October 13, 2024
“Rent control is the worst thing that can happen to a place besides bombing.”
-Benjamin Tal, September 19, 2024
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 and podcasts:
1. Ozzie discusses “AI: Game-Changing Secrets Investors+Buyers+Sellers Need to Outsmart the Market!” with Richard Morrison
2. Ozzie discusses: “Rentinvest. Buy a house in Florida with a pool under $275,000 and rent it at $3,000” with Vlad and Marina (BC investors that moved)
3. Ozzie discusses: “Fraser Valley Market up or down. The future!” With Brent Roberts, ace Realtor.
4. Ozzie discusses: “Real Estate Joint Ventures! Here’s What You MUST Know. Avoid Costly Mistakes: With Ace Realtor Brent Roberts.
(Each video is also available AS A PODCAST on
Spotify, Apple, Amazon, Pocketcast and many others!)
See ozbuzz.ca/category/podcasts/
AGENDA
- 4 NEW VIDEOS
- A NEW MORTGAGE UP TO 90% FOR A $2 MILLION HOUSE!
- ECONOMY ASSESSMENT
- INFLATION
- STRIKES
- THE DOLLARS
- USA AND CANADA SURPRISING RATE FORECASTS
- CANADIANS ARE STRESSED
- WORRYING INSOLVENCIES
- VANCOUVER: 4 YEAR RUNNING TOTALS SHOW A 50% COLLAPSE IN SALES
- INVESTORS: WHAT YOU SHOULD DO NOW
- QUESTIONS, QUESTIONS
- THE HIGH IS IN PLACE REVISITED AT END OF THIS ISSUE
ECONOMY
Why talk economy? Well, how our Federal Government and our central bank read the future (say economy) that’s how they will decide on the new interest rate on October 23, 2024. Oh, and in the US … ditto! Only on November 4. What are the central banks looking at in order to decide? Job reports, CPI and PPI and unemployment numbers.
JOB REPORTS ASTOUND BOTH IN USA AND IN CANADA
Canada: Employment report surprised. Job numbers last week showed a rebound in employment. The unemployed rate dropped lower. Employment astoundingly added 40,000 jobs in September.
INFLATION RATE
Canada: Inflation date is inconclusive. CPI rate is announced on Tuesday (15th)… But in Canada we are already pretty low (close to the target of 2%).
US. Stronger employment reports abound here as well – as to revisions to previous months – and surprise as well. Inflation date is hotter. FED looks to be more cautious.
Plus: Geo-political events overshadow all forecasts. Israel attacking Iran. Russia siding with Iran and fighting Ukraine. West spending a fortune in support – all printed! In fact the huge debt problems worldwide – astound. Canada pays interest that soaks up all GST income. The US debt is now over $35 trillion! The interest on that is $1 trillion a year. $1 trillion! (1 million, one-million-dollar houses). All that is inflationary.
Major Point: Note that the (long) bond yields sharp rise (below) smell of (presage?) already the turn?
STRIKES ARE RECESSIONARY OR INFLATIONARY?
In another lifetime I quoted in my (then) ‘Jurock Real Estate Insider’ newsletter that more strikes determine how truly bad the inflation is GOING TO BE. More strikes from workers as their purchasing power is diminishing tell the truth. In 2024 strikes and their settlements are exploding.
- Port workers get 62 percent for a 6-year deal. 10% a year fixed!
- Boeing workers rejected (!) 31% over 3 years. 10% a year!
- Dock workers got 62% over 6 years. 10% a year!
- Autoworkers got a 3 year 8% plus deal!
- Air Canada Pilots get a retroactive deal (September 2023.Expiring Sept. 2027).
- They get a 26 per cent wage bump for this year and a hike of four per cent in each of 2024, 2025, 2026. Looks like 9.5%ish per year. More and more big settlements are actually crashing car companies. Big wages are inflationary!
Major, Major Point: These settlements come on top of huge and idiotic DEI and ESG restructuring (now in retreat) and – mark my words: WILL RESULT IN MORE STRIKES FIRST AND THEN ASTONISHING LAYOFFS! So, inflation YES, but in the end no soft landing – RECESSION.
THE DOLLARS?
The US dollar. Some of you congratulated me on my forecast in Ozbuzz 98/99. But even bullish Ozzie did not see it soaring by 2.8% in 10 days.
Canadian dollar. The strength in the US dollar is bad for the Canadian dollar (74.6cts down to 72.6cts in 2 weeks). Canada is not alone. BP and Euro way down. Yen up 14% then down 6% last week. More to come.
INTEREST RATES
There were a lot of fine economists on both sides of the border forecasting not only another cut of .25% but some 60% saw a .50% cut ahead. That has now changed to where no one sees .50% and some actually see NO cut.
So, add into the mix that in the last 2 weeks the Canadian Dollar fell about 2 cents against the US dollar, that the 10-year bond rate went from 3.7% to 4.1%. (The bond rate determines fixed mortgage rates.)
FORECAST: Talk about a conundrum. But here goes: Watch the Canada inflation rate report on the 15th. If it is the same or down, the BOC will do a .25% cut, not .50%. The US will cut .25% on November 4th or .50% after the US election. Chairman Powell talked about a target rate of 3.5% by middle of next year. Canadian bank economists see the rate below 3% same time.
You and me? If the stock market is determining rates … there will not be any cut – it’s moving! Likely a .25% drop this month. Will it make a difference? No, the first three cuts didn’t either. Psychologically we are scared (see below).
Best fixed mortgage rate this month? Keep shopping around with a good broker. Investment real estate? Need a GREAT broker! One of our clients got still a 4.1% fixed.
MORE ECONOMY? CANADIANS ARE STRESSED
New poll says: Canadians are financially stressed, despite the rate cuts. People are looking to downsize from their current homes because they can no longer afford their mortgages and are “…hoping the rate cut would make their properties more appealing to potential buyers.” So says John Wright, EVP of Maru Public Opinion. He adds: “With more interest rate cuts on the way, homebuyers are pushing their home-buying intentions until after the Bank of Canada’s meetings on Oct. 23 and Dec. 11.
Another Maru poll: “Among 20 pressing issues, the most significant include the cost of living, affordable rent and home ownership, and health care,” Seven in 10 people indicated they feel their “cities are unaffordable,” while 84 per cent agreed it was “too costly to live and work in these urban areas.” For now, Canadians’ outlook on the economy remains firmly stuck in negative territory, with 63 per cent indicating they think it is moving in the wrong direction.
Major Point: That feeling is mirrored in a very tough real estate market (see the numbers below), sharply rising inventory and the ‘phone not ringing’.
INSOLVENCIES
Superintendent for bankruptcies reports: For the 12‑month period ending August 31, 2024, the total number of insolvencies increased by 17.2% in comparison to the 12‑month period ending August 31, 2023. The proportion of proposals in consumer insolvencies increased to 79% during the 12‑month period ending August 31, 2024. For the 12‑month period ending August 31, 2024, consumer insolvency filings accounted for 95.5% of total insolvency filings.
Business insolvencies for the 12‑month period ending August 31, 2024, increased by 51.6%.
Major Point: NO wonder the polls show a worried negative consumer. Why talk about it? We talk about anything that affects real estate markets. These stats will continue to affect real estate markets – AS IN WEAKER!
BIG NEW NEWS – A 90 PER CENT 30-YEAR MORTGAGE
New ( Oct 8) government legislation CAN get you a 90% mortgage on a 2 million house if you add suites/laneway house!
- As we know BC now allows 4 and 6 plexes on almost any lot to create more units. Well, our Fed government now added a new initiative (to help the BC Government?) and all of us. How?
(Ronald Reagan said: The scariest worlds in the English language: “Hi, I am from the Government and I am here to help!”)
- If you are a homeowner AND have extra space like an unused basement, or a garage that could be converted into a laneway home.
- Historically, the cost of renovating, combined with municipal red tape, has made this both difficult and expensive. (They even admit it.)
- Some major cities, using the Housing Accelerator Fund, created new legislation for homeowners to add additional suites and increase density.
- The idea? New rental suites would provide more homes for Canadians and could provide an important source of income for seniors continuing to age at home.
- New targeted changes to mortgage insurance rules to encourage densification and enable homeowners to add more units to their homes.
- Effective January 15, 2025 you can get a 30-year insured mortgage up to 90 percent value
This measure will apply to all borrowers seeking to access mortgage insurance in Canada to add more units (secondary suites). Borrowers must satisfy the following requirements:
- Already own their properties.
- The borrower or a close relative are occupying one of the current units.
- Intend to construct additional units; and,
- The additional unit(s) must not be used as a short-term rental.
- Refinancing: Insured refinancing will be allowed for building additional unit(s).
- Legal units: The new units must be fully self-contained units (separate entrances,etc.) and meet zoning requirements.
- Number of units: Maximum of four dwelling units including the existing unit.
- Maximum Property Value Limit: The “as improved” value of the eligible residential property against which the loan is secured must be less than $2 million.
- Maximum Loan-to-Value limit: Up to 90 per cent of the property value, including the value added by the secondary suite(s), in combination with any other outstanding loans secured by the property.
- Maximum amortization: 30 years. Additional financing must not exceed the project costs. All other eligibility criteria for government-guaranteed mortgage insurance will continue to apply.
- Ozzie’s Major, Major Point:
1. In my view it would be better to have professional rental property developers build the units. My neighbour – good old Harry – doesn’t know how to swing a hammer, much less supervise building units.
2. Also, before you get too excited, you need an income of $330,000-$350,000 a year to qualify for that 90% – $1,800,000 mortgage. And that devil … the details … still coming.
3. MOST importantly: If you add income producing property, you MAY (WILL) – eventually in my opinion – no longer qualify for residential capital gains exemption. Or lose a big percentage of it… Even if they don’t take it all, a laneway house can take up to 40 % and more of your lot and you make $1 million … lose $400,000 tax free – is it worth it?
“Borrow money from pessimists — they don’t expect it back”. –Anonymous
COMMENTS
COMMENT: I like your inflation rate story. Yes, inflation accumulates. It literally feeds on itself … EVER HIGHER.
COMMENT: I found your developer story really interesting. More important for the first time I understand the pre-sale market. The why and the wherefor. Thanks.
COMMENT: I loved your SUMMARY OF : “If you are an investor: here is what you should do now!” I did it and getting the continuous barrage of pre-sale goodies is incredible.
COMMENT: I am a realtor. Keep hearing that market is picking up and to buy now! I like your true facts, because I am in the market every day: Lots of listings, no calls.
COMMENT: On the developers offering deals. True. I am a Realtor and I have been offered: $40,000 commission, or 4% across the board on commission,1 –8 Porsches, 12% interest on deposit. $25,000 price reductions, 15,000 price reductions. Half the commission paid right away, no claw back on commissions.
COMMENT: Inflation is even higher than 25% in last four years. (Ed. note: See above)
COMMENT: On DEI. I noticed that Ford joins list of companies cancelling DEI policies. It is an example how far the swing to insanity went. Now back to sanity: Ford said also it will not use quotas for minority dealerships or suppliers and will stop participating in the Human Rights Campaign’s Corporate Equality Index, as well as various other “best places to work” lists.
–CYBER ATTACKS ARE IN THE FUTURE. PROTECT YOURSELF – NEXT ISSUE!
QUESTIONS, QUESTIONS
Q: You do not mention the impact of strikes. I can’t believe the settlements. There is no way our inflation rate is reported accurately.
A: Thanks. Above, I did a review on our past discussions and current views.
Q: You took some flak on your EV stance and EV SUVs and solar panels. I was exploring the later and ran across this: https://www.cbc.ca/news/science/solar-panel-insurance-1.7329712. Did you see this?
A: No, I had not. Thanks. Insurance rate increases are raising their ugly heads everywhere. Thank you to everyone that send a story on panels, windpower, water power and EVs. I’ll do something on it next month.
Q: You were right on the US dollar. Now 3 cents higher than last Ozbuzz. Keep up the good work.
A: Hold on. It’s up 2 cents not 3. It is not a new stance…I have felt strong about the US dollar always. Reserve currency, strong economy, what options? High returns!
Q: The free AI book is no longer available?
A: It is available. Not free at Amazon. Can be free at Kindle. A great read. Also, the author and I will do a video week of October 15, where he discusses his new book coming up.
MARKETS CHANGING: LISTINGS UP EVERYWHERE – SALES LOWER
Numbers for Vancouver, Fraser Valley, Nanaimo and Calgary and Toronto
Toronto – sales up 9 %, active listings up 36%, prices over 2023 -4% to 1%. Prices down from $1,947,000 in April 2022.
Real Estate board numbers are much better than what TO realtors on YouTube are reporting.
The amount of negative news on pre-sale collapses, bankruptcies and realtors yelling ‘Clickbait’ is unprecedented. Funny though…Realtors are not quitting en masse in Vancouver or Toronto.
Calgary.
SF house prices up 9% 757,000
Condo prices up 13% 345,000
New listings up 16% 3,680
Active listings up 49% 5,064
Sales SF – 17%, Condo sales – 29%
Calgary has had a classic – unusual – boom in the last two years, now followed by malaise. Still Edmonton and Calgary are CHEEEEAP! Rents are just fiiiine! Investors are getting a retuuuuurn!
NUMBERS- TORONTO-CALGARY-VANCOUVER-FRASER VALLEY
NOTE – WE GOT THIS QUESTION: Q: I like the running total…but your numbers are garbled. Is it June 30, 2020 to July 1, 2021…or July to July 30 or August 30?
A: Ouch! Indeed. To confuse you further or enlighten you…we changed the RUNNING TOTAL COMPARISONS FOR 12 MONTHS ENDING September 30, 2021, 2022,2023 etc. to September 30, 2024 (The 12 months preceding the September number.)
SNAPSHOT SEPTEMBER 2024 VANCOUVER + FRASER VALLEY–ONGOING SALES CRASH
Let’s take a longer view by analyzing sales over a longer period and a “rolling total.”
We use the 12 months SEPT 30 – SEPT 30 the following year. Eyepopper!
Major Point: Dramatic 4-year snapshot on crashing sales (DOWN NEAR 60%).
HOWEVER NOTE! Prices are stable to higher EVEN there are much fewer sales… that speaks to strength of market.
Let’s keep looking at SEPT 2024 comparison to the ALL-TIME HIGHS ACHIEVED:
VANCOUVER SEPTEMBER 2024
VANCOUVER SF and condos
Down from last SEPT. Down sharply from June. Well below the 10-year average.
VANCOUVER: Here is a 4-year SEPT 2024 over SEPT 2023/2022/2021/ comparison.
Major Point: SF sales are still below previous years – sharply below 2021.
FRASER VALLEY
Here is a 4-year SEPT 2024 over SEPT 2023/2022/2021/ comparison.
Major Point: Fraser Valley – SF Sales were down by 9% y-o-y. Condo sales down 14%.
Note: New listings are now up 26% in condos. Active condo listings ARE up 45%!
NOTE: Normal as there were fewer sales.
NANAIMO From Ace Realtor Ian Thomson (watch his videos)
Average Prices + 6% 840,000
SF sales – 7%
Active listings SF +21%
Active listings condos +39%
MAJOR, MAJOR POINT: AS WE PREDICTED LAST MONTH:
The story in SEPTEMBER was a continued sales SLOW DOWN – and a continued INCREASE IN PRODUCT for sale. This will accelerate further into October/November.
Buyers: Make low ball offers. Best deal maybe a pre-sale that closes in 2–3 years. (Get lower rates.)
You can get as low as a 5% DP! Or, if you pay down more (15% DP at Anthem) you get 12% interest on your deposit. Look, ask for, even demand discounts…You may not get cash…but a car? Or a $25,000 furniture package (where developers do not want to lower the price… but give incentives).
Some developers offer $40,000 commission to realtors, and/or 4% commission across the board. A savvy buyer gets ‘some of that.’ It is a deal making time!
Remember these ‘MUSTS’: Pick a professional realtor. Pick a good area, a quality developer, good assignment clause, deposits in trust account, professional marketing company (Like ‘Key Marketing’), did I say professional realtor?
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NOTE:
Q: The ‘high is in place’. I got a number of annoying questions on my video when I stated that I had written/forecast “The High is in Place” in Feb. 2022 and ‘lock in your mortgage’ (April 2022). They persisted in their follow up of “can’t find it”.
So, at the end of this issue #100… I have placed a summary of the old forecasts with Q’s and A’s following. Since that is only interesting to a few – I placed it at the bottom of the numbers below.
From Q and A section – follow up: From OZBUZZ IN FEB – APRIL 2022
Q: The ‘High is in place, which issue did you quote it? Don’t see it anywhere?
A: Headline in Issue #67. Actually it was then an ongoing discussion over several issues from 66 – 69 and so on… In Jan/Feb 2022 we saw a massive downturn. We reported sharply lower sales in Jan 2022.We talked about it in the questions constantly-see below:
Excerpts: “Issue 67: The High is in Place?; Issue 68
Q: YOUR CONSTANT “THE HIGH IS IN PLACE,” SHOWS NO BACK UP FOR YOUR STATEMENT. WHAT DO YOU SEE?
A: My answer last month said it all! This month read the Fraser Valley Board report (below).
Q: I DISAGREE WITH YOUR RUNAWAY INFLATION IN REAL ESTATE COMMENTS. IF IT IS A RUNAWAY, WE WOULD BE IN THE MILLIONS.
A: You are entitled. And we are – in the millions! Surrey SF home from $1,050,000 to $1,900,000 is runaway inflation (in 3 years).
Q: DO IT NOW! AGREED. THIS YES AND THEN NO GAMES DON’T HELP ANYBODY
A: It got worse, when our Finance minster stated a date: “March 2” at which they would raise rates. That drove the last few buyers into mad offer markets.
On high in place: …markets are”…It’s a game where there are no guilty or innocent parties. Everyone participates with eyes wide open. However, in this mad world there will be a peak… There will be demand destruction in a recession in this and many areas of the economy. “
68/59/70: Feb-April 2022 GENERAL: We have had a lot of questions and comments on the “high may be in place’comments. It is clear that momentum is slowing (look at the Fraser Valley board stats) but it is still there. I expect that this spring a large number of owners will continue to list(!). Initially many of those listings will be soaked up’ by the demand, but it will slow into the summer with news reports about listings and a slowing market.
If you are an investor, take a good hard look at your portfolio. Sell your losers (subsidizing rental income) keep the cash flow (it will be harder to come by in the future). As an owner, understand your blessing of low rates – maybe look at your HELOC convert it to a long-term mortgage.”
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