Crashing in Kelowna

News Flash: Real estate guy dumps on article below

Just received this insightful email, which is well worth passing on. Was it just six or seven months ago the property experts of idyllic Kelowna were saying it couldn’t happen there? Duh. — Garth

Mr. Garth Turner,

I know your time is very precious in this election year, but I though I’d drop you a line about the city I live in; Kelowna, British Columbia.

According to OMREB (Okanagan Mainline Real Estate Board) data, our housing market peaked out in March of 2008, with the average home price sitting at around $542K. In the six months following the peak of our market, the average home price has fallen about $67K; by far the highest raw dollar and percentage rate in all of Canada, and perhaps in all of North America for the six months following a market peak.

This is greater than Vancouver ($45K over 5 months), greater than Calgary ($62K over 16 months) and greater than Edmonton ($64K over 14 months). In effect, the owner of an “average” home purchased at the height of the Kelowna housing bubble has been losing $11,000 per month, or about $370 per day of their home equity.

When you look at that $67K drop, that ends up being about 12% from the top of the market, or 25% annualized. This is a rate of decline which is accelerating, because the annualized rate based off of August OMREB figures was 21%. I would not be surprised to see the annualized rate of decline to hit 35% before the new year.

The thing is, when you have a look at all 5 Fundamental Housing Rules, the Net income of the average Kelowna family and combine them with Kelowna’s 50-year moving trendline, it would not be unreasonable to expect prices to fall 70% (or more) in order to return to the realm of affordability.

These “5 Fundamental Housing Rules”, which have been used to great success for the last century, are:

  • The monthly mortgage payments should not exceed 33-35% of monthly Net family income.
  • The monthly mortgage payments should be around 1/120 of the mortgage, and no less than 1/200 that of the mortgage (this is the “120 rule”).
  • The monthly mortgage payments should be – at minimum – 15% less than comparable rents for similar units in the rental market.
  • The price of the house should be about 3 and no more than 3.5 times that of Net annual family income.

And perhaps, the most important one of all;

  • The average house must be affordable by the average family and their combined income.

Using all 5 fundamentals, the 50-year moving trendline of the price of an average Kelowna home ($174K) and the average Net family income for Kelowna residents ($53K/yr), the resulting “window of price ranges” means that the average home price should sit somewhere between $150K and $180K. This is a drop of about 70% from the March 2008 high.

Image that… a price drop of 70%. And this is a middle-of-the-road estimate; neither optimistic nor pessimistic.

Now imagine if the world enters into a Greater Depression. Average wages decline, which then causes the “window of house prices” (as defined by the 5 Housing Fundamentals) to go downward as well. If we do indeed end up facing harsh economic times down the road, we could easily see a peak-to-trough drop of up to 80% in the value of the average Kelowna home.

80%. Peak-to-trough. Boggles the mind, doesn’t it?

What makes these figures all the more realistic and rational is the state of the Kelowna and area economy.
In a normal, healthy economy that can weather significant changes in prices, there tends to be 30% of the population employed in service-level and/or entry level jobs, 60% in middle-income, middle-wage jobs, and 10% employed in high-end, top-tier jobs that garner the highest wages. With this kind of a distribution, the middle-income, middle-wage families provide the economic buffer to moderate any bubble and cushion any crash.

Unfortunately, Kelowna has these percentages switched around — over 60% of our economy is service level and entry level jobs, many of which garner less than $12/hr (and this is in an economy where people require a minimum of $15/hr in order to properly support themselves, much less a family). Only about 30% of the jobs in Kelowna bring in a decent, middle-income wage. As such, Kelowna is particularly vulnerable to dramatic bubbles and catastrophic crashes.

And there is precious little optimism for future growth. The Alberta Oil Sands projects are slowing dramatically, and fewer Albertans are going to have the cash or the desire to spend copiously on a second or third vacation home. Retirees, who have made up more that half of our population growth, are seeing their retirement funds wiped out; both in the devaluation of their current home (which many retirees have been relying on to fund their retirement) as well as the value of their investments in the overall markets. In particular, the massive declines of the stock markets have been delaying the retirement of many baby boomers by as much as a decade or more. Remember, retirees are on a fixed income, and as such, are by far the most cautious of people — they are the first to avoid a declining market and the last to jump back in once it bottoms out.

Compounding this entire clusterfrack of a housing bubble is the speculative market. Many new developments have had the majority of their units sold to speculative investors. The Centuria project on the corner of Bernard Ave. and Gordon Dr., in particular, is over 60% flips and assignments. Even my own apartment complex – which is relatively new but far from prestigious – has had close to 15% of its units purchased by speculative investors. Once all of these speculators and flippers try to flee the market, we will have an unprecedented glut of housing that will push prices through the basement.

In fact, we are already seeing a massive spread between listings and sales that is unprecedented in our history. Sales for September have all but collapsed (265), and listings continue to reach for the sky (6692). If the trend continues, as many as one in five homes within city limits could be for sale at some point in 2009. Heck, we already have 25 months worth of inventory sitting on the market, and a healthy and normal market should only have about 3 months of inventory. These kinds of market stresses will only force the price plunge to be sharper and deeper.

Yes, things are going to get very nasty in Kelowna over the next few years. There are going to be many homeowners, speculators and flippers who purchased within the last few years who will find themselves holding an asset that is worth far less than the mortgage on it. I have posted at length on this subject in a local community website and forum called; you can find my forum threads at and Be aware, however, that the second one was started last November, and currently is sitting at 338 pages and 5080 posts. It will be a long read.

The Chinese have a very polite curse: “May you live in interesting times.” To be certain, the next three to five years will be very interesting times for Kelowna and its residents.

René Kabis
30-year resident of Kelowna, BC


#1 hal on 10.09.08 at 7:51 pm

I am a longtime resident of Kelowna and Rene has described the housing and economic situations here in Kelowna perfectly. In addition to the clusterfrack he describes in his commentary I would like to ask a question. What happens when all the boomers want to retire and cash in the equity on their empty four thousand square foot three car garage and a swimming pool McMansions between 2010 and 2015? Will this not exacerbate the current housing devaluations? Care to comment Garth? Didn’t you write a book about this?

#2 Ed Sager on 10.09.08 at 7:53 pm

We spent a month in the Okanagan this spring, looking the area over for a possible retirement home, and concluded that it was vastly overpriced — even as local industry such as sawmills was collapsing. Young people were moving elsewhere as there were no jobs that paid enough so they could afford a house, according to local media. There were 50-60 year old shacks in Summerland valued at astronomical prices, so we crossed the area off our list and are looking elsewhere. Thanks for the illuminating comments.

#3 Dropper on 10.09.08 at 8:00 pm

Mr. Kabis’ article is not hard to believe. Kelowna is moderately pretty because of the lake but other than that it is a complete craphole. Bye bye K-town.

#4 John on 10.09.08 at 8:13 pm

WOW, another bad news! When are we going to recover?

Best, Orange County Real Estate

#5 Roger on 10.09.08 at 8:32 pm

Another popular retirement area is Vancouver Island. Prices have been dropping in recent months in several areas. Click my name to see what happened last month.

#6 dekethegeek on 10.09.08 at 8:34 pm

Hmmmmm, unaffordable housing, service sector jobs in the majority, and a sky rocketing listing / plummeting sales market.
Perhaps we could swap the name “Vancouver” with Kelowna and repost this letter.
I’ve been speaking to all and sundry for over a year in the “Lotus Lowermainland” about the coming real estate plunge ( sorry folks can’t claim I knew the Stock Market was gonna join the Cheese Melt Down party)and I still watch in disbelief as friends mortgage 600k+ houses/ condos ( all the while chanting vague blatherings about ” The Olympics are coming !”)
Excellent stats and sobering job loss/ boomer retirement predictions, makes me want to curl up in a ball in a dark room and not come out for a decade or so.
You”ll know a Depression has hit when a bum asks me for a Gold nugget for a cuppa Robson St. StarBucks java .
Be afraid.

#7 dotava on 10.09.08 at 8:52 pm

Garth – please say hallo to René and I hope that VitaFoam is not there anymore (there wasn’t big polluter beside them at the time of my presence). He should enjoy that paradise –> mountains/hills around, fresh air (excluding VF) … – if house value is important – he is missing his life.

#8 Noz on 10.09.08 at 9:39 pm

This is greater than Vancouver ($45K over 5 months), greater than Calgary ($62K over 16 months) and greater than Edmonton ($64K over 14 months). In effect, the owner of an “average” home purchased at the height of the Kelowna housing bubble has been losing $11,000 per month, or about $370 per day of their home equity.


About time this bullshit magic money went away.

#9 B on 10.09.08 at 10:12 pm

Don’t forget that prestigious institutions such as the World Economic Forum and the IMF (bystanders during the global economic shitstorm) in all their wisdom are predicting that Canada will lead the G7 in “GDP GROWTH in 2009” – hahaha – Obvious red meat being dished out to convince voters to vote right wing… How does one define growth?

The system is broken.

#10 neutral on 10.09.08 at 11:20 pm

Can I be on the “evil’s” side today and input a good news:

#11 thriller on 10.09.08 at 11:23 pm

CANBERRA (Reuters) – Canada has the world’s soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.

But Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a 50 billion pound ($86.5 billion) pledge this week by the government to bolster bank balance sheets.

The United States, where some of Wall Street’s biggest financial names have collapsed in recent weeks, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

The United States was on Thursday considering buying a slice of debt-laden banks to inject trust back into lending between financial institutions now too wary of one another to lend.

The World Economic Forum’s Global Competitiveness Report based its findings on opinions of executives, and handed banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Canadian banks received 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).

UK banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness, while Switzerland’s banking system scored the same in 16th place, as did Singapore (13th).

The ranking index was released as central banks in Europe, the United States, China, Canada, Sweden and Switzerland slashed interest rates in a bid to end to panic selling on markets and restore trust in the shaken banking system.

The Netherlands (6.7), Belgium (6.6), New Zealand (6.6), Malta (6.6) rounded out the WEF’s banking top 10 with Ireland, whose government unilaterally pledged last week to guarantee personal and corporate deposits at its six major banks.

Also scoring well were Chile (6.5, 18th) and Spain, South Africa, Norway, Hong Kong and Finland all ending up in the top 20.

At the bottom of the list was Algeria in 134th place, with its banks scoring 3.9 to be just below Libya (4.0), Lesotho (4.1), the Kyrgyz Republic (4.1) and both Argentina and East Timor (4.2).


1. Canada

2. Sweden

3. Luxembourg

4. Australia

5. Denmark

6. Netherlands

7. Belgium

8. New Zealand

9. Ireland

10. Malta 11. Hong Kong

12. Finland

13. Singapore

14. Norway

15. South Africa

16. Switzerland

17. Namibia

18. Chile

19. France

20. Spain


124. Kazakhstan

125. Cambodia

126. Burundi

127. Chad

128. Ethiopia

129. Argentina

130. East Timor

131. Kyrgyz Republic

132. Lesotho

133. Libya

134. Algeria

SOURCE: World Economic Forum Global Competitiveness Report 2008-2009.

(For the full World Economic Forum report click on: )

#12 Republic of Western Canada on 10.09.08 at 11:26 pm

And this is news.. how?

First of all, the blind self-righteous expectation of eternal real estate price expansion was hardly different from any of the historic stock-market blowoffs. It was just a lot more stupid and you had to be a lot more drugged-up to get caught up in it.

In stock trading, no one that I ever heard of could take such an extensively long (or short) underlying position with such massive amounts of margin as what was available to either sub-prime or average mortgage-seekers. At least with stocks, you have to have a lot greater percentage of your own after-tax savings involved. Generally, the liquidity of large-cap stocks allows you to quickly sell if you have to, as well. But if you have to drop a house in a difficult market that could take months. An experienced stock-market investor would shudder when thinking about taking on so much risk for such a long time frame with no way out if need be.

There’s no way to tolerate even a bit of sympathy for those who so recklessly took on even a single property, let alone a string of ten. No way. That’s no better than playing ‘Russian Roulette’ after a half-bottle of whiskey.

Secondly, B.C.’s employment situation is no secret. The whole province has a fabulous endowment of natural resources and scenery, but the way things are set up very few people can get rich on it, and for most it’s difficult to just keep even. The province is a tough place to get around and maintain, and several generations of hard-working, self-sacrificing people would be necessary to put things together right and maintain it that way. Instead, it has the most amazing collection of stoners, retro-colonialists, fun-seekers, Hong Kong exiles, Persian exiles, under-employed resource workers, dock-workers, government employees, and a tax-and-‘give-it-all-away’ government which probably taught the U.S. bailout artists a few things.

Putting those two things together could only have lead to an insanely volatile and unstable situation.

#13 dd on 10.09.08 at 11:33 pm

Great post …

I know this is about Kelowna but get this take on world oil prices:

#14 kc on 10.10.08 at 12:04 am

Hey all, Just a wondering question, has anyone here read “Shakedown” by Angus Reid?

I read this book a while back, and now looking back into days gone by I have to say how true he knew what was coming during the fall of the 90’s and how the economy would be turning in the “next decade” if you have read this book what are your views of how he predicted the future?

here is a link to a good review of the book.

#15 y3maxx on 10.10.08 at 12:11 am


..Only one city in Canada will prosper in this current Recession…


Huge govt $$$ infrastructure projects on the go.

Rated #4th best place in the world…cost < less than 20th

Gateway of Canada’s natural resources to the Far East

Read yesterday’s front page news lead and article…

#16 Mike.Slob. on 10.10.08 at 12:30 am

Kelowna has RE Market hundereds times less than Toronto Area. Last year in GTA resale volume was 93,193 sold resale properties plus more than 10,000 sold by owners and new properties from builders.
So Kelowna has Zero influence in Canadian RE Market..
Garth what happen with Gold price? For 3 weeks jumped up $ 190.
Garth what happen with Canadian Dolar?
Bank of Canada has printing money like crazy…
From Nov/07/2007 when 100 CAD= 110 $US
Today Oct/09/2008 ——113 CAD=100 $US
So Lonnie lost 23% of it’s value? Why?
Oil price is same as Nov/2007,and Gold and Silver
went up…..
Is US economy in better shape than Canadian?
But it’s scary when BoC decreased interest rates 2.5%.
Soon will see even 1%. And this scenario is not good for RE Crash.I wish to see RE Crash in GTA, but with very
low interest rate and population growth every year over 100,000 from new immigrants in GTA,so it will be very difficult! ALSO when you see the prices from Builders in Toronto Area than I have to cry…..
High peak of property price (avg. $400,817) in GTA was in May/2008 but when I see the new prices from builders than I’m desperate because I’m waiting from Jan/2006(avg. $332,687) for price correction in GTA and even that price was too high for my family.
I can’t see any negative price correction of houses
up to 350K in Halton and Peel. Just opposite only higher prices from last year!
Do you think that next year we can see avg. prices in Halton and Peel as Jan/2006?
However, god bless you because you are supporter of reality in RE market and I still hope that every next day we can see less greater fools in RE Market.
Stock market TSX,DOW and others have crashing, but
RE Market in Halton and Peel are still going up!

#17 prairiegopher on 10.10.08 at 1:20 am

In another entry I posted some stats from Edmonton. The local real estate board said the market there is “sizzling”. In Regina, a realtor predicted homes there would rise 5-10% next year. Ordinary people look to realtors for advice. We accept blindly that they are experts and they should know what they are talking about. Yet, experience has taught us that people like investment brokers, financial planners and realtors are really car salesmen in fancy suits with fancy titles. Maybe that’s what is happening these last days. The average person is realizing that he is being lied to by the so called professionals, politicians and just about anyone who has something to sell. We just need to get back to being “honest”. A quality that seems to be lacking in so many places! And when someone does say the truth (Garth), the liars line up to make sure he is silenced. Oh, what a tangled web we weave.

#18 AL on 10.10.08 at 2:06 am

This seems a little dramatic to me. Ok, world stock markets crashs likely wont help the RE market. And I do believe prices in many areas, especially Vancouver are too high. But I don’t think we are going to get the huge pull-backs that everyone expects. For the Greater Van area, prices have doubled in 5 years, and pulled back ~5% since May 2008. So, if you bought 2 years ago, your mortgage is likely 20% less than the market value of your home. Even if they drop another 20% you are still basically break even. Really, the only people who are screwed are ones who bough in the last 12 months. Which is how many people/families, maybe 25000. Unless there is significant unemployment, then I can’t see people defaulting. And if prices do pull back another 10-20%, there are too many people like myself waiting for prices to come down so we can purchase. I suspect the RE cycle will plateau for the next 5 to 10 years.

#19 charliegosurf on 10.10.08 at 2:27 am

nice post garth, yu nailed the picture of my life prettynicelly on there, very interesting times indeed.
cant wait to see the outcome.
lots of people eating their nails away rigth now.
curious and maybe stupid question can the price fall more than 100 percent, and still left with land value or house material value???

#20 charliegosurf on 10.10.08 at 2:40 am

if so we could all go back buyin somethin for 0$ with 0$ down and mortage less, yud still ow the notary, but man wuldnt that solve the problem! i know, iknow im nuts. but still it could technicelly or quelly happen.

#21 Taipan on 10.10.08 at 5:28 am

Of course it could also be seen as the economic form of natural selection. There are some organisations that are being bailed out, but the shareholders in many cases are losing 100%. Those who bought into the top of the market, were merely running with the herd and due to be culled.

#22 Kash is King on 10.10.08 at 6:33 am

Ha ha Noz, “magic money” I like that one.

That’s what we are seeing. Value of these voodoo financial instruments has gone off in the hands of the holder, just like holding a hand grenade too long.

This is why the stock markets are dis-inflating. They aren’t crashing folks… nah the volume is wayyy too low. You can expect massive volumes when they do actually crash. All that we’ve seen are hedge funds unwinding their exposure to “magic money”. John Q Public hasn’t even begun to bail the markets.

This is why banks won’t lend to each other… they all know that all the other banks have had that hand grenade go off, now they are afraid the other guy is going to go TU at any moment…. that is, the moment these “off the books” holdings have the light shone on them. For now, they are hiding them by extending maturity dates etc.. the light can’t be shone on them; and unfortunately I believe the lax accounting rules in Canada (compared to USA) facilitate this hiding…. and maybe, just maybe, the gov’t isn’t too eager to go shining a light where it’s REALLY dark…. leastways not ’til after the election. That’s when the fecal matter will hit the fan folks, no matter who gets in.
What I am truly afraid of, is that we end up being the next Iceland, or best case UK, if all the individual exposures are finally and truthfully known.
Once all the dust settles, people will likely be very mistrustful of banks, gov’t and markets. I think capitalism as we know it got bastardized, and maybe broken.. hopefully not beyond repair.

#23 MissedTheBoat on 10.10.08 at 8:05 am

Except from the Toronto Star:

“He said he has seen a 50 per cent increase in defaults in the last three months in his business, adding that he has personally worked recently with people who were forced to sell their homes or file for bankruptcy in the current troubled economic climate.

“Before, they could get their property refinanced, but housing prices are going down so that’s not an option for them,” he said.”

#24 Andrew toronto on 10.10.08 at 8:38 am

BCE: UK may nix world’s biggest deal

Thank God never liked it anyway and what boneheads would want to saddle themselves with 25billion in debit ..and apparently the Uk is talking to canadian officals to nix it .. has that would be bad for Bell canada sueing uk goverment has they now own Royal bank of scotland which was involved heavily in the aquistion.

#25 Ontariohouse on 10.10.08 at 9:08 am

They can lower interest rates all they want. It wont help. The US has low interest rates, has it helped them? No. Plus banks are not passing the full rate discount on to customers. And the poor new immigrants dont have money to afford these homes. The rich ones will propably end up immigrating to other countries or investing their money elsewhere.
Dont worry about the builder pricing. They are trying to hold on as long as they can. Not one of them wants to be the very first one to lower prices. It would “betray” the other builders. But as resale prices keep falling all around them, they will have to start lowering their prices. If they dont, they wont sell.
Some builders will have to start using the services of real estate agents. Then the bargaining can begin! Offer them a price that YOU want to pay. (I would wait until next year though)
Toronto home prices have already fallen 6%. GTA 3% It’s the start!
People who have lived in Canada for many years know how the system works. They saw what happened in 1989. Wait till next year. You’ll be happy that you did! The power will be in your hands, not in the sellers.

#26 Diggity Dog on 10.10.08 at 9:30 am

y3maxx …. hahahahahah. You crack me up each and every time. Prices in Vancouver are waaaay out of line with incomes, and it is incomes determine real estate prices in the long-run. Enjoy the crash!

#27 The Other David on 10.10.08 at 9:53 am

1. Banks don’t need help, Harper says:

2. Feds buy $25B in mortgages:

doesnt #2 contradict #1 somehow?

#28 lgre on 10.10.08 at 10:32 am

mike.slob – if you have been waiting since 06 then wait till 09-10..prices will adjust everywhere. Mattamy just dropped another $20k off their houses in some towns/cities .ie Milton, cambridge. You can buy an older house in Brampton for less then $250m(detached)..but the number references you make sometimes makes me think that you are looking for a 1 year old mcmansion?

#29 Li Hang on 10.10.08 at 11:08 am

Following a decline in July and a small gain in August, employment increased by 107,000 in September. Almost all of this increase was in part-time work (+97,000). The best gain of employement EVER.

Strong employment growth in Central Canada!

Employment in Ontario rose by 52,000 in September, bringing growth so far in 2008 to 1.6%.
In Quebec, employment increased by 32,000 in September, pushing the unemployment rate down 0.4%
Employment in Alberta rose by 17,000 in September, bringing total gains so far this year to 30,000 (+1.5%),
In Saskatchewan, employment was up by 7,700 in September/08.
Employment also increased in Nova Scotia in September, up 4,900.

Strong employment growth in Canada,and low interest rates,will reflecting higher housing prices.

#30 Charles on 10.10.08 at 11:21 am

The following link will take you to the 2007/2008 Annual Report of the Financial Institutions Commission (British Columbia)

2007/2008 Annual Report of the Financial Institutions Commission (British Columbia)

On page 8 it states


of March 31, 2008, there were 48 credit unions

operating in British Columbia with deposits of

$42.7 billion”.

On page 46 of this report it states

“The Credit Union Deposit Insurance Corporation (CUDIC)

of British Columbia is a government corporation that

maintains and invests a fund in support of a guarantee of

members’ deposits with provincial credit unions. All credit

unions in the province have deposit insurance coverage

with CUDIC.

Our mandate is to guarantee that money on deposit and

in non-equity shares is repaid, up to limits prescribed by

the Financial Institutions Act. If a credit union fails and is

unable to pay the money it has either on deposit or in nonequity

shares, CUDIC repays that amount, to a maximum

of $100,000 for each separate deposit.

Although FICOM and CUDIC are separate entities, FICOM

staff administer CUDIC’s day-to-day operations.

As of March 31, 2008, the BC deposit insurance fund

was worth $281 million, including $20 million held by

Stabilization Central Credit Union”.

I have a question for the British Columbia Government. According to the above statements, I am led to believe B.C.’s 48 Credit Unions have deposits of $42.7 Billion in them, and the B.C. deposit insurance fund has $281 Million in it.

If the B.C. economy goes into an major downturn (as a result of this unprecedented credit crunch which is all over the news lately), and house prices in B.C. suffer a meltdown which is similar to what is happening in the United States, and several Credit Unions in B.C. become insolvent and are forced to close their doors, is there some kind of a law on the books which states that the B.C. Government will backstop the B.C. deposit insurance fund if it goes broke and is unable to meet its obligations?

#31 $fromA$ia on 10.10.08 at 11:55 am

Liberal must move on Flaherties insane actions past and present. (past/40 year ammortization, present complaining on private banks decision not to lower rates in line with the BOC.) Flaherty says Canadian won’t be able to buy homes.

Can somebody tell Flaherty that in these times, it’s better to wait than buy high.

Garth tell your fellow Liberals that if they want to win this election, they need to move on this Consrvative mismanagement and fast!

#32 brazer on 10.10.08 at 12:13 pm

Loonie dives to 84 cents as traders ignore data

“The Canadian dollar has blown through all sorts of technical levels over the last couple of days and it’s hard to say exactly when it’s going to stop,” Ms. Douglas said.

#33 brazer on 10.10.08 at 12:24 pm

Feds buy $25B in mortgages

OTTAWA–The federal government is buying up $25 billion in residential mortgages to give the chartered banks additional cash to issue loans, Finance Minister Jim Flaherty announced Friday.



#34 brazer on 10.10.08 at 12:25 pm

Credit crisis sparks another selloff

The Toronto stock exchange was down over 300 points late Friday morning with energy stocks again getting stomped as oil prices continued to retreat and financial stocks moved lower even as the government announced help for Canada’s big banks.

#35 brazer on 10.10.08 at 12:28 pm

Harper: Bank deal is asset swap, not bailout

The $25-billion government deal to buy mortgages from Canada’s banks isn’t a lifeline for lenders stuck with bum loans, Prime Minister Stephen Harper said today.



#36 Roger on 10.10.08 at 12:41 pm

The other David,

No they do not contradict each other. Unlike the US Canadian banks are carrying the mortgages on their balance sheets. Our strict banking regulations require that they have a government set loan to capital reserve ratio. So their loans are OK (CMHC insured) but they just don’t have any more cash to loan out. They are still making profits and deposits are safe. The problem is their is a demand for more loans. If the government swaps cash for these good loans the banks now have more money to lend and the the credit crunch eases. The government will undoubtedly make money on the loans they received and so the taxpayer gets a net benefit.

#37 brazer on 10.10.08 at 1:01 pm

New buying strategies for a new economy

It seems a sure sign of a chill in the real estate market when even the bullies figure they can undercut the asking price for a house.

That’s what happened last Monday. Just as stock markets in Toronto and New York were melting down, agent Sally Moore of Chestnut Park Real Estate Ltd. was negotiating with two buyers who were competing for her client’s large and stately home on Balmoral.

#38 lgre on 10.10.08 at 1:41 pm

Can someone explain this to REIN members? as they think that Alberta real estate can only keep going up as the FUNDEMENTALS are all inline?and its ok to be in a $400/monthly negative cashflow on your investment property. I guess Don Campbell did a real good job brainwashing some of these poor souls. It boggles my mind how some people can be that stupid..WOW.

#39 The Other David on 10.10.08 at 2:33 pm

Harper said the banks do not need help, then why does the govt need to buy out loans(good or bad is irrelevant), isnt buying up these mortgages “help”?

#40 Dropper on 10.10.08 at 3:02 pm

Li Hang,

Nice try. That employment report you submitted doesn’t show that of the 100,000+ jobs that were created only 10,000 were full-time. Less than 10%. Woo hoo, fantastic. Those 90,000 part-time jobs sure will prop up the RE industry.

#41 Mike.Slob. on 10.10.08 at 4:51 pm

You make me sick…..
You should know that milions homeowners are suffering in US, and UK,Spain,Ireland, etc.
Milions homeowners can’t get the purchasing price from 2004. And for example in village Milton in 2006/Jan you could buy detach house about 2,700 sqf with Hardwood,fire place,double garrage,and much more. Today for 380K you can get just semi abuot 1,750 sqft.

So do think about very cheap detached in Brampton, in Area simmilar as Jane/Finch:

#42 AM on 10.10.08 at 5:19 pm

“Harper said the banks do not need help, then why does the govt need to buy out loans(good or bad is irrelevant), isnt buying up these mortgages “help”?”

This is typical of Harper’s arrogance. He honestly believes the typical Canadian is plain stupid and we should all believe everything he says. Boggles my mind that there are enough dull knives out there to keep him in politics.

#43 $fromA$ia on 10.10.08 at 5:42 pm

Ca$h will be hard to come buy with all these 30-40 year morgages out there.

#44 jo on 10.10.08 at 7:35 pm

To quote the great Canadian philosopher, David Clayton Thomas: “What goes up, must come down”

#45 Brittanny on 10.10.08 at 8:21 pm

Why is Intrawest developing residential property in Kelowna? I thought they were in the resort business…………..Whistler, Mt Tremblant etc.

#46 kc on 10.10.08 at 8:53 pm

I am a bit lost here…. $25B today…. however, didn’t the feds also open up a $20B earlier this week or friday last week? If so my grade 2 math says that $25 B + $20B = $45B…. what gives???? is it 25 or 45?

#47 kc on 10.10.08 at 9:10 pm

One other question…. 25 Billion and CIBC is in trouble for 25Billion…. is there any way that this is a one time buyout rescue of CIBC?

full article financial post

The deal also does not address a separate portfolio of about $25-billion in CIBC credit exposures that are a source of concern for some analysts who fear further mark downs and question the reliabilitty of financial guarantors who insure these positions.

“In concluding that additional insurance in the form of the Cerberus transaction was desirable, management has in our view reflected a loss of confidence in the ultimate claims-paying ability of its first-level monoline insurer coverage,” said Brad Smith of Blackmont Capital.

Mr. McCaughey stressed the underlying credit quality was much higher in this largely illiquid pool of $25-billion of assets than its mortgage exposures, meaning the risks of ultimate losses was much lower. Controversially, the chief executive waded into a politically charged debate over accounting rules, saying a proposed loosening of controls by authorities “may have positive impact on our portfolio across the board”.

#48 Kash is King on 10.10.08 at 9:11 pm

Ah OK, so it looks like Italian PM Berlusconi lets it slip that we may be facing a suspension of stock markets come Monday???

#49 yyc doomer on 10.10.08 at 9:15 pm

Love the blog.

get this out to the LEFT, I think smart voting can really make a difference next Tuesday for the Canadian Election.

This site helps us not split the vote – they have endorsed Garth in his riding.

I’m screwed in Calgary but the rest of you can make a big difference.

#50 cynically inclined on 10.10.08 at 9:35 pm

Li Hang and his statistics;
must be another real estate agent…
post elsewhere please…

#51 kc on 10.10.08 at 9:47 pm

Just wondering one other thing…. how many people in this blog that write in here were in the workforce during the 80’s? and how many of you think that the (gloom) that is everywhere today (radio, tv…) can get worse than it was during the 80’s? I know this is a housing blog, however, it is still very reminiscent of 25 years ago. housing crashed (from over values) high interest rates, and you couldn’t buy a job…. Why do I feel as we have been here before, however, I feel STRONGLY that this time around it is going to be DOUBLE the pain of the 80’s…. any one agree?

#52 dd on 10.10.08 at 10:17 pm

Seems like the market is giving up ground to pre credit bubble days. TSX almost at 50% loss? Wonder if houses will do the same? Probably not … people have to live. However the spec investors will lose their shirts.

#53 rant in Calgary on 10.10.08 at 11:51 pm

Kelowna correction 70%? Still not enough!

We visit Kelowna every summer to mooch off Grandma for a couple of weeks. Last summer will be the last. Having a couple of kids (under five) and wanting to have a pseudo holiday, we tried to find vacation stuff to do. Almost all age appropriate tourist things are now gone. Old McDonald’s farm and like theme parks are now condos and drug stores. The downtown beach is o.k. as long as you dodge the junkies, and find a parking spot. Power boats, golf, fruit and wine tours don’t impress five year olds very much, so off to the mall we go. There we are greeted by cranky seniors who don’t want people coming in ruining their town.

Thanks for the invite Grandma, but why don’t you come visit us again…Kelowna doesn’t like families.

#54 Peter on 10.11.08 at 12:02 am

Li Hang should be a conservative…because he seems to be a typical guy who listens to the SPIN on TV and newspaper…Li Hang must be having alot of GREAT $$$$ from somewhere in Asia and do not need to worry about his house decline 15% or 20 %… Li Hang is also a typical guy that we can see around our coffee shop that keeps saying ” Our home prices are still growing and should not be going down !!!”…or ” Our housing market is healthier than anywhere in the world and we got a strong leadership from Harper and they will help us if we hits the fan..!!!”

#55 Ontariohouse on 10.11.08 at 12:14 am

I dont have a clue what you’re trying to say. You tend to go in all directions. If you believe that prices are still going to go up (despite the statistics pointing other wise) then I suggest you go out this weekend and buy yourself a house. You have so much proof that real estate is starting to go down the toilet yet you still say that prices will be going up forever. Your understanding of the housing market is weak. Your house is only worth what someone is willing to pay for it. You can ask for a million dollars, but it doesnt mean that somebody is going to pay it. LISTING price is not the same as ACTUAL price received. Stop looking at the past (the boom years), look at whats happening in the present. Look towards the future.

#56 Peter on 10.11.08 at 12:23 am

but Li Hang does not understand 1) A couple working PART TIME wont be able to make ends meet by upholding 1) Mortgage… 2) Property Tax … 3) Car Leases … 4) Energy cost and etc..The other thing they can afford are 1) Rent – because it makes sense when the couple knows how much they will be paying exactly a month and they can move to another place if they want …2) Cost of Food – is much higher than before and some people has go to the food bank for their food needs..
Also, a part-timer also includes someone who already retired (over 55 or 65) that they need to work in your local store to get more income…A big ad on shown on my neighbourhood can-tire, wal-mart, drug mart said “SENIORS ? OVER 55 ? , WE ARE HIRING PT TIME, APPLY WITHIN !” what you those numbers (97,000) part-timers may consist a lot of golden-age man and woman…
On last Wednesday’s Markham Economist and Sun, there was a research publish by York Region and it shows that there is over 11.5 % of people living under poverty lines and food bank usage increases yoy, many people living in York Region has NOT been benefited from this uprise in housing price but are severely waiting for “Affordable Community Housing”…I dont have the numbers for TO but I believe all those would be on a higher %tage..All I know is our rich and poor GAP has been spreading higher and higher…

#57 POL-CAN on 10.11.08 at 12:34 am

#49 dd

Would it be so bad if housing prices returned to the 2000 or 2001 levels?

I purchased my first 1 year old detached house on a 40 foot lot in Garth’s riding in 2001 for 204 K. Sold it in 2004 for 275 K after fencing, driveway, and finishing the basement. In 2007 the same house would have sold for around 400 K.

If the average household income is around 70 K and housing should be 3x, logic dictates that the average house price should be around 210 K.

We have a long way down :)

#58 POL-CAN on 10.11.08 at 12:44 am


What stage are we at? Anxiety, denial, or fear?

I think the USA housing market is at the desparation or panic stage, which means that the bottom is still a ways off…..

#59 Patsan on 10.11.08 at 1:58 am

Referring to brazer’s link in #34.
Mr. van der Wyst of Royal LePage Real Estate Services Ltd. says “Interviewing new buyers and sellers, the question of the economy comes up every single time.”
Methinks that it’s an upside-down world. Should not new buyers and sellers be interviewing agents?

#60 JC on 10.11.08 at 5:07 am

One of the greatest investors of the 20th Century, John Templeton, predicted in 2004 that real estate would lose 90% of its gains. Kelowna looks to be well on its way there, with Vancouver to follow.

#61 cm on 10.11.08 at 9:42 am

“Li Hang”??:

#62 David on 10.11.08 at 11:33 am

Am amazing story by Rene. A 70-85 percent correction sounds perfectly in order.
A local economy based on real estate trading sounds fake. A city where people make their real life occupations doing each others laundry and a shadow virtual economy based on escalating real estate prices.
Anyone remember the movie Really Weird tales with John Candy and Joe Flaherty. John Candy arrives from another planet and begins preaching the gospel of real estate prosperity in an economically depressed community, which subsequently experiences a real estate bubble. It is quite hilarious. In the end the bubble breaks and the character that Candy plays Xarxon is charged with practising interplanetary real estate without a license. Sounds like lots of Xarxon’s in Kelowna.

#63 Pedro on 10.11.08 at 11:52 am

#13 y3maxx on 10.10.08 at 12:11 am

Do you seriously believe everything you read in the papers and hear on the nightly news?

Do a little more research and you’ll quickly realize that Vancouver will also be hit hard – and, probably even more so than most cities in Canada as the housing market there is grossly overpriced. Stop believing that the Olympic games will be the saviour – it hasn’t been that way for ANY city that held Olympics. The same applies for Victoria and the whole of Vancouver Island.

As well, yes, our current demographics will certainly apply. When someone’s around 65/70 years old and still have to take care of their monster size houses, they will quickly ‘bolt’ and try to downgrade. But, downgrading in this type of market/economy will certainly make it most difficult to even gain a few dollars. Hard times coming up for sure!

#64 wealthy renter on 10.11.08 at 12:13 pm

dd and Pol-Can

Would it be so bad if housing prices returned to the 2000 or 2001 levels?

It seems like all media these days is focused on the entire credit/bank crisis (for lack of a better term.) It appears like all of the “roundtable experts,” pundits and politicians all espouse “fixes” that will stop the decline of housing values, and perhaps increase them in the near term.

I have heard very few “experts” advocate that prices should return to pre-bubble levels. I am sure this is not a politically astute thing to say. I would be fairly willing to bet that Garth Turner does not get a lot of high fives and warm hugs when he tells existing homeowners that their home’s value may fall by 25%. He is probably right, but it must be tantamount to political suicide. If were a Gen Xer (I am,) who just inked a deal on a million dollar McMansion (I am not,) I would drawing little devil beards on his campaign signs. :)

I guess I am greater fool, but the fix doesn’t appear to be rocket science. It starts with allowing houses to fall where the average income earner can afford them. Combine this with modest income tax decreases and policies that motivate saving and investing in productive industry instead of McMansions (maybe some good green technologies,) we would probably be okay in a few years.

#65 lgre on 10.11.08 at 2:03 pm

mike.slob- if you are sick then go see a doctor maybe a neurologist is best. Yes, there are semi’s for $380 but there is also a lot of semis for a lot less. Open your eyes and quit dreaming about granite and marble. This is the attitude that drove house prices to where they are now, first time homebuyers weren’t happy with buying an 1100sqft TH, they had to buy that 2600sqft dbl car..just like what you want.

#66 GenXer on 10.11.08 at 2:26 pm

The more I research mortgage rate predictions, the more worried I get.

I agree with everyone here – suddenly homes in my area of the GTA are starting to sell again. People are taking on big mortgages and getting in on variable rates as the government drops them again.

But the spread between variable and fixed rate mortgages continues to climb across the board.

Yesterday the prime-BA spread (a rough indicator of lenders’ variable-rate margins) was 1.25%. That’s exceedingly low by historical standards. Had banks followed the Bank of Canada today and lowered prime by 1/2%, the prime-BA spread would have shrunk another 12% to 1.10. Don’t cry too hard, but some banks would be making little, if any, money at a 1.10 spread. In some cases, lenders are eliminating variable-rate mortgages altogether. Yesterday, Macquarie Financial was the latest lender to halt them.

Now think about the fact that we have only seen part of the financial mess yet to come out of the US. This week, we’re going to see the fallout from credit default swaps from Lehman – pulling billions of dollars of liquidity back out of the markets. After Christmas, we can expect to see credit card defaults begin to rise, causing a second round of credit shortages on the market. This time, the US will be at almost zero interest rate with no real money left to inject into the markets.

Worst case scenario – oil turns around and starts to rise again (don’t forget the limited supply side of the price equation, including lots of instability remaining in the middle east).

Oil Increase + Bailouts + Credit Crunch + Pull out of Iraq = Lending Rate Increases

We are starting to see a rapid decoupling of lending and interest rates. Central banks are losing their ability to influence bank lending rates because their is a lack of credit.

Sure, it might take 1-2 years to happen, but home owners highly leveraged on variable rates will be hit hard in this scenario. I think the recent $45B injected into Canadian institutions is only increasing the height of the housing roller coaster before it starts its rapid descent.

#67 David Dodge on 10.11.08 at 2:36 pm

Headline: “Toronto Stock Exchange loses over 33% of its value this year”

If you bought a house in Calgary on dec 31, 2007 for $400,000 it would now be worth $401,000.

If you bought $400,000 of stocks on the TSX, they would now be worth $267,000.

#68 Shifty on 10.11.08 at 2:56 pm

I was in the 80’s mess. Among all the lost opportunities which included savings evaporating, RRSP’s collapsing, companies shrinking and fear of loosing my job, I will always remember a real estate friend showing me a house in Victoria. This place was beautiful, had a winding stair case to the upper level, large living room with bay windows,double garage and in a great area. The house was vacant, the owner had to leave town to escape creditors. My real estate friend said I could have the place for $90,000 and possibly less, I was afraid in those days to purchase even at that price. The place sold last year for $1.2 million.

#69 dd on 10.11.08 at 3:04 pm

#61 wealthy renter,

Yes … housing has to fall as well as other assets. Cheap credit makes assets expensive. Why not borrow cheap when you asset is increasing in value? However how do you service the debt? Through income or capital gains?

Valuation again will be based on the tried and true. How much income can I make from the asset? That is why companies that have solid business models that pay a dividend are not back in stlye.

#70 dd on 10.11.08 at 3:05 pm

#61 wealthy renter,

Yes … housing has to fall as well as other assets. Cheap credit makes assets expensive. Why not borrow cheap when your asset is increasing in value? However how do you service the debt? Through income or capital gains?

Valuation again will be based on the tried and true. How much income can I make from the asset? That is why companies that have solid business models that pay a dividend are now back in stlye.

#71 confused and a little crazed on 10.11.08 at 4:43 pm

Hey KC #48

I was in elementary school durring the 80’s…so I don’t know the pain. But I do remember the 90’s around 94-95 after unversity…it was hard to get a full time job. In a span 0f 2 years +/- months I had 3 contract jobs. Once the contract was over I had to look again. I don’t have to tell you how many jobs I had to apply for. At that time, I was looking for Science/ finance jobs. It was tough. But judging by this blog the 80’s were worse. I don’t want to go thru the 90’s aagain. But I am happy for this blog and other s like it.A few of my uncles told me about the 90′ s and eighties and they tell me the same group mind think then aand now.the most popular’

” IT’s Different now!!!” Even they were starting to believe it …the prices in 06-07 kept getting higher and higher. The math no longer maade sense. Buy vs rent??? When retail clerks and pub waitresses give you their realtor business cards…it not a good time to buy

#72 dd on 10.11.08 at 9:05 pm

#54 POL-CAN,

Yes housing will align with 3x salary in most cities. However it just depends on the city to the adjustment in prices. Take Victoria, salaries are about $80k on average but house prices will not come down to $240K. West Coaster pay a “Sunshine Tax” … people are going to pay more to live there no matter what. Futhermore with the land zone restriction in place since 1972 (agr land reserve) prices will stay higher that the rest of Canada.

#73 Jen on 10.11.08 at 9:46 pm

Ok. I am sick and tired of finding out almost each and every week that some new food product is contaminated. This is absolute crap! In my entire being, I can not recall another time when I feared feeding my family. Now, it is No Name Flour. Although it contains excessively high levels of folic acid, iron, niacin, riboflavin and thiamine which mainly causes intestinal discomfort, it still is another sign that our FOOD is not being inspected and controlled properly. What is going on?

#74 Charles on 10.11.08 at 10:43 pm

It seems like it was just yesterday that our economy had been deemed as “booming”. The news headlines said our unemployment rate was at a 30 plus year low. House prices were going sky high, and stock markets generally were doing good. Governments were running surplus budgets. People were spending money on everything under the sun like there was no tomorrow. Most people were partying like it was 1999. They were dancing on the table tops, drinking their favorite beverages with lamp shades on their heads and singing “We are in a new era of never ending prosperity”. Most people were having a grand old time. These people forgot one thing though, that the boom times they were experiencing were solely as a result of more and more credit/debt being injected into the economy.

How quickly things change. Our historic world wide credit/debt bubble finally burst in the summer of 2007, and now we have a historic worldwide credit crunch which is very bad news for asset prices and economies. With house prices, stock prices, and economies beginning their decent into the unknown, I think most people have been shocked into the realization, that as a nation we have not been smart with money. We have been living beyond our means for a long, long time.and our “high on the hog” standard of living was a big lie. We are in deep financial doo doo. It is not only the staggering amount of government, corporate, and consumer debt in this country that is the problem, but we also have massive unfunded liabilities in Medicare, the Canada Pension Plan, Old Age Security, Guaranteed Income Supplement, and infrastructure upkeep and replacement costs for things like sewer and water systems, roads and bridges, electrical infrastructure, etc. at a time when the leading edge of our huge(approximately 8 to 9 million strong) baby boom generation is turning 61 years old.

It seems to me the crux of the problem is that when our forefathers (and foremothers) created the financial system that most economies in the world (including Canada) now use (ie: central banking and fractional reserve banking) they were not thinking of the long term, they were only thinking of “what is good for us right now, and let future generations fend for themselves”. (Presently we are doing the same thing by pumping more debt into a worldwide financial system which is already too much in debt and over leveraged in a desperate attempt to keep the present system going a little bit longer).

This fiat currency monetary system which was set up in the past simply was not sustainable over the long term. It is a ponzi scheme which is dependent upon more and more debt (which is created out of thin air) constantly being injected into the economy. There has been a wild increase in the m3 money supply in Canada and the USA (and in most other countries in the world) in recent years and decades.

The following paragraph is a quote taken from a series of articles written by Peter Ewart. I took several quotes from this excellent series of articles and posted them on this site on August 22, 2008. The following is the link to this post. It is post # 4. I encourage everyone to read this post.

Post # 4, Aug. 22, 2008

“Today, there is only one way to describe the amount of debt in the world – absolutely frightening. Future generations will look back in amazement at the herds of politicians, bankers, corporate leaders and establishment economists who have refused to address or even acknowledge the extent of the problem, and who, in fact, have contributed greatly to it. Like Nero, they have their fiddles. And, yes, while Rome burns, they play, and play, and play.”

Our overwhelming debt problems are due to three groups of people’s actions, irresponsible borrowers, irresponsible lenders, and the financial regulators/the Bank of Canada/elected politicians who were at the helm of the good ship Canada in recent decades that chose not to step in and stop this wild infusion of debt into our economy.

Garth, while I disagree with your choice of political parties (I am voting Conservative) I have a lot of respect for you for speaking out (the truth) about our very serious economic problems. There is no doubt in my mind you will win your riding in this upcoming election.

When you get to Ottawa could you please try and get some serious discussion going about our economic problems, and suggest to your fellow M.P.’s something along the following line:

As a nation for a long time (many decades) we have had a complete lack of respect for money and as a result have dug ourselves into a very deep hole. It is time to develop policies to get us out of this hole. It would be irresponsible for us to dig this hole even deeper (and thus pass the problem off to future Canadians to deal with) by pumping even more debt (by bailouts) into a financial system which is already too much in debt and over leveraged in a desperate attempt to keep the present system going a little bit longer. I think we owe it to future Canadians to get our country back on the right track and set up an economic system which is sustainable over the long term. This is going to result in a lot of pain for us, but I think it is the responsible and right thing to do.

#75 POL-CAN on 10.11.08 at 10:55 pm

#70 dd

I lived in Vancouver for a year in 84-85… Let me tell you that the climate is worth the premium but there have to be limits :)

As for the sunshine tax….. I think we get more sunshine in Ontario then they do in Vancouver as all I remember is rain, rain, and more raid lol

#76 Jeff on 10.11.08 at 11:08 pm

“Sunshine Tax”
Really??? How about a rain discount?

#77 hal on 10.11.08 at 11:08 pm

Bert#69 : You’re full of it. Rene is right. Kelowna is tanking.

#78 dd on 10.12.08 at 1:32 am

69 Bert Chapman ,

Good points. It is great to see a difference of opinion.

#79 anonymous on 10.12.08 at 1:43 am

Interesting to read about BC… greatest fools.

I’ve just downgraded Alberta to outright BUST! I knew that we were going to see a retracement of 50-60% in house prices, but the economy was still truckin’ along at the time. But things are slowing, projects are being halted and commodites busted.

It’s going to be as bad as it was in the 80’s. No doubt.

Oil’s in freefall and NatGas is dead money. The loonie is dropping and that will have positive affects on Ontario. Credit is tight, and banks are starting to slow lending to natural resource companies here.

It’s over. Pack your bags and get the hell out now of Alberta while you can.

I made a ton of money in the market on Friday in US financials (+13%), it’s nice to see that even with the shitkicking the bulls took all week, they still have life. Just like a Rocky movie.

Monday or Tuesday will be the bottom for the DOW.

#80 dd on 10.12.08 at 1:44 am

72 Charles,
Anyone that thinks fiat money is not sustainable over the long term is in trouble. Charles what assets are you holding? Don’t tell me it is the Cdn buck. Hopefully you have all your wealth in hard assets.

Canada is getting serious about money. What do you think this nation has been doing since the mid 90s? We have paid dearly for paying down our debts. This nation has a long way to go but at least we have been doing something. BC and now Sask is paying down debt .

Thank everyone in Canada, the liberals and Conversative, the workers, and the NDP. Yes we are going into a recession … the whole world this … but we are better off than most and better off than the past.

#81 womp on 10.12.08 at 1:47 am

LOL @ Bert. If Rene is Chicken Little, you’re Ostrich McGee. Let us know when you bring your head up out of the sand!

It’s funny… you sound exactly like Tony Joe. Do all Realty board chairpersons go through some kind of course on how to spew slippery/brainwashing context to their customers?

#82 POL-CAN on 10.12.08 at 1:56 am

# 72 Charles

Great post. Glad you have thought things through.

There are many of us that are true fiscal conservatives, it pains me to say that we no longer have a political party that is true to that simple theme…..

Why is it so hard to understand that if we have to live within our means (budgets) we should have a government that does so as well?

#83 anonymous on 10.12.08 at 1:58 am

There has been a big push in the past month or so… relax, it’s just the last of the 0/40er’s getting in while they can. Nice, ignorant, young families getting theirs because they can get low payments. I really can’t feel sorry for them at this point. Just greedy, stupid people that’s all.

After October is done, the housing market is going to literally freeze up. No sales, no buyers. Deep-freeze city, baby.

Just watch.

Because of this I forbid you all from buying a house for at least two years.

#84 JC on 10.12.08 at 2:11 am

Headline: “Toronto Stock Exchange loses over 33% of its value this year”

If you bought a house in Calgary on dec 31, 2007 for $400,000 it would now be worth $401,000.

If you bought $400,000 of stocks on the TSX, they would now be worth $267,000.

Wrong — If you bought December 2007 in Calgary for $400,000 that house today is $370,000, at best. I know several REALTORS in Calgary who are already moonlighting.

And Bert Chapman — you are the very kind of person whose lies and distortions and blind sales propaganda were as so much kerosene on the inflationary bonfire of the Boomers’ vanities. You are whistling past the graveyard. You don’t even rate as a decent propagandist. Hope you can sleep with yourself after having been a two-bit apologist for the most sweeping, dishonest and destructive credit abuse in North American history. You are a clown. Be wary of peasants with pitchforks and torches, amigo.

#85 David on 10.12.08 at 3:17 am

Bert Chapman. You not only represent insolvent home debtors, you represent a bankrupt set of ideas. Kelowna is exceptional and the rules of fundamentals no longer apply. Did it ever occur to you that many Russian and Swedish bus drivers actually OWN fully paid off first homes and summer homes?? Wealth transfer is not the same as wealth creation. You have the two mixed up.
Enjoy your well deserved crash Bert!! By the way Stephen Harper is toast on Tuesday!

#86 Kash is King on 10.12.08 at 6:40 am

With the recently annouced bailout of Canadian Subprimes, I have to stop and wonder. How much creative financing might have been used to “top up” a persons down payment, to put that down payment above the CMHC’s 20% rule?

Namely, how many homeowers used other instruments, such as HELOCs on other owned properties, to “create” a 20% down payment…. and buy outside of the sphere of the CMHC ? And how eager were banks to be an enabler for this?

Perhaps banks then insured these “private risks” thru private mortgage insurers such as AIG? Since AIG at the time appeared to be a fitting tool.

Maybe this exposure is what has Canadian banks crapping their pants, since these “subprimes” are off CMHC’s radar, not insured thru CMHC…. and possibly insured thru AIG.
Don’t forget how impotant it was for the Mortgage Clerk(I am deliberately not using the term Officer or Underwriter) to win their bonus for signing the debtor.

Think of the domino effect of these subprimes going underwater! Depending on how much of this stuff was encouraged/tolerated at the various banks… the effects could be devastating. I think they know they are all guilty of these sins, and that’s why they are afraid to lend to each other.

Wonder how many of these subprime homeowers then took HELOCS against their new property when it had appreciated?
You know…they HAD to have a new big screen, new furniture, new SUV… no wait… that could be leased for near zero thru GMAC. Look where GM is now.

Maybe banks need to look at going back to having Loans Officers on SALARY ONLY with no signing bonuses, or other commissions for signing new loans , and for them to have the banks risk exposure first and formost in their minds.

#87 Kash is King on 10.12.08 at 6:44 am


#88 cmh on 10.12.08 at 10:32 am

Word on the street in Kelowna is that prices are dropping and the real estate industry there is slowing down.
I’m from B.C. and hearing lots about Kelowna these days and it’s not good.
Garth has written another book entitled 2015 After The Boom How to Propser Through The Coming Retirement Crisis. It’s excellent – I read it on a flight from Vancouver to Hong Kong about 12 years ago – it then made for great conversation with some people from Melbourne – no sleep for us on that flight!

#89 dd on 10.12.08 at 11:01 am

77 anonymous,

BS … It is over for Alberta? HA. Where else do you move to? Ontario? BC? East coast? Alberta is debt free remember! Natural gas and oil … the world is burning it all the time and it has to be replaced. If there is a cut back in oil and gas spending now it will only add to the pressure to spend tomorrow. Most of the projects will keep going because the world will no see $50 oil in five years … more like $150.00.

#90 Rasputin on 10.12.08 at 11:13 am

Post #77.
I agree, Alberta is going splat and comparing this to the 80’s bust is valid in my opinion. When I moved to Calgary one of the things I noticed is that no one is FROM here. There is no sense of Calgary being home. Mentally, many people are half way back to Saskatckewan or Ontario. The Newfies started leaving a few years ago. (I miss my Newfie friends. They are the nicest people on earth). This town is full of laptop toting spreadsheet jockey mercenaries who are going to be left out in the cold when projects get cancelled, which they are in droves. It all adds up to a LOT of houses about to go on sale in Alberta.

#91 y3maxx on 10.12.08 at 11:27 am


It is about infrastructure spending, and Vanouver is in the middle of a major infrastructure boom.

For those of you who have never heard of Nouriel Roubini…well…he should be Hank Paulsons replacement.

If you don’t know who Hank Paulson is…well…you shouldn’t even be on this blog site.

#92 macchiato on 10.12.08 at 11:36 am

Bert Chapman is delusion. I think he actually believes what he is saying. He clearly does not comprehend the magnitude of the events unfolding and he is beyond ridiculous for publicly saying such nonsense *during* RE and global financial market implosion. Moreover, in light of current events, he has the gall to use the term ‘chicken little’. Bert Chapman is this weekend’s turkey, gooble, gooble.

#93 René Kabis on 10.12.08 at 12:04 pm

Re: Bert Chapman

Yo, Mr. I-Rely-On-Rising-RE-Prices-To-Sustain-My-Lifestyle, SO WHAT if I had listed my unit? Simply story is, I had gotten married in ’06, and my other half was a “nester”. Renting would NOT have garnered a “yes” at the alter, even though I could see this clusterfrack coming from way back in 2004.

With the sudden change in conditions Spring of this year, my other half finally realized I was right all along (hindsight is 20/20), and we decided to make an *attempt* to sell. Nothing more, just an attempt. So what if we didn’t sell? We don’t care. We were planning on holding our unit for more than 15 to 20 years anyhow, which should allow us to ride out the worst of the downturn.

My point with the article is that these “5 Housing Fundamentals” that you so disparage are very real, very relevant and still in effect — they have just been temporarily overwhelmed by easy credit. They have been in effect for the last 100 years, and will still be in effect for the next 100 (or until we have a Star Trek utopia where money has no place).

And these 5 Housing Fundamentals – when combined with the average Net wage of a Kelowna family, show that our current market prices for housing are overvalued by at least 70%.

And you can take that to the bank.

Housing WILL come down, either by real dollar drops in its value; or by massive, runaway inflation that has gas at $10/gallon and minimum wage at $30/hr.. There is no other choice. We have here a city where people actually have to work, live and raise a family — this is not a “resort community” like Whistler or Big White, where prices can be quite comfortably disconnected from reality.

Oh, and your “wave of retirees”? GOOD LUCK. Many of them, if not most of them, are feeling decidedly poorer these days, with up to 50% of their retirement income wiped away, evaporated and plain just deleted (the stock market). This “wave of retirees” simply won’t happen within the next decade, because it no longer CAN happen… what will they retire on, when the stock markets (and therefore, their savings) have dropped by close to 50% already, and are showing all signs of possibly dropping another 30%? The value of their homes, which will drop between 50% and 70% depending on what community they live in?

Yeah, right. Dream on.

No, Sir. It is YOU who are greatly deluded by recent performance, rose-tinted glasses and simple inability to see the writing on the wall. We are in the middle of the greatest deleveraging and evaporation of wealth in human history. With all the points I made in my article, I believe I have made my point as to just how much Kelowna will suffer.

Of course, there IS the question of WHY I wrote that article… it is not for the perma-bulls that only believe that housing can only ever go up, up, up. They would never believe me, no matter what “evidence” is beaten over their heads; only the hard truth of reality can do that. It is not for the people who speculate, flip and try to profit from rising housing prices by buying places they don’t even live in and remain unrented; in fact, I sincerely hope they loose their shirts… they have been a very integral part of the PROBLEM of affordable housing.

Rather, I have written this article (and posted elsewhere on the same subject) for those average Joes that might be THINKING about buying a home, but who have a chance to be warned away from doing so. I have written at length on this subject so that those people who can be spared severe financial distress down the road have the information from the other side of the coin to balance out the (almost criminal) spin put out by the RE industry.

To put it bluntly, I am trying to save Joe and Jane Taxpayer – who are currently renting but are thinking of buying – from making a mistake that they will regret for decades to come. Prices WILL come down. Dramatically. If this is to be a viable town with anyone under the age of 60 living in it, there simply isn’t any other choice.

70% MINIMUM. Either through raw dollar values, or by runaway inflation that guts the value of our dollar. And you can take THAT to the bank.

#94 Rasputin on 10.12.08 at 12:19 pm

More news…it’s looking like every bank in the g7 will be nationalized this week. Possibly by the end of today. This has gone non linear in a big way. Real Estate and federal elections are about to get blown right off the front pages.

#95 CalgaryRocks on 10.12.08 at 1:06 pm

Namely, how many homeowers used other instruments, such as HELOCs on other owned properties, to “create” a 20% down payment….

Last time I checked you can only get up to 70% of your equity on a HELOC so I don’t know what exactly you are refering too. You have a source from these numbers?

#96 womp on 10.12.08 at 2:17 pm

Anonymous #81:

I disagree that young homebuyers are “greedy”. There may be some that are like that. But on average, what you describe is not true. Imagine you’re a young FTB with a baby on the way, and everyone you talk to is saying “buy now or be priced out forever”, “real estate only goes up”, “it’s the best investment you’ll ever make”, and continually assuring you of what a safe investment it is. The only scenario you can imagine is house prices rising out of reach.

Every “professional” you talk to is finely tuned to put you in the mindset of “we have to buy now”. I don’t think greed plays very much part of the average homebuyer’s decisions. In fact, the greed mostly lies with Realtors like Bert Chapman and the bankers that were falling over themselves to maximize this family’s debt.

Sure, they probably couldn’t afford to buy. But with all the “professional” help our hypothetical family was getting, their perspective was that they couldn’t afford not to.

#97 GeorgeinUK on 10.12.08 at 4:16 pm

Hopefully this economic downturn will have a significant upside… Maybe it will lead to more sensible consuming and spending – no more buying a new ipod or laptop every year just because it’s the latest thing. Maybe, people will actually work for a living – none of this retiring at 50/40/30 any more or sitting dreaming of that Internet business that will make them millions instead of getting an honest day’s work done for an honest day’s wage. Maybe people will stop putting themselves in debt to study a worthless general arts or social sciences degree and instead start working sooner or at least study something that gives them actual skills. Maybe teenagers will stop expecting a car for their 18th b’day and they won’t be so fat and spoilt. Maybe people will realise that a Starbucks opposite a Starbucks is a little excessive.

We are all learning a valuable lesson right now. Mr Macawber put it best in ‘David Copperfield’: “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

#98 dd on 10.12.08 at 4:30 pm

#88 Rasputin,

If Alberta is going to canel all the outstanding contracts … I would hate to see what the rest of Canada will cancel. We all know oil and gas prices are going to go up. The globe uses most of the production the world pushes out and the decline rates are increasing.

Thank God we don’t have a lot of short term thinkers running O & G projects like you. Costs and exchange rates are coming down big time so it will cushion the downward movement in commodity prices. It takes about 5 years just to plan and built these mega projects. You think energy will be cheaper in five years? Will it be cheaper when 50 million people in Asia are entering the middle class? Will it be cheaper when there are 50 million more cars on the road in 5 years?

You want proof that things are worked out in Alberta? ZERO DEBT FOR ALBERTA!

House prices are coming down … great. Soon families will be able to afford to buy.

Hear that? Oh you are driving your car again. What? You need heat for the home? Alberta will give you some energy. CA CHING. CA CHING

#99 dd on 10.12.08 at 4:51 pm

#88 Rasputin

The U.N. expects world population to rise 40% to 9.2 billion by 2050. Guess what? Where is the energy going to come from to feed a world 1/3 more size than today?

#100 rant in Calgary on 10.12.08 at 4:52 pm

David Dodge,

If the TSX fell that far, that is a good indication of what real estate will do. Wait til the portfolio statements start arriving.

#101 Rick on 10.12.08 at 6:15 pm

#91 René Kabis on 10.12.08 at 12:04 pm Re: Bert Chapman
……..the (almost criminal) spin put out by the RE industry………
It *IS* criminal. Realturds are deserved of an unprecedented amount of putrid discust by the general populus.

#102 dboy on 10.12.08 at 7:03 pm

I’m very curious about the 25 billion mortgage purchase. This is oddly timed. Is this a preemptive bailout? Is there something that we are not being told? Mr. Flaherty and Mr. Harper both say its not a bailout, but rather an asset swap.

#103 Rasputin on 10.12.08 at 11:15 pm

DD your arguements are quaint but not based in current reality. Projects are getting cancelled. Oil is NOT $200. It is $80 on it’s way to $50 or lower. The world is in the middle of a deflationary credit collapse. Heard of a little company called Encana? The one with the billion dollar hole in the middle of Calgary? They just got turned down for a loan to fund their company split. It’s going to be spun as “we want to remain large to prevent a hostile takeover.” Alberta has many fine qualities. That won’t prevent it from coming back to earth with a thud. BTW I have been called many things but short term thinker is not one of them. It’s even funnier considering what I do for a living. We are all entitled to our opinions but you are batting WAY out of your league here.

#104 Rasputin on 10.12.08 at 11:30 pm

re: “The U.N. expects world population to rise 40% to 9.2 billion by 2050. Guess what? Where is the energy going to come from to feed a world 1/3 more size than today?”

The UN is full of Commie one world government types with strange ideas. We are at peak oil, peak food, and peak credit. World population is far more likely to be 90% less than it is now rather than 1/3 more. I hate to break this to you but all those Asians are never going to see our version of middle class. But we are sure going to see their version of it. 50 million more cars? Never going to happen. Oil is dwindling. At some point the people who run the show on this little rock are going to decide oil is too important for the common man to just burn up. Oil = military power. That’s already being discussed at certain levels. The real game is not what you see on the news.

#105 anonymous on 10.13.08 at 2:00 am


Ok, so young families are stupid and/or ignorant as oppose to “greedy”. Same result two years from now. Bankruptcy. I don’t take any joy in this, but I don’t feel sorry for them either. It’s nothing personal. I don’t care WHY they are buying 0/40’s right now, but they are. In any case, it won’t end well for them.


you are a clown-prince. I see you bought into the whole oil-at-any-price bullshit argument. Massive liquidations in the energy/commodity space and you think Alberta’s ok because we are debt-free? What does the debt level have to do with the economy. Nothing.

Hey man, be my guest… but I warn you, if you buy a house, start a business (besides repo/auction) or invest in any Alberta-based company you will lose massive amounts of money. An Alberta bust is 2-3 years away. I can feel the chill in in my bones.

To all:

It looks like the US stock markets may have bottomed. Remember what a bottom feels/looks like, as you will need to spot it when housing bottoms. You should feel like the biggest dope on the planet for buying.

#106 Stephen from Toronto on 10.13.08 at 5:44 am



FINANCIAL NEWS-Thursday Oct 8, 2008

CNN-Lou Dobbs TV show 7pm

Dow Jones Industrial 8519,19 , -678.91
Toronto Stock Exchange 9600.00, -456.00
Nasdaq 1600, -100 points

*2271 points lost in 7 days (20% lost)
*$2.3 trillion lost during week of Sept 6-9, 2008
* Stock Market down 39% from October 8, 2007 when it hit a high of 14,164. It has hit a 12 year low since 1995 and the worst slump since 1973.

*Wilshire 5000 index down 7.4% or $900 billion.
*$8.3 trillion lost over the past year. About $6.8 trillion lost since Jan 1, 2008.

Friday October 10, 2008

Asian Markets

Nikkei-Dow 8276.43, -881 (9.62%drop). Yamato Life insurance Comany filed for Chapter 11 bankruptcy.
Hang Sen 14,796.87, -1146.37
SP/ASX 200 3960.00 -360 (8.84% drop)


FTSE100 3932.06, -381.74 (8.85% drop)
DAX 30 4544.31 -342.69 (7.01% drop)
CAC40 3176.49 -266.21 (7.73% drop)

North America
SP500 down 42% to 909.
Dow Jones Industrial 8451.19, -128 (1.4% drop)
Toronto Stock Exchange 9065.16, -535 (5.52% drop)

Analysis from Patriot radio news hour(All American

*G7 finance ministers meet with President Bush, Secretary of Treasury Hank Poulson and FRB Chairman Ben Bernanke on Saturday to discuss coordinated action.

Commercial Banks borrowed $75 billion/day this week. last week they borrowed $44.5 billion from the Federal Reserve Board (FRB)

On Wed October 8, 2008 commercial banks borrowed a record $98 billion in one day. Investment banks borrowed $134 billion. Hedge funds borrowed $146 billion to cover withdrawals from mutual funds that week.

AIG insurance received $85 billion loan from the US Treasury and the FRB to avoid a default and so far has spent over 80% or $70 billion. On Thursday Oct 9, 2008 they received an additional $37 billion

Monday October 13, 2008

Asia Markets (3:30am EST)

Hang Seng, 15,275.67, +478.80 (up 3.4%)
Australia SP/ASX300, 4160.30, +218
South Korea KRK 100, 2713.63, +90
Taiwan 5020.44, -110

Europe (4:20am EST, 9:20am UK time)

FTSE100 4146.01, +213.95 (up 5.44%)
DAX30 4817.51, +273.20 (up 6.01%)
CAC40 3387.40, +210.91 (up 6.64%)
IBEX 35 (Spain) 9555.70, +558.00 (up 6.2%)
Swiss Mkts 5678.78, +331.56 (up6.7%)
Italy Milan MIB30 21, 954.00, +1374 (up6.0%)
Russia MICEX30 1254.50, +80.79 (up7.0%)


European leaders met this weekend in Paris to discuss financial crisis. The plan has three parts: Guarantee till the end of 2009 bank debt issues with maturities up to 5 years; permission for governments to buy bank shares and recapitalize systematically critical banks.

The plan will be implemented in the original 15 states of the European Economic Union. Approximately $25 trillion dollars of equity have been erased from world markets in 2008. European Banks have lost $228 billion out of $635 billion of subprime loan defaults. Germany is planning a 100 billion Euro bailout plan to recapitalize private banks, state banks and insurance companies.
Portugal is injecting 20 billion Euro ($27 billion) in their banking system. Norway is injecting 55.4 billion of government bonds to exchange for mortgage debt.

A second financial rescue plan will be presented to the 25 member EFTA sometime next week.

London UK-8:30am (3:30am EST)

UK announces 64 billion pound bailout plan for Barclays Bank, HBOS and LLoyd TSB. Royal Bank of Scotland experienced a collapse of their share value and requested help from the British government of an injection of 20 billion pounds ($35 billion dollars). The CEO of the bank resigned. HBOS and Lloyds TSB will try to raise 17 billion pounds. Barclays Bank told the government this morning that it will try to raise 6.5 billion ($13 billion) in the stock market without their help. This will raise their capital ratio to 9%. The British government will not allow cash bonuses to be paid to executives. They will also have the power to appoint directors and set dividends.

World central banks are launching a coordinated effort to stabilize the global capital markets. The European Central Bank, Bank of England, Swiss National Bank and Bank of Japan will be offering unlimited dollar funds.


Lehman Brothers credit default swaps contracts auctioned off at 8.625 cents per share.

Fannie and Freddie ordered by federal regulators to buy up $40 billion dollars of troubled mortgages per month to stabilize the housing markets.

Wells Fargo to sell Wachovia’s investment bank unit. The unit made $131 million this year and made $1.3 billion in profit in 2007. However, fees are down 63% from 2006. The acquisition of Wachovia bosted the banks share price by 3.9% ($1.06) to $28.31. Wachovia’s share also rose 43% ($1.55) to $5.15.
The company value is currently set at $12.2 billion. The takeover deal cost Wells Fargo $11.5 billion and was endorsed by the FDIC when Citicorp ended its takeover bid for the troubled bank.

Intel, Microsoft and other technology companies may lose $170 billion in sales in 2009 due to the credit crunch(

Circut City and Best Buy may file for Chapter 11 bankruptcy this week making Wall Mart the largest electronics retail chain in US.

Analysis of Stock Market Behavior-Friday Oct 10 , 2008

Patriot Radio News hour recorded a show on CNBC, Thursday evening on the fall of the markets near closing.

On the show “Word on The Street” (which was broadcasted at 5 :30pm Joe Terranova of Virtus Investment Partners Chief Alt Strategist, Jeffery Harte, Sandler Oneil and the Fast Money team discuss reactions on the markets.

Main Issues discussed:

The group of analyst are of the view that a cascading crash has occured due to a crisis of confidence in US financial system.

Federal Reserve Board has burned up $1 Trillion of its financial reserves. The FRB needs to buy stock index futures.

Mutual fund withdrawl of $72 billion in the end of September and $50 billion during the first week of October.

There is a run on the equity markets. A rational investor should not sell all their stocks or withdraw their money from the banks.

Mutual funds and hedge funds have to sell their positions to cover margin calls.

There is a lack of trust in the markets. Cheating has occurred because banks and financial institution were leveraging large amounts of money with small pools of capital ($30 billionx30=$900 billion)knowing that they could not cover trillions of risk.

GM stock was under heavy attack as its stock price dropped from $43/share to between $2-4/share. Its access to credit has been pulled. This was part of the reason why the S&P500 fell that day.

US banks are in trouble and some may not exist in the future. Citibank broke off talks with Wachovia(p.s. merger deal actually ended that day.)

The Dow could fall below 8000 points.

Part 5- More Analysis to Come

#107 Kash is King on 10.13.08 at 6:46 am

#93 CalgaryRocks If you notice the wording of what I said, you’ll see “perhaps, maybe,wonder” etc…since I was speculating….. just wondering?

I have seen people create a 20% downpayment for a secondary property, by using a HELOC on their primary residence (IDK if they had 100% ownwership of that?).
CMHC mortgage insurance on a secondary resisdence purchase, on a less than 20% down payment ,is 6% of the purchase price tacked on to the overall pp, vs 1% if you are purchasing the unit as your primary residence with less than 20% down.
I have seen cases where parents lend their kids the 20% down, again to avoid having the CMHC involved… but the kids still owe the parents the 20%, and owe the bank the other 80%. The house is 100% financed, and if purchased near the peak, could find the new owers upsidedown on their purchase.
Since the CMHC wasn’t involved, they are off the radar.
We can only speculate how many deals were put together this way, so how much exposure is out there with off-the-radar 100% financed deals? Who knows? But they are a ticking timebomb.

#108 kc on 10.13.08 at 9:34 am

Did anyone catch this article in Globe and mail’s report on business that tells it like it is towards China’s Melt down? They call a spade a spade, who really thought that China would stay in a BULL economy? They are at a point that is the same as Canada, over built, over predicted and are stalling. Sure Olympics aside, how much infulstructure does one country need? Vancouver is another example, there is talk now that with the “credit crunch” all the expensive projects here are on hold or the new bridge they are building that is P3 is in a state of cash short problems. The partners that are building the bridge are looking towards germany for funds…. Folks we are just watching the roosters come home. buy a box of popcorn and take a seat, this is going to get interesting.

Big red machine hits speed bump

BEIJING AND TORONTO — Less than two months after the excitement of the Beijing Olympics, the economic news from China has suddenly taken a turn for the worse.

Auto sales are slumping. The stock market is nose diving. Developers are offering heavy discounts to promote their unsold houses and apartments.

Even in an economy that is still expected to grow at an impressive 10 per cent this year, the hints of trouble are worrisome. And the problems are concentrated in industries such as construction and automobiles, which have major implications for the commodities that Canada produces.

The slowdown in China is already causing a drop in global commodity prices. This slump could continue for the next year or two, analysts say.

#109 dd on 10.13.08 at 9:39 am

#103 anonymous,

What does the debt level have to do with the economy?
Ask the US government that you clown. I can give you 11 trillion reasons why. Idiot.

#110 dd on 10.13.08 at 9:42 am

#101 Rasputin,

Ya … 3 billion more people in 40 years the UN predicts. They won’t need energy will they.

#111 dd on 10.13.08 at 9:51 am

#101 Rasputin,

Oil is not $50. Lets see how long OPEC will let it sit at that level. Not for long.

#112 dd on 10.13.08 at 9:57 am

#101 Rasputin

“They just got turned down for a loan to fund their company split. It’s going to be spun as “we want to remain large to prevent a hostile takeover.”

Why do you think that is? Why would any company want to buy Encana? Hmmm …let me guess. People are bullish on energy LONG TERM.

#113 Dave on 10.13.08 at 10:57 am

BC has been overpriced for at least 15 years especialy in the Okanagan. I really expect property prices to go to 20% of what they now are. Not 20% lower, but a drop of 80%. That’s right 80%.

#114 dd on 10.13.08 at 11:27 am

Roubini wants governments to spend massively on Infrastructure. Keynes theory to be revisited.

#115 dd on 10.13.08 at 11:37 am

Saudis cutting production to Europe:

#116 David Dodge on 10.13.08 at 11:54 am

#94 “Sure, they probably couldn’t afford to buy. But with all the “professional” help our hypothetical family was getting, their perspective was that they couldn’t afford not to.”

For the person getting lots of professional help convincing them to buy stocks a year ago, can they now blame their stock broker for losing a third of their value?

Blame everyone but yourself. It only encourages people to make unwise decisions when they can lay the blame on someone else.

#117 y3maxx on 10.13.08 at 4:04 pm

Financial crisis: Countries at risk of bankruptcy from Pakistan to Baltics

A string of countries face the risk of “going bust” as financial panic sweeps Asia, Eastern Europe, and Latin America, raising the spectre of a strategic crisis in some of the world’s most dangerous spots.

#118 Nasa Intercept! on 10.13.08 at 4:13 pm

Dear Mr. Bush and Mr. Paulson,

Thank you very much for your recent interest in joining the Intergalactic Monetary Union and your request for emergency funding. We initially thought your transmission was a misguided plea to an imagined deity for a “miracle”, but since we are unable to work outside of the current 6 known dimensions we considered whether a more temporal solution could be found. Unfortunately, we are unable to assist at this time, but can offer the following observations that may assist you in managing the “crises”.

Earth stock markets appear to be a liquidity pool to allow banks to sell exhausted companies to the public before they cease to generate profits. That was bound to end badly. How the banks managed to convince an entire generation to use their retirement money for such “investments” has lead us to believe that earth people aren’t that far evolved from their ape relatives. In the same way you look a lot like them, you appear to think like them too: very short sighted, guided by fear and greed, without the ability for abstract mental constructs, yet conceited enough to believe your limited mental understanding accurately describes the physical reality. We do have to hand it to the bankers for exploiting human conceit so successfully, but of course that sort of behaviour is not permitted amongst IMU member planets.

You have so called “Public Accounting Firms” and “Ratings Agencies”, but yet they were unable to identify even one single company’s approaching demise. Not even one! We could see they were going to collapse from here in space! There are many more companies about to collapse as soon as the insiders can plunder all the assets and sell the corporate shell to the public, but we are afraid if we tell you which ones you simply wouldn’t believe us. I’ll give you a hint though, because it is just too humorous to pass up: give Office 2007 a try sometime.

We also notice that humans are very accustomed to borrowing large amounts of money and that other humans are willing to lend it to them. This seems very strange to us as it is clear from space that there are no animals on earth that are inclined to voluntarily part with an asset once they have it, whether it be a piece of fruit or a dollar. In other words our planetary economists believe it is against human nature (and probably all ape nature) to pay back the loan unless forced to.

The other thing that has us very perplexed about the earth economic system is how humans trade pieces of paper for very valuable items. We think it must be because of the fine artwork on the paper rendering it valuable, but this seems inconsistent with the fact the paper is mass produced and not in limited supply like other human artwork. It was proposed by some of our interplanetary economists that perhaps these pieces of paper were contracts specifying delivery of certain valuable goods, but after further investigation we could not collaborate this theory. They seem to be simply a government promise to deliver another government promise at some future time period. But given that the government itself is a human institution we here at the IMU do not believe they can even deliver that! Besides, why would they want to? As previously discussed it appears to be contrary to ape nature to part with valuables. We also note that humans have not been able to convince any other earth species to accept their paper in financial transactions, causing us to question the system’s viability.

In any case humans, cheer up! What we have been able to conclude by observation is that the wealth you currently believe is disappearing never existed in the first place! It was all a notional theory you managed to concoct in your poorly functioning minds! A mass delusion of apes believing the tree had as many bananas as they could imagine! And then actually trying to trade those imagined bananas for real ones! We at the IMU found it to be most amusing! The older apes who look after your young apes during the day buying “stocks” in something called “Google” based on “advice” from a so-called “expert”! And thinking they would get rich by doing so! At times we could not contain our mirth! Or that by selling each other dwellings you had created an unlimited supply of bananas! That one was so good that it is still circulating the interplanetary e-mail system.

In any case, our study was able to conclude that humans are not yet mentally capable of entering the galactic financial system, and as such we are not able to send the requested financial support. We will review the study in 1.2 million earth years and check on your evolutionary progress at that time. If in the intermediate period another sentient earth species evolves to the point where they would like to be considered for membership we will of course be happy to reconsider earth membership in the IMU on their behalf at any time.

Warmest Regards,


Chief Admittance Officer,
Intergalactic Monetary Fund

#119 POL-CAN on 10.13.08 at 4:24 pm

Zeitgeist 2 came out on Oct 2 2008. Finally had a chance to look at it last night… wow

Not sure how many of this blogs readers have seen the first movie but this second one is even better as it really hammers home the problems with a fiat based monetary system and fractional reserve lending….

Please give them both a look at:


#120 dboy on 10.13.08 at 4:46 pm

check out this article from the national post re- condo projects in Vancouver:

#121 dd on 10.13.08 at 6:23 pm

Matt Simmons on Peak Oil,

Don’t let cheap oil fool you:

#122 David on 10.13.08 at 6:33 pm

“First they ignore you. Then they laugh at you. Then they fight with you. Then you win”
Mahatma Ghandi

The Harper government made it first $45 billion installment payment otherwise known as mortgage bailout this week. The government seemed so terribly vague on the rationale as to why Canadian taxpayers should be holding private debt instruments like mortgages. The official fib was liquidity for the banks and that these are great profitable assets for Canadian taxpayers. Since when did banks start offloading profitable assets on Canadian citizens? The so called liquidity injection really means taxpayers are subsidising the option for banks to use that liquidity to make more profitable loans. The taxpayers are now stuck with loans with impaired collateral and declining market values. Most of that junk probably can not be valued by Standard and Poors, let alone some hapless Ottawa bureaucrats.

#123 Ontariohouse on 10.13.08 at 7:00 pm

What I dont understand is how people start complaining when gas prices go up a few cents but when houses go up by 100,000 nobody complains. Property taxes go higher and debts go higher. Only builders and banks benefit.

#124 Trevor on 10.13.08 at 7:08 pm

dd – I live in Calgary and I work primarily on International O&G Projects. Right now our company has projects ongoing in Mexico, Columbia, and we are starting operations in Ecuador. You seem to have a very limited view of the actual situation in our great province, the major reason why Oilsands projects will fail is due to the cost of labour and terrible productivity. The Major Players being Shell, BP, CNRL, Suncor, Syncrude etc etc are really getting fed up paying non-ticketed individuals $50/hour that are unable to complete the task they are being paid to complete in a safe efficient manner. The grumblings that I hear are that shutdowns will happen not due to lifting issues but more to flush out the unions and labour market down to more “normal” levels.

Your notes about Alberta being debt free are jokingly to say in the least sir. We have the poorest debt ridden Cities, Towns, Health Board(s), and School Boards in the country. I for the life of me can’t find the document but if you add up all of their debt it more than the total debt of BC which is around $41 Billion including Provincial and other liabilities.

Good luck – I am sitting cash heavy (sold the primary residence) and I am awating the price correction before I purchase again in either Calgary or Vancouver.

#125 Rasputin on 10.13.08 at 7:43 pm

dd, if you are going to post please add something of value. Otherwise go back to cleaning the snake cages.

#126 Caught between a ROCK AND A HARD PLACE on 10.13.08 at 9:00 pm


– neighbor sold their mobile home for $475K approx. 3 months ago.
– prices had dropped since so we listed our 4 years old (bought over a year ago) mobile home in first week of October for $440K and got an offer within three days of listing, but they did not get approved from the bank (the banks have tighten up their lending because of the US scare as you all know)

– we are hard working young (27&28years old) married couple trying to make a living in this town
– never liked it here but our jobs and our parents have kept us here
– trying to sell the mobile home so that we can build 2 bedroom 1380sqft bi level home (nothing special but we’ll have a house with a detached garage and a little piece of land for the kid to play)

– we already paid $30K of 20% deposit for $700K house that will start and finish building in the spring of 2009
– instead of buying, we though of renting after selling the current place but there is no way we want to pay $3000 per month for 2 bed room apt.
– we have 8 months old baby and we will be here for another 4 to 9 years
– we can go live with either of the parents but felt that it is not good in the long run and (we always felt that once you get married you should never go back to Mon&Dad)
– we made about $200K net in 2007 but wife stays home to look after the little one (we should never have children if one of us cannot afford to stay home and we do not want live in nannies or strangers to be raising our kid. Money is important only to a point. Family always come first.) So our future net income would be around $150K a year.

We are not greedy and we work hard to make a living. We have no interest in making profit out of our new house.


1. Should we just stay in our mobile home or should we buy $700K home with 20% down(renting for us is not an option)
2. Would the prices in Fort Mac level off or would it go down in the future?
3. We are already aware of the downfall in Edmonton, Calgary and the States however many people we talked to here thinks that the housing market here will level off… Would it really???

We don’t care if the house prices don’t go up. As long as it doesn’t go down after we purchase it. That is exactly the problem we are having a hard time forecasting it. We are scared and somewhat confused about the gloomy future.
One of our parents have negative opinion on buying a new house(they rent because they never trust this place) and the other have a positive opinion (they just bought $700K house in April 2008.), because of that we are here trying to reach out for outside opinion.

Any advice form any of you with knowledge of the housing situation will be turely appreciated.

And THANK YOU VERY MUCH GARTH for creating this website and helping ordinary family like us with a wealth of helpful information.

#127 anonymous on 10.13.08 at 9:02 pm


Did the markets bitchslap you around today? Maybe you can explain how that happened… you seem to be such an expert on the economy.

#128 dd on 10.14.08 at 12:27 am

#105 Rasputin

“World population is far more likely to be 90% less than it is now rather than 1/3 more.”

No facts are facts … the world population is increasing at an alarming rate.

“I hate to break this to you but all those Asians are never going to see our version of middle class. But we are sure going to see their version of it.”

True … it may not be North American’s version of middle class, however, it still will be millions upon millions of people consuming more every day

“At some point the people who run the show on this little rock are going to decide oil is too important for the common man to just burn up. Oil = military power.”
“Oil is dwindling”

TRUE … and that is why oil will not stay at $50 a barrel. “Oil is dwindling” = peak oil my friend. This little cost decrease is just that … little. Opec knows it will be able sell a barrel of oil more tomorrow than today. That is why they are going to slow down production.

#129 Keith in Calgary on 10.14.08 at 2:48 am

Oil was $23 a bbl before the US invaded Iraq.

Oil is one of the most powerful low risk weapons that the leftist world and the Arabs have in their decades old war against US. Why do you think it was traded up immediately there after ? There is no surge of demand for oil. Their is enough coal in the US to produce synthetic fuel for decades to come, forget about oil.

Now that the US is going into a depression along with the rest of the world, and public focus is on removing foreign dependancy as much as is realistically possible traders (like George Soros, who owns the Democratic party) and governments unfavorable to the US are closing out their positions, taking their money and running away or else they will get burned. Which is why oil is under $90 a bbl now and going lower IMHO regardless of what a bunch of Arabs do to their production.

The general public can no longer afford to buy anything but basic staples……oil at $23 a bbl again will not matter.

#130 brazer on 10.14.08 at 8:09 am

Daimler to close St. Thomas, Ont., plant

TORONTO — Daimler AG plans to shut down its Sterling Trucks factory in St. Thomas, Ont., next March as the German-based company eliminates the Sterling brand.

Daimler Trucks North America said Tuesday that a total of 2,300 workers will be affected in St. Thomas and at another Sterling plant being closed in Portland, Ore.

#131 Caught between A ROCK AND A HARD PLACE! on 10.14.08 at 8:29 am


– neighbor sold their mobile home for $475K approx. 3 months ago.
– prices had dropped since so we listed our 4 years old (bought over a year ago) mobile home in first week of October for $440K and got an offer within three days of listing, but they did not get approved from the bank (the banks have tighten up their lending because of the US scare as you already know)

– we are hard working young (27&28years old) married couple trying to make a living in this town
– never liked it here but our jobs and our parents have kept us here
– trying to sell the mobile home so that we can build 2 bedroom 1380sqft bi level home (nothing special but we’ll have a house with a detached garage and a little piece of land for the kid to play)

– we already paid $30K of 20% deposit for $700K house that will start and finish building in the spring of 2009
– instead of buying, we though of renting after selling the current place but there is no way we want to pay $3000 per month for 2 bed room apt.
– we have 8 months old baby and we will be here for another 4 to 9 years
– we can go live with either of the parents but felt that it is not good in the long run and (we always felt that once you get married you should never go back to Mon&Dad)
– we made about $200K net in 2007 but wife stays home to look after the little one (we should never have children if one of us cannot afford to stay home and we do not want live in nannies or strangers to be raising our kid. Money is important only to a point. Family always come first.) So our future net income would be around $150K a year.

We are not greedy and we work hard to make a living. We have no interest in making profit out of our new house.


1. Should we just stay in our mobile home or should we buy $700K home with 20% down(renting for us is not an option)
2. Would the prices in Fort Mac level off or would it go down in the future?
3. We are already aware of the downfall in Edmonton, Calgary and the States however many people we talked to here thinks that the housing market here will level off… Would it really???

We don’t care if the house prices don’t go up. As long as it doesn’t go down after we purchase it. That is exactly the problem we are having a hard time forecasting it. We are scared and somewhat confused about the gloomy future.
My parents have negative opinion on buying a new house(they rent because they never trust this place) and the inlaws have a positive opinion (they just bought $700K house in April 2008.), because of that we are here trying to reach out for outside opinion.

Any advice form any of you with knowledge of the housing situation will be truely appreciated.

And THANK YOU VERY MUCH GARTH for creating this website and helping ordinary family like us with a wealth of helpful information.

#132 dd on 10.14.08 at 10:10 am

124 Caught between A ROCK AND A HARD PLACE!,

HA … what a great situation to be in.

#133 POL-CAN on 10.14.08 at 10:12 am

Great post from the comments section of Mike Shedlocks site

I sit here at my desk at work—for now—and gawk wide-eyed in utter amazement at the depths to which human beings will go in order to satiate their lust for power and their Midasian greed. Paulson, Bush, Bernanke: soucndrels, one and all. Scumbags of the highest order. Liars who would sell their souls to the devil, who would swear on the lives of their families, that they are telling the truth. But no amount of dissembling or obfuscation can change the laws of nature: reality, in the end, always wins out.

Toxic “assets” in the tens of TRILLIONS of dollars fill the casks and vaults and safes and basements of the world’s major financial institutions. Worthless pieces of paper that, when exposed to the light of day, will bring the global economy as we know it to its knees. There is no escaping this reality. None. The laws of nature will eventually pull the curtain back on the Oz-like charade that is being played out in Washington and Paris and London and Berlin, and the global economy will shatter.

And so in the intervening days/weeks/months, Paulson and Bush and all of their minions pump trillions of dollars of “money” into these so-called “healthy” institutions in order to loosen the credit market so that, at least for the time being, things regain the appearance of a recovery. And an election takes place next month, and the DOW “rebounds” to about 10,400 give or take, and a few of the largest banks begin easing credit restrictions and reluctance to take on risk, and all seems to be moving in the direction of eventual better times. And yes, recession exists, and the economy is tight, and jobs are lost, but the new President goes on TV and tells the people that, while times are tough, we are a strong people, and we will recover. (Meanwhile Bush and Paulson and their minions have moved to a small island off of the coats of Costa Rica and hired Blackwater to protect them from the rest of the world.)

But soon thereafter, at some unknown moment in time, all of the fake money, the supposed assets and capital that the Bushies have pumped into the system—all of the trillions of dollars in guarantees promised by the countries of the EU to their financial institutions—all of these monies become exposed for what they really are—MORE DEBT. More lies, falsehoods, specters. Trillions of dollars THAT DO NOT IN FACT EXIST, loaned to banks and insurance companies and auto makers in “hopes” that they, somehow, will be able to make some money and build capital that, at this point, is simply a wraith in the night. But of course this plan fails. It must fail. It is just another layer of the grand ponzy scheme of the millennium, perpetrated on the people of the Earth by a handful of greed-mongering bastards and sons-of-bitches.

And so I sit here and watch economist after economist, legislator after legislator, president after prime minister after finance minister, claim that the plan “will” work. And they are all lying.

#134 dd on 10.14.08 at 10:13 am

#130 Keith in Calgary,

synthetic fuel … where is the structure to support the system? Coal is the way of the future, however, it is going to take years to develop it. We are not there yet.

#135 dd on 10.14.08 at 10:24 am

Boone Pickens … Oil is going up up up.

#136 dd on 10.14.08 at 10:26 am

#130 Keith in Calgary,

Again Keith

6 billion people + how many billion more people in the future = more energy needed.

The world won’t revolve around the US in x years.

#137 smwhite on 10.14.08 at 10:37 am

#121 dboy,

I don’t get it, Vancouver is the gateway to North America and the financial capital of the planet Xenu…

How could this be? What a shocking event, who could of ever foretold of this?

Beware the sarcasm…

#138 dd on 10.14.08 at 11:05 am

28 anonymous ,

I am sitting on cash and renting at the moment … that is what is happening.

Markets are being de-leveraged.

#139 dd on 10.14.08 at 11:08 am

#126 Rasputin,

You talk about low oil prices and peak oil in one sentence. What is it?

#140 dd on 10.14.08 at 11:12 am

#125 Trevor,

Yes costs are high. Materials are the main reason behind this. With the run up in commmodity prices that is a given.

But show us where the 30 year reserves are? Most of the convensional projects are small and have short lifes. And tell us why the companies are still putting in billions and billions of dollars into the sands?

#141 Bobby in Victoria on 10.14.08 at 12:27 pm

To Caught between a rock and a Hard Place.

The obvious question. If oil goes to $50 -$60 a barrel the tar sands quickly become unprofitable and guess what happens to the price of housing.

That $475 k trailer would be worth $125 k here in Victoria if you could find a buyer. What does that tell you!

#142 dd on 10.14.08 at 1:55 pm


Thanks for the discussions. I was looking back at the writtings and there are some valid agruments.

Sorry for getting nasty in some email.

#143 The Tallyman on 10.14.08 at 2:40 pm

#143 dd said:
“Sorry for getting nasty in some email”

I think it’s part of the process as we run through the emotions this mess brings.

I for one was king nasty in blaming the youth. After going through disbelief and disappointment at how our system is screwed, anger and frustration kicked in.
Only natural to want to vent.
But in the end there are no winners or losers.
Optimist/pessimist, right,left, center, we’re all affected.

And the great thing about a blog like this is that we are presented with all points of view…. no holds barred.
that’s freedom & democracy.

#144 My_View on 10.14.08 at 3:48 pm

Half a mill for a trailer, that must be some fancy pancy trailer. What times we live in.

#145 if you don't like it on 10.14.08 at 4:23 pm

Caught between a rock and a Hard Place

I would sell the mobile home while the gettings are good, and as much as you don’t want to rent I would try to rent or shack up with friends or family. I think in 6 months (which is really a short period of time) you will be happy you didn’t buy.

But then again, no one can tell you whats best for you and your family. We just bought, mind you we only paid $230,000 for our 1500 sq ft, then again we’re not in Ft M.

$700,000 for a house sounds crazy, even up there. I looked up on the mls and I could find many homes under that would be fine to raise a family in.

I would write a long and detailed pro and con list. Base it on you potentially only making $125,000 this year and see how comfortable you are. I wouldn’t have all housing costs add up to more than 25% of your income just to be on the safe side.

Good luck!

#146 Keith in Calgary on 10.14.08 at 5:17 pm

#135 DD….

Well, if a failing German Reich could produce it from the middle to the end of WWI with everything in sight getting pounded by staetegic bombing I think the US will do just fine. Who says they have to sell it to anyone but themselves ?

#147 Keith in Calgary on 10.14.08 at 5:17 pm

That should be WWII……

#148 Rasputin on 10.14.08 at 5:49 pm

dd: RE my statement about oil. I agree. The 2 ideas do seem to conflict but here is what I see shaking out. Global deflation. Credit collapse will lead to this. The possible error in this is the fact that goverments around the world are trying madly to inflate. I think they will fail. That will cut demand for oil. Opec CANNOT cut production. They are pumping all out right now and would do more if they could. Those glass towers in Dubia cost a lot. Many of the middle east oil countries pissed away their money and they need the cash now. They can talk but they cannot cut. I see a short term (5 year) oil glut smack in the middle of post peak oil. How is that for reasoning? My opinions only. Your mileage may vary.

#149 amos811 on 10.14.08 at 6:23 pm

To Caught between a rock and a Hard Place

sold the mobile house, move in with in-laws, save.

#150 dd on 10.14.08 at 6:50 pm

#132 Caught between A ROCK AND A HARD PLACE!,

Can you buy a moblie in Edmonton, ship it up, buy land, and have it installed yourself for less than that?

#151 Mmm on 10.14.08 at 10:51 pm

Sitting in kelowna debating on selling our townhouse. Debate no longer! Sit I will.

#152 Schroedinger's Bull on 10.14.08 at 11:16 pm

Some random thoughts:

Spelling should be a legal requirement.

That IMU post was hilarious.

Sorry to hear that you lost Garth. I would have voted for you if I lived in your riding. I might have voted liberal based on their social stance, if the liberals didn’t want to bankrupt my company and give the money to Ontario. Instead of punishing producers of oil and gas, why not punish those who consume it? I can’t do much to affect the price I get for my oil or gas when I sell it, so the idea that carbon taxes will pass through to consumers is just bunk. Rather, tax drivers and people who won’t properly insulate their houses…of course, that’s a tougher sell than “tax corporate fat cats” isn’t it. sigh.

While I understand that winning seats in Alberta doesn’t really matter to you guys, you might want to think about a slightly more balanced platform next time around.

Oil will be vastly more expensive at some point, however even if a declining asset will always go up in price, it can fluctuate around that trend in the short term. I suggest buying Oil and Gas Juniors who operate within cash flow and who have low debt…their shares have been massacred and you’ll make a fortune in 2-3 years.

That’s all of the agruments I feel like writting down at the moment.

#153 sourgrapes on 10.15.08 at 12:23 am

Garth, I’m sorry you lost your MP seat, but hopefully you’ll continue to guide us on your blog. Much appreciated

#154 prairiegopher on 10.15.08 at 12:24 am

First, let me give my condolences to Garth. I too would have given my vote to him had he been my candidate. Instead, I voted for Ralph, He won and I’m glad.

So where do we go from here? The U.S. must need a new printer by now after the tons of paper they have been turning into greenbacks. Does anyone really believe this is the silver bullet they have been searching for? I know some at work are all excited because the TSX finished up today. I said, that’s today. Let’s see what tomorrow, next week and next month bring. We are simply seeing the start of the storm, the eye is no where near us. If you doubt this forecast just look at some of the big players who have fallen. Then look at those next in line i.e. GM and Chrysler. If oil recedes far enough, junior oil companies will fall like dominoes. I read that India will be constructing it’s own refinery soon which could supply as much as 20% of world oil. At the same time people are cutting back on their driving and invariably their consumption. All of this puts pressure on people’s finances and ultimately we come back to the value of housing. I truly believe we have seen the last of the gains in real estate for awhile. Now we will do good if we can weather the storm and come out with our families in tact.

#155 dd on 10.15.08 at 12:31 am

#149 Rasputin ,

Point taken. There is a sea of oil and gas for the next couple of years. And will the governments inflate once again? Never would have guessed that the governments would be preferred shareholders in banks, however, here we are on Tuesday and within weeks it will happen. I hear if this doesn’t work that there is talk about massive government spending on projects to divert a depression type situation like the 30’s. This might get us out of this mess, but higher taxes and inflation will be here to stay for years to come.

I guess I don’t really understand the deflating to inflating deal. Deflate to flush out the bad debt, write it off on the tax payers, and inflate it again?

#156 dd on 10.15.08 at 12:36 am


Sorry for your loss on election night. However I have gain greatly from your advise.


#157 nonplused on 10.15.08 at 12:58 am

My condolences to Garth as well. To bad you and Harper had the “fall out” because it would have been nice to see someone with some sense close to the top. And what you were doing hanging with Dion I can’t possibly figure, the man is a lucky fool. Thank the good people of Canada for seeing this man for what he is: no clue, hoping to get lucky. Harper isn’t perfect either, but the problem is the other parties have brought no reasonable alternate forward, and they have been told so by the Canadian people tonight. That give the parties (including the Conservatives) 2 years or so to come up with something that isn’t more balderdash, and we’ll do it all again. If the Liberals don’t come up with a leader and some good policies in that time period, well, I’m afraid the Conservatives might get their majority at that time, although maybe Harper won’t be at the helm. They are disappointed with the results as well.

#158 Nick on 10.15.08 at 1:57 am

Sorry to hear you lost Garth, I guess people would rather plug their ears and pretend they can’t hear the truth.

#159 Greg on 10.15.08 at 10:02 am

Subprime in Canada:

#160 smwhite on 10.15.08 at 10:34 am

Peak Oil

The maximum amount of oil Goldman Sachs can purchase and take out of the global market to let sit so as to create a bubble; the maximum amount of oil Goldman Sachs can short in the global market to deflate the bubble and cover their “shit” positions in “mortgage backed securities”.

No coincidence that the gentleman at the tops of Goldman are now at the top of the central banks, can you say Bilderberg?

#161 Dave in Calgary on 10.15.08 at 12:07 pm

#155 Prairiegopher:

“I read that India will be constructing it’s own refinery soon which could supply as much as 20% of world oil. ”

Refineries don’t supply oil. They refine it.

#162 Dave in Calgary on 10.15.08 at 12:15 pm

“Well, if a failing German Reich could produce it from the middle to the end of WWI with everything in sight getting pounded by staetegic bombing I think the US will do just fine.”

At Nuremberg, Albert Speir(sp?) admitted that carpet bombing did nothing… it was the lack of oil that brought German industry to it’s knees.

#163 Schroedinger's Bull on 10.15.08 at 7:57 pm

#155 (PG) – If the Cdn$ price of oil recedes, then yes, you are correct, but so far our cash flow hasn’t been too severely impacted as the Cdn dollar has fallen basically in lockstep with the fall in Oil, which is priced in US$.

So the question is, what will happen to the Cdn$ as we head into this recession/depression? Will it rise vs. the US or fall…a sharp rise would kill the juniors if oil continues to fall.

Of even greater concern is the junior sector’s ability to raise equity. Nobody can raise any money at the moment, and without it all you can afford is small or non-existent capital programs, which make it pretty hard to replace existing reserves, much less grow.

#164 Caught between A ROCK AND A HARD PLACE! on 10.16.08 at 12:36 am

To #145 “My_View”
The trailer is anything but fancy
– 1216sqft, three bedroom, one regular bathroom and one big ensuite bathroom, that’s all.

To #146 “If you don’t like it”
-yes , we are trying to sell it but then two more trailers around our block popped out for sale at MLS this morning
-our current mortgage is $500 weekly
-if tar sand is no longer in production because of the drop in oil prices then we would be in deep trouble
-also we are stuck with 30k deposit we paid on advance for the new house that haven’t been built
-the new house will have energy saving features that will save $$$
-since the builder already sent out the drawings to be reviewed because we wanted custom design, we wonder how much would it cost to back out (thinking a couple of thousands but not sure, we haven’t sign any contract)
-people say the price will go up again in the spring but no one knows for sure
-if we can sell this mobile home we’ll try to live with the parents
Reality is that there are so many listings out there (approximate 500units, 80 of which are mobile homes) and not many seem to be buying!

To #151 “dd”
To buy a plot of land here will cost at least 255K and you either have to built a bungalow or a 2 story, plus labour shortage would not help in any way


WE ARE STILL “Caught between A ROCK AND A HARD PLACE” until we can sell this trailer☹

#165 Kelowna Gal on 10.17.08 at 1:15 am

I cannot believe the attitudes of people here in Kelowna. Most of the comments that I am hearing is that most people believe that nothing has changed in our housing market here. Talk about denial. Some people even believe that the house prices are continuing to rise overall…….dumb or what???? If that were the case why is the majority of listings showing reduced, motivated seller, 1% finders fee, people willing to throw in the furniture, pool table heck even their dog if it means a sale. Garth you nailed it while you were here in Kelowna a couple of years ago when you said that the housing market was going to soften considerably. I listened to that advise and it saved me from buying at the very TOP of the market. Thanks, Thanks, Thanks. The real estate professionals had a hay day after you left. Your comments were debated at length and of course they always knew better than you. The market has softened. We have developers who have pulled out and decided not to build. The signs are still standing but nothing else is happening.

To # 72 Bert Chapman your attitude pretty much sums the attitude of most people who live in Kelowna. Everything is geared for the select few who can pay cash for their home, car, etc. If you have lots of money, etc., Kelowna just opens it’s arms and let’s you take over. There is very little thought given to those who are middle class or on assistance. It was getting to be ridiculous reading the advertisements for the new homes, condos, that were being built back in 2005-2007 everything was high end this and high end that. Let’s not forget to mention the lifestyle that one get’s to live in Kelowna if you are rich enough (private boat storage, exclusive, talk of the town, gated community) It sure didn’t make middle class families feel welcomed when everything was geared for the upper class. Let’s build them bigger and better with no thought about affordable housing, families and environmental concerns. Let’s just build, build, build. It did not matter if we could not see the lake anymore it was about building condos/McMansions as quickly as possible. Not just your average condo no in Kelowna everything has to be high end to keep us all in the lifestyle that we’ve become accustomed to. The only problem was that there really is no place for middle class families to live here anymore and I’m not even talking about people who are on assistance be it welfare or disability. How can someone who makes $10-12.00 per hour pay $1600.00 a month for rent, etc. Let me ask this if there is no place to live for those families who are middle class, etc., than who is going to serve your coffee, cut your hair, check your groceries, sell you your car or clean your homes? We need a correction to the over-inflated house values in Kelowna ASAP. Every day I read ads in the paper where families are desperate to fine affordable housing.

I have read in this blog that some of the tourists no longer want to come to Kelowna because the “family attractions” example; Old McDonalds Farm have been torn down for new development and same with the water slides in it’s place are shiny new homes. It is hard to even find a spot for a picnic on the shoreline because everyone is crammed into public areas in between the big mega-mansions with their “No trespassing” signs.

I think that it is time for a major wake up call on a global level. How important are granite countertops, stainless steel appliances and waterfront property going to be when housing collapses, the markets collapse, food prices raise sky high and interest rates go up???? Sorry if I sound bitter. I’m not I just feel sorry for the families that I see who are struggling just to try and find a decent place to live. Hopefully house prices will come to some kind of affordable level. Thanks Garth keep writing and I’ll keep reading. I’ll definitely let you know when I purchase my first home. Waiting and watching.

#166 Andrew on 10.17.08 at 11:21 pm

While I find Bert Chapman’s opinion of the current market to be laughable in the least, I find that his behaviour in this comment forum and on his own blog to be reprehensible.

He is a licensed Realtor. By maintaining that license, he is bound by a code of ethics. The fact that he has shared that level of information regarding Mr. Kabis leaves me feeling that he has violated CREA’s privacy code and probably put him at odds with PIPEDA.

I doubt Mr. Kabis will do much about it.

I, on the other hand, am an absolutely huge privacy advocate and will. First thing Monday morning, I am going to be in touch with both CREA and the Privacy Commissioner. I doubt that the privacy disclosure that Mr. Kabis signed when listing his property listed “Posting on personal blogs and internet chat forums” as a possible use of his information.

#167 Buy_canned_foods on 10.20.08 at 9:41 pm

Canadian (and Albertan) debt/future liabilities:

#168 OZy - correction on 10.20.08 at 10:31 pm

Thanks all that predicted this, so we did no buy, nor will until price goesdown another 30%

Is going to be much worse that that, don’t let TREB place the Trojan Horse in your HOUSE !!!!

Mid-October stats are here straight from horse’s mouth:
City of Toronto – minus 15% price chop
Toronto Suburbs – minus 8% price drop

Changing GTA Resale Housing Market Reflects Economic Times

#169 Joe the plummer on 10.20.08 at 11:03 pm

Let me get this right.
It’s ok for René to twist his facts to suit his agenda and then have his personal letter posted by Garth Turner, but not ok for Bert to point out the positive the sales numbers for the Kelowna real-estate market.
Wow !!!
Now that’s a double standard!!

#170 Joe the plummer on 10.21.08 at 8:51 am

Kelowna Gal,
As far as tourist go they drive our economy and will continue to come here as we have a climate that people love. Old MacDonald’s Farm was torn down because it was a dump.
The decision to live in a community is made by the individual not the economy.
Please note that there are a lot of places in Canada where you can live and buy a home for 145K to 225K.
You have chosen to live here in Kelowna.
Possibly time for you to leave!!!

#171 joe the investor on 10.21.08 at 3:13 pm

Joe the plumber:

i suggest you read the letter and, carefully, find stats to refute before you make accusations of fact twisting.

the decsion to pay more for homes than the local economy can support is also a choice. May i suggest you take your poorly planned buying decisions elsewhere so our local economy can get back to normal, and working families can afford to stay, rather than trying to chase them out?

seriously, comments like yours are why our community is hurting now. If the affluent want a vibrant community as well, they might also want to consider the costs and ramifications of driving out lower skilled labour and removing the opportunity for businesses to make a reasonable profit without the worry of paying unrealisic wages.

#172 O'Ryan on 10.21.08 at 8:23 pm

What happened to Bert Chapman’s entry? Can we make these posts dissapear if we like? mmm…

I was asked to remove this post by the Ethics Advocate of the Okanagan Mainline Real Estate Board as the result of a complaint. I did so earlier today, while asking for information to substantiate the action. I have yet to receive a response. — Garth

#173 Andrew on 10.21.08 at 11:41 pm

Joe the plumber:

It’s not that Mr. Chapman is not entitled to his opinion and even argue it to his heart’s content. He used his position as a licensed realtor to obtain private information and use it as an ad hominem attack on somebody who did not agree with him. Rene did not at all single out Mr. Chapman. The posting of Rene’s information did not at all add or detract from Chapman’s argument. It was an abuse of position by a licensed professional who, by his very own license, is to hold himself to a higher code of ethics.

Obviously his local licensing body agrees.


Without trying to sound too condecending…. *** well, duh! *** Part of that information had no business being posted here. Garth has taken the proper course of action, as I’m sure he sees the value in the Canadian Public’s right to privacy. I do believe that he is in fact owed some kind of official statement – if it were my blog, and I were in his shoes, I’d be asking for the same.

#174 david on 10.29.08 at 5:53 pm

sounds like a lot of whinging renters with their what about me stories

#175 Jaded on 11.01.08 at 5:07 am

I have to laugh….We purchased a house in late 07 for 690,000 however the builder refused the sale over a 4000 hold back for legitimate deficiencies. it is currently listed for 642,000 and has a CPL attached on title….What goes around comes around

#176 Sunset on 11.21.08 at 1:31 am

I read this blog with some bemusement.

Chicken Little said “The sky is falling!” Now, the modern day Chicken Little, Rene Kabis is using similar skewed logic to predict “the real estate market is falling” in Kelowna.

Many people are credited with saying this: “There are three kinds of lies; lies, damned lies, and statistics.” Unfortunately, Mr. Kabis is invoking the third kind of lie.

Mr. Kabis is using an April statistic that is flawed by approximately $32,000. The reason for that is that there is a property that was shown as “sold” for $7.2 million (not lakeshore and not acreage, which don’t form part of the average house price stats) by a con-man named Robert Zoost. In fact this property didn’t sell, but it skewed the numbers for April by the aforementioned $32,000. The real average for April was around $521K, not the $553K that Mr. Kabis quotes.

Another fact that Mr. Kabis does not take into account is the type of home that has been selling in the Kelowna market in the fall, compared to the spring. The market now is more focused on lower priced homes, rather than high end homees. For instance, in September, there were no sales over $1 Million. In April thre were three homes sold in that price range. That tends to lower the relative average price in the month of September, also adding to Mr. Kabis’ inaccuracies.

To keep things in perspective, I compared prices for single family homes, built before 2000, between 1500 and 3000 sq. ft., with 3-4 bedrooms and 2-4 bathrooms. The price in April 2008 was $453,741 and in September 2008 the average price was $429,343. That drop of $24,398 is a far cry from the $77,000 that Mr. Kabis quotes and is closer to 5% rather than the 14% that Mr. Kabis quotes.

Mr. Kabis’ effort to project an annualized rate of decline, based on the past 5 months’ performance is like trying to drive down a road looking in the rear view mirror. He can see where he has been but he has no idea where he is going. The reality is that he has no idea where the market is going and no ability to predict it accurately. The only thing I can conclude, unequivocally, is that Mr. Kabis doesn’t have a clue where the market is going. He and his ilk have been making similar predictions for some time.

If you were to believe Mr. Kabis’ predictions, the market would end up dropping to a level approximatley 20% below 1994 price levels, when 5 year interest rates were hovering around 8-8.5% (about 25-30% higher than current levels) and incomes were far lower than in 2008. Give your head a shake, Mr. Kabis!

Mr. Kabis, apparently a self appointed expert on real estate inventories, says that “a healthy and normal market should only have about 3 months of inventory.” How did you come to that conclusion, Mr. Kabis? A 3 month inventory level was about what we had in June 2007, with 956 active listings and 323 sales. The result – a 21.84% increase from June 2006.

Mr. Kabis should understand that a 3 month inventory is actually a very unhealthy ratio, resulting in the kind of huge, unsustainable, year to year increases we had experienced between 2002-2007 and a much more healthy inventory ratio is approximately 8-10 months’ supply.

Now that we understand tha Mr. Kabis basically doesn’t understand what the hell he is talking about, let’s look at a couple of other realities about the Okanagan.

1. The baby bomers are coming. The last time I heard that no one was going to be able to retire because of the failure of the stock market was after the dot-com crash in 2000, so let’s set that argument to rest right now. They are coming and won’t need service jobs to pay for their homes.

2. There is a huge work force now working in the Okanagan who can work anywhere they have a high speed connection. They are not empoyed in the Okanagan but they are earning wages far above those paid in the service sector.

3. The Okanagan has been discovered internationally, due in a large part to the Internet. Peole from other countries still consider the Okanagan real estate prices to be a bargain. These people will continue to buy in the Okanagan.

4. There is oil in the ground in Alberta and the prairies. The same people who are now telling us that real estate prices are going through the floor are the same people who were telling us in July that we were months away from $200 per barrel oil. What a difference a few months makes! The reality is that oil will come bakc to a price that will make the economies in those two provinces and Northeast BC once again boom. As we know, the weather is the pits in those areas. These well to do people will continue to buy in the Okanagan and commute to the oil patch.

5. Second home sales will continue to happen in the Okanagan, in perhaps a lesser rate than in the past 5 years, but nevertheless they will continue.

So what can we really conclude?
1. The sun is going to shine in the Okanagan
2. The Okanagan is going to continue to be a draw to those who want the Okanagan lifestyle
3. The land base is limited in the Okanagan and the water supply will ultimately limit the potential to develop real estate.

The result? In the next few years, the Okanagan will continue to be one of the the best real estate investments in Canada and the world.

If Mr. Kabis believes in his own BS, I suggest he sell his house now and wait on the sidelines until the prices go down to his predicted average of $150K to $180K. I can assure you, Mr. Kabis, that you will be waiting until hell freezes over!

#177 René Kabis on 11.22.08 at 5:13 am

#176 – Sunset

You are so misguided with your comments, it isn’t even funny.

Let’s look at your points:

1. The baby boomers are NOT coming. Recent news articles ABOUND that make it clear that 60% (or more) people who are approaching retirement are NOT going to retire… they are delaying retirement by up to a decade or more (on average). As well, most BOOMERS figure HEAVILY on their investments and the value of their current home to fund their retirement. Investments are already down 50% across the board, and the value of a boomer’s home is now tanking dramatically, assuming they can find a buyer in the first place. Retirees are, by the very definition of being retired, some of the most cautious people out there. They are the first to jump out of a declining market, and the last to get back in once it recovers. Our market will NOT be saved by retirees, because the vast majority of them are having their retirement savings decimated by the stock market declines and the home value declines.

Or, in other words, how can a boomer retire when they suddenly own 50% (or less) than what they had just six months ago? How can they fund their retirement on 50% of what they had just a short while ago? Simple answer: they cannot.

2. What do you base this on? Who is this workforce? If it is anyone under the age of 65, please tell me what you are smoking, because it must be something really strong. The simple fact is, our high home prices have been driving people away from the Okanagan in droves. Enrollment in SD23 has lagged dramatically behind our population growth for the sixth year running, indicating that the people moving here DO NOT have school-aged children (that is, they are NOT young people!!). As well, the % of our population has surged towards the geriatric end of the scale. We now have more than 50% of our population above the age of 65 than beneath it. Ten years ago, that value was less than 40%. Clearly, we are growing as a city, but the majority of the growth is NOT with people under 65.

3. So what? The British are going broke. The Germans are having their own banking crisis. Europe as a whole is doing worse than the U.S., and many countries over there are on the brink of severe recessions. So I seriously doubt many of them are suddenly considering spending oodles of money just to move here. They can’t afford it anymore.

4. So what? Alberta Oil Sands oil has a break-even point of $60/barrel. If they can’t even make that, then they won’t be profitable. NEWS FLASH: OIL IS AT LESS THAN $60/BARREL, AND IS BOUND TO BE THERE FOR SOME TIME. Consumption is wayyy down across the planet. and is still declining as country after country slips into deep recessions and demand for oil and gas plummets. When people start feeling the pinch, one of the first things they do is cut down on driving. Ergo, demand plummets.

5. Second home sales? For whom? There is currently (as of November 2008) 32 months of inventory on the market. That is close to three years worth of inventory. Home prices are declining by over $15,000 per month, or about $500 per day. Credit is harder than ever to obtain, and most people who are making the “average Kelowna wage” of $53,000/year are now finding themselves unable to be approved for a mortgage of more than about $200,000. Where can you find ANYTHING DECENT for around $200K? A 1bdrm shoebox condo, perhaps? Not very appropriate for raising a family of 4, I’ll tell ya.

Sunset, it is clear to me that either you are either one of three things: In the land of delusion, a REALTOR®, or a homeowner desperately trying to unload investment properties and panicking at the severe lack of buyers out there (Sales for October 2008 are down 63% YOY, and down 76% from the May 2007 high).

Wake up and smell the coffee! The sooner you come to grips with reality, the sooner you can avoid your own personal disaster.

And if you are a REALTOR®, how can you possibly explain away (or in other words, provide “spin-control” for) the current housing stats provided by OMREB:

• Sales down 63% YOY
• Prices (average home) down $92,000 from our April 2008 high
• Prices (average home) down 16.6% from our April 2008 high
• Both YOY and YTD in the negative (October 08 average prices are lower than that of October 07 as well as January 08)
• The annualized rate of decline since April 08 has reached 33%, and continues to accelerate; home prices should reach 50% down YOY by April 09 if it continues as it has been for the last six months

Simple fact is, the Kelowna housing market is crashing faster, from a $ and % standpoint, than any other housing market in North America for the first six months following a market peak.

This is a fact that is proven.
This is a fact that is indisputable.
This is a fact that cannot be explained away.

We WILL reach a 70% peak-to-trough decline some time before 2012, and I am willing to put my money where my mouth is. And here is my first step:

Let’s see who ends up looking like a “greater fool”, shall we?

#178 Kelowna Gal on 11.24.08 at 2:34 am

To # 177 Rene,
Thanks for your awesome response to Sunset’s (#176) comments. I couldn’t have said it any better. It’s crashing as we speak.

Yesterday I counted 88 houses for rent in the Capital News. That’s not even counting the condo’s and suites that are available. People haven’t been able to find buyers so, they are trying to rent these properties out. It’s going to be very interesting to see what is going to happen in Kelowna over the next year or two.

#179 Tony Soprano on 12.05.08 at 5:05 pm

Okay, let’s try this again. The “Willows of lake country” is DEAD. DEAD, DEAD, DEAD. Do not collect $200.00, Do not pass go. In the morgue, dead. That property is in the Kelowna area, and I think you would be hard pressed to see anyone other than the homeless living in this thing within the next 2 years. Just my opinion.

#180 Brittanny Originals on 12.27.08 at 2:55 pm

KeLowlowlowlowna, prices.

#181 Shiza on 01.06.09 at 6:51 pm

Gee, it sounds like this Rene [email protected] still won’t be able to move out of his mom’s basement. Maybe next year when he turns 37 and his income finally exceeds the poverty line he will be able to buy property which at that time will be a great investment.

Dear Rene Kabis, Is this post about the macbook temperature or about the Celsius vs Fahrenheit issue? If you have any issues regarding the superiority of each I think this is not the right forum to address your criticism. Besides, dumbass, do you realize that in America the metric system is indeed used in every field (science, medicine, etc). I guess you don’t! And besides, America is ONE of the (if not THE) most technologically advanced nation in the world regardless of which system we use. Can you say that about where you are from?

#182 René Kabis on 02.17.09 at 3:21 pm

#181 Shiza – what is with the personal attack? Are you a REALTOR® or a mortgage broker, and are feeling threatened by my comments? Rest assured, I did not cause this current downturn, I am just trying to warn away those innocents that are beguiled and entranced by the “buy now or be priced out forever” sales pitches. If I can help even one person avoid foreclosure and ruin by avoiding an ill-timed and ill-advised home purchase, then my work here is done.

If you want to debate what I have said, then stay on-topic. Personal attacks are simply the refuge of the weak-minded and weak-willed.

#183 Kelownabound on 02.24.09 at 12:22 pm

Thanks for this!!!
We are relocating this summer from…wait for it…Alberta.
But we were thinking of renting until we have a good feel for neighbourhoods.
This is just the affirmation we needed to wait to buy.

#184 optionrider on 03.09.09 at 4:41 pm

The real estate market is more complex than suggested by Rene. An average buyer, coaxed by realtors and bank/morgage brokers, does not do the math. They don’t pay attention to house prices but to how much the monthly payment is. In light of the low interest rate environment and growing international popularity of Kelowna it’s hard to bet on Rene’s assumptions. The real problem may arise if Obama keeps printing money like crazy and, after a couple of years, the annualised inflation rate will hit five or more percent mark (it’s a conservative estimate) and the virus spills over to the rest of the industrialised world, as it’s the case is now with subprime mortgage-backed securities. You cannot bypass the laws of economics.

#185 hy on 08.15.09 at 2:05 pm

hello, everyone who can offer an opinion on this matter. I am an albertan, I want to buy a property in kelowna, 1128 sunset drive to be exact. I am having trouble determining the value as, prices are all over the place, both with mls-agencies and private sale records, i am seeing everything from $400 per square foot up to $700 per sq. can someone shed light on me it is looking like a good unit 1500 sq foot with good upgrades and view is floating around $700,000.00 is this realistic or should i bid lower, or wait it out…..

all input will be much appreciated

#186 Chris on 09.30.09 at 6:26 pm

Hy, take what the realtor is asking and make your first bid half of it. It’s a buyers market and as Rene pointed out all of the retiree’s here are cashing out on their homes at once. You can see it when you drive around and notice the number of house for sale, there are millions.

#187 hy on 10.07.09 at 10:04 am

chris, thank you that is exactly how i am feeling i see tons for sale, but when i pull out previous sale records most of them picked them up 40% less then their current asking price. and heres the kick! they bought them during the peak of the real estate market in 2007 & 2008. we all know that the bottom has fallen out most of the houses in alberta have fallen about $100k ++++. but here in kelowna they have doubled since then in prices. are they waiting for the winter olympic to make them rich??? it is very discouraging i am almost willing to forget about it. i just wonder sometimes is this an actual marketing strategy to price so high even after the real estate market has fallen? anything else you may add is good for me….thanks