TD defends Canada from Krugman

Why is everybody picking on the Canadian housing market lately?

US economist Paul Krugman was one of the latest to say that we’re at risk for a housing market collapse.

An economist at TD bank couldn’t let that stand though, and was there to defend our delicate reputation.

“Largely owing to a continued low interest rate environment, mortgage interest costs as a per cent of personal disposable income have fallen despite the sharp rise in the debt-to-income ratio,” she added in her report.

“Meanwhile, while mortgage delinquency rates in Canada and the U.S. were similar during the 1990s, the per cent of mortgages in arrears 90 days or more in Canada is about a third of what they were in the U.S. leading up to the 2008-2009 crisis.”

Ms. Petramala cited the “riskier lending practices” in the U.S. between 2002 and 2007, and the tighter restrictions now in place in Canada.

Of course the reason ‘tighter restrictions’ are in place now in Canada was because they had become rather loose.  And as Patriotz points out, mortgages arrears are a trailing rather than leading indicator.

The TD spokesperson is ignoring the fact that the US housing bust started in 2006, when mortgage arrears were at historic lows, not in 2008. Mortgage arrears are a lagging indicator of falling prices.

Lots more “it’s different here” for your enjoyment.

Read the full article in the Globe and Mail.

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F contradicts Poloz and Carney too!
Guest
F contradicts Poloz and Carney too!
3 years 1 month ago

http://www.timescolonist.com/news/federal-briefing-deflates-claim-of-inappropriate-hoard-of-corporate-cash-1.331978

“While Canadian non-financial corporations are holding more cash than ever before, they appear to have legitimate business and economic reasons for doing so,”

Gee, with that out of the way, what’s the hold up on raising the overnight rate and stopping the wholesale rip-off of savers?

Ralph Cramdown
Guest
Ralph Cramdown
3 years 1 month ago

Maybe above optimal unemployment and below target inflation have something to do with keeping the overnight rate low?

The only savers who are being involuntarily ripped off are life insurers and similar capital pools which are mandated to hold high quality bonds. Everyone else has a choice where to invest their money. There’s even a sale on yield right now!

Anonymous
Guest
Anonymous
3 years 1 month ago

“raising the overnight rate ”

Longer term fixed income, at least, is real zero or higher. Not high but at least it’s not a tax.

The high corp savings rate annoys everyone but OTOH they won’t invest into a weak economy and provision for future economic shocks. Higher rates might actually get them off the bed only because their capital is going to start eroding if they don’t get it working.

DADDY BEAR
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DADDY BEAR
3 years 1 month ago

I’m glad I plowed all my money into stocks instead of Vancouver real estate.

BULl
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BULl
3 years 1 month ago

Lol house bears getting spanked on stocks

golden_boy
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golden_boy
3 years 1 month ago

Mortgage arrears are a lagging indicator of falling prices.

USA:

2006 1,259,118 foreclosures
2007 2,203,295 foreclosures
2008 3,157,806 foreclosures
2009 3,957,643 foreclosures
2010 3,825,637 foreclosures
2011 1,887,777 foreclosures
2012 1,836,634 foreclosures

As you can see, delinquencies didn’t start to skyrocket until 2 years after the bust started so I would expect the Canadian default rate start to creep upwards soon.

BULl Flub
Guest
BULl Flub
3 years 1 month ago
BULl Says: June 24th, 2013 at 8:16 am 5 Lol house bears getting spanked on stocks Unless they are short stocks, oil, dollar… Wait wha… you can do that? Who knew? I thought I buy the thing and wait for the guy on TV to tell me, sell it. You know, like when ancient forefather advised me to buy land/wives/oxen/etc… You mean I don’t have to drive my father’s Oldsmobile? That’s right @BULl#5, you don’t know and you’re too dumb to find out. But you’re gonna find out what a real spanking is when what you think you’ve got is… Read more »
Anonymous
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Anonymous
3 years 1 month ago

Dollar getting hammered. Watch for items around you rise in price. READ not going to budge as that’s the last thing immigrants will let go!

Meanwhile ur savings will get eaten up…

Anonymous
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Anonymous
3 years 1 month ago

Read should read RE. Damn auto….

Anonymous
Guest
Anonymous
3 years 1 month ago

RE not going to budge? Tell this guy, his place is down at least $100k since 2007:

http://vancouverflippersintrouble.wordpress.com/2013/06/21/six-years-six-figure-loss/

bears dont get it
Guest
bears dont get it
3 years 1 month ago

house bears end up with worthless shares that can only wipe their A$$ and house bulls at least will have roof under their head.

Carioca Canuck
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Carioca Canuck
3 years 1 month ago

Bears don’t get it said……”and house bulls at least will have roof under their head”

Very true…..because they’ll be sitting on the roof of their properties as they’ll be underwater…..LOL !!!

bears dont get it
Guest
bears dont get it
3 years 1 month ago

and when you are 70 you will not be able to afford philipina to change your diepers because you have to pay rent hmm lol

Anonymous
Guest
Anonymous
3 years 1 month ago

Have your say in Future Immigration Levels. Remember, lower levels equals lower house prices.

http://www.cic.gc.ca/english/department/consultations/levels/2014/index.asp

Anonymous
Guest
Anonymous
3 years 1 month ago

bears don’t get it:

when he’s 70, his pension won’t be around anymore.
Unsustainable in a globalized world!

Do the Math…

Anonymous
Guest
Anonymous
3 years 1 month ago

The problem with pensions isn’t that they are unsustainable. The real issue is contained in comment #1:

“While Canadian non-financial corporations are holding more cash than ever before”

Money that used to go to fund pensions is now being hoarded by corporations.

VMD
Member
3 years 1 month ago
Chinese buy up Canada farms; is Beijing behind it? 23 Jun 2013 In Saskatchewan province, home to 45 percent of all arable land in Canada, the price of farmland has risen an average of 10 percent in the last year, and as much as 50 percent over three years in areas where Chinese immigrants have settled, according to farmer Ian Hudson, who lives near the village of Ogema. Provincial authorities counted a half dozen large investment firms buying up farmlands in the province of one million people, but could not say if any of them are linked to Beijing, nor… Read more »
Son of Ponzi
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Son of Ponzi
3 years 1 month ago

Listings are shooting up here in Richmond.

Mick Murphy
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Mick Murphy
3 years 1 month ago

Was talking about the China situation with a co-worker. He told me that the ATMs have run out of money, although they have deposit insurance it is nothing like we have here, and that because they distrust the government people believe rumour more than officials.

It seems that there is a run on the Chinese banks.

Also, this:

http://www.zerohedge.com/news/2013-06-24/bank-china-declares-moratorium-transfers-online-banking-counters-inoperable

Kbro
Guest
Kbro
3 years 1 month ago

Looks like George Soros was right half a year ago when he said int rates were going to spike…who’da thunk it!

Global markets getting pounded again today.
China monetary crisis looming with economy in trouble.
US bond yields up again today.

” RE not budging “?
With HAM totally dried up and mortgage rates in a major reversal, you will probably miss the “budge” as our housing market implodes.
Of course it will take a while for the penny to drop as our housing market is not exactly driven by rocket scientists.

Democrass
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Democrass
3 years 1 month ago

“Listings are shooting up here in Richmond.”

Got any numbers?

BULl
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BULl
3 years 1 month ago

Puling the numbers from his arse. HAM is buying whats left, farmland. RE is gone, oil sands gone.

Son of Ponzi
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Son of Ponzi
3 years 1 month ago

# 20
Townhome listings increased from 381 to 419 over the weekend in Richmond.
Builders are dumping their inventories.

Dumbest time in 31 years to buy RE
Guest
Dumbest time in 31 years to buy RE
3 years 1 month ago

Every single fundamental that drove Van RE to new heights since 2009 has totally reversed:

China syndrome could force HAM to liquidate.
Unemployment will worsen with faltering economy.
Government cutting back on immigration.
Demographics, more boomers will soon be downsizing than ever before.
Higher mortgage rates will be the single biggest factor to kill this market.

How dumb do you have to be not to figure this out?
Pretty friggin dumb!

ALL-CAPS
Guest
ALL-CAPS
3 years 1 month ago

CHINA IMPLOSION IS HERE. WHAT NOW?

YOU CAN MAKE ARGUMENTS THAT THIS WILL INCREASE OR DECREASE VANCOUVER REAL ESTATE PRICES.

THE WORLD HAS NEVER SEEN ANYTHING LIKE THIS BEFORE.

addair
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addair
3 years 1 month ago

“Listings are shooting up in Richmond”

That answer your question #24?

Rats leaving a sinking ship.

Wakeup call
Guest
Wakeup call
3 years 1 month ago

Just heard on BNN that Canadian rates have been going up faster than the US over the last couple of weeks.
With the Can $ hitting a one year low today it does not look good for the new Carney.

Sure glad I’m not sitting on a big fat mortgage.

mac
Member
mac
3 years 1 month ago
Liberals have invested in increasing foreign students by 50%. Problem is the cost of educating oneself in New Zealand is 50% of what it costs in BC. Countries are fighting it out to get their share of money fleeing China. All Western countries seem to have depreciating real estate (except US) and are all hoping on being sustained through a downturn by Chinese, Russian, Iranian, Brazilian money. But economic problems are brewing in each one of these delightful countries where the governments need money to prop themselves up. No one knows which way it will play. More money out into… Read more »
UBC in crisis mode
Guest
UBC in crisis mode
3 years 1 month ago

It is too late for many boomer to liquidate.

Shanghai/Shenzheng Index down 6% again, crisis started already in China and with little attention from Canadian press /media.

http://www.bloomberg.com/quote/SHSZ300:IND

Billy
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Billy
3 years 1 month ago

i thought when the crisis hit (China) you flee the their market and move the money to stable market (Vancouver) but i guess bear logic works other way around

Anonymous
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Anonymous
3 years 1 month ago

be careful what you wish for…

it might come true!

Son of Ponzi
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Son of Ponzi
3 years 1 month ago

Billy,
Vancouver a stable market?
Thanks for the sarcasm. Made me chuckle.

ALL-CAPS
Guest
ALL-CAPS
3 years 1 month ago

@Billy

YES THAT’S POSSIBLE. BUT WHAT IF THEY CAN’T GET THEIR MONEY OUT?

Bank Transfers and Services Suspended in China: ATMs, POS Machines, Online Banking Paralyzed 50 Minutes
http://globaleconomicanalysis.blogspot.com/#MJdWQeYeG1DzQW1k.99

Son of Ponzi
Guest
Son of Ponzi
3 years 1 month ago

Billy # 29.
There a credit crunch in China. Chinese will have to liquidate foreign holding such as RE in Vancouver to get cash.
They will get hammered in at least 3 ways:
Capital gains taxes.
Loss due to falling RE prices.
Foreign Exchange loss due to falling C$.
And once they’ve left, they will think twice before coming back.

FATHER
Guest
FATHER
3 years 1 month ago

#33
is right on the mark

Anonymous
Guest
Anonymous
3 years 1 month ago

VCIers, do not taper your hate of trolls.

Downvote them fast before anyone can read their emotion-baiting. Restore confidence to VCI.

Anonymous
Guest
Anonymous
3 years 1 month ago

Read somewhere of David Letterman in the 1980s having joke segments where Japanese businessmen were buying cardboard cutouts of Manhattan.

That has absolutely nothing similar with what Chinese businessmen are doing now. Nothing. Almost nothing. Probably almost nothing. Admittedly I can see where someone might see similarities. Is it hot in here?

Billy
Guest
Billy
3 years 1 month ago

@Son of Ponzi
why they would cash anything here. they come to stay here and are moving from Vancouver east. in growing numbers.
ride on frikking skytrain and you will see yourself.

China Syndrome
Guest
China Syndrome
3 years 1 month ago

“Vancouver stable market?”

Would that be the same place that Robert Shiller called the “bubbliest” city in the world?

My guess is that the rising inventory in Richmond will only get worse as Chinese owners of local RE will dump their foreign assets to cover the damage at home.
When the dust settles, why would they take a chance on Vancouver just before the plug gets pulled when they can shop for bargains at home?

Son of Ponzi
Guest
Son of Ponzi
3 years 1 month ago

Billy,
When riding the Skytrain, all I see is temporary foreign workers going from their shoebox apartments to their minimum wage jobs, or vice versa.

Kbro
Guest
Kbro
3 years 1 month ago

Say goodbye to a lot of resource industry jobs in BC as demand from China wanes. Not many offices of mining companies on Howe Street will be able to survive, especially with the end of cheap money that they have depended on for the last few years. That should suffice to choke off other industries that are supported by RE.

Higher mortgage rates without jobs.
The silence from Tsur and Cam is deafening.

Anonymous
Guest
Anonymous
3 years 1 month ago

BillY: “i thought when the crisis hit (China) you flee the their market and move the money to stable market (Vancouver) but i guess bear logic works other way around.

What happened in 2008 during the last financial crisis? Van RE plummeted. The problem with moving the money is credit dries up and margin calls come in. There is no money to move. What there is left is put in USD not illiquid RE.

Billy
Guest
Billy
3 years 1 month ago

and what happened 8 months after the credit dried? credit spigots were open and RE skyrocketed another 40%.
US RE is back, again credit flood gates were open and now you have bidding wars again.

HAM has left the building
Guest
HAM has left the building
3 years 1 month ago

Hey Billy,

HAM has already sniffed out the problem in Vancouver, and the bigger the losses at home the less they will have to invest here, even if they were dumb enough to do that.

Kbro
Guest
Kbro
3 years 1 month ago

Probably flogging a dead horse here and my sympathy goes out to poor Billy.

” credit spigots were open and RE skyrocketed another 40% ”

That’s exactly the point.
A dying market got revived when the spigots were opened with a 3% drop in int rates, the biggest sudden decline in 30 years. Now just relax and slowly try to figure out what might happen when the spigot gets turned off. LIKE WHAT IS HAPPENING RIGHT NOW.

Billy
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Billy
3 years 1 month ago

its bidding wars in US all over the place, are you that dense? Spigots ARE WIDE OPEN. read the papers.

Lurker
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Lurker
3 years 1 month ago
I love this idea that if you don’t invest in real-estate, you have no ROI from the bulls. Bought in to equities around S&P 1100, sold at 1625 about 1 week ago. About 50% gain in two years. All I had to do was follow the fed. I’ll buy real-estate when it’s priced correctly, but right now it’s not even close. You’d have to be a sucker to buy right now. There’s a time to be bullish and a time to be bearish for everything. If you’re a perma-bull or a perma-bear, you are destined for pain.
Poloz Kills Bulls Dead
Guest
Poloz Kills Bulls Dead
3 years 1 month ago

Country Rank
Canada 25,556
United States 86,447

http://www.alexa.com/siteinfo/mls.ca

HAM has left the building and MOHINDER was never interested.

Son of Ponzi
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Son of Ponzi
3 years 1 month ago

Lurker # 46.
whatever happened to hold and prosper?
Were all those financial advisors wrong?

Lurker
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Lurker
3 years 1 month ago

@Son of Ponzi

Was a great idea when the working population was expanding, energy was cheap, and it seemed there was no limit to how big an economy could get. Nothing can expand forever though… I think a lot of the people that don’t see this yet (RE, Equities, any investment) are going to get spanked again in the future.

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