This page has been archived and commenting is disabled.

Guest Post: Primer #5: The Role Of Demographics In Canada’s Coming Housing Bust

Tyler Durden's picture





 

Submitted by Ben Rabidoux of Financial Insights

Primer #5: The role of demographics in Canada’s coming housing bust

I’d like to reiterate that the point of these primers is to explain
the big-picture factors that have shaped my opinion on the direction of
the economy in general, and housing in particular.  So far we have
seen that deflation
and not inflation will be the dominant force over the next several
years as we have reached a point of peak credit and peak consumption in
the Western world.  Beyond that is anyone’s guess, and the inflationists
and hyperinflationists may yet be proven right.  But it won’t be in the
next few years, at least not in Canada.  We’ve seen that real estate in
Canada absolutely is in bubble territory
when the data is considered rationally and compared to widely accepted
measures of fundamental value.  We’ve seen that the two big drivers of
this bubble growth have been mass psychology
(how many times have you heard, “real estate only goes up,” despite all
the contrary evidence just south of our border) and also by the
erroneous and self-defeating policies of CMHC.

We’re once again looking at one of the macro factors that will exert
significant downward pressure on real estate prices over the next
several years:  demographics.

Let’s start by noting that Canada has a population pyramid similar in many ways to other mature economies.  The population of Canada is aging:  the median age in Canada increased from 35.2 years old in 1996 to 39.3 years old in 2008
This results in a larger share of the population getting closer to
retirement.  This is largely caused by the most notable feature on the
graph below, and the one we are particularly interested in: the bulge in
the middle of the pyramid.

I’m sure most of my readers are quite familiarized with this bulge
and with the name given to the group of people who make up this
anomaly:  The Baby Boomers.

Baby Boomers is the name given to a group of people born between 1946
and 1965.  Some simple math tells us that if you are currently between
the ages of 45 and 64, you have a lifetime membership in this club.

Right off the bat, let’s identify two important facts about the ages
of 45 and 64.  Next year the oldest Baby Boomers turn 65,  marking the
traditional end of their working years, and with it a shift away from
spending earned income to spending a retirement income that is usually
significantly less.  Also next year, the youngest Baby Boomer turns 46. 
During the typical working life, spending increases throughout the
early working years until…..age 46.  At this point spending begins to
decline while saving and debt repayment accelerates.

The effects of an aging population and this housing life-cycle can be seen in the following charts from CMHC.

Note that 59% of homeowners currently live in larger houses that
their previous house, while 32% of home purchasers in 2009 indicated
that they purchased their home because they wanted a larger home.  This
would be expected as a population ages and approaches its peak interest
in large homes.  There is also a sociological element to all of this, as
average home sizes have moved higher across all age groups over the
past several decades.  Nevertheless, I believe the era of the McMansion
is over, as you will see below.

As we noted in our first primer, because of the nature of our
fractional reserve banking system, we need a continually-expanding debt
base to service existing debt, as that debt must be repaid with
interest.  When demand for debt diminishes and when that diminishing
demand is coupled with increased savings, it causes deflationary
pressure as both the monetary aggregate and velocity of money decline. 
The impact of deflationary pressures on housing prices have been
described ad nauseum on this blog.  So we’ll leave it at that for now. 
But keep that in the back of your mind as that is the macro picture that
will be working behind the scenes here in Canada over the next several
years.

As of early 2010, real estate provided 48% of the net worth
of Canadian households, the highest it had been in 20 years.  I would
bet that number is quite likely north of 50% today, though I can’t
prove it.  Below is a chart taken from the October 2009 Moneysense
magazine, in which they profiled the net worth of Canadian households. 
Net worth was measured as assets minus liabilities, where assets
included home equity; financial assets such as stocks, bonds, and mutual
funds; savings and bank accounts; and accrued pension benfits.  What I
want you to notice is that net worth for the 55-64 age group peaks at
roughly age 60.  The median net worth at this time is a little over
$420,000.  At closer to 65, net worth drops below 400K.

Some simple math tells us that well over 50% of Canadian households
between the ages of 55 and 64 have a net worth of less than 400K. 
Putting that fact together with the one above, it implies that there are
50% of households in Canada facing retirement with an asset allocation
of approximately $200,000 or less in home equity and $200,000 or less in
financial assets.  The picture may be even bleaker depending on the
methodology used in the Moneysense wealth test.  If they included such
non-financial depreciating ‘assets’ such as a car or household items,
the numbers could be even lower.  Here’s the point:  A massive group of
Canadians are nearing retirement and are completely unprepared for it
financially.

Let me put it another way.  In 2009, this cohort of 55 to 64 year old individuals represented a total population of over 4 million, or over 12%
of Canada’s total population.  Accounting for some one-adult
households, this represents over 2 million Canadian households.  Since
the median line represents the 50th percentile, it means that there are
over 1 million households facing retirement in the next few years and
evidently planning on having less than 200K sustain two people for the
next 20 years.  Given the extremely low interest rate environment, that
won’t throw off much, perhaps 10K per year if you’re willing to take a
bit of risk.  I don’t know what that lifestyle will buy exactly, but it
will certainly involve significantly less discretionary spending and/or
an acquired taste for Purina in a can.

Not only are they not prepared in terms of liquid financial assets,
but increasingly, people are entering retirement years with significant
debt.  Since the early 90s, the rate of insolvency among Canadians
over 55 has shot up by more than 500%.  The fact that more and more
Canadians are reaching the end of their working lives encumbered by
debt is a worrisome trend. It seems that as the boomer generation edges
into their 60s, a significant number are finding themselves
unprepared for retirement.

It should be obvious that there are many boomers expecting to free up
the equity in their home to finance their retirement.  Currently,
nearly 75% of people in the 55-64 age group own their home, meaning that
based on my crude calculations, we are looking at approximately 750,000
households faced with the option of either freeing up home equity or
significantly delaying their retirement plans.  If someone can find hard
stats that either support or refute my crude analysis, I would love to
see them.

There are several ways to free up home equity:

1)  A reverse mortgage.  In Canada, CMHC will provide these mortgages through the Canadian Home Income Plan
It will give you up to 40% of your home equity as a loan.  The
principal and accrued interest are payable either upon the death of the
mortgage holder or upon sale of the residence.  I have no doubt that
this option will become an increasingly popular way to free up home
equity.  Between 2004 and 2008 compound annual growth at Toronto-based
HomEquity Bank, Canada’s leader in reverse mortgages, was 12%.
This approach to freeing up equity should have the least impact on the
housing market.  However, the total number of homeowners opting for this
approach is still tiny; In the past 20 years, CHIP has issued
approximately $770 million in reverse mortgage loans to to only 12,500
clients.  If my math above is correct and there will be over 750,000
households that need to free up this equity, this will represent a drop
in the bucket!

2)  Sell and rent.  Given that the notion of housing being the ‘safest investment’ is heavily ingrained in the Canadian boomer psyche, I think it is a fair assumption that only a small percentage of boomers will opt for this.

3)  Downsize.  Here is where I believe the majority of boomers will
attempt to free up their equity.  The idea is simple.  Sell the huge
McMansion that now requires too much maintenance and is too large for
the needs of the near-retirees; buy a smaller home or condo.  Pocket the
difference.  Live the dream!

Several new reports from CMHC lends credence to this.  In one report,
CMHC highlighted the percentage of household undertaking major
renovations.  The results were then displayed based on the age of the
households.

From the report:

“The most common reason provided for renovating was to update, add value or prepare to sell.
In light of these findings, it shouldn’t come as a surprise that those
aged 55 and over represent the largest share of intending home
purchasers in 2010 – which provides a window for who’s behind the recent
rise in listings.”

Interesting!

Note that some of the largest increases in home purchase intentions were in the 55-64 and 65+ age groups.  So what were they buying?

I believe that this absolutely is a trend that will continue.  The net effect of this will be two-fold:

1)  Price compression in the real estate market, particularly in larger, multi-floor homes.

2)  A price floor under smaller residences, particularly small
bungalows (2 bedrooms) with smaller yards.  In markets where condo
speculation and overbuilding are not rampant (ahem….Toronto!), this may
also put a floor under condo prices.

I’m confident that this boomer downsizing will be a dominant theme in
real estate for the next decade.  The great unknown, of course, is just
how many are counting on their home equity for their retirement.  How
will they react to the headlines about year-over-year declines in real
estate values?  Will they sit tight like in the Fall of 2008, expecting a
rapid bounce?  Or will they all reach the conclusion and in a wave of
panic selling try to catch the peak, spurred on by all the media talk
about a housing bubble?

As Isaac Newton famously said, “I can calculate the motion of the
heavenly bodies, but not the madness of men”.  And so it is with our
ingrained animal spirits
The great danger in having such a large group dependent on one asset
class to fund their retirements is that they may act en masse in trying
to free their equity, leading to self-feeding beggar-thy-neighbour
behaviour of price reductions amid surging inventories.

We may well see an orderly liquidation and downsizing, but it’s one
more mine in the great minefield that is the Canadian real estate
market.  Tread lightly!

-Ben

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 09/22/2010 - 10:04 | Link to Comment williambanzai7
williambanzai7's picture

Do Canadians still think real estate prices can only go up?

Wed, 09/22/2010 - 10:24 | Link to Comment Double down
Double down's picture

Yes, this is just a dip.  It will be back next year because we are responsible Canadians not mired in debt like those Americans.

And, yes we are retarded.

Wed, 09/22/2010 - 10:38 | Link to Comment Mad Max
Mad Max's picture

Don't forget your took, eh!

Wed, 09/22/2010 - 10:47 | Link to Comment svendthrift
svendthrift's picture

Look Yankee, it is spelled toque.

Wed, 09/22/2010 - 10:24 | Link to Comment Double down
Double down's picture

Yes, this is just a dip.  It will be back next year because we are responsible Canadians not mired in debt like those Americans.

And, yes we are retarded.

Wed, 09/22/2010 - 10:52 | Link to Comment Spitzer
Spitzer's picture

I agree.

These clowns had their warning in 2008. Rather then take it as a warning, it convinced them even more that housing only went up because it did bounce back.

The idea that these people cant make the correlation between falling interest rates and rising home prices is beyond me. I was renting but I knew the landlord was so far into debt and so brain dead that I wanted to get the hell out before this thing blows. My x landlord will go bankrupt, I know it. He will probably try and raise the rent to cover his ass, thats how dumb he is.

I just bought a little small house in northern Alberta to live in for now. It only cost me $38,000 because I found out that the banks will not finance it because it is too old. Imagine that, look what happens to prices when you have to pay cash, haha. I can still rent out this house for $700 a month. That is around a 20% yield.

Wed, 09/22/2010 - 12:21 | Link to Comment dogbreath
dogbreath's picture

I just made an offer in small town alberta.  Sombody actually outbid me.  Told the realtor that I would not counter offer but they probably told the other party that I would because they upped their offer.

Spoke with a realtor yesterday.  She was remarkably on the ball because most can only sing the company song.  She said wait till spring as prices will be down by 50K.

Wed, 09/22/2010 - 14:01 | Link to Comment Jessica6
Jessica6's picture

I know someone who bought a fixer-upper a few years ago in southern Saskatchewan for $10K and the municipality sold her the lot next door for one dollar.

Not sure how much it's gone up but it's where the 'smart money' headed before Calgary and Edmonton started to decline.

Wed, 09/22/2010 - 10:46 | Link to Comment svendthrift
svendthrift's picture

Hubris is strong there. They watched the US housing market implode and theirs not and found an almost moral justification for it. It validated their feelings of "we're different" which heavily informs the "this time it is different" sentiment in Van/CGY/Toronto. Canadians, particularly in Van and Toronto, will drone on about how their city is world class this and that. They really don't know.

So the answer is yes. Yes, they do believe that their houses will appreciate for ever.

Wed, 09/22/2010 - 12:08 | Link to Comment RockyRacoon
RockyRacoon's picture

Do we need to start building a fence at the Northern border as well?

Wed, 09/22/2010 - 12:23 | Link to Comment dogbreath
dogbreath's picture

You don't.  I think we need to build a fence at our southern one.  

Wed, 09/22/2010 - 14:05 | Link to Comment oddjob
oddjob's picture

I'm sure you can print the money for that as well.

Wed, 09/22/2010 - 11:44 | Link to Comment Diogenes
Diogenes's picture

Do Canadians still think real estate prices can only go up?"

 

Not me. I've been investing in real estate since 1972 and have seen the ups and downs.

In 2008 I sold most of my rental properties in fear that Canadian real estate was about to follow the US down the drain.

Since then those properties have appreciated 20%.

I've been looking for something to buy all summer but prices are too high for me and still rising.

 

 

Wed, 09/22/2010 - 10:07 | Link to Comment ACjourneyman
ACjourneyman's picture

I agree bubble, there was just a report that said 60+% of people in Canada have no savings and will be in trouble if one pay cheque is delayed one week. To add to that, a house 1 1/2 hours drive to Vancouver is 500K and the ave wage is less than 50K a year. I try to get my friends to open their eyes to this but I get the deer in the headlights look.

Wed, 09/22/2010 - 10:08 | Link to Comment Sudden Debt
Sudden Debt's picture

Immigrants will buy up all those houses so there's no problem.

MORE IMMIGRANTS!!! BRING THEM ALL IN!!

Wed, 09/22/2010 - 10:10 | Link to Comment billwilson
billwilson's picture

Yes but ... the big driver on home purchases has been immigration. When 200-300,000 new folks come each year (almost 1% of the population) that provides a cushion under prices.

Wed, 09/22/2010 - 10:32 | Link to Comment web bot
web bot's picture

duplication.

Wed, 09/22/2010 - 10:32 | Link to Comment web bot
web bot's picture

This is the smartest and best comments made on this blog. The author misses this fact... and sounds like one of those RRSP salesmen parroting other people's ideas.

In Toronto alone, over 100,000 immigrants go through each year... and where are they going to? suburbs... Population growth is driving the housing market in Canada, not an academic bubble.

Now in the US... well that's another story.

 

Wed, 09/22/2010 - 10:37 | Link to Comment BenRabidoux
BenRabidoux's picture

Actually I didn't miss that point at all.  Immigration into Toronto is projected to be 65K for the next several years, not 100K. 

 

http://www.cmhc-schl.gc.ca/odpub/esub/64459/64459_2009_A01.pdf?lang=en

 

Regardless, housing starts in Canada have been running at ~175K, well exceeding net household formation, including immigration and organic household formation.

And yes, we are in a bubble.

http://financialinsights.wordpress.com/2010/09/07/primer-2-is-there-a-ho...

 

If you'd like to debate the content of this post using widely accepted measures of fundamental value, I'd love to hear it.  Otherwise your weak anecdotes expose you for the fool you are.

Wed, 09/22/2010 - 10:46 | Link to Comment web bot
web bot's picture

Go back to selling used shoes.

Wed, 09/22/2010 - 10:50 | Link to Comment BenRabidoux
BenRabidoux's picture

That's about the level of intelligence I expected in your rebuttal.  You prove my point.

Cheers

Wed, 09/22/2010 - 11:05 | Link to Comment web bot
web bot's picture

So typical of an insecure person... the moment your post is up on Zerohedge and you are on here like some little man trying to smother everyone with your insecure comments.

You've got a way to go little man.

Cheers

Wed, 09/22/2010 - 11:07 | Link to Comment BenRabidoux
BenRabidoux's picture

Yeah....the guy posting using his own name rather than a pseudonym is the insecure one.  My analysis is there for you to refute.  Give 'er!

Wed, 09/22/2010 - 12:38 | Link to Comment dogbreath
dogbreath's picture

regardless of the actual number coming in the number that is important is the number that are staying.   I see alot of new latinos and chinese in my area and they seem to be happy.  Most probably never had it so good but they are surely aware of the huge difference in the value of the goods they buy here and what they would have to pay back home.  I think many are immigrants of conveience.  Got the passport and the healthcare card.  Mom and dad work illegally.  Relative showed up and dropped a kid so it will have citizenship and the money is getting saved to be taken back or sent home where a person is comparatively rich on what is modest wealth here.  I have chinese friends who have a canadian passport and they are doing well back home.

Wed, 09/22/2010 - 11:21 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

web bot, denial is hard to accept.

Wed, 09/22/2010 - 11:51 | Link to Comment UrbanAnalyst
UrbanAnalyst's picture

The CMHC report linked by the author forecasts 2009 net migration to Toronto of 64,500, I believe the commentors were discussing future immigration. Supporting statistics would indeed lend credibility, perhaps also on a national basis as the nature of your content seems to not be CMA specific.

Wed, 09/22/2010 - 11:33 | Link to Comment taraxias
taraxias's picture

You mean those rufugees entering Canada at an alarming rate because Canadian immigration laws are too lax are the ones responsible for holding up Toronto RE prices at 10/1 earnings to price ratio and Vancouver's at 16/1?

Who would have thunk?

Wed, 09/22/2010 - 11:39 | Link to Comment BenRabidoux
BenRabidoux's picture

Yes, because we only accept uber wealthy refugees.  It's a good thing those refugees are coming carrying bags of cash to purchase the average Vancouver home for a cool mil or a home in T.O for half a mil. 

Wed, 09/22/2010 - 11:42 | Link to Comment taraxias
taraxias's picture

+10

Now that made me laugh.

Nice piece BTW.

Wed, 09/22/2010 - 10:49 | Link to Comment svendthrift
svendthrift's picture

Sounds like Miami.. What with all those rich South Americans and all.

It's worth noting that there really was a flood of wealthy South Americans into Miami. They really did buy lots of high end property. They're all underwater now, but that's not all that relevant.

Wed, 09/22/2010 - 11:55 | Link to Comment Suisse
Suisse's picture

On the bright side you can pick up a waterfront condo on the cheap now.

Wed, 09/22/2010 - 14:39 | Link to Comment Jessica6
Jessica6's picture

I always use Miami when trying to talk sense into people about Vancouver. There aren't that many 'rich Chinese' and the really rich ones started coming over in the late 1980s. The ugly truth is that most of the Vancouver bubble is being fuelled by locals on the scaling up treadmill all counting on that greater fool to offload their first property onto. I do think that million-dollar crackshack blog represented a tipping point though.

On top of that, underwater immigrants can bugger off back to their home countries, only losing what they put down. The Canadians with nowhere else to go will soon learn what 'full recourse' really means.

At least Miami has nice weather and gorgeous beaches.  Vancouver is only pleasant if you're moving from either the North Pole or Seattle.

Wed, 09/22/2010 - 10:11 | Link to Comment Sudden Debt
Sudden Debt's picture

I reminds me of a job offer I got a few years back to go work in Norway. As a gift, they would GIVE ME a FREE 5 SLEEPING ROOM HOUSE with 90 acres of ground as a incentive!

They don't have enough young people in Norway anymore and they need people to do the work. The -500000 degree temperatures could be a reason but WHAT IF that will be the future for all western country once the old people start kicking the can? 

Wed, 09/22/2010 - 10:13 | Link to Comment FranSix
FranSix's picture

What's even more disturbing about the coming housing collapse in Canada is that long term mortgages are being allowed with very little or no money down, and the pension plans are all positioned to 'insure' these mortgages with what's called covered bonds.

Canada was one of the first countries to experience a melt-down with Asset-Backed Commercial Paper based on credit card debt and mortgages, but here we have the government propping up with taxpayer dollars the exact same corporate bond bubble.

And the people who are on the hook are working age couples, two-income homes with families in over their heads.  Its unreal how everyone expects that this will all work out for the better.

First, along with the housing collapse you'll get a corporate bond market collapse.  Then pensions, who are insuring it all as counterparties to the risk, can no longer guarantee any payment because its all tied up in credit default swaps.

All this is happening with a backdrop of historically low interest rates in long dated bonds.  Unreal.

Major deflation risk here.

Wed, 09/22/2010 - 10:20 | Link to Comment DosZap
DosZap's picture

Hate to say I TOLE YA SO........Canuckians.Saw this biatch coming over a year ago.Their fissin to get a dose of what we have.

Poor Shmucks.

Wed, 09/22/2010 - 10:24 | Link to Comment FranSix
FranSix's picture

What's even uglier is that retirees are fixing to profit from the onset of the collapse in housing, figuring they will yoke the young into lifelong debt servitude, but instead the entire complex will become illiquid.  Its patently insane.

Wed, 09/22/2010 - 11:13 | Link to Comment CPL
CPL's picture

Yes they are...

It reminds me of given dining rooms sets. When my wife and I got married we found a modest dining room set someone as giving away a la curbside. I sanded it, polished it down , repaired it, found boston bolt sets to replaced the busted ones and refinished all the chairs. It was (is) a nice Ash set and the price was exactly where we needed it to be. Free.

4 years after being married my mum in law gave us her dining room set because she didn't like it anymore. So we took it graciously, table, chairs, hutch and buffet. We put the one I restored away in the garage to give to another couple if they needed one.

5 years later after the fact, my parents gave us their dining room set. we thanked them as the dining room set we had lived through three kids up until that point, basically it had the shit beaten out of it. So I put that set next to the old set I intended to give to someone else. So two sets in stow, one in use. Fast forward to the progressive retirement of my wife and I's parents.

So both parents retired in the span of four years between one another and when moving from a 2300 sqft two story home to a single level 850 sqft bungalow. They didn't have any problems in 2003-2006 dumping their places, it was the fact they had all this crap. Tonnes of it. Including dining room sets, dining room sets, beds, bikes, couches, tonnes of prints, boxes of knick knack crap women buy...aka shit.

I attempted to unload what I had and just had been given in the garage through craigslist and kijiji. For Free, even offered to use the truck to drop it off to any one starting out. Took forever to organize and take pictures of, meanwhile the parents are busy in Florida.

I get a couple of calls, manage to help out a couple of kids starting out (not one of them owned a car btw, these are 25 year olds, not even sure they had a license which wouldn't be that irregular). Dropped stuff off. Managed to get my own son outfitted with any stick of furiture he would even need so he doesn't move back home to live in the fridge.

To be blunt, I hardly put a dent in the mess in the garage. So two summers ago I had a 100 thousand dollar bonfire and BBQ. Just the estimates on the 80 large boxes of books, had to be a conservative estimate of around 15k. The beds I salvaged the wood and burned the rest. The Four given dining room sets went into the pyre, ash/oak/teak. Burned the prints, which are posters anyways. All oils and originals stay hanging on the walls. The shoes, suits dating back to the 70's (why do people collect/keep clothes); some was salvaged for the quilters around the area, 95% was burned.

It took two days to safely burn it all.

Now both sets of parents have rentals and a primary residence. All of the siblings have their own places and rental properties. When even both sets of parents on both sides are dead, there will be 5 properties plus the left over crap we dind't burn or give away.

I have already explained to both sets of rents that I do not want the property because managing it is a pain in the ass. So we've made arrangements for the local diocese to take them.

So to quickly summarize, see all that crap you have and the houses you own, they were only valuable to one person.

Wed, 09/22/2010 - 11:26 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

CPL, why did you not have the Salvation Army come pick up the items and drag them away for free?

Wed, 09/22/2010 - 12:00 | Link to Comment CPL
CPL's picture

I did. Salvation army is swamped with crap from a huge glut of junk from people "downsizing". They seriously don't want anything, people assume the Sally Ann is synomous with "dump".

Otherwise In the country, it just gets burned regardless at the pyre at the dump or I setup a controled burn on my property.

I obtained a license and paid some of the off duty guys firefighters to hang around and eat hot dogs/drink beer while it all burned.

If I rented a skid, hauled the skid, brought it to the dump and paid the dump levy it would have cost me $3500. For a license, beer for around 40 people and hot dogs. It cost $750. My place or the dump burns it regardless, just cost less to DIY

Wed, 09/22/2010 - 11:33 | Link to Comment Rogerwilco
Rogerwilco's picture

@CPL

LOL -- sounds like your garage has much in common with mine. They say when Ghandi died, he had a rice bowl, his spectacles, and a pair of sandals.

Wed, 09/22/2010 - 12:08 | Link to Comment CPL
CPL's picture

The mind blowing thing is my sister is "downsizing" as well as her brats are out and gone. Since her kids rent, don't own, she's been trying to foist all her junk on to them. Since they don't want it, she's been noticing all the room in my garage. :(

It's endless.

I hope I only die with my glasses, an empty beer mug, a half finished book and a bar tab. Wife has other plans though.

Wed, 09/22/2010 - 10:40 | Link to Comment VWbug
VWbug's picture

i am renting in one of the most in demand areas of toronto and have owned rental properties here.

last week i was jogging and i saw something i have never seen in over 20 years here: for rent signs. Lots of them. I have never seen more than 1 for rent sign on any given street, and now i am seeing 5 or 6 on every street.

Might be a strange coincidence...but something is going on.

I never had to place an ad to rent my places here, i just tacked up a sign and then waited for the hordes to start calling and banging on my door.

Something is different now.

I also looked at some open houses for fun. One was a horrible DIY reno on a bad house on a bad street. Sloping floors, crooked windows, obvious foundation problems. About 1500 sq ft. Price? $785,000   what a joke, lol.

Don't think prices have dipped yet...but looks like they will...

Wed, 09/22/2010 - 10:45 | Link to Comment gmak
gmak's picture

Why there are so many rentals now is that the condo market is soaking up young people who traditionally rented. Others are moving to owning on the rationale that it makes more sense to own than to rent at current rates. (At current rates? Are they in for a surprise in 5 years at renewal time. I also get tired of hearing that paying rent is throwing money away. So what is interest, then? :-)

It's simply supply and demand. Artificially low mortgage rates, long amortization terms, and the herd mentality are removing the demand side from the rental equation. Supply remains fixed. Look to Atlanta in 2003 - 2007 for a similar example. A traditional "full up" market, by 2003, even the best rental properties were offering major discounts and freebies to get warm bodies in vacant units.

Wed, 09/22/2010 - 11:40 | Link to Comment taraxias
taraxias's picture

Nice try!

The reason there are more "for rent" signs up is because people who lose their job in the "city" can no longer afford to live there due to the high cost of living. So they are abandoning ship and moving back to smaller centers where they originally came from.

And the unemployment wave is just beginning.........

Wed, 09/22/2010 - 11:59 | Link to Comment gmak
gmak's picture

Could you back up your contention with data? Or is this an assumption on your part?

It appears that you are saying that those losing their jobs had moved from other cities and were renting. If people can't afford rent, then they certainly can't afford mortgages and we would probably see an increase in the foreclosure-sale market, no?

Further, according to Bloomberg, Canadian unemployment peaked  in mid-2009 and has been declining since then. I would think that these rental signs would have been popping up in 2009 (since the rise in unemployment began in early 2008).

Wed, 09/22/2010 - 12:08 | Link to Comment taraxias
taraxias's picture

This is all you need to know:

http://vreaa.wordpress.com/2010/08/26/two-charts-all-you-need-to-know-ab...

Or, if you are still in doubt which you seem to be, the whispers are getting louder:

http://www.theglobeandmail.com/report-on-business/economy/economy-slowin...

Wed, 09/22/2010 - 12:14 | Link to Comment gmak
gmak's picture

Nice chart. But what does it have to do with rental availability in Toronto, or with your contention that it is out-of-work intra-country migrants who rent that are leaving to move back home?

 

 

Wed, 09/22/2010 - 12:46 | Link to Comment taraxias
taraxias's picture

My "contention" is based on real life observations, not any "cut & paste" chart. 

And it's getting worse out there by the day.

In my estimation by about this time next year we'll really get to find out that a lot of Canadians been swimming naked.

Wed, 09/22/2010 - 13:04 | Link to Comment gmak
gmak's picture

In essence, you are saying that you know some people who moved to TO from elsewhere, lost their jobs and had to move back.  Somehow, that can be extrapolated to include the area of TO referred to in the original post?

I guess we're done here.

Wed, 09/22/2010 - 14:12 | Link to Comment VWbug
VWbug's picture

gmak i think you are right.

Young people that used to rent 2 bdrm places here for $1200 to $1500 a month plus utilities are now buying 500 and 600 sq ft condos downtown, they are building them at an astonishing pace.

Also makes sense because i don't see an unusual number of for sale signs, just for rent.

I also noticed the HUGE empty lands from the distillery to the DVP (I heard it was the biggest piece of undeveloped land in any major NA city) has finally started to be developed. Foundations for condos being poured right now.

I figure they can put, i dunno, 50,000 units in there? Maybe more?

The TO downtown skyline is dramatically different than it was even 5 years ago.

Be interesting to see where it is in another 5...

 

Wed, 09/22/2010 - 11:30 | Link to Comment walküre
walküre's picture

The "fixer upper" ran out of money.

That place probably has a $750,000 loan on it.

 

Wed, 09/22/2010 - 10:25 | Link to Comment darkpool2
darkpool2's picture
but you also forget the mass immigration coming from south of the border when the US falls into hyperinflationary chaos and social unrest makes huge swaths of the country unsafe to live. Worried about the open border......no worries, a few weeks output from the oilsands will pay for that.
Wed, 09/22/2010 - 10:43 | Link to Comment CPL
CPL's picture

Meh, I live on a border town, somehow I don't see my cousins in northern new york worrying excessively about the issues. Upstate New York and border town Ontario have been dead economically for 20 years.

In Metro areas though I would guess people will just sit and listen to the radio as to when and where the food rations are being handed out then what time the lights go out at night.

The oilsands haven't even paid for themselves yet, the bonds are still being papermilled for that worthless government of Canada iniative. Costs almost as much oil/energy to extract the same amount of oil produced so far. Estimations are running at 8 barrels used to pull out the oil one barrel is produced.

Our Government inaction...participaction!!! (swear to christ they had an ad on that endorsed the nintendo Wii for our fat kids and elderly to get moving)

Wed, 09/22/2010 - 13:43 | Link to Comment romanko
romanko's picture

let me guess, Fort Erie?

Wed, 09/22/2010 - 14:24 | Link to Comment CPL
CPL's picture

Closest US cousin lives in Ogdensburg, closest town of note is Prescott. Not much in either place. Dead main streets and factories that haven't produced anything but insurance fires in the last 20 years. Other than Farming, home support services and a couple of restos. Unless you are running your own business or on welfare, no point in staying in town.

Both sides of the border speak french, english and mohawk btw. Not necessarily in that order, sometimes all at once depending how drunk someone is and who's talking. lol

Wed, 09/22/2010 - 10:25 | Link to Comment darkpool2
darkpool2's picture
but you also forget the mass immigration coming from south of the border when the US falls into hyperinflationary chaos and social unrest makes huge swaths of the country unsafe to live. Worried about the open border......no worries, a few weeks output from the oilsands will pay for that.
Wed, 09/22/2010 - 10:25 | Link to Comment darkpool2
darkpool2's picture
but you also forget the mass immigration coming from south of the border when the US falls into hyperinflationary chaos and social unrest makes huge swaths of the country unsafe to live. Worried about the open border......no worries, a few weeks output from the oilsands will pay for that.
Wed, 09/22/2010 - 10:26 | Link to Comment darkpool2
darkpool2's picture
but you also forget the mass immigration coming from south of the border when the US falls into hyperinflationary chaos and social unrest makes huge swaths of the country unsafe to live. Worried about the open border......no worries, a few weeks output from the oilsands will pay for that.
Wed, 09/22/2010 - 10:26 | Link to Comment darkpool2
darkpool2's picture
but you also forget the mass immigration coming from south of the border when the US falls into hyperinflationary chaos and social unrest makes huge swaths of the country unsafe to live. Worried about the open border......no worries, a few weeks output from the oilsands will pay for that.
Wed, 09/22/2010 - 10:26 | Link to Comment darkpool2
darkpool2's picture
but you also forget the mass immigration coming from south of the border when the US falls into hyperinflationary chaos and social unrest makes huge swaths of the country unsafe to live. Worried about the open border......no worries, a few weeks output from the oilsands will pay for that.
Wed, 09/22/2010 - 11:31 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

darkpool2, the mass immigration is going to be south to the US when this bubble blows big time! What are Canada's other major industries? Commodity based industries. No real estate construction means your wood is useless. Oil prices will soon drop when we enter into another downturn in the depression. We Yankees will see a lot of you canucks crossing the border. Cheers!

Wed, 09/22/2010 - 12:38 | Link to Comment DaveyJones
DaveyJones's picture

As long as we remain way behind the eight ball on peak oil, its price may weave a little but its long term direction is up 

Wed, 09/22/2010 - 10:27 | Link to Comment darkpool2
darkpool2's picture

ooops............maybe the Irish in me !!!

Wed, 09/22/2010 - 10:32 | Link to Comment DosZap
DosZap's picture

You post like my EX wife talked.............LOL

Delete them, it's easy.

Wed, 09/22/2010 - 12:40 | Link to Comment DaveyJones
DaveyJones's picture

ex-wives or the posts?

Wed, 09/22/2010 - 10:38 | Link to Comment BenRabidoux
BenRabidoux's picture

Cheers

Wed, 09/22/2010 - 10:42 | Link to Comment Rogerwilco
Rogerwilco's picture

RE bubble troubles for Canuks? No way, I hear they use silver bricks for the foundations and the door knobs are pure gold. DTI ratios don't matter either because they can dig up lots of tar sand. The only nation luckier is Australia, a place where a mate of simple means can lever up for a $1M flat in Melbourne and sleep well at night knowing his investment is secured by coal in a hole.

Wed, 09/22/2010 - 10:40 | Link to Comment gmak
gmak's picture

If "everyone" is selling their larger home and buying condos, it is only the 'first in' (again the "golden ones" born in the war years who were first to every good thing about being on top of the demographic wave) that will benefit. The remainder will tend to go for the CHIP reverse mortgages. It is only when they move to retirement homes that forced sales could force prices down.

Since both young and old are competing for condominiums right now (before the biggest bulge in the boomers makes their move), we may be  about 3 - 5 years from where the mcmansion swap for an apartment no longer makes sense. Then, we will see the rise of the chip with onerous implied rates behind it (demand > supply forces prices up).

I agree that prices are stretched in Canada, but it is hard to imagine the confluence of events that will force them down. So long as financial institutions are keeping mortgage rates down to compete, demand will continue to be at least adequate to maintain prices around where they are. The supply will be moderated by those who do not believe that there is a proper return to selling and downsizing - and will look to the reverse mortgage, accomplishing their goal of monetizing "savings" in their houses without increasing supply in the resale market.

 

Wed, 09/22/2010 - 10:52 | Link to Comment Rogerwilco
Rogerwilco's picture

"I agree that prices are stretched in Canada, but it is hard to imagine the confluence of events that will force them down."

That is what the "experts" were saying here in the U.S. in early 2007. Ask yourself this, can the Canadian government pull $2T out of its ass at the drop of a hat? No?, then plan on lower RE prices.

Wed, 09/22/2010 - 11:14 | Link to Comment gmak
gmak's picture

Sorry, but I don't understand. Why would the Cdn gov't need to pull $2T out of its ass?

To your other point: in the USA at the time it was obvious that the bottom of the barrel had been reached in terms of buyers (from the types of loans being made). I would argue that, perhaps, the same is not true in Canada yet.

I would agree that if the economy declines to where it impacts gross income, then (at the margin), there will be pressure on prices from the supply side (foreclosure due to non-payment). However, if the demand side is falling at a similar rate......

Wed, 09/22/2010 - 11:22 | Link to Comment BenRabidoux
BenRabidoux's picture

Home ownership rates are higher in Canada than at the height of the US bubble.  Something to consider...

Wed, 09/22/2010 - 12:30 | Link to Comment gmak
gmak's picture

But the growth rate in ownership is less than it was in the USA, no? This means that home ownership was higher to start with.

I don't think that it is the degree of home ownership, but rather the percentage of home owners that bought more house than they can afford, were rates at their long run real average. To me, that is the defining factor that would drive the degree of economic hardship and price declines in any second dip.

To everyone else:

I'm not saying that there is no bubble. I'm not saying that prices won't come down.  I'm saying that one should not use absolutes and anecdotes to project an apocalyptic scenario. Stick with the facts.

I think what Ben showed us about Vancouver is telling. I look on it as a definite micro-USA in terms of where the job growth came from, the increase in housing prices, and the behaviour of the entire industry.

 

Wed, 09/22/2010 - 11:48 | Link to Comment Rogerwilco
Rogerwilco's picture

@gmak

The U.S. government used over $20T in various bailouts to prevent a total economic meltdown and major bank failures when RE prices started to decline. The Canadian government will need to do the same, hence the $2T estimate.

Wed, 09/22/2010 - 12:04 | Link to Comment gmak
gmak's picture

I  think that the bailout was not due to price declines. The price declines were a result of the most recent purchasers (say 2004 - 2006) being unable to pay their mortgages and every institution that had MBS on their books was technically insolvent.

Prices fell dramatically on Canadian real estate throught the '90s, and yet there was no economic meltdown and bailout.

Wed, 09/22/2010 - 11:43 | Link to Comment walküre
walküre's picture

The Canadian government can't and won't subsidize housing.

Instead, Canada that is burdened by huge debts will need to find new buyers for their existing and coming debt to pay their liabilities. Canada's economy is considered a risky trade, therefor the interest rates on the debt need to be attractive.

BOC will keep rising rates at 25 basis points to get to a 4% prime rate.

Wed, 09/22/2010 - 12:34 | Link to Comment gmak
gmak's picture

1. Lowest debt / GDP amongst G7 (I believe)

2. Resource backed currency, including the 2nd largest oil reserves in the world.

3. Financial system (knock on wood) that is solvent and well-capitalized.

 

Define "risky trade" vis a vis the rest of the world.

 

Why a 4% prime rate? Is this some magic number?

First of all, the BOC does not control the prime rate. It is set by the banks and based on supply and demand in loans with businesses primarily. If no one is borrowing due to weaker economic conditions then it seems unlikely that the rate will rise - unless the banks' cost of funds is affected indirectly by BOC actions.

Wed, 09/22/2010 - 11:59 | Link to Comment SRV - ES339
SRV - ES339's picture

To your other point: in the USA at the time it was obvious that the bottom of the barrel had been reached in terms of buyers (from the types of loans being made). I would argue that, perhaps, the same is not true in Canada yet.

Sounds like wishful thinking to me... and if you own it could be a very costly position to take. To me, the big story is how the bubble was so quietly inflated, while the media was strangely silent (the RE lobby is very strong).

Lets see, 40 year variable mortgages at 1.5%; 5% (or zero with some kickback schemes) down; and insane bidding wars driving up prices while RE in the rest of the world was tanking. If you were employed and had a pulse you qualify... so much for the "quality" of the Canadian buyer.

So what happens when interest rates rise (they will), job losses mount (they will), and thousands no longer qualify when they try to lock in long term at higher rates and more normalized qualification criteria? "It's different here" until it isn't.

The Canadian government and the RE / Banking lobby took reckless action to counter the sudden drop RE value in the spring of 2008. It set off a mini boom that cannot be sustained and is unwinding as we speak. Personally, I've rented a high end condo for years (and I'm confident rental cost will continue to decline)... and invest the savings in precious metal stock.

Wed, 09/22/2010 - 12:07 | Link to Comment gmak
gmak's picture

I think that it would be a mistake to draw conclusions about the entire market from a small group at the margin. 40 year mortgages were only permitted for a short while, remember?

 

If job losses are going up, why would interest rates be rising?

Wed, 09/22/2010 - 12:15 | Link to Comment SRV - ES339
SRV - ES339's picture

Interest rates are basically zero... do you expect them to drop? If you own RE, I'm afraid you are in for a very unpleasant surprise... but I may be interested in taking it off your hands... in a couple of years!

Wed, 09/22/2010 - 12:18 | Link to Comment gmak
gmak's picture

If job losses are rising, I would expect interest rates to remain where they are.

Wed, 09/22/2010 - 11:05 | Link to Comment casey13
casey13's picture

Another possibility is that people will choose the bigger houses but go back to the extended family model of the previous farmer generations. In which case there may be an equal percentage decline in the price of all home sizes.

Wed, 09/22/2010 - 11:17 | Link to Comment gmak
gmak's picture

That's a valid point. The demand side would decrease with fewer younger people owning. IF they were home owners previously, it would tend to increase supply.

Wed, 09/22/2010 - 11:19 | Link to Comment walküre
walküre's picture

Good analysis, Ben.

I'm intimately familiar with Canadian RE and have family there. They SOLD this year and are renting. Families, young couples AND BOOMERS. They understood that in order to make money on RE, you have to take profit just like the stock market.

Their rents are slightly higher than their mortgages payments were but they're not facing the coming mortgage debacle.

You haven't included in your data the fact that lending parameters have changed quite dramatically. Many of the 500k+ suburb homes were only affordable with rental income from basement tenants or worse, the "carriage" house option above the garage. Sometimes you find 3 parties living on 3500 sq ft. "lots" with 2700 sq ft of "housing". They're called chicken coops.

Mortgages are resetting now and in the next 5 years. The big banks have lowered the fixed rates even when prime went up because of competition.

They even advertise "when banks compete.. you win"

BUT.. what they do not advertise is that they are absolutely not willing to take on any risk going forward and need to be 150% sure about the ability of their new borrower to pay back.

The existing borrowers? The banks could care less. They've got them by the balls and won't let go, or worst case get their cookie from CMHC.

FYI... the bubble burst in May 2010 and is now slowly but surely deflating. Expect min. price correction of 20% in some cases up to 50%.

Canada is NOT different.

Wed, 09/22/2010 - 11:27 | Link to Comment BenRabidoux
BenRabidoux's picture

Completely agree on all counts.  The new CMHC rule changes will have a major impact in markets like Vancouver, but this didn't quite fit with the purpose of this primer.

Cheers

 

Vancouver Island realtor Shayne Fedosenko, as quoted on greaterfool.ca 27 Aug 2010“[There are] huge concerns and hardships in the new mortgage qualifications regarding suite income and people having to qualify. This is the way that it used to be: you could take the suite income, say it was $1200/month and they would add it to your mortgage qualifications as a $200,000-$250,000 increase in your qualification amount, now what they do is take the amount of the rent: $1200 /month, multiply it by the 12 months in a year and add it to your income, making only an extra $ 40,000+ to your qualification amount. This is why the market has completely softened. The market is completely dead.  Brand new houses in Sooke, down to $299,900 from $399,900, no calls. The market has dried up all due to financing. I talked to 7-10 mortgage brokers and many agents while I was at the Victoria Real Estate Board golf tournament and everyone is scared. Hundreds of foreclosures coming, about 75% of the home owners could not qualify to buy their own houses (especially with suite). So what happens when their term of mortgage is up and the banks need them to re qualify?  They are doomed. Last month there were 300 home sales on the Lower Vancouver Island with 4700+ listings. One of the worst ratios ever.  End of June is supposed to be the closing day of the year.  Every Realtor has a few nightmare bank stories right now. This will put us into a huge recession.”

 

Wed, 09/22/2010 - 11:39 | Link to Comment walküre
walküre's picture

It's the US housing market ca. 2007 redux in Canada.

Banks in the US gave out too much, sucked everyone and their dog into home "ownership" and then they changed the lending rules. From there it went downhill quite quickly as we all know.

The banks in Canada are sworn not to sell any foreclosure for less than market value.. at this time. Their losses are ensured by CMHC. 

Will it end badly? Does the sun rise in the East and set in the West.

You betcha.

Commodity economy or not. Eventually there are no Chinese cash buyers left. The Chinese are falling in love with Europe by the way. RE is much cheaper, more stable and the weather is better for the most part.

Canada's recreational properties are going bust. The outer periphery of the big metros is already flooded with listings and hefty price declines.

EVERYONE is trying to sell because jobs aren't secure for 40 years and $1,500 mortgage payments to buy that $500,000 home three times over in 40 years. LOL.

What a joke! Not even including any maintenance. Can you spell G.H.E.T.T.O?

Wed, 09/22/2010 - 12:17 | Link to Comment gmak
gmak's picture

Now, that is a valid catalyst for falling demand. Meanwhile, the building industry keeps building to avoid having to pay back their revolvers at the bank, so supply is, at least, remaining steady.

Wed, 09/22/2010 - 12:03 | Link to Comment Ieetseelmeet
Ieetseelmeet's picture

there is an option being overlooked.

 

"Aging In Place" is the new catchphrase for boomers. Pay a small amount for renovations such as a walk-in tube, and in-house elevator and larger switches for those shaky hands.

 

The boomers will want to stay where they are as this is the community, church and lawn bowling club, where they want to stay.

 

The pressure will be on City Hall to change the zoning regulations. Much of this has been done in Edmonton already.

 

For example, the wife has arthritis in her legs, the kids out of the house, and there is no longer used for going upstairs. You go to City Hall and allow the upstairs to be converted into an apartment which you then rent out to wild college students.

 

The House has been paid for and becomes rental property. Everything is covered you stay in your community, you make money, and you don't have to move.

 

If you Google "aging in place" you will find that it is an industry. In fact, the American builders Association has a certification for aging in place specialists.

Wed, 09/22/2010 - 12:13 | Link to Comment Thunder Dome
Thunder Dome's picture

You canadians are already hosed, eh?  Best thing to do is break the market and puke your home now while you still can. 

Yields in Vancouver in many instances are less than 3%. 

 

 

Wed, 09/22/2010 - 12:26 | Link to Comment ertyqway
ertyqway's picture

OP, I don't know about Canada, but if you're talking about the US Baby Boomers, you've got your dates wrong. Following Strauss & Howe, members of the Baby Boom generation were born 1943 to 1962. Calling someone who was born in 1965 a Baby Boomer to their face is as likely as not to get you a punch in the mouth. ;-) Them's fightin' words.

 

But, the point that the generation now entering midlife (GenX) is half the size of the generation now entering elderhood (Boomers) is very important and mostly glossed by the inveterate market bulls. You can't cut demand by half in a core demographic bracket (midlife earners) without it having some profoundly bearish consequences for asset prices. 

Wed, 09/22/2010 - 13:33 | Link to Comment Jessica6
Jessica6's picture

I've argued that too - about 'when' Gen-X was born. There's people turning 30 now claiming to bepart of that demographic but when the phrase was first popularized by Douglas Coupland in 1990/91 it was generally understood to apply primarily to people in already in their twenties. I was around twenty at the time - then considered to be the tail end.

In Canada though, there was most definitely a 'baby-bust' in the late-sixties/early 70s though the baby boomers' kids are a pretty sizeable geneneration here and have been buying up real estate at much greater numbers at a much younger age than Gen-Xers. I think this 'boomer echo' generation has done more than their share to fuel the bubble and with no memory of how rotten the economy can get, or double-digit interest rates, this is not going to end well.

Wed, 09/22/2010 - 17:36 | Link to Comment Arkadaba
Arkadaba's picture

I find the whole generations thing interesting as well:

http://arkadaba.blogspot.com/2010/07/generations.html

I never thought that Canada's demographics might be different - definitely something to look at. But one thing to keep in mind - Douglas Copeland was Canadian ;)

 

Wed, 09/22/2010 - 19:10 | Link to Comment ertyqway
ertyqway's picture

Plus or minus a year, the US generations shake out like this:

 

Boomers: born 1943-1962

GenX: born 1962-1982

Millennial: born 1982-2004

 

We've still got a few years before all the Boomers are out of mid-life and the GenXers all fully in mid-life. The core of the millennial generation is still in school, though the early-cohort of Millennials (often called GenY, lumping in some late-cohort GenXers along with them) are now out of school.

We don't hit the "generational sweet spot," where Boomers are all in elderhood, GenXers are all in mid-life, and Millennials are all in young adulthood, for right around another decade (2020 or so). If Strauss & Howe are right, that'll be when the Crisis era comes to its most crucial resolution point.

 

In the UK, they're on a longer historical cycle and their generations line up differently to the US. However, with this Crisis turning, both US (80-year) and UK (100-year) cycles are synced up again for the first time since we parted ways back in the 1700s. I don't know enough about Canada to say where their cycles are falling, but I'd guess they're more in the US pattern than the UK pattern since WW2.

Wed, 09/22/2010 - 12:57 | Link to Comment Running on Empty
Running on Empty's picture

TREB for Canadians who are from Toronto reports the figures bi-mounthly. Sept 16th Pdf file found here; http://www.torontorealestateboard.com/consumer_info/market_news/news2010...

The statistics that are important to me is the 22% decline in number of units sold with a drop in the average price of 6% over the first six month average price.

Wed, 09/22/2010 - 13:15 | Link to Comment UrbanAnalyst
UrbanAnalyst's picture

Could the author please comment on the mitigating impact of defined contribution pensions on the following statement:

"Since the median line represents the 50th percentile, it means that there are over 1 million households facing retirement in the next few years and evidently planning on having less than 200K sustain two people for the next 20 years. Given the extremely low interest rate environment, that won't throw off much, perhaps 10k per year if you're willing to take a bit of risk"

This appears to be, among others, an instance of illustrating a substantial gap in the logic of article's underlying premise. While StatsCan does include EPP assets in their Net Worth calculations (thereby included in the very crude $200k figure arrived at by the author), these are actuarial calculations done on a conservative Termination Value basis (excludes benefits from remaining high-income years to retirement accrued).

Furthermore, despite the conservative inclusion methodology it appears as though these assets represent a material component of net worth at a national level on a median basis (Please note figures are from 2005 - http://www40.statcan.gc.ca/l01/cst01/FAMIL110-eng.htm), and will intuitively represent a substantial source of income for most retirees, undercutting the need to draw down home equity. Treating these assets as fungible portfolio assets that can be invested in markets at all is an error in logic, as these balance sheet assets payout according to complex benefits schedules rather than market forces.

I look forward to your commentary and supporting materials that indicate to what extent income provided by DC retirement funds will be insufficient to fund future needs.

Thanks.

Mon, 10/04/2010 - 21:36 | Link to Comment Jeffrey Thomas ...
Jeffrey Thomas Marlin's picture

I find this author insightful, inspiring, and well researched. This is a man who dares to challenge the status quo with his hard hitting analysis. If only we could find more shop class teachers who steal basic ideas off other poorly informed blogs the Internet would be a better place.

 

Wed, 09/22/2010 - 13:23 | Link to Comment Beard of Zeus
Beard of Zeus's picture

Demographics?

There's nothing about the Canadian and US housing crises that importing a few billion Chinese and Indians can't solve.

You know, because over-population has worked out soooo well for the third world.

 

Wed, 09/22/2010 - 14:04 | Link to Comment romanko
romanko's picture

+1

Wed, 09/22/2010 - 15:09 | Link to Comment Reductio ad Absurdum
Reductio ad Absurdum's picture

+7 billion and counting

Wed, 09/22/2010 - 13:59 | Link to Comment romanko
romanko's picture

Having just sold my dowtown small Toronto condo *this week*, I'll share my first-hand experience. I listed at appraised value, about $500 a square foot. AA location, 5 year old building. Literally dozens of new 30++ story developments going up within a 2 sq.km area. Sold after 9 days with 20 showings, only 1 offer 97% of list, a chinese investor intending to rent it out. My r/e agent who is in the top 1% in downtown condos says market peaked a few months ago, expects 30-50,000 NEW units to come on the market next year in the downtown core. Toronto is experiencing a chinese r/e bubble.

Wed, 09/22/2010 - 14:27 | Link to Comment VWbug
VWbug's picture

i'm quite sure it must be all chinese that are buying those condos lining the 401, especially in scarberia. I can't imagine who else would want to live there.

Nothing against chinese or immigration, i like both, i just don't understand why they like to live in concrete jungles, yecchhh.

Wed, 09/22/2010 - 17:22 | Link to Comment Arkadaba
Arkadaba's picture

Ok I have no housing stats to back up my assertion that the Canadian bubble is different than the US housing bubble (yet) but as I see it there are two main differences:

1. http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_002.cfm

2. http://www.angrybearblog.com/2010/07/relative-employment-patterns-are.html

I'm really surprised at the Canadians on this site bashing their own country. I lived in the States for a decade and consider myself lucky that I am back in Canada during this unravelling.

That being said, I do think housing prices will decline and yes Toronto will have a glut of condos on the market - which is great for me because I rent. But the impact of the decline of those prices may not have the same deleterious effects as was seen in the U.S.

I would love to hear what David Rosenberg thinks about the Canadian housing situation (and who (surprise, surprise) also moved back to Canada in early 2009 I think).

Sat, 09/25/2010 - 23:06 | Link to Comment CL1
CL1's picture

In the evening ceremony chanel bags,chanel handbags sale as the first high-level chanel designer handbags custom Chinese star chanel bags prices uk XuQing alone in Paris – 2010 Shanghai chanel bags online uk,chanel bags uk online shopping early series dress coach outlet as ceremony. coach outlet store is Karl Lagrange coach outlet online the anfield fantasy coach outlet 2010 is 30-40 in Shanghai outlet 2010 coach handbags,coach handbags oulet China’s amorous feelings chanel 2.55 handbags,chanel handbags black different dress.

Do NOT follow this link or you will be banned from the site!