An interest rate hike this summer?
Don't count on it. For the Bank of Canada to raise rates before the middle part of 2011 would be totally inconsistent with its current forecast
David Rosenberg Published on Wednesday, Jan. 27, 2010
David Rosenberg is chief strategist for Gluskin Sheff + Associates Inc. and a guest columnist for Report on Business
Canadian market watchers will get some good news this week. The predictions for a "blowout" reading on fourth-quarter GDP are already out there and it is likely to be an abnormally strong number. But for anyone who thinks a big number is likely to help lock in a rate hike this summer, I would suggest that is not going to happen. In fact, my view is that the Bank of Canada will not be raising rates until mid-2011 - at the earliest.
This is critical to the outlook for Canadian money market and bond yields since futures have priced in nearly 100 per cent odds of a 25 basis point rate hike this June, and another 25 basis points by September. (A basis point is 1/100th of a percentage point.) The central bank has already told us that its base case is for 2.9 per cent real GDP growth this year and 3.5 per cent next year, with the starting point on the "output gap" being 3.7 per cent ("output gap" is the gap between the actual level of real GDP and where real GDP would be if the economy were at full capacity). Remember that an output gap that big in any given quarter classifies as a 1-in-20 event. Moreover, baselining these expected growth rates against the latest estimates of potential growth puts the output gap at a smaller level of 1.55 per cent this year, narrowing further to 0.25 per cent in 2011.
The history of the Bank of Canada is such that - outside of when it had to defend the Canadian dollar - it typically does not embark on its tightening phase until the output gap is close to closing. Even during the aggressive John Crow era, the bank's modus operandi was to time the first rate hike just as spare capacity was being eliminated, and not much before. On average, the first central bank rate hike following a recession takes place one quarter before the output gap closes (there is still a gap, but it is small at 20 basis points). If such a strategy is replicated this time around - and the cause for being on pause longer in the context of a historic deleveraging cycle is certainly quite strong - then the very earliest the bank will move is the second quarter of 2011.
Under this scenario, based on some back-of-the envelope calculations I just did, the unemployment rate at no time declines below 7.5 per cent through to the end of 2011. The peak in the jobless rate was 8.7 per cent in August, 2009. Going back to prior recessions, the central bank does not begin to tighten rates until the jobless rate is down an average of 150 basis points with a range of 130 basis points to 170 basis points.
Unless the bank wants to be pre-emptive - highly unlikely when it acknowledges in its economic outlook last week that "the recovery continues to depend on exceptional monetary and fiscal stimulus" and that "the overall risks to its inflation projection are tilted slightly to the downside" - then to raise rates before the middle part of 2011 would be totally inconsistent with its current forecast. More to the point, while bored Bay Street economists analyze every word to see if the bank is more or less "hawkish" than in its previous outlook, what is important for investors is to assess the bank forecast and decide what it means for the degree of excess capacity in the economy and what that implies for the future inflation rate.
The bottom line is that even with the fragile recovery, the bank sees more downside than upside risk to its inflation projection, and, to reiterate, for it to start tightening policy until the jobless rate falls below 7.5 per cent would be a break from past post-recession actions.
And whatever future "policy tightening" is needed could also come via the overextended loonie, limiting any need for an interest rate adjustment in the time horizon that the markets have discounted. This is a source of debate on Bay Street, but the bank is still sensitive to the growth-dampening impact of an exchange rate too firm for its own good. To wit: "The persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada," the bank says.
In a nutshell, the Canadian market is already braced for 50 basis points of tightening from the Bank of Canada by September. With that in mind, it is difficult to believe that there is any significant rate risk here; if anything, the surprise will be that the bank is on hold for longer. If that proves to be true, then there is actually more downside than upside potential to Canadian bond yields, particularly at the front end of the coupon curve.
The reason the markets think the bank may pull the trigger is because of this one sentence that
shows up in every press statement: "Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target."
So the central bank has really only given a pledge to keep rates where they are until mid-year. But June is only five months away and so one would have to think that at one of the next three meetings, the Bank is going to have to update this particular sentence or cut it entirely and leave the market without a de facto time commitment. Either way, the moment the bank changes this sentence is the moment the market will put on hold its expectations of a new rate-hiking cycle coming our way.
Until then, homeowners opting for variable rate mortgage financing will likely not have to face the interest rate music.
Sunday, January 31, 2010
Tuesday, January 19, 2010
Bank Slightly lowers growth forecast for 2009-2010; interest rates unchanged
Bank slightly lowers growth forecast for 2009-2010; interest rates unchanged
19/01/2010 1:09:00 PM
Julian Beltrame, THE CANADIAN PRESS
OTTAWA - The global recovery is strengthening, but still needs a boost from massive "extraordinary" stimulus measures to sustain growth, the Bank of Canada said Tuesday.
And the central bank also signalled once again it intends to keep interest rates at historic lows until at least mid-year despite growth returning to the Canadian economy.
"Economic growth in Canada resumed in the third quarter of 2009 and is expected to have picked up further in the fourth quarter," bank governor Mark Carney and his policy-making council said in an accompanying note.
"Nevertheless, considerable excess supply remains, and the bank judges that the economy was operating about 3.25 per cent below its production capacity in the fourth quarter of 2009."
The statement, which included a minor downgrade in projected growth for this year, suggests Canada will be taking a message to the G7 meeting of finance ministers and bank governors in early February that now is not the time for governments to exit stimulus strategies.
In the statement Tuesday, the bank said it would do its part by keeping its trendsetting rate at 0.25 per cent until at least mid-year.
To reinforce the commitment, it extended its emergency lending instruments to April, allowing chartered banks to access funds at the historically low rate.
The bank said the private sector won't become the sole driver of domestic demand until 2011.
As well, the bank tweaked its October economic growth forecast for this year a tenth of a point lower to 2.9 per cent. However, it said 2011 would be slightly better than it thought, with growth projected at 3.5 per cent.
Some analysts saw a brightening hue to Carney's language from October.
Scotiabank economist Derek Holt noted that central bank removed from its text an earlier comment that "significant fragilities remain," and forecast that global expansion would be somewhat stronger in 2010 and 2011 than it thought three months ago.
As well, a new report on leading indicators from Statistics Canada, released half an hour before the bank's announcement, offered more evidence that economic activity picked up last month. The index rose 1.5 per cent, the biggest one-month advance since 1958, with none of the 10 major components registering losses.
Economists are now projecting that Canada's gross domestic product grew by between three and four per cent in the last three months of 2009, and will likely advance at a similar pace this winter.
Given the firming conditions, Holt said it was becoming increasingly difficult for Carney to justify a policy rate near zero.
"The justification for giving away free money is a lot tougher now," he said, even if growth is muted.
But analysts also pointed out that Carney does not want to signal too early he is thinking of raising interest rates for fear of stoking the dollar, which would make exports an even harder sell in foreign markets.
The bank blamed low American demand and the high loonie, currently trading near 97 cents US, with restraining growth in Canada, and leaving the heavy lifting to consumers and homebuyers.
The bank's minor adjustments on growth rates puts it more in line with many private sector economists, particularly the Conference Board, which Tuesday estimated growth of 2.8 per cent for this year.
As the bank noted, Canada's export-dependent manufacturing sector will continue to be weighted down by the strong dollar and the weak consumer recovery south of the border.
A new industrial outlook report from the TD Bank shows just how enfeebled Canadian factories have become by the global meltdown of 2008 and 2009. While manufacturing output will outperform the overall economy in the next few years, it has sunk so far that by the end of 2011 it will still be below levels of a decade ago, the report said.
In another aspect of the Bank of Canada statement, the central bank said inflation has been rising faster than anticipated but it did not appear to be overly concerned at this point.
Although economists say inflation likely hit 1.6 per cent in December, after being below zero through much of the summer and part of the fall, the bank said it still doesn't believe it will return to the two per cent target until the third quarter of 2011.
19/01/2010 1:09:00 PM
Julian Beltrame, THE CANADIAN PRESS
OTTAWA - The global recovery is strengthening, but still needs a boost from massive "extraordinary" stimulus measures to sustain growth, the Bank of Canada said Tuesday.
And the central bank also signalled once again it intends to keep interest rates at historic lows until at least mid-year despite growth returning to the Canadian economy.
"Economic growth in Canada resumed in the third quarter of 2009 and is expected to have picked up further in the fourth quarter," bank governor Mark Carney and his policy-making council said in an accompanying note.
"Nevertheless, considerable excess supply remains, and the bank judges that the economy was operating about 3.25 per cent below its production capacity in the fourth quarter of 2009."
The statement, which included a minor downgrade in projected growth for this year, suggests Canada will be taking a message to the G7 meeting of finance ministers and bank governors in early February that now is not the time for governments to exit stimulus strategies.
In the statement Tuesday, the bank said it would do its part by keeping its trendsetting rate at 0.25 per cent until at least mid-year.
To reinforce the commitment, it extended its emergency lending instruments to April, allowing chartered banks to access funds at the historically low rate.
The bank said the private sector won't become the sole driver of domestic demand until 2011.
As well, the bank tweaked its October economic growth forecast for this year a tenth of a point lower to 2.9 per cent. However, it said 2011 would be slightly better than it thought, with growth projected at 3.5 per cent.
Some analysts saw a brightening hue to Carney's language from October.
Scotiabank economist Derek Holt noted that central bank removed from its text an earlier comment that "significant fragilities remain," and forecast that global expansion would be somewhat stronger in 2010 and 2011 than it thought three months ago.
As well, a new report on leading indicators from Statistics Canada, released half an hour before the bank's announcement, offered more evidence that economic activity picked up last month. The index rose 1.5 per cent, the biggest one-month advance since 1958, with none of the 10 major components registering losses.
Economists are now projecting that Canada's gross domestic product grew by between three and four per cent in the last three months of 2009, and will likely advance at a similar pace this winter.
Given the firming conditions, Holt said it was becoming increasingly difficult for Carney to justify a policy rate near zero.
"The justification for giving away free money is a lot tougher now," he said, even if growth is muted.
But analysts also pointed out that Carney does not want to signal too early he is thinking of raising interest rates for fear of stoking the dollar, which would make exports an even harder sell in foreign markets.
The bank blamed low American demand and the high loonie, currently trading near 97 cents US, with restraining growth in Canada, and leaving the heavy lifting to consumers and homebuyers.
The bank's minor adjustments on growth rates puts it more in line with many private sector economists, particularly the Conference Board, which Tuesday estimated growth of 2.8 per cent for this year.
As the bank noted, Canada's export-dependent manufacturing sector will continue to be weighted down by the strong dollar and the weak consumer recovery south of the border.
A new industrial outlook report from the TD Bank shows just how enfeebled Canadian factories have become by the global meltdown of 2008 and 2009. While manufacturing output will outperform the overall economy in the next few years, it has sunk so far that by the end of 2011 it will still be below levels of a decade ago, the report said.
In another aspect of the Bank of Canada statement, the central bank said inflation has been rising faster than anticipated but it did not appear to be overly concerned at this point.
Although economists say inflation likely hit 1.6 per cent in December, after being below zero through much of the summer and part of the fall, the bank said it still doesn't believe it will return to the two per cent target until the third quarter of 2011.
Friday, January 15, 2010
Home Buyers Opt for Fixed Rates
Home buyers opt for fixed rates
14/01/2010 2:38:10 PMCBC News Despite close to record-low rates for variable mortgages, a strong majority of home buyers are choosing to pay a little more for the stability of a fixed rate, industry data shows.
A full 86 per cent of borrowers signing up for mortgages in 2009 opted for fixed rates, data compiled by the Canadian Association of Accredited Mortgage Professionals suggested Thursday.
The agency surveyed more than 40,000 mortgages issued in 2009, worth some $10 billion in total, to look for lending trends.
The $10 billion examined is a tiny slice of the overall mortgage market, but was tailored toward first time buyers, the borrowers CAAMP deemed to be most vulnerable to rate fluctuations.
The 86 per cent figure seems high, but it's actually lower than where it was earlier in the year as variable rates became more attractive later on, CAAMP president Jim Murphy said, with some variable mortgages coming in as low as 2.25 per cent, compared to four per cent for fixed terms.
The trend toward fixed rates speaks to the oft-cited Canadian predilection for stability, Murphy says.
"Canadians have always been more cautious," he said "And you can see that bearing out in the fact that most go for the fixed product."
Among those who opted for fixed terms, the majority (70 per cent) opted for a term of five years or longer. And the vast majority of people who took out their first mortgage last year borrowed less than they could afford to, as their gross debt service ratios - a closely watched ratio of how much income it takes to service a debt - are far below allowed maximums.
"This group is the most vulnerable group of borrowers in Canada [but] they are being prudent and the vast majority of Canadian mortgage borrowers are not taking on undue risks," Murphy said.
A small minority of buyers, however, might be cutting it close, CAAMP said. "Our data shows that only a small percentage of them are pushing-the-envelope [by coupling near-maximum debt levels with short-term low rates]," the group's economist Will Dunning said. "About 4,000 households, which amounts to a tiny fraction of the 13.25 million homeowners in Canada."
In late 2009, both Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney banged the drum on excessive debt levels, and urged Canadians to get their financial houses in order. Flaherty mused publicly about raising the minimum down payment level when buying a home from five per cent, or possibly reducing the maximum amortization period lower than it's current level of 35 years.
The Bank of Canada is set to reveal its next decision on interest rates on Tuesday.
14/01/2010 2:38:10 PMCBC News Despite close to record-low rates for variable mortgages, a strong majority of home buyers are choosing to pay a little more for the stability of a fixed rate, industry data shows.
A full 86 per cent of borrowers signing up for mortgages in 2009 opted for fixed rates, data compiled by the Canadian Association of Accredited Mortgage Professionals suggested Thursday.
The agency surveyed more than 40,000 mortgages issued in 2009, worth some $10 billion in total, to look for lending trends.
The $10 billion examined is a tiny slice of the overall mortgage market, but was tailored toward first time buyers, the borrowers CAAMP deemed to be most vulnerable to rate fluctuations.
The 86 per cent figure seems high, but it's actually lower than where it was earlier in the year as variable rates became more attractive later on, CAAMP president Jim Murphy said, with some variable mortgages coming in as low as 2.25 per cent, compared to four per cent for fixed terms.
The trend toward fixed rates speaks to the oft-cited Canadian predilection for stability, Murphy says.
"Canadians have always been more cautious," he said "And you can see that bearing out in the fact that most go for the fixed product."
Among those who opted for fixed terms, the majority (70 per cent) opted for a term of five years or longer. And the vast majority of people who took out their first mortgage last year borrowed less than they could afford to, as their gross debt service ratios - a closely watched ratio of how much income it takes to service a debt - are far below allowed maximums.
"This group is the most vulnerable group of borrowers in Canada [but] they are being prudent and the vast majority of Canadian mortgage borrowers are not taking on undue risks," Murphy said.
A small minority of buyers, however, might be cutting it close, CAAMP said. "Our data shows that only a small percentage of them are pushing-the-envelope [by coupling near-maximum debt levels with short-term low rates]," the group's economist Will Dunning said. "About 4,000 households, which amounts to a tiny fraction of the 13.25 million homeowners in Canada."
In late 2009, both Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney banged the drum on excessive debt levels, and urged Canadians to get their financial houses in order. Flaherty mused publicly about raising the minimum down payment level when buying a home from five per cent, or possibly reducing the maximum amortization period lower than it's current level of 35 years.
The Bank of Canada is set to reveal its next decision on interest rates on Tuesday.
Friday, January 8, 2010
Home inspectors not finding grow-op clues:Marketplace
Home inspectors not finding grow-op clues: Marketplace
07/01/2010 11:33:28 PM
Several homeowners have been shocked to discover their newly purchased homes hosted grow-ops, despite the fact they paid for a pre-sale inspection, a Marketplace investigation has learned.
Marketplace met with homeowners in Toronto and in Kamloops, B.C., who recently learned their homes had once been used to grow marijuana.
In both cases, the homeowners had paid for a pre-sale home inspection and had no idea they were about to buy a former grow-op. In both cases, they were left with huge bills after problems began turning up.
Houses used for grow-ops can sometimes be left unlivable once they've been busted and closed down. Shoddy work to run vents can result in structural damage, electrical wiring tampered with to hide high energy use can be a fire hazard - and there's the issue of mould.
Marketplace enlisted construction guru Mike Holmes to do a thorough inspection of a Toronto home that had once been a grow-op before being patched up and sold to Jagat and Nirmala Prasad four years ago.
According to Holmes, the tell-tale signs of a grow-op should have been obvious to the first inspector: mould in the attic, a large vent hole in the fireplace, patch work over large holes in the ceilings.
Marketplace wanted to find out if other inspectors would see the grow-op clues and hired four inspectors to come through the house. They all had a look, checked out the basement, climbed into the attic, but not one detected that the house had been a grow-op.
Went with police on raid
Marketplace began its investigation by accompanying police on a drug raid in Brampton to see how a grow-op can destroy a house and to look at the modifications throughout the home.
Peel Regional Police Det. Jason Kirkpatrick pointed out a hydro bypass.
"This is your theft of electricity. Just be careful of all the wiring. It's very dangerous here," he said to the Marketplace team.
"It's terrible. The structural damage that they do from breaking the foundation, and this is just the basement we've seen so far," said Kirkpatrick. "What will happen is over time, we've seen houses start to leak because of these breaks in the foundation."
There were marijuana plants in every room, along with wiring and vents.
"They want to get the hot air and the smell out or they'll get detected," said Kirkpatrick. "The watering will take place right inside of this bedroom. Mould is going to grow on the wall and on the floors."
"I think a proper inspector would notice some of the telltale signs, such as ventilation being left in the attics," he said.
The Prasads thought they did everything right by buying a four-bedroom home in a quiet neighbourhood.
Now, they're faced with tens of thousands of dollars to deal with a bad mould problem and much more to repair structural damage caused when floor joists were cut to make way for venting.
Holmes, whose motto is "Make it right," is known for his criticism of shoddy construction and bad contractors, and he doesn't hold back when it comes to home inspectors.
"Do you think it should be part of an inspector's job to know about grow-ops? I say yes!" said Holmes.
At the Prasad house, Holmes found his first "red flag": a hole in the basement foundation.
"What did the home inspector say about this?" Holmes asked Jagat Prasad.
"He didn't say much about it. He just said you have to put [an] insert in there," Jagat replied.
"They don't care what they do to the house. They're in here to make money. Somebody covered it up and then sold it to you," said Holmes. "This is going to cost you one crap load of money."
Kamloops resident Theresa Denton is facing even worse problems. After spending $8,000 to try to solve her mould problem, she's learned her home has so many toxic mould spores she shouldn't be living there.
Her son has developed a severe mould allergy and must take steroids, and the repairs to solve the problem are calculated at more than $100,000.
"It's devastating you know. First, of course, we don't want to live in this house, but it's the only house we've got," said Denton, who is suing the former owner, her real estate agent and her home inspector.
The biggest sign her home had been used as a grow-op is the black mould that coats one wall in her attic, caused by moisture that had been vented there from the grow rooms.
Denton said her inspector did check the attic with a flashlight.
"Either he's not telling the truth or he's just completely incompetent," she said.
Marketplace spoke with Denton's home inspector, David Mahoney, about attic mould.
"Mould will happen very quickly so," he said. "I didn't see any mould when I was there. Remember, I'm not looking for mould. I'm not a mould expert. I don't have the equipment for that so that's not part of this inspection. If I had seen something that needed to be exposed to her then I would have told her."
"I say right in my report I don't look for mould," said Mahoney.
But Holmes doesn't buy that answer.
"Well, I got a question. What the hell do you look for? You know, what are you looking for? Dog hair?" he said. "I think we need to do something about the home inspection industry. It's obvious that it's not working."
Glenn Gogal, president of the Ontario chapter of the Canadian Association of Home and Property Inspectors, said a property inspection is no guarantee the new homeowner won't find problems that were missed.
"There is a lot of protection in hiring a home inspector to give you an evaluation of your property, but it's not a 100 per cent. It can't be," said Gogal.
He admitted it didn't look good that all four inspectors missed signs that the Prasad house had been a former grow-op.
"Can a random sample of four different inspectors miss something like this on one house. I think that's just wrong, personally, I really do," he said.
Asked what action he would take on the matter, Gogal replied: "I can send out an email to our membership saying that this is the scenario, and it was four out of four, so like heads up and pay attention."
As for the Prasads, the only good news they've received so far is that an air quality check found the mould spore count is low enough for them to remain their house while repairs are done.
"It's a major concern because right now we thought we were paying a mortgage towards an asset," said Jagat. "But we're paying it toward a liability now."
07/01/2010 11:33:28 PM
Several homeowners have been shocked to discover their newly purchased homes hosted grow-ops, despite the fact they paid for a pre-sale inspection, a Marketplace investigation has learned.
Marketplace met with homeowners in Toronto and in Kamloops, B.C., who recently learned their homes had once been used to grow marijuana.
In both cases, the homeowners had paid for a pre-sale home inspection and had no idea they were about to buy a former grow-op. In both cases, they were left with huge bills after problems began turning up.
Houses used for grow-ops can sometimes be left unlivable once they've been busted and closed down. Shoddy work to run vents can result in structural damage, electrical wiring tampered with to hide high energy use can be a fire hazard - and there's the issue of mould.
Marketplace enlisted construction guru Mike Holmes to do a thorough inspection of a Toronto home that had once been a grow-op before being patched up and sold to Jagat and Nirmala Prasad four years ago.
According to Holmes, the tell-tale signs of a grow-op should have been obvious to the first inspector: mould in the attic, a large vent hole in the fireplace, patch work over large holes in the ceilings.
Marketplace wanted to find out if other inspectors would see the grow-op clues and hired four inspectors to come through the house. They all had a look, checked out the basement, climbed into the attic, but not one detected that the house had been a grow-op.
Went with police on raid
Marketplace began its investigation by accompanying police on a drug raid in Brampton to see how a grow-op can destroy a house and to look at the modifications throughout the home.
Peel Regional Police Det. Jason Kirkpatrick pointed out a hydro bypass.
"This is your theft of electricity. Just be careful of all the wiring. It's very dangerous here," he said to the Marketplace team.
"It's terrible. The structural damage that they do from breaking the foundation, and this is just the basement we've seen so far," said Kirkpatrick. "What will happen is over time, we've seen houses start to leak because of these breaks in the foundation."
There were marijuana plants in every room, along with wiring and vents.
"They want to get the hot air and the smell out or they'll get detected," said Kirkpatrick. "The watering will take place right inside of this bedroom. Mould is going to grow on the wall and on the floors."
"I think a proper inspector would notice some of the telltale signs, such as ventilation being left in the attics," he said.
The Prasads thought they did everything right by buying a four-bedroom home in a quiet neighbourhood.
Now, they're faced with tens of thousands of dollars to deal with a bad mould problem and much more to repair structural damage caused when floor joists were cut to make way for venting.
Holmes, whose motto is "Make it right," is known for his criticism of shoddy construction and bad contractors, and he doesn't hold back when it comes to home inspectors.
"Do you think it should be part of an inspector's job to know about grow-ops? I say yes!" said Holmes.
At the Prasad house, Holmes found his first "red flag": a hole in the basement foundation.
"What did the home inspector say about this?" Holmes asked Jagat Prasad.
"He didn't say much about it. He just said you have to put [an] insert in there," Jagat replied.
"They don't care what they do to the house. They're in here to make money. Somebody covered it up and then sold it to you," said Holmes. "This is going to cost you one crap load of money."
Kamloops resident Theresa Denton is facing even worse problems. After spending $8,000 to try to solve her mould problem, she's learned her home has so many toxic mould spores she shouldn't be living there.
Her son has developed a severe mould allergy and must take steroids, and the repairs to solve the problem are calculated at more than $100,000.
"It's devastating you know. First, of course, we don't want to live in this house, but it's the only house we've got," said Denton, who is suing the former owner, her real estate agent and her home inspector.
The biggest sign her home had been used as a grow-op is the black mould that coats one wall in her attic, caused by moisture that had been vented there from the grow rooms.
Denton said her inspector did check the attic with a flashlight.
"Either he's not telling the truth or he's just completely incompetent," she said.
Marketplace spoke with Denton's home inspector, David Mahoney, about attic mould.
"Mould will happen very quickly so," he said. "I didn't see any mould when I was there. Remember, I'm not looking for mould. I'm not a mould expert. I don't have the equipment for that so that's not part of this inspection. If I had seen something that needed to be exposed to her then I would have told her."
"I say right in my report I don't look for mould," said Mahoney.
But Holmes doesn't buy that answer.
"Well, I got a question. What the hell do you look for? You know, what are you looking for? Dog hair?" he said. "I think we need to do something about the home inspection industry. It's obvious that it's not working."
Glenn Gogal, president of the Ontario chapter of the Canadian Association of Home and Property Inspectors, said a property inspection is no guarantee the new homeowner won't find problems that were missed.
"There is a lot of protection in hiring a home inspector to give you an evaluation of your property, but it's not a 100 per cent. It can't be," said Gogal.
He admitted it didn't look good that all four inspectors missed signs that the Prasad house had been a former grow-op.
"Can a random sample of four different inspectors miss something like this on one house. I think that's just wrong, personally, I really do," he said.
Asked what action he would take on the matter, Gogal replied: "I can send out an email to our membership saying that this is the scenario, and it was four out of four, so like heads up and pay attention."
As for the Prasads, the only good news they've received so far is that an air quality check found the mould spore count is low enough for them to remain their house while repairs are done.
"It's a major concern because right now we thought we were paying a mortgage towards an asset," said Jagat. "But we're paying it toward a liability now."
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