There's 26 Comments So Far

• Norm Fisher
  October 3rd, 2004 at 3:31 pm

  Thank you Callum.

  I had no idea that Ozzie Jurock was President of Royal LePage. I guess I need to brush up on my company history.

• Crikey
  October 4th, 2004 at 1:09 pm

  Norm,

  I see your point, but I don’t really see that stock brokerages’ main concern of late is investors pulling their liquid investments to buy illiquid ones. I totally agree they need to maintain as much of a client base as possible, especially now.

  Thanks.

• K
  October 4th, 2004 at 11:09 pm

  Norm,

  I am just wondering if you have heard any numbers being thrown around about the cost of the River Landing residential units?

• Bookrat
  October 3rd, 2008 at 1:27 pm

  Looks like your friend who writes these things got an easy ride this month, Norm.

  Of course, he failed to mention that 246 sales is the lowest September in 5 years, off 27% from last year’s bubble, but still down between 8%-13% from the quite-consistent 2004-2006 numbers.

  And he also didn’t mention the impact that two sales worth $2.4million had on the overall picture, those two sales alone adding a $7k premium to the average sale price in September.

  But, honestly, those are small things. September numbers are much better than I would have thought they’d be, given what August looked like. Now we just wait to see what October looks like in the wake of all this financial fun and the (official) end of 0/40.

• Crikey
  October 3rd, 2008 at 1:30 pm

  This is an article from RGE Monitor:

  Can any Canadian provinces decouple from the US?

  -RBC: All provinces have lessened their exposure to U.S demand by diversifying their exports to other international markets like China but none will fully escape US weakness. The hit to exports will disproportionately affect Ontario, which will teeter on the brink of recession, because of its reliance on U.S. demand especially the most afflicted housing and auto sectors. In fact, the gap between the highest and lowest performing provinces has widened, with growth in Saskatchewan stronger than previously projected and that in Ontario and Newfoundland & Labrador slightly weaker.

  -Nation-wide domestic demand offset net export weakness but nationwide growth registered a small contraction in Q1, after several quarters of deceleration

  -U.S. export share of GDP by province ranges from 18% in British Columbia to 40% for Ontario (TD) Provinces with a larger energy/refined product share of exports are more cushioned from consumption-led slowdown in U.S. – Newfoundland (70%), Alberta (68%), New Brunswick (59%), Saskatchewan (34%) Nova Scotia (17%) and B.C. (8%)

  -Global Insight: Economic growth in Alberta has outpaced the national average by a wide margin in recent years on strong energy prices and low tax but increase in population means GDP growth/capita is slowing as output rises in Saskatchewan and Newfoundland. The Ontario economy has been running below the Canadian average since the SARS epidemic and electricity blackout days of 2003 on appreciating Canadian dollar, weak U.S. economy, and high energy prices

  -TD: Ontario’s industrial base was largely built on a foundation of a competitive and often undervalued Canadian dollar, relatively free access to the U.S. market and low cost energy supplies -> a cyclical rebound in the U.S. economy won’t be enough to restore the foundation

  -Scotia: Western Provinces will continue to lead with average growth of 3.0%, underpinned by the booming energy and mining sectors and infrastructure investment in British Columbia, Central Canada will grow around 1.4% and Atlantic provinces 1.8%. Significant infrastructure investments underway across canada: British Columbia, Ontario and Quebec plan ambitious longer-term transit development. Alberta faces a critical need to upgrade the infrastructure surrounding the oil sands. Quebec (hospital projects, power)

  -TD: Led by non-forestry commodities: Saskatchewan to have largest change in real GDP growth

  -Deceleration in Western Canada may be exacerbating Canada’s overall housing slowdown,but still strong job market and low unemployment (4.3% in BC and Sask and 3.3% in Alberta) implies that overall it is just returning to normal growth

• Bookrat
  October 3rd, 2008 at 1:39 pm

  Sorry for two-in-a-row comments, but this just caught my eye when I was updating my own spreadsheet…

  Norm, why does August ‘closer look’ article show an average sale price of $282,470, while your ‘MLS Statistical History’ page has it at $279,366? How is it that the two don’t match up?

  I see similarly small discrepancies in July ($294,306 vs. $292,428) and June ($313,109 vs. $310,386), but a *huge* discrepancy in May ($327,292 in ‘closer look’ vs. $301,527 on stats). There are probably more, but I have no further time to look just now. What’s causing these numbers not to line up?

• Norm Fisher
  October 3rd, 2008 at 2:34 pm

  Bookrat,

  Yes, Harry got a bit of a break this month.

  In addition to the two million dollar plus sales, there were two others between 800-900K. If you remove those from the equation, plus the lowest four sales, you get an average which is closer to $290K.

  What’s causing these numbers not to line up?

  The MLS stats page includes the complete residential category where the “closer look” is strictly detached houses and condos. Mobiles, vacant lots, duplexes, semi-detached are not part of my calculations in this particular report. With the May numbers you’ve pointed out, you’re comparing the average of the whole residential category to the average price of a detached house.

• George
  October 3rd, 2008 at 6:14 pm

  I don’t agree with this press release, many who post here could write a more accurate picture of the current real estate market here.

  But it can’t be easy writing this and I don’t blame whoever wrote this. I would do the same if it was my bread and butter. If realtors were quoted in the paper that the real estate market is gonna drop, then market pyscology would feed on that.

  When sports teams are down 0-3 in a 7 game series, they still have to show confidence and believe. Not many will say, “yeah, we’re finished!”. Not saying this market is finished, just an example of pyscology.

  Shiller had a piece on the Canadian real estate market and pyscology just the other day

• Crikey
  October 3rd, 2008 at 8:47 pm

  Hey George,

  Have you caught this? The main-stream media is finally getting a clue:

  Credit taps running dry in the U.S.

  http://tinyurl.com/4f3wel

  “WASHINGTON — In the chaotic two weeks it took to get a monster bank rescue through the U.S. Congress, the credit crisis has spread like a virus, infecting people and companies far beyond its epicentre in U.S. housing.

  Many Americans can’t get car loans. Companies of all kinds are struggling to secure operating cash. Banks and brokerages are too afraid to lend to each other. And many state and local governments are facing financial ruin because they can’t issue bonds to pay for roads, schools and other essential services.

  California Governor Arnold Schwarzenegger, the former tough-guy actor, sounded like a frightened man as he begged U.S. Treasury Secretary Henry Paulson this week for a $7-billion (U.S.) emergency loan.

  “Absent a clear resolution to this financial crisis, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing,” the Governor wrote to Mr. Paulson. “California is so large that our short cash-flow needs exceed the entire budget of some states.”

  California’s my home state.

• George
  October 3rd, 2008 at 9:27 pm

  Crikey,

  thanks for the link. The thing with California is that they have one of the most diversified economies in the world, if not THE. From oil and gas, to Hollywood, to silicon valley, to tonnes of tourism and they are in bad shape.

  Crikey, why did you leave? I have been there once been through San Fran to San Diego. Loved it, except traffic:(. Did 30 miles in 3 hrs in LA. People who think that Circle Drive is backed up, know nothing about at traffic jam.

• callum
  October 4th, 2008 at 12:01 am

  (cadged from an unnamed course, shhhhhh)

  Canada’s Mortgage Markets Not Like The US Mortgage Market

  Merrill Lynch released a report last week warning of a U.S.-style meltdown in Canada’s housing market. Consider the source. Merrill Lynch lost an average of $52 million per day from early 2007 – $19.4 billion in all – until it was taken over last month by Bank of America. (Merrill Lynch is becoming holy now … their analysts now hammering everything down … from potash to a hundred other stocks to real estate…). But, then again Professor Schiller said the same thing on Thursday: Canada and most of all Vancouver and Calgary are going to face a US style meltdown. They base it primarily on the fact that we have similar housing and mortgage markets.

  While everything is possible, in our view it is not likely. If the fundamental problem in the US was the sub-prime mortgage debacle then Canada is in little danger of seeing the housing and credit collapse now paralyzing the United States.

  Here is why:

  Canada’s sub-prime market represents no more than 6% of outstanding mortgages. In the U.S., 25% of new mortgages during the 2006 peak were sub-prime. In addition our 100% mortgage buyers actually had to qualify and have a job, in the US all they had to do was fog up a mirror.

  Canada’s definition of sub-prime (90% to 95% of financing) would be considered near-prime in the U.S.

  Adjustable rate mortgages resets (where the interest rate sharply increases) caused much of the U.S. problems. In Canada, the closest we have are variable rate mortgages, but these are constantly re-priced so consumers are not caught off-guard, and float with the prime rate … not a predetermined 3% – 7 % higher at a fixed date.

  Mortgage interest is tax deductible in the U.S., which creates a strong incentive to leverage … to create ever larger tax deductions and have larger and larger debt, less equity. Canada has no such deduction, given Canadians the incentive to pay off the non-tax deductible mortgage as soon as possible … generating more and more equity in the process.

  Investor mortgages account for 9% of all U.S. mortgages and were among the first to default. In Canada, investor mortgages are only 2% to 3% of outstanding mortgages.

  Mortgages in arrears in Canada (90 days or more) remain at .027% (27 basis points) the same range since 2004. In comparison, default rates in Florida and Nevada, as an example, peaked at around 25%.

  Major Point: Clearly, the end of the upward cycle happened back in May. We were in for and are in it now … a normal correction. In addition these last 2 weeks of worldwide turmoil in the world’s banking system and stock market crashes are unprecedented in its ferocity and wild swings, creating fear and uncertainty. Clearly we will also be affected. We already warned about the impending credit crunch last year. We said at the Outlook conference last year that we expected the turn within 6 to 12 months and we are there. We ran out of steam, our affordability was out of whack and prices overshot. We expect a 12 – 24 months slowdown in Canada with prices reversing between 10% and 20%, depending on what and where the real estate is located. Canada will see the effect of the U.S. credit crisis. Our forestry sector will be hit by the housing slump; our manufacturers will sell less autos, appliances and textiles. But if you are invested in Canadian real estate – that has a use – urban residential or commercial – you are in a relative safe environment with an appreciating asset that will rise in value as inflation follows the inevitable U.S. money-spinning bailout. You could have been in stocks … and lost 23% of your assets in 6 weeks … or 55% on the Venture exchange … or you could (more likely!) clip that rent.

  The writer of the above comments used to be the president of Norm’s company Royal LePage.

• Crikey
  October 4th, 2008 at 9:25 am

  Callum,

  Thanks for the post, lots of nice information. Nothing very surprising, however. This is not because of sub-prime lending, but because of the strain on individuals paying mortgages. It’s all connected. It’s not just a matter of a few narrow parameters within the mortgage market. Everything from the price of food, to the ability of someone to get work in their field, to the price of gas, electricity, and the loss of manufacturing jobs, affects the housing market. I also have 2 points for you to consider:

  1)Merrill Lynch analysts vs. the president of a real estate company- who has a more vested interest in getting people to buy Canadian real estate?

  2)The BIG factor that will determine house prices is the availability of credit, and that is not looking good at this point. Anywhere. Jobs numbers, of course, will be important too.

  George,

  I left CA as a young child with my family. I have dual citizenship. I do still have family there, which makes events down there a bit more anxiety-provoking.

  Yes, they do have a huge economy- in fact, if CA were an independent state, they would have had the 10th largest economy in the world in 2007. Canada was 13th.

• Norm Fisher
  October 4th, 2008 at 9:25 am

  Callum,

  Any chance you can reference this article? I’d like to read it.

  I believe that the points made in this story are valid and reasonable. The only real wild card is the potential impact of the “credit crisis.” No doubt that Canadians are as concerned and uncertain as their American counterparts.

  Some interesting points.

  It’s amazing to me that anyone would be taking Merrill Lynch very seriously.

  The value of my “investment portfolio” is dropping much faster than the value of my home. For the first time ever I find myself wishing I had a little more real estate.

  Crazy question here, if you don’t mind. Do your parents own a Royal LePage brokerage in Calgary?

• Norm Fisher
  October 4th, 2008 at 9:52 am

  Crikey,

  “Merrill Lynch analysts vs. the president of a real estate company – who has a more vested interest in getting people to buy Canadian real estate?”

  Or, to put it another way, who has more of a vested interest in getting people not to buy Canadian real estate?

• James P.
  October 4th, 2008 at 10:17 am

  Well, the bail out passing has pretty much doomed the US economy now. Many people have not considered the impact of the now $850B dollars into their economic system. Where do you suppose that money is going to come from? Will China lend it to them? Nope, China is actually one of the countries that will be coming on Monday with their hands out for their piece of the pie (oh yea, they slipped it in that foreign debts can be re-sold to the banks and paid out as part of the bail out – does the bail out make sense now?).

  No folks, a good portion of that money is going to be printed out of thin air by the national treasury (nowhere in the constitution of the US does it say the treasury can even do that!). Take a guess who two of the major stock holders of the privately traded (yes, not nationally owned) national treasury are? Goldman Sachs and the Lehman Bros.. Two companies that were in part responsible for creating this mess are now going to get hand out from the national treasury, of which they are Shareholders! This is sick. And now they’re talking about price fixing!!! What happened to capitalism and free market economy?

  If you want to hear the truth about this bail out, I encourage you to view the commentary by Ron Paul – probably one of a handful of non-purchased politicians in the US.

  Why do I bring this up? If the US dollar tanks because of inflation – which I have no doubt it will with this influx of money – Canadian exports go down the crapper. The already crippled manufacturing sector will take a fatal blow, and it doesn’t look promising for commodities – especially if the greenback goes so low it is turfed for oil valuation and purchase (the euro seems like a better choice these days).

  With the coming election, I encourage you to ask yourself this – do you want a government in power that over its last term has shown on a consistent basis that it is in the pocket of the Bush administration?

• Mark
  October 4th, 2008 at 11:15 am

  James P.

  The Treasury in the US is a federal department plain and simple.

  Most of the money for the bailout will likely be raised by issuing bonds I believe. And there will be no shortage of buyers for US treasuries, but rates will rise to entice them, with so much sudden supply. And there will be no problem selling them simply because the US remains one of the wealthiest and most stable countries in the world. What other country’s debt would people be happier to take on in uncertain global climate. There aren’t many.

  All this headline talk about ‘insolvent’ USA etc, is so overdone. Even if they flushed this entire 700 billion right down the toilet, they would still have a decent debt to GDP ratio compared with most G7 countries. Not to mention the 700 billion isn’t a total loss. It purchases a lot of assets that are tough to value, and the market has essentially valued them at 0, but they are clearly worth more than that. Time will tell how much. Wouldn’t be surprised if a few more international banks swoop in and scoop up some of that ‘toxic’ debt through mergers before the government gets their hands on it.

• SomethingDoesntAddUp
  October 4th, 2008 at 11:40 am

  James,

  There are some elements of truth to what you say but I don’t think the situation will go exactly as you expect. A couple points:

  1) Lehman Brothers is not going to be getting anything out of the bailout, they went under a couple of weeks ago and their assets have been absorbed by other banks.

  2) The success of the bailout will depend on how it is administered. So long as they are buying the assets at market price the US government isn’t really bailing anyone out. They are investing. Buffet has suggested they find co-buyers for all assets, so a hedge fund would buy say 5% of a mortgage pool and the fed takes the other 95% at the same price. So long as they are buying in this fashion the government will do okay.

  3) I would not count on the US dollar tanking, at least not anytime soon. These things rarely go the way you think they will. For one thing, there already is a lot of pessimism against the american dollar, most of the factors you mention are already built in.

  In the case of a serious financial crisis, where are you as an investor going to want your money? Emerging markets or the US for instance. You are going to pull your money back into the US as things go south. Just take a look at the emerging markets for instance, through no fault of their own they are highly leveraged to the success of the developing countries and will continue to get slammed as this plays out. I mean look at their stock market performance over the past year, most of these countries have underperformed the US market.

  Finally, the banking industry WORLDWIDE has been participating in the credit buildup and hence many non american banks will be participating in the fall out. The European banks in particular are even more leveraged than the US banks. If Europe crashes they further undermine asia in the process as the asian tigers lose more export countries. If Europe, US, and Asia all go down, what do you think that does to commodity prices? So guess what, all the remaining countries, like Canada, which depend so heavily on natural resources are in for tough times as well. How exactly it plays out, relative strengths and weakness, all of that is very difficult to determine but you’re not going to see a huge unrestrained tumble of the US Dollar in the next year although you will certainly see large fluctuations.

  I haven’t even gotten into that political instability that will show up in the emerging countries as this unfolds but I will guarantee you that the US, with all of it’s problems is more stable politically than say Russia or China. At least from an investors perspective.

  The US federal debt is around $10 trillion and with the bailout, deficit and Iraq costs it will be at $11 trillion within a year. This is high. However, the US GDP is still $14 trillion. Using this metric debt to GDP is 80%. In comparison at the end of World War 2 it was over 120%. Japan’s debt to GDP is 180%. The US is not dead yet, it still has a substantial capacity to bail and at some point is going to end up holding a lot of assets purchased on the cheap.

• Norm Fisher
  October 4th, 2008 at 12:14 pm

  Hi Crikey,

  Maybe I’m mistaken but I’m under the impression that a stock brokerage would benefit from a diminished interest in real estate.

• Crikey
  October 4th, 2008 at 12:14 pm

  Norm,

  “Or, to put it another way, who has more of a vested interest in getting people not to buy Canadian real estate?”

  I think I can see what you’re getting at, but could you explain that a little more, if you don’t mind?

  Thanks.

• George
  October 4th, 2008 at 12:54 pm

  Some great discussion on the forum this morning.

  James P,

  great post about US GDP to debt. Only 4 years ago Canada’s GDP to debt was worse than the States. I believe that Italy and Japan have a worse GDP to debt than the States in the G7. You could be right in that the States are probably not finished, but they will be in severe recession for some time, in which Canada will be affected the most.

  The gloom spreads north

  http://www.reportonbusiness.com/servlet/story/RTGAM.20081004.weconomy04/BNStory/Business/home

  New post by crazy ol Garth:)

  http://www.greaterfool.ca/

  ok last one:)

  Plunging markets

  http://www.reportonbusiness.com/servlet/story/RTGAM.20081003.wfivethings1004/BNStory/Business/home?cid=al_gam_mostview

  1. You thought this week was bad?

  2. The pain doesn’t always last

  3. But sometimes it does

  4. Sometimes a long time can be very long

  5. Sometimes the pain just lingers

  European leaders head divided into emergency summit

  http://www.reportonbusiness.com/servlet/story/RTGAM.20081004.wecrisis1004/BNStory/Business/home

  Norm, is it ok if you use Paypal?:)

• Norm Fisher
  October 4th, 2008 at 2:05 pm

  Crikey,

  You’re probably right. I’m having some trust issues lately.
  Crikey,

  You’re probably right. I’m having some trust issues lately.

  Callum,

  Thanks. I didn’t realize this was the whole thing. Really more interested in who was being quoted. You say, “used to be the President of Norm’s company, Royal LePage.” Would that be Simon Dean then? If so, does the newsletter say what he’s up to?

  Thanks again.

• callum
  October 4th, 2008 at 3:39 pm

  Norm, that’s it, that’s the article (part Ozzie Jurock’s 2 page weekly letter to investors. I asked after I posted it here because I felt bad for breaking his terms of service, but he’s fine with it).

  Do my parents own a brokerage in Calgary? No. My mom is in Stoon, follows the market closely, she’s fun to talk to … “oh that house on Grosvenor has been on the market forever, what are they thinking?”

  I guess I shall remain anon on here as I tend to mouth more than I should. Internet tough guy, that’s me.

• callum
  October 4th, 2008 at 4:03 pm

  Ozzie Jurock http://www2.jurock.com/insider/products/ozziebio.asp

• Norm Fisher
  October 5th, 2008 at 8:56 am

  K,

  I don’t think they’ve released any numbers yet. Their website promises, “River Landing Village will be the most spectacular and high-quality development Saskatchewan has ever seen,” but they may be a little biased. I’ve submitted a request for more info and will let you know if I get anything back.

  http://www.lakeplacidsaskatoon.com/

• James P.
  October 6th, 2008 at 10:18 am

  My apologies for the “misinformation” in my post above regarding the US bailout. I meant to say Federal Reserve, not national treasury.

• Norm Fisher
  October 7th, 2008 at 6:41 am

  K,

  This note back from the folks at River Landing.

  “Thank you for registering with River Landing Village. We hope that you have had the opportunity to browse our newly updated website.

  As many of you may have noticed, we are in the final stages of design development and we have receieved approval from the City of Saskatoon! Lake Placid will be releasing the first phase of units for sale this October! We are currently setting up our sales office on site at River Landing, which will be equipt with floorplans, color boards and virtual tours .

  As a registrant you are considered a VIP, and will be given top priorty at our October Sales Event. All registrants will be sent invitations and will be given the opportunity to preview prices and select their unit of choice, in advance of the public. Please stay tuned for information updates over the next month.

  We are thrilled to be bringing this world class project to Saskatoon and we look forward to meeting all of you.”

  Not the best spellers, but hey, I guess that being kind of petty.

  I’ll try to check this out if it works with my schedule and let you know what I find out.