Hear Garth in Nanaimo Feb. 13, Conf Ctr 12 pm
In the news: Higher rates 'sooner than later.'
Always instructive to watch others, don’t you think? You just never know when someone else’s experience will end up being yours.
Take the folks in Cape Coral, Florida, for example – a modest but overbuilt community where the average house price a few years ago was $325,000. Last month it was $89,000. And that was after a sales increase in 2009 of about 90%. The trouble was, half those sales were of bank-owned foreclosures and another third were ‘short sales’, or distressed deals by owners in negative equity.
Why did this market in the desirable sunny south collapse? Simple. Too many homes built, then sold to too many people who bought with little or nothing down, at ever-higher prices. So when interest rates rose and equity stopped building, sales stuttered and lots of people found they owed more than they owned. They walked.
So much for a key state in the world’s biggest economy. Not let’s go to the second-biggest economy.
We just heard housing construction in Japan has fallen to the lowest level since 1964. Yeah, the Beatles. Jay and the Americans. The Animals. The reason: falling household incomes and sustained deflation, despite an $80 billion government real estate stimulus package.
The biggest apartment builder’s gone bust, and building is down 16% over last year. Since the real estate bubble burst in 1991, house prices are off 40% and surveys show people expect them to fall further – so why buy? Condos in Tokyo fell another 5% last year.
Why did the Japanese real estate market collapse? Rampant speculation forced prices beyond the ability of average families to buy, while banks took huge positions in real estate loans. When the market eventually turned (it always does) it plunged the country into a financial chasm it’s been unable to climb out of for 18 years.
Now, Canada is not the USA and it’s not Japan. But neither are Canadians inherently smarter than Americans or Japanese. If those guys – who built the No. 1 and No. 2 economies in the world – can screw up on real estate so monumentally, why can’t we?
Answer: we are.
The reasons the current bubble will not endure are obvious. I know recent buyers don’t much care, and I also realize tens of thousands of house-lusting young couples will be desperate to take the plunge between now and Canada Day – when we get the HST and higher mortgage rates. They’ll think they’re so smart for scoring a cheap mortgage, oblivious to the face they bought an asset at its most expensive and will have to refinance it at vastly higher costs in a few years when it’s worth less. Duh.
In other words, somebody should tell them about Florida.
But it strikes me that experienced homeowners should know better, and be doing something about it. Those who have more than half of their net worth in their homes, or who have experience windfall capital profits due to the 2009 popular delusion over real estate, now have a small window in which to act.
I highly doubt we’ll face a deflationary threat again in the next few years, given the hysterical reaction of governments to the last one. But this much is clear: The end of government stimulus, starting now in the US and in one year in Canada, higher interest rates next summer here and next year in the States, record household and government debt in both countries, and higher taxes in the period 2011-5, means a torpid economy.
With barely no real GDP growth, there’s little chance for a gain in disposable incomes. Without that, and with family budgets sucked drier by higher taxes, rates and gas prices, you can welcome an old acquaintance – stagflation. It’s interesting to note the last time it was with us, real estate flatlined.
In Tokyo, that would be heaven.
Daily this blog is rife with informed speculation on what comes next. Some people agree with me. Some ride me. But there’s overwhelming evidence this most beloved of assets is an unstable place for your wealth.
American fools learned it. Japanese, too. And the fool who follows is the greater fool.
121 comments ↓
Cool dynamic chart: Percentage of Arrears to Total Number of Mortgages in Canada 1990-2009
Alberta is historically high 0.72% in November 2009
http://canadabubble.com/charts/411-mortgage-arrear-rate-canada-history.html
Yes well current owners are still pretty convinced that their rotting 2×4’s and plywood are worth a king’s ransom. I was talking to one seller the other day. “It’s the land!” he said. 4 acre lots are so rare! Meanwhile this one was a toboggan hill that went down into a slue. Not much you could do with most of it. And behind it? Section after section of poor farmland awaiting subdivision. Literally for miles in every direction.
The farmers are still sitting on it waiting for the hay to literally turn to gold, but sooner or later someone dies and the kids usually move pretty quickly.
Unfortunately, it’s not a fast process.
But Garth, unlike Canada, Japan has all kinds of land. And the US is in the middle of a recession… because American’s are dumber than Canadians.
Japan is one-third the land mass of Ontario and has four times more people than Canada. If Americans are dumber than you, I’m changing continents. — Garth
#131 dave from Oakville…”the disappointment”
“”#78 jr
Not sure how the toyota recall is a huge potential boost to ontario car industry. “”
….dave, Thanks for pointing this out… uhmmmm, get out of Dodge asap.
…Ontario’s gonna sink hole quicker’en you can say “perdy please”.
Move west young man, Hongcouver don’t you know.
…and don’t mind that “Asia” guy who relentlessly bashes me…he’s batting “0″, while I’m batting “near perfect”.
Nostradamus jr.
Ah what the heck….Canada has a secret weapon on the sidelines to save our mortgages…….http://www.youtube.com/watch?v=BWgi6W-uMeI&feature=related
you could have titled it the ” already dead ”
or the ” green mile ”
seriously though things are now unwinding fast
a reading of the recently deceased J. D. Salinger’s classic The Catcher in the rye may be in order if for no other reason than to remind people that there’s a hell of lot more to life, than houses and money.
The second episode of our weekly serialized account of a Vancouver homeowner’s experience of our RE boom has been posted at VREAA:
‘The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise’-
‘Part 2: Up, Up, Up: Winning the Real Estate Lottery’
http://tinyurl.com/frooglescott02
“In the three years following the purchase of our house in the fall of 2003, its assessed value increases by 72%, or almost a quarter of a million dollars. This windfall changes the way I think and feel about money.” – Froogle Scott
“What effect does all of this distraction have on our city, our society? Froogle Scott generously shares his experience.” -vreaa
Garth – I do you mean real estate flat lined in nominal terms during the stagflation of the 1970s. I believe in real terms they actually decrease.
With real estate prices flat lined and annual inflation rate of 8% to 12% during this period it meant an erosion of real home prices by a significant amount.
The only saving grace for most people was that during the 1960s and early 70s mortgages were for a 25 year term. So people were locked in to low 1960s interest rates for the duration of the 25 years – so their payments did not increase due to the higher interest rates of the inflationary 1970.
Now NOBODY locks in for a mortgage term longer than 5 years – if that. So if stagflation returns and we see inflation rates of 5 to 8 percent over the next decade you get to renew your nice fat mortgage in the range of 7 to 10 percent. Do the numbers and see how much more even a modest $300k mortgages costs at 7 percent as opposed to 3 percent.
So not only may house prices flat line the pressure on people of higher mortgage cost could cause prices to fall in both nominal and real terms.
Of course this is all years out and lots can happen. Maybe global warming will make Canada the next Southern California and all the new found wealth in China will buy vacation homes here.
Garth,
Thanks for the book.
Awesome!
Somebody buy Notradamus Jr. this T-Shirt as a gift:
http://www.bustedtees.com/winterolympics
Wear it proud, buddy!
Well things are different here in BC. Did anyone watch this last night? No wonder prices in BC are going up.
http://www.cbc.ca/documentaries/doczone/
Garth some like you, others don’t. You’re OK in my books..
http://thecomingdepression.blogspot.com/2010/01/subprime-crisis-canadian-housing-market.html
But Garth, stagflation *is* deflation, just with reduced affordability of essentials like food.
There’s only one definition of deflation, and it ain’t about prices; those are merely an indicator – a lagging indicator – of the state of the ‘flation.
Deflation was, is, and will always be a reduction in the effective money supply – M3 times the velocity. We’re already there, despite desperate attempts by governments to inject liquidity. Only in China can the government literally force banks to lend at the point of a gun.
Check out Zerohedge! Tyler Durden opines that it’s in the US government’s best interest right now to spawn or permit another panic-inducing crash in equities, because that will:
1) Provide a large market for government-issued debt when everybody flees equities;
2) Which will keep interest rates on T bills low enough to protect the crucial bond markets; and
3) Punish those folks who are short the dollar and exploiting the carry trade.
Just look at what’s happening to availability of revolving credit, the most volatile component of M3: its crash continues unabated.
But Garth, unlike Canada, Japan has all kinds of land. And the US is in the middle of a recession… because American’s are dumber than Canadians.
Japan is one-third the land mass of Ontario and has four times more people than Canada. If Americans are dumber than you, I’m changing continents. — Garth
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hahaha. Tim, I’m going to try to talk you through this. Japan has a very small land mass and more people than Canada (plus a larger economy). The laws of supply and demand (I’m not an economist though), tell me land in Japan would be of higher importance to the Japanese considering their smaller size and big population, compared to Canada which has the 2nd largest land mass and a very small population. There is less abundance of land and homes available to the Japanese.
If the Japanese are vulnerable to severe housing problems then Canada is even more vulnerable.
I sensed sarcasm in Tim’s post…
#3 tim
your kidding right japan has al kinds on land . you do know it’s an island
That was some serious withdrawal! Luckily, Money Road was around to give me my fix.
Garth did you notice that at one point during your site crash the Howe Street frame in the side bar was hijacked by bidz.com? Personally, I think they hacked you.
#2 nonplused on 01.29.10 at 10:20 pm
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‘waiting for hay to turn to gold’
hilarious!
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With the Canadian dollar near par, and many decent houses and condos in Florida going for under $100,000, it’s likely a buying opportunity of a lifetime. Garth has said that prices swing as a pendulum, over-shooting on both sides. Hasn’t the pendulum swung too far in the USA?
Regarding the Japanese, they have a totally different mind-set when it comes to ‘assets’. It’s likely those mind-sets came from the prolonged crash they’re experiencing…..
THE REAL NEWS….
Occasionally, it’s heartening to see that the same publications so co-opted by Real Estate Porn can run a page or two of empirical cold water. In this case, the Globe and Mail’s Report on Business insert yesterday ran a little item you might otherwise miss, trying to figure out which Baron of Bay Street has the most toys.
We all have prejudices on this particular blog, so a little ‘anecdotal evidence’ is a good thing. Apparently a reporter with more patience than the ones at the G&M who write about colour swatches and helpful hints in putting in ‘unconditional’ offers, went to the Registry Office in Toronto one day. They report that on one target street, after title-searching 6 properties these little Woodward & Bernsteins found the following for the period 2004-2007 (arguably somewhat comparable to the incremental insanity in this market, in 2009):
#1
Price Paid: $1.4M
Mortgage: $1.3M
Refinance: this guy then put a $4M second on the property in 2005
#2
Price Paid: $1.4M cash (the reporters helpfully provide what may be fake, but decidedly Asian, names for the owners)
#3
Price Paid: $1.2M
Mortgage: just over $1.2M
A demand loan on the first, so there would be more to this story…
#4
Price Paid $1.6M
Mortgage: $1.3M – on a 3-yr fixed – and this owner went back to the well for a small second…
#5
Price Paid: $1.3M
Mortgage: $300K, but this year the owner also put a demand second on for $600K
#6
Price Paid: $1.1M
Mortgage: $700K on purchase, then a second this year for $500K, followed by a third for about $600K.
So what do we know? We know that for a certain part of the market (i.e., not scrabbling first-timers, or working stiffs looking in Toronto under $1M, but not the demonstrably wealthy – in short – the Wannabees) there are properties that are going to get slammed in the inevitable correction coming in Toronto this year or next. Extrapolating (dangerously?) from the above, 2/3 of that market segment may be in that kind of trouble. We also confirm the anecdotal stories of Wannabees demanding that their banker roll 100% car financing into their mortgage security, or regularly paying for the groceries that fill these houses with debt. These folks are working mightily (not sleepwalking) on their inevitable financial Waterloos.
After which, we will see the same newspapers (if they exist, as Paper is Dead) wringing their collective hands over the therapeutic and emotional ‘recovery stories’ of these silly buggers…
#3
The phase “There’s a fool born every minute” was coined many years ago followed by a “A sucker every minute” and fast forward to North America (Canada) and there are “Greater Fools made every day” All the Kings Men and all the Kings Horses will never mend their broken hearts when the bubble burst. And, guess what? they will claim it was not their fault, stating someone should have told them and they government help. Any bets?
Garth – #3 (Tim) was being sarcastic. (It’s a form of humour that depends on understanding the mocking nature of the form). You’ve been at this too long, my friend….
Garth et all
Here is another point of view. lets compare a house to a car. We all buy a brand new cars for $30,000 (I am average) or a BMW for the rich ($60,000) and in 7 years the car is worth almost zero. and yet we all do it year after year.
My Point is if you buy a house and live it in till you die and its worth nothing so what. I still do not understand why your scaring ue as we cannot change the future..
So my question is with all your nice little facts of one quarter of Americans have negative equity. So what! Is everyone (all 100%) selling I bet most are staying in their homes because they need a place to live!. So back to the car,
100% of people who borrow and bought a car all have negative equity the second we drive off the lot and yet we all buy brand new cars. So what! That is the lifestyle we choose. Remember Garth a car today is worth more than most houses in the 70’s. I think the world is a little distorted.
Bottom line and you can not argue the point if you are working like 90% of the population and your house even goes to zero, you have to live somewhere!
As my wife always says we are all in the same boat. (Maybe the rich like you can sell their homes and write books)
So stop scaring everyone and take a deep breath for those of you who can follow Garth’s advice, go ahead sell your home, but for the rest of us common people your strategy is stay in your home until you die.
Besides there is absolutely no room in retirement homes because all those boomers who read the book are selling and moving into the retirement homes so you might as well be taken out of your home feet first.
Cheers try and smile. Yes we are in trouble but the majority of us just don’t want to sell our homes. Period!
PS Mr.Turners’ new book (yes I am reading it) offers great advice (strategies) on what to do if you stay in your home, I like these! My only complaint you should have spent more chapters on what we strategies to employ to stay in our homes and pull out the equity.
The ‘Correction’ may begin sooner than we think. Inflation, though hidden, is coming in with a bang. My car insurance went up $300 this year, I got a nice letter from the broker telling me that the insurance companies are paying out more in claims than they earn in revenue, yeah right!
Rogers sent a nice letter that CRTC in its efforts to save the Great White North culture of NFL and American Idol is taxing me 1.5% on my cable bill to subsidize, CTV, CBC etal. I guess there’s not enough college football from Nebraska on TSN, we need more local programming.
Grocery prices are definitely heading higher, as are gas prices over last year, heating, cooling, hydro, and water costs have only one way to go, and then we have the HST dipping into our wallets later this summer.
So folks, you do the math! Those who bought homes based with budgets stretched tighter than Brittany Spears jeans may not be able to ride it out till interest rates go higher, they may meet their Waterloo much sooner.
But I forgot that food and energy are not included when calculating official inflation numbers, so I guess we’ll be OK. Go buy a house!
Blog Dogs (puppies too),
Can you please have a look at that last 3-4 postings ob this site and let me know if you think it is game over for the Vancouver market – thanks.
http://www.yattermatters.com
Thoughts? Is the trend now in capitulation mode?
I guess Canadians are dumber, good one Tim!
lol
re: …. “higher interest rates next summer here and next year in the States, record household and government debt in both countries,” ….. Garth
Central banks have limited ability to raise interest rates because carry costs of government debt would also explode. No other feasible option left, except, continued quantitative easing. To combat the resulting inflationary pressure the Federal Reserve is presently considering a new policy tool to tighten credit – a new benchmark rate – by replacing the present fed funds rate with the interest paid on excess bank reserves. Interesting times indeed.
Side note: strikes during recession, food, utilities, public transit, postal, tax increases – historical unemployment …. hasn’t stagflation already arrived in Canada.
“I highly doubt we’ll face a deflationary threat again in the next few years”
two words: Irving Fisher
Re; 19 marcus.
I hope we do not end up bailing out the over-mortgaged, who I believe, may be engaged in some form of massive scam to take the money and run offshore. Why else would they do it? and are the banks so stupidly in collusion?
Having family property in the Ft. Myers/Naples area for 30 years, I can make a couple of comments on Cape Coral.
Cape Coral was massively overbuilt already in the 70’s.
The developers put in roads with street lights and serviced lots and waited and waited some more for buyers to come.
In fact those developments were so empty that drug traffickers were landing small planes there at night to unload their illicit wares. There was always restricted road access over the Caloosahatchee River via one bridge.It wasn’t until the 90’s that the area really took off.
So now Cape coral has really just returned to its usual position as dreary second class suburb.
http://www.shaw.ca/NR/rdonlyres/24641C1D-821E-4708-BCE2-24C7AC7C0D61/0/MessageComps0ct23.pdf / This is the link to the ‘hidden tax’ imposed by CRTC that Shaw, Rogers and co. will fully pass on to consumers.
I believe once the avalanche of the housing downturn starts, it will gather steam quicker than most sheeple anticipate. I do not understand what is driving Ontario’s economy? Can someone please explain?
I certainly agree on the stagflation call. The U.S. recovery continues to be much more dismal than many people thought. The Cheerleader Press looks for any snipet of good news and then megaphones it out with big headlines. However that does not change the fact that fundamentals remain dismal.
Yesterday the analysts who believe it will be a “V” shaped recovery were all over the 5.7% GDP number as proof. Wrong. It was deceptive as many economists including Nobel Prize winner Paul Krugman pointed out.
Here is another one, Nouriel Roubini commenting on it:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqLMEUObhysc&pos=2
Why do so many people miss the fact that our economy almost went into the ditch in 2008 and the steps taken to bring it back will take years.
“We just heard housing construction in Japan has fallen to the lowest level since 1964. Yeah, the Beatles. Jay and the Americans. The Animals. The reason: falling household incomes and sustained deflation, despite an $80 billion government real estate stimulus package.”
Another perhaps more important reason is the aging demographics of Japan, as its elderly population dies off and the next generation isn’t as large. This is something Canada will be experiencing beginning this decade as all us Boomers start keeling over.
James In Ottawa wrote: “My Point is if you buy a house and live it in till you die and its worth nothing so what. I still do not understand why your scaring ue as we cannot change the future.. ”
I agree with the first sentence to some extent. Let the kids sell my house (paid off in 1997 on a 15-year mortgage) for whatever they can get. As to your second sentence, yes, you can change your future. Diversify into gold and conventional oil, look for cash flow investments, and keep at least six months of non-perishable food items. Live below your income and stay out of debt, which few Canadians do.
Recommended reading: Napolean Hill’s “Think And Grow Rich”.
Garth – You’re in La Presse this morning, the big times
http://lapresseaffaires.cyberpresse.ca/economie/immobilier/201001/29/01-944523-immobilier-au-canada-des-craintes-de-surchauffe.php
#20 David B.
That is my fear too: the government will penalize those of us that saved and lived within our means so we can protect the greedy who bought houses they could never afford! (Exactly, what is going on in the States will happen here!)
Garth, I am not sure why you let Nostro back here. Do we really need a guy who never misses an opportunity to express his irrational hatred for another Province? I am proud to be Canadian, I like every part of this country I have visited. Never been to NWT/Yukon, but I am contemplating a late summer roadtrip up there.
We talk a lot about real estate bubbles in various locations, but I don’t see most other commenters expanding that to mean they have to insult every person who lives there. I like BC and Alberta, as Provinces and places to visit, I have been there a few times, though not recently. If I criticize BC or Vancouver or whomever here, it is in the context of their crazed real estate market, not because I hate everyone who lives there.
jr sounds like a guy who has never visited Ontario, or anywhere else more than a block from his house. He needs years of therapy to deal with his issues, but why do the rest of us have to listen to his verbal expressions of a deeply disturbed mind.
We might put up with him, like a crazy aunt in the attic, if he occasionally made any sense. We’re still waiting for that.
Typical was his clueless pronouncements about Toyota and CTS this week. FYI, jr, CTS is a contract parts manufacturer – they make the part Toyota orders, to their specs. They don’t design it, and I am pretty sure they are not at fault here, it’s a bad design by Toyota engineers, probably in Japan. I have been to the CTS plant many times on business, though not lately, they are very nice people there from what I have seen. They are regular working people, ordinary citizens.
If the true measure of a man is how they deal with others, well… jr should have his human license revoked. Taking delight in the misfortunes of others is a trait of the petty and cruel, and says much more about jr’s pathetic mental state than anything meaningful about those he rants about with such disdain.
If I lived in BC I would be embarrassed to call jr a “fellow citizen”. Is this the face you would want your Province to present to the world?
I’m starting a petition to ban jr. He can come back after he grows up.
“given the hysterical reaction of governments to the last one. But this much is clear: The end of government stimulus, starting now in the US”
Don’t count on it yet. Marc Faber gives an interesting argument about the next wave of money printing. If the S&P falls more dollars will fall from the sky.
Garth…BC is not perfect…the BC hinterland cities (including Victoria) and town’s real estate are either in “glut availability or overpriced”.
…Hongcouver is “different”…regardless whether we get overun by world visitors or instead a virtual Olympics…its win/win… cold or it’s second earliest spring in the > 20 years I’ve lived here.
…The North Shore will be recognized next month for what it really is…the most beautiful and liveable neighbourhood in all of North America.
As to Ontario…a manufacturing economy engined by Toronto…it will be tough treading….there are not enough jobs to sustain its future….too many citizens.
I see “bubble real estate” in Toronto.
Nostradamus jr.
#33wrote:
Garth – You’re in La Presse this morning, the big times
http://lapresseaffaires.cyberpresse.ca/economie/immobilier/201001/29/01-944523-immobilier-au-canada-des-craintes-de-surchauffe.php
******************
I was disappointed when I clicked on the link because the article came up in French. Then I discovered the Google Translate icon at the top of my browser. Voila, I was able to read it.
#35 Gotawatch
…I lived in TO for nearly 40 years.
…Get off your high horse….Ottawa dropped % rates to save Ontario’s citizens and its manufacturing economy.
Without closing its trading borders to the world you have to ask yourself…can Ontario’s manufacturing economy survive?
sheesh
Nostradamus jr.
Enjoyed your latest book, well worth the few dollars.( though there is a decimal place typo in that first P/E ratio column page 127, damn all nitpickers, eh)
On the other hand I think you should talk to Nelson #13’s Austrian yodel. Also last I looked, the velocity of money in the USA was .852 , any idea what it is here?
BTW, this below was reported on MSN with great glee , optimism and without the word ‘meagre’.
Economic growth resumed in the third quarter of 2009, with real GDP
increasing by a meagre 0.4 per cent (at annual rates),
Looks like there is one honest word juggler in Carneyland! LOL
James in Ottawa wrote:
“We all buy a brand new cars for $30,000…”
Not all of us. The last time I bought a new car was in 1992, and I paid less than $6,000 for it.
“So my question is with all your nice little facts of one quarter of Americans have negative equity. So what!”
Not all US mortgages are a fixed interest rate for the duration of the mortgage. What happens when a “homeowner” with negative equity has to renew their mortgage at the end of a five-year term?
“Bottom line and you can not argue the point if you are working like 90% of the population and your house even goes to zero, you have to live somewhere!”
If the house is paid for, this is not a problem. If the house is not completely paid for, this could be a rather large problem when it’s time to renew your mortgage.
“Yes we are in trouble but the majority of us just don’t want to sell our homes. Period!”
Wanting to sell your home and having to sell your home are not the same thing.
“…you should have spent more chapters on what we strategies to employ to stay in our homes and pull out the equity.”
What equity?
It is called WAGE DEFLATION………..
http://www.calgaryherald.com/news/City+cuts+overtime/2502856/story.html
“City hall employees, whose overtime payments grew steadily through the boom years, have been billing for fewer hours in recent months.
Civic-staff overtime slid by nearly one-third last year, with the city’s transit, roads, fire and almost all other divisions spending less on OT, according to preliminary figures provided to the Herald.
The drop to $33.2 million in 2009 from $48 million the previous year was nearly triple the cut aldermen had ordered.”
Now, the question becomes, as many a public sector employees are of the “I got me the fat paycheque for life, screw the taxpayer, let’s go spend” union mentality……how much mortgage debt does $15MM cover on an annual basis…….
As before, with my other comparisons and estimates posted here over the past months, my argumentative premise remains the same…….I am still using a 25 year amortization, a 5% fixed rate, and a bi-weekly payment schedule…….after all, gotta assume some of these folks have functioning grey matter and as CAAMP tells us they do…..here we go……
As the online RBC mortgage calculator will “short out” with too many zeros, I did it this way…….
A $1MM mortgage debt on the above terms costs $2,684 every 2 weeks, so multiply that times 26 bi-weekly periods and you get $69,784 of principal and interest to service a $1MM mortgage over a one year period.
Divide $15MM of lost annual income by $69,785 and you get 214.95……or…..$215.95 MILLION dollars of mortgage debt service (or, put another way, consumer buying power) that just evaporated……and that is from the municipal public sector employees only. FWIW…..the private sector is also experiencing strong WAGE DEFLATION as well…….and if I could get a job I’d be able to report first hand what that amount is…….LOL !!!
Now someone will come along and say, hey wait a minute…..what about debt service ratios….shouldn’t you be using 30/32/34% of that lost income instead of all of it….? Well, if you know what these people are like, and my wife works with them, they are pretty much all buried up to their eyeballs in mortgage and consumer debt.
Financially, the majority of them are like the WWII German battleship “Bismarck” in her last hours…..circling helplessly with a broken rudder in the North Atlantic while under a hail of British gunfire and torpedos…..the decks awash in blood and listing to one side.
The bubble’s already deflating… Canmore condo sales are moribund.
#37 Nostra Jr.,
I live in Vancouver as well. It is not different. No market is an island in this world. The closest thing was Dubai and it popped last year.
Repetition does not make you correct.
re: “this much is clear: The end of government stimulus” …. – Garth
To the contrary, we’ll see a continuous policy of quantitative easing despite the rhetoric.
Withdrawal would invite double-dip recession / depression. The U.S. dollar is toast, Canada will be forced into continuous stimulus to prevent Loonie reaching parity, to save the manufacturing sector.
Advice – seal the hatches, keep bow pointed into gale force 10 stagFLATION winds, prepare for possible beaufort scale 12 storm …. (?). Hint, hyper.
Garth said
I highly doubt we’ll face a deflationary threat again in the next few years, given the hysterical reaction of governments to the last one. But this much is clear: The end of government stimulus, starting now in the US and in one year in Canada, higher interest rates next summer here and next year in the States, record household and government debt in both countries, and higher taxes in the period 2011-5, means a torpid economy.
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I can see how at this point,stagflation looks like the road ahead–but i disagree–
Declining GDP–falling wages–falling house prices–falling stock market–unemployment = loss of net worth–
Banks tightening lending standards-
(afraid to lend)–people afraid to borrow and instead start saving and paying down debt =decreasing velocity-
Of course consumer prices will hang above the market clearing level–for only so long–then down they come–
To me-this spells deflation–
Cash–absolutely agree with Garth on that–
The question is–what’s the best money to hold?
I like Gold and USD at the moment
Gold especially and probably always or until we see inflation back,which could be years–if not decades–
USD is garbage like all fiat–but at this point–it’s just not as rotten of garbage
This chart describes the US–but it will work here–just fill in your own blanks–
As we deflate further–i think the already filled in spaces will apply to us as well–
http://1.bp.blogspot.com/_nSTO-vZpSgc/Sr2fJoBTGxI/AAAAAAAAG8o/r1cYsuFTJCI/s1600-h/deflation-conditions3.png
From G&M
Is Canada’s standard of living improving or declining?
26% 1193 votes Improving
74% 3366 votes Declining
So ladies and gentlemen perhaps that means there are still 26% of working Canadians that could be considered Greater Fools …. but and it’s a BIG BUT they have to find one Greater Fool in other 74% .
Interesting eh.
How is possibly in US print 1 trillion dollars and get it to rise 1US-1.07CAD? So recession is over in US?
The reason that Japan was the first in to the re decline has very little to do with re spec and everything to do with demography . They did not have a post war baby boom . The buying cycle tops out at 48 years of age add 45 to 48 …. 1993 was the year those born in 45 turned 48 top spending age for most of us . They now have the most aged pop. of any country in the world harajuko girls are not making babies and no immigration . Japan will never get out of what’s now called the Japanese malaise . Germany is next in line . Housing is directly tied to population growth in a 48 year cycle . When western countries stopped valuing children highly and valuing the women that gave us children highly by forcing them into the work place to make ends meet ,they set the stage for what we are about to reap. As for the creep that wants a war on the aged I had three children , five grandchildren (another on the way god willing ) my oldest grandson has a serious girlfriend . How many children do you have creep? How many are you planing ?
The median age in Japan is 44, and 64% of the population is between 15 and 64. Demographics is a factor, but a spec-fueled bubble was the overriding one. — Garth
Post#22 James in Ottawa. I see your point. This blog could really help you.
By coming here you have to realize most of the regulars think outside the box.
There are even more that come here trying to get knowledge.
And there are quite a few who come here without a clue.
May I suggest that you think about what we are trying to tell you, some assembly is required though.
As to buying a new car every seven years, dutifully staying in your house till your packed out, if that works for you fine.
I explained how last year how as a contractor my wholesalers pay in full for my trucks, (no money out of my pocket)
Garth has explained many times on what to do to re mortgages.
He has also laid out simply how to get 6% on your money.
In general people who are in debt, show up for work on time every day. Are easily controlled. Its a good way to manage the masses.
Independant thinkers, people not heavily in debt,those that challange conventional processes are the ones that are dangerous to “stability”
We’re all on the same boat sure, but a lot of us have upgraded our tickets, do you want to upgrade yours?
Your last paragraph is very telling.
The comments and info here could really help you.
Don’t be like Walter Mitty.
You renew your term. The bank doesn’t care about your negative equity. They care even less if you are CMHC insured.
A reasonably intelligent person can figure out that the bank would do the homeowner a favor if it were to foreclose on a negative equity property, which is precisely why it would not do it.
And actually, you do not ‘renew your mortgage’ unless you move to a different lender. You renew your term which is different.
Btw garth my local coles book store has only 5 money road copies ordered … in on monday . Alas not signed … on the other hand your ego gets stroked enough and think of the money I’ll have saved … It’s been a hard slog for us . Raising kids when no one else were having any . No hippying around for us . Helping our parents . when it should have been the other way around . When you get frugal it’s hard to stop . All things come to those who wait.
HI Garth,
You say that we shouldn’t have more than half of our net worth tied up in real estate. My partner and i have those gold plated pension plans that make anyone who doesn’t have them seeing red (and calling us govt workers parasites or worse). So how do i figure out what those pensions are worth so that I can make that net worth calculation? I have been tracking the numbers for our real estate holdings but the pension variable is missing. THanks.
You are gambling if you do not commute. — Garth
At the risk of fanning the flames of Nosty jr v. the blog
dogs, I pulled this off wiki:
http://en.wikipedia.org/wiki/Global_city
If you scroll down you’ll find the “rankings” of alpha/beta/gamma for various cities which represent their influence on the world stage socio /economic/
culturally. Obviously you get New York, London as Alpha++. Toronto comes in as Alpha, Montreal as beta-, Vancouver as gamma+.
Van/Hongcouver as gamma+??
A little more scrolling and you find Vancouver has the 6th highest percentage of foreign-born residents of major cities in the world. Toronto is 4th! The referenced study therefore ranks both as Alpha cities on the immigration index.
So everybody has some ammo:
1) Nosty jr – a world Alpha city!
2) Ontario – a higher ranked Alpha City
3) Blog dogs – Dubai, LA, Miami also ranked Alpha for
immigration (and looked what happened there!)
Calgary – you’re gamma minus – you must try harder.
#22 James in Ottawa …
Why are you scaring us? We won’t be able to sleep nights knowing the extent of disfunction raging in the land.
Please consider:
1. Never take advice from your Dog. He doesn’t know what he’s talking about. Talking dogs are known to play mindgames and will speak to anyone who will listen to them. Next time he explains something to you
ask yourself … “Is he serious here – or is he fooling me again so I’ll give him a treat?”.
2. Never poste your dog’s “stuff” on a blog as if it was your own. If you do you are:
a) cheating
b) taking a chance that your dog could read it and
get pissed off and stop talking to you.
c) alienating your audience – they always know
when someone is stealing “stuff” from their dog.
2. A dog and a people are not the same. A car and a people are not the same either. A house and a car … well … awww forget it.
3. Yes you can get your toes into the fingers of your gloves. Yes its OK to wear them that way around the house. No its not a good idea to go outside wearing them that way.
4. Yes that boat did disappear way out there where the sky meets the sea. No it didn’t fall off.
5. Yes most people you know do think just the way you do. That’s why they are also there in the institution. Now … a car and a house are … ummm … let’s talk abut this one later – OK?
6. Homer Simpson isn’t a real person. I know!!!! It really is hard to tell. Apparently none of those characters are.
6 Noah had 2 dogs to talk to. He didn’t have a house and a car on the ARK. Some people think this is because they are different and also because they don’t come in boy and girl kinds. But we know differently don’t we?
7. You have scared the absolute hell out of me !!! Up until now I had hoped that the financially self destructive behaviour that is plaguing our economy somehow might have a chance of reversing before it reached worst case proportions. Your little assembly of paragraphs has given me even greater fears that they have actually thought it through … and they are doing it on purpose.
8. It really is worse than anyone can imagine.
#45 Michael…
Seems obvious to many….Ottawa will kill Ontario’s manufacturing industry the most, if and when it ever raises % rates….and Ontario is where Canada’s largest population lives.
…The world needs Canada’s oil, food, timber and other commodities, but it doesn’t need Ontario’s manufactured goods…Asia wins on that one.
Canada must be prepared to close it trading doors for long term protection of Ontario’s manufacturing economy.
Nostradamus jr.
Are you a bot? — Garth
Two Words: Greek Bonds.
Watch what is happening in PIIG Countries, after Germany said ‘nien’ to bailing out crazed Greek Property speculators, nor any other Southern European Country.
Greek Bonds went up .40 bp’s in the day, on Friday and ended at a stratospheric 7.4% on the Ten year.
The word is that Greece is du jour Bankrupt and so is Portugal, Italy, Estonia,Iceland, Ireland, Latvia and Ukraine.
France and England are in terrible shape and Japan, the world’s second or third largest economy is about to get it’s debt downgraded.
The USA? Don’t buy that 5.7% GDP growth BUNK. It was on the back of nearly a two TRILLION in stimulus, and most of that number has been ‘blended’. That is economist for “twitter droppings”. The USA has no choice. Default or PRINT. That’s it.
If you don’t listen to what Mr. Turner and some of the bright lights here are saying, you are going to wind up on the street, wondering what kind of Freightliner just ran over you.
It won’t happen overnight – but when Bill Gross of Pimco, the World’s largest Bond Dealer says that “British Gilts are laying on a bed of nitroglycerine….” – you can bet your bottom pfennig that rates are going up, folks.
Not just up. I mean Volcker time. Not this month, but by 18 months into the new wave of US and Japanese defaults, we will see double digit interest rates and it will be a catastrophe for all the poor saps that thought the guy at Ditech.com was right.
Take a look at the number of people in your Grocery store lineup that pay with a Credit card. It used to be illegal to use a credit card to buy food.
Now, as one of the blog dogs pointed out – people are eating their equity.
Literally.
I can’t seem to get many of my friends to listen, and so I have given up and I never talk about Real Estate or the economy in social situations anymore.
Back to the Hockey scores.
re: #53 Gee, those 2 masters degrees aren’t serving me well right now…Garth, what do you mean by your comment: “You are gambling if you do not commute”??
If you truly believe public sector pensions will be in place in 15 years, while 85% of the population have none, I have some micro-lofts in Vancouver to sell you. A wise person would commute the value, and damn quick. — Garth
Mr. Turner feels we are in for a bout of (stag) inflation as a result of this round of government spending. I am not so optimistic. Most of our manufacturing is now in the Orient, so how much long term demand is created by Canadians spending on foreign goods?
As to Keynesian economic policies: What great public works that will create wealth in the future have been put in place as a result of all this government spending and debt? Are there any new hydro-dams or rail lines in place? Or has most of it gone into putting granite counter tops into suburban boxes and new pavement on beat up roads?
If this is not funny enough for you.
http://www.edmontonjournal.com/business/fp/money/Beware+year+TFSA+investments/2473824/story.html
then go to peopleofwalmart.com
#8 – OMG – I recall in the 80’s my sis and I bought a townhouse condo.. Assumed the mtg for 14% with 6 + or more to go. Talk was then, IIRC, it would go down. Time came we had to renew. It went to 19+. We renewed for 6 mos, IIRC and then it finally came down. We managed, but then got hit with a special assessment. All the roofs had to be replaced. We had a 3 story, 18 ft. condo and got hit with a special assessment of $2,500. It was a lot back then.
We are in the midst of doing some absolutely necessary renos. In the mist of it we have discovered carpenter ants have totally destroyed a window in the basement. We suspect they’ve also destroyed others. The house is 30+ YO. So now we’re facing replacing most of the windows as well as siding. We had hoped to use these $$$ to increase our investments. I am now wondering whether it might be worthwhile to take out a HELOC rather than paying for the reno in cash. I haven’t looked into what a HELOC loan costs vs potential investment gains. BTW, our home has been paid off and we have no debts. Appreciate comments.
Is that for Real???
Japan’s population is DECREASING! All while the average age is getting older. Any amount of stimulus won’t do anything to RE. Demand is not there. Speculators are absent because of this.
Canada’s population is INCREASING! There are going to be more people below 65 added to the Canadian population (Immigration and Births) each year than turn 65 each subsequent year for the foreseeable future. Demand is there in the major centres (Vancouver, Calgary-Edmonton Corridor, GTA, Greater Montreal, and Ottawa to a lesser extent). Other areas are doomed because of speculation and no true demand.
US: Speculators drove up some areas and they have fallen hard. No true demand there. However, check out neighbourhoods in San Diego (Coronado), Los Angeles (Malibu, Santa Monica, Venice, etc.), New York, Washington… Where demand is there, prices DID NOT correct.
Canada’s media age is 39, and in Japan it is 44. Our population is growing by 0.8% and Japan’s is decreasing by 0.19%. Hardly a massive difference. BTW, Canada has a significantly aging population and people over 65 will double as a proportion of the population by 2025. Ever heard of Google, son? — Garth
Garth – re: Outtahere. What do you know about public sector pensions that we dont? Are you saying they wont survive? Can you explain how they are invested and
administered?
I’m merely saying that in 15 years there could be unbearable political pressure amid a mounting debt and retirement crisis. The last thing I would do is leave a commutable pension in the hands of the administrator. — Garth
Too many people still think that national governments of sovereign nations are at the top of the chain of command for their respective countries. And they think that their welfare is a top priority to those they voted in, particularly when it comes to being helped to continue to go into debt. There’s also this misconception that “they won’t or can’t do this because this or that will happen”, particularly when it comes to dollars because that is what the entire human race is about…jockeying, maneuvering, labouring, trading, skimming etc all to either scrape a living, or to feed and endless list of wants.
But, there’s another “reality” behind the curtain and the ones pulling the strings of governments worldwide view us as we view cattle. For a while we let the cattle eat and roam within a fenced pasture, and then…..
We’ve have our use as the middle class to create the technology for those in power to watch us, to know everything about us, and are now beginning to put the squeeze on our liberties and wealth in earnest.
With the rampant conditioning and programming that causes herding behaviour going on, being contrarian is wise for more than just money matters, but it is still “thinking within the box”. It would be interesting to hear from some sharp minds how the planet would be run, what our quality of life would be, and who would benefit most if the global financial crisis is indeed being deliberately orchestrated. Even that assumption is not completely thinking out of the box, but it’s a start.
You are gambling if you do not commute. — Garth
Garth, I’one who has one of those prov. Gold plated pensions. My husband, who works for a municpality, rec’d 1% increase as he’s not unionized. The unionized people rec’d 2.5 or so%.
There are lots of govt. workers and I wonder if a govt., prov. or federal, really started to reduce/dismantle those currently receiving a pension would survive an election. IMHO, more should be done to ensure ‘all’ Canadians receive an adequate pension. And, that begins with ‘Nortel’ type of workers be among those that receive the first dibs. Sorry, I can’t recall the correct word.
You are gambling if you do not commute. — Garth
For those who are financially naive Garth, can you please explain exactly what you mean by ‘commute’. I think I understand, but I’d like your explanation. TIA.
Instead of leaving the pension assets in the hands of the plan administrator, you take them in a one-time, lump-sum payment and invest the money yourself (with a professional’s help). You would do this to (a) possibly garner a better rate of return, and an increased income and (b) to control the assets yourself, to prevent a ‘Nortel’ or a political surprise down the road. — Garth
#37 nostradamus jr. on 01.30.10 at 10:35 am
…Hongcouver is “different”…regardless whether we get overun by world visitors or instead a virtual Olympics…its win/win… cold or it’s second earliest spring in the > 20 years I’ve lived here. – nostradamus jr
I don’t believe you have really yet thought this through…
What makes you think that China/HongKong/Asia has an invincible economy that is willing to pursue continued unprecidented credit expansion to drive its the economy the last couple years the way it has? People talk about Chindia being the next superpowers but ignore the simplistic fact that China has already grown so far and fast that it will have its growing pains? Should China experience any kind of economic stall (and it will), what in the world makes you think Hongcouver, blessed by asian prosperity as it has been, won’t be effected by an international led asian wealth extraction should a Chinese economic stall or downturn occur?
Sure, money has come in from China/immigration policies boosting RE values in Vancouver in a big way… what in the world do you think is going to happen to a seriously overvalued Hongcouver RE market if Asia begins to pull money out of Canada due to an economic stall of their own regardless of the impact of domestic rates here? Just the idea of Chinese banking restraints has shed 900 points from the markets over the last couple weeks and I can see the TSX falling easily below 10000 if there’s fire behind the smoke.
Readers, pay serious attention to whats coming out of China with everything they are doing, from stockpiling base metals to unsustainable levels of credit expansion. This is a nation that is in competition with the rest of the world to the point where it will hurt its own importers (customers) to make a buck which always costs you in the long run and while I’m actually impressed with the way the Chinese government has handled things so far in China (I have a serious appreciation for competitive spirit), they have a whole other world of problems surfacing as they become the #1 manufacturing superpower in the world. China’s problems/solutions/failures will be the same as historical manufacturing expansions other empires have taken on over time, only evolve much faster. Environmental degradation, human rights, wealth disparity, a looming reliance on imported energy and resources and yes, overvalued assets caused from governments bending over to banks just as the Harper/Bush governments have done for personal gain… (is there a reader who would disagree with the simplistic fact that too much bank ownership of a nation’s people/assets is an incredibly bad thing? Holy smokes folks, its capitalism’s ugly evil twin to communism, too much debt imprisoning human freedoms… consumers need to have voters/readers learned nothing?)
This is the great challenge China faces today. There are growth limits and the biggest challenge China now faces in the immediate is the economic woes of its importers forcing China to scale back. Governments there are curbing back bank lending because they know the inherent risks to over developing manufacturing capacity and the ugly dangers of rapid asset inflation caused by ease of credit. They have to know and if they’ve gone too far with overdevelopment/asset inflation already, the only thing that can truly save them through the midterm is if China becomes the next #1 import nation through a big pop in their currency which I predict will happen within 20 years. (y’all want a currency play, there it is… but it won’t be in any time real soon)
Readers, some of you like Nos jr simply haven’t thought this through. And the timelines of China’s growth spurts and pains isn’t an easy one to map out… but my own investors hunch is that China isn’t as super invincible to economic downturns as we all think. Their exports took a big hit last year and credit expansion can buffer this downturn but not for years on end.
Should China experience such an economic downturn, however minimal, it has the potential to devastate Hongcouver (a 20% plus haircut all on its own, I think) as you call it, as surely as a big pop in interest rates would do so here in Canada. I’m predicting (cause I like to do that sometimes, offer opinion, predict) both within the next 2 years and if I was a betting man, later this year. It would be good for the U.S. dollar in the immediate opening the door to rising interest rates in Canada and well… (cause lets face it, our fed rates are ultra low because we have a high flying loonie currency crisis on our hands) and y’all know the rest once that happens with RE bubbles when this happens… it’ll suck to own a home as an investment, thems the breaks. Can’t help but say it, shorting Hongcouver is a smart play.
Rec’d. “Money Road” Friday. Got a few pages into it and went looking for an old book I picked up at a garage sale for 50 cents back in ~1990. The book is “Contrary Investing” by Richard E. Band published in 1985 – notably before Oct. ‘87 – the general similarities in philosophy – for want of a better term -are interesting.
“If you want to make money -big money-do what nobody else is doing”
“Contrary thinking works in any market because human nature is the same everywhere. Most people are followers,not leaders.”
Sounds kinda familiar.
Easy to say – damned hard to do.
A real reminder of how much easier information and opinion are now available with the net.
Garth, you look much better calling for $2000 gold rather than $500.
Spring is in the air…
I checked a bookstore in Edmonton for your new book. SOLD OUT.
Disappointed.
Order one here and get a $2,500 autograph free! — Garth
Addendum to previous:
Mr. Band,no doubt,in a humorous mood,had the following to say re: real estate tops and bottoms:
You can tell Market Bottom
“Uncommonly courteous real estate brokers.”
You can tell Market Top
“Rude,hard-nosed brokers.
A favourite broker’s line at the top of the Market is: “If you don’t buy now,you’ll never be able to afford a home again.”….. The universal hard sell will tip you off that the market is about to go bust…..”
“I’m merely saying that in 15 years there could be unbearable political pressure amid a mounting debt and retirement crisis. The last thing I would do is leave a commutable pension in the hands of the administrator. — Garth”
Interesting, I had no idea you could commute a pension (in fact, up until a minute ago I thought commute meant to drive to work).
I can see that public pensions may be abolished in the future, but do you think that would put their existing contributions at risk? My pension is pretty sweet (1:2.5 contribution ratio for me:employer) so I figure it would be stupid not to take advantage of it.
“Canada’s media age is 39, and in Japan it is 44. Our population is growing by 0.8% and Japan’s is decreasing by 0.19%.”
According to Google, Japan’s population is still increasing, at least until 2008 where the data ends. http://www.google.com/publicdata?ds=wb-wdi&met=sp_pop_totl&idim=country:JPN&dl=en&hl=en&q=japan+population
I just got my tax assesment. Its up by 21% over last year. This is hell of a way for the governments to engineer another tax grab eh?
Don’t tell me that the BOC and Flaherty don’t know exactly whats going on here.
I had several ‘New Canadian’ neighbours who are mortgaged to the hilt after of buying at the very top of the market (Vanc) who have asked me to help them appeal the assesments.
I suspect that the reason is not because of the increased ‘value’ but they are now facing additional expenditures that they hadn’t calculated into thier monthly budgets.
Many of these people have no obvious source of income, so where does the money come from? I don’t ask. Nor do a majority speak a word of English or work.
But it is becoming obvious they are not paying cash and are only ‘in the game’ on spec, with huge mortgages that eat thier lunches for them every day and its getting uncomfortable to be so hungry.
As an ex-analyst I know how the appraisal process works and I know I would be wasting my time appealing the assessments. The very people who are crying about the increase in taxes are the same people who had a part in generating the statistics for the appraiser in the first place.
I suspect they have only purchased these properties because of the free money offered to people with no credit record and no job to wait for a big payoff before selling. If I am right the bubble is about to burst based on unaffordable costs of ownership finally becoming a factor for the many who have ‘no skin in the game’.
Re: public pensions
I got a red flag in the mail this week – the Ontario Pension Board notified us that the pension buyback (to increase your pension – at a cost) rules had changed. They are now allowing people to purchase credits for a) non-public service work years and b) work prior to the usual 24 month window. I thought to myself – crap, are they running low already?
It is interesting to note that the pamphlet is 6 pages and has the word ‘estimate’ or a derivative thereof printed no less than 72 times – including two separate warnings that the calculations are estimates, do not reflect your actual benefits and are not binding on the OPB.
Keep in mind the Ontario government is still in the first year of a 3 year plan to reduce the number of civil servants by 5% (about 3400 jobs at full time status – probably affecting about 5000 workers). They hoped to achieve this primarily through attrition but since I think that is a lofty goal, you can bet more organized methods will be used eventually. By the time the mass retirements happen, we’ll have far less workers paying into the system.
The OPS reduction numbers can be found here – search on the word ‘attrition’ to find that section of the document.
http://tinyurl.com/yjjc43n
#64 Live within – Though I have been wrong before, I was under the impression that Public Pension Boards were ‘accountable to’ the government but not directed by them. They are equally accountable to beneficiaries so I don’t see what difference a collapsed fund would make to the party in power at the time of collapse. Vote any which way you want, if the money’s gone – nothing is going to bring it back. How exactly will a bankrupt government be able to prop up pensions of one of the largest employers in the province. Tax me now AND tax me later?
This is seemingly just another ponzi legacy that my fellow GenXers and the Yers have the privilege to inherit.
I truly enjoyed the past succinct, one word posts submitted by Nostradeletus Jr.
Soon to be revisited. — Garth
JOBS JOBS JOBS song is starting to get sung
stagnant deflation with recession, leading to a state in which the economy stalls and unemployment rises
The public sector pension in BC is not commutable after a certain period of time and employee contributions are mandatory. luckily the investment managers are outstanding, but unless you are in the upper echelons of the income bracket it still does not amount to very much and one should not depend on a pension as their total source of income in retirement. I think one of the first things to be clawed back again will be the medical benefits – the premiums are being hiked 6% annually hereafter due to rising health care costs, increase in number of retired members, etc.
and as I mentioned before, no index raise this year, although CPP managed an increase.
“It is notable that the record construction period continued for two years after the Depression had begun”
http://www.nytimes.com/2010/01/29/business/29norris.html
#60 Live Within Your Means
Don’t blame this on ants and poison yourself with pesticides. The ants live in rotten wood. They don’t rot it. You have a moisture problem not an ant problem.
Learn how to fix this yourself and pay down your debt with the money you save.
“. . . why can’t we? . . . we are.”
Is Kannaduh moving along at a snail’s pace or going with the flow, rushing with the masses of rodents over a cliff’s edge? Not too hard to see!
——
#66 Daystar — “China experience such an economic downturn . . .”
Hi Daystar. May go with the link I put up a day or two ago (after Bernanke had been reappointed), about China pulling the plug on the greenback (also there are some hidden Chinese military in the US at present, but the m$m [as usual] doesn’t talk of those things).
Little Timmy (Geithner) doesn’t have a clue, only there to be a m$m ‘yes man’, then discarded when everything happens in synchronicity and we are all dancing on the Titanic.
There’s a helluva lot of garbage to sort through, almost as if someone has turned a garbage can upside down, and what we’re seeing now is only our part of it. For instance — China
I forgot to mention yesterday that now Harper has the senate covered, when he gets a majority in Parliament he will pass all kinds of laws in accordance with someone else’s wishes (the elite).
——
#13 Nelson on 01.30.10 at 1:06 am — “. . . it’s in the US government’s best interest right now to spawn or permit another panic-inducing crash in equities . . .”
Well lookkee here — wot’s it like to be audited? Further links within. / Could all of this fiscal barf be linked together, in one way or another? / Plus others. / AIG
Update from Vancouver
Witnessed, Saturday afternoon:
More OPEN HOUSE signs than I’ve seen in many moons.
Garth, are you of the view that Vancouver is starting to tilt?
“You are gambling if you do not commute. — Garth
For those who are financially naive Garth, can you please explain exactly what you mean by ‘commute’. I think I understand, but I’d like your explanation. TIA.
Instead of leaving the pension assets in the hands of the plan administrator, you take them in a one-time, lump-sum payment and invest the money yourself (with a professional’s help). You would do this to (a) possibly garner a better rate of return, and an increased income and (b) to control the assets yourself, to prevent a ‘Nortel’ or a political surprise down the road. — Garth”
Most municipal pension funds in Alberta are not commutable after you have been on permanent for more than a year.
CalgaryRocks quoted me,
Not all US mortgages are a fixed interest rate for the duration of the mortgage. What happens when a “homeowner” with negative equity has to renew their mortgage at the end of a five-year term?
And then CalgaryRocks replied:
“You renew your term. The bank doesn’t care about your negative equity. They care even less if you are CMHC insured.”
Are you sure of this? I thought that banks had LTV ratio limits that restricted the amount that they could loan, based on the appraised value of the property. I also wasn’t aware that CMHC was insuring US mortgages.
“A reasonably intelligent person can figure out that the bank would do the homeowner a favor if it were to foreclose on a negative equity property, which is precisely why it would not do it.”
Why would a bank not foreclose on a negative-equity mortgage in a recourse State? (Or a recourse Province?)
“And actually, you do not ‘renew your mortgage’ unless you move to a different lender. You renew your term which is different.”
Can you provide a link? This is not my interpretation of the ING information that I’ve been reviewing.
nostrodamas mad vlad said:
“I forgot to mention yesterday that now Harper has the senate covered, when he gets a majority in Parliament he will pass all kinds of laws in accordance with someone else’s wishes (the elite).”
you paint a picture of a truly hellish future. personally,
I think Canada would be better governed by Mel Gibson smashed on tequila
garth, if interest rates are going up sooner then later that means the housing market will boom more becasue people will panic and want to buy before the rates go to high?
Shane
Silly them. — Garth
#84 Don’t just stand there, buy something. — “. . . would be better governed by Mel Gibson smashed on tequila” — Agreed. Check the clip.
Seems the Mayans may have been accurate re: 2012.
With the US and others now fiscally broke, we may as well sit back, crack open a cold one then move back into the other worlds (the other side)! 4:18 clip.
——
Maybe this is why Hillary is screeching like a cat so
loudly.
Since war with Iran (when it breaks out, not if) will likely mean war with Russia and China, Hillary is pissing China off now, but if a fake war (recall “Wag The Dog”?) with Taiwan keeps China from intervening in Iran, the WH is sadly mistaken — Iran 1 / Iran 2
Figure out which country, more than any other, wants Iran taken out and therein lies the answer to the military build-up worldwide.
——
The stuff broken legends are made of.
#81 Not Garth,
I think Vancouver is starting to tilt. It is still too early to really tell because January is traditionally a slow month and the Olympics may have unexpected effects such as getting more people to list and less people motivated. Who knows?
More importantly the impact of the lowering of interest rates appears to have leveled off. Originally the lowering of interest rates favoured buyers but prices rose so now it is pretty much even. We are now back to the peak in 2008 on an affordability basis and probaby beyond. I think the market will gradually begin to fall now regardless of what the gov’t does.
I took a quick look at the new real estate pricing for houses in Ottawa last night. The realtors have priced up houses by 5 percent for the new year. It does seem that real estate will have another price increase in the first 6 months of this year prior to settling down.
Also, as one of the bloggers stipulated earlier with respect to his Alberta pension being non-commutable, the same fact applies to Federal Government pensions. After two years of service, they are locked in. Barring quitting, there is no way you can take your money out. And in respect to public pensions being tampered with due to unbearable political pressure, I can’t see that happening either. People signed contracts stipulating what the value of their pensions will be after 35 years of service. A politician can’t just unilaterally take that away because other people who don’t have one are upset about it. That’s why we have a justice system in place that honors legal contracts signed by both parties.
#62 Our population is growing by 0.8% and Japan’s is decreasing by 0.19%. Hardly a massive difference. BTW, Canada has a significantly aging population and people over 65 will double as a proportion of the population by 2025. Ever heard of Google, son? — Garth
Actually Garth, the info on statscan website for last year state that the population grew by approx 433,000 last year in our country (1.31%). Here is a link
http://www40.statcan.gc.ca/l01/cst01/demo33a-eng.htm
Plus, if you extrapolate for this year (quarterly numbers times 4, the population will grow 1.60% for Canada. In BC, 2.24%. Link:
http://www.statcan.gc.ca/daily-quotidien/091223/dq091223b-eng.htm
What do you think the growth rate in Greater Vancouver will be since most of bc’s new people settle in greater Vancouver? This folks is where the demand comes from…POPULATION GROWTH!
Please get your facts straight before you post them. You have loyal followers who live by your word. Some responsibility sir is due. And please don’t call me son.
And blog dogs, if you want lower prices for real estate, look at the population numbers for your own sake.
o snail,
climb mt fuji,
but slowly, slowly.
-issa
grandpa Garth in action (at The Money and Wealth Show):
http://www.youtube.com/watch?v=3IqCT_NzRn4
http://www.youtube.com/watch?v=YLe33nbkPwc
http://www.youtube.com/watch?v=mReAG6XfiCc
#77 Beauty in lala — good call on several points. Some have already had their medical benefits canceled.
And I agree that no one should count on these pensions alone for retirement income. Who knows what they’ll actually be worth in real terms decades hence?
I know some people who proudly spend every penny they make, expecting their house and their pension to pay for their retirement. I have tried to suggest otherwise, but the response is invariably blank incomprehension.
Ugh. Back to the long forgotten Xurbia world of independence from the grid….
Today our septic system backed up so I had to call out a vacuum truck. You know how hard that is to do on a Saturday? Well, harder than one would think, but I got it done and the fellow was very helpful, good service, although the price was not cheap, he didn’t ask for pirate rates like some of the guys I phoned did. Just a regular overtime hourly rate.
But it got me thinking: How independent from the grid can you really be? Even if you have totally independent water and sewer, heck even power, you still need to have a friend with a pretty impressive vacuum truck on speed dial. For those who haven’t had their sewer pumped before, well, good for you it’s quite the process. I don’t know what that truck was worth but it has to be well more than an average single family home, with all sorts of industry behind it that must be functioning. Plus, when he was done, his next port of call was going to be the city waste water facility because that’s the only place he can unload. (The city charges a hefty fee for this service it turns out.)
So to be independent, you still need your friend with the vacuum truck and you still need the city taking waste. Long and short, we must save the grid. The alternative is back to outhouses, that you have to dig yourself. Solar LED light illuminated outhouses made from recycled materials, sure, but outhouses none the less.
Plus he told me a funny story as the truck was doing its’ thing. He answered a call near by on Christmas Eve one year. The tank was flooded, like mine, but when they opened it up there were an impressive number of condoms floating around. Funny, because the owner, looking down at this spectacle, commented that he was seldom home (worked away) and usually it was just his wife and 16 year old daughter in the house. Yikes! That’s the sort of funny I hope doesn’t happen to me.
People don’t think about it but everything ends up in the tank. My own tank had a big rock, a piece of 1×8, and a mat of rags. That he got stuck on. Who knows what other yuck is down there. Ick.
But, my point to this wandering post: We must save the grid. All of it. The alternative is not acceptable.
Oh, I was going to post another thought as well, on the housing market.
As Garth has pointed out (and me too! I think I was first) the government is terrified of a housing price collapse (it’s only price, the houses will all still be there and occupied by somebody within a while) because of the potential affect on the banks.
But I am going to stick with Bill Bonner’s maxim: Any problem the government attempts to solve they only make worse.
You have to subscribe to the Daily Reckoning (it’s free) to get the whole thrust behind the idea and either read a lot of back posts or wait because it’s a recurring theme, but he has a well thought out critique and lots of anecdotal evidence to support the thesis.
So, our government has pulled out all the stops to levitate housing prices and save the banking system in advance (and CMHC), and they have succeeded. They have also created the most extreme housing bubble in the world given price to income ratios. It can only mean that Garth is way, way, and a third way to conservative in his estimate of how the eventual crash (in prices, the houses will still be there occupied by somebody) will be. He’s gone mainstream with his new book, trying to help people plan the road ahead. He needs to not seem a kook. Understandable, he’s already dealt with housing and all those “who have an ear” have already heard. No use flogging that horse anymore.
But the biggest bubble in the world must lead to the biggest crash in the world. It won’t be pretty. All that we don’t know is when. These things can take a while, especially when your own government is conspiring against you. (Yes, high house prices are a conspiracy against the masses. It only benefits the banks.)
You all know I did not coin this one: “The higher they fly, the harder they fall.”
But I would add, not until their wings melt.
155-beauty in lala land
187-bottoms up from the last post
cpi—-there was no cost of living increase for this year because the cpi was -0.9 per cent (thats negative -0.9%) you typed it correctly but didn’t read it right
the cost of living increase payable in january matches the CPI as calculated from sept to sept
i believe with your gov’t plan the cost of living increase is not guaranteed. it is paid from a seperate account and depends how much is in that account and of course the increase in the CPI
in 1981or 82 the CPI hit 12%??? i think—whether it was paid to retirees or not, i don’t know—if and when it hits that level again, you can bet you won’t get it!!!
#8 omg
RE: Stagflation of the 1970’s?
There was no stagflation during the 1970’s it was an inflationary period of time in the true sense of the word. Everyone certainly remembers the spike in the price of sugar back then.
Stagflation means rising prices in a time of no growth. — Garth
#42 Keith in Calgary
said “…as many a public sector employees are of the ‘I got me the fat paycheque for life, screw the taxpayer, let’s go spend’ union mentality…” and “…after all, gotta assume some of these folks have functioning grey matter and as CAAMP tells us they do…”
Don’t you mean “…as many a PRIVATE SECTOR CONTRACT BUSINESSPERSON WITH A CRIMINALLY FAT GOVERNMENT CONTRACT are of the ‘I got me a fat government contract, screw the taxpayer, I’m gonna charge the taxpayer $5 for a box of kleenex in hospitals, let’s go spend in the bahamas” mentality?
I would rather see unionized government workers with at least some transparent negotiations and contracts, making good money and plowing that money back directly into the local economies – to the homebuilders, the tradespeople, the car dealerships, and all the retail – rather than trust government work to some privateer who rolls in after greasing some politician’s campaign, getting a fat contract and come in, overcharge the taxpayer for everything, pay their people next to nothing for the local economy, and take off with the big bucks.
Come on – honestly. Do you really believe that the private sector is oh-so angelic that if trusted with the public purse they wouldn’t rip everyone off to high heaven. You already see how these slippery contracts work with politicians and privateers working hand in hand to benefit each other (ever heard of E-Health, or the nice ‘honest’ private retailers in the OLG scams?).
Sure the private sector CAN do things very efficiently. But WILL they? Sure they’ll slash wages and employee costs. But will they really, willingly, take less in total from the taxpayers for their services? Get real. Politicians and privateers teaming up to spend the taxpayers money – only spells trouble.
From corporations like Rogers and Bell, to my local auto mechanics – privateers are, at the very least, no less pragmatic, and at times slimy, than as you claim government employees are, when it comes to making the most for themselves. The government staff, welfare, unions – easy targets for simple minds.
“Instead of leaving the pension assets in the hands of the plan administrator, you take them in a one-time, lump-sum payment (…). — Garth”
Not for Qc province employees ( gov’t adm, health, schools) unless you leave. Currents negos will see wage increase but steady chipping away everything else. For many yrs now, group health insurance is basically 95% paid by employees, despite peoples perception. Littles things this time. 2015 negos will be about pension plan.
#96 Tony on 01.31.10 at 4:37 am
#8 omg
RE: Stagflation of the 1970’s?
There was no stagflation during the 1970’s it was an inflationary period of time in the true sense of the word. Everyone certainly remembers the spike in the price of sugar back then
*******************************************
There was something else happening in the 70’s that caused prices to rise–
That being there was a run on the USD–
1971–Nixon cut gold loose–why?
Because Gold,under the “world gold agreement” was forcing deflation on the US–
The US was definitely inflating (printing/devaluing) in order to pay war costs for Viet Nam–
Lenders–most notably France and GB were fed up with lending and being paid in a depreciating currency/USD–
So they had the right to demand payment in gold and they did–
This made the USD defunct as a currency of final payment-as far as foreign lenders were concerned,which also made gold,the only money supply of final payment–
The US was being forced–to ship out their money supply,which is genuine–deflation–
So Nixon/Volcker severed the link–and made the USD the “only” form of payment–
Severing the link weakened the dollar and caused a run (dumping) it showed up in the form of higher commodity prices–
Foreign dollar holders buying anything tangible,before the dollar devalued more,driving prices of commodities up–
Gold (real money) started rising=money was becoming expensive–
Gold went into a mania–from $35 to $887–
Enter Paul Volcker–
Raised interest rates to +20%–
Of course this made the $ attractive to hold again,and also loosened up foreign purse strings–
The $ strengthened–money came back out of commodities and back into the USD–
Prices came back in line–Gold crashed–
That–imo–is what happened–
Volcker/Nixon–stopped a deflationary spiral and a anti dollar sell off–in the US,by cutting out Gold and allowing the US to print with a high rate of return–
Volcker today is known for halting inflation–
Inflation defined as high prices–which is wrong–but it did bring prices down–
Volcker saved the USD from collapse and the anger of US citizens who only understood high prices–
So–here we are 40 years later and deflation is staring us in the face again–
Had the US taken its lumps back then,we wouldn’t be where we are today–
You see–with Gold–you cannot experiment with military adventurism–
The US founding fathers knew this–
They also well understood–theft of savings by inflation–
That’s why Gold Standard–
nice deflection of all blame attempt, Nostro
You can issue your pronouncements about real estate or the economy, no one would be complaining. Thinking you are really weird, probably, but not moving them to complain. As another commenter said, repetition does not make it fact, but it must make you feel better, as you keep doing it, over and over and over.
BUT I will complain about your spiteful and insulting diatribes, and I will continue to do so. You diminish this Blog with the general tone of most of your comments. Maybe it is because you really believe the nonsense you write, or you are just a troll who wants to get others upset to get a laugh.
So far all you have accomplished is to destroy any credibility you may have had, and make the readers here think you need professional help to work out your issues.
If your interest is to promote Vancouver, you aren’t doing that city any favors either.
I am not trying to limit your free speech. Just fed up with your attitude. Just because you have the right to say almost any insulting thing you want does not mean you should. I would suggest starting your own Blog, call it the ‘North Shore Stupid Hatred & Loathing Blog’, where you could post your disturbing concepts all day, then comment on them. Good luck with that.
The rest of us would like to discuss real issues that matter to normal people in a semi-civilized manner.
Brilliant, Garth! Brilliant!
You should take a forced day off more often – a break is as good as a holiday.
Rgds
Munch
SAQ -> Societe des Alcools du Quebec
31% salary increase over the next 8 years.
http://fr.canoe.ca/infos/quebeccanada/archives/2010/01/20100126-075300.html
Tell your kids to drop out of school. Cashiers will soon make 25$/hour (vs 19$/hour currently). Quebecers are rich, rich, rich! Money is no object when the taxpayer is paying!
PS-> Alberta, send more of ‘dat’ dirty oil money. Love, The Bloc.
So many reasons. Recourse is only against the owner defaulting on it’s obligations for one. No default = no recourse. Secondly, a judge would never approve a foreclosure on LTV grounds alone.
Recourse is useless against people with no other assets, etc, etc…
Sorry to blow your bubble.
Sorry to blow yours. Recourse means a lender can pursue you legally, including your assets and your future earnings. That means garnisheeing wages, cowboy. There is no simple escape save bankruptcy. — Garth
#89 TheTruth,
Are you saying that just because people are moving to Vancouver means prices can’t possibly fall? Please, not this again! More people move to Montreal and Toronto than Vancouver and thier prices have not gone up as much.
Most people coming to Vancouver are coming from places with less expensive RE markets so they have to move down in the market. So what?
Before you say there is no land please refer to the thousands of units added in the City of Vancouver the past few decades where no new land has been made available for more than a century.
We can and do build new homes in B.C. After the Olympics there will be a huge number of available workers looking for something to do – for sure. Wages will drop and eventually the prices on new homes will help bring down prices on the existing inventory.
Yes, we need better land use policies. Yes, we have too many taxes and built in costs on land and development in B.C. and yes there is a premium for living in B.C. that people appear prepared to pay.
HOWEVER these factors do not account for the wild disparity and unaffordability of Vancouver compared to other cities in Canada and across the world.
Gee, sounds like a difficult choice between bankruptcy and having some bankster garnish your wages for the rest of your life. Keep living in Garth’s world. I deal with reality myself.
Macho. I’m so impressed. — Garth
Garth,
where are you quoting the 1/3 of the population will begin to retire / turn 65 statistic from?
thx
I did not say a third of the population, but rather that the proportion of seniors would double. “The proportion of seniors in the overall population has gone from one in twenty in 1921, to one in eight in 2001. As the “baby boomers” (born between 1946 and 1965) age, the seniors population is expected to reach 6.7 million in 2021 and 9.2 million in 2041(nearly one in four Canadians). In fact, the growth of the seniors population will account for close to half of the growth of the overall Canadian population in the next four decades.” Source. — Garth
#104 junius
Before you say there is no land please refer to the thousands of units added in the City of Vancouver the past few decades where no new land has been made available for more than a century.
_________________________________________
I’m amazed at the number of Vancouver real estate bulls who put this factor on a huge pedestal.
First of all, I’d take it more seriously if developers, not investors, chanted this mantra.
Secondly, when land that should be allocated to commercial or industrial use goes to residential construction, then average salaries, in the long term, decline. Even in the best of times, finding a permanent Vancouver-based job that pays $50,000+ per year is tough, regardless of your demographical background.
SEAN #101 .. from yesterday.
Great rant !!!
I guess you’ve looked at the wave data. Some “stuff to think on …
The “Boom” spans an entire generation which means that with the front end just barely crossing the 65yr. threshhold … there is a parade about 20 years long to watch. Actually when you look at the wave as a phenomenon one could argue that the wave itself is a 25 year phenomenon. The wave is very back end loaded so there are almost twice as many boomers in the last half of the wave than the front half. The peak is 15 to 20 years out so that’s in the 2025 to 2030ish time frame. So … the back end of the wave is just now hitting their peak earning and saving period and finishing up with the big spending years, getting the kids through post secondary, and “established” and getting into a position where historically people have been able to start putting a bit of ‘real” money aside for retirement … or … buying toys or whatever. As you likely well know most people spend at least the first 20 years of their working lives just trying to make ends meet and are lucky to be able to build much at all in the way of real savings. Actually … when you think about the boomer generated benefits … you have to think in terms of who was actually positioned to gain from the wave of “Peak” spending and growth as it has made its way through the economy etc. That peaking and maximum crest of the wave as I mentioned sits in the back half of the wave and is currently 55 and younger with an average age closer to 50.
The peak-group has never really been able to capitalize much on the wave from an investing standpoint because they’ve just not been able to get ahead of it in terms of having anything to actually invest at the time they needed it … and also because they were generally in a position to get caught ploughing money into the “hot” markets at the back end of mature trends that they themselve were boosting into froth. Unwittingly and really for not much more than a fluke of timing that group has been positioned as both the market generator and the bagholder.
Actually the group that has actually been positioned to benefit most from the boomer wave has been those say in the group of boomers say at the front (first 5 years) of the wave and perhaps those preceeding the wave by say up to 10 years. Say the ones currently aged about 60 to 75. And more so the crowd that are 65 to 75 now. In fairness … the boomers themselves have pulled through some pretty challenging times.
It seems rather a sad and haunting reality that there are always in every generation that those who are able to do relatively well are outnumbered by at least 2:1 and possibly 4:1 or more depending on how you want to define “well”. Seems to more or less be a rule of thumb that applie generally throughout the world.
Anyway … in respect of Garth’s storage capacity I’ll cut this blurb off here.
If it gives you comfort though … you might take some comfort in knowing that the “Boomers” are actually far from “leaving their shit” behind … they are actually for the most part in the midst and closer to the front end of creating it and coping with it … and with a lot of help from the folks behind them going all the way back to the 20 & 30 something 5%-downers.
Just as a final note … the notion of folks getting pissed off and leaving for better places is an interesting one. Somehow it seems a remote probability though that this is likely to be a mass movement for all practical purposes.
1. North America is very likely the last “New Wold” this planed has to offer at least in terms of virgin opportunity and geographic appeal. At this point most of the world is about as peopled-up as practicle. Actually the bubble (elephant in the room) that gets very little play … is the population bubble as we are now approaching the 7 Billion mark and adding some 70million a year to as we speak. Its likely pretty easy for an individual to pick up and head for greener pastures … but not likely that many are about to get sufficiently primed to leave a place where just by being here puts them in the top couple of percentages of the world’s population in terms of living standards and opportunity. Who knows though … things do change and change is certainly what we can continue to expect for the next couple of “boomer” decades. More times of danger/opportunity … with the latter open to those able to see it – as always.
Luck to you in your journey’s.
#97 BigAl (Original)
BigAl …you suffer from the delusion that big .gov is the ticket to prosperity for all by robbing Paul to pay Mary …what you fail to understand if the .gov is paying $5 for tissue to some scum bag privateer it is because the .gov did not do their job but does that .gov employee care…NO! …it is not their money so they don’t care …their prime purpose is to make their job/life easier (again not all .gov employees are like this, ditto for privateers)…with no skin in the game who cares what they pay or sign on the dotted line for …your finger pointing is hugely misdirected…as always IMHO.
Remember big/excessive .gov on all levels is bad for your country and only good for .gov employees. Who pays – the poor smuck, suckered, deluded, misused, and abused taxpayer?
P.S. – Who has all the power and resources to reduce a citizen to dust …that would be your Government … tread careful for what you wish.
P.S. #2 – you can always say no to Bell, Rogers or your local mechanic … trying telling your .gov to f%@# off …dare ya….IMO.
In fact, the growth of the seniors population will account for close to half of the growth of the overall Canadian population in the next four decades.” Source. — Garth
Yep, that’s what is says. Doesnt make any sense to me. I dont contribute to population growth by getting older, and as all these future seniors are already alive, and
some will die before they become seniors, they are a net drag on the population. Unless a bunch of seniors are
coming from other countries.
Greetings: Re: # 86 [Nostradamus Le Mad Vlad]
It is uncanny that you should bring up the movie “Wag the Dog”. I just watched it a day ago, and had a erie sense of de-ja vu. There is a scene where Dustin Hoffman is talking about the American President. “We should get him a peace prize” says Hoffman. Movie was done in 1997. Corporations have been “wagging” the White House, US Congress, and Ottawa since “noah was a baby” , and now they have included the US Supreme Court. Go figure!!!
Order one here and get a $2,500 autograph free! — Garth
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
You cheap slut. You told me it was worth $10,000.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Liked your comments on Check 6, one thing you might want to add to your vision is how the gov spent 1/4 of Ameriacas stimulus and that we have 1/10th their population!!!
Can you say we are more vulnerable to inflation than the Amerikans? It might be a reason that the BOC may move rates before the Americans!
Ever thought that wealthy A$ian$ from bubble real estate areas such as Hong Kong and Shanghai would find prices in Vancouver cheap and help to drive prices up more considering the low rates that have contributed to their bubble back home are here too?
If I remember correctly the Chinese gov had to move quickly to stop the banks from lending so much since in the first 22 days of the year something like half of their stimulous has been spent.( how much of that was used to purchase houses already in a bubble?) In a closed environment where their currency is held within the country this is much more inflationary!
Oh, and by the way, I really enjoyed how you related the stimulous to drugs.
#89 the truth
As replayed through out history-
A REAL SUSTAINABLE HEALTHY HOUSING MARKET NEEDS A REAL HEALTHY SUSTAINABLE ECONOMY WITH HIGH PAYING JOBS FOR THE MASSES! END OF STORY!
Maybe it would help if you didn’t try to rationalize why houses in BC will continue to sell for $1M+ and into the extended future due to investment by rich immigrants and focus to us how the MASSES will earn enough income to service their large debt ratios later.
We all know, it all boils down to masses and their money and if you can justify how BC is going to sustain large incomes over the long term, you may gain more credibility with the people that have the ability of analysis with reason.
Mortgages are a long term commitment and anything can happen over the next 5 years but one thing is for sure we are at the bottom of the interest rate curve. Later come debt service and you better have the jobs market able to service those debts made now.
James in Ottawa wrote:
“We all buy a brand new cars for $30,000…”
James – we haven’t bought brand new cars for years. We buy used ones that are a couple of years old at a good price and keep them as long as we can. Once we feel we’ll have to start putting major bucks into them, we sell them. Works for us. My husband is on his 2nd Camry and I have an Accord. His Camry doesn’t have any brake problems. Only problems I’ve had with my Accord is with the air conditioning and had to replace a battery. I drive very little. If and when I buy another it will be a smaller car as I hate large cars. We owned several Mitsubishi Colts. Loved them but couldn’t get used parts where we live. We have never taken our cars in to dealers for all those checkups. Instead, we have a reliable mechanic with whom my husband barters his knowledge/service. We spend very little on car maintenance.
#104 Junius
I hear you. One of the points I’m trying to bring across is that as time marches forward , incomes have little to do with housing prices. Wealth and where to park your money do.
Vancouver’s prices are not expensive compared to many cities in the world. Smaller cities such as Ludhiana and Jallandher have higher land prices within the city than Vancouver. The going wage for labour for a 10 hour day is about $5 per day. The income to price ratio is off the charts and has been going in that direction for a while.
Don’t compare Vancouver to a select few cities like the Demographia survey does. There are many smaller cities in the world where the pay is less and land is more expensive.
The only reason I could think for this is people believe that land is intergenerational. By aquiring it, you aquire it for future generations. It will always be there…intergenerational family wealth. Now what an advantage for the children as they go through life with this land.
Another little tidbit:
In Northern farmland areas of India, an acre of good farmland leased out provides a return of 1-2%. Yet you can sell the acre and deposit the money in a bank and earn 5 times more interest.
Majority of people don’t sell. Why?? I suppose that the land will always be there and will provide a return on investment for hundreds of years as it has for the last few centuries.
Vancouver market looks rational when compared to the farmland market in The plains of northern India.
#79 Rural Rick on 01.30.10 at 7:29 pm
#60 Live Within Your Means
Don’t blame this on ants and poison yourself with pesticides. The ants live in rotten wood. They don’t rot it. You have a moisture problem not an ant problem.
Learn how to fix this yourself and pay down your debt with the money you save.
Rural Rick – We are not allowed to use Pesticides where we live. We live on the east coast and I do realize we have a moisture problem. All of our windows, except the kitchen & patio doors (German technology) are wood. We live in a split entry. We need to replace them with plastic (?) ones and will likely have to replace the framing, etc. with wood that is impervious to ants. Downstairs there are 8 windows to replace. In addition, the windows on the main level need to be replaced. Two in the back are old sliders (most innefficient – heat wise) & have another 2 and a very large picture window that have to be replaced. Years ago my husband put in an air/heat exchanger. Before that on a cold winter’s morning water would sit on the window sills. I used to put old towels each morning to soak up the water. I’ve done lots of research on one of the fed govt websites re windows. I’d love to replace all the remaining windows withe the German technology ones (actually made in our prov.) but we can’t afford them.
You said “and pay down your debt with the money you save.”
We don’t have any debt. It’s just that I’m wondering whether we should pay cash for these windows or take out a HELOC loan. I have no idea what a HELOC rate would be vs what we could gain by taking those $$$ and investing in some of the type of bonds that Garth suggests in his book. Sorry if I’m not making myself clear.
Are we being tricked…again?
Government spending is what governments do to get the economy moving again. So why is Obama announcing a spending freeze, yet continuing to push for of a second stimulus at the same time?
Isn’t that an oxymoron of a plan?
It is. But it’s not what you think.
The Fed has already announced that we are out of a recession. Last quarter, GDP growth in the US hit 5.7 – the highest ever in the last six years! Everything is going great right? Wrong.
Official unemployment continues to remain above 10%, with the real unemployment rate at over 20%.
That’s a staggering 1 out of 5 Americans who are jobless!
http://campaign.constantcontact.com/render?v=001yqHNAgdI3XiN1mfvXJhqIykHU8OIKkoQzyNhuGafbbYIWVYanTE1CYbxMDprdjD0usWmulhbS9B3fbAAa8YcJfLTwMDx9cHAKIpq1hxqWgA%3D
Good read!
Thanks for your comments just to let you know I did read them, just might buy the book Think and grow rich.
cheers
#116 TheTruth
Tell your theory to our identical neighbours to the south who’s time ran out and are renting or… on the street now. They will not be intergenerational real estate owners. Nice places too, like Riverside Ca.
#22 James In Ottawa,
Pretty narrow thinking here! Too many shoes to drop, nothing positive to report moving forward.
90% working or not, it’s the ability to service the debt and anyone owning homes without at least 30% equity right now will be told to leave their homes in the next 3-7 years. VAN and TO 50%. RE Pandemic.
WANT to stay in your home???? Are you serious, need a place to live obvious, but for most it wont be an option.
With a flood of listings coming if you miss the opportunity to sell you will be shackled to the sinking ship you live in.
If you rolled the dice on low rates and inflated values you simply lost. If you pulled money out of your home to where you now own less that 30% you will loose.
If you dont have alternative investements that are either liquid of can be used a collateral after the avg. 30% correction you may still fall below the line.
Boomers retiring with all equity in homes will be smoked after the correction.
Anyone loosing a job is done. Retired boomers = retired jobs.
Dont for a second be fooled by 10% U3 unemployment as the U6 is about 17% but REAL unemployment and what it feels to be unemployed is more like 25% so your 90% more likely 75% shortly.
Your debt will be collected until you die. It is different in Canada for sure!!!
If you are different from the the above, you are only part of a few!