Canadian Banks could absorb losses in US-style housing crash

Good news for your monday morning!

If Canada saw a ‘US-style housing crisis‘ the big 6 banks could generate enough capital in a few quarters to cover losses.

If Canada were to experience a U.S.-style housing crisis, with house prices falling by up to 35 per cent, mortgage lenders including the country’s big six banks could lose nearly $12 billion, according to a new report from Moody’s Investors Service.

CMHC would also take a hit of about $6 billion if they challenge and reject claims, but if they decided not to they would take about half the loss as it would be more evenly split between the banks and CMHC.

You probably don’t have to worry about a US-style nationwide housing crash, because we have a different mortgage market that is explicitly backed by the government. The main concern would be rate increases and job losses as Canadian debt loads continue to increase:

There was almost $1.6 trillion in mortgage debt outstanding at the end of March, including home equity lines of credit, more than double the amount outstanding 10 years ago.

Read the full article over at the Financial Post.

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david
Guest
david

Hooray! The coming Canadian crash won’t be as “disruptive” as the American one was….because unlike that one, all the costs are borne by the banks and the government. And by that, we mean almost all by the government.

So that’s good. In a country without a decent road to drive on., bridges falling down, a military that gets bills for contract cancellations in lieu of ever taking delivery of new equipment, and a health care system that’s already quietly bankrupt.

Take that, Yanks!

elvince
Guest
elvince

But our PM has great hairs. Can’t say that about either trump or hillary.

patriotz
Member

“You probably don’t have to worry about a US-style nationwide housing crash, because we have a different mortgage market that is explicitly backed by the government. ”

“You” in this sentence clearly refers to someone other than the Canadian taxpayer.

elvince
Guest
elvince

Refers to the banks shareholders. That’s why it’s in the national post.

Forthe record, think they’re wrong. Any kind of housing slowdown will hurt banks earnings, which in turn will hurt the share price. The average MSM pundit doesn’t understand that earning growth is priced in the stock price, and even a slowdown of earnings can hurt the share price.

Combat roach
Guest
Combat roach

Until crash happens China will considerably own the land, country or whatever is left of Canada so they will be taking care of it. It will be just another midsize loss as many of them which they are dealing with across the China.

UBC in Crisis Mode
Guest

Canada Overwhelmed By 100,000 Chinese Millionaire Immigrants
https://www.youtube.com/watch?v=fTPym5VHI4c

BubbleTea
Guest
BubbleTea

Sickening Locusts.

Best place on meth
Member
Best place on meth

Canada Overwhelmed By 100,000 Chinese crooks.

Fixed.

Hyper-mega-Bull
Member
Hyper-mega-Bull

we are entering the parabolic phase of the housing market. it’s not too late to buy. in the next 2 years things are going to go up more than they have ever gone up before.

everything will go up. houses. condos. townhouses. everything. it’s going to be INSANE.

no one will be talking bubble. at that point we can reexamine the situation. but until then….

http://www.space.com/images/i/000/047/415/i02/star-wars-jump-light-speed-hyperspace.jpg

Best place on meth
Member
Best place on meth

Next 2 years?

More like 3 to 6 months before it all blows up.

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE

I am going to hold it to ur word.I will give u
9 months to a year to see even if it materialize ?

Personally i don’t believe it will happen

Ulsterman
Member

Us bears having been confidently predicting the demise of this market for 8-10 years.A betting man would go with the bulls. Logic appears to play no part in this market.

YVR
Guest
YVR

You bears?

Only thing worse than being bearish and not buying is being bullish and not buying.

space889
Member
space889

Actually, the only thing worse is being bearish and not shorting!

Best place on meth
Member
Best place on meth

Precisely why I think this is the final stage, the blowoff top – because “you bears” have capitulated.

Ulsterman
Member

Sadly, I think you are probably right. I only wish i had the courage to NOW buy a place, make a ton of cash over the next couple of years!

Hyper-mega-Bull
Member
Hyper-mega-Bull
Zero Down Forty
Guest
Zero Down Forty

Media’s been on this for years. I remember the hype Global TV was giving this bubble back in 03-04 when it just began. Been going for years. We’re way past that. Maybe we’re now at the “New Paradigm” stage as even a lot of bears are capitulating and saying this just must be the way it’s gonna be.

Of course, the above graph is an example of a speculative bubble unhampered by govt intervention. We entered the ‘bull trap’ phase back in 08-09, only to have massive govt monetary stimulus bounce us back to the ‘return to normal’ stage and keep it going for the last few years.

patriotz
Member

” Of course, the above graph is an example of a speculative bubble unhampered by govt intervention.”

That should be “enabled by govt intervention”.

patriotz
Member

OK, I just expanded the post and saw you’d said that 🙂

Ulsterman
Member

I’d definitely go with “new paradigm.” All the people who used to even casually listen to my analysis of PE ratios on housing etc now just look at me with pity. In the last 5 years some are up more than a million in equity and they now confidently tell me that it IS different and this is the new norm. I knew back then that some could be swayed by the logic to some degree, but now they are firmly in the “prices will never go down” camp.

YVR
Guest
YVR

Has there ever been a bubble where the above would not be true?

“they now confidently tell me that it IS different and this is the new norm.”

As long as they are confident then all must be OK.

space889
Member
space889

yes, the bubble of bears and I’m not racist on this blog.

Best place on meth
Member
Best place on meth

What are you talking about? You’re totally racist.

And a liar.

Ulsterman
Member
Of course every bubble has had a “this is the new norm, it’ll never go down phase” – no one is disputing that. But when bears have been proven so wrong, for so long, maybe the model IS changing. Who could have imagined interest rates this low for so long, yet alone negative rates? This alone says maybe this period of asset inflation won’t follow previous patterns. Maybe rates can stay low for 20-30 years and people will look back at 5-10% rates with amused curiosity. Maybe rates will stay at 2% and mortgage amortisations of 50 years will become the norm. Ultimately, this strange period of economic history has gone on so long that maybe it isn’t now strange and is the new normal. It’s just as plausible as the alternative. Throw in tens of millions of wealthy Chinese… Read more »
realist
Member
realist

Ulsterman, I am not an economist, but I believe your friends might be correct: it is different this time, because central banks have engineered a low, and now negative, interest rate regime, giving rise to the largest creation of credit in the history of money. As wiser people have said, sometimes “quantity has a quality of its own”. However, that doesn’t mean the outcome will be any different than usual. Except perhaps worse, as in terminal blow-up of the west’s financial system: Keynes’ “eventually we’re all dead”. Meanwhile, speculators make money in RE, as do their creditors. But pension funds, insurance companies, and even the banks are on a slow march to their own graveyards.

Best place on meth
Member
Best place on meth

No, we’re at the delusion phase.

Just one more step to the top.

StupidityCheck
Guest
StupidityCheck

That chart needs to be updated with a “Locust Phase”.

ostritch
Member
ostritch

It’s “different” this time because it’s no longer a housing market. It functions as something else altogether for people we know little about. That’s why it’s different. And that’s why it’ll be so tough to predict when it’s actually going to be over.

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE

Surrey family cashes in on hot housing market to ‘wander’ the world

https://www.google.ca/search?q=Surrey+family+cashes+in+on+hot+housing+market+to+%27wander%27+the+world&oq=Surrey+family+cashes+in+on+hot+housing+market+to+%27wander%27+the+world&aqs=chrome..69i57&sourceid=chrome&ie=UTF-8#q=Surrey+family+cashes+in+on+hot+housing+market+to+%27wander%27+the+world&tbs=qdr:d

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE

Canadian banks could survive a 25% house price decline, Moody

https://www.google.ca/search?q=Canadian+banks+could+survive+a+25%25+house+price+decline%2C+Moody%27s+says&oq=Canadian+banks+could+survive+a+25%25+house+price+decline%2C+Moody%27s+says&aqs=chrome..69i57j69i64l2j69i60&sourceid=chrome&ie=UTF-8#q=Canadian+banks+could+survive+a+25%25+house+price+decline,+Moody&tbs=qdr:d

realist
Member
realist

I hope so, because bank failures of the size of Canadian institutions would be very messy, and expensive to taxpayers and other (relatively) innocent parties.

Loon
Guest
space889
Member
space889

No, it’s demanded by loan sharks – ie. the shadow banking system – as insurance for loan repayment and likely perpetual debt slave given that interest rates for those kind of loans can go over 10% per month or even 1%+ per day.

Loon
Guest
Loon
Guest

straight up, this is my dream – but my wife has other plans.

Best place on meth
Member
Best place on meth

They’re getting the hell out before the locusts reach Surrey.

BubbleTea
Guest
BubbleTea

The deputy chief economist at one of Canada’s largest banks is calling for the taxation of foreign real estate speculators, saying it’s the best way to cool down Vancouver’s red-hot market without causing a collapse.
http://www.cbc.ca/news/canada/british-columbia/tax-foreign-real-estate-flipping-1.3643389?

paulb
Member

New
397
Sold
108
TI:8717

http://www.paulboenisch.com

ostritch
Member
ostritch

8700 inventory…. Does it look like its climbing steadily or hopelessly bouncing along the bottom?,

YLTNboomerang
Member

It was quite interesting to see Vancouver on the front page of Reddit for quite a bit of the weekend regarding this dateline documentary regarding China’s Millionaire Migration:

https://www.reddit.com/r/Documentaries/comments/4otwvr/chinas_millionaire_migration_vancouver_sbs/?

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

There’s been a lot of discussion on Reddit lately. I was surprised and happy to see it. I consider it a good sign of some kind — maybe that people will be opting out.

Of course that doesn’t mean demand will die down as long as 1000s of foreign nonresident buyers with way more purchase power than most locals are every month allowed to buy with no restrictions or controls.

Polozi Scheme
Guest
Polozi Scheme
Hyper-mega-Bull
Member
Hyper-mega-Bull

A wise man once said “we are at the ‘media attention’ phase” of the bubble.

Combat roach
Guest
Combat roach

Canada’s ‘Housing Bubble’ Is ‘Going To End In Tears’: Capital Economics

Who’s tears?

http://m.huffpost.com/ca/entry/10579398

Combat roach
Guest
Combat roach

“The massive surge in risky debt being taken on by Canadian households illustrates that the housing bubble can’t be blamed on cash purchases by foreign investors,”

That is another story but we should still get rid off the heavy locust excess that piled up in BC along the housing shitshow.

southseacompany
Member
southseacompany

“Looking for someone to blame for skyrocketing housing prices across Canada? Take a look in the mirror.

That is basically what research firm Capital Economics advised in a new report that puts the blame for rising real estate squarely on Canadians — their debt, and their banks.”

southseacompany
Member
southseacompany

“Expect the worst. Fed officials try to understand why they cannot keep raising rates”, The Economist
http://www.economist.com/blogs/freeexchange/2016/06/expect-worst

Sellnoworbeprucedin4evah
Guest
Sellnoworbeprucedin4evah
Ulsterman
Member

Random anecdote on the crazy state of housing. I’ll be renting a house in San Diego for a couple of weeks this summer from a retired friend. We met today to exchange money for keys. He told me he bought a bungalow in Tswwassen in Nov 2014 because, “I knew prices where heading up and if i didn’t buy before the spring i would get priced out.” Paid $545k. Put 50k in renos into it. Now assessed at $1.1m. Doubled in 18 months. He’s confident when the big, new shopping development is completed and when the new bridge is eventually done, he’ll make a lot more. Who am i, the renter, to argue with the guy who doubled his money?

Shut It Down Already
Guest
Shut It Down Already

Way more than doubled (due to leverage).

But also zero (because he’s not sold yet).

YVR
Guest
YVR

He still has the same house. No extra money. Money you can spend.

Rofl
Guest
Rofl

How did he “know” prices were going up? Is he living in the house, or is he another speculator?

MikeS
Member
MikeS

Got to ask the Federal Finance Minister about their plans. Definitely sounds like they don’t want to make weak markets any weaker with any policy. Says he’s going to have some kind of announcement on Thursday. Made it sound like they (the federal government) can’t control prices.

It was amazing how much people under 35 wanted to talk to me more afterwards, and how those older than that disagreed completely.

Oracle
Guest
Oracle
This game is over. If you don’t have a detached home by now, you are going to become a second class citizen in your own country. The 10 year visitor visa was issued over a million times in 2015. These people are not counted in population stats. All of these people are millionaires. I applied for my extended family overseas, only the millionaires got the 10 year visa. It’s also renewable. Canada has been sold out. Nothing can be done now. Millions of rich folks are gonna come here BUT not pay income taxes. That is for the locals to pay. Unbelievable. That locals take it without a peep. Oh the lot I have that someone was offering me $500,000 over what I paid last year …. $700,000 over now I kid you not.
Rofl
Guest
Rofl

So why don’t you sell it?

Oracle
Guest
Oracle

Because That’s the only real estate I own. Renting otherwise. If I sell, may not be able to get back into market.

I’m of the camp that believes in HAM. If you look at Shanghai prices , then Vancouver could in fact triple in prices from here.

Rofl
Guest
Rofl

That pretty much sums up the bubble mentality right there.

Oracle
Guest
Oracle

Even Garth acknowledged that a 35% crash in Vancouver would bring prices to late 2014 levels.

He further reiterated that a crash is not likely to happen.

Then he said foreign money is a myth.

Then the locals on his site buy it. Hahaha. Got to be the dumbest people on the planet.

space889
Member
space889

Like the bears who continuously refuse to admit they were wrong for 10 years running and that the crash is just around the corner? This year is THE year it will happen? That they will finally be vindicated and get to laughs and mock all those people who refused to listen to their sermons?

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE

Caught On Tape: What Happens In China When You Don’t “Exceed Expectations”Chinese Manager Spanks Employees For Not Working Hard Enough.

http://www.dailymail.co.uk/news/peoplesdaily/article-3650132/Chinese-boss-smacks-employees-BUTTOCKS-huge-wooden-stick-didn-t-work-hard-enough.html

https://www.youtube.com/watch?v=sUw72A_Y1pQ

BubbleTea
Guest
BubbleTea

He then spanks them with what looks like a stick. Reports say he later also cut and shaved their hair.

space889
Member
space889

Seems like some of the bears on this blog could use some of this punishment.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

You have not exceeded my expectations, Space. You need to go read a book, k? No pictures, just words.

space889
Member
space889

What?? There are non-picture English books? Wow…I didn’t realize that your pathetic culture has surpassed grade 2 level so quickly.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

I guess it must be the younger people who get paid the .50 rmb for each post someone keeps mentioning, probably as kind of a summer job.

Hyper-mega-Bull
Member
Hyper-mega-Bull
space889
Member
space889

Care to eat beef in India or pork in ME?

Hyper-mega-Bull
Member
Hyper-mega-Bull

know what else you can’t eat in indian and the middle east?

dogs.

space889
Member
space889

And yet I don’t see those in ME / India demanding you Caucasian Canadians stop eating beef or pork. And India at least isn’t calling such practice barbaric, backward, or savage.

oh yeah, Canada is also a big horse meat exporter too.

space889
Member
space889

btw, pigs are also closest genetic relative to humans, having even more genetic similarity than various species of monkeys.

Best place on meth
Member
Best place on meth

Is that why the chinamen were eating each other in the 60’s?

Because they tasted like pork?

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE
CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

That’s such a short time ago. The 1960s.

Best place on meth
Member
Best place on meth

I know, the Americans were putting men on the moon while the barbarians were eating each other.

space889
Member
space889

While Canadians like you were busy saying, hey, if we wanted to do it, we would do it so much better than those arrogant Americans.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

Quiet down, Space. Do you have no clue about grace or courteousness or responsible land stewardship or good government? At some point trading insults stops being clever if that’s the only thing you know how to do. There is more to the good life than you can imagine, and more to building a creative, innovative culture than you can imagine.

space889
Member
space889

You know what else is a short time ago? You being born. But good thing there are lots of ways to fix that mistake. Why don’t you take the first step and help make the world a better place?

Best place on meth
Member
Best place on meth

Now I know why the Japanese killed so many of you.

space889
Member
space889

No, but at least we are edible, unlike you. Probably not even fit for vermins.

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE
space889
Member
space889

About time!!!

southseacompany
Member
southseacompany

“O’Leary on real estate: ‘It self corrects, we always survive'”, BNN video

http://www.bnn.ca/Video/player.aspx?vid=887858

“Kevin O’Leary weighs in on the subject of Canada’s red-hot housing market and potential issues that could be created by government intervention.”

southseacompany
Member
southseacompany

“He (Morneau) knows that if they try to manipulate this market and it corrects, they’ll own it. It’ll be all over their suits.”

patriotz
Member

The bubble itself has been created by government intervention. What he really should be saying is if the government eases off on the juice, but his conclusion is right.

patriotz
Member

Oh I should add that Canada’s housing market is not “red-hot” (ask someone in St. John’s for example), but BNN comes from Toronto which thinks it’s Canada.

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