House Price Index (HPI): September 2010

(Scroll down for Garth Turner Forecasts)

Canadian home prices in September were down 1.1% from the previous month, according to the Teranet-National Bank National Composite House Price Index released today.

The monthly decline ended a string of 16 consecutive increases in the composite index since the last monthly deflation in April 2009. For the first time since February 2009, prices fell in all six of the metropolitan markets surveyed.

Year-over-year, Canadian real estate values were up 7.9%, showing increases in all cities surveyed with the largest YoY increase in Vancouver & Ottawa at 9.2%.

In Calgary, house prices were down 2.2% from the previous month. It was the second consecutive monthly decline.  Year-over-year, Calgary house prices were up 1.7%.

House Price Index: September 2010 (click to enlarge)

On Forecasting and Humility

I’m used to pundit’s real estate forecasts falling short, but when someone stubbornly asserts something in the face of evidence to the contrary, I get irked.

On November 24, 2010 Garth Turner posted: “I have consistently suggested there will be a correction of up to 20%, followed by a slow and painful decline in prices. Where it ends is anyone’s guess. I do not expect a drop of 40-70% as in Phoenix, and never suggested that would be the case — Garth”

This is where some of his “blog dogs” have taken issue, as some are still wistfully holding onto the promise of 50% declines in Canadian real estate values for years now. But wherever would they have gotten such an idea? Surely not from Garth himself, right?

December 2008
Don’t be surprised if these things happen
* Real estate prices in Calgary, Edmonton, Fort Mac at 50% of 2006 levels
Expect these things to happen
* Falling house values until at least 2010

September 2008
The explosion in resale listings across Canada is but the first phase of a market meltdown which will soon move into widespread price reductions in all markets. Those price drops will be between 15% and 50% (as I previously forecast), based on local conditions. My numbers may well be revised in early 2009, and it won’t be for the better.

July 2008
We are in the early stages of this correction, and price reductions will be much more dramatic by October. Year-over-year, I am sticking with my prediction of a 15% national dive by this time next year, with some markets off twice that amount.

July 2008
I expect all major Canadian markets will correct by an average of 10-15%, and some areas will be clobbered with 30% declines by the end of 2008, or the early Spring of 2009. Does everyone agree? Of course not…Especially if you are a greater fool.

August 2008
Home values will be lower next year by between 15% and 50%, depending on the community

August 2008
The next on the hit list (in this order, I would say), are Vancouver, Toronto, Victoria, Regina, Winnipeg and Saskatoon. In those last three cities, the reduction in home values could look more like Armageddon, with drops of up to 50%. In Vancouver, it will be about 30% by this time next year, and in Torontopolis, 15% with more pain to come after that.

September 2008
The Canadian market is doing exactly what I forecast. This will continue. Declines in prices of 10% or 12% in Alberta will become 20% and 25%. Vancouver ultimately will be even harder hit, and Toronto values will drift lower at the end of 2009 by about 15%. Some neighbourhoods, far more.

…and those are just some of the forecasts I quickly found while browsing his blog.   Ironically, today when a local bubble blogger posted on Greaterfool that “Calgary will become Phoenix and see a 60% plunge,” Garth responded by saying, “Helping people rests on credibility, not hyperbole.”   Whoa, talk about a policy shift.

What’s even more tragic about his forecasts is that Canadian real estate prices actually went UP 20% between 2008 and 2009. So to “continue” predicting a drop of 20% followed by a slow melt means what about his previous forecasts exactly?

On November 2008 he posted an artists rendition of the Bow tower, with his comments underneath stating: “This is what the future looked like. Remember it well.”

No reason to “remember it well.” The future is here, and guess what, I see the Bow Tower rising proudly above the Calgary skyline.

35 responses to “House Price Index (HPI): September 2010

  1. “What’s even more tragic about his forecasts is that Canadian real estate prices actually went UP 20% between 2008 and 2009. So to “continue” predicting a drop of 20% followed by a slow melt means what about his previous forecasts exactly?”

    You make an excellent point, Mike. Here it is, in CREA’s release for December, 2009:

    “The national residential average price was $337,410 in December, up 19 per cent year-over-year.”

    Now, I fully realize that most of 2008’s sales prices were poor, making a large year-over-year gain more explainable. Interest rates dropped to generational lows, which undoubtedly goosed sales. Did Garth see this coming? It doesn’t appear so, but to be fair, not many of us did. I think the more telling issue is not how far off his prognostications were, but his apparent inability to admit it.

    What continues to hold up this market to date is this: relatively stable employment numbers and continuingly low interest rates. I follow the markets pretty closely, and while I’m cautiously optimistic about our employment prospects in this part of the world, in truth, interest rates really have nowhere to go but up. When that will happen, and at what rate the increase will happen, is anyone’s guess. Let’s hope that the majority of those who bought in the last two years can afford their payments when interest rates do rise.

  2. Jen

    You cannot predict an economic meltdown and not expect generational lows in interest rates. If Garth had proper economic training instead of an English degree and a background in media and politics, he might have seen that and revised his predictions.

  3. Good point Jimmy. On the other hand, you also cannot predict an economic meltdown, which will result in exceptional increases in real estate values. I suppose the oddity about this meltdown is that while lower interest rates kept up the housing market, they did nothing to revive the rest of the economy (normally, I think, this would be the case).

    I’ve read Garth’s blog for a while now and I must say that he definitely knows how to keep churning through the same facts over and over again. Kinda lost me after a few weeks – there’s not much new to add after it’s been said once!

    At the end of the day people have to make their own decisions. Whether that means listening to Garth, Mike, or taking in as much information as you can and forming your own opinion – that’s for everybody to decide for themselves.

  4. I agree that Garths blog does become very predictable after a while. He needs to be more transparent and honest with his readers as he does have some valid points that people should consider before diving into a real estate purchase. He needs to stick to his guns and if he is going to change a prediction (which is done by everyone all the time, so not really a big deal) he needs to be open about it and give his reasoning, not pretend that his old predictions never happened.

    Will, I would argue that you can predict real estate values to go up during a financial crisis. Look at past recessions/financial hick ups and see what happens. Prices go up into, during and sometimes afterwards. They then usually go through turbulence for a period of time…and finally, like clockwork, we see a correction. It’s a natural cycle.

  5. Let’s be honest – Garth is a cheerleader for lower home prices and with it, economic hardship. He is not really an analyst.

    This is not a dumb thing to do – there is much more money and less accountability if you just join one side (the money saving bears) and stick to it, selling your books to your own team.

  6. Good points Mike. Garth definitely has a hard time admitting when he is wrong. It’s hard to quit his site though :( I’m down to around two visits per week now. Is there some sort of Garth patch out there to help me kick the habbit for good?

  7. Looks like pending sales dropped every day during that cold snap. I guess we’ll see if it’s a trend or if it actually was the weather. I’m guessing it was just the weather.


  8. Jimmy,

    Al Greenspan who many considered before the crash “The greatest Mind in economics of his generation” failed to the see the Bubble, then the collapse. I have 2 University Degrees, and personally do not put much stock into assuming people know more being “System Trained” Vs “Real world experience”.
    Albert Einstein was classically trained as a Math Teacher…but i would still listen to him discuss theoretical Physics as being correct, you?
    Garth is quite savy as a financial analyst…and his housing predictions are more to help people NOT put 70% of ones income into a single home/Asset. Whats wrong with that message? thats the basic premise of his blog and it makes sense. the rest of it is for sensationalism and entertainment, which i enjoy.

    Now to Interest Rates:
    You are 100% wrong is assuming that Interest Rates go down with a financial Meltdown. or more specifically, you did not accurately state which goes down.
    – variable rates (BoC controlled) will be spiked down to promote economic growth through Credit (or debt) growth/expansion. i like to think of it as current artificial growth that borrows from Future Growth.
    – Bond rates, or the Risk to Cdn debt, should have gone UP, as people with new investment dollars will shun a country in a meltdown. They would actually demand a premium to that countries debt/Bond (think Greece and Ireland). this is what drives the 3-10 years fixed mortgage rate.

    the thing that did not drive the CDN Bond consistently high, was that CDN, AUS, GER and US debt were deemed ‘safe’ to other Global players so the money poured in chasing safe returns on fixed Income for pension funds, Mutual Funds, etc, etc, causing Demand to Strip Supply of CDN Gov’t and corporate debt and the Yield to be offered lower and lower until its where it is today.

    Long Story Short, no one can predict the Global direction of where the Bond Market will go (Not Greenspan or Garth…but maybe Einstein). However, if CDN Bonds were shunned back in 2008, we would most definitely have seen a different cdn housing market over this past 2 years. think interest rates at 8% vs 4-5% they have been.

    Anyways, for every outcome, there are economists and people who predicted “correctly” and others that predicted “Wrong”, everyone has a opinion. Like in War however, the Victors get to tell their side of the story.

  9. Entertainment, that’s what Turner is good @ and that’s how he made his money. If it was for me to put him in a category, I would definitely pick Jerry Springer, totally avoid typing his name in a phrase which contains names such as Einstein, Greenspan.

    ”Bond rates, or the Risk to Cdn debt, should have gone UP, as people with new investment dollars will shun a country in a meltdown. They would actually demand a premium to that countries debt/Bond (think Greece and Ireland). this is what drives the 3-10 years fixed mortgage rate.”

    Canadian debt is backed by hard assets (commodities), while Irish is backed by a few potatoes and the Greek one is backed by few ruins (with more to come). One does not have to be a financial guru to know that we are different after all.

    ”However, if CDN Bonds were shunned back in 2008, we would most definitely have seen a different cdn housing market over this past 2 years. think interest rates at 8% vs 4-5% they have been.”

    This is so Turner, something he is great at: predicting the past. “I was right on my prediction, only things did not happen as expected”

  10. Actually, I’m no raging Garth fan, but he was former Minister of National Revenue in the 90’s, and he is currently a licensed financial advisor based in Toronto. I would like to point out that most people would consider either of these as “financial experience”.

  11. Jen, he was Minister of National Revenue for 4 months back in 1993, that’s fact. How he got there only he knows, but this is politics, you don’t need to know much (if anything), if you know the right people you’re set.

    As for financial adviser, how hard is that really?

    How Easy Is It To Become A Financial Advisor?

  12. Movember day, thanks for the link. It casts a whole new light on Garth when he berates realtors for lack of education.

    The site says
    “As for the admissions requirements, quoting directly from IFSE’s website: ‘Admission into any of’s programs is open to all individuals. There are no academic requirements for entering the Investment Funds Program.’ Last time I heard, the pass mark was 60%.”

    I think the realtors program requires 80% ?

  13. Movember Day,

    Focus on the moustache, less on the legit facts.

    1 – Canada is not an export based economy (anymore). See generic blog link of made-up data below:

    Note, the mathematical difference between Export and Import value. How is Canada an “export” based economy given that we have a trade deficit??? I won’t even get into the issue of exporting Raw materials in order to buy back processed finished products…another time.
    To simplify, given that this blog is based in Alberta, I can only assume you mean Energy or Oil and Gas for your “export based economy comment”.

    See 2 below links on US Imports from Cdn. (Given that BC regulators will prevent any Export of global market priced oil and Gas to Asia given the fear of the Exxon Valdez crisis, we unfortunately only export the bulk of our production to the US.)



    Assuming OPEC standard ratio of 6:1 between Gas to Oil Conversion, Canada only exports ~60% oil to the US and 40% Gas. At $3.50 – $4.40 Gas, how long is Alberta going to be “kickin Ass” in this economy? Especially given the TransCanada toll on Producers to shipping that value to the US being ~$1.65-1.90? What is the break-even cost for typical producers, Do you know?

    I am sure you are no accountant or financial Guru yourself, but I can assume that you can conclude that a 40% haircut off of Net Income from the Canadian energy sector is not going to look good this coming fiscal year.

    For the Long term – I should also point out:
    • Gas Supply increasing in the US Shale Regions.
    • US politically is in favor of trashing our ‘Dirty Oil” export. , Canada needs to Export to other Markets that unfortunately our own cdn ‘environmentalists’ are against.
    Now, if you were referencing Forestry, Agriculture (thank god for the Russian crop failures this year), manufacturing….you obviously should know, that these exports are trashed. You can thank your Global view of our “export based” economy for that (Loonie increase here).

    2 – Ireland comment:
    Are you serious? Potatoes? Pickup a book and read before you write. Its embarrassing. Did hear that fact in the hockey change room, or from your Dad?

    3 – Garth:
    Speaking of Reading. If anyone actually read Garth’s “Money Road” Book prior to trashing him, you would actually know what the guys mission is about. I love when people trash someone for going against their personal “ideals” and have no real knowledge of what the person’s message is.
    Personally, by reading his book, it saved me thousands of dollars on cdn Tax savings this past year. It helped me generate a proper investment mix given my age and financial worth. All of which is a bonus.
    I couldn’t care if the guy is only a professionally trained hair dresser. His knowledge of our Tax Code is solid and Even Einstein would have listened to his Canadian Tax tips and financial advice.

    Mike Fotiou says: For the record, I have read all of Garth’s recent books. My issue isn’t with his financial advice but rather his real estate forecasts in which he has softened his “houseageddon” outlook with nary a blink and then lambasts others for holding his previously held view. Those that followed his advice a couple years ago and sold their primary homes based solely out of fear of a 50% haircut in real estate values have lost out in tens of thousands of tax-free dollars. It’s as though he purposely made outrageous claims to get notoriety, and now that he is more mainstream he has adjusted his forecasts to realistic levels. (Which coincidently ties in nicely to his financial advisor business because all of the people that believed him suddenly have no real estate holdings and a lot of cash to invest)

  14. Mike F,
    good points and i haven’t followed Garth’s Blog since it started in order to rebuttal, but i will assume you are correct.
    One thing i will comment on, is that if one picks a financial path and follows it stubbornly without change, that can lead to pain. Times do change and attitudes must reflect that.

    a couple of quick points:
    1 – sorry about the rant in the last email….too many Rum n Cokes before bed.
    2 – Everyone should have a Voice or opinion without prejudice, no matter what that piece of paper from the University says. Intelligence and Life experience first, Formal training 2nd.
    3 – as this is a real estate Blog. I get annoyed reading from CREA about how the Alberta energy is going to get us out of the economic hole Canada is in (and increase home values/prices) etc, etc. that the point of my previous post. CNRL and Devon just cancelled some of their Shale Gas natural Gas projects recently. CNRL are now letting go a bunch of employees. Basically, we are not out of the woods yet. What if Hillary does not sign that TransCanada expansion line??? big precedent.
    4 – if you make 100K….stop buying 800K homes with a 5/35 mortgage and matching Leased BMW’s for you and the wife. you are essentially poor!!!

  15. Garth has not even been close to predicting prices in the Calgary housing market. The CREB has done a much better job. He simply ignores his past poor forecasts, or he will come up with a convenient excuse. What’s inexcusable in my opinion is that his blog dawgs eat it all up without question. Totally blind and lacking in critical thought.

  16. Koz, my comment was is regards to Canadian Bonds and why they are AAA rated unlike Greek and Irish ones which are rated as junk bonds. Do you know how bonds get rated, and if yes can you explain why the difference. Now you don’t need to type a whole 10o00 words post and waste all that bandwidth on something unrelated to the subject, a short explanation should do.

    “I love when people trash someone for going against their personal “ideals” and have no real knowledge of what the person’s message is.”

    I assume you refer to Turner trashing that PhD dude, Lee I believe is his name. That actually was a blog entry that clearly showed the difference between the financialy literate and experienced on one side and the cheap, sensationalist, self promoted, know it all, used book salesman on the other side.

    “His knowledge of our Tax Code is solid and Even Einstein would have listened to his Canadian Tax tips and financial advice”

    I was about to say how ridiculous the repeated Einstein association was, when I’ve noticed you are talking about Even Einstein and not Albert Einstein.
    Most cult leaders are usually compared with some sort of divine entities or exceptionally gifted mortals and I see is no different this time around.

  17. Mike and others,
    What do you think is in store for Calgary RE over the next two years? Anyone have any predictions? (I know this is hard to do because there are a lot of factors beyond our control. It’s just for fun.)
    I predict a 15% drop in average and median by August of 2012 for SFH and 25% for condos.

    Also Mike, in April of 2008 when Garth’s book Greater Fool came out, the average in Calgary were $475k and $420k respectively. Today they are $455k and $400k. Not everyone has lost tens of K by heeding his advice. I guess those who sold in early ’09 are out some coin, but surely there are some that are ahead. It all comes down to when you decided to act on his advice. Some people love him and some people hate him. I almost sold in April of this year, partly due to points raised by Garth. If I had, I would have made tens of thousands in tax free income (comparing the price I could have had in April to the price I could get today). Garth has definitely been wrong on his timing a few times. You posted a graph here that demonstrated how emergency rates and relaxed lending standards influenced prices to the upside shortly after Garth called for the drop. You can’t blame him for not seeing that coming. I believe that we will be dealing with a debt binge hangover sooner rather than later. Time will tell.

    Mike Fotiou says: Calgary was unique in that during the recession we didn’t experience a surge in real estate values. If you were to take a look at the House Price Index, you’ll see that those that heeded Garth’s advice and sold in Toronto & Vancouver in 2009, probably lost out in hundreds of thousands of dollars. They actually sold at the lowest amount they could have gotten in years. “Greater Fool: How to Sell Low and Throw Thousands of Dollars of Your Equity Away” – not as catchy a book title. Other cities tracked by the index such as Montreal, Ottawa, and Halifax are at record highs.

    We all know almost every bank and institution (including CREA) is forecasting a decline in prices in 2011. Where Garth failed is that his timing couldn’t have been any worse and that he has substantially revised his outlook on the future of Canadian real estate while denying he has done so. His forecast on housing would be akin to having advised his clients to sell off their portfolios in March 2009 and then telling them if they bought stocks again anytime soon they were a greater fool.

    His message about diversifying, not having all your net worth allocated solely in real estate, his tax & investing tips, etc are all spot on. It’s his forecasting/timing that bites, and as Jen stated above, his apparent inability to admit it.

  18. Last post until i am back in the country, with internet access.

    1 – Bond rating agencies are the A$$ of the financial world unfortunately. If you have the skills to potentially make Millions at Goldman Saks, or 50k at the SEC or Moody’s…where would you work?
    The Bonds that trashed the US financial systems (MBS’s) were rated AAA by these agencies….so how reliable are they really???? the agencies do not LEAD with their ratings, they follow the professionals (like Goldman) after the professionals start to shun them and demand Yield Premiums.

    2 – Trashing opinions. No, my point was that the majority of Canadians have their Net Worth in a single asset (their house), nobody listens to anyone with a message that their is massive risk in that decision. Its easier to follow the herd and pretend that 500K bungalow in scenic Acres can only go up 5%/yr forever and offset a lack of financial portfolio.
    The same can be applied when Nortel was hot and crashing. No One wanted to listen that their decision to put 40% of their Invesements in a single stock is a bad one.

    3 – Einstein comment. my comment is still to show how ridiculous you still base institutionalized educated peeps as naturally knowing the right answer. the reference is to show that the smartest and most influential man in Centuries was not “School Smart”, so why mock someone just because of that?

  19. Koz,

    I appreciate that your arguments have some grains of truth but you have a habit of using “the straw man” which is something I used to see all the time on GT’s site until I stopped bothering.

    I suggest you google “Straw man” to find out more.

    Where in my post did I say anything about bond rates? After you criticized me for criticizing Garth about missing why fixed rates dropped, you then proceeded to explain why they dropped and why that was predictable (the Canadian economy was deemed safe). Perhaps you know more than Garth about the interest rate game – please pass him some hints in future.

    How is Alan Greenspan’s performance at the Fed helm prior to 2006 comparable to Garth not foreseeing low interest rates? That’s a weird thing to say – more Straw Man-ning.

    I hope you would agree that any degree in economics or at least an accountable, transparent measure of aptitude in economics is better than nothing of the kind, which is what Garth has. 4 months in a cabinet post does not count in my book. He came 4th in the leadership contest, won by Kim Campbell, before being given that consolation prize.

    That said, you later imply that because Garth has given some good advice like not ploughing all your funds into one investment class he is above criticism. His advice about real estate and stocks in the past has been terrible – a few seconds of Googling will tell you why – and vanilla advice about diversification and tax law doesn’t change that.

    Canada is and will be an export based economy and we will live or die by that sword. Just because we had a trade deficit because of recent consumer spending and currency adjustments, that does not change the fact we are one of the world’s foremost oil and commodity exporters.

    Trade deficits come and go – they are less connected with economic strength than you think. Check out Japan and the US in the 1990s for an example. I do agree that a prolonged trade deficit would be problematic for Canada.

    If you think that Greenpeace and environmentalism is holding back the Oil Sands, please check how many billions of dollars have been invested there in the last 2 years and where the oil will otherwise come from. If our incomes are dropping so badly from low gas prices the last 2 years, why are AB weekly wages up almost 5% year on year? Why are Canadian wages up that amount too despite a trade deficit?

    There are more oil importers in the world than the US. I agree that demand there will decrease but what about China? Oil is fungible. More oil from OPEC will go to China, less will go to the US and Canada will pick up the slack. This is already happening. BC first nations are irrelevant to this process. So are US Democrats, please check the last election results.

    “2 – Ireland comment:
    Are you serious? Potatoes? Pickup a book and read before you write. Its embarrassing. Did hear that fact in the hockey change room, or from your Dad?”

    This comment tells us a lot about you. Maybe instead of insults, you could have backed up your own point about how Ireland and Canada’s sovereign ratings are otherwise defined. In doing so you might realize why you are wrong. I am starting to think you might actually be Garth since this is how he often forms his points

  20. Jimmy
    ”This comment tells us a lot about you”.
    ”YOU” NOT ”US” TROLL!!!!!!!!

  21. “His message about diversifying, not having all your net worth allocated solely in real estate, his tax & investing tips, etc are all spot on. It’s his forecasting/timing that bites, and as Jen stated above, his apparent inability to admit it.”

    Turner does not bring anything new to the table when it comes to investment advice, there are 100 thousand + advisors that will tell you to diversify your investment. The “don’t put all your eggs in one basket” saying as far as I know came out long before Turner was even born. (it may have been Einstein though). There is nothing Turner says that have not been said before. On the minus side however, Turner doesn’t say much about the risks associated with any investment: the higher the return, the higher the risk.
    Even for very low risk investments, if I take into consideration how many times Turner was wrong in his investment predictions, I would find it a little uneasy to give him any of my money to invest. He talks nice returns, but at the same time he talks end of days and personally I just don’t see how those things can work together.

    One other thing I’m kind of not big fan of (and Turner suggests) is borrow money to invest. Of course he suggests borrowing, then he talks the high level of debt Canadians are into.

    As for timing, that determines whether you lose money or make money on your investment. As many have already pointed out, timing is not Turner’s thing, which is not to help his business.

    In conclusion, the way Turner conducts his business through his blogs, to me looks like a cheap 3:00AM infomercial with an old guy asking you to send him $19.95 in the next 10 minutes in order for him to share his secrets with you, secrets which will make you rich. That’s when you wonder, if the guy knows the secrets to richness why would he waste all this time to collect $19.95 from people who watch TV at 3:00AM.

  22. Garth is definitely a writer and can certainly write and re-write things to make them seem new, but he definitely has a hard time admitting being wrong….and he has been as have all of us on earth. He makes very valid arguments that can’t be ignored though. He is also wrong on his ETF advocating since they underperform their relative sectors/indexes, but hey, maybe he does ok for his clients, maybe not….I don’t know. He censors all posts to his site so we will never know unless some people with bad experiences with him go public on other sites (not saying there are any people in this situation).

    Give credit where it is due. He is right on many things. Price and percentage property value declines are nearly impossible to predict for anyone and you don’t have to be an “analyst” to see truths in markets.

    The bottom line is we are in a deflating market in the lowest interest rate environment in history….with the bond market dropping and yields rising, banks raising long term rates, it is a mathematical certainty that it will further affect prices. That can’t be argued by anyone. Higher interest rates 100%= lower prices because of less qualified buyers (i.e payment buyers), = less sales=higher inventory=price drops…..etc etc etc.

  23. Well said Cory. Garth is just another voice out there. Take what you like from his site and leave the rest. Right now I am leaning more his way than the Conference Board of Canada’s way. Mike has called the conference board out on their failed predictions as well. I think they’re calling for a 7% increase for Calgary RE next year. Mike, do you know if they have ever called for a decrease?

    Mike Fotiou says: I’m not sure, but their forecast of a 5-7% short-term year-over-year price growth is what they wrote in their June report as well.

  24. One can imagine what effect cutting back the maximum amortization from 35 years down to 25 would have on the real estate market.

    But TD’s CEO is recommending that this be done, eventually.

    In a brief roundtable with reporters after his speech, Mr. Clark addressed several other issues, notably concerns by experts that Canadians are taking on too much debt and a nascent move by lawmakers to push banks to tighten credit.

    “We’ve been an advocate of taking some measures now,” Mr. Clark said. “We see a world in which low interest rates and excess liquidity has created asset bubbles all over the world … We don’t have a problem here, but why are we not making sure we don’t create a problem?”

    Mr. Clark said Canada should eventually move back to allowing maximum 25-year mortgage amortizations from 35 years now because longer debt repayment leaves Canadians more exposed should the economy tank. He said half of TD’s fixed-rate mortgage customers in the United States choose 15-year paydown times. “[The] American consumer lost a big amount of their net worth and are trying to recover it by saving more … [Canada has been following a recent motto] of ‘Don’t save. Take a longer period to spread out your payments.’ I don’t think that’s good public policy.”

    Read more in the Financial Post

    RBC Housing Trends & Affordability

    It’s becoming more affordable to own a home, according to Royal Bank of Canada. Here is the excerpt from the report regarding Calgary:

    Calgary — Stuck in a low gear
    The good news is that Calgary’s housing market is no longer running in reverse. The bad news is that it appears to be stuck in a very low gear. Despite affordable homeownership costs, the recent pick up in area home resales has been modest, with levels moving up only to levels that last prevailed 10 years ago – notwithstanding the slump at the end of 2008, during the worst of the housing downturn.

    Weak demand to a large extent reflects Calgary’s still sluggish job market where employment has been stagnant at best in the past year. Meanwhile, availability of homes for sale continues to be plentiful, maintaining downward pressure on property values.

    In the third quarter, home prices fell in all housing categories, for the second consecutive time in some cases. This result contributed to further improvement in affordability in the area. RBC’s affordability measures declined by 1.2 to 2.3 percentage points, representing the third straight drop for two-storey homes and condominiums.

    You can read the entire report here

  25. I’m all for fixing the amortization to 25 years max. It should be done gradually and announced at some point in the future when home prices pick up again. It could mean short term pain for buyers and sellers … The groups that will surely lose out in the short term are RE agents and speculators though.

  26. So True Cory. I think to many people begin to get bogged down in details when trying to predict future prices in real estate, but when you take a high level look its quite clear that without anymore governement intervention in the market prices can only go down.
    The real estate market is slightly poor for a few locations and sluggish for the rest. And this during a time when we have apparently been out of a recession for over a year; interest are almost as low as they can go; and people are said to be spending just as much in the economy as ever. I don’t believe prices will “crash” as some people think, but the days of making money and speculating on houses is over for a good long while.

  27. People need to simply run numbers in a mortgage calc to see what a .5 interest increase will do to payments alone on ~400k mortgage. Funny how banks are “advocating” shorter amort’s when they are doing all the lending to these over extended people. I don’t see a big crash but the market is certainly doing what I thought it would do and that is a prolonged decrease in prices……more than likely back to ~2003-2004 levels. Interest rates are the key here (i.e bond market) and eventually the BoC rate will take part as well.

    I don’t know how people do it anyway. I have been in O&G for 20 years and make very good money and I can’t afford half the house people buy these days, nor do I want to. If something goes sideways (health problems, job loss, etc) people are in instant trouble.

    I saw a real estate piece on CTV news tonight about Calgary’s housing market. it was good for the most part because it was truthful…meaning the market is terrible and dropping. But then at the end they comment about CREA?? saying house prices here will rise ~5% next year so people should wait for a better market…this will effectively sink many people who should be selling now because it won’t happen.

    Strange days for sure. One thing I learned from travelling to several countries with a world of history attached to them, and I can say for sure, is if you look at all of known human history, humans are very resilient and things will work out eventually. Of course there will be casualties along the way but things will still move forward. Does it mean I think housing will come roaring back? No, not for a loooooongg time. But people will survive and move on, that’s for sure.

    Mike Fotiou says: At the end of the CTV segment, it was CMHC – not CREA – predicting a better 2011. CREA has forecasted a decrease in sales and average prices for Alberta next year.

  28. James Williams

    Nice post, there is no limit of investment in property.You have done great work to take the pricing list in percentage thats very good for those which are upcoming real estate holders. House is only worth what a ready, willing and able buyer will pay for it. But it can be depend upon the value of the the property
    but real estate holder must know about buyer is willing to pay. Real estate provide the facility to visit the location of that property and provide all facilities that are not provided by other forms through which clients are fully satisfied

  29. A couple of interrelated news stories to consider:

    We know David Rosenberg has been one economist warning of a Canadian housing bubble. Here’s an excerpt from a research note of his today:

    Did Canada experience some type of housing bubble? “We are worried about looming default risks but have been pleasantly surprised by the fact that the real estate market has eased, rather than busted. Be that as it may, a more pernicious turndown in real estate values cannot be ruled out, especially if the Bank of Canada follows the market and resumes in its rate-hiking program early next year.”

    Read more in the Globe & Mail

    Which brings us to the next article of the day, which is a case of bad news/better news.

    The Canadian economy grew at the slowest annual pace since the recession between July and September. The 1% rate of expansion was well below Bank of Canada Governor Mark Carney’s estimate of 1.6% annual growth for the three-month period. The silver lining in this?

    `This result is a clear disappointment, especially after the surprisingly perky growth rates seen earlier this year,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns, said in a note to clients. “It looks like the economy borrowed all the growth from the second half of the year and put it in the first few months of 2010. Bottom line for the Bank of Canada – there’s zero rush to raise rates again.’’

    Read more in the Globe & Mail

    Weird how a poorly performing economy might end up being somewhat of a stabilizer for real estate.

  30. Mike,
    In my opinion it’s better to sell too early then to try to sell too late. I’d hold off on the call for a bottom in 2009 until we’re clearly past the current depression.

    Mike Fotiou says: Weak sales are showing we aren’t out of the woods yet.

  31. I think it’s fitting to end this thread with a final comment about Garth Turner.

    Tuesday night, he wrote this regarding Calgary:

    So far this month 825 houses have changed hands in this city of 1,080,000 people. That’s down about 25% from last November, and off 7% from last month, which was down by a third from last autumn.

    Note to Garth: when using statistics, at least attempt to provide up-to-date and accurate figures.

    825 SFHs had sold up until & including Sunday. It’s now almost Wednesday. At the time of this posting there have been 888 sales – exactly the amount sold last month, and with still over 3 hours to go ;)

    So where did he get the 7% drop from? That’s right – he compared October’s month-end stat to November’s month-to-date stat. Nice.

    What really was the point of him manipulating the figures like this? Sales are still down about 19% year-over-year. That’s bad enough.

    Then he writes:

    Currently there are about 10,000 houses for sale in the city (which means sellers will wait, on average, almost a year for a buyer)

    Wait a second. I count exactly 6095 active listings at this point in time, or nearly 40% less than what he has reported – and that’s INCLUDING condos. Which means he’s probably including surrounding areas as well such as Okotoks, Airdrie, Chestermere Strathmore & Cochrane. Hmm…that’s not it either. I still only get 7086 active listings – INCLUDING CONDOS.

    I dunno, maybe he has included Metro-Edmonton. Bingo! That bumps us up to just over 11,000 listings.

    But notice to calculate his 1 year absorption rate (“almost a year”) he only included single family home sales for Metro-Calgary?

    So if you ever wondered why he rarely sources his stats, now you know.

  32. …Well, I guess it all comes down to whether you like Garth Turner or not! How can anyone think that this housing boom can continue? Mortages are based on income generated by labor. When the price of housing out paces the income of the average wage earner then there will be a correction. The scary part in this picture is that when housing starts slow so do all the jobs for “soft trades” such as drywallers, roofers, painters, couriers, truck drivers, lumber yard employees, warehouse employees, … the list goes on and on. Many of these people are the consumers of our housing boom that snapped up cheap mortages with little equity in their new purchase. The only thing that is supporting our real estate boom is speculative greed and the jobs that are supported by that greed. The dog will catch his tail sooner than later. If this was a truely sustainable boom then our population growth and per capita income would keep pace with our increase in housing prices.
    The reality is that most people are buying much more house than they need. The logic is that just like that of the pyramid schemes of the early 80’s, if I buy the biggest house I can today then I’ll flip it for a bigger profit than if I buy the house that I need today. Feed the Greed Brother, but remember you’re taking us all down with you.

  33. Updated…

    December 31, 2010
    Canadian Mortgage Trends article: Garth Turner, the Housing Crash, “Liar Loans” & More.

    The difference between 90% and 47% isn’t exactly a rounding error, so we asked Garth where he got his figures. He said he “doesn’t have a source.”

    September 29, 2010
    I wanted to comment on Garth Turner`s most recent post, specifically the following parts:

    Lastly, while I applaud the Teranet-NB index guys for trying to pull off a Canadian version of the Case-Shiller in the States, the data we’re being provided is both dated and suspect.

    Dated, yes. But guess what? The S&P Case-shiller index also runs on a 2-month lag. To reiterate the explanation provided by Scotiabank: Teranet is based on land registry figures and there may be between a one- and two-month lag in reporting sales transactions to public land registry offices. Indeed, when we correlate monthly percentage changes in the Teranet and CREA measures, the best correlation arises from comparing current Teranet readings to CREA from four months prior.

    To call it “suspect” because one doesn`t understand how the Index works or because the figures don`t jive with your view of the Canadian real estate market is misleading.

    Garth continues:

    Americans have constant access to various sources of market info (such as Zillow), and organizations like S&P actually do original research, rather than depending on the National Association of Realtors (the USA version of CREA) for their numbers.

    Like was already stated, Teranet doesn`t get their data from CREA – they get it directly from the land registry offices. They do the “original research” as well. If you recall, back in February of 2009 I contacted Simon Côté with National Bank specifically on the subject of them not using MLS data for their Index (click to read blog article)

    He goes on:

    Maybe if the Competition Bureau is successful in loosening the grip of the real estate cartel in Canada, some entrepreneurs will start giving us real-time and unskewed views of housing’s health. That would be cool.

    Making MLS data public is currently not even in the scope of what the Competition Bureau is after. And besides, how reliable is Zillow? Take a look at their “Zestimates” table. Read their own forums and you`ll see how far off the valuations are. Do you consider estimates as “real-time and unskewed views of housing`s health”?

    March 10, 2011

    In today’s Greater Fool post entitled “Happy Wife, happy life,” Garth says banks are attempting to circumvent the upcoming mortgage rules changes by “back-door amortization lengthening.”

    To quote:

    For example, one would think the country’s largest bank would know better than to circumvent, even unwittingly, the federal ban on 35-year mortgages, which takes effect next Friday. F murdered the little sucker because over the last year the overwhelming majority of all new loans had an amortization so long horses were envious. This, of course, encouraged over-borrowing and exaggerated the threat posed by a housing downturn (which 90% of people dismiss).

    How does this ban work to change things? By forcing people to make higher monthly payments for an equal amount of debt, with the goal of disqualifying those who should never have borrowed in the first place.

    But here comes the “Skip-a-Payment” option at RBC. Read about it here. Essentially the bank will allow people with 30-year amortizations to make only 11 monthly payments a year, with the 12th simply being added on to the mortgage principal. This (you can work it out) has about the same effect as turning a 30-year loan into one with a 35-year amortization, lowering average monthlies and goosing the interest the bank collects.

    Unfortunately, most of Garth’s sycophantic fawners on his blog wield this “new” piece of information with as much ignorance as one can muster on the internet.

    When finally an intelligent poster from Winnipeg calls Garth out, he backpedals:

    Yes, skip-a-payment is not new. Nor did I say it was. But it provides a route around new amortization rules.

    I don’t know about you, but when someone begins a sentence with:  “But here comes…” that implies a new arrival.

    I contacted an RBC mortgage specialist about the Skip-A-Payment option.
    Her response:

    We’ve offered that for as long as I can remember or at least as long as I have worked for the Bank which is over 20 years.

    Yup, just in time to circumvent the rules on  March 18th.

    Sneaky little hobbitses.

  34. Pingback: : Is Garth ready to throw in the towel?

  35. Pingback: Calgary Home Prices & Sales Increased In 2012 | Calgary Real Estate Review

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