Category Archives: USA

Have we seen this movie before? Canada surpasses US bubble peak

Even outside of ridiculous vancouver, this nation is real estate crazy. In many key metrics Canada has surpassed the US housing bubble at its peak.

As David Rosenberg, the chief economist at Gluskin Sheff told BNN Thursday, “This bubble is on par with what we had in the States back in ’05, ’06, ’07. We have to actually take a look at the situation. The housing market here is in a classic price bubble. If you don’t acknowledge that, you have your head in the sand.”

Read the full article over at Macleans.

Moving to Seattle

JustMe‘ posted this article from Bloomberg about wealthy buyers moving from Vancouver to Seattle after the foreign buyer tax was implemented.

“Just a few days after Vancouver announced a tax on foreign property investors, Seattle real estate broker Lili Shang received a WeChat message from a wealthy Chinese businessman who wanted to sell a home in Canada and buy in her area.

After a week of showings, he purchased a $1 million property in Bellevue, across Lake Washington from Seattle. He soon returned to buy two more, including a $2.2 million house in Clyde Hill paid for with a single cashier’s check.”

Read the full article here (warning autoplay video).

Capitulation time

Some people say there are three stages to a bubble: denial, concern and capitulation.  Have we reached the last stage yet?

This comment from YLTNboomerang:

I’m almost ready to call this bubble done, my evidence?…my historically poor timing! Family is getting flown down to TX next month for interviews and to check out RE/Lifestyle that Houston offers. If we finally pull the trigger and move South, even for tremendously more dough, I will post it and that will be the point that YVR becomes cheap cause as a bear since 2007 I can’t get this F*&$er timed right. BTW, I already stipulated a “Trump clause”, if through regime change foreign workers are kicked out, I get 3 years pay and no non-compete plus relocation costs.

Any one else hit the capitulation stage yet?

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.

Who wants a 50 cent dollar?

With rumors of another rate cut, Rob Carrick points out 8 reasons he thinks that’s a bad idea. The very first reason? The Looney will fall even further against the US dollar.

For eight years, the Bank of Canada has been trying to encourage economic growth by lowering interest rates. It’s so not working.

In fact, lower rates are hurting a lot of people more than they’re helping. We have to at least acknowledge this as speculation of yet another rate cut grows. It could come as soon as Wednesday, which is the date of the next rate announcement from the Bank of Canada.

The central bank considers the entire economy when it sets rates. Now, let’s look at things from the point of view of everyday people. Here are eight reasons why the Bank of Canada shouldn’t cut rates any lower.

1. The dollar will fall even more: The most disruptive force in personal finance right now is the falling dollar. That’s because it’s hitting us all in a vulnerable spot – our grocery bill. Helpful for exporters, a weak loonie is a tax on families and snowbirds who must change Canadian dollars into U.S. currency. Last week, the dollar fell below 70 cents (U.S.) for the first time since 2003. A lower dollar adds downward momentum.

Read the full list over at the Globe and Mail, although a number of them are directly connected to a dropping looney.

The one group that a dropping looney should help are exporters as their products get cheaper for foreign buyers, but Jayson Myers, the head of the countries largest exporters association says don’t bother.

“Interest rates are low already. A little bit of dollar stability would be better.”

As an interesting aside, in 2002 when the CAD was hitting record lows Treasury Board President Scott Brison said it was

“a pay cut to every Canadian, a drop in our standard of living and a reflection of the fact that Canadians are getting poorer as Americans are getting richer under the watch of the government,”

Scott Brison is now a key cabinet minister and top economic aide to Trudeau.

 A hat-tip to southseacompany for the links.