rb

I think with the Germans they don't care and I don't think it would make a big difference in their business. With the Americans I think it's a combination of culture and don't care. But culture mainly.

There are really two kinds of car buyers. The new car people who like to buy or lease a brand new vehicle every 3-5 years and the used car people who like to buy a vehicle which is already 3 years old and drive it for 10+ years. The new car people don't notice much of a difference between the various brands/companies and will tell you that American cars are just as good, or german cars are just as reliable, etc because almost any new car will be pretty good for the first 3 years, but the used car people know that there is a tremendous difference between the different makes. rk is 100% spot on. I've bought about 12 cars for me and my family. All used. There is a lot of difference between brands. Toyota/Lexus is the king. The only other ones that come close to Toyota are Honda and Subaru. -- Maybe just a coincidence that Subaru is part of the Toyota family?

You can't read too much into that for several reasons. 1. This is kind-of the real estate season so you get a lot of listings around this time of year. 2. If you have a hot market where homes sell really quick you would have a lot of very young listings.

Wow, retirement in the US seems to be very scary.

I think that's excessive. 1.5 M for just living? A 4% return on 1.5M will give you 60K a year without touching principle. Social Security will kick in another 30k. Maybe in some cases one would also get some sort of pension from the employer. Assuming you have your house paid off, 90k per year just for living expenses excluding healthcare? Then on top of that 1-1.5M for healthcare? I don't know exactly how expensive services are in the US but again it the amount seems large considering that you have Medicare and Medicare-D coverage. I'm sure some people do use the amounts you've stated but that's definitely not how much you would "need". Further proof is that few people in the US have those kinds of amounts when they retire and somehow they manage to live.

Actually Canada is an advanced and diversified economy. We're a bit more heavy on resources than out peer group. But resources are nowhere close to the level that some people are thinking. Housing and related activity (renting, relators, leasing, financing) is running a couple of points of GDP ahead of where it should be but that's nothing that some painful re-balancing won't take care of. The TSX is a different beast since the TSX is not a fair representation of the Canadian economy. While I'm not fond of the corner we've backed ourselves into we'll be just fine in end.

I think that Canada's situation will be good long term but there will be medium term weakness as we work through the real estate mess and delever. Effectively when we decided to sell houses to each other at ever increasing prices we levered up and are paying more and more for housing. That means that house expenses are getting a bigger part of the pie. The problem is that there is money to spend on other things, which leads to weak demand and a not so good jobs situation. So the next 5-10 years while we work through the hangover will be a bit rough. Once we come out the other side and return to normal demand levels Canada will do very well.

I thought the analysis of Cap Rate spreads was interesting. Do you see any flaws in that approach? I don't think that looking at cap rates spreads to 10 yr bond is bad as a data point. But I do think that his data is crap. One of his sources is globalproperty guide.com... please. Then he bounces between GTA cap rates and condo cap rates. Then on the spread graph he uses a nation average cap rate. Just a back of the envelope cal will tell you that the Toronto cap rates between 3-5% is bullshit. There have been way better studies that put the Toronto cap rate around 2%. Then he has the national cap rate at 6%. Since Toronto is at 2%, Vancouver isn't better, you must have some crazy cap rates in the rest of Canada to pull the average to 6%. That's just not true... so i call bullshit on that too. Add to the fact that he talks about Toronto as a global city comparing it to New York, London, and Tokyo as a reason for why housing should be unaffordable but leaves out the fact that both New York and Tokyo are more affordable than Toronto and not by just a bit. In addition his Demographia numbers are wrong. I don't know if he fudged them or used an outdated report. All these things add up to the fact that the numbers in that report are seriously unreliable. The author is either bullshitting or he's incompetent. In the end it doesn't matter the value of that report is the same.

+1 I'm not so sure. I thought the same thing when they announced the Vancouver tax but Vancouver seems to have calmed down some since then.

Yeah, I've read that. It's such a joke and so bad that I didn't even think it merits a take down. Anyway it was written by a kid barely out of school - nothing wrong with that some of them are totally brill. But the thing reads like an assignment you just bang out while hungover in the morning because you didn't have time to do it the night before cause you were out drinking. Thing guy would get laughed out of any investment committee meeting. Anyway, I'm surprised Baskin published that. They're actually a semi-decent shop.... Maybe they're slipping.

We should make that the new Canadian motto. Go to school, work hard, and maybe you'll get to live in squalor.

Also, those figures seem understated? I remember the February numbers stating that SFD in Toronto were $1.6 mln while the average house (condo, SFD, semi's, etc) reached $1.1 mln. I recognize the chart is dated for Jan 2017 but that seems like too big of a leap in one month. He's using the HPI benchmarks from CREA. You can download the full data set here: http://www.crea.ca/hpi-tools-terms-of-use/

The cranes that you refer to are building condos and there aren't many that are saying that there's a supply concern with condos - though listings there have also tightened. It's single detached homes that are now increasingly uncommon and whose prices have risen 33%. Condo prices have risen near that much. From CREA stats: GTA Condos 29% YoY. GTA single family 30% YoY. Tell me more about supply. I find it tiresome to discuss with you because you automatically take something I said, conflate it and then present a gotcha-type conclusion. One year numbers can have plenty of noise, but take a look at the following graph and tell me what kind of housing units have been rising faster than others: http://creastats.crea.ca/natl/images/natl_chartC010_xhi-res_en.png I also said that condo supply recently has been tight, but the supply concern isn't chronic like it is with single family detached homes. You'll see a lot of condo completions this year and the next which will help to alleviate some of that tightness currently. In contrast, there is barely any forseeable development of single family housing in the city area. Anyway, I'm done talking to you about housing. I'm actually not trying to play the gotcha game too much. I was just trying to modulate my sarcasm to your justifications. In your view it's all the realtor line about supply. Let me summarize: Prices going nuts in places that have lots of land: Supply - they just can build because it takes time to get permits: Prices going up like crazy in Thunder Bay? It's those wealthy Torontonians retiring there. Nevermind that Thunder Bay isn't on any wealthy Torontonian's list of retirement destinations. Population not going up in Thunder Bay: Well that doesn't prove anything. By this logic we'll soon get to the point where we're saying that well 20-30% price increases as warranted because Canada is taking in Syrian refugees and they're snapping all the million dollar homes. In all seriousness now. I try look at things using facts and data. I also usually try to employ the scientific method. Namely I accept x premise to be true, what else should I be seeing. This is where a lot of things start to smell about the real estate market. Single family detached did go up more than condos. By about 2% per year over the 12 year time frame you've pointed. But once you take into account the shrinking square footage of condos over that period that doesn't add up to much. You've premised that there hasn't been a lot of single family detached (SFD) construction in Toronto proper so that's the reason why prices are going nuts. Well it's true that there hasn't been a lot of SFD construction in Toronto proper. That's because Toronto is all built up. But it's been all built up since late 70s early 80s. Why haven't we seen 20-30% per year price increases in the 90s? They weren't building SFDs back then and Toronto was getting lots of immigration. In regards to SFDs coming to market, Toronto didn't get a lot of them. But Oakville-Milton did area did build a lot of SFDs. Prices in Oakville-Milton went up more than Toronto as per CREA during the 12 years mentioned. Yes this could be due to economic refugees from Toronto but you did get supply there and prices went up more than Toronto where you didn't get supply. Then take the case of Montreal which is also a highly developed city that gets plenty of immigration. It's also all built out and not one that I would consider cheap. But the price gains there aren't anywhere close to Toronto or Vancouver. You did mention that the condo supply has tightened some in the past year. I didn't check your numbers on that. I believe you. But just because supply tightened somewhat is that reason enough for prices to go up by 30%? Especially after the ocean of supply that came to market in the past years? Is that a normal market? You may call me an ass. And you may even be correct. But it seems to me that you are grasping at every straw you can find to justify the price action in real estate except for the most obvious one: It's just plain old good old fashion bubble. As TBW said (I paraphrase). If the average family cannot buy an average house it, something smells bad and won't last for long.

The cranes that you refer to are building condos and there aren't many that are saying that there's a supply concern with condos - though listings there have also tightened. It's single detached homes that are now increasingly uncommon and whose prices have risen 33%. Condo prices have risen near that much. From CREA stats: GTA Condos 29% YoY. GTA single family 30% YoY. Tell me more about supply.

Suppose you are correct. Then why aren't they building houses over there to meet demand? Is there a shortage of land in Thunder Bay?

Hey all: I know many Canadians. Of the ones I know, they live(d) in Windsor. A lot of youn(ish) folks in Windsor try to come to the USA. A lot try to work in the Detroit area because of the economic opportunities available to them in the USA. They explain to me that if you are older, or well established, Canada is a great place to be...but if you are young, and not connected, it is difficult. At least this is in the Windsor area. I always found this to be very odd... Let me put it this way: While Toronto may be our version of New York City, Windsor is our version of Detroit. They're pretty much screwed. Add on top of that that you have the same youth underemployment problem that you have in the US. Add on top of that that while 08/09 wasn't as bad up here as it was in the US the recovery has been much weaker as well especially when you take out all the housing nonsense. Put all of those together and you're starting to get the picture.

There are spill-over effects on nearby towns with populations of between 100,000-300,000 when their neighboring city with over 6.5 million inhabitants see detached prices rise by so much. Just a small migration of people priced out of the GTA or selling out of their homes in the GTA and relocating elsewhere will have outsized impact on smaller towns. They're migrating to London, Windsor and Thunder Bay?

Large price movement does discourage listings to some extent for normal people. Last month there was a price movement of 6%. To take your example: Since your wife won't agree to renting to get another house, if you sell yours and then buy another one you're out 90k. So why would you do that especially if there's nothing wrong with your house. I am confident that normal folk are afraid of getting screwed over in a market like this so they just sit on their hands instead. On the other hand the number of transactions is up 17% YoY. So there are plenty of listing - as you know for a transaction a buyer and a seller are required. The other point is regarding all the talk around shortage of detached homes. Maybe you can't build any more detached homes in Toronto proper. But I'm not sure there's a shortage. If a shortage of detached homes was a problem what I'd expect to see is prices increases for detached homes outpacing townhouses and semis. Also I'd expect to see price increases for detached homes in Toronto proper outpacing prices for detached homes in places like Milton and Newmarket where there's room to build. However that's not what's been going on. Prices on the outskirts of Toronto have kept pace with Toronto proper and prices for towns and semis have outperformed detached.

That is correct.

Actually mortgage rates have gone up about 50 bps in the past year or so. But as another poster said, why does that matter when you can make 3,000 bps? Even if you can raise rates 500 bps why would it matter? By the way, to stop things you don't have to hike rates like crazy to brick the whole economy. The government has tools at its disposal to go use more precision based tools to regulate the shit out of real estate and real estate lending without taking down other sectors. But that seems to be unconceivable. Why should real estate speculators suffer and not manufacturers as well?

I live in Ontario where we have lots of nuclear. This is our generation mix tonight as of 7 PM: Nuclear: 9,919 MW Hydro: 4,765 MW Wind: 1,506 MW Gas: 389 MW Biofuel: 224 MW Solar: 28 MW As you can see there's a ton of nuclear in that mix. Last month I paid $60 for electricity. Btw, I'm not a low power user. In fact every month I get a letter from my utility berating me about how I'm in the high bracket of users and I should seriously think about conservation. So it's not so bad.

Well everyone likes to complain about electricity prices. But in North America they're pretty cheap. Nuclear may be more expensive than nat gas (for now?) but it's not that big of a deal. Even if nuclear is 4 cents per kwh more expensive that doesn't add up to so much. A US household uses on average about 11,000 kwh. That's about $36 per month extra if everything was converted to nuclear. But really you wouldn't do more than an extra 40% of generation. So that's about an extra $15 per month per household on average. Of course no one likes to pay. But that's not a very high price to pay to make a blow a huge whole in global warming. But of course between the environmental zealots who want everything to be solar, the coal people, the oil&gas lobby, and the I don't want to pay people it just ain't gonna happen.

Well his approach has changed a lot since then. Do you make room for the fact that maybe the man has learned a thing or two in the intervening 60 years?

33% YoY is means that the price appreciation is actually speeding up. This is utterly insane. If/when prices stop climbing you won't have normal real demand. You'll have depressed demand because everyone bought houses at ridiculous prices and are now broke many others will be unemployed and won't be able to afford homes even at the new prices. Then you'll also have huge supply because all of the "investors" either can't make the payments anymore or all of a sudden they're not so thrilled anymore with the negative carry. Here's an interview with the Toronto mayor on Bloomberg: https://www.bloomberg.com/news/articles/2017-04-05/toronto-home-prices-jump-33-in-march-as-market-tightens Let me paraphrase "My heart weeps for the people of my city that can't afford a house anymore (most of them). We are looking at many tools. But we have no data, we are totally clueless about what's going on. So we shouldn't rush to do anything, we should just sit around and wait." Sure, we should sit around and to nothing. It's not like we have a critical situation on our hands. I wonder, when this thing goes tits up and we have a full blown crisis whether the response will be the same: sit around and do nothing. Compare this with the Oakville mayor's interview on CBC that was posted here yesterday. That guy surprisingly had data (shocker!), called bullshit and Real Estate industry and was calling for action.

I think that what you're looking for are your compounders unless you're afraid of mark to market losses. The companies that are worth more today than in 2007/2008 (with some exceptions) do so because they were able to continue to grow their business and create value. Whether their profits shrink during a crisis or a recession is doesn't really matter. What matter is whether they can survive a crisis and whether they can return to their previous growth path once the storm passes and sunny skies return. Take Berkshire for example. In the financial crisis BRK market value declined by about 50% from peak to trough. Today its market value is 67% higher than pre financial crisis peak close to the end of 2007. However for 2007 Berkshire's pre-tax income was 20.1 Bn, float was 59 Bn, and BV was 121 Bn. In 2016 pre-tax income was 33.7 Bn, float was 100 Bn, and BV was $286 Bn. That's why Berkshire is worth more today than 9 years ago.