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most of us thought this blog was dead and we all migrated to Squids blog including all the trolls too (you know who they are) but now we will have your great blog along with squids blog to visit.
Welcome back to real estate/Oil paradise Island call Alberta Gloria.
Health issues are closely tied to the economy. It is unfortunate, but also reveals how close to the financial edge many people live. Stress induced illnesses are up and all because the homeowner balance sheet is out of whack.
So, gov'ts think the solution is to throw more credit at them. Lower rates. Keep the illusion alive as long as the apathetic masses will take it and keep bailing out bankrupt policies.
Also, welcome back. The new comment system is nice, but the page really gets to be a pain to navigate when there are 500+ posts. Some of my comments went missing and some never got posted. Unfortunately, being popular has its consequences..... ☺
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We are currently at or near the second upward peak of the of the "M" due to bargain basement interest rates, and government intervention/money printing on all levels. Both these types of stimulus are unsustainable in the long term, as each begets a totally different set of economic malaise that harms the economy irrepairably in the long run.
We're fucked............and it is just a matter of time..........
*** If I may request Gloria, PLEASE kill the troll posts here so they don't try to ruin your blog again. ***
TD Bank raises real estate-backed LOCs by 44% to prime + 1%.
There is an interesting movement going on amongst my senior friends regarding their investment loss's. I would be interested on fellow bloggers opinions as to how this works as the only thing I understand is the 185.00 an hour consultation fee
http://www.macgold.ca/fees
http://www.renaissanceinvestments.ca/en/product...
But we would be over the CDIC limit. Do you risk it for .95%?
BTW: The we would only be in the bond fund for less than 2 years, would this make a difference in your opinion?
I'm currently getting 1.2% at canadiatire.
https://www.myctfs.com/Products/
My situation is a little different as I am holding my Brasilian government bonds to maturity in 2014 and they have an effective 13% yield once cashed in. Rates can fluctuate all they want during that time and it won't affect my redemption value, unless I cash out early. Which I have no intent of doing.....as I have already recovered 40% of my initial investment in interest paid to date.
Personally, IMHO, the only reason the US/CAD stock and bond market is still alive is the trillions of printed money Barry Obailout has given the "Plunge Protection team" to use in falsely supporting the US markets. It is an illusion......and when the Chinese want out of US debt, watch out.
I forgot to say, Madoff and all others were supposedly 5 star AA+ rated investors as was the paper they traded. You know, the ABCP.....stocks.....bonds......etc......
These ratings mean nothing and are fraudulent IMHO.
Right, as you've been earning 1-2% in "cash", you're actually poorer than you were before. Gold is $1000 plus per OZ, so your paper money buys far less of this precious metal (that is used as a hedge against fiat money) than it did before.
Rate increases? Things are too far off now to save the USD. Staying in cash has killed a lot of savings lately, as real estate prices have gone up, oil is staying at 65-70/barrel, food prices are up (and last time i went to the market they aren't coming back down). So what good is all that cash for, except as spending money for emergencies.
Carioca, you are in a different position in "cash"...you are doing things right. Most of your cash is in a FOREIGN currency, from a country that has a large amount of yet to be exploited resources. Also, Brazil is a country that is not as tied to the USA as Canada is in trade or monetary policy. The Brazilian currency will do well and appreciate much further than the Canadian currency.
If you must stay in cash, Mike-o-rama, then you should at least spread it around and buy different currencies or foreign bonds like CC does. Your Loonies, while not as bad as the greenback, will lose value faster than the 1% you get leaving it in the bank. And what about possible deflation? Well, don't believe those numbers the way the MSM spews it out at you... all it takes is a trip to the supermarket to see how far your money goes now. In the end bread is needed, but cheap chinese toys and gadgets (which have gotten cheaper and shows up in "deflation") aren't. Spend some of that cash before you can't any longer.
Debt is the long-term driver of the future of economy. Those who jumped on the RE buying bandwagon in spring and summer 2009 have made this factor a self-fulfilling prophecy. I was reading an article just last night about skyrocketing personal debt levels, credit card delinquencies and soaring debt levels. The stimulus and bailout has essentially benefited Wall Street and corporate America while Main Street remains huddled in rags with a winter of discontent coming. Every significant fundamental economic indicator for Main Street remains in a quagmire: debt level, job outlook, spending power, etc.
With job losses to continue into 2011 by most estimates there is no relief for consumers. I really don't know how those who bought in the recent spring and summer 2009 min RE boom will survive higher interest rates down the road, which will come at a time when some baby boomers will start leaving the market.
I don't see oil and natural gas prices attaining its bubble prices for a long time. China has pretty much finished its program of stockpiling resources and the world will see very slow growth if any in the next few yrs before the debt crisis delivers payback. Therefore, IMO the current economic picture and pattern in Alberta may very well be the template for the short and medium term. While job losses may not necessarily mount heavily I think we will see serious wage deflation as the big oil companies use excess labour demand to their advantage.
Encana has given everyone a 5% cut across the board. 2 of my former employers have cut 20% from wages........my wife, who works for Alberta Health Service, will be getting a wage freeze shortly..........and it goes on.
You make a good point about debt. C/C delinquency is around 12% +/-......banks are not foreclosing in the US because they do not want to have to sell the asets at true book value due to "mark to market" accounting rules, which would mean billions of losses and further trouble from which there is no bailout.
You'll notice that Foreclosures Canada and Find Calgary have both STOPPED listing the weekly foresclosure numbers on their respective websites. Previously, Calgary was averaging 100 new defaults every week acording to the Foreclosures Canada site data........what is up with that ? IMHO it only means one thing......numbers are really getting worse and the criminals (yes, that means realtors as well as investors) that populate the REIC must hide the truth from propsective greater fools, errrrrr, buyers and critics alike.
Back in 2007/2008 the unemployment rate in Calgary was in the %3-%3.5 range. People who did not know how to spell their own name were making $50k+/year. Now the unemployment is %7.5, great time for businesses to dump the uneducated and hire the professionals. Calgary still has a great job market, for educated and skilled only.
Foreclosures Canada and Find Calgary no longer report the forclosure numbers indeed, at the dealership you used to work, do they report how many of the people they've sold cars too, went bankrupt?
You say you've saved $275k for the past 8 years by renting and not buying. Can you provide a calculation of what your financial wealth would be, should you have bought a house 8 years ago and sold it back in 2007, or even today?
When news reports from credit bureau companies state that some 2/3 of Canadians are but one paycheque away from being flat out of cash, over 12% of C/C accounts are behind, people graduating from university have to publicly demonstrate on the steps of the Alberta Legislature due to a hiring freeze (because of our great job market for skilled people LOL !!!) it all becomes very relevant to anyone who is not wearing rose colored glasses and/or working in the REIC.
Everyone my wife knows who makes between $25 and $42 an hour and who bought RE in the last 3 years (lots, as they are pretty much all females in the hospital) is struggling to make their payments and not spendig money on anything......these people cannot even afford to go for a coffee with her or her other friends who are debt free and renters.
Car dealerships and BK clients are irelevant.....RE stats and foreclosures are relevant. You had better schedule some warranty work because when you put your mouth into gear, your brain stops working. All the other superflous crap you asked me you already know the answer to.
As for all the talk about renting/owning, I personally have no issue with people doing one or the other. It all depends on ones life style
and expectations. Are people who buy houses nowadays stupid as you and otheres here imply? I don't know, there are still many people out there who make very good cashola, are they stupid? dunno, stupid people usually don't make a boat load of money.
Are renters losers? No if you ask me, pay whatever the rent is, don't bother with any repairs, taxes .... and most important imo is the freedoom, don't like it here anymore, pack your suitcase and hastalavista baby, no strings attached no nothing.
We have a more normal job these days, with skilled people actually competing for a job, as opposed to clueless people getting high paying jobs with no questions asked. Services should improve, you can now take your car to a mecanic who knows how to pop up das hood.
As for your wife's co-workers beeing strapped for cash, should they make twice as much money starting tomorrow, they're still going to be strapped. Some people spend all the money they make + some, no matter how much they make, they don't know any better than that.
RE talk, one way or the other, is okay as long as it doesn't turn into obsession. As for giving advise to others, I would personally stay out of that. Just because something worked for me it doesn't mean you should do the same as it may not necessary work for you as well. People should keep informed and make decisions based on their on situation.
Bottom line: The average house is NOT affordable for the average person. We went from one family incomes many years ago, to two family incomes, to 25% down, to 15% down, to 5% down, to zero % down, so what's next? Pay me to live in a house? Lending standards have decreased and household incomes have increased (to a lesser extent). That is why prices are so high and out of reach with reality.
BTW... I've owned a few homes over the years, as I know others have on here. Owning is good. I would recommend it, BUT timing needs to be right. Since 2002, timing sucks. This thing is about to blow. Advice or no advice, anyone that buys now seriously risks their asset devaluing considerably.
But I could care less what others do, really. If someone wants to buy gold, sit on a hump of cash, or triple dip into their LOC, economic reality doesn't and won't respect individual whims. Housing is over priced and will fall. That is the reality that is going to unfold.
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In other words, many realtors will likely have to find new employment.
It's no secret wage and asset deflation is the largest looming threat to the world economy. Gov'ts lowering lending rates and basically dropping money from helicopters is not "growth", but forceful spending in an attempt to delay the inevitable. How that translates into future sales trends of over-priced assets is pretty clear.
- Cash for clunkers was a failure. Sept auto sales are anticipated to be "much worse" than expected.
- TALF was a failure. The fed simply spoon fed large banks hoping they would lend, but they didn't. All the big banks did was speculate on the stock market via their prop desks. Now we have a stock market bubble waiting to burst.
- PPIP has no takers. Version 3 is set to be released in an attempt to see what coercion can be done to save credit defaults.
- Foreclosures continue to rise. Shadow inventory in the US is sitting at about 3 years absorption of current sales rates. In Canada we have "shadow developments", which no one wants to acknowledge or accurately account for.
- CC delinquencies are at 35 year highs.
- Unemployment at 25 year highs.
Our economy sits at a serious cross roads right now. Housing data will largely be lost in the fray when the gov't balance sheets unwind.
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GM and Chrysler are still intact and new auto inventories at 24-year lows. I understand the concept of borrowing from future demand so sales could very well decline again. But after the crash auto sales were well below sustainable levels so this decline may be temporary.
http://www.bloomberg.com/apps/news?pid=20601087...
"TALF was a failure. The fed simply spoon fed large banks hoping they would lend, but they didn't. All the big banks did was speculate on the stock market via their prop desks. Now we have a stock market bubble waiting to burst.
- PPIP has no takers. Version 3 is set to be released in an attempt to see what coercion can be done to save credit defaults. "
The government was trying new programs on a weekly basis so pointing out a couple that were not utilized is hardly representative. I don't know what the libor rate is now, but I think its reasonable to say that government intervention "fixed" the liquidity crises.
http://www.calculatedriskblog.com/2009/05/three...
"Foreclosures continue to rise. Shadow inventory in the US is sitting at about 3 years absorption of current sales rates. In Canada we have "shadow developments", which no one wants to acknowledge or accurately account for."
What shadow inventory? There are one-third the number of single family houses under construction in Calgary than there were during the peak (from 6000+ to 2000). Multi-family under construction has decreased substantially as well.
http://www.cmhc-schl.gc.ca/odpub/esub/64167/641...
"- CC delinquencies are at 35 year highs.
- Unemployment at 25 year highs."
Is this Canadian or American and do you have a source? Alberta unemployment is currently about as bad as it was in the mid-90s. (I recognize that as of recently it is still deteriorating).
..There are many negative signs in the economy and government intervention is not necessarily good long-term. My opinion on the housing market is that gains made in 2009 will start to reverse and overall the market will be weaker in 2010. However I do not anticipate a precipitous price crash in 2010 due to continued low interest rates, government intervention, low resale and new construction inventories.
Ergo, less money to go around, means consumers, which drive our economy, spend less, which means prices have to come down, which means more layoffs to keep prices low, all leading to more RE defaults and lower prices, etc. We have just lived thru the greatast consumer credit fuled boom in modern history, and we must now suffer thru the hangover from same, so, get ready to earn less, live on less and pay less for everything......even as our goverment is virtually guaranteeing the demise of our economy thru variosu taxpayer funded stimulus programs which are assured to destroy what we had left. Wasn't it a party ?
It;s funny how the real estate industry some how find any positive spin on EVERYTHING, like "buy now because price is lower than last year" or " buy now because price has gone up from last year" or the most common one now is " now buy because monthly payment to lower than previous year (who cares if it's 2-3x more than the historical normal price compare to income)",
how ever I'm sure if selling price was lower but monthly payment was high the spin would be "buy now because price is cheap, (who cares if the monthly payment is high)"
I'm sick and tire of the the spin from these people, it's time people start ignoring them and start using their own brains, but that's hard to do for a lot of people.
In any event, the govt's handling of this recession has effectively delayed the onslaught and pushed it into the future. Consumers have borne the brunt of it as credit card delinquencies, soaring debt loads, wage deflation, personal bankruptcy levels, etc have shown.
Finally, those who bought in the belief that they will benefit from record low interest rates on their 25 year mortgages must pay down their mortgages faster during these 5 yrs to benefit and to offset the higher rates coming down the road. If you are simply struggling to make your basic mortgage payment you cannot benefit from low interest rates. Those who will benefit are the people who can somehow afford to pay their mortgage down faster in the next 5 yrs.
However, the truth is that most of these individuals will struggle to pay their mortgages because of basic affordability issues smack in the middle of a recession notable for rising unemployment, high debt and wage deflation, which will last for yrs. For a healthy percentage of those who bought in 2008 and 2009 they will not benefit from these record low mortgage rates, which was exactly the reason the RE industry told them was a great idea for buying.
http://www.globeinvestor.com/servlet/story/RTGA...
"I'm sick and tire of the the spin from these people, it's time people start ignoring them and start using their own brains, but that's hard to do for a lot of people"
You are not alone in these sentiments. Seems that the REIC directly and indirectly employs some 27% of the Canadian population........so government will allow the media to allow the REIC to lie, to keep the government in power and the people feeling smug, when really, they are stupid.
Buying RE is totally emotional, however, using logic in our bubble makes purchasing RE a non-issue for people capable of clear and rational analysis.
I guess my posts are getting largely ignored in the replies here as they've either become more of the "same ol' thing that worldclass posts" or it is finally accepted that the world governments are insane and pursuing the debasement of money.
Though I don't bat for the other team like Radley or Bearclaw, I would like to note that they may be right. Look at it this way:
1. Governments of the world debasing value of paper money
2. All the debt owed becomes easier to pay off as soon as this current deflation ends....which it will... there are signs of it everywhere.
3. True inflation is here... defined as an increase in the supply of money.
4. Calgary has this new Plan It idea that probably will get passed. It limits the number of detached SFH and favours multi-family developments that are attached. http://tinyurl.com/yelcenb
Pretty much everything that Squidly, CC, Garth Turner, and myself (during 2007 and 2008) SHOULD have happened. In fact, things would be better quicker if we were to have a true recession and home prices were to fall. Short term pain, but long-term gain. HOWEVER, because of the government programs we are in a whole different world now. I think those telling people to "hang on" are still probably right in the long long term...but it is irresponsible to ignore that time=money, and that many small families have held-off buying homes too long and missed this recent window. Will they eventually get to buy lower? Maybe in a few years... but even that is an uncertainty.
Official StatsCan canadian data shows we are currently in a deflationary zone of -0.8% YoY.
The Calgary Herald has an article about house prices going up 300% since 1980........I posted there in the comments section about 4-5 times as "Wealthy Renter".......since Mario Toneguzzi does not let "Carioca Canuck" post comments on his articles. Imagine that eh ?
The fact that I had the unmitigated gall to point out that the wife and I had saved the cash equivalent to a homeowner's equity in 1/3 the amount of time while still paying a high value of rent, or that the actual out of pocket cost of buying 30 years go only netted my parents a $40K paper gain after all the bills were added up, has the "brainwashed" recent Calgary homeowners in a tizzy, as it was akin to stating that God was a black Protestant female during the time of the Spanish Inquisition.
Studying the psychology of RE is most fascinating.........people throw logic, facts and reason out the window in pursuit of granite. All they have to do is stop buying.......it's a really simple response to a growing problem.
Holding a mortgage is renting money from a bank. And if you disagree with that, then you would agree then the interest you pay on the borrowed money is thrown away just like rent.
I forgot to add that in order for inflation to occur, banks have to lend and consumers have to spend. Neither is happening despite government's best efforts........banks need the printed money to cover the loan losses they are hiding, and the consumers are saving for the rainy days that are ahead.
Reading today that the unemployment rate for 20 somethings is 52% in the US........not hard to believe. Tomorrow's homewoners no longer exist.
Province unveils Fort Mac expansion
Alta. to spend $241 million over five years to develop neighbourhoods for 44,000.
This summer Imperial's Kearl Lake bitumen mine was given the go-ahead, and expansions at Suncor, Shell and CNRL that have been shelved could quickly resume. There is also a growing number of oilsands projects in the region.
Fort McMurray housing is among the most expensive in Canada, with average home prices around $630,000.
www.globaltvedmonton.com/money/Province+unveils...
Wow, it's a regular Boom. It seems like the Alberta government is trying to appear that it is taking care of it's people, or at least it's oil people. While at the same time they are laying off droves in the health care industry and proposing to close thousands of long tern care beds.
I'm just trying to point out that the government is giving money to service lots at a time when there is 718 properties for sale in Fort Mac. Do you think the Government may have some inside information on the future development of the Oil Sands??? Probable not. LOL
Joke !!! I am working on Suncor. Before 2013-14 no any activity.
The US will NEVER dig out of their mess and Canada will be dragged under with them. This is what happens when you have 2 decades ( the last being the worst) of unbridled, debt driven consumption. The party is over and soon everyone will realize it as the economies languish. Here in Canada, it will soon begin to hit allot of people just how grossly overpriced Real Estate really is as the masses begin to realize that the good times are not coming back anytime soon.
Young, unemployed and facing tough future
The unemployment rate shows the real picture. What surprises me is you would think that there would be a larger job recovery as stimulus puts people to work? Why wouldn't we? You pay one fellow to dig a hole and another to fill it in. My point has always been what comes after, when there is nothing left to drive the jobs. No "Cash for Clunkers" to keep dealers employed and auto plants humming along, no home renovation rebates which keep trades people busy and reno stores and suppliers jumping, no infrastructure money which keeps many thousands employed in the construction field busy. What stimulates job growth after this? Especially when your economy is over 70% consumer spending driven and that consumer is in debt to historical levels with zero or very little savings?
The sort of economic growth that we witnessed over the last decade or two had to come to a crashing halt eventually, it was primary driven by consumers taking on more and more debt. There had to get to be a point where the consumer could borrow no more. They borrowed without any thought of the future, they did not care how much debt they had, only that they could get what they wanted and GET IT NOW! Housing being a very good example.
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U.S. Job Seekers Exceed Openings by Record Ratio
With the pain that some baby boomers felt to their nest eggs I suspect that some will cash in from the recent stock market recovery and head for the hills and for a life of frugality as jsan aptly indicated. In any event, the next 5 yrs will be an interesting period as inflation, debt and baby boomers collide for a toxic mess.
As I stated, if anyone is buying now for the sake of low interest rates then that person better be prepared to pay down on their mortgage as an insane rate to benefit. Paying down extra per mth on your mortgage will go directly to your principal. Unless you possess the capacity to attack and reduce your principal aggressively over the next 5 yrs then your inability to pay anything substantially above your monthly pymt will see a dramatic increase in your interest rate in 5 yrs time, which means interest will account for a bigger portion of your mthly mortgage pymt when you renew in 5 yrs and it will eat away a bigger portion of your mortgage by the time you renew in 5 yrs thereby offsetting any gains you have made in reducing your principal for the first 5 yrs. I suspect that most who bought to take advantage of the record low mortgage interest rates will struggle to make their basic monthly mortgage pymt. They are unlikely to benefit in any significant way from their decision.
I agree as well. October will be a very interesting month in the stock market I hear.
If I was a baby-boomer and I didn't cash out already in Stocks, I would be doing so now and living a life without stock market worry.
Interest rates will be low for a long time untill 2014>>>
On the magnitude of the CMHC's impact in the housing market
http://marketdepth.typepad.com/marketdepth/2009...
and how to hedge home equity in Canada
http://marketdepth.typepad.com/marketdepth/hedg...
http://nymag.com/realestate/features/57904/
credit in 2010 is going to get ugly...
http://www.telegraph.co.uk/finance/financetopic...
keep moving the deck chairs people .no matter what she is going down.........