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Population growth will NOT prevent the Candian housing bubble from going bust

FEBRUARY 29, 2012

If I read another ridiculous article proclaiming that Canadian real estate can defy fundamentals in perpetuity simply because we have a measure of population growth, I'm going to bang my head against a wall!

This is the third time I've written about this topic.  New readers may want to check out these two prior posts to see why this 'argument' is completely ridiculous:

The superficial appeal of the 'population growth drives house prices' argument.  Does it hold water?

Revisiting the "population growth drives house prices" argument: Still leaking like a sieve

 

I won't rehash the content of those posts, but suffice to say that anyone focusing solely on demand (pop growth) is missing 50% of the supply/demand equation.  Population growth and house prices do not exist in a vacuum.  If sufficient supply is being brought to market fast enough to satiate new demand, we would expect that population growth should have a negligible effect on house prices on a macro scale.  Additionally, factors such as availability and cost of credit have a far more significant impact on house prices at the macro level.

Never one to leave it at that, allow me to present some charts that nicely sum up what some folks are missing:

 

Chart 1:  Population growth alone does not mean house prices will defy fundamentals indefinitely.  In terms of cumulative population growth, some of the hardest-hit regions in the US experienced population growth in the ten years leading up to their bust that puts the population 'boom' in Alberta (and certainly other provinces) to shame.  To see how far large cities in these states have fallen from peak, check out the chart in this post.

 

Chart 2:  Housing starts relative to total population in Canada has been higher in the past 10 years than the US experienced in the 10 years leading up to its bust.

We've built an average of 208,000 new residential housing units annually in Canada over the past decade against demographic demand of 165,000-185,000 annually.  What is unsustainable, by definition, will not be sustained.  See the last chart for why this is important.

 

Charts 3/4:  Additionally, if we look at the level of housing starts in Canada over the past decade relative to the change in population and compare that to the US in the 10 years leading up to their bust, we see that Canada again has outpaced the US.

   

 

Chart 5:  The logical argument would then be that perhaps Canada has less total dwellings relative to population than the US had and has simply "caught up".  Let's not let the facts get in the way of a good story.  Below is the total Canadian housing stock in 2011 versus total US housing stock in 2006 when their bubble burst.  As you can see, we have more residential dwellings relative to population than the US had at bust.  This is important considering that an estimated 13% of all US homes are now vacant despite low vacancy rates pre-bust.  This excess supply or overbuilding has often been cited as one of the factors that exacerbated the US bust.  I'd suggest that if they had an overbuilding problem, we may too. 

By the way, before you argue that our vacancy rates are low, please read the following post: Are vacancy rates a leading indicator of house prices?

 

Finally, and as an aside, consider how this level of residential construction buoys both the economy and the labour market.  We have more Canadians working in the construction industry as a percentage of our labour force than the US did at peak:

Note that a 'soft landing' in which prices stabilize and construction levels normalize would mean shedding 2% of the labour force, likely leading to a double digit unemployment rate.  This is one of the many reasons I think it will be difficult to orchestrate a soft landing in housing.  Our economy is simply too levered to this current boom.  The car is going 150....on black ice.....and regulators think they can tap the brakes and slow it down in an orderly manner.  I'm far from convinced.

-Ben

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Ben Rabidoux
By Ben Rabidoux

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168 Comments

  • Greg said:
    • 2 years, 1 month

    Sometimes there are other statistical forces that give warnings to a coming crises. http://i42.tinypic.com/1ile94.png

    BILD High Rise Sales http://i41.tinypic.com/34imyc8.png

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  • Ben Rabidoux said:
    • 2 years, 1 month

    WOW! That RealNet data is incredible. Can't believe I missed that one. Thanks Greg. A 40% y/y decline in new highrise condo sales in TO is significant. I'm doing some digging to see if there is an easy explanation.

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  • Greg said:
    • 2 years, 1 month

    Yep. The only gains have been in York Region http://i40.tinypic.com/24pyjxf.png

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  • Ben Rabidoux said:
    • 2 years, 1 month

    Have you made charts for all separate regions? Historic highrise sales in Durham, Halton, Peel, York, and TO?

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  • Greg said:
    • 2 years, 1 month

    I have all the regional data and from my findings there is no excessive inventory in condos. The issue being overlooked in demand was the contribution of lower underwriting standards. To analogize Toronto's condo market; if the drinking age was lowered to 16 years of age, you'll have more people show up at the bar, however now the age limit is being raised again, putting bar owners' profits at risk.

    Smart builders know how to time and size their projects, while others build on greed.

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  • Ben Rabidoux said:
    • 2 years, 1 month

    Agreed. My question is how do Jan 2012 highrise sales in areas GTA compare to past years. We know they tanked compared to 2011, but was 2011 an anomaly? If you have historical highrise sales data for those regions, please post.

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  • Greg said:
    • 2 years, 1 month

    Not from the City of Toronto as seen in the this chart http://i39.tinypic.com/52f3h2.png Most of the new high rise sales are coming from the outer GTA regions, as seen here http://i44.tinypic.com/vrg23d.png

    In the Toronto chart you'll notice a decline starting 2007, whereas this next chart may give some insight as to why http://i40.tinypic.com/jrqvkk.png

    Banks were streamlining immigrants Ben. It's no mystery.

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  • Ben Rabidoux said:
    • 2 years, 1 month

    Something doesnt jive in your chart of GTA highrise sales. Check your chart and then check the Realnet data in the link in your original comment. Why such a difference between the two data sets? What's your original source for the graph?

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  • Greg said:
    • 2 years, 1 month

    Disregard the GTA title in the charts: To clarify

    GTA (666 Sales) http://i39.tinypic.com/28s0end.png
    City of Toronto (485 Sales) http://i39.tinypic.com/52f3h2.png
    Outer GTA regions (excluding Toronto sales) http://i44.tinypic.com/vrg23d.png

    Data is here http://www.bildgta.ca/media_releases_2012_detail.asp?id=868

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  • Joe Q. said:
    • 2 years, 1 month

    I was perusing the Mississauga MLS listings registered as "sold" yesterday. (I don't usually look much at Mississauga, but got curious.) Interestingly, of the 24 homes in the list, only six sold for at or above the asking price. The other 18 sold below asking.

    I generally don't dwell too much on asking prices (they are more about marketing than anything else), but did find this ratio surprising.

    Of the homes in the list, six were on the market for about a week or less. The others ranged from 10 days to several months.

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  • Joe Q. said:
    • 2 years, 1 month

    Again today -- of twelve "sold" listings in Mississauga, only two sold at or above asking. Very strange.

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  • Appraiser said:
    • 2 years, 1 month

    I don't know where @Greg got his data, but the Realnet data that I subscribe to indicates that seasonal sales are slighty above the 5-year historical average for December and January.

    It also illustrated that for 2011 as a whole, condo high-rise prices declined ( y/y ) by -1.75% while low-rise prices increased 8.4%.

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  • Steve said:
    • 2 years, 1 month

    A little late to this thread but here's the data on January new home sales numbers over the past 13 years.

    http://informedadvantage.wordpress.com/

    January 2012 high rise new home sales were well off from January 2011 (record year) but up slightly from January 2007 (2nd best year). Hopefully the February 2012 data will provide more insight.

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  • terces said:
    • 2 years, 1 month

    Great post Ben. What in the world will it take to "flip the switch" to negative in Canada. In spite of warnings from the government, extreme articles in Macleans, the globe etc, there is still a buying frenzy in certain sectors. The extreme bubble areas are causing the numbers to be distorted, and people keep ignoring the on coming train wreck. What will change the market sentiment? Will it be one event that will be the final straw, or is it a long, long slow process?

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  • landlord said:
    • 2 years, 1 month

    When you lose your job.

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  • Kevin said:
    • 2 years, 1 month

    Ben,
    great post again.

    If construction employment reverted back down to 6% of the working population, the unemployment rate would be near 8.4%, up from 7.6%. This is with the expectation everything else would remain the same, but as we all know this scenario would be a drag on other employment and getting to double digit unemployment is certainly not a stretch.
    http://tinyurl.com/738w9y6

    The last two times Canada experienced double digit unemployment was right after epic housing bubbles that busted.

    Here is western Canada's housing bust in the early 80's
    http://tinyurl.com/87mhh9c

    Here is Toronto's housing bust in the early 90's
    http://tinyurl.com/73oz2ok

    A soft landing might be possible in a few select cities in Canada ( many stars would have to align for this to happen) but a hard landing in most cities is the more probable outcome.

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  • landlord said:
    • 2 years, 1 month

    In your second graph, the final date is missing for Toronto, where is 2010, 2011, 2012 compared to that peak of 1989????

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  • Bally said:
    • 2 years, 1 month

    Putting aside the fact that I don't believe soft landings even exist, what confuses me is why people consider flat prices for many years to be a 'soft landing'. Surely it is just a 'hard landing' in slow-motion. All the pain is still there (unemployment, excessive costs of housing, misallocation of capital, negative equity, etc.) just in a less concentrated form meaning it takes longer for the economy to correct itself. Personally I've always preferred ripping of the band-aid quickly but maybe I'm just a masochist like that. Plus I'm a renter so I know I won't be stuck overpaying for a rapidly deprecating asset.

    Maybe this would be a good topic to post on Ben - 'The myth of the soft landing'.

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  • Ben Rabidoux said:
    • 2 years, 1 month
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  • Joe Q. said:
    • 2 years, 1 month

    a recovery from the sluggish price growth of the 1990s

    The rest of the factors listed are possible causes, but this isn't -- it's a description of the effects. Makes no sense to me.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    [W]hat confuses me is why people consider flat prices for many years to be a 'soft landing'. Surely it is just a 'hard landing' in slow-motion. All the pain is still there

    Compare a soft landing where the multi-unit building gets completed to a hard one, where it sits, half built and abandoned for half a decade or more. They may both be misallocations of capital, but one is worse than the other.

    The cynic in me would point out that in a soft landing, the debtors get screwed, but in a hard landing, it's the creditors.

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  • Appraiser said:
    • 2 years, 1 month

    I'm not sure that population growth alone can help to sustain home prices either. However, one model cited by the BoC attributes 2001 to 2010 home price gains to the following:

    "◦Increasing population 33%
    ◦Rising incomes: 24%
    ◦Declining mortgage rates: 13%
    ◦Other (including “a recovery from the sluggish price growth of the 1990s): 29%"

    http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/02/t...

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  • Jim said:
    • 2 years, 1 month

    Unless the BoC can show us that residential construction has not been sufficient to meet demand from rising population, I'm inclined to say they've got this one dead wrong. They may be smart, but show me the data that supports that notion.

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  • Leo S said:
    • 2 years, 1 month

    I'm somewhat wary of any model that does not include relaxation of CMHC credit standards as a major factor. Is that bundled into Other? Ben has shown pretty clearly how the shift to 5% down, no CMHC limits, and extended amorts have boosted affordability, and how the market has risen to that new affordability ceiling.

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  • Test said:
    • 2 years, 1 month

    2011.http://ext03.realnet.ca/RealNet/pdf/newhomesMarketReport.pdf

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  • reasonfirst said:
    • 2 years, 1 month

    Appraiser,

    I am guessing that you did not read the artcile as you only linked to the CMT website.

    The concluding remarks of the article said this:

    "...expectations of rising future house prices and changes in the liquidity of the
    housing market have also contributed to the gains in house prices in the
    past decade. Over history, these other factors are associated with the
    medium-run tendency of house prices to rise faster than their long-run trend
    for a number of years and then subsequently adjust back to trend."

    http://www.bankofcanada.ca/wp-content/uploads/2012/02/review_winter11-12...

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  • Appraiser said:
    • 2 years, 1 month

    @reasonfirst:

    The key phrase from your BoC quotation above includes the following:

    "...house prices to rise faster than their long-term trend for a number of years..."

    The pertinent question for market timers is - how many years?

    Market timing aside, bear in mind as well that reverting back to the trend in price increases still implies price increases, just not above the long-term historical trend.

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  • Greg said:
    • 2 years, 1 month
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  • reasonfirst said:
    • 2 years, 1 month

    "still implies price increases"

    You are wrong. It could over correct and then rise agin to the trend, it could drop to the trend, it could flat line to the trend or it could rise slower than the trend to eventually meet it. Either way from an investment perspective, that is not something I would invest in.

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  • reasonfirst said:
    • 2 years, 1 month

    "not invest in"

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  • andrewf said:
    • 2 years, 1 month

    No, reverting to trend means the trend in price level path, not in y/y growth rates. In other words, negative y/y to get to the price level path.

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  • Tony Maynard said:
    • 2 years, 1 month

    The same silly arguments are used non-stop here in Australia. Population growth and the mythical 'housing shortage' (see http://www.differenthere.com/2011/07/neverending-shortage-story.html ) will supposedly save our bubble from popping. The proponents of that argument forget one thing. When prices diverge from fundamentals, a correction is inevitable.

    Population growth didn't save Ireland did it? Ireland had one of the strongest population growth rates in the world prior to their bubble popping, and now Irish house prices are down 50%.

    There is also a great discussion here ( http://australianpropertyforum.com/topic/8769009 ) on the Australian housing shortage myth, and the arguments put forward by the bulls are the same as always. We're different, they say.

    Until we're not.

    Tony.

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  • Appraiser said:
    • 2 years, 1 month

    @ Tony Maynard; Ireland is a terrible analogy. You fail to account for the fact that Irish house prices tripled in 6 years, while Canada's doubled in 10 years. A major difference in price acceleration of a mere 250%!

    On average, house prices in Canada are NOT currently accelerating at true bubble-speeds. There is a difference between a boom and a bubble.

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  • Joe Q. said:
    • 2 years, 1 month

    Appraiser, I don't think that in any way diminishes Tony's point, which was that strong population growth was unable to prevent a big decline in housing prices there.

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  • Appraiser said:
    • 2 years, 1 month

    @Joe Q.

    Re: Ireland: After prices tripling very quickly and then falling by 50%, I would say that despite such wild volatility, arithmetic is still on the side of the Irish homeowner who got in early.

    Regardless, population growth in and of itself, is clearly not the definitive variable in the equation. As the BoC study clearly illustrates, poulation growth is merely one of the factors affecting house prices.

    P.S. Analogy is NOT analysis. Ever wonder why all of the analogies to the U.S., Ireland, England etc., etc., never come to fruition? Does that not perplex you in the least? Or is it merely just a matter of time (if so, how much time - months - years) ?

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  • Brian Caldwell said:
    • 2 years, 1 month

    I agree with appraiser. Growth, even strong growth, in house prices does not mean there is a bubble. Take a look at these charts for 20 countries around the world where prices have been rising for up to 20 years, without crashing (includes Canada).

    http://australianpropertyforum.com/topic/9424587

    Will the doomsayers try to tell us every one of these countries has a housing bubble?

    I don't think so!

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  • Leo S said:
    • 2 years, 1 month

    @Brian. Do each of those countries have a housing bubble? Well that's impossible to say without going further into the details of what the fundamentals are of those countries. That's only 20 countries. Is it so outlandish to suggest that approximately 10% of the world's countries have a real estate bubble?

    Perhaps some of them do, some of them don't. It's kind of impossible to tell without longer term data. Some of those don't even have 10 years on the graph, which is not even one cycle. The fact that they have been increasing for 10 or 20 years doesn't mean they are in a bubble, but it equally does not mean they are _not_ in a bubble. I'm sure the experts in each respective country could provide more context.

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  • jim said:
    • 2 years, 1 month

    @Appraiser

    Ireland didnt see house prices triple in six years. Get your facts straight. Prices averaged 150K Euros in 2000 and peaked at just over 300K nationally in late 2006. You will use any "facts" to support your BS arguments, even if it means lying through your teeth. Zero integrity.

    By the way, the US didnt see house prices triple in 6 years. Was it not a bubble?

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  • Appraiser said:
    • 2 years, 1 month

    @jim.

    Direct quote from attached article: "House prices went on to triple between 2000 and 2006."

    http://en.wikipedia.org/wiki/Irish_property_bubble

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  • Ben Rabidoux said:
    • 2 years, 1 month

    Classic Appraiser. "Well if Wikipedia said it..."

    Jim's right. Here's a publication from a slightly more credible source: The IMF

    http://www.imf.org/external/pubs/ft/scr/2010/cr10209.pdf

    Reference page 9. I'll echo Jim's sentiment: Get your facts straight.

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  • Appraiser said:
    • 2 years, 1 month

    @ Brian Caldwell:

    "I agree with appraiser." ? Are you sure you're on the right blog? Thanks anyway.

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  • Joe Q. said:
    • 2 years, 1 month

    There is a difference between a boom and a bubble

    I would be interested to know how you (Appraiser) distinguish between the two. Obviously you think Toronto is in a boom, not a bubble. What about Vancouver? Montreal? Australia's big cities?

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  • Appraiser said:
    • 2 years, 1 month

    @Joe Q.

    Boom vs. Bubble? Let's see, you do the math. How long would it take for prices to triple at these rates? - Latest Teranet data is out today. Here is an excerpt regarding y/y prices:

    "The 12-month gain of the composite index in December was 6.8%. The December 12-month change varied widely from market to market. It was 9.9% in Toronto, 8.7% in Winnipeg, 8.2% in Vancouver, 7.7% in Hamilton and 7.2% in Quebec City - five markets in which the 12-month rise exceeded that of the composite index. It was 6.2% in Montreal and 4.6% in Ottawa-Gatineau."

    "There were much smaller 12-month gains of 1.6% in Halifax, 1.0% in Edmonton, 0.9% in Calgary and 0.3% in Victoria. December was the first month since September 2010 in which all 11 metropolitan markets showed prices up from 12 months earlier."

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  • Leo S said:
    • 2 years, 1 month

    >> How long would it take for prices to triple at these rates?

    I don't get it. Why is a tripling of prices now the criteria for a bubble? Ireland's situation was extreme, but certainly not the only place that had a bubble.

    Also Canada is a little different than Ireland. All the country-wide stats for Canada are of little value because there are many places without a bubble.

    >> Latest Teranet data is out today

    Wait, you like Teranet now? I thought it was a crappy index and the MLS HPI was superior in every way. Why aren't you quoting that one?

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  • Appraiser said:
    • 2 years, 1 month

    Nothing wrong with Teranet, it's just a little dated. Teranet is still quite useful when examining historical information.

    The new HPI is better but it's brand new and has limited data at this point.

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  • Joe Q. said:
    • 2 years, 1 month

    That's a nice bit of statistics Appraiser, but you didn't answer my question.

    You said "There is a difference between a boom and a bubble". I am just interested in where you draw the line between a "boom" and a "bubble". Is a tripling of house prices in six years the cut--off for a "bubble"?

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  • Appraiser said:
    • 2 years, 1 month

    @Joe Q:

    A bubble is formed when the affordability indexes say so. We're not there by a long shot.

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  • Ben Rabidoux said:
    • 2 years, 1 month

    Can you point to the bubble in NAR's affordability index?

    http://economistsoutlook.blogs.realtor.org/2012/01/06/housing-affordabil...

    "An index of 100 means that the family with median income earns exactly the income needed to qualify to purchase the median priced home. Anything greater than 100 signals that the median income family has more income than is necessary to qualify to purchase the median priced home, and the greater the index, the greater the median income is relative to the qualifying income."

    The index never fell below 100.

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  • Appraiser said:
    • 2 years, 1 month

    When up to 25% of all mortgages are sub-prime, the affordability index is useless.

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  • Ben Rabidoux said:
    • 2 years, 1 month

    You're right on the second part of that statement: "the affordability index is useless"

    For lots of reasons I've previously discussed: http://www.theeconomicanalyst.com/content/why-housing-affordability-misl...

    But hold to it if you'd like. I wouldn't expect facts to sway your opinion.

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  • Appraiser said:
    • 2 years, 1 month

    Unfortunately you dismiss all of the indexes, even the BoC, which is not fact-based analysis, but bias.

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  • Ben Rabidoux said:
    • 2 years, 1 month

    I don't dismiss them; I point out their flaws....using 'fact-based analysis'. Nothing wrong with looking at affordability indices as ONE metric, but if it's all you're leaning on, you just might be missing the bigger picture.

    And if you do think an affordability index is the best gauge of market health, you may want to check out RBCs affordability index for Montreal, Vancouver, and Toronto....home to over 1/3 of all Canadians.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    "When the facts are against you, argue the law. When the law is against you, argue the facts. When both are against you, pound the table."

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  • Appraiser said:
    • 2 years, 1 month

    I'm still waiting for the facts, or the law, or anything of substance to convince me that my positive real estae bias is incorrect. Thus far, I have rebuked every argument, at least to my own biased satisfaction.

    In addition, it must be obvious by now that despite all of the long-standing and ever-so dire warnings of an imminent market collapse, my bias is still correct.

    Simply "dancing until it rains" is not a justifiable position. Yet all I see is dancing.

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  • Greg said:
    • 2 years, 1 month

    The government can only lie for long until investors start taking matters into their own hands. You're going to have a hard time convincing this blog that gas and other everyday items are increasing by 2.3% annually, when in fact, it happens to be nearly triple that amount.

    The Everyday Price Index
    http://www.aier.org/article/7545-everyday-price-index

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Look Appraiser, your positive bias is obviously correct. Prices in the places that matter have been going up. They've been climbing more than income, and they've been climbing more than rents. RE markets are serially correlated, which means the trend is your friend. Bubbles last longer than the bears expect. Prices could keep going up for another year or two or five.

    My metrics are price/income and price/rent -- everything else is gravy, though I do note in passing that the BoC Governor is hollering like his hair's on fire.

    Anecdotally, I'll note that, near the top of the marketin Toronto, either agents are having trouble pricing properties or there's some panicky sellers. Take C2217766 or C2275987 for example. Did their loans get called? Price reductions of that magnitude in that short a time on those properties is indicative of something unusual, and these aren't amateur agents or unique properties, so what's up? From here on, sentiment could be a problem. Nothing West of SK seems to be doing all that well, which could leave Toronto the last major market standing. Credit is tightening, and that won't help.

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  • Appraiser said:
    • 2 years, 1 month

    Never a good idea to narrow one's focus on a few listings, when 80- 90,000 listings a year get sold on TREB.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Never a good idea to narrow one's focus on a few listings, when 80- 90,000 listings a year get sold on TREB.

    REALLY?! I'm looking for information. When a condo sells in Cityplace, that provides me no information whatsoever. When a developer buys a teardown, draws up plans and gets permits, then lists the package on MLS without even offering to build it, that provides information. When somebody assembles a prime parcel near the subway, then lists the lots for sale on MLS individually, that provides information.

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  • Appraiser said:
    • 2 years, 1 month

    Anecdotes are for fun, Garth Turner swears by them.

    You appear to seek information to support your bias, while a huge market is swirling around you, i.e. - 250 MLS sales a day on TREB.

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  • Leo S said:
    • 2 years, 1 month

    It all depends on the local market. I think you're in Toronto, and it appears that you have been absolutely correct there. Prices up and as of yet no sign of a turnaround. Luckily I don't live there. In Victoria, prices are down and dropping, so you see we have both been correct. Country wide metros have little relevance because they're incorrect for every market.

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  • Joe Q. said:
    • 2 years, 1 month

    When up to 25% of all mortgages are sub-prime, the affordability index is useless.

    This comment is particularly rich, considering how vigorously you've defended Canadian affordability indices that assume first-time buyers have always put down 20% on their purchases.

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  • Appraiser said:
    • 2 years, 1 month

    As long as the indices use the same metrics, the results are valid. The indices that are widely quoted (RBC, TREB) called a peak at 55% back in '89, as the precipice.

    We are 40% below that threshold.

    Ridiculous fear-mongering.

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  • Leo S said:
    • 2 years, 1 month

    Again, it depends where you're looking. The RBC affordability index for BC is far above anything it reached in 1989. http://www.rbc.com/newsroom/pdf/HA-1125-2011.pdf
    And this is with record low interest rates.

    So, based on that, would you agree that BC, or at least Vancouver is in a bubble, even if you believe Ontario is not?

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  • Appraiser said:
    • 2 years, 1 month

    I previously describe Vancouver as "out of control" and yet I've been saying that for over 20 years now.

    Vancouver is an anomaly, an outlier - a mystery wrapped in a riddle, an enigma.

    Even if Vanvouver prices dropped dramtically, it would still be an expensive place to live.

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  • Greg said:
    • 2 years, 1 month

    Now you're saying Vancouver is a unique situation as if Canada will be isolated from their crash. Get it through your head—there is nothing more the government can do or will do for the housing market. It's over.

    Here's BMO's own words after CIBC and TD made the same announcements.

    “We're going to have to take some business from others as the market is slowing around us."

    http://www.mortgagebrokernews.ca/forum/bmo-sends-a-warning-to-brokers/12...

    Stick a fork in it.

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  • Leo S said:
    • 2 years, 1 month

    Right you are, I do remember you saying that. I wonder how long it can continue on the west coast. Certainly Toronto looks completely benign in comparison to here. Heck, the sleepy little backwater of Victoria has the same average home price as Toronto. So either Victoria is in for a big fall, or Toronto is in for a big rise.

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  • landlord said:
    • 2 years, 1 month

    Keep banging your head on the wall Ben, you have been wrong for over 2 years now and probably another 2 with your doom and gloom claims. End of the month, get that check book out and pay that rent.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    I live in a jurisdiction with rent control, strong tenant protection laws (and no landlord protection to speak of), in a property that wouldn't cash flow at today's valuations. When I write that cheque every month, I'm getting my largest living expense at 20% off, and my net worth is growing faster than if I owned. You think that doesn't put a smile on my face every month?

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  • Rajiv Kaushik said:
    • 2 years, 1 month

    And when prices crash, I will be a predatory buyer. I was at the other end in the US in 2007 and have no qualms about reversing roles with brutality. Sad part is that these real estate agents will still be making money all the way to the bank. The real estate agents I know expense-deduct a significant portion of what they owe in income taxes (like driving around a 100k Merc when showing homes) and when the market turns they will likely not be paying any taxes.

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  • landlord said:
    • 2 years, 1 month

    Keep renting, you have no clue what you are talking about. If instead you had written that check to yourself and held property, you would have made a killing on your investment. Instead you pissed away money renting...wow, you are so smart, keep smiling.

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  • tw said:
    • 2 years, 1 month

    Well what have we here? A pejorative statement from a landlord about renting? Mocking someone for being "so smart" after that remark is the epitome of irony.

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  • Rajiv kaushik said:
    • 2 years, 1 month

    Buying re in niche areas in the US now seems very smart versus buying here. I agree with the concept of buying re as investment but the risks south of the border are much lower than here at this point in time. I am an no smart guy but i sure do learn from mistakes and i know never to repeat one. There is no point arguing with bulls or bears right now. I say rest in peace with the canadian market for now... Hedge against canadian dollar, rent here, buy across the border, invest in fixed deposits in asia where fd rates are 9 percent plus. That may not be very smart but it is not dumb either.

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  • Greg said:
    • 2 years, 1 month

    Canada's real employment figures by province.

    Employment To Population Ratio (R8)%

    Canada http://i44.tinypic.com/53pw1w.png
    Saskatchewan http://i41.tinypic.com/oh4kgn.png
    British Columbia http://i41.tinypic.com/2igc47k.png
    Alberta http://i43.tinypic.com/3590rp4.png
    Quebec http://i40.tinypic.com/dqhbbm.png
    Manitoba http://i44.tinypic.com/2qxaj9s.jpg
    Ontario http://i42.tinypic.com/117tjxh.jpg

    Now consider from 2008, nearly $900 billion in stimulus money amongst Canada and the U.S. was injected into the economy to save jobs and businesses, yet we are still at levels seen in 2001.

    Recovery—fail.

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  • Greg said:
    • 2 years, 1 month

    Latest StatsCan estimates of private and public investment intentions for 2012.

    Finance and insurance Est. -14.2%
    Real estate and rental and leasing Est. -11.2%
    Management of companies and enterprises Est. -19.1%

    http://www.statcan.gc.ca/daily-quotidien/120229/t120229a1-eng.htm

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  • Petr S said:
    • 2 years, 1 month

    For an economist, its tough to give an exact date for a correction in the market. Economists are good at pointing out that something is over/under valued. What's in my wallet- a cheque book too, for paying the rent. As for you landlord, I've called you three times in the afternoon and twice in the evening, replace my f---kin fridge, b---ch

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  • rp1 said:
    • 2 years, 1 month

    All of those countries have housing bubbles, except possibly Iceland since its currency was heavily devalued (post credit bubble).

    http://brazilianbubble.com/

    http://www.macrobusiness.com.au/

    http://www.zerohedge.com/news/guest-post-post-2009-northern-western-euro...

    etc.

    The problem is easily spotted by comparing the cost of purchasing a house to the cost of renting one perpetually from the returns of a standard investment portfolio. For my neighbourhood, houses sell for $400k but you can rent them forever with a $270k portfolio. Guess what they're worth?

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  • landlord said:
    • 2 years, 1 month

    What rate are you assuming you are earning on your 270k and what about the risk of the market going down vs the risk of real estate.

    rp = renter perpetual...

    Keep renting buddy. We need more like you.

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  • Greg said:
    • 2 years, 1 month

    It appears Canadian and Australian banks are causing a stir in the international bond market by unloading pools of mortgage bonds that are ready to implode (of course bond buyers don’t know this as all they care about is that it’s stamped AAA with CMHC behind it). It all looks too familiar to what happened in 2007 when US banks unloaded toxic mortgages on the international market at the expense of AIG to cover insured defaults.

    http://www.bloomberg.com/news/2012-03-01/credit-suisse-pays-almost-doubl...

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  • landlord said:
    • 2 years, 1 month

    Keep in mind that I would never believe the vacancy or home ownership #'s in Canada. over 75% of people who spec on property will use all the family members in name to own the property to avoid capital gain tax. The home ownership density is much lower then people think. On the ground, remember, if someone picks up 5 condos to flip, he will put one in every family members name. That is not five independent owners making it look as ownership density is large.

    Also keep in mind that the vacant % #'s are wrong. By far most people are keeping someone in a basement, closet, using craigslist, etc to find renters. These are never claimed on taxes and no true way exists to measure the vacant home rate. Condo's are always offline on MLS (you have to pay a broker to list which will wipe out your first year returns)
    if you added that in, it would explode the vacancy rate. Housing on the other hand is now creeping like Vancouver did with adding the mortgage slave helper in the basement.

    I see it everyday, so don't always follow the charts and suggest #'s. On the ground, land is what people want, not some box in the sky. Many of the high end real estate projects are starting to pull back launches as no one is showing up to buy 1800$ sqft condo's.

    Toronto is a highly diverse city, but very self segregated. What does this mean? More and more ghetto's and less mobility to move out of the comfort zone. This will force people to over for some areas and allow other areas to drop like stones (bad schools, old community centers, etc). If you buy, overpaying is not bad in a good area, you will get it back in the future...I can't say the same when an agent says "up and coming area" It never goes up, and never comes.

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  • Greg said:
    • 2 years, 1 month

    As per your comment above:

    "Keep renting, you have no clue what you are talking about. If instead you had written that check to yourself and held property, you would have made a killing on your investment. Instead you pissed away money renting...wow, you are so smart, keep smiling."

    And here are some MLS Toronto rental price stats that are on the market with no bids generating $0 returns.

    1 + 1 Beds, 1 Baths
    Listings 182
    Average $1,750
    Median $1,750

    1 + 1 Beds, 2 Baths
    Listings 60
    Average $2,445
    Median $2,350

    2 Beds, 1 Baths
    Listings 53
    Average $1,941
    Median $1,900

    2 Beds, 2 Baths
    Listings 261
    Average $2,839
    Median $2,550

    2 Beds, 3 Baths
    Listings 42
    Average $5,220
    Median $4,300

    All Listings
    Count 598
    Average $2,556
    Median $2,350

    Price Distribution
    $500-750 6
    $750-1000 33
    $1000-1250 3
    $1250-1500 14
    $1500-1750 78
    $1750-2000 87
    $2000-2250 45
    $2250-2500* 107*
    $2500-2750 58
    $2750-3000 61
    $3000-3250 22
    $3250-3500 25
    $3500+ 59

    Details here https://docs.google.com/document/d/1IKhmuYJCKr9Wb2qISpQnGDueyXHH2-e1tekO...

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  • landlord said:
    • 2 years, 1 month

    I would agree more places are available for rent then this. Boxes in the sky will come down, Boxes on the ground (homes) will continue to raise...

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  • Greg said:
    • 2 years, 1 month

    Not when the boxes on ground rely on the boxes in the sky to keep the property ladder moving. The model: First time buyers moving into 1-2 bedroom 200-300k condos; moving 2-3 bedroom 300-450k condo owners into 450-600k homes, moving 450-600k home owners into larger 600-850k homes and so on...

    Once the bottom stops, the majority of the market becomes illiquid.

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  • landlord said:
    • 2 years, 1 month

    That is wrong, a growing family cannot live in condo across the street from HELOC horny teens.

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  • Greg said:
    • 2 years, 1 month

    You're right, they can't, because waiting a few years to save hundreds of thousands of dollars is not worth the extra space they would get for a 2 year old and a new born child; they are "doomed" and evil parents if they don't.

    "Richardson is now worried the couple are “doomed” to have to raise their children in their two-bedroom Beach apartment after losing out Monday in a six-person bidding war — their second in just a few weeks — on a renovated three-bedroom Beach semi that was listed for $699,000."

    http://www.thestar.com/mobile/NEWS/article/1040425

    One at a time, those horny teen condo owners sipping their $6 Starbucks coffee everyday will be gone faster then they came in.

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  • landlord said:
    • 2 years, 1 month

    Funny...my advice to that couple.

    Churchill, "It's not your spending thats the problem, its your income"

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  • Joe Q. said:
    • 2 years, 1 month

    That is wrong, a growing family cannot live in condo across the street from HELOC horny teens

    Is that supposed to be a "values statement" or a description of reality?

    I know of at least three (off the top of my head) families of 4+ (two adults and two kids) living in 2BR condos. They aren't slouches, either -- I am talking about doctors, teachers, high-tech workers, etc.

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  • landlord said:
    • 2 years, 1 month

    High Density of Condos are built around the worst public schools in the city, so on average that family will be sending kids to schools where nobody speaks english and have the kids are failing at math. That is the reality, move to a house or deal with it.

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  • Joe Q. said:
    • 2 years, 1 month

    Gross over-generalization. I'm not talking about CityPlace here.

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  • BobJJones said:
    • 2 years, 1 month

    To all the naysayers, please visit http://fieldgatehomesblog.com/ to see what's going on in the real life, instead of plowing through charts to support your biases

    To all RE bulls.. and as the saying goes "now is the time to invest and get rich" - Buffet '74

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  • Greg said:
    • 2 years, 1 month

    As per your buddy above who mentioned "On the ground, land is what people want." He is correct, that is why if you actually checked the stats you would see that 416 sales are heading 905 for land, which is the worst thing that could happen as demand flows out of Toronto into the burbs, leaving TO properties illiquid. These is the anatomy of a bubble defined as the effect that 'rocks the boat'.

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  • landlord said:
    • 2 years, 1 month

    I could show you photos of people banging on doors to at Walmart every year on black friday, Crazy for iphones, I can even show you pictures of these same stuff in Vancouver. This bull market in Toronto is just getting started, people from China are selling in Van and buying 2 in Toronto for the same price!

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  • mfx said:
    • 2 years, 1 month

    "You only find out who is swimming naked when the tide goes out."
    Buffett 2001

    great wisdom

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  • PeterPropertyManager said:
    • 2 years, 1 month

    I agree with Landlord , i have purchased more than one property (4) with partners over time , and i thought i paid WAY too much everytime , i worked 2 jobs thru all of it , and my job as i saw it , was not to watch values , but to pay bills and maintain as required , learning as i went , making tons of mistakes, mine was a long term plan , no crystal ball , no magic wand, no parental help, finding good tenants (court twice) both wins btw, every chance i got i borrowed against value , and unlike some people , i re invested in my houses , either to increase rent or avoid aggravation , which there is alot of aggravation tending to tenants needs , the only stats i was concerned with were MINE and the only spending i was concerned with was MINE , sacrifices i made to my personal life were always enough to counter market problems , my orig interest was 9% and i thought that was LOW , my partners were silent and were i managed to keep the bills paid , sometimes having to sell things to keep up, taking chances involves risk , and i would rather buy something and take a chance then whine about the future , and if at the end of it all it didn t work , i could claim bankruptsy and still believe i tried to do something good , for tenants , investors , lenders and govt , and especially for me , i am a mathematician , always was , if people spent as much time working on something instead of trying to figure out flawed graphs and postering , you will get ahead , good luck to those who do, God Bless

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  • Greg said:
    • 2 years, 1 month

    And I thought my spelling and grammar was bad. App makes characters look so real I almost believed it.

    Get a life App. You're pathetic.

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  • reasonfirst said:
    • 2 years, 1 month

    Typical crap assumption that ALL real etate bears hang out on downer blogs all day and whine and do nothing else. As if there was nothing else to in life if you don't buy real estate. That over the top moronic assumption in itself kills your credibility.

    Have fun with your sacrifices. I am going to have fun with my lifestyle. Bye bye.

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  • landlord said:
    • 2 years, 1 month

    Canada is making a first on many fronts with this housing boom. But most important is even if you invested in Energy, what we are known for, you Suncor stock has done nothing for you, your banks have not beat RE, Canada RE has beat any investment one could have made over the last five years. Its been an amazing run, while people were watching every tick with the Euro Crisis last year, worried about savings, I was playing golf.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Canada RE has beat any investment one could have made over the last five years.

    Not Edmonton, Calgary or Victoria. And let's face it: If RE had underperformed over the period, we'd be buying it from you right now (or from your bank).

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  • landlord said:
    • 2 years, 1 month

    No Ralph, you don't understand RE. Unlike stocks, RE doesn't have a margin call. My renters have always paid on time. Even the ones that are not getting a bonus, they want to keep renting and saving to buy a home one day. When you lost your savings in Euro Crisis or exited the market, I am still holding a solid asset that is generating a great yield.

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  • Ralph Cramdown said:
    • 2 years, 1 month

    Had I known nothing else about real estate, Landlord, you've spelled it all out for me right here on this thread:
    - I should overpay in a good neighbourhood and hope inflation and tenant turnover eventually give me a cap rate
    - I'll be competing with both amateurs with mortgage helpers (who don't understand cap rate) and professional tax cheats, who won't need as much of one
    - vacancy rates are higher than they appear

    Anytime I feel like being a landlord, I can click my mouse. $20 round trip gets me a diversified portfolio of properties, professional management, favourable tax treatment without a lot of paperwork, and the ability to resize my exposure any time for peanuts. I don't have to call the plumber, and I don't have to be the plumber.

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  • landlord said:
    • 2 years, 1 month

    Good luck REITs in Canada, they are the most overpriced in Canada because of people as yourself. I can guarantee you REIT stock in Canada wil be 20% lower in 24 months

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  • Ralph Cramdown said:
    • 2 years, 1 month

    I agree that REITs are pricey right now. Now how come you don't have the same insight about the underlying product?

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  • Greg said:
    • 2 years, 1 month

    February 2012 Victoria Real Estate Market Reflects [Plunging] Consumer Confidence: http://www.vreb.org/mls_statistics/current_statistics.html

    "The story continues from last month when the Victoria Real Estate Board reported a relatively stable market when compared to the same time in 2011 [why are they comparing last month?], but REALTORS® report they are optimistic that new provincial HST transition rules and a New Home First-time Buyers Bonus will stimulate sales of new properties."

    Pause II You know something is wrong when excuses come before the number and more stimulus is needed to keep the party going, because heaven forbid, if the government didn't help, well.. ya know.

    Play >>February’s sale volume was virtually identical (they really meant FLAT) to that of February 2011, but the average price softened (gently now) by 5% for single family homes over February 2011. The average sales price for a single family home in Greater Victoria was $579,985, with a six-month average of $594,027, showing a corresponding decrease of 4.7% over February 2011.

    Let's look at y/y average and median prices.

    Feb 2011 Single Family Average $610,374
    Feb 2011 Single Family Median $564,750
    Feb 2012 Single Family Average $580,556 -4.89% y/y
    Feb 2012 Single Family Median $530,250 -6.11% y/y

    Feb 2011 Condominium Average $323,844
    Feb 2011 Condominium Median $285,444
    Feb 2012 Condominium Average $313,093 -3.32% y/y
    Feb 2012 Condominium Median $276,250 -3.22% y/y

    Feb 2011 Townhouse Average $415,591
    Feb 2011 Townhouse Median $393,000
    Feb 2012 Townhouse Average $393,934 -5.21% y/y
    Feb 2012 Townhouse Median $378,450 -3.7% y/y

    Luckily the hot spring season is here as speculators await flocks of HAM to come bail everyone out again, because like last year (as greed says), just buy another property and hang-on for one more season.

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  • landlord said:
    • 2 years, 1 month

    Greg, whistler is probably down 50% in 10 years. Of course, the point is that if you are a RE investor, you always stick to golden rule. LOCATION LOCATION. Everything else doesn't matter. The last time I checked, Victoria is where people in Canada went to go and die and the Asians don't ski.

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  • Greg said:
    • 2 years, 1 month

    Ok then how about this one from REBGV:http://www.rebgv.org/news-statistics/greater-vancouver-housing-market-trends-near-long-term-averages-spring-market

    As for Asian immigrants, we had some pretty racial remarks coming out of Minister Jason Kenney's mouth today regarding immigration reforms to allow businesses to select immigrants based on skilled work: http://www2.macleans.ca/2012/03/01/canadas-aussie-rules-immigration-reform/

    “It’s quite clear from the Australian evidence that it has the effect of shifting immigration away from non-English speaking countries, China particularly.”

    This is all part of NGDP targeting as I discussed in the earlier post. They are pulling the plug on RE and directing capital to where it's needed. The housing casino is over. For recent buyers who can maintain their mortgage payments and weather the storm (at a loss) will do so regrettably. For those who leveraged themselves and spent away their equity will get what they deserve.

    Are there opportunities? Of course there is and always will be. Right now if you own clean affordable one bedrooms in the city, you have no worries and probably wished you had purchased more units. There's a shortage right now. However the masses do not think strictly in terms of RE investment as most base their decision on personal needs with the intention of renting it out for a few years, only later to be stuck with a property that nobody is willing to pay $2000 a month for. That is the biggest mistake I see over and over again. Personal taste and emotions should never be commingled with business decisions.

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  • Leo S said:
    • 2 years, 1 month

    >> LOCATION LOCATION. Everything else doesn't matter. The last time I checked, Victoria is where people in Canada went to go and die and the Asians don't ski.

    LOL. As someone living in Victoria and watching the housing market since 2008, this is too funny. The mantra of the real estate bulls in Victoria is that everyone wants to live here.

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  • Appraiser said:
    • 2 years, 1 month

    @ Leo S.

    "Watching" the market for 4 years in Victoria.

    Really?
    _________________________________________________________________________________

    "And then one day you find ten years have got behind you, no one told you when to run, you missed the starting gun."

    Pink Floyd.

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  • Leo S said:
    • 2 years, 1 month

    It's a hobby more or less. I can demonstrate with actual numbers how we have saved thousands by renting in that time of you want. While our peers spent their summers renovating, we spent them out having fun.

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  • Perry said:
    • 2 years, 1 month

    I'm dissapointed in many comparisons of the Canadian situation with the US situation at the start of the housing correction and subsequent financial fiasco (including the latest Macleans) which don't explore potential solutions. Instead there's a tendency to blame retail borrowers for acting in economically rational ways: i.e. borrowing cheap to invest in assets appreciating at higher rates than the cost of borrowing. In my mind there is no problem in doing that and real estate in Canada has generally been fullfilling the requirement. Banks seem to have no concern that their portfolios of loans are at risk of default or their interest rates would reflect the risk ...right? Perhaps the problem is in how the banks are operating, or assessing risk, not how the borrowers are behaving. Or, perhaps the risk models are not actually as they are perceived (i.e. there significant misperceptions of risk) by the different participants in this business.

    When our Canadian chartered banks report profit growth at 5 to 8 times GDP growth a red flag is raised in my mind. Why are banks growing so vigourously when the rest of the economy is not? Do they not have to address risk in their real estate loans through higher rates because they do not have significant risk of loss? If bank profits are growing so fast, where is that growth coming from - is it at the expense of other sectors - why? What would the GDP growth rate be ex financial sector? What are the policies affecting the banking and finance sectors that are so disproportionately in their favour? Are those policies in effect a tax on other sectors being collected by the chartered banking sector? ... a transfer of wealth? ... is that in the countries' best interest? Should the Bank Act be revisited and revised to address the real source of the problem?

    I am not an economic modeller, and I know this forum is not focused on the banking sector, but I would be very surprised to find an explanation to the questions of: Why have Canadian real estate prices continued to rise? and ...When will they correct? tat did not include a significant explanatory element on Canada's set of banking policies.

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  • Greg said:
    • 2 years, 1 month

    "Why are banks growing so vigorously when the rest of the economy is not?"

    BNN's Howard Green asked BMO's Bill Downe the same question: Go to 6 min mark http://watch.bnn.ca/#clip598975

    And the answer is here http://i42.tinypic.com/qnnthy.png That's T for trillions.

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  • 45north said:
    • 2 years, 1 month

    Perry: What are the policies affecting the banking and finance sectors that are so disproportionately in their favour?

    Canada Mortgage and Housing Corporation (CMHC) guarantees most Canadian mortgages.
    http://www.cmhc-schl.gc.ca/en/co/moloin/index.cfm

    CMHC guarantees mortgages where the borrower has less than 20% down. He pays the insurance to CMHC but in case he defaults then the bank (mortgagee) submits a claim to CMHC for its losses. At the moment the default rate is 0.5% so there aren't too many claims. Compare and contrast with the US where the default rate is 10% but higher in places like Nevada and Florida. Way higher. There are two private companies that also provide mortgage insurance: Genworth and Canadian Guaranty.

    Jim Flaherty, Minister of Finance will soon announce changes in the kinds of mortgages that CMHC will insure. It will no longer insure mortgages more than 25 years. This means that at the outset the borrower has to agree to pay off the mortgage in 25 years. However the interest rate on almost all mortgages in Canada are set for a maximum of 5 years unlike in the US where the rule is 30 years.

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  • Perry said:
    • 2 years, 1 month

    Wow! great response to my query.

    Bill Downe threw out a load of crap though. Based on his drivel, 20% profit growth came out of increased profit from the retail client fees. I don't believe it for a minute.

    I fear that the reality is probably closer to - they make excess profits through managing the conflicts of interest that they participate in, very well, and very much in their own favour. That includes activities such as providing investment advice while managing their own portfolio of investments; Playing both sides of the loan & insurance game; and rehypothecation of client savings and investment accounts into investments in their own accounts, which they leverage in investment positions significantly enough to turn 2% returns into 20% returns. Offshore they can leverage infinitely and it's off-book as well, so they don't even have credit rating risk. Risk is not an issue they have to consider, unless you mean compensation risk or bonus risk, because as has been proven the world, over banks are not subject to investment risk - they have insurance for that - taxation. I hope I'm wrong, but I don't see the evidence to the contrary.

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  • Greg said:
    • 2 years, 1 month

    Watch how it's done here http://www.youtube.com/watch?v=LKsZ1hqHBHU

    This is how our modern banking system works and why it will eventually collapse. There is no solution when the laws of math determines the outcome.

    This stuff is too scary for an RE blog...

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  • Perry said:
    • 2 years, 1 month

    Thanks Greg, V.good info in the video.
    Makes me wonder how Flaherty - Carney are playing this for Canada. I would think that our banks have significant skin in this game and will not emerge unscathed. Certainly Canada would suffer significantly in the deflationary scenario and we've been through the inflationary phase and no it's no walk in the park.

    But, you're right, this is not the forum. I presented it here because of the knowledge of the participants and I thank you.

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  • Perry said:
    • 2 years, 1 month

    Banking impact on RE
    Well, it's a major component of bank portfolios, which they roll into CD's and resell. It's big enough in the Canadian economy that Flaherty/Carney will do whatever is necessary to avoid a RE collapse and the correlated banking correction. But will F/C do the right thing to correct the improper signals that the banking sector is sending the market. Their jaw-boning the market is not changing the Banker's behaviour, that's where the real problem lies, not in the borrower behaviour. Under the current banking regulations the banks are going to continue to push this market (because that is in their own best interest) until it dies of exhaustion, but banks will not bear the cost - obviously.

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  • Greg said:
    • 2 years, 1 month

    Canadian and Australian banks have already been dumping covered bonds on the international markets and are causing quite a stir. http://tinyurl.com/7c7vvaw They know the housing market is going to crash—that's why they're front-running to save themselves.

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  • Appraiser said:
    • 2 years, 1 month

    Well it looks like my predictions came true. Latest TREB data released today:

    "Toronto, March 5, 2012 – Greater Toronto REALTORS® reported 7,032 sales in February 2012 – up 16 per cent compared to February 2011. New listings were also up over the same period, but by a lesser 11 per cent to 12,684. It is important to note that 2012 is a leap year, with one more day in February. Over the first 28 days of February, sales and new listings were up by ten per cent and six per cent respectively."

    "The average selling price in the TREB market area was $502,508 in February – up 11 per cent compared to February 2011. The Composite MLS® Home Price Index for TREB, which provides a less volatile measure of price growth compared to the average price, was up by 7.3 per cent compared February 2011."

    "To infinity and beyond"~ Buzz Lightyear.

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  • reasonfirst said:
    • 2 years, 1 month

    Meet the new CREA spokesperson Buzz Lightyear!

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  • Greg said:
    • 2 years, 1 month

    "Over the first 28 days of February, sales and new listings were up by ten per cent and six per cent respectively."

    That makes around 6664 sales in the first 28 days (368 added on the 29th), now remove 230 revisions to compare sales properly (28 days) to last year—now you have 6,296 sales for Feb 2012, up 4%y/y.

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  • 45north said:
    • 2 years, 1 month

    Toronto, March 5, 2012 – Greater Toronto REALTORS® reported 7,032 sales in February 2012 – up 16 per cent compared to February 2011.

    I had coffee today with Jim Flaherty, he said things were looking so fine he thought he should raise the down payment requirement to 10%.

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  • Brett said:
    • 2 years, 1 month

    Yeah, kinda humorous that app is cheer leading price increases this month. To me this is the one month bulls don't want to see a large price increase. If F was on the fence about rule changes any gain in momentum in feb's numbers might just push him to implement the required changes.

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  • Appraiser said:
    • 2 years, 1 month

    Rule changes rule shmanges, what affect did the last 3 mortgage tightening rules have? Can you say negligible? Yeah, yeah I know - this time it'll be different; just like last March when the rule changes were going to kill the market. Or was it the HST?

    Here's the real kicker. Toronto has not one but two land transfer taxes. You have to pay double just to live in Hogtown, and yet bidding wars are commonplace.

    Can you imagine how much higher prices would be in the big smoke without municipal government interference?

    Here's an idea, they should just triple or quadruple the LTT, because demand is so freaking unreal in T.O. that it just doesn't seem to matter.

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  • Greg said:
    • 2 years, 1 month

    Every rule was offset by lower rates, lower mortgage standards and tax credits. That's why they had no effect.

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  • Joe Q. said:
    • 2 years, 1 month

    You have to pay double just to live in Hogtown, and yet bidding wars are commonplace.

    Bidding wars are commonplace because the number of listings is low compared to the number of interested buyers. It's right there in your cut-and-paste from TREB. Months of inventory is at a record low in Toronto. Why is this so hard for you to understand Appraiser?

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  • Olga said:
    • 2 years, 1 month

    CREA's 2012 outlook:

    CREA expects Alberta, Saskatchewan, and Nova Scotia will drive the sales growth this year, offsetting weakness in British Columbia, Ontario, and New Brunswick.
    ....
    In Vancouver, prices are already falling from sky high levels a year ago, especially in the once bustling condominium market, and prices elsewhere in country are not rising significantly to offset those big declines...

    By contrast, sales and prices are still moving higher in Toronto, with sales up 16 per cent from last February and prices up 11 per cent.

    Sales are now expected to pull back by 0.3 per cent to 457,200 units in 2013, with prices rising 0.9 per cent to a national average of $362,300, CREA said.

    Ontario is expected to weigh down the national results, as it is the only province not expected to make "modest gains," CREA said.

    Read more: http://www.ctv.ca/CTVNews/Canada/20120305/crea-housing-sales-120305/#ixz...

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  • Market Player said:
    • 2 years, 1 month

    The last thing F should do is to interfer with the maket, i.e., to tighten the mortgate rules.

    Again my motto is: Let the market force truly and freely express itself.

    Go Condos go!

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  • Joe Q. said:
    • 2 years, 1 month

    So he would be "interfering" with the market if he tightened the mortgage rules, but he wasn't "interfering" with the market when he loosened them in the first place?

    There was just a post on Canadian Mortgage Trends about how some lenders offer better rates to borrowers with less equity, because it is easier for them to re-package the mortgages and sell them off. If that isn't "moral hazard", I don't know what is.

    If you truly believe the market should be "free", you should be advocating for the CMHC to get out of the mortgage-insurance business altogether.

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  • 45north said:
    • 2 years, 1 month

    Market Player: The last thing F should do is to interfer with the maket, i.e., to tighten the mortgate rules.

    pretty funny! Talk to me about unfettered capitalism! Well I suppose that without CMHC, the banks would still write mortgages. Some mortgages. The reality is that without CMHC the housing market would stop. Flat out stop.

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  • landlord said:
    • 2 years, 1 month

    No doubt Toronto is hot, I get calls everyday asking me if I would be willing to kick out my renters so they could buy. LOCATION, GOOD SCHOOLS, COMMUNITY, prices will hold. Not sure about boxes in the sky looking at an ugly space needle (soon to be condos) with TRUMP lights flashing into my bedroom has any value....

    Walk around downtown Toronto at night, from 1am-3am it's hotdogs, whores, people pissing and barfing out HELOC financed drinks, after that the rats come out to meet the early morning dog walkers...Ya, people are going to raise a family in that. Try getting into an elevator in these mega towers that take 10 minutes to arrive while your baby is screaming in your stroller trying to jam in with bay street fat cats with hangovers...

    Future reality," I didn't buy a house because I was short sighted, now I am stuck in a negative equity condo with 2 kids, my wife is screaming for a house, my kids are jumping over puke and dog shit to get to an F rated school" But we are just a crowded slow street car away from work and my monthly common charges are only $1300

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  • David said:
    • 2 years, 1 month

    You fail to consider the breakdown of the population growth in your analysis. I.E - Where did the population growth come from? The fact is, not many rich Chinese immigrants were moving to Arizona to buy houses/condos.

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  • landlord said:
    • 2 years, 1 month

    You fail to consider the self-segregated ghettos in Toronto, it is the worst I have ever seen. I don't expect Chinese immigrants to mix with the Canadian culture. They will simply move to Richmond Hill and stand in line with everyone else and hang out at Pacific Mall buying bootleg CD's and fake LV bags. Look around you David, research the data, open your eyes, Toronto might have people from all over the earth, yet they create a mini version of homeland in area of Toronto. So what is the factor that people from races care about, Schools and Community. I believe Chinese would have Education first on any list

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  • joe said:
    • 2 years, 1 month

    David, your comment at first seems like a valid point, but I don't think it takes into consideration that many rich Chinese immigrants are not buying houses in every part of the GTA, or Canada for that matter. Chinese, as well as any other immigrants, live in areas populated by people of the same or similar background. And even if they were merely buying properties all over Canada and not just in Chinese-dominated areas, it would imply that they think it is still a good investment, regardless of whether it is or not.

    As for the RE bulls, it's usually easier to see a bubble after it bursts. Everybody who was buying tech stocks back in 1999 or 2000 could've said that there was no bubble and that the naysayers were wrong. They could've loaded up using as much leverage as possible (like when buying a house) and claimed to have made huge profits if they sold at the top or on the way up. But as soon as reality hit and tech stocks crashed, they lost everything and they may have realized that they were just speculators and not true investors. So to say that there isn't a bubble while you're in a bubble isn't the safest thing to do. But it's not the first bubble and definitely won't be the last. It's human nature to follow the crowd and to speculate.

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  • Bob Jones said:
    • 2 years, 1 month

    It's so easy to make money out there, it's almost too comical at times... i'm talking about semi/single/townhomes in the GTA

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  • Appraiser said:
    • 2 years, 1 month

    No end in sight for the GTA: http://guava.ca/indicators.html

    Highlights February Stats:
    ------------------------------------

    Listing inventory, 2nd lowest in 9 years.

    Sales, 2nd highest in 9 years.

    Days on market, 2nd lowest in 9 years.

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  • Greg said:
    • 2 years, 1 month

    All depends where you're looking App. Toronto just hit a 3 year high for Feb.

    http://i43.tinypic.com/riw0ft.png http://i42.tinypic.com/b8jo6r.png

    It's all 905 now, leaving TO illiquid. http://i44.tinypic.com/241ro1s.png

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  • Greg said:
    • 2 years, 1 month

    TD to Halt Non-Prime Mortgage Lending; http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/03/t...

    Bye bye immigrants, self-employed and every other first time buyer who overstated their income to get a mortgage. One has to wonder why the banks are fleeing while the bulls are touting manipulated statistics. They must see something that the bulls don't.

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  • landlord said:
    • 2 years, 1 month

    Greg, many other banks are lined up to take this business. It doesn't matter, because if prices go down, it will go down both for prime and subprime.

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  • Greg said:
    • 2 years, 1 month

    Wrong. When home prices go down the quality of collateral used to securitize covered bonds also goes down, therefore investors demand insured collateral (CMHC) and higher yields in return costing the banks more. Banks will not invest in risky mortgages if they can't sell them to someone else.

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  • landlord said:
    • 2 years, 1 month

    What I am saying is that exactly, if banks won't invest in risky mortgages, other global banks will. It's a business and at the right price, banks will take the risk. You will end with overall higher rates, lower lending growth and slowdown, but not a crash.

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  • Appraiser said:
    • 2 years, 1 month

    "TDFS mortgages comprised just 0.2% of TD’s overall mortgage book..."

    Wow! Volume like that that should crash the market in no time flat.

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  • Greg said:
    • 2 years, 1 month

    That's only TDFS, what about TD Bank mortgages? Voila.. http://business.financialpost.com/2012/03/05/td-bank-pockets-us3-billion...

    As I stated above, they're dumping everything.

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  • Greg said:
    • 2 years, 1 month

    As per TREB's latest stats:

    The Boom http://i40.tinypic.com/260wg8w.png
    The No-Boom http://i40.tinypic.com/34yxj43.png

    TREB Map http://www.torontorealestateboard.com/buying/district_map/index.htm

    @landlord

    Looks like Asians are getting acquainted with Italians rather then upper class whites. Mount Pleasant homes about to go bid-less... http://i44.tinypic.com/63zzia.png

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  • landlord said:
    • 2 years, 1 month

    Greg, I am not sure how to read these graphs and come up with boom/no boom/bid less. I almost think you need flip your microscope to the income side of the balance sheet and not the expense side as you are doing so well. For example, if you start to look at CRE listings, etc it will tell you how people are spending and what business is thriving and what is not. This will then take a turn into job losses and the spiral starts.

    Don't forget Greg, people are allowed to take on debt, as much as the banks can give them, how they spend (homes or plasma) it doesn't matter. As long as they have jobs, they can service the debt. So all the stuff that Ben posts as "low hanging fruit" is useless. Has to come from job losses, and we don't see that anywhere. At worst, we see prices flatten for now, a touch lower, but no bust/bidless world can happen if people are gainfully employed Greg. They will spend and take on debt. Canadians are no different.

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  • Greg said:
    • 2 years, 1 month

    You're right, they can take on as much debt as they want, until it's time to pay the bills—then this happens. https://p.twimg.com/AnWqVvqCIAATxPJ.png:large

    Now it's time to wonder how many recent east side buyers are commingled with all those middle-upper class buyers (in core areas) that were paid for with 0-10% down mortgages; cause when rates are low and money is practically free, even the kid flipping burgers at McDonalds can get a ritzy condo in Toronto's core district.

    It all starts with the health of low-income mortgagors like every other housing bubble.

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  • landlord said:
    • 2 years, 1 month

    What is E10?, Greg you are all over the place man. My point is this Greg, if the guys pay at McD can afford him a condo, the condo could lose value, but if he can still have a job to "flip" burgers and service the loan, no one cares. The government and banks don't care if he sells crack after his shift, as long as he pays the bills, everything is fine. NO ONE CARES

    Show me something like a massive rise in inventory? Job Losses? Only <100 Chinese in line to buy, it will get my attention.

    Greg, with all your work, how are you setting up to profit from it?

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  • Greg said:
    • 2 years, 1 month

    I've looked at those stats and they're worth what they are, another guesstimate survey.

    Demand has exceeded supply (despite regulations) because the banks have i) lowered their mortgage standards i) offered all time low rates; which proves that in order to boost demand, rates and standards must to be lowered to tap into new demographics. But the bulls argue that rules have been imposed and had no effect on demand, of course it hasn't, because there's always a loophole for banks to work around new regulations.

    RBC Cash Back Mortgage

    "Your cash back is paid on the date your mortgage is advanced-just in time to help you cover immediate expenses, expected or otherwise! The money you receive is yours to keep so long as you hold your mortgage to the end of its negotiated term."

    http://www.rbcroyalbank.com/mortgages/cash-back-mortgage.html

    Translation: 'We'll lend you the cash for a down-payment so you can borrow even more money from us.' And that folks is the end of real collateral and what the government and banks DO care about because their solvency depends on deposits, not loans.

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  • landlord said:
    • 2 years, 1 month

    Greg, have you looked at total housing stock in Canada vs absorbtion rates? I don't see much inventory available?

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  • Normand said:
    • 2 years, 1 month
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  • Appraiser said:
    • 2 years, 1 month

    TREB Weekly Stats are out:
    ______________________

    2,122 Sales. Mean sale price $515,639.

    Headed for well over 8,000 sales for March. Average sale price inching ever-upward.

    Does anyone see a trend?

    Where to invest? Should I buy equities or real estate?

    If not buy real estate now, should I hang on to my current rental properties, or sell them a.s.a.p.?

    Go ahead, make your case. I'm listening.

    (P.S. TSX is tanking, almost 2,000 points below the index level a year ago) !

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  • Joe Q. said:
    • 2 years, 1 month

    How many listings for the week, Appraiser?

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  • Appraiser said:
    • 2 years, 1 month

    Sorry @Joe Q.

    Unfortunately, weekly listing data is not published by TREB, only monthly.

    If I had the data, I would share it with you though.

    Nothing to hide here, in fact I'm actively seeking as much real information (positive and negative) as possible to guide my real-estate decisions.

    Thus far, my decisions seem correct and have been downright bountiful for over two decades. Safe, secure, growing in value and profitable.

    Do you honestly believe that I've read anything on this blog to change my mind from that path?

    Get real.

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  • Dave said:
    • 2 years, 1 month

    I know a bunch of people are going to say I'm appraiser as they always do when I even marginally agree with him on here, but I have come to the same conclusion.

    I was questioning whether I should continue to invest in RE when I found this blog. I agree with people I wouldn't invest in Vancouver. I probably wouldn't invest in TO, but that's due to the overall health of the economy of the province (thanks Dalton), which I don't really see discussed here. Kelowna is going through some issues, but that's such a small market.

    However, the overall market in Canada is fine. People do point out good points, but the fact remains people are paying there bills. That's what matters, and so long as that happens, all the other indicators are superfluous.

    Real estate won't go up 10% every year like it has, but it doesn't have to to be a good, solid investment. That's what I want.

    And even though I don't agree with people on this blog, I'll keep reading. I learn lots.

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  • Greg said:
    • 2 years, 1 month

    And where would one subscribe to weekly TREB stats? Or are you just fabricating numbers cause you can't find any good news?

    P.S. Can you make money from shorting RE? http://tmx.quotemedia.com/quote.php?qm_symbol=HIX

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  • landlord said:
    • 2 years, 1 month

    Keep in mind CMHC is nothing new, it has been around forever, so its not fueling anything. It's the low rates and great jobs and economy in Canada that are fueling a surging demand. CMHC can still be open, but if rates are high, no one is going to come knocking. If rates are zero, but got no job, no one is coming to join a bidding war.

    Thats all that matters.

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  • reasonfirst said:
    • 2 years, 1 month

    I don't have all the facts at hand so this is just from memory but in the last few years CMHC:
    -funded HELOCs for a while
    -increased its ceiling much faster the economic growth would suggest
    -removed the cap on how much can be insured on a home
    -was explicitly asked to increase sub-prime lending
    -increased amortizations
    -decreased down payments

    Greg? anything else?

    Not fueling anything?????

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  • Greg said:
    • 2 years, 1 month

    Is that all that matters? Or does this?

    Recent headlines:

    -Sears to close 3 stores in Canada, 670 jobs at risk
    -Zellers workers face 15,000 job losses in Target takeover
    -IBM Layoffs Top 1000 In U.S. And Canada
    -Maritimes to lose 14,000 workers, warns CAPE
    -Hasbro Annouces Job Cuts in US and Canada
    -Harper To Cut 80,000 Public Servants' Jobs
    -U.S. Steel layoffs include 175 at Canadian plants
    -Bank of Montreal cuts 60 capital markets jobs
    -Layoffs hit Thunder Bay call centre
    -Enbridge Gas considers lawsuit, layoffs
    -Yahoo preparing layoffs, could affect thousands
    -'Mass layoff' looms at TeleTech
    -La Cañada Unified plans to issue layoff notices
    -EI queue has ballooned since Service Canada staff cuts
    -Hundreds of Environment Canada jobs to be cut
    -Sanofi to lay off 100 Montreal workers
    -RBC, Bank of Montreal Lead 1,362 Job Cuts at Canada’s Banks
    -Kraft Plans 1600 Job Cuts in US and Canada
    -Statistics Canada to Cut Jobs
    -Unions brace for tens of thousands of job cuts in public
    -Bell Mobility cuts jobs at Ontario call centre
    -Canadian Wheat Board layoffs begin
    -Air Canada layoffs 51 in Winnipeg

    If you knew how to measure employment instead of believing that phony unemployment rate every month, then you'd realize jobs have not recovered since 2008. Canadian R8 Employment To Population Ratio % (Institutional employment measurement) http://tinyurl.com/793cwmt And that's why the government has lost control over the economy no matter how much money they spend or or cut rates—they are only making the problem WORSE.

    Just wait until Q1 earnings come rolling in negative...

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  • Appraiser said:
    • 2 years, 1 month

    First priority - buy a house to live in.

    Second priority - buy at least one house to rent out.

    Third and riskiest priority - (optional) - buy houses to flip.

    Do not alter the order of priorities.

    Pay off principal residence a.s.a.p.

    Pay off rental properties at an accelerated pace (ie. + - 15 yr. amortization) and / or divest at any time, as long as there is money on the table. Remember, it's never a bad decision to take a profit.

    CAUTION: Be very careful what you choose to flip. Try not to flip more than one at a time. However, if you do attempt to "juggle" several properties at once, then it's best that you stagger the closing dates substantially. Be psychologically and financially able to survive a loss.

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  • reasonfirst said:
    • 2 years, 1 month

    rational approach if real estate was your only option. I wonder ho many skipped 1 and went straight to 2 or 3?

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  • Greg said:
    • 2 years, 1 month

    Exactly. Cause everyone is trying the second or third step to get to one.

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  • Appraiser said:
    • 2 years, 1 month

    Real estate is not the only option. There is nothing that precludes one from investing in other fields as well as real estate.

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  • Harris said:
    • 2 years, 1 month

    Yep, that worked in Calgary in 1980 and in Toronto in 1990.

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  • oscar said:
    • 2 years, 1 month

    I think the problem with this is that with the current RE prices it takes something like 30yrs to pay off the first principal residence, so unless you're talking to retirees, this plan probably wouldn't apply to most people who are investing in RE.

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  • Bernard von Schulman said:
    • 2 years

    From 2001 to 2006 in the census the average number of people per dwelling in the Vancouver CMA and Victoria CMA rose. Vancouver went from 2.53 to 2.59

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  • Ash said:
    • 1 year, 12 months

    Hi Ben! thanks for all your analysis.

    What do you think of this article. It seems to be slightly different from one of the graphs you showed for the young house buyers numbers.

    This article was in the globeandmail. Maybe the source of statistics is different or I am interpreting it incorrectly.

    Would greatly appreciate your view. Here is the link

    http://www.theglobeandmail.com/globe-investor/investment-ideas/features/...

    many thanks
    ash

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  • Andrew said:
    • 1 year, 10 months

    "Population growth will NOT prevent the Candian housing bubble from going bust"

    Spellcheck Candian

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  • Bill said:
    • 1 year, 8 months

    Don't forget that US banks foreclosed on many Americans who were current on their mortgages only because they were under water (Owed more than the house was worth) in a greedy last attempt by banks to cash out, fearing the dwindling Freddy and Fanny reserves. It was not home owners walking away from their obligations that created the the final glut of foreclosures but bankers who were facing lower bonuses needing to show better cash positions who called mortgages or refused to renew terms to collect from the mortgage insurers. Many of these same hard working Americans would love to get back into the housing market but can't because of their bank created credit history.
    We don't have that problem in Canada. We didn't have a foreclosure problem or a problem with gainfully employed homeowners walking away or being forced from their homes when interest rates hit the low 20%s in the early 1980s and we won't have it today.
    I don't doubt that we could see a further 15 to 20% reduction in prices in a response to affordability but 15 to 20% is not a crash! It is prices re-aligning with existing wages among a working class whose income has fallen behind inflation.

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  • Bill said:
    • 1 year, 8 months

    Don't forget that US banks foreclosed on many Americans who were current on their mortgages only because they were under water (Owed more than the house was worth) in a greedy last attempt by banks to cash out, fearing the dwindling Freddy and Fanny reserves. It was not home owners walking away from their obligations that created the the final glut of foreclosures but bankers who were facing lower bonuses needing to show better cash positions who called mortgages or refused to renew terms to collect from the mortgage insurers. Many of these same hard working Americans would love to get back into the housing market but can't because of their bank created credit history.
    We don't have that problem in Canada. We didn't have a foreclosure problem or a problem with gainfully employed homeowners walking away or being forced from their homes when interest rates hit the low 20%s in the early 1980s and we won't have it today.
    I don't doubt that we could see a further 15 to 20% reduction in prices in a response to affordability but 15 to 20% is not a crash! It is prices re-aligning with existing wages among a working class whose income has fallen behind inflation.

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  • Bill said:
    • 1 year, 8 months

    Don't forget that US banks foreclosed on many Americans who were current on their mortgages only because they were under water (Owed more than the house was worth) in a greedy last attempt by banks to cash out, fearing the dwindling Freddy and Fanny reserves. It was not home owners walking away from their obligations that created the the final glut of foreclosures but bankers who were facing lower bonuses needing to show better cash positions who called mortgages or refused to renew terms to collect from the mortgage insurers. Many of these same hard working Americans would love to get back into the housing market but can't because of their bank created credit history.
    We don't have that problem in Canada. We didn't have a foreclosure problem or a problem with gainfully employed homeowners walking away or being forced from their homes when interest rates hit the low 20%s in the early 1980s and we won't have it today.
    I don't doubt that we could see a further 15 to 20% reduction in prices in a response to affordability but 15 to 20% is not a crash! It is prices re-aligning with existing wages among a working class whose income has fallen behind inflation.

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  • Gary Anderson said:
    • 1 year, 3 months

    I have a question. Does anyone here think that the wealthy can corner a housing market, meaning they can perpetually blow a housing bubble in that cornered market? I need some feedback on that. I contribute to Business Insider and have followed bubbles. I am concerned that the hedge funds and foreign hot money is back in the US housing market juicing prices again.

    http://www.businessinsider.com/author/gary-anderson

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