Days of ultra-cheap money coming to an end

..At least that’s what Mark Carney and other Bank of Canada officials have said according to this article, yet they’re refraining from being more specific.

Meanwhile the Organization for Economic and Co-operative Development (OECD) is urging Canada to start raising interest rates in the fall and keep on raising them to stop an inflating housing bubble and reign in inflation.

The OECD, a high-powered economic research group backed by contributions from its 34 rich country members, offers a scenario: An increase in the benchmark rate of a quarter of a percentage point in the autumn, and similar increases each quarter through to the end of next year, leaving the benchmark overnight target at 2.25 per cent.

That still would be low by historical standards, yet, according to the OECD, likely a big enough increase to cause prospective homeowners to think twice before buying at current inflated prices. However, the OECD’s recommendation comes with a risk.

The Federal Reserve Board has made a conditional pledge to leave U.S. rates extremely low until the end of 2014. Following the OECD’s path could create an unprecedented spread between Canadian and U.S. interest rates, which would put upward pressure on a Canadian dollar that many say already is too strong.

Oh, and the OECD made this same recommendation a year ago and was ignored. So I wonder how Carney intends to bring the days of ultra-cheap money to an end?

105 Responses to “Days of ultra-cheap money coming to an end”

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    http://www.bloomberg.com/quote/GCAN10YR:IND

    Suggested noted, OECD.

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    Turkey Says:
    2

    I think the expression “bat-sh*t insane” is over-used and should be reserved for special occasions.

    On a completely unrelated note, our friends at cmhc-class-action.com have removed their blog, but posted some tidbits showing how wronged they were. To wit:

    In our affidavits, we were careful to make the first line a denial that were were anything other than a natural Man and a natural Woman, (not Person), we expected the Judge to take notice of this, but it was ignored. No Court has jurisdiction over Men and Women as they are the creators of courts and governments. The created cannot have authority of the creator, much the same that a character in a book cannot have authority over the author. I expressed this opinion later to the Attorney General of B.C. who was very careful to avoid addressing that point.

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    Anonymous Says:
    3

    @Turkey: Ah. Well that clarifies things. Clearly this housing bubble is literally driving some people crazy.

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    Anonymous Says:
    4

    @Turkey: LOL…that is gold. This city is filled with people like that, that will refuse to accept responsibility for being wiped out by the pending crash. The entitlement types are going to take a serious beating.

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    Turkey Says:
    5

    @Turkey: Also, they’ve scrubbed the judge’s remarks at cmhc-class-action.com. You can find them here. Some tidbits:

    I find that this action, as commenced by the plaintiffs, is designed to annoy and to force the defendants to expend resources coming to court, rather than to advance a legitimate cause of action. Counsel for CMHC seeks an award of special costs.

    Parties should not be discouraged from litigating legitimate actions. Here, the plaintiffs’ allegations were utterly and obviously without merit.

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    @Anonymous: impending crash? are you another vreaa in the making?
    but you are right for one thing “The entitlement types are going to take a serious beating”. they have taken a serious beating; but they didnt learn the lessons, they keep blogging all day!

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    Anonymous Says:
    7

    can anyone tell me what the last selling price was for ph7 108 west Cordova street, Woodwards building

    thanks in advance

    Like or Dislike: Thumb up 0 Thumb down 0

    What dah Says:
    8

    Re:Hikes, Carney does not have the balls. I will believe it when I see it.

    Like or Dislike: Thumb up 0 Thumb down 0

    What would be interesting is how the Bank of Canada would change its outlook if it included commodity price drops among its “downside risks”.

    Regardless I don’t think runaway inflation is a problem; if nothing else the Conservatives will see to that via policies weakening employee wage terms.

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    real_professional Says:
    10

    Home Price Index by National Bank will be published sooner!!!

    “Montreal, May 23, 2012 – National Bank and Teranet are pleased to announce that the Teranet – National Bank House Price Index™ will now provide a more timely indication of the housing market. The index will be published a full month sooner, no later than 30 days after the transaction month. “

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    jumpin in Says:
    11

    I think the market is turning.
    Many price reductions in my sector.
    More and more SFH below 1 million West of Main…
    But prices are still too sticky to my taste ;)
    I cannot wait for the fun to begin.

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    Simple Says:
    12

    Quiet today. Is everyone resting up for the 19K party or what?

    Like or Dislike: Thumb up 0 Thumb down 0

    As a bear, I’m most pleased about the number of price changes. I assume that people are acting on the advice of their realtors.

    In my view the realtors are the key to the drop. Volume, not price, is what matters to a realtor so the longer sales stay flat the more nervous the realtors get. This thing will crash when the realtors collectively switch their propaganda from “Buy now or be priced out forever!” to “Sell now or never realize a profit!”

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    patriotz patriotz Says:
    14

    @moses:
    It’s not a switch per se, the latter is what they tell the sellers and the former is what they tell the buyers.

    Or as the NAR put it succinctly, “It’s a great time to buy or sell a home”.

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    Bull! Bull! Bull! Says:
    15

    Is inventory still tracking lock step with May 2010?

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    Patiently Waiting Says:
    16

    Here’s why many don’t consider psychology as hard science:

    http://www.news1130.com/news/local/article/365722–many-young-people-living-jobless-ambition-free-lives

    So what is Canada’s real unemployment rate?

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    Patiently Waiting Says:
    17

    OK it appears Patriotz was right:

    http://www.news1130.com/news/national/article/365647–ndp-worries-about-proposed-mortgage-changes

    NDP joins the horde of pandering populists.

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    Makaya Makaya Says:
    18

    @Patiently Waiting: Some interesting comments from your article:

    “Wow, this would be a terrible change, and totally unfair. Payment history is all that should be considered. I don’t have a mortgage any more but certainly sympathize with those who do, who would be incredibly stressed every time they had to requalify. It also would mean everyone goes for the longest term possible, to avoid this review. How ridiculous is that idea? At renewal the banks already update your profile, but allowing them to kill your mortgage so easily? No way.”

    don’t do that

    we have been paying our mortgage every months for years now without fail it is the one payment that must be made – why penalize or make me jump through hoops to keep my home which by the way costs a fortune to run in BC. Its enough that strata’s and property management companies can take your home on unpaid levies let along having no home at all – let people keep their homes based on good merits on making each and every payment .. poverty packs are waiting around the corner for good people who don’t deserve that -”

    Wrong Wrong Wrong
    People cam be so mean! The government idiots that suggested this probably don’t realise that many people will face undue hardship and suffering. Get rid of this proposal!!!”

    People are scared, really scared…

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    @Makaya:

    What I don’t get is why the banks or the CMHC would want to re-qualify someone. If the person fails to re-qualify, then the bank has to foreclose. Why would they do that when the person is paying? Considering that the money has already been lent, what is advantage to insisting on re-qualification?

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    patriotz patriotz Says:
    20

    @Patiently Waiting:
    Forcing people to requalify upon renewal of an insured mortgage would result in more foreclosures and hurt the balance sheets of both the banks and CMHC (at least in the short term). It really doesn’t make much sense economically or politically and I don’t see the federal government allowing this change notwithstanding what the NDP thinks.

    As for uninsured mortgages it’s up to the banks what they want to do. There’s also the category of mortgages which move from uninsured to requiring insurance due to a drop in equity and thus would have to meet CMHC qualifications. But I don’t think there will be a lot of these.

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    Yalie Says:
    21

    I actually think the NDP is right this time. As much as I think the mortgage rules need to be tightened, this is not the way to do it.

    Canada will have enough trouble in the coming years with people defaulting on their underwater homes; why add to the problem by including people who are otherwise willing to keep making their payments?

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    Anonymous Says:
    22

    If I was a bank, and given the current economic climate, I’d rather foreclose earlier rather than later in the burst cycle. Foreclosing earlier may provide opportunities to mitigate losses by unloading foreclosed properties to unsuspecting idiots who don’t realize what’s happening. That would be more challenging the longer the cycle lasts (although, Vancouver does seem to have a rather unending supply of idiots to draw from). Bob Renni would be out of work if Vancouver runs out of idiots.

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    @Turkey: Thank you. Thank you very much. I take 100% credit for shutting the guy down. I ranted and raved at him and dogged him in every calmly-composed response he made to any other poster under the name of FedUpwithU. But the guy is still out there posting on a money advisor site that he had to shut the blog down because no one understood the point he was trying to make. And, oh, yes, how he was like Mahatma Gandhi, the flower seller in Tunisia, the Russians at Stalingrad. I kid not:

    http://www.canadian-money-advisor.ca/threadview/2232.html

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    boogeybear Says:
    24

    Perhaps there are just too many home owners in Canada and the re-qualifying rule is to bring the level of home ownership back to historical norms and thereby stabilize the market. Cull the weaklings, so the herd can stay strong. I never read how long the person has before topping up their mortgage, maybe there could be an intervention period in order to put the home owner under a course that won’t lead to foreclosure. Maybe a 12 month extension to allow a home owner to reduce their expenses or for credit counselling. Stop thinking of this as being a bad thing- but as an opportunity to pull someone out of financial ruin.

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    Patiently Waiting Says:
    25

    “Foreclosing earlier may provide opportunities to mitigate losses by unloading foreclosed properties to unsuspecting idiot”

    Yep, it speeds the inevitable. You’d have millions of Canadians sacrificing everything to save a “hopeless cause” mortgage. Hurry them into foreclosure and bankruptcy, and let the healing begin.

    I guess now I’m tired of waiting for this shit to end :P

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    What I don’t get with this requalification sh!tshow is that if I run a business and go to the bank for a loan they will look at my sales to determine what rate they will lend to me. I go in one year and my sales are in the pooper, the bank will not lend to me with as favourable terms.

    How to avoid this? Take out a loan that matches the duration of the asset. Maybe I’m thick in the head but the easiest way to avoid requalification risk is to avoid requalifying altogether by duration matching. Read: get a multi-decade term loan.

    This used to be the standard in Canada until the ’60s, after which loan terms were changed to match bank balance sheet durations. Longer terms are par for the course in the US.

    Am I missing something?

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    Anonymous Says:
    27

    Any government that enacted such rules would find themselves out at the next election. If they were to do so they’d probably grandfather existing mortgages. Politicians generally know on which side their bread is buttered, and wouldn’t take any action that could be directly attributed to thousands losing their homes.

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    boogeybear Says:
    28

    For the typical Canadian, the re-qualifying requirement is of no concern and probably would have little to no exposure in any election. Besides, Flaherty is distancing himself from CMHC. Hell, he might even sell CMHC to Genworth and come out a hero.

    I’m just glad I’m not a recent home buyer. Anyway you look at it, recent home buyers are road kill.

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    Just speculating like everyone else.

    I think with CMHC under OSFI, they have to care about the vulnerability of CMHC and how it ties in with the banks. If foreclosures start happening later in the process where more and more people can’t afford to pay their monthly payments that would cause problems for CMHC and the banks as they try to collect or foreclose in a severely downward market.

    By making sure people can still afford to make payments, when mortgages come up for renewal, they can weed out the people who can’t afford their payments ahead of time, mitigating the risk for banks and CMHC in the future.

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    Best place on meth Says:
    30

    @jesse:

    “What would be interesting is how the Bank of Canada would change its outlook if it included commodity price drops among its “downside risks”.”

    If commodities keep falling then so will the dollar, that would make it easier to raise the bank rate.

    If the rumors that China is tanking hard are true then commodities will keep falling.

    Some say their GDP numbers are completely fabricated and that their economy is already contracting.

    http://seekingalpha.com/article/610891-is-china-in-recession

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    spareanickledimedollarpenny Says:
    31

    @s: If that’s what they’re doing it sounds like a risky strategy since the rule change could be blamed for the crash.

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    @N: IMHO, it makes sense for OSFI to include requalifying in their proposal for new rules.

    1) It’s something that people will talk about, because regular people can see that it could be scary to requalify every few years.
    2) It is so universally dislikeable that it’s guaranteed to get press, and…
    3) Draw attention and criticism away from OSFI’s other, more reasonable proposed rules.
    4) Allows OSFI to exclude the widely-criticized requalification rule when they finalize the new rules.
    5) OSFI can then keep their other rules, and just eliminate this one, and claim that they paid attention to the proposals received from institutions, individuals, and brokers.
    6) Nobody can claim that OSFI unilaterally imposed a crazy set of rules– as evidenced by the previous point, they paid attention and adjusted the rules!
    7) If the RE market all goes to hell sometime in the future, OSFI has covered their asses by including “requalify” in their proposed rules– they can say that it wouldn’t have been politically feasible to include it in 2012. But now that the market has gone to hell (eg, 2015-2020), they’ll implement it to prevent crazy bubbles from happening again.

    Or maybe they’ll implement a “requalify-lite” rule, which gives borrowers a period of time to get their finances back in order, eg, if a job loss has occurred, it gives them 6 months to get back on their feet, or get over a medical issue, or whatever.

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    Anonymous Says:
    33

    @boogeybear:

    “For the typical Canadian, the re-qualifying requirement is of no concern and probably would have little to no exposure in any election.”

    It would have massive exposure in an election if a significant number of people found themselves being foreclosed on despite the fact that they’d never missed a payment.

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    boogeybear Says:
    34

    But there won’t be a significant amount of people being foreclosed on. That’s just fear mongering.

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    Losers with girls Says:
    35

    oil today had a handle $89, first time since October 2011

    DOW was saved from carnage in the afternoon trading by rumours again. for how long?

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    Anonymous Says:
    36

    @boogeybear:

    “But there won’t be a significant amount of people being foreclosed on. That’s just fear mongering.”

    Aren’t we always being told that everybody who has bought recently has been doing so with 5% down over the maximum amortization period?

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    Patsan Says:
    37

    Just wondering.
    Would a mortgage payment that is made from a HELOC be considered as a missed?

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    shriller Says:
    38

    I think the requalifying rule is intended to get banks to offer longer term mortgages, like banks in the US do. It will probably be grandfathered, so that anybody with an existing mortage will be exempt, but future borrowers will need to requalify at renewal. This should give banks an incentive to issue duration-matched mortgages. Otherwise, renewal risk for the bank and borrower will be uninsured.

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    ReadyToPop Says:
    39

    @Best place on meth

    If the rumors that China is tanking hard are true then commodities will keep falling.

    Some say their GDP numbers are completely fabricated and that their economy is already contracting.

    ….and will the same ebb of foreign capital create a giant sucking sound, as a government who turned a blind eye to the RE tsunami on the way in, has to watch the implosion as it makes it’s way out? Maybe it will be Canadian land for Canadian citizens once more…..what a concept!

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    Anonymous Says:
    40

    @Anonymous: …Aren’t we always being told that everybody who has bought recently has been doing so with 5% down over the maximum amortization period? …

    Yes. But ‘recently’ is the key! Most folks won’t be affected by new mortgage rules or increased rates because they either don’t have mortgages or they’re so small it’s not an issue. But, those folks don’t have to sell either when things get really bad, but for those that are affected, they’re the ones, the ‘minority’ that will deepen the crash and put a serious dent in prices. Keep in mind the US has gone through a massive crash, but plenty of folks haven’t and won’t lose their homes.

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    McLovin Says:
    41

    oil today had a handle $89

    That is good for the markets and the economy. (Other than oil companies)

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    Numskull Says:
    42

    Do you think the Rules changes are to force banks to deal with potential default problems , instead of letting them become CMHC problems?
    Numpty

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    patient renter Says:
    43

    We made it to the BBC

    http://www.bbc.co.uk/news/magazine-18155405

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    watson Says:
    44

    @Patiently Waiting: It really kills me that all these stupid politicians, mortgage brokers, real estate whores and general bleeding hearts are clamoring over one another to speak out against the proposed OSFI regulations. What they simply don’t understand is that this shit should have NEVER been allowed to happen in the first place. Owning a home is not a right. Taking on a $500,000 mortgage when you only make $50K a year is not a smart thing to do and it is not the banks or the governments fault for not protecting you from your own stupidity. They should make people re-qualify each time their mortgage is up for renewal because that is what the terms of the agreement state, that is why there is a term. Why should the bank or the taxpayer be on the hook because some idiot took on too much debt and believed what he or she purchased would only ever go up in price indefinitely. The purpose of this clause is to cause the lender and the borrower (mostly the lender because the borrower is too damn stupid) to re-think and to scrutinize the amount of debt being considered. When the term is up its a new loan plain and simple. The borrower needs to assume some risk for change. Jesus, even you bears are starting to drink the kool-aid. Protect the poor borrower… waaa…waaa. Give me a fricking break.

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    @Turkey: Thank you. I believe I shut down that blog by dogging the guy in every blog post as FedUpwithU. Yet, he still doesn’t get it. He’s going to set up another one to defend his fight against the CMHC in the vein of Gandi, the Russians who fought the Nazis, and the Tunisian flower seller who set alight the Arab Spring. Yes, he’s that delusional:

    He goes by the name of dandy rough. This is his best post ever at : Tue May 08, 2012 10:05:40 AM

    http://www.canadian-money-advisor.ca/threadview/2232.html

    Sad thing is, I bet at least 50% of all people who took out mortgages with little money down think they are the ones being insured against a loss.

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    test

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    Having trouble posting.

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    sunblaster Says:
    48

    @M- got it 100% correct

    Like or Dislike: Thumb up 0 Thumb down 0

    Now have nothing to say. Except, Turkey, I am FedUpwithU from that guy’s blog over at the Imma gonna sue the CMHC. I shut down his blog. I went all RJ on him. I couldn’t help myself. But he’s going to start another blog soon too because he says the posters didn’t “get” what he was trying to do. He’s nuts. I know. I’m wasting my time but I know in my heart of heart’s that at least 30% of people with CMHC backed mortgages think they’ll be bailed out if they default.

    Like or Dislike: Thumb up 0 Thumb down 0

    @mac: I thought his blog interesting not for his content, per se, but for the level of pain it expressed. Multiply that pain by a million or two households and you have a real crisis on your hands. Everyone mocks the walk-aways in the U.S. but at least we have an outlet available that returns millions of households to normal consumer status again.

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    @Patsan: I don’t believe so. HELOCs are personal debt secured against the house. Mortgages are mortgages. In any event, money is fungible, even it the bank were to somehow try to block it, there is nothing stopping one from paying the credit card bill with the HELOC and using the money from one’s paycheck destined for the credit card bill to pay the mortgage instead.

    This is the reason the new proposed rules on enforcing amortization schedules on HELOCs is more significant than it’s been garnering attention. Even if they don’t lower the total HELOC limit, a lot of people who have been living off their HELOCs long-term will be cut off from the tap.

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    Anonymous Says:
    52

    @McLovin: …oil today had a handle $89

    That is good for the markets and the economy. (Other than oil companies)…

    Except that Oil, or more broadly, resources, are the economy.

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    Anonymous Says:
    54

    @McLovin: “That is good for the markets and the economy. (Other than oil companies)”

    You must be an amateur investor. Have a look at the correlation of oil and the major indexes. They tend to go up and decline together.

    Like or Dislike: Thumb up 0 Thumb down 0

    patriotz patriotz Says:
    55

    @Numskull:
    “Do you think the Rules changes are to force banks to deal with potential default problems , instead of letting them become CMHC problems?”

    A default on an insured mortgage is CMHC’s problem. That’s why the banks are so happy to make them.

    Again, I don’t see the point of any policy which would force a default on someone who is making their payments. Foreclosures are a big waste of economic resources.

    Just make it harder to get an insured mortgage in the first place. This is something which Flaherty has always personally had the power to do, which IMHO is the reason he’s so reluctant to do it. This is a government which is chronically unwilling to wear the mantle of responsibility.

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    patriotz patriotz Says:
    56

    @shriller:
    “I think the requalifying rule is intended to get banks to offer longer term mortgages”

    They do. Very few people take them out because of the rate spread over short term. You can get 10 years if you want. The banks would offer 30 if people were willing to pay – they can borrow for 30.

    Introducing a requalifying rule would have no effect on new buyers because buyers almost always expect the best rather than the worst going forward.

    What the government should be doing is requiring people to qualify for new mortgages on long term rates. Right now it’s 5 years – make it 10.

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    spareanickledimedollarpenny Says:
    57

    @patriotz: So why can’t I get a 30 year mortgage locked in at 3.795% like I can in the states?

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    Anonymous Says:
    58

    I can just picture the star fleet academy of real estate pimps right now trying to think of their grand plan to make a come back:

    “They tighten lending standards and we fall back. They threaten to raise rates and we fall back. Not again. The line must be drawn here! This far, no further! And we will make them pay for what they’ve done.”

    harsh losers

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    Anonymous Says:
    59

    Where the hell is paulb?…. I think we may have to fire him if these delays continue. So how much does he get paid to post here?

    nothing?…. I see….. well carry on then.

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    Inventory Says:
    60

    Inventory Detached & Attached.

    Sunshine Coast
    9/30/2008 = 1060
    5/23/2012 = 1300

    Richmond
    9/30/2008 = 2639
    5/23/2012 = 2691

    Bowen Island
    9/30/2008 = 84
    5/23/2012 = 130

    Islands Van & Gulf
    9/30/2008 = 196
    5/23/2012 = 247

    Maple Ridge
    9/30/2008 = 1177
    5/23/2012 = 1121 ***Almost there

    Vancouver West
    9/30/2008 = 3978
    5/23/2012 = 3643 ***not yet

    Whistler
    9/30/2008 = 701
    5/23/2012 = 865

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    Inventory Says:
    61

    5/23/2012 = 18655

    Like or Dislike: Thumb up 0 Thumb down 0

    patriotz patriotz Says:
    62

    @spareanickledimedollarpenny:
    “So why can’t I get a 30 year mortgage locked in at 3.795% like I can in the states?”

    Because Fannie and Freddie (which now have a USG debt guarantee) intervene in the market to buy them.

    If CMHC were to do the same we’d be heading for an even bigger train wreck than we are already.

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    McLovin Says:
    63

    “You must be an amateur investor. Have a look at the correlation of oil and the major indexes. They tend to go up and decline together.”

    What major indexes? The TSX? 2% of the world market cap?

    The S&P and Whil 5000 have virtually zero correlation to the price of oil over any meaningful period.

    Go try to impress other people at the stock house.

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    Bob the builder Says:
    64

    @McLovin: “That is good for the markets and the economy. (Other than oil companies)”

    You must be an amateur investor. Have a look at the correlation of oil and the major indexes. They tend to go up and decline together.

    LOL…..McLovin plays fantasy stock market :)

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    VultureBoy Says:
    65

    @spareanickledimedollarpenny:

    “The 1880 Section 10 of the Canada Interest Act puts a maximum penalty of 3-months’ interest on repaying any loan over 5 years after 5 years have passed. That’s a small penalty, and it would take only a small fall in interest rates to make it worthwhile for a borrower to exercise his option to renegotiate created by Section 10. In effect, closed mortgages of longer than 5 years are effectively banned in Canada.”

    http://worthwhile.typepad.com/worthwhile_canadian_initi/2010/06/why-cant-canadians-get-30-year-mortgages-but-americans-can.html

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    patriotz patriotz Says:
    66

    @Bob the builder:
    “Have a look at the correlation of oil and the major indexes. They tend to go up and decline together.”

    I guess you weren’t around for the oil crisis of 1973 or the oil bust of the 1980’s.

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    admin Says:
    67

    @mac: Not sure why your comments got held up in moderation, something tripped the spam filter. Hopefully posting works better for you now that your comments have been manually approved.

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    @M-: OSFI strikes me as proposing doing what’s right, not what’s politically feasible. The requalify scheme does have issues, first that it can cause undue distress if people are in between jobs or have other income impairment at time of renewal. Ultimately banks could qualify them contingent on renewal of an income stream after (like you say) 6 months or whatever, that seems like a reasonable compromise.

    The cynic in me says they relinquish this requirement, the optimist tells me that they allow banks a probationary period to handle short-term income impairments aligning with renewal times, in fact banks do this all the time for people who are on layoff or medical leave. The overarching issue is ensuring no systematic impairment of bank assets if they are hedged via government guarantees.

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    mac, that was you? Holy crap you brought it, too bad the blog was shuttered. I should have copied your comments onto housing-analysis; I’ll check your other comments.

    This person is a nut-job, focusing on odd clauses to try to wriggle out of a complicated contract. Nice try, ain’t going to work. But it will be used with increasing frequency, which is why your comments are so awesome. I want to save them to refer to later.

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    Bob the builder Says:
    70

    patriotz Says: “I guess you weren’t around for the oil crisis of 1973 or the oil bust of the 1980′s.”

    and you have been sleeping in 2008,

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    paulb. Says:
    71

    New Listings 313
    Price Changes 146
    Sold Listings 137
    TI:18635
    http://www.laurenandpaul.ca

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    DaMann Says:
    72

    @paulb.:

    Paul

    Thanks for the numbers as always. It IS very appreciated!

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    Makaya Makaya Says:
    73

    @paulb.: Inventory up 106 since yesterday. Still growing nice and strong :)

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    patriotz patriotz Says:
    74

    @Bob the builder:
    S&P peaked in July 2007 and was down substantially by the time oil peaked a year later.

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    Makaya Makaya Says:
    75

    @Makaya:

    2012 monthly inventory increases:
    January: +2,727
    February: +1,544
    March: +1,762
    April: +1,048
    May (so far): +1,513

    And I thought May was in spring…

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    VanDweller VanDweller Says:
    76

    Copied from PaulB’s number. Thank you PaulB.
    http://www.laurenandpaul.ca

    Using good-format’s format.

    Date     Listing  Price(+-)  Sold  Inv    Inv(+-)  S/L(%)
    12.04.30   316      179      124   17530   75       39
    12.05.01   354      144      179   17122   -408     51
    12.05.02   371      131      150   17243   121      36
    12.05.03   339      159      121   17400   157      36
    12.05.04   337      120      77    17592   192      23
    
    12.05.07   353      177      90    17727   135      25
    12.05.08   365      157      183   17823   96       50
    12.05.09   337      145      183   17917   94       54
    12.05.10   318      129      115   18073   156      36
    12.05.11   262      132      81    18176   103      31
    12.05.14   268      168      150   18182   6        56
    
    12.05.15   287      174      95    18274   92       33
    12.05.16   271      185      204   18200   -74      75
    12.05.17   270      127      70    18306   106      26
    12.05.18   328      106      135   18419   113      41
    
    12.05.22   381      255      120   18529   110      31
    12.05.23   313      146      137   18635   106      44%
    
    Total-Cur  5154     2455     2090          1105     41
    5 day-avg  308      166      127           76       42
    
             Listing  Price(+-)  Sold  Inv    Inv(+-)  S/L(%)
    

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    Bob123 Says:
    77

    Does anyone know how recent sales prices for SFH’s in Coquitlam compare with last years property assessments?

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    Anonymous Says:
    78

    @patriotz: “S&P peaked in July 2007 and was down substantially by the time oil peaked a year later.”

    They both ended up in the same exact place which is what matters. Have a look at the second chart down.

    http://ei-forum.com/2009/01/22/oil-vs-sp500/

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    shriller Says:
    79

    @patriotz
    The US banks offer 30 years because of securitization. Not really sure why you think Fannie and Freddie are the reason. They might have some influence on the interest rate offered. But the debt instrument is the result of a competitive market for debt. People can get other debt instruments, the 30 year is just the most popular and the banks have made it profitable selling covered 30 yr bonds to insurers, pension funds, etc.
    Last time I seriously checked the premiums in Canada were crazy at 10 years, never mind 30. Welcome to an oligopoly.

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    Mortgagee Says:
    80

    Hasn’t the BOC basically painted itself into a corner? Wouldn’t even just a modest increase cause large scale carnage? My bank has offered me an early renewal on my mortgage at 3.49% (so basically, I’d have this rate locked in for 7 years), but I’m starting to wonder if a variable rate mortgage isn’t going to continue to be the better option for the foreseeable future.

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    Ravishing Rick Says:
    81

    Cut the music!

    From Market Watch 14 minutes ago: One old-pro Vancouver Realtor told me, “Look, interest rates are going to go up in Canada. Maybe later than sooner. We all know that. But you’re not going to see a real-estate bubble pop, like it did in the United States. What we’re starting to see here now is some of the air slowly coming out of the bubble. We don’t do things here the way you do in the States.” Thank heavens for that.

    http://www.marketwatch.com/story/no-real-estate-bubble-pop-expected-in-canada-2012-05-24

    What a bunch of crap! Hit the toilet flushing music!

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    Anonymous Says:
    82

    @Mortgagee: “Hasn’t the BOC basically painted itself into a corner? Wouldn’t even just a modest increase cause large scale carnage?”

    The BOC rates are not significantly influenced by mortgages. Other factors such as inflation would trump the carnage that will be caused when rates rise.

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    shriller Says:
    83

    @ Mortgage. Actually that sounds like a good deal. I think they probably want to bundle your mortgage into a covered bond. CMHC will likely start reining in the NHA-MBS pool once OFSI’s rules kick in and the banks make like 4-7 per cent on every mortgage in this pool. They’re just trying to squeeze a little bit more profit. But not from you. You’re just the conduit. So it could be good.
    That said, the BoC won’t raise rates unless inflation takes off. But if commodities crash then the exchange rate depreciation will cause prices to rise (pass through). In this scenario rates could rise, maybe even quickly.

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    Mortgagee Says:
    84

    @VultureBoy hit the nail on the head regarding 5 year Cdn versus 30 year US mortgages. Not sure why @patriotz thinks this makes the Canadian mortgage market less risky. On a 30 year mortgage, you have payment security and know exactly what your home is going to cost you over your lifetime, on a 5 year mortgage, you expose yourself to interest rate risk. Can you imagine what a sharp and sudden increase in mortgage rates would do right now?

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    DaMann Says:
    85

    @Mortgagee:

    I would snatch their hand off. 3.49% for 7 years is insane. Just goes to show how spoiled we have been with free money the last decade ( not you Mortgagee, just in general). Probably could squeeze out another 6 months to a year on variable and be ahead but at some point the rates will be up. I would take that in a heart beat!

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    other ted Says:
    86

    I just returned to Vancouver for the week and I am hearing rent is through the roof. Is this true? Is it impossible to rent a one bedroom downtown below $1200? Is east van really expensive for renting? Was under the impression rent was cheaper than what friends and family are telling me.

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    other ted Says:
    87

    Not trying to reply to my own post but just checked craigslist and saw a few really expensive properties but overall I thought prices were not as bad as what I heard. Is craigslist a good barometer for price?

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    spareanickledimedollarpenny Says:
    88

    @other ted: Craigslist is pretty notorious for some goofy asking prices since it doesn’t cost anything to post. A lot of amateurs post their apartments for way above market rent. The best places I’ve found to rent were by walking around in the neighborhood or looking in smaller classifieds like the courier.

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    Makaya Makaya Says:
    89

    @other ted: Craigslist postings are usually overpriced. on a $1500/ month rental, you can easily negotiate $100/ month reduction, probably more depending on the property.

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    @VultureBoy: Corporations can obtain mortgages longer than 5 years, it seems relatively easy to modify things to allow longer durations for individuals.

    The real issue, as patriotz has mentioned, is that the governments in the US and Canada have been heavily involved in the mortgage markets for generations and have distorted risk premiums. This is viewed as beneficial because of externalities caused by credit market volatility. Canada was loath to adopt a US-style mortgage financing industry because of the problems the US encountered in the 1930s with its credit markets. Canada instead chose to heavily regulate mortgages at a time when household formation was occurring at a record pace in the 1950s. Since then it has gradually moved the mortgage book onto banks and continually relaxed LTV and DTI ratios (until 2008 that is) but has still maintained heavy involvement in underwriting mortgage loans.

    I doubt that involvement will wane any time soon, rather it could increase in the next while if house prices start to show weakness. That has been the path Canada embarked on before in the early 1980s in the last round of mortgage distress (that one was real rate stress, this one looks to be a different but equally potent beast). Canadians studying their own, let alone the US’s, history should be able to figure out the endgame.

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    @jesse: Yes. It was me. It made me nuts. I wanted him to keep the posts up so that future morons who think that… how did he put it?… oh yes, that the borrower should be insured, not the bank, to prevent any future problems with foreclosure shortfalls… that those future morons could see that they are in the wrong for borrowing money and expecting the government to bail them out.

    Anyway, I don’t know how I managed to digest dinner. We went to a Chinese place near Main St. and who was booming real estate advice to a middle-aged woman but this fat, bat-shit crazy realtor. He showed her how, using his hand like an airplane, the real estate market would go down by 5%. Then, plane angling up, it would go back up again and that at the end of 10 years it would not lose any money. (Why again are stock brokers forbidden from making similar comments on the market but RE agents aren’t?)

    He then tried to sell her on a condo downtown telling her there were good deals there as prices were down (dunno… maybe part of the predicted 5% dip). Then, she said something, we couldn’t hear, and next thing you know he said condos would go nowhere for the foreseeable future and they weren’t a good deal, a way to lose money. The best deal now was a house with a yard. Eventually I had to drown him out by putting my chopsticks in my ears.

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    spareanickledimedollarpenny Says:
    92

    @Makaya: Right. Heed Makayas point if you’re looking for a rental. I got a $100/ month reduction on the last two places I rented off craigslist just by asking.

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    other ted Says:
    93

    thanks for getting back that is what I thought. I am a bit disapointed how delusional people are as I can’t even agree with the basic facts to begin an intelligent conversaion. I was told by my brother that his friend had to go far out in surrey and as an act of charity his landlord gave his friend a basement suite for $1200. This sounds ridiculous as I could rent a suite downtown for this. But everyone insists rent is much higher than buying and throw numbers out there like $1600 and $2000-$3000 for a house in east van. I don’t know where people get his info and if true why the rental market is so strong. But looking at craigslist which is already known to be high, rents seem cheaper.

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    other ted Says:
    94

    @other ted: that is $1600/month for downtown

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    @mac: LOL the old “take ‘em out for coffee/dinner” trick. No better time to sign the deal than with a nice full tummy-tums.

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    #80 @Mortgagee: “Hasn’t the BOC basically painted itself into a corner?”

    Leveraged home buyers have painted themselves into a corner. The BoC does not unilaterally set interest rates, although their actions have influence. The overnight rate is basically a floor under the 3-month bankers’ acceptances rate.

    http://www.bloomberg.com/quote/CDOR03:IND/chart/

    If that chart goes to 1.5%, you can watch the BoC to go to 1.25%, and so on. You can verify the historical record of this from the table posted here:

    http://credit.bank-banque-canada.ca/financialconditions

    You can download the data and check. And you can check that the Fed, the RBA, and other central banks do this too. That’s how central banks set interest rates. The discussion you see in the media and elsewhere is a dog and pony show.

    Now that world markets are taking note of Canada’s housing bubble and especially Toronto’s overbuilding, and with fewer sovereign guarantees being thrown around, you can expect that rate to start rise. I think we’re in for a bit of a vicious cycle.

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    space889 Says:
    97

    @watson: I don’t like to wish ill on people but if this mortgage requalification rule is implemented as it is, I really hope you lose your job right before the mortgage renewal and requalification and you can’t find a similar paying job because the economy is tanking, and despite making every single payment for 15 years, banks don’t renew your mortgage and you have to sell the house for a huge loss. All because your mortgage renewal just happened at the worst time for you.

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    Devore Says:
    98

    @Anonymous:

    They both ended up in the same exact place which is what matters. Have a look at the second chart down.

    “Ended up”? Did time end in 2009? Using selective timeframes, you can show any correlation you like. And what about the stuff in between? This is like Dave’s “flat market”(tm), where only values at the beginning and end matter.

    Like or Dislike: Thumb up 0 Thumb down 0

    @space889: yes this is a valid point, but one that can be dealt with fairly.

    It would be easier if households had some proper hedging and risk management practices in place. For the most part they don’t. So enter Big Brother.

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    VultureBoy Says:
    100

    @jesse:

    From the TD document, the reasons for 5 years are CMHC and the interest rate act:

    “A key reason for this is that the Canada Deposit Insurance Corporation (CDIC) only
    insures term deposits up until a 5-year maturity. Given this, depositors
    disproportionately tilt towards 5-year Guaranteed Investment Contracts (GICs) instead
    of GICs with longer maturity, and they are willing to accept a lower rate of interest. In
    turn, this combination of inexpensive duration-matched financing and lumpy availability
    encourages banks to offer their best mortgage deals for a five-year term, luring
    borrowers.
    A second reason is that Canada’s Interest Rate Act grants borrowers the right to
    prepay any mortgage with a term of greater than five years once the first five years
    have passed, for a penalty of no more than three months of interest. This is less costly
    than the usual prepayment penalty. In turn, banks must hedge against this
    prepayment risk, and pass the additional cost along in the form of higher mortgage
    rates for terms greater than five years.”

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    VultureBoy Says:
    101

    @VultureBoy: i mean CDIC not CMHC.

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    fred Says:
    102

    @space889: i am sorry for you being you!

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    Jerry Boyle Says:
    103

    Re. rentals:

    I pay $1400 for a pleasant 3 bed/2 bath bungalow in East Van. Rent has actually dropped $50 from where it started 6 years ago.

    I do think this is a pretty good deal. Can’t imagine playing 3K. Assessed value of house is somewhere north of $700,000.

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    sbermunk Says:
    104

    Does anyone know of a rental-discussion forum for the Lower Mainland? I haven’t found anything useful along those lines.

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