The swoop

Is this legal? Norm had that question for me after stumbling across a listing for a $350,000 house in NE Calgary being advertised for… $24,900.

Well, actually, no. And so the marketing words of Royal LePage agent Ron Jobbagy were ghosted from realtor.ca sometime during the wee hours of last night (while at the same time Alberta’s new premier took the first shame step towards separation from Canada). For the record, and the amusement of generations to come, here is the full text relating to 6843 Temple Drive NE, Cowtown, Canada. Remember this one.

PLEASE READ IN FULL BEFORE CALLING !!!! Selling a half equity stake in this property. YOU WILL NOT GET POSSESSION… YOU WILL NOT BE MOVING IN WITH CURRENT OWNER. Here is the math. Last known amount owing on CIBC mortgage was 230K. Current Value of home in its current condition would be about 350. Therefore… equity in house is approx. 350-230=120K. We are selling half of this equity for only 24,900. Renovated value on this home would easily be 400K. Owner is an unwilling seller with a debt owing to another financial institution other than the mortgage holder. You would then own half the equity… so a value of about 60K for only 25K ask. You would then register your lien and interest on title and wait it out… wait for the current owner to sell or go into default… you are on title then you swoop in and pay out the mortgage and have a whole house for balance owing on mortgage plus whatever you buy this for. You park some money here for a future profit. For a very clear understanding of what you are buying.. text us for a copy of the offer to purchase.

Did Ron’s broker, in horror, discover this Death Watch listing? Did the regulator lower the boom on a rogue agent taking advantage of an ‘unwilling seller’ pickled in debt and garroted by CB tightening? Did the MLS gods gag over an ad telling buyers to “wait for the current owner to go into default” so a vultcher could “swoop in” after just “parking some money” in order to profit from the downfall of some poor dude? What about privacy laws, disclosing a person’s mortgage amount, lender and financial circumstances? Who is this agent working for, if not the owner?

Beats me. But she was gone with the dawn. By the way, here’s the prop:

The above is unethical, unprofessional, and provides further evidence of the financialization of residential real estate. Now that we’ve had a 1,600% increase in the Bank of Canada rate, you can expect a long and difficult period of adjustment. Lots of people with money will do great. Lots more people with debt will suffer.

Here’s a sobering reality. Just a year ago new buyers were ‘protected’ from crazy, impossible and unexpected future mortgage increases by having to pass a stress test crazy-higher than street rates – 5.25%. If a borrower could climb over that hurdle, they could score a VRM at just 1.5%.

Well, yesterday the CB jacked again. Prime swelled. And now that variable-rate mortgage has actually surpassed the stress test rate of 12 months ago (that everybody said then was absurd). The median VRM this week is 5.95%. With more to come.

HELOCs are currently a hair below 7%. Reverse mortgages are pushing 10%. Private mortgage lenders are charging 9%+. Don’t even ask where your credit card rate is headed. And remember that in March – nine months ago – a five-year fixed home loan was 2.95% and a variable-rate borrowing common at 1.45%.

Economists say it takes, on average, about 18 months for higher borrowing rates to have their full impact. If true, this is the middle of the beginning, with one or two more hikes to come before the central bank pauses. It foretells a difficult, transitional property market for all of 2023, making a mockery of those who are telling you the damage will be healed by April.

Says crusty mortgage broker Rob Butler (correctly): “For a legit sustained pop in real estate, mortgage rates need to start with a 3. That’s just how the math work. The new key word is DURATION. How long do high rates persist? How long before the BoC cuts rates? I don’t know those answers. But don’t be fooled: RE won’t pop.”

How might mortgage rates brushing 6% drop by half, to the 3% range?

Inflation would have to decline from the prevailing 6.9% to something below the current central bank rate, 4.25%, just for the Bank of Canada to pause and keep rates at that level. For mortgages to return to three per cent woud take inflation at around the same number, then stabilize for months before the CB would cut. At the earliest, 2024. Even then Tiff would not return to pandemic-level borrowing costs. Look what they did to real estate prices. Look at how Pierre Poilievre’s noggin exploded. Remember that the bank itself admitted this was excess.

In short, will we ever see 3% five-year mortgages again? Before the Millennials retire?

Nah. This suggests a real estate market where sales have already been reduced by 50%, where vendors have retreated, where families have decided to never sell their homes but pass them on like dowries and where average people don’t have a prayer of affording average properties, is doomed. More houses won’t help. Nor will the FHSA. Or racist buyer restrictions.

Jeannine has it figured out. “So, Garth,” she asks, “do you think that they will bring in a 45 or 50 year amortization for mortgages?’

Oh my.

About the picture: “I am location scouting on a show called Spiderwick,” says Michael, the blog dog and big-time Netflix and Disney+ producer. “Caught this great pup full of energy running around saying hi to all of us. Thank you and your team for all the years of wisdom and direction. Have a great week!”