“If Canadian banks are not grounded with deposit ratios and can lend based on profits, on the back of rising house prices, imagine what happens when those profits turn negative.”

Indeed, imagine – in fact you don’t have to imagine, just look at what happened in the U.S. or any country anywhere where a housing bubble burst: failing banks and government schemes to manage an orderly wind-down or recapitalize them.

The Canadian banks have a number of advantages in that most of their risky mortgage loans are insured, they have a high baseline profitability, they’re relatively diversified, they operate in a relatively uncompetitive market and they are assured of government bailouts if needed, but they’ll still feel it if and when housing prices turn downwards and they will curtail lending in order to conserve capital if they need to.

Then house flippers are back in town.
Remember Nelson Skalbania. Where is he now?

@188 Gokou3 “You really need an education on how banks operate.”

Well, I took the time to explain how I think banking works, why don’t you do the same and we can compare notes? Or at least clarify your points of disagreement with what I wrote. I generally agree with your posts, so I’d be interested to hear your take.

Just stating that I’m wrong without explaining why or offering a counter-argument doesn’t really advance the discussion. Besides, it will pass the time while the housing market goes nowhere… 🙂

“You really need an education on how banks operate. Then you can thank Jesse for his corrections to your thinking and me for being blunt.”

How bank operate? In one sentence, borrowing you an umbrella when sunny, and taking it back while it is raining.

From that Harper article – “But when asked about the biggest risks to Canada, Harper said they were external. “That’s what keeps me up at night,” he replied..

Notice they already have the blame game planned for Canada’s upcoming crash.

Tell someone who cares.

Some guy,

You really need an education on how banks operate. Then you can thank Jesse for his corrections to your thinking and me for being blunt.

@jesse
Yeah, I’ve heard that ad a few times lately. I was wondering what those two steps would be:
1-buy
2-sell
… or perhaps
1-buy
2-pray
… or maybe
1-pay for my expert advice
2-go to hell

I’m sure some clever folks on this blog can come up with some other “2-step programs”. Any takers?

Just saw a house on marine drive in Whit Rock. list is $3,800,000.00

So how much can his house’s price come down to after a correction?

Obviously, there are other factors at play with prices in Metro Vancouver. And the Bears on this blog must realize that its more than rental rates and income rates.

There is a lot of wealth here now. Until you accept that fact, you will continue to feel bewildered.

Oh, the taxes on that house are $18,000/per year.

Of course, down vote this post because it makes you angry.

crabman: “This unit was purchased for $2M and is now selling for $1.7M:”

That place was for rent on craigs list for months at $3500 per month. No takers. After maintenance and property taxes they would be just over 1.4% yield if it could rent for that (which it couldn’t).

http://ca.finance.yahoo.com/news/harper-says-household-debt-not-biggest-worry-191643714.html

“Canada’s soaring consumer debt is backed by solid assets, Prime Minister Stephen Harper said on Thursday”

girlbear’s friends must have advanced copies of the PM’s finance talking points when he’s abroad. “Backed by solid assets” if it wasn’t mistaken from “backed by solid ass-heads”, could give people the impression that equity in their home today is their’s to spend.

If Harper asserts “solid assets”, apparently the government is endorsing the current debt level and would therefore backstop any shortfall among those who have reduced wages in the future.

It’s too bad reporters at the event didn’t follow up with Harper and find out if asserting “solid assets” means his government is guaranteeing the present valuations of homes and unsecured loans going forward.

@175

One of the houses was just over $10M in UBC…sold in for basically ask. Only took a few months which is pretty good I thought.

Speaking to some friends in the industry.. Realtor friend: Last 6 months were BAD, but sales are picking up a bit. He sounded cautiously optimistic. Mortgage broker friend: A lot tougher to get loans through these days. Also he said over the last 5 years, the bulk of his business was refi’s…refi’s to take more equity out. He said he has seen loans that started at $500k go to $800k, then over $1mill as owners keep leveraging off the “price” increases. He expressed that he is more than a little worried about this as most of the “clients” are all in. As in no other investments. No stock portfolios, no RSPs, no excess cash. Personally, I am seeing some of the high end on the west side starting to move. A couple of friends sold houses for what I would… Read more »