Yeah, right

flip1

Two houses, two families, two cities, two questions. No, this is not reality TV. Just reality.

Hi Garth: I’m in a little pickle of a jam,and I need some hard advice/guidance. I just turned 24 this past september, i have a small family 2 kids and a lovely wife. I am on the verge of paying off my house through a lot of hard work and a few good little investments. I have put ALL of my hard earned money into my house. We built a house ourselves and saved a fair bit of money so we have some equity built in. But here’s my problem, sure my house is going to be paid for but i have no cash , zero because its all in the house. I am proud of paying off my house but its a very bitter sweet feeling, all my money in one investment, scares me! i don’t know when work will dry up, could be this winter or maybe i’ll stay busy for another year, i don’t know

i was raised and told to pay the house off first before any toys, cars, vacations. we did our best. what should i do, we have been trying to sell our house because i don’t like the idea of putting all my money in one place, i should have been more thoughtful, we have had the house listed for almost a year and dropped the house price nearly 150,000 dollars, ( shows how inflated the housing market is). We are starting to lose money on the house, and thinking about staying knowing that the housing market will never reach the heights of what we seen. We have had a lot of showings, even offers but they have all fallen through.

there seems to be no buyers, a lot of tire kickers. I took action and i got a heloc out against my house in case of emergency, so I have some cash flow in a sense. I’ve exhausted my options, and I’m looking for options, ideas, any angle that i have missed. I do realise how lucky i am to have a soon to be paid for house at my age. maybe im over reacting, But as a father of 2 little ones you always worry about the future.

I don’t have issues with you posting this on your greaterfools website. As I would like to know what peoples thoughts are. I know my grammar sucks, what can I say I’m a welder. – Paul C.

No shame, pal. You’ve obviously succeeded according to the rules you were taught. At your age to own a home free of debt is unimaginable for many.

Having said that, you’re right to worry. If demand for your trade wanes, you have no reserves to carry you through (and it sounds like you’re the sole source of income). Arranging for a line of credit was smart, since that will give you emergency funds, but it’s no solution to having every single egg in one basket.

If financial security is your goal, then you’ve little option but to sell, raise cash, relocate, downsize and get the extra money working for you and your family. If the property’s not moving, then it’s at the wrong price. You may feel like you are ‘losing’ money by knocking the asking price down again, but after a year it’s the only path to follow.

Try taking it off the market until after Christmas, then list it again at a lower level. That way it can come out as a fresh new listing, instead of a tired dreg. And you might want to spring for a staging.

Thanks for reminding us of how a house can become a trap.

Hi Garth: I have no trouble admitting that I am a fool, but I am hoping that there are many greater fools than myself and I am doing my best to educate myself out of foolishness. Please bear with me, my understanding of economics, politics, and finances is sadly limited. I have two questions for you and sincerely hope you can help me understand the greater picture better. I am sure you get a lot of mail, and I know you can’t possibly answer all of it, but I can hope right?

My questions:

1.When the Canadian government intervened and pushed the interest rate down to keep the real estate business moving to keep money moving and keep people spending, what other options did they have to stimulate spending in the face of the rapid change in the global economy?

1. Can you see any way that this RE bubble bursting situation can be avoided at this point? What would it take, from the government, banks, or the public?

Don’t get me wrong, I am all for it bursting. We are holding our breath and keeping our happy little family of three in a 1 bedroom 560sq ft condo in Kits (that crazy Realtors have priced at $400,000) and waiting for the day when the cash we’ve saved up will be worth something a wee bit larger. While the Realtors keep telling us to fear the rising interest rates, the math doesn’t work – how do you justify bidding up an already overpriced home by another $200,000? I’ll keep working on the down payment, take a raise in interest rates, forget the bidding war increase, and possibly have a more reasonable price instead – thank you very much!

Thank you for your blog. You have helped me understand many issues that I wasn’t able to piece together on my own and you’ve got my husband and I both hooked.

Family of sardines in Vancouver

Those are not fool questions. As for monetary policy, the Bank of Canada moved lockstep with many other central banks to crash rates in the wake of the market meltdown and the collapse of credit markets last year. Was it necessary?

History will tell. We can’t yet. Certainly there was concern banks could fall like dominoes and governments had a role in backstopping the system. That’s why Ottawa spent tens of billions buying up bank mortgages. It’s also why the BoC moved to flood the system with liquidity and ensure the banks had access to all the money they needed.

But that doesn’t exactly explain why consumer rates went so low and have stayed there so long, since (unlike the Yanks) we did not have a collapsed housing sector to reflate. In fact other than the mortgage orgy this year, the lowest rates in history have done little if anything for the car business, appliances or other durable goods sales. But it sure has blown gas into a real estate bubble which isn’t in anyone’s interests.

What can prevent this bubble from bursting? Ultimately, nothing. The pendulum has swung too far in one direction to stop at the middle now. Pent-up demand from last year has been satisfied. Future demand from next year has been sucked into the present by cheap money and the threat it might increase. Higher rates are a certainty in 2010 as governments compete for money and the US moves to support its currency.

This market will not just slow down, it will shudder to a halt.

But, seriously, they want $400,000 in Kits for 560 square feet? And three of you live there?

You want advice? Get out.

There’s so much more room on this side of the rocks. So much less delusion.

97 comments ↓

#1 atrax on 10.29.09 at 11:05 pm

I strongly suggest the following BBC documentaries

http://en.wikipedia.org/wiki/The_Mayfair_Set
http://en.wikipedia.org/wiki/The_Century_of_the_Self
http://en.wikipedia.org/wiki/The_Power_of_Nightmares
http://en.wikipedia.org/wiki/The_Trap_(television_documentary_series)

The Observer adds “if there has been a theme in Curtis’s work since, it has been to look at how different elites have tried to impose an ideology on their times, and the tragi-comic consequences of those attempts.”

#2 ruraldude on 10.29.09 at 11:21 pm

Paul!
Good going sport! paid off a house by the time your 24. You don’t need to take advice from anyone. BUT if you are in the market and a little confused by all the doomers out there this is what I would do in your shoes. Stay in the house you built, your dream house. It took a welders job to pay for it but it doesn’t take a welders job to live once your castle is paid for. Enjoy the security you have in your paid off house knowing that you can still feed the youngnuns with a job at Tim Horton’s if need be. Keep spending to a min and try to build up a decent reserve with your welders job for as long as you can. Again Paul congratulations you’ve over come one of life’s greatest obstacles to financial security.

#3 Nostradamus jr. on 10.29.09 at 11:24 pm

1/
Mr & Mrs Sardine Family in Kitsilano.

…Transfer jobs and move to a locale where you can be Queen and King and not Slaves.

2/
Mr. Welder Homeowner,

…Do not sell your home! The home is Y O U R S!

Take it off the market now!

Figure out a 10 year family plan.

Garth, and others here, are here to give you positive Long Term choices/options, not Short Term advice.

So… learn first before you jump….btw, what you’ve done to this point is head above shoulders than 90% of the readers on this blog.

Nostradamus jr.

#4 Dan in Victoria on 10.29.09 at 11:27 pm

Hey Paul, I bet you know what these are and where they’re used.E6010,E6011,E6013,E7018.To bad the house market isn’t as easy to understand.If you’re not getting results,is everything finished? All the trim bits,switch and plug covers,flooring,siding you get the idea.This is VERY important that its all finished(speaking from experience here)Garth is right on, get the joint polished up,and DON’T chase the market down.Get ahead of it.By the way GOOD for you,Well done.You’ll do okay in the long run.Theres going to be a couple of bumps coming up,just look ahead and steer around them as best as you can.

#5 Kurt on 10.29.09 at 11:37 pm

Mr. Sardine: I don’t know how portable your job(s} are, but leaving Vancouver was one the best things I ever did. Think carefully, and if you do, make damn sure you got a job waiting for you, but you really should consider going elsewhere. I do not miss any of the things people believe to be so essential as to require living on the most expensive real estate in the country.

#6 rp on 10.29.09 at 11:44 pm

I don’t think Paul C. should sell his house if he can’t get a good price. I’m not sure what “on the verge of paying it off” means though. 1 year? 5 years? Put it on the market in the spring if you have to, but I think what you really want is a backup plan in case of job loss. Would you get EI? If so, how much and for how long? How long would your line of credit last? Can you cover the mortgage with two low paying jobs and family members babysitting? Don’t panic and think you need to take a lousy price. You need to think of more options.

#7 Gord In Vancouver on 10.29.09 at 11:45 pm

I just turned 24 this past september, i have a small family 2 kids and a lovely wife. I am on the verge of paying off my house through a lot of hard work and a few good little investments.
_______________________________

This dude must be in northern Alberta.

#8 Dan in Victoria on 10.29.09 at 11:46 pm

Mrs Sardine,once the “Government” meddles in something it distorts.Mice become elephants,bubbles become ballons,idiots become managers,sporting events become multi generational debt etc.They may mean well,but it never works.Its like a math equation you can go round and round and introduce all the variables you want but the ending is always correct.When there is a rise in interest rates the first row of greater fools will be mowed down,as rates go up more rows of them will be mowed down.There will be huge amounts of financially crippled people out there.There will be a correction,how large,how long, and how much?Who knows?

#9 mariaboombah on 10.30.09 at 12:19 am

Hey again, Garth
Thanks for the quick, right to the point response earlier yesterday…..it made my day, and the rat had a nice dinner of warfarin. Chow down little one and stop the endless internal chatter of financial concerns!…For now,I’m back to the woodsy view from my birdhouse in the sky. Cheers….MBB

#10 Nostradamus Le Mad Vlad on 10.30.09 at 12:52 am

Smart that the first person is almost free of a noose around his neck, and I like your idea of taking it off the market for a while, sprucing it up over winter and putting it back on (at a lower price) in Feb. or March. Rent when it sells and invest the proceeds.

As for the second person, same as above — sell, then rent a townhome or similar.

Either way, a small amount of cash, dividend-paying shares, bank preferreds, etc., staying liquid for a few years is better than being held to ransom by a mortgage (unless it’s an RRSP mortgage).

Flip This House? Indeed, I would if I could but I can’t so I won’t. At least not for right now.
——
#104 Nostradamus jr. — “. . . that Russia is considering selling gold on world markets to cash in on high prices . . .”

Some time ago, I read that the IMF and / or UN was able to sell gold at going rate, then buy it back at US$42.20 oz., but I don’t remember where.

The question is: To whom is everyone selling their gold to at the high price, as obviously someone is willing to drive the price up, and for what reason(s)?

No doubt there are many things happening which none of us hardly hears of, or pays attention to. Could be one or both of these Central Asia / War Drums
have something to do with it.

Iran was accused of playing games on the nuke business. Fair enough. Who accused them? One country stands out, and y’all know who that is. Don’t forget Iraq — same rhetoric, different day.
——
There may be some truth in this. Let the greenback slide and it could lead to a deliberate collapse in international trade.

Face it, the US is beyond broke, so what do they care? It just screws everyone else up, that’s all.

‘Spose this is why constant talk of a new currency, or basket of currencies is gaining steam. — Trade Breakdown
——
1:40 clip of Dancing Politicos. — Singing Politicians and a 2:17 musical interlude for Boomers (clean). — Baby Boomers Battle Hymn
——
Yesterday was the day when the torch was picked up from Greece to come to B.C. Also 80 years ago — Le Crash! — 1929

#11 dd on 10.30.09 at 12:57 am

Paul C,

U are 24, paid your house off, and worried? If the house is in a good location and town why sell? Plant a big big garden in the spring and keep saving. On the slow days tend to the garden, on the busy days count your savings.

#12 Jeannie on 10.30.09 at 1:18 am

Paul…. you might consider a consultation with a reputable ‘stager’ or Decorator.
If the house has had no offers, it’s possible that there’s a reason other than the economy. Hiring a professional who will tell you honestly why it lacks appeal, can often pay off big time.
A ‘stager’ can arrange the rental of quality furniture and accessories, that would emphasize the best features of the house, and minimize the negatives.

If this is an unaffordable route, why not ask a friend who has a good eye for design and decorating, to give you their no-hold barred opinions on what they see as a lack of style, then act on the free advise?

#13 Real Estate Bear on 10.30.09 at 2:01 am

Has anyone seen this

The great B.C. real estate bust

Offering mountain view and golf on the doorstep, developers spared no expense to draw retiring boomers to British Columbia. Too bad about the timing, though: Utopia is now in creditor protection

http://www.theglobeandmail.com/report-on-business/rob-magazine/the-great-bc-real-estate-bust/article1343682/

#14 Calgary real estate on 10.30.09 at 2:08 am

While I don’t always agree with Garth, I do agree with his advice on how to increase the chances of getting the home sold. When a home has been overpriced at the start the price reductions will take it below what you could have achieved by pricing on target from the start. December is a dead time for sellers. If you remove it from the market and leave it off for a period of time it should be removed from the MLS database for accumulative days on market (the REALTORS and potential buyers are less likely to view it as a stagnant product as they don’t know it was listed prior) In the Calgary real estate board that time is 31 days but each market is different. Have a well known REALTOR who guarantees the sale come in and do your comparative market analysis. They are more likely to price your home accurately and fairly. (They want you to list with them, but they don’t want to lose money if they have to purchase your home from you) And then list with the agent that shows you
a. the best marketing plan
b. the best proven results
Stage it, but you don’t necessarily need to spend a tonne of money, lots of it will be re-organization and such.
Make sure a professional photographer takes the pictures.
Make sure professional looking flyers are made for the home
Market the neighbourhood and schools as well as your home.
Clean up what needs to be cleaned up and feature the parts of your home that make it unique and marketable. And don’t fret too much. If you have a plan that didn’t work, revise it, and list with the right REALTOR one who will honestly tell you what you need to change and what you don’t – do your homework. Good Luck.

#15 Danforth on 10.30.09 at 5:27 am

To Mr Welder:
I say keep the house, and if you’re real close…work hard to own it free and clear. I tend to agree with the value set you were raised on.

Once you own the place, you can likely live off about 20K a year covering property tax, basic maintenance (you’re a handy guy), and grocery/gas money.

If you lose work welding…all you need is a 10$ an hour McJob and you’re covering your family’s operating costs.

Contrary to all the greater-fool-wisdom I see around here, I see owning one’s home as one of the best securities in life. If there are big money issues later in life (employment, disability, etc) – at least you own the house.

By moving to renting, you’re signing up for 20-40K a year in extra costs. Hard to cover without employment.

Sometimes you come across elderly (typically) widows well into their 70’s and 80’s, living in their home with no income outside of the government pension. There hasn’t been a minute’s effort in maintenance in the last decade since the husband died. Yet they pull it off because the house is owned free and clear.

#16 Mike (Authentic) on 10.30.09 at 5:39 am

Paul C – You did all the right things, can’t fault you for that. I also believe in putting 100% down on your debts to get yourself out of debt before investing, buying toys or a longer vacation to more $$ places.

Since your home is paid-off or very close to it I wouldn’t sell it if you can comfortably want to live in it for 10+ years, all the property tax, utils, maintenance have to be cheaper than renting.

If you can’t live in it for 10+ years, then Garth made a good point about taking it off the market and putting it on in Jan/Feb.

I want to congratulate you on paying off your debts before investing or buying toys, etc. Your financially minded and responsible and it shows. You have made the right decisions thus far, you will make the right ones moving forward.

—————–
Family of sardines – Wow, that is a very small place for 5! We once rented a 25×25′ 1bd apartment for $525/mo in Calgary and that was tiny. I think Garth is right, you need to move to something bigger. I would suggest renting rather than owning a 2-3bd place, maybe in Surrey (or other less expensive than Kit) as it’s more economical there to help you save your $$ downpayment and get some breathing room too.

Mike

#17 David Bakody on 10.30.09 at 6:19 am

Garth you are a gentlemen …… 24 two kids and a paid home of any value (?) a) lotto winner or b) another type of windfall in the normal world ….. sit back and enjoy life and transfer home energy to savings energy you are going to have to live somewhere. If and when you need work I think you are resourceful enough to find it. 24 (?) !

#2 you are all safe and sound under one roof and small it might be but not a poor mans shack. If you want a bigger place and it would appear you need it …. then start looking and do your homework. Hello Canada is 5 1/2 times zones wide …. plenty of fine places to raise a family …..for far less money, plenty!

#18 Danforth on 10.30.09 at 6:40 am

Just another thought for Mr. Welder….

One way to look at one’s primary residence is to _not_ look at is as an investment. Its simply your home. Live in it…enjoy! Sure, there is capital tied up in it, and enjoy that capital later in life if you have to (or leave it to the kids if you don’t need to). Homes might come and go over the span of a lifetime. If you sell low, then you buy low in the same market. If you sell high, then buy high. Its just a “price of entry” into the world of living on your own terms with the security of a place to live in the event that you come to be without income. If you want to play hockey, you have to buy a bunch of equipment. If you want to live on your own terms, you buy a house.

“Investments” are things that you do _outside_ of your primary residence.

I know this is unconventional…but it is a good reality check.

#19 Repatriated Expat on 10.30.09 at 6:56 am

What a great juxtaposition on the problems with the housing market in Canada.

Paul cannot sell a house after dropping the price by 150k? How freaking big / rural / undesirable / overpriced is this house? Why would anyone build a house like that at your age unless they were hoping to “cash in big” some day, and you obviously think this is the day. If Paul had built a house he needed for his family instead of pie-in-the-sky get-rich-quick flipper-house, he wouldn’t be looking to move. I don’t think Canada is out of fools, but we are short on complete idiots so good luck with that house sale.

Family of Sardines, likely overpaying for rent and paying the price of a housing bubble. Hang in there, it’s hard to beat rational logic during more reasonable periods over the long haul.

#20 Ben on 10.30.09 at 7:07 am

Mr. Welder: Keep the house!

Then put all your new paycheques into a savings account until you’ve got 6 months expenses. Smart move to have a line of credit set up, but smarter yet if you can build yourself a real cash cushion.

Relax, you’ve got a paid-for house, a head on your shoulders, a great family, and the world is your oyster.

#21 Toronto C9 Renter on 10.30.09 at 7:13 am

To Paul who has nearly paid off his mortgage at age 24:

First, I second #2 Ruraldude’s near-perfect response. Best line was “It took a welders job to pay for it but it doesn’t take a welders job to live in it”

Second, it seems like you have managed to live a 1950’s lifestyle in a 2009 world. (built house with your own hands, growing family in your early 20’s, minimal debt) Good going! At this rate you’ll be a wealthy man one day

#22 613 Happy where I am on 10.30.09 at 8:02 am

Paul:

If you have paid off your house, you should now start saving and investing so you don’t feel like all your wealth is in one basket (the house). A common mistake people make is to move to a bigger (and more expensive) house, thus continuing to put all their wealth in one asset.

Family of Sardines… I agree things are tight for you but just wait a few more months… Be patient then pounce!!!!

#23 pezzazz on 10.30.09 at 8:41 am

#6 your comments are music to my ears…

They represent the first phase in what’s to come.

Phase 1: Pride: “There’s no way you should accept that crappy price for your home”

Phase 2: Concern: “Wow, things seem to be on a bit of a downswing, don’t worry, they’ll bounce up again and then I’ll sell.”

Phase 3: Serious Concern: “I’m starting to get worried here, my mortgage is up in a year, and I did the math with my mortgage broker and there’s no way I can afford a renewal.”

Phase 4: Desperation: “Alright, I’m going to list for a very lowball price and it’s bound to sell. I’m listing for 200K less than what I paid for it.”

Phase 5 (and my favourite) Capitulation: “I need out of my house NOW, drop the list price 20K/week until it sells.”

I’ll give you a guess when the blog dogs and I are going to go for the jugular. See you at 6%, and I’ll really see you past 9 or 10%.

#24 Jonathan on 10.30.09 at 8:48 am

Garth I can’t even believe these stories any more. 24? Are you writing these scripts just to get a rise out of people?

#25 TAO on 10.30.09 at 8:48 am

Dear Mr. Welder

You should be proud of owning your own home outright at only 24 years old.

We might be in for a couple of bumpy years but a house in a good neighborhood will be your best hedge against inflation.

Think long term.

A house not just an investment, its where you raise you family.

I say keep the house.

#26 Grantmi on 10.30.09 at 8:49 am

Dear WelderBoy,

Loosing money on the house! Yes! Maybe on paper.. but you’re not beholden to any bank now.

All the expenses you’d have now you’d have if you rented. (Except taxes on the property. But trust me.. the landlord of a rental would have that built in your rent anyway)

Keep the home…. like most of said. You’re in a profession that people are still screaming for… you’ll always be able to find work somewhere. If you have to go somewhere for a stint to work while your family stays put.. so be it. Thousands over the years have done it before.

Last! You’re young! Your house is NOT your retirement nest egg, needed to be cracked in the next 10 years to eat kitty food to survive. (Meewwwooooo)

The RE market will come back as you get into your rip age! (24… wow… i wish! and a home paid off. Wish again!)

Move Along! Nothing to See here!!

#27 Bill-Muskoka (NAM) on 10.30.09 at 8:51 am

$400K for 560 square feet? Yeah, I bet you could get a better rate from Corrections Canada including 24/7 security service? No real difference as both are called prisons!

#28 Jonathan on 10.30.09 at 8:55 am

Everything the government has done is wrong.

What they should have done: Never touched the economy in the first place.

They lowered interest rates for thirty years trying to keep a stagnating developed economy growing in a deflationary global economy.

By keeping it going, what do you think they set the seed for? A larger and even more violent deflationary crash later. Or alternatively twenty years of a complete dismal economics with structurally high unemployment.

Give me a crash, let the economy rid itself of debt, let workers salaries deflate, government debt shrink and asset prices deflate.

After a couple years of that there will be nothing but talk of growth – since the economy will only have one direction to head.

Most will say that was I just suggested is not a solution. But in fact, while it is horrible, it is the best solution. The governments haven’t solved anything. They’ve only added trillions to debt and discouraged people from saving even more. They’ve forced trillions into equity markets.

How do you think this will end?

#29 dave99 on 10.30.09 at 8:56 am

GDP #s out show a 0.1% drop for August. (annualized drop 1.2%)

A thought about the influence of our resurgent RE market on our GDP…

RE is approx 10% of our GDP. With transactions up by 18%, and prices up 11%
http://creanews.ca/2009/09/15/mls%C2%AE-home-sales-remain-strong-in-august/

(nationally, and distorted by more activity in expensive markets), that translates to a 31% increase in RE GDP. Which translates to a 3.1% increase influence in our total GDP.

So even if RE had remained flat, our GDP figures for August would be negative 4.3% (ie the 0.1%x12 + 3.1%).

And if our transactions had been down 10%, and prices down 6%, then we’d be seeing a annualized GDP drop for August of negative 6% (!)

Just some thoughts on the truth behind GDP #s (and any corrections are welcomed)

#30 Soylent Green is People on 10.30.09 at 8:59 am

Mr. Welder, if I were you in your shoes, I would not sell. Pay off the mortgage and do what all the other posters said about planting a garden and getting a $10.00 an hour job if you lose the welding work.

Unless of course the house was built to be flipped at a high price. Then good luck to you.

#31 Bill-Muskoka (NAM) on 10.30.09 at 9:11 am

Potential For Sale Ad for the ‘luxury condo’

ATTENTION!!!</b/ Big Box For Sale! Stackable, well located, and ready for you! Please call for appointment as it takes us some time to get around each other to exit! Don't miss this opportunity! Contact Maytag Realtors-Your source for Boxy living!

#32 Bill-Muskoka (NAM) on 10.30.09 at 9:13 am

#10 Nostradamus Le Mad Vlad

The U.S. is not broke…Their printing presses are still working just fine!

#33 Devil's Advocate on 10.30.09 at 9:16 am

#14 Calgary real estate

That you, imply that you, often disagree with Garth and your suggestions of how to sell a property indicate that you are a bushy tailed, newer , inexperienced REALTOR.

There is one most significant trump card in the marketing of a home above all else and that is price. Nothing sells a home like price and nothing stalls the sale of a home like price.

For every dollar a home is overpriced above fair market value the seller can expect to get an equal dollar less than fair market value upon successful sale… if it ever does sell.

By pricing your home just 1% below fair market value you are likely to be seen as the logical alternative if not exciting new opportunity in the market which leads to such interest there is a bidding war of multiple offers and your house sells for MORE than asking price.

The single biggest asset a professional, experienced, REALTOR brings to the table is the ability to price a home such that it results in a sale for the highest possible price in the shortest period of time and least inconvenience to the seller. Not all the glossy brochures with fancy pictures in the world will do that.

Home staging? Home staging does work. Of course the condition and presentation of a home will affect price positive or negatively. That is just common sense. But it is as I said before… it comes down to price. Everything comes down to price… but again… a glossy brochure will not overcome that and the best marketing plan ultimately comes down to price. Marketing 101… price. Everything has a price. Worn out roof… has a cost that must be deducted from the home. Great location… adds value which increases price. It’s just that simple.

But it’s like the story of the guy who calls the plumber because his tap isn’t working. Plumber tells him that he charges a minimum $100.00 for a service call. Customer agrees. Plumber shows up, sticks his head under the sink, hits a pipe with a rubber mallet, rises up, turns on the tap, and voila water runs freely. Customer is happy. Plumber prepares bill and presents it to the customer.

Customer looks at the bill and says, “I thought your service call charge was $100?”

Plumber says “That is correct.”

Customer asks “Then why is the bill for $200.00? All you did was hit the pipe with a rubber mallet!”

Plumber says “$100.00 for the service call and $100.00 for knowing exactly where to hit the pipe with the rubber mallet. $200.00.”

#34 Devil's Advocate on 10.30.09 at 9:26 am

What REALTORS know and what the admit in public are often two different things… and often for good reason. Secretly most, I suspect, would agree with Garth more than they might publicly admit. Interview one in private and you are likely to get a different story than that spewed out of the SPIN machine.

#35 Onemorething on 10.30.09 at 9:29 am

Paul C. likely lives in rural Ontario and RE transaction history along with potential buyers are limited. When you build your own house these days it’s rural. It’s a ranch about 1800sqft and has a two car garage 1/2 to 1 acre lot.

Rule number ONE, location, TWO location, THREE location, FOUR kitchens/baths/Beds, roughed in plumbing downstairs!

Paul, you gotta sit on this one bro BUT likely it is so RIGHT PRICED now, it’s not going to take you out. The LOC will only help you if locked for 3-5 years.

I would never recommend this to myself as I would not own this type of property (but now thinking of it) but about 100 acres more land and a natural water source.

Try and roll back some equity out of the home if the bank values it equal or more than for what you are asking. I’d say about $25K-$30K or given you are close to paying it off, take the equity back to $100K so you have I’m guessing $40K liquid in cash. Roll $10K each year into a 5 year locked in return rate vehicle. $10K 2009, $10K 2010 etc.

Go out a lock in a fixed 5 year mortgage for the $50K and it will carry for peanuts. The house will NOT drop to $100K in value unless the bank says it will and they wont as when it’s all said and done, you will be a VIP client.

Either way, you have money right away earning income, you have money on the sidelines for Yrs 2010 forward for any foreseeable challenge. Even if the return of your investment vehicle does not match interest paid on the mortgage, the amount will be so close, it’s important to have the liquidity.

Hey, it’s not like you are unemployed but if you are, this plan will get you through bro!

Now go cut a cord and tune that Gennie!

As for the Sardines, simple, get out of dodge, dont sleep until you do, Transfer or use transferrable skills to change that geography. The Ottawa Region for Governement jobs and traditional professional positions.

If not, start at HWY 7 in Ontario, and proceed North!

Both of this families are on the ball, they deserve this blog (cant say that for some of you). Just a tweak here and there and you will both be MONEY!

#36 My_View on 10.30.09 at 10:08 am

“Having said that, you’re right to worry.”

Paul,

Good job, and stop worrying. Actually there is no need for you to be worried. You have done an excellent job. Your 24 dude! Young and vibrant, stay put and start building a reserve (use the HELOC and start investing i.e. RESP, RRSP etc.). Trades will always be in demand. Not enough of them, especially after all the old boomer tradesmen start hanging up their tool belts. YOUR 24 YEARS YOUNG

#37 Bill-Muskoka (NAM) on 10.30.09 at 10:09 am

Garth,

Your Blog was unreachable for about 20 minutes. Just to let you know.

Now, what is this about ‘the Recession is Over in the U.S.?’

Seems StatsCan does not agree?

Canada’s economy long way from recovery: report

Oh, and a little review of things hopefully to come to Court in Canada soon!

Chirac ordered to stand trial in France

Former French president Jacques Chirac will stand trial for an alleged corruption scandal from his years as Paris mayor.

Investigative magistrate Xaviere Simeoni has ordered Chirac, 76, to stand trial on charges of embezzlement and breach of trust, a judicial official said Friday.

The allegations of corruption and nepotism date back to Chirac’s tenure as mayor from 1977-95.

Chirac has been investigated for allegations that 35 contracts paid for by Paris City Hall were awarded to friends and associates for jobs that did not exist. Simeoni concluded that 21 of the 35 were for non-existent jobs.

Shall we start with eHealth, and let’s not forget Chalk River, AECL, etc. My, my, the list is soooooo long.

#38 My_View on 10.30.09 at 10:10 am

Garth,

It really amazes me how you say sell and most of the blog dogs say keep the home. Mind you some cant even believe the welder story to begin with.

#39 smw on 10.30.09 at 10:22 am

Paul C, if you couldn’t sell your home in this environment where everyone with a pulse and the equivilent beats per minute for thier IQ, can’t get into your bohemouth, then what does it tell you?

You have too much house.

Most boomers are looking to rid themselves of debt at this stage not take on more, so you don’t have the right product for the right audience.

Its the medium to upper medium priced homes that are going to take the biggest price beating in Canada, the ones owned by the boomers. There will always be demand for the entry level to medium homes(especially if we continue with the credit contracting environment).

Price drops of 10% – 20% from 400K looks better than drops of 10% – 20% from 700K.

Its never too late to take a few bucks and throw it into a TFSA to start pure cash savings and the fact that you are aware of both the power of saving and realizing you may be in a pickle puts you steps above the average person. Good luck.

#40 Toronto C9 Renter on 10.30.09 at 10:26 am

to #34 Onemorething…

I’ve no idea where Paul’s house is, so perhaps he’ll tell us.

But, if you’re correct and he lives in an 1800 sqft ranch in N.Ontario, wouldn’t his listing price now be zero? (i.e. after his price reduction of 150k?)

#41 Downsized and Delighted on 10.30.09 at 10:28 am

If it is so easy to rent as everyone on this blog suggests, why is Sardine family renting a one-bedroom apt? If you have to rent, at least rent something big enough for your family!

24 year old free and clear homeowner – Something is wrong with your story. You say you reduced the price by $150,000 and had offers that fell through – but then you say there are no buyers. Perhaps there are no buyers at YOUR price? I don’t know where you are located – but in Toronto the market is red hot right now – but only if the properties are priced right. So if you want to sell, find out what your property is really worth and reduce the price to just UNDER that value. Then let’s see if there are NO buyers?

If there are still no buyers, you have a quality issue. Did you build the house yourself? Is the workmanship up to snuff and is the design what the average buyer wants? If it isn’t, your house won’t sell at any price. You will need to correct any problems before trying to sell.

#42 taylor192 on 10.30.09 at 10:40 am

Family of Sardines:

I live in Kits too and surely you’ve noticed all the condo for sale signs being slapped with SOLD stickers only days later?

Some things to consider:
– $400K buys a much bigger condo only 30 streets East, and the commute isn’t noticeably different.
– I was able to find 2bdrm condos in Kits renting for $1700. I’m willing to bet your taxes/condo fees/mortgage is about the same. Those 2bdrms were 800-1100 sqft, double the space you’re in for the same price.
– You’re not going to see any appreciable gains in your condo. We’re entering the winter months when real estate cools, and wow has it ever cooled.
– Numbers for Oct show sales have dropped off a cliff, <1/2 of what Sept sales were, and in some neighbourhoods as low as 20% of Sept sales.
– Moreso, numbers for Oct show only the wealthy are buying. Sales of lower prices units have hit a wall.

My advice: take whatever you can get and run. Housing may collapse after the Olympics, or stay flat, or steadily decline for years. Its not going up. Rent, its cheaper, bigger units, better locations.

#43 Going on a holiday anyway! on 10.30.09 at 10:47 am

Wow 24, Looks like I chose the WRONG profession. I may not have much to show for my time here on earth, but sure have alot of good memories and none of them involve mortgages, kids, marriage or working 7 days/week 14 hours/day in my twenties. Oh well, 35 and hoping for more.

#44 Watched Bubble Never Pops on 10.30.09 at 10:50 am

Why do some people hate on others who have achieved more than they? 24 years old and almost has his home paid off. I think that deserves a hearty congratulations!

Don’t hate because you barely finished high school at 24.

#45 DaBull on 10.30.09 at 10:55 am

Don’t you people understand what Paul C. is telling you. He says he is trying to sell his house below what it cost him to build. So even though he did most of the work himself, the price of real estate where he lives is so severly depressed that he can only sell at a loss. I only know of one market that is that severly depressed and that’s McKenzie B.C.

By the way if property is now selling below replacement cost in Canada, like it is in the US, why would anyone buy let alone build a new house. Makes no sense. I guess that’s why most poeple think of a home as a place to live and not an investment.

On the same theme. Has anyone ever thought what is going to happen to the US real estate market when the inventory of unsold homes is either sold down or more likely torn down? Just think if they aren’t building new product now or in the foreseeable future, then the cost of housing will sooner or later have to revert back to the replacement cost. Which is a hell of a lot higher than the current re-sale market prices. The US is setting itself up for a giant housing shortage in the future. Don’t forget the US population is still growing and they won’t be in a recession forever.

PS: If you don’t think they are tearing down homes, use google maps and look at Detroit City. It’s slowing reverting back to farmland.

#46 Brian in Victoria on 10.30.09 at 11:04 am

To Paul the Welder, before you decide to sell you need to do some analysis. How long do you intend to live in the area? What will it cost to pay taxes and maintain this house? What will it cost to rent a comparable place? What will it cost to sell this place and buy another in the future? How likely is it that homes of your type will crash? (see advice to sardines) One piece of advice I can give is that buying and selling real estate is very costly. If you house has modest upkeep costs and meets you longterm needs selling it may not be the wisest choice.

For the Sardine family: Garth never lived in Vancouver in the 90’s. He only saw that real estate crashed in Ontario. Vancouver and Victoria went through a decade of flat pricing. (Yes condo’s did crash out here) When inflation is taken into account, house prices actually went down but the lesson is that bubbles don’t always burst….it is possible that they can be deflated slowly. I worked with an easterner who kept waiting for the crash and he got so frustrated he moved back to Ottawa.

#47 Jim on 10.30.09 at 11:17 am

Family in Kits condo, the price is what the real estate agent said you would get, but no one would be stupid enough to pay $400,000 for a studio-wait a minute, people seem to do that here. I rent a 700 sqr ft one bedroom on the west side in a beautiful area for $1000 a month. I have no condo fees, no property taxes, no maintenance and no mortgage- which will rise when rates rise. How could I justify moving into a smaller space and paying more just to be an owner? SELL NOW while people are still dumb enough to pay these prices

#48 Dean on 10.30.09 at 11:26 am

Paul. Credit is cheap right now. If you’re worried about having some liquidity, simply refinance your mortgage and take a little out, say 40k. If you can lock it in at a 5 year and you’re looking at about $700 per month. Interest wise you’ll end up paying about 4k over the 5 year period.

Then take your 40k and put it into something that isn’t locked in but will give you some kind of return. Right now there isn’t too many great options, but as interest rates creep up in the next year or two, even a GIC will start to get you near the 4% you’ve locked in at.

Or you could just stick with your line of credit as a backup. Just know that banks have a tendency to change the rules on you with lines of credit. Many of us have seen them crank up the rates on them, and the fine print often allows them to call in their loan at any time. Cash in hand is much more secure as a plan B. Just don’t spend it on Big screen TV’s and Skidoos.

#49 Carrie Lynn on 10.30.09 at 11:27 am

Mr & Mrs Sardine – Kits? For heaven’s sake, you could save a small fortune by moving a 20min drive East, never mind even leaving Vancouver entirely – you wouldn’t even have to leave your job. Function over fashion and quit your bitchin’.

#50 JoeCalgary on 10.30.09 at 11:35 am

A real deal in Calgary:

http://www.realtor.ca/propertyDetails.aspx?propertyId=8774402

#51 Sardine in Kits on 10.30.09 at 11:35 am

Thanks everyone for the comments but we’re pretty comfortable for the time being. Having lived in Tokyo, we’ve learned the key is being making the best of what you have and not collecting all the junk people seem to love so much. I don’t really understand the appeal of monster houses with all the work they come with. Our condo was purchased during the last slump and now it is paid off and we have a lot of other reasons to stay. Meanwhile we are too risk adverse to sell without knowing how long it will take for the market to turn. We are willing to trade the possible loss of profit from this place in exchange for peace of mind.

I do welcome responses to my first questions however. What do people believe would have been an appropriate government intervention, or should they have not intervened at all? Everyone seems intent on criticizing what the government does, but I have yet to hear any plausible alternatives…

#52 Gordon on 10.30.09 at 11:48 am

Why don’t you sell the house.
Rent until the prices drop to 150 times monthly rent
Then buy your home back.

That way you will have a paid off home and cash to invest.

#53 Gordon on 10.30.09 at 12:07 pm

Here is a better scheme for you

Say, market rent for your home is $1,500/month
When selling your home tell your agent to bring buyers that are looking for a rental property and that you are willing to lease back the home for $2,000/month for the next year. Add another 10 or more percent to the price of the home.

Since the prospective buyers is looking for rental income and because they are financing with someone else’s money they pay a higher price for the home for the inflated rent.

-You end up getting more money for the house which means you are basically living rent free (even at $2,000/month) for the next year.
-You don’t have to move.
-If the market collapses in a year, you can buy the home back before the house goes into a forced sale circumstance.

PS

To Gord in Vancouver, there are also lovely women in Vancouver – you just have to look farther than Main and Hastings.

#54 Two-thirds on 10.30.09 at 12:08 pm

Some of you on the wet coast might care about this article:

“The great B.C. real estate bust

Most developers were not so lucky. “Talk about a folly,” Maw says, steering by an idled site on Kelowna’s southern edge. “Even he stubbed his toe,” he adds, pointing out a project initiated by a hitherto respected developer. By the end of 2008, sales of residential units here in the Central Okanagan district had dropped to scarcely 100 a month, leaving sufficient inventory on MLS for an astonishing 40 months of sales. (Six months is considered a balanced market.) In step with a surprising countrywide real estate resurgence, the pace picked up a little this spring, but in August there remained sufficient listings to fulfill 14 months of sales.”

http://www.theglobeandmail.com/report-on-business/rob-magazine/the-great-bc-real-estate-bust/article1343682/

#55 Jake on 10.30.09 at 12:26 pm

Congrats Paul,
I can see where you are coming from. Not having long term job security can be a challenge even if you have your home paid off. If having your house paid off was the ultimate measure of security, I would move to northern Manitoba right now and be mortgage free. The problem is that I would also be job free. I don’t know where a lot of the posters on here are coming from saying that you will be fine on $10/hour with a family of 4 and an almost paid for home. I am in a similar boat to you. I am in my 20s and I owe very little on my house (mortgage around $300/month). I would have it paid off by now but I left carpentry a few years back to return to university. At the time I was having a hard time imagining a secure future in carpentry. Anyway, even with our small house payment and frugal living, it would hard for our family of four to live on a $10 an hour job. On top of that, if things really get bad, there may actually be a lot of competition for those jobs. So I can see why you have these thoughts going through your mind. I’ve been in the same spot man. From the description of your family, you seem like the type of people who would be happy even if you “downsize.” I would consider the option as it may provide you with increased financial security. All things considered, you should rest easy. You are in a position at a young age that is unimaginable for some. Do what you need to do but spare yourself the anxiety. Good luck.

ps. I admire your discipline. There are a lot of Alberta boys who could be in the same position you are in were it not for their rig rockets/ toys/ 5th wheels and addictions.

#56 Bill-Muskoka (NAM) on 10.30.09 at 12:32 pm

#37 My_View on 10.30.09 at 10:10 am
Garth,

It really amazes me how you say sell and most of the blog dogs say keep the home. Mind you some cant even believe the welder story to begin with.

What’s to be amazed about? Garth sells real estate. Granted, anything in VBC is OVERPRICED, but they are too high, like their RE, to comprehend that! BTW, the saying ‘Location, location, location’ is really RE code for ‘Commission, Commission, Commission!’

I wonder what the property taxes will be after all the bills for the Olympics come in and BC, especially Vancouver, finds itself in a hole deeper than the Abyss?

Maybe they should invest in a phone call, or email to Montreal? ;-)

Hold the phone, Muskie! ‘Garth sells real estate’? I think a few million realtors would disagree with that one. I offer nothing but charisma. — Garth

#57 Mark on 10.30.09 at 12:34 pm

Hey Sardines, I’m in almost exactly the same boat except 2 kids in a somewhat larger place. Check out vancouvercondo.info for up to date local information on the vancouver real estate market (i know the title says condo but he’s broadened his horizons since the site opened).

Garth, you say, “But it sure has blown gas into a real estate bubble which isn’t in anyone’s interests.”, but certainly the Conservatives have a stake in this, if the housing market collapses they will surely lose the next election, especially after their complicity with raising the coverage limit for the CMHC and lowering requirements to 5-35 (sure that was a raise from 0-40 but it’s still a very low bar).

Personally I think this is the biggest reason Harper wanted an election last fall, it was his last best hope at a majority, once housing crashes the Conservatives stand to be on opposition again for another decade or so due to their mismanagement of the situation.

#58 taylor192 on 10.30.09 at 12:38 pm

Sardine in Kits,

It doesn’t matter what our government could have done for 2 reasons:
– the bubble is inflated. Its going to burst, or suffer a slow long leak. The choice is a few years of severe pain followed by rebound, or decades of minor pain. There’s nothing the government can do that this point to keep asset prices moving up. they’ve done all they can with low rates, policy change (35yr mortgages), and regulation (CHMC increased lending power).
– Canada had to follow the rest of the world. This recession has been unlike others as it dragged the entire world down, so we were forced to follow other countries and lower rates.

Your question should have been: what could the government have done to prevent the asset bubble in the first place? Yet none of that matter.

What matters is, why on earth are you living in < 600sqft? That's crazy.

#59 Makeorbreak on 10.30.09 at 12:43 pm

http://www.chicagotribune.com/news/education/chi-homeless-studentsoct28,0,7967162.story

#60 ralph on 10.30.09 at 12:49 pm

Paul C:

Some things to consider are your location. Acreages are usually harder to sell. Especially to younger families because of access to daycare/babysitting and commuting, etc.

So I would say that your biggest consideration are where do you and your family want to live. What if your wife had to go to work.

Since your mortgage is paid off you have a head start on most people at your age. Keep saving and just don’t do anything crazy like going back into big debt.

I say carry on and take care of your lovely wife and two children.

As for the family in Kitsilano I would move to something bigger for less money. The million dollar view out your window isn’t much fun if your living like sardines.

Vancouver is a nice place to visit in the summer but I wouldn’t want to live there. And that pretty much goes for the rest of BC too.

#61 Just Janice on 10.30.09 at 12:53 pm

Here’s the deal – Mr. Freedom 24 – do an analysis on your home, a fundamental value analysis. If, and only if, you can rent a home that is equivalent for less than what the mortgage and maintenance fee would be, should you sell. If you can’t do this, then you should likely stay as your home is a solid performing investment, that solidly reflects what it is really worth and you have to live somewhere. And if needed you could rent the pad out for income flow should you need to move to follow work and rent/buy (depending on the analysis of what is more advantageous) something else somewhere else (you’d be a landlord, but there are much worse things to be).

At 24, I would also be hesitant to be as worried about the ‘all your eggs’ in one basket problem. Your largest monthly expense is taken care of. Now you can focus on all of those other areas. Start squirrelling away an emergency fund that is liquid and safe (6mos-1year of living expenses), get rid of any other debt you have (this will just increase your monthly expenditures), then start squirrelling away for your retirement (note: a house is not a retirement plan). Perhaps, a good form of insurance would be to ensure that your wife is trained in a field of employment and works enough to keep up her skills as a form of labour force diversification. (I note that there are many fields that would be good hedges – dental assisting, legal assisting, medical office assisting, LPN, ECE – if she runs childcare out of her home, etc.). This is also important as if things don’t work out, will mitigate the amount of spousal support you may be exposed to and will certainly mitigate the economic risk you presently face having your income earning potential concentrated in one area. Also make sure you have sufficient life insurance and disability insurance coverage – if you or her were to be gone tomorrow how would you or she make due while still providing sufficiently for your children, (this needs to be a priority and at your age is likely to be quite cheap)??

You are in a much, much better position than most. You’re smart to get a HELOC, but only if you don’t have to use it and only if it doesn’t cost you anything unless you use it. Good luck.

#62 Bill-Muskoka (NAM) on 10.30.09 at 1:23 pm

Hold the phone, Muskie! ‘Garth sells real estate’? I think a few million realtors would disagree with that one. I offer nothing but charisma. — Garth

Ah, apparently my bad! So, you sell ‘charisma!’ How is that market mon ami? Headed UP or DOWN? LMAO!

BTW, don’t miss ‘UP’ when it comes out on DVD November 10. Talk about Real Estate Balloons, eh?

#63 Daystar on 10.30.09 at 1:40 pm

5 years ago, the same sized payment it would have taken for a $100,000 mortgage loan would get you $200,000 loan today. We talk about mortgage affordability… 5 years ago, we had 25 year, 10% down regulations. Today, its 35 year and 5% down. 5 years ago, 5 year amortizations were around 8%. Today, they are around 5.5%. Do the math, and one can borrow twice the money for the same sized payment.

And did the market price it in? You bet the market did! The priceS of homes doubled. You get the same home for twice as much. Now I ask you… what will happen if interest rates go back to the norm? 8%? 10%? And you can borrow half of what what you can today for the same sized payment?

You guessed right, the market will price it in. How long are we away from 8 to 10% interest rates during governmental/consumer love affairs with debt the staggering likes of which we see today? 2 years? 3? 5? Really, the only question that begs to be asked now is “when”.

#64 Ken on 10.30.09 at 1:45 pm

The BOC is creating an illusion of wealth,and is not doing our economy any favours by keeping interest rates artificially low. We will certainly pay for this in the future. In my opinion.

#65 jess on 10.30.09 at 1:46 pm

What could have been done… I wonder what WE learned.
“History is a nightmare from which we all must awake from.”

Congradulations young human you are AWAKE

#66 David Bakody on 10.30.09 at 1:48 pm

TSX off triple digits after GDP drop
Oil, dollar, gold all sink

This is becoming a broken record …… “Once again GT predictions ring true”

As mentioned here the worst is yet to come. You see ladies and gentlemen cheap money is like free parking it will be abused. The only way to allow more the privallage of its use is to raise the price so it has value that people understand. Ottawa (Even Harper’s poorly run Ottawa) know they can not continue to print money to solve their problems, or do they?

#67 lgre on 10.30.09 at 2:00 pm

At 24 and a house paid off i woudnt be selling or stressing, you are ahead of the game and ahead of most people in their 50’s not to mention your peer group. If you were in your 50’s and no money with all your assets in one basket, then I would worry..enjoy your life, you got rid of your mortgage, the biggest burden most people have..and you did it at a very young age.

Even if you lose your job and have to get a job payig less, who cares..you have no debt or mortgage..a few hundred will pay for prop taxes and bills..I really cant see a problem here..I think you are putting way too much pressure on yourself.

#68 Daystar on 10.30.09 at 2:11 pm

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20091030/weak_economy_091030/20091030?hub=TopStoriesV2

The link suggests August is the first month in three months (June was 0.1% and July was flat) that has shown a negative GDP number but… July numbers are being revised and are likely to show – .2% instead of being flat. Couple this revised number with August’s GDP and a flat or slightly negative GDP in Sept, and Canada is still in a recession which begs any reasonable person to ask… “why was Jim Flarehty and Mark Carney both declaring the recession dead 2 full months ago well ahead of actual numbers?

Should it make us comfortable to elect politicians who tell us lies or sell us future economic forcasts that are pure bunk? From an investors point of view, I don’t appreciate being lied to or the sheer extent of the damage done to my portfolio over this whopper. If Canadians truly do experience another negative GDP quarter and continued extention to the recession, one has to ask seriously if either of these two are the right men for the job. Personally, I think Mark is up to the task but Flarehty should never have been given the job to begin with. The record, as they say, speaks for itself.

http://www.cbc.ca/canada/story/2009/10/29/report-economy029.html

#69 Nostradamus jr. on 10.30.09 at 2:22 pm

Garth, your next blog subject is in the making as we speak.

…Two weeks ago the U.S. stock indexes were trading daily volatile of 100 pts on the Dow and 10 pts on the S&P indexes.

…This week we are seeing 200 pt volatiltiy and 20 pt daily, respectively.

This is a habinger that a major World Event is on the verge of occuring.

Where is the safety…Gold, U.S. Dollar or canned goods?

tia

Nostradamus jr.

#70 Bill-Muskoka (NAM) on 10.30.09 at 2:23 pm

#66 Daystar

I don’t appreciate being lied to or the sheer extent of the damage done to my portfolio over this whopper.

Ah, but that is how the game is played. Has been, and Will be! Until and unless we have strict and enforced laws including prison time. Can you recall the IT scandal Dim Jim gave so many? What was the penalty for that WHOPPER?

#71 Rob in busted bubbleland (spain) on 10.30.09 at 2:29 pm

Just Janice, I don’t quite see how a line of credit is a smart move, sure you can take money out in a pinch then you have to pay it back with interest and monthly payments, hardly what you want when money is tight. Banks love HELOC becuase people use them run up huge debts and pay loads of interest. If you need cash get a decent emergency fund.

Paul C I highly recomend checking out http://www.thesimpledollar.com and http://www.getrichslowly.org both are excellent resources for good money management.

#72 Men With Hats on 10.30.09 at 2:32 pm

Young fella with the hous paid off .Price slides $150,000 .
Sounds to me like you built a custom home and one that does not appeal to the general market .That is too bad .
When building you must keep an eye on the re-sale potential .
You may have to find a specialist realtor . One who deals with custom homes , almost, exclusively .
Obviously the general public has no interest .
Or you can crash the price and take a heavy loss .
Not recommended .
If catastrophe does befall you and you become unemployed at least you will have a roof over your head
until the marker turns around .
Good luck .

#73 Patiently Waiting on 10.30.09 at 2:32 pm

Sardine, when do you think your kid will want their own bedroom? You know, just a little bit of privacy. I hope nobody snores.

Seriously, SELL NOW.

#74 Daystar on 10.30.09 at 2:35 pm

#62 Ken on 10.30.09 at 1:45 pm

The BoC really hasn’t got a choice in keeping rates low. Its either keep rates low until the Greenback stops its freefall, or face a soaring loonie that will kill our export markets and ring the death knoll on manufacturing.

The real culprit here is CMHC and their loonie tune regulations. These regs should have been kept at 25 year 10% down. This Conservative government naturally didn’t do this. They wanted to create a wealth effect through higher real estate valuations to buy an election. It did, after all, work for George Bush.

Did this Conservative government have this purpose in mind in wrecklessly introducing 40 year nothing down amortizations for over more than 2 years? Christ, they even tried ARM’s up here for 2 weeks til’ the banks said no and if people don’t know what those are, try interest only mortgages…!!!! Yeah, in 2006, they actually tried!!!!!!

One needs only to look at what their policy is in terms of hard asset inflation/deflation to see how sleazy these Conservatives truly are and if people don’t like to hear about their favorite team being called sleazy, if they are too drunk on blue koolaid, I don’t care, too friggin bad. People certainly aren’t going to like it later when a large minority of first time home buyers go broke at the taxpayers expense and another large minority of first time home buyers end up burdened with debt the rest of their lives because they bought to much debt during a time when the great Conservative credit expansion to buy our votes was in full swing.

A lot of lives are going to be ruined by this governments lust for power at all costs, using the greedy and weak minded as pawns to their lust for power and control (and for what… what is so damned important about a majority government that one must damage Canada as a nation this substantially to win it, yes, by all means ask the question). There will be an ugly price to pay from us all from ugly proven failed policies that are darkened not just by their results but by their motives. Right now, its measured in years. If these fools get a majority from even greater fools, the damage to Canada will be measured in decades.

#75 CS on 10.30.09 at 2:50 pm

Paul – keep the house. The number one worry for most people when they run out of work is ‘how will I pay the rent’. You have solved that problem. You say your job is ok now, but may not be later. So save as much as you can now for that later if it comes. Plant a garden. You’ve done an amazing thing at your age, and are showing maturity far beyond your years. Enjoy your family and your home.

#76 Going on a holiday anyway! on 10.30.09 at 2:56 pm

Watched Bubble Never Pops

“Why do some people hate on others who have achieved more than they? 24 years old and almost has his home paid off. I think that deserves a hearty congratulations!

Don’t hate because you barely finished high school at 24.”

Woopee!!! Congratulations….. 24 what a working class hero! The whole of society, including most people who follow this blog are delusional in my opinion.

Never assume my friend and I need not explain why.

#77 PeckedToDeathByDucks on 10.30.09 at 3:00 pm

@Daystar…keep your cogent posts coming

I fear though that you are a tad too optimistic with your “the damage to Canada will be measured in decades”. I don’t think our country has that many years left. We are being sold out for short term gains on every front. I despair for our country.

#78 jess on 10.30.09 at 3:09 pm

no cents on the dollar for the nonsense. Kinda sort of?

Financial Group Inc. filed for Chapter 11 bankruptcy protection after originating $60 billion in commercial property loans in 2006 and 2007.

“Our methodology is to make a great big list: What’s every thing we can think of that’s either wrong with the industry or that we just plain don’t like about it,” Ross said today.

Mr. Ross was quoted in Bloomberg
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoRYl03Rw1_g

“Then we start work on another list. If we had control of this industry, what would we do to fix each one of those problems?” he said. “Once we feel that there is a reasonable likelihood that the second chart kind of equals the first chart, that’s when we get ready to do something.”

#79 Two-thirds on 10.30.09 at 3:21 pm

A great post and links to two Gov reports, at AB bubble:

“Growing economy, more jobs and other lies

Two very sobering releases from Stats Can- the Payroll report and the GDP report.
The GDP number takes us back all the way to the fall of 2005 with a total output of around $1170 billion or so. So much for 4 years of growth and the new era of prosperity brought in by the dirty oil and natural gas speculators. The growth is occurring in the same sectors-construction and public sector. One paid by tax payers now and for the other the bill will be coming pretty soon in the form of tax payer supported bailouts. ”

http://albertabubble.blogspot.com/2009/10/growing-economy-more-jobs-and-other.html

#80 Gerry on 10.30.09 at 3:25 pm

Hey Paul. Unless you really don’t like the house or really want to live somewhere else, keep it. You’ve got the HELOC as your insurance. Heck, if you want to get some cash out or the house use the HELOC now and just invest it in income generating securities. I think Garth’s talked about this one often enough. It’s not for everyone, but it’s a good way to get some cash on your balance sheet if you’re worried about having everything tied up in your house.

#81 Stop Puttin Down Boomers on 10.30.09 at 3:35 pm

#72 Daystar on 10.30.09 at 2:35 pm

Daystar – I heartily agree with you.

#82 Stop Puttin Down Boomers on 10.30.09 at 3:54 pm

I went through the 80’s – 14 then 18+ mtg int. rates. Thankfully my sis & I were able to manage the increased mtg payments.y. I recall a few years later there was lots of talk about whether it was best paying down one’s mtg. or investing. My sis & I married & sold the place. I’m glad my husband & I chose to pay off our current, in 7 yrs., without a CMHC loan. Had we invested at the time (rather than paying off our home) we would have lost much more in the market than we did. Our investments have rebounded about 40% but I’m really apprehensive.

#83 Dan in Victoria on 10.30.09 at 4:58 pm

Post#72 Daystar,you must have been standing beside me at the job site last week when I gave an “old man”rant to some idiots telling me how smart they were,AND how well the present government was doing.Morons.
I would say that post pretty much sums it up.Most of these idiots are going to get creamed.
On a bit diffrent note,i’ve had 9 calls this week from people looking for work,and have noticed more Alberta plates showing up on sites.AND prices are starting to slide a bit,some guys are starting to feeling the pinch.
Going to be some good deals on them fancy big diesel pickups soon……

#84 Daystar on 10.30.09 at 5:10 pm

#68 Bill-Muskoka (NAM) on 10.30.09 at 2:23 pm

God, don’t remind me. :-\ Hope all is well your way, Bill.

#29 dave99 on 10.30.09 at 8:56 am

The percentage of GDP from RE is closer to 20%. CMHC’s website brags RE up to being nearly 20% of GDP. From the link below, its not hard to extrapolate that it is in fact, 20% of Canada’s GDP.

http://2.bp.blogspot.com/_0YOsyi5WbLY/SsaIATxkHjI/AAAAAAAAAMA/4x6dhX9iZ3I/s1600-h/July_2009_GDP_Canada.Bmp

Which brings us to an interesting question. IS THIS CURRENT CONSERVATIVE GOVERNMENT MANIPULATING GDP NUMBERS?

They certainly are propping GDP numbers up directly through CMHC policies that directly inflate the valuations of real estate. By how much, its hard to say other than to compare historical sectors that contribute to GDP and I do strongly urge jounalists to look to see what the percentages are.

What I want to know is… does the buyout of NBA Mortgage backed securities contribute to GDP? Thats what I want to know… if it does count as GDP, then clearly this government is propping up GDP numbers artificially & substantially and if I may say so boldly, its to the point of gross scandal. Just check out these numbers… and you’ll all see my point and if I’m right… well… this economy is far worse off than most realize because the buyout of mortgage backed securities doesn’t produce measurable income.

http://1.bp.blogspot.com/_0YOsyi5WbLY/SmTHCjXQhFI/AAAAAAAAAGM/SAJ6_qxTWGE/s1600-h/Mortgage+Credit+Outstanding+(June09).Bmp

Just check out the estimated growth of mortgage backed securities (securitization guarantees in force) in this link below as a taster in terms of just how large these numbers are:

http://2.bp.blogspot.com/_0YOsyi5WbLY/SmTNYtBpAWI/AAAAAAAAAGs/9s9CqLuAMKI/s1600-h/CHMC+growth+in+insured+mortgages.Bmp

#85 jess on 10.30.09 at 5:23 pm

creative accounting ?

tied captialism /public private partnerships
Garth as to all this infrastructure borrowing the government is doing isn’t this just shifting the balance sheet from us to private sector balance sheets?
====================
AUSTRALIA’s trade agency, Austrade, has emerged as a key player in the multimillion-dollar bribery scandal involving the Reserve Bank and Vietnam

#86 OttawaMike on 10.30.09 at 5:36 pm

10%+ on the Volatility Index ETF(VXX) today.
Anybody care to comment on this ? Will we see returns to the volatility numbers like last March or November?

Or is this another rigged carnival game. It appears the fund was only conceived in February 2009.

#87 Nostradamus Le Mad Vlad on 10.30.09 at 5:44 pm

#31 Bill-Muskoka — “The U.S. is not broke…Their printing presses are still working just fine!”

Ahh yes, and Uncles Ben Hank Mark Timmy are all voluptuously magnificent press operators with nary a brain cell between them! Are we all enjoying the freefall yet?!
——
A combo of #62 Ken and #66 Daystar’s excellent posts put together:

“The BOC is creating an illusion . . . the recession dead 2 full months ago well ahead of actual numbers?” . . . We will certainly pay for this in the future.”

This is where sheeple long ago buried their heads in the sand, and cannot see any further than their eyeballs.

For a lot of us here, we will be able to ride the storm out, but the rest will be caught short short and thus left holding the barf bag.

The majority of politicians today are “bought off” by large companies, and continually skirt the laws, so “under-the-table” cash payments, stock options and plenty of other freebies, etc. are nothing to them.

Politicos say one thing (prompted by big biz), already knowing well in advance that when the real figures are released in a few months, their original message has been forgotten.

IF big biz is quietly padding their spokepeople’s investments, what those investments?

Well, everyone needs to eat and drink to always look on the bright side of life, so enter Monsanto. Monsanto makes GM seed and crops, which have a nasty, annoying habit of making a lot of people sick.

Ask some farmers, whose original crops have been strangled and re-planted (guess who?).

When one becomes sick, one needs to be healed, which leads big pharma — hence, Bill C-6 which essentially wipes out natural health food stores (and a whole host of other things).

Add in big oil, then Martial Law (a sweetener) to keep people who actually use their brains (like us) under control, out of sight and out of mind, then the planet takes on a somewhat different perspective.

If Garth’s (and a few other) blogs were required daily reading (NOT the m$m) by everyone 21 or older (along with the comments), the meatheads in Ottawa and DC (DumbClucks) today would be sleeping on the streets at night — the roles would be reversed; the revolution would have already happened.

A pity that Michael Chong, Bill Casey and a few other honest ones have not followed this particular line of communication.
——
#69 Rob in busted bubbleland (spain) — Appreciate the links, and have bookmarked them. Thanks.

#88 TJ on 10.30.09 at 6:25 pm

Billionaire investor George Soros said a “bloodletting” may be coming for leveraged buyouts and commercial real estate amid the worst slowdown in 70 years.

“In commercial real estate and leveraged buyouts, the bloodletting is yet to come,” Soros said today during a lecture organized by the Central European University in Budapest, where he was born. “These factors will continue to weigh on the American economy, and the American consumer will no longer be able to serve as the motor for the world economy.”

http://tinyurl.com/y4lug8

CIT – the largest Commercial Lender in the Lower 48 narrowly avoided going broke today:

(CIT:US) dropped 24 percent to 72 cents, the biggest drop in the Russell 1000 Index. The 101-year-old commercial lender trying to avoid collapse reached a deal with Goldman Sachs Group Inc. to reduce a $3 billion credit facility to $2.13 billion and keep the line open should CIT file for bankruptcy.

CIT also announced an agreement with billionaire investor Carl Icahn to support its restructuring plan. Icahn will supply a $1 billion credit line that can be used as bankruptcy financing, the company said.

Story http://tinyurl.com/3mne9u

**The BIGGEST lender to small business (*the true engine of commerce) in the United States. This is an ominous development.
Sure, you mention this is America – so what?
Canada sells just about 3/4 of it’s trade into a market that is lying on the Beach gasping for breath.

If you don’t believe money is tight everywhere – ask the cabbies how business is!

#89 Onemorething on 10.30.09 at 7:07 pm

#39 TO C9 Renter,

Yeah, my bad, read the letter as dropped the price “too” $150K instead of “by” $150K.

Paul, you either listed the house too high in the first place or your location sucks big time. Forgot to read the offical plan that states, “When the Sh*t Hits the Fan, the Governement will stimulate with an infrastructure spending spree in which a new major highway has been planned 500m from the back of your property”.

Overpriced or badly located, I change my advice to a STRONG SELL if you are overpriced.

If your location sucks, you have to eat it bro!

#90 Grantmi on 10.30.09 at 8:43 pm

Oh my Gosh!!!!

Here comes CarneyJuice!!!!! RUUUUNNNNN!!!

http://i34.tinypic.com/r2u4gl.png

I like this so much I’m stealing it. — Garth

#91 JJ on 10.30.09 at 9:00 pm

Did we not learn anything from our parents?
We all need a place to live. Buy what you can afford, forget about what your friends and family are buying.
They do not pay your bills. Own everything outright or at least try to live your life like you are making an effort.
Savings is not an option, it is part of your monthly expenses.
At the end of the day, no one cares what you are driving or how big your house is.
If someone in your family gets the swine flu, do you have enough cash to take the time of work to deal with it?
Stop being so god damn greedy and live within your means.
Who are all these clueless people on here asking Garth for advice on what to do? People, stop shopping and put your money away for a rainy day. We all know it’s coming…

#92 john m on 10.30.09 at 9:06 pm

Well from personal experience i must say–anyone who lives on the west coast and is willing to sacrifice their life and earnings to own a piece of the most overpriced real estate in the country –should really do some travelling.I lived in BC for over 20 years…(made a good living but paid thru the nose to live).I moved back to Ontario 6 years ago when the cost of living became ridiculous and the future prospects became as dismal as the weather.I bought a property in Ontario for 1/10 th of what it would have cost me in the lower mainland……lower taxes….cheaper food..fresher veggies and some beautiful countryside…….nice people and most of all i rarely even lock my door because something i own is not being stolen if it is not locked and chained to something. The future for that environment is dismal……….life is short and anyone who thinks that is the way people must live has seriously lived a very sheltered life.

#93 Future Expatriate on 10.30.09 at 9:46 pm

#90 – In all honesty, you DID conveniently forget to mention the -50° windchill blizzards each winter.

#94 Grizzly on 10.30.09 at 10:45 pm

Paul. If you were talented enough at 24 to have a welding ticket, build and pay off a house, then stick with it. Even if you lose your job, your expenses are low and welders are essential. You’ll find more work, even if you have to travel for a bit or you will be in a position to start your own business out of your garage or the back of truck. Everyone needs a welder eventually. Keep on welding!!

#95 jess on 10.31.09 at 2:23 pm

The toll has taken it’s toll

So the math models were for the purpose of extracting upfront fees to collect /rationalize bonuses?
http://wotnews.com.au/news/Michael_Evans/

#96 Soju on 11.02.09 at 1:25 pm

To the 24 year old with 2 kids and wife. Your house is paid off so now you can save it’s just that easy.

#97 Kelly McMae on 11.02.09 at 10:14 pm

#1 Atrax – strongly suggest the following BBC documentaries
http://en.wikipedia.org/wiki/The_Mayfair_Set
http://en.wikipedia.org/wiki/The_Century_of_the_Self
http://en.wikipedia.org/wiki/The_Power_of_Nightmares
http://en.wikipedia.org/wiki/The_Trap_(television_documentary_series)

Thanks very much for those links. Watched the “century of the self” and potentially one of the best documentaries that I’ve watched. Incredibly insightful and auspicious.