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December 2, 2016 | Surprise

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


Another day. More reasons to fret about the future value of your home. They’re coming faster and furiouser than Vin Diesel flicks.

And then there were but two…
National Bank has just pulled out of the mortgage brokerage business, leaving only two major banks (Scotia and TD, for now) willing to fund home loans through the broker channel. The move seems a direct result of Wild Bill Morneau’s draconian moves to tighten up on lending, reduce loans to certain borrowers (kids, the self-employed, amateur landlords) and try to wrestle the gasping, bloated real estate gasbag softly back to earth before it blows up the entire deplorables class.

It’s “a stinging blow” says the leading mortgage brokerage site, and although National will continue for the time being to offer money through a third-party provider (Paradigm Quest), but this is no vote of confidence in the entire residential real estate scene.

“Anything but normal.” Ya think?….
Blood continues to seep out of Vancouver houses and rivulet down the gutters. The latest sales numbers are just as bad as the ones published last month. On Friday the Van board announced a 37.2% plop in deals during November, coming after a 38.8% rout in October. Ouch.

“While 2016 has been anything but a normal year for the Metro Vancouver housing market,” said cartel boss Dan Morrison, practicing for his gig at Yuk Yuk’s, “supply and demand totals have returned to more historically normal levels over the last few months.”

The average detached house price has dropped in price by just over $200,000 now. Last month the benchmark was down 2.2% from the previous month (26% annualized), and sales have collapsed 52% from this time one year ago. In the entire region, only 638 changed hands. Still working on his routine, Mr. Morrison put on his clown shoes and said, “detached homes are seeing modest month-over-month declines.”

“Wait and see” time in the Big Smoke…
Despite rising prices and a paucity of listings, some Toronto realtors are trying to frame news of the inevitable declines to come. “The urgency seems to be seeping out of Toronto’s real estate market as the year comes to a close,” reported Canada’s national house porn journal, the Globe and Mail, as the week ended.

“I think people have frankly gone into a ‘wait and see’ mode,” agent Janet Lindsay says. The reasons are simple, obvious. Trump. The bond market. Mortgage crackdown. And unsustainable prices in the GTA, where the average suburban house is now almost a million. There’s something in the air. Not snow.

Well, so much for that bronco…
Poor Cowtown. Things were looking so frisky for a month or two as house sales popped higher, breaking a year-long string of losses. But, alas, we are gelded once again. “The gains in last month’s sales were temporary,” says CREB chief economist Ann-Marie Laurie. “Stringent conditions for borrowers are converging with the current economic climate and weighing on demand.”

She means Wild Bill’s new rules, combined with 21,000 lost jobs, apoplectic landlords and tumbleweeds rivalling cars in downtown Calgary. Property sales last month were 17% below long-term averages with prices running about 4% less than year-ago levels. For the first time in almost three years the typical detached house is changing hands for less than $500,000.

Just eleven more sleeps…
After the latest US job stats, there’s no doubt American interest rates will be heading higher on December 14th. Close to 180,000 new hires came on stream, with the unemployment rate falling to 4.6%. Given American (and Canadian) demographics and a huge wave of retiring Boomers, this is now considered full employment.

Combine that with the bond market massacre since that goofy billionaire was elected, a stock market surge, looming tax cuts, inflationary government stimulus spending, raging greenback and an outbreak of trade protectionism, and you have the perfect storm for the rising cost of money. The Fed will move next month and (markets believe) twice more in 2017. Given Canada’s better job numbers and GDP growth, plus steamy bond yields, the next Bank of Canada move will be up, not down.

Well, that’s today’s news. Join me for a scotch? Or three?

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December 2nd, 2016

Posted In: The Greater Fool

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