Ka-boom

The next 48 may answer the question: is this it? The blow-off phase of a housing market that cannot possibly last?

In the next two days the Van and GTA real estate boards will drop their stats on a breathless, virus-weary  nation. Plus the other hot spots – Victoria, Halifax, Montreal, Squamish, Tillsonburg, Saint John, Hope, Sudbury, Woodstock (both of them), Kamloops… well, just about everywhere. This is now a pan-Canadian affliction. House lust.

What foretells an asset escalation with a dubious future?

Two things: (a) rapid price inflation and (b) explosive volume.

Nobody should doubt about either. Nationally, average sale prices have increased an historic 31.6% year/year, to a previously-unimaginable level of $717,000. The average detached in Toronto is $1.7 million and the typical property in the burbs is now seven-figures.

Prices are so high relative to incomes it now takes the annual wages of 12 families in Vancouver to buy one so-so house. Newbie working couples putting aside 10% of annual income need five years to gather a measly 6% down payment. And in the last five years real estate climbed steadily higher. Hopeless. And look what we’ve done to ourselves, relative to American households…

House price escalation in Canada vs the US

As for sales volumes, more history has been made.

Nationally, sales are in unprecedented territory, running 76% in March above 2020 levels. In fact the annualized increase over February was more than 60%. Sales in Toronto increased 174% (but part of March, 2020, was virus lockdown – like now). Sales in Van were up 126%, and have averaged more than 70% above the 10-year average. In London the increase was 56% – highest ever. In Victoria sales were 92% above year-ago levels and up 36% month/month. In Moncton sales hit another record high, surging 68%. In Nova Scotia a 66% jump in sales made for the best March on record.

That’s just a sample. It’s everywhere. From the Okanagan Valley to the Annapolis, from Windsor to Nelson. Both prices and volumes hit an apex in the last few weeks. Rational minds know this cannot last. History tells us so. This is an asset top.

The toll on families is growing. Despite cheapo mortgages, this price escalation – combined with the reckless behaviour of buyers (thanks to the blind auctions hosted by rapacious agents) – has far outstripped income growth. Mortgage loads are growing. People are reaching. They’re walking into decades of unprecedented debt at rates which can only go up.

The average two-income household now spends close to 40% of pre-tax earnings on real estate financing. In after-tax, take-home pay that easily tops 50% for most families. And this load is growing ever-larger, especially in BC and Ontario.

It’s a timebomb. Rates will grow enough in the next couple of years to inflate mortgage payments by 20% or more. The Bank of Canada’s already indicated its bond-buying, rate-suppression program is being curtailed. Its benchmark rate will increase a year ahead of schedule. Meanwhile the bond market will assuredly deliver higher yields (kicking up five-year mortgage costs) as (a) vaccinations rise from 30% of the population to 70% by August and (b) the economy reopens, leading to (c) even more inflation. (The price of everything is currently surging.)

As core inflation slips through 2%, then to 3% and beyond, current home loan rates will be relegated to historic footnotes. CBs will be throttling back on quantitative easing as the GDP expands (the US and Canada are rocketing ahead 7% now) because they know inflation cannot be allowed to go rogue. This will throw shackles off the bond market – the end of 2% five-year mortgages. At that point one of two things happens: (a) the vast bulk of people can no longer (ever) afford to own a home, or (b) prices start to fall.

Stay tuned.

About the picture: “Love your blog. 31 and live in Vancouver… waiting for the bloodbath and renting,” says Taylor. “Begging my parents to sell their home in Kerrisdale ASAP. Here is Lola. 8 year old runt Boston Terrier. She is the sweetest little girl and very confused why Mom and Dad with 250k combined income can’t buy her a backyard. She would love to be your pinup girl!”

123 comments ↓

#1 Drill Baby Drill on 05.02.21 at 11:14 am

Well well well the bell is beginning to toll. Even at dirt cheap interest rates most cannot afford to buy. Inflation on many items and services are increasing. At some point the average family will just stop buying other than food. How many of these individuals also have huge CC debt.

#2 J on 05.02.21 at 11:28 am

It can’t happen fast enough.

#3 Wrk.dover on 05.02.21 at 11:31 am

#80 Under the radar on 05.02.21 at 5:25 am
Try buying a portable sawmill these days . One year wait. Just assembled my Granberg chainsaw mill and will try milling some boards .

___________________________________

Screw a slab of plywood to each end of the log with a level on the top edges, throw an aluminum ladder over it all and drag the mill along the top of the ladder with a hand crank boat trailer winch. Also get a ripping chain or you will fail.

I doubt this is what the Hon. Mr. Turner does on Sunday’s.

I heard that. – Garth

#4 greyhound on 05.02.21 at 11:35 am

Central-banks-printing-money at an accelerating rate means that the drop in the purchasing power of currencies, including the Loonie, is also slowly accelerating.

Prices are going up; but a house is still a house.
It keeps taking more dollars to buy one because the dollars themselves are worth less and less.

Why? Too much gov debt. So govs are trying to inflate it away. Stock markets BOOM when they do that. Bond markets, maybe not so much…

#5 Doug t on 05.02.21 at 11:42 am

KABOOM – gonna be epic

#6 Ian on 05.02.21 at 11:54 am

Been reading for years. But I feel the Governments next move will be just expansion of shared equity mortgage or just increase amortization schedule to 35 or 40 years. They’ve shown that housing costs are not even an issue, my MP didn’t even respond. I’m sure we’ll even see an average price of $1M in Ontario soon. It’ll be crickets again from Government, then after outrage, finding ways to keep the prices high, circa 2008 all over again. As an older married millennial, no debt, good savings I don’t think a home is ever in our future in Canada. Rent is low now, but I just got an advertisement for a building in Ottawa we liked for $2499 to $3999 for 1 and 2 bedroom condo. It’s unfortunately going to price us out eventually on both rent and ownership fronts. So we are now looking at moving back to America post vaccine where we know we can put roots down and not have a career limited to only 1 or 2 good employers in a whole region. It’s sad to see so many with no option like us. But life’s not supposed to be fair I’m told. So we’ll adapt, good luck to Canada.

#7 Tripp on 05.02.21 at 11:55 am

Scenario a) is highly undesirable. While offering the present owners the illusion of wealth (lasting until they need to scale down or help their children with a downpayment), it will drastically affect the living standards of generations to follow. It will also affect the social arrangements and Canada’s capacity to attract talent from around the world.

#8 Dolce Vita on 05.02.21 at 12:00 pm

If rate suppression a function of people vax’d, at current rates, fat chance of those numbers happening this August.

Snowball. Hades.

Feds supplying after a near 1.5 week drought, about 1M unused doses today.

Bottleneck is the Province vax efforts. And the last 2 weeks no jab records being set, the opposite. I wish it were not so for Canada’s well being but it is.

Like yesterday, a measly 127K vax’d. Yes, it’s the weekend, rates are lower but that number is plumbing new depths for weekend vax’ng.

——————–

Garth, it’s going to be a long year unless the Provinces up their vax game &/or Canada awash in 1 dose vax like J&J*.

Neither looking good right now.

*US made. EU made, J&J called Janssen, doing fine with no problems (e.g., 8-15K jabs Janssen per day in Italia in the last couple of weeks, 27M** doses delivery already commenced since mid-Apr, an additional 200M by the end of year to the EU).

**At current 500k jabs/day in Italia incl. 27M Janssen vaxing…Italia will achieve 80% circa mid-July.

#9 Mr. Lahey on 05.02.21 at 12:01 pm

There are a lot of guilty parties here. The Feds, for not giving a **** about this issue as it sticks its head in the sand. Provincial Gov’ts of BC and Ontario for allowing money laundering to take place skewing the real estate market. Banks, for lending way more than people can reasonably afford. Pre-approvals are way too high and they encourage people to buy more house than they can afford. Why not? They’re covered by CMHC. CMHC is another scam that takes out the risk in the transaction showing this isn’t a market economy in real estate. Parasitic realtors, who flame bidding wars and break rules all the time with no repercussions. House flippers, a bane on society which contribute nothing. Revenue Canada which doesn’t go after landlord and flipper’s incomes with the same ferocity as going after some waitress who missed reporting $500 on tips. And then there’s the individual buyers, who lie on applications, believe that real estate is GME stock and believe they’ll always stay married, never have any surprise expenses, will soon get a raise at work to cover any shortfall etc. etc. This s***show would take years to unravel.

#10 old engineer on 05.02.21 at 12:05 pm

I’m looking forward to the Q1/2021 update of this housing affordability report which showed affordability actually improved in 7/10 Canadian markets as measured at the end of 2020. And is actual better in many markets likeCalgary than it was 20 years ago.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwiBvJPjrKvwAhXCBc0KHe43BacQFjAAegQIBxAD&url=https%3A%2F%2Fwww.nbc.ca%2Fcontent%2Fdam%2Fbnc%2Fen%2Frates-and-analysis%2Feconomic-analysis%2Fhousing-affordability.pdf&usg=AOvVaw1ZEyyNfrC6tXnKkyxprh5V

The problem seems very local to me (Toronto and Vancouver) and won’t rate increases in 5 years be managed by pushing out the amortization?

#11 Cheryl on 05.02.21 at 12:19 pm

DELETED. Don’t try that again. – Garth

#12 Dolce Vita on 05.02.21 at 12:22 pm

That chart

House price escalation in Canada vs the US

boggles my mind, the house prices vs. disposable income disparity. Unbelievable.

Have Cdns buying into this market lost all common sense?

“Precious” sure must be precious right about now even for a nation of Gollums.

Debt slavery.

Clearly, none of them care. And I doubt they ever will.

Even if rates go up, Gollums would rather drink rainwater from eaves, sleep on lawn chairs and eat dog food rather than part with precious.

That’s messed up. Each their own I say.

#13 Calgary on 05.02.21 at 12:24 pm

Maybe PM Trudeau’s govt. will help to pay the mortgages of new home buyers.

#14 Ponzius Pilatus on 05.02.21 at 12:25 pm

Can’t wait to be flying again.
“Vienna waits for you” Billy Joel
https://kurier.at/chronik/wien/nachts-im-schlosspark-schoenbrunn-ein-stueck-freiheit-im-lockdown/401368670
A peace of freedom in the lockdown.

#15 Ponzius Pilatus on 05.02.21 at 12:30 pm

#7 Tripp on 05.02.21 at 11:55 am
Scenario a) is highly undesirable. While offering the present owners the illusion of wealth (lasting until they need to scale down or help their children with a downpayment), it will drastically affect the living standards of generations to follow. It will also affect the social arrangements and Canada’s capacity to attract talent from around the world.
——————-
You’re making some valid points here.

#16 Chameleon on 05.02.21 at 12:32 pm

Picture of a bat today? I didn’t know they had such hideous claws.

Glad to see new animals on the blog.

I just watched that My Octopus Teacher movie. WOW. How about an octopus next after this bat?

#17 earthboundmisfit on 05.02.21 at 12:34 pm

As much as I would like to see an implosion, if for no other reason than the taking down of the rapacious real estate cartel, I’ve come to the conclusion that it’s not going to happen. The Canadian banks, too big to fail, are just too deeply invested. As such, so is the CMHC, aka the federal government, always the backstop of last resort.

#18 -=withwings=- on 05.02.21 at 12:37 pm

Has the average family ever been able to but the average house as a first property? There seems to be an assumption that we can all get our dream house as our first house. I also see online people asking “who is buying these houses for 1M?!?”. The answer is people who bought a bachelor, then a 2bed, then rented, then a townhouse, then a 600K house….and we could sell where we are and buy in the 1.2-1.4M range with a 500k+ downpayment and historical low rates. We started in our first little place, it was below average but we loved it. It had a parking spot, and neither of our apartments did. Pretty funny that we thought that was the dream back in 2001. There was NO WAY we could afford a house back then.

#19 The Joy of Steerage on 05.02.21 at 12:42 pm

#8 Dolce Vita on 05.02.21 at 12:00 pm

If rate suppression a function of people vax’d, at current rates, fat chance of those numbers happening this August.

…………..

Hey, let’s all move to Italia… it’s cheap it seems!

https://www.theglobeandmail.com/world/article-italy-the-land-the-property-bonanza-forgot/#comments

#20 Advice on 05.02.21 at 12:57 pm

Hi, I’m looking for opinions on a private company share purchase. 10 years to retirement. No debt. No pension plan. Terms of the purchase include 3 year locked in period from date of purchase and you are only allowed to sell max 15% of the shares value yearly after the 3 year locked in period expires. So 2 questions:
1) Would you buy in
2) What % of net worth would you commit to purchase.
Appreciate any responses.

Private company = no liquidity. You could be locked in forever if there are no buyers. Also employment risk is amplified by owning equity in the employer. If thing go south you could be unemployed with an investment loss. Caution. – Garth

#21 Drill Baby Drill on 05.02.21 at 1:03 pm

#12 “Maybe PM Trudeau’s govt. will help to pay the mortgages of new home buyers.”
You can bet your sweet bippy that he has and is considering this. Anything to appease the millennial vote.

What an absurd idea. Chances of happening are zero. – Garth

#22 Keith on 05.02.21 at 1:08 pm

@#17

“The answer is people who bought a bachelor, then a 2bed, then rented, then a townhouse, then a 600K house….and we could sell where we are and buy in the 1.2-1.4M range with a 500k+ downpayment and historical low rates.”

In the fifties, sixties and seventies single income families bought a house, and improved what they had over time. Houses were advertised for “first time house buyers,” because people actually bought a house to start with. The world has changed much since then, and not for the better for what’s left of the middle class.
250k income and can’t get outdoor space for the dog.

#23 ElGatoNerodeYVR on 05.02.21 at 1:12 pm

It will be interesting to see if the decades long predictions of severe housing market crash will eventually somehow materialize or we will continue on our path to become the next Hong Kong ( without the majority Cantonese speakers despite the rethoric in some circles) as far as affordability goes.
Given the land restrictions we have and the % of economy dependent on RE my money is on the second option.
We will have a minor correction, some will get wiped out while those that can make mortgage payments will keep going.
No crash here, move along ,buy what you can afford , ignore the averages and live your life.
The 35,50,100 year mortgages are coming in one way or the other,such as for example parents leaving the family house to their ( basement dwelling or not) children who will promptly assume the balance,maybe even borrow more and reset again to the maximum amortization.
You read it here first and it is worth all you paid for it.

This blog is not forecasting a ‘severe housing market crash.’ That’s not going to happen. But nor will the next correction be brief with a life-long escalation following that. It is societally impossible. We are not Hong Kong with 6,690 people per square km. Our density is 4 people. Be realistic. – Garth

#24 Linda on 05.02.21 at 1:17 pm

‘Lola’s’ parents might not be able to buy her a backyard, but with a combined $250K income they should be able to rent one, even in these insane markets. She doesn’t look to be a big pup, so a modest yard should give her plenty of space to romp around in.

#25 45north on 05.02.21 at 1:17 pm

The next 48 may answer the question: is this it? The blow-off phase of a housing market that cannot possibly last?

yep

#26 ogdoad on 05.02.21 at 1:18 pm

It’s you vs. HGTV, Garth.

Who will come out on top? Will the masses suffering from intolerable FOMO (which won’t go away with a house, btw) give in to the pressures of their peers? Give in to a life time worth of dept and continue to drool at the smiles, cleft chins and lumbersexual shirts on HGTV? Or will your word finally get through? Will people emerge from their tubs of embryonic fluid only to realize that their values have been unwittingly forced upon them – ripe to invest their dough on course to finical independence!

Haha Beats the hell outta me! Can’t wait for the movie though.

Og

#27 Rook on 05.02.21 at 1:18 pm

Drill Baby Drill on 05.02.21 at 1:03 pm

#12 “Maybe PM Trudeau’s govt. will help to pay the mortgages of new home buyers.”
You can bet your sweet bippy that he has and is considering this. Anything to appease the millennial vote.

What an absurd idea. Chances of happening are zero. – Garth

—————————————

https://www.cmhc-schl.gc.ca/en/consumers/home-buying/first-time-home-buyer-incentive

Couldn’t the gov just increase the amount of the mortgage it ‘owns’ from 5% or 10% to 15% or 25%?

That program has been a complete bust. – Garth

#28 Ok, Doomer on 05.02.21 at 1:19 pm

#4 greyhound on 05.02.21 at 11:35 am
Central-banks-printing-money at an accelerating rate means that the drop in the purchasing power of currencies, including the Loonie, is also slowly accelerating.

Prices are going up; but a house is still a house.
It keeps taking more dollars to buy one because the dollars themselves are worth less and less.

++++++++++++++++++++++++++++++++

Probably more accurate to say that the COST of the dollars has dropped. There certainly is an inflation component, but the correlation between low interest rates and house prices is perfect. After tax incomes have been falling, not climbing, so income gains are not driving house prices, just cheap money. Make Money Expensive Again and house prices must drop. Math 101.

Mills will find out that math lessons are hard for a reason: they stops you from doing dumba$$ stuff.

#29 Doug in London on 05.02.21 at 1:21 pm

We need a return to the good old days of 1981, with mortgages at 20% interest. Say, has anyone seen that new movie Raiders of The Lost Ark? How about Time Bandits?

#30 crossbordershopper on 05.02.21 at 1:23 pm

every poor country in the world has very high real estate prices and poor people everywhere.
Canada is one of them, super high real estate prices relative to incomes and lots of poor people everywhere.
Weird place to live, great if you own real estate outright, poor if your destined to drive up and down the 401 everyday to work to pay for a sub par life then well, thats Canada for you.
lots of millionaire old ladies living in paid off houses, getting there govt cheque every month for 20-25 years, something has to give. sqeezing regular folks so much to keep grandma siping her tea in comfort for the rest of her life is not fair, but who said life is fair.

#31 -=withwings=- on 05.02.21 at 1:28 pm

@#17

“The answer is people who bought a bachelor, then a 2bed, then rented, then a townhouse, then a 600K house….and we could sell where we are and buy in the 1.2-1.4M range with a 500k+ downpayment and historical low rates.”

In the fifties, sixties and seventies single income families bought a house, and improved what they had over time. Houses were advertised for “first time house buyers,” because people actually bought a house to start with. The world has changed much since then, and not for the better for what’s left of the middle class.
250k income and can’t get outdoor space for the dog.

———————-

We started in 2001 in that bachelor-with-parking. No dog. No space for one. When we sold the ‘gain’ just covered the selling costs, but got all our of P back and moved to the 2bed (closets! a full size oven! balcony! we grew plants!) Two kids and a mother law later we needed something bigger. But it was 2013. Toronto was going through the first wave of the boom.
So we sold, invested, and rented a sidesplit with a yard (dog! woot!). Four years of that and we moved towns and bought a detached. We though the detached was the snizzet, it had a light in the master bedroom closet, and a two piece ensuite! Amazing!

So: where are you on the chain now? You trying to jump from renting to SFH? We worked 15 years and 4 moves to get to this one. We’ve decided we are not going to take the final step to the 1.2M homes, even though they are very very nicely done. We like the bigger yard of our smaller house and the kids are pre-teen and happy here.

#32 kommykim on 05.02.21 at 1:46 pm

RE: #19 Advice on 05.02.21 at 12:57 pm
Hi, I’m looking for opinions on a private company share purchase. 10 years to retirement. No debt. No pension plan.

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

What could go wrong? Well you could lose ALL your money. Don’t do it! Maybe this will sober you up:

https://www.timescolonist.com/business/league-assets-investors-left-with-pennies-others-in-cold-1.2178525

#33 Jason on 05.02.21 at 2:01 pm

I’ll believe it when I see it.

#34 Lee on 05.02.21 at 2:07 pm

#26 Rock,

That program sounded insane from the start.

#35 Honest Realtor on 05.02.21 at 2:07 pm

There may indeed be market fluctuations, as there have been through my decades in real estate.

But property will continue to be the best investment anyone can make in Canada, and the backbone of personal financial success.

In 2030 and 2040, buyers will look back and be so grateful they bought in 2021 and beyond.

In your career, or anyone else’s, these conditions have not previously existed. Surely you have more to add to this conversation than a sales pitch. I would be wary engaging a person like you to advise me on spending, or borrowing, millions. – Garth

#36 G on 05.02.21 at 2:10 pm

Hi #19&#31,

My brother in law did similar, buy shares of the private company he worked for, and got screwed out of his money for retirement Big time!
CPP can only goes some far.
And he had a civil Engineering degree.
Yes caution, or better just don’t risk your retirement cash in one place like that. IMO.

#37 GrumpyPanda on 05.02.21 at 2:19 pm

Paramedics for Ornge air ambulance just voted 94 % in favour of a strike. Glassdoor.ca reports their salary ranges from $114,516 to $158,678, averaging $126,798. The Globe reports they want an exemption from a law capping salaries for public employees. Their “hero status” is at risk.

#38 the Jaguar on 05.02.21 at 2:24 pm

@#9 Mr. Lahey on 05.02.21 at 12:01 pm
“…There are a lot of guilty parties here….Banks, for lending way more than people can reasonably afford. Pre-approvals are way too high and they encourage people to buy more house than they can afford. Why not? They’re covered by CMHC. ……….” ++++

Hmm. If the average house price in Toronto is 1.7 million, then CMHC isn’t insuring any of them, because they don’t insure homes over one million.
I’m also pretty sure those mean old banks haven’t been caught on camera holding a Smith & Wesson Model 29 to any person’s head to make them sign up for mortgage funds or any other service they provide.

The Office of the Superintendent of Financial Institutions (OSFI ) will raise the qualifying rate to 5.25% in less than a month. Always a little late to the party, the Chicken Hawk is, but seems like they’re doing what they can halt the grass fire.

I’ll break it to you gently, Mr. Lahey. The ‘blame game’ is as old as the beard of Moses, but the reality is that people get in over their heads all by their little old selves.
Parents are grand accomplices, of course. Coercion, Bank of Mom down payments, co-signing the debt, and above all forgetting the lesson that job #1 as a parent is preparing the kids to stand on their own two feet, make their own mistakes, and prepare them for the road ahead. Those are all ‘character’ lessons.

As for Lola and her backyard, my observation is that a dog with a big backyard is invariably on the doorstoop waiting for its owner to appear. They only want their owners. And maybe half of their owners cheeseburger.

#39 Hilroy on 05.02.21 at 2:27 pm

“welcome to my million dollar home – furnished exclusively by Goodwill, Value Village and Kijiji. We opted to replace our aging roof shingles with straw thatching.”

#40 Lumber on 05.02.21 at 2:30 pm

If Canada’s GDP is ‘rocketing ahead 7%’, and yet real estate in Canada makes up 15%? 20%? of GDP, is Canada’s recovery as rosy as it seems? Especially if rates skyrocket and prices plummet? Can equities continue to be so sunny when consumer confidence takes a crap? Seems like there’s a few more ingredients to go into this happy-talk pie…

Residential real is 9% of GDP. House prices are not going to ‘plummet’ and rates will not ‘skyrocket’. People need to stop talking in extremes and use their noodles. – Garth

#41 Leftover on 05.02.21 at 2:30 pm

Globe and Mail has an interesting dynamic graphic that shows house price gains in Canada versus the rest of the G8 since 2000.

We’re in the lead, no surprise. 168% compared to the USA which comes in the middle of the pack at 55%. I won’t bore you with the math but that equates to 5% CAGR in Canada versus 2% in the States.

They have an actual economy down there, a reserve currency, and room to tax wealthy people and corporations to pay for stimulus. We have none of these things and are relying on MMT to finance consumption.

I’ll reserve comment on MMT other than to say that it doesn’t require taxation other than to suppress inflation. When we have asset inflation that’s more than double the posted consumer rate then things, even in the Utopian MMT world, have to change.

That, combined with the animal urges of the bond market coming later this year, could devastate Canada’s housing market which, these days, means our whole economy.

1989 all over again, but this time we’re on our own.

#42 Luca on 05.02.21 at 2:33 pm

I’m confused. Garth, if you’re not predicting a housing crash why the daily blogs making it sound like you are predicting a housing crash? Day in and day out housing kinda crash talk. If it’s just a level off then I suggest not writing daily blogs about housing. Perhaps stick to the markets although they too are sky high. Gold looks cheap.

When did I say ‘crash’? The market need only flatline or decline a little and many recent buyers are in trouble, especially the WFH refugees. Be careful. – Garth

#43 Quintilian on 05.02.21 at 2:46 pm

Oh boy! A raw nerve was struck, and the realtors, the one trick ponies, debt slaves, got triggered.

The truth hurts.
Today’s post will surely result in an avalanche of posts.

It’s different this time… they don’t make anymore land… tycoons from all over the world want to live (insert town)…

#44 Ponnaps on 05.02.21 at 2:47 pm

Legislation to allow only citizens to buy property.. buying a piece of Canada is owning a piece of its sovereignty, a privilege reserved for citizens .. wonder how many citizens still can’t own a home? No greater tragedy if one can’t own a home in their only homeland,

That would make zero difference to values. We are doing this to ourselves. – Garth

#45 Claire on 05.02.21 at 3:05 pm

#18 -=withwings= Jumping properties means paying realtor commission each time. People I’m aware of that went from a bachelor or apartment to a townhouse made no money on their apartment, broke even, and moved into a townhouse because they got married and 2 incomes to support the larger payments. After that they bought a house with a suite and had a tenant or family live in the suite to pay the higher mortgage. Equity wasn’t the reason they could carry the larger mortgage each time, it was adding an income to the equation.

#46 Handsome Ned on 05.02.21 at 3:16 pm

#9 Mr. Lahey

Your trailer park is going to get real busy with people fleeing high housing prices. I can see double wides going for 200k. Tell Randy to lay off the cheese burgers. You will need him for whats coming, a flock of Sh*t birds coming on a Sh*t wind. You are the liquor Mr. Lahey.

#47 crowdedelevatorfartz on 05.02.21 at 3:16 pm

@#3 Wrk.dvr
“Screw a slab of plywood to each end of the log with a level on the top edges, throw an aluminum ladder over it all and drag the mill along the top of the ladder with a hand crank boat trailer winch. Also get a ripping chain or you will fail.”

++++
Interesting.
Link?

P.S. Taylors Boston Terrier Lola must have some British in her…….. judging from those teeth…

#48 TurnerNation on 05.02.21 at 3:17 pm

I can see the future (tongue-in-cheek of course)
It’s 2025. We are facing only 28 more days of shutdowns, natch, to lick that CV-23.
My local prefecture’s Block Captain has placed me under investigation for Suspected CV Minimization.
This offence while not a serious as the indictable ‘CV Denial’ one, comes still with a $10,000 set fine and/or 6 months of jail.

Back to the present: apparent photos of the new Border Checkpoint at New Brunswick. Guard huts are in place.
Temporary?!

https://i.redd.it/mar9jf9g8lw61.jpg

— Again early 2020 we got hit with WEXIT. Who is behind all these marketing campaigns and what timing?
The country is being shredded before our eyes.


–Economic Shutdowns in Kanada…probably aren’t going away. Which would bring us to winter, and as we’ve seen in the past hospitals are always full. Which would lead to…non stop lockdowns.

“The COVID-19 B.C. modelling group warns that if the circuit-breaker restrictions are lifted as planned immediately after Victoria Day, the coronavirus could see a resurgence, which could slam hospitals already struggling to keep up with cases and deal with outbreaks.

—2018 do you recall it?

https://toronto.citynews.ca/2018/02/13/toronto-hospital-flu/
Surgeries postponed due to severe flu cases overwhelming Toronto ICU
BY AMANDA FERGUSONPOSTED FEB 13, 2018 5:23 PM EDT

#49 islander on 05.02.21 at 3:27 pm

https://www.theglobeandmail.com/world/article-italy-the-land-the-property-bonanza-forgot/

Try Italy!

#50 Dogman01 on 05.02.21 at 3:34 pm

#37 GrumpyPanda on 05.02.21 at 2:19 pm
Paramedics for Ornge air ambulance just voted 94 % in favour of a strike. Glassdoor.ca reports their salary ranges from $114,516 to $158,678, averaging $126,798. The Globe reports they want an exemption from a law capping salaries for public employees. Their “hero status” is at risk.

—————————————-
I saw the same MSM story about those “hero’s”, I was kind of curious how down-trodden they were. Defined Benefit Pension Plan and weeks of vacation for likely one of the coolest most coveted jobs in Canada.
I guess with TO RE Prices (basic shelter) everyone will be needing raises quite soon….

Maybe the hero’s are those working minimum wage in precarious jobs, or the construction or forestry workers with higher accident and death risk.

#51 crowdedelevatorfartz on 05.02.21 at 3:38 pm

@#20 Advice

Without knowing your personal situation?
Oh the possibilities.
I have purchased “share options” in the past on my publicly traded employer and have done ok.
Shares never really went anywhere but the “cost of living” increases and they were easy to sell.
But the company would “gift us one share for every 3 we purchased up to a maximum number purchased per year.
That was nice.

I also have shares in a privately owned company for the last 10 years of my employment that have paid HUGE dividends year over year which I re-invested in the stock market.
Its worked out very well…..so far…
But as Garth says.
The privately owned company shares will be a tough sell down the road but “do-able”.
I have recouped all my money invested in that company and continue to reap the dividend benefits.
In both scenarios ( public or private)I never had more than 10% of my “retirement” investments in my employer…. i have seen friends over the years push everything they had into their company shares only to watch a new management team or the economy destroy it all…along with their job.

The job gone and their savings wiped out at 45, 55…..then the final trifecta…..divorce usually follows.

Never risk (invest) your future in company shares more than your willing to lose entirely…because your retirement may be…..
“Welcome to WalMart how may I help you”

#52 Rogerhomeinspector on 05.02.21 at 3:40 pm

Just my theory on why this out of control situation is being allowed to happen:

Baby boomers are set to retire. A lot of them have their net worth tied up in their home. The powers that be create a situation allowing them to cash out for top dollar. They then have cash in hand.

These same folks need a steady stream of income in retirement. The BOC allows rates to rise to something reasonable- say 6 percent. This allows for reasonable, low risk income for this cohort not only personally, but makes it easy for governments to meet their pension obligations too.

The folks now saddled with crazy mortgages will be given longer amortization periods etc… to make life more affordable. 25-40 years down the road, we do this whole thing over again. Lower rates, inflate assets, assets are sold and profits taken and rates normalize to create stable income.

Boom, bust. Over and over.

Seems to be not a reasonable play, but an explanation for the insanity. My parents bought in 1976. Refinance at 18 percent in 1981. Times sucked… for them. My grandparents that sold their farm in the mid 70s and retired to the city were earning 16 percent guaranteed on their nest egg. Now my parents are the ones with the inflated assets to sell and the high net worth, they just need the interest to see them through to end of life.

Am I crazy or has anyone else thought this?

The former. – Garth

#53 Mr. Lahey on 05.02.21 at 3:45 pm

Garth’s Quote: This blog is not forecasting a ‘severe housing market crash.’ That’s not going to happen. But nor will the next correction be brief with a life-long escalation following that. It is societally impossible. We are not Hong Kong with 6,690 people per square km. Our density is 4 people. Be realistic. – Garth

I know on paper we are 4 peeps per kilometer, but that’s a little unrealistic. Isn’t Canada 80% urban? Not quite Hong Kong, for sure, but not exactly Baffin Island. either. Also, sorry to break it to half the country, but most immigrants don’t want to move to small towns in the prairies, Winnipeg, rural Maritimes etc. Nor do a lot of people want to retire there. There is a ton of demand for Victoria, Vancouver, Okanagan, Canmore, Ottawa, GTA, parts of Montreal and Halifax. I agree with your rebuttal Garth but am wondering if Vancouver and Toronto will continue to be stupid for decades as they seem to be locked on stupid mode for decades already.

#54 crowdedelevatorfartz on 05.02.21 at 3:46 pm

@#48 TurnerNation

Back to the present: apparent photos of the new Border Checkpoint at New Brunswick. Guard huts are in place.
Temporary?!

https://i.redd.it/mar9jf9g8lw61.jpg

+++++

The A/C units installed on those “guard huts” are probably “heat pumps” they can provide heating and cooling year round.

My recollection from decades ago of driving the Trans Canada Hwy in winter through the Tantramar Marshes on the N.S. / N.B. border was, screaming winds and blowing snow ….and that was in the month of April….. :0

Those huts may be there for a while.

#55 KVC on 05.02.21 at 3:49 pm

This sold in Northern BC recently for $480,000:

https://webcache.googleusercontent.com/search?q=cache:ZCSEk5I6j-8J:https://wendebrash.remax.ca/listing/292280298-150112725/816-blair-crescent-prince-george-bc-v2m-6h5/+&cd=4&hl=en&ct=clnk&gl=ca

Listing is gone so that’s a cached page.

$489,900 was asking price. It did sell for under but, then you go look at BC assessment; $392,000 assessment value. Not to mention it shows 3 bedroom there so looks like they made some big modifications to get up to 6 bedrooms. I hope whomever bought it, did an inspection!

Is a near 1980’s house in good old Prince George worth almost half-a-million?

#56 David Prokop on 05.02.21 at 3:51 pm

Technically we’ve had a recession, but it wasn’t a typical consumer demand/ credit tightening recession. Businesses were ordered to shutdown but the government pumped more money into people’s pockets than they would’ve made working.
Our RE won’t go down until people start losing jobs for real, large layoffs due to lack of demand etc..
I don’t see it happening, government will do anything to prevent this bubble from popping. They embraced full blown MMT, they will print whatever is needed, send people free money, forgive debt, introduce 100 year mortgage, just wait… Central banks have changed the rules, it’s a game charger imo

It’s always a mystery how people can tell themselves, and obviously believe it, that ‘government will do anything to prevent this bubble from popping.’ You folks will be quite surprised. – Garth

#57 Brett in Calgary on 05.02.21 at 3:52 pm

Many of the small towns around Calgary are starting to slump again (flat year-over-year). Some further out have had ‘price cuts’. Whatever happens will be worse in T.O. and Van, but I think the idea that ‘houses are the best investment’ will be tested. I am curious to see how the devoted followers react to that idea being challenged.

#58 I’m not a doc on 05.02.21 at 4:25 pm

They will own nothing and they will be happy or will they…

#59 Fragrant Cookie on 05.02.21 at 4:29 pm

“We are not Hong Kong with 6,690 people per square km. Our density is 4 people. Be realistic. – Garth”

But real estate valuation is highly localized though. In 2021, Vancouver’s population density is 5300 per sq km, while Hong Kong is at 6800 per sq km. The fact that we are not so far behind Hong Kong is quite concerning. The big difference is that the Hong Kong government was very hands-off when it comes to market intervention. At one point Hong Kong is as close to a free capitalist market as a market can get. Our BC NDP is far far more meddle-happy when it comes to that.

Unlike HK, citizens of Van can load up the minivan move. – Garth

#60 Corona Extra on 05.02.21 at 4:34 pm

#48 TurnerNation

My local prefecture’s Block Captain has placed me under investigation for Suspected CV Minimization. This offence while not a serious as the indictable ‘CV Denial’ one, comes still with a $10,000 set fine and/or 6 months of jail.

—–

Do you have the pay the ten large, or can you instead opt to be bitten by the CV bat featured in today’s post?

#61 -=withwings=- on 05.02.21 at 4:52 pm

@ #45
#18 -=withwings= Jumping properties means paying realtor commission each time. People I’m aware of that went from a bachelor or apartment to a townhouse made no money on their apartment, broke even, and moved into a townhouse because they got married and 2 incomes to support the larger payments. After that they bought a house with a suite and had a tenant or family live in the suite to pay the higher mortgage. Equity wasn’t the reason they could carry the larger mortgage each time, it was adding an income to the equation.

We bought/sold 3 times in twenty years. That doesn’t fell like jumping. As I said first one was a wash, with the gain just covering realtor and transfer fees. 2nd one pretty good (We did all the reno work ourselves over the time we were there) and 3rd one the best (As we caught the rising Toronto, but bought elsewhere). Our income did grow, as it should as you get older and more experience. I went to grad school in 05 so we had no income at all for a few years which was not fun but worth it.

I still feel a real sense of entitlement to the perfect property here. Someone needs to tell people they may have to live in a non-prefect less than average home for a few years – like seven – before they move up. And it may take multiple moves to move up.

With 250k income, and say 100k down you can buy something for 1M. So go do that.

#62 under the radar on 05.02.21 at 5:02 pm

#3 thanks , but you need to make holes in the ladder to screw to the log. I will use some angle iron at both ends of the log , a level and screw a 2×6 into the top of the log and guide the mill over the 2×6.
Oh, and about buying shares in a private corp, not a good idea , as Garth said, you cannot get out and unless you have voting control, your toast as shareholder agreements only you get you to the court house steps and proving oppression is not easy.

#63 Quintilian on 05.02.21 at 5:03 pm

Too funny and too predictable, I was waiting for the Hong Kong Realtor Pitch.

If all of the supposedly 300,000 thousand do move to Vancouver, it will be the best catalyst for a real melt down.

If 100,000 thousand of them are supper rich and manage to inflate the bubble even more, surely the 200,000 thousand remaining will join the ranks of the disgruntled locals and hijack the political reins.

#64 Wrk.dover on 05.02.21 at 5:15 pm

#3 Wrk.dover on 05.02.21 at 11:31 am

(saw mill blather)
I doubt this is what the Hon. Mr. Turner does on Sunday’s.

I heard that. – Garth

What I meant is; I suppose Grand Master Turner uses a broad axe and adze to square mighty timbers, while blushing ladies gather to watch in glee, on Sunday afternoons!

______________________________

#47 crowdedelevatorfartz on 05.02.21 at 3:16 pm

Interesting.
Link?

_____________________

I bought a big coffee table book about chain saw milling with the Alaska mill, in the early eighties. It had a gross of photos. I flipped it a few years ago to someone ready to use it!

What I mentioned is the total summary. The book never mentioned the rate of cut though. Plus, I wasn’t a metal fabricator yet, so that mill was too much to bootleg for me. But yeah, super simple, with a Stihl 090.

Rip chains have way fewer teeth, and you cut away the guard to allow rapid chip expulsion too.

#65 Editrix on 05.02.21 at 5:21 pm

For another month prices will increase, based on my neighbourhood. A lot of houses came onto the spring market. All are selling over asking very quickly. The bubble isn’t over just yet.

#66 joe on 05.02.21 at 5:28 pm

Next time when any of the self righteous “capitalists” whine about government handouts, just remember all the money printing and the savers (including pensioners) who are being payed less than inflation who are ultimately paying the price for your cheap mortgage.

#67 Cheese on 05.02.21 at 5:49 pm

I work in the Ottawa General, I watch the Orange guys landing all the time. I do the cleaning for 19$/hr, if they go on strike, is their job available? I would love to learn to be a paramedic or nurse.

#68 leebow on 05.02.21 at 6:05 pm

So many people are procrastinating on the most important financial decision of their lives and have no clue what’s going on.

But try telling that to anybody now or ever without risking the relationship.

#3 Wrk.dover

I wouldn’t be so sure. Sometimes it looks like GT runs the blog for direct descendants of Homo Habilis with all their power tools, generators, trucks and inexplicably detailed knowledge of forestry.

#69 Nonplused on 05.02.21 at 6:13 pm

This is back to yesterday’s topic. File it in the “perception vs. reality” drawer.

https://www.zerohedge.com/commodities/what-lumber-shortage-train-loads-lumber-just-stacked

One commenter writes:

“I was expecting a huge limber yard. The one in the video represents a couple of days throughput for your average Canadian mill. A drop in a bucket is all that represents.

In BC our sawmills are paying a 30% tariff to ship to America because our lumber is exempt from free trade and the American lumber companies say they can’t compete with free trade. For a while last year the price of lumber was lower than cost before tariffs, so any gains now are only recovering the previous losses.

Also the pine beetle in BC (worlds larges lumber producing region) has wiped out nearly half of our pine forests a decade ago, and yet we could still process that wood from dead stands for the last decade, but now it all goes to pellet plants and co-gen operations because any salvage wood left is to brittle to make into dimensional lumber. Thus in the last year most companies have had their allowable cut reduced by as much as 60%… which will be a new decades long trend.

The last time we had a huge spike in lumber prices ($600 a thousand board feet) was 1992 after hurricane Andrew, and immediately all sawmills went to adding a third shift on fri-sun and extending hours on weekdays where the mill ran around the clock. That is not happening now, its just business as usual because the log yards at the mills don’t have the logs to process… they are all half empty even though spring breakup is just now starting. where will the logs come from to keep the mills running in 2-3 months time. Last summer the logs were literally going from logging truck straight to feeding the mill… which isn’t sustainable unless you have prices like $1000 a thousand board feet like today.”

——————–

So where one guy with a camera sees abundance and conspiracy, another guy who seems to have industry experience sees a false narrative.

It does seem strange though that a country with as many trees as Canada can have a lumber shortage. Or a housing crisis given all the land.

#70 Steven Rowlandson on 05.02.21 at 6:14 pm

There is a lot of faith in the market and greed to overcome before the big slide down to home prices that fit peoples earnings. A 95% to 99% drop.
What color is your parachute realtors and homeowners?

#71 Steven Rowlandson on 05.02.21 at 6:20 pm

“It’s always a mystery how people can tell themselves, and obviously believe it, that ‘government will do anything to prevent this bubble from popping.’ You folks will be quite surprised. – Garth”
Garth are you thinking that being on the hook for mortgage defaults and other losses isn’t a big deal or
is a Force Majeure when it comes to mortgage insurance possible?

#72 Nonplused on 05.02.21 at 6:22 pm

#20 Advice on 05.02.21 at 12:57 pm
Hi, I’m looking for opinions on a private company share purchase. 10 years to retirement. No debt. No pension plan. Terms of the purchase include 3 year locked in period from date of purchase and you are only allowed to sell max 15% of the shares value yearly after the 3 year locked in period expires. So 2 questions:
1) Would you buy in
2) What % of net worth would you commit to purchase.
Appreciate any responses.

Private company = no liquidity. You could be locked in forever if there are no buyers. Also employment risk is amplified by owning equity in the employer. If thing go south you could be unemployed with an investment loss. Caution. – Garth

—————————–

Hey Advice, I owned shares in a company like that once, only they didn’t yet have an exit plan (although it was being discussed). After a huge move up in the appraised share price they did a capital raise and I rode that to sell. It would have been difficult to do had they not been oversubscribed and the other owners didn’t like me much.

But that’s just my experience, the other investors are still quite happy with the company.

#73 Ponzius Pilatus on 05.02.21 at 6:30 pm

Is State Communism dead or just latent?
Watching the news yesterday, and I did not see any  parades and shows of military might that were common during the cold war.
I happened to be in EastBerlin on May 1st, 1976.
We just went for a walk on a wide street (could have been Unter den Linden).
We noticed that the crowds were getting larger and we wanted to turn into a smaller street, which was cordoned off.
So we had to continue to walk as the crowds got bigger and bigger.
Then finally the crowd emptied into a enormous Platz ( could have been Alexander Platz) which was full of tanks and rocket launchers.
And on the huge balcony of a large building we could see Leaders of the DDR (Deutsche Demokratische Republik) waving to the crowd. Very few people waved back. It was actually eerie how quiet the crowd was.
After we exited the Platz, the crowd dispersed and we entered the nearest pub for a round of  well deserved East German beer,  which was actually very tasty.
And very cheap.
Prost.

#74 Nonplused on 05.02.21 at 6:52 pm

#22 Keith,

In Calgary you can get this for $299,000:

https://www.realtor.ca/real-estate/23143235/20-coachway-gardens-sw-calgary-coach-hill

Not far from Edworthy park and you can bike to work downtown if that’s your thing. Many people do from that area. Quick access to the mountains and the West Side Rec Center is also nearby. 3 bedrooms, a garage, a developed basement, and enough yard for a small dog. At today’s interest rates you could probably float that on $60,000 a year family income.

Between Calgary, Airdrie, and Cochrane (all considered commuting distance to downtown) there are over 250 listings with 3 bedrooms under $300,000 right now.

So ya, Calgary doesn’t really have a housing crisis to the same extent as Vancouver or Toronto. We have an employment crisis. But if you can get a decent job here, housing crisis solved!

#75 mmehan on 05.02.21 at 6:55 pm

Two different friends of mine sold their houses in Surrey last month with closings in August.

Now they can’t borrow money for a new place because they haven’t received payment for their sale yet and they are freaking out about getting priced out over the next few months. They are frantically asking ppl to borrow $50-75,000 so they can get something right away.

#76 Nonplused on 05.02.21 at 7:01 pm

“We are not Hong Kong with 6,690 people per square km. Our density is 4 people. Be realistic. – Garth”

My contention would be that when calculating Canada’s population density all land north of Edmonton (nation wide) and the whole of Saskatchewan, Manitoba, and western Ontario should not be included. Nobody wants to live there. It’s still not Hong Kong though. But the livable areas are full.

#77 mmehan on 05.02.21 at 7:03 pm

It’s always a mystery how people can tell themselves, and obviously believe it, that ‘government will do anything to prevent this bubble from popping.’ You folks will be quite surprised. – Garth

The gov’t has to prevent the bubble as everyone had no choice but to get into the market at these prices because of the gov’t. They caused it, and will help everyone out later on.

#78 IHCTD9 on 05.02.21 at 7:14 pm

The future will be interesting with some new tech already being deployed and gaining momentum.

Starlink promises global high speed Internet, for the first time. This opens the door for learning, “socializing”, and working from anywhere. Drone deliveries of lightweight packages are already happening around the world. It will not be too long before a UAV can carry 100 lbs, and autonomous logistics hubs are set up allowing quick, cost effective deliveries of the most common consumer products to almost anywhere. Solar tech continues to improve with the world record currently at 47%. Some day not too far down the road, 50%+ efficient panels will be available for 2.00/watt allowing real world true off grid power that for the first time, requires an acceptable sacrifice in lifestyle.

Maybe in 20-30 more years, one might be able to build a small efficient home off the beaten path where land is cheap, and still earn, learn, socialize, power most of the modern conveniences, and be resupplied with food and consumer goods at workable delivery costs. About the only snag left to conquer is heating and transportation fuels. This could be solved with lots of on-site storage with maybe semi-annual deliveries. It’s all shaping up to be workable in the near future.

If it happens, people will take advantage of the lower costs of living, and greater quality of life as they have always done – and move.

If government does not meddle, I can’t see how this isn’t a logical direction for folks in the future given all the empty space in Canada. Folks who own a pile of urban rental units had better keep their ear to the rail…

#79 Nonplused on 05.02.21 at 7:21 pm

#67 Cheese on 05.02.21 at 5:49 pm
I work in the Ottawa General, I watch the Orange guys landing all the time. I do the cleaning for 19$/hr, if they go on strike, is their job available? I would love to learn to be a paramedic or nurse.

——————————

Can you fly a helicopter? Because I think we were talking about pilots.

My son can fly a remote toy helicopter. But then my wife tried it and she crashed it with the loss of all lives on board.

#80 DON on 05.02.21 at 7:26 pm

https://granadawm.com/transitory-inflation/

Seems like a sensible article on ‘transitory inflation’ the last time the feds used the term in 2011.

On Friday the Fed reiterated ‘transitory inflation’ then Yellen and the White House over the weekend. Can transitory inflation last a lufetime. Warren and Charlie are seeing price increases that are being accepted by all.

#81 Cheese on 05.02.21 at 7:30 pm

If only, it would be very fun to be able to fly.

#82 crowdedelevatorfartz on 05.02.21 at 7:37 pm

@#75 mmehan
“Two different friends of mine sold their houses in Surrey last month with closings in August.

Now they can’t borrow money for a new place because they haven’t received payment for their sale yet and they are freaking out about getting priced out over the next few months. They are frantically asking ppl to borrow $50-75,000 so they can get something right away.”

++++

Well, maybe thats a good thing.

I’m thinking the banks know if they loan them the mortgage for a new place and the market has a dump before their old place changes hands and the buyers “walk”…….. fugly.

The banks win again….

#83 DON on 05.02.21 at 7:57 pm

#69 Nonplused on 05.02.21 at 6:13 pm

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

That commenter knows his BC Forestry.

While driving around the interior around 12 years ago lumber yards were full of pine logs, a race against rot. We stopped in Merrit for the night after a long drive the motel was close to a mill. Everything smelled like pine.

It takes a lot of logs to feed an automated mill. Lots of logs are loaded on barges that travel out of sight of locals. Logs headed accross the boarder and abroad.

The one true pleasure in life is to walk amongst the old growth trees in a forest of them. As a kid I never imagined an end to the massive forests. My next house will be built with rock…like Fred and Wilma.

#84 crowdedelevatorfartz on 05.02.21 at 8:11 pm

@#83 DON
” My next house will be built with rock…”

++++
Moving to Sudbury or Newfoundland?

#85 joblo on 05.02.21 at 8:26 pm

Hey Apocalypse, you on the job?

10 days to Line 5 shut, what then?

#86 Devil Anse on 05.02.21 at 8:27 pm

Wealthsimple on brink of largest-ever Canadian private tech funding: $700-million-plus deal would value the bank challenger at $5-billion

https://www.theglobeandmail.com/business/article-wealthsimple-on-brink-of-largest-ever-canadian-private-tech-funding/

….$5B valuation for $9B in AUM? Maybe if Turner investments launches an app, Garth and Ryan and Doug will be gajillionaires?

#87 Tri state pat on 05.02.21 at 8:39 pm

No problem here. Just like in California, our banks will push 50 year mortgage terms. Again, the ones running the show could have done something to keep this gasbag from happening. But they didn’t.

#88 Ponnaps on 05.02.21 at 8:44 pm

That would make zero difference to values. We are doing this to ourselves. – Garth

One of the newer categories of YouTube channels deals with people talking about their immigrant experiences.. a popular sub category is that of channels talking about how they were able to buy 2,3 houses in 2,3,5 yrs… it takes 4-5 yrs to get your citizenship including 3yrs to qualify.. family income in the first few years is normally below average.. begs the following questions:

1. How are you arranging for your downpayments to buy multiple properties as PRs?
Ans from these channels: money from home countries. Perfectly legal sources but bypassing formal banking system to avoid the rabbit hole called AML

2. How are you able to carry your debt?
And: Rental income from each of these properties cover all expenses. Yes, they have no idea it’s reportable income in which case they’d never make their investment realize cash flows post taxes

Inference from #1 – local ownership doesn’t imply local sources of funding.

Inference from #2 – rental incomes are not always declared. Topic of today’s post speaks about income but misses unreported income such as rents which massively cover mortgage payments.

There is such a large underground economy in Canada, Garth, you have no idea because you are a statistical analyst.. you may want to dig further into this to discover the murky underbelly that’s shoring up real estate

Not statistically influential to the overall market. Emotional, yes, Meaningful, no. But believe what you want. – Garth

#89 Strike Won! on 05.02.21 at 9:10 pm

#32 kommykim on 05.02.21 at 1:46 pm
RE: #19 Advice on 05.02.21 at 12:57 pm
Hi, I’m looking for opinions on a private company share purchase. 10 years to retirement. No debt. No pension plan.

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

What could go wrong? Well you could lose ALL your money. Don’t do it! Maybe this will sober you up:

https://www.timescolonist.com/business/league-assets-investors-left-with-pennies-others-in-cold-1.2178525

________________________________________

WTF? He was talking about shares in a private company, not shares in a REIT that was private. Two completely different entities.

Please try to keep up with the conversation.

#90 GrumpyPanda on 05.02.21 at 9:21 pm

#79 Nonplused. Nope, definitely paramedics. I checked the Ontario sunshine list. Actually, one Critical Care Paramedic pulled $171,799.39. I couldn’t find what pilots earned.

#91 JRT on 05.02.21 at 9:49 pm

This is a timely post. With the talk of inflation, next time you go grocery shopping. Spend an extra 10 to 20$ if you can. There is a drought in many areas of the US and I hear from sources that there are some supply issues.

#92 Montana Bob on 05.02.21 at 10:38 pm

I saw those graphs. I could not find publication for first graph. However, second graph is interesting.
So, a family spends 45% of pre-tax income in ON. With assumption that family has 100k of pre-tax income, they spend 65% of after tax income on mortgage. If we include other expenses, if will go to more than 70%.
And, this will end well…. Sure…

#93 Northshore guy on 05.02.21 at 10:39 pm

So many people in comment section thinking prices won’t decline.
Anybody who has watched northshore market like a hawk will tell you there are neighborhoods where prices declined by up to 40% for detached during 2017 to 2019. The only reason picture wasn’t so bad because condo prices doubled during same period.
Those who bought at the top in summer of 2016 thinking rates will always be 0 and Justin will never let real estate go down learnt a big lesson.
I see the same happening now and the lesson will be taught again.

#94 fishman on 05.02.21 at 10:49 pm

The B.C. lumber tariff? B.C. because the Feds fixed it so the vast majority of timber affected was from B.C. Due to the fact the TFL’s (tree forest licenses) are on crown land. Back east the timber is mostly on private land. It was an anti dumping reverse tariff that is reduced as the price goes up.
The beetle infestation was a glorious opportunity to go way over the allocated quota for each TFL. The mills geared up. They had years & unlimited supply of cheap timber to practice on & become the most efficient in the world. And boy oh boy did they efficiently overcut.
Old timers dealt with pine beetles for decades. They’d go in the winter when the bugs were dormant & take the bug infestation area out.
The bug problem mestastized when the Dippers got in power & at the same time the public sector unions wrestled the party from trade unions. The big daddy being the IWA. Greenie types wouldn’t let loggers go into Manning Park & take out a growing bug area. The government backed the Greenies.(its a park as in the budget will balance itself). From there it went north & the interior became a sea of red. No action like inaction. Similar to our Covid 15 months ago when the Chinese in Richmond got a petition of 53,000 signatures to stop planes landing at YVR from China. But if it makes you feel any better blame it on Climate Change. And stay away from lumberyards. Worry about important things like whether you have to WFH or WFO.

#95 Island Guy on 05.02.21 at 11:10 pm

In BC, 94% of our landbase is crown land (back east I believe the amount is much lower). In a country with so much land, I often wonder why we don’t consider freeing up more of this crown land to help offset our supply of land for people to live on. Seems weird.

#96 TheDood on 05.02.21 at 11:25 pm

#35 Honest Realtor on 05.02.21 at 2:07 pm
There may indeed be market fluctuations, as there have been through my decades in real estate.

But property will continue to be the best investment anyone can make in Canada, and the backbone of personal financial success.

In 2030 and 2040, buyers will look back and be so grateful they bought in 2021 and beyond.
__________________________________________________

“……property will continue to be the best investment anyone can make in Canada, and the backbone of personal financial success……”

The backbone to personal financial success is a six or seven figure (and growing) investment portfolio that spits out a monthly income. You’re a salesman. Nuff said.

#97 Terry on 05.02.21 at 11:29 pm

Nothing wrong in the housing markets. All is unfolding as it should. Just let the free markets do their thing. Rates have already gone flat and are already starting to trend downwards again. It’s a great time to buy a house. It’s always better to have something substantial that you can see, touch and feel. Paper assets can just up and disappear with the wind. Getting tangible physical assets its the best defense for the inevitable stock market collapse and multiple currency crisis getting ready to happen. If you have cash…………..start spending alot of it quickly. Spend it on tangible physical assets……….horde stuff………get it out of paper assets to preserve your Net Worth and to get away from the tax man who will be taxing you alot more in the near future.

#98 Galt on 05.02.21 at 11:30 pm

This Vancouver condo at 1.5 million for 1,100 sq ft.

https://www.realtor.ca/real-estate/23143022/1608-1111-alberni-street-vancouver

With 5% down and a 3.2% mortgage locked for 10 year amortized over 25 year, the monthly payment is $7,733

I just accepted a position at $160K CAD working remotely for a San Francisco tech SPAC and my after tax income would not cover the usury let alone $1017.00 per month maintenance fee, taxes, food, transportation etc.

The Bank of Canada along with CMHC and your elected representatives are about to leave young Canadians holding the biggest bag of odorous excrement ever assembled in the history of capitalism.

Honestly you all deserve it for willingly going along with this insanity.

#99 Tom from Mississauga on 05.02.21 at 11:35 pm

Up in Halliburton again this weekend splitting firewood, 8 x 4 x 3ft seasoned pile now $1,300 +HST doesn’t include delivery and stacking at residence not offered. Ryan wrong about distancing in the mill. The problem is no TFWs to do the brute work. Higher prices will not fix supply. Uppa, uppa.

#100 Don on 05.02.21 at 11:54 pm

Ka-boom, in my opinion, is your BEST blog post so far.
Equities are ready for a major correction within weeks. Real estate correction cannot be too far off.

#101 Keith on 05.03.21 at 12:00 am

@#74 Nonplused

What a difference in Calgary. You have to believe that Vancouver is going to have a worsening crisis of professionals with these insane prices.

#102 Diharv on 05.03.21 at 12:46 am

The vast bulk of people cannot ever afford a home now. As for the toll on families growing, well, they did it to themselves.

#103 Nonplused on 05.03.21 at 12:57 am

#89 GrumpyPanda on 05.02.21 at 9:21 pm
#79 Nonplused. Nope, definitely paramedics. I checked the Ontario sunshine list. Actually, one Critical Care Paramedic pulled $171,799.39. I couldn’t find what pilots earned.

——————————

I don’t mean by any means to say anything bad about paramedics, but I do agree that if that number is correct it seems excessive. That would be a lot of overtime. Top pilots flying 747’s hardly make that.

Now I might have assumed that the air ambulance had the best and most experienced pilots given where I have seen Stars land here in Alberta a few times, literally threading the needle between trees, but if what you say is true then I see your point. And in the cases I saw the local paramedics and firefighters and ski patrol had done the hard work of extracting the patient and stabilising them, they just couldn’t get them to hospital as fast as a helicopter could.

You know who doesn’t get paid enough? The ski patrol. But on the other hand they get to ski for free or actually get paid a bit to ski until there is an accident. Then they have to pay it back. Some of the things they do, whew. I’m glad I never ended up in the toboggan (knock on wood). I’ve been down the double black shoots, and carried skies to someone who lost them, but I couldn’t think I would be capable of getting said person off the mountain if they were hurt, and down to the helicopter which has to land in the trees in a cross wind.

There are truly amazing people everywhere.

I’ve met a few “fire jumpers” as well. These are people who parachute out of airplanes to fight forest fires. They don’t get no $147,000 a year, I can tell you that.

If you open your eyes, you will find that there are heroes everywhere except at the ANTIFA protests. Well maybe the cops.

#104 Nonplused on 05.03.21 at 1:08 am

#83 DON on 05.02.21 at 7:57 pm
#69 Nonplused on 05.02.21 at 6:13 pm

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

That commenter knows his BC Forestry.

While driving around the interior around 12 years ago lumber yards were full of pine logs, a race against rot. We stopped in Merrit for the night after a long drive the motel was close to a mill. Everything smelled like pine.

It takes a lot of logs to feed an automated mill. Lots of logs are loaded on barges that travel out of sight of locals. Logs headed accross the boarder and abroad.

The one true pleasure in life is to walk amongst the old growth trees in a forest of them. As a kid I never imagined an end to the massive forests. My next house will be built with rock…like Fred and Wilma.

————————————-

One of my first jobs out of university was on a bridge substructure project (piling, concrete, etc.). One of my jobs was to survey with another more experienced fellow after super (8 hours a day? Ha. That was the weekends.) I would typically run the total station while he did all the smart stuff. Fixed as I was to the total station, the old guy would come chat me up. He was near 70, but had been a surveyor. He’d done a bunch of pipelines, but he also did forestry. His job would be to go down the roads and his men would flag every tree at the top of the ridge that could be seen from the road. Everything on the other side got cut. Most of these areas have not yet recovered and won’t for another 30 years, if they do at all.

#105 Wrk.dover on 05.03.21 at 6:25 am

#62 under the radar on 05.02.21 at 5:02 pm
#3 thanks , but you need to make holes in the ladder to screw to the log. I will use some angle iron at both ends of the log , a level and screw a 2×6 into the top of the log and guide the mill over the 2×6.

_______________________________

The aluminum ladder is worth less than a 2X6 now….

Lash the rungs to some holes in the ply…while the rails sit in purpose cut shallow notches.

Get a financial advisor, you don’t think deep enough.

#106 Guelph Guru on 05.03.21 at 6:31 am

For the sake of argument, Here is a it’s different this time theory.

The CAD depreciates due to all this money printing. Min wage is set at 100+ per hour. The current house prices suddenly seem reasonable. That would mean no cheap imports and a host of other things. But everyone can afford to carry the mtg at 10%. Basically hyperinflation. The banks will decide.

It can be different this time. Hope not.

#107 the Jaguar on 05.03.21 at 7:58 am

More mob unrest. Portland or Berlin, it’s all the same. The Madness of Crowds.
We think it can’t happen here, but anything might set it off. Maybe even a housing market correction.
This was Labour Day, Berlin.

https://pressreader.com/article/281651077969517

#108 George S on 05.03.21 at 9:13 am

#39 Hilroy said:
“We opted to replace our aging roof shingles with straw thatching.”

That would be very expensive compared to Asphalt Shingles. It is very hard to find the quality of straw that you need for thatching the straw would be very expensive and would have to be trucked in from afar, you would have to completely re-build your roof to be thatch-able and unless you have plenty of experience at thatching roofs and all the tools you would have to hire somebody to do it, probably from a museum.
In addition it would not meet any building codes in Canada so the inspector would make you tear it down otherwise it would be uninsurable.

#109 The West on 05.03.21 at 9:43 am

#53 Mr. Lahey

Also, sorry to break it to half the country, but most immigrants don’t want to move to small towns in the prairies, Winnipeg, rural Maritimes etc. Nor do a lot of people want to retire there. There is a ton of demand for Victoria, Vancouver, Okanagan, Canmore, Ottawa, GTA, parts of Montreal and Halifax.

—————————————————

Good – you take them on down to Sunnyvale and leave The West alone.

#110 Don on 05.03.21 at 9:49 am

@#97 Galt.

Congratulations on your new job! Yes going South is the way to go now. The US is about to pick up.

YOu are assuming 1) The down payment is only 5%.
A lot of people who are buying are mover-uppers, who have a much larger DP. Even as much as 75, 80% from their current home sale. ( inheritances -the largest “pass over” is underway, immigrant $$ and family chip-ins. )

2) CDN160K is NOT the average income of TWO earner families. A lot higher. Over $250K now. Gone are the days a $100k income was a biggy. I personally averaged $175K from 1990 to 2000 period alone. (wife studying full-time most of the time.)

#111 Keen Reader on 05.03.21 at 10:11 am

@102 Nonplused

Top Air Canada pilots make $335K, according to Glassdoor.com; that’s comparable to major airlines I’ve dealt with internationally. BillyBob can certainly confirm. I am mostly privvy to salaries in flight-testing, where Capts make $150-180K. Average pay is $100K for helicopter pilots, whereas an EMS pilot makes roughly $160K. An Ornge pilot likely makes a little more, so in line with $171K.

Not suggesting any of the above are heroes, which don’t necessarily get paid accordingly, unfortunately!

#112 Ponzius Pilatus on 05.03.21 at 10:16 am

#107 George S on 05.03.21 at 9:13 am
#39 Hilroy said:
“We opted to replace our aging roof shingles with straw thatching.”

That would be very expensive compared to Asphalt Shingles. It is very hard to find the quality of straw that you need for thatching the straw would be very expensive and would have to be trucked in from afar, you would have to completely re-build your roof to be thatch-able and unless you have plenty of experience at thatching roofs and all the tools you would have to hire somebody to do it, probably from a museum.
In addition it would not meet any building codes in Canada so the inspector would make you tear it down otherwise it would be uninsurable.
———————-
How about grass?

#113 Ponzius Pilatus on 05.03.21 at 10:33 am

97 Galt on 05.02.21 at 11:30 pm
This Vancouver condo at 1.5 million for 1,100 sq ft.

https://www.realtor.ca/real-estate/23143022/1608-1111-alberni-street-vancouver

With 5% down and a 3.2% mortgage locked for 10 year amortized over 25 year, the monthly payment is $7,733

I just accepted a position at $160K CAD working remotely for a San Francisco tech SPAC and my after tax income would not cover the usury let alone $1017.00 per month maintenance fee, taxes, food, transportation etc.

The Bank of Canada along with CMHC and your elected representatives are about to leave young Canadians holding the biggest bag of odorous excrement ever assembled in the history of capitalism.

Honestly you all deserve it for willingly going along with this insanity.
——————————
Well good luck.
This from the Financial Times:
Spac share prices slump as enthusiasm wanes
Companies that came to market via blank-cheque deals are trading at an average of 39% down from their highs

#114 Left GTA on 05.03.21 at 10:42 am

@ 109 Don

No most families don’t earn that sort of income. Someone earning over 160 K is likely in the top 10% or so in Canada. Less than 1 million people make that. Earning over 100K is still a big deal.

https://www.canadianrealestatemagazine.ca/market-update/how-much-does-the-average-canadian-family-earn-326655.aspx

#115 All the way up on 05.03.21 at 10:55 am

Home prices are not falling anytime soon.
1) lumber prices have double making new builds more expensive.
2) pre-existing homes will then rise in value.
3) the upgrades people are doing to their homes will increase there values more.
4) all skill trades are busy so there’s another floor for pricing.
5) gentleman from Home Depot said, come mid May, new prices for installs and material will be in effect.
6) plus if house prices fall, lol. To what level considering year over year your up +20 percent.
7) end on lucky 7. Anyone with debt outside the mortgage could easily roll it into there home if they have owned 1 plus years.
-and the BOC is blowing hot air. They’re not raising Jack soon.

#116 Confusions on 05.03.21 at 11:05 am

Response to -=withwings=-

If you take the action mentioned below, you will have more debt than you ever had, and 20 years into trying to own a property, still own less than half a house.

Has the average family ever been able to but the average house as a first property? There seems to be an assumption that we can all get our dream house as our first house. I also see online people asking “who is buying these houses for 1M?!?”. The answer is people who bought a bachelor, then a 2bed, then rented, then a townhouse, then a 600K house….and we could sell where we are and buy in the 1.2-1.4M range with a 500k+ downpayment and historical low rates. We started in our first little place, it was below average but we loved it. It had a parking spot, and neither of our apartments did. Pretty funny that we thought that was the dream back in 2001. There was NO WAY we could afford a house back then.

#117 WTF on 05.03.21 at 11:16 am

#109 Don. “CDN160K is NOT the average income of TWO earner families. A lot higher. Over $250K now. Gone are the days a $100k income was a biggy.”

Link? Respectfully, You may be correct regarding inheritance or existing equity, just not income.

Based on this Stats Canada data for Vancouver, its well below your assertion.

https://en.wikipedia.org/wiki/List_of_cities_in_Canada_by_median_household_income

#118 Wrk.dover on 05.03.21 at 12:02 pm

#113 Left GTA on 05.03.21 at 10:42 am
@ 109 Don

_______________________

My # must drag the national average down at least a decimal point! Just like the value of my house, and tax payable does.

#119 Concerned Reader on 05.03.21 at 12:56 pm

Quoting from the post:

“It’s a timebomb. Rates will grow enough in the next couple of years to inflate mortgage payments by 20% or more. ”

So if a dual income family that has the LTV of 80 percent and 25 year amortization sees a 20 percent rise, are you saying they will then be paying 70 percent of their pre-tax (gross) income? Clearly that is unsustainable.

Also, it would appear that the conditions would be far worse, even at present, for the people who bought with five percent down. As has been said in this blog and in other places, the long-term outlook for the borrowers is going to be very difficult. They will not have enough money to save for retirement and throughout their lives, they will be faced with having to make decisions that limit them.

I remember reading here that the previous leader of the Federal NDP had re-financed a property (presumably his principal residence) throughout most of the time he had lived in it. The money owing on the property exceeded the original purchase price. If this was a common practice for some in years past, it will become inevitable for those who are caught up in these impossibly high mortgage obligations.

Not mentioned but I also wonder what effect a likely increase in mortgage delinquencies will have on the mortgage insurance underwriters (if that is how it works). Would we likely see higher premiums required? Perhaps it is a good time for the winding down of CHMC to limit government exposure to potential losses. Indeed, it may be too late to take that step; the train has already left the station to its appointed wreckoning (yes, a bad pun).

#120 Don on 05.03.21 at 1:21 pm

#116 WTF

Sorry, I don’t have a link. But these are my observations looking at my neighborhood. Who can afford these 4,5,6,7,8,9,10 mill homes, if they don’t have at least $250 income Plus a huge DP? These big homes are bought by white-collar professionals.

#121 Mosey on 05.03.21 at 1:43 pm

Sorry but there are no interest rate hikes coming for years. Cdn central bank follows the US Fed…they think they can avoid a US gov. default, which would happen if rates went up, by letting inflation run “hot”. This will not end well…and I believe that if you can afford a home, get it now. Prices will be higher this time next year even with the coming market crash. Try to imagine runaway inflation and your portfolio cut in half with no V shape recovery this time. Could happen. Real assets such as real estate, precious metals etc. are your safety, if you can afford them. Just my hmo, ymmv.

#122 Don on 05.03.21 at 2:54 pm

#120 Mosey

YOu are right, it will go on till next year. ( I mean until after the election).

Just wait one year!

This Canadian real estate price correction will be a case study in Universities.

US 10 year bond yield broke through the downtrend, now at 1.60
See 5-year chart.
https://finance.yahoo.com/quote/%5ETNX/

#123 What Goes Up...Must stay up on 05.03.21 at 3:02 pm

Garth, a logical person would arrive to the same conclusion as you. BUT is the government, BOC, economy logical and open to market price discovery the last 15 years?