Comparables

Even for a real estate agent, you have to feel for the guy. Living on the knife’s edge of commission-only can sometimes be a bitch. Too much credit card debt racked between deals. Spouse with HGTV expectations. And a market crumbling beneath your feet.

It’s been a big few months for Jeffrey. Finally sold his own house after six months of showings. Wife left. Moved in with parents. Trashing career.

And all this came as a shock because where Jeffrey works – the Lower Mainland of BC – real estate’s supposed to only go up. So he wonders, is this a blip? Or has everybody been lying to him?

He wrote me yesterday: “After reading today’s blog, I can’t help but think that history always repeats itself.  What were the major causes of the 1980′s high interest rates.  Did prices really plummet and were realtors in the same boat then looking for deals to do as they are today? I’d be curious to see a pattern here with history as from what I always understood the real estate cycle happened every 9 years.”

Good questions. Is history being recycled? Are we repeating past boobs? What’s it tell us about what comes next?

Well, as you know, oil hit $100 a barrel Thursday and Libya’s descending into civil war. Gas prices are already reacting, as will food. Airlines are panicked. And if oil stays at this level for the rest of the year, inflation will mushroom, interest rates will rise and we could teeter back into recession. If gasoline increases much more, the carmakers will be back in the soup line. If interest rates stay elevated, real estate tanks sooner.

If Libyan oil capacity is shut down completely by war, then some believe oil will hit $200. If that happens, we’re back knocking on the door of 2008. You remember two-and-a-half years ago, right? That was when we were trading squirrel brownie recipes and debating what kind of tuna  and rifles to buy. It’s when the real estate market fell off a cliff – only to be rescued in 2009 by emergency interest rates. It’s when people with equity mutual funds needed defibrillators or Viagra, and people with big mortgages, lines of credit and credit card balances swore they’d change their ways. It’s when we came close to the edge of the financial abyss and everybody feared for their job.

Is that where we’re headed?

Nah, I doubt it. But the possibility exists. I’d put it at maybe 25%.

More likely will be the scenario that Jeff heard about from his great-grandfather who lived back in the Eighties and had a punk rock band, too much hair and a thing for Debbie Harry. Steadily creeping inflation led to higher mortgage rates, but at the same time real estate prices snaked up based on a widespread belief anyone who didn’t buy would be shut out of the market forever. So, they bought. Orgiastically. Condo towers sprouted all over Toronto. Bidding wars erupted. Houses closed multiple times on the same day, since speckers had sold their signed offers – to others who did the same.

By 1989 house values hit the highest point ever and almost overnight it became obvious that combined with rising interest rates, this was a Greater Fool moment. The needle of human emotion swung from Greed to Fear in the space of only weeks. Buyers evaporated. Speculators were nailed. Sellers were shocked. Realtors unemployed. And prices plummeted. In fact, in the GTA, it would ultimately take 14 years for people who bought the average home in 1989 to get their money back.

Could this happen again? You bet. Sooner than we get $200 oil.

But this time it would be worse. Today we have armies of virgins who bought in the last two years with little or nothing down, and massive mortgages. A price correction would sweep them underwater. Today we’ve generationally low mortgage rates – the only reason real estate has flourished. A rate hike, even modest, will make their fat home loans unaffordable. Today we have nine million disgusting old Boomers with most of their wealth in a home – the same people who fueled the housing boom of the Eighties. When they cash out, look out. Today we have a fragile economy, record household debt, bankrupt governments and too many people out of work. A real estate plop ain’t gonna help.

So Jeff, yes and no.

There are similarities, like public delusion, numbnuts governments and an inflationary shock. But this time we’re already out there. On the edge.  It’s the age of 5/35, house porn and instant gratification. Credit’s cheap and plentiful. Risk is so yesterday.

Until tomorrow.

206 comments ↓

#1 LH on 02.24.11 at 11:34 pm

Everyone is born short real estate. This short is covered with a roof over your head. There is nothing wrong with being flat (e.g. owning one house). Having four (like me) is another matter. But why panic? Demographically we are a different country, nothing like twenty years ago. Interest rates are not going to explode. Take a deep breath and chill, everybody.

#2 bsallergy on 02.24.11 at 11:35 pm

So many people are like Wile E Coyote looking back at the edge of the cliff while holding an anvil.

#3 Dmitry on 02.24.11 at 11:35 pm

Thank you Garth for this blog! I love it.

#4 rental monkey on 02.24.11 at 11:39 pm

@ Carlyle: Talk about narrowly dodging a bullet. Lucky for you. So many others won’t be. Sounds like you will fine. Good Luck on the move and job hunt.

In this current economy I am curious to hear what others think will be a growing industry/profession, becaue it sure seems like jobs are evaporating~all across this fine nation.

PS@ KC: Thanks for the link hook-up. I will figure it out.

#5 False Facade on 02.24.11 at 11:41 pm

Love the picture!

#6 Boomin Buster on 02.24.11 at 11:45 pm

Heard today that Calgary has one of the most balanced housing markets in the country, and I heard yesterday that it is expected Calgary will lead the nation’s economy in 2012. This place is built on boom and bust. Always has been. Oil will do that. So what now, boom or bust?

Why ask me? The Herald has all the answers. — Garth

#7 T.O. Bubble Boy on 02.24.11 at 11:46 pm

Here’s a property I drive by every day… it was for sale back in November at $1.1M, sat for a few months, dropped to $1M, delisted in January, and now it’s back up at $950k:

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=10382271&PidKey=-1624875101

$150k price drop in 4 months, and still probably over-priced.

People cannot afford these places! (even with $110/barrel oil driving the TSX)

Toronto may be catching Vancouver for highest levels of house addiction, and there aren’t even any conspiracy theories like those “rich asians” to blame for the bubble here!

#8 Crazy on 02.24.11 at 11:48 pm

First?

#9 Hoof Hearted on 02.24.11 at 11:51 pm

I think I see DA in the woods doing “something”

Besides that….yeah, the 1980′s were a bitch…

So were the early 1970′s when OPEC ran rampant with Oil prices.

The 1980′s had a Gov’t program called MURB….

However, demand was domestic and more natural domestic forces called ” supply and demand” drove money “cost” ie interest rates North of 20%.

That collapsed demand, and both new and retreaded virgins learned a lesson.

It’s different here ??

No its different NOW…..research ” Ponzi scheme” CMHC then and now….. and the US is a harbinger of what we . ” America’s hat”..will see.

#10 Crazy on 02.24.11 at 11:53 pm

Is that Debbie Harry in front of the bovines?

#11 Hoof Hearted on 02.24.11 at 11:54 pm

#6 Boomin Buster

I agree.

Garth’s soft porn photo is actually an Albertan gal stimulating milk production in lesbian cows.

To hell with marketing boards….

#12 cameraman on 02.25.11 at 12:00 am

Some of these ditzy models are so hard to work with.

#13 Hovering on 02.25.11 at 12:01 am

HA

that’s nothing

check this place out

http://www.realtor.ca/propertyDetails.aspx?propertyId=10308213&PidKey=-1711200835

some guys bought it. put in crappy faux wood flooring and painted it sky blue. 2 million !

lol

#14 Jeff Smith on 02.25.11 at 12:06 am

I doubt the boomers will unload their houses; where are they gonna live? They will just stay there and retire in it. Still we have massive bubble.

#15 SkyMager on 02.25.11 at 12:07 am

My brother in law and his wife just bought a house in Port Coquitlam. They paid 550k for it. They put 100k down (mother loaned them their down payment). The place needs a new roof, a new furnace, new hot water tank and the backyard is a swamp. I told them to wait 6 month but they didn’t listen.

I know they will be losing a fortune.

What fools they are…

#16 kc on 02.25.11 at 12:09 am

13 Hovering on 02.25.11 at 12:01 am

“Open House: Sunday Feb. 6 at 2-4 PM.”

that listing must be “OLD” for the open house has come and gone… and it must have sold by now to some Rich Asian from mainland China…..

#17 Jeff Smith on 02.25.11 at 12:09 am

Well I guess I am gonna try travel less in my gas guzzling minivan this weekend. Hate those freaks in Libya! :-(

#18 Morry on 02.25.11 at 12:09 am

i call bullshit! Libya supplies 2% of the worlds oil. Stop it garth… you peddle hyperbole

Libya supplies 75% of Italy, for example, which will need to find alternative sources, which pressures the supply chain. I suggest you research a little more on the reasons oil has increased 150% in about 20 months, and what markets believe credible scenarios now are. — Garth

#19 John on 02.25.11 at 12:11 am

Getting back to Jeff Rubin for a minute I agree with him 100% and was amazed when no media outlet even mentioned that the high price of gas was at least partly responsible for the economic downturn in 2008. In my area full size pick-up trucks proliferate and I often wondered how the owners could afford to gas them at $125 to $175 a pop when a litre hit $1.38. They couldn’t …and the pickup truck market virtually collapsed. The tipping point had been reached. Deep price discounts and reduced oil prices brought it back to life but I think we’re headed right back into the same situation.

#20 Boombust on 02.25.11 at 12:13 am

Are those cows or Vancouver buyers? Same duncey look.

#21 BC Bring Cash on 02.25.11 at 12:19 am

Yup it’s gonna be worse this time compared to last time in 1989. Back in 1989 we did not have a world wide financial crisis or crazy rising RE prices during a recession. As pointed out by Garth those 0 down payments did not exist nor the 40 yr. amort. This bubble has been blown way bigger than ever before thanks to HFC and their private sector banking pals and almost free money. This price appreciation during a recession is unprecedented.
The mania was present back in the late 80′s as well. In Newmarket Ont. where I lived at the time Condo’s were bought and flipped even before the ground was broken. Sound familiar?

#22 [email protected] on 02.25.11 at 12:23 am

I agree with the 25% probability. Feel sorry for people who live in Milton with gas prices at 2 buck chuck. Even GoTrain is expensive. What people will romantically pay to sleep by the escarpment at night (can’t see it).

#23 Kevin in Winnipeg on 02.25.11 at 12:23 am

I grew up with a fear of mortgages. My parents had to close their business in the early 80′s when the Credit Union renewed their store mortgage at 19%.
We now have the highest house prices in history, highest debt ratio and the lowest interest rates. Where else can this go.

#24 Brad on 02.25.11 at 12:29 am

Well I make over 220k/yr, drive a Civic that gets over 40 mpg, and only drive about 3000 kms a year. Gas costs me only a fraction of a percent of my after tax income. Let oil rise to $1000 a barrel, I could still afford it without blinking.

I’ve been deriving much amusement over the past few days listening to people at work today going nuts over how oil prices are expected to skyrocket soon. One guy lives over 120 kms from work. Most of the people who work at my office here in downtown Toronto live somewhere like Milton or Oshawa or Aurora because they’re too good to live in a condo. No, they need that big house because “a condo is no place to raise kids” or some other ridiculous reason. These same people think cheap gas is their God-given right. I really hope gas prices soar, it’d be a small price to pay to have less traffic jams.

#25 Brian on 02.25.11 at 12:30 am

Last time around in Victoria I Realtor I know had to sell the (fancy) condo that he was living in just to pay his tax bill – and he wasn’t even leveraged back then.

Everything dried up all at once and all his bills came due – he was just an ordinary guy too

#26 Waiting.... on 02.25.11 at 12:31 am

Since there seem to be a few posts thus far with price comparisons of properties, here’s one…

http://www.realtylink.org/prop_search/Detail.cfm?areatitle=&ARPK=&ComID=&agentid=&MLS=V864096&rowc=20&rowp=16&BCD=GV&imdp=9&RSPP=5&AIDL=22&SRTB=P_Price&ERTA=False&MNAGE=0&MXAGE=200&MNBT=0&MNBD=0&PTYTID=5&MNPRC=200000&MXPRC=3900000&SCTP=RS

#27 Kurt on 02.25.11 at 12:36 am

#18 Mory, Mory, Mory – this is EC100 stuff. The demand for oil is terribly inelastic in the short term – the curve goes almost vertical. Small but very quick restrictions in supply result in large price increases. At the same time, the supply isn’t terribly elastic as well, so small but rapid reductions in demand (like at the begining of the recession) result in startling price drops. In the long term it’s quite a bit more reasonable, but oil prices are extremely volatile, and we’ve built a world economy that is critically dependent on liquid fuels. Adjust your investment strategy accordingly and enjoy the ride!

#28 Enlightened on 02.25.11 at 12:38 am

Hi – stumbled upon this blog a few weeks ago – far too late in some ways but hopefully early enough to evade complete financial disaster.
The upshot is, I have finally convinced my other half to list and after interviewing a couple of agents, should have the house pimping done and the property listed within the next two weeks.
Unfortunately, he is not on side with renting. Originally we were considering downsizing into a small home with a rental suite to offset my f/t tuition costs – I have a few more years of school. However, the better I understand our situation the more I realize what we must do.

Due to 2 back to back job transfers – we have purchased twice in the last 5 years in escalating markets…we sleep and eat in a beautiful home in a great location but have zero cash and few investments. All our money, time and energy goes into home improvements and maintenance and I feel trapped.
I appreciate reading (almost) everyone’s comments and guess I’m really looking for feedback – and some moral support. Any thoughts or suggestions would be appreciated. Thanks, and thank you Garth for this blog.

#29 45north on 02.25.11 at 12:38 am

Debbie Harry:
http://www.youtube.com/watch?v=t-_xnN2MfOA&feature=related

I remember the song

#30 nonplused on 02.25.11 at 12:38 am

Well Garth, let’s hope you a right about your forecast. A housing melt will be much less worrisome than $200 oil.

I was discussing “black swans” today with coworkers (most over used phrase of 2011 so far). We were discussing how the phrase was originally coined by Nicholas Taleb to refer to events nobody could see coming because they weren’t thought to exist. That’s when one of my coworkers suggested a true black swan in the Middle East would be peace and stability. These “cereal revolutions” in the Middle East as they are now being called were as predictable as they were unavoidable, only the timing was uncertain.

I also think the MSM is drastically downplaying the potential for disruption these revolutions could cause. The people are not protesting because they want brotherly love and democracy. They are protesting because they can no longer afford to eat. We have to keep in mind how desperate a revolution over food can get. Look at the French revolution as an example. Not too far along after they beheaded the king, they tried to behead just about everyone else. Then they got Napoleon, and Europe was at war for years. The cereal revolutions have every potential to degrade just as badly, only this time the world economy hangs in the balance, because we cannot live the way we do without that oil. Not even for a little while.

$200 oil could cause similar riots in the developed world. At $200/bbl, our way of life is simply not affordable, and people aren’t going to take kindly to the situation. Just look at what’s going on in Wisconsin over a proposed increase to pension contributions from teachers. And those teachers are, in theory, free to seek alternate employment if they don’t like the deal they are getting from the state.

I think the previous world order, based on cheap oil and deficit spending, is breaking down. Humpty Dumpty has fallen, and he can’t be put back together again. Something new will take his place, and it might not be pretty for a while.

Watch the DOW tomorrow and in the coming weeks. One mistake now by a high frequency trading algorithm and we are going straight in the ditch. But if the herd panics over some brazen display of questionable utility, it could be even worse.

#31 Boomin Buster on 02.25.11 at 12:43 am

In the case of that picture, I’m all about the bust, never mind the boom. Too bad the model is looking the wrong way. I demand a retake!

#32 Big Al (New) on 02.25.11 at 12:45 am

I don’t care I got out last year May which was good, but the best part was I also prevented that dumb boyfriend of my daughters not to buy that Condo in TO on spec. You know that kid might have hope yet, he better thank me for the two best things I gave him my daughter and piece of mind..

#33 Dexter on 02.25.11 at 12:46 am

#15 Skymager

“My brother in law and his wife” ??
Is that not your sister? Is this a real story?

#34 Eddie on 02.25.11 at 12:51 am

And here’s what that 2.2mil will get you in sunny Florida.

http://www.realtor.com/realestateandhomes-detail/702-Berrocales-De-Avila_Tampa_FL_33613_M54926-22291

#35 BC Bring Cash on 02.25.11 at 12:59 am

#13 Hovering
Re your posting of MLS# V866890. Apparently it has a mortgage helper 2 bedroom suite thrown into the bargain. Do buyers stop and think how much of a dent the mortgage helping suite is going to actually contribute to the massive monthly payments approaching $9,000 a month? What a deal! NOT! Mortgage helper my ass. Sounds like RE listing agents desperation.

#36 m on 02.25.11 at 1:02 am

I’m sure you can use this picture for your of your posts Garth.

http://i.imgur.com/F1EjB.jpg

#37 Crash Callaway on 02.25.11 at 1:03 am

#25 Waiting.

That 2.1 millon listing is Van’s version of Little House on the Prairie.
I’ve seen bigger & nicer looking garden sheds at Home Depot for $800

#38 Soylent Green is People on 02.25.11 at 1:09 am

snip snip: I honestly don’t give a flying-f**k what The Economist thinks. Canada has decent employment because our housing bubble hasn’t burst yet.

Our governments haven’t been asked to bail-out imploded banks because harper wasn’t able to deregulate them fast enough. The policies that created the world-wide economic disaster are precisely those advocated by the financial-sector shills who write for The Economist.

http://thwapschoolyard.blogspot.com/2011/02/stephen-harper-rising-to-challenge.html

.
.
.

.♥

#39 Another Albertan on 02.25.11 at 1:10 am

#18/Morry –

Libya is not the only factor involved here. You have Egypt and its proximity to the Suez canal. You have oil-rich Arab countries giving large sums to the population in order to quell any bad feelings. You have declining North Sea production.

Check out the current pricing scheme of West Texas Intermediate. It’s at nearly a $20 discount to Brent, principally due to the inability to move oil in, out, or around Cushing, Oklahoma. If Conoco reversed its line through to Houston or if there were more transportation options to the Gulf Coast, WTI would be about 20% higher than it is. And then Congress would start hearings left, right, and centre. Garth is correct. Italy is feeling a very hard pinch right now. One doesn’t “re-task” a tanker en route like a spy satellite in a Hollywood movie.

Prices are set at the margin. And about 1.7MMbbl/d is currently at high risk of coming offline entirely, while Canadian crude pours into the US with no ultimate destination. No one really knows what HETCO has yielded with their cornering of 30% of the February Brent and Forties tanker cargos over the past 5 weeks, but I suspect a number of players have been scalped six ways from Sunday.

The commodity trading markets are schizophrenic right now. We had a 7 sigma move in crude today. Soft commodities have been limiting up AND down in the last week or two.

Any one of these factors can have some impact at the trading margin. Tie a number of them together and you have volatility that will upset a lot of tummies.

Everyone else’s mileage may vary.

#40 City Slicker on 02.25.11 at 1:11 am

I know sentiment has changed for houses in the U.S since the pop, deeming it no longer a good investment. But prices have drastically fallen and interest rates are dirt low, how come sentiment hasn’t changed when everyone else in the world seems to be nibbling there?

#41 Analyst Analyzer on 02.25.11 at 1:17 am

Maybe I’m too young to know that this can happen, but I just can’t see oil spiking to $200. If it gets there, then it won’t last long. People will just stop consuming and living the same way they do now before we get there, ultimately reducing demand.

#42 InvestorsFriend (Shawn Allen) on 02.25.11 at 1:17 am

CMHC at risk?

CMHC will probably not have to go to the government for a bail out.

But they might. It seems clear they don’t have adequate capital to survive a big uptick in mortgage defaults if that should occur.

They run with a measly 1.3% capital in their mortage operation.

Page 37 of the CMHC 2009 annual report states:

“Retained earnings related to the insurance activity are appropriated in accordance with guidelines set out by the Office of the Superintendent of Financial Institutions (OSFI). CMHC’s target for capitalization is 150 per cent
of the minimum capital test recommended by OSFI. Under these standards, the insurance activity is fully capitalized. Currently, CMHC maintains approximately twice the level of capital reserves recommended by OSFI.

In 2009, retained earnings set aside for capitalization represent 1.3 per cent of the total insurance-in-force of $473 billion.”

Now that certainly implies that the Office of Superintendent of Financial Institutions has blessed this 1.3% capital ratio and that in fact it is twice the level needed!

But later at page 93 it is revealed the OSFI did not bless this number. CMHC states:

“Although not regulated by OSFI, CMHC follows OSFI’s guidelines as a best-in-class business practice and our capitalization rate is approximately twice the recommended level.”

When I emailed OSFI they indicated they DO NOT bless this 1.3% level.

OSFI stated to me in an email

“OSFI is the prudential regulator of federally regulated financial institutions. The CMHC does not fall under our jurisdiction. As this is the case, you may wish to contact the CMHC for information in this respect. Again, although we appreciate your interest, we regret that we are unable to provide you with an opinion on this matter.”

Anyone with a modicum of financial knowledge would conclude that a 1.3% capital level is woefully inadequate. That is 77 times leverage!

So the situation is that CMHC is obviously woefully inadequately capitalised but they pretend that they are well capitalised and they seem to imply their capital level was blessed by OSFI, but that is not true.

So, it’s interesting… If we get much a housing price drop and if we get too many bankruptcies and mortgage defaults then CMHC is going to burn through its capital and come looking to Ottawa for funds.

Well I hope they all have all their fingers crossed over at CMHC… Perhaps they should cross their toes as well…

#43 Dave in Victoria on 02.25.11 at 1:23 am

#32 Dexter on 02.25.11 at 12:46 am
#15 Skymager

“My brother in law and his wife” ??
Is that not your sister? Is this a real story?

well said. maybe it was a second cousin.

#44 Chris in Langley on 02.25.11 at 1:23 am

Hi Sybil,

How are you enjoying the blog today? Are you making sure to read each and every response? Good girl!

#45 Globe Article on 02.25.11 at 1:32 am

“Meanwhile, ongoing tensions in Libya had a see-saw effect on the price of crude oil. It shot above $100 (U.S.) a barrel for the first time since 2008, then reversed course after Saudi Arabia and the International Energy Agency said they would meet any production gaps that the Libyan crisis might cause. ”

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/the-close-energy-hits-dow-tsx/article1919520/

#46 Patz on 02.25.11 at 1:34 am

Record debt, housing in the US still in free fall, depression level unemployment in US, Europe bust, Middle East and North Africa on fire and on and on and you only give us a 25% chance of a recession? You are a big spender! Must be because you figure it’s a 99% shot at depression, as in way worse than the last time by which I don’t mean 2008.

#47 Karla on 02.25.11 at 1:38 am

# 32 Dexter

His “brother-in-law” is his wife’s brother, and the “brother-in-law’s wife” is not Skymager’s sister.

#48 LJ on 02.25.11 at 1:38 am

Garth: “If gasoline increases much more, the carmakers will be back in the soup line.”

Globe and Mail today: “GM races to highest profit in decade.”

GM Stock: $33.02, down 5% today – back to IPO price after giving $4000 bonuses to employees and receiving untold billions from the US and Canadian taxpayers.

Look for unprecedented sale prices this summer as they try to clear the gas hogs off the lots. Heck you can already buy a truck for half the price of the promised “Volt.” If you can afford to fill it up, which should cost you as much as your monthly payment…..

FAIL.

#49 Alberta Boy on 02.25.11 at 1:38 am

#32 Dexter,
Skymagar is married to a woman who has a brother. This brother is Skymagar’s brother in law. This brother in law is married. His wife is not Skymagar’s sister. I know it’s complicated, but do your best to think deeply about it.

ps. Do not consider writing the LSAT. It would eat you for lunch.

#50 Kitchener1 on 02.25.11 at 1:40 am

Interest rates and inflation are a real worry right now.

$200 oil is a deal breaker, $150 oil is a deal breaker, if it stays there for even 1 quarter, all the stimlus spending will be for nothing.

Either way housing is cooked.

#51 Thetruth on 02.25.11 at 1:44 am

Too much doom and gloom by Garth,

Three families that I know have bought in the vancouver area over the past week. Watch the statistics next month!

As I’ve always stated, government policies dictate real estate prices! and did I mention 559,000 per year?!

#52 casanova on 02.25.11 at 1:44 am

garth,
Arent you tired of being so wrong for so long?
Market is hot hot hot in the best place on earth.
look at this:
4035 28th Ave W
3,057 sqft house; 52×130 lot; MLS V869100
Listed 10 Feb 2011: Ask price $1,988,000
Sold 19 Feb 2011: Sale price $2,683,000
$695k [35%] over ask.

http://vreaa.wordpress.com/2011/02/24/695k-35-over-ask-dunbar-tear-down-52×130-for-2683000/

This proves my point, of course. It is a market of danger. — Garth

#53 Basil Fawlty on 02.25.11 at 1:44 am

If the US government were to quit printing the $75B per month used to help purchase their own treasury bills, the 2008 abyss would reappear muy rapido. Below market interest rates, money printed out of thin air and the largest budget deficits in world history are not a solution for a financial crisis, they only delay the inevitable. We are in unchartered waters and there is no exit strategy.

#54 Timing is Everything on 02.25.11 at 1:47 am

Regular gas in Victoria up 7 cents to 123.9 today.

#55 patient in BC on 02.25.11 at 1:47 am

For those interested in the Asians/Hospice saga at UBC, here are the latest news:
page 1
page 3
and above all, page 6!
http://www.myuna.ca/wp-content/uploads/2010/04/CampusResident_Vol2_2_lowres.pdf

#56 Morry on 02.25.11 at 1:54 am

@#26 Kurt

this is EC100 stuff. The demand for oil is terribly inelastic in the short term

In the short term greedy bastards will use whatever excuse to jack us around, and INSTANTLY raise prices.

BUT if this ploy succeeds watch the Recovery slow to a snail’s pace … along with you returns in ALL sectors! > demand then tanks.

EC401 stuff.

#57 Burnt Norton on 02.25.11 at 2:12 am

Someone needs to tell the chick in the pic that it’s cow tipping as in ‘pp’ not ‘tt’

#58 Heddok on 02.25.11 at 2:31 am

#27 “Enlightened”
Best of luck to you, you’re headed in the right direction. There’s never a downside to saving money and cutting expenses. Investing in a balanced portfolio (we’re currently 50/50 fixed income/equity)is actually rewarding in and of itself. We’re in control of our future and making the decisions rather than being at the mercy of interest rates, mortgage payments, debt servicing, etc. We can control how much or how little risk we take and how to act or react to world economic events. There is an amazing amount of good advice and direction out here on the web, this blog being one of the more important ones to get a healthy handle on real estate. If we end up a slave to our home how can we be masters of our destiny?

#59 The Original Dave on 02.25.11 at 2:34 am

I wish more people would post stories and experiences from 1989 real estate bubble!!!

Here’s a bit of info from what I remember….

I was in elementary school at the time. My parents were in business, so I HAD TO pay attention. Man, oh man, were people taking it on the chin. A lot of my friends parents were business owners. One had a very reputable flower shop at the time and they were really struggling from what he told me. He too had to pay attention. Another friend’s parents owned a lumber company and they were really struggling (I believe they do real well now). My extended family struggled too. Brick-laying uncles laid off, and tradesmen with very little work. This is all very possible again. In fact, I believe this is what’s coming for us.

Most of the people I was friends with in ’89 were young and didn’t really pay attention to it all, so they’re oblivious and don’t see the similarities.

#60 The Original Dave on 02.25.11 at 2:41 am

anyone else talk to people or hear people mentioning getting into another career? Just yesterday, someone I work with was talking about going to school to become a real estate appraiser, as he was told they make a lot of money! I’m sure they do. I tried explaining to the guy, that that was yesterday’s trend. That already happened and the people who made money there and are making money there, set themselves up while the trend was full-steam ahead. I got the blank look from him. I told him health care is the way to go and he shrugged.

I have a family member who actually pays attention to the economy. He doesn’t believe anything that bad can happen to real estate. He’s seriously contemplating trying to get his license as a plumber! That’s 5 years of apprentice (I think). I told him the same thing. With a real estate downturn, how many plumbers will be left jobless? How many of them will be looking to land those “side jobs” that he intends to get on the weekends? I’d imagine a lot of people got into plumbing as it has been a cash cow. He doesn’t seem to consider what a reversal will do to those in that sector.

Tradesmen are not immune to this. They weren’t in 1989. They aren’t in the United States right now. It’s as if people have to see the final stage of a trend before they want to get in on it.

#61 Dan in Victoria on 02.25.11 at 2:43 am

Enlightened @ 27

Start hubby with
The Crash Course by Chris Martenson chapter 15
Then Patrick Killelea rent vs owning
The links to those sites are at
The automatic Earth blog.
Left hand column, link vault.

Then take his hand hold it tightly and go to You Tube
The American Dream film full length (animation)
Then to the Secret of Oz
Its long but well worth the effort, a good “taster” is the 36 to 38 and a half minute segment.

And of course hang arond here there are some good posters here, although a pitch fork is required some days.

#62 listening on 02.25.11 at 2:44 am

To Dexter #32 -his brother-in-law and wife would be his wife’s brother and the brother’s wife.

#63 Dan in Victoria on 02.25.11 at 2:50 am

That picture reminds me of an old folk song…..
Fat and docile, Big and dumb

http://www.youtube.com/watch?v=FQMbXvn2RNI

#64 Cato on 02.25.11 at 2:52 am

Welcome to stagflation 2011. Starts with a badly written horror flick starring zombie consumers, zombie governments and zombie banks followed by a nasty skin flick where anyone with a few dollars in bank account gets royally screwed by big brother. After all anyone with money must be the whole reason we are in this mess, right? Evil capitalists who took advantage of all those naive property virgins and hard working baby boomers who deserved 3 spec homes. Don’t forget to punish all those contrarian voices for spreading fear and causing the housing market to crash. The sheeple need someone to blame, Garth can be public enemy #1

#65 Captain Obvious on 02.25.11 at 3:01 am

#32 Dexter
It could be his wife’s brother and the brother’s wife

#66 tiffa on 02.25.11 at 3:04 am

#32 Dexter

Deep breaths, man.

Your brother-in-law may be your sister’s husband.
It can also be your spouse’s brother.
The story is fine.

Skymager’s wife’s brother (and his wife), however, will not probably not be fine. Alas.

#67 tiffa on 02.25.11 at 3:05 am

“will not probably not be fine”

Boy, I write a mighty fine sentence, don’t I?

#68 nomadic on 02.25.11 at 3:18 am

Bring on the $200/bbl oil. I would not mind patiently paying the $1.50+/L gas prices while waiting to snap-up another round of deals in the stock market, and pick up a newer discounted SUV for the Mrs. Plus, this would bring forward the inevitable pain that is lying ahead of us in RE, and accelerate the process (unless the Feds decide to perform more acts of economic stupidity like stimulus).

Get it over with quickly at the expense of a mini-depression instead of a longer, more drawn-out recession; I look forward to whatever opportunity springs out of the ashes of stupidity of my fellow Canadians. If so many people are willing to give their hard earned money away, I have no reservations about taking it.

#69 LB on 02.25.11 at 3:18 am

#29 Nonplused

Well said.

That is exactly what is happening, and what will continue to happen – ie we are witnessing a new world order being initiated and established by global citizens using new communications and networking to circumvent and render powerless the institutions of governments,media,militaries,religion,corporations and financial to establish a more evolved,equitable and global democratic system.(Through what I’m presuming you meant as “serial revolutions” rather than “cereal” ones).

A necessary process and a good thing.

#70 Peter Pan on 02.25.11 at 3:21 am

Jeffrey the realtor says “I’d be curious to see a pattern here with history as from what I always understood the real estate cycle happened every 9 years.”
——————

I didn’t even know real estate agents could count to 9…

But if 9% commission was the market rate, I’m sure they could multiply by that number!

#71 Peter Pan on 02.25.11 at 3:27 am

One big difference between now and 2008… We’re already at “emergency” interest rates… These “emergency” rates kept the bogeyman away from the front door.

There are no more silver bullets…

There are no more wooden stakes…

The garlic bulbs have already been used up…

#72 Shoggy on 02.25.11 at 3:36 am

Garth, it is not Libya we should be worried about. Libya supplies at best 2% of the oil and most of it goes to Italy. Also in the grand scheme of things Libya is #15 on the OPEC list. It is the contagion effect that caused oil to spike and the worry that if these riots (which started over food and the price of wheat) spread to counties like Iran, Iraq, or Kuwait or god forbid Saudi Arabia then we are in for trouble. And it won’t take $200 to kill the economy. If oil goes to about $125 and stays there for any length of time the tentative recovery we have experienced so far will die and we are back to a double dip recession (if we are lucky) or full blown depression/stagflation. It is not corporate America or Canada that is in trouble. They were smart enough (for the most part) to learn from the Great Recession of 2008 and cleaned up their balance sheets. It is the consumer that is in trouble and after all businesses are only profitable if they have a consumer to sell to. But with the average debt load in Canada being at 150%, the Canadian consumer is weak. Atleast the Americans’ savings rates have gone up.

With commodity inflation kicking in on all the soft commodities and now if oil spikes and creates even more inflation then whatever little money the consumer might have had to spend on a few ‘luxury’ items are instead only going to be spent on the necessities. It will not take $200 oil to get there and neither Egypt or Libya will be the cause of that. That will only happen if the big producing nations get overturned.

Interesting to see that the Saudis are attempting to take pre-emptive action by one, trying to buy off their citizens before hand and two, by promising to open up the taps a bit more to keep oil from spiking further because hopefully they too realise that a prolonged spike in oil prices is no good for them either since it will eventually kill demand for their product. Whether their actions help is left to be seen. I wonder what Iran will do, coz they don’t seem to have the same two options as the Saudis.

Oh and as for yesterdays post about the cult thing, (1) don’t the faithful to this blog site fall under the same category? and (2) this blog has its own set of crazies as does the REIN site (the mortgage brokers on the REIN site telling people to double leverage their houses to buy more property, just crazy)
Shoggy

#73 betamax on 02.25.11 at 4:16 am

#18 Morry: “i call bullshit! Libya supplies 2% of the worlds oil.”

A little knowledge is a dangerous thing…

“Libya produces less than 2 percent of the world’s oil, and exports little to the United States. But the high quality of its reserves magnifies its importance in world markets.

Libya’s “sweet” crude oil cannot be easily replaced in the production of gasoline, diesel and jet fuel, particularly by the many European and Asian refineries that are not equipped to refine “sour” crude, which is higher in sulfur content.” — NYT

http://www.nytimes.com/2011/02/24/business/energy-environment/24oil.html?src=me&ref=business

#74 realityguy on 02.25.11 at 4:30 am

Interesting stuff with real estate.

I’ve been keeping a close eye on the housing in two specific areas. East van and burnaby.

Just recently 3 houses that were on the market for about a year finally sold (sold sign posted ) in the last 2 months. Today they are all back on the market at an increase prices of about 50 to 75 thousand dollars more. And all with new realitors.

Not sure what is going on, but I feel speculators bought the houses and is hoping to do a quick flip and makes some money. Hopefully the fool will get caught with his pants down and get roasted.

Mabey this is what is driving the market up lately.
BTW, I would like to see if anyone is see this type of actions in their areas.

#75 Derek on 02.25.11 at 4:36 am

His sister? Don’t be daft, Dexter. SkyMager is talking about his wife’s brother and his wife’s brother’s wife.

#76 dance...dance to the radio on 02.25.11 at 4:37 am

Haven’t heard much lately from the Americans, I mean Democrats, decrying our dirty oil.

#77 vreaa on 02.25.11 at 4:51 am

#32 Dexter on 02.25.11 at 12:46 am
#15 Skymager
“My brother in law and his wife” ??
Is that not your sister?
Is this a real story?
——————————————
No, it’s my wife’s brother’s wife.
Sounds real-ish.

#78 Whistler Dude on 02.25.11 at 5:25 am

75% of whistler RE is owned by Vancouverites, mostly boomers with aching knees. The mainlaind Chinese don’t ski (yet- give a generation, no marketing rescue plan). 2 years of inventory- and it’s just started. Melt down central. the toys are the first to go!

#79 Brian1 on 02.25.11 at 5:43 am

Well Garth, I suppose that I am a joker at times and probably deserve to be admonished for it, but I am new to the newsletter idea and just thought it prudent to make inquiries as to your opinions. For example, Marc Faber claims to read about ten newsletters per month and is said to have a PHD, yet when I go to his Grant recommendation this fellow is offering his site for sale and appears to offer nothing (I was exploring the possibility of investing in corporate bonds). It appears Mr Faber doesn’t really read what he claims.
Harry Dent has a newsletter and gives a free one for October (which I haven’t got around to sample yet) but I suspect he gets his information from Shiller and Shilling, so why buy his? Besides, his greatest weakness is the logic behind his ETF. Supposedly it started at around $3 and is around $20 today, but why buy an ETF that is supposedly doomed when, by his own admission, this stock will drop 70% along with all the others as he claims the stock market will do. Should one not buy then rather than now? The fact that it dropped this week is proof that this will happen and if it doesn’t do so then he was dead wrong.
I suppose this blog could be treated as a newsletter and I await your next book but you do tell us to diversify. I assume one should not only diversify in investments but in sources of information as well. Since I suspect the other stars of the industry subscribe to newsletters (they can afford to) I assumed you did as well but, gathering from your response yesterday, it may not be so. It is possible that you rely solely on certain statistical sites and probably could write a book on that topic alone. Anyway, I have just begun Shilling’s book and was impressed with his videos on You Tube where it appears he discredits Peter Schiff face to face. He seems to have a good track record and does have a PHD. Are PHD’s important? I think so, but not always.

#80 Jas Girn on 02.25.11 at 6:16 am

LH, you can chill until the rates go higher. And yes they will go up…..really up there.

#81 MM on 02.25.11 at 7:05 am

Re MLS®: C2041472 Looks like a flipper. The give away is the commercial staircase railing. Go figure Rob Ford is trying to trim the gravy train at city hall. Me thinks we are paying too much for civil servants if they can actually afford to live in 416.

#82 Rifles on 02.25.11 at 7:20 am

“If Libyan oil capacity is shut down completely by war, then some believe oil will hit $200.”

This is not the issue. Libyan oil capacity is essentially shut down, taking c1.5 million barrels/day out of the market. The issue is contagion and the countries to watch for this in the region are, obviously, Saudi Arabia and, less obviously, Algeria. If the sort of domestic unrest we have seen in Libya etc spreads to these countries then $200 is a possibility. But we have not had a supply shock yet no matter how much the press describes recent oil price moves as driven by that. Look at 1972 or 1990 if you want to see what a supply shock really means.

My sentence is correct, and reflects an opinion expressed by Nomura Group. Go argue with them. — Garth

#83 Ripa on 02.25.11 at 8:49 am

Effen A! My landlord has the same repair kit as the Gov (Aussie that is) Sticky tape & chewing gum.
I’m talking amongst the thingking people, but I can’t help but think of the hillbillies in their pick up in the movie Cannon Ball Run ” If your gonna be a bear, be a Grizzly!” Rrrrrr… R = Rent!

#84 Ripa on 02.25.11 at 8:49 am

yes thinKING

#85 R on 02.25.11 at 8:53 am

#27- Enlightened…..Go rent a place. Nothing fancy just a roof over your heads.There are great deals out there on rent. Plenty of choices too.Invest the money you get for the house.Wait a couple of years and then re enter the market. And please don’t buy into the fear that you will be priced out of the market forever. Thats a crock of BS. Real estate prices are up and soon the cost of borrowing will go up. Supply goes up. Then the price starts to drop due to the supply. Borrowing cost is still up and thats when you will want to re enter the market. Yes the rates will be higher but remember you will be paying less for the house. Rates should be o.k. for the next several years. Nothing like they were in the 1980s…. 17% This won’t happen. I think this is what people fear.Remember fear is the mind killer.

#86 fancy_pants on 02.25.11 at 9:07 am

…one cow to another, “Really Molly, I’m not impressed. She may have two but her inexperience will be her downfall.”

Ya, grow a pair lady. She signifies many new neive homeowners who have thrown caution to the wind and made reckless purchases they can’t afford.

When the cows come home from pasture and it’s milking time, it’s the neive property virgins who will get sucked dry.

You certainly milked that one. — Garth

#87 Robert Dudek on 02.25.11 at 9:16 am

#43 Expand Your means

My stock portfolio increased by 78% last year. How did your real estate do?

#88 robert in london on 02.25.11 at 9:24 am

If inflation is too much money (or credit) chasing too few goods how is the high price of oil inflationary without a) higher incomes /employment or b) looser credit? As both a and b are in the rear view mirror for now I do not understand how a high oil price is an inflationary mechanism in the current environment. Deflationary yes as people will have less money/credit available to spend on everything else but inflationary? Hardly.

#89 Fractional Reserve on 02.25.11 at 9:34 am

To all you who commented on Skymager’s brother-in-law and his wife. All of you missed the possibility that his brother-in-law is the husband of his wife’s sister.

Brian 1 #79. If you want an excellent newsletter to read I suggest reading The Friedberg Mercantile quarterly report. It is written by Al Friedberg, president of Friedberg Mercantile and one of the best traders in the world. It is also free. Read his Fourth Quarter 2010 report, written in January 2011 and you will get a feel for what he thinks is to come. He has a tremendous track record.

http://www.friedberg.ca/c/htmlos/00611.2.1952146562511872507/Quarterly_Reports

#90 Ben on 02.25.11 at 9:48 am

Libya is nothing, if Libya were to fully shut down it’s only 1.6m barrels less per day. Saudi Arabia can increase production by more than that within 24 hours. The markets have been on a run and needed an excuse to take a breather. There’s nothing more to this.

Oil 2008 – $31. Oil 2011 – $97. Yeah, that’s nothing. — Garth

#91 Pr on 02.25.11 at 9:51 am

Today we have a fragile economy, record household debt, bankrupt governments… and dont forget lots of lies and more lies, like Inflation in Wonderland is 2%!!!!
Percentage of Price Increase in just the last 6 months:
Source: http://www.indexmundi.com/
- Sugar +81%
- Rice +12%
- Wheat +67%
- Soybeans +37%
- Coffee +28%
- Barley +25%
- Beef +28%
- Chicken -3%
- Salmon +7%
- Crude Oil +24%
- Natural Gas – 2%
- Coal +38%
- Cotton +131%
- Coarse Wool +30%
- Fine Wool +69%
- Gold +13%
- Silver +59%
- Copper +41%
- Aluminum +22%
- Zinc +29%
- Nickel +31%
- Lead +41%

#92 S.B. on 02.25.11 at 9:52 am

That REIN forum is scary! Most people post links to their supposed “property management” or “investment” companies which bear important-sounding names.

Upon closer inspection, many are offering dingy 70′s and 80′s style basement apartments and houses for rent. These are not assets or investement, they are huge liabilities.

Sigh, with interest rates at 2% I guess anybody can easily accumulate a boatload of this rubbish.
One man’s junk is another man’s treasure…

#93 Fractional Reserve on 02.25.11 at 10:36 am

A great video by Professor Gary Shilling, author of the book The Age of Deleveraging. As Garth has pointed out many times, there will be no hyperinflation. As the late president of France, Charles De Gaulle once said, “serious countries don’t have hyperinflation”.

http://www.youtube.com/watch?v=DLMebsio48Q

#94 MM on 02.25.11 at 10:37 am

Oil speculators are biding the price up on speculation that panic could spread in the middle east. If protests begin in Saudi Arabia, oil theoretically could quickly hit $200/Barrel. No one actually knows how much oil is left in Saudia Arabia and to what capacity if any they could increase supply.

#95 Another Albertan on 02.25.11 at 10:42 am

#72/Shoggy -

While I don’t disagree with your assertions, how can Libya be #15 on OPEC’s list, when OPEC only has 12 members in its cartel? It’s #8 on the OPEC dance card, according to Peter Tertzakian’s weekly publication (this is verifiable by Garth, who has access to the same data).

Additionally, it is 18th in oil production globally, according to the CIA Factbook.

(And I’m guessing that the CIA’s African and Middle Eastern Station Chiefs have been a tad busy in the last number of weeks, likely handing out duffel bags of cash to ‘strategic parties’…)

Everyone else’s mileage may vary.

#96 David on 02.25.11 at 10:45 am

#18 Morry…. Libya does not supply much oil in the aggregate world supply, but as with sall things, it is the amount at the margin that is crucial. Take out that 2%, and the customers for that oil have to outbid some other (incumbent) customer for it, and so on….voila, price shocks.

BTW Garth, Libya supplies between somewhere between 25 and 35% of Italy’s oil, not 75%.

#97 Dave on 02.25.11 at 10:50 am

Brian1

Your wasting your time and money. It is a well know fact in finacial circles that analyst are wrong 1 out of 3 times. They survive by cutting their losses. The vast majority of news letters are written for the greater fools. If the people giving the advice actually new what was going to happen they would be too busy trading to waste time with a news letter.

#98 Chris no longer in England on 02.25.11 at 10:50 am

Garth, I have walked past many fields of cattle in my time, but never once have I thought to lift my T-shirt in their direction. Can’t think why it didn’t occur to me before I saw this photo – heaven knows I’ve had enough opportunities. So many possibilities are going through my mind now. There are some cows in a field at the end of my road, so I’ll be off in a moment to see what their response is.

#99 AACI-Okanagan on 02.25.11 at 10:54 am

Yes Jeffrey Real Estate does go in cycles, history has shown that after every crash, the people who bought at the high end of the market and that hung on to their homes have done well 10+ years after the fact. I am guessing that you are one of these realtors that got into selling real estate during the “boom times” , times in which a monkey could of sold real estate. Now times are tougher, less deals, and you have to work harder. The seasoned realtors who have been around during the good and bad times will survive, and this market will weed out the ones that don’t want to work or the ones that thought this would be easy. Two things that are different from the last crash is that now a realtor can have another job while still selling homes, a bonus to you, and the NEW rules on the mls system being brought on by the Competition Act. Good Luck .

I am unaware of stats that show people who bought at a market peak “have done well 10+ years after the fact.” Could you provide a source? Certainly in the country’s largest market, as my post indicated, it took 14 years following the peak of 1989 for people to just break even. Factoring in inflation, it was 17 years to get your money back – let along make any. Collectible urns did better. — Garth

#100 Grrr on 02.25.11 at 11:07 am

““My brother in law and his wife” ??”

Translate: my spouse’s brother and his wife.

#101 Jamaican_Gal on 02.25.11 at 11:13 am

#32 – Dexter

“#15 Skymager

“My brother in law and his wife” ??
Is that not your sister? Is this a real story?”

Highly complex and confusing but this utube video should explain it all to you. It certainly helped me…:)

http://www.youtube.com/watch?v=UtAuDCLVlXg

#102 dd on 02.25.11 at 11:18 am

It is only price inflation … not asset inflation. What is there to worry about?

#103 The American on 02.25.11 at 11:20 am

At #78: Whistler Dude, I agree with you – “the toys are first to go.” So, much of Vancouver ARE those “toys” for the Chinese as much of the purchases are used as second homes.

#104 kilby on 02.25.11 at 11:24 am

Garth, what qualifies us as disgusting old boomers, I guess both of us are? But liquid ones right?

Disgusting and liquid are two of my favourite attributes. — Garth

#105 jess on 02.25.11 at 11:34 am

Fake Mortgage Assets called, “plan b”

2003 through August 2009, six years !!!!!!!
Feb. 24 (Bloomberg) — The former treasurer of Taylor, Bean & Whitaker Mortgage Corp., once the 12th largest mortgage lender in the U.S., admitted helping run a $1.9 billion fraud scheme

One of the goals of the scheme was to obtain funding for Taylor, Bean to help cover expenses for operations and “servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities,” the department said in the statement.

The Brown case is USA v. Brown, 1:11-cr-00084, and the Farkas case is USA v. Farkas, 1:10-cr-00200, U.S. District Court, Eastern District of Virginia (Alexandria).

========================
Abstract
This Article argues that a principal-agent problem plays a critical role in the current foreclosure crisis.

A traditional mortgage lender decides whether to foreclose or restructure a defaulted loan based on its evaluation of the comparative net present value of those options. Most residential mortgage loans, however, are securitized. Securitized mortgage loans are managed by third-party mortgage servicers as agents for mortgage-backed securities (“MBS”) investors.

Servicers’ compensation structures create a principal-agent conflict between them and MBS investors. Servicers have no stake in the performance of mortgage loans, so they do not share investors’ interest in maximizing the net present value of the loan. Instead, servicers’ decision of whether to foreclose or modify a loan is based on their own cost and income structure, which is skewed toward foreclosure. The costs of this principal-agent conflict are thus externalized directly on homeowners and indirectly on communities and the housing market as a whole.

This Article reviews the economics and regulation of servicing and lays out the principal-agent problem. It explains why the Home Affordable Modification Program (“HAMP”) has been unable to adequately address servicer incentive problems and suggests possible solutions, drawing on devices used in other securitization servicing markets. Correcting the principal-agent problem in mortgage servicing is critical for mitigating the negative social externalities from uneconomic foreclosures and ensuring greater protection for investors and homeowners.

Publication Citation
Yale J. on Reg. (forthcoming, 2011)

Scholarly Commons Citation
Levitin, Adam J. and Twomey, Tara, “Mortgage Servicing” (2011). Georgetown Law Faculty Publications and Other Works. Paper 498.
http://scholarship.law.georgetown.edu/facpub/498
=====

#106 Sonja on 02.25.11 at 11:34 am

@ #7 T.O. Bubble Boy
HA! I live literally around the corner from that house, and it’s no surprise it hasn’t sold. The house and lot are TINY and the price is RIDICULOUS.

This house is a on the same street and it took at least 4 months to sell (it’s an obvious quick flip, I walked by it every day): http://www.myvisuallistings.com/vt/43276
They were originally asking about $700-750k, I think, but I’m guessing that the reason that price is still “to be updated” is because it went for well below asking.

Then again, my manager just told me that she put her house in Ajax on the market last Wednesday, and it sold the following day for over asking. They bought a brand new house from a developer in east Oshawa, so it sounds like they had been planning it for a while. I think they probably got lucky with the pre-March 18 panic, but not lucky enough. My manager got let go yesterday.

“My brother in law and his wife” = The guy is married to a woman, and she has a brother who is married. Thus, the guy’s brother-in-law and his wife. It’s not complicated, people.

#107 Sid on 02.25.11 at 11:41 am

for those who like stories about past crashes… picture it. Vancouver 1982. My fancy new house finally sells at 220, after being listed for close to a year, with a starting price of 375. Wish we could have kept it but interest rates had gotten insane.

Now, picture it. Calgary 2007: Very different story this time. Oil was sky high, interest rates low, economy was hot. It was truly different here. Then the house buying just stopped. Supply was winning against demand, it was almost like the invisible had come out to punch all the naive homeowners in the face. People were stunned.

#108 Timing is Everything on 02.25.11 at 11:43 am

Ha! Another well timed ‘technical glitch’…

http://www.cbc.ca/news/business/story/2011/02/25/lse-trading-glitch.html

#109 eddy on 02.25.11 at 11:52 am

Short video about the food banking connection. The shills are out to advocate a gold standard, (Max Keiser and Ron Paul are two) I expect it’s all leading up to a gold element being added to Special Drawing Rights

http://video.godlikeproductions.com/video/Federal_Reserve_Causes_Middle_East_Unrest?id=f2e52b590144837d220

#110 mostMiserablePlaceon Earth on 02.25.11 at 11:58 am

#42 Dave in Victoria on 02.25.11 at 1:23 am
#32 Dexter on 02.25.11 at 12:46 am
#15 Skymager

“My brother in law and his wife” ??
Is that not your sister? Is this a real story?

well said. maybe it was a second cousin.

c’mon guys, think it through.

My wife has a brother, my brother in law. He has a wife. Not hard to imagine.

#111 morry on 02.25.11 at 12:01 pm

i have been censored. one of my comments “cut”….
c’est la vie.

Time for a Libyan revolt.

PS the worst spike in oil was in the 197-74 time frame. The world was doomed…coming to the end. And again Chicken Littles are out running around dooming ;-)

The world is only doomed for those with more leverage than brains. — Garth

#112 Fractional Reserve on 02.25.11 at 12:07 pm

97 Dave on 02.25.11 at 10:50 amBrian1

Your wasting your time and money. It is a well know fact in finacial circles that analyst are wrong 1 out of 3 times. They survive by cutting their losses. The vast majority of news letters are written for the greater fools. If the people giving the advice actually new what was going to happen they would be too busy trading to waste time with a news letter.

While this is true of many analysts, it is not true of all. The Friedberg Quarterly Report that I mentioned in my earlier post is written by Al Friedberg and is a summary of his funds performance in the previous quarter as well as his economic prognostication of the future. He has an outstanding record of over 40 years and has real world success in the markets to back his predictions.

#113 Brian on 02.25.11 at 12:24 pm

The Saudi’s always make the right noises about pumping more but they never really seem to – maybe its because they don’t really, you know, have any http://www.theoildrum.com/node/7465

#114 AG Sage on 02.25.11 at 12:32 pm

Re: Libya oil [all] going to Italy.
(I’m going to get nailed for thinking aloud here, but what the heck, it’s Friday)

Doesn’t that actually lesson the impact on the rest of the market, by concentrating the pain all in one place and forcing demand to become elastic faster in that small market? Because the best Italy can do is buy what they can from anyone who will send them a ship or ten. But there are not going to a lot of sellers, given the threat of rising prices–hordeing being the (locally) rational response to the situation. Italy suffers mostly alone, and everyone else shakes their heads and looks sad about it.

>#66 tiffa on 02.25.11 at 3:04 am
>#32 Dexter
>Deep breaths, man.

To further split hairs, because coffee is not working yet today, I’d also call my wife’s sister’s husband my brother in law. What else would I call him? And unless I am astoundingly drunk I would not call my wife’s sister my sister.

#115 Steven Rowlandson on 02.25.11 at 12:37 pm

Garth the property virgins who lost their virginity recently forgot to measure what they might gain psychologically by what they are losing and will lose financially. They will learn the hard way and they will not enjoy the experience.

Steven

#116 Prof ANON on 02.25.11 at 12:39 pm

@#79 Brian 1

“Are PHD’s important? I think so, but not always.”

I have one, and my opinion on this question is usually not but sometimes and not for the reasons that most people think.

I worked hard for my degree and continue to work hard in my teaching and research. However, I do not have any kind of special magical insight and the social status some people grant PhDs is completely unwarranted.

#117 vreaa on 02.25.11 at 12:44 pm

Panic Buying In Local Vancouver Move-Uppers

“I have friends who are panicking to upgrade before the Mainland Chinese price them out and before the mortgage rules change.”

http://wp.me/pcq1o-1Uk

An anecdote about locals extending themselves even more into RE based on two beliefs -
- 1. “Prices will continue to increase.”
- 2. “The mainland Chinese are going to price us out.”
The first belief has driven almost all Vancouver buying for 5-6 years.
The second has increasingly affected buying by locals, even moreso this past 1-2 years.
Regardless, we have people buying for speculative reasons. (They are paying stratospheric prices based on the belief that prices will continue ever upwards, _not_ based on the utility of the property.)
Note that the sentiment mentioned is now ‘panic’.
Panic buying. When does that happen in the RE cycle?

#118 Joan on 02.25.11 at 12:46 pm

Garth: I notice you have not had a mess of speaking dates promoted on your site over the past couple of months. I need my Garth fix,and was so looking forward to hearing you speak again in vancouver. Have you quit on us?

Of course not. I’m here to poke you daily. But I’ve also decided to devote serious amounts of time to looking after individuals who’ve entrusted me with their finances and futures. It’s one of the most satisfying things I’ve done, surpassing even the joys of being groped at the airport. — Garth

#119 cynic with a long view on 02.25.11 at 12:47 pm

A great video by Professor Gary Shilling, author of the book The Age of Deleveraging. As Garth has pointed out many times, there will be no hyperinflation. As the late president of France, Charles De Gaulle once said, “serious countries don’t have hyperinflation”.

http://www.youtube.com/watch?v=DLMebsio48Q

What a load of c…!

There is an example of why the term with age comes wisdom is utter tripe!

The math is simple…..peak oil….7 billion humans…..1 billion of which use the same enegry equivalent in their daily lives as a blue whale (11,000 watts)……so you think the planet can handle a population of 1 billion blue whales and 6 billion entitled monkeys?……and you think this equates with a deflationary economic environment?

Put this guy in a room with Faber and he will get his a.. handed to him….he should go get a real job!

#120 Soylent Green is People on 02.25.11 at 12:49 pm

A physician visited a Canadian mental institution (PMO) and asked a patient “How did you get here? What is the nature of your illness?”

Patient: “It started when I got married and I guess I should never have done it. I got hitched to a widow with a grown daughter who then became my stepdaughter.

My Daddy came to visit us, fell in love with my lovely stepdaughter, then married her. And so my stepdaughter was now my stepmother.

Soon my wife had a son who was, of course, my daddy’s brother-in-law since he is the half-brother of my stepdaughter, who is now, of course, my daddy’s wife.

So as I told you, when stepdaughter married my daddy, she was at once, my stepmother. Now since my new son is brother to my stepmother, he also became my uncle.

As you know, my wife is my step grand-mother since she is my stepmother’s mother. (Don’t forget that my stepmother is my stepdaughter.) Remember, too, that I am my wife’s grandson.

But hold on just a few minutes more. you see, since I’m married to my step grand-mother, I am not only the wife’s grandson and her hubby, but I am also my own grandfather.

Now can you understand how I got put in this place?”

http://www.unseatHarper.ca
.
.
.

#121 wetcoaster on 02.25.11 at 12:53 pm

Nice udders !! Seriously now, Ghadaffi got it all wrong, it’s Canada, not Lybia where they’re spiking the milk with drugs enticing the masses to riot and buy real estate like psychotics.

No wonder those cows look pissed, now they’re going to have to move to Detroit like Ozzie and his band of suckers running out of “hot properties of the week”.

#122 AG Sage on 02.25.11 at 12:55 pm

>#6 Boomin Buster on 02.24.11 at 11:45 pm

http://www.housepriceindex.ca/
Click on Communiqués, then look at Feb 2011 and scroll down to Calgary, lower left. Change in price is already -2.9% year on year and sailing downward like a stoner riding a paraglider. Also note that Toronto and Vancouver are right behind.

#123 David on 02.25.11 at 12:58 pm

#107 Sid …I will remember Calgary ’07 for the rest of my life, in a very good way. We sold our house, which had tripled in price in 7 years, in June/07. It turned out to be the exact peak of the market, to the month.

For the third time, we sold a house without the “help” (?!) of a realtor….WeList cost us $200. It took a little bit longer than we hoped (3 months, not bad for a FSBO) because sales were actually starting to show signs of slowing down already. The phone calls were 20% potential buyers, 80% crass (some incredibly ignorant) realTORs looking for a solid listing and easy payday (leave sign on lawn, check messages every 3 hours…ka ching!).

It was a lot of fun telling them how incredibly poor their marekt knowledge of our area was, how egregious their fees were, and eventually hanging up on them.

Good times.

#124 SAD on 02.25.11 at 1:07 pm

To: #41 InvestorsFriend (Shawn Allen) on 02.25.11 at 1:17 am

So, it’s interesting… If we get much a housing price drop and if we get too many bankruptcies and mortgage defaults then CMHC is going to burn through its capital and come looking to Ottawa for funds.

Well I hope they all have all their fingers crossed over at CMHC… Perhaps they should cross their toes as well…

Nothing is ever straightforward in our “strong Canadian banking regulation system”. It is going to be a long time before a default hits CMHC’s books. Here is a link to the Homeowner Default Management toolbox CMHC has developed for guidance to the lenders.
http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/moloin_006.cfm#CP_JUMP_148321

Some of the tools that are available are:

* Converting a variable interest rate mortgage to a fixed interest rate mortgage in order to protect the borrower from a sudden interest rate increase, should one occur.
* Offering a temporary short-term payment deferral.
* Extending the original repayment period (amortization) in order to lower the monthly mortgage payments.
* Adding any missed payments (arrears) to the mortgage balance and spreading them over the remaining mortgage repayment period.
* Offering a special payment arrangement unique to the particular financial situation.

Banks are to go to any length prior to foreclosures.
This gives CMHC the opportunity to review the original loan application and see if there was a misrepresentation (like overstated income perhaps, better known as fraud) at loan approval time. The process if followed through by CMHC will keep the Borrowers, Lenders and Mortgage brokers honest….
it will also defer foreclosures for quite a while if the market crashes in regions, hmmm.. lets see where is the likely hood of this hitting the hardest, oh ya Vancouver ….
Makes me wonder what lenders are most exposed in BC?

#125 Devore on 02.25.11 at 1:18 pm

#54 patient in BC

http://www.myuna.ca/wp-content/uploads/2010/04/CampusResident_Vol2_2_lowres.pdf

ROFL! Oh, those poor unfortunates, suffering in their million dollar condos! Must we be so heartless?

#126 grantmi on 02.25.11 at 1:19 pm

Interesting piece in today’s vancouver sun.

http://bit.ly/fy9dcq

Many newcomers are failing to find work as rewarding as the work they can obtain in booming China.

As a result, many are having to become taikong families, with one spouse, typically the husband, returning to work in China to earn a stable income.

“The spouse working in China normally visits Vancouver once or twice a year. In many cases the wife will stay in Canada for three or four years, waiting for Canadian citizenships,” Yu writes, adding that the gap years are often jokingly called “sitting in immigration jail.”

Read more: http://bit.ly/fy9dcq

So let me ask this.. ARE WE NON-CHINESE Canadians on a level playing field with these guests???

Are they REPORTING their WORLD WIDE INCOME while their whole families are using Canadian services year after year, after year! Health care, schools, etc. etc.

Why didn’t the piece dive into this. To me! This is why lower mainland Vancouverites are not able to compete with home purchasing!

The fix is in… and we can’t compete when 50% of OUR income goes to taxes!!!!

Does theirs?

Sorry! Pisses me off when I read this!!

#127 Fractional Reserve on 02.25.11 at 1:21 pm

#119 Cynic with a long view

I assume you think Garth is full of crap as well as he has stated on numerous occasions that there will not be hyperinflation. Is this correct?

#128 L Pearson on 02.25.11 at 1:21 pm

#89 Fractional Reserve on 02.25.11 at 9:34 am
To all you who commented on Skymager’s brother-in-law and his wife. All of you missed the possibility that his brother-in-law is the husband of his wife’s sister.

Nope, sorry FR…there’s no relationship there at all in the situation you describe. The BIL is related only to the guy’s wife. To put it differently, the guy would speak of his wife’s BIL.

#129 Patiently Waiting on 02.25.11 at 1:23 pm

“Just yesterday, someone I work with was talking about going to school to become a real estate appraiser, as he was told they make a lot of money! I’m sure they do. I tried explaining to the guy, that that was yesterday’s trend”

Part of the problem right now is living, breathing appraisers aren’t being used enough. He may be on to something. This isn’t the same as being a realtard or mortgage peddler.

BTW, I’m the same PW from VCI. I notice someone else uses the same handle here so I’ll go by Waiting Patiently from now on.

#130 Michael on 02.25.11 at 1:27 pm

@39

I know sentiment has changed for houses in the U.S since the pop, deeming it no longer a good investment. But prices have drastically fallen and interest rates are dirt low, how come sentiment hasn’t changed when everyone else in the world seems to be nibbling there?

Not everybody is nibbling there. Why would you want to buy a house in a sub division as an investment? There is really little gain to be had, esepcially as long as there are so many other ones sitting empty.

A house is an investment property when you can rent it out at a profit (after factoring ALL the costs), I don’t think that’s a possibility right now.

Investors usually go for MDU (Multiple Dwelling Units aka Apartments) where they do own the entire property, not just individual units, especially if they are from abroad and “flush with silly money”.

Can you imagine a guy in Hong Kong sitting there trying to manage a few dozen SFHs somewhere in Florida? The cost overhead alone would be prohibitive really.

#131 Devore on 02.25.11 at 1:28 pm

#32 Dexter

Maybe it’s his father’s brother’s nephew’s cousin’s former roommate?

#132 Hoon on 02.25.11 at 1:28 pm

Still going hard on this. You are a tenacious little monkey.

#133 kabloona on 02.25.11 at 1:29 pm

Household debt could spark ‘made in Canada’ recession
Michael Babad – Globe and Mail Update
Published Friday, Feb. 25, 2011 11:13AM EST

http://tinyurl.com/6dyvdgk

“A visiting scholar at MIT’s Sloan School of Management says Canada’s finance ministry should develop a code of conduct on lending, which would force the banks to recommend “suitable borrowing and repayment plans.” High debt levels, he warns, could have dire economic consequences.

Derek Dunfield, a neuroscientist and visiting scholar in behavioural economics and marketing at MIT, warned today in a paper that Canadian consumers “may soon be overwhelmed” given the inevitable rise in interest rates….

“…The historically high levels of household debt present two possible problems for the Canadian economy,” Mr. Dunfield said.

“One scenario is that interest rates rise, house prices drop, and more people begin defaulting on their credit card debt and mortgage obligations. An equally worrying – and perhaps more likely scenario – is that interest rates go up a little, and more of people’s disposable income goes to repaying their debt, leading to a significant reduction in consumer spending. Since personal spending on consumer goods and services accounts for 58 per cent of the Canadian gross domestic product, this decrease would provoke a ‘made in Canada’ recession.”

“….The policies of Canada’s banks have inadvertently encouraged the loading up of personal debt,” Mr. Dunfield said.”

;-)

#134 Waiting Patiently on 02.25.11 at 1:30 pm

#54: Here is a quote from the UNA article:

“It is not unusual amongst recent Chinese and Korean immigrants, for one parent, almost always the father, to settle the family (the wife and child or children) in their home in Canada and return to his country of origin. He returns to work as he has to earn income sufficient to support the family and the purchased property. Work prospects in Canada for these “returnees” are a challenge. Their professional or business credentials are not readily accepted in Canada. Their facility with the English language is poor. The husbands return to Canada as they can to visit with the family. This arrangement, driven by eco- nomic necessity, may last for some time.”

The whole tone of the articles is very sympathetic to the Chinese condo owners. The UNA seems to feel their rights are more important than those of sick and dying Canadians.

Oh give me a break. Few among us ‘pure’ Canadians would trade places for an instant with these immigrants. This is pure xenophobia. — Garth

#135 morry on 02.25.11 at 1:31 pm

The world is only doomed for those with more leverage than brains. — Garth

We are in total agreement +1

I have never been in leveraged any position, not even in my Kama Sutra positions.

#136 morry on 02.25.11 at 1:33 pm

#126 grantmi

That my friend is the 1000lb gorilla in the room that none of the supplicant Politicos wish to deal with.

As one who was in the federal government… care to comment ?

#137 Devore on 02.25.11 at 1:40 pm

#79 Brian1

He seems to have a good track record and does have a PHD. Are PHD’s important? I think so, but not always.

Only if they’re wearing a white lab coat and carry a clipboard.

#138 Fractional Reserve on 02.25.11 at 1:44 pm

L Pearson. I don’t want to drag this on but there is indeed a relationship in the situation I describe. The BIL of his wife is also his BIL. You cannot have a wife who has a BIL that her husband does not. Skymager’s BIL can be one of three possibilites. 1. His sister’s husband. 2. His wife’s brother. 3.His wife’s sister’s husband.

#139 Bill Grable on 02.25.11 at 1:45 pm

Just to add some gasoline to the fire – anyone paying attention to what’s happening in Mexico?
The Country is in a de facto war.
Their Oil reserves, even with the elephant in the Gulf, are falling off a cliff, and the Central Government in El D.F. has become an afterthought.
IF things get much worse, there will be an unpararalled run to the Border, and it will be Reconquitsa by sheer numbers.
People have to wake up and realize that what Mr. Turner has been trying to drum into our thick skulls – that everything is interrelated. You might not give a damn what hapens to some poor schmuck in Oaxaca, who gets shot in the back for protesting his pathethic Teachers wage – but when you go to the pump and the Hummer takes a mortgage payment for a fill – then you get it.
Libya, Oaxaca, Mexico, Egypt – they are all on the same planet – and we have to live with it.

One last shot – I find it incredible watching the neighbor here on Maui pounding thousands into this condo of his. I couldn’t stand it – and over the grill last night I innocently asked if he rented the unit out. “Oh we try to, we haven’t had much business, so we thought that putting in all new stuff and the upgraded kitchen would attract business”. This gent is I would guess in early 60′s.
He has a 700 thousand buck Condo, give or take, and he is flogging about 100 K into the joint.

Oh, he rented it for two weeks this last season. (*Lives in Illinois – bet his house is just aapreciating like heck there).

The maintenance fees for his unrentable slice of Maui are – wait for it, $2390.00 a month. Power is over the moon on this crazy island.

Nobody is going to fly anywhere on 200 buck oil. That’s all Maui needs. It is barely getting off the canvas from two years ago.

People are hallucinating. Is there something in the water?

#140 Devore on 02.25.11 at 1:46 pm

Not that I necessarily disagree, but why did you pick 6 months? What about 3 or 4 years?

http://www.indexmundi.com/commodities/?commodity=barley&months=60

http://www.indexmundi.com/commodities/?commodity=soybeans&months=60

http://www.indexmundi.com/commodities/?commodity=nickel&months=60

#141 Waiting Patiently on 02.25.11 at 1:50 pm

Garth, I bet many Canadians would love to have even a small portion of their wealth. We are talking about people living in million dollar condos blocking a hospice by using “cultural” concerns. In reality it is just property values. They want to deny the sick and dying the right to live somewhere because it MIGHT cause their condos to go down in value. Like many Vancouverites, I’m sick of these NIMBY assholes trodding over OUR VALUES.

I understand it is UBC that made the decision, not condo owners. Besides the people in that development are not the poor immigrants your quote referenced. You still sound like a xenophobe. — Garth

#142 jess on 02.25.11 at 1:51 pm

Investors friend

Did it ever occur to you that there are people, who are poor (under 31k), but just like to know the truth about/or how things work? How can understanding and an educated change go forward ? Lately, the information data bases seem rigged with missing or incorrect information. Whether it is the Finra, where wall street is suppose to inform and input data regarding broker behaviour or programmers that claim to have a killer app. that can separate out who is a terrorist. Hackers for humanity and hackers to track the hackers who pretend to be humanity.

What prompted an arizona senator to change? Was it because this person had higher level empathic skills as a Republican or now a victim of the same foreclosure /servicing fraud. Is there only outcry when it affects the 10%?

The silent avoidant motivated types led by that golden rule “buyer beware” led to some taking even more from the less. And to claim that people speak out due to their lack of shiny granite jealously or if one doesn’t have 1000k dollars to invest in sometimes deserves that televised facetous answer David. By the way, if you look that word up in the urban dictionary (an asshole’s word for sarcasm) the cynics watching found that amusing. He said it was such a straight face! Makes me think he is a good poker face since you bought into that.

Well, in the better world of do no harm , disaster seems to make stocks go up? Policy… who checks the checkers. The Accountability Act? Trust but verify right? The company claims it TOLD its contractor, to stop using that chemical because doing so violates worker safety policy. It also said it will monitor the medical conditions of the 137 or so sick/dead workers. In 1994, n-hexane was included in the list of chemicals on the US Toxic Release Inventory (TRI).[8] In 2001, the U.S. Environmental Protection Agency issued regulations on the control of emissions of hexane gas due to its potential carcinogenic properties and environmental concerns.[9]

My guess is that when a stock jumps 168.01 in a 52 week range it screams a buy as you don’t consider that the silencers and the never confiming nor denying fund has been at work in the background as white noise.

#143 Dave on 02.25.11 at 1:54 pm

Sorry I meant to say analyst are wrong 2/3 times. Numbers can easily be manipulated. Take Moneysense sure thing couch potatoe portfolio where they claim to beat the market over the last 30 years. Sure if you have held for 30 years you would have done very well when interest rates were 19% which hid the losses in their portfolio during the most recent meltdown. Will interset rates rise to 19% again in the next 30 years to mirror this trick, I don’t know. I think there couch potatoe will do quite poorly in the next 5 years due to lower yields on bonds as interest rates rise and another correction on the stock market which is a given if oil goes to $200 per barrel. If Oil goes to $200 per barrel the USA dollar will be 85cents of a Canadian dollar so it is all relative. It is nearly impossible for any analyst to beat the market year after year. That is why ETF’s are so popular. Again if this dude was so smart why doesn’t he invest his own money? A good percentage of analyst these days are also betting against their clients. Look at companies that short sell and than tell their customers to go long. If it works for you than keep doing it. My wife lost half her inheritance by having it invested by TD banks analysts. Than her father lost half his early pension buy out when he had to retire due to disability. I was shocked at first that my wife only invested in GIC’s. When the market tanked a few years ago should looked smarter than Warran Buffet. Taking advice from other people is the quickest way to lose money, mine included. Most news letters are boiler rooms with a few exceptions.

#144 Debtfree on 02.25.11 at 2:02 pm

@ nostradamus There is an article on dailygalaxy.com
I can’t seem to pick up the link but the title is…

Human Sprawl! Images from the “Anthropocene Epoch”

It’s a jaw dropper .

#145 Hoof Hearted on 02.25.11 at 2:06 pm

#78 Whistler Dude on 02.25.11 at 5:25 am

75% of whistler RE is owned by Vancouverites, mostly boomers with aching knees. The mainlaind Chinese don’t ski (yet- give a generation, no marketing rescue plan). 2 years of inventory- and it’s just started. Melt down central. the toys are the first to go!

=========================

Good post….
What a lot don’t realize is boomers bought in there early…then it shot up once well known…a lot of Dot.com barons.

No one can afford it….now……it’ll be a dog….

#146 Hoof Hearted on 02.25.11 at 2:08 pm

The 10 commandments of money

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/the-10-commandments-of-money/article1915583/

You talk about good versus bad debt. For instance, you don’t believe it’s a good idea to borrow for home renovations.

Even at the peak of the real estate boom, very few projects returned 100 cents on the dollar. In most cases, even then, you were taking a loss when you put money into your house. Now it’s clear, most renovation project won’t return more than 70 cents on the dollar even if you sell right away. I was trying to bring home the point that this is not an investment – you’re locking in a loss.

You’re the first personal finance expert I’ve spoken with in a long time that doesn’t believe borrowing to build equity in your home is good debt.

In general, a moderate amount of mortgage debt is good debt, because your house will grow in value over time. But we can’t go [in] with this idea that anything we do with home equity debt is good debt. You can overdose, you can overspend. If you want to do this project that will add some value to your home or make your life better, fine, but don’t borrow more than half. It’s also important to keep some of your home equity there for the real emergencies, where you simply have nowhere to turn in case your life completely falls apart.

#147 wetcoaster on 02.25.11 at 2:09 pm

One other Ozzie point, I had to go listen to his weekly pump on the archive last week and he was indeed actually pumping Detroit. This is after making gun jokes so many other times the subject came up. Now it;s a great time to buy there ? I thought the previous poster who mentioned this had to be joking. Is this guy on the same drugs Ghadaffi is ?

The best part was Ozzie then went on and dissed Shiller as someone who didn’t know what he was talking about because Shiller mentioned Detroit in his latest report as a market going down with Ozzie saying: “Detroit went down in 2004″ and something along the lines of “Shiller doesn’t know what he’s talking about”.

Who the eff is Ozzie to say this about a guy who predicted several crashes and Ozzie can’t even predict his next crap ?

One week he attacks Garth, the next it’s Shiller, whose next ? Maybe the Canadian banks who say real estate is going down ? The man is a total delusional shyster.

#148 AG Sage on 02.25.11 at 2:12 pm

>#124 SAD on 02.25.11 at 1:07 pm
>This gives CMHC the opportunity to review the original
>loan application and see if there was a
>misrepresentation (like overstated income perhaps,
>better known as fraud) at loan approval time.

So where is that double short Canadian bank ETF anyway?

Garth, start one!

#149 Jenn on 02.25.11 at 2:12 pm

Uncle!!!!

As a retired realtor (tired and having some morals intact) people including past clients, friends, relatives and cocktail party
acquaintances all inquire as to what I think is going to happen in the local real estate
market. Remember this is the insane lower mainland of BC where everyone has an
opinion. I was licensed just prior to the Feb 1981 crash and have my memory intact
regarding how bad it was. I was young, naive and incredibly lucky to walk into a
very busy market where commissions were flowing into my hands. I had no qualms
about writing up mom and pop and any offshore investor unlucky enough to listen
to the local media saying you will never again be able to afford a home here and then wander into my office. You see, most savvy investors, speculators and realtors had already dumped the unsellable. That unliveable shack, that Knight Street beauty where you could not hear the TV or anything else even from inside the uninsulated walls, all of these beauties sold at forcibly inflated price. Fast forward. I try to kindly congratulate
the ones who have recently bought not wanting to crash their bubbles, too late anyway,
and try to explain, as you do, that it might be better to pay off your debt and hunker down.

I give up. They don’t want to hear that because it won’t happen here, will it. This last
few weeks have been a literal buying frenzy trying to get in with the 35 year plan. I see
people in there 60’s purchasing homes with 35 year amortizations. People who are in
debt up to the eyeballs overextending themselves. Again, I give up. They only hear what
they want . I can see the looks now, here she comes, the doomsayer. Screw em.

Jenn

#150 Waiting Patiently on 02.25.11 at 2:13 pm

Garth, that quote was about wealthy residents of Promontory. UBC makes their decision soon. Since the hospice controversy, I no longer support the policy of “multiculturalism” (and I had all my life). I wish I had seen years ago where it was leading. Soon there will be no Canadian culture at all here in Vancouver.

#151 Roial1 on 02.25.11 at 2:13 pm

Garth.
I know that you do not believe in conspiricy theories– But! I have one for you that is provable.
Ever see the CBC documentry called ” Who Killed The Electric Car”?
If it had not been for that bit if stupidity GM and FORD would be off to the races as far as supplying fuel supply proof cars.

Oh! why is it a “conspiricy”?

They sold the rights for the batteries (lithium) to Texeco.

And crushed the cars.

Have a nice day.

#152 VICTORIA TEA PARTY on 02.25.11 at 2:16 pm

LIBYAN REBELS TO “HONOUR” OIL DEALS, IF…

For those alarmed by the prospect of $2 per litre unleaded regular gas, and who are still hankering for the good old 39-cent per gallon days gone by, some GOOD news! Perhaps. Nah, I’m kidding!

In a report from Reuters in Libya, Rebels who have supplanted the Gaddafi monsters, have pledged to keep the oil and nat gas flowing by continuing to honour contracts. That’s well and fine, except for the FINE PRINT (and whatever THAT will turn out to mean):

‘ “The oil deals (with foreign firms) that are legal and to the benefit of the Libyan people we will keep,” Nour (Rebel leader) said.

While he acknowledged it was important to adhere to international contracts, he said:

“Some deals were unfair. The big oil companies have relations with politicians in America, Italy, … (there has been) big corruption. They tried to draw a wonderful picture of Muammar Gaddafi. But he slaughtered the people.”

“If the deals are good, we will support them. If not we have the right to negotiate and translate the will of the people in the street, who want democracy and are asking ‘where is our money?’,” Nour said.

He said the interim leadership would form a special committee to investigate whether deals were rooted in corruption. “There is no interest for us to support these deals,” Nour said.

Another member of the coalition, Omar Mohammed said eastern residents would not damage oil wells. “There is no destruction of oil wells, they are ours. No way.

If any destruction of the oil facilities happens, it will be Gaddafi doing it,” he said. Libya normally produces about 1.6 million bpd of high-quality oil, or almost 2 percent of world output. Between 30 percent and 75 percent of output has been shut down due to the turmoil in the country.’

We could see such developments in other oil-rich Mideast jurisdictions in the days to follow. For example in Iraq at some point?

In Iraq today, in addition to a violent life-losing Rage Day demo, there is news of the return of a major Shiite cleric, from “exile” in Iran, Moqtada al-Sadr.

He should give all cheap oil afficionados in the West the willies. In his early 30s, this young man is known for his strong anti-American rhetoric and is therefore very popular amongst Shiites in Iraq. Uh oh…

Future oil contracts to be renegotiated there? We wait, of course. Always waiting these days aren’t we, as Mideast oil-rich countries now look increasingly subject to “change.”

And, thanks, Vlad for your clarifying comment of Thursday. It was a Revelation! Of course it is.

#153 SAD on 02.25.11 at 2:25 pm

I love how our politicians are handling our energy problems. Take McG and the gang here in Ontario.
This happens….
http://www.moneyville.ca/article/892879–liberals-warn-hydro-to-jump-46-in-5-years
Than this happens…..
http://www.cbc.ca/news/canada/ottawa/story/2011/02/24/ottawa-rate-hike-hydro.html
And of course than we have the Ontario Clean Energy Benefit Act, 2010 which creates an arbitrary 10% rebate on electricity rates.
http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_10o26_e.htm
Nothing like a clear concise energy policy that people or business’s can plan on.
If you really think about it would you plan and invest in a major business capital expenditure with this kind of regulatory nonsense going on?
Thank God most do not think about it or nothing would happen.
Same thing going on in different ways all over the world. G20 thing cannot reach agreement on stabilizing policies.
H,F and C and the gang cannot collectively agree on anything substantial.
It is no wonder business’s are sitting on trillions.
I wonder how H and the Premiers are doing with Canada’s energy policy?
No long term policies at the top, just one band aid after another. Very difficult times to create long term policies.
Thank God I am just a little person living in my own little universe. This big stuff for the big people to figure out.
Interesting times….

#154 jess on 02.25.11 at 2:27 pm

gas glut prices go up?

IEA expects gas glut to last until 2020

* Cheap gas threatens oil-indexed contracts, renewables…

IEA expects gas glut to last until 2020

By 2013, gas demand in the OECD area is envisaged to rise by two per cent above 2008 levels to 1.6trnm3 annually on the back of the economic recovery. In addition, increased consumption by the power generation industry is seen as a key driver by the report. “The current low gas prices and improved prospects of global gas supply, plus the very strong business advantages of gas-fired power, continue to drive strong interest in investment in gas-fired power plants in the OECD region,” the IEA said.

#155 Chaos on 02.25.11 at 2:41 pm

Cause and effect.

When a dog barks in Africa, Mexico or Siberia…

We get bit in the ass.

It’s all one.

It’s called the “ButterDog Effect”.

And no, he doesn’t have a brother-in-law…
cause he’s to busy leading the riot.

Gotta love Riot Dog.

#156 cynic with a long view on 02.25.11 at 2:42 pm

127

#119 Cynic with a long view

I assume you think Garth is full of crap as well as he has stated on numerous occasions that there will not be hyperinflation. Is this correct?

That is absolutely correct….I disagree completely with garth in this regard…..but in a nice way ;)

He is correct about housing however….but the macroeconomic picture is a forgone conclusion…massive waves of inflation (and hyperinflation in some nations) worldwide….followed ultimately by greatly expanded military activity by the USA (that means big WAR) followed by complete deflationary collapse worldwide out around 2020…….

The mistake that analysts make is that they simply believe that growth economics is a science…when it is NOT!

If it were it would recognize that it’s entire premise is flawed……built on FREE (essentially) energy….that is now over forever..

The result will not be slow decline or “adaptation”..that is not historically accurate and does not factor how humans respond to deprivation.

It is not alarmist to call a spade a spade….

the future is collapse and no amount of ponificating will change it.

#157 Victor on 02.25.11 at 2:44 pm

Dream of retiring at 55 is dead for baby boomers, Conference Board says

February 25, 2011 – 10:57 am

The dream of retiring at 55 is dead for most baby boomers, according to a Conference Board of Canada survey of 2,000 released Friday. Freedom 55 is of course the hugely successful marketing slogan of London Life Financial, which is the basis of a division of London Life called Freedom 55 Financial.

http://opinion.financialpost.com/2011/02/25/freedom-65-boomers-will-keep-working-conference-board-says/

#158 Shawn on 02.25.11 at 2:49 pm

“Even at the peak of the real estate boom, very few projects returned 100 cents on the dollar. In most cases, even then, you were taking a loss when you put money into your house. Now it’s clear, most renovation project won’t return more than 70 cents on the dollar even if you sell right away. I was trying to bring home the point that this is not an investment – you’re locking in a loss.”

I agree with this 100%. Today everyone thinks that you get $1.25 back for every dollar you spend. This is in part the builders fault. 25 years ago builders would build a whole sudivision and than try to sell the units. Some lost their shirts and had to sell at a loss. Fast foreward 25 years and builders presell and make very costly modification. $450 homes with $200 of builder add ons is more the norm these days than the exception. Builders take things like hardwood and add it as an add on for say$14 dollars. People want hardwood so they begin to think that every dollar put into a home will come out at the end. I just laugh when I see MLS listings where they want $150 more because they have $150 of upgrades.

The exception to the rule is when you have a very old house that needs repairs. If the carpet if worn out you will get your money back from replacing it. If you have hardwood trim than painting it white will add value.

#159 Robert Dudek on 02.25.11 at 2:53 pm

#38 Another Albertan wrote:

“The commodity trading markets are schizophrenic right now. We had a 7 sigma move in crude today.”

Commodity price movements are not Gaussian – therefore “sigma” has no meaning in relation to them. See Mandelbrot, Benoit for more.

#160 Shawn on 02.25.11 at 2:55 pm

Funny how the Americans are crying over $3.30 per gallon prices when we are now paying $5.00 per gallon. I think the liberals must have drugged our young people’s milk and coffee with hallucinogenic’s otherwise they wouldn’t ruin the country by paying these prices. Young people listen to your parents and stop listening to the Liberal tax terrorists.

#161 Draat on 02.25.11 at 2:57 pm

Hi Blog Dawgs. This comment is totally off subject but one that has surfaced as a result of following Garth’s writings both in his books and on this site. Possibly someone else has encountered this issue. I took out a loan against my house and bought some dividend stocks. I get to write the interest off against my income which will cover the taxes I have to pay on my dividend income. Sounds great till I realized if I pay down my loan I won’t have the write-off to apply against my dividend tax. Essentially year after year I will be paying dividend taxes with less and less interest to balance it out. My question is there somewhere to place my money where it can sit and accumulate (with potential for either growth or income) which I don’t have to pay tax on until I cash it all out and pay off my loan all at once? Please don’t suggest RSP’s and limit the severity of the insults to my intelligence for asking this question – I know the kind of company I keep on this site ;)

#162 Shawn on 02.25.11 at 3:01 pm

Please buy Odyssey Petroleum (ODE). I know I will never recoup my loss but thanks for helping me unload some shares. It trades on Vancouver. Need I say more.

#163 C on 02.25.11 at 3:02 pm

The only reason Canada looks strong is our debt bubble hasn’t burst yet. That’s it. Plain and simple, no sugar coating. When it’s our turn (think US, UK, Ireland, Spain, Portugal) Canadian real estate will collapse. We had a taste of it in late ’08 but the bubble was just rocked, it didn’t burst.

Air has been pumping into this bubble since and it’s ability to grow is basically at it’s limit.

As Dan says…..Pop what was that?? It’s coming…

#164 debtified on 02.25.11 at 3:02 pm

#150 Waiting Patiently on 02.25.11 at 2:13 pm
“Soon there will be no Canadian culture at all here in Vancouver.”

***********************************************

I disagree with your xenophobic views. I am confident that most people here in the blog, in Vancouver and the rest of Canada disagree with you. Must really suck to be you.

#165 Mr. Plow on 02.25.11 at 3:17 pm

#27 Enlightened

Funny its usually the other way around…

I would show him some rentals so he can see that he can still live in a decent place even though he is renting. Lastly, I would show him what you would do with the equity that you pull out. i.e., “invest it here that will provide X % return which will help pay for our rent, or add to savings or whatever.”

Good luck.

#166 Mr. Plow on 02.25.11 at 3:20 pm

#48 Alberta Boy

Ha! I wrote the LSAT about 6 years ago and that is what I was thinking, “this sounds like an LSAT question”…

#167 SRV ES339 on 02.25.11 at 3:31 pm

Interesting trip down memory lane Garth!

Luckily (dumb luck) I bought in /85 and did well through that period (but so many got really whacked).

I never put them together before, but it reads much like the /08 financial crash… with the agents flipping paper (sometimes many times before anyone actually close a ‘real’ purchase) until the music stopped… and those left holding paid the price (of course the /08 bankers CDS orgy was… “taken care of” by the Fed… why not, since they own all the shares of that private corporation).

With nnfettered greed at the core of both events… and the next one, and the next…

#168 Robert Dudek on 02.25.11 at 3:32 pm

#150 Waiting patiently wrote …

“I wish I had seen years ago where it was leading. Soon there will be no Canadian culture at all here in Vancouver.”

First thing I would like to say is that xenophobia is so uncool – so 19th century.

Next, multiculturalism is the essence of Canadian culture. We are a tapestry of English, French and First Nation with waves and waves of immigration from all over the world that have been layered upon this tapestry for over 100 years.

#169 dd on 02.25.11 at 3:51 pm

.#91 Pr

….Inflation in Wonderland is 2%…- Sugar +81%…

Funny, pulled this up about 4 months ago and suggested that alllthe QE going on in the world would lead to explosive price inflation. Garth just laughed at me. Well he is wrong.

I did not laugh, and I am not wrong. This is not the fault of quantitative easing by the Fed. — Garth

#170 David on 02.25.11 at 3:54 pm

I’m gonna post this again, because I put it on late last night and some of you probably missed it…it really was an incredible moment in the career of financial socialism….

Does anyone else watch the financial expert panel that the CBC National news puts together every once in a while? It includes Patricia Croft (who I really respect) and Jim Stanford (who I do not). Amanda Lang and another guy who I can’t recall round out the group.

Anyway, the latest gathering of this group was about 2 weeks ago, and the topic was the debate about TFSAs vs. RRSPs. The reason it is a raging debate is because many Canadians are only now realizing that they have to pay tax on eventual RRSP withdrawls (!). And the only reason they know that is because of the standard sales pitch for the newly-invented TFSA, which is tax-free (T-F…duh).

Anyway, the panel was asked in closing: What should the average Canadian do if they had $1000 (a round, generic figure, simply used to frame the question) to invest: TFSA, RRSP, or somethng else?

Everyone gave standard answers, most of them pretty good….I won’t bore you.

But what does Jim Stanford, Economist with the CAW, suggest? He says that $1000 isn’t going to do anyone any good in retirement at all, that they should just “go and have a nice dinner out”. He basically dismissed the entire principle of compounding, implicitly endorsing gambling or bequeathments as the best retirement strategy (in that they would be more adequate size and instantaneous).

I kid you not. It was surreal. I think I saw Patti Croft wince.

That, my friends, is the kind of brain power that our unions have at their disposal. They pay this dufus big money to lobby governemnt and to tell them they need better public pensions…becasue it’s a wasted effort to even try to take care of themselves. “Go out to dinner instead, it will all work itself out…”

Unions, please take a bow.

#171 Brian1 on 02.25.11 at 4:02 pm

Fractional Reserve: as I read Shilling I get the feeling that it was he and not Harry Dent who was standing alone. Have you read him yet? He seems eerily similar to Garth Turner – You know him – the guy who ignores my posts. Anyway there are many examples of his calls where many Americans could have been saved had they listened to him.
I also appreciate the Friedberg tip. What does he say?
Dave: Good reasons to feel jaded. I would ask that you at least watch his You Tube videos and give me a second opinion.(How come everyone is mentioning him now as if I wasn’t the first to bring up his name today?)
BTW he does warn you on his site not to depend on his calls just listen to his insight.
Prof. Anon: You have only one? Just kidding. I say what I do because I have seen a difference in the Dummie Books when they are written by PHD’s. I also like Schaums, but as you have told me before, you get out what you put in.
Cynic With a Long View: You have a long name.CWLV better? Have you read Shillings book?
Isn’t Faber the guy who recommends buying a gun and own a farm and stay there?
BTW What do all you guys think of my Dent Tactical ETF Analysis?

#172 wetcoaster on 02.25.11 at 4:09 pm

Household debt could spark ‘made in Canada’ recession

Who woulda thought eh ?

http://www.theglobeandmail.com/report-on-business/top-business-stories/household-debt-could-spark-made-in-canada-recession/article1920594/

#173 Otto Doppelganger on 02.25.11 at 4:15 pm

Wow. All I can say is wow.

“It’s a living thing…it’s breathing.”

http://www.youtube.com/watch?v=hdfFS693Pm4&feature=related

#174 Form Man on 02.25.11 at 4:29 pm

# 163 C

exactly. Remember that the housing market is contributing 20% to Canada’s GDP right now. When it corrects, not only will consumers spend less because they feel less wealthy, the unemployment rate will most certainly go up. It is estimated each new home built provides 3 person years of employment. There is a tremendous multiplier effect that needs to be factored in. Harper and Flaherty are patting themselves on back now. I expect the Canadian voters will feel more like kicking H and F in the ass when the results of the collapsing housing market are fully known

#175 Jan Etter on 02.25.11 at 5:01 pm

#160 Shawn on 02.25.11 at 2:55 pm
“Funny how the Americans are crying over $3.30 per gallon prices when we are now paying $5.00 per gallon. I think the liberals must have drugged our young people’s milk and coffee with hallucinogenic’s otherwise they wouldn’t ruin the country by paying these prices. Young people listen to your parents and stop listening to the Liberal tax terrorists.”

***

Your comments blame capital-L “Liberals” for what you perceive are high gas taxes, and which equals to you the ruination of the country. I don’t understand that as the capital “C” “Conservatives” have been in power for some time now.

Simply comparing gas prices here to the U.S. and concluding we are overtaxed is an oversimplification. There are many other Western nations that would similarly find it funny how we cry about gas @ $5.00/gal.

See page 63 (or page 67 of 114 as numbered in the .pdf):

http://www.gtz.de/de/dokumente/gtz2009-en-ifp-full-version.pdf

Fine if you want to lower taxes on gas, but what’s your solution as to how that impacts other government revenue sources or industries? Gas taxes, or conversely subsidies, are used by different countries to achieve certain economic objectives. Read http://money.cnn.com/2008/05/01/news/international/usgas_price/?postversion=2008050109 :

“Comparing gas prices across nations is always difficult. For starters, the AIRINC numbers don’t take into account different salaries in different countries, or the different exchange rates. The dollar has lost considerable ground to the euro recently. Because oil is priced in dollars, rising oil prices aren’t as hard on people paying with currencies which are stronger than the dollar, as they can essentially buy more oil with their money as the dollar falls in value.

And then there’s the varying distances people drive, the public transportation options available, and the different services people get in exchange for high gas prices. For example, Europe’s stronger social safety net, including cheaper health care and higher education, is paid for partly through gas taxes.

Gas price: It’s all about government policy. Gasoline costs roughly the same to make no matter where in the world it’s produced, according to John Felmy, chief economist for the American Petroleum Institute. The difference in retail costs, he said, is that some governments subsidize gas while others tax it heavily.

In many oil producing nations gas is absurdly cheap. In Venezuela it’s 12 cents a gallon. In Saudi Arabia it’s 45.

The governments there forego the money from selling that oil on the open market – instead using the money to make their people happy and encourage their nations’ development.

Subsidies, many analysts say, are encouraging rampant demand in these countries, pushing up the price of oil worldwide.”

#176 borrowedcarbon on 02.25.11 at 5:14 pm

http://www.rbc.com/economics/market/pdf/house.pdf

RBC housing report on affordability.

#177 VICTORIA TEA PARTY on 02.25.11 at 5:24 pm

#29 nonplused

A most informed opinion. Countering your clarity is, what else, the nonsense pumped out by the MSM in Canada, UK, and US.

Especially CNN whose on-air minions want to believe that by tomorrow, “everything will be back to normal and we can all go get another latte and take a cheap trip to somewhere else.”

Watching that network’s live coverage of Yanks arriving in Malta from Tripoli is another “journey” into American ignorance and fantasy of what’s going on out there.

One tourist was telling the Anchor how the 300 passengers were watching a Star Wars show aboard ship (chartered by the US State Department), apparently oblivious of what was swirling around them in Africa.

It was as if that arrival was some sort of victory for America. It was, in fact, a strategic retreat (presaging many more such voyages), filled with symbolism about future oil price prospects through loss of global powers by the “developed world”, as these so-called cereal revolutions keep popping up all over.

Any predictions of a future revolt location? How about Chad to the south of Libya. It is oil rich, has sent mercenaries to Libya, to help out Gaddafi. It is also strategic for the Chinese who need that real estate to transport oil by pipeline from Sudan in the east to the west coast of Africa, for transhipment to China by sea. So China may be embroiled in these revolts one day as well?

So many more potential revolutions in oil-rich countries means that $200 oil may seen like a bargain soon.

Black Swans indeed. Flocks of ‘em. Black swans, oil; I get it!

#178 David on 02.25.11 at 5:53 pm

#41 Investor’s Friend…

Good read. Hey, Devore….you should be interested in that little nugget.

CMHC has a whopping 1.3% of retained earnings as capital against its liabilites 0f $473 billion, and OSFI has no oversight jurisdiction of their books.

That’s why we’re so-lid…solid as I-raq!

#179 Junius on 02.25.11 at 5:54 pm

Great article from Bill Black over on Barry Ritholtz’s blog on the predatory nature of the financial services business

http://www.ritholtz.com/blog/2011/02/how-the-servant-became-a-predator-finances-five-fatal-flaws/

#180 Form Man on 02.25.11 at 6:06 pm

CMHC is fully backed by the government of Canada. The amount of reserves they have is immaterial. The Canadian taxpayers will pick up any shortfall……

#181 BrianT on 02.25.11 at 6:07 pm

#156-Yes-the thing is, real wealth is shrinking while virtual wealth is expanding rapidly. Most people don’t understand the difference between the two. Example: lots of talk about overbuilding and “ghost cities” in China as an example of wealth squandering-it is. Now look at the USA economy-where is the productive economy? Paper scams, insurance schemes, bureaucracy upon bureaucracy, a million dollars for a medical operation, etc.etc. The actual productive economy is TINY. How is this possible? it is possible the same way Bernie Madoff’s client statements could show vast wealth-it is virtual (in this case based on continual debt accumulation). The SDRs are proposed as a way to create an even greater supply of virtual wealth to somehow right the balance sheet-the ACTUAL productive economy is not fixable.

#182 BrianT on 02.25.11 at 6:14 pm

#139Bill-WOW-$2390 a month-here in Honolulu fees are reasonable.

#183 BrianT on 02.25.11 at 6:19 pm

#151-At this point, the term “conspiracy theory” is outdated. To the general public, the term means any piece of info or theory the MSM hasn’t approved. This is 2011, not 1991-the % of the general public that has awoken to the reality that the MSM is a farce is at record levels and climbing steadily.

#184 realpaul on 02.25.11 at 6:45 pm

2011 is a MUCH worse set up than 89 for a few very obvious reasons.

1) buyers had 25% equity and tougher qualification rules for mortgages meant less risk on 25 year ams. More skin in the game and steady work helped the vast majority ride out the recession and the 14 year dip in prices during the re-fi sessions.

2) Savings rates were much higher

3) Personal debt was well below 158% ( below 50 in fact)

4) Intrest rates were not set to ‘ tease’ unqualified suckers into the market.

5) There was no tsunami of boomers pouring inventory into the market in desperation after having lost 50% or more in a market crash as we had just experianced. And after a bit of recovery the lame ducks are piling into bond funds at exactly the wrong time insuring past losses sting and their future gains are zero…..meaning boomers will not be as wealthy as had been forecast. Ergo less competition for ‘trophy props by the lake’.

6) The governement had room to tax to tax in ’89 ( and did they ever)…there is no such wiggle room now.

7) Generally people weren’t broke, inflation and skyrocketing rates were contained outside the masses to the least able to afford the hit. Nowadays it is the masses who are living paycheque to paycheque and unable to withstand any shock whatsoever. It has been reported than a majority of Canadians couldn’t finance a $5000 payment without debt financing.

8) The real estate fantasy has led a majority of young people off the cliff and will wring the future out of service for an entire generation leaving no one to pick up the pieces when the cycle reverses itself.

9) Real Estate cycles have traditionally swung on 7 to 9 year cycles with troughs of 18 to 24 months between reversals. This has been exacerbated by the ZIRP and the Stimulus. The 90′s real estate recession took 12 years and the trough to recover…an anomaly….this time around if either the ZIRP or the Stimulus continues I expect the business cycle to reflect in the downturn the number of years the government interfered with the business cycle ( as happened between 89 and 92) extending the downside an equivalent number of years. Ergo…expect a downturn turn to last as long as the uptick.

#185 betamax on 02.25.11 at 7:32 pm

#42 Dave in Victoria:
re. #32 Dexter
“well said.”

The only two people here who couldn’t figure out that the wife of a brother-in-law isn’t a sister. You and Dex must be buddies on the short bus.

#186 Fractional Reserve on 02.25.11 at 7:59 pm

Brian 1 #171. I must thank you for mentioning Shilling. I did not give you credit for being the first to mention him today. Haven’t read Dent but will check him out. Go to Friedberg’s site and read his Fourth Quarter Report which is a summary of his fund’s performances as well as his prognostications for the near term future. I won’t go into everything as you can read it for yourself but I will state that he is not predicting hyperinflation. To repeat what I stated earlier, he is one of the world’s top traders and has an outstanding record over the past 40 years.

#187 jess on 02.25.11 at 8:01 pm

…but then again some carbonized chicken feathers and some very simple brillant thinkers

serve as a hydrogen adsorbent in fuel cell vehicles is cheap and is environmentally benign.

The goal of University of Delaware project is to develop new low cost hydrogen storage substrates from an abundant waste material (6 billion lbs/yr in US): chicken feathers.

Chicken feather fibers are mostly composed of keratin, a natural protein that forms strong, hollow tubes. When chicken feathers are heat-treated by controlled pyrolysis, hollow carbon microtubes are formed with nanoporous walls. Their specific surface area increases up to 450 m2/g by the formation of fractals and micropores thus enabling more hydrogen adsorption than raw (untreated) feather fibers. The protein also creates crosslinks, which strengthen its structure.

The net result is carbonized chicken feather fibers, which can absorb as much or perhaps more hydrogen than carbon nanotubes or metal hydrides, according to Dr. Richard Wool, professor of chemical engineering and director of the Affordable Composites from Renewable Resources program at the University of Delaware in Newark.

Using carbonized chicken feathers would only add about $200 to the price of a car
….”

#188 Nostradamus Le Mad Vlad on 02.25.11 at 8:17 pm

-
#41 InvestorsFriend (Shawn Allen) — “CMHC at risk?”

No, just taxpayers here. Same as taxpayers in the US for Fannie / Freddie, GS, JPM + the banks.

#52 Basil Fawlty — “We are in unchartered waters and there is no exit strategy.”

Other than WW3, you’re correct.

#64 Expand Your Means — “The worldwide uprisings are just speeding things up a bit.”

Actually, the karmic speed of time is zipping along, much quicker than most know. It’ll hit us eventually, whether we are prepared or not.

#109 eddy — Great link. Who controls the IMF and the US Fed?

#93 Fractional Reserve and #119 cynic with a long view — “. . . there will be no hyperinflation.”

That’s right. HI is a politically-motivated event; if it is good for TPTB, it will happen, regardless of what individuals say. If not, stagflation.

#133 kabloona — “Household debt could spark ‘made in Canada’ recession”

On the other hand, it could drive Canada right over the edge of the cusp of madness, freefalling into the abyss.

#144 Debtfree — Would this be the one? Also, for a nice pic.

#152 VICTORIA TEA PARTY and #155 Chaos — Good day, gennnul orfspringz! Keep ‘em rockin’ and rollin’!

#189 AxeHead on 02.25.11 at 8:34 pm

#170 David.

I saw the show and saw the socialist, unionist idiot as well. He was just as stupid on 2 previous shows. I worked for a union once – it was a real eye opener. My biggest task on the job was 1) not to fall asleep and 2) try to find a sleeping spot away from the forman.

No wonder our country is tits up (see Garth pic).

dt

#190 Devore on 02.25.11 at 8:36 pm

#178 David

Devore….you should be interested in that little nugget.

CMHC has a whopping 1.3% of retained earnings as capital against its liabilites 0f $473 billion, and OSFI has no oversight jurisdiction of their books.

It all depends on how much they are likely to pay out, within certain probability range, that’s the actuarial part of insurance. As is, they only have to “pay the difference” on what banks are able to recover for mortgages that go all the way to default. How many will that be in Canada on CMHC insured mortgages?

Again, I’m not claiming this is awesome. But putting 1.3% and BB473 next to each other gives a very misleading picture. The 1.3% is not securing the entire $473, just the expected losses.

Both private and public entities have tended to completely ignore the far end of the risk, ie the catastrophic event, instead of hedging against it. So risk exposure has piled on as financial instruments got stacked on top of each other, because all of it is ultimately, and implicitly, backed by “full faith and credit” of the feds. The entire economy is too big to fail.

#191 Roial1 on 02.25.11 at 8:38 pm

.#98 Chris no longer in England on 02.25.11 at 10:50 am
I have walked past many fields of cattle in my time, but never once have I thought to lift my T-shirt in their direction.
There are some cows in a field at the end of my road, so I’ll be off in a moment to see what their response is.

Chris, I would sugest that you wait a while before doing this.

IT”S WINTER IN CANADA!

You’ll freeze them off.

I’d suggest you wait till June maybe?????

#192 wetcoaster on 02.25.11 at 8:45 pm

The RBC report is full of shit. How can the affordability index for Vancouver and Victoria be lower now than in 2007 when we are record prices and 5 year mortgages in a similar range give or take a quarter point ? Wages have not gone up enough in a couple of years to make the percentage go down from 60 to low 40′s. Most have had wage freezes as per most union jobs.

Affordability is out the window except for the fools and their VRM’s which is the same as a sub prime/emergency/teaser rate. So many painful moments ahead for those buying this RBC crap.

Remember Moody’s & S&P said all those subprime models were bang on when they never had a clue what they were even talking about ? Anyone giving CMHC and the big banks the same credit is about to be given a huge wakeup call. The Land of OZ is about to reveal his stubby little legs with braces.

#193 S.B. on 02.25.11 at 8:52 pm

Garth your reply to #99:

I would like to purchase some of these said collectable urns, at once! Sounds like a great investment.

You’ve been holding out on us man, this is the good stuff!! :P

#194 Another Albertan on 02.25.11 at 9:04 pm

#159/Robert Dudek:

Go argue with Zero Hedge and Bloomberg terminals and their math functions if you don’t agree.

http://www.zerohedge.com/article/visual-summary-todays-ludicrous-action

I’m not going to fundamentally disagree with your assertion, but the population is essentially innumerate, so the technical correctness of your point is going to be lost on most people.

Everyone else’s mileage may vary.

#195 John on 02.25.11 at 9:16 pm

Garth I have a simple idea that would curb inflation, save the taxpayer money and save families billions, while keeping the economy on an even keel.

Legislate the MLS monopoly to post for the consumer the historic price history of homes. Consumers have a right to know and shouldn’t have to ask a real estate agent every time. This would dampen all the flippers and speculators who are making houses unaffordable to the masses. Ya ya I know mls is a monopoly but if they have no competition they need better access for consumers.

P.S. Is it to much to also ask real estate agents to post their fees in a tranparent manner?

#196 Utopia on 02.25.11 at 9:29 pm

Morry = Devils Advocate!!! I knew it. You gave yourself away buddy. Good to see you have reinvented yourself and returned as a new character.

Does Morry rhyme with Sorry btw?

#197 Devore on 02.25.11 at 9:34 pm

#178 David

Hmm, maybe I should elaborate my thoughts a bit more.

Again, personally I don’t think CMHC is in a great position, but I don’t think it is nearly as bad as some people are making it out to be.

Insurance companies make money (and public ones don’t lose money by returning profits to their “owners” in form of lower premiums), by modeling their expected payouts against the risks they are insuring against. Ideally, they segregate the participants into risk pools, to better manage risk and price their services appropriately. The more discriminating the pools, the better, so you can attract more participants with attractive pricing, but you still want the pools to be large enough to be able to spread the risk.

AFAIK, CMHC treats everyone equally. This is a strike against them. Even state-run auto insurance charges people different premiums based on their risk profile. Our “health insurance” is not really insurance, it’s an entitlement program, so that doesn’t count.

At the end of the day, unless you look at CMHC’s model, you can’t say 1.3% is laughably inadequate. There are many things that seem that way at first glance to the untrained (and even trained) eye. Like how you can poll <1000 people and get a very good representation of the entire country, assuming your sample is good. 1.3% may be “good enough for government work”, or it may be just right. It’s very likely it is inadequate to some degree, because risks have gone up (high LTV, high debt service ratio, low rates, low qualifications) but premiums, as a percentage of amount insured, have not. The higher end of the risk spectrum is explicitly backed by the government, so they are probably heavily discounting it.

#198 Dark Sad Monster Bunny on 02.25.11 at 9:38 pm

159 Robert D – Interesting. Seems very counter-intuitive. Are you sure you have Mandelbrot’s conclusion in the right context? Regardless, cannot a mean and standard deviation be calculated for any sample from a population?

#199 Willy H on 02.25.11 at 9:52 pm

I am kinda wary of the 1980s comparisons. In my opinion the current dynamics are far more disturbing. Of course Garth’s point about debt bloating and RE-centric investment portfolios is a given (at least on this blog). Unfortunately there are far more ominous differences. After the 1980′s recession we saw two periods of major economic growth separated by a brief flirtation with recession in the early 1990′s. Both periods of growth took place in a world still relatively blessed with an abundance of resources at our disposal. However, rapid population growth, 500-700 million additional Western-style consumers (India & China), unsustainable global consumerism, tsunami after tsunami of almost interest free money and a dwindling supply of cheap oil are all knocking at the door at the same time.

China will be putting as many cars on the road in one year as we have in all of Canada in the not too distant future.

Libya or no Libya oil prices are heading higher and we are going to experience major economic and political volatility as our economies oscillate wildly between anemic growth and recession for decades to come.

Sometimes I get the feeling that our economic prognosticaters are like the global warming scientists. They are afraid of the being called “doomers” so they candy coat their hypothesis in order protect their reputations and to remain publicly relevant. All of sudden the polar ice caps are melting much faster than the scientific models predicted and the best-case scenario is replaced with an alarming reality.

Oil at $200 a barrel, I’ll give it a 75-80% chance over the next 3 years.

#200 ballingsford on 02.25.11 at 9:57 pm

Conspiracy Theory on again tonight showing the Global Warming conspiracy. Anyone watch it? It was the second time I watched it.

It sucks that so many people still believe in it. It’s a money making cause, that doesn’t justify the end!

Fools with their money are soon departed!

#201 tiedattutu on 02.25.11 at 10:08 pm

Anyone else noticed that Garth has a case of the vapors lately? He’s kicked it into high gear. I

Vapours? Are you Emily Bronte? — Garth

#202 Republic_of_Western_Canada on 02.25.11 at 10:11 pm

That chick is DEFINITELY from Ontario.

#203 Republic_of_Western_Canada on 02.25.11 at 10:41 pm

#98 Chris no longer in England on 02.25.11 at 10:50 am

Garth, I have walked past many fields of cattle in my time, but never once have I thought to lift my T-shirt in their direction. Can’t think why it didn’t occur to me before I saw this photo – heaven knows I’ve had enough opportunities. So many possibilities are going through my mind now. There are some cows in a field at the end of my road, so I’ll be off in a moment to see what their response is.

You settled in Ontario, didn’t you.

#204 Kaganovich on 02.25.11 at 10:48 pm

bill from last thread wrote:

Kaganovich
we used to have paid up and paid for communists in the rank and file at my mill that rambled on and on with the same line you have.
damn near word for word. funny how they all vanished when the money stopped coming from russia.
watching the class warfare between the maoists and the marxist Leninist competing for attention at our mill was one of the humorous aspects of a dangerous job.
the maoists were particularly obtuse.
once when the m/l were organizing the fieldworkers in the valley the maoists would disrupt the meetings and beat on various members of the opposite cult. nice guys just thinking of the worker eh?
e.a. blair nailed the process exactly in his book ‘animal farm’. however it applies to all forms of government, not just the hierarchy of the communists in spain and russia ect.
I am not missing your message. ok?
you dont have one.

My point was that if you are intent on blaming union members for the state of our continent’s economy today, then perhaps some other groups should be recognized as at least equally culpable as well (if not more so). That the communist movement devolved into a fragmented, lethal and hypocritical mess does not mean that a class based analysis loses all merit. Especially now. That one author (Orwell) wrote a work that espoused an eternally unequal but natural/default state of society (some being more equal than others as an allusion to the violent imposition of Nomenklatura in place of some royal dandies). It has been a long while since I read that work but to believe that all attempts to establish a more egalitarian society would be sure to result in something even worse doesn’t leave us with much to work with politically. The communist groups you speak of were indeed intent on achieving a revolution by means of a vanguard elite with little worries for the workers other than strategic interests in most cases…but I don’t know how that relates to the issue that sparked this discussion off other than it being another example of how many of us turn on each other rather than focusing our energies more constructively.

#205 jess on 02.25.11 at 11:47 pm

Fake Front Groups
misuse and manipulation of the powerless to THINK they have power (tea party)

The weapon used by both state and corporate players is a technique known as astroturfing. An astroturf campaign is one that mimics spontaneous grassroots mobilisations but which has in reality been organised. Anyone writing a comment piece in Mandarin critical of the Chinese government, for instance, is likely to be bombarded with abuse by people purporting to be ordinary citizens, upset by the slurs against their country.
http://astroturfwars.com/

(Astro)Turf Wars – Tea Party Documentary
http://www.youtube.com/watch?v=xv99k7MPoXo

For his film (Astro)Turf Wars, Taki Oldham (australian with japanese name) secretly recorded a training session organised by a rightwing libertarian group called American Majority. The trainer, Austin James, was instructing Tea Party members on how to “manipulate the medium”. This is what he told them: “Here’s what I do. I get on Amazon; I type in ‘Liberal books’. I go through and I say ‘one star, one star, one star’. The flipside is you go to a conservative/ libertarian whatever, go to their products and give them five stars … This is where your kids get information: Rotten Tomatoes, Flixster. These are places where you can rate movies. So when you type in ‘Movies on healthcare’, I don’t want Michael Moore’s to come up, so I always give it bad ratings. I spend about 30 minutes a day, just click, click, click, click … If there’s a place to comment, a place to rate, a place to share information, you have to do it. That’s how you control the online dialogue and give our ideas a fighting chance.”

Over 75% of the funding for American Majority comes from the Sam Adams Alliance. In 2008, the year in which American Majority was founded, 88% of the alliance’s money came from a single donation, of $3.7m. A group that trains rightwing libertarians to distort online democratic processes was, in other words, set up with funding from a person or company with a very large wallet.

http://www.monbiot.com/2002/05/14/the-fake-persuaders/

#206 tiedattutu on 02.26.11 at 8:22 am

Garth.

You are one funny guy. I did read something by a Bronte, but can’t remember which Bronte it was. That may have been where vapours comment came from. Also here in the Heart-o-Fukkin’ Dixie, we still get the vapours.