And what about that weird hum coming from Zug Island that’s never been properly explained?
The Rent Racket
ProPublica is exploring New York City’s broken rent stabilization system, the tax breaks that underpin it, the regulators who look the other way and the tenants who suffer as a result
Landlords Fail To List 50,000 N.Y.C. Apartments for Rent Limits
Owners are getting $100 million in property tax breaks while violating the law requiring them to officially register, and city and state officials are unable to explain why.
by Cezary Podkul and Marcelo Rochabrun
ProPublica, Nov. 5, 2015, 3:14 p.m.
That is the finding of an extensive analysis of government data covering nearly 15,000 rental buildings receiving the tax subsidies as of 2013. About 40 percent — or 5,500 buildings — weren’t listed as rent- stabilized
=============
Stephen Werner, an analyst at the city’s Housing Preservation and Development Department (HPD), has been complaining to higher-ups about the missing registrations for decades. Werner said he first told his bosses 20 years ago they were “perpetrating a fraud” by counting too many apartments as rent-stabilized in the triennial surveys prepared for the City Council and the public.
HPD analyst Stephen Werner spotted the problem of landlords not complying with rent stabilization laws 20 years ago, but his warnings were ignored. (Bryan Anselm for ProPublica)
https://www.propublica.org/series/the-rent-racket
From the Seattle Times:
“On Aug. 2nd, a 15 percent tax on foreign buyers of real estate took effect in metro Vancouver, B.C. It was intended to at least take the froth off one of the hottest housing markets in North America, ease a bubble and discourage speculative “hot money” from China.
By early measures, it has succeeded. The proportion of foreign buyers who closed deals Aug. 2-31 was only 0.9 percent, compared with 13.2 percent in the seven weeks before the tax was implemented. In September, sales fell 33 percent from a year ago. Ottawa also tightened mortgage requirements. This doesn’t mean Vancouver is now inexpensive.
Some observers say the tax has sent the hot money to Seattle or Toronto. China has a savings glut and Chinese buyers are attracted to appealing cities in advanced nations with the rule of law.
How much foreign buyers affect the Vancouver housing boom is a subject of debate. “Low interest rates, robust population and employment growth, limited housing supply and the proximity of protected areas collectively known as the Agricultural Land Reserve are among the reasons real estate in the Vancouver region is so expensive,” the Globe and Mail reported, citing a Canada Mortgage and Housing Corp. report. It is unclear how much foreign capital is bidding up Seattle prices (and improving equity of Seattle homeowners).
Old Seattle had an ugly history of anti-Chinese activism. But this is now. Would you support a Vancouver-like tax?”
http://www.seattletimes.com/business/economy/vote-would-you-back-a-vancouver-like-real-estate-tax-here/
#132 traderJim on 10.08.16 at 11:16 am
I agree with those who are warning that people hoping for a crash might want to be careful what they wish for.
————————
Real estate crash is an absolute certainty. It will come no matter what we wish for/want.
Absolutely, there will be horrendous job losses and the next generation will be a lost/bobless generation, but hey, one reaps what one sows.
No sympathy on my part whatsoever. Just sadness.
Stupidity must and will be eliminated one way or another.
Smoking Man must be holding his open house today as some bald guy wearing sun glasses was putting up open house posters on Lakeshore Blvd. in Long Branch with direction arrows.
the very first episode of the beverly hillbillies where jed was told that he is now wealthy, and should move away. She portrayed it as a bad backward place and jed thought it was great. at the end of the episode his new mansion in beverley hills he thought was a prison because of the gate and the looks.
i remember my grandmother telling me about making their own soap. i have never saw it, but owning something that is yours and your are content is better than trying to live to someone else’s view of the world. Do we really need any of these things, and with borrowed money. Jed was right it is a prison with all the trappings.
do a youtube, 55 years ago, nothing has changed. just the granite countertops, hardwood floors, and moen faucets.
“A 75% decrease in price of housing would be “terminal” for Canada’s economy, it would not just affect only bankrupt home owners, but everyone, as there are a myriad number of businesses and occupations that one way or the other are linked to real estate. Won’t happen.”
The Canadian economy was smokin’ hot with a 75% relative decrease in the prices of Toronto houses vs. the TSX back in 2000.
Falling house prices aren’t the end of the world. They’re opportunities for other sectors of the economy to shine.
Globe editorial
“What’s more, higher taxes on carbon can be used to fund things like lower business or personal income tax rates ”
Do people get paid to write this nonsense ?
Talked to a mortgage broker
And she said not many people who buy home in the 1+ million put down less than 20%.
Also it won’t change inventory
If people were renewing at higher rates than you can infer
That some people would be pressured to sell
However one can suggest that not being able to refinance could force a small portion to sell to do to debt load.
Perceptions…
I bought my first house in 1978.
Price was $85,500
(New – 1671 sq.ft. split in a new sub-division in Edmonton)
Income $50,000 (joint income)
Price/Income = 1.71
————————-
From: Stats Canada 2014 (latest available)
Median Family Income= $78,870
Houses today should cost $78,870 * 1.71 = $134,868
Hmmm.. what’s changed?
My perception… inflation. A gov’t tool for the rest of us.
Of course I now belong to the wet diaper crowd. :)
#137 Damifino on 10.08.16 at 12:01 pm
#123 lastchanceyou
Windsor???Good lord…do people really move across country just to take advantage of low housing prices and live in such an awful place…
—————————————
And what about that weird hum coming from Zug Island that’s never been properly explained?
///////////////////////////////////
ZOMBIES
Globe editorial
“What’s more, higher taxes on carbon can be used to fund things like lower business or personal income tax rates ”
More likely.. feed the political system.
Today I saw a paramedic leaving a Money Mart with an envelope in her hand.
EEEEEEK!
#137 Damifino on 10.08.16 at 12:01 pm
#123 lastchanceyou
#147 Penny Henny on 10.08.16 at 3:02 pm
I believe thats the old Bartok Science Industries facility…
I was born to zero. So was my wife but she grew faster than me? I was amazed she accepted my proposal.
I know I can be evil but I try to be better. The wedding was cheap as I chose a bar – the buffet was good but the host bar bill nearly killed me – I still have the receipts ~ $1,000. It was a small wedding.
It is too bad we could not hang together but I have no ill will. We got great daughters.
Hello Garth, excellent post. But I am not completely agree as these mortgage change rules won’t affect much. The reason is clear that these real estate agents along with banks create fake documents (T4s, employment letters, tax assessments, etc) and get the mortgage approved even for those who have no declared income, some of them are even on welfare. Rules are for the good people and they make difference only when they are applied. Getting the work done through fake papers will eliminate the effect of these mortgage changes. Today, I met with one real estate agent and he shocked me that for many deals, they create fake documents for their clients so that they can qualify for the higher mortgages. I know some in my circle and they have the mortgage approved through agent provided fake documents.
Anyone buying pre-construction condos expecting to quickly flip them is going to be in for a surprise.
Re: #52 Dave on 10.07.16 at 7:29 pm
Selling prices on mls in Calgary are about 20 to 25 percent lower than they were back in October 2014. If you make enough vulture bids you can likely buy a house for less than half of what it sold for prior to October 2014. You must only look at new home sales not the resale market.
#1113 jane24 on 10.08.16 at 3:23 am
I find it disturbing and repugnant that the word “realtor” has been registered.
Are there any lawyers out there that can weigh in on how this is possible? Realtor is a common English language word. Does that mean I can register the word fool? And possibly sue those who use that word in their daily use
Témoignage sur le retour de mon mari
Bonsoir à tous déjà je tiens a vous dire que ce n’est pas de mes
habitudes de venir sur les réseaux socio mais j’ai vécu une expérience hallucinante ce qui a changé ma vie jusqu’au aujourd’hui ayant eu des soucis avec mon mari car il a rencontré une autre femme il est partie de la maison et ma laissé tombé j’ai fais recours a plusieurs personne … … et autre pour le fais revenir mais cela a été sans suite ayant perdu déjà beaucoup d’argent j’étais désespéré sincèrement abattu impuissante je n’arrivais plus a faire
quelque chose, la vie me dégouttais sincèrement j’étais plus moi même car je l’aimais tellement fort que j’étais prête a tous pour le voir revenir vert moi mais en fin de compte j’ai rencontré
un Mr qui ma redonner le sourie et gout a la vie car en 3 jours mon hommes est revenu a la maison nous vivons le plaint bonheur actuellement je suis très heureuse car il me prouve son amour chaque jour et il est toujours la pour moi
vous qui ne croyez plus au retour affectif au retour de l’être aimé contacter le
vous qui aviez des soucis dans votre couple contacter le tout juste
Mais méfiez vous des faux marabout,parce que moi aussi j’ai rentrer dans leurs piége 3 fois par différents personnes,soit disant marabout,qui profite des gens qui sont en détresse pour avoir de l’argent et dieu merci, je suis tomber sur ce sérieux Mr qui m’aider.
Les gens qui ont des dons sont rares.
Voici sont mail :[email protected]
#140 Sheane
I agree the crash is inevitable and even necessary. And I have no sympathy for speculators or those in the financial and RE industries that are ‘enabling’ this.
My point is, the way the world works today the 1% that have governments in their pocket will not be the ones paying the bill. Those that are ‘too big to fail’ will be bailed out with our tax dollars. Meanwhile, Joe and Jane Average, who never participated in the bubble shenanigans will lose their jobs and be the ones who suffer. Not saying they will lose their home, they will just go a decade or two backwards, financially.
And COLA increase will ensure they are near the poverty line in old age.
The USA is waking up to the fact that it’s ‘us vs them’. The little guys may not win this election but they sure are shaking things up, to put it politely. I expect a lot more of that in future, and it’s not going to be pretty, for anyone.
jane24: I was a realtor in TO during the 1980’s crash.
In the late 1980’s the market turned in a week to nothing.
on closing a deal, I went from calculating how much profit vendors would make to how much they would lose. Literally how much they would have to pay the lawyer on top of all their equity to get out. Couples sat at their kitchen tables and cried.
that got my attention. I’m thinking the lives of real estate agents are going to become more stressful: stressful if you don’t sell, stressful if you do
Dan Eisner, founder and CEO of True North Mortgage, tells BNN why Ottawa’s new mortgage rules are a shock to him.
http://www.bnn.ca/winners-and-losers-from-ottawa-s-new-mortgage-rules-1.581492