“The Bank of Montreal poured cold water on the idea Canada’s housing market could be headed for a crash” … “Expect the housing boom to cool rather than crash”…”While the housing boom is unlikely to continue unless mortgage rates drop much further, neither is it likely to bust.” … “In our view, the national housing market is more like a balloon than a bubble… While bubbles always burst, a balloon often deflates slowly in the absence of a pin.”
- BMO’s chief economist Sherry Cooper and senior economist Sal Guatieri, ‘No housing crash coming in Canada, BMO says’, CBC, 30 Jan 2012
“We’ve always said the market remains vulnerable to a correction in the face of a shock. It could also “pop” in the absence of a shock should current frothy trends persist.”
- Dr Sherry Cooper, Chief Economist, BMO Capital Markets 6 Mar 2012, on Toronto’s RE market
[hat-tip to Zerodown]
1. Something has changed in the last 35 days?
2. CYA.
- vreaa
BMO sees trouble in the GTA market. That’s why they brought back the 2.99% special. If you think The lower mainland has an excess of condos, the GTA has much more. Look for a sizable correction to start in the condo market this year.
So Shelly sold her house? Good for her.
Sherry is full of 💩
Great pickup Zerodown.
Filthy, money-grubbing liars.
The quote seems to be attributed to Sal Guatieri if I read the link correctly. No matter, the banks are making an effort to minimize their involvement. They did after all say that the Canadian housing market was vulnerable to a shock.
To my knowledge though they have NEVER before acknowledged the obvious. That this bloated market might POP in the absence of a shock. That’s a new one. We knew it all along of course but it is good to see it in print. So we are vindicated in making the arguments that:
1) housing prices can collapse even while rates are low.
2) housing prices are vulnerable to correct following a parabolic rise.
3) external shocks to Canada can destabilize our markets.
4) stock market corrections could trigger a major correction (that is coming).
5) the excess of credit and (credit granting) is at the heart of our problem
6) understanding that all markets eventually return to equilibrium following a period of credit excess it is quite clear that the banks have known all along that their actions in offering easy terms at low rates were putting the Canadian economy at risk.
Amen Farmer. Quick update from your Europe correspondent: in last 48 hours,banks over here have parted company with the bank of England/Euro Central Bank base rate and increased mortgage rates markedly (to a spread of >300 points in some cases) because a) they need to “rebuild their balance sheets” (get more cash in) and b) the cost at which they are borrowing on international markets goes up. Net effect = central bank wants a zero interest rate policy (ZIRP) to protect those with huge borrowing via low mortgage rates… but the news is … they aren’t getting it! Could US and Canadian banks be next to catch this particular dose of reality…?
Thank you Craig. I will dig into it later. We knew it was coming. But really, who knew it would be this very night. It is obvious to anyone who follows banks that once the lure of low rates had consumed the bulk of buyers that the transition must therefore be towards wider spreads. Rates must rise. Hey, its just business, right? And anyway, where the hell else will fresh profits come from?
What fools actually thought that once the banks had captured all the customers and maximized the mortgage lending opportunity that they would not develop any new sources of revenues?
Ha Ha Ha. Stupid people.
The banks know very well where their next meal is coming from. It will be on the differential between low savings rates, marginal bond offerings and rising borrowing costs. They don’t need permission to hike variables anyway. Screw that, they have shareholders to appease.
Housing is such a mugs game.
PS: Sorry about ripping into the English earlier, Craig. I had a rotten holiday every time I was over there. Always wondered why the English are so stressed and bitter. It just seems everyone wants to pick a fight for nothing at all. Even in the McDonalds….they charge you for a drink of water for Gods sake.
It looks like the banks may keep things on hold this month in Australia. ANZ were the first major bank to announce an interest rate decision following the RBA and decided to keep their standard variable rate at 7.36% today but they did put their three year fixed rate up to 6.19%.
“Housing market ‘balloon”, meet pin: Pin, meet housing…..”
The problem is that the bankers are now addicted to the low interest rate environment and expect it to continue into infinity. Thus, they are trying to make every last penny off the “spread” until it all blows up. It is securitized anyhow so they have nothing to lose, no matter how little they make. It just gets added to their bottom line at the expense of the taxpayer and debt slaves.
Make no mistake. The banks have gorged themselves on the biggest share of this countries disposable income and they have done so at the expense of every other segment of our economy.
When this bubble finally blows they will still get paid. It is all the small business and services that comprise our consumer economy that will suffer the fallout as consumption dollars evaporate and unemployment rises.
The dollars lost to the economy that would normally propel growth will instead be used to paying past obligations like mortgages and lines of credit. This share represents the majority of our income in Canada.
As debt is serviced in one area, dollars are lost in another. It is why I believe that low rates are effectively predatory as they will result in rising unemployment in the long run and an extra burden on taxpayers.
Those extra costs are effectively a subsidy for the banking industry. But it is the obvious inability of policy makers to effectively address this serious and growing problem that is at the source of our coming troubles
In America, jobs growth is not coming anywhere near to keeping up with the combination of natural population growth and in migration, never mind returning the country to where it stood prior to the Credit Crisis. The unemployment rate remains persistently high years into the housing collapse.
We can only imagine our situation will mirror what we see to the South.
So who will compensate the owners of small business that fail as a result of falling consumption? The banks? Not too likely. That group is busy raising bank fees to boost revenues and keep shareholders happy while they deploy resources abroad into happier hunting grounds. The new opportunities have been effectively drained here already and the primary business of mortgage lending will now revolve around renewals.
That means spreads will rise to boost bottom lines. Just watch.
Lets never forget that bank economists are employees of publicly traded companies. They are NOT credit counselors for average Canadians. They are under no obligation to offer an inside advantage to borrowers that will defeat their own lending practices. They do have an agenda and a bias that favours their own business sector and supports their corporate goals.
Last: They are not in the business of babysitting the general public.
Farmer for Prime Minister? Methinks you are an economist, sir…
You are too kind Craig. I will buy you a pint next time I am over.
Agreed. I once thought you could skip Farmer’s posts, but they are fantastic. Now I only skip chubster.
You drop the net to catch the fish, and raise it when it’s full.
Seriously, does anyone look to a bank economist when deciding whether or not to buy a house? I think we’re putting a lot of faith in the ability of homeowners to think “macro”. More often reasons for buying are personal, or based on logic unbecoming of someone with a doctoral degree.
We could say this is “spin doctoring”. It seems Cooper is more than qualified.
“pin doctoring”
I just found out my ex gf is now a mortgage broker.
I shudder to think that someone who was so financially irresponsible is now advising people on their biggest purchase in life.
I don’t know what you need for qualifications to become a mortgage broker these days, but she has no degree, worked pretty much in sales and call centers her whole working career, can barely manage her own finances.
But at least shes not bad to look at.
Are you bitter towards her because you only got to look at her?
Don’t quit your day job… oh wait.
My day job is @ Pokerstars.com. You should try it. Tax free too. I ain’t quitting this job.
Good looks, irresponsible with money and no brains…….. Hmm? What are the odds of that in the Realtor/ Broker/ sales business. She must be a real gem.
Brokers don’t advise. Brokers sell. You should congratulate her on finding a good job.
True, she will be pulling in more money then me soon. That is if the market stays the same.
Hmmm… I went out with a MB once (literally), 4Slices… Prior occupation? BlackJack dealer…
For what it’s worth I spent a few months after my undergrad as a blackjack dealer and there are some smart people in that field. It was hard to get a ‘real’ job afterwards though, thankfully I didn’t have to get into the MB field!
RU mad others will be tapping her?
For loans of course.
haha “While bubbles always burst, a balloon often deflates slowly in the absence of a pin.”
A banker schools on hydrodynamics. What happens when you fill a balloon with debt based liquidity and drop it from the third floor of a defective building?
“should current frothy trends persist.” Read aerosol-headed speculation.
You don’t spend 10 years in school without picking up a little something about useless analogies.
debtless, many thanks for your very funny posts tonight.