CRTC Chairman Likens Cell-Phone Company Profiteering To Banks Promoting Excessive Mortgage Debt – “It reminds me a lot of when the banks are trying to get people to over-pay for housing, above what their salaries determine.”

crtc-web

“Mr. Jean-Pierre Blais [Chairman of the Canadian Radio-television and Telecommunications Commission] also questioned whether Telus was fully apprising consumers of their eligibility for a discounted rate: “Do you push that? It is fine to say it is on the website. Are you actually encouraging people to keep their devices? … Why do I get the feeling that that’s not what you want customers to do, to actually go out and maybe invest and keep the device? It reminds me a lot of when the car salesman wanted everybody to be on long-term leasing or banks right now that are trying to get people to over pay for housing above what their salaries should be – and therefore all kinds of regulators have to come in to control that market so that people don’t buy above their means.”
– image and text from ‘CRTC grills Telus on pricing’, The Globe and Mail, 12 Feb 2013 [hat-tip CM]

Housing and related concepts have become go-to metaphors; yet more clear evidence of the speculative mania. Also noteworthy in that it appears to have become common knowledge that shady stuff goes on in mortgage financing and that borrowers are overextended.
Not quite completely an example of a ‘pop culture’ reference, but filed under our ‘RE References In Popular Culture‘ category nonetheless.
– vreaa

30 responses to “CRTC Chairman Likens Cell-Phone Company Profiteering To Banks Promoting Excessive Mortgage Debt – “It reminds me a lot of when the banks are trying to get people to over-pay for housing, above what their salaries determine.”

  1. Good find.

  2. Oh, look! The MSM must have gotten another infusion of cash from the realtors…witness today’s story, claiming that a new to “take aim at ‘myths and hysteria’ about housing in Metro Vancouver”. Riiight.

    Basically the premise is that if you take out the “high end” in Vancouver, it all ends up being affordable if you’re willing to live in the burbs. Which is the same thing that they real estate shysters have been pushing all along, ignoring the fact that the majority of jobs aren’t located where people live, and living in the burbs and commuting 1-2 hours each way is not a sustainable lifestyle. Also, based on the average family income, prices in the burbs are NOT affordable for many families. A $450K crap built developer box house in Maple Ridge is still pretty unaffordable for a family making $70-80K per year with 2 kids to raise. Not with the price of gas, taxes, childcare (if you’re a single parent or if both parents have to work) and food on top of that. And you can count the number of 3 bedroom units for sale on one hand. Not to mention the fact that you don’t get decent value for money in most of the Vancouver area, which is the real root of the issue.

    What is it they say about “lies, damned lies and statistics”? You can twist the numbers to mean anything you want…doesn’t change the facts.

    http://www.vancouversun.com/business/What+type+home+afford/7969716/story.html

    • Also, and interesting tidbit on Urban Analytics…

      “Michael Ferreira is a Principal of Urban Analytics Inc., Metro Vancouver’s leading new home research and advisory firm, and the publisher of The New Home Source, a quarterly publication that provides detail and analysis on all active and planned new multi-family projects throughout Metro Vancouver.”

      So basically he’s getting his money from the RE industry, and thus has a vested interest in maintaining the myth of affordability. Shocking, that.

      http://www.vancouversun.com/business/Metro+Vancouver+affordable/7969755/story.html

      • Ralph Cramdown

        With respect, I don’t think affordability is a myth. Buyers have to come up with the nut every month, or they lose the house. Now there’s a lot of people out there making stupid decisions, like buying a marginally affordable house in the ‘burbs and spending most of their disposable income on 2 car payments, insurance, gasoline and daycare, while losing hours in a dreary commute.

        But it was ever thus. Most people spend most all of what they earn. Centuries of classic literature describe people having trouble making the rent, or selling off the ancestral lands or living in a declining manor for which they can’t afford the upkeep. Post WWII, the baby boomers did quite nicely, helped by a number of factors. But that certainly isn’t normal.

        “All [women] ask of a cave beyond its shelter is that it be a degree more ostentatious than that of a neighbour’s wife” — Cicero
        “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” — Charles Dickens

      • UBCghettodweller

        I really like the Dickens quote Ralph.

        Classics exist for a reason other than frustrating high school english class students.

      • Ralph Cramdown

        “No quarters are provided for the officers. They draw instead a lodging allowance, which together with their pay and other incidentals fills each month with silver rupees a string net bag as big as a prize turnip. All around the cavalry mess lies a suburb of roomy one-storeyed bungalows standing in their own walled grounds and gardens. The subaltern receives his bag of silver at the end of each month of duty, canters home with it to his bungalow, throws it to his beaming butler, and then in theory has no further material cares. It was however better in a cavalry regiment in those days to supplement the generous rewards of the Queen-Empress by an allowance from home three or four times as great. Altogether we received for our services about fourteen shillings a day with about 3 a month on which to keep two horses. This, together with 500 a year paid quarterly, was my sole means of support: all the rest had to be borrowed at usurious rates of interest from the all-too-accommodating native bankers. Every officer was warned against these gentlemen. I always found them most agreeable 5 very, fat, very urbane,
        quite honest and mercilessly rapacious. All you had to do was to sign little bits of paper, and produce a polo pony as if by magic. The smiling financier rose to his feet, covered his face with his hands, replaced his slippers, and trotted off contentedly till that day three months. They only charged two per cent a month and made quite a good living out of it, considering they hardly ever had a bad debt.”
        — Winston Churchill charges his string of polo ponies on the credit card. Emphasis in the original.

      • Ralph Cramdown

        Did anyone else catch the glaring error in the Ferreira article?
        When he compares affordability between 2007 and now, he uses posted rates and 25 year amortizations for both. No doubt he’d claim this is an apples to apples comparison. The stretched first time buyer in 2007 would not have taken out a 25 year mortgage. All the peers he’d be competing with would have used 40 year mortgages.

    • Lovely quote in the same section under the heading “”Four level townhouses help improve affordability”. After showing how cheap townhouses are at a medium price of $765,752, the author then writes that “Prices at Montgomery are a bit higher than the median at about $1 million” Only in Vancouver would a difference of over a quarter of a million dollars (enough to buy a freestanding house in many parts of the country) be considered a rounding error.

  3. I have to wonder whether all the banks will just ignore this, or whether any would call someone in Ottawa and encourage that someone to call Mr. Blais and ask him to stick to his knitting. Just idle wondering on my part. Who would they call? Would the message get relayed?

    • The chair of the CRTC swings a pretty big piece of lumber in Ottawa, so I imagine he’d tell them to go cram it with walnuts, lest he begin an investigation of the banks’ television commercials or what have you.

  4. Real Estate Tsunami

    Wow, car salesmen, bankers and real estate, all in one paragraph.
    I wonder what they all have in common?

    • 4SlicesofCheese

      Comments are closed. Boo.

    • Thanks.
      Archived in the ‘What Bubble?’ sidebar collection.

    • The writer uses BC assesment data to support her assertion that home prices have not gone down in the past year. 2012 assessment data is 7 months old and a lot has happened since then. Proof? Just look at the growing for sale listings at below assessed value.

      I wonder what other “fundamentals” the writer is refering to when she states current house prices are supported? None are given.

      All the other “this is up”, “that is down”, crap is just cherry picking.

      This article is just another case of selective use and misrepresentation of data.

  5. It’s another story provided by Postmedia, publisher of today’s Vancouver Sun advertorial boosting “affordable” real estate. Saturate the media with propaganda. It worked for Joseph Goebbels. If only they could make viewing this page illegal.

  6. Here is a good candidate for the what bubble? section.

    “Michaela Hacker
    The bottom line is, there is no bubble and price will still go up. Lower end people can sell their home and move to higher end, the cycle will continue. Higher housing prices in Vancouver will benefit Calgary and Edmonton. Vancouverite will sell their high price home and move to the cheaper west to work for the ever expanding oil field. Canadian economy is benefiting from high housing prices and we salute the home owners who is holding the price high and the realtors who help them. They show true patriotic spirit in keep Canadian land value.”

    http://www.vancouversun.com/business/affordability/Vancouver+housing+affordability+index+shows+varies/7967396/story.html

    • Some snippets about the future of oil and gas revenues in Alberta. Cheaper oil and gas, if sustainable, will really give the U.S. economy a boost and make it a lot more competitive against Asians, the rest of the world in manufacturing and especially in petrochemicals.

      Oh, and good luck getting any pipelines through all the environmental, political, and native opposition and lawsuits quickly enough to make a difference in the foreseeable future.

      “The province’s oil and gas royalties are now expected to fall $6-billion short of projections in the coming year, Ms. Redford said Thursday evening. That would amount to a 45-per-cent drop at a time when economies across Canada continue to sag and the federal government dials back revenue projections – underscoring how closely national fortunes are tied to the energy sector…

      …Market access, however, is not a new problem in Alberta, and Ms. Redford’s critics say she’s now paying the price for overestimating revenue in last year’s pre-election budget…

      …The Alberta government is frequently bailed out by non-renewable resource revenues, either in natural gas, oil or through the sale of land leases. Without that, the government would need higher taxes, deep cuts or both to balance the books. Spending in the province has ballooned since its debt was paid off in 2004, far outpacing its population and economic growth. As such, Canadian Taxpayers Federation Alberta director Derek Fildebrandt says Ms. Redford should be cutting spending, not complaining of dropping oil prices. “We do not have a shortage of money,” he said.””

      http://www.theglobeandmail.com/news/national/bitumen-bubble-means-a-hard-reckoning-for-alberta-redford-warns/article7833915/

      “Alberta’s coffers are being hit hard by the steep discount oilsands producers are getting for their crude versus other varieties. Alberta’s limited access to markets means its bitumen is fetching about $40 a barrel less than West Texas Intermediate, a benchmark for landlocked U.S. light crude.

      The price gap widens to $50 when Alberta crude is compared to international benchmarks that can access the most lucrative markets by sea.

      A number of pipeline proposals to the east, south and west are in the works to expand market access for Canadian crude, but that won’t fix the situation in the near term…

      …”We’re accustomed to the ups and downs of resource prices and we’re used to the boom and bust. But this is not your average storm. This is a structural change in our key commodity and we must do more than wait for the storm to clear, and we are.””

      http://www.huffingtonpost.ca/2013/01/21/alberta-budget-doug-horner-finance-minister-wont-be-fun_n_2522161.html

      ““Historically, the price we receive for our oil has been a few dollars lower than Texas oil, and that differential had been manageable,” she said.

      “But, since September, that gap in the differential has grown considerably and the trend is getting worse for the foreseeable future.”

      The root cause of the problem is that Alberta exports most of its oil to the U.S., which is currently experiencing rapid growth in the production of oil.”

      http://www.journalofcommerce.com/article/id53978/–industry-concerned-about-2013-alberta-budget

    • Naked Official #9000

      Wu Mao has been deposited in “Michaela Hacker”‘s account!

      Long live the party!

      (The Real Estate Party!)

  7. Real Estate Tsunami

    You know what they can Do with their UDI!

  8. What a strange article – they don’t even disclose what expenses are counted in their “new” index – is it a bare mortgage payments, or with the property taxes, municipal charges for water/garbage, monthly condo fees and upkeep contingency reserves plus the potential loss of investment on the downpayment. Some puzzling index.

  9. I just reread this affordability story in Vancouversun. It is appalling to read what this Adrian Mastracci, portfolio manager at KCM Wealth Management,
    suggests?
    Read more: http://www.vancouversun.com/business/What+afford+housing+affordability+index+shows+varies+across+Metro+Vancouver/7967396/story.html#ixzz2L23535HJ
    :
    “Mastracci said most people have to start with a small condo and whittle down their mortgage to build up equity. “Plow any extra money you have against your mortgage and really go to town,” Mastracci suggested. “That is a risk-free investment you can make.”

    Since when the risk to loose the down-payment when/if the RE prices fall and be on the hook for the whole amount of the mortgage became a risk-free investment? It never has been a risk-free investment and now it is a very risky one when all the leading economists are saying that the RE in Vancouver is overvalued by at least 10 % – so the risk to loose at least 10 % is very real.
    I am wondering if this guy is on a Facebook.

    • What he was trying to say is that paying your mortgage down early is a risk free investment, which it is, regardless of the riskiness or wisdom of the original purchase.

    • Using that affordability metric they have in that article, $60,000 income, 10% down affords you $356,000 purchase price.

      Hard to imagine how you can work a budget around that, in fact I would like to see a breakdown of someones lifestyle earning 60k gross with a $350 mortgage.

      Only caveat being if you earn 60k after tax, fairly substantial difference.

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