A simple truth

For the past half-century, real estate itself has amounted to an average of 5.8% of the national economy. Today it’s nicely above 7%. So what?

So, every time the 7% mark has been breached, the housing market’s taken a dive two or three years later. There is no reason to suggest this time it’s different, says finance professor and economist George Athanassakos. Expect a “severe correction.”

He even has a handy chart. Copy, paste and email it to your 25-year-old daughter about to buy her first condo with 5% down and daddy’s co-signature. This could save Christmas dinner next year:

In fact the Canadian housing market, one of the few in the western world still supported by endorphins and hormones, is gaining the attention of a few academics who think we’re, well, nuts. Like Neville Bennett, of Canterbury University in New Zealand, where they’ve had a bubble of their own. Cheap rates, lax lending standards and $85 billion in mortgages to people with dodgy credit spell disaster, he suggests:

“Any market fall would shake out the most vulnerable first, which would bring a flood of property onto the market and create a near panic and deep losses. A recent study by the Bank of Montreal found that 4 out of 10 borrowers stated they could not repay their loan if interest rates rose slightly.”

And Neville points out that the guy who called the US housing crash, Yale prof Robert Shiller, says Canada “is due for a US-style drop.” That would be a 30% price reduction, basically wiping out the equity of every 5%-down property virgin who bought since 2008.

In parts of the country (like Vancouver Island) this is already upon us. In others (like Toronto), buyers are willing to enter insane bidding wars, paying up to a 30% premium over asking prices to get title to a property. In some places (like Vancouver) sales and prices are falling but most people refuse to believe it means anything. And there are cities (like Calgary) where a local arrogance and media boosterism have people convinced a boom is just forming.

People like Dale:

“Your blog is really focused on GTA and Van, and I can understand how ridiculous it is there, but why no mention almost at all of other centers like Calgary?  Right now Calgary feels an awful lot like somewhere between 2005 and 2007. Seeing many “sold” signs and a lot of cars with out-of-town plates, especially Ontario.  And everyone is talking boom again.  So do you think Calgary or Alberta is moving into boom times again?  (Realtors here like to say the Calgary is an island within Alberta which is an island within Canada which is an island within the world).  I have a rental house that I was going to sell (could get $400k, selling because $300k mortgage term is ending soon) that is barely cash flow positive.  But with all the new blood in town and rental vacancies going down, I feel like I’m getting out just when things are turning.  I guess my real question, is your housing Armageddon just for GTA and Van, or will all of Canada go down, even supposedly-booming Calgary?  Or should I get out while the getting is good?

Actually, Calgary’s an interesting case. House prices are still less than they were during the 2007-8 peak. Most condo owners who bought within the last five years have lost money. Amateur landlords who grabbed a house or a high-rise unit to rent out are in negative cash flow. And since the GFC, oil prices – which are supposed to grease Albertan real estate -  have climbed more than 300%.

House prices in Calgary are up from March, 2011, by 3.6%, which is slightly ahead of inflation over the last 12 months. Condo prices have slipped below increases in the cost of living – which, ironically, are fueled by higher gas prices. What this means is even with the cheapest mortgage money ever, even with $100 oil, even with cash-back mortgages, even with sunshine pumped up the public behind by The Calgary Herald and a few thousand realtors, housing is stalled in a city where everyone thinks it’s on fire.

Of course, Calgary is not different. Nor is Alberta.  Or Canada. The same laws of economics which chewed up housing markets in most western countries didn’t get suspended here. We just think they did. And that keeps the party going.

So I’d say the world’s eggheads echo this blog, and are telling us something consistent.

  • Better to sell now, than buy.
  • Don’t put all your net worth in a house and expect a good outcome.
  • Lock in to mortgage rates that simply cannot last.
  • Get the hell out of the rental housing business.
  • Don’t even think about specking or flipping.
  • Avoid bidding wars.
  • Need equity out of your house for retirement? Do it now.
  • Never buy with 5% down and 95% leverage.
  • And don’t get sucked in by hype.

Remember a simple truth. Real estate is no longer a financial strategy. It’s but a part of one. Abide by these nine points, secure in the knowledge your MIL will never get it.

178 comments ↓

#1 Bob on 04.23.12 at 9:23 pm

hahah

#2 Not on the boat. on 04.23.12 at 9:29 pm

Go Bob.

#3 cramar on 04.23.12 at 9:32 pm

“So, every time the 7% mark has been breached, the housing market’s taken a dive two or three years later. ”

Whew! I thought we only had 2 or 3 months instead of 2 or 3 years! What a relief! Now I can wait to 2012 to sell at a much higher price!

We breached 7% in 2010. — Garth

#4 charles on 04.23.12 at 9:37 pm

omg, omg secoooond!!!!!!!

#5 Scalgary on 04.23.12 at 9:39 pm

Garth,

Very true about Calgary…but people live indelusion here!

Keep up the great work..!

#6 bubu on 04.23.12 at 9:41 pm

What Dale forgot to consider is the amount of debt in Calgary/AB which is the highest in the country.

#7 Ben on 04.23.12 at 9:45 pm

So now Calgarians are saying to themselves… our turn!

#8 Just Park It on 04.23.12 at 9:46 pm

You know it’s bad when Carney can only sound the alarm but is powerless to do anything. Let’s face it, he’s an intelligent guy who probably has every possible outcome mapped out. Why the inaction, because this country will crater if he jacks rates. He’s a man who is damn if he does, and damn if he doesn’t.

But be warned, I deal directly with people who seek bankruptcy protection and they will do anything to keep the house. Cut every discreationary expense – thus this will lead to having our economy cave in on itself to protect an asset that wan’t their’s to begin with…may the Economic God’s have merry on our souls.

#9 Smoking Man on 04.23.12 at 9:56 pm

ANDERS Behring Breivik

Here is an extremism case of belief system gone wild. no flexibly, no deductive reasoning, no critical thinking. Void of all logic, and balance. I often say school trains you to stay between A to Z in his case he’s stuck between Y to Z.

He is not really crazy look what he pulled off., his mind just has no range.

The belief system once it takes hold of you with an idea, it becomes an unconscious censor and filterer of info. This feeds the prevailing belief and slays the ideas of the contrary.

Now if you ever get stuck in this vortex and you make investment decisions , you will surly lose your shit. That’s why only a very small number of the population can day trade and make money or even code.

We have no beliefs system other than what worked today might not work tomorrow, keep analyzing and evaluating. be ready to do a 180 at any-given moment. Go with you’re first instinct. Follow through.
Become and practice to be great liar (teacher never tough you that) , for it’s the only way will have the ability to really spot one.

In the day time I’m like Clark Kent, glasses happy dog (hang over) , willing to serve. I watch the daily play actors, the hiarchy positioning and posturing, the egos clashing, over hear disastrous bets people are going to make on the markets. Yet I never intervene, as I only come out at night. I’m Batman on here.

I am always bragging and boasting speeling poorly, why would I do that, knowing that makes people dislike me.

I’m trying to prove a point, your conditioning at school trains you to dislike people that have characteristics , like the smoking mans, the machine does not want to compete with many smoking men, School makes you love the person I pretend to be in the day time.

It’s called control.

I’m free and loving it. Will never stop smoking, risk taking or drinking ever.

I was looking back at the posts In Nov and Dec.

99% percent believed with all your heart RE was over in the GTA. and look what happen Just like I called it. For the exact reasons I used. Yet right in front of your face you did not see it, it was filtered out.

The damn belief system, you play it right it’s your best friend, let it box you in your finished.

I hope I get threw to you guys one day.

Ya RE will hit the wall in the GTA but not this year

#10 Brooks on 04.23.12 at 9:56 pm

Go Senators Go! F, Carney and the PM should dress for Game 7.

#11 House Poor on 04.23.12 at 9:59 pm

two to three more years.

beginning to sound like a broken record

Only to those who can’t read. — Garth

#12 Joe on 04.23.12 at 10:02 pm

The level of smugness in Calgary is appalling, I keep repeating to friends and family that the market isn’t driven by the price of oil it’s driven by credit. This is the most indebted province in Canada therefore most vulnerable in this housing bubble driven by a credit boom. My opinions are constantly challenged by my smug friends which think I’m crazy to sit on $200000 without ‘buying something’ anything.

#13 Furst on 04.23.12 at 10:03 pm

Smoking Man. I love your posts. Very insightful and probably one of the few people following Garth that actually knows what he’s talking about. My guess is that you’re probably very successful financially given your ability to see through the fog and tell it like it is. A contrarian’s contrarian. The hero of all heroes. Please start a blog about how great it is to buy RE now and I’ll follow you.

#14 Just a boy on 04.23.12 at 10:09 pm

Why remove ourselves from the rental business? Because prices will drop?

#15 coastal on 04.23.12 at 10:12 pm

Great chart, but don’t try and convince any of the arrogant Victoria agents it holds any meaning because prices are “solid” while every tradesman worth his salt has jobs coming out his ying yang and most owners are mortgage free. Yes, La La Land indeed.

Then again, sales are down bigtime at the hottest time of the year with historical low rates so this looks more like a Homer Simpson moment coming soon. Especially behind the tweed curtain where I was cruising through yesterday admiring the posh Oak Bay palaces, and low and behold one of the more well known agents in town had to resort to attracting traffic to his open house using multi-colored streamer ribbons all along the hedges. Even the well off agents are acting desperate in V-town.

#16 Suede on 04.23.12 at 10:13 pm

Total Vancouver inventory just below 17,200 and counting…

Looks like the peak of Vancouver was game 5 of the Stanley cup last June. Real estate never higher, Canucks one game away from Le Coupe Stanley and the rainiest June on record.

Man oh man is it time for trading assets

#17 Sebee on 04.23.12 at 10:15 pm

“A house is just a place to keep your stuff.”
George Carlin.

Lately a very expensive place.
Hope people have enough left for stuff.

#18 Makaya on 04.23.12 at 10:16 pm

I was really surprised that Bennett’s article is fairly extensively “inspired” and even sometimes outright plagiarized from the article I wrote for a european think tank called GEAB regarding Real Estate in Canada…

See on the right column, on the contents section, an article called:
“The Canadian real estate insanity, a repetition of the US mistakes – Towards a 15% to 25% fall in prices from 2013
In this anticipation on the evolution of the Canadian residential real estate market, LEAP/2020 shows that the economic “miracle” is nothing more than a mirage, based on excessive private debt that created a gigantic real estate bubble that is about to burst. ”

http://www.leap2020.eu/English_r25.html

I can’t publish it online directly because of copyrights, but if you send me an email, I can send you the whole document, which includes all the articles of this issue.

Here is my email address: [email protected]

#19 Uh Oh Canada on 04.23.12 at 10:18 pm

I call Houseageddon in 2015. Prepare to buy dingy knock downs for $12,000. US style crash, here we come!

#20 Sid on 04.23.12 at 10:20 pm

So lets say you have a couple of well maintained multi units in Hamilton with cap rates in the 9% range, do you suggest getting rid of those too even though they make a consistent return alot higher than ETFs, prefereds, or bonds?

#21 Debt's Dark Embrace on 04.23.12 at 10:29 pm

Interest rates will not rise to “historical norms”. Low interest rates are the “new normal”. The world economy would collapse if rates reverted to the “historical norm”.

#22 Curious! on 04.23.12 at 10:35 pm

why cant housing be 8% of GDP? Whats so special about 7%? just because it happened twice in last 40 years?

I believe the dynamics of Canadian society and economy is different this time. This bubble/balloon is nowhere near bursting/shrinking.

#23 Sell Low Buy Low, Buy High Sell High on 04.23.12 at 10:41 pm

The madness of the current real estate mania in the GTA will hurt the 5%ers and those who buy in at the end, the greater fools. Those who buy now and sell their hoSeme have made neither a gain nor a loss. They will be in the same position as those who never sold during the peak. The real winners will be those who sold, sat out the bust, made a nice return on their capital gains free windfall and buy back in if they choose to.

#24 Victor on 04.23.12 at 10:44 pm

How ‘headwinds’ changed Carney’s tack on rate hikes

Monday, April 23, 2012

The foreign headwinds have abated in the past few months. The European Central Bank has taken measures to reduce – although not eliminate – the risk of another major banking crisis, and the U.S. economy has shown signs that it is finally recovering from its recession. Without those headwinds, a policy rate of 1 per cent provides more stimulus than the Bank may be comfortable providing.

Even if conditions in Canada remain unchanged over the next few months, continued encouraging news from abroad could be reason enough for the Bank of Canada to increase interest rates.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/stephen-gordon/how-headwinds-changed-carneys-tack-on-rate-hikes/article2410876/

#25 BC Bring Cash on 04.23.12 at 10:53 pm

Check out the Aussie experience. Can you see Vancouvers future or Torontos in this story? Coming to a Canadian city any time soon.

http://whispersfromtheedgeoftherainforest.blogspot.ca/

#26 Smoking Man on 04.23.12 at 10:54 pm

Just to be clear to the hard of heering.

I said the GTA still has the jets on wide open.

Vancouver and Victoria (in particilar) are beginning to fall off of the proverbal cliff.

Stick that in your drink and chugg it.

#27 Mark W on 04.23.12 at 11:04 pm

http://www.winnipegfreepress.com/business/City-condominium-prices-climbing-at-fastest-pace-in-the-country-146278275.html

Please someone explain this to me.

Condo prices in Winnipeg climbing at fastest rate in country.

A city with zero demographic pressures and tons of land.

People in Winnipeg are in a price bidding war on homes and a place in Riverview that listed for $189,900 a few weeks ago sold for $60,000 OVER asking price.

In The Peg they are not only drinking the Kool Aid, the Kool Aid is spiked.

#28 Smoking Man on 04.23.12 at 11:07 pm

#13 Furst on 04.23.12 at 10:03 pm

Can’t really advocate buying RE in GTA does not make sense to me. Developing a belief system on here LOL

But the herd is truly stupid and that’s power. When the herd runs it moves shit.

I hate to miss a quick buck.

Europe is going to fall, Carney’s nuts will be tied, he might show a semi with a 1/4 point but will he be able to support a wet towel on the package.

That is the question

#29 Smoking Man on 04.23.12 at 11:08 pm

#24 Smoking Man on 04.23.12 at 10:54 pm

fake

#30 Carpe Diem on 04.23.12 at 11:11 pm

#22Curious!

“I believe the dynamics of Canadian society and economy is different this time. This bubble/balloon is nowhere near bursting/shrinking.”

Keep believing it’s different this time … and max out your mortgage, get in super debt and keep beleiving it buddy …. when it pops … remember it’s never different + never time the market.

#31 JRH on 04.23.12 at 11:15 pm

Looks like Alberta is still PC blue. pc 61 wrp 19 ndp 4 lib 3

#32 steev on 04.23.12 at 11:17 pm

#22 Curious! on 04.23.12 at 10:35 pm

why cant housing be 8% of GDP? Whats so special about 7%? just because it happened twice in last 40 years?

***

Did you not read the post? For whatever reason, 7% happens to be the limit at which investment in housing becomes unsustainable. It’s special because every time we breach said limit we experience a housing correction.

***

I believe the dynamics of Canadian society and economy is different this time. This bubble/balloon is nowhere near bursting/shrinking.

***

It’s different this time? Really? That’s the breadth of your argument? No data to back that up, not one iota, not even an anecdote? At least the other bulls try…albeit poorly.

#33 Ben on 04.23.12 at 11:25 pm

#28 Smoking Man

Europe isn’t going to fall… lol

Spain’s the story the financial media is spewing for the market red the last few days. They have to come up with some BS and they can’t do Greece again.

#34 Cory on 04.23.12 at 11:28 pm

It ain’t going to crash in Calgary. Condo construction full steam ahead even tough they have not sold all from the last “boom/bust”. It is busy here however layoffs are occurring and we are not getting WTI pricing. There is about a $20 differential meaning we get Edmonton pricing at ~$80/bbl because Cushing is full and we are landlocked.

I am deadset against cheap money, easy credit, and CMHC/taxpayer backed lendiong, but it will not stop. It will only continue to heat up unfortunately. Only tighter lending and higher borrowing costs will change the tides…until then all talk is for not.

#35 This is Wonderland on 04.23.12 at 11:49 pm

Interesting article in the globe and mail.

http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/succession-planning/anyone-want-to-buy-a-business-it-appears-not/article2409390/

#36 Toxicosis on 04.23.12 at 11:53 pm

Now wait just one minute Garth I didn’t think that a severe correction could occur here in Canada. At least according to your prognostications. And I thought for sure the US market was going to come back. Oh that’s right anytime soon now.
So you still think Europe is gonna stabilize and get through too?

#37 mark on 04.24.12 at 12:05 am

Interesting take on the Chinese – in Hong Kong

http://www.cbc.ca/video/#/Radio/1447825254/ID=2225853643

#38 Tim on 04.24.12 at 12:07 am

Hey if that wingnut from the Wild Rose Party gets in, then you couldn’t pay me to live in Alberta! lol A Stephen Harper clone- well maybe she has a bit of integrity…

#39 Mr Buyer on 04.24.12 at 12:13 am

Just to be clear. I have spent the last few months warning that now is not the time to buy a house and that there is no upside to buying now as the bubble has topped. I still stand by that assertion. The bubble has topped and I refuse to give an inch on this because people must understand clearly the environment in which they are currently making purchases (even in Toronto). There is no upside potential. Even if somebody does get lucky and pull a flip off this summer, that is all it is, luck. It is currently an all in bet where you are putting up $100 for every $1 you could win and your holding Queen high after your draw in a 5 card straight poker game. Now I would rather be lucky than good any day but I have never been that lucky. Even when playing against really bad players. My brother used to bet against the players and hauled in a bundle until he started losing his shirt consistently. He now bets against the odds and has returned to his winning ways. His biggest loses still come when he has incorrectly bet against the player. I do not gamble, I save and live frugally, boring yes, but I can not make a mistake right now. Time is not on my side. I am certainly over cautious generally but not where this real estate bubble is concerned. BUYER BEWARE. When you hear people are buying like crazy in Toronto do not assume they can turn around and sell like crazy. THE BUBBLE HAS TOPPED. SALES ARE FALLING ACROSS CANADA (as they have or are in AMERICA, SPAIN, IRELAND, ENGLAND, NEW ZEALAND, AUSTRALIA…)

#40 Investx on 04.24.12 at 12:15 am

So we surpassed that 7% mark and a few years ago reached the price to income ratio mark at which the US real estate tanked.

And no crash or major melt yet.

And rates were expected to be higher by now.

Wow.

#41 Form Man on 04.24.12 at 12:16 am

#215 westernman yesterday

sorry buddy, your word is spelled wrong. Look it up in the dictionary next time and get the spelling right.

#42 Gandalf on 04.24.12 at 12:17 am

Everyone on this site is waiting for this movie to become a flop and sitting on idle cash. If you are bearish on real estate, take a stance and put your money to work to take advantage of the future carnage!

If you want to take make some bucks short Home Capital (HCG) and Genworth Canada (MIC). These companies will be at the epicenter of the chaos.

Anyone who read “The Big Short” by Michael Lewis knows the smart money made some serious cash by betting against the crowd. Now’s your opportunity! Carpe diem!

#43 Nostradamus Le Mad Vlad on 04.24.12 at 12:18 am

-
Good post, and the chart was enlightening as well. At least our son & DIL sold when they did, are working feverishly to pay off penalties / debts / loans, then will rent.

“. . . still supported by endorphins and hormones, we’re, well, nuts.” — Fair description!
*
Need Insurance? Don’t get Met! CN Last week, it was the US trains enjpying a good year. Now, it’s our turn, and here; More jobs going? Cashback Now in Limeyland; British Gas Huge profits, 550 jobs cut; Cdn. Pension income splitting; Adequate (maybe) Compensation; SS ending a little earlier, and this. However this gives the other POV; Austerity Backlash; US Fed fueling bond bubble; Illinois Treading water; Yale’s Shiller Another problem; EU infecting US because of this? Sweden helping Spain; Graduates Times are changing; German mfg. down.

Eleven Days; US Fed Blowing up this week? Bubbles in Bubbles; Sinking Sears? BoA says tide has turned; Between ChIndia New biz. hub? Garth, this one’s 4 U! Unsustainable will Implode; Pix of Poverty in Maine; Scottsdale Rental bubble; Citizens Leaving US First time since GD1; Iran Preparing to block the SoH; Run, don’t Walk from markets; Shaky Economies.
*
Dreamliner Boeing 787. Looks nice; Intimidation sometimes works; BitTorrent Legalese; 1:52 clip At least this planet’s in better shape than nutty Saturn; Stockpiling Curious; Twitter Acronyms For those who use Twitter; Radiation Mutation in Michigan; 7:48 clip Sierra Club wants coal plants finished; Obomba’s Shift Skipping congress; Ireland Becoming a military state? Mexico Spirits and Ouija Boards The last 75 minutes of the second film (The Exorcist – The Version You’ve Never Seen) gives a near-perfect account of what happened when the boy didn’t know how to use one properly.

#44 FTP - First Time Poster on 04.24.12 at 12:24 am

There is nothing more refreshing than to read a well thought out argument based on historical facts researched by a well informed third party. Hats off to you Garth, another one clear out of the park!

#45 SophieZombie on 04.24.12 at 12:33 am

Sellers in Mid-Vancouver Island are still dreaming zombies. Some are still daring a ”New price” tag for a majestic 1K reduction on a 4-500K house not selling since 3-4 months x 2-3 rounds of different agents . Not working for me. Any trick to smell desperation of the seller or to find the real bottom price ? Hard to find the new normal when normal places don’t sell !

#46 penpal on 04.24.12 at 12:37 am

@ # 22

Let me get this straight.

Garth (and others) base(s) their opinion based on historical precedence, but their opinion is worthless.

You, however, base your opinion on, what?
Your feelings?
Your opinion?
Your bowel movements?
and this is somehow supposed to be correct?

HAHAHAHAHAHAHAHAHAHAHAH!!!!!!!!!!!!!!!!!!!!!!!!

Why even bother posting if this the best you can come up with?

#47 scib on 04.24.12 at 12:37 am

#13 Furst

I too would like to Kowtow at the altar of Smoking Man.

I would also like to perform a sun dance in honor of our Tree of Life and Great Spirit mentor the Garthmeister!

#48 penpal on 04.24.12 at 12:42 am

@ # 9 Smoking Man

Hey dude, if you are as smart as you say you are, why the hell is your net worth only in the low 8 figures?

I have lowly professionals in my family that have that net worth.

And yes, I know that 8 figures means above $ 10 million net worth.

I guess you spend a lot of time “giving back” to others, especially on this blog.

Stick your bald head up your azz, it’s lonely.

#49 P & T S on 04.24.12 at 12:42 am

Always a bit risky to place all your bets on a narrow asset class, even if it is easily / rapidly traded.

Seems most “up there” have chosen the illiquid, hard to trade class with high holding and transfer costs. Interestingly, there seems a major subclass who have placed their entire “wealth” in just a single asset, which they are convinced will pay all their outstanding bills when they sell it “when the price is right”.

Whilst it’s OK to suggest “they will all be doomed”, they make up a sizeable proportion of the VOTING Public, and on the basis of past track records, I’m not so sure that the Politicians of the day (when the penny finally drops) will have the force of will to stand up to this voting bloc.

The major financial Institutions aren’t the only ones who like the idea of privatising THEIR profits, whilst sharing any losses throughout ALL Society, especially as the numerous posts here (and elsewhere) from smug “landlords” who look down on their “thanks for paying MY mortgage” tenants must surely indicate.

Canada, Australia and everywhere else is stuck far too up the Cloaca Maxima for any outcome to be “less than unpleasant” for ALL the population. The accumulated debt WILL have to be paid in some form or other (and the magnitude of this debt is truly horrific).

#50 blase on 04.24.12 at 12:50 am

Calgary is the most indebted province in Canada? Hardly.

And, housing prices are about 5x gross income. So, Temple, a looked-down upon area of Calgary in the N.E. has a $60,000 average income/household and a house can be had for $300,000.

But it doesn’t matter if you are in Calgary, Winnipeg, Saskatoon, Halifax, Prince George, Fort Mac, Thunder Bay, or Montreal…

Once the worm turns and buying becomes the fart in the elevator, everyone runs to the doors. The $20 angry bird at Christmas becomes the $1 angry bird in the bargain bin that goes untouched.

Everyone will go from wanting to buy, to waiting to see where the bottom is. I saw it in 2008, when a condo townhouse went from worth $405,000 to having low-ball offers at $320,000 just 6 months later. The vultures will sit on the side, waiting for the carrion to get picked apart.

All the naked swimmers will be exposed when the tide goes out. Many already are.

#51 The Thing in the Basement on 04.24.12 at 12:56 am

“That would be a 30% price reduction, basically wiping
out the equity of every 5%-down property virgin who
bought since 2008. In parts of the country (like
Vancouver Island) this is already upon us.” – Garth

30%?? VI prices peaked at a $349K ave in 2008. The 2010 ave was $342K. 2011 was $341K. Sales have been steady last two years, though well below 2007 peak. (That was nuts believe me. It couldnt be sustained)

Better described as agonizingly slow melt……

#52 blase on 04.24.12 at 12:58 am

Winnipeg is full of house-horny Asians (Philippinos from what I hear).

Probably many will be shocked if normal winter weather ever returns to those parts, hehe.

#53 ANONYMOUS on 04.24.12 at 1:03 am

So Garth, you are trying to tell us that Calgary is the next hotbed for profits in real estate?

Well that sounds good, so no wonder so many people from Ontario are heading there, they can smell money to be made !

I’m going to go there myself, buy 10 to 20 rental units, and watch those places appreciate 10% per year for the next 5 to 10 years, then cash out and retire RICH !

Thanks for that great tip Garth !

#54 Van grrl on 04.24.12 at 1:06 am

aka DA:
How many times have I heard that? “If you don’t like____ (fill in blank- rain, homelessness, high cost of everything), move!”
Why would I move just because it’s not perfect? I do like it here, I thought I made that clear. But every day I pass a homeless person lying in a store doorway in the rain, be it downtown, east Van, west Broadway… while half the city’s condo towers sit empty. It’s a bit sickening. So I will challenge those who claim it is the best place on earth and want to bury their pretty little heads in the sand, because that claim is ridiculous.

ps. I’d only ever buy Lululemon if I picked it up second hand from Value Village :) And the Okanagan is nice, I especially like Naramata and those wineries!

#55 Debtfree on 04.24.12 at 1:09 am

Wild rose tea party Can go back to kicking cow turds down the trail. White supremists and religious fanatics can’t Win in Alberta . Whats this world coming to . Reality . Hey Flanagan screw you.

#56 Dan in Victoria on 04.24.12 at 1:23 am

“Dale”

Read the seven stages of a bubble by Hyman Minski.
Read stage “5″ Compare it to comments here.
Then read “6″ Compare it to the daily comments here.
Sound familar ?

“The savvy are long gone.”
Think about it.

http://www.notesbit.com/index.php/finance/economy/stages-of-recession-economy-hyman-minsky%E2%80%99s-seven-bubble-stages/

#57 $$$BPOE#1 on 04.24.12 at 1:24 am

Lovin It. Only thing wrong with this article is it should focus on global riches coming to Vancouver not just one area Remember this quote folk

“The borders won’t close. The world will continue to come here. The expectation of being able to afford to live in the neighbourhood you grew up in has evaporated. It’s a new world.
“The city has changed irrevocably in the last 20 years,” Yu said.
“There’s no going back.”

Read more: http://www.vancouversun.com/business/McMartin+Vancouver+real+estate+race+World+hits+home/6506256/story.html#ixzz1svrbNbuY

#58 Nate on 04.24.12 at 1:27 am

This article brings up a very interesting point on Real Estate at 7% of total GDP forecasts an eventual decline in the market.

When referring to this chart it appears that real estate bumped around 7% during the 4 year period from 1987 to 1991. It looks as though we are currently in the 2nd year of RE at 7% of GDP.

Whether it be Equity markets or the real estate market, research that I have seen confirms that people and markets can remain irrational for years.

What was the famous quote from Greenspan back in the late 90′s during that incredible stock market bull run?

Great article Garth.

#59 Peterfromcalgary on 04.24.12 at 1:36 am

Alberta just elected the most left wing government in Canada. We are screwed!

#60 I'll do anything for a listing - please on 04.24.12 at 1:51 am

Just a thought… someone posted that nobody will lend 10/1 to buy stocks but they will for real estate. That is why prices are so high for this asset class – as nobody would spend that much using their money.
1 – Robert Kiosaki guy preaches to put this as a principle to wealth “OPM – other peoples money”. So isn’t this what the sheeple are doing? Just utilizing a tool that is given to them that is backstopped by the rest of us taxpayers
2 – Isn’t this similar to overpaid fund managers – with their annual RRSP contributions in the millions, pension fund contributions in the millions, the dollar cost averagers, etc, that have a contant flow of OPM?
So what’s the difference between the markets going up continually on OPM and the real estate assets rising on OPM?

How do we get out of this all? I guess Mark C knows the answer….

BTW – the Canucks lost yesterday, out of the series, no more $50,000 a night policing costs, no more alcohol sales…
All that money to plow back into the BPOE.

All funnelling to Prince George BC, the dead forestry town kept alive by Health care, and a university.
This is not a joke… condo’s going for 800k in Prince George BC.
Google earth it, it’s 10 hrs from Vancouver – where they have air quality closures
http://www.bclocalnews.com/news/147275185.html

#61 Muzza on 04.24.12 at 2:15 am

Nice wrap up of the current situation Garth, if only the Philistines would listen huh! BTW why do sweet young milfs turn into carp mouthed MIL’s ? Yikes !

#62 Bill Gable on 04.24.12 at 2:21 am

Debt, baby, debt.

That is what the new word is.

How do you spell relief?

Spanish bonds?

Gold?

Balanced and diversified and liquid. Si, gracias.

Look at the market from the wrong end of the binoculars, can be very expensive.

People in Vancouver might remember 1981 and for a few more years, RE dived in Vancouver.

It has started, you can feel it.

#63 truth hammer on 04.24.12 at 2:48 am

The idea that buying and then ‘locking in to protect oneself from rising rates’ is a mugs game. The last real estate correction took 12 years to sort itself out….and guess what..the one before that took 12 years to sort itself out…….a 12 year slide ( average market over 40 years history has gone 7-9 yrs up…peak of 2-3 yrs….down for 7-9 and another trough of 2-4 years before any nascent recovery).

My point being that no one with any ZIRP mortgage is going to survive……the generation before this one survived because mortgage rules were different…you had to have more skin in the game….at much higher rates….at least 25% equity to qualify. How does this stack up against the munchkins who have zero equity, zero skin, ZIRP mortgage due to reset every term….not down like the last bust ( rates went to 20% SHORT TERM)

There is no magic bullet for the entitlement generation…they will get creamed…..the nerds are right…..it’s a question of when not if the market will correct………….blue sky is only for scams.

#64 daystar on 04.24.12 at 3:20 am

#203 John on 04.23.12 at 6:03 pm Re: Daystar’s post about Mark Carney

Since the man and his position are not drivers in the process, it’s hardly an issue to even bring him up. – John

Lol, of course its worth bringing up.

When technocrats and politicians are “issuing warnings”, do you take that seriously? – John

Absolutely. I may not always believe (or dis-believe) them John but I definitely take them seriously, of course. When a central banker speaks, as an investor, I have to take it seriously and not just here but elsewhere, specifically the U.S..

John, I’ll just cut to the chase. I would love for our governor of the BoC to get political because I see our elected government (specifically Harper and Flarehty) as being the most responsible of all for the housing bubble that exists in Canada. Fortunately or otherwise, I’m also a realist. I know that its highly likely that the moment Mark talks at length with fiscal policy criticisms, he’ll get fired by F over it and as much as I hate to say it, for good reason because it undermines our democracy and as a consequence, theoretically at the least, bond investor confidence which could have a huge impact on the cost of borrowing for all Canadians that could last years.

I have to ask you to consider what it would solve for Mark to attack fiscal policy. The BoC elects another governor to replace him to what, do the same thing expecting a different result? What happens to the directors who try that again? Consider for a moment how the Harper government would spin such fiscal attacks. Yup, just another crown corp that gets in the way of Conservative progress (look at what they did with the Canadian wheat board, getting rid of all the elected farmers on the board who stood in their way as an example). I think it would put huge awareness toward fiscal/monetary which would be good but what if I’m wrong and at what cost and is it necessary? Would it even be successful or the best tactic? Maybe not, bud. Perhaps the best approach is precisely the one Mark Carney has chosen.

Canadians need to be smart and listen to what Mark Carney is really saying here with the opportunity he’s been given to speak about our economic risks, issues and concerns. Some of it is very blunt.

“The number one domestic risk to our economy is household debt.”

How can one be more direct than this? Search “Mark Carney warns” or “Mark Carney” on any media site and you will see warnings gallore with some talk of risks that couldn’t be more plain but some of it is in a covert sense. What is the nature of these warnings? How can he for example call a housing bubble a housing bubble without actually calling it a housing bubble due to the market risks of doing so?

“We are seeing late 80′s valuations in some markets.” (i.e. housing bubble for anyone who knows Canadian history) “Housing valuations in our cities are extremely firm, is one way of putting it.” His exact words. Extremely firm… how can a central banker be more direct than this? In the same breath, lets not expect Mark to go political and call this housing bubble a bubble and blame a housing bubble on our elected government. Its something much as some of us wish would happen simply can’t and for good reason. It simply isn’t the role or job of a central banker to do so regardless of how true it is (its not a central banker’s place to say it) including the strength of our desires to wish it so.

Simply put… fiscal criticisms are the role of concerned Canadians like you and I and the rest of us who can speak freely under the privilege given by Garth to express our concerns on this site because our voices, especially Garth’s, are needed now more than ever. Its a powerful service being provided here and like I assume with yourself, am quite thankful for it.

#65 young & foolish on 04.24.12 at 5:21 am

I am wondering what will happen to rents over the next few years. They seem to have been going way up in large cities. With more properties coming up for sale, and in a “correction” it would suggest they should be coming down. However, I have never heard of rents dropping by much. Any thoughts?

#66 housedoc on 04.24.12 at 5:31 am

I call 2015 in Toronto too.
With all the current building, and the Pan-Am games, I believe the facade will remain here until then.

#67 TurnerNation on 04.24.12 at 7:10 am

From the Macleans article posted yesterday, did economist “lite” Ben RabidDog just cover the same points as this pathetic weblog’s?

#68 bigrider on 04.24.12 at 7:21 am

Simple question Garth.

If markets re-test 2008 lows, or thereabouts, will your advice change at all?

How many 20% plus and 40% plus, peak to trough drops in equity indexes will you have to experience before you admit that the markets are fundamentally broken?

The start of the century has seen the worst secular bear market to grip the world since the great depression. Deleveraging=deflation=depressed financial assets.

I know that with the greater % of my assets in financial assets, my frustration on fire. Kerosene is the continued outperformance of GTA RE

Sorry you have a dud portfolio. — Garth

#69 TurnerNation on 04.24.12 at 7:36 am

#9Smoking Man on 04.23.12 at 9:56 pm

Speaking about conformity, on Bay St you notice most guys <40 wear very brightly coloured socks with their regulation issue drab blue, grey suits? I think the brand is named Happy Feet or something. Socks so loud and colourful and ammost out of place that you cannot help but notice.

Two points: it's sad, the only personal identity touch allowed by corporate masters is with mostly-hidden socks. Second, now everybody's doing it, it's hardly unique and has become almost a new conformity.
Art imitates life?

#70 Smoking Man on 04.24.12 at 7:49 am

#29
Fake FAKE

#71 TurnerNation on 04.24.12 at 7:49 am

#31JRH on 04.23.12 at 11:15 pm
Looks like Alberta is still PC blue. pc 61 wrp 19 ndp 4 lib 3

That means 42% of voters did not vote PC!

19+4+3/61.

If you see 10 people – assume all are voters – 4 of them do not want the current regime. That’s strong.

#72 TurnerNation on 04.24.12 at 8:11 am

Has Garth ever thought about joining the Wild Rose party?

Let’s see…

Cowboy boots – check.
Large domestic pickup and/or Hummer – check.
Animal (Small) Husbandry – check.
Cowboy hat – ??

Knuckle guards – nope. — Garth

#73 Ralph Cramdown on 04.24.12 at 8:29 am

Just a thought… someone posted that nobody will lend 10/1 to buy stocks but they will for real estate. That is why prices are so high for this asset class – as nobody would spend that much using their money.

This isn’t quite true. You can borrow 70% for qualified stocks (no penny ante stuff) and they don’t ask where your 30% came from. So you could borrow $30k from a 10% APR credit card, borrow $70k on margin at 4.5% for a blended rate of 6.15%, put it all in Boston Pizza because you like the outfits, and make $350/yr on no money down. Not that I’m saying it’s a good idea. But like the Man* said, you don’t need money to trade stocks, only credit.

With mortgages, lenders are SUPPOSED to verify that your downpayment is actually yours, not just a loan disguised as a gift or a developer incentive built into the purchase price. And hey, some people ARE paying cash at these prices. Which isn’t to say that if credit dried up, they wouldn’t fall like a soufflé on a washing machine&.

* Jesse Livermore
& Worst analogy ever

#74 jess on 04.24.12 at 8:29 am

Abstract:
During the 1980s, a number of unusual financial crises occurred. In Chile, for example, the financial sector collapsed, leaving the government with responsibility for extensive foreign debts. In the United States, large numbers of government-insured savings and loans became insolvent – and the government picked up the tab. In Dallas, Texas, real estate prices and construction continued to boom even after vacancies had skyrocketed, and the suffered a dramatic collapse. Also in the United States, the junk bond market, which fueled the takeover wave, had a similar boom and bust.

In this paper, we use simple theory and direct evidence to highlight a common thread that runs through these four episodes. The theory suggests that this common thread may be relevant to other cases in which countries took on excessive foreign debt, governments had to bail out insolvent financial institutions, real estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust. We describe the evidence, however, only for the cases of financial crisis in Chile, the thrift crisis in the United States, Dallas real estate and thrifts, and junk bonds.

Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.

Akerlof, George A. and Romer, Paul M., Looting: The Economic Underworld of Bankruptcy for Profit (April 1994). NBER Working Paper No. R1869. Available at SSRN: http://ssrn.com/abstract=227162
==============
Bankrupt MF Global execs may get bonuses – Business – CBC Newswww.cbc.ca/news/business/story/2012/03/09/mf-global-bonus.html

http://ktwop.wordpress.com/2012/03/07/green-is-also-the-colour-of-slime-when-companies-take-their-subsidies-pay-their-bonuses-and-then-go-bankrupt/

#75 Young Old Fart on 04.24.12 at 8:33 am

The ripples from the US crash are still moving…..

Dude from the States here in Mexico that owns a gorgeous boat worth near a 100K: “I need to divest, took a bath with RE…I am in trouble….may have to sell the boat”

The vulture radar in me perks up……

“I’ll give you 25k and you throw in all your fishing gear (six marlin rods worth at least 1500 a piece plus tackle)!”

Sold!

The Tall Boys song starts playing in my head: “Somewhere in Mexico….there’s a field of dreams….”

http://www.youtube.com/watch?v=pV4xh4g5WJQ

The RE story ain’t over in the USA and it is just getting started in Canada…….

#76 Kitchenerite on 04.24.12 at 8:36 am

I agree with eight of these nine pieces of advice, Garth. The only one I disagree with is the one I am not following, because it can not apply to everyone: “get the hell out of the rental housing business.”

Depending where and when exactly a property was bought, it might be enjoying positive cash flow. Rents are low and have stagnated (I am speaking from an Ontario perspective- no one can forget when the province told us last year that expenses went up only 0.7%, but market rents when tenants turnover are not much better), but that is no indication that they will continue to stagnate.

Cap gains are over for a long time, that’s obvious. If a landlord ever thought about harvesting, he must do it now. If capital gains are the extra, and you have properties that you enjoy managing (or are good at managing, probably the same thing) and flow cash, it’s not a mistake to stay in. We’re at a very bad moment in the business right now, with low rents and the last of the quality tenants earnestly believing that they will be home owners any day now. If you have been a landlord and enjoy it now, at its darkest time, you will possibly do well in the future, understanding that there will not be any capital gains in any kind of short- or medium-term.

#77 Steve on 04.24.12 at 8:50 am

For those of you persistently arguing that ‘it’ is different, most have little more than emphatic declarations. Those that do present supporting ‘data’ tend to be fosussed on specific rather than more general issues. When you think about it, these behaviours are typical of denial. Proving that one specific thing is ‘different’ does not then lead to the conclusion that everything is different.

Let’s try an analogy: Assume for a moment that we are all sailing on a ship, that starts taking on water. Some parts of the ship get wet immediately while others remain dry. In fact, some parts of the ship will remain dry for a very long time, as others succumb and slip steadily into the water. It is also possible that some parts bob in and out of the water. Every part of the ship will be ‘different’, but in the end, every part will become soaked.

We are all in the same boat. Does not matter what city or what neighbourhood. Yours may stay ‘dry’ longer, but until repairs (corrections) are in place, the trend will be sinking, and we are all headed for a soaking.

Garth presents arguments that, pooled together, indicate that RE is trending ‘down’ overall, and he presents strategies, as he did today, for suffering the least as a result.

People behave in curious ways in the face of impending trouble. Thanks for sharing your wisdom Garth.

Did you bring the snorkel? — Garth

#78 bigrider on 04.24.12 at 8:52 am

Garth’s response to Bigrider at #68- ” Sorry you have a dud portfolio ”

Seriously Garth, I think the blog expects something more than a childish answer like that.

The dud portfolios are and have been all those invested in financial assets over Cdn. RE assets.

At least thus far this decade.

If you have not made money thus far in 2012, it is non-performing and, hence, a dud. That’s why you get for hanging on to mutual funds. They make more than you do. — Garth

#79 Not 1st on 04.24.12 at 9:06 am

Garth, your vaunted REIT stock pick EXE.UN has been dead in the water for months now. A big dividend but no movement in price. Isn’t there tons of boomers selling their homes and entering extendi-care facilities soon? This thing should be on a rocket.

I do not recommend individual securities, and have not done so with this. I notice, however, the yield is 10.7%. — Garth

#80 Nonno Nicola Investore di Reala Estata on 04.24.12 at 9:13 am

#68 Bigga Rider

Hiya Bigga Rider. Listena to Nonna Nicola. Dat booka bya da guya nama Jarislowsky, he tella you alla youa needa knowa about da stocka marcato. You supposa buya da stocks abouta 6 montha after da crasha lika 2008. You seeya how mucha they go uppa since thena Bigga Rider? No playa the marcato like dat guya Jarislowsky saya. You gotta be pazienta wid da marcato Bigga Rider. You checka youra recordi Bigga Ridera, da charta of the storia of da stocka markato as da people saya and youa seea dat da big moneta is made ifa youa buya six montha after da panico and all hella breaka loosa in da marcato. It no very complicato Bigga Rider and youa hava a lotta more educazione than Nonno Nicola. Remembera, Nonno Nicola only goa to grada fiva (I no even passa but da teachera she kicka me outa…). I no even reada da Inglese, dat booka by Jarislowky, my nipoto Tonino, he a read it to me. He a smarta boya, he already in grada 6…

#81 vreaa on 04.24.12 at 9:14 am

Vancouver Realtors With PhDs – “I’m a fully qualified brain-surgeon! I only do this job because I want to be my own boss!”

http://wp.me/pcq1o-40B

It is not unusual for people with PhDs to end up in occupations unrelated to their training. This happens all over the world. After all, universities produce far more PhDs than they have academic positions for them to fill.
At the same time, we think that these two sightings are significant.
The Vancouver RE mania has drawn human resources away from many useful and productive endeavours; we find it hard to imagine that these individuals’ skills couldn’t serve them, and their communities, in better ways.
Anybody know of any other examples?
Who’s the most (over?) qualified realtor in town?
- vreaa

#82 Canadian Watchdog on 04.24.12 at 9:16 am

Red Pin MLS stats climbs to 25,020 listings, up 7.2% w/w.

http://www.theredpin.com/blog/canada/toronto-real-estate-report-apr23

#83 Tyredandboard on 04.24.12 at 9:22 am

“Lock in to mortgage rates that simply cannot last.”

The Earth can’t last either, eventually the red giant of our sun will swallow us up. But that’s several billion years from now. How old is “C” anyway?

#84 bigrider on 04.24.12 at 9:24 am

Looking forward to your conference call today !!

By the way, markets are not up 30% from last autumn.

Is that a joke or an error ?

An error. The correct number as of the close yesterday is a gain of 24.2%, after the correction. The S&P was at 1099 on October 3rd, and 1366 on April 23rd. — Garth

#85 Fred on 04.24.12 at 9:25 am

An interesting article in the New York Times, describing the effects of the bursting of the Spanish real estate bubble:

http://www.nytimes.com/2012/04/25/business/global/cost-of-spains-housing-bust-could-force-a-bailout.html?_r=1&src=busln#

#86 GregW, Oakville on 04.24.12 at 9:28 am

Hi #43 Nostra, re: links to info. and GMO info. for free

Your radiation mutation link; altered DNA and cell function from several know things like radiation, pesticides and herbicides (both designed to kill living things) or messed up GMO foods!

There are very good reasons nature doesn’t allow cross species to have sex!

Here is a link to an information video, this one is for Free. Please watch and pass it on!

And take some additional action too, to protect your extended family!

You can no longer simply rely on dishonest Government Bureaucrats to protect your family, you need to get informed first! Seek out the honest ones and others that can help and do something!

This is the same guy I saw speak on the weekend and covers as much info probably more, as this info video is ~1-1/2 hours, and the talk I attended was only ½ to 1 hour long.

http://www.seedsofdeception.com/
(scrawl down to see the Feathered Video titled,)

‘Everything you HAVE TO KNOW about Dangerous Genetically Modified Foods’

“Expert Jeffrey M. Smith, author of the #1 GMO bestseller, Seeds of Deception, and Genetic Roulette, entertains a wildly appreciative audience with shocking facts about how genetically modified organisms (GMOs) entered our lives. Smith links GMO to toxins, allergies, infertility, infant mortality, immune dysfunction, stunted growth, and death. Whistleblowers were fired, threatened, and gagged, and warnings by FDA scientists were ignored. Start today to protect yourself by joining the Campaign for Healthier Eating in America—a plan that gives the consumer the power to end the genetic engineering of our food supply.”

Few more links if you are interested:

http://responsibletechnology.org/
(Sign up to get latest news and network to help.)
http://whatthehealthmovie.blogspot.ca/
http://www.cornucopia.org/
http://shivchopra.com/
http://www.charterofhealthfreedom.org/
(Please read this charter)

#87 bigrider on 04.24.12 at 9:36 am

Garth’s response to Bigrider at #78 regarding mutual funds.

So lets get this straight , mutual funds, with an approximate 1 to 1.5% additional cost over an all ETF and preferred porfolio, managed by an independent advisor such as yourself, now only 4 months into the year, additional cost drag of say, 0.5% for MF’s has caused the underperformance of many portfolio’s this year??

Beg to differ.

Asset allocation has been key, whether asset allocation has been done through ETF’s or mutual funds.

The only way you are up Garth is because of income tilt and your efficient frontier portfolio at 40/60 income to equities.

News flash respected bearded guru, with rates where they are and where they are going as you profess and I agree, no more lifeboat on the fixed income side.

As I said yesterday…Deleveraging=Deflation=decline in value for financial assets.

Suit yourself. — Garth

#88 Cowboy on 04.24.12 at 9:38 am

I have been waiting for a large(ish) correction i n Calgary for YEARS. While I have noticed some properties come down a substantial amount from the peak, I too have a feeling prices will slowly go down or take a long while to change. I have noticed ‘Sold’ prices of ugly,old houses in areas that have transportation issues, I do NOT get that! 20-30,000 people expected to move here in the next year or two.
I want prices to get cheaper as much as the next person but just calling it as I see it! Too much $$ to get people to sit on their hands and not buy!!

#89 bigrider on 04.24.12 at 9:40 am

#84 Garth to Bigrider response correcting error.

Big deal and so what ! What about the rest of the markets and all there sub indices ?? Yuk is my number.

Your portfolio construction Garth is very well diversified. In no way can you possibly be implying that your portfolio’s are up the full extent of the S&P’s advance, are you?

Spare us all the sunshine, we all don’t have our sunblock on.

I said the market was up substantially. It is. — Garth

#90 SJ on 04.24.12 at 9:41 am

Garth, wonder if you could post the transcripts of those weekly calls for us who could not call in? thanks a lot.

Sorry, verbal only, but I will publish an audio link. – Garth

#91 Dontcallmeshirley on 04.24.12 at 9:47 am

Yep, we’re starting to plateau.

Genworth’s Australian IPO is cancelled and pushed into 2013. The company had been expecting $800M IPO proceeds.

US and Australian underperformance implies it’s unlikely Genworth will ramp up activity in Canada.

http://www.bloomberg.com/news/2012-04-23/genworth-credibility-eroded-as-australia-plan-shelved-mortgages.html

As usual there’s opportunity in other’s misfortune – stock ticker is MIC.

#92 Toronto_CA on 04.24.12 at 9:51 am

“Red Pin MLS stats climbs to 25,020 listings, up 7.2% w/w.”

Thanks for that info Watchdog. That does seem like a large jump on it’s own, but it could just be a stat blip too. Anecdotally there does seem to be a turn lately where mainstream folk are starting to agree it could be a bubble and maybe it’s a good time to sell while the market is at a peak.

Will be very interesting to see all these tens of thousands of new condos in the GTA come online, flooding supply in the next few years just as the value of housing is dropping 10-15% a year.

#93 };-) aka DA on 04.24.12 at 9:59 am

# 54 Van grrl on 04.24.12 at 1:06 am

Psst, keep quiet about Naramata will ya? It’s a secret place we don’t want anyone to know about. If the Torontonians get wind of it there will be a strip mall with all the ubiquitous chain stores there before you know it.

—–

# 75 Young Old Fart on 04.24.12 at 8:33 am

Ya right, and Garth should know they are giving Harleys and Hummers away for free };-) No one in the US is selling their $100K boat for $25K. If they are it was long, long, long ago that it was worth $100K if ever. Either you found a needle in a haystack of a deal or you are yankin’ our chain. I think quite confidently the latter.

You are correct though when you say “the RE story ain’t over in the USA and it is just getting started in Canada” (and Mexico too BTW) as on my recent travels I’ve seen good evidence the US is picking up steam once again and we will most assuredly ride along on her coattails, just as we have in the past, slowly but surely at first as they cautiously test those waters in which that $25K “dream” boat of yours would rapidly sink as your illusion of it is as full of holes as any reality might be.

#94 Calgary girl on 04.24.12 at 10:06 am

Love your blog and books Garth, and buy into a lot of what you say, but…

Did you pick TSX and Oct 4 as your “last autumn” stock price comparison date? Because if so, sure, the TSX is up. But if you look at 1 year, it’s down 14.1% or even the last 6 months it’s down 1.32% (source: Google Finance TSX)

And oil is up 300% – I wish! :-)

http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

I said S&P. Oil has traveled from mid-$30 to $100. What about this is unclear? — Garth

#95 Ret on 04.24.12 at 10:09 am

Alberta’s election results show 87 ridings. That should be good for 40 Cabinet Ministers. Twenty-four ridings to represent Calgary alone.

In contrast, as of 2006, Alberta had 28 Federal ridings. Three provincial ridings for every federal riding? That ratio would have Ontario with over 300 MPP’s!

What are Albertans thinking?

#96 Grantmi on 04.24.12 at 10:10 am

#4 charles on 04.23.12 at 9:37 pm
omg, omg secoooond!!!!!!!

omg, omg idioooooot!!!!!!!

#97 Mark "the talk" Carney on 04.24.12 at 10:20 am

Ya…Mark Carney..The situation isn’t getting out of hand.

Ask a tax expert
If l rent one condo and buy another, which is my principal residence?

The question:

Right now I’m renting the condo that I live in. I don’t have any desire to be a homeowner just yet, due to the higher maintenance associated with it but I was thinking of buying a condo as an investment property – buying it early pre-sale and then selling after. My question is: Which condo should I list as my principal residence? In other words, if my investment condo is the only property that I own, is it possible to list it as my principal residence, even though I actually live in another condo that I rent? I would like to see if I can avoid capital gains when I sell.

http://www.theglobeandmail.com/globe-investor/personal-finance/tax-centre/if-l-rent-one-condo-and-buy-another-which-is-my-principal-residence/article2405033/

#98 Bottoms_Up on 04.24.12 at 10:25 am

#79 Not 1st on 04.24.12 at 9:06 am
————————————–
if the yield is close to 11% and the security price is (and stays) flat, that is a big time winner. nothing wrong with that.

#99 Canadian Watchdog on 04.24.12 at 10:27 am

#92 Toronto_CA

Nope, no stat blip. Red Pin stats include resale and new condo sales which they claim is 1.6 times greater then the MLS system. http://i39.tinypic.com/33u8xmr.png

I’m afraid condo speculators have timed this season very badly as early warm weather and 2.99% mortgages have pulled demand forward. This is what happens when everyone has the same exit strategy—increasing velocity and volatility.

Remember when you’re looking at charts, you’re really looking at market behavior, not numbers.

#100 torontorocks on 04.24.12 at 10:28 am

Hey #69 TurnerNation- you’re absolutely right about the Bay St drones. They get their haircut over at Tony’s place for $25, SAME conveyerlike process of that short gearbox look. NOW they’ve started trying to bring out the coloured sox.

But one thing – I’m a Bay St cat as well and I’ve been wearing flash shirts, ties and sox forever. My identity was never shaped by this boring-a$$ street of stiffs!

#101 getreal-tor on 04.24.12 at 10:28 am

#69 TurnerNation on 04.24.12 at 7:36 am

Most folks on Bay St are merely sheep out at pasture until the Abbattoir comes calling….

#102 Mark "the talk" Carney on 04.24.12 at 10:31 am

Ralph Cramdown on 04.24.12 at 8:29 am
Just a thought… someone posted that nobody will lend 10/1 to buy stocks but they will for real estate. That is why prices are so high for this asset class – as nobody would spend that much using their money.

This isn’t quite true. You can borrow 70% for qualified stocks (no penny ante stuff) and they don’t ask where your 30% came from. So you could borrow $30k from a 10% APR credit card, borrow $70k on margin at 4.5% for a blended
——————————————————————

If Home buyers in Canada needed 30% as a downpayment to buy a house prices in Canada would crash 50% overnight. I know it, realtors know it , mortgage brokers know it and the world knows it. To say it’s the same thing is stupid. Housing in Canada is held up on cheap easy credit that people can not and WILL NOT pay back. People are gambling on RE like they gambled on stocks. Remember nortel was $120 a share ….that is how stupid the masses are. The masses are scary stupid.

#103 Nonno Nicola Investore di Reala Estata on 04.24.12 at 10:48 am

#87 Bigga Rider

“As I said yesterday…Deleveraging=Deflation=decline in value for financial assets.”

Heya Bigga Rider. Ita Nonno Nicolo againa. I no agreea wid da commento youa maka abova. Actually, letta me a saya dat Marco Fabero (oka ha actually is a calla Mark Faber but Nonno Nicolo he alwaya adda da vowels after da nama…remembera I only gotta da grada 5…)Anywaya, Marco Fabero, he dis smarta guya who hasa newslettera mya nipoto Tonino reada to me(Tonino he sucha smarta boya, he passa into grada 6 and never faila a grada yetta! )calla Boom, Gloom and Doom reporta. He saya dat da governmenti of da mondo, dey gonna keepa printing da moneta and da bigga shots, dey gonna keep putting da moneta of da governmenti into da stocka marcatos. You ascolta to dis smarta fellow Bigga Rider. “Hey Tonino, how do youa posta da Utube connezione for Bigga Rider?” Tanks Tonino now go to schoola. You a late and I no wanna da maestra to fail you lika my maestra faila me in da grada 5…Enjoya and learna Bigga Rider. You a lika a figlio to Nonno Nicola.

http://www.youtube.com/watch?v=vu3vuTRkh6A

#104 Grantmi on 04.24.12 at 10:48 am

#22 Curious! on 04.23.12 at 10:35 pm

why cant housing be 8% of GDP? Whats so special about 7%? just because it happened twice in last 40 years?

I believe the dynamics of Canadian society and economy is different this time. This bubble/balloon is nowhere near bursting/shrinking.

You see folks! This is the mentality we’re dealing with!!!

“it’s different this time!”

Ask the poor bastards south of the 49th, if they though it was different THEIR time??

#105 Toronto_CA on 04.24.12 at 10:49 am

Interesting piece on CNN today:

http://money.cnn.com/2012/04/24/real_estate/home-prices/index.htm?hpt=hp_t1

The housing downturn just hit 2002 levels! 17+% drop in Atlanta from last year.

Of course, Toronto is different!

#106 patiently waiting on 04.24.12 at 10:54 am

#88 Cowboy

Prices will have a hard time correcting until either rates rise or mortgage rules are tightened, or a combination thereof. Looks like Carney wants to raise rates but so far only jawboning, and OFSI may tighten lending regulations later this year . . . Flarety’s back door way of tightening credit so he isn’t seen to be poping the real estate bubble. So for the time being looks like status quo, though eventually it will happen . . . 2013 is my guess . . .

Meanwhile in Detroit soon they will be asking you if you want a home with that side of fries . . . you can already buy a home for as low as a buck . . .

http://www.trulia.com/for_sale/Detroit,MI/price;a_sort

#107 John on 04.24.12 at 11:00 am

Canadians are nuts? Nope. Regular folks raised in an anti-information culture. Can you imagine the vibe of the Toronto Star editorial department? What about cable or the drag-along behind the 72%GDP chunk in the US being pure consumption.

Do Talibans book Tony Robbins motivational seminars as a “professional upgrade”? Why not? Well. They are no different than Canadians. It’s just training. Dog training.

Gold, guns , worms et al. That’s an unfair reference. So is the “doomer” label. It’s a has been deal to try to jam counter arguments into a convenient box. Too much time has passed. A lot of people figuring it out…are just figuring it out.

Reality will keep coming. You’re right though. The tone seems to have changed towards better judgment
( although it’s a minority). I’d be hard pressed to put them into the ye olde 2009 “doomer” convenience bin.

It’s hard to find a “doomer” among the objective comments I’ve read here ( with great links too).

The informed group is going to grow….even before the “correction” unfolding.

Then what.

#108 shanks on 04.24.12 at 11:08 am

Garth, if the stock market drops, does gold and other PMs go up? i guess its more complicated than that.

#109 coastal on 04.24.12 at 11:09 am

“Condo construction full steam ahead even tough they have not sold all from the last “boom/bust”. It is busy here however layoffs are occurring and we are not getting WTI pricing. ”

Victoria appears to be going down the same road with the condos still going up while past developments in prime areas are still unsold years later or re-sold with major price cuts. I drove by a bare foundation built 4 years ago in prime new condo waterfront downtown area and it remains a barren chunk of cement while a block away they ramp up the selling hype job for the highest condo in town. As long as you have agents touting to the sheep that you “can’t lose on pre-sales”, then the sheep will continue to be fleeced even in these late stages of the bubble.

Lets not talk about the shipyard graving dock about to be built within yards of the existing greenest condo development in town and a few blocks from the new pump and dump. Toxic ship paint fumes, grinding, welding and other obnoxious fumes, dust and noise 24/7. So much for paradise in “the core” pushing out industrial, aint happening. Don’t forget to ask the agents wether they include the ear plugs and gas masks, just remember the agent mantra “you can’t lose”.

#110 Ralph Cramdown on 04.24.12 at 11:09 am

…I was thinking of buying a condo as an investment property – buying it early pre-sale and then selling after. [...] is it possible to list it as my principal residence, even though I actually live in another condo that I rent?

So your principal residence is going to be a cube of air above a hole in the ground? Might get sticky if you’re audited. I LOVE this blog.

#111 Kilby on 04.24.12 at 11:11 am

#93 };-) aka DA on 04.24.12 at 9:59 am
# 54 Van grrl on 04.24.12 at 1:06 am

Psst, keep quiet about Naramata will ya? It’s a secret place we don’t want anyone to know about. If the Torontonians get wind of it there will be a strip mall with all the ubiquitous chain stores there before you know it.
——————————————————————
Lived in Naramata, great little place except every time you need a nail or groceries you have a 30 kilometre trip on a slow, busy road. We moved to rural Summerland, much better for access and you watch Naramata roasting in the summer sun until after nine every night.

#112 penpal on 04.24.12 at 11:13 am

@ # 93 D(umb) A(hole)

As usual, you know nothing of which you write.

In attempting to further your self delusion that the US economy picking up will bail out your sorry underwater azz, you will say anything, won’t you.

I just bought a PRISTINE 24.5 foot cuddy cabin powerboat a few years old cost $80K new plus tax, including a $6K plus tax trailer for $14K in Miami.
Boat needs nothing and trailer has not a spot of rust and the brakes work well.

Marina gas is over $5 US per gallon dockside now. Some boats never seem to leave the dock, especially the smaller ones.

Go back to attempting to con retirees into buying your RE delusions and STFU about stuff you know nothing about.

If you had any brains, you’d know that asking prices are not selling prices.

#113 Inglorious Investor on 04.24.12 at 11:19 am

Case Shriller out today. No bottom in US houses yet. Is this what’s in store for Canada?

Average Canuck (free and clear) homeowners who are in or near retirement, who don’t have much cash, and who have ever thought of retiring somewhere in the sunnier Lower 48, can goose their golden years with perhaps the greatest arbitrage play of a lifetime.

They can get cash-flow AND property. And tell the reverse mortgage pedlar to go suck on some other desperate victim.

#114 bigrider on 04.24.12 at 11:20 am

#103 Nonno to Bigrider.

I have watched a lot of Marc Faber and understand his viewpoints succintly ( its Marc not Mark or Marco).

An austrian for sure as opposed to the many keynesians on this blog.

Deflation and inflation in a tug of war but deflation is winning so far, Nonno.

And bya da way, grada 5 in Italia lika da universita degree in Canada, at least dats what papa mio tells me and he only hav grada 4

#115 };-) aka DA on 04.24.12 at 11:26 am

#92Toronto_CA on 04.24.12 at 9:51 am
“Red Pin MLS stats climbs to 25,020 listings, up 7.2% w/w.”

Thanks for that info Watchdog. That does seem like a large jump on it’s own, but it could just be a stat blip too. Anecdotally there does seem to be a turn lately where mainstream folk are starting to agree it could be a bubble and maybe it’s a good time to sell while the market is at a peak.

Will be very interesting to see all these tens of thousands of new condos in the GTA come online, flooding supply in the next few years just as the value of housing is dropping 10-15% a year.

Sentiment here in the Okanagan Valley region of British Columbia is quite different. Many Sellers are abandoning their designs on selling based on news that the market peak has passed and they should get out now while the getting is good. They are now choosing to stay put and ride out the insignificant normal market fluctuations, choosing instead to enjoying life and not worrying about a fear monger foretold future that is unlikely to come true.

March Single Family Dwelling Unit Available Inventory
March 2010 = 1903 SFD Units Available for Sale
March 2011 = 1885 SFD Units Available for Sale
March 2012 = 1862 SFD Units Available for Sale

Not falling by any discernable amount but certainly not increasing either. But then, it is different here. };-)

#116 Ralph Cramdown on 04.24.12 at 11:26 am

#102 Mark “the talk” Carney

Read it again. There are none so blind as those who cannot read.

#117 John G. Young on 04.24.12 at 11:34 am

I host a weekly, live conference call dealing with such things. Drop by. It’s today (Tuesday) at 5 pm EDT. Call 1-877-969-8433, participation code 9764038. — Garth

You’re a brave man!

#118 foolsrushin on 04.24.12 at 11:49 am

I think your bang on about Calgary in every respect. Our condo (rented) recently sold for $10K above the appraisal and $15K below asking. Most realized that it was way overpriced and walked but they did snare a young couple. Most were young couples with the wife drooling over having their own place and the husband being prompted along, worried about RE. It was quite funny to watch time and time again.
On the otherside its time to find a new place to rent. What a joke! RE Agents marketing a 3 bedroom, 2.5 bath which turned out to be a 1 bedroom, 1 bathroom. When questioned it became my fault that I didn’t confirm the listing specifications before I made the appointment.
Seen a nice place in Tuscany that we said we would take. I was informed by the owner that he received a number of calls and that he would select the best 3 candidates. Then whomever made the highest bid would get the place. We walked even though we were the chosen ones.
Nice building (on the outside) in the SE that I wouldn’t let my dog sleep in. Drywall repairs needed everywhere, filthy carpet etc. and when asked if she was going to fix/paint/clean she replied if you don’t take it someone else will.
How about the apartment in Country Hills where the agent scheduled an appointment for us with 5 other renters at the same time. We walked and I see the place is still for rent.
I could go on along the same lines. One thing I will point out is on many occasions we met landlords (we only visited private listings) that wanted out but refused to take the loss. Their chosen path was to rent their units until prices returned to 2007 levels. Should that day come there is going to be a ton of condos for sale in Cowtown.
PS we landed a place in an older but well managed complex for $350 a month less but I’ll have to paint a mountain view on the windows.

#119 Nonno Nicola Investore di Reala Estata on 04.24.12 at 11:51 am

#115 Bigga Rider

My bada Bigga Rider. Dat guya he isa calla Marc Faber, youa righta Bigga Rider and youa a smarta younga fellow. Youra papa isa righta by da waya. Da people in my homa towna in Italia usa to calla mea “da professore intelligente” causa I goa to grada 5a and wasa da firsta ona in mya villagio to doa dis. Heya, Nonno Nicola gonna giva you one mora ting to reada Bigga Ridera. Dis is da quarterly reporto of Alberto Friedbergo (againa dis is howa Nonno pronuncio hisa nama). I hopa you enjoya dis Bigga Rider and I hopa you no already reada dis (it justa come outa yesterdaya and my smarta nipoto Tonino, he a reada me it).

http://www.friedberg.ca/webpieces/reports/quarterly/First%20Quarter%202012%20-%20Quarterly%20Report.pdf.pdf

#120 Pr on 04.24.12 at 11:52 am

…4 out of 10 borrowers stated they could not repay their loan if… – Com’on Carney, light up this firework!

#121 Canadian Watchdog on 04.24.12 at 12:05 pm

#108 shanks

Gold trades inversely with the USD, so if the USD goes down, gold goes up or vice verse. The next two months is the best time to buy as three key events will take place that will boost PM prices i) QE3 ii) US debt ceiling hike iii) Indian wedding season in Q4.

Quick Facts: $85,000 invested in silver in the late 80′s equals today’s GTA average home price, or if you invested $270,000 (GTA average home price) in silver in the late 80′s, your return would be around $1.4 million, which is equal to two average GTA homes and one condo.

It’s all about purchasing power.

Actually precious metals prices have become increasingly correlated with equities. Just more commodities, it seems. — Garth

#122 zeeman1 on 04.24.12 at 12:06 pm

#81 Vreaa.

Most realtors are people who were fired or laid off from other jobs and took a part time 6 week course to become realtors. Very few were what I would call successful in other areas but it’s different in Vancouver because they say so, right?

#123 J.I.M. on 04.24.12 at 12:16 pm

@119 Fools rush in
Your observations about couples RE buying , the woman drooling and the man not so sure:

Consider this quote by Ralph Nader
“The suburbs exist for women. They have to show the world they exchanged themselves for something of value.”

The phrase -something of value- seems to be one of the driving forces behind the real estate boom

#124 disciple on 04.24.12 at 12:45 pm

#73 RCDown…”put it all in Boston Pizza because you like the outfits,” – LOL. Incidentally, Jack As_tors was also equally lewd when I visited with a client yesterday. Same damn outfits. Seems to be a trend.

THE TRUTH IS NOT SO SIMPLE

“Drinking the Kool-Aid”, as we all know, comes from the Jonestown Massacre episode. But most don’t know that it was a total CIA mind control experiment. Jim Jones was CIA. The survivors were actors, which included among others, Whoopi Goldberg and the acting debut of Eddie Murphy.

http://www.youtube.com/watch?feature=player_embedded&v=nlx5G7q81lc

#125 Dan in Victoria on 04.24.12 at 12:45 pm

Pen Pal @113
Had to scroll up a few posts to read what that was about (I don’t waste any mental calories reading his posts)
You and Young old fart are right, I know many people who bought nice boats from down south at a huge discount. Buyer Beware.
Was talking to a fellow in Barclay Sound last year who had bought a beaty 23 foot grady for pennies on the dollar.
The guy was giddy on the deal he had gotten.
Nice boat.
Went out fishing yesterday morning, going out through the harbour entrance there was a little tramp frieghter unloading boats off the deck.
My buddy has better vision than me and said they were used boats, all in the high 20 foot range.
And yes, fishing was good 2 nice springs and 4 big dungness crabs.

#126 T.J. BONES on 04.24.12 at 12:49 pm

Sir Garth: Thank You for the invite to your conference call. Sadly I cannot participate, I am at a awards dinner for a criminal lawyer. Go figure!

#127 disciple on 04.24.12 at 12:52 pm

#79 Not1st… EXE.UN is expected to convert to a corporation this year, which would probably mean a decrease in distribution/dividend, so despite the yummy yield, many are holding off on purchasing even if on sale; hence, the stagnation in price. Most of its revenues are affected by the politics surrounding health care in the US. Leisureworld (LW) is probably a better buy, with most of its assets in Canada.

#128 Canadian Watchdog on 04.24.12 at 12:59 pm

“Actually precious metals prices have become increasingly correlated with equities. Just more commodities, it seems. — Garth”

It may appear that way but it’s really the falling dollar. If you look at gold’s negative correlation to stocks vs USD, gold trades more inverse to the dollar by percentage and duration.

Ignore the coded dashed lines.

USD http://i41.tinypic.com/34sihe0.png
S&P http://i43.tinypic.com/1zy7trd.png

It’s very skewed because the Fed is intervening in USD/EUR via FX swaps keeping investors out of the dollar.

Interesting but irrelevant to suffering gold investors. — Garth

#129 cramar on 04.24.12 at 1:02 pm

#3 cramar on 04.23.12 at 9:32 pm

“So, every time the 7% mark has been breached, the housing market’s taken a dive two or three years later. ”

Whew! I thought we only had 2 or 3 months instead of 2 or 3 years! What a relief! Now I can wait to 2012 to sell at a much higher price!

We breached 7% in 2010. — Garth

————————–

Oh…kay! That means any time now!! My gut feeling is that we will not end 2012 without the bubble bursting in TO. This year could very well see the peak in RE in Canada. However RE values are highly localized, so prices in some areas may only slow or plateau for a year or two while TO gets a much needed reality check.

#130 bill C on 04.24.12 at 1:03 pm

home prices in toronto are undervalued. Buy as much as you can. They will double within 1 or 2 years. Everyone in the world wants to live in Toronto. I have a small bungalow anyone can have for a steal at 990K. Hurry it wont last. I just bought a bungalow in florida for 59K.
So hurry because i have to move quickly. Before all the morons wake up.

#131 John G. Young on 04.24.12 at 1:14 pm

#124 J.I.M. on 04.24.12 at 12:16 pm

“Consider this quote by Ralph Nader
“The suburbs exist for women. They have to show the world they exchanged themselves for something of value.””

If that is in fact true, then it could be argued that the root cause of RE obsession is not women themselves (as has been stated by many on this blog), but rather a society that does not see women as having inherent value.

How sad.

This blog respects hot women. — Garth

#132 dd on 04.24.12 at 1:23 pm

Too soon to call a US recovery.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

“US home prices drop for 6th straight month

The steepest declines were in Atlanta, Chicago and Cleveland. Prices rose in Phoenix, San Diego and Miami. They were unchanged in Dallas.

Prices in nine cities fell to their lowest levels since the housing bust. The average price in Atlanta fell 17.3 percent in February compared with a year earlier. That’s the biggest annual drop in the history of the index for any city.”

Of course the economy is in recovery. Glacial, but indisputable. — Garth

#133 Dontcallmeshirley on 04.24.12 at 1:37 pm

Anyone notice the outfit that made the “housing is okay” call last week (Central 1 Credit Union) is the same credit that got taken last year in the “Islamic mortgage” rip off. You remember…there was actually a guy driving around Toronto with gold bars in his trunk.

This Central 1 is a total gong show.

http://www.central1.com/newsandevents/displayjob.php?sp=35&type=SB&jid=0

#134 Linda Pearson on 04.24.12 at 1:44 pm

04.24.12 at 1:14 pm
this blog respects hot women. — Garth

On behalf of un-hot women everywhere…how sad.

How about humourless women? Even hotter. — Garth

#135 Bottoms_Up on 04.24.12 at 1:49 pm

#132 John G. Young on 04.24.12 at 1:14 pm
——————————————
I’m not even sure what that quote is saying. “Exchanged themselves”???

Suburbs use to exist for families…good amenities, quiet streets, inexpensive houses on large lots for kids to play.

Now the suburbs lack sidewalks and parks, are busy, expensive, and you can give your neighbour a ‘high five’ out your bathroom window on your postage stamp lot.

#136 penpal on 04.24.12 at 1:56 pm

@ # 126 Dan

Gotta love fishing, especially out your way where the scenery is only upstaged by the catch!

In the long run, it’s cheaper than chasing the ladies and arguably tastier!

#137 disciple on 04.24.12 at 1:59 pm

#132 JYG… Great point. Western democracy began in the 1600′s, but only 300 years or so later did women count as persons. Still is a total sham, Wild Rose or not.

#138 };-) aka DA on 04.24.12 at 2:01 pm

Dan in Victoria @ #126
and
Pen Pal @ #113

Ya right. It is not so costly to ship a boat across the continent and as such they garner a relatively huge market compared to real estate which is stuck in the ground and subject to that locales economic climate. Consequently boats tend to sell for what they are worth wherever that highest price might be unlike houses which are “stuck” selling for what they are worth where they are.

There are simply too many erroneous claims in your statements for anyone who knows the real story to take you seriously. But there are many here who will and would, in any event, prefer to take issue with anything I might say. So we’ll just leave it at that. };-)</b

#139 John G. Young on 04.24.12 at 2:02 pm

#136 Bottoms_Up on 04.24.12 at 1:49 pm

Not sure either, but I think the quote may speak to an earlier time (1950′s/60′s) in American society — would need to know the context.
The original post was #124 J.I.M. on 04.24.12 at 12:16 pm — he might have more information.

Cheers

#140 };-) aka DA on 04.24.12 at 2:07 pm

#135 Linda Pearson on 04.24.12 at 1:44 pm

04.24.12 at 1:14 pm
this blog respects hot women. — Garth

On behalf of un-hot women everywhere…how sad.

A woman who thinks she is hot, even though she may be, does not garner respect although she may think it so. What she thinks is respect is nothing more than insincere flattery used as bait to lure an easily manipulated mind. };-)

#141 NoName on 04.24.12 at 2:11 pm

Interesting read about facebook, facebook bussines model.

The Red Giant (Five Reasons Facebook is Over)
http://goo.gl/WLz7m

“… In the end, Facebook will be comprised of dormant and inactive profiles with a majority of its “engagement” coming from people in their forties stalking their exes from high school in the late 80′s…”
_____________________________________________

What if Facebook isn’t so special after all?
http://goo.gl/sNUQx

“…It may be stretching things somewhat to compare Facebook to Groupon, another highly-anticipated public offering, but one of the main criticisms of the group-buying service — and something that has helped push the stock down by close to 50 percent since its IPO…”

#142 truth hammer on 04.24.12 at 2:17 pm

Vancouver ‘Shitty Hall’ and development community pointing fingers over ‘high cost housing’…..bwahahahahahahaha ….this…after the shitty hall braintrust reduced the FSR of all buildings 47% to create the coffin sized condo’s we have today…..the reason they added that many more units per sq ft was two fold…it lined the developers pockets with gold……it increased the tax revenue that pays the outrageous pay packets and pensions of the greedy civic ‘servants’ who dine on the corpse of Vancouver taxpayers.

http://www.vancouversun.com/news/Vancouver+must+make+cheaper+developers+build+housing+torqued+system+says/6505553/story.html

and all this against a backdrop of greed where parking meter revenue topped 43 million…..more than New York!!!!!

Greed greed greed….and civil servants…..bad combo all the way around. Not to put too fine a point on this but the tax bill for services on SFH is $140,000 in the ‘shitty of Vancouver……how are rising taxes good for ‘affordable housing’?

#143 cramar on 04.24.12 at 2:29 pm

Of course the economy is in recovery. Glacial, but indisputable. — Garth

Could be what is refered to as a “dead cat bounce.”

#144 truth hammer on 04.24.12 at 2:36 pm

btw..case schiller shows that us housing has stepped back to 2002 and continues to lose ground

http://urbansurvival.com/week.htm

#145 Victoria on 04.24.12 at 2:46 pm

I had a very nice tradesman at my house – and we started talking about RE. He said things are slow in Victoria because people are holding on to their money.

I said I don’t think people have any money…..

#146 Bill Gable on 04.24.12 at 2:54 pm

Check out the Conference Call – you will be glad you did.

You might meet some interesting friends and I a am confident you will recognize your genial, bearded Host.

Impressive in alies as well….as you might hear.

I hope you meet Scott, too – VERY informative and NON biased.

#147 Mark on 04.24.12 at 3:42 pm

“stock markets ahead 25%” — in what world do you exist Garth? Today we’re barely breaking 12,000 — for much of last year, the TSX was at least 13k-13.5k.

I referenced the recovery in the S&P 500 (the broadest market index) since the last time you said we were doomed. Apparently, we’re not. — Garth

#148 LS in Arbutus on 04.24.12 at 4:02 pm

It couldn’t happen in Vancouver….. it’s much nicer and has a better economy than LA or San Diego.

“In 2011, a median home in Los Angeles had dropped to $324,800, a downward correction of 44 percent. San Diego also saw its median multiple fall from 10.5 to 6.1 and its median house price drop from $601,900 to a mere $270,000, a massive correction of 68 percent. Now that’s a bursting bubble!”

http://viableopposition.blogspot.ca/2012/01/housing-affordability-in-united-states.html

#149 Look Out on 04.24.12 at 4:21 pm

Garth,

While I agree with your logic, I’ve posted twice now on how your warnings pre-2009 (expect 15% decline followed by years of small declines) proved wrong if the expectation is that prices will only retreat to 2008 prices. But you have not posted my comments.

You seem to have developed a thinner skin as most of your warnings have proved wrong to date.

Your last three comments, saying the same thing, were published. They were also all incorrect. — Garth

#150 Smoking Man on 04.24.12 at 4:27 pm

Keep your eye on this one. ERF. Its been beat up bad. Don’t say I’m not genorous. Feeling a bottom right now had my eye on this one for the last six months. Jucy div and great profit grouth outlook

#151 yanz on 04.24.12 at 4:34 pm

great blog entry Garth… as usual.

I’m starting to enjoy the “It’s different here” comments. People actually seem to believe this… I mean, bubble theory is very well explained in the books, but to actually see real “it’s different here” arguments ?? Daaamn, you can almost smell the desperation, the wishful thinking… I can’t wait for this godforsaken prairie to come back to reality. Ahh yeah, natural resources, potash, immigration, the riders… it’s different here for sure. ….. Sigh….

#152 truth hammer on 04.24.12 at 5:08 pm

#150…SM…..could be an acronym for ‘sado masochism’ on the ERF call…….5 years down from $60 and still crumbling incrementally…..the extra high yield 12.2% could be a sign of trouble…….i didn’t bother to tech it fundamentally…..the chart looks so ugly i didn’t have to. Given that the macro on the space is extra positive…..once we get the perception of ‘safety’ out of the way…..timing is sketchy…as always. i’d say a dartboard would be as good a predictor when the market turns…..patience is the game right now……my best call….buy small tranches across the board….mix of XEG and rifle shot picks…SU for ex…..and drip in….will be a very nice space at some point…the real question is when

#153 Westernman on 04.24.12 at 5:31 pm

Yanz @ # 151,
You got it… the people in the prairies ( especially Sask. ) are some of the most self-deluded people I’ve ever had the displeasure of being amongst. They act kinda like hillbillys who have found a 50 dollar bill on the ground, instant big shots.
When this region is returned back to it’s 20th Century Canadian Prairie Ghetto status ( it won’t be long ) where it came from you are going to see some REALLY long faces when they realise they weren’t special after all, they just stumbled onto a 50 dollar bill laying on the ground…

#154 Smoking Man on 04.24.12 at 5:42 pm

#151 yanz on 04.24.12 at 4:34 pm

An astoriod is going to hit earth one day and re set the game.

Question is can you pick the date for the crash.

That’s where the money is

#155 Smoking Man on 04.24.12 at 5:46 pm

Got an invite to a cool party in Chantilly, Virginia at end of may.

Finally

#156 Time to leave Canada for a better life on 04.24.12 at 5:52 pm

#117.
If you had to borrow at those interest rates housing would crash 50% you moron. Imagine borrowing 30% of your home at 10% and then the other 70% at 4.5%….Lol you idiot. What would happen to the housing market.

#157 big T on 04.24.12 at 6:31 pm

I have seen this movie before, 40+ years back the uk
had rapidly rising mortgage rates, you had 2 options,
pay the new amount, or pay tha same, but change the
ratio of interest to principle and extend the time..

#158 In Garth and God We Trust on 04.24.12 at 6:46 pm

Big Rider #89

“Your portfolio construction Garth is very well diversified. In no way can you possibly be implying that your portfolio’s are up the full extent of the S&P’s advance, are you?”

Are you kidding me Big Rider??? The bearded mystic oracle from the east that runs this blog and who is the lone voice crying out in the financial wilderness of Canada is surely above the paltry S & P advances in his personal returns. He doesn’t brag about it for fear of upsetting the mere mortals who come to his blog for their daily dose of financial wisdom. Sheeesh Big Rider, I thought you knew better!

#159 eagle eyes on 04.24.12 at 7:09 pm

Check out all the “solds” in Richmond BC. Mostly all have sold at under “tax assessment” I guess City of Richmond will be hiring more appraisers in 2012. All the city assessed values need to be adjusted downwards. The decline of RE will have to be reflected in your next tax bill. Will the owners be jumping for joy that their property taxes will decrease? Or will they be upset that they are no longer fictional millionaires?

#160 SaggyBottomBoomer on 04.24.12 at 7:14 pm

#141 };-) aka DA on 04.24.12 at 2:07 pm
” What she thinks is respect is nothing more than insincere flattery used as bait to lure an easily manipulated mind. };-)”

Kind of like the same treatment you get from a Realtor n’est ce pas?

#161 TurnerNation on 04.24.12 at 7:59 pm

Smoking man I did not see you at Duke of Devon tonite.

#162 McExpat on 04.24.12 at 8:23 pm

Garth I just don’t understand why you are so anti precious metals….
So anyone holding them in their portfolio is a moron?
Warren Buffet doesn’t get them either but then they were never part of his reality after the gold standard was abolished. It seems hypocritical to me that, on the one hand, you can see the idiocy of thinking that what happened in RE the last ten years is going to continue however precious metals are for fools.
It just seems to me that you just don’t understand them fully.

I’d say the same. — Garth

#163 maxx on 04.24.12 at 9:09 pm

#107 John on 04.24.12 at 11:00 am

Insightful and excellent, as usual. Keep ‘em coming!

#164 John on 04.24.12 at 9:15 pm

Ben responded to “Smoking Man”:

“#28 Smoking Man

Europe isn’t going to fall… lol

Spain’s the story the financial media is spewing for the market red the last few days. They have to come up with some BS and they can’t do Greece again.”
————-

I think there’s a strong misunderstanding about what denial is. The “thinking” processes used in the belief system being exposed by the comment above are an exact copy of those who are caught up in the central-banking debt pump-up ( using real estate).

When a person in denial “sees” the real estate scam, he’ll be unable to use clear thinking for the objective conclusions required for a “bigger picture” view.

In other words, the denial hasn’t even cracked at all. The poster is sincere. He actually thinks “Europe”
( whatever that is), can somehow continue to exist in it’s present form. A strong argument for believing this is not required. It’s a really good example of what denial actually is. It’s always accompanied by sincerity.

#165 Marshy on 04.24.12 at 9:22 pm

#151 Yanz

Thank you for the godforsaken prairie reference. Mention the word prairie or Sask in a post and it is a given that you will see a post from Westerman within minutes. I find his simple,mindless,moronic comments to be really quite amusing.

Think I will go out for a walk now to see if there are any $50 bills on the ground.

#166 cramar on 04.24.12 at 9:59 pm

Milions more U.S. homeowners to rent! RE recovery? No way, Jose!

http://www.bloomberg.com/news/2012-04-24/millions-more-u-s-homeowners-to-rent-pimco-s-simon-says.html

@158

“The bearded mystic oracle from the east that runs this blog and who is the lone voice crying out in the financial wilderness of Canada…”

A bit of an exaggeration here. There are others. I was just reading something written by Gordon Pape the other day and he was saying the same thing about RE.

#167 McExpat on 04.24.12 at 10:02 pm

I knew you would say something of that nature but find it odd that you cannot back up your negative sentiment on precious metals with anything more concrete…..

#168 TurnerNation on 04.25.12 at 7:36 am

#120Nonno Nicola Investore di Reala Estata on 04.24.12 at 11:51 am

I stopped reading Friedburg’s pap at this line, pg. 3. It’s not the first time his fund has blown up in the short term.

“The net asset value of the Friedberg Global-Macro Hedge Fund Ltd. fell 18.1%, recording
its worse quarter in its 10-year history”

I can get that kind of insane volatility myself, by trading leveraged ETFs and their covered calls online for $5 a trade. I do not need “professional” help to induce such gut wrenching leveraged bets gone wrong/right…

#169 maxx on 04.25.12 at 9:53 am

“We’d be happy to own something, anything,”

Irretrievably stupid.

Money spinners (central banks) are getting the wrong results in all of the weakest sectors of the economy.

#170 jess on 04.25.12 at 10:08 am

Traders transfer belief system -confusing need with spending power.

“My job is to bring physical goods from a place where the people don’t need them to a place where they are needed.”

smoking man said: “Here is an extremism case of belief system gone wild.”

Try this one
http://video.pbs.org/video/2226432507/
exotics- regulatory risk removal services
http://www.pbs.org/wgbh/pages/frontline/
money,power and wall street: episodes one and two

Phil Angelides, Chair, Financial Crisis Inquiry

….” We created $13 trillion of mortgage securities, many of them defective, many based on loans that never should have been made, many based on loans that were fraudulent. ”
================

#171 Timbo on 04.25.12 at 1:46 pm

http://theeconomiccollapseblog.com/archives/27-statistics-about-the-european-economic-crisis-that-are-almost-too-crazy-to-believe

the numbers tell a tale of a major recession held up by faith and that is in decline too.

I’d be as depressed and confused as you, if I read that site. Take care. — Garth

#172 Toronto_CA on 04.25.12 at 2:08 pm

FML Listings blog yesterday had an interesting post about the difference in maintenance fees for condos/townhouses in Toronto versus Vancouver. Toronto was much higher (anecdotally anyway). Garth, do you have any idea why a townhouse in Toronto would have $600+ v $150 or so in Vancouver?

Here’s the post:
http://fmlistings.tumblr.com/post/21710800989/toronto-maintenance-vs-vancouver-maintenance

#173 Tito on 04.25.12 at 4:33 pm

# blase:

Your lucky its the Filip’s… they are good people for sure .

The problem is that many immigrants (and non-immigrants ) have only seen the good times and a possible downturn is not even on the radar.

#174 Westernman on 04.25.12 at 5:12 pm

Marshy # 167,
Even more amusing is the fact that that after I post about the prairies or Sask. in particular some inbred gopher gobbler will respond defending the vast wasteland with every ounce of ferocity their 65 I.Q’s can muster.
These are the kind of people that would defend Auswitz if they were there…

#175 Marshy on 04.25.12 at 5:53 pm

Westernman #176

I think you just verified what I stated in my last post.

Have a nice day.

#176 Westernman on 04.25.12 at 6:58 pm

Marshy @ # 177,
What I ” verified ” was that there is a certain genre of cousin-loving dungballs present in the prairie provinces that would brag about a landfill if they happened to be born there..
Apparently you happen to be one of them…

#177 Marshy on 04.25.12 at 8:16 pm

Westernman

I guess I was wrong …. apparently this “cousin loving dungball born in a landfill” doesn’t have to make a prairie reference to get an idiotic response from you.

If you are nothing else at least you are entertaining.

#178 Tony on 04.25.12 at 11:24 pm

You can clearly see by the chart that the last time the market peaked was the third week of September of 1987. For thirteen years i’ve been reading this crap about Toronto peaking in 1989.