Fifteen months ago few people thought we might be mere days away from the cusp of a neo-depression. Indeed there are folks who doubt it still. Fact is, when Canadian officials walked into an emergency meeting one October day with US Treasury Secretary Henry Paulson, they were shocked.

Paulson sat down, said ‘this is Aramgeddon’ and warned there was a damn good chance banks and stock markets might not be opening up on the next business day. For the guys from Ottawa, it was a Depends moment.

Extreme Risks This all goes to show you just never know what darn things will happen next. That’s a point the fun guys at global consulting powerhouse Watson Wyatt are making with publication of their latest bedtime work, “Extreme Risks.” They’re warning the world that in times such as these, prudent leaders of companies, and of countries, should expect and prepare for anything. Specifically, here are the top possibilities:

  • depression
  • hyperinflation
  • excessive leverage
  • a currency crisis
  • a banking crisis
  • sovereign default
  • climate change
  • political crisis
  • insurance crisis
  • protectionism
  • disunity in Europe
  • the end of capitalism
  • the end of fiat money
  • war
  • a killer pandemic.

Now, speaking of extreme risk, we whisk you to that paradise known as Saskatoon, where there is at least one decent building, the Bessborough Hotel, and one distraught guy:

Hi Garth: I picked up your book today, and have already started reading it. I think I already know what your answer is going to be, but maybe I’m wrong, so I am going to ask you anyway. I am in the midst of buying a new house in Saskatoon.  This have been ongoing since September, 2009.  The plans are drawn, the lot is picked, the mortgage is preapproved, I have a builder ready.  He actually got back today, so time is of the essence, and I hope you are able to write me back, urgently!

I am 30 year old single father, who makes around $50,000 per year.  I currently own a house in a good area with a rental suite.  I owe $235,000 on my house, and worse case, I could get $300,000, if not more, right now.  If I rent out the top and bottom on this house, I would approximately get $2300 worst case scenerio.  So, with that being said…

I have to put down a down payment of $20,000 on this house to be built.  It is a 1260 sq.ft. bi-level, with a 2 bedroom legal suite on a corner lot, in a brand new area, with a double attached garage.  I have already put $1150, non-refundable, towards the drawings.  I am going to keep my current house and rent it as a double unit.  I will also rent the suite in the new house, and live on the main floor.  I will be living rent free because of the low interest rates right now.

Should I continue and go forward with this house, or am I making a huge mistake? P.S. Saskatchewan is just entering a recession. Now, my builder was on holidays until today, So I know we are going to be communicating any day now, and the wood is already on the property.

I also already cashed out my RRSP, for this down payment 2 weeks ago, and I did get turned down by 2 mortgage brokers, but the third approved me. So, even if I say wait for a year, or two to buy, I may not get approved for this much ever again. One other thing, new house prices are down 5% from September 2008 to September 2009!  I got the contract in October.  There are comparables with less square footage, but upgrades for $425,000 on the market.

I also plan on buying another one in a couple of years, once I pay some of these two down a bit, and have some extra money for a new down payment.

What is your suggestion? Respectfully, Joe

P.S. I am basically going to try and wait for your reply, and I am going to base a lot of my decision on what you say.  Thanks again.

You’re kidding, right Joe?

I mean, you seem to have only $65,000 in equity and $20,000 in cash (robbed from your RRSPs), and yet contemplate buying a $400,000 house while you keep your existing $300,000 home – for as total debt load of, what, $615,000? All on a salary of fifty large?

You say two of three mortgage brokers turned you down. Did the other two hurt themselves when they fell down laughing?

After all, mortgage debts of $615,000, even financed with a VRM of 2.25% would cost $32,000 a year in payments and require an income almost twice as large as yours. Further, as you must know, interest rates have only one direction in which to move, which means you will be murdered after you are killed. And what’s this trash talk about spending $400,000 on a 1,260-square-foot home? In Saskatoon?

If you insist on being a complete greater fool, then sell your existing home and at least muster a half-decent down payment to put on the new place. Better idea, just kiss off the $1,150 you spent on drawings (that was a genius move) and stay where you are. You’re a real estate junkie, Joe, and not a good one.

Now call the damn builder.


Joe has emailed with more questions. I submit them to you for a response. I’m done with the guy. — Garth

Hey Garth, Thanks for your quick reply.
I have a few more questions for you, I hope you can answer. What do you propose the real estate market is going to do here in Saskatchewan(mainly Saskatoon)? And then wouldn’t it be wise to even sell my existing house and rent until the market is way lower?
Be specific.  Be point blank.  You even give me an option to buy that new house with a bigger down payment, yet if it was going to be worth nothing, or say a lot less, then why should that even be an option(to buy it)?
I know you say it would be better to stay where I was, and kiss my $1150 good bye. Though,my question to you was not about affordability, but more as if the market is going to slump so bad, and then I’m stuck with this huge debt, and how long it is projected to come back?
But, say the affordability worked, would or could it be worth it to buy this house?
Basically, I am trying to get a clear cut picture of how you think Saskatoon realestate is going to be in 1 year? 3 years? 5 years? etc Also, I see you are an author, you have done a lot of public speaking, you sell bestseller books, you are in politics, and schools and papers, you are an entrepreneur, but do you or have you invested in real estate?


#1 [email protected] on 11.23.09 at 10:29 pm

What you can buy if you sell your house in Mississauga,


#2 Calgary_rip_off on 11.23.09 at 10:40 pm


what is it with this prairie real estate that is priced like Long Island, New York? So the interest rates are going to be crushing? Good.

#3 NorthOf49 on 11.23.09 at 10:51 pm

Gotta be a fake email from “Joe”. How the hell could anyone be extended that much financially and take on that much risk on $50K/yr?

Shakin my head……

#4 Concessionman on 11.23.09 at 10:53 pm

Man the drugs must be really good in Saskatoon….

Just goes to show, there’s alway a Greater Fool out there! (or it’s just Nikki playin with you Garth…)

#5 GrimWeeper on 11.23.09 at 11:18 pm

If Saskatoon Joe thinks for one nanosecond that his ill-conceived housing plans will ever result in financial pleasure during his lifetime, he definitely needs an immediate check-up from the neck-up. When, oh when, will medical science develop a vaccine that wards off the ravages of stupidity?

#6 Dan in Victoria on 11.23.09 at 11:23 pm

Are you sure this guy is from Sask? I had the same conversation a few weeks ago out here, (rental and new house) the guy was “going” for it as he said. I showed him a little simple math, no your wrong, he said, its diffrent this time, it’ll keep going up, only slower.
Whatever, you’re in your mid thirties, lots of time to recover.
Be real careful there Joe, what seems like a good idea scratched out on a sheet of paper, could cripple you financialy for the rest of your life.
Is it worth the gamble?
There will be another opportunity to take a run at it, get a better foundation established.
Watch what the smart money does, not the herd.
When nobody wants anything to do with real estate will be the time to move on it.

#7 Two-thirds on 11.23.09 at 11:27 pm

@ #66 F, from yesterday’s post:


differnece of $475 a month. Hardly a reason to mail in your house keys.”

When the average Canadian’s debt-to-disposable income ratio is solidly above 100%, where is the average Canadian going to find an extra $475 per month?

#8 kitchener1 on 11.23.09 at 11:28 pm

LOL @ Joe

Dude, put the kool aid down and step away from the ledge.

What if your plans to rent out your exisiting home and that suite in your new home fall through? Do you have enough cash flow to carry it? For how long?

Dude, don;t want to sound blunt, but guys like you are the reason the RE is over inflated to begin with. 2 mortgage brokers say no, but yet you keep trying and finally find a “sketchy” broker to fudge the numbers and get you approved. Why should he care, he is getting a nice cut from the lender, maybe your throwing a little green his way too.

I wonder how many of these sketchy mortgage brokers are out there in all of Canada? And how many guys like you actually took the plunge and got it underwritten by CMHC?

If the deal goes bad in 2-3 years, you do know that you still have to pay back your RRSP right?

#9 NUR on 11.23.09 at 11:28 pm

I think Joe has a game plan, and he is buying the new house based on;
1: he will have rental income from existing home, that will take care of his ongoing payment for existing house.
2: The new house will have a potential of rental income plus his income from job.

Joe, I don’t think there is any problem with your decision. You will have the risk of not having renters in your house, if you are comfortable that the location is right and you will easily find renters than I don’t see any issue.

#10 Another Albertan on 11.23.09 at 11:34 pm

Meanwhile in Calgary, there are a number of technical professionals I know who have each pulled out well over $25k in home equity in the past 6 months in order to pay for basic living expenses because they haven’t worked since early Q1.

#11 Einsam Solo on 11.23.09 at 11:36 pm

“Should I continue and go forward with this house, or am I making a huge mistake? P.S. Saskatchewan is just entering a recession.”

I think you answered your own question.

Do what the ING man says… “save your money.”

#12 Bobby G on 11.23.09 at 11:46 pm

is it going to be ugly or what?
so many who can’t wait it out
buying a house now?
my prayers are with thee

#13 palebird on 11.23.09 at 11:47 pm

That is funny, ha he is probably wishing he had not done that right about now, careful for what you wish for..

#14 Jake on 11.24.09 at 12:17 am

#2 Nestor (from yesterday),
Thanks for the post man. That was hilarious. That “lifestyle” sacrifice line was priceless. Nothing like being newly married and getting cut off. I will have a moment of silence for you tonight buddy.

ps. Garth,
I heard a couple of professors talking about you today. The next thing I knew, I was talking about real estate and the economy with them too. Thanks for serving us up the daily reality check. You should definitely put an Edmonton date on your speaking tour. Let me know early and I will camp out for tickets Twilight style.

#15 Mike on 11.24.09 at 12:22 am

I own a small business.
I feel so unfair that banks pump all the money to real estate.
So many small businesses closed, and struggling,just
look at the Subway ADs, you will know business still not advertising.

I really hope they have plan to distribute money on the business to produce real things.

#16 Nostradamus jr. on 11.24.09 at 12:23 am

Joe, this is a joke right?

…How could any mtge lender approve you?

There must be a girlfriend/fiance behind all this…isn’t there.

Just a suggestion….add property when u have accumulated a 30% DP.

…and enjoy your life.

Nostradamus jr.

#17 arit on 11.24.09 at 12:33 am

Ubelievable!!!! Un-be-lie-va-ble. If it wasn’t Garth I would think I was being mocked.

arit+wife ,on the other hand, have a combined income of just over 100K, no debt whatsoever, and AFRAID to buy anything which could put the family at financial risk. Not, repeat, not paying over 250K for anything (and have way more than 25% down).

WHY? Oh why does arit need to compete with these morons? M-o-r-o-n-s, Please give arit a break! The rental townhouse has only one washroom and four women inside it!

PS: this is the first in time in 15 years I curse online. MORONS!!!

#18 Tallyman on 11.24.09 at 12:47 am

Boy I miss the the good ol days when it was simply
“The haves and the have nots”
Today it’s the haves and the have mores.

There’s going to hell to pay before the asylum gets back on track.

#19 nonplused on 11.24.09 at 12:51 am

#1 nearmilton,

Ya, but that stadium has over a million a year in upkeep and is hardly ever used since they built the new one. It’s been a net loss to the city for some time. And the new owner’s plan to use it for soccer isn’t likely to have any better economics than a CFL franchise. All said the new owners probably had to commit many millions of dollars to the project.

As for the Watson Wyatt boys,

Everyone thinks they are Nicolas Taleb now. The plan in Canada is to keep making mortgages cheaper to finance through low interest rates, low down payments, long arms, and tax breaks. I think they are out of ammo on most fronts so I expect tax deductions for mortgage interest in the next budget. The reason is simple. The strength of the banking sector here, as in the US, is all tied up on being able to declare those mortgages already written as performing, which you can do so long as the liquidation value of the house is above the mortgage amount. If a significant amount of houses go underwater, the banks have to start writing down and CMHC goes the way of Fannie, Freddie, and FHA. Why on earth the Americans needed 3 separate GSE’s to pave the way to affordability I will never know. Maybe they thought if the 3 competed against each other it would drive mortgage lending to new thresholds. Which is what happened to CMHC when GE Capital came here.

Ever notice that whenever the government sponsors some plan to “make something affordable”, it in essence ends up being a program to entice banks to make more loans and then have the government guarantee them? And the net result is that price spirals out of control and people are left with insurmountable debt?

As for Joe,

There are times in the past where people have made their fortunes doing what he is doing. But not these times. The government would have to somehow sustain the highest prices for real estate in the world (accounting for value and location), plus keep inflation and interest rates both at low levels indefinitely.

But I think something will give eventually. As Mises put it: “There is no way to avoid the eventual collapse of a credit fueled boom other than the voluntary withdrawal of additional credit or the abandonment of the currency system involved”. We already sped right past a voluntary withdrawal of further credit, so it’s on to collapse of the currency system involved. But if the Canadian dollar collapses along with its US counterpart, what does that mean for house prices? I wish I knew. I think it’s bad, as food and energy consumes more and more of the paycheck, but I am not sure.

Either way gold appears to be a better bet.

#20 ted on 11.24.09 at 12:59 am

this writer captures zeitgeist of the 2000’s. Another donald trump wanna be who feels he is wheeling and dealing his way into riches. at least this guy is honest. and don’t be too hard on him, he might actually listen unlike the vast majority of fools out there.

#21 G. on 11.24.09 at 1:05 am

All over town, people have built apartment suites in their basements.
You see them in the listings as legal and non-legal.
Listed as revenue property.

I came here almost two years ago at the peak of the price mania.
After the sticker shock from the rent on our apartment I looked around and saw folly.
I asked around at company functions ‘how much did you pay for your house?’
They’d say ‘about 90K but last time I looked it was worth 250’.
And I asked if they could buy that same house today.
No, of course not.

And the condo crazy mayor approved any and all conversions that crossed his desk.
I see them standing empty like hopeful wallflowers at a junior high dance on my bus ride to work.
The pressure on the remaining rental stock saw rents rise – a lot.
In our block alone, the wholesale turnover was astonishing as people fled to the trailer park countryside.
But a REIT’s gotta make money, right?
(I think they are barely legal ponzi schemes that have yet to reckon.)

Joe can’t be for real.
But, if he is, I am waiting.

#22 Jon B on 11.24.09 at 1:07 am

Wow, this guy is living in a dream world where cheap credit never ends and real estate values in SK never go down. Good luck Joe.

#23 TJ on 11.24.09 at 1:12 am

Please, Joe, bud – 50 K?
After taxes, what, 34K?

Wow – and you are bombing over 600 large in debt load, for a home in Saskatoon?

Listen to Mr. Turner, and eat the payment for the plans and call it a cheap lesson.

I just keep shaking my head when I hear stories like this, and wonder what ABS is eating the mezzanine debt of guys like Joe.

#24 Peter Pan on 11.24.09 at 1:14 am

Why are they always in their late 20s and early 30s? The 535 generation never fails to astonish (5% down, 35 year amortization)… Is it hubris, naiveté or just plain recklessness?

#25 omg on 11.24.09 at 1:16 am

Now Garth, the University of Saskatchewan has some nice buildings too.

#26 Nostradamus Le Mad Vlad on 11.24.09 at 1:34 am

Is that a pic of you in your S. Roughriders’ days, Garth? Hah! Rebel Without A Clue!
How’s this for a good market contrarian? / Commodities suck / Dollar Vomit Opera Zoo

When the US$ rises (next year), the Dow, etc. head into the Dark Void of Nothingness. Then the greenback sucks wind and heads into the same realm. All following the ‘limptrix — coming soon to a planet near you!
In this case, is the devil we already know better than the one we don’t? — Lucifer — and — Echoes Not only a great Pink Floyd song (the live version is even better), but memories of GD1.
In case BoA needs help, check with FinanceBusters!
What is the possibility of a gold bubble? Last week came word that Barrick said the world was running out of gold. Maybe they haven’t dug deep enough.
Gonna be a bumpy ride in more ways than one. Courtesy http://yayacanada.blogspot.com/ 7:57 clip, an excellent Cdn. site.

#27 Onemorething on 11.24.09 at 1:44 am

Well Joe, you asked for Garth’s advice and you got it!

Now take it!

Now here comes the Blog Dog onslaught intervention to enforce it!

#28 Bogdan on 11.24.09 at 1:55 am

“I have already put $1150, non-refundable, towards the drawings.” – ROLF! Last night I paid double than this amount for my cat’s treatment.

I love this guys! I love the story too, can’t compare it with the $500K/year sluts asking for advices on how their new McMansions should look like. Look, here we have high stakes ($50K), great builder, excellent dreamer, action man, suspense (two out of free said NO!), crazy risk (30+kid/s) and mystery fiction… a true bestseller!

Joe knew something might be wrong, this is why he wrote… good that he did.

#29 A bit harsh on 11.24.09 at 2:44 am

That was a bit harsh. While he obviously wanted your educated opinion, I think you could have said “You shouldn’t buy that second house and sell the one you have” without saying it the way you did. A lot of people here look to you as a guru. Keep up fighting the ‘MAN’ without fighting the man that looks up to you.

#30 Dan-O on 11.24.09 at 3:43 am

By renting out his home he’s increasing his income to about $75,000 so I’m not certain his plan isn’t do-able; I do question the investment of $400,000 in a recession for a 1,300sf home in Saskatoon, tho. He’s getting income from two properties so I’m thinking the risk is reduced considerably. Just my worthless opinion, tho.

#31 corvus on 11.24.09 at 5:24 am

the sky is falling! the sky is falling!

#32 Peter on 11.24.09 at 8:59 am

In Joe’s defense, he has planned to pay for both mortgages with rental income and is not planning on paying for both mortgages with only his salary.

The rental market is extremely limited right now in Saskatoon due to high rise apartment building that have been turned into condo developments over the past couple of years. Rental rates have skyrocketed, which will only help Joe. Plus with a university of 18,000 students, there is never any shortage of renters in Saskatoon.
I think Joe’s plan is prudent and well thought out. Sure there is risk involved, but even if there is a housing correction of 25%, his fully tenanted houses will continue to make their mortgage payments. The rental business not a get rich quick scheme, but provided that Joe has carefully calculated that he has positive cash flow, he will prosper.

Having 100% of your net worth in one asset class, which is at its zenith in terms of value, while interest rates are at low tide, and leverage at 90%, is neither prudent nor well thought-out. It is high-risk and financially suicidal. Are you a realtor? — Garth

#33 Kris on 11.24.09 at 9:00 am

If you are going to buy anything in Saskatoon, buy something central and efficient – those subdivisions they are pounding out are the epitomy of bad urban planning and a terrible investment.

Check out http://www.theshifthome.com/, it’s a LEED certified, highly energy efficient new home that includes a basement suite for rental income and is within walking distance of downtown. Perfect for first timers who are determined to get into the real estate market. I think even Garth would like this place!

#34 Jayman on 11.24.09 at 9:04 am

Joe, stay put. Cancel the new build. Keep building the equity in your existing place. Save. Diversify. Get debt free. Slow and steady.

#35 Simon in TO on 11.24.09 at 9:11 am

At first glance, I thought Joe’s plan wasn’t that bad – with the rental income, I figured he’d be okay, but then I ran some sample numbers and did a cashflow analysis, and realized that Garth may be right. Here are the numbers I used. I’m assuming a 25 year amortization (on both mortgages, just for simplicity’s sake) at 4.19% on a fixed 5-year rate, which is what ING is currently offering. The old mortgage is for $235,000, and has a payment of $1260 a month at 5/25/4.19%. The new mortgage, on a $400,000 property with $20,000 + CMHC would be $2100 a month at 5/25/4.19%. So that’s $3360/month, just for the two mortgages. Now, let’s look at the costs for running two houses – I’m assuming $450/month per house for insurance/taxes/utilities. Not sure if that’s reasonable for Saskatchewan, but I think it’s probably about right with those cold prairie winters. So that’s another $900 drain on the monthly cashflow for two houses.

So, cashflow-wise, we’re talking about $4260/month to support these two properties. Is Joe able to pull in that much per month in rent? No. It looks like the first house can yield $2300 in rent, and what can he get for the suite in the new house? $1200? That still leaves him at about -$760 a month. I suppose Joe could look at that negative cashflow as the “rent he pays himself,” but then there’s also the risk of vacancies, and unexpected maintenance costs…plus, I have no idea if my estimate of $1200 for the monthly rent on the suite in the new house is feasible.

Hmmm….now that I look at those numbers, I don’t think it’s too-too horrible a situation…if Joe sold everything and had to rent, he’d probably be paying more than $760 a month for rent (although he’d also have a ton of cash in the bank and no debt).

What do you think, blog dogs?

#36 JeffinPickering on 11.24.09 at 9:12 am

The end is nigh, the end is nigh!
Everybody get your [email protected] helmets on and fastened tight.
Nope, that’s not sarcasm. When I read stuff like this it has to be desperately close to bursting.
Single father…50k..owes $235 large on the house….I don’t know how he’s paying for what he has (especially if the rental suite ends up vacant) , nevermind what he wants.

Sadly, the following is indicative of what is going on, on a widespread basis:
“I currently own a house in a good area with a rental suite. I owe $235,000 on my house, and worse case, I could get $300,000”

You own your house, yet owe $235k? One of these things is not like the other. You don’t own your house!

What you mean to say is “Best case scenario, I own X percent of my house (sounds like 20% or less), and at best have $65K in real equity (less what I need to put back in my RRSP), if I can sell for 300K”.

Garth, you’d better ramp up production and get that book out in time for the holidays. We’re going to need it.

#37 David Bakody on 11.24.09 at 9:15 am

Now call the damn builder.

Now call the damn builder.

Now call the damn builder.

Your primary purpose is to provide food shelter and clothing for your children …. there purpose is to go to school and try for good marks and play ….. case closed

Now call the damn builder.

#38 Gord In Vancouver on 11.24.09 at 9:26 am

Canadians on jobless benefits rise 7.1%


#39 Munch on 11.24.09 at 9:27 am


Be NICE – to the people!

Thanks fer listening

Moms are for being nice. I’d rather help them.– Garth

#40 Lance on 11.24.09 at 9:44 am

So let me get this straight… you’ve built up a little bit of equity and now you’re going to gamble it all on a long-shot that you’ll double or triple it with the much higher chance that you’ll lose it all?

I have a better idea… sell your house and use the proceeds to buy lottery tickets.

Never, ever put all of your eggs in one basket.

#41 dd on 11.24.09 at 9:48 am

#2 Calgary_rip_off

“So the interest rates are going to be crushing? Good.”

You got a lot of heart rip_off.

#42 dd on 11.24.09 at 9:51 am

#33 Peter

“I think Joe’s plan is prudent and well thought out.”

Ha. What plan? Sounds like a wim and a prayer. Not much room for error.

#43 Devil's Advocate on 11.24.09 at 9:55 am

What so many of you don’t seem to realize is just how many live on $50,000, or less, a year, before tax, like Joe and how many of them have taken on such astonishing levels of debt.

Look at average annual household incomes for your area and factor into that the distribution. There are far, far more making less than there are making more. I would tend to question the claims of those $500 large per annum boasters than those like Joe.

How has Joe been granted such credit? While there are variables you need to consider might be missing in order to answer that they are not the point. The point is that Joe and many others like him are being extended enough slack to hang themselves by those who know the risk. But the risk is not of the lender it is of the borrower. The lender will have long since collateralized and sold the debt by the time the borrower defaults hanging themself.

#44 Devil's Advocate on 11.24.09 at 10:05 am

What we need to realise is; we have not yet fixed the problems that lead to the near collapse of the financial system last fall. Governments have simply infused copious quantities of cash and liquidity into the system such that as fast as the air is escaping it is being replaced. Eventually that is going to run out. We haven’t fixed the system we’ve just made a short term fix. Banks are still behaving, as badly as ever… the worst of which is that government run institution CMHC.

#45 beauty in lala land on 11.24.09 at 10:17 am

I defer to Garth’s opinion because he has credibility. As for some of the ‘commenters’ on this site, does it make you feel better to trash others? What a nasty group.

#46 Grantmi on 11.24.09 at 10:20 am

Dear Joe Schmo,

Of course Joe you plan on declaring the rental income to the CRA with your own salary.. RIGHT!!!

.. which after income taxes it would not be wise for you to cover everything or help you survive a lost tenant for a month (or two)!!

(Trust me.. I know.. moved out of a hated landlord’s home because he got greedy and jacked up my rent by 10%… we fled to a better and lower priced rental home.. and his place sat EMPTY for 4 months. $2,100 x 4 = $8,400. oops)

Next Patient please!!

#47 infernalmachine on 11.24.09 at 10:21 am

Hey #25 peter pan…

“They” may all be in their 20s-30s but all my Toronto late-20s, early 30s pals and myself are renting. We’re all young professionals or middle class workers and we’re not f%&*$# insane. Sure, a condo would be nice but so would having money to spend on dinner once a month, or a night out, or say… food.

Meanwhile, our parents who all bought during the lows of the earlier 80s or the lows of the early 90s are the ones bugging US to buy. My mother even told me once “Oh you don’t live in *such and such a neighbourhood* you’re just renting.” Jee, thanks mom.

#48 Zippy on 11.24.09 at 10:39 am

#3 NorthOf49 on 11.23.09 at 10:51 pm

It’s real. My EX wanted a divorce & bought me out of our hobby farm, She owes $570K to the bank & 100K to her relatives.

She quit her govt job (70K/annum) because she didn’t want to commute, and is now self-employed (horseboarding & freelance internet).

I moved out in January, & in July she put the place up for sale (maybe reality sank in). The place is still up for sale & she reduced the price twice already. BTW – we’re in Lower Mainland – the most expensive area in The Great White North.

#49 $fromA$ia (Thinks Nostradamus makes more sence than Marc Carney!) on 11.24.09 at 10:46 am

Wow – and you are bombing over 600 large in debt load, for a home in Saskatoon?-TJ


Where do these guys (most Canadians) fit in Marc Carney’s economic model?

Way to go Marc, keep lending to the problem that created all of this in the first place. (RE)

#50 Grantmi on 11.24.09 at 10:49 am

Sorry Joe.. on to more pressing matters….


Now Apartment BUILDINGS are getting into the mix of – “YOU BETTER BUY NOW… OR BE PRICED OUT OF THE MARKET FOREVER!!!!” syndrome.


love these lines!

“CMHC has made it relatively easy to finance the ownership of an apartment building for Canadians. The agency backs loans for individuals who sign a personal guarantee with as little as 15% down. That mean you can buy a small $1-million building with just $150,000.”


“During this whole credit crisis we’ve been quite busy because we are one of the only ones to have funds available,” says Peter Cook, assistant vice-president of commercial lending of First National Financial LP. “From a company standpoint we’ve had our biggest year ever.”

Great! Now our tax dollars are also going to bail out greedy apartment owners when they also declare bankruptcy!!

Move Along!! Nothing to see Here!

#51 Ruraldude on 11.24.09 at 10:57 am

Greed GREED GREEEED! It’s all about Greed. Joe better stuff a good layer of news papers in his britches cause he’s about to get the licking off his life.

#52 PeckedToDeathByDucks on 11.24.09 at 10:58 am

Extreme Dollars – The Dollar Bubble

That second video features clips of Bernanke’s economic forecasting ability….it’s amazing how wrong the man in charge has been.

#53 Evangeline on 11.24.09 at 11:03 am

((Why on earth the Americans needed 3 separate GSE’s to pave the way to affordability I will never know..))

Don’t forget Ginnie Mae …

from the WSJ, August 2009

((Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too…

All of which means that the FHA and Ginnie Mae could well be the next Fannie and Freddie. While Fan and Fred carried “implicit” federal guarantees, the FHA and Ginnie carry the explicit full faith and credit of the U.S. government. ))


#54 Jeremy on 11.24.09 at 11:04 am

Mortgage brokers don’t give mortgages to people because they don’t think the person can pay them back. If a mortgage broker turns you down, take the hint.

#55 Grey on 11.24.09 at 11:06 am

#48 infernalmachine

Couldn’t agree with you more!

We’re in that age bracket and got offered a 5/35 mortgage and refuse to touch it. Not all of us are stupid. I read Joe’s letter and was instantly thought, people like you are part of the problem/reason we are in this RE bubble right now.

#56 Grey on 11.24.09 at 11:09 am

PS – The Globe and Mail is on fire today!

Numbers on EI swell


Living standards sink, report says


#57 Devil's Advocate on 11.24.09 at 11:27 am

#47 Grantmi
Of Course he is going to report the rental income to The Canada Revenue Agency. If he did not he could hardly deduct the expenses such as interest could he?

What you don’t seem to realize Grantmi is that very few landlords fit the Snidely Whiplash stereotype. Conversely it seems all too often RENTERS fit the stereotypes attributed them. It’s that vocal minority, cry baby thing…

#58 Guan-Di on 11.24.09 at 11:30 am

A bit harsh:

Ummmm… do you read this blog? If you don’t want a quick sharp slap to the reality chops, don’t ask Garth for advice!

#59 BlorgDorg on 11.24.09 at 11:43 am

Yep — the Globe has a great follow-up with Niall Ferguson. What does he predict? Instability, inflation, higher taxes, a sideways stock market. Where have we heard that before?


#60 Calgary Rip off on 11.24.09 at 11:51 am


Thanks for the comments dude. Realistically crushing the current bubble in Calgary will be a good thing. Think about it: Less property taxes, and more people able to afford food and housing. And this is a bad thing? Id take being able to live than some stupid inflated equity.

And I put my money where my mouth is: I vote for parties that will help out others poorer than myself: NDP baby. These right wingers are nonsense. Why have government if its not for the people? NDP is not fascist. It’s not like you cant work, achieve and own things. Its that your work goes to help others, not just yourself!!! If there was a mindset like this, this planet wouldnt be known as being ruled by Lucifer.

Now tell me that I dont have heart. Bring the interest rates up to 15%. Bring it on!!!

#61 Sid on 11.24.09 at 12:00 pm

There are a number of factors to consider here. How stable is your job? Who are your tenants? Is their income stable or do they work in an industry that could be dried up by the recession? Also, what are vacancy rates like in your area? Would you consider taking in a roommate along with a renter downstairs to help out incase you’re between tenants? Overall the first house sounds like a good investment with nice cash flow, the second one however is a bit of a stretch. I’d say given the recession starting in Saskatchewan, you’d be better off holding off on the new building, and try and pick up another older home near the university with rental suite potential in a year or so after you’ve seen what prices will do there. Beware of cities that have exponential price growth, they are often the ones to crash the hardest.

#62 Men With Hats on 11.24.09 at 12:06 pm

Sorry,I don’t get it .How on, Gods green ,earth does Joey qualify for almost three quarters pf a million in mortgage financing making only 50k a year .
The mortgage company must be extraordinarily obtuse / stupid .
Sounds like a load of bollocks to me .
The wood is already on the property and he doesn’t have a signed contract with the builder ?
Yea, sure .
Drawings are called blueprints Joey .If you are gonna lie at least know the lingo going in .
This is a below average piece of fiction .

#63 latinlife on 11.24.09 at 12:13 pm

how to get your own set of bumper nuts


#64 mattvic on 11.24.09 at 12:14 pm

CNN article: “1 in 4 mortgages underwater”. Be careful, Joe:


#65 latinlife on 11.24.09 at 12:20 pm

Here’s a pic I just got of the RE guy from Red Deer AB


#66 Grantmi on 11.24.09 at 12:21 pm


What you don’t seem to realize Grantmi is that very few landlords fit the Snidely Whiplash stereotype. Conversely it seems all too often RENTERS fit the stereotypes attributed them. It’s that vocal minority, cry baby thing…”

I wasn’t blasting ALL landlords!

Far from it. I’m currently renting from a great landlord and treat (and repair the home on my own) as if it was ours. They love us.. and they EVEN dropped the rent recently due to the correction in the rental market.

My point was the perils of BEING a landlord and loosing a tenant. (or trying to kick a bad tenant out.. while they squat for free for months on end)

My last landlord was a Troll…. and yes… I might have stayed in place for the 10% increase. But not with him or THAT house!! And it did sit empty for 4 months.

If you misinterpreted my post… my apologises!

#67 bill on 11.24.09 at 12:42 pm

dont do it .sell and rent. hurry.

#68 tjmikey on 11.24.09 at 12:51 pm

#19 Nonplused

Tax deductions for interest?

Yeah, OK.

Let’s see….taxes are going to be on the rise on all fronts and you think they are going to give back that kind of coin?

If anything, you may well see huge changes to the primary residence rule.

All avenues of goverments are broke and borrowing to aid cash flow.

Wake up dude, they are not going to give…they are going to take away.

#69 robert on 11.24.09 at 12:56 pm

I cannot believe that Watson Wyatt makes no mention of deflation (unless one assumes this to be a subset of “depression”). Hyperinflation? We’re more likely to be visited by space aliens in the next ten years. Do people actually pay for this piffle?

#70 Popeye on 11.24.09 at 1:00 pm

#36 Simon in TO on 11.24.09 at 9:11 am
Good analysis. Joe is way too exposed to the ‘unknown’. What are the occupations of his renters? Are they long term renters or transients?

Given his income and the uncertain economic future, he should sell his house and rent, therefore eliminating risk and his exposure to interest rates. If I were his kid(s) that’s what I’d want him to do!

#71 AxeHead on 11.24.09 at 1:10 pm

Here in Alberta, we are about a year or 2 ahead of Saskatchewan. Joe – if you want to see the future, look west (due to lack of trees, you can see all the way to Calgary). Alot of us (including me) did what Joe did…ride the wave, buy another place & rent it out while watching equity grow. BUT…that’s all gone now. Prices are flat or deflating, especially high end. Under $350k will move cause it’s affortable but anything above is hurting. Rent prices are dropping, fast, and vacancy is everywhere. Good renters are picky and you’re lucky to find one that has a job. If you proceed, you should expect the following:
1 – reduction in your property value by at least 20% in one year and few buyers if you’re listing.
2 – reduction in rental income by another 20% and renters moving around trying to find the best deal.
3 – shedding of speculation properties and rental properties as speculators realize they need to get our or loose their equity.

Joe – keep the house that meets your needs the best and sell the other NOW while you can get a good price. I did.

#72 PeckedToDeathByDucks on 11.24.09 at 1:17 pm

Extreme News:

The Good: There is an American government insurance fund that protects more than $4.5 trillion of U.S. bank deposits. FDIC

The Bad: FDIC’s list of “problem” banks increased to 552 in Sep.

The Ugly: FDIC now has negative $8.2 billion balance.

The Backup: Treasury has their back and will support by selling bonds.

The Clincher: Treasury says the bonds are not risky because they are backed by….Freddy & Fannie

The Ponzi Circle: The U.S. Treasury backs Freddy with $52 billion to keep it solvent

round ‘nd round
:-) going forward :-)

#73 AxeHead on 11.24.09 at 1:18 pm

#63. Saskatchewan is in a time warp…the past. They are where Alberta was 2 years ago and have peak boom thinking – money is everywhere, equity can only go up, blah blah blah. Even the banks are thinking like this. I think this dude is real. I’ve seen guys like him everywhere in Alberta 2 years ago.

#74 brico9 on 11.24.09 at 1:25 pm

I believe this post.
Almost anyone can get a mortgage. Why not? The lender takes very little risk. As long as CMHC gives their blessing and the mortgage broker filled out the paperwork with creativity – you have a green light.

Any type of reason was gone years ago.

#75 George on 11.24.09 at 1:30 pm

I can’t explain exactly how, I just knew intuitively that if I hung in there, somewhere down the road all the hours put into your blog were finally about to pay off. Well that day has arrived – “Bumper Nuts” They’ll be under the tree this year for all the relatives.

#76 George on 11.24.09 at 1:35 pm

There’s this dude with a site called cowpieclocks.com He goes out into the field pulls out a pie, shellacs it solid. cuts out the center and pops a cheap clock inside. Oh ya and how bout credit default swapping my collateralized debt obligation with your residential mortgage backed security too.

#77 buying_in_calgary on 11.24.09 at 1:38 pm

After waiting for three years for market to correct I am calling my RE agent first thing tomorrow morning (I might shed a tear tonight for listening to you guys and not buying 8 months ago).

Yes, houses are overpriced but our government will never allow RE prices to drop.


“No correction expected” they say and this time they are right.

#78 tech4monkies on 11.24.09 at 1:38 pm

I’m curious as to what term and rate you ended up getting….

I don’t think S’toon is worth building in my opinion, just because these prices cannot be sustained. I also live here & sold my place and currently rent, as opposed buying another bloated house or immersing into massive debt. Month to date, the average residential sale price for the Saskatoon area sits at $280,106.

If all you are going to lose is $1150 so far, what do you have to lose by sitting it out another year? Sell your house, rent in the meantime. Invest what will be YOUR money. Worse that happens is that you’ve pissed off a banker and a builder.

just food for thought.

#79 Repatriated Expat on 11.24.09 at 1:39 pm

Hey Joe, if you’re sitting around a card table playing poker with a bunch of people and you don’t know who the fool is, your it.

#80 Soylent Green is People on 11.24.09 at 2:02 pm

What about the trouble Joe parent six-pack will be in if or when he loses his job?

What if Joe falls off a ladder?


re Moms are for being nice. I’d rather help them.– Garth

They are? You should meet my mom (think Mrs. Saprano).

#81 David Bakody on 11.24.09 at 2:09 pm

I think it is safe to state we are in the first 10 on the list to some extent. To listen to Washington and Ottawa stating all will be well to-morrow is not wise to say the least. Harper and Flarherty have their mint printing presses working 24/7 and if that is not enough they have given all their inside boys and girls good jobs …. so where do modern day rats escape to in times of trouble, plush fat government appointments, while friends of government have non accountable non tendered defence contracts wrt the Winds of War. Sad issue is most do not understand and they will be the first sacrificed. All this while our MSM await yet another Senate lotto draw! All material things have only market value, otherwords what some one will buy it for, not what your paid for it + and in troubled times it is always far less, fact!

Listening Joe (s) ?

#82 David Bakody on 11.24.09 at 2:19 pm

73 PeckedToDeathByDucks on 11.24.09 at 1:17 pm

All good and fine but what if the credit rating falls yet another fraction and causes this to grow more than the $3m/min it is at now.

– $ 12,123,282,031,757 US National Debt

As complex this issue is there is Iraq/Afghanistan soon to be Senior Boomers and news to-day that there are 535,000 more unemployed that they forgot to count. Hello what about Canada are we getting the real facts wrt our debt and real unemployed. I see more closed up shop windows every week.

#83 DaMann on 11.24.09 at 2:19 pm

Why are all the people amazed at how Joe can qualify for so much money? ” How or why would a mortgage company or Bank give him all that money” The questions to ask is why wouldn’t they? The banks, mortgage and mortgage companies ARE NOT the problem. The biggest problem in this whole mess can all come down on the shoulders of one entity ( aside from stupid people of course)… CMHC. The banks are guaranteed to get their money back no matter what. If the person fails to pay, CMHC picks up the tab The banks are not stupid, they have ZERO risk in all this. CMHC ( the tax payer) takes ALL the risk. CMHC shoudl not be insuring 35 year mortgages with 5% down. Let’s not kid ourselves, if CMHC didn’t exist, Joe would queslify for maybe $200k at best and wouldbe required to put 20% down or else NO bank would touch him with a 10 foot pole.
Rot in hell CMHC

#84 ralph on 11.24.09 at 2:29 pm

You are right Garth. Tough love is what is needed here. Some people just won’t get it if you’re nice.

Joe, if want to play landlord then you should be in multi-unit buildings such as apartments or fourplexes. Where the zoning is more favorable and you can spread your risk.

#85 artisuseless on 11.24.09 at 2:49 pm

How on earth do RE agents or anybody else rationalize home prices going up in the prairies – that they’re running out of land??

@ #70 robert on 11.24.09 at 12:56 pm

I cannot believe that Watson Wyatt makes no mention of deflation

I’ve argued elsewhere (and maybe here, I can’t remember) that there seems to be some sort of ideological war going on right now, largely between the bunch that buy into the idea that economic prosperity comes via tax cuts (particularly to the wealthy), deregulation, free trade, monetary policy and so on and those who believe that prosperity comes from less socio-economic disparity, fiscal policy and better regulation.

So far, the first group (which includes a motley crew of neo-cons and ‘austrian school’ types) appear to be winning all the battles. The neo-cons dodged real financial reform and so long as Goldman Sachs can keep their bonuses they seem to think all will be well in the world, and the Austrian schoolers have stoked so much fear from their nonsense theories about gold and ‘fiat’ money that the internet is rife with people who haven’t even taken high school economics barking on about how gold has been money for 6,000 years and that all ‘fiat’ currencies are doomed.

However, they also seem to be intent on forcing the US to raise interest rates prematurely, and if they do it’ll likely send gold and stocks right back down again and the ‘banksters’ can forget about another easy bailout any time soon.

#86 The Great Gazoo on 11.24.09 at 2:55 pm

So much news today, maybe they should be read by the chief “economists” at the re institutes.


This article today says Canadian standard of living has dropped. But who cares? Government is too busy making money for their banker buddies through CMHC to care if standard of living is dropping and unemployment keeps rising…. by the way, BOM posted a 16% increase in profits today..

#87 Ronaldo on 11.24.09 at 3:03 pm

Joe, listen to #72 Axehead, he is dead on.

#88 David Bakody on 11.24.09 at 3:50 pm

#88 Ronaldo on 11.24.09 at 3:03 pm

Had a good long time friend do almost the same thing, but what happened the house that sold was the one he was living in that was an attractive well finished home, to which he had to accept less than he wanted. The new home still needs those finishing touches y’all know what that is and it costs and that was three years ago!

Do not know how these vultures sense when a seller is in a bind (s) but they do …. sure can not be closed mouthed RE agents ?

#89 X on 11.24.09 at 3:51 pm

People still don’t get it. RE is over priced. Whether it undergoes a correction, or it plateaus, it can not continually rise in value.

Patience for the RE market.

But no patience for Garth. Do you have an expected release date for the book? And/or title?

I am looking forward to it.

“Money Road” will launch February 1st. — Garth

#90 Soju on 11.24.09 at 3:59 pm

Joe do your own thing and don’t take advice from people singing the renters blues…

Make the sacrifice when your young so that you can enjoy the finer things when your old and tired.

My advice is pass on building a new home and buy an existing home so you can cash in right away and start saving towards an emergency fund. Building will simply cost you money while the place cannot give you any income not to mention not knowing if the construction costs will come in on budget or not.

#91 David Bakody on 11.24.09 at 4:13 pm

Well, well, well…
From the G&M

U.S. banking troubles far from over ( note the use of word “far” ) so where is Canada ?

This and more strikes at least 3 or 4 on the above list hard. real hard!

Well done to journalist …. all we want are the facts wrapped in the truth. We can handle it, there is no need to think the working class and retired will panic , because really there is no where to go.

#92 Mitch on 11.24.09 at 4:27 pm

I owe a ridiculous amount of money, and thats the way I want it. As an investor, I want to leverage my money to buy as much as I can with as little money as possible. The difference for me, and average Joe, is that there is a plan in place to pay off my properties (rent them out and other people pay for it). Property investors will rarely own more than 20 or 25% of each property….if they do, you are not fully invested, and your money is just sitting there, not doing anything. An investor will have plans in place in case interest rates go up.

Also, your example does not accuratly reflect what is actually happening. Looking at the example, he states that he makes 50k, but also that his rent in his old house will be 2300, which translates to another 27,600, and will have a basement suite in the new place (conservativly rented for 900) which is another 10,800. So his actual income is 88,400/year.

The reason that he was turned down by 2 banks is because most banks only consider half of rental income as actual income. I suspect that the 3rd place he went to was a credit union, or RBC, as they use all of rental income to determine TDSR.

What is the real shocker though, is that once he buys his income property, and gets established, he can deduct all of his costs from his income, and get most of his income tax back. I paid only $1200 in income tax last year, and got a significant rebate.

Financially successfull people leverage their money to do more for them. Even Warren Buffet leverages himself like crazy, and is one of the richest men in the world.

Except Warren Buffet doesn’t come here to justify himself. Guess he has that missing ingredient. — Garth

#93 Publius Enigma on 11.24.09 at 4:33 pm

I have a hard time swallowing this one.

Little equity. Cashed out the RRSPs. Wood is on the property, but the down payment isn’t paid yet.

Perhaps I am mistaken, but I think someone is pushing your buttons.

#94 PeckedToDeathByDucks on 11.24.09 at 4:48 pm

Garth…”Money Road”

You are a work maniac. It brought to mind the hog and Steppenwolf’s song by Mark Bonfire. (What a great nickname for Carney, eh)

Get your motor running down that rolling paperprestiditizer highway. Is there an exit ramp?

#95 Downsized and Delighted on 11.24.09 at 4:53 pm

Fake, fake, fake, fake, fake………..

Don’t be so hard on yourself. — Garth

#96 David Bakody on 11.24.09 at 4:55 pm

Added note:

For those who remember I as did others wrote that what happened last fall would last until at least 2015 and now every day the truth is coming clearer. Even as I type away President Obama is stating just that and he is stating what Mr. Turner has said over and over again.

Many jobs will never come back! what the Pres. and others in Washington and Ottawa will not say is “They were high paying jobs with full benefits” The kind that mortgage lenders once fought to do business with.

#97 jess on 11.24.09 at 4:58 pm

end the war feed the people.

DETROIT (CNNMoney.com) — On a side street in an old industrial neighborhood, a delivery man stacks a dolly of goods outside a store. Ten feet away stands another man clad in military fatigues, combat boots and what appears to be a flak jacket. He looks straight out of Baghdad. But this isn’t Iraq. It’s southeast Detroit, and he’s there to guard the groceries…


#98 Soju on 11.24.09 at 5:14 pm

#93 Mitch

Great words…

#99 $fromA$ia (Thinks Nostradamus makes more sence than Marc Carney!) on 11.24.09 at 5:23 pm

#93″Financially successfull people leverage their money to do more for them. Even Warren Buffet leverages himself like crazy, and is one of the richest men in the world.”-Mitch

Excuse me, when everybodies doing the same thing to make money it’s game over. The secret is out of the bag buddy.

Ever heard of possitive cashflow?

#100 T.O. Bubble Boy on 11.24.09 at 5:24 pm

Here’s a question I’d be curious to hear people’s opinions on:

Why on earth does CMHC insure mortgages for investment properties and other types of non-first-time buyers?

I find it insulting that our government is not only pushing unqualified lemmings into a valley of debt, but also backing high-risk speculation/income properties!

I agree with Mitch that no one in the business of renting properties should ever be paying off each one before moving on to the next investment… but I see no reason that my tax dollars should be enabling slumlords to maximize their leverage to unnatural levels.

#101 Calgary Rip off on 11.24.09 at 5:30 pm

#78 Buying in Calgary.

The government controls the cost of houses. Right. That’s what’s happened in Canada and USA. If you can afford the property, you like it, and can handle it if interest rates skyrocket, then buy. You are likely getting less for your money. Sounds like you are buying on emotion about what you hope things will be. As it stands, are current house costs sustainable? Not likely. You may be better off renting for a while. What’s the hurry anyway? It’s not like people are lined up in droves in Calgary in a rush to buy. However, if you have the downpayment though and it feels right, why wait? I cant buy anything right now thankfully, cause I dont have the cash in the bank yet for a big down. Im slowly saving cause my rent is so high. Still the rent is more affordable than owning, for now. It may grow much more affordable. Pray that interest rates dont skyrocket and your value on the shack drops through the floor. This is highly likely. Oil sustaining the economy? Not likely. Natural gas? Not a chance. What then? The conservative party? Not a chance. So what will keep the house prices up? Not much. Only people that are desperate to sustain a delusion that Calgary is Long Island, New York. Right. Once I have a big downpayment, say 20K then I will buy. No can do to a 35 year mortgage owner.

#102 jess on 11.24.09 at 5:33 pm

mcmansions rented for theme parties?

Police say the party had been heavily promoted at Georgia State University in Atlanta and at the University of West Georgia in Carrollton. Food and alcohol were being sold inside the six-bedroom mansion.

“It was unbelievable,” says neighbor Kathy Battaglia, a user-support analyst for an accounting software firm. “The noise over there was so loud it may as well have been in our house. It sounded like the whole party was in the front yard and on the front porch.”

The Halloween party was the latest of several in Sandy Springs in which empty mansions are rented for huge parties that draw complaints from neighbors, says City Councilwoman Karen Meinzen McEnerny. “I think it’s related to the economy,” she says. “We have a lot more vacant property. In August 2008, there were 11 vacant properties in my district. In August 2009, there were 34 vacant properties.”

The Sandy Springs party planner was charged only with disorderly conduct, a misdemeanor, because he had permission from the property manager to host a party, Meinzen McEnerny says.


#103 greyhound on 11.24.09 at 5:40 pm

Apparently two of Scotiabank’s economists have been reading Garth:

#104 Ian on 11.24.09 at 5:47 pm

Simon in TO. you forgot to factor in the income tax Joe would have to set aside at about 25% while he could write off the interest payments and utilities the general point that he would be screwed is still valid.

After reading this blog for months I sold my house with the $2300 mortgage payment on a $339k loan and downsized to a $795 mortgage payment on $135k loan. at least now its less than rent. Downside is I am in the burbs and I may well lose a chunk of the equity (70% downpayment) in this vinyl box. Oh well easy come easy go.

#105 Ronaldo on 11.24.09 at 5:56 pm

Check out this latest report regarding “Negative Equity” in the U.S. Housing market. Couldn’t possibly happen here right because we’re different, eh……..


#106 Popeye on 11.24.09 at 6:17 pm

Joe, Garth was pretty frank with you (so were the blog dogs).

Continue with your plan and take on substantial risk.


Revise your plan to reduce your risk. The days of “Rich dad, poor dad” are pretty much over for the foreseeable future.

And Garth is a real estate investor, and wrote a book in early 2000 notifying people to get INTO real estate (he was right). It’s now the opposite advice, and I’d be tempted to listen to him (i.e. reduce your exposure to the real estate market).

#107 Cassandra on 11.24.09 at 6:23 pm

#93 Mitch
“An investor will have plans in place in case interest rates go up. ”

My plan was to sell “too early”, and pocket the profits.

What’s yours?

#108 Dan in Victoria on 11.24.09 at 6:58 pm

Joes update
It’s called “research” Joe, all that has been discussed here before. Insert city or province name as required (more or less). Read what Garth told you, then read it again. Still not sure what he said?
I have some friends who did what you are proposing, it worked out very, very well for them. Only thing was they were much, much, much more shrewd than you.
Times and circumstances are now different, they won’t touch it right now.
But hey, give it a poke, whats the worst that can happen?
How much construction experience have you got? Are you paying full retail?
You know, full pop on everything?
Profit to the builder on every nail, screw, 2×6?

#109 X on 11.24.09 at 6:59 pm

RE #93 True, it can be good to use OPM (other peoples money) to invest, however I would be cautious to put it all into RE at this time.

#110 ziggy on 11.24.09 at 7:06 pm

Hey Garth you often mention Van. Calgary, Kelowna, and Toronto but how about Quebec City or Montreal.
Is Quebec experiencing the same RE delusions as the rest of the country. Just an observation from a fellow fan of yours.
Ziggy in P.G. B.C.

#111 $fromA$ia (Thinks Nostradamus makes more sence than Marc Carney!) on 11.24.09 at 7:12 pm

#101 T.O. Bubble Boy-“I find it insulting that our government is not only pushing unqualified lemmings into a valley of debt”…

This is the only way this Government can cling to power, they are the reason for this mess. It was our beloved Finance Minister that lowered the bar for home buyers. 0/40 Bomb.

#101 T.O. Bubble Boy-“… but I see no reason that my tax dollars should be enabling slumlords to maximize their leverage to unnatural levels.”

Again, what ever it takes to prop up housing. It Props up the party in power.

#112 rory on 11.24.09 at 7:15 pm

#61 Calgary Rip off …

Oh you poor deluded soul …Lucifer…good grief …what don’t you get …big G bad no matter who is in is …a large overpaid and medicated civil service is bad …so in your world we all work for the gov’t then we all can get the great benefits and live rich …oops …who will pay my wages and my pension …must be those damn right wingers …crap just when you thought they were finished.

Another sobering thought …just because your home value goes down (same as everyone else’s) the local G will still rake in the same amount …they just adjust the mill rate …hellooooo …only way to win is to have your property depreciate more than the neighbourhood …sounds like a win-win for you in your reality.

Last thing …15% interesrt rates will hurt the poor more then the rich …so yeah baby bring on that 15%…where did you learn this crap.

102 Calgary Rip Off you said:“ Once I have a big downpayment, say 20K then I will buy. No can do to a 35 year mortgage owner.“

So $20K is a big down payment …on what a new F350.

Question for you …do you know who pays most of the taxes in this country …the answer is not the bottom half…like it or not you cannot chase away big business, entrepreneurs or high income people …believe it or not.

#113 G. on 11.24.09 at 7:45 pm

#61 Calgary…

Refreshing to see someone who knows how to correctly spell the word fascist.

And, if the NDP were to adopt the position that governments should not have any debt aside from short term financing of large capital projects then I might consider voting for them.
Imagine the world we could build if all the money we spent on interest every year was available for social programs.

#114 Nostradamus Le Mad Vlad on 11.24.09 at 7:57 pm

Yesterday I opined (without a shred of evidence) about peak oil, and it generated a small debate. Interesting, but it counts for zippo. On Garth’s old political blog, I posted links which stated there were a glut of oil and other tankers, jamming up the Straits of Hormuz (sp?).

Last night, the following link. It is clear that big oil is hijacking their own tankers, which inevitably leads to shortages, then higher prices at the pumps. — http://www.conspiracyplanet.com/
Headline reveals a clearer Picture

31 min. clip of US$ bubble.
Armored trucks / cars for Gold 1. Argentina Gold 2
We elected this lot. I guess we get what we deserve — The Usual Suspects
A very good question
Some have said it’s time a Revolution
For those interested in swine flu, this is top-notch journalism — Comment from wrh.com is better: “The government and media lied to us all about global warming. What else are they lying about? In fact, let’s save time. What have they told us the truth about?”

Do the above questions coincide with the controlling big oil / monsanto / big pharma / NWO theories?

#115 Sid on 11.24.09 at 8:12 pm

Joe, Garth does not have a crystal ball, he cannot acurately predict when the market will crash and by how much, or when it will recover. He can only estimate the general direction it will take based on current facts (interest rates, historical prices, economic indicators, etc). Prices may go up for another 2 years, or maybe another 2 months. They may drop 5% or they may drop 50%. NOBODY KNOWS FOR SURE.

The only thing you can do is prepare for different scenerios. Be fiscally conservative and run your budget based on different “what if” scenerios. What if interest goes up to 7%, what if your tenant stops paying rent, what if you lose your job.

What if he stops being an avaricious gambler? — Garth

#116 Piccaso on 11.24.09 at 8:14 pm

Hey Joe,

Jump in with both feet !!!
If it all falls apart, just…ah, well…pray that it doesn’t.

#117 Emma on 11.24.09 at 8:43 pm

Joe, you’re really not getting it. Grab a calculator! You cannot carry a debt load of 12 times your income! And as others have said, a lot can go wrong with your income plans

Saskatchewan is no different than the other Canadian markets – 1, 2, 3 years or 20 years – you cannot afford these properties NOW so what does it matter about the future? Read the blog, man – the future is bleak!

Who cares when it hits – the point is that it should have already landed! The more the government meddles and drags this sucker out the longer we are going to feel the pain – the market needs to rebalance!

It could be quick, it could be slow but from the looks of recent government decision making it is going to be a very slow bleed propped up by every bandaid solution they can think up. If the last one took 13 years, why are you asking about 3 years – the States is at 3 or 4 years post peak now – how does it look to you?

#118 BAD on 11.24.09 at 8:46 pm

Joe’s case, if in fact true, is an excellent example of subprime lending in Canada.

Once property prices start dropping these loans are the first to go sour. Joe seems to have no other assets so the loss will be on the taxpayer through CMHC.
Joe’s lender will most likely get the money back so it does not risk anything but stands to earn interest until the default happens.
There’s an expression “moral hazard” (has nothing to do with morality) that everyone seem to have forgotten about. The above is a perfect example of the “moral hazard” that has been created by our government policies of the past few years and produced our Joe Extreme.

Interesting times we live in, interesting indeed.

#119 Calgary_rip_off on 11.24.09 at 9:26 pm


Rory: Save your breath. You are annoying.

#120 Taxpayer like you on 11.24.09 at 9:30 pm

113 Rory – thank you for explaining property taxes to 61 rip-off. And the F350 line was good too.

Drifting slightly off the posted topic, but onto you fav – our civil service, I get to deal with various employees at the different levels of government. What is shocking is the complete naivete many have wrt the “real world” of
day-to-day business. I’m not saying they dont do their
job, or that they dont work hard, but they get the
funniest look when you tell them that you havent taken a
draw in six weeks because a client hasnt paid you. They
just know their cheque is always there, and their pension
is guaranteed.

And generally, people forget how entrenched the “free market” is in our lives. Take away just some of the
choices the market gives us and they would sing a
different tune.

Enjoy your evening. You too CRO. You too Garth and again thanks for hosting this forum.

#121 Off-gridder on 11.24.09 at 10:12 pm

Joe! My goodness…My boyfriend and I jumped in head first into a $80,000 owner operator job back in 2004. It was suppose to be great money. The truck broke down constantly. We made negative $5000 in the first 8 months. We eventually went under and got out before we started borrowing more money from our dispatch company for repairs. The point is…what could have gone wrong…DID. We only just finally crawled out of that hole of debt in 2008. And it was only $80,000.

Joe. We all know your mind is already made up. So there’s no telling you anything. But be honest with yourself. And ask if you’d be willing to lose it ALL.
We never thought we would. And we would have made a different choice had we known we would lose it all. But our mind was already made up and no one could tell us anything.

#122 Slownsteady on 11.24.09 at 10:12 pm


One vacant suite with 9% mortgage rate in five years from now and 50K/YR income?

How about two vacant suites? And no job…

I don’t see any cash reserves to weather a storm, that arguably may or may not come.

Right idea, wrong time.

#123 Ronaldo on 11.25.09 at 8:17 am

Definately Nikki playing with you Garth…too bizarre

#124 $fromA$ia (Thinks Nostradamus makes more sence than Marc Carney!) on 11.25.09 at 12:01 pm

Nikki is hot, I wish she’d play with me:P. I have a pre approved morgage waiving in my hand.

#125 Increasing that 1% on 11.25.09 at 1:12 pm

Re: $fromA$ia (Thinks Nostradamus makes more sence than Marc Carney!) on 11.24.09 at 10:46 am

–Which Nostradamus are you referring to, or would it be both of them?

As for Joe, you need to learn a little more about Garth- the guy you’re asking advice from…. regarding what could be one of the worst financial choices of your life..

#126 Kent on 11.25.09 at 2:22 pm

This guy is messing with you Garth. He cannot be for real.

#127 Joe on 11.26.09 at 12:16 am

Thanks for all the advice, I think I am going to wait it out, and not buy that house. I am also thinking we are going to follow Alberta like someone suggested… There are always going to be other opportunities, as someone else suggested… As for those who thinks this is fake, and that I must be lying… GET OVER IT, IT’S ALL TRUE.

#128 Smac20 on 11.26.09 at 5:20 pm

This has been a wonderful read. I am a late 20 something professional and become increasingly discouraged by the property market in Vancouver. Is Vancouver really that wonderful that you need a dual family income just to afford a 1 bedroom apartment? These are the kinds of stories I hear all the time. Who in their right mind thinks a 40 year amortization period is realistic?

It’s time for fundamentals to rebound to a normalized level. Can housing prices continue to clime with the boomers moving to the renesting stage–hello care homes?

Further, for those of you that believe the world will buy Vancouver after the Olympics so the next big boom is around the corner, chomp on this: there has never been a sustained real-estate boom after Olympic Games in the host city ever! So what makes Vancouver different?