Smoky hole

runner1

For two years Darren and his hot young wife prowled the shady streets of mid-town Toronto for a house in the $900,000 range.

Despite a combined income of over $200,000, plus $225,000 in savings and the threat of Lysistrata, he couldn’t quite pull the trigger. A few weeks ago he wrote me: “I couldn’t get by this sinking feeling that there was something fishy going on in the market. I spent hours with spreadsheets trying to justify a million dollar house, as that was what people I knew with similar incomes were doing. But I can’t get past the numbers.”

Buying a fixer-upper (what nine bills gets in that hood) would mean burning through 90% of their savings, tight cash flow and no saving for retirement (or anything else). Darren wrote me and asked if it made more sense to buy in a demand area like that, or rent and invest the cash. That was one easy question to answer – and I did.

Well Darren & the babe have finally made a choice. I’ll share that with you in a moment.

First, growing evidence the soft landing that F & the peckerettes were so hoping for is in a hard dive. Even in secondary markets, where things are supposed to be sleepy and stable, the air’s coming out of the housing gasbag in a deafening whoosh. Housing sales in Halifax in the months of February, March and April have declined by 31%, 35% and 29.2% respectively. In Sherbrooke the plop last month was 29.3%. In fact in 24 or 28 Canadian urban markets, sales were down substantially – spanning the country.

In the canyons of Toronto, where teeming hordes of hipster metrosexuals on Vespas live in forests of condos with de rigeur glass balconies and cement ceilings, all is not well. Realtors report sales during the first half of May were flaccid (661 units sold, a 13.6% drop), but in the last two weeks, they’ve collapsed. By this time next week we shall know.

And did you hear about CMHC?

The federal agency which ponies up insurance to cover high-ratio, high-risk mortgages a year ago was barely able to keep up with the demand from bankers and brokers, and perilously close to bumping up against its $600-billion limit. In the first three months of 2012 these guys wrote $19 billion in insurance on new loans. But a year later, crickets. A decline of 56.8%. And the number of properties insured fell 54%, from over 114,000 to just 52,000.

Now contrast this stark fact – a drop in housing demand by half – with what the realtors have been telling folks. For example, here’s Toronto Real Estate Board president Ann Hannah:

“Despite the headwinds we have experienced in the housing market this year, April sales came in quite strong in comparison to last year.  As we move through the spring and into the second half of 2013, the demand for home ownership should continue to firm-up relative to last year. It has been almost a year since the federal government enacted stricter mortgage lending guidelines. It is realistic to surmise that some households, who originally put their decision to purchase on hold, are once again looking to buy.”

Nice manipulating, Ann, but it doesn’t seem to be working. When the feds, the bank regulator and CMHC all toughened up rules a year ago – which realtors said would have little market impact – the effect was dramatic, coming during a time of speculative excess. Some observers, like Scotiabank head egg Derek Holt, think the timing couldn’t have been worse. “Those markets likely would have cooled on their own through an exhaustion factor,” he says. “Now the consequences are only just emerging by way of the magnified risks of a hard landing.”

Yup. The smoky hole with the tailfin sticking out, as I’ve been telling you to look out for. And while that doesn’t mean a Phoenix-style, OMG-70%-crash, it’ll certainly be enough to wipe out the equity of new buyers and the retirement plans of many Boomers. Even having house prices flatline for a few years while mortgage rates tick higher and houses get illiquid will put countless families into a financial vise – and that’d be a best-case scenario.

So, why would smart people not choose diversification, balance, liquidity and freedom?

Darren did. And no sex strike.

I just wanted to send you a quick update to let you know that thanks to your blog my wife and I just signed a 1 year lease in a BEAUTIFUL townhouse in an ideal location! I used all the stories and principals from your blog to make a great case for renting, and you know what… it worked!!

Thanks again for reading and responding to my email, it made a world of difference to me.

I know you said ditch the spreadsheet… but alas I could never do that. I’ve attached the spreadsheet that I used to help bolster my argument. It is fairly simple, but I found it effective to help quantify my decision. Feel free to send this to anyone who, like me, likes to play with numbers.

Well, dude, it’s a nasty piece of work. To break even on that house over a decade, it shows, would take a 50% increase in value – and no mortgage rate increase. Like that’s gonna happen.

Download here.

182 comments ↓

#1 Holy Crap Wheres The Tylenol on 05.31.13 at 6:26 pm

Friday First Oh ya!

#2 Ann on 05.31.13 at 6:30 pm

re-119 AK on 05.31.13 at 1:26 pm
The Real Reason Millennials Don’t Buy Cars
——————————————————————–
The real reason is they can’t get a full license till they are about 20 and the insurance is a deal breaker and there is no open road freedom like back in the day.

#3 In the Valley on 05.31.13 at 6:37 pm

Thanks for the sanity!
My dream team to run Canada is Garth Turner,
Rick Mercer and Chris Hadfield. Oh yeah. That would truly rock.

#4 Allan Tonkin on 05.31.13 at 6:37 pm

Enjoy reading your blog, especially when there’s a rational reader like Darren getting some good advice. Keep up the good work!!

#5 Interested Renter on 05.31.13 at 6:41 pm

Thanks for keeping the great posts coming Garth! I’m learning a lot and look forward to calling you someday.

#6 Terry on 05.31.13 at 6:56 pm

A lot of people I know buying here in Bramladesh will be in that financial vice to are talking about Garth. I am looking at what they spend and some of the properties are chit. That is what happens when you lust after a house.

#7 Julian on 05.31.13 at 7:03 pm

Hey Bubbles, Rickey, we’re #1 !!!

#8 Julia on 05.31.13 at 7:09 pm

I can’t get over how many of my co-workers in their 30′s, and some on contract no less, bought houses in the city here in Toronto in the last few months. One who just bought this month said a house she bid on in High Park went for $125k over asking. I’ve learned to just smile and say “that’s nice”.

#9 T.O. Bubble Boy on 05.31.13 at 7:09 pm

I like the spreadsheet… simple, but to the point.

For my situation, I see that a house would need to appreciate 4.5% per year for the next 10 years to break even.

(we’re going to see a repeat of 2003-2013 for 2013-2023, right?)

#10 FATHER on 05.31.13 at 7:09 pm

Here in dampcouver realtors are say’n prices r gonna go up n up n up because more and more people r moving here. This is what i have heard from 6 people 2 builders and 4 realtors from these damp streets of dampcouver

#11 T.O. Bubble Boy on 05.31.13 at 7:11 pm

To clarify, I’m comparing the house that I rent vs. the price to buy a comparable place with a 50% down payment.

#12 andrew on 05.31.13 at 7:12 pm

FIRST, LOL, I MEAN FIRST TO MOVE OUT OF VANCOUVER WITH my family to Qatar, get paid the same tax free, with free housing, compare that to buying or even renting in this rip off place, and yes more people speak English there than Vancouver, what does Garth think?

#13 Andrewski on 05.31.13 at 7:17 pm

Bravo Darren! And, you’re still getting laid, double bravo!!

#14 blokexistentialist on 05.31.13 at 7:22 pm

magnifico prose and advice

#15 Babblemaster on 05.31.13 at 7:34 pm

Heard from a neighbour in my building that her 24 year old son just bought a new condo. It’ll be ready next April. I don’t know any other details, but he doesn’t plan to live there. Instead, he’ll rent it and continue live with his mother. My neighbour obviously thinks it’s a great investment idea and I didn’t say anything to disabuse her of that notion. What’s the point? She and her son have been convinced by the MSM and the Ann Rohmer types. I certainly don’t have any credibility regarding TO RE. Besides, I have finally discovered that there is no point in trying to predict the future as there is always something that you can’t anticipate. For instance, years of super low rates that show no signs of abatement. Maybe the kid is right and condos will resume their upward trajectory after a brief lull.

#16 Andrewski on 05.31.13 at 7:43 pm

Re: #12; here you go.

http://www.canadainternational.gc.ca/kuwait-koweit/consular_services_consulaires/index.aspx?lang=eng&menu_id=15

#17 screwed on 05.31.13 at 7:49 pm

#10 FATHER

You’re hanging/talking to the wrong people. My Van experience over the last few weeks with realtors, builders, trades etc has been allot more muted.

#18 Daisy Mae on 05.31.13 at 7:55 pm

#5Interested Renter: “Thanks for keeping the great posts coming, Garth! I’m learning a lot and look forward to calling you someday.”

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

You’ll be very happy you did!

#19 Pulp Faction (Dorf) on 05.31.13 at 7:59 pm

Thanks for sharing your work, Darren.

Nicely played, too ! :-)

#20 Nemesis on 05.31.13 at 8:11 pm

http://youtu.be/YL1FblthxQ0

Anatoly was feeling much better by the time he arrived in Abbotsford… He also told me that ejecting too soon always beats too late.

#21 Sideline Sitter on 05.31.13 at 8:21 pm

I’m like the poster… almost identical situation, but we were “forced” to rent by selling our place when I got married (I owned with my brother for 7 years).

I’m still waiting, and I can honestly see that I feel the tide turning in the listings I’ve been checking out.

Still, I can’t wait 2-3 years to buy… must. buy. soon.

#22 Sideline Sitter on 05.31.13 at 8:22 pm

By the way, I live by spreadsheet. I’m downloading now.

#23 Squatter on 05.31.13 at 8:22 pm

Nice colorful spreadsheet, but TOTALLY WRONG!
Just try to change the rent (cell 12) to $0, the change in Break Even Cost should be the order of 12 X $3200 X 10 years = 384k in year 10.
But it only changes from 1220K to 1137k, i.e a change of only 83k instead of 384k.

#24 Tom Vu on 05.31.13 at 8:26 pm

Tell Banksters….

Wass-amata-U

Ehhh..Tone-E……its simply Fiat currency mixed with a dollop of fractional reserve lending…eh……(a couple of slaps and gold chain posturing)……go easy on the middle class Paesanos…cement prices are climbing ….capsice’

#25 Mike T on 05.31.13 at 8:47 pm

Hey Mr. Turner,

I read about the CMHC numbers in the G&M today as well. It also pointed out a 98% drop in bulk insurance sales.

How do banks use bulk insurance differently than the regular CMHC protection? Why was that drop so incredibly dramatic?

#26 East Van on 05.31.13 at 8:51 pm

In response to Garth’ s economic optimism of 2 days ago.

http://www.commondreams.org/view/2013/05/31-12

Another pol selling a book. Yawn. — Garth

#27 Mister Obvious on 05.31.13 at 8:55 pm

#2 Ann

“The real reason is they can’t get a full license till they are about 20 and the insurance is a deal breaker and there is no open road freedom like back in the day.”

——————————
I would agree with that Ann. I started driving at 16. Getting a driver’s licence was a straight forward affair then. Provided one’s parents cooperated. Mine did, as did most of my friend’s parents.

Traffic was non-existent compared to the mess we have in every major city today. The open road was easy to find and the freedom to escape was sublime. I even knew of a place to buy gasoline for 40 cents a gallon. An imperial gallon. That’s about 9 cents a liter.

But you’re right. Insurance was the stickler. You could buy an old heap fairly easily but insurance for young people was very expensive. Most of us piggybacked as part-timers on our parent’s insurance then proceeded to drive pretty much all the time anyway. (Man, the risks they took for us).

It occurs to me though that owning a home versus renting is similar in some ways to driving versus taking transit. I own a car but still use transit quite often. Sometimes its just a lot less hassle and actually faster for me living inside Vancouver city limits.

So, we can think of the millennials as being ahead of the curve by ‘conferencing’ on their smart phones rather than wasting gas stuck in traffic trying to get to a face-to-face meeting where nothing gets resolved anyway.

#28 brainsail on 05.31.13 at 9:11 pm

“principals?”

#29 Dean Mason on 05.31.13 at 9:19 pm

Canada’s budget deficit continues to shrink and now stands at $18.30 billion for March-2013 versus $21.60 billion same time a year ago.

The full details at http://www.financialpost.com

Some conservatives. — Garth

#30 Soylent Green is People on 05.31.13 at 9:24 pm

The Bay Street “Wonder Boy” Nigel Wright DOES NOT GIVE AWAY HIS OWN MONEY! Not a single dime came out of Wright’s pocket!

It would be a simple matter of Nigel INVOICING the Conservative fundraising account (the money raising arm of The Conservative Party) multiple times for some type of phony “Financial Consultant Fees” to accrue back the $90K. CPC treates that Fund’s coffer as their private “Honey Pot.”

Are there any conversations between Conservative Senator Irving Gerstein (Harper’s bagman) and the PMO about Nigel getting paid back from the Conservative Fund of Canada — the federal party’s war chest Gerstein once chaired.

Or, the money came out of Alberta, where there is no shortage of it.

http://www.huffingtonpost.ca/social/MyTake/mike-duffy-nigel-wright-unanswered-questions_n_3314315_254934263.html

.
.
.
.

#31 Soylent Green is People on 05.31.13 at 9:25 pm

I could not open the document, I never heard of .xlsx

Guess my ‘puter real old….

#32 Soylent Green is People on 05.31.13 at 9:31 pm

I found a free file converter, I’ll see if this works

http://www.zamzar.com/

.

#33 Mike T on 05.31.13 at 9:32 pm

from WSJ Canada

‘Carney Departs on High Note as Canada Economic Growth Tops Views ‘

HA!

I still want to know what bulk CMHC insurance is for any why there was a 98% drop in sales. Help? Blog Dogs? (i can’t believe i said that) :(

#34 Hh on 05.31.13 at 9:33 pm

The US economy is steadily resurging; equity markets have been on a tear; the American housing market is making a sustained comeback…………

LoL. Pull the $45billin in fed support and we shall see the housing recover stop dead. Pull the $45 billion in extra QE and watch the stock rally stop dead. A true sustained rally doesn’t need government help. More QE more debt more life support is needed. As per Jim Rickards and Peter Schiff.

#35 AK on 05.31.13 at 9:44 pm

#34 Hh on 05.31.13 at 9:33 pm
“More QE more debt more life support is needed. As per Jim Rickards and Peter Schiff.”
——————————————————————–

Yes. great sources of info.

#36 JMG from Alberta on 05.31.13 at 9:53 pm

Canada almost at the top of most overvalued house prices across the globe–this chart from the London Telegraph:

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10088467/OECD-British-house-prices-are-31-too-high.html

#37 TurnerNation on 05.31.13 at 10:01 pm

Oh boy I’m not clicking on that link. Will it say I am richer than I think?

#38 Dave on 05.31.13 at 10:03 pm

50% appreciation in 10 years is fairly modest…even given the elevated starting point of today’s home costs. In 10 years, Darren could probably expect the home he passed on to be worth 80% to 120% higher then today

#39 grasshopper on 05.31.13 at 10:13 pm

#23 Squatter

Would you please provide a correction to the spreadsheet.

Nice colorful spreadsheet, but TOTALLY WRONG!
Just try to change the rent (cell 12) to $0, the change in Break Even Cost should be the order of 12 X $3200 X 10 years = 384k in year 10.
But it only changes from 1220K to 1137k, i.e a change of only 83k instead of 384k.

#40 Canuckistan on 05.31.13 at 10:14 pm

Garth,

Although the guy made the right decision (by the way we must have been bumping each other at rental viewings), the spreadsheet has some major flaws that are inexcusable for anyone that has taken any corporate finance classes in his undergraduate studies.

One doesn’t need a spreadsheet to analyze anything like this when someone else has already done the analysis for you: http://www.huffingtonpost.ca/2013/05/22/canadian-housing-bubble-the-economist_n_3319397.html

#41 young & foolish on 05.31.13 at 10:16 pm

Is the economy really on a sustained improvement course, or is it all due to QE and there will be a huge pull back? Will all that money printing finally ignite inflation? What will your dollar be worth 10 years from now? Will Abebonomics trigger currency wars? Is the economy “fixed” by elite insiders?

So many uncertainties swirling around today’s economy, so little trust in our leaders, is it any wonder people believe in hard assets?

Since when are most people correct? — Garth

#42 Victoria on 05.31.13 at 10:16 pm

Nice comparison of a purchase of a million dollar home vs. renting a townhouse probably half this price. I presume the numbers would be the same, should he have been looking for a townhouse to buy, or a million dollar house to rent, wouldn’t they?
You do know the difference between rhetoric and demagogy, right?

A million-dollar home in TO rents for $3,500 to $4,000. — Garth

#43 richard on 05.31.13 at 10:19 pm

I find completely funny how some pictures in mls.ca still have lots of snow! Time is changing, fools are waiting longer to buy houses. There are still plenty of greater fools but they are more patient now lol

#44 T.O. Bubble Boy on 05.31.13 at 10:21 pm

@ #38 Dave on 05.31.13 at 10:03 pm
50% appreciation in 10 years is fairly modest…even given the elevated starting point of today’s home costs. In 10 years, Darren could probably expect the home he passed on to be worth 80% to 120% higher then today
————-

80% to 120% in 10 years (after already rising 100% in the past 10 years)???

How’s the Kool-Aid taste?

#45 swm on 05.31.13 at 10:22 pm

Spreadsheet error: the principle that is paid off shouldn’t be included in the ‘sunk + opportunity cost’ but it is indirectly.

The breakeven cost should subtract the principle that is paid off.

Otherwise, nice sheet

#46 LJ on 05.31.13 at 10:23 pm

The “working poor” in Calgary are getting a little help.

See definition of people who need assistance: $90,000/yr.

http://metronews.ca/news/calgary/690670/attainable-homes-expands-eligibility-for-calgarians-with-children/

#47 frank on 05.31.13 at 10:24 pm

great spreadsheet – I think it is even more bleak that you point out, the opportunity cost of the 7% interest you’re missing out on should be multiplied by the number of years….unless I am missing something

#48 45north on 05.31.13 at 10:28 pm

talking about CMHC And the number of properties insured fell 54%, from over 114,000 to just 52,000.

That cannot be right. You mean that when you drive across the country and look at rows and rows of houses, the total of number of houses insured is 52,000? I’m going to canvass my street just to check.

brainsail: principals?

pretty funny

As stated, in Q1/13. — Garth

#49 rails on 05.31.13 at 10:53 pm

bulk insurance – financial institutions purchase mortgage insurance on conventional mortgages – those without the need for mortgage insurance (i.e. <80% loan to value ratios). They do this so that securitized mortgage pools have an implicit government guarantee, and easier to sell to investors through securitized products. Feds clamped down on this practise last year- hence the drop in bulk insurance.

#50 Patiently Waiting on 05.31.13 at 10:54 pm

Here are todays stats of combined sales from the Greater Vancouver Real Estate Board & the Fraser Valley Real Estate Board for the last 30 days:

Year / Sales of Single Family Homes

2013 1138

2012 2038 (2013 is 44% below this)

2011 2576 (2013 is 56% below this)

2010 2252 (2013 is 49% below this)

2009 2598 (2013 is 56% below this)

2008 1856 (2013 is 39% below this)

————————————————————-

These are the combined sales of both boards for strata (condos /townhouses) for the last 30 days:

Year / Sales of Strata Units

2013 1176

2012 2070 (2013 is 43% below this)

2011 2341 (2013 is 49% below this)

2010 2527 (2013 is 46% below this)

2009 3047 (2013 is 61% below this)

2008 2365 (2013 is 50% below this)

In both of the above single family and strata markets there is clearly a significant down draft in sales … if this continues (and there is a much higher probability of this continuing than not … If they are not already, I would think realtors and recent buyers alike will soon be sh___ing their pants …

pw

#51 Mick on 05.31.13 at 11:06 pm

Carrington now pulling out of the US housing market, one of the largest institutional firms in the market. The so-called recovery is nothing more than a pump and dump on the back of Bernanke’s inflation strategy.
The market won’t crash, but anyone who thinks the US is in an organic recovery is deluded.

#52 Sam on 05.31.13 at 11:13 pm

Love your blog Garth, but I’m going to have to agree with poster number 23. Change the house price from $800k to $120k (cell C1) with the same $100k downpayment and all of the sudden that 50% increase in value you mentioned changes to 124%. So basically it’s saying with a tiny $20k mortgage, you will need your house to go up in value by even more (124%) to break even from your $20k mortgage (vs a 52% increase in value required on the original $700k mortgage).

#53 Dean Mason on 05.31.13 at 11:32 pm

Garth,in the last month or so you are always talking about more good economic and financial news.This is good news.

#54 JM on 05.31.13 at 11:37 pm

Thanks for the spreadsheet! Nice work.
But I agree with #23 Squatter
The spreadsheet does not take the annual rent into account. The yearly rent should be subtracted from the interest in the TOTAL OPP COST for the spreadsheet to be more accurate. In the current version the rent is only used to calculate the money you have available to invest if you rent. But the cost of renting is not calculated.

#55 Smoky hole — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate – The Affluent Boomer on 05.31.13 at 11:40 pm

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

#56 T.O. & GTA bidding wars debunked May 31 -read carefully, something has changed on 05.31.13 at 11:44 pm

Here are the last “bidding wars” of the month
http://recharts.blogspot.ca/2013/05/to-sfh-bidding-wars-debunked-may-31.html

http://recharts.blogspot.ca/2013/05/tgta-sfh-bidding-wars-debunked-may-31.html

Now look at these:

May 31 -Sold under:37 Sold over:42 Sold for asking:10
May 30 -Sold under:43 Sold over:55 Sold for asking:6
May 29 -Sold under:50 Sold over:45 Sold for asking:13
May 28 -Sold under:60 Sold over:36 Sold for asking:20
May 27 -Sold under:62Sold over:29Sold for asking:4

See how for the last two days of the month, the number of Sold over is bigger that the number of sold under?
Well if you go and look at the map, for the central area (colour ranges green to red) most of the houses sold “over” the asking price BUT well under the price of the area. See the colour difference between the markers in the central area and the colours surrounding each of these properties.

#57 nuke on 06.01.13 at 12:00 am

This Rent vs Buy calculator is recommended:

http://michaelbluejay.com/house/rentvsbuy.html

#58 Slightly Less Foolish on 06.01.13 at 12:15 am

Big fan of your blog… not a big fan of the spreadsheet.

Example: If you purchased a 40k house in cash tax-free with no costs vs. putting it in a savings account at 1% and rented at $2,000/mnth, per this spreadsheet, your house would still need to appreciate by .48% in the first year to “break even”. By year 2, you are only ahead 0.12%.

Obviously this is wrong. In real life, in 2 years, you’d have a 40K house AND the 48K in rent you didn’t have to pay. Compare this to 40k + 804 interest in the bank, but out 48K in rent.

Good thing I’m not his wife… no sex for him. ;)

#59 T.O. Bubble Boy on 06.01.13 at 12:28 am

@ #42 Victoria on 05.31.13 at 10:16 pm
Nice comparison of a purchase of a million dollar home vs. renting a townhouse probably half this price. I presume the numbers would be the same, should he have been looking for a townhouse to buy, or a million dollar house to rent, wouldn’t they?
You do know the difference between rhetoric and demagogy, right?

A million-dollar home in TO rents for $3,500 to $4,000. — Garth
_______________________

… or less!

http://toronto.kijiji.ca/c-cars-vehicles-cars-trucks-Avenue-Rd-and-401-Summit-Heights-Beauty-July-1-W0QQAdIdZ489771813

http://toronto.kijiji.ca/c-cars-vehicles-cars-trucks-3-Bedroom-Bungalow-Located-In-The-Bayview-Village-Neighborhood-W0QQAdIdZ487767272

#60 rp1 on 06.01.13 at 12:32 am

Well good for Darren, and good luck to him. Maybe it will work this time? Or maybe the government will just give everyone a free jacuzzi again, throw another 600 billion on the fire to prevent a recession, and make house prices rise even further above fundamental value.

They’ve already done it once, and wives won’t listen to math for five years. Are they going to make an example out of the people they have burned with market interference?

#61 T.O. Bubble Boy on 06.01.13 at 12:44 am

The old hacks from CMHC are slowly but surely being fired:
http://business.financialpost.com/2013/05/29/cmhc-makes-another-change-to-its-upper-ranks/?__lsa=487c-cb3e

#62 gg on 06.01.13 at 12:55 am

Read something diff about US reflation. The Peter Schiff.

http://www.europac.net/commentaries/great_reflation?font_size=3

#63 NorthOf49 on 06.01.13 at 1:11 am

As secondary markets go, I expect May Hamilton-Burlington numbers to be real stinkers when they come out next week. In my little enclave of Ancaster, there are now 9 houses for sale, the most I’ve seen for sale in my 5 years of living here. Two are relists from last year, 1 sits unsold for well over a year and the rest are new Apr/May listings. Some are way overpriced at $600K+ while one has now set the new ceiling at $459K. Its not moving but we’ll see if there’s any interest at the open house on Sunday. Meanwhile, just outside my hood is this place. It overlooks the Hamilton Mountain and you can see the CN Tower from the upstairs windows:

http://www.realtor.ca/propertyDetails.aspx?propertyId=12726553&PidKey=1794704870

Listed last Fall (you can see the leaves in the pics) for $875,000, its now priced at $749,900. Only a 14% drop but with summer coming fast and foot traffic dying off, I expect more price drops if he really want this thing sold.

As for Burlington, have a look on MLS at Alton Village, bordered by Dundas St., Walkers Line, Appleby Line and the 407. At last count there are 42 single family homes listed, most listed way too high for the average Ham-Burl joe to afford.

#64 Dmitri on 06.01.13 at 1:13 am

It seems like yesterday…. I bought a house in TO for 1.1 big one and put down 300 grand. It was hard to pay down the mortgage, took almost 12 years and interest was high… 8.25% at first and 7.25% at the end. Would think 10 times before doing it again, but hey…. this “house” had 30 apartments and collected 200 grand gross rents first year. Year was though 1997. And you talking about a house to live in (translate shack) for a million? Don’t need a spreadsheet to figure out the answer. :-)

#65 Tom Vu on 06.01.13 at 1:26 am

DELETED

#66 Freedom First on 06.01.13 at 2:03 am

Kudos’ Garth! Another couple saved. How sweet it is to read those stories of people brought back to financial sanity. That is extremely difficult to do, as you know Garth, house lust kills all desire for sane thinking. We only have to look at the multi-millions of people who have been financially destroyed world wide by the RE world.

#67 Onthesidelines on 06.01.13 at 3:05 am

“FIRST, LOL, I MEAN FIRST TO MOVE OUT OF VANCOUVER WITH my family to Qatar, get paid the same tax free, with free housing, compare that to buying or even renting in this rip off place, and yes more people speak English there than Vancouver, what does Garth think?”

Sorry to break it to you, Andrew. Been here a year already… grin. Lots of other folks much longer. Tax free, rent free.
Here’s a tip for you, buy Canadian government bonds when the yields go higher, and those will be tax free to non-residents such as yourself as well.

#68 Ralph Cramdown on 06.01.13 at 3:17 am

My only advice for people making $200k is that if they can put away $100k of that for a few years at the beginning, their future selves will thank them profusely. But it’s likely that anyone with a rent/buy spreadsheet is already far ahead of the crowd.

“It is realistic to surmise that some households, who originally put their decision to purchase on hold, are once again looking to buy.” — The Prez of the Real Estate Board shouldn’t need to surmise such a thing, as customers aren’t invisible. They’re either calling her members and attending open houses, or they aren’t.

#69 Onthesidelines on 06.01.13 at 3:26 am

In response to Garth’ s economic optimism of 2 days ago.

http://www.commondreams.org/view/2013/05/31-12

Another pol selling a book. Yawn. — Garth

Excuse me, Garth. Your arrogance is showing, and it’s working against you big time.

The article is pablum. — Garth

#70 Onthesidelines on 06.01.13 at 3:50 am

#16Andrewski on 05.31.13 at 7:43 pm
Re: #12; here you go.

http://www.canadainternational.gc.ca/kuwait-koweit/consular_services_consulaires/index.aspx?lang=eng&menu_id=15

Wow, is that the best you can do? Get out much?

#71 Ralph Cramdown on 06.01.13 at 3:52 am

#41 young & foolish — “So many uncertainties swirling around today’s economy, so little trust in our leaders, is it any wonder people believe in hard assets?”

I still own the Leica that my grandparents bought as a store of value as they prepared to emigrate from Germany a few years after the war. Here’s a certainty: You’re going to pay your phone bill next month. Odds are, I’m going to get a taste of that. Thank you.

#72 Rob aka Captian and Mrs Slow on 06.01.13 at 4:36 am

A lot of people have asked how to re-balance

Andrew Hallman (Millionaire Teacher) walks you through the basics, worth posting up front

http://andrewhallam.com/2013/05/canadian-divorcee-in-singapore-finds-her-investment-wings/

#73 Deb on 06.01.13 at 6:26 am

“…the demand for home ownership should continue to firm-up relative to last year.”

What? Firm-up? What a revealing choice of words, Ann.

#74 Pr on 06.01.13 at 6:50 am

Its amazing to see that the gouvernements will do everything and anything wrong, before they do it right.

#75 I'm stupid on 06.01.13 at 7:04 am

#45 LJ on 05.31.13 at 10:23 pm

Nice link, I laughed my ass off. The problem with most people today is:

1 they feel entitled
2 over lapping services that add up to big spending
3 heard mentality
4 they are unable to think logically
5 they don’t understand the value of money

1 self explanatory

2: How many people have cell phones and home phones? Why do you need both? 7 Tvs paying extra cable per outlet or both cable and satellite? Internet on their cell phone plus home Internet. Two cars or more when 1 will do. That’s two insurance premiums. Etc etc. the point is that it’s all wasteful spending for useless excess.

3: You buy things just because everyone else does. You don’t need all the B.S. it useless junk.

4: They buy things because they seem cheap, when in fact they are expensive. My cousin was sold a golf membership $40 a month plus food and beverage $2000 per year. $40 per month is for 15 years. That’s not cheap. He indebted himself for a luxury good. What sense does that make? All the little payments add up to huge monthly costs that cripple your household balance sheet. You should fear debt and avoid it at all costs.

5: $1 at 30 is worth more than $1 at 60. Think about it for a second. If at $30 I save $1 and invest it what will the value of that $1 at 60? Spending $1 is actually costing you $2. Think about that for a second. Financing $1 is costing you $4. The $1 spend is net income and includes 13% tax. You need to make $2 pay taxes to have $1. If you finance the purchase $1 will cost you $2 with interest and you need $4 of gross income to pay the original purchase of $1. If your 30 that $2 would be worth $8 conservativly at age 60.

Just saying… But what do I know I’m stupid.

#76 maxx on 06.01.13 at 7:15 am

#3 In the Valley on 05.31.13 at 6:37 pm

” Thanks for the sanity!
My dream team to run Canada is Garth Turner,
Rick Mercer and Chris Hadfield. Oh yeah. That would truly rock.”

I wish we didn’t have to just dream about it.

People would matter once again.

#77 Mike on 06.01.13 at 7:58 am

I’m not completely sure, so correct me if I’m wrong; there is a mistake on the spreadsheet (although it is quite good). The sunk + opportunity cost adds interest to the investable sum for the current year only, while it should have a cumulative effect. For example, the cumulative opportunity cost in year 10 should be the sum of all 10 years, and not just for investable assets in year 10.

#78 Ron on 06.01.13 at 9:04 am

$500 a year for maintenance cost is way too low for a house. Also utilities are usually included in the price of rent, so you need to add utility costs of the house for proper comparison (and those will be going up). I would say that property taxes will also be going up since that is the only thing people own.

#79 Darren on 06.01.13 at 9:14 am

#75 Mike,

Thanks for taking a look at the spreadsheet. If you look at row 27 “interest paid” that is the cumulative interest over each year (from row 18 “interest paid”).

#80 T.O. Bubble Boy on 06.01.13 at 9:35 am

Some significant price drops in the high end of the GTA market…

Check out 346 Riverview Dr:
http://www.realtor.ca/propertyDetails.aspx?propertyId=13105678&PidKey=-1709355600

Currently listed at $15.88M (as of April 2013).

Previously listed:
June 2012 @ $19.5M
July 2013 @ $17.5M

From the initial listing, that is a 18.5% drop.

#81 JM on 06.01.13 at 10:01 am

#75 Mike
I think you’re right. Opportunity cost should be cumulative. In addition, the cumulative cost of renting should be subtracted from the opportunity cost.

#82 Juan Sanchez on 06.01.13 at 10:56 am

@ 57 Slightly Less Foolish

I’ve never heard of a 40k house, unless you’re looking in Flint, Michigan. You’re also not comparing apples to apples: 40k house vs. $2000/mth rent? You’re comparing a shack to a palace. No sex for you… Ever.

#83 Piccaso on 06.01.13 at 11:07 am

#78 T.O. Bubble Boy on 06.01.13 at 9:35 am

Another 50% price drop and I still wouldn’t touch it, what a dump!

#84 Poorboy on 06.01.13 at 11:13 am

Another pol selling a book. Yawn. — Garth

The irony is deafening.

Actually I have no new books to sell. This site is free, which means even you can afford to come here. As for the article in question, it’s vacuity defined. Useful to scare people, useless to profit from. — Garth

#85 Spiltbongwater on 06.01.13 at 11:52 am

Actually I have no new books to sell. This site is free, which means even you can afford to come here. As for the article in question, it’s vacuity defined. Useful to scare people, useless to profit from. — Garth
.

I can hardly even pay attention, but this site is alot of free information even though I ignored the warnings and bought a Langley townhouse last year. Paid $334K with $110K down, and am hammering away at my 3.5 variable mortgage by paying $2600 monthly right now. Will be locking in and slowing the payments to $1100 p/m for a bit. I feel all debts need to be repaid so why I attack the principal right now. I can save money in a few years from now when I have a more comprotable debt level. Complex has 45 units and 5 have sold in last year at prices slightly under what I paid. 1 listing which I looked at last year is still for sale but price has not been competitive with the rest. Stubborn vendor I take it.

Congratulations on building equity in a losing asset. — Garth

#86 Josh in Calgary on 06.01.13 at 11:58 am

#70 Rob,
Good link on how to create a simple balanced portfolio. I would add a US index to the equity mix but the 50/50 split between equity and fixed income is about right for most people. The point about rebalancing by topping up the loosing funds is important, but one that many people fail to do. It’s counter intuitive to add money to “loser” but this is called buying low and would have netted 20% returns on a US index this last year.

Also for most people they should only rebalance once or twice a year. Too often and you’re just blowing your money on fees. Pick the same time every year just to take the emotion out of it.

#87 Andrewski on 06.01.13 at 12:12 pm

Re: Onthesidelines on 06.01.13 at 3:50 am

My intentions are good, while yours are?

Does it make you feel good? Kudos to your parents for raising such a fine young man…

#88 r1200c on 06.01.13 at 12:27 pm

Wondering how Genworth mortgage insurance is doing… Since the feds increased their guarantee from 250 billion to 300 (the press release went out on December 20, 2012… methinks someone wanted this to go unnoticed…)
http://business.financialpost.com/2012/12/21/feds-ok-another-50-billion-of-mortgage-guarantees-for-private-sector-players/

The big question… is the CMHC dismal Q1 numbers mean the banks are now using another source of mortgage insurance?

#89 Old Man on 06.01.13 at 12:33 pm

I thought it appropriate to check out the market in Muskoka because the family summer home will be the last to cash in for whatever reason. I went to mls, and used Port Carling as my target with $700,000 to unlimited for dots. It opened up the entire region, and looked like a christmas tree; this is negative, as the family cottage will be the last to go, or is this just a normal buy /sell period; not sure?

#90 Piccaso on 06.01.13 at 12:59 pm

#87 pinstripe on 06.01.13 at 12:29 pm

It is different in AB and SK. Many Jobs. Excellent Pay.
…………………………………………………………………….

Turned down a good paying contract in Regina, can’t find extended stay accomodation. Your looking at $150 a night for a worn bed in a flea bag motel.

#91 VICTORIA TEA PARTY on 06.01.13 at 1:03 pm

IT’S THE PRINCIPAL OF THE SITUATION

Interest rate payments keep those mortgaged to the hilt in bondage; it’s the remaining principal payments that’ll kill ‘em stone cold dead as the next decades will confirm.

Their so-called life-styles will be more like death-styles and, then, there goes the neighbourhood!

I wish that St. Garth of Fiscal Reticence would, once again, point out that once a $700 thousand mortage has been been finally toasted, the former mortgage holder will be a burnt out shell of a human being: google photos of the Battle of Stalingrad for a metaphorical representation. But will any lessons have been learned, such as paying your own way?

Good luck!

BACK AT THE RANCH

I disagree with Garth’s contention that the US economy is recovering a la the early 1980s.

Bill Bonner, the self-described “Rogue Economist”, has this to say about contemporary American economic activity:

“…Few people understand this. But the Fed’s ZIRP and QE policies are not bringing about a recovery. They’re not bringing prosperity. They’re bringing poverty. They’re suppressing… repressing… depressing… a real recovery.

Why? Because a real recovery stifles the aforementioned “accumulation of capital goods by saving.” People need to save… and they need to invest in real productive enterprises. Those businesses, factories and enterprises then create real jobs and real wealth… goods… services… stuff.”

He says while growth in the US public sector adds to GDP, it does not add to useful production and, therefore, is bogus.

Friday’s stock market mini-melt will likely be glossed over by a 400 point jag to the upside on Monday because, everything is “just great” in the good ol’ USA.

#92 Tom Vu on 06.01.13 at 1:32 pm

#64 Tom Vu on 06.01.13 at 1:26 am

DELETED

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

I see I was DELETED.

I can’t remember what it was , but it must have been something important.

#93 Potato on 06.01.13 at 1:38 pm

If people are looking for a more detailed rent vs buy spreadsheet, there’s always my own: http://www.holypotato.net/?p=1073

Hope it helps some of you.

#94 Ralph Cramdown on 06.01.13 at 2:17 pm

#90 VICTORIA TEA PARTY — “[Bill Bonner] says while growth in the US public sector adds to GDP, it does not add to useful production and, therefore, is bogus.”

http://research.stlouisfed.org/fred2/series/USGOVT
…And that little spike at the peak was the decennial census.

Bill Bonner is, therefore, bogus.

#95 tkid on 06.01.13 at 2:28 pm

A most excellent excel spreadsheet!

On that theme, may I recommend Ben Barkow’s Retirement Cashflow Calculator, courtesy of the Globe and Mail? It really brought home to me the impact of interest rates upon retirement funds:

http://www.theglobeandmail.com/globe-investor/investment-ideas/article5164626.ece/BINARY/cashflow-calculator.xls

#96 Old Man on 06.01.13 at 2:35 pm

Just a memo on all this spread sheet stuff as there are too many variables going forward to consider, so is all a waste of time in my opinion, but is a good exercise non the less. The other option is not to look at the trees in a forest, but the forest as a whole within context of known factors instead in a general economic sense as to where Real Estate capital values will be a few years from now in terms of a discount of capital vs renting.

Anytime that one is faced with a complex problem take the basic components and keep it simple for making a decision going forward without a lot of confusing detail with this and that. Use common sense, and a bit of logic with what is known, and act upon this alone, as in making a decision without emotion, but with common sense.

#97 tkid on 06.01.13 at 2:36 pm

For those who cannot open the spreadsheets (xls and xlsx) try Open Office:

http://www.openoffice.org/

It is a full Office Suite, whose main rival is MS Office, but it is free.

#98 BillyBob on 06.01.13 at 2:53 pm

““FIRST, LOL, I MEAN FIRST TO MOVE OUT OF VANCOUVER WITH my family to Qatar, get paid the same tax free, with free housing, compare that to buying or even renting in this rip off place, and yes more people speak English there than Vancouver, what does Garth think?”

Sorry to break it to you, Andrew. Been here a year already… grin. Lots of other folks much longer. Tax free, rent free. Here’s a tip for you, buy Canadian government bonds when the yields go higher, and those will be tax free to non-residents such as yourself as well.”"

Hmmm I think I got this one covered too. Been living in Dubai for over six years, one of the many Canadian Em-Rats. (You couldn’t pay me enough to live in Doha!) No longer in company accommodation, because the allowance the company pays, is enough for a nice two-bedroom on Sheik Zayed Road with a couple of grand/month extra in my pocket. On top of the tax-free salary.

Sure I miss Canada. But no way I’m coming back until they sort out the RE disaster. It’s a running joke in the rest of the world, everyone except those living in Canada (and a few mavericks like GT) know a correction is imminent. I’ll wait on the sidelines saving/investing my hard-earned cash. No mortgage for me…ever. Guess you say the expats are a third class, neither renters OR buyers!

#99 johnny d on 06.01.13 at 2:54 pm

@ #87 pinstripe

It is totally different in sask and alberta… The personal debt rates are some of the highest in Canada and the economy lacks the diversity to weather downturn in commodity prices. Perfect storm up ahead.

#100 Old Man on 06.01.13 at 2:58 pm

I had no problem opening up the spreadsheet, and just took one look, and said to myself why do an audit with this and that. One does not need this to make a Real Estate capital decision, as the train wreck is coming in slow motion, so why blow a downpayment; a dividend tax credit; paying for taxes and utilities; all savings is gone; and what about the mortgage renewal with all that equity gone? One can rent a nice corporate apartment with most of the expenses being paid for a bargain price, while saving money for a potential future home purchase at a capital discount, or rush in and buy to become the greater fool.

#101 Onthesidelines on 06.01.13 at 3:05 pm

#85Andrewski on 06.01.13 at 12:12 pm
Re: Onthesidelines on 06.01.13 at 3:50 am

My intentions are good, while yours are?

Does it make you feel good? Kudos to your parents for raising such a fine young man…

I’m neither young nor fine, but I’ve been around long enough and far enough to find the sort of link you posted laughable.

If you want to scare Canadians from moving to this region, at least do a bit of research before shooting off your mouth. Believe me, you’ll find plenty to be afraid of, not the least being the SARS like coronavirus that has appeared in the Gulf. http://www.who.int/csr/don/2013_05_31_ncov/en/index.html

#102 Dr. Hoof - Hearted on 06.01.13 at 3:13 pm

Paralysis by analysis.

Spread sheet blah blah blah….

Its a trap until the dust settles back to some historical norm.

Finally, you have a huge volume of inventory that could cascade onto the market at any time.

Not buying may be the “new norm”.

#103 Shawn on 06.01.13 at 3:15 pm

Bill BONNER

Ralph Cramdown said:

“[Bill Bonner] says while growth in the US public sector adds to GDP, it does not add to useful production and, therefore, is bogus.”

And that little spike at the peak was the decennial census.

Bill Bonner is, therefore, bogus.

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

Bill Bonner is hugely successful in business and is an excellent writer and is highly intelligent.

I hear him speak at an internet conference one of his companies sponsored in Delray Beach Florida in 2006.

Since then I have read many of his once daily columns.

But the U.S. recovery has totally confounded him. He was calling for DOW 4000 or something like that. These days he no longer even writes much.

To suggest that ALL government spending does not add to anything productive or worthwhile is plainly idiotic. Teachers may or may not be over-paid but they do provide a useful service. Certainly healthcare is useful. Police as well. The courts are kind of necessary for rule of law and contract enforcement. There is waste in government but again to suggest that the private sector creates ALL the wealth is simply idiotic.

#104 Ret on 06.01.13 at 3:16 pm

Hamilton RE bidding wars. Housing gone crazy! It’s true. It was on the front page of the Hamilton Spectator today. I guess that everyone wants to live here!

http://www.thespec.com/news-story/3252025-bidding-wars-housing-gone-crazy/

#105 Uwinsome on 06.01.13 at 3:27 pm

You’re wrong again in Vancouver Garth:

http://www.yattermatters.com/2013/06/vancouver-average-prices-3-times-lucky/

That’s funny. — Garth

#106 Spiltbongwater on 06.01.13 at 3:39 pm

I couldn’t care less about building equity. I care more of paying down the debt. Garth, you are the same guy who told me I pay interest on $50 dollars gas when paid by a credit card. Someone who thinks that way should not be giving anybody financial advice until they learn how to use credit.

Lighten up. Repaying money you borrowed at 3% to dump into an asset losing value when you could invest it for double the yield, more diversification and heightened liquidity is not exactly a genius move. — Garth

#107 Old Man on 06.01.13 at 3:49 pm

I bought a new car last week, as will use the old one in the winter months, and damn these cars cost a lot, but will not live forever, so went for a BMW Z4 in sapphire black with the open and closed top and has a 7 speed auto transmission called the turbo 6 with 335 HP off the line.

I went shopping and some guy followed me with a 1950′s restored pick-up truck in mint condition, so he pulled up and pointed at the stoplight, and nodded ok, as wanted a drag off the light. I am so depressed, as he beat my ass, as had something big under the hood, and left me in the dust :(. I need a refund lol.

#108 Shawn on 06.01.13 at 3:52 pm

BILL BONNER TOO

In his latest daily reckoning Bill Bonner concludes:

“Machines can be manipulated and controlled. Real economies can’t.”

His point is that it is folly to try to control the economy. And so the FED’s effort are folly. Maybe so.

We might also conclude that real economies cannot be predicted with accuracy. Anyone who states that interest rates WILL rise or fall. Housing prices WILL rise or fall does so at their peril. Better to say that based on they evidence they SHOULD rise….

The economy has confounded most forecasters time and again. Economies can stay irrational longer than those who bet big on a certain direction can stay solvent.

#109 Bargains everywhere on 06.01.13 at 3:56 pm

I thought it was interesting that Richmond Hill has banned the number 4 in any new subdivisions.

http://metronews.ca/news/toronto/691279/richmond-hill-bans-number-four-in-new-addresses-due-to-superstitious-connotations/

#110 Dr. Hoof - Hearted on 06.01.13 at 4:52 pm

#108 Bargains everywhere on 06.01.13 at 3:56 pm

I thought it was interesting that Richmond Hill has banned the number 4 in any new subdivisions.

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

I never heard of a number being banned….

I now in Vancouver that you could change the numbers to ” 8′s ”

PS Maybe we should change Canada to the Number “4″

#111 Mark on 06.01.13 at 5:00 pm

Spreadsheet needs a correction. Returns are compounded, so you can’t just divide the breakeven percentage by the year, you need to enter the formula =(1+breakeven)^(1/number of year)-1

Doesn’t really change the answer, but it makes the annual return a little lower.

#112 Ralph Cramdown on 06.01.13 at 5:04 pm

OK Shawn, I read a bit of Bill Bonner. He either knows nothing about economics, or he’s very good at pretending. I agree with you that much government work is useful, but I didn’t even feel the need to argue against Bonner’s view on that. If he didn’t know that the US public sector workforce has CONTRACTED by 4.8% since mid 2010, or thought it irrelevant to his argument (or perhaps just inconvenient), there’s no use engaging on the consequences.

The delicious irony is that his website, full of claptrap about how government spending is a waste of money and doesn’t help the productive economy, appears to be supported exclusively by ads exhorting people to buy gold.

#113 Ret on 06.01.13 at 5:15 pm

So if I live in a condo that has no fourth floor listed because it is bad luck, I will feel so much better living on the fifth floor which is really the fourth floor after all, in all but number only?

The logic escapes the rational mind.

How many cities have properties with a 666 number?

#114 Young & Foolish on 06.01.13 at 5:22 pm

Ralph Cramdown ..
“I still own the Leica that my grandparents bought as a store of value as they prepared to emigrate from Germany a few years after the war. Here’s a certainty: You’re going to pay your phone bill next month. Odds are, I’m going to get a taste of that. Thank you”

Hold on to that camera .. it’s vintage and may be worth more than your ipad! As for paying the bills, you still have to pay to live somewhere. Would you like a rental application?

#115 TurnerNation on 06.01.13 at 5:54 pm

Realtors in a panic! Whistler edition.

http://whistler.kijiji.ca/c-real-estate-apartments-condos-2-bedroom-WANTED-rental-for-myself-and-2-boys-for-July-1st-W0QQAdIdZ488126110

“I have always owned my own home until now and am just selling my half duplex in Rainbow which will complete early July. I have lived in Whistler for 22 years and have been selling real estate for REMAX for 12.

I am looking for a long term rental as I save up for when the real estate market takes off again when I will buy back in… Still a couple of years away I believe.”

#116 Triplenet on 06.01.13 at 5:59 pm

You spent how many hours reviewing a spreadsheet you devised on buying a 60 year old bungalow that has reached the end of its economic life.
How many days did it take you to create your work of art?
You must be a brilliant beaurocrat.
I spent less time buying a company jet.
Well…its an airplane.

I do not believe Darren is a bureaucrat. And that matters, how? — Garth

#117 jess on 06.01.13 at 6:00 pm

apple guy says it is too complex …NOT! This explains it

http://www.youtube.com/watch?v=3SrLgzGVbt8

Lee A. Sheppard: Corporate tax planning and avoidance
explains the structural problems

Lawyer and contributing editor to Tax Notes International, Lee A. Sheppard, speaks at Publish What You Pay Norway and NHH Norwegian School of Economic’s Financial secrecy, society and vested interests-Conference in Bergen, Norway, November 2012.

More at: http://www.publishwhatyoupay.no/conference

#118 Julia on 06.01.13 at 6:01 pm

Ok couldn’t help myself. Just got back from popping into an open house at a condo builing I’ve been curious about in my Y and B hood. Nice! Actually the first condo we’ve seen that we could actually picture ourselves really enjoying living in. And we could, if we wanted to, buy it pretty much for cash.

So did the math. Added condo fee, taxes, insurance, heat and hydro and magically the final number came out to just about what we pay in rent. Granted the unit is a bit bigger and nicer than our rental and the building is definitely nicer.

But, even if the condo market stays put and doesn’t crash, owning this condo will cost me approx $20k per year in lost investment income plus whatever costs there are to maintain, fix and upgrade appliances, fixtures, flooring etc.

How in heavens do people ever justify owning a condo?

#119 westcanguy on 06.01.13 at 6:08 pm

#111 Pinstripe

In my travels I see the same thing in all of AB and SK.

It is different here without any doubt whatsoever.

_____________________________________________

What part didn’t you understand when johnny d said the economy doesn’t doesn’t have the diversity to weather a downturn in commodity prices?

How many busts have you lived through in Alberta? Apparently none. If you’ve lived in Sask your whole life, this is a new experience for you. I guess you’ve forgotten whats happened in the past when wheat and other commodities were in the toilet with prices.
Have you ever seen commodities continuously rise and never fall? Give your head a shake.

I have personally talked to bankers and brokers who give me story after story of engineers and doctors making tons of money, couples making 2-300k a year and they can’t get financed for a 25k motorcycle.

You’re right, money isn’t the issue. It’s stupidity that’s the issue.

#120 Saint Herb on 06.01.13 at 6:26 pm

A million-dollar home in TO rents for $3,500 to $4,000. — Garth

I am currently looking for a nice house to rent and am having a lot of trouble justifying a $2,300 payment. I just turned down a nice house for $2500 because I refused to pay, it just seems like to much.

How much money do I need to make to justify a $3,500/month rent? Am I just being cheap? or am I under estimating how much of my monthly income is appropriate to put towards rent.

What is appropriate? I think the landlords are jacking up the rent because they overpaid for the houses.

#121 Ralph Cramdown on 06.01.13 at 6:31 pm

#116 Young & Foolish

Maybe I was a little too obtuse earlier. My point was that there have been a number of times in living memory when hard assets really were the way to go as inflation raged. When my grandfather quit his job as he prepared to emigrate, his boss delayed paying him for a few days, and that was enough time for a significant decrease in his purchasing power. In addition to the steamer tickets, he bought a Leica and a pair of binoculars; other than the household goods, that was pretty much the extent of their portable wealth.

Here we are in 2013. We have our own independent currency, are a net exporter of energy and commodities, have a comparatively benign national debt and a very good credit rating, unemployment is nowhere near NAIRU, our central bank has the mandate, knowledge and desire to control inflation, and China and India have been exporting wage deflation to us for over a decade now.

You’re worried about inflation, and see “hard assets” (real estate at today’s price/rent and price/income ratios?) as a store of value? Inflation isn’t the problem, and isn’t going to be the problem.

#122 Andrewski on 06.01.13 at 6:31 pm

Re: Onthesidelines on 06.01.13 at 3:05 pm

Appreciate the interesting link, although you’re way off on my intentions.

This site is not a pissing match, so move on with your vapid comments.

Cheers.

#123 VICTORIA TEA PARTY on 06.01.13 at 6:32 pm

ET AL ABOUT BONNER

We were all snookered after QE arrived at our doors, Bill Bonner included.

Who wouldn’t be?

These bouts of QE are unprecedented in world financial history, especially since other countries are also cascading printed money onto the scene to finance the vastly more important underlying currency wars.

Currency wars.

That’s the issue, not the budgets, not the debt. Those are sideplays.

It’s all in the currencies, as one country beggars its competitors with lower and lower interest rates, bond buy-backs and other God-forsaken bloody-minded nonsense.

Those continue unabated and with the usual lethal intended and unintended consequences coming to your wallet one way or another.

Figure out the date of arrival and you win. Otherwise you lose regardless of how many civil servants it takes to screw up a budget and to find replacement “programs” for on-the-lam family members.

I worry about the effects of the madness of crowds, an issue Mr. Bonner wrote about a number of years back. It’s still current. Read it. And think.

#124 Old Man on 06.01.13 at 6:37 pm

#120 Julie went to an open house once, and walked inside through the door for a look around, and this man came out, so said nice home you have here, and am just looking around, so take me down to the basement as want to see more, as see you are doing renovations. I kid you not as walked into the wrong home, as said wtf the open house is nextdoor lol.

#125 T.O. Bubble Boy on 06.01.13 at 6:47 pm

@ #122 Saint Herb on 06.01.13 at 6:26 pm
A million-dollar home in TO rents for $3,500 to $4,000. — Garth

I am currently looking for a nice house to rent and am having a lot of trouble justifying a $2,300 payment. I just turned down a nice house for $2500 because I refused to pay, it just seems like to much.

How much money do I need to make to justify a $3,500/month rent? Am I just being cheap? or am I under estimating how much of my monthly income is appropriate to put towards rent.

What is appropriate? I think the landlords are jacking up the rent because they overpaid for the houses.
————-

You need to be more specific… You can get a detached house for $2300 in the burbs, but not likely in the core. If you do, you’re probably going to have a separate tenant in the basement.

Semi-detached houses rent from about $2500-$3000 in nicer neighbourhoods, and detached are $3000+.

As far as whether you should pay it…. That all comes down to income, and what comparable house you’d see yourself buying if you weren’t renting.

There are thousands of condos/apartments for rent in this city, but far fewer rentL houses… Supply and demand has definitely raised rents, but nowhere near what cheap debt has done for inflating house prices for buyers. As Garth noted, a $1M house can rent for as little as $3000-$3500 per month, which is less than the mortgage payment on a $800,000 mortgage @3%/25yr for buying the same place with 20% down.

#126 Tom Vu on 06.01.13 at 6:49 pm

Bureaucrats ? Civil Servants ?

..are proof alien life forms exist.

#127 The Man From Nantucket on 06.01.13 at 7:09 pm

“#115 Ret on 06.01.13 at 5:15 pm
…………How many cities have properties with a 666 number?”

A thousand lifetimes ago, as a young student in search of a U of T obedience certificate, I once checked out a bachelor rental at 666 Spadina Avenue.

#128 AK on 06.01.13 at 7:31 pm

#51 Mick on 05.31.13 at 11:06 pm
“The market won’t crash, but anyone who thinks the US is in an organic recovery is deluded.
——————————————————————–
Well, based on the visitation numbers to Las Vegas, the recovery appears to be very organic.

: Last year(2012), a record 39.7 million people visited Las Vegas.

Record Las Vegas Numbers

#129 Dr. Hoof - Hearted on 06.01.13 at 8:03 pm

#129 The Man From Nantucket on 06.01.13 at 7:09 pm

“#115 Ret on 06.01.13 at 5:15 pm
…………How many cities have properties with a 666 number?”

==================================
This is true anecdote…

We know a person who works for TELUS…

Said no-one wants ” 66″ in tel. numbers…

Duly note , many Gov’t agencies have that as a numerical prefix .

#130 Victor V on 06.01.13 at 8:04 pm

http://www.thestar.com/business/real_estate/2013/05/31/housing_market_shows_ominous_signs_of_downturn_report.html

Canada’s housing market is showing “ominous” signs of the same slowdown that hit the U.S. housing market before its devastating meltdown so it’s too soon to celebrate a soft landing, says Capital Economics.

“Home building in Canada is on an ominous downward slope, similar in many ways to what happened in the early stages of the slump in the U.S.,” says economist David Madhani, who first predicted a downturn in house prices of up to 25 per cent two years ago.

The housing market — especially Toronto’s condo market — has somehow defied the skeptics so far, with house prices flattening and condo prices declining just slightly since tougher mortgage lending rules were implemented last July. But Madhani says all signs are now pointing to a looming downturn.

“There seems to be this view that we’ve achieved a soft landing because everything is declining slowly, but the pace of decline is more or less in line with the early stages of the U.S. slump,” he said in an interview Friday after issuing his state-of-the-market note.

Canada’s decade-long housing boom is every bit the “credit-driven asset bubble” that has burst in the U.S., Spain and Ireland, he said. It is “premature to sound the all-clear siren for Canada.

“Like so many other developed economies that have experienced unsustainable housing booms over the past decade, Canada exhibits similar ominous symptoms of overvaluation and overbuilding,” his report says.

#131 Rabbit One on 06.01.13 at 8:13 pm

666 Burrard Street, Van Downtown.
Park Place Building.

Number 6 is “fortune” in Chinese culture.

#132 HogtownIndebted on 06.01.13 at 8:27 pm

Now here’s an interesting link between the Rob Ford debacle and the housing melt:

It appears Rob Ford’s latest city hall wannabe Rasputin has a substance abuse problem – with real estate. (Not crack related, thankfully, although the Globe hashed out his other interests quite nicely last weekend)

According to reports, Ford’s “director of logistics and operations” (?!? – read ‘the guy who figures out new ways for Ford to put his foot in his mouth while maintaining his head up his ass’ – not an easy feat) has some side effects from real estate delusions, according to divorce papers filed by his wife.

“His wife also claims in the documents that Price had incurred gambling debts and had been paying them using mortgage credit.”

(But, the house hornies say, what else is a HELOC for? )

So, apparently, being over-leveraged in a dubious real asset not only can contribute to divorce; it may also lead you to make bad employment choices and give very dumb advice to even dumber politicians.

His HELOC drove him to Rob Ford. It was destiny.

Wonder who’s been advising Duffy and how much he owes to TNL@TB…..

http://www.thestar.com/news/city_hall/2013/05/31/who_is_david_price.html

#133 LP on 06.01.13 at 8:31 pm

#129The Man From Nantucket on 06.01.13 at 7:09 pm

The grocery store (formerly a Dominion) in Etobicoke at 666 Burnthamthorpe Road, west of Renforth Drive.

#134 LP on 06.01.13 at 8:32 pm

#115Ret on 06.01.13 at 5:15 pm

Sorry, the reference should have been to post #115, not to #129.

#135 James on 06.01.13 at 9:20 pm

Dear Garth or other sage commentators, can I get an opinion on a rent vs buy example? I am not buying this place, just asking the question from a theory point of view. The following link to the exact same unit, it is either the same one or a clone in the same complex.

Rent?
http://regina.kijiji.ca/c-real-estate-apartments-condos-2-bedroom-Harbour-Landing-Condo-for-Rent-W0QQAdIdZ482055191

or buy?
http://condos-in-regina.com/regina-condos-for-sale/propertyDetails.php?recordID=7473

Renting still make sense in this market with those numbers?

#136 young & foolish on 06.01.13 at 9:43 pm

Ralph Cramdown :
“You’re worried about inflation, and see “hard assets” (real estate at today’s price/rent and price/income ratios?) as a store of value? Inflation isn’t the problem, and isn’t going to be the problem.”

Not suggesting RE is necessarily a good store of value (unless it pays dividends, aka, rents), but I can see how people can get bewildered by today’s markets and thus gravitate towards something “real”. QE has made many people nervous and has brought back fears of accelerated currency devaluation.

#137 Ralph Cramdown on 06.01.13 at 9:56 pm

You think Apple is worried about currency wars? When Japan devalues, they raise the Yen price of their stuff. What keeps Apple up at night is Ireland raising tax rates.

The Japanese and European carmakers long ago built plants in America to circumvent tariffs and mute the impact of currency fluctuations.

And Europe has this thing called the Euro, where everyone uses the same currency. Since they put the Bundesbank in charge of it, purposeful devaluation is pretty unlikely.

How much would Mexico or Japan have to devalue to be competitive with China? Or China to compete with Vietnam or Bangladesh?

I think that ‘Currency Wars’ guy is playing a one note symphony. His bio indicates that he’s built his entire (post-LTCM) career around being a professional Cassandra.

#138 Ret on 06.01.13 at 10:03 pm

#135 -The grocery store (formerly a Dominion) in Etobicoke at 666 Burnthamthorpe Road, west of Renforth Drive.

Yup, that’s all it was, a grocery store. No, “666″ Satanic rituals done after hours although they might have given out candy to little kids on Halloween, our only Satanic based holiday.

Do believers of the unlucky 4 hocus-pocus drive Toyota Rav-4′s? They shouldn’t be risking their lives in any vehicle with 4 wheels. Maybe they count the spare to add up to 5 total wheels so a 4 wheeled car is okay to drive after all?

Canadian culture has some weird superstitions too, but who would go to a municipal politician to get their house renumbered?

Are developers really not having a 4th, 13th, 14th, 24th floor in their condo buildings? I bet that they are charging the height premium for each of the missing floors.

RE agents and developers who pander to this unlucky 4, lucky 8 nonsense lack professionalism IMHO.

#139 NoName on 06.01.13 at 10:14 pm

I was never good with math anyway…
http://goo.gl/kRm4L

#140 Nemesis on 06.01.13 at 10:40 pm

Egads! Corrigendum!

I neglected to genuflect and/or accord you a well deserved Homage for referencing “Lysistrata”.

Trivium/Quadrivium… Though we may well disagree on matters ‘Renaissance’…

There’s no denying the Kulturny.

Small wonder they punished you so.

Rosé. My Nemesis. Hardly in the SmokingManLeague, though… try as I might.

#141 Devore on 06.01.13 at 10:51 pm

That’s a pretty shoddy spreadsheet. Darren is lucky his better half doesn’t know any better, or at least isn’t motivated enough to rock the boat. But that’s what you get when you let amateurs loose. There are already plenty of perfectly fine buy-vs-rent calculators out there, some of them even allow for negative growth in house prices.

#142 Julia on 06.01.13 at 10:52 pm

137 James.
The condo fee is very low. Maybe it doesn’t cover much? I would offer $200k and buy

#143 Tom Vu on 06.01.13 at 11:04 pm

4…666…etc.

Not to worry..

Most people in Politics, banking , Real Estate and Toronto Sports Teams are going to Hell(Handbasket optional)

Use Ouija board , Tarot cards and Don Cherry to determine what Spread Sheet sorcery would mislead otherwise.

#144 Nemesis on 06.01.13 at 11:25 pm

@AK/#/130

It might seem counter-intuitive… But that’s not a GoodThang…

http://youtu.be/l0rS5Zusw4M

http://youtu.be/d7JNUH7P2Aw

#145 AK on 06.02.13 at 12:27 am

I hate to admit it, but I agree with him on this call and all his points within the articles.

NOURIEL ROUBINI: 6 Reasons Why Gold Will Plunge To $1,000.

Gold is Tanking

After the Gold Rush

#146 CTung on 06.02.13 at 2:02 am

Just started reading the blog….trying to understand how income tax comes into play. Consider: Young Professional couple working full time. If they choose the rent over mortgage route, their investment would be taxed year over year (in the same bracket as their income)….whereas the capital gain of the house would be exempted based on the principal residence rule. Does that mean their investment will have to do ~30% better year over year than the housing market to make up for the tax difference??

#147 AK on 06.02.13 at 7:59 am

#146 Nemesis on 06.01.13 at 11:25 pm
“It might seem counter-intuitive… But that’s not a GoodThang…”
——————————————————————–
People going on vacation, Airline load factors are increasing. Obviously, people have some disposable income. Why are these bad things?

#148 Don't Prop Up the Ponzi on 06.02.13 at 9:02 am

Hi from Melbourne, Australia. I’ve been reading this blog for a while, and Garth, you make a lot of sense. Australia is very similar to Canada in so many ways, but unfortunately our bubble isn’t bursting yet. Prices in the state of Queensland have fallen a lot, but in Melbourne, Sydney and Perth prices are still way too high compared with wages or rents. We have a government committed to maintaining the housing bubble under any and all circumstances, and are bringing in hordes of immigrants to create a constant demand. We have now virtually unrestricted foreign investment so that cashed-up foreign investors can and do outbid Australians as they snap up several properties each. And then we have something I never see talked about on this blog – negative gearing, which enables investors to claim expenses as a tax deduction on their total income, not just income from property. This has pushed up prices to the stratosphere as prices have far outstripped rental returns, and subsidised investors are able to outbid would-be home buyers every time. First time buyers have been priced out of the market, but the government doesn’t care as investors are now being encouraged to use their superannuation (retirement money) to invest in property. It seems almost impossible to imagine that prices could go any higher (Sydney prices are about 9 times average salary and Melbourne prices are about 8 times) but baby boomer parents who made a killing out of property are funding their kids or at least giving them a helping hand with their deposit. I wish we had someone like you in Australia warning the greater fools about this Ponzi scheme, because it seems that our bubble here really does defy gravity. I don’t know when it will burst, and I suspect it will eventually despite the government’s best efforts to prop it up, but I look at Canada and hope that we follow.

#149 Ralph Cramdown on 06.02.13 at 10:24 am

#148 CTung — “trying to understand how income tax comes into play. Consider: Young Professional couple working full time.”

If they’re in sharply different tax brackets, they can use a spousal RRSP as an income splitting plan. If they’re not maxing out their TFSAs, they’re fools. The wisdom of normal RRSP contributions depends on how much income they think they’ll have in retirement. Outside of those shelters, bond interest and foreign dividends are taxed at their marginal rates, realized capital gains at 1/2 that, and Canadian dividends at a lower rate depending on bracket. Attribution rules apply, so the lower earning spouse should do all the non-sheltered investing while the higher earner pays for all household expenses. If they build big enough RRSPs, they can either borrow the down payment from it(them) at 0% for ten years, or it can hold a mortgage on their property at whatever interest rate they can reasonably and justifiably charge themselves. If the higher earning spouse has a lot of cash or cash flow surplus, he can lend it to the lower earner at the prescribed spousal loan rate of 1%, making the income above that taxable in the hands of the lower earning spouse.
http://www.taxtips.ca/taxrates/on.htm

“Does that mean their investment will have to do ~30% better year over year than the housing market to make up for the tax difference??”

Keeping in mind that the house will likely be leveraged anywhere from 5:1 to 20:1? The housing market doesn’t have to do all that well, it just has to keep going up more than enough to make up for the price/rent difference.

Anyone want to put all the above in a spreadsheet? :-)

#150 Squatter on 06.02.13 at 10:47 am

#148 CTung:
the capital gain of the house would be exempted based on the principal residence rule. Does that mean their investment will have to do ~30% better year over year than the housing market to make up for the tax difference??
——————————————————–
If you want to consider taxation, buying now means you will probably have a non-deductible loss on your principal residence.
Better invest and pay the taxes on your gains than have a non-deductible loss…
Then after a few years you buy at a lower price with more money. Or buy a bigger house. Whatever.

#151 The Man From Nantucket on 06.02.13 at 11:31 am

#137 James on 06.01.13 at 9:20 pm
……….Renting still make sense in this market with those numbers?

Thought I responded yesterday, might have been buried under the ten tonnes of electrons that make up Garth’s comments inbox.

Quick and dirty – lets assume 90% mortgage @ 3% for 25 years.

Certainly rents go up, but so does mortgage interest, maintenance, and property taxes. I’ll neglect escalation.

Anyway, on today’s terms, your mortgage payment, condo fees, and property taxes are $1400, and I have not even started to add up all the other shit (closing costs, time value of $25,000 locked up in drywall, maintenance, cost to sell and, god forbid, break a mortgage mid-term if you end up needing to do that).

Bottom line, your ownership costs are a damned sight higher than $1500 a month and you need to account for this in your assessment.

Buying costs more, and it almost always does. That can scarcely be denied. The $249,000 question is this:

Is the several hundred per month premium cost worth it given that you are gradually acquiring equity in a ~$250,000 asset?

Faced with this situation, I would probably buy if I could meet Garth’s rule of 90, and rent otherwise.

#152 Dr. Hoof - Hearted on 06.02.13 at 11:31 am

E mail from someone that who received a Chinese Only RE Weekly and complained.

REPLY BELOW

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

Thank you for your comments and we will remove your address from our delivery system.

Our goal at Real Estate Weekly is to provide real estate information to all Canadians who are looking to purchase their next home. We publish 12 English editions that we distribute throughout the Lower Mainland, including a Richmond version, and we’re pleased to now be able provide a special Chinese edition that reaches out to new Chinese speaking Canadians and help them with their home purchase choices.

Your neighbourhood shows a high percentage of Chinese speaking households and was therefore selected to receive this special edition. We regret that you feel this is discriminatory against Canadians, while this publication is targeted towards Canadians who also happen to speak Chinese.

Publisher of Real Estate Weekly

#153 Ralph Cramdown on 06.02.13 at 11:35 am

#150 Don’t Prop Up the Ponzi — “And then we have something I never see talked about on this blog – negative gearing, which enables investors to claim expenses as a tax deduction on their total income, not just income from property.”

I don’t think Canada has anything similar. But it does remind me of two huge, soured deals that occurred near the peak of the US insanity. In each case, buyers bought a property portfolio that was cash flow negative from day one, financing with a loan for considerably more than the purchase price, the idea being that the excess loan would cover the cash flow deficit until rents could be raised enough to cash flow. In each case, the only security for the loan was the underlying property, so the borrowers eventually walked.

West coast style:
http://www.sfgate.com/bayarea/article/DEAL-OF-THE-WEEK-Morgan-Stanley-purchases-2598027.php
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLYZhnfoXOSk&pos=5
http://blogs.wsj.com/developments/2009/12/17/walk-away-news-morgan-stanley-gives-properties-back-to-the-lender/

East coast style:
http://www.nytimes.com/2006/10/18/nyregion/18stuyvesant.html?pagewanted=all
http://www.nytimes.com/2010/01/25/nyregion/25stuy.html?_r=0

#154 Mister Obvious on 06.02.13 at 11:44 am

#150 Don’t Prop Up the Ponzi

Thank you for your comments on the present situation in Oz. You claim Sidney and Melbourne prices are running at about 8 to 9 times the average income. Here in Vancouver we are somewhat worse than that and yet, to the man on the street, the ‘bubble’ still seems to be floating nicely.

Granted, sales have gone over a cliff but prices are not really following suit. Certainly, they are down slightly in some areas but owners are sloughing that off on the weather (or some such thing) and many are waiting it out until the market ‘improves” as it’s certain to do in short order.

So, when do we begin referring to a giant hissing gasbag as ‘a bubble’? As it is forming? When it finally blocks out the sun? Or when it collapses like sticky chewing gum on unsuspecting faces? No one seems to agree. Certainly, people who still have skin in the game don’t speak much of bubbles. That’s just asking for trouble.

Meanwhile, new construction abounds. Lately the lower floors in dozens of new developments are reserved for retail. These tend sit empty for a very long time just like the dismal concrete shoeboxes stacked above them.

For me, the explanation lies in the name of this blog and the ultra-low interest rates that just don’t seem to go away. (Even the governor of our central bank gave up on that fantasy and left town).

If one was certain interest rates would be low for the next two years and a development could be thrown up and sold into the remaining pool of Johnny-come-lately greater fools within that time, I suppose one would act on that… wouldn’t they?

#155 Piccaso on 06.02.13 at 11:57 am

#153 nothing new on 06.02.13 at 10:52 am

NOURIEL ROUBINI: 6 Reasons Why Gold Will Plunge To $1,000
…………………………………………………………………

Gold is $1,390 so it’s already half way there from it’s $1,790 high 6 months ago, so that’s not much of a plunge.

#156 Rule of 90 on 06.02.13 at 12:15 pm

Hello

To meet the rule of 90 when total liquid net worth is $170000.00 and age is 45 does that mean I should not use more than 45 % of 170000.00 for a down payment?

And of course mortgage payment is equal to rent with no other debt.

#157 lawboy on 06.02.13 at 12:23 pm

Too good not to share. Two-thirds of a million for a little dumpy place in Lesliev…err, Little India, but hey, it comes with A SHED!!! Double the 2006 sale price.

http://www.theglobeandmail.com/life/home-and-garden/real-estate/a-little-polish-helps-sell-leslieville-home/article12283481/

Why diminish yourself and your comment with an ethnic slight? — Garth

#158 debtified on 06.02.13 at 12:27 pm

#133 Rabbit One on 06.01.13 at 8:13 pm

666 Burrard Street, Van Downtown. Park Place Building.

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

I used to work in that building. Right beside it is the Christ Church Cathedral.

Happy Sunday, Garth! It’s time to thank you again.

THANK YOU!

You know, when I first started reading your blog, I was more of a pessimist than an optimist. You opened my eyes to the possibilities when they were clouded by all the doom and gloom surrounding me. Last week, I just made my first portfolio rebalancing act (since deciding to listen to you). One of my holdings was up 30% so I thought it was a good time for it to be brought back to its original weighting. A couple other holdings are up around 20% and, they too, may soon be subject to rebalancing.

Overall I am doing great. Thanks, in part, to you. With money earned, saved and invested solely after discovering your blog (I have separated in my accounting assets accumulated prior to that), I have hit multi-digit six figures in that portfolio so I think I may soon have enough to hire a professional fee-based financial advisor to manage this portion of my assets.

Keep up the great job!

#159 TurnerNation on 06.02.13 at 12:29 pm

(Worms might find this story offensive:)

Lots of chatter on here about Atheists. About anything else they’d claim it olde fairytales-crutch for the weak-poppycock.
I bet if you asked on what will happen when we’re gone they’ll say we just turn into mush – worm food – and that’s it. To them I’d ask why both then, end it now. They’d likely say For my kids man, I want them to have a good life.
Again, I’d ask why bother. When you’re both Deep-sixed and it’s finally over, what matters?

Here’s short account from a bush pilot in Canada. Flying alone, his engine quit after take off. Put er down hard into the tree line.
Rescuers discovered him still strapped into his seat, broken and bloodied.

He tells a different tale. Came to, grabbed a roll of paper towels and staggered out in spite of the injuries. Spent some time mopping up his blood. Looked back, recalled a leg hanging out of the plane – which was odd as he was alone. Came to in a hospital bed.

The ticks played by the mind eh!
Oh really. At 8:50 in the video, Government crash inspectors interviewing him made note of dozens of bloodied papertowels strewn within walking distance of the plane….

Experts told him this was due to “Bi Location”. What we don’t even know. By the way he’s seen the other side, says have no fear.

His story: http://www.youtube.com/watch?v=NSbU-CdwVEk

#160 debtified on 06.02.13 at 12:30 pm

P.S. Please don’t go back to politics again. I think you may have found the ideal venue for public service.

#161 coastal on 06.02.13 at 12:34 pm

There is no collapse coming. — Garth

There will be in Canada if gold and copper do indeed head down below previous lows. The TSX will get crushed and sentiment will spread fast. BC mines would shut down overnight and all the house pumpers out west will be left holding the bag. With prices and sales declining faster in Vancouver, you will see the delusional Victoria sellers and agents be left with broken jaws as they hit the floor.

#162 TurnerNation on 06.02.13 at 1:08 pm

#108 Old Man
This is more of a bike blog, but:

“There’s no replacement for displacement”.
Also the traction control bleeds the power off, off the line.
I know a guy with 2 BMWs – one an M3 – he had learned the trick of two buttons/settings to finally turn that stuff off.

I’d get one of these if I needed a car. Light on the computer stuff: http://www.bigcoupe.com/gallery.php
Simple enough to work on myself.

#163 Ralph Cramdown on 06.02.13 at 1:25 pm

Why diminish yourself and your comment with an ethnic slight? — Garth

Garth, the property is PLAINLY smack dab in the middle of Little India (right under the “Indian Bazaar” label on realtor.ca). Houses in Little India go for less than in Leslieville, and calling it Leslieville is realtor lying + Mop & Pail laziness.

If you want to take that as a racist comment, I think that reflects more on you than the commenter.

I said it was an ethnic slight. It is. — Garth

#164 Keith in Calgary on 06.02.13 at 1:34 pm

Garth will keep saying there will be no collapse until there is one. He’s starting to sound like a central bankster.

A correction is a given. A collapse is unlikely, given corporate profitability, US recovery and global central bank policy coordination. That’s your fear talking. — Garth

#165 Ralph Cramdown on 06.02.13 at 1:35 pm

#162 TurnerNation — “Lots of chatter on here about Atheists.”

Nope, you’re the first to mention it today. If you think the afterlife is so much better than this one, I’d encourage you to dispatch yourself with all dispatch.

#166 rayman on 06.02.13 at 1:48 pm

#50 Patiently Waiting on 05.31.13 at 10:54 pm

Here are todays stats of combined sales from the Greater Vancouver Real Estate Board & the Fraser Valley Real Estate Board for the last 30 days:

Year / Sales of Single Family Homes

2013 1138
———————————————————-
I am wondering how Patiently Waiting calculates a combined sales so low when another vancouver realtor website claims 1220 detached sales in Vancouver alone?

Who is correct?

#167 GPS on 06.02.13 at 2:21 pm

Love your blog.
This is a good spreadsheet. I love how transparent it is. They didn’t add to the total opportunity cost how much money they would have gained by investing the money long term. The rolling interests would have snowballed quickly.

The next question then Garth is WHEN is it the right time to buy? If the house only breaks even by year 10, then what would the suggestion be the right time to buy when buying makes sense? Bigger downpayment? How big of a down payment is necessary before it’s cheaper to buy?

#168 Grim Reaper/Crypt Speculator Ⓤ on 06.02.13 at 2:38 pm

#169 Ralph Cramdown on 06.02.13 at 1:35 pm

#162 TurnerNation — “Lots of chatter on here about Atheists.”

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

Buy me a beer and I will tell you the truth.

#169 Old Man on 06.02.13 at 2:57 pm

#171 GPS – you are looking at a 5 year meltdown, but the condos and townhouses will have a greater velocity of capital depreciation or an adjustment if you will. Not all areas will be the same, as housing type, and location matters for all of Canada, so sit back and watch the show. It will be like playing a piano in concert with different songs; the bottom line is buy nothing now, and sit out the storm.

Now take any city such as Toronto, as the GTA area will collapse first, and within Toronto are districts and some will do better than others; the Real Estate game is buying in support areas that involves many critical variables, so what are they? This takes common sense to rationize what is important; what factors support value for a buyer in the future? This is where one needs to buy for a big discount when the time is right.

#170 daystar on 06.02.13 at 3:11 pm

#153 nothing new on 06.02.13 at 10:52 am
#147 AK on 06.02.13 at 12:27 am

http://www.project-syndicate.org/commentary/the-end-of-the-gold-bubble-by-nouriel-roubini

I have no problems with his take on gold myself. I would add to his list a noticeably rebounding U.S. economy offsetting problems elsewhere, shrinking U.S. trade deficits and a stronger dollar or at the very least, a U.S. dollar holding its own while most other western currencies devalue and when one puts it all together it spells trouble for gold. My own take mirrors Rubini’s, being that gold will trade routinely below $1,000 within 2 years.

If we are right (we aren’t always obviously), that spells big trouble for Canadian miners. Canadian miners abroad have had a Conservative government weaken the environmental reputation of international miners through dramatically weaker environmental standards here at home and trying to positively PR spin it abroad which is doing much more harm than good with noticeable consequences so its tougher for miners to do business abroad in an environmental context. Couple this with weaker prices in base and precious metals and we have what could be a lengthy slump in the mining sector and this is nothing new to investors and the markets have reflected this with shrinking market caps and index’s with PM’s in the most trouble.

Ventures & the TSX have 1663 listed stocks in the mining sector as listed on their website. There is roughly the same number of listed stocks in the mining sector alone as there is the rest of TSX/Venture sectors combined. The vast majority of miners in the TSX are into gold. Market cap comparisons are another story but still, the point I’m making here is that should gold drop to below $1,000, it will have a serious negative impact on the markets and in ways, because its much easier to see gold below $1,000 than before and its recent drop in values, the negative impact is already here and one can see it specifically with juniors. Speculators have been hurt and will continue to be hurt by this sector and this will definitely have a serious overall drag on Canadian markets going forward as PM values spiral.

Real estate is a dog with fleas. Canadian consumer debt is at what… 165% and climbing, ultra high and its close to 70% of our economy, 1.4 million jobs are related to RE so we have unemployment vulnerability in this sector in a big way. Canada has been running trade deficits for a while now and commodities won’t be saving us like before but rather, working against us not just with metals that make up 11% of exports but energy that makes up close to 25% with continued falling prices for Western Canadian select as the U.S. continues to produce more of its own energy through fracking and horizontal drilling of older verticals.

I see a falling loonie as exports slide, higher inflation, higher interest rates as a consequence starting modestly before 2015 and with all that debt out there concentrated on the middle class, I’m worried about this nation’s future. We’ve had lobbyists running governments, leadership acting in their own naked self interests with our largest lenders crack coking levels of debt to where I believe 1 in 10 Canadians may not be able to make payments in a high interest rate (8% at banks) scenario, we’ve had piss poor leaders and they’ve blended in with the rest of the pack during the GFC but the world is recovering and deleveraging while Canadians are becoming more and more record indebted and its not hard to see how this slow moving train wreck will end. As an investor, where does one put his/her money? The U.S.? Buy America sell Canada has been the smart play for 2 years or more now but its not so profitable today and yet, there is far more risk domestically than ever before in keeping money at home.

If I had serious weight to move in markets, South America still looks best to me. Barring 2.7 km asteroids with their own moons colliding earth, nasty Spanish flu pandemic versions, resource wars, nutter nuke nations, currency collapses from the top 5 and all out environmental degradation throwing mud in our faces, life will go on for most and in that context I like south America’s chances more than any other continent right now but that’s just me. My thoughts anyhow.

#171 Tom Vu on 06.02.13 at 3:16 pm

#164 coastal on 06.02.13 at 12:34 pm

There is no collapse coming. — Garth

There will be in Canada if gold and copper do indeed head down below previous lows. The TSX will get crushed and sentiment will spread fast. BC mines would shut down overnight and all the house pumpers out west will be left holding the bag. With prices and sales declining faster in Vancouver, you will see the delusional Victoria sellers and agents be left with broken jaws as they hit the floor.

===================================
This is why should only buy ground floor condos.

If want to jump over railing…worst can happen is spilled drink

#172 Julie on 06.02.13 at 3:17 pm

We are leaving on a family (ten of us) trip to Mexico next weekend……one of our cousins cannot go because she is house poor. $2100 tax bill for a 1300 sq ft cornflakes box in Garrison Crossing Chilliwack, BC.

I get hungry whenever I drive buy it….then I remember that GMO corn flakes are killing everything and hunger goes away. On that note……interesting (NOT) how the main slime media did not cover the Monsanto marches all over the world. But the media is NOT controlled right? (barf) Enjoy the sun for the two days its here in raincouver !!

#173 Shawn on 06.02.13 at 3:36 pm

we ARE Amused…

It is amusing how many people on this blog get down right angry that others disagree with them.

I mean some people think it is best to buy a house others say its best to rent. To each his or her own. There is no cause for anger.

In fact, in terms of markets, in order for you to win by being right you NEED others to be wrong.

It is amusing (and also disturbing) to see the many radical, defeatist, and blamest views on this site.

To each his or her own, but thanks for the laughs and thanks to those who take the other side of my trades.

#174 Old Man on 06.02.13 at 3:57 pm

#176 Julie – Cabo? I say a big maybe :).

#175 lawyboy on 06.02.13 at 4:13 pm

It isn’t an”ethnic slight” (whatever that means), nor racial in any way, and if you chose to take it as such, that’s your problem, not mine.

#176 Devore on 06.02.13 at 4:46 pm

#162 TurnerNation

Pilots training in centrifuges regularly report NDEs. You’d think the “other side” would be a little smarter than to be tricked by such tomfoolery.

If you need belief in the supernatural to get out of bed in the morning, maybe you’re best off taking your advice.

#177 Patiently Waiting on 06.02.13 at 5:49 pm

#170 Rayman

My stats come directly from the real estate boards computer …

pw

#178 Keith in Calgary on 06.02.13 at 5:53 pm

A correction is a given. A collapse is unlikely, given corporate profitability, US recovery and global central bank policy coordination. That’s your fear talking. — Garth

So we agree…….definitions “and” printing presses being set aside.

#179 Mike on 06.02.13 at 6:38 pm

#79 Darren on 06.01.13 at 9:14 am

#75 Mike,

Thanks for taking a look at the spreadsheet. If you look at row 27 “interest paid” that is the cumulative interest over each year (from row 18 “interest paid”).
——————————————————
you probably wont see this, but what I meant about interest being cumulative, I was referring to line 30, which shows the opportunity cost of money for each year, however, it does not accumulate from year to year, understating the opportunity cost by year 10.

#180 TurnerNation on 06.02.13 at 8:48 pm

Cramdown…is that you? Your truer colours emerging.
I was created, and will create until my final breath.
If you were destroyed at some point, try to get over it.

#181 TurnerNation on 06.02.13 at 8:52 pm

#179 Devore – so your suggesting there’s only two choices: self dispatch or belief?
What about wonderment, amazement, creation? What you’re on I will stay far away.

#182 Justin on 06.03.13 at 7:23 pm

I have gone through the spreadsheet in detail and made some adjustments which I believe correct some of the errors. First of all, if sunk costs are growing in a cumulative way, then so too should the opportunity costs. I have also made adjustments to the way interest/principal is calculated, and updated for true commission fees and property transfer tax rates.

But the biggest adjustment is that, to truly determine the “break even cost” you need to deduct from your total the cost of renting! I don’t think that was properly done in the first sheet.

Let’s say you have a house that costs $800,000, and you’re putting 20% down. In year 1, the sunk costs (excluding realtor fees, which are only incurred at time of sale) are $44,000, and the opportunity cost is about $13,000. If you wanted to sell after year 1, add in a commission of $26,000. Total of sunk + opportunity + commission = $127,000. BUT….what is the sunk cost of putting a roof over your head? Let’s say the equivalent condo to what you’re getting for $800k is renting for $2800/month. So in year 1, the cost of rent would be $33,600.

If you take the sunk+opportunity+commission and then deduct the amount you’d need to spend to rent, the property would “only” have to appreciate by 3% for you to ‘break even’.

This certainly is not an argument for purchasing property. I live in Vancouver, I have done the math, and I rent a 2 bedroom for $22,000 a year in a neighbourhood where a 2-bedroom condo would cost me over $750,000. The annual interest + strata fees and property taxes would put me at about $39,000 a year, plus the opportunity cost of not investing about $170,000 at 7% (i.e about $12,000). So….that’s $51,000 vs. $22,000. But the point is that the true break even in this case would necessitate the condo to appreciate 4.4% after one year. If I didn’t take into account the rent, then the math would show a need for 7.5% appreciation.

Just something to consider.

If anyone finds flaws with the math above, please let me know.