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Guest Post: Is Canada's Housing Bubble 'Different'?

Tyler Durden's picture


Via Pater Tenebrarum of Acting-Man blog,

Nothing to Fear, They Say

According to this article, CIBC thinks the huge amount of household debt in Canada and the beginning cracks in the housing bubble are nothing to worry about. The main reason for this benign assessment seems to be that there have been a few other credit and real estate bubbles in the world that have grown even bigger than the US one before it burst. What a relief.

"The news out of Canada's real estate market isn't good, but the country will avoid a U.S.-style real estate meltdown, CIBC said Tuesday.


Economist Benjamin Tal said in a report that even recently released data about high levels of Canadian consumer debt isn't proof that there will be a sudden, big drop in home prices.


"To be sure, house prices in Canada will probably fall in the coming year or two, but any comparison to the American market of 2006 reflects deep misunderstanding of the credit landscapes of the pre-crash environment in the U.S. and today's Canadian market," he wrote.


Tal noted that Canada's debt-to-income ratio has just broken the U.S. record set in 2006, but said other countries have had even higher levels without a crash.




Tal said home prices in large cities like Vancouver and Toronto are overshooting their fundamentals and will likely slip as sales fall.


"But the Canada of today is very different than a pre-recession U.S., namely as far as borrower profiles are concerned," he wrote.


"Therefore, when it comes to jitters regarding a U.S.-type meltdown here at home, the only thing we have to fear is fear itself."

(emphasis added)

To sum this up: there have been bigger bubbles, so ours can grow bigger too. Moreover, it is different this time.

It is actually fairly typical to find this type of thinking near the top of a bubble. The people living inside it cannot believe that it could possibly crash. Of course Canada's economic situation is in many respects 'different' from the US economic situation, but that is the case with every slice of economic history. Not one of them can possibly be exactly the same. Nevertheless, one can come to some general conclusions about credit expansion-induced bubbles. Economic laws will be operative whether or not the precise historical circumstances are similar. When Japan reached the height of its bubble in the late 1980's, it was also widely argued that the overvaluation of stocks and real estate was no reason to worry because Japan was allegedly 'different'.

Regarding borrower profiles, Mr. Tal is mistaken if he thinks that the current  profiles of borrowers are actually relevant. These profiles always look good at the height of a boom. They deteriorate only after the boom ends. To wit, here is a chart of the history of US household credit scores:


During the US housing bubble, even while capital was malinvested and consumed and the actual creditworthiness of borrowers constantly declined, 'credit scores' got better and better. The error was only revealed after the boom began to fall apart – click for better resolution.


Canadian household debt as a percentage of income by now vastly exceeds the peak that was seen at the height of the US real estate bubble. So in this sense, Canada is also 'different' – only not in a particularly good way. Note that the chart below actually understates the true level of the Canadian debt-to-income ratio by a full 11 percentage points. It does not yet reflect the most recent revision to the numbers (i.e., the ratio is really at 163%).


Two credit bubbles compared side by side: US and Canadian household debt as a percentage of disposable income. The green line should actually be at 163% – click for better resolution.


The 'Soft Landing' Mantra

Canada's housing market has begun to cool markedly. As is usually the case, the first sign of trouble is a sharp drop-off in transaction volumes. Existing home sales in Canada were down by 15.1% in September year-on-year. This seems to be the result measures recently introduced by the government that are aimed at slowing down or reversing house price increases. Prices will no doubt eventually follow transaction volumes.

The WSJ reports on the cooling of the previously red-hot Vancouver market. What is so funny about this report is that government officials are patting themselves on the back for having produced this cooling without realizing that the measures are coming way too late. Yes, they may well lead to a bursting of the bubble, but the hopes for a 'soft landing' are very likely misguided.

“Canada's finance ministry tightened home-lending requirements, the latest in a series of moves the government has taken to tighten credit amid the real-estate boom. Recently, a number of economists and policy makers, including the country's central-bank chief, have warned about possible overheating in several Canadian markets, notably in the Vancouver and Toronto condo markets.


This summer, Ottawa cut the maximum mortgage amortization period from 30 years to 25 and reduced the amount of home equity Canadians can borrow against, from 85% to 80%. This month, Finance Minister Jim Flaherty said that the new mortgage-financing rules are beginning to have "some effect," as activity in the housing market has cooled in both Vancouver and Toronto.


"We think that's a good thing," Mr. Flaherty told reporters. "I would much rather have a soft landing than a hard landing."

(emphasis added)

This is a good example for what is known as a 'non sequitur'. The credit tightening measures are beginning to bite, but it does not at all follow from this that a 'soft landing' will result.

The 'soft landing' mantra is invoked at every opportunity, as if repeating it often enough will make it true. Consider the conclusion of this article on Canada's growing household and mortgage debt burden in the Vancouver Sun:

Ottawa has moved four times in as many years to tighten mortgage rules to keep marginal buyers out of the market, most recently in August.


The latest change, which added to monthly payments on insured, first-time purchases, has been partially credited with a recent slowing in home resales, particularly in previously hot markets of Vancouver and Toronto, and with a moderation in prices.


New data released Monday by the Canadian Real Estate Association showed sales of existing homes fell 15.1 per cent in September from a year ago, although last month’s numbers were slightly higher than in August.


Bank of Montreal economist Doug Porter said he believes the trend points to a soft landing for housing, not a crash.”

(emphasis added)

One is tempted to ask: what exactly is it about the 'trend' that 'points to a soft landing'? It sounds more like wishful thinking than a conclusion justified by the evidence.


House prices compared to rents in Vancouver. To say that prices are out of whack with  rental returns would be sugar-coating it. This is, in a word, insane. Sales in Vancouver have meanwhile plunged by 32.5% from year ago levels – click for better resolution.


The divergence between prices and rents is far less extreme in Toronto, but it is still obvious that prices are now way above trend – click for better resolution.


Are the Banks Safe?

It is generally held that Canada's banking system is in ruddy health and not in danger from the extended credit and real estate bubble, mainly because a government-owned organization, Canadian Mortgage Housing Corp. (CMHC)  insures most of the mortgages with down payments of 20% or less. The company also helps fund mortgages by issuing debt and buying mortgage backed securities with the proceeds. 

This kind of thinking has things exactly the wrong way around. It is precisely because such a state-owned guarantor of mortgages exists that the vaunted lending standards of Canada's banks have increasingly gone out of the window as the bubble has grown. Today some $500 billion, or 50% of Canada's outstanding mortgages are considered 'high risk' according to the Financial Post. Moreover, HELOCs ('home equity lines of credit', i.e., the use of homes as ATMs) have grown like wildfire, at loan-to-value rates of up to 80%.

Through CMHC and government guarantees for privately held mortgage insurers Genworth Capital and Canada Guarantee, Canadian tax payers are on the hook for more than C$1 trillion in mortgages. In other words, there is no practical difference to the role played by the once nominally private GSE's and credit insurers in the US and the Canadian version of them: in both instances these institutions have enabled vast growth in ever more risky lending, while ultimately tax payers are picking up the tab when things go wrong – as they invariably must. In this sense the banking system is 'safe' – the government has already committed tax payer resources beforehand to bail out the mortgage credit market in the event of trouble. However, mortgage debt is only a part of the household debtberg. It stands to reason that the end of the boom will create a lot of economic pain and the banks won't be able to evade it. Moody's has recently put the biggest Canadian banks on 'downgrade watch' for precisely this reason. Of course Canada's economic situation depends greatly on commodity prices, especially the price of crude oil. Similar to Australia, Canada is thus to some extent a 'warrant'  on China.

Lastly, the official house price data – as scary as they look, especially in Vancouver's case – don't really capture the sheer insanity of the bubble. To get a sense of what the bubble has wrought, one should take a look at the following web pages. They compare actual 'crack shacks' with Vancouver homes that have been sold at incredibly high prices, but can otherwise hardly be differentiated from the former.

Crack Shack or Mansion?

Crack Shack or Mansion, Part two


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Mon, 11/05/2012 - 14:20 | 2949190 q99x2
q99x2's picture

You don't mean to say that some entity is still buying mortgage backed securities? You have got to be kidding me. Arrest them.

Mon, 11/05/2012 - 14:25 | 2949211 redpill
redpill's picture

oops, did I stumble on

Mon, 11/05/2012 - 14:34 | 2949237 flacon
flacon's picture

I went to ScotiaBank today to take out $1,500CDN. The teller refused to give me my cash because she said it exceeded my $400 limit. She did say that on ONE CONDITION she would give me my money - if I showed her two pieces of GOVERNMENT ISSUED IDENTIFICATION. 


Last month Royal Bank of Canada REFUSED my ScotiaBank cheque to pay my rent. It was "cash only" (or equivalent (certified cheque)). 


I keep a minimum possible balance at my bank - just enough to pay the bills. All my other assets are kind of cold, hard, and shiny and usually sitting in a dark, dank place. 


LOL! Canada is just a fucked as everyone else. 

Mon, 11/05/2012 - 14:34 | 2949254 redpill
redpill's picture

Any time I get the slightest attitude from one of the banks I use, I just shrug and calmly say, "ok then I'd like to close my account."   Suddenly they become remarkably helpful.

Mon, 11/05/2012 - 14:36 | 2949261 flacon
flacon's picture

That's a good idea. I'm going to open up some local credit union accounts so that I have a backup first. 

Mon, 11/05/2012 - 14:41 | 2949285 Herkimer Jerkimer
Herkimer Jerkimer's picture

I walk around with a copy of my mom's bank statement that has my name on it, since we co-mingled to beat the govy, in the event of her untimely death, and simply slide it across the table to the offensive party.


They look at me, and I motion for them to open the envelope, which they do.


I watch their eyes walk down the page, getting bigger and at the appropriate time, when there just about done and as soon as they look up, I'm there, leaning forward, looking them in the eye, saying,



"Now. Do I have your complete attention?"


Never met a bank manager that wanted me to stand in line, again.




Mon, 11/05/2012 - 15:08 | 2949358 James_Cole
James_Cole's picture

Worth noting - CIBC is one of the worst banks out there, so of course whatever they say officially is wrong. 

Mon, 11/05/2012 - 22:51 | 2950725 markmotive
markmotive's picture

They don't want you to know this but the Canadian banks were bailed out in 2008/2009 along with the rest of them...

Why so smug, Canada?

Mon, 11/05/2012 - 17:34 | 2949864 smiler03
smiler03's picture

So you're a Mommy's Boy.

Mon, 11/05/2012 - 14:40 | 2949281 zuuma
zuuma's picture

You can hide your assets in your chesterfield!

Mon, 11/05/2012 - 15:15 | 2949371 asteroids
asteroids's picture

A good friend is a grocer. He's seeing the cracks at the retail level. He's at the Ontario Food Terminal (Ontario's major food clearing house) every day. He hears rumors, and they aren't good. Canadian job numbers are just as made up as the BLS numbers. There are more cranes in Toronto building condos than any other place in North America. This will NOT end well.

Mon, 11/05/2012 - 14:43 | 2949289 ACP
ACP's picture

Well, at least Vancouver is a nice place to visit. So laid back. It'll be even better when prices drop, because some Chinese criminal from Shanghai who bought a house at the peak will have to sell it on the cheap to pay the hundreds of thousands of $CANs to keep from getting deported and executed.

Interesting the article didn't really take into account the fact that mortgage interest is not tax deductible, and how that will affect investor, er owner mentality. Or how much recourse banks have towards homeowners. I don't think that'll make much different on how the bubble bursts, but might during the aftermath?

Mon, 11/05/2012 - 15:09 | 2949363 James_Cole
James_Cole's picture

"Interesting the article didn't really take into account the fact that mortgage interest is not tax deductible, and how that will affect investor, er owner mentality."

It is tax deductible, just need a good accountant. 

Mon, 11/05/2012 - 16:15 | 2949577 Absalon
Absalon's picture

The interest is tax deductible only under limited circumstances - namely, that the money borrowed against the property is being used to earn income.

Tue, 11/06/2012 - 00:39 | 2950948 jackinrichmond
jackinrichmond's picture

if you want to make your mortgage interest tax deductible, check out the "smith manoeuvre" 

(it can be done)

Mon, 11/05/2012 - 14:53 | 2949317 THECOMINGDEPRESSION

What fool uses a bank anymore? Credit union only. I asked for 10 grand, no questions, handed it over and

Mon, 11/05/2012 - 15:46 | 2949471 JuliaS
JuliaS's picture

Vancouver credit unions are heavily invested in local CRE. Wouldn't touch them with a 10-foot pole.

Mon, 11/05/2012 - 18:29 | 2950017 BurningFuld
BurningFuld's picture

This could be true for Vancouver. Interior of BC...everyone has actual real jobs and can actually really afford their mortgages. I have no mortgage neither do any of my  friends...I'm wondering about this debt level thing???

Mon, 11/05/2012 - 19:00 | 2950113 JuliaS
JuliaS's picture

Even people who can afford their bloated mortgages will be walking away once they discover they owe multiples of what the houses are actually worth.

I'm glad you and your friends don't have mortgages. Keep in mind what the "average" means. If an average debt shared between 2 people is 30K and one of them is debt free, how much debt does the other person have? It's 60K. It's called math.

For every person relatively well of there's one out there who's really messed up.

Your friends aren't to their neck in debt? Well, unless you have 34.5 million friends, your individual observation doesn't make it a national trend.

Mon, 11/05/2012 - 19:44 | 2950254 BurningFuld
BurningFuld's picture

How do they walk away if they have a job and can afford the payments and the debt will not be forgiven. Perhaps they are trapped in their current home but that's as far as it goes. Even if the value of their home goes to zero they still have to make the payments which they CAN. This is all supposing there is not some global financial collapse, and then all bets are off.

Mon, 11/05/2012 - 20:39 | 2950406 JuliaS
JuliaS's picture

"This is all supposing there is not some global financial collapse?"

What do you call the last 5 years?

Mon, 11/05/2012 - 14:56 | 2949326 aint no fortuna...
aint no fortunate son's picture

Nonsense. "It" is different this time. It always is.

Mon, 11/05/2012 - 21:06 | 2950468 Matt
Matt's picture

We'll grow our way out.

Mon, 11/05/2012 - 17:21 | 2949822 AvenoSativo
AvenoSativo's picture

Don't know about your circumstances, my experiences are totally different from yours.

Just the other day, I withdrew $800 cash from an RBC (Royal Bank of Canada) ATM machine at a gas station without any problem.

Mon, 11/05/2012 - 19:12 | 2950156 hardcleareye
hardcleareye's picture

He just needs to meet with his Scotia Bank rep and set the withdrawal limits on his account to meet his needs, no big deal and it is set up like that so that it min the liability to the bank and you, in case if someone gets ahold of your bank account and pin numbers.

Mon, 11/05/2012 - 20:56 | 2950449 billsykes
billsykes's picture

I argue more so than the US, for a number of reasons.

Canada- and Canadians in particular are very risk adverse, so they don't venture far from home in business, and when you look at the business there it is comprised of money shuffling, O&G & real estate. That's it. The big problem is that they are too far concentrated in energy, and don't, as all resource based economies, diversify.

So when the companies start selling out to foreigners- which they already have- 70% of the oil sands are foreign owned they are like the boiled frog.Industry CEOs scoff at that number, its all right there in the news and ownership of stock.  Bank of china opens up in a city of 1m in Canada.

They have 1 productive province that is is being sold and mismanaged away, another with huge debt and high taxes (Ont), and another that wants to break off (Que), and gangsters running and floating another (BC), the rest doesn't make anything and is totally uncompetitive without subsidies. 

Combined with the fact that it hasn't succeeded from the UK, they don't even own what they think they do(governor general from a nod from the QUEEN can dissolve the government and prime minister) - even worse is their property owner rights (the worst in the western world)

When put into this prospective-  Canada has way more issues than the US, plus they are highly dependent on the US for income as their largest trading partner.

With sky high personal debt, unsustainable health care system, low job prospects, huge unproductive land mass, pussy corporations afraid to expand internationally, and continuing to engage in war(s) (Iran next) they cannot win- this goose is cooked.

Canada, the geek half brother to the receding, dysfunctional, violent, slightly retarded but loveable buffoon brother, America.

Mon, 11/05/2012 - 21:04 | 2950463 robertocarlos
robertocarlos's picture

You forgot about Sask. They have a surplus and they are doing well.

Mon, 11/05/2012 - 21:30 | 2950517 Matt
Matt's picture

The Governor General is a symbol, like the Queen. The government can, unlike the United States, deploy the military domestically. 

Our banks are expanding internationally. I don't know what corporations you are thinking of specifically that are adverse to expansion. 

Tech is pretty hosed, with Nortel and now RIMM going down the tubes. 

As for BC, the high Canadian dollar hurts Hollywood North and tourism. Lots of wood, but no one really needs lumber, and all these shitty trade agreements result in more and more of it being shipped as raw logs.

I would be surprised if we get into any new conflicts with Syria / Iran / whatever, other than maybe sending a few token CF-18s. I don't think the will or capabilites are there.

Tue, 11/06/2012 - 02:19 | 2951051 billsykes
billsykes's picture


and read the bank act- sorry no pictures, get your dad to read it to you if you cannot and see who actually owns the bank of canada shares.

also kicking out embassies is a prelude to an act of war;

lumber business blows, its not profitable.

Tue, 11/06/2012 - 12:26 | 2951980 Matt
Matt's picture

I understand that on paper, the Governor General IS the Executive; however, in reality, the Governor General is a symbol that goes with the Prime Minister's decisions.

The Deputy Minister of Finance holds the shares in the Bank of Canada on behalf of Canada.

Lumber can certainly be profitable, it simply is not right now, due to current market conditions plus the trade agreements we are stuck in. Back in 1969, Port Alberni (a logging / mill town) had the highest per capita income in the country. Now I think it has the lowest.

Tue, 11/06/2012 - 14:19 | 2952462 billsykes
billsykes's picture

No you are not getting it. the Governor general specifically has the right to dissolve parliament- they did it in Aust. just because they don't exercise the option does not mean they cannot.

The queen is not symbolic, its because legally the UK still owns Canada.  If you were a squatter on my land, just because I don't kick you off- doesn't mean I forfeited my legal right to kick you off.

You have to educate yourself- you have been a member here over 2 yrs- haven't you learned something?

Or are you so rigidly tied in to thinking the government is out for your best interest?  Are you shaking your head because the lie is so big that you cannot fathom its truth? Are you aware of history?

Matt, get some knowledge in legal. If you change the ownership of something the new owner holds all the shares, if you are a custodian, you hold them on behalf of someone else. This is the bank of canada shares. 

Do not reply, its obvious you don't know anything, you can fix that, read the articles at least.



Mon, 11/05/2012 - 15:37 | 2949437 Handyman
Handyman's picture

Flaherty had no problem putting mortgages up to 40 years in 2006. The only thing I'll say for him now is at least he looks scared shitless. Carney looks the same way. Of course when the SHTF they blame it on everyone else.

Too bad Canada sold all it's gold.

Mon, 11/05/2012 - 14:24 | 2949207 orangegeek
orangegeek's picture

Canada's workforce is largely government employees - well over 50%.  Under Obama, the US count grew to over 30%.


Canada's tax base is primarily high priced commodities, particularly oil and gold.


And when these commodities fall hard, Canada will have caught up to the US real estate crash.

Mon, 11/05/2012 - 14:32 | 2949245 trembo slice
trembo slice's picture

Is this hard fall in commodities imminent?  Why would the dollar go up in the current environment?

Mon, 11/05/2012 - 14:39 | 2949269 Orly
Orly's picture

People are realising that Dr. Bernanke is about out of bullets and the magical unemployment numbers from last week told everyone that the punch-bowl is going to be taken away by Unca Sugar.

Now, they know they'll have to deal with their problems on their own, so they seek a safe-haven.  And yes, commodities, including precious metals, are due for a hard landing as well because all the money that was being pumped into them via the retail crowd following JPM, Wells, etc., is also going to dry up pretty fast.

Sell all risk-on stuff now, including your gold and silver.  There is no such thing as hyperinflation and if there were, there is no medium of exchange for gold and silver bricks or coins.  You're going to be holding a bunch of very pretty, shiny rocks.



Mon, 11/05/2012 - 14:50 | 2949308 flacon
flacon's picture

The antidote for hyperdeflation is hyperinflation. It's happened hundreds of times before why would this time be different?



Mon, 11/05/2012 - 14:55 | 2949321 Orly
Orly's picture

Because Dr. Bernanke said he could stop inflation in fifteen minutes.  Also, we're not talking about a third-world currency here, it is the US dollar.  Everyone one the planet is going to want to get paid in US dollars.

It simply won't happen here.


Mon, 11/05/2012 - 15:21 | 2949365 flacon
flacon's picture

Given enough global economic/monetary stress something is going to go "SNAP!" and change the US Dollar paradigm overnight. 


There hasn't been a single fascist dictatorship that has survived the wrath of the people. Not even Pol Pot, Lenin, Hitler, Chauchescu, Mussolini, etc. In theory these regiems should have gone on into infinity until the ocean turned to lemonade but for some reason or other there reached a critical mass of rebellion and they were toppled. Ben Bernanke can stop inflation in 15 minutes, but he can't stop hyperdeflation when money velocity falls to zero - and when it does that signals the loss of faith in the currency and money velocity goes from zero to infinity from Monday to Friday. 


There is a fine line between zero and infinity - one could argue they are the same in some respects. 

Mon, 11/05/2012 - 15:25 | 2949407 Orly
Orly's picture

I will grant you that under your scenario, it is possible for that to happen.  However, there are already grumblings in the US military about stepping in to wipe the slate clean.  But even suppose there weren't, the people of the United States aren't going to be fooled by a Pol Pot or Lenin or Stalin or any of these people and please, don't even think of comparing the murder of millions of your countrymen to rigging the stock markets and sticking the populace with a lifetime of debt in this case because it is simply not accurate.

While I will grant you the possibility of that happening, you must admit that the probability of it is very near zero.


Mon, 11/05/2012 - 20:43 | 2950419 Toxicosis
Toxicosis's picture

You're giving far too much credit to the awareness and attitude of people living in the good ol' US of A.  Most people thus far are just going along with all of it.  Perhaps that's why they are referred to as sheeple.  And point of fact, sticking people with harrowing debt is and robbing them blind is effectively killing them, however, indirectly.  A man with a briefcase can also kill more people than even a man with a gun.

Mon, 11/05/2012 - 14:57 | 2949328 oddjob
oddjob's picture

$40 billion a month in toxic mortgage bond purchases....those are real cutbacks.

Mon, 11/05/2012 - 15:08 | 2949359 Orly
Orly's picture

QE3 has been priced into equities eleven months in advance, by the way.  Not only that but the banks will have to start using that extra cash to try to soak up equities to prevent an out-right crash of the stock market.  I'm sure that this is in their "contract" somewhere.

Mon, 11/05/2012 - 20:58 | 2950454 billsykes
billsykes's picture

Who cares. Why? because canada doesn't own any of it anymore.

Mon, 11/05/2012 - 16:11 | 2949560 rete
rete's picture

Good must be "let's yank random numbers out by butt" day. 

You don't say, Mr. Orange?


Given that governments in the US and Canada (at all levels) spend basically an identical % of GDP (39.7% Canada and 38.9% US) that must mean some kind of gravy train in the US for those lucky enough to work for guvment. And those well over 50% of all employees in Canada must be seeing pretty shitty pay and benefits - let's face it, having to be paid from that same ~40% of GDP that also pays for healthcare everywhere and welfare in Quebec there's likely not much left in the pot for wages.

Mon, 11/05/2012 - 16:24 | 2949608 FrankDrakman
FrankDrakman's picture

Canada's workforce is largely government employees - well over 50%.

Excuse me for a moment - hahahahahahahahahahaha. While I would never disagree that our public sector is bloated, the FACT is that about 20% of Canadians work at all levels of government - federal, provincial, and local.

This bozo's probably never set foot in Canada, and thinks we live in snow forts ten months of the year. Moron.


Mon, 11/05/2012 - 19:06 | 2950138 hardcleareye
hardcleareye's picture

Concur, thank you for  correcting this misconception.

Mon, 11/05/2012 - 14:26 | 2949218 Orly
Orly's picture

Love the game at the end!  Holy smokes!  Really...can you tell the difference?  I scored 12 of 16...

How'd you do?

Mon, 11/05/2012 - 14:49 | 2949306 Blammo
Blammo's picture

I got 4 out 16....Even got the one with the cops in front wrong....I thought it had to be a head fake

Mon, 11/05/2012 - 14:55 | 2949322 Orly
Orly's picture

Yeah, I got suckered on that one, too.

Mon, 11/05/2012 - 14:27 | 2949220 Divided States ...
Divided States of America's picture

I got friends who make less than 40k CAD a year who has multiple condos that they are renting out or looking to rent out. The immigration effect there has definitely helped kept prices higher than they should be but this wont last....Canada's condo market is about to burst. I can see the skyline of Toronto and they have high rise condos sprouting like weeds. Its amazing but I hope ppl keep buying because the bubble will burst sooner rather than later and I can try to pick some carcasses off for cheap.

Mon, 11/05/2012 - 14:32 | 2949243 Unprepared
Unprepared's picture

Copy that. I got friends here trying to convince me to buy a condo in Toronto. No thanks, I'm not a sucker to buy at or near market top. Plus I'm still in my late 20's. Not a good idea at all.


I would rather buy some large coastal farm in western Portugal.

Mon, 11/05/2012 - 14:35 | 2949223 mick68
mick68's picture

 I live in Canada and can tell you there's alot more than "cracks" forming, they're full blown holes everywhere. Vancouver is Canada's most expensive and formerly most desirable real estate by far, and what's happening there is sending chills down everyone's back.


 In fact, the smart money is leaving in droves as we speak. Sales down 30% compared to 10 year average, prices dropping by 15-25%, though the biased real estate board has their own secret sauce calculations which neatly mitigate the price drop numbers behind a "median price" formula.

Recently, a high end development downtown vancouver saw its pre-sale buyers launch a lawsuit against the developer in an attempt to get out of their contracts due to the developer being late. But you know if prices were rising these buyers would gladly wait.


Cracks? Nope, massive gaping holes.


Different as in later, that's it. Goin down hard.

Mon, 11/05/2012 - 17:25 | 2949836 Metalredneck
Metalredneck's picture

I live in cottage country, and up here it is starting to smack of panic.  So many boomers are trying to pawn their waterfront stuff to pay for their ZIRP'ed portfolios, that one of my local realtads married the dog-catcher to pay the bills.


Our family cottage is like an albatross around my neck, and now that prices are falling, the in-laws are unbearable.

Mon, 11/05/2012 - 14:29 | 2949233 Duke of Con Dao
Duke of Con Dao's picture

here's actor Michael Cera harshing on Canadians (shot with Crotch-Cam...)

Mon, 11/05/2012 - 14:32 | 2949246 ParkAveFlasher
ParkAveFlasher's picture

This week on Property Brothers, a newlywed couple buys a money pit shithole while the guys con them into a $350,000 drywall install!

"We can make it the house of dreams and still have $10,000 left in your budget!"

"Guys, you are making ridiculous demands.  You're going to have lower your expectations."

Fuck it, the banks are paying for it!


Mon, 11/05/2012 - 14:33 | 2949249 LawsofPhysics
LawsofPhysics's picture

Canadian banks want in on the fraud too. A non-event. If they want the hot potato, let them have it, but one might consider what Canadian wages have been doing as well.

Mon, 11/05/2012 - 14:35 | 2949256 q99x2
q99x2's picture

From Bloomberg:

"The die is cast for a much stronger recovery," said Mark Zandi, chief economist in West Chester,Pennsylvania, for Moody's Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up.

Sounds like the guy would sell his own mother for a nickel if he could.

Mon, 11/05/2012 - 16:45 | 2949700 TheFourthStooge-ing
TheFourthStooge-ing's picture


Sounds like the guy would sell his own mother for a nickel if he could.

If only economists would limit themselves to such simple matters, their mothers would be on far less shaky ground than that which they currently occupy.

It would not surprise me if Zandi's mother has already been chopped up into several tranches of MBSs (Maternal Backed Securities) which, through the magic of having been sold to a TBTF subsidiary based in the City of London®, have been transformed into the collateral behind an incomprehensible number of CDOs (Criminalized Despicable Obfuscations), effectively selling his mother for a nickel so many times over that he still raked in seven figures in the deal.

Watch for Goldman Sachs to make a client recommendation in March to go long florists and greeting card companies before Mothers' Day, based on analysis showing that the average American now has 2.3 mothers.

Mon, 11/05/2012 - 14:38 | 2949270 Herkimer Jerkimer
Herkimer Jerkimer's picture

Oh! I was so worried that this time, it WOULDN'T be different!


And now it is going to be different!


It's too bad that all those times before, that everyone said "it will BE different!" and it wasn't, and it turned out to be just like before, didn't turn out like they say it will this time.


I can sleep easy, tonight!




Mon, 11/05/2012 - 14:42 | 2949276 Diogenes
Diogenes's picture

Take another look at the charts in the above article. See the dip in 2007 - 2008? That was our reaction to the US housing bust. That was our "crash".

We've had booms and busts in RE in Canada before but not the neutron bomb (kills the people but leaves the houses standing) you see in the US.

What usually happens is, real estate goes into a slump. Sellers find they can't sell for a big profit, and use the equity to buy a bigger house like they used to. So they say the hell with it and don't move.

Oh sure, a few people lose their houses or must sell for some reason. This causes prices to drop by 10% or so. But most overpriced listings either sit there or get taken off the market. There is no domino effect like you saw in the US.

I was panicked out of some good RE investments in the wake of the US debacle in 2006. RE slumped for a few months, by 5% or 10% then took off again. Sure wish I could buy those houses back, for the same price I sold them for in 07 and 08.

Mon, 11/05/2012 - 14:51 | 2949311 jcaz
jcaz's picture

Mmmm- Kool-Aid good...........

This isn't about what Canada was doing in 2007-  it's what it's been doing SINCE.

Oh ya shore it will be different this time-  no leverage going on in Canadian real estate, oh noooooooooo......

Mon, 11/05/2012 - 15:14 | 2949369 Bay of Pigs
Bay of Pigs's picture

LOL. You wonder if the dude even bothered to read the article? 

Mon, 11/05/2012 - 16:34 | 2949650 Diogenes
Diogenes's picture

I've been reading it every week since 2007. "US real estate hits the skids, Canada to follow".

Take another look at the 2 last charts above. Notice 1) we already had our slump, it lasted about 2 months and then RE took off again 2) if you invested in Canadian RE in 2007 you would have a very good return.

As a Canadian real estate investor since 1972 maybe I have a little different perspective. All I can say is, real estate has been good to me in spite of some horrible years, much worse than anything we are likely to see in the next few years. And, there has never been a single day in all that time, that it was a good time to buy according to the papers and my broke neighbors - except at the peak of a boom.

In other words I am quite comfortable investing in real estate when everyone says it's no good, especially when I can get good properties with positive cash flow. When everything I look at has bad negative cash flow and everyone is saying buy real estate, it only goes up, I know it's time to sell.

Mon, 11/05/2012 - 17:18 | 2949805 Bay of Pigs
Bay of Pigs's picture

What part of the "bubble" did you miss with the hundred other facts presented above? It HAS peaked.

What's your point except the "this time its different" mantra?

Mon, 11/05/2012 - 19:03 | 2950127 hardcleareye
hardcleareye's picture

So if you are saying that you are only buying properties with a positive cash flow, is one to assume that you are renting these properties out?  So what are your assumptions to calculated your CAP Rates????????  What is an acceptable CAP rate for you?

Because at these prices with these rents it doesn't work.......

Once again calling bullshit and cite your sources and hard DATA!!!!!


Mon, 11/05/2012 - 16:36 | 2949659 Diogenes
Diogenes's picture

What it's been doing since 2007 is go up.

Mon, 11/05/2012 - 16:47 | 2949707 TheFourthStooge-ing
TheFourthStooge-ing's picture


Mmmm- Kool-Aid good...........

Maple syrup sweetened Kool-Aid.

Mon, 11/05/2012 - 15:17 | 2949383 richard in norway
richard in norway's picture

wait a mo, house prices have been rising faster than wages and you think that can go for ever? seriously? 

Mon, 11/05/2012 - 16:42 | 2949688 rp1
rp1's picture

Question it and you'll be quietly escorted out of Tim Hortons.

Mon, 11/05/2012 - 17:29 | 2949851 Metalredneck
Metalredneck's picture

This is more accurate than you know.  Home ownership is like a cult, and renters are second class sub-humans.

 It is frightenening.

Mon, 11/05/2012 - 18:58 | 2950107 hardcleareye
hardcleareye's picture

Yup...  renter and proud of it!!!  Did the tour with the Ontario realtors last year and came away shaking my head telling a few to their faces that they were full of shit!!!

Now when I run into them around town and at social functions, I just kinda smile and ask them how's it going?  Reminding them you ain't seen nothing yet, this is the beginning.

Mon, 11/05/2012 - 14:41 | 2949287 dolph9
dolph9's picture

The price declines in Vancouver and Toronto are going to be spectacular.  They are nice cities, to be sure, but no different than 100 other cities like them.

You will know we are reaching the end of our current system when housing declines in NYC and London.  Until that happens the party continues.

Mon, 11/05/2012 - 14:45 | 2949295 EvlTheCat
EvlTheCat's picture

It would be interesting to see how many younger Canadians borrowed from their RSP to fund a 20,000CAD or less downpayment on their first home.

Mon, 11/05/2012 - 14:48 | 2949304 alangreedspank
alangreedspank's picture

Moreover, it is different this time.

Yep, pretty much sums it up.

Mon, 11/05/2012 - 14:55 | 2949323 alangreedspank
alangreedspank's picture

Bubble eh ? It's aboot time it poofs.

Mon, 11/05/2012 - 16:51 | 2949723 TheFourthStooge-ing
TheFourthStooge-ing's picture

The next Canadian bubble: trailer parks in and around Halifax.

Mon, 11/05/2012 - 17:43 | 2949888 FrankDrakman
FrankDrakman's picture

Yep, when they find all of Ray's piss jugs, prices are going to tumble.

Mon, 11/05/2012 - 15:02 | 2949339 ILikeBoats
ILikeBoats's picture

Canada's Benjamin Tal = USA's Lawrence Yun.

Reality is, Canada has certain advantages - when you divide their natural resources by the number of Canadians, you end up with a big number.  They have lots of wheels and dials they can turn, because so much of Canada is already under govt control (GST/VAT, fuel taxes, other sales taxes), that will let them fiddle with numbers for years to come in an attempt to delay the day of reckoning. Is this enough to cover up the cracks?  I don't know.

Mon, 11/05/2012 - 18:51 | 2950085 hardcleareye
hardcleareye's picture

Nope, not even close... 

Mon, 11/05/2012 - 15:08 | 2949357 dwayne elizando
dwayne elizando's picture

Just keeps goin up, eh?

Mon, 11/05/2012 - 15:18 | 2949389 batz
batz's picture


Slight difference in Canada is that you can't just return the keys to the bank and walk away from your mortgage.

The individual is on the hook for the loan, regardless of what the asset is worth. It's still a bubble, but the banks have less exposure since they can sell the debt off to a collector who can hound the Canadian for the rest of his life. The banks can force the sale of the house, and make up any difference between the loan value and the price (less than $100k in all but some marginal cases) by selling off the debt at a loss, but their net exposure isn't too bad.

The number of homeowners is also much smaller, and so the banks are probably fine. The Canadians who owe the money are much more screwed than the people who took out liar loans in the US.

It could be bad, but it will definitely be different.

The more interesting place to look for instability in Canada is at off-balance sheet liabilities in the provinces and municipalities. There is a compensation program, pension, welfare service, or contingent liability in the provinces and munis for like 2/3 of the population.


Mon, 11/05/2012 - 16:28 | 2949621 TheCanadianAustrian
TheCanadianAustrian's picture

"but the banks have less exposure since they can sell the debt off to a collector who can hound the Canadian for the rest of his life."

Irrelevant and immaterial. When a lender sells bad debt to a colllection agency, they get maybe a few pennies on the dollar if they're lucky. If anything, these kind of writeoffs would very quickly bring a bank's balance sheet to its knees. The name of the game is extend-and-pretend and mark-to-skittle-shitting-unicorns. You must never forget that. Once the delinquencies perk up, the banks simply will not have either the means or the desire to pursue the losses. A sparse handful of Canadians will declare bankruptcy. The vast majority of Canadians who stop paying their mortgages will live much like their American predecessors, rent-free and carefree. They simply cannot afford to force Canadians into bankruptcy. Doing so would expose the system for the irrecoverable shamblefuck that it is.

Mon, 11/05/2012 - 16:43 | 2949696 alangreedspank
alangreedspank's picture

Apparently, if delinquencies increase by only 1%, the CMHC goes belly up.

Mon, 11/05/2012 - 18:49 | 2950080 hardcleareye
hardcleareye's picture

CMHC is back by the Canadian Taxpayers, it is not going belly up...

But if you start getting those kind of delinquencies/defaults what is going to happen to the rest of the Canadian Economy, it's currency etc...  FIRE sector of the economy up here is 22- 25% of the GDP....

Shit meet fan.....

Mon, 11/05/2012 - 22:01 | 2950592 Matt
Matt's picture

Housing bubble pops, CMHC is in serious trouble, government bails them out with massive new borrowing program. Best case scenario, CAD/USD goes to 0.50 but probably will not happen, since they seem determined to keep it around parity. Instead, we end up with big national debt, maybe some QE to keep yields under control. 

Mon, 11/05/2012 - 15:22 | 2949398 derailedcapitalism
derailedcapitalism's picture

There are obviously cracks forming in Canadian real estate, I will not argue that.

However, there are a few large differences between Canadian and U.S. mortgages:

1) Full recourse - the housing asset is just one part of the mortgage

2) Equity - The average equity is 36% ($156,000 / $430,000) as of December 31, 2011

3) Secured by CMHC (with average equity of 36%, CMHC has approx. $30 billion in cash), It will take a large drop before CMHC has to payout.

4) Investors are required to put 20% down


While it's anyones guess to where housing will go, I personally thing there will be a huge correction in condos in city centers along with a smallish correction in homes around the city centers (excluding suburbs/country, that's a different story). 

At the end of the day, I do not think housing will drive a financial crisis to the same extent of what happened in the U.S. However, I am concerned that Canadian consumers do have sizeable wealth in their homes which may result in other problems down the line (i.e. retirement)

Mon, 11/05/2012 - 18:46 | 2950074 hardcleareye
hardcleareye's picture

You need to cite your sources!!!  I am calling "bullshit" on your assumtions (you have been drinking the kool aide)!


Mon, 11/05/2012 - 21:09 | 2950476 billsykes
billsykes's picture

The 20% down is Bullshit.

just like the 30% Chinese put up- its all family money and in lots of cases they do the Carlton sheets no money down dance with the sellers to cover up the 20% shortfall. I have seen cases where crooked home inspectors give appraise whole neighborhoods with a bunch of other developers just to bump the wooden multi family tear down that is happening so the developers can get a better ratio.

CMHC= fannie & freddie

I even questions the 36% equity- is that actual cash, real cash or has that cash been Refi'ed? then counted.  Plus it you cannot sell- people are willing to lose 100% than take 30% of what they think the house is worth in most cases.

Mon, 11/05/2012 - 22:13 | 2950628 Matt
Matt's picture

The 20% just recently came into effect and is not at all representative of what has been going on the last 5 years. 

No proof of income for self-employed, cash back loans, 40-year mortgages, CMHC insurance on $2 million shacks in Vancouver for people with a $60K income. 

The issue is not everywhere, in my opinion. Vancouver, Toronto, a few other massively overpriced places have big drops. When it comes time to refinance, these places will be screwed. The rest of the country could have a 10 to 15% correction, but some of these massive bubble places will be 40%+.

Only 18 States are non-recourse:

So that doesn't make as much difference as people suggest.

Tue, 11/06/2012 - 00:26 | 2950936 jackinrichmond
jackinrichmond's picture

how can you say something is overpriced if that is the price it sells at ?  all else is just conjecture.

something is worth the price it fetches..   period.

Tue, 11/06/2012 - 00:58 | 2950977 Matt
Matt's picture

I suppose overpriced is the wrong word; unaffordable (based on price to income levels) would be a better term.

Mon, 11/05/2012 - 15:24 | 2949403 legorf
legorf's picture

Well to compare both US and Canada, one should first use personal income instead of personal disposable income. Health care and many services are public or subsidized in Canada, which makes the use of disposable income a bit unfair.

Rules concerning morgages are different also. While in the US one could just get the keys back to the banker and walk away without filing for personal bankruptcy, in Canada, if you miss your mortgage payments, you are in for full blown bankruptcy so you loose everything, not just your house.

Just saying. Now that doesn't mean the Canadian housing market is not in a bubble.

Mon, 11/05/2012 - 18:34 | 2950030 hardcleareye
hardcleareye's picture

Wrong, out of the 50 states only 11 or so are non-recourse (owners can walk away and just return the keys) the rest are Recourse (like Canada), or some variation of that.

Mon, 11/05/2012 - 15:28 | 2949420 lolmao500
lolmao500's picture

The sheeple keep telling me it's different... so it probably isn't.

Mon, 11/05/2012 - 15:34 | 2949428 onearmedlove
onearmedlove's picture

That Vancouver price vs rent index is awesome. Makes my insistence on renting "like a crazy person" all the more reassuring.

Mon, 11/05/2012 - 19:16 | 2950169 CCanuck
CCanuck's picture

Im outside GTA, been renting for over 5 years now. 95% of friends that own homes + rental properties are broke, living month to month, zero cash, looking for second or third part-time job to pay creditors.

 I am flush, have zero debt, only living expenses, never had more savings, and the stack at the bottom of Lake Ontario is bigger than ever.

I am certain that its not Global warming and melting icebergs causing rising water levels its simple displacement.


Tue, 11/06/2012 - 00:21 | 2950928 jackinrichmond
jackinrichmond's picture

i personally challenge those stats.

i have several friends renting in vancouver.   a normal 2bdrm suite near the city is north of $1400/month. 

$1600-$1800 is not unusual.   mortgage for something similar (90% down) is about the same (before strata fees).

Mon, 11/05/2012 - 15:39 | 2949441 walküre
walküre's picture

If real estate in Seattle is slumping, so will Vancouver. if NY slumps so will Toronto.

Asian and other hot money hasn't just propped up those markets in Canada. Outside of the big Canadian cities, real estate is less desirable and cheaper. As far as Canadian banks are concerned, they're not holding billions of shadow inventory from foreclosure at mark-to-fantasy values.

As far as price of oil and other commodities are concerned, the days of a strong USD and oil at $25 / barrel are gone and won't come back. Correction is possible but what would investors who supposedly dumped oil, gold and other contracts buy instead?

Unless interest rates shot up drastically, it won't happen. I'm not even sure if interest rates would make a difference anymore when the debtor servicing the paper can barely keep up with existing debt payments. I'm speaking of the UST obviously. Who would take a drastic interest rate hike announcement from the Fed even serious at this point?

Mon, 11/05/2012 - 16:15 | 2949574 Orly
Orly's picture

Anybody remember the Japanese buying up 30 Rock back in the '80's and it was the end of the world?

Same thing...

Mon, 11/05/2012 - 15:40 | 2949443 lolmao500
lolmao500's picture

And even better... when the US goes kaboom, Canada goes kaboom. 50% of GDP is exports and 90% of exports go to the US.

Not to mention, when US goes kaboom, commodities cratter... which cratter the rest of the economy... which cratters the government, which is the rest of the workforce.

It will be a perfect storm...

When one goes, everything will go...

US goes kaboom = commodities and exports down the drain = 50% on unemployment = less taxes = government has to cut people = the other 50% on unemployment = 100% unemployment! YAY!

Mon, 11/05/2012 - 15:44 | 2949462 Canadian Dirtlump
Canadian Dirtlump's picture

That is a point so many of my fellow countrymen ( english speaking or not ) fail to grasp. Many Canadians enjoy our brand of Kool Aid secure in the thought that we are an economic island immune to the effects of bad policy in the USSA for example.


The saying used to be if the US gets the sniffles, Canada gets pneumonia.. now the US seems to be developing AIDS, so lord fucking help us.

Mon, 11/05/2012 - 18:29 | 2950020 hardcleareye
hardcleareye's picture

Here Here and the NHL is locked out, it's a beauty.

"...some kind of dog food."

Mon, 11/05/2012 - 19:05 | 2950117 CCanuck
CCanuck's picture

Fuck'n Ehhh!!

Dirtlump you owe me a keyboard, fuck'n Timmies Everywhere!!!

USSA Got the AIDS...I grew up listening to that line about the sniffles.

You nailed it with that analogy.

True North Strong and ZZZZZzzzzzz Asleep!


Tue, 11/06/2012 - 00:16 | 2950916 jackinrichmond
jackinrichmond's picture

i think that used to be more true than it is today.

more and more of canada's trade is occurring outside of north america.

..and yes, canada still depends on the american consumer - just not as much as the old days.

Mon, 11/05/2012 - 16:40 | 2949685 Diogenes
Diogenes's picture

But the US real estate did go kaboom, in 2006. Canada followed with a "crash" that lasted about 2 months when prices dropped about 10%. That was it. That was our crash.  It shows up clearly on the last 2 charts in the above article.

Mon, 11/05/2012 - 18:23 | 2949992 hardcleareye
hardcleareye's picture

The Bank of Canada had to infuse cash into their 5 banks during the 2008 crash, so they more or less took title/bought from the banks their best preforming assets.... mortgages, now the banks had cash but no revenue so the Harper boys rolled back the mortgage rules to goose market (remember 40 year amort loans etc etc).... (you can find this detailed in a Ice Cap Asset Management report from a year or two ago)  so I would say that the can has not only been kicked down the road but over the cliff....  wait till the current Canadian currency status of "flight to safety currency" evaporates, you ain't seen nothing yet!

Mon, 11/05/2012 - 15:42 | 2949450 Canadian Dirtlump
Canadian Dirtlump's picture

I hate reading about this to over and over again read about Toronto and Vancouver. THat being said, I closed on the sale of my house and got the funds october 15th. I have a 1 year lease and am looking forward to watching the carnage.


In Airdire (north of calgary) building is still going great guns and the few showhomes I've checked out of course are manned by a hard selling douchbag whose pitch is largely made up with a "you better buy now while you still can" attitude. You have to be a fool to think the music isn't going to stop at some point. Hard or Soft Landing - to me is somewhat moot. The human face on this says that I'll be able to probably get a good deal on a house soon, and that many others are going to watch their equity evaporate, the only question is whether it is a little or alot.


Side note - as any married person can relate the amount of politicking to get my wife on board to sell, and rent for a year was truly herculean. The next step is to try to go balls deep in silver rather than 10-20oz at a time.


Best of luck and wear a helmet felow canadian dirtlumps.

Mon, 11/05/2012 - 16:35 | 2949654 Herd Redirectio...
Herd Redirection Committee's picture

Aah, what a man wouldn't give for a woman who understands global finance, the treachery, deceit, the fractional reserves...  If women the world over would just wake up, it certainly would make things much easier.  As it is, instead man and woman are pitted against each other, in a dialectic battle of the sexes, a classic case of 'Divide and Conquer'.

The fact that men have been much harder hit by the recession than women certainly doesn't help either, as they find the evidence much harder to relate to, because they and their female friends are all comfortable in health, education, government employment! 

To the men in the smoke-filled room who came up with this shit, I say, "Well played, you bunch of douches."

Mon, 11/05/2012 - 17:51 | 2949913 hardcleareye
hardcleareye's picture

After reading your post the vision of a  "troglodyte donkey" came to mind...........

A little blast from the past, this will help explain what a troglodyte is, circa 1973 if my memory doesn't fail me, some education for you young ones out there.... early rap  lol

Mon, 11/05/2012 - 21:12 | 2950480 billsykes
billsykes's picture

They shouldn't even be voting.

Mon, 11/05/2012 - 17:01 | 2949679 Haole
Haole's picture

I don't like reading about it either but I've suspected this might eventually happen and have taken measures to not only prepare but to significantly simplify my life.

One condo development scheduled in S. Vancouver just sold 80% pre-construction on opening day.   $500+/square foot, less than 3% variable mortgages, buy buy buy... I am baffled as to who is buying all the towers going up like weeds around False Creek and wondering how many of these thousands of units the developers might be forced to try and rent themselves.  Seems every Tom, Dick and Jaswinder is a mortgage broker now, adds all over the place.

I almost wish I'd done like you and gotten out altogether to rent.  However, I have radically downsized twice over the last seven years at lovely profit and now own a small apartment clear title with very low expenses in a cool, "developing" (for now?) neighborhood in downtown. 

Not that I want to see any of this happen at all but I have, and I am, totally prepared for it mentally and financially.  If it never somes to pass I have much more freedom and liquid "capital" to virtually do whatever I want now.

Mon, 11/05/2012 - 17:08 | 2949781 Jreb
Jreb's picture

Mind boggling eh?

We live in a very middle class subburb not far from there. Very large and new developments keep popping up all around us. I keep wondering where the hell all the people are going to come from to fill them???? That in the face of a real estate market with a lot of noticeable inventory on the market and a town full of realators complaining about declining sales.

I don't get it. Are we that stupid? Now they want to clear cut one of the last remaining green spaces in the area (about 100 acres) - the one my house happens to back onto. Wifey is not happy. I keep telling her that development is at least a year to two years away and a lot can happen in that time span. I guess we'll see.

I look at the level of debt to income around me and I am in awe. My wife and I collectively earn twice the local houshould income level and we live in one of the least expensive homes in our small region.

Growing debt, low interest rates, property bubble and people way in over their heads all around us. Some days I feel like we are sitting on a time bomb.


Mon, 11/05/2012 - 17:27 | 2949847 Haole
Haole's picture

"Now they want to clear cut one of the last remaining green spaces in the area (about 100 acres) - the one my house happens to back onto."

Northwest Delta area or somewhere in Langley?

We are all sitting on a time bomb me thinks, it's called Western civilization as we've known it.

Best regards, neighbor!

Mon, 11/05/2012 - 20:09 | 2950333 Jreb
Jreb's picture

To you as well.

Tue, 11/06/2012 - 06:12 | 2951166 bunnyswanson
bunnyswanson's picture

This is globalization.  It's all up for grabs to the highest bidder.  Just hope your currency does not collapse.  French/English/Mandarin on all labels.  One day, we'll wake up and be outsiders in our own countries.  It's happened over and over again through the history of man on other continents and now it will happen here.  I hope you realize what's in store for all of us.  This is a business deal.

Tue, 11/06/2012 - 00:12 | 2950908 jackinrichmond
jackinrichmond's picture

i see them lining up in the rain to buy pre-sale suites in richmond.

it's mostly asian money.   vancouver prices are a real deal for many asians - they think real estate is still cheap here.

they wouldn't buy here otherwise.


Tue, 11/06/2012 - 06:05 | 2951162 bunnyswanson
bunnyswanson's picture

There's a rumor going around that the Vancouver is now Little Shanghai.


“As the Chinese get more and more prosperous, they are diversifying their assets out of China,” said Jim Rogers, an American investor who moved to Singapore from New York four years ago so his daughters could learn Chinese. “Vancouver is very high on the list.”

Canada China Investment Agreement Signed

Canada and China are now joined in a new foreign investment agreement named the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA). The deal makes it easier for Chinese investors to buy businesses and invest in property in Vancouver and other desirable areas of Canada.

Chinese buyers are an extremely important market for Vancouver real estate agents and property management companies. The Chinese are looking for property investment in a stable economic environment and Canada has earned that reputation.

The signing of the agreement was witnessed by Prime Minister Stephen Harper and Hu Jintao, President of China, at the Asia Pacific Economic Cooperation (APEC) Leaders’ Meeting in Vladivostok, Russia.

What do you think of this?  I am curious to know.

Mon, 11/05/2012 - 16:59 | 2949752 Jreb
Jreb's picture

My wife actually suggested selling then renting a few days ago. I nearly choked. Hell must have frozen over.... I'll have to check.

Anyways - already have lots of "stuff" to ride out whatever comes next. My house is where I live (never looked at it as an "investment" just a liability that provides shelter and refuge) and I live small. I'm not sure the stress of moving two or three times in the next decade is worth the 20% + or so haircut we might take out here in the burbs.

Logical VS emotional algebra. The process sucks rocks. I just wish that whatever is going to happen would happen so we can get on with living...

Mon, 11/05/2012 - 18:41 | 2950061 Toxicosis
Toxicosis's picture

Keep your cash, why would you buy a house, when property taxes are only going to go up, gasoline is up, food is up, water and electricity are up, the cost of living is only going up, and for damned sure the federal government is going to bail out the banks.  Thus our taxes go up.  Guaranteed our government will also print money like mad, which will send the cost of everything up even more. 

A house now will become a noose around your neck, because rent is easier and the money or silver/gold you have will allow you to eat and protect yourself.  Liquidity means everything now, don't fall back into that rat trap again.

Mon, 11/05/2012 - 15:47 | 2949472 Islander56
Islander56's picture

Northern Ontario is fine. Low prices, open land, clean  water, fresh air, and a sky that never ends. Little chilly for a couple of months a year but it keeps you active. Shame about the southern cities. I guess ;-)

Mon, 11/05/2012 - 15:53 | 2949493 alangreedspank
alangreedspank's picture

Plus Northern Ontario has some prime fishing areas to offer from what I can see on Fish 'n Canada.

Mon, 11/05/2012 - 15:47 | 2949473 Islander56
Islander56's picture

Northern Ontario is fine. Low prices, open land, clean  water, fresh air, and a sky that never ends. Little chilly for a couple of months a year but it keeps you active. Shame about the southern cities. I guess ;-)

Mon, 11/05/2012 - 20:46 | 2950426 Toxicosis
Toxicosis's picture

And where do you get your gas and oil from if some unforseeable cash/credit crunch unfolds and business ceases to function.  Better hope you have valuable hunting skills and water purification or else your shit out of luck.  And oh yeah don't get injured or severely ill, cause all these medical services depend upon everything energy and credit wise working out just fine.

Mon, 11/05/2012 - 22:24 | 2950655 Matt
Matt's picture

Tons of wood, lakes and rivers full of fresh water. If things get apocalyptic, it doesn't really matter where you are.

Tue, 11/06/2012 - 00:07 | 2950894 jackinrichmond
jackinrichmond's picture

lotsa oil and gas in canada

Tue, 11/06/2012 - 01:01 | 2950981 Matt
Matt's picture

I think (s)he means being unable to get heating oil or gasoline in the event of a massive collapse of all credit. If things go Mad Max, I don't think commuting to work is going to be such a priority. 

I also seriously doubt things will get anywhere near that serious for any length of time.

Mon, 11/05/2012 - 15:49 | 2949483 Pancho Villa
Pancho Villa's picture

Every bubble is different, but in the end they all pop.

We need to encourage a rent-to-own system where the buyer's potential gain or loss due to changes in the house price is proportional to his/her equity in the home. This would discourage speculation and bubbles. But the banksters wouldn't like that.

Mon, 11/05/2012 - 15:49 | 2949485 leadingmarkets
leadingmarkets's picture

Bubbles are bubbles! I trade stocks! will make you money! Get outta the mortguage market!

Mon, 11/05/2012 - 16:38 | 2949673 giggler123
giggler123's picture

What did you put my house on their for?

Mon, 11/05/2012 - 16:42 | 2949689 Confundido
Confundido's picture

Here's a clue to understand Canada. Imagine what would have happened in the US if:


-Inmigrants would have been allowed to become residents and bring their savings from overseas to buy a home

-Banks in the US were able to collect not just from the value of the properties but from the debtors' incomes

-Buyers would have been required to put a minimum 20% upfront in equity

-Buyers who couldn't afford the upfront payment would have been asked to buy insurance from the government

-The guarantor government would have one of the acceptable debt/GDP ratios and AAA, in spite of not owning the world's reserve currency


Once you see these points, you can see why the market has lasted for so long....but everything comes back to you in the end...

Mon, 11/05/2012 - 17:18 | 2949803 Jreb
Jreb's picture

Stein's Law "If something cannot go on forever, it will stop."

The one constant in the universe is change.

And still one of the best videos available on the net with regards to the Vancouver real estate market:


Tue, 11/06/2012 - 00:05 | 2950889 jackinrichmond
jackinrichmond's picture


Mon, 11/05/2012 - 18:19 | 2949984 swabeyjw
swabeyjw's picture

Here in Canada the Bank of Canada is owned by the people; well at least the few appointed to work in our best interests. We also just finished the first test of the mintchip ( I do not recall but if the mintchip is classified as coinage and coinage can be printed debt free, I can imagine how the government can issue its way out of debt and throttle inflation into holding a bubble at the burst.

Mon, 11/05/2012 - 20:50 | 2950436 Toxicosis
Toxicosis's picture

Please don't count the 'government' as belonging to the people. They will destroy 'us' in the process of self preserving themselves.  Money is their's for them to print, and soon enough print much more they will.

Mon, 11/05/2012 - 22:13 | 2950626 swabeyjw
swabeyjw's picture

As a comparison the Federal Reserve is owned and for profit of private banks. In a liquidity crunch print they must. The issue is the shape of the moat between the printing and the debt.

Tue, 11/06/2012 - 00:03 | 2950882 jackinrichmond
jackinrichmond's picture

the difference (between the us and canada) is the criteria required to obtain CMHC financing.

high ratio borrowers simply can not obtain financing without conforming to CMHC requirements.

ninja loans did not happen in canada due to CMHC.

will the canadian real estate market have a correction - of course (real estate prices are cyclical).  

will the correction be as bad as the us, likely not - because the loans were of higher quality.

america's real estate problems happened because of rampant fraud.  canada's real estate problems are supply and demand related.  

the value of real estate is determined by the price paid.. all else is merely speculation (as to whether it was too much).


Sat, 11/10/2012 - 04:14 | 2967375 Deliverator
Deliverator's picture

Then why did the OSFI ( Office of the Superintendent of Financial Institutions - the Canadian insurance and banking regulator) introduce new guidelines this year specifying, among other things, that:

— for Stated Income Mortgages OSFI guidelines encourage FRFIs to ask for official income documents (like notices of assessment from CRA) to satisfy income reasonability tests for self-employed borrowers [Kind of blows your "no NINJA loans" theory out of the water, doesn't it?]
— under the *new* rules, to qualify for a mortgage loan Canadians can spend a maximum of 39% of their gross household income on home expenses such as mortgage, property taxes and heating, and a maximum 44 per cent of income on housing expenses and all other debt. [Makes you wonder what the old rules were, if any]
— reducing the maximum amortization period for a government-insured mortgage to 25 years from 30 years.
— The maximum loan to value on home equity lines of credit (HELOCs) is cut to 65% from 80%
— The loan to value should be re-calculated upon any refinancing and whenever the lender deems prudent
—HELOCs will continue to as revolving lines of credit with no specific amortization period. However, OSFI says lenders must now expect borrowers to have the ability to fully repay HELOCs over time.

Tue, 11/06/2012 - 01:07 | 2950992 Matt
Matt's picture

As I understand it, $1 CDN must be sitting at the bank for every $1 out on the mintchip: 100% reserve with existing Canadian dollars.

They could probably do QE if they have to, if CMHC needs a big bailout.

Tue, 11/06/2012 - 10:05 | 2951410 swabeyjw
swabeyjw's picture

You miss the point of the chip. If you loss the chip you loss the money full stop. The only way to not lose the money with the chip is if you have transferred the program to another medium first. It is potentially computer cash without big brother. Look out Switzerland - Canada is moving in. To me it seems like good people who are strapped to the front of a Mac truck and know it - they are now looking at options for a safety valve.

Trust and the price of insurance are funny topics.

Tue, 11/06/2012 - 12:45 | 2952043 Matt
Matt's picture

Free from big brother, until they add in tracking to comply with AML and KYC:

Mon, 11/05/2012 - 18:44 | 2950069 ptolemy_newit
ptolemy_newit's picture

ther ewill be great defllation before any inflation!  that wip saw will start now copper is doomed under 2100


Tue, 11/06/2012 - 01:07 | 2950989 jonjon831983
jonjon831983's picture

Back in Octber Reuters came out with a piece saying the Canadian Mortgage and Housing Corporation (CMHC) has a flawed program that allowed for basically non-eligible borrowers to get mortgages from banks, which may have resulted in inflated property values.  (CMHC only insures the mortgage if less than 20% down, so the Banks get the $ if borrower defaults)

"Analysis - Canada house appraisal tool seen skewing values"


From what I gather from the piece, sub-prime (or something close to it) in Canada, but not acknowledged.


The CMHC hit back with a small rebuttal:

"CMHC Response to Reuters"

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