Greed is the gas. Fear the brake.
Remember that and you’ll know more about investing and markets than nine out of ten people ever met. Houses, stocks, bonds, gold, no matter.
Now remember this: When greed prevails, sell. When fear rules, buy.
This, as you might imagine, is the mirror opposite of what most of your relatives, co-workers, friends and neighbours are doing. God help them. For they know not what they do.
So, an example. One year ago the cold winds of panic blew through our days. Financial markets and house prices were frozen. People feared for their lives and assets, and reacted in specific ways. There was, for example, an avalanche of mutual fund selling. At the low ebb of the markets, everybody wanted out, turning paper losses into real ones, and missing the inevitable trip back up.
In the housing market, more humanity. In Toronto over 20,000 homeowners threw their houses on the market last January just as purchasers retreated. The result was obvious – it would take the better part of three months to sell a house, with buyers were in the driver’s seat.
Contrast that with today, when greed has replaced fear. Although buyers still swarm, active listings have crashed by 41% while sales increased 87%. That squeezed prices higher by a fifth, while the time on market plunged. So just as last January was the best time to buy and the worst time to sell, so this January was the best time to sell and the worst to buy.
See what I mean? Up is down.
Given half a chance, people almost always do the wrong thing. And they keep on doing it until the scales tip turning greed into fear or vice versa.
My thesis is we’re near such a tipping point and it will come in the next months. Soon it will be clear even to the federal opposition parties the economy still sucks. Without government stimulus drugs, we’d all be out hunting squirrels (which I do regularly). Taxes and interest rates will be higher this year, debt will continue to go out of control, and the US is heading into an electoral evisceration.
Canada’s gaseous, greed-infused housing market has – like the stock market last winter – only one direction in which to travel. And when it starts, it’ll be amid a general sense of malaise. That’s when many people will hear a little voice at night telling them they’re seriously at risk. What looked like a sure-thing, everybody’s-doin’-it strategy in March could turn into a run for the exits in April. Recent buyers, of course, will be trampled like so many squished spectators at Pamplona. Road kill, as I poetically put it in my current book.
By the way, house sales in Vancouver rose 187% last month over last January. The average house is now $788,499. The average SFH is over $950,000. The average family income is less than in Toronto. Does this seem, ah, suicidal?
But this is interesting. Listings last month up 40% from a year ago, and 139% from December.
Do you smell that? Could be rubber.
122 comments ↓
Pity the Housoing Bull
I really feel bad for the Canadian housing bull – they could lose their shirts and rag the rest of the economy down with them.
Mainstream banks and media is now picking up on what most here have recognised for the past few months – that Robert Shiller is right and we are going back to 3X income housing prices in the US – back the 1960s and 70s style prices. When home were someplace to live and not an “investment”.
In Canada on the other hand we continue to have our heads firmly dug into the sand. As do Australia, the UK, and many other countries with housing prices that defy gravity.
Yes the house price reset in Canada may take a decade but I will gladly sit on the sidelines for that decade as current market bulls see the prices of their investment steadily erode.
I just hope the bulls keep spending to keep the economy going.
No! This time it’s different!
Soon it will be clear even to the federal opposition parties the economy still sucks.
That’s cruel, Garth, but ever so true.
The job of the Loyal Opposition should be to speak truth to power – and the people. These guys are drawing their parliamentary salaries under false pretences.
My only wish is that it crashes quickly before any real estate sales people can get their investments sold.
The only way the crash is fair is if they go down with the ship. After their fraudulent encouragement to trusting souls about the value of their advice, they should ride it to the bottom.
After all, it can only go up right…… great time to buy (always) , never a better opportunity, don’t think about the total price you pay think about can you make the payments!
Slime!
Steve Crist saying about America = what Mr. Turner is saying about Canada.
CHMC is stinking out the rink here – and the FHA, in the States? Here is a story that should interest you….
Because when this one finally comes tumbling down the taxpayers will be on the hook for every single penny of it. You see, those awful subprime loans never really disappeared.
Instead, these folks simply moved into FHA loans—which in most cases are nothing more than subprime deals with the backing of the federal government.
In fact, your Uncle Sam has been using FHA loans to fund non-prime borrowers for some time now–all the way up to $729,750 in some cases.
That’s how desperate we’ve become to prop up home prices (the old limit was $417K). The funny thing is that we are expecting different results this time, which by definition is insane.
However, the cold hard reality is that the agency now expects defaults on 25% of all the loans they insured in 2007, and 20% of those backed in 2008.
Those, by the way, were the default rates that imploded the entire sub prime industry.
As for the FHA it looks like it’s only a matter of time now before it needs to be bailed out.
Link: http://tinyurl.com/ygqyj73
Wow…just read this article after your blog….
http://finance.yahoo.com/loans/article/108746/no-help-in-sight-more-homeowners-walk-away
A foreshadow of Canada in the coming years? As your blog, and all the facts would point…yes.
Hi Garth,
‘The average house is now $788,499. The average SFH is over $950,000.’
I presume SFH means ’single family home’. If so, why is it significanly higher than an ‘average house’?
Condos. — Garth
Remember something, all of you rubbing your hands together and salvitating. Gleefully hoping for a 40% or more correction.
This runaway bubble is going to do (has done) more damage than just the housing market.
Lets just take my company.
We do a job for $10,000 right now. Fair wage fair profit.
Now we have a 40% price correction.
We now have to do that job for $6,000. That means we have to pay lower wages, lower material costs.
So now we are paying $26 an hour lets reduce it roughly 40% works out to $16 an hour. Whats that employee going to do? Hes not going to be buying that new atv is he. Hes not going to Timmies every day now is he.
His wife isn’t going to be going to the nail saloon is she. Maybe the kids don’t play hockey cause they can’t afford it.
That means no skates being bought no hockey sticks being bought.
More people not working or working for less.
Lets jump over to the wholesale side, i come in needing lower prices they cut the staff trying to save money, The truck driver who delivers the product has to take a cut, the guys producing the product take a cut.
Its self perpetuating.
This is going to be messy, some people are going to be affected who have nothing to do with the housing industry are going to get creamed.
The housing was starting to correct twice in the last few years and these idiots pumped it up.
There is going to be a huge amount of suffering in Canada because of this.
The correction will come it always does.
It pains me to think of the grief coming to people .
So Garth how would you read the DOW and TSE right now? Greedy or Fearful?
I think it’s in between and not very clear. Your take?
“. . . it will come in the next months.” — Three incidents which will probably happen very shortly. Following is a quote from the first link, ft.com:
http://www.ft.com/cms/s/a82cfe04-10f5-11df-9a9e-00144feab49a,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fa82cfe04-10f5-11df-9a9e-00144feab49a.html&_i_referer=http%3A%2F%2Fwhatreallyhappened.com%2F
http://www.denverpost.com/news/ci_14303473
http://www.moneyteachers.org/Yellowstone2.htm
“Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tackle the country’s budget deficit.
“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added in an issuer note.”
Webmaster’s Commentary: “It looks as though this nation’s economy is poised to fall off a cliff, in the not too distant future.” (wrh.com).
When Yellowstone erupts and causes chaos, that will give the two govts. (US and Canada) the chance to bring in martial law, trash our freedoms and rights then toss them in the trash.
#8 Dan in Victoria
nicely said Dan.
It is deflation at its finest, and yep, it is coming our way.
Garth and all my fellow bloggers, I don’t know about you guys but it’s so frustrating waiting for prices to return to affordable levels. Sometimes I feel like diving in (especially after reading the local Calgary papers – you would think everyone here earns $100K+ after taxes and the recession is a mythical creature that lives everywhere else) but I come to this site for some strength. Hopefully, the government wakes up soon and starts to take care of the people not gouge them.
#8 Dan In Victoria…It’s been 30 years of stimulus my friend. Everyone from Boomers to Xers going for it. This is the last straw….THE GREAT GLOBAL RESET!
I encourage everyone to read this article!
The War on the Young
Mises Daily: Wednesday, February 03, 2010 by Brian Foglia
http://mises.org/daily/4040
Here’s the opening:
“We live in an age rife with oppression. No group of Americans is better aware of this than our nation’s youth. Young people today will most likely become the first generation in US history not to surpass their parents’ living standards. Consider the increasing proportion of young adults who are choosing to either remain living with their parents, or move back in with them. Rather than seek new opportunities on their own, they are choosing the security of home and hearth at the expense of their future.”
#8 Dan in Victoria:
It’s called deflation. We will not see inflation as people are calling for. In food, gasoline, gov’t fees, etc yes we will and are, but not in consumer goods, housing included of course.
People are much too used to the false economy we have just lived through (i.e. credit driven) that they could not afford to do. It was inevitable this would happen… the whole planet lived on credit….it is now over and cannot continue so you will see continuing deflation, something governments do not want to see. They only want perpetual “growth” which was not only unsustainable, it was also “false” growth since the guy buying his new ATV, or the wife getting her nails done as you mention was done on a feeling of wealth that did not exist to begin with.
Until *everyone* admits the addiction to credit/debt, the pain will only be enhanced for a longer period of time.
Garth, for the past few weeks your blog has served as the gospel my my fiance and I. As young professionals in Calgary, we are both very financially prudent, saving and paying down our mortgage at every moment. As we near our wedding and think about starting a family, the temptation to search the MLS listings is almost too much. I’ve always had this nagging thought at the back of my brain to pay attention to basic economic principles. I appreciate your daily reminders. If we were to move into another townhouse in our inner city neighbourhood, with the same footage (1400 sq ft) and to add a garage and a small backyard, we’d have to throw down another $300-400K. That does not sit well with me. Even as I anticipate the upcoming “correction” I know that we will see a number of very unfortunate cases among our close group of friends. See you at your event in Calgary.
For all you Dragon’s Den fans out there I attended an east Ottawa conference today with Jim Treliving as keynote speaker.
Jim is a 69 Y.O. from Manitoba and tells a great story. Sort of like listening to your grandpa talk.
He told the story of his rise from RCMP officer to Boston Pizza business empire owner.
Some points he touched on:
~Canada’s banks saved us with their strict lending standards
~he is now a Dallas resident and claims this downturn is probably the biggest hardship to ever face the US in their history
~the amount of private wealth there is still astounding
~central USA is faring quite well, the coasts are where the trouble is
~Texas survived the housing bubble intact and housing remained affordable
~don’t bet against America they will come out of this with their innovation and resiliency
~small,medium enterprises in US have virtually nowhere to borrow capital
~natural gas is the key to NA energy independence and the coal lobby is stalling the inevitable transition
~Canadians can compete and win in the US market but it is a tough place to break into
~if interested start looking at buying a US property soon as they are near the bottom
For 2011 I am submitting to the organizers Mr Turner’s name as the keynote for this annual conference. Lets hope they can work something out.
Interesting snippet from the local media in Vancouver here Garth….
On a month-to-month basis, sales decreased 22 per cent in January compared to December, while new inventory more than doubled, going from 1,453 new listings in December to 2,941 in January. This increased overall inventory by 14 per cent in one month.
“If I were house-hunting right now, I’d be pretty excited. There is more selection and potentially less competition over the next few weeks. ”
“Some buyers will put their house-hunting on hold during the Olympics creating an advantage for those who don’t want to wait.”
So I guess we should buy now or be priced out forever, afterall some rich foreigner is certainly going to buy during the games driving the prices up even further!
#4 Comfortable in a coma on 02.03.10 at 9:29 pm
My only wish is that it crashes quickly before any real estate sales people can get their investments sold.
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That’s exactly what needs to happen–
Home prices “need” to fall–
In fact prices–of everything “need” to fall–but–
Governments are using tax-payer dollars to support high prices,so they can pretend,there’s no deflation in the system–
No doubt falling prices will wipe out a lot of people,but isn’t that how a free country and a free market are supposed to work?
The opportunity to either succeed or fail?
Instead we have a PM and FM that give buy and hold tips in an insanely overbought market–
Hinting all along,that they have the situation well in hand and “if” such an inflationary signal ever comes along–”they’ll act” lol
Their incompetence,is mind boggling–in failing to understand the scope of this–major global monetary deflation–that “wants” to unwind at warp speed the debt to equity gearing,in every sector of the economy —
But–they are focused on–get this–”future inflation” should it ever rear it’s ugly head-
It’s unreal,how clueless they are,as to what’s going on–
Some think they do know,what’s happening and are letting it happen-
If that was the case,why didn’t they just let it go when Bear Stern’s blew up and started this cascade?
If a crash was in their plan–it happened for them that night–but what did they do?
They juiced bullish stock market sentiment and have been throwing borrowed money at it–hopelessly trying to reflate the credit bubble,”trying” to “create” inflation–Yet–ready to attack it–if it ever gets going–like wtf?
They bailed out anything and everything–any price drop was met with stimulus-
So they hold prices artificially high,while people who lose their jobs and others try and live on low wages,struggling to get by–
Sorry conspirators–don’t look to our leaders in Canada as being a “knowing” force of any conspiracy-
If they are involved (other then Carney) “they” don’t know about it–
So they’ll do exactly what they shouldn’t do–
They’ll spend your money supporting high prices,until the market decides it wants to move on and then,it will bowl them over and do what it wants,which is reprice–much lower–
******************************************
#8 Dan in Victoria on 02.03.10 at 10:04 pm
Remember something, all of you rubbing your hands together and salvitating. Gleefully hoping for a 40% or more correction.
This runaway bubble is going to do (has done) more damage than just the housing market
*****************************************
If these idiots would get out of the way and let the market work,this thing would be sorted out quite quickly–
Lower wages are not necessarily a bad thing,as long as prices are allowed to fall as well–
How would you be any less wealthy if for example–
You work for $20/hr and have to pay $5 for a beer–or-
you work for $1/hr and have to pay 25 cents for a beer-
It’s all realitive and the market would adjust it fast–
Yes–lots will and are going to be skinned alive over this,but it needs to happen–
People need to learn,not to live beyond their means–
Yes government and lenders are responsible as well,but so are the people–
Do we want a nation of sheep,or a nation of sensible people?
I’m not rubbing my hands together-with glee–
I’m in shock at the amount of people,who joined in on this credit mania and now can’t see it’s over–
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one”
“Extraordinary Popular Delusions And The Madness Of Crowds,Charles McKay’s 1841 classic work on mass hysteria and national crazes”
@ Dan- housing is the usually the largest expense in a working person’s budget. Reduce that by 40% and even with a lower wage you can still afford all those things.
Regardless, all this debt must be flushed out of the system. No one is saying this is going to be fun. It’s just that it will be less painful for those not leveraged to the hilt.
My father in law just listed his 3 bedroom house with 2 bedroom suite in a desirable hood on Vancouver’s west side. The agent put it on the market at $1.28 million…WTF….still has crappy old 1970s fridge and stove- 1 bdrm on main floor 2 tiny ones upstairs…
I pleaded with him to sell it last summer (he is nearly retired and single) and could easily retire on the proceeds. He was all smug with me at Xmas about how wrong i was.
So he gets no offers last weekend, and he was expecting multiple bids. Whoops.
Now down to $1.2m (what a bargain now)- this is how it starts.
Do you think now is a good time to re-enter mutual funds?
Teachers in Alberta just got a 6% raise!
http://calgary.ctv.ca/servlet/an/local/CTVNews/20100203/CGY_Teachers_province_100203/20100203/?hub=CalgaryHome
Garth,
If the housing bubble in Canada begins to deflate, how will it impact Equities? Won’t bank stocks be crushed?
I know you don’t agree with purchasing bonds because interest rates have to start increasing at some point, but would rising rates really affect mutual funds holding short term bonds?
I transfered my TFSA into a Dividend Income mutual fund today, and it contains a mix of Equities and Cash. Hence the concern regarding the market.
Thanks for any helpful opinion.
Ciao
“…house sales in Vancouver rose 187% last month over last January. The average house is now $788,499. The average SFH is over $950,000. The average family income is less than in Toronto. “ -GT
It’s an exercise in futility to try to use the average family income of Vancouverians in any kind of financial equation. The city is awash in unreported income and an influx of foreign money.
Don’t get me wrong, there will be a housing correction in Vancouver as well. However, it will likley be cushioned by the vast number of homes earning unreported incomes, from renters or grow-ops (or both) in their basements.
p.s. The average ‘house’ is not $788,499 – the average ‘home’ is. Two different things…
Well, in the US house prices started to fal with no tightening of lending, and fell for a year while standards were dropping. So maybe you can run out of greater fools even without raising standards. We’ll see, now that 10% down is off the table.
Here we go, let the craziness begin!!!
“In January, 7% of homes sold through the multiple listings service in Calgary sold above the asking price.”
http://www.calgarysun.com/news/alberta/2010/02/03/12729026.html
Jim Flaherty promises to defuse any housing bubble:
http://www.youtube.com/watch?v=ueuauKKjPZI
Garth, Vancouver is differant, we have the Olympics, all the Chinese buyers are here, the drug money topped 7 billion, there are no penalties for any sort of crime so that even foriegners are rushing here from other jurisdictions to avoid prosecution.
We have open prostitution and drug markets in every area, people are flocking here for the freedom from prosecution.
You see, this is paradise. bad things never happen in paradise Garth. It will be good times forever. Prices can only go up. Mr. Flaherty says that rates will never go up. He may even lower them. Housing is a right, things have changed , you home BUYERS are dinosaurs, we new people are being given houses for free, the government will never take them back. That wouldn’t be Canadian.
You know Mr. Harper will do anything for a majority. Do you think he’ll taint paradise with reality before he gets his holy grail? Let the good times roll. Yipppppppeeeee!
Its sad isn’t it?
http://finance.yahoo.com/loans/article/108746/no-help-in-sight-more-homeowners-walk-away
It won’t happen here, F*. What will happen here as a result of recourse loans is house arrest and the depression and despair money pit’s give birth to, caused by homeowners who have bought in high (over the last 3 years) and later cannot walk away from its escalating debt service and negative equity created as interest rates rise. The first wave to be hit with rising interest rates will be VRM holders, those who foolishly believed federal governments would leave interest rates low forever or would not lead them into such nightmares, likely beginning at the latter part of this year. I’m thinking interest rates will rise 1.5 to 2 points per year From this summer on, into 5 year term double digit rates within 5 years, flatlining around 10% for 1.5 to 2 years afterward in an attempt to prop up a falling loonie as a result of combined record federal deficits and continued annual trade deficits brought on by the delayed effects of failed governmental policies of this federal government in particular. As interest rates climb over the next 5 years, 5 year term holders will be most caught 3, 4, 5 and 6 years from now especially as they come up for renewal. This is the time… 2013, 2014, 2015 and 2016, where Canada’s real recession becomes the most severe and it could last much, much longer unless Canadians demand and elect competent governments who for a change, serve the public’s interest. I really, really hope I’m wrong about this, but…
The masses are going to hope for the hail mary of big breaks in the years ahead. It could come with incomes and inflation rising around 2014, 2015 on as commodities begin to skyrocket from growing world populations and demand from developing nations, especially in energy, metals and agriculture sectors. The major stumbling blocks to recovery are escalating, unsustainable continued deficits and debt from the U.S. and Japan specifically, as well environmental degradation and escalating potential for war as more and more nations begin to become economically unstable.
“house sales in Vancouver rose 187% last month over last January. The average house is now $788,499.”
Yes, imagine that in the province with the highest rate of child poverty in Canada and the lowest amount of funding for the arts. Well, what can you expect with a hypocritical former paver for a premier who said that BC wouldn’t run a deficit? How much are we spending to truck snow in from the interior to put on top of a mountain? We can do that, but we cut funding for education and healthcare. We have a mayor who wants this to be the greenest olympics, yet they have over 400 new SUVs for security staff. House prices are high, but the Province is run by inept, incompetent, greedy people
greed has ruled the housing market here in vantown for 5 years now, apart from a blip last spring. So if you’d sold 4 years ago (greed) you’da lost a lot of dough….. I think the prices have about doubled in that time. I agree with you, Garth, that it’s looney….but it’s sure hard to know when it’s going to turn.
And more oil workers get laid off from big oil compaines, the rigs go to break up in a couple months, operators being laid off daily, and alberta suddenly seems not so invincible. Should be a disasterous year for a lot of small business’ and people.
Wow, even Paul Volcker doesn’t understand our whole CMHC scheme or the fact that the govt has been buying billions in mortgage backed garbage from the banks to keep our party going. What, no bailout here folks!
http://www.theprovince.com/business/story.html?id=2514580
the best part about these wonderful home values is that the insurance premiums are about to join. why wouldn’t you want to insure it for it’s real value! and won’t it be fun to increase the property tax value too! So nice to show your wealth.
“Now remember this: When greed prevails, sell. When fear rules, buy”
Good rule of thumb. But like the first stock market crash of 08 or US Housing price crash of 06, do you buy when fear really starts and ride the market down or wait till you see some sort of bottom?
The problem with this rule of thumb is by the time it hits bottom you don’t know if it’s really a bottom or not and when it starts to go up you don’t know if it will just go down again.
Mike
#8 Dan “40% correction (in everything)…So now we are paying $26 an hour lets reduce it roughly 40% works out to $16 an hour. Whats that employee going to do? Hes not going to be buying that new atv is he. Hes not going to Timmies every day now is he.
His wife isn’t going to be going to the nail saloon is she.”
You forget that its an economy of scale, everyone else will reduce their prices and wages too. Thus your $16/hour (that’s good money per hour not long ago!) will be worth $26 an hour still so yes, ATV’s will be bought, nail saloon’s will do great business still etc.
Now if you have money in the bank, that’s now worth 40% more and if you have debt, that’s 40% more debt.
Mike
Fun article in Mcleans:
http://www2.macleans.ca/2010/02/02/awash-in-a-sea-of-debt/
“Last week Bury was in court to seek approval for the sale of a one-storey foreclosed home in central Richmond for $670,000. That was already $40,000 more than the house had been valued at two months earlier. Then, as he always does, Bury asked whether any other bidders were interested in the 2,000-sq.-foot home. Ten hands shot up. What happened next left him stunned. After a secret auction, the winning couple offered a whopping $852,500. “That’s an extreme case, but it’s the kind of thing we’re seeing all the time now,” says Bury. “It’s a feeding frenzy out there.”
So far seems to be business as usual in Vancouver:
http://agentwill.com/weekly-stats/
Got your book a few days ago. Just finished Irrational Exhuberance by Shiller, you’re next on the reading list. Pretty amazing how little was learned from the dot-com crash. Are we back to the infinite boom-bust cycle? I sure hope not.
#1 omg on 02.03.10 at 9:10 pm
“When home were someplace to live and not an “investment”. ”
Just thought this needed to be repeated… :-/
“Buy when there’s blood in the streets”
Baron Rothschild, 1871
Jack the Lad
“how would you read the DOW and TSE right now? Greedy or Fearful?”
There is no overall vinner right now.
I’d go for selective greed, meaning there are still a good number of great compagnies which are clearly undervalued, GE and Wells-Fargo for example.
In any case always go for quality and be patient.
Mike (Authentic) #35
“The problem with this rule of thumb is by the time it hits bottom you don’t know if it’s really a bottom”
The goal is not to buy exactly at the bottom, an impossible task since no-one can predict the bottom, but to buy when prices are low. It doesn’t matter if you buy on the way down or up. I bought all along the bear market, in my mind an historic occasion, some stocks went straight down just after I bought them, but overall I’m really happy with my investments and I figure most of my stocks have much more to give before I even think about selling.
There are still many good deals out there, especially on the US market, just aim for quality.
“It’s always darkest before dawn”
Hen house homilies!
{retching into eco friendly, bunny-hugger shopping bag}
Hi
The catalyst for a Canadian housing bust (and Australian and South Afcrican!) will be a tanking stock market.
The next leg of the crash (aka The Big Shred) has already begun, and there is NOTHING that can stop it, as bad news keeps rolling in and sinks into the subconscious.
Mark my words, this is it!
How do I know?
Well, if I told you that I would have to kill you, so you’re just going to have to trust me.
Yes, I’m a doctor!
Rgds
Munch
Ontario is the cause for why interest rates need to be kept so low.
…Ontario’s Manufacturing Industry, supporting 12 million citizens, cannot be allowed to sink into the abyss.
Food for thought….
If interest rates suddenly elevate, yes, Vancouver may correct…but Toronto will crash.
…I suggest keeping track of West Vancouver’s “Evelyn” Real Estate project, geared up to match its sales with Olympic visitors/investors.
It may be an excellent harbinger of where Vancouver’s Real Estate’s price future is headed.
http://www.evelynliving.com/developer.html
Nostradamus jr.
Yes indeed the real, “Dark Horse” in room is/are wages. The banks who were (used to be) money managers using simple math (%’s) to calulate risk. It was just simple 32% for lodging and another 8% for toys. The rest was for living. Then it went to 42% and as they say the rest is history until Harper/Flaherty/Caney and now this and growing.
According to the latest release by the Bank of Canada, the outstanding balances of various credit types held by Chartered Banks (only) have expanded by the following amounts during the period of February 2008 – November 2009 (1 year, 9 months):
personal loans have increased 19%
balances on credit cards have increased 14%
‘other’ types of loans have expanded by 14%.
personal lines of credit have grown 39%
And just how did these people pay for Christmas New Years?
If the situation is so dire, that real estate is going to collapse from all angles, why are developers still buying land in Ontario for future residential 3 to 10 years down the road? Is the world according to Garth going to end again!!
Melt, not collapse. Developers seem to be driven by greed, too. — Garth
#21 Bill – yeah, and the provincial govt is going to announce how it will cut $2 billion next week… can’t touch the teachers or health care so there are probably going to be BIG job losses in all other areas of the Alberta govt (and the non-govt orgs it funds)
#10 Nostradamus le mad Vlad…
There has been quite a bit of chatter recently about “something” going to happen soon. There are many such ideas (1) Yellowstone, (2) Terrorists, (3) Financial Collapse (4) Aliens and UFO’s….etc.
All I know about the future, is that even the best at predicting it are only about 75%, so that leaves a lot of room for changes.
Like all good boy scouts know, be prepared for anything. That is what they train for. So, prepare your bad day box, get your list together, and prepare for a 30 Day “Quebec” style ice storm. Have what you need in your home “now”. Toilet paper is the most important item. (No Frills on sale this week)
You can always eat your stock pile of canned goods, or give to charity, like I did at Xmas. Toilet paper doesn’t go bad.
Garth has his bunker, which is outfitted to withstand any siege, weather it be from the weather, financial or social. You should too. It is not too late to start.
I pray “nothing” happens. I prepare for a Quebec style storm.
#45
Developers bought land back in the 80’s too. Many lost their shirts. Right now it is buyer beware.
We have relatives in Vegas, who lost their “McMansion” recently. They could buy it back now for about 1/2 of what they originally paid, if they had employment.
Look at the US…..we trade big time with them. And they are still on the downward swing.
A couple a years ago I took early retirement from my job as an airline pilot to serve as an international aid worker/missionary. I returned to Canada to find out my financial advisor (FA) had absconded with a good portion of my pension payout and savings. The police are continuing their investigation and expect charges to be laid by July.
This man (FA) as part of my “Investment Plan” put us into leveraged GIFs. One of the companies involved was Canada Life and a large portion of that investment had been placed in a real-estate fund. The leveraged funding that was supposed to cover this investment would have been financed from my non-leveraged savings, but as I said the FA has disappeared with the money that was supposed to cover that investment. The plan was that a portion of my paid out pension was supposed to go into tax deductible investments or so I was told.
With my capitol largely depleted, ( stolen ) I thought perhaps I should close down the leveraged GIF, and pay out the difference of the loss and current value of the fund and stop the monthly payments. Poorer, older and wiser; “pay out” instead of “payments”. However, due to the losses now being experienced in the Canada Life real-estate fund they have frozen all payouts!
Canada Life will not let me wind down the investment… because, I have still have a few thousand dollars equity left from my house that we were forced to sell to cut down the debt as created by our FA. (Their agent) So I am stuck making monthly payments that I can ill afford until the real-estate turns around, ( will it ever?) or go bankrupt whichever comes first.
Most of the skulduggery surrounding the missing capitol seems to have occurred while I was out of the country serving as a missionary in a developing country! Serving abroad and being fleeced at home. There is no justice in this world. The system is flawed, and those speaking the truth about the system are rare. Mainstream press will not report the truth, and they should be relabelled “Corporate Press” as they report only their master’s interest. Keep spreading the truth Garth, you are a rare gem. Investors, beware, as real-estate fund products as pawned by major brokers, are not any safer than the real-estate in them!
A sad tale. Send me details offline (garth@garth.ca) and I will assist seeking justice in any way I can. — Garth
The greed/fear rule is useful, but the exception may be gold. I gather that some of the hoarding of gold is alongside the hoarding of guns for some imagined Mad Max-style socialist dystopia that Glenn Beck keeps warning them about. There’s some greed there too among some investors I’m sure, but the driving force may not be investing so much for profit as for survival during what they fear is the coming Obamapocolypse.
#12 Confused …
You might be waiting a long time for that magic “affordable”.
You said “Hopefully, the government wakes up soon and starts to take care of the people not gouge them.”
What’s up with that????
Government is not supposed to be mommy and daddy. People are supposed to be able to take care of themselves (the grown-ups anyway) … right? Perhaps the government has been doing far more mommy&daddying than it should have as it is. You want more????
#16…Mike…your speaker, while obviously having made his fortune….does not truly understand economics.
Economics and its response to the real world…is different from Business and its very short term approach (outside of dynastic families at least).
For a country that is facing the greatest stress of its history (funny there was a civil war in there somewhere) the USA has not seen even a 1/5 of the pain that it (and the rest of us) are in for.
I sound like a broken record on here (apologies all round..sorry Garth)….but the peaking of oil in 2005 cut the throat of the world economic system…..it is OVER.
The EROEI is now far in deficit…deep water riggs, tar sands….are the dregs of the energy curve.
Economics..that voodoo that we like to think is reflective of reality….is just now catching on to the FACT that it is finished. I just did a deal on some farm land and it was sadly funny. The prior owner kept repeating that the “oil patch” was heating up…hiring was starting again (he is trying to run a trucking outfit in alberta)……but he also was willing to do a deal on land that effectively held his feet to the fire…..
There are at least 20 reasons why the USA and indeed the world are headed into the dark ages…..from overwhelming paper dollar debt (just the derivatives market is multiples of world GDP) down through the absolute peaking of multiple resource streams…..
The world that all of you knew and loved…is over now.
Success will come throught the carefully navigated realm of the salvage society (trying to find resource streams in a steadily constricting society)…..growth will only come in the individual business model within and overall decline worldwide……
We are screwed..and even the darkest forecast just thinks that the housing bubble might burst????
Give your collective heads a shake…..the average wealth of a Canadian is about to plummet…..along with all else.
I think people should keep in mind that it takes two parties to make a transaction. Much as the cloud of envy and years of pining have convinced people to blame the buyers, take a look at the sellers who need the money to live in dignity through their remaining years after a lifetime of contributions to Canada.
Do I think Vancouver prices are inflated? Yes. But the reasons given by people who want to spend 500k to live in a million dollar home isn’t drawing a lot of sympathy from me.
I charted the Toronto numbers yesterday.
http://guava.ca/indicators.html
Those who planned their investments on the theory that the US $ was going to fall through the floor any day now, should probably re-think that concept.
In fact, I could see the US $ going on a run now, on a primary up trend that could last most of this year and maybe beyond. The one legged man wins the foot race against those with no legs.
The reasons for that are fundamental economic issues and the structure of the international ForEx markets. The two biggest crosses to the $ in ForEx, Yen and Euro, are sliding down the debt and sovereign risk slope much more quickly. And that situation is structural. Yes, the USA will be in that same debt place soon enough, but the others have gotten there first to claim bragging rights. Those 3 currencies added together make up the vast majority of all ForEx transactions, there exist no other currencies in their size that could replace them. Don’t count on China, they don’t want to see their currency float and be traded internationally.
The effect of this will be most likely to crush stock markets and commodity prices. Bonds will be bought, and some gold. Gold should decline less than most other assets, due to some safe haven buying. But the primary winner here will be the US $ and Bonds.
It also implies that deflation is winning so far, inflation has been pushed back further into the future. Almost one would buy a long-dated Bond yielding near 0% if inflation is really of imminent concern, regardless of credit market stress. Shorter term Bonds should be favored.
Under this scenario the CAD $ will fall, making our exports more competitive, and imports more expensive, which should help to mitigate the effects of continuing structural weakness in the USA dragging our economy down. So it’s not all bad for Canada, you can’t expect much upside anyway in a global crisis situation.
I see some here think the value of the CAD $ will be driven down by the Government for Ontario’s benefit for political reasons – LOL,as if. The Government does not control the international ForEx markets, no Government does. They can exert some influence for short periods, that is it – at a daily traded volume above $3.7 Trillion US, there is no Government with deep enough pockets that can “control” ForEx trading. Ask Japan about that one, or the UK.
Canada is an exporting nation, and our biggest export is natural resources/commodities followed by manufactured goods. A low CAD $ benefits BC and Alberta as resource exporters too, as well as Ontario (manufacturing exporter) and the other provinces too. That’s the way it is, though you can choose to believe otherwise if you want, it’s a free country. The Flat Earth Society is always looking for new members.
If you are wondering what to do with your money, one of my picks for this year and beyond is the agricultural sector, to buy when the time is right (I use technical analysis for entry points, YMMV). In general, what worked last year as an investment theme is less likely to repeat, it will most likely to be sectors that were recently out of favor, as David Rosenberg has been pointing out lately. Remain flexible, we are in volatile times, circumstances can and will change.
Disclosure: I am long US $ over-weighted, at the moment. So yes, you could say I am talking my book, but I am an active trader, I may go long, short, hedge or take no position (ca$h) at any time, as my technical analysis suggests.
#48
People keep making comparisons to the U.S. market. Have you checked which country you live in? Or is Canada a U.S. state. Show me who has been at a loss when purchasing real estate in Canada from the early 90’s to now. The only people that did lose, are those misguided individuals that were fear mongered into selling what they were able to hang on to.
#49 Defrauded2
Garth,
This comment really struck a cord with me this morning and your response was sensational. You are a good man Garth. I guess I should show a little more appreciation for your blog and yourself. Keep up the good fight.
One thing I don’t understand:
The average SFH in Vancouver is $900,000.
In Toronto it’s around a third of that.
Yet average income in Vancouver is LESS than Toronto.
So, doesn’t that prove it is possible to sustain massive increases with SFHs in Toronto? Thereby indicating we are no where near the top?
It proves Vancouverites are idiots, willing to devote more than 70% of family income to just shelter costs. — Garth
http://www.energybulletin.net/51428
read it and weep people…..and yes we are bound to the USA like a siamese twin
Greer nails the situation completely.
re: #56
Garth, I believe idiots are not bound by geography. So it is possible for Toronto idiots to follow leaving this idiot who sold last year on the sidelines for quite a while.
I’m really anxious to see what happens this year.
Thanks for the comments everyone, I hope every one thought about what Is coming/ happening.
Post #35 Mike agree with you ,Bang on, Lets lay this out though….Some will brush right over it and not stop to think. If you owe a $200,000 at 26 bucks an hour and 200,000 at 16 bucks an hour your debt doesn’t RESET. To pay off 200,000 its about 7700 hours at 26 an hour, to pay off 200,000 at 16 an hour its 12500 hours (before tax money) hence a lot of pain for some for a long time.
And now, at 16 an hour how much of their income goes to pay the house now.
How many are going to get ruined?
And for what reason?
Greed in office, and on the street.
Garth,
With China acting to cool things, and their real estate market in a hard stop cooldown, Vancouver could (may have already occured, in slow motion) hit a brick wall over the next couple a months. Vancouver could already be in free fall, we’ll only know when we look back in a few months – but listings are soaring (albeit off of a low base) and sales are stalling out….
“The frozen corpses are spread across the streets and there is no one to take care of the dead”
Is it a picture from the next winter in Canadian cities?
It is most likely:
Economy is collapsing – Society in chaos.
The unemployment is skyrocketing,
Food shortages,
Infrastructure is disintegrated – blackouts, fuel shortages, no heating, transportation and communication are down.
Credit cards – unusable (broken infrastructure), cash – unreachable (banks closed)
Government services almost absent – health care, police, schools.
Crime is skyrocketing; gang’s wars, social unrest, bands and different groups are controlling different areas. Government is busy to protect itself.
What to do?
How to protect yourself and your family?
As an individual you can not do anything, you can not prevent it.
Run away from Canada before next winter to the warmer countries, at least there will be wormer and some more fruits and vegetables to eat.
Or buy a farm in good small community and try to be self-sufficient.
Prophet
Garth – I just got Money Road in the mail today and already I’m on page 115!
Ironically, reading it thus far I was thinking of putting some money into the markets (as per your specifics in the book) and just turned on CNBC… 200 point drop! Global Stock Sell Off!
Wowzers, well, what do you do now? Buy when others are selling or wait till it goes lower?
Mike
The book tells you to expect volatility. Get used to it. — Garth
It proves Vancouverites are idiots, willing to devote more than 70% of family income to just shelter costs. — Garth”
Given there are many forces influencing Vancouver real estate, as an informed professional can you offer more of a comprehensive explanation for our overvalued real estate in Vancouver instead of an inarticulate, overly simplistic statement?
You must be new here. We have already done vivisection. — Garth
Dan in Victoria, everything you said is correct. But the fact is the same guy making $26/hr can not afford a 400-500k house. That’s just reality. So a lot of people are going to suffer, many of them innocent, and many more were simply too trusting of a society that has lead its middle class off a cliff.
It’s a tragedy all around, but a small percentage of the population has benefitted enormously from the bubble, and they continue to hype it now. Remember that when they’re closing schools and hospitals, slashing services to the bone, and raising taxes through the roof all at the same time. It was never realistic. The bubble is a big economic lie, like burning down your house to stay warm.
#53 Guava.ca
We ain’t looking for sympathy, we’re looking for lower prices…
#60 Dan in Victoria on 02.04.10 at 11:29 am
Hi Dan, even if your wages are frozen the cost of living with higher food, transportation, Harper’s Sales Tax, interest rates and personal taxes rising we are all knocked out of the game. I am retired and went out and met some other seniors at Zellers, I had a coffee and a burger, that cost more than my raise in my pension checks.
#60 Dan in Victoria on 02.04.10 at 11:29 am
——————————————-
and the other factor being left out of the equation of wages dropping from 26 to $16/hr is that some goods (such as food and gas) will go higher. Making $26/hr and buying $500/mo groceries and $200 gas is sure of a hell lot better than making $16/hr and paying $800/mo groceries and $400/mo gas…..
#53 guava.ca
I truly thank you for your site! I check it daily and you give me better info than I get from my own agent.
Those numbers speak more than media hyped articles can for January.
IRT Dan in Victoria
You need to stop and think. Your economic theories and mathematical scenarios are flawed to an absurd degree. You are making broad, random calculation and dividing numbers into each in a way that makes no logical sense.
However, if your overarching message is to “live within your means”, then yes, I agree with you.
You guys are a bunch of whiners. If people are willing to pay what ever prices for their homes, so be it. Why bitch about it? Canada needs people like them to keep the economy rolling and they are doing a good job at it. You should be cheering them on because without them you might not have a job.
Humans, being humans, act in herds. Think China is going to bail us all out, after this Thirty Year Credit Binge?
Think the U.S. real estate bubble was bad? China’s could be worse:
Millions of Chinese are pursuing property with a zeal once typical of house-happy Americans. Some Chinese are plunking down wads of cash for homes: Others are taking out mortgages at record levels. Developers are snapping up land for luxury high-rises and villas, and the banks are eagerly funding them. Some local officials are even building towns from scratch in the desert, certain that demand won’t flag. And if families can swing it, they buy two apartments—one to live in, one to flip when prices jump further.
And jump they have. In Shanghai, prices for high-end real estate were up 54% through September, to $500 per square foot. In December alone, housing prices in 70 major cities rose 7.8%, while housing starts nationwide rose 34%.
The real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets, and local governments. “Once the bubble pops, our economic growth will stop,” warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences’ Finance Research Center. On Dec. 27, China Premier Wen Jiabao told news agency Xinhua that “property prices have risen too quickly.” He pledged a crackdown on speculators.
Link: http://tinyurl.com/ygyzvmy
Ah Possum. The other white meat.
#35 Mike
Succinct and sage comments indeed.
Geez, starting at a mere $1.6M you can own a piece of Canadian history. Not too long ago there would be a line of people camping out for the “opportunity”. I wonder how fast these will sell?
http://curriebarracks.com/main.html
thanks to Ronaldo in previous thread for anecdote:
“My first home purchase was a brand new 2 level 1878 s.f. ,3 b.r., unfinished basement, townhouse in Lynmor Village on Lillooet Rd in North Vancouver. The requirement was for $3000 dn with a mortgage of 17,800 over 25 years, 5 yr amort. This price represented 2.6 times my annual salary.”
The Demographia study stated ” in Vancouver the median sale value was $540900 and the median household income was $58200, giving a Median Multiple of 9.3 “.
My old real estate book used the average price, not the median, and 2.6-3 was a good market by their standards. But then again I think they did not conceive of a market where it went above 6. We are so much more advanced nowadays. Must be the internet.
Vancouver with average price at $788,499K or $950K SFH, VS present annual average family income of $63K = present (un) affordability ratio of 12.51 in condos, or 15 (!) in SFH. At those altitudes you need oxygen.
thanks to Garth for latest numbers
Toronto is at about $70-72K average family income I think, down a bit from the recession. “The average home selling price in January 2010 climbed 19 per cent to $409,058, compared to 343,632 in the same month last year.” Affordability ratio in Toronto is 5.84, which is still very high by normal standards.
So let’s see:
If Vancouver reverts to a ratio of 4, average real estate price = $250K condo/$320 SFH area, or about one third of present levels.
If Toronto reverts to a ratio of 3, average real estate price = $220K area, or near half of present levels.
At the depths of a correction, there is the strong chance of an overshoot. In which case I am an optimist.
If real estate was a stock, I’d sell it. Then buy it back later at half the price.
Real estate bulls can rebut my logic if you can.
Garth:
Depression rather than recession in USA article.
http://www.infowars.com/we-are-in-a-depression-not-a-recovery/
Check it out. Makes a lot of sense.
Garth,
I am an avid reader of your blog, but seldom (rarely) post. As I am from the Vancouver area, I am curious about the future “Opportunity Loss” a number of recent RE buyers will experience. With a crash (or fender bender) in housing on the horizon, recent buyers with large mortgages will face losses in the value of their RE holdings. What opportunity have they lost in other investments by putting large eggs in one large and tippy basket? I’d appreciate your thoughts and the Blog Dogs as well.
Enjoying your book,
Sailorman
Just got your book Garth , lots of info to take in.. question to you and the board you mention that going forward , we should be looking at an Urban location not suburban.because of cost of travel and price of oil. In particular areas that make sense in the city of toronto. looks like only thing their building is condo’s in downtown toronto.. would this not make for a good investment especially if baby boomers are retiring in a few years that would be an ideal situation to downsize ESPECIALLY IF re CORRECTS they should take the biggest hit…
#43 nostradamus jr.
“It may be an excellent harbinger of where Vancouver’s Real Estate’s price future is headed.”
Ya … down.
#55 Sail …
1. Checked what planet we’re on lately ?
2. You’re supposed to throw out the old callendars … you can’t reuse them.
3. Yes Canada is different – completely different. Very very different. The mostest differentest. And getting morther and morther differenter every day.
4 We better keep on differenting because if and when we do start differenting less and start becoming samer like the rest of the morther developted planet places some Canada Units are going to be terminating – especially the ones who have been using the same callendars over again.
Dan in Victoria….this is not a DIS!
We all get what you are saying….it’s hard to live on way less money. How can anyone be expected to be able to pay for their services when they can’t make a living wage? Isn’t it complete madness to run the country into the ditch by pursuing this economic model?
The answers are.
- Consumers will stop buying all of the frills when things get much tighter.
- It’s complete madness to pursue this bubble any farther.
Wait for the HST to hit 23 July 2010. It will like someone turned off the tap. It will be the final straw that slams the whole thing into full reverse. You may say that we already pay the taxes on goods and services right now, the thing is, those costs are buried. When consumers see that they have just been handed a 14% haircut on all goods and services and they realize that they have become the final source of tax recourse for the govts, I believe that many canadians will finally give up the lifestyle of living on credit.(sorry, bit of a rant)
Another thing is that many canadians who work in the services sector have already had their personal financial economies reset. They haven’t asked to be left behind, to become second class citizens, havenots.
Consumer demand for cheaper and cheaper prices have driven many skilled service providers to hold the line on prices and chop costs. The HST for these businesses will be the final nail in the coffin, how frakkin’ hard must a person work to cover their lease and pay their taxes. In short, I beleive many people will surrender, as the screwing that they are getting, will not be worth the screwing that they are taking.
Dan, you and I both know that an independent guy can get skinned in a heartbeat. That is why your are wise and see the crap comin’, you’ve probably been skinned a time or two, and survived.
Hard times are comin’ brother, but you’ll be okay, because you’ve lived the hard times before.
The canadians that won’t be okay are the one’s who don’t know what hard times look like or feel like.(It’s the feeling part that’s going to hurt a lot of people)
Knucklewalker….F**KIN’-A!
It only works because of cheap energy and that tanker is sinking. Sure was fun while it lasted.
Thanks for the link. It’s on my bookmark bar.
That is all, carry on.
Advice.
1. Sell your home now and get maximum equity. Do your best to become debt-free now. Today. Or sometime very soon.
2. Find a small town w/cheap housing and some land. Make certain it is nowhere near a prison or correctional facility. Having family nearby is also prudent – unless they were just released from a prison or correctional facility.
3. Buy silver – it’s still cheap. Especially as I type.
4. Make sure you have land with good soil and good ground water. Quite critical. Always a safe hedge.
My fellow Canadians… We are in for a HUGE awakening. Every prole in every metropolitan area in this country refuses believe their quality of life is unsustainable (not to mention useless – we are a culture built upon vain fashions, brain-numbing gadgets, piss-poor music and juvenille, sometimes pornorgraphic entertainment) The sheep simply can’t conceptualize their beloved way-of-life ever come down like a stack of Jenga sticks. They are too focused on the Super Bowl, cheap trips to Phoenix and Vegas, and American Idol. (I left out the NHL because I am a huge fan. We all have our vices!)
The economic system is not only broken. It’s inherently corrupt. Perhaps why it’s broken?
There’s Grace and Hope in such unraveling. But it will be painful for most, whenever the jenga sticks begin to tumble….
Greedy or Fearful… no just a lot of HUBRIS
The predatory “buying opportunity” of late doesn’t inform the thinking of Mr. Harper’s enlightened Kingdoms group think …hear that Atlas! Symbiotic relationships co-operating harmonously together are in! Women and children need to go into the planet’s life boats first whilst the greedy sink into their sea of debt. How proudly he speaks to other nations about our systems such as our banks and social safety nets.
More expensive than gold but security comes first yes.
I read that tritium decays quickly; supplies in nuclear bombs must be replenished every ten days.
#47 miketheengineer — “. . . be prepared for anything.”
Excellent point. Expect the unexpected, as life itself (which is the greatest teacher) always deals new cards to everyone, everyday.
Our youngest son (25) has treatable, benign facial cancer and two other friends have terminal cancer, all within the last few months or so.
#52 knucklewalker — “the average wealth of a Canadian is about to plummet…..along with all else.”
This is what the poster from Asia says — The Great Global Reset!
But as North Americans will have lost most of their “supposed” wealth when the ongoing and current Reset has finished, it means that someone else will profit handsomely from other’s misfortunes.
Here is where #38 I. Muvrini’s post — “Buy when there’s blood in the streets” — Baron Rothschild, 1871 comes in, as it becomes easier to understand who is behind all the present mayhem.
There IS a reason why all this is happening, with plenty still yet to come. Mike said “be prepared”; how prepared are we here, on this blog?
That is when sheeple (the mases) will be separated from the sheep-herders (us).
Good thing we spent so much money bailing out GM, buying bad mortgages from banks, and paying for home renos and basic labour trades instead of investing in research/science/technology:
http://money.canoe.ca/money/business/canada/archives/2010/02/20100203-150624.html
“The study said it can be conservatively estimated that at least 75% of workers in Ontario will need postsecondary education and/or training by 2021 if they are to be employable in Ontario’s new innovation economy. However, if current trends continue, only about 64% is actually expected to have acquired postsecondary credentials by that point.”
The Conservatives bet the entire recovery in road pavers and home contractors, and we need doctors, engineers, and entrepreneurs.
What’s F’s education again?
Flaherty holds a Bachelor of Arts degree from Princeton University, as well as a Bachelor of Laws degree from Osgoode Hall Law School of York University. He practised law before entering political life, and was a founding partner of the firm Flaherty Dow Elliott, a firm specializing in motor vehicle accident and personal injury litigation.
So, he took arts, and then chased ambulances… totally qualified to run our country’s finances!
Try to paint the complete picture if you cite Vancouver sales and listings information….
First of all, an “increase” in listings is really seasonal.
Is it really a surprise that people took their houses off the market in December and then re-listed in January and February. This supposed “bearish” pattern has been the same all during the boom years. Sorry, but this is no “flood” of listings.
Second of all, listings are still extremely low, around 9000 for the REBGV. Just to keep things in perspective, during the last EIGHT boom years, when MOI favoured sellers, listings hovered between 8000 and 12000. We are STILL in very firm sellers territory and MOI is still around 3/3.5.
It looks like someone is grasping at straws…
Oh well, maybe things will change with the March federal budget. Oh sorry, I forgot there will be no catalyst this year with changes to the DP and amortization requirements…
Most astounding news today – the unlimited cheques given to Freddie and Fannie are not included in the budget.
#55 Sail1
Yes real estate in Canada from 1990 until 2010 has been a spectacular investment.
Almost as good as investing in real estate in the US from 1990 to 2007.
Just like shooting fish in a barrel.
Oh wait, I forgot, rates may rise as well. Sorry, I forgot that one is not going to happen for some time…
http://www.reuters.com/article/idUSN0419521020100204?type=marketsNews
Re message #8
As a stair builder I spent 26 years working at market pay rates ranging from $4 an hour as an apprentice to $15 an hour business income until a hand injury and this economic depression stopped me from working for the time being.
That $15 an hour translates into a $9 to $11 an hour pretax profit by the way. So I know what it is to exist in Canada with out getting paid to live there.
To those who would bitch about a 40% pay cut I say tough! You should be gratefull for that $26 an hour and consider $16 an hour an improvement compared to unemployment or $0.00 an hour. As for people who buy zillion dollar houses and find they can’t pay any more or can’t find a buyer I say tough! You all had a great education and were born with a brain and you are all big boys and girls. You should have known better and should not have taken foolish risks. The entire housing market as we know it is about taking foolish risks based on unreal expectations, ignoring fiscal conservatism and cheating by combining incomes.
Now the party is over and its time for the majority to wake up and smell the coffee. Your juicy salery can be reduced or terminated and you can be left with enomous debts with no way out and no greater fools to bail you out. There is after all a finite supply of greater fools.
Steven
Well shiver me timbers, it seems like yesterday Mr. Harper and Flaherty were talking up our economy even more. And they are not even at work. (oops sorry off housing) wait jobs, recession, retirement, savings and our standard of living all have everything to do with our economy ” Get Greater Fools”
The global economy is recovering from the recession but will be dramatically changed for the worse, and Canadian companies and workers need to prepare for that, says Bank of Canada governor Mark Carney.
In an address Thursday to the Winnipeg Chamber of Commerce, Carney said he’s not sure corporations and the labour force are prepared for the changes.
AGAIN!
Read more: http://www.cbc.ca/money/story/2010/02/04/carney-speaks-winnipeg.html#ixzz0ebKX29Zg
Addendum!
dramatically changed for the worse
No need for a dictionary 3 the 5 words are bad news bears. Get it?
not sure corporations and the labour force are prepared for the changes.
So if y’all are were not ready for the last round how the hell are you going to answer the bell for the next?
And where is Harper & Co …. in the hills practicing for the next round of Snowballing voters event.
So to put as simple as I can throw all those past numbers out the window and prepare to find cash and protect yourself, long term speculation will be fine for those who are secure and young. (40-20-20-20)
Did we not mention GIIP —-Greece Ireland, Iceland Portugal ….. (Global Economy)
PS: Thanks for your blog Garth it has been an eduactional and truthful source for many.
Just waiting for someone to point out the 260 point loss today on the TSX as an indication of the coming RE collapse…maybe the subject of the post tonight?
Lol…so predictable when you cater to people at room temperature
I think what I like most about these comments is the bulls that pop in with smart-ass/weak/incomplete arguments that are always good for a laugh.
When they drop off, we will know that the last of the fools are gone and soon it will be time to buy….
#80 BDG YYC :
Loved the reply, especially number 4….
yours truly has called this pullback in the market and rally in U.S dollars. I’m sure there’s some that are saying “oh my gosh gold is tanking”. I told people on here to look at gold versus other commodities. Commodities in general are falling far more than gold. My gold/commodity ratios are telling me that gold is holding better than they are.
I mentioned over the past few months that a pullback would do what I stated above and this would make gold mining stocks, especially junior gold mining stocks more profitable. The proof is in the pudding. Commodities are falling relative to gold allowing people to make massive profits in gold mining shares.
Garth,
reading your book. I can not stomach too much risk, but it is RRSP time and I would like to know what would be better: market linked GIC or segrated funds over 10 years?
Thanks
Neither. A market-linked GIC is a lousy investment, especially since markets will be trending sideways. The seg fund has an MER of at least 4%. An RRSP is for long-term assets and growth over decades, so why not a nice selection of blue chips, or something like energy sector and precious metals ETFs? By fearing risk, you are taking a greater one. — Garth
The effect of this will be most likely to crush stock markets and commodity prices. Bonds will be bought, and some gold. Gold should decline less than most other assets, due to some safe haven buying. But the primary winner here will be the US $ and Bonds.
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The primary winner will be: 1. gold stocks (especially juniors), 2. U.S dollars 3. Gold 4. Bonds
Re: #49 Defrauded2 on 02.04.10 at 9:27 am
A sad tale. Send me details offline (garth@garth.ca) and I will assist seeking justice in any way I can. — Garth
Well, I’ve got the same story, just another version related to the ABCP collapse and the lies I was told by Vancity Credit Union and its Financial arm Credential Securities.
How can they expect anyone to invest in anything other than guaranteed avenues if the banks (and Credit Unions) can just bald-face lie to you with no repercussions. The Ontario Securities Commission is the most corrupt (just take a look at Marketplace’s show on the OSC (which includes the TSX) and OLG). This corruption extends to the IIRC, the MFPA, the BCSC in BC et al.
Why not let the people know where else we can put our money where it won’t disappear into the ozone through theft or fees and mismanagement other than real estate or gold-silver-platinum. At least you have something tangible in your hands (even if it is worth less) instead of a court case or suits.
Isn’t the number one rule for investors “Preservation of Capital”?
#88 omg
I suggest you keep fishing until you can.
Real estate market surging
Early signs indicate that Canada’s hot real estate market surged again in January. Among the cities to report data, sales rose an average of more than 60 per cent, and prices more than 14 per cent, from a year earlier in Toronto, Calgary, Edmonton and Ottawa, BMO Nesbitt Burns said. In Toronto, sales jumped 87 per cent and prices 19 per cent. Earlier this week, the Real Estate Board of Greater Vancouver reported that, excluding apartment properties, sales rose 141 per cent in January from a year earlier, and prices 19.5 per cent.
http://www.theglobeandmail.com/report-on-business/canada-probes-prius-brakes-real-estate-market-surges/article1456570/
One more thing, Garth I will be seeing you in Surrey on Feb.27 when you speak at the Casino In Langley. Hopefully they won’t lose my admission like they did at the last one at the Northview Golf Club and wouldn’t let me in. I’m now boycotting that Club and telling everyone I know how rudely I was treated, after a 2 hour drive to get there!
Again I apologize on behalf of the organizers, and I was unaware of what happened in Surrey. Please come by in Langley after the talk so we can meet. — Garth
With respect to China and debt…
Who has the bigger club: China or USA?
Why are we in Afghanistan?
I’m betting on the USA and buying low.
#95 I agree on your assessment…but the tricky part is…..which shares does one buy??
Are you a Howard Ruff aficionado?….or do you have any advice for a gold mining stock picking newbie….I have always been a guns, gold and garden supply kind of guy….but I am willing to learn new things.
Knucklewalker,
Greer presents some interesting ways of looking at our future, especially in light of his view of what he calls the myths of progress and apocolypse.
“The Long Descent” however, beyond these concepts, didn’t really contribute much over what has already been stated by other more comprehensive authors who have better writing styles. I got the feeling throughout his book that he was stretching for volume by repeating ideas. It reminded me of some of my grade 11 essays, reaching for those additional sentences to struggle over the 2000 word minimum.
It’s somewhat disconcerting that he can dismiss “apocolypse” so handily. I guess it’s a matter of definition or semantics. If in some energy poor future my grandchild dies from insulin dependant diabetes or dies from a brain abscess following an ear ache my definition of apocolypse might be different from a biblical themed event. Its also hard to reconcile his dismissal of “lifeboat communities” (survivalism lite) when these are the places where the very actions and skills that he encourages latter in the book are being put into place.
And I will refrain from a tirade on his spirituality except to say I don’t think Druidism or whatever he wants to call his belief system is more valid than any other system. I think from a practical point of view, his comments on Druid spirituality detract from his book and resonated with me as much as Sarah Palin’s myoptic comments on her spirituality.
91 David B on 02.04.10 at 3:53 pm…….the harpocrites have done this since day one…preach both sides of the story and they are never wrong..they use our tax dollars to preach a recovering economy with ads full of actors stating how great things are..then by the same token express caution towards a potential real estate bubble and increasing household debt…but in general they really don’t give a “rats ass”…the caviar is flowing in Ottawa ..no hard times there in fact the government is growing…………power is the game and so sad but too bad for the suckers paying their salaries
#93 Vancouver Rocks,
My Bear to your Bull. The only relationship to the TSX drop and Re drop is indirect. It shows that the recovery is tenuous and that volitility will continue. I expect that pattern to repeat many times over 2010.
The economic events that will lead to a drop in Re are probably not directly related to ups and downs of the stock market. The key factor right now is affordability. My view is that buyers are pretty much spent. I agree with you that the market is small with very few listings and very few buyers relative to the past. Uncertainty is the prevailing attitude.
The issue for RE will be the next confidence trend. Will it trend up or down? Obviously I think there are many, many more events on the horizon that would send Re down than up. However I doubt rates will go up or the CMHC changes will be made until at least the summer.
I can see the shit is about to hit the fan, not only with the housing bubble in Canada but all the uncertainty in the Eurozone. Greece, Portugal, Spain probably unable to pay their debts through revenue income and possible requiring a bailout (if they can get it). Hard times are a coming!
Also, the Bank of Canada Governer issues a dire warning today:
**************
“Carney said Canadian companies have fallen behind on their investment in new technology, while Americans have seen a surge in productivity during the recession and are emerging more competitive than ever.
He also predicted that many of the jobs lost in the downturn will never return and that Canada might be heading for a period in which unemployment rates are generally higher than they were in the past.”
****************
I might be a bit naive, but wasn’t everything rosy last week with how well we in Canada were doing. I thing I need a Shrink to help me understand the contradictions. I guess I’m not the sharpest tool in the shed!!!
As i have mentioned repeatedly over the last 6 mts or so, the bond market vigilantes are finally here. They started their adventure in Dubai, then Greece, now Portugal and Greece….then possible Ireland, UK, Japan, and US and Canada. The bond market has a noose on the economy. The economy cannot grow too fast, or rates will rise – who wants to hold a 10-30 yr gov’t bond at under 4 or 5 % ? If the economy goes into a nasty recession again (more likely – second half 2010), tax revenues collapse, and rates go higher as the vigilantes request higher rates to compensate for uselelss/corrupt “stimulus” spending and related deficits. Even an economy that remains weak (barely positive GDP growth) will eventually cause problems as tax revenues remain too low to cover mounting debt levels which are already near record levels.
Sorry to say folks, the bond market will decide how things play out. The risk is an outright collapse in bond prices over the next 5-6 yrs…rising rates/bond scare now and lasting through 2011, then one last decline in rates possibly 2012/2013, before a wicked rise a la late 70’s between 2013-2016. God help anyone renewing a mortgage between 2013-2016. Get ready for “austerity measure” budgets.
The gov’t better tackle the bloated/overpaid public sector at all levels..the term civil servant is a misnomer…it’s been the civilans doing the serving. Admin assistants/records clerks/garbagemen/day care workers and the like mostly making salaries that average up to double or more what the same job pays in the private sector..with cadilac pensions to boot. Ironic how the vast majority of the productive folks who pay for it all and do not work for gov’t have no pensions or have pensions that are meagre.
Somethings got to give.
JO
#84 – Nostradamus le mad Vlad
I survived cancer (bone) about 26 years ago. I did conventional therapy, and “mega” dose of Vitamin C. When I wasn’t barfing, and could stomach it, I took about 1000mg daily. I did this a year into remission. I had a strong “prayer” group of little old Italian ladies who were praying daily for me as well, though I didn’t know it at the time. I learned about the Vitamin C from Mr. Silva. I met him at the Hamilton Cancer Clinc at the Henderson Hospital. He told me how he started with the Vitamin C and how his cancer “shrank” in size (with conventional meds as well) They gave him 6 months and he stretched it to over 2 years. I used Vitamin C and mom purchased a juice extractor, and I drank “pure” fresh fruit juice and Pure fresh vegatable juice as well. You have to do a radical change in your life, and most importantly, you must have the will to live. The doctors and nurses at the Henderson were awesome…..just awesome. Believe it or not, I do have some fond memories of that experience.
re flaherty’s education. the illuminati needs puppets with general education. flaherty, harper and the aptly named carney are products of the canadian school system. we’ve all been through that system and know – they were brainwashed. all graduates of Canadian schools are completely clueless about the real causes of wars. blame the school boards. i learned more history by reading the text of a single Benjamin Freedman speech, than in 5 years in High School. history is not politically correct- it’s slavery, mass murder and mayhem
Junius #105
I was being facetious, and commenting on what will most likely be raised in this evening’s post by the author. But thank you for confirming that the two markets are not linked
75 Got a Watch
Dont you know its different here?
From the link at 72
In Beijing’s Chaoyang district—which represents a third of all residential property deals in the capital—homes now sell for an average of nearly $300 per square foot. That means a typical 1,000-sq.-ft. apartment costs about 80 times the average annual income of the city’s residents.
Meaningless in a country where the middle class amounts to 2% of the population. — Garth
Go here for history and geopolitics. You won’t regret:
http://www.engdahl.oilgeopolitics.net/
http://www.amazon.com/Century-War-Anglo-American-Politics-World/dp/074532309X/sr=1-1/qid=1165788589/ref=pd_bbs_1/103-9935134-1529436?ie=UTF8&s=books
#55 Sail1
I’m not sure why I am wasting my time explaining this to you.
We are a mirror image of our neighbors to the South. They have been our largest trading partners by far for 100yrs and the wealth we have in our financial system and our houses is due to this fact.
Just because we have not seen a major RE correction since 1991 would likley suggest that we are due for one!
If our neighbors to the South loose their wealth, it will affect us in profound ways!
You are a short sighted small minded person and your words speak volumes of immaturity!
“Meaningless in a country where the middle class
amounts to 2% of the population. — Garth”
I did say its different here. And cheaper too. And 2% isnt
a middle class. Its quite elitist. If you checked the links I provided yesterday, you would see its quite different in our “property owning democracy” than the reality of so much of the world. You’ve said it many times Garth – housing is not an entitlement.
Thanks again for hosting this blog.
quote from someone on the internet.
“Most of all, don’t try to be like the people who raised Toronto home sales by 87% last year, lifting prices by 18%. Those people just bought themselves a one-way ticket to the slaughterhouse”
#95 I agree on your assessment…but the tricky part is…..which shares does one buy??
Are you a Howard Ruff aficionado?….or do you have any advice for a gold mining stock picking newbie….I have always been a guns, gold and garden supply kind of guy….but I am willing to learn new things.
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first off, you want to know that things are going the way I’m projecting. One thing you can look at is the gold/silver ratio. The ratio was at 58 or 59 a week and a half ago. We’re now at 69. Anything above 65 in the ratio has always indicated credit problems. Sure enough, early last week we broke above 65. As the ratio widens as it has, it signifies bigger spreads between gold and silver, and most likely gold and other commodities (you’d have to find some other source to find a gold/commodity ratio to measure). The numbers don’t lie.
As far as which companies to purchase, it’s your duty to speak to as many geologists and experienced mining people you can. There are literally thousands of mining companies and very few will ever go into production. Although in a mania, even crappy companies do well, but you do want the best chances. Try to find a lot of good companies that prudent mining people like and then do your own due dilligence of those companies. I like to spread an equal amount of capital to each company. With all this being said, I think there will be a mania in gold mining companies – especially junior mining companies, as their balance sheets will reflect exactly what I said would be happening and what is happening. These companies have not seen balance sheets like they have in the past year and a half in decades.
The more credit problems in the world, the less leveraging and spending by corporations and governments. What I’m talking about is a deflationary economy, the type of economy that is ruled by gold mining stocks.
keep in mind, the last time the gold/silver ratio was above 65, Lehman Brothers went under.
Well that was fun, Some people obviously understand what is coming others shoot the messenger because they disagree with some math. Whatever. Seen and lived this story before. LOL got a nice thick hide from it.
The main thing is to get it out there for debate, and make people think.
Post#81 Chaostrology, yep been at this along time, got a few bruises along the way. Very much Appreciate your thoughts.
Just HATE to see young trusting people who really don’t understand how this game is played get led to slaughter.No one taught us.
Post#70 Hoon feel free to step up to the plate and offer up your thoughts. I might be having one of my stupid periods.
I’m not really into debating what I think, I think what I think. Take it or leave it.(doesn’t mean I won’t change my mind) I go and make my own way. (come to think of it maybe thats why I was always in trouble in school) Please introduce a diffrent line of reasoning I would enjoy analyzing some diffrent thoughts.
My mind is always open to well thought out, intelligent conversation, and ideas.
112 ekstso on 02.04.10 at 9:33 pm
I have to agree with you… i have the century of war book and have read it a couple times…. excellent read for anyone who wonders…
#113 conf in T.O
Please don’t waste your time. Its fear mongering idiots like you that have convinced people to sell their homes because the world was going to end. Are you still in your parents basement apartment?
# 56 My View
Seconded!!
I have “Century of War” in PDF.
Can e-mail to anyone.