Garth Turner - Real Estate in Canada

[Liberty]

MOSTLY MONEY with Preet Banerjee: 51: What is going on with the Canadian housing market? Ben Rabidoux weighs in.

 

https://overcast.fm/+8XSGzLPc

[alpha]

Today the BC NDP and Green party announced an agreement to form a minority government. This could put pressure on the Vancouver bubble as both parties campaigned on increasing taxes on foreign money and implementing measures to lower the price of housing. Will be interesting to see if they act on any of their promises.

[Cardboard]

It is more how they are going to destroy the B.C. economy by cancelling the Site C hydro dam, TransMountain pipeline expansion and killing all LNG projects.

 

This will please some of our scientists paid by our tax dollars and their religious war on CO2. Can't wait for these people to be unemployed and to see their kids go hungry.

 

Cardboard

[scorpioncapital]

The future is in the southern lands as they are more understanding of human nature, unfortunately Canada has no southern lands :)

 

[Viking]

Liberty, thanks for posting the 'Mostly Money' link. Best rational and balanced discussion of where the housing market in Canada is currently at that I have come across in a while.

[SafetyinNumbers]

Liberty, thanks for posting the 'Mostly Money' link. Best rational and balanced discussion of where the housing market in Canada is currently at that I have come across in a while.

 

Hey Viking, that podcast was 11 months old so keep what you heard in context.

[Liberty]

Liberty, thanks for posting the 'Mostly Money' link. Best rational and balanced discussion of where the housing market in Canada is currently at that I have come across in a while.

 

You're welcome.

[wisdom]

http://www.cbc.ca/beta/news/business/financial-industry-employees-forge-documents-more-often-than-you-d-think-1.4138212

 

More revelations on how Canadian lending works.

[wisdom]

Everything I have been saying about the Vancouver market hitting newspapers now. Looks like the next year or so will be interesting:

http://realestatereviews.ca/news/risky-mortgages-shadow-bankers-threaten-vancouver-housing-markets-stability-vancouver-sun/

 

http://vancouversun.com/news/local-news/regulator-tracks-rise-in-mortgage-fraud-complaints-in-b-c-as-house-prices-jump

 

This is a 2 part report. Interesting and finally some decent journalism. Even if it is too late.

[alpha]

New survey out finds 30% of Toronto area households are planning to sell their home in the next 12 months while first time buyers are pulling back.

 

Although it also states 80% of these new sellers are planning to buy another home which may be problematic. I personally know several people in the GTA who have been trying to cash in on the gains in their property value and downsize to something smaller but have been unable to find an affordable new place in the region. Many of these listings could get pulled when they realize their limited options for moving.

 

http://www.bnn.ca/30-of-toronto-households-plan-to-list-homes-amid-government-intervention-survey-1.787064

[Liberty]

http://www.greaterfool.ca/2017/07/06/the-perfect-storm-2/

 

Also:

 

http://www.greaterfool.ca/wp-content/uploads/2017/07/DEAL-modified.png

[TBW]

If the anecdotes in Garth's latest post are even sort of true, the GTA bubble is imploding.

 

http://www.greaterfool.ca/2017/07/11/it-could-be-worse-2/

 

From my POV, houses listings are increasing and sales are slower.  For the first time ever one listed and failed to sell in my hood.  But not sure I am seeing panic like described in his post.  It is increasingly likely the bubble burst, but think we need more time to be say so definitively.

 

I took a look at the OSFI new letter on mortgage underwriting.  Found it fascinating.  They mentioned some serious failings in underwriting and clearly know about a lot of poor behaviour.  I ask why they don't disclose more.

 

https://onbeyondinvesting.com/blogs/blog/so-what-are-you-really-saying-osfi-taking-a-look-at-their-latest-mortgage-underwriting-letter

[clutch]

But do you think there are enough people who would be forced to sell?

 

We definitely see the signs of cooling already (both the data and the sentiment), but not sure if we would see a significant "burst" of this bubble in a short period of time.

[alpha]

 

Teranet's latest data shows house prices are still rising: http://www.bnn.ca/canadian-home-prices-rise-in-june-as-toronto-hamilton-lead-teranet-1.802738

 

Prices rose in 10 out of the 11 markets covered by the index, with Toronto up 3.7 percent and nearby Hamilton rising 4.1 percent.

 

Toronto prices were up 29.3 percent from a year ago, while Hamilton was up 25.6 percent.

 

 

[bbarberayr]

I saw this too.  Hard to reconcile with the big drop in prices the TREB showed a couple days ago.

 

 

Teranet's latest data shows house prices are still rising: http://www.bnn.ca/canadian-home-prices-rise-in-june-as-toronto-hamilton-lead-teranet-1.802738

 

Prices rose in 10 out of the 11 markets covered by the index, with Toronto up 3.7 percent and nearby Hamilton rising 4.1 percent.

 

Toronto prices were up 29.3 percent from a year ago, while Hamilton was up 25.6 percent.

 

 

[bbarberayr]

Found this:

 

"Well, it’s worth noting that Teranet-National Bank numbers are as stale and largely irrelevant as Kevin O’Leary by the time they’re published. They track ‘solds’ which were registered a couple of months ago, and only those homes for which two sales over time have been recorded."

 

http://www.greaterfool.ca/2017/06/15/stats-and-lies/

 

I saw this too.  Hard to reconcile with the big drop in prices the TREB showed a couple days ago.

 

 

Teranet's latest data shows house prices are still rising: http://www.bnn.ca/canadian-home-prices-rise-in-june-as-toronto-hamilton-lead-teranet-1.802738

 

Prices rose in 10 out of the 11 markets covered by the index, with Toronto up 3.7 percent and nearby Hamilton rising 4.1 percent.

 

Toronto prices were up 29.3 percent from a year ago, while Hamilton was up 25.6 percent.

[Liberty]

 

 

 

[TBW]

To address the point of forced sellers.  I think there will be.  Plenty of investment properties owned were the economics only worked in a house appreciating market (most house or condo's in GTA are negative carry every month).  Add to that the amount of people that have over leveraged themselves.  Finally, in the US homeownership went from ~70% to low 60s.  We may see a similar, although perhaps not as dramatic move, as our homeownership % is now above 70%.

 

Also, I think the assumption of automatic mortgage renewal will be challenged.  I am hearing more stories were banks will not just renew a mortgage unless the credit risk is fine.  HCG getting bailed out by WEB hid the fact that the alt lending space was en mass going to have a renewal issue if GICs kept getting pulled.  The big banks cannot renew most mortgages that were originated by the alt space due to OSFI rules.  This could, I am not certain it will, cause further forced selling.

[rb]

 

 

The charts are so nostalgic.... remember the innocent days of 2008

[rb]

If the anecdotes in Garth's latest post are even sort of true, the GTA bubble is imploding.

 

http://www.greaterfool.ca/2017/07/11/it-could-be-worse-2/

 

From my POV, houses listings are increasing and sales are slower.  For the first time ever one listed and failed to sell in my hood.  But not sure I am seeing panic like described in his post.  It is increasingly likely the bubble burst, but think we need more time to be say so definitively.

 

I took a look at the OSFI new letter on mortgage underwriting.  Found it fascinating.  They mentioned some serious failings in underwriting and clearly know about a lot of poor behaviour.  I ask why they don't disclose more.

 

https://onbeyondinvesting.com/blogs/blog/so-what-are-you-really-saying-osfi-taking-a-look-at-their-latest-mortgage-underwriting-letter

Now that we're on POVs and anecdotes let me share mine.

 

On my street 3 semis went on sale around end of march/beginning of April. First one goes on sale, lots of traffic, sells in 3 days for 850k, 100k over asking. Number 2 goes on sale the day number one sold. Listed for 750k same as number 1. A week later number 3 goes on sale listed at 875k. Crickets. Subsequently the price on number 3 was lowered to 850k then lowered again to 800k. Still crickets. Not only are these 2 houses not selling, nobody is coming to look at them.

 

Elsewhere in the hood. A detached listed for 1.5M didn't sell and was pulled. A 1.375M detached with a huge lot is getting some visitors. A bunch of 1.3 M detached have been sitting on the market for months (I'm guessing crickets territory). A really, really nice 3 bed detached that came complete with a good tenant in the basement just sold after being on the market for 3 months. It was listed at 1 mil don't know what it sold for.

 

This market right now reminds me of that scene in the Big Short where they're in the car with the realtor and she keeps saying that the market's just in a gully.

[Liberty]

Thanks for the anecdotes. It certainly sounds like a change from the bidding wars and people throwing $100k cheques with their offers without inspections and such.

[Guest 50centdollars]

Oakville has also slowed down. Townhouses are not moving at all. There is one down the street from me that has been for sale for 2 months and has had 4 open houses during that time and still hasn't sold. Detached are still selling but its taking a lot longer to sell. I have seen some detached houses that were for sale and have been taken off the market.

[bearprowler6]

Oakville has also slowed down. Townhouses are not moving at all. There is one down the street from me that has been for sale for 2 months and has had 4 open houses during that time and still hasn't sold. Detached are still selling but its taking a lot longer to sell. I have seen some detached houses that were for sale and have been taken off the market.

 

I am also in Oakville---south east of Trafalgar and QEW---market still very hot here---very few active listings and those that are listed still sell very quickly. I have heard (from several prominent agents and a few real estate lawyers) that things have slowed down  north of QEW but the slow down has brought the market activity back a more "normal" level from the torrid pace it was on earlier in the spring. Where are you in Oakville?

[Guest 50centdollars]

Oakville has also slowed down. Townhouses are not moving at all. There is one down the street from me that has been for sale for 2 months and has had 4 open houses during that time and still hasn't sold. Detached are still selling but its taking a lot longer to sell. I have seen some detached houses that were for sale and have been taken off the market.

 

I am also in Oakville---south east of Trafalgar and QEW---market still very hot here---very few active listings and those that are listed still sell very quickly. I have heard (from several prominent agents and a few real estate lawyers) that things have slowed down  north of QEW but the slow down has brought the market activity back a more "normal" level from the torrid pace it was on earlier in the spring. Where are you in Oakville?

 

Dundas and Third line

[rb]

I took a look at the OSFI new letter on mortgage underwriting.  Found it fascinating.  They mentioned some serious failings in underwriting and clearly know about a lot of poor behaviour.  I ask why they don't disclose more.

 

https://onbeyondinvesting.com/blogs/blog/so-what-are-you-really-saying-osfi-taking-a-look-at-their-latest-mortgage-underwriting-letter

I've read your piece. Interesting. But I also think that OSFI effectively fired a shot across the bow of financial institutions.

 

It really looks like the government decided to basically decided to pull the plug on the real estate party. If we're gonna have a crisis let's have it now before things get even worse. Today's weird rate hike was another ominous sign. That's it, no more music. The only people still dancing are the ones totally wasted and/or high who still hear the music in their heads.

 

When the new OSFI rules come in (September?) they will have effectively tightened real estate credit in a big way. On top of that OSFI is not actually reminding banks to do their job. What OSFI is really saying is that they're gonna make damn sure that these rules are strictly followed. No messing around. Under new rules and current prices, very few people will be able to qualify for mortgages. Good luck having a bubble without credit.

 

This is bubble popping -- Canadian style.