Mortgage dudes were just asked this question in an online poll: Will Trump cause Canadian interest rates to pop?
Saying ‘yes, his policies will stoke inflation and drive up rates’ were 54% of respondents. Saying. ‘no, his policies won’t help Canada’s GDP enough to keep rates from falling,’ were 28%. The other 17% of brokers are busy looking for new careers.
You might have noticed every time I try to warn all the little beavers in this mapley paradise that 2% mortgages are endangered, there’s pushback. Why?
First, denial. The over-extended can’t fathom shelling out more. Second, it’s been a decade since anybody paid 5% for a mortgage, and back then moisters were more worried about zits. They just don’t believe increases can happen. Third, a mistaken belief the economy will fold if money costs what it should. And, finally, an unfounded conviction our hipster T2 government won’t allow higher rates – when politicians actually don’t set them.
So, here’s what you need to know as we count down to Wednesday’s Fed increase – the first in a year.
Central banks are associated with governments, but do not answer to them. Monetary policy (interest rates and the money supply) is supposed to be independent from fiscal policy (taxes and spending). The central bank bosses (Poloz here and Yellen in the States) are appointed by governments, but then unaccountable to them. In other words, Donald can’t fire Janet.
These central banks are in place to ensure the integrity of money. For most of our lives that’s meant containing and controlling inflation – which seriously erodes the value of moolah. The more inflation bubbles up, the higher rates generally go in an effort to maintain the purchasing power of a dollar by cooling off economic activity. In the last eight years, of course, we’ve had the opposite trouble – something approaching deflation, with anemic or negative growth. That’s why central bankers dropped rates to all-time lows, to encourage borrowing, spending and hormonal activity.
In Canada, though, it backfired. The economy still sucks (although the latest numbers show signs of life), but debt-snorfling, real estate-speculating borrowers have gone crazy when it comes to loans. Mortgage debt has doubled in a decade, to the point where 26 million income-earners now owe $1.4 trillion. And as debt spiked, so did house prices. Now we face a withering combo: rates at the lowest point in history. Debt and prices at the highest. As I have pointed out here often, there’s a perfect negative correlation between then. Cheap money is crack. We’re junkies.
The Bank of Canada knows this. It wants to raise rates. Desperately. After all, there’s no easy way to come down from a housing bubble, and soft landings are elusive. The longer our central bank’s key rate sits at a ridiculous 0.5% while kids with no money and no credit borrow six figure loans at 2.2%, the worse the outcome will be. That’s why the recent bounce in oil, improvement in trade and bump in job creation are great news for the bank. So’s Trump.
He’s probably the most fickle person ever to enter the White House, but markets have decided he’ll be the Inflation President. With lower taxes coming in after his cut, and government spending amped up for infrastructure, plus the costly inefficiencies flowing from protectionism, traders figure the years just ahead will be completely unlike the ones just passed. Meanwhile the US economy continues to pump out new jobs (180,000 last month), with robust manufacturing, a stable housing market, rebounding corporate profits, record equity markets and gonzo GDP. Shortly after the election last month the odds of a rate increase this week shot to 100%.
So whether you believe it or not, the cost of money will swell. Pucker up. Coming. Never before have US or Canadian bond markets diverged for long – nor have our two central banks. This time will be no exception. The next rate move here will be up, not down, and likely arrive later in 2017. Long before that, fixed-rate mortgage costs will increase, thanks to the dorfs in the bond market.
Yes, I am repeating myself. But apparently it’s required.
Bankers expect higher rates. Realtors anticipate them. Mortgage dudes are convinced. Traders have no doubt. Governments are preparing.
The ability to lock into a five-year fixed-rate mortgage today at 2.18% is historic. And, like this blog, abnormal as hell. Govern yourself accordingly.
162 comments ↓
Uh oh VREU, time to ignore the warnings and stick you head in the sand again.
Looks like foreign buyers are on the move in Victoria with a massive spike in the number and value of transactions. At 6.4%, that is way above the mere ‘5%’ the RE industry cited for years in Vancouver before BC implemented the foreign buyer’s tax.
Metro held on to the myth that only 5% of sales were from foreign capital but of course we know the industry ‘misled’ the public as the BC gov data clearly showed sales to foreign capital as high over 20% in cities like Richmond.
Prices up 24% in a short period in Victoria! It must be all those new high paying jobs and people’s realization after a decade of low interest rates that rates are now suddenly low :) I am sure it has nothing to do with foreign capital….
Without a 15% tax in Victoria, prices are only going higher as foreign capital flocks there. Time to invest in Victoria and the GTA with their ‘unregulated’ markets driven by a continuous flow of foreign capital.
Its not rocket science. Anyone who disagrees with the influence of foreign capital has had their positions trashed with the recent decline in Metro sales and melt in prices following the imposition of the foreign buyers tax. The spike in prices in regions like GTA and Victoria corresponding to the exact time of the imposition of the foreign buyer’s tax further reinforces the connection.
Don’t worry VREU, in a few years, after prices have shot much much higher, you may start to contemplate officially the impact of foreign capital. Perhaps acknowledge their impact in a certain neighbourhood, then in a city, then a higher percentage of overall sales in the entire CRD…..that is the narrative to follow for those in denial.
http://www.calgaryherald.com/business/Business/12454774/story.html
The point is moot, Trump will not be inaugurated. America doesn’t want a POTUS and Secretary of State beholden to Russia. Sarah Palin is especially outraged because she can see Putin from her backyard.
The problem is that when everyone is ‘universally’ on one side of the trade (ie: interest rates going higher), things often go the other way.
0.5% might seem like a low interest rate, but with the economy barely growing, if even at all, and true unemployment/underemployment so horrifically high on both sides of the border, is it really? The output gap is so wide at this point that you could drive a bus through it.
Sure, they might do their few rate hikes. And prick the dot-com bubble that now exists (same old story, a bunch of unsustainable and largely nonsensical tech companies with no earnings are trading at sky-high valuations!). But the end result will be back to a sort of deflationary quagmire requiring rate cuts down to ZIRP and even NIRP. Especially so in Canada where there has been extreme amounts of over-investment in export capacity (and people chomping at the bit to invest even more!).
Canada’s massive housing bubble would have done what all housing bubbles do – end badly – even without the guarantee of significantly higher Canadian fixed mortgage rates.
A massive housing bubble + rising rates + the “it’s different here” attitude = a future major financial backfire for many Canadians. A generation or two will learn that taking on a mortgage (extreme leveraged debt) always comes with risk, despite what your in-laws, realtor, broker, friends, etc say.
Just ask those who’ve experienced the inevitable outcome of a housing bubble in Ireland, Japan, Greece, the US, Iceland and many other countries over the last 40 years.
There’s no such thing as a controlled, safe, soft landing when you are dealing with a housing bubble.
SAANICH EAST UPDATE
Back in April, an above average number of detached houses sold in this area.
Of course realtors used this as an opportunity to spew their FOMO propaganda – that buyers from Asia and Vancouver refugees were buying up all of the local real estate and that Saanich East was on the list of targeted areas.
NOVEMBER’S CHILL
Sales of detached houses in Saanich East have tanked by 66% since April, leaving a cold chill in the air.
As well, year-over-year, sales of detached houses plunged 20%. This was even worse than October’s 16% year-over-year disappointment.
APPLYING THE LOGIC OF REALTORS
Apparently, to realtors and the media, if an area posts a strong monthly sales total, it automatically means that a sustainable and permanent outside influence has entered that part of the market and that a new normal has been established. FOMO-producing claims like these come with no proof to back them.
Let’s use realtor logic to explain what must be happening now in Saanich East.
The area’s alarmingly weaker sales of late (66% fewer than in April), must mean that buyers from Asia and Vancouver refugees have been selling all of those homes they (supposedly) bought in April – establishing the new, permanent weak sales norm for the area.
That’s the only conclusion possible if we apply the logic of realtors.
THE REGION’S DRAMATICALLY WEAKENING SALES TREND CONTINUES IN NOVEMBER
Sales of detached houses have now fallen 58% since April across Greater Victoria.
Some of this decline in sales is seasonal, but a 58% drop is a clear sign that Greater Victoria’s market has changed. (2015’s April – November drop in sales was only 34%, 2014’s was 38%.)
It must be increasingly difficult for the region’s real estate “professionals” to ignore these leading indicators which point to a major market correction (crash?) that will deflate Victoria’s housing bubble and crush the dreams of thousands of misled moistens.
NO SUCH THING
Victoria’s bubble (up to a decade old) has been maintained for years with lax lending standards and falling (abnormally low) rates.
An orderly, controlled, safe, happy, soft landing is impossible when you are dealing with a housing bubble. History provides the world with no such example.
An impossible soft landing, fairy tale ending only exists, for now, in the minds of those who refuse to accept what’s about to happen in Canada.
That picture… holy Jeebus are dog people disgusting.
That thing just finished licking its balls, eating feces it found on the ground and now she is licking its tongue.
She probably buys bank mutual funds and votes T2 as well.
Best 5 year fixed rate mortgage come Q2 2018 will be between 4-5 %
Poor little beavers
What a s show this will be for RE
Just signed up some nice clients at 7 yrs for 2.95
That said rates could trend steadily higher into 2018
But maybe come back down after
The economy will be on life support for most years between 2018-2022
#118 Freedom First on 12.12.16 at 12:21 am
Yes. Thanks. I used to have some empathy for the younger generations. But after reading and hearing so many demented comments like yours, I am over it.
_________________________
You even fail as a freedom first impersonator, we all know he can’t feel empathy. We don’t need your pity either because according to all the orwellian dystopian doomers we will just elect some commies to take your money.
You see T2 get elected? that was millennials, hope you’re getting used to being irrelevant, at least you get 10 percent off at shoppers.
Gartho can T2 introduce a 30yr mortgage like in the states? Thats the rumour im hearing
Well it’s a one for the Yellen
Two for Poloz
Three to get ready
Now go cats go…
M42BC
“These central banks are in place to ensure the integrity of money.”
My pick for sentence of the year.
Who’s money?
Someone posted a comment yesterday about automated delivery trucks taking the jobs from truckers in the oil patch.
Here’s what I don’t understand: why would a company spend millions of dollars to automate the job of a guy that gets paid, at most $100,000 per year? Each driver replaced with a million- (or 10Million) dollar vehicle that can do the same job, in the name of ‘Shareholder Value’.
If the goal is to maximise shareholder value, and if the average CEO makes ten to one hundred times what a trucker makes, wouldn’t it generate more shareholder value to automate the CEO’s job?
A CEO’s Seven figure salary, benefits and options, versus $12.95 for a Magic 8-ball? Seems like you could unlock a lot more shareholder value, comapred to buying a fleet of robo-trucks.
“The Bank of Canada knows this. It wants to raise rates. Desperately. ” Do you have any sources to back this statement up? The last I heard from the BoC they were still trying to find reasons to cut.
Agree on the bond market signalling higher rates and no doubt the Fed raises this month. Here is the fly in the ointment: the US currently has debt as a percentage of GDP around 360% and in fact it has never been higher. We now Trump’s plan will accelerate debt. The critical question is whether Trump can drive the corresponding growth. Last year and this year the US will come in around 2% growth. The only way that the Fed can normalize rates is if we see 3+% GDP growt that is sustained over his term. The reality is that the debt in unpayable unless we have significant inflation….monetize the debt which is exactly what is playing out globally.
“The central bank bosses (Poloz here and Yellen in the States) are appointed by governments, but then unaccountable to them. In other words, Donald can’t fire Janet.”
He may not be able to fire Janet, but he will surely pick someone who will do his bidding come Jan, 2018 when Janet’s term expires. The question then will be: What does he want a dove or a hawk?
Canada 5 year bond closed at 1.10% today, that is considerably higher than what they have been for the last year – bouncing around 0.55 – 0.75%. Fixed rates are going up folks. Lock in if you can.
http://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx
IMO first US rate hike will be June 2017, and a stock market pull back then.
Does your 60/40 split ever change based on your clients investment timeline?
I always figured this was your baseline, and fluctuated at least somewhat with investor age, but I’m not sure.
thanks!
People are screwed.
I got an early renewal offer from Scotia for 2.51% fixed two years term. This is down from 3.09% I was paying, five year fixed term.
I have two more terms coming due next year, a 3 year 2.79% and 2.35% variable 3 years.
This was all blended terms in a scotia STEP.
I should have all my mortgages paid off in 3 years, the balances are relatively low now.
Still very cheap considering historically my first mortgage rate was 5.5%
Global investing wasn’t easy a decade ago unless it was through mutual funds or individual stocks sold to you by a commissioned advisor at a rate of $200 or 2% whichever was higher for a simple trade or the dreaded rear loaded mutual fund. Investing was scary for DIY individuals back then.
Indexing like ishares & Claymore where the bulk of availability for the most part unless Canadian investors loaded up on US ETFs.
Today we have Canadian ETFs like Vanguard, BMO, & ishares (They bought out Claymore in case you get confused on their website, duplicated stuff). Building a balanced & diversified portfolio has never been easier.
Garth has pointed out the weightings in past posts for those that take this road. No brainer. Take it.
I do hope that she was watching what he was licking just before that picture was taken.
Horray, jack em baby.
Let fixed incomers and the baby boomers finally get a decent return. Maybe folks will even start saving and that capital could then be invested in productive assets.
So Russia is alleged to have fiddled with the election of the worlds super power, and the guy whose supposed to be leading is like “meh”. As Garth has said in the past, this will not end well.
Central banks are associated with governments, but do not answer to them. Monetary policy (interest rates and the money supply) is supposed to be independent from fiscal policy (taxes and spending). The central bank bosses (Poloz here and Yellen in the States) are appointed by governments, but then unaccountable to them. In other words, Donald can’t fire Janet.
—
This can change. Its certainly not one of the “laws of the universe”. There was life before the Fed, it was created just a short while ago in historic terms.
Donald can’t win the election and Brexit would never happen – remember?
Why do you insist on this topic… Yes, rates will go up but 0.25 or even 1% is not going to make a big difference… Maybe the prices will stay flat and not go up for a year, 2 or even 3. People lost big incomes in Calgary or Edmonton and the real estate prices are almost the same… That was worse than 1% increase for the mortgage rates….
CONFUCIUS SAY…
Never approach a bull from the front, a horse from the rear or a FOOL from any direction.
two things scare me abiut current state:
1) people think unless rates hit double digits, we wont gave a repeat of the 90s crash
2) that people will be saddled with GIANT debt loads and they wont buy “stuff” causing things to be WAY worse and for everyone.
I always say, I’d rather have a $400k mortgage at 10% than a $900k mortgage at 2.5% because its SO much easier to pay back $400k
“These central banks are in place to ensure the integrity of money. ” – GT
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Seriously?
“Fiat” currency and “integrity of money” form a kind of paradox, in my opinion.
TCC
Sorry realtors and mortgage brokers many of you will NEVER work in the industry again. Happy Housing Crash Everyone! :-)
“The Bank of Canada knows this. It wants to raise rates. Desperately. “
The next move by the BoC will down, not up. The mortgage rules changes introduced by Bill Morneau were to shelter the housing market from the impacts of the planned rate cut(s). How effective it will be remains to be seen.
The next move by the US Fed is up, and then another long wait. The Fed is in no hurry to raise rates, as stated by Janet Yellen. In fact, they’re willing to let inflation run above target for quite some time before taking action. Why? Firstly, because they want to make sure inflation is sustainable. Secondly, because they need much higher inflation to take care of the nearly $20T in debt.
For the record, I am neither a moister, millennial, indebted nor in denial. In fact I believe the rate cut will be a mistake. As stated above, excessively loose monetary has not worked in Canada. However, I also understand what central bankers are saying and this is my view.
If only I could borrow $500k locked in at these rates to invest in a balanced and diversified portfolio.
#11 common sense on 12.12.16 at 6:26 pm
“These central banks are in place to ensure the integrity of money.”
My pick for sentence of the year.
Who’s money?
===
Good question.
Not to mention that the entire “integrity of money” is completely bogus.
Just Google it. Post the link if you found one.
There is no such thing by any scientific measure.
Luckily we have central banks to “ensure the integrity”.
#11 common sense on 12.12.16 at 6:26 pm
I’m money!. You’re money. Money is a psychological phenomenon, so we’re all money. :)
#1 – why would Victoria shoot up if the foreign dude tax is province wide?
#12 – an automated truck works 24 hours a day, doesnt get sick, cant join a union, always has a smile on their face and is less likely to get into an accident. Same as robots on an assembly line
Rates are going UP and UP and UP. Sales and Prices are going DOWN and DOWN and DOWN. GTA is hurting and hurting bad. Happy Housing Crash Everyone :-) Sorry realtors and mortgage brokers…financial pain for you and LOT’s of it :-)
My thinking is that interest rates will rise and they being a cost of doing business will cause across the board inflation or an increase in all prices to consumers !?
Garth is it going to be inflationary or deflationary this interest rate increase ? Maybe deflationary if property values crash but if not ??
Cliff notes on ‘Russia did it’ for those relying on the coniving MSN for their view.
1) RNC has not been hacked, confirmed by RNC and FBI
2) DNC emails were leaked by an insider, not ‘hacked’. Wikileaks strongly indicated it was Seth Rich, who was murdered shortly after the leak. Wikileaks has a reward for info on his murderer. Ex UK Ambassador Craig Murray also confirms these were leaks and he knows the source.
3) John Podesta emails that Wikileaks were publishing during the campaign…thanks to Podesta leaving his Blackberry in a Cab..someone found it and guessed his simple password, and passed tgem onto Wikileaks.
4) Hillary’s private email server…FBI confirmed its confident 5 other nations hacked her server…but none of the emails have been publically released.
5) no evidence ‘muh Russians’ hacked in voting machines….confirmed by FBI.
….so it’s BS…certain CIA operatives may be colluding with HRC in an attempted Coup d’etat…or at least try and fool the Electoral College with their BS
Unfortunately, Academic is rooted in the world of quiet dissent. Acquiescence becomes the aphrodisiac.
(No hex please, we’re Canadian. )
#6
That picture… holy Jeebus are dog people disgusting.
That thing just finished licking its balls, eating feces it found on the ground and now she is licking its tongue.
She probably buys bank mutual funds and votes T2 as well.
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Actually, research has shown homes with dogs have more bacteria diversity especially for the human gut and pregnant women will bear children with less allergies.
http://www.livescience.com/34612-dogs-boost-microbe-diversity.html
If you consistently believe common wisdom, it will hurt in the markets. Need to be more contrarian.
#35 Happy Housing Crash Everyone!
Rates are going UP and UP and UP. Sales and Prices are going DOWN and DOWN and DOWN. GTA is hurting and hurting bad. Happy Housing Crash Everyone :-) Sorry realtors and mortgage brokers…financial pain for you and LOT’s of it :-)
===
Are you seriously butt hurt selling on the bottom or are you just an infantile child man?
Nothing to see here. Just a coincidence.
“The Bank of Canada may be holding off on interest-rate hikes, but the country’s largest financial institutions are signalling they expect the cost of borrowing to rise in the not-too-distant future by staging a series of massive bond sales in recent weeks.
Canada’s central bank kept benchmark rates at historic lows last week, explaining that the business outlook remained uncertain and there is still slack in the economy. However, the news release from Bank of Canada Governor Stephen Poloz did note that market sentiment is shifting: “Following the election in the U.S., there has been a rapid back-up in global yields.”
It’s that move in U.S. markets that put the spurs to Canada’s big banks. U.S. bond yields spiked after the election of Donald Trump, in large part on expectations that the incoming Republican administration will rekindle inflation through government spending. With credit markets moving, the country’s largest financial institutions rushed to lock in debt at current rates, selling $6-billion in bonds in the past two weeks. Analysts expect corporate Canada to continue to tap the credit markets this week.”
ww.theglobeandmail.com/report-on-business/streetwise/canadas-big-banks-rush-to-borrow-ahead-of-rising-rates/article33294235/
bump
“markets have decided he’ll be the Inflation President”
These are the same markets that didn’t think he’d be President at all, right? Their track record isn’t good.
#1 Victoria Booming…..don’t try and talk to VREU about what is actually happening on the ground…. you’ll just get accused of being a realtor LOL
VREU on the other hand will give you listings on properties not even in the same time zone or Country. If that doesn’t convince you then a graph from 2013 will be in order.
The recent Italian referendum seemed to slide by without a ripple but nothing was actually solved.
The following comment sounds like it is from Zerohedge but it’s not. It is from the Financial Times of London, one of the world’s leading financial publications.
“The next Italian prime minister will need to explain to the next German chancellor, presumably Angela Merkel, that her choice will not be between a political union or no political union, but between a political union or Italy’s withdrawal from the euro.
The latter would imply the biggest default in history. The German banking system would be in danger of collapsing, and Europe’s biggest economy would lose all the competitiveness gains so painstakingly accumulated over the past 15 years.”
Political union seems to mean a German bailout of Italy. Rock and a hard place.
https://www.ft.com/content/a7b94c72-be2a-11e6-8b45-b8b81dd5d080
Housing market is stalling in Toronto. Same old for sale signs up on my tree lined street, no sold signs, no one at the open houses that take place every Sat &
Sunday. . .sure it’s close to Christmas but these properties have been sitting for months. Sorry but the crash has begun, the people in Hamilton just haven’t heard the news yet. People will react angrily to this post, my guess is, these are the same people who are mortgaged up to their arm pits, convinced the Toronto market is different.
This is how you bribe the peasants into giving up cash transactions.
http://blogs.wsj.com/briefly/2016/12/09/5-ways-the-indian-government-is-trying-to-wean-its-citizens-off-cash/?mod=briefly_more
#12 Smartalox on 12.12.16 at 6:27 pm
Someone posted a comment yesterday about automated delivery trucks taking the jobs from truckers in the oil patch.
Here’s what I don’t understand: why would a company spend millions of dollars to automate the job of a guy that gets paid, at most $100,000 per year? Each driver replaced with a million- (or 10Million) dollar vehicle that can do the same job, in the name of ‘Shareholder Value’.
——-
It won’t cost that much because it can’t. Obviously if having a real driver at the wheel is cheaper, that’s the way it would go. The only way an automated process wins over human labour is by being a better overall investment over the timeframe applicable. That means they ultimately put more money in an owners pocket that a human worker would.
Several cars on the market already offer driver “assists” keeping cars between the lines via electric power steering inputs by “seeing” the lines on the highway, slowing a car in cruise control by “seeing” proximity to the car in front, automatic driverless parallel parking, steering, braking, accelerating, gps systems, are all semi-automated already on cars and are just boxes on the options list. The GM OnStar system has been able to manipulate various systems on a car remotely for years. If anything, the tech has been held back due to consumer concerns over this kind of remote stuff and privacy issues regarding the GPS data. One example a few years back was a state police dept pushing to fine speeders remotely using gps data. They’d know how fast you were going, and what the limit was where you were driving, and email you the fine. The ultimate photo radar revenue generator.
It’s coming, it will be affordable, I guess you can call that “progress”…
People have been gobbling up mortgage debt for their slanty Leslieville semis, spending on their HELOC to finance the renovations to their rotting foundations, using their credit cards to buy their Hunter boots and designer coats for their dogs. That is the “real” Toronto. Don’t be fooled, the people of this horrible city are teetering on the edge of financial destruction. January will be interesting.
#12: “automated delivery trucks taking the jobs from truckers in the oil patch”
These are the same people who, back in the seventies, predicted we’d all be living like the Jetsons by now with robot maids and flying cars.
The new technophile dream (and recent media meme) is a fleet of robo-trucks working 24/7 with no union, no benefits, etc.
The technology to make that possible might seem immanent, but the reality is different. Computers fail and crash all the time, and we put up with them doing so because it’s largely an inconvenience.
Now picture a fully laden 18-wheeler ploughing into oncoming traffic like a runaway freight train. Computer failure is no longer just an inconvenience.
That dream is decades away or — like the Jetsons’ flying car — maybe never.
Why would anyone want to be so highly leveraged in such an illiquid asset as a house? I can’t understand why people are not opting out of this madness. Why would anyone pay a million dollars for a house? Have people lost sight of just how much money that is? People will receive a life sentence (25 years or more) to pay off something that maybe took 3 months to build? It’s sheer madness. People have lost their minds.
2 pathcontrolmonk on 12.12.16 at 5:51 pm
The point is moot, Trump will not be inaugurated. America doesn’t want a POTUS and Secretary of State beholden to Russia. Sarah Palin is especially outraged because she can see Putin from her backyard.
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How come when Donald said that the vote may get rigged he was laughed at, and when he said that he might not accept a defeat he was ridiculed for holding that position?
But now, ‘everyone knows’ that the RUSSIANS rigged the vote and the left won’t accept the outcome despite the recount fiasco (which was coming around to proving Hillary to have been instrumental in vote rigging); and the ‘FAKE’ news sources are those who said that Donald would win and the ‘REAL’ news sources said that he had no chance.
Just talked to a successful realtor in the GVRD. Their take: condos and townhouses are still selling, but numbers are way down because first-timers are failing the higher-rate mortgage stress test mandated in October. They want to buy, but they can’t get the financing.
The realtor was convinced things will turn around next spring. I didn’t see why but considered it impolite to say so.
“The central bank bosses (Poloz here and Yellen in the States) are appointed by governments, but then unaccountable to them. ”
It is a nice story, but has any central bank boss ever squared off with the PM or POTUS?
The whole thing looks like a team sport to me. You play for the team or you get cut.
Alan Greenspan played the game for over 18 years by telling his political masters what they wanted to hear right up until 2006. A double bubble chair with both a dot.com and a credit/RE bubble for the citizenry to deal with.
Poloz strikes me as a team player. The last thing JT wants is for the party to end before another federal election or a provincial election in Ontario.
Thinking Bonds are on sale right now.
Bet Accordingly
“Trump won’t be inaugurated”. Um, unless Mr. Trump croaks between now & inauguration, he will ascend as POTUS. Or is there some other USA election rule I’m not aware of that might see Mr. Trump not become POTUS? I suppose if he is arrested for some reason he might lose out…..
#37 Deplorable Dude on 12.12.16 at 8:05 pm
Cliff notes on ‘Russia did it’ for those relying on the coniving MSN for their view.
1) RNC has not been hacked, confirmed by RNC and FBI
2) DNC emails were leaked by an insider, not ‘hacked’. Wikileaks strongly indicated it was Seth Rich, who was murdered shortly after the leak. Wikileaks has a reward for info on his murderer. Ex UK Ambassador Craig Murray also confirms these were leaks and he knows the source.
3) John Podesta emails that Wikileaks were publishing during the campaign…thanks to Podesta leaving his Blackberry in a Cab..someone found it and guessed his simple password, and passed tgem onto Wikileaks.
4) Hillary’s private email server…FBI confirmed its confident 5 other nations hacked her server…but none of the emails have been publically released.
5) no evidence ‘muh Russians’ hacked in voting machines….confirmed by FBI.
….so it’s BS…certain CIA operatives may be colluding with HRC in an attempted Coup d’etat…or at least try and fool the Electoral College with their BS
…..
Just think of what would happen if Soros and company got Electoral collage to flip.
Lefties hate cops. Deplorables got their back.
Lefties hate millatary. Deplorables are millatary trained.
Lefties don’t got guns. Deplorables have assault weapons, amo and know how to use them.
Under Globalism Deplorables have no future, lefty’s lots of tets to milk off of. They know the system.
1776 all over again. Seriously it could happen.
Debtslavecreator on 12.12.16 at 6:18 pm
The economy will be on life support for most years between 2018-2022
================
and what, pray tell, happens in 2022 to turn things around?
The Great Reset indeed is coming! I’m speaking of Gold prices back to triple digit levels.
Who needs it. But oil…in everything.
Bullion Bolsheviks will get trumped.
bump2
The Left is furious, I predict a big downturn in stocks once their hissy fit starts.
Mr Soros comes to Canada.
https://youtu.be/9aETpLQ7WcM
Getting harder and harder to keep the Nictonite mission quiet with all these damn telescopes and cameras everywhere.
https://youtu.be/DFC5cYNjN6w
That was Issac in the mother ship.
#27 yorkville renter on 12.12.16 at 7:36 pm
I always say, I’d rather have a $400k mortgage at 10% than a $900k mortgage at 2.5% because its SO much easier to pay back $400k
At first glance, it looks like you are correct:
For a $400,000 mortgage at 10.00%, 25 years amortization, your monthly payment will be
$3,577.95
For a $900,000 mortgage at 2.50%, 25 years amortization, your monthly payment will be
$4,031.70
But if you consider it some more, I think you overlooked something:
After 25 yrs, you end up with $0.4M equity in the first scenario.
But in the second scenario, $0.9M.(*)
For those $136K extra payment, you gain $0.5M. (**)
Bram
(*)Assuming two things:
-A- that house price matches inflation, which historically it does.
-B- equity figure in ‘real dollars’ which needs to be corrected for inflation.
(**)Again: real dollars. At high capital appreciation, this gap becomes much larger.
That image is oddly arousing
Chirping Obama on Twitter so much fun. Floyd on the buds
@SmokingMan.
I do it politely. The bastard has drones with missiles, I’m not an idiot. Everyone knows where I live.
DELETED
Rip https://youtu.be/ZIO4oSLwK3A
One of my many hero’s
Guys dead I’m thinking murder.
Learn grasshoppers
https://youtu.be/b8CpON8VrRU
Monster Mortgages Can’t Be Paid Off Early
#27 yorkville renter on 12.12.16 at 7:36 pm said:
“I always say, I’d rather have a $400k mortgage at 10% than a $900k mortgage at 2.5% because its SO much easier to pay back $400k”
*****************************************
I agree! A $900k mortgage is almost impossible to pay down early even with a family income of $200k or whatever. (Most or ALL of which is already accounted for in income tax, other deductions, huge mortgage and property tax costs and other living costs).
In 1995 we had a mortgage of $108k. (Typical mortgage for Edmonton in those days) A bonus cheque of $5k could whack about 5% off that mortgage, $10k meant about 10% off the principle. It got paid off in about eight years. Incomes are higher today, but a $10k bonus cheque only knocks off 1% on that $900k monster. (Why bother?) Barring really big extra discretionary income, there is no way to whack that thing down to size. It’s almost immune to early payment.
So….what’s the profit picture for financials ie banks as the increases will certainly be accretive. What about the preferred which seem to have bottomed…maybe? Could the rate announcement blast a crater in the market? Inquiring minds want to know…..cause in spite of e flame I continue buy buy buy…..RY yesterday at 90…..crazy ….right?
Btw….the two picks I generously gave you to prove my point are doing nicely…..PD from 5 to 8 in two weeks…..TDG….from 2.50 to 3.20 ditto. No thank you?
More money…..more problems……oh well.
I’m not a big fan of Donald Trump but give him credit for one thing, he’ll probably be successful at deflating our housing bubble. We’ve been unsuccessful (or unwilling) to do so for many years now and it’s about time someone did what has to be done.
@Henry Morgan, post #61:
Great, I love buying opportunities! Bring it on!
Bram Checks the Math
Bram at 64 said:
After 25 yrs, you end up with $0.4M equity in the first scenario.
But in the second scenario, $0.9M.(*)
For those $136K extra payment, you gain $0.5M. (**)
****************************************
You make an excellent point and one that surprised me. It makes sense, a lot less of the payments are going to interest so more to equity.
It’s ALWAYS good to actually run the math.
Your example illustrates why house prices indeed should be a lot higher when rates are lower and puts the lie to the very silly notion that houses “should” cost 3 times income with no regard to interest rates.
Must suck to be David Suzuki.
You’re young and stupid. You push a agenda that you believe in. You get a bit older realizing your wrong.
But the fan base. That pays for your luxury.
You can’t let them down..
There are wimps and there are Smoking Men.
Smoking man saving one mind at a time. I get James and bottoms up.. This battal is won.
Don’t think I’m strong enough for a war.
Rip https://youtu.be/ZIO4oSLwK3A
One of my many hero’s
Some place their trust in Canadian real estate, and some in a state-less, corporatist McLife. But we remember the divine Emperor Trump. They are brought down and fallen; but we are risen and victorious.
#37 Deplorable Dude on 12.12.16 at 8:05 pm
Find more non-MSN views here:
http://billmoyers.com/story/trumps-second-gilded-age-overcoming-rule-billionaires-militarists/
#37 Deplorable Dude
A real basket of deplorables:
http://www.counterpunch.org/2016/12/12/a-real-basket-of-deplorables-donald-trumps-cabinet-nominees/
@smokingman
What are you smoking?
What a racist fake news piece of sh*t YouTube video you posted.
12.12.16 at 11:14 pm
Bram Checks the Math
Bram at 64 said:
After 25 yrs, you end up with $0.4M equity in the first scenario.
But in the second scenario, $0.9M.(*)
For those $136K extra payment, you gain $0.5M. (**)
****************************************
You make an excellent point and one that surprised me. It makes sense, a lot less of the payments are going to interest so more to equity.
It’s ALWAYS good to actually run the math.
Your example illustrates why house prices indeed should be a lot higher when rates are lower and puts the lie to the very silly notion that houses “should” cost 3 times income with no regard to interest rates.
//////////////////////////////////
Where’s the scenario where the house value goes down to 650k.
Oh ,that’s right houses only go up in value…
M42BC
Zio-Chen Fu says:
If a banker gives you mortgage for 5 years at 2.19%.
He is either a fool, or he expects interest to go negative.
Banker no fool.
Why a pretty lady kiss a dog?
#74 Maj
Nice fake news blog.
The whole world saw that, during the election, Hillary and her cabal used every dirty trick in the book to win. Now, after the “unexpected” loss of this mendacious warmonger, we are observing a new set of dirty tricks to delegitimatize the election.
Obama, whose legacy got repudiated by the voters, is leading the effort. I sincerely hope that this gambit will not work, but backfire. I also sincerely hope that Trump will pay you people back in your own coin once he is sworn in.
And always, the Emperor Protects.
#64 Assume the wife and I make $250k, I wouldnt need 25 years to pay back the mortgage… and after the mortgage is gone in 19 years, we could spend the next 15 years getting back to investing.
damn…. i typed 19 years in my post but meant 10.
fat thumbs.
This house is a good example of what I was getting at with my previous post.
I know you guys are talking about over a 25 year period but look what happened to this guy just a few houses away from where I live.
He bought the nicest house on an average block in East Van for 2.436m ,they were asking 2.3.m in late June.
If he was to put it back on the market 6 months later he would be getting offers with a one in front of it ,as the neighborhood has cooled off by around 20% and counting and the euphoria has dispersed.
On Zolo there are 46 listings for this area and 13 of them have noted price reductions on current listings and a few more were relisted at a lower price.
Around 10 more were taken of the market recently due to non sale/lack of activity and end of contract…most were over 90 days on market.
I don’t mind ,they are good neighbors and I suspect after losing around 400k of paper equity they will be our neighbors for a long time yet.
To be continued…
M42BC
https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAwMjdQTQ==
Bankers expect higher rates. Realtors anticipate them. Mortgage dudes are convinced. Traders have no doubt. Governments are preparing.
The ability to lock into a five-year fixed-rate mortgage today at 2.18% is historic. And, like this blog, abnormal as hell. Govern yourself accordingly.
If everyone is so sure of this why can I still get that rate today? Who in their right mind would lend out that kind of money if they knew they’ll have to pay depositors another 1% in a couple years from now? It would eat half their profit. It’s because after the last one-and-done for a year they don’t really expect a tightening cycle.
The Prediction:
(1) first mtg rate at August 2017,(canada) Minimum 4.75% real world cost with high probability it will be north of that.
(2) Janet and the fed pull a surprise .50 ( 50 basis point hammer on next rate set) 0dds: 25% lets see what happens….
#108 Ponies Pilatus on 12.10.16 at 12:52 pm
#76 NEVER GIVE UP on 12.10.16 at 1:51 am
A GREAT CHRISTMAS GIFT;
Every year I give a financial book to my kids. Something to keep their eye on the ball. books like “Think and Grow Rich” by Napoleon Hill. Or even “Looking out for #1” by Robert J. Ringer. “Rich Dad, Poor Dad” books are great inspiration.
The most inspiring book of all is “THE RICHEST MAN IN BABYLON” by George Clason.
All my kids loved it and remain debt free partly because of its advice.
It is a very basic financial guide told in an ancient style. All the basic laws are relevant today.
Give this book to everyone you care about. You can get them used in paperback for peanuts or new copies for 10 bucks. Way worth it!
https://www.amazon.com/Richest-Man-Babylon-Original-1926/dp/1508524351
https://www.youtube.com/watch?v=uJlHnFDdfRU
Merry Christmas!
————–
Merry Christmas, to you too, Ebernezer!
==========================
Sorry if it sounded like that is ALL that I give my kids for Christmas. I am a little ashamed to say that on Christmas Eve our Christmas tree kind of looks like an unbridled testament to obscene consumerism. Lots of people… “Squared”
#72 InvestorsFriend on 12.12.16 at 11:14 pm
silly notion that houses “should” cost 3 times income with no regard to interest rates
Good point, Yes.
I guess rule is meant to protect you from rate increases.
But long-term-fixed could offer the same protection (popular in the USofA)
About principle payments:
It’s the only payment you will ever make that is net-worth neutral :-)
Every other payment in life is a cost, a fee, or charged with sales tax.
That’s why for rent-vs-buy comparisons I consider interest portion only (along w prop tax and maintenance.†)
Principle payments leave my wallet only to return into my future wallet at time of selling the house, often appreciated along w inflation or, in yvr/yyz case, better than inflation.(*)
Bram
*) In theory you could buy high and sell low, but as your horizon lengthens, the more likely you will get your money back, and then some. Depressed values never last more than a decade. Not on stock markets, not in housing markets.
†) And as Garth often mentions: lost earning potential may have to be considered as well.
“These central banks are in place to ensure the integrity of money.”
What a hell of a job they’ve done.
#64–
If we assume for a moment that the $400k house and the $900k house are the same just on either ends of a market cycle(probably exaggerated I’ll concede), what is the value in such a spread of prices? That is to say, if you have your 900k in equity but it can only buy you a similar house, what good is the higher valuation?
Why should this endless climb of prices induce–
Greater leverage for young people at historically lowest rates
Higher likelihood of HELOCs and financing from parents
Loss of buying power from being house poor/possible CMHC bailout if it goes wrong->currency devaluation?
All in the interest of buying the same house? If prices were cut in half there’d be a lot less leverage, a lot less speculation, and the houses would still be occupied by working Canadians. Why do we love high house prices so much when we hate high-priced everything else?
Will Canadians ever realize that bankers are not our friends, or will we be economically Mexico by then?
#51 fully agree. If you have a million and want a million dollar house by all means but it hasn’t even been close to being the case.
Instead, the majority of people the last 7-8 years have enslaved themselves to overpriced houses with cheap and easy money.
I see it often, acting like super “smart” investor and smug because they have a house (who cares, the bank owns 94% of it) and they can’t afford anything else.
All those overextended, lets see how much freedom and wealth creation your overpriced real estate gives you when you miss a payment. You’re only a slave to the big banks.
Canada house porn and house obsession is insane. It blows my mind- house, shoe box in the sky or any piece of real estate at any cost. It really needs to stop.
Too bad you can’t go to the bank and borrow 500k at 2.2% to invest in a balanced portfolio (extremely conservative) that will net you 3-5% return free money- of course the banks would never let you do that- that’s their business- better give and enslave the sheeple to a 700k debt load. Can’t argue with it though, if people are willing, why not do it- great business- worst case- tax payer will cover our butts (glad that will change soon too).
All the insanity has gone on too long, it just seems normal in Canada now.
#25 Bubb, prices in Cowtown , Edmonton and Canada generally have held up traditionally for up to two years after a crash because the owners have that much saved in RRSPs etc and severance. The crash comes later when the savings and credit runs out. Don’t forget that many of these people / couples have been earning fat dual salaries. The average real estate cycle over 50 years looks like a long ocean wave with up trend cycles lasting 7 to 9 years with peaks and troughs lasting 24 to 36 months followed by a down trend of 7 to 9 years. The past two decades has been interfered with by government incompetance but that has been a disaster and it looks like a reversion to the mean is in the cards . Alberta oil money is not going to rehire all those redundant engineers, the bust has yet to come.
One thing has emerged though, the resurgence of the stock market at the same the real estate markets crash. This is a long established relationship. As the equity markets takes off it sucks off all the interest from investors who might have considered real estate as an alternative….so no new money for RE means the crash is in… while equities rocket up to the frustration of trapped RE money.
The look on the dog’s face is priceless.
“Third, a mistaken belief the economy will fold if money costs what it should.”
Exactly. However, they can be forgiven, sort of, because this bs has been fed by business interests to msm and then sprayed relentlessly all over the little twerps since the gfc.
If anything can pull itself out of the crapper, it’s business of any sort or size, regardless of external conditions.
Rising rates won’t make much difference at all in the short term and will be positive in the long term, as, in good economic times, business will carry on peddling, squeezing suppliers, sloughing off manpower and cutting costs.
Oh, and sitting on what precious cash they can. Just like prudent savers who exercise sound fiscal habits.
Business won’t be dealt a death blow from rising rates, far from it.
Tptb have fallen in love with faster and faster money. Trouble is, the needle’s moved into the red zone and the resulting debt loads across the entire consumer/government spectrum is causing economies to cannibalize and implode with business now way more aggressive in trying to eat each others’ lunches. The law of diminishing returns is in full swing.
Gubmint believes that low rates preserve balance sheets and assets when in fact all they do is encourage borrowing against the future whilst continuously corroding the entire country’s wealth. This is the thin edge of the wedge prior to selling precious assets and commodities down the river, never to be seen again- and these national jewels are not simply being sold to domestic private interests, they’re being sold to foreign interests.
Just look at the pathetic state Ontario is in, now the world’s most indebted sub-sovereign borrower. Think about that: the world’s most indebted sub-sovereign borrower. Its leaders have lost it: spend like mad and to hell with the taxpayer.
So yeah, the do-nothing BOC can carry on sitting on rates like a demented circus elephant or wake up and start administering the requisite medicine so that Canada may return to fiscal health.
What a mess. As for the little twerps, welcome to the school of hard knocks….even the boomers graduated from it.
#22 joblo on 12.12.16 at 7:22 pm
“Horray, jack em baby.
Let fixed incomers and the baby boomers finally get a decent return. Maybe folks will even start saving and that capital could then be invested in productive assets.”
Some will save, some will pay off debt and some will spend.
…and TFSA limit should be returned to 10K.
http://www.theglobeandmail.com/real-estate/vancouver/east-side-vancouver-homes-surging-in-value/article33287877/
#26 GogglesPaisano on 12.12.16 at 7:30 pm
“CONFUCIUS SAY…
Never approach a bull from the front, a horse from the rear or a FOOL from any direction.”
Fools are simply accidents waiting to happen. Absolutely steer clear…..
#33 ANON on 12.12.16 at 7:43 pm
#11 common sense on 12.12.16 at 6:26 pm
“Who’s money?
I’m money!. You’re money. Money is a psychological phenomenon, so we’re all money. :)”
Not far from the truth- we are all viable taxpaying units, utterly dependent upon an inescapable monetary system which is controlled and managed by people who regularly make bad decisions.
apparently, russia did not have to meddle in the us election
crosscheck database
#23 AJ on 12.12.16 at 7:26 pm
http://www.rollingstone.com/politics/features/the-gops-stealth-war-against-voters-w435890
superiority trap
http://www.investopedia.com/terms/s/superiority-trap.asp
#64 Bram on 12.12.16 at 10:05 pm
Whoops! Let’s not forget the “fire under your butt” factor that comes with higher rates- massive incentive to pay off that sucker.
#79 Ponzius Pilatus on 12.13.16 at 12:08 am
“Why a pretty lady kiss a dog?”
Because it’s winter and the frog’s unavailable?
The Trump spike will probably be short lived. The States is not going to be able to re-invent themselves and make themselves “great” again. They got their greatness by building a military industrial complex that made its money invading the entire world on a pretext of “freedom fighting” (which was actually just deposing democratically elected governments and replacing them with pro-US business right wing dictators).
They unfortunately can’t do that again. Their little mistake in Iraq has caused such global hatred of their “brand” that they can’t get anyone on their side anymore.
That, and the military industrial complex made its money by borrowing from the American people (a fact that is not well understood, but will be). All of those wars were fought on credit, and the balance is now due. It is in the trillions. They can’t borrow that amount again, and keep up the warfare on a world that understands them now and won’t be fooled by them again…..
#27 Yorkville renter
Excellent point that a lot of people just don’t get.
Apologists for central bank artificially lowering rates say that affordability of houses is helped by low rates.
They never mention that the house price is 3x what it should be, and that rates are not guaranteed to stay low for the next 25 years.
When it all comes crashing down (years from now) people will be saying ‘Why didn’t anyone see it coming? Why didn’t anyone warn us? Government needs to bail us out, no one could have forseen this!’
#61 Henry Morgan on 12.12.16 at 9:28 pm
The Left is furious, I predict a big downturn in stocks once their hissy fit starts.
LOL the Left is always furious!
#56 Linda
The ‘Trump will never be President’ folks are in a constant state of delusion and denial, I wouldn’t waste my time with them.
Of course, many of them are also desperately hoping for Trump’s assassination.
Such lovely, non violent, tolerant people these leftists.
It’s Flop’s turn
#77 For those about to flop… on 12.12.16 at 11:54 pm asked BRAM and I:
“Where’s the scenario where the house value goes down to 650k.
Oh ,that’s right houses only go up in value…”
*********************************************
Well, it’s your job to show that scenario dude. I mean you are the one that is interested in that scenario. Please show the math. Perhaps show a scenario of a quick price drop with mortgage still owing and one where the price is down after 25 years. How does the lower interest rate on the 900k mortgage affect the results?
(I in no way condone mega mortgages, but the math may surprise in some ways)
Leverage in Real Estate
Huge leverage allowed in home purchases can lead to huge quick gains in net worth.
But if one bus a house and pays it off over 25 years, there is no leverage at the end of the 25 years. If the house is up 100% the gain is 100% whether it was 5% down or 100% down. And in the case of 5% down the interest payments may or may not be considered a deduction from the gain (maybe not since in the 100% down case one could deduct lost potential earnings on the down payment).
Now if the house gains 50% in the first couple of years does this become a leveraged gain if the house is kept and paid off over 25 years (I would say no) or b) the house is sold and similar one bought at 150% the price of the old and then paid off at the same end time (I would say no).
I may be missing something but it is hard to see a scenario where the leverage really helps the homeowner.
Perhaps the gains in real estate are 100% due to the price rises and leverage is not really helpful if the place is eventually paid off?
Well, the leverage helps I guess by getting the homeowner into the property market far earlier (assuming gains to come)
You repeat yourself, so will I.
Yes, Trump will lower taxes and invest in infrastructure, but the following are also likely, Trump will:
-Cause world instability because of Russian foreign policy
-Create a confrontation with China…China will strike back hard, not with military, but economically
-Cause chaos with Iran and ISIS
-Spark social unrest in a US population already under high tension. This will be nasty and long lasting…this is probably the worst thing in this list.
The odds of one of the above happening are probably lower then the odd of all of them happening.
Social unrest in America and a China Conflict would cause Markets big losses. Much worst than ‘Housing Crash’ or even ‘9/11’
Get out of markets before its too late…or until he resolves the above.
Good luck.
#64 Bram on 12.12.16 at 10:05 pm
At first glance, it looks like you are correct:
For a $400,000 mortgage at 10.00%, 25 years amortization, your monthly payment will be
$3,577.95
For a $900,000 mortgage at 2.50%, 25 years amortization, your monthly payment will be
$4,031.70
But if you consider it some more, I think you overlooked something:
After 25 yrs, you end up with $0.4M equity in the first scenario.
But in the second scenario, $0.9M.(*)
For those $136K extra payment, you gain $0.5M. (**)
Bram
___________________________________
Total waste of time with this kind of pie in the sky math. So what happens if rates go back to normal over your current 900K 25 mortgage and your million dollar tear down reverts to the mean? That’s all historically very trendy as well.
1. Mortgage payment goes from $4031.70 to $5758.26/month.
2. 900K dollar house after the bubble pops is now say 600K which if in a good area in an urban environment is probably about right, certainly no more than that.
BAM! just like that you’re now paying at a rate covering principal + COB of over 1.6 Million on a market value 600K run of the mill house. This could (probably will) be YOU in less than 10 years.
Once you add in taxes, insurance, CMHC that 600K MV pile will consume an entire 6 figure income after taxes to keep your name on the deed – 30% drop in MV, and 4-5 years of regular increases is all it would take to put you there.
Given everything going on in the world, USA, Canada on the political and economic front, my scenario of dropping values and increased rates is 100% guaranteed. There is no chance any household carrying near a million in debt on regular local incomes will get out in the black paying 4-6+% on a bubble market house.
Even if the house appreciates back to the original bubbly purchase price over the 25 year length of the mortgage, you could have dumped 3/4 Million+ in interest alone by the time you own it – there’s just no way to recover from that. Zero equity game after 25 years of debt slaving.
#76 What are you smoking on 12.12.16 at 11:45 pm
@smokingman
What are you smoking?
What a racist fake news piece of sh*t YouTube video you posted.
………………………………………………………….
He is not a racist just a certified wack job. One of Garth’s pets he keeps on a leash. “I hope”
“Garth please take Smoking Man out for a walk he really needs to do his doggie thing as he is really full of sh#t!
Bill Gates likens Trump to JFK:
http://www.cnbc.com/2016/12/13/after-talking-with-trump-bill-gates-likens-president-elect-to-jfk.html
Trump meets Kanye West:
http://www.businessinsider.com/kanye-west-trump-tower-2016-12
hahaha The next 8 years are going to be the most fun ever.
Best part will be watching ‘progressives’ heads explode from severe cases of cognitive dissonance.
Here’s an update on the house I have for sale in Calgary.
2 weeks on the market and 30 people have gone thru already. No offers yet. 4 groups have gone thru twice now, and another is going thru today.
Told the realtor that I thought it would be a good idea to spend $15K painting inside, new floors, granite counters, stainless appliances, etc, before listing. We’re talking baout general cosmetic refurbishment here, eye candy, as the basic structure is sound and without issue. Thing is, we’re also dealing with a 40 year old smoker home, with someone else’s decorative taste still intact.
She said not to do anything. Well, one day after hearing those numbers and not seeing an offer I went ahead and ordered all the work I wanted to do originally. I feel like we’ve burned 30 prospects for no good reason.
I am priced 10% lower than all the comps in the neighborhood, and am offering a commission equivalent to an agent selling one of the houses priced $100K more than mine.
Here is one to follow…
https://www.realtor.ca/Residential/Single-Family/17592333/192-NEVILLE-PARK-BLVD-Toronto-Ontario-M4E3P8-The-Beaches
DELETED
#108 quebecEconomist on 12.13.16 at 9:55 am
You repeat yourself, so will I.
Yes, Trump will lower taxes and invest in infrastructure, but the following are also likely, Trump will:
_______
“-Cause world instability because of Russian foreign policy”
More or less than instability caused by Trump winning the election for POTUS the most powerful nation the planet has ever witnessed?
” -Create a confrontation with China…China will strike back hard, not with military, but economically”
Is China that massively stupid? Military action would be suicide for China, so would economic action as the USA is China’s largest customer by far, and the USA has massive influence over just about every major partner of note that China trades with. China has reasons to fear Trump, not the other way around.
-Cause chaos with Iran and ISIS
Who cares – Trump might just as soon leave and let the whole middle east bomb itself into the stone age. They’ve got plenty of oil back home.
-Spark social unrest in a US population already under high tension. This will be nasty and long lasting…this is probably the worst thing in this list.
Trump’s supporters have all the guns, all the training, and less to lose. If someone got dumb – it would be over quick – no worries.
#111 traderJim on 12.13.16 at 10:28 am
hahaha The next 8 years are going to be the most fun ever.
Best part will be watching ‘progressives’ heads explode from severe cases of cognitive dissonance.
____________________________________________
Every now and then I catch a flash of light in my peripheral vision as a hardlefty runs by, engulfed in flames and sobbing hysterically.
I figure there must be a way to somehow use these to heat my house.
#77 For those about to flop… on 12.12.16 at 11:54 pm asked BRAM and I:
“Where’s the scenario where the house value goes down to 650k.
Oh ,that’s right houses only go up in value…”
________________________________________
Yep, and interest rates never go up apparently.
Amazing what a giant mortgage and massive paper “gains” can do to the frontal lobe of some folks.
#87 Bram on 12.13.16 at 2:29 am
About principle payments:
It’s the only payment you will ever make that is net-worth neutral :-)
Every other payment in life is a cost, a fee, or charged with sales tax.
______________________________________
Yeah, except that net worth “value” you’re talking about is ascribed to you by the same folks that lent you the money for your house lol!
Your “NW” is good for borrowing more money, paying more taxes, and receiving less perks from Justin and Wynne.
In other words: useless.
#83 For those about to flop… on 12.13.16 at 12:52 am
This house is a good example of what I was getting at with my previous post.
I know you guys are talking about over a 25 year period but look what happened to this guy just a few houses away from where I live.
___________________________________________
Yep. I’m in what could be considered a normal market – but buying the nicest house on the block carries the same consequences here as well. 550K one year+ on market sold for 450K. Guy only owned it a year before it was back up for sale, something must have happened – that’s life. 100K loss in 1 year – he bought the wrong house at the wrong time and tried to sell at the wrong time.
time to get growing!
4 plants per household – max 100cm tall.
policing this is impossible. pot plant height inspectors are few and far between.
in the hands of a decent gardener 4 plants can produce all anyone could possibly use.
although i can’t stand t-ball trudeau, this one he got right.
time to enjoy a fat one in celebration.
#110 Johnny Boy on 12.13.16 at 10:23 am
#76 What are you smoking on 12.12.16 at 11:45 pm
@smokingman
What are you smoking?
What a racist fake news piece of sh*t YouTube video you posted.
………………………………………………………….
He is not a racist just a certified wack job. One of Garth’s pets he keeps on a leash. “I hope”
“Garth please take Smoking Man out for a walk he really needs to do his doggie thing as he is really full of sh#t!.
……..
Typical name calling lefties.
Ha. Trump just put Rick Perry in charge of Energy department.
Good bye and good riddance UN man made global warming scam…
Progressive heads are going to explode.
@ #108 quebecEconomist
You’re wrong on pretty much everything, no wonder you’re from Québec :-)
#117 IHCTD9 The 900k house can go down (or UP) in value just as the 400k same house at different point in the cycle. Opposite end in the cycle? who is the one who knows that and what is he doing posting on this blog instead of being out there multiplying his m(b)ilions?
Same goes for the 2% vs 10% rate. You will never find one position trade that wins in every scenario => You can always build a case against any position.
And to answer another poster wondering how the higher prices are of benefit to anyone.. let me see.. what gives one the impression that market set prices are or should be for the benefit to anyone, except for those who HAPPENED to be on the right side?
Garthie boy can’t handle the truth LOL !!!! Deleting innocent yet accurate comments.
The fake news meme is really the start of a war on free speech by the left.
Your comment was wholly irrelevant to my blog post, the conversation or this blog. Go and slag people elsewhere. — Garth
I hope that dog is consenting.
This is one persons take on the fake news thing…
M42BC
http://m.imgur.com/gallery/iPLkz
<blockqute#16 TurnerNation on 12.12.16 at 6:41 pm
IMO first US rate hike will be June 2017, and a stock market pull back then.
You’re pathetic. I normally avoid ad hominems, but seriously, you’re pathetic. You’ve been bleating here about how the US won’t possibly raise rates all year, and now you’re still in denial, though trying to cover you behind.
You’ve been exposed. And I will expose you further.
Sir Garth
Is there a Conference Call today? This can be deleted. Many Thanks to your team .
Every Tuesday at 5 pm ET. — Garth
Where can you get a 5yr fixed rate mortgage for 2.18%? I’ve looked and can’t find anywhere in Ontario that offers that rate.
Ratespy.– Garth
#77 For those about to flop… on 12.12.16 at 11:54 pm
Where’s the scenario where the house value goes down to 650k.
Oh ,that’s right houses only go up in value…
#109 IHCTD9 on 12.13.16 at 10:15 am
Total waste of time with this kind of pie in the sky math.
#117 IHCTD9 on 12.13.16 at 11:19 am
Amazing what a giant mortgage and massive paper “gains” can do to the frontal lobe of some folks.
First off… a deep sigh, as I fear for my poor kids getting Canadian math education.
I wonder if I should send them to the old country for schooling.
Next, as a service to the community, I have performed the following exercise.
STEP1: Download 26 years of yvr price data from teranet, and load it in Google Sheets.
STEP2: For each and every month from jul2000 onward: calculate appreciation compared to 10 years earlier.
Now, before reading further… you guess… how often in this history did buying in month X of year Y and selling 10 yrs later resulted in a nominal loss?
Hmm….. Of the 192 months examined, I found ZERO.(†)
WORST CASE SCENARIO:
Buy in jan1993, Sell in jan2003 -> +16.7%
BEST CASE SCENARIO:
Buy in aug2001, Sell in aug2011 -> +145.5%
AVG CASE SCENARIO: +80%
Moral of the story: long term you always get your nominal money back.
And that avg +80% covers 10 years of inflation just fine.
For the math-challenged commenters here, I may repeat this exercise for other cities and for shorter horizons, but only if you ask nicely.
Bram
(†) Nominal dollars, not adjusted for inflation.
#113 Jimbo on 12.13.16 at 10:43 am
Here is one to follow…
https://www.realtor.ca/Residential/Single-Family/17592333/192-NEVILLE-PARK-BLVD-Toronto-Ontario-M4E3P8-The-Beaches
___________________________
That’s a $26,834.20/month mortgage payment at 4.6%. You need to make about 650K/yr gross just to make the mortgage payment alone.
Houses like these are for rich folks who’s spending limits aren’t tied to the local economy. Someone will buy it, and probably not need to haggle for it. The only thing that needs to happen is the value of that house needs to be at least as good as the next 4.8 Mill Beaches house
Pucker indeed.
Sold all stocks today .
Time for popcorn, fireworks and SQQQ.
Santa is flying in with a bag of cheap gold this week, Mothers day returns.
But what do I know, I’m just a reader.
Happy holidays to all.
for the tax experts here…
say i have a corp. holding a several years worth of retained earnings.
my sister has zero income – she can earn about 50k in divs before any tax applies.
i want to make her a 25% shareholder and pay her 50k divs yearly.
this seems perfectly legal to me , are there downsides should i be wary of?
#130 Bram on 12.13.16 at 1:00 pm
So going back to 1993 has the illusion of being reasonable, but the reality is that you stopped going back just in time to avoid invalidating your ‘Moral’. Your own numbers show the ‘worst’ was starting Jan 1993 at 16.7%. That is a pretty horrible 10 year return with no inflation considered, and remember there is always a 5% exit cost (ignore FSBO).
Run it again for purchases going back into the late 80s and I expect you will find there were even worse losses over 10 years, and that is likely the comparable point in time to present day…it took nearly 30 years, but we are back at peak house
Bram, I know you have skin in the game and I wish you no financial harm.
It sounds like you got in early enough to weather this storm ,but I merely wanted to point out that you guys seemed to be reading from the song sheet where houses keep going up in value and interest rates stay the same.
People seem to think that its impossible for the market to go down 30% in Vancouver but that is already happening in certain areas.In a lot of cases it just put it back roughly where it was in 2015.
Who knows what the average home will be worth here in 25 years but in the short term the speculators and the flippers will be hampered.
It’s all well and good to say what happens normally but what has happened in Vancouver in the last decade was far from ‘normal’.
For me ,it has less to do with the numbers and more to do with the sense of entitlement…
M42BC
#130 Bram on 12.13.16 at 1:00 pm
__________________________________
So history will repeat itself indefinitely?
I see.
If a guy bought a house in YVR 2013-2016, I submit to you that history will NOT repeat itself.
But of course, you did buy in YVR right near the peak of the bubble didn’t you? And you expect that you are looking at 10+ more years of huge appreciation and low rates, because that’s what happened in the last 10 years yes?
I understand your objections.
DON’T send your kids wherever you went to learn Math.
#130 Bram on 12.13.16 at 1:00 pm
For the math-challenged commenters here, I may repeat this exercise for other cities and for shorter horizons, but only if you ask nicely.
Would you mind doing it for Winnipeg?
“A task force appointed by the Canadian government to study the legalization of marijuana determined Tuesday that sales should be restricted to those 18 and older, with a personal possession limit of 30 grams.”
____
I’m sure the entire task force sweated bullets for months making the above decision.
How much are we paying these dingbat T2 cronies for such elite decision making?
On second though, don’t tell me…
http://www.cbc.ca/news/politics/marijuana-legalization-pot-task-force-1.3893876
Post deleted ?
Pucker indeed.
Sold all stocks today.
Scaling into SQQQ 14th and 15th.
Santa is bringing a sack of cheap gold, Mothers Day returns.
Happy Holidays to all.
“god view” renamed “heavens view”
Cab startup’s former forensic investigator Samuel Ward Spangenberg claims he was fired from the company after blowing whistle on lack of security
https://www.theguardian.com/technology/2016/dec/13/uber-employees-spying-ex-partners-politicians-beyonce
Uber said it protects you from spying. Security sources say otherwise
By Will Evans / December 12, 2016
https://www.revealnews.org/article/uber-said-it-protects-you-from-spying-security-sources-say-otherwise/
==========
Victorian police sold illegal drugs, corruption report finds | Australia …
https://www.theguardian.com › … › Australian police and policing
15 hours ago – Commission finds police used ice, cocaine and ecstasy, met with … drug syndicate”, the state’s anti-corruption investigation has found. Police
#121 Smoking Man on 12.13.16 at 12:01 pm
#110 Johnny Boy on 12.13.16 at 10:23 am
#76 What are you smoking on 12.12.16 at 11:45 pm
@smokingman
What are you smoking?
What a racist fake news piece of sh*t YouTube video you posted.
………………………………………………………….
He is not a racist just a certified wack job. One of Garth’s pets he keeps on a leash. “I hope”
“Garth please take Smoking Man out for a walk he really needs to do his doggie thing as he is really full of sh#t!.
……..
Typical name calling lefties.
Ha. Trump just put Rick Perry in charge of Energy department.
Good bye and good riddance UN man made global warming scam…
Progressive heads are going to explode.
……………………………………………………………………
I call em the way I see em doggy dog. By the way a Card Carrying Conservative not a scintilla of liberalism in my blood. So cut out the leftist bullshit get a haircut and get a real job whack amole.
In his preamble, Trudeau talked proudly about his planned “price on carbon” — effectively a new tax — and when a reporter asked if he plans to levy another new tax on private health-care plans, here was the answer:
“We’re engaged very much in pre-budget consultations, engaging with stakeholders across the country, engaging with economists and within, within our government as well on a broad range of departments, to work at where there are savings, where there are investments to be made.”
____________________________________________
Asked, for example, whether he will deliver on his categorical promise that the 2015 election would be the last federal election ever held under first-past-the-post rules, Trudeau replied: “Canadians want “robust and diverse representation,” but that “any government is going to be faced on an important issue with a … broad range of views on any given issue and it is up to the government to figure out the way forward that respects the broad range of views and the concerns that Canadians are expressing through many different ways.”
___________________________________________
Justin Trudeau, though, manages to say less than most of his predecessors, and takes longer to do it. Listening to him is like trying to drink cappuccino foam.
__________________________________________
What a colossal douchebag, and now even the hard left T2 worshipping blockheads at the CBC are starting to wonder if this was a good idea. Trudeau has shoveled more Portland cement into Ottawa than the Romans did building the Coliseum. A bunch of bird-brains that can’t figure out how to submit a routine money bill to the senate.
He won’t be keeping any promises, he won’t be doing anything good for anyone – just a pile of debt and new taxes for squat, along with gobbledygook answers to simple questions.
#80 Give Praise To the Emperor of Mankind and Holy Terra on 12.13.16 at 12:10 am
“I also sincerely hope that Trump will pay you people back in your own coin once he is sworn in.”
Haters gonna hate.
Your gullibility is so sad.
fun math ….62 people own the same wealth as the bottom 3.6 billion people
#135 For those about to flop… on 12.13.16 at 2:17 pm
Bram, I know you have skin in the game and I wish you no financial harm.
It sounds like you got in early enough to weather this storm ,but I merely wanted to point out that you guys seemed to be reading from the song sheet where houses keep going up in value and interest rates stay the same.
People seem to think that its impossible for the market to go down 30% in Vancouver but that is already happening in certain areas.In a lot of cases it just put it back roughly where it was in 2015.
Who knows what the average home will be worth here in 25 years but in the short term the speculators and the flippers will be hampered.
It’s all well and good to say what happens normally but what has happened in Vancouver in the last decade was far from ‘normal’.
For me ,it has less to do with the numbers and more to do with the sense of entitlement…
M42BC
____________________________________________
Flopper – I know you’re just trying to be nice, so I’ll translate your post into normal speak for Mr. Bram to add a little impact:
Bram, you bought your house near the peak of the mother of all Canadian housing bubbles. A deranged market never seen in Canada in all of its history. I hope you don’t get your ass roasted like chicken dinner on this deal.
Despite your precarious position, you are currently, for a short while; in a position to take the biggest financial torching of your life, and instead turn it into the ultimate short term flip of your life – if only you could honestly appreciate the downside potential of your situation.
Euphoria tends to blind the downside risk of a winning investment, it’s why people didn’t sell their Nortel shares at 128.00, but rather at 2.00. Don’t be that guy, YVR is changing right now, it ain’t going to come back for decades, or ever… just like Nortel didn’t.
You bought into a market on Prozac, far from normal, and almost on it’s last legs. There is no 10 more years of growth left – it’s done. Historical price patterns didn’t start with a massive bubble, but yours did. That means your house MV is on a toboggan headed down the hill for years, and years, and years. The USA had long protracted price growth prior to their crash too – didn’t mater it all went down anyway. And just about everyone who said something was wrong out there was laughed right off the air – right up to the day Lehman went broke.
$$$
You are also going to get pounded into the ground like a fence post with 50-100% increases in YVR property taxes coming your way 100% guaranteed. Also interest rates are going up, you’ll probably renew at 4-4.5% in 2019/20, maybe more – minimum DOUBLE what you got now – maybe worse.
Trudeau is also going to make life more expensive too. What do you do for a living? How about your significant other? What happens when one income evaporates? IT WILL HAPPEN over the course of 25 years, more than once.
Let reality in the door and sell that house asap!
#137 Renter’s Revenge! on 12.13.16 at 2:25 pm
Would you mind doing it for Winnipeg?
Winnipeg data at Teranet starts at jul1990.
Which is also the worst case:
Buy jul1990, Sell jul2000 -> +9.8%
Best case:
Buy feb2002, Sell feb2012 -> +152.3%
Avg case: +88.7%
Who would have thought? Avg case WPEG is even better than VAN.
#134 Steve
you stopped going back just in time to avoid invalidating your ‘Moral’
Stop accusing me of malice, please.
I would hope I have a better reputation than that, on this blog.
This is data from Teranet, which did not go further back than 1990.
#135 Flop
People seem to think that its impossible for the market to go down 30% in Vancouver but that is already happening
I completely agree with you.
Yes -30% right now. Heck, it will drop some more next year, if you ask me.
What is `impossible’ (I should say: unprecedented in recent history), is that nominal price goes -30% in a 10 year term.
You buy a house to live in for a decade+, not to sell it 24 months later.
Houses are like stock: you buy and hold. Just don’t get foreclosed due to neg equity.
#136 IHCTD9 on 12.13.16 at 2:24 pm
you did buy in YVR right near the peak of the bubble didn’t you?
jan 2012, reasonably close to peak-house (in time), yes. In value, less so.
The chance that nominal prices in 2022 are lower? Oh so slim, you may as well put them at zero.
Will 2016 -> 2026 show nominal loss? If it does, it would be out of line with the historic data that I have at my disposal. Calling it unlikely.
Bram
RE: “The ability to lock into a five-year fixed-rate mortgage today at 2.18% is historic. And, like this blog, abnormal as hell. Govern yourself accordingly.”
This interesting situation also gives people another rather cool “ability” with regard to fixed rate mortgages. This is of course the ability to “cheat” the bank’s “interest rate differential” calculations for breaking the mortgage early, should you decide to (or need to) sell your house.
The IRD works quite simply: bank just determines how much money they lost by you breaking your mortgage, by looking at the difference between the interest rate you were paying when you broke the mortgage, and their posted rate (usually they play tricks in their contracts, so look carefully here). Up until now, people have been paying quite a bit to break mortgages (because rates have been on a steady downward spiral). However from this day forward, breaking a mortgage should get less expensive, as the IRD will always be negative (so you’ll just pay three months’ interest instead).
So party on peeps, it is a good time to be a homeowner!
Bram
jan 2012,
Oops, sorry, I messed up my timeline.
jan 2013. So yes, close to 2016 peak.
#TuesdayMischief,Or… #StudiesInSlavicMentonymy… #Putin’sPooched… #Yume,Kremlin’sNewTopDog?
https://youtu.be/zOemaZfcQ5g
Trackie,you might want to check this out.
A certain neighborhood in Vancouver with 20% yearly gain ,but a 27% reduction in the average sold price in the last month.
In the neighborhood south of this one the numbers are even more diabolical 70% yearly reduction ,but the sample size is too small…
M42BC
https://www.zolo.ca/vancouver-real-estate/cambie/trends
Taking profit from an asset class is one thing. Dumping an entire position is what amateurs do.
That is why they loose money. Common problem it seems.
DUMB.
Kissing a dog is like kissing a low mortgage rate, yuk.
Anytime a trade happens a leader disputes the pros and cons, but most importantly, comes to a conclusion for what is best for the people of his nation. You hope.
I have to give credit to any leader who fights for the people, and may look bad/worse now, but will improve situations for all countries.
Missing out on a great leader when have to speak two languages (another topic).
#145 IHCTD9 on 12.13.16 at 3:58 pm
Flopper-I know you’re just trying to be nice, so I’ll translate your post into normal speak for Mr. Bram to add a little impact:
//////////////////////////////////////////////
The scenario at the start seemed to be hypothetical and so I somewhat jokingly said”what about to other side of things “knowing full well what is going on in my neck of the woods.
You can pump all the numbers you like into a calculator,I was more trying to point out that recent conditions were unsustainable and the pendulum is swinging back the other way.
I’m not going to get too animated over a hypothetical ,I was kind of shocked that people way smarter than me did not point out some of the errors.
When people disagree on a topic ,there always seems to be the insinuation that the other person is not as intelligent as you ,when if this beast of a blog has taught me nothing else ,it is that we all have different ways of looking at issues and problem solving.
The fact that there is way smarter people than me on the blog does not mean I cannot see what is going on with a lot of issues.
I’ve got not choice but to see the light as I have holes in my curtains…
M42BC
#133 bdwy sktrn…my best advice, go to a lawyer and several or accountants. You want to make sure you are doing the books correctly and the rules change all the time. Even if you get some advice here still seek professional opinions. So you can sleep at night.
#142 IHCTD9 on 12.13.16 at 3:07 pm
“Listening to him is like trying to drink cappuccino foam.”
“along with gobbledygook answers to simple questions.”
Impressive. Master rant.
Laughing, choking, coughing, laughing agin.
Made my day.
#133 bdwy sktrn
Fantastic idea to solicit complex financial advice from other anonymous posters on this blog. IMO you should absolutely proceed with your plan; full steam ahead!
IHCTD9—->Don’t get all in a knot. This (T2) to shall pass.
Stick with Garth’s advice and it really does not matter what party runs Canada. Hope this makes you feel better.
Here is a CTV new article about real Estate in Dampcouver..
http://bc.ctvnews.ca/prices-plunging-houses-selling-well-below-asking-some-under-1m-1.3190864
This of course will never see the light of day here in the GTA.