‘Borrow To Get Ahead’ – “People are notorious for looking at the glass half full, or pretending things aren’t happening.”

Scotiabank Store Poster, image from this CBC News clip

Announcer: “The biggest concern for the Bank of Canada is still the record amount of debt that Canadians hold, debt that Carney expects to keep rising.”

Carney: “Some Canadian households are becoming overstretched, and Canadian households as a whole are being overstretched, which creates risk for the economy.”

Announcer: “Some experts argue that most Canadians can handle their debts, often backed by solid assets, like houses. But, even with strong hints interest rates may rise, Canadians appear to be ignoring the bank’s repeated warnings.”

Laurie Campbell, CEO of Credit Canada: “Well, to a certain degree I believe they are tuning it out, I mean people are notorious for looking at the glass half full, or pretending things aren’t happening.”

– from ‘Carney’s Warning’, CBC News, 18 Apr 2012

65 responses to “‘Borrow To Get Ahead’ – “People are notorious for looking at the glass half full, or pretending things aren’t happening.”

  1. The justification for Canadians’ record-high debt, and our supposedly strong economy, always comes back to our magic, global-trend-defying housing sector. Not jobs, not new businesses, not a more diversified economy. Housing. It’s a “solid asset”. This is code for “it can’t go to zero, so it must be a good investment!”. Well, even if RE depreciates 20-30%, a lot of households are going to be destroyed, and the economy won’t have a leg to stand on.

    • It seems to me that Vancouver housing is almost entirely determined by whatever monthly payment people can afford.

      As evidence, I’ve already pointed out chart on slide 15 of Somerville’s presentation here http://withinyourmeans.ca/resources.html. There are other similar charts out there.)

      [Easy link HERE to chart Jeff is referencing. -ed.]

      A consequence is that near-zero interest rates result in stratospheric prices in Vancouver.

      So, in what sense is a house a “solid asset”?

      • Great illustration of my point on slide 7 of bubblemania’s link:

        Click to access OBAA-ML.pdf

        That house is as rock-solid as the rickety teeter-totter it rests upon.

      • Yeah, its as charming as that wreck that is featured over at VCI in the article titled “Offered for 688,000”. That might just be the same 1st ave. house we were talking about here last week. Pictures are worth a thousand words.

    • mmmm – as a Canadian who has lived in Europe for too long, I’d say Canada’s strong economy comes off the back of a relatively low population and gigantic natural resources which will only be in more and more demand. Plus COMPARATIVE fiscal probity – just look at Europe…

      Of course, neither of those factors helps to explain the YVR -nuts housing market.

      • But Dilbert might.

      • Thank you. Without ‘healthy’ housing we go lower. But Canada’s low is considerably higher than Europe’s low.

      • mmm – as a Canadian who lives in Europe the words fiscal probity & Canadian economy are not often done in the same sentence more like rigged & protectionist.

        The only reason the Canadians have got away with it for so long is that no one has noticed or been bothered until now.

      • CanuckDownUnder

        if you think Canada has it good, try Australia. Better weather and on Asia’s doorstep. No wonder they call it the lucky country.

        Now if we could just avoid paying that coastal premium on real estate.

  2. Renters Revenge

    “Some Canadian households are becoming overstretched, and Canadian households as a whole are being overstretched, which creates risk for the economy.”

    “Some” or “as a whole”? Take your pick Mr Carney, it can’t be both.

  3. somebody spliced paul lynde with ollie north in cronenburg’s teleporter. killer brows. forehead is agent86-ish though. and could really use mullet.

    • +1000

      • the duality is requisite for an ascending goldman. solemn testimonial ollie north face for the public. gaggy paul lynde face amongst fellow friendlies backstage at g7 meets, davos and such.

  4. yltnboomerang

    I used to think places like North Van were stable as people were buying homes…nope:

    Spot the NVAN speculator:

    Sold March 10 2011 for $989K, re-listed a year and a month later for 18% higher at $1,169,000.


    I hope this speculator loses their shirt.

    • How about this one:

      Don’t know the previous sale price but was completely rebuilt in 2011. The asking price a few months ago was $2.4 M. Successive price reductions brought it down to $1.9 M. It has been at this level for a few weeks already with no takers…I’m guessing this is close to their break-even point.

      • 'name to be announced'

        I’ve written a program that runs every morning collecting details about every listing in the lower mainland and fraser valley – it takes about 20 minutes to run each day. It’s been going for about 5 weeks now and I’ve written little pieces that show me new listings (and if they are re-listings with a different MLS#), price changes, average listing prices per area / city etc etc. I’m planning on doing my part in documenting a lot of the things that normally get hidden and plan on keeping this program running indefinitely. Anyways, here a few funny listing price drops just in the 5 weeks:

        Down 29% to 1.9M

        Down 21% to 1.5M

        Down 22% for $3 million drop

        Down 22% for 2.75 million drop

        Down 21%

        Down 40%!!!

        Down 31%

        lot’s more over 20% off

      • You rock, ‘name to be announced’.

      • Nice job, ‘name to be announced’. I had considered doing do that too.

        You should beware of the Realtor.ca “Terms of Use Agreement”. It says:
        “The prohibited uses include “screen scraping”, “database scraping” and any other activity intended to collect, store, reorganize or manipulate or publish data on the pages produced by, or displayed on the CREA web sites.”

        They will not be happy if they find out what you are doing. Please be careful.

      • You may just be the Real Estate Yoda we have been looking for, ‘name to be announced’. I really respect those of you with the computer smarts who can start putting the data in order and bringing perspective to this madcap market. This is great news! Hopefully you won’t mind if we pick your brains a bit as the correction unfolds.

      • ‘name to be announced’,
        Any significant data from east Vancouver?

      • You know, ‘name to be announced’……if you are a good programmer and have some ideas to bring to the table there is a veritable mountain of money looking for the next big thing in Canada. I am talking investment dollars that are available to anyone with the moxy and the mind to build a national Zillow type site. As you know, none yet exists. Such a service could be gold mine though and if it is subscription based should be able to earn some fat healthy revenues. You should maybe think about it. Then make a few calls down South and partner up with the code writers and speculative investment gang. All you need to know is that there is literally billions of dollars floating about looking for a good idea and a Canadian Zillow would seem a slam dunk of an opportunity. Do you think those guys really want to earn 2 or 3% when they have the chance to go public with an offer? Gamblers all. Smart ones too. Just saying.

      • Try the link for a backgrounder:

      • 'name to be announced'

        F1, most of the East Van properties that have been reduced are 10% and the top was a 14% drop. Actually noticed a lot of oldish East Van listings increase their list price – no idea if they are selling or not but quite a few increases. As you can probably guess the majority of drops are in Van West, West Van and Richmond.

        Jeff, I don’t use the mls site directly and the site I scrape from doesn’t have anything substantial in the privacy statement but duly noted and I appreciate the heads up. I’d rather not have someone tell me to stop collecting the info.

        As far as Zillow, it is a great site – I’m considering relocating my family to southern california at some point over the next few years and frequently check Zillow for listings. I have no intention or desire to use the information I am collecting for any sort of monetary gain and any programmer could do what I’m doing here if they sat down for a day to figure it out – it’s fairly basic stuff.

      • 'name to be announced'

        That should say less than 10% for east van but the forum did not like the less than sign

      • Farmer, ‘name to be announced’ is right. Recreating Zillow in Canada has very little technical challenge. The only challenge is in getting the data. It is not difficult to extract the data from MLS (or some other site, as roygon is doing), but any for-profit venture doing so would be sued instantly.

      • ‘name to be announced’->
        Many thanks; please continue to share your findings with us.

      • We have a competition bureau for just these kinds of situations. All the cartel needs is to be challenged and to take down the walls they have set up. I would argue that the information they collect is actually public domain and that they have already been compensated through sales. We all need a little more transparency in the system. Meanwhile, I am not so sure that setting up a Zillow type system is really all that simple. If it were we would have one. There is years of research to gather past data, storage centers to be built etcetera. I was not really thinking of a system that runs on a home computer that anyone in the country might access. Bigger. Much bigger.

      • ‘name to be announced’, that’s awesome. Sometimes, I wish I was smart. I know it’s a lot of work, but still…… 🙂

      • The absence of a Canadian Zillow has nothing to do with how technical it is, the infrastructure involved nor the software to run it. It has everything to do with the data and the monopoly.

        Creating a script to scrape addresses and listing prices every morning is child’s play. It’s nice that someone is doing it, as long as they don’t get caught.

      • Monopolies are easy to break. We have rules for just that purpose.

      • It’s me, ‘name to be announced’. I setup a blog at http://vancouverpricedrop.wordpress.com that will have more info on the dropping expectations of sellers in the coming months and years and a weekly article “The Weekly Drop” that profiles the 10 sellers that had their expectations cut the most during the previous week. Hopefully Bulls and Bears alike find this informative

  5. Well for the 25% that get into bidding wars they need to borrow to get ahead. http://www.cbc.ca/news/business/story/2012/04/19/housing-survey-bmo.html

  6. Vancouverites just not willing to step up to the plate and do battle in bidding wars. Kind of like the Sedin twins?


    Though surprised that Albertans are still willing to get into bidding wars.

  7. Borrow to get ahead! Ha…..too damn funny! If only it was not actually sad given the outlook and current circumstances. Anyone ever seen this vid of how leverage destroyed America? Sounds awfully similar to what has been happening up here these past few years.

    The Crisis of Credit Visualized

  8. “On a Friday night in May of last year, I ordered pizza for my two boys. When the pizza delivery guy arrived with the pizza, he asked a very unusual question. He asked if I wanted to sell my house. When I explained that we liked our house and weren’t interested, he told me that he had a lot of great contacts in China and that he could get me a very good price. I again declined and he left telling me that his name was Mike and I could contact him if I changed my mind.
    Legend has it that Joe Kennedy knew that it was time to get out of the stock market before the 1929 crash when he received stock tips from a shoe-shine boy. His thinking was that by the time the shoe- shine boy was excited about the stock market, there was probably nobody left to buy and drive the stock market higher. It turned out he was right.”

    “For Canada’s sake, I hope they pull another rabbit out of the hat. Nonetheless, I don’t think it is prudent to have too much riding on that outcome because once the air starts to come out of a bubble it rarely comes out slowly.”

    Click to access OBAA-ML.pdf

    • Yikes, the 2012 Odlum Brown annual address uses the word “crackshack” (Page 21).

      I think the hoi polloi are starting to get the message.

      • Hilarious! Well, even the guys at Odlum can shake their hair loose and get all jiggy and relaxed with the lingo from time to time. Who ever said economists were just eggheads has never sat and drank with them after hours. You could not have a better evening. Swear.

        Two thumbs up for the report itself by the way. I like their outlook and perspective. I did get a laugh about the comparison at the end of the report between a ruined Van house and a Howard Hughs investment. In general I agree. Not necessarily with Hughs (as I don’t know the company) but with the principle of reducing exposure to commodities and housing as China has amplified both while increasing the risk outlook for rising rates.

        Right now sentiment is turning negative to China and some bloom has certainly come of the commodity complex in the past weeks. Even gold which had been on a decade long tear is suffering. Right along with the fortunes of the TSX which Odlum has pointed out is now looking less predictable. Nobody can read the future but I am one who is in favour of the flattening of commodities as this will tend to boost the bottom line corporate earnings.

        So that is good thing. We can make some good guesses on where the smart money will be flowing in the next while and where it will be leaving. Some real estate is finally going out of favour. When the better investors call the top and back their hypothesis with good data you can be sure those who follow the advice will be taking notice and getting out of Dodge.

        The sudden rush of listings in Vancouver may be the most telling sign.

    • Joe_Blown_Away_By_High_Housing_Costs

      Ever consider the possibility that your pizza delivery boy might have more education than you have? There are lots of people with master’s degrees working in low wage jobs, these days.

      The 1929 example of a shoe shine boy giving a stock tip is not directly transferable to the neoliberal context we are living in. This example rests on the assumption that the status of one’s job is a direct reflection of their intelligence, ability, and education. Due to a variety of factors that I won’t get into, that assumption is less likely to be true in the present time. Many people today are stuck working in low wage service jobs even though they have education and ability to do much more important work. It’s another example of the ‘misallocation of resources’ that VREAA often talks about.

      So ignore stock tips/real estate tips from low wage service workers at your own peril.

      I understand the point you are making, but the classist nature of your point is something that irks me.

      • The pizza delivery boy comment is a quote of the Odlum Brown dude.

      • Aldus Huxtable

        Outside of available credit there is little social mobility in the city of Vancouver.

      • The analogy of the shoe-shine boy is still valid. That is not to say it is wise to completely ignore the observations of those who are working “lowly” jobs. It isn’t, and never was. But when the pizza dude is getting caught up in the house flipping game, however tangentially, that is usually a good sign that the gig is nearly up.

        Back in the 1990s, I remember cab drivers talking about Internet stocks. They may well have had Ph Ds, but they, along with the suits, were caught up in a bubble that would not end well. Just as a menial job does not make one’s opinion worthless, an education does not make one’s opinion valuable.

    • that’s not so uncommon bubblemania.
      I’ve had wo realtors come to my house with offers…still waiting to hear something I can’t pass up

  9. cruise ship industry continues to provide great metaphors – for your cronified bankopoly

  10. TheNumbersDon`tMakeSense

    Thanks ‘name to be announced’ for your post – very interesting!

    • Watchdog -> Thanks very much.
      Some remarkable drops…. Richmond 60% year over year.
      Price will follow volume.

      • No problem. I’ll be posting more data as I compile more stats. For the moment, the biggest problem I see is that 2.99% mortgages did not help increase sales throughout Q1, indicating that buyers are waiting for lower prices to jump back in. Once listings start piling up, sellers/speculators will become fearful and start lower prices to exit the market.

        Right now sellers with high DOM listings are in denial. This will change when greed turns into fear. Always does.

  11. I just saw an interesting article by Mark Hasiuk of the Vancouver Courier regarding foreign investment in Vancouver.

  12. Joe_Blown_Away_By_High_Housing_Costs

    NDP won both byelections in BC!!! HAPPY DANCE!!!

  13. Victoria Grant, age 12, speaks to a group of 600 business people on the topic of the corrupt Canadian banking system. Apr 6, 2012. From the mouth of babes.

  14. Long time lurker…1st time poster….Here’s one for you…http://www.realestatenorthshore.com/p-listing-gallery.php?propertyID=2818 and now http://www.ecorealtyinc.ca/listing?id=259346495
    2 price drops since listed 30 days ago.
    Hope the links work

    • Thanks; interesting example; will headline.
      Welcome to the land of the posters.
      Give yourself the luxury of a unique handle…!

    • Anon -> Please clarify:
      This property (V939226) is still on MLS for an ask price of $1.649M.
      When was it ‘sold’ for $1.059M as per your first link?

  15. It sold in 2008 for $1,025M and the new ask price today is $1.599M.Sorry I should have clarified.

  16. 1st of all thank you VREAA for providing such a forum..it is much appreciated. I have been reading for sometime now. I posted this one as it’s in the area that we are house hunting..north of Edgemont Village. We just sold a town house in N Van and will be renting for a while.But,is this place an indication of the market in this part of town? I don’t see how?

    P.s re unique handle …I’m a bit on the shy side, so will stick with Anon for now!

    • You can remain shy, and anonymous, yet still choose a handle that allows the rest of us to follow your comments. … But it’s also ok to stick with ‘anon’… We don’t have any other ‘anon’s right now… Thanks for joining the conversation.

      • funny … supposing wordpress permitted only choice of handles from a common theme – say mythology

  17. Anon, I had been considering edgemont for the last 6 months or so because it is a great spot. One thing you should note is that just about every single listing close to the village for $1M to $1.4M have sold and very quickly and often above asking (my realtor emails me sold listings in the area as they happen). For example 929 Beaumont closed today at 1.3M ( $100K above asking) and it just listed 6 days ago which means it probably had offers the same day it listed. These are all being bought for “land value” and will likely be torn down. Also starting to see a lot of 8’s in the prices around there which is a new trend for the area.

  18. Thanks Roygon,we have been looking for a while now. My realtor has set me up with the Private Client Services so I get the updates on a daily basis.I can see that listings are up and as you point out things do sell fast. We are going to be renting for a very long time if this keeps up.

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