Days ago a prestigious national financial professional group asked me to keynote their autumn convention. Sure, I said, and agreed to deliver a talk on the causes, impact and legacy of runaway societal debt.
When asked the title of my talk, I gave it. “House porn.” Not sure, but I think I heard little fainting and gurgling noises on the other end of the line. I am so looking forward to that talk.
You know my thoughts on mortgage debt. It’s the leveller. Perhaps the greatest financial irresponsibility of this generation was to give hundreds of thousands of people with little money billions of dollars at rates which will reset 200% or 300% higher. This alone is reason to believe we are headed for a multi-year housing melt.
Slagging sales and rising listings now, price crumbles by Christmas, desperate sellers in 2011, vultures in 2012, then three years of mortgage renewals as VRM victims meet interest rate reality. If you think there’ll be housing bargains in a year or two, just wait for 2014. You’ll be able to buy houses and write the womenfolk into the offer.
But perhaps I’m a tad conservative. I received this note hours ago from a guy who was an investment banker at Morgan Stanley in Manhattan, chopping toxic mortgage paper at the height of the US housing bubble:
“Straight from the horse’s mouth, the Toronto Real Estate Board, Toronto prices in May averaged $446K, and in the first two weeks of July they’ve crashed down to $427K, putting Toronto prices on a pace to hit $340,000 in 1 years time— but in my experience, the acceleration of the downward trajectory will increase exponentially once the mortgage holders attempt to get out of their mortgages. I foresee prices breaking below $400K by Christmas, and then a steady progression towards below $300K for most of 2011.
He continues: “Canada will see the same housing crisis as the States has been, and for the naysayers, must I remind them that Canada did and does have subprime mortgages— 0/40 & 5/35 mortgages (with the 5% downpayment amortized across the mortgage essentially resulting in 0-down mortgages), artificially and historically unprecedented interest rates, and a general mentality that Canada is different, that housing prices can only go up. But we all know how that ended in the States. In Spain. In Australia. In Japan. In Ireland. Sigh.”
Yesterday US Fed chairman Ben Bernanke rattled markets when he told Congress the American economy faces “unusually uncertain prospects.” That spoiled a perfectly good stock rally, sank our dollar and dashed hope that recent bad economic news was a fluke. The reality is sinking in that even after tanking interest rates to zero, paying people to buy houses, bailing out whole industries and spending $1.5 trillion buying back crappy mortgages and government bonds, Washington is stymied.
Now I mention these things because you should know them. Most people don’t. They’re busy buying Capri pants and riding mowers.
Credit’s been so easy to come by in our society, so normal and accepted, so routine and innocuous, that we’re now addicted. Using other people’s money to buy houses cars and plasma TVs has made us immune to the fact we don’t generate enough ourselves, that we’re living beyond our means.
So, we have the phenomenon of young first-time homeowners padding around in 2,400 square feet of perfectly finished space in a manicured burb, replete with stainless and stone, while their parents never achieved anything close – after a lifetime of work. The kids get luxury. Their folks get adequate. But the old ones also have equity, and safety.
The housing market, and the Canadian middle class, is at serious risk. There’ll be no job-filled recovery here while the US stumbles. No chance mortgage rates will ever sink back below 2%. No planes full of rich Chinese or Iranian greater fools to save us. Instead, next year’s headlines will be about negative equity and the TV casts will feature first-time sellers stunned they’re losing everything.
This is the pornography of debt, thanks to the lust for houses.
Finally, to remind how we got here, believing we’re different, and could make the same mistakes as America without consequences, is former Stephen Harper speechwriter Michael Taube. In Sun newspapers this week he wrote:
“In Canada, we don’t offer subprime mortgages to potential clients. Most importantly, credit checks matter. If you don’t have sufficient personal income or assets, you ain’t getting the deed to the house.”
Sigh.
179 comments ↓
Interest rates went up on Tuesday for the second time in 3 months, with 2 more promised increases to come, over another 5 months, economic conditions permitting……yet the Calgary Herald has left this rather important financial consumer interest tidbit off their website for the last 48 hours.
They did have a 2 sentence blurb online for an hour or so, but it rapidly disappeared around lunch hour on Tuesday, never to return.
They must have had more than a few really aqngry phone calls on Tuesday morning from their only advertiser of note…..the real estate industry.
Heh…..snort,chortle, spew……
Interesting analysis, what really surprises me is that there is a general belief in todays economy that debt is good. You are viewed by those with debt as a moron for not getting on the bandwagon.
My wife, child and I rent a house and we are laughed at by our neighbours who each have over 400K in mortgage as being overly conservative and a bunch of chicken littles.
I have never wished ill on people but boy it would be nice for a dose of reality for some of these folks.
Garth, you’re right …. we are returning to the mean …
the “credit expansion” years seem to be over.
” …we don’t generate enough ourselves, that we’re living beyond our means.” It could not go on forever.
You didn’t need to be an economist to figure it out.
Some people on here may remember more difficult years, but many younger ones have been unaware. Has our governing class become so callous, or have they simply lost their way? How could so many
educated and informed people get it wrong?
“In Canada, we don’t offer subprime mortgages to potential clients. Most importantly, credit checks matter. If you don’t have sufficient personal income or assets, you ain’t getting the deed to the house.”
Truer words have never been spoken…what mortgagees are doing is RENTING, expensively. Loaned a house for a short time, they WILL lose it.
I’m glad to hear you mentioning…
“…we’re living beyond our means…”
…because realising that is KEY. We simply don’t produce enough real wealth, or produce it cheaply enough, to support the lifestyles to which Canadians have come to feel entitled.
This is not a “credit crisis”, an “unemployment event” or a “Great Recession” so much as a PRODUCTIVITY crisis…
SO…get ready for: ONE car, smaller houses, local education, cooking at home, stagnant salaries, permanently high structural unemployment, low-to-no REAL economic growth (never mind government stats, GDP, CPI – they’re all measured in dollars).
And your kids living at home…
I’d like to see shrinking governments, free market interest rates, lower taxes, an end to business licensing, relaxed zoning regulations, permanently capped property taxes, the end of compulsory CPP and healthcare deductions, fewer government employees paid less, abolition of minimum wages and the end of student loans.
Because we desperately, desperately need small business startups, entrepreneurship on every street corner and less regulation…
Sorry. Rant over.
Finally, to remind how we got here, believing we’re different, and could make the same mistakes as America without consequences, is former Stephen Harper speechwriter Michael Taube. In Sun newspapers this week he wrote:
“In Canada, we don’t offer subprime mortgages to potential clients. Most importantly, credit checks matter. If you don’t have sufficient personal income or assets, you ain’t getting the deed to the house.”
Shocking – another Stephen Harper party member (ahem, Flaherty, ahem) that doesn’t understand math or statistics… maybe this is why the head of Statscan quit???
Speaking of stats, a small dip in average prices from Spring to mid-summer is quite typical.
What won’t be typical is when there is no rebound in August-September-October. Then, in early 2011 when some of the 2006-era 0%/40-year mortgages start the 5-yr renewal cycle… that’s when the real fun begins.
*sigh*
#2 Mike, I’d love to join you for that schadenfreude party when it comes. But there’s a problem, as pointed out on the Edmonton real estate blog today:
“I’m not sure what they think is coming that will bring a 20% or even 40% drop, but if it comes I don’t think they’ll be happy in the end since we’ll be in the middle of a major melt down.”
As much as we can take the advice here, and protect ourselves from the destruction of our money, we can’t entirely protect ourselves from recession, and that’s what comes hand-in-hand with this future. A few posts ago I asked Garth in the comments if he thought it was too late for the government to duck what we almost all here believe is inevitable. I’ll take the silence as a “yes”. I would have no problem if there was a way to escape this future, no problem accepting being horribly wrong about this. It would be better for us all if the debt could be accumulated ad infinitum, if no one ever had to pay the piper.
I did okay last year betting against the Oilers, too. Predicting the inevitable results, even profiting from them, doesn’t make me happy about them.
Yes, exactly. I’m an accountant and I have clients who have $700k-$900k of mortgage debt. And their income is $55k per year. The creepy basement suite tenant helps meet the mortgage payment (for now, but not when rates are higher). People are delusional.
“In Canada, we don’t offer subprime mortgages to potential clients. Most importantly, credit checks matter. If you don’t have sufficient personal income or assets, you ain’t getting the deed to the house.”
Three years ago after a logging injury I had a job change, and worked in a wood working shop for $12 an hour, for 3 months.
For shits and giggles I went to see a mortgage broker, and within minutes was approved for a $400,000 loan…I’ll always remember her saying…”We’re gonna get you a home because CMHC will back you…”
I said no thanks and vomited in my mouth a little…
I now have a well paying job, I still rent my house and save and invest. I think I’ll go house hunting in a few years.
Great job Garth, I enjoy your reading material!
But we all know how that ended in the States. In Spain. In Australia. In Japan. In Ireland. Sigh.”
Garth,
How is Australia included on your list? Our house prices increased over 20 percent last year and are still climbing. Economist magazine this month reports we have the most over valued house prices in the whole world (62% overvalued), but we don’t care we are different down here, we have kangaroos, a housing shortage, love our houses, booming economy, low unemployment, resources by the bucket load and china as our friend.
Toronto prices in May averaged $446K, and in the first two weeks of July they’ve crashed down to $427K, putting Toronto prices on a pace to hit $340,000 in 1 years time
Yeah because that’s a valid extrapolation.
Yesterday it was 20 degrees, today 25. By next week my cat will spontaneously combust.
The next, more devastating leg down in the economy has begun. Housing has rolled over and will now go through hell. 2011 ought to be the worst year ever in Canadian RE. This fraudulent economic model will enter its terminal stage. It is best described as a massive debt based Ponzi scheme – creating massive amounts of heavily subsidized debt (think 0 % rates and CMHC/NHA programs using guarantees against all current and future taxpayers to help speculators and people with no money to buy houses) with banks laughing all the way to the bank with the gov’t.
This will get very interesting when people trapped in this disaster – many of whom should never have borrowed such large amounts of money at such cheap rates (theft from savers due to artificially low rates on deposits and also from lost purchasing power as all that debt and money is spent)- start to beg for taxpayer bailouts/help…the crooks in power may try a failed progam or two at first,but it will end in a tragic debacle for all but the senior bankers and corporate elite, as well as a large segment of the public service, make out like bandits…well the PS will get its Greece moment soon,but until then, enjoy the party.
As this next phase gets more intense, Canadians will come to understand the truth about how things really work – our “democracy” is much closer to totalitarian/fascist rule than “democracy”. Expect drastic actions, mostly failed actions that further punish the prudent and innocent among us.
Let the debacle rage on.
JO
With most markets, once the appropriate psychological resistance point is breached the way down is usually much faster than the ride up was. Think stock market in 2008, NASDAQ in 2000, Gold in 1982. So I don’t know. I agree with the substance of most of what Garth writes but not always the flavor. I contend that the bust started in 2008 and for a year or more the unusually low rates and stimulus measures have just been loading a spring. If by the end of 2011 we are at the price levels that the US experience suggests would have happened had the 2008 move been left to run it’s course, the move could seem suprisingly rapid.
Sales, of course, will plunge as sellers hold on to prices that are anchored in their brains. Buyers, on the other hand, overwhelmed by listings will hold out for that perfect house to come to the market and have dreams of Los Vegas in their minds. But sooner or later something will have to start clearing, and actual sales prices could be down 20% in a matter of months. Sellers will then all pull their listings on mass, but sooner or later the three “D”s will do their thing (death, divorce, downsizing). Throw in some Canadian form of foreclosure and we could be back to 2005 or even 2004 pricing before this is all over. Or even 2000 with a CPI type adjustment of 2-3% increases over the 2000 price for 10 or 11 years.
I don’t foresee much overshoot below that. A few houses may sell at distressed prices, but I think get back to 2000 price levels with an inflation adjustment and it’s the go to investment area in an environment of economic uncertainty, so long as people can pay rent.
-
“What problem? . . . mortgage debt. It’s the leveller.” — We, like the multitude of universes after this one, are continually unfolding but here, thanks to Garthmania, we’re unfolding a tad faster than TROTW.
It’s somewhat of a strange experience — knowing each person is fully and completely responsible for themselves, while at the same time watching zombiewoofs tread merrily on the path to self-help books and / or the abbatoir.
Yyeeeesss! There is a major breakthrough in the disappearance of all the cocoa beans. Details to follow!
#159 Bill (Peterborough) — “Money does not make a person; CHARACTER, MORALS VALUES AND PRINCIPLES DO. People who do the right thing.”
As long as one puts the effort forth and tries, it’s worth it. These ultra-rich baboons were born into wealth, and flaunt it in our faces.
They will get their come-uppance in the afterlife, when they suffer the same fate as they’re handing out now.
Scary Movie This chart makes The Exorcist a garden party!
DD — Not a double dip, not what you think it is!
Gold – Gits ma mojo working! “Ever notice how these little events that shake confidence in gold always happen at the start of a drop in the stock market?” wrh.com.
It’s official The US is Dead Man Walking.
More change is good. “Remember that it is in the interests of the bank and government to keep housing as expensive as possible, to extract the greatest possible profit from you over your lifetime.” wrh.com. Sound like socialism? Debt slaves / serfs, that’s us!
Laundry Dirty money needs to be cleaned (of drugs and the like).
Gandhi Interesting. Began in Europe, now it’s spreading. “I’m as mad as hell and I’m not gonna take it anymore!”
That’s one false flag shot to hell. North Korea had no reason to attack.
Cyber FF of a possible takedown. 2:59 interview with Jay Rockefeller. Five points for correctly answering which family he belongs to!
Brazil, via Turkey will enrich Iran’s uranium. Good for the three of them!
Ah, the Superior North!
But let’s go back a little ways, let’s say 1980 and the election of Ronnie Raygun in the US. The trends of money going to the haves while the middle-class flatlined had already begun in the mid–70s. But it was Morning in America that set the tone for for the next 3 decades. It was the beginning of the deification of the wealthy and the wealthy lifestyle.
Jimmy Carter said we had to be prudent, frugal and begin to transition from our dependence on fossil fuels. Ronnie said you can have it all it you first just give it to his buddies then they will trickle on you—er excuse me, I meant to say it will “trickle down to you.”
Business and government worked hard to create the demand and to sell the dream to Joe and Jo middle-class consumer. Hell, they built their bubble on it. And along with their cronies in the media they fashioned a compelling narrative: real estate is the road to wealth for the middle-class; it always goes up; the most important thing is to get in as fast as you can.
So if anyone was astute enough to notice that they were not part of the great leap forward in income, well it didn’t really matter because they had the clever use of debt and real estate to get them to the same place.
So if anyone tells you we got here because of some inherent sense of entitlement and that the real estate buyers were the perps, tell them to shove it. The bad guys were/are the banks, the real estate industry and all their hangers on. In other words the usual suspects.
And if you think we’ll just ride this out over the next few years, say 3 or 4 and then get back to BAU–that’s business as usual–then you are a victim of hope over reality.
The human race is a bunch of cowboys who happened on a saloon that gave out free beer. They moved in and had a pretty good time, even as they kind of wrecked the place. Now, understandably they don’t wanna hear the beer is running out. Some of them might shoot you if you try and tell them.
So, there it is spelled out above…”the Canadian middle class is at serious risk…”
A little rhyme describing this sorry orb, its controllers and their minions could go like this:
Haywire boat
Haywire crew
Goll-darn skipper is haywire too
And the rest of us are ballast. We’re being steered towards a destination. I don’t think the captain and his officers are very nice people. And you know what happens to ballast when the ship gets to port? It gets pumped out into the chuck because it is no longer useful.
There’s nothing wrong with selling your house and getting a 6% return on your “investments”. But if you let fear of running out of money distract you from “higher thinking” and blind you to the direction this world is heading, it may cost you your sanity when you come to the painful realization that your nest egg (if by some small chance enough of it survives that giant sucking sound pulling money from your pocket into the ether) is not the foundation you truly needed to achieve inner peace. Security is a state of mind and even millions in the bank will not calm a confused and fearful mind that doesn’t understand why we will be taken to yet another world war on top of the deteriorating economies, and a system that is unraveling and out of control.
Wondering what Garth’s opinion is on the census…
yeh or neh?
2010 Canadian GDP = +3.5%
2011 Canadian GDP = +2.9%
Your blog mentions that we are not different.
I think the past couple of years have proven that we ARE different.
Our GDP and real estate markets indicates that we ARE different.
We have been singled out by international bodies as being different.
Doomsdayers likes to compare CMHC and 0/40 with Fannie Mae and subprime. Sorry folks, NOT THE SAME.
Can anyone dig out the proportion of mortgages in Canada that were 0/40 (which lasted for what, 3 years max in a population of 30 million people?) vs. subprime lending which was occurring over 9 years in a population of 300 million?
Our top 5 banks were WAY more prudent than the top 5 in the USA.
Canadians owe $140,000 yet have $330,000 equity in their homes. How is this a scary scenario? Please provide a scenario of a rationally-functioning country; how much would the average person owe? How much equity would the average person have?
Awesome post Garth…yes I think you are conservative but correct to show that an even more agressive MeltDOWN is still probable.
Found this after seeing a BECU ad on TV (yes HD plasma I know ya wannit)
http://www.becu.org/properties-for-sale.aspx
BECU is Boeing Employees Credit Union, which started as just that back in the 30s, but has morphed into a statewide CU which any washington resident is elligible to join. As you can see, they have a link from the homepage to some CU-owned properties for sale – some nice ones too! Coming soon to your local CU?
What planet do you bears live on??? The Toronto real estate market is about to take off again and instead of taking advantage of the opportunity, you guys wallow in doom and gloom. Can’t you see the gold in the streets? I will try to dumb it down for you.
This press release is only a week old so the ink isn’t even dry yet, so you are getting the inside scoop first.
http://www.remax-oa.com/media-newsroom/article/60/
If you are not so good at reading, watch the movie:
http://www.youtube.com/watch?v=bN1EoK4YtYM
@#2 Mike.
I couldn’t agree more.
Victoria June 2010…HEADLINE NEWS…Be afraid, very afraid.
“Victoria real-estate sales fall 36 per cent, most in B.C….B.C. figures down 22.5 per cent while active listings skyrocket”
http://www.timescolonist.com/business/Victoria+real+estate+sales+fall+cent+most/3285820/story.html#ixzz0uNtER8Ch
How’s it goin’ on the BIG island?
Bin’ watchin’ the local real estate market for cracks and they are there. Even on the “Wet Coast”.
(which has not had any rain for the entire month so far.)
There is a 10 unit apt. building listed for three months. started at $ 1.1mil. Just relisted at $ 950.
Looks like a good haircut.
This just in from Vancouver:
A recent Metro Vancouver staff report contains disturbing figures about the extent of the housing problem in the region.
According to the report, written by senior housing planner Janet Kreda, a total of 55,765 households are at risk of being homeless.
Although one might assume that an overwhelming majority of these family units are renters, this isn’t the case. Some 24,470, or 44 percent, of these at-risk households are actually homeowners. The rest—31,295, or 56 percent—are tenants.
http://www.straight.com/article-334736/vancouver/metro-vancouver-homeowners-face-risk
So we’ll wait until 2014 (or just after Xmas 2103) to vultch? Sounds like a plan. Right now, wife and I will just drive around Kitsilano with our eyes on that (used to be) Million dollar “fixer-upper”… Should be down around 350K by then… lol…
Junius (Imp),
Garth called, he wants his inflatable RE agent porn doll back and no – you can’t go on a second date.
http://www.thestar.com/business/article/674995#Comments
Hmmmm.
Mike, my wife and I are in your boat. Been happily renting for several years now, putting out huts $1500 per month for shelter in a great part of midtown Toronto.
Similar to you, most everyone we know is either up to their eyeballs in debt, or in the process of buying property to ensure their fate.
After a few attempts at cautioning them, we stopped, because quite frankly the koolaide is too strong and folks are blind.
So we sit in our place, no debts whatsoever, decent savings in TFSAs, RRSPs, and non-registered accounts with steady growth + good jobs bringing in nice cashflow.
We know the fate that awaits our friends will not be kind, but they did it to themselves and we don’t feel any sympathy.
I live in the BC interior, and prices are definitely starting to fall. However, they are not crashing. I put my house up for sale in April, and after 2 small price reductions ended up selling it for only $13,000 less than I originally listed it for. And when I look around at other recent sales in this town I would say my experience is fairly typical. As for interest rates, while they do appear to be on the way up, they are still at historical lows. So with prices falling, and interest rates still at very low levels (5 year fixed at only 3.99% is a great rate IMO) this may well be a good time to buy for those with secure jobs. Holding off until the market hits bottom is just as foolish as trying to time the stock market, because one never knows when the bottom has been reached. People who have the down payment, have a secure job, and qualify for a mortgage, needn’t worry too much about buying their first home. Because a house isn’t an investment that you ought to make a profit on, it’s a place to live and provide shelter and build a nest in. So the message to the first time home buyer shouldn’t be “don’t buy a home”, rather it should be “don’t overextend yourself in order to buy a home. Wait until you’re sure you can afford it.” In other words, live within your means and all will be well.
It is getting harder and harder for the MSM to keep up appearances that it is business as usual even though they are trying very hard. The usual distractions are no longer interesting and explanations of certain events are beginning to ring hollow.
Lindsay Lohan going to jail for a few weeks is making world headlines. Why? It is what people are interested in would be the usual answer by the national broadcasting networks and the Larry Kings, etc. Who thinks this is true? I don’t, but if it IS true, then it’d be so sad that people have sunk to such a low level to lap up such pablum.
Larry King has been given the opportunity to bow out gracefully. His viewer ship has dropped to less than one million viewers. People are tired of celebrity gossip and the “Barefoot Bandit”. How and why does this make not just the US news but WORLD HEADLINES? They seem to have distraction (non) stories queued up and ready to roll out to avoid talking about real issues important to people.
The MSM and its so-called experts are doing their best to keep people ignorant and “at the table” playing cards until the house has their money. Unfortunately there are still too many people, particularly young people — property virgins, who can’t get even recognize the biggest housing bubble ever in certain markets (we know the list), let alone see through politics and the exploitative and often criminal banking practices of the “too big to fails”.
Must be something in the water, or the air, or the food and drink…maybe all of the above, because there seems to be an increasing amount of herd mentality and less critical thinking going on in young and old alike.
This blog is real estate porn! I gotta have my fix every day.
“Toronto prices in May averaged $446K, and in the first two weeks of July they’ve crashed down to $427K, putting Toronto prices on a pace to hit $340,000 in 1 years time— but in my experience, the acceleration of the downward trajectory will increase exponentially once the mortgage holders attempt to get out of their mortgages”.
This is a similar result to my own suggestion of few days ago that if you were to plot the changes in homes sales on a graph you would be see a steep decline forming.
Even I am surprised by the assessment that Toronto prices could nose-dive to 340k in a year though. If that bears out then we really are in for a shock in this country and will catch up to the US faster than any imagined, and before most people have time to adjust to the changed circumstances. The suggestion is left open that if prices do drop that fast then a housing collapse could theoretically result. Buying sentiment would simply evaporate along with the hopes of sellers to get out and sales declines (and prices declines) would indeed go exponential.
But like the photo above in todays piece clearly suggests,…we are in for a hard landing.
Hi Mike,
My wife and I went through a similar experience in Dubai.
Years 2004-2008 saw a 700% increase in property values. For example – the market price of our rental flat soared from 70K to 485K. Our colleagues and neighbors mocked us for not buying. Many of them purchased multiple units for flipping. We sat quietly in the knowledge of what would follow, all while living in the safety and comfort of our rented flat.
So came the “correction”. Autumn 2008 was indeed an ugly time. At the moment, property values have reset to 2005 levels (and counting), while sales volumes are extremely light (or stopped completely in certain districts). Mortgage costs have soared, as liquidity is tight. Maintenance fees are higher than promised.
Rental yields on most units amount to a small fraction of their carrying cost. Our rental agent showed us a $1400/mo unit that carries at $3000/mo. As an owner, you can rent out at a loss. Or live in it, paying more than double what your non-owner neighbors pay. I don’t see a viable exit for these people.
I’m not saying that Canada could fall as hard.
However, Toronto circa 2010 reminds me somewhat of Dubai circa 2007. Mass of sales centers popping up everywhere. Huge queues for property launches. Badly issued mortgages. AKA the moment of climax.
Keep renting. You’ll have your chuckles later.
The Globe and Mail reports that Canadians are now reducing debt levels.
“In virtually all forms of borrowing, the rate of increase has slowed drastically. “I’ve been saying for a while that this is the most logical display of behaviour on the part of the consumer that I’ve seen in a long time,” said Benjamin Tal, senior economist at CIBC World Markets and an expert on household finances.”
http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/canadians-back-away-from-borrowing/article1646613/
“In Canada, we don’t offer subprime mortgages to potential clients. Most importantly, credit checks matter. If you don’t have sufficient personal income or assets, you ain’t getting the deed to the house.”
Of course, the fine print in that statement: “Unless you’re Canadian.”
“But we all know how that ended in the States. In Spain. In Australia. In Japan. In Ireland. Sigh.”
I can see the point this guy is making, but there has been quite the opposite of a crash in at least one of those countries. Which kind of suggests he is just shooting his mouth off…
If I had a million dollars!
I still would not buy real estate today in Canada, actually I have half that in liquid assets and it makes me warm and fuzzy knowing I can sit on the fence, rent, invest, travel and execise the freedom that most house poor Canadians have forgotten about.
Like you say Garth 2014 to be a vulture is not that far out in my enviable situation, unless of course I find a better deal in a warmer climate in the mean time!
So sorry for the young ones that have dug the hole already though.
Hopefully the population will see our present day political leaders sowed the seeds of the oncoming crisis!
Spot on…….I just disagree with the timeline….it will happen much faster……..house prices 50% of by end of 2011.
Since a few bloggers have decided to defend Conrad Black I have decided to defend Harry Dent. Firstly, he has never been caught on video obstructing justice.
Second: I have listened to your podcast critisizing Prechter and Elliot Wave. To my knowledge Harry only commented that they were interesting and that he would be watching. I think that he needed extra to have a bigger book and to be fair I never heard you associate him with those theories.
Yes, he does lean to sensationalism. 14% unnemployment prediction is not breadline depression, and his calls were wild(40,000 dow later revised to 25,000). But here is what is interesting, prior to the 25,000 call the subprime was beginning. Alan Geenspan and his Soprano Wall street buddies had similar research (actuaries have done this for decades) and decided to get all the money before any average Joe could benefit by lowering the interest rates to zero and packaging and getting rid of the mortgages.
Harry underestimated their involvement and the resolve of the government to apply stimulus thereby throwing off his consumer confidence calls.
So Conrad Black returns to the Lord’s manor and Alan sticks the blame to Ayn Rand.
Sorry that I could’nt tie in with your excellent article and the defense in no way intended to take away from you. You are your own man.
“In Canada, we don’t offer subprime mortgages to potential clients. Most importantly, credit checks matter. If you don’t have sufficient personal income or assets, you ain’t getting the deed to the house
——–
That’s because they look at current and past ratios and project them into the future. People are so convinced that Canadians will always hold onto their homes through thick and thin. Let’s see what they cling onto with 0% down.
I’ve been in the workforce for 20 years and during that time what I’ve seen time and time again, is that when money is made easily through no work of their own, it is spent just as fast. When people work hard for it, they think twice before reaching into their pockets to buy a devaluating asset.
Had our leaders used the US reality as a bad case scenario (10% delinquency and higher for mortgages above 500K), Canada would be a in different place today.
People were asking about Montreal… In 95, the fleet on the 20 between St-Jean and St-Charles was a bunch of rusty clunkers, today it’s a parking low filled with Audis, BMWs, Merceedes, Infinitis… Mortgage brokers have confirmed to me that many of those have been financed with the equity in homes. A Toronto banker shopping for a house in Montreal told me that he couldn’t believe how much Montrealers were spending on their cars, that the luxury effect was worse than in Toronto. I’m now in Ottawa, and could not agree more.
But there is one difference in Montreal, thanks to the 7$ per day daycares, we have never seen so many women do so well financially. Couples with kids are now the lowest taxed in Canada if the kids are in a 7$ per day daycare. Now in Ottawa, I have witnessed the difference. Life is harder for the average woman with children in the ROC compared to Quebec, especially single moms.
G’day Garth. I have just stumbled across your blog and really like it. I am writing from Australia where we are experiencing the same kind of property bubble and delusion as Canada. In fact, the similarities between both our predicaments is uncanny. Like you, I am tired of the “it’s different in Australia” mentality and the ongoing spruiking and mis-information peddled by the property industry, so I have also started a blog warning Australians about the housing bubble. My website is http://www.unconventionaleconomist.com. Check it out if you are interested in an Australian prespective or for comparitative purposes.
Anyway, keep up the good work. I will be sure to follow closely the situation in Canada, via your blog.
Cheers Leith
If we all jump ship, abandon our mortgages and homes, etc, etc, etc.
…And all get rentals, someone please tell me who will hold the mortgages on all those rentals?
?????
More to that, where are we all going to live if the mysterious sucker mortgagees that are now our landlords… bail as well?
??????
I foresee prices breaking below $400K by Christmas, and then a steady progression towards below $300K for most of 2011.
—————————
Yup ….. average single family home prices 240-260K
Taxes up
Interest rates up
Cost of living up
Transportation up
Service fees up
Wages down or even at best!
Remember y’all were told Harper’s Canada would be different. Mr. Magic took $18 B in savings and turned it into a 40-$50 B deficit.
Soon we all pay! oops it’s already started right here at home!
ottawa’s head statistician quit yesterday because the government wants to drop the mandatory census for a voluntary one.
the voluntary one would allow the government to make up the numbers, at least that’s my take on it. we’re screwed.
…while the US stumbles… – Garth
Not so fast, it is far from certain that the American economy is sliding into a double dip, that’s certainly not the view from the board rooms of American companies where the expectation is rather that we are at the beginning of another growth cycle.
http://articles.moneycentral.msn.com/Investing/MutualFunds/why-are-ceos-so-cocky-these-days.aspx?page=1
The world is changing and the market is imposing its rules, no longer it will be possible to keep a high paying job if you have no skills, even the protection of big labour will not help (unless you work for the government but even that will change eventually). That is just common sense: if you want to make money you will have to be productive and create more wealth than what you cost.
That means a lot of hardship for many and their complaints will spread pessimism and paint the atmosphere. That’s what’s happening right now and obviously politicians and even central bank directors have no choice but to pay lip service to those who lost.
But that does not mean the economy can’t grow, not by a long shot.
IMO another big shock for Canadians will be property taxes. Municipal budgets and taxes will be increasing as values plummet, increasing the % of taxes on property value dramatically. Wait for the MSM articles promoting this as a positive-”cushioning the downturn” or comparing Cdn property taxes to out of control places like New Jersey.
I have never wished ill on people but boy it would be nice for a dose of reality for some of these folks.
——–
Well the reality is here. Since 1982, taking on debt has been a winning strategy because rates had a long way to fall. And with each drop came asset appreciation. It’s mathematical pure and simple. But long yields are now at 3%. Can’t get much lower than that. The only way you can now keep the game going is by printing. But even that will promise inflation and higher rates sometime in the future.
#11 LS:
“Toronto prices in May averaged $446K, and in the first two weeks of July they’ve crashed down to $427K, putting Toronto prices on a pace to hit $340,000 in 1 years time”
“Yeah because that’s a valid extrapolation.
Yesterday it was 20 degrees, today 25. By next week my cat will spontaneously combust.”
LS, it’s a valid extrapolation because it is plausible.
See the difference?
#10 – bps – I have to agree regarding AUS. NZ is in the list too. I couldn’t believe when we went to Melbourne for Xmas and the cuz in law who is a lawyer laid out $350K for a 600 sq ft condo with no windows and all concrete.
NZ is worse in some instances. 1.2Mil for a box, 700 sq ft overlooking the water. Prices have yet to drop in that part of the world – delusion reins!
#46Pb-what few understand is that the overall economy grows when credit/debt increases. The last 30 yrs has seen an unprecedented growth in credit. The growth rates of the last 30 yrs were overstated as extraordinary growth in credit/debt comes at a long term price while reaping short term gains. When you talk to most advisors, every single piece of data they reference comes from this extraordinary time period which is ending. Real estate is more dependent on credit/debt growth than other assets, so it is going to get absolutely hammered without high credit/debt growth. Read Chris Martenson (among others) for a primer on this one.
@ #46 pbrasseur:
Funny how the next article listed on that MSN Money page is “Could the Dow fall to 1,000?”. Most CEOs are still cutting costs, hiriing part-time workers, and looking at merging with other companies – not exactly what you do when times are good.
@ #20 Property Virgin Apprentice:
I’ll take a wild guess… you work for RE/MAX?
That video is hilarious — posted on April 27, 2010… almost the exact peak of this last phase of the bubble!
Patz @ #14,
you didn’t blame the victims – how refreshing!
I am by no means optimistic about housing, but isn’t there a big difference between something like 5/35 (Canada) and the normalization of adjustable-rate mortgages with teaser rates and no credit checks at all (US in 2001+)?
CMHC still requires the banks to do due diligence, right? I mean, if they were found to not have properly assessed the client’s ability to pay then they might not be able to claim on the insurance. I guess you could say that’s a problem for the future to worry about if and when things go bad… but there must be some terms to this CMHC insurance…?
Garth, here is a good one
NEW EMBLEM
Official Announcement:
The government today announced that it is changing its emblem from a Maple Leaf to a CONDOM because it more accurately reflects the government’s political stance. A condom allows for inflation, halts production, destroys the next generation, protects a bunch of pricks, and gives you a sense of security while you’re actually being screwed.
Such a good article but not the Australia thing. We’re watching you guys thinking “That’s us in a few months” so could you be awfully decent and bring on the crash?
Another great posting Garth, this one is particularly good.
#17 Bottoms Up,
Canadians owe $140,000 yet have $330,000 equity in their homes. How is this a scary scenario?
***
The avg house is at $330k. But that does not mean that the avg owner had $330k of equity, as most have mortgages. Also, home ownership is not at 100%.
In answer to your various questions, I think you need to take it upon yourself to do some reading and think about the things you read. I’d suggest the following as a useful site for some eyeopening information
http://americacanada.blogspot.com/
#5
Shocking – another Stephen Harper party member (ahem, Flaherty, ahem) that doesn’t understand math or statistics… maybe this is why the head of Statscan quit???
Just look at this unique but scary documentary featuring Paul Martin, Flaherty, party leaders, MPs, mayors discussing money creation and debt in Canada.
They REALLY don’t understand anything!
http://www.youtube.com/watch?v=OYRdlegDYwo
It’s different here, there and everywhere… really?!:
http://www.news1130.com/news/local/article/8
0388–okanagan-real-estate-market-feeling-the-strain
#20 Property Virgin App.
Hey buddy, try reading something other than what is pumped out by a Canadian real estate firm. That document talks about the first half of ’10. The market has been in the tank since April. Do some digging rather than reading the same old stuff spoonfed to realtors and the the sheeple.
Are you sure Moneta that those cars between St.Charles and St.Johns didn’t have Ontario licence
plates?
But seriously folks,I read your article #27 Debt’s Dark
Embrace and I don’t wish the worst upon anybody, but
sometimes you have to say “Oh c’mon”.
So the day camp closed,there isn’t in Hamilton a
soccer league,a baseball league,a summer hockey league, some community activities to put your kids into.
I remember from 8 years old on the last thing I wanted
was to be around my parents from 8AM till suppertime
in the summer.
You talk to some people and they say whenever they
have a problem they go to their socialworker.
What you don’t have family,friends,neighbours,co-workers?
I can understand if your handicapped , an immigrant
or just moved.
Here in Quebec of course the nanny state has run amok.Now we have to pay fertility treatments for couples.
Hey young’un, I’ll get you pregnant and we won’t
need no taxpayers money.
” …we don’t generate enough ourselves, that we’re living beyond our means.”
Imagine if those billions in mortgages had instead been invested in productive assets like factories, businesses, etc, then perhaps we could one day justify these prices, instead, it was squandered on living beyond our means.
You drive around southern ontario and you would think that all Canada is about is building condos, tim hortons, banks and stores full of stuff made in china, there really isn’t much of an economy to speak of.
Well said Garth, very well said.
In the years to come Canadians will wonder how we got into such a mess.
Some of us already know as we come to our own, logical, conclusions.
Listings down in Nova Scotia. Is Halifax different? Timeline anybody?
http://thechronicleherald.ca/Business/1192780.html
Great moments in journalism: the headline says sales are down and the copy talks about listings being off. Way to go, Chronically Horrid. — Garth
#20 Property Virgin Apprentice
that post was suppose to be a joke –I hope–if not you take the cake for being the most gullible person i have read on this blog
go for it –buy a couple–the video is several months old-you don’t listen very well either
#17 Bottoms_Up on 07.21.10 at 11:06 pm
Canadians owe $140,000 yet have $330,000 equity in their homes. How is this a scary scenario? Please provide a scenario of a rationally-functioning country; how much would the average person owe? How much equity would the average person have?
**************************
Why not use Greece or in fact any of the PIIGS-for your comparison scenario to Canada?
You shouldn’t use today’s debt to equity ratio as a guide for tomorrow-because prices are fluid and change is constant and the direction is down–
Also–your missing–Autos/Toys/CC/Credit lines maxed out for Holidays that ended up on the never-never bill–
I think your also forgetting rising unemployment-which is also gaining momentum-which will have a further negative drag on house prices–
This is not a correction coming–
This is a sea change of immense proportions-
A watershed event-
Several generational fantasies will be destroyed before this is over–
I think prices will overshoot and perhaps 1980 prices will be bottom–
“Canada is marginally in second place to Ireland in terms of total debt-to-gdp. Canada has significantly higher household debt than all other countries. In fact Canadian households owe more than both Greek households and businesses combined.
funny stuff–
http://americacanada.blogspot.com/
.#40 Moneta on 07.22.10 at 5:49 am
People were asking about Montreal… In 95, the fleet on the 20 between St-Jean and St-Charles was a bunch of rusty clunkers, today it’s a parking low filled with Audis, BMWs, Merceedes, Infinitis… Mortgage brokers have confirmed to me that many of those have been financed with the equity in homes. A Toronto banker shopping for a house in Montreal told me that he couldn’t believe how much Montrealers were spending on their cars, that the luxury effect was worse than in Toronto. I’m now in Ottawa, and could not agree more.
But there is one difference in Montreal, thanks to the 7$ per day daycares, we have never seen so many women do so well financially. Couples with kids are now the lowest taxed in Canada if the kids are in a 7$ per day daycare. Now in Ottawa, I have witnessed the difference. Life is harder for the average woman with children in the ROC compared to Quebec, especially single moms.
……………
I can only speak based on those I know.
A SIL who has an 18 and 7 yo worked as a sales rep for various French co’s., mostly dealing with dermatologists & cosmetic cos. Was earning $65k+, same as her hubby. Due to stress, etc. she went into a real depression , on meds, etc. but rec’d 2/3rd of her salary. Even when she was able to function, she paid $7. a day 2 or 3 days a week to have her young son attend a daycare across the street. She’s a chemist, but for the last 2 yrs. has not been able to find a job in her field. Instead, she works for a co. as an Admin Asst. for 3 days a week for 1/3rd or less of her previous salary. Although their house is paid off, they continue to spend like there’s no tomorrow. BIL is my hubby’s twin, 54. He’s also in IT w/Hydro Quebec and has a pension. But, AFAIK, no other savings. He got royally dinged with his shares in NORTEL years ago. Other than his pension with Hydro Quebec, nada and he has a 7 yr old to put through university. PIL’s in France put most money into an account B&SIL can’t draw on cause they know they ‘live beyond their means’.
cmhc expands the money supply like a proxy printing press, creating inflation, which makes people feel rich. harper carney and flaherty can each take 33.3% blame for the mess. if a loan needs to be insured because the bank won’t touch it, the buyer doesn’t qualify
#47 pbrasseur,
You said, “The world is changing and the market is imposing its rules, no longer it will be possible to keep a high paying job if you have no skills, even the protection of big labour will not help (unless you work for the government but even that will change eventually). That is just common sense: if you want to make money you will have to be productive and create more wealth than what you cost.”
Fair enough but this is core to the problem in the US. Many of the jobs eliminated during the recession are never coming back. The factories are shutting or are being outsourced (if they haven’t been already).
It is not just a matter of unemployment being high now that is an issue. It is structurally high and many people who are unemployed or under employed have no opportunity to return to the workforce. It will take 5-10 years in most estimates to get back to pre-recession employment levels.
It is easy to blame these unemployed for their situation but I would focus my criticism on our corporations for not investing in research and development AND outsourcing much of the economy over the past few decades. Don’t even get me started on the incompetence of our gov’ts.
The point is that the structurally high unemployment in the US will continue to drag on any recover and threatens to bring a double dip. Even if a dd doesn’t happen we won’t see a typical recovery rebound. If US GDP growth is even 3% or above in 2011 it will be a miracle.
#10 bps
How is Australia included on your list? Our house prices increased over 20 percent last year and are still climbing. Economist magazine this month reports we have the most over valued house prices in the whole world (62% overvalued), but we don’t care we are different down here, we have kangaroos, a housing shortage, love our houses, booming economy, low unemployment, resources by the bucket load and china as our friend.
You forgot to also include a not yet exhausted pool of “GREATER AUSSIE FOOLS”, although they are getting scarce in Brisbane.
Aussie Update
These two articles look at the drivers behind the Aussie housing bubble.
http://www.unconventionaleconomist.com/2010/07/housing-affordability-then-and-now.html
http://www.unconventionaleconomist.com/2010/07/bringing-it-home.html
http://www.smh.com.au/business/foreign-punters-spooked-by-perky-property-market-20100719-10hwp.html
Our “friend” also has some issuses.
China Has a Painful Debt Bubble Surprise for the Global Economy
http://www.marketoracle.co.uk/Article21281.html
#10 bps on 07.21.10 at 10:20 pm
And just like Canadians, majority of Aussie home owners have no disposable income. Lots of debt though, and with big fat mortgages and a debt to income ratio close to the same as Canada’s…
The media in Australia and Canada can slice it anyway they want, fact is, both countries have borrowed heavily to obtain assets at their peaks prices.
#55 mattbg,
You said, “I am by no means optimistic about housing, but isn’t there a big difference between something like 5/35 (Canada) and the normalization of adjustable-rate mortgages with teaser rates and no credit checks at all (US in 2001+)?”
Difference – Yes. Big difference – No. 0/40 and 5/35 not to mention banks willing to lend people the money for the down payments and HELOC loans given at the same time for renos. Don’t count on it being different.
Lax lending practices are always a feature of a credit bubble. We forget over time that things can go wrong and start to believe it is “different here”.
I think you will find that many of the bloggers here were driven to this blog when they experienced the reality of this first hand. It was a meeting with a mortgage broker last fall that drove me here. I went in expecting a mortgage about 4x my salary and was quickly shown how to significantly increase my salary through consulting income and came out at nearly 8x my salary. I was shocked. It was right then I knew something was deeply wrong with this situation.
We don’t know how widespread the problems are in Canada. Certainly it was not as bad as the US but I think many Canadians are going to get a shock when they find out what they have been guaranteeing through the CMHC. It is going to become detestable against the bank when they start calling guarantees they should have never requested.
The only thing we do know now is we are going to find out how bad it was. Increasingly over the next 2-3 years as many mortgages set there will be a high number of negative equity households in Canada. We may not reach the 25-30% we see in the US but even 10% will be devasting for the economy and the Re market. I could see that 25% number easily being reached in Vancouver where I live. I can’t tell you how many 30 somethings I know that live on the edge with no margin for rate increases or eroding wages.
#55 mattbg…
You are exactly right. CMHC does their own due diligence up front on the file after the bank does theirs. i.e., the bank could approve the client, but then CMHC could decline them their insurance. The bank could still go to alternate insurer (everyone always talks like CMHC is the only one) like Genworth or GE.
But even if the bank does get approval on the loan from CMHC (or whomever) if the client were to go into foreclosure, when the bank goes to get the money covered by the insurance, CMHC goes through the file AGAIN with a fine-toothed comb and can still reject it.
It is very rare, but if they deem the client to be one who should never have received the loan in the first place, i.e., poor lending practices by the bank. Then they can reject the bank on getting that loan covered.
A little different than the US model.
I don’t work in the banking industry this is just from research I have done, and people I have talked to so take it for what it is worth.
Well said Garth,It would be great if they would publish your blog in the calgary herald or the vancouver sun,maybe someday.
My boats name…
Fiat Current Sea
I lives in Toronto. Garth said SELL! when average prices were 10% below 2008 peak. So I did. House I sold was roughly worth 400K in 2008, but I sold for 360K because Garth was screaming SELL! Similar houses on my old block now sell for 440K.
Basically, I missed 80K pay day thanks to Garth. I put money in markets like Garth say. I’ve not made 80K. I’ve not made 20K. Maybe soon I make 10K, unless I’m unlucky (even more I mean!).
Wow, thanks Garth! And nice to hear you scream SELL! again. This is dangerous game to play. I regret it.
I ran your IP against previous comments that were deleted from this site because of their abusive nature, and found that you have posted under more than 6 names, including ‘Where’s the risk?”, “Kevin” and “Gone with the wino.” In those you never mention having either owned or sold a property, having invested or having taken any advice from this blog. Obviously your comments are fabricated and your intent is malicious. Your IP has now been flagged and further comments will be blocked as spam. However, I think this gives an unfairly bad name to spam. — Garth
The middle class is seriously at risk throughout the western world, since when the real estate dust eventually settles we are left with a hollowed out manufacturing base and service employment.
#39 bullion.bunny
For prices to fall that much that quickly, there would have to be panic selling. There won’t be. Sellers will pull listings, and a softening market will continue for as long as people can service their debt. The selling will come like it did in the US, when mortgages start resetting, and debt becomes unaffordable.
#46 breezer1 on 07.22.10 at 6:36 am…<<<<<<<< interesting point and sure fits in with "H"'s accountability.
#72Aussie-Prechter is right about the China situation. When this baby pops Vancouver will get sucked into the vortex big time.
What made me sick yesterday was that the market dropped within 10 minutes of Bernanke starting to speak. This tells me that the market was not actually responding to what he was saying, but more so what it expected him to say. Today the market is back up which makes yesterday’s drop look like an over reaction. The speed in which this market turns scares me. Garth, do you do any active/short-term trading?
Garth, are you admitting Canada will have US style correction?
Mikey
Can ya read, Mikey? — Garth
#83Analyst-do 5 min research into who is moving the large volumes of money in the “market” and then you won’t try to explain moves as “over reactions”.
#80Devore-yes, with the exception of the markets with heavy speculator involvement (Vancouver esp).
Economy slowing sharply, says Bank of Canada
Module body
57 minutes ago
By The Canadian Press
ADVERTISEMENT
OTTAWA – The Bank of Canada says the risks to the global recovery and Canada’s economy have grown markedly.
In a new outlook, the central bank says the European debt crisis is having an impact on the global economy and Canada’s as well.
And the bank says there is a risk that private demand around the world may not be strong enough to sustain the recovery.
Canada’s economy is not escaping the general worsening trend, the bank says, although it makes no mention of a risk of a second recession.
The bank says Canada’s economy grew at only half the speed in the second quarter — three per cent annualized — than it did in the first.
In the current third quarter, growth will slow even more to 2.8 per cent.
The bank also says income gains for Canadians will moderate and that global forces will likely weaken the value of the Canadian dollar.
Here’s an absurd story of blatant greed. These folks lost their home in a recent local fire and are now seeking public assistance.
Their property was for sale for $6,400,000 prior to the fire and that was predominantly land value. They likely own it free and clear as a mortgage might require proof of insurance before funding. In any event they are far from destitute. ($6.4 mil)
This one deserves national media attention and a public flogging for such blatant ignorant greed if not the stupidity of not insuring the place if it were potentially such a loss and if not what are they trying to do???
Full News Story
http://tinyurl.com/34ywdsy
Great moments in journalism: the headline says sales are down and the copy talks about listings being off. Way to go, Chronically Horrid. — Garth
Ha. Agreed. It certainly feels as though listings are increasing in the city.
#21 Property Virgin Apprentice
“The Toronto real estate market is about to take off again and instead of taking advantage of the opportunity, you guys wallow in doom and gloom. Can’t you see the gold in the streets? I will try to dumb it down for you.”
Don’t speak to loud there big guy!..the Americans may wage war and conqour us to reteive our “wealty real estate” in a few years. After all, they are responsible for stimilating our economy over all those years and they’re only a border away! Toronto real estate will not last at 3 times the value of our cousins so get real!!!
One upside to this is that the taxpayers are not as exposed as the US taxpayers with the fannie freddie mess. CMHC will pay off the banks if a homeowner goes into foreclosure, however CMHC will go after the homeowner for the money it had to pay the bank.
The Bank of Canada said Thursday “Canada’s economy is slowing markedly from the initial burst out of recession”. It’s funny. Anyone in the manufacturing sector knew this little bit of information by mid-May. We went from full roar January to April to full stop in May, June and July. Sales in the Auto industry are off. Even the mighty Honda and Toyota were down in June.
Scores of economists are concerned a “W” recession is about to arrive in the USA …… Our largest trading partner is in big trouble. The wolves of economic depression may actually be at their doors this time.
The dominoes are rapidly falling in Canada’s housing market . -20% here -27% there. If you’re not scared by these numbers .. you’re a fool. Of course, if you bought a house or condo in the last six years, you’re a charter member of the fools club anyway.
As interest rates continue to rise, us predictable Canadians will quietly pay out high and higher monthly mortgage payments. (even when the mortgage is worth more than the house) There will be less money left for cars, clothes, TV’s, College and University tuition ..etc. We will try to save more. Our actions will guarantee our own unemployment. We’re just like a dog chasing its own tail … and we’re about to chomp down on it.
Then the dump the house at any cost panic will take hold. So you sell for a lot less than you owe on the Mortgage. Do your non-house assets provide you enough collateral to get you a demand loan (8% interest) to cover the shortfall? If not, congratulations!!! You’re bankrupt!
We all know, the government(s) will be forced to step in (if they have the money). Otherwise, thousands (maybe hundreds of thousands) of families will become renters (homeless) with a house-less mortgage hanging around their heads like an albatross. Not a good thing if you’re trying to build a recovery based on consumer spending. Buying a house will become as popular as paying taxes. Like in California, Nevada and Florida.
We built an economic boom since 2001 on huge waves of personal debt. Then we exported entire sectors of the economy offshore. Now, we sit here wondering how low this thing will fall.
Like no one saw this coming?
Living on the S.W. side of Edmonton. I wanted to buy last winter thinking prices had gone done to an almsot affordable level. Then they sprung back up early this year as people “jumped in” to get low interest rates! I was so depressed-at first. Now that we’ve hit July it’s turned again! I’ve been renting from an investor for 2 1/2 years where I am now. I’ve never seen anything like this! There are 11 houses for sale in 2 blocks and NOT one has sold yet. Prices for these 3 bedroom couble-car Garage cookie cutter brown vinyl sided “Edmonton” houses was $400-$410,000 in may/june. I checked MLS using my postal code on the Advanced search and people are listing for $389,000 now and there’s no movement. Glad I never bought-it’s still summer, prices look like they may collapse in the “gateway to oil country”.
re #78 – you sold a house for 10% less than it was worth? You only have yourself to blame for that one.
re #4 Tax Haven
Because we desperately, desperately need small business startups, entrepreneurship on every street corner and less regulation…
Our government is hostile to small and especially micro business. There is only one selfish reason why. Tax collection. They would rather pay people to stay on welfare than let them start micro businesses.
In Vancouver the city is so hostile towards flea markets that they have a no parking zone around the only flea market in the city on Saturday and Sunday only!
I know a man who sold those flashing carnival lights during festivals. Every year the police actually confiscate his goods! What a police state!
I have a friend from Slovakia who escaped from the days of the Iron Curtain, who maintains he doesn’t feel any freer here any more because of over-regulation. In China when it rains every subway entrance has a bunch of extremely flexible entrepreneurs selling cheap umbrellas. How convenient! Here we send the police to confiscate them because the seller doesn’t have a license to sell them, nor could they get one if they wanted one!
We must resist the legislation of poverty and cultivate a culture of entrepreneurship. We have become a nation of worker bees. Convenient tax collection points for government.
“Garth, are you admitting Canada will have US style correction?” #84 mikey on 07.22.10 at 10:27 am
“Can ya read, Mikey?” — Garth
Based on what I have seen, read and heard of the U.S. correction I figure if we experience the same we are lucky. Chances are that is just what will happen.
What has happened there isn’t so bad… really. Yes there are areas that have been financially devastated but there are many areas of the U.S. which have experienced nary a hiccup. So too will it be so in Canada. I also do not believe that Canada will be so hard hit as the U.S. works it’s way through their troubles which by the time it does hit Canada full force the U.S. will have figured at least a few things out such that we tend to ride their upswing more than their downfall.
This is not to say that the U.S. will regain/retain it’s world leadership on so many fronts. Like so many empires before the U.S. is in the final stages of glory.
Both Canada and the U.S. need to bring jobs home. That will happen less by design and more by consequence as peak oil plays out.
http://www.am770chqr.com/News/Local/Story.aspx?ID=1255766
Results from Calgary’s new census show the city’s population has increased just 6060 from 2009 reaching 1,071,515. It’s a 0.57% increase–the smallest percentage growth since 1984–and represents a significant slowdown in the growth of Calgary’s population.
@ 74 Junius and 55 mattbg
Count me in on the “driven here by experience”. I’ve related the story of my girlfriends experience getting approved for an insane loan and being told how to fraudulantly come up with the 5% down too many time….
We took a drive on the weekend up to Campbell river.
Ice cream at Discovery Pier. Mmmm. On the way back down we took the Old Island Hiway.
The amount of for sale signs along the waterfront was amazing, I can’t ever recall seeing that many for sale. House after house.
We were looking around too see if there was any good deals on toys, its starting.
We found a few that people had paid in the mid 60K range, were 4 to 5 years old and were asking 20K for them. Please? No offers.
We dropped in at one lot to see what was going on and the salesman was trying to slide us into a new unit only 350 a month he said. Nothing down 100% financed.
One percent above prime locked for 5 years, how can you pass on that deal? He asked.
Then the telling statement, Everyone and I mean Everyone does it that way he said.
I couldn’t believe it, no wonder were going to have an adjustment.
This easy credit is crack, everyone is addicted to it.
Painful withdrawl coming.
TaxHaven:
Interesting that you would like to see all these reductions in the universal regulations/services/benefits/lifestyle/taxes which ordinary taxpayers have paid into these past decades,but you don’t mention how the private corporations and financial institutions who have raided and benefitted from the public coffers to bring us to this point should be made accountable and make restitution.
@71 Junius
I completely agree with your post! Unusual…
There is plenty of blame to go around. However, I would like to add one additional culprit. Unions during the 1980′s and 1990′s should have included skill acquisition in their bargaining. Instead, they went after every last possible cash dollar.
The thought process could have been something as simple as “Efficient production methods continually improve and become more technologically advanced, therefore we demand that ongoing marketable advanced maintenence/computer/robotics/etc. training be made available to all employees.”
In this way, the means of production have to potential to remain competitive in a global environment (i.e., factory remains open), and people are much more employable than they otherwise would have been if the company does go belly up.
Any union folks out there? Are there current examples of unions demanding this kind of skill training during trade negotiations in Canada?
Dancing and singing past one cemetery after another, is what Big Ben Bernanke and his band of merry Fed Guvs are doing these days.
Before a Congressional group for the second day, today, Ben the Brave opines that he may invoke even MORE of the same economic medicine that he shoved down our throats in 2008-09. The effect of THAT misadventure was to worsen the already deep monetary/fiscal trauma that continues to wrack the US, EU, Japan, China, and Canada, of course.
Big Ben churned out $1.5 trillion of funny money back in those years; so there’s more to come? This is called the definition of insanity. At first, IF your plan to “cure” the US Empire’s economic ills fails, then try the SAME plan again. And if it fails, do it yet again, and…Same result: FAILURE.
You know things are not going to cure anytime soon when famed UK columnist Ambrose Evans-Pritchard writes an alarming piece about the faltering Baltic Dry Index, in language that a even the dopiest will comprehend.
As well, the 10-year US T-bill is at a paltry 2.96 per cent, so far today. That means that cheap money is out there in US Mortgage-Land, BUT NOBODY’S BUYING because they are BROKE.
Yet, another report indicates the US RE market continues to shred itself at an ever-increasing pace with lots more listings, declining sales, more foreclosures; the usual. Hello Toronto Real Estate Board Nitwit!
At least Mark Carney, our BoC Guv, will not be printing money; right? That should shorten the continuing recession here, maybe. Sadly, that outcome ALSO depends on a million other factors; like so many balls in the air being sorted out by a burnt-out juggler trying to get it together before it all collapses and bounces away…far, far away.
Meantime the Dow and Toronto are way, way up because earnings are good! Most of the US earnings are from overseas sales I expect. Domestically, business looks an awful lot like the wasteland that has become downtown Detroit. American capitalism thrives on the planet, not in the US, which, in the great scheme of things, doesn’t seem to much matter anymore.
Sad.
Here is how wrong sided Hyper-inflationists make the Gold market whip-
Mention stimulus–they buy-
Mention tightening–they puke–
Uncertainty rules–
http://www.barchart.com/chart.php?sym=GCQ10&style=technical&p=I&d=M&im=&sd=&ed=&size=M&log=0&t=CANDLE&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&x=39&y=11&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump
#17 Bottoms up
You and your comments represent the typical nieve Canadian denial of reality….
“Canadians owe $140,000 yet have $330,000 equity in their homes. How is this a scary scenario? Please provide a scenario of a rationally-functioning country; how much would the average person owe? How much equity would the average person have?”
I don’t know where you are getting your stats from, maybe that represents your own personal situation and if it does, good for you and yes a significant down turn wont have the same effect on you, but that does not represent the masses, I have been brokering mortgage for 20 years, and the larger percentage of the public are sitting at $280,000 -300,000 on $330,000 value and the smallest reduction in value is enough to removal any remaining equity.
I have to scoff at everyone holding the lending practices of the 5 Canadian Banks with such high regard, the lack of SUB Prime lending, if you only know what type of lending the Canadian Banks have been doing over the last 5 years.
The vast difference in Canada is that about 10 – 15 years ago, the Bank’s figured out that securitizing their entire mortgage portfolios with CMHC, meant they could take new liberties with mortgage lending, I am sure many people are not aware of the fact the majority of the Banks have paid the insurance premiums on all of their mortgages that were less then 80% Loan to value, out of the bank’s own pockets which was actually funded by increased spreads on all mortgages, this is why the Canadian Bank’s will approve clients based on “STATED INCOME” up to 80% of current market value, now they do ask for good quality credit rating and potnetially proof that someone has been self employed for at least 2 – 3 years, but guess what, that is SUB PRIME LENDING… Approving a client for a mortgage that requires income higher then what the client actually makes….
Also when the Banks started approving clients with debt servicing upto 44% and removing the 32 % GDS limit of 32% is also what has allowed clients with $65,000 income qualify for $350,000 mortgages….
Again, SUB Prime lending with our ever precious top 5 banks……
The difference in Canada, is that we somehow managed to dodge the initial free fall of 2008, and created a “DEAD CAT BOUNCE”giving this last serge in housing prices to May of 2010.. But the fact of the matter is that the cat is still dead, and it only bounces once>>>
Jeez Garth, Ya got me scared and I bought in 2001.
“This is the pornography of debt, thanks to the lust for houses.”….
…and new cars, and expensive vacations, and shiney toys, and restaurants, and private schools for
the kiddies, and the pool, and the hottub, and the cottage, and the home theatre, and the 3000 sq feet…..tell me when to stop….all bought on credit. Do the math.
Nothing wrong with owning a home, it has done well for our family…. I’d rather be a landlord than a renter, but I was a renter before I was a landlord. Just be rational, even a little bit, please.
Taxhaven #4, you’ve been living in Taiwan long enough to see the future, however I think that we will see somewhat of a flip with the Asians starting to go gaga for credit while the productivity crisis gains severe traction here. Political reform rocks but the least amongst unfortunately are our leaders and the least amongst them feed an arm up those wazoos to play em like puppets. What if and this sounds a bit radical. What if you just buckled down and played in to the existing game/system with the utmost of effort and intelligence. I’m unable to see far enough up into the future where governments actually relinquish the great power to imprison. I haven’t yet figured out how not to respect this powerful system fully in place.
”…but you don’t mention how the private corporations and financial institutions who have raided and benefited from the public coffers to bring us to this point should be made accountable and make restitution.” #100 LB on 07.22.10 at 11:43 am
The current state of the economy both North and South of the boarder is the consequence of ignorant socialist/fascist governments who thought, through Keynesian economic policies and artificially low interest rates, they could perpetuate the good times forever.
The free market will ultimately have it’s way… one way or another equilibrium will be achieved. A “correction” is the prepayment penalty you pay for bringing economic good times forward by changing the natural order of things through an aggressive monetary policy.
Water always finds its own level and so too will an economy always seek and find its own equilibrium. Entrepreneurs are engine that drives the wheels of the economy. Feed that engine nitro and of course it’s going to take off… but it will be a short blast to burnout.
Don’t blame business blame government for feeding us all the monetary drug.
Now the detoxification begins
#101 Prof Anon,
I don’t know why it would be so unusual to agree with me. Or is it because of that little troll who uses my name, invests only in gold and most posts about online dating?
You said, “There is plenty of blame to go around. However, I would like to add one additional culprit. Unions during the 1980’s and 1990’s should have included skill acquisition in their bargaining. Instead, they went after every last possible cash dollar.”
Agreed 100%. The union movements primary goal through the 60s through the 90s was to maintain job security through seniority. The corporate response was to outsource to places beyond their legal grip which meant low wage countries. In this respect they bear some responsibility in our declining corporate productivity.
Of course, they achieved these goals by convincing gov’ts this was good for society. This is where we find our great divide between “left” and “right” in the political debate. The left wing wants to protect the established worker base and does this by promoting policies that entrench this groups monopoly. The right responds by pushing for policies that re-inforce the corporate monoploies powers. They both become stooges for the existing monopolies.
Meanwhile we become less productive and efficient as a society. The best part of capitalism – its ability to creative destruct through entrepreneurial vision and innovation – is held hostage to entrenched monopolies.
We need to find a new way forward beyond these competing visions of the past.
#100 LB
Nothing specifically against this comment per se, more on the sentiment represented here.
It seems so typical, that when you have someone suggest some real changes that would improve the economy and the lives of many by lessening the business regulations that strangle in the cradle most entrepreneurial ambitions, only to hear back, hey! you can’t do that, you’re not solving all our problems! back to the status quo with you and your extreme views!
It’s almost like the only way to effect any change is to come up with a foolproof, bullet proof 5-year plan that will also deliver world peace, slice bread and dice tomatoes.
The only way to extricate ourselves from the free-borrowing and spending ways of big, ever-present government colluding with big business, mortgaging our future and intruding on every aspect of our lives, is the same way we got ourselves into it: over decades, one small step at a time. In reverse.
Whereas it was easy and immediately rewarding to borrow future money to pay for present benefits and freebies, it will be painful and unpopular to cut that benefit and repay the debt. Be it at individual level, or public level.
It will happen one way or another; in small steps, or all at once when you least expect it.
#83 Analyst Analzyer on 07.22.10 at 10:11 am
“This tells me that the market was not actually responding to what he was saying, but more so what it expected him to say.”
Look back at the history of what you are saying, During the 90′s everyone thought that a booming stock market was the end to the “recession” look at what has happened over the past 12 months, steep incline of the numbers and every economist states that the recession is over. these numbers DO NOT say that this recession is over, it is a perceived misconception that if the markets are going up then the recession has to be over… pure hog wash and I will explain ….
I have no idea how many people here are actually watching closely to the important factors around them. I drive the same route every day to work, and I pay attention to “tiny things” like commercial buildings with “for lease/for sale” signs on them. during the past 18 months 4/5 of these buildings are still sitting there with the same signs hanging on them, or embedded on the front grass. On my route I pass by both warehouses, and manufacturing buildings. Can you say that these empty buildings are a sign of a booming economy? (I have trouble believeing).
18 months ago linen&things went tits up. in the town I live in they had a huge store, to this day after they emptied the building, it is still vacant. For lease signs posted everywhere around it. This is in a strip mall (so to speak) in the same area are many for lease signs on retail space. Booming economy? I don’t think so….
I also have been watching a residential building boom in an area that I drive throu about once a week. This area is in a suburban jungle of cookie cutter homes, small lots, and houses in the 2500/2800 sq/ft range. The land that once was dedicated to small lots (1 acre homesteads) before this boom and all owners sold out to the “cul de sac” developers. many of the homes are now coming on line and are near completion, and to top them off, many of these houses also have these (ugly) coach houses (a small apartment over the car garage) for rent. I for the hell of of it, drive into these subdivisions once a month to see the clusters and to watch progress. (and to silently laugh at them) the parade of for sale signs stretch out among the grass. I also watch CraigsList’s rentals for that same area to see how things are going for the suckers who bought and are trying to rent out those places.
Rental wars seem to be happening, many ads are exactly the same for all these places in that area. However, now I am seeing something that is starting to pop up on CL in this same area. Many of the builders are now hiring rental agencies to rent out the homes that they CAN’T sell in this same area. This is the end game for the builders and contractors.
One of the reasons I have kept an eye on this area is because of where it is located, once a nice last stretch of rural living that was close enough to the hustle and bustle, yet a place to escape from it all. Never again will that area be the same. lost to the greed of “they are not building any more land syndrome”
Now getting back to #83 recovery???? all you need to do is question the BS from facts and open your eyes to see the forest from the trees to make out the destiny that we are on. End to the Canadian recession?…. I feel we haven’t started to feel the true bite of the Canadian recession.
cheers
Met a friend on Tuesday evening… he said his prime minus mortgage payments went up $100/month with the last rate hike in June. He had no idea that there was another hike announced early Tuesday. When I told him about it, he could almost choked on the sandwich he was having.
rinse lather repeat
GM pays $3.5B for subprime lender
Oh one other thing I forgot to get into…. incase this was posted before (my appoligies)….
China is in worst shape than we are. For those who beklieve the “rich chinese with buckets of cash” theory.
Mish kinda tosses a bucket of reality on that one
Ponzi Shark Loans Fuel China’s Housing Market Bubble That’s Going Bust
http://www.marketoracle.co.uk/Article21266.html
How could so many
educated and informed people get it wrong?
They are neither educated nor informed . Putting a failed provincial finance minister (Flaherty) in charge of the piggy bank was and is an irreversible disaster .
We are being ruled by klowns who are the least educated parliament in the history of our nation .
Surreal Capitalism: You have two giraffes. The government requires you to take harmonica lessons.
Looks Like we Albertans will probably see the most remarkable “Housing Bust” in our territory! WIth interest rates still close to historical lows we are already seeing arrears on mortgages “SOAR”!
Wait until we start competing against Asia for Natural Resources-prices are set to soar anytime soon now. Interest rates will hit 7-8% possibly. How will $150 for a tank of gas add to these arrears and massive Bankruptcies that are starting? Even in ALberta the small % of Jobs recreated will not make up for more & more families falling below the poverty line.
oops forgot to add the link for my posting!
http://edmontonhousingbust.com/files/100715-1.jpg
#103DSP-???Have you heard of JPM?
#102Victoria-I assume you got the “Ben Bernanke is insane” story from the MSM. I guess you never wondered why his “insanity” makes so much money for so few.
As I was making my way to a coffee shop through the streets of Old Montreal just now, I noticed that another retail shop had closed. Taped to its windows were dozens of property listings. I’ve noticed this in other areas of Montreal as well. Realtors are pushing listings along abandoned shops like drug dealers on seedy street corners. They are the new drug pushers. Or more accurately, “debt pushers”.
Realtor called me about another apartment I am planning to vultch. They were at 369K last year…dropped down to 294k now…it is empty, parents moved to retirement home..they told the realtor that they NEEDED to sell and to bring any offer…
patience Grasshoppers…..patience……
#80 Devore on 07.22.10 at 10:10 am
Jobs are evaporating at a record pace….regardless of the Government numbers……fall 2010 will be very interesting…..getting ready to short heavy…..this thing is going down large!
PleaseExplain on 07.22.10 at 10:01 am I lives in Toronto. Garth said SELL! when average prices were 10% below 2008 peak. So I did. House I sold was roughly worth 400K in 2008, but I sold for 360K because Garth was screaming SELL! Similar houses on my old block now sell for 440K.
Basically, I missed 80K pay day thanks to Garth. I put money in markets like Garth say. I’ve not made 80K. I’ve not made 20K. Maybe soon I make 10K, unless I’m unlucky (even more I mean!).
Wow, thanks Garth! And nice to hear you scream SELL! again. This is dangerous game to play. I regret it.
I ran your IP against previous comments that were deleted from this site because of their abusive nature, and found that you have posted under more than 6 names, including ‘Where’s the risk?”, “Kevin” and “Gone with the wino.” In those you never mention having either owned or sold a property, having invested or having taken any advice from this blog. Obviously your comments are fabricated and your intent is malicious. Your IP has now been flagged and further comments will be blocked as spam. However, I think this gives an unfairly bad name to spam. — Garth
———————————————————
More Realtor propaganda of lies. As you can see beware of realtors on not only this blog but other blogs. The housing crash seems to be getting worse as realtors will do almost anything to get the market going again.
Garth, your comments on first-time homeowners reminds me of what I observed earlier this year in my neighbourhood. Two young couples did the same thing upon moving into their new (first) homes down the street. They trashed all of the white 15 year old or so major appliances that came with the house and replaced them with brand-new stainless steel ones. Fridge, stove, dishwasher, washer and dryer. Most or all of these would have been in good working order. Has anyone else seen this kind of thing? Until a few years ago I believe that this would have been virtually unheard of.
@ 107 Devil’s Advocate
I am getting tired of your equilibrium crap. The economy is never in ‘equiliblium’
The thing with market dynamics is that they work both ways.
longer the run up, the longer the downturn, take a look at the US housing downturn charts for that.
Law of mean reversion. simple math.
The big question is will people be able to hold on to their homes (as people did in the 90′s and waited until 2002 to break even)
Like the banker says, when people start to dump their mortgages the downturn speeds up real fast.
I am seeing this in pockets of the GTA already. People trying to get “in front of the market” by reducing their price and the home still sitting on the market. Over time, just as when home prices were bid up and the last sale price on the block or condo dictated the new “floor” for prices.
Price reductions will also dictate a “new floor” for bottom end. Just how it works folks.
Its already starting but just in the first inning. These will spread like a praire wildfire in the coming months.
The urgency to buy is now gone, every increase in the BoC rate will curtail buyers ability to purchase a home. In a few months the pre qualified buyers who get buy at 450K will now only be able to buy at 420K. Only 30K but thats a bighaircut to the seller.
and down she goes…
Fannie Subpoenas to Show $30 Billion Bad Mortgages, Rosner Says (Bloomberg)
ND20 contributor Josh Rosner reveals that Fannie Mae and Freddie Mac’s regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase.
=
“Facts do not cease to exist because they are ignored” (Aldous Huxley) … “In a time of universal deceit – telling the truth is a revolutionary act.” …
#124 Genghis
Yes, definitely. Not even just with new homeowners, many homeowners I know took out lines of credit and renovated their places, and in the process bought entire new (stainless steel) appliances. Often you would see “free!” ads posted on craigslist, people giving away perfectly good washer/dryers. Imagine what our grandparents would have thought, what a waste!
@108 Junius
Unusual only in the sense that I rarely agree. I’m a combative sumbitch sometimes.
Debt………hmmmmmm……..
Canada versus the PIIGS…….
The only countries with more overall “combined” debt consisting of public, household, and corporate borrowings than Canada are…….wait for it……Ireland and Portugal……..
Canadians have more household debt than any of them.
http://3.bp.blogspot.com/_0YOsyi5WbLY/S_WpgdC2dVI/AAAAAAAAAdU/flaf1_x28YE/s1600/Canada%27s+Debt+Versus+the+PIIGS+debt+-+Net+Government+Debt.jpg
Sources you say ?? Why none other than……Statistics Canada, the Bank of Canada and the European Central bank.
Excuse me while I go and walk thru my field of golden flowers to give my purple unicorn a lollipop…….why, there’s nothing to see here…….
#111, once the defaults set in, look for Prime to increase on its own, independant of the Bank of Canada.
Its amazing how many people think “Prime” is a rate set by the government, or the BoC. Its not. Its set by your bank.
118 BrianT on 07.22.10 at 1:25 pm
#103DSP-???Have you heard of JPM?
*************************************
Am I supposed to answer this?
#59 dave99 on 07.22.10 at 8:06 am
—————————————
Ok, how about page 14 of this study:
http://www.vifamily.ca/library/cft/famfin09.pdf
‘average Canadian household NET worth = $390,000′
and page 30:
‘total Canadian household debt as a percentage of net worth = 25%’
Average household net worth = $367,000. Average household debt = $112,000. Average household savings (includes all cash, RSPs etc) = $71,000. The remainder of net worth, about $280,000 is largely represented by real estate equity, which can be both illiquid and reduced by market forces. — Garth
#77 DA
Don’t mention boats to Garth.
“End to the Canadian recession?…. I feel we haven’t started to feel the true bite of the Canadian recession.”
Exactly.
I scoff every time I hear this ridiculous “meme”.
#124 Genghis on 07.22.10 at 2:13 pm
I’m glad everybody is going to stainless.
This week I installed a 5 YO white fridge which, free, and an 8 YO Kitchenaid gas convection range, 300$, all because the previous owners wanted the new shiny silver ones.
Usedottawa.com is full of cheap white appliances in perfect shape. This is another example of a housing related boost to our economy.
I sometimes wonder if stainless will become so passe that it will be the new avocado of appliances.
Took the kids to Long Point beach yesterday. Drove through Port Dover on the way. Holy crap, it looks like the whole town is for sale!! Realtor signs, private sale signs, even handmade sale signs everywhere. Not much different at Long Point. LOTS of properties, cottages either for sale or for rent. Not much activity in both places either. Used to be always packed after sunset in Dover. Guess its only busy on Friday 13th these days, eh Garth?
interesting article that came out on the Financial Times today regarding how Bernanke still has some bullets left to push the US out of a possible double-dip:
http://www.financialpost.com/news/business-insider/ways+Bernanke+could+stimulate+economy+right/3309966/story.html
Now, i am no economist, politician or Finance Minister….but how scary would it be if ANY of these solutions were truly actually considered in this economy??
i really REALLY hope an 8 yr old wrote this article.
Paying of Student and Auto Loans?? I would have to go out and quickly buy that Audi R8 that i could never afford if that were the case. Nothing would push an economy out of a recession faster than that!
or have thousand’s and thousand’s of additional high-paying federal employee’s doing the ‘day to day’ processing of small business loans (the only real good idea actually), so that the business’s get 50 cents on the dollar actually planned for the program.
anyways. Good post Garth. The most impacting statement i’ve read on any site in awhile was:
“”to give hundreds of thousands of people with little money, billions of dollars at rates which will reset 200% or 300% higher.”"
Discussion then seems like today
Marriner S Eccles. a banker speaks
Investigation on Economic Problems
Hearings Before the Committee on Finance
February 13 to 28, 1933
http://fraser.stlouisfed.org/docs/meltzer/ecctes33.pdf#search=Eccles
http://www.newdeal20.org/
Sorry for my previous post. i apologize for the grade school gammer. i read my post after i posted it and realized the errors. Apparently i am guilty of writing that Financial Post article.
re # 14 Nostradamas Le Mad Vlad.
I believe what goes around comes around. Very informative blog today thanks. As well as the others out here as well.
Back around 1989 we had the same real estate bubble syndrome as we are having now ; the difference being this one has been stretch out over 5 years at least compared to a couple years in around the 1989 one.
Look how many people have fallen unto this real estate abyss this time. Like I stated earlier I can see at least 1/3 of the middle class wiped out within 10 years or less , being overextended.
Back in the last bubble in Toronto it took 10 years for the guy who bought at the peak to recover the same cost which he payed for his house , in general. Where as the person who bought when the prices dropped made money in 10 years.
Now based on this observation if the housing market has been over priced consistanly in Toronto for at least 5 years the $ 800,000.00 house you bought in Bloor west village ( Etobicoke) this year should correct itself to the 2005 price of around $450,000.00 ( that’s what a friend of mine bought for in 2005 and sold for around the start of this year)
Now factor in the jobs we have lost in the last couple years which we will not get back, wage freezes / reductions, taxes on the rise ( Toronto’s infrastructure is fucked). Alot of these were not in play in the last real estate correction.
Now the banksters know this but will slowly stretch out this gauntlet of death , like a death of a thousand cuts. The bought and payed for puppets of the banster knew this or chose to ignore it because their pockets are already lined.
The first to go will be the ones who bought with nothing down, Variable Mortgages ( 1-2% increase will wipe them out.)
Then the rest will follow when they have to renew, factoring in that their homes have dropped in price and now the banks will be kind enough to give them second mortgages. FUCKING WIPED OUT.
This will all be stretched out for at least 10 years because if if all happened within a couple years we would have a revolution. Civil unrest… When you take a persons right away to survive they sort of get really upset. Whether it was their fault or not.
If any of you people believe the governments are that stupid to put us in this situation, running the countries into financial defficits, which will never be repayed back, except for the interest to these BLOOD SUCKING BANKING CABALS, YOU TRULY ARE SHEEPLE.
No theatrics here people just ‘ COMMON SENSE” which seems to have elude alot of people.
The ‘SCREWING OVER’ we are going to get from BIG BUSINESS in the next 5 years is going to make the last 30 years look like a picnic .
Truly a shame most chose to ignore the writting on the wall, or were to busy having a good time, getting further in debt.
” NO CONSPIRACIES HERE PEOPLE’, All the governments of the world are just completely incompitent. RIGHT.
Get the vaseline out sheeple and enjoy the ride, gonna be a hell of a ride for a while , after all you’ve already paid for the ride.
As I was making my way to a coffee shop through the streets of Old Montreal just now, I noticed that another retail shop had closed. Taped to its windows were dozens of property listings. I’ve noticed this in other areas of Montreal as well. Realtors are pushing listings along abandoned shops like drug dealers on seedy street corners. They are the new drug pushers. Or more accurately, “debt pushers”.
————–
A couple of years ago I had an argument with a Montrealer who thought things were different there.
His argument was that if Vancouverites could afford 500-600K houses on the same income as Montrealers, why couldn’t real estate prices in Montreal shoot up some more?
I asked him if he had ever visited Statcan’s database to compare a Montrealer’s budget vs. that of a Vancouverite. Of course he hadn’t. Well, let me tell you that Vancouverites spend much less on clothes, furniture and restaurants.
And as far as I know Montrealers who work in those 3 industries also buy houses so if these sectors were to suffer, something tells me they’d have trouble paying their mortgage.
It’s amazing the number of people who don’t realize that an economy must readjust itself when real estate prices balloon. And it does not happen overnight. It probably takes 3-5 years for new homeonwrs to run out of money.
Anyway, one of my friends emailed me a couple of weeks ago to tell me that my predictions are slowly coming true… quite a few of her clothing stores and restaurants have shut down recently.
Merck also announced it will be laying off 150 scientists. Too bad for the West Island, lots of Wannabe Nouveau-Riche with a big life there. Jobs going back to the US. Our economy was built on a 65 cent dollar most of our recent prosperity was built on the currency appreciation. Anyone who expects Canada’s “hegemony” to last much longer is dreaming.
Prime Minster are you our paternal father?
#124 Genghis on 07.22.10 at 2:13 pm
Garth, your comments on first-time homeowners reminds me of what I observed earlier this year in my neighbourhood. Two young couples did the same thing upon moving into their new (first) homes down the street. They trashed all of the white 15 year old or so major appliances that came with the house and replaced them with brand-new stainless steel ones. Fridge, stove, dishwasher, washer and dryer. Most or all of these would have been in good working order. Has anyone else seen this kind of thing? Until a few years ago I believe that this would have been virtually unheard of.
…………
Haven’t seen that, but B&SIL redid their kichen 1+ yrs ago. Trashed all their wt. appliances & bought all new stainless. On one wall, put in fridge only, next to freezer only. Looks great, but both are mostly empty ea. time we visit them. They mostly do daily shopping. What a waste of electricity.
AWESOME
If this comes to reality all the idiots in Calgary who actually believe their shacks are worth $400K will have a large enema in short time.
Looking forward to the crash.
#136 OttawaMike on 07.22.10 at 4:34 pm
#124 Genghis on 07.22.10 at 2:13 pm
I’m glad everybody is going to stainless.
This week I installed a 5 YO white fridge which, free, and an 8 YO Kitchenaid gas convection range, 300$, all because the previous owners wanted the new shiny silver ones.
I sometimes wonder if stainless will become so passe that it will be the new avocado of appliances.
…………
Good for you.
Don’t forget the gold and rust ones from the 80′s – Yuck – and those pink and turqoise bath fixtures!!
To copy a quote from Warren Buffett who referenced Noah.
Predicting Rain is not good enough. Building Arcs is what counts.
Hope ya all got yours built.
#95 warptweet, right on…Vancouver is DEAD in terms of productivity. Until people can freely squat down on a mat on the sidewalk fixing shoes, selling used books, repairing watches or selling produce – without police harrassment and without licenses, taxes, insurance and mandated wheelchair access laws – there will always be more unemployed.
Or – why not set up multi-story public cooked food markets, as in Hong Kong, which can be rented for next-to-nothing and where anyone can sell anything?
-
#12 JO — “The next, more devastating leg down in the economy has begun.”
Indeed. Second half of 2010, all the veggies (us) are being tossed about in a sizzling hot wok.
Great post.
#39 bullion.bunny — “. . . it will happen much faster . . .”
Agreed. Plans are afoot that the entire western economic system, based on individual greed, will happen very quickly and without warning.
For those who are debt free or renting, it won’t be too hard. But factoring in food and water shortages, civil riots and a few other things, people will be walking a tightrope of their own making for several years.
#45 David B — “. . . Harper’s Canada would be different.” — Harper’s quote
Not that far off. Maybe the US will walk in, Cdns. will hand everything over lock, stock and barrel. That’s what timid sheeple do.
#56 mikey — “. . . you’re actually being screwed.” — See #45 David B.’s response!
#79 Basil Fawlty — The middle class in the UK and US has all but evaporated, with the rest of the Eurozone following fast.
Canada, NZ and Oz will follow very shortly. As I mentioned to #39 bb, the takedown is almost in full swing now, Wait ’til the false flags begin in earnest!
#107 Devil’s Advocate — “Now the detoxification begins”
Aahhh, withdrawal symptoms of a money junkie. Takes time, a lot of mental and physical pain, but it can be done.
Yes, it was govts. who convinced lustful losers to spend way beyond their means, but they are only a part of the problem.
See the present mass of looniebins for the main cause.
#141 Bill (Peterborough) — Good post. A link some time ago said the supposed net wealth of the Rothschilds was around $500 trillion, a fair chunk of change.
Add to that the Rockefellers, Soros (Obama’s backer), Ted Turner, the Sultan of Brunei etc., and one can see why all of this is happening — depopulation and / or misery for zombies, deluded by the illusion of money.
Could be just about time for an unexpected asteroid crunch!
ZIRP Depression or words to that effect. If they’re in one, can’t be far off for us.
BP could stand to learn a couple of things from others.
11 min. clip La End de Le Empire, but a NWO is unlikely to happen despite their best efforts. Following the US’s lead, they will destroy themselves first.
Karl Rove Remember him? Did he create Obama? “Is Karl Rove the master puppeteer behind Obama? If I wanted to destroy a party… what better way than to put someone like Obama in charge of the party?”
so who really subsidizes the pakistani rich
http://www.nytimes.com/2010/07/19/world/asia/19taxes.html?_r=1
WORLD
Tax-Free Living in Pakistan
Very Few Wealthy Pakistanis File Income Tax Returns
#119 Brian T.
No, actually I didn’t get the “insane” idea from MSM; thought it up myself given his testimony of this date!
You’re exactly right about this insane monetary behaviour making few rich and many poor. Of course it does. It’s an outcome which is as old as the market place itself, as long as the rules are not quite “fair”, whatever that means!
Summing up: Big Ben is well educated, but is he smart as in street smarts, and/or does he wonder about the unintended consequences of his decisions?
One thing is for sure. He is, like his “irrational exurberance” predecessor, a highly prized member of the Wall Street/DC “tool box brigade”; maybe not the sharpest tool in the box, but he does what he’s told.
That’s all that matters as the Empire unglues itself, thanks to the manufacture of one amoral financial decision after another. Insanity, it is!
The chumps will get what they deserve. (See: History of the Roman Empire; the bit about watering down the currency. Interesting, Mr. Ben).
#124 – Old news. This has been happening for at least 4 years.
I don’t foresee much overshoot below that. A few houses may sell at distressed prices, but I think get back to 2000 price levels with an inflation adjustment and it’s the go to investment area in an environment of economic uncertainty, so long as people can pay rent.
Does anyone know of a website which archives MLS listing prices? It would be interesting to take a look at what houses were being listed for at different points in time.
#149Nost-too much truth on that site you linked re ZIRP depression-basically a downer.
Time to debunk Garth position that you should not own a stock in your own company. It highly depends what type of company it is. I know he will use nortel as an example, but that is just one case study.
This is one hell of a story
http://www.thetelegraph.com/articles/college-37098-frugal-leaves.html
Double jeopardy. — Garth
Stainless steel appliances for those on a budget…
http://fauxstainlesssteel.com/FauxStainlessSteelFilm.php
Asia ETF vs Asia Mutual Fund
MAPIX (Mutual Fund)= up 8.37% for the year
FXI (ETFs) = -2.70% for the year
”I am getting tired of your equilibrium crap. The economy is never in ‘equiliblium’” #125 TorontoBull on 07.22.10 at 2:23 pm
I don’t disagree with you. I should not have written “one way or another equilibrium will be achieved”. What I should have written instead is ”the economy always seeks equilibrium”.
What exactly is YOUR point TB, just arguing for arguments sake? ‘Cause I’d happy to discuss the semantics with you… but I somehow believe you got my point. Care to discuss it… my point that is?
Rather than bore the Blog Dogs with it email me at Kelownial@gmail.com
Realtors……………..lost alot of respect for them lately……………..I thought Lawyers were crooks……………but the “Real Este Professionals” as they call themselves…..well they take the cake. Long story, take my word for it…………..I’m sure you have your own stories.
Do you know when a realtor is lying? Their lips are moving………….
Local house, dumpy thing, listed here for 128G privately, prob worth….say 75. Realtor gets ahold of it and lists it for 150g? I call the realtor on it and say WTF? Yesterday listing was 128, on kijiji, today it’s 150…………..they did 22G in improvements in the last couple days??
She replies “I have no control over their private asking price, sorry”.
No, you don’t. BUT, you have control over what YOU suggest…….they had it at 128, you list at 150……don’t try and slither out from that you snake, is basically what I told her………………I’ve lost a friend, as this is a small town. That’s OK, I don’t need friends trying to milk me hard, been there, done that, with the “vows” and I say “vows” with a grin, believe me.
Nothing but fucking liars and thieves, those realtors.
Re # 149 Nostradamas Le mad Vlad
BP new about the leak for a while , giving them and their cohorts enough time to start dumping shares, at a profir of course. Interesting reading below for those interested, might take a while. For some truth is stranger than fiction.
(Sort of like in the LORD OF THE RINGS scenario with wormtongue corrupting the King Of Rohan , Then Gandalf removes the clouded vail and the King finally sees the whole picture.)
http://www.iamthewitness.com/DarylBradfordSmith_Rothschild.htm
Watrous Realty…………..so far, what I’ve seen is……you have a prop you list private, kijiji, bulletin boards, local rag (remember this is very small town)…………………………you are high on your price, real high………..nothing happens………….the ads disappear……………I figure, guess they’ve sold, or changed their mind……………….THEN, without fail, it pops up on Watrous realty.com, at 25-50% more!!
WTF! It didn’t sell at 2x “value” so now Watrous Realty lists it at 2.5x??
VERY frustrating…………….yet shit is not selling, so hopefuly this is the realtors wet dream ending.
Spent a couple hours with a local, retired Potash miner, (maybe 35 years or so) Potash is the SHIT here, he tells me the new mines everyone is hoping for…………….by BHP………….are not going to happend..only new shafts, leading to existing mills and loadouts……………whole new pic here now……………..lotta egg to go on these greedy friggers faces…………….
Garth et al:
As per my post yesterday.
Coast to Coast Radio program:
http://www.coasttocoastam.com/show/2010/07/12
I actually listened to the entire 4 hours.
If you listen to the segments, they talk about the fact that the rain that is falling from Texas straight up north to Canada, just draw a straight line up, and then go east is the areas that are getting or will get the “questionable rain”. They then talk about the July 4 fishing derby in the Dakotas, where all the fish in the lake were dead floating on the surface, and “acres” of crops have died prematurely due to “something” in the rain.
Methane concentrations are at “toxic” levels. People swimming in the gulf are getting sick after coming out.
In the 4 hours it talks a bit about the toxic gases hitting Ontario, killing crops etc.
If the gas escapes from the many “cracks” in the floor of the gulf and hundreds of thousands of gallons of oil gush out, and has not been pulled out, where is it going to go. It is going into the atmosphere, where it will concentrate, and then move north with the wind.
Sorry to be bearing bad news, but this is going to continue.
The methane gas is coming out at 40% of the amount of the oil. Normal is 5%. Don’t forget the Hydrogen Sulfide. Yuck.
RE anywhere north of Texas is going to get screwed soon, as everyone heads to Vancover.
Nostradamus, we hear you have a few dozen foutons for us blog dogs.
#141 Bill ( Peterborough) on 07.22.10 at 4:57 pm
If any of you people believe the governments are that stupid to put us in this situation, running the countries into financial defficits, which will never be repayed back, except for the interest to these BLOOD SUCKING BANKING CABALS, YOU TRULY ARE SHEEPLE.
*************************
Bill-
I must be a sheeple–cuz–
I truly do think Government’s and especially “our” Government is totally-farm animal dumb–
Cab you imagine for even one brief second-that F-especially–has one friggen-tiny clue what’s happening?
Government’s are controlled by Banks-
These guys take their direction from Carney et al–
Not the other way around–
Geezzuz–can you imagine “F” being a mastermind in a conspiracy?
Look who’s walking away with taxpayers dollars–
Not the Government-
The Banks are cleaning us “with” the help (unknowingly) of our incompetent-economically “illiterate” leaders such as F-and Harper and our equally stupid opposition members-who “think” F and H aren’t doing “enough” borrowing and spending and handing it over to the already enriched pigmen-
Carney “knows” what’s happening–
Carney is a Goldman-
The Goldmen “always” know-
Aussie Roy, my bro-in-law lives in Brissie! We have watched homes in his suburb of Hawthorne (just a few blocks from Bulimba) go ape shit for years.
Double plot Queenslander remodelled for $750K 10 years ago now worth $2M. Crazy for sure and makes VAN RE look normal when compared.
I have told him to sell and rent as kids now off to Uni but again sees no end to the increase. Ouch!
#179 Bottoms_Up on 07.21.10 at 11:18 pm
That’s BS.
check this out:
“What about this one” /a>
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The great unknown, and we’re almost there! “Most Massive Star to Blow Itself Apart?”
Hmmm. ‘More from the “weather is not climate” department in the “hottest year so far ever”.’
Leaving the door open to an almost certain response from Russia and China. More progress from the WH. Fits nicely with the previous.
The US is itching for a scrap, and they’re probably going to get it. Plus this.
Prognostifications Prophecies and / or Predictions.
Jobless “Ever notice that when the jobless claims go down the government announces this is a sign their policies are working, but when the jobless claims up it is “unexpected?” wrh.com. Orwellian doublespeak for tripletalk; for six unemployed, there is one job opening in the US.
Stagnancy = Death.
Letting staff go then contracting out all over.
Great post Garth……oh ya were different here
……why even “Helena’ is now demanding a one on one with Mr H to get some answers and explanations for booting her tainted ass 
… i’m sure Mr H will arrange this as soon as possible to prevent a potential loss in the polls due to the huge popularity of herself and her beloved “snorter” 
Why governments could print like there is no tomorrow.
http://www.ritholtz.com/blog/2010/07/japan-past-the-point-of-no-return/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheBigPicture+(The+Big+Picture)
I think the interesting question to ask is: assuming, for a moment, that you’re correct – housing prices decline, and the lucky ones will be those with cash and no debt. What then? I mean, sure, you’ll have avoided the worst, but it’s not like the markets as a whole will respond positively to that result; you’ll have cash, but no way to grow it through investment.
But then again, you’ll have avoided the worst, so maybe that’s enough?
Once you grow up, son, you’ll learn there are actually other investments than houses. — Garth
Not sure we should be taking investment advise from an ex-MS employee…let alone someone that worked the toxic mortgage desk. We shouldn’t forget that MS made the single worst trade that any investment bank has ever entered into in the history of the world! They ended up losing $9 billion betting on sub-prime CDOs. They didn’t understand the US real estate market and investment products they developed and based on the comments above they clearly don’t understand Canadian real estate. The fact that you published this non-sense Garth is a joke.
Average prices down to $340K in 1 year…that’s some nice extrapolation…must have done the same kind of math when they invested in those CDOs.
Re #164 dark sad person
#141 Bill ( Peterborough) on 07.22.10 at 4:57 pm
If any of you people believe the governments are that stupid to put us in this situation, running the countries into financial defficits, which will never be repayed back, except for the interest to these BLOOD SUCKING BANKING CABALS, YOU TRULY ARE SHEEPLE.
——————————————————————–
The governments are bought and payed for selling their souls for money, All of them who did this are JUDA”S. ( Granted alot are blanks)
They know that they sold us out but don’t give a shit, choose to reap their rewards here at any cost.
So they really can’t be that stupid, not knowing what the outcome will be, instead they choose to ignore it, while lining their pockets.
The banking cabals are set up in almost every country with their serpent tongue advisors guiding the governments in any direction they choose.
Garth won’t let me post other things here for fear that some groups might get upset, even though it is the truth and never been challenged in court…
The GREY MEN FEAR EXPOSURE at all costs , because once exposed people will truly see what has been going on for centuries, control of the world by a few through our monetary systems.
Granted the Governments might not know the whole picture, but are a huge part of the problem for allowing these BANKING CABALS in , they knew the outcome of this action but instead chose to ignore it lining their pockets. But I agree alot do not see the big picture.
Hope that re-clarifies my previous statement better.
Food for thought:
http://www.sherryshriner.com/black-pope.htm
#153 Love this Blog on 07.22.10 at 6:39 pm
Buyers tend to fall in price brackets. There are those in the $100,000 to $125,000 bracket and there are those in the $125,000 to $150,000 bracket. As you move up those brackets grow larger to the point that you have a $750,000 to $1,000,000 bracket of buyers who logically if they can afford $750,000 likely have the where-with-all to afford $1mil. In my experience, in a normal market, pricing a home in it’s proper price “bracket” is the first test so all things being equal a price of $150,000 is not going to knock out that many prospective buyers from were it priced at the $128,000 it was when private. Now that is in a normal market and these are not normal market conditions. Besides which it didn’t sell at $128,000 did it? Likely neither will it at $150,000 even though “professionally” marketed.
If you price a home just 5.0% over its true market value you will knock out 25% of the market. Price it 5.0% below market and you will attract an additional 35%. Even if you price a home at its true market value you are going to attract only a portion of the prospective market for it. Fact is if you put a home on the market for just $100.00 it would result in a feeding frenzy of competitive offers likely bidding it over its true market value. (BTW a list price is “an invitation to treat” in other words you are not compelled to accept it). Price sells, word of price travels… nothing… NOTHING markets like price…. NOTHING. And it is a double edged sword… too high a price is a kiss of death.
In today’s real estate market the price you market a property is of paramount importance. As I stated in an earlier posting to this site buyers are not giving even a second glance to anything they perceive priced even the slightest above its true market value. Buyers have no motivation to make a hasty purchase as they perceive prices are only falling. But put just a reasonably priced home on the market amidst all those overpriced ones today and all hell breaks loose as it looks like a comparative bargain. That listing your friend took will help sell the listings of other agents. Your friend might even be the REALTOR that sells the competitive listing down the street instead of her own.
There are two schools of thought in the real estate profession. The first is list it at any price, just get the listing, you can work them down to a price at which it will sell later. The other, I think more professional approach, is to list it right in the first place. A rule of thumb I tell clients is, generally, for each dollar you price a home over the true market value you can expect and equal dollar less than market value when it finally does sell and it will take at least two to three times longer to achieve what otherwise would be done within a month. There are many logical explanations I could offer that explain this… believe me it is true and the moral of the story is you are NOT doing your client any favour what-so-ever by conceding to their lofty price expectations or as we say in the business “buying the listing” by agreeing to an over market list price.
Imagine if our industry insisted on doing it right the first time… Obviously we would have a lot fewer expired listings on which we spend thousands upon thousands of dollars trying to flog a dead horse. We would not need to recoup those expenses on the next listing and could reduce the costs to all our clients.
Bottom line with respect to your friend… they are just trying to compete in a very competitive industry… Her tactics may be misguided and arguably “unprofessional” which might be good reason not to use her as a REALTOR but no reason to terminate her as a friend. Fact is she is likely going to need a friend as the chances are they won’t have much success with that listing which never sold for $22,000 (14.66%) less in the first place.
#101 Prof ANON “…I would like to add one additional culprit. Unions during the 1980’s and 1990’s should have included skill acquisition in their bargaining. Instead, they went after every last possible cash dollar…”
I work in the automotive industry and I can tell you that as of the early 90′s the big 3 have had a best-in-class policy for all of the skilled trades people they hired. The employment agency for the company I work for told me that only 5% of the applicants make it through the testing.
—-
“…The thought process could have been something as simple as “Efficient production methods continually improve and become more technologically advanced…”
That is already a part of everyday life for every person who works in the north american automotive industry. Both the Union and the company embrace improvement and change because we know it is the only way to survive.
—–
“…In this way, the means of production have to potential to remain competitive in a global environment…”
The people working in Mexico and China are a lot less skilled that those in North America. Canadian trades are also considered to have more advanced skills than those in the US and are able to work regularly without supervision.
There are many things that one must consider when assessing competitiveness. The cost for environmental, safety equipment and related regulations in foreign countries for example are minuscule when compared to their costs in North America.
I’ve been told that lower level management in Mexico are paid the equivalent of about US$4 per hour. I would hate to think what the production people are earning…
#155 Behavioral Finance on 07.22.10 at 6:09 pm …
Regarding investing in your employers shares. If one’s employer gives you 1 share for every 3 or 4 that you purchase, for up to 5% or 6% of your salary (these are typical examples of employee savings plans), then obviously common sense dictates that you should take advantage.
It essentially amounts to a 25% discount on your shares, or viewed another way, a slightly higher salary.
What is the risk? If you think your company is going to sustain a 25% annual share erosion, might as well find another job
#78 PleaseExplain
The same had happened to me. I sold in 2008, and now it is (still) sells considerably higher.
But I don’t blame anybody. It was my decision. Who could predict that people would react so irrationally to Gov’t stimulus? Well, we can cheat the economy for some time, but we can’t do it for ever. We are fighting Gravity, and I wonder for how long we gonna last. It is like Jack Nicholson in the last episode of Batman. With huge boulder strapped to his feet, for how long he is going to clinch to the ladder? Well, with large dose of dope shot in his arm by our Gov’t, he managed to pull himself up 4-5 steps (unprecedented, nothing short of miraculous performance!!!). And what is next?
Time is coming when even ultra low interest rates (dope) would not force swollen fingers to clinch to the ladder any longer. In US 35 years fixed mortgage now stands at 4.57% (Tax deductible, that would equal 3% for 35 years here in Canada), but even such unprecedented dose is not helping them. They just can’t bear it any more.
It is different in Canada? Oh, yea, of course! We made of different, real stuff up here. We are strong and our women are beautiful, and our kids smarter and we have healthier genes pull. And our Flaherty is wise like an owl, and we are protected by Mike Carney’s mantra (Mike is cute, isn’t he, ah!?).
So, don’t worry. Just strap huge mortgage to your knees and jump on the ladder!
#170
Once you grow up, son, you’ll learn there are actually other investments than houses. — Garth
_______________________________________
Like mental and physical health….
maybe invest in a secure water source (I have a well, who doesn’t these days?), a backup power generator, irrigation system for the veggie garden.
Invest some time to gain skills and knowledge wrt
being more self sufficient. Learn how to wean yourself off the grid as much as possible.
A bit of land is a good investment.
Responding to Garth: Yes, I know there are other investments than houses (which I don’t personally view as investments or even assets, even if they’re paid off).
My point is that if housing tanks, you have to consider the longer term ramifications on the market at large. People who are struggling to pay their mortgage will need to reduce their consumption in other areas to keep their heads above water. This will have a ripple effect on other market sectors: reduced consumption leads to reductions in companies’ growth and profitability; and reduced bottom lines will impact dividends, and returns on equity holdings. And, if you’re really cynical, those companies will reduce their own investment, lay off staff, and the cycle becomes self-reinforcing.
I guess my concern is that even if you aren’t burdened by a mortgage, the longer term picture still isn’t too rosy. Or am I wrong?
LOl I love the picture! I laughed so hard at it! I didn’t take the time to read all the comments, but I wanted to say to brendan that there are other types of investments, such as owning a business or taking a loan out for a business.
Also, I found a great article a few mintutes ago, maybe it would help your readers, it’s called get smart to manage income , I hope that helps!