Be worried

F before the election: “By choosing to act in the best interests of our country, we can ensure a bright future for our children and grandchildren.” F after the election: “I am quite worried.”

Which kinda begs the question. Should you be worried, too?

Well of course you should, but not on the macro-economic level that keeps F up at night fretting over Basel 3, international settlements, capital reserves and how to keep hair stuck on the bald spot. Yeah, I know we face giant issues. Europe is committing financial suicide again, led by those fun-loving Greeks, now busy cleaning out their banks. The US faces a debt apocalypse and yet the biggest news this past weekend was Sarah Palin on the back of a Harley. Oil is mired over a hundred bucks and that quick little war in Libya is turning into a mess. Even Canada has dropped hundreds of bombs there, each one costing the same as a bungalow in Winnipeg.

The world’s a sea of risk. Of course F is a wreck. Does he keep on spending and fuel the debt crisis, or go all Mennonite on us? Find out next Monday.

But this blog is not about stuff you can’t control. That’s what Lady Gaga, Navy Seals and the Royal Family are for.

Instead we focus here on micro-economics, which these days almost always leads us back to house porn. The reality is, when it comes to family finances, people in this country have never been so exposed to this one asset, which currently sits at nose-bleed height. That’s odd enough, given high unemployment and swampy wages, but it’s all the most astounding since we refuse to believe we’re like any other humans.

Like the Irish. They had a real estate bubble, too. A mama of a gasbag, with Belfast bloating up to look like a green Vancouver. That hit its zenith three and a half years ago, at which time a guy named Jonathan Davis shocked the media, and was called an idiot, for predicting a collapse in prices of 50%.

So what happened? As of last month, Irish house values are down 47%.

“The house price bubble has been the biggest economic disaster for Northern Ireland, yet everyone was saying it was a good thing,” Davis says. “The prices to earnings were way beyond extremes, the borrowings were way beyond extremes, the investment speculation was way beyond extremes.” Sound, ah, familiar?

Of course, when the house bubble inevitably deflated (as all bubbles do), lots of Irish dudes who bought expensive houses with tons of borrowed money suddenly got nailed. They felt poorer. They stopped spending money on consumer stuff. The economy tanked. And you might have heard that Ireland went bankrupt and had to be bailed out – all just a few years after people were writing books about the ‘Celtic Tiger.’ Unemployment is 14.6%. And this may be just the start, since the average Belfast home has lost more value in the past 12 months (11%) than those in staggering America (8.2%).

But that’s Ireland, the Canuckistan house pumpers cry. This is Maple! We’re different. And so was Britain, the US, Spain, France, Portugal, Japan and (soon) Australia and China. In fact, there’s never been a real estate boom that did not turn into dust. The only constants have been human stupidity and denial.

Anyway, Ferenc could care less.

He writes:

Hi Garth, I love your blog and read it a lot! Does it ever really matter if you lose or win money on a house you live in (i.e., it’s not for investment purposes) because when you sell it and buy a new house, the price of the next house will be proportional to the market at that time. For example if I bought a house 5 years ago for 250k and today it’s worth 500k, I wouldn’t be able to get a house that is twice as big now because all of the house prices have gone up by 50% (hypothetical). Similarly, if I lose money on a house all of the other houses will have gone down as well. So I’ve lost dollar amounts, but I didn’t lose what I can afford for my next purchase.

What do you think of this kind of reasoning? Am I off my rocker and just trying to justify buying a house in a market that I think is going down?

Uh-huh. Bad logic, Ferenc baby. There’s no safe way to catch a falling knife.

Of course, it might not matter so much what house prices did if the average family could afford to buy the average house. If real estate cost two or three times what the typical income amounted to. If a couple could manage to put down, say 25% of the asking price. Or the government didn’t need to subsidize the banks because nine of ten borrowers were high-risk.

But that’s not this world. So today almost all purchasers are forced to put almost all of their net worth into one asset on one street. No pretending a house is just a home any more, Ferenc. It’s a savings plan, an investment plan, a kids’ education plan and a retirement plan. When the housing storm hits, and it always does, a huge amount of net worth can be blown away, leaving only debt standing — erect, silent and as sad as chimneys in Joplin.

So buy if you want. But understand the odds.

F is worried. And he knows why.

 

213 comments ↓

#1 TurnerNation on 05.30.11 at 8:45 pm

I’ve found a wormhole in the blog! A parallel universe where too can be First. Get a load of this plucky fellow:

http://www.greaterfool.ca/2011/05/29/patience/patience/

#2 Neil on 05.30.11 at 8:50 pm

What’s this “go all Mennonite on us”?

#3 Fractional Reserve on 05.30.11 at 8:56 pm

Garth, as a man who once graced the halls of power in Ottawa as the Minister of National Revenue, why weren’t the feds afraid of letting the housing market go in the early 1990s? Why are they so paranoid about keeping this bubble going today?

Different feds. — Garth

#4 Toon Town Boomer on 05.30.11 at 8:58 pm

Ok I ‘m worried, I’m still thinking about the ” surprise” you mention in your previous post.

#5 james . on 05.30.11 at 8:58 pm

first

#6 Paul B on 05.30.11 at 9:02 pm

closes in two weeks sweet sweet payoff time

#7 ballingsford on 05.30.11 at 9:08 pm

When F is worried, so should we! This is the first time he spoke the truth in a long time. Buckle down and ride this one out. It’s not going to be pretty!

Think Europe, think Greece (I know it’s part of Europe), think of PIIGS, think of the US, and think a little about Canada.

The time of reckoning is upon us! No kidding!!!

#8 Jay on 05.30.11 at 9:09 pm

Kasha does some odd things when she sells real estate. She started one home for $699K – quickly reduced it to $649K and then when it sold for 20K more than that she sticks a “sold for over asking” sign up. Ummm… so what was the right price?
Having said that things are moving fast in NV. Homes I wouldn’t expect to sell do – and fast.

#9 disciple on 05.30.11 at 9:09 pm

Yes, the only constant is debt. The silent slayer of empires. Unnecessary, unfruitful, unserviceable, unholy, unnerving, unpalatable, and seemingly unstoppable debt…

#10 Mr. Lee on 05.30.11 at 9:17 pm

The party was over two 2.5 years ago if it were not for historical low intrest rates. F is worried, and C is worried yet tomorrow the prime rate will remain at 1 % and the mass of greater fools will continue to rush into overwhelming mortgages.

We live in an era of live for today, and who gives a damn about the future. One problem, the future becomes the present and too many will be left behind……..no grants, no incentives, no special tax regimens, and no bail outs. Just debt servitude that could to our economy what has been happening in Japan for close to two decades now.

#11 Tim on 05.30.11 at 9:20 pm

Auto Bailouts won’t be paid in full:

http://www.theglobeandmail.com/report-on-business/auto-bailouts-wont-be-repaid-in-full/article2039762/

Thanks Conservatives, for bailing out a dying industry and subsidizing people who have less education than most, but better benefits than most. We are paying your pensions, most of us don’t have pensions, but we’ll be paying yours, thanks to the short-sighted decision by the Conservatives to bail out companies with inept management, who made bad decisions and who make cars that most people don’t want

#12 Hoof - Hearted on 05.30.11 at 9:22 pm

First time I every saw a sign that stated ” SOLD OVER ASKING.”

Maybe they should have RE signs like gas station signs …prices in digital sites, that reflect market price…

#13 Tim on 05.30.11 at 9:25 pm

Worried about F’s decisions? Why would we worry about a government who has run up the biggest deficit in history, despite high commodity prices? If the Conservatives were worried or cared at all, they would end subsidies to big oil, but they don’t have the balls to do so

#14 mississaugasold on 05.30.11 at 9:27 pm

Yes! I closed today and it’s registered, the deed is transferred and I pick up my cheque tomorrow!

Feels amazing right now!

#15 squidly77 on 05.30.11 at 9:28 pm

In fact, there’s never been a real estate boom that did not turn into dust.

Yup. Never.

#16 Mark on 05.30.11 at 9:31 pm

The near-universal use of short-term adjustable rate debt in Canada (as opposed to long-term 30-year mortgages in the USA) promises to collapse the Canadian market far more quickly than in the US. Ireland is a good preview of what is to happen in Canada.

#17 Devore on 05.30.11 at 9:32 pm

and that quick little war in Libya is turning into a mess.

No, really?

/whocouldaknowed

#18 Scalgary on 05.30.11 at 9:32 pm

Canuckistan… Terrorism funded by HAM?

Cheers…

#19 Duke on 05.30.11 at 9:33 pm

Garth, Dude! I just don’t get it! I’m in my dirty thirties and I don’t stand erect at attention when I see a for sale sign.

I remember all those Japanese in the late 80s and early 90s over here buying golf courses and investment properties. My pops even sold a property to a swarm of Japanese in investors in the late eighties. Back then it was about the Japanese keeping our housing bubble going and now it’s about the Chinese.

Why does no one remember that? Why do they think what happened in Japan can’t happen in China?

Pity them for them are human. — Garth

#20 PesaMingi on 05.30.11 at 9:35 pm

OK Garth here’s the question:

What’s gonna happen to all the Bank preferreds you’ve talked me into buying, after all the sheeple default on their mortgages?

Maybe I shoulda stuck with that dog of a Bond fund that was making me 2.5%???

The preferreds will still pay you 5.6% dividend income. BTW, there will be no wave of defaults. Just quiet power of sales and steadily eroding prices. It’s a Canadian thing. — Garth

#21 disciple on 05.30.11 at 9:36 pm

I cannot understand why anyone would pay half a mil for a cookie cutter detached home in the burbs. What is this madness? Houses all around are still selling like crazy. Sold signs everywhere I look. Something’s afoot…I smell trouble…What is shadow inventory again?

#22 BoomerBoy on 05.30.11 at 9:39 pm

In the great scheme of things Greece and Ireland are small potatoes. With a combined population of less than half of Canada, their influence on the world stage is greatly overblown.

Especially Ireland, with less than 4.5 million people.

The fact is that all of the G7 countries are slowly recovering. None are in recession and although GDP numbers are somewhat anemic, they are still positive.

Many emerging economies are charging ahead with annualized GDP numbers approaching double digits, resulting in a somewaht lopsided global economy of haves and have-nots.

Sure, it’s easy to find doom and gloom in the world – one needn’t search too hard. Pick any year, or any decade for that matter and you’ll discover that the planet has never enjoyed complete sunshine and butterflies.

There have always been wars, financial hardship and natural disasters. But it has always been thus. Lighten-up.

Enjoy your mortgage. — Garth

#23 Mr. Reality on 05.30.11 at 9:41 pm

Short everything in sight folks……. I’ve said this many times and i’ll say it again.

Short commodities and the TSX

Mr. R.

#24 BPOE on 05.30.11 at 9:42 pm

!!!!!!!!!!!!!!!!!WINNING!!!!!!!!!!!!!!!

#25 Ben on 05.30.11 at 9:43 pm

#10 Mr. Lee

We live in an era of live for today, and who gives a damn about the future.

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

I think your right… I mean what the hec, if you have all your money (not much) in one asset and it doesn’t work out? So what, walk.

#26 BPOE on 05.30.11 at 9:43 pm

Pssssttttt interest rates are going down.

#27 MikeT on 05.30.11 at 9:46 pm

Sorry, but if the house went from 250k to 500k as in the example, that’s 100% up. Does Ferenc mean that more expensive houses went up by just 50%?
Didn’t quite get the math, but from the little I know about houses, the bigger ones have more volatile prices…

#28 Ronaldo on 05.30.11 at 9:46 pm

http://www.ctv.ca/generic/generated/static/business/article2040522.html Yep, F is worried alright.

#29 Bottoms_Up on 05.30.11 at 9:47 pm

That sign should instead say:

_________
SOLD
Bend over
————

With the Stanley cup finals coming to Vancouver, I must ask the question: how many players on the Canucks can actually afford to buy a SFH in Vancouver?
Or do the players rent?

#30 disciple on 05.30.11 at 9:47 pm

Constantly being bombarded by ads on TV, radio and junk mail here in the GTA on the great mortgage rates, how the RE market is booming, and on how debt consolidation is the answer to my debt problems!!?

#31 Jsan on 05.30.11 at 9:50 pm

“Hi Garth, I love your blog and read it a lot! Does it ever really matter if you lose or win money on a house you live in (i.e., it’s not for investment purposes) because when you sell it and buy a new house, the price of the next house will be proportional to the market at that time. ”
====================================

Just more proof to me that too many people, especially in this generation, have no concept of debt or appreciation of money. When I say appreciation of money, I am not suggesting that money brings happiness. I am suggesting that having money and little or no debt brings options and flexibility from jobs to vacations from how you spend your leisure time to when you will eventually quit the rate race, kick back and enjoy retirement. Having money allows you to earn even more money by putting your savings to work for you. It’s amazing how this works. Those with high debt will never be able to enjoy many things that life has to offer because they are the equivalent of a modern day serf.

I’ve said it before on here, I have read story after story of people in the US who have grown to hate their homes. Why? Because they bought at the top of a bubble and are now thousands and thousands of dollars underwater on their mortgages. They are virtually slaves to their mortgage and their house. They cannot sell because they would have to cover the huge loss, they cannot move because they cannot sell and every last penny they earn is now going into feeding their huge debt. What a great way to live out your life!

#32 T.O. Bubble Boy on 05.30.11 at 9:52 pm

CMHC – where economic impossibilities are public policy!

New GTA forecast came out yesterday:

http://www.cmhc-schl.gc.ca/odpub/esub/64319/64319_2011_B01.pdf?fr=1306802576381

The new 2011 forecast for the GTA is 86,000 sales, which would be down about 2% from 2010.

However, for January through April 2011, the number of sales were down at least 10% each month (-13%, -14%, -11%, -17%).

What kind of crazy boom is CMHC forecasting for May through December to get the 2011 total sales decline to only -2% from 2010???

#33 bringtherain on 05.30.11 at 9:53 pm

With nothing but sales jobs like real estate what will all these sales people do for work?. Hard to sell stuff to people with no money, unless there is more credit. Do real estate agents have a back up plan, or did they drink the Kool aid, and reinvest? Hopefully you made alot of money and diversified your portfolio to live on the interest. Living large with no saving will have you saying need fries with that.

#34 Renting in Toronto on 05.30.11 at 9:56 pm

Been renting for past 12 months since selling. Enjoying no maintenance on city property. Just negotiated a $400 decrease in rent for next 12 months. No debt. Real estate (cottage) about 20% of net worth.

I hope real estate doesn’t crash but if it does I’m ready. I hope investment markets don’t crash but again I’m ready.

Housing prices are crazy as indicated by this listing:

http://www.realtor.ca/propertyDetails.aspx?propertyId=10733784&PidKey=760349984

#35 T.O. Bubble Boy on 05.30.11 at 9:57 pm

Chinese House Prices to fall at least 10% this year:
http://economictimes.indiatimes.com/news/international-business/chinese-home-prices-likely-to-fall-by-more-than-10-this-year-analysts/articleshow/8645603.cms

But, if you’re a Chinese property developer, you can always get out of residential housing and invest $1.5B in a monkey-themed amusement park:
http://www.shanghaidaily.com/nsp/Business/2011/05/31/Monkey%2BKingdom%2Bpark%2Bgoes%2Bto%2BBeijing/

#36 Lisa on 05.30.11 at 10:00 pm

Yes, still lots of cookie cutter homes on tiny lots jammed together going for half a mil. It’s absurd! Best value in the near G.TA. is Barrie and Hamilton. But the commute will kill you, of course.
North America, as well as Europe, is in Crisis mode (i.e. Great Depression and WW1 & WW2). History repeats itself every 80-100 years (in 4 cycles of 20 years each, or the span of one generation).
Garth is right…human nature is the same everywhere and over time. Our Canadian culture is the same as the U.S. Culture so we think along the same lines. What happened there is happening here…we just don’t see it yet.

#37 Ronaldo on 05.30.11 at 10:07 pm

http://www.dailymail.co.uk/news/article-1391868/This-city-built-million-people–lives-here.html?ITO=1490 The Chinese should be worried. City built in inner Mongolia for 1 million people on the idea that “if we build it, they will come”. So far, they’re short about 900,000 people.

#38 sasquatch on 05.30.11 at 10:10 pm

Garth,

Quick point. Belfast is in Northern Ireland, therefore part of the UK. It was never bankrupt, never part of any IMF bailout and never a ‘Celtic Tiger’. People from Northern Ireland, which Belfast is a part, are British not Irish. The housing crisis in Northern Ireland has been less severe than its neighbour to the south, but by far the worst part of the UK due to its unique geography.

Just thought I’d clear that up prior to the ticking parcels arriving in the post.

You are right of course. But my understanding is that NI was a beneficiary of the Celtic Tiger phenom. — Garth

#39 Behavioral Finance on 05.30.11 at 10:20 pm

Mr. Reality

Before you start shorting everything start reading this…

http://www.businessweek.com/news/2011-05-30/palladium-rebounds-as-bmw-proves-catalyst-for-growing-shortage.html

#40 BC Bring Cash on 05.30.11 at 10:25 pm

Garth you say that F is worried. I don’t believe he is worried a bit. He is only concerned about his own personal
well being. He already has more than he needs because he is a member of the elite. He pretends to be worried on our behalf. I’m positive he has insider information that will benefit him in the future. His future is assured regardless.

#41 Cato on 05.30.11 at 10:27 pm

F is probably realizing he’s about to become the proverbial punching bag of the country. Give it 9 months and he can watch the mob burning effigies.

What has the G8/IMF absolutely freaked is fear the irish & greeks won’t take to being kicked in the face kneeling down. If Greece & Ireland resistance sets example for Spain or Portugal then its game over, the whole house of cards collapses. http://www.youtube.com/watch?v=A5zXU1bQ3tQ

Starting to see white faces hidden in the ranks of libyan resistance, obviously things aren’t going as planned. The bombs aren’t working, so boots on the ground will probably be next. Of course we have no idea who we are getting in bed with, guess its a case of enemy of my enemy is my friend.

‘Scuse me while I go bang my head against the wall.

#42 Gord In Vancouver on 05.30.11 at 10:33 pm

Excellent post, Garth.

It’s interesting how the mainstream media doesn’t pay much attention to Ireland’s terrible housing bubble.

#43 nonplused on 05.30.11 at 10:34 pm

Garth, I read today that US banks are setting the transaction price on foreclosures at the appraisal done when the loan was made, artificially distorting some statistics (but not Case-Shiller). Does the power of sale thing avoid this in Canada?

#44 Ronaldo on 05.30.11 at 10:35 pm

http://www.youtube.com/watch?v=mACqcZZwG0k A little song for Mark to help him sleep tonite while he’s pondering his next rate hikes….

#45 sasquatch on 05.30.11 at 10:35 pm

The Celtic Tiger phenom, if one ever existed, was not a case of the Irish being better,smarter or faster, just cheaper. They set their corporate tax rate at 12.5% as opposed to 26% in Northern Ireland and the rest of the UK.

They did this to attract companies to setup European HQ’s in Dublin as opposed to London, which is only a 50 min flight away. As a result Microsoft, Google and Dell chose Ireland over the UK, taking their jobs and employment with them.

As a result of this the ‘Celtic Tiger’ actually was very detrimental to the comparatively uncompetitive North.

http://www.irishtimes.com/newspaper/finance/2011/0527/1224297851852.html

#46 Hoof - Hearted on 05.30.11 at 10:37 pm

I wonder if this more indications of problems.

In todays Vancouver Sun I saw and Info -ad for UBC Dental School.
It was 3 full pages.

I have never seen that before.

Furthermore, I think Dentistry is a rip-off.

MD’s cover the whole human body…WTF is so special (or closed shop) about a mouth?

Are Dentists just slow learners?

I mean really, can’t various trades(like autobody repair) take over? What’s the difference?

Certainly 2 year course maximum. not this 7 year gouging BS

#47 SM on 05.30.11 at 10:39 pm

I have been noticing for the last 6 months that less and less people are using credit cards to make purchases. Almost all of them use Debit or Cash to pay large amounts. food for thought…

#48 fiendish Thingy on 05.30.11 at 10:50 pm

Here’s an amusing and informative animated video on Spain’s housing crisis (with english subtitles):

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

Of course, there are always those who will say “it’s different here”, and they’d be right, as most Canadians don’t speak Spanish ;-)

#49 Mature Student on 05.30.11 at 10:55 pm

Garth,

Love the blog… but Belfast is in Northern Ireland. You know, part of Britain? Dublin is Ireland’s capital. Its housing’s cratered more than Belfast.

Sectarian violence sucks, but it kept a few speckers out of the north at least.

Keep up the good work.

#50 Coho on 05.30.11 at 10:59 pm

Garth, as a man who once graced the halls of power in Ottawa as the Minister of National Revenue, why weren’t the feds afraid of letting the housing market go in the early 1990s? Why are they so paranoid about keeping this bubble going today?

Different feds. — Garth
——————————————————-
How does that explain bubbles in so many other countries? Sounds like everyone got their marching orders to inflate like never before. Economies then collapse and the IMF (god love ‘em) swoops in to pick on the carcasses. Wannabee a vulture? Then look to the IMF and take notes. It’s running a clinic on how to vulch.

#51 Left coast dbags on 05.30.11 at 11:04 pm

#38 sasquatch,
You read my mind. Perhaps Garth was thinking of Dublin and the rest of the Republic of Ireland. The point is the same nonetheless.

#52 El Magnifico on 05.30.11 at 11:12 pm

I don’t know why you keep taking France as an example for RE collapse: “We’re different. And so was Britain, the US, Spain, France, Portugal, Japan and (soon) Australia and China.”

France RE bubble never collapse. In fact, it’s the opposite. Paris is probably at the top of the bubble right now (that’s what the MSM are starting to question, a sure sign). Paris is close to reach 8000€/m², or roughly $1040/sq.ft on average… Prices have been going up by 20.8% last year, not quite a collapse yet.

Let’s brush up your french, you’ll get the details here:
http://www.lefigaro.fr/immobilier/2011/05/26/05002-20110526ARTFIG00466-immobilier-paris-au-dela-des-8000-eurosm2.php

#53 bridgepigeon on 05.30.11 at 11:20 pm

Bungalows not bombs.

#54 Aussie Roy on 05.30.11 at 11:24 pm

Aussie Update

Sydney prices continue their retreat.

http://www.smh.com.au/business/sydney-spared-as-home-prices-extend-retreat-20110531-1fdmu.html

Prestige property sellers retreat as demand vanishes

http://www.smartcompany.com.au/finance/20110530-prestige-sellers-abandon-auctions-as-clearance-rates-remain-weak.html

Its a GREAT time to buy – where are the greater fools.

http://www.heraldsun.com.au/news/more-news/perfect-storm-helps-first-home-buyers/story-fn7x8me2-1226064491095

New housing sales drop – don’t we have a shortage?

http://www.smh.com.au/business/new-home-sales-reflect-softening-property-market-20110530-1fd3x.html

Aussie banks are stuck..

http://macrobusiness.com.au/2011/05/australian-banks-paint-themselves-into-a-corner/

Seasonally adjusted, prices are fine.

http://macrobusiness.com.au/2011/05/pass-the-popcorn/

Chinese boom, boom.

http://macrobusiness.com.au/2011/05/china-services-boom/

#55 El Magnifico on 05.30.11 at 11:26 pm

Garth,

Further to my previous comment about RE bubble in France, one french Think Tank working for the Prime Minister is saying that there is indeed a bubble:

“Selon le Centre d’analyse stratégique, les prix des logements connaissent depuis quinze ans une évolution déconnectée de celle des loyers. Les premiers ont doublé tandis que les seconds ont augmenté de 30%.”

Rough tranlation:
“according to the Centre for Strategic Analysis, RE prices, for the past 15 years, have experienced an increase disconnected with the increase of rents. RE prices doubled while rents have grown by 30%”

http://www.lefigaro.fr/immobilier/2011/05/03/05002-20110503ARTFIG00587-immobilier-la-possibilite-d-une-bulle.php

#56 Republic_of_Western_Canada on 05.30.11 at 11:27 pm

yet the biggest news this past weekend was Sarah Palin on the back of a Harley.
Who cares? What I wanna know is who was the chick that was driving?

#2 Neil
When God handed down the plates of metal, he emphasized thriftiness.

The preferreds will still pay you 5.6% dividend income. BTW, there will be no wave of defaults. Just quiet power of sales and steadily eroding prices. It’s a Canadian thing. — Garth
Only so long as the QEII momentum lasts, or banks siphon off cash flow from resource producers. The only thing different between common and preferred stock is what’s written in the corporation’s bylaws. I highly doubt any bylaw states a minimum of 5.6%. Even doubtful if preferreds are mandated any dividend at all on pain of a company impaling itself on a stake of penalty or corporate liquidation.

And no, it’s not a Canadian thing. It’s a slow-moving eastern/Ontario thing based on memories of manufacturing and financial halcyon. The NEP days were anything but quiet and steady. Like Russia in ’98 or Argentina in 2001.

#57 Utopia on 05.30.11 at 11:29 pm

#2 Neil asked…..

“What’s this “go all Mennonite on us”?
—————————————————————-
Conservative values Neil. Good old fashioned home spun family-oriented tradition and the ideals of restraint in a booze-free environment.

Home grown vegetable patches, canning your own produce, saving for a rainy day, not depending on credit to get you by and sticking to old fashioned belief systems that are just as valid today as they were one hundred years ago.

These are virtues to live by and will get you and your family through thick and thin. Traditional Mennonites eschew violence, gambling, drinking, smoking and even dancing and music at the extremes. They are appalled by the drug culture of this country and the crime that results from poor parenting and youth gone wild.

They pride themselves on loyalty to family, make hard work a virtue to live by daily and keep the social company of other Mennonite Christians above all others.

They are Conservative in their views of politics when it comes to issues like abortion, crime control, premarital sex, gay rights, gun control and the evolving role of minorities in our decision making bodies.

They are generous to a fault. They are cheap as borscht with each other too. They are frugal savers, devoted parents and above all they dislike Liberalism and what it stands for as a destructive force that negatively impacts on the cohesion of families as they believe it can lead to the breakdown of society and our social norms.

So they are realists. Not all of them of course, just most.

Going Mennonite means controlling government expenditures and limiting entitlements to reasonable levels and by doing so, keeping taxes low. These are virtues too.

Hope that helps.

#58 Nostradamus Le Mad Vlad on 05.30.11 at 11:32 pm

-
“Be worried. Even Canada has dropped hundreds of bombs there, each one costing the same as a bungalow in Winnipeg. Find out next Monday.”

Are there not better things to spend taxpayers money on, than dropping bombs on a country which has never done anything to us? You were right to stay out of politics, Garth — it is run by criminally-warped minds.

If F chooses the Mennonite approach, it may be one of the better things he has done, starting with keeping spending to a bare minimum on outside forces. If the US wants to go to war with someone else, let them. They can pay for their own ticket.
*
0:49 clip Waterspout off Sydney, Oz. Quite high.

Mega tsunamis — 3:53 clip Alaskan giant wave in 1958, similar to Canary Islands, and 4:02 clip Landslide effect on sea. The wave reached 520 metres high. 3:10 clip After effects of mega tsunami; it reaches 720 km/h top speed. Change is constant, inevitable.

Large Rate Hike Always be prepared for the unexpected. DSK (Cdn. take) — Quite interesting, with links, DSK One and DSK Two.

US Military The rest is pretty much gonzo. Middle Class is going, going . . . Betting Do doctors, guns or people kill?

US$5 / gal. gas – how much is that per litre? Summertime, and the driving is hard yet see those multibillion dollar profits. TPTB? Retail sales hit the skids in Italy, plus Abyss – Precipice.

Images Strange things in pyramids, and Ecosystems Sinister tools (inventions).

#37 Ronaldo — Failed Nukes Remember that 12-km. empty city in Mongolia, designed to hold a mln. plus? The US and Japan have other ideas. India and Spain support Palestine’s 1967′s borders.

Google Phishing sites on Google’s servers. Someone wants our IDs, and Lockheed-Martins hack attack.

#59 Republic_of_Western_Canada on 05.30.11 at 11:35 pm

What do you think of this kind of reasoning? Am I off my rocker and just trying to justify buying a house in a market that I think is going down?

Yeah. ‘Cuz you don’t jump from one paradigm to the same paradigm when the tide flows out. You go from owning to renting when it’s massively cheaper. Then when housing crashes, you jump back into ‘ownership’.

Sorta like stocks to bonds, bonds to fiat, fiat to gold and hunting/farming. That kinda thing.

#60 Randis on 05.30.11 at 11:36 pm

http://insider.thomsonreuters.com/link.html?cn&ctype=group_channel&chid=3&cid=221018&shareToken=MzpmY2MzMDY4NC1kZjlhLTQ4ODktYjBiYS1iNTY2MWUwZGFmN2E%3D&start=0&end=360

Go figure this one out. China is the biggest bubble in the history of … bubble.

And if our RE market is not a bubble (according to his definition), I don’t know what else is.

#61 Phil S on 05.30.11 at 11:37 pm

Unlike Canada (and Australia – another “bubble denier” Country), the EU MAKES things that people want, and are prepared to pay real cash for. Just like Japan, just like China. If Greece defaults – Germany could buy up the Country and almost not notice the cost; likewise Spain and Portugal. Economically the EU is very sound with the major Population Centres not experiencing any particular financial hardship, and whilst the rest of the World covets their Manufactured goods (e.g. BMW, Mercedes, Bentley, Ferrari, Porsche, Ducati, etc., etc.)it’ll be “business as usual” for the real power base Countries. Canada (and Australia) are almost entirely dependent on others wanting their resources, and what happens when the currency rates encourage “the others” to look elsewhere (e.g. Brazil)? This scenario is starting to worry Australia (with their astronomically high Aussie Dollar), – another Country where “wealth” has been “Majicked up” solely on the basis of selling overpriced (and not particularly great quality) homes to each other. The damage has been done, and their future is now starting to ever-so-slowly unravel (with even the mainstream media starting to cotton-on to the “approaching crisis”!) Used to live there, definitely relieved to get out, and we’re not prepared to consider returning until there’s a substantial drop in housing costs (i.e. 50% ++)

#62 Republic_of_Western_Canada on 05.30.11 at 11:42 pm

#9 disciple on 05.30.11 at 9:09 pm

Yes, the only constant is debt. The silent slayer of empires. Unnecessary, unfruitful, unserviceable, unholy, unnerving, unpalatable, and seemingly unstoppable debt…

I do believe Mohammed was onto something when Islam prohibited interest on debt.

Seems to be an amazing coincidence that the popes declared war/crusades on Muslims, and Dubya invaded Iraq (which openly voiced use of the Euro as a petro-currency instead of the USD).

#63 Utopia on 05.30.11 at 11:47 pm

#11 Tim on 05.30.11 at 9:20 pm

“Auto Bailouts won’t be paid in full. Thanks Conservatives, for bailing out a dying industry and subsidizing people who have less education than most, but better benefits…”
————————————————————————-
Tim, you really have no idea of the importance of the auto sector to Canada or how its loss will impact our manufacturers, do you?

Take a second look before you make such foolish remarks.

#64 Dan T on 05.30.11 at 11:50 pm

Like vultures squabbling over a carcass.

http://business.financialpost.com/2011/05/30/in-a-slowing-market-banks-fight-over-mortgages/

#65 Republic_of_Western_Canada on 05.30.11 at 11:55 pm


#21 disciple on 05.30.11 at 9:36 pm

I cannot understand why anyone would pay half a mil for a cookie cutter detached home in the burbs. What is this madness?

As explained many moons ago, it’s a fad thing – mostly a morbid fascination with domestic family crap. That requires a detached house in wasteful suburbia distant from social awareness or the responsibilities of previously raped real estate closer to town’s core.

It’s a vehicle and power base to promote golf-headed insular domestic family horseshit.

That’s why. And once hooked, it’s “a bitch to get out of”, as was clarified here not too long ago.

#66 Utopia on 05.30.11 at 11:58 pm

#19 Duke wrote…..

“I remember all those Japanese in the late 80s and early 90s over here buying golf courses and investment properties”
————————————————————
Terrific point Duke. It is time someone brought up that period in history. How quickly we all forget. Like you, I was also there as witness to what was happening.

Do you recall we all thought the Japanese were going to rule the world. We were have hissy fits over the idea that they were taking over the world and we were all going to be left behind as third-class citizens!

In those days, Japan seemed to have all the wealth. There were even crazy stories in the papers saying things like all the real estate in Japan was more valuable than the combined R/E of North America and Europe together!!!!!! Yikes!

We were awestruck of course (and fearful too). But it was just a bubble like all other bubbles. Look where that got them in the end.

Now take a close look at China. History is about to repeat.

#67 Industrial Guy on 05.31.11 at 12:00 am

I don’t understand how our Minister of Finance keeps his job … He’s always wrong and yet the Prime Minister thinks he’s a genius …

June 1st, 2008 …. Canadian Finance Minister Jim Flaherty said Canada is not headed for a recession even though domestic economic data from Stats Canada showed the economy had shrunk in the first quarter.

“If some people are saying that Canada is headed for a recession I disagree with them,”. This was his story as we went into an election that year.

Well, we all know what happened after that election. The “soft landing” turned in to a crash landing with two of the Detroit Three in bankruptcy ….

Check this short video …. http://www.youtube.com/watch?v=vkk_OR6Dqt8

#68 The InvestorsFriend (Shawn Allen) on 05.31.11 at 12:06 am

Atually Ferenc has a good point.

For everyone a plop in house prices of 50% means we should have sold, rented for a spell and then bought back cheaper.

But a crash in house prices is still good news for some homeowners. Imagine you have a $500k shack, paid for, and covet a $1 million McMansion. You need to borrow $500k to do it. Now prices crash 50%. Now you have a $250k shack and the one you covet is $500. Now you only have to borrow $250k for the new shack.

In money terms you are down $250k in wealth. In debt terms your new shack costs $250k less. You are actually better off. Especially if you never intend to sell the new shack. The lower price means less wealth tied up in a house $500 k versus $1 million. What is the good of the extra $250 in wealth under existing prices if it is locked into a house you will never sell in your lifetime?

I learned a long time ago, it is liquid wealth that really matters to me. Wealth I made through the value of my house going up does me no good. It potentially could, but as long as I don’t want to sell that is “dead” wealth.

If you want to move up to a more expensive house, pray for prices to drop. What ever you lose on the old house house you will more than make up on the new house.

Also many of you have no plans to sell, have lots of wealth outside your house and hate the thought of moving. For you, house prices are a minor part of the net worth and a drop in house prices is of no real consequence to you.

As Buffett, says people understand that lower prices for hamburgers is good, but when it comes to stocks and houses they don’t get that a lower price can be quite advantageous if you plan to buy stocks and houses in the future.

But what does Buffett know?

#69 I think that I am the Greater Fool on 05.31.11 at 12:10 am

Garth, I’ve read your books and blog for the past 3+ years. I took your advice and sold my Toronto house 3 years ago (while searching for squirrel recipes), and rented since then.

The money (after terminating the mortgage) has been invested, with approx 7% return, which covers the rent and a little left over.

Unfortunately in that time, houses appreciated much more, and I’m on the losing end, with no end in sight. I repeat, no end in sight.

Yes your facts are correct, but the market (whether stocks or real estate) isn’t listening. Unfortunately, it looks like I’m the Greater Fool.

You’ve lived for free for three years and have a pile of cash, and think that’s losing? — Garth

#70 Jas Girn on 05.31.11 at 12:43 am

Garth is usually spot on. I read this freaking blog every freaking day because it is like my Bible now. Thank you Garth.

#71 Silentblogger on 05.31.11 at 12:50 am

Been a couple months now since the house closed, living a vagabond lifestyle, drove to “Godless” Hogtown today to invest the proceeds and to take a load of stuff to the storage unit…see a little slice of what used to be “home…opened the door there and looked at each other and considered a yard sale – Post Haste – it’s just stuff worth MUCH less than what you paid for it…you realize a few things:

1) Until you get off the hamster wheel and catch your breath for a bit and order your thoughts the concept will seem foreign and scary – even when you first stop the mind and body take a while to adjust

2) The clarity starts to crystallize as you realize that this year the flood in the basement is for someone else to worry about…

3) and the drive across south Toronto and past Hamilton is truly truly truly E V I L – yes much worse than in years past – and coming back isn’t happening

A whole world now opens to you…It’s scary at first but as you stretch it feels GOOOOOOOODDDDD!!!!

The trouble? Most clutch the stuff in horror at the sound of those foreign and strange sounding words that it’s still “just stuff”

The cherry on top is to watch things in your old hood languish on the market, disappear, and re-list for less…those haven’t registered yet with CMHC data, have they?

Run little hamsters run…

#72 Ulsterman on 05.31.11 at 1:14 am

You are right of course. But my understanding is that NI was a beneficiary of the Celtic Tiger phenom. — Garth

Indeed it was. Dubliners made weathly from their raging property market came to Northern Ireland in droves and bought property, inflating the bubble not only with their cash, but with their cant lose boosterism.

Sasquatch, im not so sure you can say the NI property market crash is not so extreme as the South of Ireland. It is down on average 50% and in places 60%. I dont think Dublin property has fallen much more than that. Also, Belfast went from being the cheapest place in the UK to the most expensive (except London of course) within 10 years.

#73 farmboybc on 05.31.11 at 1:34 am

twice since my first house in 82,Ive seen prices come down 30%….

#74 MKUltra on 05.31.11 at 1:35 am

October 2011 – CDN real estate – GTA in particular – is gonna start straining on that long hard stool called a price plop. Mark the date. tick tick tick…time is marching towards destiny…

#75 Jeff on 05.31.11 at 2:06 am

Average house price in Calgary May 2006? $415,815.00
Average house price in Calgary May 2011? $486,959.00

BUCKLE YOUR SEAT BELTS FOLKS!!!!! THE CRASH SLOW MELT DECLINE IS COMING!!!!!!!

#76 VanCity Girl on 05.31.11 at 3:01 am

Was talking to my friend who is a mortgage advisor at RBC. He said the mortgage market has completely dried up. Which is why RBC lowered their rates. It’s too competitive and nobody is taking out loans. NOBODY. It’s done. Finished. And the Chinese will stop coming very soon. The shit is about to hit the fan.

#77 Canuck Abroad on 05.31.11 at 4:05 am

Mr Reality, you of course are welcome to short everything but most people don’t know how to do this safely so they should probably not. Of course, one should never ever take investment advice off a blog anyway…

It is not necessary for central banks to crash the market in order to transfer taxpayers wealth to the banks. Karl Denninger is a little OTT but I like to skim his posts anyway and today he did a little video on how the S&P has gone up 20% in the last year but because the dollar has fallen 20% over the same time period, anyone invested in the S&P has seen their net wealth unchanged. I think it explains in plain english the Federal Reserve’s plan – sucker people into thinking their investment are doing just fine whilst quietly destroying their purchasing power through dollar debasement.

http://market-ticker.org/akcs-www?post=187182

Your strategy of “short everything” in this scenario will lose doubly – not only when stock markets and commodities continue to defy your expectations, but also on the currency. Oops. And if your currency of investment is the CAD, how well do you think that will do if China implodes?

If you really think the world is doomed, you should probably be moving off grid, burying gold and silver in your backyard and stocking up on canned goods and guns & ammo.

#78 Canuck Abroad on 05.31.11 at 4:35 am

BoomerBoy, your laissez faire rose tinted advice to ignore the PIIGS’ problems based on their populations is a bit simplistic, no?

And let’s look at the G7 you mentioned:
France – loaded up with PIIGS debt
Germany – ditto, carrying most of Europe at this point
Italy – one of the PIIGS
Japan – just downgraded, massive demographic issues
United Kingdom – you don’t read english newspapers do you
United States – housing crisis ongoing, banks still bankrupt
Canada – housing crisis just starting, overly dependent on commodities and the US and China

The reality is there is no recovery. Stock markets have been propped up by QE and QE2. The banks are still insolvent, unemployment is a big problem, economic data has been fudged to keep people from rioting (not working so well in Europe). Ignore Europe at your own peril.

#79 BrianT on 05.31.11 at 6:10 am

Time to release the new video-Bankers gone Wild http://abcnews.go.com/US/egyptian-banker-mahmoud-abdel-salam-omar-arrested-sex/story?id=13721680

#80 Pr on 05.31.11 at 6:38 am

F is worried. And he knows why… We know to!

#81 BoomerBoy on 05.31.11 at 7:15 am

“Enjoy your mortgage.” — Garth

While I would be hard-pressed to say that I am enjoying my mortgage, I will admit that I am taking advantage of our historically low interest rates by rapidly paying it down.

In fact, there has never been a time when borrowing money made more sense, they’re practically giving it away.

Are there people that are gorging on debt and getting in to trouble? You bet, but that’s nothing new. Heck, there are those that regulary load up on credit card debt!

The smart ones however, recall double-digit interest rates of the past and are plowing money on to the principle portion of their mortgages and watching the balance melt away. It’s almost joyous.

Just because money is cheap, doesn’t mean you have to be stupid with it.

Sure, plow money into a low-interest mortgage on an inflated asset, in order to build up equity the market will erase. A winning strategy, without doubt. — Garth

#82 T.O. Bubble Boy on 05.31.11 at 7:15 am

re: my post #32 on the CMHC Forecasts… I just ran the numbers, and now I’m even more confused.

The CMHC is calling for 2011 GTA Sales to be 86,000, which is down about 2.5% from 88,209 in 2010.

So far in 2011 (January through April), sales have been down 14% from 2010: 28,906 in 2011 vs. 33,605 in 2010.

That means that 2011 sales are running 4,699 behind 2010 for the first 4 months of the year.

In order to get to that 86,000 forecast (which is 2,209 behind 2010), May through December 2011 will need to have sales that are +4.6% from the same period in 2010.

Can anyone explain how the GTA housing market will magically rebound from -14% YOY declines each month to +4.6% increases for the rest of the year?

Has May 2011 been such a blow-out month that CMHC would forecast a sudden +20% turnaround in year-over-year sales?

Lies, Damn Lies, and Statistics.

#83 SquareNinja on 05.31.11 at 7:33 am

Ferenc and Shawn Allen… you are both off your rockers. If everything goes up, and you move from small to big house, it’s “relative.” But, if everything goes down, it ain’t so relative anymore.

Let’s say you buy $500,000 house with 10%, that’s a $450,000 mortgage. Prices tank by 20%, house is now “worth” $400,000… oops, you owe $450,000! If you want that formerly-$1 million house, which is now $800,000… you’ll have to fork out $50,000 just to get out of that mortgage (not incl. other costs).

What about portable mortgages? Well… since you now have negative equity, in order to bring the new $800,000 mortgage up to even 5% down, you’re gonna have to come up with $90,000!

Looks like your foolish assumptions of non-investment housing are just that: foolish.

#84 Junius on 05.31.11 at 7:35 am

#76 VanCity girl,

You said, ” He said the mortgage market has completely dried up. Which is why RBC lowered their rates.”

Clearly this is the case. Just don’t tell BPOE, Smoking Man, Mick and the gang here it is because the market has dried up. They think it means the market will pick up.

#85 TurnerNation on 05.31.11 at 7:43 am

Blog Dog Carney is featured on Bloomberg today:

Why Carney Proves Different From Other Central Bankers With Listing Loonie
By Chris Fournier and Allison Bennett – May 31, 2011

Canada’s currency is poised to weaken as investors bet Bank of Canada Governor Mark Carney will keep interest rates low to protect the economy instead of fighting inflation by raising interest rates.

http://www.bloomberg.com/news/2011-05-31/why-carney-proves-different-from-other-central-bankers-with-listing-loonie.html

#86 jen on 05.31.11 at 7:46 am

See the following link:
http://www.huffingtonpost.ca/2011/05/31/most-expensive-condo_n_868767.html?ir=Canada%20Business

Some people are still in the euphoric phase of the bubble I guess.

#87 TurnerNation on 05.31.11 at 7:53 am

Let’s nest! In the “desirable” yuppie enclave of Bloor West in the GTA. Spend 3/4 million in a bidding war – no home inspection – for an ancient unrennovated house.
It’s an investment!!!

No interior pictures, but the ad states:
“Home To Renovate”

That’s right – $750,000 buys an 80 year old renovation project. One man’s junk is another man’s treasure.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10742916&PidKey=-1183187195

#88 pessimist on 05.31.11 at 8:09 am

Ferenc of course is missing something.

His argument would have some merit if the owner of said house had paid cash and had no mortgage. (I still have issues with this condition, but let’s just ignore that for right now as it is really beside the point).

The problem is if the owner of said house had made only a 10% down payment resulting in a 90%, or $450,000 mortgage. If that house falls even a modest 20%, he can sell it for $376,000 after real estate commissions. But he still owes the bank $450,000, so the sale of the house leaves him $74,000 in the hole.

How exactly is one to buy a cheap house now?

Garth has been quite clear – the problem is not just that house prices are set to fall, but rather that Canadians have too much of their net worth tied up in houses AND the houses are highly leveraged. In a falling market this is a recipe for disaster.

If you have only 40% of your net worth in a house and houses fall by 20%, you have lost only 8% of your net worth. Sad, but hardly a catastrophe.

But if you owe $450,000 on a $500,000 house and have another $10,000 in net worth lying around, if the house falls by 20%, you have lost 167% of your net worth.

Leverage is fun on the way up. If is far less so on the way down.

#89 fancy_pants on 05.31.11 at 8:12 am

her sign says “SOLD OVER ASKING.”

why would you want to advertise the fact that you are inept at evaluating a home at a suitable price based on market conditions to begin with?

In all likelihood, any agent putting the same sticker price on it would have had the same success. Any home can be priced to sell over asking.

and for heavens sake dye you lid properly (if you feel God gave you the wrong colour) before you have you picture stuck on a sign.

Alos, being a RE agent in the Vancouver area has got to be one of the most lucrative jobs for the mental and physical effort involved.

#90 Scott Duncan on 05.31.11 at 8:12 am

Interesting article about the UK becoming a society of renters. Nobody can save any money, and house prices are too high. I suspect the same thing could happen here? http://www.guardian.co.uk/money/2011/may/31/housing-market-generation-rent

#91 maxx on 05.31.11 at 8:15 am

#31 Jsan-

“Those with high debt will never be able to enjoy many things that life has to offer because they are the equivalent of a modern day serf.”

Why is this so difficult for people to get? So many rush headlong into “perma-debt” based on the pronunciations of RE cartels and MSM.
Social engineering via emotional manipulation (mainly fear) is turning the citizenry into a hoard of self-made slaves.

Well put, Jsan!

#92 SMOKING MAN on 05.31.11 at 8:23 am

#75 Jeff on 05.31.11 at 2:06 am
Said
Average house price in Calgary May 2006? $415,815.00
Average house price in Calgary May 2011? $486,959.00
BUCKLE YOUR SEAT BELTS FOLKS!!!!! THE CRASH SLOW MELT DECLINE IS COMING!!!!!!!
……………………………………………………..

U see bubble heads this is where you logic is wrong.
The above amounts show a very slow price increse
over 5 years.
When Ireland and the USA tanked they had prices doubling over a 2 year period.

#93 Pr on 05.31.11 at 8:24 am

Wow! Recondution of the 1% from banque du canada. Real estate going higher in prices, again, what a messi correction its gonna be, when the the *normal* interest rate will be back.

#94 PEI Red on 05.31.11 at 8:24 am

It strikes me that the problem isn’t just house horniness (though it’s a driving factor), but also we have a generation of people who don’t understand the power of compounding interest etc.

Who can get excited about HISA’s paying 1-2% Wow! Look at my money grow by $1 a month!!! Then the media machine pumps out stats about housing increasing in the mid-double digit percentile…now that’s an investment!

Everyone seems convinced that owning something is the same as having the cash to buy something and it just isn’t. Sure your house is worthe twice as much as when you bought it, but if you don’t sell it, you can’t buy milk with the equity without using some mortgage vehicle.

This isn’t rocket science people who just aren’t picking up what Garth is laying down. Sure your networth statement looks good (if you haven’t mortgaged yourself up the wazoo – you lucky 10%) but you can’t pay for a new timing belt on that cute new Mini you bought without cash in the bank. (Using credit isn’t PAYING for something it’s deferring the pain until later, (usually until it’s even more painful). Let that idea blow your minds!)

#95 BoomerBoy on 05.31.11 at 8:30 am

The Bank of Canada has decided to maintain the target for the overnight rate at 1 per cent:

“To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn, consistent with achieving the 2 per cent inflation target. Such reduction would need to be carefully considered.”

Given events of the past two weeks, as expected. Rates will still rise in 2011. And real estate will decline regardless. — Garth

#96 Mikey the Realtor on 05.31.11 at 8:32 am

#69 I think that I am the Greater Fool

You hit the nail on the head my friend, the moral of the story is that nobody can predict where and when the markets will go up or down. The next catastrophe will be the people that follow Mr Reality’s advice on shorting everything in sight, at least you have money; they wont be so lucky.

#97 maxx on 05.31.11 at 8:40 am

#64 DanT-

….and there’s not much meat left on the carcass!

#98 Nemesis on 05.31.11 at 8:42 am

Am I the only one who wonder’s whether Realtor™ Kasha Riddle’s “SoldOverAsk” signage refers to a property or her connubial arrangements… ??? ;)

#99 C on 05.31.11 at 8:44 am

Bank of Canada just announced they are not raising rates today. More of the same, keep that bubble going Carney, you’ll be famous just like Greenspan once this thing runs out of gas.

Record commodity prices, a national housing bubble, and record low interest rates. No need there to raise em I guess??

What a joke!!!

#100 Brandon on 05.31.11 at 8:49 am

Why does everyone plan on moving so much? I bought a 45 year old house in September from the original owner. Several people on the street are also original owners.

The only way I could see moving again is if I landed a dream job in another city — and at that point taking a loss on the house isn’t a big deal.

#101 Daisy Mae on 05.31.11 at 8:51 am

“Why does no one remember that?”

Because people generally have very short memories and are easily swayed….or could just it be ‘human stupidity and denial’?

#102 maxx on 05.31.11 at 8:53 am

#76 VanCity Girl-

Thanks for the insight. Figured as much.

Guess the banks will eventually have to look elsewhere for profit.

Debt is not just “out there” and available for people to take on, it is literally foisted on them. You can hardly walk into a store without someone standing at the entrance, giving away a freebie to get you to sign up for a credit “product”.

#103 Nathan in Van on 05.31.11 at 9:03 am

#68 Investor’s Friend:

… or, you, know, you could sell the place at peak for 500k, rent for a few years and then buy that million dollar McMansion for … 500k. Hell, if you’re as savvy an investor as you seem to think you are, you could probably grow that 500k by another 15-30k while waiting for housing prices to fall and end up well ahead in the deal in both money and housing.

And yet you think waiting to sell until you’ve lost 250k of value on your shack makes you ‘better off.”

I must be missing something.

#104 dave99 on 05.31.11 at 9:08 am

#92 Smoking Man, you wrote:

U see bubble heads this is where you logic is wrong.
The above amounts show a very slow price increse
over 5 years.
When Ireland and the USA tanked they had prices doubling over a 2 year period.

***

Two points…
First, Calgary’s prices have not had a slow increase over 5 years. They peaked a couple of years ago, and have decreased since then.

Second, no, Ireland and the US never had prices double in 2 years. More like doubling in 10 years.

#105 AA on 05.31.11 at 9:11 am

Have been thinking of upgrading…
Townhouse $500K – Carrying cost- $2500 – Renting $2300
2 Bed Condo $400k – Carrying cost- $2800 – Renting $1800

Question : WHY are people buying?!!…did some maths…over the next 10 years i would be saving more than building equity…

UNLESS ….house prices keep going higher and higher and higher for the next 10 years….then we can all move into caves!

Btw – Rents have remained Flat and prices have increased….smart investing!

AA

#106 Rocket Boy on 05.31.11 at 9:19 am

I get a sense the board is smelling blood and high fiving each other that Garth’s predictions are taking hold – and not that long ago the very same people were ripping Garth a new one on why the real estate slaughter has not begun…what a fickle group!

I bought, 2002 as I found a home that was almost comparable to my rent – but to make that work, we agreed to move 45 minutes north of Toronto – those first 5 years of any new mortgage – we doubled-up’d when we could, extra payments, paid accelerated weekly (just paying weekly cuts nearly 5 years off a standard 25 year mortgage). We are 9 years into our mortgage and we can see the finish line – had we continued renting – (at nearly the same expenses) – I’d have nothing but crappy memories of cheap landlords and noisy neighbours.

Our house has increased on “paper” value by almost 70% – I only take note of that as I wonder if I sold and tried to buy a comparable home – will the funds let me do it…

Sadly, many hear scream with excitement that home owners will get their just desserts … nice attitude! Housing will be the last bastian before the entire economy falters… housing won’t collaspe while everything else goes on as usual – I work directly in the insolvency industry – and “I know what’s going on” – while some in here who post from their moldy, rented basement apartment that they have their party shoes on – though I agree – bad things are brewing, I surely don’t want to see the tragic aftermath of it either -

For those “few” in here who wish ill on others – I too count the day when Karma bites you in the azz – then I will take my party shoes out and do a dance to that!

A sad group we all have become.

#107 mikef on 05.31.11 at 9:22 am

@21 Disciple

Real Estate has become an emotional good.
Many people have pets of the furry kind and can’t
live in a condo or apartment.

Many people are pack rats or have hobbies and fill
their garages,basements,attics with stuff.

Many people today I find are shall we say “closed”
they like to deal with as few people as possible and
don’t like the communal living or an apartment or condo.

Among other reasons

#108 David Jensen on 05.31.11 at 9:24 am

NO INTEREST RATE HIKE…AGAIN

But, you know, he is really, seriously thinking that one day…when there aren’t any global concerns, that possibly interest rate hikes will almost probably have to go up.

High oil prices = Weak Economies = Low Interest Rates
High Debt = Weak Economies = Low Interest Rates

Japan has had near zero interest rates for 20 years now.

Interest rates will normalize. In decades.

#109 mikef on 05.31.11 at 9:24 am

@#29Bottoms_Up

When Dave Nonis was GM of the Vancouver Cannots
he lived in Washington State.

Wouldn’t be surprised if he isn’t the only one.

#110 Utopia on 05.31.11 at 9:42 am

Kasha Riddle?….Over asking….?

I will not buy a house from a pretty girl.
I will not buy a house from a pretty girl.
I will not buy a house from a pretty girl.
I will not buy a house from a pretty girl.
I will not buy a house from a pretty girl.

I think I made my point.

#111 TS on 05.31.11 at 10:02 am

BOC press release http://www.bankofcanada.ca/2011/05/press-releases/fad-press-release-2011-05-31/

No rate rise but F and C should be worried. In fact we should all be concerned. This part sums up what is so wrong with our economy for most citizens.
Flipping properties is not going to save us.
The squeeze is on…

While underlying inflation is relatively subdued, the Bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3 per cent in the short term. Total CPI inflation is expected to converge with core inflation at 2 per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.
The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation.

#112 Utopia on 05.31.11 at 10:03 am

#88 Pessimist said…..

“Leverage is fun on the way up. If is far less so on the way down”
———————————————————————

Man you said it Pessimist and that is so true. You new blog-dawgs are getting way too savvy lately. The comments I read here lately are just getting smarter and more in touch with reality every single day. There is just not enough time in a day to answer them all but I assure you I notice. Leverage is indeed a sword that cuts both ways, yet so few see it until it is too late.

#113 TheBigLebowski on 05.31.11 at 10:04 am

With the U.S economy going full throttle over a cliff with a 454 engine of debt driving it ever faster. How can Carney possibly raise rates and goose our dollar even higher ? We are tied to the U.S like a crack head is tied to his supplier , caught in a two step of currency devaluation along with the rest of the world.

#114 disciple on 05.31.11 at 10:08 am

#36 Lisa…
I live in the burbs in a regular assembly-line detached home that is now worth almost half a mil in this insane marketplace. I know because that is what I sold it for recently. My neighbour remarked to me last week how his house purchase one year ago was…and I quote, “a money grab”. I almost burst out laughing but fortunately used some of that Mennonite restraint, seeing how serious he was, and also remembering how I used to think like that during the past decade and a half. He has a wife and family with two young children. He is spending gobs of credit on the landscaping, could not shell out $75 labour for a leaking pipe on his early 90′s Ford sedan (I can’t even remember the name of this model but it’s really, really ugly) and instead asked me to replace it, his employment seems spotty from what I can tell by his awkward hours away and various daily uniforms ranging from restaurant fare to landscapers green. I have tried to gently introduce him to the idea of an imminent correction, but it’s one of those things where I don’t want him to hate me by telling him that I believe a crash in prices is coming, even though I have to live beside him for another month while my house closes.

Don’t get me wrong: it doesn’t matter what you’re driving. I love old model cars, especially ones that are about to fall apart but for some expertly placed duct tape where nobody would detect it, and have a carburetor that could be converted to get 200mpg (I’ve done it but it’s not street legal – so you can see where my passion for technology comes from). I hope my point is obvious: it’s not only Vancouver where the cash poor sweat it out for the illusion of wealth in bricks, lumber, concrete and ceramic. Practically everyone I know with a SFH is renting out the basement even though it is illegal in these parts. I just had a client last week tell me that if she didn’t rent out her basement in her fancy 1+ mil house in Toronto, she could not make the mortgage payments. She is a businesswoman, single. I told her also about my predictions for housing and she tilted her head to one side and said…”well, yeah, maybe, but I need a place to live…”!

Who is responsible for this mess? They should be in jail for destroying an entire generation. I don’t see any way out of this except for another global “war”, or some stupid thing like that. The battles are for your mind! The “money” is just a distraction.

#115 Hoof - Hearted on 05.31.11 at 10:10 am

realpaul etc

Re Tsunamis

Have a look at the satellite photo on cover of MVGRS.

http://www.metrovancouver.org/planning/development/strategy/RGSDocs/RGSJan-14-2011SubmittedtoAffectedLocalGovernments.pdf

Duly note the build up of silt at the Western end of Richmond etc mouth of the Fraser.

That ain’t dredged…and as one Geologist stated…if it slips into the deeper part of Georgia Straight …Tsunami

#116 Go Jets on 05.31.11 at 10:12 am

I imagine you’ve seen this:

http://www.nytimes.com/2011/06/01/business/01housing.html?_r=1&hp

#117 Young Old Fart on 05.31.11 at 10:13 am

Does he keep on spending and fuel the debt crisis, or go “all Mennonite on us”

As my wife and her family are “Mennonite”, I ask a serious question here…. do you make this remark as a slur?

If so, you have lost what once was my admiration and respect……….

Mennonites are know for austerity and prudence, among other things. What did you think I meant? — Garth

#118 Mister Obvious on 05.31.11 at 10:23 am

#106 mikef

You make some excellent points Mike, but there are rental solutions to all of them. Except perhaps running that 12 inch table saw at midnight. You’ve got me there.

#119 Jed on 05.31.11 at 10:25 am

109
Who says she’s pretty? She’s a realtor (an oxymoron if ever there was one)–fake hair color; liposuction, careful prep to hide the structural defects and great self-marketing. Like the houses she sells–selling to an image. Look at that pose; a spruiker indeed.

#120 disciple on 05.31.11 at 10:41 am

Can someone help me get more info on this statement by Jim Sinclair: which bank? I don’t have time to Google right now…

“This week we saw a European Bank forced to sell their US mortgage derivatives and the loss was a shocker. These pieces of crap are not worth the digital bits they are written on. Smart money has not let this event pass their view, and know now how broke the US financial system really is.”

#121 rory on 05.31.11 at 10:53 am

Hey all …lots has been written of the top 10% have been the ones that have made out like bandits with the rest suffering under ZIRP and the like.

Many have huge mortgages but also many have no mortgage. But on paper net worth is net worth.

In the old days $1M in investable assets was like the top 10% + paid off home. These days $1M seems like pocket change with house prices, etc being what they are.

My question: What is the new in-number for the top 10% in net worth and/or investable assets – north of $2M or maybe even $5M????

#122 reality guy on 05.31.11 at 11:01 am

NO INTEREST RATE HIKE…AGAIN

But, you know, he is really, seriously thinking that one day…when there aren’t any global concerns, that possibly interest rate hikes will almost probably have to go up.

High oil prices = Weak Economies = Low Interest Rates
High Debt = Weak Economies = Low Interest Rates

Japan has had near zero interest rates for 20 years now.

Interest rates will normalize. In decades.

========================
That fine, Carney can keep the rates low and let Canada go in even more debt. When the fog lifts we will become another 3rd world country.

Artifical stimulus = higher debt = broke country

#123 Mr. Reality on 05.31.11 at 11:22 am

#96 Mikey the Realtor on 05.31.11 at 8:32 am
#69 I think that I am the Greater Fool

You hit the nail on the head my friend, the moral of the story is that nobody can predict where and when the markets will go up or down. The next catastrophe will be the people that follow Mr Reality’s advice on shorting everything in sight, at least you have money; they wont be so lucky.

If you looks at the charts you will see why. The nasdaq, the S&P 500 the TSX the Dow……they are all topped out. It is impossible for these markets to continue to rise with record debt levels and eveything else going in this world.

If you use inverse etf’s to short the markets you can take gains on the way down, and flip into a bullish mode when everything settles. The trend is your friend! Look at the charts are see for your self. Get into your shorts, hold on and get out before the bottom. Playing both cycles can be very profitable within a diversified portfolio.

Mr. R.

#124 zombiedelight on 05.31.11 at 11:22 am

Le Vlad
Are there not better things to spend taxpayers money on, than dropping bombs on a country which has never done anything to us? You were right to stay out of politics, Garth — it is run by criminally-warped minds.
_______

Shouldnt we be doing the exact opposite? Get all together, each get elected in a different area and prop up Garth as Prime minister of Canada???

#125 confused and a little crazed on 05.31.11 at 11:25 am

hey guys,

maybe % rates won’t increase for a long time due to eu turmoil. After a additional bailout for greece there is still ireland and portugal. Since Canada is part of IMF we will be paying for it to

This is the new paradigm of finance float or sink together…so they will give credit to those who are fiscally inrresponsible b/c they have no plan to help otherwise thus markets will correct a bailout will be demanded and the cycle goes on.

Will real estate crash after stock correction…the powers that be will try everything they can to prevent it thus more credit…lower dollar value and the cycle goes on

lots of things going on is nonsensical . valuations do not matter …math does not matter only perceptive.

YOU BELIEVE THUS IT IS REAL

#126 Hoof - Hearted on 05.31.11 at 11:27 am

Mennonites are know for austerity and prudence, among other things. What did you think I meant? — Garth

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

I thought you meant they pulled your HUMMER out of the ditch…or can outrace your Harley, with -or- without Sarah Palin riding shotgun.

#127 debtified on 05.31.11 at 11:30 am

#109 Utopia on 05.31.11 at 9:42 am

Kasha Riddle?….Over asking….?

I will not buy a house from a pretty girl.

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

You ought to get your eyes fixed.

P. S. I enjoyed your other posts. I learned a lot from you. Thank you. You are bright but you don’t know what pretty is.

#128 BrianT on 05.31.11 at 11:31 am

#112Big-That is what it looks like-Carney even said as much today-not good at all (unless you count the impact on PM prices).

#129 zombiedelight on 05.31.11 at 11:31 am

Republic of western:
I do believe Mohammed was onto something when Islam prohibited interest on debt.
___________

Yeah he probably read that Jesus said NOT to ask interest when lending money, because he read Jesus

#130 Silen on 05.31.11 at 11:38 am

Hi Garth,

While I generally agree that Canada’s RE is inflated if you look at the historical norm, it is less so if you compared with the rest of the world:

http://www.numbeo.com/property-investment/gmaps_rankings.jsp?year=2011

I’m coming from Europe and in my home city the
House Price to Income Ratio is around 10.

Btw, I am renting and have a 25% downpayment but have been waiting for 5 years now (I though the prices were high back in 2006) .. :(

#131 Hoof - Hearted on 05.31.11 at 11:40 am

Canada is a zit in the world scheme…its fairly well known we have a lot of resources, an dperhpas the highest ratio of area per person.

EU basket cases

Greece (toast) has a population of approx. 11 Million
Ireland (toast) has a population of approx. 6 Million
Spain ( ?) has a population of approx. 46 Million
Italy ( ?) hs a population of approx. 60 million

If one looks at a Globe…it appears the combined area of all (4) could fit into just about every Canadian province.

There is nothing sacred about Canada on the world stage. Trudeau fractionalized Canada to the point it is held together by Hockey, beer and duct tape.

Canada with Mark Cornholio as Goldman Sachs incubi at BoC could be the final nail in the coffin for us to follow the same road of countries at the abyss whose histories are much longer than ours.

#132 Genghis on 05.31.11 at 11:42 am

Hey, US real estate could rebound — in 2025

http://finance.fortune.cnn.com/2011/05/31/how-housing-could-rebound-in-2025/?iid=HP_LN

#133 Nathan in Van on 05.31.11 at 12:02 pm

#107 David Jensen

“Japan has had near zero interest rates for 20 years now.

Interest rates will normalize. In decades.”

————————————

Yeah, but aren’t Japan’s rates explained by the fact that they is STILL recovering from their own real estate bubble that peaked 20 years ago? And that Japanese people today would rather cut off pieces of their own anatomy than be tricked by attractive interests rates into taking on monumental debt and fueling another frenzy of speculative spending?

#134 Calgary_renter on 05.31.11 at 12:09 pm

Everyone knows who created this bubble? Low rate? 0/40? And now 3/35? And now we think the gangs who created this going to fix this problem? If you think this way, you are same naïve as my 8 months daughter. How many times Carney mentioned inflation? Are we still in history low rate? How soon he will increate it? Fall? No winter, since we only have summer and winter. F will do the same thing next week no matter how he ‘worried’. This system/gov corrupts from TOP and they are not acting on behalf of you PERIOD
The strategy to go through this if you want to purchase a house? First you have to try stay alive under pressure from your co-worker, friend, by-laws, spouse, this bubble won’t burst as soon as you think. Second, make sure you stay calm before others realize their stupidest, The market can stay unreasonable longer before you get mad.

#135 Mikey the Realtor on 05.31.11 at 12:21 pm

#123 Mr. Reality

yes, yes, charts. Charts are great but only provide probablities, its human nature to want things to ride up instead of down, hence RE today at all costs. Stocks will go down and will go up, where will most catch it? thats the question.

#136 45north on 05.31.11 at 12:39 pm

Rocket Boy: I get a sense the board is smelling blood

me too

I bought, 2002 , 45 minutes north of Toronto. We are 9 years into our mortgage and we can see the finish line

well Rocket Boy what about your neighbours? I asked my brother-in-law who lives 15 minute drive from Aurora “are your neighbours highly leveraged?”, he replied “some of them”.

Disciple: I have to live beside him for another month while my house closes.

discretion is the better part of valour

Mister Obvious: You make some excellent points Mike, but there are rental solutions to all of them. Except perhaps running that 12 inch table saw at midnight.

A few years ago I saw a neighbour with a double garage filled with wood working machines: a table saw, a router, a drill press plus more I don’t remember. Trouble was there was no room to work.

#137 Joe Q. on 05.31.11 at 12:40 pm

Garth, this pic is good for a laugh, at least among those of a certain persuasion… because “kasha” itself sounds like the Yiddish word for “riddle”.

#138 disciple on 05.31.11 at 12:45 pm

Good advice, Calgary_renter…

I bought my last house 6 years ago, thinking that it was a “good investment”, at the then inflated price. The bank was giving money away, it seemed odd but I didn’t really believe that the government would be in bed with the banksters. I was dead wrong. I couldn’t see the grand plan. Fortunately I have learned the truth before disaster has struck for my family.

Your true enemy is very patient, it has been doing this transfer of wealth thing since the dawn of time. Your enemy knows you and your nature better than you know it. Most of you don’t even know your enemy exists – how can you possibly win? Evil can win by hiding in darkness or by shining a bright light at you so as to keep you blinded by the light. You can literally be blinded by the truth. Ironic.

#139 TheBigLebowski on 05.31.11 at 1:34 pm

In the late 90′s the public was herded into the tech bubble and got hosed. The following decade to this point the public in the States was herded in the housing market and they got hosed(We will soon follow). Now the public is being herded into the bond market via artificially low interest rates and volatile manipulated stock markets. Guess what the end result of the public will be ? They will get hosed. The public is being scared and lied to regarding the gold market. The same people who herded them into the last 3 bubbles are the same people telling them not to buy gold/silver. Why is the public suffering from a mass case of Stockholm Syndrome ?

#140 Daystar on 05.31.11 at 1:36 pm

#41 Cato on 05.30.11 at 10:27 pm

Thats quite the link.
300,000 excess houses were built for an Irish population of 4.5 million. Talk about overdevelopment. Price tag? 175,000 Euro’s of debt per person but its yet to hit home. If I was Irish I wouldn’t be too big on paying for the greed of bankers, developers and corrupt politicians myself. Its an ugly RE bubble gone bust there to say the least.

I would think that Ireland’s only plausible way out of their overcapacity is through immigration. Its not ideal, but its either find occupants or all that empty real estate goes into high speed decline only to become bulldozed at some point as it sits empty and like you say, Spain and Portugal are also nations with excessive housing overcapacity. The U.S. could try immigration (using long time illegal immigrants might be the way to go) to mop up their excess housing capacity as well, their valuations are approaching affordability but thats just it. Valuations still have to come down to affordability so there is no saving grace here for Canada. And its true, immigration poses another can of worms especially if its tried while valuations are quite high, but then again… the alternatives…

What’s interesting is how the Irish government or the public became liable in the link. NAMA was the government organization that insured mortgages, taking the risk from the banks just… like… CMHC does here. NAMA bails out 300,000 homes of excess capacity or in essence bailed out banks/developers and it was of the severity that the nation of Ireland is facing bankrupcy.

Quite the link, Cato and when one looks at economies the size of Spain facing similar RE bubble collapses…

http://www.youtube.com/watch?v=A5zXU1bQ3tQ

#141 Nostradamus Le Mad Vlad on 05.31.11 at 1:53 pm

-
#41 Cato — “F is probably realizing he’s about to become the proverbial punching bag of the country.”

Someone has to be led to the slaughterhouse. We’re all dead meat walking anyway, so F is the next scapegoat.

#60 Randis — “China is the biggest bubble in the history of … bubble.”

Noted. See response to #74, #75 and #76 VanCity Girl.

#67 Industrial Guy — “… He’s always wrong and yet the Prime Minister thinks he’s a genius …”

You have answered your own question. Most present-day politicos have a love of power, as their mindsets haven’t evolved far enough to know and see anything better. That’s why the time is right for a good shake-up and clear-out.

#68 The InvestorsFriend (Shawn Allen) — “. . . it is liquid wealth that really matters . . .”

So true. It is good to have a paid-for home and things running smoothly (albeit with bumps in the road of life, which everyone has) but to be in the position of not having to worry is a good place to be in.

What is the point in worrying, esp. over something which one has no control? It is a pointless exercise in futility.

#69 I think that I am the Greater Fool — “You’ve lived for free for three years and have a pile of cash, and think that’s losing? — Garth” — It takes all sorts.

#70 Jas Girn — “. . . it is like my Bible now.” — One difference — this blog reflects the day-to-day reality of life!

#74 MKUltra, #75 Jeff and #76 VanCity Girl — “And the Chinese will stop coming very soon. The shit is about to hit the fan.”

A theory here: What if Beijing deliberately crashes their own markets, on the pretext that it will cause other dominoes to topple?

A few days prior, China cashes its US holdings out (along with Japan), sinking the west and switching to a Ruble-based system? Just a thought.

#90 Scott Duncan — “. . . about the UK becoming a society of renters.”

Good link and post. Majority of Europeans rent and are quite happy with it. Plenty of NAmericans may be in the same boat soon, due to taking on too much mtge. debt.

#101 Daisy Mae — “….or could just it be ‘human stupidity and denial’?”

Just human stupidity, as no one can be in denial about that!

#106 Rocket Boy — “. . . the board is smelling blood . . . For those “few” in here who wish ill on others . . .”

It is not so much wishing bad tidings on others, more the realization that all things (cycles) must change — life is always in a constant state of flux, nothing ever stays the same but history does rhyme and repeat, simply because we all have karmic lessons to learn in which to improve ourselves on. Hence, rebirth.

#113 TheBigLebowski — “We are tied to the U.S like a crack head is tied to his supplier . .”

Good point, and maybe that’s why F is so scared — he can see the end and it ain’t pretty.

#122 reality guy — “When the fog lifts we will become another 3rd world country.”

About right. Until sheeple get rid of warmongers like Harper and the CPC neocons, the only thing that will change is that we will know what it’s like to be a third world country, but cannot do anything about it.

#124 zombiedelight — Garth as PM? If he wants it, I’m sure there will be a huge groundswell of support for him, and we bloggers can also toss our hats into the ring.

Don’t need gold-plated pensions, don’t need Oddaawwaahahahahah for anything as we can run our provinces from where we live — yep, sounds good to go!

#137 disciple — “. . . transfer of wealth . . .” and #138 TheBigLebowski — Good posts. Basic thing is sheeple don’t bother to learn from past mistakes, so jump right back in at the deep end on the next ‘sure thing’.

The Jim Carrey film ‘Dumb and Dumber’ comes to mind.

#142 BrianT on 05.31.11 at 1:54 pm

#138Big-You summed it up-IMO it isn’t Stockholm Syndrome because that implies knowledge they have been captured or abused. I think what the sheeple have is more akin to hero worship or blind love of any perceived authority figure.

#143 Sid on 05.31.11 at 1:54 pm

refinancing now. What is the best way to go, 5 year fixed at 4% or variable at 2.5%

Rates will be higher in a few months. Not hard to figure that one out. But you should do better than 4%. — Garth

#144 Timing is Everything on 05.31.11 at 2:04 pm

I can’t make this stuff up…good ol’ Kelowna.

And I quote…

“REDUCED $200k, owner wants it sold.”

http://www.realtor.ca/propertyDetails.aspx?propertyId=9953547&PidKey=1158939847

Sno-cone anyone?

#145 Hoof - Hearted on 05.31.11 at 2:06 pm

#140 Nostradamus Le Mad Vlad
Check this out

Jesse Ventura Conspiracy Theory – Great Lakes Part 6 of 6
http://www.youtube.com/watch?v=f2JrMhhAPcg&NR=1

Spragg bags
http://www.youtube.com/watch?v=4TEJp6UZaDI&feature=related

#146 Daystar on 05.31.11 at 2:11 pm

#57 Utopia on 05.30.11 at 11:29 pm

Too bad our federal Con government ran up all that mortgage debt through CMHC. Heck, they even thought it prudent to run HELOC’s through CMHC until recently (making a stronger case for preferred shares, truth be told). Mortgage debt in this nation has just topped a trillion in case you don’t know and the majority of it grew under Conservative rule.

The “Conservative” brand mennonite image is there but… the mennonite math isn’t and as such, federal Conservative fiscal policy can be far more lethal, far more destructive to our nation than those “Liberal” values of equality and fairness that some claim to breed immorality, eroded human rights and crime.

Just ask yourself if a 40% housing correction in Canada is possible over the next 5 years… would our financial industry with CMHC leading the way take a 300 billion dollar hit? Would personal equity take a kaka kicking? You bet it would and it can still happen, all under (and caused by 5 years of Conservative government policy specifically done through CMHC) our presently popular federal government making the logical wonder… how popular will this current Harper government be 5 years from now should a 40% real estate correction have taken place in Canada?

Considering the events (real estate bubbles gone bust) elsewhere in the world, its not an unreasonable scenario to contemplate. My opinion is that the Harper government will be very, very, very lucky to get away with a 20% correction. 40% is more likely and there is no way the Harper government can scapegoat their way out of their own policies that led to it, especially due to blogs like Garth’s.

#147 Abitibidoug on 05.31.11 at 2:25 pm

@ Garth’s comment of “different feds” to posting #3:
During that 1990′s period, the market was allowed to sort itself out which caused short term pain but paved the way for the next boom period. Isn’t that the ideology Conservatives are supposed to believe in, rather than propping up inflated asset values? By keeping house values propped up and inflating, they will ultimately fall harder and cause more damage than the last time when the market was allowed to correct and find its own equilibrium. How’s it that, in this day in age with more knowledge and information than ever before in history, we’re dumber than 20 years ago?

#148 disciple on 05.31.11 at 2:26 pm

Nostradamus – Truly you are a seer. I think you’re on the right track with respect to the ruble. 4 major players on the world stage right now: Washington, Moscow, Brussels, and Beijing.

Washington: Fake house of cards ready to crumble…
Brussels: Europe on the brink no escaping debt…
Beijing: Mother of all bubbles will go firecrackers…
Moscow: Resources, resources, resources, and they are the ones behind the Japan tsunami (nuclear blast of continental shelf along Mariana’s Trench causing massive shift in tide). They have the best technology (rocket launch, hyperdimensional, weather control, mining, alternative energy, etc…) The bankers want another Cold War certainly. Amazing how history repeats itself, eh?

#149 Canuck Abroad on 05.31.11 at 2:34 pm

120 / Disciple – The bank was Dexia

#150 Abitibidoug on 05.31.11 at 2:37 pm

@TheBigLebowski, posting #138:
You say the public was herded into these various investments as though it was against their will. As I said in another posting, is there anyone in the world left who has free will? These people CHOSE to buy the over priced investments during those past and present bubbles. Aren’t you supposed to buy low and sell high?

#151 Daystar on 05.31.11 at 2:38 pm

#61 Phil S on 05.30.11 at 11:37 pm
If Greece defaults – Germany could buy up the Country and almost not notice the cost; likewise Spain and Portugal. – Phil S

Right you are on Australia’s concerns, but I have to disagree with your opinions regarding Europe. While Greece debt issues are small in comparison to neighboring nations and while its true that Germany has the most exposure to debt default in Greece, their banks would still be facing serious writedowns that could flush out undercapitalized institutions there and if Greece creates a problem for Germany, the next logical questions are what Portugal and Spain would do.

Lets not take light of the size of Spain’s economy.

http://en.wikipedia.org/wiki/Spain

With the 12th largest economy world wide and 3rd largest world wide investor, Spain a mere 2 years ago had the same GDP as Canada. What they also had in 2005, their best year in real estate/housing, was 16% GDP directly from real estate. What you will find in Canada’s CMHC website is CMHC’s boast of real estate being responsible for over 20% of Canada’s GDP, a cause for true concern that can only be rebuffed through an argument that immigration is keeping up with supply, an argument that in my opinion, won’t hold water.

Spain is not thee reason for a world wide slowdown, but it is a part of it and considering who their neighbors are (Italy, Portugal) and which one’s can face serious real estate corrections (England, France) to come, these links are required reading:

http://en.wikipedia.org/wiki/Real_estate_bubble

These links below get to the heart of it, if one wants to truly educate themselves with how real estate bubbles are formed. Why? well… self interests of course.

http://en.wikipedia.org/wiki/Heterodox_economics

http://en.wikipedia.org/wiki/Austrian_School

This last link gets to the heart of it:

http://en.wikipedia.org/wiki/Austrian_Business_Cycle_Theory

#152 Yes, I am the Greater Fool on 05.31.11 at 2:45 pm

Garth, I think you missed my point in my posting (#69).
You replied “You’ve lived for free for three years and have a pile of cash, and think that’s losing?”

The point is that after selling my house and paying off my mortgage, the funds I invested is obviously far less than the selling price of the home (as it was leveraged by a traditional mortgage).

So even though the invested funds cover the rent (and some extra), I’m still a loser: To get back into a similar home to what we sold (which we want), I require far more cash, and a larger mortgage, as house prices are up approx 25% since I sold.

And now with BOC delaying a rate increase (again), prices will continue to rise. Bummer.

Quit whining. — Garth

#153 disciple on 05.31.11 at 2:51 pm

#148 Canuck Abroad…
Thank you! Nothing substantial on this anywhere on the Web. Wait a minute, is that the same as RBC Dexia?

#154 Mr. Reality on 05.31.11 at 3:01 pm

#134 Mikey the Realtor on 05.31.11 at 12:21 pm
#123 Mr. Reality

yes, yes, charts. Charts are great but only provide probablities, its human nature to want things to ride up instead of down, hence RE today at all costs. Stocks will go down and will go up, where will most catch it? thats the question

http://wallstcheatsheet.com/trading/your-cheat-sheet-to-the-psychology-of-market-cycles-infographic.html/

History and human behavior repeats itself. Look at that above chart, then look at the TSX over the last 5 years. You tell me where it is going.

Mr. R.

#155 Daystar on 05.31.11 at 3:05 pm

Haven’t got much time left, but there are 3 other links worth noting today, all three giving us cause for serious worry. The first is a Japanese debt downgrade, highly predictable:

http://money.ca.msn.com/investing/news/business-news/moodys-reviewing-japan-rating-for-downgrade-2

The second is the U.S. housing slump, also quite predictable as one eductates themselves of the history of foreclosures there and their own RE bubble collapse:

http://money.ca.msn.com/investing/news/business-news/home-price-index-at-lowest-point-since-2006-bust-1

The third is potential rate hikes. (more on that later, I’m out of time)

http://money.ca.msn.com/investing/news/breaking-news/bank-of-canada-holds-rates-hawkish-tone-surprises

#156 Devore on 05.31.11 at 3:10 pm

#105 Rocket Boy

Can’t stop the future.

#157 jess on 05.31.11 at 3:14 pm

.#37 Ronaldo

…how about the ghost prison in virginia…seems those future criminals didn’t materialize and this prison costs 700k to maintain /year ( Susan Kinzie, washington post) 105m. to build…

…1,024-empty beds perhaps saving them for the white collar criminals.

The fed. is going after the health care cheats where they seem to prefer fines and pass the cost on to the health consumers. Many of these repeat offenders are on the fortune 500 .
“To our way of thinking, the men and women in the corporate suite aren’t getting it,” Morris continued. “If writing a check for $200 million isn’t enough to have a company change its ways, then maybe we have got to have the individuals who are responsible for this held accountable. The behavior of a company starts at the top.”
In shift, feds target top execs for health fraud
By RICARDO ALONSO-ZALDIVAR , 05.31.11, 07:39 AM EDT

WASHINGTON -

#158 TheBigLebowski on 05.31.11 at 3:27 pm

149 Abitibidoug
You are correct when you say that people have a CHOICE. I mean herded maybe in a more metaphorical sense. We have been conditioned to believe the media and government at face value. The un named self appointed “Experts” that are quoted on a daily basis telling us to do this and not do that is taken by the public as the gospel. It has been a lifetime of training that we have undergone, no different than breaking a wild horse. Once full of intuition and instincts of what is right and wrong , we have been train to pull the buggy and follow the carrot. Sad as it may be, our society has be domesticated and can no longer decipher truth from fiction without being told what to believe. Starting from pre-school we are taught to be good little producers and consumers and thinking outside the box is punished. Parrot what you are told and you will advance through college eventually to the workforce and 40 years of watching hockey , working 9-5 and never asking a single question.
In a sense people were never really were given a chance to see the truth. A few wake themselves out of the dream world they have been cast into and begin to visit blogs on a path to reality. Most I fear, buy into the lies and accept the deceit . They think its cool and trendy to parrot what they hear on the news, an actually believe their opinions are of their own making, not even realizing that there conversations are only a collage of quotes from the night before. They even begin to defend the system they have been given, mocking anyone willing to question the information that has created their reality. Consider yourself fortunate that you have been able to unplug from the Matrix . It can sometimes be a lonely place but wouldn’t you rather know what is coming and prepare than to think some government “Expert” is looking out for you.

#159 Sid on 05.31.11 at 3:36 pm

Garth, I know rates will be higher, but will they be higher enough to justify going for a fixed rather than a variable?
And who does low fixed in Ontario. The cheapest I could find was 3.98

#160 Bill Gable on 05.31.11 at 3:39 pm

One of the issues regarding this “housing debacle” is the toll on marriages, and people’s lives in general.

The stress is incredible, and palpable among some of my peers.

I have to spend (unfortunately) a lot of time with health issues, and one of my favourite therapists said that she heard that the Psychiatrists are actually starting to worry about the number of people complaining of being unable to cope.
That is another sure sign of a market in trouble.

John Law spent his time building homes and not worrying about the seething mob that were ripped off in Louisiana shares, and I have a sinking feeling that a lot of so called ‘ fat cats’ are going to be even more unpopular, soon (if that’s possible) than they can possibly imagine.

The old adages never change and I go back to two that have haunted me – / My Gran told me that had they not had a garden in the Thirties, they would have starved. (They lived in Vancouver – NO WORK) and “People left with NOTHING, have nothing left to lose”.

Ireland, Greece, Portugal, Italy – Mr. Turner has been telling us about this stuff – and people have basically said – “but we are so brilliant because we are Canadian – it’s different here”.

Pity.

#161 Sid on 05.31.11 at 3:40 pm

no sorry, I mean the best 5 year rate I could find was 3.89 not 3.98

#162 Utopia on 05.31.11 at 3:44 pm

145 Daystar

You are forgetting that all parties signed on to the stimulus initiatives and fully endorsed the programs that were implemented. There was a majority vote during a time of a minority government. I think your blame is misplaced.

#163 Utopia on 05.31.11 at 3:48 pm

#127 Debtified

“P. S. I enjoyed your other posts. I learned a lot from you. Thank you. You are bright but you don’t know what pretty is”.
————————————————————

Well, since you mention it, I actually do need my eyewear prescription updated. That gal still looks terrific to me though. Guess I am just older….all the gals look nice now.

#164 Cato on 05.31.11 at 3:56 pm

#139 Daystar

I suspect Greece and Ireland are part of wider social experiment by the elites. Can middle class be made to shoulder burden of bailouts & willingly accept austerity without rebelling. Its not going well, in the case of Greece its leading to violence.

In Irelands case the bailout measures are forcing best & brightest to leave country. I’ve had a few friends recently move to Oz permanently with no intention of returning to Ireland. The irish gov’t could probably open up all those vacant estates to immigrants – but ireland had an economy built on finance & realestate, it could never absorb migrants actually looking for a job. That leaves only choice of bulldozing the excess capacity into the ground.

Most western economies are simply playing a game of extend and pretend. US is no different then Ireland, just a much larger scale and far more complex. Instead of forcing austerity on the masses the political elite are choosing to debase the currency. At some point even the US will face austerity.

The true culprit of our calamity is western govt’s have allowed FIRE (Finance, Insurance, REalestate) economies to supplant the real, productive economy. The FIRE economy only produced debt and to keep bubble going we allowed China to manipulate currency and shift our industry to within their borders. They now control the industrial engine of the world, we don’t.

Now that the FIRE economy is falling apart the west is realizing it has no productive economy to fall back on. The social order of the world has to change and its going to be a rude awakening for many in the west who have thought their standard of living was a birthright and never actually had to be earned. We simply cannot exist in a world of producers and consumers where the only unit of trade is debt. At some point the Keynesian house of cards had to come down, and we get to be the unlucky ones to live through the consequences.

#165 Coho on 05.31.11 at 4:02 pm

@TheBigLebowski, posting #138:
You say the public was herded into these various investments as though it was against their will. As I said in another posting, is there anyone in the world left who has free will? These people CHOSE to buy the over priced investments during those past and present bubbles. Aren’t you supposed to buy low and sell high?

But what happens when prices go high like Nortel shares, dot.com, real estate? The pumpers get their orders and the propaganda machine goes into overdrive which screams buy now while you still can because prices will only continue to rise. So, people end up doing the opposite — they buy high and sell low.

Technically, we do have free will, and most of us think we exercise it, but we act like children (or adults for that matter) which are asked questions designed to illicit particular responses.

We elect leaders to lead — to set good policy which benefits the country and its people, but the reality is these people are grunts for those really calling the shots. Some mentioned F is of the elite. F and such people are only doing their jobs, but who are they really working for? The true elite exercise power which transcends national boundaries.

It likely was an order from very deep within the rabbit hole which brought about the meteoric rise in oil prices in 2007-2008. This was the main reason for the creation of the world economic crisis and the push for countries to take on insurmountable debt loads with help from almost zero interest rates. When the time is “right”, interest rates will be hiked and more countries will go into default…and then “Hello IMF. Hello, World Bank”. They are the vultures and we are the road kill.

Remember, it has always been about world conquest. That hasn’t changed. It’s only that the tactics have been tweaked and refined to suit modern times.

#166 Vancouver_Bear on 05.31.11 at 4:02 pm

#64 Dan T on 05.30.11 at 11:50 pm

It only confirms that landing standards are getting lower and lower….now you don’t even have to fog a mirror….next stage will be giving mortgages to deceased. Canadian banks are so prudent…..yeah right.
BPOE….. interest rates are getting lower ’cause banks are getting desperate….as elementary school dropout you will never understand this….so go back to school learn some grade 5 math.

#167 BrianT on 05.31.11 at 4:18 pm

#149Abit-Gigantic amounts of capital have been pissed away by sheeple pension managers-someone posted a typical example the other day of CALPERS buying land for 400 million and selling it for 32 million. Another example: this “Greek bailout” is basically German taxpayers taking the hit for stupid sheeple German bank employees (well paid to boot). A lot of the money being pissed away is not actually ever in the hands of the public at large.

#168 Young Old Fart on 05.31.11 at 4:28 pm

“Mennonites are know for austerity and prudence, among other things. What did you think I meant? — Garth”

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

Just checking….. ;o)

#169 Imstupid on 05.31.11 at 4:35 pm

Daystar

I agree with you with the state of European affairs. It’s the same everywhere. Cheap labour has ruined the economy of every country. They fed globalization down our throats and we ate it. We enjoyed a life of excess on the backs of slaves in asia and children barely off their mothers breast. Look at countries like Germany who are the second largest exports in the world if not for the euro they would not be in this mess. Countries like Canada and Australia are net exportres of raw goods and have small populations relative to natural resources this will save them. Countries like the USA and majority of europe are going to be like south america with only haves and have nots. Am I the only one who finds it ridiculous that you buy a la coste shirt and it’s made in china. After paying 100 bucks for it can’t these companies use labour in their own country? Even when the label says made in Italy or France or where ever it’s made in china and domestic labour sews buttons and zippers on to get that labour. I want to know who will buy 2k suits when everyone is broke? Even China will have a problem in the future because as domestic labour increases it will no longer be cost effective to produce their and ship half way around the world. Eventually the true inflation rate will show itself. I guess maybe people will industrialize Africa as it will be the only place left with cheap labour.

#170 Imstupid on 05.31.11 at 4:53 pm

#90 scott Duncan

I am the son of immigrants. Do you know why they came to Canada? It’s simple they were poor. Do you think people will just stay and have nothing barely making ends meat? I’m sure some will but some will leave in search of a better life. Do you think that all the new immigrants that come here do so for a worst living standard? I don’t and I don’t think this will ever happen. Look at the size of our country it’s not like land is very scarce.

#171 Hoof - Hearted on 05.31.11 at 4:55 pm

Just got back from a short drive in Richmond..

Ist time ever seen this…newly built home with ” FOR RENT” sign…..

#172 Hoof - Hearted on 05.31.11 at 4:58 pm

Greece got vaselined by taking on the Olympics…that set them up for the fall….weak..no resistance.

Ireland….was fairly backward….IMHO…set up to fail by the EU…..always felt since day one the Celtic Tiger was a sham…any such miracle is “juiced” to be squeezed..

#173 triplenet on 05.31.11 at 5:02 pm

Mennonites are know for austerity and prudence, among other things. What did you think I meant? — Garth

I thought you meant they don’t believe in dancing ’cause it could lead to premarital sex.
….at least not very much and not very often.

#174 Mr. Plow on 05.31.11 at 5:18 pm

#69 I think that I am the Greater Fool

I think you are only the greater fool for blaming someone else for your decisions, you’re a big boy, but on the big boy pants.

#175 Mr. Plow on 05.31.11 at 5:20 pm

#75 Jeff

There is a big difference between avg price and median price. I have no clue what median prices were in 2006, but the current price is the median price.

I don’t know for sure, but I really doubt the avg price in Calgary is that high.

#176 Mr. Plow on 05.31.11 at 5:23 pm

#76 VanCity Girl

Yeah maybe, but maybe your friend is a really shitty advisor.

If you are going to contribute anecdotal evidence, at least provide some context.

i.e., “my friend was in the top 3% of mortgage advisors with RBC says….”

I meet with her/his boss’ boss a couple of times a year; the western canadian manager, and that is not what he tells me when we met in March. I may see him this Friday at a golf outing, I will see if it has changed since then.

My little bit of anecdotal evidence.

#177 Mr. Plow on 05.31.11 at 5:26 pm

Sure, plow money into a low-interest mortgage on an inflated asset, in order to build up equity the market will erase. A winning strategy, without doubt. — Garth

What is he supposed to do? That mortgage isn’t going anywhere regardless of the market value of his house.

Might as well pay it down while rates are cheap, if he waits till they go up the debt doesn’t reduce with the higher rates. Just means it will be tougher to pay.

Now if he owns 75% of his property I would feel differently, but from his post I doubt it.

#178 Behavioral Finance on 05.31.11 at 5:28 pm

Looks like Garth has a friend.

http://www.montrealgazette.com/business/Credit+lines+worst+trend+last+years+Wealthy+Barber+writer+says/4862498/story.html

#179 VICTORIA TEA PARTY on 05.31.11 at 5:29 pm

DOW’S DANSE MACABRE CONTINUES WHILE AMERICA’S WILTATHON GATHERS SPEED

Speculation that more money will be forthcoming for Greece’s intractable money problems boosted the Dow by 128 points this day.

That was on the same day that the US continued to get more bad economic news. Two examples.

First, in the so-called housing market, it’s official: there is a double-dip. CNBC reported the following:

“U.S. single-family home prices dropped in March, dipping below their 2009 low, as the housing market remained bogged down by inventory and weak demand…The S&P/Case Shiller composite index…declined 0.2 percent in March from February…seasonally adjusted…, in line with economists’ expectations.

The price index was below the low seen in April 2009 during the financial crisis. The glut of houses for sale, foreclosures, tight credit and weak demand have kept the housing market on the ropes even as other areas of the economy start to recover…David Blitzer, chairman of the index committee at S&P Indices, said… ‘Home prices continue on their downward spiral with no relief in sight.’”

Second, US poverty takes a great leap forward. “ABC News…reports: Congress is under pressure to cut the rapidly rising costs of the federal government’s food stamps program at a time when a record number of Americans are relying on it.

The House Appropriations Committee today will review the fiscal year 2012 appropriations bill…that includes $71 billion for the…“Supplemental Nutrition Assistance Program.” That’s $2 billion less than what President Obama requested but a 9 percent increase from 2011, which, critics say, is too large given the sizeable budget deficit.

A record number of Americans — about 14 percent — now rely on the federal government’s food stamps program …More than 44.5 million Americans received SNAP benefits in March, an 11 percent increase from one year ago and nearly 61 percent higher than the same time four years ago. Nearly 21 million households are reliant on food stamps.

Opponents of the program argue that…needs to be shifted to other programs such as education and child nutrition.”

This issue will probably catch fire in Congress shortly, because the Dems are all up in arms. In the end the program will likely be cut, because poor people have no voice there. And the Repubicans are on a bit of a roll.

BACK IN MAPLE LEAF COUNTRY — FAIRY TALES

Meanwhile, back in Canada mortgage interest rates head lower by a wisp, the BoC boss Mr. Carney holds steady on the bank rate but warns of hikes in the future, and Mr. F. casts about for a good pair of shoes in time for next Monday’s budget reintroduction.

All this is not stopping new legions of suckers probing the perimeters of Canada’s apparently economically-disconnected housing market.

A note to those folks.

Don’t be bamboozled by a “healthy” Dow. These numbers represent nothing but stage-managed stats overlaid on an empire that is dying. It’s cosmetic!

As for Greece. Today’s bailout news is JUST another PR feint, a lie.

Greece is a failed, declining state, a sort of USA in miniature. The EU will have to print lots of money to help Greece which, at day’s end, will default and a whole bunch of too-big-to-fail banks will fail.

Not EVEN all of Mr. F’s budget shoes placed end to end will help the house-horney, here, because you DON’T want to hold a mortgage on a brand new gluey suburban shack-o-rama when that mean mother of an economic disaster shows up to play, will ya!

I don’t think so.

#180 Mr. Plow on 05.31.11 at 5:31 pm

#83 SquareNinja

Smart guy.

Although while you were being so smart, I think you assumed that Shawn was using an example with debt on the house, when he said right in it “paid for” and “some homeowners”.

Foolish.

#181 Mr. Plow on 05.31.11 at 5:40 pm

Sid

Check out ratesupermarket.com

#182 Nostradamus Le Mad Vlad on 05.31.11 at 6:09 pm

-
#143 Timing is Everything — “Sno-cone anyone?” — Make mine a double fudge-nut sundae with extra loose screwnuts thrown in!

#144 Hoof – Hearted and #147 disciple — G’day gentlepersons. Great links, HH on the Spragg bags. Disciple, last night there was a report on how HAARP is being used to flood the US and Canada, and heat TROTW, to bring about mass starvation, and thus, conveniently eliminating us.

Quote: “President Obama is the only person who can authorize the use of nuclear weapons, biological weapons and this star wars weapon of mass destruction [HAARP]) to manipulate the weather and create floods to destroy the World’s food supply. . . . Henry Kissinger, wrote: “Depopulation should be the highest priority of U.S. foreign policy towards the Third World. Depopulation, also known as eugenics, was first proposed by the Nazis during World War II.”

So there is something afoot, other than changing cycles. You might also be interested in the following (link in) — Gog and Magog Magog unmasked. Also, this, this, this and this. All should have links in. Setting themselves up nicely!

One part of the elite looks after fiscal downturns, another arranges elections and heads of govts., another brings in scientific psychobabble (GW – GC – CC) to keep us off balance, etc. It’s just that we’re caught up in the middle of it all!

#161 Cato — “Now that the FIRE economy is falling apart the west is realizing it has no productive economy to fall back on.” — Accurate, and . . .

#162 Coho — “We elect leaders to lead . . .” — Once all polls have closed, numbers are fudged and TPTB have their own little tin gods put in place.

To a large extent, elections are pointless. Better to have a revolution, and bring REAL change.
*
Double Dip Not so good.

Investing? Avoid GS — they pretty much guarantee a loss.

Creepy Watch out! The elite are about, using PC’s to boot!

Borders Apparently, recognition of the pre-1867 border is not a big deal.

#183 realpaul on 05.31.11 at 6:19 pm

Yeah…Ferenc…the biggest hole in your logic is that the debt you take on when you buy high is not going to exercise the same ‘elasticity’ as the market of homes.

For example…you just bought an average dump and pay $700,000. It go’s down 50% in value……..after the crash you see that all other homes , including your own can be had for $350K…….you lose the entire $700K because you still owe the whole $700K……..it doesn’t go away. You just get to live in a $350K house and make $700K pmts.

#184 Ronaldo on 05.31.11 at 6:21 pm

#121 Rory – in the old days (1898) this is what $923,000 got you…….hard to believe isn’t it? I got to tour the interior last Saturday and it blew my mind that this was built for less than 1 million even at that time and was over budget by $430,000. The same amount today gets you a crack shack in Vancouver.

http://en.wikipedia.org/wiki/File:British_Columbia_Parliament_Buildings_-_Pano_-_HDR.jpg

#185 jess on 05.31.11 at 6:37 pm

Cash-strapped families switch £60bn-worth of mortgages to interest-only

Analysis of Financial Services Authority (FSA) data

The trend also runs against the FSA’s advice. It has threatened to “constrain future interest-only lending”, branding much of it unsustainable.
============

http://www.telegraph.co.uk/finance/personalfinance/pensions/8546698/New-pension-rules-risk-a-mis-selling-scandal.html

..”David Pitt Watson, of Hermes Fund Managers, says Coalition plans to automatically enrol workers in pension schemes will expose many to the danger that their money ends up in unsuitable funds that eat up much of their savings in fees.

In a letter to The Daily Telegraph, he warns of a “second crisis of mis-selling” even bigger than the scandal of the late 1980s, when more than one million people are thought to have been wrongly advised to take out personal pensions instead of staying in company schemes.

Under new “auto-enrolment” rules, which will take effect next year, all workers and their employers will be obliged to pay into a pension fund.
…There will be no restrictions on the terms which can be offered by private providers of auto-enrolled pensions,” he warns.

“History suggests we can expect that many will be sold pensions where 50 per cent or more of their potential pension disappears in charges.

“Perhaps even worse, it seems there are no restrictions on how the money will be invested, or adequate standards for the records that providers will need to keep. A recipe, some might say, for fraud.”

#186 JackRussell on 05.31.11 at 6:39 pm

I guess my reaction to Ferenc is that what he is saying would be true if everyone paid 100% cash for houses, and nobody got home loans. But buying a house with a mortgage is in some ways similar to buying a stock on margin. If you only put down 10% to buy a stock, and then the price of the stock goes down 10%, your investment is gone. The only difference between homes and stocks is that once you are underwater on a mortgage, the bank doesn’t make a margin call.

#187 TurnerNation on 05.31.11 at 6:39 pm

This summer it appears we will see the same street theatre playing out as seen in Europe: Public servants (Canada Post set to strike this week) taking to the streets, protesting austerity, being brutalized by the police. Makes for good TV footage. All of this is a giant distraction as the noose tightens.

Greenwashing continues in Toronto: looking to ban or tax cars in city core. Yet they cut back on transit funding.
All based upon the “greenhouse gases” scam, we never see measurements or readings or proof. Just tax after tax.

But our military is allowed to pollute and bomb the h-ll out of 2nd world countries at our massive expense.

#188 Pr on 05.31.11 at 6:41 pm

The message from the bank of CANADA: The party is on!
Do Flaherty and Carney see what they are creating with this madness in real estate. CRAZY!
http://www.chpc.biz/Plunge-O-Meter.htm

#189 BrianT on 05.31.11 at 6:52 pm

#160Utopia-No apology needed-she looks like a supermodel next to Ahnuld’s parade of hoes.

#190 BrianT on 05.31.11 at 6:59 pm

#155Big-Yes, but you are dramatically underestimating the % of the population which knows the truth on any given subject and would never admit it. One of the reasons for the growing popularity of anonymous or semi-anonymous blogs such as this one is that it is one of the very few places where persons will often state what they believe to be the truth of the matter.

#191 shanks on 05.31.11 at 7:01 pm

#114 disciple on 05.31.11 at 10:08 am

you are right on with your comments… I have been trying to convince my inlaws that it is a good time to sell and move out to the country… pay off all debts and invest the remainder.

#192 Hoof - Hearted on 05.31.11 at 7:14 pm

#179 Nostradamus Le Mad Vlad

Funny you should mention HAARP…I just saw Ventura’s expose’ on it..

http://www.youtube.com/watch?v=uZOt29NR0FY

……scary stuff

#193 JB on 05.31.11 at 7:55 pm

#2 You would have to be from Skatch to catch that one (I think)… I blew coffee out my nose when I read that Mennonite line… Those poor buggers with their jacked up Duramax’s pulling trailers with bobcats, they will be the first to be “tree miles nort” up sh*t creek without a paddle when this lil Sask’a'boom goes bust…

#194 eddy on 05.31.11 at 7:56 pm

Russia Says IMF Chief Jailed For Discovering All US Gold Is Gone

http://mylogicoftruth.wordpress.com/2011/05/31/russia-says-imf-chief-jailed-for-discovering-all-us-gold-is-gone/

#195 TurnerNation on 05.31.11 at 7:58 pm

Good old Toronto: a ancient slanted semi in Leslieville, tiny, 2 bedrooms, no garage, one bathroom, for a mere 400k…plus bonus raccoons in attic.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10728696&PidKey=-1553834512

Set aside another 50k for closing costs, Toronto and Ontario land transfer taxes, and future repairs!!

#196 Abitibidoug on 05.31.11 at 8:15 pm

@TheBigLebowski, posting #156:
Interesting points you make. Society does go to great lengths to discourage thinking outside the box. Periodically I hear this idea that we live in an individualistic society. Anyone who actually believes that ridiculous idea should do something they’ve never done before, and pull their head out of their ass. Funny, when I was a teenager (1970′s, I’m an old fogey) I heard this idea repeatedly that we were the Me Generation that rebels against the established order, influenced by the hippy generation. Where did it all go wrong?

#197 Daisy Mae on 05.31.11 at 8:26 pm

Ronaldo on 05.30.11 at 10:07 pmhttp://www.dailymail.co.uk/news/article-1391868/This-city-built-million-people–lives-here.html?ITO=1490

“The Chinese should be worried. City built in inner Mongolia for 1 million people on the idea that “if we build it, they will come”. So far, they’re short about 900,000 people.”

Not so smart, are they?

#198 Onemorething on 05.31.11 at 8:27 pm

TBL

“Starting from pre-school we are taught to be good little producers and consumers and thinking outside the box is punished. Parrot what you are told and you will advance through college eventually to the workforce and 40 years of watching hockey , working 9-5 and never asking a single question.”

that’s it in a nutshell! Almost impossible to re-program even if you do understand what has occured! This is what our PONZI government expects!

#199 Daisy Mae on 05.31.11 at 8:40 pm

Disciple: “Who is responsible for this mess? They should be in jail for destroying an entire generation. I don’t see any way out of this except for another global “war”, or some stupid thing like that. The battles are for your mind! The “money” is just a distraction.”

Who is responsible? Simple! World greed, corruption and mismanagement….

#200 Devore on 05.31.11 at 8:50 pm

#184 JackRussell

The only difference between homes and stocks is that once you are underwater on a mortgage, the bank doesn’t make a margin call.

That, and your house is costing you more than you would pay to rent it, so you’re continually shoveling money into your “investment”.

#201 45north on 05.31.11 at 8:57 pm

Mr. Plow: VanCity Girl

If you are going to contribute anecdotal evidence, at least provide some context.

VanCity Girl: anonymity is vital here, RBC management would like to know the name of your manager friend. Or at least his postal code.

http://en.wikipedia.org/wiki/Anonymity

#202 Kuwaiti on 05.31.11 at 8:58 pm

@ 62 Republic of Western Canada

Interesting name… When do you think you guys are splitting up from the rest of the country? If it’s a country for free men, no crazy banks, political correctness or multicultural liberal craziness, where can I sign up?

#203 45north on 05.31.11 at 9:04 pm

VanCity Girl: if you hear the sound of helicopters, it’s too late

#204 BigAl (Original) on 05.31.11 at 9:21 pm

Milton, Ont.

Home bought pre-build from builder (Mattamy) in the campout last August, 2010 for $360K.

Completed May 2011, listed for one week at 430K, sold for 440K.

440K – 360K = 80K
Minus 5% commission = 58K left
Minus initial closing costs = 50K left

Even if he’s taxed at 20% of what’s left, 40K would be left, and over 9 months has a solid 133% return on the 30K required down by Mattamy.

Risk to buy at that time, but paid off.

Am I missing something?

That isn’t real estate investing. It’s futures trading. And a reason why people can’t afford houses. — Garth

#205 Daystar on 05.31.11 at 9:25 pm

#160 Utopia on 05.31.11 at 3:44 pm

Do you seriously believe the Libs would have risked elections wisely over the last 5 years, like they had a choice to watch Cons lead and opposition follow? The result of actually opposing would have been (except for early on) what it is now, a majority Conservative government.

Its really up to the governing Conservative minority government to introduce budgets and CMHC regs, its not the other way ’round. Take my word for it, no opposition party forced Conservatives to introduce 40 year nothing down CMHC regs for 9 quarters or 35/5′s (which 3 of the big 6 banks gave back to the consumer) for another 9 quarters. Nope, our Harper led government did it all on their own. Do you serioulsy expect us to believe the Libs wanted an election during Canada’s subprime era of 40/0′s without a leader, or a Dion led government was looking for a fight?

Over 5 plus years, the opposition parties took the Harper government to the polls a mere once being this year and the conclusion in my opinion, watching the 3 largest provincial Liberal brands going down in flames, was highly predictable. Why do you think the opposition parties didn’t bring down a Harper minority for so long? Same result, my friend.

Regardless… our Harper government created a real estate bubble whether you want to admit it or not, and they, having been elected into a majority, get to preside over its bust and the consequences, unless the CBC is sold off and all the private media still strongly supports them spinning stinky propaganda like no other and a broke middle class somehow believes the spin, will also be obvious. But hey, thats just my observation. What do I know.

I base my opinion, by the way, on international examples of real estate bubble phenomenom and the governments that presided over them and the governmental changes following. Every government that introduced bubblicious real estate policies had one thing in common and the one we have now is no exception. Right wing, left wing, communist, socialist, it mattered not their ideology, it was self serving government policy all the way. Politicians got greased one way or another world wide, take my word for it. Real estate valuations grew not through earnings, but through credit and credit has now come to haunt these nations from Japan, to the U.S., to the southern european states, to China and a host of asian nations we have yet to talk about, to the ones that have come late to the party, Canada, Australia, England and now, I think, France.

When this decades old playbook of running up real estate valuations driven solely by credit consistently leads to economic disaster capable of bankrupting nations and governments ignore the consequences regardless, how can one logically come to any other conclusion? It’s either governments were after a shortlived (5 to 8 years is a short lived run) wealth effect in a bid to hold power and get re-elected, cashing in on their own policies (and whatever brown bags of cash lobbyists provide), or they were really, really, really dumb. Whats left for future governments is negative equity, bank defaults, RE insurance defaults, public debt bailouts that may or may not be sustainable and we have yet to see if the nations in question from Japan to the U.S. and nations from southern Europe can take these hits.

Guess what, dude, Canada is next and if China’s bubble melts badly within the next 2 to 3 years, it will get ugly here, of this I have no doubt.

#206 td6969er on 05.31.11 at 10:02 pm

#69 and #151 Yes you are the Greater Fool. Don’t kick yourself, you just panicked. Happens all the time. But never put all your eggs with one view. Whether it’s gold and Peter Schiff(who I would recommend 100% but only trust 49% when it comes to money), anything can happen in money that’s why you can short a stock-like RIM-going to $20. Wait the market will come down especially in your area 20% it will just take a few years. Otherwise be thankul you never listened to a deal like Nortel, Bre x or Dow 400,000. Semper Fidelis.

#207 Daystar on 05.31.11 at 10:27 pm

#162 Cato on 05.31.11 at 3:56 pm

I suspect Greece and Ireland are part of wider social experiment by the elites. – Cato

Its possible… your conclusions, I believe are soundly based but I believe what is more possible is simplistic greed infecting developers, bankers and politicians creating the shortsighted mess Ireland is in today.

I’m not so sure Ireland should write off the possibility of immigration to fill the serious housing oversupply they have either. Any government that tries it would have to have the unanimous support of its citizens and that could only be accomplished with a really good plan that outlines what kind of immigrants they are after, what kind of currency valuations they are targeting and where jobs will come from. If there is no public will or consensus, no clear cut goals and well thought out plan to follow, there really is no point but I would test the waters if I was in government there to see what I could find in way of government/public support. There are obvious incentives for them to try, even though there is no guarantee of success. What I know for sure is, if their government doesn’t try to control the damage and serve their people to the best of their abilities, a great deal of dead loss is certain. 300,000 unlived in homes hit by dozers are one good example of dead loss and price it in euro’s, is it avoidable? Its unavoidable if they try nothing.

I agree with the rest of what you say, for sure and unfortunately, I think it will either lead to protectionism or potential resource wars or both but the degrees and timelines (at a minimum over the next century) are still quite foggy to me. There are too many unknowns to me, either because they are unpredictable (like potential new leadership) or because I simply haven’t looked or yet discovered the answers. Human populations, green revolution sustainability, peak oil, tech changes, environmental decline, climate change, changing governments/systems, human nature, world resource estimates, while some of it seems quite predictable, some of it isn’t and its all integrated making timelines and degree’s harder to predict.

Its alot to soak in and contemplate, never mind attempt to opinion a working model but I do believe the answers are already known.

#208 Utopia on 05.31.11 at 10:35 pm

#202 Daystar on 05.31.11 at 9:25 pm

#160 Utopia on 05.31.11 at 3:44 pm

“Do you seriously believe the Libs would have risked elections wisely over the last 5 years, like they had a choice to watch Cons lead and opposition follow? The result of actually opposing [them] would have been what it is now, a majority Conservative government”.
———————————————————–

I see Daystar. So what you are telling me is that the Liberals, NDP and Bloc all put party politics ahead of the interests of Canadians and the constituents they were elected to represent.

Is that really what you are saying? That they are sell-outs?

You are trying to tell me that they were all so afraid of an election that might put the Conservatives into a majority that they meekly gave in to the Government without a fight. And that they voted the bills in against their better judgment?

Or perhaps that they just got bulldozed and bullied into supporting a crazy Stimulus program costing 43 billion dollars because they might lose their seats. As you suggest, they were not ready to fight an election yet.

Your logic is baffling.

Do you not think that if the program put forward was really crazy that all the opposition would not have defeated the government on principle and taken the vote to the public?

Of course they would have. In a bankers minute too. fourty three billion is a lot of money. The public would have been all over that kind of spending insanity according to your theory and the Governments plan would have been scrapped in elections.

The problem with your thinking is that you do not seem to understand that the emergency rates, the stimulus and the policy initiatives were agreed upon by all parties. Almost everyone thought they were the right solution at the time. Even your beloved Liberals.

Beg to differ? Check Hansards and the debates.

There was not a hope in hell those bills could have passed without the cooperation of the opposition parties.

Stop blaming the Conservatives.

#209 disciple on 05.31.11 at 10:40 pm

Be cautious with Ventura…I’m still not sure of his motives. Alex Jones is definitely a shill.

Remember, when someone has more money than God, has experienced everything they ever dreamed or desired, what is left to do? Con-troll. It’s just a game, just for laughs, just to see how far they can go at pulling your strings. These psychopathic members of our species, or hybrids if that’s what you believe, literally have nothing better to do…

I will tell you about robotoids later perhaps…kudos to those who read my posts at the nether portions of yesterday’s blogs…there is much you can gain…

#210 Utopia on 05.31.11 at 10:43 pm

#202 Daystar wrote…..

“Over 5 plus years, the opposition parties took the Harper government to the polls a mere once being this year and the conclusion in my opinion, watching the 3 largest provincial Liberal brands going down in flames, was highly predictable. Why do you think the opposition parties didn’t bring down a Harper minority for so long? Same result, my friend.
—————————————————————

So what you are saying is that the people wanted a Conservative majority all along. Got anything else for me? This is fun!

#211 NAGA on 06.01.11 at 10:10 am

Hi Garth – been following your musings on RE since the early 80′s.

I have been a RE investor for over 30 years mostly in Sounther Ontario – GTA and Cottage areas.

As an investor I have learned that 100% financing is only possible after you have accomulated enough equity in one property to take it out and re-invest it.

While I agree that most RE markets in Canada have gotten too expensive (I sold property last year in GTA to my tenant – NO Re commission and multiple private bids…go figure – I sold it for a price that I would not be prepared to pay for it) I do not feel that RE will go to zero.

I like many other true RE Investors I am preparing for possible market pull back to re-enter.

However, what I find confusing with some of your blogs and most of followers that think the end is coming for RE in Canada is that some of your theories contradict one another.

What drives RE – major factors:
1. MicroEconomic factors/Wages/Employment;
2. Interest rates;
3. Affordability

There are other factors as well more at the macro level such as:
1.Inflation/Hyperinflation;
2.Deflation/Depression;
3.Stagflation
4.Govt and personal debt level

I would say that currently most fiscal policies are concerned with avoiding a delationary/depression scenario.

I believe that the best the govts can manage is a stagflation scenario with continued low interest rates. BTW the FED policy in the US is not made by the US Govt it is the FEDERAL Reserve – your readers should familiarize themselves with who owns it and what their objectives is. Learn from history – study the great depression and find out why gold did not save any fortunes then since it was regulated.

So as investors in any sector be smart – not greedy or too scared to believe that the world will end anytime soon. More fortunes have been made by the average person in RE than in any other sector – but be an investor which means you need to accumulate investments funds by yourself or with others to embark in RE investments. 100% financings at 40 amt is ok provided you have the cash flow to meet your liabilities and allow for negative contingencies.

So I am not proposing to enter the market now but I am on top of unederatsnding its dynamics – incluidng keeping up with this blog – if I find a deal I will buy otherwise I will keep waiting.

As far as holding RE in REITS or other funds tyoe of instruments just remember somebody is taking a cut of the gravy which could be yours – also understand their debt levels as some of these funds have been driving their good returns throgh financial engineering and are now sitting on significant debt levels on their balance sheets…if and when the markt corects guess who gets killed – the lazy investor….

NAGA
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#212 VICTORIA TEA PARTY on 06.01.11 at 2:08 pm

‘WE’RE ON THE VERGE OF A GREAT, GREAT DEPRESSION. THE [FEDERAL RESERVE] KNOWS IT”

This is a quote from a Wall Street type, Peter Yastrow, today during an interview he conducted with CNBC (but in the end he recommends sticking with the stock market! Of course he does. He makes his living dining off investors’ flesh and bones!).

Here are some quotes from the CNBC yarn:

‘Yastrow (market strategist for Yastrow Origer)said: ‘Wall Street is having a hard time figuring out what to do now that the U.S. economy appears to be sputtering and yields are so low.

“What we’ve got right now is almost near panic going on with money managers and people who are responsible for money,” he said. “They can not find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.

“We need to find real yield and real returns on these assets. You see bad data…and then the people who are betting against the U.S. economy start getting bearish on stocks. That’s a huge mistake.”

Stocks extended losses after the manufacturing fell below expectations in May and the private sector added only 38,000 jobs during the month.

…”We have many, many homeowners that are totally underwater here and cannot get out from under. The technology frontier is limited right now. We definitely have an innovation slowdown and the economy’s gonna suffer.”

However, he said he wouldn’t sell stocks. “Any bears out there better be careful because the dividend yields on these stocks look awesome relative to all the other investment vehicles out there…”

WHAT TO DO?

What’s an investor to do? Get snowed by his/her conflict-riddled stock broker to stay the course? Listen to a grindy old Gold Bug saying: “Bail (!)”? We are on our own here, there’s no doubt.

My read on this stays unchanged over the years. We’re embroiled in a complex set of economic catastrophies all of which orginate with TOO MUCH DEBT.

Over the next years, as this Great Depression 2.0 shreds the “lifestyles” of the debt-soaked industrialized middle classes, the third world folks and, finally, the so-called elites who tell us how we should govern ourselves, we’ll ALSO see our investments get generally trashed.

Along the way we’ll get some ups and down. In the case of the Dow Jones and S&P, as two examples, they’ve gone stratospheric since the March 2009 market lows.

BUT WAIT. The US dollar index collapsed by that same staggering amount. Which means that those holding US stocks paid for with US cash have broken even or lost since then.

The US economic numbers, released today, are truly alarming. Go take a look at CNBC or Karl Denninger’s Web-site. This is not good.

#213 jess on 06.01.11 at 7:09 pm

…this box store is offering onsite doctors to qualify,evaluate ,instruction classes
called the cannabis university(tax break)? ….betting that when the dispensing is shut down people will grow their own . And of course they want to be first just like the kids on this blog.

WeGrow opens its latest store in Phoenix, Arizona, selling marijuana-growing equipment but not the drug itself.
‘Walmart of Weed’ to open in Arizona, promote growing your own
(cnn)