Among its victims, Covid has big-city condos on life support. This has cleaved the real estate market in two. Houses with dirt, in the suburbs or even the sticks, are objects of desire, FOMO and bulbous prices. Concrete boxes in the heart of urbanity are emptying, devaluing and shedding equity. Rentals are piling up. Leases are coming down. The inventory of listings is bloating fast. The epicenter is 416, but this class of housing is now unloved in every major centre.

Here’s why. Followed by reasons it cannot last.

  • Rental demand is plunging. Small investors and amateur landlords are sitting on empty units costing them big bucks every month. In the good times rent barely covered costs. Now, for thousands, the rent is gone. Ouch.
  • Covid killed off gobs of jobs in hospitality, entertainment, the food industry, retail and other sectors where many renters tend to work.\
  • Silly politicians declared a virus moratorium on evictions, signaling tenants could live for free and suffer no consequences. A knife through landlords’ hearts.
  • Airbnb restrictions in Toronto, Vancouver, Montreal and other places have sent large-scale hosts screaming for cover. They have flooded the market with long-term rentals and listings. Down she goes.
  • Tourism is kaput. This is a multi-billion dollar piece of the economy utterly destroyed by government edict. Urban real estate, downtown properties, employment and condos have been negatively impacted.
  • Students at university and colleges aren’t in class, staying home in Mom’s basement, taking online courses. Rental demand has crashed in key areas near these institutions.
  • Economic uncertainty, fears of a second wave and the drop in rents (now 15% in Toronto) has kept investors on the sidelines. New condo sales have been decimated – down 85%.
  • Supply keeps piling up. Every day another 300 resales hit the market, pushing prices lower. There are 12,000 rentals listed on MLS, forcing rents down. Lots of those will migrate into active listings as tenants stay rare.
  • The industry is grossly overbuilding. Urbanation reports a record 78,212 condos were under construction in the second quarter,
  • Covid has made condo living seem close, germy and dangerous. People are freaked out at encountering others in the corridor, the elevator and garbage room. Irrational, but powerful.
  • Immigration is largely gone – massively curtailed by Covid and politics (down 63% so far in 2020). The bulk of immigrants rent or look for entry-level real estate (condos). That demand has evaporated.
  • Cities are viewed by many as less desirable than the burbs or the boonies, especially when four million people are WFH, want more space and delude themselves into thinking this is the new normal.

The results are entirely predictable. Prices are falling for some of the most prime, desirable, convenient, hippest urban real estate in the country. Units that commanded $1,400 a foot last February have dropped to $1,000 and below. That’s a crash of almost 30% in the space of 180 days. New condo sales in Q2 were off 51% year/year in Toronto, and in Vancouver 75% of pre-sale units failed to find buyers.

According to Padmapper, the average one-bedder in the core if now renting for just over $2,000 a month, down from $2,300 six months ago. That price will soon have a ‘1’ handle for the first time in a decade.

So where’s this all headed?

Down. Way down, and fast.

The Covid condo correction has only started. Big declines are yet to materialize over the winter months as these trends take hold, inventory accumulates, renters stay scarce, landlords give up and potential buyers sit on their hands. Cheap mortgages can’t save this puppy. Rates likely won’t go any lower. This is a simply play of supply and demand.

Then, it all changes.

The time line is fuzzy and evolving. But it’s probably safe to make these assumptions for 2021 and beyond.

  • That awful US election will be over.
  • A vaccine will have been approved, and distribution started. Restrictions eased. Social distancing and mask-wearing will start to fade.
  • Therapies will emerge. Cases numbers will fall fast. The second wave will have come and gone. Deaths will continue to drop even if infections do not. Everybody feels safer.
  • Global will growth resumes, economies reopen and markets rage higher.
  • The Canada-US border will be reopened. Flights resumed. Tourism, pro-sports and concerts trickling back to life. Immigration restored.
  • WFH will stop being a thing. Ambitious employees will flock back. The downtown will be repopulating. Office towers will slowly, steadily return to more normal operations.
  • People who thought they’d never commute again will be taking the train, the bus, the streetcar, the subway. Traffic and congestion will be back. All the reasons people wanted to live downtown – to be close to work, entertainment and buzz – will rage again. Cities do not die.

The opportunity?

It’s coming. Buying back into the excitement of a thriving urban core for 30% or even 50% less than in late 2019 would be a win. Get into a quality building with a proactive condo board, adequate reserves and a competent management company. Buy low-rise, not into a 95-storey tower (like just announced at One Yonge). Location is everything to a condo.

Mostly, take advantage of conditions which have not been here for years. Maybe decades. Maybe forever. Oodles of inventory – thousands and thousands of units to choose from. Motivated sellers, some of them bleeding and desperate (my fav kind). Scant competition, so no multiple offers, bind auctions or no-condition offers. And the lowest, most ridiculously cheap mortgage rates ever.

Or, you can raise sheep in Marmora.


Into the smoke

Kicked off some major media web sites for being such a tool, he landed here. Over the next four or five years Smoking Man dropped thousands of comments on this blog. At least half of them were obscene, libelous, incendiary or unintelligible. Especially the drunken, overnight ones. SM became the most Deleted person in blog dog history.

The others were always acerbic, sometimes profound, bordering on prophetic. He called for a Trump win when the guy was still riding down his elevator and labeling Mexicans murderers. He mercilessly raked former banker colleagues on Bay Street. He wrote the worst book possibly ever penned, then insisted on trying to publish pieces of it here, hoping I wouldn’t notice. He attempted to humble, humiliate, embarrass and torment me. Then he sent me creepy emails (at night, drunken) to say he loved me.

When I wrote about Dorothy one day, this was his nocturnal message:

Garth, she is beauty. I know she hates my character. I wanted to say nicer things but I love being the bad man on the blog..you can’t bend what you can’t offend..

Your lucky, you got a good woman at your side.. It’s all you need. Everything is a risk on adventure after that.

Why you got into politics beats me.. You can’t the machine. What is wrong with you? Guess you figured it out the hard way……

Congrats, you ugly bearded freak…

Smoking Man was a persona. Or was it? Was Jim Stojsin really dyslexic, or just pretending? Did he actually make millions trading forex in his wife’s name after perfectly timing his Toronto real estate sale and moving onto a California beach? Or was that fiction?

Once day three years ago he materialized, coming to visit me at my country general store, wearing Wal-Mart flip flops and driving a runt pickup with a broken windshield.

Just before the virus arrived, he went silent. I sent a note. The response: “Hello Garth this is Jim’s wife Brenda.  It’s been a tough road for Jim and I.  We were living an incredible life in California when terrible and tragic events occurred.  When he’s up to it he will let you know.  Meanwhile keep him in your prayers.”

Hours later SM sent this: “I want to send something. Just need some time to put words together. This thing is a bitch.”

Last Sunday, says daughter Amy, Jim died of brain cancer. At 61.

She sent his obituary:

Jim and his wife Brenda spent 2 fabulous years in Corona Del Mar, CA after Jim landed his dream job. Sadly, their time was cut short when Jim was rushed into emergency brain surgery in California. After, he had to return home to Canada and fight for his life, not able to return to his home away from home. He enjoyed the last few months of his life surrounded by his loved ones, seeking as much quality time and adventure as his body would permit.

Jim was a loving husband, devoted father, published author, conspiracy theorist, blog writer , alien hunter, animal lover and self-taught computer guru. Jim was not your average man, he pushed the envelope, thought independently, and walked to the beat of his own drum, all things that made others love the man they endearingly called “BigStoj”.

“Remember when you were young
You shone like the sun
Shine on you crazy diamond” – Pink Floyd

Amy also said she was going through his laptop, “and found a final blog post that mentions you. It seems that he meant to post it. We were wondering if we sent it to you if you would publish it?”

Here are Smoking Man’s final words.

It must have started in September of 2019. I came here to post words would not flow, I imagined that I had grand essay only to catch it the next day one or two sentences.

Just did New Year 2019. Wife’s forex account screaming green. Complete bragging rights for Greater Fool, was trying to figure out a way to link the P&L sheet with out Garth knowing about it.

Next thing I know I wake up at the Hoag hospital in Newport Beach to the news that if I’m lucky, I get to live 1 to 5 more years. Brain Cancer.

Man does that change your priorities, even typing this little blurb while in treatment is almost impossible, good thing my phone does the typing, I just talk to it. It’s retarded but it works.

In a short span of time I’ve gone from a make money Maverick to a how much time do I have left. Take in the views, plan the next vacation before it’s to late, start helping other’s.

I never planned on living as long as my parents, was brutal on me watching them melt. Now the odds of me making it to 65 are clearly against me. Never saw that coming. But it is what it is.

I just want to thank you dogs for putting up with all my shit over the years, I think I’m a great troll but who knows who cares. Those days are over.

Indeed they are. And I regret that. It’s now a worse world.




So here’s a big surprise. Not.

US financial giant JP Morgan has discovered younger employees who WFH are less productive, inefficient and more untrustworthy. What a shock that people in their jammy bottoms, watching TikTok on their phones and playing footsie with the cat while they Zoom a client were not fully engaged? Who knew?

As this paleo blog has stated a few times, this is not the future. Remote working will not replace the office. Those downtown towers will not stand empty. Employers want to see you, and anyone with a career aspiration should want to see the boss. The workplace is where innovation, collaboration, mentorship, experience and social interaction happen. When human nature chances, so will the nature of work. That’s not now. WFH is doomed. At least on a large-scale basis. That means about three million people still without good hygiene will eventually be heading back.

And what a shock that will be in, oh, Hamilton.

That once-gritty, steel mill-loving place 70 km beyond the Kingdom of 416 has now become Pandemic City. An exodus of WFHers has made its way down the near-empty QEW, escaping Toronto crazy prices to snap up – and inflate – properties in Hamilton, Burlington, Grimsby and environs.  A house in the east end, listed just above three hundred thousand had 172 showings resulting in 15 offers, and sold for 30% above asking. As reported locally, digs listed for $699,000 garnered 63 showings and 13 offers, giving its owners $885,000.

And are all these GTA refugees planning on trucking back to work in the Big Smoke?

Nah. Not a chance. GO Train ridership into Toronto is down 90%, for example. An army of millennial buyers figure they can own something affordable and let Covid take care of the rest. The virus has fostered the belief traditional workspaces are kaput, commuting is for idiots, enlightened employers understand work-life balance and the need to wear really, really comfortable pants, plus technology will eliminate supervision, trips into the germy outer world and being judged. But, of course, everyone still expects full pay.

Yes, it’s a fantasy. Some may live this dream. Most will not. They will be outsourced, overlooked or downsized. Forever forgotten. In Hamilton. Or Barrie. Or Hope. Nelson. Ladysmith. Kingston. Fredericton. Truro. Lloydminster. Even Mississauga.

So the latest stats just arrived. The phemon is national. Real estate sales in August were 6% greater than in July and 44% above the year before. Prices across Canada climbed 18.5% in twelve months – in a pandemic, a recession and amid double-digit unemployment. Just imagine how great things would be if we had Ebola and locusts.

By the way did you catch this comment yesterday from federal Treasury Board President Jean-Yves Duclos? The Libs have no choice now, he said, when it comes to further opening the spending spigot: “We need to keep investing in Canadians to avoid moving from a recession to a depression.”

Seriously. He said that. So regardless of what the Throne Speech contains next Wednesday, all of us need to be aware the virus  – and the way governments responded – has blown a hole in the economy that will take a long, long time to repair. But it will.  Normal will be normal again. Meanwhile low rates are facilitating rash real estate decisions while the social media-infused WFH meme is providing justification for them.

A Mill couple sold a mortgaged $760,000 condo in Toronto, for example, and bought an ancient Hamilton bung for $700,000. He’s remote-working because of Covid. She’s on mat leave. Both have jobs are back in 416. They need two incomes. “We can’t really make a decision based on this future because nobody knows what will happen,” she told a local reporter who was writing about the hot market. “So we had to use the information we had. We’ll figure it out when we come to it.”

Yes, the future’s an abstraction. Forget it. Now is what counts, baby. Sha-la-la-la-la-la, live for today.

Where have I heard that before?

‘The budget will balance itself.’

Source: Bloomberg. Click to enlarge. PPE recommended.



The illusion

Covid crushed rates. It could be the big story of our times.

On the weekend we talked about Marie, the 60ish income-less single who sold her only asset (a house) to finance her remaining decades. But since central bankers tanked the cost of money to fight the virus, saving’s a disaster. GICs are awful. High-interest accounts aren’t. There is no option but to onboard some risk in order to make money work.

But wait. These bankers have not just squished senior savers. They’ve also brought panic buying and more debt for young families. The bug which came ashore in March might have its enduring impact here. In real estate. Mortgages, bloated and unwise

The big news is we now have a major bank advertising five-year home loans for less than 2%. CIBC’s rate is 1.97%. Never before in Canadian history has this taken place (although sub-2 has been offered unofficially by the banks and smaller lenders for several weeks). It’s also interesting that this is just a skinny five basis points more than the cost of a variable rate mortgage (which would be foolish to take).

Okay, so banks are giving 0.85% returns on a five-year GIC, and offering five-year debt at 1.97%. We know what those deposit rates are doing to savers – impoverishing them. What are the cheap mortgage rates doing to borrowers? Yes, indebting them. Plus, inflating houses. Oh yeah, and totally distorting the housing market. Well done, CBs.

It’s all about demand. When it exceeds supply, prices rise. Demand can be manipulated. Normally when the economy tanks, jobs are erased and recession takes hold people lose confidence in their financial futures, hunker down and spend less. In other words, in bad times, real estate markets shudder to a halt.

Now imagine if you layered over this economic collapse a global panic, endlessly bad headlines, plus a scary virus that floats through the air and which has killed nine thousand Canadians in the last six months. Oh, and lockdowns. Quarantines. Eight million people on government benefits. Four million more forced to work from home. No school, either. Did I mention no travel, concerts, sports or conventions? Right. Plus masks. And social distancing.

Such things, in normal times, would lead to one result. Housing torpor. But these are not normal days. The CBs have seen to that. So they have taken demand from the future and pulled it forward to now. Hence a 1.97% mortgage at the Bank of Commerce.

It’s a trick, of course. By collapsing the cost of borrowed money, central banks are trying to create economic activity by coaxing people into borrowing gobs and buying stuff. Like $1 million houses in the vacuous, soulless suburbs. As you know, it’s working. Sales and prices in the last two months have been off the charts. In the midst of economic collapse, real estate values in the GTA (for example) have just surpassed those of 2017 – when governments thought things were so out of control that new rules were required.

The cheap Covid CB money has overwhelmed those safeguards. It has rendered impotent new restrictions imposed by CMHC. It’s made moot structural unemployment and the fact some industries (like oil and gas) may be forever wounded and starved of investment capital. But even as the head of the central bank, Tiff, warns, “We don’t expect the strong rebound we’ve seen to continue at the same pace in the months ahead,” the house-buying orgy continues as if the economic crisis is in the rear-view. But it’s not.

Even as he says that, the CBs are further depressing rates and inflaming desire. Five billion dollars is being spent buying up mortgage bonds in Canada. Every single week. That supresses yields, pushes mortgages lower and property prices higher. In a recession with grinding employment lenders should be cautious. Loans harder to land. Rates stiffer. Instead, it’s party on.

Well, what could possibly go wrong?

A second wave, more lockdowns and quarantines? Things are not looking too cool in Ontario over the last few days.

A long, tough, empty winter? Less than one in ten of those forced to WFH have returned to the office. Airline business is off 90%. The jobless rate may still be double digits in February.

Trump? The November 3rd election may not be decided on that day. Or in that month. Or this year. Anything seems possible given the polarization, the Covid effect on voting and the social rift in our major trading partner.

Augmenting debt at lower rates is a horrible long-term strategy. When the cost of money creeps higher (it will happen), loans aren’t decreased but asset values fall and payments swell. Pulling demand forward should make you wonder what the future will look like, when we get there.

Use cheap rates to reduce, consolidate and trash debt, not borrow more. It’s a trap.


Tech boom or bust?

RYAN   By Guest Blogger Ryan Lewenza

The US stock market has been “the” market over the last decade, in large part due to the phenomenal gains from the US tech sector. Indeed, over the last 10 years the Nasdaq and S&P 500 Information Technology sector have returned 18.6% and 20.9% annualized, respectively.

Since the pandemic hit it’s been the only game in town, with the Nasdaq rallying an incredible 75% from the March lows. That was until the beginning of this month when technology stocks pulled back sharply, leaving many to wonder whether the tech rally has run its course, or has much more to go. This is our focus today.

The Nasdaq’s Wild Ride Since the Virus Hit

Source: Stockcharts.com, Turner Investments

Let me begin by stating that this recent pullback should not be a surprise to any investor and only greed could blind you to this fact. Yes, there are many supportive and bullish trends for the technology sector as I’ll touch on shortly, but nothing, even Tesla’s stock price, goes straight up. With the Nasdaq having rallied an incredible 75% since the March lows, tech stocks were ripe for some profit taking.

First, tech stocks had become insanely overbought on a technical basis. The Relative Strength Index (RSI) momentum indicator hit 80 for the Nasdaq in early September (above 70 indicates overbought) and the Nasdaq was trading 28% above its 200-day moving average (MA) – both extreme overbought technical readings.

Second, with the strong price gains valuations for the tech sector had become downright frothy. Below is a chart of the forward price-to-earnings (P/E) ratio for the Nasdaq and you can see how it just “hockey sticked” over the last few months. To start the year the Nasdaq P/E was at 24x and following the huge rally increased to 40x, nearly double the long-term average of 24x. Sure earnings should continue to rise but I’m not sure if enough to support a near doubling of valuations. As Warren Buffet famously said “price is what you pay. Value is what you get”.

Nasdaq P/E Has Surged to 40x Earnings

Source: Bloomberg, Turner Investments

So, given the extreme technical readings and elevated valuations, tech stocks were vulnerable to some profit taking and very well could fall further in the short-term. Currently the Nasdaq is at a critical technical juncture with it trading right at its 50-day MA. If this level fails to hold the Nasdaq could experience another leg lower and I would look to roughly 9,400 (14% lower from current levels) for next major support, which is where the 200-day MA comes in. The next few weeks are going to be very interesting for tech stocks!

The Nasdaq is Trading at its Important 50-day MA

Source: Stockcharts.com, Turner Investments

Now longer term I’m still very bullish on the technology sector given so many supportive trends. They include:

  • E-commerce. The biggest tech trend has been the move to online sales. Last year global e-commerce sales rose to US$3.5 trillion, up from US$1.3 trillion in 2014. And with e-commerce sales still only representing 14% of all global retail sales there is still tremendous growth potential. E-commerce sales are projected to hit US$6.5 trillion by 2023, which would represent a 19% compounded growth rate since 2014. Sorry brick and mortar businesses! Amazon came and changed the world (not necessarily sure if in a good way).

  • Artificial Intelligence. This is the next big thing and will have far-reaching implications for the labour markets, how we get around with autonomous cars and ridesharing, robotics, computing, healthcare and so much more.
  • Cybersecurity. As our whole life moves online bad actors will try to exploit this through those terrible cyber-attacks. In 2018 there were 80,000 cyber-attacks per day in the US or 30 million in total. Cybercrime damages are forecasted to rise to US$6 trillion next year, up from US$3 trillion in 2015. Huge potential!
  • Stay at home. All these technology trends we’re already well established but the pandemic only accelerated these even more. We’re shopping online even more as we avoid large in-closed shopping malls, we’re watching a lot Netflix, Disney and Prime, we’re all on Zoom conference calls, while playing the newest video games. It’s crazy to think one event could change the world so dramatically, with many tech companies greatly benefitting from this pandemic, sadly.
  • Then there’s automation, Fintech, VR, blockchain, IoT, and don’t even get me started on drones! Those things are nuts!

I see these trends lasting for some time, so I’m bullish long-term on the tech sector. But in the short-term, there could be more downside given the current mania and elevated valuations. Buckle up!

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.



The money tree


Some people wonder how, in the midst of recession and pandemic, RV sales are surging. Boats, quads and hot tubs are flying off the shelves. Building supplies are scarce and precious as prices rip higher. Real estate is sizzling with sales and values inflating – as if the economy were on fire.

But it’s not.

And, incredibly, look at the chart below. This is the Canadian household savings rate. Remember when it was barely above 1% a while ago? Well, the rate just jumped to 28% – the same level as back when I had sequined bellbottoms and thick, curly chest hair.

Source: Statistics Canada, Turner Investments

But wait, there’s more news. Equally astonishing.

Direct deposits into Canadians’ bank accounts increased in the last three months by almost $94 billion. Billion. With a b. The most ever. Household net worth in the midst of the worst downturn since the 1930s was up by 5%. The value of investments increased by over $300 billion. Residential real estate was pushed higher $78 billion in just 90 days. Yikes.

There’s more. The ratio of debt payments to income dropped by the largest amount on record, partly because of all those mortgage deferrals. Debt as a percentage of income plunged from over 175% to 158% – the biggest quarterly plop ever.

This is a staggering jolt to personal finances. Historic. Unprecedented. And it’s 100% because of a torrent of government money coursing out of Ottawa into bank accounts across the nation – a response to a virus which infected far less than 1% of the entire population, but caused the economy to shut. The public cost was just as startling, new StatsCan numbers show, as the impact on consumers and the gush of spending on home renovations, quads and bungalows.

In a mere three months Ottawa was forced to borrow $301 billion. Of that, $234 billion came in short-term paper issued by the central bank and $66 billion in fresh bonds. More records. Nobody alive has ever seen this level of new public indebtedness. Says the agency: “The ratio of federal government net debt (book value of total financial liabilities less total financial assets) to gross domestic product (GDP) jumped to 32%, the largest quarterly increase in the life of the time series, as federal government net borrowing increased and GDP contracted sharply during the quarter.”

Okay, what does all this mean?

First, politicians deliberately turned off the economy, throwing eight million people out of work, shutting down entire industries and blowing an historic hole in the GDP. This was in reaction to Covid 19. It might have been wise and prudent. It might have been a hysterical over-reaction. History will tell us. Nonetheless, those who locked us out of employment, schools and routines had an obligation to compensate for their actions.

Second, we will be paying for this for a long, long, long time. When the government burns through $100 billion a month, every month, pushing the debt past $1 trillion (double that when provincial red ink is included) there’s no choice going forward but increased taxation, currency debasement, inflation, or all of the above. Oh, and Parliament’s been suspended or restricted the entire time. Most measures were announced under the powers of a state of emergency. So much for democratic protocol.

Third, did Canadians blow this? Handing over $94 billion in direct deposits made real estate less affordable, goosed motorcycle sales and drove the price of two-by-fours through the roof at the same time 25% of all homeowners with mortgages decided to stop making payments and unknown numbers of tenants welched on rent. There’s a growing sense we might come out of this in way worse shape thanks to the unregulated flow of CERB cash. More spending did not reduce debt. In fact, household borrowing just hit a new high of $2.33 trillion.

Covid really messed things up. The political response was extreme. Maybe that was the right response. Perhaps not. Obviously a lot of people needed income support when their livelihoods were erased. Others found CERB cash replaced the need to look for a job. Others quit work to collect it. Small businesses complained of a lack of willing employees. And the gush of cash, along with crashed interest rates, has inflated prices and increased personal obligation. Now we have an unfathomable shortfall in public finances, and a government unbothered by it.

The next few months will tell the tale. Throne Speech soon. Budget a few weeks after that. At some point in 2021, likely an election. Polls today show the spendiest government in history would win again. Our national appetite for caution, moderation, prudence, restraint went pffft. These are the days of quick gratification when people vex if a download takes more than five seconds.

Covid brought us to this crossroads. Pick your path.


The airheads

Covid killed tourism. And that slaughtered Airbnb. The company says bookings have started to reappear, but the revenue hit was about $1 billion. That temporarily put the kybosh on plans to take the room-sharing giant public, making the founder a bazillion.

Some online, shared-economy ideas are winners. After all, who doesn’t love the dancing nymphs on TikTok? But Airbnb turned over the years from a way to make money renting your back bedroom to creepy strangers from Moncton to a rapacious, greedy monster upping property values and punting renters.

Once it became evident you could buy a house or a condo, sign up for short-term rentals and make $200 a night renting it out, no longer did it compute to have pesky tenant paying two grand for a whole month, expecting you to actually fix things and then maybe decide to stop paying and squat. Investors competed for high-rise units and whole houses to run Airbnb, and soon large-scale commercial hosts were dominating the platform. In Toronto alone, pre-virus, there were about 7,500 properties in that category (of 21,000 listings) – nobody lived there permanently. They were not room-sharing principal residences, but ghost hotels.

So Airbnb (a) displaced long-term tenants, (b) caused rents to increase by sucking off the rental pool, (c) seriously hurt hotels which (d) caused many lower-income people to lose their hospitality jobs, (e) decreased the supply of housing for residential uses in most cities and thus (f) helped inflate property values making it harder to families to buy. Critics also claim the sharing platform caused an unwelcome surge in tourism in many places that don’t want it. Paris. New York. Venice.

What a legacy.

Cities like Vancouver, Montreal and (finally) Toronto have adopted rules that Airbnb hosts must live in the place they’re renting out, register and collect tax. But so far the platform continues to list thousands of places that are just fake hotels. Lots of owners still flog their units, pocket the cash, pay no tax and are usually in violation of condo bylaws.

Well, Airbnb’s controversial CEO, Brian Chesky, says he’s sorry. All the criticism has merit, he adds. The company will change its ways.

“We grew so fast, we made mistakes. We drifted. We really need to think through our impact on cities and communities.” He went on to say that “Airbnb needs to change. We need to go back to basics — to what really made us successful in the first place.”

Chesky says priority will be given mom-and-pop hosts in the future. The company will ink deals with cities limiting the number of nights rentals can occur. It will comply with enhanced municipal regulations. And it will assess and mitigate its impact on local property values.

In practical terms, Airbnb bookings have plumped again as the economy reopens but a lot of hosts are bailing out, selling properties and adding to a swell in property listings. This is helping to push down rents in places like Toronto while Covid whacks condos and inflates the burbs.

So, yeah, it’s a changed world. Airbnb kills hotels. Uber massacres all the taxi drivers. Amazon and Wayfair destroy the physical retail sector. Zoom steals your office. AI might finish off your job.

And here we thought the pandemic was the problem. Silly us. The millennials did it.


Are you a female living in BC or Ontario?

Hmm. Odds are (says a new Nik Nanos poll) you think the Trudeau Libs should continue to let it rip, spend money, provide social support and care not about the deficit. Support for this approach peaks on the west coast (of course) and tanks in Alberta (naturally). A majority of men want less spending and lower federal deficits. Most women are the opposite – more spending if it means better support. Overall 86% of Canadians oppose government even trying to balance its books if it means a cut in benefits.

Wow. Trudeau gets a pass, it seems. And now that we’re just twelve sleeps away from the Throne Speech, this pretty much paves the path of the nation.

Ottawa will spend maybe $400 billion more than it collects this year. That’ll push the accumulated debt to over $1 trillion. Economists figure deficits will run at least $100 billion each year the Liberals stay in power, which compares with the worst-ever previous cock-up – Harper’s $56-billion hole during the credit crisis.

The big speech will outline more spending, a green initiative and measures to address the wealth gap, including (probably) a form of guaranteed annual income, or UBI. If you have wealth and think the role of government is not to remake society, you’ll hate it. But the real hit could come with the first Chrystia budget a few months later. New tax bracket. Capital gains inclusion rate hike. Corporate tax jump. Big tech attack. More debt, taxes and spending than you ever thought possible.

Five years ago Justin Trudeau said the budget would balance itself. The pandemic just taught us something else about him. What a revealing little bug.



“Tearing my hair out here,” says Brenda, who needs to get a life. “Your blog keeps talking about stupid cheap mortgages at 1.5%, but the best my bank (the green one) will give me is 1.81%. So what should I be doing because my loan comes due in a few months? Will I miss this chance?”

Calm down, lady. Get a grip. Go for a walk. Sheesh. Society’s in the middle of a global pandemic with Depression-era job loss and you’re worried about a third of one per cent?  First World problems.

To be clear, here’s the difference between those rates on a $300,000 mortgage with a five-year term and a 25-year amortization: $44 a month, or $1.46 per day. That’s $526 a year. If that makes a consequential impact on your cash, B, you shouldn’t own a house. Period.

Mortgage rates are both cheap and all over the map. The banks still have posted rates of more than 4.5% for five-year loans, but will generally slash that to 2.3% if you can still breathe. Good customers (flatter [email protected] and buy some of her dodgy mutual funds) will get something between 1.8% and two. Sometimes this will dip to the 1.7% range. To do better you’ll have to visit a mortgage broker (slicked-back hair, loud jacket, big rings, Jeep, curvy secretary) but the borrowing may not come with sexy stuff like pre-payment privileges (…but why would you pay it off?).

Some people think rates will never go up. Central banker boss Tiff Macklem has fed that narrative by pledging to keep the cost of money low until Covid is history. He did it again Wednesday. This is not necessarily good news, since low rates = bad economy. Sooner or later bad economy = crappy real estate market.

Said the Tiffer:

The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.

So when the economy reopens, a vaccine arrives and normal creeps back, the cost of money will rise. Not a lot and not fast. But when people stress out over a few basis points and obviously are cash-strapped, imagine when happens when mortgages return to 3%, 4% and then 5%. And, yes, it will happen. If it doesn’t you have bigger things to worry about. We will not survive the next downturn if rates are still in the ditch.

The best strategy?

Lock in, of course.

Do not be seduced by the slightly-tastier rate on a term shorter than five years. Eschew variable. Consider a decade-long loan (now as cheap as 2.55%) if you don’t plan on moving for at least five years (the break fee is big).

And what about aggressively paying down a mortgage with a rate that’s less than two per cent? Does it make sense to double up on payments or throw big chunks of cash at the loan every anniversary?

Nope. Probably not. Despite what your debt-hating spouse wants. After all, you’re using precious after-tax cash to pay down a loan with a rate about equal to inflation on an asset that’s hopefully increasing at a pace faster than the annual cost of living. Meanwhile financial portfolios have averaged a 7% return over the last decade and popped more than 15% in 2019. Even in 2020, the year everything screwed up, returns will likely surpass the cost of that home loan. So over five years you’d be better to invest the dough in balanced ETFs, see it grow, then plunk it against the mortgage principal upon renewal. End result – greater net worth. Happy spouse.

Now look closely at what the central bank just said:

  • “The rebound in the United States has been stronger than expected.”
  • “As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July.”
  • “Economic activity has been supported by government programs to replace incomes and subsidize wages. Core funding markets are functioning well, and this has led to a decline in the use of the Bank’s short-term liquidity programs. Monetary policy is working to support household spending and business investment by making borrowing more affordable.”
  • “Household spending rebounded sharply over the summer, with stronger-than-expected goods consumption and housing activity largely reflecting pent-up demand. There has also been a large but uneven rebound in employment.”

Exports are still iffy. Business confidence subdued. Recovery, the bank says, will be “slow and choppy.” But wait. Core inflation is now between 1.3% and 1.9% – and the point of ignition for interest rates is not far off. When will the cost of money start to rise? The bank said Wednesday it “will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”

Dunno about you, but it seems to me the trip from 1.9% to 2% is probably not a long one. Maybe it’ll take a year. Or two. Depends on Covid. But pandemics are temporary, and this one’s already past the curve.

Do not assume cheap money will stay forever. Nor that there’s still a downside for rates. Real estate that’s been inflated by monetary policy can be deflated just as fast.  Lock ‘er up. And if you’re losing sleep over a few basis points, you may not survive what’s surely coming. Time to find a greater fool.



Once there were cows. Then cookie-cutter little houses on treeless streets. Then the Home Depot came. Fat roads. Traffic and people. McMansions And now this.

Last month 360 detached houses sold in Mississauga (pop 800,000) for an average price of $1,307,832. That was $244,300 (or 23%) more than the same house fetched a year ago. The first time above $1.3 million. And it was forty grand more than similar homes were changing hands for across the line in west Toronto, and $100,000 above the price in the east end of the city. Only the traditional mid-town enclave of the wealthy saw sales at a higher level (by a million).

Hmm. What’s up?

The Virus Boom. It’s hard to imagine a global pandemic would have rendered the commutershed more valuable than the employment destination it fed. But it’s occurred. More evidence that these are not normal times. The question is whether or not they constitute the new normal.

It’ll be years before that question’s answered. However, the paleo thinking behind this blog is that until human nature is altered, things will revert to the way they were. Cities will restore and rejuvenate. Employers want workplace interaction, creativity and team thinking and people with aspirations will want to be there. After all careers and jobs are two different fish. Even in the gig economy. Once the world normalizes, a mess of newly-minted suburbanites will discover what commuting hell is, and why urban houses cost seven figures more.

Meanwhile, the best strategy at the moment is to sit on your hands, not falling victim to FOMO.

Look what financial markets have been saying recently. Volatility is building. Valuations are being second-guessed. Commodity prices deflating. After all, we’re still in a recession with scary levels of unemployment, record heaps of personal debt and hundreds of thousands of people not able to service their mortgages. Some companies aren’t coming back. Some are crippled. Look at Porter Airlines – no fights now until at least the middle of November, if ever. Retail is crushed. Restaurants entering a winter nightmare. Big corps trimming office space in advance of trimming workers.

Meanwhile the macroeconomics may start to suck soon. The American election is a slow-mo disaster. The virus is churning a second wave through parts of Europe, hitting India and leading to a 200,000 death toll to our south. Oil prices are forecasting a slower pace of global recovery. Central bankers, sitting on near-zero rates, are out of magic bullets. Government spending is off the charts.

Yet the average house in Mississauga now costs $1.307 million, up a quarter million since Covid came. Does this not define ‘risk’? It’s emotion, after all, not the economy which has caused a continent-wide real estate rush.

$     $     $

Speaking of emotion, time for a sort hop to Montreal.

“We recently migrated to Montreal from Vancouver,” says Alex. “Primarily due to the unattainable, and disgusting nature of the home ownership in BC. We thought we could get to Montreal in time to buy something at a modest price but alas, it seems as though house prices are moving faster than our wee toes can keep up.

“My wife and I are Both 36 and have a 1 year old. We have never owned a house, but we feel we need a home and don’t really know how much bullshit it is going to be. We have a huge down payment, and won’t need to borrow big to pay off a loan.

“I do not understand if we should be trying to buy now in a great area or wait until October when the mortgage deferrals stop and an influx of properties could hit the market and drive prices “18-20%” lower. Do I try to lock in a mortgage rate for 120 days now and wait until the axe falls? We are looking for a home for our family with the ability to service the debt without killing ourselves like everyone we know in Vancouver. What to do?”

Well, Alex, sales in Montreal last month were up over 30% and prices ahead 24%. Of course, compared to Van or the GTA (including Mississauga), it’s cheap. Average price under $450,000. Like in Alberta, big numbers of deferrals. Big Covid in Quebec, too. And the shuttered US border is having a significant impact.

Will houses cost less in November than in August? Probably. Will the deferral cliff have an impact? Yes, it will. Will mortgage rates go up by Christmas? Not a chance. The answer to your question – buy now (in a frenzy) or wait (until it passes) – should be obvious. The next query is why, when home loans are 1.5%, you’d throw all your cash at an asset that could prove unstable. Better to have a minimal downpayment, cheap financing and invest the rest for the long-term security of your family. Or, if you insist on using the cash, borrow against the place to invest and achieve a tax-deductible mortgage. Or just rent.

By the way, you didn’t need to move 4,500 km to afford a house. Drama queen, much?


The leap

So here’s where we are.

Interest rates can hardly fall further. Mortgages are 1.5%. It doesn’t get any cheaper. This suggests we hit peak house (above 2017 pricing) last month during the Virus Boom. With no room for rates to fall there is little reason for real estate to inflate.

Second, the economy’s about to become a lot more critical. CERB is ending. Employers expect millions to return to the office, shop or factory floor. Child care expenses, commuting costs, new slacks and haircuts are back in the household budget. (If you think WFH was a permanent thing, you’ll be surprised what the next 18 months bring.)

Third, that exodus to the suburbs will probably end up being a career-killer for many. In any case, it wildly inflated non-urban prices, brought urban rents and condo values down and was the answer to boonie-dwellers’ prayers.

Fourth, there’s a ton of volatility on the way. Second wave – hope not. US electoral paralysis – almost certain. Trudeau/Chrystia spending orgy and political consequences – bet on it. Vaccine – its arrival will be explosive. America – closer to a civil war than at any time in memory. Inflation – a certainty after the world spent $20 trillion fighting a bug.

Fifth, real estate listings could take a turn higher as the deferrals end. In fact, all kinds of mayhem might result, since the number of people missing their payments over the last few month has been seriously under-reported. According to Equifax 1.2 million blew off one or more payments between March and July. There are 8.24 million homeowners in Canada and 44% don’t have a mortgage. Of the 4.7 million with a home loan, therefore, 25% stopped making payments. This is not only massive, it’s more than double the rate in the US – where folks currently carry far less debt.

Mortgage broker rockstar Rob McLister recently estimated 61,000 forced sales could occur as the deferrals shudder to a halt over the next few weeks. But the housing risk could be greater. According to the Equifax analysis (and, yes, they are recording all these deferrals) 600,000 people were still not making payments last month. These borrowers had mortgages 25% larger than the average, lower credit scores and greater leverage. Duh.

“If mass payment forbearance ends as expected next quarter and we do get 60,000+ forced liquidations,” says McLister, “say goodbye to record-high home prices for a while.”

But the deferral cliff is just one reason experts like CHMC are sticking to their forecast of a 20% decline in prices over the months to come. Or more. The list of uncertainties has seldom been as lengthy as it is now. Big job losses. Recession. US electoral crisis. A pandemic. Record debt. Spend-and-tax politicians. At-risk industries. Winter.

Do sane people leverage up and move away from their jobs in days such as these?

Only if they think it’s different this time. (It isn’t.)