On a plate

First, the news. Sit.

Our central bank’s spine grows and stiffens daily. Now the boss there says the Bank of Canada “may need to take a larger step” when rates are adjusted again on July 13th. Larger than 50 bips, in other words. Immediately the financial markets began pricing in a 75-pointer, which would raise the chartered bank prime to just under 4.5%. There will then be another 50-point increase on September 7th, the market believes. The prime will become 5%. Mortgages will be 6%. Maybe more.

Also today, the CB’s latest report warns everyone with a mortgage coming up for renewal – which is 37% of all indebted homeowners in the next year and a half – should brace for a big payment jump. The guessing is a minimum of 30% up to about 50%, depending on the existing rate borrowers have. In any case, it’ll hurt.

As for HELOCs, interest-only payments are set to double by Christmas from where they were on Groundhog Day. When the bank prime was 2.4%, those loans cost 2.9%. When prime is 5%, they will be at 5.5% or greater. On a $200,000 borrowing, monthly payments rise from $400 to just under $1,000.

Now imagine if you bought a rental property with 100% financing, using a HELOC to raise the 20% downpayment and an 80% LTV mortgage for the rest. Maybe even a variable one. Suddenly you are (a) in negative cash flow as the rent collected doesn’t come close to covering costs, and (b) the property’s value is falling weekly, wiping away the prospect of a capital gain. Whaddya do? Yup, list.

As this blog stated the other day, this is not a housing correction. It’s a real estate crash. If the CB does what it’s signalling over the course of this summer, property values everywhere will decline significantly. Recent buyers (2021, early 2022) with downs of less than 10% will be in negative equity. It’s reasonable to assume a big increase in listings, a dearth of buyers fearful of acquiring a declining asset, and a price correction reminding all the Boomers of 1989.

For the record, this is what Tiff Macklem, the CB governor, thinks will happen. A housing slowdown is “healthy” and here’s the plan:

“If the economy slowed sharply and unemployment rose considerably, the combination of more highly indebted Canadians and high house prices could amplify the downturn. This is not what we expect to happen. Our goal is for a soft economic landing with inflation coming back to the 2% target. But it is a vulnerability to watch closely and manage carefully.”

In other words, cross four fingers and tap your heels twice. That should make it all okay.

Now, step back for a moment.

Did the bank cause inflation by keeping rates too low for too long, thereby making this period of correction more painful?

Some say so. Tiff should lose his head.

But that does not explain why there’s inflation around the entire world, or why bond yields (and CB rates) are rising in the US, Britain, across the EU, Down Under and everywhere else from Chile to Russia. Even if the Bank of Canada had delivered 5% mortgages a year ago, skidding the property market into a ditch, we’d still be dealing with the impact of $120-a-barrel oil, food inflation, the war on Ukraine, two-dollar gas, romping input prices, the US post-pandemic expansion and a wonky global supply chain with its chip shortage and used car price eruption.

It’s human nature to point to something, or someone, to establish guilt and wipe away all vestige of personal responsibility. But that masks the problem. It stalls a solution. Some people, like Pepe, know the ignorance of the citizenry when it comes to the bond market and monetary policy, and proffer this simple explanation. That’s done to gain power. But the power will come with no fix. Serving up Tiff’s noggin on a Con platter would do nothing more than politicize our central bank and scare off global capital. It’s beyond dumb.

Around the world there’s about $120 trillion sitting in bonds. That’s six times the US economy. This vastly exceeds the value of the world’s stock markets. And these days Mr. Bond Market is in a funk. The price of almost all those bonds is dropping and the yields are rising. Including here. Dramatically. With big implications.

This is not going to stop for a while. Months and months. Dumping the bank bosses would change nothing. Even tossing the federal government would not alter the course of what is coming. So it’s better for angry, scared people to direct their energies to their own situation.

Stop borrowing, obviously.

If there’s high interest-debt (my MasterCard statement just told me the interest rate on retail purchases is moving to 20.99%) pay it down. Don’t keep cash in a 2% HISA when you have a credit card balance.

If you took a VRM, understand how variable-rate mortgages work. As rates pop your principal payoff shrinks fast and at renewal you could owe more than expected while facing a drastic rate hike. Be ready for that, or switch to a fixed-rate loan.

A good defence against the eroding power of inflation is to trash tax exposure. Current conditions are a powerful incentive to stuff your RRSP, your tax-free account and the kid’s RESP. Use a spousal plan to lower family taxes and split pension income. Also consider switching your mortgage payment to weekly, if you can.

Of course, festering debt may necessitate large decisions. Like dumping declining, over-leveraged real estate even when the market’s falling. Remember the last time we had a meaningful housing plop it took 14 years for prices to recover. The longer people waited to exit their distress, the more they embraced it.

In short, a generation is learning low rates are not normal. Escalating real estate is not normal. Leverage is risk. The herd isn’t always right. FOMO is lethal.

And nobody made you do it.

About the picture: “This is our guy Hudson,” writes Alan, “when he was a pup. He is a four year old Hungarian Vizsla, and is the boss of our household. After a year of research, I went out on a limb and surprised my dog-loving wife with this breed, over her families typical choice of a Golden R. He is incredibly fast, handsome, and affectionate. He is a best friend and an incredibly picky eater. If my wife ever had to choose between myself and the dog, I would be sacrificed without thought. Life just wouldn’t be the same without this ball of energy around.”

164 comments ↓

#1 crowdedelevatorfartz on 06.09.22 at 3:48 pm

These rate rises are long overdue.

But I will enjoy the real estate correction.

Where’s the popcorn.

#2 Islander on 06.09.22 at 3:48 pm

Finally! and thank you Garth for helping to save me and mine from real estate insanity.
All the best for the rest of 2022.

#3 Lee on 06.09.22 at 3:51 pm

$120 T is not “six times bigger than the US economy”. USA GDP is about $25T. So $120T is about “six times the US economy” (actually 4.8 times the US economy). This is about “four times bigger than the US economy”.

(If a ball and a bat together cost $1 and the bat costs $0.90 cents more than the ball, what does the bat cost?) Those who watch Tic Toc will know the answer.

And by the way, FIIIIIIRST.

#4 Captain Uppa on 06.09.22 at 3:53 pm

My cousin just became a real estate agent.

Godspeed.

#5 mj on 06.09.22 at 3:56 pm

Best way to fight this inflation is if Trudeau and Biden got the pipeline going again. Then both countries open up the taps at full speed. That would drop the price of oil and help with inflation.

#6 TurnerNation on 06.09.22 at 3:58 pm

This blog is about trends, economic and social. I post Mainstream news links almost all of the time.
There are only a few issues affecting the average person today. Inflation. Travel. Loss of Middle class/Small businesses. (Almost a de facto one-child policy, who may afford more?)

Or as I pegged it, since March 2020 we have seen unprecidented and un-ending control globally over our Travel/Movements, Feeding, and Breeding. (Those armed interprovincial ON-QC checkpoints in 2021 anyone? Kanadians, heavily traumatized by the State-funded media, have short and trusting memories. I get it)

MAINSTREAM NEWS headlines here they come :

— Absolute power?…absolutely. Supply chain issues for the Former First World Countries — this is like asymetrical warfare??

.China digs in for permanent zero-Covid with testing and quarantine regime. Shanghai district prepares for new lockdown as authorities build infrastructure to extend approach (ft.com)

.Seventh COVID wave possible this fall, Tam tells MPs: ‘The pandemic is not over’ (nationalpost.com)

.COVID-19 on the rise in Israel again? Fifth jab being considered – report (jpost.com)


———–
“Tricon Launches Market-Leading Down Payment Assistance Program”
https://www.theglobeandmail.com/investing/markets/stocks/TCN-T/pressreleases/8626545/tricon-launches-market-leading-down-payment-assistance-program-expands-environmental-sustainability-initiatives-and-releases-esg-report/

#7 Caffeine Monkey on 06.09.22 at 4:00 pm

The last point is key. This is going to be a protracted downturn that will last at least a decade, if not two. This is something that Canadians who are heavily invested in one asset class (real estate) don’t fully appreciate yet. The current hopium is that the BoC will wimp out and do an about-face on interest rates, but that is grasping at straws.

The most likely scenario is a multi-decade depression in real estate prices that bleeds the wealth out of people who are invested entirely in real estate. They’ll wait year after year, fruitlessly hoping that prices will turn around. It’ll be crushing.

The sad thing is that a majority of Canadian adults don’t know how to invest. To the majority, investing means keeping money in a bank account, GIC, or going balls-to-the-wall on the largest mortgage possible to buy a stucco-clad East Van bungalow. It’s cultural, and I don’t know if Canadians really know how to do anything else. The next decade or two will be really interesting.

#8 Robert B on 06.09.22 at 4:01 pm

Could it be that Central Banks were suppressing rates for so long????
The genie just had to come out of the bottle….
Inflation just doesnt just shoot up when everyone was sleeping.

Good luck the biggest country in Europe ( Germany) raising rates any time soon…….Fireworks are definetely coming…

#9 bob on 06.09.22 at 4:02 pm

Didn’t you hear, the reason why real estate prices are dropping is because Chinese buyers aren’t buying homes anymore!
.
.
.

#10 CharlieDontSurf on 06.09.22 at 4:05 pm

“Nobody made you do it”

Exactly.

#11 Adam on 06.09.22 at 4:07 pm

14 years for prices to recover. I don’t think this generation can handle that. We’re gonna have a massive mental health epidemic on our hands.

#12 None on 06.09.22 at 4:15 pm

Garth,

This was a good one.

I’ve considered Can RE risky for years and stayed out of the market. People have literally called me an idiot for doing say. Even yesterday a friend told me her friends thought I was an idiot for not buying a house NOW.

I have to admit, a good chunk of me will enjoy watching those grins turn upside down in the next few months.

#13 stealth on 06.09.22 at 4:16 pm

Garth, thanks for the post, it is very direct, truthful reminds me of Professor Fama giving interviews, crisp and simple.

In the recent week or two, I have heard people starting to talk about coming recession, another pandemic wave, job security like never before.
Few people I talked to and participated in their interviews are terrified of leaving their public sector jobs due to fear and pension loss (most are early 20s, not married, what pension). What is going on? Are people this afraid? Is every job now terrifying unless it is in a public sector?

Point is that I have never heard or seen this level of fear before.

What do you think, how should these folks protect themselves? Also no one seem to want bonds any more, traditional protection mechanisms.

Thanks

#14 OK, Doomer on 06.09.22 at 4:18 pm

Few people appreciate how finely tuned and balanced the economies of the world were prior to COVID. We operated on a just in time inventory system that depended on cheap fossil fuels to keep it intact and running smoothly. Any slack or unused capacity was considered wasteful and was chased out of the system.

In reality, excess capacity and slack are buffers to guard against shocks, and with them gone every shudder in the system echoes and reverberates around the world.

My view is that inflation is transitory and will dampen down once these shocks subside. That’s the good news. The bad news is expect a couple of years of this debacle .

#15 TurnerNation on 06.09.22 at 4:21 pm

Yellow Tractor guy you were not exagerating about Peterborough being rough. Here is only TWO day’s of headlines from the Ptbo. Examiner:

Man with gunshot wounds taken to hospital as Peterborough Police investigate shooting
Police investigating after man allegedly cut with boxcutter in Peterborough
Aggravated assault arrest in Peterborough after woman allegedly stabbed at convenience store
Police investigating after multiple reports of man with a knife in Peterborough
Man allegedly brandishes knife against Peterborough store staff
Police look into report of man allegedly wielding pellet gun on Peterborough trail


— War on Middle Classes.

.The Financial Post reports in its Thursday edition that Dollarama is rolling out new price points up to $5 as it adds new products amid a shift in consumer spending patterns. (stockwatch.com)

.The Globe and Mail reports in its Thursday edition that business leaders have urged senators to address concerns that a new luxury tax on autos, boats and planes could trigger many job losses in Canadian manufacturing. (stockwatch.com)

— Control over Travel… is Permament as we are in Year Three FYI.

.Passport application backlog leads to lineups, scrambles summer travel plans (cp24.com)

.Canada To Introduce Mandatory Monkeypox Quarantine For Travellers
https://travel.gc.ca/travelling/health-safety/travel-health-notices/229

#16 YYC millenial on 06.09.22 at 4:21 pm

Mortgage is up for renewal in Dec 2022 currently at 3.2% rate.

Bank is offering early renew online showing 2 years at 4.42 % going all the way to 4.6-4.8 ish for a 5 year fixed.

Not really sure what to do picking a 5 year fixed last time was a bad call.. Didn’t want to go fixe again this time. Either i go fixed now wait til december and see what is happening.

#17 wallflower on 06.09.22 at 4:22 pm

12 remaining days “spring” RE market which is typically winding down at this point but not this year!
It is moving into full-on, final sprint, spring panic.
• Sales to delistings – sales going lower – delistings going higher
• Relisting at lower prices – volume increasing daily
• Gap between original list and relist (relist more and more many times) – getting wider and wider
• New open house to repeat open house – repeats on open house weekend going higher
• Available rentals – going higher, all time high per my southern Ontariowe city
• Rentals moving into multi-month listings – DOM enormous
• Rentals price drops steamrolling – price drops multiple and gap from first list to multidrop growing
• Listings of all, growing
• Clear indications that recent SOLDS listing now for resale will be underwater at close
Those who talk about not enough supply are ignorant. Tim Hudak, you are so full of it.
It isn’t supply, it is the supply mix that is a problem. And continues to be.

#18 Caffeine Monkey on 06.09.22 at 4:27 pm

#9 bob “Didn’t you hear, the reason why real estate prices are dropping is because Chinese buyers aren’t buying homes anymore!”
——-
As a first-generation Chinese-Canadian, I think this is salient. The narrative that people have been pumping is that Chinese investors are impervious to cooling measures and interest rate hikes because they’re aren’t taking out mortgages: they’re using Canadian homes to launder their immense wealth that is often ill-gotten. Interest rates don’t matter to them. BC has had measures aimed at curbing foreign ownership for years with no effect on prices.

Well… now that prices are suddenly dropping… *throws hands in the air* WHERE DID ALL THE CHINESE GO?

#19 Quintilian on 06.09.22 at 4:27 pm

“Did the bank cause inflation by keeping rates too low for too long, thereby making this period of correction more painful?
Some say so. Tiff should lose his head.”

CB’s of most of the developed world have collectively and with intention kept interest rates too low for too long.

They thought they could do away with the established multi century economic cycles. They were wrong, turns out that recessions are indeed our friend.

As for Tiff, he should definitely NOT lose his head; he is the only BOC Gov, so far, to my surprise, has shown fortitude and is doing the right thing.

#20 macduff on 06.09.22 at 4:28 pm

One thing that no one talks about is that public pensions, CPP, OAS are all subject to annual increases in the CPI. If a high level of inflation persists, this is no doubt an unbudgeted expense that will further affect our government’s balance sheet.

#21 Saint Herb on 06.09.22 at 4:30 pm

As this blog stated the other day, this is not a housing correction. It’s a real estate crash.

Oh my dog! Garth, you made my day a second time!

I know they say, “be careful what you wish for”, but it’s long overdue.

#22 Damifino on 06.09.22 at 4:32 pm

#5 mj

Best way to fight this inflation is if Trudeau and Biden got the pipeline going again. Then both countries open up the taps at full speed. That would drop the price of oil and help with inflation.
————————————

Sure thing. Then a few weeks after that we all die in flaming cauldron of corporate greed. Did you learn nothing from Greta? How dare you?

#23 Linda on 06.09.22 at 4:33 pm

‘Hudson’ looks like he is contemplating switching dog kibble. Mournful but resolute, he projects ‘you can’t be serious! You expect me to eat this?’

‘Stop borrowing, obviously’. If only it were ‘obvious’ to the masses. When you have folks turning to their credit cards to fund their lifestyle despite the horrific interest rates appended to said cards one must expect things will not end well. I know math is hard & all that, but good golly Miss Molly, don’t these folks realize just how much using the CC will cost? It isn’t like the cost is hidden by the card companies. Every statement we receive outlines how long it would take to pay off our current balance in full if we only made the minimum payment. We always pay it off in full so as to avoid paying any interest, but if we didn’t most months there are sufficient charges to take literal years to pay off if we ‘only’ made the minimum payment! Our last statement said it would take 29 years & 9 months to pay off the current balance if we only made the minimum payment. The bill for that month was just over $3,500. Think about that. 29.75 years to pay off just over $3,500. With ‘average’ debt running north of $20K, using the CC is not the way to save yourself.

#24 Dave on 06.09.22 at 4:34 pm

Each day I check the 5 year bond price and it keeps going up. I love it. Looking forward to the days of 10% or more GIC rates. Mmmmm that will really make my savings swollen. I just don’t want to lock in for 5 years because I don’t want to suffer from FOGS due to higher and higher interest rates. Should I lock in at 5% today for a fiver, or wait till December and lock in at 7%. I have been waiting for this for a long time. The 10 year GIC payng 5% sounds nice but I like the idea of the 10 year GIC paying 10% instead.

#25 Doug t on 06.09.22 at 4:37 pm

KABOOM – welcome to the REAL world Millenials

#26 Grumpy Cat on 06.09.22 at 4:41 pm

Adam “I wouldn’t let the Canadian Bubble crash” Vaughan is probably on suicide watch right now lol.

#27 Felix on 06.09.22 at 4:42 pm

DELETED

#28 JEFF13 on 06.09.22 at 4:44 pm

We have a serious problem with accountability in our society.

Tiff said in July 2020…rates will stay low for a long time. Less than 2 years after, they are exploding higher at the fastest pace in decades.

Tiff said in fall 2022…inflation is transitory. Now it seems it is getting more permanent. Of course, at some point, it will slow but when?? 3 years from now until it get below 5%.

If the guy had a sense of honor, he would have resigned for these costly mistakes. If his ego doesn’t allowed him to do this, he should have been fired. Nothing personal, but you need to own your mistakes and your responsibilities.

Doesn’t hindsight make you feel so smart? – Garth

#29 Billy on 06.09.22 at 4:48 pm

While it’s true that our government couldn’t have done anything to prevent globally driven repercussions, they could have limited the historic increases in deficit spending – which will now hobble their ability to support Canadians for decades to come…

#30 Reality check on 06.09.22 at 4:49 pm

I do not think i have ever heard anyone claim that interest rates revert to the mean.

If interest rates do revert to the mean, look out below, after 12 years of emergency interest rates we would need a decade or more of higher than normal long run rates. And Canadian house prices would correct sharply for the next decade plus.

#31 Scott in Gibsons on 06.09.22 at 4:51 pm

How will the CMHC situation play out? Banks made whole with borrowed money while Main Street starves?

#32 Infellation on 06.09.22 at 4:51 pm

#3 Lee on 06.09.22 at 3:51 pm
$120 T is not “six times bigger than the US economy”. USA GDP is about $25T. So $120T is about “six times the US economy” (actually 4.8 times the US economy). This is about “four times bigger than the US economy”.

(If a ball and a bat together cost $1 and the bat costs $0.90 cents more than the ball, what does the bat cost?) Those who watch Tic Toc will know the answer.

And by the way, FIIIIIIRST.

######

Sorry, Lee … you weren’t even close to being FIIIIIRST. Try the WIIIIRST.. we stopped playing that game a few years ago. Don’t give people any ideas.

BTW, since your post was made, the price of bats has doubled!

#33 Søren Angst on 06.09.22 at 4:57 pm

https://storeys.com/tiff-macklem-admits-boc-moved-too-slow-rate-hikes/

https://financialpost.com/news/economy/tiff-macklem-acknowledges-misjudging-inflation-pledges-to-act-forcefully-to-bring-it-down#Echobox=1651146462

From the horse’s own mouth.

Yes, he did.

Has a 1,000 people working for him, surely to God someone there last fall possessed half a brain, but, alas…

Clear to me last year, why not them?

#34 Brunett43 on 06.09.22 at 4:58 pm

My sincere condolences to those who purchased real estate in the last 4yrs. Hate to say it, but Garth told you so!

Regards,
T.

#35 T-Rev on 06.09.22 at 4:59 pm

“I follow the Moskva
Down to Gorky Park
Listening to the wind of change” (lyrics credits to the Scorpions)

This is going to hurt a generation of buyers, and leave an indelible mark on a generation of Canadians if it turns out like it looks like it is. Guess the music finally did stop, in a big enough way, in a large enough portion of large Canadian housing markets, that we can’t escape it this time. The only two crashes in my adult life were Albeeta 2007/2008 and now this one. I wasn’t in Toronto, or out of grade school, during the one in 1989. And wasn’t born just yet (but likely swimming towards home base) for the Alberta crash of the early 80s.

The equity loss is going to cripple a lot of folks. I stand by my belief that the areas that shot up the least will be the least affected, which means the Prairies sees a small melt, while Southern Ontario, the Maritimes, and Interior BC are in for a terrible amount of pain.

#36 cmccullo on 06.09.22 at 5:03 pm

From my cost-efficient detached rental in leafy part of Ottawa, 20min commute downtown, Re/Max just listed the house across the street at 949K. Comps with more sq ft (one with a pool) sold for 800 last year, and that was almost beyond believing. They haven’t bothered to mow the lawn, even. Is there a fool that great? Let’s wait and see.

#37 Cash is King on 06.09.22 at 5:05 pm

BUCKLE UP. JUMP

#38 T Rex and the dinosaur clique on 06.09.22 at 5:06 pm

RE: #6 TurnerNation on 06.09.22 at 3:58 pm

Interesting that you see planning in all of this.

I see a decadent system on the verge of collapse.

Like the Capital in “Hunger Games”. Over fed, over coddled, immature, and over protected.

Ask any Eastern European what they think of North Americans: They are immature. They are spoiled. They complain all the time.

It is becoming apparent to me that when Freeland and Trudeau touted their “build back better” agenda, they had no plan of building anything at all, they cannot build things, they have never built a thing in their lives, and they were not planning on building anything.

What they were doing, was virtue signalling.

The signal was being sent to an organization called the World Economic Forum. They were acknowledging that Canada would fall in line with the W.E.F. agenda (whatever that is) and they were signalling their own virtue in being willing to put that agenda in place in Canada.

Neither Trudeau nor Freeland had, or have, any idea what build back better means. Neither has any idea what is being reset or why.

It is questionable whether many of the billionaires who frequent the W.E.F. have any idea what they are building back, or better, or resetting, either.

When you have a bunch of folks in power, mindlessly signalling virtue to promote causes they do not understand, and those in charge of those causes, do not understand them either, and the general public just follows along because it “feels good”, you have a decadent Society on the verge of collapse.

We have detached from the fundamentals of reality and we are living a dream. That dream was built by our parents and grandparents (who actually knew what they were building, and were not just mindlessly signalling virtue to unknown individuals).

There is going to be a great reset, but not the one we think.

Unless someone gets a handle on what we are actually trying to do, we are going to get reset in a way that will not be comfortable.

Where is our media to ask Trudeau, what he is building, and why will it be better? Again, mindless. No one is asking the right questions.

There is no plan. Just a decadent society, on the verge of collapse.

Society is not collapsing. Oh, the drama. – Garth

#39 Annuity time? on 06.09.22 at 5:08 pm

Riddle of the day for those so inclined … or those that don’t care about cereal box weights and morels.

5 years ago, my wife and I retired and cashed out our respective DB pensions. Due to the interest rates, our commutation was, shall we say … able to put a smile on my face. Nearly caught the bottom of the cycle..not quite.

Since that time, i have managed to significantly boost this amount into the stratosphere with some nearly 20% returns annually on this money.

That being said … why not take all of that cash and drop it into an annuity once interest rates have maxed out?

FYI, All I ever needed to make from my commute was min 3.69% to equal what I would have received as a pension. (Though my calculation was based on 2 or 3 % inflation indexing, so this number would be a bit higher).

So ostensibly .. I would end up with a risk free income for life, while receiving significantly more than my pension would have ever offered given that the principal is way more now and interest rates much higher than that used by the pension fund.

#40 Søren Angst on 06.09.22 at 5:12 pm

Society is not collapsing. Oh, the drama. – Garth

I would have gone for “pathos” living in the EU but drama is good.

Too funny. Good one Garth.

#41 A Luta Continua on 06.09.22 at 5:12 pm

The accelerating correction will appear to have come from nowhere to most.

Seeing some urgency amongst the more dialed-in amateur landlords trying to offload properties.
Heard of a couple offering cash to tenants to break leases early.

The ones who geared up and bought more house in the last year while keeping the old place….hooped.

#42 Economics won oh won on 06.09.22 at 5:14 pm

#5 mj on 06.09.22 at 3:56 pm
Best way to fight this inflation is if Trudeau and Biden got the pipeline going again. Then both countries open up the taps at full speed. That would drop the price of oil and help with inflation.

You wish! Come on now. Give your head a really good shake.

You really think the gas/oil companies in my portfolio would sell YOU product at a discount when I can get a better price elsewhere in the world?

Now take two aspirin and don’t comment again in the morning!

#43 Philco on 06.09.22 at 5:14 pm

One does not need to read or watch the news to figure stuff out.
I said here over and over the green movment and the govs cluless plans a JOKE. Hug a barrel of oil. Go listen to the dude on Campbell last Sat. Hes a pro.

Also
Heeeeeeeeres Biden. Trump looks like a genius next to him and crew.
News: Biden’s approval rating reaches new low. Read story
News: American trust in government near ‘historic low.’ PEW Study. Read story
News: Why are boosted Americans testing positive for COVID more than those without extra shot? Read story
Yup the fear campain money making scheme was full tilt.
2 was enough.

And T2 Mr flake going after honest ppeps guns while the real criminals will always have.
While people cant afford food or fuel and Inflations crushing them. Not me.
I knew where we were heading. Simple their not your friends their there to empower and enrich themselves.
Garth when you said no one goes into power to do bad things I fell.off the couch.

You will die without FF. HUG A BARREL!
https://mikesmoneytalks.ca/june-4th-episode/?mc_cid=3e4a66c431&mc_eid=84b7e8f164

https://morningconsult.com/2022/06/08/biden-approval-rating-new-low/
https://www.msn.com/en-us/news/politics/american-trust-in-government-near-e2-80-98historic-lows-e2-80-99-pew-finds/ar-AAYfyq8
https://www.msn.com/en-us/health/medical/why-are-boosted-americans-testing-positive-for-covid-more-than-those-without-extra-shot/ar-AAYbs7n

#44 Philco on 06.09.22 at 5:15 pm

We are facing SERIOUS STUFF. EOS

#45 Jens on 06.09.22 at 5:20 pm

So it’s better for angry, scared people to direct their energies to…

…do what the boomers did to make ends meet when times were tough: get a second job! There are plenty of them out there. We enjoyed two years of pandemic money for nothing. Now we might as well roll up our sleeves and dig ourselves out of that collective financial hole.
And, keeping busy will keep our minds off worrying about our future.

#46 Gravy Train on 06.09.22 at 5:22 pm

#1 CEF on 06.09.22 at 3:48 pm
These rate rises are long overdue. But I will enjoy the real estate correction. Where’s the popcorn?

Did you even read Garth’s blog today? He wrote: “As this blog stated the other day, this is not a housing correction. It’s a real estate crash.” Try to keep up! :)

#47 Søren Angst on 06.09.22 at 5:24 pm

When BoC start buying Gov Canada Bonds in the billions to pump Fiscal coffers given out to Cdns to pump demand and you keep the Prime very low so money is cheap to borrow

AND ALL THIS BEFORE WAR, OIL ETC.

What did the BoC think was going to happen when you LITERALLY pump MONETARY STEROIDS + pump FISCAL STEROIDS into DEMAND?

That was 2020 and 2021.

Now BoC admits:

Too late.

Asleep at the wheel my moniker about them last year. Still holds true.

——————

Now they’re going all MONETARY MACHO hoping to douse the flames and for a soft economic landing.

I don’t believe that outfit can engineer a soft landing if their lives depended on it.

Unfortunately Cdns will have to pay the price.

#48 Fond farewell, TurnerNation on 06.09.22 at 5:24 pm

#6 TurnerNation on 06.09.22 at 3:58 pm
This blog is about trends, economic and social. I post Mainstream news links almost all of the time.

______

That explains it. All these years you were posting to the wrong blog.

This blog is actually about Canadian real estate, stock market investing and to a lesser extent … dogs.

No wonder I never read a single thing you wrote.

On behalf of myself and the vast majority of greaterfool bloggers, thank you for your patronage. And please close the door on your way out, Komrade.

#49 Gina on 06.09.22 at 5:25 pm

All my friends were mocking me back in 2012 when my wife and I got our first house, mortgage at 4.65% fixed. It was $467,000. We started with a monthly schedule payments but we switched after 8 months to weekly and we also paid at year end a principal payment of $20,000 a year which is the maximum allowed. We were supposed to pay off our mortgage by 2037 and with falling interest rates alot of my friends told me don’t pay it off.

Guess what, we paid it off just last year. We also, were adding maxing our TFSAs and savings every year. We have a bunch of cash now, $150,000, no debt and we can probably get GICs, term deposits with the same rate we started with our mortgage. We earned a decent income of $88,000 a year on average over the last 10 years but took no vacations, kept our budget in check, raising 2 kids and just was careful. Glad we are not in debt anymore.

#50 Kurt on 06.09.22 at 5:26 pm

I first started reading Greater Fool in 2008. The current BOC bears some responsibility for things getting so out of hand, but not very much, and it looks like he is taking the steps to deal with it.

For something on the order of 14 years Canadian real estate has been over-priced, often ridiculously so. The BOC bears some responsibility, the Federal Government bears some responsibility, the Provincial Government bear more responsibility and the Municipal Government bear even more. But we live in a democracy. Who is truly at fault for this C-F?

Your neighbours. The public at large, too selfish, stupid and whiney to take criticism, like a spoiled toddler insisting on what it wants, when it wants it, and punishing any leader foolish enough to call it out.

I’ll get out my marshmallow sticks and make the most of the resulting dumpster fire. I’d renounce democracy if Russia and China weren’t doing such a wonderful job of showing how much worse the alternatives are. Sigh.

#51 Nick on 06.09.22 at 5:26 pm

.
But, but…..my realtor said RE prices in lower Brainland never go down.

He has been right for 10years. I trust my lower Brainland realtor. Buy buy!!

#52 Francisco on 06.09.22 at 5:29 pm

Honest question here: how are interest rate raises going to help with the price of gas (oil is an international market that is pretty much independent from everything) and the supply chain issues that cause product prices to go up and depend on things like COVID and the war in Europe? People will have less disposable income and their houses will be worth peanuts. Is that actually good for the economy? Thanks.

#53 Richard L on 06.09.22 at 5:30 pm

I started following this blog in 2013 around the time we sold our house. I thought that the real estate correction (crash??) would occur by 2015.

I was seven years early. Amazing how fast the market has turned after two rate hikes. I now see for sale signs, open houses and new price signs. No more ‘coming soon’ signs.

#54 Math major on 06.09.22 at 5:31 pm

#13 stealth on 06.09.22 at 4:16 pm

What do you think, how should these folks protect themselves? Also no one seem to want bonds any more, traditional protection mechanisms.

Thanks

For you, I would suggest a bomb shelter and a gas mask based on the level of fear you are projecting.

As for bonds, if inflation is 8% and bonds pay 3% …. well, let’s just say, do the math!

#55 Jay (not that one) on 06.09.22 at 5:32 pm

“If jumping in the lake is why I’m wet, then why are Tom, Dick, and Harry also wet?”

Because they also jumped in the lake! Everyone decided to jump in the lake at the same time and they’re all surprised they’re wet!

I know that Janet and her friends said you wouldn’t get that wet, that’s because Janet and her friends were trying to get you to jump in the lake. They knew full well that you were going to get wet because anyone who has ever jumped in a lake knows you’re going to get wet!

#56 Todd on 06.09.22 at 5:32 pm

I agree, GICs are savings accounts are not investing. It is sure better than be leveraged and in debt all your life and more. I am only 19 and have not alot of savings, few thousand but I am also not in debt. My sister has saved 40% of your her net income each year and at 30 has passed the $130,000 mark. She only makes $36,000 a year full time.

#57 Indebted on 06.09.22 at 5:33 pm

Thankfully the housing market is finally starting to melt. We’ve gone from home owners to renters in the last 5 years due to moving to beautiful rural BC where like-for-like housing is double the price in Calgary and we couldn’t justify the mortgage increase. Received extreme pressure from neighbors and friends that real estate only goes up and its foolish not to get into the market. Most BC friends own multiple mortgaged properties on VRMs so this is going to get interesting…

#58 Graeme on 06.09.22 at 5:37 pm

There were always 2 camps of “They can’t raise rates because there will be too much pain”. One that assumed they be dumb enough to try (clearly wrong) and the other that agreed they would try but it would quickly blow up. Being in the second camp, don’t count us out just yet! If in 12 months we are essentially here just with much higher rates and much lower markets ie. nothing has imploded catastrophically, I will then concede.

#59 Concerned Citizen on 06.09.22 at 5:38 pm

For the record, this is what Tiff Macklem, the CB governor, thinks will happen. A housing slowdown is “healthy”

*****

That’s more than a bit rich coming from the same Tiffster that said last year, in regards to the housing mania, “We need the growth we can get.” It’s also the same Tiffster who did jack squat as he witnessed home prices rising 50, 75, 100% in many markets around the country. Talk about short-term thinking. You would hope that someone in his role would contemplate the medium and long-term implications of his policy, but not the Tiffster apparently.

I think the man is completely detached from the reality on the ground of the average Canadian. And I think he has no interest whatsoever in controlling inflation – just like Jerome Powell, Christine Lagarde, and the rest of them.

I think he is incompetent, and should resign. We need someone in his role that actually wants to fulfill the BoC’s mandate.

And raise rates more, faster? Do you have a death wish? – Garth

#60 Penny Henny on 06.09.22 at 5:40 pm

As this blog stated the other day, this is not a housing correction. It’s a real estate crash.-GT
//////////////////

Popcorn….who needs Popcorn

#61 Lolo on 06.09.22 at 5:41 pm

I have a friend who bought an investment property using 100% borrowed funds. She is operating at a loss already, but her logic was that it creates a loss on her income tax and she gets a refund, so it’s all good.

#62 meh on 06.09.22 at 5:48 pm

2% target…yes Tiff the 2% target which is never anything close to 2%. I wonder when real 8% will be the new massaged 2%.

Want to know the real inflation rate? Just place 1 before the number these clowns gas light us with every month.

#63 Søren Angst on 06.09.22 at 5:49 pm

And Garth, you know that I love you BUT your argument that all the other CBs were just as asleep at the wheel is in effect:

2 wrongs make a right.

That’s an apology not an argument.

Yellen recently admitted she didn’t know the difference between a hole in the ground and you know what with inflation. Today Lagarde says she will raise rates in the EU – World’s Queen of Late to the Table.

All I will say is that the World’s CBs are being run and staffed by:

Village Idiots.

Running scared of the job they were tasked to do. Afraid for their own skins to take action in case they made a mistake when clear they pumped DEMAND to UNEARTHLY proportions and thought it’s all good.

A plague on all of them for being asleep at the wheel.

ALL OF THEM.

Yellen does not run the Fed. – Garth

#64 crowdedelevatorfartz on 06.09.22 at 5:50 pm

@#46 Pedantic Train
” ….this is not a housing correction. It’s a real estate crash.”

+++
One man’s “crash” is another mans’ “correction”.

Po-Tay-to
Po-Tah-to

Either way. entertaining
Pass the buttered popcorn.

#65 JEFF13 on 06.09.22 at 5:52 pm

Doesn’t hindsight make you feel so smart? – Garth

Smarter I don’t know, but will take it as a compliment since it seems I have more common sense and a better understanding of how the economy really works. Maybe it is because I understand that their models have become useless.

You want a prediction? You highly underestimate the impact of this real estate downturn on the Canadian economy. Give it 6 months and Tiff will be proven wrong again with his comment that the Canadian economy can handle higher rates. Just too much real estate debt in the economy, it will be a painful domino effect.

#66 Observer on 06.09.22 at 5:53 pm

#11 Adam on 06.09.22 at 4:07 pm
14 years for prices to recover. I don’t think this generation can handle that. We’re gonna have a massive mental health epidemic on our hands.
^^^^^^^^^^^^^^^
Thus the hate on for “Boomers” while their home owning peers make bank.

Only first time home buyers(and some late to the show “investors”) who bought in the last two years or so will lose money in real estate, at least short term.

Those who bought a home 3+ years ago have had 10+ years of low rates and above average real estate appreciation lucked out.

#67 crowdedelevatorfartz on 06.09.22 at 5:54 pm

@#48 Fond farewell
” thank you for your patronage.”

+++
I find Turner Nations’ “Illuminati” information rather amusing and at times, spot on.
As shame if he were gone.

#68 Rowdie on 06.09.22 at 5:56 pm

Excellent information as usual, Garth. The high interest rates and house prices crashing are a long time coming to those who wish to purchase a reasonable priced home, and have food on our plates. And, yes we have heard from family members that we should have bought years ago, before we miss out. Glad it fell on deaf ears!

Will wait to mid Summer to see the outcome. Not our fault new home owners are crying the blues…

Cheers

#69 willworkforpickles on 06.09.22 at 5:58 pm

Rejoice young man in thy youth.

Getting rich quick is for the quick fast and furious!

Greed is the driver. Don’t act fast you get smoked.

Many big dreams come with a ticking time bomb beneath them.

Mills today are no exception.

Ask him his dream
What does it mean?
He wouldn’t know

“Can’t be like the rest”
Is the most he’ll confess

But the time’s running out
And there’s no happiness

#70 Reality is stark on 06.09.22 at 5:58 pm

A lot of folks here patting themselves on the back for not buying in the last 5 years.
Congratulations for doing the obvious.
Now let’s talk about taxes.
The folks that bought recently will be declaring bankruptcy so you will pay for that with massive tax increases. The money will come from you.
Most of the soon to be bankrupt never saved any money anyway, they just made false real estate wealth.
You, the people who saved judiciously, will pay for all of this including the additional needless government spending.
You still feel smug?
Thanks for voting liberal.

Bankruptcies do not result in higher taxes, nor do defaults on insured loans. A little research might save you embarrassment. – Garth

#71 Alberta Ed on 06.09.22 at 6:00 pm

Tiff really should share whatever he’s smoking.

#72 Søren Angst on 06.09.22 at 6:05 pm

Yellen does not run the Fed. – Garth

https://twitter.com/SecYellen

Read carefully her own description.

And if not enough:

https://edition.cnn.com/videos/business/2022/05/31/janet-yellen-admits-to-being-wrong-about-inflation-sot-tsr-vpx.cnn

FYI:

https://www.investopedia.com/insights/what-does-secretary-treasury-do/

3rd bullet under Key Takeaways

—————-

And ya, you poked the bear. Very funny.

#73 UnluckyBoomer on 06.09.22 at 6:12 pm

First time homebuyer in 1989, Hamilton area. Sold 2011 due to job relocation to Ottawa. Realized 50% gain from purchase price for 23 years of ownership during a time period when interest rates were quite high. Not much of an investment. At least it was almost paid off when sold.

Rented in Ottawa while looking to buy, but ended up not purchasing a home (kids getting closer to flying nest, prices seemed high – in hindsight they were not and we should have bought something).

Hamilton area house worth at 3 times what we sold for. Ottawa real estate went just as nuts.

Home ownership makes no sense for me now having exited the market for too long at the wrong time, but that may change.

And my kids may have a chance at affordable ownership as well.

#74 AACI Homedog on 06.09.22 at 6:18 pm

Raising rates too high would make it difficult for Canada to compete on the world markets, unless most other countries do also, no ?

#75 Freddy on 06.09.22 at 6:21 pm

When people’s mortgages come due; they will just lengthen their amortization periods to keep the payments lower.

They will be in debt forever ; but they won’t be out on the street or forced to sell

#76 VladTor on 06.09.22 at 6:22 pm

#4 Captain Uppa on 06.09.22 at 3:53 pm
My cousin just became a real estate agent.

Godspeed.

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

Don’t laughing at him!!!

That is b’s he know some inside Canada Bank info. Even Garth don’t know.

#77 Søren Angst on 06.09.22 at 6:23 pm

And raise rates more, faster? Do you have a death wish?
– Garth

No truer words.

Like you wrote about today, Cdns paying the price be it mortgages, HELOC, LOC, Credit Cards…

Water under the bridge now.

Just hoping the damn doesn’t burst and the CB gets it right.

For the sake of all Cdns.

#78 Yorkville Renter on 06.09.22 at 6:24 pm

#52 – less overall demand for goods/services means less demand for oil… less demand as an input product, and less demand to transport goods as gas

#79 Beaver on 06.09.22 at 6:29 pm

Does every country in the world have 2 cities in the list of top 10 least affordable housing markets in the world – Canada does: Vancouver #3, Toronto #10 https://www.zerohedge.com/personal-finance/these-are-worlds-10-least-affordable-housing-markets

#80 Doug t on 06.09.22 at 6:29 pm

I also enjoy TurnerNation

#81 Warren-the-lagging_indicator on 06.09.22 at 6:35 pm

#14: “In reality, excess capacity and slack are buffers to guard against shocks, and with them gone every shudder in the system echoes and reverberates around the world.”

___________

Like removing the surge/slack capacitors. If you prop up the ‘river’ banks in a river that has a dam upstream, you can bring them together in order to ramp up the velocity. Just watch that current flow.
It really is all just electric.

#82 Philco on 06.09.22 at 7:01 pm

#37 Cash is King on 06.09.22 at 5:05 pm
——‘
Nope. Cash flow and punching up your yield every year is king.
Dont matter whats happening you just cruise.

#83 Philco on 06.09.22 at 7:03 pm

Doug T
TN rock
And and sometimes mr Garth :)

#84 Mike on 06.09.22 at 7:03 pm

You’ve been pushing this narrative for awhile, just wish more people listened

#85 Ponzius Pilatus on 06.09.22 at 7:14 pm

#164 Sail Away on 06.09.22 at 11:25 am
Locomotion analysis:
Just ran a transportation comparison between a Subaru Impreza and Tesla Model 3, both driving 500 miles/week for comparison purposes.
Subaru Impreza: 31 mpg, 16 gal/week @ $8.36/gal
Model 3: 0.34 kWh/mile, 170 kWh/week @ $0.126/kWh
Results:
Subie = $175/week or $7,000/year
Model 3 = $21/week or $1,000/year
An F150 would be $9,100/year
Ponzie’s annual walking cost would be 2 pairs of Value Village shoes per year at $18.84 after aggressive negotiation.
————————
Actually my walking shoes are $200 NB walking shoes prescribed by my Orthopaedic, which last about a year.
They are accessorized yearly with handcrafted and fitted insoles by same Orthopaedic and cost $450, 400 of which is covered by extended health.
Probably would cost at least 5k in South Dakota.

But you’re right on the insane gas bill for an F-150.
Even higher if it’s Diesel.
And it’s after tax dollars.

#86 Reality is stark on 06.09.22 at 7:14 pm

People who had paper real estate wealth bought cars on the value of their real estate. They paid HST on the purchase, that’s called tax.
When they go bankrupt they don’t buy new cars and thus don’t pay HST on anything.
You can research it all you like.

#87 John on 06.09.22 at 7:14 pm

On if Tiff is responsible, using other countries inflation and rate rises as an example that Canada isn’t isolated.

Covid hit everyone around the same time, but had the worst effects on the least healthy people. Canada is one of the least healthy economies around. So inflation and rising rates to fight inflation will hurt us way worse than many. This is what Tiff and his CB crew past and present will own.

#88 willworkforpickles on 06.09.22 at 7:22 pm

There is a ticking time bomb under the US dollar.
It comes when the world at large comes to realize in no further uncertain terms that inflation wins the fight . And its going to. Not the Fed fighting it.
Protect the value of your paper dollars now. You too Canada.

#89 Ponzius Pilatus on 06.09.22 at 7:29 pm

#5 mj on 06.09.22 at 3:56 pm
Best way to fight this inflation is if Trudeau and Biden got the pipeline going again. Then both countries open up the taps at full speed. That would drop the price of oil and help with inflation.
————————
Not gonna happen.
Just a band aid anyway.
What has to happen is energy conservation and diversification of energy sources in the West.
The Sheiks can’t stop laughing.
They can’t believe the stupidity of Western consumers.

#90 Habsfan60 on 06.09.22 at 7:40 pm

More anecdotal evidence from my drive to a south Etobicoke for the best chicken wings around. (smoking Man used to visit here)

Drove down a street that locals use to bypass 14 stoplights along the lakeshore. 6 “for sale” signs up, I swear 2 weeks ago there was only 1.

Abandon Ship!!

#91 Steven Rowlandson on 06.09.22 at 7:44 pm

The house horny and other RE investors are all educated adults and made their deals with their eyes open. The risk is theirs and they will have to take the rough with the smooth just like any other investor does.

#92 DON on 06.09.22 at 7:47 pm

#80 Doug t on 06.09.22 at 6:29 pm
I also enjoy TurnerNation

*********
He’s family.

#93 Economics won oh won on 06.09.22 at 7:49 pm

#73 UnluckyBoomer on 06.09.22 at 6:12 pm
First time homebuyer in 1989, Hamilton area. Sold 2011 due to job relocation to Ottawa. Realized 50% gain from purchase price for 23 years of ownership during a time period when interest rates were quite high. Not much of an investment. At least it was almost paid off when sold.

Rented in Ottawa while looking to buy, but ended up not purchasing a home (kids getting closer to flying nest, prices seemed high – in hindsight they were not and we should have bought something).

Hamilton area house worth at 3 times what we sold for. Ottawa real estate went just as nuts.

Home ownership makes no sense for me now having exited the market for too long at the wrong time, but that may change.

And my kids may have a chance at affordable ownership as well.

_________

Yes, thank you for admitting you screwed up. Had you bought, you would have been laughing all the way to the … bank. Cant say I blamed you since you were making an informed decision .. obviously not the right one in retrospect.

However you must realize something if it isn’t obvious. People like myself will swoop up properties if they end up being anywhere near a GOOD deal. Its human nature. We are not going to sit around on our thumbs so your kid can get a GREAT deal on a property. Our pockets are much deeper. It’s always been that way.

Just not happening. Economics. Supply and demand.

#94 Nonplused on 06.09.22 at 7:59 pm

“Our goal is for a soft economic landing with inflation coming back to the 2% target. But it is a vulnerability to watch closely and manage carefully.”

Except Tiff doesn’t have very much control over all of that. All the bank of Canada does more or less is manage the CAD/USD exchange rate. Raising or lowering rates in Canada doesn’t really work if the US Fed isn’t also acting. The BoC cannot much affect global oil prices. The economy is not self sufficient and depends largely on what is going on in the US and China, maybe to some extent Europe.

The main thing that is made in Canada is the absurdly high energy prices Trudeau is phasing in. Putin didn’t have anything to do with that. Right now they are screaming about $5 gas in the US, but that is a gallon, so approximately $1.25 a liter to us. The rest is all taxes, including and not in an insignificant way the carbon tax. And we ain’t seen nothing yet. Enjoy $2.++ a liter while you can, because by the time crude starts to come down another $15 a ton is going on the pump price. Every year until 2030.

“the war on Ukraine”…

It’s actually a war against Russia and has been going on for a long long time, growing more overt since 2014. I’m not sure whether Washington wanted Russia to fight back with tanks or was convinced they could not, but they did. Russia seems to be in control of the ground war, so it is the economic war that is the real thing. But I think that is the war Washington wanted to fight the whole way along because nuclear weapons. The ground war is an inconvenience, nothing more. And a good excuse to saddle Ukraine with unpayable debt in exchange for 20 year old NATO equipment. The real winners here, as always, are the arms manufacturers and bankers. They never lose a war.

Interestingly, the real war is being fought in the streets of Europe, the US, and even here in Canada every time you fill up or go for groceries. I think we are losing.

#95 Blobby on 06.09.22 at 8:00 pm

As a renter, Im now scared (after reading this) that my house might be soon placed on the market!

Bugger.

#96 TMac on 06.09.22 at 8:02 pm

50% increase in payment cost with most of the country $200 away from disaster.
This is going to be a bloodbath in the next 18-24 months

#97 Prince Polo on 06.09.22 at 8:09 pm

The lemmings can’t possibly be blamed for their own actions! Personal responsibility is so 20th century.
Meanwhile, is it too late to trademark “real messtate houseageddon”?
Signed,
A loser renter

#98 yvr_lurker on 06.09.22 at 8:09 pm

For those who have to renew their mortgages in the next year at >5–6% it seems to me that it would be a good idea to take $$$ out of the B and D to make some effort at a decent sized lump sum payment. If these rates are going to be here for a while according to our host, it would be more of a gamble I think to assume that one can easily get 7–8% per year (the extra 1% for fee based advisor + tax considerations) for each of the next five years from a B+D portfolio.

Garth was correct in saying that it was nuts to make balloon payments on a mortgage at 2–3% given the opportunity cost of lost growth in the portfolio of 6-7% per year (averaged), even if it did bring more peace of mind in having a much lower principal.

Now it appears to be a much different equation than before, and to me it would be a gamble to simply assume that the growth in a B+D (given the large fluctuations downward that we have seen this year) will exceed the advantage of making a decent sized balloon payment at renewal time.

Remember what your portfolio did during the Covid crisis? I’d bet on liquid financial assets instead of shovelling more money into a declining property. – Garth

#99 k on 06.09.22 at 8:11 pm

#18 Caffeine Monkey re: #9 Bob

Sarcastic comments don’t always come across in print because you can’t see the twinkle in the eye of the poster. I firmly believe #9 Bob’s comments regarding Chinese buyers was completely tongue in cheek ! And quite witty at that !

#100 Sail Away on 06.09.22 at 8:12 pm

#85 Ponzius Pilatus on 06.09.22 at 7:14 pm
#164 Sail Away on 06.09.22 at 11:25 am

Actually my walking shoes are $200 NB walking shoes prescribed by my Orthopaedic, which last about a year.

———-

I got boots that are made for walking. Sometimes that’s just what they do.

#101 Waystar Royco Shareholder on 06.09.22 at 8:15 pm

How will the smug REALTORS put a positive spin a real estate market crash?

By calling the market moving to “more balance conditions”

LMAO That sounds way better to the average person instead of terms like “crash”, “decline”, “Losses”, “plunge”, and “plummet”,

“Don’t worry, it’s just a gully!”

#102 kommykim on 06.09.22 at 8:22 pm

RE:#64 crowdedelevatorfartz on 06.09.22 at 5:50 pm
@#46 Pedantic Train
” ….this is not a housing correction. It’s a real estate crash.”

+++
One man’s “crash” is another mans’ “correction”.

Po-Tay-to
Po-Tah-to

Either way. entertaining
Pass the buttered popcorn

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

What’s the old saying again? Something like:

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.”

#103 Bdwy on 06.09.22 at 8:25 pm

I cant believe the stupidity of those pushing diversification of energy into intermittent non reliable sources.

But i really appreciate them. Like well into the 6 figs. Thank you for driving oil prices to the moon!

#104 Dragonslayer on 06.09.22 at 8:41 pm

#24 Dave

Each day I check the 5 year bond price and it keeps going up. I love it. Looking forward to the days of 10% or more GIC rates. Mmmmm that will really make my savings swollen. I just don’t want to lock in for 5 years because I don’t want to suffer from FOGS due to higher and higher interest rates. Should I lock in at 5% today for a fiver, or wait till December and lock in at 7%. I have been waiting for this for a long time. The 10 year GIC payng 5% sounds nice but I like the idea of the 10 year GIC paying 10% instead.
===============================

For fun check out the Canada Savings Bonds (remember those?) history. They topped out in 1981 paying a whopping 19.5%. I recall getting some in 1990 paying 10.75% but declining each year thereafter.

A shame they axed those. While there were better investment vehicles around, they were easy to set up as a payroll savings deduction and so prodded a lot of people into investing who otherwise wouldn’t have.

#105 Bonobo on 06.09.22 at 8:55 pm

There are quite a few of you who voted for Trudeau on this blog. Of those who did, I suspect you would still prefer to vote for Trudeau in the next election because you don’t want to see PP voted in as the next PM of Canada.

Go ahead and vote for Trudeau again. Can’t wait to see what happens. You lefties must be squirming right about now.

#106 Nelson on 06.09.22 at 9:04 pm

Another good post. I’ve been in the ‘Canadian housing is gonna crash big time’ camp since about 2010. It seemed really unaffordable and unfair then. I devoured Hilliard Macbeth’s first edition of “When the Bubble Bursts – Surviving the Canadian Real Estate Crash” in…..2015. If I’d bought a house that year instead of reading that book and praying for a crash I would have tripled my investment.

I bought a house in Campbell River in late 2019 on a half acre with an ocean view at a price that I thought was ludicrous but I really liked the house and neighbourhood and had known for a decade exactly where I wanted to live. Since then the house is up about 60-75% in value. Honestly, even if it dropped 50% I still wouldn’t regret the purchase. I chose well – but I chose primarily a home, secondary was it’s appreciation potential.

A lot of people buy homes and pay what they have to for them because they need a place to live and want the security of owning it. Those people will be alright.

Ironically the housing crash will very likely guarantee Le Pew’s ascent to the PMO. His narrative that inflation and the imminent housing crisis is all Trudeau/Singh’s fault will catch on with the masses. The freedumb convoy has not went away either, just home with a newfound arrogance and unity and all those PPC voters are now headed for the ballot box to vote for Pepe.

Pepe – who secured his ‘set-for-life’ MP pension around the age of 30 and has done nothing but sleazy politicking for his entire adult life. What a world.

The housing crash is a long time coming. So is a massive correction in growth stocks and speculative mania in financial markets. Equities are going down with real estate – hard and fast. When the dust all settles maybe things will start to make sense again. I’m ready. Still love the home I purchased. Unlike equities I use it every day and get sanctuary and comfort and pleasure from it’s use. It is a tangible thing, though illiquid.

Somehow watching my money go up in smoke in the stock markets would be a far harder thing to endure. ‘Things’ that I have bought have proven, in inflationary times, to have been wise decisions. Somehow my Toyota Truck is worth more now than I paid for it almost two years ago. It would probably be wise to sell everything right now – house, vehicles, toys, furnishings and the lot – because the bubbles are popping everywhere and there will be deflation that follows. But a lot of the things I have purchased, I like and get good use of. I expect them to depreciate.

I am sure my house is going down in value, nowhere near as much as a lot of Canadian postal codes, because gawl-dang-it, people really want to live on this island, especially boomer retirees! But I am also very sure that equities have a long way to fall from here and if you have any you should really sell them. Low interest rates for companies has allowed so many to operate with no real profits or growth. Low interest rates have resulted in unprecedented margin debt. Low interest rates have resulted in HELOCs being used to buy equities – well home equity is crashing now so how do you suppose people will pay back those inflated HELOCs? Record numbers of young retail traders who know nothing but the pandemic pump all now realizing stonks do go down sometimes.

Finally, the reset button is being pressed and the central banks are being forced to actually do what they were created to do. Not just step in to pump up equity markets and keep the rich rich whenever some crisis presents. Inflation really is a thing that could come back…..who knew?!

#107 Rjay on 06.09.22 at 9:05 pm

I would miss Turner Nation

#108 Failed grade 7 but has nice hair on 06.09.22 at 9:05 pm

Just in:

‘Massive majority’ of Liberal caucus wants Trudeau to drop federal COVID mandates, say Liberal MPs

https://mobile.twitter.com/TheHillTimes/status/1535050834991513607

#109 crowdedelevatorfartz on 06.09.22 at 9:13 pm

161 BC Fentanyl Deaths in April 2022

More deaths than all BC Murders, suicides, motor vehicle, fires and accidental deaths ….combined.

Almost 900,000 British Columbians have no doctor.

#110 macduff on 06.09.22 at 9:15 pm

Received my statement from my landlord today; my rent is going up 1.2%. $1160 for a one bedroom in Ottawa. Life is good.

#111 Doing my Part on 06.09.22 at 9:19 pm

I would like all the people posting, that they would like certain people to stop posting, to stop posting.
Wait a minute…
Scrolling is your friend, if you don’t like it move along.

#112 mike from mtl on 06.09.22 at 9:26 pm

Really none of this is any surprise. Yes the CBs are not directly responsible for 2$/L gas or can do anything against it however, they’re doubtless in-direct responsible for everyone’s biggest expense – shelter.

Real world inflation has been out of control and downplayed for nearly two decades, just now it’s in everyone’s faces and cannot be denied no more.

Those CB geniuses can jack rates all they want but the fact remains that barring a true consumer recession nothing will change.

Housing shedding 10 or say 20% max but borrowing doubling / tripling is further cementing more unaffordable but hey who cares?

#113 A01 on 06.09.22 at 9:33 pm

Great Blog today Garth. I’m surprised it’s taken this long for houses to start to drop. People with a lot of debt must be having a tough time sleeping these days.

#114 POKEL on 06.09.22 at 9:53 pm

Re: Even if the Bank of Canada had delivered 5% mortgages a year ago…

Then that would have affected CAD$ and there would be some people complaining about that. Plus how could BOC done that if FED was not?

I love this: “Doesn’t hindsight make you feel so smart? – Garth”

#115 RWZ on 06.09.22 at 9:54 pm

People are still bidding over asking and paying over half a million for something in Windsor, ON, at rates that have tripled.

Things will get worse forever, because the government will continue to increase the population forever.

The price may “crash” compared to a few months ago, but the actual cost (even factoring in 20% down) will probably never even go back to what it was 12 months ago.

#116 Caffeine Monkey on 06.09.22 at 9:57 pm

#99 k on 06.09.22 at 8:11 pm
Sarcastic comments don’t always come across in print
——
I know it was sarcastic! I was actually agreeing with his point. I guess that didn’t come across :p

#117 45north on 06.09.22 at 10:07 pm

“If the economy slowed sharply and unemployment rose considerably, the combination of more highly indebted Canadians and high house prices could amplify the downturn. This is not what we expect to happen. Our goal is for a soft economic landing with inflation coming back to the 2% target. But it is a vulnerability to watch closely and manage carefully.”

they are going to watch it closely but we’ve past the point of no return.

#118 yvr_lurker on 06.09.22 at 10:08 pm

Remember what your portfolio did during the Covid crisis? I’d bet on liquid financial assets instead of shovelling more money into a declining property. – Garth
———
If you plan on living there long term (i.e. job stability and you are raising your family), why wouldn’t you on a 5-year time-frame put down a decent balloon payment to offset a huge spike in your monthly owing to a rate changing from 2.5% for 5 years to say 5.5% for 5 years? I don’t think we are going to a situation where a B+D is going to get 15% a year again (like in the pandemic). Houses went nutes and so did portfolios, but for this brief period. A multi-year recession where one advances very slowly in a B+D is more likely than another large spike.

There is indeed a sweet spot in this calculation…

#119 Sail Away on 06.09.22 at 10:11 pm

#109 crowdedelevatorfartz on 06.09.22 at 9:13 pm
161 BC Fentanyl Deaths in April 2022

More deaths than all BC Murders, suicides, motor vehicle, fires and accidental deaths ….combined.

———

If only there was a way to stop that. Some way that people could avoid getting that stuff inside their bodies. Some as yet undetermined miraculous method of prevention. If only it could be as easy as a simple choice.

Sigh. Such conundrums.

#120 45north on 06.09.22 at 10:11 pm

None I have to admit, a good chunk of me will enjoy watching those grins turn upside down in the next few months.

and let’s add a question:

“how should I protect myself?”

protect yourself by not watching them. Make no effort to watch them. None.

#121 45north on 06.09.22 at 10:13 pm

Caffeine Monkey

As a first-generation Chinese-Canadian, I think this is salient. The narrative that people have been pumping is that Chinese investors are impervious to cooling measures and interest rate hikes because they’re aren’t taking out mortgages: they’re using Canadian homes to launder their immense wealth that is often ill-gotten. Interest rates don’t matter to them. BC has had measures aimed at curbing foreign ownership for years with no effect on prices.

now that prices are suddenly dropping, they’re saying “where did all the Chinese go?”

pretty funny

#122 Ponzius Pilatus on 06.09.22 at 10:15 pm

#94 Nonplussed
“the war on Ukraine”…

It’s actually a war against Russia and has been going on for a long long time, growing more overt since 2014. I’m not sure whether Washington wanted Russia to fight back with tanks or was convinced they could not, but they did. Russia seems to be in control of the ground war, so it is the economic war that is the real thing. But I think that is the war Washington wanted to fight the whole way along because nuclear weapons. The ground war is an inconvenience, nothing more. And a good excuse to saddle Ukraine with unpayable debt in exchange for 20 year old NATO equipment. The real winners here, as always, are the arms manufacturers and bankers. They never lose a war.

Interestingly, the real war is being fought in the streets of Europe, the US, and even here in Canada every time you fill up or go for groceries. I think we are losing.
—————————-
Hard not to agree with your points.
Ukraine is in between with Selensky putting up a brave face.
The real battle will come after the war.
Remember, to the victor go the spoils.

#123 Johnny Debt on 06.09.22 at 10:19 pm

Oh sure…suddenly these addicts with megapints of debt in both hands are going to pay down the debt in the western economies?

Why do you think they kept the money so cheap? Interest so low? …Because without it no chance the consumer spends on all this crap we don’t need.

So now higher rates is the way to deal with this giant pile of debt they’ve built up? Suddenly everyone will pay it down? Oh sure!

Too little, too late. The herd has passed the amber caution light long time ago. People have left a giant human turd of debt in their beds. Who’s gonna clean it up?

#124 Ponzius Pilatus on 06.09.22 at 10:27 pm

#100 Sail Away on 06.09.22 at 8:12 pm
#85 Ponzius Pilatus on 06.09.22 at 7:14 pm
#164 Sail Away on 06.09.22 at 11:25 am

Actually my walking shoes are $200 NB walking shoes prescribed by my Orthopaedic, which last about a year.

———-

I got boots that are made for walking. Sometimes that’s just what they do.
——————-
Haha
You remember the song.
How old are you?
Nancy Sinatra.
I think that was her only hit song.

#125 DON on 06.09.22 at 10:31 pm

#120 45north on 06.09.22 at 10:11 pm
None I have to admit, a good chunk of me will enjoy watching those grins turn upside down in the next few months.

and let’s add a question:

“how should I protect myself?”

protect yourself by not watching them. Make no effort to watch them. None.

*********
Just watch a couple episodes of ‘Fear thy Neighbour’ and you will keep your distance. ha ha

#126 FerrisWheel on 06.09.22 at 10:41 pm

Here in Montreal, listings are low and slowing but prices have not budged. I don’t see any correction whatsoever.

I have bid on 8 homes over the past 14 months and have not won any. I don’t believe in this correction. I’ll believe it when I see it. So many articles about correction and nothing happening here.

Montreal realtors report a drop in median prices month/month in May and a sales decline year/year amid a growing inventory. Look harder. – Garth

#127 Tom from Mississauga on 06.09.22 at 10:48 pm

I know you aren’t worried about the banks Garth but the ZEB has formed a head and shoulders with today’s sell off

I have the same formation. Feel okay. – Garth

#128 Ponzius Pilatus on 06.09.22 at 10:53 pm

19 Sail Away on 06.09.22 at 10:11 pm
#109 crowdedelevatorfartz on 06.09.22 at 9:13 pm
161 BC Fentanyl Deaths in April 2022

More deaths than all BC Murders, suicides, motor vehicle, fires and accidental deaths ….combined.

———

If only there was a way to stop that. Some way that people could avoid getting that stuff inside their bodies. Some as yet undetermined miraculous method of prevention. If only it could be as easy as a simple choice.

Sigh. Such conundrums.
—————————
Well, they are harming themselves.
Unlike the American gun addicts who commit mass killings of innocent school children.

#129 Cowtown Cowboy on 06.09.22 at 10:57 pm

DELETED

#130 Faron on 06.09.22 at 11:14 pm

#119 Sail Away on 06.09.22 at 10:11 pm

Good job. You made it a whole 24 hours without trolling. Well done. Apparently you are bored now.

#131 Brian on 06.09.22 at 11:26 pm

Tiff Macklem vs Tiff Macklem on Canadians’ mortgage debt
June 9 2022
“During the pandemic interest rates were exceptionally low, they weren’t going to stay that low, they only had one way to go — up”

July 15 2020
“interest rates are going to be low, very low, for a long time”

Two years is a long time in monetary policy, especially when (unlike you, apparently) the bank boss did not know $120 oil or a European war was coming. His focus was the economy. How much mortgagee debt you swallowed is your problem. – Garth

#132 Shawn on 06.10.22 at 12:02 am

Paying down debt is not shoveling money into a house

Remember what your portfolio did during the Covid crisis? I’d bet on liquid financial assets instead of shovelling more money into a declining property. – Garth

***********************
Paying down mortgage debt is not like buying more of the house house or investing more in it (A Kitchen reno is that). The entire price of the house was invested at day 1 albeit with borrowed money. The full balance of the mortgage must be paid eventually. Paying it down faster reduces risk. It’s basic finance that more debt is always more risk. Less debt is less risk.

To each his own, but I fail to see a reason to criticize anyone for choosing to pay down debt.

Of course one has to be careful about selling investments after they decline. It might be very wise to hold the investments and find other money to pay down the mortgage.

Main point, paying down a mortgage does increase the equity in a house. But the risk of home ownership is proportional to its full value not the equity. The investment in a house is always the full amount paid for it, (or arguably the market value only if that is higher) not just the down payment or the equity.

A man with zero equity in his house but who can’t escape the mortgage except by bankruptcy clearly does not have zero risk on the house.

#133 Stealth on 06.10.22 at 12:04 am

54 Math major on 06.09.22 at 5:31 pm
#13 stealth on 06.09.22 at 4:16 pm

For you, I would suggest a bomb shelter and a gas mask based on the level of fear you are projecting.

As for bonds, if inflation is 8% and bonds pay 3% …. well, let’s just say, do the math!

———-

On the fear part, yea you are probably right I over did it, recency bias, best to avoid certain people. Alright good. By the way have you tried hiring anyone competent lately?

Thanks for educating us that bonds are held only for their yield and that simple comparison with inflation is appropriate. We can now safely ignore all other bonds properties and uses forever.

Yes, Math is great.

#134 VicPaul on 06.10.22 at 12:09 am

#63 Søren Angst on 06.09.22 at 5:49 pm
And Garth, you know that I love you BUT your argument that all the other CBs were just as asleep at the wheel is in effect:

2 wrongs make a right.

That’s an apology not an argument.

Yellen recently admitted she didn’t know the difference between a hole in the ground and you know what with inflation. Today Lagarde says she will raise rates in the EU – World’s Queen of Late to the Table.

All I will say is that the World’s CBs are being run and staffed by:

Village Idiots.

*********

Are we still pretending that inflation “snuck up on” the CB’s worldwide? Or maybe they were just “slow off the mark”? It’s plausible it was a very craftily executed plan to inflate the (worldwide) debt away. The CB’s are aligned globally on this policy. Shsssh…nothing to see here.

“There are a few reasons inflation makes it easier for a government to pay its debt, especially when inflation is higher than expected. In summary:

Higher inflation increases nominal tax revenues (if prices are higher, the government will collect more VAT, workers pay more income tax)
Higher inflation reduces the real value of debt, bondholders on fixed interest rates will see a fall in the real value of their bonds and it becomes easier for the government to pay back these bonds.
Higher inflation can enable the government to freeze income tax thresholds so more workers pay higher tax rates – it becomes a way to increase tax revenues without increasing tax rates.”

https://www.economicshelp.org/blog/3015/economics/why-inflation-makes-it-easier-for-government-to-pay-debt/

M58BC

#135 Cowtown Cowboy on 06.10.22 at 12:11 am

Sad…very sad

#136 Yukon Elvis on 06.10.22 at 12:25 am

#124 Ponzius Pilatus on 06.09.22 at 10:27 pm

Nancy Sinatra.
I think that was her only hit song.
+++++++++++++++++++

Summer Wine with Lee Hazelwood.

#137 Michael in-north-york on 06.10.22 at 12:57 am

#94 Nonplused on 06.09.22 at 7:59 pm
“It’s actually a war against Russia”

Huh? No foreign troops invaded Russia, russian troops invaded Ukraine, and they are illegally occupying parts of Georgia and Moldova. Russia is the agressor, noone else.

Russians tried to set their bases in Kazakhstan back in January, too. Fortuinately, China told them to get the F out of there.

And we aren’t losing. Keep the sanctions on for 10 years, or 20 years, as long as needed. Their GDP is less than 2% of the global GDP. All the western nations combined account for more than 30%. They will lose a lot more not trading with us than we will lose not trading with them.

Even if the russian economy doesn’t collapse outright, they will be falling behind all other big countries in technologies and in military capabilities.

#138 fishman on 06.10.22 at 1:06 am

35 million in R/E deals on my block in the last two months. High quality buildings on the west side. The big guys are aggressively chewing up anything good comes along. 40 acres or there around of nice farmland for the nags? Double wide in the corner for the caretaker. Add to the quiver with the Bowen Island & Whistler cabins. Killer whales looking for wounded prey.

#139 T-Rev on 06.10.22 at 1:25 am

#52 Francisco on 06.09.22 at 5:29 pm wrote:
“Honest question here: how are interest rate raises going to help with the price of gas (oil is an international market that is pretty much independent from everything) and the supply chain issues that cause product prices to go up and depend on things like COVID and the war in Europe? People will have less disposable income and their houses will be worth peanuts. Is that actually good for the economy? Thanks.”

————————————————————————————————

Good question Frankie, one I’ve pondered myself. Higher interest rates don’t fix a war-driven energy crisis that is in turn driving everything else higher. They don’t fix supply chains damaged by two years of global lockdowns, nor do they open up Beijing’s ongoing Covid lockdowns. I’m fact, if I’m an American company gearing up to build microchips or dishwashers to try and replace international supply with domestic options, I’m less likely to re-took my factory in an era of rising rates (costs me more for that borrowed capex) or declining consumer demand (high debt service costs mean I’m selling fewer of what I make as the public retrenches).

On the other hand, prices are always set at the margin. You don’t have to dampen demand much sometimes in order to corral prices, you just need to bring demand down a few points so it balances with supply and prices can correct drastically. So who knows. Crazy thing is, rates are not really high- still low by historical standards. We’re just crossing into the low-normal zone and people are starting to fret.

So I dunno how it turns out, but hopefully it doesn’t turn out that interest rates become decoupled from inflation with rising rates and that have little impact on inflation. Have to hope those CB folks know what they’re doing…

#140 Dr V on 06.10.22 at 1:28 am

I support Turner Nation and propose a truck convoy to…….. the bottom of the hill because that is all the gas I can afford……not sure if I’ll make it back up……

#141 MalcolmM on 06.10.22 at 1:42 am

No one is suggesting that the BoC caused inflation worldwide. Central banks in many countries having been printing money and greatly contributing to inflation.

#142 crowdedelevatorfartz on 06.10.22 at 1:42 am

@#119 Sail Oi-vey
“Some as yet undetermined miraculous method of prevention.”

+++
I was merely stating the facts.
Not moaning about dead overdose victims.

It seems our federal govt leaders are more interested in flying to California to “save the planet” rather than the Canadians (without doctors or treatment) in it.

https://www.ctvnews.ca/canada/canada-california-to-partner-on-climate-action-and-nature-protection-1.5939445

But lets get real.
The PM doesnt give two shites about voters or the burning issues of the day.
Our fearless leader never misses an opportunity to self promote.
He loves the cameras, the adulation, the perks…..
The rest of this bores him to death.

Its a shame he toughens legislation for law abiding Canadian Gun owners rather than drug dealers killing 5-6 people a day in BC.

One can only hope he believes his own BS and leads the Liberals down the rabbit hole as the economy and Real Estate tightens its sphincter over the next 2 years.

#143 Defeat on all fronts on 06.10.22 at 8:12 am

Even if the russian economy doesn’t collapse outright, they will be falling behind all other big countries in technologies and in military capabilities.

##$$

USSA and Canada and EU will crash and burn long before that

#144 Johnny Debt on 06.10.22 at 9:29 am

Hey, I told you over and over again, it wasn’t about money. $10.35m in debt owed to me…I’ll forgive her this debt. Not like she’ll be in Aquaman 3.

Do you think the banks will forgive your debt…you silly debt slaves?

Readvanceable mortgages – how many of you are surfing the wave of revolving debt? My goodness…the banks sure give you the rope to hang yourself with. And many of you are into self-asphyxiation-by-debt, that’s for sure.

What useless crap did you buy? OH NO…not one of those European cars like Mercedes, Audi/Porsche or BMW that even in their motherland are rated BELOW AVERAGE for reliability with about 150 problems per 100 vehicles sold? Did you take out a HELOC to buy that thing? Let me guess? They got you for 20K in options you needed, right?

Johnny Debt forgives the debt, your bank of credit card won’t.

That’s why my public loves me. I’m not into usury.

…now, back to my megapint.

#145 Network Admin on 06.10.22 at 9:34 am

I think the standard way of fighting with the crisis will not work as well as previously because the inflation is caused by various sanctions and, if continued like now, will cause “structural” changes (average household will spend more money on food and energy rather than travel, for example). See also https://mishtalk.com/economics/food-rent-and-energy-prices-are-totally-outside-the-feds-control.

#146 Dave on 06.10.22 at 9:36 am

CEF was poster number 142 and it was posted at 1:42 AM.

Inflation rate in US up again. Interest rates going uppa uppa uppa.

#147 Shawn on 06.10.22 at 9:37 am

Caution: The Jobs report is a statistical sample!

Great jobs report out this morning!

But take it with a grain of salt. It is a statistical sample. It contains statistical errors and noise.

This morning they reported 40k new jobs in May.

They reported that public sector jobs increased 108,000 or 2.8% in just the month of May versus April and this is seasonally adjusted. They said the private sector was down by 95,000. Come on! Even the most committed government bashers must recognize that this must be statistical noise. It’s too big an increase in one month to be remotely believable. More believable is that since the start of 2022 the public and private sector gains were about equal at 2.7% and 2.5% respectively. Any journalist repeating this huge public sector gain in May without asking questions is not doing a good job at all.

Perhaps? more believable is that 28,000 jobs were created in Alberta where the unemployment rate improved massively, down a fat 0.6% to 5.3% and suddenly almost down to the National Average of 5.1%.

Alberta is rocking and rolling with cash gushing out of the oil sands and the whole energy sector.

Did I mention? Move to Alberta or at least send your adult children this way. Slide on over to Alberta!

Go Canada! and Go Alberta!

#148 Shat N Freud on 06.10.22 at 9:38 am

Garth,

The real estate crash is Bilderberg conference elite inspired programme to wipe out new money middle classes trying to join the global wealth 1%ers. These hillbillies got caught in a classic bait and switch.Actually not a bad thing as listening to the RE imbeciles talking like tycoons was a bit tedious. They will all be back to working as Batista’s and French fries specialists very soon.

#149 Apple Pie on 06.10.22 at 9:47 am

What’s…on that plate?

Apple…Pie? Debt…as American as…

Did you see? Apple released a whole bunch of new stuff this week.

How are you going to pay for all these new devices you don’t need?

With Apple’s latest most important product announced quietly this week…

Apple Pay Later

Debt…it’s the only way. No one saves to buy something anymore.

Saving takes too long as is for dummies.

I need to be FIRST…to own it.

Or will IT…OWN ME?

https://arstechnica.com/gadgets/2022/06/apple-digs-into-its-massive-pile-of-cash-to-fund-new-pay-later-service/

#150 KNOW IT ALL on 06.10.22 at 10:06 am

The heat under Powell’s a** rises appreciably.

Real wages WAY negative.

Inflation hit fresh 40-year high in May to 8.6%. It rose 1% from April, topping all estimates.

Core CPI, which DOESN’T include food & energy rose 0.6% from prior month & 6% from a year ago, also above forecasts.

Undisciplined monetary and fiscal policy doesn’t work!!

#151 Mattl on 06.10.22 at 10:34 am

Stan Brooks posts about runaway inflation for years. It finally hits and he is gone. Somewhere I hope Stan is draining an ice cold beer, turns out he had a window into the future.

#152 Mattl on 06.10.22 at 10:39 am

Those cheering for a crash, careful what you wish for. I wouldn’t want to be in the trades, building will grind to a halt. Anyone exposed to consumer discretionary spend should be concerned.

The net result of all of this will be significantly decreased consumer spend as billions is directed to debt servicing. We saw early indicators in the retail report with volumes down. What comes next is all very predictable.

#153 Shawn on 06.10.22 at 10:48 am

Forgot to give the link to the jobs report

(Bring your own grain of salt)

https://www150.statcan.gc.ca/n1/daily-quotidien/220610/dq220610a-eng.htm

#154 Summertime on 06.10.22 at 10:58 am

What happened to ‘peak’ inflation?

CPI keeps rising – record 8.6 % in the US, real inflation is double that.

It increases equal or faster than the nominal rate increases which translates to further decline in real rates deeper into negative territory.

We basically ‘fight’ inflation of 15 % + with 1.5 % rates.

And of course the central bankers were ‘unprepared’ for that, they ‘did not expect it’ and similar BS.

#155 Stone on 06.10.22 at 11:13 am

#110 macduff on 06.09.22 at 9:15 pm
Received my statement from my landlord today; my rent is going up 1.2%. $1160 for a one bedroom in Ottawa. Life is good.

———

That’s excellent! Well done.

#156 Stone on 06.10.22 at 11:31 am

#118 yvr_lurker on 06.09.22 at 10:08 pm
Remember what your portfolio did during the Covid crisis? I’d bet on liquid financial assets instead of shovelling more money into a declining property. – Garth
———
If you plan on living there long term (i.e. job stability and you are raising your family), why wouldn’t you on a 5-year time-frame put down a decent balloon payment to offset a huge spike in your monthly owing to a rate changing from 2.5% for 5 years to say 5.5% for 5 years? I don’t think we are going to a situation where a B+D is going to get 15% a year again (like in the pandemic). Houses went nutes and so did portfolios, but for this brief period. A multi-year recession where one advances very slowly in a B+D is more likely than another large spike.

There is indeed a sweet spot in this calculation…

———

That’s a statement not based on math.

Just because the interest rate on a mortgage jumps from 2.50% to 5.50% doesn’t automatically mean the payment is unaffordable. It’s all about available cashflow and if you can still service the payment, why touch the B&D? As for a B&D and its annual return, you may have recency bias on your mind. Just because this year so far has a negative return, you assume future returns on said B&D portfolios will be poor. If an average annual return for a B&D is somewhere in the range of 7%-7.50% and a mortgage rate is 5.50%, you’d still cash out a portion of your B&D, pay taxes on that withdrawal, and then dump it on your mortgage? That makes absolutely no sense when using math.

If you already know that you can’t afford the higher interest rate on the mortgage, you sell the house before you renew and either buy something more affordable or you rent while investing into a B&D whatever equity you get from the home sale.

#157 beanbean on 06.10.22 at 11:33 am

Dear Garth, My husband and I are in the cross road right now and hope you could see this and give us some advices. We have been renting for the past 8 years in a nice condo with good rate. And of course, the landlord wants to sell to us right now as is (not fixing up anything) or he will move in if we don’t. The place is nice but condo fee is high at about $900 a month. The fee will only go up and you would not get the money back. We wanted to buy a house since few years ago but we did not find anything we like. The house price is almost double in some location now so I don’t think we will buy another place now. Since we have cash in hand, we are not sure if we should buy the condo (to save the trouble of moving and looking for another place) or rent another place for a year and buy a house when it drops. My husband is saying we should use the cash on investment since he thinks the house market will only go downhill from now. And not sure how hard it is to resell the condo later since the condo fee is high.

#158 Ponzius Pilatus on 06.10.22 at 11:42 am

#150 KNOW IT ALL on 06.10.22 at 10:06 am
The heat under Powell’s a** rises appreciably.

Real wages WAY negative.

Inflation hit fresh 40-year high in May to 8.6%. It rose 1% from April, topping all estimates.

Core CPI, which DOESN’T include food & energy rose 0.6% from prior month & 6% from a year ago, also above forecasts.
————————————-
Core CPI.
How can they call it the core if it does not include food and energy?
Like doing core body exercises that do not include your hip muscles.
I think the cost of a grain of salt is also not included.

#159 Ponzius Pilatus on 06.10.22 at 11:57 am

#151 Mattl on 06.10.22 at 10:34 am
Stan Brooks posts about runaway inflation for years. It finally hits and he is gone. Somewhere I hope Stan is draining an ice cold beer, turns out he had a window into the future.
————————
No window into the future.
Inflation is part of economic circles inherent in the supply and demand equation.
In the long run, prices will always go up.
The BIG Mac once was 20 cents.
Sometimes, like now, prices rise faster, due to unforeseeable events.
Like in the past, it will revert to its historical mean again.
When, that’s the question that not even CEF’s fuzzy crystal ball can foretell.

#160 George on 06.10.22 at 12:12 pm

#126 FerrisWheel on 06.09.22 at 10:41 pm

It’s the same where I am in Kingston, Ontario.
The odd property will post a big price drop after a couple of weeks but new listings are coming on higher as the summer goes on.
Seems to me the talk of a crash is actually an attempt at pumping the RE market as rates rise.

#161 Observer on 06.10.22 at 12:14 pm

#157 beanbean

I’d suggest you consider calling your landlord’s bluff and agree to let him move in as he is threatening to do. Then keep tabs and see if he really does move in. Not sure where you live, but in Ontario he can find himself fined and/or owing you money if he doesn’t actually move in. Read up on the landlord/tenant acts in your province so you know what your options are and your landlord’s responsibilities.

Of course that means you will have to move to a new rental, but this seems to me a small price to pay to avoid catching a falling knife. Patience.

#162 beanbean on 06.10.22 at 12:55 pm

#161 Observer on 06.10.22 at 12:14 pm
Thanks for your reply. We live in Ottawa and I do think our landlord is bluffing since he is a home builder himself. The only problem is the rental market is insane right now and house price hasn’t been dropping much in our area. Maybe less bidding war but the asking price is still way too high at the moment. If we buy the place we are living in right now, it sure would save us some trouble or inconvenience. But eventually we would want to move to a house or even move to GTA if house price is really dropping in the next few months or next couple of years. We worry it would be hard to sell the condo by then since the conde fee is high. If we rent, the rental price is insane right now but we could use the cash to invest. If we use the money to invest, what would be the best and safest to invest on? I would appreciate if anyone could give us some advices on that.

#163 yvr_lurker on 06.10.22 at 1:37 pm

#156
annual return for a B&D is somewhere in the range of 7%-7.50% and a mortgage rate is 5.50%, you’d still cash out a portion of your B&D, pay taxes on that withdrawal, and then dump it on your mortgage? That makes absolutely no sense when using math.
——
We are fine at our end with the renewal. However, I think it all depends on what a 5-year would be for people when they do have to renew in 2023. The expectation is somewhere between 5.5 and 7.0%. I think you are a little optimistic on the growth of a B+D, perhaps based on the anomaly in 2021. If one has an extra 100K that is easily accessible, if you crunch the numbers like I have done it is a toss up whether to put it on the mortgage or simply assume a 7–7.5 growth in the market. My sense is that there is a growing likelihood of a recession starting in the next year or so once people realize that their wages will not catch up with inflation, and consumer spending starts to tank.

#164 Jurgen Muller on 06.11.22 at 4:47 pm

Do you understand what’s going on in the steamy bond market? Junior is here to help … https://twitter.com/SilbergleitJr/status/1526261232654614531