So far in dreary November, sales of houses in Victoria have crashed 43% from this time last year. Ouch. In Calgary deals are down 13% from awful 2017 levels, listings are up 13% and prices have plopped 6%. Cowtowners have said no to the Owelympics and fuggedaboutit to housing, while in BC there’s a bad case of Dipperitis.
Face it, things are changing. World oil has shed a third of its value in three weeks. The price of Canadian crude is a joke – thirteen bucks a barrel, over $40 less than they collect in Texas. Real estate taxes are rising in BC, and across the country mortgage rates have stiffened along with the central bank’s spine.
The gulf between what people say and do is yawning. A poll last week found a big proportion of the population (44%) think housing prices are about to shoot higher. And yet the stats show the opposite. So, are we lying to pollsters or just confused?
Here’s some fresh data. While the Teranet-NB house price index is questionable, the one published on Thursday was nonetheless a shocker. It showed a 5% annualized price drop last month, but here’s the big news: this was only the fourth time in two decades that real estate values fell during an October. Plus, for the first time in five years values of houses dropped in 10 of the 11 cities surveyed. Incroyablement, Montréal était la seul ville où nous avons vu le house horniness.
Everywhere else, regardless of how local realtors spin the numbers, a decline. In Calgary prices have dipped in 10 of the last 13 months. In Van, we’re now three for three.
And speaking of the housing cartel, this week brought the latest report from the Canadian Real Estate Association, also showing systemic weakness. Actual sales across the country fell about 4% from last autumn. The GTA, where a new rightist government was recently installed, did okay but plunging sales in YVR and the Fraser Valley dragged the national average down.
Said CREA, bluntly: “National sales activity lost momentum in October… This year’s new mortgage stress-test has lowered how much mortgage home buyers can qualify for across Canada…” As for prices, while Teranet records a loss, the real estate guys claim a win (sounds like Trump). The Aggregate Composite MLS® Home Price Index (MLS® HPI), better known as the Frankenumber, was up 2.3% year/year – pretty much because of condos.
What are we to make of this?
Well, supply and demand move all markets. When four in ten people believe real estate is the bee’s knees, price pressures increase. But that’s no longer enough to shove values higher. More consequential is the availability of cheap funds. Without a doubt, rising mortgage rates and the B20 stress test have reduced credit which will push asking prices lower in almost all cities. The latest stats from the Bank of Canada, showing a big drop in morons with 450% debt-to-income ratios, proves it. The party’s over. The punch bowl has been put away. The drunks are being rolled to the curb.
But the next few months will show just how local real estate is.
Calgary, Edmonton, RD, GP, Forts Mac & Sask plus other AB places are pooched for a long time. The price of Western Canadian Select is a disaster, driven down not only by its high sulphur content but by the elevated idiot count in Ottawa. Without pipelines to get our stuff to thirsty markets, it remains cheap and forgotten. As my buddy Ryan points out when not detailing his Porsche, this is costing Canada $90 million a day. And guess where that money is not flowing the most? Yup. So think twice before buying a house there.
Meanwhile the saga of BC has been detailed to death here. The province kind of (but not exactly) elected a socialist government now determined to destroy the real estate market thinking this will make homes more affordable. Of course, prices and sales are coming down together because (a) lots more taxes don’t make things cheaper and (b) falling markets scare people, so they don’t buy. It’s a classic lose-lose, the magnitude of which will only be seen in the rear view. So, yeah, lots more decline to come.
Montreal’s okay despite this being the second-largest market in the country, with prices still within the grasp of most middle class families. Plus urban Quebeckers feel the same way about real estate as they do marriage. No more comment required. The Maritimes, says Teranet, is looking a little bleak (but how bad can it be when the average house in NB costs just $175,000?).
So that leaves the GTA, where the outer fringes saw a 20-30% price drop for particleboard McMansions but there’s continued steady sales and prices in demand areas, plus the relentless condoization of downtown. What’s happening in Alberta, on the prairies and throughout BC will not transpire in southern Ontario. Sure, desperate sellers who over-extended will offer some bargains, but the market will prove more resistant to the credit drought than the rest of the country. This blog has said so for a few years. Nothing has changed. The boom is over in the Kingdom of 416, but don’t expect a bust.
Of course, 905, 519 and 705 are different stories. You have more in common with Burnaby, Richmond and Langley than you ever dreamed possible. And no, that’s not good.
135 comments ↓
Is Mississauga 416 or 905? Prices around here seem stubbornly sticky.
There are three to five rate increases to come. Just wait. – Garth
Hello from land down under..First
Fortunately Cowtown house prices never got to insane levels & since the ‘Owelympics’ (love it!) were voted down the hope is that the economy will continue to creep towards upward mobility. There have been some signs of life despite the ongoing tales of oil patch woe.
Fyrrzzt !
Dont forget the tax on satellite families that dont pay local taxes-also known as the fair to local tax payers tax
Of course all property owners pay local taxes. – Garth
Garthgantuan what do you think about this…the fed has now said that meetings with the media will occur after every fed meeting as to keep everyone informed as to the state of the economy And to make everyone understand why interest rates are going up. They have also indicated that at each meeting interest rates decision will be considered ” Live” …doesn’t this say that way more increases are on the way? …if so Gta can put that in its pipe and smoke it? Does this sound logical??
Who Would Buy a House at the Highest Mortgage Rate in 9 Years at the Top of a Bubble?
http://www.investmentwatchblog.com/mortgage-rates-may-hit-6-sooner-as-fed-sheds-mortgage-backed-securities-but-what-will-that-do-to-housing-bubble-2/
DELETED
Why is the BoC interest rate tied to that of the Federal Reserve?
Red Deer, Alberta is a disaster, over 3k houses for sale in a city of 100k people. No pipeline, no economy, no money. Prices are down but very few are buying, and those that are selling are slashing prices by 20-30% to make the sale.
Garth said Don’t expect a bust…
Well Garth I disagree, as the 50% of GTA,Van, Calgary, Edmonton, and so and so on households watch their mortgages go to 7-10% in the next 24 months (or less due to the impending pension crisis unfolding worldwide), banks are now creating their “lists” of deadbeat underwater mortgages and are gearing up for a once in a lifetime mortgage call…..
Yup – you heard it here cause I just heard from my banker broker…
They are preparing for one mother of a mortgage call…
Not just mortgages either, commercial loans, HELOCS, etc.
In 1980 I had my business loan called for no reason other than the banks were tightening lending and clearing the books…
It nearly wiped me out.. Luckily I had cash and asset reserves but I had to fire sale my house to pay off the commercial line.
Its coming again he said. I learned a valuable lesson back then…
Don’t rely on credit and I never did again. But that being said, the credit crunch is here, its real, and Canada and the governments in it are completely unprepared.
Think Edmonton 1980-82 when the city shut down…
The Armageddon you all hoped for is coming..
Thoughts create.
Cdns. being holistic and lying thru their teeth to pollsters so their words gets out:
Please don’t increase interest rates.
Like last years doom & gloom < $200/mo. of committing financial Seppuku when in fact, Bankruptcies, Proposals etc. are at CDN. 7 year lows, 15 years in ON).
Same with the 44% that think prices are about to shoot higher. Thoughts create and yet again, wishful thinking.
It's the psychology of the "thing".
Folly to think that cratering RE prices in outlying 416 areas will not happen in DT 416.
FEAR based thinking and rising interest rates will see that thru soon enough as is happening in YVR.
There is no magic "NO FEAR, NONE SHALL PASS" line in the sand (as within the confines of where the TTC subway ends…as if).
Dominoes (and not the pizza).
The commute.
O.k so I showed you guys another detached going well under a million,like me, it was a bit rough around the edges.
Here’s one I have been watching drift down.
It is turn key, and with people buying dumps out in Surrey for over a million, ones like this are worth considering with the time and cost of commuting.
The details…
3433 Skeena st,Vancouver.
Originally asking 1.36
Now asking 1.26
Fully renovated
Assessment 1.25
Getting cheaper by the fortnight…
M44BC
Date Price Event
Oct 26, 2018 $1,268,000 Price Reduced
Oct 10, 2018 $1,298,000 Price Reduced
Sep 27, 2018 $1,328,000 Price Reduced
Sep 11, 2018 $1,335,000 Price Reduced
Aug 20, 2018 $1,368,000 Listed For Sale
https://www.zolo.ca/vancouver-real-estate/4344-skeena-street
The reason prices are sticky is because sellers won’t sell for less tan the schmuck next door got last year.
Sally homeowner is browbeating her husband to stick it out.
No we won’t move on price she says.. We will be laughing stock of the community….
They will literally follow the market down to foreclosure.
I’ve seen 2 times in my life and for the life of me I can’t figure out why people won’t take a loss.
Hope springs eternal I guess
They will speculate up and sit tight on the way down..
Then capitulation happens and like Florida we will buy condos from a guy with a portable microphone taking Visa for the purchase of 10-15K.
You saw this in 09 yet you say it can’t happen here.
One thing I know is – Collapses start on a Sunday afternoon and take a year to unfold.
Think Lehman Brothers
This time it’ll be Home Capital or something like that…Some nebulous dark room mortgage company that comes out with 500 billion in bad paper….
Then we will watch the slide over the next year as the frogs in the pot hang on for dear life to their 90% mortgages properties…..
Will Patrick Brown being Mayor of Brampton devalue the city? Doug Ford been coming down hard on Brampton ever since Brown won.
No more university being funded, there goes Real estate in downtown btown. Nice try to the realtor’s who tried to pick up property there for a quick flip.
Garth, when can I expect the information on MLS to become available to the public?
Thanks for this post.
#6 You know on 11.15.18 at 5:23 pm
the fed has now said that meetings with the media will occur after every fed meeting as to keep everyone informed as to the state of the economy And to make everyone understand why interest rates are going up. They have also indicated that at each meeting interest rates decision will be considered ” Live” …doesn’t this say that way more increases are on the way? …if so Gta can put that in its pipe and smoke it? Does this sound logical??
———————————————————-
No, but lets break it down…
The Fed as in the Federal Reserve Board in Wash D.C.? Live, even with hand puppets, a marching band and a simulcast frowning el Presidente in the background rage tweeting in response isn’t going to materially change Greater Toronto Area, Canada RE between live and announced same day after the meeting… Sounds like more American theatrics… I blame Mark Burnett for if not inventing, bigly popularizing reality TV, it all needs to be on him…
Foreign Buyers Tax May Become Reality In Montreal As Housing Market Beats Toronto, Vancouver
http://www.huffingtonpost.ca/amp/2018/11/06/montreal-foreign-buyers-tax_a_23581756/
Good. Next up, Halifax RE spikes?
Garth have you sold your Bitcoin yet?
With an offer on the table, rotating Canada Post strikes continue
Facebook
Twitter
Two southwestern Ontaro communities, six others across Canada hit Thursday
CBC News · Posted: Nov 15, 2018 7:44 AM ET | Last Updated: 10 hours ago
https://www.cbc.ca/news/canada/windsor/rotating-canada-post-strikes-continue-nov-15-1.4906445
Well, supply and demand move all markets.-GT
////////////
Except, of course, when demand is from overseas.
#9 mogulrider on 11.15.18 at 5:54 pm
Garth said Don’t expect a bust…
Well Garth I disagree, as the 50% of GTA,Van, Calgary, Edmonton, and so and so on households watch their mortgages go to 7-10% in the next 24 months (or less due to the impending pension crisis unfolding worldwide), banks are now creating their “lists” of deadbeat underwater mortgages and are gearing up for a once in a lifetime mortgage call…..
Yup – you heard it here cause I just heard from my banker broker…
They are preparing for one mother of a mortgage call…
Not just mortgages either, commercial loans, HELOCS, etc.
In 1980 I had my business loan called for no reason other than the banks were tightening lending and clearing the books…
It nearly wiped me out.. Luckily I had cash and asset reserves but I had to fire sale my house to pay off the commercial line.
Its coming again he said. I learned a valuable lesson back then…
Don’t rely on credit and I never did again. But that being said, the credit crunch is here, its real, and Canada and the governments in it are completely unprepared.
Think Edmonton 1980-82 when the city shut down…
The Armageddon you all hoped for is coming..
————————
If true… Holy crap!
Hi Garth. Could you address the US stock market? Are we heading in bear market? Thanks!
GTA will bust too. The only strength remaining is in condos, predominantly 1 bdrm. This does establish a temporary market floor. 1 bdr condos won’t start to cost more than SFH.
Condos go bust over the next year and half. 48% of new condos completed in 2017 were investor owned. 44% of which were cash flow negative. These would have been presold in 2013-2015. The true horniness was 2015-2017, as each of these years saw increasing price acceleration and increasing total presales. 2017 was a record year for precon. These will all be starting to come online over the next 2 years.
I think we can assume that there was a higher percentage of investors purchasing presales in 2016 and 2017 than in 2014 and 2015. These investors paid record prices and many of them did so prior to B-20 and the start of the rate hikes. Now there is also a good chance that the HELOC capacity on their inflated primary residences will be cut off by the time they need to close………… What will they do?
To the boomers counting on their homes to fund their retirement – Your liquidity is about to disappear
Incroyablement, Montréal était…le house horniness.
FRANGLAIS. THAT was good.
Actually, there are a lot of Maison de Horniness in Montréal and across the river from Ottawa, if memory serves me correct.
Why you have to love La Belle Province vis-à-vis the rest of uptight, No Fun, sexually repressed, Anglais speaking Canada.
Ya, I know Garth. Buonanotte.
“..The province kind of (but not exactly) elected a socialist government now determined to destroy the real estate market thinking this will make homes more affordable. Of course, prices and sales are coming down together because (a) lots more taxes don’t make things cheaper and (b) falling markets scare people, so they don’t buy..”
_ _ _
This criticism makes no sense Garth. If the BC NDP were elected to bring down housing prices, and their taxes have resulted in “prices and sales are coming down together” then it is Mission Accomplished!
If buyers are not buying what was the point? To punish people with houses? – Garth
#20 Penny Henny on 11.15.18 at 6:17 pm
Well, supply and demand move all markets.-GT
////////////
Except, of course, when demand is from overseas.
……………………………..
You make a valid point. With a weak loonie and falling prices our real estate will start to look like a good investment again to foreign buyers. I don’t think we will see the bloodbath in prices that some predict.
Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth
“The boom is over in the Kingdom of 416, but don’t expect a bust.”
What I am hearing and seeing says that may not be correct, Garth.
I remember well the drop after 1990, a lot of 416ers lost 30-50%. People are much worse off now, lots more debt than at that time.
It may take more time or less, not sure.
I see 416 prices, all housing categories, dropping 30-60% over the next 3-5 years. Best case, maybe only 25%. Worst case? Maybe 80% if other parts of the economy unwind.
So, you have some of the biggest money managers in the world – Paul Tudor Jones, Steve Cohen, Ray Dalio – all basically saying the same thing – that the recession isn’t happening ‘today’ but sometime in the next 12-24 months. Little reminder people – from the peak in 2007 – it took 17 months for the financial markets to find their ultimate bottom. It’s a process. By the time a recession starts in the real economy, the financial markets will have already reset. That’s what’s happening as we speak. Whether it be because of leverage in corporates, trade wars, emerging markets – whatever – everyone is looking for a reason. Frankly, it’s just time for a clearing of the deck. We’ve pulled forward so much consumption that the system just needs a massive reset. And, it’s coming… It’s already here. I posted earlier this fall that my wife and I went 85% in cash in August. Why? Because you get out while you are ahead – that’s why. If you’ve had a good run playing blackjack, you take your cards off the table. The fiction of hiding in some asset class when a bear market takes hold is exactly that. FICTION. All asset classes are essentially correlated now. Unless you are willing to buy inverse market ETF’s or play in the options game – which virtually no one should be doing unless you are a professional – the only real recourse to preserving capital right now is to buy 2 year treasuries or cashable GIC’s and wait it out. And, guess what – when the financial markets take a drubbing, it’ll be like dropping an H bomb on the already dead housing market. So, buckle up people – the abyss is around the corner. Welcome to the show…
Nice justification of your own rash, emotional, unjustified move. What bear? – Garth
Got 4 emails like this so far today, smelling desparation.
There are a lot of people talking about how they missed the boat when it comes to purchasing an investment property in Toronto. Well that’s not true because there are always opportunities available. You can still own a piece of Toronto Real Estate. All you need is the right information, strategy and most importantly, the right mindset.
Join me on Saturday December 8th for an informational session and learn about the following:
Where to invest in Toronto and get a good return
Pre-construction condo projects across the city
Resale investments
Breaking down the negative myths of investing in condos
How to be part of a pool of investors and purchase property
2018 Condo market update
Contact me at 647.995.XXXX or [email protected] to get more details and/or RSVP! I look forward to seeing you there!
Love the signature
“If you know of someone thinking of buying or selling real estate, who would appreciate the kind of service I offer, I’d love to help them. As these people come to mind, just give me a call with their name and number. I’ll be happy to follow up and tend to their needs!”
Foreign buyers tax coming to Montreal you say so they’ll go to Halifax?
What’s the matter with people in Halifax, don’t they know interest rates are low?….lol
i know this is a real estate board, but once and while we have to talk about how lousy the canadian stocks in general have performed. real real lousy returns, i find canadian stocks now all pay a div , they bribe their shareholders with 3% yields with their stocks cap gain well close to zero for years and years,
very poor place to invest, either buy property, income property, residential real estate, business operations, wow
what a poor place to do business, and the cra wasting their time for nickels and dimes when business owners really make no money. what a poorly run country, its really about leadership, bad luck, bad timing and just overall bad bad bad.
#27 HogtownIndebted on 11.15.18 at 6:39 pm
#23 Darts on 11.15.18 at 6:25 pm
#11 mogulrider on 11.15.18 at 5:54 pm
Yawn. There are thousands of comments like this on this site from 2010, 2011, 2012 etc. Mine included..
Time to accept the new normal and move forward.
#28 Caleb Landry on 11.15.18 at 6:40 pm
#22 Stormy Daniels on 11.15.18 at 6:23 pm
I guess this is what happens when stocks go up straight for a decade. People lose their minds if they see some red for a few weeks.
Meh. Been there. Done that. Yawn once again. Retired Boomer would be proud.
M35ON
MF
Hey Trudeau, how’s that “social license” thing working out?
The idea was supposed to be; say nice things about the environment and stick all Canadians with a symbolic tax, and then we can build a pipeline that most Canadians agree with.
Problem is not much gets done when dealing with groups comprised mostly of anarchists.
Next time, ignore the looney bin and let them all cry. We have a country to run here.
the rules change every few weeks
sometimes, as we saw from Bill Morneau, retroactively,
which is immoral to say the leasts
the osfi creates a red herring argument for the stress test and puts the focus on the ‘credit worthiness’ of borrowers in an environment where there are few defaults , while pointing fingers at the straw man foreigners
we are told that osfi don’t work for banks or governments; conclusion- we don’t have a government
Joan Veon said it all in here videos: ‘when central banks rule the world’ we are there
Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth
……………………………
…..and some of us absurdly underestimate the impact of non-resident purchasers. Especially in the LM.
I follow the data. Always the truest path. – Garth
Bad signs on the horizon. In the meantime, carry on with ‘extend and pretend’. All praise be to the deeply insidious Federal Reserve system. rip
BTW
You can tell credit is tightening or the economy is sliding when the car dealerships, small businesses, and restaurants start to close in your town.
It is a true canary in the coal mine. – Car Dealerships that is.
Even with a 30% drop in prices, Greater Vancouver still seems pricey. About the cheapest place you can get in Maple Ridge is a crack house selling for 500K. Half a mill for a tear-down and you still have to commute through hell each day to get to work.
Kilt.
#21
Only saying what I was told…
Credit tightening is real, the banks used to do this stuff quite often.
Most people weren’t around to see it.
I lived it.
Teh difference today is the debt is collatorlaized and rehypothecated so yoru local manager isn’t holding the paper.
But someone is… And from what I gather those someones are saying the mortgage game is over..
They aren’t buying the crap paper anymore..
From today…
https://www.cnbc.com/2018/11/15/cramer-says-ceos-are-telling-him-off-the-record-the-economy-has-cooled.html
Wonder what happens when screaming maniacs like this guy infest the minds of countless people out there… To say nothing of the fact that virtually all real estate markets in major cities in N/A are all synchronously heading south… LA, Seattle, San Fran, NYC, Miami… Bear Markets take shape over time. You don’t spontaneously wake up and in 2 days find yourself in a bear market.
https://en.wikipedia.org/wiki/United_States_bear_market_of_2007%E2%80%9309
Started on Oct 9, 2007 – WAS CONFIRMED in JUNE of 2008 and played itself out until March of 2009.
Longest expansion in history – a double top on the Dow and S&P… Who knows… I could be wrong – but I like being on the sidelines at this point in the journey.
2008 is not coming back in your lifetime. You can come out if the fruit cellar now. – Garth
SWEET JESUS please bring a 30% nose dive on the house porn market that is Victoria –
RATM
#35 FOUR FINGERS WATSON on 11.15.18 at 7:06 pm
Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth
……………………………
…..and some of us absurdly underestimate the impact of non-resident purchasers. Especially in the LM.
I follow the data. Always the truest path. – Garth
……………………..
You could show me your data and I could show you my data. Then we could contest each other’s data. I follow my eyes and ears. Always the only path. – Watson
#28 Caleb Landry – 85% Cash?
That has got to be the craziest thing I have ever heard. Even in 2008 I only sold a bunch of my bank stocks and was probably sitting at 20% Cash. I bought the financials back in March when earnings were still great and dividends were nearly 10%.
You are far better off just buying more at set intervals or prices, bull or bear. If you are cashing out at every correction you really need to have someone else looking after your money. I am bearish the market, but that just means I am scrounging every dollar I have to average down when there is more value.
No different than real estate. Now is not the time to buy a house. Two or three years from now there might be some serious bargains though.
Kilt.
#31 crossbordershopper on 11.15.18 at 6:51 pm
But who was trillion dollar stimulus package? Who was QE? Who was the US deficit?
By the way, Canadian stocks are presenting value if you were smart…
MF
#11 Mogulrider;
Sounds like you learned about perils of credit and whims of the banks a few years before myself; I had to wait until 1987 to go thru a rough approximate of your scenario.
Never again, said I, and have pretty much maintained a “credit free” life since. (Actually, took me until 1991 to pay everything out and haven’t been back at the trough since)
Over the last several years, I’m continually struck by how stressed out people are when they owe large mounts of money, and how unstressed I am by not owing SFA.
No payments = greater freedom
Not free-dumb; that only lasts as long as the payments are current and the amortized articles are increasing in value. And sometimes (as you mention) even that isn’t enough in stormy economic weather…or what the banks “think” might be a upcoming credit tsunami…
But hey, I was still blissfully borrowing lots of cash in 1980 and riding moguls, usually in Big Sky MT!
#29 Caleb you folks did a smart thing.
” Profits are the Mother’s Milk of Capitalism” as Larry Kudlow used to say.
Your 2% GIC just made about 10% in the last month from stock losses…
There is no shame in taking profits.
Its why we invest
Most people don’t have the guts to sell.
There may be one more leg up in the markets but who cares.
If you rode from 5 years or more you are smart to take profits.
Its a great day when my wife and I pay capital gains.. It shows we made money
PIGS GET SLAUGHTERED AS THEY SAY
This whole website is about bubbles….
It is disingenious to criticize profits.
The business cycle is clearly slowing and the markets are forward looking so they are tanking
Few people understand this.
You (like most) confuse ‘investing’ with ‘stocks’. – Garth
“And yet the stats show the opposite. So, are we lying to pollsters or just confused?”
=====================================
They probably take the cue from CNN. They make up the polls to suit the event.
@#12 Dolce Vita
“committing financial Seppuku …..”
+++++
Kinda like the Italian govt’s budget?
@#17 Howard
“Next up, Halifax RE spikes?”
+++++
Nah,
PEI seems to be the latest “craze” in offshore money… bizarre but true.
I suspect the areas in BC that are not impacted by the spec tax won’t be impacted in the same way. If anything, it may redirect demand to those areas, creating a further boost to prices. One way or the other, in my area, low supply means prices have gone nowhere but up this year. I’ve basically stopped holding my breath. Would be nice to see some drops…
22 Stormy Daniels on 11.15.18 at 6:23 pm
Hi Garth. Could you address the US stock market? Are we heading in bear market? Thanks!
——————————————————————–
Yes a Bare market for sure !!
https://www.bnnbloomberg.ca/ontario-forecasts-deficit-of-14-5b-introduces-low-income-tax-credit-1.1169019
Any thoughts Garth?
#37 mogulrider on 11.15.18 at 7:09 pm
“It is a true canary in the coal mine. – Car Dealerships that is.”
In this case, my west coast capital city will be just fine.
Two years ago, massive new multi-level Lexus and Toyota dealers. One year ago, a new Alfa dealership next to Timmies. Right now, massive Audi and Maserati stealships being erected on the main drag.
Maybe these car companies know something we don’t, or maybe it’s true that anyone with money and smarts gets the heck outta Canada’s wastelands and moves west?
Either way, perplexing.
28 Caleb Landry on 11.15.18 at 6:40 pm
So, you have some of the biggest money managers in the world – Paul Tudor Jones, Steve Cohen, Ray Dalio – all basically saying the same thing – that the recession isn’t happening ‘today’ but sometime in the next 12-24 months. Little reminder people – from the peak in 2007 – it took 17 months for the financial markets to find their ultimate bottom. It’s a process. By the time a recession starts in the real economy, the financial markets will have already reset. That’s what’s happening as we speak. Whether it be because of leverage in corporates, trade wars, emerging markets – whatever – everyone is looking for a reason. Frankly, it’s just time for a clearing of the deck. We’ve pulled forward so much consumption that the system just needs a massive reset. And, it’s coming… It’s already here. I posted earlier this fall that my wife and I went 85% in cash in August. Why? Because you get out while you are ahead – that’s why. If you’ve had a good run playing blackjack, you take your cards off the table. The fiction of hiding in some asset class when a bear market takes hold is exactly that. FICTION. All asset classes are essentially correlated now. Unless you are willing to buy inverse market ETF’s or play in the options game – which virtually no one should be doing unless you are a professional – the only real recourse to preserving capital right now is to buy 2 year treasuries or cashable GIC’s and wait it out. And, guess what – when the financial markets take a drubbing, it’ll be like dropping an H bomb on the already dead housing market. So, buckle up people – the abyss is around the corner. Welcome to the show…
—
Nice justification of your own rash, emotional, unjustified move. What bear? – Garth
******************
Although I agree with Caleb that we’re in the beginning phases of a bear market (as in 2007 when no-one was concerned about a major plunge), there are still opportunities to make money. Look at the energy sector or materials for instance. Oil is almost x2 the lows of early-2016 yet related equities are trading at or below the level experienced during that period! People talk about buying low but when things actually are stupid-low, most are afraid to pull the trigger (emotions take over).
Also, the ‘modern’ definition of a bear market (>20% drop), is actually not the traditional and more reliable definition: a series of lower highs. These, collectively will eventually EXCEED -20%, but not in one swoop, so they don’t generate a panic as most are unaware of the process at hand (ie. “what bear?”)
Consistent with this version of what constitutes a bear market, we’ve now experienced sudden drop in October (but not quite 20%); over the next whild these will likely rebound enough to make everyone feel that the ‘worst is over’. But then, when widespread complacency is back, the next ‘sudden’ drop will occur (again, probably less than the ‘magic’ 20%, for the same reasons).
Each time the media will continue to pronounce that this is NOT a bear market (using the -20% ‘rule’). We don’t want people to panic now, do we? We can’t have a game if all the players fold and go home! Think Poker…
Personally, I’ve covered 98% of my short positions (some at a loss), and have been adding to my energy and precious metals positions, along with several emerging markets etfs.
My only remaining shorts are in Amazon and Tesla. But I plan to add to these in due time. For me, timing is everything!
TCC
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#26 FOUR FINGERS WATSON on 11.15.18 at 6:37 pm
#20 Penny Henny on 11.15.18 at 6:17 pm
Well, supply and demand move all markets.-GT
////////////
Except, of course, when demand is from overseas.
……………………………..
“You make a valid point. With a weak loonie and falling prices our real estate will start to look like a good investment again to foreign buyers. I don’t think we will see the bloodbath in prices that some predict.”
====================================
If that’s the case, then why are sales crashing in Markham ?
York Region still booming, especially in Newmarket and East Gwillimbury. I’ve seen so much going on in Newmarket, especially along the Yonge corridor. I’m sure people overbought during peak 2017 and are now forced to sell, but the region itself is seeing incredible growth.
“Aurora and Newmarket are just coming now. We’ve seen it along the Yonge corridor in Richmond Hill, high density does pretty well,” Czestochowski. “So certainly, Richmond Hill has it, Markham has it, Vaughan has it, it has done well in these areas where townhouses have gotten very unaffordable, in excess of one million dollars. So we will see the trend to continue in the north.”
Link: “32% of GTA investment in York Region”
https://www.yorkregion.com/news-story/9033743-york-region-saw-32-per-cent-of-gta-s-real-estate-investment-in-2017/
#11 mogulrider
Yes credit is tightening! About a month ago I asked if anyone else here has experienced strange dealings with the banks in regards to credit. Sold my Vancouver house. Have cash in the bank and own another house on a lake in the okanogan. Banks have been begging me to take money from them. Last month or so, all three institutions I deal with made me requalify for automatic cheque deposits over $5000 with funds available right away. One bank switched credit card providers. And then the new card provider denied me, so my bank phoned to apologize and issued the card anyways! So strange. Last year the cash I had in one bank from the sale of the Vancouver property gave me %25 down on 4million. That’s what my banker tried to sell me! It was as good as done. Fortunately my hubby and I weren’t suckers and said no thanks. Now, I would qualify on my income for less of a mortgage than the money I have in the bank. That’s why House prices will drop!
More bad news for globalist cash grab climate change and northern real estate.
We’re heading for a mini ice age. Can’t wait for climate barbi to spin this in favour of a tax grab.
http://www.shtfplan.com/headline-news/scientists-warn-prepare-now-for-a-mini-ice-age-as-the-sun-cools_02132018
Sure hope you are right about 519. Long overdue for a pricing correction.
Loving the comments today… some of the best RE doom porn I’ve read in a while. Where’s Happy Housing Crash?
Correct, people are totally unprepared for what is coming.
GTA is overpriced 2-3 times, condos are the very last (blow of the top) crazy action in this idiotic bubble.
So when it/the crash/ hits, psychology will totally change and real estate will become a dirty word as it was at times back in the last century.
Foreign buyers is urban myth that is convenient for the real estate industry and the lenders.
‘Investors’ are local which explains the levels of private debt.
==========================
#20 Penny Henny on 11.15.18 at 6:17 pm
Well, supply and demand move all markets.-GT
////////////
Except, of course, when demand is from overseas
China already implemented capital controls. There is no overseas demand. I doubt there ever was. That horse is dead so stop beating it. And change your job, real estate is dead.
=====================
#54 tccontrarian on 11.15.18 at 7:58 pm
Smart move.
The bad news is that our WCS oil will miss the potential explosion in energy prices. Yep, 13 bucks per barrel of it/WCS. No pipelines. Explains why major oil companies abandoned the oil patch few years ago.
People younger than 35 who never experienced higher rates and went into debt will be totally wiped out.
GTA RE will be destroyed, specially the condo market that is ‘booming’ now due to debt. Immigrants have no money, earn very little, they don’t even impact the rental market (due to low wages), nor the housing market.
If they/the immigrants were rich they would not be coming here but go to SoCal for example, Switzerland, Cyprus, Spain etc.
https://ca.yahoo.com/news/december-like-temperatures-way-canada-no-one-spared-201930549.html
An old condo ‘worth’ 100 k 15 years ago in Toronto now ‘fetches’ 650 k , it has over 1 k in monthly maintenance + property taxes and no future.
Toronto in particular will be destroyed.
The fair thing to do is to transfer all CMHC loans back to the bank balance sheets.
If stock market dives 30-40 % from the top, which it can, housing will for sure decline at least 60-70 % in overheated markets like GTA and Vancouver. Maybe more. It is not doom and gloom, it is the cold hard reality.
Of course everybody who says it now will be laughed at as it was the case in the US in 2008.
We will fall from twice that height.
Life will go on, it will be much shittier though , most debt slaves will be destroyed, all real estate ‘professionals’ will go hungry, banks profits will evaporate, younger generations left with low paid jobs and a little future.
Very normal outcome form the biggest ever credit orgy in housing the world has ever seen.
Of course banks are preparing for that.
Australia is already imploding/actually crashing fast.
We are the last idiots standing. Something not to be proud of.
Garth in the land of no more boom but no likely bust of the 416, I’ve been keeping a close eye on places in and around Leslieville, just east of downtown. It’s interesting what’s going on in terms of pricing. There’s an existing 1400sqft two bedroom loft condo with brick and beam near Broadview and Eastern that they were asking $1.2m for and have now dropped asking to $1m. Meanwhile in the preconstruction world, Wonder Condos has a 1400sqft preconstruction condo that won’t be ready for a few years down the road at Eastern and Logan selling for double the price at $2m. That’s quite the futures market!
Why do you think people are paying more for future condos than the price of existing ones? Do they really believe the prices will be that much higher three or four years from now when they are finally built?
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Smoking Man on 11.15.18 at 8:20 pm
More bad news for globalist cash grab climate change and northern real estate.
We’re heading for a mini ice age. Can’t wait for climate barbi to spin this in favour of a tax grab.
http://www.shtfplan.com/headline-news/scientists-warn-prepare-now-for-a-mini-ice-age-as-the-sun-cools_02132018
>>>>>>
She was spinning like a top on the radio today. She said “climate change” a few times but the new buzz word is “pollution”. They have realized that their “science” is completely wrong when it comes to the PLANT FOOD called CO2 and the fact that WATER vapour is 90 plus percent of actual green house gas. CO2 or plant food as its know to farmers, is about 0.4% of known green house gases.
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Garth, does the data showing a ‘big drop in morons’ include data from all types of lenders or just the big six banks? Are the uber-leveraged just moving to private high-rate outfits to satiate their debt lust?
The references Garth makes to the Poor Decisions, on the part of the BC government, in my opinion, do not emphaiss enough the disasterous, possibilities, of these types of Market Interference, and Obfuscation.
The Decision by Paul Horgan, The English Gal.. ex School Trustee, and no fan of basic Economic theory, who have developed Policies, like this to some extent, highlight the difficulties, facing the average citizen of Canada.
We sadly are being Governed by Leaders, who simply do not have the skills, to understand the implications of their decisions, or are wistfully hoping there poor decisons, will be offset by their Political Gains… Sadly I might add…
For example, has anyone explained to Horgan, et al, that the Banks that have financed the House purchases of the last 4 years operate typically on a 1:12 to 1:15 ratio of Debt instruments, to actual Assets. This is the process of Leveraging that is part of the Global Financial system.
So just one implication of falsely devaluing ..deflating, long term Debt like Mortage instruments, will potentially create many Non Performing Loan instruments. This then is by construct, of our Financial system, a Fractional Banking model, used Globally, a dangerous self inflicted, potential problem.
If one Loan defaults, then the Banks have to make up that money via the other 12 or 15 profitable Mortages.. So if one Loan/ Debt instrument is a loser, it effects 12 to 15 of the Banks good customers cash flow… Two defaults, 24 – 30 etc.. This is a bit simplistic but you get the idea…
This is turns, puts a lot of pressure on the Lenders.. the Banks, and so on … the real difficult times, start to materialize, once the Credit Extended to the Lender/Banks is constrained…then a very serious situation will materialize… I won’t elaborate on the Pain and suffering, that Poor Policy makers, can inflict on their subjects… Look at Wynn and Co… crazy how they have really accelerated the problem of a potential Debt Crisis…
Just a reminder in my opinion… Central Banks control the Credit Market.. Credit like Money is spending… Once Credit is withdrawn, without an offsetting rise to incomes, there will be recessionary pressure…
It is complete folly to elect in a cavailer way .. poor Leaders.. who have almost a Childish Approach to their management fiduciary responsibilities… We have an Almost College like group of wanabees in Ottawa now.. I started to sell my hard assets, in Western Canada, once Morneau, showed his hand on Income redistribution, taxing Capital more… also foolish…Successful folks, will just get angry and cause Capital Outflows, further exacerbating the Debt concerns…
When our newly Minted Leader and his Enviro dumbo got on the save the planet march, and effectively Hobbled the largest single Export market, denominated in the World Reserve currency, ENERGY.. from the Canadian resouce basket of Revenues… I knew it would foretell, so many problems,… The entire Economy can be cratered by Economic Shocks, like the Oil Market crash and changes.. we had Energy East, North Gateway, jobs, great cash flow, and a postive for our Countries, Federal Reserves, our Current account, etc… Couple this with the BOCs mistaken path, to promote debt insecurity vis a vis, the Extension of so much credit… the risk profile, is high.. in my opinion.
If you are not commited to Debt now.. don’t, don’t do it…. If you are close to retirement, ask a Pro, for help, or purchase safer..more liquid assets… if you are younger, then talk to Garth and the Porche polisher, and Rebalance… your portfolio… there are ETFs that did reasonably well, in a downturn and bounced back quickly…. Market ups, and downs, are inevitable.. sadly once misinformed, or inexperienced Policy Makers, like the BC NDP, will cause a lot more problems, with ill advised and knee jerk decisions, that can cripple an Economy or even start the Domino’s falling… scary is the fact these folks, think they have the answer…
#59 Smoking Man
Hey Smokey, how’s that blood pressure coming? You up to 250 over 150 yet? Something to shoot for and prove you are a man and not a wimpy loser like all the men you deride on this blog….
J’aime quand tu écris en français Garth!
Death watch on the ‘death cross’
Yesterday, we just had the 50×150 cross in the S&P500 – keep an eye on the 50×200 and then go back at 2008-9, 2016 to see what happens next. These moving averages are like oil tankers – take a while to turn around – if you like the ride down, be prepared to stay in and take the pain for a while. It will be an interesting couple of weeks ahead to see what’s in store. Lots of trapped traders unloading every time there is a bounce back.
It might very well turn around and bounce back up but each leg down can be 7-8%. If we do indeed get the death cross, be advised.
By the way, we are well past the death cross in the Russell2000 and that is always the first to go – S&P500 follows shortly thereafter. I am not saying get out and run, all I am saying is keep an eye for the obvious and do not be in denial.
The death cross is a rare event and significant when it happens – it does not mean that it is justified, but it is always self-fulfilling, wont hurt to keep an eye for it.
#31 crossbordershopper on 11.15.18 at 6:51 pm
i know this is a real estate board, but once and while we have to talk about how lousy the canadian stocks in general have performed. real real lousy returns, i find canadian stocks now all pay a div , they bribe their shareholders with 3% yields with their stocks cap gain well close to zero for years and years,
very poor place to invest…
——————
You are right. The magic is in the dividends.
11% increase of distributions between 2017 and 2018 on Vanguard FTSE Canada All Cap Index ETF (VCN).
https://www.dividendhistory.org/payout/TSX/VCN/
Don’t think too many wage earners received a 11% increase this year, while trust fund babies get a healthy raise.
Canada is experiencing “from shirtsleeves to shirtsleeves in 3 generations” on a large scale.
Our Prime Minister and Finance Minister are generation #3. They think money grows on a tree.
Just look at Torstar (TS-B) and Bombardier (BBD-B) share performance. Same dynamics.
Or look at the Stronach family feud. Grandpa is terrified to see money being squandered at the company he built with his two hands. Shirt sleeves to shirt sleeves.
Invest accordingly.
#35 FOUR FINGERS WATSON on 11.15.18 at 7:06 pm
Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth
………………………………..and some of us absurdly underestimate the impact of non-resident purchasers. Especially in the LM.
I thought of this blog on Saturday when killing time with my two year old in Unionville (Markham Ontario). We stopped in to the local hockey arena to warm up. Just about every kid on the ice was of Asian descent. The parents watching were speaking in Mandarin, sipping coffee. They sure looked like residents to me.
Not to mention that my Irish/Anglo immigrant parents never got me in to hockey as a kid… but I think they were accepted as residents.
Having said all that, the lack of quality data on this topic is frustrating.
thank you Garth, for the cold hard facts,
Good pic of the dog!
Any thoughts on Winnipeg Garth? Besides “don’t live there”. Apparently sales have sucked but haven’t heard much more than that.
#59 Smokin Man is in fine form! Adding value to this blog every day. Pipelines will save North America from the coming cooling age.
Ray Dalio:
https://www.howestreet.com/2018/11/08/ray-dalio-on-the-debt-ctisis-and-navigating-net-worth-over-full-market-cycles/
You might think that he’s talking about the Canadian housing market but he isn’t. He’s talking about debt and debt cycles in the United States but the principles apply to the Canadian housing market. He says there are six stages in the debt cycle. Stage two is the bubble phase when assets are constantly rising. Stage three is when the market hits the top and stage four is when the market is on the downward slope. He mixes metaphors and says the United States is in the seventh inning. I understand that to mean that the market is still in phase three but it’s close to the end like the seventh inning is close to the end of the game in baseball.
I see the Canadian housing market is in stage four – it’s already hit the top and is on the downward slope. Garth says that the large areas of Canada are on the downward slope: Alberta, the Vancouver and Toronto exurbs.
He has a sense of urgency that I don’t expect from a hedge fund manager. He sees the economy is not allowing people to do useful work. He says 22% of students are either disengaged or disconnected. They won’t get an education and are going to end up on the street. He says the President should declare a national emergency which is pretty much the exact opposite of what our leaders are saying. They say that everything is fine or will be fine once they are voted into office.
I see the same problem in Canada – the economy is not allowing people to work. Justin Trudeau and his Liberals are making the problem worse – they don’t see that people don’t have useful work. They misconstrue it to be a gender equality problem. It’s not. It’s a general problem. Justin Trudeau sees himself as a social justice warrior but he’s not the man to lead us out of a general downward slope.
Did anyone watch CityNews today? Did Doug just remove rent control??
#65 Proud Dreg on 11.15.18 at 9:03 pm
Smoking Man on 11.15.18 at 8:20 pm
**********************************
It’s almost funny that you can be so willfully ignorant, but then I remember that people like you can actually vote and it makes me sad.
Pro Tip: When your reading material won’t even name a single person involved in the “study” and continually just says “scientists believe” without any links to an actual study, you might want to take it with a grain of salt.
Do yourself a favor and google this
mini ice age myth
Have a look at the articles-note how they have links to detailed scientific publications that recognized scientists have worked on.
You think you are smart because you are skeptical about what you are being told regarding climate change.
GREAT.Healthy skepticism is important.
So how do you then turn around and swallow the climate deniers with both eyes closed and your brain turned off?
House in Penticton dropping below 300k,next stop 200k
Re #53
Not all car dealerships are about making money selling cars. Some are investment vehicles to wash money for many other reasons (visas, citizenship etc)
Dr.Oz on 11.15.18 at 9:28 pm
#59 Smoking Man
Hey Smokey, how’s that blood pressure coming? You up to 250 over 150 yet? Something to shoot for and prove you are a man and not a wimpy loser like all the men you deride on this blog….
…..
Way down. After only two days of Vaping.
60 year olds should not smoke 3 packs a day.
#73 Lead Paint
Having said all that, the lack of quality data on this topic is frustrating.
……………………………….
Good to hear that new Canadians are liking our hockey.
You are absolutely right about quality data. When we are told that inflation is 2% and the budget will balance itself I find it hard to believe any government numbers. I only trust my eyes and ears. Even then I only believe half of what I see and hear.
#35 FOUR FINGERS WATSON on 11.15.18 at 7:06 pm
Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth
……………………………
…..and some of us absurdly underestimate the impact of non-resident purchasers. Especially in the LM.
I follow the data. Always the truest path. – Garth
*************
Omitted variable bias in some cases, no? That is if you can find the data in the first place, government search functions and directories aren’t exactly that helpful or effective. More like a well constructed labyrinth.
#53 Biddy on 11.15.18 at 7:56 pm
#37 mogulrider on 11.15.18 at 7:09 pm
“It is a true canary in the coal mine. – Car Dealerships that is.”
In this case, my west coast capital city will be just fine.
Two years ago, massive new multi-level Lexus and Toyota dealers. One year ago, a new Alfa dealership next to Timmies. Right now, massive Audi and Maserati stealships being erected on the main drag.
Maybe these car companies know something we don’t, or maybe it’s true that anyone with money and smarts gets the heck outta Canada’s wastelands and moves west?
Either way, perplexing.
*****************
My take on this:
Two years ago Victoria was booming and the Toyota Dealer moved across the street into a formerly vacated GM or Chev car lot. VW/audi updated their piddly showroom, as did porsche and Ford/land rover down the street.
Two years is a long time ago…now most of the car dealers are offering more incentives, cash back, sales discounts and 0% 84 month financing. My favorite is the employee discount racket. Besides doesn’t everyone own a newer car or two in Victoria compliments of low financing and Helocs?
60% drop in outbound Chinese tourists will soon show up as thousands of listing dumped in desperation.
https://www.bangkokpost.com/business/tourism-and-transport/1576470/hotels-panic-as-chinese-cause-slump
Chinese stock markets have collapsed…..and the life savings of hundreds of millions have vanished. That pOS house in Vancouver that’s turned into a tax ducking money losing money pig is next to go.we see lots now….but this will turn into a tsunami. Very quickly.
#71 EP
Maybe: https://www.zerohedge.com/news/2018-11-14/raging-bull-patterns-its-now-or-never-rip
That is awesome. It means this bull market still has legs. Bear markets start when sentiment is very bullish. Peaks are always when everyone thinks the market can only go up. The fact there are so many saying the bear is coming is actually bullish. Let us know when these guys go all in. That will be the end of the bull market.
It’s true , all climate change nonsense is fake.
https://trib.al/bidZvOK
Phony, cowrcerced, fraud. All fake.
“Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth”
Hmmmm. It would be more accurate to say:
Canadians absurdly overestimate the QUANTITY of purchases made by NON-residents.
BTW, I did send you immigration stat links a year back or so.
I firmly believe my own eyes when I say that a FEW new immigrants, or non-residents come with boatloads of money. They buy 15-20 properties or swaths of development land. It is these people that hit the radar of the locals, and they are by no means fictitous.
The less well off immigrants who move in and rent a basement suite are of course not visible or talked about and hence the stereotype of RICH immigrants prevails.
Unfortunately though Garth, as much as you dispise the measures taken to cool the market, you will need the market to crash in order to prove yourself right.
In theory, if it wasn’t cheap local money that created the bubble, then the “limitless” foreign capital should kick in at the bottom.
We will see who is buying at the bottom. I think it will be savvy local renters…..
#35 FOUR FINGERS WATSON on 11.15.18 at 7:06 pm
Canadians absurdly overestimate the impact of non-resident purchasers. The data does not support this urban myth. – Garth
……………………………
…..and some of us absurdly underestimate the impact of non-resident purchasers. Especially in the LM.
I follow the data. Always the truest path. – Garth
……………………..
You could show me your data and I could show you my data. Then we could contest each other’s data. I follow my eyes and ears. Always the only path. – Watson
….
got to back watson on this one, i guess urban myths are real. I really want to see how these low stats of foreign buyers were collected (guessed? Fabricated?). I grew up in YVR and you walk around any area go to any community centers, walk around public places and what the eyes sees and the ears hear is not even close to whats being reported and people arent buying it. There are a ton of students (and non students)coming here where property and expensive cars are bought for them while they stay here to “study”. Friend of mine lived in an affordable basement suite near metro town. Entire house was sold so that a student could live there during her studies. One thing that i think we need to define is what is a foreign buyer exactly. To me foreign buyer also includes property bought with foreign money regardless if said persons are transient or recently arrived. Maybe this is where the disconnect is? It could be that our banks are giving out insane loans to supply these but i doubt it. Also btw i am not denying whatsoever that local speculators house hornyness and questionable practices had a massive part to play in the insane price increase.
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I do not agree with Garth. Kingdom 416 WILL go bust too. This is unlike any bubble of the past as people are carrying record debt and way over leveraged. In early 1990s despite mortgage rates being higher home costs abd overall debt was MUCH less. This time around housing prices are 1 mill plus all the other debt ppl have so any marginal rate increase has much more of an impact, more sensitivity than early 90s. Stay tuned folks, the cliff downwards is about to strike over the next year to two and the 416 is not immune. Sell if you can while you can. Take the money and run.
Garth, I hope you’re able to comment on the new rent control rules just announced by the Ontario government and what this could mean for rental stock in Toronto.
Apparently (details still foggy), new buildings will be exempt from rent control. It’s basically a rehash of the 1991 rule, except now it’s 2018 that will be the dividing line (in terms of when a building was occupied) between rent control and no rent control.
(but how bad can it be when the average house in NB costs just $175,000?).
$175,000/6000 man hours = $29.17 per hour as the minimum wage to buy the average home in New Brunswick. Clearly minimum wage for adults would have to increase to this level.
For everyone who asked – I am indeed in Hamilton. Lets not start a hate fest about this city, I’ve heard it all and I also used to have a strong, yet uninformed, negative bias (I moved here from Toronto)
If the sheet is about to get tangled in the fan – how would banks start to call in helocs? Our one dangling debt is just such a creature and unless they rolled it inside the existing mortgage (which they wouldn’t because its already a loan against the house) and that would require requalifying etc?
I rely on the more experienced blog dogs to set me straight re the fear mongering on ‘calling in’ loans, helocs etc.
What’s the story morning glory?
Tales from ground zero…
I have a friend who bought a 1BR condo in downtown Toronto, right on Front Street. He’s single and paid about 560K back in summer of 2017. While he raves about all the restaurants, walking distance to work, and other amenities … he’s stressed financially. He never used to be like that.
So he can’t really enjoy all the restaurants because he can’t afford it.
Something to think about.
Hi Garth,
I saw my holdings peak in value on Sept 29th.
After a gradual, then steeper drop, it bottomed out on October 30th.
Over the past 2 weeks we’ve seen a bit of a recovery.
Most people likely have their peak and valley in the recent roller coaster on similar dates.
Here’s my question:
I’m curious – In a properly structured portfolio, what are you typically seeing in terms the % of that October loss which has recovered over November?
I’ve seemingly recovered about 1/3 of the October drop.
Tx!
If you’re fretting over weekly changes you should probably own GICs. These fluctuations are irrelevant to your future financial security. – Garth
#11 mogulrider on 11.15.18 at 5:54 pm
Garth said Don’t expect a bust…
Well Garth I disagree, as the 50% of GTA,Van, Calgary, Edmonton, and so and so on households watch their mortgages go to 7-10% in the next 24 months (or less due to the impending pension crisis unfolding worldwide), banks are now creating their “lists” of deadbeat underwater mortgages and are gearing up for a once in a lifetime mortgage call…..
Yup – you heard it here cause I just heard from my banker broker…
They are preparing for one mother of a mortgage call…
Not just mortgages either, commercial loans, HELOCS, etc.
—————————————————————
Your “banker broker” (whatever that is) is a moron. Mortgage rates aren’t going to 7-10% in 2 years. That would require 5 year rates in the 5-8% range. And that’s not happening. As much as I might joke about it, Canada isn’t actually an emerging market.
Tanking housing sales in Canada.
Tanking sales in Australia.
Slowing sales in the US.
US tariffs starting to hit China’s economy.
Brexit turning into a political dumpster fire with no resolution ( Lets fire the Prime Minister! That’ll fix things!).
Italy’s budget is a kick in the gonads to the EU’s fiscal rules and…they dont care.
Interest rates climbing inexorably……
Oil dropping to unknown depths….
Did I forget anything?
#78 rent control on 11.15.18 at 10:49 pm
Did anyone watch CityNews today? Did Doug just remove rent control??
———————————————————–
On new units / first rentals of suites, properties, etc as of yesterday or today. Was fuzzy on that timing as his drawl is tiresome with his ” Mr. Speaker, through you…” and “friends” affections, so tuned out. Regardless, active today (Friday) for newly rented units going forward. Existing controls still in place for units already rented…
#100 crowdedelevatorfartz on 11.16.18 at 8:24 am
Did I forget anything?
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Dogs and cats living together…
Saw the pix on this blog!
Yo Garth:
Serious question, for once.
So you always say that a balanced portfolio means that when equities do gown your bonds will help smooth the ride.
But my bond ETFs have done diddly-squat for 2 years.
So when does this “bond buffer effect” start to kick in?
Smoking Man– your insights too please!
Steve O.
https://www.bloomberg.com/news/articles/2018-11-16/fed-rate-pause-possible-in-2019-as-powell-highlights-headwinds
Fed hints at possible pause to rate hikes in 2019…
#97 Frank The Tank on 11.16.18 at 7:01 am
Tales from ground zero…
I have a friend who bought a 1BR condo in downtown Toronto, right on Front Street. He’s single and paid about 560K back in summer of 2017. While he raves about all the restaurants, walking distance to work, and other amenities … he’s stressed financially. He never used to be like that.
So he can’t really enjoy all the restaurants because he can’t afford it.
Something to think about.
_________________________________________
I never understood how walking to work and restaurants could justify $1200.00/sf and 2.5 decades of serious debt.
Who cares? My commute to work is 12 minutes, zero restaurants within walking distance, I paid $78.00/sf.
Did I get ripped off?
101 Remembrancer on 11.16.18 at 8:40 am
#78 rent control on 11.15.18 at 10:49 pm
Did anyone watch CityNews today? Did Doug just remove rent control??
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On new units / first rentals of suites, properties, etc as of yesterday or today. Was fuzzy on that timing as his drawl is tiresome with his ” Mr. Speaker, through you…” and “friends” affections, so tuned out. Regardless, active today (Friday) for newly rented units going forward. Existing controls still in place for units already rented…
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If there is a property listed for rent that was built many years , can the owner just say it’s never been a rental before? This seems strange.
The condos in the core will be tested when the trigger ignites called fear, and panic. In the meantime, the ownership is being squeezed facing the doom of higher costs to come. The cost of money will rise eventually crossing the line, placing many into a dark hole. Once that line is crossed the trigger mechanism comes into play. We shall see what happens then.
Steve French on 11.16.18 at 9:08 am
Yo Garth:
Serious question, for once.
So you always say that a balanced portfolio means that when equities do gown your bonds will help smooth the ride.
But my bond ETFs have done diddly-squat for 2 years.
So when does this “bond buffer effect” start to kick in?
Smoking Man– your insights too please!
Steve O.
…….
Invest in heat. Ice age is coming…
Stock pile bourbon.
#103 Steve French on 11.16.18 at 9:08 am
Just thought I’d throw my 2 cents in as well, for what they’re worth.
The correlation (beta?) between stocks and bonds isn’t -1, in fact sometimes the correlation is positive, so bonds aren’t never going to perfectly smooth the ride when stocks go down.
Also, given the relative amount of volatility between the two markets, you’d have to have a portfolio of something like 20% stocks, 80% bonds in order to get any significant smoothing effect.
I think if you don’t like volatility, the best thing to do is just not watch the market or your portfolio.
Further reading:
https://www.investopedia.com/articles/fundamental-analysis/09/intermarket-relations.asp
People should not fret over weekly changes in their etfs but that does not mean that you should not watch them for bargains. For example, US Small Cap etfs are down 12-13% right now, which is quite a bargain. For those who include them in their portfolio (and some people invest only in small cap etfs) this is an opportunity to buy cheap and elevate the dividend yield a bit. If you put all your money in small cap etfs 20 years ago and bought regularly and a little extra on the dips you’d have a yearly return of about 10% compounded including dividends. Not for everyone, but something to consider if you can stomach a downturn. Small cap also appears to bounce back first and bigger after a downturn. I usually have about 10-15% of my portfolio in it.
Yup! All RE is local. One house near me had a sign go up on Friday, and a sold sign on Monday! No open house and the MLS listing didn’t even get posted. I was told some agents have a client list of prospects. They were asking around $250k. It was purchased 2 years ago for $185k. Do the math.
Well, with all this talk of crap hitting the fan in Australia I yesterday decided to do something I had been putting off for fear of bad news.
Although I am just a blue collar bum, I have one Northern Hemisphere portfolio and a Southern Hemisphere one that I started when I was 18.
I’m sort of like an International Man of Misery.
Anyway I checked the Southern portfolio yesterday and it did 8.5% last year basically June2017/June 2018 and has gone only sideways since, not down.
It did go down a fair way in 2008 and took a long time to recover, but I never panicked and just kept feeding it.
I throw $300 in it each month and do the TFSA thing and non reg as well.
Don’t have an RRSP as I use the Southern Fund in lieu of this.
It’s all small potatoes compared to what you lot have going on, but just because you don’t earn that much doesn’t mean you shouldn’t try to put some aside for a later date.
My main concern at the moment is if they remove the Georgia Viaduct,then I won’t have a bridge to live under as a backup…
M44BC
And this is why it makes absolutely no sense whatsoever.
https://www.cbc.ca/radio/quirks/bitcoin-s-energy-costs-beatboxers-invent-new-sounds-wind-farms-change-lizards-and-more-1.4897314/bitcoin-mining-uses-more-energy-than-mining-for-real-gold-1.4897333
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I believe that Mr. Eitel has overdosed on his own kool aid.
https://biv.com/article/2018/10/housing-downturn-will-last-another-four-years-analyst-says
#82 Smoking Man
“Way down. After only two days of Vaping.
60 year olds should not smoke 3 packs a day.”
A relative of mine lived to be 87 and was a non stop smoker from the age of 10. Never smoked less than 2 packs a day. There is hope for you Smokey!
#75 Adam on 11.15.18 at 10:23 pm
“Any thoughts on Winnipeg Garth? Besides “don’t live there”
I built my CanWest empire out of Winnipeg! Heart of Canada and home to the mighty Jets!
One of my long-term cases is getting a bit of press…
M44BC
“While the two properties together have an assessed value of $5.85 million, one of the homes sold for $2.4 million in a court-ordered sale, the Russet Way home is currently listed at $2.1 million.” The owner has seen $1.35 million in value disappear.”
https://www.thestar.com/amp/vancouver/2018/11/14/sub-prime-lending-as-well-as-the-risk-that-comes-with-it-is-growing-in-canadas-hottest-real-estate-markets.html
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#53 Biddy,
Brand new shiny car dealerships are the purvey of the franchise operator not the car manufacturers
These folks used cheap money to build new facilities and were most likely told to by the manufacturers to get the logo and franchise of the manufacturers..
Most importantly, these car dealers are leveraged to the nuts…
As I said watch your town for the shutdowns….
It will happen, when it happens is a mug’s game. As someone mentioned here – its a process not an event…
But pay close attention to these car dealer closures..
In 50 years it has never failed to show a severe decline…
Wait…it’s not costing “Canada” $90m/day.
It’s costing money-desperate governments. And huge redource corporations with government-granted nearly-rree access to supposedly-public resources. Maybe they’d better cut those dividends.
And it’s costing my resource grunt-labour neighbours their next plastic hot tub or F-150 pickup.
But for most of us who just wish government would shrivel up and blow away…nada
#99 Tater said..
Your “banker broker” (whatever that is) is a moron. Mortgage rates aren’t going to 7-10% in 2 years. That would require 5 year rates in the 5-8% range. And that’s not happening. As much as I might joke about it, Canada isn’t actually an emerging market.
Tater my broker is a very talented observant fellow. They are gearing up for interest rate explosions.
You can choose to ignore it.
If you choose to believe that Canada isn’t an emerging market then here’s one for you.
In 5 years or less Canada will have a sovereign default event.. As capital flows move to the US to escape collapse elsewhere, Canada’s debt will become a focus of bond holders.
Interest rates will skyrocket to attract capital and that is when Canada’s debt payments will skyrocket. They will not have the revenues to support this debt.
QE has caused governments, including Canada, to spend like drunken sailors taking on monstrous debt for infrastructure and entitlement payments.
Canada may in fact default…
One thing is for sure, Canada is in very serious trouble.
90 years of borrowing has made our country a 3rd world country.
You can choose to ignore it – its a democracy after all.
we know form elsewhere that declining real estate assessments will cause cash flow crises across all levels of government as the economy collapses, jobs are lost, spending dries up, small business bankruptcies etc and will cause a sovereign debt crisis.
Governments receiving property revenues will either have to raise taxes or cut entitlements and programs. Ultimately these folks will have a revenue crisis.
Canada has trillions in debt and entitlements – we are broke.
We are no better than Venezuela, its jsut not top of mind yet.
Car Dealer Closures? Do tell more
#120 mogulrider on 11.16.18 at 1:47 pm indicates car dealer closures indicate severe recessions.
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Interesting. I have observed over the years that car dealers always seem to be some of the most prosperous looking businesses around. Especially noticeable in small towns.
I know there were dealer closures when GM and Chrysler went bankrupt in the financial crisis. They wanted to reduce the number of dealers and took away some franchises.
Did individual dealers close on their own in those days?
Other than that I never heard of dealers closing. Do you have more details of when this happened.
I can imagine it must have happened in Alberta in the 80’s with the collapse of oil combined with high interest rates.
So, agreed it is not unheard of but how common is it?
I notice Toyota in particular has put up numerous big dealerships all across Canada. I was wondering if those are dealer/ franchise or what?
Here in Edmonton Peter Pocklington got his start owning a car dealer I believe. It was sky high interest rates and debt that brought Peter down. His star burned very bright for a while.
Also in Alberta there is the Don Wheadon group. Huge.
I think there has been a lot of big money made in car dealers. But you have a different story. Details?
Hey,
When the interest rates rise 5 more times and Interest rate sits at 3%, how much will house prices in the GTA (Mississauga, Brampton and Milton areas) actually drop on a now $850k property?
$100k? $200k? I think knowing these values is important before actually decided whether or not to jump into a property. Reason being, if prices are only coming down $50k, it might be best to just pick one up now, no??
#96 Hamsterwheelie
On the contrary sir, you were brilliant for investing in Hamilton before it became the rage and prices doubled because of the Toronto crowd looking for affordable housing within the GTA. Kudos to you!
Hey Garth :
How about the 613?
(Ottawa)
Any comment on Real Estate market in the Nations Capital?
#106 Rent control on 11.16.18 at 10:38 am
If there is a property listed for rent that was built many years , can the owner just say it’s never been a rental before? This seems strange.
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In ON rent control for this type of scenario is commonly misunderstood – its the % limit a landlord can raise a year on the *current* lease holder without winning a filing for an exception or reaching an agreement with the tenant for some consideration.
Current tenant moves out you can take that newly vacant $1000/month puppy and try to flog it for $10000/month if you want… Hence the from time-to-time charges of reno-victions or fake owner family occupations which last long enough to paint the place and post the higher rent ad… The control kicks in for the lease after its in place…
Some background to further confuse things…
ON Libs in May, 2017 expanded controls to cover all types of rental properties – before then, anything rented for the first time after Nov, 1991 didn’t apply to the guidelines. Now its anything after Nov-16-2018 doesn’t apply, anything before does (my head hurts too – one reason why I got out of landlording…)
So, for instance, as I understand this change; if I offer for rent my former primary residence, built in 1985 for rent for the first time tomorrow, tenants going forward are not covered by rent controls. My currently rented condo which was first occupied Jan-2018 and tenanted Oct-31-2018 is not covered by this change so rent control is still enforced going forward for INCREASES on established leases year over year…
Or… in your example, new listing, no controls. If claiming its new and its actually previously a rental unit is fraud and probably in violation of multiple provincial laws – not recommending that as part of your financial planning…
#95 Steven Rowlandson on 11.16.18 at 5:39 am
(but how bad can it be when the average house in NB costs just $175,000?).
$175,000/6000 man hours = $29.17 per hour as the minimum wage to buy the average home in New Brunswick. Clearly minimum wage for adults would have to increase to this level.
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People post such ridiculous stuff on this blog I can’t even tell anymore. Are you being sarcastic, or do you actually think that everyone making minimum wage should buy the average house?
#122 mogulrider on 11.16.18 at 2:00 pm
Tater my broker is a very talented observant fellow. They are gearing up for interest rate explosions.
You can choose to ignore it.
If you choose to believe that Canada isn’t an emerging market then here’s one for you.
In 5 years or less Canada will have a sovereign default event.. As capital flows move to the US to escape collapse elsewhere, Canada’s debt will become a focus of bond holders.
Interest rates will skyrocket to attract capital and that is when Canada’s debt payments will skyrocket. They will not have the revenues to support this debt.
QE has caused governments, including Canada, to spend like drunken sailors taking on monstrous debt for infrastructure and entitlement payments.
Canada may in fact default…
One thing is for sure, Canada is in very serious trouble.
90 years of borrowing has made our country a 3rd world country.
You can choose to ignore it – its a democracy after all.
we know form elsewhere that declining real estate assessments will cause cash flow crises across all levels of government as the economy collapses, jobs are lost, spending dries up, small business bankruptcies etc and will cause a sovereign debt crisis.
Governments receiving property revenues will either have to raise taxes or cut entitlements and programs. Ultimately these folks will have a revenue crisis.
Canada has trillions in debt and entitlements – we are broke.
We are no better than Venezuela, its jsut not top of mind yet.
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So he’s moved all of your holdings out of CAD denominated assets, right?
If not, he’s either full of sh*t that he doesn’t believe or
negligent.
Hi Garth, No one ever told us that we cannot contribute to TFSA and RESP while being non-resident. We are citizens, however living in US for 2 years on TN and have been contributing to these unknowingly. This year we are back, no jobs yet, and received a letter from CRA to payback thousands of dollars. Half of what we contributed, says that there is high penalty. All these big banks, tax guys , accounts…no one ever told us this. They are on time to grab money but couldnt tell us one point. with limited space i am not able to write more here. We were very disciplined, loyal, never broke one rule and yet being penalised for what we dint know. WOW, so much for being outside just because my son couldnt get autism services on time here and we moved to US just so he could get the support he needed. I wanted some space to rant and if it might help anyone like me.
#23 Darts on 11.15.18 at 6:25 pm
GTA will bust too. The only strength remaining is in condos, predominantly 1 bdrm. This does establish a temporary market floor. 1 bdr condos won’t start to cost more than SFH.
Condos go bust over the next year and half. 48% of new condos completed in 2017 were investor owned. 44% of which were cash flow negative. These would have been presold in 2013-2015. The true horniness was 2015-2017, as each of these years saw increasing price acceleration and increasing total presales. 2017 was a record year for precon. These will all be starting to come online over the next 2 years.
I think we can assume that there was a higher percentage of investors purchasing presales in 2016 and 2017 than in 2014 and 2015. These investors paid record prices and many of them did so prior to B-20 and the start of the rate hikes. Now there is also a good chance that the HELOC capacity on their inflated primary residences will be cut off by the time they need to close………… What will they do?
To the boomers counting on their homes to fund their retirement – Your liquidity is about to disappear
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You got htat correct. Any one who purchase a condo in the next year or two will be burnt heavily. They are buying into a bull market that is about to unload. Once all those pre-build condos go on the market after the loser owners that bought them when times were a hopping will have to unload at pennies on the dollar to pay for their losses. Good luck suckers, just wait it out and in two years you will have the pickings to your self after the owners bail at massive losses. It will also degrade the market with all of the super discounted condos going on the market at fire-sale prices.
mogulrider
Stan Brookes is that you?
Here’s a hint: nearly every country on earth has debt problems. Why single out Canada?
lol if you think the US doesn’t have its own debt issues.
MF
What is it about houses being horny in Montreal?
Why do they need to buy in Vancouver or Victoria. They dont like renting a crackshack in van for 5k? Go to Victoria, a nice 2bed 2bath Plus Den in a prime location downtown in a nice building with a gym and pool rents for $2400. This includes underground parking and NG. SS appliances, quartz all around blah blah blah. Much better weather too. Only a fool buys in Victoria right now.
https://victoria.craigslist.ca/apa/d/2400-2br2bathden-at-the-falls/6735825969.html
More nice two bedders centrally located:
https://victoria.craigslist.ca/apa/d/2bed-2bath-1076sf-corner-unit/6745969894.html
https://victoria.craigslist.ca/apa/d/two-bedrooms-den-one-bath/6744834955.html
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