The rest of us

LOSING

When real estate lawyers worry about cash flow, we all should. Twice in the past week, four provinces apart, I’ve sat with guys I’ve known for years, listening to their report from the front lines. These are the people who close deals at the land office, register deeds and mortgages, arrange title insurance and the transfer of keys. This is not about hype, marketing, listings or offers. It’s where real estate actually moves. If deals don’t close, lawyers don’t get paid.

I ask Greg, now in his sixties, a lawyer for four decades, when he’s going to retire. “I’m working on the Freedom 95 plan,” he growls. “I basically got wiped out in the mess back in the early Nineties, and the same damn thing is happening again.” By the way, his office sits in the middle of one of the most densely-populated suburbs crowding Toronto, the scene of explosive growth. “It was,” he says of the recent downturn, “like a switch being turned off.”

A thousand miles away Stefan sits looking over the condos and wharfs at the ocean. “So far this year,” he says, gazing distractedly out the window, “they tell me at the registry office that mortgages are off by fifty per cent. That’s dollar volume. I knew it was down from my own billings, but I had no idea…”

Making less business worse are lower prices. Legal fees, after all, are usually tied to the value of deal done. “In the last six months I’ve done more foreclosures that in the past three years. And every one of them is a nightmare.”

Lawyers, like real estate agents, insurance guys, mortgage brokers, carpenters, bankers. appraisers and drywall dudes, are all part of the FIRE sector of the economy. Since interest rates cratered the ‘finance, insurance and real estate’ industry has been on a roll. It now accounts for about 12.5% of the entire economy, while manufacturing sits in second place at 11% followed by mining and oil and gas at 8% (see below).

This is another legacy of cheap money, lax lending standards, and government policies deliberately targeted at promoting home ownership. Since 2007 we’ve seen the introduction of 40-year mortgages, 0% down payments, cash-back home loans, first-time buyer tax credits, property tax rebates, home renovation tax credits plus dirt-cheap interest rates, all designed to get people in debt and buying houses. It worked. In major cities three-quarters of families have real estate, and debt’s gone through the roof. All this, plus strong commodity prices, helped the Canadian economy skate through years when others were tanking.

Suddenly, it’s changed.

Commodity values have fallen. Oil sands guys are having a tough time attracting foreign capital as costs rise, demand slags and margins thin. Now real estate’s hitting a ceiling, thanks to inflated prices, stagnant incomes, fat debt and housing saturation. Mortgage rates can’t really fall much further, if any, while the jobless rate is going up and the dollar down. Just a few years after people here looked at struggling Yanks and felt smug, there are hedge funds working overtime to short Canada.

About 30% of our economy now emanates from actually making stuff, digging it up or exporting it. The other seven-tenths comes from consumer spending. The biggest asset people have, where most of their net worth and debt is concentrated, is housing. And since 2009 there’s nothing people have been obsessed with more than real estate. Collectively we’ve taken a massive gamble that this one asset class will hold its value. Because if it doesn’t, the downside risk is immense.

Nathan wrote me yesterday:

Garth, after reading your post this week I find myself wondering what will happen to the rest of us.

If I hold off buying a house (and believe me I intend to), continue to stuff my TFSA following a index investment strategy, and am generally wise with my money will I get swept away in the flood of debt generated by fools or will this nation eventually turn into a society of haves and have nots?  Will the insistence of the masses to measure their worth by “stuff” eventually tank the economy and ruin it for the rest of us too?  Any thoughts?

You’re smart to be worried, Nate. As housing weakens, millions of families will feel poorer with many owing more than their homes are worth. Some people will walk, most won’t. Instead they’ll just stop buying Fords, flat-screen TVs and vacations, resulting in more lost jobs and a weaker economy. It’s a vicious circle destined to melt real estate values further.

As I’ve said so many times, it’ll be the kids without equity, and the Boomers with too much of it, who get nailed the worst.

What to do, Nathan? Exactly as you are. As housing turns cold and unloved, the best refuge is liquidity. Concentrate on building a portfolio with the right balance between safe stuff (fixed income such as corporates and preferreds) and growth assets (like ETFs), plus diversification across asset classes, sectors, capitalizations and economies. Don’t overdo exposure to Canada. Learn what rebalancing is, and do it. Match risk with portfolio weightings. Buy at the right prices – typically along 200-day MAs. Shelter fixed income. Collect dividends and cap gains in a non-registered account. Maybe get some help.

And remember. Over 70% of people own real estate. Only 1.2% have a million to invest.

Yeah, social justice is so overrated.

SECTORS

160 comments ↓

#1 Sockeyemoon on 05.24.13 at 7:16 pm

As the debtor nation goes down the rabbit hole, should we not worry that they will vote in a government to inflate away the debt? It seems the days of doing the right thing are long lost.

#2 Randy on 05.24.13 at 7:20 pm

Not sure if I’m a Narcissist …or everyone else is an idiot !!!

#3 blokexistentialist on 05.24.13 at 7:25 pm

Killer post.

#4 TurnerNation on 05.24.13 at 7:26 pm

Attn. new blog dogs. The following usernames are still available; reserve yours today.

Fancy Coloured Kias

Stephen who?

Otto B. VanDelusional

Sticky Figures

NDP caucus sucker

Yuus Been Duffed

Garthflation

Bandit’s Nemesis.

Bikes, Babes and Balanced Portfolios

Smoking Manchurian Candidate

Chancellor Rebalancer

Gee I See-er

Reserved:
Blog Dog Poloz

#5 prairie person on 05.24.13 at 7:41 pm

Had supper with my daughter and son in law yesterday. They’re around 50. Talked about real estate and construction. Their house is paid for. However, a number of their friends, a lot of their friends, actually, still have large mortgages, big credit card debt, are working extra jobs, and can’t save a dollar. None of them keep a record of expenses. Wants and needs are the same and there are no priorities. It sounds like people are driving in a thick fog and just hoping there are no objects on the highway in front of them. And the government set an interest rate policy that has allowed this.

#6 charles on 05.24.13 at 8:05 pm

I noticed that agriculture, fishing & hunting near the bottom of the GPD graph…our natural resources. Today debt is the “I got”. The B.C. Liberals have created the worse debt in history. Greed from all levels have created a false life. Also, casinos & gambling have been used as a resource for the government which they should have used the bascis of life as the resource.

I have been taught by the best. Mankind will come to an end when we start using gampling as a resource while ignoring the basics. Corruptions & greed are at the highest level, the very people who regulate our lives. Life is tough but it does not help when the government from all levels especially the MLS can give too hoots and just care about themselves and their golden pensions.

All I can say is God help us and I am not even religious.

#7 Spiltbongwater on 05.24.13 at 8:06 pm

Lawyers transfer the keys? I got the keys to my house from my Realtor, who I assumed got the keys from the sellers Realtor. Learn something new everyday.

#8 NoOneOfConsequence on 05.24.13 at 8:16 pm

We have been all sold a pack of lies.

Growth DOES NOT equal prosperity.

Growth and prosperity are funded by SURPLUS.

Surplus is achieved by consuming less than we produce. We may then invest that surplus into growth and/or prosperity.

In a balanced government budget, there cannot be growth or prosperity…because consumption(govt spending)= production(taxes).

Same principle for normal folks.

If you cannot put aside money for savings (surplus in your budget) then taking on debt, consumer or other) can only result in hardship.

Well…as a nation, we have NO surplus. We have accrued debt.

Now comes the hardship part.

Simple isn’t it?

#9 East Van on 05.24.13 at 8:20 pm

http://www.straight.com/news/381926/market-delays-hastings-sunrises-alba-project

#10 Brian Ripley on 05.24.13 at 8:21 pm

Garth said “Over 70% of people own real estate. Only 1.2% have a million to invest.”AND “As housing weakens, millions of families will feel poorer with many owing more than their homes are worth… a vicious circle destined to melt real estate values further.”

I look at the U.S. occaisionally to see what the post bubble pattern looks like. Certain areas are booming, but only if personal income and financing is not an issue. Cash buyers rule when prices get down to perceived value. Despite the second boom in some of these bullish U.S. metro markets, the national U.S. ownership rates are in freefall and down to 1995 levels. Another transfer of assets is occuring in real time from the many to the few.

Charts are here: http://www.chpc.biz/2/post/2013/05/us-housing-recovery-update1.html

#11 Michael on 05.24.13 at 8:22 pm

Looks like the 12.5% of GDP figure is only for the “RE” part of the FIRE industry. The “FI” part adds another 6.5%, for a total of about 19%. Throw in construction and it is a whopping 26% of the economy that is about to get hit hard…

Really glad most of my assets are in $US!

#12 Rob on 05.24.13 at 8:24 pm

Unfortunately some people dont learn, they are out buying convinced by their trusted realtor that its a good time to buy. While a friend in Burnaby couldn’t sell his condo last fall which was on the market for a few months. His realtor advised to take it off the market and put it up this spring as a new listing. This year with a $20k mark down only a few viewings but nothing serious.

#13 T.O. & GTA bidding wars debunked May 24 on 05.24.13 at 8:24 pm

http://recharts.blogspot.ca/2013/05/to-sfh-bidding-wars-debunked-may-24.html

http://recharts.blogspot.ca/2013/05/gta-sfh-bidding-wars-debunked-may-24.html

#14 Freedom First on 05.24.13 at 8:27 pm

I really really enjoyed your post today Garth! Thank you.

Stay balanced, stay liquid, stay diversified, stay liquid, stay debt free. Works for me. Also, remember, fear, greed, and the societal pressures are the killers. As well as the people involved in the selling of anything that serves their self-interest. The RE industry is a great example as it is incredibly difficult to tell the friendlies from the hostiles for the house horny……..Freedom First.

#15 Vincent on 05.24.13 at 8:32 pm

I’m wondering if the relatively strong manufacturing presence in Canada could potentially be leveraged to get out of this oncoming situation faster than what was seen with our southern neighbors? I mean, logically, if the 2nd and 3rd biggest GDP contributors are manufacturing and mining, couldn’t we get going with some high-tech tertiary and secondary economic growth? Cheap energy, lots of resources, educated workers, plenty of space… It might even put a dent in that structural unemployment I keep hearing about!

#16 Julia on 05.24.13 at 8:40 pm

#4 TurnerNation on 05.24.13 at 7:26 pm

How about Fordnationcracksmokingman?

#17 ManWhoClimbsTrees on 05.24.13 at 8:43 pm

Had a few talks with some other tradesmen in town and they’re talking like its a full blown recession.

Wonder what Garth says to people investing into their own businesses right now. I’ve bought a chipper and some forestry equipment this year and new sprayer for my farm.

I spose its similar to stocks and what not…

#18 The InvestorsFriend on 05.24.13 at 8:45 pm

Nice Chart!

If I do say so myself…

I was delighted to see my chart featured in today’s post.

Here is a link to my article from whence that chart hails.

http://www.investorsfriend.com/Canadian%20GDP%20Canadian%20imports%20and%20exports.htm

You mean the one you got from StatsCan? — Garth

#19 Brendan on 05.24.13 at 8:48 pm

Hi Garth,

This blog has talked about how mortgage rates are going to go up in the next several years. I owe just under 100k on my mortgage and I can probably pay it off in 5-6 years if I use most of my extra income after food, utilities, taxes, insurance, etc.

In my case, would it be better to pay off the mortgage first while I have locked in low rates, then start a portfolio with mortgage payment size contributions?

OR Pay the minimal mortgage payment and start a portfolio now?

Thanks,

Brendan

#20 45north on 05.24.13 at 8:53 pm

“I basically got wiped out in the mess back in the early Nineties, and the same damn thing is happening again.”

maybe sales can be fiddled but people are going to notice when houses don’t sell

Raginnn: (from yesterday) RealNet Canada Inc. said there were 987 new single, semi-detached and townhouses sold in the GTA last month. Year-to-date sales are the second worse ever and 30% below the long-term average.

that got my attention – April sales down 30%!

#21 The InvestorsFriend on 05.24.13 at 8:57 pm

Who’s Chart?

You mean the one you got from StatsCan? — Garth

***************************************
Perhaps my article is not clear about the source. The data is from Stats Canada and a link is provided to updated data. The chart was my own creation.

#22 AK on 05.24.13 at 8:58 pm

“This is another legacy of cheap money, lax lending standards, and government policies deliberately targeted at promoting home ownership.”
——————————————————————–
Speaking of cheap money: Investors borrow cash from portfolios at record pace

Margin debt highest since 2007

#23 George on 05.24.13 at 9:01 pm

Latest household credit numbers (to the end of April 2013) from the Bank of Canada:

http://credit.bankofcanada.ca/householdcredit

Latest business credit numbers (to the end of April 2013) from the Bank of Canada:

http://credit.bankofcanada.ca/businesscredit

#24 dosouth on 05.24.13 at 9:02 pm

I agree with not paying down a mortgage with this cheap money abounding and investment funds being tax deductible. If you do it right, it works…if not, well you’re the remaining 70% I guess.

#25 T.O. Bubble Boy on 05.24.13 at 9:07 pm

@ #17 Julia on 05.24.13 at 8:40 pm
#4 TurnerNation on 05.24.13 at 7:26 pm

How about Fordnationcracksmokingman?
_______________________

How about FORDboughtthecrackvideo?
How about FORDbigfatliar?
How about FORDindenial?

#26 Thank you Mr. Flaherty!!! on 05.24.13 at 9:13 pm

Thank you Mr. Flaherty! You flaherted real estate market instead of popping the bubble when the time was right.
You are also a great contributor to Canadian popular culture. Your name will be associated withe real estate bubbles in Canada forever. Grazie mille.

Bargain Hunter (R/E bargains coming soon)

#27 Mister Obvious on 05.24.13 at 9:27 pm

I have a teak dining set that was made in Markdale, Ontario perhaps 30 years ago. It’s a beautiful thing I inherited from my mother and is now the only consumer item I have that was manufactured in my own country.

I had the chair seats and backs reupholstered because I couldn’t let it go. Just think of it! Domestic wooden furniture of excellent quality that didn’t arrive in a shipping container from Asia.

Makes me misty. Honest.

#28 Garth's more handsome brother Doug Turner on 05.24.13 at 9:35 pm

Doug here to bring my expert report o n real estate. This market is built on fear that of being priced out forever. The media (except Globe and Mail) brings the fear any opportunity they have. Choppers bringing asian immigrants to purchase every single house in your city with cash. They want your house, and they have cash. Observation #1.

#29 DonDWest on 05.24.13 at 9:36 pm

We’re a sad excuse for a nation.

If the GDP stats are any indication, we’re a nation that spends all of our money for a roof over our head; leaving nothing left at the end of the day for any fun.

But keep telling yourselves this is a wealthy nation. . .

#30 Renter's Revenge on 05.24.13 at 9:44 pm

As an electrical engineer in the power delivery consulting industry, I thought I was safe from this mess, but I’m not. The slowdown in the commodity sector is causing a slowdown in our sector! So glad I diversified my investments away from Canadian equities and real estate!

#31 About Ford on 05.24.13 at 9:48 pm

It’s interesting how easily people jump to conclusions. Media still rules. The allegations made by The Toronto Star (the same that publish false R/E “news”) are not proven. The Toronto Star reporter saw the video on a cell phone owed by a drug dealer and “it appeared that it’s Ford on the video”. Beside the point of befriending drug dealers by the reporter, publishing information that is unproven, stalking Ford family hiding in the bushes, lying every time it serves their agenda, basically showing the lowest ethical standards, they think that everything is ok. Most of people are very gullible, or don’t care that’s why this type of behaviour gets int the mainstream.

Disclosure: I’m not Ford’s firend, I don’t even like him very much. I just know that the reason he is haunted (beside his lack of grace) is that he is trying to stop the gravy train and the flow of our tax money on stupid initiatives. I like it but it seems that those who keep thei hands in public purse don’t. They want to finish Ford.

They don’t need to. He’s doing a fine job on his own. — Garth

#32 Dr. Hoof - Hearted on 05.24.13 at 9:48 pm

Re: Oil Sands

Always thought they were kind of a set up…it really made no sense except to build it up to a cre$cendo…then yank the rug out……the old carpetbagger trick.

So..either mega bailout…or sold for pennies on the dollar.

#33 Smoking Man on 05.24.13 at 9:49 pm

Really Garth

I was just showing off, I would never in courage a grasshopper to really do forex, to dangerous..
it’s serious gambling… You need to be big stacked and afford to lose it all.

Just trying to weasel a few free beers at Duke..

Man you are sensitive…

#34 a prairie dawg on 05.24.13 at 9:52 pm

Only 16 easy payments left, and then the bank can kiss my azimuth. ;)

#35 About Ford on 05.24.13 at 9:53 pm

Garth, maybe he does but it still doesn’t justify use of unethical methods by the reporter of The Toronto Star. And this is my point!

#36 lee on 05.24.13 at 9:56 pm

It is still cheaper to own than rent in Toronto, given comparable sft and area.

#37 The Patient on 05.24.13 at 9:57 pm

“Since interest rates cratered the ‘finance, insurance and real estate’ industry has been on a roll. It now accounts for about 12.5% of the entire economy.”

Correction: seems to be 19% according to your own bargraph — real estate 12.5% + finance/insurance 6.5%

#38 Smoking Man on 05.24.13 at 9:57 pm

You got to admit, it was a good week garth,

#32 About Ford on 05.24.13 at 9:48 pm
Tree huggers Toronto star readers are the most brain washed cool aid drinking baffoons you will ever meet.

#39 Balmuto on 05.24.13 at 10:03 pm

If mortgage originations – which are a significant source of bank revenue – are cratering, shouldn’t we be worried about owning Cdn bank stocks?

Mortgage portfolios remain intact, and insured. Banks naturally anticipated this. Chill. — Garth

#40 Bargains everywhere on 05.24.13 at 10:07 pm

#32 About Ford

I agree with you. I’m no fan of Rob Ford either but whatever happened to being innocent until proven guilty? Everything I’ve read appears to be allegations by third parties without any proven facts. Since when are drug dealers, gawker.com or even the Star credible regarding this issue? Frankly, at this point I am more disgusted with the media than I am with Rob Ford.

#41 steve p on 05.24.13 at 10:15 pm

70% consumer
30% produce
how is this sustainable?

#42 t on 05.24.13 at 10:28 pm

What happens to your beloved preferreds when interest rates go up?

Not much. Yields unchanged. Prices stable since demand will remain. If you buy them for income then enjoy. — Garth

#43 rosie "moving backwards" on 05.24.13 at 10:35 pm

# 28

Our latest Chinese toaster flamed out and I started my hunt for a new one. Brought home a Bodum (Switzerland) made in China, naturally. It smoked and smelled on testing. Returned it. Looked for a North American or European brand. All made in China. Looking on Kijiji and found a Sunbeam Automatic, built in Toronto, probably in the early 80′s. Pristine condition. The guy plugged it in. The bread should go down automatically and rise when done. No joy. Bought it anyway for $5.00. Checked it out, Googled it. Little screw on the bottom given 1 turn. Works like a charm. The point. That toaster symbolizes the new global economy. Look inside any toaster, no matter what brand or price. They’re all identical. Drive through any community, all the same, a car mall every 20 km. Rant off.

#44 Victor V on 05.24.13 at 10:40 pm

PRICE DROP #3 – 26 Harwood Road – DAVISVILLE VILLAGE

http://themashcanada.blogspot.ca/2013/05/price-drop-3-26-harwood-road-davisville.html

It’s Grey House price drop day again!!!

This house in Davisville Village was first listed at $1,899,000.

I thought it needed to go down to $1,699,000 at least.

They dropped the price in February to $1,849,000 and again in April to $1,699,000.

Looks like they had to drop it again…

This time to $1,689,000.

It’s going to have another drop.

#45 Uh Oh Canada on 05.24.13 at 10:40 pm

So far our Landscaping company is busy as heck. But I think business will teeter from the inside out- inside the house to outside. Some pals who are small business owners (mostly renovations) are slowing down. We live in an area of ‘old money’, so people can pay for extras. ‘New money’ are those who only feel rich thanks to debt. Already the areas of ‘new money’ are showing signs of erosion.

#46 45north on 05.24.13 at 10:52 pm

Rob Ford: I cannot comment on a video which I have not seen and may not even exist

I’ll see your 20 and raise you 20. I just read up on “string bets”. In poker, they’re not allowed. In any event the stakes have been raised.

#47 The InvestorsFriend on 05.24.13 at 11:00 pm

30% Goods, 70% Services (not consumer)

Number 42 Steve P asks

70% consumer
30% produce
how is this sustainable?

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

Not sure if it is sustainable but anyhow it is not true.

The source article for the chart indicates 30% goods, 70% services.

That’s what we produce.

Now who consumes that?

The article indicates Consumers 56%, Government 22%, Business Investment 20%, business investment 4%, net exports minus 2%.

Before you panic about the high level for consumers remember that the raison dete of production is consumption.

#48 The InvestorsFriend on 05.24.13 at 11:01 pm

Should say government investment 4% in last post.

#49 Jula on 05.24.13 at 11:02 pm

There are 206 condo units for sale on MLS on Fort York blvd between Spadina and Bathurst. Only 5 are new listings.

#50 Nemesis on 05.24.13 at 11:10 pm

It’s heartening to see that you’re getting out more, OldPol…

;)

#51 Paully on 05.24.13 at 11:11 pm

I bought a Chef’s Choice waffle iron last year. Made in America, not China. It is by far the best waffle iron that I have ever used. Cooks better, more evenly, and waaaayyy faster too!

Proof that all production does not need to be outsourced to China.

#52 Chickenlittle on 05.24.13 at 11:14 pm

#32 About Ford

Don’t forget that this is the same paper that Garth has been writing about for the last few weeks non stop.
Why anyone still believes anything they say is beyond me!

Besides, he’s the wrong size for a crack smoker.

#53 Tom Vu on 05.24.13 at 11:18 pm

#44 rosie “moving backwards” on 05.24.13 at 10:35 pm

======

Re: Toaster

Very strange what happened.

Usually, you see small mushroom cloud first.

Then as you try to turn dials, sound of Godzilla.

Then followed by Brian Mulroney speech saying how great NAFTA is.

PS You must have bought a real lemon.

#54 Mike T on 05.24.13 at 11:38 pm

‘It is still cheaper to own than rent in Toronto, given comparable sft and area.’

PLEASE SHOW ME

#55 Victor V on 05.24.13 at 11:47 pm

To buy or to keep renting? Costs go beyond just the mortgage

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/to-buy-or-to-keep-renting-costs-go-beyond-just-the-mortgage/article12094441/

#56 Questions on 05.25.13 at 12:04 am

That bar graph should be the most upsetting to those who have the power to help change it.

#57 thiscountryisgoing down the toilet on 05.25.13 at 12:26 am

You said..

“You’re smart to be worried, Nate. As housing weakens, millions of families will feel poorer with many owing more than their homes are worth. Some people will walk, most won’t. Instead they’ll just stop buying Fords, flat-screen TVs and vacations, resulting in more lost jobs and a weaker economy. It’s a vicious circle destined to melt real estate values further.”

I think this overstates the adjustment……people hardly notice a minor sideways flush over the period of a decade or more. Average suburban prices won’t go down if people are locked into their homes…what will happen is the spec homes and those deemed ‘functionally obselete’…or having no place in the overall market will adjust more…..up to 60%…as we’ve seen before….these are the spec props and custom builders inventory….inc condo’s. There will be big adjustments on condos after peoiple have stopped looking. What we’ll see is prices stabilize….long periods between sales…..and dead money for a decade at least……opportunity cost lost.

Retail is going to take it in the teeth…that I agree with…people with no disposable capital and unmanageable debt are not buying flat screens or Hawaii. Watch for kids RESP’s to disappear though as downstrokes for the new SUV lease.

I wouldn’t bet on commodity prices tanking in Canada…..if our biggest customer is moving manufacturing back on shore in the midst of an improving economy we’ll see a strong C dollar and higher prices as the trend continues…..good time to buy low.

#58 Joe Calgary on 05.25.13 at 12:33 am

My prediction for 2014 is that rates will go up slightly, and when they do, mortgage amortizations will go back to 30yrs, then 35, then 40 all over again in an attempt in keeping the bag gassed.

#59 Ronaldo on 05.25.13 at 12:44 am

#18 ManWhoClimbsTrees -

”Wonder what Garth says to people investing into their own businesses right now. I’ve bought a chipper and some forestry equipment this year and new sprayer for my farm.”

My guess is you will have that paid off within a year or so. Where better to invest your hard earned cash than in yourself. Good for you. My son also climbs trees and is having a record year.

#60 george on 05.25.13 at 12:51 am

And the higher stock prices climb, the more convinced participants are that the Fed will not allow a market accident. The more euphoric the market backdrop, the more confident the marketplace is that the securities markets are “too big to fail” – that the Fed will be there providing liquidity abundance irrespective of the data. As always, monetary inflations are as seductive as they are difficult to control.

http://www.prudentbear.com/2013/05/kurodas-gambit.html

#61 USA Rules on 05.25.13 at 12:53 am

I thought this was a thing of the past in your country ? lol, you guys are so screwed !

https://www.cibc.com/ca/focus/spring-13/mortgage-offer.html

#62 Penny dreadful on 05.25.13 at 12:56 am

“Buy at the right prices – typically along 200-day MAs.” Garth can u explain this?

#63 KommyKim on 05.25.13 at 1:06 am

RE: #43 t on 05.24.13 at 10:28 pm
What happens to your beloved preferreds when interest rates go up?

Not much if you buy rate reset preferred shares.

#64 Sideline Sitter on 05.25.13 at 1:49 am

my friend had a tough time trying to sell his $1mm+ home… and had already signed firm on another property.

he was getting REALLY worried… he said some IB friends of his are losing their jobs, so the market at that price level is cratering (that, plus 20% down changes).

when he got an offer, he took it, and we celebrated with an adult beverage.

still, the wife wants to buy… and soon. Tough to keep her at bay! Happy wife, happy life.

#65 Future Expatriate on 05.25.13 at 2:12 am

#29 Troll alert.

#66 Notta Sheeple on 05.25.13 at 2:19 am

#39 Smoking Man on 05.24.13 at 9:57 pm
“…Tree huggers Toronto star readers are the most brain washed cool aid drinking baffoons you will ever meet….”
=========================

Incorrect, S&M.

That honour goes to the illiterate, knuckledragging, slumshine-girl-addicted, Deliverance in-bred, gun-hugging, neanderthal, ideologically-blindered, tea-party wannabe worshippers of Charles Agitator, Ezra Irrelevant, and the other right-wing whackos of the Slum News Network (aka The Comedy Channel).

The sooner the CRTC wipes their feces-flinging, hate-mongering primates from the electromagnetic spectrum, the less polarized this country will become.

Then again, I’m holding back.

#67 ben on 05.25.13 at 2:20 am

Saw recently they were saying “enough is enough, no need to increase rates”.

This is what happened in the UK. First no more rate rises, then cuts to the zero bound. Then govt stimulus for housing. All readily exchanged for votes by the olds, the house owning majority.

It could happen in Canada too. You can have a lost decade (and still be in bad shape at the end of it) just like the UK!

Garth: when volumes fall prices can go up. Plus the govt can play stupid, destructive games for years.

#68 live within your means on 05.25.13 at 2:30 am

#44 rosie “moving backwards” on 05.24.13 at 10:35 pm
# 28

Our latest Chinese toaster flamed out and I started my hunt for a new one. Brought home a Bodum (Switzerland) made in China, naturally. It smoked and smelled on testing. Returned it. Looked for a North American or European brand. All made in China. Looking on Kijiji and found a Sunbeam Automatic, built in Toronto, probably in the early 80′s. Pristine condition. The guy plugged it in. The bread should go down automatically and rise when done. No joy. Bought it anyway for $5.00. Checked it out, Googled it. Little screw on the bottom given 1 turn. Works like a charm. The point. That toaster symbolizes the new global economy. Look inside any toaster, no matter what brand or price. They’re all identical. Drive through any community, all the same, a car mall every 20 km. Rant off.
…………………..

Sis & I rant about the same thing on a weekly basis. I do remember eons ago complaining about cheap but lousy quality Japanese products flooding the Cdn. market. IMHO Japanese cars are one of the best in the world for the price. Wonder if the Chinese will ever follow the lead of Japan. We need to replace our v. noisy & inefficient dishwasher. We’ll be looking at a Bosch. B&SIL have had one for yrs & we are v. impressed with it. I don’t care if we can only get it in stainless, which doesn’t match the rest of our white appliances, no doubt made in China & are pieces of expensive junk.

#69 VancouverJoe on 05.25.13 at 2:35 am

If real estate lawyers worry about cash flow, then
why not outsource them from India?
Same as companies do with IT.
Then they would feel real competition.

I don’t think the field is more complicated, the learning curve for lawyers less steep and knowledge gained 40 years ago is still useful.

#70 live within your means on 05.25.13 at 2:54 am

#46 Uh Oh Canada on 05.24.13 at 10:40 pm
So far our Landscaping company is busy as heck.
……………….

I wanted to remove & give away most of my perennials in a garden out front as I can no longer maintain it due to back, etc, problems. DH looked out at all the spring blooms & said no. I agreed on condition he go to Costco & get dark brown cedar mulch. I need LOTS of bags for both front & back gardens. Still waiting – may or may not happen this weekend. Sis said call a landscaping co. I may just do that tho I know it will be much more expensive.

#71 Dave on 05.25.13 at 6:28 am

Your advice to Nate Dogg is excellent. I would only add that he should have RRSP money ready to be used under the 1st time home buyers plan when the time is right for a house purchase.

#72 Tony Right on 05.25.13 at 6:31 am

We’re doomed!

#73 David G on 05.25.13 at 7:40 am

Even my barber smokes crack and he says it so casually. I told him that as long as he cuts my hair straight I don’t care. after I got up, I vowed to never go back. But I admit he gave me the best haircut ever.

#74 Smoking Man on 05.25.13 at 7:55 am

#67 Notta Sheeple on 05.25.13 at 2:19 am

They are all the same, they have boundaries, each trying to appeal to a specific mind set.

You Wana expand your knowledge, greater fool ctr+f Smo

Also my blog, when I feel like posting… Once or twice a month.

Universe is shrinking, ufos and making money the fast way..

Don’t do politics….. Boaring

#75 Ballingsford on 05.25.13 at 8:05 am

#63 Penny Dreadful

Garth is talking about the 200 day moving average. Watch out for the death cross when the 50 day MA falls below the 200 day MA.

#76 rosie "moving backwards" on 05.25.13 at 8:06 am

#54
The returned toaster was originally Swiss. The toaster, fortunately, remained neutral when self destructing. No anti-western agenda I guess.

#77 Smoking Man on 05.25.13 at 8:10 am

http://m.thestar.com/?content=6656cbf529088050b7ecd666c7913931&section=opinion

Un real, the revenge of the tree hugging dandelion lovers

The star, above link, videos can not be manipulated.

Ba hahaha ha…

Let’s not forget carbon taxes are good for you… Thieves

#78 AK on 05.25.13 at 8:19 am

#61 george on 05.25.13 at 12:51 am
“And the higher stock prices climb, the more convinced participants are that the Fed will not allow a market accident. The more euphoric the market backdrop, the more confident the marketplace is that the securities markets are “too big to fail” – that the Fed will be there providing liquidity abundance irrespective of the data.”
——————————————————————–
There is nothing euphoric with the U.S. Market. It’s trading on positive fundamentals. The forward P/E for the S&P 500 is still below 15.

DOW INDEXES

#79 John on 05.25.13 at 8:35 am

It is way past time that Carney and Flaherty acknowledge the truth about soaring inflation in the cost of homes, food, gas, and just about every other necessity. These bozos need to start raising interest rates immediately to expedite the inevitable flushing of the toilet which will get rid of the crap and put a stop to the debt machine .

#80 Waterloo Resident on 05.25.13 at 8:36 am

ROB FORD DID NOT SMOKE CRACK !

Anyone who thinks otherwise is a total idiot !

#81 Mark on 05.25.13 at 8:58 am

“though one of the properties was partially financed with a loan against her own life insurance.”

http://business.financialpost.com/2013/05/01/family-finance-massive-debts-retirement/

I just threw up in my mouth. How is this kind of thing even allowed?

#82 Swing Trader on 05.25.13 at 9:13 am

@Penny dreadful

The 200-day moving average is a popular, quantified, long-term trend indicator. Markets trading above the 200-day moving average tend to be in longer term uptrends. Markets trading below the 200-day moving average tend to be in longer term downtrends.

http://www.tradingmarkets.com/glossary/Moving_Average_-_200-Day

#83 maxx on 05.25.13 at 9:47 am

#35 a prairie dawg on 05.24.13 at 9:52 pm

Wow, prairie dawg, you are a clever one. Love the post! Bubble, bubble, ;-), toil and….voila, you’re free!

#84 Old Man on 05.25.13 at 9:49 am

I just read the Globe and Mail this morning and cannot stop laughing, as more dark clouds are forming over City Hall. The thunderstorm will hit on Monday, and bet Sundays radio show will be cancelled again; let them all eat cake.

#85 Ronaldo on 05.25.13 at 9:51 am

#62 USA Rules -

”I thought this was a thing of the past in your country ? lol, you guys are so screwed !”

https://www.cibc.com/ca/focus/spring-13/mortgage-offer.html

The above link you posted brought back memories of when I purchased my first home back in 69. Had been married for just over 2 years at the time and just finally paid off debts (both working). My boss suggested that I consider looking at some new townhouses that had been built in North Vancouver that were very affordable. The following weekend, we went and had a look at them and decided to buy. Price for the 1868 s.f. units were $20,800. They required 15% down (I only had $500 in the bank). PIT and condo fee worked out to 1/3 of my own monthly salary and the price of the unit at $20,800 was just a bit over 2.5 times my annual salary (average wage) of $8000.

I opened an account with the BNS and had my mother spot me the $3000 which I deposited in my account. Now I had $3500.

The bank approved the mortgage which at the time was 9 3/8%. Normal for those times. I then asked for a loan for $3000 to buy furniture. No problem she said. Got the loan and repaid my mother. Used the $500 to buy fridge and stove and we were now broke. The payments for the house and $3000 downpayment were still very affordable since we were both working.

It is interesting to note that the same place today is going for $470,000. The thing that is different though is that to buy it today using the same wage I had in todays dollars would be around $60,000. This would make the unit value almost 8 times salary. The cost to service the debt using same 15% down and 3% interest (about 1/3 of 1969 rates), the PITH would work out to about $2000/mo. of 1/3 of the salary, due only to the emergency interest rates. Keeping in mind that my salary was an average salary back then.

If rates were to return to what they were back then, all of a sudden the cost of servicing that unit would take up 2/3 of that one persons salary therefore requiring that both salaries would be needed to service this unit.

If you cross the Second Narrows bridge to Vancouver’s west side, a house that sold for the same amount as my townhouse in North Vancouver in 69 now sells for double the amount of the townhouse or close to 1 million dollars. So from that we can see that prices in North Vancouver have not even closely kept up to the prices over the bridge. Those prices are not even affordable for two average salaries.

So over the years we can see that prices of real estate have risen much faster than wages. To own the same unit today with interest rates at the 1969 level, would require an individual to earn around $12,000 per month.

Yes, things have changed a lot regarding prices but havn’t changed much with regards to banks lending practices? I suppose the fact that I had a very secure job may have had to do with the ease of getting the money.

Is it even possible to imagine this unit increasing 21 times over the next 45 years to almost $10 million dollars and a house in Vancouver to $20 million?

I believe we are screwed.

#86 polecat on 05.25.13 at 10:02 am

When I bought my house the lawyer was the only professional in the whole process. I will never buy again.

#87 Old Man on 05.25.13 at 10:13 am

The political equation on city council will be changing in the future, as those on the far right will be voted out of office in the next election based on voter perception, as a tidal wave is about to change the landscape. The next Mayor of Toronto must consolidate what is left behind by being neither left or right to capture the ward votes with a middle of the road approach as a simple formula to win the prize.

#88 Ralph Cramdown on 05.25.13 at 10:14 am

A few days ago I delivered my sister-in-law to the airport so she could fly back to the Bubbliest Place on Earth(TM). I offered to look at her situation and do some financial planning for her, but she said “you’d probably just tell us to sell the house.” She works in a branch office of a national law firm, luckily for a lawyer in a field that’s recession-proof. Says the office was tiny up until a few years ago, but has been growing like Topsy mainly because of the…… mortgage enforcement department. Of course, that’s only one or two lawyers and a bunch of clerks. Ain’t none so blind as those who refuse to see.

#89 maxx on 05.25.13 at 10:21 am

#44 rosie “moving backwards” on 05.24.13 at 10:35 pm

Sooooo true.
It’s useless (or very nearly!) trying to source anything ex-China. I buy almost exclusively second-hand. $2.00 for a toaster, works just as well as new. You quite often get far better quality second hand. Breaks down? Who cares, just get another 2 buck special. At any rate, I’ve had no more problems with second hand than new. Saves a ton and you get to be greener- way greener. I’ve got a collection of Bodum coffee presses second-hand- all perfect, and each for under 2 bucks apiece.

Drastically slowing down the consumption from China and the outflow from my wallet are my very favorite parts.

Sorry if this sounds a bit “lecturey”, it’s just my enthusiasm. ;-)

#90 Ann on 05.25.13 at 10:24 am

polecat on 05.25.13 at 10:02 am
When I bought my house the lawyer was the only professional in the whole process. I will never buy again.
.——————————————————————-Like the in the movie the “STING’ get them so good they don’t know it and they thank you.That’s the Lawyer

#91 Smoking Man on 05.25.13 at 10:38 am

#80 John on 05.25.13 at 8:35 am

It is way past time that Carney and Flaherty acknowledge the truth about soaring inflation in the cost of homes, food, gas, and just about every other necessity. These bozos need to start raising interest rates immediately to expedite the inevitable flushing of the toilet which will get rid of the crap and put a stop to the debt machine .

……….

Duh, Carney had left the building…

You dream ain’t going to happen, if anything rates will be going lower…

Got off your ass figure out a way to make more loot. Marry into money, open a hot dog stand, and sell a but of weed on the side.. I know a coffee truck driver who put his kids threw USA elite university’s just with the loot from weed.

Stop complaining and start thinking smoking man style..

In my books no right or wrong, just risk vs reward.

The BoC will not lower its rate. Unless we are entering a depression. Chances = zero. — Garth

#92 Elmer on 05.25.13 at 10:42 am

The reason people need to buy houses is to put all their stuff: http://www.youtube.com/watch?v=MvgN5gCuLac

#93 Doug in London on 05.25.13 at 10:54 am

I wonder about this lawyer Greg, now in his sixties, who has seen real estate go bust before. Didn’t he see this present slowdown coming? If he did, he could have taken advantage of the good times by saving up as much earnings as possible, sold his house if he has one, and retire in some economically depressed area where the cost of living is cheaper. Freedom 95? You’ve got to be joking.

He’s a real estate lawyer, not an economic clairvoyant. Stop being a back seat driver. — Garth

#94 Luc on 05.25.13 at 11:05 am

Dean Graziosi promises to make me a real estate millionaire. He is in my home town…

http://www.seminarwithdean.com/ONTARIO/6.0000/Index.cgi?MID=3966015

Can he really make me a millionaire? Should I attend is seminar (free)

#95 Tom Vu on 05.25.13 at 11:13 am

Re Toasters:

Well this is why wedding dresses are white, so wearer matches the other appliances in the house.

Deviation may cause strife like burnt toast and supper not made on time.

#96 TOUGH TIMES on 05.25.13 at 11:16 am

A very hard landing is coming for many, make sure you protect yourself!!! Big Negative Feedback Loop coming to Canada’s Economy Soon.

Look at LINKS below and learn my HGTV Virgins!!!!

HGTV Virgins get out there and start low balling these realtors by 50 percent. Don’t waste your time going to open houses when you could just sit on the MLS and low ball these used car salespeople by email. Get out there and get your revenge. Show them that you are not as stupid as the show portrays you!

- Europe already in recession/depression, Japan Tanking, USA on life support!

- Jobs being lost everywhere and the Canadian economy is slowing down. Watch and read the news in the business section and learn about the layoffs happening every day my virgins. Educate yourself!

- Austerity starting already in Canada. Many in government jobs will be bye, bye. Federal gov’t firing 20,000 alone in Canada. All gov’t jobs under attack.

- More Job Losses!!!! CON government replacing 500,000 Canadian Jobs in CANADA with temporary foreign workers paying them 15% lower than Canadian Citizen’s/wages with no benefits, pensions plans etc. You are getting screwed badly Canada. Also, at the same time giving BIG CORP friends tax reductions to sit on $500 billion of money doing nothing in investments in Canada.

- Manufacturing jobs have moved to Asia and back to the US. Canadians can’t compete with the New America where the factory worker now makes $12.00 to $15.00 an hour, with no benefits and new Union Breaking Laws in many States. The New US can now buy a nice home for $100,000K-$200,000K vs. Canada $500,000K to $1 million LOL. You are so screwed in Canada!

- Big Bad Alberta is in big danger now. They cannot compete now in the global marketplace with their overpriced Oil and are losing money on every sale now. They are being taken to the cleaners. Not good for our economy. I guess this is why President H & CON government have started throwing a lot of money back into Ontario Car Plants. I guess they realized there mistakes that you can’t only have a 1 trick pony called Alberta Oil but need a diversified economy. Poor management on their end and more job losses to come.

- 70% of CDN living pay cheque to pay cheque and have no savings and over 70% have no pensions

- 60% of boomers 60 years and older entering retirement in a lot of debt. Also, a lot of these boomer fools co-signed for their kids $800,000 Mc Mansions. The banksters will wipe the floor clean with both the kids and parents after this 50% RE Crash when they both lose their homes!

- Empty condos being built everywhere and will be going for 50% off soon. HGTV Virgins will be crushed!!! Many HGTV Virgins are going bankrupt at Trump Towers, what happened to RE only goes up? Many in the Construction Trades will be soon unemployed. They have already started calling begging for any kind of work. I feel sorry for them as it will be tough times for them and their families. The only thing Canada had for the last 10 years was construction jobs and now these jobs will be going bye, bye as well. At the same time over the last 10 years all our good manufacturing jobs were going overseas.

- Empty homes all over the MLS, can you say power of sales, bank owned sales and CHMC Sales have started, soon 50% off will be coming to Canada. Also your friends at the CHMC are trying to hide all the Power of Sales & Bank owned homes that are flooding the marketplace so you don’t low ball them. Word of advice if the home is empty then LOW BALL IT.

- For lease signs everywhere in business districts and commercial areas, I guess business has moved out of Canada

- Canadians are 165% in debt! More than the US, Ireland, Spain, and UK when they had their RE Crash.

- Over 8 months of dropping RE sales. Next thing to drop will be prices by 50%.

- Over 70% of mortgages in Canada are 5% or 0 down, 35yr, 40yr CHMC mortgages. Can you say high risk and backed by the taxpayer. When this baby blows up kiss your social services good bye. This is what the in action plan looks like. We supported our banks with free taxpayer dollars to give out loans to people with no money creating a RE Ponzi scheme 10 times bigger than the US, Spain, Ireland etc. Even Brother C is bailing out of Canada and going to the UK after his poor policies of 1% rates have enslaved Canadians with unrepayable debt at record levels “What a Rock Star”. See you later fools.

- And remember a home is only worth what a buyer will pay.

- The realtards, brokers, banksters and builders are in full out panic mode. They have already enslaved 70% of Canadians with RE Debt and there is no more FREE Money to give to the other 30% HGTV Virgins.

The 50% crash is here my virgins. Get out there and start low balling as the time is now for your revenge. Don’t sign up for bank slavery like the other 70% of the HGTV Virgins in Canada. They are screwed for life now as they were sold the Kool-Aid by the RE industry!

Get out there and start Low Balling by 50% as you have the Power Now.

http://www.theglobeandmail.com/report-on-business/economy/jobs/this-years-grads-extremely-disadvantaged-when-seeking-entry-level-work/article12113197/

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/one-third-of-canadian-households-living-paycheque-to-paycheque/article12056287/

http://www.theglobeandmail.com/report-on-business/economy/housing/housing-slowdown-to-worsen-cost-150000-jobs-mortgage-group-says/article12061269/

http://business.financialpost.com/2013/05/22/court-upholds-b-c-mining-companys-use-of-temporary-foreign-workers-from-china/

http://business.financialpost.com/2013/05/22/canadians-spending-spree-is-playing-havoc-with-their-savings/

http://business.financialpost.com/2013/05/22/canadian-home-building-to-plunge-30-by-2015-costing-the-economy-80000-jobs-mortgage-industry-warns/?__lsa=e14d-e91a

http://business.financialpost.com/2013/05/21/canadas-housing-slump-only-just-beginning-capital-economics/?__lsa=af97-16e8

#97 But they do in the USA on 05.25.13 at 11:22 am

The BoC will not lower its rate. Unless we are entering a depression. Chances = zero. — Garth

What is the reason Canada cannot afford to drop its rates all the way down to 0.25, which seems to do well for the USA? I understand we are not the USA, but what are the differences that will make the odds of this happening here nil?

#98 Koshy Alex on 05.25.13 at 11:32 am

Went to TD yesterday for a preapproval, asked the branch mortgage specialist how the business is going, her straight reply surprised me, down 60%, she further said that two years back it was not like this, she used to be booked for the entire day, certainly things are changing

#99 Spiltbongwater on 05.25.13 at 11:39 am

Garth, do you listen to Joe Bowen from Dundee financial on CKNW on Saturday mornings? He seems to have the same choir sheet as you about dividends stocks, calling it a Tax Free Investment Account etc. If this is independant investing strategy, we are all equally doomed, as everybody is piling into the same lifeboat.

I don’t buy stocks, and never heard of him. — Garth

#100 Drug Ford on 05.25.13 at 11:52 am

Any real estate lawyers out of work, just give me a call.

I’ve got some great ideas for subcontracting and self employment work that won’t be a burden on taxpayers, and you don’t have to sell out by working for one of those disgusting, lying mainstream media outlets that make up stories and hurt hardworking politicians and their families.

It’s kind of a franchise opportunity, lots of retail face to face contact. Mostly evening and weekend work. Own car required. Discretion essential. Occasional travel to Latin America, so some Spanish would be helpful. Many non-taxable benefits.

This offer is only for those select few who have what it takes –

Customer Service Excellence!

#101 Buy? Curious? on 05.25.13 at 11:53 am

Is there another job in the world where you can smoke crack with gangsters AND STILL keep your job? Well, Senators can legally steal money, Bankers can claim commissions by conning stupid people and William Shatner can go on to make best selling tracks so I guess my career options are wide open.

#102 waiting on 05.25.13 at 11:59 am

“About 30% of our economy now emanates from actually making stuff, digging it up or exporting it. The other seven-tenths comes from consumer spending.”
Just when I think you can’t find another way to say “we’re screwed” you do it so succinctly. It keeps me coming back …

#103 Smoking Man on 05.25.13 at 12:06 pm

Now the G&M going back to the 80s attacking ford family.
Cut off a tree huggers funding, with our money by the way, they go nuts.. All the little back room deals not happening these city politicians going mental trying to live on just there salary…..

#104 Dr. Hoof - Hearted on 05.25.13 at 12:07 pm

#86 Old Man on 05.25.13 at 10:13 am

That’s becoming a major problem. I have major issues with the Neo con aka the new “right”, but the problem is almost seem to bait a voter backlash to the Left.

There is no more middle of the road/left of center RIGHT..middle of the road right of center LEFT etc etc. that cater to the middle class.

The Neo Cons get involved in cronie capitalism, multi nationals etc, which is effectivley killing off the middle class. Once they are done..the public has been plucked, and then people shift to the Lefties. Them the Lefties pick over the bones with their GAIA Cult crap..y’know..all the global warming enviro-friendly crap.

Vancouver is a perfect example.
Their current Council will go down as promoting chickens in back yards, ill advised bike lanes, etc. They already enforce LEEDS per new unit(adds $11,000 per unit).

The right is so disorganized, the Lefties will likely slide into office again with their Marxist agenda. Perfect example is Obama…useless, yet no viable opponent.

Regardless….In a few years, their won’t be much carcass left for either party.

#105 rosie "moving forward" on 05.25.13 at 12:08 pm

Now their telling the stupid to keep the house. Idiots. http://www.thestar.com/business/personal_finance/2013/05/24/real_estate_sellers_remorse_can_be_a_costly_thing.html

#106 rosie "moving forward" on 05.25.13 at 12:10 pm

Correction. Greedy idiot. Hope she gets her ass sued off.

#107 Snowboid on 05.25.13 at 12:12 pm

Latest G&M article about RE Commissions – wow, $ 8.26 billion in commissions last year.

It has to change!

http://tinyurl.com/Real-Estate-Commissions

#108 Early bird on 05.25.13 at 12:39 pm

Wicked post!
I try not to be one of the “masses”. I have a small mortgage with lots of equity, an average car loan, no other debt, and a family income over 6 figures. Might look ok on paper, but after the residual bills are all paid, (phone, cable, gas, water, etc), the soccer and baseball registrations are all paid, the brownies and
Cubs registrations, etc, and then the $7 jug of milk that is needed every day, there simply isn’t a whole lot left over to dump into a well balanced portfolio.
It can be a struggle for many just to stay afloat.
What’s interesting to me is there might be 5 to 10% of the general population that truly can invest with ease….and and they all comment on this blog…

#109 lee on 05.25.13 at 12:50 pm

In response to #55 Mike T:

Take Minto apartment in High Park Village described as two bedroom/one bath/865 square feet renting for $1,675.00.

Compare it to a two bedroom/one bath condo at 1506 Bloor in same area with parking and locker (but appears to be about 100 sft smaller) which lists for $309,000.00. Assuming the unit can be bought for $275,000.00 or so, with a 2.75% rate, then the mortgage would come in at about 1200 a month (assuming a 13,500 down payment), the maintenance is stated to be 333, and the tax I guess would be about 150 for a total of 1,683 a month.

Of course, some of the paydown on the mortgage is accrual of capital so 1,683 is actually a little high when you factor this in. Maintenance may also cover some utilities and you get some amenities.

And this is a nice area, in demand.

Of course, you have to have 13,500 plus legal fees and land transfer tax to buy. But you also need two month’s rent up front to rent. And of course, when rates go up, prices will be a bit lower, so the math will have to be redone at given prices and rates at the time. But for now, it is pretty much a wash, but with the condo you are at least paying into some equity over time.

I still think you are better off with a condo at this time given the low rates if you can afford it and if you plan to hold it long term first to live in and then as an investment. I agree with Garth that it is bad for your health to spend your whole life in a little 800 sft apartment or condo.

There are a lot of comparisons like the above around town. Compare as well for example a two bedroom one bath 765sft apartment at Mintos 16 The Links Road renting for 1266 with a condo at 1020-15 Northtown Way in Toronto (401 and Sheppard) which results in much the same analysis.

Go Blue Jays.

#110 Old Man on 05.25.13 at 12:51 pm

#103 Dr. Hoof – Hearted – I beg to differ somewhat, so we can agree to disagree. The voting public in Toronto are fed up, and there will be no more shifting hard one way or another. They want a common sense platform that is honest and realistic, and a candidate that can compromise down the middle. It will be a time of healing with a vision for someone to bring all political and ethnic divisions together as a driving force to make Toronto whole going forward as a great city for all.

#111 Ronaldo on 05.25.13 at 12:53 pm

#97 Koshy Alex -

”Went to TD yesterday for a preapproval, asked the branch mortgage specialist how the business is going, her straight reply surprised me, down 60%,”

Same answer I got at the TD back in December of 08. She told me it was like being the Maytag repairman and laughed.

#112 Interesting Twist? on 05.25.13 at 12:56 pm

There is a chance the video might be a fraud with a Rob Ford impersonator. Not surprising based on the drug dealers peddling it…

http://toronto.canadianlisted.com/other-jobs/rob-ford-impersonator-look-alike-toronto_2586499.html

#113 Interesting Twist? on 05.25.13 at 12:59 pm

Is it just me or does “Rob Ford” seem a little slender in a screen capture of the crack video?

http://gawker.com/for-sale-a-video-of-toronto-mayor-rob-ford-smoking-cra-507736569

Can’t wait to see how this all plays out…

#114 The InvestorsFriend on 05.25.13 at 1:15 pm

GDP PRODUCTION VERSUS CONSUMPTION

101 waiting noted from today’s article that:

“About 30% of our economy now emanates from actually making stuff, digging it up or exporting it. The other seven-tenths comes from consumer spending.”

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

Maybe I should not be bothered to point this out because although the sentence is not correct people seem to enjoy believing it is correct.

What the bar chart in today’s article shows is that about 30% of GDP emanates from actually making stuff, digging it up or exporting it. (So far, so good, that sentence is correct) The other seven-tenths comes from making and providing services of all types (and not from consumer spending as the second sentence says).

GDP production consists of making goods and services. While services often get a bad rap compared to making more tangible things, services do include such important things as health care, police, and education.

All of this GDP is then either consumed, invested into long-lasting assets or exported.

Consumption is by consumers or by government.

So when we say that a large portion of GDP depends on personal consumption that means that much of what is produced (The goods and the services) are produced to satisfy consumer demand. That is not a bad thing.

A large portion of GDP dependent on personal consumption does not mean there is little business activity. It means consumption drives business activity.

Again, the raison dete (excuse my poor French) for production is consumption.

When it is reported with alarm that consumption accounts for a large percentage of GDP before becoming alarmed one should know what the historic percentage was and one should be aware that it refers to where the production is used not where it comes from. The alternatives to high consumer consumption of GDP include more government consumption, more investment in long-lasting assets and more net exports. Be careful what you wish for.

#115 The InvestorsFriend on 05.25.13 at 1:21 pm

COUNTING

I said the sentence was wrong. But there are two sentences the first being correct.

Well anyway this illustrates that there are only three types of people in the world.

There are those who can count… and there are those who can’t count.

#116 Dr. Hoof - Hearted on 05.25.13 at 2:15 pm

#109 Old Man on 05.25.13 at 12:51 pm

#103 Dr. Hoof – Hearted – I beg to differ somewhat,

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

Well…at least you begged..

That said, it’s the same flushing noise all over the world.

Fed Up = What ________ ?

A Super Mayor and Super Council will jump out of a phone booth , sweep in and save the City ?

The a$$clowns we elect are front men for their masters

Admittedly a few rebels show up and say” the Emperor has No Clothes”…and are forced out.

Just ask Canada’s Top Rated Real Estate Blogger.

#117 Victor V on 05.25.13 at 2:23 pm

#86 Old Man on 05.25.13 at 10:13 am

The political equation on city council will be changing in the future, as those on the far right will be voted out of office in the next election based on voter perception, as a tidal wave is about to change the landscape. The next Mayor of Toronto must consolidate what is left behind by being neither left or right to capture the ward votes with a middle of the road approach as a simple formula to win the prize.

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

Time for Mr. Tory…

https://www.facebook.com/DraftJohnTory

#118 TurnerNation on 05.25.13 at 2:28 pm

#17 Julia

The CONs’ credo is: Hate us but fear us.

Now you know where all this is going.
The war has come home, boys and girls.

#119 rosie "moving forward" on 05.25.13 at 2:56 pm

For all you sellers in Montreal. I think we have a winner. This guy is the poster boy for real estate agents, of a certain type, if ya know what I mean. http://www.dailymail.co.uk/news/article-2330713/Meet-Mr-Wall-Street-29-year-old-Canadian-realtor-Instagram-account-showcasing-luxury-watches-tailored-suits-plenty-champagne.html?ico=home^editors_choice_six_of_the_best

#120 Dr. Hoof - Hearted on 05.25.13 at 2:57 pm

Anecdote:

In HAMville….

Stretch of Road (aprox 1/2 mile ) I drive by about 4 times a week has literally been converted to all McMansions.

One house was demolished over a year ago, then nothing.
Then the lot was put on the market for about 6 months.

Nothing.

Now I see a load of lumber has been dropped off and the “For Sale” sign gone.

In other words…looks like the owner either can’t sell it, or is asking too much. Now he is going to build in this market ?

The area already has several McMansions for sale.

There is a saying in business about cutting your losses.

Stupid is as stupid does.

#121 rosie "moving forward" on 05.25.13 at 3:04 pm

#116
Have you ever listened to him on the radio. He’s a boring, pedantic gas bag. I know he tried a couple of times, which is laudable, but the guy is a loser politically. What’s your problem with this guy? http://warrenkinsella.com/wp-content/uploads/2013/05/BlottoRobbo.png

#122 Old Man on 05.25.13 at 3:12 pm

#116 Victor V – thanks for the link, but have someone else in mind who could pull this off in spades if he wants the position, as know how it can be done, as am too old for it all, but am willing to help in the dark with connections and knowledge; its called decades of hands on experience in the world of politics, as have done and see it all in my walk in life from highschool, and it was a power trip to win. Yes one receives a few rewards in life, as a pay back, but so what, as if you pay your dues working the system a few rewards will come your way in life like a dividend :)

#123 X on 05.25.13 at 5:17 pm

Historically what is the average % of GDP, that real estate and rental and leasing normally is?

#124 Cici on 05.25.13 at 5:40 pm

#7 Spiltbongwater

In the province of Quebec, for one, you need to get your keys from the notary.

#125 Freebird on 05.25.13 at 7:44 pm

@#114

Is it just me or does “Rob Ford” seem a little slender in a screen capture of the crack video?
—————-

He was photographed in exact same sweat shirt by media. If you have nothing to hide, you hide nothing and Mr Ford has shown in body language and behaviour alone he’s got things to hide but sure lets ignore the mounting evidence.

http://news.nationalpost.com/2013/05/17/from-high-end-dealers-to-the-somali-connection-a-closer-at-the-alleged-rob-ford-crack-cocaine-scandal/

#126 Tom Vu on 05.25.13 at 7:44 pm

#114 Interesting Twist? on 05.25.13 at 12:59 pm

That is not Rob Ford

That is either Captain from Gilligans island or ex-NFL coach Bill Parcells.

#127 =-=jwk= on 05.25.13 at 7:48 pm

@ #110 lee.

Why do you think you can get a 309 k for 16% less than list? Thing don’t sell for 84% of list, they sell fro 99% of list.

The cheapest condo in that area right now is a *1* bedroom for 329k.

Without mythical listings and insane price concessions the numbers don’t add up. You are right, id one could buy a 2bed condo for 275k then that would be a good price. But you can’t.

#128 Asse on 05.25.13 at 7:50 pm

Congratulations old man. You took someone who was broken but doing his best and did the rest. No, I don’t blame you or the others.
Cheers my friends.

#129 Chickenlittle on 05.25.13 at 8:12 pm

#120 Rosie…

Meh…He’s not that great. I’m a little disappointed!

I always get a kick out of people who think they`re amazing, like Paulina Gretzky.

He doesn’t hold a candle to Garth, or Steve Yzerman.

#130 Smoking Man on 05.25.13 at 9:08 pm

The other day went for a massage, bad back. My attendant was drop dead gorgeous, either one of two things happened here.

1 She’s a damn good actress
2 We made a connection

All the same it was magic, she in school for business, a Morman gone rouge…. I love it..

I showed her my p&l she was fascinated. She slides me her tell, teach me I will make it worth your while, your cute.

2 seconds ago I just incinerated the paper with tel number.

I was tempted to but, it’s against the pay em to go away code..

However I just might go back one more time, and spend the hour just teaching trading.. Nothing else can happen.

It’s against code….. Like a highlander taking a head off in church…

Damn she was a perfect 10.5

Why did I burn the number…..

#131 lee on 05.25.13 at 9:24 pm

Re 128,

A-Rod’s house in Florida listed for 38 million and sold for 30 million, so houses do sell for less than 99 percent of list. A house on my street just sold for 630,000 after listing for 688,000. Condo sales at 85 percent of list happen every day.

#132 Tom Vu on 05.25.13 at 9:31 pm

#120 rosie “moving forward” on 05.25.13 at 2:56 pm

People need glasses?

That is Michael Buble’
( Or his music that bad he has to sell Real Estate ..maybe AmWay too?)

#133 Smoking Man on 05.25.13 at 9:46 pm

Garth stop trying to protect me man..

Free spirt here, I don’t care about bay street.. And the job.

Stop making my shift vanish…

Really I don’t care anymore…… About to take it to the next level…

#134 a prairie dawg on 05.25.13 at 10:41 pm

#82 Mark

“though one of the properties was partially financed with a loan against her own life insurance.”

How is this kind of thing even allowed?

- — -

Like most kinds of built up equity, you can usually borrow against it. My Dad used to do the same thing 30 years ago when interest rates were much higher. Borrow your own accumulated money (life insurance equity) at a low rate, and reinvest money in higher interest paying investments. You pocket the difference as income. It’s completely legal.

And as Garth advocates, don’t forget the dividend tax credit either if you buy preferred shares. Then it’s taxed lower than income, in most cases.

Now if someone borrows life insurance equity to fund more real estate, then let them dig their own grave.

#135 KG on 05.25.13 at 10:57 pm

@ #101 Drug Ford:

which one ?

#136 Smoking Man on 05.25.13 at 11:00 pm

My dream getting my ass removed by security, ten min later.

A post…?

Will garth allow it.. That is the question…

#137 Sparky55 on 05.25.13 at 11:43 pm

#53 Chickenlittle

“Besides, he’s the wrong size for a crack smoker.”

That was my first thought too.

#138 Steven on 05.26.13 at 12:27 am

So basicly around 25% of the economy consists of doing or making something usefull and the rest is screwing people over, scams, communism and wealth redistribution. No wonder we are in a great depression that will dwarf the last one!

#139 Dean Mason on 05.26.13 at 4:30 am

In the future with falling real estate prices those that are thinking of the reverse mortgage route are going to have a tougher time getting money out of their house.

Why would a lender let a homeowner get a reverse mortgage backed by an asset that keeps falling for years even if it’s 3% to 4% a year for 5,6,7 years straight.

They would not want to touch that real estate with a ten foot pole.The only way I can see a lender still giving a reverse mortgage to retirees and seniors is that the lender gives such a much lower maximum lump sum or monthly payments.

The maximum lump sum that can be borrowed today is 50% of the property’s value minus any mortgage on it if there is one.I could see them going to a maximum 30%-35%.

CHIP’s(Canadian Home Income Plan) current rates for a 5 year fixed rate is 5.52% which is 100% more or double the current 2.75% lowest 5 year fixed rate regular mortgage available to home buyers today. A $500,000 mortgage free house that a person gets 50% borrowed value $250,000 today at 5.52% compounded for 20 years will be $732,210.00.

If the house goes up 2.50% per year for 20 years the house be worth $819,308.22. It’s not that far apart.If house prices do not go up that much and reverse mortgage rates rises to 6.50%,7.50% etc. the debt owed by the homeowner will be higher than the value of the house.

This is why I can’t see a 50% maximum lump sum borrowing amount for reverse mortgages stay in place.It has to come down to 30% to 35%.

#140 timtoddle on 05.26.13 at 7:27 am

“How Canada’s housing downturn threatens to shake up real estate commissions”

In a country where grousing about bank fees is a national pastime, where a 5-cent rise in gasoline prices sparks outrage, one fee remains remarkably static: the thousands in commissions paid to real estate brokers. Technology has failed to snap consumers out of their complacency, and regulatory efforts to force the industry to make it easier for new Web-based firms to compete have been abortive.

But there is a new threat to the status quo that could be the catalyst for industry-rattling change: the housing slowdown.

http://www.theglobeandmail.com/report-on-business/economy/housing/how-canadas-housing-downturn-threatens-to-shake-up-real-estate-commissions/article12146703/

#141 AK on 05.26.13 at 8:08 am

#97 TOUGH TIMES on 05.25.13 at 11:16 am

“- Over 70% of mortgages in Canada are 5% or 0 down, 35yr, 40yr CHMC mortgages.”
——————————————————————–
Bullshit.

Do you have a link to confirm your useless propaganda?

#142 Bottoms_Up on 05.26.13 at 8:26 am

#81 Waterloo Resident on 05.25.13 at 8:36 am
————————————————–
He did smoke crack. He just didn’t inhale.

#143 TurnerNation on 05.26.13 at 9:09 am

Because everybody’s commented on this story: the fallout is immediate and huge.

1. One young man taken out via orchestrated hit. Apparently he was on the football team and in that video?
2. Another man fired, the mayor’s right hand man.
3. Mayor fired from coaching the football team.

Nothing to see here, citizen; now move along.

#144 TurnerNation on 05.26.13 at 9:20 am

By the way I’m getting the feeling our current govt’s job is bankrupting us via the same script.
Let’s see:

1. 1 billion wasted on fighter jets
2. 1 billion wasted on G20 in Toronto.
3. Over 1 billion wasted/missing in “Terrorism” funds. (You bet it is.).

All this in a tiny country of 34 million. Iceland much?
Is the IMF waiting in the wings, with a “bailout”?

(Sometimes, they are so obvious. Recall a few year ago the monsoon/tornado in Myanmar (Burma) – long a target of colonialists. Located in the world’s Rice Basket. Oh how our media told us awful tales of their “military junta”. US warships stood poised outside the country. Man they were close, they wanted in so badly. Didn’t work out. Look for another push time.)

#145 Ann on 05.26.13 at 9:59 am

Re-141 timtoddle on 05.26.13 at 7:27 am
“How Canada’s housing downturn threatens to shake up real estate commissions
——————————————————————–
Actually most sellers are willing to pay more in a down market to get the job done.
Less quality buyers = more demand for that buyer.

#146 Marcolovesgarth on 05.26.13 at 10:02 am

just some crazy talk

http://www.640toronto.com/HostsandShows/ExpertHours/Guildhall.aspx

Another radio station whores itself. — Garth

#147 Doug in London on 05.26.13 at 10:07 am

Garth said: He’s a real estate lawyer, not an economic clairvoyant. Stop being a back seat driver.

Yes, but wouldn’t someone so close to the real estate business, who has seen the sector slow down before, have a better understanding of what’s going on than the average person and know that, sooner or later, a slowdown would come again?

Oh, you mean like homebuyers? — Garth

#148 baddog on 05.26.13 at 11:27 am

Garth said: He’s a real estate lawyer, not an economic clairvoyant. Stop being a back seat driver.

Yes, but wouldn’t someone so close to the real estate business, who has seen the sector slow down before, have a better understanding of what’s going on than the average person and know that, sooner or later, a slowdown would come again?

Oh, you mean like homebuyers? — Garth

I’m not sure that comparing homebuyers in their 20′s or 30′s to veteran real estate lawyer in his 60′s who has seen this play out before is quite fair. Do you really expect the same level of knowledge and wisdom from both? Really? Something doesn’t sound quite right here.

#149 thiscountryisgoingdown the toilet on 05.26.13 at 11:28 am

DELETED

#150 Spiltbongwater on 05.26.13 at 11:39 am

Didn’t Rob Ford give some money to charities? Rob Ford can’t be a cracker, as a cracker don’t give no gifts away.

#151 Gunboat denier on 05.26.13 at 11:39 am

142 AK – dont worry about that particular commenter. Has posted here often using name “interesting times” and spews the same stuff every time. I skip it completely.

148 Doug – you would think so wouldnt you? I’m on my third downturn, and my business is heavily dependent on
development. We were smart enough to diversify as
much as possible.

Each cycle has its own driving engine, its own brakes and
people have short memories.

#152 Mike T. on 05.26.13 at 11:54 am

‘In response to #55 Mike T:’

notice how many times you use the word assume?

assume you can buy a 330K condo for 275K?
what will the price be in 1, 3, and 5 years?

thanks for the reply – definitely not convinced

try again

#153 Shawn on 05.26.13 at 12:40 pm

FIRST LAW OF EMOTION

Newton said:

An object at rest remains at rest unless acted upon by a force. An object in motion remains in motion, and at a constant velocity, unless acted upon by a force.

Mike T at 153 just above and a billion other people in response to a counter argument said:

thanks for the reply – definitely not convinced.

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

Beliefs and emotions are subject to ENORMOUS amounts of inertia.

Once people form an opinion they tend to cling to it.

They will read articles that confirm what they already think. They will barely skim or will ignore completely any counter evidence.

It’s simply human nature. We can’t afford the time and effort of re-examining all the facts afresh every time. So we are programed to stick with our beliefs.

You can argue and write facts all day long and while you will likely convince those with no prior opinion, you will seldom ever change the mind of those with entrenched opinions. We grow attached to our opinions and world views. They give us comfort. We stick with them.

Gold bugs remain gold bugs, doomers remain doomers, optimists remain optimists, conservatives remain conservatives. socialists remain socialists.

Now, anyone care to disagree with that?

#154 Mike T on 05.26.13 at 1:52 pm

use hard quoted numbers and facts to prove that owning a property in TO (or anywhere) is a better deal than renting.

how hard is that?

this Lee character used assumptions and not fact based numbers, therefore I am not convinced.

I have a very fluid belief system that is constantly evolving as I learn more about myself, others, and the world we live in.

Please use ACTUAL numbers to prove a point…..like Mr Turner does over and over again.

#155 Dr. Hoof - Hearted on 05.26.13 at 1:52 pm

#155 Shawn on 05.26.13 at 12:40 pm

Gold bugs remain gold bugs, doomers remain doomers, optimists remain optimists, conservatives remain conservatives. socialists remain socialists.

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

No you excluded the Liberals….aka the Chameleon Party.

ALSO: As we speak, Justin Trudeau has accepted Rob Fords challenge to a sumo wrestling match.

#156 Shane on 05.26.13 at 3:07 pm

Garth, the ham is lined up in Markham today on 16th ave for buying new houses..this will never end???

‘HAM’ means money from Asia. Are you referring to your Chinese-Canadian neighbours? — Garth

#157 lee on 05.26.13 at 3:21 pm

#157

I an using real numbers. The 630000 sale on my street is a real number. Also, the difference in mortgage payment on a 307000 mortgage compared to 275000 is about 125 a month. I also did say in my original post that when rates rise you will have to re crunch the numbers. When you factor out the pay down on capital over five tears we are still at about a wash. So even at 309000 the logic is correct. I was also very open with my assumptions, and acknowledged there may be a slight sft difference.y point is, one of the thrusts of this blog is renting is better than buying when it comes to condos. I just do not believe we are there yet. At present rates if you can find a condo that’s been listed for a while, in a building with a lot of listing you can still do quite well. Who knows when rates go up what the case will be but if you lock in for 7 years it nay not natter given the price going in
My submissions are based on real numbers.

#158 Bubu on 05.26.13 at 3:22 pm

#69 live within your means

Get yourself a Bosch or Miele. Quite a bit more expensive, but those will last you a lifetime without troubles.
Plus performance and efficiency at its best.

#159 Spiltbongwater on 05.26.13 at 6:47 pm

.#159 Shane on 05.26.13 at 3:07 pm
I think our Chinese-Canadian neighbours are always seen lining up to buy new builds, is because there is no similar version of Greaterfool that is written in Mandarin.

#160 espressobob on 05.26.13 at 7:03 pm

#155 Shawn

Good comment! Emotional attachments to ones investments or real estate can be ones undoing!

There are those of us who think outside the box and profit. Too bad the gold bugs & doomsters can’t see beyond their nose.