Myke Thomas on real estate Will the bubble pop？
Episode Stats
Words per Minute
190.6762
Summary
In this episode, we talk about the crazy prices of real estate in Canada and why it's so hard to buy a house. We also talk about why the real estate bubble may be bursting and what it means for the rest of the housing market.
Transcript
00:00:07.040
You know, Navi invented the term real estate porn.
00:00:32.680
I don't think I'd need some 20,000 square foot house.
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while I travel the world and get my foot massages.
00:00:42.120
But there's some amazing places out there all the same.
00:00:44.400
But you know, it is interesting looking at them
00:00:48.540
Because, I mean, obviously, they're all custom done.
00:01:10.580
You know, everywhere you hit a certain point in age
00:01:12.580
where you just kind of lock on to a style and a trend.
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doing well with the hip new styles or anything.
00:01:26.260
But, yeah, it is amazing what people will do to their houses.
00:01:30.520
What were some of the prices on some of those ones?
00:01:32.380
The most expensive one, I think, in Montreal was $39 million.
00:01:37.260
The most expensive one in Alberta was $12 million up in Canmore.
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I'm reasonably familiar with the housing so much as that years ago
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when they opened the Three Sisters Village up there.
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But it looks totally different than it did back then.
00:01:57.440
I can imagine the property taxes and maintenance.
00:02:00.680
It's not just that purchase price you're dealing with.
00:02:08.260
The down payment is more than most people spend on a house
00:02:26.400
I mean, there's just people that are at a level of wealth
00:02:33.800
I'd rather have the same amount of money as you've got.
00:02:53.140
I mean, this is what people have been hearing on the news
00:02:58.340
It sounds like the bubble could be popping in the real estate.
00:03:04.880
For the bubble to pop means that every housing market
00:03:28.320
and prior to that is they were the mortgage companies.
00:03:41.240
And then what they did is they bundled them up.
00:03:50.480
basically, take them to the big financial companies.
00:04:00.660
So what happens is you've got a bag full of mortgages
00:04:06.500
that they're selling to the big guys for $3 million.
00:04:16.040
Well, I did a bunch of American work after that.
00:04:19.060
And I was working in the Northeast a lot in Pennsylvania.
00:04:23.820
And there was this, this was around 2008, 2009,
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Victorian brick, beautiful on probably an acre.
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They were begging people just to take it off their hands.
00:04:39.420
I mean, it would have been a $5 million home in Calgary
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I mean, that became a self-fulfilling prophecy in Canada
00:05:17.400
I kind of went, well, I don't know if we need that.
00:05:32.480
whichever was higher that you had to qualify at.
00:05:38.380
And with the Bank of Canada probably going to hit it up again 50, 75 in points in September.
00:05:51.860
So to say that people aren't necessarily in a panic to sell because of that stress test,
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they had to be able to prove they could make the payments at 6.5% or 5.25%.
00:06:07.380
Because a panic sale is what could really cause a bad domino effect.
00:06:11.240
And that's what caused, that's what happened in Canada.
00:06:15.480
Canada recovered from that way a lot, a whole lot quicker than the United States did.
00:06:20.240
And that had a lot to do with Stephen Harper, who's back in the news.
00:06:32.180
I mean, the real superheated ones we always hear about are in Vancouver and Toronto.
00:06:36.660
The Golden Horseshoe in the Lower Mainland and Victoria in BC will be hit hardest.
00:06:45.560
But only because they were so hot and the prices were driven up so high.
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So if everything, if there's going to be a 23% reduction in sales,
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which is what the economists are forecasting today,
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23% value in Toronto is way a lot more money than it is in Calgary.
00:07:11.920
The other thing to keep in mind right now, are sales down?
00:07:21.520
The spring season ended probably in the middle of June.
00:07:27.420
They're down from June, but they're up year over year.
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People should not be comparing going from year over year.
00:07:39.680
Because that's where you see the trend coming in.
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Calgary, I think, from what I can be told, and Edmonton, Regina, Manitoba, will, I guess
00:07:53.780
that's a province, Winnipeg, are not going to be hit as hard.
00:07:58.000
They will probably come through this a lot cleaner.
00:08:00.960
And when I say through this, we don't know exactly what it's going to look like.
00:08:05.440
It sounds like we've got more interest rate hikes coming down.
00:08:08.340
The Bank of Canada wants their rate to be at least 3.25% by October.
00:08:17.000
The next rate announcement is in September, on the 7th of September.
00:08:22.720
So in order to get it to 3.25% from where it is now, they have to raise the 75 basis points.
00:08:29.400
They'll either do it all at once in September and then rest and see how things are going,
00:08:34.480
or they'll do it incrementally in the last three announcements.
00:08:38.620
And those rises, I mean, they can have a very significant impact depending on how much
00:08:42.360
balance you're carrying on your mortgage if you renew.
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I mean, I know we just renewed recently, not extremely, but barely.
00:08:48.120
And it still hit us with a, basically we're up for a few hundred bucks a month, but we're
00:08:51.860
lucky at least for the next five years, we're in an affordable spot.
00:08:55.200
But if we had to renew by December, that could be a terrible hit.
00:08:58.500
You know, and again, it comes down to more than just housing and people buying and selling.
00:09:09.380
There's a big argument in the United States about how you define that, but we are in one.
00:09:13.340
How deep and severe that will be, I don't know.
00:09:25.500
If a lot of people lose their jobs because of the recession, then their mortgages are in jeopardy.
00:09:33.340
Well, then we see defaults and that's a whole...
00:09:36.720
But again, nobody wants that to happen, but it's only natural.
00:09:42.780
I mean, the housing market in Canada, all of the markets in Canada were so hot and so rapid,
00:09:58.240
And Pamela Jones-Kenny asking for you, just saying, what happens to all the outrageous rent
00:10:02.020
that's being charged to a lot of renters in BC?
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I know my daughter's got to go back to university this fall in Vancouver, and she's having...
00:10:11.820
So, you know, would it trickle down at least to give some relief there?
00:10:16.240
I was going to say that's the government's problem, but it's not.
00:10:22.000
And the rents are going to go up anyway, because we've got half a million people moving to Canada
00:10:29.760
every year, most of them to Toronto and Vancouver.
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They come up with all these programs that are nothing more than bureaucratic nightmares.
00:10:47.120
You spend more money hiring bureaucrats than they do in building apartments.
00:10:52.020
They need to go sit down with the Canadian Home Builders Association or just travel around
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to each city and say, look, to the builders, look, here's a hundred million dollars, which
00:11:06.100
I've had Shane Wenzel on a couple of times, and he's good, and he's outspoken.
00:11:11.180
And I mean, the ridiculousness in Calgary is far from alone with it.
00:11:14.540
It's eight years from proposal to construction on an area.
00:11:19.860
And I mean, the investment in long-term thinking involved, and that's assuming you get approved.
00:11:24.320
You could get stopped any step along the way with a new development.
00:11:27.600
Nobody wants to invest, or at least they're investing because they have to, but it's reducing
00:11:32.680
And meanwhile, I look at discussions online, though.
00:11:34.680
I mean, City Hall, the hipsters, and everybody's still screaming, no more development, no more
00:11:47.800
But the other thing, I mean, in terms of the type of housing that's required, which is
00:11:53.320
multi-family apartments, not the towers they're talking about downtown, Calgary, that doesn't
00:12:00.720
One of the things that gets in the way is the money from the banks, because a builder has
00:12:07.240
to sell, I think, 50% of the building before the bank will say, here's your money, go build
00:12:16.280
But if the government, instead of coming up with these horses' ass programs that they
00:12:21.400
do, just took the cash and said, here, here, Shane Wenzel, go build some apartments.
00:12:26.940
Shane would be out there building them right now.
00:12:29.140
Hopefully the dirt be moving the week afterwards, and it would put some people to work and take
00:12:34.720
I mean, I don't want to see government throwing money out.
00:12:37.000
But it'd be better than what they're wasting it on.
00:12:41.520
Which is never, I mean, that's just virtue signal.
00:12:48.320
You know, but the, you said the government throwing money, I agree with that.
00:12:57.540
But if the government gave them money, it got out of their way in terms of development
00:13:02.180
permits and crap like that, it would, it's not throwing it away.
00:13:06.400
It's providing cheap accommodations for people in BC and well across the country and places
00:13:14.860
And supply is still an issue, big time issue all across the country, regardless of the
00:13:22.560
fact that sales are going to slow down and the demand is going to weaken.
00:13:30.000
So, I mean, it's, it's, it's not something that changes quickly.
00:13:32.620
I mean, even if suddenly the government woke up, cut a bunch of the red tape out of the
00:13:36.200
way and yeah, threw some money out, you're looking at a year before these new places
00:13:44.700
I think if, if, I think they could be fast tracked.
00:13:47.500
I don't know the exact building cycle, but I mean, the problem you're going to have there
00:13:53.260
a bit more than anything else is the labor to build them.
00:13:56.580
Just because you have the money in the space, but you got to find some skilled help.
00:14:00.100
I mean, I remember also during the boom, you know, back in the early 2000s and some of
00:14:04.680
the quote unquote contractors and the amount of people who bought new houses and were realizing
00:14:09.760
my pipes already leak or my place is, you know, the electric's on fire.
00:14:13.560
We just got a lot of challenges all at once hitting right now.
00:14:17.440
It's almost feel like going down to the rabbit hole to see if Alice in Wonderland is still
00:14:23.740
Yeah, well, and as you said, we're probably already there and it's kind of undeniable.
00:14:31.560
I mean, the advantage, the advice, I guess we could give most people is just, you know,
00:14:34.800
batting the hatch is try to, try to reduce your debt load, but don't panic and sell.
00:14:38.600
Yeah, the worst thing that can happen is, is do a panic sale.
00:14:43.700
One thing that people should not try to do is forecast what the price is going to be two
00:14:51.340
The last two years, it was easy because everybody, it just did this.
00:15:00.100
It's like this, you know, and if it stays that way, we'll be fine.
00:15:03.860
Ride it out a few years later, it'll come back.
00:15:06.960
But once again, if you start seeing a ton of for sale signs in the city, we got a big problem
00:15:13.880
I got a feeling we got a few years of insanity.
00:15:16.440
I mean, you can't, it's unavoidable to point out.
00:15:18.880
I mean, definitely the pandemic has a lot to do with this.
00:15:21.580
It's just messed up markets in every sort of way.
00:15:24.180
I mean, was it two years ago down in Prentice where I live?
00:15:27.640
They throw a for sale sign out front and the place was gone in a day.
00:15:32.180
And they were getting people bidding wars to get into these houses.
00:15:36.040
And again, I mean, that's just not a healthy market either.
00:15:42.040
But that's, again, that's the Bank of Canada's fault, if there is a fault.
00:15:48.140
By putting that interest rate down to 0.25%, that just started a fire.
00:16:10.480
What else do you think we got to look forward to before I let you?
00:16:19.600
We're supposed to have some nice weather and such.
00:16:26.380
I mean, it's really, it's hard to nail it down, so to speak, because it's still kind of developing.
00:16:35.640
I think we'll know, have a better sense for things by the time August is over.
00:16:41.820
That'll be, I think, a much more clearer picture of what's going on.
00:16:45.440
I mean, a lot of people right now have just said to hell with it, and they're on vacation, and it's like, to heck with it.
00:16:55.200
But, you know, that's a good thing to get going, get out, have some fun, enjoy your family.
00:17:00.220
You'll see the people that you haven't been able to see for a while, and just forget everything.
00:17:04.580
Because, number one, if you dwell on it forever, it just gets worse.
00:17:11.700
That's part of the problem I have in this show.
00:17:12.920
I'm always, you know, ranting, raving, and angry, but that's what it's all about.
00:17:16.320
I see what you wrote about the Brad Pitt and some other stuff in a story a little while ago, too.
00:17:21.020
It doesn't always have to be real estate and dry stuff, I guess.
00:17:27.840
I've got a really good one that you're going to like.
00:17:29.660
A company down in the States did a survey, media survey, Rasmussen Reports, and they
00:17:36.840
went to the big media outlets and asked the reporters and the editors what they thought
00:17:41.500
were the major issues that they should be reporting.
00:17:45.580
And then they went out and talked to the people on the street and said, what issues do you
00:17:51.980
The two lists are entirely different, entirely different.
00:17:57.780
But it's an indictment, I think, of the mainstream media, the legacy media.
00:18:03.760
Without doing any homework, they just decide in the editorial meetings, oh, no, it's all
00:18:09.440
And then the people go, no, no, no, it's inflation.
00:18:14.740
And so the media, legacy media wonders why everybody's turning them off.
00:18:21.100
Because they're not reporting what people care about.
00:18:24.340
Well, that's what I keep, I've been pointing out a lot lately.
00:18:26.600
And when it comes to climate change or COVID or all of these other things that may or may
00:18:31.580
But when a person can't make the bills, none of that crap matters anymore.
00:18:34.720
If you can't pay the mortgage, you can't put food on the table.
00:18:40.480
You don't care if the temperature might go up a degree in 50 years or if there's a disease
00:18:45.860
going around that's killing one in 100,000 people.
00:18:51.980
You know, people don't sit down at dinner and say, geez, I wonder if COVID's coming back.
00:18:56.160
They're going, how are we going to pay the mortgage this month?
00:19:00.980
The other one I'm going to tackle, and this will probably get me in trouble, is the climate
00:19:05.980
I found some really good stuff that you'll also enjoy about from the way back in the
00:19:12.260
beginning when they started first talking about this back in the middle 70s, 80s, using
00:19:18.840
exactly the same phrasing that they're using now, except by 1980, the world would be just
00:19:26.500
Oh, there's only so much, you know, apocalyptic copy out there.
00:19:29.720
I mean, you just cut and paste, change the dates and whatever the cost is.
00:19:35.840
I just remember, you know, I was a voracious reader in a used bookstore, and I pulled out
00:19:39.980
just randomly and bought this old used book back in the 90s, and that was the population
00:19:44.900
time bomb all the way back from, I think that came out in the late 60s, and that was the
00:19:49.800
prediction that, oh, we're all going to die because we're going to overpopulate.
00:19:57.780
There's always an apocalypse around the corner.
00:19:59.820
There's always a boogeyman that we've got to be afraid of.
00:20:03.180
Well, it's exhausting, but it's also it's unfortunate because people buy into it, you
00:20:08.680
know, and you got one or two percent of the people in the world who are promoting all this
00:20:13.760
apocalyptic stuff and the woke people and that everybody's catering to.
00:20:20.000
And there's like 98 percent of the people out there who are kind of like, huh?
00:20:31.760
I mean, we're looking at the ratings for conventional media outlets and unfortunately, the government
00:20:38.120
But instead, as you said, they should be listening to what people want to hear and providing it.
00:20:48.500
And also, I mean, I just enjoy, you know, putting up those pictures.
00:20:56.180
I noticed that the picture had Jolie next to it, too.
00:20:59.880
And so, I mean, there's eye candy for both sides, even if she might be crazy.
00:21:03.400
I'm sure she has a lot of other assets that would have been admirable.
00:21:09.540
Well, thanks for coming in to talk to me today, Mike.