Bad strategy

predict

A year ago today the average house in Canada sold for $348,178. Today the price is $356,687. The increase, about eighty-five hundred bucks, represents an annual gain of 2.4%. And while it’s free of capital gains tax (if you live there), it’s less than the current inflation rate of 3.1% in Ontario. In BC, inflation is just 1.5% but, whoops, the average home has actually lost value – a whopping 8.6%.

Ditto for Montreal, which means real estate in the three major markets in the country is worth less in real or inflation-adjusted dollars than twelve months ago. Meanwhile, of course, the cost of owning one is higher, thanks to property tax, utilities, insurance, condo fees and furnace filters (can you believe what those suckers cost?).

For those who think paying down a 3% mortgage is an investment, buy a calculator.

In contrast, US stocks advanced 13.3% (the S&P 500), while the laggard TSX gained just 4% – but still beat your house. A balanced portfolio of 40% fixed income (various bonds and preferreds) plus 60% growth stuff (equity-based ETFs and REITs, for example) in 2012 returned about 10% (if you knew what you were doing). If this happened inside your TFSA or RRSP, no tax.

As I’ve said on this pathetic blog repeatedly, the three gods to worship are Diversity, Liquidity and Balance. Being a real estate junkie with the bulk of your net worth in  a house, or letting your spouse persuade you to accelerate mortgage payments and ignore investing, is a ticket to heartache.

The average mortgage rate for homes bought in Canada in 2012 was just 3.24%. The average house appreciated less than inflation. So, how does it even make sense shoveling precious after-tax dollars into something that’s essentially depreciating? But it’s exactly what most people are doing.

According to the mortgage brokers’ association’s latest report, Canadians are once again proving with their wallets they have absolutely no idea how to build wealth. A quarter of everyone renewing a mortgage opted for higher payments and one in seven made a pre-payment. People voluntarily increased their monthly mortgage payments in the past year by $3.5 billion. They dumped an astonishing $20 billion in lump sum payments against their home loans.

Consider a homeowner in Ontario, where inflation is 3.1%, stripping all the extra money from his family to pay off a $3.24% mortgage so he can build equity in a house worth less than last year. I rest my case. He’s flipped.

And, of course, we’ve only started to see absolute declines in the value of real estate. The reasons are legion, but here’s a good one even the mortgage brokers recognize. F’s big mortgage-shortening changes of last summer took aim at the 55% of people who can’t buy a house without a high-ratio mortgage. About 17% of those people who got a mortgage under the old rules would not qualify today. So, either home prices have to drop to maintain existing sales levels, or home sales in general will decline about 10% nationally.

So what?

So that equals 45,000 fewer sales a year. By the way, that’s close to twice the total number of properties sold in all of Vancouver last year (25,390).

And this is the effect of just one of the changes now in force. Also gone, remember, are cash-back mortgages at the banks and CMHC insurance for properties listed above $1 million, of which there are currently 3,500 in Greater Vancouver and 1,500 in the GTA. Add to this a condo glut, and it shouldn’t be too hard to see how 2013 will be shaping up for the housing market.

Lost on an entire generation, it seems, is the realization that real estate’s just another asset class. Its value fluctuates. It requires extreme leverage to acquire. It’s costly to buy and more costly to sell. You have no control over the rate on your debt. Nor political decisions affecting the market. Buy at the wrong moment in the cycle and you overpay. Sell at a poor time, and lose either value or liquidity.

Of course, financial markets are fickle, too. And you need a place to live.

But amassing your family’s net worth in a house is a gamble I wouldn’t take. The fact millions now are should keep you awake tonight.

153 comments ↓

#1 Peter on 01.01.13 at 9:41 pm

Yes Garth but we have been programmed for years about the importance of paying down your mortgage. Especially if you are entering “retirement”.

Retired people need money. — Garth

#2 Rodrigo on 01.01.13 at 9:43 pm

Interesting

#3 T.O. Bubble Boy on 01.01.13 at 9:44 pm

Many families have essentially zero net worth, and you can still get into a house with 20-to-1 leverage (5% down).

Low barrier to entry = artificially high prices

#4 Furst on 01.01.13 at 9:44 pm

Happy New Year!! Let’s start with a near FUUUURRRRRSSTT post!!

#5 TurnerNation on 01.01.13 at 9:47 pm

Attn. New Blog Dogs, the following user names are still available. Reserve yours today:

The Mulletizer

Expectorating Rubbie

Mr. Morley Superior (Canadian)

Stephen Who?

FirstHole

Suicide Financial, Ltd.

Raging Bullion

Chancellor Rebalancer

Doom As I Say, Not As I Do.

Reserved:

Sir Blog Dog Carney

#6 TurnerNation on 01.01.13 at 9:48 pm

Whistler Commercial, forclosure. Right on the highway.

BPOE? Taxes are almost $38,000 yearly. Is this considered a high figure, for its size?

http://www.whistlerrealestate.ca/whistler-commercial-property/detail.aspx?id=4663

Beautiful building with great visibility from the highway as you enter the Creekside area of Whistler. Comprised of a main floor of 3,508 square feet, a 2nd story of 2,310 square feet and a storage area of 929 square feet.
..

This is a court ordered sale. <—–

#7 TurnerNation on 01.01.13 at 9:50 pm

There is something to Truth Hammer’s blatherings. We have an elite class of party faithful.

Whister’s mulling more tax increases after a one year break, after 10 years with uninterupted hikes.

Let’s examine this one cost center’s pay packet:

Base salary of $149,895; yearly let’s say $2500 in health benefits, 6000 car allowance; Plus 56 paid days’ leave @ 410 per day is $23,000.

Totalling: at least $181,395/year for helping to run a small resort town. MPs do not earn even this much for running a country? How many other local, unelected, elite 200k slugs are out there?

But, they’ll whine, we’re a “world class” city and need top talent. Nonsense. There’ll be no shortage of passionate long-term locals willing to take this job at $70,000-100,000.

Up to 200k per elite denizen. Cost centres running cost centres.

http://www.piquenewsmagazine.com/whistler/wrongful-dismissal-lawsuit-against-rmow-resolved/Content?oid=2443896

The municipality has quietly resolved a wrongful dismissal lawsuit initiated by a former senior employee, after both sides agreed to settle the case without costs.

Kim was the municipality’s general manager of environmental services for roughly a year and a half, a key member of the senior management team at the hall, hired under the former CAO Bill Barratt.

According to court documents, Kim’s contract included, among other things: a base salary of $149,895; extended health and medical benefits; a $500 car allowance and fuel card per month; participation in the municipal pension plan; 46 days of paid vacation per year; two additional weeks of paid leave per year.

#8 blase on 01.01.13 at 9:52 pm

“My father used to say, “If everybody agrees on it, it’s wrong.” Or, as Dave Robicheaux, the protagonist in some of my books, says, “Did you ever see a mob rush across town to do a good deed?” -James Lee Burke

http://www.esquire.com/features/what-ive-learned/meaning-of-life-2013/james-lee-burke-interview-0113

#9 mr-b on 01.01.13 at 9:53 pm

What about being mortgage free and not having to make that $1500 or better monthly payment?

I “make” about $18,000 a year by not having to make a mortgage or rent payment. How much before tax income does it take to make that?

How much money do I have to invest to make that kind of return? I understand the reasoning for people to rent instead of purchasing, especially if they can rent for less money but if you don’t have the $400k for the house, investing it is kind of moot isn’t it?

I don’t have to pay income tax on money I don’t need to earn. Why is it a bad idea to reduce expenses and live within our means instead of making more money?

#10 T.J. BONES on 01.01.13 at 9:58 pm

Sir Garth A stool for the man please

#11 kenda75 on 01.01.13 at 10:03 pm

well..paying down the mortgage even though roi is 3% makes sense so that interest burden in the near future years (when rates go up) is still affordable.

Why do I bother? — Garth

#12 DJIM on 01.01.13 at 10:14 pm

There is one advantage to owning over renting – a mortgage is eventually paid off and you no longer have either banks or landlords threatening you with loss of a place to live for missed payments. This should not be a forty year goal, or you’ve blown this advantage. It should also be achieved by retirement. I don’t know how most people would make mortgage payments out of a retirement income.

Mr-b, you’ve reached this point it seems, and are in a different category than usually addressed here.

The point is diversification. How did you miss that? — Garth

#13 mr-b buddy on 01.01.13 at 10:17 pm

That makes 2 of us! Now we just need the other 20 million households in ?Canada to get their sh&t together?

#14 Snowboid on 01.01.13 at 10:19 pm

#7 TurnerNation on 01.01.13 at 9:50 pm…

While your analysis may be close, don’t forget that Whistler has an exceptionally high cost-of-living.

How is this for a ‘high-end’ luxury rental…

http://whistler.en.craigslist.ca/apa/3458653612.html

Or more suitable to year-round rentals…

http://whistler.en.craigslist.ca/apa/3494897274.html

#15 City that smells like it sounds on 01.01.13 at 10:23 pm

15th post!!

#16 fiscal cliff claven on 01.01.13 at 10:25 pm

I wish I knew Garths philosophy 40 years ago.
Too late for me, but a quote from a ZH comment sums up my situation.
“It’s all good. I was born poor and I still have most of it left. ”
Hopefully more people listen to the Garth

#17 mortgagebrokeront on 01.01.13 at 10:30 pm

rather quiet, posting, the economists are allmost in unison canadians at record levels of debt.

http://www.cbc.ca/thenational/indepthanalysis/thebottomline/2012/12/2012_and_the_bottom_line.html

#18 CrowdedElevatorfartz on 01.01.13 at 10:31 pm

Sold the house several months ago, moved to an apartment building….
I ride the elevators ALL Day Long………..

#19 LJ on 01.01.13 at 10:40 pm

New Year’s Day!!!

Time to top up that TFSA.

#20 Will on 01.01.13 at 10:43 pm

@DJIM After you’ve paid off your mortgage you may not being paying anything to a bank, but you still have general household costs and repairs which may not be cheap. If you rent it’s a fixed cost no matter what goes wrong with the building.

#21 Twooping on 01.01.13 at 10:49 pm

December stat: In Van, average detached is up over two percent from $1,053,902 to $1,078,495. There’s more HAM than we realize or still many, many fools to be had yet. 

Check the volume. — Garth

#22 Concessionman on 01.01.13 at 10:53 pm

While all you say is true, by not taking advantage of low rates by lump summing and/or increasing payments to make a substantial dent in ones mortgage while rates are low, aren’t you just setting yourself up for greater expense down the road when rates return to historical norms?

Of course one should be prudent and do this as part of a greater financial plan, and be investing for retirement at the same time.

The other thing is the satisfaction of finally paying the damn thing off. I have 3 weeks left and it’s done. The feeling of soon having this burden lifted from my shoulders is exhilerating. I’m still 20 years from typical retirement age, and all those mortage payments (almost 30K/year) will now go in my balanced portfolio for retirement.

Sure, I’m sitting on a paid for asset appreciating at less than inflation. But I have to live somewhere, and in 3 weeks, I’ll be doing it for less than renting a cheap basement apartment…

No you won’t. You are ascribing no value to all that equity. Classic mistake. — Garth

#23 Dave on 01.01.13 at 11:02 pm

I’m glad you included the last 4 sentences in this article – it really allowed you to save face. Your argument started off on very shaky ground by taking a long-term investment (primary residence) and analyzing using only a 1 year timeframe for comparison of returns.

I was being gentle. It gets a lot worse. — Garth

#24 DJIM on 01.01.13 at 11:02 pm

Not intending to contradict you Garth! Just pointing out that a mortgage is a long term strategy, with the payoff at the end of amortization. Anyone not realizing that can get burned, as you’ve pointed out many times.

#25 habbit on 01.01.13 at 11:03 pm

#9 mr- b Well said

#26 Snowbush on 01.01.13 at 11:04 pm

Garth, why don’t you team up with Ric Edelman

Not flashy enough. — Garth

#27 habbit on 01.01.13 at 11:06 pm

#20 Will Costs are usually passed on no?

#28 Angela on 01.01.13 at 11:12 pm

I get the point about diversification, but I still have a question about not paying down a mortgage at 3%. Why not pay it down now when more of your payment goes to principal? Once interest rates are higher you have next to no hope in hell of paying off a $400,000 mortgage.

The other day I called the bank to reset my bank password. They happened to “notice” that I have a balance on my PLOC, told me they had suggestions how to help me pay it off faster. I can take out a personal loan instead, the payments are only $230 a month instead of $400 and so the same payment of $400 will pay off the loan faster. Odd, I thought. “Are you giving me a better interest rate?” “No,” they said, “the LOC is revolving, the loan has a specific pay off date you have to meet, so you can’t keep borrowing the money back.” So it’s a question of discipline. Uh, thanks, but I’m not an idiot that needs the bank to hold my hand. “Have you thought of buying a home?” they asked? Then she received my usual tirade about how mortgagees borrowing a giant steaming pile of debt get a better interest rate on their smaller steaming pile of debt. “Yes, but the HELOC is secured against the property, we’ll always get our money back. Equities aren’t secured.” I thought, “Hmmf, we’ll see about that.” But the fact that banks are pushing the personal loans shows they’re encouraging people to pay off the debt, get the unsecured debt off their balance sheets.

#29 Elmer on 01.01.13 at 11:13 pm

The fact that interest rates are low now is not an argument against prepaying your mortgage, because rates will go up, and when they do, will it not be better to have as much of your mortgage paid off as possible?

#30 habbit on 01.01.13 at 11:15 pm

#22 Concession man Garth, is the equity not related in any way to saving and investing the 30K in yearly savings? After all, costs of owning in this situation now ARE lower than renting. They could take out a HELOC and invest as you have suggested no? Every situation is different. Blanket statements are not relevant.

#31 House on 01.01.13 at 11:18 pm

You should be able to realize your 2012 gains in the stock markets Wednesday morning.

#32 Hoof - Hearted on 01.01.13 at 11:25 pm

This means our only hope is whatever (?!?)Pierre Trudeau sired…

#33 popados on 01.01.13 at 11:31 pm

my x landlord in richmond bc has over 20 townhomes for sale.ten are 1 year old rest are new.why dont they rent them out.HAPPY NEW YEAR TO ALL p.w. do they have mortgage.

#34 Brendan on 01.01.13 at 11:31 pm

Paying more on a mortgage at 3-4% can avoid paying off that mortgage balance at a higher rate in years to come, and rates have no where to go but up. Meaning that the sooner one pays off their mortgage the less overall interest they pay to the bank overall.

Let’s say that John Smith owes 200k on his house and has no savings for investing or bulk mortgage payments. A likely scenario for many Canadians. He locks in now for 5 years at 3.5% fixed 20 year amortization. The monthly payment is $1,157.33 and at the end of the 5 years he will have paid the bank $69,439.80 total, and have a balance remaining of $162,161.31. So to pay off almost 40k in principle will cost John Smith just over 30k. If he went with the same mortgage as above but with a 10 year amortization his monthly payment would be $1,975.35 and at the end of the 5 years he will have paid the bank $118,521.00 total, and have a balance remaining of $108,635.79. So to pay off just over 90k in principle cost John Smith just under 30k. If John locks in for another 5 year fixed at say 5% with only 5 years left for amortization John will have a monthly payment of $2,047.54 and pay $14,182.02 interest for the term and own his house. Total interest $41338.81 for 200k, not bad. Lets say that now John takes the lower mortgage payment amount and starts stuffing that amount in a nice Garth approved portfolio that is diverse, liquid and balanced. So $1,975.35 monthly, annually compounded at 7% (on average over the long term for the portfolio) for 10 years is a total of $343,897.51. We are also assuming it’s all TFSA between John and his spouse. After we take away the nasty bank mortgage interest of $41,338.81 John has just over 300k to the good at the end of 20 years and owns his house.

If John Smith took the difference of the 20 year amortization and 10 year amortization payments and invested in a nice Garth approved portfolio that is diverse, liquid and balanced, meaning that he puts the difference form the larger mortgage payment into his portfolio each month, $818.02 and earns an annual 7% compounded interest over the long term at the end of the 5 years he would have a total $58,906.05 in his portfolio, $9,824.85 of which is interest (lets assume this is in John Smith’s and his spouses self directed TFSAs). But John still owes $162,161.31 on the mortgage, lets say in 5 years from now John gets a nice 5 year fixed at 5% for the balance amount above keeping the same initial amortization (started with 20 years, now 15 years left). This next term will cost John $35,284.29 in interest. Assuming the average interest rate for the next 2 terms of 5 years have an averaged rate of 5% (which may be a little generous, by then it maybe 6% or 7%) John will have paid the bank $23,690.81 and $8,848.83 for those terms respectively. Total interest to the bank over the 20 years in this example is $99,425.04. Total for saving the $818.02 with compound 7% for 20 years is a whopping $428,614.18, only $196,324.80 is from actual deposits. So going the portfolio route has John up almost 330k at the end of his mortgage.

By this example that I made up off the top of my head the simultaneous 20 year portfolio and mortgage route is better, but not by much, 30k over 20 years, and a higher interest rate in the later fixed terms for the 20 year amortized mortgage could shift this the other way with ease.

Garth, I’m a big fan of yours, “…accelerate mortgage payments and ignore investing, is a ticket to heartache” doesn’t seem nearly as heart breaking as you made it sound in tonight’s blog, at least by my pathetic numbers.

Garth, please shed some light? – Have I missed something?

Thanks,

Brendan

#35 Freedom First on 01.01.13 at 11:41 pm

Happy New Years Garth!………and to all the blog dogs too!

It is very good to see that there is people who read your blog, learn from your valuable financial information, act on it, and come back to thank you Garth.
Unfortunately….the “why do I bother” people need a higher financial education to see the light. Like perhaps
bankruptcy. I think it is just the way it is, many people, as witnessed worldwide, manage their financial affairs without thinking, or acting on what they do think with what they thing being backed with no prudent financial knowledge whatsoever. I also believe that “societal pressure”, “peer pressure”, “family pressure”, and “SO pressure”, also play a huge part in people making financial decisions that they do realize are insane. Would it be politically correct to say the most house horny people are the women?

#36 Smoking Man's Old Man on 01.01.13 at 11:46 pm

Stay diversified and single.

Only living thing you should commit to (sorry to say) long term wise is a border collie or equivalent. Marry or live common-law at your own peril. My Son didn’t drink or smoke before he got married and now look at him :(

#37 Rob on 01.01.13 at 11:49 pm

#22
If you focuss only paying your mortgage off first istead of saving for retirement, the problem is that you lose “time” to grow those savings.
If you really wish to own a house, buy it dirt cheap in a few years or else just rent.

#38 William of the North on 01.01.13 at 11:49 pm

O.K. Garth,

Let’s hear (or read) your example of a diversified investment portfolio. I want to see specific examples. Let’s see if you earn that 10% on the year. It’s easy in hindsight to be an oracle. Hit us with your best shot.

I bet you don’t match inflation.

Let me guess. You have a Kia. — Garth

#39 T5>myT4 on 01.01.13 at 11:50 pm

In 2012 Mark Zuckerberg took out a $1 million mortgage on his home for 30 years at a rate of 1.05%. He will let inflation pay for the mortgage. An important financial lesson from a person who didn’t even require a mortgage.

#40 rentingsucks on 01.02.13 at 12:00 am

We get it. But, is there anybody else out there who thinks like me? I got a wife. Two young school age kids. I grew up the son of a military man and we moved every three years. So every three years I had to say goodbye to friends – crushed. New schools. If I rent a house for my family, the owner can legally kick us out with due notice if he wants to sell. I have no interest in returning to that life of uprouting and uncertainty. So I bought a house at a good price. I made significant gains this decade. Paper gains soon to come back to reality. I bought a nice minto townhome in the 90’s and made nothing. But I liked the neighbourhood and it was the best 7 years of my life. Real estate is an emotional thing, indeed. I got $350K in RRSP’s making 10%. That’s the easy part of my life. Keeping a family happy is significantly more complicated. Like most things, the answer lies somewhere in the grey middle – it ain’t so black and white. Nobody will ever own the roof over this head but me. Ever… Happy New Year.

#41 Brendan on 01.02.13 at 12:09 am

Hey Garth,

Are you going to comment on my above #34?

I would really appreciate an answer. If it’s in the TLDR (too long didn’t read) category, the abridged version is I did the math, paying off the mortgage aggressively and then starting the portfolio seems to be about the same as starting the portfolio while paying off the mortgage at a normal rate. If my math is off please tell me how.

Thanks,

Brendan

#42 earlybird on 01.02.13 at 12:11 am

Once your paid off, you still have rising property tax that seems to go up endlessly, Utilities,the maintenance that noone talks about and the endless projects, upgrades (little and big)….those things alone on a SFH is equivalent to renting sometimes. Invest your equity while you still have some…

#43 William of the North on 01.02.13 at 12:16 am

I have a Chev Silverado 1500 (0% financed), Gold and silver. (Kia’s are for metro-sexuals, deviants and ex-politicians!)

I bet the Gold and silver do better than your portfolio as well. (Gold up 1.14 %; silver up 1.07% so far this year)

Oh, so you have an agenda. What a surprise. — Garth

#44 franke le skank on 01.02.13 at 12:19 am

Obama’s fiscal cliff bill was passed.

A fix was never in doubt. Next, the debt ceiling, part deux. — Garth

#45 Ralph Cramdown on 01.02.13 at 12:23 am

Don’t overlook an other advantage of starting to invest early rather than paying off the house earlier… Practice. So that maybe you’ll be OK at it by the time you reach middle age and have a lot to invest. And then there’s diversification over time because stock market returns are variable. And the security that comes from having liquid assets rather than one huge illiquid one which, should you need cash, will have you going hat in hand to your banker for a HELOC (and credit won’t always be this easy).

But the real goal should be a tax deductible mortgage on your primary residence.

#46 Victoria on 01.02.13 at 12:23 am

Talking about Canadian Debt …

Teenage daughter going out NYs Eve. Decided that she and her 3 friend’s should take a taxi home. Other two families could not afford taxi fare for their 16 year old daughters. One family lives in a house on market for 1.8 million the other at least $1 million. WTF

Things are out of proportion and priorities are all wrong.

#47 Sydneysider on 01.02.13 at 12:25 am

#39 “In 2012 Mark Zuckerberg took out a $1 million mortgage on his home for 30 years at a rate of 1.05%. He will let inflation pay for the mortgage. An important financial lesson from a person who didn’t even require a mortgage.”

That’s a monthly repayment of $3,239, excluding the property tax, insurance etc. In Sydney, I rent a house worth the same amount, and pay $2500 per month, all in.

#48 TCH on 01.02.13 at 12:33 am

Happy New Year.
Yes, diversification is it. Maybe this website is now going away from a real estate centric view to more advise on how to. With all things investment.

I mean if people still don’t get it after all those posts……they never will.

http://theceliachusband.blogspot.fr/2012/09/for-sale.html

#49 45north on 01.02.13 at 12:35 am

Meanwhile, of course, the cost of owning one is higher, thanks to property tax, utilities, insurance, condo fees and furnace filters (can you believe what those suckers cost?).

3M used to sell a plastic frame that held a replaceable filter. The cost was half of the furnace filters now on sale. What was wrong with the plastic frame?

#50 William of the North on 01.02.13 at 12:35 am

Does truth and honesty qualify as an agenda?

#51 hangfire on 01.02.13 at 12:41 am

OK so Obamas tax ghouls have been beaten back for a coupe of months…..cool. In Canada we need a full cort push to lower structural spending….if we do that no programs would have to be cut….in fact there would be more money to spend on programs. Heres how we do it…..the civil servant costs on average $140,000 per person…according to the PMO. This is more than 50% higher than the average wage of a working family in Canada. I would cut the number of civil servants by 50% and then reduce the compensation to these civic servants by 50% to come into line with the average income.

Second….civil servants pay zero income tax……heres why…..they pay income tax up front…but every penny is given back in pensions and benefits for life….at $5 to $25 dollars for every dollar they contribute to the defined benefit pensions. Lets cut the pensions to zero and give the civic servant the same CPP and OAS that everyone else does. Don’t forget that the DSB pensions are paid out for decades longer ( with survivor benefits) longer than the civil servants works and contributes….ergo…they pay zero tax net net net.

I woould estimate that if every level of government, quango, crown corp, supported industry, subsidized special interest …which by the way add up to millions of tax payer funded wages for people who can easily work in the private sector or for themselves.

If the structural changes that are being suggested by the responsible people in the country…then this land would run with milk and honey….there would be so much cash flowing into charities that no more outside fund raising would be nessecary…we would wipe out child and senior poverty overnight.

The problem is not that these needs are underfunded …its that the revenues that are pid into the various ministries is being misallocated to the greedy civil servants and not to those who need the money….like new hospitals with better equipment and schools with the best technology and equip.

C’mon guy…sky train cops making $200 grand a year…city advisory board members pulling down $365000 ( which is more than the PM……lets all get serious….Throw the bums out!!

#52 Derek R on 01.02.13 at 12:46 am

#27 habbit on 01.01.13 at 11:06 pm wrote:
#20 Will Costs are usually passed on no?

Common misconception. Let’s just say that owners will attempt to pass on the costs to their tenants. However they will find it impossible, or at the least extremely difficult, since it is not the costs that set the rental price of the house. It is the market.

Faced with this fact, owners have to find some way of reducing their costs, have to subsidize their tenants, or have to sell up and get out of the game. That’s it. Market competition will prevent them from raising rents, so that is not a way out.

The big REITs deal with this by keeping their costs down. They know what the market rental is going to be and they know they can’t change it, so they work backwards from the rental to ensure that they know the maximum to pay for the property at purchase time and in running costs and hence don’t overpay. Hence they ensure a decent return. Small time landlords aren’t that professional unless they’re smart. That’s why only the smart ones make money.

#53 Blacksheep on 01.02.13 at 12:46 am

Mr-b # 9,
Great post

#54 Dr. WAYNE on 01.02.13 at 12:47 am

#4 Furst on 01.01.13 at 9:44 pm

Happy New Year!! Let’s start with a near FUUUURRRRRSSTT post!!

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

Really sorry and disappointed you didn’t get the FURST position … you may be the lucky one next time … keep trying, don’t give up, as I’m sure there are hordes wishing you all the best in your quest to stand out herein.

#55 popados on 01.02.13 at 1:00 am

here is the kicker PW ,the property they booted me and the neihbour out of two nice houses to be demoed to build 15 more townhouses.i think its the assesments.they list new ones at 500k with new honda civic.are you listening PW ?wake him please garth ! partys over.

#56 Investx on 01.02.13 at 1:13 am

Garth, so people should defer the mortgage payments (paying it off faster) to when the rates are higher?

You’re assuming they’d use the money extra money they would have used to accelerate mortgage payments towards the potential greater returns in equities.

#57 Nostradamus Le Mad Vlad on 01.02.13 at 1:15 am

-
Good post, but I prefer playing different Buddha Bar albums on YouTube, along with Saudi Arabian / Middle East music combined with a lot of the stuff I grew up with. Better for the space between my ears, and not as emotionally draining as RE!
*
#21 Twooping — See following link. Port authorities are seizing some of the loot, however — Chinese flying cash west First para. is good; Mother, should I trust the govt.? Laugh? I nearly bought my own drink. Apologies to Roger Waters and Six Things The US Fed was signed on Xmas Eve, and these six things were in the fiscal cliff bill; Taxing Train Rides “Research shows fares have shot up 20% faster than wages in the past 10 years – and average season tickets increased by £1,300 for London commuters.”; McMansions Precisely what Garth has been saying; Russia ships poisonous meat back to US; SKorea doing well, and so is Taiwan; Intel plans to launch subscribe for one’s own channels, taking cable down a notch; Japan nationalizing mfg.?
*
1:34:43 doc. Making a killing on anti-depressants; 2:21 clip Boeing’s new spy jet; Baywatch in Manchester The Hoss showed up; Seal ends up 50 miles inland from floodwaters; 53:03 doc. The ‘net and evolving human consciousness. May go with transhumanism, a computer and human mixed together; Giant Pandas are good for medicines, and Best Bug Pix Curious looking things; Deep Fryer unless it’s bacon; 13 Objects that bit the dust last year; India launches new SS system. Is it to shift attention away from that gang-rape and murder?

#58 Snowbush on 01.02.13 at 1:16 am

Response to #46

Victoria, your daughter had the right priority that night, and that was to take a cab, if she took the cab alone the fare would have been the same, all in all everyone is safe, don’t worry it will come back 10 fold.

#59 Dave B on 01.02.13 at 1:28 am

Garth, in Ontario, what are the benefits for a first time home buyer? What can one expect to pay for closing costs (renting right now, still not looking to buy).
Also, would like to hear more from TO Bubble Boy and less from Wayne (dr) and smoking man.

#60 Hoof - Hearted on 01.02.13 at 1:41 am

#33 popados on 01.01.13 at 11:31 pm

my x landlord in richmond bc has over 20 townhomes for sale.ten are 1 year old rest are new.why dont they rent them out.HAPPY NEW YEAR TO ALL p.w. do they have mortgage.

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

Lemme guess….Landlord= Icelandic right…?

If not …….can I have ONE more guess ?

#61 robert on 01.02.13 at 1:49 am

All one has to do is look to the US and the fiscal cliff outcome tonight to get an accurate vision of where the World economy is really at. Are Americans really that blind not to see what the Government is doing. Kick the can once again hoping the problem will go away. I am utterly shocked that this fraud continues however in time the real judgement day will come and the us dollar and the bond market will collapse as the world comes to understand that the US is just another Spain. Garth I know you are totally on the mark when it comes to deflation but your market is totally flawed. The entire World economy is a Ponzi Scheme and the Governments around the world are the Directors. If you are near retirement be very careful as the value of paper certificates is about to become worthless as will the US Dollar. Its a master plan for the greatest ever redistribution of wealth and these cheap criminals we put in office are behind it. Cash is king period.

#62 tkid on 01.02.13 at 2:05 am

#34, don’t forget to include the possibility that the house loses value. Also, include property taxes and maintenance in on your calculations. And if you want to get very technical, include lost equity (how much money would the house generate if the equity in the house was invested and at what point would the return from the equity investment equal rent).

#63 monopoly money on 01.02.13 at 2:36 am

Thought I would share one of my new years resolution with the blog. First is to reduce exposure to paper assets, and not keep more than 5k in the bank. Sell most paper assets and buy physical gold and silver, but majority of it silver. So portfolio ends up looking like 70% precious metals, 25% stocks in precious metal companies and 5% cash! With 80% silver holdings and 20% gold. I don’t have a mortgage and just rent living as a single man, so all I do is save money and protect it. I feel that it is safer when you have most of your wealth outside the banking system with so much uncertainity.

Gold is making a come back as money in europe as well… http://finance.yahoo.com/news/tiny-gold-bars-latest-rage-143717362.html;_ylt=A2KJ3CRA0.NQwCwAkTLQtDMD

I think eventually the SFH price relative to gold will also come down more than it will come down in dollar prices… Today it costs approx 210 ounces of gold to buy SFH I think in the near future (maybe 4 -5 years) it will be about 100 ounces of gold buying the same SFH. Gold relative to house prices has been catching up over the last decade, I think the trend still looks strong.

#64 The end is nigh on 01.02.13 at 2:57 am

So the Americans have chickened out again.
Next on the agenda will be the debt ceiling.
Band Aid solution again.
$ 16,000,0000,0000 in debt.
$ 3,000,000,000 Deficit per day.
Wonder how much longer will the Chinese and the Japanese bondholders be patient?
Anese

Ci if

N

#65 Mark on 01.02.13 at 3:13 am

@#51 Hangfire:

Indeed, civil service salaries should be cut to a point where only otherwise unemployable people would dream of considering a public service job. After all, we need the best and brightest to be in the private sector creating the wealth. Not as civil servants who merely spend the wealth and produce nothing.

Heck, I’d submit that a very large chunk of civil servants not only are useless, but they actually impede the productive members of society from getting their work done and creating value.

#66 daystar on 01.02.13 at 4:03 am

Tomarrow, as good as your points are on RE Garth, this story should dominate somewhat:

http://news.ca.msn.com/top-stories/us-government-avoids-fiscal-cliff-1

… and this:

http://www.forbes.com/sites/anthonynitti/2013/01/01/problems-with-the-pending-fiscal-cliff-deal/

… explains the problem. As a consequence of not allowing tax increases to reset straight across the board or tackle spending cuts that would have contributed to an estimated $600 billion i.e. go over their self imposed fiscal cliff, the consequence if the link has the right math above is $600 billion in new tax revenue over… 10 years. That equates to $60 billion in new tax revenue annually and its likely that there will be no new tax increases for the next four years. Considering the federal deficit is around 1.1 trillion, it hardly makes a dent to their fiscal troubles.
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

Having said this, there is no way the U.S. will head towards fiscal balance under an Obama presidency and likely now for all the presidencies to come. It simply can’t come from spending cuts and growth alone and in a couple months once we find out what the numbers will be with spending cuts (probably a 100 billion or less), I would estimate the fiscal deficit for 2013 to be around $800 to $900 billion and close to the same for the next 3 years or so regardless of the end of war and future growth is negated somewhat by apprehension with their currency.

What does that mean? It means Q.E. to infinity. The money has to come from somewhere and it won’t all be foreign lenders. It means another round of Q.E. within 3 to 6 months. It means gold will continue to rise and the U.S. dollar will continue to drop. It means commodities will remain strong as they are priced in U.S. dollars distorting value fundamentals somewhat over supply/demand. It means continued low central bank rates specifically with the U.S. fed and continued credit expansion overall as a consequence until consumer credit is completely exhausted (some nations are near there now including us). It means continued zero to negative savings for nations like Canada and the only question from there is how long “infinity” truly is with Q.E. and I don’t have the anwer to that one. Exponuncially speaking it won’t be forever (but when i consider the challenges of global warming and environmental degradation along with the prospects of future uncontrolled population growth and resource wars, we don’t have forever).

As long as a nation (especially the size of the U.S.)meets its external debt obligations and its currency is still deemed as credible (Hazlitt and Mises says it best):

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

…Q.E. can continue on not indefinitely persay but for decades or more as long as there is confidence in the worlds largest currency but there’s no way to be sure that this will be the case and a nation like the U.S., if currency issues were major, the U.S. could reverse course and go protectionist and the entire economic world paradigm changes along with it.

A blogger nailed it yesterday. If we lend money to ourselves with printed money and spend it or use it, thats called counterfeiting. If a government does it, thats called Q.E. . Perfectly legal apparently… until its not. It depends on how the world reacts to it and how it impacts international trade and that, I would think, comes down to what the threshold of risk is without Q.E. for the U.S. economy and even then there is a time of unawareness and denial that follows.

In other words, every dollar raised by Q.E. will never have to be repaid because all a government has to do is more Q.E. to repay debt as it matures and this includes new debt foreign lenders won’t touch regardless of yield and derivative coverage. Sure, gross public debt will eventually skyrocket but because the need to borrow from outside the nation in question with higher interest rates is taken away, interest rates can stay low indefinitely as is the case with Japan… as long as you can continue to Q.E. without the rest of the world noticing (or maybe thinking of doing the same thing).

A few years ago and up til’ now, I always assessed risk through gross public debt to GDP, looked at balance sheets or net debt and external debt levels and 100% gross public debt to GDP was the tipping point in terms of sensitivity to higher interest rates. If the nation in question didn’t get it together, markets would raise rates and the nation would begin a death spiral and if deep spending cuts and steep taxation wasn’t implimented balance wasn’t acheiveble and lower rates didnt come, that death spiral would become certain. At 150% (unless there are asset surprises on the balance sheet), one should start considering throwing in the towel and look at the cost of bankrupcy without having to sell intangible assets (crown land, assets that are hard to value and dispose of quicky for top dollar). That paradigm has changed since the GFC and the arrival of Q.E. to america (especially because it keeps interest rates low and meets the need to borrow). Its my feeling that the U.S. has hit its “fiscal tipping point” so to speak right now and now that the U.S. isn’t going over the fiscal cliff, well, its pretty much the same thing as hitting the rocks below, its just a question of when.

Will it be decided numerically? What is the Q.E. tipping point now if the rest of the world doesn’t raise an eyebrow… 200% gross public debt to GDP? 500? 1,000%? Will it be decided by the rest of the world, that Q.E. to infinity means there is no way to sustain government debt now without it and that the economy becomes in a way a system that is unsustainable and as a consequence, broken and false but mirroring functionality until the time comes when the overall population within and outside america percieves it as correctly dysfunctional and has the courage and exit plan to do something about it?

I don’t know but the negative scenarios, the one’s I’ve purposely avoided aren’t good.

To the metalheads, sure there will be some profit in the years to come but to go long under this scenario, just remember that gold is priced in U.S. dollars. If it was another currency, it would be “thee” commodity to go long with but thats not the case. Its like owning a stock that suddenly stops trading and what you own is paper and you have no recourse through some form of bankrupcy because its not bonds that you own but a paper commodity priced in its currency.

If the U.S. ever does experience a major currency collapse and stops trading like a stock does, its paper could be worth nothing. you would have to get out sooner to a currency that would remain uneffected. We can’t excape that fact. Maybe if it was priced in something other than U.S. dollars? But its not. (not today)

Nor will physical gold feed you (you can’t eat it) if the U.S. dollar ever becomes worthless and too big to fail brings down the houses around it. Or clothe you and keep you warm at night because at the end of the day its just a chunk of metal. In the case of an outright U.S. currency collapse (if it ever happens), all gold on paper will be worth as much as all currency paper is worth which is basically nothing. The only gold in theory that would have worth is physical gold and thats worth something only if, in the new paradigm of a currency collapse, humanity wants to even honor it as something valuable. There is no guarantee whatsoever that that will happen. Clothes, security and 3 hots and a cot will be worth more than gold if our present economic system collapses and if I’m wrong (my record these days does mirror baseball averages) maybe all it would do under such doomer scenarios is put a bounty on your head. Seriously, does anyone really want to store it in their basements or safes until the end which may not come in their lifetime? I mean, if you can print money to no end, will the end be any time soon?

Maybe I’m just off and blowing off steam but I sure don’t like what I see developing and I sure don’t like particating in falsehoods. I’m not happy ’cause its all just… bad strategy.

#67 Buy? Curious? on 01.02.13 at 4:44 am

Garth, if you’re getting 5 million hits a year, why hasn’t some dumb-ass TV producer/executive dropped a wad of cash on your desk and beg you to do a TV show? I mean, gawd if they have shows like Honey Boo-Boo on TV, I’m certain you could do something. You’ve got a few zingers, you’re better looking than Hugh Hefner, you’d be perfect! Just promise me that you don’t hook up with anyone from CP24.

http://www.youtube.com/watch?v=1oHWvFrpocY&feature=player_embedded#!

#68 unbalanced on 01.02.13 at 7:29 am

To # 34. Do you live in Winnipeg (southend ) and work for the city? You sound like someone I know.

#69 unbalanced on 01.02.13 at 7:33 am

To # 39 T5>T4. In Canada you cannot get a 30 year mortgage. If you could there would be zillions lining up to do so. Buy a place, pay a low payment and invest the rest. Just saying.

#70 Robert on 01.02.13 at 7:42 am

Hey Furst your #4 post shows what you are about. Next time post a picture of yourself to see how dumb looking you are.

#71 Danno on 01.02.13 at 8:01 am

I think people pay down their mortgage now while the rate is low so they won’t get destroyed when the rates start to climb. Isn’t it better not to have three hundred thousand worth of debt suddenly rise in five years with whatever the new monstrous rates will be?

#72 Paul on 01.02.13 at 8:05 am

You know Garth, I’ve been reading your articles since your days in the Toronto Sun and I have the upmost respect for you. But come on, telling people to not pay down mortgages and basically borrow to invest like there is a guarantee that the financial markets will deliver. Odds are, people will not pay down their mortgage and lose their shirts on the market. It’s easy, just pick the right investments. Easier said than done for your average investor.

I think of my parents, immigrated in 1955, no education, worked hard all their lives, made minimal incomes, PAID off the house, banked and conservatively invested the rest. They retired at 60, 12 years ago, and could not ask for anything more. If more people followed this model, the average Canadian wouldn’t be in so much debt.

(a) I did not say to eschew paying off debt (mortgage payments do that), but not to do it to the exclusion of investing. (b) Where in that article did I mention borrowing? (c) I don’t buy stocks. (d) DIY investors reap what they deserve, having amateurs invest for them. (e) It’s not 1955. — Garth

#73 T.O. Bubble Boy on 01.02.13 at 8:10 am

$5500 more in the TSFA today… can the “debt ceiling part deux” fake crisis start soon so that I can go ETF shopping on sale?

#74 TurnerNation on 01.02.13 at 8:56 am

Not for long: everything in Whistler is reduced reduced reduced. This desperate realtor.

http://whistler.kijiji.ca/c-PostersOtherAds-W0QQUserIdZ4334620

#75 Steve on 01.02.13 at 9:02 am

“No you won’t. You are ascribing no value to all that equity. Classic mistake. — Garth”

So a house has value. I get that. But if someone (like me, for example) is retired, and owns and lives in a very modest house that is fully paid for, that value is not really relevant, at least in terms of income. Is it? Sure, I could use my fully paid for and modest house as collateral to take out a loan and invest the money, and I could even declare the interest as an income tax deduction. And the investment income and the income tax benefit might even outweigh the entire loan payment in most years. I get that. But it’s still a bad idea for a (young) senior citizen who is in a comfortable and stable financial position. Because in some years the portfolio will lose money. That’s the reality of investing, even with a properly diversified portfolio. A house is more than just a place to live. It’s home. And that has a great deal of worth above and beyond its dollar value. So for at least some people (like me), it makes sense to live in it, enjoy it, and ignore the fact that I could be using it to earn a few bucks in some years. Garth, I’m not disagreeing with you at all. I know a house has value, and I know that there are ways to take advantage of that value. But for some of us, it makes more sense to ignore that truth. At my stage of life, I don’t want to worry about whether or not my asset-backed portfolio is making or losing money. My little paid for house is not a potential source of investment income to me. It’s home. And I want to keep it that way.

Happy New Year, Garth. I enjoy the blog very much.

You have an overly-emotional view of your house and an irrational view of investing. But great taste in blogs. — Garth

#76 TurnerNation on 01.02.13 at 9:12 am

This will be Canada’s news in a few years, as H & the Globalists seek a complete reset into a Corporate Paradise. The war is coming home.

A man-man crisis. A new order out of chaos.

http://www.bloomberg.com/news/2013-01-01/danes-face-new-reality-in-struggle-to-end-crisis-premier-says.html

“Danes face a new reality as the Nordic country needs to provide more welfare services at a lower cost and stop a slide in its competitiveness amid a struggle to end a four-year economic crisis, Prime Minister Helle Thorning- Schmidt said.

The country will have to prepare for a “long, enduring stretch,” the premier said yesterday in a traditional televised New Year’s speech from Copenhagen.

..
Denmark can emerge from the crisis if we “understand that we are in a new reality,” she said. “The abundance of the last decade will not return.”

Denmark is struggling to recover from a real estate slump that’s pushed at least a dozen banks into insolvency since 2008. The International Monetary Fund has urged the government to consider direct stimulus measures to avoid a recession as house prices continue to sink ->>>>. Property values have lost more than 20 percent since their 2007 peak and will probably drop 4.7 percent this year, the government-backed Economic Council said Nov. 1. ”

[emphasis added]

#77 FTP - First Time Poster on 01.02.13 at 9:33 am

Spot on post Garth! With inflation running above 3% (really – does anyone buy the whole “core inflation” BS?) there is absolutely no point in paying down your mortgage unless:

a) You max out your TFSA and RRSP contributions, the latter I’m hesitant to continue contributing to
b) You have no kids and hence, no RESP to contribute to;
c) You have no HELOC, LOC, CC or Auto loan debt – these should always be paid down first as they’re higher interest.

People just dont get it. We have been screwed by our educators who would rather we understand quadratic equations rather than simple finance. It’s pretty evident that this is planned in order to keep people in debt servitude and pacified with iCrap & DWTS.

#78 AK on 01.02.13 at 9:42 am

#74 – T.O. Bubble Boy on 01.02.13 at 8:10 am
“$5500 more in the TSFA today… can the “debt ceiling part deux” fake crisis start soon so that I can go ETF shopping on sale?”

Not to worry, CNBC and BNN have already started the useless chatter.

#79 Goddess of Kamchak on 01.02.13 at 9:53 am

I hardly ever read your post anymore, the stupidity of some people is too discouraging. However while at a film with a friend who is stubbornly holding onto her condo because she likes the wood burning fireplace (?!!!), told me that because her Condo has now gone leaky, was given a $40,000 assessment. As a result, her retirement is postponed by at least another year. I spent hours explaining to her a year ago to sell while the market was still high and now look at it. We don’t talk about it anymore. I told you so doesn’t make me feel any better, just sadder for her.

#80 Herb on 01.02.13 at 10:24 am

#51 hangfire,

if you weren’t clueless about what government and public sevants do, you’d be dangerous. Thank dog you’re clueless!

#81 Seven Stars and Orion on 01.02.13 at 10:31 am

I’m not the sharpest guy money-wise. Reading some of these comments makes me feel like a mensa member comparatively. If your mortgage resets at 5 or 6 or 7% and it “destroys” you, well mon ami, you’re an idiot. You’ve been irresponsible, not to mention deluded.
sheesh.

#82 Seven Stars and Orion on 01.02.13 at 10:36 am

I’d like to retract the idiot comment and apologize.
Sorry.

#83 -=jwk=- on 01.02.13 at 10:40 am

Brendan:200k is nothing. You happen to have chosen a number that makes payoff roughly equal to investing .try again using the more typical 650k mortgage.

Hangfire:your pension rant is way off. I am a member og a private dbpp. We pay 9% ,employer puts in about 10.5%.pension is fully funded fron contributions alone. Do you save 9% gross from every paycheque since yoo

#84 mingeford on 01.02.13 at 11:18 am

# 69 unbalanced

Sorry, but I have to correct you. In Canada you most certainly can still get a 30 year, and even a 35 year mortgage if you have a 20% down payment.

#85 Canned Goods and Buckshot on 01.02.13 at 11:26 am

Skeptical

Please expand your post and summarize the points you are trying to make wrt Rothbard and Rees-Mogg. I am not an economist and need some spoonfeeding if you have countering views to Daystar’s comments.

My teenagers were making fun of ‘Merica. I trotted out the line “Don’t bet against the US.” My own words rung hollow. Many posters and the host support the continued hegemony of the US in financial strength, but I can’t reconcile the US debt with the status quo.

#86 };-) aka Devil's Advocate on 01.02.13 at 11:28 am

#279CrowdedElevatorfartz on 01.01.13 at 7:08 pm
@267 Mark
Porsche’s can also be leased…..

The impression of wealth doesnt necessarily mean a porsche driver is wealthy….

Very few automobiles, including Porsche’s, are appreciating assets.

Leasing such a depreciating asset can make sense. When you lease you are amortizing the depreciation over the term of the lease and paying a commensurate level of interest on the whole of the capital cost carried over the term of that lease.

A simple lease example might be a vehicle that has a new capital cost of $30,000 and a residual value of $15,000 at the end of a four year period. If you lease that vehicle over four years the depreciation would be $312.50 per month ($30,000 new capital cost less $15,000 residual after four years divided by 48 months). You would also pay the interest component over the term of the lease. Let pretend for simplicity sake that the interest rate is 0.0% as offered by many manufactures these days.

Now to buy that car even if you paid cash for it you would have tied up $30,000 for four years and get back that residual value when you disposed of it as a trade in or private sale in four years time.

What’s the difference between the two at the end of the day? Not much really.

Do the math for a $100,000 Porsche and I don’t think there is much difference between the probable net worth of the one who leases, the one who buys with cash or the one who finances other than all three have likely have a smaller penis than a Kia owner.

P.S. Garth I thought that mock up picture of the figurative Blog Dawgs attacking you was funny. Obviously you don’t share in my humour.

#87 };-) aka Devil's Advocate on 01.02.13 at 11:40 am

#76 Steve on 01.02.13 at 9:02 am

“No you won’t. You are ascribing no value to all that equity. Classic mistake. — Garth”

You have an overly-emotional view of your house and an irrational view of investing. But great taste in blogs. — Garth

I agree with Steve at #76 and the many other posters who have stated much the same.

Not everyone is an irrational emotionally driven house porn addict Garth. Many have modest reasonable homes bought and paid for within their means. You might even be one of them yourself I suspect or are your Hummer and Harley parked in the garage of a similarly pretentious pad?

Must I remind you that we just came through a credit crisis consequential to a credit bubble and still feeling the effects of it by these ultra-low interest rates seducing people into believing they too can be a rock star?

The way to build wealth is work for it. The way to build security is not be indebted to anyone by paying debt off. Eventually you might have worked your way into a position that you have money work for you rather than you continuing to work for it. Yet not everyone will and ultimately not everyone can be a Rock Star but if you work hard your chances are better that you might be.

WORK

But above all… ensure that, rich or poor, you enjoy life.

#88 Steev on 01.02.13 at 11:44 am

#34 Brendan:

Good, well thought out post…here’s my take on it.

You had John Smith take out a 20 year mortgage to at 200K. He sounds like a conservative guy so let’s say he put 20% down and his house is worth 250K. That’s a pretty modest place and if you’re using the rule of 3X income then John and Jane Smith only bring in 83K between the two of them, or about 40K each.

In that case a 30K windfall from doing the Garth approved method isn’t small potatoes, it’s close to a full year’s salary after tax.

#89 Eaglebay - Parksville on 01.02.13 at 11:52 am

#69 unbalanced on 01.02.13 at 7:33 am
To # 39 T5>T4. In Canada you cannot get a 30 year mortgage.
________________
You sure can. Where have you been?

#90 robert on 01.02.13 at 11:56 am

The market rally today is going to be short of legs and it would not surprise me to see it pullback by market end. As soon as the fools and the day traders come to understand that nothing was solved fear will return to the markets. The US is bankrupt and soon we will see the bond market demand a solution. Lets see how about two points in a week or 4 points in a month. Now talk to me about where Canadian RE prices would be should this happen.

The market is up more than 250 points. Of course it will pull back on profit-taking (not on fear). Since last January investors have made about 14% on US equities and about 10% on a low-impact balanced portfolio. Sounds like you’re not one of them. — Garth

#91 Stoopid Idiot on 01.02.13 at 12:05 pm

#66 Daystar

You’ve been reading…. Your scenarios will play out in rapid succession. But it’s not the end of the world. The new money will be backed by something to give the semblance of confidence. What that may be may or may not have a Gold Backing… and in time, will revert back to what Bankers and Politician like.. Fiat. My parents always had six month of food in the house, that was not because they were religious fanatics but Dad would say, incase he lost his job or was hurt or illness. He would say tomorrows food at todays prices. I have understood inflation most my life and will simply say it’s the tax of the stoopid… (Stoopid is Dumb on Purpose) Diversification is the only strategy to the balance and protection any investor or gambler should seek (investing or gambling can sometimes be hard to distinguish) I hold physical Gold and well run gold producers (shares) with proven 43-101 reserves and low production cost. With the way things are in the world today my weighting is a little stronger than historic levels at 20% of net worth. Again … the malinvestment has to and must come out to purge the debt… So the correction is inevitable (Boom Bust Cycle)

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

Doomer alert
#247 TurnerNation

Anyone who uses the internet buzz word “fiat money”, I tune out.
We use MONEY, as your parents, grandparents, great grandparents, great-great grandparents, great-great-great grandparents, great-great-great-great grandparents did. Going back to biblical times.
Get over it.

Think of how stupid the average person is, and realize that half of them are stupider than that~

George Carlin

#92 Doug in London on 01.02.13 at 12:10 pm

@William of the North, post #43:
I don’t know about Kia owners specifically, but many owners of small econobox cars are cost conscious types who want to keep their transportation costs down so they have more money to invest. Some even come to this blog for advice on how to invest that money they save.

#93 Form Man on 01.02.13 at 12:25 pm

#92 stoopid idiot

While I view the ‘Austrian school of economics’ with a fair amount of scepticism, I do see evidence of mal-investment in real estate as a result of cheap borrowing costs. In the Okanagan right now there is no shortage of inventory in any category. Residential, commercial, retail, office space, etc, is amply supplied with relatively high vacancy rates. In spite of this, developers are continuing to build on spec because ‘money will never be this cheap again’. Of course this overbuilding simply makes the problem worse. When interest rates were higher in the past, I do not recall seeing the same level of risk-taking ( even though vacancy rates were lower ).

#94 Southern Ontarian on 01.02.13 at 12:39 pm

#85 mingeford
and
#90 Eaglebay – Parksville

You guys don’t understand: in the States, you can get a mortgage with a 30-year TERM.

T5>T4 was completely correct that we can not here, and also has the coolest handle ever.

#95 mingeford on 01.02.13 at 1:07 pm

#95 Southern Ontarian

I take your point. I misunderstood.

But a 10 year fixed mortgage at 3.79% ain’t too shabby.

#96 JdeLyon on 01.02.13 at 1:29 pm

Right said Garth!

#97 Danno on 01.02.13 at 2:21 pm

Thanks for the apology…not needed… I rent.

#98 Dupcheck on 01.02.13 at 2:36 pm

We all need a place to live. It gets emotional when talking about the roof over your head. Safety net is more important to a lot of people than more monetary gain. I know you make more profits by investing and not paying off your mortgage, but people need a roof to be safe so no one will ever take it away from you, say when jobs are scarce.

If all of us had their main residence (roof over head) paid off, we would definitely consider higher income choices such as investing more.

#99 Devore on 01.02.13 at 2:54 pm

#63 tkid

And if you want to get very technical, include lost equity (how much money would the house generate if the equity in the house was invested and at what point would the return from the equity investment equal rent).

A) It’s ‘opportunity cost’ not ‘lost equity’.
B) It’s not just something you include if you ‘want to get very technical’. It’s something that should always be included, especially when you’re dealing with a paid off house worth hundreds of thousands or more. Sure, you no longer have to pay rent just part of it, ie property tax + maintenance), but now you have a bunch of money tied up in your house.

Like with double-entry bookkeeping, you have to account for both sides of the story. Assets are balanced by liabilities. You’re counting the benefits of house equity (no rent), but not the downsides (opportunity cost). Essentially, it’s a feel-good calculation. I feel good living in a house that I own. That’s fine, just don’t try to justify it as something else (smart investing).

#100 Devore on 01.02.13 at 3:13 pm

#67 daystar

Maybe I’m just off and blowing off steam but I sure don’t like what I see developing and I sure don’t like particating in falsehoods. I’m not happy ’cause its all just… bad strategy.

Not at all. At some point you come to the realization that if you’re betting against the system so heavily, how do you collect if you win? If “the collapse” happens, how much is the gold in your pocket worth, exactly? Maybe should have had a pack of smokes or beef jerky instead.

In the case where the person sees this, and decides to do it anyways, it’s the same as bubble investing: how and when do you cash out, capture the increased value in a way that is valuable today? In a bubble/pyramid scheme, everyone with paper profits thinks he can get out before it collapses. That when the music stops, they will have a chair under their butt. Just one more day, one more percent, one more dollar. Can’t miss out and be the fool that sold too early.

Metalheads will tell you they don’t plan to sell, ever. Some will say otherwise, but push them for their exit plan, target price, etc, they got nothing. So that only leaves one thing. They’re hoping, that on the other end of “the collapse”, when “new world order” comes, and they’re still alive, their gold will be worth something, and they will be better off vs not having it. That’s a mighty far bet.

#101 Devore on 01.02.13 at 3:17 pm

#72 Danno

I think people pay down their mortgage now while the rate is low so they won’t get destroyed when the rates start to climb. Isn’t it better not to have three hundred thousand worth of debt suddenly rise in five years with whatever the new monstrous rates will be?

This is the exact opposite of what people should be doing, which is not very surprising. Crowds have never been known for their smarts. You pay off expensive debt. Cheap debt, take your time. With a 5 year fixed, you know the exact day when your rate will go up! How frickin cool is that? Before you renew at the high rate, take your savings/investments, and throw it at the mortgage, THEN, now NOW when money’s cheap. (as long as your investments are growing more than your mortgage interest after taxes/expenses, not TERRIBLY hard)

#102 Westernman on 01.02.13 at 3:26 pm

Herb @ # 82,
I can only assume by your constant defense of the the parasitic civil “servant” class in Canada you must be one of the pigs at the trough…
Let me assure you Comrade Herbie the view regarding civil “servants” in our delightful little Socialist Nanny-State looks a lot different when you are one of the few producers carrying these boat anchors on our collective backs.
But then again, you probably wouldn’t know anything about being productive would you…

#103 house burden on 01.02.13 at 3:38 pm

Yep O-Blame-Him just kicked the (fabricated) fiscal cliff down the road.

No tax increase for the poor, but government will get then in terms of inflation. You just wait and see!

Its a bandage on the debt wound. But as most people all know, you can bandage up a wound without taking care of it. After a while when you peel the bandages away the green gangreen puss starts to flow out.

Say good bye the to green back, but on the other side of the coin, companies should do good (real assets and real things)

Here’s a clip from Peter Schiff and his take on the past few days. Also Note Schiff has been pretty accurate on his predictions on alot of things.

http://www.youtube.com/watch?v=5B9ycOLil7s&list=UUIjuLiLHdFxYtFmWlbTGQRQ&feature=player_embedded#!

#104 Tkid on 01.02.13 at 3:41 pm

#102 Who peed in your cornflakes this morning?

#105 daystar on 01.02.13 at 3:45 pm

#98 skeptical on 01.02.13 at 1:19 pm

Gold is not a currency, skeptical. Do you see anyone in the world paying for stuff with gold or walking around with gold in their pockets? No. Thats not to say that you couldn’t pay for something with physical gold but its impractical to do so, just as its impractical to pay from something with a truck load of wheat or raw lumber. “You want to pay with gold? I don’t have a scale! Get one? What? A fleck of gold for chewing gum, what am I supposed to do with that?” Gold’s value is abstractly established as hedge against currency instability and as a commodity that goes through the same supply/demand fundamentals as all the rest. My point is, beware what gold is priced in and for that matter, what all other commodities are priced in (U.S. dollars).

A few quick words and I’m gone from Garth’s blog for a while, already explained why but mainly, perhaps its because I’m not George Carlin. Case in point. Did we ever really see George laugh at his own jokes? No, because he was too busy being satyrical and cynical to take the time and as such, I think it contributed to his not seeing a 70th birthday (may he RIP).

Readers, look around you. Cynicizm is the product of negative judgment coupled with pessimism that arguably breeds hopelessness and disengagement. Its rooted in a belief that everyone acts upon their own self interests 24/7 and thats just not true. Its not an environment that breeds participation towards a serious effort towards solutions but more like a “look, the world is shit, don’t bother trying to fix it, let it fail”. Cynicism is like a negative judgment that is cast with an intellectual vanity behind it that rules out any form of healing, comebacks or any room for being wrong with a flavor towards denigrating anyone who disagrees with you. (a couple of Garth’s entries back, denigration in the commentary was at its ugly finest)

Don’t get me wrong, I actually like the guy and cut him some slack because the roles we play condition us whether we are aware of it or not and I agreed with a good deal (not all of it obviously) of what he had to say and we do have to learn to hold fast on our convictions but his “truths” were far from complete. Perhaps its because I’ve never considered George to be a team player. How can anyone who denigrates:

http://dictionary.reference.com/browse/denigrate

… anyone who disagrees with you be considered to be a team player? It can’t happen an as such its dangerous because it keeps individuals from seeing it from all angles or angles beyond our own (and getting help as a consequence from those outside of ourselves looking in).

Off to a hermits repose now (or something like it), thinking about the systems we’ll need to replace the ones that will inevidably fail but for the most part, I already know. I don’t know the timelines and levels of loss or damage we’ll collectively face before we get there or the full details of the systems to come but I do know the general system we are headed for and its highly functional. Others do too, I’m not alone but you’ve got to be a team player to see it for what it is.

Best of luck to you all.

#106 daystar on 01.02.13 at 3:50 pm

#103 Devore on 01.02.13 at 3:13 pm

Well said. Like the guy in “The last Samuri” says, “I’ve enjoyed our conversations”. Cheers Devore.

#107 CalgaryRocks on 01.02.13 at 4:05 pm

102 Devore on 01.02.13 at 2:54 pm
#63 tkid

And if you want to get very technical, include lost equity (how much money would the house generate if the equity in the house was invested and at what point would the return from the equity investment equal rent).

A) It’s ‘opportunity cost’ not ‘lost equity’.
B) It’s not just something you include if you ‘want to get very technical’.

Also, how much would you miss this money when (not if) your crack investment adviser loses it in the stock market?

You may get 7% returns for 10 years but then something fundamental changes in the market, buddy boy becomes senile or decides he’s been to conservative and the next thing you know, you’re left with 50% of your portfolio. Maybe less if he decides he should use some of your money for a down payment on his boat.

Just saying…When you trust your money to strangers, one of these days you’ll trust the wrong person.

#108 Is there a site that lists foreclosures in Whistler? on 01.02.13 at 4:07 pm

I see a few people listing the foreclosures in Whistler, does anyone know a realtor in Whistler that deals only with foreclosures? I’d like to know their website

#109 Old Man on 01.02.13 at 4:07 pm

Now here is a tip for those that own an income producing property, be it commercial or a few modest apartment units. I agree with Garth for the most part, but for a conventional mortgage of $1 million plus one can get a 25 year term with an Insurance Company. It is important to understand the rate will be higher, but within this time frame you will be paying them back with discounted dollar values. Something to look at with accounting, as a longterm bet, and just a few will offer such, and must be shopped.

#110 Sacola FNC on 01.02.13 at 4:11 pm

Good RE posting, but financial asset recomendations a little Bay Streetish.

U.S. Labor Participation Rate at a 30 year low, the number of those on Food Stamps at an all time high, record national debt, and a trade deficit that will not go away in my lifetime-I am uncertain where you get your bullishness on the U.S. economy from.

#111 Rob on 01.02.13 at 4:12 pm

Don’t forget the 2.5% dividend that the S&P and TSX paid out during that year. Total returns were closer to 16% for S&P and 6.5% for TSX in 2012.

“In contrast, US stocks advanced 13.3% (the S&P 500), while the laggard TSX gained just 4% – but still beat your house.”

#112 Form Man on 01.02.13 at 4:35 pm

#105 westernfool

Since Stephen Harper has proven to be one of your so-called ‘commies’, your only hope now is to leave Canada for somewhere more suited to your fanatic beliefs. I for one shall be sad to see you go, as the burden of subsidizing me and my socialist friends and family will fall to an ever-shrinking pool of knuckle-dragging anchor carriers.

Perhaps you will be lucky enough to find a new home where there are no women at all ( a monastery or gay lifestyle resort would provide a couple of options…..)

#113 espressobob on 01.02.13 at 4:44 pm

#103 Devore

Excellent comment!

#114 Old Man on 01.02.13 at 4:46 pm

I want to make this clear about a commerical or multi- unit small apartment complex that is conventional for $1 million plus fixed for 25 years, as a few insurance companies in Canada will fund the deal, and if a sale comes up will be transferred to a new buyer. You will pay a higher rate of interest, but over time be paying them back with discounted cost of money.

Now, I believe in time we will once again have hyper inflation as part of a business cycle, so what if in 10 years from now the cost of money for a prime rate commercial type mortgage goes to 12%. This will make your property act like a Bond for a sale, as this mortgage can be assumed, or you can just sit back and smile at it all.

The value of a commercial type property depends on cashflow which increases over time, but if the debt mortgage is fixed for 25 years, it would be a safe bet in my humble opinion to assume higher rates, and thus boost the property value going forward. The mortgage payment with a higher rate might seem a bit excessive now, but in 10 or 15 years from now will look like a joke.

#115 CalgaryRocks on 01.02.13 at 4:52 pm

#111 Is there a site that lists foreclosures in Whistler? on 01.02.13 at 4:07 pm
I see a few people listing the foreclosures in Whistler, does anyone know a realtor in Whistler that deals only with foreclosures? I’d like to know their website

There really is no benefit to buying a foreclosure once it’s been given to a Realtor and put on the market.

You’ll just pay market price by definition. BTW, any foreclosure that happens to be priced right will be snapped up by the many insiders that are handling it before it gets to market.

#116 Popo on 01.02.13 at 5:17 pm

Couple buys a house after the coming correction and start the 10 year plan. As in all financial plans lets assume a few facts .They have a 200k mortgage at 5%.Maybe boomer parents helped a little with the downpayment that they were lucky to have saved by renting.Both have reasonable jobs and are able to handle mortgage payments of $1314
TMI (taxes maintenance and insurance) and other living expenses are budgeted at 2000 per month . Total cost equalling approx. 40k per year . Now comes the fun this hard working couple have 10k left over each year for investment and have 2 options .
1. invest it each year for the next 10 years and hope to make the 7%. If they do after 10 years they will have
147k portfolio, 124k mortgage, paid 81k interest ,and equity in the house which at worst they hope will equal what they paid. 76k(principle)+147k(portfolio)-124k(mortgage) =99k to the good (plus downpayment)= diversified
2.take the 10k and put it against the mortgage each year.
in 10 years you will have 0 portfolio 0 mortgage paid 55k interest
200k (principle)=200k to the good ( plus downpayment)
=not diversified
Now they start the next 10 year plan. What can you live without a house or a portfolio?

#117 Pr on 01.02.13 at 5:17 pm

My realtor sold me a two story house- one story before the sale, another after.

#118 Bill Gable on 01.02.13 at 5:31 pm

#21 Twooping.

HAM is a fiction, for the most part.

China is in deep economic doo doo. (*Crooked Party members that have run banking schemes that make Madoff look like Honey boo boo).

It is a giant ponzi scheme.

As for people wanting to move to Dampcouver, because it SUCH a great place to live – they are quickly realizing this is a dead end.

No jobs, a City with huge Civic debt and infrastructure from the 1940’s.

Watch the taxes hit the ceiling on these million dollar dumps.

Many are are Oil heated 1950’s era, crap.

Can you read?

Try following what Mr. Turner has been saying and wise up.

You are living in cloud cuckoo land – and we are about to find out how many people are (thank you Warren Buffet) swimming naked, when the tide goes out, come this Spring.

Take a look at what’s happening now in the Okanagan and in that snobby Potemkin Village, Whistler.

#119 unbalanced on 01.02.13 at 5:38 pm

To # 91 Eaglebay-Parksville, maybe I should have explained it a little better so you could have undesrstood it. Show me a 30 year term. If you want to know where I have been. I retired 3 yrs. ago at 53. I still pull in 90k. Just saying.

#120 CrowdedElevatorfartz on 01.02.13 at 5:43 pm

@115 Form Man
I really dont think Westernman’s beliefs about an unsustainable civil servant class is “fanatical”.
Under the Harper govt civil servants have grown to an unsustainable drain on the public coffer. The defined benefit pension plans are subsudized by the average taxpayer( those would be the ones carrying “your” financial anchor on their backs.

Enjoy the lifestyle while it last because with 500,000 Boomers retiring per year for the next 8 years……. There are more and more anchors leaving the good ship “Delusional”…..

#121 Old Man on 01.02.13 at 6:05 pm

#120 Popo – I believe the point that Garth has made all so clear which I agree with, is that in the past few years too many couples got hooped who never bought a home with high leverage, but bought the pie in the sky buying debt; not a home at all. Now for them they will all be kicked under the bus as a lost generation of greater fools. They are toast, and within context would be fools to throw excess cash to pay a mortgage down, as too late for them, so now what?

#122 jess on 01.02.13 at 6:09 pm

itchy and scratchy

http://www.propublica.org/article/can-you-fight-poverty-with-a-five-star-hotel

#123 Twooping on 01.02.13 at 6:09 pm

#122 Bill

“Can you read” “cuckoo land” “wise up”

Don’t be a dick, I was merely pointing out a stat. There’s no reliable data avaliable for how much HAM there actually is so you saying that it’s fiction is not accurate.

#124 RedDeer1 on 01.02.13 at 6:09 pm

Why do the mortgage rules in Canada not provide or allow for a traditional fixed 25 year mortgage as Canada used to and the US still does, rather than face a typical 5-year renewal?

The Bank Act. — Garth

#125 Rob on 01.02.13 at 6:12 pm

#51 Hangfire, only is it was that easy!

#126 hangfire on 01.02.13 at 6:23 pm

#7 Turner nation…..multiply your example by the over a million civic servants on all level of government…inc all social disorders and oddities….as well as crown corps. cities, depts..etc etc….and the waste will blow your nut off. Most people don’t realise how much fiscal drag the civil service has..dollar wise..on the taxpayer. 100 dreds of billions flushed down the toilet every year on waste, duplication special interests and redundancy……and then the redundancy is perpetuated in the form of lifetime pensions and politically correct subsidies …..while kids starve…..they get fat…..somethings wrong with Canadian social math. Cut the civil service by 50% right now…..eliminate the pension sytem and give civic servants the same pension as all Canadians. Stop all spending that cannot be accounted for…..First Nations debacle anyone? Reduce the number of seats in Parliament to 10…..farm out all work to private contracts……sensible things……mo more 200,000 sky train cops…..or piggish ‘councilors’ raking in more than the PM.

I’ll tell ya…this country could run with milk and honey if we got rid of the lard butts……..reducing the ‘staff’ would also mean we’d reduce taxes by the same amount….50% straight off…..lots more money for people to spend and create a real economy instead of the one we have created on debt.

#127 Westernman on 01.02.13 at 7:06 pm

Form man @ # 115,
Only two types of people would vigorously defend Civil Servants as they are so incorrectly referred to –
1. A member of the thieving class himself.
2. a complete idiot who enjoys being robbed.
That makes you a thief or an idiot – not very flattering…

You have been warned before to keep this seething vitriol bottled inside your troubled head, and not bring it here. Last time. — Garth

#128 Suede on 01.02.13 at 7:29 pm

Read the Fiscal Cliff Bill in its entirety if you like.

Lots of juicy items in there, but be prepared to get dizzy.

http://www.scribd.com/doc/118551686/Fiscal-Cliff-Bill

#129 Old Man on 01.02.13 at 7:30 pm

#128 RedDeer1 – Garth is being too kind about it all, as any residental mortgage was always 5/25, but Caesar and K needed to win an election, so changed the rules which was all political. They were willing to screw over the masses by changing the rules to explode the GDP to grandstand about how well the Reform Party was doing, and all went in to buy Real Estate; all a con job to win a majority. Now after the election pay attention how fast they changed the equation – you fools who voted for Caesar got hooped, and now what? Now pay attention as the spin offs involving an explosion in Real Estate amounted as much as 2% to the GDP, and all was well under Reform.

#130 Westernman on 01.02.13 at 7:39 pm

Seething vitriol? Perhaps you should go back and read Form Mans post @ # 115…
I know it’s your blog and all but shouldn’t you at least make a token attempt at fairness?

Like you’re fair to hard-working nurses, cops, paramedics and teachers? No. — Garth

#131 Cow Man on 01.02.13 at 7:42 pm

#131 Westerman

You are so correct. The primary purpose of all levels of government in Canada is to benefit government employees, not the tax payers who cover the bills.

#132 Bad strategy — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate « The Affluent Boomer™ on 01.02.13 at 7:48 pm

[...] via Bad strategy — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. [...]

#133 Freedom First on 01.02.13 at 7:52 pm

Garth, it is disturbing to just finish reading the posts I hadn’t read yet, and hear people arguing the wisdom of having a paid for house, with no other assets, as they can accumulate those other assets later, in their mind. Oh, to live in a world where everything goes according to one’s plan. Sadly, they do not even know how ignorant they are. People, YOUR thinking is why so many millions worldwide have gone bankrupt investing in 1 asset……..RE. Wake up!

#134 Smoking Man on 01.02.13 at 8:15 pm

#131 Westerman

DELETED

#135 Nostradamus Le Mad Vlad on 01.02.13 at 8:35 pm

-
For Garth and USSR, NKorea + USSA.
*
Red Cross and EZone First para. sums it up pretty well; Google and Bermuda Taxes; 77% of households The remaining 23% are almost certainly part of the 1%; Mega Scandal starring Obi-Wan Kenobi of Star Wars; Eight Golden handshakes in the fiscal cliff, and Other Stuff While taxpayers are hit by the FC, friends of the WH did quite well; BoE and ‘Net Not the Carneymeister.
*
Syria’s Oil Bingo! Just like Libya’s oil, gold, fresh water and public central bank; 7:46 clip Agenda 21 being implemented, with rural areas going. Explains the attacks on small farms, and Orwell / Obomba At least Orwell didn’t say dumb things; Being Overweight may lengthen lifespan; Psychiatry “This is an old trick from the USSR; to declare anyone unwilling to do as they are told by the government as “mentally ill” to both stigmatize them and allow incarceration without trial in a “mental health facility” (prison with a different paint color).”; wrh.com, Newtown shootings and Obomba’s crocodile tears, 2:38 clip “Do these morons at ATF even know how a real gun works?”; wrh.com, 3:36 clip Fox News on SSRIs and shootings, and Illinois Total gun ban arriving? 1:22:05 doc. GWarming leads to GGovernance, and What GW? Check the report by scientists on Alaska; Undersea Volcanoes, not Frank Drebin farting.

#136 Herb on 01.02.13 at 8:44 pm

#105 Westernmoron,

ah, you must be one of “the responsible people in the country” hangfire referred to at #51!

Now do become responsible and answer the questions I have been asking you and your cohort of the simple persuasion for months: what functions of government at which levels are you prepared to reduce/discard to achieve your public service savings; which private sector comparables are you relying on to determine your PS compensation package ; etc., etc.

I’d like to see your public service function at half the current size and compensation. But you Neandercons don’t worry about factual matters as long as you can preach the ideology.

#137 Westernman on 01.02.13 at 8:45 pm

I don’t debate some of them are hard working and in their own minds think they are doing good but the point is there is WAY too many of them and they are paid WAY too much… this is not debatable.
I contend that most of the civil “service” could be turned over to private contractors and the Canadian taxpayer would get much needed relief…
Now, I ask you in all honesty – why should taxpayers foot a bill that is twice as high as it needs to be?
This is not vitriol, this is common sense…

Move on. — Garth

#138 Westernman on 01.02.13 at 8:55 pm

I see by your response I am right again…

No, just tedious. Move on. — Garth

#139 Westernman on 01.02.13 at 8:57 pm

Herb @ # 140,
This is not a court of law,Sir, and i am under no obligation whatsoever to answer to the likes of you…

#140 45north on 01.02.13 at 8:59 pm

Pr My realtor sold me a two story house- one story before the sale, another after.

pretty funny

Devore: talking about people that hold gold:

They’re hoping, that on the other end of “the collapse” and they’re still alive, their gold will be worth something

They key phrase being “and they’re still alive”. Julian Philips wrote an article “Confiscation of Gold – then what”. When gold is confiscated, it becomes illegal. You cannot take out a little bit each day and go buy some groceries.

http://www.financialsense.com/contributors/julian-phillips/confiscation-of-gold-then-what-part-three

#141 Chemical Valley Kid on 01.02.13 at 9:04 pm

#38 William of the North

A portfolio of Funds alone nailed 10% in 2012. If you paid attention to the market at all there was quite a bit of growth in 2012 and if you didn’t make a return of at least 5% you should either hire a good manager or fire the one you have (which may be yourself). Good Companies set record profits and increased dividend payouts generously.

#142 Devore on 01.02.13 at 9:06 pm

#110 CalgaryRocks

Just saying…When you trust your money to strangers, one of these days you’ll trust the wrong person.

You trust your life to complete strangers every single day, and you’re worried about some money? That’s not very rational, but humans are provably known to be terrible at judging risk.

Just saying.

#143 MovingUpInADownMarket on 01.02.13 at 9:09 pm

http://www.realestatenorthshore.com/property-3320.php

North Vancouver House List for $1,325,000 at the end of June, price just dropped to $899,000 or 47% lower. Will it sell now?

#144 guy from toronto on 01.02.13 at 9:15 pm

hey Daystar, thanks for all your postings and hope that you’re not a hermit from this blog for too long!!!

I’ve really enjoyed your perspective and appreciate you taking the time to share your thoughts.

all the best for 2013!

#145 RedDeer1 on 01.02.13 at 9:22 pm

Garth,

Why do the mortgage rules in Canada not provide or allow for a traditional fixed 25 year mortgage as Canada used to and the US still does, rather than face a typical 5-year renewal?

The Bank Act. — Garth

>>>>
Thanks. I do understand Canada used to have (minimum) 25 year fixed mortgages (as my family had one), but as the banking system evolved so did the gov’t legislation. I found the following at
http://www.canadamortgage.com/articles/learning.cfm?DocID=37

Under the initial terms of the 1954 legislation, borrowers had the right to a minimum of a 25 year term and amortization period which, with the consent of the lender, could be extended to 30 years. In 1969, the lending regulations were changed to permit renegotiations of mortgage agreements during the life of the debt as an alternative to fixed interest rate mortgages (e.g., five year call option or term).

-With this I was wondering why longer terms aren’t being considered by the banks 10yr, 15 yr, or even 20 or 25 yr, particularly if entering a deflationary period, potentially long-term low rate environment? I believe the current act allows longer than 5 or 10 year terms, the banks have just not been interested in offering that option in their product.

#146 RedDeer1 on 01.02.13 at 9:25 pm

#133 Old Man
I believe your statement of the bank mortgages always being 5/25 in incorrect as the Act and lending practices have been changed (monkied with) with changing economic/political/banking environments. See #149

#147 Sir Finance on 01.02.13 at 9:26 pm

“Couple buys a house after the coming correction and start the 10 year plan. As in all financial plans lets assume a few facts .They have a 200k mortgage at 5%.Maybe boomer parents helped a little with the downpayment that they were lucky to have saved by renting.Both have reasonable jobs and are able to handle mortgage payments of $1314
TMI (taxes maintenance and insurance) and other living expenses are budgeted at 2000 per month . Total cost equalling approx. 40k per year . Now comes the fun this hard working couple have 10k left over each year for investment and have 2 options .
1. invest it each year for the next 10 years and hope to make the 7%. If they do after 10 years they will have
147k portfolio, 124k mortgage, paid 81k interest ,and equity in the house which at worst they hope will equal what they paid. 76k(principle)+147k(portfolio)-124k(mortgage) =99k to the good (plus downpayment)= diversified
2.take the 10k and put it against the mortgage each year.
in 10 years you will have 0 portfolio 0 mortgage paid 55k interest
200k (principle)=200k to the good ( plus downpayment)
=not diversified
Now they start the next 10 year plan. What can you live without a house or a portfolio?”

Popo- Your scenario doesn’t consider time value of money. Add 10 years to that strategy and see what happens.

#148 Form Man on 01.02.13 at 9:48 pm

#140 Herb

Westernman is a great example of why the neocon cause is sputtering. He brandishes wild talking points, and then retreats into cowardly nonsense ( or sullen silence) when asked to back up positions with facts. The self-immolation is fascinating to watch.

#149 Cigar Goop on 01.02.13 at 11:00 pm

Glad I paid off the mortgage in 2008. Debt is weakness. No debt is power. Profits are maybe, expensis are for sure. Having a job is not a sure thing. 7% on investment from diversified and balanced is not a for sure. Opportunity costs of owning a house are balanced against rent. Put it all together and the pay off your debt. If you just bought inflated value, sell. If not pay it off. When they call you into the office and shut the door you will still be able to sleep.

#150 TurnerNation on 01.02.13 at 11:14 pm

“Like you’re fair to hard-working nurses, cops, paramedics and teachers? No. — Garth”

From what I’ve heard Toronto’s EMS is suffering shortages while the cops are best-paid in the land.
According to former Toronto mayor John Sewell writing in the local ‘www.thebulletin.ca’, they answer on average one call per shift. And what of their $65 paid traffic duty rate. That’s all gravy.

Toronto’s police budget is a scared cow as the US’s military spending is. Apparently, a even a penny of cuts will result in unmitigatable doom.
What is it, 1 out of 4 Toronto tax dollars go towards the budget that’s taken with 80-90% of salaries and benefits?

#151 Snowboid on 01.02.13 at 11:56 pm

#141 Westernman on 01.02.13 at 8:45 pm…

“…I contend that most of the civil “service” could be turned over to private contractors and the Canadian taxpayer would get much needed relief…”

Wrong, this was tried in BC starting in 2001, and the majority of the public service work ‘turned’ over to the private sector ended up more expensive.

Not a small bit more expensive, a lot more!

Maybe you should expand your research material beyond the backs of NeoCon cereal boxes.

#152 walltiger on 01.03.13 at 11:53 am

Seething vitriol? Perhaps you should go back and read Form Mans post @ # 115…
I know it’s your blog and all but shouldn’t you at least make a token attempt at fairness?

Like you’re fair to hard-working nurses, cops, paramedics and teachers? No. — Garth

I don’t think cops should be in the list. they are the most overpaid civil servants. I have many friends who are cops, and their biggest complains is lack of things to do on a day to day basis. Politicians in Canada are all too gutless to bring this powerful group inline, unfortunately.

#153 walltiger on 01.03.13 at 12:03 pm

#155

I totally agree with you.