What happened to this site yesterday?
As those who tried to access Greater Fool yesterday discovered, we were toast. The site was out for almost 12 hours, during which time no posts or comments could be made. I asked my crack technical team for an explanation, after I had finished waterboarding them. Here it is:
“In the morning of January 28, the database server attempted to execute a self-repair routine on the database table that contains the comments from visitors. The self-repair failed and required intervention by special technical means to be repaired. A repeat failure occurred later that same evening, 10 hours later, but this time the web server software was affected, causing rejection of all traffic during that period in the evening. Special technical intervention again made repair, and also identified a secondary issue that was addressed successfully, thus finally returning all functions to normal status later in the evening. There was no loss of any data, other than visitor comments that were submitted over a few hours in the afternoon.”
* * *
Well, that was interesting.
“This entry really shakes your credibility,” said one critic, while another cited my crushing yesterday of “your sick pack of rabid antisocial bubble watchers.”
“You are doing some serious backpedalling on your predictions about a RE correction,” a guy warned ominously, while a twentysomething moaned, “you just told an entire new generation of first time home buyers that they’ll be renting til they die.”
The catalyst for despair and derision was my comment that we should expect a real estate correction, not a crash. A decline of 15% in average prices, not a 40% US-style meltdown. That negative equity would be the disease here, not foreclosures. That places like Toronto would decline more slowly, and Vancouver faster. That Canada would see a long, slow and relentless real estate melt, not a housing implosion.
The words were chosen with as much care as they were misread with carelessness. So let me try again.
First, why the market will not blow up overnight:
- The federal government is terrified of this happening. They will endure a bubble, even with its destructive long-term consequences, over allowing market forces to be unleashed. This is called ‘politics.’
- In the light of the cabinet shuffle and the looming budget, the feds are signalling that the pain will come in the form of less spending, then higher taxes.
- The latest statements by the Bank of Canada suggest strongly that CHMC’s 5% down disaster will not now be amended to 10%.
- I’m betting the interest rate increase later this summer will be tame to start – maybe a couple of quarter points. The real misery is being held back for 2011 and 2012.
- Looks like we should expect a wave of new listings in the next couple of months, seriously diluting the supply-demand equation, quickly knocking price increases back to 0% and giving Ottawa a way to back off its recent mortgage threat.
Why the market will melt down, instead:
- Interest rates will be returning to their historic norm. That means mortgage renewals in 2014 or 2015 will shock people who borrowed in 2009 and 2010.
- Housing affordability will crash due to rising rates, stagnant incomes and higher income and consumption taxes.
- The Boomers hit the 65 mark starting in 2011, on their way to Freedom 85 – but only if they ditch the big house. Another tidal wave of listings.
- Economic growth will suck for at least half a decade, perhaps much longer. Government stimulus drugs will be cut off, our biggest trading partner is in decline, and China still has all our jobs.
- Rapidly rising energy costs over the next few years along with more taxes will help stoke inflation and rob Canadians of disposable income. This is hardly the climate for bidding wars, or $900,000 unrenovated bungs.
- A housing correction will become self-reinforcing, as recent buyers taste negative equity and the news spreads that real estate is now eating the young.
What this means:
- As I said yesterday, 2010 will be see the start of a correcting market, with a likely decline in average prices nation-wide of 15% by the end of the year.
- This will be the start, not the end.
- Between now and the time a five-year mortgage renews, I can see residential real estate declining another 20% to 40%, depending on the market, GDP growth, rates and taxes.
- This will bring a return to 2007 or 2008 prices and some extraordinary buying opportunities for those with cash.
Real estate is not a tech stock. It won’t crash in value in the space of a few months. Those who believe this don’t understand how the market works. This Spring a ton of owners – afraid they missed the peak – will list their homes and, being the greedy people they are, try for top dollar. That happens in March. If they have not sold in 90 days, they might reduce the price by 10%. That takes us to July, just when the BoC raises rates for the first time. If no offers materialize, they might drop prices again after another three months, and now it’s October.
At that point – nine months distant – sale prices will drop below list prices as inventory accumulates and buyers melt away.
See what I mean?
There’s a reason I’ve not said on this blog real estate will crash. It won’t. Get a grip.
But this is the top. The road ahead belongs to the realistic.
187 comments ↓
No explanations necessary Garth…you have been right..corrections will come starting out on a small scale gradually escalating ,our country’s economy can not fix it no matter how much our vote buying politicians try to save the day..our economic future can not support it.
Love it.
Love it.
Love it.
Garth, you are basically saying that you BELIEVE that we are now on the cusp of the turn. Inflection point.
Love it.
Love it.
Love it.
Look South for Canada’s future>
This hours question on the CNN’s Situation Room Cafferty File shows America is worried about their National Debt and more, much more.
Here’s my question to you: The U.S. may go bankrupt in the next 7 to 10 years. Why won’t our government do anything about it?
– $ 12,404,636,472,802 ( National Debt Clock)
And in Canada:
According to the latest release by the Bank of Canada, the outstanding balances of various credit types held by Chartered Banks (only) have expanded by the following amounts during the period of February 2008 – November 2009 (1 year, 9 months):
personal loans have increased 19%
balances on credit cards have increased 14%
‘other’ types of loans have expanded by 14%.
personal lines of credit have grown 39%
The long and short of things are, “You load 16 Tons and what do you get, another day older and deeper in debt”
And as Garth said neither government has the politcal will to bite the bullet and raise interest rates. And our man is out of town trumpeting Paul Martin’s past plan that bailed us out last time.
Next trick …. Pres. Obama State of Union, will he or won’t he start a War on National Debt.
It can not happen fast enough! Maybe we can get some sanity back to this country
Oh okay …”15% by the end of the year”
…. that was a quick fix hey Garth. lol
It’s January. What else would I mean? — Garth
http://upload.wikimedia.org/wikipedia/commons/f/fe/Cshpi-peak.svg
http://static.seekingalpha.com/uploads/2009/9/24/saupload_case_shiller12_08.JPG
what makes 40% in four years a “crash” in the US but not here?
The US market had double-digit declines for consecutive months running. We will not repeat that. But the decline will be substantial, nonetheless. — Garth
•This will bring a return to 2007 or 2008 prices and some extraordinary buying opportunities for those with cash.
Wow, what a relief, you had me for a second.
Bummer.
I am so confused at the moment. Can anyone explain the rational behind this:
http://www.cbc.ca/money/story/2010/01/27/vancouver-growth-forecast.html
How should one interpret and what value should we give to the Conference Board of Canada’s predictions. This current one goes against all my rational thinking. Maybe I’m just a slow learner!
The Conference Board is wrong. — Garth
Further confirmation of Canada’s housing bubble
Call it what you want, but economists at Scotia Capital think the Canadian housing market is a bubble that faces downsides into next year – and the numbers continue to prove it.
http://canadabubble.com/bubble-watch/402-further-confirmation-of-canadas-housing-bubble.html
That picture was my second laugh of the day, this was my first if I may bring some levity to the site:
An American tourist asks a Newfoundlander: “Why do scuba divers always fall backwards off their boats”
To which the Newfoundlander replies: If they fell forwards they’d still be in the f*****g boat.” I’m about to put my condo on the market early Feburary and hope I am falling the right way!
Cheers
“This will bring a return to 2007 or 2008 prices and some extraordinary buying opportunities for those with cash.”
In 2007/8, you were saying prices would drop 15% and only fools were buying then. Now those fool prices are buying opportunities that we can only hope for.
Basically you are saying that the 15% drop from the 07/08 peaks will never happen. The fools who bought or kept their overpriced properties will have paid down a big chunk of their mortgage because of low rates.
The non-fools who sold on your advice can only hope to buy back for what they sold for and loose a fortune on transfer costs. As well as spending years in a crappy rental for more than tax and mortgage payments would have been at 2.5%.
You wonder why people reading this are disappointed?
Then learn to read. 15% is the start, and a realistic one. If you have fantasies, buy a doll. — Garth
Garth,
Great summary. I am one who has believed that Vancouver is due for a big drop. I keep saying 30% in a year. However you make a lot of sense that it could take place over a much longer period of time.
I think we are now at the top of the market. The low interest rates have driven up prices so that affordability is now past the point we were in 2008 when the market began to fall. There is probably no point in the government changing the CMHC rules because the damage is now pretty much done.
Fed to keep Interest Rates low for extended period
http://www.globeinvestor.com/servlet/story/GI.20100127.escenic_1446287/GIStory/
This will prolong the rise in interest rates, thereby prolonging the housing bubble.
———
“This will bring a return to 2007 or 2008 prices and some extraordinary buying opportunities for those with cash”
Didn’t you warn us in 2008 that housing was overvalued? Now you are saying that a return to those prices will bring extraordinary buying opportunities. I don’t know what the multiple was for Vancouver in 2007-2008, but it was still extremely overvalued. If I understand you, it may not make sense to buy in Vancouver for another five years.
How many copies of that book have you sold Garth?
I don’t run the market, dude. Grow up. — Garth
Heres a comment from Rob Chipmans Blog.
Enjoy Garth,
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
31 Crying Wolf Wed, Jan 27, 2010 | 11:44 am Anyone check out Garth’s “predictions.”
What a sham that guy is. After a 20% increase in prices nationally, he predicts a 15% decline. But lets not forget the fact that he predicted the same 15% in 2008 prior to the 20% increase. What a pansy.
Why bother writing anything at all. A 15% pull back is not even noteworthy.
Instead of “After the Crash,” maybe his next book can be “Real Estate Armegedon” where he note that prices will drop 5% in 2020 and outlines how you can profit from this “dire” event.
Too funny…
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The comment about dropping 15% after a 20% bump up this year is interesting.
Rob who? — Garth
Where do you find the pics? I can’t stop laughing….
Experts See Another Global Dip Ahead
Davos Attendees Pin Hopes on Emerging Economies, Saying Debt and Deficits Will Trouble U.S.; Sparring Over Bank Rules
http://online.wsj.com/article/SB10001424052748704094304575029200234924446.html?mod=WSJ_World_MIDDLENews
There will be more dissapointments down the road….worse then the one depicted in the today’s picture, I just can’t stop laughing…
over-values housing by city
calgary is about 50% overvalued
toronto about 20%
montreal about 25%
vancouver about 45%
halifax about 25%
ottawa about 25% at least according to these guys
http://www.housepriceindex.ca/Default.aspx
nationally US house prices are down 30% since 2006
USA home price graph
It’s important to remember that demographic effects like the Boomers selling their real estate won’t happen all at once either. The leading edge are hitting 65 soon, but the peak of the wave are in their early 50s and have maybe 10 years of child rearing to go before they are empty nesters.
I should think that a 15% decline will be bad enough. A lot of highly leveraged first time buyers will suffer plenty under such a scenario.
Nothing for certain…maybe US banks have more deliquent mortgages…more people lose jobs…quite a number of things are possible. Prime % rate increase in June (.5 %)then another one in Oct/ November (.25%)
Olympics creates a 200 million dollar defecit. Well what do you expect Vanoc is shipping in snow via truck or helicoptor to cover a mountain…a contingency plan happening now. that’s not a plan! that ’s just stupid.
we end up on par with US $1.00 – $1.0124 CAN. It could happen. A number of this factors coming together
re-posted
as of today calgary RE is down $65,000 or 13% edmonton is down $84,000 or 20%
so what constitutes a crash 10% 20% 30% 40% 50% ?
there is no question that when banks eventually raise rates..which they will definitely do.. prices will fall further
how much further ?
consider that calgary homes are priced about $240,000 higher than the long term median would indicate
calgarys unemployment rate is now at 7.3% or about the same as it was before the boom..and its getting worse
metro-calgary has built approximately 140,000 new homes since 2001 and its population has grown by 250,000 = 1 new home for every 1.78 new calgarians
people are now leaving alberta
alberta is a unique place for housing for many reasons the main one being we are the only non-recourse mortgage province in Canada and mortgages debtors can leave the keys by the sink and simply walk away with little consequence..which is why i say
nobody knows where the bottom will be
———————–
the looming housing crisis is being masked pretty well
the temptation to buy is great..realtors the media and even politicians are painting a happy go lucky face onto a badly deformed and rotting pig but in the end it will be what it will be
i haven’t noticed any back tracking by the author despite the massive and unexpected taxpayer subsidization of the REIC
one more thing CMHC are the same as freddy and fannie
you remember those two don’t you ?
First, why the market will not blow up overnight:
* The federal government is terrified of this happening. They will endure a bubble, even with its destructive long-term consequences, over allowing market forces to be unleashed. This is called ‘politics.’
***************************************
The market trumps politics–obviously–
Otherwise their Keynesian voodoo wouldn’t have stopped working–
A paper system that’s designed to run on constant inflation–ie-ever expanding money and credit supply–ie–theft of the saver–by inflation–is stymied by what Von Mises phrased–
The pool of greater fools eventually dries up and there is no way to prevent a final bust–
They will keep trying to goose inflation,but with higher taxes–loss of net worth in falling asset prices “homes” and job loss psychology,entrenching itself–it ain’t gonna happen–imo
Garth, I should add a bit of clarity to my previous post. Does the Conference Board of Canada have a lot of influence (i.e., Board Members) from Real Estate and Forestry?
Exactly so. — Garth
Thanks for re-explaining exactly what you mean Garth.
We can all stop talking/warning everyone. Everyone has been warned after your big book tour and of course the subject has been debated ad nauseum for years on this blog. All that’s left to do is get on with the rest of our lives and see what happens to the RE markets in Canada.
Trying to talk this market down has really not helped the cause, with the exception of selling a few more books maybe.
How come Canadians don’t know how to build houses
using bricks, concrete and steel?
Is b’cos there are abundant of cheap lumber?
The US market had double-digit declines for consecutive months running. We will not repeat that. — Garth
weren’t those declines expressed on an annual basis?
not that I’m saying this is going to blow up overnight, but regarding “why the market will not blow up overnight”
1. US gov was powerless to stop the “crash”?
2. does this mean no gov bail-out? (including CHMC?)
3. what would CHMC do when default losses start to come in?
4. US had no interest rate increase during the “crash”?
in terms of demongraphics, do you recommend renting indefinitely due to the on-coming 15 year wave of baby boomer unloading their RE?
in any case, I think it would have been more clear to everyone if you had said ” … will logically result in a 15% decline in the national average house price THIS YEAR.” instead.
I can cut up your veggies for you, too, if you want. — Garth
From Yale Economist Robert Shiller, you know it is a bubble when:
The solution: a checklist like psychologists use to determine if someone is suffering from, say, depression. So here is Mr. Shiller’s checklist.
Sharp increases in the price of an asset like real estate or dot-com shares
Great public excitement about said increases
An accompanying media frenzy
Stories of people earning a lot of money, causing envy among people who aren’t
Growing interest in the asset class among the general public
“New era” theories to justify unprecedented price increases
A decline in lending standards
If your asset class is suffering from these symptoms, consult your neighborhood economist or licensed broker, and maybe a good psychotherapist, too.
Love it.
Wow people certainly take literally everything Garth has to say.
Everyone should remember that this is all just opinion – no one knows the future – PERIOD. Garth may be right or he may be wrong. But one should get a handle on things themselves so they can make their own judgements on what makes more sense and diversify themselves accordingly.
My own opinion is that we will have a slow grinding retrenchment of house prices in real terms over the next decade.
I view it this way;
- many markets in Canada have had bull market in RE for 20 years. When nobody can recall that prices can go down its about time for a major correction.
- you can buy a decent house in a decent suburb of San Diego (or name any other nice SoCal city) for less than in Saskatoon – something just smells wrong about that. (or, you can buy a nice house in a spectacular area of LA for less than a house in Vancouver – also stinky.)
- we have had a perfect storm for RE – almost free money, microscopic down payments backstopped by CMHC, and a very mild recession in all but a few hard hit manufacturing areas. One thing changes and opps there goes your equity. Two or three things change and look out below.
- the only quantitative analysis on US housing prices was done by Robert Shiller – read the book – its quick and easy. His thesis – over the long run, prices always trend toward the long run average (in real terms). if you apply the same thesis to Canada average prices would be about 1/2 what they are now. Oh yes, I know we are soooo different than the US, so a comparison is not fair. Its just that we look the same as the US and our economy runs off the US.
But of course this is all just opinion. I may be right or I may be wrong.
Of course I think I am right
consider the sudden and unexpected bank actions in Australia and ask yourself..can it happen here ? no you say..why ?
Good way to get the blog dogs back on board Garth. Just say the real correction will happen several years down the road and it will end badly then. Maybe write a book by then. This blog is very entertaining
These Bears are getting out of control…keep em in check. I think the market will go lower by 66%. ’sarcasm’
Post #24 tran, hcmc. We do, not economicaly feasible in most cases.
Framing a house in 200 hours is far cheaper.
Plumbing a house in 80 hours is far cheaper.
Wiring a house in 80 hours is far cheaper.
FYI there are some concrete block houses that were built in in the mid 70’s on Carey road in Victoria, still going strong today.
Garth (and #133 Jim from previous posting)
The message FEDs sent today was to reiterate the pledge to maintain the “exceptionally low levels of the federal funds rate for an extended period.” That probably means at lest entire 2010.
Assuming that Canada cannot / will not raise rates before US, what you guys believe the RE will appreciate this year? I would bet on another 15-20%.
From an article in yesterday’s “24H Vancouver” (free newspaper given away at the Seabus):
“Young families considering a starter home should resign themselves to living in an apartment condo for the rest of their lives. My advice is to get to Calgary as fast as you can. It’s not great in Calgary but it’s a whole lot better than it is in Vancouver”.
Developers here think that house prices will increase (some think 20% this year) forever because people want to move here.
With the prospect of spending the rest of your life in a condo, I think that the opposite will happen.
Yesterdays’s posts were not good for my soul. People really need to analyze their finances and do neighbourhood specific research to know when prices are sitting at the right price for THEM! Ultimately, it’s a personal choice. Renting has a lot of pros – especially when ownership will tie up a large chunk of your income for 35 years.
I have a hard time reading the “I sold because you told me to” comments. Geez, would you slay your first born just because Garth told you it’d be a good financial move? You already know it would be.
My neighbourhood in Toronto needs at least a 50% haircut before I would recommend it to someone. Unless of course, they were super wealthy, in which case they wouldn’t want to live here anyway.
I’m thinking that a true crash will happen as soon as there is a change in government.
So what are the chances the budget is defeated in a confidence vote this spring? It seems a perfect opportunity for Ignatieff to springboard from, and magnify, the proroguing issue.
Same thing happened in the U.S. – except the U.S. knew exactly when their election would take place – they have fixed elections. So everything started unraveling in Oct. ‘09.
It’s all hinging on the next election. As soon as the conservatives smell defeat, they will let the economy crash. In fact they’ll MAKE it crash to leave a mess for the Liberals.
You speak plain, Garth. I love it! Can’t say there’s a thing I’ve read that I disagree with… again. I much appreciate your continued efforts by the way, to steer naive, self destructively impulsive young homebuyers from the ball and chain of debt slavery to the politicians/banks/realtors/developers who care not how they get rich… just so long as they get rich quick on those who foolishly borrow to buy a the top of a real estate peak.
Excellent analysis once again of where we are at and where we are headed over time.
“I can cut up your veggies for you, too, if you want.” — Garth
Now thats the kinder, gentle, nurturing, supportive softer side we never had the chance to become intimately acquainted with while you were in politics!
The road ahead belongs to the realistic. – well Garth, now you do sound realistic. If one compares the points under “why the market will not blow up overnight” with the predictions you made in the past, this time not only that you took into consideration how the government&BOC are going to act, but you did it in each of the points. Bravo!
One more thing, I think there’s a psychological percentage of negative equity, at which, once reached, the families underwater are going to consider bankruptcy.
In order to find the percentage, I imagine myself in a river with a rising water, cold as ice. When do I start to panic? Well, I think that when the water gets close to my genital organ, ~30% from my body length (if you can’t figure it, check the picture of this article, it works great)
Many home sales took place last year. Those sales are the key to the equation, as half of them were with a 10% (or lower) down payment, so those home buyers will be the first to get into the cold water. How much would have the last year’s prices to decline from now on in order for a vast majority of the home buyers to consider bankruptcy? Correct, 30%. Once the market declines by 30%, we will have a price crash. See, this is why you shouldn’t “see residential real estate declining another 20% to 40%”. Otherwise, you are correct.
No one is expecting a housing crash in months, are you kidding? In US it took them 3 years so far and they need at least 2 more. And yes, they can walk away.
Your scenario might play out well if the $CAD will deflate (this means inflation), which, an uneducated guy like me, can’t see it happen once house prices begin the “decline”.
CMHC – they’ll insure $600B in risky mortgages, but not islamic ones:
http://www.google.com/hostednews/canadianpress/article/ALeqM5h3Noa3L5tn5B_HCvPNBUnFHxTMeQ
“The CMHC prefaces the report by stating it has no plans to insure Shariah mortgages, nor does it plan to change current legislation or administrative practices.”
Explain this to me: how would a partnership/profit sharing mortgage be more risky than a 0%/40-year bank mortgage? Maybe the lender would actually pay attention to the person and property they were investing in.
I sold four properties (3 rental properties & a residential lot) last year based on what I was reading on this site. I was freaked man. I then paid off my own personal mortgage. I then bought a hot tub & a motor home for the family. The best part? The stress is gone and I’m not wondering if my tenants still have a job or if one of the basements is leaking etc. I went out and got a life. No regrets. Thanks Garth.
Garth,
Two evenings and 300-odd pages later, kudos to you on an excellent piece of work with Money Road. Great job. As someone who purchased their home just before things got stupid and has no plans to sell, I especially appreciated the details relating to leveraging equity to reduce RE market exposure. The chapter on technical/fundamental analysis was sweet, and the chapter on legal tax avoidance was even more exciting after I re-read it to confirm that I was actually reading it right!
I’ve read some of your other books, and I don’t think you’ve ever timed the times better. I’m sure most of the blog dogs have already purchased their copies, and whether they agree with outlook on RE or not, all will find something in this book that will make them wiser for taking the time to thumb its pages. Best $20 I’ve spent in a long time.
Dude, you’re doing every Canadian who reads this book *right now* a huge favour. More than a few of us appreciate the effort, and thank you. Maybe a few will even heed the warnings and do something about it, but I won’t start holding my breath just yet.
Contrarily,
Dan of the sound
Seems people are fixated on EVENTS and schedules.
Processes and trends for some reason seem to be too uncertain to tolerate. Everything takes time. RE is an illiquid asset … it moves over months and years not days and weeks. The US decline is into its 4th grinding year coming off the top and still has a way to go.
Its a PROCESS. Lots of moving parts. One part is interest rates which will move in a series of little events (rate movements). It’ll take a lot of time.
31 FOMC statement on 01.27.10 at 8:55 pm
If interest rates and mortgage regs remain unchanged, I’d say you are right, that we could see a national gain of 15% this year and a rising stockmarket created by the continued bubble inflation/wealth effect. This would effectively mean that the average Canadian home will sell for $350 grand by years end. And… I think we both know what would happen from there if this scenario took place. For those who don’t know, let me refresh them.
The slow real esate melt Garth speaks of will melt with more speed and duration breeding a recession economy outright as a result of too many consumers curbing spending due to too much debt, reduced borrowing power and lower national incomes from a shrinking economy. The decline will be steeper and the bottom will last longer. The RE market will become a ponsi scheme (actually, it has already) and a U.S. style meltdown will become all the more possible. The RE melt that follows will become more exasterbated. And if it follows late into 2011 and beyond? The RE melt scenario will most likely be replaced by the U.S. style meltdown scenario triggered by interest rate hikes.
Readers, its just another 1.5 to 2% of Canadian consumers who will, after this year, be unable to contribute to our economy in any kind of meaningful way as they will be too indebted from this years new mortgage, welcoming a future of being too broke or too bankrupt to spend as a result of buying into real estate at or near the top of a RE market peak that later breeds negative equity in the years to come and you can all thank Harper for it.
This government wants everyone to be more and more indebted. This is their legacy. Debt. This is the great Conservative plan to expand the economy…. just get everyone more and more indebted. Expand through credit. Borrow. It leaves any sane person to ask why this government doesn’t believe in expanding our economy through earnings instead, y’know, like the previous government successfully did… but are instead willing to continue to impliment well known failed policies of other nations with historically proven devastating economic consequences. It really does disappoint me to see so many other Canadians who aren’t catching on as to why this government wants to burden its citizens with so much excessive debt. Why… the question readers, should easily answer itself.
I’m glad to see people on this blog have minds of their own and it’s not some sort of cult where everyone believes their leader. I guess a lot of us misinterpreted what Garth was saying in regards to the 15% decline – I too wrongly assumed he felt that was all Toronto would fall by. So many people went against Garth on that – good on you folks.
Those of you, who gobbled up the 15% as the totaly decline, do you solely rely on Garth’s words? You need to do your own research and reading and inform yourself on markets, speculative bubbles, and the general economy. I wouldn’t ever rely on one guy’s words to formulate my opinion. My opinion won’t turn on a dime and neither should yours. Do your homework and you’ll come up with the proper conclusion.
The Original Dave
Garth, we already pay 50% direct tax and another 30% indirect. How much more can the sheeple of Canada take? Does no one remember the math classes they took in grade 5? 100% means its all gone.
I got thinking today about us tail end boomers, you know the ones who were always sort of behind. Good jobs taken etc.You tail-enders know what I mean. Anyhow, how many of us have a huge swack of equity in our houses.
I thought hell, this housing run is done…toast… maxed, no more “real” profit.
So is my house going to double in 10 years proabably not.
What happens in 10 years, yep tail-end again.
Trying to sell while all the early boomers already have.
Then they get to pounce on all the good retirement “stuff”
So lets say we sell now, were going to sell anyhow.
I’m getting tired of mowing the lawn (BIG) painting, maintaining etc.
Say you have 500 grand left or whatever.
Take that money invest conservatively at 6.5%.
Using the doubling function (how many of you checked that link I gave you?) you should double your money in about 10.76 years.
So if you had 500 grand you’ve got a million.
That would pay you 65 grand a year at 6.5%
Now I know there are taxes and such to consider thats a given.Lets just keep it simple.
Is that box (house) that sits there rotting in the rain going to be worth a million in 10 years?
#34 BigAl – Bingo. This mess over the past year and a half has been *all* about getting Harper re-elected. If he smells defeat, he’ll pull the plug just to screw Ignatief.
The 15% in the first year and then a long slow slide makes sense and mirrors the chart of CDN Housing Prices in the 1980s and 1990s you posted a few months back.
If history repeats then valuations would remain stagnant for a number of years after that, as people are shell shocked and swear of RE as an ‘investment’.
I did an analysis on CMHC data for prices in here in London Ontario and found the average price rose about 70% from 2000 to 2007. I would expect the historical norm should be ~3%/yr max, so that should have only been ~25%.
I have been thinking that over the next five or six years London would pull back 30% in total (maybe 35% with overshoot) five or six year out, which seems roughly in line with Garth’s assessment.
The blogger in this link describes well, the road we are headed on. (I could almost hear a “seize the day” chant when I read this one)
http://americacanada.blogspot.com/2010/01/recession-to-continue-in-q3-2010.html
Ha ha! sure a lot of wingnuts on here.
Hmm! lets see. Garth said so, so that means it will be true, right down to last 100th mm. I’ve said it before, take the information, study, observe, analyze and use it wisely, but don’t believe all the numbers, it’s just a suggestion. Maybe get a second or third opinion before you jump the gun. Why oh why would anyone take a proposal so literally.
Garth writes books and a blog to give you some insight into events that may happen, ideas that you can use to better yourself, an opportunity to learn the fundamentals of real estate, investments and overall economic conditions. So some numbers are askew, so what, take it for what it’s worth. If you honestly believe what every person tells you (that you hardly know) then you deserve the outcome. Some people will come out ahead and some will fail…way of life. If Garth told you that something was going to be worth 100% more, but it only attained 75% increase, I guess you would be pissed off. Give me a break. Go hire someone to manage your life, investments and see how well you do.
The beauty about recessions, downturns whatever you call it, there are still people that will become millionaires during this period of time. They are what you call on this blog contrarians. Yep people who take a chance or come up with ideas when everyone is hiding in the bunkers. Also remember that alot of these people fail and go broke too.
Just today I read an article about a 56 year old guy that invested all of his pension and RRSP’s in a company that was too good to be true. 3% interest per month. Whoa! red flag. My wife ask me why someone would do that. My answer was either too dumb, greedy or trying to make up lost years of investing or spending too much money and not saving. I do feel sorry for these people, but what can a guy do. Now how would you like to take his advice or the company that sucked him in to it. Lets hope you never go this far.
I do appreciate Garths advice, knowledge and his blog but for the life of me, I would never consider it to be the gospel of investing. There is more to it than one persons testimony.
BTW! I do enjoy reading this blog, wingnuts included, but as the saying goes “Here I sit broken hearted, paid a dime and only farted, took a chance and $4aT my pants.”
PS: Garth, maybe you should go back to writing a newsletter like you use to in the 80’s, before you had to stop due to politics, this way you only had to deal with one wingnut letter at a time.
….type-o above…I meant everything started unraveling in October ‘08 —not ‘09
It is telling that people are pissed if they think that Garth has gone soft, as if they were owed some divine guidance. I read this blog like I think it was intended: not as a model for my life, but to get more information from a contrarian point of view. Doesn’t mean that Garth is any more right than the pundits on BNN, but you can’t make an informed decision without both sides of the story.
Which brings me to a somewhat offtopic rant. Just got to the section on why GICs are a poor strategy in Money road, and that small section is just so full of misleading statements I have to respond. From the book (shortened):
“500,000 invested at age 60 at a return of 2.5% will give an income of $32,000 a year … That may be enough to survive on … but hardly a goal to strive for”
Here you conveniently leave out CPP earnings, which you state earlier are 17,000 a year. So actually you’ve got near-as-makes-no-difference 50k to live on, which is more than fine without a mortgage (which you certainly shouldn’t have if you listened to Trahair’s advice.
Then you go on to talk about how the average RRSP had a market value of 64,000. Firstly that has exactly zero relevance to the subject of GICs so I don’t know why you even bother to mention it here, and secondly it is not clear if that number is RRSPs for people at retirement age, or all RRSPs. All this shows is that most people don’t know how to save or invest, which is not surprising but has no relevance to the subject at hand.
Just like on your blog, you go on to compare two numbers that you cherry picked to make them favourable to your argument. TSX average return over 25 years at 7.5%, and GICs in 2010 at 2.5%.
There are so many things wrong here, but I’ll try to keep it short. Firstly, I can get 3% on a 90 day GIC at ING, and 3% on their 5 year right now. Secondly, your comparison is worse than meaningless because of the time frames. If you want to compare 25 year averages then get a number for 25 year average GIC returns. HINT: It’s not 2.5%. A couple years ago a high yield savings account was 4%, so GICS were certainly over that. Then you don’t lose a word to the fact that the investments are totally not comparable. One having zero risk is kind of an important point.
Rant over.
Don’t get me wrong. I lean towards safe investments, but I bought your book because I’m totally open to seeing how I can invest more intelligently and get better returns. However when you make arguments like in that section, and make silly statements that it is “simply impossible” to retire with save investments, it really brings down the advice in other sections.
You sound like a GIC proponent. Good luck – you’ll need it. The numbers in that section are not mine, but were sourced (and credited) to TaxTips.ca. BTW, counting on CPP is not a wise strategy. — Garth
“The Boomers hit the 65 mark starting in 2011, on their way to Freedom 85 – but only if they ditch the big house. Another tidal wave of listings. ” – Garth Turner
G Turner, you need to at least consider that a fair %, if not a majority of Boomers, will likely take an investment loan out against their property and live off the interest and let the capital dwindle over the years. People who have lived in and built their houses up over the decades, are attached to them. They don’t want to just sell the farm and move somewhere smaller and cheaper, simply because they have turned 65. Now, if they plan on fully retiring and moving somewhere warmer, i.e. the current cheap Southern States, that is a different story. The point is, I think you are over-estimating Boomers suddenly flooding the market with their family homes. There are other options for them, that let them keep their homes and have retirement equity.
Bang on Garth!
It takes time for the upside and downside of the manipulation to play out.
The best time to buy is about 5 years out as with so many shoes dropping the direction will be messy and hard to navigate, right down to a neighborhood scale I believe.
Buy for location and resale will change during this next decade. The boomer trends speak volumes shortly.
Best blog photo yet! I knew I shouldn’t be sneaking a peak at the blog in the office, and it was a close call today when the ‘beach’ photo popped up with colleagues nearby…
Your rationale behind your forecast for house price declines, both the magnitude and the rate of decline, makes a lot of sense.
Just received Money Road in the mail today, thanks.
See you in Langley in February!
Need to clarify the calculations in my post – those were from memory (and I cant find the CMHC data online right now). Here are the numbers from the horse’s mouth, CREA:
From 1999 to 2000 there is a total 1.9% increase – from 2000 to 2001 a 1.6% increase – then:
2001 Ave Price $136K
2007 Ave Price $202K
2008 Ave Price $210K
An increase of 74K or 54% in 7 years. At ~3% that should be only 21% and would still suggest a 30% overvaluation (2001 to 2007 is a 48% increase over 6 years).
Am I overestimating the 3% as what one should expect? If the historical average should be closer to 2 or 2.5%, then the overvaluation would be greater.
Source Data:
http://creastats.crea.ca/lond/index.htm
hey junius ,you could be right.or it could go garths way. now we’re going to find out.
Then learn to read. 15% is the start, and a realistic one. If you have fantasies, buy a doll. — Garth
Great response to a ’sheepish’ comment. Well into your book…great read. We sold in Sept ‘09 and I love renting. My wife – not so much.
It looks like a good time to:
* reduce the tax bill
* invest in low-debt companies in ‘recovery’ sectors (forestry, oil, gas, electricity)
* watch and listen to the housing hiss
Sheep follow. Dogs guard.
Ron
According to my crystal ball, by the time Garth’s naysayers wake up and smell the croissant, they won’t be receiving future financial pleasure for having presently got so high on unreal estate, they need a stepladder to scratch their own bottoms.
Don’t shoot “Garth The Messenger” folks and do your best to read above, below and between the lines of his blog. In essence, he’s reminding us that Rome was neither built nor burned in a day, and that he smells smoke.
Stashing too many hopes, dreams and eggs in one highly mortgaged nest is bound to attract vultures when the drek hits the fan.
So how many people went out on a Casey Serin RE shopping spree between Garth’s posts?
The same people that raided their BMO savings accounts after Garth’s warning of possible troubles at BMO?
http://www.greaterfool.ca/2009/08/23/too-safe-to-fail
http://www.greaterfool.ca/2009/08/24/behind-the-bank
And to quote Garth from 08/24,
“The real estate market will correct, not crash – a 15-20% decline, not 40-50% plunge – and it will take long months to unravel. Yes, there will be some effect on stocks, but not dramatic. The impact on 2009 homebuyers, however, will be something else. ”
Garth, the social experiment continues…
Knucklewalker, your point from yesterday proven today.
http://www.greaterfool.ca/2010/01/26/wolf-boy/#comment-59365
Looks like the markets like whatever Bama said in his state of the union address. Wedgies to Geitner and Bernake?
Hey, that’s me in grade 9! Kim went on to date a guy named Warrington and I joined an abstinence group at church. I had nothing better to do.
No crash eh? Probably right. But there is no room for error if there is a “black swan” so don’t give up all hope. Anything can, and given enough time, usually does happen.
I’m still hoping for a bubble in the market Kim passed up but so far no bidding war.
The market was correcting in 2008 by its self. I live in Victoria and it peaked in April of that year and started a gradual decline. Then September came along and we all know what happened. If people are calling Garth a Joke because he didn’t predict a global melt down and rebound due to ultra low interest rates, your expectations may not be reasonable. From September 2008 until December 2009 we crashed 15% and recovered 20% and set new records. A movement like this sounds like a “bull trap”.
Why will Canada’s RE market not crash like in the USA? Walk away mortgages.
In the US, you can hand the bank the keys and thats that. Thousands who find themselves underwater are doing it. One major US daily suggested its the smart thing to do.
In Canada it’s the horror show of personal bankruptcy.
Us Canucks are a tough bunch of rats in a cage. Once you sign. You’re stuck paying …. no matter how low the value of your house falls … and your choices are fewer than you think.
Imagine the nightmare a 50% fall in RE prices would create in Canada. You’re a home owner with a $470,000 mortgage on a $500,000 (not an uncommon situation). You want to sell but the market value of your house in only $250,000. If you do sell, you’re stuck with $220,000 owing to the bank on the mortgage. No problem … just convert the balance of the mortgage to an unsecured loan.
Just as an exercise. Goto your bank manager tomorrow and ask if you can have a $220,000 unsecured loan. BINGO!! … You’re bankrupt.
So you just keep paying your mortgage (if you still have a job) and wait for some days in the far away future for another housing bubble to raise prices. With the prospect of millions of Baby Boomer dumping houses on the market to provide the pensions they never saved for … it could be a long wait. You pay all that money to a bank and never have an equity to show for it. You would have been better off just renting …. Geez, this gets depressing sometimes.
“The latest statements by the Bank of Canada suggest strongly that CHMC’s 5% down disaster will not now be amended to 10%.”
Garth, just wondering what you were basing this prediction on. Was it something in the quarterly monetary report? Do you figure we may just go back to 5% down/ 25 year amortizations. Thanks.
Great post.
Yank here – moved to Canada from “fly over” country in the US midwest. My husband and I were pretty surprised by the real estate market up here. We’re in a prairie city and we’re confused. Anyways, we’ll rent here until and unless this market steps away from the crazy.
When we learned about Vancouver we decided that people had lost their collective minds. I don’t know what they are smoking in BC, but it must be good.
There is a widespread misconception in Canada that the US mortgage debacle was caused by subprime lending. It was caused by mortgage resets.
From what I understand, buyers in Canada rarely lock in mortgage rates for 25 or 30 year terms.
I expect it’ll get ugly when interest rates rise and mortgages reset.
A new report says, Toronto is in the severely unaffordable category and Montreal is classified as being seriously unaffordable because of contraints on land use. And Vancouver is the most unaffordable market in the world when median housing sale values are compared to median household incomes. Read More @ http://bit.ly/toronto_re
Slide will be slow – Japanese style, however, one can never discount some form of a “Black Swan” even happening meanwhile.
2010 to 2014/15 is a lot of time for strange things to play out affecting the price of everything.
In any case, I do not understand this obsession with R/E ownership.
It’s like owning a McDonalds resto. so that you can eat a crappy burger when any smart person can just pay rent/lease fee just for the time it takes to make a burger.
To the people hanging off Garth’s every word and dissecting every sentence: Can’t you make up your own opinion? Take what Garth has to say and agree or disagree, combine it with a bunch of other opinions and then make your own. Whether you think he’s right or wrong, that’s your choice, but trying to “prove” his opinions are incorrect is a pointless exercise-they’re just *opinions*.
That said, I am in full agreeance: we have a different system here, one that prevents such a fast collapse in house prices and instead spreads them out over a much longer period of time (I bet my father $1,000 his house would be worth less in 2015 than it is today [in real dollars]). The jury is still out on which is the better method… but I say it’s better to pull the bandage off fast and take the pain than to let it drag on for ages.
#27 omg – great comment, except for the mild recession part. Not convinced we are out of the woods yet.
BUT IT IS ‘BUYERS MARKET’ NOW!!!
Got this in the email today. It’s from Intrawest, which I heard is having some troubles later. Better believe it, they sound desperate.
———————————————————
It’s time to live the good life.
Yes, the economy may be tough, but these tough times have created the best real estate buyer’s market in over a decade. It’s not too late to find your perfect resort home at Blue in time for ski season. Luxury resort homes at Blue have never been more affordable, and resort life has never been more exciting – just ask our 60 new homeowners since June 1.*
There are still great opportunities to be had, including special pricing and incentives on new properties at Mosaic and The Westin Trillium House – but the clock is ticking!
realtor interpretation of Gath’s pic_____
The shorts aren’t half empty they’re half full!!!
Accurately predicting percentages downward is hopeless. I prefer to use adjectives:
2010: Housing prices will drop from outrageous to atrocious.
2011: Sliding down from atrocious to horrendous.
2012: Horrendous leveling off at scandalous.
2013-20??: Iniquitous, shocking and contemptible.
Great job Garth! Keep up the great work and analysis.
BTW: Can I pickup your new book anywhere in the UK or order it online from a UK dealer?
Mike
Order it here and we will ship. — Garth
RE is a slow price mover vs stocks, stocks are very fast and harsh and you can lose your capital if you are on vacation and not watching the market.
But unlike stocks, RE is hard to unloaded quickly and if you follow a market down, your dead. RE needs to be priced BELOW market value to sell (as everyone wants to buy a deal).
The City of Calgary just released realistic property value assessments and it’s amazing how much they dropped everyone’s value by. Our old house we sold fell 33% in assessed value and others almost 50% in value in just 1 year.
I always recommended buying RE as much as possible BELOW city assessment value to protect yourself. We see city assessed value as the “MSRP” value, why pay more than a product is worth?
Mike
Really, did you timed your prediction well Garth?
You did noise in March/2008 and small semi houses in Mississauga from 340K hit down 280K in Jan/09 and now are again priced 370K. SO 15% correction is not good with higher interest. They will keep interest low untill death. And will be death in 2012-2016.
•”As I said yesterday, 2010 will be see the start of a correcting market, with a likely decline in average prices nation-wide of 15% by the end of the year”.
#9 Just Wondering on 01.27.10 at 7:17 pm
I am so confused at the moment. Can anyone explain the rational behind this:
Just Wondering:
Much like the CBOC got it completely WRONG in their predicted report in 2007!!
They haven’t a clue!!!!
****************************************
World Economy Expected to Survive U.S. Slump
Ottawa, January 31, 2007 – The economic slowdown in the United States will weaken growth in the world economy from 3.8 per cent in 2006 to 3.2 per cent in 2007, according to the Conference Board’s World Outlook – Winter 2007.
“The health of the U.S. economy casts a long shadow over global growth,” said Kip Beckman, Principal Research Associate. “A sharper-than-expected decline in the U.S. dollar would hurt countries that rely on the U.S. market for their exports, such as Canada, Mexico and those in the Asia-Pacific region.”
The United States is facing tumbling home sales nationally and falling prices in some parts of the country, as well as weaker vehicle and retail sales and orders of durable goods. The Conference Board’s U.S. Outlook – Winter 2007 forecasts that the U.S. economy will have a soft landing, although the odds of a hard landing have increased somewhat over the past 12 months. The United States is expected to avoid slipping into a recession because a weaker U.S. dollar will boost American exports and business investment will remain strong, leading to economic growth of 2.2 per cent in 2007.
http://bit.ly/a0XzpF
Garth et all
People should remember that these are forecasts based on Garth’s analysis. Yes in my opinion many of the topics covered ring true. Growing deficits, aging boomers. I also agree with many of his predictions as well. But they are predictions!
People have to live somewhere? and I know many people currently in their mid sixties who are retired and kept the bigger house because in the end it would cost 5% to sell. Plus were are all the kids and grand kids going to sleep when they visit? So they figured stay in the house and the real estate fee that would have been paid would cover rising energy cost.
And do not forget the current government brings in new immigrants at a staggering amount each year and they need some place to live? And many immigrants have will need big houses because on the whole the have more babies than the current home based population.
Heres another example remember the late 90’s housing was rising and a friend of mine in Edmonton said I will wait for houses to drop before I buy. Guess what 12 years later he is still waiting.
More People should understand that all the information Mr. Turner lays out in his book is interesting facts and his predictions of what will happen based on current circumstances. I would guess he is more right then most. But he is one fish in the ocean and currents change.
So read as much as you can stay informed and draw your own conclusions. And please do not follow his advice about selling your house because we all know the pack instinct …… If you all decided to sell your houses based then there will be a real crash.
Having said that, my mother recently passed away and guess what I found a book dated 1980 co-authored by Mr. Turner where he predicted horrible forecasts for the economy by 1999. I am not saying he was wrong, what I am saying based on the information at the time of writing and his analysis he was correct. And you should all read that book as it has great information it it (all the information and points he made are good even if its dated) But as he pointed out in other blogs things change and hence forecasts change.
In conclusion stay informed update your reading and if all else fails buy gold. But do not sell your house. I need the equity to borrow money to buy a sports car (mid life crisis)
Now for some comments about your book and the road ahead; On the whole this is a very good book for a beginner as well as the seasoned investor. Read it with a grain of salt and add his valuable information to your analysis, I will not be selling my house right now because I need someplace to live but if I owned multiple housing, now that would be a concern.
Let’s say as Florida condo from 250k I saw yesterday was sold for 48 k.
“as of today calgary RE is down $65,000 or 13% edmonton is down $84,000 or 20%
so what constitutes a crash 10% 20% 30% 40% 50% ?
there is no question that when banks eventually raise rates..which they will definitely do.. prices will fall further
how much further ?
Next 6-7 years. Is it ok.
Garth said bubble prices are from March/08 and I said will be from Sept/2010. I said that Gold will go up to
$ 2000 and Garth said $ 500. Because is “Deflation’.
Garth said Oil can go to $ 20, I said over $ 180 for next 2 years. Garth posted pandemic fly in 2009 and I said will be in Nov/Dec 2010.
Is it true Garth, can you remembered in 2008/Nov.
Why is Canada different than rest of the western world, about housing prices? Hah, You don’t know very well your country about immigration, and “low income guys” whose got for “free” houses in Brampton,Whitby,Jane etc.
I’m human but something smell bad as corruption in politics and goverment.
Canada used to be great country in 50’s ,60’s,70’s.
I guess it just goes with the territory Garth.
At every uptick and oscillation they will be poised to unleash a fury of ‘AH HAs!’ and ‘I guess you don’t know ‘!. This is understandable given that anyone with a highly leveraged position in anything desperately needs to believe that the return to the highs of a few years ago will soon be imminent.
I believe that we just have to accept and prepare for a society that is going to be less affluent in the face of hitting the natural limits of our environment.
Garth, the auto industry looks to have a potential positive economic outlook for Ontario due to Toyota’s downfall.
…That would bode well for Ontario Citizen’s jobs.
Greetings to all my friends here from Hongcouver.
Nostradamus jr.
BWAhahahahaha!
Okay Garth, we stand corrected (pardon pun), until we don’t.
Rgds
Munch
Hello Garth.
If your talking about a 15% drop this year as a start of a corrective process. One should keep in mind that para bolic curves and bell curves the gradual change in direction tends to be followed by change of greater magnitude. Therefore a serious crash is possible.
Steven
This link was sent to me by a friend from England. The article is extremely relevant for the Canadian market as well.
http://www.fsponline-recommends.co.uk/page.aspx?u=mwpropertyIIa&tc=LMYKL105&PromotionID=2147066703&
From my side I would like to thank you for being a voice of reason in this insanity.
In your latest posting, you mentioned:
“This will bring a return to 2007 or 2008 prices and some extraordinary buying opportunities for those with cash.”
But prices in 2007 and 2008 were ridiculously expensive too, no? Am I missing something here?
Thanks
It is sad, because it could have been an opportunity for the young to get ahead. After all, those with no investment in real estate would have been in the best position to rebuild from the pieces. When this whole thing began, I thought that’s what would happen: that those with large debts — those in middle age, holding large debts on overvalued assets — would be way worse off than those that had relatively small debts — those in their younger years.
But, I was wrong. And people sometimes say I am pessimistic or cynical. You can’t win, really
The above seems pretty optimistic compared to what actually happened!
It turned out that those do-gooding boomer parents wanted to get their kids into houses so badly that they helped them out with the minimum downpayments and loaded them up with “advice” about the neverending real-estate bonanza. I don’t think they wanted to hurt their kids, but you have to wonder about the collective subconscious.
That meagre downpayment assistance offered by the parents will probably turn out to be the equivalent of buying someone a $500 car for Christmas: rather than a free car, you have just given them a future of $1000 repair bills, and they can’t call you out on it without shaking up the family.
#74 Grantmi,
Thanks for pointing out how incompetent the Conference Board of Canada is in their predictions. The are blindless cheerleaders of all that may be positive. Sure they throw in the odd possible negative but mostly they just cheer on about all that is positive.
This is all part of the “Cheerleader Section” of the Financial world. They believe that since the market is all emotions it is their job to always spin upwards. Sometimes this is valuable but it does tend to heighten bubbles in times like this because it gives people false confidence. It can be deceptive because it speaks with such authority.
Their latest report is even more incompetent. They have us in Vancouver leading the way at 4.5% in 2010. I think that is wildly optimistic. Has anyone seen the job losses in Vancouver lately? With the Olympic stimulus over we will be lucky to get over 2% for they year.
Here is it is – Rah! Rah! Rah! –
http://www.conferenceboard.ca/documents.aspx?did=3402
Good article from the Washington Post on house prices in the U.S. and how they continue to slide down even 2 or more years after the crash. The interesting part is the study on how after a crash it will take 5-10 years for prices to gain back what they lost.
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/26/AR2010012604115.html?source=patrick.net
one of the reasons you want to live in Vancouver
http://www.vancouversun.com/life/Conde+Nast+Traveler+magazine+says+Vancouver+best+Chinese+food+world/2491872/story.html
I work in real estate and I’m already seeing a lot of foreclosures and bankrupty from 2008 and 2009 buyers. Home prices are very obviously going down as there are way more listings today !!!
Oh man, RE sure is about emotion, WOW. To all the boomers out there: get a grip. Your generation had the greatest opportunities in investing history all laid out by your parents (the greatest generation) while my generation is nothing more than a stable boy cleaning up all your sh**!
Another great article, Garth.
Right now, Canadian real estate bulls are probably rolling around on the ground and laughing their heads off at you. Don’t be surprised if you receive 100 “now you’re repositioning the goalposts” emails even though you never said that we’d get a short, quick decline.
Personally, an abrupt, fast crash similar to what the DOW/NYSE went through in late 2008 is preferable to a slower decline as the former enables victims to rebuild their lives sooner.
# 86 Allan
2009, The Economist rates Hongcouver #1 World’s most liveable city.
2010, Conde Naste rates Hongcouver best Chinese restaurants.
…and also in 2010, Nostradamus jr. will be acknowledged for being first who rated North Shore, (North & West Vancouver) Hongcouver, as world’s best lifestyle neighbourhood to live in.
Nostradamus jr.
#88 Tony on 01.28.10 at 9:05 am
Oh man, RE sure is about emotion, WOW. To all the boomers out there: get a grip. Your generation had the greatest opportunities in investing history all laid out by your parents (the greatest generation) while my generation is nothing more than a stable boy cleaning up all your sh**!
*********************************************
More bad news for ya son–
While you were whimpering helplessly in your crib at night,with nothing-but a diaper full of cold shit–
Here’s what us boomers were up to–
http://www.youtube.com/watch?v=qsnUu71Viyo
it’s not easy to be a seer.
doctor- you’ve got 6 months to live
patient- you told me that 6 months ago
doctor- did you pay your bill?
patient-no
doctor- ok, take another 6 months
75 @James in Ottawa
Everything you mention was also true in the US, just look where that go them…
Garth’s predictions are just that, predictions. Nobody can predict the market short term, to do so is more or less entertainment
One thing is clear however: the market has been driven by an ever growing amount of debt and as such it is unsustainable, that’s not a prediction, that’s a fact.
Granted government has the power to make the growing indebtment go on for a long time, I mean it could insure mortgages up to a 100 years (like places in Europe), it could print money like crazy to buy mortgage securities, it could drop money from an helicopter to help people buy homes, etc..
But even government can’t transform an unsustainable market into a sustainable one. Eventually it will break and the further we go on this path the worse the return to reality will be.
In short you’d better assume Garth’s predictions materialize because they are indeed a best case scenario!
Glad your site recovered from its crash (you need redundancy) – now let’s talk about the other crashes
http://www.theglobeandmail.com/globe-investor/investment-ideas/features/lets-talk-investing/whats-wrong-with-the-stock-market/article1445991/
this CA doesn’t even recommend investing in the stock market, what do you think Garth?
Yo Garth?
Your site is NOT ALLOWED to go down!
NOT ALLOWED!
I had a SERIOUS case of withdrawal when I logged in this morning to find NO GREATER FOOL!!!
You, Sir, are NOT ALLOWED to do this! No excuses!
Or ELSE, you will taste the sharp end of my sword!
Yes!
Thanks anyway!
Dr Munch
Just out in the non-farm payroll for November jobs were lost, but we created 3100 new jobs in seniors homes. The new economy is here. Get your credit cards out and get ready to spent. See there is a use for seniors.
In case you didn’t know, Toronto and Vancouver have had the hottest real estate markets since their low point:
http://www.movesmartly.com/2010/01/toronto-and-vancouver-canadas-hottest-real-estate-markets.html
Interesting to me was the fact that Toronto has seen the smallest run-up since 2005. I still think this type of data is skewed by the 905 vs. the 416. If you were to look at 416 only (Toronto proper, excluding GTA burbs), I’m sure Toronto would be above the national average of +30% since 2005.
Hey Garth.
Strange I was going to post and ask about the big BC ski resort that went south due to the US style housing bubble …. it appears some RE people bought it bargain basement plus … sign of times/BC future or what.
Garth et al:
I was at a meeting last night. One of the guys there has relatives that live in St. Thomas Ontario, (where the Ford Plant is that is shutting down). He was saying that almost everything is up for sale and that RE was moving at a snails pace.
How do you spell “rapid” decline. Once a prosperous city now to be a whole lot less prosperous. And our Government continues to let imported products “flood” the market, while our own people will suffer, and never be able to recover from this type of loss. They lost their good paying job, and can’t recover from the RE loss they are about to take. How do you spell disaster.
Anyone from St. Thomas on line? How bad is it?
#90
2009, The Economist rates Hongcouver #1 World’s most liveable city.
2010, Conde Naste rates Hongcouver best Chinese restaurants.
…and also in 2010, Nostradamus jr. will be acknowledged for being first who rated North Shore, (North & West Vancouver) Hongcouver, as world’s best lifestyle neighbourhood to live in.
Nostradamus jr.
___________________________________________
Hey nostranausiating jr….you forgot the “Vancouver least affordable City in the world” report in your post.
Would you get real already…
#91 jr on 01.28.10 at 9:28 am
hey, can ya dig it man… while you ARE “whimpering helplessly in your crib at night,with nothing-but a diaper full of cold shit”… in your pathetic, underfunded retirement, watching the nightly news about the country you f*****d up, and the resources you squandered….
Here’s what us post boomers will be up to– we’ll be long gone, away from this high tax socialist hell hole that you’ve created… we won’t be paying taxes to help out with your ED or your Depends, or the Whiska that you’ll be eating… and we won’t be coming to visit to clean up the shit you will be living in.
I honestly predict inter-generational warfare in our future. That video really sums up what a pathetic end-of-empire generation the Boomers are… the only generation to take such pride in being cop-outs and such financial fuck ups that they have buried their children in debt.
Nice work you hippie loser… can ya dig it?
Put the keyboard down. Slowly. Now back away. Nobody has to die today. — Garth
#95 Munch
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Look on the bright side, you didn’t have to read Nostratard’s comment’s.
“Honcouver, Hongcouver, Honcouver, blah, blah,blah.”
“Bet you can almost smell my verbal diareah!”
Please, take a hike Nostratard and take North Van with you.
#71 “Order it here and we will ship. — Garth”
Glad to support you Garth, I just bought your book. $10.50 for shipping int is ok, just hope it gets here in less than 8 weeks…
“Your Order ID is: #4004″
Mike
It went to Bangkok last week in 4 days. Damn, but those pigeons are quick. — Garth
Vancouver is expensive and will continue to be one of the most expensive cities in the world. A lifestyle that can’t be beat and while not all real estate in Vancouver is expensive, let’s just accept and move on.
You can still buy a house for under 550K in Langley, Surrey, Aldergrove, Abbotsford and drive an hour to the center of Vancouver. Compared to other large metropolitan cities in the world this drive time is perfectly acceptable. Please consider, LA, Seattle, San Francisco, Dallas, Phoenix, NYC, and others as a comparison and we are still cheaper and far better lifestyle.
Put the keyboard down. Slowly. Now back away. Nobody has to die today. — Garth
Thanks, Garth. I needed that. You are one of the good hippies.
#54
Could provide that info for the Burlington/Oakville area…. it would definately be interesting to see…
We are currently renting and looking to purchasing a home but not until the later part of 2012.
#63 Yank on 01.28.10 at 1:01 am
————————————————-
I love hearing from Yanks, welcome to the great white north!
Real estate in Canada may be (and probably should be) relatively higher than the US because of the commodity boom (bubble?), universal access to healthcare, great educational system and very safe cities.
Many 1st time home buyers that I know that bought within the past year definitely opted for 5 year fixed rates, but also bought less of a home than the banks told them they could afford (i.e. they are planning for higher rates in the future). They also bought houses they could afford on one income at today’s rates. Interestingly, the 5% down payments largely came as gifts or loans from (boomer/traditional) family members.
The madness that is Vancouver/B.C. is largely due to the weather and scenery. Many Canadians think 10 oC average winter temperatures, no snow but lots of rain/cloudiness is heaven on earth; multiplied by proximity to mountains/ocean/rain forests and being in Canada, and you’ve got a recipe for a frothy real estate market.
But good point about resets in the USA — people shouldn’t have been allowed to take out mortgages at 2% that would reset at 6% in one or two years. Greedy bastard bankers, I’m surprised people haven’t taken to the streets against them!
Garth,
This posting is clearly an eye opener. It is realistic and full of facts. there will be a correction in the market down the road. Atleast we have one person like you who dares to speak the truth and show audience the reality and consqueces that are coming in years to come.
Thank you so much for your genuineness.
Here comes the taxes, even as we still fight off deflation…
http://www.cfra.com/?cat=1&nid=70975
What it means to people of Ottawa
2010 municipal tax increase: 3.77% (Estimated impact on an average Ottawa home, assessed at $285,000 or $138)
Transit fare increase: 7.5%
Water & Sewer increase: 10%
Adult arena rental , hall, pool rental rate increase: 2%
Notice that the assesment of the average home in Ottawa in $285K. CREA reports 2008 at $273K and 2009 at $313K respectively, looks like they are hitting the middle.
Stay tuned for the HST helping squeeze even further, the fruit of affordability.
#82 Dave T on 01.28.10 at 8:31 am
———————————————-
If we assume the average household income is $70,000, then based on historical averages (3.5x income) the average home should be roughly $250,000. Given the current low interest rate environment, it makes sense that the average home will go higher. Thus $300,000 is no longer bubble territory (it might be if rates were at 8%). The increase of $50,000 at today’s rates equates to payments of $200 to 250/month extra. The average home at $350,000 – $400,000 may encroach on bubble territory — but again, with these low mortgage rates all the standard equations have changed. Maybe 5x income will be the new measure (especially if interest rates remain below average for a long time)?
I’ve followed Garth’s blog for about 2 years and he’s helped me come to the conclusion that: 1) if you buy the right type of house, 2) in the right location, 3) and can afford it based on standard equations (and have a stable job), then buying is a decent way to go (especially if rents are high in your city, such as Ottawa). It is easy to mis-interpret his point about real estate because of all the bears that post on his site. Buying a home is really dependent on each individual’s circumstances. Analyze your own, and decide what to do from there (and no, I’m not a real estate agent).
#107 Bottoms_Up
If your ever in the southern states, don’t EVER call them Yanks…
Trust me on that.
“Please consider, LA, Seattle, San Francisco, Dallas, Phoenix, NYC, and others as a comparison and we are still cheaper and far better lifestyle.”
Umm — no you’re not far cheaper and there is a lot less rain in San Fran. I think it’s insanity that you see 550K as cheap. Look at what happened to houses an hour’s drive into SF. There are towns that you can buy two story houses that are below 100K. (BTW – you can buy a townhouse just south of San Fran in Pacifica, a few blocks from the Pacific Ocean, for less then 550K. Some of the best surfing around…)
And Seattle is much cheaper then Vancouver. Look at the houses just a ferry ride away from downtown. (We’re not even starting to talk Portland prices, which are much lower then Seattle.)
Great read from your friends at Howe Street…
http://www.howestreet.com/articles_as_pdf/2010Jan270941bsccc012710.pdf
Another thing that really should be discussed on this blog is: how much does it cost to build a house? Anyone know?
It would seem to me that house prices shouldn’t ever fall below the cost to build a decent place (obviously).
Thanks in advance.
@#104 Alan:
Have you been to Dallas? Or, how about looking at their Real Estate ads on the internet?
Many houses are $100,000 and under, which is half of the price of those new 250sqft micro-lofts in Vancouver.
http://www.realtor.com/realestateandhomes-detail/6624-Leaning-Oaks-Street_Dallas_TX_75241_1110456891
http://www.realtor.com/realestateandhomes-detail/6234-Power-Drive_Dallas_TX_75227_1115431347
http://www.realtor.com/realestateandhomes-detail/18922-Tupelo_Dallas_TX_75287_1109385434
Also – if you read the affordability report from a couple days ago, Vancouver is in fact less affordable than even NYC.
Yank is right – there are some beautiful places in the states that have more right to claim the sort of rhetoric that we see coming from Canadian west-coasters. These US places are ahead of us in the transformative process. While we are struggling to clean up our mess, Yank will be attending urban planning meetings about how his new highspeed rail system is coming along.
Hooray, we’re back. Sheesh, talk about BW. And my rant didn’t even get wiped out after all.
“You sound like a GIC proponent. Good luck – you’ll need it. The numbers in that section are not mine, but were sourced (and credited) to TaxTips.ca. BTW, counting on CPP is not a wise strategy. — Garth”
I’m not suggesting the numbers aren’t true, just that they’re not chosen to be fair. On the plus side that section made me go and order Trahair’s book, which should be an interesting read as well.
CPP is an interesting (scary) though. Do you really think there is a significant chance that the canadian government will renege on their CPP responsibilities in the future?
Anyway, not to be all negative. The section on bonds was excellent. Very clear and now I think I understand what they actually are and how to use them. They sound like something that even I could get behind.
Almost through the book now.. Stock picking will never be for me, but I will likely be making some changes to my financials. Thanks!
#112 Yank,
You are 100% correct. Prices in SF are quite comparable to Vancouver but salaries are roguhly 50% higher (98K to 66K). I have not seen a full price to price comparison but cost of living is probably less in SF and Seattle because of taxes.
Merrill Lynch economists Wolf and Kwan did a report in 2008 where they suggested Canadian prices always lag the U.S. by about 2 years. The economists were suggesting at the time that the tipping point had come to the Canadian housing market. However the government soon after lowered interest rates and expanded the CMHC insurance criteria.
Many of us believe that this move pushed the drop of Canadian prices from 2008 into 2010 or 2011. While it is true that Canada has differences than the U.S. it is also clear to most of us that the fundamentals are out of whack.
Most of the Bears on this Blog (like me) believe that a price correction is inevitable once market forces return. The size and timing of the correction is up for debate amongst us but the inevitability of it is not. Furthermore the Canadian market is uneven with the biggest busts likely to happen in the Western markets such as Vancouver, Victoria, Calgary and Edmonton along with Toronto.
#115 T.O. Bubble Boy
My brother in law just did up his mortgage ifor a home just outside Austin Texas for a brand new four bedroom.
When I quickly looked at the amortization schedule I almost pooped my pants and thought, “How can your monthly payments be that high?
On closer inspection I noticed I wasn’t looking at MONTHS, I was looking at YEARS!
As in almost $6000 a year for thirty years.
Somebody mentioned Robert Schiller the other day, the second edition from 2006 is still a highly recommeded read, “Irrational Exuberance”. He mentioned Vancouver even back then as being in a bubble caompared to other cities in the world.
But what does he know and how credible is he compared to the talking heads on GLOBAL or CHUM; or at CREA or the bank?
I guess the question you have have to how much real estate advertising revenue is he receiving?
Maybe if you’re retired but if you need to work for a living you can’t just move to the US on a whim.
Not to mention that the cheap RE locations in the US, usually also have low wages or few jobs that a Canadian would qualify for.
miketheengineer .. I was in St Thomas on Monday.
The two major employers, Sterling (Daimler) Truck and Ford of Canada are shutting down in quick succession. Most of their parts suppliers are also shutting down. Not much is left after that happens. Would you want to live in a town where the major employer is fast food outlets?
There are countless duplications of St. Thomas’ along the 401 between London and Windsor. The Main employer in Chatham, Navistar is all but closed. Ridgetown, Rodney, Wallaceburg ….. all have suffered the same fate. These jobs are gone and they are not coming back. It has taken decades to build Ontario’s industrial sector and in 24 months it was wiped out. There are a lot of factory workers in their early 50’s who will never work again. They vanish from the RADAR screen because their EI runs out or they become “self employed” the new euphemism for the underground economy. I cannot tell you how many workers with University degrees have dropped off resumes at our plant looking for any work that’s available. They’re not financially prepared for retirement. For many, the cash they receive from selling their house will be the only real retirement money they have. Their company pension plans in shambles after the (somtimes planned) bankruptcy of their last employer. The coming decline in RE values will have far reaching effects on a lot of Canadian families.
OK, there is enough blame to go around. Self interest and greed have no bounds in this equation. The Government of Canada subsidized inefficient Canadian industries with a low dollar policy. Unions all but banned modernization of those factories and sabotaged any equipment they didn’t like (I have personal experience with this). The factory owners invested their profits in Mexican and offshore operations to get away from the unions, payroll taxes, occupational health and safety costs …..
@104
My Vancouver rental is less than $1200 a month and I am steps away from the park and beach. The downtown core is walkable in minutes. I get the full advantage of the Vancouver lifestyle but my rent doesn’t reflect that at all. Why does the lifestyle premium not apply to rents?
As to Bottoms_Up question. When demand for new housing slows, manufacturers of building products compete by lowering their prices making new homes less expensive to build.
Falling material and labour prices are NOT a good thing for builders. If Builder A just finished building a home and today’s home materials and labour costs are now lower, then Builder B can sell his unbuilt home from plans at a lower cost than Builder A’s completed house.
Ironically, an increase in building permits can be a signal of the start of a declining market when tied to lower material and labour costs. You would also see a spike in unemployment rates, as the recently unemployed workers do not want to work at a lower hourly rate.
In my opinion, this is where the West Coast markets are now.
In a rising market new home prices tend to set the upper end of prices for similar newer properties. In a declining market, prospective buyers shy away from new construction (people don’t buy when prices are getting cheaper) and as the decline in values becomes more entrenched, its the re-sale market that dominates.
If demand for housing weakens and the market for new housing is in favour of buyers then taxes like the HST will be mostly absorbed by the builder by reducing his/her profit. Eventually, the builder is working for wages only, with no compensation for the risk in building, and leaves the trade.
And then the real fun starts, when land developers can not sell their stock and the bank wants their money. Unlike housing, which you can rent, vacant land has no rental market. And that affects the re-sale market for starter homes. And the wheel keeps spinning and spinning.
#75 I know many people currently in their mid sixties who are retired and kept the bigger house because in the end it would cost 5% to sell.
I have sold two houses privately…cost me $500 for Notary Fees. I am not a financial wizard…nor do you have to be to sell a house. Easily done..talk to your Notary. RE Agents are not a necessary part of selling a house…anybody who thinks so and pays 20 – 40000 to sell a house needs to question what they are doing.
Greetings: Coming to an Olympic Village near you, March 2010:
http://www.nytimes.com/2010/01/29/greathomesanddestinations/29skicondo.html
Be careful out there Yank.
You surf in San francisco,dont be surprised if you hear the theme from Jaws in the background.
#88 Tony
To all the boomers out there: get a grip. Your generation had the greatest opportunities in investing history all laid out by your parents (the greatest generation) while my generation is nothing more than a stable boy cleaning up all your sh**!
#88 Tony, I’m not sure where this comment came from. My generation grew up poorer than a church mouse. We did not benefit from the wisdom of “the greatest generation” because they were poorer than us. We didn’t benefit from the knowledge of how to invest because we lived hand to mouth. The difference between my generation and yours is that we saved our pennies till we could afford to buy things outright whereas yours bought everything on credit. We were satisfied with the basics while you wanted the biggest and the flashiest. I live in an 880 square foot house that is paid for. Your generation bought mega houses, two cars, motorcycles, snowmobiles etc. While I was earning less than 30k/yr. your generation was earning 50k/yr. and still living beyond your means. Any sh**! that you have to clean up is your own doing. Don’t blame us for it.
Garth, I was sure Steven shut u down!!!
#104 Allen
Just wondering? Who is the major employer of the masses in the GVA?…or is everybody rich?…because if…there are wealthy people immigrating or investing…then I guess they will need poor people to serve them (excluding middle class).
Only in 3rd world countries do you have some high class people hoarding all the wealth, and then heaps of poor people scavenging for the crumbs.
In order for the masses in BC to service their $+500k debts you need actual, realistic, tangible, sustainable employment for the middle class masses or at some point down the road the system will emplode! Yes, Vancouver offers an awesome lifestyle, but for who?…So does Bermuda, or Dominican, or Belize, or…..Unfortunately though, the locals can’t afford the condo on the ocean and work for the rich foreigners.
As for the current lower interest rate should change our thinking from paying between 3 to 4 to paying 5 or higher, I think a point needs to made about affordability versus risk.
The lower interest rates makes the home more affordable but the higher multiplier increases the risk, unless a substantial down payment is made that would bring mortgage amount to gross income multiplier down to the range of 3.
When homes were being exchanged between 3 to 4 times the median income, it was possible for someone to pay off the mortgage more quickly than 25 years. Simply because most people had more disposable income to put down a lump sum on the mortgage each year and thereby reducing their exposure at renewal time.
When you’re buying at a multiplier of 8 or 9 times, the typical high ratio mortgagee is giving up the ability to pay down the mortgage and is most likely to never pay off the mortgage during a large chunk of their life span.
Being exposed over a larger time period to interest rate fluctuations and the “shocks” that happen periodically in all of our lives should make most people cautious of buying at 8 times Gross Income unless a substantial down payment is made.
And that probably is the key to why we see BC prices so high. BC home prices have been increasing, unlike most of the country, at double digit rates for most of the last decade. A goodly portion of those buying at a high price are also selling at a high price. Their monthly payments most likely have gone up some, but not ridiculously. Except for shocks, like becoming unemployed most of these people will be fine. This is group A.
However, there is a significant portion of the market that has been dipping into their home’s value with their lines of credit and also the high ratio buyer. These people are for the most part high risk. This is group B.
If you live in a city with a high multiplier, it would also mean that you have more group B purchasers than cities with a low multiplier.
As long as group A dominates the listings in the market, then prices are stable or increasing. Group B is along for the ride and is fine too.
But if prices stagnate, group A is less likely to put their home up for sale – and then group B becomes the dominate seller. And group B sellers are mostly duress sellers.
And although it may seem illogical, the precursor to declining prices would be a sharp reduction in listings as group A takes their homes off the market.
#127 Teroy – thanks for that, I think Tony is a little short on facts and some other things. And whomever posted the idiotic youtube video, what a joke.
My parents knew little about investing and my father had much less of an estate than he might have. I certainly don’t blame him for that, I was glad he was such a decent and caring man. We put the small amount we got as an inheritance into land, and built our house ourselves – every bit of it. It was not grand, especially at the start. Feeding our children good homegrown food was a priority, didn’t leave any time at all for rock concerts, etc, just an occasional community hall dance.
My grown family knows how to live frugally when necessary, and when it is possible to splash out a little. We don’t buy all the new toys and for those we do, we wait a year or two until the prices have dropped. Bigger is not better, and gets to be obscene when people attach their importance to how much crap they have. There have been precious little ‘investment opportunities’ in my life, but I feel wealthy. My children are not waiting for an inheritance – they are building their own lives, are grateful for their education, and are doing just fine – in Vancouver, at that.
The poor bitter bunnies who want to slather the pre and current boomer generation for their economic woes need to take responsibility for their own lives.
Thinking about buying a place cash in the US myself. Beats the prices here thats for sure easily and much nicer weather.
But anyone know anything about this?
http://www.centa.com/article.php/20100108235106506
As a cdn you can’t even do maintenance on your US home if you are or planning to use it as a rental property unless you fill out a ton of paperwork and apply for a visa that includes apparently even painting the place or you can face fines and up to 10 year ban given by US Homeland Security.
#78 jr
Not sure how the toyota recall is a huge potential boost to ontario car industry.
The faulty gas pedals are manufactured in Mississauga by CTS Corp.
http://www.theglobeandmail.com/report-on-business/faulty-toyota-part-made-in-canada/article1445925/
and the recall also applies to other car companies including some models of Fords as they are using the same parts from this company.
Thanks for the welcome Bottom’s Up! We’re enjoying it here, except for the real estate stuff. Although I have to admit I’m intrigued. Canada has a lot of land and a lot of trees. I don’t get the high house prices.
Ok – this is going to sound unbelievable, but my husband and I are renting a condo in Edmonton. It has just gone through judicial foreclosure. We’re running around trying to get another place to live. Rents are dropping, so we’re fine.
A few years ago my sister and her husband were renting a townhouse in Pacifica, California. (San Fran) Their landlord went through foreclosure. They found out that the place was in foreclosure when a Realtor showed up on the doorstep.
Anyways – I’m fascinated and confused about the real estate market here. And clearly I need help choosing landlords.
I need my GT fix…..
#127 Teroy on 01.29.10 at 12:39 pm
#88 Tony, I’m not sure where this comment came from
We did not benefit from the wisdom of “the greatest generation” because they were poorer than us.
*****************************************
Yep typical blame game–
If they want to find out what the real cause of this is–they need to go back in time–before the boomers–
before the boomers parents–
I suggest you all find out what happened in Genoa Italy 1922–
It’s there you’ll find your answers–
*****************************************
#101 Sean on 01.29.10 at 9:04 am
********************************
Real live ITG–
Pull your pants up–put your hat on the right way-stop shaving your armpits and get with it–
Canada’s economy rebounds sharply on GDP growth and revisions
Excellent – hopefully, Carney will now get his nose out of the real estate industry’s a$$ and raise interest rates.
http://ca.news.yahoo.com/s/capress/100129/national/economy_outlook_6
I was listening this morning to Arianna Huffington (Huffington post). She’s in Davos . She said many things but the thing that really stood out for me was her figs. for unemployment state side . She maintains that the real fig. is 18 +% if one counts the discouraged , underemployed . If this is correct then this is not anything other than a depression and our so stated 10% unemployment fig. is just as big a lie as theirs. Recession , depression word game/politics for sure reality not so sure.
I hope for all of us … that you were not attacked by a trojan that shut you down. garth ??? Please waylay our fears . Our firewalls have been working overtime since yesterday . ?????
‘Rich Dad’ seminars deceptive: Marketplace
A high-profile workshop series that purports to teach Canadians how to invest in real estate and stocks uses deceptive tactics, gives questionable advice and focuses more on getting participants to pay for more seminars, according to CBC-TV’s Marketplace.
The workshops, called “Learn to get rich,” are held regularly across Canada and are connected to financial guru Robert Kiyosaki, who licensed his name to Whitney International, which runs the series. Whitney recently changed its name to Tigrent Learning Inc.
The U.S. -based Kiyosaki exploded onto the self-help scene 12 years ago with his book Rich Dad, Poor Dad and has since become one of the best-selling personal finance authors on the planet.
But even Kiyosaki says he isn’t pleased with how the licensee runs the seminars.
Courses cost up to $45,000
The seminars range from free one-day introductions to three-day seminars that cost $500 to longer courses priced between $12,000 and $45,000. Critics say the marketing of the series is aimed at upselling participants on the more expensive next level.
At a $500 seminar in Kitchener, Ont., Marketplace found participants who felt pressured into raising their credit-card limits right on the spot. They were even given scripts instructing them on how to ask for limits of $100,000. …
http://news.ca.msn.com/top-stories/cbc-article.aspx?cp-documentid=23358953
DISAPPOINTMENT PICTURE EXPLANATION:
THERE WAS SHRINKAGE!
FROM THE COLD WATER…
THERE WAS SHRINKAGE, I TELL YOU!
Do girls know about shrinkage?
(Explanation courtesy Gorge on Seinfield)
Vancouver is truly an odd place. Salaries do not reflect the true cost of housing here but employers refuse to adjust wages accordingly. The problem is that there are two classes of people here – those who owned pre-boom, and those who have come to Vancouver in the last few years or joined the workforce recently. The pre-boom types often have property and are fabulously wealthy on paper [$250K houses now worth $900K] – for them, current salaries are more than sufficient to service a $200K mortgage and then some. However, those who are new to the game find that current salaries doom them to condoland in Surrey. They demand higher wages so they too can afford a house, but employers refuse, knowing that any increase given to the newcomers will have to be passed on to the house-rich as well. So long as the majority of people are content [wages sufficient to service older mortgages on pre-boom values, continuing huge increases in property values to create paper wealth], employers – including the provincial government – can fend off demands for wage increases. But the tipping point will come. Once the propertyless or mortgage-poor constitute the majority, there will be serious pressure to have wages reflect the true cost of housing here. Vancouver is already having trouble attracting talented people with families, and this will only get worse as affordibility continues to decline.
#127 Teroy on 01.29.10 at 12:39 pm……..well said ! truer words were never spoken!
I just received my monthly statement from Visa…interest rates are going up for all categories..get ready they are coming…
Post#114 Bottoms up, That is a good question. Its simply supply and demand. Lets go back a few years, near the bottom of the last market here. Not too many trades around, the bidding was tight sometimes break even or a small profit.
It starts to pick up a tiny bit.
The guys are happy to start getting full weeks.
Lots are plentiful and reasonably priced. Then it starts to go, all the contractors are busy but not making huge money. We’re working a few weekends and looking good.Lots are still easy to purchase, only a slight increase in cost.
Now we start to perk along a little bit more, all the regular trades are busy and can’t take on any additional work, trained manpower is starting to become a problem.
Now we are starting to get calls can you come and do this job? I’ll pay whatever!!!!Not enough trades avaliable prices go up.
Prices are up, still having issues with finding good qualified tradesmen.
Now we start turning work down we are runninig at 60 to 70 hours a week.
Now we have the young contractors enter the business and the prices have reached an all time high, they think its like this all the time. New fancy trucks, fancy recreation stuff etc.
Now we have a good long stretch of high demand and high prices.
It’s diffrent this time as they all wink and nudge each other.
Soon though market forces start to take over prices have climbed too high people are stopping buying.
Now the contractors are starting to bid against one another the days of “just do it” are over.
Off to the wholesalers they go crying that the pricing is too high. The wholesalers reduce their prices and every one is happy for a little while.
Now sales are becoming slower and some guys are not getting paid, a few stupid ones go broke or just disappear. Things are ok for awhile.
Sales slow more, now we are starting to tighten up, the lease payments on that 60,000 diesel pickup become a problem, the lease on the office becomes a problem, all those cell phone bills are”how much?”
Now panic starts to set in with the younger contractors, they are waiting 90 days or more for money, the sketchy contractors lead them on, if you do this house I can pay you for both, off they go and do another job, now they are really in hock and start cutting costs and manpower if you want a job its only 22 an hour not 24 take it or leave it.
Now we only have half the building of only a few years ago but we still have twice as many contractors.
Now it gets really tight and desperate, guys are working for next to nothing, the fancy trucks are all gone.
Still the competition gets worse, tell me his price i’ll do it for less.
Now all the stupid contractors are gone, broke, divorced,out of the country. We are left with the survivors who are smart and shrewd.
Rinse and repeat.
Your housing costs are low at the beginning of the boom and escalate quickly as the demand increases
In my trade we have seen about a 20% reduction in prices since last summer.
More pain to come, the stupid ones will destroy the market soon.
And here we go:
REAL ESTATE
Home buyers in the suburbs are about to cash in
http://www.yourhome.ca/homes/realestate/article/757403–home-buyers-in-the-suburbs-are-about-to-cash-in
=======
City council can’t exempt seniors from safety rules controlling basement apartments.
Provincial law demands equal treatment for everyone under city’s regulations, said planning commissioner Janet Babcock.
“You cannot specify for particular income or age group or demographic characteristic” when regulating “in-law suites,” she said.
…City officials can’t bend fire and building code rules to allow low-cost seniors housing, Babcock said. The city is legally bound to evenly enforce the law to promote public safety. Basement apartments require a separate exterior exit, along with fireproofing between the existing living area and the new unit.
It’s also impossible to ensure a basement apartment is only used by seniors, once it’s created inside a house, she said.
Any kind of special treatment for seniors is problematic, Babcock said.
http://cambridgereporter.com/printarticle/201397
Looks like the intergenerational war has started already.
It is pretty foolish to paint an entire generation with the same brush.
There are just as many boomers as gen x’ers as gen y’ers who are responsible. No generation has the right to be self-riteous.
For some it has been new digs without the income to truly support it if interest rates go above 3%, for others it has been movin’ on up from humble beginnings to 4000+sq foot homes, and for some it has been taking out $250K+ in HELOC’s to put in all the latest granite, stainless steel, etc. in what were once possibly humble beginnings.
No particular generation should be painted as zero or hero as a whole; there’s plenty of variance within each.
#129 Gordon,
I think this is an excellent post. I think it very much explains the situation in Vancouver. There appear to be a large number of listings right now at the high end that are not moving and some listings have been pulled lately. It seems clear that many of the upper end buyers will hold and can hold for a long time if they want to. The notion that there are two classes of buyers very much fits my understanding of the market here.
Well done.
#135 Gord in Vancouver,
Good to see. I have my doubts about a “V” shaped recovery. Wages are still very flat (up 1-2%) and consumer debt is still at historically high levels. Let’s not forget that the economy is still 70% consumer spending.
I don’t expect the gov’t to touch interest rates until they absolutely have to. Not until the unemployment numbers go down and there is compelling proof the economy can stand on its own.
Interesting comment on Paul Krugman’s Blog (from Jan. 16) about the positive GDP numbers. It was pretty clear it was coming then but mostly from companies simply re-stocking inventories. It is a one time blip and not a sign of a “V” shaped recovery.
http://krugman.blogs.nytimes.com/2010/01/16/blip/
Talk: “deficit freeze”, spending cutbacks, unwinding, etc.
Action: Senate approves greatest rise in USA debt ceiling ever…+1.9 trillion.
I say, I say, I say that’s nearly two Trillion son. With a T.
Stephen Harper calls for ‘enlightened sovereignty’ .
This is the latest headline coming out of the Davos economic summit of global elite. In other words Harper is continuing the push of Canada into the merger of a North American Union which is the merger of The U.S ,Mexico and Canada. In 2006 Harper Signed the SPP (security and prosperity partnership) which was designed to merge all financial, military, regulatory and criminal law between the 3 countries. Garth writes book after book giving financial advice to people refuses to address the elephant in the room . In 2006 he was attached to the Conservative government and knows full well what the SPP entails. To give financial advice and not even mention the push to merge all three countries under a unified government control grid is really questionable. For Garth To heckle the recent revelation that the U.S Gov wants to role private savings into U.S treasuries to try and plug their unfundable debt is sad. We are becoming ever more intertwined with the South, and to not even acknowledge this is misleading for people. We must keep an eye on what is happening in the States because what happens their may be coming to a tax code near you very soon. Please elaborate on how the SPP will effect Canadians Financially, Economically and Socially in the near future Garth. Or maybe your not allowed to…
#138 Robert Kiyosaki was himself found out to be quite the fraud, in regards to many of his dubious claims in the “Rich Dad Poor Dad” book. I am not surprised by the tactics used in his seminars either.
http://www.johntreed.com/Kiyosaki.html
Garth, are you sure that the website didn’t go down so you could delete all of the real estate is going to crash doom and gloom references made in the past? You know, so you could avoid any sort of Jim Cramer type roasting by Jon Stewart?
Wouldn’t that be funny. hehehe
I take back the semi-nice stuff I was thinking. You’re an idiot. — Garth
Reality Check – Calgary and Edmonton RE prices
Somebody has mentioned that Calgary prices are down 13% and Edmonton down 20%.
Now I am an RE bear but in the interest of the facts neither Calgary or Edmonton has seen a year over year or month to month decline of these magnitudes.
Calgary up YOY in Dec and down slight Nov to Dec (December is a throw away month anyways as sales are so sparse.) Edmonton is up slight for the same periods.
and the BC public service pension plan is not paying any inflation adjustment increases for the first time since 1982. they have always matched the CPI increase, and this year CPI is -0.9. they wanted us to know how lucky we are it is not being reduced.
#140 – Pessimisticprof
I would propose that there is a third class of people in addition to the “pre-boom” class who got into the market before prices rose and “post-boom” class who are either doomed to condo land in Surrey or are priced right out of the market.
There are also those who made their money elsewhere that can easily afford to buy at Vancouver’s current prices, regardless of how ridiculous these prices may seem to the rest of us.
#50 LS GIC Rant
A few comments –
Remember Garth’s opinion that GICs are over as an investment vehicle depend on rates remaining extremely low. Inflation of 4 to 6 percent may return again and then we’ll need to have another think about GICs as part of an investment strategy. But keep in mind there is no free lunch – if the GIC rate is 7 percent and inflation is 5 percent – you are still only getting 2% real.
CPP adding to GIC income – This is a red herring – you get the CPP whether you invest your savings in GICs or dividend stocks or beanie babies. You should just look at how to maximize (within the realms of safe investments) the return on the money you have to invest. Currently GICs only make sense if you need to park the money for some other use in the near term and do not want to risk your principle.
ING’s 3% GIC is a loss leader for 90 days to get you into their RSP. After the 90 days you will have your choice of their regular GIC rates which are pretty good compared to other banks but still only 1.25% for a 1 year GIC. At 1.25% your money will be shedding about 1% of its real value annually at expected inflation rates.
#140 pessimisticprof. Thanks. Interesting post.
Glad to see that the peak oil, famine / pestilence & squirrel hunting posts are dwindling. All the tinfoil hat-wearing blog dogs were making me think Alcoa might be a decent play right now.
Garth, I would expect something more witty from you! Just think of how many books you could sell if you actually got on The Daily Show.
I didn’t mean to hurt your feelings. lol
Speaking about Cramer Nolan did you see him pumping v.wlc . He’s probably the guy shorting it . What was he pumping at $ 2.50 ? BTW Garth has done everything possible in every way to say without uppercase lettering NO CRASH HERE JUST CORRECT. And for all you gold bugs …I bet george Soros is shorting gold .
overnight disrepair?
Apartment building inspection blitz nets 10,000 violations
Toronto building inspectors found nearly 10,000 violations in about 200 apartment buildings during 2009, up dramatically from 47 the year before.
Everything from faulty balconies and crumbling staircases, to cracks in the foundation were spotted by the inspection teams.
The substantial rise in tickets is due to an intensified program to crack down on buildings that let maintenance slide….
Read more: http://www.cbc.ca/canada/toronto/story/2010/01/29/toronto-apartments.html#ixzz0e2rHg8n3
#156 Pat
The “outsider money” is frequently mentioned as a possible explanation for Vancouver’s affordability problem, but as Garth and others have pointed out in the past the numbers simply don’t add up. There is a lot of Asian money in play (originally HK and Taiwan, now Korea and the PRC), but RE investors are increasingly steering clear of our overpriced property in favor of better deals and warmer climes to the south. As for the “loaded immigrant”, this is hardly the case – most new immigrants do not arrive flush with $$$ to dump on property. There is ample evidence of immigrant hardship in the lower mainland’s ethnic economy, where both recent arrivals and long term residents are trapped in minimum wage jobs. They do buy, often in cooperation with others in order to afford a starter place, but the numbers are not the driving force in Vancouver’s race to RE insanity – we have only ourselves [and the government!] to blame for that! A ridiculous capital gains policy that rewards RE speculation and encourages flipping, land use policies shaped by developer greed rather than public need, irresponsible lending practices based on “pass the risk”, an idiotic willingness to pile on debt, and last but not least, our deep-rooted desire for “our own place” – these are the true culprits.
George Soros is calling it a gold bubble and at the same time asking for the G8 govts. to not withdraw the stimulus. His claim is the US and others have more room to borrow !
http://www.telegraph.co.uk/finance/financetopics/davos/7085504/Davos-2010-George-Soros-warns-gold-is-now-the-ultimate-bubble.html
Been following your blog for over a year. I can see why the critics think you’re changing your story. You’ve been posting about “bubbles” and immanent crash since I started reading your blog. As for comparisons to the US, what were all those posts of houses going for pennies on the dollar about then? I suggest people look back at past entries. Like you were saying till now, we are heading for a real crash and things are “not different here” despite what the Realtors are telling us.
My consistent real estate prediction has been for a correction, not a US-style crash, but one that will last for a long time. If you haven’t figured that out in a year, good luck. — Garth
#143 Dan in Victoria on 01.29.10 at 3:35 pm
Great summary on the rise and fall of the construction contractor.
I can tell you’ve been there in the trenches and seen it to.
BottomsUP
It costs anywhere from $150 per sq.ft. for low end to $400 per sq.ft for really nice finishing, plus land cost. The thing to remember though is that when the economy tanks so does the cost of construction. Cheaper labour and materials. Last year Home Depot cut prices on everything to spur sales. I stocked up on tools and did a ton of renos to my house at a fraction of the cost it would have been a year earlier. I sold that house 6 months ago and lost $60 k on it after losing my job. I am in the process of building a 1800 sq.ft. house on a piece of land I purchased in 2008. I am looking at bringing it in at $150 / sq.ft. by doing all the interior work myself. I know the average in Calgary for resale is $350-$380 per Sq.ft for crappy finnishing. So yes It is way cheaper to build than buy.
Garth, I do not understand your numbers for CPP benefits. According to Service Canada web site the maximum at age 65 is slightly over $10,000 per year. Are you including OAS in your $17,000 quote? Even if you wait until age 70 to collect CPP the maximum only increases by 2% for each year up to age 70. Am I missing something? Please comment.
That’s the combined CPP & OAS maximum. — Garth
#142 john m — “. . . get ready they are coming…” — TGIF! With Garth’s site out to lunch yesterday, it gave me time to burn a couple of CD’s and DVD’s (all legit, mind you) but what would Friday be without something to focus on over the weekend? One minute clip on China and possible WW GD2. “Did China just pull the plug on US debt?” (wrh.com). / The other side of the coin is a China crash. / Also — don’t forget the false flag at Whistler, just prior to or during the ‘lympdicks along with Yellowknife et al!
The above links may go with this one — the eventual break up of the US into six separate states in the summer. Seemingly, the US is hell-bent on further wars, and engineered wars drive an economy.
In any event, 2010 and on appears to be real humdingers of years!
——
#45 Kurt on 01.27.10 at 10:51 pm and #34 BigAl — “Bingo. This mess over the past year and a half has been *all* about getting Harper re-elected. If he smells defeat, he’ll pull the plug just to screw Ignatief.”
In today’s KDC, a report states that “Tories wrest control of Senate — PMSH to gain upper hand by naming five new senators today”.
Along with the few seats he needs to give the CPC a majority in Parliament, it means Harper will be a dictatorial ruler, but that’s what sheeple voted for, I guess. Either that or a false flag so he assumes dictatorial powers as the head honcho.
BTW, St. Al of the Goracle has come up with ths amazingly brilliant idea! “Let’s blow up the sun; that’ll REALLY cool things down!!!” — Saint Al of the Gore, PhD (Piled higher and deeper)”
If these don’t prove Copenhagen was a hoax, nothing will — Obama 1 and Obama 2
Israel wails about the atrocities of WW2, yet how much publicity is given to the holocaust of the Palestinians? What comes around goes around. The wheel always turns.
Garth, I’m glad you got your site up and running! Yesterday, I thought the ‘powers to be’ were trying to silence you because of your frankness and not going along with the crowd. Glad it was only a server problem. Freedom of speech rules.
I find it interesting today that the media was reporting how well the US and Canadian economies were forging ahead (GDP). What a load of crap in my opinion. Are the medias being influenced from political masters to report on positive results that probably include skewed interpretations of data to show a positive effect to instill confidence in us ordinary folks that the economy is recovering and we should start spending again?
We truly can’t trust anything that we are reading these days and I think the general public is starting to understand this. The stock market players are starting to finally read between the lines of the media, and the stocks results lately have proven this.
Like all bubbles, this one has been engineered to transfer wealth from the working poor to the wealthy elite in a rapid manner. What we are witnessing is nothing more than the fattening of the geese before the slaughter. The bankers will take your money when you sign up for a massive mortgage. They will then take your money again when your money bails them out a la cmhc. Welcome to the world of disaster capitalism.
#145 Jess Re: Illegal basement apartments nixed by Cambridge Council.
As a senior, I’ll be changing my Will if my family tries to stuff me into an illegal basement firetrap. Perhaps Mr. Newton, pictured in the link, would like to live in his own basement firetrap?
Hamilton has hundreds of these illegal basement apartments all around the city, but they are especially concentrated around McMaster U. and Mohawk College.
Enforcement of firecode, building code or property standards on illegal conversions/ basement suites never happens anywhere in this city from what I have seen. (Garth- I have got to stop lying like this. A neighbour on the street was ordered to build a fire escape on his 2 story wood frame house. He did and it was approved by the City. It is a wood fire escape!)
Lots of foreign students, who don’t know the rules, wind up living in basement firetraps that, incredibly, have been advertised on Mac’s student housing site.
Just another reason not to make any RE investments anywhere in Hamilton. Hamilton has become a haven for rogue builders and slumlord “investors.”
Cambridge Council needs to be commended for doing the right thing by enforcing fire and building code standards for basement suites. They have probably saved a few lives in the future.
Pessimisticprof
Well said. Please add the beaches, activities including cultural lifestyle Grandville Island -the fresh produce, locally produced cheeses and products sourced from regional producers. Let’s face it, most people who harp on Vancouver’s high prices have a good point. It’s becoming way too expensive. The alternative is to move away. Prices are high because you come to Vancouver, begin living the lifestyle and you have to say it’s the most fabulous new-age city in the world.
Garth, thanks for giving us the opportunity to take you to task. The blog is good for everyone contributing and you give us the opportunity to say what we want without interferance, despite the fact us Vancouverites may have a different opinion. Remember, Vancouverites pay twice as much for organic produce and are happy to pay any fee related to saving the planet or keeping the city and it’s inhabitants green. This is definitely an oddity unique to us and in a way best describes the attitude here in lotus land.
114 Bottoms up – 143 Dan has given the best description of how the “marketplace” works for so many of us. He, “nailed” it, no pun, well OK – pun intended. Kudos to Dan.
I recall you saying you were in the public service in
Saskatchewan, and had some crazy amount of Postsec
ed? Not sure what you do, but Dans summary is the
reason the “holy grail” of the public service pension is
coveted, and the CS takes such a lickin’ from so many on this blog. Nothing personal!
162 Prof has said:
“A ridiculous capital gains policy that rewards RE speculation and encourages flipping, land use policies shaped by developer greed rather than public
need”
Could you elaborate on these two topics? TIA.
“This will bring a return to 2007 or 2008 prices and some extraordinary buying opportunities for those with cash.”
In 2007/8, you were saying prices would drop 15% and only fools were buying then. Now those fool prices are buying opportunities that we can only hope for.
Basically you are saying that the 15% drop from the 07/08 peaks will never happen. The fools who bought or kept their overpriced properties will have paid down a big chunk of their mortgage because of low rates.
The non-fools who sold on your advice can only hope to buy back for what they sold for and loose a fortune on transfer costs. As well as spending years in a crappy rental for more than tax and mortgage payments would have been at 2.5%.
You wonder why people reading this are disappointed?
Then learn to read. 15% is the start, and a realistic one. If you have fantasies, buy a doll. — Garth
——————————————————————
O.K I’m as confused as Dave T #82.
If you think the 15% decline back to 2007-2008 levels is just a start, than how in the world could you still think that 15% decline will bring “some extraordinary buying opportunities for those with cash.” ?? how can buying at that time be good if your predicting it’s just a start of the decline?
Distress sales will abound among the equityless crowd. As I said, it will be a very good time to be in cash. — Garth
to Big City High Rollers.
In order for the masses to afford a housing market for the masses at NORMAL interest rates there has to be a stable job market with decent well paying jobs first.
Beautiful places like Van will definitly attract the high paid professional specialists, however these peaple only constiute 1/8 of the population.
A population that buys the expensive houses first on Government assisted low interest rates and expects to fight later for higher wages, based on an increase in cost of living (debt service) is definitly putting the cart before the horse!
@OMC
“Remember Garth’s opinion that GICs are over as an investment vehicle depend on rates remaining extremely low”
Not really. Rates are low now, but all indications are that they will be rising in July, and rising fairly swiftly. Garth has mentioned this many many times as a contributing factor to real estate decline.
“Inflation of 4 to 6 percent may return again and then we’ll need to have another think about GICs as part of an investment strategy. ”
Historical GIC rates here:
http://www.assante.com/advisors/hjohns/advisorarticles/gic_dilema.pdf
In 1981, inflation was 12%, and 1 year GIC rates were over 17%. GICs seem to give better inflation adjusted returns in times of high inflation.
“CPP adding to GIC income – This is a red herring – you get the CPP whether you invest your savings in GICs or dividend stocks or beanie babies.”
I know you do. The point is that Garth wrote it like you would have to live on 32k/year, which is just not true.
“Currently GICs only make sense if you need to park the money for some other use in the near term and do not want to risk your principle.”
Bingo
“ING’s 3% GIC is a loss leader for 90 days to get you into their RSP.”
I’m already in their RSPs so that doesn’t matter to me. They have good rates and promotions regularly. Their TFSA is also at 3%.
Once rates start rising in a few months their returns will improve and I will adjust accounts accordingly. Yes the returns are low (especially now), just not nearly as bad as Garth portrays in Money Road. That was the point of the rant.
Unless you already have a substantial pool of capital, GICs are a disaster. Put all the lipstick on that you want. — Garth
Interesting article regarding the tight control Canadian Real Estate Association has on R/E data in Canada vs. the situation in the USA:
http://www.globeinvestor.com/servlet/story/GI.20100129.escenic_1450088/GIStory/
171 Ret on 01.29.10
it seems like all cities have the hamilton model.
#44. Dan in Victoria.
Dan, I’d like to read the link that you mentioned in #44 . Can you please re-post. Thanks.
#162 pessimisticprof
Jan. 29 (Bloomberg) — Rich individuals from Europe and the Middle East are moving money from Switzerland to Asia, said Renato de Guzman, who heads private banking at Oversea-Chinese Banking Corp. after it acquired Asian assets of ING Groep NV.
“It’s a favorable trend,” Guzman said in an interview on Jan. 27. He takes the helm at the Singapore-based bank’s unit today after having been ING’s Asia private banking head since 2000. “Having a Singapore bank with no ties to Switzerland is an attractive proposition for a lot of them.”
=================
In the early to mid-1980s, most tax havens changed the focus of their legislation to create corporate vehicles which were “ring-fenced” and exempt from local taxation (although they usually could not trade locally either). These vehicles were usually called “exempt companies” or “International Business Corporations”. However, in the late 1990s and early 2000s, the OECD began a series of initiatives aimed at tax havens to curb the abuse of what the OECD referred to as “unfair tax competition”. Under pressure from the OECD, most major tax havens repealed their laws permitting these ring-fenced vehicles to be incorporated, but concurrently they amended their tax laws so that a company which did not actually trade within the jurisdiction would not accrue any local tax liability.[11][not in citation given]
The Cato Institute has argued that tax havens are beneficial as they help pressure developed countries to reduce their tax rates and become more fiscally responsible and efficient on a federal level.[12]
http://www.fatf-gafi.org/document/4/0,2340,en_32250379_32236992_33916420_1_1_1_1,00.html
And get ready for an interest rate hike:
http://www.globeinvestor.com/servlet/story/GI.20100129.escenic_1450086/GIStory/
Recovery points to summer rate hike
Kevin Carmichael
Friday, January 29, 2010
Ottawa — Canadians should be preparing for higher interest rates sooner rather than later.
With the North American economy growing significantly faster than expected at the end of 2009, and with mounting evidence that Canada is pulling clear of recession, economists are increasingly of the view that central bank Governor Mark Carney will pull the trigger on an interest-rate hike this summer, rather than wait until later in the year.
In Washington, the Commerce Department estimated Friday that the world’s largest economy and Canada’s biggest trading partner grew at an annual rate of 5.7 per cent, the fastest in six years. In Ottawa, Statistics Canada said gross domestic product expanded for the third consecutive month in November, and that growth in October and September was stronger than initially stated.
Post #180 Jeannie here you go, its a great piece long though. Pay attention to one of his examples at 5 minutes in. Very sobering.The doubling is explained a few times in the first 5 minutes, if you have time watch the whole lecture even if it takes a few days. http://www.guba.com/watch/3000053112/Arithmetic-Population-Energy
I’m betting we wont see interest rates higher,in fact i think we go lower,before we see any increases–
If someone can point out “anything” inflationary about falling house prices/rising unemployment-please do so-
Falling house prices = loss of net worth = deflation–
Japan has been in deflation for almost 20 years and has maintained a 0% IR–
The US is at 1/4%-
We raise rates and our dollar will become a carry trade–
A high $–is not what an exporting country wants–
This is all about competitive currency devaluation–
The race to the bottom–
ZIRP–all the way–imo
As mentioned a couple of times now, the great commodities market crash has begun (and technology, and industrials, and and …). The real estate market in Canada has followed the stock market up for years. As the TSX and the Dow Jones crash, so to will the housing prices in Canada. The TSX is down 900 points in two weeks so far, but it has only begun. The talking heads will say that this is the correction they have been waiting for to get back in. They will also say that at the 25% correction level…and at 50%. Bullish sentiment is now off of the charts, i.e. there is no one left to buy. As the TSX goes, so will go the real estate prices, especially in Calgary, commodity central. Get short the stock market if you have a way too. I am all out real estate now and fully short both the Canadian and US markets. Real estate price movement typically lags the market, so at least everyone has a chance to get out.
Like all bubbles, this one has been engineered to transfer wealth from the working poor to the wealthy elite in a rapid manner. What we are witnessing is nothing more than the fattening of the geese before the slaughter. The bankers will take your money when you sign up for a massive mortgage. They will then take your money again when your money bails them out a la cmhc. Welcome to the world of disaster capitalism.
————————————-
hey now, lets not pretend that homeowners are innocent victims. I can’t even count how many average joes I know that are self-professed geniuses because they bought real estate. They do absolutely no market research, buy at any price, don’t know anything about purchase to rent ratios & p/e ratios. They all pat themselves on the back, and time and time again, after they buy into the bubble of the day at the tail end of it all, they blame those at the top.
Lets not pretend that greed is only at the top of the food chain. Maybe we can argue that stupidity only exists at the bottom though.
Thanks to Gordon, Dan (in Victoria) and Ian for the responses, I definitely learned a lot. Yank I hope you find a nice cheap rental to ride out the Edmonton market.
To ‘Taxpayer like everyone else’: your memory is decent, I am in the public service (in Ottawa) but have little debt. Left the nest in 1997 and rented from 1997 to 2009. During this time I got 2 university degrees, including a Ph.D, and worked my butt off at part-time jobs to avoid debt. For those years of sacrifice and frugality (missing out on the equity boom in housing, opportunity cost of not earning a salary), my net pay is $1600 biweekly, an OK living wage in the city of Ottawa, but it’s not going to make me rich (no supply and demand wage increases for me, and I have to declare every penny haha!). If at the end of the road there is a pension waiting for me (for which we heftily contribute to) then I consider that a bonus (I’m not holding my breath). Look at post #155, the B.C. provincial pension not indexed for the first time in 28 years….could be a sign of things to come!!
Regarding the talk on recruiting talent to Vancouver/B.C., I agree there must be huge difficulties, I could transfer out there at my currently salary level, but with no savings or equity, and the same paycheque, I’d be doomed to rent for life…..