The standoff

stuck-dog-modified

They listed a week ago for one point nine. In doing so, Tom and Mary thought they were being astute. Look at the comparables? Check. Stay below the two million threshold? Check. Expect scant showings and aggressive buyers? Check. Get an agent experienced in Burnaby? Check. Ensure it was an Asian dude with strong community contacts? Check.

So far, a few showings. One offer. “It was totally insulting,” Mary says. So they didn’t even bother signing it back. Why, I asked? “Because it was a joke. Just one point five.” Of course, even that would have constituted a windfall gain. But it was taken as an affront. An attack. Demeaning. The vicious assault of a down-class vulture.

So I reminded them that two or three days after they hit the market, everything changed – again. The Chinese Dudes tax was the first shoe to drop at the end of July. Wild Bill’s massive mortgage overhaul was the second. On Monday all insured buyers faced a stress test, for the first time, equivalent to a 2% surge in mortgage rates. Brokers found themselves suddenly hobbled. And already sales had been catapulting lower across the Lower Mainland since the late Spring. The evidence that BC real estate peaked last March is now undeniable.

It’s not over yet, of course.

On Friday the T2 gang made good on a promise which has the Bay Street bank titans’ shorts in a twist. After more than six decades, the government is no longer willing to shoulder all of the risk for mortgage defaults. It’s huge news. Heretofore lenders have merrily doled out billions to moisters with no savings, no financial track record and nothing but house lust in their young eyes – at the bottom of the rate chart. In fact, kids with nothing but hormones and 5% down have often received preferential rates – simply because virtually every dollar of their loans was guaranteed by the government with insurance paid for by the borrowers.

How sweet is that? How could there possibly be less incentive to worry about risk? Or more moral hazard?

Now it changes. The feds have just released this consultation paper which seems designed to lead to one conclusion: the bankers will be forking over a deductible, likely 15%, of the loan losses that might occur. And occur they will. Everyone knows we’re in the final, painful phases of a housing bubble which has wildly inflated residential real estate, creating mountainous debt even as the economy slumps, unemployment rises and wages mold. Given government actions like the stress test and the China tax, and the fact fewer and fewer people can now afford houses, this market’s doomed. A swollen stream of mortgage failures has never been more certain.

Imposing a deductible will cost money. Higher costs will be passed on to borrowers, so it’s a fair assumption (since the banks have said as much) this will increase mortgage rates when implemented, likely in 2017. Meanwhile it’s estimated the new stress test alone will remove about 20% of buyers from the market. On Friday CBC carried an interview with a financial planner telling Millennials they’ll just have to get used to having babies in apartments. What a cruel world this is becoming when people without money can no longer buy $800,000 houses with borrowed downpayments, financed by 2% loans.

Anyway, it’s done. Ottawa has formalized a process with an inevitable conclusion. The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down. They think a soft landing is possible. If so, it will be the first asset bubble in history not ending in tears.

Meanwhile in Burnaby, and Richmond, Surrey, Poco, North Van or the Westside (where sales this month are reduced 93%) it’s a standoff. Sellers like T&M think their house is worth exactly the same as it was two months ago, fervently believe this is all faery dust nuisance that’ll blow away, and have no intention of being screwed out of their gains. Buyers, like the one who ventured an offer and was rebuffed, see a market that’s withering, populated by vulnerable sellers. If prices will be lower every single month – why not bid down?

‘There may soon come a day,’ I said to Mary in words she did not want to hear, ‘that you’ll wish the one point five offer was back sitting on your kitchen table.’ She was silent.

Pride still goeth before a fall.

172 comments ↓

#1 Randy on 10.21.16 at 6:30 pm

Can i buy that dog ?

#2 First on 10.21.16 at 6:34 pm

DELETED

#3 torontorocks on 10.21.16 at 6:36 pm

The same audaciousness that has moisters thinking they’re entitled to money backed by me, the taxpayer are those same geezers waiting for the equity recap of their house. They’re both clueless, self righteous and entitled.

#4 Jimmy on 10.21.16 at 6:39 pm

‘The pumpkin seeds were Faery dust’ she sayeth while goeth downtown.

#5 I am in C on 10.21.16 at 6:42 pm

My sister has bought 3 houses in the last 15 years. The first 2 were bought with 10 % down. The bank rubber stamped the mortgage approval. The third house she bought with 25 % down. Then the bank did a careful due diligence of her application. She was surprised and couldn’t understand, until I pointed out to her that with 25 % down, the bank is now taking the risk , instead of the taxpayer

#6 Mark on 10.21.16 at 6:47 pm

“New mortgage rules that took effect on Monday will likely mean many millennials will have to raise infants in apartments, says a Toronto financial planner.”

Oh the horror, babies raised in relatively affordable apartments instead of in SFH’s financed with boatloads of debt that ensures the family will spend the next few decades of its life in de facto indentured servitude to bankers!

Ironically those families who are raising babies in apartments will, due to changes intended to reign in subprime credit, have a much better chance of owning a SFH on a sustainable basis in the future. An apartment-renting family at this point is saving literally thousands of dollars per month in direct and opportunity costs compared to now-significantly-in-decline Vancouver/Toronto housing. Balanced portfolios have outperformed housing for at least the past 3 years, and with major stock market indices like the TSX priced beneath long-term averages, there is no end in sight to the probable outperformance of investments instead of home ownership.

#7 Bank of Millenial on 10.21.16 at 6:47 pm

And here I am holding an undiversified, international value stocks with growing dividends. Damn, I’m a sucker for this one.

Ill be hiding in short duration TIPs if anyone needs to find me.

#8 You know what they say. . . on 10.21.16 at 6:48 pm

Back in “normal” times agents use to say “Sometimes your best offer, is your first offer.” But since the market left normalville a long time ago, greed has clogged the ears of many. But greed is a terrible master, and only leads to ruin. They should have been greatful to get a 1.5 offer, but they missed the boat. If your going to play with fire, chances are you are going to get burned, in Burnaby.

#9 Boombust on 10.21.16 at 6:50 pm

Excellent post, Garth. It sums up everything quite “swimmingly”…

#10 bdwy sktrn on 10.21.16 at 6:50 pm

it’s a standoff. Sellers like T&M …Buyers, like the one who ventured an offer and was rebuffed….

——————————–
oh c’mon bossman garth, this is vancouver the sexy, we all know exactly who blinks first in lotusland.

the most withered and stale listing -comm drive hood- has been up since the spring. ask 2.0 for a lot worth 1.3 max at peak. like the handful of other overpriced lots around , not a single one has dropped the ask a penny.
they seem happy to wait.

#11 Mark on 10.21.16 at 6:51 pm

“She was surprised and couldn’t understand, until I pointed out to her that with 25 % down, the bank is now taking the risk , instead of the taxpayer”

Actually there’s a very good chance, especially with her only 25% down, that the bank went out, with their own money, and bought CMHC insurance against the loan.

I’ve heard of the banks taking out CMHC subprime mortgage insurance against loans with as much as a 55% down-payment brought to the table. Of course it logically follows that the banks were using proprietary risk models to determine which loans, to which sort of people, and in which cities they maximized the risk offloaded to the CMHC, and hence, the gain in value that bank-paid CMHC subprime insurance provided.

#12 TurnerNation on 10.21.16 at 6:51 pm

#181 Mark I see the same thing.. Front page comments # vs. inside differs. Must be the Smoking man Deleted effect.

#13 crdt on 10.21.16 at 6:55 pm

The memory of the quick recovery from 08 will trap a lot of folks into a false sense of security. Now that the unsuitable and less financially literate are removed from the stampede, the ones who against their gut feeling jumped in will have to decide how far they want to ride on the real estate bus. From a psychological perspective, watching society as a whole move through the stages of acceptance is amazing. I wonder if the FOMO is stronger than the FOSI (fear of staying in). Potential loss of an opportunity is far less painful then a sudden realization of an actualized loss. A nice to have compared to a comprehensive screw job package, lasting for what would appear to be an eternity. Don’t know what is worse, a delusional population entertaining fantasies of a real estate dynasty, or a population of over indebted every day guys trying to bridge the gap between the hey days and the new reality.

#14 Nero on 10.21.16 at 6:56 pm

Ahaahaha!!!!! 1.5 million to live in Burnaby!!?
WTF?

Pass me my fiddle…

#15 Smoking Man on 10.21.16 at 6:57 pm

Chuck some liberal Carbon Tax and you have the makings of a train wreck, been a real-estate bull here for what the last 8 years. I’m now neutral even in the 416.

The free trade deal with Europe dead. The minister leaves the meeting in tears, crying, no kidding, T2 cabinet made up of easily triggered snowflakes and political correct cabinet ministers. All idiots, the men and woman equally.

Wynne, a total lost cause.

#16 Lulu on 10.21.16 at 6:58 pm

Trick or Treat? Well well well well…..It must be the festive season coming, everyone want their early Christmas present, BUT Halloween is not here yet, you can’t skip the scary one first before getting your sweet.

It’s just the beginning folks… Spring 2017 is gonna be a meltdown everywhere. Happy Halloween!!!

#17 Md on 10.21.16 at 6:58 pm

Pride is a terrible thing. Hopefully a greater fool will by her property. No shortage of fools out there.

#18 TurnerNation on 10.21.16 at 7:01 pm

Market Fundamentals changeth before a fall.
I’d be boolish on TSX, Preferreds, Commodities.
(I follow and sometimes trade ETFs for Cocoa, Coffee, Steel, Wheat. (In the US: JO, NIB, SLX, JJG)

#19 jay on 10.21.16 at 7:02 pm

http://www.bnn.ca/vancouver-detached-home-prices-to-fall-20-correction-will-begin-soon-economist-1.589735 Lets hope it happens , this will raise our standard of living with every price drop.

#20 WUL on 10.21.16 at 7:04 pm

Brad Lamb is annoyed at Rachel’s government. Actually more than annoyed. He is threatening to never build a condo development in Alberta again.

Ms. Rachel is proposing a regulation that would require a mandatory occupation date in a purchase and sale agreement for a pre-build condo. The gall to expect that when a purchaser buys a condo, the buyer is entitled to know when they might actually move into it.

http://www.cbc.ca/news/canada/edmonton/proposed-alberta-condo-legislation-would-bankrupt-industry-developer-warns-1.3814630

#21 CanadianOne on 10.21.16 at 7:08 pm

Thought I post it here to get a diversified conversation going… I know I know…. housing has been the meme for days in the minds of many and governments regional and federal… but I suppose all of the world isn’t a basket case.

Any I take on the safe(r) stuff.

http://247wallst.com/investing/2016/10/19/saudis-china-dump-treasuries-foreign-central-banks-liquidate-a-record-346-billion-in-us-paper/

Regards
M39AB

#22 bdwy sktrn on 10.21.16 at 7:10 pm

#1 Randy on 10.21.16 at 6:30 pm
Can i buy that dog ?
——————————
he’s got plenty of aussie or border collie in him.

smartest buggers going.

my border collie pup walked off leash perfectly at 9 weeks the day we brought her home – she can sit outside the gate and cross our street unsupervised. she’s 9months old. probably knows more people in the hood than anyone, everybody stops for some love (like 20-40 people/day)
chewed the armrest in the wife’s car today, though.

got this happy playful yet submissive thing going where she can approach even the nastiest dogs and go in for a sniff without getting in trouble.

juno is her name (copied a poster here!)

#23 Gimme Shelter on 10.21.16 at 7:10 pm

There are 2 houses on my street that have sat for months. One has no backyard, the other needs head to toe renovations and in an area with junkies, prostitutes, and a revolting dollar store around the corner. Welcome to Kingsway and Knight. Both well over 2 million. Open house after open house and no offers. East Van really needs to get its head out of its ass.

#24 Goldie on 10.21.16 at 7:10 pm

“A swollen stream of mortgage failures has never been more certain…”

Cryptic. Disturbing.

#25 Victoria Real Estate Update on 10.21.16 at 7:11 pm

In a down market it’s those who have to sell that bring the entire market down.

Nobody has to buy.

There’s always people who have to sell.

This is the way it went down in Japan, Ireland, Greece, the US, etc.

It isn’t different in Canada.

#26 45north on 10.21.16 at 7:12 pm

The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down. They think a soft landing is possible.

Bill Morneau deserves credit for his actions. The Conservative Government was afraid to prick the bubble. Rightly so because a rising market hides many sins. When the tide goes out, you get to see who’s swimming naked.

from yesterday: Kool-Aid: Canada needs to invests in the future. Housing isn’t it.

no housing isn’t it and the sooner we see that the better!

There may soon come a day that you’ll wish the one point five offer was back sitting on your kitchen table’

indeed there may. I read that the first offer you get is the best

#27 Drenched in Delusian on 10.21.16 at 7:12 pm

Contrary to what the Great Garth in his ivory tower in 416 believes, Vancouver is the only place in the country not in a bubble. Yes it is Ironic that the place with the most expensive real-estate is not in a bubble, but we proved that with the effects of the foreign buyers tax. Yes it is different here. Prices have not, and will not move an inch here in central Delusia (The burbs maybe). It was always real money coming into the city, and that money won’t be leaving any time soon. I’m already starting to see the sales pickup again.

#28 Realtard on 10.21.16 at 7:13 pm

It’s like baseball, you never swing at the first pitch. Sure, that might mean strike one, but you have to see what the guy can throw before you step in.

Analogy decoding key:
“It’s like baseball” = “It’s not like baseball”
“first pitch” = “first offer”
“strike one” = “whoops! I just lost a lot of money”
“what the guy can throw” = “market sentiment”
“step in” = “hit that offer hard and hope to Dog the financing comes through”

#29 boonerator on 10.21.16 at 7:15 pm

Time to read Kahneman and Tversky again about the persistence of loss aversion, in the face of all evidence.

#30 boonerator on 10.21.16 at 7:16 pm

Even weirder, as with T&M when it is likely not a loss.

#31 S.Bby on 10.21.16 at 7:18 pm

T&M need to realize that Burnaby house prices are declining by $1,000 a day. My elderly neighbour’s teardown dump of a house sold in the late spring for $1.9 million (ask was $1.65 million) and now if it could even be sold again, the new owner would be lucky to get $1.4. That is a $500,000+ drop in just 5 months. Interestingly, the house was bought by locals and no one has ever moved in since the purchase. I’m thinking that they have now realized they made a huge mistake and are trying to figure out what to do.

There are currently 18 houses for sale in my immediate 1 km area of Burnaby – Deer Lake.

#32 Harbour on 10.21.16 at 7:18 pm

I guess the fake Property Brothers will have to go back modeling underwear

#33 Cory on 10.21.16 at 7:20 pm

If the roles were reversed Mary and her counterpart would only be willing to pay the 1.5 if someone else owned it and the “audacity of the seller to expect more”!!

Funny how it works.

#34 mouldyinYVR on 10.21.16 at 7:21 pm

“What a cruel world this is becoming when people without money can no longer buy $800,000 houses with borrowed downpayments, financed by 2% loans.”

…not a moment too soon……..

#35 Victor V on 10.21.16 at 7:21 pm

http://www.bnn.ca/vancouver-detached-home-prices-to-fall-20-correction-will-begin-soon-economist-1.589735

Vancouver’s detached home prices will fall 20 per cent over the next year as the number of homes changing hands in the city continues to plunge, National Bank Financial said in a report on Friday.

“In the case of Vancouver, we think a price correction will begin soon,” National Bank economist Marc Pinsonneault said in the report.

While a correction of that magnitude sounds dramatic, the bank characterizes it as “moderate” given how high prices have climbed in the city.

#36 Findyou worth.com on 10.21.16 at 7:21 pm

Homes were never 2 bangers. Media just convinced fools to throw their lives away by paying that much. We sold at 2 bangers and that was probably 800 dogs more than it should have got. Sail away.

#37 Trojan House on 10.21.16 at 7:21 pm

Ahhh, residential real estate – throw all common sense out the window. It’s all emotionally driven.

#38 Heddok on 10.21.16 at 7:25 pm

Garth
Please keep us updated on Tom and Mary if confidentiality allows you to. I’m really curious as I see this same mentality on VanIsle

#39 bubu on 10.21.16 at 7:26 pm

Last year I went to a show home listed for 659k in Edmonton.. The price was lowered from 679k. I asked if it is negotiable and the realtor told me yes bit don’t expect something like 600k… This year the house was still on the market for 610k and no offers… I bet 600k would look good now…..

#40 Derek R on 10.21.16 at 7:27 pm

It’s been a while since I last distributed the GarthFAQ. So here, once again, is a link to help anybody who isn’t sure who [email protected] is, or whether they should worry because they don’t have any lawn ornaments.

The GarthFAQ

#41 RocDoc on 10.21.16 at 7:28 pm

Hopefully all these governmental measures prevent a severe hard landing as occurred in the US. Even a “soft” landing will likely cause much individual pain for many Canadians.

#42 Keith in Calgary on 10.21.16 at 7:28 pm

Hell hath no fury like a woman…….error……..homedebtor scorned.

#43 Tim on 10.21.16 at 7:28 pm

re: 20 WUL on 10
“Ms. Rachel is proposing a regulation that would require a mandatory occupation date in a purchase and sale agreement for a pre-build condo. The gall to expect that when a purchaser buys a condo, the buyer is entitled to know when they might actually move into it.”

Heaven forbid we structure housing as a place to live instead of an investment for greedy speculators. The nerve of Notley..

#44 CMHC has got to go and free markets for all! on 10.21.16 at 7:28 pm

People go and email wild Bill and T2. Don’t be lazy. Let them know CMHC should be shut down and all the risk should be on the lenders and not the taxpayers. Let the free and open markets properly price in risk. Please go write to them.
mailto:[email protected]
mailto:[email protected]

#45 AACI Homedog on 10.21.16 at 7:31 pm

Aaaagghhh !!!
They had a greater fool on the hook and let it get away !

#46 crowdedelevatorfartz on 10.21.16 at 7:33 pm

I drive all over the LowerBrainland almost daily.
Seeing more and more “For Sale” signs popping up. Not too many are getting “Sold” stickers slapped on them.

#47 Shawn on 10.21.16 at 7:36 pm

The $CAD is going to quickly go below 70 cents. It’s time to get long the S&P500 and/or $US now. The best investment a Canadian can make is to simply buy a Vanguard S&P500 ETF (ticker is VFV).

#48 BS on 10.21.16 at 7:44 pm

the bankers will be forking over a deductible, likely 15%, of the loan losses that might occur.

The banks can fund mortgages with deposits and will just increase mortgage rates and absorb the losses paid for with higher rates. It will be the monoline lenders that get hammered. They sell off their mortgages to fund new ones (which previously were 100% insured). An 85% insured mortgage is worth a whole lot less to an investor who buys it not knowing the credit risk since it is no longer CMHC backing it 100%. No way investors will accept a potential loss of 15% on a 2% return mortgage backed security. Either the monoline lenders die off leaving all mortgage business to the banks (less competition = higher rates) or all mortgages will be significantly higher to compensate investors for the potential 15% loss. Likely both.

#49 acdel on 10.21.16 at 7:44 pm

15%, ha, it should have been minimum 35%, no tax payer should be responsible for this calamity!

#50 Paully on 10.21.16 at 7:45 pm

I hope that you will let us know what ultimately happens with their sale. I can’t wait to hear the whole story once it is done!

#51 Context on 10.21.16 at 7:46 pm

The greater fools in Toronto who own condos are sitting on the fence waiting for confirmation to hold or sell. By the time the confirmation comes it will be too late and they will list hoping to cash out with the herd rushing to the same door. Panic will take place with a bidding war to get out cutting the price just like everyone else, but the buyers are hiding. In the meantime they have made no effort in looking at rental options in case an offer is made and don’t have a clue what to do because the closing clock will be ticking.

#52 Dan on 10.21.16 at 7:47 pm

I’ve posted every now and again, especially when Garth really hammers home the inevitable… 1.9 million, get a grip, the whole market need a reality check and everyone needs a new hobby.

Canada= I needed a place to live in 2002 so I bought in Burnaby, Surrey, Langley, Poco, Abby etc., now I m a real estate guru, and I know exactly that my place is worth 1.9 mil, 1.2 mil, 1,0 mil 899k and 750k, are you friggen kidding me. Who cares if the bank owns half (if you bought in 2000-2005) and probably 70-90% if you bought after 2010. It’s all yours.

I want to go on record saying Canada takes the cake when it comes to real estate bubbles. Even out did the USA bubble. Well done!

And don’t underestimate the mental aspect or impact of watching your 1.9 mil windfall (deserved windfall because you invested so wisely) turn into 1.2 or even 400k turn into 320k and so on, it won’t be pretty.

Losing a few grand sucks, losing a few hundred grand and even for many, 70-80k and up might be life changing. Good luck with that. Again, glad the insanity is coming to an end.

#53 spaceman on 10.21.16 at 7:49 pm

So this is priceless, CMHC isures the mortgage for the bank, the bank doles our money like theres no tommorrow, creating this windbag of a bubble, and when the Can Gov get wind of what has already happened, they pull the pin? But they are still on the hook for all the current CMHC back mortgages right?

What happens when I renew? Is my mortgage stll covered? I paid for it afterall…

#54 Same Same on 10.21.16 at 7:52 pm

Hey VREU,

Where is your monthly assessment of the ‘declining’ Victoria market?

The media is even saying its up from the foreign buyers. Remember the ‘domino effect’ from Vancouver’s prices that you were warned about for many months – looks like it is materializing.

Don’t say you were not warned!

#55 Let's get real people on 10.21.16 at 7:54 pm

Toronto is delusional as well . . .all these people in million plus dollar 100 year old rotting semis, renovating, renovating, renovating. All that renovating money is coming from their credit line. Please! People are suffering from the wealth effect around here. It’s not uncommon in my area for people to have million dollar mortgages (I’m not making this up either). It’s all a house of cards, when the market collapses on theses debt snorters being close to the downtown core, will not save them!

#56 HoweStreet.com on 10.21.16 at 7:57 pm

Hilliard MacBeth (Author) says Vancouver prices tumble, soft landing unlikely.
http://www.howestreet.com/2016/10/20/vancouver-home-prices-tumble/

#57 Rents Up Up and UP on 10.21.16 at 7:57 pm

All you sideline renters get ready for increased rental rates! You thought you were astute investors sitting on the sidelines for years having cheap rent – but guess what rents in Metro Vancouver and the overflow areas for urban refugees (Island and Kelowna) are way way way up!

Guess what is going to happen to rental rates and vacancy rates as houses start to decline and there are more people looking to cash out? The pool of renters just got a lot bigger and the pool of living units just got a lot smaller!

You will end up paying more for increased rents over the next couple of years than the amount you will lose in house prices. Careful for what you wish for!

#58 Victoria - the original on 10.21.16 at 8:01 pm

A lot of people in victoria seem to think that Victoria is going to be the new Vancouver and our prices will just keep going up and up. They think people from Vancouver have “discovered” Victria and all want to move here. I mentioned jobs or lack thereof… one person said – oh there is the government …..and some tech…..I guess this is the the Denial stage ..

Thoughts?

#59 Aggregator on 10.21.16 at 8:04 pm

#26 45north – Bill Morneau deserves credit for his actions.

If anyone bothered reading the proposal it states that the deductable is post default. That means a bank who makes a claim with CMHC would have to pay a deductable after they receive payment from CMHC (the taxpayer). Nice ponzi scheme.

The government has no intentions of letting prices decline. They said cool, not crash. Like F said before prices went even higher.

#60 The Real Toronto on 10.21.16 at 8:05 pm

People are living way beyond their means. Racking up debt, living some crazy fantasy lifestyle, thinking that because the live near the heart of the city, they are fine. They are not fine. I live in a very nice hood, and families here are just shuffling debt, trying to keep up with each other’s granite countertops driving their leased cars, going to the outlet malls spending on the stupidest things. Name brand labels, so stupid really. It’s all just smoke and mirrors. Many of these people when they will have to renew their mortgage will not even qualify at the new standards. And just wait to their “imaginary” wealth starts fading away. People will be running for the exits or go down with their ship. Either way, there will be heartache.

#61 };-) aka Devil's Advocate on 10.21.16 at 8:06 pm

‘There may soon come a day,’ I said to Mary in words she did not want to hear, ‘that you’ll wish the one point five offer was back sitting on your kitchen table.’ She was silent.” – Garth T

As we say in the biz; “Your first offer (offer received by buyer) is generally your best offer”.

#62 Sebee on 10.21.16 at 8:07 pm

#14 Nero

You owe me $6 to dryclean this wine that ejected form my nose onto my shirt.

#63 JSquared on 10.21.16 at 8:08 pm

A coworker of mine trying to sell their SFH in Burnaby has had 4 open houses over the past couple on months, no bites, not even any interest. New luxury condo already bought (empty nesters, downsizing). They refuse to lower ask price on the house “would rather rent it out for a year than sell it for less than what it’s worth.”

#64 Please Rent up up on 10.21.16 at 8:10 pm

The rents won’t go up, because all the speculators, when they find the music stops, will become reluctant landlords. When the ship starts sinking they will take anyone who can pass a basic credit check. Been there done that in the 89 crash. When your property that you thought would just go up and up, starts going down faster than you can catch your breath, you will rent to anyone with a pulse. Wake up, be informed and don’t believe what the media feeds you!

#65 TCContrarian on 10.21.16 at 8:13 pm

‘There may soon come a day,’ I said to Mary in words she did not want to hear, ‘that you’ll wish the one point five offer was back sitting on your kitchen table.’ She was silent.
************************************************

“Greed is good” – until it kills you.

On another note, moving again…

Current landlord ‘demanded’ a rental increase (within the legal limits, to the penny – no rounding for this guy!) As if I ‘had to’ accept it or else…

So, I looked around and found a better situation. Hopefully, he’ll find new tenants as good as us. But then again, he may end up with a night-mare.
We all takes our chances…

TCC

#66 Chaddywack on 10.21.16 at 8:14 pm

I hope these two get smoked and end up settling for $975k 18 months from now.

#67 not 1st on 10.21.16 at 8:25 pm

Garth, you once said you would have so much stuff to talk about after Canadian RE cratered. Well….??

#68 D.D. Corkum on 10.21.16 at 8:25 pm

The proposals are not really that harsh. Consider the following worst case scenario:

– Buy a $316K home with $15K down-payment;
– Immediately fail to make any payments, defaulting with $300K remaining loan principle;
– The bank forecloses immediately, but due to severe correction can only sell for $150K; and
– The bank discovers you have zero other assets for recourse (or are in a non-recourse province).

In this scenario, CMHC would still pay 90% or 85% of the $150K net loss (depending on strategy chosen).

Now throw in just a tiny bit of monthly payments (who defaults in the first month) and make the correction a little bit more modest. No bank is going to lose much money even with this proposal. This will only make banks blink at the extreme marginal customers.

#69 Joe2.0 on 10.21.16 at 8:30 pm

Wait until the herd gets nervous and start dropping house prices.
Stampede exit 2.0
Followed by late sellers remorse.

#70 Jon on 10.21.16 at 8:31 pm

Left Canada a few months ago. Today was cool, only 20C. Back up to 27C next week. Earning USD. Loonie tanking, dollar rallying, the way I look at it I got a raise today! Will buy some loonies when they hit their seasonal low this winter. #eningeeringExpat #trudeauRefugee

#71 D.D. Corkum on 10.21.16 at 8:39 pm

#59 Aggregator on 10.21.16 at 8:04 pm

“If anyone bothered reading the proposal […banks] would have to pay a deductable after they receive payment from CMHC (the taxpayer). Nice ponzi scheme”

You must be talking about figure 5 of the proposal. This is saying that purchasers of securitized mortgage assets would continue to be protected 100%, rather than sharing losses with the bank’s shareholders.

This is likely intended to prevent the problems that occurred in the USA ten years ago with packaging of mortgages and alleged misrepresenting of risk to investors who suffered from information asymmetry compared to the banks.

When designing a deductible to prevent moral hazard, it helps if the losses will be imposed on the institution who actually generated the loan. ie, the bank (and its shareholders).

#72 Joe2.0 on 10.21.16 at 8:40 pm

#58
Thoughts…

I think that many smart people in Vancouver and area will or have sold.

Within our huge aging demographic many people have retired and realized their profits will buy 2-3 times the house or houses in places like Victoria, Sunshine Coast..,

Retired with money in the bank and a paid off home.
What a concept…

#73 Harbour on 10.21.16 at 8:44 pm

#58
A lot of people in victoria seem to think that Victoria is going to be the new Vancouver and our prices will just keep going up and up.
………………………………………………………………………..

Not until you have a 6 lane bridge built to the mainland.

#74 Roial1 on 10.21.16 at 8:44 pm

The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down.-(G.T.)

Sorry Garth, but I must call you on this statement.

It was (as you well know) the Harpo Government that blew this bag.

Now a LIBERAL government is faced with the deadly debris.

I just hope that when all is said and done we are still an independent country and not some broke states.

‘Governments’ – plural, all of them, every level. — Garth

#75 Bob dog on 10.21.16 at 8:55 pm

Shakea! When the walls fell.

#76 mark on 10.21.16 at 9:00 pm

Tom & Mary might want to consider the $1.5 today will look like a dream price in 2 months.

#77 fleabitten monkey on 10.21.16 at 9:00 pm

#54 same same – the media??? Lol post me the link so I can laugh even louder.

#78 the Hammer on 10.21.16 at 9:04 pm

Pride goeth before a fall…something I heard often from the old Deutch carpenters I worked with when I was young. It’s good… sort of a cautionary ‘don’t get too cocky’ and practice due diligence, avoid mistakes. Hubris seems to me often to be the ethos of our age, whether it be in real estate or politics or anything. Coupled with ignorance, you have a potent cocktail for mistakes. Trump is, of course, hubris personified. Judging by what he says and how he says it, ignorance is right there as well. The people he speaks to and who listen to him is what is scary. The idea that he has anything up his sleeve that might make America anything than more accessible his own snake oil sales speaks to a sort of collective ignorance that is truly frightening. I get the frustration with the current state of affairs in Washington, but this guy? Really? I can think of other species of primates, or ungulates for that matter, I would rather see as president.
PJ O’Rourke gave a talk a number of years ago at the NY Public Library where he discussed the difference between ‘seriousness’ and ‘earnestness’. Seriousness he saw as good. Earnestness he saw as stupidity that has gone to college. (Did anyone think of MF just now..?) Personally, I will continue to monitor my own hubris as best I can. It has gotten the best of me a couple times in my life, I have generally done pretty well. And, I will try and remember that there is more than one herd of ungulates on the steppes of humanity. Anyone with a PHD in Herdonomics would know that. (Herdonomics sounds like something from the Social Sciences post 1968…does that put it on par with gender studies? History would have been a better choice than either…) The election will turn out how it turns out, so will Canadian real estate. (Which I got out of in 2015…hee, hee, hee… I hate to see my Canadian dollars lose value, as I was hoping to relocate back in the US. Spending a fair bit of time there, I’ll let you all in on a secret, It ain’t nearly as bad as Donald says it is. It is actually quite nice, much like Canada. Work hard, enjoy life, plant trees and grow your own tomatoes, I say. Il faut cultiver votre propre jardin… or something like that. Fiddling with your devices is a form of masturbation, it is not work.

#79 bdwy sktrn on 10.21.16 at 9:08 pm

#31 S.Bby on 10.21.16 at 7:18 pm
T&M need to realize that Burnaby house prices are declining by $1,000 a day. My elderly neighbour’s teardown dump of a house sold in the late spring for $1.9 million (ask was $1.65 million) and now if it could even be sold again, the new owner would be lucky to get $1.4.

————————
here is likely your neighbour’s house:6108 BERWICK STREETV5H $1,628,800sell $1,890,000

here is the SAME (tiny bit smaller) lot , one block over , same side of the street for sale today.
5862 BERWICK STREET, Burnaby, British Columbia
$1,790,000

i guess your 500k drop is bullshit. go offer them 1.4 and see what they say.

1.68m for the same lot in metrotown (would you choose it over your area?)sold last week at 100% of ask – 7288 Waverley Ave, Burnaby

so i guess you really are full of it.

#80 andre demers on 10.21.16 at 9:15 pm

#44

Done.

#81 Houseless in Vancouver on 10.21.16 at 9:23 pm

Just had drinks with a mortgage broker. I’m insane to rent says she. Even with a modest 2% increase in property values you’d be hundreds of thousands ahead in just five years. How about an immodest decrease of 5% says I? More proof that I’m insane. Time has a way of telling.

#82 chopstix on 10.21.16 at 9:23 pm

re: ”There are 2 houses on my street that have sat for months. One has no backyard, the other needs head to toe renovations and in an area with junkies, prostitutes, and a revolting dollar store around the corner. Welcome to Kingsway and Knight. Both well over 2 million. Open house after open house and no offers. East Van really needs to get its head out of its ass.”
————————-
asians love east van…what can you say…i agree with you, however…that area of kingsway and knight (a few km from me) reminds me of the danforth (woodbine/main, coxwell areas)…nothing special at all.

#83 Houseless in Vancouver on 10.21.16 at 9:28 pm

Pretty easy-to-use rent vs buy calculator.

http://www.getsmarteraboutmoney.ca/tools-and-calculators/buy-or-rent-calculator/buy-or-rent-calculator.aspx#.WArAgPkrK00

#84 Smoking Man on 10.21.16 at 9:31 pm

Pre-Bourbon Poem dedicated my Liberal loons.
dedicate this poem to James. It’s rough but done in real time with no edit. Need to give him something to bitch about.
…………

Today each victim I know controls the strings that
they scream hold them in place.
Their eyes are sunken deep in their face,
and they divided the truth with religion and race
and only believe in their truth in their time and their place

And there is no reason left for them to breath
for the victims I know carry tricks up their sleeves
and they threaten with sex oh and they threaten to leave,and they force you to lie, so you say you believe

Oh the victims I know are so cold and stale
and they are so common and see through like the breath I exhale.

And they blame others for what has been done to them
and they misuse words like love , cherish and friend.
As the cry and complain that they have lost their way,
they bullshit their own dreams, and never speak of today.

For it’s always tomorrow you here the victim’s cry
they don’t live for the moment there just living to die
and they cannot rise no they need your hand
and they bite down so hard, now you cannot stand
and your blood may run thick while there runs so thin
that you lose sight of the clock, where did this begin

This victim a plague who says they have a right
but hide in a corner when its time to fight
for truth , a confrontation they cannot bear,
and outside opinion they say is unfair
and all that matters is all the wrong done them
for the one who blames, can never find empathy again
so they must be just existing ……

#85 John on 10.21.16 at 9:38 pm

#44
People go and email wild Bill and T2. Don’t be lazy. Let them know CMHC should be shut down and all the risk should be on the lenders and not the taxpayers. Let the free and open markets properly price in risk. Please go write to them.
mailto:[email protected]
mailto:[email protected]
_____________________________________
Done. I let them know the proposed risk sharing doesn’t go far enough. It’s a good start.

#86 Love My Kia on 10.21.16 at 9:41 pm

#20 WUL on 10.21.16 at 7:04 pm

Thanks for that link on Brad Lamb refusing to build in Alberta. I can see the thank you cards from Alberta residents piling up on his desk.

Score one for Notley for protecting Alberta condo buyers from being ripped off.

#87 Ronaldo on 10.21.16 at 9:43 pm

#8 You know what they say. . . on 10.21.16 at 6:48 pm

”Back in “normal” times agents use to say “Sometimes your best offer, is your first offer.”

——————————————————————
That proved correct in my case several years ago. I moved to another city to take a job and thinking that my house would sell quickly, I purchased another at the location I would be moving to. Before placing the home on the market I was given an offer by a fellow I worked with which was 15% below my appraisal. Of course I turned it down thinking that I could get the appraisal price. I had the home listed with a local realtor. We moved to the new location and 7 months later, no offers. In the meantime, house is sitting empty and winter is coming on. I ended up becoming a reluctant landlord and subsidizing a tenant. It took 7 years to sell and the price ended up being the same as what I’d been offered privately 7 years before. There will be many stories like this in the coming months and years in certain parts of the country especially if the country goes into recession as it had back when I was trying to sell my place. An expensive lesson.

#88 Mark on 10.21.16 at 9:44 pm

Our buddy Mish has just pointed out that the CAD$ GoC yield curve is now in a partial state of inversion:

https://mishtalk.com/2016/10/21/canada-recession-signals/

“The 3-Month bond yield is 0.49% and the 1-year yield is at 0.53%. This makes the yield curve partially inverted as the 2-year yield is less than the 1-year yield.
Combined, these are strong recession signals for Canada.”

This is ample reason to believe that the CAD$ is going much higher and policy rate cuts as well as some sort of QE will be required in the not so distant future as the RE downturn accelerates.

#89 Ronaldo on 10.21.16 at 9:48 pm

#72 – Joe2.0

”Retired with money in the bank and a paid off home.
What a concept…”

Unfortunately, some poor fool will be strapped to the gills paying for that retirement.

#90 Context on 10.21.16 at 9:51 pm

#57 Rents UP:- This is not always the case in Toronto as a huge Heritage Complex owed by a REIT just came up for November 1st. All renovated with huge rooms and this one bedroom is going for $1,280 in a prime area with underground parking for $107.

#91 ej on 10.21.16 at 9:55 pm

Look at all the supportive comments here below; looks like the average Joe wants this CMHC change:

http://www.theglobeandmail.com/real-estate/the-market/ottawa-proposes-sweeping-changes-to-spread-mortgage-risks/article32467860/

#92 45north on 10.21.16 at 9:57 pm

aggregator: The government has no intentions of letting prices decline.

that’s what I thought, so I wondered is Bill Morneau shooting this past Justin Trudeau and the entire Liberal caucus? If this goes out-of-control does Bill Morneau loosen the qualifying interest rate?

Bill Morneau, Justin Trudeau cannot have it both ways. Either the bubble expands or it doesn’t. There is no way you can stop the expansion of debt and have the price of houses stay the same.

Bill Morneau must have seen something he didn’t like and he sold Justin Trudeau. It looks like prices will decline.

#93 Smoking Man on 10.21.16 at 9:58 pm

Denim made America Great.
Suits are destroying it.

Branson chirps Trump on Twitter, he gets crushed.
Regardless of the outcome the world has changed.

Perhaps all the nobs that suck up to him on LinkedIn are busy sucking up to him on linkedin to come and defend him.

#94 young & foolish on 10.21.16 at 10:03 pm

Ouch ….. it hurts!

#95 acdel on 10.21.16 at 10:12 pm

#57 Rents Up Up and UP

Nope, there will be a heck of a lot more options in the few years to come; including ownership; dream away.
The world, this country is a mess, money is not there, many are struggling, prices are coming down.

#96 Comrade on 10.21.16 at 10:18 pm

Wonder how is it related and why CMHC is shutting down the hiking and mountain biking trails on Seymore Mt. What is becoming of vancouver?

#97 earlybird on 10.21.16 at 10:22 pm

Wow…why wouldn’t they counter to 1.9…and go from there? Why take it so personally? Entitled and greedy…they are selling for the wrong reason.

#98 WalMark of Sadkatoon on 10.21.16 at 10:25 pm

Toronto is delusional as well . . .all these people in million plus dollar 100 year old rotting semis, renovating, renovating, renovating

Totally agree

Toronto RE prices have been rising for a long time. Even on sketchy buildings. When the fall comes it won’t be pretty

#99 WalMark of Sadkatoon on 10.21.16 at 10:38 pm

Canada continues to be a failed/failing exporter

http://www.bloomberg.com/news/articles/2016-10-21/canadian-economy-takes-fresh-hit-as-eu-free-trade-deal-collapses

#100 BS on 10.21.16 at 10:38 pm

#57 Rents Up Up and UP on 10.21.16 at 7:57 pm

For residential tenancies, the standard allowable rent increase for 2017 is 3.7%

http://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies/during-a-tenancy/rent-increases

#101 NotAGreaterFool on 10.21.16 at 10:41 pm

Just need the Wynne government to layer in the foreigner tax now. I know Garth doesn’t like it but it will only help prices not swell more.

#102 Doug t on 10.21.16 at 10:43 pm

We have become a society that embraces greed not need.

Rage Against The Machine

#103 common sense on 10.21.16 at 10:43 pm

#87 Mark

CAD going higher? What am I missing here?

#104 Keith on 10.21.16 at 10:53 pm

Re 23 and 81 – Cedar Cottage is a great neighborhood, French immersion elementary school, restaurants and funky shopping are close at hand. There were four properties for sale on E. 22nd a month ago. Two have sold, two are sitting. Guess what. If you price a house at 50% + over the 2015 assessed value, and the market has gone up less than 30%, the property will sit.

The one at 2,475,000 has been re listed at a lower price with a new more sensible agent. Still too high The one with no lot is also way overpriced. The townhouse and the teardown on a corner lot have both sold. Not in a week, but in less than six weeks. The market is correcting vigorously, but not yet crashing. Supply is increasing, but quality properties are still in short supply.

Interest rate cut coming, low dollar is a good deal for tv and film, and tech continues its quiet growth. Vancouver has taken a right cross to the jaw, but is far from down and out.

#105 Ginny Wong on 10.21.16 at 11:01 pm

DELETED

#106 SWL on 10.21.16 at 11:02 pm

#77 the Hammer

Great post hammer

#107 Tim on 10.21.16 at 11:08 pm

@40 Derek R on 10.21.16 at 7:27 pm

Thanks for the GarthFAQ! I finally know that [email protected] = The Nice Lady At The Bank.

re: VanCity = Vancouver. This may instead refer to VanCity, the large credit union based in Vancouver.

#108 Mark on 10.21.16 at 11:09 pm

“Bill Morneau, Justin Trudeau cannot have it both ways. Either the bubble expands or it doesn’t. There is no way you can stop the expansion of debt and have the price of houses stay the same. “

Debt can (and arguably should) expand in other areas of the economy. For instance, Canada’s telecoms could take on $100B of additional debt to modernize and bring fiber optic Internet to everyone. Canada could use on the order of $100B of modernization in its private sector rail infrastructure. Another $100B-$200B or so to modernize/replace the nuclear generating fleet which is rapidly aging and for which go-ahead decisions will need to be made over the next number of years. There’s a ticking timebomb beneath our feet (or over our heads) in terms of decaying municipal infrastructure. And R&D in Canada is valued so minimally in the contemporary economy that some incredibly bright Canadians hop on the first thing smoking and work in the United States simply for lack of opportunities, any opportunities, in Canada.

An ideal policy response to this, and the lop-sidedness of the Canadian economy, is to chop the knees off of the housing bubble and the subprime finance sector that supports it. And redirect the credit elsewhere. Or at the very least, allow the credit to find its way elsewhere. Morneau et al have made some absolutely courageous decisions over the past few months, and while I may not fully agree with other proposals of the Liberal government, particularly with respect to immigration and “climate change”, this is one area in which the government absolutely ‘nailed it’. Making the best of a bad situation created by their predecessors that pumped up a housing bubble with subprime credit to the exclusion of most other areas of economic activity and competitiveness in Canada.

#109 ANON on 10.21.16 at 11:20 pm

The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down.

I’m sorry Garth, but governments only midwifed the gasbag. Everyone (undersigned included, before realizing the law of gravity applies always) wanted this birth, it was the main narrative (and the only one possible to keep things going).

#110 betamax on 10.21.16 at 11:22 pm

#48 BS: “Either the monoline lenders die off….or all mortgages will be significantly higher to compensate investors for the potential 15% loss. Likely both.”

Yes, the increased cost of risk, the loss of monoline business, and the subsequent raising of rates is going to be the final pin to pop this bubble.

Yesterday, I thought another minor housing correction was coming (like ’08), followed by a rate drop to keep everything trundling along. But the government-mandated sharing of risk could cause mortgage rates to rise — even if the prime rate falls.

As a GVRD condo owner, I’m not thrilled about losing equity, but I bought a few years ago and plan to live there for another 15 years minimum, so hopefully things will have bounced back somewhat by then.

#111 stage1dave on 10.21.16 at 11:50 pm

Every day brings more bad news for the housing market…wow, this is like a schoolyard pile – on…

“Anyway, it’s done. Ottawa has formalized a process with an inevitable conclusion. The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down. They think a soft landing is possible. If so, it will be the first asset bubble in history not ending in tears.”

Ahhh, the gov’t giveth and the gov’t taketh away…and I missed the whole damned thing…oh well…

#6 Mark:

Your comment brought back some memories from 05 and a relative’s perdictament in Saskatoon…seems the GF became pregnant, and there was no way in hell that baby was gonna be raised in an apt (!) Unfortunately, with 2 freshly minted university grads, massive student debt, no work history, and NO JOB in sight the bank told them to take a hike when they went for mortgage pre-approval…go figure.

The solution? Get a relative to pony up the 40K to clear the (then) 25% DP hurdle…no problem…

(I would have put both my parents in hospital for just askin’, y’know?)

152K purchase price; later appreciated to 340K and change…hope they sold it and rented!

#112 Love My Kia on 10.21.16 at 11:52 pm

‘Governments’ – plural, all of them, every level. — Garth
=======================

What did the libs or dippers do to inflate the house bubble?

Give credit where its due when the governments of the day are doing something to fix this mess. (wild Bill, Notley)

#113 WalMark of Sadkatoon on 10.21.16 at 11:58 pm

#47 Shawn on 10.21.16 at 7:36 pm
The $CAD is going to quickly go below 70 cents.

You’re probably right. Time will tell. What’s clear is that people who have bet against the USD$ over the last 4 years have lost a lot of money.

Fundamentally the Canadian dollar should be at least par, if not higher due to Canada’s robust export capacity and general state of trade surpluses. A slowing of or even cessation/reversal of expansion of credit in CAD$ terms, which appears to be in the process of occurring, is highly favourable to the Canadian dollar.
http://forums.redflagdeals.com/canadian-dollar-its-ups-downs-1442859/2/#post18316586

This is why SM kicks butt. He makes the right, money-making calls.

Except for Trump/Clinton. Unless he’s right. Then he becomes untouchable.

#114 WalMark of Sadkatoon on 10.22.16 at 12:01 am

#102 common sense on 10.21.16 at 10:43 pm
CAD going higher? What am I missing here?

Nothing much.

It’s the same money-losing prediction for the last 4 years. Don’t pay it any serious attention.

I believe the CAD$ is on its way up soon
http://forums.redflagdeals.com/deflation-1418406/#post17933797

#115 Smoking Man on 10.22.16 at 12:04 am

Sad, my dad a refuge from ww2, house, cottage, car, mom didn’t work. He swept floors for a living. All paid for in a few years.

Today, university educated couples, can’t even afford kids or lodging.

And they are oblivious to the fact that they have been bent over. Tossed into the dry well. Distracted with causes that are meaningless in the grand scheme of things, sabotaging their well-being and prosperity from bull shit that was planted in their heads.

They would rather drive a bike than a Trans Am. with a holly carburetor and slicks.

Not only do they not realize they got grossed they have been programmed to hate and resent someone who can bring some economic justice back. It’s all about fitting into the narrative today. Losers!!!!!!

Shlong Zumanga from Nictonite is laughing all the way to the bank. He runs the earth.

Yeah, Education and Shlongs curriculum really worked out for them.

Sad.

#116 Sheane Wallace on 10.22.16 at 12:15 am

The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down
————————–

I think they were different governments.

The cons (the PM was an ‘economist’!) legacy will be a long and nasty one. That government created the debt bubble having some of the most incompetent (or maybe corrupted?) finance ministers one can get for the money.

#117 Smoking Man on 10.22.16 at 12:20 am

#102 common sense on 10.21.16 at 10:43 pm
#87 Mark

CAD going higher? What am I missing here?
……..

A 26 onz of Jack Danials taken down in a few hours. You still won’t get it. But it won’t matter if you got good ear buds and a good tune.

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

#118 Mel on 10.22.16 at 12:31 am

So let me understand this. Experts of this world, including our Bank of Canada, are running our economies on the premise for the last many years that recovery is around the corner.

We should replay our Bank of Canada Governor’s speeches in the past years. It will make you cry.

No wonder we are so…. screwed.

#119 Sheane Wallace on 10.22.16 at 12:37 am

#107 Mark on 10.21.16 at 11:09 pm

Debt can not grow uncontrolled. It has to be serviced at some point.

10 billions will be enough to bring fibre optics to everyone in the big cities and medium size towns.
What is the incentive for the telecoms to borrow money? They rip you off anyway with expensive but crappy services.

R& D and opportunities here?
What are you smoking, man?
This is a society of low productive extraction from slaves labour, in highly non-competitive environment.

There are protected oligopolies in every sector that just want to collect their ‘rent’ . Incentive to invent in such environment? None. To be politically correct is what matters, I think many people will need plastic surgeon to remove that constant smile from their faces when TSHTF.

I don’t think you are getting the picture.
There is no economy here. Just FIRE sector and some services around it. Plus commodities that are in decline.

If the deal with EU does not go through we are toast.
What surprises me to some extent is the ignorance of the EU (normally cognisant of health hazards) on the danger of importing our GMO crap there.

#120 Spectacle on 10.22.16 at 12:48 am

Total monthly Sales units…..reduced 93%.

If that doesn’t make leveraged/maxed homeowners crap their diapers, it’s more reinforcing for the GreaterFool nickname .

93%, wow….93%, Ouch! Mr Turner is/was so correct.

#121 Spectacle on 10.22.16 at 12:55 am

Regarding::
“#95 Comrade on 10.21.16 at 10:18 pm
Wonder how is it related and why CMHC is shutting down the hiking and mountain biking trails on Seymore Mt. What is becoming of vancouver?”

It starts with bike lanes, no public parking, Agenda-21 and now Agenda-30. The total control of the population and wealth grab. The ruin of the middle class, on and on.
Look it up:: an eye opener that will change your life.

#122 WUL on 10.22.16 at 1:04 am

#85 Love My Kia on 10.21.16 at 9:41 pm
***

Little wonder that Bradley Lamb is condo catatonic these days with Premier Notley’s moves here on the Great Plains. His three condo developments in Edmonton (the East Berlin of Canada) and Cowtown are absolute losers.

Rachel is clever and tough. My kinda gal.

#123 Smartalox on 10.22.16 at 1:17 am

@#57: Rents are up, up, up!

My experience would suggest different.

My family rents, and I have a number of Craigslist alerts programmed for rental listings for three-bedroom houses in South East Vancouver.

Since June, I’ve noticed an uptick in the quantity, and more importantly the quality (size, privacy, location) of the listings that land in my inbox.

This week, I saw a couple of listings for 3 Br. SFD at $1.00 to $1.10 a square foot.

I know the homes that were listed, and know that they’ve been empty for some time, so I can only assume that the rents have been reduced recently so that they now fall within my filters.

Rents are coming down.

#124 ronh on 10.22.16 at 1:27 am

Off topic, interesting read.

https://www.scribd.com/document/324137454/Harvard-Study-on-US-Economy-Under-Obama#from_embed

#125 fleabitten monkey on 10.22.16 at 1:42 am

#103 Keith – the townhouse was reduced in price once before it went down to $818K ask. Dunno what it ended up selling for. And by the way, there is VERY limited space in the Selkirk immersion program, its a lottery win to get in, same with Tyee Elementary.

#126 TRT on 10.22.16 at 1:44 am

Real estate is done everywhere in Canada. It YVR and YYZ.

Why?

Immigration, Foreign $, Land use restrictions.

#127 TRT on 10.22.16 at 1:56 am

#27 Drenched in Delusian on 10.21.16 at 7:12 pm
Contrary to what the Great Garth in his ivory tower in 416 believes, Vancouver is the only place in the country not in a bubble. Yes it is Ironic that the place with the most expensive real-estate is not in a bubble, but we proved that with the effects of the foreign buyers tax. Yes it is different here. Prices have not, and will not move an inch here in central Delusia (The burbs maybe). It was always real money coming into the city, and that money won’t be leaving any time soon. I’m already starting to see the sales pickup again.

—-

Agreed. Several huge sales today. Foreign money inflows brought in by local permanent residents is picking up again.

Only 47,000 detached homes in Vancity. Ther are over 47,000 multimillionaires here. Do the math.

#128 BS on 10.22.16 at 2:21 am

#109 betamax on 10.21.16 at 11:22 pm

As a GVRD condo owner, I’m not thrilled about losing equity, but I bought a few years ago and plan to live there for another 15 years minimum, so hopefully things will have bounced back somewhat by then.

Keep hoping. I doubt we will see these prices for 30 years or more. Most condos will be a dated leaky wrecks by that time.

#129 Earn Money on 10.22.16 at 2:24 am

see a market that’s withering, populated by vulnerable sellers. If prices will be lower every single month

#130 dan on 10.22.16 at 3:34 am

While the government had a role in this mess there is no way you can blame them. Nobody put a gun to people’s heads and made them overspend and treat homes like an ATM. After witnessing the U.S. housing meltdown, rational people knew what was coming. People need to accept responsibility for their own actions.

#131 Crashed or Not? on 10.22.16 at 4:21 am

First, great post today Garth and Commentators, there are some equally amazing and informative posts here today.

How I figure out if YVR RE is crashing:

1. Go to Zolo.ca, Search for a city (e.g., Burnaby) and look for properties with “Reduced” in the MLS listing photo.
2. Click on the property to view the Full Listing, note the price reduction, calculate % list price reduction and note the new list price for these properties. Do this for a variety of home price levels and particulars – apples to apples.
3. Look for new listings in the area. Compare new listing price to those of reduced homes.

I have done this since early Sept and for a variety of cities, not just Burnaby. List price reductions have ranged from 10% to 25% in 1.5 month time.

Almost all new listings fell in line with the reduced list prices.

Reductions lower as you go East of the Downtown, Higher as you go towards/into the Downtown – no brainer.

All pre-Morneau observations.

Gave up after that as disheartened to see the large asset losses going on in YVR RE – well, except that I looked at Kits which I posted about a few days ago [$2 MM listings after price reductions in the 8% to 13% range and new listings following suit]. Since Garth said Kits ought to be fine. Just curious is all.

Is it a crash?

When you compare price drop vs. period for the early 80s and 90s crashes, yes it is a crash [i.e., % price drop much, much faster, 1.5 months vs. a couple of years in the past].

Expect to see an uptick in prices as it seems past crashes have a “shoulder” of increasing price after the initial peak price and crashing prices. After that, it keeps going down continuously until recovery.

Just observations and no conjecture other than I am not only disheartened, but surprised at the voracity of the price drops in such a short period of time.

I was just curious as to what was going on in YVR RE.

bsant

#132 Prideful, Whay & YVR Condos? on 10.22.16 at 4:38 am

Hard to say on the prideful Garth. That was 1 case about prideful Mary.

People will hang on to the bitter end to prevent a investment loss (esp. if sell price < mortgage). I call that prudent.

What will tip this so-called YVR RE buyer/seller "stand-off" is an economic shock where job losses are large and people HAVE to sell.

Why I am in shock at the voracity of price drops in YVR RE – what is the reason?

We are not in a job loss recession.

Maybe profit taking before the market drops further?

If so, then there were many, many speculators in YVR RE and now they are looking to cash out – well except for prideful Mary [greedy].

Morneau measures will force new buyers into lower priced property purchases and you gave an example of that today.

Why I think YVR RE Condo prices will go up [and lower priced smaller homes].

You see very few price reductions on Condos nowadays.

bsant

#133 DAve b on 10.22.16 at 5:22 am

Derek r #40 thanks for that. Any chance you can help me unravel the “kia” reference?

#134 Sam the Sham on 10.22.16 at 5:27 am

‘There may soon come a day,’ I said to Mary in words she did not want to hear, ‘that you’ll wish the one point five offer was back sitting on your kitchen table.’

Ah, I love the smell of Schadenfreude in the morning!!

#135 Hespler Koho on 10.22.16 at 5:58 am

“In case you were diverted watching Donald Trump’s butt being handed to him” … You have to turn the TV off put down the newspaper and magazine and go online dude. Have you ever heard of wikileaks? Clinton Cash?

#136 tony on 10.22.16 at 6:47 am

time to buy property in montreal.
Where prices are low and rents are cheap.

#137 NEVER GIVE UP on 10.22.16 at 6:52 am

#107 Mark on 10.21.16 at 11:09 pm
“Bill Morneau, Justin Trudeau cannot have it both ways. Either the bubble expands or it doesn’t. There is no way you can stop the expansion of debt and have the price of houses stay the same. “
————————————————————
Agreed.
It is high time government backstopped bank loans to business.
You know…. the ones that actually create jobs and wealth.
Bankers are way too lazy and illiterate to read financial statements and business plans.
That they consider old school business.
Like… work!

#138 Aggregator on 10.22.16 at 6:53 am

#71 D.D. Corkum –

You must be talking about figure 5 of the proposal. This is saying that purchasers of securitized mortgage assets would continue to be protected 100%, rather than sharing losses with the bank’s shareholders. This is likely intended to prevent the problems that occurred in the USA ten years ago with packaging of mortgages and alleged misrepresenting of risk to investors who suffered from information asymmetry compared to the banks.

—-

Under a crash scenario it's a pre-planned back door capital injection since CMHC wouldn't have sufficient funds to cover that many claims. Morneau's plan would essentially be giving taxpayer money to pay a bank, who then pays a deductible back to the govt (a ponzi scheme). Either way the moral hazard component of the govt's housing scheme hasn't been removed since investors' payments are 100% guaranteed no matter what quality loans are stuffed in those securities.

No, this wouldn't prevent the same problems that occurred in the US. In fact, it would do the opposite because now you have the gov't hoarding high quality mortgage originations and telling private lenders 'you deal with all the crappy loans'. What people don't realize is that private lenders will end up selling those mortgages back to the banks under Master Mortgage Purchase Agreements (MMPAs). This is the key reason why the US market imploded as subprime lenders off-loaded all their crappy loans to banks, who then stamped them with AAA ratings and sold them to global investors.

As long as Canadian private lenders (sellers) sign a rep and warranty agreement under MMPAs with the banks (buyers), stating that the information written on the mortgages are 'true', banks don't care what the quality of those mortgages are. They can still insure or securitize them with CMHC who only verifies mortgages by what's written on the submitted document.

This is why you're seeing private lenders kicking and screaming about the rules, because now they have to put their ass on the line by leaving a paper trail stating they approved the loan. But hey, if you're a newly landed Canadian immigrant mortgage broker who can barely speak English and are now making $20K a pop for a jumbo mortgage, do you care?

#91 45north

Nothing has really changed. Morneau is only trying to rebalance govt-backed mortgage insurance so that there's more volume (units) for Canadians. The key problem was that home prices were rising so fast that it was pushing mortgage insurers close to their allowable limit. You can see this in two charts: CREA Canadian home sales adjusted for population (Chart) and govt-backed mortgage insurance per capita (Chart).

CMHC mortgage insurance as a percentage of Canada's average home price peaked in 2011 at 4.54%. If you work this number backwards to today's price ($488,840 CREA), it's about $16,450 — times the current population (36,286,425 StatsCan) is $596,890,185,149. CMHC's limit is $600B. Effectively what you're seeing is govt-backed mortgage insurance relative to Canada's growing population dry up. That means less homeowners and more renters.

As I stated before, this is a transition from public-to-private lending. And once private lenders realize there's demand for Canadian subprime in a yield-staved investment world, and higher margins (profit), they'll be flipping subprimes like flapjacks. You ain't seen nothing yet.

#139 maxx on 10.22.16 at 7:37 am

Mary should pay more attention to what’s going on in the world.
She feels insulted now? Wait for it.
Smart buyers would do well to get comfy and watch how prices behave on the slide. Prices absolutely must drop if Canada’s economy is to begin healing again and re-balancing, in terms of proportional industrial contribution to GDP. RE is beyond obese.
Qualified buyers have TONS of time and FOMO is now a thing of the past. No fear.
We have realtards calling and emailing us every single day, one asking for “any offer” who said that the list price is fictitious, that the seller is “fishing”. His listing client.
Mary is “insulted”? I’d hate to see how she feels if the shack doesn’t sell for anywhere near their delusional asking.
So far, a diff of 300K is a lot of travel and fun evaporated.
Gone fishing, and now they’re wishing…………..

#140 GR on 10.22.16 at 8:14 am

T&M are typical of this stage in the cycle. Like thousands of others they will follow the market down, cutting their asking price a bit at a time, but always behind the curve.

How many times have we seen this video before…

#141 Hal on 10.22.16 at 8:56 am

Low ball offers will become more prevalent and along will court ordered sales in divorce and estate sales the new normal will be lower prices. It’s too early to vultch but never too late to get the ball rolling. The market always swings wide so expect the prices to fall quickly.

#142 Ace Goodheart on 10.22.16 at 8:57 am

This is interesting. I wonder if the govt knows what it’s doing here. CMHC and the notional amortization period had the effect of equalizing Canada. Prior to these inventions, only the wealthy could own houses. Most people rented or lived in a “company house” owned by their employer.

This may have the opposite effect thanot intended.

#143 burb cratchet on 10.22.16 at 8:57 am

Mark

What is going on with USD/CAD…looks like you were wrong again…..a true contrarian….D’oh!

#144 Apocalypse2016 on 10.22.16 at 9:09 am

MASSIVE GLOBAL CYBER ATTACKS!!!!!

And this is just a test, a taste of what is coming next.

http://www.aljazeera.com/news/2016/10/hackers-cripple-internet-wide-scale-cyber-attack-161022063916685.html

The hackers have fully infiltrated the American electoral computer system and are only weeks away from controlling the nuclear launch systems in at least three countries.

The Autumn of Angst is upon us.

Will you survive? Don’t bet on it.

#145 burb cratchet on 10.22.16 at 9:10 am

#28 Realtard on 10.21.16 at 7:13 pm

It’s like baseball, you never swing at the first pitch. Sure, that might mean strike one, but you have to see what the guy can throw before you step in…”

To add to your ball analogies., I think alot of potential buyers will be telling seller’s to “balk off” with their crazy prices…

#146 joblo on 10.22.16 at 9:39 am

What’s the best van to get to live in down by the River eating government cheese?

#147 LL on 10.22.16 at 10:02 am

“New mortgage rules that took effect on Monday will likely mean many millennials will have to raise infants in apartments, says a Toronto financial planner.”

Oh the horror, babies raised in relatively affordable apartments instead of in SFH’s financed with boatloads of debt that ensures the family will spend the next few decades of its life in de facto indentured servitude to bankers!

And instead to be debt slavery to the banker, they will have time to enjoy being with their kids!
No need to have 3 jobs to pay the mortgage!

#148 jane24 on 10.22.16 at 10:11 am

121 WUL

You are so right Edmonton is the Canadian East Berlin. Been to both recently but did not notice the similarities till now. West Berlin much better folks, less Soviet Union.

134 Tony

Sorry but you are so wrong it is never the time to buy in Montreal. The prices are always low and the rents are always cheap as there are few high paid jobs. Lived there too and moved out when I realised it was loser country.

#149 common sense on 10.22.16 at 10:55 am

#113 WAL MARK #116 SMOKIE

I read mark’s comment about CDN going UP and it was so unbelievable that I just had to ask to get his opinion AGAIN for all of us to see. I’m still shaking my head this am.

CDN to .69 soon and when oil pops to .64 and yes my bets are already placed.

#150 Bottoms_Up on 10.22.16 at 10:59 am

#141 Apocalypse2016 on 10.22.16 at 9:09 am
——————————–
Hacking people’s thermostats to send internet traffic to a single server is hardly breaking into nuclear weapon territory….

#151 Realtors and mortgage broker will lose their shirts on 10.22.16 at 11:14 am

#136 Aggregator

Poor Aggregator is going to lose his shirt . Lol delude yourself all you want. Tough times are coming and you can feel it. The Ponzi scheme is getting shut down.

#152 crowdedelevatorfartz on 10.22.16 at 11:49 am

@#141 Apocalypto 2016

THANK GOD!
Glad to know
You’re still trolling the internet looking for new stories to justify your paranoia
I was getting worried.
I thought you might have been buried out in the back yard while digging your underground bunker
Your paranoid drivel is my only source of humour now that Brazil ExPat has taken it upon himself to remain silent (or he was swept up in the arrests along with the rest of the corrupt socialist ex govt cabal currently proclaiming their innocence).
Either way “pocky 16″ you just keep postin”. I only have one question.
On the stroke of midnight on New Years Eve…do you become Apocalypto 2017?

#153 Linda on 10.22.16 at 11:56 am

Even if we get a ‘soft’ landing this deflation of the housing gasbag could not come at a worse time for the older generations who are in their late 50’s or early 60’s. If so many Canadians have no pension plan other than CPP/OAS (heaven help them if they qualify for GIS) & their savings those who own homes that have appreciated in value are likely depending on the sale of said homes to finance their retirement. Or – more likely – they will be working to age 65, 70 or until they die. IF they have a paid for home they can possibly ‘live’ on CPP/OAS – if they get the maximum CPP, which is not a slam dunk process BTW – but only if they do work right up to at least age 65 so their CPP is not reduced. Or age 70 so their CPP is enhanced & hope for their sake they have excellent health, can still work & have employment that pays more than minimum wage.

#154 Oli on 10.22.16 at 12:07 pm

I guess the question now would be… if you have some cash that you have the choice between investing in a portfolio or plopping it into a downpayment on a house, would it be smarter to keep the money in cash awaiting the fall of house prices or will the fall be long and perilous, leaving plenty of time to grow that money in said portfolio before taking the plunge into real estate?

Why would you put all your money into a single asset, anyway? — Garth

#155 Aggregator on 10.22.16 at 1:03 pm

#148 – delude yourself all you want

Sorry man. But it's the public who's been deluded by the govt's mouthpiece (media) about what's really going on. And now these reporters are handing themselves awards for irrelevant stories about a rich Chinese living in Vancouver, who according to them drove up the entire housing market. That's delusional.

Meanwhile the real culprits of rising home prices, rate rigging and currency debasement are still running the show.

#156 Smoking Man on 10.22.16 at 1:19 pm

John Cogur Melencap Tonight.

I’ll be reporting on the American Dream at the concert at Seneca Tonight.

Lets see if there is election talk and what the sentiment is by the audience.

#157 S.Bby on 10.22.16 at 1:20 pm

#78 Bdwy Skytn

here is likely your neighbour’s house:6108 BERWICK STREETV5H $1,628,800sell $1,890,000

here is the SAME (tiny bit smaller) lot , one block over , same side of the street for sale today.
5862 BERWICK STREET, Burnaby, British Columbia
$1,790,000

=====================================
5862 Berwick Street has been for sale for almost three months so obviously their price is too high. Asking prices mean nothing as you should be aware.

7288 Waverly Avenue is in a different area and within walking distance to the Metrotown mall area and it also backs onto a park/greenbelt, so this not a valid comp. No RE agent would use that as a comparable.

Look at the recent sale on Bryant Street (I don’t have the exact address handy but is in the 6300 block) that was listed at $1.499 and took almost a month to sell. That would be a valid comp to the Berwick house and the Bryant house was reno’d and has a nice view so is a more desirable ppty.

I stand by what I say that 6108 Berwick is worth $1.4 now in this market. Maybe you should stick with East Van so you don’t embarrass yourself even more.

PS: I do continue to enjoy your squirming as you lose your equity on this sinking ship.

#158 Bytor the Snow Dog on 10.22.16 at 1:21 pm

Interesting read. Proof that trickle down ain’t working.

#159 Bytor the Snow Dog on 10.22.16 at 1:21 pm

That was for 123 ronh.

#160 Ogopogo on 10.22.16 at 1:22 pm

It just so happens that before reading Garth’s post with my breakfast I was showing my wife all the listings in Kelowna that have been lowered in recent weeks, some two or three times already (despite DA’s lies). I also told her that delusional sellers will try to hang on to their overpriced shacks until despair sets in.

Today’s post couldn’t have come at a better time. I read it giggling all the way in anticipation of vultching some time down the line.

Can’t wait for more rules to gut this market further!

#161 S.Bby on 10.22.16 at 1:25 pm

#78 bdwy sktrn

Also you are kind of creepy with your cyber-stalking.
I guess you are getting desperate?

#162 Bobby on 10.22.16 at 1:30 pm

Regardless of what realtors or your BIL says your home is only worth what someone is willing to pay.

Over the years I have looked at many homes that have followed the market down, always holding out for that last $10-20k.

For once I agree with DA and Garth is indeed correct, in a short while this couple of ninkampoops will be dreaming of the $1.5 million they could have had.

The real winner in this is the prospective buyer. He just saved himself a bucket of money.

#163 isuckless on 10.22.16 at 1:54 pm

Deal with EU will (shall?) pass
Is is a proxy for TTIP and it will be pushed down the throats of EU countries
No surprises here

#164 Context on 10.22.16 at 2:06 pm

Anytime the perception of a market drop takes place in the price of one’s principal residence there is an important factor to be added into the equation. I have no idea why this is being disregarded in the loss of capital as its so important upon the eventual sale. Its the critical loss and utter waste of tax free capital.

#165 Tony on 10.22.16 at 3:54 pm

Re: #25 Victoria Real Estate Update on 10.21.16 at 7:11 pm

Then there’s the people that don’t have to sell but are smart enough to sell. This is a temporary standoff before prices literally fall off a cliff. Everything is a negative for Canadian real estate with the exception of present day low interest rates. The idiots that don’t sell or the dumbest of the dumb the present day buyers of real estate in Victoria will be steamrolled when prices fall more than 50 percent in less than one years’ time. “Things fall fast where everyone is white”. The last line is well worth reading again.

#166 Tony on 10.22.16 at 4:01 pm

Re: #151 Oli on 10.22.16 at 12:07 pm

Very simple answer:
The whiter the population the faster the plunge in real estate. All white cities can and do drop more than 50 percent in value in less than 6 months time.

#167 Jo on 10.22.16 at 6:48 pm

#78 Bdwy Skytn

here is likely your neighbour’s house:6108 BERWICK STREETV5H $1,628,800sell $1,890,000

here is the SAME (tiny bit smaller) lot , one block over , same side of the street for sale today.
5862 BERWICK STREET, Burnaby, British Columbia
$1,790,000.
####################################

Bdwy Skytn take a pill and relax!!!

S.Bby is correct. The properties are grossly overvalued and overpriced. When you look at $ per sq foot, you will actually see the light, if you open your eyes!!!

#168 45north on 10.22.16 at 7:58 pm

Mark: The ideal policy response is to chop the housing bubble off at the knees. And redirect the credit elsewhere.

agree

#169 betamax on 10.22.16 at 8:04 pm

#127 BS: “Keep hoping. I doubt we will see these prices for 30 years or more. Most condos will be a dated leaky wrecks by that time.”

Your previous post provided a reasoned argument; this merely reflects your own hopes. No one has any idea where prices will be 10 years from now, let alone 30. And well built and maintained condos will not be “leaky wrecks”. You don’t know what you’re talking about.

#170 joe on 10.23.16 at 9:41 am

China is imposing new tax for chinese buying in Toronto area….

Soon chinese will be selling their possesions….
My chinese friends alreay put houses for sale in Toronto

#171 onpar22 on 10.23.16 at 3:18 pm

“The same governments that helped create this gasbag, driving people into epic debt and wildly inflating the value of Tom and Mary’s suburban home, are now actively bringing it down.”

And here I thought it was the CONS who brought in 40 year mortgages with peanuts down. Maybe I was reading the wrong newspapers.

What part of the word ‘helped’ do you not understand? — Garth

#172 Joey Boots on 10.24.16 at 9:20 pm

Well said Garth – tears will flow – you forgot to add: except in The Mighty GTA !