Hear Garth in Nanaimo, Feb 13 noon, Conf Ctr
For other people, it may be women and horsepower. For me, it’s plank pine and turned mouldings that send rivulets of hormones to all extremities. Old buildings wire me. It’s a cruel mistress.
So a day or two ago I went to see a 127-year-old pile of bricks I have long admired which sits in a hinterland village not far from the bunker. Built as a hotel, a defining feature is a stone archway which led to the rear stables and cuts through the heart of the three-storey Second Empire structure.
Sold as a POS five years ago, the seven apartments it contains were eventually condemned and now the owner has thrown in the towel, listing it for $469,000. But, as I learned, not before destroying it.
Where the ballroom with its intricate wood ceiling once hosted dances and county council meetings is a hulking pile of debris. The Italianate entryway is naked of hand-worked plaster mouldings, and everything else, right up to the 15-foot ceiling. Snow blows through the roof while every interior wall has been demo’d, every ornate gas lighting fixture gone and the twelve-by-twelve hand-hewn basement support beams teeter dangerously.
Such is the legacy of do-it-yourself demolition, combined with a real estate market that, in the winter of 2010, suddenly shows signs of frostbite. At least in my hood near the GTA. Just as the old hotel owner realizes a reno-spec guy will likely lose his shorts, it’s becoming apparent listings are sitting longer and longer – especially for properties north of five large.
And why not? Common-sense people can see clearly where the economy’s at. Last week I bought a new pair of cowboy boots, since the duct tape was wearing off the bottom of my old ones. The store I frequent is in a chi-chi strip of North Toronto retailers. When I arrived a sign taped to the door said ‘BACK IN 15. LUNCH.’ Hmm. One employee.
Across the street was a high-end sushi restaurant. In the window a waiter stood and stared out at the traffic on Avenue Road. He had the time. No customers.
When I bought my boots I asked about business. “To tell you the truth, real slow.” How slow? I was the day’s only sale. And the boots cost $300 less than the last ones, which were identical.
This week the US president sent Congress a federal budget worth $3.83 trillion, of which close to $1.6 trillion is deficit. That means almost 50% of the annual spending of the largest economy of the world will be borrowed money. One big reason is that tax revenues, especially from businesses, have collapsed.
Same here. In Ontario the take from companies is down 50%, because few are making money. In Ottawa, ditto, as our federal deficit rises to the highest point in history. And it’s against this tableau of an economy which is repaired but unhealed, functioning but bleeding, that the real estate bulls are so delusional.
Jim from Calgary wrote this last night: “We paid $600K cash for an ersatz castle in Oakridge Estates, and had enough money left over to adorn said castle with new roof, electrical panel and Pella triple-glazed windows top and bottom — front and back doors, too. We now have a nice house we’re not paying a mortgage on in a leafy SW Calgary neighbourhood near the reservoir, but we’re into it for around $700K including upgrades.
This currently represents at least 80 per cent of our net worth. Given the fact that just 5-7 years ago these places were going in the $400K-range, will that be what I should expect 5-10 years from now? Just wondering what you think. I’d like to dump it now, thus throwing my wife and two kids out onto the street with me, but that wouldn’t go over very well. Just how much do you think we can expect to lose on this in the next 5-10 years?”
Of course, Jim could reasonably expect his castle to be worth $400,000 again in a few years given the combination of a few factors. Rising taxes (inevitable), higher interest rates (certain), less migration from East to West (a given), nagging unemployment (probable) and a stampede of castle-owning Boomers trying to turn real estate into income (assured).
Not only could Jim lose a huge chunk of his equity (and his net worth), but he might end up living in a house which is unsalable. The days are coming when even Calgary will learn that big is no longer beautiful, unless it’s the span of the horns and the size of the danglies on your F150. (By the way, I’ll be in Calgary next month for a talk. Details soon.)
As I poked through the fallen members and splayed lathe and plaster of the Exchange Hotel, I thought about the hot times and blind optimism which encouraged some guy to build so grandly overlooking the fields of wheat. Everything has its season. This one’s for caution.
