The trap

When the cost of money tanks, debt swells. People devote more income to making payments. They save less, spend less and worry more. Liquid assets vanish. Children go shoeless. Dogs run free. Relationships crumble. But realtors and divorce lawyers are happy. Audi guys, too.

That may be a tad exaggerated. But you get the drift. People can’t resist low rates. They pig out and buy assets (houses) they couldn’t otherwise afford. Demand increases prices. So families must borrow more. Cheap money begets high prices. If those assets ever fall, the debt remains. It’s a helluva gamble.

That’s the theory. Here’s the reality.

This week the eggheads at Scotia Economics demonstrated clearly what’s happening. After (a) the price of a mortgage dropped, (b) the stress test rate declined and (c) the federal shared-equity moister-trap T2 program clicked in, borrowing bloated again. Look at this…

As mortgage rates & stress test go down..

...mortgage borrowing again goes nuts.

It’s stark. Mortgage debt is about $1.6 trillion now, approaching the size of the entire economy. Worse, it’s increasing. Fast. The year/year jump in debt is twice the inflation rate. The month/month pop in family indebtedness is more than 5%. Yikes. Growth is accelerating – far above last year’s level. It reverses a trend firmly in place since the market peaked back in 2016 amid a flurry of government actions.

Say the bankers: “The expansion in total household credit was boosted by easier borrowing conditions, which led to a strong acceleration in both residential mortgage and consumer credit growth. Despite an all-time high household debt-service ratio and a near-record ratio of debt to personal disposable incomes, Canadians are still responding to lower market interest rates and strong labour markets by borrowing more.”

Are people this dumb? To load up on even more debt when the economy is slowing, real estate is still priced for perfection, the savings rate has crashed and wages have hardly paced inflation?

Yes, baby!

All it took, apparently, was for the stress test rate to inch down from 5.34% to 5.19% in August. That accompanied a general easing in mortgage rates, so a fiver is now available everywhere for less than 3%. Plus we had the feds boost RRSP withdrawals for downpayments by a whopping 40%, then implement a plan to have the government pay part of new buyers’ mortgages. And, Bam!, up she went.

In August residential credit blew past expectations for the biggest jump in two years. And it will get worse, we’re told, since the Bank of Canada is too chicken to raise rates and curtail the lemmings’ borrowing. “With the BoC looking to insure against a Trump-imposed slowdown, residential mortgage credit growth is expected to remain robust as the popular five-year rate returns to the same level as five years ago.”

Now, as you know, there’s even more gas being thrown on the fire as federal political leaders desperately try to win Millennial support with more housing giveaways and debt inducements. Trudeau’s goosed the shared-equity plan to cover houses worth up to $800,000 in the Bubble Cities, guaranteeing they remain that way. Scheer would gut the stress test, make mortgages easier to get and bring back 30-year amortizations – ensuring a rise in demand and prices. Both Libs and Cons would give or loan a few more billion to homeowners to install energy-efficient hot tubs and environmentally-sensitive towel warmers.

As a result, markets are moving back into nosebleed territory. Sales increased along with mortgage borrowing. Prices in the GTA have regained 2017 levels. Vancouver is still 8% below its peak, which was insane. After October 21st we know that whomever forms government will be catering once again to the nesting instincts of people without remorse or fear of borrowing like a Third World nation.

And what next?

With more than $2 trillion in family debt can the central bank easily move interest rates higher? How about financing the $20-$30 billion a year in federal deficits that are coming? If Trump blows up and the American economy has a recession – even mild and short (like me) – then our bankers will want to stimulate, taking loan rates lower. Surely that will deepen the pile of loan muck. How do folks think they’ll ever climb out?

They don’t. The Mills don’t sweat loan principals. They focus on payments. In their world mortgages have never topped 3% with houses always beyond reach. You can’t blame them for being Faustian.

You can only warn.

 

128 comments ↓

#1 Axehead on 10.09.19 at 4:17 pm

Worse yet, with no diposable income, people will forgoe that Mercedes or Audi or even that Acura and settle for, sigh, Hyundai and Kia.

Garth, I miss you dissing Kia more often.

#2 Sask to AB on 10.09.19 at 4:20 pm

Good Grief!
It boggles the mind………
What happened to save until you have the money to
pay for it in cash–I realize people cannot do that with a house, but for other stuff. Buy used, go on Kijiji, garages sales, etc.. or learn to make do with less. Borrow it from someone, etc.

#3 NotLegalAdvice on 10.09.19 at 4:21 pm

Is paying $3200 a lot for Mortgage + Property tax if my after tax income is $8100?

#4 Flop... on 10.09.19 at 4:22 pm

This article is from Business In Vancouver.

It’s basically telling me I have no business being in Vancouver…

M45BC

“According to the latest RBC Economics report on housing affordability in Canada, buyers faced the prospect of shelling out 79.5% of their income for the typical home in Vancouver during the second quarter.

While this marked an improvement over previous quarters as the impacts of government policies continued to make themselves felt, RBC considered it “jaw-dropping” and “extraordinarily high.” In particular, improvements meant that a single-family home in the Vancouver area still required 108.9% of a household’s monthly income, while condos required 49.2%.

This marked “the partial restoration of relative single-family home affordability” in Vancouver, RBC said, though the standard measure of affordability is housing that requires just 30% of a household’s income.”

https://biv.com/article/2019/10/solving-housing-issues-promises-big-rewards-vancouver?amp&__twitter_impression=true

#5 tccontrarian on 10.09.19 at 4:31 pm

“Are people this dumb? To load up on even more debt when the economy is slowing, real estate is still priced for perfection, the savings rate has crashed and wages have hardly paced inflation?”
– – – –

A rhetorical question, no doubt.

But, as old Albert is known to have said,

“Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”

Why are we surprised?

TCC

#6 Sail Away on 10.09.19 at 4:39 pm

Bring it on! I thought it would be years before Van markets returned- now I’ll sell the Shaughnessy place this spring and try to figure out a use for the cash.

Not many great places to invest right now for us lazy people. Probably preferred shares and US/CDN interlisted companies for this cash. Could also stop working, but that’s too much fun.

#7 Cottingham a bargain on 10.09.19 at 4:41 pm

You can only warn-Garth.

True . My warning , a complete 180 from yours , is that you should take FOMO in the GTA housing market very seriously .

When it comes to housing ,all entities with a vested interest and the power to steer direction say loudly “PLAY BALL “

#8 Anna on 10.09.19 at 4:45 pm

Re: #3
Is paying $3200 a lot for Mortgage + Property tax if my after tax income is $8100?

I would think that you have the best answer to that question yourself based on all the other information we don’t know such as cash flow? Other debts? Other savings? Are you expediting your mortgage payments and this your timeline? Do you have a stable job/income Etc. I don’t think it matters what a calculator would say. Only you can really answer your question. Good luck.

#9 MyTwoCents on 10.09.19 at 4:48 pm

Yes, people borrow more if rates are lower. A lot of people borrow as much as they can. But there is another part to this. People are borrowing because wage/salary increases aren’t keeping up with inflation. Price increases for houses and condos is the largest part of a persons cost of living increase. And it’s a lot more than the government’s CPI and has been for many years (decades). Borrowing makes up the difference. As for how all this ends … run away inflation is a possible outcome. And if this is the case, the big borrowers won’t be the ones who look dumb (with their big debt dwindling as money rapidly becomes devalued), it’ll be the ones who don’t have any debt (and have savings) who’ll be the sorry ones. As they watch their cash lose value and everything that it buys go up. Yes, a currency collapse has never happened in Canada, but something close to it could very well. And the one institution that’s supposed to protect against it is lowering interest rates and telling everybody that inflation is under 2 percent (when it’s really much much more).

#10 Lawnboy on 10.09.19 at 5:03 pm

Question: Will I need an home energy audit to qualify for a refund on my Solar Powered Dog Polisher post October 21?

LB

#11 yvr_lurker on 10.09.19 at 5:03 pm

In YVR the higher end of the detached market (2M +) is still going down as evidenced by the detailed stats that a realtor friend passed on from his company. This particular market was really influenced by the offshore and speculator folk. I don’t see this segment bouncing back anytime soon with all of the taxes in place.

#12 mj on 10.09.19 at 5:04 pm

I heard the odds are more likely that the bank of Canada may cut rates once this year. If not this year, they will cut early next year if the feds cut rates. The more the feds cut , the more chances we cut as well.

#13 Involuntary Sell by Date on 10.09.19 at 5:08 pm

Let the house and condo prices tank in Canada.

Let there be a real estate collapse!

The economy at its current state does not benefit the single young man. It is a corporate feudal system where overlords rule us with an iron fist and a dress, and I’m not only talking about Sunny Ways Trudeau!

#14 Asterix1 on 10.09.19 at 5:09 pm

Would not trust any stats coming from banking economists and the clueless bunch at Scotia Economics!

As some RE analysts have pointed out, its all smoke and mirrors, prices are not going up in GTA.

The RE cartel are desperate, will do anything for a sale, even pack dog poo in a ball and sell it as a gourmet meatball!

#15 Yukon Elvis on 10.09.19 at 5:16 pm

Painted ourselves into a corner we did. If interest rates rise in any meaningful way half the country will go bankrupt. No government will allow that. Low rates and easy borrowing terms are here to stay. You can easily borrow money at less than the rate of real inflation. Getting a safe return on investments at better than the rate of real inflation ( 5-6% ) is not so easy any more. Hard road for savers and investors. May as well join the party.

#16 HoweStreet.com on 10.09.19 at 5:22 pm

Ross Kay on HoweStreet.com Radio:
Sex, Drugs and Housing.
Developers Pivot to Sales Agents.

https://www.howestreet.com/2019/10/08/sex-drugs-and-housing/

#17 Wait There on 10.09.19 at 5:30 pm

What we have completely forgotten is that homeowners are completely happy with that mortgage helper suite. Banks encourage it.

What about AirBNB?

Add in a dose on undeclared income…..to subsidize the mortgage and the troubles go away.

#18 Tony on 10.09.19 at 5:31 pm

The greater part of current economic growth in Canada is in sectors where consumers can load up with cheap debt.

This will end in tears.

#19 theoryAndPractice on 10.09.19 at 5:35 pm

.. And, Bam!, up she went.-GT

The gravity pull the house prices down from a higher point. The outcome is not going to change but will be delayed.

#20 Young Couple on 10.09.19 at 5:38 pm

I cannot understand it why they would be circling the drain in the GTA. All they have to do is have a bit of savings; skills in demand; education; portable jobs; and ambition. They could rent a nice apartment or buy a starter home for about $275,000 by just moving to live a much better life. Its possible that their net earnings, and overall expenses would be better than living in the GTA.

#21 Flop... on 10.09.19 at 5:42 pm

The only strength in the Vancouver market at the moment is that so many people got wrapped up in the speculation, mainly between 2014/2016 that they can’t afford to sell without taking a hit on a mass scale.

Don’t just worry about the top end, have a look at this zolo page.

8 out of the cheapest 24 detached options in Vancouver proper have reduced stickers.

One of those not reduced is only for a 50% stake so that one doesn’t even count.

https://www.zolo.ca/vancouver-real-estate

A handful of the other ones have been removed and relisted at a lower price, so it’s actually up over 50% of the cheapest options in Vancouver are reduced to try and get an offer.

No strength at all at the bottom.

The next rung up you have guys trying to get 1.10 but some of them bought at the peak for 1.3 so that’s the only reason they haven’t yet tested the million mark.

If I was a speculator I would definitely be voting B.C Liberal in the next provincial election because as things stand any sign of life will be snuffed out by the governing NDP.

Another factor that I think we will see the bottom end continue to flail is because the speculators are sitting on their hands and first time home buyers are not thrilled at having such a project to deal with in their spare time.

These houses require a lot of work and youngsters today just don’t seem to have the same handyman skills as previous generations, combine that with less people shacking up, and an unquenchable thirst for glass and granite and all they see is a money pit.

What to do?

They will most likely wait until the speculation begins again and then pay 200k more for the same house a couple of years older, because they are told now is a good time to buy by their brother-in-law.

You want it or not?

The Real Estate Cartel has them right where they want them.

They are glazed and confused…

M45BC

#22 Shawn Allen on 10.09.19 at 5:44 pm

Will Interest Rates Rise

To at least some extent, low interest rates depend on bank deposit owners accepting low rates.

It has been established that borrowing creates deposits. Since there is huge debt to banks, there is, perforce, huge deposits in the banking system. And it is basically impossible for the population to pull those deposits out. (We could take them out as paper cash, but that is risky theft wise and will never happen.)

If you take your deposit and buy stocks it ends up as a deposit in the brokerage account of whoever you bought stock from. This is true even if you buy an IPO from a company. They put the cash into their bank.

Virtually all spending consists of simply transferring deposits around.

But why to deposit owners accept low rates? They can move their deposits to the bank or credit union offering the highest rate. Some people do this. Most let the deposit sit earning basically nothing.

A depositor rebellion and rush to move deposits to banks that pay the most could finally cause rates to rise? In theory?

#23 Mattl on 10.09.19 at 5:48 pm

House prices are going up because demand exceeds supply. In a lot of places, finding a suitable rental is close to impossible. Cheap money has an impact for sure, but I think expensive rents and lack of inventory are the biggest culprits here.

I’m not convinced that the folks buying overpriced real estate- that can afford to make the payments – will be the losers in the end. What are rents going to look like in 30 years? 10K for a house in Burnaby? Condo on King West for 5K?

Pay now or pay later.

#24 J on 10.09.19 at 5:56 pm

So, in the 1-2 years I’ve been reading this blog, the prediction has pretty consistently been that property values are destined to go down… but seems now the tune has changed simply because of a few government campaign promises, etc. If the low end of the market is going to be goosed higher, wouldn’t the advice to someone potentially buying into that range be to buy now? Or rent forever?

#25 Scott on 10.09.19 at 6:00 pm

Garth are you not worried they’ll legislate a bail out for home owners who get burned in a housing market collapse? I’m on board to sit it out and wait til prices reach a level that i deem a house is fair value to me but it may never come. Maybe i should join the 70% (home owners) since my tax dollars will probably help cover a cratering housing sector if that day should come. I can’t imagine any Canadian government letting evictions and foreclosures double in a year. Better to let the grandkids pay for it along with everything else if our planet is still habitable in forty years.

#26 NotLegalAdvice on 10.09.19 at 6:03 pm

#8 Anna on 10.09.19 at 4:45 pm
Re: #3
Is paying $3200 a lot for Mortgage + Property tax if my after tax income is $8100?

I would think that you have the best answer to that question yourself based on all the other information we don’t know such as cash flow? Other debts? Other savings? Are you expediting your mortgage payments and this your timeline? Do you have a stable job/income Etc. I don’t think it matters what a calculator would say. Only you can really answer your question. Good luck

‐———————-

Thanks for responding, Anna.

No other debts, but thinking about leasing a KIA for 300 a month? Job is stable. I’ve calculated costs and I’d have around 2400 bux left over after all overhead cost.

Not sure 2400 bux is a lot though.

#27 cultural elitist on 10.09.19 at 6:06 pm

Hm. Speaking of making deals with the devil, here is a line from Goethe’s Faust.

Mephisto:
… if the soul would fly away,
I shall confront it with the blood-signed scroll
Alas, they have so many means today
To rob the Devil of a soul.

Seems apt.

#28 RISE Canada on 10.09.19 at 6:06 pm

DELETED

#29 45north on 10.09.19 at 6:07 pm

Now, as you know, there’s even more gas being thrown on the fire as federal political leaders desperately try to win Millennial support with more housing giveaways and debt inducements. Trudeau’s goosed the shared-equity plan to cover houses worth up to $800,000 in the Bubble Cities, guaranteeing they remain that way. Scheer would gut the stress test, make mortgages easier to get and bring back 30-year amortizations – ensuring a rise in demand and prices.

it seems as if the political parties conspire to set people up for failure. I know, I know that you should never attribute to conspiracy what simple stupidity can explain but it looks like a conspiracy. So what are they going to do when interest rates rise? They’ll fold. Garth, you’ve been warning that the good-times policies today will lead to hard-times in the future.

With more than $2 trillion in family debt can the central bank easily move interest rates higher? How about financing the $20-$30 billion a year in federal deficits that are coming?

The US Federal Reserve has been pumping billions of dollars a day into the repo market to keep interest rates low – what if it doesn’t? Interest rates will go up. If rates go up, a quarter point, we think that’s a big deal but there are no guarantees. I mean we’re all sitting around talking about climate change – the irony is that climate change is undefined – it’s loose and amorphous but debt is well defined – it’s structure and amounts are precisely written down.

#30 Rick Fast on 10.09.19 at 6:14 pm

What is it going to take to get the bubble to finally burst? And when will this happen?

#31 Debtslavecreator on 10.09.19 at 6:26 pm

What a spectacle Garth, what a spectacle
There is no helping most of the people – the more “educated” they are the more irrational they are
It’s a farce and will end badly eventually
Then they will elect Bolsheviks who will steal everything including and especially from the good sized minority who did the rights things …,because you know it’s not fair you have a “big” TFSA or RRSP
I really hope I’m wrong
Trying to be optimistic but working in lending has turned into helping financially illiterate people commit financial suicide
It’s pathetic
End the CMHC/Bank of Canada and after a nasty quick recession and debt write down we would fix 90% of our economic, financial and social problems

#32 Drill Baby Drill on 10.09.19 at 6:32 pm

#30 When the jobs start disappearing

#33 Randy on 10.09.19 at 6:33 pm

What’s a mortgage ?

#34 Reximus on 10.09.19 at 6:35 pm

#30

when there are more sellers than buyers. when would you see that happening?

it was/is the case in Alberta and so prices fell….but I don’t see it happening soon in GTA

#35 JSS on 10.09.19 at 6:45 pm

Many Canadians don’t really care because:

– government manipulation of financial systems will not allow a major drop in housing, primarily in the three biggest Canadian cities
– lack of basic financial education holding back many Canadians
– perpetually low interest rates, leading to poor spending and borrowing habits
– immigration keeping housing prices up, to some extent
– “my friend bought a triple garage estate home, and I saw their pictures on Facebook. So I want a house just like theirs, and I don’t care how much the monthly is. We’re both working damnit! “
– assumption by many young ones that retirement is far away, and no need to fret about it now.

#36 AGuyInVancouver on 10.09.19 at 6:49 pm

#6 Sail Away on 10.09.19 at 4:39 pm
Bring it on! I thought it would be years before Van markets returned- now I’ll sell the Shaughnessy place this spring and try to figure out a use for the cash.

Not many great places to invest right now for us lazy people. Probably preferred shares and US/CDN interlisted companies for this cash. Could also stop working, but that’s too much fun.
– – –
Sorry Charlie, Shaughnessy and all of the single family home market on Vancouver’s west side is still tatas-up. Priced for offshore buyers who have disappeared. You’re only hope is to get it rezoned for multifamily, but with your NIMBY neighbours, good luck!

#37 yorkville renter on 10.09.19 at 6:55 pm

I dont get it…

– 70%+ home ownership
– prices back to peak levels
– mortgage rates in the gutter

…and somehow the RE market needs more pumping?

#38 Cto on 10.09.19 at 6:57 pm

I agree with #31.
I think a lot of people in this country have a pretty good idea where this is going and what the government’s going to do when the party ends as the majority is going to want to get those people with the savings and the politicians will do what the majority wants.
That’s why many are investing in houses and condos and not liquid Investments such as equities or bonds.

To All Savers , be afraid , very afraid.

#39 for #26 on 10.09.19 at 6:59 pm

dude, you’re fine… I think 40% is the highest you want to go and you’re lower than that

#40 David Prokop on 10.09.19 at 7:16 pm

If transport sector is any indicator of what is happening in a real economy then recession is approaching very fast. I have several friends who work for trucking companies and they all confirm the same: business has dropped off the cliff, it’s been slowing down since spring but after the labor day it just died. Their companies mostly serve US and Montreal ports.
When the tide goes out we will know who’s been swimming naked

#41 MF on 10.09.19 at 7:25 pm

“You can’t blame them for being Faustus.”

-Got that right.

Rates will never rise to anything remotely close to historical norms.

They can’t. For the obvious reason mentioned in this post: the central banks already herded everyone into debt through a failed experiment they have no way of ending now.

It’s hilarious. Maybe the economy needs more “stimulus” at historically low unemployment levels?

What a joke.

The jig is up. Everyone is calling the bluff now. It’s obvious. They are out of options. GTA housing to the moon.

MF

#42 leebow on 10.09.19 at 7:29 pm

There are certain pluses to this level of RE ownership. Bolsheviks have no chance. Conservatives have a great chance to squash Justin along with his house equity initiative. Here is a script for an ad.

It is a late fall rainy night in Toronto. A millennial couple comes back to their 600 sq ft downtown condo. They open the door and see Justin playing video games with Jagmeet. Chips, peanuts, vaporizer, empty beer bottles everywhere. Optionally, Justin has his face painted.

Millennials: What are you doing here? Immediately get out of our condo.
Justin to Jag: Their condo?
Jag to everybody: OUR condo.
Narrator: Liberal Party of Canada. Just sign on the line.

#43 Scott on 10.09.19 at 8:00 pm

@42 that would be the definition of boomer humour. Not that there’s anything wrong with that Haha.

#44 PeterfromCalgary on 10.09.19 at 8:01 pm

Soon borrowers may discover why both Christianity and Islam had or have restrictions on lending.

#45 G on 10.09.19 at 8:07 pm

From RT, one on money and taxes, and one is political in nature.

American billionaires have never had it so good – they’re actually paying a lower tax rate than the working class, according to two economists exposing the real beneficiaries of a system that has redistributed wealth to the top.
https://www.rt.com/usa/470563-billionaires-paid-less-taxes-inequality/?utm_source=Newsletter&utm_medium=Email&utm_campaign=Email

The residents of one Mexican city have grown so dissatisfied with their mayor over unfulfilled election promises that they turned vigilante to make their feelings known, kidnapping the man and dragging him behind a truck.
https://www.rt.com/news/470538-mexico-mayor-abducted-dragged-truck/?utm_source=Newsletter&utm_medium=Email&utm_campaign=Email

#46 Cottingham a bargain on 10.09.19 at 8:07 pm

30.Rick Fast on 10.09.19 at 6:14 pm
What is it going to take to get the bubble to finally burst? And when will this happen?
————-

Only thing going to burst the bubble in T.O is a supernova or 3 mile rock from outer space lol.

If you’re lusting to own Rick( as are all the bubble heads in this comments section) then just go for it .

Nothing stopping the increasing price juggernaut

#47 Nonplused on 10.09.19 at 8:14 pm

Pet peeve of the day: Plastic straws are bad bad bad but k-cups are… Ok???? This just goes to prove that half the population is below average intelligence once again, and when you consider how intelligent “average intelligence” is, it is a truly frightening thing.

It’s like all the Green New Deal type stuff that the media is obsessed with. Sure, it would be nice to get off fossil fuels, and we have to do so eventually one way or another, but in 12 years? It ain’t going to happen unless we turn off the furnace and the lights and start walking everywhere. And it must be remembered that fossil fuels are the reason we aren’t (what few of us would be alive) still living in mud huts and plowing our fields by hand with an ox. The benefits clearly outweigh the risks, which is why it isn’t going to happen in 12 years. But it will happen. Give it more like 50-100 years though for a complete transition.

As for today’s topic, I have an example just recently come up that I think speaks to why so many people must live in and accept debt. Things are too damn expensive!! My furnace is kaput. Simple control unit but they won’t fix it unless I replace the heat exchanger because it is cracked. So now we are into some serious money so we may as well go with a new furnace, there is no point throwing that kind of money at a 25 year old furnace. Any idea how much that is going to cost? The lowest cost option is over $5,000. Coming down the pipe will be the hot water tank because it’s just as old, and that will run another $5,000 to get it up to code. And these are the cheapest options! They had some other proposals that could have easily gone over $20,000! I declined and went with the cheapest one.

This is something everybody that owns a house has to deal with sooner or later. People who have seriously old furnaces that don’t have electronic controls can probably go much longer, but make sure you have a CO detector because your heat exchanger is probably cracked and you are getting crappy efficiency.

But, given the stats Garth has shown us time and again on this blog, how many people have $5,000 lying around if their furnace breaks? $10,000 if they need to do the hot water tank too? Don’t forget asphalt shingles only last 20-25 years, and that is no small touch either. It costs a lot to do maintenance on an old house, which is why most vendors now have to offer financing to get jobs. All my quotes came with a monthly payment plan option. And I can assure you the interest rate was not 2%. But what are you going to do when you are headed into winter an your furnace is kaput? You either have some serious cash lying around, or you go further into debt. This will eventually happen to everyone who owns a house.

After that, the washing machine breaks. The fridge breaks. Apple no longer supports the iOS on your phone so you need an upgrade so it’s 3 more years under contract. Netflix raises their prices. Your kid “needs” a laptop just to go to school. It just goes on and on.

The only way they keep the CPI at 2% is by adjusting the cost of things for supposed quality improvements. So my $1000 iPhone 10 doesn’t really represent huge inflation over my old land line because it represents such a huge quality improvement. Maybe, maybe. But I still got to pay for it. In debt we go.

#48 Remembrancer on 10.09.19 at 8:28 pm

#45 G on 10.09.19 at 8:07 pm
From RT, one on money and taxes, and one is political in nature.
————————————————
Jeez, RT, really? At least the Buffalo Chronicle is (probably) locally financed slop…

#49 Cognitive Dissidence on 10.09.19 at 8:36 pm

DELETED

#50 Paul on 10.09.19 at 8:51 pm

#37 yorkville renter on 10.09.19 at 6:55 pm
I dont get it…

– 70%+ home ownership
– prices back to peak levels
– mortgage rates in the gutter

…and somehow the RE market needs more pumping?
————————————————————————————————
They politicians are not pumping real estate they are pumping Millennials. Vote for me and I’ll set you free! Lol

#51 meslippery on 10.09.19 at 8:53 pm

#47 Nonplused

New Water Heater Tank and Installation Costs

Average Total: $1,308
https://www.homedepot.com/c/cost_install_water_heater

#52 ronh on 10.09.19 at 8:58 pm

This is just a re-test of the previous high. Could go up
to new highs or fail. Now, where is my book about technical analysis?

#53 Paul on 10.09.19 at 9:02 pm

#33 Randy on 10.09.19 at 6:33 pm
What’s a mortgage ?
————————————————————————————————
Well Randy, it’s a financial instrument, that private person can invest in and and receive a interest rate of 7 to 9 percent.

#54 conan on 10.09.19 at 9:10 pm

…and somehow the RE market needs more pumping? -Paul.

Perhaps it is being primed for a new tax? Give with one hand now, and 5-10 years from now, take it back with the other.

#55 Bill Grable on 10.09.19 at 9:19 pm

I hope people realize the work it takes to keep writing posts like this, day after day.

This is where I have learned MORE about the “Real World” than I did at University taking Economics and Political Science.

Mr. Turner – Bravo.

incredible.

#56 Capt. Serious on 10.09.19 at 9:20 pm

I have been doing some reading about the 30s dust bowl lately. If you think government can’t create and then ignore terrible policy that allows people to sow the seeds of their own ruin (quite literally), you are sadly mistaken. Currently I think any unexpected shock is going to ruin a bunch of folks. Oh well. Big wheel keeps on turning.

#57 And they will sell you ... on 10.09.19 at 9:22 pm

#51 meslippery on 10.09.19 at 8:53 pm

#47 Nonplused

New Water Heater Tank and Installation Costs

Average Total: $1,308
https://www.homedepot.com/c/cost_install_water_heater

a gas hot water heater and let you leave the store with it. But not a furnace … oh no, not out here in BC anyways. Have to have it installed by a “pro.”

#58 Nonplused on 10.09.19 at 9:23 pm

#51 meslippery

Ya things are a bit more complicated in my case because it is a 75 gallon tank, runs the infloor heating, and the exhaust ducting needs to be redone. It’s not exactly like for like.

#59 Cognitive Dissidence on 10.09.19 at 9:27 pm

#49

DELETED

Not surprised. It was outside the purview of your general content. But Garth you have to admit it is an interesting question? Not all ideas are compatible. It is a difficult issue we face going forward because we can’t necessarily have all things for all people.

#60 Felix on 10.09.19 at 9:52 pm

A sadly revealing pic today. Mr Turner.

Aspire as they might, canines simply do not have the IQ to become lawn furniture.

They should aim instead at becoming four-legged pebbles.

Much more attainable for them.

#61 Election Promises on 10.09.19 at 9:52 pm

These election promises are just pandering votes, and most of them will never be completed. Its nothing more than the old bait and switch routine, and pay no attention to these illusions of grandeur. Pay attention to a change or you’ll receive more of the same. Do not be fooled by politics, because its all a shell game for the losers at the gambling tables rolling dice.

#62 akashic records on 10.09.19 at 10:03 pm

How do folks think they’ll ever climb out?

The much better question, how do governments think they’ll ever climb out?

They have the power to tax. – Garth

#63 Kothar on 10.09.19 at 10:19 pm

At what level of debt would it take say Canada to have a Greece moment like back in 2011?

#64 dosouth on 10.09.19 at 10:21 pm

You can write about this until death do us part but in the end you cannot legislate common sense.

Some, not all thank god, are in a downward spiral and continue to be rescued by parents and friends never learning a lesson. Heck regardless of the election outcome we will still never learn the lesson that you cannot please anyone all of the time…but you can try to buy their vote.

#65 Cap'n Obvious on 10.09.19 at 10:35 pm

#47 Nonplused
“This just goes to prove that half the population is below average intelligence once again”

How could it be any other way??

#66 akashic records on 10.09.19 at 10:41 pm

They have the power to tax. – Garth

There is only so much juice in a lemon. 40% or so folks are un-taxable already and you argue, convincingly every day how folks are sinking more and more in debt.

#67 Dannyboy on 10.09.19 at 10:43 pm

Mr G, I really wish you’d Allow people to freely speak when they blog.
If it’s vulgar sure, we get why you delete,…But if it’s opposition view or right leaning or not of your opinion….it is not required for you to restrict the content. Otherwise 1-800echochamber.
This is a public blog now.
You are the custodian.

Hopefully you are open minded enough to allow rationality to prevail.
You’re still a good guy in my view, but deleting irritates a lot of people that would otherwise dial back into this blog including me on this rare departure back.
DB

#68 Man From Uncle on 10.09.19 at 11:05 pm

A bit off topic, but quick question for Garth and/or the Blog Dogs:

I have a 22 year old nephew earning a low income (around $15/$16 an hour). He’s recently started to invest $200 a month into a tax free investment fund from his online bank Tangerine.

https://www.tangerine.ca/file_source/fberoot/pdf/en/Tangerine_Balanced_EN.pdf

I told him it looks like a mutual fund with slightly lower fees and he’d likely be better off buying some etfs with a self directed TFSA, but he likes the simplicity of getting the money automatically deducted every month from his bank account. Obviously, he doesn’t have much to invest at this point, so I guess it’s better than nothing. Thoughts?

#69 Sask to AB on 10.09.19 at 11:43 pm

re #47 Nonplused on 10.09.19 at 8:14 pm

Good Post!
thanks for sharing.

#70 DON on 10.09.19 at 11:47 pm

https://www.cbc.ca/news/canada/new-brunswick/nb-insurance-rates-soar-consumer-advocate-1.5270814

Escalating costs, private insurance companies need to raise rates.

Also happening in Ontario and Alberta (google is your friend).

In BC the fix was in to privatize the once crown jewel by the former discredited ‘free enterprise party’. The notorious BC Liberals/Conservatives. Now the association of private insurers wants to privatize ICBC under the assumption that insurance will be cheaper while it is actually increasing in other Provinces. Right in plain site they are contradicting themselves and we are the assuming pawns.

I am tired of paying for those that drive recklessly…grow up and take your medicine! YOU do the crime YOU pay the price. Now that is FREE enterprise and based on the natural laws.

#71 DON on 10.09.19 at 11:58 pm

Scanning the international news this am, came across one on the mainstream financial news outlets mentioning that Germany is in recession. That’s the way it read.

The US Fed no longer knows what to do?

Debt is the elephant in the room.

Read another article and that consumers are indebted that’s why they aren’t spending but the hope is that they will start spending as you know the economies of the US and Canada rely on consumer spending. Yup…! Push on a string and hoping for the best.

Logic no longer exists, the meme doesn’t make sense…debt is the anchor. Then again will Trump’s ‘unmatched wisdom’ on show, the bar low, almost ground breaking. LOL – 1987 1987 1987. Look it up!

#72 Sail Away on 10.10.19 at 12:38 am

#62 akashic records on 10.09.19 at 10:03 pm
How do folks think they’ll ever climb out?

The much better question, how do governments think they’ll ever climb out?

———————————

Government doesn’t really care. They’re only there for awhile, and if things get too bad, they’ll be voted out and it’s someone else’s problem.

#73 Bob Dog on 10.10.19 at 12:46 am

If the pimple faced republican stooge actually gets democratically elected by the worlds biggest collection of losers, and he succeeds in renouncing his us citizenship, can I have it? I’m sick of giving 40% of my income to an incompetent corrupt puppet regime.

#74 Sail Away on 10.10.19 at 12:49 am

#53 Paul on 10.09.19 at 9:02 pm
#33 Randy on 10.09.19 at 6:33 pm
What’s a mortgage ?
————————————————————————————————
Well Randy, it’s a financial instrument, that private person can invest in and and receive a interest rate of 7 to 9 percent.

——————————–

Haha. Very good, sir!

#75 Sail Away on 10.10.19 at 12:56 am

#36 AGuyInVancouver on 10.09.19 at 6:49 pm
#6 Sail Away on 10.09.19 at 4:39 pm

Bring it on! I thought it would be years before Van markets returned- now I’ll sell the Shaughnessy place this spring and try to figure out a use for the cash.

– – –
Sorry Charlie, Shaughnessy and all of the single family home market on Vancouver’s west side is still tatas-up. Priced for offshore buyers who have disappeared. You’re only hope is to get it rezoned for multifamily, but with your NIMBY neighbours, good luck!
————————-

Give it time. Hoping for full feeding frenzy by May.

#76 DON on 10.10.19 at 1:03 am

#23 Mattl on 10.09.19 at 5:48 pm

House prices are going up because demand exceeds supply. In a lot of places, finding a suitable rental is close to impossible. Cheap money has an impact for sure, but I think expensive rents and lack of inventory are the biggest culprits here.

I’m not convinced that the folks buying overpriced real estate- that can afford to make the payments – will be the losers in the end. What are rents going to look like in 30 years? 10K for a house in Burnaby? Condo on King West for 5K?

Pay now or pay later.
*****************

Have you not been paying attention…I guess you will need to see it before you believe it. Most of these new home owners will NEED renters to cover the mortgage and all those unexpected costs due to wear and tear repairs etc. They will all be competing for renters.

But don’t worry about that debt as others will be more than willing to fall on a sword and offer millions upon millions for average houses in the second biggest country in the World. It is better to look into the mirror and face the truth rather than to rely halfheartedly on recency thinking.

#77 DON on 10.10.19 at 1:09 am

Rising rates may not happen right away but debt saturation is a lot closer and our economy runs on consumerism. So we are relying on indebted families to propel our economy. Great model, who was the genius…FFS!

#78 Smoking man on 10.10.19 at 1:23 am

I’m not bad dog.
https://youtu.be/t51MHUENlAQ

#79 Smoking man on 10.10.19 at 1:32 am

Just saying..

https://youtu.be/lCgicPdsxxg

#80 Fortune500 on 10.10.19 at 1:33 am

The talk is always how this is going to keep rising or it is going to crash. The more likely option is that it will bounce around at this inflated level for decades.

They can’t lower interest rates because the bubble will burst. So diddling around the edges makes whatever group is the loudest happy for the short term. Then it will drop slightly (but never crash due to housing culture, immigration, lack of housing supply and most importantly insanely low interest rates).

If ever we see a real correction caused by a recession or some other panic, Canada will institute negative interest rates. At least until the boomers have shuffled off or enough socialists wanting real estate tax and inheritance tax take over.

Either way, this is it for a long long time folks.

#81 Stan Brooks on 10.10.19 at 2:13 am

Another chapter of the crap show in play.

It seems the servants of the owners of this place have lost their mind in their effort to earn that bonus, to a degree of complete slaughter of the sheeple, they think that they can import quality sheeple from abroad at no cost… and then mortgage their future and that of their children….


#63 Kothar on 10.09.19 at 10:19 pm
At what level of debt would it take say Canada to have a Greece moment like back in 2011?

Have you ever been to Greece?
Nice weather, people relaxed (true, more stressed lately but still a very quiet life), private debt 123 % of GDP down from 147.

Much, much, much cheaper life.
People regularly eat outside, enjoy coffee at the coffee shops and you know what? No cornflakes homes or glass condos.
The cheapen-dale ultra expensive housing with juuuuuge mortgage and debt slavery is reserved for the children of brainfrozen land. Who are busy discussing who will be next elite’s lackey to elect, like something depends on that.

How long before this insanity stops?
Hint: it never will folks, it never will.
We are dealing with some exceptional stupidity here.

Think about it: They call 1.5 mil shacks or 800 k concrete boxes ‘affordable housing’ and nobody smashes them in the face.

Exceptionally compliant brainwashed shepple.

The real beauty is that we keep over leveraging instead of using lower rates to pay up debt, like US, indescribable and incomprehensible stupidity, greed and incompetence.

And you know what? This is for benefit of all Canadians…

Buy lubricant and enjoy folks.

Cheers,

#82 Stan Brooks on 10.10.19 at 4:13 am

Non retirement crisis brewing:

https://ca.finance.yahoo.com/news/canadians-prefer-pension-over-raise-175749128.html

Poor broken indebted sheeple.

#83 Stan Brooks on 10.10.19 at 4:29 am

https://globalnews.ca/news/3355767/toronto-rent-doubles-rent-control/

…lives in a 430 square foot one and a half bedroom apartment with his roommate in west-end Toronto with no balcony, no real view and said he received notice Sunday his rent had doubled from $1,650 to $3,300 per month.

No inflation, right.
39 square meters ‘1 and a half bedroom!’ shoe box concrete condo for $3300 (after tax) a month.

This will require income of over 100 k before taxes just to sustain a very, very basic living.

Cheers,

#84 neo on 10.10.19 at 6:08 am

#40 David Prokop on 10.09.19 at 7:16 pm
If transport sector is any indicator of what is happening in a real economy then recession is approaching very fast. I have several friends who work for trucking companies and they all confirm the same: business has dropped off the cliff, it’s been slowing down since spring but after the labor day it just died. Their companies mostly serve US and Montreal ports.
When the tide goes out we will know who’s been swimming naked.

*******************************************

Yup, I have a neighbour that owns a manufacturing facility that serves Canada and the US. They noticed a change since March.

#85 Tannhäuser Gatekeeper on 10.10.19 at 6:09 am

Today’s post is a marvel of wooly-headed economic thinking. If the consumer credit impulse is expanding, then the economy is quickening, not slowing. It’s that simple. Statscan says hourly wages are up 3.7% YoY.

Are the Audi guys happy? Yes, the Audi guys are happy. What are the eggheads at Scotiabank telling us? That growth is accelerating again. That if the down-at-the-heels guy who can’t find $5,000 for a new furnace applies, Scotiabank will gladly lend it to him, against the value of his house, which probably increased by $5,000 in the last few months.

Might it all end badly, later? Of course, but that’s always the case. It appears not to be going badly right now, Cassandra.

#86 neo on 10.10.19 at 6:14 am

@45north

“The US Federal Reserve has been pumping billions of dollars a day into the repo market to keep interest rates low – what if it doesn’t? ”

DING DING DING! We have a winner. That right there is the canary in the coal mine. But it’s not just to keep interest rates low. It’s to prevent another financial crisis brewing with all this bad debt globally. QE4 is already in full swing.

The repo market has nothing to do with a global financial crisis. Go back to tending the chickens. – Garth

#87 Sail Away on 10.10.19 at 6:58 am

#68 Man From Uncle on 10.09.19 at 11:05 pm
A bit off topic, but quick question for Garth and/or the Blog Dogs:

I have a 22 year old nephew earning a low income (around $15/$16 an hour). He’s recently started to invest $200 a month into a tax free investment fund from his online bank Tangerine.

https://www.tangerine.ca/file_source/fberoot/pdf/en/Tangerine_Balanced_EN.pdf

I told him it looks like a mutual fund with slightly lower fees and he’d likely be better off buying some etfs with a self directed TFSA, but he likes the simplicity of getting the money automatically deducted every month from his bank account. Obviously, he doesn’t have much to invest at this point, so I guess it’s better than nothing. Thoughts?

—————————–

He’ll probably be ok with that fund and it’ll help him learn the game without breaking the bank. Decent holdings in the top 10- heavy on Canadian banks but decently diversified.

1.07 MER means Tangerine gets around $1.3M annually at that market cap for an assortment of holdings any flunky could compile in an afternoon.

If you want to make real money: work with money, not for money.

#88 Captain Uppa on 10.10.19 at 7:11 am

#109 Captain Uppa on 10.09.19 at 12:20 pm
A smidgen off-topic.

Garth, why the hate for Kia? I meant to ask this a few posts back when you made yet another disparaging quip against said automaker.

I don’t own a Kia, but all reports suggest their quality and reliability are towards the top these days. Just curious.

Now ask me about Hyundai. – Garth

—————————————————————–

Garth, what about Hyundai?

#89 maxx on 10.10.19 at 7:15 am

Faustian or not, most avocado toast scarfing Mills really don’t get it. They don’t get the concept of wealth nor do they get the wealth.

There is nothing at all quite like owning, yes, owning wealth as opposed to “wealth lite”, aka a borrowing wealth wannabee.

Getting there is not a hardship at all, it’s just a choice of saving habits, one of the side benefits being that you then become a crack consumer, able to squeeze the truck nuts out of a buck – and the harder you squeeze, the richer you get.

At retirement, voila! you have enough f/u money for the rest of your life.

As the venerable Judge Judy would say: “You’re an idiot!”

#90 RE_Investor on 10.10.19 at 7:20 am

#30 Rick Fast on 10.09.19 at 6:14 pm
What is it going to take to get the bubble to finally burst? And when will this happen?

Answer #1: when Garth is right, the bubble will burst.

Answer #2: when fear is high, what do you do? Do you follow the herd?

Answer #3: don’t know, who does. you have to put your money somewhere, so make a careful decision what to invest in. I did.

#91 MF on 10.10.19 at 8:03 am

73 Bob Dog on 10.10.19 at 12:46

The only losers are the ones complaining endlessly.

Winners are happy.

Which side are you on?

MF

#92 Tater on 10.10.19 at 8:11 am

This credit cycle will end like all others, eventually the cost to service debts will exceed the income for servicing them.

The 5y is sitting around 1.33 up some 40bps from where it was when the GTA made the highs. This little squirt higher has been driven by the move down from 2.48.

As the global population shifts so there are less working age people, inflationary pressures will start to build. Globally there has been huge deflationary pressure as this large cohort of workers have come of age just as technology evolved to allow global coordination of workforces. This allowed companies to replace high cost DM labour with lower cost EM labour.

BIS has some good stuff on this: https://www.bis.org/publ/work722.htm

#93 crowdedelevatorfartz on 10.10.19 at 8:24 am

@#70 Don
“Now the association of private insurers wants to privatize ICBC under the assumption that insurance will be cheaper while it is actually increasing in other Provinces. ”
+++++

Why are ICBC car insurance rates so high in BC?

Observe a driver in down town Vancouver two days ago attemping to parallel park in front of the Depet of Immigration Building at 1148 Hornby st….two people seriously hurt….

https://globalnews.ca/video/6007713/dashcam-footage-of-downtown-vancouver-car-crash-close-call-for-people-on-sidewalk

#94 crowdedelevatorfartz on 10.10.19 at 8:31 am

@#24 J
“the advice to someone potentially buying into that range be to buy now? Or rent forever?”
++++

You’ve been reading the blog for a whole 1-2 years.
Impressive.
That shows commitment.

Perhaps you also missed the endless warnings about unnecessary debt, bubbles, Fear Of Missing Out, politicians doing anything to get elected such as goosing the market, etc……?
Kinda like the topic of this day…..

#95 Q2 Class No. 6131 on 10.10.19 at 8:45 am

‘Are people this dumb?’

If Canadians are dumb enough to give T2 a second majority – somewhat likely – then, yeah, they really are this dumb.

#96 crowdedelevatorfartz on 10.10.19 at 8:45 am

From the “Gee , that didnt take long.” dept.

https://www.reuters.com/article/us-syria-security-turkey-europe/turkeys-erdogan-threatens-to-send-syrian-refugees-to-europe-idUSKBN1WP1ED

The Brexit Border guard patrols may have to be moved from northern France to the south of France….

1 million refugees part deux….

Syria is the tip of the iceberg with 7 million people.
Wait til Egypt goes sideways with 83 million people (50% under the age of 30).

#97 neo on 10.10.19 at 8:48 am

The repo market has nothing to do with a global financial crisis. Go back to tending the chickens. – Garth

Please Garth, there are issues bubbling below the surface of the credit markets that The Fed are trying to calm down so they don’t affect the rest of the financial system or they wouldn’t be intervening in this way in the first place. This is a symptom not the root cause. That’s what canary in a coal mine means.

Worry about your own finances. You can control them. Not the world. – Garth

#98 Stan Brooks on 10.10.19 at 8:52 am

#92 Tater on 10.10.19 at 8:11 am
Globally there has been huge deflationary pressure as this large cohort of workers have come of age just as technology evolved to allow global coordination of workforces. This allowed companies to replace high cost DM labour with lower cost EM labour.

I got it, you are the BoC governor incognito.

Deflationary pressures? What exactly except cheap TVs was reduced lately in price and where?

Stop whatever you are taking and look at reality/my post above with rents skyrocketing everywhere. So is with groceries, tuition, health care costs.

All you problems come with the wrong measurement of inflation. You measure spending habits, of course people have less money to spent so there must be deflation. Not in a global economy when combined with junk monetary policy.

In a global economy you have less money consuming less of increasingly more and more expensive stuff and services.

Get used to it as it here to stay.

#99 Dharma Bum on 10.10.19 at 8:54 am

#47 Nonplused

The benefits clearly outweigh the risks, which is why it isn’t going to happen in 12 years. But it will happen. Give it more like 50-100 years though for a complete transition.
——————————————————————–

Why don’t more people get this?

Old technologies take decades upon decades to fade away because of how deeply they are embedded into the fabric of every facet of our infrastructure, society, economy, and way of life. The multi trillions of dollars at stake that are so deeply invested in the “old ways” will not simply let the new technologies (including renewable clean energy sources) wipe them out just like that.

Yes, the old ways will eventually be phased out, but after several more decades.

Nice to read a voice of reason on here every once in a while.

#100 Westcdn on 10.10.19 at 9:10 am

My neighbour sold his house. I kind of wondered because he took up a younger woman and moved into her home. I considered him lazy and the house faded fast. I liked the renters – ambitious. They agreed to lower rent for maintenance. The buyers are Russian and willing to sink money into the place.

Yesterday they tore down the entire backyard. They have plans. I need to up my game – exterior wise as they will put my feet to the fire. My instincts like them. The lead contractor (Russian) said they will be working on the place for 6 months and wanted my approval. I hope it is not flip because my thinking is they are the kind of people I respect. My eldest red haired with a major number of freckles daughter married into a Russian Jewish family and they are just about proud as Umphervilles. Her sons are blond and she calls them German. Go figure.

#101 Dharma Bum on 10.10.19 at 9:11 am

Are people this dumb? – Garth
——————————————————————–

Are you KIDDING ME? Come on!!!

“We make too many humans, we don’t feed each other properly, we bicker, we argue, we wage war, and we willfully deny so much of reality – we make ignorance into a vocation.”

“Our ideas of ‘super-intelligence’ are like a crayon drawing made by a distracted four-year-old compared to what might actually be.”

https://blogs.scientificamerican.com/life-unbounded/stupid-humans/

#102 leebow on 10.10.19 at 9:12 am

#68 Man From Uncle

That fund is good enough and easy to work with. It gives diversification, although may be too heavy on Canada (which at this precise moment is a good thing). When he accumulates more money, it may (or may not) make sense to pay trading commissions instead of the somewhat high MER.

#103 Tater on 10.10.19 at 9:59 am

#98 Stan Brooks on 10.10.19 at 8:52 am
#92 Tater on 10.10.19 at 8:11 am
Globally there has been huge deflationary pressure as this large cohort of workers have come of age just as technology evolved to allow global coordination of workforces. This allowed companies to replace high cost DM labour with lower cost EM labour.

I got it, you are the BoC governor incognito.

Deflationary pressures? What exactly except cheap TVs was reduced lately in price and where?

Stop whatever you are taking and look at reality/my post above with rents skyrocketing everywhere. So is with groceries, tuition, health care costs.

All you problems come with the wrong measurement of inflation. You measure spending habits, of course people have less money to spent so there must be deflation. Not in a global economy when combined with junk monetary policy.

In a global economy you have less money consuming less of increasingly more and more expensive stuff and services.

Get used to it as it here to stay.
—————————————————————
Well, the deflation is found in items where DM labour can be swapped out for EM labour. So manufactured goods that can be made elsewhere and shipped.

If you spend half your income on housing and food and the other half on goods, and the goods drop 30% and the housing and food goes up 30%, there’s no inflation. The mix of your consumption has just changed.

#104 Dups on 10.10.19 at 10:04 am

The hockey player in the picture looks like Garth: https://lfpress.com/sports/hockey/see-it-drew-doughty-trolls-calgary-flames-fans-after-netting-ot-winner

Garth we did not know you switched careers!

An anemic version. He needs to work out more. – Garth

#105 Cbo on 10.10.19 at 10:16 am

Was speaking with a contact at BoC the other day. She reminded me that Poloz’s 7 year term is up in spring and he’s not eager to make waves on the way out.
Expect cheap dough the next few quarters.

#106 Mattl on 10.10.19 at 10:22 am

#76 DON on 10.10.19 at 1:03 am
#23 Mattl on 10.09.19 at 5:48 pm

House prices are going up because demand exceeds supply. In a lot of places, finding a suitable rental is close to impossible. Cheap money has an impact for sure, but I think expensive rents and lack of inventory are the biggest culprits here.

I’m not convinced that the folks buying overpriced real estate- that can afford to make the payments – will be the losers in the end. What are rents going to look like in 30 years? 10K for a house in Burnaby? Condo on King West for 5K?

Pay now or pay later.
*****************

Have you not been paying attention…I guess you will need to see it before you believe it. Most of these new home owners will NEED renters to cover the mortgage and all those unexpected costs due to wear and tear repairs etc. They will all be competing for renters.

But don’t worry about that debt as others will be more than willing to fall on a sword and offer millions upon millions for average houses in the second biggest country in the World. It is better to look into the mirror and face the truth rather than to rely halfheartedly on recency thinking.

—————————————————————–

Don the truth appears to be that gov’t refuses to let RE correct, CB’s are struggling to normalize rates, and RE inventories are not enough to cover demand.

Competing for renters? Vacancies are around 1% and rents are outpacing inflation. The competition is for rentals, not renters.

I’ve been paying attention, have you?

#107 IHCTD9 on 10.10.19 at 11:17 am

#3 NotLegalAdvice on 10.09.19 at 4:21 pm
Is paying $3200 a lot for Mortgage + Property tax if my after tax income is $8100?
___

How is your job security?

Do you think rates will be this cheap for the next 2-3 decades?

What’s your retirement nest egg looking like?

Right now, that’s close to selling your soul to the bank IMHO, unless you have little to no expenses outside the house (but you do, don’t you?)

10 years from now – you might really regret you ever snorted that line of FOMO – depending on rates/job factors alone.

If you get caught in a correction or a rate run up – you WILL NOT be able to sell quickly without taking a bath on it. You’re probably also the proud owner of a full recourse mortgage too.

That’s life changing trouble if you find yourself unable to make the monthly. Your working life won’t be long enough to recover.

Think about the future more than the present – things are too easy right now – you’re only being reasonable to expect that to change – 25-30 years is a long time…

#108 TurnerNation on 10.10.19 at 11:21 am

#29 45North I got bad news.
Turns out there’s a large glowing super hot orb in our sky. So intense are its rays a few hours exposure will literally burn my skin to blisters.
I think this hot orb should be further studied – its influence hotness.

Btw this PG&E power shut off in Cali smacks of Agenda you-know-what. Shut off power and drive people off their land and into cities. Could it happen?
California is always the test state. Watch it closely.

#109 TurnerNation on 10.10.19 at 11:34 am

#40 David check out Mullen Trucking stock price on TSX. At 10 year lows .I bet they soon slash divvy imo.

#110 doug t on 10.10.19 at 11:37 am

https://www.cbc.ca/news/business/recession-layoffs-gladwell-1.5313099

#111 IHCTD9 on 10.10.19 at 11:57 am

#20 Young Couple on 10.09.19 at 5:38 pm

They could rent a nice apartment or buy a starter home for about $275,000 by just moving to live a much better life. Its possible that their net earnings, and overall expenses would be better than living in the GTA.
____

Not only possible, but if you’re not one of those mils making 150K+/yr – it’s 100% assured to be a lot easier in many smaller cities than in the GTA.

The median household income in Toronto is not much higher than your typical medium/smaller Ontario city – and even less in a few cases. Meanwhile everyone there has to pay the same for a house.

Get yourself at least 1.5-2hrs outside the GTA and find a decent job – then find a gainfully employed S/O – BINGO!

#112 Heregoesnothing on 10.10.19 at 12:19 pm

Not sure if this is a great place to ask this, but here goes nothing!

Given these low interest rates, would now be a good time to access the HELOC, turn it into 3-5 year fixed mortgage, and then use the funds to invest…?

This way, can “participate” in the low cost of borrowing, but not get caught in the real-estate trap?

(If it helps, here are some other high-level circumstances. We’re in our late 30s, no debt, house is paid for. Can access up to $300K on the HELOC. TFSA and RRSP is maxed out, but the current value is less than what we’ve put in due to poor investment decisions in the past (not properly diversified). Slightly regret spending the last 10 years putting all extra money into paying off the house as opposed to investing it. Wondering if we could/should correct this with leverage now…?)

#113 DON on 10.10.19 at 1:02 pm

#106 Mattl on 10.10.19 at 10:22 am

#76 DON on 10.10.19 at 1:03 am
#23 Mattl on 10.09.19 at 5:48 pm

House prices are going up because demand exceeds supply. In a lot of places, finding a suitable rental is close to impossible. Cheap money has an impact for sure, but I think expensive rents and lack of inventory are the biggest culprits here.

I’m not convinced that the folks buying overpriced real estate- that can afford to make the payments – will be the losers in the end. What are rents going to look like in 30 years? 10K for a house in Burnaby? Condo on King West for 5K?

Pay now or pay later.
*****************

Have you not been paying attention…I guess you will need to see it before you believe it. Most of these new home owners will NEED renters to cover the mortgage and all those unexpected costs due to wear and tear repairs etc. They will all be competing for renters.

But don’t worry about that debt as others will be more than willing to fall on a sword and offer millions upon millions for average houses in the second biggest country in the World. It is better to look into the mirror and face the truth rather than to rely halfheartedly on recency thinking.

—————————————————————–

Don the truth appears to be that gov’t refuses to let RE correct, CB’s are struggling to normalize rates, and RE inventories are not enough to cover demand.

Competing for renters? Vacancies are around 1% and rents are outpacing inflation. The competition is for rentals, not renters.

I’ve been paying attention, have you?
******************

So you think that vacancy rate is depicting all the residential houses that have and are being built with rental suites as mortgage helpers are part of the calculation? I have tried searching CHMC perhaps another blog dog can weigh in. I do agree that rents are getting higher as indebted house owners need to up the rent to make end of month expenses. You see no problem with this house of cards…young people can stay at home longer and are staying at home longer with rents being so high. My nieces are staying close to home for uni as the costs are so high for rent. There is a breaking point, you know that right? And you are paying attention to the world around us right? Things have changed and not for the better. Not doom and gloom just reality. Garth’s last few posts should bring you some renewed perspective.

#114 IHCTD9 on 10.10.19 at 1:38 pm

#47 Nonplused on 10.09.19 at 8:14 pm

Things are too damn expensive!!

…Any idea how much [furnace] that is going to cost? The lowest cost option is over $5,000. Coming down the pipe will be the hot water tank because it’s just as old, and that will run another $5,000 to get it up to code. And these are the cheapest options! They had some other proposals that could have easily gone over $20,000! I declined and went with the cheapest one.

…Don’t forget asphalt shingles only last 20-25 years, and that is no small touch either. It costs a lot to do maintenance on an old house, which is why most vendors now have to offer financing to get jobs.

…After that, the washing machine breaks. The fridge breaks.
______

Nonplused, I agree with 95+% of your posts, but this “stuff is expensive” heeds a hone.

The finish on this topic is that things are expensive “for some”. They don’t need to be, and it’s largely up to you to control these costs.

A 5K furnace is no biggie for a turn-key install. that price would have your old one removed and disposed of as well. I more wonder how those poor schmucks can make any money at 5K. A cracked H/E means it’s toast 100%. My silent gen Dad finally gave up burning wood, and got LPG. 6K to supply, install, remove, dispose – just sign a check. Every homeowner gets to do it once.

5K for a water heater is insane. A toaster is more complicated than these things. Buy one and install it yourself less the gas line, then get a certified guy to finish the install and go over your work. Guys often moonlight doing this kind of stuff. If it’s electrical you can do it yourself 100%. A new 50 gal gas fired water heater itself should not cost much more than a grand. Good used ones on Kijiji are 1/4-1/2 of that. You can also rent one for about 2-300.00/yr and not worry if it craps out. Our rental (electric) started leaking a few years back and the rental company sent in two guys with a new tank. They were in and out in under 2 hours, that included bringing it up to code (it was 28 years old).

You’d be lucky to get 20-25 years out of an organic asphalt shingle, but yes roofing jobs are 5 figures most of the time. I just did my own (second time around) for under 2K, and you can too. It’s not complicated or difficult. YouTube has everything you need to know. Choose your poison.

My washer, dryer, and freezer have all broke at least once since I moved in. Just fix ’em yourself. Did you play with lego when you were a kid? If yes, you have the technical ability to fix any of these things. There are excellent resources on the net for do it yourself repair. None of my appliance repairs cost more than 75.00.

IMHO, this stuff is as expensive as you allow it to be.

#115 Shawn Allen on 10.10.19 at 1:39 pm

Borrow $300k to invest?

We’re in our late 30s, no debt, house is paid for. Can access up to $300K on the HELOC. TFSA and RRSP is maxed out, but the current value is less than what we’ve put in due to poor investment decisions in the past (not properly diversified).

*****************************
Good luck getting your wife to agree to borrow $100k let alone $300k. Also, I don’t think you need the stress. Just keep on your present course of investing what you can save. P.S. congratulations you are doing well, way ahead of most at your age.

#116 SoggyShorts on 10.10.19 at 1:50 pm

#68 Man From Uncle on 10.09.19 at 11:05 pm

With a few minutes of work your nephew can set up his bank to auto deposit money into a questrade account and his questrade account to buy shares of vgro or vbal.
The difference in MER from 1.07 to 0.25 will make him 12.5% more money in the long run.

7% return – 1.00 mer = 6% net
7% return – 0.25 mer = 6.75% net
6.75/6= 12.5%

If he keeps it up at just $200/mo until 65 that extra MER will cost him over 20 grand.
If he kicks it up a notch and fills his TFSA every year it’ll cost him over 50 grand.

#117 James on 10.10.19 at 1:59 pm

#108 TurnerNation on 10.10.19 at 11:21 am

#29 45North I got bad news.
Turns out there’s a large glowing super hot orb in our sky. So intense are its rays a few hours exposure will literally burn my skin to blisters.
I think this hot orb should be further studied – its influence hotness.

Btw this PG&E power shut off in Cali smacks of Agenda you-know-what. Shut off power and drive people off their land and into cities. Could it happen?
California is always the test state. Watch it closely.
____________________________________________
If all the people go into the city’s when the apocalypse happens they wont be able to grow their own food. Sure I can grow some herbs 50 floors up in a concrete slab but then I have to come down to get some water every day. Also I like big fences when the Zombies are out at night! Stay in the countryside my friend. You can always get juice from solar.

#118 Eks dee Siple on 10.10.19 at 2:07 pm

Itchy, you’re forgetting that nonplused is roughly twice our age. At a certain point in your life, you don’t want to be bending down on your knees trying to replace a belt or screwing around with wiring. Those metal roofs seem to last a few decades at least, though.

#119 Mattl on 10.10.19 at 2:13 pm

#113 DON on 10.10.19 at 1:02 pm
#106 Mattl on 10.10.19 at 10:22 am

#76 DON on 10.10.19 at 1:03 am
#23 Mattl on 10.09.19 at 5:48 pm

House prices are going up because demand exceeds supply. In a lot of places, finding a suitable rental is close to impossible. Cheap money has an impact for sure, but I think expensive rents and lack of inventory are the biggest culprits here.

I’m not convinced that the folks buying overpriced real estate- that can afford to make the payments – will be the losers in the end. What are rents going to look like in 30 years? 10K for a house in Burnaby? Condo on King West for 5K?

Pay now or pay later.
*****************

Have you not been paying attention…I guess you will need to see it before you believe it. Most of these new home owners will NEED renters to cover the mortgage and all those unexpected costs due to wear and tear repairs etc. They will all be competing for renters.

But don’t worry about that debt as others will be more than willing to fall on a sword and offer millions upon millions for average houses in the second biggest country in the World. It is better to look into the mirror and face the truth rather than to rely halfheartedly on recency thinking.

—————————————————————–

Don the truth appears to be that gov’t refuses to let RE correct, CB’s are struggling to normalize rates, and RE inventories are not enough to cover demand.

Competing for renters? Vacancies are around 1% and rents are outpacing inflation. The competition is for rentals, not renters.

I’ve been paying attention, have you?
******************

So you think that vacancy rate is depicting all the residential houses that have and are being built with rental suites as mortgage helpers are part of the calculation? I have tried searching CHMC perhaps another blog dog can weigh in. I do agree that rents are getting higher as indebted house owners need to up the rent to make end of month expenses. You see no problem with this house of cards…young people can stay at home longer and are staying at home longer with rents being so high. My nieces are staying close to home for uni as the costs are so high for rent. There is a breaking point, you know that right? And you are paying attention to the world around us right? Things have changed and not for the better. Not doom and gloom just reality. Garth’s last few posts should bring you some renewed perspective.

—————————————————————–

Don, stop hyperventilating and stop putting words in my mouth.

Of course I don’t think high RE prices are a good thing – it forced me to move away from family to get a place that made sense for us. We got chased further and further out in the Valley and finally left the Lower Mainland when houses in Mission were running high 800’s. Madness

And yes, the party SHOULD end at some point but forgive me if I’ve grown a little tired of the doom and gloom. While you are yelling at clouds I am going to try and understand what is ACTUALLY going on, and that is gov’t propping up RE, CB’s scared of their own shadow, and inventory that can not keep up with demand. That doesn’t shout CRASH to me. But trust me, I hope the market crashes, if that happens I am going to buy a better home! For those that have all of their net worth in RE, that’s their problem. I don’t lose any sleep over my neighbors financials.

#120 IHCTD9 on 10.10.19 at 2:29 pm

#118 Eks dee Siple on 10.10.19 at 2:07 pm
Itchy, you’re forgetting that nonplused is roughly twice our age. At a certain point in your life, you don’t want to be bending down on your knees trying to replace a belt or screwing around with wiring. Those metal roofs seem to last a few decades at least, though.
___

Is he? I’m 47, I thought he was not much older than that.

The galvanized metal roof on my drive shed turned 102 this year :).

#121 DON on 10.10.19 at 2:34 pm

#119 Mattl on 10.10.19 at 2:13 pm

#113 DON on 10.10.19 at 1:02 pm
#106 Mattl on 10.10.19 at 10:22 am

#76 DON on 10.10.19 at 1:03 am
#23 Mattl on 10.09.19 at 5:48 pm

House prices are going up because demand exceeds supply. In a lot of places, finding a suitable rental is close to impossible. Cheap money has an impact for sure, but I think expensive rents and lack of inventory are the biggest culprits here.

I’m not convinced that the folks buying overpriced real estate- that can afford to make the payments – will be the losers in the end. What are rents going to look like in 30 years? 10K for a house in Burnaby? Condo on King West for 5K?

Pay now or pay later.
*****************

Have you not been paying attention…I guess you will need to see it before you believe it. Most of these new home owners will NEED renters to cover the mortgage and all those unexpected costs due to wear and tear repairs etc. They will all be competing for renters.

But don’t worry about that debt as others will be more than willing to fall on a sword and offer millions upon millions for average houses in the second biggest country in the World. It is better to look into the mirror and face the truth rather than to rely halfheartedly on recency thinking.

—————————————————————–

Don the truth appears to be that gov’t refuses to let RE correct, CB’s are struggling to normalize rates, and RE inventories are not enough to cover demand.

Competing for renters? Vacancies are around 1% and rents are outpacing inflation. The competition is for rentals, not renters.

I’ve been paying attention, have you?
******************

So you think that vacancy rate is depicting all the residential houses that have and are being built with rental suites as mortgage helpers are part of the calculation? I have tried searching CHMC perhaps another blog dog can weigh in. I do agree that rents are getting higher as indebted house owners need to up the rent to make end of month expenses. You see no problem with this house of cards…young people can stay at home longer and are staying at home longer with rents being so high. My nieces are staying close to home for uni as the costs are so high for rent. There is a breaking point, you know that right? And you are paying attention to the world around us right? Things have changed and not for the better. Not doom and gloom just reality. Garth’s last few posts should bring you some renewed perspective.

—————————————————————–

Don, stop hyperventilating and stop putting words in my mouth.

Of course I don’t think high RE prices are a good thing – it forced me to move away from family to get a place that made sense for us. We got chased further and further out in the Valley and finally left the Lower Mainland when houses in Mission were running high 800’s. Madness

And yes, the party SHOULD end at some point but forgive me if I’ve grown a little tired of the doom and gloom. While you are yelling at clouds I am going to try and understand what is ACTUALLY going on, and that is gov’t propping up RE, CB’s scared of their own shadow, and inventory that can not keep up with demand. That doesn’t shout CRASH to me. But trust me, I hope the market crashes, if that happens I am going to buy a better home! For those that have all of their net worth in RE, that’s their problem. I don’t lose any sleep over my neighbors financials.
**************************

Those are MY words…I was not giving them to you (in your mouth) and your attempt to say I am yelling at the clouds is your slight of hand attempt to discredit your opponent by pointing you finger and laughing.

Grow up!

You cannot reject things as doom and gloom when they are reality. You should be a little worried about your neighbour’s finances as it could affect the value of your property.

Over and out! Glad you moved to find affordable housing. Take care…all the best to you and your family.

#122 Heregoesnothing on 10.10.19 at 2:47 pm

#115 Shawn Allen on 10.10.19 at 1:39 pm

Aha, yes, the wife barrier will definitely be a tough one to breach.

Thank you for your thoughts!

#123 Not So New guy on 10.10.19 at 3:22 pm

#121 DON on 10.10.19 at 2:34 pm

#119 Mattl on 10.10.19 at 2:13 pm

#113 DON on 10.10.19 at 1:02 pm
#106 Mattl on 10.10.19 at 10:22 am

#76 DON on 10.10.19 at 1:03 am
#23 Mattl on 10.09.19 at 5:48 pm

Guys,

You don’t have to copy the entire message. Could you please just quote the last thing said?

#124 SoggyShorts on 10.10.19 at 3:22 pm

#116 SoggyShorts on 10.10.19 at 1:50 pm
#68 Man From Uncle on 10.09.19 at 11:05 pm
*******************
EEK! bad mathing, sorry.

Your nephew will spend an extra $115,000 in fees at 200/mo
or if he maxes out his TFSA he will spend an extra $285,000 in fees.

The difference between 1% MER and 0.25% seems pretty small, but the end results are actually rather insane: A TFSA of 1.2m @ age 65 vs 1.5m

#125 crazyfox on 10.10.19 at 3:47 pm

Where are we at this juncture….

An election is 11 days away and we have clear distinctions between all six political parties with a final debate tonight between their leaders.

Only 2 parties have a costed platform on their websites as of today…. with 11 days to go before we vote. Why the hell is that?

The Libs have a costed platform out and its boring. And, it should be. The Greens, God love their ethics and ideals, have some radical changes to how they would tax, spend and regulate. This is not a party ready to govern. High marks for a costed platform, low marks for what’s in it.

The NDP has no costed platform. There is detail void of numbers. To me, if you can’t put numbers down on what you tax and spend, like I say, you are either not ready to govern or you have something to hide. I like Jag but until the NDP has a costed platform, I can’t support the party.

The People’s party needs to die. Too many false claims, too much division, the best thing it can do after the election is stay in the ashes where it belongs.

The Bloc can’t even translate their website into English. Unless Canada flops with the basics of equality and the rule of law, the leaders and followers of the Bloc remind me of self interested glory seeking individuals trying to reinvent the wheel for their own future history books. Deviation in language and culture simply not enough to try. A long look at Canada as a whole should tell us why that is. How can a much smaller market (Quebec) compete internationally for the same markets and resources “better” than the larger market of the rest of Canada? What makes their way of doing business so much more superior? What, are they Spartans? Being legends in your own minds is not enough. Seeking glory at the expense of others does not entitle one to merit. Federal parties need to remind Quebecers AND Quebecois the way it is and the way it always will be. Quebec is not an island. Neither is Canada, only Canada has known it for some time now. It’s long overdue the time we remind Quebec why that is.

The Conservatives, the only real governing party alternative, still have not released a costed platform. Why the hell is that? Do Canadians not deserve a chance to look at their numbers? Even if they release a costed platform within the next few days, guaranteed a good number of Canadians with their busy lives won’t have a chance to see it. Does this sound like a party ready to govern to you, one that respects democracy? A party willing to connect with Canadians? I think not.

Political parties simply cannot govern with innuendo. What I see Sheer standing for, an obvious American apparently, is Republican talking points. 25% cuts to foreign aid, moving our Israeli embassy to Jerusalem, inviting U.S. missile defense on Canadian soil (sure to have permanent U.S. military bases that follow), immigration and tough on borders, Sheer brought MS- 13 street gangs yesterday, how slow is that?

https://ipolitics.ca/2019/10/09/scheer-invokes-ms-13-street-gang-in-immigration-announcement/

I mean, the Trump train is going down in flames with a clear majority wanting him impeached AND gone from office and Scheer is hitching himself to the same train with the same Trump rhetoric, how Farging (I have no idea what Farg means but it keeps me from swearing) stupid is he? Governing by failing Republican talking points, this is what we can expect?

Out to lunch real estate regs, sure it will create boom AND bust! Do Canadians really have to learn this lesson over again? 25% cuts to foreign aid… this isn’t just for bleeding hearts, its for economic access. look at the world’s premiere mining sector of the TSX for example and tell us this isn’t so. The Conservatives were supposed to be the “money” party. They’re supposed to know that. Governing by Republican talking points, what I see over and over, is a party that isn’t ready for training wheels. A sippy cup and a blankie for their afternoon nappy maybe, wake ’em up when its over.

Good God, we think we had growing pains with Trudeau. At least we know what side he’s on. With Andrew Scheer I fear, we know that too and its not above the 49th parallel. Canadians deserve better than this, we truly do.

Elections. At some point in life, we are told this truth. “Si vis pacem, para bellum.” Thank God its just moments of one day every 4 years.

#126 crazedmillenial on 10.10.19 at 10:38 pm

Here I am, a crazed Millennial that just plopped down 1.1m for a house in a big (but not TO or VAN) Canadian city. Then again, my wife and I make a combined 350k+, and generally have a savings rate over 50%.

Sad to be contributing to the increased debt-to-income ratio, but okay with it since we’ll have likely assets exceeding the remaining value of the mortgage by the time we’re up for renewal.

#127 Sail Away on 10.10.19 at 11:28 pm

#112 Heregoesnothing on 10.10.19 at 12:19 pm
Not sure if this is a great place to ask this, but here goes nothing!

Given these low interest rates, would now be a good time to access the HELOC, turn it into 3-5 year fixed mortgage, and then use the funds to invest…?

This way, can “participate” in the low cost of borrowing, but not get caught in the real-estate trap?

(If it helps, here are some other high-level circumstances. We’re in our late 30s, no debt, house is paid for. Can access up to $300K on the HELOC. TFSA and RRSP is maxed out, but the current value is less than what we’ve put in due to poor investment decisions in the past (not properly diversified). Slightly regret spending the last 10 years putting all extra money into paying off the house as opposed to investing it. Wondering if we could/should correct this with leverage now…?)

—————————–

Why would you borrow $300k to invest if your experience investing to date has lost money? And related to this, paying the mortgage off was definitely a positive return, so good work.

If you do want to borrow to invest, get a cash out mortgage for 2.5% instead of HELOC and pay Garth’s team for an asset allocation. Mortgage interest will be tax deductible if funds are used for investing. Good luck. It sounds like you’re in good shape in any case.

#128 Heregoesnothing on 10.11.19 at 10:00 am

#127 Sail Away on 10.10.19 at 11:28 pm

… get a cash out mortgage for 2.5% instead of HELOC and pay Garth’s team for an asset allocation. Mortgage interest will be tax deductible if funds are used for investing. Good luck. It sounds like you’re in good shape in any case.

————————————————————

(If I can get the spouse to agree), going to see Garth was definitely going to be the next step. :) Thank you for your advice – will look into this cash-out mortgage.