This is slowly becoming one of my favourite TRB features.
I get to talk about not one, not two, but like, ten stories, all at once!
And I get to write in some of my favourite tones: sarcastic, cynical, apoplectic, and unsympathetic.
Okay, let’s start with a bang:
“A Bank Of Canada Rate Cut Is Looking More Likely And The First Could Come As Early As September”
Financial Post – Chris Fournier, August 20th
That sound you hear is me – patting myself on the back.
“Jolly good show, old chap!” I’m telling myself, as I smile at myself in the mirror.
Oh, the ribbing I took at the end of last year, and start of this year, when I said that rates weren’t going up.
“He’s a salesperson,” the peanut gallery exclaimed. “What else is he gonna say? Just rhetoric, cheerleading, and lies!”
But I doubled down. I didn’t just say that “rates aren’t going up,” I said I thought they would actually go down.
“More double-talk,” the stadium of haters chanted. “The crash is coming once rates skyrocket! Prices down 40% in Toronto!” they shouted, having convinced themselves that not buying in 20011 was a good idea, and that being stubborn is the way to go.
Well, here we are in late-August, and we’re seeing headlines like the one above.
I don’t gloat often, and it’s not that I enjoy being right, but rather when I pour my heart and soul into this blog, my job, and my opinions therein, and have it thrown back at me with distrust, I’m happy to see vindication.
From the article:
More economists are coming around to the view the Bank of Canada will have to cut rates this year, with a move as early as September looking increasingly possible.
A slowing Canadian economy, along with a deterioration in global demand and growing trade tensions, suggest a downward move from the central bank is likely to happen more quickly than currently accounted for, according to David Doyle, an economist at Macquarie Capital Markets in Toronto.
Implied odds show investors are assigning only a 20 per cent chance of a cut at the central bank’s next decision on Sept. 4. One rate cut by December is fully priced, as is one more cut by June next year. That may not be quick enough, especially with the country’s yield curve inverting to the point that historically has presaged central bank easing, Doyle said.
“In the event that we are heading into a global recession and things turn ugly and you get rising unemployment rates globally, then Canada is going to have to ease, maybe even more than the U.S.,” Doyle said in a telephone interview.
Macquarie is assigning a more than 50 per cent chance of a cut in September, plus another cut in October.
Scotiabank also revised its rate outlook last Friday, predicting one rate cut this year from the Bank of Canada no later than at its Oct. 30 decision, and as early as Sept. 4. A second cut would come early in 2020. It based the revision on the view the U.S.-China trade war will persist through Donald Trump’s presidency.
Alright, so maybe I was out of line.
The truth is: interest rates are going down because the Canadian economy is lagging, and because, well, the world is a really, really complicated place right now. I’m not happy about this. In fact, I wouldn’t mind seeing rates go up, real estate prices remain flat, and society catch its breath.
I’ve been in real estate since 2003, and the market has done nothing but increase. The highest 5-year, fixed-rate mortgage I’ve ever seen is 5.99%, which was back in 2007 or 2008, I believe. Today, we’re seeing rates back down to 2.59%, from a “high” of about 3.09% earlier this year.
And what I really don’t want to tell you is this: a decrease in interest rates will simply add more fuel to the Toronto real estate fire.
Fall is going to be busy, folks.
“Even As Insolvencies Rise, Indebted Ontarians Are Borrowing Big Against Their Homes For Vacations And Cars”
Toronto Star – Michael Lewis, August 20th
Hmmm….even as insolvencies rise, and Ontarians are borrowing big against their homes for vacations and cars, I continue to buy $300 worth of chicken from Costco, go home and put it into freezer bags, four per pack, and live off that chicken for months and months. Probably saving 70% off retail in the process.
Am I a genius? Like, Mensa level?
Or am I completely normal, and there are just a lot of stupid people out there?
And you know where this is going, right? Back to politics, where I always take it?
Because I know, and you know, and your mother knows that the same people who are using their homes like ATM’s to buy luxury goods are the same people complaining about the economy, housing market, inflation, taxation, lack of government services, and just about anything and everything else, including Tim Horton’s recent five-cent increase on coffee.
So I wasn’t exactly pleased to read the above headline in Tuesday’s newspaper.
From the article:
As consumer insolvencies mount in Ontario, a new survey has revealed worrying trends in one of the most popular ways to borrow money, the home equity line of credit, or HELOC.
An Ipsos Reid survey of 2,111 Canadians, conducted for Calgary-based insolvency firm MNP Ltd., showed that about one in seven Ontario homeowners with a HELOC admit they have used it to fund discretionary purchases, such as a vacation or new car. One in 10 say they have used their HELOC to fund other real estate investments.
The survey, released Tuesday, also found that 32 per cent of Ontario homeowners have used the funds borrowed to pay down other debts — while 42 per cent have used the money to do things they otherwise wouldn’t have been able to do, such as home renovations.
“It seems there was a time not so long ago when paying off the mortgage was an important financial goal for households,” said MNP licensed insolvency trustee David Gowling. “But today the house is an ATM and the cash withdrawn is being used to pay other bills or to fuel household spending.”
“A HELOC might seem like a cheap and convenient mechanism for credit,” Gowling added, “but what can happen is that people borrow too much and end up struggling with the debt in the long term because they have no room in the budget to cover unexpected expenses.”
“Balking At Cottage Prices, Millennials Are Driving RV Sales”
Financial Post – Nicholas Sokic, August 21st
On the heels of the article above, comes this one.
I had thought about dedicating an entire post to this subject, but with a new agent having just joined my team, who is, himself, a 25-year-old Gen-Z’er, telling me that I slag on “young people today” too often, I thought better of it.
So perhaps I’ll limit this rant to one paragraph?
Where the F$*!@# do millennials get off thinking they “should” own a cottage? Remember, I believe that “should” is a bad word in today’s society, because it implies deservedness. And the entitlement among many in society today just drives me nuts.
But a cottage? Really?
I mean, it’s been two years since the dumbest shit I’ve ever read, by a millennial, Gen-Z’er, or otherwise, was posted HERE by some late-millennial/early-Gen-Z’er that is upset that house prices are so high, and her dream of owning a detached home with a white-picket fence, all at the tender age of 23, while working part-time as an Instagram commenter and food photographer, has been shattered.
But now cottages?
A cottage, in the typical real estate hierarchy, was something that a select few purchased after decades of hard work. Picture your 48-year-old, father of two, pulling the trigger on that rustic cabin in Honey Harbour. Or that 55-year-old couple with teenagers who finally, finally get their hands on that Muskoka cottage they’ve been eyeing forever.
And now millennials are “balking at cottage prices?”
I wonder if the poor things lament current Jaguar prices as well…
“Eight Neighbourhoods in Toronto Have Seen Prices Double In The Past Five Years”
BlogTO – Lauren O’Neill, August 22nd
This is a really cool feature!
And the best part is, the eight areas that have seen prices double are not the areas you’d think they are.
I mean, be honest with me, and yourself. What do you think the common denominator is between the eight areas?
Are they central?
Are they big money?
Are they dominated by condos or are they dominated by houses?
From the article:
We’ve all heard tell of people whose grandparents bought their $2 million Rosedale homes for less than $100K back in the 60’s. Such things are hard to hear for millennial renters, but understandable. It’s been a long time.
What’s harder to comprehend is how condo values could increase by more than 100 per cent in just half a decade — and yet, in some parts of Toronto, that’s exactly what happened between 2014 and 2019.
A new report from the real estate listing service Zoocasa reveals that eight out of the 35 MLS districts in Toronto have seen condo prices literally double over the past five years. These areas are as follows:
1) West Hill and Centennial
2) Scarborough Village annd Guildwood
3) Malvern and Rouge
4) Willowridge, Martingrove and Richview
6) Yorkdale, Glen Park and Weston
7) Black Creek and York University Heights
8) Rexdale-Kipling and West Humber-Claireville
I’ll admit – these are not the areas that I figured would double in value, but once I saw which areas were on the list, I literally facepalmed.
I thought the areas would be very popular, at least middle-class, and central.
But in the end, the answer seems so obvious: the areas that doubled are the areas that were among the cheapest to begin with.
“Federal Partnership Aims To Increase Affordable Housing Across Canada By Offering Incentives To Investors”
Globe & Mail – August 21st
Really? How is this going to work?
“Providing incentives” usually means one of two things, and they’re at opposite ends of the spectrum; either the incentives are much more than that, and end up being handouts, or the incentives are meaningless, and simply make headlines.
Call me skeptical, but when a Fisheries Minister is making the announcement, maybe this isn’t going to mean as much in practice as it does in principle.
From the article:
The federal government is investing in what it calls an innovative financing model that it says will help generate funds for affordable-housing projects.
A government news release says the new lending institution, HPC Housing Investment Corporation, will provide funds to investors by creating and offering bonds in capital markets at long-term fixed interest rates.
Fisheries Minister Jonathan Wilkinson made the announcement in Vancouver saying the corporation will have the ability to take a relatively small investment and maximize it.
An investment of $20-million from the Affordable Housing Innovation Fund is being used to complete the first round of financing that the release says is valued at approximately $33.1-million for two separate projects in British Columbia and Alberta.
The developments, one in Vancouver’s former Olympic Village and the other in north-central Edmonton, will offer a total of 271 units to low- and middle-income tenants, while 10 of the homes in Vancouver will be provided at shelter rates.
For starters, can we now see why Toronto doesn’t need an Olympics? Every city that’s hosted an Olympics ends up with all this un-used infrastructure. As an aside, check out this article: “What Abandoned Olympic Venues Look Like Today”. It’s honestly quite eye-opening.
But what do you think about this: “…will provide funds to investors by creating and offering bonds in capital markets at long-term fixed interest rates.”
Did I mention that I wear a tin-foil hat, and don’t trust the government?
“Millennials Top Boomers In Debt While Gen X Still Owe The Most: Transunion”
CBC News – August 20th
Just when you thought this topic had been covered, right?
Although in fairness, I will say this: life is a lot more expensive for millennials today than it was for the previous generation when they were the same age. Yes, I slag this generation for the YOLO attitude and the desire to spend money they don’t have on consumer products and vacations, while Gen-X’ers are tied to their desks. But I will be the first to admit that the cost of living has skyrocketed exponentially, and it shows no signs of stopping.
Millennials do need to borrow, no question about it.
More than their predecessors, and more than they themselves did last year, or the year before.
The fact that Gen-X’ers, according to the article, owe the most, is most likely due to where these folks are in their life cycle, and that fact that more of them own real estate (and thus mortgages) than millennials, whereas most Boomers paid a pittance for their homes, and/or have already paid them off.
From the article:
TransUnion says a spike in borrowing over the past year has led millennials to overtake boomers in total debt holdings as part of a generational shift.
The credit reporting agency says total millennial debt was up by 12.3 per cent at mid-year compared with a year ago to hit $515.9 billion, just ahead of the $514.3 billion owed by boomers but still behind the $767.4 billion held by Gen X.
Younger borrowers helped push overall consumer debt up 4.3 per cent at the end of the second quarter compared with last year to $1.88 trillion, while debt held by boomers declined.
The rising debt loads came even as lenders issued 8.9 per cent fewer new mortgages in the first quarter, and 1.6 per cent fewer auto loans, though the number of lines of credit was up 13.9 per cent.
Average mortgage debt went up 3.56 per cent year over year to $269,274, while the average consumer balance on instalment loans rose 7.38 per cent to $34,168 as younger borrowers took on more loans in the category.
TransUnion says low unemployment and stable interest rates have helped keep delinquencies low even as debts rose, but the risk of a slowing economy means borrowers will have to manage carefully going forward.
So that’s it for this week, folks!
I’m away next week, but not far; 2 hours north of Toronto, which is just close enough that I can abandon my wife and daughter if I need to come back to the city and work.
I may just put the blog on pause for a week in my absence, who knows. 🙂Back To Top Back To Comments
at 7:11 am
“…having convinced themselves that not buying in 20011 was a good idea, and that being stubborn is the way to go.”
As far as the bears go, that sums it up succinctly.
at 7:49 am
Wow, combine the global recession from the first article and rising homeowner debt from the second, and … what could possibly go wrong?
The millennial article is just dumb. Nobody is leaving their job in Toronto to go fail at faux farming. Living in cottage country is wonderful but not easy, you overprivileged millennial muffin.
at 8:32 am
The Michael Lewis article vs his headline are completely at odds. His headline makes it sound like people are taking out HELOCs to piss away on vacation and cars, but the article actually shows people being quite responsible with their debt.
1 in 7 (or only 14%) used their money on cars and vacations. Not sure why this small percentage is the only thing that made it into the headline. And who says they weren’t in a position to easily repay this?
Meanwhile 10% and 42% used it to buy other property or do home renovations. What the hell is wrong with borrowing at a low interest rate to make long term investments in assets that historically appreciate over the long run?
And 32% have used it to pay off other debt. You mean people, borrowed at 3% to pay off 20% consumer debt – well duh.