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In an perculiar coincidence, just hours after Home Capital Group imploded in what we dubbed Canada’s “New Century” moment, Canada’s housing regulator, the Canada Mortgage And Housing Corporation, which describes itself as “contributing to the stability of the housing market and financial system” moments ago the CMHC issued a report, warning that there is “strong evidence of overall problematic conditions.”

In the report, the Housing regulator again warns that while conditions in Canada’s housing markets are showing some signs of improvement, the official overall rating from the Canada Mortgage and Housing Corporation (CMHC) will be held at “strong evidence of problematic conditions”.

Every quarter, the CMHC issues its Housing Market Assessment (HMA) “to provide Canadians with both expert and impartial insight and analysis, based on the best data available in Canada.” The report is meant to serve as an “early warning system” for the country’s housing markets “an important tool supporting financial and housing market stability.” Or lack thereof because as the CMHC said while “conditions in Canada’s housing markets are showing some signs of improvement” the official overall rating from the Canada Mortgage and Housing Corporation (CMHC) will be held at “strong evidence of problematic conditions”.

As noted in the press release, some of the report highlights are the following:

Overall rating to be held at “strong evidence of problematic conditions”.
Evidence of overvaluation at the national level has been downgraded from strong to moderate. It is now present in six centers instead of eight.
Evidence of overvaluation has increased from moderate to strong in Victoria, as fundamentals are not keeping up with higher prices. There is also moderate evidence of price acceleration and overheating, leading to strong overall evidence of problematic conditions.
Conditions have improved in Regina, Montreal and Quebec relative to home prices.

…click on the above link to read the rest of the article…

Canada’s Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History

April 26, 2017

Canada’s Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History

Call it Canada’s “New Century” moment.

We first introduced readers to the company we said was the “tip of the iceberg in Canada’s magnificent housing bubble” nearly two years ago, in July 2015 when we exposed a major problem that we predicted would haunt Home Capital Group, Canada’s largest non-bank mortgage lender: liar loans in particular, and a generally overzealous lending business model with little regard for fundamentals. In the interim period, many other voices – most prominently noted short-seller Marc Cohodes – would constantly remind traders and investors about the threat posed by HCG.

Today, all those warnings came true, when the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice.

As part of this inevitable outcome, one which presages the company’s eventual disintegration and likely liquidation, Bloomberg reports that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday. Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable Group Inc. fell 17 percent, Street Capital Group Inc. fell 13 percent, while First National Financial Corp. declined 7.6 percent. In short, the Canadian mortgage bubble has finally burst.

Some more details on HCG’s emergency source of funding: Home Capital will pay 10% interest on outstanding balances and a non-refundable commitment fee of C$100 million, while standby fee on undrawn funds is 2.5%. The initial draw must be C$1 billion.

…click on the above link to read the rest of the article…

So China’s Authorities Crack Down on Housing Speculation?

April 18, 2017

So China’s Authorities Crack Down on Housing Speculation?

Who’s Behind China’s Wild House Price Bubble? State-Owned Property Developers, Funded by State-Owned Banks.

Beijing’s municipal government summoned representatives of state-owned property developers on Monday and told them to stop hyping the already overheated housing market, according to the portal, Chinese Real Estate Business (CREB), cited by Reuters.

State-owned property developers, funded by state-owned banks, have been a major force in inflating home prices as they bid aggressively for land to gain market share. According to CREB, state-owned developers bid for nearly half of the most expensive land in China during the first five months of 2016. And that trend has continued. But after the meeting with the municipal government of Beijing, these firms may be forced “to change their land strategy.”

Telling state-owned developers to stop hyping, as CREB put it, “operational and market activities” would be the latest effort to crack down on property speculation gone wild in China. It would come on top of the numerous other ways local and central authorities have tried to curb this speculation, without success so far.

Today, the National Bureau of Statistics reported that new home prices in 70 cities surged 11.3% in March year-over-year. It was the 18th month in a row of year-over-year gains. Prices jumped 19% in Beijing and 16.8% in Shanghai (chart by Trading Economics):

On a monthly basis, new home prices rose 0.6%, the fastest in four months, up from 0.3% in February. Of the 70 cities in the index, 62 experienced a month-to-month price gain, up from 56 cities in February, once again defying expectations of a slowdown. Prices jumped the most in Haikou (2.6%), Sanya (2.5%), and Guangzhou 2.3%), followed by other second- and third-tier cities, to which the speculative fire has been spreading.

…click on the above link to read the rest of the article…

Toronto homeowners cash out of hot real estate market amid uncertainty

April 16, 2017

Toronto homeowners cash out of hot real estate market amid uncertainty

Agent says some buyers are delaying purchases in anticipation of possible fixes

Many buyers and sellers are waiting to see what will come of Tuesday’s scheduled meeting between Finance Minister Bill Morneau, Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory, who are expected to discuss ways to rein in Toronto’s hot housing market. (The Canadian Press)

Seven years later, they found themselves on the right side of a hot housing market, with values tripling in a ‘hood suddenly considered up-and-coming for young families seeking detached homes.

They recently sold that renovated three-bedroom for more than $1 million and now expect to live mortgage-free in a four-bedroom purchase in their hometown of Ottawa.

The 34-year-old says it made sense to cash out of a city that was draining their finances, energy and family time.

“My husband and I saw an opportunity to take advantage of the recent gains in real estate and to move to a less expensive city to live mortgage-free, support our savings for retirement and also to be closer to family,” says Blakely, whose new home has nearly twice the square footage.

A sold sign is shown in front of a west-end Toronto home. (Graeme Roy/The Canadian Press)

And they may have taken action at just the right time.

Blakely’s real estate agent Josie Stern says the market appears to be cooling, and doubts Blakely could fetch that same jackpot sale today.

“A little bit of air has been let out of the bubble,” she says.

…click on the above link to read the rest of the article…

Toronto House Price Bubble Goes Nuts

April 5, 2017

Toronto House Price Bubble Goes Nuts

Based on fundamentals? You gotta be kidding.

Residential property sales in Greater Toronto soared 17.7% year-over-year to 12,077 homes, according to the Toronto Real Estate Board (TREB). New listings jumped 15.2% to 17,052. Prices for all types of homes, based on the MLS Home Price Index Composite “Benchmark,” soared 28.6%. The “average” selling price soared 33.2%!

That average selling price of C$916,567 is up from C$688,011 a year ago. Over the past five years, it has doubled!

The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422.

Even the house price bubble in Beijing cannot compete with this sort of miracle; new house prices there increased only 22% year-over-year in February. And Sydney’s fabulous house price bubble just flat out pales compared to the spectacle transpiring in Toronto, with prices up only 19% in March.

Vancouver has its own housing bubble to deal with. But there, the government of British Columbia has tried to tamp down on wild speculation with various measures, including a transfer tax aimed squarely at foreign non-resident investors, with “mixed” success.

Now the great fear in Toronto’s real estate circles is that the government of Ontario might impose similarly cruel and unusual punishment on the participants in this spectacle. Some measures are on the table, with folks wondering how to stop the bubble from inflating further and causing even greater harm to the real economy when it deflates, as all bubbles eventually do.

They’re reluctant. It seems they want to see how BC’s measures are washing out in Vancouver. The central government too is trying to fine-tune some macroprudential measures, but they’ve had absolutely no effect on Toronto’s housing bubble.

…click on the above link to read the rest of the article…

“This Is Going To Blow Sky High” – Observations On Canada’s Housing Market

March 20, 2017

“This Is Going To Blow Sky High” – Observations On Canada’s Housing Market

For months we’ve been warning about real estate bubbles re-emerging in various markets around the world from Canada to Australia (see “There Are 66,719 Empty Mansions In Vancouver” and “Vancouver Home Sales Crash 40%, As Toronto Home Prices Soar 22%“). And while facts and figures clearly indicate that certain markets are bubbling over courtesy of all the same mistakes that caused the ‘great recession’ in 2008, nothing helps to confirm the truly obscene nature of a real estate bubble quite like attending a good ole-fashioned, get-rich-quick real estate expo. As such, below are the musings of one financial market observer who recently attended the Canadian Real Estate Wealth Expo as a joke but walked away convinced the system is about “to blow sky high.”

* * *

Originally Authored By Tim Bergin of On Beyond Investing

Originally, I thought this would be a bit of a joke. There were billboards in all the Toronto subway cars advertising the Canadian Real Estate Wealth Expo – learn how to become a millionaire. I thought this was so ridiculous, it may be fun. What better way to experience the top of the housing market than watching Tony Robbins and Pitbull along with a bunch of US real estate professionals explain how Toronto real estate is the path to riches.

Prices were originally $150 per ticket, but I was able to buy for $50. While it deeply bothers me that I paid $50 to these shameless (amoral) self-promoters, I thought it would be worth it to witness, in person, the top of the housing market.

I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there! I was blown away. Bubbles are largely psychological. This crowd was tangible proof of that.

…click on the above link to read the rest of the article…

How Much Money Laundering is Going On in the Housing Market? A Lot

February 25, 2017

How Much Money Laundering is Going On in the Housing Market? A Lot

Answers trickle in. Tough luck for New York, San Francisco, Miami…

“I am shocked – shocked – to find that money laundering is going on in here!” – Borrowed and twisted from Casablanca.

The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced on Thursday that it would extend for another 180 days a “temporary” program that was due to expire on Thursday, and that it had originally kicked off in January 2016 and expanded in July, to identify and track secret homebuyers who hide behind shell companies and “other opaque structures” for the purpose of money laundering.

And it has already gleaned some insights.

The US housing market has been a perfect platform to launder large amounts of money, no questions asked. Brokers, banks, and other industry professionals played along. There were no reporting requirements. Everyone in the world knew it. And they came to launder their cash by buying expensive homes.

But FinCEN, via its evocatively named Geographic Targeting Orders (GTO), wants to know who these opaque homebuyers are. To find out, the GTOs “temporarily require US title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ [i.e. without bank financing] for high-end residential real estate in six major metropolitan areas.”

FinCEN is soliciting the help of title insurance companies “because title insurance is a common feature in the vast majority of real estate transactions,” and these companies can provide “valuable information about real estate transactions of concern.”

In its July announcement, when the program was expanded from two metros – Manhattan and Miami Data – to six metros, FinCEN Acting Director Jamal El-Hindi wouldn’t say to what extent money laundering was involved, but he did throw in a tantalizing tidbit: “The information we have obtained from our initial GTOs suggests that we are on the right track.”

…click on the above link to read the rest of the article…

A Murderous Complacency

February 4, 2017

A Murderous Complacency

Dark omens are circling everywhere in today’s markets

murder: a flock of crows

~ Miriam-Webster dictionary

Many view the appearance of crows as an omen of death because ravens and crows are scavengers and are generally associated with dead bodies, battlefields, and cemeteries, and they’re thought to circle in large numbers above sites where animals or people are expected to soon die.

~ “Nature”, PBS.org

Running PeakProsperity.com requires me to read and process a lot of data on a daily basis. As it’s hard to digest it all in real-time, I keep a running list of charts, tables and articles that catch my attention, to return to when I have the time to give them my full focus.

Lately, that list has been getting quite long. And it’s largely full of indicators that concern me; signals that the long era of “extend and pretend” in today’s markets may finally be at its terminus.

Like crows circling overhead, every day brings with it new worrisome statistics that portend an ill change ahead. Indeed, these omens are increasing so quickly now that it’s hard not to feel like Tippi Hedren in Hitchcock’s suspense classic The Birds:

So what are the data that make me think these crows will soon be feasting on the carcass of the great bull market that has powered stock, bonds, real estate and most other asset classes to record highs since 2009?

Rogue’s Gallery

Complacent Investors

Investors have enjoyed remarkably gentle treatment by the stock markets over the past half-decade. Retracements have occurred much less frequently than historical norms, and have been shallow and short-lived when they happened.

Tom Lee, head of research at Fundstrat and often referred to as “Wall Street’s biggest bull” notes that 2016 was the mildest year on record for the S&P 500, with only 7 days in which the index traded at less than 3% of its 52-week high.

…click on the above link to read the rest of the article…

Wolf Richter: The Economy Is Cracking Under Too Much Debt

October 16, 2016

Wolf Richter: The Economy Is Cracking Under Too Much Debt

Housing, restaurants & retail are suffering

Wolf Richter joins the podcast this week to discuss the deterioration of the global macro situation, and how he is seeing growing signs of recession breaking out across the economy:

I think that was one of the biggest mistakes the central banks made during the financial crisis: They stopped the debt from blowing up. So we never had a cleansing.

In a recession, normally companies de-leverage. They go through bankruptcy, they shed their debts, and you have this big wave of debt restructuring. This is painful for bondholders and banks, but it clears out the crap that is clogging up the pipeline. And so these companies reemerge or get bought out and the debt just disappears. The same with consumers: they unload their debts through various methods, and so when the recovery starts, you are not suffocating under this huge load of debt.

That has not happened in the United States, particularly, but in other countries, too. That debt never got fully blown out. And then the recovery started with 0% interest rates and monetary stimulus, which only encouraged companies and individuals and governments to take on even more debt. So now we’re burdened with such an enormous amount of debt that I think it is very hard to even breathe for the economy. A lot of people out there are worried about this, which is why you hear now voices saying we need a serious reflation. They need to come up with a lot of inflation to wipe out that debt. And of course, that will be a fiasco for our economy because if you have any uptick inflation without an equivalent uptick in wages — which we have not been getting — then you will destroy the consumer. And so this is not a great solution either.

…click on the above link to read the rest of the article…

Canada Moves To Burst Housing Bubble, Closes Foreign-Buyer Loophole

October 4, 2016

Canada Moves To Burst Housing Bubble, Closes Foreign-Buyer Loophole

In a move which many Canadians, especially those who have been persistently priced out of the housing market, welcomed with open arms, overnight Finance Minister Bill Morneau unveiled new measures aimed at slowing the flood of foreign money pouring into overheated housing markets like Vancouver and Toronto, a move which some dubbed an unprecedented federal intervention in the sector.

As first reported by the Globe and Mail, Ottawa announced it would close a tax loophole that allows non-residents to buy homes and later claim a tax exemption on the sales.

According to the revision, the government will make sure the principal-residence exemption is only available to individuals who reside in Canada in the year the home is purchased, which immediately excludes thousands of “hot money” Chinese tourists who come to Canada simply to park billions in Chinese cash.

The Ottawa shift comes after home prices soared dramatically the last few years in the Vancouver and Toronto markets, triggering a vigorous debate about the role of foreign money. As reported in the summer, British Columbia imposed a 15-per-cent foreign buyers tax on homes which led to a dramatic cooling in the Vancouver housing market. Just today we learned that Vancouver home sales had plunged another 32.6% relative to a year ago as the market remains paralyzed as a result of a lack of buyers willing to chase near record prices.

The finance minister also announced new measures to combat offshore speculation, including closing the loophole. The moves follow a Globe and Mail investigation that revealed a network of speculators flipping homes for profit and avoiding taxes by classifying them as principal residences.

…click on the above link to read the rest of the article…

Foreign Buying Plummets In Vancouver: Sales To Foreigners Crash 96%

September 24, 2016

Foreign Buying Plummets In Vancouver: Sales To Foreigners Crash 96%

China’s favorite offshore money laundering hub is officially no longer accepting its money.

According to data released by British Columbia’s Ministry of Finance on Thursday, foreign investors officially disappeared from Vancouver’s property market last month after the local government imposed a 15% surcharge to curb a record-shattering surge in home prices. Overseas buyers accounted for a paltry 0.7% of the C$6.5 billion of residential real estate purchases in August in Metro Vancouver; this represents a 96% plunge from the seven weeks prior, when foreigners were responsible for 16.5% of transactions by value.

According to the latest data overseas buyers snapped up C$2.3 billion of homes in the seven weeks before the tax was imposed, and less than C$50 million in the next four weeks. The government began collecting data on citizenship in home purchases on June 10. The ministry said auditors are checking citizenship or permanent residency declarations made by buyers and also reviewing transactions to determine if any were structured to avoid tax (spoiler alert: most of them were).

Across the province, the participation of foreigners dropped to 1.4% of transactions by value in August, from 13% in the preceding seven weeks.

Prior to the new real estate tax home prices were almost double the national average of C$473,105; however we expect a sharp corretion in the coming weeks – as we pointed out at the beginning of September, the average price of detached Vancouver properties promptly crashed following the news tax, dropping 17% on the month, and 0.6% on the year, to C$1.47 million ($1.13 million) in August, wiping away one year of gains in a few weeks.

As Bloomberg notes, the plunge in foreign participation joins other signs of a slowdown in Canada’s most expensive property market.

…click on the above link to read the rest of the article…

Sorry Losers!

September 10, 2016

Sorry Losers!

By its actions, the Federal Reserve has selected a precious few winners and many, many losers. Sadly, you are highly likely to be one of the losers.

Sorry!

I’m one, too, if that helps soften the blow.

But we have a lot of company. Other losers include:

Savers
Anyone with money in a checking account
Anyone with money in a savings account
Anyone with money in a CD
Anyone depending on bond income
All pensions
Endowments
First time homebuyers
Renters
Those who invest based on fundamentals
Everybody alive in the future, when the bills come due

Anyone on this list has been intentionally pre-selected by the Fed for losing. The Fed has done this deliberately, with full pre-knowledge that it was going to diminish the prospects of the majority in favor of the benefit of an elite few. And to make matters worse, it has no plans to — and no clue how to — reverse the damage it has wrought.

Everyone on the list above has been dinged by the Federal Reserve — on purpose and by design, I will repeat — in order to transfer wealth and purchasing power to:

Big banks
The government
Entities with large stock (equity) holdings
The wealthiest 0.1%
Speculators
Borrowers (the heavier the better)
Well-connected insiders whom the Fed tipped off in advance

This has, of course, not been lost on the 99.9% relegated to the loser camp. They are angry and growing more pissed off by the day. We see this anger playing out politically, in street protests, and in growing tensions with the police. All of this is connected, of course.

Soon, more and more folks will figure out the source of the growing inequity causing this anger, and the hot new trend of the future will be Fed bashing. So you might as well get in on the ground floor…

…click on the above link to read the rest of the article…

Fear Spreads of a Housing Crash in Canada

August 31, 2016

Fear Spreads of a Housing Crash in Canada

More Canadians sour on their Magnificent Housing Bubble.

Canadians have been gung-ho about their magnificent housing bubble, feeding it with an endless willingness to pay every higher prices, even as regulators and international institutions issued warnings, as short sellers began circling, as subprime liar-loan scandals made their reappearance, and as a generation was getting priced out of the hottest housing markets in Canada, the metros of Toronto and Vancouver, and as locals came up with an acronym to describe what has fired up the market: HAM – Hot Asian Money.

But the Vancouver housing bubble, the hottest even in Canada, hit rough waters in early summer. By July the first serious troubles appeared. Even as apartment prices soared 27% year-over-year and detached house prices 38%, overall sales plunged 19%, while sales of detached homes plummeted 31% [Vancouver Housing Bubble, Meet Pin].

Then on August 2, British Columbia’s notorious 15% transfer tax on home purchases involving foreign investors took effect. Preliminary data indicate that sales over the first two weeks in August plunged 51% year-over-year, with sales of detached homes down 66%.

And this flood of news on the Canadian housing bubble and speculations about a Canadian housing crash have now begun to slice into the previously imperturbable confidence of regular Canadians in their housing miracle.

The housing related part of the Bloomberg Nanos Canadian Confidence Index just had its worst spill in the history of the monthly data series, going back to May 2013: The percentage of the respondents who expected a decline in local home prices jumped from 12% to 20.5% in one fell swoop.

The percentage of those who expected home prices to rise dropped 2.3 percentage points to 41.4%, and the percentage of those expecting little change dropped 5.3 percentage points to 36.3%. Bloomberg:

…click on the above link to read the rest of the article…

Ottawa sets up working group to monitor housing market

June 23, 2016

Ottawa sets up working group to monitor housing market

Finance Minister Bill Morneau says he will work with cities and provinces to get more and better data

Policymakers are looking at all the tools at their disposal to take care of the housing market.

Policymakers are looking at all the tools at their disposal to take care of the housing market. (David Donnelly/CBC)

“The working group will review the broad range of policy levers that affect both supply and demand for housing, the issue of affordability, and the stability of the housing market,” Morneau said in a speech to the Economic Club in Toronto on Thursday.

Morneau said that while he worked with his provincial counterparts on Canada Pension Plan issues, the housing market was also a major topic of conversation in Vancouver at their meeting Monday evening.

“Housing prices have surged by 15 per cent in Toronto, and 17 per cent in Vancouver in the last year alone,” Morneau said. “People want to know what’s going on.”

Managing the housing market to ensure new buyers can still get in without harming existing owners is an “extremely complex problem,” Morneau said, made even more so by the fact that no level of government has complete control over the issue.

“We want to make sure housing stays affordable for Canadian families but we also want to make sure the market stays stable, that it’s not vulnerable to economic shocks,” he told the CBC’s Peter Armstrong in an interview set to air on The Exchange at 7 p.m. eastern time.

“It’s important to understand that while the federal government has some levers it can pull, we don’t have all of them,” Morneau said.

…click on the above link to read the rest of the article…

Canadian housing market hits $508,097 average price in April as sales rise to record

May 16, 2016

Canadian housing market hits $508,097 average price in April as sales rise to record

Average Canadian house price up 13% in April, but wide regional variances remain

Canada's housing market hit new all-time records both for the average price and the number of homes sold in April.

Canada’s housing market hit new all-time records both for the average price and the number of homes sold in April. (Associated Press)

The Canadian Real Estate Association says the average house price increased by more than 13 per cent in the year ended in April.

CREA has said for several months in a row that the average price is skewed higher by the hot and large markets of Toronto and Vancouver. Stripping those two cities out, the national average drops to $369,222 and the year-over-year gain is reduced to 8.7 per cent, CREA said.

CREA says the average figure is misleading, so it calculates something it calls the Aggregate Composite MLS House Price Index, and contends it’s a fairer representation of the real market, by blending together all housing types.

Even on that more normalizing scale, the CREA index rose 10.3 per cent in April, its biggest gain in almost six years stretching back to May 2010.

Here are the eye-popping numbers for some areas in and around Toronto and Vancouver:

The Greater Vancouver Area’s index increased by 25.3 per cent
The nearby Fraser Valley increased by 25.6 per cent
Prices in the GTA were up by 12.6 per cent
Victoria was up 12 per cent
Vancouver Island prices were up by 8.2 per cent.

By way of contrast, prices declined by 3.5 per cent and 2.4 per cent in Calgary and Saskatoon, respectively, which are smaller declines than those posted by these markets in March.

…click on the above link to read the rest of the article…

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