Thoughts from CMHC's Canadian Housing Observer
JANUARY 01, 2012
Happy New Year!
I’m hoping to get a chance to post some 2012 predictions and review my 2011 predictions, which I’m fairly happy with.
In the meantime, I just wanted to share a few thoughts on CMHC after reading through the 2011 edition of their flagship publication, The Canadian Housing Observer.
Readers will know that I have been critical of CMHC over the following:
CMHC’s mandate, which I believe is inherently self-defeating.
CMHC’s massive expansion in insurance in force, which is happening largely without meaningful public discussion of possible risks to the Canadian taxpayer
CMHC’s balance sheet, which is opaque (criticized by Dr. Ian Lee as the most secretive crown corporation in existence), yet from what we do know, bears uncanny resemblance to a pre-bust Fannie Mae’s, a fact that should weird us out.
Let’s keep the criticism parade going! I’m glad the CMHC finally got their act together and released the 2011 Housing Observer on the 29th of December! Nicely done. But here’s the kicker: The data is actually from 2010! There is very little data from the past year even included. Thanks for showing up, CMHC.
The 184 page document has too many interesting tidbits to include in one short post, but I did want to share four that jumped out at me. Well, three actually, plus an interesting thought I’ll steal from Fishy’s real estate blog.
1) Residential investment has doubled in the past decade, well eclipsing inflation and gains in incomes and GDP.
The chart above indicates that spending on new dwellings has doubled in the past decade (interesting considering we’ve built way more dwellings than demographic demand would warrant, see this post for more details). Furthermore, and perhaps symptomatic of the HGTV housing porn generation, renovation spending has more than doubled as well.
This won’t last. And with 8% of the Canadian population employed in construction (historically 5.5%) and renovation spending nearly 2 GDP percentage points above long-term norms, it’s not hard to see how when the housing boom fades, it will significantly pressure the labour market and economic growth....and that’s not even considering the knock-on effects of lower consumer spending and weakness in ancillary industries that are levered to the housing boom.
2) Boomer effects on the market
I’ve written before that the Baby Boomers will have a massive effect on property prices (see here for more detail). I’ve suggested that the greatest impact that they will have is on price compression in the market. The era of the McMansion is over (see here). And as Boomers move to free up housing assets to help fund their retirement and/or to seek more ‘age friendly’ dwellings, it will invariably put additional pressure on larger houses while putting a relative floor under smaller bungalows within city limits as well as condos in areas where overbuilding and investor participation is not rampant (you’re still screwed, Toronto!).
CMHC agrees, and they devoted a chunk of their report to discussing these demographic influences.
While they suggest that these demographic influences will favour smaller dwellings, they seem to miss what this means for larger ones. And if you compress the market so that the top end falls while the bottom end rises, you still end up with a falling average price, which is what CREA reports and is what is widely reported in the news.
Don’t forget that one influential paper by the Bank for International Settlements recently calculated that Canada’s demographic imbalance is significant and, after boosting house prices over the past 40 years, will now weigh on house prices going forward:
It’s pretty easy to visualize in the following graphs:
There is one major take-away points from this trend: If you have to buy, and you have a young family, buy an age-friendly dwelling recognizing that while the price will at best flat-line over the next 5 years (and more likely fall in most Canadian cities), the house you really want will fall further, both in percentage and nominal terms. Position yourself to take advantage of the larger family homes that will increasingly see supply/demand imbalances favour buyers in the coming years.
3) Immigrants are not the saviour of the overinflated housing market
Population growth is often cited as the driver of house price appreciation, which is ridiculous on its own considering it only looks at one side of the supply/demand equation and becomes laughable once we actually look at how many new homes have been built relative to the change in population in Canada’s largest cities (which we’ve done here).
While it’s tempting to look at the near-record high total immigration into Canada in 2010 as being inherently supportive of house prices at unprecedented levels compared to fundamentals, it’s worth keeping in mind that total population growth is still only running at a ‘whopping’ 1.2% annually. (On a side note, the people who most vigorously defend the ‘immigration will save us’ argument are people from Toronto. This is comical since Toronto receives fewer immigrants today than it did 10 years ago.)
It’s also worth remembering that statistically, immigrant households are on average nearly 50% larger than Canadian households. This means that since the bulk of the population growth is via immigration and not natural household formation, the true household formation rate is actually lower than typically calculated. In simple terms, we’ve built WAY more houses than demographics would warrant given the composition of population growth.
CMHC provides some additional colour on this topic, noting that new immigrant households (less than 5 years in Canada) have ownership rates less than half the Canadian population (35% vs 70%). In addition, immigrant households earn on average 30% less than other Canadian households. And since house prices are at unprecedented multiples of income in virtually every Canadian city (see here), it’s hard to see how an influx of immigrant households earning significantly less than the average income will support prices at these levels.
Immigration is NOT the golden bullet solution to a massively overextended housing market.
4) CMHC's board of governors made of housing industry representatives
Kudos to Fishy’s real estate blog for discussing CMHC’s board of governors and highlighting the glaring representation of the real estate lobby on this board: The 10-person board contains 3 developers, 1 CMHC paid employee, 1 real estate broker, and 1 partner in a plumbing/renovation company. From the Fish’s mouth:
A rather small board considering the Hundreds of Billions which are at stake. ...Iam sure they are well meaning people. However I am not reassured. Neither it would seem is the IMF which has called for more supervision.
Where are the well-known Business and Economic Professors from U of T or McGill? Where is the seasoned insurance executive who has dealt with major losses? Where is the representative from the Canadian Tax Payers Association? WHERE is the significant representation of NON-housing interests?
Great questions.
Cheers
Ben
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196 Comments
CMHC's board of governors made of housing industry representatives
Kudos to Fishy’s real estate blog for discussing CMHC’s board of governors and highlighting the glaring representation of the real estate lobby on this board: The 10-person board contains 3 developers, 1 CMHC paid employee, 1 real estate broker, and 1 partner in a plumbing/renovation company. From the Fish’s mouth:
A rather small board considering the Hundreds of Billions which are at stake. ...Iam sure they are well meaning people. However I am not reassured. Neither it would seem is the IMF which has called for more supervision.
Where are the well-known Business and Economic Professors from U of T or McGill? Where is the seasoned insurance executive who has dealt with major losses? Where is the representative from the Canadian Tax Payers Association? WHERE is the significant representation of NON-housing interests?
All so very true. I think you and I already KNOW that real estate in Canada is already on a downward slide - I've heard anywhere from 25% - 40% - and going down more every day.
Obviously I am NOT at all impressed with who is on the board of directors of CMHC - how can we the public CHANGE THAT - like immediately would be a very good idea.
Thanks Ben - keep up the great work!!
Glad to hear your opinion on the Housing Observer. I must admit I didn't read the entire thing.
What bugged me most was on page 35 - "Household Indebtedness". http://www.cmhc-schl.gc.ca/odpub/pdf/67508.pdf?fr=1325452791890
For the "Annual growth rates of total household debt, consumer debt and mortgage debt, Canada, 1981-2010" graph, they only gave compound average figures. You look at a number like 9.3 for total household mortgage debt, and the average person won't think this is bad. Actually, the average person probably doesn't understand what a "compound average" is.
They chose to give numerical values for those 3 debt types instead of showing a scary graph like this one (courtesy of Saskatoon Housing Bubble) - http://3.bp.blogspot.com/-17PkdlZJcwY/Tt-XchEghfI/AAAAAAAABSc/WwEIyqbzre...
Awfully convenient if I'd say so
So 1990 was RE bubble times too for Canada? I guess they're trying to make it look like we're not as bad as that period? I was too young to remember that...
not like home buyers read these things anyway... or do any kind of research before making the biggest purchase of their life
"On a side note, the people who most vigorously defend the ‘immigration will save us’ argument are people from Toronto. This is comical since Toronto receives fewer immigrants today than it did 10 years ago."
In the early 1990s Toronto became home to large numbers of wealthy investors / immigrants from Hong Kong, mostly people seeking to establish a foothold in Canada before HK's reversion to PRC control. (Sounds an awful lot like Vancouver today...)
Despite all the immigration and investment, home prices actually dropped and then stagnated until the late 1990s.
I strongly agree with Ben here. Immigration is indeed an important factor in determining house prices -- but in no way is it the only factor.
Demographics are not static, they are fluid. Much like demographics, immigration is also fluid. It is not the immigrants that arrived this year that will have the greatest effect on housing. It is the ones that arrived 5-10 years ago, who have now established themselves with employment, language proficiency, a credit history and financial assets, that are buying homes and condos.
The latest census report (2006) recorded 55,000 new immigrants to Toronto. That is in excess of 4,500 per month, month after month, year after year. These numbers help to illustrate the ultra-low rental vacancy rate in the big smoke, as new immigrants tend to rent before they buy.
It is well to remember that this river of immigration is well-stocked for many years to come with ambitious potential home-owners.
Where do you get the idea that the vacancy rate in Toronto is "ultra-low"? The CMHC?
Toronto's vacancy rate is 1.4%, according to CMHC.
According to the City of Toronto, Shelter and Housing Administration (as of fall, 2010).
Number of Toronto households that rent: 579,010. As a percentage of all households: 32 .
City of Toronto vacancy rate (Fall 2010): 1.8%.
The methodology that the CMHC uses to calculate vacancy rates has been discussed elsewhere, but in short, to be considered "vacant" for CMHC's survey, a unit must be (a) in a building with three or more rental units, (b) have been on the market for three months, and (c) be actually reported as being a rental unit by the owner / landlord.
I think you can see how these criteria would lead to a massive under-estimation of vacancy.
The City of Toronto number you cited just points back to the CMHC.
Fishy makes a very valid point, and I think one that should be examined further. The minister overseeing CMHC is Diane Finley, minister of Human Resources & Skills Development. It could be a good time to put pressure on Diane and local MP’s to revisit the board. Crafting a blanket email or response to Mrs.Finley on the topic could be a good start.
Very interesting outlook about the baby boomers sell offs that are coming.
But I doubt some point of Ben post and other people comments that are based on an official stats data due to its limitation - the tax fraud reached unprecedented heights in Canada now that were not seen before when arriving immigrants were looking for a better life and were generally poor.
For instance:
Ben uses the stats that "immigrant households earn on average 30% less than other Canadian households" to illustrate the lower buying power of the recent immigrant when in reality many cases the new immigrant from the Mainland China are buying their 2 million dollars home for cash and do not report their income overseas. We recently discussed in our community of Richmond that the kids from these households are considered to be the kids in need as their family income is extremely low (or no income at all) so we have like 20-30 % kids considering to be living in poverty when they in fact drive their BMW to school. It illustrates the limitations of the official stats when the fraud becomes the new norm - cash transactions are very common here.
The same with Appraiser's saying about the "ultra-low rental vacancy rate" - you really have no clue now what is the real vacancy rate as most of the condos are rented out trough the Chinese media channels and are not registered at all with the rent unreported (and every first floor of the old house in our town is divided in small units to accommodate the students or immigrants etc with that rent unreported as well). Our city hall has recently employed 600 temporary agents to spy on unreported rental units.
But I am not saying that wealthy Chinese buyers are going to keep buying the property for investment at the rate seem before - not at all. They mostly lost an interest here in Richmond after realizing that our house prices hit the ceiling. There are other places in the world with the better perspective of the returns in RE, they are buying agriculture land in Africa, RE in Brasilia and Mongolia and Vietnam, and with US housing reported another medium house price decline in the last month they can have a good house hunt there for an investment with the much better price/rental income ratio. I am sure that some of the investor class immigrant will keep coming to Canada just to get the permanent residence but it is going to support the prices only if they are allowed to do so in significantly bigger numbers than now. And if they are allowed we are done as a country we knew (which has probably happened already).
Well, somebody's buying all these these GTA condos: Excerpt from Toronto Star (Dec. 31, 2011):
"Indeed it was the best year on record for highrise sales. According to RealNet Canada, 27,224 condos were sold between January and November. The previous sales record from 2007 was surpassed at the end of October."
"Meanwhile, GTA home prices in November hit a record average of $481,305, almost 10 per cent more than the average home was worth a year ago, according to the Canadian Real Estate Association."
Ohhh look whose talking about immigration now. I'm amused.
"This is comical since Toronto receives fewer immigrants today than it did 10 years ago."
Those immigration stats are permanent residence (Canadian citizenship) ONLY and do not include foreign students and temporary workers which make up 50% of +500k immigrants coming to Canada. Check again and see what' declining and rising http://i44.tinypic.com/8ytit5.png Total my calculations, Toronto now receives over 100k immigrants per year. I posted it on this blog somewhere before.
What matters is rotating population (the amount of people coming and leaving) that has been constantly growing for years. With rent demand growing while supply is suppressed (factoring 15% of home sales being speculative—not offered for rent), you can see where one major problem is. Speculation has taken supply away from demand and it's creating a chaotic situation in the rental market.
It's no secret that increasing immigration to record levels was part of the Canada Action Plan. The government seems to believe this may actually work and I expect they will ramp-it-up further to 550-600k immigrants in 2012. Little do they know they are playing with fire.
Forget CMHC stats as they are corrupted, opaque, manipulated and useless. We've seen this over and over again and we know how it ends.
Sorry I may have underestimated 2012 projections. Make that +700k immigrants entering Canada in 2012. Also to clarify, Toronto is receiving 100k net immigrants per year (inflow minus outflow).
Immigration Charts:
Toronto http://i41.tinypic.com/243g35v.png
Canada http://i40.tinypic.com/wc25g8.png
Here, http://en.wikipedia.org/wiki/Population_of_Canada_by_year, it shows that Canada's population as a whole is growing 400-500k per year. 700k net new immigrants is just plain impossible.
Net immigration (migrating minus emigrating) is growing and offsetting the declining natural base population. Remember student and foreign worker stats are not included in most government population reports. That's the deception.
Chart I posted here before http://i53.tinypic.com/2wq66wx.jpg
I never said 700k net immigrants.
So, let's take a look at the quality of mortgage lending in the U.S vs. Canada. The latest mortgage in arrears stats are out for the U.S. indicating a mortgage default rate of a whopping 5.88%!
The most recent numbers from the Canadian Bankers Association show a mortgage default rate in Canada of 0.39%.
That's right, for every mortgage default in Canada there are 15 in the U.S. So yeah, it's different here.
Right. Because falling house prices and rising delinquencies are not at all correlated. And prime borrower defaults are extremely low in the US, right? Oh wait...
You're missing something in your 'analysis'.
Yes, and mortgage lending standards had nothing to do with U.S. default rates...oops:
"The Financial Crisis Inquiry Commission reported in January 2011 that many mortgage lenders took eager borrowers’ qualifications on faith, often with a "willful disregard" for a borrower’s ability to pay. Nearly 25% of all mortgages made in the first half of 2005 were "interest-only" loans. During the same year, 68% of “option ARM” loans originated by Countrywide Financial and Washington Mutual had low- or no-documentation requirements."
No one in their right mind would suggest that lending standards had nothing to do with it. The next big question is why is the fastest growing default rate in the prime borrower group? Why didnt it stop with the subprimes?
Well, certainly strategic defaults play a roll in prime borrowers walking away from their mortgages and I realize that there is a counter-argument to that. However, the problem is most definitely exacerbated by the "jingle-mail" option being so widely available in the U.S.
The combination of poor lending standards, dangerously exotic loan options and strategic default capability are what differentiate Canada from the U.S. Even with a real estate correction, Canada will never approach the default rate of the U.S., in my opinion.
"The combination of poor lending standards, dangerously exotic loan options and strategic default capability are what differentiate Canada from the U.S"
Poor lending standards are relative. We haven't matched what happened in the US, but "prudent" is a stretch for sure. Exotic loan options existed, but were not the drivers of mortgage growth in the US. Even in the final days of the bubble, they were still a slim minority. Strategic default capabilities are massively overstated. For example, in California, the initial loan was non-recourse but subsequent refinancing were full recourse. Refinancing was one of the hallmarks of the bubble......it hasnt made a difference. Negative equity and job loss are the greatest determinants of default, not whether or not the mortgage was recourse.
Recourse and Residential Mortgage Default: Theory and Evidence from U.S. States
Andra C. Ghent and Marianna Kudlyaky, Federal Reserve Bank of Richmond Working Paper No. 09-10 July 7th, 2009.
CONCLUSIONS
Empirically, we find that, at the mean value of the default option at the time of default,
the probability of default is 20% higher in non-recourse states than in recourse states. The
deterrent effect on default is signicant only for borrowers with appraised property values
of $200,000 or more.
At the mean value of the default option at the time of default and for homes appraised at $300,000 to $500,000, borrowers in non-recourse states are 59% more likely to default than borrowers in recourse states. For homes appraised at $500,000 to $750,000, borrowers in non-recourse states are almost twice as likely to default as borrowers in recourse states while for homes appraised at $750,000 to $1 million, borrowers in non-recourse states are 66% more likely to default.
@App
Must you always Google for your answers? Don't know how to use a calculator? Have you asked yourself 'how' people are paying their mortgages when income growth is lagging? Two charts for you.
http://i41.tinypic.com/t7efb4.png
http://i39.tinypic.com/2h37k8m.png
And just to clarify before you put a spin on this, people are NOT paying mortgages directly with their lines of credit, rather are using lines of credit as a debt buffer to consume other goods and services that their income (tied up paying the mortgage) can not provide.
Sidenote: I heard a report last week stating household debt-to-income is expected to reach 151% due to a high level of consumers using lines of credit and credit cards for Christmas shopping. More info will come out in Q1 regarding this.
@Ben
I think what's important regardless of poor lending, is the fact that the middle class is being pushed into the lower income bracket, therefore creating borrowers who were prudent into borrowers who are now vulnerable to defaulting.
The entire Canadian economy is checkmated.
@Greg: As a matter of fact I like Google, rather than sweepingly incoherent rhetoric, which appears to be your purview. What in the world do you mean when you spout that "The entire Canadian economy is checkmated." Total nonsense.
Anyway, back to reality. The more I delve into the issue, the more complicated and nuanced becomes the study of strategic default. Here's an abstract from a more recent paper on the topic:
Strategic Default and the Foreclosure Process
Cem Demiroglu
Koc University; University of Florida
Evan Dudley
University of Florida - Department of Finance, Insurance and Real Estate
Christopher M. James
University of Florida - Department of Finance, Insurance and Real Estate
April 28, 2011
"Consistent with this argument, we find that the effect of state foreclosure laws varies with the borrower’s equity position, with borrower-friendly foreclosure laws having a significantly greater effect on default rates for borrowers with negative equity.
We also examine how recent state and federal loan foreclosure-prevention programs have affected the likelihood of strategic default. Overall, we find a significant reduction in the effect of state foreclosure laws on strategic defaults following the introduction of loan modification programs after late 2008.
Our results suggest that programs meant to prevent foreclosures have also reduced the effectiveness of foreclosure laws that discourage strategic defaults."
Exactly my point that your logic comes from Control-C Control-V. You don't even know what the hell you're posting and can never reasonably explain how borrowers will maintain payments and their jobs in a contracting economy. There is not much more the government can do other then to print more money (re-recession) or allow the economy to go into depression.
My view is not rhetoric, rather fundamental math. Your view is asset inflation, a zero sum game.
It appears that you object to scholarly papers that utilize logic, statistical analysis and the scientific method to present and support a feasible hypothesis.
No surprise to anyone who has read your numerous tin-foil rantings.
Your feeble attempts to sound relevant are nothing short of cringe-worthy and only serve to highlight your abundant intellectual weaknesses, while simultaneously displaying a severe case of blatant xenophobia bordering on racism; that you seem to be smugly unaware of.
@ App and @ Greg
I believe these guys explain it the best, because it looks at debt-service costs, they simply have not gone up in over 5 years with rates coming down so much. They believe that homes will drop 10%, I tend to agree with them and I believe so does Garth. Most people still have made a fortune on RE, 10% will mean more on price chop now. REITS are the real bubble!
http://www.polofg.blogspot.com/2011/12/off-topic-canadian-housing-bubble...
Yes papers written by scholars which are the same people who got us into this mess and continue to deny the inevitable, only to save their worthless years of education (along with yours), because somehow they really believed they could defy the laws of math and could overturn reality by formulating a few fancy macro equations. Ohhh how history has proven them wrong over and over again, yet there are people like you still brainwashed by all the doctrine lectures on how the world is square.
And as I told you before, when you lash out like that with no logical response it proves your inability to understand the real world around you. You keep making yourself look stupid again and again and again. Are you that intimated by me? You keep running away from my argument (yet months after calling me a racist we see you addressing immigration), or is your sole purpose to come on this blog and bash Ben work?
A poetic English major trying to learn economics. Absolutely hilarious.
God I miss you.....
Ben, thanks for your article. What do you mean by age-friendly, as in "If you have to buy, and you have a young family, buy an age-friendly dwelling"?
Any luck on using Access to Information to get more info from CMHC?
An age-friendly house means an old-age-friendly house: Preferably one level or with a minimum of stairs (or with an elevator or stair lift); fewer barriers to access -- wide doors, easy entry, ability to add safe entry ramp, washrooms with turning space or that can be expanded/opened, etc; well lit; lower maintenance. Accommodations are things that are easier to live with in cases of disability -- cupboards within easy reach, single-lever faucets or taps, light switches and outlets not too high or low (there are guidelines), work surfaces such as kitchen counters at varied heights, seating space in work areas, and so on. Also - grab bars properly installed in showers and tubs are good for everyone. One level (bungalow) seems to be the common denominator and at least in the GTA, that's a prized commodity.
The CMHC actually offers a lot of good information to the public in its Housing for Seniors section. Good luck to you and happy hunting.
Thanks Katya - I figured that was the case but wasn't sure since Ben was recommending an age-friendly dwelling for young families who are obviously a long way off from requiring such a home. I will take it to mean that he recommends buying a place you can stay in for 40 years!
As for CMHC, my question referring to his search for more detailed breakdowns of mortgage debt in Canada - this information is NOT available to the public (although it should be). He mentioned a few months back that he was going to use ATIP to acquire some of that information - I was curious to see if he was successful.
oops... typo:
*referred
Here is the link to that CMHC page with many links:
http://www.cmhc-schl.gc.ca/en/co/maho/adse/index.cfm
This is a really fantastic post. I find the contrast between Statistics Canada's assessment of the future housing market and CMHC's assessment quite interesting.
Good luck EMJ. Ben may have been suggesting that you search for a home that offers what your young family needs now and for the foreseeable future, yet will be easier to sell to future - older - buyers when your time comes, as people tend to move and NOT stay in one place. That said, one level living is easier for most and things that make life easier for people with disability make life easier for all of us, per the principles of Universal Design. Kids especially might appreciate things like mixed counter heights, single lever taps, and lower light switches!
Bear in mind that younger or middle aged people with disabilities search for these homes, too. My one-level house which had various simple accommodations just for ease of living and a little safety boost sold to a nice middle-aged couple in which one member was in the early stages of Parkinson's. They were looking ahead. You never know!
Good luck EMJ. Ben may have been suggesting that you search for a home that offers what your young family needs now and for the foreseeable future, yet will be easier to sell to future - older - buyers when your time comes, as people tend to move and NOT stay in one place. That said, one level living is easier for most and things that make life easier for people with disability make life easier for all of us, per the principles of Universal Design. Kids especially might appreciate things like mixed counter heights, single lever taps, and lower light switches!
Bear in mind that younger or middle aged people with disabilities search for these homes, too. My one-level house which had various simple accommodations just for ease of living and a little safety boost sold to a nice middle-aged couple in which one member was in the early stages of Parkinson's. They were looking ahead. You never know!
Hey Ben, do you still think "strategic default capabilty in the U.S. is massively overstated?"
It's actually a fast growing business and becoming more populay every month. Check out the website below. You can actually get a membership!
http://www.youwalkaway.com/
Except from Forbes, (5/31/2011):
Names You Need To Know: YouWalkAway.com
"The three year old company welcomed 40% year-over-year growth in terms of both clients and profits from 2009 to 2010. It is already welcoming a 10% increase year-over-year from 2010 to 2011. Site traffic averages 1,000 to 2,000 visitors per day and an average of 250 new clients shell out hundreds of dollars for full services each month."
@Appraiser
So 250 people/month makes 3000 people a year. Out of how many tens of millions of home owners?
You're talking about hundredths of a percent of owners here. Not exactly a significant slice of anything.
I see that you missed the point Leo. The fact that websites such as YouWalkAway.com even exist, let alone earn a mention in Forbes, should make it obvious how popular and prevalent strategic default has become in the U.S.
Uhh no. The fact that a website exists means nothing. The fact it was mentioned also means nothing. What means something is actual hard number, of which you apparently have none.
I regret to inform this blog that TREB is now on a data manipulation rampage. Here's what they did with today's report:
Firstly, TREB reported today that Dec 2011 sales figures was up 4% from Dec 2010, when in fact it was up 10% as can be seen here in today's report (last page). http://i42.tinypic.com/9k4128.png TREB's statistician department seems to be confusing themselves.
Secondly, they had revised ALL of 2010 sales figures down and for the first time in months, they went back and revised 2011 sales from Jan-Nov (except March). http://i42.tinypic.com/20hnclg.png This sparks a change from what I believed were seasonal moving averages but now realize TREB is outright manipulating previous sales downward in order to make upcoming monthly sales look better then they are.
Ex. Looking at the last chart you can see TREB initially reported Jan 2011 sales at 4337, then revised to 4208 in July, then unchanged from Aug-Nov, and lastly revised to 4199 in Dec. Moving averages do not change in this kind of order.
The reason why they would revise Jan-Feb 2011 (in late Dec) is because they probably expect lower sales this Jan-Feb, so by lowering the previous year's sales down, will make Jan-Feb 2012 look better.
Lastly, as an ongoing overview into these manipulated stats, TREB's statisticians continue to do what every statistician shouldn't do, that is to report 2011 seasonally adjusted figures to 2010 unadjusted figures. As we've seen with today's report, the manipulation is taking it's toll and now confusing the very institution that is reporting it.
Sidenote: TREB reported commercial RE down -3.5%, but who knows what that number represents. Never forget things are much worse then they appear.
Are you ever going to comment on this Ben?
More info on today's TREB report
Chart: GTA Average Prices (Detached, Semi-Detached, Condo Apt.) http://i40.tinypic.com/24nft4i.png
Dec 2010 - Dec 2011 YOY
Detached Sales 416 +6.19%
Detached Average Price 416 +27.63%
Nov 2011 - Dec 2011 MOM
Detached Sales 416 -35.28%
Detached Average Price 416 -6.05%
Dec 2010 - Dec 2011 YOY
Condo Sales 416 +2.92%
Condo Average Price 416 +15.79%
Nov 2011 - Dec 2011 MOM
Condo Sales 416 -30.61%
Condo Average Price 416 -2.44%
Toronto, January 5, 2012 — Greater Toronto REALTORS® reported 4,718 transactions through the TorontoMLS® system in December 2011. The December result capped off the second-best year on record under the current Toronto Real Estate Board (TREB) boundaries.
For all of 2011, the average selling price was $465,412, an increase of eight per cent in comparison to the average of $431,276 in 2010.
P.S. @ Greg - Month over month comparisons are for amatuers only; especially in relation to December.
P.P.S. @ Greg - If you have a serious beef with TREB stats, take it up with their chief economist, Jason Mercer. I'm sure he'll be glad to haer from you.
And only amateurs believe TREB's average price is accurate when it includes +$2 million dollar properties that have no relation to the majority of properties sold. Do you want to make yourself look dumb again by attempting to debunk that math too?
Pull out a working calculator and go through the micro data instead of fetching headline banana stats.
@ Greg:
The average includes all of the data including outliers. So the average is accurate. As to the usefulness of the average, that is debatable, especially in relation to real estate sales, where the median is a better measure of central tendancy.
Having said that, the average is still a useful measure of comparison year over year, despite the influence of outliers, due to the large TREB database of over 80,000 sales annually.
Look at the Frequency of Distribution http://i42.tinypic.com/29pelhu.png
Let's do some speculative math:
Total under 800k is 82,258 sales x median range $450,000 = $37,016,100,000
Total over 800k is 7,089 sales x median range $1,250,000 = $8,861,250,000
Therefore, homes sold over 800k roughly accounted for nearly 24% of total sales this year, meaning they also account for nearly 24% of TREB's average price.
That's why headline sales figures are useless. If you had experience in RE you would be talking about location, class and regional differences, which there are still some good value properties out there, but to come on this blog stating RE is a great investment based on headline figures is completely absurd.
There's enough bits of information in all these stagnant graphs to create a a 4 minute HD animation.
Show me the money, (animated flow of).
I attended the seven hour 2012 budget meeting at my local city hall yesterday. Where was your 4 minute HD economic forecast animation as well?
Baby boomers, where is your future economic disaster 4 minute HD animation showing, besides Steven Harper's office?
It looks like our RE board (Vancouver) is more prudent than Toronto - they say that "The overall residential benchmark price, as calculated by the MLSLink Housing Price Index®, for Greater Vancouver increased 7.6 per cent to $621,674 between Decembers 2010 and 2011." but then they proceed with the clarification:
" However, prices have decreased 1.5 per cent since hitting a peak of $630,921 in June 2011."
The manipulations by the stats are always back fired. They mislead not only players with the vested interests (buyers, banks, developers) but also the sellers and the RE agents as they do not get a honest feedback and fail to adjust.
Anyways, the prices in our municipality are falling at the rate about 0.4 % a month - as we were overpriced comp. to half of Vancouver - and I am reasonably happy having received a good advice from the info on this Ben's web-site, we the townhouse in July and are happily renting the big house. The rent prices are declining here as well as the number of the sellers are reluctant to drop the price and put their homes for rent. Win-win situation for us so far.
@Greg: You are correct, the ditrubution is skewed to the right, as I tried to point out to you in my last post. Real estate sales are inherently top-heavy. There are very few sales below $200,000. Resulting in almost no sales beyond one standard deviation to the left of the mean. Yet there are many sales two standard deviations to the right and beyond.
You have merely provided statistical observations, and no analysis. I already covered why the median is a better indicator of central tendancy. Your ranting about the average price doesn't change the statistcal fact that the mean is measured in an identical fashion each year. That the mean sale price is greater each year is the statistically valid piece of data that you seem to miss.
Honestly, some of you bears out there seem to be part of a real estate tea-party movement. Illogical, yet still strong believers in the presence of a mystical real estate crash, even in the face of statistical proof to the contrary.
P.S. Real estate is a great 'long-term' investment, I can never deny that.
Almost 30 years as a homeowner, real estate investor, appraiser and real estate broker have taught me so. Most Canadians agree with with me (70%, at least). But what does the majority know.
Always remember @Greg:
There are only three kinds of people on the planet, homeowners, those that wish to be homeowners and the deniers.
Most Canadians agree with you because 70% are just as successful as you are in a NO RISK-ZIRP economy. At least for now until they realize who's paying the government's debt back—their kids of course.
Carry on, keep borrowing.
My kids and future grandchildren will inherit my excess wealth; which I hope is substantial in exactly 40 years from today, when incidentally, I have strategically planned my own demise (at the ripe-old age of 94).
Real estate is the bedrock of any financial plan. I hope to provide my kids with a mostly paid-for home on their wedding days. Am I so wrong for such a plan?
Here's the thing @ Greg: Real estate can't be beat', so stop trying. The majority of Canadians (and their kids) have spoken. Get in the game or get over it.
Appraiser - I do not know about you (you probably bought a long time ago) but most of the Canadians that bought recently, are not going to be able to pay out their mortgages before they retire, just no way with the prices like that and their income like this. We do not need to beat the RE, it is going to beat us.
@Olga: Anybody can buy a home and pay it off. You must buy what you can afford to get started and hang in for the long-term. Your first home will probably not be your last, as you slowly and carefully climb the property ladder. In the end it will pay off.
But there's the rub - you must be patient and persistent. It's the same with saving money for retirement. That's right, owning your own home is not get-rich-quick scheme, yet the latest stats (RBC) indicate that 42% of homeowners have no mortgage.
To those out there trying to time the real estate market - How's that working for 'ya?
yet the latest stats (RBC) indicate that 42% of homeowners have no mortgage
Only someone who doesn't understand price-to-income ratios would fine this notable.
Let me ask you this, Appraiser. If someone making $50k per year who had $20k saved up wanted to buy a $400k house in east Scarborough, would you advise him to do it?
@Joe Q. To answer your question, no I would not advise someone to buy due to the simple fact that they would not qualify. The gross debt service (GDS) ratio for the scenario you have presented is over 50% and the limit is 32%. Bad example.
Only someone with no actual knowledge of GDS and TDS ratios used by lenders would present such a ludicrous question.
>> To those out there trying to time the real estate market - How's that working for 'ya?
Exceedingly well, thank you. Victoria is down over 8% from December 2010 and no signs of leveling off.
So, when 'ya gonna buy @Leo?
Probably never, You're waiting for the "killer-of-a-deal" right?
Typically, people like you wait until prices start rising again - good luck with putting you're life on hold in Victoria.
>> So, when 'ya gonna buy @Leo?
When it makes sense to. In the next year or so we'll be looking at moving to a bigger place (possible family expansion, etc). So then we look at the market and decide. If it's still going down at this rate, we rent a house and wait. If it's looking like it will stay flat, we'll buy then.
Either way we saved a ton by waiting for a couple extra years. 3 years ago we were looking at 5% down on a condo. Some of our friends bought then. Now they're looking to upgrade to a house. Their condos are worth the same or less than when they bought, and they spent two times what we spent on shelter.
We saved and rented, and now we'll be putting 30% down on a house that will be big enough to live in for the long term.
As for putting our life on hold.. Not exactly. The friends that bought condos didn't have a house either, and the friends that bought crappy entry-level shacks spent their summers and vacations doing renovations instead of vacationing like we did. Yep, our life as renters sure sucks!
Sounds like a retirement plan similar to these folks http://i40.tinypic.com/2dooe1.png
And the majority own their own homes with no mortgage...
"Almost 30 years as a homeowner, real estate investor, appraiser and real estate broker have taught me so. Most Canadians agree with with me (70%, at least). But what does the majority know."
In the early 2000s most Americans agreed too. Now very few do (the number is around 30-40% if I remember right) I've talked to a number of Americans in their mid-30s who wish they had never bought homes. These are professional people with good incomes, not sub-primers. They got dragged down with the whole mess.
The point Appraiser is that everyone thinks RE is a good investment, until it isn't. Hindsight is 20/20, right? You point out how many Canadians think RE is a good investment, and then crow about big price increases, as if the two weren't linked. If average prices in Toronto were to drop 10% and put pretty much every recent first-time buyer underwater, don't you think people would feel differently?
@Joe Q. The homeownership rate in Canada has steadily climbed over the past 40 years from around 62% to 70%. So it is not a recent phenomenon that Canadians prefer owning their own home.
The increase in homeownership is commensurate with the slow and steady increase in the average standard of living of Canadians over the past two generations and not solely on recent price gains.
Hey @ Joe Q., What if buyers who bought last year already had an 8% cushion against your hypothetical 10% drop - oops that already happened, apparently while you were sharpening your pencil trying to figure out how to time the market.
P.S. Any comparison to the real estate death spiral in the U.S. is misguided. Strategic and other defaults are causing price declines as the market is flooded with foreclosures, walk-aways and bankruptcies - which are instigating more defaults, inducing further price declines, etc. etc.
Perhaps I didn't make myself clear Appraiser.
If you asked people in 2006 if purchasing stocks was a good investment, you'd probably have a lot of people answering "yes", right? What if you asked the same question in 2009?
People think housing is a good investment because it has done well. In the USA people think it is a poor investment because it has done poorly. You're mistaking herd mentality for some kind of detailed objective analysis.
Ah, now I see where the disagreement is. Appraiser commented about how many people think that "real-estate is a good long-term investment" and then cited the home-ownership rate to back it up.
He's comparing apples to oranges. The home-ownership rate in the USA is in the low 60s at the moment, but when surveyed earlier this year, only 30-something percent of people thought that owning a home was a good long-term investment. It doesn't really matter what caused the crash there, I'm just pointing out what price decreases do to "investor" sentiment. Like I said -- people think it's a good investment, until it's not.
@Joe Q.: Your thinking is far too short-term. It's as though you are comparing homeownership to day-trading in stocks.
You need to extricate yourself from the Garth Turner paradigm, which consists mainly of pumping book sales and selling financial advice, and realize that owning your own home is much more than merely an investment. The long-term positive financial aspects of homeownership are only part of the story for the majority of Canadians.
Pride and self-determination are priceless. Fretting from year to year over the value of your home does not register for the vast majority of Canadian homeowners, for they are in for the long haul; busy raising families, building memories and all the while filled with the true-blue Canadian pride of being master of their domain.
You. Just. Don't. Get. It.
I do get it, Appraiser. But every time I point out the flaws in your reasoning, you change the subject.
@Joe Q. I've lived through several recessions and never did it deter me or the majority of Canadians from investing in home ownership.
Your constant references to the debacle in the the U.S. is tiresome.
Not. Gonna. Happen. Here.
"I've lived through several recessions and never did it deter me or the majority of Canadians from investing in home ownership. "
Household debt is at a level we've never seen before. The consequences of household deleveraging will be the same as Canada as it was in the US. The components of residential investment in Canada is at never-seen-before levels and this accumulation of debt is unsustainable.
From Ben's post:
http://www.theeconomicanalyst.com/sites/default/files/u3/resi_investment...
"The chart above indicates that spending on new dwellings has doubled in the past decade (interesting considering we’ve built way more dwellings than demographic demand would warrant, see this post for more details). Furthermore, and perhaps symptomatic of the HGTV housing porn generation, renovation spending has more than doubled as well. "
"This won’t last. And with 8% of the Canadian population employed in construction (historically 5.5%) and renovation spending nearly 2 GDP percentage points above long-term norms, it’s not hard to see how when the housing boom fades, it will significantly pressure the labour market and economic growth....and that’s not even considering the knock-on effects of lower consumer spending and weakness in ancillary industries that are levered to the housing boom."
There would have been a long-term positive financial aspects of homeownership if:
1. They would not spend the equity as fast as it was building - HELOC.
2. It would not skew all other services and drain all other resources (we need to build a new hospital in Richmond but it would cost twice as it was budgeted for 5 years ago...).
Regardless your sentiments Appraiser, there are simply no people left to support this snow ball moving that would qualify for the mortgages at the current RE cost. Today's job report is not helping either:The unemployment is UP in Canada. 25.500 full time and some number of the part time jobs was lost with 43.100 part time jobs created so the quality employment is down by 6% - and guess what - the part time jobs people are not likely to be qualified for ANY mortgage as they are usually low paying jobs.
@Olga: Are you staitically challenged too? Since when does 92.5% of the poulation represent "no people left to support this snow ball...." Do you live in fear? Is the world filled with nothing but doom and gloom?
Watch the sales numbers and prices again this year @Olga. Up up and away!
The first link in my post will take you to the Total Household Credit numbers in Canada as of the end of November 2011 (as per the Bank of Canada's web site).
In spite of the record household debt in this country it looks to me like the lending to (and the borrowing by) Canada's household sector is not slowing down one little bit.
If you want to see some real interesting numbers check out the Residential Mortgage Credit lending done by Canada's chartered banks over the last year.
If anyone is interested Canada's total business credit numbers as of the end of November 2011 can be accessed by clicking on the "business credit" link at the very top on the page.
http://credit.bank-banque-canada.ca/householdcredit
Follow Australia by privatizing CMHC
http://opinion.financialpost.com/2011/12/29/follow-australia-by-privatizing-cmhc/
Greg, thank you for your analysis - how do you explain the low inventory in Toronto, as an RE investor I am shown plenty of CRE, but very few SFH are even for sale in Toronto?
What would be useful is to see the following,
1) Loss of jobs
2) Bridge Loans via real estate - I buy your place, some else buys mine.
3) Increase in vacancy rates
That will show up in TREB, not matter what you believe they are doing.
1) Finance, Real Estate and Manufacturing sectors all losing jobs http://i40.tinypic.com/16k3x4l.png Not good.
2) Pay close attention to the spike in November in this chart as it resembles how Canadians financed their holiday shopping. I can't wait to see December. http://i39.tinypic.com/2zf04te.png
3) Unfortunately we have no good measure of real vacancy rates but my view is speculators have consumed supply (12-18% market share) away from demand causing low vacancies. http://i41.tinypic.com/282ga5j.png
And lastly we get the mother of all charts for 2011 http://i42.tinypic.com/6oexyr.png
Good Luck Canada.
I'd like to dedicate this chart to Appraiser. http://i42.tinypic.com/27wr3nn.png
There's no way that chart is correct. Where specifically did you find that data? I see you referenced the BoC. Link?
http://i44.tinypic.com/2lcpaa9.png
http://i43.tinypic.com/wvdfsn.png
http://www.bankofcanada.ca/wp-content/uploads/2010/10/wfs.pdf
It's a debt orgi now. Starring who? http://i44.tinypic.com/2cijuwg.png
HO....LY......SH*T! Game is OVER!
***Note to Users***
Beginning January 2011, the Canadian Accounting Standards Board (AcSB) adopted International Financial Reporting Standards (IFRS).
Financial institutions adopting IFRS converted at the start of their first fiscal year following 31 December 2010. For the credit measures
presented on pages 13, 14 and 15, the most significant effect relates to the inclusion of securitized loans on financial institutions’ balance
sheets, which were previously shown as loans held by Special Purpose Corporations or NHA mortgage-backed securities. This
reallocation of credit primarily affects the January and November 2011 reference months. For the monetary aggregates presented on
pages 11 and 12, the most significant effect relates to the chartered banks’ reclassification of deposit liabilities to other liabilities, which
resulted in decreases in deposit liabilities, and therefore historical continuity adjustments were applied to the monetary aggregates for the
period February 1998 to October 2011.
***Note to Users***
Beginning January 2011, the Canadian Accounting Standards Board (AcSB) adopted International Financial Reporting Standards (IFRS).
Financial institutions adopting IFRS converted at the start of their first fiscal year following 31 December 2010. For the credit measures
presented on pages 13, 14 and 15, the most significant effect relates to the inclusion of securitized loans on financial institutions’ balance
sheets, which were previously shown as loans held by Special Purpose Corporations or NHA mortgage-backed securities. This
reallocation of credit primarily affects the January and November 2011 reference months. For the monetary aggregates presented on
pages 11 and 12, the most significant effect relates to the chartered banks’ reclassification of deposit liabilities to other liabilities, which
resulted in decreases in deposit liabilities, and therefore historical continuity adjustments were applied to the monetary aggregates for the
period February 1998 to October 2011.
WOW!!!! Look at mortgage jump, that unheard or unseen????
@ Jim: Quite right. The data produced by @Greg is garbage.
@Greg, (a.k.a. "Canadian Watchdog" on Garth Turner's site), is a charlatan. He produces
charts and graphs and cites otherwise reliable sources as the author, when it is clear that the information is nothing more than his very own personal fabrication.
I'm starting to think that @Greg is either a troll, has "special needs" or is a complete moron.
@ Appraiser
Check the F***ing links, numbnuts! It's from the BoC and it's legit.
Everybody knows who the troll is Appraiser. It's obvious you're just an old fart that can't get a grip with reality and is in denial of losing everything he planed to retire on.
Don't take others down with you.
Love your work Greg. Appraiser likes to look at 10 years ago because that way he knows he's right. I can call every boom/bust in the past too, that's why they call me Mr. Talented on the streets. It's laughable to think the next 10 years will be the same as the next 10 years. The economic landscape has changed internally and externally that it's no longer an option. Another 100% price increase? I think not.
C'mon, after every Canadian bank, IMF, the economist, macleans, mish shedlock, ben rabidoux, even BOC wants part of the action with predicting the fall of TO condos, C'mon, even Garth Turner says so, do you think were going to believe someone who spends way to much of his time on the Internet trying to convince others to buy a home? it's such an easy prediction, that everyone wants in on the action! Why are we having this discussion with this nobody?
Just so everyone knows: the secret to Appraisers success is 'buy a home' and then 'sell a home'. That is his definition of talent.
"I’ve written before that the Baby Boomers will have a massive effect on property prices (see here for more detail)....." ~Ben
This analysis from StatCan says otherwise:
"The pattern of homeownership after age 65 is consistent with the hypothesis of a “ratchet effect” in housing: households tend to adjust their housing consumption upward but seldom reduce it (Kendig 1984). One implication of this pattern is that there is not likely to be a spike in the demand for rental housing and a massive increase in the number of houses for sale as the annual population reaching age 65 rises from 320,000 to 570,000 within the next 20 years and the size of this population then gradually levels off. On the basis of past experience, we know that most boomers are likely to retain their houses for more than 10 years after age 65."
Citation:
http://www.statcan.gc.ca/pub/11f0019m/2010325/part-partie1-eng.htm
It is really cool for stats Canada build their conclusion on a 30 year old quote from Kendig (1984) - anything up to date? 30 years ago people had no idea that they will have to take a HELOC to give it to their kids so they stay close by and not move to US.
I would love to see how they (baby boomers) are going to be able to keep up with rising cost of food etc. and to pay their taxes - most of their properties are the single family homes and we saw an increase as much as 20% in the last year tax assessment and it might be up to $3,000 for an old rancher if the lot is substantial and is located in a good area.
@Olga: I've got news for you. The boomers control over 70% of the wealth in the U.S and Canada and 80% in the U.K. It won't be the boomers who are worried about paying $250 / month for their realty taxes.
It depends on what you consider a "wealth". How do you pay property taxes from the wealth tied in your own property? A good old HELOC again?
That's nearly a 25% jump m/m in total credit card debt outstanding. That can't be right. If it is, it is a smoking gun that consumer spending is about to die!
@ Appraiser: I beg you, pick one of Greg's charts that you feel is "garbage". Or two, or three, but keep it a manageable number. Pick the really bad ones, the ones that are completely made up out of bitter loser bearish envy.
Ask Greg to fully prove them, using valid links to irrefutable data sources.
Then apologize after he does so, and go away!
And like you Appraiser, I have a dual alias and act like a moron to remain anonymous—similar to the works of The Economist magazine.
When I said I admired your articulation, I really meant your linguistic signature was well perceived.
Oh yes, Greg? If Appraiser does accept my challenge, you also are expected to put up or shut up!
I personally have little doubt you can and will, but I will take note if you don't.
Nice catches, Greg. Interesting data from the BoC.
Great Graphs - can you paste the link to the boc site showing that CC usage increase - are Canadians using credit cards to pay mortgages?
Also the CMHC-MBS increase, I can't find the link to that
Greg you are pointing some interesting debt information, keep in mind people are allowed to have plenty of debt, the debt servicing costs today are the same as 2007 (rates down, assets up) so its not that surprising people taking on more. The jobs is still not a smoking gun. Still a very high tax, free educational, free health society and that shows in the jobs.
Seems BOC made some adjustment for international - was it all lumped into last observation
Over the course of 2011, this series was affected by International Financial Reporting Standards (IFRS)./ Au cours de 2011, les Normes internationales
d’information financière (IFRS) ont eu une incidence sur la présente série.
READ THIS BEN OR GREG
THIS BOC CANADA REPORT IS SAYING THAT WE JUMPED 46% IN ONE MONTH??? SOMETHING IS WRONG, THE GUY AT BOC IS ALSLEEP. NO WAY
Date Total Mortgages Rate of Change
2/1/2010 472,181
3/1/2010 472,872 0.15%
4/1/2010 475,899 0.64%
5/1/2010 484,898 1.89%
6/1/2010 490,338 1.12%
7/1/2010 495,200 0.99%
8/1/2010 496,112 0.18%
9/1/2010 497,006 0.18%
10/1/2010 500,217 0.65%
11/1/2010 505,248 1.01%
12/1/2010 505,968 0.14%
1/1/2011 529,004 4.55%
2/1/2011 529,225 0.04%
3/1/2011 533,076 0.73%
4/1/2011 535,667 0.49%
5/1/2011 541,712 1.13%
6/1/2011 547,953 1.15%
7/1/2011 555,652 1.41%
8/1/2011 560,673 0.90%
9/1/2011 561,353 0.12%
10/1/2011 562,953 0.29%
11/1/2011 823,482 46.28%
My thoughts exactly. IFRS taking effect has to be explanation. Looking into it...
The jumps are in all Nov Data. Even if it lumped into Nov, and the adjustment is done to all numbers. This could be something major
This is why
***Note to Users***
Beginning January 2011, the Canadian Accounting Standards Board (AcSB) adopted International Financial Reporting Standards (IFRS).
Financial institutions adopting IFRS converted at the start of their first fiscal year following 31 December 2010. For the credit measures
presented on pages 13, 14 and 15, the most significant effect relates to the inclusion of securitized loans on financial institutions’ balance
sheets, which were previously shown as loans held by Special Purpose Corporations or NHA mortgage-backed securities. This
reallocation of credit primarily affects the January and November 2011 reference months. For the monetary aggregates presented on
pages 11 and 12, the most significant effect relates to the chartered banks’ reclassification of deposit liabilities to other liabilities, which
resulted in decreases in deposit liabilities, and therefore historical continuity adjustments were applied to the monetary aggregates for the
period February 1998 to October 2011.
Definitely the most exciting non story of my day.
I don't see the drop in SPV or NHA however? Very strange adjustment
I'm not a CA and won't attempt to explain the mechanics of those reports. There were also adjustments made in CMHC's MBS data:
NHA Mortgage-Backed Securities PDF: http://www.cmhc-schl.gc.ca/en/hoficlincl/mobase/upload/r303b_en.pdf December surged to $29,259,279,610.57 from $9,653,171,247.92.
Also most of the largest MBS issuers removed some holdings http://i42.tinypic.com/o8aowl.png
Lastly the yearly total for 2011 reached $903,716,409,432.13
http://www.cmhc-schl.gc.ca/en/hoficlincl/mobase/upload/r303a_en.pdf
The reallocation of the non-transparent securities into their corresponding categories is useful, as it now gives some complete number on total debt/assets/liabilities outstanding. Not to my surprise, the numbers are becoming too big for Canada's economy to support.
I think you have jump the gun here ,but I find that it very strange that moving to an international standard would be a lump sum move and not smoothing (as a stock split). Looking at at this 1 year from now will still show the jump and make people scratch heads.
This probably explains all the capital raises via bonds/prefs, etc done by Cad Banks in the last year to make sure ratios stay the in line when off bs was moved onto bs.
Canadas CRE is the main problem, the lease revenue and cap rates are so small and they are being flipped into REITs to dividend chasing investors in Canada. This will be the first shoe to drop before you can find a house with no bidding war. A REIT is a very highly leveraged RE bet with very little room for error and can have a margin call from a bank. Retail should beware of those high yields
Same thing happened with REITs residential mortgage credit back in Jan 2011 http://i43.tinypic.com/e9hqfd.png
I posted about this before...
Greg, regardless that this spike does not probably mean the crazy holiday spree, thanks for drawing our attention to the graphs and new looks and new regulations. We can let Ben to explain this BOC move and its consequences :(
I wouldn't be quick to dismiss a spike in holiday credit spending as Statscan stated that household debt to disposable income jumped from 150% to 153% from Q2 to Q3 alone. http://www.youtube.com/watch?v=nOsT1Jxj3mI We'll have more clarification soon.
Debt holders are under a serious 'threat' now that our economy is contracting along with the US and European nations, Canada's two largest trading partners.
This recession will be much different from those in the past as inflation will creep back while the economy contracts. The reason being China is now committed to its currency appreciating (Asian OCA monetary reform) and rise in domestic consumption—they are also taking a hard stance on purging their asset bubbles to help restore the economy's equilibrium. This policy action will keep commodity prices higher then that of 2008, as this week we've already seen raw materials price index (RMPI) surge to 3.80%.
http://i43.tinypic.com/14voiky.png
China's move will challenge the Fed and BoC into an offset position as the spread between interest rates and inflation will widen. This will create more pressure to lift rates even though lifting rates will put debt holders further at risk. Simply said, this is not the western nations' choice anymore.
There is tough time ahead so be ready for the unexpected.
Regarding the 45% increase in residential mortgages from October to November 2011:
http://i43.tinypic.com/wvdfsn.png
Can someone explain what this might mean? I can only think of a few reasons:
1) an accounting change, but why for November and not the end of the year?
2) a massive transfer of mortgages from the government to Canada's banks
3) a massive unprecedented spike in mortgage approvals for next spring
4) a massive unprecedented spike in HELOCs
This needs an article in itself. Can anyone provide evidence for any of these? Or clarify the accounting?
Ozzie Jurock was a guest on Michael Campbell's radio show (Money Talks) yesterday (Saturday) on radio station CKNW in Vancouver.
It is well worth listening to 2 minutes and 15 seconds of this interview where Mr. Jurock discusses recent house prices in Vancouver.
The link at the end of my post will take you to the audio vault page of the radio station. You do not have to register with the station to access the audio vault.
At the top of the audio vault page put the date Jan 7 in the first drop down box and 9:00 AM in the second drop down box. Then click on the "listen" link. When the page loads use the slider to fast forward to the 43 minute part of the program. Be sure to listen to the full 2 minutes and 15 seconds of the interview as there are two good quotes in it.
http://www.cknw.com/other/audiovault.html
"Karen Kinsley was reappointed as President and Chief Executive Officer of Canada Mortgage and Housing Corporation (CMHC) in March 2011. She was first appointed in June 2003.
Ms. Kinsley joined CMHC in 1987. She was appointed Vice-President, Finance in 1990 and Treasurer in June 1995. In November 1996, Ms. Kinsley became the Vice-President, Corporate Services and Chief Financial Officer, and in May 2000, was appointed Vice-President, Insurance and Securitization.
Prior to joining CMHC, Ms. Kinsley was Vice-President and Treasurer with two real estate development companies.
Ms. Kinsley received the Award of Excellence in 2004 from the Canadian Home Builders’ Association in recognition of service to Canada’s home building industry. In 2006, she was inducted into the Canadian Mortgage Hall of Fame by the Canadian Association of Accredited Mortgage Professionals in recognition of her service to the Canadian mortgage industry. In 2009, Ms. Kinsley was named 2009 CEO of the Year by the Ottawa Business Journal. She is also a three-time recipient of the Women’s Executive Network™ Canada’s Most Powerful Women: Top 100 Award (2008, 2009 and most recently in 2010)."
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_011.cfm
Bought and paid for?
"[CMHC's] Appointment Provisions
The Board of directors shall consist of:
- the Chairperson of the Board who is appointed by the Governor in Council to hold office during pleasure for such term as the GiC considers appropriate; eligible for reappointment;
- the President and CEO who is appointed by the Governor in Council to hold office during pleasure for such term as the Governor in Council considers appropriate; eligible for reappointment
- eight directors, all appointed by the Minister with the Governor in Council approval to hold office during pleasure for a term not exceeding four years, ensuring, as far as possible, that not more than one-half of the directors' terms expire in any one year; eligible for reappointment."
http://www.appointments.gc.ca/prflOrg.asp?OrgID=CMH&lang=eng
Ben most everyone know your work will be and are plagiarist. A sign of who good you are. Simple
I'll leave this image here as a marker for tomorrow's housing starts report. http://i54.tinypic.com/smpsi8.png I originally posted it on this blog on October 1st, 2011.
In a 2008 report, CMHC called Ontario to have 65,000 housing starts by the end of 2012. If that number comes in accurate or close enough to it, I wonder how CMHC is predicting the market with such accuracy.
@Leo:
"A recent FICO data analysis found more than six million U.S. homeowners have a current-loan-to-value ratio of 120 or higher, meaning they are at least 20 percent underwater on their mortgages. Based on recent data from Fannie Mae, these homeowners are more than twice as likely as other borrowers to consider defaulting on their mortgage."
"These figures suggest that an already-depressed housing industry may be more susceptible to more incidents of strategic default. Studies from the University of Chicago Booth School of Business indicate that 35 percent of mortgage defaults in September 2010 were strategic, up from 26 percent in March 2009. And FICO’s latest quarterly survey of U.S. risk managers found that 49 percent of respondents do not expect housing prices to rebound before the year 2020."
http://bankinganalyticsblog.fico.com/2011/10/fico-analysis-strategic-def...
@Leo, you do the math - it ain't prety!
Thanks. Good data.
Given that about half of US states are actually recourse states, it would be interesting to see what the incidence of strategic default is there compared to non-recourse states. Was it something like 20% less defaults in recourse states?
This is why I believe a housing correction would be very painful in Canada as well (in the more expensive markets). Based on Ben's previous work, there is strong correlation between negative equity and defaults. Our mostly recourse status protects us to some degree, but not nearly completely.
You still don't get it do you App. So you honestly believe people will continue to pay their mortgage and differ more debt onto their credit cards and lines of credit until...??? Have you not realized that all non-mortgage debt is growing at a faster rate then income growth because people are being forced to resort to using debt in order to pay-off other debt? Ponzi isn't it?
What logic lies behind this notion? Tell us how it can possibly work in a sluggish non-growing income economy.
There are only 12 non-recourse states. Florida (one of the hardest-hit) is recourse.
Note that most mortgages modified under one of the various programs become recourse even in the non-recourse states.
Yet another fail for the extremely myopically optimistic Appraisor!
Hey Appraisor, did you pick the most utterly garbage of Greg's charts yet? I really want to know who's opinion is based on verifiable fact, and who needs liberal doses of warm fuzzy truthyness to make it through the day.
You sound like a really angry renter @Alexcanuck, do you need a hug?
P.S. You obviously need to do alot more research into strategic default, before you get a handle on the basics - I suggest you do more reading.
That is not a fact-based answer. I can see you are avoiding the issue, preferring ad hominem attacks. Quite high up on the list of common denialist tactics, actually.
Please, tell me more about strategic default, especially how to meaningfully compare the default rates of those underwater on a loan vs those before a bubble pops. US foreclosure rates were very low in 2005, one of the reasons why it wasn't a bubble. Until it was, of course, but nobody could have seen that coming.
The papers that I've already referenced in previous posts above would be a good start. You will have to educate yourself on the matter however, as I'm afraid your current bias is obviously very strong and regrettably dependant on the opinions of others with the same ideological bent. I suggest you get started.
@Appraiser:
Earlier you stated
The data produced by @Greg is garbage.
@Greg, (a.k.a. "Canadian Watchdog" on Garth Turner's site), is a charlatan. He produces
charts and graphs and cites otherwise reliable sources as the author, when it is clear that the information is nothing more than his very own personal fabrication.
I'm starting to think that @Greg is either a troll, has "special needs" or is a complete moron.
I'm just asking you to justify this off-hand dismissal of his data. "Garbage", "charlatan", "complete fabrication" and "moron" are pretty clear, I feel it is a fair request to require you to take some effort to support your case in this. Pick one or more of his links that you feel so strongly are indeed fabrications. I'm pretty sure Greg will be happy to respond with detailed sources for his data. Is this truly such an onerous and unfair request?
We see very little from you except realtor talking points, innuendo and insults.
(See http://en.wikipedia.org/wiki/Denialism for a crash course on Appraiser's style.)
Oh, that is annoying formating! A line break closes an italics tab. More of Appraiser's quote should have been italic, up to complete moron.
I think the point comes through, though. Dismiss the person with insults while ignoring the data, an excellent debating technique when you have nothing.
Prove me wrong, please! But do it with data, not insults.
Don't change the topic @Alexcanuck.
As for @Greg. He is clearly a tin-foil conspiracy nut with little or no analytical ability. He simply reproduces data (some of it clearly flawed) and then makes wild accusations or arrives at unsupported conclusions that are often indecipherable.
Or perhaps you can discern what @Greg means when he states that "the entire Canadian economy is checkmated" ? Pure nonsense.
Dismissing opponents as conspiracy nuts is also high up on the list of denialist techniques.
How about picking the link you feel best exemplifies the flawed data? Better yet the "complete fabrication"?
Seems to me that would be the best response if you are actually correct.
I think you're both trending towards the crazy. You're obviously lost in the past and think that applies to the future, and Greg seems to have read too much Garth Turner. On the plus side you both link to interesting articles once in a while, so if one can ignore the catcalling you're still interesting reads.
Hey look at that. The latest stats are out from Equifax :
So let's review. The Canadian Bankers Association reported previously that mortgage delinquencies are down nationally to 0.39%.
Today Equifax reports that credit card debt and bankruptcies are also down. Wait, I know. People are selling their gold fillings to make their mortgage payments - right?
http://www.cbc.ca/news/business/story/2012/01/10/equifax-credit-card-deb...
http://www.russell.com/helping-advisors/Markets/EconomicIndicatorsDashbo...
Oddly enough, US mortgage delinquencies hit an all-time low in 2005, just before all hell broke loose. Strange how a bubble manages to escape all recognition until it begins to deflate!
So which one of Greg's links was fabricated? C'mon, App, give me something!
@ Alexcanuck: Do you know the difference between correlation and causation?
Of course only a headline monkey like you would believe such propaganda.
Equifax: Average balances are 'GROWING' at half the rate as last year.
www.equifax.com/international/canada/Consumer_Credit_Trends_Q42011_Engli...
And when you get to the last page, have a look at this chart.
http://i41.tinypic.com/sdd8jl.png
http://strategis.ic.gc.ca/eic/site/bsf-osb.nsf/eng/h_br01011.html
Sorry try again App.
About those CMHC Ontario housing starts http://i44.tinypic.com/23ur476.png No comment.
"Canadian housing starts made strong gains in December, climbing to 200,200 on an annualized basis, compared with 185,600 in November.
For the year, preliminary figures suggest starts came in at 193,000 in 2011. Actual housing starts for 2011 are still being verified and will be reported by Canada Mortgage and Housing later in January."
http://www.cbc.ca/news/business/story/2012/01/10/december-housing-starts...
Ontario.
Slow down buddy. You're making yourself nervous.
Mortgage defaults DOWN. Credit card defaults DOWN. Bankruptcies DOWN.
Housing starts UP.
Yeah, it looks like doom and gloom for sure.
Very good App. Now if your brain can quantify which indicators lag you'll get a better picture of what comes next.
Total debt UP. Whether people are rolling their credit cards into their HELOCs is irrelevant. The total pile keeps growing and that is not good news.
Housing starts UP. How is that good news for prices? One of the biggest concerns at least about the condo market is overbuilding, and Ben has raised similar concerns about detached homes. So an increase in starts means more supply, meaning more pressure on prices down the road. A decrease in starts would have meant possible supply pressure down the line to stabilize prices.
Low interest rates along with a growing population and a growing economy almost ensures that nominal debt will rise. The fact that the pace of growth has slowed is probably not a bad thing. And that people are prudently servicing their credit is even better.
As for housing starts, they are also indicative of a growing poulation and an expanding economy. You know, jobs, GDP and stuff like that.
As far as new condos go in the GTA at least, there is strong evidence that there is probably a shortage, not a surplus. In 2011, well over 27,000 were sold. There are approximately 43,000 condos in the pipeline for future delivery (over the next three years, or so), which is only 14,000 per year. Once again @Leo, you do the math. The annual condo absorption rate is more indicative of a shortage than a surplus.
Depending on which report you believe, 50-85% of condo purchases are going to investors. That's not sustainable demand you can extrapolate forward like it's due to population growth.
There is no actual "report" in which to believe, as far as the percentage of flippers and speculators in the Toronto condo market is concerned. ALL "data" thus far in this regard is stictly anecdotal and nothing more.
Having said that, I have no doubt that the percentage is substantial and that many condos are being rented out. The demand for rentals is very high in Toronto and the vacancy rate is a miniscule 1.4%. Investors have their pick when it comes to potential tenants right now.
Along with domestic rental demand, there are approximately 4,500 immigrants arriving in Toronto every month, most of whom rent before they buy. I would argue that until that equation changes drastically, there will be strong demand for condos - especially since new purpose-built rental buildings are extremely scarce.
People have to remember that the market is not static with a fixed numbers of investors and renters. To the contrary, the market is dynamic and growing all of the time.
There is no actual "report" in which to believe, as far as the percentage of flippers and speculators in the Toronto condo market is concerned. ALL "data" thus far in this regard is stictly anecdotal and nothing more.
Data on the extent of investment in the Toronto market comes from Urbanation, who surveys the condo market several times per year. In May they stated that over 50% of condo sales in the Toronto CMA (Oakville to Ajax) are going to investors. We don't know how that breaks down into flippers and speculators (those two words are a matter of definition anyway).
The demand for rentals is very high in Toronto and the vacancy rate is a miniscule 1.4%. Investors have their pick when it comes to potential tenants right now.
Again -- the vacancy rate you've quoted is for the whole Toronto CMA and refers to the percentage of units in buildings with three or more rental units that were physically vacant for a certain period of time before and during the survey period (which is in October). The actual rental availability rate -- percentage of rental units that are available to rent at the time of the survey -- is much higher, around 3.5%.
Urbanation also notes that index rents only increased 1.1% from 2010 to 2011, while index resale and new condo prices increased at several times this rate. This suggests to me that those buying condos as investments in 2011 will have a difficult time getting positive cash flow from their investments. Whether this makes them "speculators" or not is a matter of semantics.
http://www.marketwire.com/press-release/urbanation-launches-inaugural-co...
Urbanation and all other "reports" regarding the percentage of condo investors in Toronto are based on anecdotal evidence. Period.
There is no published hard data that exists.
If you have a beef with the officail vacany stats, take it up with CMHC. You have no evidence to the contrary, only conjecture.
Who said CMHC was lying about vacancy? I'm just pointing out their methodology.
They don't count basement apartments.
They don't count duplexes.
They don't count rental houses.
They don't count buildings where fewer than three units are rented out.
They only consider a unit vacant if it is actually empty and available for immediate rental.
They don't count units where the previous tenant has given notice, but hasn't moved out yet.
All of this is in the CMHC's report, in the methodology section. It's easy to find and worth reading if you are going to continually cite the 1.4% number.
http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/suretaanme/suretaan...
Rental housing availability includes units where the previous tenant has given notice, but the landlord has not found another tenant yet. For Toronto, rental housing availability this October was 2.9%, in April it was 3.0%, last October was 3.9%.
https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?lang=en&cat=124&...
As for Urbanation, their data comes from surveys, as does the CMHC's data. If you think that's "anecdotal", there's nothing much I can do for you.
http://www.urbanation.ca/UrbanRental/
@Joe Q.
A unit is not considered vacant when the tenant has given notice for good reason - the unit is NOT vacant. Try to keep units of comparison order, it makes things easier to comprehend and contrast.
Any way you slice it the vacancy / availability rate in Toronto is very low in comparison with other cities and in relation to previous years in the city itself.
Your apparent need to be overly pedantic on the issue serves no real purpose. Splitting hairs doesn't change the facts.
App, your mind is so narrow its becoming amusing. If 80% of the condos are snapped by the speckers it does not mean a sustainable demand. All it means that this situation can turn around within months - at the sight of the first drop of blood. Also, look at the fundamentals and they will show you the real picture.
Please enlighten me @Tang.
Besides popular myths propogated by this site and others, what proof do you have as to the actual percentage of condos purchased by investors? Not hearsay, not anecdotal, not conjecture, but proof ? Good luck.
There is no evidence that there is an oversupply of condos in the market. There is no evidence of a slow-down or price decline in the condo market. Quite the contrary, as I've detailed in previous posts above.
What "fundamentals" are you referring to @ Tang, - explain?
Canada has reached and surpassed every false "benchmark" that the U.S. reached quite some time ago. Clearly it was not the percentage of homeownership or the debt to income ratios, or the price to income ratios, or the price to rent ratios that were critical in the collapse of the U.S. real estate market. Canada surpassed those long ago and is still going strong. Why?
I'll tell you why. Incredibly poor mortgage underwriting in the U.S. is the true culprit. That doesn't happen here, despite the musings of those who confuse 5% downpayments by well-qualified borrowers as "sub-rime" lending. Or those who wish to conflate cash-back mortgages as some sort of evil conspiracy.
A poor understanding of the fundamentals is what has driven all of the real estate bubble-heads into a frenzy and it is also why they have been so wrong for so long.
"Because Urbanation expects a record year for condominium apartment registrations in 2011, that additional supply is expected to keep prices from escalating. Index rents are up just 1.1% annually in the rental condominium market in comparison to 3.5% for resale condominiums and 8.4% for new condominiums."
http://www.marketwire.com/press-release/urbanation-launches-inaugural-co...
So the price per sq ft of new condos is increasing about seven times faster than the market condo rent per sq ft. For resale condos it's about three times faster. Something seems amiss, doesn't it Appraiser? If there was so much demand, wouldn't condo rents be rising at a similar rate to prices?
Clearly you missed the message. The price to rent ratios have not correlated very well at all, due to the lack of understanding by many would-be analysts regarding the mitigating effects of ultra-low borrowing costs, so I'm not sure why you keep returning to that outdated metric.
The only thing keeping rents from escalating is the generous supply of new condos. It doesn't mean that demand is not very strong.
Lack of understanding of analysts? Are you kidding me?
It's not me who's "returning to this outdated metric" -- it's Urbanation, uber-housing bulls who nonetheless felt compelled to point out how quickly condo prices are going up relative to rents.
Appraiser, do believe that ultra-low borrowing costs are the explanation for a seven-fold difference in price appreciation vs. rent appreciation in the new condo market?
Unless resale inventories start rising, prices in the GTA will continue to increase.
http://communications3.torontomls.net/newstand/president_message/2011-20...
At least this guy agrees with you http://www.youtube.com/watch?v=pYvJWj5QQuc
Greg - with all your graphs and data, what are you doing exactly to profit from your upcoming doom and gloom view. App is long RE and making a fortune. That is all that matters
And how would you know or even confirm that he's making a fortune? A blog wouldn't be appropriate to compare personal investment returns—I'm well-off if you must know.
There are plenty of opportunities out there if you know where the next big market is.
Thanks for the honest reply.
>> App is long RE and making a fortune.
That would be _made_. The question is not "has real estate been a good investment in the past 10 years?", but "is it a good investment now?". Plenty of people made money on RIM too. Doesn't take a genius when things are going up.
The past is irrelevant. We're looking forward here, and the first step to profiting is not betting on a losing asset class. Also not sure what Appraiser's business is, but I think most of the people here are interested more in a personal own/rent decision rather than whether to invest in real estate.
I'm still waiting to learn which garbage chart that moronic charlatan Greg fabricated to further his nutcase conspiracy case. (Apologies to Greg, you know those aren't my words.)
This seems like a really good way to establish some credibility, which at the moment I sense is acting somewhat like the wicked witch when watered.
Or are you just going to stay on the standard talking points while ignoring any factual dissent?
Silly question, I know, but do you notice how obvious I am making your inability to present hard data to support your case?
All you offer is "proof" that a bubble has not yet popped, not that a bubble doesn't exist. No one denies a bubble once the damage is completed, although there are steady bottom calls throughout the burst.
All I ask for is one single solitary chart the Greg has fabricated, is that really so hard?
For those interested, the link below provides up-to-date TREB data:
http://communications3.torontomls.net/statistics/mstats/pdf/2011/TREB_Ho...
Appraiser,
Your link comes from Torontomls.net, which is only available to Realtors. The rest of us lack the password to access it.
@ Joe Q. My apologies. It worked yesterday.
Oh Boy, OSFI must have seen something they don't like because they've just sent a letter The US Treasury, Federal Reserve, FDIC and SEC regarding the Canadian banks risk exposure to Hedge Funds and Private Equity Firms. http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/media/rstrprttd_e.pdf
And so the fun begins...
Ben, I request to have a fresh new post on this. This is important for people to know.
You gotta love this...
"In other words, OSFI would not wish to see US regulators taking actions that may enhance the stability of their financial system at the cost of undermining the stability of other systems around the world."
I told you guys the hedge fund hyenas and bond vigilantes would come on the first drop of Canadian blood.
http://www.bnn.ca/News/2012/1/11/Housing-market-overheated-BMO-CEO.aspx
Banks sure are sounding the housing alarm lately. I'm sure they have their agenda but I definetly would pay very close attention to what the they say and do.
Amazing how they're all coming out all at once to warn everyone. I see this in two ways i) they're absolutely amazed at the stupidity amongst borrowers and literally had to come out to say something before the entire system collapses ii) they're short mortgage backed securities (via US branches) and now pushing the housing market over the cliff.
If history is any lesson to us, bankers are more likely to be on the winning side.
@Brett: Looks like the big banks say one thing then do the other.
"Later today, BMO is reportedly announcing the lowest advertised 5-year fixed rate ever for a Canadian bank."
"It’s a 2-week promotion at 2.99%. Official announcement to follow."
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/01/b...
"New home prices rose by a stronger-than-expected 0.3 percent in November from October but continued to subside in the pricey Vancouver market, according to Statistics Canada data released on Thursday."
http://www.bnn.ca/News/2012/1/12/New-home-prices-rise-soften-in-Vancouve...
Looks like TD Canada Trust wants in on the game too:
TORONTO, Jan. 12, 2012 /CNW/ - TD Canada Trust lowers six- and seven-year special fixed rate mortgage offers, effective January 13, 2012.
Special Fixed Rate Offers* To: Change:
6-year closed special 3.79% -1.32%
7-year closed special 3.99% -0.91%
http://td.mediaroom.com/index.php?s=43&item=1499
Banks have been trying to push mortgage holders into fixed rates for a few months now, ever since they hiked their discount on variable rates.
And the banks aren't going to start trying to soften the housing situation themselves and perhaps lose market share, they are sounding the warnings in the hopes that the governement will tighten the rules this spring in their budget. And don't underestimate the lobbying power of the banks.
I have no doubt that our major banks along with the Bank of Canada and the Ministry of Finance are working in concert to avoid a nasty crash in the property market.
Hiking the rates on variable mortgages has the same effect as raising the overnight rate, without juicing the prime rate, which would hurt exports. Very clever and quite coincidental, I must say.
The banks are also currently enjoying a generous spread on fixed rate mortgages, based on the current bond market. I'm not sure that a great deal more tweaking of the credit market can be executed without serious consequences.
From what I've read, it appears that the Feds are unlikely to touch downpayment requirements, but they may reduce insured mortgage amortizations to a max. of 25 years, if the real estate market does not cool sufficiently.
What matters is how they deal with fading confidence.
What matters is that almost everyone who wanted and was able to get qualified for a mortgage in order to have a slice of RE is already in and this is just the last fool call. And very low new mortgages applications force banks to lower the rate trying to get these last fools to sign with them and not with the next door outfit.
I doubt that as there is always another batch of fools to fool. Consumer sentiment could be that a 10-15% correction is a good deal, even though home prices will not return to current price levels for the next decade or so.
Regardless, a correction of that amount will raise concerns on CMHC's solvency.
App - Regarding your comment above
"There is no evidence that there is an oversupply of condos in the market. There is no evidence of a slow-down or price decline in the condo market. "
Great example of "Argument from ignorance" - If an argument has not been disproven (there is no evidence that there is an oversupply of condos in the market), then it cannot be considered false and must therefore be considered true.
http://beta.images.theglobeandmail.com/archive/01350/Condo_chart_1350829...
App - don't supply numbers like this raise at least a small amount of concern? Do you really have confidence in yourself when more important people with a higher level of economic and global background than yourself, start raisinging red flags?
How about from the words of Bank of Canada? The thought that the "Economic Analyst" site exists or the thought that BOC warns that a condo boom might be ending, or the thought that every major bank has declined some kind of house price decline, or the IMF, Capital Economics, my brother Larry, does this surprise you? And why? Hint: Correct answer is NOT "because it hasn't happened yet"
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/da...
"While it may be true that the residential market in Canada is vulnerable to price declines in the advent of an economic slowdown, the source of the problem is more likely to come from a credit-crunch induced global recession."
App - I haven't heard your thoughts ever using a global perspective. What are your thoughts about global influences on Canada? Hint: Correct answer is NOT "because Canada is an island and we're not affected by other economies"
@ Petr
App is correct, we simply have too much demand in Toronto. I am get calls looking for people to buy, rent condo's homes more then I ever have. Now with lower rates, people are really starting to get excited about just how cheap it is to own vs renting and very happy they waited. Everyone knows if housing has an issue, rates will go even LOWER.
People who own homes simply have no choice of where to move! If they sell high, they have to pay high, no one is going to disrupt family life to do this, instead people take the money out by using HELOC. So not a bubble, just a broken demand/supply market or move 2hours away.
I am looking myself and I can't find anything.
Click refresh on MLS in about one or two months. I'm sure you'll be overwhelmed.
Thanks for the response landlord. I better take your word for it. Demand will continue infintely until house prices are worth more than the GDP of the entire world combined. We're that special here and will always be that special here in Canada.
Still waiting for App's response about why he thinks the IMF, Ben Rabidoux, BOC, Captial Economics, The Economist, all Canadian major banks, Merrill Lynch, my friend Günther wearing his tinfoil hat are all a little nutso thinking about the POSSIBILITY that house prices will decline at some point in the short-medium term. Aren't the house price to rent & house price to incomes graphs income slightly, just a tiny bit suspicious? Lastly, tell me why should I care what a nobody like you thinks anyhow when the economists (minus Günther because he's just a bit crazy) I mentioned above know a lot more than you.
I'm an angry renter too. roar. We all are on this site, but really, what's your point? And how does this change anything about comparing fundamentals.
my point is this is not a bubble (excess supply) - we are in excess demand (healthy economy)
"Lack of inventory in Toronto produced strong year-over-year price appreciation in 2011. Average price gains ranged from 3.4 to 7.2 per cent for the housing types surveyed. Migration and low interest rates also continue to drive real estate prices. At the end of 2012, average house prices in Toronto are forecast to increase 2.6 per cent over 2011."
http://www.royallepage.ca/en/media/120112-house-price-survey-q4-2011-mar...
I said one or two months App. Slow down buddy, you're getting too excited.
I will assure you of one thing App, don't expect growth as it was from 2008 on. The only factor that kept our economy afloat was a global stimulus package worth $1 trillion dollars that was committed amongst World leaders at the G20 summit. The stimulus funds has now has run its course and world leaders have opted-out for further action, as the first stimulus was only intended to 'postpone' a depression like crash, which is inevitable at any point in the future.
Wealth can not be printed, nor grow faster then the material world. Rates can stay as low as zero, but not without serious calamities elsewhere. Once you understand the anatomy of a crash or depression, you understand why governments have and will try to prevent it from happening, but unfortunately, we've hit the beginning of exponential velocity, where it takes more money, on a more frequent basis, to generate so much GDP. This is the failed system.
So despite whatever headline you fetch to keep your optimism aroused, always remember something much bigger, more dangerous and highly leveraged threatens the entire global financial system.
A tin foil hat is a piece of headgear made from one or more sheets of aluminium foil or similar material. Alternatively it may be a conventional hat lined with foil. One may wear the hat in the belief that it acts to shield the brain from such influences as electromagnetic fields, or against mind control and/or mind reading; or attempt to limit the transmission of voices directly into the brain.
The concept of wearing a tin foil hat for protection from such threats has become a popular stereotype and term of derision; the phrase serves as a byword for paranoia and persecutory delusions, and is associated with conspiracy theorists.
tinfoil hat also worked well for magneto when professor x was trying to control his mind
Smart answer but here's reality App.
Canada GDP $1,200,000,000,000
OTC Derivatives Shadow Banking Market $700,000,000,000,000
Canada's GDP is 0.17% of that amount. Helpless.
http://i44.tinypic.com/rsdfv5.png http://www.bis.org/statistics/derstats.htm
These are real numbers that exist on contracts and balance sheets. It really isn't even a game anymore, rather the end of Anglo-America's financial system as we know it. It's what you don't see that threatens everyone and keeps governments printing.
How do you figure Canada's GDP is only 1.2 tril? Greg...you are hard to take seriously. Canada's GDP is $1.5-1.6 trillion.
Sorry I usually refer to GDP in real terms. In nominal yes, 1.6 trillion which is 0.22% of the OTC market. That better?
And the tinfoil hat does seem to work, as my repeated entreaties to App to take the effort to pick just one little chart as provided by Greg to prove once and for all whose opinion is based on fact and who is high on Hopium and tinfoil fumes have not yet penetrated said tinfoil.
C'mon, App! You were pretty clear that all those links from Greg were, at the best misrepresented, and more likely complete fabrications. Pick one! Just one! Or admit you got nuttin' but fluff and distraction, as is typical in
consalesmen types.@Alexcanuck; You come off as a REALLY ANGRY renter. Get a life, be a good "canuck" and buy a house already. Your country needs you.
Why the insults, and why not just point to one single solitary chart that Greg fabricated?
It really doesn't help to establish your credibility when you resort to ad hominem attacks, rather than respond with such a simple and easy way to show that you do indeed have a leg to stand on. Come on, you can do it. One chart! Just one is all I ask for, prove that Greg doesn't know what he is talking about and I will take you a lot more seriously.
I really will, as Greg' opinion matches mine and I am very wary of cognitive bias and deliberately seek out contrary views to test mine against. I do, however, require ones that rely on facts, figures and a reference to more than a short-term localized background, none of which you provide.
Until then I will regard you as the ignorant blowhard clown with an agenda that you appear to be.
"The Canadian Association of Accredited Mortgage Professionals estimated recently that the 1.35 million mortgage holders who renewed their mortgages in the past year saved an average of $2,000 a year in interest costs – or $2.7 billion a year in total."
Imagine that. Homeownwers renewing their mortgages and saving money on interest.
"TORONTO, January 17, 2012 – Greater Toronto REALTORS® reported 1,506 sales through the TorontoMLS® system during the first two weeks of January 2012. This result represented a six per cent increase compared to the first 14 days of January 2011. New listings were also up on a year-over-year basis, but by a lesser 3.7 per cent."
"The average selling price during the first two weeks of 2012 was $444,473 – up by more than 8.5 per cent compared to the same period in 2011."
Look at that! Sales UP, prices UP and inventory going DOWN.
Yup, sure looks like a correction to me.
Sales down -3.65%.
For those with obvious comprehension abilities:
"TORONTO, January 17, 2012 – Greater Toronto REALTORS® reported 1,506 sales through the TorontoMLS® system during the first two weeks of January 2012. This result represented A SIX PER CENT INCREASE compared to the first 14 days of January 2011."
Let's take a close look at these manipulated numbers that they just revised...
January 2012, Mid-Month Report
416 sales (552) average price ($467,152)
905 sales (954) average price ($431,351)
GTA sales (1,506) average price ($444,473)
January 2011, Mid-Month Report
416 sales (581) average price ($416,647)
905 sales (839) average price ($404,341 )
GTA sales (1,420) average price ($409,376)
Jan 2011 sales 1,420 / Jan 2012 sales 1,506 = up +6.06%
However, a little Google historical search finds us figures TREB initially reported back in January 2011: http://www.thinktorontohomes.com/blog/2011/1/21/gta-realtors-report-mid-...
January 2011, Mid-Month Report
416 sales (628) average price ($418,951)
905 sales (935) average price ($409,947 )
GTA sales (*1,563*) average price ($413,565)
Jan 2011 sales 1,563 / Jan 2012 sales 1,506 = down -3.65%
They even went as far as to remove January's 2011 mid-month report archive and replace it with 2010—just so it looks like a mistake.
Try to find before they remove it http://www.torontorealestateboard.com/market_news/release_market_updates...
Sorry, you bought the headline again.
Ohh and by the way App... The city of Toronto (and many more municipalities soon) just gave homeowners a new present. http://www.cbc.ca/news/canada/toronto/story/2012/01/17/toronto-budget-de...
So much for that $2000 savings for renewed mortgages.
@Greg: You really can't do basic arithmetic can you? Nor have you clearly ever paid a realty tax bill in your life:
"CBC reporter Jamie Strashin said the 2.5 per cent (tax) increase passed without debate. The increase is likely to add about $60 to the average annual tax bill."
How many years does the average mortgage have App?
Regardless, if you knew anything about politics and government revenue streams, the reason they increased the tax is because they expect home prices to fall. They want to balance next year's budget or retain the surplus.
So you're saying that they manipulated / revised the sales numbers. Worst case scenario if true is that volume is down negligibly. Inventory is low after all. I notice you don't say much about dwindling inventory. Hmmmm.
I also noticed that you don't say much about avg. price. Either way you slice it, prices are up either 7% (your numbers), or 8.5% (TREB numbers). Still quite impressive.
Spin that that one, genius. Oh - snap!
Ok you win in 2011. Now what?