Oz Buzz #99: Rate Cut: Fed Acted With Confidence Or Out Of Fear?

September 18, 2024

“In Life, it is not the waiting of the storm to pass, but to learn to dance in the rain!” –Anonymous

“If you think someone is ruining your life. You are right. It is you!” – Nietzsche

Remember: You are reading Ozzie’s opinion, not advice! And, yes, I have lots of them! But use only your personal professional lawyer/realtor/accountant/ to make your personal investment and life decisions.

Latest videos

1. Kyle Green, Ace Mortgage broker and Ozzie discuss the September 16 new rules:

2. Kyle Green and Ozzie talk Variable or Fixed rates:

3. Ozzie tells the Vancouver homeowner  to LIVE YOUR MONEY. Older video – still relevant:

Videos coming soon: AI for Real Estate; Buying in Florida Houses only

• RATE CUT: FED ACTED WITH CONFIDENCE OR OUT OF FEAR?
• USA INTEREST RATES – AND IMPACT ON CANADA
• NEW MORTGAGE RULES. GET A 5% MORTGAGE FOR 1.5.MIL HOUSE
• DEVELOPERS JUMP INTO THE MARKET. DEALS ABOUND…GALORE
• CANADA INTEREST RATES – NOW LOWER – WILL THEY HELP MARKETS?
• BITCOIN KILLER: QUANTUM COMPUTER QBITS EAT BITCOIN’S ‘BITs’?
• INFLATION IS NOT 2%!
• LANDLORD AND TENANT ACT KILLS REALTOR MOTIVATION
• CURRENT CANADA WIDE NUMBERS
• ECONOMY – OUTLOOK
• LIVE YOUR MONEY VIDEO
• THINGS YOU MUST WORRY ABOUT
• INVESTORS: WHAT YOU SHOULD DO NOW
• NO, IT IS A CRASH! REVISITED
• QUICKIE NEWS
• QUESTIONS, QUESTIONS

INFLATION IS 25% NOT 2%

Inflation in Canada fell to the slowest yearly pace since February 2021 and core measures have continued to ease. The consumer price index rose 2% in August from a year ago, following a 2.5% increase a month earlier as per Statistics Canada. That’s slower than the median estimate of 2.1% in a Bloomberg survey of economists.

Major Point: Ok, but inflation from 2020 to now has now accumulated to be 25%. For the average household nothing is only up 2%. From rent to gas, camembert to meats. Every increase must be added to previous increases. I have recommended to you before: Check shadowstats.com charts. Official inflation vs. Shadowstats real inflation!

QUICKIE NEWS

• For TOD buyers: Surrey-Langley SkyTrain costs soar $2B as construction delayed AGAIN!
• For office space renters: Metro Vancouver office vacancy rates increase amid development slowdown.
• For non-closing buyers: Ontario buyer DOES NOT CLOSE. Now liable for over $330,000 loss.
• For US buyers: Allstate to increase home insurance rates for California customers by an average of 34.1%, per Bloomberg. The rate hike, which will take effect from November, will impact about 350,000 policyholders. Some customers will face premium increases of up to 650%.
• For Industrial Okanagan buyers: Colliers report: Central Okanagan’s industrial real estate vacancy rate jumps 28%. colliers.com.
• Clean fuel: Japan, Germany and many others are dusting off mothballed Nuclear power.

DEVELOPERS TAKE BIG CHANCES

Last month we reported collapses and bankruptcy … this month developers are jumping in with all feet AND pull out all stops to catch the fall presale buyer. Developers have a year to get 60% or so units presold – to get construction loans. When they get close to the last 2 months, there are some real offers to be had for buyers.

Pete Ryznar from Ryznar Media launched/promoted 69 different projects in August/September. I attended the launch (re-launch) of Vancouver’s tallest condo tower CURV and the Monogram – a 49-story beauty – corner of Burrard and Davie this week.

We also hear that the Piano (Concord) will be relaunched (with the old name) but smaller units, fresh new start in a week. Many are swinging the bat with low deposit offers flying.

Interesting ones: 

Key Marketing’s (they seem to have a lot of good ones!) … Scott 77. Raffling off a 10% deposit – worth as much as $77,000.

Anthem’s… Ethos. Offers of a 15% deposit but will PAY 12% interest on it…and talks about a “$31,000 saving”.

Bosa: 4 buildings: PARKWAY, Solhouse, Fifteen Fifteen or SEAandSKY. Get a year free living (strata, taxes, diners, cleaning, insurance, plane tickets, etc.) after you move in, they pay it all.

Major Point: Ok, a tough market, a tough world. There are also more towers coming into Surrey and elsewhere. More product, more developers fighting for buyers. Generally markets are dead for presales starting in November, so 6 weeks is what developers have to get the quota. So, think about it. First look for a good assignment of a building soon to finish, where the buyer walks away from his deposit. Or get a new one. Tie up a condo with 5% down, close in 2 years when all forecaster say rates will be below 3 percent … and get a discount (ask for it). You get leverage, minimal cash exposure and … low mortgage rates. No guarantees, but clearly worth a look. BUT MUST DO: Check out the builder (what did he/she build before), the marketers, the guarantees, the lawyer, the area, and the building … then cautiously stink bid.

BUT NOTE ALSO:

We said so last month, and the CBC featured it with a story: Over the last year, more than 200 real estate developments in Canada became insolvent. Andrew Chang explains why, at a time of high demand for housing, a growing number of projects are falling through.

NEW MORTGAGE RULES. HUH?!

(WATCH VIDEO ABOVE!)

The government announced a new 30-year mortgage amortization for new-build homes on August first. On Sept. 16 they announced that as of December 15 a new eligibility for getting a 30-year mortgage on all homes – not just new – for newbies. Repeat buyers can get 30-year term only on NEW Built. Huh!? Why?

Also they will increase the $1 million price cap for insured mortgages to $1.5 million, to reflect ‘current housing market realities’. Canadians can now qualify for a mortgage with a downpayment below 20 per cent. THIS IS THE FIRST TIME SINCE 2012!

NOTE: Yes, you can get that insured mortgage with 5% down – but your income must still qualify.

Also: The new Canadian Mortgage Charter¸ announced in Budget 2024 allows all insured mortgage holders to switch lenders at renewal without being subject to another mortgage stress test.

More: …it is also taking ‘bold’ action to protect the rights of home buyers and renters. Today, as announced in Budget 2024, the government release of the blueprints for a Renters’ Bill of Rights and a Home Buyers’ Bill of Rights.

The Feds will implement these blueprints by leveraging the $5 billion in funding available to provinces through the new Canada Housing Infrastructure Fund.

Also: Make sales price history available on title searches.

Major Point: Just thinking to help a buyer spend $1.5 million with less than 20% down sounds like insured mortgage-backed securities. Only in the US there were no guarantees, in Canada, they are guaranteed by? You and me.

US INTEREST RATES

POWELL ACTED WITH CONFIDENCE OR OUT OF FEAR?

September 18, Chairman Powell said that core inflation rate rose to 2.7 percent but eased from 7 percent high two years ago. He feels safe to lower rates now and possibly another .50 in November (after the US election) and a further 1% by end of 2025. Fed fund rates to stabilize at 3.5%. That is not a promise but will depend on a meeting-by-meeting assessment of the numbers.

He surprisingly indicated that payroll data cannot be trusted (always revised downwards a month later) and that massive immigration was an issue (on skewing job numbers).

However, he is not worried:

• The economy strong overall, says Powell
• All 19 committee members wrote down 3 more future cuts
• However, one Fed Governor dissented (first time since 2005)

Major Point: The chairman’s favorite word was “Recalibration.” No more numbers just a change of stance, compared to last year. Still meeting by meeting decision (he says) but clearly rates (now 4.75% – 5%) to go to and stay at a minimum of 3.5%. In my view that has been decided and only if inflation reignites will that change.

NEW THINGS TO WORRY ABOUT

1. The world’s banks are lowering rates together: Japan, England, China, US. ECB. Australia and Canada just did also.
2. Last week Jamie Dimon, chief executive officer of JPMorgan Chase and several bankers told the world that banks are/will be in difficulty. Following his comments JPMorgan crashed (yes crashed 7.3%) in the morning, then recovered and together with BoA and others ended the day about 4.3% lower…
3. The recession is coming, labour market numbers are being revised downwards, immigration skews the numbers and unemployment is rising
4. US unemployment rate will climb to 4.4 percent. Remember, often when rates climb – they keep climbing. Also, labour markets have cooled, job creation data is revised continuously downward.
5. Was the FED politically motivated to lower rates by .50? Valid question, not conspiracy. Nancy Pelosi publicly wrote a letter with five other Dems to Powell, to urgently lower rates by .75 last Monday. What does she know/fear?
6. Credit card debt is soaring
7. Oil going down below 70 dollars and heading dollar (watch our Canadian dollar)
8. US Private credit is in a huge bubble
9. Overvalued stock market
10. The last time (pre-covid) the US dropped .50 of their rate was 2008, recession was deep.

Major Point: My view? And it is an opinion only! The numbers that the FED and the world’s banks see must be scary. No one even talks about the deficits and nay – debts. To me this .50% cut means that the internal numbers are scary … we are heading into a deeper recession. This .50% cut may mean they are recession scared or we are already in one.

Finally: We cheer on rate cuts, but fast big rate cuts come historically ONLY with recessionary trends.

IN CANADA

MAJOR, MAJOR POINT: If you expect mortgages rates to follow further, it may (may) behoove you to get a short-term variable rate (see video above). Or rent till the smoke clears.

Wither the markets? We reduced rates 3 times in a few months. The real estate market did NOT react. The lower Canadian rate and government adjustments help all renewals and refinancing but not new sales. NOTE: Stress test is still at around 6.8%ish – poor first-time buyer has to first qualify. ​Banks seem spooked – very difficult to get financing. Many buyers are now waiting for all these announced further reductions until payments are lower.

THE CRASH REVISITED

• So many quick comments: From “I like the word ‘horseshit’. It has a ring of authenticity” to “The carry trade will not be finished till after Christmas. So, it is not over.” I was surprised, then concerned of how many of you expressed deep fear of pending crashes in the next 2 months.
• I profess no knowledge other than it seems to me that economies around the western world are in trouble – from Germany (!) to Holland, from England (!) to France and North America is at the edge of it. That is why interest rates are cut at the ECB, Canada, Australia, and this week the US.
• More volatility and quite possible a deeper crash is certainly possible even likely. Why should real estate investors care?

Major Point: We pointed to Warren Buffet’s ‘Mr. Buy and Hold forever’ – move into some 277 billion in cash. Now we find that Micheal Burry sold half of his holdings weeks ago and others have apparently followed suit.

CONDO SALES ARE SLOWING SHARPLY HERE AND IN THE US

Most Canadian markets have seen a stable SF home market but a strong slowdown in condos. In the States it is worse. According to Redfin, condo prices are falling in major Florida and Texas metros as inventory piles up and buyers back off. This comes as high HOA fees and insurance costs make condos a tough sell.

In Tampa, condo units for sale soared 57% from a year earlier in July, pending sales dropped 20% and the median sale price fell 5%. In Houston, inventory is up 36%, pending sales are down 36% and prices are down 7%. Nationwide, condo inventory is increasing and pending sales are falling – though not as much as in Florida and Texas – but – prices are still rising.

Major Point: Single Family homes in Florida are an outright bargain now, $300,000 with a pool in a great community. Rent value $4,000 to 5,000. Worth a look. Watch Ozzie upcoming video on bargains in Florida (Sept.23)

QUESTIONS

Q: I HEARD THAT IN GERMANY BUILT-IN PARKING SPOTS CAN BE AS HIGH AS $100,000. IS THAT COMING HERE? 
A: In my hometown of Cologne, most new condo buildings have no built in parking spots at all. The city centre has had no car traffic for 70 years. Big shopping streets – no cars (Hohe Strasse und SchilderGasse). So, yes if you have a spot you own, you get more than $100,000. Oh and in Canada? REM magazine says that condos with parking in Toronto can be “quicker to sell but cost up to $122,000 in high-demand, central areas”. That’s NOW!

Q: We were talking about you and my friend said that you recommended renting the best house you can afford the rent on. Live in style and but go buy an investment property where you get a return from the rent. Like in a cheaper city and you did a video on it?
A: Not exactly like that but I did a video on LIVE YOUR MONEY and wrote a story on the average Vancouver homeowner living in a $2 million house, musing what he could do if he thought like the multi-millionaire he is! You can watch it here: https://www.youtube.com/watch?v=VGsFRHfrues&t=45s
Actually there is also a great story by Zoocasa about why we should rentvest. i.e., Rent expensive downtown Toronto and buy in Windsor-Essex. Or rent in Vancouver and buy in Edmonton. 

Q: Ozzie, I have 6 properties and am of retirement age (62). I want to sell, but wonder whether the conservatives will drop the capital gains tax back to where it was? Should I wait to sell?
A: Million-dollar question. I don’t have an answer for you. My feeling is that ALL governments are going to need cash to pay debts. They hang their hat on carbon tax … popular, affects everybody. Capital Gains Tax has a limited number of affected people and the rest of the voters may be jealous. I do not think they’ll fight a battle on it. Easier to just blame previous Government. Who to ask? Write to your local conservative Rep.

Q: You mention the word crash a few times. Then you say we will muddle thru. Which is it?
A: We will have more inflation eventually, but first must go thru the valley…crash. Then we will muddle thru for 2-3 years and then we go again with everything being more expensive in dollar terms.

Q: YOU SEEM STILL UNCONVINCED THAT BITCOIN IS HERE TO STAY. EVEN WITH BLACKROCK GOING INTO IT BIG TIME.
A: It certainly is volatile. We are talking about a ‘coin’ that is generated with current maximum in computer power. Maximum today’s power. And then we are now building Quantum computers! Learn that world QUANTUM! In my view there is a good chance it will kill all things Bitcoin. You won’t just have a bit (computer bit) you will have a qbit (quantum bit). Exponential more power – faster. My good friends feel it could break Bitcoin by 2025 to 2029. 

WHAT IS PROPER TEE?
Well, it is 1^st of all a play on words…a company I own. 2^nd the name of my boats. Proper Tee, Proper Tee 2.0 etc. I also featured all my boats from time to time on Facebook…Boy, the responses! OK, I love you all for sharing…but: 22 people think I never heard “A boat is a hole in the water in which you pour money”. Plus other versions “the 2 happiest days are buying and selling your boat.” Etc.

Over the years I found that always and without exception these comments come from people that do not have a boat. Ergo, don’t understand the wonders of being on the water anytime, anywhere, go fishing with the grandkids, explore BC’s wonderland of a coast, spend overnight on Keats or Bowen (a hop and a skip) on your own boat. Oh, 7 of you thought it was important to tell me I should rent a boat – that it’s cheaper. Well, without exception everyone that says that has NEVER, EVER (not once) rented a 50-foot boat in his/her life.

As far as the ‘play on words goes…yes, I love golf…alas, it does not love me back.

Q: DO YOU STILL OWN THE MOBY DICK. SAW YOU ON FACEBOOK.
A: Haha. No I owned it when it was called Long Beach cafe and sold it a looooooong time ago. I did own and keep in the same block a small apartment building (7 suites) and a large restaurant “The Chit Chat Cafe” on the ground floor. Those were the “work hard”18-hour days! I bought the fresh ling cod from Blaine fresh from the boats and we made the French fries by hand from large potatoes and blanched them twice.

Q: YOU HAVE LISTED SURREY’S HOUSE PRICE FOR 2022 AT $1.9 MILLION AND IN THE 4 YEARS SUMMARY FOR 2022 YOU HAVE IT AT $1,520,000.
A:I don’t get the question. One is the all time high a SF in Surrey achieved in Feb/March 2022. The other is the current price…well behind still the all time high?

Q: I HAVE A QUESTION ABOUT PURCHASING A PRESALE 30 MONTHS AGO AND I WANT TO SELL IT WHEN I COMPLETE THE INSPECTIONS AND FINAL PAYMENT. WOULD I BE SUBJECT TO CRA PENALTIES FOR DOING THAT IF I AM BREAKING EVEN ON THE SALE? ANY COMMENTS OR SUGGESTIONS WOULD BE APPRECIATED.
A: Not sure why the question. No profit, no tax! So, you buy it …you pay 5 % GST. Plus you pay about 2.5% legal / tax portions etc. You sell at break even …no profit…no federal speculation tax. As well BC flippers tax starts Jan.1. 2025. But again, no profit no tax.

BUT EVERYBODY MUST NOTE: You buy it new and pay GST. Now believe it or not: Even if you paid it, it is due again if still unused and still new. Even if you paid GST…another GST is due from your buyer!! Crazy? Yes!

FREE SPEECH VIDEO

Q: Nice video. Free speech yes, but you must allow that people like Trump’s free speech should be curtailed.
A: I am still amazed at this attitude. It is the very fact that we know the opinion of – even enemies – that free speech forms the base of society. By banning ‘these kind of people’ and me ‘my kind of people’… we know nothing of the benefits or the dangers each may or may not pose.

Q: I DISPUTE YOUR VIEW OF THE US DOLLAR. THE INTERNET IS FULL OF EXPERTS THAT POINT TO AN OUTRIGHT COLLAPSE AND SO ON.
A: Dispute away! Your prerogative. I pointed to the fact that the US dollar was the place to go to in all major economic crisis of the past. My view: Not going to be different this time. Money goes to safety first. ALWAYS. YOU want return OF cash, not just a return ON cash. Oh, and NOW more than ever. All of China’s, Europe’s money will be fleeing into the dollar.

COMMENTS, QUESTIONS, QUESTIONS
C:  Great share! Thanks Oz. Hope you are well.

Q: Did the government just relax the rules for 2 stairways?
A: If you mean the BC government relaxing that rule for small 6 plexes etc. Yes. https://www.cbc.ca/news/canada/british-columbia/stairwells-british-columbia-six-storeys-1.7308756  Investors  rejoice – now maybe makes more  sense without that cost …BUT the fire departments of BC see that as a terrible fire danger, trapping inhabitants.

Q: You invited one of the subscribers to a Action Group meeting. How can I get invited?
A: By writing and asking for it. While I don’t own the group, I’ll pass your name to the guest list.

WEALTH TAX COMMENTS DOMINATED THIS MONTH 

1. HUGE ! Huge response
2. I had a strong response to Age and Market related percentages to be in cash. All were very positive and telling me wonderful stories. Except one: I listened to you and went into cash, then my grandson told me to by Bitcoin. Yes, I am one of the losers. Should have stayed in my house.

REAL ESTATE MARKETS CHANGING

LISTINGS UP EVERYWHERE – SALES LOWER

All markets sales are down over August 2023 except Edmonton!
Prices slightly under pressure except Alberta still shows strong increases (of low prices).

TORONTO 

(We are writing a new piece on condos in TO. It is becoming a basket case of mini units sitting empty and people not closing.)

• Sales are down 5% to 4975
• New Listings  up 3% to 12,600
• Active Listings up 46% to 22,600
• Det price down – 01% 1,414,700 (Area code 416 = 1.650,000, AC 905 = 1,303,000)
• Condo down  -05%  674,000

CALGARY

• Sales detached down 14%
• Sales condo down 37%
• New listings up 13%
• Active listings up 37%
• SF price 752,500 up 9%
• Condo price up, 346,000 up 10%

EDMONTON

• Detached sales  +12%
• Condo sales +23%
• New listings -7%
• Active listings -14%
• SF price 546,100 +10%
• Condo price up, 203,700  +5%

VANCOUVER

• Detached sales – 14%
• Condo sales  – 21%
• New listings – 2%
• Active listings up + 29%
• SF Price – 11%  (2,095,000
• Condo price +5% (845000)

FRASER VALLEY

• Det sales                           -6%
• Condo sales                       -22%
• Condo New Listings         +16%
• Active listings det             +13%
• Active listings condo        +44%
• Sf Price                             + 5%
• Condo price                      – 2%

Fraser valley listings are highest since 2014 high

BRITISH COLUMBIA 

REPEAT WITH PRICES: SNAPSHOT JUNE  2024 VANCOUVER AND FRASER VALLEY
Let’s take a longer view by analyzing sales over a longer period and a “rolling total.”
We use the 12 months AUG 1 – AUG 30 the following year. Eyepopper!

Let’s keep looking at our monthly comparison to the ALL-TIME HIGHS ACHIEVED:

Vancouver and Fraser Valley AUG 2024

VANCOUVER 

SF sales are ABOUT EVEN with last AUG but down sharply from June. Still well below the 10-year average. Here is a 4-year AUG 2024 over AUG 2023/2022/2021/ comparison. 

Major Point:  SF sales are still below 2021. NOTE: Vancouver SF prices drop from June by $255,000%! NOTE! Active listings (unsold end of AUG) are much higher at 20% (SF) and 38% (Condo)! 

Major Point: Fraser Valley – SF Sales were down by 6% y-o-y. Condo sales down 22%! 
Note: New listings are now up 16% in condos. Active SF listings ARE up a whopping 44%! NOTE: Normal as there were fewer sales.

MAJOR, MAJOR POINT: 

AFTER ALL THIS TO WORRY ABOUT: 
IF YOU ARE AN INVESTOR: HERE IS WHAT YOU SHOULD DO NOW!

1. Remember that a falling or lower volume market is for us, the investor. Buffet says, when everyone is crying, you should be buying
2. Get on all foreclosure lists nationally.
3. Get on all assignment lists (Incl. Craigslist, Kijiji)
4. Make offers – lots of offers …stink bids…
5. Get on all pre-sale invitation lists – at least you get free shrimp.
6. Study great current offers for a presale. Discounts, low down, timeline etc…, etc. (some in this issue)
7. Subscribe to reag.ca (watch member videos!)
8. FREE: 
   Subscribe to Ozbuzz.ca
   Subscribe to askanexpert.ca
   Subscribe to bcred.ca
   Subscribe to realestatetalks.com

Major Point: AI will not kill markets, but the investor WITH AI will outperform and kill investors without it. (Watch new video on AI and Real Estate)

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