Lights out

The noose tightens. Days ago we told you about the mess higher mortgage rates are making of things. Families pay more to service mortgages than ever, and after a few years during which loan-to-debt ratios dropped, we fell off the wagon. Once again we’re snorfling up borrowed money, making history, setting the scene for a momma of a reset down the road.

So here’s TD. It just raised its one-year mortgage rate by a stunning thirty basis points. Yeah, that may not sound like a lot. But it is. At 3.34% it’s now breathing down the neck of the best 5-year mortgage rates, so one more option for borrowers is effectively gone. More importantly, it tells you the trend. Up.

Short-term loan rates are swelling along with the yield on short bonds. They, in turn, are growing because the Bank of Canada will be jacking its benchmark rate in a month – by a quarter point. The current odds of that happening are north of 80%, and it’s not out of the question we could see a jump in December, as well (especially if Trump lets us back into a trade agreement).

The prime rate soon will be just a few man-bun hairs less than 4%. By this time next year it’ll be at least 4.5% and possible a quarter point higher. We have not seen this level for well over a decade, and it effectively eliminates the “emergency rates” thing in place since 2009.

This is a big deal for the kids buying real estate (or wanting to) for the first time. Gone are the 2% and 3% locked-in, half-decade-long mortgages that have been around since they discovered acne and urges. Combined with the B20 stress test, it means they have to qualify at 5.34%, or two per cent higher than what their bank is offering – whichever is greater.

Soon that Bank of Canada benchmark mortgage rate will be 5.6%. Next year it will pass 6%. Haven’t seen that for a decade, either. Frankly,  I don’t know why anyone would be buying now, knowing what’s coming.

$     $     $

Despite that, Barry’s thinking about it since he’s moving to a new jobs as a hated civil servant in that puffed-up place called Ottawa.

“I’ve been reading your blog for ten years now, and you saved me from the mistakes of rent-to-own schemes and listening to the buy-now-or-buy-never crowd. I have recommended your blog to several others, who generally don’t want to hear that their real estate purchases may have set them back financially, and argue that since they’re going to stay in their houses forever, it doesn’t matter (which you have repeatedly refuted. of course).”

Okay, MSU over. What’s the issue?

“I don’t often hear you comment on the Ottawa market. I will be moving there for work by November (in time for the horrible winter) and when I looked recently at condos and other properties for rent or for sale, I was staggered by how much more expensive Ottawa had become since the last time I looked about two years ago – this includes outlying areas such as Barrhaven and Orleans.

“My situation – 51, single, defined benefit pension plan, maxed out invested TFSA (stands at about $70,000 right now) and about $100,000 in savings (which I know I should invest). I got a late start to investing and savings due to some health issues, which have passed. My annual income is now a little over $100,000. I have never owned a property. The banks’/other institutions’ ‘buy or rent’ calculators seem to indicate I should buy, but then again, they are in the business of selling mortgages.  I would appreciate your insights on the Ottawa market and what would be best to do.”

That’s easy. Ottawa is a more stable market than most, thanks to all that government money sloshing around. There are almost 150,000 Trudeau employees in the National Capital region, thanks to a 12% hiring binge, and that’s enough to keep real estate less volatile that in, say, Vancouver where most people are private sector and/or nuts.

So the average Ottawa house costs about $433,000 and the typical condo is $276,000. Sales this year are close to identical with those recorded in 2017, and prices haven’t moved one centimeter when inflation’s factored in despite an 18% drop in active listings. So, this place lags the rest of urbanized Ontario in price increases, and will prove to be more resilient when conditions deteriorate.

The answer to your question: buy if it lowers your housing costs because there is no real reason to expect capital gains. Therefore real estate is shelter, not an investment. Given your pitiful level of savings and investments ($170,000 at age 51 is not cool), it means buying would hollow out your liquid assets, saddling you with mortgage payments, and put you on the hook for condo fees, property taxes, higher insurance and utility charges. Can you rent for less than that (including the lost investment potential of your down payment)?

Of course you can. Have you learned nothing from this pathetic blog? Besides, you’re single. Not even a spouse to nibble away at your resolve. And given the fact you haven’t lived in Ottawa before, plus the job is untested and may not work out, why would you throw all of your limited resources into a property? Move there. See if you like being in a  place where it snows every night, where major roads are shut down routinely so elected poohbahs can rush by in black Yukons, and everyone feels superior to Toronto.

Meanwhile, Barry, get serious about investing. When Doug Ford becomes PM your pension might be as secure as Toronto council.

About the picture...

“I love the blog, I share it with all of my moister friends and boomer parents regularly. Sufficient suckup?”

Yes, that passes. Continue.

“My girlfriend is a student and has a decent amount of OSAP, probably more than she needs, today she asked me if she should invest it. Curious what your thoughts are on that? I’ve been a long time blog reader and can’t recall you writing anything on the topic before. Thanks, Shea. PS: In hopes of you replying I attached a photo of my dog Stanley having a snooze, he likes to be tucked in.”

OSAP money is loan money and she’s got to start paying it back after a six-month holiday. The average loan rate currently is 3.5-4%, and it’s non-deductible. So, Shea, the answer is no. Your GF would have to assured of a pre-tax return of 7% consistently in order for this to make sense, and in the short-term, that’s not a given. So why doesn’t she just pay the loan back instead of keeping funds she doesn’t need?

But yes, Stanley rocks.

95 comments ↓

#1 stan brooks on 09.21.18 at 4:12 pm

first

#2 crossbordershopper on 09.21.18 at 4:23 pm

americans can deduct mortgage interest on property owned in Canada.
what a joke this country is.

The US deduction is limited, and no country (including the States) could afford to implement such a policy today. – Garth

#3 HoweStreet.com on 09.21.18 at 4:27 pm

Ross Kay on HoweStreet.com Radio:
Young Home Buyers See a 30% Reduction in Asking Prices in Toronto.
Canadian Home Buyers bought fewer homes in August.

https://www.howestreet.com/2018/09/17/young-home-buyers-see-a-30-reduction-in-asking-prices-in-toronto/

#4 Proud Dreg on 09.21.18 at 4:32 pm

MF on 09.20.18 at 7:47 pm
#40 Proud Dreg on 09.20.18 at 6:06 pm

Would it though?

Lots of people making money and using banks are happy the way they are.

So I don’t see any outrage at all.

You have employees, depositors, investors, home buyers, business owners, shareholders and so on.

Banks are in the game to make money, that’s how capitalism functions. Our banks are pretty damn stable compared to the others. That’s why I don’t think anyone is upset at how banks make money, other than a few on this forum.

MF

So your suggesting that if the fraud is in the billions and lots of people are making money in that fraud…..then who cares about the rule of law? That sounds pretty scary.

#5 jess on 09.21.18 at 4:32 pm

interesting

Why Stephen Harper’s former policy director is defending Trudeau’s carbon tax

Canadians in provinces with federal carbon tax would get more in rebates than they pay in tax, study suggests

https://www.cbc.ca/radio/asithappens/why-stephen-harper-s-former-policy-director-is-defending-trudeau-s-carbon-tax-1.4832116

#6 Ottawan on 09.21.18 at 4:35 pm

Thanks for the Ottawa update. But where did you get the “12% hiring binge” stats?

Statistics Canada only shows numbers up to 2017, and doesn’t include a few agencies. The total they give for the NCR is only 107,969 and very little growth since 2014.

https://www.canada.ca/en/treasury-board-secretariat/services/innovation/human-resources-statistics/population-federal-public-service-national-capital-region.html

Using that table, I’ve plotted the annual growth in real estate prices against the annual growth of the public service, and it matches extremely closely with a one-year lag.

Conclusion: Federal government hiring has a huge effect on Ottawa real estate. Duh.

#7 bill on 09.21.18 at 4:36 pm

Just passed this on to some friends who have inlaws that are way over extended…hope they listen.

#8 Brian Ripley on 09.21.18 at 4:43 pm

Once again we’re snorfling up borrowed money… Garth

Today by coincidence I mashed up some charts to show the snorfling that has been ongoing since the credit crash in 2009 without any real resulting boost in productivity:
http://www.chpc.biz/history-readings/looks-like-canada

It has however increased the level of the hottest employment sector in Canada: Warehousing and Transportation.

Included is a chart in the mashup on how Toronto housing prices have fared since the 1960’s with 3 inflation adjusted price downtrends that lasted 5, 7, and 11 years. The next one is awaiting the history books.

#9 Dave on 09.21.18 at 4:46 pm

If Canada sees 2 interest rate bumps in 2018, it will finally happen. Can show up at a dinner party and not be treated as a 3rd class citizen and looked upon as re*arted for not buying a crack shack for $1.8M.

#10 All Settled on 09.21.18 at 4:52 pm

Garth recently divorced and all settled. I have the proceeds from 1/2 of the house in cash, home was a 4X bagger over 15yrs. My IA is saying I should just keep it in GIC’s until I buy a home again because i will look in 1 to 2yrs. Feel nervous about putting it all in equities. Any recommendations on how to invest?

#11 mike from mtl on 09.21.18 at 4:55 pm

Wow, what is so special with all the trading volume today with VSC?

1.2M

#12 dakkie on 09.21.18 at 5:02 pm

Canadian Housing Markets WILL CRASH! – This Is Why The Bubble Will BURST

http://www.investmentwatchblog.com/canadian-housing-markets-will-crash-this-is-why-the-bubble-will-burst/

#13 IHCTD9 on 09.21.18 at 5:20 pm

#5 jess on 09.21.18 at 4:32 pm
interesting

Why Stephen Harper’s former policy director is defending Trudeau’s carbon tax

Canadians in provinces with federal carbon tax would get more in rebates than they pay in tax, study suggests

https://www.cbc.ca/radio/asithappens/why-stephen-harper-s-former-policy-director-is-defending-trudeau-s-carbon-tax-1.4832116
——-

“New research to be published next week suggests that, if the prime minister follows through on his plan to return revenues from the tax to households in the form of carbon dividends…”

In the words of the ancient Spartan ephors in response to Philip II of Macedon’s threat to bring his troops into Sparta:

“If”

#14 Hamsterwheelie on 09.21.18 at 5:25 pm

Sounds as though Barry should follow your advice until the job seems stable then buy a property that is easily divided into 2 units or more. Renting with your tenants on site is surprisingly great. Also, it could help him catch up on savings while paying down a mortgage faster due to income & writing off renos and mortgage interest.
Win win no?

#15 Lefty on 09.21.18 at 5:35 pm

Ottawa prices haven’t budged? Is the CBC lying again?

https://www.cbc.ca/news/canada/ottawa/ottawa-home-prices-increase-1.4827492

Apparently, according to the Ottawa Real Estate Board. – Garth

#16 HowDeepThePain on 09.21.18 at 5:41 pm

60 Minutes Australia -Housing Crash
https://www.youtube.com/watch?v=smPR0s2W-Ck

Boy this sounds familiar -Australia & Canadian Real Estate Bubble
https://www.youtube.com/watch?v=0lrdxpKPocY

#17 Mattl on 09.21.18 at 5:49 pm

“The answer to your question: buy if it lowers your housing costs because there is no real reason to expect capital gains. Therefore real estate is shelter, not an investment. ”

I this is mostly right, but I would be comfortable buying even if housing costs were more, at least to some degree. For instance, I’d rather pay 3K total to own a house then 2500 to rent. The idea being that the extra 500 may be worth it when 20 years later you don’t have to make rent payments anymore.

At this guys age though I would 100% rent and save. By the time he pays off his home he is going to be into his 70s. Single and mobile and renting is a beautiful thing – I’d be driving towards being on a beach in Mex at 65 milking my pension winding it down.

#18 Smartalox on 09.21.18 at 5:50 pm

A lot of people don’t know this, but OSAP and other Canadian student loans can be paid back early, (or at any time) without penalty.

#19 Linda on 09.21.18 at 5:53 pm

Barry might consider buying property in a small town in the Ottawa region instead of buying in Ottawa. There are commuter highways that permit quite a swathe of small town Ontario to be within reasonable commute times to the downtown core.

Of course, this presumes Barry will want to settle down in the capital region long term. Best to rent for a year first & ensure that the challenging weather conditions are something he wants to live with long term. The humidity ensures very cold winters & sweltering summers which is not everyone’s cup of tea.

#20 The Wet One on 09.21.18 at 5:57 pm

“There are almost 150,000 Trudeau employees in the National Capital region,”

Actually, those are Government of Canada employees. Government of Canada =/= Trudeau.

C’mon Garth. Don’t mislead people like that. Most of those people were there under previous governments and will be there after Trudeau is gone.

Isn’t there enough partisan stupidity in the world already?

#21 For those about to flop... on 09.21.18 at 6:24 pm

Recent sale report.

Update from my post this morning and I will pass the information now onto you guys.

2201 – 867 Hamilton Street, Vancouver, paid 1.23 June 2018 ass.1.00

Asking 1.18

https://www.zolo.ca/vancouver-real-estate/867-hamilton-street/2201

*Addendum,someone with the initials A.B contacted me and stated they believe it went for 1.1,confirmation will come when the database is updated as usual.

Thanks A.B.

So if confirmed that’s a 16.5% loss in 4 months, or around 200k.

No wonder they were going to take Hamilton off the money…

M44BC

#22 Doug t on 09.21.18 at 6:37 pm

There is so much upheaval politically and economically worldwide that it makes me think a shoe is going to drop somewhere in 2019

RATM

#23 Afro-Canadian Millenial on 09.21.18 at 6:41 pm

My OSAP balance is at 30k, but I blamed the feminists for making me drop out of university. I guess it’s good being a “visible minority”.

I don’t have any intentions of paying back any OSAP loans because it was the feminists on campus who went on a slander campaign to foment an angry classroom environment.

The PCs will agree that suppressing free speech on campus leads to dropouts and OSAP delinquents.

#24 The Real Mark on 09.21.18 at 6:50 pm

Interest on OSAP money not deductible? Since when?

Since the CRA ruled bank loan interest isn’t. – Garth

#25 Asterix1 on 09.21.18 at 7:15 pm

#16 HowDeepThePain on 09.21.18 at 5:41 pm
60 Minutes Australia -Housing Crash
https://www.youtube.com/watch?v=smPR0s2W-Ck
____________________________________________

Thanks for link! Starts off great!

“It’s no secret that Australia is experiencing a downturn in the property market. But for Aussies who own their own home or have a mortgage, there’s worse news. Many believe calling it a downturn is foolishly optimistic – the slump we are in is more like falling off a cliff”.

Canadians have no clue what is presently hitting our own markets and that the worst is yet to come.

It’s going to get uglier, TREB/CREA will keep blasting lies, MSM will keep cashing in the checks and Canadians will remain dumber than ever.

#26 Lost...but not leased on 09.21.18 at 7:22 pm

Ottawa ?….Public Servants???
Bwahahahaha !!!

I’ve posted in the past re: my role as Executor for my late Fathers estate. Our accountant sent in the paperwork last January 2018…we are seeking a “Clearance Certificate” from CRA which would alllow us to close out the matter (aka no more taxes owed.)

We received a letter from CRA dated August 23,2018 seeking some clarification on a minor issue, …….and informing us if we do not supply the requested info within 30 days we would effectively be put at the back of the line.

We provided them the info within 48 hours….and to this date have not had a reply.

What a JOKE…in the real world this corporation would be broke via lack of satisfied clients.

#27 Ace Goodheart on 09.21.18 at 7:31 pm

All the spare parts are coming together for a massive cut to Ontario’s civil service.

Fordsie, who is not afraid to go notwithstanding and who just got his butt saved by the Ontario Court of Appeal (“dubious ruling” – strong words in favour of the cons) is getting his game together for a full on assault on the Ontario sunshine list and it’s many hangers on.

This guy means business folks and he just won a landslide majority. Now even the courts are supporting him. There is literally nothing in his way.

The Liberal name is about to become mud in Ontario and if you happen to be a well paid sunshine lister or a hanger on to one of these people well I hope you have a lot of savings or some career options cause you are about to get crushed.

#28 AK on 09.21.18 at 7:39 pm

“When Doug Ford becomes PM your pension might be as secure as Toronto council.”
=====================================
I am so rooting for Mr. Ford to be the next PM. Does he speak French ??

#29 akashic record on 09.21.18 at 7:40 pm

#24 The Real Mark on 09.21.18 at 6:50 pm

Interest on OSAP money not deductible? Since when?

Since the CRA ruled bank loan interest isn’t. – Garth

So “education as investment in the future” (of the individuals) is just an empty political slogan in Canada.

In that case politicians should be called out every time they make the false claim.

The CRA should not even have the authority to make this call, it should be a political decision at a higher level.

It would be interesting to test this CRA ruling against the Charter or other legal venues, due to the negative impact on social mobility, which is a fundamental political ideology and the economic engine of Capitalism.

I can’t imagine the CRA made this ruling while you were in charge.

#30 ANON on 09.21.18 at 7:44 pm

Got the perfect tune for this. Some sowing, others reaping, the usual racket.

#31 Terry on 09.21.18 at 8:07 pm

“Lights out” is right on the mark for Canada.

I’m just a messenger here but I’m telling y’all right now…….there will be no renegotiated NAFTA with the Trudeau Liberals in power. Trudeau and his weak team of negotiators are wasting their time. This fight with Canada is “personal”……. Trump verses Trudeau, and it will cost Canada plenty. Auto tariffs are coming………..get ready for it Canada!

#32 conan on 09.21.18 at 8:07 pm

It’s lights out in Ottawa, literally.
Mega power outage.

#33 Lorne on 09.21.18 at 8:51 pm

#28 AK on 09.21.18 at 7:39 pm
“When Doug Ford becomes PM your pension might be as secure as Toronto council.”
=====================================
I am so rooting for Mr. Ford to be the next PM. Does he speak French ??
……..
He barely speaks English!

#34 Stan Brooks on 09.21.18 at 8:58 pm

David Rosenberg:

https://www.youtube.com/watch?v=V2FEkQC6Hn0

1. Ottawa created the debt bubble with bad policies. Mary Shelley creating the Frankenstein and saying: Oops.

2. BoC controls the short term of the curve, mortgages are 90 % correlated to US 10 years treasuries that are going further up by 1 % within a year, maybe more. There is nothing BoC can do about that.
(BoC defines short term deposit trends robbing savers)

3. 47 % of the Canadian mortgages are rolled over/to be refinanced next year, so now you know why the stress test was announced but unfortunately too late.

4. Mark Carney warned about excessive debt in ….. 2009. What did Poloz do? Double it. The most incompetent and useless figure head ever.

5. If BoC is wrong on inflation (and they are wrong as you see at the grocery stores) and have to play catch up, all bets are off.

6. US will keep raising rates until something brakes. No indication on something breaking until 2021-2022. Maybe up further 2 % from here.

———————————————–

Auto Tariffs are just a matter of time. NAFTA is over.
You can’t come to an agreement by parties who are drifting fast apart. Once the Auto sector is gone there is no coming back.

https://ca.finance.yahoo.com/news/u-very-close-proceeding-mexico-135845723.html

#35 X on 09.21.18 at 9:03 pm

Any thoughts if the gov’t will drop the additional 2% mortgage loan qualification thingy once the average 5yr rate hits 6-7%?

#36 Smoking Man on 09.21.18 at 9:05 pm

For any of you retarded people that think a blue wave in the mid terms.

Wrong. Social Medea CEOs. All in and bet on blue.

Big mistake.

Not one spot on a board of directors anywhere has a phd in Herdonomics

As always. Im way a head of the curve.

#37 For those about to flop... on 09.21.18 at 9:12 pm

What this thread needs is some Flopper magic…

Pink Pumpkins being carved in Richmond.

As the embers of summer die out I’m going to get started on what appears to be a rip-roaring Fall selling season.

Gonna start off with this house in Richmond that just took another 20k off after relisting at 1.55,the new ask 1.53 after dreams of the great escape back in March.

They paid 1.6 in June 2016 and the piece of paper from the city says it’s worth 1.56

Halloween is still a while away but it’s carving season so sharpen your knives and get ready to see some blood splattered pumpkins…

M44BC

8540 Wagner Drive, Richmond paid 1.6 June 2016 ass 1.56

Mar 6:$1,698,000
Sep 19: $1,538,000
Change: – 160000.00 -9%

https://www.zolo.ca/richmond-real-estate/8540-wagner-drive

#38 For those about to flop... on 09.21.18 at 9:14 pm

Pink Pumpkins being carved in Port Moody.

Haven’t done much carving in Port Moody before, dunno whether it’s because some people see it a some sort of deranged bastion of affordability,but these guys have just put a Pink Pumpkin on their front doorstep.

They paid 1.35 in July 2017 and after spending the summer on the market,the lemonade stand has been packed up and they are off to the pumpkin patch.

The only way out of the patch for these guys is by way of someone giving them a heap of Jane dough…

M44BC

2805 Jane Street, Port Moody paid 1.35 July 2017 ass 1.38

Jun 25:$1,488,000
Sep 19: $1,398,000
Change: – 90000.00 -6%

https://www.zolo.ca/port-moody-real-estate/2805-jane-street

#39 Doug t on 09.21.18 at 9:15 pm

#36 – never never go full retard

RATM

#40 For those about to flop... on 09.21.18 at 9:16 pm

Pink Pumpkins being carved in New Westminster.

These guys in New West just carved a big chunk off of their ask,which will make things a little lighter.

They signed on the dotted line for 1.29 in October 2017 and although only a borderline pumpkin at this stage with an ask of 1.39,the assessment comes in at only 1.01,making it worthy of a watch.

What’s in your wallet?

Just a few pumpkin seeds…

M44BC

341 Johnston Street, New Westminster paid 1.29 October 2017 ass 1.01

Jul 3:$1,678,000
Sep 19: $1,398,000
Change: – 280000.00 -17%

https://www.zolo.ca/new-westminster-real-estate/341-johnston-street

$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#41 ANON on 09.21.18 at 9:30 pm

Complexity is fragile. Paradoxically, complexity makes life simpler, while simplicity makes life harder. Food for thought.

#42 arfmoocat on 09.21.18 at 9:31 pm

since they discovered acne and urges.

LOL

#43 Lost...but not leased on 09.21.18 at 9:46 pm

DELETED

#44 For those about to flop... on 09.21.18 at 9:51 pm

Pink Pumpkins being carved in Richmond.

Well these guys just cut roughly a fifth of their pumpkin off, and are now down to their buy price with their massive reduction.

Picked up for 1.98 in December 2016 with an assessment of 2.2,they decided to bypass that number and get down to a number that they hope will garner some action.

Before we blink it will be the holiday season, when things traditionally go quite, and so guys like these only have a short window to get something done,especially if the media decides to get off its hands and produce some factual reporting about the real state of play.

Next spring some of my cases will be three years old and will be starting to grow out of the toddler outfits that I bought them to keep warm.

Nighty night.

Sleep tight…

M44BC

8 9055 Dayton Avenue, Richmond paid 1.98 December 2016 ass 1.98

Jun 7:$2,498,000
Sep 20: $1,980,000
Change: – 518000.00 -21%

https://www.zolo.ca/richmond-real-estate/9055-dayton-avenue/8

#45 Dolum McKague on 09.21.18 at 9:57 pm

A great time to hold banking shares in a rising rate enviornment?

#46 AK on 09.21.18 at 10:00 pm

#35 Smoking Man on 09.21.18 at 9:05 pm
“For any of you retarded people that think a blue wave in the mid terms.
Wrong. Social Medea CEOs. All in and bet on blue.
Big mistake. ”
=====================================
Just like the 92% Clinton landslide that CNN was predicting on November 08, 2016…

#47 Reality is stark on 09.21.18 at 10:46 pm

It’s comical that the average real estate agent cannot understand that higher interest rates lead to lower house prices after an unprecedented 21 year housing boom.
The brainwashing they receive from their associations is so intense that their ability to reason becomes compromised.
A real estate agent is essentially nothing more than a shill.

#48 Stone walker on 09.21.18 at 11:16 pm

haven’t seen gas prices this high since ‘07. Along with rising interest rates, how can this not affect the economy? However, when it comes to housing, is there still a shortage? Rents will likely continue to climb, in most places renting is more than a mortgage, people keep caving, might as well just buy instead of paying someone else mortgage at a higher monthly payment. The more people that get foreclosed on, the less rental vacancy there’ll be since the ex-owners need a place to live, There’s enough refugees entering the country to compensate the shrinking population, soon Canadians will be a minority in their own country. People entering from places like the UK have money worth far more than the North American peso our banks print, so they’ll continue to price out the locals. She’ll come crashing down someday, but by the time that happens, it won’t matter where you are in the West, the ships sinking, weather your on the bow or stern, you’ll go down with it, some will just get there sooner

#49 Ponzius Pilatus on 09.21.18 at 11:19 pm

Floppy,
We have Ovlix now.

#50 FOUR FINGERS WATSON on 09.21.18 at 11:44 pm

#35 X on 09.21.18 at 9:03 pm
Any thoughts if the gov’t will drop the additional 2% mortgage loan qualification thingy once the average 5yr rate hits 6-7%?
………………………………….

You mean IF the 5yr rate ever hits 6-7% again. We are a looooong ways from there pilgrim.

#51 islander on 09.22.18 at 12:20 am

https://vancouversun.com/opinion/op-ed/lee-abrahams-our-family-loves-vancouver-but-were-leaving-because-the-struggle-to-live-here-is-simply-too-hard

….you’ve been warned – stay away…

#52 Jungle on 09.22.18 at 12:32 am

#35 X stress test reaching 6-7% is excessive, they would be smart at that point to reassess pros vs cons.

#53 will on 09.22.18 at 2:04 am

Lucerna extincta ( for the Latin lovers here).

#54 Smoking Man on 09.22.18 at 2:53 am

Hiking on the edge of insanity.

What a rush.

#55 Myra Andrews on 09.22.18 at 2:57 am

Stats for Greater Vancouver from realtor Paul Boenisch

Sept 21 New 171 Sold 63 TI:13,574
Sept 20 New 218 Sold 81 TI:13,538
Sept 19 New 227 Sold 99 TI:13,472
Sept 18 New 266 Sold 99 TI:13,418
Sept 17 New 360 Sold 93 TI:13,339

Sept 14 New 143 Sold 85 TI:13,239
Sept 13 New 225 Sold 58 TI:13,240
Sept 12 New 268 Sold 90 TI:13,147
Sept 11 New 325 Sold 77 TI:13,057
Sept 10 New 487 Sold 87 TI:12,916

Sept 7 New 197 Sold 87 TI:12,681
Sept 5-6 New 609 Sold 195 TI: 12,653
Sept 4 New 498 Sold 53 TI:12,439

Inventory at the end of August was 12,510

#56 The Real Mark on 09.22.18 at 2:59 am

“#45 Dolum McKague on 09.21.18 at 9:57 pm
A great time to hold banking shares in a rising rate enviornment?”

I’ll spare you a bunch of macro theory as to why bank’s suffer in a rising rate environment (basically rising rates compress the spread between nominal GDP and interest rates), but in a nutshell, the banking sector is around 40% of the modern TSX. The top 3 companies are in fact banks, and you have to go to company #4, Canadian National Railways, to find a non-bank.

This situation, that of a severe weighting of the TSX to the Canadian banks, occurred in the environment of long-term rates falling.

So if we apply some logic, in a long-term rising rate environment, instead of being the Canadian banks being the long-term relative winners for another few decades (and becoming 80% of the index), they’re likely to be the long-term relative underperformers.

I know its hard to imagine this being the case, but every sector of the stock market has its proverbial “day in the sun” as part of the long-term cycles in and of the stock market and the economy more generally. So someone trying to beat the TSX over the next 30 years might not want to carry the same heavy allocation to the banks and may wish to overweight some of the lesser loved sectors. Even if the dividends are, at least for the time being, not as rich, and the business case less clear.

#57 Howard on 09.22.18 at 4:11 am

New report from 60 Minutes Australia : https://m.youtube.com/watch?v=smPR0s2W-Ck

The message : get out while you can

#58 dharma bum on 09.22.18 at 6:34 am

Hey, it’s FORD FEST time again in the GTA.
Yay.
MOGA! MOGA!

#59 TurnerNation on 09.22.18 at 8:04 am

The key to understanding in this life is taking our elite rulers’ words and flipping them.

When Big BankCo states Employees are our most valuable asset…this translates: Employees are our most expensive liability.

Layoffs abound.

#60 Remembrancer on 09.22.18 at 8:25 am

#52 Jungle on 09.22.18 at 12:32 am
#35 X stress test reaching 6-7% is excessive, they would be smart at that point to reassess pros vs cons.
——————————————————————–
LMAO so you think at 5% for say a 3 or 5-year, the risk is any less than at 3% or that its not fair and interest rates will never go above 6-7%?

#61 MF on 09.22.18 at 8:34 am

#26 Lost…but not leased on 09.21.18 at 7:22 pm

“What a JOKE…in the real world this corporation would be broke via lack of satisfied clients.”

-Another ignorant comment regarding the public service.

The CRA is not a corporation. It’s not interested in whether you are “satisfied” or not. It’s interested in trying to be impartial. Your clearance certificate is waiting to be processed along with the millions of others.

That’s what separates us from a third world country like Mexico, where the wealthy and elite pay off usually underpaid government workers for kickbacks. That’s essentially corruption in a nutshell and ignorant people like this poster cannot seem to fathom it.

I bet he’s first in line to call for cut backs too.

“There are almost 150,000 Trudeau employees in the National Capital region, thanks to a 12% hiring binge, ”

-I know Garth is being facetious, kind of. But aside from the elected officials themselves, government employees take an oath to carry out whatever idiot policies the people elected by Canadians create. That’s also what separates us from a third world dump where no one listens to whoever was elected and democracy is ignored.

MF

#62 Millennial Realist on 09.22.18 at 8:38 am

Maxime is sounding more credible every day. He will siphon enough votes from useless Scheer to guarantee Liberal and NDP governance across the country for a generation. The People’s Party will soon generate provincial versions as well and wipe out those conservative parties.

God Bless Maxime And All His Supporters!

Millennials love you !!!!!!!!!!!!!!!!!!

We are SO, TOTALLY, taking over ;)

#63 Remembrancer on 09.22.18 at 8:39 am

#58 dharma bum on 09.22.18 at 6:34 am
Hey, it’s FORD FEST time again in the GTA.
Yay.
MOGA! MOGA!
—————————————————————
Sorry, not selling my objectivity or swearing undying fealty for the price of a Costco hotdog. This government needs to start focusing its energy on all of Ontario, real issues, and not the cheap carny theatrics of DOFO…

#64 IHCTD9 on 09.22.18 at 9:14 am

#62 Millennial Realist on 09.22.18 at 8:38 am
Maxime is sounding more credible every day. He will siphon enough votes from useless Scheer to guarantee Liberal and NDP governance across the country for a generation. The People’s Party will soon generate provincial versions as well and wipe out those conservative parties.

God Bless Maxime And All His Supporters!

Millennials love you !!!!!!!!!!!!!!!!!!

We are SO, TOTALLY, taking over ;)
——

A Trudeau victory complete with a landslide majority would be a significant event in Canadian history right now, just because of timing.

With no NAFTA deal, Auto and other Tariffs, a plunging GDP due to consumer spending taking a dive, and a mortally wounded economy – giving an arrogant prideful ideology driven dingbat ultimate power again till 2022 would definitely teach us all a lesson in priorities.

IMHO, we may as well just get him in there and get it over with. The problem in Canada starts with our flaky backwards voters, and the only way folks like these will think twice about their world view is to pound them hard right where it hurts the most – their wallets.

Unless it looks like Scheer can pull off a majority, I’ll be voting T2 for maximum financial carnage.

#65 russell on 09.22.18 at 9:57 am

Garth… The 51 year old with as you say a pathetic 170 large to his name. You know how many people get divorced and get wiped out at middle age? Do you know how many people get wiped out with business bankruptcy, myself included at age 60 without a pot to piss in. I met you when I was about 30 and I walked away thinking you were about the most arrogant man I had met to date. Read your blog everyday, great sense of humor but the arrogance part bites and stings people. Cut the shit brother and just be a human being that at least pretends to care about the plight of others.

Caring about others does not mean patting them on the head and saying, ‘life happens, bro. It’s okay to fail.’ It’s about helping people to seize control and throw off their victim mentality. Maybe you should have listened to me thirty years ago. – Garth

#66 Rob on 09.22.18 at 10:27 am

“Reality is Stark”

This is another broad based generalization that is so patently untrue.

Are there Realtors out there that follow the company line and obfuscate – for sure.

There are plenty of Realtors working diligently for their clients and are telling the unmitigated truth.

Is what comes through on this blog the truth?

Most of it.

Be aware of statements from “Reality is Stark” that lack substance or empirical evidence to back their claims.

Shameful waste of space.

#67 Gravy Train on 09.22.18 at 11:12 am

I imagine Barry is reconsidering his move to Ottawa—what with the tornado devastating Gatineau.

#68 millmech on 09.22.18 at 11:36 am

#50
Might be at 6% by Christmas,5.59% now, BoC rate increase in Oct takes it to 5.84% plus the usual 10-15 bp addition the bank likes to add like they did this week and we are there.
This is going to hurt,600k @2.5%-2700/mth,[email protected]%-4430/mth, you could have a “rent” increase of 1750 a month at renewal.

#69 Bytor the Snow Dog on 09.22.18 at 11:37 am

Sure Jess, sure. Trudeau’s minions, who apparently work for free, will somehow calculate every Canadian’s carbon tax paid and then give each and every one of them a “carbon tax dividend” of a greater amount than the taxes paid in.

With what, magic fairy dust money?

#70 KLNR on 09.22.18 at 11:58 am

@#48 Stone walker on 09.21.18 at 11:16 pm
haven’t seen gas prices this high since ‘07. Along with rising interest rates, how can this not affect the economy? However, when it comes to housing, is there still a shortage? Rents will likely continue to climb, in most places renting is more than a mortgage, people keep caving, might as well just buy instead of paying someone else mortgage at a higher monthly payment. The more people that get foreclosed on, the less rental vacancy there’ll be since the ex-owners need a place to live, There’s enough refugees entering the country to compensate the shrinking population, soon Canadians will be a minority in their own country. People entering from places like the UK have money worth far more than the North American peso our banks print, so they’ll continue to price out the locals. She’ll come crashing down someday, but by the time that happens, it won’t matter where you are in the West, the ships sinking, weather your on the bow or stern, you’ll go down with it, some will just get there sooner
____________________________
cheer up stone, it’s not that bad.
Things are pretty damn good these days.
Unless of course you’re part of the small group that’s in over their heads, but then who’s fault is that?

#71 Stan Brooks on 09.22.18 at 12:09 pm

Strange. The ‘richest’ people are the most unhappy.

Vancouver, Toronto Named Canada’s Unhappiest Cities

https://ca.yahoo.com/news/vancouver-toronto-named-canadas-unhappiest-181016636.html

Note that these are sometimes ranked as some of the most ‘livable’ cities.

The happiest cities: The one with minimum commute where people spend less than 30 % of their income on housing.

#72 T on 09.22.18 at 12:09 pm

#61 MF on 09.22.18 at 8:34 am
#26 Lost…but not leased on 09.21.18 at 7:22 pm

“What a JOKE…in the real world this corporation would be broke via lack of satisfied clients.”

-Another ignorant comment regarding the public service.

——–

MF,

Your should update your name to Alex P. Keaton.

#73 Drill Baby Drill on 09.22.18 at 12:12 pm

If you love dogs you will love this story.

https://www.cbc.ca/news/canada/edmonton/graysen-cameron-humboldt-survivor-manitoba-service-dog-1.4834586

#74 Oft deleted much maligned stock picker on 09.22.18 at 12:20 pm

Winning….Trump will expose the sordid conspiracy to limit free speech . Let’s hope we see Zuckerberg, Soros etc in orange real soon. Go Trump. The resistance…is dead. Now let’s hope our “Groper” gets the message.

https://www.cnbc.com/2018/09/22/white-house-prepares-order-directing-antitrust-probe-of-tech-companies-report.html

#75 NoName on 09.22.18 at 12:22 pm

Very interesting podcast about non investing chickens.

https://www.npr.org/templates/transcript/transcript.php?storyId=649642029

#76 AGuyInVancouver on 09.22.18 at 12:24 pm

As per the CBC, as long as Quebec keeps selling Canadian citizenship, BC’s housing market will be fine. But at least the Caandian taxpayer collected a whopping $70 in income tax (after they bought a multimillion dollar mansion in West Vancouver):
https://www.cbc.ca/news/canada/quebec-immigrant-investor-consultants-hidden-camera-1.4832245

#77 Shawn Allen on 09.22.18 at 12:49 pm

Bank Investing Performance as Rates Rise?

“#45 Dolum McKague on 09.21.18 at 9:57 pm asked:

A great time to hold banking shares in a rising rate enviornment?”

Mark at 56 responded: in a nutshell, the banking sector is around 40% of the modern TSX and suggests other sectors may outperform since we can’t expect banks to outperform and become an even larger share of the TSX.

************************************
I believe the common wisdom is that higher rates add to profits at the U.S. banks and especially a steeper curve when longer rates are substantially higher than shorter rates. (But that steeper curve is not the case now)

Mark makes a good point about the banks already being a large part of the TSX.

According to ishares, the big 5 banks alone make up 30% of the TSX 60 index and 23% of the composite. So, not sure the banks can be 40% but the financial sector might be. But Mark’s point stands. Can we expect banks to outperform and become an even larger proportion of the TSX? Probably and Hopefully not.

#78 Shawn Allen on 09.22.18 at 12:52 pm

Being Rich won’t Make One Happy?

#71 Stan Brooks on 09.22.18 at 12:09 pm said:

Strange. The ‘richest’ people are the most unhappy.

*************************************
I have heard that before. But it’s a chance I am willing to take. I want to prove this theory for myself.

#79 Lost...but not leased on 09.22.18 at 12:58 pm

#61 MF

What a joke your comment is…

CRA is in the public service..servants of the public…they work for us..not against us.

When we initially filed they submitted replies to my accountant and dates they would reply by. We had to inquire after 6 months and they admitted they had misplaced our file.

Then they say don’t contact them again on the delay issue, as our inquiry must have embarrased them. The file is not complicated at all, its a relatively simple estate.

I’ve set aside funds( a large chunk) to pay if CRA decides more is owed on advice of my lawyer and accountant. IMHO it would be better to have disbursed the funds and then made up any shortfall given all the interest lost.

Deadly words:”I’m from Gov’t and I am here to help you”

Now…go back to yer video game of “Gov’t-zilla versus Taxpayers.”

#80 Shawn Allen on 09.22.18 at 1:03 pm

Canada’s Giant Company that few know about…

I mentioned that Alimentation Couche-Tard (Circle-K stores) is now Canada’s largest company by revenue.

It is also the 17th largest by market cap on the TSX and I think ranks around top 10 in profit but those figures are hard to come by.

Of the top 25 names on the TSX it is probably easily the most obscure. The one the fewest Canadians know about.

Its main founder, Alain Bouchard, born in a cabin in the woods, and now worth several $billion is a true business genius and mostly unsung and not that well know. He has quietly made a TON of money for his investors. I am not advocating buying the stock. I marvel at how little attention the achievements of this company seem to get. Unlike Royal Bank and most of the other big Canadian companies this one does not trade in the U.S. and is probably almost exclusively owned by Canadians. I suspect Warren Buffett would love to buy it up whole.

#81 MF on 09.22.18 at 1:53 pm

#71 Stan Brooks on 09.22.18 at 12:09 pm

So people are “happier” whatever that means when they feel a “sense of belonging”, and they feel more belonging in a small town than a big city.

In other news water is wet.

That can be said of any large city in the world.

MF

#82 Mark on 09.22.18 at 1:55 pm

Can you say = International Financial Accounting Standard aka IFSR. Beware, this is coming down the pipe. Re-qualify on renewals. Higher rates on renewals based on credit and debt. Mortgages called… RUN

#83 SoggyShorts on 09.22.18 at 2:00 pm

#48 Stone walker on 09.21.18 at 11:16 pm
haven’t seen gas prices this high since ‘07. Along with rising interest rates, how can this not affect the economy?
****************************
I don’t understand people and gas prices. I mean seriously the average is
20,000KM per year.
10 liters per 100 KM
So if gas prices are $1.00/L then you spend $2K a year.
Every $0.10 rise in price is an extra $16 per month
For commercial stuff (like your groceries coming from other places) the impact is also pretty minor compared to everything else involved.

#48 Stone walker on 09.21.18 at 11:16 pm
There’s enough refugees entering the country to compensate the shrinking population, soon Canadians will be a minority in their own country.
**********************
What absolute bullsh*t.
1. Not everyone coming to Canada is a refugee.
2. Everyone who comes here a becomes a Canadian, and therefore they can’t outnumber themselves now can they? Unless you only count Natives as Canadians? Or 4th generation? 5th? 2nd? Where are you drawing the line for who is an “actual” Canadian and who isn’t?

#84 Gravy Train on 09.22.18 at 2:19 pm

#74 Oft deleted much maligned stock picker on 09.22.18 at 12:20 pm
“[…] Go Trump.” I can understand your comment if you’re an American, but if you’re a Canadian—and you approve of Trump’s trade war with Canada—then you’re a loon. :)

“The resistance…is dead.” Trump won’t fire Sessions, Rosenstein and Mueller before the midterm elections—and only then if the GOP can win both the House and the Senate. BTW, Sessions and Rosenstein were both nominated by Trump!

“Now let’s hope our ‘Groper’ gets the message.” Biased much? Donald Trump is a self-described pussy grabber. (Aim for balance.)

#85 Raging Ranter on 09.22.18 at 3:06 pm

Crossbordershopper, the joke is the deduction itself. Why should those who don’t own property subsidize those who do? Some joke. Mortgage deductibility is always a silly idea, and one of the few things Trump did right was reduce that deduction. He should have eliminated it entirely. That deficit isn’t going to balance itself.

#86 Stan Brooks on 09.22.18 at 3:23 pm

#81 MF on 09.22.18 at 1:53 pm
#71 Stan Brooks on 09.22.18 at 12:09 pm

So people are “happier” whatever that means when they feel a “sense of belonging”, and they feel more belonging in a small town than a big city.

In other news water is wet.

That can be said of any large city in the world.

MF


Vancouver is # 8 in the list of big cities in Canada.

It is not the size of the city, it is the size of the mortgage….

#87 conan on 09.22.18 at 3:31 pm

Re #36 Smoking Man

I disagree by a 180 degrees.
Trump loses the house 100 %. The Senate 80 %.

Still no power where I am :(

#88 Rodger Campbell on 09.22.18 at 4:22 pm

Where do you pull your BoC rate hike odds from?

#89 Tony on 09.22.18 at 4:55 pm

Re: #10 All Settled on 09.21.18 at 4:52 pm

I’d short the U.S. stock market on November 16th and cover on November 27th. I’ll be playing the volatility index or double it in that timespan.

#90 PastThePeak on 09.22.18 at 5:01 pm

#71 Stan Brooks on 09.22.18 at 12:09 pm
Strange. The ‘richest’ people are the most unhappy.

Vancouver, Toronto Named Canada’s Unhappiest Cities

https://ca.yahoo.com/news/vancouver-toronto-named-canadas-unhappiest-181016636.html

Note that these are sometimes ranked as some of the most ‘livable’ cities.

The happiest cities: The one with minimum commute where people spend less than 30 % of their income on housing
=============================

I agree. Sounds like where I live. No one talks about the RE market much at all. And in a city of almost a million residents. But it doesn’t have many new expensive trendy restaurants, so it will never make the lists.

#91 Tony on 09.22.18 at 5:52 pm

Re: #22 Doug t on 09.21.18 at 6:37 pm

Not if American keeps on fabricating most of its data.

#92 OSAPPY on 09.22.18 at 11:06 pm

Garth, I’m confused. I’ve always been under the impression that provincial and federal student loans (OSAP qualifies) for the tax deduction, as per CRA;

“Line 319 – Interest paid on your student loans
You may be eligible to claim an amount for the interest paid on your loan in 2017 or the preceding five years for post-secondary education if you received it under:

the Canada Student Loans Act;
the Canada Student Financial Assistance Act;
the Apprentice Loans Act; or
similar provincial or territorial government laws.
Only you can claim an amount for the interest you, or a person related to you, paid on that loan in 2017 or the preceding five years.

You can claim an amount only for interest you have not already claimed. If you have no tax payable for the year the interest is paid, it is to your advantage not to claim it on your return. You can carry the interest forward and apply it on your return for any of the next five years.

#93 Rentin on 09.23.18 at 12:34 am

Garth,

I took a quick look and the 4% 7/8 year fixed is still out there. Might even get 10 at that rate if I try hard. The spread between 1 and 10 year fixed is less than 100 points. Is this the banks trying to increase their mortgage portfolios? Doesn’t sound like much of a money maker.

#94 Remembrancer on 09.23.18 at 9:33 am

#79 Lost…but not leased on 09.22.18 at 12:58 pm
#61 MF

I’ve set aside funds( a large chunk) to pay if CRA decides more is owed on advice of my lawyer and accountant. IMHO it would be better to have disbursed the funds and then made up any shortfall given all the interest lost.
————————————————————–
Thank your lawyer and accountant for being the adults in the room. Its far easier to hand out more $$ you didn’t have to spend after settling than collect more $$ back after handing it all out…

#95 Shawn Allen on 09.23.18 at 1:51 pm

GDP, Wealth and Debt

Stan Brooks on 09.23.18 at 12:33 pm:

#71 Shawn Allen on 09.23.18 at 11:28 am

In any case GDP was never a perfect measure, but is probably the best available measure of value added.

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

No way. Our GDP is 2 trillions and we increase our debt by 400 billions early.

GNP – (minus) Debt is the best indicator for net economic output.

********************************
Interesting view. Stan, what is the net debt of the human race and who do “we” owe it to?