It’s here

fire

How’s that for symbolism? On the very day the Dow hit an all-time high, our real estate swooned. While one was being pushed higher on a wave of investor optimism and corporate profits, the other limped and sputtered.  Could this be that moment when even your mom-in-law starts thinking it might be better to have a million dollars than a used bung in Etobicoke?

In case you missed it, the stock market tanked on March 9th, 2009. That was the day millions threw in the towel and sold. It was also the moment of least risk and greatest opportunity, the cheapest point in a dozen years. The equity market high came on March 5th, 2013 – at least the latest one. There are more ahead. In the intervening four years the gain (for US markets) has been 128%. That might even beat the average Vancouver crack shack.

So momentum has turned. While Canadian banks bloat with record profits and people with balanced portfolios make double-digit returns, house sales are tanking and prices are under pressure. Everywhere, it seems – Vancouver, Winnipeg, Halifax, Edmonton, Vancouver, Montreal, the Lower Mainland, even Calgary – deals in February trailed those of a year earlier, in some cases dramatically. Prices are now falling literally everywhere in BC, a harbinger for the nation.

As I mentioned here Tuesday morning, the latest battleground is the GTA, a six million person market where realtors are rock stars and developers have cults. There are more new residential towers under construction (almost 150) than any other city in the world. More than New York and Chicago put together. More immigrants than the rest of the country combined. If Sodom and Gomorrah got hitched and wanted a condo, it’d be here.

For months the house pushers have insisted Toronto’s different, embarrassing themselves with comparisons to London and Singapore, but without all that useless history, culture or economic growth. Falling sales weren’t on the agenda. Falling prices, never. Even though the average family can’t afford the average house, without extreme debt and no savings, the Toronto Real Estate Board insisted rising values were completely normal. Forever.

Until now.

This week’s numbers are stiff. Aside from the GFC in 2009, sales have not been this low since way back in 2001. The number of deals in February dropped 15% below the same period a year earlier. If you use the raw numbers, instead of the ones TREB cooks, the actual decline was 18%.

Sales of detached houses in 416 tanked 16.9% and in the 905 they fell 15.8%. Condo sales in both the downtown and the burbs crashed 20%, and prices in the core fell about 5%. Sales of houses costing more than $2 million – of which there are an exploding number – withered 32%, and the dollar value declined even further, by 35.5%.

And what of prices in general? The realtor Frankenumber says they’re up 3% year/year, but given the slide in deals being done, it seems a moot point. In all but some traditional, demand areas where supply is tight and enough buyers still clamour to get in, this is a market losing momentum. With sales numbers now falling across the country, asking prices will follow as homeowners figure out selling for less today beats the hell out of a fire sale later, or simply not finding a buyer.

There are lots of excuses for this (snow, Russian asteroids) and some are even valid. When CMHC crashed mortgage insurance for listings over $1 million a chill swept through the Audi market. When F killed the 30-year mortgage, the condo towers shuddered. The end of cash-back loans and higher debt ratio counts disgusted more virgins than Justin Trudeau.

But it all comes down to one thing. Stupid prices. When sane people refuse to pay insane amounts to greedy owners wanting windfalls, the gig’s over. After all, half a million invested in a balanced portfolio last year probably earned $50,000, while a Toronto condo costing that much sucked thousands in condo fees and taxes, ate $15,000 in closing fees, and was worth less twelve months later.

Months ago I said to ready yourself for a shift. Real assets to financial ones. Suburban to urban. Complex to simple. Locked in to liquid.

So, welcome.

189 comments ↓

#1 KG on 03.05.13 at 10:19 pm

Are we till at the same method of calculation to arrive at the 3% yoy.

#2 mortgagebrokeron on 03.05.13 at 10:20 pm

interesting to see how much more stock market surges that is for sure….. That’s where i put my investments.

#3 KG on 03.05.13 at 10:23 pm

@2: like the spirit.

#4 jwkimba on 03.05.13 at 10:25 pm

This just in…
—————————–
First time buyers who do not have a full down payment take
note! Rent to Own at Cinema Tower, in the heart of King West!

Daniels Corporation, one of the most respected condo builders in Toronto, is offering two exciting Rent to Own Programs

Cinema Tower – King & John Streets in the heart of the Theatre District of Toronto. Occupancy Summer/Fall 2013. There will be a limited sale of 30 Rent to Own Suites available to our buyers March 21, 2013, on a first come first serve basis.

New York Towers 2 – Bayview & Sheppard Avenue. A prime location across from Bayview Village with easy access to the TTC. Occupancy May, 2014. There will be a limited sale of 24 Rent to Own Suites available to our buyers in May, 2013, on a first come first serve basis.

These two projects are unbelievable opportunities for first time buyers who want to live in prime locations and need time to build up a deposit. Best yet, move in within the next year!

Here’s how the program works

Buyers will become renters for one year at Cinema Tower. In that year, they will pay market rates for the rent of their selected unit. Whatever that rent is, a full $1,000 per month of it will go towards their down payment. One year later, they will purchase their unit (at a price that is agreed to at the beginning of their rental period), using their $12,000 that was accrued during the rental period. Best yet, Cinema Tower will only require a 5% deposit, so the $12,000 will go a long way to the full 5% deposit that will be required. On a $400,000 purchase, it will be almost 60% of the monies that will be required to purchase.

To help get you started, we can provide you some first-time buyer programs, rebates and tax credits currently available to encourage home ownership and help reduce the costs of purchasing your first home….

—————–

At the bottom of the email they admit they are NOT affiliated with Daniels corp. They just have 30+ units to sell now, to buyers who don’t have any money. This will be an epic mess a year from now …
Etc, etc.

#5 guelphstudent on 03.05.13 at 10:25 pm

If you adjust for inflation, DOW is no where near records. Anyhow Toronto is now fourth largest city in the North America where condos fell down by $18000 from last year.

By the way, I saw a 420 square feet condo in etobicoke for rent with my girlfriend today, renting for 1100. There were three other couples there. I barely talked my girlfriend from renting it. Can’t wait till the prices go down, and hopefully rents too!

#6 TurnerNation on 03.05.13 at 10:26 pm

Almost. That’s a Saturn not a Kia.

Anyway here’s why the TSX is sucking:

“Globe figures TSX more akin to Third World than London
Tuesday March 05 2013 – In the News

The Globe and Mail reports in its Tuesday edition that for global investors, Canada is a Dr. Jekyll-Mr. Hyde nation — outwardly pleasant but with an equity market that can stab portfolios in the back after the sun sets. The Globe’s Scott Barlow writes the correlation of the S&P/TSX composite to the MSCI Emerging Markets benchmark is an astounding 0.95. A correlation of 1.0 would indicate perfect lockstep. By comparison, the Toronto Stock Exchange’s correlation with the S&P 500 in the United States is a far lower 0.78. How is it that a country as economically mature as Canada has an equity market that moves more in line with the South Korean KOSPI index than the S&P 500 or FTSE 100? Mr. Barlow says it is because the S&P/TSX composite bears almost no resemblance to the Canadian economy. Mining and energy together represent 12.7 per cent of Canadian gross domestic product, but the materials and energy stocks make up 41 per cent of the S&P/TSX composite. Resources have an endless ability to absorb investor capital. David Einhorn at Greenlight Capital has said, “Give a miner a dollar and he’ll dig a hole.” What the miner will not do is tell you the market is already satiated.
© 2013 Canjex Publishing Ltd.”

#7 AisA on 03.05.13 at 10:35 pm

Prices simply can’t fall enough. (Period)

#8 Naga on 03.05.13 at 10:39 pm

Garth – last year investing in financial markets, or even earlier, was the right thing to do.

So the real question is are we at the start of a great bull run or are we still in bear territory?

Personally I feel that smart money will play the middle and also consistent with your preaching – go for divindents paying stoks or a diversified basket, ETF;s , preffereds, even mutual funds as long as they have a track record of paying and increasing yield.

RE is not longer a recipe for retail (read income property) investors – go for REITs inlcuding ETFs and Mutual funds for exposure to US and other markets and BTW infrastructure ETF and mutual funds also good bets….

#9 Recovery? on 03.05.13 at 10:41 pm

Dow Jones Industrial Average: Then 14164.5; Now 14164.5

Regular Gas Price: Then $2.75; Now $3.73

GDP Growth: Then +2.5%; Now +1.6%

Americans Unemployed (Labor Force): Then 6.7 million; Now 13.2 million

Americans On Food Stamps: Then 26.9 million; Now 47.69 million

Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion

US Debt as a Percentage of GDP: Then ~38%; Now 74.2%

US Deficit (LTM): Then $97 billion; Now $975.6 billion

Total US Debt: Then $9.008 trillion; Now $16.43 trillion

#10 Mr. Monday Night on 03.05.13 at 10:42 pm

It’s an interesting standoff between buyer and seller that’s happening right now, but it’s only a matter of time before the sellers crack and the prices start coming down to match the fall in sales.

People have to move, full stop. Be it for work, divorce or downsizing, it’s gonna happen.

I’ve seen a lot of hatred towards the boomers lately, but it’s the boomers who are going to bring the prices down, folks who bought / built their homes in the mid to late ’80s and aren’t looking for a 500% return on investment, just a little more than they paid for it, since it’s all paid off by now. Watch entire neighbourhoods lose their s*** when this happens.

Yes, there will be some who pull their listings and will have to get comfortable with huge mortgages over time. Others will have to suppress jealousy when learning that their friends who waited got a lot more for a lot less. However, there will not be a seismic shift of values to having multiple generations under one roof in order to not have to sell property, nor will BoC raise rates and put millions into foreclosure.

People will sell, lick their wounds, pay off their debts and go on living their lives. Others will be able to buy affordable housing again. Marked-to-market wins over marked-to-fantasy every time.

#11 Abraxas on 03.05.13 at 10:42 pm

Everything looks bubbly right now.

The Canadian housing, most world equity markets are super frothy (the SPY P/E touching 25) and I won’t even mention bond prices. The ZIRP turned everything on its head. There is no sensible place to put your money to work anymore. Those who just live it up on cheap credit may be smarter than us savers and spendthrifts.

#12 Tripp on 03.05.13 at 10:44 pm

“…embarrassing themselves with comparisons to London and Singapore…”

A couple of years ago, I remember an article in the Ottawa Citizen calling Sussex Drive ” the Canadian Champs-Élysées”. Delusions of grandeur, at its best!

#13 Fabrega on 03.05.13 at 10:47 pm

Lets see how long this euphoria with the stock market will last. The media is already talking about the Dow breaking records. Pathetic.

By the way has anyone here have data about the Dow & TSX real returns of the last 10 years? It seems to me that the TSX and the Dow is just now about to break even since the 2008 bloodbath.

Anyone to enlighten us blog dogs will be appreciated.

#14 Money talks on 03.05.13 at 10:48 pm

Still waiting on the Winnipeg Real Estate Board to release the report for February sales….is that smoke I smell?

#15 Mr Buyer on 03.05.13 at 10:48 pm

The buyers often sober up before the sellers. This spring will sober everyone up….
21 straight years of property price decline and counting in Japan. The bubble burst big and long here in Japan and contrary to popular belief it is still playing out in many other post bubble economies including the US. Spin is one thing, decimation is another entirely different experience. Not so easy to spin. Month in and out borrowing from Peter to pay Paul and slipping further behind with each monthly iteration. New cars out of reach, even reliable used cars unattainable. This is what house ownership at current valuations holds for many Canadians. Promise the world and deliver poverty in style. Oh well, like they say about gold mining in the Yukon, you have to spend a large fortune to make a small fortune. But wait, even the vaunted pot at the end of the house ownership rainbow is missing now and likely for a generation or two. Come on now you real-estate types lets spin that into gold now too for a peaceful ending to a truly grim fairy-tale. Post spring will be an entirely different and likely exponentially self re-enforcing landscape. She’ll tell 2 friends and she’ll tell 2 friends and so on…

#16 TEMPLE on 03.05.13 at 10:50 pm

#5 guelphstudent on 03.05.13 at 10:25 pm

If you adjust for inflation, DOW is no where near records.

And if you adjust for dividends?

TEMPLE

#17 The Prophet Elijah on 03.05.13 at 10:56 pm

Garth if that DOW is so healthy why is the Fed continuing QE without question and doesn’t raise interest rates?

Fed’s Yellen: Full steam ahead on QE3:

http://articles.marketwatch.com/2013-03-04/economy/37420629_1_vice-chair-janet-yellen-asset-purchases-bond-purchase-program

Canada can’t raise interest rates cause the US HAS to leave them at all time lows. That doesn’t sound like a healthy economy to me, just artificially propped up!

I’ll explain it to you some day. — Garth

#18 Lance on 03.05.13 at 10:56 pm

In 2009 the housing market got a kickstart when rates plunged down after the GFC. This time there is no such saviour over the horizon and thus house prices are headed down, down, down…

#19 Mr Buyer on 03.05.13 at 10:57 pm

#5 guelphstudent on 03.05.13 at 10:25 pm
and hopefully rents too!
……………………………………………………
I still haven’t nailed the dynamics down but rents declined in Japan after the bubble. I am guessing economic conditions make reliable renters slightly more scarce and keeping vacancies down that accompany turnovers makes these reliable renters even more desirable. Like I said I am just blowing smoke up your skirt right now, I have not thought this out well or come anywhere near researching this assertion.

#20 Vandamnncouver on 03.05.13 at 10:57 pm

Great post today Garth, thanks for that.

Given the impending mortgage war that’s sure to begin with Canadian banks, and a crumbling real estate market, what affect do you think this will have on the Canadian market from an investor point of view?

#21 A Nightmare on Bay Street on 03.05.13 at 10:57 pm

On the picture we cant see it very clearly but Brad Lamb is driving the SUV at full speed.

#22 David W on 03.05.13 at 10:57 pm

I read that Stevie H’s wife, L.H., unloaded the family stock portfolio before the end of 2012. Does this mean our P.M. thinks the stock market is going to tank soon? Are we due for a crash in the markets soon? Any thoughts on this Garth?

Are you serious? What a made-up piece of media crap. — Garth

#23 Ralph Cramdown Ⓤ on 03.05.13 at 10:58 pm

Match the B with the S:

- “I’d be cautious about suggesting there is any kind of trend here.”
- ” the City of Toronto’s additional upfront land transfer tax arguably played a role”
- “Your investor’s coming from China or Iran [...] they’re looking for a place to place [their money]”
- “The market is red hot!”
- “God’s not making any more land.”

- Jason Mercer, senior market analyst for TREB
- Re/Max top gun Barry Cohen
- Paul Miklas, President, Valleymede Homes
- TREB President Ann Hannah
- area real estate agent David Fleming

#24 marco on 03.05.13 at 11:00 pm

Just as an fyi, Toronto has become the 4 th largest city in North America. We surpassed Chicago. I heard it on Bobcat’s sports show. What this means for real estate? Difficult to say, but tha is alot of people and they all need to live somewhere.

#25 Smoking Man on 03.05.13 at 11:00 pm

Yes up on no volume…. Even the ceo of home Depot saying wtf.

USA stock market just banks an institutions trading, retail gone, they hope to drag Em back in. There is a bag that needs holding….

#26 HAWK on 03.05.13 at 11:02 pm

#10 Mr. Monday Night on 03.05.13 at 10:42 pm

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

I agree with your position that prices will correct, but am not so sure that Boomers will be the ones to crack. The Boomers are far more likely to be loaded than the young people that have bought with heavy debt.

#27 T.O. Bubble Boy on 03.05.13 at 11:04 pm

@ #11 Abraxas on 03.05.13 at 10:42 pm
Everything looks bubbly right now.

The Canadian housing, most world equity markets are super frothy (the SPY P/E touching 25) and I won’t even mention bond prices.
———-
SPY P/E is 14, not 25:
http://finance.yahoo.com/q?s=Spy&ql=1

#28 Dr. Hoof-Hearted on 03.05.13 at 11:05 pm

#186 TurnerNation on 03.05.13 at 9:55 pm

Spiltbongwater , Buy Curious and Dr. Hoof Hearted all are the same person likely.
HAL 9000 spat this out.

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

Your deductive skills are amazing !

Can you tell us WHO shot JFK , ….WHERE Santa and the Easter Bunny hang out ‘tween seasons …..and the NEXT Lotto 6/49 winning numbers?

#29 Smoking Man on 03.05.13 at 11:20 pm

Pre 2008 vs now

Dow Jones Industrial Average: 
Then 14164.5; Now 14164.
Regular Gas Price: 
Then $2.75; Now $3.73GDP Growth:
Then +2.5%; Now +1.6%Americans Unemployed (in Labor Force):
Then 6.7 million; Now 13.2 million Americans On Food Stamps: 
Then 26.9 million; Now 47.69 millionSize of Fed’s Balance Sheet: 
Then $0.89 trillion; Now $3.01 trillionUS Debt as a Percentage of GDP: 
Then ~38%; Now 74.2%US Deficit (LTM): 
Then $97 billion; Now $975.6 billionTotal US Debt Oustanding: 
Then $9.008 trillion; Now $16.43 trillionUS Household Debt: 
Then $13.5 trillion; Now 12.87 trillionLabor Force Particpation Rate: 
Then 65.8%; Now 63.6%Consumer Confidence: Then 99.5; Now 69.6S&P Rating of the US: 
Then AAA; Now AA+VIX: 
Then 17.5%; Now 14%10 Year Treasury Yield: 
Then 4.64%; Now 1.89%USDJPY: 
Then 117; Now 93EURUSD: 
Then 1.4145; Now 1.3050Gold: 
Then $748; Now $1583NYSE Average LTM Volume (per day): 
Then 1.3 billion shares; Now 545 million sharesZee USA

Nothing to see, buy buy buy…..

#30 Smoking Man on 03.05.13 at 11:23 pm

Why have I become a doomer ……. Lack of bozze I’m thinking…

#31 Devore on 03.05.13 at 11:24 pm

#4 jwkimba

Here’s how the program works

That’s not how rent to own works. This program is just a hidden price reduction. The reduced amount is the $12,000 portion of the market rent that goes towards the downpayment.

#32 Bricklayer on 03.05.13 at 11:26 pm

Smokin man, what stocks , funds, or bonds are you looking at for short set ups?

Good luck on the labresults

#33 Mr Buyer on 03.05.13 at 11:27 pm

There are some high end weekend get aways in Japan that abandoned exclusive pricing that maximized the amount of money spent by each customer and adopted a lower pricing scheme that maximized the number of suites occupied each weekend. The margins are so slim 21 years into the bubble collapse that many of these resorts must have 80% or 90% occupancy rates to make money after all is said and done. Once the place is built there is little point in allowing it to stand empty though, thus the aggressive pricing and ensuing market wide shift. There are still exclusive places at exclusive prices but there are no more of the once plentiful posers.

#34 Intuitive Missus on 03.05.13 at 11:30 pm

Garth, what’s your take on RE market in Hamilton and surrounding area?

#35 TurnerNation on 03.05.13 at 11:31 pm

Audis?

From the satirical GS Elevator tweets.

https://twitter.com/GSElevator

@GSElevator

Things heard in the Goldman Sachs elevators do not stay in the Goldman Sachs elevators. Email what you hear to elevatorgoldman

#1: Wearing a Rolex is like driving an Audi. It says you’ve got money, but nothing to say.

#36 TurnerNation on 03.05.13 at 11:33 pm

Justin Trudeau? Yesterday the Globe’s cover was touting him as Canada’s next sine qua non. The de facto leader. Offering prima facie evidence. And I don’t even speak French. Fuddleduddle.

#37 Editor on 03.05.13 at 11:45 pm

#18 Mr Buyer – we sold and now rent, and have seen asking rents come down by $100-300 (relative to size) lately in the GTA. Other changes: listings say things like “freshly painted!” whereas in the past renters weren’t allowed to ask for anything. Owners (“investors”) need to cover their costs and indeed it’s hard to find good renters, but owners might also be slow to realize their leverage over renters is slipping the way sellers are slow to realize their leverage over buyers is slipping.

#38 len on 03.05.13 at 11:48 pm

We are lurking from bubble to bubble thanks to an underlying dysfunctional monetary policy in response to the cracks in the global economic ideology. Those amazing company profits will turn out to be originated in the same experimental accounting departments of the likes of Enron.

I would not underestimate the willingness of the status quo to desperately use any measures to hang on to power and privillage – so far, they have achieved much to postpone the need to re-examine how we conduct ourselves on this planet. How anyone would even want to align themselves with this kind of dysfunction and hope it continues – for 2% extra rentseeking, 4%, 8%?

How much does a person’s happiness rise with an incremental increase of $100 or $1000 once basics of food and shelter have been satisfied?

#39 Doug in Victoria on 03.05.13 at 11:51 pm

I thought Cash-Back mortgages were no longer available through the major banks?

http://www.tdcanadatrust.com/products-services/banking/mortgages/view-all-our-mortgages/5-cashback.jsp

#40 Abraxas on 03.05.13 at 11:54 pm

TO Bubble Boy – I was talking about the Schiller 10 year rolling P/E. that is the one that actually correlates with future returns and it’s sitting at over 24

http://www.multpl.com/shiller-pe/

#41 Richard and Zeus on 03.06.13 at 12:09 am

Garth on Real Estate – check
Garth on gold – check
Garth on the paper ponzi scheme – no soup for you

Two out of three is still pretty good. I would ask you all to read what one of the greatest economists of all time thinks of this. He is so dangerous the US Govt locked him up for 8 years…on contempt. Longest in history.

Mr Martin Armstrong

http://armstrongeconomics.com/armstrong_economics_blog/

R&Z on wacko economists – check. — Garth

#42 Smoking Man on 03.06.13 at 12:12 am

31 Bricklayer on 03.05.13 at 11:26 pm

Don’t know, I have an underwater short on lows and HD.. Even the ceo of HD is saying wtf…….

Just out of the zone at moment….

#43 Tom Vu on 03.06.13 at 12:13 am

Re: blog photo

Looks are deceptive…

The silver KIA SUV rear – ended a 1972 Ford Pinto .

PS This would never happen with my personally trained bikini -clad 911 crew.

#44 nuke on 03.06.13 at 12:18 am

Fitting for today’s record-breaking DOW, learn about wealth inequality in america from this now-viral short video:
http://www.youtube.com/watch?v=QPKKQnijnsM

Social justice is so Nineties. — Garth

#45 Shawn Allen on 03.06.13 at 12:20 am

Doomers are always trembling in fear…

But Warren Buffet buys good stocks and good companies and mostly holds forever.

And Berkshire Hathaway is up over one million percent since 1965. Coincidence?

Winners win, and doomers don’t.

Everyone, do yourself a big favor and stop trying to predict the overall market direction for stocks. Just get in, buckle up, shut up and enjoy the ride. It’ll have a few stomach churning drops to be sure, but ultimately, if you invest steadily, the ride will take you the top of a mountain of wealth. (Nevertheless please sign the waiver where you acknowledge the risks and absolve the market of all blame. The roller coaster called the market does not want you suing every time you wet your pants on a steep drop).

#46 Uh Oh on 03.06.13 at 12:21 am

If I asked you to give me all your savings and then pay over 50% of your monthly income for thirty years for one necessity, is it worth it? Yet that’s exactly what a mortgage is asking From you. How did shelter become so important- over food, water, and oxygen that people are willing to go into slavery and servitude for it?

#47 It’s here — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer™ on 03.06.13 at 12:22 am

[...] It’s here — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. [...]

#48 Blasé on 03.06.13 at 12:23 am

finally.

#49 T.O. Bubble Boy on 03.06.13 at 12:25 am

#22 David W on 03.05.13 at 10:57 pm
I read that Stevie H’s wife, L.H., unloaded the family stock portfolio before the end of 2012. Does this mean our P.M. thinks the stock market is going to tank soon? Are we due for a crash in the markets soon? Any thoughts on this Garth?

Are you serious? What a made-up piece of media crap. — Garth
_____________________

Not made up… it happened:
http://www.ottawacitizen.com/news/Prime+minister+wife+sells+entire+stock+portfolio/7802376/story.html

But, could have been in response to articles like this one:
http://o.canada.com/2012/10/22/spouses-of-ministers-hold-portfolios-of-publicly-traded-securities/#.UTbFAaJ68x4

Non-story. Trust me. — Garth

#50 Ronaldo on 03.06.13 at 12:29 am

#25 Hawk -

“I agree with your position that prices will correct, but am not so sure that Boomers will be the ones to crack.“
————————————————————–
The oldest of the boomers turned 65 in 2011 and the youngest boomers are turning 49 this year. They are not ready to bail out of their homes just yet…..it will be the generation above them…(the blessed ones) their older siblings, the ones born during the war and their parents who are now in their 80`s.

This will be the group IMO that will have the most impact on the prices going down in the coming years.

These people are all sitting on a pile of equity and dropping the price will be no big deal to them since most are aware that the markets were in a massive bubble and due for correction anyway.

They/we have seen this several times before. The ones that will be hit hard will be the newbies who got into the market after 2006/07 and I don`t think they make up that large of a percentage of the homeowners.

I suppose the boomers could blame their parents for having too many children since when we boomers arrived at the age where we got into the housing market around 1969 or so, there was a shortage of housing and a whole bunch of us and as a result prices of houses rose tremendously.

So, I suppose you could say that we were responsible for making our parents house rich. The first home my parents purchased in 1961 (21 years after being married) was $6000. They sold it 41 years later for $150,000. 25 x what they paid. They were in their 80s.

Since having owned several homes in the past 43 years, I have witnessed many ups and downs in the real estate market. Sometimes you win, sometimes you lose.

My first home purchased in 1969 was $21000. This same home today is valued at $469,000. 22 x what I paid.

My son bought his first home in 1999 for $150,000. Today, that home is valued at $300,000. 2 x what he paid after 14 years. So what will it be worth in the next 25 years is anyones guess. Maybe it will be $6 million or maybe it will be $400,000.

The thing that is different when the boomers bought their first homes was that they were a large group and there was a shortage of supply so prices were forced up.

In the not too distant future, however, we will have the opposite. We will have a small group entering the market and a large group ahead who will be unloading their homes creating an oversupply which will result in lower prices. It`s all about demographics. Garth spoke about this years ago. Now its happening. Get used to it. Blame my parents.

#51 Astroboy on 03.06.13 at 12:31 am

Thank you Garth. After reading your blog early last year, I decided not to buy a house and instead rented, at the same time I invested 120k into the stock market which is now 160k. So it has worked out really well for me, and I’ve learnt a lot in that time too.

#52 Ralph Cramdown Ⓤ on 03.06.13 at 12:32 am

#37 len — “How much does a person’s happiness rise with an incremental increase of $100 or $1000 once basics of food and shelter have been satisfied?”

That’s a question every man needs to answer for himself.

#53 Sags on 03.06.13 at 12:35 am

Best wishes Smoking Man……..

#54 A Nightmare on Bay Street on 03.06.13 at 12:39 am

I zoomed on the water hose kids tshirt.

It says : Soft Landing.

#55 Ralph Cramdown Ⓤ on 03.06.13 at 12:39 am

#39 Abraxas — “I was talking about the Schiller 10 year rolling P/E.”

I’d argue that if you think that events like the 2008 GFC are going to become a regular part of the business cycle, you don’t need the Shiller P/E because you should probably just stay out of stocks entirely.

#56 DON on 03.06.13 at 12:55 am

@10Mr. Monday Night on 03.05.13 at 10:42 pm

Nicely said!

#19Mr Buyer on 03.05.13 at 10:57 pm

I agree with your reasoning add in more basements suites, kids moving home, trades leaving for Alberta etc etc.

#57 KommyKim on 03.06.13 at 12:59 am

Garth, I’m trying to figure out a good mix for a conservative portfolio. What do you think of this mix:
Canadian equity 20%
US equity 15%
International equity 15%
Real estate investment trusts 10%
GICs/Bonds 40%

Or should it be heavier on the USA and lighter on Canada since the US markets seem to have more upside vs Canada with more downside risk?

#58 Richard and Zeus on 03.06.13 at 1:01 am

Mr Martin Armstrong

http://armstrongeconomics.com/armstrong_economics_blog/

R&Z on wacko economists – check. — Garth
——————————————————

Hahahaha…….too funny. Garth’s way or the highway. Please tell us how you really feel about Mr Armstrong. Time will tell I guess….

#59 DON on 03.06.13 at 1:04 am

@#49Ronaldo on 03.06.13 at 12:29 am

Couldn’t agree with you more.

#60 tim on 03.06.13 at 1:06 am

And whatever you do, don’t stuff your RRSPs with GICs.

Why Dividends and RRSPs belong Together:
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/busting-a-myth-why-dividends-and-rrsps-belong-together/article9318411/

You will come out ahead with a significant portion of dividend paying stocks in your RRSPs.

#61 Smoking Man on 03.06.13 at 1:10 am

DELETED

#62 tim on 03.06.13 at 1:10 am

Re # 9 Recovery…

—-
And the market climbs the wall of worry, with large cap blue chips poised for growth from emerging markets, and the best balance sheets they’ve had in years. The stock market doesn’t mirror the economy. Now is the time to buy stocks!

#63 Mr. Monday Night on 03.06.13 at 1:15 am

#49 Ronaldo – “These people are all sitting on a pile of equity and dropping the price will be no big deal to them since most are aware that the markets were in a massive bubble and due for correction anyway.”
——————————-

That’s exactly what I was getting at, I was just confusing the boomers with the generation ahead of them.

My grandfather is 87 and looking to sell. He built his house in 1985 for next to nothing (less than $100K) and is looking for just enough to maintain his lifestyle. He cares not about what the market will bear or what impact it will have on the rest of the properties in the neighbourhood, he just wants a fair price for it – fair being a relative term and having no correlation to what Joe Realtor tells him what he can get for it if he’s patient. Octogenarians have neither the time or patience to play chicken with the market and will more often than not opt for the quick sale so they can get on with whatever it is that they do.

Hail to you, oh wise and elderly, I salute thee for returning sanity to homeownership!

#64 Van guy on 03.06.13 at 1:18 am

Garth,

Nice call on the Dow and the US. But what do you think about out very own TSX? Any chance we could catch those yanks?

#65 Queen Victoria on 03.06.13 at 1:37 am

Garth,

They’re talking about you in Victoria, B.C. I wish you’d ask this poster to break down her home ownership costs over 30 years. Seems like she expects to pay only principal & interest, amen.

Hers will be the only house in history that won’t ever need a plumber, or electrician, or new roof/flooring/windows or other repairs & maintenance.

Neither does she expect to pay annual property taxes over the next 30 years. All of these expenses are normally paid for by landlords, if one rents!

I know that renters lose out on Capital Gains, but there’s also opportunity cost on the funds that are tied up in houses.

She said: “Garth Turner reminds me of Tom Fletcher. All flash and no substance, regurgitating the same old, same old, until it just gets nauseating.

I would just like to say to him.
“Alright already, yes Garth we know you don’t think people should own homes, however, if no one owned, you wouldn’t have anyone to hand over your rent money to.
Feel free to hand over $1,700,000 in rent to your landlords over 65 years (1500x12x65) while I spend only $600,000 (total including interest) to buy the same size house over 30 years.
I am sure you can figure out somehow a way to justify your intelligence in spending almost 1.7 million in rent instead of $600,000 in a house purchase.”

I found it here:
http://www.kidsinvictoria.com/forum3/viewtopic.php?f=7&t=3761754&start=15

#66 dosouth on 03.06.13 at 1:40 am

….well Nanaimo is bucking the trend, VIREB says so!

http://tinyurl.com/b3h4vzj

#67 TurnerNation on 03.06.13 at 1:51 am

#4jwkimba. Fun Times.

They’ve created an OTC Collar on the condo.

Short Call – Long put. Collect income monthly, cap the upside and secure the minimum sale price via a sucker/buyer on the bottom line.

#68 Nostradamus Le Mad Vlad on 03.06.13 at 1:59 am

-
“Months ago I said to ready yourself for a shift. But it all comes down to one thing. How’s that for symbolism? There are lots of excuses for this (snow, Russian asteroids) and some are even valid.” — There is some truth in the post. $500,000 spinning off $50K / yr., snow but asteroids are identity-less, neither male nor female snowflakes or cornflakes.

Other than that, one has to say a good 40-60 portfolio balance sure beats RE hands down, esp. with no property taxes and / or minor maintenance costs to pay.
*
Dow and FTSE both hit highs; China’s FX Reserves could buy all the gold in the world twice; Bedroom Tax Never ceases to amaze what length govts. will go to, and sheeple bend over and say more please, yes sir; Dentist Ponzi Keep investments away from choppers (teeth); Five Best Countries to move (updated); Soaring – Sinking Corporate profits, workers’ pay; Migrants This was happening decades ago. It’s nothing new; Naked Capitalism Links in; 7:50 cartoon How the 1% messed everything up; 210 more blnaires. than last year amid rising poverty, so the whole system is out of whack; EU tells Spain to raise taxes; Cdn. Dividends and the Dividend Tax Credit; Fed and Stocks like steroids; Rising Home prices; BPOE and Mikey the Realtor Try NY and London; Pension Shortfall Who is addressing it?
*
Smoking Man – Guess these are two of the easiest ways to turn kids into sheeple, and it’s what TPTB do very well; Lamborghini New wheels are nice, but a Hummer is better in the snow; IKEA After Swedish meatballs, how about Swedish dessert? Rip van Winkle or Castaway? Not sure; Tattoo You This man craves attention; Brains and Nutrasweet Don’t mix; Obomba Good character description; Viking Compass Mythical or real? DHS (cancer) destroying its host (US); 3:20 clip Planned obsolescence of humanity; Egypt – Israel Plague of locusts in Egypt, panic in both countries; Russian draft? US draft possible; Cardinal O’Brien exposed Vatican’s hypocrisy on celibacy; Holohoax See the figures; Supercars at super prices; Retirement This is a tough way to start.

#69 Island Girl on 03.06.13 at 2:12 am

So I’ve got a question, a family member is trying to unload a property that is being sold as a commercial property, but is currently undeveloped as it was an acreage before. Do they have a hope in selling? Last year it sat on the market and had one big price drop. They eventually took it off the market and now that there might be rezoning they have relisted at almost twice the price of the last offer they had (which they felt was a joke). Is there hope for them?

#70 Soylent Green is People on 03.06.13 at 2:20 am

http://www.ottawacitizen.com/news/Prime+minister+wife+sells+entire+stock+portfolio/7802376/story.html

#71 Signpost in the bushes on 03.06.13 at 2:28 am

“Social justice is so Nineties. — Garth”

Does social justice ever go out of style?

#72 Johnny D on 03.06.13 at 2:52 am

http://www.leaderpost.com/business/Regina+tenants+shocked+rent+hike/8048247/story.html

A story about a new owner taking over apartments and hiking the rent by 77%.

Read the comment section to see how ignorant and stupid people are here when it comes to RE.

Here’s a sample comment: “For people saying that it’s too high – try owning a rental property at todays current values. There are large mortgages and property taxes and expenses to pay. I have two rentals, and I HAVE to charge $1100/mo just to break even! $675/mo is way too low in todays market environment, unless the owner has had the place for quite some time. If there was a change of ownership, then the new owers would have to charge that much…”

What this moron who left this comment doesn’t see is the SHE is the problem. The fact that people can heavily leverage two or three houses as income properties is exactly why RE and rent has skyrocketted here.

This disgusts me and the fact that our government has devalued our currency by causing such a credit bubble is mindblowing. They have allowed this to go on for too long and it’s destroying lives.

#73 Bobby on 03.06.13 at 3:29 am

Gotta love this market. Equities are up and big gains from last year with high yield bonds.

I remember a newby realtor telling me a few years ago that I was stupid to have money in pension funds. Real estate was where it was at he said. Well with 1300 realtors here in Victoria and only 380 sales last month, 275 in January, I wonder how it is going for him?

Just waiting to lowball a new home!

#74 Mocha on 03.06.13 at 3:49 am

Person in today’s pic recently had a smart meter installed.

#75 VMD on 03.06.13 at 4:12 am

Battle of Vancouver: SFH – Feb 2013 Battle Update:

- As predicted in January, Bear Forces successfully invaded Port Coquitlam and N Delta.
- Charged with triumphant spirit, Bear Forces also liberated West Vancouver, Port Moody, and Tsawwassen.

- The following Bull Territories are facing imminent defeat: Coquitlam & Cloverdale

- Coquitlam is where the Last Stand of REBGV Bull Forces takes place. The Bulls are down to the Very Last tank battalion. If they are defeated, the Bulls will be chased South of Fraser River, and possibly soon, South of the Border.

http://greaterfoolvancouver.blogspot.ca/2013/03/battle-of-vancouver-sfh-feb-2013.html

#76 page88 on 03.06.13 at 7:22 am

Munch, HOOKER knows the new place.

#77 Devore on 03.06.13 at 7:27 am

#62 Queen Victoria

Renting for 65 years? Ah, the boogeyman of the forenter! This is just another way to say “priced out forever” and “always a good time to buy a house”.

Buying a house like buying anything else subject to boom/bust; there’s a good time to buy, and a good time to stand back from the carnage. And while the price of a house goes through boom/bust cycles, rents do not. Rents are the earnings, so there are periods where real estate is clearly overpriced as an investment (negative cashflow, ho!) which then corrects to place where it makes sense to buy property (holy crap, this is cheaper than renting!).

#78 T.O. Bubble Boy on 03.06.13 at 7:40 am

@ #39 Abraxas on 03.05.13 at 11:54 pm
TO Bubble Boy – I was talking about the Schiller 10 year rolling P/E. that is the one that actually correlates with future returns and it’s sitting at over 24

http://www.multpl.com/shiller-pe/
————-
Gotcha – how very Benjamin Graham of you… Great analysis for individual stocks in Graham’s “deep value” world… but as a view of the entire S&P, the snapshot view of ten-year earnings may have limits.

#79 T.O. Bubble Boy on 03.06.13 at 7:59 am

(for example, where are bond yields vs. dividend yields, and what is the % of the S&P in each industry group)

Not saying that the market isn’t over-valued, but it is far “cheaper” than bonds these days, and certain sectors are inexpensive as well.

#80 Tony Right on 03.06.13 at 8:14 am

Adios gold bugs and real estate douches. On to the next bubble: the stock market. High Frequency Trading and sheep piling in at the top should crash this market in a few years time.

Invest in a balanced, diversified portfolio and you can ignore meaningless fluctuations, along with vapid predictions. — Garth

#81 Jackfrost on 03.06.13 at 8:26 am

Hi everyone.

My wife and I have been a long time renters and sitting on the sidelines waiting for houses to drop so we can some day own a place. We have been saving and investing as many of you have suggested however my mother is going through a tough time and may have to to move in with us. Because of this, she’s considering selling her home. The problem for us is we don’t have the room and we might now have to buy a house at these high prices to accommodate my mother. Something I don’t want to do… I could rent a house but the selection is terrible and most landlords want to charge more. I guess I might not have a choice here and may be buying at the top!

#82 Pr on 03.06.13 at 8:30 am

…Stupid prices…
Yes! And from now on, it will start to sink in, for to many people. This blog will attract a lot a buyers and sellers. Specially when they discover, we knew it, much in advance. Pressure will follow.

#83 Toon Town Boomer on 03.06.13 at 8:37 am

“But it all comes down to one thing. Stupid prices. When sane people refuse to pay insane amounts to greedy owners wanting windfalls, the gig’s over.”

EXACTLY! Wake up folks, the balls in your court.

#84 Pr on 03.06.13 at 8:40 am

Johnny D on
…fact that our government…causing such a credit bubble is mindblowing. They have allowed this to go on for too long and it’s destroying lives.

Destroying lives, yes, thats wath coming in mass, with a higher interest rate, if they ever come. So please send emails to Mark Carney, M jim flaherty and M Harper, to bring a bigger cash down to buy a house, (10% minimum) this will slow the speculation right away, from people with no money, but good credit, and poor investors.

#85 For Sale on 03.06.13 at 8:40 am

Like everyone, I loathe paying banks’ service fees. So by keeping $3500 in my account all the time, the $12.95 monthy fee and $1 monthy book keeping fee is waived. So I’m guaranteed to make 5.5% on that money each year. And for some reason it feels like I’m sticking it to the bank for a change.

And the bank gets to use your $3,500 for free. Sucker. — Garth

#86 Dwilly on 03.06.13 at 8:52 am

Garth, you have often said that certain areas/localities and types of properties are likely to be hit less hard, while others take a deep bath. Could you elaborate more on this? In your view, what are the areas, or what are the characteristics of areas that will suffer most vs. those that will suffer least?

Stay tuned. — Garth

#87 AK on 03.06.13 at 9:03 am

#84 For Sale on 03.06.13 at 8:40 am
” I loathe paying banks’ service fees. So by keeping $3500 in my account all the time, the $12.95 monthy fee and $1 monthy book keeping fee is waived. So I’m guaranteed to make 5.5% on that money each year.”
——————————————————————
With thee $3,500.00, you can buy 100 Shares of N.AGNC and collect $500.00 U.S. in dividends.

#88 AK on 03.06.13 at 9:09 am

#79 Tony Right on 03.06.13 at 8:14 am
“Adios gold bugs and real estate douches. On to the next bubble: the stock market. High Frequency Trading and sheep piling in at the top should crash this market in a few years time.”
——————————————————————-LMFAO. Dude, you are hilarious.

The market will crash in a few years time? Every few years the market presents us with great buying opportunities. I guess that you will be correct with your “Prediction”. :-)

#89 LSC on 03.06.13 at 9:11 am

Yes the DOW hit a new high yesterday and with QE forever will continue to hit higher highs. This measure is artificial due to money printing and the weight of multi-nationals. It does not seem to directly correlate to the US main street economy. While improving, growth of <2% does not normally translate into this kind of market performance.

If you are into equities directly or thru ETFs or Mutual Funds the US markets are great these days for traders, but I would caution the investor to stay nimble.

Another point is not to confuse the US market performance with the TSX. While the Dow has hit new highs the TSX is at 12700ish, down from 14250ish in the spring of 2011 and way off the almost 15000 levels seen in the early summer of 2008.

With a housing correction under way and the direct and indirect effect that will have on our economy, plus austerity budgets coming from BC, ALB, ONT, NL etc. and commodity issues I would forecast the TSX to at best move sideways.

So proceed with extreme caution ….

US markets are rising on profits, not illusion. The TSX is constrained by commodity prices, not housing or politics. — Garth

#90 David W on 03.06.13 at 9:24 am

Garth, here is the link to the article in the Ottawa Citizen about Laureen Harper liquidating her portfolio I mentioned in ny earlier post.

http://www.ottawacitizen.com/touch/story.html?id=7802376

I am well aware of the media reports. It’s still a total non-story, inconsequential and voyeuristic. — Garth

#91 Buy? Curious? on 03.06.13 at 9:29 am

When I was reading this, the song by Salt N Peppa, “Push it” was playing on my Internet Radio that is streaming from Germany.

A sign from the Money Masters of the Universe? I don’t know. I’m no high priest of Finance. I’m just a dude that is luckier than a tall leprechaun, not worrying about steal my gold at the end of the rainbow, safe in a Safety Deposit box.

There no such thing as bad dancing. You’re either dancing to celebrate or because you don’t care.

#92 CrowdedElevatorfartz on 03.06.13 at 9:39 am

“…embarrassing themselves with comparisons to London and Singapore…”

You mean like Vancouverites constantly bleating,
” We’re a world class city!” .
As if to reassure themselves that the ludacris housing prices are justified.

The only thing “world class” about Vancouver is its municipal debt……..

#93 Astronaut down on 03.06.13 at 9:51 am

Yesterday it was 10 years, today it’s here. Man oh man.

Mayday! Mayday!
What the heck is that?
Why, that’s the Russian New Year. We can have a parade and serve hot hors d’oeuvres…

Over & Out

#94 Small Town Steve on 03.06.13 at 9:53 am

Hey guys I found this little gem for those who are having to diversify and you need to protect your open money.

http://m.theglobeandmail.com/globe-investor/personal-finance/bulls-bears-and-baseball-tax-strategies-for-investors/article4192320/?service=mobile

Most likely you have already memorized it but hey one never knows.

#95 Shawn Allen on 03.06.13 at 10:00 am

OH THE HUMANITY….

How would you like to have invested in a stock that has fallen by over 50% (over half!) four times over the holding period. Gut wrenching!, no?

One such stock is Berkshire Hathaway A shares. Buffett got himself AND his partners into the stock in 1965 at under $15. Since then his partners have suffered the aforementioned 50% plus plunge four times.

But if they hung on the for the ride they (or their heirs) are now up over one million percent as Berkshire is past $150,000.

What if they has gone the capital preservation route and used stop losses? More like stop fortune.

What if they had diversified away from Berkshire as it soared? Again stop fortune.

Rock on Mr. Buffett!

#96 Form Man on 03.06.13 at 10:01 am

Kelowna February 2013

sales down 18% from Feb 2012
volumes down 20%
MOI = 17.3

where is DA’s elusive rebound ? He did say by April, so we will give it another month……..

#97 The real Kip on 03.06.13 at 10:22 am

Few of your colleagues even in the US agree with your Rosie assessment of American markets of late preferring to see it for what is, a market that has returned zero since its 2008 lows but simply taking five years to claw back steep losses. A market that could not have achieved even that without massive US government intervention from the Fed with an 85-billion dollar monthly bond buying program known as QE-3.

Without QE-3 it is highly unlikely the Dow Jones could have bloated itself back to it current levels and if the Fed pull the plug on this program markets will likely collapse but no matter, keep those rose-coloured glasses, they look good on you.

Grouse all you want. The S&P returned 12.5% last year. Toronto condos lost 5%. — Garth

#98 Doug in London on 03.06.13 at 10:27 am

Here we go again, where we see everything goes full circle, including stock markets. On March 9th, 2009, millions threw in the towel and sold. That’s odd, if they really wanted to sell that badly why didn’t they wait until now when prices are high?

People lust for rising assets and run screaming from falling ones. Explains a lot. — Garth

#99 The Prophet Elijah on 03.06.13 at 10:34 am

#17 The Prophet Elijah on 03.05.13 at 10:56 pm Garth if that DOW is so healthy why is the Fed continuing QE without question and doesn’t raise interest rates?

Fed’s Yellen: Full steam ahead on QE3:

http://articles.marketwatch.com/2013-03-04/economy/37420629_1_vice-chair-janet-yellen-asset-purchases-bond-purchase-program

Canada can’t raise interest rates cause the US HAS to leave them at all time lows. That doesn’t sound like a healthy economy to me, just artificially propped up!

I’ll explain it to you some day. — Garth
———————————————————-
No need we already know you bow down to the cartel – Elijah

Why do I bother? — Garth

#100 afraidit allmightend on 03.06.13 at 10:39 am

In recent memory…and I am old ….the periods when the stock market is best..real estate is always at it’s worst…so the pendulum has swung during my measly 60 years as an investor. Everything reverts to the mean and begins to cycle around…thats the way it must be in a capital system….otherwise we’d have million dollar bread and billion dollar houses.

In Canada the union elites are attempting to Canute the financial reality of the business cycle…..of course the boomer unionista want ever increasing wages and perks…..disregarding the growing poverty among the young and disadvantaged……demographics will rule the day of course…because poor people vote too.

Unsustainable emergency rates…set low to fund a greedy elite….have…as many suspected…come around to bite the naive in the ass. F might have wanted to borrow chewap to fund peace in the civic service….and pander to the ethnic bloc….but even Carney knew that 100% of GDP was too much for the system and abandonded his post before this crash was made public.

Naturally we will have turmoil…and great outrage against all the wrong people as the poor and disadvantaged try to grab their share of the taxpayers purse….greed runs things in Canada…..there is no upside to a country so far in the toilet….turn the lights out when you leave.

#101 Adam on 03.06.13 at 10:39 am

@Recover #9, good copy and paste from zerohedge, give credit when it’s due.

#102 Ydnew on 03.06.13 at 10:45 am

#49 Ronaldo.
I was talking to an 86 friend this week. She and her late husband bought her home in BWV in 1960 for $19K and she intends to live there until she is “taken out of there, feet first”. It is, in, in RE speak, original condition – regularly maintained, but no updates whatsoever. There are 22 houses on her street, 18 of which have been extended and renovated.
Her tax assessment is for $1.1 million.

#103 Ydnew on 03.06.13 at 10:47 am

#80 Jackfrost
Ever considered moving into Mom’s house instead?

#104 Bargains everywhere on 03.06.13 at 10:56 am

Garth, what do you think will happen with cottage properties and rural farms? Will prices be expected to retreat there as well? They don’t appear to have had the same run up in prices as city properties.

We are looking to buy a little hobby farm but don’t know if we should wait for a bit or jump in when we find one we like.

#105 The Prophet Elijah on 03.06.13 at 10:58 am

#9 Recovery? on 03.05.13 at 10:41 pm Dow Jones Industrial Average: Then 14164.5; Now 14164.5

Regular Gas Price: Then $2.75; Now $3.73

GDP Growth: Then +2.5%; Now +1.6%

Americans Unemployed (Labor Force): Then 6.7 million; Now 13.2 million

Americans On Food Stamps: Then 26.9 million; Now 47.69 million

Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion

US Debt as a Percentage of GDP: Then ~38%; Now 74.2%

US Deficit (LTM): Then $97 billion; Now $975.6 billion

Total US Debt: Then $9.008 trillion; Now $16.43 trillion
———————————————————-
Yes prosperity built on debt. Thank you for this, it doesn’t get any more clear.

#106 live within your means on 03.06.13 at 10:58 am

#12 Tripp on 03.05.13 at 10:44 pm
“…embarrassing themselves with comparisons to London and Singapore…”

A couple of years ago, I remember an article in the Ottawa Citizen calling Sussex Drive ” the Canadian Champs-Élysées”. Delusions of grandeur, at its best!
……………….

You’re SO right. Over the years I’ve spent time in 12 EU countries & most of their capital cities + towns & villages. I’ve walked the Champs Elysee & visited many museums. I think Vancouverites also have delusions of grandeur. Been there as well as many cities in the US. I’d rather spend time in Europe soaking up the culture.

#107 pascal on 03.06.13 at 11:00 am

Some news from Quebec city, volume sale (february 2013/february 2012):
SFH: -24%
Condos: -32 %
http://www.ciq.qc.ca/webjournal/2013/03/813/

And plenty condos are currently under construction. And now builder offer you electric appliances as a gift when you buy a new condo…
http://www.lapresse.ca/le-soleil/affaires/actualite-economique/201303/04/01-4627796-super-rabais-sur-les-condos-neufs-a-quebec.php

Next months will be of interest…

#108 Steven Rowlandson on 03.06.13 at 11:03 am

Let me guess. That was a lightning strike with out a thunderstorm. Yes?

#109 Ralph Cramdown Ⓤ on 03.06.13 at 11:04 am

#96 The real Kip

You forget that that stock market has been paying dividends all along — even when the index says zero movement, it’s still paying more than your savings account.

The man on the street just got the message yesterday that the stock market is back.

#110 Spiltbongwater on 03.06.13 at 11:22 am

Spiltbongwater , Buy Curious and Dr. Hoof Hearted all are the same person likely.
HAL 9000 spat this out.
#186 TurnerNation on 03.05.13 at 9:55 pm

I have never posted as Buy Curious or Dr. Hoof Hearted. For the most part I use Spiltbongwater, but at times have used Huj Kok, or Hugh G Rection as an online handle. TurnerNation with a swing and a miss.

#111 Small Town Steve on 03.06.13 at 11:28 am

#103 Bargains everywhere

2008 the house I bought was listed at 479k. 2 yrs later I picked it up for 320k. A similar house in Edmonton would list for 900k or more depending on location.

#112 Ralph Cramdown Ⓤ on 03.06.13 at 11:46 am

Holy Toronto resale home price reductions, Batman! Looks like a few people are motivated.

#113 Ronaldo on 03.06.13 at 11:51 am

http://www.rollingstone.com/politics/blogs/taibblog/fallout-from-untouchables-documentary-another-wall-street-whistleblower-gets-reamed-20130304#ixzz2MhadhYCR

An incredible video regarding the events that lead to the GFC according to witnesses and people directly involved in the issuance of bad mortgages in the U.S. Begin at the 4:20 point of the video. Unbelievable. Maybe our own bankers need to review this as well as a reminder of what can happen if you lend to people with no money.

#114 Ronaldo on 03.06.13 at 11:57 am

#103 Bargains Everywhere – if the future is anything like it was regarding rural properties in the early 80′s, the prices on rural properties was devastating. An acreage I had purchased for 12000 in 75 and which I saw rise to 45000 by 1981, dropped back down to 12000 and stayed at that price til I sold it in 1989 for the same price I paid for it. Prices never recovered until after 2002.

#115 Daisy Mae on 03.06.13 at 12:03 pm

#84 For Sale: “And for some reason it feels like I’m sticking it to the bank for a change.

And the bank gets to use your $3,500 for free. Sucker. — Garth”

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

It’s amazing how many seniors still allow the feds to deduct more income tax than will be owing…just so they’ll get a cheque in April. They think they’re so clever. LOL

#116 Mixed Bag on 03.06.13 at 12:05 pm

Hm, Dow is up, VIX is low. Does that mean Dow will continue to rise for a while? Or is the correlation too simplistic?

#117 Toronto_CA on 03.06.13 at 12:14 pm

Great. Carney to Canada, paraphrased: “The economy sucks so bad that the housing bubble is the least of our worries. I have to keep interest rates artificially low indefinitely or we’re going to need squirrel recipes.”
http://www.theglobeandmail.com/report-on-business/economy/carney-puts-focus-on-economic-growth-signals-no-fast-rate-hike/article9336355/

#118 maxx on 03.06.13 at 12:14 pm

#11 Abraxas on 03.05.13 at 10:42 pm

Great post.
But don’t believe for a second that a spendthrift is somehow smarter than you. We are all stuck in this monetary system, must create and maintain quality of life, and those with savings and investments are and will continue to be in the winning class, not the underclass.
Take a few seconds to research “debt collection horror stories” to see what those who live too large have to deal with. From there, they must then pay off what they owe and THEN start saving.
Destructive debt seems to be the foundation of the new economy. It’s not working and will never work. It will never create a vibrant, optimistic society and the strong real economy that goes with it.
Central bankers need to accept that they’ve failed horribly. They are smitten with the private sector. They have relinquished practically all of their power.
Corps. are propping up balance sheets in large part through sackings and debt creation, whilst sitting on mountains of cash. Every business owner and bank employee I speak to is not optimistic about the future, the most positive response being one of deep confusion. Even realtards have, for the most part, gone quieter and are modifying the canned remarks so as to be able to survive what’s coming.

#119 Harvard Grad on 03.06.13 at 12:15 pm

Okay – I am not seeing the whole picture – everyone is rushing back into stocks – it’s regained it’s appeal (and wasn’t the old saying when everyone rushes in – you gotta rush out). The Market is back in the “skies the limit” – where have I heard that before – oh yes – in here – why not take some profit off the table and see what summer has in store.

Buffet has been noted as quietly unloading staple stocks – the Fed is flooding the market with cash and it has no where to go but in the markets … I guess when those who have been sitting on the sidelines with cash and decide to venture back in – the market will be ready for another bumpy ride downnnnnnnn. The Herd likes the taste of the stock market – it’s gonna be another slaughter. IMHO

Love the blog G

#120 Daisy Mae on 03.06.13 at 12:18 pm

#102Ydnew on 03.06.13 at 10:47 am
#80 Jackfrost
“Ever considered moving into Mom’s house instead?”

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

Depends where it’s situated. Jackfrost may not be able or want to re-locate because of job.

#121 Old Man on 03.06.13 at 12:33 pm

#80 Jackfrost – not enough details as all locations and situations are different. I enclose my standard billing fee of $200.00 for my brilliant assessment. :)

#122 Daisy Mae on 03.06.13 at 12:37 pm

176Daisy Mae on 03.05.13 at 8:56 PM
#122 Hogtown: “…..the maintenance fees on that $60,000 condo are $773.67 monthly.”

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

These high ‘maintenance fees’ on most condos everywhere need to be investigated.

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

On second thought, strata corporations may be trying to build up a contingency fund.

#123 Still Renting on 03.06.13 at 12:38 pm

“There are more new residential towers under construction (almost 150) than any other city in the world. More than New York and Chicago put together.”
——–
To be fair, new construction is driven by population growth, and Toronto’s growth vastly exceeds that of New York and Chicago combined.

New York’s population has been growing by about 17,000 per year. Source: http://www.nyc.gov/html/dcp/html/census/popcur.shtml

Chicago’s population fell by about 20,000 per year between 2000 and 2010; the most recent period for which I could find reliable stats. Source: http://igpa.uillinois.edu/content/census-reveals-population-change-illinois

And even if Chicago’s population were to begin rebounding, there would be little immediate demand for new housing, as many vacancies were created by the years of population decline.

So looking New York and Chicago together, we find an average of population decline of about 3000 per year. Hardly an environment conducive to new home building.

By contrast, the population of the City of Toronto grew by an average of 22,356 per year between 2006 and 2011 (the two most recent census years). The Metro Toronto census area as a whole, grew by 94,000 per year during that period. Source: http://www.cbc.ca/news/canada/toronto/story/2012/02/08/toronto-2011-census.html

If we compare a city growing by 94,000 per year to a pair of cities where the population is declining by 3000 per year, it should hardly surprise us that the former is experiencing much greater residential construction.

I agree with your central premise, that condo prices in Toronto are wildly overpriced and vulnerable to a major correction. I just think the comparison to New York and Chicago constructuion numbers is a bit misleading.

#124 Buy? Curious? on 03.06.13 at 12:43 pm

Hey Garth! Did you see that the Toronto Star (Torstar) reported profits down 65% due to weak ad sales? Bwahahaha! Everyone is getting the real news here!

“Now push it real good!”

#125 Edward on 03.06.13 at 1:00 pm

“…the stock market tanked on March 9th, 2009. That was the day millions threw in the towel and sold.” <– And today will be the day they all decide to try and get back in on the action. Seems to be the way that works. :/

#126 DreamingInTechnicolour on 03.06.13 at 1:02 pm

Banks offering up mortgage rate reductions to the indebted appears to be a lot of smoke and mirrors to me – I don’t hear anything in the media about interest rates for credit cards, car loans, lines of credit, pay day loans etc. moving downwards too

#127 Richard and Zeus on 03.06.13 at 1:31 pm

Adios gold bugs and real estate douches. On to the next bubble: the stock market. High Frequency Trading and sheep piling in at the top should crash this market in a few years time.

Invest in a balanced, diversified portfolio and you can ignore meaningless fluctuations, along with vapid predictions. — Garth
————————————————
The problem is if you take out gold and RE….all your left with is….paper? What solid diversifiable investment am I missing?

#128 Mixed Bag on 03.06.13 at 1:33 pm

This was an interesting story from Scott Adams:
http://dilbert.com/blog/entry/market_manipulators__clarification/

If you’ll forgive the posting of the contents, it is not that long but is an entertaining read.

“Rob Wile at Businessinsider.com asked me to clarify my prediction of a 20% stock market correction in 2013. (See my post below.) So I tapped out the following message on my smartphone:

—- Start —-

“I’m glad you had the wisdom to get a cartoonist’s opinion on global financial markets.

The 20% estimate is based on the fact that 20 is a big round number and more likely to happen than 30%. I don’t like to over-think these things.

My reasoning is that the people at the highest levels of finance are brilliant people who chose a profession with the credibility of astrology. And they know it. Then they sell their advice to people who don’t know it. So that’s your cast of characters.

Now consider that the characters – who are literally geniuses in many cases – have an immense financial motive, opportunity, and a near-zero risk of getting caught. How do you think that plays out?

We can only give a guess of the odds that the market is being manipulated. So I ask myself: How often does the fox leave the hen house because he feels that taking an egg would be wrong?

If you have a different answer from mine, I applaud your faith in human nature.”

—– End —–”

#129 Axxman on 03.06.13 at 1:35 pm

More fun with numbers from TREB – Last February they announced the average house price was $502,508. This year, one would expect to see that same number used as the 2012 comparison in their Market Watch report but guess what?? In true history revisionist fashion, they created a new number for Febraury 2012 – $500,249 – which makes the year over year price increase look better. Does Jason Mercer have a little Enron in his past??

#130 Tom Vu on 03.06.13 at 1:36 pm

People lust for rising assets and run screaming from falling ones. Explains a lot. — Garth

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

That is also called a Honeymoon.

#131 Steve on 03.06.13 at 1:41 pm

#80 Jackfrost on 03.06.13 at 8:26 am Hi everyone.

___________________________________________

I agree with #102 Ydnew on 03.06.13 at 10:47 am.

Why would your mother sell, and you buy? Are you trying to support the real estate industry?

Rent from your mother, or buy from her, or be a little evil and give her a reverse mortgage, but don’t sell her place and buy another right now. That would pretty much destroy the advantage of waiting.

#132 Ronaldo on 03.06.13 at 1:44 pm

#101 Ydnew -

“Living at Home

With over 80% of seniors suggesting they want to live at home, this is the most popular option. Many seniors thrive on their own or within a home with family members. They may need some medical assistance like everyone does now and then. However, the reality is that their life is not much different than prior to becoming an “official” senior.

This group, which makes up the largest amount of seniors sees family and friends, travels and remains active in the their community.” http://www.seniorcare.net

I am 67 and have no interest in getting comfy in the rocking chair just yet. Too many mountains to climb. My own parents lived in their own home until forced to move to a care facility, they were 89. Both passed away within a year of moving in. I was so grateful that they were able to stay in their home, which they loved, for as long as they did.

Nobody that I hang out with in my age group have any interest in moving into a condo or anything like that anytime soon.

The other factor that is keeping the elderly in their homes is the costs associated with living in these facilities. Not everyone lives in areas where their homes have grown to values in excess of 1 million dollars. For these people living outside these bubble areas, its a much different story.

The risk these elderlies face, the ones with the equity in their homes as the majority of their capital, know that it would not take a great deal of time before that equity is sucked away by these retirement homes.

Then what? Do they get turfed or do they get subsidized by the government to stay where they are or are they forced to move into some other government subsidized facility.

These are some of the fears facing the elderly nowadays. I know that many in my age group are facing these challenges with their parents at this time. I hear a new story almost every day in regards to this subject. Very stressful times for many of the older boomers right now.

#133 Blacksheep on 03.06.13 at 1:56 pm

“Why do I bother? — Garth”
——————————–
You bother, because you have an agenda.

As we all do. Mines different than yours.

Some may not admit it or even realize it,
but if one looks, its there.

take care
Blacksheep

#134 Buy Low Sell High on 03.06.13 at 2:04 pm

The kid set his garage on fire building a home made meth lab and now he’s trying to put out the fire before his father gets home!

#135 HAWK on 03.06.13 at 2:04 pm

#49 Ronaldo on 03.06.13 at 12:29 am

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

You could well be right, it would octenagarians are also substantial in numbers. Many tend to leave the home to kids as gifts though.

#136 Old Man on 03.06.13 at 2:09 pm

The real bargains in life actually exist to establish a retreat home to get away from the madness of the big city. It is a matter of thinking out of the box; not an overpriced cottage, but a potential retreat home that one day might be a retirement haven; something real nice that will cost peanuts in the range of 65 to 135K.

I just did a bit of research on Blenheim, Ontario with MLS, and was amazed at what money can buy. There are a few bargains that have been updated, and might be worth a look, as know Mr. Turner will see a couple of properties much to his liking – need I say more!

#137 Holy Crap Wheres The Tylenol on 03.06.13 at 2:25 pm

http://mytorontocondo.com/blog/articletype/articleview/articleid/98

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

http://www.sunnewsnetwork.ca/sunnews/straighttalk/archives/2013/03/20130304-070837.html

We have been through this high rise building stuff before and it didn’t work!

The Tower of Babel forms the focus of a story told in the Book of Genesis of the Bible. According to the story, a united humanity of the generations following the Great Flood, speaking a single language and migrating from the east, came to the land of Shinar, where they resolved to build a city with a tower “whose top may reach unto heaven; and let us make us a name, lest we be scattered abroad upon the face of the whole earth.”
God came down to see what they did and said: “They are one people and have one language, and nothing will be withheld from them which they purpose to do.” “Come, let us go down and confound their speech.” And so God scattered them upon the face of the Earth, and confused their languages, so that they would not be able to return to each other, and they left off building the city, which was called Babel “because God there confounded the language of all the Earth”.

So let me think this through we are defying what the Prophets have been telling us for many years. We kept on building to the heavens anyway with no regard for the consequences to come. Oh well what could ever happen, a severe clipping, a nasty crash, a profound clobbering with a sheepherders crook!
Not to worry, es sólo una historia, könnte dies niemals wahr sein, είμαστε τα πρόβατα, и ми смо много! Cosa, cosa è che si sta dicendo? Non capisco!

Babel = Toronto ?

#138 john s on 03.06.13 at 2:38 pm

http://www.theprovince.com/business/Looming+trade+shortage+means+higher+home+prices/8047073/story.html

prices to be high in Ottawa, FOREVER…..(sarc off)

#139 GTA Girl on 03.06.13 at 2:58 pm

This is a story that pisses off many financial advisors who run their business ethically and Lawfully.

http://business.financialpost.com/2013/03/05/osc-bans-former-dentist-from-trading-over-role-in-ponzi-scheme/

A guy with no financial credentials raises $40mil in a Ponzi scheme. Hopefully this is the first step towards a criminal trial.

Also, this story may get bigger. The odd timing of his pleading a settlement after months of stalling seem odd.

Rumour has it many involved in top tier of the scheme and got there money plus 35% were in condo development. Seems the CRA have been watching this closely.

The old adage, if it looks too good to be true, it probably is

#140 Rob in TO on 03.06.13 at 3:01 pm

Copied from Garth’s message of the day, in part…

“As I mentioned here Tuesday morning, the latest battleground is the GTA, a six million person market where realtors are rock stars and developers have cults. There are more new residential towers under construction (almost 150) than any other city in the world. More than New York and Chicago put together. More immigrants than the rest of the country combined. If Sodom and Gomorrah got hitched and wanted a condo, it’d be here.”

It reminded me of last Sunday’s 60 Minutes broadcast of what’s going on in China. Thousands upon thousands of new condo units – in ‘new’ cities sit empty. There are still so many people there that can’t possibly afford to buy one, based on what they earn – something like 2 bucks a day. Yeah, economies of scale – still very scary.

#141 The Prophet Elijah on 03.06.13 at 3:13 pm

Garth i just saw on the elevator TV that the housing bubble has been averted cause interests rates are not going up. Don’t know what to make of it.
But is a sure testiment to the health of the global economy, prepare for stagflation ladies and gents and load up on gold/silver. My friend Putin of Russia is doing the same along with the Chineese.

#142 AK on 03.06.13 at 3:32 pm

Private Jobs Continue to Show Signs of Growth

http://finance.yahoo.com/news/private-jobs-continue-show-signs-155430072.html

#143 Ydnew on 03.06.13 at 3:54 pm

#131 Ronaldo
You missed the point. My friend has no intention of moving, and I’m not questioning that. What frustrates her is the fact that she is paying taxes on a house that the city values at $1.1 million despite the fact that, apart from routine maintenance, is exactly the same as when she moved in 50 years ago and for which she paid $19 thousand dollars. She is fighting the assessment, but doesn’t expect to get much sympathy from City Hall

#144 Edmontontian on 03.06.13 at 3:58 pm

Here in Edmonton we have large new 2 bedrooms (new still but 3 years old-never lived in yet). Condos in a premium DT area going for $397,000 that would be $2600 plus electricty with Taxes, condo fees & mortgage payment at todays low rates. Or you can rent it with Electricty incl (ad on Kijiji) for $1800. You decide.

#145 Ralph Cramdown Ⓤ on 03.06.13 at 4:00 pm

#125 DreamingInTechnicolour — “I don’t hear anything in the media about interest rates for credit cards, car loans, lines of credit, pay day loans etc. moving downwards too”

Why would they? Just today I got mail about one of my cards, personalized “cheques” I can write to borrow at 0.99% for six months plus a 1% balance transfer fee. That works out to about 3%APR for a six month unsecured loan. If you have good credit, banks are giving away money. There’s a difference between buying market share of price conscious borrowers with high quality collateral (or a AAA co-signer) and giving deadbeat and/or price-insensitive unsecured borrowers a break.

#146 bill on 03.06.13 at 4:04 pm

R&Z said: What solid diversifiable investment am I missing?

all of it.

#147 LS in Arbutus on 03.06.13 at 4:06 pm

64 Queen Victoria

There is absolutely no point in arguing with that person in Kids In Victoria. She’s always right and her reading comprehension is terrible. Her arguments are so unbalanced, it’s like she’s from mars, or is it venus? :-) Garth’s too smart to dignify her with an ounce of his time.

#148 Doug in London on 03.06.13 at 4:13 pm

In response to my posting #97 Garth said: People lust for rising assets and run screaming from falling ones.

I still don’t get it. It seems the more you know the more confused you are, in other words paralysis by analysis. We’ve all seen people lined up out in the cold waiting to be first to get at those Boxing Day or Black Friday bargains. I don’t know too much about investing or economics but when stock prices are cheap like they were in March 2009, isn’t that the same kind of thing as the bargains in stores? I don’t understand all these financial terms, but intuitively when prices are cheap that seems like that’s the time to buy, not sell. What’s so hard about that?

You must be a robot. My kinda guy. — Garth

#149 betamax on 03.06.13 at 4:39 pm

Garth: “the stock market tanked on March 9th, 2009….It was also the moment of least risk and greatest opportunity, the cheapest point in a dozen years.”

So now that the Dow’s hit a record high, it represents the moment of greatest risk and least opportunity. Time to sell.

No, time to rebalance. — Garth

#150 Dorothy on 03.06.13 at 4:41 pm

Garth predicted a correction followed by a slow melt in housing prices, based on the fact that prices could not be justified by the underlying funadamentals. And frankly, I agree with him. I always have (which may surprise some of you). However, for those who didn’t buy RE as an investment, but merely as a place to live and to enjoy, falling prices aren’t necessarily a reason to sell. It’s all a matter of what you can afford. After all, we all own plenty of other assets that depreciate in value, but we still hang onto them because we enjoy owning them (Vehicles, RV’s and Boats come to mind).
However, financial investments are only held for their cash value. So, given that current stock market highs cannot be justified by the underlying fundamentals, I believe people would be making a mistake if they were to sell their principal residence in order to invest in the Stock Market. Because Wall St appears to be totally out of whack with what’s happening in the real economy. And such a disconnect is just as dangerous as housing prices being out of whack with the real economy. But housing does at least have a utilitarian value. Whereas worthless financial investments are just that, worthless.
So, while I can see risk for those who INVEST (speculate) in Real Estate, I don’t consider falling prices to be a reason to sell my home, rent and invest the difference in many of the various financial instruments Garth recommends. I enjoy owning as opposed to renting, can afford to continue doing so, and don’t want to risk my capital by investing in current volatile stock markets. And there are many who think just like me. Which is the reason I don’t think you’re going to see the flood of Boomers listing their homes that some bloggers are expecting (hoping) to see. I DO agree with those who say many of my parents generation, who are now in their mid to late 80′s, will be selling their homes soon in order to move into retirement homes. But that group is small compared to the Boomers.

#151 chickenlittle on assignment on 03.06.13 at 4:44 pm

How could rent go down if prices have been is high for so long? People need to pay their crazy mortgages so I doubt rent would go down.

#152 Holy Crap Wheres The Tylenol on 03.06.13 at 4:46 pm

But it all comes down to one thing. Stupid prices. When sane people refuse to pay insane amounts to greedy owners wanting windfalls, the gig’s over. After all, half a million invested in a balanced portfolio last year probably earned $50,000, while a Toronto condo costing that much sucked thousands in condo fees and taxes, ate $15,000 in closing fees, and was worth less twelve months later.

“Think of how stupid the average person is, and realize half of them are stupider than that.”
― George Carlin

Most of those stupid ones now live in the fourth largest city in North America, congratulations Toronto!

http://www.youtube.com/watch?v=6MT3CihStFQ

#153 Mixed Bag on 03.06.13 at 4:47 pm

Recently, I had occasion to drive in to downtown Toronto via the Gardiner. My jaw was agape. The number of condominium buildings under construction was astounding. Crane after crane, building after building under construction. I could not believe how much the view had changed from driving that same route a few years earlier. One building after another – is living by the Gardiner that desirable?

#154 Rich Renter on 03.06.13 at 5:06 pm

The banks are offering Joe a 5 year fixed mortage rate of 2.99%.
The real estate marketing media machine is telling Joe now is the best time to buy a home.

Garth Turner has been blogging since 2008.
What do you expect Joe to do?

Joe will go over the cliff with his friends, neighbours and the buds at work. Is that not a given? — Garth

#155 Old Man on 03.06.13 at 5:15 pm

I just came back from my rant room, as about 60 people are waiting for me to crack jokes, and they all went into stitches, as make them laugh. Why to I do this all? Well, it makes me happy to give them a fun day with a bit of BS day and night, as they love it all, and makes me feel good as well because there are hard times for many, and such needs to be done as so many are hurting. I went to an upscale grocery store today to buy some items, and oh felt the pain to pay that bill as well.

#156 Ralph Cramdown Ⓤ on 03.06.13 at 5:22 pm

#142 Ydnew — “My friend has no intention of moving, and I’m not questioning that. What frustrates her is the fact that she is paying taxes on a house that the city values at $1.1 million despite the fact that, apart from routine maintenance, is exactly the same as when she moved in 50 years ago and for which she paid $19 thousand dollars. She is fighting the assessment, but doesn’t expect to get much sympathy from City Hall”

Nor from me. Would she be happier if the city divided the assessed value of every house in the city by 1,000? Her share would be the same, and the city would cost about the same amount to run, so her taxes wouldn’t change.

Maybe she’s having trouble affording the taxes, and believing her house is worth that much? I’ll tell you what. I’ll buy her house for $40,000, I’ll pay the property taxes and I’ll even maintain it for her. I’ll grant her a life interest in the property, so she can live in it rent free until she dies. Let me know if she’s interested.

#157 cramar on 03.06.13 at 5:26 pm

The crash of ’08-’09 will never be repeated because it is different now! Yah, right!
http://www.marketwatch.com/story/your-sequestered-brain-cant-see-next-crash-coming-2013-03-06

Insiders are again now selling to the retail trade, but this time is different!
http://www.triwealth.com/dow-sets-new-record-attention-winners-please-sell-your-shares-to-the-losers/

And Greedometer readings are at extreme:
http://www.triwealth.com/greedometer-2/4614-2/

Every time since 1999 the Greedometer has redlined, a crash followed! Every time! Except there will be no crash this time. This time is different!

There will be a correction, of course. But no 2008. – Garth

#158 DreamingInTechnicolour on 03.06.13 at 5:27 pm

Re: 144 – perhsps someone who needs to play a shell game by shifting their debts around like deck chairs on the Titantic might bother to write out one of those debt “cheques”, only to be faced with high interest credit card rates 6 months later. Did you ever hear the story about Pavlov, the dog and the piece of steak ?

#159 afraidit allmightend on 03.06.13 at 5:42 pm

Man..we have it so good. In the US the IRS gives you the first $250K free on RE appreciation ….but in the meantime everything related to prop ownership is tax deductible….quick someone do the math!! mortgage interest …deduct…commissions…deductible, prop taxes…deductible…maintenance..deduct it…repairs ..deduct….fee’s ..deduct….title registration…deduct…improvements and upgrades…etc etc etc…deduct deduct deduct…..even moving expenses post sale….thats right…deduct.

Oh yeah…did you hear about the latest health care advantage in Canada…..the woman who’s waited 10 years to get foot surgery and has lived in pain all that time……in the US……thats right….health care expenses are tax deductible.

Does anyone go without healthcare in the US…no…thats a CBC red herring…..the argument is over which hospitals take pro bono cases……BC MED costs more p/a in premiums than a single policy in Texas……go figure right?…and you have instant access to things like foot surgery….not ten years.

Wakey wakey people….youse canooks is getting hornswoggled. Start asking yourselves where the tax revenue is really going….it sure as heck isn’t back to the taxpayers.

#160 Old Man on 03.06.13 at 5:44 pm

#149 Dorothy – I love your postings, and can see you are a woman with some smarts, and the world around us is out of control. Now see a new trend taking place which I don’t like at all, as the corporations who bought the apartment buildings are now making a move to spend huge amounts of money that really are not necessary in reality in Ontario, as a means to an end, to go to the government control boards to say we need to now lift rents up bigtime to cover our costs, as this is a scam in my option.

#161 Derek R on 03.06.13 at 6:04 pm

#142 Ydnew on 03.06.13 at 3:54 pm wrote:
What frustrates her is the fact that she is paying taxes on a house that the city values at $1.1 million despite the fact that, apart from routine maintenance, is exactly the same as when she moved in 50 years ago and for which she paid $19 thousand dollars

$19,000 in 1963 is worth around the same as $143,500 in 2013. And the city doesn’t value the house at $1.1 million. More likely it values the house at $100 thousand and the land that the house sits on at $1 million. So the house dropped in value a bit (because it’s been maintained but not updated) but the land on which it sits has soared in value because other people want it.

As a retiree your friend could live anywhere. If she chooses to live on an expensive piece of land then it is up to her to pay the taxes for that land. If she really didn’t want to pay them she would move elsewhere. There are plenty parts of Canada where she could get a very nice house for less than $143,500 and substantially lower her tax bill.

#162 The Prophet Elijah on 03.06.13 at 6:06 pm

#153 Rich Renter on 03.06.13 at 5:06 pm The banks are offering Joe a 5 year fixed mortage rate of 2.99%.
The real estate marketing media machine is telling Joe now is the best time to buy a home.

Garth Turner has been blogging since 2008.
What do you expect Joe to do?

Joe will go over the cliff with his friends, neighbours and the buds at work. Is that not a given? — Garth
———————————————————-
There comes that point in the cycle where lower interest rates won’t stimulate like in the past, due to debt saturation.
Garth are you saying we are at that point?

Thx, bud

#163 The Prophet Elijah on 03.06.13 at 6:09 pm

#148 betamax on 03.06.13 at 4:39 pm Garth: “the stock market tanked on March 9th, 2009….It was also the moment of least risk and greatest opportunity, the cheapest point in a dozen years.”

So now that the Dow’s hit a record high, it represents the moment of greatest risk and least opportunity. Time to sell.

No, time to rebalance. — Garth
———————————————————-
There is an inverse relationship between the DOW and gold, time to fill the sack with all things gold?

Not a gold blog. You were warned. — Garth

#164 Ralph Cramdown Ⓤ on 03.06.13 at 6:19 pm

#158 afraidit allmightend

Dude, do some research before posting. Obvious glaring errors in your post:
- health care expenses are deductible in Canada
- US hospitals only do acute emergency cases on a pro bono basis. Walk into an emergency room without insurance and needing foot surgery for chronic pain and you’re going to need ass surgery too, because that’s what they’ll throw you out on.

#165 Old Man on 03.06.13 at 6:30 pm

#153 Rich Renter – when money is offered too cheap to believe it such is a trap, and it is like going down to Dundas and Jarvis late at night or parts in the area as a lady in waiting will be there for you making an offer better than Walmart. Do not do it as the consequences of such can come back, and hit you hard. Now some of those ladies are now Real Estate agents, as the money was much better to hoop the suckers.

#166 [email protected] on 03.06.13 at 6:48 pm

ok rebalance – what are the percentages and into what?

Any soon to be posting on this topic?

#167 Devore on 03.06.13 at 7:17 pm

#117 maxx

But don’t believe for a second that a spendthrift is somehow smarter than you. We are all stuck in this monetary system, must create and maintain quality of life, and those with savings and investments are and will continue to be in the winning class, not the underclass.

Too many fall for this trap, envying apparent prosperity. But regardless of the severity of the collective and individual outcomes, those who have been prudent will be far better off than those who spent every penny earned and loaded up on debt.

#168 Hannah on 03.06.13 at 7:23 pm

Hi Garth,

Love your blog, addicted to reading it daily (missed it on the weekend :)). Just show an example of how Richmond BC has been overinflated and then started to deflate now and hopefully will continue for the next few years. Based on BC assessment values of a property in Quilchena, Richmond BC. 2010 = $848,000; 2011 = 991,000, 2012 = 1,299,000; 2013 = 1,154,000. There is no such investment that can gain over 30% in 1 single year. Time to crash. Thanks Garth

#169 Devore on 03.06.13 at 7:26 pm

#121 Daisy Mae

On second thought, strata corporations may be trying to build up a contingency fund.

The only thing that needs to be investigated is why condo maintenance fees are so low.

The really really high ones are, as you note, either sitting on an empty reserve fund and looming bills, or needing to finance decades of deferred maintenance due to the aforementioned low fees.

The majority of fancy glass towers built in the last 10 years contain a shocking amount of consumer-grade parts picked up at HD on sale, many are having huge plumbing and mechanical problems just a year or two into operation.

These things are very expensive to maintain properly, even at the best of times.

#170 Smoking Man on 03.06.13 at 7:35 pm

Not too bad
http://guava.ca/indicators.html

Now that BOC says low rates for ever. RE agents armed with this info will disarm any fence sitting sheep into signing ZEE papers.

Not saying this is a good thing.

Just calling it…

BoC said no such thing. — Garth

#171 Shawn Allen on 03.06.13 at 7:37 pm

BUY AMERICA, BUFFETT IS…

148 betamax said:

So now that the Dow’s hit a record high, it represents the moment of greatest risk and least opportunity. Time to sell.

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

No, DOW is at record high. But it is far from a record P/E in terms of earnings.

GDP grows over the years and the DOW grows with it. DOW P/E is at about its historical average or so (around 16 times trailing earnings) In 2000 it was about 27.

Given low interest rates a higher P/E is justified.

All told, the DOW is not expensive. But yes, rebalancing some to cash and short-term fixed income and pref shares is a good idea. Don’t even think about long-term government bonds which are at 33 (3%) to 50 (2% yield) times earnings. (And the earnings never grow). Bubblish…

#172 Tom Vu on 03.06.13 at 7:43 pm

Mr Smoking Man…

You have good advice….
Years of wisdom stick to you like …..well you know.

http://www.joe-ks.com/archives_jan2007/OuthouseTreasure.htm

#173 Ralph Cramdown Ⓤ on 03.06.13 at 7:46 pm

#156 cramar

This Gweedometer seems like a neat trick. Extensively curve-fitted — er, back-tested — over ten years. Can I point out the obvious flaw? It looks at the insider buy/sell ratio as a measure of management confidence in corporate future performance. Big problem: People (including insiders) sold a boatload of everything in December 2012 on fear that capital gains taxes were going up January 1st as the Bush “Let’s pretend ten years is forever” temporary cuts expired.

#174 Ronaldo on 03.06.13 at 7:51 pm

#149 Dorothy – good post.

#175 jess on 03.06.13 at 7:58 pm

Stone tha Flamin’ Crows!
Moody’s reported profits 2012 $1,077 million

huh?
http://www.moodys.com/research/Moodys-Investor-Fears-Over-Greek-Government-Liquidity-Misplaced–PR_191285

http://www.gpo.gov/fdsys/pkg/CHRG-110hhrg51103/html/CHRG-110hhrg51103.htm
http://www.justice.gov/opa/pr/2013/February/13-ag-156.html

Bathurst Regional Council v local Government Financial Services Pty Ltd (No5)[2012]FCA 1200
http://theconversation.edu.au/downgrade-your-expectations-it-pays-to-be-wary-of-credit-ratings-agencies-12603

page 12
http://www.uic.edu/classes/actg/actg516rtr/Readings-M/04-Enron-Senate-Report-Rating-agencies.pdf

#176 Ydnew on 03.06.13 at 8:15 pm

#155 Ralph Cramdown
#160 Derek R
In my friend’s case it is the miracle of MPAC’s mystical working. A couple of streets over, where no houses have been renovated but are nonetheless well maintained and the street is otherwise identical, similar houses are assessed at around $500K. Because most of the houses on her street have been reno’d and extended until they risk tipping into the ravine this assessment has been given to her house. Part of the problem is the ravine because the lot size included as very steep ravine and city by laws allow you to build on 60% of the lot. Hence McMansions have been built in what used to be a very working class ‘hood. It’s just the goal posts that have moved. BTW she can still afford to live there. She and her husband had no kids so knew that they had to save for their old age and invested very wisely.

#177 Ronaldo on 03.06.13 at 8:21 pm

#142 Ydnew – I understand exactly what you were saying.

The point that I was making is exactly what you stated about your friend. She doesn’t want to move or go into a retirement home like many in her age group. This group will only leave kicking and screaming. The value of the home makes no difference crazy as it may seem.

No different than my parents but they lived in an area where properties did not appreciate to the same extent as your friends did so they were able to pay their taxes and maintain their home.

Like so many people in that age group, their funds have mostly run out hence the delapidated homes that we see as we walk around certain areas of the cities.

Those are the tear downs that are selling for 1 million in some parts of the lower mainland. I saw many in the Mountainview area between Main & Cambie and bordered by 16th and King Edward.

The same thing occured back in the 80′s in the lower mainland where prices sky rocketed to the point that the elderly (often widows) could not afford to pay the taxes then either.

I believe the gov’t came up with a deferral scheme where tax payments could be put off until the property sold. Maybe she should look into this possibility.

#178 Screwed on 03.06.13 at 8:31 pm

Smoking Man on 03.06.13 at 7:35 pm

Not too bad
http://guava.ca/indicators.html

Now that BOC says low rates for ever. RE agents armed with this info will disarm any fence sitting sheep into signing ZEE papers.

Not saying this is a good thing.

Just calling it…

BoC said no such thing. — Garth

Of course they don’t spell it out for you. Garth still believing in fairy tales? Money from nothing doesn’t deserve anymore than 1%. Lucky for them if they can keep collecting from the deeply indebted sheep. When the sheep wake up, it’s game over for them. So far this is a good gig. See Scotia record profits. If they get too greedy and demand to eat their pie and have it to, the fairy tale will end.

Do you comprehend the difference between the central bank and chartered banks? — Garth

#179 AK on 03.06.13 at 8:38 pm

#148 betamax on 03.06.13 at 4:39 pm

So now that the Dow’s hit a record high, it represents the moment of greatest risk and least opportunity. Time to sell.

——————————————————————-

JPM – Book Value $53.65 – Current Price : $50.03

BNS – Book Value $33.47 – Current Price: $61.12

What do you think will happen next?

#180 Nostradamus Le Mad Vlad on 03.06.13 at 8:47 pm

-
“Why do I bother? — Garth” — Because you luv us! You are charged forever with correcting our grandiose mistakes! Otherwise, what would be the point of your narratives?
*
2:29 clip Illinois state govt. wants all PMs registered; US Oil Prod. passes SArabia’s first time in a decade; Fance Leaving the good ship EU? The Fourth Reich and Corruption Politicos with money is a bad idea; Fake or Fase? Greek violence; Banks want Libor lawsuits tossed; NYC Homeless pop. reaches 50K, and Wholesale 4Closure sales planned; EZone QE ain’t working.
*
1:45 clip — P2Pi Peer to Peer internet; Iran Oh. What of Israel? Israel has nukes, Iran doesn’t; Mother Teresa Ancient history; Anger Management III in Florida, and Gun Ownership Mandatory? One city studying the option; Joe Biden knows an awful lot about nothing; Chavez Beware the imperialists, and Chavez “FOX News is pounding on this issue of Hezbollah being inside Venezuela, which signals that the US is going to invade Venezuela “To Fight Terror” but to actually gain control of the oil, the gold, and the uranium, and to get rid of Chavez’ silly notion that the wealth of the nation belongs to the people of the nation. “ wrh.com; 11:04 clip Twenty ingredients to avoid; Women are Smart and Dangerous Men, stand back.

#181 Smoking Man on 03.06.13 at 9:05 pm

Why did know you where going to say that..

BoC said no such thing. — Garth

Of course they didn’t but that how it’s going to be spun…

Don’t matter why they say exactly, it’s what the herd wants to beilive it thinks it said….

#182 Westernman on 03.06.13 at 9:18 pm

afraidit allmightend @ # 158
But you don’t understand Sir, Canadians enjoy being screwed over royally by their owners in Ottawa – it’s like they have mass guilt complex and feel they deserve punishment – they wouldn’t have it any other way…
Couple that guilt and helplessness complex with an unshakable belief in the Socialist Nanny State and you have Canada…

#183 johnny d on 03.06.13 at 9:35 pm

#83Pr on

“Destroying lives, yes, thats wath coming in mass, with a higher interest rate, if they ever come….”

———————————————————

Although I somewhat agree with your statement. My negative sentiment is more directed toward the fact that people who rely on a fixed income such as those retired are having their lives destroyed.

You work for a living and pay into CPP and so forth with the hope that the government doesn’t make Canadian currency worthless all to prop up a credit bubble.

I feel little empathy for those who gambled so much on debt. It’s “money” that they never worked for yet. On the other hand the retiree who has worked their whole life counts on their fixed income dollars to actually stretch far enough to cover housing.

House prices increasing up to 300% in a few short years has made money essentially worthless and it is destroying the lives of people who count on this money to have some actual value.

Interest rates can skyrocket for all I care. Those who have worked for their money will at least see the fruit of that work and those who overloaded on debt will get what they deserve.

#184 jess on 03.06.13 at 9:37 pm

05 Mar 2013

effects of social media …

http://www.globaltimes.cn/content/748278.shtml

http://www.danwei.com/master-kong-how-internet-rumors-can-affect-share-prices/

http://qz.com/60218/internet-rumors-and-xenophobia-cost-the-worlds-biggest-instant-noodle-maker-2-4-billion/

#185 Ydnew on 03.06.13 at 9:43 pm

#175 Ronaldo
I appreciate your comments, but do not worry about her financial health. She and her late husband were old school DINKs. They grew up in an era where there were no government pensions or health care and budgeted accordingly.
It never ceases to amaze me how people who have lived through WWll and the depression, many were refugees and also had very poor living conditions as a child yet managed to accumulate enough wealth to
survive today.

#186 Old Man on 03.06.13 at 9:44 pm

#170 Tom Vu – it is time for you to come clean, as your success came about years ago by consulting with the Smoking Man, as he alone taught you all about how the machine worked to make some money.

#187 Ronaldo on 03.06.13 at 10:14 pm

#183 – Ydnew -I know what you’re saying. I’ve known some elderlies from the same era who died with a fortune and lived like it was back in the depression. Hard to kick old habits I guess.

#188 Willy2 on 03.07.13 at 5:26 pm

Mr. Turner,

Could you write a post why you think (Hyper-)inflation is inevitable ?

Falling canadian house prices are actually VERY deflationary (destructiong of money & credit). And rising taxation, rising food and energy prices make it for the average canadian person more and more difficult to service their debts and that will ultimately lead to a whole string of defaults (=destruction of money & credit). Highly deflationary, IMO.

There will be no hyperinflation. — Garth

#189 Willy2 on 03.08.13 at 3:27 am

Mr. Turner,

If you don’t think hyper-inflation is comng (and I agree) then why are you advocating buying gold + commodities ?

About Hyper-Inflation:
“Hyper-Inflation requires Hyper-Deflation”
“Hyper-Inflation is a political choice”
Source: Hugh Hendry. (GOOGLE his name !!!)