It’s not so much the number, as what it means. What comes next.
Within minutes of Wednesday’s announcement that official inflation is 6.7% (on the street it’s much higher) there were slack-jawed economists everywhere, ripples of angst through the Bay Street bank towers and realtors taking to Twitter saying the housing market is ‘falling off a cliff.’
The facts: it’s a big deal. Numbers like this haven’t been seen since 1991, when Millennials were still playing with their toes. The inflation jump was 1% in four weeks. Food, gas, services – all going nuts. The experts had forecast maybe 6.1% and the Bank of Canada even less.
It won’t soon be over. “Price pressures across the economy are showing more heat both for goods and services,” said a TD economist. “Inflation is likely to remain above the Bank of Canada’s target range until 2023, crimping consumer purchasing power and driving interest rates higher.”
The main consequence will be a higher, longer move in the cost of money after the CB got things so wrong over the last year. Adds the TD: “We believe this inflation report supports the case for another 50-pointer in June.”
“We have a full-on inflation issue,” states BMO economists, “and the central banks need to play catch-up, with haste.” And this…
“Perhaps it’s the broad-based nature of the increase that is most disconcerting. In turn, we continue to look for the Bank of Canada to crank interest rates to neutral as quickly as possible, pointing to 50 bp hikes at the next two meetings, and then keep grinding at a 25 bp cadence every other meeting thereafter.”
That would raise the CB rate from 1% now to 2.25%. The chartered bank prime (currently 3.2%) would be 5%. Variable-rate mortgages, HELOCs, personal loans, business debt, lines of credit and credit card rates will all be along for the ride.
Scotia’s chief economist Derek Holt is forecasting even more drama. He’s speculating the next BoC rate hike (June 1) could be a full 1%. Yahoo. Cowboy stuff. “The fact that inflation is running amok should drive a minimum 50 basis point (bps) hike that we forecast at the next meeting in June. I had previously argued they should deliver a series of three 50bps moves,” he wrote to bank clients today. “There is even a solid case for the BoC to hike by 75–100bps in one shot.”
Now take a look at the bond market. As the central bank stops buying bonds and lets them mature it means a giant buyer of debt is gone from the marketplace. Bond prices drop. Bond yields jump. And the key bond that bankers use to set five-year mortgage rates has a yield that’s essentially doubled in the last few weeks. We are headed for a point w-a-y past 5% for these home loans.
The yield mortgages based on has doubled in 2022
Source: Investing.com
And what about going variable?
Here’s what mortgage maven, broker and blogger Rob McLister was saying as Stats Canada unleashed its fat inflation number: “Following today’s March inflation stunner the bond market is pricing in another 175+ bps of hikes by the Dec 7th BoC meeting. For folks in a prime – 1.00% variable mortgage, that would whisk them up to nearly 4%. On March 1 these borrowers were paying 1.45%.”
Sure, you can switch from VRM to fixed, but those longer-term time mortgage costs have already ripped. There’s no place to hide. And let’s all remember that inverse correlation of interest rates and real estate prices. It has never failed. Nor will it this time.
Here’ something interesting making the rounds on social media, where the masses go to learn everything, since we killed all the reporters. This was massively retweeted. A cautionary tale.
So you can blame the central bank for messing this up. Blame the busted supply chain. You can blame Putin, like the Bank of Canada did. Or immigrants, which Chrystia says are part of it. Blame China’s zero-Covid policy and punishing lockdowns. You can blame Canadians for sucking in $1.7 trillion in housing debt and pushing prices to the sky. But none of that matters much. Inflation broke loose the surely bonds of monetary policy and has now touched the sky.
Be humbled. Be ready.
About the picture: “Read your blog daily. Love it. I’m a serial saver. So life is good to quote tacky sayings,” writes Michelle. “This is Winnie. My son’s four years old rescue. She’s been in our lives for three years. She’s fiercely protective and beyond lovable to her people. Her favourite activity is eating treats. Lol. She runs 6 to 10 kms a day with my future daughter in law. She’s the light of this dog Granma’s eyes.”
Have a beast picture to share with the pack? Email me at ‘[email protected].’ – Garth
161 comments ↓
“Standing up for middle class Canadians and those working hard to join them.™” – The Liberal Party
“We know they’re lying, they know they’re lying, they know that we know they’re lying, we also know that they know that we know they’re lying, but they still lie.” – Alexander Solzhenitsyn
Best if we hear about a 0.75 increase in June?
I feel bad for those who genuinely just wanted a family home. They felt they had to do something and now will likely be punished for it.
As for realtors and specu-flippers; I hope they get crushed.
“Reality is that which, when you stop believing in it, doesn’t go away.” Philip K. Dick
So how to deploy new money:
ETF COW and XEG
Are there any inverse ESG ETF’s out there yet….. Like Weapons, Fossil Fuels , smokes and booze?
Seems a winning combo for war, recession, inflation, housing correction.
Millennials were still playing with their toes.
And wearing diapers, which is exactly what they will be like again by the time this is resolved…. And God will they ever need those!
Remember everyone: Canadian exceptionalism will prevent the real estate market from experiencing ANY major correction! Exceptional immigration, exceptional money laundering, exceptional political stability, exceptional livability: these are the TRUE reasons for the remarkable increase in house prices, and the reason why Canada will never experience more than a minor, temporary dip.
Rising interest rates and debt load may cause house price corrections in ordinary countries like the US, but not Canada, the most exceptional country in the world.
/s
Real Estate in Metro Vancouver is currently only available for the Financial Elite or if 4 individuals sign one mortgage!!!
For those still looking for a house to buy…what scale of correction will there be? How long does it take to make this correction?
Its all good until they break something.
And that will happen…. they break everything!
ELECTRIFYING NEW FUTURE?: How practical is the plug-in car?
https://www.youtube.com/watch?v=yc_7rdH3ixs
• develop a regulated sales requirement that at least 50% of all new light duty vehicle sales be zero emissions vehicles in 2030.
• electrify the entire federal fleet of light duty vehicles by 2030, up from our existing target of 80% by 2030.
https://liberal.ca/our-platform/zero-emissions-vehicles/
A Taxpayer funded boondoggle orchestrated by Gerald Butts and his fellow travelers, transferring billions upon billions of public dollar to well connected insider interests.
“When I was young and naïve, I believed that important people took positions based on careful consideration of the options. Now I know better. Much of what Serious People believe rests on prejudices, not analysis. And these prejudices are subject to fads and fashions.”
– Paul Krugman
I saw that post on Reddit. I don’t think anyone mentioned that they could lose more than just a deposit. If they back out now and the house has to be resold for less, lawsuits could come. I wonder if she realizes Bankruptcy is an option if they back out of the deal. I still wonder if it was a “joke” post as I really didnt think people were that financially illiterate and not understand the contract that they signed.
if this embargo happens, gas can go over 3 dollars
https://www.reuters.com/world/an-eu-embargo-russian-oil-works-french-minister-2022-04-19/
Yes lots of talk about vacating agreements they won’t just lose their deposit if it was that easy there would be lots of Of bounced deals. What a difference 60 days make!!
‘Winnie’ has such expressive eyes! Tres cute!
I’m not shocked by the inflation numbers as I think they are actually understated. About the only thing that did surprise me is that the ‘official’ number actually is expressing at least in part the true state of affairs. About time is all I can say. Who knows? Maybe we will eventually be able to trust that our government is actually telling the truth for a change.
Buyers regret isn’t a surprise either. Folks are still expecting ‘the government’ to protect them from the consequences of their financial choices. Even our financial advisor was saying word in the industry is that the BoC will try to hold off on further increases to the prime rate for as long as possible due to the fact so many are so indebted that they fear the economic carnage should they repeat their .50 increase come June. I expect they will make a decision based on what the official inflation numbers for April & possibly May are. Have to look to see whether May’s numbers would be known prior to the next BoC rate announcement or not. For sure if inflation numbers remain at 6.7% or even higher for April/May the BoC will be between a rock & a hard place decision wise…..
Nasty stuff. But it will end quickly as it began. The rapidly rising price of money combined with general price volatility is already leading to shelved projects here on the east slopes of the Rockies. The smart money has seen this movie before and are putting their wallets back in their pockets until sanity and stability returns. Recession ahead as a result of demand destruction.
To paraphrase the great Gartho, the best cure for rising rates is rising rates. This will self correct and the cost fixed rate mortgages will again be less than 3.5% a year from now as the government pivots and starts snorfeling bonds again to bail out the economy.
#12 What a difference 60 days make!!
—
It’s baffling. Do people really make life-altering financial decisions in the same way they shop at Costco? “Oh honey, I saw that interest rates went up today. Maybe we shouldn’t buy that house today.”
Country is doomed.
Through all of this RE madness I kept saying to myself — Am I the crazy one? Why do people think buying in this environment is OK? All the signs point to danger but the price increases and sales kept on coming…
but, I realize now… smart people (and dumb people) do very dumb things.
Chickens =-> Roost
Inflation is the result of structural (oil shocks, supply constraints), behavioral (inflationary expectation, FOMO) and monetary/fiscal inputs.
We have all three, in spades. None show any signs of abating so we’re in for it. Housing might be the least of our worries.
All countries are in massive debt. What to do?
INFLATE the debt away.
Remember when $200 was a lot of money?
Remember when $1 million was a lot of money?
Eventually, with (intentional) inflation, the debt will seem smaller too.
#4 Dogman01
Netflix.
-35.12%
That’s just today.
There will be a tomorrow, then again, maybe not for them. As for me and the usual…
yea oil
yeah maple
——————
Enjoying the Comments today!
Some real comedic talent, besides My Liege, out in force tonight (CET for me).
Staying here instead of returning to Netflix.
So Garth, UPDATE Comments FAST. No potty breaks allowed.
Hey Garth (please)…
What would you recommend if you saved 20K in cash in order to replace an aging deck….
The rotting deck could last another 2 maybe 3 years but then I worry about inflation chewing away at the 20K I diligently squirrelled away for the new deck.
I got a quote last year at 15K….got a new quote this year and it’s 18K (same dimensions, same company….they just said “inflation”).
Do I just get er done now….or plop the 20K in a One year GIC earning 2.63% and hope inflation moderates and I can squeeze an extra 2 years out of my current deck?
Long way of saying….what to do with saved cash earmarked for needed projects when inflation is essentially destroying all that hard earned savings?
(And yes, I do invest otherwise….just knew I wanted to pay cash for the deck when I started saving 4 years ago.
I think
6.5%
the official Mar 2022 Inflation number. Italy the exact same number. So much for buying local.
Other places worse. The Helen’s of Russia will not be making many Holopchi’s any time soon.
There will be hard lessons coming for many Some deserve it and some don’t. Some were given bad advise and some just greedy. Either way, lessons cometh.
As mentioned on this pathetic blog many times, best to live within your means. Buying your first home $1.3 mill sounds like a want not a need. And, it’s a binding agreement. Even if you walk away from the deposit you will risk a lawsuit. I feel for you but also I don’t. Life lessons, good luck amigo.
Thank you for this blog. People who borrowed money at low rates for multiple things will have to reconsider
their spending habits and set goals and objectives and separate, is it a NEED or a WANT? Our family cannot figure why this was let to happen. People have been using these low interest rates to PLAY BIG SHOT hopefully families and children will not suffer. When couples are short of money divorce follows and children
suffer. Do you Garth or anybody else have a prediction
for GICS IN December 2022 and how high will they go
in 2023 even though they are for the brain dead who enjoy some money to be really secure and liquid by laddering them.
Can someone comment on why CPD & ZPR are constantly falling despite the rise in interest rates?
I thought these were rate reset prefers. So, when interest rates rise they appreciate since the rate would reset.
That was the theory here.
30 year mortgage amortizations back on the table any day now.
* Sad Helen’s of Russia Holopchi link…
https://www.bloomberg.com/news/articles/2022-04-19/russia-learns-to-roll-with-economic-punches-as-shock-wears-off
[view In Demand chart – Cabbage]
2022 price increases to Apr 8.
—————-
But you know, the Russian MSM and Vlad say, it’s all good.
Re: Dogman01. Well done with the Solzhenitsyn quote. Easy guess that most people have zero clue on who this man was. Impressive.
Todays inflation print was massive–and will get worse- we haven’t truly felt the shockwave of the increase in barrel or oil or decrease in food production (fertilizer cost, lack of planting or farming in ukraine etc…) nor have we felt the effects of the Shanghai port shutdown yet. These are still to come so yes in June it will be a min of .5 if not higher rate increase.
Who in there right mind would buy real estate now? its a lock that rates will rise which means its also a lock that prices will be lower in summer then now and will be even lower in the fall then the summer as slowly inventory starts to build.
the fact that an actual bank economist is talking about a .75 basis rate hike should scare you….. and if the April print comes in hotter then 6.7 then it might happen
are people ever going to learn a lesson about how leverage works…
#1 Dogman01 on 04.20.22 at 4:30 pm
“Standing up for middle class Canadians and those working hard to join them.™” – The Liberal Party
—————
Every political party past, present and future has, is, will pander to the midle class vote.
Even PP knows that.
“So a house didn’t appraise. Buyers now have cold feet. Don’t have the money to make up the difference nor do they want to from the sounds of it. Lawyers involved. Buyers want a price abatement or they are going to walk. Lawsuits on the horizon. Real estate always go up they say.”
https://twitter.com/rewoman/status/1516872748190121987
“Inflation is likely to remain above the Bank of Canada’s target range until 2023″
If wage hikes to address inflation are going to happen in 2022, and likely ongoing supply shortages in oil, how likely is it that the target range of ~2% will be reached by the end of 2023?
#3 Captain Uppa
As for realtors and specu-flippers; I hope they get crushed.
——————
THAT was good, though:
You need to be more forthright in your assertions.
FYI, your crush cohort…legion in many locales:
https://www.ctvnews.ca/business/multiple-property-holders-own-upwards-of-41-per-cent-of-housing-in-some-provinces-statcan-1.5858795
Hike the interest rates some more! Let the greedy speculators suffer losses.
After all, Doug Ford is gonna cut social assistance rates to transfer it as business loans which are nonrepayable for 100 years.
Maybe the amputee has to pull themselves by the bootstraps after losing a limb in Afghanistan? Maybe they should take a more drastic approach to those who intend to take their benefits to give to the Rosedale millionaires.
I know quite a few people who were just bought investment properties at the peak of the market. Bombs away!
Oh, these hurly burly times. Such unrest.
Maybe I’ll just… yawn… put my feet up and have a little nap while other people figure it out.
CONTRARIAN GLASSES ON, CHECK.
When everyone is predicting something (hiking interest rates) I have a habit of looking through my contrarian glasses. All these predictions assume there will not be another recession in the long run. Central bankers like to pretend they will hike rates, but when the time comes, they have delayed so long they will find an excuse to not do so. Possible excuses that come to mind, a baked in the cake recession, stock market plunge, larger than expected real estate plunge, another global pandemic, global warming, global cooling or an asteroid crash. Number one and two on the hit parade of excuses will most likely be a recession or stock market crash. New point, I do not for one Nano second believe that the banks are as well capitalized as most believe “but” this will prove to be irrelevant as “always” they will be bailed out, but not before they put the hurt on the little people. When future earnings fail to meet expectations, look out below. Amen brother.
Yo kiddos! Betcha missed me!
Enjoyed reading Garth’s scathing reply to Nonplused the other day after Nonplused’s stream of whattaboutisms to somehow defend Russia’s criminal activities. Canadian conservatism needs many more Garths. Far fewer Poilievres.
#91 Coastal gal on 03.24.22 at 11:54 pm
#24 faron
Mt Cain sucks… tell your friends.
It was true. I mean, touring to a suspected stash to ski perfect dust-on-supportable-crust lines where nobody had been in weeks; ripping chunky pow and the one groomer inbounds with old and new friends; celebrating a birthday at the golf clubs; relaxing in a cabin and venturing out to find the secret sauna and getting naked with drunk strangers would have been fun. Luckily, none of that happened at Cain that weekend. Luckier still that — not at Cain — there wasn’t perfect powder last weekend in the shaded east in north aspects that could be accessed while skiing in shorts on flat and south aspects. The thundersnow storm was an added bonus. If it happened. Darn.
Did see evidence of a naturally triggered slide from the 1-5 April storm cycle. Tread remaining hangfire and similar slope/aspects/elevations accordingly.
Sailboat got flattened in a 40kt (est) gusting squall near the Ballenas Islands. Got caught with the genoa up. Luckily had reefed the main. That was a clusterfrick.
Another day rode through some 4-6ft seas w/25kt gusts. That was a first while solo in my 22 footer. Decided that looking behind me wasn’t helpful in that it stimulated fear that then caused bad decision making. Thereafter waited to hear a breaking white-cap to take any peeks. Surfed to 8kt SOG at one point. Hull speed in that boat is ~5kt. Surprisingly resistant to rounding-up.
Good to be back for a sec to see that Sail Away continues to waste an inordinate amount of time here. I’m sure he justifies it to himself and others somehow. That’s fun. He’ll figure it out one day or it will be figured out for him.
All the best everyone.
How can a first time buyer even think of 1.3 Million house? Pure stupidity and only them to blame.NO ONE ELSE.Realtor is doing his job.Mortgage broker is doing his job.BoC is doing its job.YOU NEED TO DO YOUR JOB.
All the moist millenials wanting to buy house in GTA Vancouver …..forget about it.
Better move to Calgary.
Houses are half price.
Jobs are coming back.
Weather is mostly better ( yeah..few days of extreme cold but this is Canada, GTA is not in tropics either)
Banff is 1.5 hrs away.
The best though….Waterton National Park is 2.5 hrs away, easy to make a day trip.But even better for camping and hiking.
Not sure why new comers even go to GTA when arriving? May be go to Maritimes or Alberta the best option.
How can someone be so dimwitted and yet have the income or rich parents to pay $1.3 million for a home. I assume they are a millenial, but maybe not. And then they listen to their realtor for financial advice to boot.
Anyway, probably best to forfeit the deposit and walk away. If, say $100,000 deposit and house already down $200,000, then $100,000+ ahead. Know when to hold them and know when to fold them.
Increasing rates is not going to fix this inflation problem. It’s not a rate issue but a supply chain issue and a war issue. the prices are going up primarily on essential items like gas and groceries and increasing interest rates is not going to stop people from buying essentials. the price of houses is not included in the inflation rate determination. The government will let inflation rise and will be happy that they will be paying off the huge debt with inflated dollars. This is a huge win for the government. Not so much for its citizens.
Garth, Would you recommend someone heavily in cash ~70-80% of their holdings, with very little fixed income currently,slowly inch into government bonds and preferreds at these massively oversold levels?
Contract law only means something to a Conservative judge. It doesn’t mean anything to a liberal judge.
Walking away from this deal and forfeiting the deposit is likely to benefit the first time buyer.
The liberal judge will call the sellers greedy and will tell them to take a lot less money. This is how social justice works.
Our young social justice warriors are brilliant decision makers when things work out in their favour and they are victims of greed when they make poor decisions.
They have no accountability for anything.
They graduate with a complete understanding of the welfare act and their rights and not much else.
Good luck marrying one of those.
what about blaming the architects of this debacle who indeed would like to see interest rates so high, that nations cannot afford to pay the interest on their debt. thus, leading to a global debt default. common, i’m not the only one who thinks this could be a possibility.
Is this a JCramer moment where you hear the screaming – ‘open the FED window!’
Don’t worry once the stock market and real estate market crash, interest rates will be in negative territory. Probably by 2024 or 2025.
OMG – pray this does not happen too fast and the number of people losing their houses is a trickle rather than a diluge.
Otherwise we will see three levels of government peeing away our tax dollars to rescue people from the dumb house buying decisions they made.
#10 Chris
I don’t think anyone mentioned that they could lose more than just a deposit. If they back out now and the house has to be resold for less, lawsuits could come.
————————————
Theoretically correct. In practice, probably a lot more hassle and stress for the vendor that it’s worth.
Don’t bet on it. You also realize a deposit may not necessarily be lost, right? – Garth
Garth
…ripples of angst through the Bay Street bank towers and realtors taking to Twitter saying the housing market is ‘falling off a cliff.’
*************
Garth! Same time one of the our famous RE mafia release new forecast for stupid idiots :
On Tuesday, Royal LePage published a home price forecast that predicts the average home price in the Greater Toronto Area will approach $1.3 million, with a projected 16.5% increase in prices, the average home price will increase to $1,304,600.
#7 dave on 04.20.22 at 4:38 pm
Real Estate in Metro Vancouver is currently only available for the Financial Elite or if 4 individuals sign one mortgage!!!
For those still looking for a house to buy…what scale of correction will there be? How long does it take to make this correction?
______________________________
No way to tell. If you listen to RE industry, not gonna fall by much. Economists and Banks can only give you very conservative estimates based on current and historical data. There is a bit of difference nowadays compared to other historical ‘dips’. As a country, we now carry historical debt, have allowed our elected government to shut down high paying industries, chased away outside investment, allowed the RE industry to run amok, kept rates at emergency levels for years (for what reason? who knows), and had a willing populace engaged in selling overpriced RE to one another and driving themselves into life long debt. Gee, I wonder what could go wrong here?
Gold should have exploded… but has hardly moved.. v strange!
Not at all. Bullion is valued in US$, which has surged higher on monetary policy. Be in dollars, not rocks. – Garth
Great photo of Winnie! Thanks for sharing!
The only blame for high real estate is the realestate cartel in BC and Ontario. Dirty industry is a magnet for dirty money. Agents are unethical and will trick hard workers into spending huge. Everyone wants high real estate because everyone is making money except for the poor hardworking folks. Listen up Canadians ‘do not trust an agent’. The cartel is real and they have too much power. Same as the Central American drug lords.
Numbers like this haven’t been seen since 1991, when Millennials were still playing with their toes.
Some of us were collecting our Topps Desert Storm Trading Cards
GOOD!
I am looking forward to house hunting and making an offer $1Million below asking.
IMO Canada is very much in tune with Globalization so the old standard rule of increasing interest rates to tamper inflation because the rest of world globalized economies are also feeling the pinch. I have no idea how to fix it but more worrisome is the “experts” won’t either. They have never experienced this type of inflationary period in a global scale when so many economies that are tied to each other.
“We have a full-on inflation issue,” states BMO economists, “and the central banks need to play catch-up, with haste.”
*****
We do have a full-on inflation issue, but the central bankers are moving with anything but haste. As I predicted, real rates continue to get even more negative, not less, even as the Bank of Canada continues to dawdle.
Central bankers aren’t stupid. This is obviously quite calculated. They are transparently trying to inflate away the debt. People that speculated with high leverage in the Everything Bubble are getting bailed out. Those that saved and lived within their means are getting royally shafted. Those without assets – notably young folks – will see a materially worse quality of life going forward, perhaps for their entire lives.
Central bankers have ramped up moral hazard to infinity and beyond since the Great Recession. The evidence is overwhelming that they have no interest whatsoever in fulfilling their price stability mandate, inflation consequences be damned. It’s a clear case of institutional failure. If I did my job as poorly as Tiff Macklem, I would have been fired 6 months ago.
Inflation is almost 7%. Wage gains are 2%. Real estate will retreat. Nobody is getting bailed out of debt. – Garth
@#2 None
“Best if we hear about a 0.75 increase in June?”
+++
Yep .75 in June or a .5 sooner (in May?).
I will enjoy “sunny days” Trudeau try and avoid owning this recession and the screaming hordes of negative equity mortgage owners(Lib Voters?)…since he’s already blown $500 Billion on Covid handouts and the cupboard is empty… :)
@#11 mj
“gas can go over 3 dollars”
+++
Shhhh.
Don’t tell Ponzie.
He’s still mocking that idea.
Gas at $3/lt in July
@#38 Patel
“Better move to Calgary.”
+++
Nah, we’ll wait for the snow and the Real Estate prices to melt.
#47 Damifino
Theoretically correct. In practice, probably a lot more hassle and stress for the vendor that it’s worth.
Don’t bet on it. You also realize a deposit may not necessarily be lost, right? – Garth
——————————————
I do. It’s not over until closing day. I think the deposit is a mostly gesture of good faith, but not money in the bank. Although, the vendor’s agent probably thinks of it as some or all of her commission.
I suppose if someone loses a sale as well as seeing the deposit returned to the buyer, they’d be more inclined to get nasty.
It raises another question. If a deposit is forfeited to the vendor, does any go to the agent?
… ready for ZST to finally move up and ready for 6500$ TFSA!
https://www.google.com/finance/quote/ZST:TSE?window=5Y
* But no indication of a recession, right Garth? My research could be off but I’ve read of only 2 instances where a recession didn’t follow sustained inflation.
Peter Morici stated last month that stagflation is a thing and it’s coming. He believes that inflation will peak by the end of Q2 and then stay at that range until 2023. If that happens, my money is on a recession. We’re going to find out quite soon.
Of course there will be a recession. There always is one. But not soon. – Garth
The law is clear in Ontario, if the buyer cannot close the deposit is lost. Seller mitigates their damages by selling again. if the sale price is less than the original price buyer paid, buyer is on the hook for the difference . Walking away from the deposit is usually not the end of the story.
But deposits are not actually available to the jilted seller without a mutual release being signed. They can stay tied up (sometimes for years) in a brokerage trust account. – Garth
I think we’re in for a good smack down.
I work at a high end millwork and cabinetry company in KW. We’ve been busy as ever the last two years but you sense a sort of panic in the air. Example- we’re doing all the millwork and cabinets in a big cottage someone is building near Grand Bend. The original plan was to build a showpiece monster cottage and rent it as an AirBNB. That plan then went to nah, let’s sell it. Now the owner is at the point of panic because he realizes he’s losing money and even the opportunity to unload it by the day. The guy had cash but still- it’s a few million build. That’s a lot of cash tied up.
I also really question the whole “investment” thing. Garth has mentioned it repeatedly that the average person who’s “investing” is actually cash flow negative month to month. It doesn’t take a math wiz to look at purchase prices and rents, compare the two and see somethings amiss. People are chasing price increases plain and simple. The moment the rapid rising prices stop and roll back, people will crush for the exits. And why not- their financing costs are rising (cash flow is even more negative) and their only hope for a profit is evaporating before their eyes. Under those circumstances panic can set in really quick.
I’ve heard before that as soon as prices slip, all cash buyers will swoop in and stabilize prices. Nonsense. Cash buyers are chasing price increases too and will disappear just as fast as the highly leveraged, cash flow negative folks. Think about it- I have a million dollars. I buy a 4 bed in KW. The absolute best rent I’ll pull is $3500 a month. Taxes and insurance will run about $500 a month. So for simplicity sake, I’ll bring in $36,000 a year. That’s pretty pathetic on a $1m investment. Plus, I have to pay tax on the income. And that doesn’t even begin to account for the risk that someone destroys the home or doesn’t pay rent. Nor does it account for a tenant who slips on the front step and cracks their head open and sues me.
People haven’t been investing in real estate to make income. They do it for price appreciation. The moment that stops I think we’re going to see a frenzy of people wanting to unload rentals. Good luck in Ontario especially, trying to sell a home with tenants in place!
You can blame all those things, but also the fact we are at full employment and the economy is running hot.
Rate hikes will do what they are supposed to do and cool the overall economy somewhat, but having everyone working and making money isn’t exactly a recipe for disaster.
Much like those who simplify the stock market to: rates up, stocks down, the real estate market is multi factorial. Don’t expect a repeat of the 80’s. Those days are over.
Regarding that post, if it’s authentic, then it would be the first time I’ve ever heard a first time buyer worried about their house price one month in.
IDK
I’m starting to wonder when the LIBDP woke supporters will realize they get hit hardest with inflation……
Right as if the woke read financial articles. They only notice when the avocado for their sandwiches doubles in price.
Inflation, coming recession, but who needs money when we have socialism and the government will take care of us all.
Do your land acknowledgement, hug a tree, eat an avocado sandwich, smoke some of “Justin’s legal” and forget about everything. The government is here to look after all you voluntary woke wards to the state.
Happy 4/20
The reason inflation was high in early 1991 was because of the introduction of GST (at its initial rate of 7%) on January 1st 1991 by the federal government, an exceptionally controversial move at the time. “No, prices won’t go up” they said, “there’s no way this will cause inflation”….
Garth, you may remember this!
Actually more taxes were removed than imposed as the GST replaced the manufacturers sales tax. – Garth
With hundreds of cargo ships floating in the Shanghai harbour with nothing to do because of the massive lockdown (Shanghai being the largest port in the world) and with California (largest port in the US is Los Angeles) set to impose a law, in January 2023, forbidding engines older than 2010 in trucks, which will affect up to 80,000 vehicles, things may get worse, much worse.
Back in the day, I was a small-town banker in Alberta. Alberta Treasury Branches. Our head office supervisors had the saying….”your first loss is your best loss.” In other words, walk away from the recent house purchase and lose your deposit. In the long run, you will do better financially. Even your credit score will recover.
Be in dollars, not rocks. – Garth
************
Garth,
I never understood why BoC or FedRes not issue dollars bills wit nominal 10000$, 20000$,50000$ or even 1000000$.
Would be easy to keep in deposit box or between pages in favorite book or even in mattress.
Easy to hide from wife too.
Even the curmudgeons (Crowdie et al) will have to agree that this is the ultimate political maneuver, with impeccable execution.
Well done, Liberals.
The bubble will pop, Mr. Market and accomplice Mr. Bond will take the blame for the crash.
Well another day and lots of opinions lots of smart ones and many that are made for YouTube all l can say is that what l get from Garth is no matter where you look there’s always risk and in normal life process most have family’s and more to think of so if you look at all this accumulated related only from realestate debt and what will you think when in a matter of month’s their will be 10’s of thousand of people under water and in maybe 5 years there will be 100’s of thousand’s underwater and many Canadians took a huge risk in realestate and will pay the price and there innocent children will suffer because of it and the laughable part is most government officials own realestate but not the top dog’s so down we go hope for the best but the worst is yet to start and let’s not forget about all the pain the world will feel from the food shortages we will be feeling all over the world some countries many times worst then us their be many thing to worry about in mere month’s complete turnaround in problily the worst of times since Reagan and Thatcher eara
#37 Faron on 04.20.22 at 5:27 pm
Hey! What is the first rule of the Golf Club?
Exactly. Shhh.
THIS THING’S GOIN DOWN BIG!
Oh my. On the same day Elon reaches the ether of the gods, my firm gets notice of award on a unicorn we never expected. It’s like we’re channeling each other.
Civil engineers, technologists, project managers needed. This inflation thingy won’t be a concern for the next few years.
Does this mean sentiment among the duped will transform into something else? Or perhaps humans will put their owners down (a hug to who guesses right :)), only to realize ‘you’ are the (supposed) top of the food chain?
Will our filthy, repair ridden, energy gulping, weekend absorbing walls be worth less in a year? Gawd, I hope so. Along with that I hope our value system has a revolution. Especially in Canada where our rate of being able to TOTB (a.k.a. imagine) is actually non-existent (among most) and working its way into negative territory. Time to move, leute….wasted – Lazy firsters.
Hope y’all are good…hope the GC’s and GGC’s will be good (Full. Dis.: WE DIE)…hope you find that the rest betters the self…b/c otherwise the rest will be in hell.
Happy weekday!
Og
P.S. Reckoning is nigh. BB’s has a choice. I’ve only been nice…really nice. Tap has run out…whatya’ do? Stay firm.
I’m thinking about trading in my vehicle for a new one, but wondering if buying one of those leased Audi’s that are being returned to the Dealers from Realtors would be a smart move to make.
Are realtors good to their cars?
65 VladTor on 04.20.22 at 7:11 pm
Be in dollars, not rocks. – Garth
************
Garth,
I never understood why BoC or FedRes not issue dollars bills wit nominal 10000$, 20000$,50000$ or even 1000000$.
Would be easy to keep in deposit box or between pages in favorite book or even in mattress.
Easy to hide from wife too.
____________________________________________
I think the biggest question is how much your wife has hidden from you… because with those types of comments, you just know she is.
Not at all. Bullion is valued in US$, which has surged higher on monetary policy. Be in dollars, not rocks. – Garth
Isn’t good considered a hedge against inflation? Inflation is off the charts both here and stateside
Sadly this country is continuing to destroy itself – the economy is bad enough – but the lack of physicians will kill you
Rates will increase to 2.25 % by year end. Big deal.
The talk in the states where they lie less in terms of CPI numbers than us (but more than Europe) is of real inflation of 15-20 % AT THE MOMENT AND INCREASING. Jeff Gundlach said it along others.
Why these games of 0.25 or 0.5 % increases when inflation rages? Why are not rates in double digits already?
What do you honestly believe the real neutral interest rates would be at the moment, given real inflation of at least 15 % if we did not have central bankers?
20 % minimum.
Somebody on this blog stated yesterday that this is not the fault of politicians and central bankers and their policies. No, somebody else apparently created the most crazy housing frenzy environment in the history of the world resulting in condos in Mississauga (the center of nothing in the most sparsely populated country in the world) being 50 % more expensive than such in the very center of Tokyo, the largest megapolis in the world on a small island with population of 120 millions, the most industrial exporting nation in the world.
Apparently somebody else invented CHMC, zero rates, tax schemes promoting constant demand, including RRSP use for down-payments, the new byers ‘savings’ plans, blind actions, FOMO, lack of regulations in the RE market, lack of capital gains for primary residences, zoning rules that prohibit the building of efficient European style low rise buildings, the failure to invest in efficient transportations, the predatory loans, the ultra high cost of living etc.
Look at the benefits indexation for dog’s sake.
2.7 % for the last year folks.
Maybe 4 % for this one/too early to tell.
With 15 – 20 % inflation.
Soon it will not be even gas money. Gas is expensive.
If this is not outright theft I don’t know what is.
And the thieves keep looking you in the eyes and keep repeating: There is no inflation, inflation is good, it is temporary, we are at peak inflation, we will somewhere down the road maybe increase the rates to 2.25 %….
Trust us.
I will trust real rates of 15-20 % and nothing else. Period.
About Calgary my daughter and son in law got hung up in
Calgary on Tuesday April 19th on their way back from
a trip to Arizona and California. West Jet should have had a direct flight back to Victoria however there was a delay
so they caught a flight to Naniamo and are now driving to Victoria. They could not believe the snow and COLD COLD during their brief stay in Calgary.
DELETED
Nobody is getting bailed out of debt. – Garth
—
This is the ONE time I disagree with you. I’m pretty sure the NDP will insist on it.
I will eat my words if this doesnt happen in the next few years.
The reference was to inflation, not political action. Having said that, nobody will have mortgage debt excused in Canada. – Garth
Nobody is getting bailed out of debt. – Garth
*****
They are transparently inflating away the debt. That is a bailout for debtors. When you hold real rates at negative levels for the better part of a decade, and then move them to -5% for a couple years, that is a massive transfer of wealth from responsible savers to speculative debtors.
It’s moral hazard on steroids, perpetrated by the very institutions that are charged with stopping this kind of crap. Not only are they not stopping it, they are enthusiastically encouraging it.
It’s institutional failure writ large. There is no other way to describe it. They will be studying this period in economics classes for the next 50+ years as an example of stupendous policy failure. Macklem will be in print for decades!
#61 under the radar on 04.20.22 at 6:42 pm
The law is clear in Ontario, if the buyer cannot close the deposit is lost. Seller mitigates their damages by selling again. if the sale price is less than the original price buyer paid, buyer is on the hook for the difference . Walking away from the deposit is usually not the end of the story.
But deposits are not actually available to the jilted seller without a mutual release being signed. They can stay tied up (sometimes for years) in a brokerage trust account. – Garth
________________________________________
Read the fine print too – usually the real estate agent gets paid even if the deal craters. Guess where the money comes from…the deposit.
Food supply. ~20 food processing plants destroyed by fire within 6 months? Build Back Better right?
https://twitter.com/drafttucker2024/status/1516553727976558600?
—
“CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today informed customers it serves by Union Pacific rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future. The Company understands that it is one of only 30 companies to face these restrictions.”
Hey Garth,
Long time, first time. I used over 100K of HELOC room to buy the early pandemic stock market dip. It’s been a great investment. Should I cash out now, or hold on?
Rumour is oil will hit $185 a barrel before long.
Garth, if BoC raises rates a full one percent, what will that do to rate reset preferred shares?
Naturally my mortgage renewal isn’t up until July at which point most hikes will be in. I think i’ll go variable and pay the thing off in the next 10yrs.
There is going to be much wailing and gnashing of teeth from the over indebted crowd.
“The reference was to inflation, not political action. Having said that, nobody will have mortgage debt excused in Canada. – Garth’
I hope i dont have to quote you on this.
And soon, Cash will be King again! Whoooo hooooo!
AND for those of you who replied that “cash has always been king”… just look at the people you know – living on credit, Lexus in the drive way, million dollar homes, Remodeled suites in the basement for the adult kiddies, L Vuitton purses, AND every gadget you can imagine plus toys, lots ad lots of toys.
Cash use to be trash… but now, (hopefully) the tide has turned…
@#69 Quinty’s Questionable Quandry
“this is the ultimate political maneuver, with impeccable execution.
Well done, Liberals.
The bubble will pop, Mr. Market and accomplice Mr. Bond will take the blame for the crash.”
+++
Bwahahaha
Do you really think the “gimme everything for free” voters will be thanking the ruling Party in Power ( ie your brilliant, crafty, Machiavellian Liberals) for $3 dollar gas, $7 dollar bread and $5 Milk?
Trudeau hasn’t bought a loaf of bread or a litre of milk for himself since he was “slumming it” as a teacher in Vancouver 25 years ago.
Give your head a shake.
I should be investing in Torches and Pitchforks to hand out at the local food bank in 12 months.
Railroads have more business than they can handle?
#85 TurnerNation on 04.20.22 at 8:42 pm
Food supply. ~20 food processing plants destroyed by fire within 6 months? Build Back Better right?
https://twitter.com/drafttucker2024/status/1516553727976558600?
—
“CF Industries Holdings, Inc. (NYSE: CF), a leading global manufacturer of hydrogen and nitrogen products, today informed customers it serves by Union Pacific rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season and that it would be unable to accept new rail sales involving Union Pacific for the foreseeable future. The Company understands that it is one of only 30 companies to face these restrictions.”
*************************
Buy railroad stocks then? Maybe Union Pacific. Maybe CN and CP as well?
@#86 ML
“Long time, first time. I used over 100K of HELOC room to buy the early pandemic stock market dip. It’s been a great investment. Should I cash out now, or hold on?”
++++
If you’re a Long time reader you KNOW he does NOT give free, personal investment advice.
Why would he do that for free and open himself to liability?
If you can afford to lose all your investments AND pay off the HELOC without losing the roof over your head………..
If the housing market becomes depressed, the first thing that goes will be discretionary spending. It is already happening. Today Netflix lost subscribers for its first time in history. In my opinion, netflix is the bellwether – pay attention folks. So what is going to happen to companies like Apple (once of, in my opinion, the most overpriced companies in the world). Currently valued at a PE ratio of 28, albeit with a lot of cash on hand, what happens when people stop buying iphones and all that other expensive junk? This is going to happen to every company that sells stuff and it’s why I believe we are actually headed for a recession, deflation and high unemployment. It may seem counter to what is happening now – people seem to think we will see out of control inflation, a booming economy and right now there’s seemingly a million or so jobs unfilled. But watch how quick that changes and once it starts turning it will go fast. The housing market will collapse into oblivion, the stock market (especially the US market) will collapse, led by the Nasdaq and we may even enter a depression if we aren’t careful. Canada never paid the true price that other countries played in 2009. We thought we could just lower rates and print out way out of it. Then when covid hit, we doubled down and tried that again… and now we’ve hit the inevitable conclusion of record levels of debt. TIME TO PAY THE PIPER. No where safe to hide. Bonds, stocks, gold, houses… it’s all going down…
I’m not convinced rates can stay high. At the end of the day if rates get high enough the economy will contract. That is the closest thing to a certainty in economics you’ll find. “Fixing” inflation by pitching the economy into recession is not a good solution. It never was in the past either.
Supply disruption is still the biggest issue and interest rates going higher will not fix that. Increasing interest costs to companies will not fix that. It’s like economists think they are doing mechanical calculations when in fact what they are dealing with is a multi variable problem where likely most of the variables are hidden from them. I don’t know what the answer is, but it is almost certainly not jack rates and pray.
@#152 sail Away
“So fun watching Elon make his supporters rich and his enemies impotently furious.”
++++
Does this mean the fight between Musk and Putin is off?
@#88 White Hat Cowboy
“There is going to be much wailing and gnashing of teeth from the over indebted crowd.”
+++
I seem to recall a lot of “unexplained” fires in residential complexes under construction in the early 80’s
Give it 12-18 months when the light at top of the financial pit is too far away to be any help..
Inflation is quickly becoming a HUGE political issue…will there be consequences for Trudeau???
https://twitter.com/PierrePoilievre/status/1516756571438551043
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
____________________
ahhhh… Honestly, everyone knew you couldn’t keep your word…can’t imagine the drama your exes have to deal with…
It’s fascinating that economists are shocked by the inflation rate. Anyone that’s paying attention shouldn’t be surprised – feels to me like that 6.7 number is actually understated.
Somewhere Stan Brooks is taking a victory lap.
#62 Rogerhomeinspector on 04.20.22 at 6:46 pm
I think we’re in for a good smack down.
I work at a high end millwork and cabinetry company in KW. We’ve been busy as ever the last two years but you sense a sort of panic in the air. Example- we’re doing all the millwork and cabinets in a big cottage someone is building near Grand Bend. The original plan was to build a showpiece monster cottage and rent it as an AirBNB. That plan then went to nah, let’s sell it. Now the owner is at the point of panic because he realizes he’s losing money and even the opportunity to unload it by the day. The guy had cash but still- it’s a few million build. That’s a lot of cash tied up.
I also really question the whole “investment” thing. Garth has mentioned it repeatedly that the average person who’s “investing” is actually cash flow negative month to month. It doesn’t take a math wiz to look at purchase prices and rents, compare the two and see somethings amiss. People are chasing price increases plain and simple. The moment the rapid rising prices stop and roll back, people will crush for the exits. And why not- their financing costs are rising (cash flow is even more negative) and their only hope for a profit is evaporating before their eyes. Under those circumstances panic can set in really quick.
I’ve heard before that as soon as prices slip, all cash buyers will swoop in and stabilize prices. Nonsense. Cash buyers are chasing price increases too and will disappear just as fast as the highly leveraged, cash flow negative folks. Think about it- I have a million dollars. I buy a 4 bed in KW. The absolute best rent I’ll pull is $3500 a month. Taxes and insurance will run about $500 a month. So for simplicity sake, I’ll bring in $36,000 a year. That’s pretty pathetic on a $1m investment. Plus, I have to pay tax on the income. And that doesn’t even begin to account for the risk that someone destroys the home or doesn’t pay rent. Nor does it account for a tenant who slips on the front step and cracks their head open and sues me.
People haven’t been investing in real estate to make income. They do it for price appreciation. The moment that stops I think we’re going to see a frenzy of people wanting to unload rentals. Good luck in Ontario especially, trying to sell a home with tenants in place!
————————————————-
Alahulia…. or how ever you spell it. Agreed, excellent point Rogerhomeinspector!! Good point!
#66 Trojan House on 04.20.22 at 6:55 pm
With hundreds of cargo ships floating in the Shanghai harbour with nothing to do because of the massive lockdown (Shanghai being the largest port in the world) and with California (largest port in the US is Los Angeles) set to impose a law, in January 2023, forbidding engines older than 2010 in trucks, which will affect up to 80,000 vehicles, things may get worse, much worse
—————————————
Or they can up date the crappy engines with new pollution control equipment. They have no right to pollute the environment. The air WE breathe…. Ford is building electric trucks already… just drive behind one of the OLD trucks and tell me how you feel???
Our circle of 25-35yo Vancouverites are pretty confident that JT will not hang us (the ones financing all the current boomers retirements) out to dry. He protected us from Covid, he’ll come through with something again. No stress from our group. Maybe he’ll offer some type of gov’t mortgage relief. He’s pretty creative, look how he saved the economy from Covid. Other countries should be so lucky.
#92 Shawn on 04.20.22 at 9:20 pm
Re: Railroads
———
Yes, buying the railroads has always been a solid strategy. They do have high fixed costs which can hurt in inflationary times, but they also have pricing power. Nobody’s building new railway routes, so what’s there is there forever.
CN, CP, CSX, UNP all good. And others.
“Townhouses in the suburbs that were selling for $1.2M at the peak are now going for $1M.
But yes rates going up another 200bps won’t impact house prices apparently.”
https://twitter.com/stevesaretsky/status/1516955600248197120
Lot of hand wringing over rate reset weakness as rates rise.
Its not hard to see that we all hate uncertainty… if a reset happens in 6 months it may reset too low for the next 4 years…if a reset is due in 3 years perhaps peak rates will already be falling and that will cream the reset prices.
Best just to ignore the noise and clip your coupons.
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
********
I think Sail Away missed you…a lot. Gotta be a yin yang thing.
Good to have you back…what’s going on with the weather? If you don’t mind.
Getting the feeling of an impending roller coaster ride. I hope the guy behind me didn’t gorge himself in debt cookies.
Housing never goes down in Canada? If they actually believed such rubbish they obviously didn’t do their homework. I wonder why they didn’t get that in writing as a guarantee from the realtor. I think I’ll get in the Delorean with Dr. Emmett Brown and go back to 1990. Maybe I’ll get a copy of that new album by Midnight Oil, from Australia, on a cassette tape.
#37 Faron
You’ve been having way too much fun away from the blog! Skiing the pow on the north facing slopes. Too bad island ski areas are closed now, but more freshies for you. Maybe we have met skiing… Funny thing about this blog – you never know. Have fun sailing!
#103 westcoaster on 04.20.22 at 10:10 pm
Our circle of 25-35yo Vancouverites are pretty confident that JT will not hang us (the ones financing all the current boomers retirements) out to dry. He protected us from Covid, he’ll come through with something again. No stress from our group. Maybe he’ll offer some type of gov’t mortgage relief. He’s pretty creative, look how he saved the economy from Covid. Other countries should be so lucky
———–
Don’t worry about Justin “hanging” you.
If I were you, I’d be considerably more concerned with Putin frying” you. Of course you realize that you live in one of the ground zeros for Canada.
Check out his latest threat!
#107 DON on 04.20.22 at 10:31 pm
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
———
I think Sail Away missed you…a lot.
———
Without Faron, we’d never have the blessedly wonderful relief of his disappearance. Like gonorrhea.
DON on 04.20.22 at 10:31 pm
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
********
I think Sail Away missed you…a lot. Gotta be a yin yang thing.
Good to have you back…what’s going on with the weather? If you don’t mind.
==========================================
Hi DON,
The weather is weird thing.
None of the climate models have been correct as base form, ever, and then there is the Al Gore and little teenager from Europe tantrums. It’s bad. We are ashamed.
Anyhoo, this year things are different. It is no longer April 20th… today is February 79th!
That feels about right, maybe even a little balmy when the sun tries to shine through.
Cheers, R
Well no surprise at the events, just never knew the timing of it.
I’m still not sold on the idea that the BoC follows through to take the pain that is needed to quell inflation.
If I was a betting man I’d guess that the first timers at $1.3M probably voted L/NDP. Kool-Aid drinkers, not fact seekers.
Give it 6 months and the pain really starts to sink in to what they’ve done and how long it will take to clean up their financial lives.
Also by then I would guess that they won’t spend so much time worrying about global warming (especially when they see their new heating bill!), transgender issues, women on corporate boards, not enough billions for the professional grievance industry, race-based math curriculums for their kids…. and any other number of issues that dominate a soft society.
Welcome to Reality!
#41 Billy McNorth on 04.20.22 at 5:41 pm
Garth, Would you recommend someone heavily in cash ~70-80% of their holdings, with very little fixed income currently,slowly inch into government bonds and preferreds at these massively oversold levels?
____________
Billy Boy,
You don’t get it. They are not “massively oversold”. The debt portion of the instrument is simply responding to the downward forces on interest rate increases. You don’t benefit from the equity side in this case.
Rinse and repeat with each successive rate increase.
Bonds, Billy….Bonds.
#113 Russ on 04.20.22 at 11:16 pm
DON on 04.20.22 at 10:31 pm
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
********
I think Sail Away missed you…a lot. Gotta be a yin yang thing.
Good to have you back…what’s going on with the weather? If you don’t mind.
==========================================
Hi DON,
The weather is weird thing.
None of the climate models have been correct as base form, ever, and then there is the Al Gore and little teenager from Europe tantrums. It’s bad. We are ashamed.
Anyhoo, this year things are different. It is no longer April 20th… today is February 79th!
That feels about right, maybe even a little balmy when the sun tries to shine through.
Cheers, R
***********
Hey Russ
I woke up with frost on the roof and parts of the grass this morning. I hope it stunts the grass to delay the inevitable weekly mowing.
Cold wind of the west coast…brrrr. Was up in Qualicum this weekend, and surprised to see that Mt. Arrowsmith has lots of snow even at the lower elevations.
cheers!
#58 Damifino
The deposit will be for the seller’s pocket, not for the RE agent
#112 Sail Away on 04.20.22 at 11:11 pm
#107 DON on 04.20.22 at 10:31 pm
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
———
I think Sail Away missed you…a lot.
———
Without Faron, we’d never have the blessedly wonderful relief of his disappearance. Like gonorrhea.
————————————
Without Faron, we’d never have the blessedly wonderful relief of his disappearance. Like gonorrhea.
——————————————–
Yup, the STD that never leaves, but make promises it will…
And here we are with his lies. Once AGAIN!!
Modern Monetary Theory can fix this.
#94 ‘Adam’ – regarding Netflix, I’d go with the simple explanation for customer loss. As in said lost customers are now back to work in the office & can’t spend all day watching Netflix. So yeah, cancel that subscription honey.
84 – thanks for pointing out the fine print. Check again. Most standard form agreements require the transaction to be “successfully completed” before an agent gets paid.
DELETED (Anti-immigrant)
Never Ever Ever Ever give your credit card number to someone over the phone from another country that tells you that you’ve won $1 million, but they need $499 for the processing fee. Better yet, never ever ever ever trust a real estate agent! They are out for themselves, and they know every trick in the game and they could each write a book on the emotional state of buyers and what they are willing to do to buy a house, especially if one of the two falls in love with the kitchen! Always do a 360 on the purchase call mom get your head around the financial markets, trying to figure out where interest rates will be going, are you living outside of your means, if your dad never threw a ball to you, why would you try to show him how great you are by buying that big house. Real estate agents then mortgage brokers, oh yeah and car salesmen, I may be nice people with great personalities and use your first name a lot when they talk to you, but that doesn’t mean they will be there when the poop hits the fan and you have to turn in the keys to your big purchase. Tried calling each of them when that happens, they will apologize and then stop taking your calls. Wise up! Now that you’ve learned your lesson, pay it forward and perhaps mentor younger people than you when they go to buy an inflated house. Whether you like it or not, I’m right!
@#65 – Inflation was running at 5% in December 1990, before GST was introduced . Yes, it jumped substantially to 6.9% in January 1991 – the month of the GST introduction, as price levels adjusted to the new tax. However, the inflation rate fell steadily throughout the rest of the year. By Jan 1992, it was just 1.6%, and remained low throughout the 90s, never even sniffing at 3% until 2000.
The GST replaced the antiquated and awful “manufacturer’s sales tax”, a 13.5% tax on goods at the manufacturing level. That tax was awful because it worked like a reverse tariff – it could only be charged against Canadian-made goods since it was levied at the manufacturing level. Imagine putting Canadian companies at a 13.5% cost disadvantage! The reason the GST caused an initial price boost is because it applied to a bunch of new items at the retail level – everything from hydro and phone bills to chocolate bars and restaurant meals and haircuts. Meanwhile, the manufacturer’s sales tax, which ended at the same time, took a while to work its way out of the system. All the goods produced prior to January 1991 had still had the 13.5% levy charged against them. Once those goods were sold off, prices of many big ticket items actually fell.
War on Small Business.
USA study indicates no change in health outcomes for States with harsh lockdowns (a prison term BTW).
Why would there be? This was WW3 kicked off, an all out assault on our way of life.
That all smacks of the Reset/Build Back Better.
Chart of results.
https://fee.org/media/41536/screen-shot-2022-04-14-at-100455-am.png?anchor=center&mode=crop&width=900&format=webp&rnd=132944221700000000
Full Study.
https://www.nber.org/papers/w29928
@#94 Adam
“what happens when people stop buying iphones and all that other expensive junk? ”
+++
It’s already happening…..
https://www.reuters.com/technology/apple-tells-suppliers-demand-iphone-13-lineup-has-weakened-bloomberg-news-2021-12-02/
I think even “the newest trend” people have a hard time shelling out 2 grand for a new phone because “It has 4 cameras instead of 2 and can upload our fave movie 3 nano seconds faster”.
Useless Hype.
My Samsung7 is still grinding away like a Volkswagen from the 1960’s.
Ugly, slow, noisy….. but tolerable…..like Ponzie.
As for Netflix….
“57 channels and nuthin’s on” comes to mind.
Their arrogant price increase excuses just alienated a bunch of consumers that were going to dump them anyway.
But I think more and more frivolous crap will get nuked in the next few months as belts tighten.
A one two three punch the airlines didnt need.
“So you can blame the central bank for messing this up. Blame the busted supply chain. You can blame Putin, like the Bank of Canada did. Or immigrants, which Chrystia says are part of it. Blame China’s zero-Covid policy and punishing lockdowns. You can blame Canadians for sucking in $1.7 trillion in housing debt and pushing prices to the sky. ”
Or if you are American…blame Biden! Everybody else does.
#62 Rogerhomeinspector
I work at a high end millwork and cabinetry company in KW.
——————————————————————————————————–
So, which robbers do you deal with?
Since the advent of COVID, prices for melamine, hardwood plywood, lumber, MDF, particleboard, and similar staples for your industry have skyrocketed from their otherwise relatively stable and competitive pricing.
The distributors in that business are plentiful – especially in Southern Ontario – so competition has kept the pricing in check for decades. Even when the robber barons at the mills (like Uniboard, Tafisa, Flakeboard, etc.) would arrogantly shove their semi annual price increases down everyone’s throat, distribution was so competitive that prices could barely be passed on to the millworker, so margins continually shrunk.
COVID was the game changer in that industry, as distribution could finally blame something other than the “mill” for price hikes. It was full force ahead – no discounts, no special deals, no favours. They finally had their day in the sun. Milking it big time.
Must been fun for the purchaser calling around to Wanderosa, Commonwealth, Robert Bury, Canwel, Eldorado, Proply, Hutton Forest Products, Rayette, Goodfellow, and the rest of them slimy scallywags.
So you can blame the central bank for messing this up.
Central bank is just a tool, we know who the true culprits are don’t we?
No matter, inflation is the end of the road for socialism, two outcomes possible: Reforms (like Sweden 1990s) or crash.
My bet is on crash.
No crash. So many drama queens on this pathetic blog… – Garth
#94 Adam on 04.20.22 at 9:30 pm
…TIME TO PAY THE PIPER. No where safe to hide. Bonds, stocks, gold, houses… it’s all going down…
lol, I like reading the fear in these posts. At least you have a safe place to hide in your parents basement, while you watch the daily action in assets ‘crumble’.
@ #128 Dharma Bum
We deal with all of them. You’re correct- you can generally play the distributors and wholesalers against each other to keep reasonable pricing and your suppliers in check. That said, premium 4x8x3/4 MDF is at about $108 a sheet now. We used to pay $60 all day long.
I’m a big believer in the idea that the solution to high prices is high prices. Eventually everyone will be chasing value pricing as soon as there’s a blip in the demand. It’s inevitable. Until then, customers eat the price.
#20…..Haha. $20,000 for a deck? Go buy yourself a mitre saw, and a drill for $200 on Kijiji, and build the deck yourself over a couple of weekends for $5000, if you want to make it fancy…..Good Lord people…..
No crash. So many drama queens on this pathetic blog… – Garth
So then, what do you mean by:
“The Troubled Future of Real Estate?
1, 5, 10, 15, 20, 30, 40, 50, 60, 70% drop?
Garth, be brave, take a position.
Real estate is now troublesome. Our government says it’s a crisis. I was correct. – Garth
Looks like yields on 5 year bonds will be over 3% by the end of this week, I can see 4% by the end of April, maybe 6% by the end of May, so possibility of 8% fixed rate mortgages by the end of May.
Will they still have the stress test of 2% making you qualify at 10% then, one has to wonder.
Back in the dark ages, people would use terms like ‘lion’ and ‘lamb’ to describe unsettled spring conditions.
Clearly, they did not understand climate change.
120 Linda on 04.21.22 at 1:20 am
#94 ‘Adam’ – regarding Netflix, I’d go with the simple explanation for customer loss. As in said lost customers are now back to work in the office & can’t spend all day watching Netflix. So yeah, cancel that subscription honey.
—————-
I think you got that one right.
Usually, there’s always a simple explanation.
Mostly I blame mortgage buyers since nobody forced them to sign for an overinflated financial anchor. I guess personal responsibility died with the advent of social media. In an ideal world, we would also have the utmost transparency & scrutiny in the real estate market, doubled up with fiduciary facilitators (in lieu of the commissioned peddlers that exist today).
Oh well – back to being a lowly, loser renter.
DON on 04.20.22 at 11:33 pm
… ***********
Hey Russ
I woke up with frost on the roof and parts of the grass this morning. I hope it stunts the grass to delay the inevitable weekly mowing.
Cold wind of the west coast…brrrr. Was up in Qualicum this weekend, and surprised to see that Mt. Arrowsmith has lots of snow even at the lower elevations.
cheers!
===========================
Hi DON,
The oldtimers around here say, “Do not plant the garden if there is still snow on Mt. Benson.” It has been getting a fresh cap o’ snow every week.
April is typically time to get fresh paint on the yacht but too cold this year.
Is there something going on with Fortis shares? The prefs have not budged?
Cheers, R
If I was in charge of the show, I would convene an emergency BoC meeting in the next few days and announce the agenda of a 1/4 point interest rate increase on May 1. I would carry it out and make the announcement the next day.
It could hold the BoC June 1 interest rate raise to a 1/4 point. At this time, I don’t the BoC interest rate exceeding the inflation rate for a long time. I think the plan is to reduce the rate of inflation rather than raise interest rates.
Much depends on whether shortages persist. Regardless, high prices are here to stay. I believe the sooner we can get inflation down, the better. Besides the public is in no condition for high interest rates and neither are our government debts.
#133 Quintilian on 04.21.22 at 10:22 am
No crash. So many drama queens on this pathetic blog… – Garth
So then, what do you mean by:
“The Troubled Future of Real Estate?
1, 5, 10, 15, 20, 30, 40, 50, 60, 70% drop?
Garth, be brave, take a position.
Real estate is now troublesome. Our government says it’s a crisis. I was correct. – Garth
*************
Garth has a reputation and business to consider. Taking a position on any decline is not needed. We won’t miss it. Worst case the overleveraged start a snowball effect as the slope is sliding into recession and probable job loss as consumers realize they are tapped out. The ball and chain of debt lasts forever.
Life happens…nothing lasts forever.
The BC govs cooling off legislation may save some who recently put in an offer.
The gov is also threatening to over ride the municipal housing red tap to get more housing built at a faster rate.
Wage increases in the range of 2-3 % on average with inflation firmly in double digits
https://internationalman.com/articles/david-stockman-on-inflationary-hell-thats-about-to-break-loose/
we are getting probably double digits decline in both the real income and the purchasing power of money/savings at the same time.
The result is double digits (as percentage) drop in economic activities which is equivalent to a severe inflationary depression, that as it seems is about to last for quite some time.
The future increases of grain prices due to the world shortage of fertilizers can cause some very unpleasant price shocks later in the fall and early spring that according to some experts can cause 50-75-100 % increases of grains prices in a single year from the already elevated current prices.
Note that this factor/the food and fertilizer shortages/ is in addition to the demand driven factors and combined with the already elevated inflation expectation can cause inflation of necessities that would cause major headaches for central bankers who would have to think of double digit rates in order to retain any form of credibility.
The real rates seem to be shaping as deeply negative double digits in the next 3-5 years combined with real deep dive in the consumption and real standard of living.
TM@ Brought to you by your central banker.
I agree, there is a lot of crap on Netflix.
But there’s decent stuff.
Spanish, Polish, Mexican, Italian, German, Scandinavian.
Even the odd Quebec movie.
But you gotta search, that’s for sure.
“I don”t SEE rhe BoC interest rate”
Last post. I contradicted myself
“The ball and chain of debt lasts forever.
Life happens…nothing lasts forever.”
Should have said, “The ball and chain of debt lasts until you pay it off which will feel like forever”.
135 Sail Away on 04.21.22 at 10:51 am
Back in the dark ages, people would use terms like ‘lion’ and ‘lamb’ to describe unsettled spring conditions.
Clearly, they did not understand climate change.
———————
The old Phoenicians started it all.
Started clear cutting all the cedar forests for their ships.
Lebanon still has a Cedar on its flag.
@#123 Brian
“Never Ever Ever Ever give your credit card number to someone over the phone from another country that tells you that you’ve won $1 million”
+++
I got a call with a Shanghai area code the other day. I was too busy to pick up so they left a message….in Cantonese.
Apparently
Even the grifters in Covid lockdown ….are bored
146 crowdedelevatorfartz on 04.21.22 at 11:19 am
@#123 Brian
“Never Ever Ever Ever give your credit card number to someone over the phone from another country that tells you that you’ve won $1 million”
+++
I got a call with a Shanghai area code the other day. I was too busy to pick up so they left a message….in Cantonese.
Apparently
Even the grifters in Covid lockdown ….are bored
————————-
You sure, it was not a message……in
Mandarin?
@#147 Ponzie’s Perfect Prose
“You sure, it was not a message……in
Mandarin?”
++++
Possibly both, since the Chinese govt seems to have arrested a ton of people in HK and sent them to prisons on the Mainland.
Real estate is now troublesome. Our government says it’s a crisis.
——————————————————–
Yes, it’s troublesome if you bought at recent overly inflated prices. If you’re looking to buy it’s good news and could get even better.
@#140 DON
“The gov is also threatening to over ride the municipal housing red tap to get more housing built at a faster rate.”
+++
Sooo the multitude of Provincial bureaucrats are going to tell the Municipal bureaucrats to speed things up…..
And the Feds are also thinking of getting involved?
That should be amusing to watch.
My dealings with all levels of govt over several decades of work seem to go like this.
Local bureaucrats are easiest to deal with. Annoying little pissants …but usually fairly quick to make a decision.
Provincial bureaucrats dont answer emails or phone messages and still , eventually, slowly blunder through.
And you have to lead them by the hand on everything that involves a clear, concise direction of work flow.
Federal bureaucrats lord their status and authority over all other levels. They are like vampires, feared, rarely seen, sucking the economic marrow from industry’s bones while adding more bone crushing legislative weight to the rack. Decisions may come but they are not to be rushed, or questioned as to the endless drivel demanded by their processes.
This new legislation is more red tape wrapped around the lone carpenter trying to build a house.
And we wonder why so many doctors are quitting their practices… ( paperwork is the number 1 complaint)
And so it begins….
https://financialpost.com/executive/executive-summary/posthaste-canada-is-headed-for-a-recession-economists-say
Central banks will keep buying up Canadian debt. Debt is now the backbone of the economy the central bank gains more power each passing day Canadians consume and take on more debt this won’t end until the central bank says so and when they become the buyer and lender of last resort and full spectrum dominance over the country.
150 fartz
“Local bureaucrats are easiest to deal with. Annoying little pissants …but usually fairly quick to make a decision.”
————————————–
Not my experience, though “Annoying little pissants” can be accurate in many cases.
It’s these lowest ones that have the big egos and go on
the power trips. I would say these types are attracted to these positions. They get to say “No” as much as they like.
By the time you work your way up through the levels of govt, about the provincial ADM level you can reach
someone who “gets it” and wants to see something progress.
Then again, you can get someone at the federal level
who will try to “just tell the province what to do”. Then the egos come back into it.
No crash. So many drama queens on this pathetic blog… – Garth
Canada was just a hair from a debt crisis in the 90s.
As a whole Canada is one of the most in debt country in the world, behind only Japan, France and … Greece!
https://www.bloomberg.com/news/articles/2022-01-21/debt-strapped-canadians-brace-for-a-risky-rate-hiking-cycle
Our real estate bubble is the biggest, behind only China. Our fiscal margin is gone and population is ageing fast while health care system (among other things) is crumbling.
Absolutely no reasons it won’t get worse this time.
Sh*t happen, even in good old boring Canada.
Sudden crash, slow motion reck or long painful decline, take your pick, it will be one of the three.
It must suck to be you. Try yoga. – Garth
Chairman Powell today: “I also think there is something to be said for front-end loading any accommodation one thinks is appropriate. … I would say 50 basis points will be on the table for the May meeting.”
Ruh roh! Come on, real estate bulls! Tell me this isn’t happening!
Inflation is only getting out of the blocks. This is going to be worse than anybody thinks. 15 percent within 12 months or less. A loaf of bread gonna cost a wheelbarrow of dollars.
Its already worse now than it was 12 hours ago.
climate change and agriculture =inflation
+greed
===========
500 test results are “confirmed or suspected to be faked, falsified, or forged,” the attorneys wrote.
A company accused of handing out fake results for hundreds of coronavirus tests will pay more than $20 million (U.S.) under a settlement deal announced by Los Angeles City Attorney Mike Feuer.
…”of sending fake results to hundreds of people, telling them they had tested negative for the coronavirus when laboratories had not actually run their tests. Some tests were never processed at all, according to the complaint filed in court Wednesday.
#107 DON on 04.20.22 at 10:31 pm
#37 Faron on 04.20.22 at 5:27 pm
Yo kiddos! Betcha missed me!
********
I think Sail Away missed you…a lot. Gotta be a yin yang thing.
Good to have you back…what’s going on with the weather? If you don’t mind.
—
Thanks for the kind welcome DON. I miss some of the camaraderie that occasionally rears its head here. Probably not back for long though.
The weather? This is pretty normal for a La Nina year. Yeah, it’s cold, but pretty typical for the phase. I absolutely love it and will probably still be skiing well into July if this keeps up. Got some Cascade volcano glaciers in my cross hairs. The run from Sherman Peak to the moraines on Mt. Baker can be 1200m (in the vertical) of spring corn snow bliss. It’s just there. For the skiing. Or but sliding for that matter. And nothing makes one appreciate spring’s rich green lushness more than a day or days spent among the snowy wastes. I digress…
Like all things climate related, 20 or 40 or 60 years ago this would have been an even colder April. The baseline has warmed a degree or two, so what is now a bit of frost nip would have been a killing frost not too long ago. Snow in Calgary in April? Pfffft. It only feels weird to Calgarians because of the warmer background today. When I lived there in the early aughts, a dump of snow in May was de-rigueur.
Anyhow, the cold now will average out. I’m sure, once again, this year’s average will fall among the top 20 in BC and top 10 globally. Or not. A year’s weather does not define climate and doesn’t say much about climate change. Yet, extreme events can and do reveal much.
Russ, unfortunately the models are not wrong. That you think they are reveals where your head is stuck askance. The greater risk is that they are undershooting and leaving us exposed to surprises like last year’s heat-wave that killed more than 750 British Columbians.
I’m sure Sail Away misses me like he does his gonorrhea-catching days when he, you know, used to go out into the world and have fun rather than while away his hours playing holier-than-thou on this comments section and god knows where else on the internet. Also liars, insulters and cheats kinda want to be caught out, so they dribble and drool little hints just to raise the stakes. Without me, no-one is doing the catching.
Finally, I was reading my copy of Pojar and MacKinnon’s “Plants of the Pacific Northwest Coast” a few nights ago. I was curious to learn more about the Yellow Cedars that share space with mountain hemlock in much of the Island’s ski terrain (oldest trees in our forests! They smell like arse!). I came across the description of the plant that Sailo’s engineering firm is named after. It made me chuckle.
#136 Ponzius Pilatus on 04.21.22 at 10:55 am
120 Linda on 04.21.22 at 1:20 am
#94 ‘Adam’ – regarding Netflix, I’d go with the simple explanation for customer loss. As in said lost customers are now back to work in the office & can’t spend all day watching Netflix. So yeah, cancel that subscription honey.
—————-
I think you got that one right.
Usually, there’s always a simple explanation.
———————————————-
Netflix lost 700,000 Russian subscribers because they pulled out of Russia. So now, netflix stock is the DEAL of the century…not everything is limited to our Canadian boarders….
If Canadians are back to work, doesn’t mean they cancelled Netflix and even if they did, it wouldn’t even dent the stock. Canada has say 37 million people, we are not a make it/break it population by any means. Canada shifts nada.
Reading people saying “The central bank can’t possibly raise rates” is frustrating, and for the reason I feel that way, this is an excerpt from a book called The Graysonian Ethic:
“The greatest recession in public memory, the Great Depression, came about in part because of a change to the Homestead Act. The change to the Homestead act said that in order to Homestead you did not need access to groundwater. Previously you needed access to groundwater. At the same time, a temporary change in climate occurred so there was a lot more rain over the Prairie. As a result, for a few years people thought that perhaps the climate had changed permanently so lots of money ended up flowing into these new farms as bank loans. Also at the same time, the Federal Reserve had been created which provided a lender of last resort and appeared to reduce the risk of Bank runs. Because of this, banks were more than happy to take what looked like a low risk and lend a whole lot of money to Farmers starting up their own farms using the Homestead Act.
What happened next is the climate reverted to normal, and suddenly all this Prairie was trying to grow thirsty crops on plains that did not get enough precipitation to support those crops. The resulting environmental catastrophe was called the dust bowl, and the farm failures led to bank failures which led to the Great Depression.
The point I’m getting at here is: just because a thing that we know will be harmful hasn’t been harmful yet does not mean that it won’t be harmful.[…]”
well,well… the market participants are screaming – WE’RE NOT GONNA TAKE IT!! uhh_uhn…not one more rate hike as big as the last one mentioned. Will our puppeteers blink?