Should bank CEOs be worried about housing market?

Who should worry most about an overheated housing market?

Overstretched owners with big debt? Renters who want to buy? Government?

What about Bank CEOs?

TD CEO Ed Clark says that bank CEOs ‘should be worried’ about the Canadian housing market.

While he isn’t worried about a full-blown bust, Mr. Clark believes chief executives simply can’t ignore warning signs in the market – particularly the sudden run up in prices for real estate of all stripes. “If you run a bank, you should be worried about it,” he told the audience at a bank conference in Toronto.

Now if banks start to worry about insured mortgages, maybe the taxpayers insuring them should be worrying a bit too.

Of course other bank CEOs have said that there is no problem and lending has been prudent and restrained.

That article ends up with possibly the weirdest last paragraph of the year so far:

Mr. Clark’s comments Tuesday weren’t the first he’s made on the topic, but this time he went into more detail on how his bank is changing its behaviour.

“We’re saying ‘no’ lots of times” to potential real estate borrowers,” he said, some of whom are big, lucrative clients. Mr. Clark wouldn’t name names, but he noted that in one instance, Tim Hockey, the bank’s head of Canadian retail and commercial banking, was “virtually in tears” for having to turn the client down.

The austerity! it hurts!

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Snake
Guest
Snake

Building under construction collapses in Brier Creek

http://www.youtube.com/watch?v=5t9MpNTSbYg

gordholio
Member
taylor192: More recent press on Canadian car sales & debts. Seems we’re doing the same thing there as we’ve done with real estate – namely buying way more than we can afford. http://www.cbc.ca/news/business/canadians-taking-on-more-auto-debt-over-longer-terms-1.2490713 I find this one quite telling: http://business.financialpost.com/2014/01/13/auto-industry-gears-up-for-another-record-sales-year-but-raises-flags-on-long-term-financing/ I cannot imagine what life would be like with onerous real estate debt, onerous car debt, onerous credit card debt, and onerous LOC debt. It must be horrific. As in hard-to-sleep-at-night horrific. But I know people who just wipe final costs from their vapid minds and instead concentrate on monthly payments, never thinking how long they’ll be paying out and what might happen if they 1) Need to spend money elsewhere, 2) Lose their job, 3) Are hit with an unforeseen circumstance, 4) Are hit with increased interest rates. Etc, etc. And in the meantime, they’re squeezed so hard that… Read more »
taylor192
Member

I would like to see a breakdown of this:

“The total debt service ratio of Canadian household debt is at a record low after falling to 7.2% recently from 7.4% a year ago.The debt service ratio represents the amount of disposable income needed to cover interest payments and other obligations stemming from household borrowing”

Car loans have gotten around debt problems be extending financing periods.

“According to data from JD Power and Associates, today 58% of Canadian vehicle purchasers borrow with payment terms extending 72 months or more, compared to just 14% in 2007.”

Enigma
Guest
Enigma

I don’t even understand how high net worth:income can even suggest household financial health. To me, it seems to suffer from a critical logical error.

Say a two income household with a net worth of $360,000 is taking home $60,000/yr. Their ratio is 6:1.

If one member loses their job, and reduces their income to $30,000/yr, their ratio increases to 12:1. And that means their household finances are in… better shape?

Am I just stupid? I would have assumed increasing net worth AND income is better for a household’s finances. By this ratio, it seems I should be increasing net worth while simultaneously shedding income to achieve better financial health. Maybe I got the ratio reversed: I should be shedding net worth while increasing income… No, that doesn’t seem right either. Please help David, I’m very confused!

Bo Xilai
Member
Bo Xilai

Actually, Rosenberg being bullish is a good sign because he has been wrong for so long, having him in the bullish camp is a good counter-indicator.

Enigma
Guest
Enigma

24: “In fact, there is one measure-net worth to income-which is at an all-time high, which actually suggests that household finances are in pretty decent shape,” [Rosenberg] said in the report.

Hey Rosenberg! The Americans called, and they want their quote back.

Unbelievable. We’re watching the same movie, and yet we’re still expecting a different ending?

Many Franks
Member
Active Member
Another article about debt service trumping RRSP contribution, again pulling from nowhere the idea that people are voluntarily opting to service debt rather than pay RRSPs. Feeding the debt monster is killing our RRSPs: Between the finance minister, the Bank of Canada and various experts shouting concern about debt levels, maybe it shouldn’t come as too much of a surprise that consumers are heeding the warning. The problem is it’s now the No. 1 reason to not make an RRSP contribution.How do we know that consumers are heeding the warning? What we know is that they’re not finding themselves able to make RRSP contributions. “In some ways maybe this is the unintended byproduct of some of the constant hectoring we have seen in recent years from various officials in Ottawa about the building up of debt,” said Doug Porter, chief… Read more »
Barney
Guest
Barney

Thanks gordholio.
I hear you. I have been only passing through Okanagan so i can’t judge how is full time living there. Do you think you can adjust to a smaller community? I have moved from Van to the Prairies and i miss big urban amenities sometimes.

How much money would rent cost in Okanagan? That would be the biggest expense that i would anticipate. We usually cook at home so the cost of food is very small for us.

CryingGhost
Guest
CryingGhost

(;へ:) *cry* *sniff*

i can’t afford a house! i am entitled to one because i am a superior white person.

i even made this video to demonstrate my superiority.

http://www.youtube.com/watch?v=fZQl0QB-aHY#t=39

gordholio
Member
#16, Barney: My GF and I are perhaps a decade (hopefully less) from retiring. We don’t make a ton of money, but we don’t spend it foolishly. We’re lucky in that we don’t get great pleasure from designer clothes, restaurant meals that cost $50 a head, Yaletown knick-knacks, criminally overpriced rainforest real estate, etc, etc. So we do okay. You asked where I’d retire in North America. Neither of us can live full-time in the US (if we could, we’d have moved to southern Cali a long time ago), so our current thinking has us moving to the southern Okanagan as soon as we’re able. If we can work it so that we spend ten months a year there, and escape to California or Arizona (or Mexico) for January and February, that would make us pretty darned happy. We’d think… Read more »
Melba
Guest
Melba

….Retire in Vancouver? Why would anyone want to do that? Ridiculous cost of living, seven months of rain, dreadful traffic……

7 Months of rain? That’s all? Oh, you mean Vancouver Washington.

tedeastside
Guest
tedeastside

Bull bull bull:

Why do you bother? We dummies have taken over this blog.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

when the house you own is worth $1 million, retiring in florida is easy.

Tedeastside Says:
January 15th, 2014 at 10:55 pm 20

Proud vancouverites should buy a billboard in Coconut Grove Florida that says ….world class vancouver!! Dont you wish you retired here

Barney
Guest
Barney

“T]he total debt service ratio of Canadian household debt is at a record low after falling to 7.2% recently from 7.4% a year ago.The debt service ratio represents the amount of disposable income needed to cover interest payments and other obligations stemming from household borrowing”

so just pay interest and forget about principal. The principal, you can pass to the next generation. wow. we are doing good.

Many Franks
Member
Active Member
“On the other hand, once I put this blanket over my head, driving isn’t so terrifying after all.” Household Debt May Not Be as Crushing as Some Data Suggest: There’s no doubt Canadians are carrying a significant amount of debt. But exactly how crushing that burden is depends on how you crunch your numbers. It’s uncertain how crushing things are. That’s reassuring. [T]he total debt service ratio of Canadian household debt is at a record low after falling to 7.2% recently from 7.4% a year ago. The debt service ratio represents the amount of disposable income needed to cover interest payments and other obligations stemming from household borrowing. That’s important, he argues, because “the driving force behind defaults and delinquencies is the ability to service the debt,” not the amount owed. So what? We already know delinquencies are currently low.… Read more »
Barney
Guest
Barney

@gordholio
where would you retire in north america?

patriotz
Member

@8: ” The Tories plan to spend $30 million over five years to improve efforts to fight tax evasion both in Canada and abroad ”

$6/million a year might hire about 50 people, assuming it’s all spent on staff. Yawn.

In other news, the Tories spent $2.5 million of taxpayers’ money advertising the non-existent Canada Job Grant program.

Funkeymonkey
Member
Funkeymonkey

Before I sold I always reported my rental income. I wonder how many people with lane way houses do that?

tedeastside
Member
tedeastside

Proud vancouverites should buy a billboard in Coconut Grove Florida that says ….world class vancouver!! Dont you wish you retired here

crashtard
Guest
crashtard

we are crashing right now, as we speak, and the mainstream is totally unaware! this is insane!

VMD
Member

Australia just posted terrible employment numbers.

The Australian Bureau of Statistics has just released the December employment report, which was a terrible number no matter which way you cut it.

Employment in Australia fell by 22,600. But the huge fall in full-time unemployment of 31,600 is the big shock for markets, and puts a big question mark on the recovery at the moment.

But it is the contracting participation rate (think people in the workforce or actively looking for jobs) which is really holding the unemployment rate below 6%.

AUDUSD down 3% in 3 days. Sounds familiar?

gordholio
Member

Retire in Vancouver? Why would anyone want to do that? Ridiculous cost of living, seven months of rain, dreadful traffic…

Interesting. I’m watching the Canucks get destroyed and really loving it. The team was pretty darned good…three years ago. Management and others with vested interest have waxed poetic about them ever since, while in fact they’ve grown steadily worse the whole time. Now it’s finally becoming evident to everyone.

It reminds me of something. Hmm…what could it be…

mac
Member
mac

Notice how there’s no blog called the Restrained Banker. LOL.

So not even Romeo Jordan is going to divulge his secret number for retiring in Vancouver sans condo? What about Dave? Has Dave bought yet?

Snake
Guest
Snake

FULL TIME LICENSED AGENT NEEDED ASAP! TOO MANY BUYERS TOO HANDLE!*

http://vancouver.en.craigslist.ca/van/rej/4288120031.html

Renter
Guest
Renter

Not to mention the homeowers who live in the basement suites while their tenants rent the main floor of their own house, I personally know a few…. Silly Willy