The big hairy deal

Dripping in profits and satisfaction, RBC’s brass faced the financial media this week. Our largest bank has a monster mortgage portfolio of $245 billion (a billion is a thousand million). Just over half of that is made up of mortgages which are no insured. The rest is covered in whole or part by insurance provided by CMHC which is you, the taxpayer.

Nobody in Canada, save your local, starving Re/Max guy weeping for his Audi lease, cares more about real estate than the bankers. Back in the winter, RBC’s CEO, David McKay, was loud and clear about the housing market in southern Ontario and the GTA. “It’s not sustainable,” he said, and called on governments to bring the hammer down.

They did, barely 50 days later. Foreign buyer’s tax. Universal rent controls. CRA crackdown on speckers. Ban on AirBnB. Empty house tax approval. And now higher interest and mortgage rates.

Dave’s happy.

“We welcome the changes that have happened so far,” he just said, “and the slowing.”

As you know, Toronto sales have crashed and prices have dropped 20% in three months. Historic. In Vancouver detached sales are falling fast, average prices are in decline and move-up buyers have vanished. In Calgary deals are being outpaced by new listings. Across Canada 70% of markets have fading sales and flat or falling values. The Bank of Canada has raised rates only once, by a tiny quarter point, yet a third of homeowners polled say it hurts. There are four to six more increases to come.

Plus yesterday’s bête noir, B-20.

As described here in hoary detail, the new mortgage regs to be brought in by the regulator overseeing RBC and the other Big Five will require all borrowers – new or renewing – to pass a stress test equal to the current rate + 2%. If you fail (because income sucks, your spouse caught you with the pool boy, you were punted at work or your house value has fallen) the amount you can borrow will be reduced until a rigid LTV (loan-to-value) ratio is met.

It’s estimated (by mortgage dudes) this will reduce the size of mortgages by 18% on average, leading to a commensurate further reduction in house prices. As values fall, mortgage renewers are also caught if their financial situation has worsened or the house is worth less. In order to conform to new rules, they might have to find more money to buy their principal down, rush into the arms of an alt-lender (at a higher rate), or sell.

Lots of deporables in the comments section said, nah, ain’t gonna happen. The lenders will never go for it, since this kind of stress test would do to the market what Kim Kardashian has done to taste.

So what does our largest mortgage lender say?

“McKay also voiced his support for draft changes to the federal policy on mortgage underwriting – known as the B-20 guideline – proposed by Canada’s banking regulator. New rules would introduce tougher stress testing for uninsured mortgages, making it harder for some borrowers to qualify. But Mr. McKay called the proposed measures ‘prudent.’”

In other words we should know this: (a) the OFSI stress test will happen, and be fully in place by the end of the year, and (b) the banks love it. They want it. Uninsured mortgages are romping ahead 14% a year while insured mortgage volumes have fallen 41%. Everybody – the regulator, the banks, the realtors – know that each month thousands of people lie when they apply for “conventional” mortgages with 20% down and no need for CMHC coverage. The borrowers say the down payment is their own money when, in fact, it came from Mom or a subprime lender operating out of a Hyundai. Like this:

That picture was snapped by a blog dog this week in Vaughan – where prices are falling fast after an unprecedented explosion higher six months ago. Some people think the GTA burbs full of $1.6 million McMansions will be the epicentre of our housing demise. They may be correct.

What OSFI says is the law. The banks must obey. They actually want to. They will not deviate, weave, bend, wink or wiggle things for homeowners who have stellar payment records but no longer meet the LTV rules or can’t pass the income stress test. Having a mortgage now doesn’t mean you’ll automatically renew for the same amount. If there’s a 40% real estate correction, for example, anyone with less than 60% equity in their home could be in for grief. And the banks – in an abundance of caution and prudence for their shareholders – will throw OSFI in their face.

Now, not everyone’s happy. Home Capital is moaning.

Our largest non-bank mortgage lender, which almost went paws up after being hit with fraud charges and securities violations, says B-20 will “materially impact” its operations. That’s because the company admits having loaned billions in first mortgages to customers with spotty credit who borrowed down payments from unregulated lenders (like those awful mortgage investments corporations – MICs) to get around CMHC insurance requirements. If house prices tank, it stands to reason those borrowers have a zero chance of seeing their loans renewed.

Well, there you have it. The new rules mean people can borrow less, spend less, so prices will fall. They mean renewers must meet guidelines or find money in the couch cushions. And everyone seeking a bank mortgage must qualify as if rates – which are rising – were two per cent more. In other words, in the space of six months we will have gone from 2% mortgages to 5% ones.

Surprise, surprise.

175 comments ↓

#1 JB on 08.24.17 at 5:50 pm

“It’s time to stop wasting our money and recognise the high priests for what they really are: gifted social scientists who excel at producing mathematical explanations of economies, but who fail, like astrologers before them, at prophecy.”

By fetishising mathematical models, economists turned economics into a highly paid pseudoscience

The new astrology

https://aeon.co/essays/how-economists-rode-maths-to-become-our-era-s-astrologers

#2 crowdedelevatorfartz on 08.24.17 at 5:56 pm

Well.
A huge mortgage and housing price reset……

Its long overdue in the Lowerbrainland……

A shame its 5 years and hundreds of billions of taxpayer dollars too late……..

Boomer Moms, Mindless Millenials, Spineless politicians…….. and the messes they leave

#3 Randy on 08.24.17 at 5:56 pm

Avoid the Rush. Default Now.

#4 90 cent Loonie here we come! on 08.24.17 at 6:01 pm

BREAKING NEWS!!!

C$ set to hit 80 cents US$ tonite!

Mark predicts that the Canadian dollar will reach 90 cents by next month because of Trump’s big troublesome mouth.

Finally! A loonie which is going to be on par with the American dollar!!!!

Thank you Donald Trump P.O.T.U.S. and your big mouth!

#5 suburban coyote and pup on 08.24.17 at 6:02 pm

wow….here in 905 downtown burlington, I have seen 8 detached homes that have been languishing for 90 plus days. At least one of these sold and the deal fell thru so back on the market. Last year this time these homes would have all sold in 2 weeks. My lawyer says he has never seen so many deals vaporize. The builder that bought my infill lot in May is looking green at the gills. So glad I cashed out. May delay getting renos done until trades people are more available.

Onf52

#6 AGuyInVancouver on 08.24.17 at 6:10 pm

“…As you know, Toronto sales have crashed and prices have dropped 20% in three months. Historic. In Vancouver detached sales are falling fast, average prices are in decline and move-up buyers have vanished…”
_ _ _
Those move up buyers haven’t vanished, they’ve been priced out by foreign money at the upper (ie. single family home) end of the market in Vancouver (and Richmond, Burnaby, West Van. etc..)

#7 Muttley O'Toole on 08.24.17 at 6:12 pm

Well here in down-under Melbourne (there is another in Florida) a foreign buyer (Chinese billionaire) has just paid a whopping foreign buyers tax of $8,500,000 (Can.-Aus.$ near enough to parity) – he paid a record $39,000,000 for a house property in Toorak, our most prestigious suburb.
I don’t think he was a happy chappy and he will be less than happy when our property collapse happens.
(Please Lord, let it happen tomorrow – our insanity is probably now worse than Canada’s ever was.)

#8 GTA Is Crashing on 08.24.17 at 6:14 pm

You’re only losing $2,100 per day if you buy in Toronto, it’s not that bad… said anyone, ever.

#9 surprise tomorrow? on 08.24.17 at 6:16 pm

Yellen making surprise announcement from Jackson Hole tomorrow?

#10 Mike on 08.24.17 at 6:17 pm

Wife is pushing to buy house ASAP.

Its going to be a struggle to stop her until March next year after OFSI sinks in.

God help me and and my delay tactics!! Got to be innovative.

#11 Wishful thinking on 08.24.17 at 6:17 pm

Anyone who thinks there will be a full out crash in prices is engaging in wishful thinking. Politicians will never ever allow it. To be clear, I hope I’m wrong but I don’t think so. I would be shocked if they allow for stress testing on renewals – governments have no interest in the crash that could result in. If they really wanted to curb prices they would make one simple reform – you can’t use heloc $ or otherwise refinance a current home to procure source of downpayment for your second or third etc home. Prices would crash by 50 percent in 6 months. Watch what would happen to condo market. They’ll never do it though because this economy is dependent on housing. You just get punished for being responsible -so if you have sufficient income you might as well leverage up and get yours.

#12 David on 08.24.17 at 6:17 pm

Renewals will happen: it’s switches at term end that will be affected. No lender is going to cause a default by not renewing, and OSFI doesn’t want that either. Bank act LTV MI requirement is applied only at origination. Price declines can’t trigger MI requirement at renewal with same lender. That’s the law.

#13 Phil Indablanque on 08.24.17 at 6:18 pm

We are starting to get a glimpse of what ” not ending well” is going to look like.

#14 Ken From BC on 08.24.17 at 6:21 pm

You people that had FOMO and managed to allay your fear by “getting in” in the first quarter of 2017 are now MOFO (maxed out, forever owing). How’s that working out for you?

#15 The real Kip on 08.24.17 at 6:21 pm

OSFI will do what they always do, talk large and do little. Yawn!

#16 Dan.t on 08.24.17 at 6:22 pm

Haha, can’t wait to read Happy housing crash Gus’s post!

About time. Right , watch people wine about gov intervention now after they flogged houses with massive intervention, like zero down 40 years, self regulation for shysters (that worked well), which gave us liar loans, shadow flipping, Fomo, paid real estate “news” to make sure Canadians know that debt means zip, only house matters! , and only houses go up and up forever,

Plus Yellow peril, out right lies, say anything and if u only have 1 buyer for the POS Milton tear down, make sure to put him in a bidding war with himself so he over bids 90k(major of Milton would be so proud)!

Here is a crazy idea, how about having cities where people can afford to live and work, go out with friends, meet for coffee, support local business with actual cash and not using a credit card or heloc to live.

I hope the whole market blows up in BC, then maybe people will stop acting like investment gurus because they bought a POS condo or a house 25 years ago. Hope everyone cashed out.

#17 I'm stupid on 08.24.17 at 6:28 pm

I think a rant for Happy Housing Crash Everyone is in order. Lol

#18 Hotdogs from Heaven on 08.24.17 at 6:34 pm

#11 Wishful thinking on 08.24.17 at 6:17 pm

Anyone who thinks there will be a full out crash in prices is engaging in wishful thinking. Politicians will never ever allow it. To be clear, I hope I’m wrong but I don’t think so. I would be shocked if they allow for stress testing on renewals – governments have no interest in the crash that could result in. If they really wanted to curb prices they would make one simple reform – you can’t use heloc $ or otherwise refinance a current home to procure source of downpayment for your second or third etc home. Prices would crash by 50 percent in 6 months. Watch what would happen to condo market. They’ll never do it though because this economy is dependent on housing. You just get punished for being responsible -so if you have sufficient income you might as well leverage up and get yours.
—————————————————-
Yeah sure. And in Alberta, where the economy is dependent on oil just what did the government do when prices crashed….they brought in carbon taxes and made it even worse.

Stop depending on politicians to save you from the coming real estate crash. It ain’t gonna happen.

#19 Pressure Off (WHEW!!) on 08.24.17 at 6:38 pm

#10 Mike on 08.24.17 at 6:17 pm
Wife is pushing to buy house ASAP.

Its going to be a struggle to stop her until March next year after OFSI sinks in.

God help me and and my delay tactics!! Got to be innovative.

=================================

Hang in there Mikey! My wife was the same until a good friend of hers said that she thought we were smart renting. It’s amazing how much my IQ jumped once her friend agreed with me.

#20 Freedom First on 08.24.17 at 6:39 pm

Yes. I gladly take responsibility for everything I say and everything I do, happily accepting all of the corresponding results. I need and want to, as I am a man.

Of course. I always make sure the results/consequences work out in my favor. All Principles in life are infallible.

Today, and throughout history, many people of every generation have put themselves in the position of being bent over. Most unfortunate, and unnecessary.

It is only my humble opinion, but I do believe that the information that Garth shares with everyone here, is to help them maintain a stable and satisfying life in every way, which means, of course, avoiding irrational actions/decisions, automatically holding the powerful/deadly emotions of greed and fear at bay.

Freedom First
Master of Freedomonics

#21 IM in C on 08.24.17 at 6:40 pm

Garth. There was an article in the Toronto Star yesterday concerning the refunding of deposits placed on houses should the buyer renege . Can you comment on this?

Deposits are never refunded. — Garth

#22 crowdedelevatorfartz on 08.24.17 at 6:44 pm

@#10 Mike
“Wife is pushing to buy house ASAP.
Its going to be a struggle to stop her until March next year after OFSI sinks in.
God help me and and my delay tactics!! Got to be innovative.
+++++

A Wife is pushing to buy house ASAP.

Its going to be a struggle to stop her until March next year after OFSI sinks in.

God help me and and my delay tactics!! Got to be innovative.
++++++

Hire a new “pool boy” and a hidden camera?

#23 Sus on 08.24.17 at 6:54 pm

Been following your blog for years, following your advice to diversify and wait for real estate values to fall. Have one long ago paid up house, which has tripled in value in 15 years (if sold today). This latest post makes absolute sense in supporting the idea that values are going to come down, finally. But so does the post that government is not interested in the ensuing crash. In terms of a current 20% downturn in GTA prices, a 2 bed bungalow in East York sold for close to $800,000 yesterday, more than 20% after asking, in one week. I don’t see any sign of a slowdown there.

#24 InvestorsFriend on 08.24.17 at 7:02 pm

Don’t Count Your Housing Crash Until It’s Hatched

It would be surprising if OSFI hatched a plan that will will cause house prices to decline anything like a commensurate further 18% and therefore guarantee problems for the banks all in the name of protecting the banks.

(Then again the OSC caused a run on Home Capital in the name of protecting investors, so who knows?)

Perhaps RBC has a different view of what the proposed new regulations might do to renewals and how many will have difficulty renewing.

Well, we will see what unfolds. The future is never ever certain.

#25 Smoking Man on 08.24.17 at 7:09 pm

#11 Wishful thinking on 08.24.17 at 6:17 pm
Anyone who thinks there will be a full out crash in prices is engaging in wishful thinking. Politicians will never ever allow it.
….

You have a globalist government running Canada, Dave McKay not ashamed to admit he’s a globalist.

The only way people will allow their sovereignty to yield to globalism is if the culture goes to shit as well as the economy. You basically need to wipe out the middle class to get it done.

Look around is all I’m saying. The plan is in play and being executed before your eyes. Open them.

In fact much to the delight of my haters, I’m going real easy on my posts going forward, perhaps a link to a cool video once a day.

It’s going to get dangerous very fast to be for individualism and ani-globalism these days.

Dr. Smoking Man
Phd Herdonomics

#26 Suede on 08.24.17 at 7:10 pm

Hopefully Bank shares correct 30%.

Many analysts outside of Canada are calling that the banks will suffer a correction (as well as the bank heavy TSX).

I welcome it

I want to buy some RY and TD in the $60 range.

Also, don’t miss the Dinner en Blanc tonight in Vancouver.

A little too early for jokes on that one…

#27 Blutterfy on 08.24.17 at 7:11 pm

Seems they don’t want to lower the price in order to sell. This house has been listed since the end of May in the most desirable part of Surrey,BC

https://www.realtor.ca/Residential/Single-Family/18557773/8451-171-STREET-Surrey-British-Columbia-V4N0A9

#28 Linda on 08.24.17 at 7:12 pm

#11 ‘Wishful Thinking’ – well, you are sure living up to your blog name. I side with Garth; the stress test will be implemented & rates will rise, though likely only a quarter percent per increase each time so as to ease folks into the new reality. No one wants the economy to crater but no one wants to be on the hook for underwater homes either. Those uninsured mortgages are the reason why the rules are tightening, because the big banks & the taxpayer do NOT want to be responsible for bailing out those who spent like a millionaire while earning a beer budget salary. I’ve seen what happens when the balloon goes up & it is not pretty. Yet despite the many grim examples folks still keep making the same mistakes……

#29 Stress Test Dummy on 08.24.17 at 7:12 pm

#12 David on 08.24.17 at 6:17 pm
Renewals will happen: it’s switches at term end that will be affected. No lender is going to cause a default by not renewing, and OSFI doesn’t want that either. Bank act LTV MI requirement is applied only at origination. Price declines can’t trigger MI requirement at renewal with same lender. That’s the law.

Agreed.
here’s the B-20 doc:
http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b20_dft.aspx

I could not find a reference to stress testing renewals in the draft.

#30 Anthony on 08.24.17 at 7:13 pm

Funny how things change when the banks aren’t covered by CMHC.

#31 Al on 08.24.17 at 7:13 pm

I’m not sure if any of these changes will make much of a difference. If one is already going to lie about how much money they’re making on a mortgage application, won’t they just say they make even more to pass the stress test?

#32 InvestorsFriend on 08.24.17 at 7:13 pm

Refunds of Deposits?

#21 IM in C on 08.24.17 at 6:40 pm asked:

Garth. There was an article in the Toronto Star yesterday concerning the refunding of deposits placed on houses should the buyer renege . Can you comment on this?

Deposits are never refunded. — Garth

************************************
Well, I imagine not when the buyer renegs.

I once had a deposit returned when I changed my mind within about 48 hours on a house purchase. This was Edmonton in 1990. But I had subject to financing and inspection so the agent might have figured I could use that to squirm out. That was also a long time ago. The market was pretty hot for a few months in early 1990 in Edmonton which also may have made it easier for the agent/seller to let me off the hook. Anyhow, they basically said no problem.

#33 InvestorsFriend on 08.24.17 at 7:17 pm

Those were the days…

In 1989 when buying a rental house I had a long list of conditions including that I would be able to borrow 80% from a bank and another 15% as part of the down payment to avoid CMHC fees. Mortgage and down payment loan (co-signed by a guarantor who was a strong RBC customer) were both from RBC. Probably in those days rules could be bent. That purchase went through.

#34 GARY Smith on 08.24.17 at 7:19 pm

#19 Pressure Off (WHEW!!) on 08.24.17 at 6:38 pm
#10 Mike on 08.24.17 at 6:17 pm
Wife is pushing to buy house ASAP.

Its going to be a struggle to stop her until March next year after OFSI sinks in.

God help me and and my delay tactics!! Got to be innovative.

=================================

Hang in there Mikey! My wife was the same until a good friend of hers said that she thought we were smart renting. It’s amazing how much my IQ jumped once her friend agreed with me.

—————————————————————–
Mid 30’s millennial here with a similar situation. Mind you, we have 2 kids. Guess my wife doesn’t enjoy the benefits of living with her in-laws-built in baby-sitting and small living expenses.

She definitely wants to spend her money on property taxes, a mortgage and general maintenance!

Maybe its a dream, but we would love a correction of 20%. Would take us waaaaaaaay back to…..aaaah…..8-12 months ago

#35 Doghouse Dweller on 08.24.17 at 7:29 pm

FEAR NOT ! Politicians will save you !

Hotline 24/7
Telephone: 1 800 O-Canada (1-800-622-6232)

Let me know how you make out.

#36 Newcomer on 08.24.17 at 7:34 pm

#11 Wishful thinking on 08.24.17 at 6:17 pm
Anyone who thinks there will be a full out crash in prices is engaging in wishful thinking. Politicians will never ever allow it.
————-

Which techniques do you think they’ll use to stop it, the ones used in Ireland or the ones used in Spain?

#37 conversion survey on 08.24.17 at 7:36 pm

Survey:

“Happy renter” blog animals, how much would it need to drop the market to convert you to home owners?

#38 Old Salt on 08.24.17 at 7:42 pm

I’m curiously watching on the sidelines in the Ottawa Region. The last GTA crash seemed to be paired with a 5-10% dip here followed by a flat decade.

So, while I don’t expect a major crash here, it’s hard to imagine buying an aging house with falling apart builder grade finishings any time soon.

#39 Renewal on 08.24.17 at 7:42 pm

#29

The draft regulation only mentions LTV test at renewal. Not income test.
The latter would be silly for well behaved borrowers.

“The LTV ratio should be re-calculated upon any refinancing, and whenever deemed prudent, given changes to a borrower’s risk profile or delinquency status, using an appropriate valuation/appraisal methodology.”

#40 Guy Fawkes on 08.24.17 at 7:44 pm

#19 Pressure off

My ribs are hurting….lol…one of the biggest reasons why houses cost so much, not foreign money!
Spot on

#41 knock knock, whose there? your honest realtor. on 08.24.17 at 7:44 pm

lol
#3 Randy on 08.24.17 at 5:56 pm
Avoid the Rush. Default Now.

#42 AGuyInVancouver on 08.24.17 at 7:46 pm

#27 Blutterfy on 08.24.17 at 7:11 pm
Seems they don’t want to lower the price in order to sell. This house has been listed since the end of May in the most desirable part of Surrey,BC
_ _ _
“The most desirable part of Surrey”…Error, error, does not compute.

#43 TortyPapa on 08.24.17 at 7:49 pm

I think a lot of people are too afraid to buy right now. It will take a lot of guts and convincing for anyone to drop a huge downpayment on a falling asset. There are a few oblivious and naive people in the RE market remaining keeping sales afloat but they will soon vanish as well.

I think come the fall when the rain here in Vancouver return and there is no more appetite for detached properties, people will start listing lower. No one wants to be the first to lose money but you can only hold on so long.

#44 young & foolish on 08.24.17 at 7:51 pm

The banks seem to know rates will not rise high, let alone fast enough to affect the market (likely due to non-housing factors), so they are pushing for alternate measures.

#45 Irish Stew on 08.24.17 at 8:00 pm

What is a reasonable debt load % to hold in a mortgage?

#46 smartalox on 08.24.17 at 8:03 pm

@Al #31:

If borrowers are too stupid not to borrow more than they can afford, what makes you think that they’ll be smart enough to do the math to figure out how much their new ‘salaries’ have to be to cover the new regs?

Also, (more importantly) how are they going to fudge the valuation of their property (or properties) if prices are down 20% or 30%?

Remember kids, a 33% increase (from $750k to $1.0M) is not the same as a 33% drop from $1.0M!

33% off $1.0M is $670k, or 10% less than $750k.

That other 10%? That’s the loss of equity.

#47 Pepito on 08.24.17 at 8:03 pm

Better late than never, I suppose. But why so late? Why were such neasures not implemented years ago when it was clear that a bubble was forming? Why did the banks not implement such measures on their own instead of being mortgage whores?

This whole “regulations are coming” drama seems like a disingenuous publicity ploy to take the heat off the principal culprits responsible for the mess in the first place.

#48 Hopeful Wisher on 08.24.17 at 8:04 pm

This isn’t fair! “Trudeau gunna pay ma mortgage!”

#49 Pinocchio on 08.24.17 at 8:06 pm

Just lie even more about income. Problem solved!

Legal documents. — Garth

#50 bellend on 08.24.17 at 8:15 pm

“renewers must meet guidelines or find money in the couch cushions”

or won’t meet the guidelines and default? how vexing

#51 waiting on the westcoast on 08.24.17 at 8:15 pm

#6 AGuyInVancouver on 08.24.17 at 6:10 pm says “Those move up buyers haven’t vanished, they’ve been priced out by foreign money at the upper (ie. single family home) end of the market in Vancouver (and Richmond, Burnaby, West Van. etc..)”

If the prices in detached houses have been driven up by foreign buyers, why has their sentiment changed? It’s not like every house was bought by foreigners. But let’s say that was the case… Why are the foreigners selling them to each other for 10% less this year?

#52 DON on 08.24.17 at 8:18 pm

#24 InvestorsFriend on 08.24.17 at 7:02 pm

Don’t Count Your Housing Crash Until It’s Hatched

It would be surprising if OSFI hatched a plan that will will cause house prices to decline anything like a commensurate further 18% and therefore guarantee problems for the banks all in the name of protecting the banks.

(Then again the OSC caused a run on Home Capital in the name of protecting investors, so who knows?)

Perhaps RBC has a different view of what the proposed new regulations might do to renewals and how many will have difficulty renewing.

Well, we will see what unfolds. The future is never ever certain.
**********
They are socializing it in the news and getting buy-in from the largest bank who just provided juicy dividends to their share holders, good timing. A good way to break the news.

This is the policy consultation stage – meaning unless any legitimate opposition – the already made decision will proceed.

#53 Fran Deck Jr. on 08.24.17 at 8:19 pm

I just watched Hot Property on CP24 … lots of discussion about the difficulty in closing real estate deals these days … buyers are trying to back out at the 11’th hour and asking for price concessions … and then, the lead story on the news following Hot Property, is a massive fire at a Whitby construction site … a townhome complex currently under construction at Brock and Rossland has mysteriously gone up in flames … how symbolic … what an appropriate nonlinguistic metaphor.

#54 Tony on 08.24.17 at 8:22 pm

Re: #5 suburban coyote and pup on 08.24.17 at 6:02 pm

Presently Burlington is probably the most overvalued city in the entire GTA. Ajax is probably the least overvalued. Milton has a lot of farmland so Burlington takes first place.

#55 Pinocchio on 08.24.17 at 8:23 pm

Just lie even more about income. Problem solved!
—-
Legal documents. — Garth
———
True. But! Forge those docs! All in the name of big houses and greed and lust. Judges would understand.

#56 jay#2 on 08.24.17 at 8:24 pm

Still a long way to go on house prices .https://www.thestar.com/business/real_estate/2017/08/24/new-home-sales-in-gta-plunge-prices-soar-in-july.html

New home sales down 85%. All you need to know. — Garth

#57 Happy Soft Landing Everyone! on 08.24.17 at 8:26 pm

Stats are deceiving, the fact is, as noted by #23 Su,
East York brick bungalows are over $800,000. on ‘good’ streets in fact the better streets, and I’m not talkin’ Leaside, still south of O’Connor, in the last 30 days it’s the $900,000 range. Same goes for brick bungalows Islington Bloor area,
$850,000. gets snapped up as a bargain, better streets, it’s the 1 million range. These are the ‘corrected’ prices.

#58 Mama knows best on 08.24.17 at 8:27 pm

All these things look good on paper.

But it’s reality that matters. These OFSI threats won’t materialize as stated and if they are, then the rules won’t be followed.

There are mortgage rules now that are not followed so why on earth would anyone expect that rules will be followed in the future?

This is all insignificant news IMHO.

Do you have any idea what a financial regulator is? Apparently not. — Garth

#59 FOUR FINGERS WATSON on 08.24.17 at 8:28 pm

#47 Pepito
Better late than never, I suppose. But why so late? Why were such neasures not implemented years ago when it was clear that a bubble was forming? Why did the banks not implement such measures on their own instead of being mortgage whores?
…………………………………..
Because the government, Harpo, Flats, and Karney WANTED the bubble. They gave birth to it and nurtured it with low interest rates, 40 year amortizations, raid your rrsp, etc etc. They wanted this bubble to boost economic activity and inject money into the economy so that Canada’s failing economy did not go tits up. They wanted this. This was the plan and it worked.

#60 Arto on 08.24.17 at 8:29 pm

That takes care of the Bank of Mom and Dad. But Garth you forgot about the most important Bank…the Bank of China

#61 Dave on 08.24.17 at 8:30 pm

ALL mortgages are insured by the government. Some by CMHC/Genworth/CG (high ratio loans with transactional insurance with premiums paid by the borrower and low ratio loans with portfolio insurance bought by the lender who then dump all of these loans into the bond market) and balance sheet funded loans (rental mortgages, refinances, helocs) which are backed by deposits guaranteed by CDIC. No matter what, the banks are protected by the taxpayer on all the credit they write. We better pray for no collapse. We’re the ones guaranteeing it all.

#62 Palmateer on 08.24.17 at 8:32 pm

Hey Smoking Man:

How’s your “revolution” for the “oppressed” “forgotten people” going?

LOL LOL.

Seriously, you Trump-tards are so dumb…

Trump and his swamp buddies have taken you for fools!

And unfortunately, you are fools.

– Mike Palmateer

————-

“Treasury secretary’s wife boasts of travel on government plane, touts Hermes and Valentino fashion”

U.S. Treasury Secretary Steven Mnuchin’s wife, Louise Linton, boasted of flying on a government plane with her husband to Kentucky on Monday and then named the numerous fashion brands she wore on the trip in an unusual social media post that only became more bizarre minutes later.

When someone posted a comment on Linton’s Instagram picture that criticized the way Linton touted the trip, the treasury secretary’s wife swung back hard, mentioning the extreme wealth she and her husband control.

“Did you think this was a personal trip?!” Linton wrote on her Instagram page, responding to the person who had written “glad we could pay for your little getaway.”

Linton continued in her response to the critic: “Adorable! Do you think the US govt paid for our honeymoon or personal travel?! Lololol. Have you given more to the economy than me and my husband? Either as an individual earner in taxes OR in self sacrifice to your country? I’m pretty sure we paid more taxes toward our day ‘trip’ than you did. Pretty sure the amount we sacrifice per year is a lot more than you’d be willing to sacrifice if the choice was yours.

Linton added, “You’re adorably out of touch … Thanks for the passive aggressive nasty comment. Your kids look very cute. Your life looks cute…..”

https://www.washingtonpost.com/news/wonk/wp/2017/08/21/treasury-secretarys-wife-boasts-of-travel-on-government-plane-touts-hermes-and-valentino-fashion/?utm_term=.f20f3f95eea4

#63 conan on 08.24.17 at 8:52 pm

Looks like that dog is spending too much time on line.
He needs to go outside and enjoy the day. Don’t waste those puppy years, they are the best.

https://youtu.be/A2thPGWVELE?t=40

Hey Mike Duffy suing the pants off anyone related to his charges. Do it bro!! So many people got thrown under the bus, for zero reason,because someone was a class A jerk.

LOL @ the Conservatives, your not coming back anytime soon! So was ALt Right the master plan? Pfffffttttttttt!

#64 Average Joe on 08.24.17 at 8:59 pm

Two points for consideration:

1. Interest rates must rise.
==================
There is no wiggle room here. The BoC must raise rates now even though the economy is tepid by historical standards, because it is the best it has been in a long time. If not now, it may be too late for the next adverse economic event, whether locally or globally triggered (pun intended – more tragic than funny).

The housing bubbles in Toronto and Vancouver, now widely acknowledged to have been, at least in part, fuelled as an unintentional consequence of emergency rates, are inconsequential in the grand scheme.

If only the BoC could set two rates, one for commercial loans, and one for residential real estate loans.

This brings me to my second point.

2. The OSFI Stress Test must be implemented.
==============================
By introducing a +2% stress test for residential real estate loans, the BoC and OSFI combined will have effectively created a two-tier rate system, one for commercial loans and one for residential real estate loans.

Clever. Simple. And (hopefully) effective.

#65 crdt on 08.24.17 at 9:03 pm

Seems like all the fun is gone… For years I waited for the impending correction only to be dismayed by the never ending relentless house price explosion. Now that the bubble has popped, the fun is gone. I remember a US site that was like this closed shortly after the carnage began.

#66 Ret on 08.24.17 at 9:10 pm

#34 “Maybe its a dream, but we would love a correction of 20%. Would take us waaaaaaaay back to…..aaaah…..8-12 months ago.”

Maybe a 50% fall in RE will happen? Central Florida cratered by over 125% after 2006. Sister-in-law thought that they stole their place in Sebring Fl. at $211,000 in 2008. It had Zillowed at $274,000 in 2005. Currently Zillowed at $183,000. They are still not back to 2008 prices. Three years ago, the house next door to them, similar to theirs but not as big (@1500sf) and no pool, sold for $95,000.

The property below is in her area just sold in April. It Zillowed at $312,000 in Dec.2007. and it appears that the graph line was already on the down before that.

Who knows what the valuation was at the 2005 peak but it was more than $312,000. The current valuation was $210,000 in April and it sold for $196,000.

https://www.zillow.com/homedetails/2917-Monza-Dr-Sebring-FL-33872/45142786_zpid/

It looks a whole lot better than 99% of the places in West Hamilton and costs a bit more than 1/2 as much. Property taxes are also about 1/2 at $1849USD.

When it comes to RE valuations, Canadians remain seriously delusional even when the banks express concerns. Ignore OSFI and the big 5 bank concerns at your peril.

#67 fancy_pants on 08.24.17 at 9:14 pm

what frightens me is when inflation (non Real Estate) digs in, will rates follow? either way, socioeconomic crisis in the making here. you think people are living paycheck to paycheck now? buckle up

#68 Peter on 08.24.17 at 9:19 pm

What will Ontario’s new labor laws in 2 years’ time mean to real estate? Who knows, but this blog sure does: DOOM!

#69 Bob Dog on 08.24.17 at 9:27 pm

If the Canadian people allow private banks to control the issue of their national currency, first by inflation, then by deflation, the banks and corporations that surround them will deprive the Canadian people of all property until their children wake up homeless In the cities their fathers and mothers built… I believe that banking institutions are more dangerous to Canada than standing armies…. The money issuing power should be taken from the banks and restored to the Bank of Canada which is owned by the people, to whom it properly belongs.”

#70 Willy H on 08.24.17 at 9:28 pm

#47 Pepito on 08.24.17 at 8:03 pm

Better late than never, I suppose. But why so late? Why were such measures not implemented years ago when it was clear that a bubble was forming? Why did the banks not implement such measures on their own instead of being mortgage whores?
___ ___ ___ ___

Our central banker God’s (beginning with Ed Greenspan) got us hooked on almost free money. The goal was to spur economic growth, particularly among corporations and more specifically manufacturers and resource extractors creating meaningful long-term employment and quality GDP.

Our central bankers cannot control how cheap money is used, especially at the consumer level driving up residential real estate. Folks borrowed money and focused solely on one asset class – housing. It was destined to become a bubble from the get go. Emotion and housing purchases go together like K-Y Jelly and glow-in-the-dark condoms! It’s a real shitty way to grow your economy as residential real estate is hardly quality working capital unless you happen to run a business out of your home.

Of course cheap money also allows corporations and individuals to move up purchasing decisions when interest rates are rock-bottom vs building up cash reserves (savings) and making more restrained capital purchases in the future.

In short, we have pulled billions of future economic growth into the present which can only lead to burst asset bubbles or a recession (or worst case a depression) once the credit is maxed out vs cash flows.

As the BoC and OSFI watched consumers gorge themselves of debt (for 16 years straight) and mortgage themselves to over-valued assets divorced from any economic reality, they finally decided to bring down the stress-test hammer.

They could not bring it down 2-3 years ago due the crash in oil prices which weighed heavy on Canadian GDP. As Alberta began to show signs of a shallow recovery this summer OSFI and the BoC finally grew a pair.

It is the only way to drive a wooden stake through the heart of this vampire.

The Big 5 banks had no choice but to play the game because there was always one player willing to undercut rates for mortgage business.

#71 Smoking Man on 08.24.17 at 9:41 pm

#62 Palmateer on 08.24.17 at 8:32 pm

Using hockey players name as a handle is a cultural appropriation, a no-no with the looney left. Well your aging yourself, how many young ones know who Mike Palmateer was. He sucked, at least you could have picked a better player.

I calling you out, a 55-year-old university prof that’s jealous as shit and Peterson’s success.

Close?

#72 Willy H on 08.24.17 at 9:43 pm

#47 Pepito on 08.24.17 at 8:03 pm

Better late than never, I suppose. But why so late? Why were such measures not implemented years ago when it was clear that a bubble was forming? Why did the banks not implement such measures on their own instead of being mortgage whores?
___ ___ ___ ___

BoC and OSFI were spooked by the oil crash 2-3 years ago which weighed heavy on Canadian GDP and weakened the economy. No surprise that they balked at using regulatory hammers at that time for fear of doing real damage.

The worst is behind the oil patch at this point and this has allowed the BoC and OSFI to finally grow a pair.

The housing bubble was an unintended consequence of central banker’s love affair with cheap money. Consumers gorged for 16 years on almost-free money focusing on one asset class. A bubble was a forgone conclusion because housing purchases and emotion go together like K-Y jelly and a glow-in-the-dark condom.

Trillions plowed into an over-valued asset was not their goal, they wanted corporations and small and medium sized business’s to invest in working capital. They couldn’t control were cheap money ended up.

Our Big 5 banks were always competing in the mortgage market and there is always one willing to undercut the other for the business.

#73 Renter's Revenge! on 08.24.17 at 9:46 pm

#37 conversion survey on 08.24.17 at 7:36 pm
“Survey:
“Happy renter” blog animals, how much would it need to drop the market to convert you to home owners?”

At least 30% to break even on cost. More like 50% to make it worth the hassle of maintaining my own home (in Winnipeg). Mind you I’m not married, so I have no pressure to buy from my non-existent wife (or non-existent in-laws). On the other hand if I was married and my wife wanted to buy I would probably buy now. I’m at the point in my life where I think I can make some sub-optimal financial decisions in the name of love. It’s not all about the money, after all. Hopefully I don’t end up marrying a financial retard though. What a nightmare that would be! Hopefully this comment isn’t coming off as too sexist. Note to female blog dogs: probably the main reason men are sexist towards women is that they’re scared of them. So more financially astute comments from women on this blog (and elsewhere) would go a long way to assuaging those fears.

#74 Dolce Vita on 08.24.17 at 9:46 pm

If B-20 implemented, a lot of buyers taken out of the market.

Stress Test increase in monthly mortgage payment, 2% to 4.64%, 25 yr amortization:

$500K mortgage = $689.16/mo
$750K mortgage = $1,033.73/mo
$1 MM mortgage = $1,378.31/mo

Just add the above into your current 35% GDS or 42% TDS calculations.

Just look at Vancouver mortgage applications drop 1st Qtr 2016 vs. 1st Qtr 2017 per TransUnion:

9,162 to 6,226 or -32% fewer buyers.

You could argue this is the market cooling, I think the Morneau Measures Stress Test excluded a lot of buyers from the market instead.

OSFI B-20 will have a greater impact if implemented.

Few buyers will probably result in lower prices. By how much, who knows?

#75 For those about to flop... on 08.24.17 at 9:47 pm

This house sold 20 days ago,how much did it go for?

All I can do is keep asking…

M43BC

9551 Palmer Road, Richmond . paid 1.36

Dec 22:$1,599,000
Jun 13: $1,288,888
Change: – 310112.00 -19%

https://www.zolo.ca/richmond-real-estate/9551-palmer-road

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDA1WFBHRw=

#76 The source on 08.24.17 at 9:50 pm

Where is your source stating all these new OFSI stress tests on mortgage renewals? Other than that G&M article are there any solid facts out there?

#77 BS on 08.24.17 at 10:00 pm

In other words, in the space of six months we will have gone from 2% mortgages to 5% ones.

So much for the “rates will never rise” thingy. Last time rates doubled was in the early 80s. Prices tanked 50% in YVR in less than a year. With YYZ already down 20% this time may be worse. At least YYZ has some incomes. YVR it is baristas and house wives driving the market. Once income verification comes in for all mortgages game over.

#78 For those about to flop... on 08.24.17 at 10:20 pm

Check out the link to this latest article from howmuch if you are interested as to where Canada ranks…

M43BC

“The World’s Most Productive Countries Work Less (and Vice Versa)
The Japanese have their electronics, the Germans their cars and the Americans their technology. Many countries claim to be the best in one field or another. But which country is home to the most overall productive workers? Take a look at the chart below to see the distribution of the world’s most productive countries.”

https://howmuch.net/articles/worlds-most-productive-countries

#79 Wishful thinking on 08.24.17 at 10:23 pm

As I said – I hope I am wrong but I don’t see a significant aka 40 percent plus price decline because if policy makers really wanted to deter overleverafing they would do what I said above – one rule and one rule only – the source of your down payment cannot be $ procured from the refinancing of another home you or your spouse or your immediate family own. The only reason condo prices haven’t crashed is because people take $100k out of their suburban home to buy a condo to rent out. You institute this one rule and the market has a significant decline and will stabilize long term eg prices will mirror inflation and wage growth becaus then you would have to actually save for your down payment. But again governments won’t do this – they pretend they are trying to curb reckless borrowing by tinkering eg foreign buyers tax etc but if they really wanted responsible borrowing they would institute this one rule. Anything else is tinkering

#80 Fake News Again on 08.24.17 at 10:31 pm

Trudeau to Bill Moreau in during the 2018 mortgage crisis:

Trudeau: How long have you know about this problem?

Moreau: 3 or 4 seasons. The mortgages are for sale if you want them.

Trudeau: Let me see your identification on those mortgages.

Moreau: You don’t need to see my identification on those mortgages

Trudeau: We don’t need to see his identification on those mortgages

Moreau: These arent the mortgages your looking for.

Trudeau: These arent the mortgages we are looking for.

Moreau: Canada will bail out the banks with taxpayer money when the mortgage crisis gets going.

Trudeau: We will bail out the banks with taxpayer money when the mortgage crisis gets going.

Moreau: The bankers can go about their business.

Trudeau: The bankers can go about their business.

Moreau: Move along….

Trudeau: Move along….move along…..

#81 Happy Housing Crash Everyone! on 08.24.17 at 10:32 pm

The housing market is crashing so hard that warnings has been issued for anyone who is in a few meters away from a realtor to wear ear plugs. They are making high pitched screams from no sales or screaming for greater fools to buy. Some greater fools just lost 20-30% of their housing value for listening to these greedy vested interests. Expect to see more housing fires.

Happy Housing Crash Everyone! It’s really turning out to be a good one. Toronto home owners are losing $2100 a day . That’s almost $100 an hour in losses.

#82 dave in kincardine on 08.24.17 at 10:43 pm

This all seems like such a depressing situation. Damned if you buy, damned if you don’t, damned if you rent, damned for taking all moms money and blowing it, damned if you are a realtor, damned because all the good jobs are going and they are offering $30M with no benefits jobs, damned if you have a kids to put through school at ridiculous prices, damned if you eat out because you’ll soon get fat, damned Damned DAMNED!!! I think I am going to go hiking, no damning there me thinks.

#83 Rook on 08.24.17 at 10:51 pm

A little anecdotal news regarding rentals in Victoria,BC.
Things don’t seem to be as hot in the rental market as news articles, and a recent housing boom would lead you to believe. Many people are putting their homes for rent for unrealistic amounts (not lining up with local incomes, or the quality of house for that matter). The houses are reposted on craigslist etc. every other day with no biters. Occasionally you see a little price drop, but not a lot.

This response from a person whos house has been up for at least 3 weeks after I asked if there was some wiggle room with the rent: “…the rent is what it is. I can’t afford to reduce it or I won’t be able to pay for it. Make sense?”

I understand for sure that rent must exceed the mortgage, taxes, etc. But what if the house doesn’t won’t rent for that much and you lose one or two months rent?

I have a feeling that a lot of the landlords that bought in the last two years as an investment (I have met more than a few during our home hunt) will be trying to liquidate as soon as there is some sort of correction. Most current first time buyers have bought in the craze leaving less renters than before. This huge jump in rent isn’t going to work. Thats my two sense…. or maybe I’m just frustrated and bitter.

#84 Smartalox on 08.24.17 at 10:53 pm

@ Dave in Kincardine:

Just don’t go walking by the Beaver lake:

There’s all kinds of Damming going on over there!

#85 Rollercoaster Cut Short on 08.24.17 at 10:58 pm

#65 crdt on 08.24.17 at 9:03 pm
Seems like all the fun is gone… For years I waited for the impending correction only to be dismayed by the never ending relentless house price explosion. Now that the bubble has popped, the fun is gone. I remember a US site that was like this closed shortly after the carnage began.
——

Ya, I remember the site – Vancouvercondoinfo – had a rollercoaster video of when we had a 14% drop in 9 months in Vancouver….that was 2008. Almost 10 years later, and that rollercoaster is still heading up and up and up without the downside yet…..

I guess they are still waiting for the ‘fun’ to start

#86 Smoking Man on 08.24.17 at 11:11 pm

Sort of depressed. I see whats going on. No energy to fight.

Shit place to be.

#87 Bankish on 08.24.17 at 11:14 pm

I don’t get all the panic and gnashing of teeth around events that haven’t happened yet and may not.
The default rate on Canadian mortgages is less than 0.35%. In America it is closer to 4%and nobody says the world as we know it is ending there. It is what it is not what you project in your worried mind.

#88 Coopoiler on 08.24.17 at 11:35 pm

For those of you that think that you can not be refused a renewal of your mortgage. Read what the document says at renewal time. It says, Your mortgage is due and payable in full on said date. Normally they say, we are willing to extend the mortgage at these new terms. If they do not offer a new term to you, you need to come up with the cash!

#89 marty mcfly on 08.24.17 at 11:35 pm

Funny but the banks have been laying off lots of employees who do the back end jobs verification of income etc.. and passed it off to the sales guys no wonder there so many problems. The banks are asking for this now (b-20) because they can’t control themselves.

#90 MF on 08.24.17 at 11:43 pm

#57 Happy Soft Landing Everyone! on 08.24.17 at 8:26 pm

I agree.

Anything livable in a nice area has “corrected” from 1.2 million to 1.15 million.

-Interest rates will probably rise at a snail’s pace and to a maximum of 2% (if that) because central bankers are terrified and incompetent. That’s still cheap enough to keep this bubble going.
-If you believe the stats, the economy is performing “well”.
-Still lots of demand for housing.
-OSFI’s rules will be a non-starter and will pass without anyone noticing. I don’t know much about them, but after watching houses go up relentlessly it’s a little late to sound the alarm. Just looks like another incompetent group/institution/agency like the BoC.

MF

#91 Potato on 08.24.17 at 11:56 pm

#37 survey:

For me (in North York, ON), prices would have to come down from ~$1.3-1.4M to ~$600-700k based on current rents. Under $600k based on the rent I have (i.e., to actually catalyze me to move). So ~50-60% decline range.

It’s gonna take a few years…

#92 joblo on 08.25.17 at 12:13 am

Did they find any weapons of mass destruction yet?

#93 would-be buyer on 08.25.17 at 12:15 am

Excellent, I’m sure foreign buyers are enthusiastic that more Canadian earners are priced/ pushed out of their local real estate markets. Less competition. I am super happy that as a highly educated professional living and working in Vancouver paying 40% of my income to taxes that I cannot afford to buy a home. I super duper love renting with a young family and the fear of being reno-victed. But, that’s okay, because, you know, globalism.

#94 FC16 on 08.25.17 at 12:32 am

From yesterday’s blog:

#124 MortgageMark on 08.24.17 at 9:59 am

Sorry to say, but it’ll be a cold day in hell before any rule comes in that requires renewals to re-qualify. #Justsaying #moistersstaymoist
———————————————————-

Here’s OSFI’s mandate directly from the horse’s mouth:

http://www.osfi-bsif.gc.ca/Eng/osfi-bsif/Pages/mnd.aspx

Some highlights for you:

1. OSFI advances a regulatory framework designed to control and manage risk. – guess what B-20 is supposed to do?

2. OSFI supervises federally regulated financial institutions and pension plans – that doesn’t sound like an agency made to protect the individual debt snorfler. Mr. Turner, some time ago, highlighted the FCAC, whose boss I believe is akin to a fox guarding the henhouse. Good luck getting protection there.

3. OSFI promptly advises financial institutions and pension plans if there are material deficiencies, and takes corrective measures or requires that they be taken to expeditiously address the situation. – BOC took nearly a decade to raise rates a measly quarter point. B-20 makes noise in July, implemented in October. Government can move slow, but I would call that an “expeditious address” to the situation, albeit after the horse’s have left.

4. Taking a balanced approach – collateral damage may happen, but…..(see below)

5. OSFI supports the government’s objective of contributing to public confidence in the Canadian financial system. – red: in case you didn’t catch it the first time, read point (2) highlighted above.

The new regulation’s enforcement is to be seen. But B-20 is going to be implemented. Prepare accordingly.

#95 Nik on 08.25.17 at 12:35 am

“It’s estimated (by mortgage dudes) this will reduce the size of mortgages by 18% on average, leading to a commensurate further reduction in house prices.”
———————————————————-
didn’t the stress test for less than 20% down that’s been put in place already impact the sales volume? It has had negligible effect on prices in Vancouver and in BC in general. No way sellers will take a loss. The market will be more like Calgary as long as the job situation is good. Say goodbye to a big chunk of your disposable income if you want to live in Vancouver.

#96 Paulo on 08.25.17 at 12:41 am

#29 & #32

Missing the point i think, upon renewal of a mortgage current regulations have minimum LTV requirements
that apply. if you purchased with say 20% down but
actual value has declined 30% you will be underwater at renewal time. regardless of your payment record, you had better be able to find the funds at renewal to bring your LTV ratio in line, or you are up the proverbial creek without a paddle,you will not be renewed!

#97 Ponzius Pilatus on 08.25.17 at 1:02 am

#58 Mama knows best on 08.24.17 at 8:27 pm
All these things look good on paper.

But it’s reality that matters. These OFSI threats won’t materialize as stated and if they are, then the rules won’t be followed.

There are mortgage rules now that are not followed so why on earth would anyone expect that rules will be followed in the future?

This is all insignificant news IMHO.

Do you have any idea what a financial regulator is? Apparently not. — Garth.
————
Gotta agree with Mama. As we always should.
The problem is that your average FICOM or OSFI auditor has no clue what an MBS or a plain vanilla interest rate swap is, let alone duration matching and gap managing.
The regulators are coming to a gun fight with a knife.

#98 Mark on 08.25.17 at 1:22 am

“If only the BoC could set two rates, one for commercial loans, and one for residential real estate loans. “

The BoC can only set the policy rate. However, government and the OSFI have policy tools, including requirements for regulatory capital, and the availability of CMHC subprime mortgage insurance, to shift the allocation of capital towards or away from housing.

The top of the Canadian housing market was marked by Flaherty in Budget 2013 when the CMHC subprime mortgage insurance limit was set at $600B, and it became the explicit policy of the Government of Canada not to permit any expansion above that limit. The current Liberal government has thus far respected policy previously set forth by Flaherty. Prices in Canada stopped appreciating on individual identical units in 2013, although there was a dramatic shift in the sales mix which gave rise to a bit of a statistical mirage of higher prices which were entirely mix change driven.

The Bank of Canada needs to be mindful of the fact that the Canadian economy is slowing down and is basically comatose at this point. Unemployment is horrifically bad, particularly amongst our young and highly educated. Nothing really exists to take the place of the housing supply sector which is now in a significant state of deflation. CPI is barely above 0%/annum, and trending into deflation as the CAD$ rises against the USD$ and demand falters domestically due to shrunken HELOCs. The stock market is still at nominal levels of nearly a decade ago despite significant and obvious improvements in balance sheets. The Bank of Canada needs to be mindful of this and *lower* the policy rate as soon as it can, in recognition of the giant mistake it made previously this year.

#99 Cobble Hill Cobbler on 08.25.17 at 1:34 am

RE: #83 Rook

Victoria is terrible for rentals as I am moving over there at the end of this month from Metro Van. It’s as expensive as Vancouver with way way less choice. Main floors of houses for 2200, duplexes for 2300 right next to the highway. And that’s in Langford or Sidney. Less of an incentive to rent when places are so much dough. 40km outside Victoria houses are 400k in metro Van they’re 800 plus.

#100 Cloudy on 08.25.17 at 1:39 am

Although you are correct, a billion makes much more sense mathematically being a million million. England had it right.

#101 Math Ed on 08.25.17 at 1:43 am

#66

“Maybe a 50% fall in RE will happen? Central Florida cratered by over 125% after 2006.”

Right…
I am guessing you got your math edu in Canada?

Seller needs to pay the buyer of the house?
All houses in FLorida toxic garbage?

#102 oopswediditagain on 08.25.17 at 1:44 am

#29 Stress Test Dummy: Agreed.
here’s the B-20 doc:
http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b20_dft.aspx

I could not find a reference to stress testing renewals in the draft.
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Perhaps reading and understanding what you are reading is the challenge, my friend. I'm not being critical but most people are challenged by OSFI speak.

Where they advise the bank to "address the LTV ratio upon any refinancing or whenever deemed prudent, given changes to a borrower’s risk profile" includes mortgage renewals appropriately.

OSFI will not allow a bank to look the other way when a mortgage LTV ratio drops below their limit. You can be assured that this will be addressed, especially in the current Toronto market.

And once more, with gusto: OSFI is not the real estate markets babysitter. It allowed these huge bubbles to form in Toronto and Vancouver because the financial system (banks) were protected by CMHC.

As soon as there was an obvious problem (fraudulent non-insured mortgages) to the banking system, they acted.

OSFI doesn't give the average joe homeowner a second thought because they don't have to.

Oh and the Government will do the same thing for today's homeowner as they did in the 80's when there was nationwide screaming to stop interest rate hikes. Nothing. Why? Because the economy was being threatened by rampant inflation at the time. Save the economy and damn the homeowner.

"The maximum LTV ratio limits may be determined by law or may be established by a FRFI based on risk and other considerations, including the current and expected market conditions, the type of loan, as well as other risk factors that may impact borrowers’ ability to service their debt and/or lenders’ ability and cost to realize on their security. OSFI expects FRFIs to have in place a robust process for regularly monitoring, reviewing and updating their LTV ratio frameworks.

The LTV ratio should be re-calculated upon any refinancing, and whenever deemed prudent, given changes to a borrower’s risk profile or delinquency status, using an appropriate valuation/appraisal methodology."

#103 cd on 08.25.17 at 3:03 am

Once the new regulations are in place with a few more rate increases, weed will be legal by then. Maybe that will solve the problems.

#104 Dolce Vita on 08.25.17 at 3:06 am

This 18% less house number is a very obtuse measure of the OSFI B-20 impact. A practical example follows, courtesy of Lefty HuffPost (Oct. 2016).

LINK below to a table that shows the impact of a +2% stress test on the maximum house price that can be bought for gross incomes ranging from $25 K/yr to $300 K/yr with down payments of 5%, 10% and 20% (assumes no other debt).

Today, Zolo.ca shows that the Average Vancouver Detached price is:

$2.5 MM.

See if you can find that house price in the chart for a $300 K/yr gross income household with 20% down…the Answer is NO:

Max. house = $1.84 MM.

In 2013, there were 677,000 Canadians that made more than $150 K/yr and 207,000 that made $250 K/yr (src. CRA Income Distributions & by Age).

Pretty clear what is going to happen to RE prices in over priced areas like YVR and 416.

Why I think this OSFI B-20 is going to be a RE killer for 1st buyers that dodged the Morneau Measures last year with a 20% down payment…many more buyers will be excluded from the RE market.

This cannot end well for the RE sector and its associated Financial sector.
__________________________________

http://www.huffingtonpost.ca/2016/10/19/mortgage-rules-canada_n_12560134.html

#105 Dolce Vita on 08.25.17 at 3:17 am

PS: forgot on prior post to calculate price drops.

Avg. YVR Detached home price ($2.5 MM) would have to drop by this much to match the maximum house a $300 K/yr household can afford with no other debt ($1.84 MM):

=($2.5 MM – $1.84 MM)/$2.5 MM x 100

= 26.4% drop

There you go Garth, it will be worse than an 18% drop.

And all this to protect the banks…

#106 aa3 on 08.25.17 at 4:27 am

Now that QE has been demonstrated to work.. the old plan of expanding the money supply and increasing consumer spending through house price inflation is no longer needed.

#107 Dharma Bum on 08.25.17 at 6:37 am

I luv it wen Smoking Man lurns how two spel purfektly.

I giv him an ‘A’ four grammer and speling in his poasts today!

Yay Smoking Man!

#108 Oft deleted much maligned stock picker on 08.25.17 at 6:48 am

DELETED

#109 maxx on 08.25.17 at 6:53 am

#11 Wishful thinking on 08.24.17 at 6:17 pm

“You just get punished for being responsible…”

Nope. Many saved, waited, vultched, then sold at or very nearly the top and most definitely did not get “punished”.

That the responsible get punished is blatant bs peddled by realtards. Why some listen to this incessant hormone-driven effluent when they can think for themselves (what a concept!) and have it all is beyond me.

“……-so if you have sufficient income you might as well leverage up and get yours.”

Waaaay too early. The melt has begun- everywhere across the nation – and in some areas much faster than others.

Besides, dawgs, lurkers and many others are just now settling back to savour the schadenfreude of the new millennium.

“Getting mine” means getting value – first and foremost. That principle, so loathed by realturds is not just beginning to materialize, it’s catching fire.

Buying now is almost guaranteed to become the unrecoverable financial error of a lifetime, but given the conditioned fiscal stupidity in this country, there are probably a few imbeciles still pockmarking the landscape.

Leading to the next the next step in the evolutionary meltdown: realtards eating each other’s lunches.

This fall (and beyond) will be HIGHLY entertaining for those sitting safe on a high plateau.

I’ve said it before, gubbmint will take its intelligence from banks.

Makes sense, but only when the banks smell trouble.

#110 maxx on 08.25.17 at 7:05 am

#24 InvestorsFriend on 08.24.17 at 7:02 pm

“Well, we will see what unfolds. The future is never ever certain.”

Certainly not for realtards. Hope they all saved reeeeeal gooooood for whatever comes.

#111 2 Cents Canadian on 08.25.17 at 7:09 am

#86 Smoking man …. “shit place to be”
I agree ….. Canada (and maybe the world) seems to have taken a weird turn for the worse the last 10 years (and quite a bit worse the last 3).
I used to think a successful person was someone who made a lot of money, owned a nice house, a nice car, had a nice spouse and kids (throw a dog and white picket fence in there if you want). Now I see everyone stressed out, juggling 1000 balls and ricocheting from carastrophe to catastrophe trying to get themselves through a day (yes I live in the GTA).
Now I think of someone being successful if they figure out a way to truly enjoy their life in whatever way they can. Because it’s become very hard to do. There just seems to be so much “stuff” going on now.

#112 maxx on 08.25.17 at 7:10 am

#31 Al on 08.24.17 at 7:13 pm

“I’m not sure if any of these changes will make much of a difference. If one is already going to lie about how much money they’re making on a mortgage application, won’t they just say they make even more to pass the stress test?”

It’s called a Notice of Assessment.

#113 Victor V on 08.25.17 at 7:19 am

http://www.bnn.ca/price-slump-tight-cash-wreak-havoc-in-toronto-s-housing-market-1.838817

“The big issue is with financing,” said John Pasalis, president of the Realosophy real estate brokerage in Toronto.

The first sign of a problem often comes when the lender sends out an appraiser, who judges the property is worth less than what the buyer offered a month or two earlier. A lower valuation means a smaller loan from the lender.
Pasalis gave an example of a buyer who expected a $1 million loan from the bank only to have it cut to $850,000 days before the deal was set to close.

“All of a sudden you have to come up with an extra 150 grand,” Pasalis said. He estimated that up to 5 per cent of deals were at risk now, something unheard of a year ago.

Toronto home prices are down nearly 19 per cent from the April peak and resales were about 40 per cent lower in July than a year earlier, according to the Toronto Real Estate Board data.

#114 Wrk.dover on 08.25.17 at 7:23 am

It is getting mediocre out there!

Not wanting BMW grade snake oil, I asked Napa to bring me some old school anti freeze. How complicated can anti freeze be? It arrived with a two year life expectancy stated in the small print on the label. I will return it.

Called Car Quest for the afternoon delivery, same stuff different supplier arrives.

Why do they even market junk?

Cars….your second biggest expense in life. Do you know what is going on with the supplies at your place of choice for maintenance?

#115 Reality 1 on 08.25.17 at 7:35 am

The big question is how many of these UNINSURED mortgages have the big 5 banks SECURITIZED and sold in the form of Mortgage Backed Securities (MBS)?

(after CMHC insuring the pools of these mortgages )

My guess is they have been doing this feverishly since the OSFI proposal was first tabled.

Then, of course, they (e.g. CEO of RBC ) came out and supported the OSFI initiative, knowing that their risk exposure to these mortgages had been effectively nullified / reduced.

Does anyone know how to get the info on the size of MBS issuance done in the past 6 to 12 months ?

You figure this out and you’ll know whether or not to buy the big 5 banks’ shares.

#116 -=jwk=- on 08.25.17 at 7:55 am

@#12, #29

Consequently, FRFIs should maintain complete documentation of the information that led to a mortgage approval. This should generally include:

A description of the purpose of the loan;
Employment status and verification of income (see Principle 3);
Debt service ratio calculations, including verification documentation for key inputs (e.g., heating, taxes, and other debt obligations);
LTV ratio, property valuation and appraisal documentation (see Principle 4);
Credit bureau reports and any other credit enquiries;
Documentation verifying the source of the down payment;
Purchase and sale agreements and other collateral supporting documents;
An explanation of any mitigating criteria or other elements (e.g., “soft” information) for higher credit risk factors;
Proof of property insurance;
A clearly stated rationale for the decision (including exceptions); and
A record from the mortgage insurer validating commitment to insure the mortgage, where applicable.
The above documentation should be obtained at the origination of the mortgage and for any subsequent refinancing of the mortgage. FRFIs should update the borrower and property analysis periodically (not necessarily at renewal) in order to effectively evaluate credit risk. In particular, FRFIs should review some of the aforementioned factors if the borrower’s condition or property risk changes materially.

As a general principle, an independent third-party conducting a credit assessment of a FRFI’s mortgage loan should be in a position to replicate all aspects of the underwriting criteria, based on the FRFI’s sound documentation, to arrive at the derived credit decision.

A renewal is a type of refinance.

#117 Reality 1 on 08.25.17 at 7:55 am

to # 95 Nik

The cap is 1 million for CMHC.
Many Vancouver and B.C. properties exceed this cap.
So, that stress test did not apply to that many properties.
As those expensive properties skew the average prices, not such a big statistical impact.

Crusty Clark’s down payment assistance policy also helped goose condo prices.

#118 Gravy Train on 08.25.17 at 8:05 am

#100 Cloudy on 08.25.17 at 1:39 am

“Although you are correct, a billion makes much more sense mathematically being a million million. England had it right.”

The American system of numeration for denominations above one million was modeled on the French system but more recently the French system has been changed to correspond to the German and British systems…. In recent years, however, British usage reflects widespread and increasing use of the values of the American system in place of those of the British system.
https://www.merriam-webster.com/table/collegiate/number.htm

Flop, I’m a purist, not a pedant; besides, Cloudy started it! :)

#119 Reality 1 on 08.25.17 at 8:09 am

to #86 Smoking Man

I feel ya man.

Either wait and see if Wynee or Truedope get re-elected or leave now if you have the means.

You can always visit for up to 6 months (less 1 day) per year to visit your offspring and still be very present in their lives.

Despite our obvious differences, I am near your age and I see the same crap you do.

The lefties preach TOLERANCE and practice INTOLERANCE.

#120 Ret on 08.25.17 at 8:19 am

#87 “The default rate on Canadian mortgages is less than 0.35%.”

That could actually be a huge red flag if borrowers are doing mortgage and/or HELOC augmentations to keep current on their payments, pay property taxes, put on a new roof, replace worn out vehicles etc.

Borrowers appear to be solvent, but maybe actually losing ground financially every month.

As stated often, Canadian default rates tell us nothing. — Garth

#121 Reality 1 on 08.25.17 at 8:23 am

I am actually laughing as I read some postings on this OSFI topic by;

“Mama Knows Best”
“aa3”
“Ponzius Pilates”
“Bankish”
“MF”
and others.

Its like a caveman telling race mechanics how to repair a Ferrari.

Absolutely ill informed and drawing conclusions steeped in opinion, not fact.

#122 crowdedelevatorfartz on 08.25.17 at 8:33 am

Dilemas, dilemas, dilemas.

Buyer offers more than the house is worth.
Bank appraiser estimates house “value” at 85% of the greaterfools offer…….. Uh oh.
Banks approve even less money for mortgage than the appraiser’s estimate…… Uh oh
Buyer scrambles for the extra dough from another lender at a higher rate….. Uh oh.
No money, no sale, no commish for Real Estate agent, mortgage broker, banks, seller, the MSM, and on and on and on.

https://ca.reuters.com/article/topNews/idCAKCN1B50ED-OCATP

Canada’s #1 industry plugs the economic toilet.

Happy Housing Crash Everyone!

#123 Deplorable waste of space dust on 08.25.17 at 8:42 am

#86 Smoking Man on 08.24.17 at 11:11 pm

Sort of depressed. I see whats going on. No energy to fight.

Shit place to be.
..

You must be enjoying the Caribbean with branson, your fellow dyslexic billionaire, as a neighbour

#124 Cow Man on 08.25.17 at 8:45 am

# 97
You are so right. There are Regulations and then there is the enforcement of Regulations. FSCO is the prime example. Ontario’s Insurance Regulations are extensive and precise. They are not enforced by FSCO. Having gone through a two year complaint process where FSCO stated that their mandate was only to assure that the insurer responded to complaints, and no further. They supplied me with a list of lawyers that specialized in Insurance Issues. All one needs to do is reference the 45 mortgage brokers who falsified mortgage applications. They were fired as agents and FSCO stated that the breaches of their policies required a higher level of proof than the employers to lay charges.

#125 Tater on 08.25.17 at 8:54 am

#37 conversion survey on 08.24.17 at 7:36 pm
Survey:

“Happy renter” blog animals, how much would it need to drop the market to convert you to home owners?
——————————————————————–
Back to long term trend, so average price in the GTA to 500k or so.

#126 Rebs on 08.25.17 at 9:16 am

When we took out our RBC 20% conventional mortgage during 2014 (2.82% fixed 5-year), we had to prove where every last penny of our down payment came from. We had to supply bank statements (chequing/saving), actual pay stubs for the past few months , etc. We specifically choose a price point that we could get to as there was no way in hell I was going to pay CMHC for the sole purpose of covering the bank’s butt.
It can’t be too hard to figure out when someone’s scraping together borrowed money for their down!
People lie, we get that. But shouldn’t the banks be performing their due diligence?

Also about renewals (having not yet been there): was there ever any type of stress test before, or were you normally just re-approved by the bank based on your payment history?

#127 Yeah on 08.25.17 at 9:19 am

Hey Garth, How should I reach you, what is your e-mail id where you receive photos and stories from the blog dogs.

[email protected] — Garth

#128 Old Ron the Realtor on 08.25.17 at 9:20 am

I support B-20. When you think about it, its kinda brilliant. In the old days they would just use a sledge hammer called “Interest rates” to correct over-heating in the economy.

Today we have over heating in a very specific segment of the economy. B-20 has a similar effect to raising interest rates by 2 basis points without actually doing so.

The Federal Conservatives tinkered for years with the housing bubble, but didn’t want to tackle the issue head on. The longer it persisted the worse it got. This solution will be painful for some but necessary.

#129 SW on 08.25.17 at 9:24 am

#73 Renter’s Revenge! on 08.24.17 at 9:46 pm
“Hopefully this comment isn’t coming off as too sexist. Note to female blog dogs: probably the main reason men are sexist towards women is that they’re scared of them. So more financially astute comments from women on this blog (and elsewhere) would go a long way to assuaging those fears.”

It’s not anyone’s business to help you overcome your fear of beavers or big cats, dear.

OK, perhaps your mom’s.

#130 Happy Housing Crash Everyone! on 08.25.17 at 9:33 am

You dirty high school drop out mortgage brokers are just as bad and useless realtors. If the new mortgage rules will have no effect as you claim then why are mortgage brokers kicking and screaming? Why are some of you even talking about this non issue? LoL you high schooldrop out mortgage brokers are another bunch of useless shills. You mortgage brokers will also scream in financial pain.
Happy Housing Crash Everyone! :-)

#131 Happy Housing Crash Everyone! on 08.25.17 at 9:35 am

#122 crowdedelevatorfartz
Happy Housing Crash

#132 Ian on 08.25.17 at 9:40 am

There is a massive new condo build that is still at ground level (actually I guess sub-ground level) right out my window downtown here at Dalhousie St / Queen E (right by St Mike’s hospital). Every morning at 7am, the drills and machines start up. The last two months have been complete and utter hell. The only saving grace is that the colder weather is coming and I can finally close my f-ign windows. Last few weeks they have been doing Saturdays too so I can’t even enjoy the weekend.

I have been wondering if this project will stop. I’m waiting for the day that so many pre-construction buyers renege, I will wake up and the drills and earth moving equipment will be silent. That will be so beautiful I will actually cry! I will let you dogs know when it happens! Will be quite a market signal!

I can’t believe the comments on here saying 1) OSFI will not do anything, and 2) who will protect the people / buyers? You are living in DREAMLAND! NO ONE will protect the buyers! Politicians will protect the buyers??!? Odds OSFI does what they’re about to do are 100%! Time to reconnect with reality people.

#133 Smoking Man on 08.25.17 at 9:49 am

More on the savage confiscation of Canadian Enterprises.

http://www.achenhenderson.ca/2017-tax-grab/

#134 Renter's Revenge! on 08.25.17 at 9:52 am

#129 SW on 08.25.17 at 9:24 am
#73 Renter’s Revenge! on 08.24.17 at 9:46 pm
“Hopefully this comment isn’t coming off as too sexist. Note to female blog dogs: probably the main reason men are sexist towards women is that they’re scared of them. So more financially astute comments from women on this blog (and elsewhere) would go a long way to assuaging those fears.”

It’s not anyone’s business to help you overcome your fear of beavers or big cats, dear.

OK, perhaps your mom’s.

================================

So, if someone was threatening to murder me, I should just “get over it”?

#135 For those about to flop... on 08.25.17 at 9:59 am

#95 Nik on 08.25.17 at 12:35 am

No way sellers will take a loss. The market will be more like Calgary as long as the job situation is good. Say goodbye to a big chunk of your disposable income if you want to live in Vancouver.

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

I have already proven your statement to be incorrect.

You need to go back and read my recap post from yesterday.

People losing hundreds of thousands of dollars is not insignificant happenings, but Woeful T.v still had a live report out the front of a crack shack that wants 11 million dollars.

It’s all one way traffic in the media and there is a dumbo from Tasmania that can’t read the street signs and is going against the flow to show you guys what the media can’t or won’t.

A small percentage of transactions are done at a loss each week in Vancouver already.

Will it get worse?

We will find out…

M43BC

#136 Rabbit One on 08.25.17 at 10:03 am

126 Rebs

I believe borrowers just have to show their “own money” sitting in the account for at least 90 days.
Banks don’t do reasonability test on accumulation.
(e.g. $40K annual income person with no other savings suddenly deposited $50K deposited in the account)

Providing pay stubs are simply to verify income, not to determine the source of down payment.

Other way is to produce “gift letter”.
Stating mom gave down payment as gift, no repayment is required.

Standard among many banks.

#137 IHCTD9 on 08.25.17 at 10:04 am

#73 Renter’s Revenge! on 08.24.17 at 9:46 pm

Hopefully I don’t end up marrying a financial retard though.

_____

You’ll know quick if that’s who you’re dating. No need to tie the knot with a woman like that if you’ve identified the problem – it’ll only get worse with time.

No one is perfect, but marrying someone who is a financial dunce would be hell on earth. My vote is marry a woman who makes at least as much, or more than you. This is a benefit in more ways than you might guess…

#138 MF on 08.25.17 at 10:04 am

121 Reality 1 on 08.25.17 at 8:23 am

Cool story bro.

Rising prices to nosebleed levels and a historic borrowing orgy that lasted a decade and a half prove OSFI is useless and incompetent.

If we are using analogies it’s more like the boy who cried wolf.

MF

Ill-informed comment as you misunderstand OSFI’s role and purpose. It is not to contain house lust or set lending rates but to protect banking integrity. — Garth

#139 fixie guy on 08.25.17 at 10:13 am

Lol, when the banks once again become liable for the loans they grant ‘tighter controls are welcome’.
Thanks Harper. At some point the historically unprecedented transfer of money to the banks our dear PM engineered – otherwise know as a grift – will reach public consciousness but for now we’ll have to settle for whocoddaknown?

#140 Rita on 08.25.17 at 10:17 am

How about i was in a bidding war last night with 13 offers in pickering area?

#141 n1tro on 08.25.17 at 10:24 am

#10 Mike on 08.24.17 at 6:17 pm
Wife is pushing to buy house ASAP.

Its going to be a struggle to stop her until March next year after OFSI sinks in.

God help me and and my delay tactics!! Got to be innovative.
——————–
Tell her you want to make another baby before getting a place. Win-Win.

#142 Braj on 08.25.17 at 10:26 am

#132 Ian on 08.25.17 at 9:40 am
There is a massive new condo build that is still at ground level (actually I guess sub-ground level) right out my window downtown here at Dalhousie St / Queen E (right by St Mike’s hospital). Every morning at 7am, the drills and machines start up. The last two months have been complete and utter hell. The only saving grace is that the colder weather is coming and I can finally close my f-ign windows. Last few weeks they have been doing Saturdays too so I can’t even enjoy the weekend.

I have been wondering if this project will stop. I’m waiting for the day that so many pre-construction buyers renege, I will wake up and the drills and earth moving equipment will be silent. That will be so beautiful I will actually cry! I will let you dogs know when it happens! Will be quite a market signal!

Won’t happen dude, get over it.

#143 paracho on 08.25.17 at 10:53 am

Now it is too big to ignore.

https://ca.rogers.yahoo.com/finance/news/price-slump-tight-cash-wreak-051804430.html

#144 Mike in Edm on 08.25.17 at 11:09 am

I really don’t think the OFSI requirements for renewal will have as negative effect on renewers as many of you think. Toronto and Vancouver will be the worst, but in other markets, people renewing their 5yr term I bet are so close to the LTV required, that they’ll somehow make it work. The only ppl that should be negatively impacted the most are ppl that bought less than 5yrs ago and don’t have enough equity built up yet

BUT

what I also envision happening is for all those people coming up for renewal soon (in the next couple of months, or even years), I’m sure their bank or mortgage broker will convince them (it won’t be hard) to do an early renewal before the new rules are put in place. They might have to pay some sort of penalty, but in the grand scheme of things for them, it’ll save their backsides. So at least that way, it’ll buy them another 5yrs of building equity, and by then if they’ve owned their house now for anywhere from ~ 7-10years, you’d THINK they’d then have their finances in order to not be affected again at their 3rd renewal. Plus in 5yrs time, they should be making more money, etc.

Just my $0.02. I think the rules overall will really cool things down (a great thing because ppl’s thought process on what is normal for a house is not normal. I recently saw some friends spamming some listing in Weyburn Saskatchewan for $700k. LOL) but it’s not going to be an atomic bomb like many blogdogs seem to think it’ll be or in denial about it possibly being.

#145 paracho on 08.25.17 at 11:39 am

Too large to hide..even in the media now !

https://ca.rogers.yahoo.com/finance/news/price-slump-tight-cash-wreak-051804430.html

#146 Not David McKay on 08.25.17 at 11:47 am

#25 Smoking Man on 08.24.17 at 7:09 pm

#11 Wishful thinking on 08.24.17 at 6:17 pm
Anyone who thinks there will be a full out crash in prices is engaging in wishful thinking. Politicians will never ever allow it.
….

You have a globalist government running Canada, Dave McKay not ashamed to admit he’s a globalist.

The only way people will allow their sovereignty to yield to globalism is if the culture goes to shit as well as the economy. You basically need to wipe out the middle class to get it done.

Look around is all I’m saying. The plan is in play and being executed before your eyes. Open them.

In fact much to the delight of my haters, I’m going real easy on my posts going forward, perhaps a link to a cool video once a day.

It’s going to get dangerous very fast to be for individualism and ani-globalism these days.

Dr. Smoking Man
Phd Herdonomics
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Jesus Christ I went to see your last video you posted from some Casino Titled “Self destruction, only way to be re-born you get tired of the way shit is re invent” and holy shit you are one hell of an angry old man.
Your story sounds sad living with each child a couple of days each week then drudging into the Casino room for a few days. You only have $400 K left to work with, buddy invest it then get a job any job. I have been unemployed and it is the worst as you have no self worth. Working gives you at least some sort of feeling of your place in the world. Couldn’t sit in the casino like you do. It would drive me nuts. Anyway loose the anger buddy, it appears that you hate everyone but tout that you love everyone at the same time. Stop supporting Trump, he is a total nut-job and you do not appear to be that stupid if you were a code smith. At least people could respect you. Good luck Smoky go get a job.

#147 Tony on 08.25.17 at 11:49 am

Re: #141 n1tro on 08.25.17 at 10:24 am

The earliest home prices in the GTA could bottom out would be October the 5th this year. Tell her to at least wait that long.

#148 Ian on 08.25.17 at 11:53 am

Oh, and Home Capital is going to zero. Or pennies, one of the two.

Happy empty open house weekend everyone!!

#149 Perspective on 08.25.17 at 11:57 am

I would really like to know the mix of new homes to resales on Zolo. I don’t see many resales moving in the Coquitlam area and yet the sales of larger high dollar homes is up, and by a lot, and so are the prices. I can’t help but wonder if most of what is showing up is recently completed custom new builds that are showing up as new sales. I also wonder if there is a stampede of folks with custom new homes who would be hurt by another change in NDP tax policy who are rushing to close.

#150 Ogopogo on 08.25.17 at 12:11 pm

Any measure that hurts Home Capital is music to my ears. That fraudulent, bubble-enabling cesspool needs to be crushed and the unholy site upon which it stands sprinkled with salt so nothing will ever grow there again.

#151 Wrk.dover on 08.25.17 at 12:28 pm

#114 Wrk.dover on 08.25.17 at 7:23 am
It is getting mediocre out there!

Not wanting BMW grade snake oil, I asked Napa to bring me some old school anti freeze. How complicated can anti freeze be? It arrived with a two year life expectancy stated in the small print on the label. I will return it.

Called Car Quest for the afternoon delivery, same stuff different supplier arrives.

Why do they even market junk?

Cars….your second biggest expense in life. Do you know what is going on with the supplies at your place of choice for maintenance?

———————————

Follow up

————————————

This morning after another phone call they brought me a jug that is labelled extended life, good for four or five years (I forget which)….for $1.00 more in the 2 litre size.

Who are they making the cheap stuff for? To save a dollar? Really? Trust your mechanic?

#152 Dissident on 08.25.17 at 12:44 pm

#16 Dan.t on 08.24.17 at 6:22 pm

Everything you said!!! <3

#153 n1tro on 08.25.17 at 12:47 pm

#147 Tony on 08.25.17 at 11:49 am
Re: #141 n1tro on 08.25.17 at 10:24 am

The earliest home prices in the GTA could bottom out would be October the 5th this year. Tell her to at least wait that long.
—————————
My point in “make another baby”….was to go through the “process” but skew the result (ie. no result) to buy time effectively getting rid of the first part of “house horny” with more important things! ;) Just don’t screw things up or you’ll have a house with a falling value and another mouth to feed.

#154 oopswediditagain on 08.25.17 at 12:48 pm

Mike in Edm: “The only ppl that should be negatively impacted the most are ppl that bought less than 5yrs ago and don’t have enough equity built up yet

BUT

what I also envision happening is for all those people coming up for renewal soon (in the next couple of months, or even years), I’m sure their bank or mortgage broker will convince them (it won’t be hard) to do an early renewal before the new rules are put in place.”
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

Hey Mike, you're thinking rationally but also from a current perspective.

First of all, you are definitely right about Toronto and Vancouver being the most impacted by the legislation but be assured the satellite cities/districts will be hurting just as much.

In terms of impact for recent borrowers, yes, but keep in mind as house prices drop (severely) more and more people are affected.

In regards to people renewing prior to the legislation, that legislation will be in place within 2 to 3 months and quite frankly nobody but you knows that this legislation is coming in. Seriously, have you seen anything in the media? Are your acquaintances talking about it? Nope.

This is going to catch the medias attention after the fact. You can be assured of that.

#155 paulo on 08.25.17 at 12:57 pm

#140 RITA: Classic Example Of Stupidity And Ignorance.

I have to wounder if this poster is naturally stupid and financially illiterate,or gets up in the morning and works on it!

Whey would you be even considering getting burned in a bidding war in Pickering of all places?

I Guess you have a pension for extreme high risk and almost 100% chance of losing a significant amount of money.

you can leed a horse to water but cant make it drink?

Rita you are a realatard Troll: Audi lease behind is it

#156 True Cobble Hiller on 08.25.17 at 1:12 pm

#99 Cobble Hill Cobbler on 08.25.17 at 1:34 am
RE: #83 Rook

Victoria is terrible for rentals as I am moving over there at the end of this month from Metro Van. It’s as expensive as Vancouver with way way less choice. Main floors of houses for 2200, duplexes for 2300 right next to the highway. And that’s in Langford or Sidney. Less of an incentive to rent when places are so much dough. 40km outside Victoria houses are 400k in metro Van they’re 800 plus.
—–

Sorry Cobble Hill wannabe resident, there are few decent houses for 400k with the exception of dedicated retirement communities – and then you have to be 55+.

Once you get outside of Victoria, every house is owned by a DYI’er who lacked any skill and used the cheapest materials. Its rural land after all with the poorest incomes.

I don’t know how many people have come here thinking they got a ‘deal’ on a ‘cheap house’ outside Van and Vic only to start to have things fall apart and then seen the true extent of the problem. The new buyers are usually young families and recent retirees – the look of frustration and bitching on the cost is priceless.

And remember, the last to rise in price is the first to fall. That has been the case with all the US bubble cities and indeed you are seeing it with the GTA communities that got the last round of TO refugees – the sharpest drops in prices in those communities. Expect the same on the Island. Hope you did not buy…

#157 IHCTD9 on 08.25.17 at 1:18 pm

#151 Wrk.dover on 08.25.17 at 12:28 pm
#114 Wrk.dover on 08.25.17 at 7:23 am

This morning after another phone call they brought me a jug that is labelled extended life, good for four or five years (I forget which)….for $1.00 more in the 2 litre size.

Who are they making the cheap stuff for? To save a dollar? Really? Trust your mechanic?
____________

The 1.00 cheaper pure crap not worth buying is marketed exclusively to Canadians.

Next time you’re in the boneyard, drain the rad of the first 70’s vehicle you see. That stuff is good for life.

#158 Tony on 08.25.17 at 1:36 pm

Re: #153 n1tro on 08.25.17 at 12:47 pm

I’ll tell you when the housing market has bottomed out in the GTA. I’m also supposed to tell that Ian guy in Newmarket. It could rally short term and double dip so I’ll tell you the details when the time comes. Very long term GTA housing has to be a terrible investment no matter what. Some cities of course will do better than others.

#159 The End Is Near on 08.25.17 at 1:41 pm

I wonder if this has anything to do with the falling market? http://www.cp24.com/mobile/news/crews-remain-on-scene-following-massive-fire-at-whitby-townhouse-complex-1.3561065

#160 jess on 08.25.17 at 2:08 pm

1 JB on 08.24.17 at 5:50 pm

predictive models -creator bias
see weapons of math destruction

========
Ditech was acquired by Walter Investment Management from Ally Financial in March of 2013. The Ditech The brand had effectively disappeared from the marketplace for five years during the mortgage crisis.
https://en.wikipedia.org/wiki/Ally_Financial

walter investment ( wac )— is ~.47 — was 48.81 /2013
https://www.housingwire.com/articles/38283-another-big-shake-up-at-walter-investment-head-of-ditech-financial-departs-unexpectedly
https://tinyurl.com/ya9sa9hs

===
“conscience laundering”

“the slothful, the drunken, the unworthy”.
http://www.newyorker.com/business/currency/was-carnegie-right-about-philanthropy

#161 Mark on 08.25.17 at 2:16 pm

http://www.cbc.ca/news/business/household-debt-1.4262500

“Rising household debt could be drag on long-term growth: federal document”

Well no sh**. They could’ve just read Mark blog comments or used even the most basic of common sense to realize that very slow growth, if not recession and deflation is the inevitable consequence of a popping of the housing bubble.

#162 Manitoba Whale on 08.25.17 at 2:26 pm

paulo on 08.25.17 at 12:57 pm
I have to wounder if this poster is naturally stupid and financially illiterate,or gets up in the morning and works on it!
*****
I personally do not like negative comments and innuendo; but man, that was a funny comment.

#163 bdwy sktrn on 08.25.17 at 2:27 pm

I have been unemployed and it is the worst as you have no self worth. Working gives you at least some sort of feeling of your place in the world.
—————————
speak for yourself.
quit the tax farm 18 yrs ago in my early 30’s.

self worth all over the place here!

#paradise

#164 bdwy sktrn on 08.25.17 at 2:44 pm

sfh sales in my area east van are very slow right now.

that is a good thing.
because there is nothing for them to buy.

in my 50 block ‘hood there are *3* listings not on major/busy roads –
#1 – 1.6m teardowm
#2 – 2.0m fixed up old house
#3 – 2.8m newer reno

choices, choices!

toronto is getting what it has coming to it.
TO will never be vancouver.
trying for 604 prices in the gta is/was foolish.

#165 GTA is YVR on 08.25.17 at 2:50 pm

re #162

*** TO will never be vancouver.
trying for 604 prices in the gta is/was foolish. ***

Wow, going out on a huge limb there buddy. Money doesn’t flow in YVR either anylonger and the sh*t from 604 speckers stinks just the same.

Liquidity has dried up. That’s all there is to it. The circus has moved on because the easy money in RE has been made. Nobody with real financial acumen is getting into this game now at this juncture. Regardless of where in Canada.

604 will correct and so will the rest of BC.

#166 Dogman01 on 08.25.17 at 3:05 pm

Hi Garth
Do you do Book Reviews?

The Wealthy Renter: How to Choose Housing That Will Make You Rich

https://www.amazon.ca/Wealthy-Renter-Choose-Housing-That-ebook/dp/B01B2DK68E/ref=sr_1_1?ie=UTF8&qid=1503687770&sr=8-1&keywords=the+wealthy+renter

#167 Johnny Boy on 08.25.17 at 3:16 pm

Who is single and looking for a rich wife?
Need money? call Mavis.

http://time.com/4914470/hospital-worker-mavis-wanczyk-wins-powerball-jackpot/

#168 Mike in Edm on 08.25.17 at 3:57 pm

#154 oopswediditagain on 08.25.17 at 12:48 pm

In regards to people renewing prior to the legislation, that legislation will be in place within 2 to 3 months and quite frankly nobody but you knows that this legislation is coming in. Seriously, have you seen anything in the media? Are your acquaintances talking about it? Nope.

This is going to catch the medias attention after the fact. You can be assured of that.
****************************
I don’t know… It’s definitely not front and center (yet) but I’ve seen a few articles on the G&M and other MSM sites discussing it. You’re right though – I’m pretty positive out of all my family and friends I’m the only one that knows about it (except a Calgary friend who is actually a professional landlord and has owned about a dozen properties for many years now). I guess we’ll wait and see.

You’d think Mtg brokers would be calling up their clients before the rules kick in to help them out… I know mine would (when I owned). He is really great though, and crafty, but not sleazy/sketchy. Maybe he’s one of the good ones though. But I guess if brokers are anything like most RE agents, their just in it to make an easy buck and don’t care.

#169 NoName on 08.25.17 at 4:05 pm

Those two that arguing about being unemployed and self worth, there are many studies that shows that being fired leave long lasting scars. I remember 3 yrs ago it was bit tough to realised that i was just a 6 digits number. I alway knew that, thats why i chose NoName…

I never told you this guys, on sep 16 or 17 2014 it was wednesday for sure, plant was empty all machines were down for a day or two, around noon i talked to my boss that i am not feeling well and i was headed home.
so far so good
Walking thru front office i sow plamt manger stop by told him that i am not feeling well and that i am headed home, and regardless of my sickness (that sounds wired) ill be back last day. So i took a scenic road (lakeshore from oakville to sc) stop by tims got coffee, and 45-50 min later when i got home, i found my wife waiting for me in driveway pale as a ghost holding open envelope. She handed it to me and sad “this came in for you 20min ago”, not knowing what is i joked that is federal felony opening other people mail…

Anyway i red a paper that stated if i dont come back to work by end of working day that i will loose my severance package.
There was nothing for me to do that day than call back and tell them that maybe me coming back same day it was not good idea. Next day security dude was there and plamt manger was absent and doors with access to upper mangaemnt was kept closed.

abut being fired.

https://www.bloomberg.com/news/articles/2017-04-27/why-getting-fired-is-worse-than-divorce-or-the-death-of-a-spouse

#170 Gravy Train on 08.25.17 at 4:32 pm

#155 paulo on 08.25.17 at 12:57 pm

I won’t point out all the spelling errors in your comment, but one of them was simply too excruciating for me to resist mentioning. The word you were searching for was penchant, not pension.

Flop, you have to admit that I’ve only mentioned one of the innumerable spelling errors in the comments section over the past several weeks. I’m delighted to see that fellow purists are now getting into the act! Together, we might clean up this comments section yet! :)

#171 Ace Goodheart on 08.25.17 at 4:36 pm

Typical lacklustre Canadian crisis. We have a retreat in house prices being managed and controlled by the Federal Government.

Everyone is afraid. What will the government do next? If we’re polite and we think of others first, will we be Ok? Maybe we should smile, think about what our therapist told us and go for a walk.

Maybe T2 will photo bomb us.

Really the Canadian market will never blow up like the US one did. In the USA the govt cut regulations and just let things go as they pleased. Their market blew up when the money ran out. Completely unregulated, like a giant fire that just kept finding more fuel. A positive feedback loop.

In Canada, the only thing we have to fear, is what will the government do?

Our housing collapse will not be a global event that almost collapses the world’s economy. Small countries will not have credit crises. No wars will start.

About maybe 300,000 people nation wide will be underwater on their mortgages. There will be a few defaults.

We will continue on.

Oh and check out rail shipping numbers folks. A lot of goods being moved around right now. Someone is buying all this stuff. Expect record earnings on your railway stocks. Best judge of the health of an economy is shipping. If goods are moving around guess what people are buying them.

#172 Stan Broock on 08.25.17 at 4:45 pm

Yes, it will be a depression:

https://ca.finance.yahoo.com/news/rising-household-debt-could-drag-081504532.html

“Our results suggest that debt boosts consumption and GDP growth in the short run, with the bulk of the impact of increased indebtedness passing through the real economy in the space of one year,” said the BIS report.

“However, the long-run negative effects of debt eventually outweigh their short-term positive effects, with household debt accumulation ultimately proving to be a drag on growth.”

——————–

And the shill:
BMO chief economist Doug Porter says he doesn’t dispute the broader conclusion that a rising household debt-to-GDP level poses risks for growth.

But he’s skeptical one can draw a direct line from the household debt-to-GDP directly to economic growth down the road. For one, he said interest rate levels must be factored in.

“I’d be very cautious about putting pinpoint accuracy on that,” Porter said. “I think that’s incredibly difficult to do.”

However, Porter says the record levels of household debt piling up in Canada, like in many industrial-world economies, does suggest it will be tougher for the country to grow as quickly as it has in the past.

Hey, Porter, let’s increase the rates to 4-5 % and see what happens.

If we don;t increase them/the rates, it will be an inflationary depression and non retirement for almost everyone in Canada.

If we increase the rate to 4-5 + % we are looking at deflationary depression.

There is no easy solution for this one (the biggest housing credit bubble of all time in history) with cooked /non-existent economy.

My humble bet is on huge deficits and inflationary depression, accompanied by lack of jobs.

In my view we are enjoying at the moment a time of max valuation of anything Canadian – dollar, housing, stock market in real terms.

This can not last.

#173 Stan Broock on 08.25.17 at 4:49 pm

pseudo – economists like Porter and the ‘easy solution’ BOC boss Poloz are the real reason why this thingy will blow big time.

If they were worth something, this credit bubble and brewing cries would have been prevented in first place.
crash. We had 10 years notice. Come on guys, WTF are you paid for?

#174 Wrk.dover on 08.25.17 at 4:49 pm

Fired is being reborn.

#175 Aw297 on 08.25.17 at 5:09 pm

MIKE #10
Wife is pushing to buy house ASAP.

Its going to be a struggle to stop her until March next year after OFSI sinks in.

God help me and and my delay tactics!! Got to be innovative.
———————————————————–
It must be a shock to wake up one day and find out your spouse doesn’t know how to use a calculator. Good luck!