The hard landing

In 16 days interest rates rise again. By half a point, most econs agree. So, the Bank of Canada rate will have swelled from 0.25% to 4.25% in nine months.

That’s a record. Up 1,600%. Variable-rate mortgages in the 1.5% range last winter are 5.5% to 6% at the big banks now.

But those are the lucky borrowers. More on their situation in a moment.

First, consider the financial lepers in out society – the lowly commission-only workers, contractors, gig employees or the worst (shudder) – the self-employed. These folks have always been given the bum’s rush by lenders, and many have ended up getting house money from the subprime guys or private mortgage lenders. What a disaster has been unfolding there, with rates now in the eight per cent range and loans unrenewed, leaving borrowers scrambling and listing properties in distress.

This is the tip of the real estate iceberg. So much more hurt lies just beneath the surface.

Crusty Toronto mortgage broker Ron Butler, as usual, is in the trenches. “Lenders are just asking for their money back,” he says. “A $70,000 second mortgage, given 30 days to find a way to pay it back or face a power of sale. These are regulated institutions who work with folks with lower FICO scores, or self-employed. Income that the banks won’t work with.”

And here’s one he cites for the record books.

Current Mortgage: $2.37M
Current Rate: 3.29%
Payment: $9,646 Monthly
New Rate: 8%
Payment: $17,248 Monthly

The house, Butler reports, “will be sold.” Or, at least, it will be listed for sale. Since the top end of the market has been falling apart lately, it might take some time to find a buyer greater fool.

Now how about the regular plebs with their paltry $400,000 or $800,000 home loans taken in 2020 or 2021 at less than 2% when everybody on this site was telling you ‘it’s different this time’ and ‘the government will never let rates rise’?

Well, the pain’s on the way. Gird your loins. There’s mortgage crisis on the horizon for many who eschewed the advice of a certain pathetic blog and took a VRM a year or two ago, to allow lower payments or a higher debt load. Bad dogs.

Here’s the rub: as the BoC benchmark jumps, so do VRM rates. However most banks allow fixed monthly payments. That means homeowners don’t really see the epic ascent while more and more of their payments go to interest. At a certain point (called the ‘trigger’) most or all of the monthly is interest. No debt. We’re at that point now for hundreds of thousands of families.

Two major lenders (the green one & the penguins) are allowing a portion of this bloated interest to be glued onto the mortgage principal, so payments remain stable but every month the homeowner has more debt and less equity. Not exactly what anyone expected when they bought a pandemic property.

This is called negative amortization. Kinda like one of those squirrely reverse mortgages, where the oldie gets a wad of cash but the debt load grows bigger daily. The trouble is, federal banking regs have stipulated a mortgage must always be amortized, or routinely paid down. The reason is simple – an unserviced loan could grow larger in size than the equity in the asset being financed. And that is a bank risk.

CHMC says it’s okay with negative amortization, so long as the mortgage is recalculated at least every five years to bring it back into the original repayment schedule. But with rates having exploded higher, that means a huge jump in monthly payments looms on the horizon. For someone who bought with 5% or 10% or even 15% down, it could spell financial chaos.

Says blog dog and K-W lawyer Michael: “Where is OFSI (the bank regulator) going to stand on this – are they going to lay the hammer down on these banks for allowing an increase in mortgage principal and amortization past agreed amount and leave secondary mortgages in an equity risk depletion position? Combine that with declining real estate values! Watch out!”

Meanwhile, here’s another warning sign: 30-year amortizations.

Word is the number of longer amortizations (which allow lower payments but inflate interest costs) are augmenting fast. They’ve doubled in three months. Some banks now have a quarter of their mortgage portfolios in thirty-year terms. Many people seem willing to pay far more interest over the years ahead in order to swallow real estate debt they (in reality) cannot afford.

So, on December the 7th, variable-rate mortgage costs will rise again with the chartered bank prime. That will probably not be the apex. Expect one (maybe two) more tweaks in early 2023. Then with VRMs at north of 6% and five-year fixed loans above that, rates will pause as the CB assesses inflation and economic growth. There will be no pivot in 2023 – no reduction, since the Bank of Canada will have reached a ‘normalized’ level consistent with history. Why would policymakers volte-face, encouraging more debt? Why let inflation back out of the bag?

They won’t. Hard homeowner landing ahead.

About the picture: “I enjoy your blog and appreciate your use of humour to spice up otherwise bland subjects,” writes Jim. “This is our pup Delilah who sadly passed earlier this year. We had tried to keep her off our new chair but she persisted and we eventually gave up. I swear she has a smile on her face in this photo, knowing that she had “won” and secured her own little piece of real estate.”

141 comments ↓

#1 Timmy on 11.21.22 at 2:00 pm

And yet even some bank economist from Royal Bank stated that we’ve reached the bottom of the housing downturn. I can see the realtors saying this because they are starving, but an economist?

The RBC guy said: “Canada’s housing market may be entering the latter stages of its cyclical downturn.” He did not say we have reached the bottom. Be accurate. – Garth

#2 Captain Uppa on 11.21.22 at 2:03 pm

I was somewhat of a good boy and took a 1.79% five year back in 2021 (re-finance).

There is a possibility I move up one last time before eventually downsizing in retirement (20 years away).

I wonder what the best way is to execute the upsize move in these conditions.

#3 dave on 11.21.22 at 2:03 pm

A lot of people have a second property because they maxed out their HELOC.

Is this going to cascade and cause housing to into forced sales?

#4 Prince Polo on 11.21.22 at 2:04 pm

I’m not worried about uncorrupted policymakers. It’s the politicos campaigning in 2025 that are scarier than any Hallowe’en! Just imagine what pathetic slogans that the uninformed electorate will lap up in a couple of years:

Cons say, “I’ll make housing more affordable by introducing 60year amortizations!”

The NDP chimes in with, “I’ll make it even more affordable by introducing 90 yr amortizations!”

Not to be outdone, the Liberals cry, “I’ll make it most affordable by handing them out for free and making evil richies pay for it all”

Bravo.

#5 Dr V on 11.21.22 at 2:09 pm

“…the self-employed. These folks have always been given the bum’s rush by lenders, and many have ended up getting house money from the subprime guys or private mortgage lenders.”
———————————————————

Great post Garth.

Here’s a solution for the self-employed, but it may come
with a catch(es).

Incorporate. Get that T4 to show employment income.
You dont even have to actually collect it, just pay the tax on it. Many lenders dont even check who the employer
is. It’s just a checkmark on the application.

Downside. Generally you want to minimize realized taxable income. A self-employed professional making 6 figures may only draw $70k in wage, so they wouldnt
qualify for as big a mortgage as if they took the $100k as wage.

Other downside. Phantom personal income when business is slow.

And it all costs money to run.

#6 Shawn on 11.21.22 at 2:17 pm

Meanwhile U.S. mortgages are A okay

I heard a few days ago that the great majority of U.S. borrowers since the financial crisis take 15 or 30 year fixed mortgages with the option to get out for a small penalty if rates go lower. In the U.S. it’s heads the borrower wins and tails the lender loses. The U.S. banks can’t take that kind of risk so they securitise and sell all these mortgages to silly fixed income investors. Investors CAN take the risk that rates will fall because in that case the investor simply gets their money back early.

Neither banks nor investors can take much risk of default which is when lending criteria in the U.S. tightened up massively after the financial crisis. And of course just like in Canada most mortgages are insured against default.

#7 Hans on 11.21.22 at 2:19 pm

One positive is all this chaos, cash is actually earning closer to the rate of inflation. If inflation does end up dipping, those that lock in longer term interest rates above 5% will be ahead of the game.

#8 Mr Fox on 11.21.22 at 2:19 pm

And that is a bank risk.

Why is it a bank risk? Aren’t mortages packaged into MBS and sold further by the banks?

No. – Garth

#9 Linda on 11.21.22 at 2:33 pm

‘Delilah’ does indeed look to have a puppy smile. Plus anything but a ‘hard landing’! No doubt is romping in pup heaven.

The mortgage example given today – sheesh, talk about mortgage payments beyond the ability of the 99% to pay. Even the 1% types might find those kind of payments difficult to service. As for those borrowers who had to use higher cost providers to get the loan in the first place, I’d include retirees to the list. Fixed income folks are probably not considered ‘good’ risks for providing a big ticket loan to…..

#10 The newcomer on 11.21.22 at 2:42 pm

Just leaving this here…

https://financialpost.com/executive/executive-summary/posthaste-more-signs-of-the-beginning-of-the-end-of-canadas-housing-correction

#11 TurnerNation on 11.21.22 at 2:46 pm

2022: The Great Unwinding. Butcoin, Crapto Currencies, Real Estate.
Ask yourself how many guys could run a book with 80-100% leverage and not blow up? Well this is what the LOCs, HELOCs and Mortgages effect.

————–

Why do we even hold the Federal Elections, when young peoples’ minds have so been poisoned against any moderate view point.
Let us just appoint a Head Leftee (T2/T3) for life. An open welfare state, anti-small business. Where, only the global corps who runs this world hold sway. The State funded newspapers complete the mind control loop.

-Leftists in action, just another day in a Former First World Country. WW3 was kicked off March 2020…now we ration, Comrades:

https://calgaryherald.com/business/diesel-shortage-puts-pressure-on-cost-of-living

— We are only a few years away from children reporting their parents for Klimate Crimes. The State will swoop in and seize the offending assets, the means of production. Proudly the children will wear their red sash to school. Teachers will reward.
You might think I’m joking but this where we are headed, the history books prove this out.

#12 Pecs Rockhard on 11.21.22 at 2:50 pm

Promises, promises… I’ve been waiting for the real estate apocalypse for going on 15 years. It hasn’t happened. Though I would love to hear the squeals of all the little debt piggies as they’re hauled into the street and stuck. It’s nothing less than they deserve.

416 SFH average price is down 22%. – Garth

#13 Don on 11.21.22 at 2:51 pm

DELETED (Anti-vaccine)

#14 Sail Away on 11.21.22 at 2:55 pm

Thanks Garth. Doom approacheth! Well, financial doom, anyway.

Personal connection: We have young relatives w/young kids in Victoria who got all frisky selling their existing place, then planting it all plus a $1M mortgage into a new house just before the big feeding frenzy. Almost inconceivably, they didn’t run the decision by us first.

So now they might be up against it at renewal time. What to do? Some options:

1. Have 3d party buy the property and rent back. 3d party being the SA family corp. Squanders principle residence exemption.
2. Carry mortgage in RRSP at 8% rate to maintain interest funds within family at acceptable rate of return.
3. Have 3d party take a part interest on title plus carry mortgage in RRSP. Not bad. Still squanders some exemption but lowers ongoing drain on the young family. And then, of course…

…the Elon Musk option:

4. Buy the property for $5M, unceremoniously kick them out, demolish it, and personally rebuild a small efficient house with a hand-picked crew of specialists.

I’m leaning toward 4.

#15 Quintilian on 11.21.22 at 2:55 pm

For someone who bought with 5% or 10% or even 15% down, it could spell financial chaos.

I tried to warn a couple of my friends.
They snickered.

And explained to me that if a pandemic can’t put a dent in the Vancouver RE market, nothing will, and went on to say prices would rise indefinitely, and of course they did,for a while.

They cited some local “experts” who were predicting basic single family homes would reach the 5 million dollar mark in the near future.

Rich immigrants, running out of land, endless funds from the bank of mom and dad -they offered up to support their argument.

But my favorite was that the government would never let interest rates rise.

TICK TOCK, TICK TOCK

#16 chalkie on 11.21.22 at 2:57 pm

Garth, you have a great piece on mortgages today, I suspect there are many other mortgage institutions like Mr. Butlers. that can tell a lifetime of stories that have come through their doors with egg on their face recently, needing help and wondering what tomorrow will bring.

Then there are other November stories like these running at 180 degrees: Statements that are very misleading in nature and perhaps trying to motivate buyers to keep real estate alive. In my opinion, this story is very misleading for the buyers on the sidelines, I disagree totally with the advice from this agent:
For investors like us (it) is an opportunity to scoop up some new inventory and master plan communities at, I think, prices that will be well-below what we could have seen last year,” Nuveen Real Estate Global CIO Carly Tripp told Yahoo Finance.
Why it may be time to buy into the slumping real estate market.
But some savvy investors believe that real estate has been, and will continue to be, a consistent hedge against inflation. In other words: it may be time to buy as others pull back.

Note how the agent did not say, who the savvy investors were? The only part of that statement that made sense was, “well-below what we could have seen last year”, that part we know for sure.

If you are one of them, you are not savvy.

Sorry Carly, but you are dead wrong.

The real estate markets have not seen bottom, nor will they see bottom by the spring of 2023, do not be in a hurry to spend your money, you have a lifetime to do that, keep in mind it is the FOMO crowd that put the real estate prices in the clouds in the first place.
The saying goes, there is a sucker born every second, so I guess there is a new crowd of 2,629,746 suckers born since last month, maybe that is the new investors that Carly is referring to, she needs to understand that they are living with Daddy & Mommy.

Quote of the day: A Realtor will tell you to buy land, they are not making it anymore, listen to us seniors, buy at these rates and you will become poor.

#17 Gr on 11.21.22 at 2:59 pm

As families mortgages come up for renewal I feel in a way sad for them and the kids especially. Hopefully the kids can still afford to eat healthy foods. Hopefully it doesn’t mean even more mom’s standing out at the local street lights holding out a cup so they can buy food for the kids and pay the rent.

I still carry a bit of cash and change with me for other stuff, so was able to contribute yesterday as I waited for the light to turn green in my warm car. I’m going to add a couple hot pack to my glove box so I can hand one out as well the next time.

Some others might find this interesting and/or “The dystopian potential of this technology is not lost on us,” she says.

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#18 Neo on 11.21.22 at 2:59 pm

There is still some room left on east Hastings street but some former home debtors will likely need to move to the homeless camp down the road. Once the banks take your home, hold a huge party them move your family out.

Good on ya Canada. Im looking forward to the crying games.

https://www.youtube.com/watch?v=lVdUqweUmeQ&t=1091s

#19 OK, Doomer on 11.21.22 at 3:04 pm

A few months ago I believe someone commented that it won’t be long before the banks started forcing people into bankruptcy because of their mortage debt.

The consensus was that people would never give up their homes and would do whatever necessary to stay.

And here we are today; banks demanding their mortgage money back. Techincally not a bankruptcy perhaps.

But potato, potah-to.

#20 PeterfromCalgary on 11.21.22 at 3:10 pm

Central banks have essentially only one tool to lower inflation. Interest rate hikes. Yes the can do quantitative tightening (selling bonds they previously bought) but that is just another tool to raise interest rates.

It would be nice if the government helped by lowering spending which would also lower inflation.

Sadly, few people understand the relation between government spending and inflation. So they just keep spending and Blame Putin’s terrible / tragic invasion for inflation. This despite the fact that Canada imports very little from Russia or Ukraine.

Putin is murdering a lot of innocent people but is having little impact on Canadian prices.

#21 Dave on 11.21.22 at 3:11 pm

Houses in Surrey that were selling for $1.5M are now at $1.1M

#22 Timmy on 11.21.22 at 3:12 pm

The RBC guy said: “Canada’s housing market may be entering the latter stages of its cyclical downturn.” He did not say we have reached the bottom. Be accurate. – Garth

Either way this implies there won’t be much further downside, which I find hard to believe especially in BC

#23 Pecs Rockhard on 11.21.22 at 3:13 pm

416 SFH average price is down 22%. – Garth

Yawn. That doesn’t even get us back to pre-pandemic levels. (Which themselves were variously described as insane, off the charts, or indescribably stupid.)

You may well see 10% more. Maybe even 15%. But prices are not going down by half. Yawn all you want. – Garth

#24 Dolce Vita on 11.21.22 at 3:14 pm

All that can go wrong has gone wrong for recent VRM holders.

This is getting worse than in the early 80s and that’s saying something.

CBs should have done high rates, fast, stomped down inflation and started pivoting or lowering rates soon after like in the 80s. They waited too long.

Hard to fathom the extra money people are going to pi$$ away on interest. Servitude for decades. They’ll be largely taken out of the economy during that period of time.

Not good for GDP. Not good for Canada.

———

Weah. Not Whoh. Weah.

He scored.

USA 1 – Wales 0
Half time

Wonder Woman + Mr. America avec Bald Eagle Head very happy in the stands.

USA has some good players like Sergiño Dest that plays for Milan AC (my team) and Weston McKennie that plays for Juventus.

The latter, after a Yellow Card, gave the Qatar Ref a correct Italia Serie A arm and mouth geticulation. Too funny.

The goal seemed to have woken up Wales. See how it goes. Good start for the Americani.

Bonus: RAI TV broadcast in 4K.

———-

Ciao Garth, you know I love you but back to Calcio.

Good Blog today, hits home the carnage of high rates and the cost of FOMO.

#25 My Karma Ran Over Your Dogma on 11.21.22 at 3:22 pm

“Word is the number of longer amortizations (which allow lower payments but inflate interest costs) are augmenting fast. They’ve doubled in three months. Some banks now have a quarter of their mortgage portfolios in thirty-year terms.”

How is this even legal?
If rates remain high (5%-6%) or what we use to call normal, for the next 5 yrs. won’t these borrowers be worse off?

I call it kicking the can down the road, gambling that rates will drop dramatically.

#26 Jens on 11.21.22 at 3:31 pm

I know Garth always admonishes us not to draw comparisons with the U.S. in 2007/08. But with each week, Canada’s situation sounds more like a subprime mortgage crisis. In today’s post: 1. it affects hundreds of thousands of Canadians, 2. amortizations are getting longer. At 25% of the pie, the 30-year terms must include renewals. 3. banks start allowing negative amortization. (At 5 years, the recalculation is a long long way out.) Add to that a private debt-to-GDP ratio that far exceeds that of the U.S. in 2007.

So what grace will save us?
The CHMC? Can it bear tens of thousands defaulting on their mortgages in a short time period?
The Big 5? It’s quite tell-tale that two of them even embrace a negative amortization plan, effectively kicking the debt snowball down the hill. Even strong balance sheets can only absorb so many defaults at a time. If you ask me, they appear to be really scared.
The government? They just bailed us out for a once-in-a-century pandemic. Taking on another couple hundred billion will not sit well with a lot of us.

Let’s not say “the Titanic can’t sink”. Rather, we need to be aware of what would make her sink, and take measures to avoid it from happening.
But maybe the iceberg is already right ahead of us.

#27 mj on 11.21.22 at 3:33 pm

I feel the bank of Canada has to go 2% more. prices of homes dropped good for the first few months of increases. It seems now that people are getting used to it and prices seem to be stabilizing. Also inflation isn’t really coming down much. Only really came down 1.2%

#28 Pecs Rockhard on 11.21.22 at 3:34 pm

You may well see 10% more. Maybe even 15%. But prices are not going down by half. Yawn all you want. – Garth

That’s too bad because that’s what I want. Actually, 75% would be more reasonable given median incomes.

#29 Fasa on 11.21.22 at 3:39 pm

Those that leveraged up will/must feel pain – recessions are a good thing that help reset markets so that we can move higher over the long term – the bill always comes due…stay balanced!

#30 Love_The_Cottage on 11.21.22 at 3:46 pm

#20 PeterfromCalgary on 11.21.22 at 3:10 pm
Central banks have essentially only one tool to lower inflation…

It would be nice if the government helped by lowering spending which would also lower inflation.

Sadly, few people understand the relation between government spending and inflation.
_________
Sadly you post without providing any analysis of the impact of gov’t spending. Is it adding 5% to inflation? 1%? 0.1%? Do you have any idea of the answer or is the solution to every problem less government spending.

#31 The real Kip (Ret) on 11.21.22 at 3:48 pm

Just homeowners get the hard landing? Not anyone else? Yea! Homeowners are number one!

#32 CASH IS KING on 11.21.22 at 3:55 pm

Nothing is funnier than watching Canadians and immigrants go down the tubes because they listened to banks, realtors and their enablers the mortgage brokers.
BUY IN USA. RENT IN CANADA.
HOUSES ARE OFTEN LESS THAN 50K IN MANY PARTS OF THE USA.
ONLY STOOGES BUY HOMES IN CANADA.

#33 Brett in Calgary on 11.21.22 at 3:58 pm

“There will be no pivot in 2023 – no reduction, since the Bank of Canada will have reached a ‘normalized’ level consistent with history.”

Although I think you’re probably right, wheels falling off of wagons have been known to produce central bank knee jerk reactions. Our current debt/GDP is not ‘consistent with history’. We are pickled.

#34 Rook on 11.21.22 at 3:59 pm

Yet the Financial Post today was saying it looks like we’re nearing the end of the housing correction.

https://financialpost.com/executive/executive-summary/posthaste-more-signs-of-the-beginning-of-the-end-of-canadas-housing-correction

The FP did not say that. An RBC economist speculated we may be entering the “latter stages” of a cyclical correction. Why can’t anyone read any more? – Garth

#35 baloney Sandwitch on 11.21.22 at 3:59 pm

King of sub-prime and Billionaire financier Stephen Smith has reached a deal to acquire Home Capital Group Inc. The dude payed 63% premium to HCG’s closing price yesterday. Looks like the smart money is saying the bottom in closer than further or could be Smith is a big gambler like Elon.

#36 45north on 11.21.22 at 4:09 pm

Well, the pain’s on the way. Gird your loins. There’s mortgage crisis on the horizon for many who eschewed the advice of a certain pathetic blog and took a VRM a year or two ago, to allow lower payments or a higher debt load. Bad dogs.

my post from August:

I personally know a young family. They moved into a row house, a year ago. The father has worked very hard at fixing it up. We’re talking major work. Just heard last weekend. Three mortgages. They went all-in on real estate and now see that property values can drop.

this young family is going to be hurt for a long time. I didn’t get a chance to give them my views on real-estate. Still I may be able to help a little bit.

#37 45north on 11.21.22 at 4:11 pm

Prince Polo
I’m not worried about uncorrupted policymakers. It’s the politicos campaigning in 2025 that are scarier than any Hallowe’en! Just imagine what pathetic slogans that the uninformed electorate will lap up in a couple of years:
Cons say, “I’ll make housing more affordable by introducing 60year amortizations!”
The NDP chimes in with, “I’ll make it even more affordable by introducing 90 yr amortizations!”

anything beyond 30 year is multi-generational. Illegal.

#38 Will on 11.21.22 at 4:17 pm

Wow the ‘conspiracies’ keep turning into truth

CBS NEWS
Corporate Media TURNS on Biden Crime Family, FINALLY admits Hunter Biden’s laptop is REAL after years of smearing it as “Russian disinformation”

“Yep, it’s real, and it’s bad!”
https://twitter.com/i/status/1594706133989707778

Hunter Biden is irrelevant. His laptop is even less interesting. Get a life. And Twitter is not a source. – Garth

#39 Crystal ball futurist on 11.21.22 at 4:19 pm

2023 Fall will be interesting. The tide of cheap money will be gone and all the folks swimming naked will be exposed.
Rising salaries will improve affordability. That will be the floor of the hard landing.
Where is that? Don’t know. Nowhere in sight.

#40 Brian on 11.21.22 at 4:20 pm

Traditional news media are under siege largely because the public has lost faith in their ability to be good at the objective practice of their craft and see them as putting their own wants, needs, beliefs and crusades ahead of the public interest. They are diminished because too many of their names are better known than their work. And they are increasingly distrusted because while so many of their employers cozy up to politicians for subsidies and legislative legs up, they don’t have the courage to seriously report on it. Or, maybe, they are under attack because too many have forgotten that journalism isn’t about them, the pursuit of their causes and what they think. It’s about us. And we are right here. Watching.

Peter Menzies is a Senior Fellow with the Macdonald-Laurier Institute, a former newspaper executive, and past vice chair of the CRTC.

https://macdonaldlaurier.ca/objectivity-what-journalists-hate-but-the-public-still-craves-peter-menzies-in-c2c-journal/

If he’s talking about Fox News, absolutely. But not Canadian media in general. He’s wrong. – Garth

#41 Faron on 11.21.22 at 4:21 pm

#159 Sail Away on 11.21.22 at 12:11 am
#152 Faron on 11.20.22 at 11:23 pm
#135 Sail Away on 11.20.22 at 9:49 pm

Why trivialize the difficulty of others?

Actually, debriefing a shaky attempt while objectively recognizing what went wrong and right as I did above is the opposite of trivializing. It’s actually extending an experience into an educational opportunity. If you could manage to bring your ego from blimp- to party-balloon size, you might be able to see that, learn and even add to what can be taken away. You choose not to.

———-

I believe you broke ribs riding your bike through a parking lot not long ago and limped in here for sympathy. Proprioception failure?

Good you brought that up (despite you clearly doing so to sling mud). My bike fall is a demonstration of two things. 1) There isn’t a lick of equipment out there that could have altered and reduced the impact aside from GPR or full DH body armour. 2) Even the highly skilled (I can track-stand a bike indefinitely within biological reason and have gobs of mountain biking under my belt) are subject to dumb mistakes. The learning experience there was pay attention/avoid false confidence. See, learning through objectivity and humility.

And, no, I didn’t limp in here for sympathy. I tend not to bore people with personal details the way you do.It came up in convo. Go dig through the record.

Bringing neurotransmitters in is a snide insult.

Do better (GLWT).

#42 Dolce Vita on 11.21.22 at 4:23 pm

Why can’t anyone read any more? – Garth

————–

‘Cause Garth like I said yesterday

“People read in favour of their personal narrative – and in the absence of evidence …”

they make sh!t up – for that je ne sais quoi.

Like #30 Love_The_Cottage pointed out, in as many words, to #20 PeterfromCalgary.

Finding truth based evidence always a chore, but well worth it especially when investing … to assess the economic environs and hopefully make the correct decision.

ONE OF THE MANY reasons I read this Blog daily. Unbiased. Evidence based. And way more often than not, CORRECT about what is to come.

————–

USA 1 – Wales 1

Gareth got hauled down in the penalty box, penalty kick and he scored to tie it. Wales Bale pulls it out of the fire for them, yet again.

Glad the US substituted Weah as there is no “W” in Italian and the Italian announcers were having a time with his name. Like “WE – AHH”. Thank God for that.

Can the Welsh ever sing. Joy to hear them. Meanwhile American only know “USA, USA, USA”.

ENGLAND, the team I a cheering for in absence of the Azzurri, amazing today. England 6 – Iran 2. Poetry in motion. They were magnificent.

Senegal and The Netherlands was a boring game, slept thru most of it, woke up and witnessed the only 2 goals in the game at the end. Senegal 0 – The Netherlands 2.

– Sleep that knits up the raveled sleave of care.

#43 Dave on 11.21.22 at 4:26 pm

Why can’t prices drop by 50% ?

#44 1998 on 11.21.22 at 4:29 pm

Middle aged Canadians will fare well. They bought early.
They will either rent the basement to 10 people for $1,000 a head or sell their home, retire in Asia and post hate speech against immigrants and visible minorities on Greater Fool.
A bunch of hypocrites.
I was born too late. I should’ve been born in the 40s and 50s to profit from real estate.

#45 The Original Jake on 11.21.22 at 4:30 pm

You may well see 10% more. Maybe even 15%. But prices are not going down by half. Yawn all you want. – Garth

A 15% further decline would just drop averages below pre-pandemic prices but still above or at the crazy apex we saw in Feb 2018.

#46 Quintilian on 11.21.22 at 4:36 pm

#26 Jens on 11.21.22 at 3:31 pm

The Big 5? It’s quite tell-tale that two of them even embrace a negative amortization plan, effectively kicking the debt snowball down the hill. Even strong balance sheets can only absorb so many defaults at a time. If you ask me, they appear to be really scared.

Jens: The Big 5 want a piece of the subprime business which is huge in Canada, and they also, don’t want any more of what hasbeen lucrative for them up to now, go to the subprime lenders.
The Big 5 are very protective of their appearance of integrity it’s their most prized asset.
But I repeat, appearance.

#47 Chris on 11.21.22 at 4:44 pm

It’s time to hit the stock market folks! Ponzi like Fonzi!!!

#48 Wrk.dover on 11.21.22 at 4:48 pm

Mt. Benson talk all done here?

My wife made me take a leisurely stroll with her down the Kaibab Trail to Phantom Ranch at the bottom of Grand Canyon, once.

One foot drop for every seven feet ahead, for a total one mile drop into sixty-degree weather.

Rubber knees at bottom. Beer was good!

Back up nine-mile Bright Angel Trail, two days later, to crunchy snow at the rim. Breathless.

Hiking for me, done and done. Over. Retired.

#49 DON on 11.21.22 at 4:54 pm

A good friend has a good friend who is a realtor in the Sooke / Langford area on Vancouver Island. The realtor got 30 additional listings in about a month. A fair number are forced/panicked listings.

#50 I’m migration on 11.21.22 at 4:57 pm

Isn’t it funny?

Canadians living on native land who are A-OK with Natives getting the shaft and being marginalized are now afraid about 500,000 immigrants a year coming and relegating old-stock Canadians, their culture and maybe even language to minority status, as was done to the Natives.

Not only funny but also somehow poetic.

I guess the fact that old stock Canadians are bringing these immigrants in to have them help pay for the Canadian old folks plans and piles and piles of debt is…what’s the word I’m looking for…

#51 TurnerNation on 11.21.22 at 5:03 pm

Wags say what is the different between conspiracy and fact? Oh about 6-12 months
It’s also been suggested that the plethora of 5G towers is not for your phone but for your MONEY. Point-to-point mobile payments. Digital currency, natch

https://www.zerohedge.com/markets/here-come-programmable-dollars-new-york-fed-and-12-banking-giants-launch-digital-dollar
According to a statement by the New York Fed, global banking giants are starting a 12-week digital dollar pilot with the Federal Reserve Bank of New York, the participants announced on Tuesday.

—– The quick march toward Mega UN Smart Cities. But you are free to leave at any time Comrade! Just try it. If you can make it past the virtual razor wire. Very likely Soft lockdowns are the future all under the guise of ‘climate’. In the second largest country in the world.

.From ‘car-dependent hellscapes’ to green cities, Canadians find new ways to fight climate change (cbc.ca)



Say, what happened to Monkeypox? Exactly.
I am urging everyone to take down their TeeVee from the wall, stomp on it a few times — that it may not harm anybody else — and take it to the trash. Starve the Beast! It lives only via the TeeVee.

#52 FIFA on 11.21.22 at 5:03 pm

Anyone else find the FIFA president’s monologue not entirely out too lunch?

Canada for example over past 2 years has certainly trampled on our human rights and without doubt people paid, and continue to pay with their lives. Long Term Care Homes and what happened there was criminal.

Certain countries bombing civilians with drones? Sending their own to die in pointless wars?

Little much with this pot calling out the kettle nonsense. I’m a bit tired of it. Get your own houses in order before you shame your neighbour’s – is a very fair point.

#53 Victor V on 11.21.22 at 5:04 pm

Major mortgage lenders let borrowers shift unpaid interest onto principal to cope with rising costs

https://www.theglobeandmail.com/business/article-major-mortgage-lenders-let-borrowers-shift-unpaid-interest-onto/

#54 @J on 11.21.22 at 5:08 pm

The FP did not say that. An RBC economist speculated we may be entering the “latter stages” of a cyclical correction. Why can’t anyone read any more? – Garth
—————————

The Canadian housing correction hasn’t even lasted a year so far, and there are economist predictions that we are in the latter stages? Other corrections lasted years or even a decade.

What makes this one different? We have more information at our fingertips than ever before so I can see how that can speed things up, but this fast? Seems a bit fishy to me.

It’s the projection of one person who happens to work for the country’s largest mortgage lender. Duh. – Garth

#55 Quintilian on 11.21.22 at 5:11 pm

Here’s how B.C.’s new premier plans to tackle the affordable housing crisis:

I think that my friend and Crowdie’s friend is going to be effective this time!

#56 Quintilian on 11.21.22 at 5:14 pm

Here’s how B.C.’s new premier plans to tackle the affordable housing crisis:

I think that my friend and Crowdie’s friend is going to be effective this time!

So sorry, previous posted link was wrong

Who ever thought an NDP government would force sprawl on municipalities and punish them if they did not grow fast enough? – Garth

#57 Dolce Vita on 11.21.22 at 5:18 pm

#35 baloney Sandwitch

the smart money is saying the bottom in closer than further

————–

All it means is that the purchaser is buying cash flow, high interest bearing cash flow.

A 10% ROE (return on equity) business per Raymond James analyst Stephen Boland.

That’s all you can read out of it. Contrary to you leap of faith conclusion:

“The deal comes amid warnings from economists that the housing market is nowhere close to the boom triggered by the COVID-19 pandemic as borrowing costs rise sharply even though home sales in Canada edged up in October.”

And the deal, it’s not done yet.

Smith Financial includes a “go-shop” period until Dec. 30, during which Home Capital will be allowed to seek other bids.

HCG will be delisted from the stock market after if the deal goes thru, since they become Private.

WITH GREAT CERTAINTY, I say Buffett WINS BIG on this having bought in 2017 at about $10/share vs. the $44 per share offer price.

https://www.reuters.com/markets/deals/canadas-home-capital-be-acquired-by-smith-financial-c17-bln-deal-2022-11-21/

#58 Faron on 11.21.22 at 5:20 pm

#48 Wrk.dover on 11.21.22 at 4:48 pm

Sounds like microspikes would have helped. LOL.

Seriously though, very common for people to have undertrained quadriceps for eccentric motion. Leads to rubbery pegs on descent and delayed onset muscle soreness (DOMS). Makes the beer taste 100% better tho :-). Downhill running on a moderate grade is a great way to train them. For those doing the h’Kusam Klimb next June, be ready to run a lot of runnable downhill logging road. Fast and fun if you have the legs for it.

Sweet that you made it down into the Grand Canyon. She’s a beaut. I was invited to join some friends (in their mid sixties) for a one day rim-to-rim-to-rim run a year from now. Just under 50 miles and two vertical miles. Should be “fun”!

#59 Dolce Vita on 11.21.22 at 5:27 pm

#52 FIFA

Nobody cares even on Roid Rage, Amygdala Hijack Twitter.

It’s the

BEAUTIFUL GAME

leave it at that.

5 Billion viewers can’t all be wrong.

Besides, he’s not playing … so who cares.

For example, Lefty CNN trying to stir the sh!t up …

https://twitter.com/CNN/status/1593952757265960961

2,486 likes. 956 Comments, 1/2 of them Karen w/o a Cause but looking for one. Not exactly a ground swell of outrage.

Again:

5 Billion viewers vs. maybe 450 Karen’s + 1 = YOU.

——————

Whoever you are go watch American Football or something. Curling. Hockey.

#60 Bezengy on 11.21.22 at 5:30 pm

How low will housing go? It depends where. Moody’s said up to 90 percent in some markets, and we know Chrystia puts a lot of faith in Moody’s, so we better listen up.

https://betterdwelling.com/canadian-real-estate-prices-are-overvalued-by-up-to-91-moodys/

#61 Sail Away on 11.21.22 at 5:31 pm

#48 Wrk.dover on 11.21.22 at 4:48 pm

My wife made me take a leisurely stroll with her down the Kaibab Trail to Phantom Ranch at the bottom of Grand Canyon, once.

One foot drop for every seven feet ahead, for a total one mile drop into sixty-degree weather.

Rubber knees at bottom. Beer was good!

Back up nine-mile Bright Angel Trail, two days later, to crunchy snow at the rim. Breathless.

Hiking for me, done and done. Over. Retired.

——–

Great hike! When the kids were in school, we’d often fly to Vegas on spring break, drive to the Grand Canyon, hike to camp at Phantom Ranch a day or two, then hike back up, camping again at Indian (now Havasupai) Springs, and back to Vegas for a show and pampering. Snowy at the top, warm in the canyon. Good trout in the muddy flooded Colorado near the campsite.

Thanks for the memory jog! Probably worth doing again this winter. Let’s see what the wife thinks.

#62 Faron on 11.21.22 at 5:32 pm

Last but not least: TesLOL. Gassy, fetid, bloaty dead cats can bounce the highest, so it’s a tempting long here. But, man, talk about getting taken to the woodshed. At least $20 a share of yawning vacuum underneath current price.

#63 Canadarm2 on 11.21.22 at 5:39 pm

Garth: “so payments remain stable but every month the homeowner has more debt and less equity”

Kinda like how there’s LESS quantity of a product you buy at the same price.

Citibank should change its slogan from “What’s in your wallet” to “Give us more of what’s in your wallet”. ;)

BTW, I’m one of those pathetic self-employed/contract workers, so, no selling of the brick and mortar here anytime soon.

Which begs the a serious question if you can answer; how the hell do you sell when you’re retired and have no income? Do banks then check your investments and base mortgage approvals on the assets?

M54ON

#64 Home Buyer to Big to Fail on 11.21.22 at 5:40 pm

So, basically what you are saying is a home owner can kick the can down the road and keep a roof over their head until the property market recovers…

…while a renter is immediately booted to the street if not able to afford the roof over their head?

Being in the housing market in any financial position seems to provide more options and the ability to keep a roof over your head.

#65 Terry on 11.21.22 at 5:41 pm

None of you get it. Sorry for all of you. More stuff is being broken right now as I type this…………wait for it……….I told ya so!

See you all after Christmas…………I have more funerals to go to and more sick and dying friends/family to see. Alot of you don’t get that either.

#66 crossbordershopper on 11.21.22 at 5:42 pm

lots of underground 2nd mortgages out there, all issued in brampton that i know of, lots of east indian based syndications where offering 8 or 9 percent equity pull outs for real estate purchases. this the cash flow crunch right now, where people took 400k against there main on there million house, to put down on 2nd and rent it out. the problem is negative cash flow forever.
i still down understand how you do taxes, you make 65k a year and write off 17k a year in interest on borrowed funds and then your rental looses about 8k a year on top of that, cra will never see a tax dollar forever from this type of person and i know many of people in that situation, they can only last about 2 years before its sell time, no way they can dance for more than say 3 years ,

#67 NOSTRADAMUS on 11.21.22 at 5:44 pm

COULD BE A WHOLE LOTTA PREPPING GOING ON!
I first started prepping for a few months, then for a few years. Now it looks like I’ll be prepping for the rest of my life in order to be 100% self sufficient.
New point. Way back in the early 90’s I was much like Captain Ahab, went down with the ship before I changed focus. For those who think real estate will bounce back in the new year, Well, in my area it took 12 long years. Best advice you will ever get on this blog, “Cut your losses, call it a day! Life is too short to owe your soul to the company store.(Bank)
Oscar Wilde quote “When I was young I thought that money was the most important thing in life, now that I am old I know that it is,” I am just a fly on the wall taking you behind the scene.

#68 Yorkville Renter on 11.21.22 at 5:44 pm

being self-employed I had to put myself on payroll just so I can qualify for a mortgage… sucks, but you gotta do what you gotta do.

#69 IHCTD9 on 11.21.22 at 5:48 pm

#50 I’m migration on 11.21.22 at 4:57 pm
Isn’t it funny?

Canadians living on native land who are A-OK with Natives getting the shaft and being marginalized are now afraid about 500,000 immigrants a year coming and relegating old-stock Canadians, their culture and maybe even language to minority status, as was done to the Natives.

Not only funny but also somehow poetic.

I guess the fact that old stock Canadians are bringing these immigrants in to have them help pay for the Canadian old folks plans and piles and piles of debt is…what’s the word I’m looking for…
—— —-

The word you’re looking for is: slaves. That’s right. 500K ain’t even enough. We need more. Entitlements, the SSN, and taxes need to be paid for, and the only way it’s gonna happen is with a boatload of immigrants. I doubt many OSC’s with a solid handle on the situation are objecting.

As far as culture and language goes, English, and Western Culture will be global in less than 100 years. So no worries there at all.

#70 Sail Away on 11.21.22 at 5:48 pm

#57 Dolce Vita on 11.21.22 at 5:18 pm

Re: Home Capital

Smith Financial includes a “go-shop” period until Dec. 30, during which Home Capital will be allowed to seek other bids.

HCG will be delisted from the stock market after if the deal goes thru, since they become Private.

WITH GREAT CERTAINTY, I say Buffett WINS BIG on this having bought in 2017 at about $10/share vs. the $44 per share offer price.

——–

No, Buffett bought in around 10-ish and sold about 20-ish (as I recall, not looking it up). He’s been out for at least 4 years.

I’ve been in since 2017 after the 50% drop. Bought 8.7, just sold today for 42.49 / +388% 5-year return. This, plus last month’s +19% on Twitter is leading to a fine year.

Left 5-6% on the table and took the certainty, same as with Twitter.

#71 Bezengy on 11.21.22 at 5:49 pm

The wifey and I took a stroll down Bloor West from Jane to Young on Saturday, about 10 km. One of the nicer areas of Toronto with lots of shops. Seen but just one ‘Help Wanted” sign along the way, a big change from a few months ago. Lots of boarded up shops along the way too. Doesn’t look too good to me at the street level. Oh, and a closed real estate shop, and another with a broken front window, probably after someone threw a rock at it. Always nice to get a view of what’s happening in Toronto up close.

#72 Shawn on 11.21.22 at 5:50 pm

Dolce Vita about Home Capital

All it means is that the purchaser is buying cash flow, high interest bearing cash flow.

A 10% ROE (return on equity) business per Raymond James analyst Stephen Boland.

HCG will be delisted from the stock market after if the deal goes thru, since they become Private.

WITH GREAT CERTAINTY, I say Buffett WINS BIG on this having bought in 2017 at about $10/share vs. the $44 per share offer price.

**********************
Buffett sold those shares at a profit not so long after he bought when Home Shareholders snubbed him on the second half of the investment that he had agreed to make. Damn peons. Ungrateful for his bailout.

Question is why did the market so greatly under value this business? If the new buyer is getting 10% it must have been available last week at more like 14%.

It traded well below book value due to fear. Again, damn peons.

#73 Reality is stark on 11.21.22 at 5:56 pm

Housing recovery starts in 2028.
We will easily hit 50% of peak price in the next year or two.

#74 Annek on 11.21.22 at 6:03 pm

#17 Gr
“Hopefully it doesn’t mean even more mom’s standing out at the local street lights holding out a cup so they can buy food for the kids and pay the rent.”
———
I hope you are aware that there are professional beggars dropped off and posted at street corner lights in the GTA. I too, fell for it. One beggar was limping a funny way and I felt sorry for him and gave him a $20. Except later, I saw other beggars limping the same way and realized their leg was tied up in a manner to give that limp. Another time, I offered a plateful of food, wrapped , from a pot luck party I was coming back from. The street corner beggar did not want it. He only wanted money.
Moral of the story: not all are legit. There is good money to be made. That is my opinion.

#75 Steven Rowlandson on 11.21.22 at 6:04 pm

“Now how about the regular plebs with their paltry $400,000 or $800,000 home loans taken in 2020 or 2021 at less than 2% when everybody on this site was telling you ‘it’s different this time’ and ‘the government will never let rates rise’?”

Those poor or soon to be poor souls will just have to admit that they believed the big lie and were taken for a ride. The Banks will just have to write off the loss and realtors will have to get by with lower commissions. The real affordable price range for homes in Canada is $0 to $90,000 providing that $15 an hour as minimum wage holds, and workers get 40hrs a week and 50+ weeks a year.

#76 FIFA on 11.21.22 at 6:06 pm

#59 Søren Vita

Isn’t that what I’m saying?

First Qatar plays the capitalist game by rules demanded and accepted by the west to get the World Cup.

Now apparently they are the only ones who commit wrongs?

Also, what’s with the outrage at the no booze thing? Or laws of the land one must comply to?

You go somewhere as a guest, should they comply to you? Is that how it works? No responsibility on the visitor to act with respect to the host?

Not a black and white issue certainly. But should they take all the blame for everything?

#77 Steven Rowlandson on 11.21.22 at 6:22 pm

“I was born too late. I should’ve been born in the 40s and 50s to profit from real estate.”

1998 you were not born too late; you were screwed over and cheated out of your chance of having a home of your own at a reasonable price to earnings ratio based on the 3 years pay rule. Remember real estate is a place to live; it isn’t and should never be a GD investment. In the 25th chapter of book of Leviticus God tells people not to take advantage of each other when it comes to real estate. I think this principle is applicable for all people even in our time. The real estate prices have become unmerciful and ungodly due to their magnitude relative to the incomes of the poorest paid in society.

#78 XEQT and chill on 11.21.22 at 6:26 pm

Stages of the Canadian Real Estate Market.

1. The real estate market will only grow due to immigration, and the government won’t let rates rise cause it would hurt too many people.
2. Rates are rising but this will cool off the overly hot markets, prices won’t drop.
3. Prices are dropping a bit, but honestly the pandemic surge in pricing was overdone, and besides, anybody who bought in 2020 is still ahead. No cause for alarm.
4. I don’t see any signs of a housing crash. We may not even have a recession. If you buy and long term, this is fine.
5. OK, house prices have cratered, but they’ve hit the bottom, cause the central bank is pivoting now. Nothing but up from here!
6. Wow, prices are still dropping. I don’t understand, rates aren’t rising anymore.
7. It’s 2024 now, clearly prices should start to rise this year! The government just introduced yet another incentive to help first time homeowners buy!
8. Why aren’t house prices rising? Why is our housing market so broken?
9. Don’t buy houses, everyone I know who bought one has lost money. They are a horrible investment.

#79 Wrk.dover on 11.21.22 at 6:31 pm

#61 Sail Away on 11.21.22 at 5:31 pm
Probably worth doing again this winter. Let’s see what the wife thinks.
______________________________

We’re booked for reef scuba followed by bar.

Weightlessness is much better!

#80 Heffe on 11.21.22 at 6:33 pm

Well I am am lucky to be renting. A 4 bedroom in the depths of Mississauga. It would cost me $1500+ more a month to buy it…plus taxes and maintenance. Average household income for my are is 59k. My landlord is very worried. He asked if he could up the rent $400 a month on the first of the year because he is losing money monthly since rates went up. I agreed to the hike in rent and signed the papers last month. He is in a trap now and bought his current home with a Heloc on this house I am sure. Live and learn. Both me and my partner are well invested and on our way to living the good life. Saving cash every month.

#81 Nonplused on 11.21.22 at 6:34 pm

“First, consider the financial lepers in out society – the lowly commission-only workers, contractors, gig employees or the worst (shudder) – the self-employed. These folks have always been given the bum’s rush by lenders, and many have ended up getting house money from the subprime guys or private mortgage lenders.”

I’ve often wondered why this is. Do the banks have statistics that the self-employed for example have higher default rates than say Twitter employees? Or Amazon workers? Is a long term successful real estate agent really a higher risk than a rig hand?

I only got laid off once in my corporate career, along with 75% of the other staff who worked for that company at the time. It sort of taught me that the concept of “stability” through working for someone else wasn’t a thing. And with pensions being a thing of the past (unless you work for the government), what really is the incentive to prefer being an employee over a contractor? Dental coverage? Severance? (I also learned from this experience that the severance is usually better for round 1 than it is for round 2, 3, and 4. Each round gets worse. Take the package early, it’s the best number they’ll show you.)

If you have in demand skills it is better to work contract. The hourly rate is more, the hours are more flexible, and if you play it right you can have more than one client so the loss of any single contract isn’t the end of the world.

But ya, it’s hard to get loans. I recently bought a new car, and I couldn’t get a loan. My wife could though, because she had a 9 to 5 job. This despite her salary being around my tax bill most years. So I paid cash. Dealers don’t like that because they get an “origination fee” when they bring loan business to the banks, and it’s substantial.

I also learned from the loan person at the dealer that “90%” of her business was people who hadn’t paid off the loan on their trade-in yet. The loan never ends. Often she was rolling the difference between the trad-in value and the outstanding loan into the new loan. This, combined with undercoating, Scotch Guard, and extended warranty often resulted in a loan that was considerably larger than the list price of the vehicle. “Wow” I thought. Anyway those deals are for people who have full time employment I guess, I couldn’t get the loan.

Also interesting was that according to the loan person, most people take the longest amortization and minimum payment they can. 5 years is unpopular, with 7 being the sweet spot. “You can always pay more to pay off the loan more quickly”, she said. “But nobody ever does.”

It’s not just the mortgage problem that is going to get us. Our culture is built around the “monthly”, for everything from houses and cars to vacations and Netflix. Heck, you can’t even buy Microsoft Excel without a subscription now. And who bothers to pay off their phone? Nope, just add it to the monthly.

#82 Omasare on 11.21.22 at 6:35 pm

vaccine)

#14 Sail Away on 11.21.22 at 2:55

…the Elon Musk option:

4. Buy the property for $5M, unceremoniously kick them out, demolish it, and personally rebuild a small efficient house with a hand-picked crew of specialists.

I’m leaning toward 4.”

You are a horrible excuse for a human being… you remind me of my landlord in Burnaby. Must be something in the rain in BC….

#83 IHCTD9 on 11.21.22 at 6:41 pm

#44 1998 on 11.21.22 at 4:29 pm
Middle aged Canadians will fare well. They bought early.
They will either rent the basement to 10 people for $1,000 a head or sell their home, retire in Asia and post hate speech against immigrants and visible minorities on Greater Fool.
A bunch of hypocrites.
I was born too late. I should’ve been born in the 40s and 50s to profit from real estate
——-

Let me tweak that up for you. Folks born prior to 1975 and bought a house prior to 2005 are golden. We will retire wherever and whenever, and the smart ones among us will be calling for more immigrants. Much more. We understand that our healthcare, OAS, CPP, GIS and government services totally depend on it. Right now, Trudeau’s power base is Boomers. Draw your own conclusions. 500K ain’t enough.

If you were born here in 1998, good luck to you bro, you’re going to need it. The good Old Canada that folks still envision as existing even today, died in 2015, and we’re not going back to that level of prosperity again anytime soon. Too much damage has been done. Post Trudeau Canada is everything you think it will be. Actually, it’ll be even worse, since all you’re apparently considering is the cost of RE. That won’t change much, and there are several other brand new hurdles headed your way over the next 20 years or so. It can’t be fixed quickly, so best be aware, and plan accordingly. It’ll take a generation to repair, maybe more. Sorry Homie, but take heart in the fact I did not vote for any of this.

#84 Bill zufelt on 11.21.22 at 6:51 pm

Steve Smith who just bought Home Capital is certainly betting on rates staying higher. The company has taken in $10’s of millions over the last year on GIC’s offering 3,4 and now 5% .Pretty sweet having that stream and loaning it out at 7-8%—a lot bigger spread than when mortgages were 1.15%. Billionaires —gotta love em.

#85 Diamond Dog on 11.21.22 at 7:13 pm

Well said, Garth. Why I come here, to speak plainly, is because you simply know more than me.

Of course, with my own 2 cents, south of the line investors should buckle up. Larry Summers suggested the terminal rate (Fed rate peak) could go higher than 6% a couple weeks back:

https://www.youtube.com/watch?v=ori6vykChbA

Former Fed Governor Randy Kroszner says the terminal rate could be in the mid 5’s and could even get to 6 by the middle of next year (2 week old interview):

https://www.youtube.com/watch?v=diQbvCoMQxk

These are older interviews that predate a modest drop in inflation and buck the market expectations of a 5% Fed terminal rate going sideways through most of next year. This leaves me to ask, is it my own confirmation bias leading me search out like minded views like those above? Or simply the search for opinions that aren’t laden with market self interests…

The burning question is what is the neutral Fed rate (neither growth or recessionary)? Summers has thought it to be somewhere between 4 and 4.5%. Add QT and will 5% be enough?

Maybe not, if Summers is right. Perhaps the terminal rate has to go higher to cause the needed demand destruction (recession) that drives prices down forcefully (also to consider is what happens if the dollar weakens next year since this would be inflationary). This is definitely not something the markets are pricing in as of late (higher terminal rate or at this point recession) but more like $ managers going for bonuses. We may need to warm up to the idea that the Fed rate will go into the mid 5’s or higher (which is great for new entries into bond markets overall, the higher the better).

As it is, the Fed rate is at 4% with the Fed expected to raise rates in December to 4.5%. This would mean, especially coupled with QT, that a Fed engineered recession beginning in Q1 and beyond for most of next year is likely but since it takes 2 quarters of recession to pronounce it as an actual recession and indicators are lagging, we technically won’t call it one officially until late July of 2023.

There are a couple more signs that the U.S. is headed towards a recession out there as of late. For one, the 10 year treasury is trading below the Fed rate. Normally when this happens, this triggers a recession (within 6 months). Another is the U.S. PMI, now at 50.2% for October indicating manufacturing isn’t far off from recession. Order backlogs are contracting as are new export orders, related to the strength of the dollar:

https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/october/

We also have a timing factor to consider. Consumers are maxing their cards as Christmas nears. For the poor and middle class, Q1 is traditionally the quarter of struggle.

Couple timing with increased levels of debt service on mortgages, lines of credit, business loans, credit cards etc. and we may see a picture emerging involving a credit crisis in the U.S. as well as Canada but it’s still early days to try to predict when a credit crisis could hit the markets or to what degree.

We’ve got fuel (higher rates and climbing), We’ve got spark (a looming recession). We’ve got oxygen (increasing unemployment). What more do we need for a dumpster fire?

#86 T-Rev on 11.21.22 at 7:17 pm

I wonder if Jag will force Trudeau to step in and save existing homeowners. I can see a situation where the federal government provides loans to renewing (or variable) homeowners for something close to their original rate for the duration of their term, be it 3 years or 5 or whatever.

To avoid gassing the system and re-inflating it, they’d have to limit it to mortgages already outstanding- no running up the heloc or otherwise increasing the size of the amount. They’d also be wise to limit it to those GFs who purchased or locked in rates between when Tiff told us all to borrow our a$$es off and, say August 2022.

It would allow homeowners to stay in their houses, avoided a crash from troubled must-sell listings and thus making for a softer landing, but at the same time it forces new financing/buyers to purchase at the now higher rates, capping the amount people qualify for and keeping a lid on house prices.

A “let them down easy” sort of situation. And yes, the feds have to backstop it, but they don’t seem to mind printing money. I don’t think it would be terribly inflationary either, although it certainly wouldn’t help reduce inflation. Just keep people in homes, and make good on Tiff’s promise that rates aren’t going up for a very long time.

#87 IHCTD9 on 11.21.22 at 7:20 pm

#80 Heffe on 11.21.22 at 6:33 pm
Well I am am lucky to be renting. A 4 bedroom in the depths of Mississauga. It would cost me $1500+ more a month to buy it…plus taxes and maintenance. Average household income for my are is 59k. My landlord is very worried. He asked if he could up the rent $400 a month on the first of the year because he is losing money monthly since rates went up. I agreed to the hike in rent and signed the papers last month. He is in a trap now and bought his current home with a Heloc on this house I am sure. Live and learn. Both me and my partner are well invested and on our way to living the good life. Saving cash every month.
———

Good job. Going forward, Canadians who are interested in winning, will need to divorce themselves from the house horny herd. There is no win available anymore via treading the recently beaten path. I don’t think Canadians at large have ever been dumber than they are right now.

Different ways of thinking about work, lifestyle, location, and investing will divide the winners from the losers. Lots of balls in the air, only those keeping an eye on the trajectory of same, will arrive at retirement in good shape.

#88 Quintilian on 11.21.22 at 7:33 pm

Who ever thought an NDP government would force sprawl on municipalities and punish them if they did not grow fast enough? – Garth

Wrong way to look at it Garth.

I don’t think it’s a good idea to let the hillbillies have cartel power over land use, especially as most of the municipal politicians have a vested interest.
That coupled with the fact they are for the most part devoid of morals.

Sometimes the means do justify the ends. I would go further than Eby.

For starters, municipal politicians would be compelled to attend and graduate from an ethics course.
Part 2 they would have to live with strugling single parents and their children for a few months.

#89 IHCTD9 on 11.21.22 at 7:41 pm

#75 Steven Rowlandson on 11.21.22 at 6:04 pm

The real affordable price range for homes in Canada is $0 to $90,000 providing that $15 an hour as minimum wage holds, and workers get 40hrs a week and 50+ weeks a year.
———

I’m thinking more like 4-500K in small city Ontario, and 800-1 Mill urban Ontario. That’s likely around where things will level out.

90K is 10 hours straight north, slowly dying, Paper Mill town pricing.

#90 Sail Away on 11.21.22 at 7:44 pm

#82 Omasare on 11.21.22 at 6:35 pm
vaccine)

#14 Sail Away on 11.21.22 at 2:55

…the Elon Musk option:

4. Buy the property for $5M, unceremoniously kick them out, demolish it, and personally rebuild a small efficient house with a hand-picked crew of specialists.

I’m leaning toward 4.”

———

You are a horrible excuse for a human being… you remind me of my landlord in Burnaby. Must be something in the rain in BC….

———

It was a joke, O. We’ll be helping cover the cost of their house, because family. I’m happy being horrrrrible, though.

#91 crowdedelevatorfartz on 11.21.22 at 8:14 pm

@#191 Blobby
“But yet you went on and on about Trudeau?”
++

My apologies if you were yanked from your safe space into the real world…

#92 IHCTD9 on 11.21.22 at 8:14 pm

#88 Quintilian on 11.21.22 at 7:33 pm

Sometimes the means do justify the ends…

—-

I think it’s probably best to leave things in the hands of us crusty hillbillies.

None of us would have totally buggered up that well known, time honoured maxim.

#93 Cow Man on 11.21.22 at 8:20 pm

#20 PeterfromCalgary

Maybe you should add “when governments spend borrowed money”, it causes inflation. If the money spent is from government revenue the inflationary impact is less, than when it is from borrowed money.

#94 Chimingin on 11.21.22 at 8:31 pm

Re-#88 Quintilian–the only hillbilly I am looking at is you.

#95 Faron on 11.21.22 at 9:12 pm

#82 Omasare on 11.21.22 at 6:35 pm
vaccine)

#14 Sail Away on 11.21.22 at 2:55

You are a horrible excuse for a human being… you remind me of my landlord in Burnaby. Must be something in the rain in BC….

Option 5: kick your relatives a few hundred bucks each month to help out because they are family and Sail Away can clearly afford it. Reap karmic benefits.

Surprised option 5 wasn’t listed? Not me.

#96 Balmuto on 11.21.22 at 9:16 pm

That is very surprising about those banks not increasing the monthly payments when they hit the trigger rates. They’re just increasing the debt burden and will make it more difficult for borrowers when it comes time to refinance. Kicking the can down the road.

And yeah, as the owner of a second lien loan I wouldn’t be happy about it either. Although in a lot of cases it will be the same bank (mortgage + HELOC package).

But it tells you they’re afraid their customers won’t be able to make the higher payments. Not a good sign.

#97 georgist on 11.21.22 at 9:22 pm

Presumably at some point BoC will try to fade the Fed and it will be time to hit eject on being in CAD.

#98 crowdedelevatorfartz on 11.21.22 at 9:31 pm

gee.
One city council in Canada has grown testicles.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwj91-yb38D7AhWXATQIHfpvCgQQFnoECA4QAQ&url=https%3A%2F%2Fvancouversun.com%2Fnews%2Flocal-news%2Fwest-vancouver-land-acknowledgments&usg=AOvVaw1z85Xdjf1LSOXMF4AvnpSq

Now if only Air Canada would stop acknowledgements of the first nations air at 39,000ft

#99 Summertime on 11.21.22 at 9:41 pm

Inflation is not coming down and it won’t come down due to the pathetic rate increases, logic requires double digit nominal rates and strongly positive real rates as to fight increased velocity of money.

Ultra financialization of economy and reliance of the debt Ponzi scheme in order to maintain bank profits and make government debt and any other debt serviceable requires further deferral of debt, so we have the 30 years amortization accounting for 1/4 of all mortgages. More innovative ways to defer and increase debt to come. Increase in any sort, shape of form of group debt – municipal, provincial etc. once the federal and private debt room is exhausted, including ‘guaranteed by the public individual debt’/more the likes of CMHC and other artificial ‘insurance’ schemes.

It seems we are also hitting the limit on debt as the UK recent experience shows.

So expect higher taxes, deteriorating services for years if not decades.

Combined with decline of labour wages.

Fun time to be young.

But it seems with the new ‘refusal to work your but off’ culture that the young worldwide are increasingly following will take care of it to some extent.

It is not about being lazy, it is about being smart and refusing to let your life go in working for somebody else’s profits and lifestyle while you get close to nothing.

That will include refusal to buy houses once people realize that the giant mortgage will take away their affordability to have kids. and any lifestyle other than to work all your life for a basic dwelling.

We have to acknowledge the intelligence and the persistence of the architects of this innovative financial scheme that squeezes the life out of the masses, while also recognizing how the decreasing intelligence of masses who fall for that trick impacts the life of every relatively normal person.

It is not easy to retain sanity while living in a mental institution.

Let’s see how it plays out, it will be a trill to watch.

#100 jack on 11.21.22 at 9:58 pm

Garth, what you didn’t include in your article is that they got plenty of warning from the Central Bank…..not once but many times. I’ve included only one of those examples here from 2021.

*********

The Bank of Canada issued a warning Thursday about the country’s over-heating housing market, saying that households are piling on too much debt that could come back to bite them and the economy post-pandemic.

https://www.advisor.ca/news/economic/bank-of-canada-warns-of-risks-from-household-debt-and-housing-market/

#101 Doug t on 11.21.22 at 10:14 pm

#98 fartz

As with many agendas these days, the pendulum is slowly swinging back

#102 Dan Rhodes on 11.21.22 at 10:51 pm

DELETED (Anti-vaccine coward)

#103 Ontario's Left Coast on 11.21.22 at 11:00 pm

Hi Garth. Can you please explain why the value of ETFs containing rate-reset preferred shares haven’t been going up along with interest rates? Thanks very much!

#104 PeterfromCalgary on 11.21.22 at 11:02 pm

I watched a video on the FTX fiasco on YouTube funny thing is half the comments were promoting another crypto scam. This was somehow related to Amazon but it little googling took me to to the FTC site. It is just another scam.

You can read about it here. It goes by various names and try’s to say it is somehow related to Amazon, crypto, passive income and so on. I tried to flag a few misleading comments but got tired after flagging about 20.

https://www.ftc.gov/news-events/news/press-releases/2022/11/ftc-takes-action-stop-dk-automation-kevin-david-hulse-pitching-phony-amazon-crypto-moneymaking

The video itself is from the Wall Street Journal and is credible but many of the comments are promoting a scam.

https://www.youtube.com/watch?v=6i18EBpcfR8

#105 Amber on 11.21.22 at 11:04 pm

There will be no hard landing. Canadian real estate is in high demand, especially in world class cities like Toronto, Montreal and Vancouver.

We should reinstate the Criminal Code charge of spreading false news. Because you’re guilty of doing that.

Canada continues to attract hundreds of thousands of newcomers who want to live in our great country. We continue to be the number one destination for families seeking a better life.

You, Mr. Garth Turner, are an incel loser.

Amber

#106 BABY'S BUM on 11.21.22 at 11:07 pm

Are we going back to 5cent loaves of bread?

Higher prices of everything are here to stay.

https://www.cnbc.com/2022/11/22/bill-ackman-doubts-the-fed-can-tame-inflation-says-higher-prices-ahead.html

#107 Elon Fanboy on 11.21.22 at 11:08 pm

#81 Nonplussed “But ya, it’s hard to get loans. I recently bought a new car, and I couldn’t get a loan.”

What’s your credit rating?

I took out a loan with Ford Financing back in July. 0.99%. Self employed. Verbally stated income, no proof of income required. My credit score was 840.

#108 Faron on 11.22.22 at 12:05 am

#106 BABY’S BUM on 11.21.22 at 11:07 pm

Are we going back to 5cent loaves of bread?

I’m pretty happy with my $0.50 – $1.00 loaves of the good stuff.

#109 SK on 11.22.22 at 12:48 am

#105 Amber
“World class city” is a stupid insipid phrase. You sound like a panicked realtor or an over leveraged airbnbust Superhost.

#110 Russ on 11.22.22 at 12:52 am

Amber on 11.21.22 at 11:04 pm

There will be no hard landing. Canadian real estate is in high demand, especially in world class cities like Toronto, Montreal and Vancouver.

Amber
======================

Almost every time I hear “world class city” as a descriptor for Toronto or Vancouver I think of their subway systems.

Check the maps of real world class city systems.

Lame (mini metro):
https://monde-geospatial.com/wp-content/uploads/2017/09/220-Mini-Metro-Maps-From-Around-The-World.jpg

Much better (world class):
https://s3.amazonaws.com/edwardtufte.com/world_subway_maps.png

Cheers, R
(commenting from a world class island just off the west coast o’ Canada)

#111 millmech on 11.22.22 at 2:13 am

Looks like banks are a good hold for the next 30 years. Curious if those who are taking 30 years have even looked at an amortization calculator and look at how much interest(rent) that they will be paying. Good chance that renting will be cheaper than ownership. Going from 25yrs ($834,000 in interest) to 30yrs ($1,038,000 in interest) there will be an extra $200,000 in interest payments on $760,000 mortgage. At least they are not throwing their money away on rent and are building equity.
Interest rate for those calculations was 6.88%.

#112 jane24 on 11.22.22 at 2:28 am

Well just arrived back from 10 days in Porto, Northern Portugal doing a scouting trip around their D7 retirement visas for non-EU pensioners. You have to live in Portugal for 183 days a year as a permanent resident and pay Portugal taxes on worldwide income of 10%. They charge nothing on rental income. Retirement visa is for 10 years. I don’t know about dividend income. Flights for us were £28 ( $45 Cdn) each way on easyjet from London.

I was most impressed guys. Porto is clean, safe, friendly with a pop of 2.4 million in the greater area and condos going up everywhere. Porto is on a river estuary going into the Atlantic so an easy cycle to the beaches. We met three American couples and one couple from Ontario checking it out for a cheap retirement. Anyone there under 40 speaks English better than we do.

Prices were as follows for bars and cafes:
coffee $2.00 Cdn
Glass of wine – $3.50 Cdn
Lunch with 2 courses – $13.80.

Great subway/ trains /buses /trams systems going right out into suburbia. Prices vary but average of $3 Cdn per trip including the 30 mins ride from downtown to the airport.

We concentrated on a beach town area about 30 mins south from Porto main train station. Pop 52,000 so all services including a hospital with empty ambulances ready to go lined up outside. We saw SFD 3 to 4 bed villas with finished basements and summer kitchens and guest suites in the yard and in perfect condition for about $560,000 Cdn. I was told an in – ground pool would cost $26,000 Cdn including landscaping.

With 2023 looking so unsettled we are going to go back again for longer is 2024. We suspect that house prices there which have been rising will settle or even go down a bit over the short term. Maybe something to think about this winter.

#113 Steven Rowlandson on 11.22.22 at 2:37 am

“Are we going back to 5cent loaves of bread?

Higher prices of everything are here to stay.”

Oh really? How much is a $4 loaf of bread worth if it goes moldy? Nada! Real estate isn’t worth crap if it is too expensive relative to incomes. That $0 to $90,000 estimate of mine is quite conservative given what employers are willing to pay which is as little as possible.

#114 Nonplused on 11.22.22 at 3:25 am

#107 Elon Fanboy on 11.21.22 at 11:08 pm

#81 Nonplussed “But ya, it’s hard to get loans. I recently bought a new car, and I couldn’t get a loan.”

What’s your credit rating?

————————————

Heck if I know. I haven’t had a loan in years and I pay my credit cards off every month. It’s going on 15 years since I had a mortgage. I’ve never missed a payment for anything. All the utilities are hooked up direct.

I do have a HELOC attached to my house which I got to deter title theft, but I’ve never used it.

The whole conversation was just weird. I think the dealer just didn’t want to do cash because they would miss out on the origination fee.

Probably if I was dealing with my own bank I wouldn’t have had any problems.

Anyway it didn’t make me too sad, like I said I was paying cash, but I think the whole thing is weird. Banks like it best if you have a letter of employment, which seems strange to me because people lose their jobs all the time.

Anyway I did look at the terms they offered my wife. Yikes! With a 5 year amortization on a $60,000 loan the interest was going to come out to $13,500! Yikes! And that was before the undercoating, Scotch Guard, and extended warrantee, all of which I declined. “The guy who declined everything” they called me. If I had got all that, it would have been another $8,000 plus GST plus interest. Double Yikes! So we’re looking at somewhere around $85,500 to finance a $60,000 car. No wonder people can’t get ahead.

#115 Nonplused on 11.22.22 at 3:39 am

“You, Mr. Garth Turner, are an incel loser.

Amber”

Hmmm I am surprised that one got through.

An “incel” is an “involuntary celibate”. It is not a term usually applied to married men. Kind of a gratuitous insult if you ask me. Most of the women who throw it around think it is a grave insult, but yet aren’t the type any self respecting man would want to sleep with in the first place.

But I guess that’s where we are today. If these are the only type of women available in your town, maybe you live in Vancouver or something, then MGTOW. It’s way better than catching something that really itches or losing half your money in a divorce settlement.

#116 Just stop on 11.22.22 at 4:34 am

#95 Faron on 11.21.22 at 9:12 pm

Check #90 above your post.
Swing and a miss Faron. If you’re going to be a dick all of the time you should at least be right with your attempts at character assassination.

#117 Reddy on 11.22.22 at 4:53 am

Garth wrt #125. There is no need for name calling. That’s pretty low class. I propose it should be deleted.

#118 Reddy on 11.22.22 at 4:53 am

Argh. I meant 105

#119 Prince Polo on 11.22.22 at 6:45 am

#37 45north on 11.21.22 at 4:11 pm
anything beyond 30 year is multi-generational. Illegal.

The govt has the power to make it all perfectly legal. I am worried that voters will love it, despite the sheer lunacy of such an idea.

#120 Robert Ash on 11.22.22 at 7:03 am

Payday Loans guys look good against some of these future Mortgage stories… They use to allow, an annual one time payment of 10%, as a somewhat standard clause. That is likely the path many will have to take, Pizza deliveries, Weekend shifts, Paper routes, Kijiji, Catering, Gig shifts, Uber… probably will separate the serious, from the not so serious. Kind of seems, like a set up, with no intervention, by our Leaders, especially when you factor in the Crypto space… Or maybe we need better people in charge. Duh! Sad for the Younger Canadians, that their turn up to Bat…. is a poor one.

#121 FIFA, those saints on 11.22.22 at 7:37 am

#52 FIFA on 11.21.22 at 5:03 pm
Anyone else find the FIFA president’s monologue not entirely out too lunch?

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

Oh sure. The guy makes a $3 million USD/year salary and he’s relating to migrant workers toiling in 50C heat 12 hrs/day 6 days/week for a few hundred bucks a month. Let’s not even get started on his “today I’m a gay” etc comments. Stomach-churning.

Totally bizarre, highly offensive, and just plain old whataboutism trying to deflect from the complete corruption of FIFA and awarding of the WC to Qatar. No one’s saying every country couldn’t improve, but Qatar is a next-level human rights abuser. I know, I lived there.

Hey Gianni, how’s Italy doing so far? Oh, right…

Meanwhile in other football news, England pummels Iran 6-2 in their opener and looks to be firing on all cylinders. At least a bit of good news to distract them from their circling-the-bowl failed state.

#122 crowdedelevatorfartz on 11.22.22 at 8:27 am

@#105 SK
“#105 Amber
“World class city” is a stupid insipid phrase. You sound like a panicked realtor or an over leveraged airbnbust Superhost.”

+++
I’m going with angry, financially desperate Realtor.

@#112 Jane24
“You have to live in Portugal for 183 days a year as a permanent resident and pay Portugal taxes on worldwide income of 10%’

+++
Sell the palazzo in Italia?
Sell the cottage in Blighty?
Buy a Chateau in France?
Buy a house in Portugal?
What to do?
What to do?

#123 Canadian expat on 11.22.22 at 8:33 am

I’m going to point out an obvious thing most won’t get. The left told us for years they would get rid of gas and move to green energy. Most didn’t realize the plan was to make it unaffordable. What if the current crisis and inflation is not about printing money but just basic suppression of commodities. The cutting of Rus grain, feritilizers and oil products from international markets. This has a huge inflationary effect and was done voluntarily.

#124 millmech on 11.22.22 at 8:56 am

Oops,
I forgot to add that every year after the 25th it is around $40,000 in interest payments with after tax dollars, 40 years is $1,475,000 interest and 50 years is1,940,000 in interest as well.
That is a lot of dividends that will find its way to my account, of course the banks are very helpful and wish to accommodate the overburdened homeowner out of the altruistic motives.
Just remember there is HELOC interest, credit card interest and the never-ending car loan that that is never paid off as a car is replaced every four years with a bigger loan that needs servicing as well (average loan now is 84 months and the payment is $700, notice how these are becoming more like a mortgage as well).
The average indebted Canadian going forward will basically be a ward of the Banks, a self-enslaved serf so to speak.
As always, at least you’re not throwing your money away on rent and you’re building equity!

#125 Katherine on 11.22.22 at 9:14 am

For those who don’t remember the crash of the 90s

https://www.thestar.com/business/2022/11/22/how-much-worse-will-it-be-canadian-mortgage-interest-costs-increased-to-highest-levels-since-1990s-housing-crash.html

#126 Outrage on 11.22.22 at 10:31 am

With the housing market reaching the bottom which I read, I think Canadians are feeling much better about the economy and inflation. The stock market is on a tear upwards so everything seems to be positive for the near future. You can rely on the central bank and the government to do the right thing and make Canadians happy again unless you have cad while living outside of Canada.

#127 Dharma Bum on 11.22.22 at 10:38 am

#77 Steve Rowlandson

In the 25th chapter of book of Leviticus…blah blah blah…
———————————————————————————————————

The real estate frenzy and hype in Canada will never end, because it is exactly like a religion to Canadians – based on BELIEF, hope, fantasy, lore, anecdotes, delusions, fabrications, and miracles.

No amount of reason and science will convince the flock to change their cultish ways. It falls on the deaf ears of the righteous and the true believers.

The realtors are the church elders.

Brad Lamb is Heavenly Father.

It’s unstoppable.

A fool’s paradise.

Dog help us.

#128 Quintilian on 11.22.22 at 10:41 am

#124 millmech on 11.22.22 at 8:56 am

As always, at least you’re not throwing your money away on rent and you’re building equity!

Sure, tell that to the guy facing this situation, which is not all that uncommon in Vancouver:

Current Mortgage: $2.37M
Current Rate: 3.29%
Payment: $9,646 Monthly
New Rate: 8%
Payment: $17,248 Monthly

#129 Shawn on 11.22.22 at 11:09 am

Mortgage Amortization Calculator

Here’s a link to an excellent mortgage amortization calculator.

After you enter the interest rate and mortgage amount you see a graph and then click to see the amortization schedule.

The different total interest and the time it takes to get it half paid off is HUGE as rates rise.

Those on low variable rates can see what is coming their way – if they dare look.

https://dominionlending.ca/calculators/payment-amount.php

#130 Don Guillermo on 11.22.22 at 11:12 am

#128 Quintilian on 11.22.22 at 10:41 am
#124 millmech on 11.22.22 at 8:56 am

As always, at least you’re not throwing your money away on rent and you’re building equity!

Sure, tell that to the guy facing this situation, which is not all that uncommon in Vancouver:

Current Mortgage: $2.37M
Current Rate: 3.29%
Payment: $9,646 Monthly
New Rate: 8%
Payment: $17,248 Monthly
#########
Tough to have sympathy for anyone who pulls a $2.37M mortgage.

#131 Shawn on 11.22.22 at 11:17 am

Rate Reset Shares?

#103 Ontario’s Left Coast on 11.21.22 at 11:00 pm

Hi Garth. Can you please explain why the value of ETFs containing rate-reset preferred shares haven’t been going up along with interest rates? Thanks very much!

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

Becasue of the math.
Fixed rate perpetual preferred shares and long term bonds decline HARD with higher interest rates.

Rate resets were designed to protect against that but not to rise with higher interest rates. Interest up, but market required return also up and the two factors cancel.

In addition there are other factors as work including the time until reset, the credit worthiness of the issuer and the investor appetite for these shares.

SOME deeply discounted rate resets will likely manage a capital gain, if they were pushed down too far due to these other factors. Or if the issuer decides to redeem them at $25 but not sure why they would in most cases. Who wants to pay off cheap “debt”?

#132 Bubbles on 11.22.22 at 11:18 am

And there’s Trudea and absolute finacial illiterate.
Back when he was stacking on debt like no other nation per capita and never done before in Kanada.
He says “but int rates are at all time lows.”
And I despised him back then.
Maybe check out those carring costs?
I personally have no debt on any of my RE and I have quite a pile.
Personally I favor a mushroom cloud because then maybe people will learn…. and think a little more what their voting for and less about free ponies…
Debt stunts growth.
It’s basic and T2 is clueless.
Please go away T2

#133 Bubbles on 11.22.22 at 11:54 am

(Missed acouple letters in the last post if Garth doesnt ditch it. Lol)
And I shale add…this
https://financialpost.com/news/economy/oecd-outlook-energy-crisis-slowdown

In likely the most inflative times in 100 years. Mr T blocks energy….this is a problem and only exacerbates inflation in a big way….just ask a farmer.
It don’t bother me.. I do not live on the fringe and I have pricing power in my biz.
Think before you vote…..lord.
How do you spell L-N-G……

Inflation is less than 7%. Three decades ago it was 12%. This is not the ‘most inflative time in 100 years.’ Sheesh. – Garth

#134 Gr on 11.22.22 at 12:06 pm

This news/(entertainment?) site redacted.inc from yesterday was pointing to peoples credit card debt versus personal savings, and it not looking good for the economy (maybe?). It’s just an option of course. 20min.
https://www.youtube.com/watch?v=G0mz2MvLWrI

#135 Wrk.dover on 11.22.22 at 12:08 pm

#114 Nonplused on 11.22.22 at 3:25 am
The whole conversation was just weird. I think the dealer just didn’t want to do cash because they would miss out on the origination fee.
“The guy who declined everything” they called me. If I had got all that, it would have been another $8,000 plus GST plus interest
________________________________

We got real lucky on our entry level Civic EX. They wanted more cash than the 2% financed deal so we financed and took some other thing in lieu of freight.
Now, after five months, we paid them in full, so we can drop the pricey collision and liability and store it until spring.

Whole transaction only set us back 30 plus tax.

Bonus, the brand-new top end snow tires on our winter driven Chevy alloy rims, discounted due to obsolete size, will bolt right on the Honda in future winters.

#136 Faron on 11.22.22 at 12:15 pm

#127 Dharma Bum on 11.22.22 at 10:38 am
#77 Steve Rowlandson

In the 25th chapter of book of Leviticus…blah blah blah…
———————————————————————————————————

The real estate frenzy and hype in Canada will never end, because it is exactly like a religion to Canadians – based on BELIEF, hope, fantasy, lore, anecdotes, delusions, fabrications, and miracles.

The difference is that for theistic systems (maybe save for Buddhism w/ the concept of samsara). Future suffering is in the hypothetical afterlife. With RE, suffering is much more real. Thus, the fever can be broken.

#137 DON on 11.22.22 at 12:17 pm

#34 Rook on 11.21.22 at 3:59 pm
Yet the Financial Post today was saying it looks like we’re nearing the end of the housing correction.

https://financialpost.com/executive/executive-summary/posthaste-more-signs-of-the-beginning-of-the-end-of-canadas-housing-correction

The FP did not say that. An RBC economist speculated we may be entering the “latter stages” of a cyclical correction. Why can’t anyone read any more? – Garth

********
Lots of folks seemingly read the headlines and that’s it. That’s the short road to Greaterfool status.

#138 Quintilian on 11.22.22 at 12:43 pm

#137 DON on 11.22.22 at 12:17 pm

“Lots of folks seemingly read the headlines and that’s it. That’s the short road to Greaterfool status.”

Hey Don,

Not only do they just read the headlines, but they don’t have the intellect to skip to the bottom of the page to see who wrote it.

Quite often it is an industry pumper.

In my books it really does not matter what the headline says, what matters is who wrote the article.

#139 millmech on 11.22.22 at 1:08 pm

#128 Quintilian
That is $8000 per month, so far!
Still better than throwing your money away on rent and equity is still growing, right?

#140 Nonplused on 11.22.22 at 1:51 pm

#135 Wrk.dover on 11.22.22 at 12:08 pm

I’ve never had winter tires, nor have I needed them. But I do find all the Audi Quatros in the ditch (sometimes by humorous distances) helpful in identifying icy conditions.

#141 Blah Blah on 11.23.22 at 1:12 am

Another benefit to Segregated Funds not mentioned, but important for the self employed is that Seg Funds are written under the Insurance Act and thusly immune from CRA and Creditor attack. So if you’re a young guy with hanging liability, like a family, they can sleep.