permabear

Thanks! It strikes me as high, but I can see it

Garth Turner recently wrote: "over 50% of all GTA condos go to flippers and amateur landlords" Does anyone have a source for this? Much appreciated

Any readers of this thread have a reliable source on % of GDP attributed to housing? Cheers

Can anyone recommend some good books on China's potential real estate bubble? I am very interested in learning more after watching this: http://www.aljazeera.com/programmes/101east/2016/09/china-economy-160913081105227.html It just seems like something has to give here. Government levering up to finance massive, worthless ghost cities, encouraging citizens to lever up to "invest" in same... Thanks!

Can someone please help me understand this? CMHC has $523 billion insurance-in-force and $426 billion guarantees through its securitization programs ($208 billion NHA MBS + $218 billion CMB). If you are trying to get a measure of CMHC's exposure to housing, is it simply the sum of the two (insurance + securitization guarantees) or is there some overlap (double-counting) on the guarantees? i.e. say a bank lends $500 million to various borrowers, and obtains CMHC insurance on every deal ($500m of insurance). Then they pool those mortgages, securitize and sell them to investors (through NHA MBS or CMB, does it matter which one?). Now CMHC has sold insurance to the bank (the beneficiaries of which should now be the investors) and has provided a guarantee to the investors that they will receive "timely payment of interest and principal". Do they now record $500m of "insurance-in-force" and another $500m of guarantees? Thanks!

I didn't say it was objectively cheap. It is cheaper than Scenario 1. The mortgage in Scenario 2 is a goal seek to get to a mortgage amount that will produce the same annual payment at a 10% interest rate. I'm not deluding myself, I'm asking a hypothetical question about the tradeoff between the price of RE and price of debt. You could also run the analysis with a 15% interest rate if you want a cheaper mortgage: Scenario 3 - $387,132 mortgage, 15% interest rate, annual payment: $115,487, total interest paid over term: $190,305

I had this conversation the other day with a friend. He was saying he should get into the housing market (Toronto, Canada) because interest rates are so low, and now is the time to do it! I was arguing that because interest rates are low, people are being encouraged to enter the RE market and prices have been pushed up. He responded: if interest rates go up, prices will drop, but from a monthly payment standpoint, it may work out to the same. This got me thinking... These scenarios work out to exactly the same annual payments and the sum of interest and principal repaid over the term (5 year term, paid annually) are equal. Which one would you pick (or are you indifferent) and why? Note: this is a hypothetical situation on the same property Scenario 1 (Most expensive RE, Cheapest debt) - $500,000 mortgage, 5% interest rate, annual payment: $115,487, total interest paid over term: $77,437 Scenario 2 (Cheaper RE, More expensive debt) - $437,788 mortgage, 10% interest rate, annual payment: $115,487, total interest paid over term: $139,649 Scenario 3 (Cheapest RE, Most expensive debt) - $387,132 mortgage, 15% interest rate, annual payment: $115,487, total interest paid over term: $190,305 I think my answer is, I would be indifferent. The real question for me would be, what is the discrepancy between cap rates and interest rates in any given scenario.

Short Medallion Financial (NASDAQ:MFIN fka TAXI) Highly exposed to NYC taxi medallions (licenses) as over 50% of their book is invested in medallion loans. Huge debt maturities coming due in 2016 totaling 74% of all debt (not including brokered deposits). Close to tripping several regulatory covenants, which could effect FDIC insurance coverage on deposits, ability to dividend cash up to parents, ability to raise capital without diluting shareholders, etc. Massive +13% dividend yield that is being funded by debt/eating into equity (not supported by operating income). Senior executives and directors are dropping like flies. Good recent explanation here: http://seekingalpha.com/article/3985501-can-medallion-financial-survive-230m-refinancing-cliff-year-end?app=1&uprof=22&isDirectRoadblock=false

Craziness. There's your catalyst! We all know incomes aren't going to start skyrocketing.

Getting married next week. Traditional, middle eastern families - translation: bloated guest list. Our culture for wedding gifts is cold hard cash, so that helps pay off some of the cost. I will be very happy if I get back half of what I spent. Weddings are expensive and vendors in the wedding industry are filthy bloodsuckers. Want a cheap wedding? Go somewhere. Destination wedding. I have heard stories of couples who actually made money off of these trips, as the resort will give them a free stay if they bring a certain number of people. Also, destinations will significantly reduce your guest count, in a way that you could never do in your hometown -- i.e. if I tried to host a small wedding in town and purposely didn't invite certain family/friends, that would have caused a big issue. We had an engagement party last summer in my backyard with about 100 people and it was very affordable. All the food was made in-house, we bought a bunch of booze, I got friends to "DJ" (with their iPhone) and tend the bar, we rented tables and chairs (no tent, it didn't rain thankfully). It was a great night and it would have totally qualified as a proper wedding reception. If you can pull this off, you can do it for $5-10k and will not regret it. I don't look at current consumption as a loss of capital that I can compound for x number years -- if I thought like that I would never buy anything and just die filthy rich (like Buffett)... what's the point?

That's incredible. Does that include incomes rising at the same pace too?

You can put together a deck or dock for your friends showing the full RE Cycle peak to peak not just the past few years. Last peak was in 1989. If you graph stock market returns on that it is a real sobering sight. Also this way you can show them what kinda happened the last time when "prices only go up and if they don't buy now they will be priced out forever and die lonely". You can also map affordability levels (hint: Toronto is at 1989 levels and Van is past those). You can also do cash flow models for different scenarios. You can also go through different "what if" scenarios. What if real estate keeps going up at x% per year? How will the market look 10-15 years from now? Does that world seem reasonable or even possible? I've done the above for certain clients who were thinking about allocating money to RE and it scared the shit out of them. I can't share the deck here for a number of reasons. But having done the analysis I can say that one you start to work the models it's really eye opening. People talk a lot of crap about RE, when I take some statements they make and I build a model based on those assumption they look at the result and go "that's not possible!" Great ideas. I like your what-if scenario, it would really help to show how ridiculous pricing and affordability has been, esp. the recent growth rates. Ideally I would like to make 2 docs, 1 for non-finance people like my friends and 2 for finance professionals with more detail, data, analysis, etc. What do you use as your primary source for this kind of research: CMHC, Statscan, CREA, Teranet, Bloomberg...?

Thanks for the insightful comments, Potato. Would love to see some of the research you described! What is "HAM"? I was hoping to have a doc or video or something to point to when my friends come to me and say they're buying their first home, an investment property, investing in syndicated mortgages.. etc. To most of them it is a simple decision in that it is that time in their life for them to enter the RE market, they want to diversify, they can afford the biweekly payment and of course, prices only go up and if they don't buy now they will be priced out forever and die lonely.

Hey guys, I have read hundreds (probably thousands) of articles (also books, slide decks, etc.) on Canadian real estate. I am convinced it is a short, don't know about timing. Wondering if anyone knows of a single article, book, essay, slide deck, or anything that lays out the entire short thesis for Canadian real estate? Preferably not When the Bubble Bursts by Hilliard Macbeth as I have already read it. Cheers

I want to get a better understanding of how Fannie/Freddie started & grew, what they did, why they failed, the resulting outcome, where they are today/how they are different, etc. I am interested to see how they compare to CMHC in Canada, which not only securitizes mortgages, but is also heavily involved in providing mortgage insurance (not to mention companies like Genworth, which are 90% backed by gov't).

Long Canadian housing report published by Fortress RDI. http://fortressrealdevelopments.com/news/the-market-manuscript-spring-2016/ Where to start...

I do some real estate development work in central Florida. The rule of thumb for homebuilders there is that lot prices (pad-ready, incl. roads, sewer, utilities, water, etc.) should cost approx. 20% of the final selling price of the home (i.e. builder's land cost / builder's selling price = 20%). Haven't done any similar work in Canada, but with old dumpy lots fetching $1.0-1.5m and being resold for $2.5-3.0m after demolition and construction, it is clear that the lot cost is significantly higher in Canada (anywhere from 33-60% based on my figures). Very little room for error. If home prices drop these builders will be stuck with very expensive lots that they can't turn for a profit.

Thanks for all the links, Schwab! Appreciate it. Canada's central bank just recently updated the lower bound of their interest rate policy, dipping into negative territory @ -0.5% so firstly I would like to better understand NIRP. But really, I think central bankers are clueless and further tinkering with interest rates will not solve anything (just push problems into the future and make them bigger). I also find it funny that just a few years ago I would hear people saying, "interest rates are so low, there's nowhere to go but up!" Well, that's not true when you get into NIRP and the scary thing is, there really is no lower bound as rates can just continue to get more negative.

Anyone have any good books/resources on NIRP? Case studies of its application in Europe? Has this ever been done before? Also appreciate anyone's opinion on the matter. Cheers

Where are the Customers' Yachts? by Fred Schwed Instant favourite.

The Canadian government quietly propped up the banking industry in 2008-10. So yeah, the 'near miss' was more like kicking the can down the road. Haven't read this report yet, but apparently the banks received $114bn in support from gov't and CIBC, BMO and Scotia were all underwater! Summary: https://www.policyalternatives.ca/newsroom/updates/study-reveals-secret-canadian-bank-bailout Full report: https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2012/04/Big%20Banks%20Big%20Secret.pdf I know it's old news (published in April 2012). If this version of events has since been debunked, would love to hear an explanation.

Looking for web-based, but I will try MyStocks on my phone as well - thanks I use it on a daily (sometimes minute by minute) basis to track securities. Not doing anything fancy - no technical analysis, not entering my trade information, not looking for fundamentals, financials, etc. Just watching price/volume activity, waiting for buying/selling opportunities and checking a few things here and there like market cap, share count, dividend yield. Google Finance news feed on the security page is absolutely terrible. Most of the feed is irrelevant or old. I don't get why the results don't mirror results of a simple Google search. I also don't like how I can't track debentures, rights or other non-standard securities. I look at mostly Canadian and US securities. Need to see it in the domestic currency (some apps like Seeking Alpha convert everything to USD, rendering it useless). That said, I still haven't found a platform I prefer to Google Finance...

Fed up with Google Finance - they haven't updated the platform in 5 years! Any better alternatives (not Yahoo)? Thanks

Canadianinsider.com is the best, aside from going straight to the source: sedi.ca

Can you believe stats can reported debt service ratio as interest only until now? What a useless/misleading metric