Sometimes it’s no fun being prescient. Especially when the rabble’s nipping at your (shapely) butt. However, here we go.
One year ago the average detached pile in 416 hit Peak House. It traded for $2.074 million.
By the end of January of 2023, that valuation has plunged to $1.486 million. That was a decline of 28.3%. The steepest, fastest, most arresting descent in national history. Suddenly social media was papered with headlines saying four in 10 Canadians with mortgages would be forced to sell within a few months. And people actually believed it.
Let me remind you what this blog said at that time:
If you truly believe prices will crash, wait to buy. But that would also mean an economic wipeout. And it’s not going to happen.
Second, if you can’t afford a home in a market that’s tanked almost 30% in a few months maybe you should give it up. Stop being angry and aggressive.
That was February 3. Two days later we added:
No matter how much people without houses want prices to crash, it’s not happening. A correction, yes. Already there. A 50%-off sale? Nope. For that to happen we’d need a long, dark downturn.
We told you to wait until the first few days of March to see if market momentum had truly changed. Now we’re there. Yesterday we showed you prices are moving higher in Vancouver and Calgary even as year/year sales volumes were crushed.
And today comes word the average detached house in 416 is trading at $1,712,364. Therefore that 28% decline evident at the end of January has turned into a 17.4% drop. A buyer who waited for the correction to deepen and for homes to descend further today faces an increase of $226,240. Oops.
How could this have happened?
We told you. The pendulum. It swings both ways. The decline in pricing in many areas of the country was (as mentioned) historic. This coincided with the most aggressive tightening of monetary policy in living memory. Concurrent with that was the Ukraine war, a stock market plop, rapidly escalating inflation and wall-to-wall recession talk.
Now we know much has changed. The inflationary spiral has been tempered. There’s full employment and no recession evident. The European war rages, but has become wallpaper for financial markets. CBs are near the end of their rate hiking. Our Bank of Canada, in fact, has paused. Most Bay Street economists think that hiatus will last all year. Mortgage rates have stabilized just slightly above 5%.
Regarding real estate, sales have cratered by 50% over the past year, so demand has been bottled-up. Prices dropped enough (almost a third) by late January to compensate for traditional mortgages having swollen from 3% to five. Confused sellers moved to the sidelines, causing inventory levels to languish. Buyers started moving down the price scale as luxe homes sat unsold and unloved. And while average households cannot afford average houses in the big cities, lots of people can. They are moving up, using windfall equity from the boom, buying with cash and eschewing financing, or porting over a cheap existing mortgage.
In short, the doomers were wrong. Again. A housing correction of close to 30% in a market like the GTA may be all that we get. By the way, that is entirely consistent with the multi-year correction of 28% in the early 1990s in Canada’s biggest market, and 32% at the trough of a US housing crash which precipitated the 2009 credit crisis.
Could the current price creep reverse and houses tumble in value further?
Of course. But as we’ve told you, that would take a spate of crappy things happening. Interest rates spiking much higher. The jobless rate taking a U-turn. A meaningful recession hitting. Business investment falling. Lots of people out of work with inflation, wages and consumer confidence falling hard. Do you really want that? Me, neither. And it’s not happening.
Finally, nothing is normal at the moment. RBC just announced its new mortgage business has fallen 40%. CIBC said this week a fifth of its clients with home loans can’t make interest payments. Lots of people who bought too much house with too much debt at the wrong moment may never recover. The world is at risk of serious political polarization (happening here, now), war creep, tribalism and potentially a 2023 tour by Drake.
It’s unseemly writing a blog that suggests I told ya so. But, well…
About the picture: “Teddy is turning 7 month his Saturday,” writes Bogdan. “He’s gone from a tiny pup to a 80lbs puppy … still the best dog ever. Feel like this picture would sum up perfectly the look you have while going thru the comments. Just remember that the silent majority appreciates what you do for us.”
151 comments ↓
Rates went down and sales went up.
Rates went up and sales are now down.
Oil is guaranteed to sky rocket….inflation is just getting its second wind
Wow, 80lb already???? I bet you did not expect that, and a fast growing food bill. I predict at least 120lb.
There Garth, I make predictions too.
#127 Observer on 03.03.23 at 11:22 am
Gambling with your death date is dumb. Take the money. – Garth
^^^^^^^^^^^
Gambling with your future old self is dumb. Case in point, a divorced woman I know who fell on some hard times (TMI) took CPP at age 60, but still needs to work at age 69 because she will not have enough money to pay her rent and bills if she quits. She is healthy and good genes run in her family, so she can expect a long life. She would have been wiser to wait until later (possibly age 70) to ensure a significantly higher CPP payout during her old age. The goal for some people (those who were not fortunate enough to amass reasonable wealth during their lives) should not be to collect as much money as possible from CPP during their lifetime but rather to ensure they can actually retire at some point. When you are dead, you are dead and won’t care if you hit the breakeven point, but when you are old and struggle to pay the rent you will care.
That story does not remotely pass the smell test. Try harder with the next fabrication. – Garth
^^^^^^^^^^^^^^^
I’ll tell my step-sister you think she isn’t real. She left her husband in her 50’s with nothing but the clothes on her back.
Waiting until 70 to take CPP would have meant working until 69 in any case. You are both confused. – Garth
I todaso … I f’n atodaso …
I’m not saying you are wrong, but it may be a bit of a premature victory lap…. This feels like a “Mission Accomplished” moment…
Only now are rate increases being felt. It took this long for people to hit trigger rates. They have some buffer to weather a temporary storm but it won’t be enough. For the remainder there are 3 options:
1) No mortgage – No impact
2) Fix rates renewals – going to hurt and only starting for 1/5 of fixed rate borrowers. What happens with the other 4/5 have to renew? Less discretionary spending equals recession.
3) Variable rate renewals at these rates with higher principal owing due to less being paid off.
The hurt is just starting… Does this mean doom and gloom, no. But certainly some very strong headwinds!
Waiting until 70 to take CPP would have meant working until 69 in any case. You are both confused. – Garth
^^^^^^^^^^^
The point is that because she took CPP at 60, she does not have enough CPP at age 70 to retire. For some people 600 versus 1700 (rough, rough numbers so don’t shoot me) makes a difference as to whether or not they can pay the monthly bills. Maybe instead of insulting me by telling me I am confused or had invented a story, you could try understanding.
The max CPP is $1,300 after a full working career and no missed premiums, years of parental leave etc. – Garth
“RBC just announced its new mortgage business has fallen 40%. CIBC said this week a fifth of its clients with home loans can’t make interest payments. Lots of people who bought too much house with too much debt at the wrong moment may never recover”
What’s this you say about a “soft landing”???
The average detached price in Toronto is, as you say, $1.486 million
The median HOUSEHOLD income in Toronto is $84,000.
https://www.toronto.ca/wp-content/uploads/2022/07/9877-City-Planning-2021-Census-Backgrounder-Families-Hhlds-Marital-Status-Income.pdf
So, the minimum down payment for the average detached is $297,200 according to ratehub, or a bit over 350% of the median household income.
Which leaves you with a mortgage of $1,188,800, at TD’s 5 year rate of 5.54%, which equals monthly payments of $7,284.04.
When I left the GTA, I was making just shy of 6 figures, and thought I was doing well for myself. To be able to afford $87,408.48 in annual mortgage payments, you’d have to be earning right around $120,000 a year. And that’s assuming you could put 100% of your income towards the mortgage payment, and needed funds for nothing else. And, as you say, prices are only increasing.
I didn’t realize the GTA had enough people that could afford $7k/month to justify the asking prices, and keep them steady or increasing. I guess I wasn’t doing as well as I thought I was.
A 50% gain followed by a 30% drop is basically back to square one:
100 x 1.5 x 0.7 = 105
Yes, math is hard.
Teddy is the very illustration of outstanding comportment. His expression signals ‘loyalty’. Semper Fi. ++
What’s this – Blog, 1. Doomers, 0.?
Are we supposed to be keeping score here? It has it’s place I suppose, but generally that game attracts male followers. Women are more content with the ‘Living well is the best revenge’ approach. Venganza. One of life’s refreshing tonics…
Live in Kelowna. Four homes sold in my neighbourhood over the past month. They were sitting all winter but now sold. More sale signs along my daily travel routes as well.
Workers Paradise Party (B.C. NDP)
We in B.C. are in serious trouble…on many fronts.
I thought the NDP would learn from pa$t mi$take$
(…as legendary BC Premier WAC Bennett claimed over 50 years ago the NDP couldn’t run a peanut stand. Nothing has changed.)
We were in Victoria, BC last weekend…beautiful city.
News showed a clip re: a local Victoria business…a sandwich shop…struggling. No secret a main engine in Victoria’s economy is the Civil Service.
Now… B.C. NDP is submitting new hires can work remotely.
Now on the one hand…yes that is possible and perhaps “more environmentally friendly” and “cheaper” for the new employees…. but NDP idealogues don’t appear to factor in the impact of this to local Victoria economy.
Tough call…but it’s clear local Victoria businesses will suffer and close. Then what ?
Cats 100. Dogawful mutts 0.
Never invest in dogs, they are the Bitcoin and Bre-X of the animal world.
Happy Feline Friday!
Meh…
Garth, you didn’t discuss some significant factors that could impact the housing market:
First of all, using average prices is less reliable than using the median, especially in a market with significantly fewer sales from significantly fewer listings.
If listings were to suddenly swell to historic norms or higher, as sellers who have been sitting on the sidelines jump in by choice, or especially, by forced circumstances, that could create downward pressure on prices.
Also, I think we have yet to see the full impact of rising rates on mortgage renewals, which could impact both the general economy, as disposable income evaporates, and to the housing market directly, if foreclosures and bankruptcies increase significantly.
Would love to see you write about any of these factors that, IMO, haven’t gotten their fair share of attention in this blog.
‘Teddy’ looks very regal, master of his doggy domain:)
About that RE pendulum swing. Is it at all possible that RE will continue to emulate some of the wild swings we see in the financial markets? As stated here, the RE contraction was very quick & now in just over a month seems to be expanding quickly price wise. So is this going to be the new normal?
Uppa she goes!
Re: cars if I may, is ok to lease a *gasp* KIA, Garth? Their lease deals seem to be the cheapest for their tools with wheels.
G, don’t lie….
That felt goooood!!!
Og
There’s not enough inventory for prices to come down further. Sellers are waiting to see what happens.
BoC in pause mode … U.S. Fed is not.
Markets pricing increase of 1% of U.S. rate
U.S. bond yields UP
Canadian UP: 5yca touching Oct/Nov highest level again
Higher fixed mortgage rates
Strong economic start of 2023 stalls
Real Estate … UP… ALL IS GOOD! over asking … bidding wars … Whatever?!? Up … UP …
OR… is it party OVER?
We are now in the official era of greaterfoolocene.
What I’m hearing and seeing on the street: There is an insatiable demand for housing right now, being driven by immigration and pent up demand, a lack of almost every type of employee you can name, and a seemingly limitless pool of capital pointed at industrial de-carbonization right now. Whatsit all mean? First, there’s enough work for anyone who wants to and is willing, likely for the next 10 years. I’ve never seen it like this in my lifetime, and I’m entering my 29th year of employment, and the trend is to tighter, not looser, labor market conditions. Second, inflation will be sticky, and anyone betting that rate hikes are done better make sure they can afford to be wrong on that bet. Third, the housing market will be just fine if rates have truly stabilized (I’m not so sure- see my second point above), as the excess has been already blown out of the system by rates that have tripled since 2020-2021. If rates are done moving, then there are markets in this country that will see yoy increases by the end of 2023, and possibly, just maybe, in some of the less exuberant markets, might actually see a recovery to 2022 peaks or beyond by end of year (Calgary, I’m talking to you). This depends on the stickiness of inflation and corresponding impact on rates though.
And the average canadian can afford the average house- because the average canadian already owns a house. It’s about so much more than income…It’s about existing equity, familial wealth, Grannie’s estate, the Bank of Mom and Dad, etc…and the only way out of this mess is to build, build, build, and de-financialize housing by capping or eliminating cap-gains exemptions, government backed mortgage underwriting, and loose lending practices. I don’t have confidence that this will happen, so….Garth is right, as long as rates have peaked.
Be that as it may , as been mentioned in a post earlier, how many buyers at these prices are there? You need incomes in the top 5% or better for couples to keep this going.
As it stands families are putting three signatures on a mortgage, also how much more of that left?
It seems that no one can’t explain the fundamental disconnect between incomes and insane home prices and how that is sustainable in any way.
We go where the money is going down south near beachea and golf courses. Cash out and never work again. Buy in USA. Couch surf in Canada
Update from Ottawa. Big trucking/development firm has 60 trucks sitting idle. They do a lot of site development for the big builders. Those developers have put a hold on any further developments. People can’t get mortgages and everything flows downhill from there.Big fuel supplier says sales are way down – mild winter/ very little construction going on. Nordstrom closing. Lots of empty commercial space. I believe down in the trenches its not good and we’re just starting to feel it
This blog has been predicting housing correction since 2010, when prices in GTA were 2.5-3 times lower than now.
Now suddenly 20 % drop from the top is sufficient?
And we are hearing that suddenly inflation is over.
Quite some accuracy to brag with.
I would expect some fiduciary duty and sense of takt/ethics here, but hey, this is the great white north after all, so you are excused.
——————————–
‘Doomer’s Inflation warnings were spot on.
Inflation is just starting.
On house prices:
Housing correction is imminent in real terms and idea that the GTA getho is worth 1,5 – 2 million dollar houses is laughable.
When inflation rages and people are hungry the last thing they would worry about is houses.
How can house prices in Japan decline by 70 % in nominal terms with close to zero rates and not to recover for 2-3 decades from the top and GTA ‘the center of the universe’ will get away with meager correction with the most spectacular housing bubble when compared to income the world has ever seen?
I don’t think so.
No amount of ignorance and wishful thinking will turn this economy around.
But lubricant will surely help.
‘Let you pay a mortgage in GTA’ will be the curse of the century.
Cheers to the winners and hey folks, do not forget to enjoy the roaring economy ahead, now that the worse is over.
———————
And here I had to go to put some medication on the hemorrhoids I got from laugher.
Exaggeration is puerile and ineffectual. – Garth
CIBC said this week a fifth of its clients with home loans can’t make interest payments.
Points finger at them and says “HA-HA!”
Oh brother. I’ve been visiting here for awhile, mainly stopping in for the beers and babes, and beyond the message, ‘Buy if you need it and can afford it’, the signaling has been, ‘House prices are sticky on the way down, and can take years to rebound’. ‘Gather round, and let me tell you about the 80s kiddos, and the GTA real estate correct back then’.
I have absolutely zero personal interest in buying or selling any real estate, but I do support people who purport to be ‘experts’ providing consistent messaging to those that are.
I get it, don’t take free financial advice from some dude on the internet, but at the same time many look to this site for a balanced viewpoint. And sure, markets are local, change rapidly, and each person’s circumstances are different. But, it would nice to be reminded that absolutely no one is able to predict the future, even those that have been beating the ‘Real estate is due for a correction’ drum since 2008.
Even a broken clock tells the right time twice per day.
Now, where’s the line up for the beer tent?
We just got a correction. And the beer is twelve bucks. – Garth
Exactly.
1. Canadians pay their mortgage like it’s a religion. There’s a new report saying a couple banks now have 25% of their mortgages at 35 year amortization. Folks will do anything to keep their home, so expecting some disastrous tire fire of selling isn’t going to happen.
2. Especially in GVRD and GTA, there are many folks that make significant incomes and can afford homes at these prices with mortgages at these rates.
3. There are also significant amounts of people who are mortgage free and / or have massive equity in their homes and can easily afford to move up the real estate ladder.
The overall percentage of homes that are for sale is miniscule compared to the amount of homes out there so even if the only buyers are high income / high net worth individuals, that’s still plenty to have home prices grind higher. Is this good for society? Not until people understand renting doesn’t make you a second class citizen.
#3 Observer on 03.03.23 at 2:21 pm
#127 Observer on 03.03.23 at 11:22 am
Gambling with your death date is dumb. Take the money. – Garth
===========================
I know this is…or can be…a difficult topic.
My late father took his CPP and OAP as soon as eligible…his accountant told him you don’t know how long the Gov’t pensions would last.
My spouse and I are in our early 60’s…65 soon…retired…we are filing now for our “Gov’t” pensions.
#20 AmStillNotLogic on 03.03.23 at 3:05 pm
BoC in pause mode … U.S. Fed is not.
Markets pricing increase of 1% of U.S. rate
U.S. bond yields UP
This indicates clearly that inflation is not under control.
In Europe where they lie less it is actually getting worse.
Imagine US rates going up by 1 %, then maybe 2%, then maybe 3 % higher from here and chicken little here ready to start cutting, can you imagine the currency carnage and what the cost of imports/inflation will be?
No gonna happen you say?
Just wait and see.
We are witnessing inflation worse than the 70-es and practically nothing done by central bankers to fight it as
REAL INTEREST RATES ARE STILL STRONGLY NEGATIVE, i.e. lower than CPI (got forbid real inflation of necessities) we are still in accommodating/easing mode.
I can’t stress strong enough what is going to happen if inflation keep running hot getting positive feedback loop from the job market.
This is as good news as is the light in the tunnel, and no, that is not the end of it but the coming train.
Engrave that in your memory: Food, rents, services and soon energy again will most likely skyrocket/explode if we continue to pay lip service and do nothing about real inflation.
My popcorn is ready.
Flop Drops.
“How long to we see 850k houses in White Rock?” someone wrote probably middle of last year.
Oh boy, this err, ahem, structure just sold for 900k.
The details…
Original ask 1.09
Assessment 1.26
Sold for 900k
Days on market 121
https://www.zealty.ca/mls-R2732899/942-LEE-STREET-White-Rock-BC/
Hey, I gotta go back to work, so just imagine I finished with something funny and then chuckle to yourself…
M48BC
Well looks like the Epoch Times was right – PP is going with it either way.
Chinese interference in elections and Chinese police stations in Canada. No doubt Trudeau will weasel his way out of yet another scandal.
Exaggeration is puerile and ineffectual. – Garth
Exactly, just as the statement that inflation is beaten, housing correction is over and all is rosy in the economy again.
None of which I made. – Garth
#6 Observer on 03.03.23 at 2:31 pm
Waiting until 70 to take CPP would have meant working until 69 in any case. You are both confused. – Garth
^^^^^^^^^^^
The point is that because she took CPP at 60, she does not have enough CPP at age 70 to retire. For some people 600 versus 1700 (rough, rough numbers so don’t shoot me) makes a difference as to whether or not they can pay the monthly bills. Maybe instead of insulting me by telling me I am confused or had invented a story, you could try understanding.
The max CPP is $1,300 after a full working career and no missed premiums, years of parental leave etc. – Garth
^^^^^^^^^^^
The maximum is 42% higher if you wait until age 70.
So what you are saying is real estate average prices eventually to $5M and proletariats may get stuff’d via stuffed $40K FHSAs? Oy vey! Poor Mills & Gen Zs.
#17 Captain Uppa on 03.03.23 at 3:00 pm
Uppa she goes!
Re: cars if I may, is ok to lease a *gasp* KIA, Garth? Their lease deals seem to be the cheapest for their tools with wheels.
==========================
FYI:
We went to the Auto Show to shop around, we were considering buying.
Sat with the various dealers and crunched numbers…including monthly payments,…warranty etc.
Mitsubishi at the time has best warranty…but after all the number crunching…we ended up with leasing NISSAN. They have ” trim ” lines(…aka levels of option packages…) but each year they add more and more to base trim line.
All depends on your lifestyle….(and NO way in hell would we go EV). We bought USED for years…thought we’d treat ourselves.
Niagara Region numbers are in
Jan-Feb 2023 MoM
Sales 302-449 up 49%
HPI Benchmark price 629,100 – 627,500 flat
Days on Market 57-48 down 16%
New Listings 771-817 up 6%
HPI Benchmark price
Feb 2022 – Feb 2023
$808,100 – $627,500 down 22%
https://www.niagararealtor.ca/public/Stats/2023/NAR%20Monthly%20Market%20Update%20Media%20Release%20-%20February%202023.pdf
So, your boss just gave you the bad news that you are being laid off, after giving him 15 good years of loyalty, you are not alone, the tide is rising higher in the IT world.
Once you sign that release, it’s game over. Plenty of workers are accepting the quick cheque because you are being told that you are only entitled to 3 months’ severance and they have extended it to 6 months, just for being you, they are calling it good will.
Don’t be dumb and stupid, know your rights, you may be inline for an entitlement of 2 years pay, plus benefits.
If you are unionized, the rules are quite different,you need to turn to your collective agreement, they differ in value for the most part. Don’t worry about the song your employer sings about common law, its hog wash, but you know how some employers can be aggressive and they will try to strong arm you, money is money and your employer wants to keep it. The Labour laws are very clearn, no one, but no one has to sign anything on the spot.
His/her bosses beautiful smile is full of deception when it comes to termination, get hold of an employment lawyer, you may get the surprise of your life in your favor.
Quote of the day: If your foot slips, you may recover yourbalance, if your tongue slips, you cannot recover your words.
#29 Jason on 03.03.23 at 3:23 pm
The ability of a group (no matter how large) of strong headed exceptionally ignorant people to defy economic laws in an open, competitive world is very limited as we are starting to witness.
There is no ‘triumph of the will’ in the real world.
And regarding maternity leave, there is a child rearing provision which excludes that period from the calculation of the amount of your CPP benefit.
I did not mention mat leave. Try again. – Garth
Still a lot of water under the bridge to come Garth.
Last year CIBC had 0% amortizations over 35 years. This year?
27%.
Basically, a quarter of their customers can’t afford their homes at current rates … stretch the payments out instead so they can.
Other banks unknown but likely, they will want to keep their existing customers like CIBC.
https://twitter.com/village_whisper/status/1631128493487710208
Softer touch, same outcome:
https://www.theglobeandmail.com/business/article-mortgage-negative-amortizations-cibc/
——————-
It’s still a market in flux Garth.
All the chickens have not come home to roost yet.
Your price drop vs. rate increase hypothesis, is just that, a hypothesis for now. Yes, evidence for what you say.
But, there is no market weight.
Trading volumes are low. Too low I think to establish a market price.
If CIBC is a harbinger, then prices may yet fall more.
Well Garth l guess your right once again although l think I’ll wait for the 50% off and you won’t be wrong then either because you’ll covering the great melt and remind that you we’re right again and Garth l hope l don’t offend anyone here including you but l would never pay these prices to live in Toronto just nowhere near Worth it l mean l think that if anyone had a house in Toronto or Vancouver should have sold and retired and never returned to these antisocial drug and crime infested city’s and don’t get started on the food district’s really low because of everyone having two or three jobs so l really believe this housing will burn and we’ll get better city’s back like it used to be quick before it’s too late and we’ll be the laughing stock of the world because nobody will imigrant here it’s already started only 50% of immigrants stay as compared to 70 plus decades before we’ll good luck to you and Canada
Here’s a great blog post, from the second best RE blog, on the Feb RE numbers in Victoria:
https://househuntvictoria.ca/2023/03/01/february-market-tightens-up-due-to-low-new-listings/
Two interesting points:
1) A plot relating months of inventory to annualized price change shows that the current 4 months of inventory corresponds to a median 10% price increase over a year.
2) So-called trigger rates resulted in people extending their effective amortization beyond 35 years rather than paying a higher monthly. 27% of CIBC’s book is now at 35 year+ amort. Seems like a herniation in the consumer credit space that wont end well.
People banking in a re-fi a few years along. We shall see…
How to read this blog:
Rule 1 – This blog is always right.
Rule 2 – If this blog is wrong, see rule 1.
1 month does not make a trend. And there are stock market rallies in bear markets too. If the new average prices are still holding up by June or July, then you can call it a win. Personally, I think this is a suckers rally. I don’t think the full effect of interest rate increases have hit the market yet. God forbid when all the mortgages issued over the last few years have to be renewed at todays rates.
Off Topic.
We just got a correction. And the beer is twelve bucks.
– Garth
Friend emailed that on holidays in Hawaii she bought Eggs -10$ US a dozen, a loaf of bread $11 US.
—–
Are you kidding me Canada???
10 eggs in Italia (they don’t go by the dozen, don’t ask)
€2.85
https://spesaonline.coopcentroitalia.it/spesa-consegna-domicilio/06121/prodotto/coop-origine-10-uova-grandi-fresche-italiane-336697
1 kg loaf
€1.00
https://prenotalaspesa.coopfirenze.it/spesa-ritiro-negozio/via-lombardia-2/prodotto/filone-di-pane-1-kg-1036474
1 Pint of Beer at a bar (Milan median price, expensive there)
€5.50
Bud Budvar from Czechia at the grocery store, 0.5 litre:
€1.28
https://prenotalaspesa.coopfirenze.it/spesa-ritiro-negozio/via-lombardia-2/prodotto/budweiser-budvar-birra-budweiser-budvar-5-vol-btg-500ml-1033894
————-
Holy Holopchi Batman.
And here I thought moving on from things beyond ones control was the thing to do…. But alas, we keep scores!
Nope I think prices are still going to come down, at least on a real basis. They are still too high.
But a crash? A 50% off sale? Nope. These aren’t meme stocks or Bitcoin. Instead I expect houses to settle out to slow declines in the 0-5% range to maybe even increases (but not on a real basis) for 5 to 10 years. But with inflation, which will stay at 3% or above, you might not notice until you try to convert the value of the house into purchasing power.
Remember folks, in an inflationary environment, all loans get paid, just in dimes for dollars. There probably isn’t a liquidation coming.
Inflation is baked in and structural. It has always been, but they can’t hold the line at 2% anymore. It was hard enough to do before monetary policy went completely bonkers. But unfortunately the damage Trudeau/Singh have done and will continue to do will not be easy to undo.
There is a reason that we don’t let kids drink or smoke. (Although we do let them change genders.) Some habits are hard to break. Using the theory that the electorate is basically the lowest common denominator, really no more than a poll of advertising efforts directed at children, we aren’t going to be able to get the kid off the juice easily. They will dye their hair blue, get a nose ring, grab a sign, and scream in the streets.
Interest rates are still negative. And that’s before you account for the fact that you only live once, and not for very long, which isn’t being priced in at all. A dollar in your pocket should be worth about 3.5% less per year to you every year just on account of that. You are running out of time. The net present value of your portfolio is zero to you when you are dead.
Therefore, plan accordingly. Buy all the things. Even a house if you need one. And one for the kids too. Why not? You’ll be moving to your final address soon enough, and you don’t need money where your going.
#157 Sail Away on 03.02.23 at 10:24 am
#138 Ustabe on 03.02.23 at 1:54 am
Never, ever take single stock tips on the Internet seriously.
———
True. Nobody should act on internet stock tips.
Btw, this month’s free cash for us went right to Tesla at $186. Score!
———
Huh. +6% since yesterday’s position. Not bad. Not bad at all. And the stock is just about where it was last week.
Grabbing little emotionally-based drops like this can greatly enhance average return. It won’t always turn around immediately like this specific case, but with a good holding, it will eventually.
———
#42 Dolce Vita on 03.03.23 at 3:43 pm
Silent increase in mortgage amortization period, as not to cause panic, then official one through CHMC insurance was pretty much in the cards, I said it long time ago.
Then intergenerational mortgages will follow, 100 years ‘lease’, interest only mortgages, multi family mortgages etc. everything to give the impression that this dead horse is alive, as there is hardly anything else left from the economy, than housing.
Degree after degree after degree of pure insanity and idiocy.
One has to look from outside, the atmosphere in a mental institution always seems peaceful.
Pulling demand from the future to the degree never imagined.
And when the future is here, there is nothing left, other than debt
Garth, isn’t the average length of a real estate cycle 18 years? Far too early to make any declarations about this one, in either direction. Personally, given the historic size of this bubble, combined with the historical levels of personal debt Canadians have, I would bet on this cycle being historically BAD but again, it’s far too early to say.
It’s also possible that lack of listing is holding prices up. Once listing normalize prices will continue the pre-COVID slide.
Just a guess….
Greetings… I’m in a tropical paradise. Been here for a few months. Gonna move some money down here. RE is cheap and right on the beach. I have been drinking so not too much more to add right now… Not coming home until the snow is gone. Because I can… Why? Thanks to Garth. :)
I look forward to your bending words in 3 months when things continue their downward trend. classic bull trap here
Interesting how so many people want bad times to visit society. That must really suck. – Garth
#41 Observer on 03.03.23 at 3:42 pm
And regarding maternity leave, there is a child rearing provision which excludes that period from the calculation of the amount of your CPP benefit.
I did not mention mat leave. Try again. – Garth
^^^^^^^^^^^
Oh, “paternal leave”, my bad. Good try at deflecting from the main point. You know Garth, it’s OK to be wrong once in awhile.
I did not mention paternal leave. The reference was to years out of the workforce rearing offspring, not making CPP contributions. Try again. – Garth
Will be interesting to see if sellers decide to show up this year for whatever reason. Might be a dead cat bounce or maybe not. Above my pay grade.
Faron, come git yer lapdog. He’s getting his ass kicked by the Boss, lol.. Take yer time though, cause it’s an awful lot of fun………
#3 Observer on 03.03.23 at 2:21 pm
#6 Observer on 03.03.23 at 2:31 pm
#35 Observer on 03.03.23 at 3:34 pm
#56 Observer on 03.03.23 at 4:31 pm
Watching a large site near me – it was zoned a year and a half ago for apartments. Existing tenants moved out 6 months later. Brand new tenants have just moved in. Tells me a bunch of things. Construction and material costs too high, market is kaput, demand disappeared, cash flow needed to pay the monthly carrying costs. Same pattern as the 1981 crash. Lots of stuff zoned and permitted for multi family right before the crash but nevar got built for a decade after. So all the hoopla about sites and developments coming – all bullshit.
New housing sales and starts have dropped along with resale volumes. Thus pretty much guarantees that tidal way of construction politicians promised will have a hard time materializing. – Garth
#28 Parksville Prankster on 03.03.23 at 3:23 pm
Oh brother. I’ve been visiting here for awhile, mainly stopping in for the beers and babes, and beyond the message,
+++++++++++++++++
Oh you pig! You are in trouble now ! Faron the Foul will read this and send the Urinati to your house. Run Prankster run! Into the the night ! Don’t look back ! Run silent, run deep ! Just run!
138 Alois on 03.03.23 at 1:15 pm
The market is free and fair. Buyers can easily find out what a property sold for in the past, or if there has been a relisting (unless they mistakenly do not have their own agent). Using terms like ‘trick’ and ‘scam’ is beneath us here. – Garth
—————————————————-
COMMENT:
Just curious….(and not being sarcastic)
Any data etc. on how educated/well informed potential RE buyers are ?
Do the majority subscribe to the good points you posted ?
Anecdote:
WE bought our current SFH back in 1996 when the market was baaad, our final offer was about 20% less than their asking price with a ” take- it- or- leave- it ” qualifier.
We knew they had to sell as they had purchased elsewhere.
That’s bu$ine$$.
Assessed price in 2023 has increased 5X’s since then.
And you feel clever having bullied the sellers? – Garth
—————————-
Most people who bought a house in Richmond in the late 90s and early 2000s had their assessments increased by 5x.
I used to live there.
You are not special.
And not a financial genius.
Just a guy who got lucky.
The Canadian military now defines “racism” as anybody who “believes in equality but not equity” and anybody who denies “unconscious bias and refuses to engage in self-reflection and education.”
This is from their Feb. 28 “Anti-racism toolkit.”
Canada’s army is totally compromised.
Does this butthole still have an army
The recent correction is nothing to be overly impressed about as everyone was calling for the same, except before prices shot up to absurd levels during the pandemic. People are starting to pack up and leave. Rent prices are so ridiculous that all you can do is laugh. Southern Ontario is a nightmare. Some people want to be close to family, or their job (not everyone can WFH) so you can’t just take off to no man’s land to find affordability. I guess there are some options for less than a million or less than $5000/month – but there is always a reason. Either it’s a crappy flip, in a terrible school district (violence, drugs, general bad reputation), in a depressing soulless suburb, has a major flaw etc. But I guess all of these mysterious buyers think that it’s all good, a mystery to me
#52 Caffeine Monkey on 03.03.23 at 4:17 pm
Garth, isn’t the average length of a real estate cycle 18 years? Far too early to make any declarations about this one, in either direction. Personally, given the historic size of this bubble, combined with the historical levels of personal debt Canadians have, I would bet on this cycle being historically BAD but again, it’s far too early to say.
_____________________________
Lmao…not any more. Central banks have warped stock and bond markets and have us in the new era of 5 week bear markets on Wall Street and 6 month real-estate corrections after 17 years of stratospheric gains. Oh and record valuations of everything during a 2 year pandemic while economies are shutdown. Cool right?
Garth knows this all too well.
#58 the Jaguar on 03.03.23 at 4:41 pm
Faron, come git
#60 Yukon Elvis on 03.03.23 at 4:47 pm
Faron the Foul will read this
—
So, if I comment too much, there’s wailing from you dopes. If I comment too little there is also wailing? LOL. WTF.
Observer’s words are bang-on:
Just reading from:
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-benefit/when-start.html#wb-cont
Observer is right that working and waiting until 70 yields a 42% increase over what would be received at 65 and more than double what would be received at 60. This is a very meaningful improvement that might make it tenable for this person to stop work after 69 while the ongoing lower amount would not.
Child rearing, in some instances, nets one exempt years. So the years raising children might be moot. Garth should apologize IMO.
Not a chance. – Garth
Anyone else beside me notice that while Faron isn’t posting to any single poster as of yet and except for a his link to Victoria real estate at #44 along with some commentary Sail Away’s toady’s are summoning him: First Jaguar at #58 and then Yukon Elvis at #60.
They only pretend to dislike Faron and fake outrage at his posts but the fact of the matter is if they don’t have a Faron to bully, they turn on themselves.
Sad, really. After all re-read #50. Who is he talking to? Sure isn’t me. I don’t need stock tips.
I’m very comfortably retired, in fact so comfortably that I don’t have to post about my gains, how well off I am or what I can accomplish physically as a manly man. Comfortable not only financially but in my own skin.
Don’t know how to end this other than to say if I had the choice between Faron or Sail Away and his sycophants being banned from this comment section I’d probably pick either on any given day but today it would be those that call him out when there is no good reason to do so. Neither post #58 nor #60 offer anything of any value insofar as a contribution to this days blog.
OK, back to your regularly scheduled arguing with Garth…
#61 Ponzius Pilatus on 03.03.23 at 5:03 pm
Most people who bought a house in Richmond in the late 90s and early 2000s had their assessments increased by 5x.
I used to live there.
You are not special.
And not a financial genius.
Just a guy who got lucky.
===========================
Richmond ???
Intriguing….
Please submit what evidence you have where I live…?
PS :
I recall a few years ago “Smoking Man” hacked into this site to contact me.
Let us go back in time, when Ludwig Von Mises developed his Austrian business cycle theory. Re: Boom and Bust.
The boom is caused by central and commercial banks creating money OUT OF THIN AIR. This lowers interest rates, which encourages businesses to borrow this newly created money to fund capital-intensive investment projects.
The bust is caused when the money creation process slows. It is then that businesses discover there are not enough scarce resources to complete their projects, so these projects must be liquidated to allow for labor and other resources to be allocated to where they are most desired by consumers. As a result, not only does the boom-bust cycle cause tremendous short term hardship, but it also lowers long term living standards by wasting scarce capital.
Mabey the gold standard kept a lid on this stupidity?
#65 Faron on 03.03.23 at 5:24 pm
Garth should apologize IMO.
Not a chance. – Garth
^^^^^^^^^^^
Why start now eh?
Interesting how so many people want bad times to visit society. That must really suck. – Garth
who said I want bad times? tsk tsk, GT…
return to normal / bull trap
are things different this time?
#2 it was expected. We met the dad and mom. He’s Pyrenee & Nfld & Bernese & Golden
Def expected a big boy. He’ll probably top out around 100-110 lbs is my guess
Who ends a comment with IMO? Obviously someone who has a high opinion of their OWN opinion. Sadly, they seem to be the only one here who thinks said opinion matters. I wait with baited breath for a rebuttal…NOT!
Blink and you’ll miss that long-awaited window for “affordable” housing in the 416. I’m going to take my stacks of high society and buy some dividend stocks or a business as opposed to bricks and mortar in the 6. Also heading to SE Asia for a while with the wife and kids in September for a break. Without any overhead to speak of back home (renters). Life is good (even when you don’t own a house).
Interesting how so many people want bad times to visit society….
Depends on what side of the coin you’re on….
Affordable real estate and high interest bearing for cash savings doesnt sound like bad times…
BANNED
#72 Really? Not! on 03.03.23 at 6:17 pm
baited breath
—
Baited breath, huh?
WHAT ARE YOU, A FISH???
Or did you get into the night crawlers? Curious behaviour IMO.
#6 OBSERVER
Maybe instead of insulting me by telling me I am confused or had invented a story, you could try understanding.
:::::::::::::::::::::::::::::::::::
You’ve been confused on several things for a long time.
#69 Observer on 03.03.23 at 5:59 pm
#65 Faron on 03.03.23 at 5:24 pm
Garth should apologize IMO.
Not a chance. – Garth^^^^^^^^^^^
Why start now eh? +++
MERCY! Garth coming up to bat in the ninth inning…I know who my money is on, lol!
https://www.youtube.com/watch?v=N4nwMDZYXTI
Isn’t 30% drop what the doomers were predicting?
I mean, what are doomers predicting? 100% wipe out?
The affordability of a home is double from 2 years ago at present day.
Rates reset for most every 5-years.
I know a lot of people considering getting rid of debt by getting rid of too much house. It won’t happen immediately, but if affordability does not improve it is pretty obvious the housing market won’t be creating FOMO.
Did you read the recent Mcleans article about the family who bought a house in Victoria, BC? This is situation is happening with everyone I know and people are looking at moving to cheaper places to cut ties with debt.
My advice is figure out how to get away from the metros and bubble cities and slow down in life. And since most of Canada is becoming unaffordable consider moving to another country that will provide a better standard of living for the cost outlay. Portugal is a prime example of a welcoming place to move to with a good standard of living for the cost required.
Interesting, I’m not seeing anything moving within our region. Us country folks nots as wells off as thems fancy cityites I guess. Perhaps there’ll be a pause on all of the second or third home purchases in these parts… and perhaps a pause on them transforming this place into the very place they left. Free country tho, it’s inevitable.
44 Faron
From the article:
“February numbers are in, and though sales were nothing to write home about, the market nevertheless tightened up substantially due to a mid-month dropoff in new listings.”
Should a snow factor be applied?
#67 Alois on 03.03.23 at 5:46 pm
#61 Ponzius Pilatus on 03.03.23 at 5:03 pm
Most people who bought a house in Richmond in the late 90s and early 2000s had their assessments increased by 5x.
I used to live there.
You are not special.
And not a financial genius.
Just a guy who got lucky.
===========================
Richmond ???
Intriguing….
Please submit what evidence you have where I live…?
—————-
Richmond is as good as any part of the Lower Mainland.
I could narrow it down to Steveston.
I lived there.
The red necks last stand.
And were everyone is bragging how smart they were to buy Property in the former backwater of Vancouver.
Garth….
The jobless rate taking a U-turn.
*************
Just yesterday, a company decided to do the same. Well, since everyone is doing U-turn, then we will do it for all our 2,500 employees.
It seems to be becoming popular entertainment in Canada.
https://www.blogto.com/fashion_style/2023/03/nordstorm-closing-all-canadian-stores-cutting-jobs/
But good U-turn news is next:
https://www.blogto.com/fashion_style/2023/03/nordstrom-planning-massive-liquidation-sale-across-canada/
Retail is going online. Unstoppable. – Garth
More like Real Estate Cartel, 12. Blog, 1
We can all cherry pick. The real estate cartel has been right calling for house appreciation since the blog’s inception up to covid.
#66 Ustabe on 03.03.23 at 5:41 pm
“Anyone else beside me notice that while Faron isn’t posting to any single poster as of yet and except for a his link to Victoria real estate at #44 along with some commentary Sail Away’s toady’s are summoning him.”
———
Well, ‘his link’, ‘commentary [add comma]’, and ‘toadies’, actually. But let’s set grammatical errors aside for the moment and have a more fulsome discussion.
We all stand on our own two feet here, although granted, I’m often powerfully bounding from one foot to the other up mountains or rapidly knocking out pullups with both feet off the ground. There are no toadies or sycophants, since free speech, within the bounds of decorum, is the flavour of the day.
Speaking of… clearly not everyone in steerage believes in free speech. And with your following sentiment, amigo, it seems we’re quite lucky you do not get to make that decision. *Sad censor-face* :-(
“if I had the choice between Faron or Sail Away and his sycophants being banned from this comment section”
9 Jason on 03.03.23 at 3:23 pm
“3. There are also significant amounts of people who are mortgage free and / or have massive equity in their homes and can easily afford to move up the real estate ladder.”
…..
I am mortgage free . Why would I want to move up the real estate ladder and get a mortgage? ( Unless I live in a dump) I keep hearing this, but I am pretty sure people who are mortgage free are prudent with their money and would not want to be in debt with this market uncertainty
More important, invest your money in the market and make your money work for you.
Qualify:
More important, invest your money in the stock market and make your money work for you.
Ah, it’s fun to watch Observer continue kicking all his toys out of the pram
:-)
#81 Dr V on 03.03.23 at 7:16 pm
44 Faron
From the article:
“February numbers are in, and though sales were nothing to write home about, the market nevertheless tightened up substantially due to a mid-month dropoff in new listings.”
Should a snow factor be applied?
—
Good point. Part of the noise in short term data and why the need for longer averaging windows to make judgements by.
Anecdotally, I’m seeing a lot of for sale signs around right now, so maybe the new lists have picked back up?
@82 Ponzie’s Property perfection
“Richmond is as good as any part of the Lower Mainland.
I could narrow it down to Steveston.
I lived there.
The red necks last stand.”
++++
Steveston?
Surrey has more red necks than Steveston.
Is that why you eventually moved to Surrey?
And here I thought Tsawwassen was known for years in the local News as “Little Rhodesia”….the last smug, white, enclave south of the Fraser…..
If this is as low as it will go and rents are at all time highs, future generations are screwed in this country.
“Retail is going online. Unstoppable. – Garth”
+++
Yep.
Big “anchor tenants” in massive Malls are going to be harder and harder to find.
Malls.
Ugh.
People still like to touch and try stuff on but Amazon direct delivery to your door….hard to beat.
What do you mean “told you so” when you’ve been saying for well over a decade that the housing market would collapse? So you are finally admitting that you’ve been wrong ALL OF THIS TIME!? I told YOU so
Collapse was never forecast here and will not come in this lifetime. Correction was forecast. We just had one. Sheesh, calm down. – Garth
#77 Go figure on 03.03.23 at 6:57 pm
#6 OBSERVER
Maybe instead of insulting me by telling me I am confused or had invented a story, you could try understanding.
:::::::::::::::::::::::::::::::::::
You’ve been confused on several things for a long time.
^^^^^^^^^^^^
You new around here or just afraid to use your regular alias? And what pray tell do you have issue with regarding my comments today? Please tell me where I am wrong – be specific.
#71 Bogdan M on 03.03.23 at 6:11 pm
#2 it was expected. We met the dad and mom. He’s Pyrenee & Nfld & Bernese & Golden
Def expected a big boy. He’ll probably top out around 100-110 lbs is my guess
******
Big dogs! So cute and loyal. Friendly giants. They love sitting on a pile of snow. I have a 12 year old Pyrennes, Burmese, Lab. I thought he was big. On New Years day my sis and I rescused two Kangal/Kuchi 5 month oldd. 6 weeks later he is taller than the old boy. He walks onto my wifes lap when she sit on the couch but she disappears when he does. I am glad he is part of our lives but ooie…he can eat. I keep telling myself he’ll stop growing soon. Lots of animals out there the need homes.
#78 the Jaguar on 03.03.23 at 7:09 pm
#69 Observer on 03.03.23 at 5:59 pm
#65 Faron on 03.03.23 at 5:24 pm
Garth should apologize IMO.
Not a chance. – Garth^^^^^^^^^^^
Why start now eh? +++
MERCY! Garth coming up to bat in the ninth inning…I know who my money is on, lol!
^^^^^^^^^^^^^^^^
You lost the bet. Amused you are that oblivious, lol!
Speaking of night crawlers….it’s considered SHOUTING when one uses all capital letters. But you probably know that and just don’t care? Whatever, etiquette is hard for some people.
Now on the early CPP while still working……
Don’t you have to keep contributing? So won’t your benefit be re-calculated every year and continue to increase to reflect those additional contributions?
China central banks just dropped a 1 trillion stimmy. That should help kickstart things.
Rents are going up in my area, but people are able to qualify for HUD, other vouchers and benefits. Many jobs available however they are part time jobs. Luckily the welfare roles are well supplied. If the can send billions to a overseas hollywood production wargame, then there should not be a problem funding the dole rolls.
#83 Vladtor
But good U-turn news is next:
https://www.blogto.com/fashion_style/2023/03/nordstrom-planning-massive-liquidation-sale-across-canada/
———————
What’s so good about it.
With their markups, even with 50% discount they probably still break even.
BTW, Zellers is coming back.
All this proves is that those already in the market think a bottom is in and want to get back into swapping houses. New buyers (often those younger but not always) could have a quarter of a million dollar down payment and still not be able to afford to buy in T.O. Sounds like everything is hunky-dory to me.
Cheaper prices will not come without economic decline. What part of that do you not understand? – Garth
You deserve to toot your own horn…great job on housing forecasts.
I doubt the country can get more divided than today…maybe Canada deserves an early election and we can start our journey back to normal.
(Oh…don’t tell the Chinese!)
#50
Bought a couple of 0DTE TSLA calls this morning and made a nice little profit in a couple of hours. Easy money!
#30 Alois on 03.03.23 at 3:24 pm
My late father took his CPP and OAP as soon as eligible…his accountant told him you don’t know how long the Gov’t pensions would last.
^^^^^^^^^^^
CPP is not going anywhere. For many people it is the only inflation indexed, defined benefit pension plan they will ever have. Why not make it work for you by taking your own unique circumstances and goals into consideration, rather than blindly start collecting at age 60 due to needless concerns that it might disappear?
I’ve no comment on OAS.
I suppose you would call me a doomer, Garth. I see myself more as someone who is clinging to hope we’ll still have a middle class in this country in 20 years.
As of right now, it doesn’t look good. More home inflation, broader inflation twice the Bank of Canada’s target, and the Tiffster seemingly caring more about pumping up asset prices than reigning in inflation.
Can’t wait to see more tent cities popping up, and the number of occupants growing. Hooray, I guess…
@Alois, Actually I do have a comment on OAS(old age security). OAP as you refer to it is not a “government pension”. It’s not a pension at all.
#86 millmech on 03.03.23 at 8:24 pm
#50
Bought a couple of 0DTE TSLA calls this morning and made a nice little profit in a couple of hours. Easy money!
—
LOL. i.e. gamblers do win now and then (then they always smoke it chasing the feels).
Maybe you should tell us about all of the money you have wasted on premium so that we have an objective sense of your abilities and performance aside from your positive confirmation biased info?
I mean, I could tell you that I’ve made a bundle shorting Bitcoin of late, but I don’t emphasize it because I don’t believe in blarfing out wins while holding back information on losses. Because… I have integrity.
Sigh, I was WRONG. OAS is considered a pension apparently. See Garth, that wasn’t so hard.
<b<#6 Observer on 03.03.23 at 2:31 pm
The point is that because she took CPP at 60, she does not have enough CPP at age 70 to retire.
***************************
What did she do with that money for the past ~100 months? Did she spend it having a better life than she would have had with nothing, or did she turn it into a nice little 6 figure portfolio that she can draw down over the next decade?
Both seem reasonable.
#88 Really? Not! on 03.03.23 at 8:08 pm
Speaking of night crawlers….it’s considered SHOUTING when one uses all capital letters. But you probably know that and just don’t care? Whatever, etiquette is hard for some people.
—
LOL (is that shouting?)
If you were in front of me I would have shouted. Some commenters get triggered when I use HTML tags for punctuation (because 5 years on, they haven’t learned to do so themselves perhaps). So, I figured I’d go easy on them. You, anon troll?
NOT SO MUCH!
@#66 Ustabe on 03.03.23 at 5:41 pm
Anyone else beside me notice that while Faron isn’t posting to any single poster as of yet and except for a his link to Victoria real estate at #44 along with some commentary Sail Away’s toady’s are summoning him: First Jaguar at #58 and then Yukon Elvis at #60.
+++++++++++++++
I generally scroll past that petty nonsense.
I’m sure they’re decent people in the real world.
At least I hope they are.
Recent bank reports indicate about $432 Billion in loans are variable. Of those, roughly half have reached the level where all the servicing costs go to interest.
Interestingly, the bulk of these mortgages will be renewed in 2026-27. So, people jumped in at the lowest rates (highest prices) possible and didn’t lock in. Idiots.
If you run some rough calculations assuming a 300 basis point increase in variables (vs the 425 potential) on the $432 billion outstanding. That is a $8 billion hit to discretionary spending. Not really significant. But the hit isn’t necessarily a hit on current spending, but on future spending.
And this is just home loans. It does not factor in HELOC’s or LOC’s, Reverse mortgages or increases in car loan costs. Signs are starting to trickle in that people are falling behind. We have yet to reach a level for concern. Next three months may indicate an acceleration in delinquencies (similar to what is being seen in car loans).
Hence I wouldn’t be too eager in raising the victory flag with an uptick in house prices. All the realtor boards say the low inventories will help push prices higher, meanwhile, listing still outpace sales in nearly every market.
Inflation doesn’t appear to be beat yet. BoC is on hold for now, as they predict inflation will be 3% by mid 2023. But they didn’t see 8% until it slapped them in the face. Inflation isn’t a Canada thing. It is global. Canada could definitely be in some trouble. With 16% of mortgage debt paying no principle, things could get very ugly. But it isn’t going to play out in 3 to 6 months. This covid housing bubble could be with us until 2027-28.
Kilt
Way too soon to call. We’ve barely begun to feel the rate hikes. This is merely today’s call, Garth. We have more corrections coming as the dead cats continue to bounce.
I’m amazed how defensive and insulting some people behave. Name calling and assumptions of commies hiding under their beds type of people. Why don’t you admit you’ve already lost this battle, lick your wounds, and hopefully learn your lesson for the umpteenth time? I’m guessing NOT!
Rates in the US will be above 6% by mid 24. Canada will follow. The legacy media is playing silly buggers with your wallet. There’s no pause when inflation is still a conflagration. The so called pause is a trap. Trudeaus poll numbers are in the toilet. The China bribery thing is explosive. I’ll bet Liberals are spending more on consultants than ever. We’re being sold fairy feathers to distract. There’s always the fool who buys into the hype. But Dudes, the market never bottoms until every sorry sap is suckered into oblivion. Don’t be a sucker. Take a long holiday instead, at least 18 months worth. However, political flying pigs are in season and if Trudeau takes his walk in the snow there could very well be a massive relief rally and a big bump in the $CDN. That’s a long shot, but, keep some powder dry. There is a global interest in keeping Canada sidelined. If Trudeau gets chased out it will be in the interest of big global to tighten the noise. This trade, as I process it, is like a gold play, strong fundamentals, no move yet, but explosive upside worth maybe a 5% seat in the portfolio. I also find it interesting that international tech, energy and resource are ignoring Trudeau and positioning for a post Trudeau Canada. Interesting.
I hope the name it isn’t patented, because I just figured out a kickier type of double-double!
Good night Plog Dogsh.
#88 Sail Away on 03.03.23 at 7:43 pm
Ah, it’s fun to watch Observer continue kicking all his toys out of the pram
:-)
^^^^^^^^^^^^^
It upsets me to think that many who read here will automatically think that it is in their best interests to collect CPP at age 60. I guess it’s somewhat personal as I see my older sister struggling. Empathy is a bitch sometimes, but of course you wouldn’t understand that.
March 2nd, 2023:
¨…while others piled on to revel in how cheap they are.¨
Cheap, for lack of a better word, is good.
Lots of doomers are coming on this blog to hear your predictions how housing will eventually fail and prices will crumble. And here you go telling them the exact opposite. Now they might start hating you lol.
Based on your last paragraph it seems the worst has yet to come. News is that CB’s will raise rates until employment comes down. Any spike in anything will warrant a rate increase. It’s simple really!
And then there were two.
Sun Shine Earth Labs of BC has announced they are producing Cocaine, and Heroin for sale in Canada with their license from the Feds.
Trudeau and BC NDP Preem Dave Eby are saying its a no go.
Maybe they should talk to their own bureaucrats……
https://www.france24.com/en/americas/20230303-canadian-companies-can-now-produce-sell-cocaine-and-other-drugs
Folks, I’ll hazard a guess that I’m probably one of, if not THE longest real-estate bear blog followers reading this blog. I recall reading Vancouver Condo Info or something similar back in 2006/7 and my then girlfriend teasing me about my “prices are crazy and the bubble is going to pop” mentality.
If you are a young’ish person hoping for prices to REALLY crash, follow Garth’s advice and give up. You need a place to live where you will build equity and not be evicted every few years for whatever reason. 25 years from now you’ll own the place – virtually effortlessly. I’ve watched friends for almost 20 years pay down mortgages while i read blogs. Many now have mortgages in the low five figures.
YOu need a place to live. Stop speculating and just buy something you can afford, even if it means moving to a less desirable suburb. 25 years from now it will be worth it. If you are extremely disciplined sure you can invest the renter savings in a diversified portfolio etc etc and come out ahead. But there’s a good chance you’ll spend the extra income or a proportion of it.
There are so many intangible benefits from having a secure residence that you can call your own. I don’t and it weighs on me every day.
I’m lucky and have an out. I’m early 50s and have sufficient investment returns combined with public sector pension to get out and retire somewhere sunny (mexico etc) or not so sunny (Ireland) in the next five years. But it forces a move away from BC that i don’t really want, so it’s a pyrrhic victory of sorts.
If i could turn back the clock 20 years I’d buy in a heart beat.
#113 Adm Steve-O! on 03.03.23 at 9:12 pm
Way too soon to call. We’ve barely begun to feel the rate hikes. This is merely today’s call, Garth. We have more corrections coming as the dead cats continue to bounce
^^^^^^^^^^^^
Though influenced by wishful thinking, I tend to agree with you. Time will tell. One thing is certain – it will be interesting to watch it play out.
#122 If i could turn back the clock 20 years I’d buy in a heart beat.
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Good post. I completely agree that taking a “risk” and leveraging around 2002–2010 and buying a place in a good neighbourhood in a major city, and that was only at the margins of affordability, was a good idea. No need at that time for following Garth’s ratio if one was in their 30s or 40s. Now, if Garth is right (and that is a big if), and that the correction has played its course, real estate is no more affordable in our major cities than it was in 2019, i.e. out of the cards for a great number of people.
I am bewildered at how the Gov’t seems to think that this is progress and that we are collectively better off than 4–5 decades ago. Our trajectory in Canada , with large immigration spikes and the housing inaffordability issue, is that young families even with good incomes will be lucky to be able to raise their families in 2-bedroom condos like in Asia…… a sorry situation in my view…
with all the respect, after so many years of bearish on RE, this blog is right this time, for now;
it would be too simple and too easy to have this V shape recovery, inflation is still not under control, we will see.
#117 Observer on 03.03.23 at 9:27 pm
#88 Sail Away on 03.03.23 at 7:43 pm
Ah, it’s fun to watch Observer continue kicking all his toys out of the pram
:-)
^^^^^^^^^^^^^
It upsets me to think that many who read here will automatically think that it is in their best interests to collect CPP at age 60. I guess it’s somewhat personal as I see my older sister struggling. Empathy is a bitch sometimes, but of course you wouldn’t understand that.
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Sorry, to hear about your sister.
But the reality is, we all are beings, and the the reality is, there is no sure fire way to calculate, which option is the better one.
One can go tomorrow, and another can go to 110.
For the record, I took it at 60.
I’m an Accountant, but I did not to do any fancy “what if” calculations.
Not worth the time in my opinion.
And a little extra money in your pocket, while you can still enjoy spending it.
What’s wrong with that?
#114 Really? Not! on 03.03.23 at 9:17 pm
I’m amazed how defensive and insulting some people behave. Name calling and assumptions of commies hiding under their beds type of people. Why don’t you admit you’ve already lost this battle, lick your wounds, and hopefully learn your lesson for the umpteenth time? I’m guessing NOT!
^^^^^^^^^^^
Damn that ego! But who would we be without it? Mix a little empathy in and it’s not so bad.
#117 Observer on 03.03.23 at 9:27 pm
#88 Sail Away on 03.03.23 at 7:43 pm
Ah, it’s fun to watch Observer continue kicking all his toys out of the pram
:-)
—————
It upsets me to think that many who read here will automatically think that it is in their best interests to collect CPP at age 60. I guess it’s somewhat personal as I see my older sister struggling. Empathy is a bitch sometimes, but of course you wouldn’t understand that.
—————
Have you considered that you may not actually be correct in the points you’re arguing?
And when someone in the family struggles, it’s time to sit down and figure out a solution as a family. Empathy, in and of itself, fixes nothing. Getting all worked up also fixes nothing.
If you politely requested Garth’s help, he very well may have given useful advice. That was not your approach.
#107 Faron
Always cut the loses to keep them small, that is the beauty of options just watch them and if they go against you just close the position not that hard really, using a momentum system now and it works well. Gary Anotacci wrote a great book on it and Edward Thorpe also uses it as well, along with many other traders ,so I seen the indicators that I needed to make my decision, not that hard to make money, this is coming from a person who actually rode the short bus to school because of a learning a disability.
Cheers and have a great weekend!
… and then there’s this from your good friend.
Ron Butler
@ronmortgageguy
·
11h
The small opening of barely affordable mortgage payments that spurred a tiny flurry of RE sales in Jan / Feb 2023 closed
As much as some people would say that there’s pent up demand to buy properties, and there likely IS demand but at 5.49% that is suddenly more expensive
Resistance to real price collapse doesn’t mean a thing Garth. Ultimately you can’t get blood from a stone.
Extreme greed will be rewarded by extreme disaster when those getting market wages who need a place to live are the last ones in the pool of buyers. That means the part time to full time minimum wage single income earners. Then real estate goes to near zero because that is all that can be paid. That is what happens when you blame the butcher, the baker and the candle stick maker for inflation and deny them raises in pay to keep up with the costs of living caused by the super debtors like governments and real estate profiteers. Debt = inflation.
House hold income of $180,000 and 42 years old and resigned (relieved?) about not owning a house if we want to stay downtown.
Problem is rents keep rising fast too so stuck in this small apartment!
Thanks for your blog Garth. Although we have no house, we instead have a nice little B&D and our pensions, a great landlord, had two extended parental leaves, no stress about surviving a downturn, the freedom to move or change careers on a dime, and maybe even retire before 65.
Now if only I could find an extra 300 sq/ft!
Real Estate – Amusing to hear about owners of large commercial office portfolio’s handing back keys to bondholders. Pimco, Brookfield and now Blackrock. They were supposed to be the smartest in the room. Financing a long term asset with floating rate debt and not hedging is for rookies. O & Y learned that lesson. 20 to 40% vacancy rates as WFH becomes entrenched enough to matter. Many more landlords with variable debt will default as office and retail footprints shrink .
The very people most often self-righteously preaching qualities such as empathy and integrity are unfailingly the ones completely lacking them. The one clown there has even given up on virtue signalling now and just skips straight to claiming “I have integrity”.
lol That’s not how it works.
If you actually model something like say, kindness, you don’t need to try and convince anyone if it’s value or that you possess it.
NP Snippet ( yikes, there’s that ‘contagion’ word again….is Brampton a city?)
Private non-bank mortgage loans that often come with higher lender fees and interest-only payment options are taking a growing share of residential real estate lending in Canada, a trend that is poised to continue or even accelerate amid rising interest rates and tougher mortgage qualification rules.
But even before last year’s steady pace of interest rate hikes combined with bank stress tests to push some homebuyers out of traditional real estate borrowing, private non-bank mortgages had soared 72 per cent to $22.4 billion in just two years in Canada’s largest province, capturing 10.6 per cent of the market by 2021, according to FSRA, which published its latest figures on Feb. 27.
Andrey Pavlov, a professor of finance at British Columbia’s Simon Fraser University, said allowing borrowers to over-extend themselves, including through loan features such as no amortization, increases the risk of default. If defaults rise in private mortgage lending, there could be some “contagion” in pockets of the housing market where such mortgages are popular, he said.
“If an entire city has a high concentration of risky mortgages, then a few random defaults could put sufficient downward pressure on prices to generate more defaults by otherwise prudent borrowers,” said Pavlov, who specializes in risk management and real estate.
the Lower Brainland “wins” again.
https://vancouver.citynews.ca/2023/03/03/metro-vancouver-cities-home-expense/
I too am preparing for a Trudeau-free Canada. There’s 50 cases of beer down in my storage locker. And I don’t even drink. It’s for friends. Everyone will be invited. Except you-know-who….
@ Observer;
“It upsets me to think that many who read here will automatically think that it is in their best interests to collect CPP at age 60. ”
+++
Personal choice is….personal choice.
A co worker’s boyfriend dropped dead at 59.
His estate gets a lump sum death payment of….$2500.
Nothing more.
He worked his entire life from age 19 so one would assume 40 years of paying in to CPP was probably worth more than ……$2500.
And the Federal govt still cant balance a budget.
Amazing when you think about all the money they vacuum up from taxpayers, businesses, etc.
Personally.
I dont need the cash to max out my RRSP’s or a TFSA and I give the govt enough in taxes already…….so I’ll let it ride until at least 65….or when ever I finally stop working or maybe….drop dead…..either way, I dont need the cash right now.
Cheaper prices will not come without economic decline. What part of that do you not understand? – Garth
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I do understand that. But fear not, I suspect we will just inflate ourselves into a fiat currency crisis with $3M houses and $13 bread loaves.
I’m taking my cpp at 60. No brainer. Reducing my non contributory years! I have plenty of asterisks too!
Glad I sold all my properties for 200-300k over asking.
We are the bull trap phase of the crash chart. This spring when the holdouts panic into the Fall it will be fun to see the carnage.
Boiling frogs don’t know they are dead until they are.
It’s just time. Sit back, relax, have a beer and grab the popcorn.
The largest bubble of everything has popped and now the debt gets reconciled.
Go look at the commercial office tower market defaults worldwide. Phew
That will breed contagion in the debt markets.
It’s not 2008, its much worse.
Keep your powder dry folks. 2025 will be a great time to buy a house,
imho
If someone paid max CPP contributions from 1980 to 2022.
They would have contributed about $55,000.00
1980 max contribution was about $210.00
2022 max contribution was $3,499.00
Regarding the question about contributing to CPP after age 60 if you continue working while receiving CPP, “If you work while receiving your CPP retirement pension and are under age 70, you can still make CPP contributions. Each year you contribute to the CPP will result in a post-retirement benefit and increase your retirement income. We will automatically pay you this benefit the following year. You’ll receive it for the rest of your life.”
There is one thing that will totally rectify any perceived imbalance or aberration in the current state of economic affairs.
TIME!
Hang in there folks.
In ten years or so, no one will even be able to remotely remember what was going on economically in 2023.
Keep saving, investing, working, and living.
None of it lasts, and it is forever evolving.
Twists and turns will continue in perpetuity.
Enjoy the ride.
Saturday, time to catch up to this pathetic blog’s most ridiculous comments.
#92 Faron on 02.28.23 at 10:01 pm
@AnonyMusk
So, you told me that the increases in money supply drove inflation. Right? Then why, over the long run, does growth in the money supply outpace inflation? And why are there periods where inflation and M2 are correlated and other periods where there is anti-correlation?
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No, I did not say that, I said very clearly that where the monetarist school went wrong was claiming that money supply was always the driver of higher prices and that this is where the Austrian school got it right, pointing out that the correlation is clear but of course not always perfect, because many other factors are involved such as credit, population growth, economic growth, supply surpluses or restrictions and human psychology.
Which is also why the Austrian school is correct in saying economics is a social science (due to the unpredictable human action involved) and not a pure science like math or physics.
The attempt by modern economists to make mathematical models of the economy are therefore doomed to fail, as experience has clearly shown.
That doesn’t mean you can’t point to the centuries long devaluation of currencies by virtually all governments as the major cause of economic problems which disproportionately harm the poor and reward the class which is able to buy large amounts of real assets with large amounts of debt.
Just a lucky coincidence that those with assets and debt are the ones who get political policy to benefit them I suppose.
It also doesn’t mean that you can’t point to the very obvious effect of the extremely rapid and large increase in money supply, credit and fiscal spending since WWII (which also caused inflation by the way) in creating a sudden and extreme rise in prices.
In other words, if MS and credit grow at a 2% or 3% rate over many years while real GDP and population grow steadily and technology and globalization provide some deflationary forces you might not be able to see a perfect correlation between money/credit and inflation.
But when MS grows by 25% in a year (and the monetary base by much more than that) and credit is eased at the same time as economies are shut down well the result is obvious (to most of us anyway).
I don’t really care if you understand this or not, the rest of the world has finally figured it out, and one result has been the rise of crypto, which is especially popular in socialist countries where governments have destroyed the value of the currency.
Imagine people are so distrustful of their government printed pesos that they would rather have something literally created out of thin air and which has no backing whatsoever in terms of taxation power or national assets.
Which of course brings up the other obvious examples of how printing excessive amounts of money (not just some steady amount, but excessive amounts) clearly result in a devaluation of the currency and eventual loss in confidence which ends in the Argentina/Venezuela experience of paper money being used as toilet paper or burned to heat homes.
This is not an endorsement of crypto, which appears to be the biggest scam in history, but more an indictment of big government which the people have learned to trust even less than crypto charlatans. Amazing.
The big claim for BTC enthusiasts is that there will never be more than 21m coins.
That’s all it takes for people to believe in it more than government controlled paper money.
Unfortunately, the poor souls in socialist nations have no choice but to embrace crypto as something that they can get out of the country if needed and which is guaranteed to hold its value better than the government issued paper, which is really saying something.
Cpp
“The maximum is 42% higher if you wait until age 70.”
On that point your life is 42% shorter optimistically speaking
And canadian dollar loses 42% of its purchasing power.
Affluence is baggage you can ill afford as you ascend that stairway to Heaven.
Most house buyers overlook the Bungalow lifestyle their old bones will desire in later years as they leave upstairs life to the spiders.
137 Damifino on 03.04.23 at 8:29 am
I too am preparing for a Trudeau-free Canada. There’s 50 cases of beer down in my storage locker. And I don’t even drink. It’s for friends. Everyone will be invited. Except you-know-who….
——————————
If it’s German beer.
You better check the expire date.
Could home prices drop further?
This recent little surge in sales and prices was due to a few factors.
1. The BoC paused rate hikes which gave the green light to many, and put the real estate industry into full pump mode.
2. The banks have been helpful to all these over leveraged home owners/investors increasing their amortizations to 30-35-40 years or more. Everyone ‘knows’ they just have to hang on a little while longer until rates go back down to ‘normal’ so they are not listing. Very low inventory of homes.
3. Pent up demand as there are people that have good reasons to buy and have been waiting for the rate hiking cycle to play out. The pause by the BoC was their green light.
The full effect of the previous rate hikes have not even been felt yet it can take 12 months for this to be felt in the economy so the very first rate hike has barely had time to make an impact yet.
The big pivot that everyone was hoping for is not going to happen this year, and mortgage rates will go higher thanks to the US Fed, not much, but higher. This will soon kill any exuberance in this housing market and prices will soon start to fall again and yes, listings will rise.
Garth is probably correct regarding a crash, that may not happen, but prices could easily fall another 10-20% in some markets once reality sets in for some of these potential sellers.
The fact is, we are walking a fine line here that could easily go either way. It only takes one major credit event which could happen at any time. Extending amortizations gives the illusion that everything is fine but something has to give somewhere, this can’t go on without someone feeling the pain. I think the pain is coming and it’s going to be in housing and then the economy follows.
#12 ‘Alois’ – anyone who is a foodie can tell you that the restaurant industry (which would include that sandwich shop) is one tough gig, with a very high percentage of places closing up shop within a year of opening. Keep in mind that the explosive increase in groceries applies to those retailers too.
As for the shop closing up due to the drop in daily customers from the new ‘work from home’ meme, could be there is an opportunity to open up in a local neighborhood where those who WFH can gather to chat over coffee. We have a rather nice bakery cafe in our neighborhood, it did well despite Covid & now life is back to ‘normal’ is busier than ever.
Single detached homes will grind downward for 3 more years if they are in areas with plenty of jobs. Condos and remote places will experience more of a crash. Rising unemployment will decide how bad it gets.
Re: #93 Tony on 03.03.23 at 7:53 pm
This is a different Tony, not me.