Garth Turner, the Housing Crash, “Liar Loans” & More

Housing-CrashPredictions of a Canadian housing crash have been unsubstantiated and have emanated largely from one man: Garth Turner.

So says Jay Bryan in this story from the Montreal Gazette.

In not so many words, Bryan suggests that Turner is more of a book promoter, and less of a real estate expert or economist.

We’ve spoken with Turner before. He’s a truly gifted writer and is always congenial with us by phone. But he is a polarizing figure to many.

Ignoring his unrealized housing crash predictions, Turner has made a fair share of other mortgage-related statements that industry experts question.

One example is Turner’s opinion on stated income mortgages. In speaking with Garth a few weeks ago, he unapologetically vilified stated income mortgages, referring to them as “liar loans.” (Stated income programs allow self-employed individuals with complex business incomes to qualify for mortgages).

Garth-TurnerHe warned that stated income borrowers face a high risk of scrutiny from Revenue Canada. He says it’s because applicants are declaring more income to lenders than they are declaring to the government.

“CRA is going to audit every one of these CMHC self-declared mortgages,” he told us. “You just count on it.”

That statement surprised us, so we asked CMHC about it. CMHC stated that they cannot share application information with CRA. CMHC spokesperson, Charles Sauriol, wrote, “CMHC is subject to the Privacy Act and must not disclose borrower information obtained from Approved Lenders to third parties.”

Another example of a Turner claim that we haven’t been able to substantiate relates to down payments. In this article, Turner says “nine out of ten new mortgages are high-ratio.”

That seemed counter-intuitive given our recollection of the numbers, so we decided to confirm with Will Dunning.

Will is one of Canada’s foremost authorities on mortgage statistics. He told us that CAAMP’s “fall 2010 survey data provides an estimate of current loan to value ratios. Among new mortgages initiated in the past year 53% have 20% or more equity and 47% have less than 20%.”

The difference between 90% and 47% isn’t exactly a rounding error, so we asked Garth where he got his figures. He said he “doesn’t have a source.” He apparently derived that number from some industry executives he spoke to a while back.

This isn’t meant to say that Turner is not right about a lot of things. But, everyone’s got their own agenda and being quoted in the media doesn’t make a person infallible. Nor does it ensure that all of one’s published facts are correct.

Rob McLister, CMT

  1. Couldn’t both Will Dunning and Garth Turner be correct?
    “Among new mortgages, 53% have 20%+ equity”
    “Among new home buyers, 90% have < 20% equity" could both be correct -- was Will Dunning talking about new *mortgages* or *new home buyers* (i.e. first-time mortgage holders)?

  2. Are you sure that Will Dunning and Garth Turner were referring to the same statistics?
    I think that they could both be right:
    “Among new mortgages” could include any type of new mortgage…
    “Among new homebuyers” would just be the first-time borrowers.
    I could see 53% of new *mortgages* having 20%+ equity, while 90% of mortgages for first-time buyers being < 20% equity.

  3. I realize that Turner isn’t known for making much sense, but why would CRA care if people get “liar loans”? I would think that all CRA cares about is whether you tell CRA the truth about your income. Whether you lie to others about your income shouldn’t concern CRA at all.

  4. Alot of renters are buying his book with high hopes that he’ll be right meaning they’ll get a chance for the bargain deal of a lifetime. Sure.

  5. Rob,
    I think you’re slicing things fairly thin here but see your point on the new mortgages differential. I am fairly sure that Garth’s numbers are missing one key piece by simple omission so would ask the question on his blog for clarification. Could it be first time buyers? As to CMHC and CRA’s relationship, I would not be surprized that info should not be passed but not sure they would tell you in a real CRA investigation/audit. It would be none of your business. I had them freeze all of my accounts in 2006 when I had already paid them the $5k I owed them which showed on a TD statement months earlier so they can do what they want.
    As to having to respond to Garth Turner as only one person with a tiny, tiny percentage of media “control” in Canada and almost the only one not drinking the KoolAid of CREA and mortgage brokers universally, it’s astounding that there has to be complete domination of media or the attacks and dissection of that person become commonplace.
    I would spend some time in your thoughts on the set up of massive debt for taxpayer mostly out of media view caused by CMHC allowing banks to essentially get off scot free from risk. This small point is great for your business and has juiced real estate while people have lost jobs never to come back overseas during 2008. However, it has skewed bank lending to small and medium businesses that would bring these businesses growth to replace some jobs but they are risky when not backstopped by CMHC. What is our government promoting here? Low down payments to people who can’t afford houses if interest rates go up (we can argue this one but only a fool would think bondholders won’t demand more) versus job creation in Canada where all manufacturing and professional jobs are slowly leaving. I think that we have overly bubbled real estate so I sold investment props after 20 years.

  6. Turner has an agenda alright, selling financial advice, mainly consisting of equities. He is to the stock market as Brad lamb and Phil Sopher is to the real estate market. Books don’t make you a lot of money unless you are Stephen King calibre, and although he is a good writer he is no King.

  7. Thanks for the due diligence. This loan/value data is not easy to find.
    Do you have any feel for how top-up loans that are not strictly classified as mortgages might change the picture?

  8. In late 2006 Canadian housing prices were crashing (in the slow motion way that they do), but reversed direction after the Gov’t introduced CMHC insured 0-5% down payment and 35/40 yr amortizations.
    In late 2008 Canadian housing prices were crashing, but reversed direction as the BoC dropped prime to the minimum possible, and the bond markets similarly bottomed, which results in the lowest mortgage rates in history.
    So I think it is a little bit myopic to describe the Canadian housing crash as “unrealized”. I think “twice averted at the eleventh hour” is a more accurate description.
    The Teranet yr over yr figures recently released seem to suggest that the rebounds of 2007 and 2009 were both short lived.
    I guess the question now is whether any further rabbits can be pulled out of the proverbial hat.
    Or alternatively, perhaps we are now into a new normal where Canadian housing prices are more expensive than almost anywhere else in the western world (price to income), and yet are indefinately sustainable at those levels.

  9. I agree with your comment that Mr. Turner is a great read.
    Celebrity and near celebrity opinion however should always be taken with a grain of salt.

  10. Further to my last comment, I had not realized the CAAMP info was survey data and had assumed it was industry data.
    Moreover, I just skimmmed the CAMMP report you mentioned and could not find the figures that were quoted as to loan/value of recent mortgages.
    FYI – on pg 91 of the CMHC’s 2009 annual report they do provide some industry statistics: For the outstanding balance of insurance-in-force, 29% of mortgages still have less than 20% equity to current (2009) prices. This seems low to me given the dramatic increases in property prices in recent years and makes me question whether the CAMMP figures you quote are accurate.
    Unfortunately, the CMHC does not provide further segmented info to properly analyze this.

  11. Quoted from above
    “So I think it is a little bit myopic to describe the Canadian housing crash as “unrealized”. I think “twice averted at the eleventh hour” is a more accurate description.”
    Why split hairs. Turner has been foretelling a bear market in housing for years. It hasn’t happened. He’s the man who cries wolf, 365 days a year.
    Turner will keep predicting a crash and eventually he might be right but that doesn’t make him any smarter than my dog at timing home prices.

  12. Vince,
    You say he’s been predicting a housing bear market “for years”? Could you be more specific? Since which year?
    You feel that the 0/5% 35/40 yr mortgages, and lowest rates in history are simply splitting hairs?
    They seem like pretty substantial tree truck sized hairs to me.
    ps. Smart dog.

  13. Vince,
    As another perspective on my point, and your rebuttal.
    Someone leaves untended candles burning in their house every day.
    They are told that eventually they will burn their house down.
    Twice their house catches fire, but it is noticed early and the fire department saves the day.
    So now they scoff at those who predict that their house will burn down, and continue to leave burning candles unattended.
    My point, leave your candles burning if you wish. But be forewarned of the consequences if you do so only in the belief that the fire department will always arrive in the nick of time.
    And make sure that you either have sufficient assets (or insurance) to allow you to rebuild if your house does indeed burn down.

  14. Hi Stats,
    This reply is to both your posts above and below.
    In speaking with Garth, he said: “90% of mortgage originations are high ratio” [i.e. have less than 20% equity]
    In his article he wrote essentially the same thing: “nine out of ten new mortgages are high-ratio.”
    Will’s data confirmed: “Among new mortgages initiated in the past year…47% have less than 20% [equity].”
    By definition, new mortgages include purchases and refinances and a “mortgage origination” is the creation of a new mortgage. We were careful to confirm that Garth meant “all” new mortgages and was not limiting the definition to purchases.
    That said, we have yet to find anyone in the industry who can corroborate that even 90% of purchases (or anywhere close to that) are high ratio. Just for “fun” I’ll compile our own internal data over the last 100 purchases to see what percentage we get.

  15. “Predictions of a Canadian housing crash have been unsubstantiated”
    “Ignoring his unrealized housing crash predictions, Turner…”
    Isn’t that the nature of predictions? That they are unsubstantiated and unrealized because they haven’t happened yet / come true yet.

  16. Will Dunning here, joining the converstaion a bit late.
    The data in question is from a consumer survey, with a sample just under 1,200, and should be reasonable reliable. While this data is not in the CAAMP report, I have generated these estimates from the survey database.
    The data shown is for mortgage holders who “During the past 12 months” have “Taken out a new mortgage on a newly purchased home/ condo”. It does not address the share for first-time buyers, which is no doubt quite high.
    As another point, about 20% of home purchases in Canada are done without mortgages (source: my analysis of the 2001 Census microfile – I have no reason to believe that the share has changed dramatically. And – save the long-form Census!!!). From a combination of data, the numbers appear to be:
    – about 38% of home purchases are high ratio
    – 42% are low ratio
    – 20% are mortgage free.

  17. Living in Vancouver, I would be SHOCKED if more than 50% of first-time buyers (as reported here) put more than 20% down on their first home. 1 bedroom condos cost $400K+, which means a first-time buyer would have to put down $80K. Who has this kind of money to put down on a 600 sq. ft. condo? Further, a complete SHACK tear-down “starter home” goes for $600K, which would require a $120K down payment. I find these stats very hard to believe…

  18. In September 1999, Garth Turner published the book “2020: New Rules for the New Age”.
    Here is what he was saying about housing back then:
    “Because real estate is no longer an inflating asset, buying a home and spending the next 15 years paying down the mortgage could be disastrous”.
    That was about 11 years ago or 12 if you read this tomorrow.
    He asks on his blog who is the greater fool? Well, people who bought that book and followed the advice would easily qualify for that “title”.

  19. Thanks for the attention.
    Readers should know, however, that the ‘interview’ with Canadian Mortgage Trends on which this article is based was done on an informal and not-for attribution basis in which I did not respond in detail because the purpose of the call was masked. That is hardly in keeping with the reputation of this publication or the integrity of the questioner, who did not identify himself as a media person but rather as “a mortgage broker looking for information.”
    On the liar loans, there will be audits – a statement I make as a former federal Minister of National Revenue. There are brokers around catering to the no-document business, as my blog has made evident. CRA will be knocking.
    Regarding the number of originations which are high-ratio, the quote provided is inaccurate and was not one I made. I am in constant and continual touch with senior mortgage sources across the country and can say with confidence that nine of ten new originations are as I described them. Perhaps an industry publication would be serving us all by finding its own data instead of just being an ankle-biter.
    But that would take some effort, I guess.
    Happy new year.
    Garth Turner

  20. Hi Garth,
    Normally I’d give deference to a source and I’d resolve this with you personally. However, since you have made several unfortunate allegations in public there is little choice but to reply here.
    To clarify for readers, you and I have spoken and emailed twice before this call. You know who I am, and you know my affiliation. In the event that you temporarily forgot, then identifying myself from “Canadian Mortgage Trends,” your returning of my call and going through the Canadian Mortgage Trends prompts, my mentioning of doing a story based on your statements, or my stating “I was going to quote you,” might have jogged some memories.
    Furthermore, there was absolutely no request made to keep any portion of said information off the record. We honour all non-attribution requests always and without exception. All of our industry sources will attest to that, and frankly, any contrary insinuations in that regard are defamatory.
    We 100% stand behind and will defend all quotes. CMT’s role is to report on data from all purportedly authoritative sources, including yours, in the same way any other media throughout the country would.
    Rob McLister
    Editor, CMT

  21. Mr. McLister:
    Yes, we have spoken in the past, including the time you offered me a writing spot in your publication (apparently withdrawn). I have considerable media experience, and can recognize an interview opportunity when it is offered. This time it was not, nor did you identify yourself adequately.
    But, no worries. We all screw up.
    Of more relevance to your readers, however, is the issue of stated-income mortgage qualification, which is being seriously abused, and the statistical nature of new originations, which goes to the heart of the little-equity, big-risk issue that Mark Carney wishes we would all discuss.
    BTW, I’d still enjoy contributing to your publication. Might as well get it right.
    Garth Turner

  22. I think some of the criticism of Garth’s track-record on housing market predictions is a little off-base. It is notoriously difficult to make accurate predictions on long-term market trends, whether it be mortgage rates, the housing market, or the economy in general. Anything can throw-off even the most informed analysis of anticipated events.
    Anyone, particularly someone in a very public field, deserves some commendation for putting their reputation on the line and trying to paint a picture of the future for Canadians seeking to inform their decision-making.
    That being said, I’m surprised by Garth’s reaction to Rob’s article, which had less to do with the accuracy of his predictions but more to do with his assertions regarding measurable stats and identifiable trends.
    Regardless of whether or not he was on the record, as a public figure who would not make assertions and prognostications without data to inform his analysis, I’m bewildered that, instead of presenting additional information to confirm or clarify his assertion, Garth has chosen to question the integrity of the blog and its publisher.
    It’s an atypical response to what should be a very typical situation.

  23. Anyone who thinks that CRA will not at some point connect with CMHC on this income matter needs a shrink. How come if you leave the country your passport triggers an instant memo to the EI offices informing them an unemployed person has left the country ? Are you that naive that big brother wants to know everything about you ? Wake up time.
    As per Garth, I have read his blog many times and I clearly recall he never predicted a “crash” as you continually call it, but a “correction” of 10-15% then a slow melt of 5% over the next couple of years depending on which over priced part of the country you live in.
    Maybe one stat you so called industry pros need to focus on is how much average income is needed to fund a 15 year bi-weekly mortgage on an average west coast house. I have owned twice and could easily afford a 15 year payment when interest rates were 11% with 10% down on the first house and 30% down on the second. Today that is impossibe on an average joe income unless you are living in Buttkiss Saskabush.

  24. Trust Mr. Turner to steal the term “liar loans” from the American vernacular and claim it for himself; he’s nothing more than a talking head for the big Canadian banks…
    As a Canadian who has lived in the USA for 20 years, the last six as a Mortgage Broker, I can state that Turner is, indeed, nothing more than a Limbaugh/Beck wannabe, bought and paid for by the Retarded Right. Unless Canada wants to end up in the same mess as the USA, he and his ilk need to be ignored by all clear-thinking,INTELLIGENT Canadians…

  25. Will – thanks for clarifying the background on these stats.
    It looks like the stat that (I believe) Garth Turner was referring to — % of first-time buyers with high-ratio mortgages — might not exist.
    CMHC’s mortgage reports are probably the closest data point.
    The 2010 Mortgage Lending Report covers data up to the end of 2009):
    On page 13 (table 48), CMHC lists the total Residential Mortgage Credit by type of lending institution.
    If you look at the 2009 vs. 2008 data, the total mortgage market grew by $65B in 2009.
    Then, you can look at table 47, and see that the amount of CMHC insurance in force grew by the exact same amount $65B.
    So – unless I’m missing something, this means that 100% of the mortgage credit growth in Canada was insured by CMHC! (i.e. 100% of new mortgage credit is high ratio / CMHC-backed)
    Now, we can’t see how much of the market growth was first-time buyers vs. people taking second mortgages etc., but it is clear that virtually ALL new mortgage dollars are high ratio.
    And, if you look at the growth in NHA (CMHC securitized) mortgages for 2009, that was $84B. So, the rest of the mortgage market (outside of CMHC-backed loans) actually SHRANK in 2009… notice that the Banks’ mortgage credit shrank by $18.5B in 2009.
    The IMPP (Flaherty’s purchase plan to take mortgages off the banks’ books and on to CMHC) may be a factor here, but I’m not sure if that even shows up in these numbers.

  26. This quote from Stats is not accurate: “it is clear that virtually ALL new mortgage dollars are high ratio”
    It ignores a key point. Not all insured mortgages are high ratio. Many lenders bulk insure low ratio mortgages. Therefore you can’t equate insured mortgages with low equity.

  27. “It’s an atypical response to what should be a very typical situation.”
    It’s not atypical at all, it is an old, cheap trick some cheap people(read politicians) always use. Unable to back your statements, no problemo, always try to discredit the questioner/source and divert the attention. The 2 weeks Garth was in the office he did learn many of these things from “Cheap guy’s pocket book” distributed exclusively in PH.
    On top of that, here is an example of how Garth Turner interprets and presents stat. data:

  28. The other apparent inconsistency is this statement from Garth’s public blog.
    “nine out of ten new mortgages are high-ratio.”
    He clearly wrote this yet he seems to claim the following quote from above is inaccurate.
    “90% of mortgage originations are high ratio”
    They are equivalent statements.
    I hate to say this because I’ve followed Garth’s blog a long time, but it looks like the case of a cornered cat. It is also surprising that Garth would try to discredit the author. He is usually a little more calculating than that and the impression it leaves is of someone attempting to divert attention from his own statements.

  29. “As per Garth, I have read his blog many times and I clearly recall he never predicted a “crash” as you continually call it, but a “correction” of 10-15% then a slow melt of 5% over the next couple of years depending on which over priced part of the country you live in.”
    Lets see what Garth Turner has predicted over time:
    On November 24, 2010 Garth Turner posted: “I have consistently suggested there will be a correction of up to 20%, followed by a slow and painful decline in prices. Where it ends is anyone’s guess. I do not expect a drop of 40-70% as in Phoenix, and never suggested that would be the case — Garth”
    This is where some of his “blog dogs” have taken issue, as some are still wistfully holding onto the promise of 50% declines in Canadian real estate values for years now. But wherever would they have gotten such an idea? Surely not from Garth himself, right?
    December 2008
    Don’t be surprised if these things happen
    * Real estate prices in Calgary, Edmonton, Fort Mac at 50% of 2006 levels
    Expect these things to happen
    * Falling house values until at least 2010
    September 2008
    The explosion in resale listings across Canada is but the first phase of a market meltdown which will soon move into widespread price reductions in all markets. Those price drops will be between 15% and 50% (as I previously forecast), based on local conditions. My numbers may well be revised in early 2009, and it won’t be for the better.
    July 2008
    We are in the early stages of this correction, and price reductions will be much more dramatic by October. Year-over-year, I am sticking with my prediction of a 15% national dive by this time next year, with some markets off twice that amount.
    July 2008
    I expect all major Canadian markets will correct by an average of 10-15%, and some areas will be clobbered with 30% declines by the end of 2008, or the early Spring of 2009. Does everyone agree? Of course not…Especially if you are a greater fool.
    August 2008
    Home values will be lower next year by between 15% and 50%, depending on the community
    August 2008
    The next on the hit list (in this order, I would say), are Vancouver, Toronto, Victoria, Regina, Winnipeg and Saskatoon. In those last three cities, the reduction in home values could look more like Armageddon, with drops of up to 50%. In Vancouver, it will be about 30% by this time next year, and in Torontopolis, 15% with more pain to come after that.
    September 2008
    The Canadian market is doing exactly what I forecast. This will continue. Declines in prices of 10% or 12% in Alberta will become 20% and 25%. Vancouver ultimately will be even harder hit, and Toronto values will drift lower at the end of 2009 by about 15%. Some neighbourhoods, far more.
    …and those are just some of the forecasts I quickly found while browsing his blog. Ironically, today when a local bubble blogger posted on Greaterfool that “Calgary will become Phoenix and see a 60% plunge,” Garth responded by saying, “Helping people rests on credibility, not hyperbole.” Whoa, talk about a policy shift.
    What’s even more tragic about his forecasts is that Canadian real estate prices actually went UP 20% between 2008 and 2009. So to “continue” predicting a drop of 20% followed by a slow melt means what about his previous forecasts exactly?
    On November 2008 he posted an artists rendition of the Bow tower, with his comments underneath stating: “This is what the future looked like. Remember it well.”
    No reason to “remember it well.” The future is here, and guess what, I see the Bow Tower rising proudly above the Calgary skyline.

  30. “my analysis of the 2001 Census microfile”
    Isn’t this kind of old? I am sure borrowers behavior has changed in the last 10 years.
    I think it is highly irresponsible for relying on 1200 responses to make a judgement about the entire population.

  31. LG,
    You have forgotten to leave out the key part where Carney dropped interest rates to almost zero to save an outright collapse of our real estate market. Kinda important isn’t it ?
    That action changed the whole lending dynamic as the ship was half under when Carney installed the “emergency” bilge pumps. Thing is joe public is clueless they are just rentals and have to go back to the shop very soon even though Carney has warned you.
    I noticed articles on the US mortgage rates going up,but we’re immune right ?

  32. Hi AS,
    A random but representative 1,200 respondents is actually a highly statistically valid sample size. The surveyor (Maritz Research) is one of the largest and most respected independent market research firms in Canada. You can be sure they are well-acquainted with sound data polling techniques.

  33. It seems that Canadians are contradicting themselves in the CAAMP survey. I guess they don’t consider mortgage as debt.
    As a whole Canadians have too much debt. The trend is up.
    I regret on taking on the size of the mortgage I did. The trend is down.

  34. Good post LG. I think somewhere deep down Turner knows he’s wrong but he’s beyond the point of no return. He can’t come out now and admit he’s made bad calls or he’ll lose his flock. My father once told me to beware of men who never admit to being wrong.

  35. I’m a fairly regular reader of both CMT and Mr. Turner’s blog, and I must admit I’m a bit perplexed by Mr. Turner’s reaction to CMT’s article as well. All discussion as to whether or not Mr. Turner felt the interview questions to be legitimate aside, the main question remains whether or not he can reliably substantiate what he claims. One can say almost anything “with confidence”, but unless one’s statements can be proven to be reliably correct, there is little use touting them as fact.
    I have no reason to believe Mr. Turner is incorrect in his assertion that his “senior mortgage sources” state 90% of new mortgage origination are high-ratio, but this could all be easily resolved if he would be so kind as to share his data. If data and/or sources cannot be produced, the information should be presented as what it is: unverified, unofficial information- not facts.
    Happy New Year to All!

  36. It sounds like it is difficult to differentiate between:
    1. first time buyers, who are almost all brand new mortgage initiators
    2. those renewing a mortgage on an existing property (still a ‘new’ mortgage?)
    3. those selling one property and buying another, initiating a ‘new mortgage’ in doing so.
    Ratios would be expected to be high in group 1 (perhaps that’s the group with 90% with less than 20% downpayment), and less so with groups 2 & 3.
    It would be nice to be able to see a clear, unambiguous break-down of these figures.
    It is remarkable that those in the industry such as Will Dunning (Chief economist for CAAMP) are not able to access and share this kind of data. It seems hard to believe that this data isn’t available. And it is even more remarkable that Dunning draws some conclusions by extrapolating from 2001 data points.
    Anybody who looks at charts of Canadian household debt vs income over the last decade knows that things changed radically countrywide in 2003, see:
    Is there any way that anybody in the industry can somehow clarify the underlying numbers?

  37. Regarding the Jay Bryan article itself:
    Isn’t anybody here concerned about him making statements like:”Unlike stocks or commodities, homes are an asset that’s resistant to big drops in value.” ?
    I think we can all think of numerous places where that’s been proven false… oooh.. perhaps a few million times in the last few years.
    Anybody bothered by an article that turns an obviously incorrect claim into evidence for it’s core argument?
    If you really believe that “homes are an asset that’s resistant to big drops in value”, it’s no wonder that you completely ignore the considerable challenges the Canadian RE market faces (record high debt to income; record high RE price to income; record (’emergency’) low interest rates; record high ownership rates; overextended consumers; sluggish economy; high loonie; etc etc)

  38. Mr. Carney has not dropped interest rates only for Garth Turner. There are so many industry experts and reputable financial analysts out there, however you haven’t heard any of them making the ridiculous predictions Garth Turner made.
    Garth thought that was going to be an easy call and the time for him to shine (for once), just to be caught with his pants down once again, showing his lack of understanding of how macroeconomics works. As always he’s blaming others for own failure, in this case Mr. Carney, Mr. Flaherty, Mr. Harper …
    But then Mr. Flaherty just got voted Canadian Press’s business newsmaker of 2010:
    What did Garth get voted for, other than himself voting himself the man of the blog on his own blog. Last time he was voted for something, was two years ago when he got voted … out by his electors.

  39. I don’t see a problem with that statement.
    You may be confusing “resistant” with “immune”. They mean two different things.

  40. Great work LG.
    Garth is on the business of selling fear.
    If you post your coments on his blog, he will censure them.
    Try it and see for yourself, he never allows any challanging comment or well argumented that might prove him wrong on his blog. On the other hand, vulgar comments get through regularly.
    I amde my mind a long time ago, Garth is trying to make a buck by selling fear. If a real estate publisher offered him a job to pump real estate instead, he will gladly switch to doing just that. He has absolutely no credibility.

  41. Canada has no exit controls – you don’t have to show your passport to Canadian officials when you leave the country, and the information certainly doesn’t get routed to Service Canada.
    Sounds like something you made up. “Big brother” is subject to some pretty powerful privacy legislation.

  42. Jim – please explain this further… why would someone pay CMHC insurance (thousands of extra dollars on the mortgage) if they did not need to?
    My understanding was that the NHA MBS program only sells mortgage bonds for mortgages that are also insured by CMHC, which are the 80%+ LTV or amortization over 25 years.

  43. Best Thread yet!
    With current home values, there are seemingly two separate perspectives based largely with two different demographic groups.
    Group 1, Homeowners
    Group 2, Non-home owners
    The Homeowner group seems to think that house values are going to be buoyant around todays values in most markets, however there will not be much for appreciation over the next few years..the Non-home owners think the current market is unsustainable and will eventually depreciate a large percentage. This is what I hear in conversations I have with real world people, when the topic comes up.
    I am not any sort of expert.
    Overall, the easiest way I can sum up what I see is current home owners are optimistic in these tougher times that they will not lose on their investment, and Non-home owners are pessimistic about the economy, the recovery, and the housing market.
    Again, I am not any sort of expert.
    Also, I have seen in these posts that Mark Carney has been referenced a few times. I think we all need to remember that his No. 1 goal is to keep inflation near 2%, everything else falls in after that…I think everyone needs to remember that.

  44. Ok-who should we trust, if we trust the expertise of this blog or Turner blog My be the government would be right. No one knows for sure.What happens in USA, happens in Canada. CHECK YOUR HISTORY BOOKS.

  45. LG,
    Useless post, Bernanke was Time Man of the Year in 2009, look where the US is now. George Bush was 2004,look at that disaster he has created. Kissing Flaherty’s rear end does not save an overpriced real estate market from correcting no matter how much lipstick you apply.
    Did you miss the part of the article you posted that says: “And as the Bank of Canada is expected to resume increasing its key interest rate”.

  46. Homeowners don’t typically pay the insurance premium on low-ratio insured mortgages. The lender usually pays it as part of its portfolio loan insurance.
    Lenders portfolio insure so they can preserve capital, offset risk (however tiny) and more easily securitize their mortgages. Consequently NHA MBS does include LTVs under 80%.
    The growth in portfolio loan insurance has been substantial. This is a point many housing critics miss when they criticize the rise in CMHC mortgage insurance. They have no inkling that billions in government-backed insurance is actually backing virtually risk-free mortgages.

  47. What happened in the US a couple years ago was indeed a tragedy and one that should have never been allowed to happen.
    In Canada, we are lucky enough to live in a country who has in my opinion one of the best Mortgage industries in the world, this is largely due to the high level of regulation that we have compared with some other countries (namely the US). While I admit we should not be over confident and say there is no chance of a similar crash in Canada, I personally believe that a Canadian repeat of the US crash would be fairly unlikely.

  48. Brett,
    Flaherty has done his share of dumb things (see the 0/40 + some), my post wasn’t to paint him as the perfect FM (he only looks perfect if you compare him to Garth Turner). There was always a rivalry between Flaherty and Turner ever since Harper and Flaherty kicked Turner out of the caucus. While Flaherty is in the spot lights nowadays (deservedly or not, not for me to say), Garth Turner on the other hand is fading into anonymity, running a bizarre blog resorting to extreme statements, posting animal porn pictures, basically doing whatever it takes to capture some attention.
    The reason I find his blog bizarre is because unlike other blogs where people have a normal debate on a subject, on his blog he and most of the blog dogs (such as your self) HOPE for a financial disaster to hit all and every homeowner, which in turn they believe will allow them to become homeowners themselves or become RE magnates by scooping cheap houses and flipping them 2 years down the road for %500 gains.
    This is about same as you want a job so badly, but the position is taken, so you wish the guy who holds the position gets fired or gets cancer or something so you can get it.
    As for interest rates going up, they already did and will continue to do so. They go up and down all the time, just like home prices. When Calgary hit the pick interest rates were much higher, ever since house prices went down then up again then down again and will continue to do so. Just don’t take your hopes to high on higher interest rates, you may end up disappointed.
    My advice to people is, if they want something (a house or whatever else) go out there, work hard, get an education and improve your social status. Don’t just sit back and wish ill on everyone else so your dreams can come true, not only that most likely is not going to work, but you could also become an individual no one wants around them, so you may end up isolated, stuck in a virtual world with depressed, chronic doom and gloomers the only ones to accept you. Stop staring at those animal porn pictures all day and go out there and live your life.

  49. While you guys argue back and forth on weather we will experiance a crash or not, Edmonton prices have declined 23% from their 2007 highs, sales are also of 30% yoy.

  50. Believe it or not prices do go down naturally on their own, without government intervention and without a crash.

  51. The opinion of a few mean little when prices are set by many. If real estate were really overpriced values would fall. Until most people agree with you Brett – which they don’t – prices will stay flat or slowly keep climbing. Either accept that or rent. Proclaiming “the sky is falling” year after year serves no purpose. Nor does trying to will the market lower while ignoring the fundamentals of supply and demand.

  52. I had 0/40 mortgage and have sinse lost my home to foreclosure, my wife left with our son to be with her parents, its all been a disater for me.

  53. Interesting to know — but, I’m curious what % of securitized mortgages are in fact conventional vs. high-ratio?
    It would be nice if this type of data was available.
    The only numbers that seem to get published are the high-level summary of the various MBS Pools:
    And, all you can get from here is an average amortization for a bucket of mortgages — not the average LTV.
    It is interesting to see how many groups of mortgages have average amortizations over 25 years. From looking at November 2010, 68% (119/175) of the MBS issues had average amortizations that were over 300 months (over 25 years).
    This seems to indicate that more than 2/3 of the mortgages that make up MBS mortgage pools are not conventional (since the amortizations are over 25 years).

  54. Holy smokes, LG
    What kind of person are you talking to this already beat up fellow Sam in this manner? I was going to address your plentiful statements here while you are obviously enjoying your life researching Garth Turner and making Sam feel even worse for serious financial blunders which led to personal tragedy but it became a moot point. No apology, nothing. And you’re concerned about Garth’s pictures? Enough said. Your attacking points just got less important.
    As said on my earlier post, it is funny that so many mainstream media are so threatened by one guy as Garth. With CREA pushing new releases with no critical comment by media and constant cheerleading of realtors (when has it ever been a bad time to buy a house? 1988-89 T.O. rings a bell), I smell changing sentiment similar to the Flaherty announcement blunders and Harper’s absolute iron fist control needs of a dictator. Things go up, things go down and time will tell but I don’t see how any rational person can see how this level of debt without quality job support will work well to underpin a solid long term economy. Banks lending risk free to 5/35’ers rather than small/medium size businesses? Makes no sense as professional jobs and manufacturing jobs go to India, Argentina, Bulgaria, China to name a few countries at my large high tech multi-national company almost guaranteed not to return without substantial changes. Will housing be our saviour? As long as we overbuild for years to come?
    Financial balance is what it’s all about which includes real estate but not overweight in investment props – which I was.

  55. Look at the bright side, you learned a valuable lesson: Don’t get a mortgage if you can’t pay it! Doesn’t that make you feel better??

  56. I’m curious why you feel that because someone feels housing is unsustainable they are automatically a non-home owner? I believe this to be one of the oddest statements I’ve read in a very long time.
    It would be the same as saying “Well if you don’t like kiwi, you must not like any fruit at all”
    Not all home owners are optimistic, and not all non-owners want a crash either.
    I think one idea you can ponder is that if you polled everyone you knew and asked them “If you had to purchase the home you are in now at todays prices, do you feel you could afford your home?” In most cases, from the friends and family I’ve asked, the answer is a very firm “No”. Given their standard of living, wages stagnant for years, they would be very hard pressed to make ends meat while affording mortgage payments on the home they currently live in that has increased in value to todays levels. Specifically talking purchases between 1999 – 2002 until today. (for arguments sake the people i’m referring to are middle aged, middle class, 2 kids, SFH, good jobs)

  57. Sure, Garth is a salesman who will spin facts to his advantage. But how does that make him any worse than the legion of salespeople who make their livelihood flogging real estate? If anything, I find Garth’s extremism to be a refreshing counterbalance to the equally extreme “buy now before you’re priced out forever, blah, blah, blah” I hear from the RE cheerleaders.
    In fact, Garth only sticks out, because his opinion is contrary to what is preached by the vast majority who only get paid (directly or indirectly) when a house changes hands. Some of the things I have read on RE agents sites were far more suspect than anything Garth has written, but were never challenged because they supported the majority opinion. Consumers really aren’t well served by the lack of thought diversity in the RE industry.

  58. > at my large high tech multi-national company
    I was going to say that you must work at my company… but the sad reality is that they’re all doing it…
    Productivity and ingenuity-wise Canadians can compete with any nation, but none of that matters to the greedy mega corps if our labour rates are 10x of those found elsewhere. But of course we need to make 10x to afford those darn expensive houses… Well, we know how this must end. Eventually labour costs will normalize. They”ll rise a bit in the low cost countries with 5 billion people and fall a lot in the high cost countries with 1 billion people.

  59. After your misinformed statement that insured mortgages are risk-free, it is your points that just got less important.
    Do yourself a favour. Before you impersonate an expert learn the true default costs on a high ratio mortgage.

  60. > I am very very depressed.
    I wish you well. Divorce is a difficult time. Financial troubles are often the straw that breaks the camel’s back. It does get better however. 5 years after my divorce, I remarried and everything is still great 8 years later.

  61. Don’t see tax increases coming? You’re a fool. Don’t see a normalization of interest rates coming? You’re a fool. Stick with real estate today if you’re high ratio? You’re a fool. Buy real estate today knowing that all of the above are coming at you? You’re exactly the sort of “Greater Fool” that Garth Turner speaks of.
    Those who would paste Garth Turner with the brush of being an alarmist are ignorant of what he has been saying, for many, many years in fact.
    To quote Garth from some 25 years ago, “It’s YOUR Money!!”

  62. You’re right about the real estate machine sugarcoating bad news. I don’t like it either but Garth Turner is no better. It’s obvious from his response here that the guy can’t keep his facts straight. The housing bears need a new leader that people can respect.

  63. Wow! Hit a nerve did he? It seems to me if this Garth guy is sooooo wrong, there’s no need to be sooooo defensive. People with a vested interest in the RE market remaining overpriced are certainly going to be upset if it corrects. That’s pretty much the ONLY reason anyone would be so bent on partaking in the massive denial that so many people in Canada are stuck in. Actually there’s another reason, people who paid too much for their house have a vested interest in the RE market remaining grossly overpriced.
    The problem you have is this: Just because you (real estate agent, banker, Finance Minister, Prime Minister, recent home buyer) stand to lose a lot if this happens, and you then go into massive denial because it helps you sleep at night, that won’t prevent a RE market correction from happening. I realize you need RE to remain overpriced. Unfortunately that’s not how it works. Every country who’s housing market heated up the ways ours did has or will have a RE market correction. Instead of facing it and making the necessary plans, you are wasting your time defending something who’s time has come to end. It’s over, all but the crying.

  64. No one is saying there won’t be a correction. They’re just saying Garth Turner has no credibility.
    P.S. Anyone can predict a correction. Only delusionals predict the timing of the correction.

  65. lg,
    You definitely don’t get it and never will. No one wishes ill will on anyone but if some idiot overpays for a car, a pair of jeans or used piano and the price goes down 2 months later cause too many people decided to sell theirs is this ill will ? Real estate is a “market” that goes up and down, not just straight up to the stratosphere.
    How you think this is a good thing only shows you and others your total greed factor. Guess you weren’t around in 81 or early 90’s when the “market” “corrected” based on overvaluation and more people selling than buying. Get with the program, the “market” is not a one way street as you will soon learn.

  66. More BS and more predictions, Turner and his flock of kittens are getting upset and can’t hack a little info diversification. Tuner has a way of twisting info in his favour that his heard cant see through all the barking and meowing, they all think that Canada is going down 50%+ and that is that, they will all be buying mansions in Van for $100k.

  67. Observation of a 51 year old guy: every asset appears to go both up, and down in value relative to other assets. Everything seems to have its’ moment in the sun. I’ve seen Real estate go through a couple significant ups and downs in my life. I’ve seen equity markets down and up and down again. I’ve seen interest rates go from reasonable to outrageous to unbelievably low. I’ve seen precious metals do amazing things over the past 30 years that I’ve actually paid attention. I am NOT saying that I’m a wise all-knowing guru on matters financial. Having made these statements… I know if I were heavily invested in Real estate in this market… I’d keep pumping it and attacking Garth and his ilk while I divested myself of said Real estate assets. Don’t misunderstand. I don’t agree with all Garth believes. I can’t however, agree with all I read on this site. If a site is going to be as one-sided as this one appears to be… then I’m glad that an alternate point of view is being expressed elsewhere. Time will tell. But geez… some of the people here are amazingly “married” to their positions… like their honour, or their lives, or their credibility were at stake…

  68. Perhaps “new” mortgage refers to those who did not have a mortgage before, whereas mortgage “originations” refers to the beginning of a mortgage by someone who may or may not have previously had a mortgage.

  69. Evidently hyperbole is the tool of choice for those not able to put together a meaningful rebuttal. Garth Turner doesn’t have all the answers, but you’re totally ignorant if you believe that all those who see a housing bubble have the thought process you descibed.

  70. I’m not sure if anyone will read the comments this far down but I’ll give it a try. First regarding Garth Turner, yes his writing is more entertainment and he sometimes plays fast and loose with the facts but it does make for an entertaining blog.
    But more to the point his message has changed over the 3 years or so he has been writing it. Let me quote him
    My message is not that Toronto will become Detroit or Vancouver turn into Phoenix. But there will be a correction, followed by an unknown number of years of slow melt. That means three groups of people are at serious risk:
    * Young couples who have purchased in the last two years with 5/35 Canadian subprimes.
    * Anyone with the bulk of their net worth – over 60% – in residential real estate. Diversify. Now.
    * Boomers or near-retirees who are house-rich and investment-poor. Soon you could be just poor.
    He has been hammering this point home for the last 6-9 months, Canadians and Americans are in for a serious economic crisis as Baby Boomers begin to retire. What do you think will happen to all those Mc Mansions when the Baby Boomers begin to retire with no savings and no pensions (and quite often with a large mortgage still attached to the property). They’re going to dump them on the market in a desperate attempt to raise money fast.
    Housing Bubble yesterdays news, retirement crisis today’s news.
    Rob (aka Garth’s blog dog) Lederman

  71. Hey Tunder Bay dude,
    Upset? Are you deeply connected to real estate only going up?
    CMHC insured loans are risk free to the banks, no? So, they don’t go lending to those small/medium businesses which might help save our economy as big multinats leave. Of course, the young couple’s credit rating is screwed – that’s obvious. So, what was your point?
    CMHC example – You get a mortgage for $95,000 on your $100,000 home purchase. It is high ratio so buyer pay a hefty CMHC insurance premium. Next year buyer loses job, can’t make payments and the house has dropped in value from $100,000 to $95,000. The bank forecloses and sells the house for $90,000 but the mortgage amount owed is still $95,000. Bank claims against the insurance for the $5,000 ($90,000 – $95,000 = -$3,000) shortfall. Bank is risk free, no?
    If I need education, I am all ears as real estate is not my racket – just a past investor but time for exit was right. I have never proclaimed myself as an expert. Did you read that somewhere?
    Go Canada Go…..

  72. Finally I’d like to add that very very surprisingly Garth’s investment advice is top notch, what every you feel about his blog his book Money Road is excellent
    As a knowledgeable person on investing I can’t say enough good things about his investment ideas, they are top notch
    And no I’m not paid to say that
    rob Lederman

  73. How can you call this site one sided? All kinds of differing opinions are allowed to air here. Do you realize how contradictory you sound by defending Turner and then accusing others of being “married” to their positions? Step back and read what you just wrote.

  74. All Garth is saying is don’t put the bulk of your net worth in real estate or you’re likely to get burned just like the Americans…and the Irish, and the Spanish…and the Greek…and the Portuguese…and the British…
    I’m pretty sure he has nothing against owning real estate, he just warns that if that’s ALL you own you could be in trouble.
    But whatever… Realtors are like travel agents, paying someone too much to do work that anyone with half a brain and some spare time could accomplish themselves.

  75. Brett, my question to you is: why are you so concerned with what other people do with their own money, or the money they borrow from the bank on their name? Why call them names? They don’t take the money from your pockets do they?
    “How you think this is a good thing only shows you and others your total greed factor”
    Think of what thing to be good?
    Here is what I said:
    “As for interest rates going up, they already did and will continue to do so. They go up and down all the time, just like home prices. When Calgary hit the pick interest rates were much higher, ever since house prices went down then up again then down again and will continue to do so. Just don’t take your hopes to high on higher interest rates, you may end up disappointed.”
    Which part of the above don’t you understand?

  76. And now for my final thought:
    Garth, getting called for ridiculous prophecies that have never come to fruition, is not hate. Benjamin Tal (your good buddy Benny, as you call him) said this about you back in 2009 at CAAMP: “It’s irresponsible to say we’re in a bubble”. Does that mean that he hates you? Or is it maybe that he never even heard of you? If you want to hear what bitter hate sounds like, you should read the comments on your own blog.
    Year after year you call on the media, the government, the “Cartel” … blaming them for your failed predictions: “I would have been right, only if the media wouldn’t have said this or the government wouldn’t have done that …”. Yet year after year the “Cartel” was right and you were wrong:
    CMT and many other websites/organizations, collect and provide valuable information to readers. Without that kind of information, there would be nothing for you to comment on, there would be no, no blog dogs, on the bright side you wouldn’t be wrong day in and day out, either. What am I saying here? Even confronted with clear evidence you were wrong, you still claim you were right … well there is still hope, maybe one day you’ll grow a pair and get some credibility for once.

  77. So are 1000’s of other financial help books that don’t rely on the use of fantasy stats or sensationalism.

  78. The problem is, that is not “all” Garth is saying. Garth has been misleading people about:
    An imminent housing crisis for years
    A “risk” problem with mortgage insurance that is totally unsupported by fact or reality
    “Irresponibility” of lenders’ underwriting. His distortion that 90% of new mortgages are high ratio proves how uneducated he is about mortgages.
    There are other housing critics who are respected and use facts to support their case. My advice would be to follow them instead.

  79. Edmonton home prices are down nearly 25% from peak. What does it take to be classed as a crash?

  80. First time buyers are not the main source of brand new mortgages. (Nothing personal. I realize you may not be familiar with the mortgage technicalities.)
    You need to understand what a “new mortgage” means. A new mortgage is simply a new mortgage charge that is registered at land titles. This happens whenever someone mortgages a new property or refinances.
    On a “renewal” no “new mortgage” is created. The current mortgage remains in force or is assigned to a new lender.

  81. Turner was clearly caught with his pants down on this one. In the words of CREB president Diane Scott, “I have no idea where Garth Turner gets his information.”
    It’s odd that the mainstream media doesn’t call Garth more on his innacurate statements. There’s no shortage to choose from. I have a feeling Turner will be getting a lot less press in 2011.

  82. There are some errors in your logic.
    Not all buyers are first time buyers. I looked at Turner’s blog and he didn’t limit his statement to first time buyers.
    Not all Vancouver buyers are domestic. A big percentage come from overseas and affordability is not an issue for these people. One could argue that foreign ownership restrictions might have more of an effect on Vancouver prices than mortgage rules.
    Vancouver is not representative of Canada. There are hundreds of real estate markets in Canada. Vancouver is just one city, albeit a big city. Take Vancouver and Toronto out of price indices and you’ll see a dramatic difference in price appreciation nationwide.

  83. I think you’re missing the point. Turner has predicted a housing crash in a specific timeframe numerous times. He’s been wrong every time. That makes his predictions “unrealized” in every sense of the word.
    In life you get three strikes but this guy has had dozens. For some reason his strange little cult keeps listening. I don’t think even David Koresh was as good a hypnotist.

  84. Let us get something straight. Garth is a salesman. Period. He knows how to sell and he can sell well! Look at all his loyal prospects on his blog!
    Generally you can’t sell books full of predictions that have been shown to be wrong unless you can sell like a machine! And Garth can sell!
    Now, Garth will now be helping Wellington West shill their financial products and earning even more commissions!
    Sad Canadians who buy from him, but hey, this is a free market! Sales is the best profession to make sick coin! I should know – I’m in sales!

  85. Quoting Verbal Graffiti – “A “risk” problem with mortgage insurance that is totally unsupported by fact or reality ”
    You don’t see the risk? Do you know anything about the CMHC, how it works, or who it is funded by?
    Got a newsflash for you. If half of the people who have bought RE on high ratio mortgages in the last 3 years go into default, (which is exactly what permitted me to scoop up my current home at 30% below market value by the way) and the CMHC has to step up and cover the insured losses to the banks ($40k on my home), who have written these mortgages that never should have been in the first place, the Canadian taxpayer is in deep, serious trouble.
    The problem, as I see it, is that far too many people have bought into this silly notion that home ownership is something more than what it actually is. A house is nothing more than a bunch of bricks, mortar, wood etc, assembled on a chunk of dirt that is not, and never will be, worth more than someone else is willing to pay for it.
    Taxes are going to go up (they must in order to pay government debt), interest rates will normalize (as dictated by the bond markets), utility costs are on the rise, wages for the most part have stagnated, GIC’s and mutual funds are barely keeping pace with inflation (meaning zero growth), and I could go on and on, about the warning signals.
    Garth is misleading nobody. The facts are out there for anyone who wishes to look. Have you looked? Open your eyes, and you too will see that this will not end well.

  86. normally I’d say yes but Garths investment advice is very simple and very good. Yes hard to believe but I have looked at alot and he is very good.
    Ignore his rants on real estate and check out his investment advice

  87. Except that you are misquoting facts. For instance, you state that “wages for the most part have stagnated”…
    However, according to the most recent payroll data from Statistics Canada (Dec. 23, 2010), average weekly earnings of non-farm payroll employees rose by 4.4% between October 2009 and October 2010.
    Furthermore, the report states that “the pace of growth in earnings has been increasing in recent months.”
    If you can’t even get the basics right, it’s really tough to give credence to your analysis.

  88. AL R,
    Wow. Holy Irony Batman.
    First, your own link states that the Oct 2009 figures were the recent lowpoint.
    Second, your figure of 4.4% doesn’t acknowledge the 2% influence of inflation.
    Third, you are quoting a single year of data, but the longterm inflation adjusted wage change is well known to be approximately 0% over the past 30 years. (The Stats Can tables confirming this cost money, which I’m not going to pony up to prove the point. ).
    You need to read the last sentence of your post.

  89. “If half of the people who have bought RE on high ratio mortgages in the last 3 years go into default”
    1/2? Are you on narcotics?
    “never should have been in the first place”
    Says who? You and Turner’s posse? There are more factors of qualification than amortization and down payment. That is what you focus on only because you have no idea how lenders underwrite in this country.
    Now run along back to, get more fallacious “facts” and come back here to retort. I’ll be waiting.

  90. Forgive me for using the most recent data. If it makes you feel better, the report states that “October was the third consecutive month in which the year-over-year growth rate was higher than 4.0%.” So it’s not a one-month anomaly.
    However, even accounting for the fact that the October 09 growth in wages was one of the slowest over the past 24 months, it was still 1.6% (, and given that Y/Y CPI was 0.1% in October 2009, that would imply an increase in real wages, no?
    As to your second point, surely you would agree that the 4.4% increase in Y/Y wages in October 2010 is greater than the Y/Y increase in CPI of 2.4% during the same month, implying once again an increase in real wages?
    As to your last point, Drew stated that wages were stagnating. That’s clearly untrue, as this data shows. Several months of consecutive wage increases does not constitute stagnation.
    Moreover, over a longer period, if you look at income by quintiles, individuals in the top quintiles (who are overwhelmingly homeowners) have been getting relatively wealthier, and the individuals in the lowest quintiles (who are overwhelmingly renters) have been getting relatively poorer. In other words, those who buy homes have experienced wage growth over the past several decades.
    Better luck next time.

  91. As I’ve already pointed out, you’ve selected a time frame that wasn’t specified in the original quote and you’ve simply created a straw man quote that you can disprove.
    ps. I’m an actuary, and know a little bit about statistics, and your second last paragraph makes me shudder.

  92. According to the HRSDC website, “Average weekly earnings in Canada have increased from $725 in 1997 to $805 in 2009, after adjusting for inflation”. That’s hardly approximately 0%, but if your comment only holds water if it includes 30 year old wage data, that’s hardly relevant today IMO!
    Choosing to purposely omit proper data strengthen’s your case while diminishing your credibility. Something Garth Turner knows and plays into all too well but is also one of many reasons why ALL industry analysts dismiss his forecasts as not credible.

  93. I’m hoping for inter-generational mortgages so Canadians can subject their children as well as themselves to a lifetime of debt slavery. Handing 80% of your income over to banksters each month seems like a good idea to me. Usury is good.
    Debt will set you free.

  94. The OP said 4.4% in the last year.
    I said approx 0% over the last 30 years.
    You came back with 11% over 12 years (for an annual average of 0.88% a year).
    The original timeframe quoted by the OP was 1 year and my reference to approx % over the past 30 years was in that context, but to avoid your misunderstanding I should have said “approx annual % over the past 30 years” and I apologise for the omitted word.
    So, is your 0.88% annually closer to the OP’s 4.4% or my approx 0%?
    Second, you state that “Choosing to purposely omit proper data strengthens your case while diminishing your credibility”, but you yourself claim to discredit my claim of the past 30 years by quoting figures from the past 12 eyars. And you then justify the apples to oranges comparison by saying that the past 30 years are not relevant in your opinion. So perhaps you should go back and reread where I quote you at the beginning of the paragraph?
    So here, I’ll go out on a limb and guesstimate that the average annual inflation adjusted net of tax change has been between 0.2% and 0.5% annually 1980 to 2009, for a cumulative change over 30 years of between 6% and 16%.
    I look forward to seeing the correct statistic which I trust you will dutifully locate.
    Have at me, BIAIT!

  95. There are many costs associated with the default, foreclosure and collections process that are not paid as part of an insurance claim to CMHC. Just think for a moment – who is doing all the paperwork, legal and admin at the bank? Those costs are not recovered at CMHC.
    No mortgage lender enters the high ratio real estate lending market with the idea it is ‘risk free’.

  96. Whether you agree with Garth or not you can’t argue with the numbers, and any asute investor will tell you that currently Canadian house prices are vastly over priced, whether we see a crash (unlikely) or a slow melt over 5 years prices are going to drop 30-50 percent.
    Why do I know this, because I lived through the last housing crash and paid a painful price for buying at the top of the market

  97. Real estate is local. “Astute investors” know that Vancouver prices don’t mean squat for Sudbury, Ontario. Qualifying your statements leads to more credibility.

  98. 100% correct. There is no correlation in the price reductions in the many different areas within the US. It is just a series of coincidences.

  99. chris, i live in vancouver also and can easily believe these numbers. The majority of the property being sold these days is to mainland chinese migrants / investors. This is the group who has real purchasing power right now. Many condos downtown are 75% or more owned by mainland Chinese investors. These are my estimations only, not from any official source. I know my own building is almost exclusively owned by mainland Chinese investment. I have no problem with that at all and its definitely help support high house prices in Vancouver in recent years. People caling for Vancouver housing prices to crash must also be calling for the Chinese Economy to crash as the two are inter-linked in my opinion. If the latter occurs, the former occuring is possible. If not, I dont see Vancouver housing prices dipping much more than the usual pullbacks during a normal housing cycle. There is huge demand for housing in Vancouver as the most desirable (rightly or wrongly) City to live in Canada, perhaps of all North America. And as such, there will always be a premium to an ‘average’ Canadian house price.

  100. Given that you’re oblivious to the differences between Canadian and US housing finance I will assume you’ve done no honest research before posting that comment.

  101. I’m not sure which quote you’re referring to, other than the one that was taken verbatim from Drew, i.e. “wages for the most part are stagnating…” I didn’t make it up.
    stagnate (v) – to stop developing, growing, progressing, or advancing
    Whether it’s 4.4% over the past year, or 11% over 12 years, wages have not been stagnating. No timeframe of any kind was specified in the original post, but it seems reasonable to infer that he (and other housing bears) are primarily concerned about price increases that have taken place over the last decade.
    In any case, you have simply been asserting (or creating?) a figure without bothering to source it, even though it’s apparently “well known.” Kind of sloppy for an actuary – makes me shudder.

  102. You couldn’t be more right Reader.
    Many of the unrecoverable default costs are tangible: underwriting expenses, recovery, admin, hedging, marketing, support, etc. Others are intangible like opportunity costs, lost cross-selling opportunities, or impact on capital costs or share valuation. You can imagine the negative effect on a lender’s stock price and/or capital cost if their prime default rate was 1%, compared to the industry average of 43 basis points.

  103. Al R said in reply to Drew…
    Except that you are misquoting facts. For instance, you state that “wages for the most part have stagnated”…
    However, according to the most recent payroll data from Statistics Canada (Dec. 23, 2010), average weekly earnings of non-farm payroll employees rose by 4.4% between October 2009 and October 2010.
    Don’t much care what StatsCan says. I’ll stick with what both my wife and I have seen on our pay cheques. What you don’t realize is that StatsCan isn’t accounting for the average middle income working stiff, not the CEO’s who write their own pay increases into corporate budgets.
    Let’s talk real world here, shall we?

  104. Now run along back to, get more fallacious “facts” and come back here to retort. I’ll be waiting.

  105. I have and he’s not writing about anything that a thousand other books out there have already. I’ve read (skim) all his books and the simple financial advice he writes about has been around forever, there’s nothing new.
    Garth’s market is the financial illiterates crowd, ie lazy wannabe investors that need their hand held by someone. That’s why he can sensationalize everything on his blog, he knows most of his financial illiterate readers
    won’t bother to check things out. They take his word as the gospel.
    If he just keep to his supposed mandate of helping people make prudent financial decisions then maybe I would give him some credit, but he hasn’t. He chooses to be the squeaky wheel, just like he was in politics. He learned from both politics and the financial industry that sensationalism sells, whether that be a product, service or yourself.

  106. Good points Al R. and sloppy indeed! Only a fool steps in without doing any homework. I am just relieved that I don’t rely on Dave, the Actuary for compiling my data.
    As for 30yr. economic data, where I work anyone presenting position papers to Mgmt., Board or Committees utilizing 30yr data, would be shown the door. Such old data is simply not credible or relevant!

  107. LG,
    You admit house prices go up and they go down, yet you say we are “wishing ill will” when they go down ? LOL You only want it one way to protect your interest I assume. Did you like paying $200 for Nortel too ? Your posts are hypocrital to the tenth degree.
    When somethings extremely overvalued the price will come down due to supply and demand and market psychology, that isn’t “ill will” but in your world it is.

  108. Why do you have to be so defensive? I won’t speak for LG but maybe he doesn’t want home prices to go one way as you claim. Maybe LG simply disagrees with your assertion that prices must imminently fall.
    I have seen housing critics constantly accuse real estate and mortgage professionals of being “RE pumpers” and the like. That is an immature and inappropriate generalization. Many in the banking and real estate industry believe prices could drop, but there is a difference between “drop” and “crash.” Just because most don’t foresee a crash doesn’t mean they are intentionally trying to deceive the public.

  109. Hello Drew
    Not to discount your lack of upward mobility but I’d be hesitant to throw objective statistics out the window without proof that StatCan’s data is somehow skewed.

  110. I know you say you “estimate” that 75% in your building are owned by mainland Chinese, but seriously, do you really think that Chinese investors are propping up the Vancouver real estate industry? I highly doubt that mainland Chinese investors are scrambling to buy properties anywhere else besides Coal Harbour, the Westside and Richmond. These investors also buy high-end properties and are therefore at the top of the property ladder. As we all know, the real estate sector cannot grow from the top down. It needs a steady supply of first-time buyers to keep the machine running smoothly and allow owners to move up the ladder. First-time buyers will disappear as F tightens mortgage regulations further and C raises interest rates. As for China, their property bubble will burst in due course…

  111. Anyone familiar with the date Oct 19, 1987, aka “Black Monday” and what happened to the North American stock market? Its interesting what a spunky Toronto Sun Business Editor by the name of Garth Turner had to say that day!
    Pay particular attention to what advice he has for recreational stock investors at 1:35 into the video. Then do a historical search on the performance of the TSX/TSE or DOW in the weeks and months leading after the one day market crash. Fasinating stuff, IMO!

  112. An excellent point. Never listen to the mainstream media (MSM) for financial advice.
    Although suggesting that a recreational investor avoid risk after a stock panic is not the worst advice in the world. ))
    By the way…to your knowledge has Turner ever been right about anything? I’m sure you wouldn’t want to suggest that he was the only person saying don’t get into the market, nor that he hasn’t been right about at least one or two things in his life. Come on now, be fair to the poor guy.
    Anyways, I’m glad to see that you know agree that data and facts from 30 years ago (or 23 in this case) are indeed highly relevant.

  113. Haha. Great find.
    I love this one.
    “I think we are on the verge of a very serious…banking problem.”
    How many times have we heard that before?
    Garth’s advice on the stock market was even better. Here are his comments when asked if people should get back into the stock market after October 19, 1987:
    “I wouldn’t go near it. The common investor should not go near it.”
    That keen foresight would have cost investors a 14% return in the next two months and a 20% return in the next six months.
    My prediction is that people stop listening to Garth’s predictions.

  114. Will is one of Canada’s foremost authorities on mortgage statistics. He told us that CAAMP’s “fall 2010 survey data provides an estimate of current loan to value ratios. Among new mortgages initiated in the past year 53% have 20% or more equity and 47% have less than 20%.”
    Maybe I’m blind, but I can’t find that info ANYWHERE in the fall survey…

  115. So now that MCAP confirms most amortizations are 35 yrs, where all anyone pays is interest and no principle, does Garth get some respect?
    “3 out of 4 mtgs MCAP approved last year” had an amortization > 25 years, with most being 35yrs – MCAP’s Ron Swift

  116. ***
    Garths Blog Dog said…
    Finally I’d like to add that very very surprisingly Garth’s investment advice is top notch, what every you feel about his blog his book Money Road is excellent
    As a knowledgeable person on investing I can’t say enough good things about his investment ideas, they are top notch
    And no I’m not paid to say that
    rob Lederman
    Garth’s investment advice record is not very good at all, somebody has been looking back through the years here

  117. Garth is a sharp guy but unfortunately his giant ego and refusal to believe he can possibly be wrong make him a poor investment advisor. In investing and in life you must admit when you’re wrong so you can cut losses and move on to more profitable trades.

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