Sure thing

Van1

Yours in Vancouver for $699,000. Listing.

On the same day Imperial Oil recorded a $1 billion profit plunge and StatsCan said a third of all employers were still laying off, the recession was declared dead.

That was the word from the Conference Board, and economists at Scotiabank. This, despite 64,000 payroll jobs disappearing in the latest reporting period, and a $1 billion bailout of Air Canada, a quarter of that being tax money.

To put it mildly, the data’s conflicting.

If you believe establishment forecasters, then the nightmare of failed businesses, vaporized earnings, unemployment and insecurity is ending.

If you observe the real economy, then not so much. But maybe misery is just a lagging indicator.

The exception, as we have noted with great interest here, is housing. In fact, a Canwest story which moved on the wire Thursday claimed boldly that house prices in both Canada and the US had stabilized – an omen of good fortune.

“With the housing market stabilizing…this cycle will end, and could even be followed by a cycle of growth: would-be homeowners who wouldn’t buy into a declining market could rush to pick up today’s bargains, driving prices and luring still more buyers to keep the upward cycle going…”

And so it goes. US home prices may be sitting 20% lower than they were a year ago (which was 15% lower than the year before), and 19 million American homes may currently be vacant, but the media spin is irrefutable: Rush and buy. A new upward cycle is starting.

Regular visitors will know my reasons for believing this will not happen. Won’t bore you with it all again. But what’s striking about today’s real estate market is the casino nature. Once again, a speculative fever has gripped society in which authority figures (muckamuck economists, the prime minister, realtors with cufflinks, Canwest) can pretty much condone, if not welcome, actions which look a lot like gambling.

Like I said, the data speaks for itself. And it’s speaking golden retriever. There is absolutely no clarity on whether life will get better or worse for the average family in this country anytime soon. If rates rise, the loonie soars, oil spikes or crashes, swine flu turns into a neo-plague or some nutbar blows up the federal building in Chicago, people taking on piles of debt right now could seriously regret it.

But, hey, free country. That’s their choice. If they think this is Japan, and rates will stay at 0% for a decade, no prob. Amoritize yourself silly. If they think house prices can rise by 5% a year for the next decade, putting the average Toronto home at $648,000, then believe that, too,

However, crunch this: If the typical Toronto home does hit $648,000 (and realtors claim an annual 5% appreciation rate is ‘normal’), and if mortgage rates return to their 20-year average of 8%, then to buy it with 10% down ($65,000 in cash, plus another for $18,100 in land transfer tax, plus closing costs) will mean mortgage payments of $4,500. Add in a grand a month for property tax and monthlies, and that ends up being a cash flow drain of $5,500. To afford that average house, according to CMHC guidelines would require an income of $17,000 a month – or $204,000 a year.

So, yeah, makes sense to me. Average family income up 300% in the next ten years. Why not? Let’s party.

_ _ _

Dear Garth: I am a 100% down, 25 year amort case.  Here’s the scenario:
Age 31
Combined income – $110k a year
Wife’s (28) RRSPs – $0
My RRSPs – Approx $12k and contributing regularly
Mortgage = $289k
House value = approx $340k if we sold today
Term = 5 yr @ 5.08% (3 yrs remaining) approx $1650 a month
Credit line = $36k @3.8% (moving, renos etc)

Question is, we have virtually no spending power so the debt is moving at a snails pace and if we go with an extreme budget we may be able to pay it off in about 5 years. But that leaves no room for savings, a life or an emergency. What do you recommend?  Do we sell, do we stay and pay it off in 5 years and then start with RRSPs?  How do we strengthen our financial situation?

This fool needs some guidance. — Dave

Dave: You’ve owned for two years, nothing down, and you’ve made $51,000 in equity advance, right? Fantastic! Real estate really works.

Of course, for that you borrowed $36,000 on a LOC for moving costs and renovations, leaving a net gain of $15,000.

If you sell for $340,000 you’ll have commission of $13,600 (at 4%) to pay, plus GST of $680,  and legals of $500. That makes your capital gain $720. Oh wait – forgot the penalty for crashing your mortgage three months early. The standard three-month penalty is $4,950.

Bummer, Dave. Here, try the slots.

Update: Economy lays an egg in May

136 comments ↓

#1 dd on 07.30.09 at 5:45 pm

Hold on … that looks like a North Shore Listing.

#2 Nathan in Edmonton on 07.30.09 at 6:28 pm

Dave has also paid $39,600 to the bank to live in that house for two years… at least he’s not throwing money away buy renting eh?

#3 Samantha on 07.30.09 at 6:48 pm

Dave –

Garth did the math on the house, so in response to:

“How do we strengthen our financial situation?”

Some suggestions –

Get out of debt.

If you want to get “ahead” learn to live below your means.

Find a certified financial planner who can help you and your wife strengthen your financial skills/planning. For example, you contribute regularly to your RRSP and your wife has $0 – not good.

Get in the habit of regular saving – pay yourself first. Annual expenses, planned expenses and emergency savings (8 months to 1 year x monthly expenses necessary to survive if SHTF).

No mention of children, however, life insurance is a must if you have children and/or a spouse and no savings to fall back on.

Your combined income is $110k a year. If you and your wife don’t have children, both of you could take on extra or part time work (lots of that these days). The extra money will help you get that savings going, plus with your wife’s unused RRSP contributions and TFSA you should be able to avoid excessive taxing of the extra income.

Another way to add a bit of “insurance” regarding employment is night or courses. If you love what you do (and same for your wife), then look at what kind of upgrading of skills/education you would require in order to advance at work and earn more money. If it helps you to be less dispensable so much the better.

If, on the other hand, your job isn’t great for one or both of you, then you could look at your transferable skills and figure a way to maneuver into a better or more stable job/career, again using night courses.

If you have to sell this house, remember you and your wife can buy again and with a more solid financial foundation beneath you. It’s better to learn these lessons now, when you are young enough to recover.

Good luck

#4 DD - Do Your Due Diligence on 07.30.09 at 6:49 pm

#1

Location : 629 E 13TH AV
Vancouver, BC V5T 2K9

The listing is in East Van, not North Vancouver…it notes it right on the listing….

#5 LS on 07.30.09 at 7:04 pm

What the heck is going on with Dave?? 110k a year, that’s pretty close to what we make. So let’s say thats about 7k/month of take home pay. 7000-1650 for the house – 1000 for monthlies – 1000 for food, etc, whatever leaves 3350. And you claim you have no spending power. Where the heck is that extra 3k going? Cars? Eating out? You really need to make a budget and figure out where that money is going. I think you should be able to pay off that LOC in a year if you set your mind to it (or better yet, pay off the mortgage by that ammount, since you’re at a higher rate there.

#6 Mel Eager on 07.30.09 at 7:07 pm

Hi Dave,

It’s your Consumer Debt (credit line) that is crippling your cash flow.

It does not make sense to contribute to RRSP’s when you have that much consumer debt.

It does not matter that the interest rate is so low, your cash flow is tied up until the debt is retired.

Put the RRSP’s on hold and redirect that money to paying off the credit line. Don’t worry, your contribution room will carry over, and you can contribute later. You have 34 years to think about retirement.

Once the CL is paid off, reduce the amount of credit available to you so you’re not tempted to put that much on it again.

In my 1960’s bungalow, I discovered asbestos duct insulation in the basement. One professional removal, air cleaner install, and ductwork replacement later, and I was $4000 in debt on my CL.

Guess what? I stopped my RRSP contributions that day, and I setup an automated payment plan through my bank to pay off the CL. In 2 mo it will be paid off, and RRSP’s will be fed again, or I might accelerate paying off the mortgage, I don’t know. Point is, I’ll have that extra cash flow again, and I’ll have a choice.

Hope this helps,

Mel

#7 TheFirstRick on 07.30.09 at 7:14 pm

Covered and barred basement windows probably equates to a couple hundred plants. The reliable invisible “tenant” keeps Vancouvers real estate industry chugging along. BC, the narco state of the north.

http://www.theprovince.com/news/Vancouver+cops+seize+house+vehicles+part+wholesaler+crackdown/1845709/story.html

#8 sunburned canuck on 07.30.09 at 7:22 pm

Canadians, wake UP. Do the math.

Taxes going UP.
Deficits going UP.
Energy going UP.
Food prices going UP.
Unemployment going UP.
Pessimism going UP.
Insurance going UP.
Maintenance fees going UP.
Bankruptcies going UP.
Destruction of personal wealth going UP.
Inflation predicted to go UP.
Government lies, corruption, incompetence going UP.
Interest rates predicted to go UP.
Foreclosures going UP.
Debt to income ratios going UP.
Probability of lower wages and salaries going UP.

Realtors, brokers and neighbors all say:

Good time to buy,
because house prices will keep going UP.

#9 In shock farmboy on 07.30.09 at 7:48 pm

I just got over one shock, now Garth did post this *Beauty* for $699,000 today. East end of Vancouver I would say.
Garth you have not been this mean since I saw you on TV when you where R.M. (tax man) Jumping out of cab in Vancouver claiming the underground has it’s days numbered ( not those exact words , but close )
Garth we need you back in government. Department of why so much? You with a crew mind you.You can’t be in all places at once.
I’m sure you and I would wonder if the 1000 watt lights go would be a part of the house as they maybe fixed to said house and that could add to the cost of a house like this one.
Garth lighten up and wait, it’s coming. Like always, your in a big rush. Your words will come true in about 2 years time.
Extra money to borrow in the world in a few years will be as hard to come by, as a 300lb lady trying to fit into a size 5 jeans. Rates? Your guess is better than mine.

#10 grandeprairie girl on 07.30.09 at 7:51 pm

I LOVE golden retrievers. Chihuahua’s would have been more appropriate!!

#11 Bruce on 07.30.09 at 7:55 pm

Hey Dave,

I would like to buy your house, but I got laid off, and the mortgage company says my EI earnings don’t qualify me.

#12 john m on 07.30.09 at 8:06 pm

Shocking the mindset of todays generation,the parents (probably evil boomers) who raised then at home till they were starting to go bald,saved up enough for a down payment,most likely have a degree in something and could not do basic math without a calculator,have never had to struggle for anything,and have no worries after all if the Parents don’t bail them out..the Government will….hmmmmm better think about that one because the government is about tapped out. But one very important point…..how secure is your income????????? that id really wonder about when one looks at the true economic picture? IMO–a word of advice—never commit yourself to anything you aren’t damn sure you can get out of by yourself…because when times get tough for you -they get tough for everyone—and this taxpayer will not be willing to pay for anyones stupidity while i struggle to put food on my table!

#13 e.lo on 07.30.09 at 8:11 pm

Nope, it’s in East Van, Fraser & 13th… aka the crack-shack heartland of Vancouver.

p.s. Garth, here in Lotusland, we call this a character home with charming mid-century heritage details. Whadda deal.

#14 john m on 07.30.09 at 8:23 pm

I have personally made a lot of money off of real estate–more than any other investment in my life–But smart people buy when the economy is good ,employment is good and the economy is stable ,and the future looks promising——–anyone who can tell me any of these conditions are applicable today is dreaming .Short time low interest rates on a property that is destined to depreciate in value turn the pride of ownership into a compulsive venture of a damn fool :-)

#15 eddy on 07.30.09 at 8:32 pm

assuming Dave had ‘0%’ down, he ventured nothing, barely has equity, buys stuff he obviously can’t afford.
To sell or not really depends on where the house is. If it’s in a ‘hot’ hood in TO, maybe he should stay put. If it’s in a typical subdivision? GTFO

Re inflation

CUPE in Toronto, after weeks of blackmail, extortion and taking an entire city hostage, got 6% !!! that’s double previous increases. No skills required. no education required. hello inflation.

#16 JO on 07.30.09 at 8:46 pm

Get out of debt. Sell the house now and rent. The math is obvious. Rent wins out. Ironically, we are in the early stages of a massive credit contraction which is very likely to cause asset prices, especially homes, to come down at least 30-40 % over the next 3-4 yrs or so. Rent has historically dropped even further for several years in credit contractions. Thi sis happening now in most of the US, has happened in most of western Europe and rent is even cheaper in many areas of Canada compared to 2-3 yrs ago. Many desperate, delusional homeowners who think the decline in home pirces is temporary will put the homes/condos on the market for rent until conditions “improve”. This will cause rent to drop even more in most areas – which will help casue many of these home”owners” to give up or go into POS.

Get out now while you can.
JO

#17 john m on 07.30.09 at 8:58 pm

#7 TheFirstRick on 07.30.09 at 7:14 pm

Covered and barred basement windows probably equates to a couple hundred plants—Ever been to east Van? Even without any plants one would be wise to have all their windows covered and barred and a damn good alarm system on their car :-)

#18 Wealthy Renter on 07.30.09 at 9:05 pm

Dave is an easy case. :)

LS and Mel Eager said it perfectly. Get your spending under control and retire your debt. Given the scenario you gave to Garth (no children or other debt), you and your wife should easily be saving a 1/4 of your net income each month.

It sounds like you have put a lot of care and effort into fixing up your house, so it is worth keeping. The price you paid appears to be quite reasonable given your means.

Pay down your credit line, and get some money in the bank to buffer the hard times.

#19 Dan in Victoria on 07.30.09 at 9:07 pm

What flavour of corn flakes do you eat?You make 110 grand a year and you are having trouble with that?You telling us every thing?If you are you need a kick in the dangly parts.Building wealth takes work, sacrifice and a PLAN .No Starbucks,No nail jobs,No sixty dollar haircuts,NO designer clothes,No junk food,etc.Get your finances under control,Go watch Till Debt Do Us Part most of those people are financially challenged. Get the DEBT payed off as fast as you can!!!!!Your’re paying to RENT money.You figure you can do it in five years so you’ll be 36 gee…… thats pretty old.That will only give you 29 years to plan for retirement.You better get going I don’t like your mortgage renewal date.Major Pain in three years.Get it payed down now.

#20 R.Moer on 07.30.09 at 9:25 pm

Memory Hole Cheat Sheet
++++++++++++++++++++++
Mort-gage = French, for agreement unto death

Debt = slavery, as in bond servant, as in I own you

Fiat = By my will, make it so, as ruler … say I, therefore is law

Fiat Currency = pretend money as in greenbacks or snow bucks (a.k.a loonies), in full faith and credit of insolvent issuer (i.e see Canadian asset backed paper & 30 billion dollar black hole). Not back buy speicie such as gold. Canad dropped gold reserves by 99.4% in last 10 years. There’s no gold in the loonie mint.

lender’s terms & fine print = if you can’t do the math you will take a bath

taxes = you owe, you, owe you always owe. See mortgage above

borrower = fool, mark, looser, debt-beat, wage slave

(Note to self: Post on fridge. Kick self when forgetting these principles (and better half pines for larger mould-estate)

#21 davers on 07.30.09 at 9:25 pm

Man that place is in a crappy area in Vancouver two. The sad thing is that those kind of listings are not the least bit uncommon. I could easily find 100 more that are just as bad.

#22 charliegosurf on 07.30.09 at 9:25 pm

Slot are fun,

but beware…

http://www.vancouversun.com/news/Blackcomb+Mountain+fire+explodes+hectares/1846250/story.html

insurance Corp worries…

keep it rollin Mother

#23 Nostradamus Jr's Analyst on 07.30.09 at 9:28 pm

That’s a fine looking unit in the photo – I’ve seen it before as it’s about 1 km from where I live.

Well maintained, a beautiful front yard for the kids to play in, desirable and central location nestled between Crack St. and Whore Ave., and plenty of great shops/restaurants/bars just 3 km away.

I’ll have to consult with the wife but at $699,000, I think we’d be foolish not to take the plunge and make an offer.

This one’s going to go fast.

#24 supersocco on 07.30.09 at 9:35 pm

Another fantastic post Garth!

#25 hal smith on 07.30.09 at 9:41 pm

Bubble fact : It will not pop and will not be allowed to pop. If it did, we would have no economy.

Bubble facts for savers and investors:

Your savings are being eroded into nothing.
Bay street and Wall street lie, cheat and steal to get your money .
The government lies, cheats , and steals to tax your money.
The government lies and changes the rules to tax you even more.
People say mean things to you ’cause you’re a party pooper.
Nobody likes you.

Bubble facts for bubble riders:

Your “nothing” is becoming “something”.
Your debt becomes less and easier to pay as your “nothing” grows into “something”.
They give you free money to build your nothing into something.
They change the rules to keep the bubble growing so that your nothing remains worth something.
You profit is all Tax Free Baby!
Everyone wants to be you.
People are impressed with your pool and your RV.
Ladies will disrobe when you show them your hawg.

The bubble will be patched, nursed, inflated with helium and preserved any way possible. The alternative is unthinkable. If it pops, everyone loses. If it stays inflated, you win and only the savers lose. Notice how the savers lose either way? Who’s the dummy?
The government will not let this pop. They have the yet to be announced Home Owners Relief Program or “HORP” waiting on the sidelines if you should get side swiped by job loss or interest rate hikes or if your crop doesn’t come in on time. Under the auspices of HORP you will be allowed to defer mortgage payments till later and extend your mortgage out to 50 years, maybe more because life expectancies are rising…So don’t miss this gravy train people, it’s a once in a lifetime event so hop on board or you will be left behind like the savers. Jump on before the train leaves the station, you know you want to…..All abooaarrdd !!!

#26 The Great Gazoo on 07.30.09 at 9:41 pm

Hey Garth, I am an enginmaneer and not even close to being an economist.

This is how I understand how interest rates will increase:

– government is in debt
– government sells debt to “investors” – people with money in the form of government bonds
– “investors” make money off of bonds cause it is repaid with interest
– as government gets more and more into debt (ie. bailing out GM) the bonds become less secure (as probability of failure to pay the bond increases)
– the initiative for bond buyers to buy riskier government bonds is to get a higher rate of return ie. higher interest rate
– higher interest rate for government issued bonds is done through Central Bank of Canada and hence into the consumer

Will this logic cause the increase in interest rates we will see?
Am I way off??

#27 Chris no longer in England on 07.30.09 at 9:48 pm

OK Garth, my mystical powers reveal no-one else will ask you so I’ll have to.

===========

July 27 (You want logic?)

“…financial speaker, a gig running the country’s tax system, blogpreneur and (soon) something radical..”

July 29 (The Inevitable)

“I have also published a number of emails from people asking for my opinion on their own housebuying aspirations and their unique circumstances. Now I will make a few final points.”

=============

No doubt there were other clues I didn’t notice (and I can’t go trawling through previous entries because I am drinking beer and watching Waterworld at the moment). You seem to be dropping hints, so I’ll bite. What is the new radical venture?

#28 Nostradamus Le Mad Vlad on 07.30.09 at 9:49 pm

“. . . blah blah bloody blah the recession was declared dead.”

George Orwell’s Doublespeak 101. Next . . .

“. . . a Canwest story . . .” — The m$m also kept repeating that Sadaam had WMD, and Comic Ali — “WE ARE DEFEATING THE INFIDELS!” — was, in fact, Wilma Flintstone in drag. Yawn . . .

“. . . the prime minister, . . .” — Does Canada still have a PM, or is Napoleon running the show? After all, he led his troops into Russia at the onset of winter — same as Hitler — and both were decimated. Fool me once . . .

“. . . or some nutbar blows up the federal building in Chicago, . . .” — Hmmmm. Does Garth know something we don’t?

“Why not? Let’s party. . . . Here, try the slots.” — ‘Nuff sed!

Slots? Try Goldfinger Smarts and JP Morgan’s approach — screw the public silly, have the BoC divert a day’s worth of paper planes (money) and spend like crazy, baby!

Do y’all get the general impression that I really couldn’t care less anymore?

As Garth said, it’s a free country so freedom of choice comes into play. Sheeple make their own choices — sheeple live with the consequences of their choices.
——
Two good links from Money Morning; Bernanke, etc. crash the US economy, Carney does ours in and we’re in a decade-long recession / depression, with nothing to support housing. —

http://www.moneymorning.com/2009/07/30/bernankes-exit-strategy-2/

http://www.moneymorning.com/2009/07/30/housing-market-bottom/
——
I’ve mentioned Yellowstone before, and possibly it is having an effect in another part of the world! —

http://www.dailymail.co.uk/news/worldnews/article-1203028/Will-Krakatoa-rock-world-Last-time-killed-thousands-changed-weather-years-deadlier.html;jsessionid=7656728CD4A0C35EF81A602FDE4F6B0C
——
The Myrh of Overpopulation — 1:31 clip.

So why did Ted Turner say this planet only needed 250-350 mln. people? Any why is the NWO (the Bilderberg Group, Rothschilds, Rockefellers, etc.) claim ‘population control’ is necessary? For whose benefit?

http://revolutionarypolitics.com/?p=1929
——
Nice, brand-new condos in Miami at 50% off! —

http://www.nytimes.com/2009/07/29/business/29miami.html?_r=1&em

#29 marnic on 07.30.09 at 9:50 pm

Next up lot number V758219: 67-year old wooden box on small patch of dirt, might not leak, do I hear seven hundred grand?

#30 Peter on 07.30.09 at 9:50 pm

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/07/wells-fargo-pulls-out-of-canada.html

#31 Joseph on 07.30.09 at 9:58 pm

What’s really disturbing about this post is Garth’s inference regarding the continuous barrage of statements coming out of the mouths of government and financial sector leaders who are telling us that the recession “is over”, when the reality on the ground tells a different story. It is interesting to listen to the likes of Jim Rogers and Doug Casey who are consistently saying that the US government is distorting numbers on unemployment rates, inflation rates, etc, in attempts to project a healthier economy than that actually exists. Doug Casey even questions the numbers supposedly reflecting “growth” in China’s economy this year that so many pundits tout as gospel. If we can’t really trust the official numbers, then we are going to have to find another barometer to determine what is really going on out there. People like Jim Rogers and Doug Casey seem to have the knack to read between the lines when official government economic data is being released. I can’t do that.

#32 jess on 07.30.09 at 10:02 pm

Is canada following the same play book ?

The Economic Outlook and the Fed’s Balance Sheet: The Issue of “How” versus “When”

July 29, 2009

William C. Dudley,

http://newyorkfed.org/newsevents/speeches/2009/dud090729.html

#33 Nostradamus Jr's Analyst on 07.30.09 at 10:07 pm

This just in….

Wells Fargo pulls out of the Canadian mortgage business:
http://financial.wellsfargo.com/mortgagebrokers/en/index.html

These were the clowns who specialized in the 40 year mortgages that Harper introduced and then canned.
Now they’re running like hell.

What’s the meaning of this, Garth?

#34 EJ on 07.30.09 at 10:17 pm

The place in that pic looks like one of Kunstler’s eyesores of the month. I always cringe when I see the vinyl siding go all the way to the dirt. It’s something you typically see in trailer parks.

Check out the actual listing too. It oozes with the effort and professionalism you commonly see from the 6%’ers during “boom” times: A single crummy picture and a “call for more info” one-liner. The surprising lack of spelling mistakes can only be attributed to its brevity.

#35 HousesforDummies on 07.30.09 at 10:38 pm

#5 – How do you get a take home pay of 7K from being paid 110K? Fancy accounting?

#36 AndyE on 07.30.09 at 10:38 pm

The idea that the Canadian government has the ability to prevent this bubble from popping is interesting. I’d ask why folks think our government is better able to do this then the one failing at the task (though giving a college try) in the U.S.?

Best of luck out there.

#37 NotaGreaterFool on 07.30.09 at 11:17 pm

Dave – been a while….what is the likelihood of a depression? 10%, 20%, 30%???

#38 lemontory on 07.30.09 at 11:18 pm

My partner lived in that area for about a year. He said he couldn’t walk down the street without being propositioned by drug dealers or sex workers. His car was vandalized, then someone did a hit and run on it while parked on the street, the apartment he lived in had regular break-ins (even though it was a decently secured building). The list goes on and on.

But sure as the sun will come out tomorrow, someone will buy it. Someone always does.

#39 Cordoroy Cowboy on 07.30.09 at 11:25 pm

Wow, that is one fugly house. I would be afraid to wipe my a$$ with it, let alone live in it. You couldn’t pay me to live there. I’d sooner live under that blue tarp that is hanging on the fence. These sellers sure are apathetic, no one picked up any crap on the lawn for the Realtor’s picture. I guess they don’t need to expend any energy flogging this thing…in this hot market houses sell themselves. *shakes head in amazement*

#40 North Van Dude on 07.30.09 at 11:27 pm

Hal- give it up already. You are posting the same copy every day.

Fraser and 13th must be one of the worst locations in East Van. The house is on the 12th ave side of 13th, so the back yard is within earshot of what is effectively a 4 lane highway. Fraser might as well be a 4 lane highway also, so at least it will allow the cops to arrive quickly when the drivebys happen.

#41 North Van Dude on 07.30.09 at 11:28 pm

Great gazoo- spot on…except that almost every govt is in this situation.

#42 Landlord on 07.30.09 at 11:43 pm

Dave, it’s time to rent!!

#43 dave99 on 07.30.09 at 11:51 pm

Tales from the front lines…

A friend of mine is considering becoming a first time buyer (against my advice)

The details…
He and his gf make about $85k combined,
no debt, $30 k saved, both 28
she’s an only child, lives at home with her mom who is going to lend them enough to put down 20%
just got approved for $450k mortgage and are horrified they were approved for so much, as they know they couldn’t carry that much

Whether or not they will actually buy, I don’t know. But I think she calls the shots, and he is reluctantly going along. I’ve done all I can to advise him, and he’s on his own now. Terrible shame.

#44 TrueGritCalgary on 07.30.09 at 11:54 pm

Garth, after seeing the picture and reading the listing you have posted with this entry, I have just stopped laughing long enough to type this comment. Sorry, but I have to run, I don’t think I can contain my giggles any longer.

#45 TrueGritCalgary on 07.31.09 at 12:05 am

#23 Nostradamus Jr’s Analyst, very funny post.

“Well maintained, a beautiful front yard for the kids to play in, desirable and central location nestled between Crack St. and Whore Ave., and plenty of great shops/restaurants/bars just 3 km away”

Your little blurb makes you sound like you have the potential to be a great ( and by great, I mean slimey)realtor.

#46 Kilt on 07.31.09 at 12:20 am

Hey Dave

You and your wife/partner should max out your RRSP, then take the refund and dump it on your mortgage. Repeat until mortgage is gone.

Can’t help with line of credit advice since I would never have gotten one in the first place.

Kilt.

#47 spstarr on 07.31.09 at 12:32 am

Given that I’ve been unemployed since April (my job moved overseas) and just signed up for EI, the IT industry is in SERIOUS trouble right now. I don’t buy any of the bullsh*t from the government or BoC. The recession *IS* hitting home and im fearful if I don’t find work soon. Everything is too expensive and inflation is going to make this so much worse!!!

#48 GG on 07.31.09 at 12:35 am

Dave, when your mortgage term expires, sell and rent.
Get a home business and deduct your rent- Stay away from the inner city-rent a place in outside the city where rent is cheaper and peacefull too.

#49 David from the Sunshine Coast, Qld on 07.31.09 at 12:43 am

Here’s a gem from Down Under that begs the question of what bank would lend an 18yo labourer 25x his declared income.
http://www.news.com.au/business/money/story/0,28323,25765394-5013951,00.html
FYI: We have record low interest rates and a $21k Govt incentive for first home buyers.

My money is on your bubble popping first, we’ve still got a few gamblers/ponzi investors to go.

Oh yeah, I’m from that other Sunshine Coast that’s ranked #265 in the world with an affordability index of 9.6!

#50 real estate in the 21st on 07.31.09 at 12:45 am

Air Canada just refinanced with GE. I think they are paying 12% plus. Anyone who doesn’t see rates going up …….
Welcome to the ride down in some of the inflated markets. The rates will crush some and others will prosper. Could it be the early 80’s all over again. With variable business loans climbing up to 20%

I still believe real estate in the right market can cash flow and provide wealth…………but it ain’t in Vancouver or Toronto.

#51 rubberduckie on 07.31.09 at 1:25 am

For the East Van PoopShack…. lazy realtor cannot even be bothered to add a relevant description, such as “Offers may be presented on Tuesday at noon! Great price! Great area! Don’t miss this one!”

#52 Epictetus on 07.31.09 at 1:39 am

Hey Garth, and all puzzled but thoughtful commenters on this form.

Pardon my salty language, but what the fuck?

I live in Vancouver, and I’ve been cringing for the recession to hit hard and heavily since the iBank crash of last October. Yes, RE went dormant, and a few layoffs were announced. The “walking-around” reality is strangely disconnected from what should be tidally powered economic facts. We go about our lives, watch that the realm of multiple offers has returned, and we see plenty of good folk from all social strata out and about, even in the bizarro heat wave.

Is it really possible that “The Worst Recession since THE DEPRESSION” passes with hardly a wimper? Strikes me as very unlikely, and yet, who in hell is paying the piper? All around me it’s business as usual.

I have, rightly in my view, stayed out of real property since 2004, when value and price appeared to lose all rationally defensible correlation. I am still comfortable with that choice, but I feel as though I’m walking among the grinning oblivious. The pip of it is, these are good people, smart people. I’m not surrounded by morons. Do they really see something I don’t, or is the current scenario weird in so many new ways that it’s not possible for any rational person to effectively respond?

Honestly, what is everyone thinking? It feels to me far too much like nero fiddling while rome burns, but I can’t see where that fire’s coming from, despite strenuous effort.

#53 Mike (Authentic) on 07.31.09 at 1:59 am

Realtor Fees are not cheap, in fact, they quite expensive when you sum it all up. They should be flat fee’d IMO (but I won’t get into that).

The fact is sellers (and buyers) forget about Realtor Fees because they are a “hidden expense”. Realtors will tell sellers “you made $XXXXXX on your house, RE really works” but then you don’t see the RE fee hit till the lawyer removes it from the sale price.

Fine if it is a booming RE market, you make 50% over 2-3 years and everything is roses. But in markets where your close to underwater on your selling costs and houses are depreciating, then it really should be more paid attention to.

Mike

#54 Mike (Authentic) on 07.31.09 at 2:04 am

Just off the cuff:

Wife and I were talking about Calgary RE (as I’ve been following it very closely for 5 years now) and while house prices have fallen there (by CREB stats), “real life” stats show a greater fall in prices.

A year ago in Calgary when you looked at hundreds of inner-city houses for sale on the MLS most sellers listed their homes near/at/above “1 million $”, “everyone thought they home was worth a million”, now, these same areas, and in many cases homes that didn’t sell with DOM over 365, it’s “$700k ish prices”.

That’s a off-the-cuff price drop of 30-33% in a year. The “official” CREB stats do not show it because they just report houses that sold, not sellers trying to sell or their original list price.

Mike

#55 SF Banker on 07.31.09 at 2:23 am

As a guy who works in the investment industry for a living, and used to live in Canada prior to moving stateside (San Francisco), I can assure you Canada is f**ked beyond believe and the crash there will make what is going down here in the US (full scale financial and social armageddon underway) look like a walk in the park.

Remember, America has significantly higher incomes (plenty of households, including my own, consider 300k/year a “bad” year), much better weather and opportunities (at least until recently), and has more leverage in the global credit market (given de facto global reserve currency of the USD), than any other nation on the planet. I am not saying this to be mean – don’t get me wrong – but Canada is but a bit player in the global political and economic system. I loved living in Canada (where I grew up), but the place is so minor leagues and it doesn’t even know it. Everything should be half off the top cities in the US and right now it is double and that spread is getting bigger. I’d sell every asset (including the CAD dollar) and get my money into forex ASAP if I was a typical Canadian with a brain. The entire country will reek of death and destruction 2 years from now – mark my words. I say this to help, not as a critique. I fear for my friends and family up north – watch out guys!

#56 Munch on 07.31.09 at 2:26 am

“muckamuck economists, the prime minister, realtors with cufflinks, Canwest”

BWAHAHAHAHA

That says it all!

#57 Van Sims on 07.31.09 at 2:34 am

My 2 cents worth – Pay Off that Debt first thing! What are you both (just one spouse – no kids?) spending all that money on every month? Cut up those credit cards & get down to really liberating yourselves. Well – you could keep just one – for emergencies – the one card with the lowest interest rate – but first pay them all off!

#58 Bob on 07.31.09 at 3:49 am

Bank of Canada will raise interest rate when inflation get outta control~

#59 jeff on 07.31.09 at 6:11 am

lol!!! $700,000 for that smuck…what free country, if this was a free country, we’d be getting everything for free -ggg

#60 Brad on 07.31.09 at 6:31 am

I suggest you all read this very dark report:

http://www.larouchepub.com/other/editorials/2009/3629oct_surprise.html

#61 Bill-Muskoka (NAM) on 07.31.09 at 7:44 am

Finally, we have the Top Man (Secretary of the U.S. Treasury) showing us how the economy works regarding RE. Yes, thanks to Jon Stewart’s stalwart British correspondent, John Oliver, we can now gain complete insight into how the Americans are dealing with the RE situation.

Timopthy Geithner’s House is for SALE!

#62 Jeff in Pickering on 07.31.09 at 8:04 am

Further to above, there’s no way $110K a year makes $7K clear per month. That supposes their take home is 76% of their gross ($9167). When you consider EI, CPP, and taxes, I think not.

Regardless, I think Dave’s decision hinges on what they want/plan to do. If the house is a long-term thing, then they probably have the means to start retiring some debt and building up some equity.
If they plan on flipping it withing 5 years, I’d be out of there like a dirty shirt. Sell it, take the penalty and rent for 3-5 years and save, save, save. Then buy back in.

You forgot the purses. — Garth

#63 Jonathan on 07.31.09 at 8:23 am

#25 Hal Smith

I just hope I’m not bailing out people like you.

Everyone in an economy except for banks are losers from high home prices. High home prices require two incomes and no children and they require our future disposable income to be sent to the banks and not into goods and services. Furthermore they risk the entire nation’s solvency if the stimulus gets removed, or if new stimulus measures aren’t strong enough to add any more to the value of real estate.

What our government has done is not capitalist, it is not conservative, it isn’t socialist. It is communist. Flaherty, Harper and Carney act much like we are China rather then a free market Canada.

#64 cj on 07.31.09 at 8:25 am

mike (authentic), you keep talking about how the CREB stats are wrong yet all your remarks are anecdotal at best. If prices were off 30% it would show up in the numbers, they arent. Trust me I’m not bullish on calgary RE but I am realistic. Calgary prices haven’t tanked like so many had hoped, listings are in the toilet much to everyone surprise. If crude goes to $200 like Garth thinks what do you think happens to wages in calgary and RE prices?? Personally i think we are 5 – 8 yrs away from that but who knows. Sometimes reality sucks!!

#65 sean on 07.31.09 at 8:29 am

The penalty to get out could be much worse actually.
The banks have started using penalty option 2:
The difference in interest rates for the remainder of the mortgage term.
A friend’s bill on a 200k mortgage=16,000!! (3 years with approx 3% difference)

Yes, you are quite right. The banks will always pick the HIGHER of the IRD or three months’ worth of payments, as is their contractual right. In this instance Dave’s mortgage is close enough to current rates I am confident the latter would apply. — Garth

#66 Mike (Authentic) on 07.31.09 at 8:40 am

Wells Fargo Pulls out of Canada.

I wonder what they see the majority of Canadians do not? They lobbied hard in 2003* to get into the Canadian lending market and I think they were the first to offer 30yr mortgages when they got in…

Now, they are out.

Mike

*Might be 03/04.

#67 Mike (Authentic) on 07.31.09 at 8:54 am

64 cj on 07.31.09 at 8:25 am mike (authentic), you keep talking about how the CREB stats are wrong yet all your remarks are anecdotal at best. ”

I do have quite a bit of evidence I can send you if you like for proof. My point is people who do not watch the MLS on a almost daily basis (no, I’m not a realtor) would miss it. You would have to watch about a few hundred properties and have a good memory of what they are not selling and dropping by.

It’s not a data stat CREB tracks*, maybe they should?

*Not-sold prices.

Here are a some you can watch too:

This one listed around $1.10 million 1.5 years ago, not sold: Today: $739
http://www.realtor.ca/propertyDetails.aspx?propertyId=8469460

This one listed around $875k 1 year ago, not sold: Today: $597
http://www.realtor.ca/propertyDetails.aspx?propertyId=8368186

This one listed around $880k 10 months ago, not sold: Today: $588
http://www.realtor.ca/propertyDetails.aspx?propertyId=8427673

Bowness lakefront property, usually around $1-1.2m last year, this one not sold: Today: $749
http://www.realtor.ca/propertyDetails.aspx?propertyId=8515234

This one listed around $1.4 million 1 year ago, not sold: Today: $879k
http://www.realtor.ca/propertyDetails.aspx?propertyId=8519529

This one listed around $890k 2 years ago, not sold: Today: $578k
http://www.realtor.ca/propertyDetails.aspx?propertyId=8369732

This one listed around $1.1 million 1.5 years ago, not sold: Today: $814k
http://www.realtor.ca/propertyDetails.aspx?propertyId=8169900

You will see the homes are all over the city, not in 1 area, idea neighbourhood, but they are all nice renovated, good location (no knockdown) homes.

You might be tempted to buy one, but remember, even with the big fat price drops no-one wants them for that price.

Mike

#68 Downsized and Delighted on 07.31.09 at 8:56 am

How can you possibly give Dave advice without knowing what he bought and where? Are all real estate purchases equal in your mind Garth? And ALL babyboomers will be dumping their beautiful properties in the next few years? Get serious. The ones who will be dumping properties are the ones who bought shitty houses to begin with, not those who waited 10 years for the right house in the right neighborhood.

So Dave, assuming you bought in a good neighborhood (which I admit seems unlikely), pay the house off in 5 years. If it is a lousy house in a lousy neighborhood, sell it now while you have the chance. And let this be a lesson to you to think about your next purchase more carefully.

Your advice, then: Sell, or pay it off. Well done. — Garth

#69 Mike (Authentic) on 07.31.09 at 9:00 am

#55 SF Banker “Canada is but a bit player in the global political and economic system. I’d sell every asset (including the CAD dollar) and get my money into forex ASAP if I was a typical Canadian with a brain. ”

I do agree with you on Canada being “smaller” than Canadians think. But I have to disagree with your “dump the CDN”, I’m actively dumping USD every day FOR Canadian dollars, no way I’m getting sucked down into the USD depreciation QE hole. Plus the US is in such economic trouble they could lose their AAA rating (should have already) and WILL lose their “#1 spot in the world” financial system in the future. The US’ time in the spotlight is sadly over. But, what a run it had!

P.S. I think Canadian have more brains than you give them credit for.

Mike

#70 dontcallmeshirley on 07.31.09 at 9:01 am

Sadly, #25 Hal Smith is right.

The G will not let the markets correct in any significant way. Instead they’ll gradually increase the money supply and keep inflation at a “manageable” rate.

RE may be the best hedge against inflation.

We likely won’t see any deviation from this path until a new gov’t takes over and possibly installs a new mandate at the CMHC.

#71 smw on 07.31.09 at 9:10 am

A recession is defined as two quarters negative growth.

But we have one quarter of very marginal “growth”, mainly cost savings attributed to laying off staff, and the talking heads start waving the flag.

I call bull shit.

They’ve been saying its over before its even started for the past year. Shit, it took a year for the USA to admit that in 2007 they were headed to recession or it was even possible.

In politically correct terms, if the recession is over, then get ready for another after Q3 and Q4, if following the model of requiring back to back quarters of negative growth.

Does anyone recall what bank or realtor company came out with the inflated real estate growth numbers over the past thrity years, last year, stating that over the period growth was 5%, with out factoring in INFLATION? The had to retract and admit that they released the press note without using their abacus to count first. You can’t even trust them to do grade 6 math.

Historically housing has grown at the benchmark central bank inflation target of 3%, housing is no different but nice try from special interest.

The extra froth will eventually spill over. As you point out Garth, salaries will not grow at 300% over the next ten years.

This bubble has nothing to do will a solid and prosperous economic engine, it has to do with emotion and speculation.

The hard target of June from our central bank makes me think that the coordinated effort from “G7/G8″ nations involed in the almost 0% bank rate policy are all planning on moving rates lock-step with the USA. Why else would Carney be so sure that rates will stay steady? Because he’s not running the show, the USA is.

A very well co-ordinated dry heave.

As other have pointed out, keep your peepers on those US bond auctions.

#72 PTDBD on 07.31.09 at 9:15 am

“But maybe misery is just a lagging indicator.”…Garth Turner

Pete Seeger sang so long ago
Of farmers, miners, workers on this land,
Brothers all brought low.
He prayed they’d finally make a stand.

Then they would own those banks of marble,
those vaults of silver and gold.

Well, they now do own those banks of marble.
They own those vaults of silver and gold.
Rescued with their debt, tax, and sweat.
Still Bankers foreclose on their hovel,
There’s many a million in bonus yet to get.

#73 Cash is King on 07.31.09 at 9:24 am

Oh oh. Looks like I’m going to have a large back tax bill to pay….with interest….and penalty. The Fed’s have found a way to narrow the deficit. Ebay sellers unite!!

http://www.cra-arc.gc.ca/nwsrm/rlss/2009/m07/nr090730-eng.html

Saving Cash for the Crash

#74 Dan in Victoria on 07.31.09 at 9:41 am

Dave,everytime you spend some thing on a”want” and not a need it costs you 5.08%.Look at it this way,You get up and drive to work along the way you stop at Timmies and order a coffee x-large double cream, pick some change out of the ashtray and pay then continue on to work.The wife does the same thing coffee x-large double doule,and continues on to work.So your household just spent $3.36 today on “wants”,now at the end of the week you both worked hard and you deserve a dinner out,nothing fancy, a couple of $15 entrees and a drink special each.About $50 after tax and a tip to the flirty waitress.So $66.80 on some small “wants” no biggie.Alright,x by 50 weeks(because you are going on a Vacation for 2 weeks,another “want”) comes to $3,340 for the year but since you didn’t pay debt down,the debt still is there, therefore add 5.08% to it.Another $170.So just on that, for one year $3510 times that by 3 years when your loan comes due thats $10,530 that didn’t WORK for you. (I guess you could compound it also).I don’t know if this will make sense to you or not but think about it anyways.Every time you spend on some “want” its costing you a minimum of 5.08% and you are extending your loan time, which is costing you interest(rent)on your loan,think about it.PS you also have to go make that money again to pay the debt down thus doubling your time.

#75 Denis on 07.31.09 at 10:01 am

The penalty to get out could be much worse actually.
The banks have started using penalty option 2:
The difference in interest rates for the remainder of the mortgage term.
A friend’s bill on a 200k mortgage=16,000!! (3 years with approx 3% difference)

Yes, you are quite right. The banks will always pick the HIGHER of the IRD or three months’ worth of payments, as is their contractual right. In this instance Dave’s mortgage is close enough to current rates I am confident the latter would apply. — Garth
——–
We got dinged higher than both calculations! CIBC calculated the IRD using the “posted interest rate” from when we purchased even though we negotiated a much better rate minus today’s low interest rates. which resulted in a higher IRD. Is this allowed?

It’s very much different from what’s written here: http://www.fcac-acfc.gc.ca/eng/publications/mortgages/penaltycharges-eng.asp

Which gives us the following:

3 Months Interest

Total Interest paid in 2008 was $7,550.03 or roughly $629.17 per month. It’s safe to assume that the 3 month interest penalty would be close to 3 times this amount.

3 x $629.17 = $1,887.51

Interest Rate Differential Penalty

Outstanding balance × Monthly interest rate differential × Number of months remaining on mortgage

Interest Rate 5.25% – Reinvestment Rate 4.050% = 1.2% Interest Rate Differential

$141,515.06 x (0.012 /12 months) x 25 months = $3,537.88

They charged us: $7,674.31 (We couldn’t believe it was DOUBLE what we had calculated!)

#76 rory on 07.31.09 at 10:02 am

http://www.oftwominds.com/blog.html

“To explain it to Goldbugs: Avg home has historically sold for 100 oz. of the yellow stuff. So houses are still way overpriced today, by about 2 to 1. ”

This implies median house prices of around $100K …this also would imply that only one working memeber per hshld and that are std. of living/wages is way ahead of itself in the global context …again if this is really an accutate/historical guage then yikes down we go.

#77 POL-CAN on 07.31.09 at 10:06 am

Another scary graph via TAE:

http://2.bp.blogspot.com/_9ZzZquaXrR8/SnJTEHQZnYI/AAAAAAAAEbE/outD-o6jong/s1600-h/Dow29-S%26P09.gif

No further comment required

#78 Sam Poper on 07.31.09 at 10:23 am

Real estate agent agent portion of the GDP was the highest of all sectors in May? Geez

#79 jess on 07.31.09 at 10:46 am

#61 BILL

….that is soooooo hilarious. i set a new distance record for spitting coffee. no polyurethane needed.

#80 jess on 07.31.09 at 11:07 am

does anyone know where to look up how far behind people are on their local taxes? if i recall (back pre harris days )i believe on average it was three years.

#81 PTDBD on 07.31.09 at 11:12 am

Media snippets on perspective

This Land –
Living in Tents, and by the Rules, Under a Bridge

Banks Paid $32.6 BBBBillion in bonuses during the taxpayer bailout which was caused by a crisis of fraud and leveraged risk taking.

“Financial analysts are only wrestlers with ties”, he said.

“You get what you pay for, and the investors sure don’t pay them.”, she replied

“I’ve woked here for twenty years and now I’ve lost my job. How much do I get for my Pension stocks?”, she asked.

Nothing, absolutely nothing they replied.

“And my Bonds?”, she asked in desperation.

“We, the executive of AfraudInc. repectfully petition the bankruptcy courts to give us our 27 million dolars in bonuses. we need them to keep our top talent. They got us where we are.”, they said.

“I plead the 5’th.”, he said.
“Granted! Thank you for the repect you have shown to this institution”, the judge replied.

“They deserve those millions in bonuses. They work hard. And besides, a million isn’t much these days.”, she said.

“There is something enormously satisfactory about a weasel!”, said BubbleVision Maria.

“Buy!”, they all said.

#82 HJD on 07.31.09 at 11:13 am

#60 Brad: The link you provide is ridiculous. Here’s one quote from the sick absurdity that appears to have struck your fancy. Or, perhaps you didn’t read the whole article.

“What is to be done? The first step is to deliver a crushing defeat to President Obama’s and his economic team’s prescription for a Nazi-modelled euthanasia plan, dubbed “health-care reform.” By defeating this genocidal scheme, the opportunity will arise to purge this new administration of the likes of Larry Summers, Tim Geithner, Peter Orszag, and the rest of the behavioral economists behind this Hitlerian scheme to declare whole segments of the population—starting with the elderly and the chronically ill—as what Hitler called “lives not worthy of living.”

#83 Bill-Muskoka (NAM) on 07.31.09 at 11:47 am

#78 jess

Me TOO! Leave it up to Jon Stewart to nail something. His daily expose’s of Fox News’ absurdity and whackiness are priceless. All news people should have to swear to ‘Tell the truth, nothing but the truth, so help my credibility and paycheque!’

I also suggest watching the Monday ‘Moment of Zen’ where Sarah Palin contradicts her entire position in a mere THREE MINUTES, or the blonde Bozoman on Fox who only took 75 seconds to refute his own statement.

No wonder the world is such a confused MESS with liars like these spewing their propaganda.

#84 Moi aussi on 07.31.09 at 12:03 pm

This is a perspective on Vancouver RE from the bull side of the fence. Not saying I agree with it by the way ..
http://vanhousingbull.wordpress.com/2009/07/29/invisible-hand-of-income-inequality/

#85 jess on 07.31.09 at 12:06 pm

Citigroup among the many dished out bonuses, after receiving government aid (record.com)

… i guess the deserving forgot the b when naming this entity:Troubled (banksters)Asset Relief Program last fall. Afterall, the vpv’s (velocity pumping vultures.) must keep the flow going.

#86 Bill-Muskoka (NAM) on 07.31.09 at 12:10 pm

#81 HJD

I stand amazed that Fox news and the Rethuglicans can get away (or so they think) lieing like they do. Goebbels would have been proud of them.

#87 Dave on 07.31.09 at 12:26 pm

Remember, America has significantly higher incomes (plenty of households, including my own, consider 300k/year a “bad” year), much better weather and opportunities (at least until

———————

significantly higher incomes? I think the avg. U.S household income is $3,000 more than Canada – at the most.

#88 Dan in Victoria on 07.31.09 at 12:40 pm

Start thinking outside the box there Dave,lets say you go to the bank and ask for a loan for a new car.Great I’m approved for say 20 grand at 6% off you go a few days later new car in the driveway,month later payments start 5 years later I need another car and so the cycle continues 6% on what you owe till you smarten up.The banks pick your pocket every month for as long as they can.Now lets do it this way,save up that 20 grand to start,(make some interest along the way)now go and buy that car,but make the payments to yourself(The Bank Of Dave)at the end of 5 years go buy another one,who’s benefiting from the monthly payments? Heres another example. When I was a young fellow you had to have the 4 wheel drive with the big jet puffed marshmellow tires,so I went down to my buddies tire store and bought a set. Lets say they were $120 each,so $480 , but wait you could buy “Blemishes” for $20 a tire less,so now i got them for $400 .So now I drove them till they were just about half wore out and I would sell them to one of my buddies for half price,so $240 .So then I would go and buy another “new” set for $400 less the $240 ,so my” new” tires cost me $160.I got the best and safest use out of them.Cheap way to be cool.Go and read Chris Martenson the story of money,pay attention to fractional reserve lending and the creation of money.

#89 MenWithHats on 07.31.09 at 12:57 pm

Okay dummies listen up .
Those of you stupid enough to jump at the government’s phony ” Home Owner ” tax credit and spend ten grand to get bacl a magnificent sixteen per cent of $1350.00
You are just,plain dumb .
All NRTC’s are the same, you are only allowed to deduct sixteen per cent of the total credit .Wow ! $216.00 Loonies.
You are better off playing roulette .
If my math is wrong I am sure Garth will correct me .

#90 David on 07.31.09 at 1:20 pm

It looks like the home stagers did not have time to set up before the listing took place. A real bargain at just shy of $700K and value hungry buyers will eagerly submit multiple sealed bids to own a piece of property in the world’s next financial and leisure capital. Steven Roy knows good affordable housing value when he sees it and priceless curb appeal awaits the lucky bidder.

#91 brett on 07.31.09 at 1:30 pm

hyperinflation will push avg. toronto home price over a million. but gold will be US$10 000 to 15 000 per ounce. Here is the shocker…wages will be stagnant.

And aliens can buy the houses, right? There will be no hyperinflation, so get ready now. — Garth

#92 Bruce on 07.31.09 at 2:43 pm

HJD,

I think Brad did read the article, and so did I. I don’t agree with all the conclusions he reaches, but Lyndon Larouche has been dead-on in his predictions in the past, so I wouldn’t dismiss him that easily. Gerald Celente is another one who I’ve been following closely, and he too says that we will see “Obamageddon” by 2012. Personally, I think Obama is all talk and no substance. He was a man who just happened to be in the right place at the right time, but there is NO WAY in hell any of his policies are going to work. They simply can’t. He’s creating another ticking time bomb by throwing money at all these problems, and I’m sorry but it’s not going to work.

The Fed needs to be disbanded, and every GD one of these crooks, Bernanke, Paulson, Geithner, Summers(among others) should be arrested and sent to prison. I too believe the recent upticks on the market are pure fantasy. Like foolish sheep, we’re being deluded and have developed a false sense of security. We are going to see an economic calamity the likes of which the world have never seen. It’s time to stop putting our trust in man-made governments and institutions, as they now sit on death throw. My only trust is in Him…

#93 Downsized and Delighted on 07.31.09 at 3:00 pm

Well I thought I was clear, but apparently not. My advice was to stay in the house and pay it off in five years as Dave suggested he could. But this presupposes that Dave is only thinking of selling because YOU say he should, not because he is unhappy with what he bought.

Where did I say ‘sell’? — Garth

#94 joel brico on 07.31.09 at 3:14 pm

Great Post. Thanks.
I like to see normal people situations, like our friends and neighbors who are like this guy.

The I have “200k in the bank and made 100k and year and and 30 years old” – please help me Garth!!! Should I buy a house ???? Really get me twisted

#95 LS on 07.31.09 at 3:24 pm

@#35 HousesforDummies and Jeff

Well that 7k was just an estimate off the top of my head with no calculation. So lets make it a tiny bit more accurate. I make 66,700 a year and my take home is 4081 per month (in BC).
So 110,000/66700 = 1.65
1.65*4081 = $6733/month

So my estimate is pretty close. So they bring home about 6700/month instead of my guess of 7k. Big diff, that still leaves ~3000 a month in left over income to apply to the debt. I’m assuming this is two incomes so tax levels aren’t higher than about what I’m paying.

#96 Basil Fawlty on 07.31.09 at 5:20 pm

Re: #25 “The bubble will be patched, nursed, inflated with helium and preserved any way possible. The alternative is unthinkable. If it pops, everyone loses. If it stays inflated, you win and only the savers lose. Notice how the savers lose either way?”
The alternative to the bubble is going to happen and it will be worse in direct proportion to the extent of the current credit/government debt bubble. The time to let it happen is now, because the “unthinkable” becomes worse by the day. The credit bubble in the US should have never been implemented when the Tech Bubble burst, and there would have been a recession. Now with the continued stimulus, seven years on and counting, we face the dogs of hell. When? Who knows, but they are coming.

#97 Flounder Digest on 07.31.09 at 5:30 pm

I wonder how many of us will remain haunted, long after today, by the words of the former Canadian “SF Banker (comment # 55)”: ” I can assure you Canada is f**ked beyond belief and the crash there will make what is going down here in the US (full scale financial and social armageddon underway) look like a walk in the park . . .
The entire country will reek of death and destruction 2 years from now – mark my words. I say this to help, not as a critique.”
Jess’s comment #32, provides a link to a speech by William C. Dudley. Near the end he makes this avowal: “Indeed, one of my primary goals for this speech is to make it clear that we have not compromised our ability or our commitment to keep inflation in check. Keeping inflation and inflation expectations well anchored around a low level is essential.”
Judging from the prices accompanying the RE pics for the blogs of today and two days ago (“Incoming”), north of the boarder, the “essential” of keeping “inflation expectations well-anchored” seems hardly a preoccupation.
Give one point to the SF Banker!
As Garth said at the end of “Incoming,” “God help us.”

#98 rory on 07.31.09 at 5:39 pm

http://www.valueinvestigator.com/en/valuefavourites/thg.php#update

“As of 2006, Thakral had revenues of AU$342 million and total assets of AU$1 billion…..Remember that the Company submits to annual independent property appraisals on its hotels, retail and commercial properties. To put it mildly, recent reviews have not met our expectations. At December 31, 2008 THG wrote down its hotels by $113 million and its retail and commercial properties by $34 million. In a press release on June 19, management suggested that additional write downs of $150 million on the hotels and $6 million on the retail and commercial assets would be required. Properties held for development are expected to written down by approximately $50 million.”

So the writedowns are about $350M by my count on $1B of assets …if this is indicative of what banks, etc are hiding off the books then we are indeed at just the tip of the iceberg in this titanic economy…residental RE in Canada could be crashed by the commercial – just a guess …but all RE down.

#99 steven rowlandson on 07.31.09 at 5:51 pm

Yours in Vancouver for $699,000.
Garth either my pay has to be multiplied by 20 or the price of the house ought to be divided by 20.
apart from that what can I say but NUTS!

#100 Peter on 07.31.09 at 5:56 pm

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090731.wfacelift0731/business/Business/businessBN/ctv-business

#101 Nostradamus Le Mad Vlad on 07.31.09 at 6:35 pm

A few posters today mentioned inflation, and they are right. As night follows day, so inflation (along with some aspects of stagflation) will replace deflation. However, a few links (check the heads out — one link refers to Eurozone deflation).

http://www.uncommonwisdomdaily.com/why-food-prices-are-set-to-surge-2/

http://dailyreckoning.com/irrational-exuberance-continues/
(The Iron Curtain tumbled down in 1989; time for another tumble down of sorts?)

http://www.moneymorning.com/2009/07/31/eurozone-deflation/

http://www.alternet.org/workplace/141645/nobody%27s_talking_about_the_silver_bullet_that_could_heal_the_economy_and_cure_most_social_ills_/

http://www.alternet.org/workplace/141584/if_the_economy%27s_so_much_better%2C_why_are_stores_giving_away_stuff_practically_for_free/

Main thing that caught my eye in Uncommon Wisdom was “. . . The 1-2-3 Problem: Drought, Rising Population, And Shrinking Farmland —

“Heat and drought have been hammering, on-and-off, the bread baskets of Australia, Argentina, China and other major grain growers.”

You get the picture, and I figure that is why things are getting mighty toasty around the globe, not the least of which is Krakatoa.

Then again, this is a world of constant change, so nothing lasts forever!
——
For the record, a 2:10 clip; shows that Ahmadinejad DID NOT threaten to “wipe Israel off the map.

http://www.youtube.com/watch?v=4mScWWtRfGQ

Further — http://www.ocregister.com/articles/freeze-people-protest-2513951-sovilla-asked

“A flash mob “freeze” protest about the Iranian election scheduled to take place at the Disney Resorts entrance plaza had few people show up to freeze.”

Webmaster’s Commentary: “Dear CIA,

“The attempt to recreate your 1953 overthrow of the Democratically-elected government of Iran has cratered. Badly.

“Please stop trying to raise on a busted flush; you are embarrassing the nation.”

Courtesy wrh.com.

#102 TJ on 07.31.09 at 6:51 pm

VICTORIA, B.C. — The B.C. government has put an end to a leaky condo loan program, saying a levy on new residential projects that funded it has dried up.

Housing Minister Rich Coleman says a construction slowdown means there’s not enough money coming in from the $750 levy charged on each new unit. (* but heh, new home construction is booming, right?)

The program, run by the Homeowner Protection Office, will stop accepting applications today.

The office started lending money to leaky condo owners 11 years ago after they were forced to spend thousands of dollars on repairs because of shoddy construction.

Some homes became unlivable because of mould.

Coleman says since the program was launched more than $670 million in interest-free loans have been approved.

http://tinyurl.com/mkfdlq

#103 Bobby G on 07.31.09 at 6:59 pm

http://www.321gold.com/editorials/schiff/schiff080109.html

More words of wisdom

#104 Nostradamus jr. on 07.31.09 at 8:27 pm

#83 Mau Aussi

>>I personally know a few Goldman Sachs employees based out of Manhattan that recently purchased very high end condos in Kits.<<

…YES, Vancouver will become the next financial, trade, culture and leisure capital of North America.

#105 John m. on 07.31.09 at 9:08 pm

Thanks Garth for telling it like it is——–your advice if absorbed is priceless and its free———-i sure wonder what motivates our government and the many who disagree??

#106 John m. on 07.31.09 at 9:21 pm

96 Flounder Digest on 07.31.09 at 5:30 pm

I wonder how many of us will remain haunted, long after today, by the words of the former Canadian “SF Banker (comment # 55)”: ” I can assure you Canada is f**ked beyond belief and the crash there will make what is going down here in the US (full scale financial and social armageddon underway) look like a walk in the park . . .<<<<<<<<,sadly i think he is right …..our resources have been sold for pennies on the dollar…… our politicians are borrowing billions to look good a day at a time…..while they promote the practices that caused the problem in th first place—-other countries learned by their mistakes–things are different in Canada :-)……….were f——-d!

#107 jess on 07.31.09 at 9:22 pm

The pitch was” that while Capco would not insure customers against investment losses, it would compensate them if the firms failed.”

“Capco was created in 2003 by Lehman and 13 other banks and brokerage companies as a kind of marketing tool. ..
Capco promises to provide virtually unlimited coverage above the $500,000 offered by the Securities Investors Protection Corporation and its equivalent in Britain. ..

Creditors and former customers are battling $32 billion of assets that have been tied up in Lehman’s London prime brokerage unit.” http://www.nytimes.com/2009/07/31/business/31insure.html?em

#108 blobby on 07.31.09 at 9:29 pm

@#101: Why dont they just build condos properly in the first place? And sue the building companies that dont?

#109 taxpayer like you on 07.31.09 at 10:24 pm

97 Rory. Hey howz it goin?

I read your link, but I’m not sure how we jump from a real estate company writing down its assets to what
the banks show on their balance sheets in this case. Total
assets of the company approached $1.5B ($1B was
2006 value) of which they re-appraised as dropping by $350M. It actually sounds realistic and responsible(!)
It also said debt-equity was only 39% (not sure which asset value) which IMO the banks would be thrilled to show on their books.

#110 TJ on 08.01.09 at 12:22 am

Goldman Sachs employees buying high end condos in Kitsilano.

There goes the neighborhood.

Buying a condo here in banana land should be easy, after all these flim flam men are cashing million dollar bonus checks for running a black box in the basement.

That block box has destroyed the US credit system and the Goldman Sachs tentacles run out all over the planet.

Bank of Canada chief Mark Carney is a GS alum.

#111 Nostradamus Le Mad Vlad on 08.01.09 at 12:25 am

Further to the links / posters who mentioned inflation —

http://www.marketskeptics.com/2009/07/doubts-about-feds-ability-to-control.html

“The Fed has NO workable exit strategy. The US is about to enter a period of stag(hyper)inflation worse then anything experienced in over a hundred years.”
——
Does anyone here believe pigs fly? ABC is the “Momma Knows Best” cartoon character for the WH. —

http://www.lewrockwell.com/blog/lewrw/archives/31449.html

“This ought to tell you what the government-media coalition has planned for us down the road concerning its swine flu crisis and the militarization of health care. ABC certainly had to offer a sweet pot to entice Dr. Besser to jump from government mouthpiece to media mouthpiece. There’s a big job planned for this fella. Red flag anyone?”

— and — http://www.reddirtreport.com/news.php?id=12022

“Another thought occurred to me. In theory all nations are at more or less equal risk from this flu pandemic we are assured is on the way. Are any nations, other than the US, deploying their armies to “assist”?”

Canada, for one, would be more than happy let let the US military in to ‘assist’. This link — http://www.joc.com/node/412655 — may hold further implications, as NAFTA dropped 35.4%.
——
The heading and a pic here seem to be saying roughly the same thing — the IMF and Krakatoa are equally dangerous! —

http://emsnews.wordpress.com/2009/08/01/imf-report-should-scare-us/

A chart and text which contains the word ‘sheeple’. The US has their own flock of sheeple too! —

http://market-ticker.denninger.net/archives/1280-GDP-In-Pictures-The-Truth.html
——
Jes’ wunderin’ if the US is quietly selling off its assets, like Canada has done. We ain’t got hardly nuthin’ left here — most of has gone to the US or overseas buyers (China and Russia?). Life is so complicated! —

http://money.cnn.com/news/newsfeeds/articles/djf500/200907310631DOWJONESDJONLINE000489_FORTUNE5.htm

http://www.bloomberg.com/apps/news?pid=20601080&sid=a51TSQvBDpmE
——
The list keeps getting longer. —

http://www.stockhouse.com/News/FinancialNewsDetailFeeds.aspx?n=12666292&src=cp

#112 nonplused on 08.01.09 at 12:42 am

#60 Brad

Come now. Every single day there is a paper currency somewhere in the world in the process of dying. First we mocked Zimbabwe, but then Iceland proved they could do it even quicker, and it goes on. No paper currency has ever survived, and there has been many. But yet life goes on.

I wouldn’t disagree with LaRouche that the US dollar will become worthless eventually, and certainly it looks to be an accelerating process. Maybe something happens in October, Jim Sinclair (jsmineset.com) has a countdown on to about the same time period but I haven’t figured out what he is forecasting to happen.

But in the end of the day life goes on. Paper currencies are commodity derivatives. Always have been, always will be. It is what they buy that gives them value. So when the paper collapses, the commodities are still there. It won’t take long to find a new way to transact. You might not be able to use your debit card though.

#64 cj

Calgary real estate rallies every spring and sets the high for the year. It’s still down from the peak.

Here is the charts for the 10th time: http://www.chpc.biz/Major_Cities_Chart.htm

Calgary, Edmonton, and Vancouver are all still in downtrends. Toronto made a new high but it’s still basically flat for the last 3 years. Only Ottawa and Montreal show signs of life, but they were never in a serious bubble.

And oil is at $60 – $70, not 200. It isn’t going to 200 until somebody can afford to buy it. Maybe the Chinese? Don’t know they need a market for their toys.

#69 dontcallmeshirley

It’s all good in theory but inflation of that sort cannot work unless it flows through to wages. House prices cannot rise indefinitely unless wages, which are the means to pay for the houses, also rise indefinitely. With unemployment continuing to rise (although at a somewhat slower pace), I don’t see the wage side of it coming through.

To me it makes sense that job losses are slowing. The less people employed, the less available to fire in a given month. The way I see it, when unemployment finally hits 100%, new jobless claims should comfortably fall to zero, regardless. But for the economy to recover, we actually have to see new jobs being created, not a slowing rate of job losses.

I know there are always some job losses even in a rising economy. But we need the net of new jobs and job losses to go positive, which it has not. And it will have to stay positive for some time before we see wage growth sufficient to repair the damage that has already been done.

86 Dave

My impression of Americans is that they tend to stick with their own social groups very tightly, cradle to grave, which gives them a distorted view of the country as a whole. Rich American kids go to private schools with other rich kids and never leave their gated communities except to travel by freeway to other gated communities. Thus the rich and the poor their live side by side without ever getting to know each other.

Canada is like that too a bit, but our population isn’t large enough to not at least “see the other side of the fence”.

So arguing with an American who thinks $300,000 is a bad year is pointless. We have plenty of Canadians making the bread and eating it too, but we’re just less likely to assume it’s normal. And although Canadians are no slouches when it comes to conspicuous consumption (the number of Porsches and Ferraris on the road in Calgary drives me nuts! What use is a car like that with all the frost heaving we have every year???), Canadians tend to be a bit more European in that they have less of a tendency to show off their wealth. Most of the rich guys I know drive pickups. Domestic pickups.

Ontarians excepted, of course, as always. The bulk of the population is too far south I guess.

#107 blobby

It’s very hard to build a wood structure “properly” so that it withstands the moisture on the west coast. Especially given the temperature range. In Alberta it’s not so bad because it’s super dry. Even if you get some moisture collecting in the insulation, which freezes and destroys the R-value, at least come summer there is a good chance it will dissipate prior to the next winter. In BC, especially on the coast, it’s tough to do. Which is why the Europeans think we’re crazy to build condos out of wood.

#113 Coho on 08.01.09 at 1:48 am

#83 Mau Aussi

>>I personally know a few Goldman Sachs employees based out of Manhattan that recently purchased very high end condos in Kits.<<

Nostradamus jr replies …YES, Vancouver will become the next financial, trade, culture and leisure capital of North America.

Boy doesn’t that just make for a warm and fuzzy all over, N jr? People are beginning to call Vancouver “Gangcouver” and now we’ve got Goldman Sachs boys in the mix. Moreover, Tony Blair and Rudy Guiliani were sniffing around Surrey late last year. Something’s up…or going down.

#114 Peter on 08.01.09 at 3:12 am

Garth, as a typical canadian, we already think prices are too high and not affordable…However, we got boatloads of people from China, India, Pakistan, Sri Lanka and South Korea coming in everyday and they all thought prices are TOO CHEAP here and there…You also have to remember, they have brought in their (PRICE NEVER GOES DOWN)mentality to our amazing country, this greatly reflects that in our GVR and GTA areas, they will keep buying until they reach a point where our economy hits the fan and they all got burned so bad that they have to walk out of their homes (which I think they wont because they probably hiding loads of cash under their mattress)….Lastly, for the past 2 months, there are not much motivated sellers around unless they are really needed to sell (unemployed and could not afford all sorts of payments)..or else, they rather get credit line and home equity line (banks are more aggressive to lend when they get cheap money and lend them with higher interest rates)to live with until the price goes up higher (Price Squeeze Strategy)..Therefore, many of the sales for the past 3 months has alot of crazy buyers going out hunting and sellers moved up prices 10,000 by 10,000 or higher to get them into the traps…!!!

#115 Peter on 08.01.09 at 3:14 am

One last talk, my friends scarborough 700 sq. ft condo was bought at 190K 6 years ago with a $ 300 maintenance fee has gone up to $ 280,000 with $ 550 maintenance fee and people still selling and buying all over the building…many of them are newlyweds and thought price will go up forever…Maybe they are thinking Scarborough would be their next Hong Kong or Shanghai where they will see their price DOUBLE or TRIPLE by next year…!!!

#116 David Bakody on 08.01.09 at 6:11 am

Hon. Garth Turner …… you are only getting better with age …… love your line ” But what’s striking about today’s real estate market is the casino nature.” and this added to the closing paragraph and bingo ….. sounds just like we older people told our children when they wanted to buy that $500 plunker some salesman told them was a gem and throwing their bike in the trash bin ….” But Dad I can afford it”

#117 lgre on 08.01.09 at 7:21 am

why worry?

banks are now allowing mortgage holders to skip mortgage payments without penalty, by the tens of thousands..

http://www.thestar.com/business/article/674995#Comments

#118 Herb on 08.01.09 at 7:23 am

blobby @#101,

“Why dont they just build condos properly in the first place? And sue the building companies that dont?”

Because greed dictates building as cheaply and fast as possible. And because building codes are written more to accommodate the industry than protect the public. And because municipal planners and building inspectors may be negligent and/or in league with builders. And because contracts are written by builders to protect builders, with warranty periods that are too short for major problems to surface.

As to suing, it is expensive, difficult and a long process to prove liability in court, so builders know that there is a low risk of being sued and an even lower one of being sued successfully. And faced with punishing lawsuits, a builder can always disappear and surface under a new corporate name or ownership structure.

What would help is consumer protection laws with teeth, high-standard building codes, and municipal administrations that maintain adequate separation from the construction and development industries. But those would offend against free market capitalism, so they canot be condoned. Better to tell the buyer to beware, and if it is a real dog’s breakfast, offer him an interest-free loan to haul himself out of the builder’s mess by his own bootstraps.

#119 somecatchphrase on 08.01.09 at 8:00 am

Interesting little snippet:

“Whether a sign of locavore chic or impending economic apocalypse, a recent spate of hobbyist farming books promise the industrious (and hungry) among us that a lack of land, money or skill shouldn’t get in the way of raising your own animals for food. ”

http://themoment.blogs.nytimes.com/2009/07/30/book-soup-farming-fantasies-fulfilled/

#120 rory on 08.01.09 at 10:05 am

#108 taxpayer like you

“I read your link, but I’m not sure how we jump from a real estate company writing down its assets to what
the banks show on their balance sheets in this case.

It was my understanding that banks, esp. in the US, are carrying huge valuations on their books that do not accurately reflect their present value, so a RE company in AU is being responsible in trying to have it books ‘balanced’. It is also my understanding that if the US banks did show the ‘balanced’ books many would be insolvent…not sure about Canada.
Was just trying to show that the down side may not have yet have been accurately reflected and their is a down side – not all rosy and ‘green’ as some say.

“It also said debt-equity was only 39% (not sure which asset value) which IMO the banks would be thrilled to show on their books. ”

The link was to a value mutual fund which would be one reason the fund purchased this company, not withstanding the depreciation in asset value – that one is a whoops.

As to the other thing, I am doing fine …TY

Totalassets of the company approached $1.5B ($1B was
2006 value) of which they re-appraised as dropping by $350M. It actually sounds realistic and responsible(!)
It also said debt-equity was only 39% (not sure which asset value) which IMO the banks would be thrilled to show on their books.

#121 Dan in Victoria on 08.01.09 at 10:34 am

Posts #107 and #117 wasn’t any trouble until the government types got involved and changed the codes,do you see problems with the sixties and seventies wood frame buildings.We told them when they wanted to build that way it wouldn’t work on the coast,but what did we know.Thats quite the statement #117 Herb about most of us being corrupt.

#122 jess on 08.01.09 at 10:42 am

‘help is consumer protection laws with teeth’
agreed!get rid of caveat emptor and replace with DO NO HARM.

#123 jess on 08.01.09 at 10:54 am

banks don’t like all at once defaults

could it be that to create an orderly unwinding, is to offset the TIMING of these possible defaults into the future.

#124 TJ on 08.01.09 at 1:57 pm

So – how goes our largest trading partner’s RE woes?

Of course, this could never happen in Canada.

Our smug little line of huts huddling the 49th are going to keep going to the moon, so relax, and have a great Long Weekend.

http://tinyurl.com/mezjmm

With the bulls desperate to keep pumping up the stock market, spin has been refined to a fine art. Even in the faintest of glimmers they can somehow plot a return to new heights.

If only it were so. . .

Yesterday’s news on new homes sales is just the latest example of this madness. It’s a world where the skies are not cloudy all day.

You see new home sales were actually down 21% over June 2008 — which was flat out horrible. But since sales rose 11% from May to June, the bottom in housing magically appeared.

And if you believe that one, I have a slightly used bridge to sell you.

From CNN Money by Les Christie, entitled: New home sales: ‘Really good news’

“Sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes,” according to a report released Monday.

The gain over May was much greater than expected. A consensus of housing industry analysts had forecast seasonally adjusted sales of 352,000, according to Breifing.com.

However, sales are still 21% below the levels of a year ago, when new homes sold in June at an annualized rate of 488,000, according to the report released by the U.S. Department of Housing and Urban Development. Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month. (emphasis mine)

Still, the report was very positive, according to Peter Morici, an economics professor at the University of Maryland who had forecast June sales to be at the 350,000 level. “That is really good news. Considering what’s going on in existing home sales, with all the foreclosure activity sending down home prices, for new homes to jump like that is a good indicator that the economy is bottoming out.”

The median price paid for a house sold in June 2009 was down about 3% to $206,200; the mean price was $276,900.

By the end of the month, the inventory of new homes had dropped to 281,000, an 8.8 month supply at current rates of sale. Last month, there were enough homes on the market to last 10.2 months at that rate.

“They have to clean out that stock to get building again,” said Morici.

“Normal” new home inventory is about 300,000, according to Newport, which we’re already below. But, he adds, the median time to sell a home is at an all-time high of 11.8 months.

“That tells you it’s still very hard to sell a new home,” he said.

The bottom in housing is nowhere in sight.

http://tinyurl.com/mezjmm

#125 EJ on 08.01.09 at 2:12 pm

#116 Igre:

That is one ugly link. Just ugly. But it goes to show you to what extent industries will go to keep prices high. Heaven forbid the gong show of unaffordability gets exposed and prices drop. We just can’t have that, can we?

If it’s just the banks taking a profit hit on this action, fine. But you know how this is going to work out, don’t you? The bank’s rainy day fund for bad loans will be exhausted and then the government will step in and hand them taxpayer money.

I’m sick to death of footing the bill for the irresponsible. If this keeps up much longer, I’m really considering moving to a country that doesn’t reward stupidity. Does such a place even exist?

#126 rory on 08.01.09 at 2:37 pm

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090801/ignatieff_ei_090801/20090801?hub=Canada

For all the Con bashers that somehow figure the Libs are going to ‘right’ the ship in Canada, pls read this…good way to trigger an election by painting the Cons as uncaring while the Libs will spend foolishly …since this picture before.

Am not endorsing either party but just saying nothing is black and white.

This is not a political blog. — Garth

#127 jess on 08.01.09 at 3:29 pm

predatory capitalism has knocked out a few builders in the u.s.a.
http://builder-implode.com/#tiny

#128 wayupnorth on 08.01.09 at 3:51 pm

#116- Banks allowing mortgage holdrs to skip payments.

Several thoughts come to mind- First is that it easy to be helpful if it is the taxpayer who has the most to lose in a bankruptcy because of CMHC and all you have to worry about is how high your profit and hence your bonus will be.

Second, if you read the article it did mention doing a loan consolidation that would eventually get paid off in 7 years but no mention of how this person was going to somehow start paying all their bills that created the debt in the first place.

Third, the big difference south of the border is the criminal element running the country steals in front of the peoples eyes. In Canada our criminals lull us into thinking we are different and steal the countries wealth by inflating bubbles far longer than any other country while “helping” us deal with any problems. Refinancing mortgages and adding missed payments onto the end of a mortgage results in huge extra free interest even our crooks never thought possible before.

Fourth, like any good ponzi scheme this one will last as long as people can be fooled into thinking we are different. In the end when it bursts, those who got in first will take their fortunes off to some country so they can start again while those who got in later will get some money back, while the majority, those who got in last are screwed.

As Garth has said often- greater fools and sheeple.

#129 lgre on 08.01.09 at 5:22 pm

124EJ – This bank intervention of the stupid will only go on for a little time, until more and more will need to be propped up by bigger and bigger sums…in the short run it’s ok..because, after all the Recession is over as per Carney the clown..

Since the start of this world crisis, Canada has tried to be a hero above all other countries..with their so called ‘solid banking system’..so this prop up dosent surprise me as it once again is trying to do what others are not….it will not work, only for the short term.

I just came back from eastern europe and what a mess that region is, family was telling me how great everything was 2 years ago and now things turned 180 for the worse..mortgage rates are in the double digits already, very hard to get loans..I told them that RE is still rising in Canada..they were in SHOCK.

#130 jess on 08.01.09 at 6:25 pm

lagging indicators
Indeed states and federal programs have extended unemployment benefits several times. They do so but do not adjust the headline numbers.

Please look at lines boxed in red for Extended Benefits and EUC 2008. The latter is Federal extensions picking up where states left off. The former is state extended benefit programs.

Note that 2,656,879 people are on extended federal benefits compared to 127,438 a year ago!

In other words, the headline extended claims number of 6,416,250 is off by more than 2.6 million. And one also needs to add in another 352,000 from various state programs.
http://globaleconomicanalysis.blogspot.com/2009/08/weekly-unemployment-claims-portend.html

————————–
PEORIA — For the first time since it began massive layoffs eight months ago, Caterpillar Inc. on Friday acknowledged publicly that some of its workers now laid off will not be called back.

#131 Nostradamus Le Mad Vlad on 08.01.09 at 7:07 pm

Minus 94 In The Shade dans La Frozenagan today. 8-) Hmmmm. What will winter bring?!
——
Quietly pondering the far-reaching thoughts of out-to-lunch astronaughts and crosses, whether there is a connection between these.

One — Betelgeuse — is emanating “stuff” from itself; two — Krakatoa — is doing the same thing, at roughly the same time. Communicating, Coincidence or Conspiracy Theory?

Then there is the ‘quake line where the tsunami hit Boxing Day 2004. If all three merge then, Friday, Dec. 21, 2012 — the end of the Mayan Calendar — is followed immediately by a weird and wacky pole shift!

Essentially, no one will know what’s happening, so call an Election — could be more Snap – Crackle – Pop to jumpstart The Ring of Fire!

http://www.sciencedaily.com/releases/2009/07/090729074525.htm

http://news.ninemsn.com.au/glance/843652/killer-krakatoas-revenge

http://www.scientificamerican.com/blog/60-second-science/post.cfm?id=major-earthquake-expected-along-tsu-2008-12-12
——
Here is some not-so comforting news. —

http://www.mybudget360.com/fdic-loan-report-and-plan-c-nearly-half-of-the-77-trillion-in-loans-outstanding-at-fdic-insured-banks-are-in-the-form-of-commercial-real-estate-usps-contracting-cre-space-drop-in-restaurant-tr/

http://www.wsws.org/articles/2009/jul2009/econ-j31.shtml

“Telecommunications giant Verizon announced that it would eliminate 8,000 jobs by the end of the year, new data showed that the foreclosure crisis is continuing to mount, and weekly initial jobless benefit claims rose.”

In today’s The Okanagan Saturday, a report states that the jobless rate in Japan hit a six-year high, with job losses and falling prices which may stall the world’s second-largest economy, which leads to this:

http://www.moneyandmarkets.com/why-deflation-not-inflation-remains-the-problem-34939 . . .

. . . along with the link posted yesterday about . . . http://www.marketskeptics.com/2009/07/doubts-about-feds-ability-to-control.html

“The Fed has NO workable exit strategy. The US is about to enter a period of stag(hyper)inflation worse then anything experienced in over a hundred years.”

#132 dontcallmeshirley on 08.01.09 at 7:53 pm

#111 nonplused

…It’s all good in theory but inflation of that sort cannot work unless it flows through to wages…

I hear what you’re saying, but consider what happens to the “new” money the G creates. In practically every country, the money ends up in RE and the stock market, which means it’s in the hands of people who will spend it on something. Same as wages right?

This may not drive house prices up indefinitely but it would accomplish something just as diabolical: house prices hold at this level for a decade or two. A status quo outcome, abetted by managed inflation, for house prices has not been discussed on this blog has it?

Sadly, Hal Smith is right. The world wants this folks…can we resist the will of the world?

#133 NoFreakinClue on 08.01.09 at 9:06 pm

Hi Garth,

Pre-purchased a condo in Western province for 200k 2 yrs ago after graduation, recently sold for 275k, thanks to RE boom in middle of resession. Going all cash… Planning to Short the heck out of Canadian banks in a year or two (need to do research for their RE exposure). Got 50% return on my stock investment the past two years… not sure why people buy houses for investment… but what would I know… simple engineer immigrant scratching a leaving.

Home-buying people are insane, Realtors are smart, Bankers are immoral, 2nd recession is closer than one thinks.

AA

#134 Peter on 08.02.09 at 5:34 am

The banks are only drowning them deeper into debt by giving them these so called consolidation loan or cheap rainy day loans and these people thought they are nice people…think about it twice!!! They know they will get reasonable amount of interest on these loans until you cant paid them off and flee…So, their last resort would be your home and I know many homes across GTA area will be their appetite !! I am sure the BIG 5 banks has already forecast that these people will not survive 6-8 months later when their EI is finished and their RRSP was redempted out to pay off some debts and daily expenses…Last thing to Look at is the Toronto Life Square, the major mortgagee already went belly up and RBC was the lender of that place, the bank now takes most of that equity now and if they are patient, they can make big money when the economy recovers (perhaps 5 years later)….

#135 Peter on 08.02.09 at 5:36 am

We dont have 2nd recession but we are in a secular downtrend recession (depression) scenerio all over the world with hard and soft asset prices inflating by cheap money from our almight govt, banks and of course, our depositors 1% GIC guys and girls….

#136 Grantmi on 08.02.09 at 9:39 am

#101 TJ on 07.31.09 at 6:51 pm

Coleman says since the program was launched more than $670 million in interest-free loans have been approved.

Yea! and wait till all these 5 year loans (these are not GRANTS! These a interest free loans) are due to be paid back and the people in these condos can’t afford them.

One lady was on CKNW talk show and said she’s into this program for $100,000. She was elderly and was on a pension. She has to start paying next year she said. Guess who has a lean on here condo! Yes. The BC government due to this loan.

As Garth says.. this will not end well for those who took part. Especially recently if the value of your condo has dropped since the peak in 2007. YOU BETTER be selling to pay for this loan!