Go long

long

A month ago I mused about ten-year mortgages. At the time , a tener could be had for 3.69%, which was less than half a point more than a five-year loan. You should get one, I said. A number like this shall not this way pass again.

Today five-year closed mortgages cost 5.4% (the posted rate), but are actually available for 3.69% (the real rate). Ten-year money has migrated higher to 4.29% at most of the major banks, but has shot up to 6.75% of CIBC and National Bank, where they obviously don’t want your business.

As you know, moaning, gnashing and drooling in the bond market in the past few weeks resulted in four rounds of mortgage rate increases, because that’s where fixed-rate mortgage are funded. This all started when the US Fed hinted it may end its bond-buying orgy in a few months, causing investors to pile out of fixed income, where prices had been fat and yields thin. The sell-off and the rate-pop were so dramatic that Fed boss Ben Bernanke subsequently soothed investors by saying he’s not finished stimulating yet.

But all that will change with a few more months’ worth of positive numbers out of the States. There is absolutely no doubt that stimulus spending will stop, and interest rates around the world will rise as every month takes us further away from 2008. The trip back to normalcy is as necessary as it is inevitable. People everywhere have turned into debt pigs.

There’s a direct inverse correlation between house prices and the cost of money. Real estate has risen to nosebleed levels not because people make more income (they don’t – wage gains are less than inflation), but because they qualify for more debt since rates tanked. And when interest levels stay low for long enough (this is the fourth year of ‘emergency’ rates), people start to think real estate values have hit a new, permanent plateau.

They haven’t, of course. And the next two years will shock a lot of folks who paid, say, $1.5 million for a faux baronial, stucco-and-face-stone McMansion on a 30-foot pizza slice in North Toronto. Not that they’ll face renewal in a few years and be unable to pay the going 6% rate. Instead, it’s equity the loss that’ll bite.

According to a research report from Will Dunning Inc., if mortgage rates rise just one-half point more than current levels over the next two years (an absolute slam dunk) then house sales in Toronto will decline 15% and prices will retreat 6%. Hmmm. Six per cent of $1.5 million is $90,000. Meanwhile, look at what last summer’s drop in maximum mortgage lengths, from 30 years to twenty-five, did to high-rise sales. That was the equivalent of a 0.9% rate hike, and new condo transactions have plunged by half, with construction down more than 40%.

This is more proof of what the Ottawa poohbahs have been blathering on about for the last two years – debt sits at such an astonishing level that society has virtually no capacity to absorb any rate increases. Which is too bad. Because they’re coming.

By 2015 you should budget for five-year closed mortgages to be in the 6% range, which will still be 2% below the long-term historic average. Beyond that, rates will normalize as economic growth and inflation rekindle. Sadly, the US will rebound more quickly than Canada, which means households here will get caught in the vise of slagging incomes and higher debt payments. But in a country where three-quarters of urbanites decided to become homeowners, and the average down payment is just 7%, there’s nobody fancy to blame.

Which brings me back to those ten-year loans. In a couple of years, how will a locked-in, decade-long mortgage at 4.29% look? That’s right. Like a night in Bangkok. Besides, remember that because of the Canada Interest Act, all mortgages become open after five years – which means you can keep the loan and the rate if you want, or bail out with a minimal break fee (three months) if I turn out to be a moron and rates decline.

But I doubt it. Those who argue rates will be low forever are making it up. Yes, the trip higher will be slow, but it will be relentless. The greatest threat to the economy is a credit bubble, not a real estate pop. And there’s only one certified way to stop people borrowing.

If I had a mother of a mortgage, I’d be doing two things – going long, and converting to weekly payments. But, of course, I now rent.

121 comments ↓

#1 Mike on 07.14.13 at 5:36 pm

Rent and make sure you have enough DP when the time comes not to have to borrow a lot, hopefully not at all :)
Cash will be king!

#2 Mike on 07.14.13 at 5:39 pm

If you rent in Vancouver or are a member of a Co-op like I am and save all the money that you’d be paying monthly as an owner … the DP money is piling up quickly :)

#3 east van on 07.14.13 at 5:39 pm

I beg, plead, cajole, implore all to read this very important report:

http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

#4 Big Sexy on 07.14.13 at 5:43 pm

And for those without mortgages, take out the popcorn ’cause this is gonna be fun to watch!

#5 bill on 07.14.13 at 5:44 pm

Hi Garth
out on the bike eh? Pleasant ride I trust?
we are glad we rent too…

#6 Ralph Cramdown on 07.14.13 at 5:45 pm

The speccers are still putting on face stone in North Toronto? Around here, they’re down to just stucco.

I think citing 8% as the average of mortgage rates over the long term is just as mistaken as assuming that they’re going to stay sub-4% for years. Both were the result of a one time anomaly unlikely to be repeated. Central bankers do learn from their mistakes, and are unlikely to allow inflation to hit 10% before raising rates ever again.

#7 bill on 07.14.13 at 5:53 pm

that picture reminds me of taking my mothers toy poodle for a burn on the old ‘LC’…
nose stuck straight into the wind,ears flapping.like most dogs they love to go fast. must be some kind of ”nose rush’ or something…
[I stuck her inside of my jean jacket with her head protruding from between the fasteners]
anybody remember ‘kookie the desert racing dog’?
stood on the gas tank.

#8 Mister Edmonton on 07.14.13 at 5:59 pm

As someone who is just learning, I appreciate the advice you give. We decided to follow some of the suggestions posted here and reduced our real estate exposure. We just liquidated an Edmonton rental property, (CAP rate of 5.5%), and now have an extra 300K after capital gains. We’re already diversified in Bond ETFs (5 year laddered CBO), some (PFF:US) preferred ETFs, some utilities (ZUT), some emerging market ETFs(ZEF), some CDZ, some monthly income (XTR), and some Canadian preferred ETFs (ZPR). I know you advise against it, but we also have 10% in metals (split evenly between GLD:US, SLV:US and MNT). With interest rates about to pop, would it be better to stay in cash and build more bond ladders, or would you estimate less risk in equity ETFs? We try and always buy below the 200 day moving average, but there sure is a lot of volatility lately. We dislike individual stocks, and like the cashflow and low MERs of ETFs. Thanks Garth.

#9 KommyKim on 07.14.13 at 6:02 pm

RE: If I had a mother of a mortgage, I’d be doing two things – going long, and converting to weekly payments. But, of course, I now rent.

You have zero real estate now? Nada? Zip?

#10 Marc in Montréal on 07.14.13 at 6:03 pm

According to the Fédération des chambres immobilières du Québec (FCIQ), Q2 2013 vs. Q2 2012:

-Sales are down 7% (Mtl -9%).
-Median price for a detached (or semi) grew by just $1000 to reach $230 000.
-Similar stats for condos : not released… how convenient.
-Properties stay on the market 10 more days (90)… pretty sure that stats doesn’t take into account houses that couldn’t sell in the 1st place and were relisted.

Alain Baribeau, realtor in the Laurentians (Quebec’s most popular vacation getaway) : Most young buyers don’t have the resources to buy a chalet, expects prices to continue to fall.

http://argent.canoe.ca/vos-finances/immobilier/les-ventes-residentielles-baissent-les-prix-se-maintiennent-12072013
http://argent.canoe.ca/nouvelles/canada/le-temps-dacheter-une-maison-dans-les-laurentides-12072013

#11 Calgary Boomer on 07.14.13 at 6:07 pm

I admire your stamina in cranking these out Garth. Keep it going…my daily muse!

#12 Michael on 07.14.13 at 6:09 pm

Sold 2 years ago, renting in Anmore BC. House next door has been on the market for 8 months first listing at 2.8 mil now down to 2,025,000, ouch!

#13 Donald Trump on 07.14.13 at 6:10 pm

Numero uno is redundant

#14 mortgagebrokeron on 07.14.13 at 6:12 pm

just to let you know, national bank offers 4.29% on a 10 yr thru your friendly mortgage broker channel

#15 andrew van poor on 07.14.13 at 6:14 pm

Rates to rise
Will van, ever be affordable though. I would move if I could, but stuck a renter for the rest of my life. The new norm…

#16 Donald Trump on 07.14.13 at 6:38 pm

Poor dog was actually on all fours carrying that UNhousebroken a$$hole strapped to his back.

#17 not 1st on 07.14.13 at 6:47 pm

Variable rates unchanged…winning

And lumber exports to U.S. are flatlined or declining, which is evidence that there is no housing building return, just old properties changing hands which has no economic benefit whatsoever. Garth’s got his hands on a rubber cat.

#18 Adam on 07.14.13 at 6:49 pm

I can’t find it right now (not easy to search your blog) but admit it, Garth, the very first post you did on 10-year 3.69% mortgage rates, you were comparing them to 5 year rates and saying that it doesn’t make sense to go 10 years.

Just several days later you changed your tune completely (long before rates made any actual move up) and were talking about what an amazing deal they were – and you never again brought up that blog post where you said the extra money you’d pay versus a 5 year wasn’t worth the security.

It just makes me angry that you’re pretending that you always thought 10 year rates were a good idea when you said they weren’t.

For the record, I was floored the first time I saw the 10 year rate at 3.69% and rushed out to get a 120-day pre-approval right away (I think it was April). Something tells me that if I went back to the bank now they probably lost the paperwork on that one…

When 10-year rates dropped to within a half point of fives, I suggested the were worth grabbing. Prior to that, they were too dear. I regret your memory loss. — Garth

#19 Yitzhak Rabin on 07.14.13 at 6:51 pm

Buy a cash house in 2017. Provincial debt will also return as an issue very soon. Rates on provincial bonds tanked since 2010 while they also ran up their spending. A lot of revenue came from the housing sector.

Places like Manitoba and Quebec which rely on transfer payments to over-pay public servants and call that an economy will be severely hit.

#20 craig on 07.14.13 at 6:51 pm

” house sales in Toronto will decline 15% and prices will retreat 6%”

I’d be happier than a pig in chit if it only drops 6%

The meltdown that all the renters were predicting is now gone? Is that what I’m reading.

So if I sell my house without an agent, there’s 5% saved so prices basically will not move for many years.

COOL

#21 Old Man on 07.14.13 at 7:13 pm

Now see this pick as a few days ago the alarms went off for a fire at 11:30 PM. I hit my TV screen with a special channel, as can see all down stairs, and the firemen by the dozens were walking wearing huge tanks dressed in space suits coming into my modest apartment building.

I am freaking out, as live high up, so watched, as was a false alarm, and at lease 100 people left on the lower floors, and what did I see? I saw people who split with dogs, and women coming back with children in their arms coming back, and made me smile. Now, was on a high alert myself to get the hell out with wisdom, as smoke will kill you in 90 seconds.

Now for those that live in a condo or apartment that is highrise will share with you the best investment that you can ever buy, and it is a gas mask at a military surplus store, and mine comes from Israel, as if I need to slip it on looking like an alien, but can walk through smoke to save my life.

#22 Brian Ripley on 07.14.13 at 7:51 pm

It strikes me that the Bank of Canada can keep the bank rate low for any length of time (the U.S. Fed as well can do the same as Japan has done for decades)… but further out on the curve is where the problems seem to be which is why this month I started tracking the “real” 10 year BoC bond yield:

http://www.chpc.biz/real_10yr_chart.html

The 10 year yield is a good proxy for mortgage rates, I think, and the real rate looks like it bottomed in 3Q 2011 and has been advancing since on a steady staircase up with a big hesitation in 1Q 2013 when the TSX Real Estate Index took a hit.

As of the June data the real rate is testing the nearby high and the TSX RE Index so far in July looks like it may be boxed in a trading range:

http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=TTRE-I

There does not seem to be any correlation between the real 10 year rate and the RE index over the last 10+ years on my chart unless you want to argue that the real rate is a leading indicator and thus is currently signalling another price rise in the RE index.

That’s what a realtor pitched me today at an open house (older remodelled poorly designed 1300sf townhouse for $900k) … that in Vancouver the inflationists are going win because of endless offshore money, it’s a safe place to park money, and there is little land left for development; so prices will rise with rising rates.

I understand the argument but I don’t understand why offshore money would continue to chase prices upward in Vancouver when the rental yield is negative and in terms of comparison, $900k can buy much more real estate in other areas of the developed world.

In Spain, for a $200k euro dollar real estate investment, you can get a permanent residency permit.

If the real rate continues to rise as it appears to be doing, I think investors will realize that a 10 year Canadian Bond is more secure and risk free than 10 years of holding a townhouse with negative yield in a city where builders have a bad track record of dealing with the rain.

#23 craig on 07.14.13 at 8:14 pm

So it’s safe to say the housing crash that was a FACT, according to many here, is now a fantasy as I said all along.

So what will the renters chant now – renting a car is better than buying one?

#24 TurnerNation on 07.14.13 at 8:17 pm

A realtor’s value:

Saw an overpriced Toronto row house. As per Guava.ca it was listed at $759,000 first last month. This month’s price is $748,000.

A whole 1.1% lower! Brilliant strategic pricing move from the realtor. I’m sure at least one couple toured the house and exclaimed: Oh honey I know this one could be perfect for us but it’s 1% over our budget. If only the nice man would budge we’d have a deal.

A mis-priced house, listed and bleeding, will attract sharks. The word is out.

#25 Mister Obvious on 07.14.13 at 8:26 pm

This link was posted on the VCI site but I though it bears repeating here. Its an article from the ‘Squamish Reporter’ showing how tradespeople and contractors have been hosed in the court ordered sale of two bankrupt developments. Some things I never knew. Rather sad, actually.

http://tinyurl.com/p6n7v3h

#26 Barry Lainof on 07.14.13 at 8:31 pm

One caveat, just make sure you don’t have to payout that mortgage prior to the five years of a ten year term.

You know, something like a divorce, an unplanned move across country for a job or maybe your significant other wants a bigger, better home because prices for those bigger, better homes went down 10-15 percent.

I couldn’t imagine what your lender would ask for the break fee, on that ten year mortgage.

#27 Donald Trump on 07.14.13 at 8:36 pm

#21 Old Man on 07.14.13 at 7:13 pm

We are all very concerned(?!?) for your well being(?!?).

IMHO, if you hear an alarm..any alarm..jump out the window….practice makes perfect ….you never know.

#28 Bottoms_Up on 07.14.13 at 8:48 pm

Garth you allude to a return to historic rates of 8%. However, don’t you think historic economic and wage growth would be needed to support those historic rates? If economic and wage growth are subpar, relative to the historic environment, then it goes without saying that rates will be below historic levels. I’m not an agent, yes I have a large mortgage, but like any sane peron on this board I’m trying to have an objective outlook on what the future holds. 6% rates might be the ‘high’ rate over the decade or so. 4% might be closer to average. That is my guess.

You guess wrong. — Garth

#29 Devore on 07.14.13 at 8:52 pm

#23 craig

So what will the renters chant now – renting a car is better than buying one?

No, renting ANYTHING, besides a house, is always more expensive than owning, unless very short term.

You should put your massive brain power towards something more useful than anonymous taunting and trolling on an internet blog.

#30 Bottoms_Up on 07.14.13 at 8:56 pm

#24 TurnerNation on 07.14.13 at 8:17 pm
——————————————
One Ottawa burb house I was following was listed 450k last year and is now 400k, so it was 12.5% overpriced (and counting)….(or the market dynamics changed and it lost 12%)

#31 takla on 07.14.13 at 8:56 pm

yup,the renters are the new “cool”,homeownership is for the G-fools.Ive even got you beat Garth,im working,liquid and employer pays total living out=zero cost of living for my next yr…YES,now if those AU prices will just stay low for more accumulation…

#32 Van on 07.14.13 at 9:01 pm

Love your new “header”, are those pics of your bloggers? The middle guy is the best…perhaps better than his head in the sand…

#33 Old Man on 07.14.13 at 9:10 pm

#27 Donald Trump -worry not as all is well, but you I worry about, as women with smarts want nothing to do with you, unless they see some big green for a date, and what that makes you in the end? I can get more than you for a date at Tims for just a donut and a cup of coffee, so buzz off.

#34 Mark on 07.14.13 at 9:12 pm

HELP….. I have a 10 year mortgage on hold for 90 days. It expired the end of Sept, do you have any ideas on how to keep this rate if house price don’t start to decline by then = )

#35 CondoCrash on 07.14.13 at 9:13 pm

Had a client say to me how he couldn’t believe a 350k condo in North York takes almost half his after tax income to afford. Think about that, $90k salary buyer complaining a $350k condo is almost unbearable in total payments for mortgage, condo fees, prop taxes, cable, etc.

That’s when you know the crash is coming. When 90k salary can barely afford a lousy condo….

Whats the average salary anyways? Lol…..

#36 chirag on 07.14.13 at 9:18 pm

#28 – I agree with poster if he is talking about short rates (variable rate). Unlikely to see short end go north of 6% without significant inflation concerns.

#37 David W on 07.14.13 at 9:32 pm

Great post but using a $1.5M house is a bad example. The avg family can’t afford that. $400k is too much even. Back in 2010 the avg home was only $175k, now that’s affordable!

#38 David W on 07.14.13 at 9:33 pm

Correction, back in 2000 it was $175k.

#39 TheCatFoodLady on 07.14.13 at 9:42 pm

Hang on – why turn this into a rent versus buy contest? For SOME people under SOME circumstances it makes more sense to rent while for others, it makes more sense to own. Everybody has to examine their own finances & circumstances, their risk tolerance & all that other good stuff we file under prudence & make the decision that best suits their own situation while trying their best ahead to think long term to the most likely future outcomes.

Once the rent/buy basic decision is made, then people have to exercise due diligence – price range, neighbourhood, if renting or owning – what sort of monthly cost increase can they absorb over time keeping in mind the rest of personal finances; loads of different things, again depending on personal/financial circumstances.

I wince when I see people ‘hoping’ the market crashes hard. In the long run, that scenario hurts us all as it hits the general economy. I don’t like seeing owners sneer at ‘stupid’ renters or renters pointing fingers at owners ‘losing money’. Do any of us need to diss others to feel better about our own choices?

Discussion – great. Learning from others – both their good moves & admitted mistakes, better. Disrespect – not helpful.

#40 *NAKED APE* on 07.14.13 at 9:49 pm

@ #4

I wouldn’t want to wish this SH*T storm on anyone! Been there, done that with the mortgages in the early nineties @ 11% which damn near killed me. Took me a long time to figure out – open and weekly payments + a wee booster above and beyond of $25/week – and when I did finally figure that out, the mortgage was done…..

#41 Smoking Man on 07.14.13 at 9:51 pm

Poloz could surprise with first policy decision by pushing back rate rise Globe and Mail – 2 hours ago Canada’s central bank could surprise financial markets this week and signal a longer period of ultra-low interest rates, as exports languish and executives display little enthusiasm for spending their excess profits.

Nobody is expect a central bank increase now until later in 2014. — Garth

#42 Donald Trump on 07.14.13 at 9:53 pm

#33 Old Man on 07.14.13 at 9:10 pm

#27 Donald Trump -worry not as all is well, but you I worry about, as women with smarts want nothing to do with you, unless they see some big green for a date, and what that makes you in the end? I can get more than you for a date at Tims for just a donut and a cup of coffee, so buzz off.

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

Not quite sure why you have this fetish for women, donuts and Tim’s…so this means UR a cop or Rob Fjord.

May suggest like the blog photos clev-err hint..that when the alarm sounds….your evil twin(?!?) Smoking Man is tied to your back (aka part above yer a$$)when ewe jump.

All that hot air (in proportions that exceed the weight factor of B.S. to at least 3 orders of magnitude) from Stogie Man tied to yer back should defy enough terminal velocity that you land with yer vitals intact, assuming you leap head first.

#43 Bill Gable on 07.14.13 at 9:53 pm

Nice to see the pictures of the new Harper Cabinet, on your Masthead.
I think two are Frat Bothers.
Yikes!

#44 Nemesis on 07.14.13 at 9:56 pm

“Like a night in Bangkok.” – HonGT

Thank you for that, AuldPol…

I do believe it’s going to be an interesting Autumn, though. Accordingly – I, for one, will be paying far more attention to NavalDeployments than YieldCurves…

Just a hunch.

PS – @OldMan#21… That won’t actually do you much good. You’d be much better off with some carabiners and climbing rope for a a QuickDescent. Wear sturdy gloves and you might also want to practice your knots, too.

#45 Devore on 07.14.13 at 10:13 pm

Bear cam

Look how patient they are!

#46 father on 07.14.13 at 10:17 pm

maybe the feds are trying to prolong this housing mess that they started until election time.

#47 Smoking Man on 07.14.13 at 10:35 pm

It was disturbing, reading some Facebook posts with my own family from the land of the free.

The joy of the acquittal, n word all over the place…. F-en stupid..

I hate people, especially ones deep in the matrix, the ones that can’t think… The ones that follow.

You could be blue, purple, black, green. I don’t care, you could be baptized, Christian, Jew, Muslim, but if you know it’s all B’s, you can be my friend.

I like smart people, hate idiots…

That’s where my racism line is…

Mind you the idiots make great customers…..

#48 takla on 07.14.13 at 10:43 pm

quote Devour post 45,bear cam”look how patient they are”.this paints a picture for me,the bears are US misguided renters waiting patiently{accumulateing cash} for the homeowners{salmond}to spawn-out and die{sell out into a devalueing market}….sorry…you know what they say about idle minds

#49 Peter on 07.14.13 at 11:20 pm

Hi Garth ,

Always interesting reading , I own more than one property and I think I fall into the category of having too much personal worth in one asset and I agree with alot of your analysis on the subject of real estate . Pretty sure you know way more than me.

While reading your articles though I have become LESS worried about real estate than before. The possible increases in mortgage rates which may not occur until late 2014, locking in for 10yr is a great idea, but having a varable option at prime or less is not a bad fall back position or even 2x5yr terms will not be even close to an average interest that will be problamatic.

On a previous article about debt loads, your chart showed 13% of Canadians had a household debt around 170% of annual gross income , which according to the government website includes mortgages. (you replied to comments saying that total did not include mortgage debt, my apologies if I am wrong about that).

I respect Will Dunning analysis also , and if what he says about how a half point increase in rates causing a 15% decrease in sales , and a 6% drop in price over 2 years , then I think this is a very healthy market.

You have also stated that forclosures will not be much above historical norms in Canada (which I agree) and that the other 87% of Canadians from your chart will be able to absorb higher rates

With blogs like these and the fed warnings and new stricter lending rules already in place for a year, and mabye more to come. Spending on borrowed money from equity (heloc ATM) have already slowed.

I agree with you Garth about this not a great time to buy using too much credit , but if you already owned for long enough there is no real reason to sell. Homes will be equally unaffordable to people waiting on the sidelines, and rents will increase faster than prices will melt. A 6% adjustment down is not alot to me , but I am sure it is substantial for anyone who just bought , or borrowed against their home. ($90, 000 on the example home is alot of money and I do not think that those types of houses have large loan to value mortgages , but I don’t know if they do)

Lastly , from previous articles , I believe current estmates of immigration to Canada from Chine, India, and the Phillipines alone will number 200, 000 per year coming to our wonderful country (not perfect). Baby boomer children (ECHO) . Very limited purpose rental buildings being built. None of these things will support large increases in house PRICES but they will need places to live, putting pressure on rents if they cannot purchase. The ones who do buy. can purchase without mortgages or much greater down payments. My parents shared space with relatives as a temporary measure to save and share expenses when interest was higher than they could afford.

Thank you for all the insight and I am trying to invest outside real estate using your advice and by reading comments from bloggers and learning alot (including tax tips).

Thank you

#50 Heather Nova on 07.14.13 at 11:35 pm

Craig #23
The vitriolic denial from Devore #29 confirms my belief that you are correct. Most people live in a fantasy of their own making and with this blog as evidence, it’s never been more apparent.

#51 espressobob on 07.14.13 at 11:37 pm

#8 Mister Edmonton

Sorry I’m not Garth. But you really should consider a fee based advisor! Why not? Wrapping your head around this topic can make you crazy! Just read some of the comments. Good luck!

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#53 Mister Obvious on 07.15.13 at 12:05 am

#39 TheCatFoodLady

Thank you for bringing of breath sanity to the usual “rent versus buy” discussions we generally suffer on this blog.

Another heated discussion often revolves around the “sell now and crystallize your tax-free profit” versus “stay put as your equity grows (or diminishes)” debate, specifically as it applies to older people who are sitting on large equities thanks to the rampant residential housing speculation of the last two decades.

If you are in an envious position that allows you to keep the “rule of 90” in effect, chances are good the imminent real estate correction will have little impact on your personal financial health.

If you are about 60 years old with 500K equity in a home and another $1M in carefully invested assets you are literally “home free” to coin a phrase. No debate is necessary.

But, as has been stated here a thousand times, if you are approaching retirement and the equity in your home is the one and only plank in your financial plan you are at very serious risk.

Can the message be made any simpler?

#54 3 yrs Free on 07.15.13 at 12:12 am

3 year update from the trench in Vancouver, after owning for 20 yrs, i sold spring 2010 here in Vancouver and became someone i had never been… a Renter! Happy to report had i sold today VS 3 yrs ago my home would be about 10% less, as for the tax free gains i pocketed, i am up about 12% on investments.

Rents are cheap here in Vancouver, most landlords lose $$ here!

Thanks Garth,

Happy Summer

#55 NoOneOfConsequence on 07.15.13 at 12:29 am

I know there are a lot of doubters on here…but Garth has got it nailed.
If you are actually on the ground, trying to sell some real estate in smaller markets in BC, it’s getting scary.
I have the mom-in-law with health and debt issues…been trying to sell her house now for 2 years. The spec homes built down the way from her are brand new, twice as nice, and as of this weekend, over $40,000 cheaper. Developer is in a little trouble and needs to move them.
Until those 10 units go, we won’t get a sniff.
Only 2 homes sold this spring…ridiculous! Where are all the Oil Sands Rich Labourers to come buy up Shuswap real estate?
I see no option than to take $50,000 off her price to get ahead of the market. She is not healthy enough to stay put. Bah…racing to the bottom.

Let me just say that years of heloc are starting to look like a Bad Idea right about now…

#56 Freedom First on 07.15.13 at 12:29 am

Nice post Garth. Canadian Governments and Canadians, debt, debt, and more debt. It is mind boggling to see the MSM reporting that the rate of the growth of debt Canadians are taking on is slowing. That is like an obese person saying that their rate of weight gain has slowed. The outcomes of both do not look good. I wish no one any bad outcomes, but I do work at keeping myself financially and physically fit. Both are very important to me. I know that it is easiest to maintain fitness, than to try to get fit when one has become unfit. Garth is trying on his free blog to either stop you from becoming unfit, or to help you recover from being unfit. Balance, re-balance, diversify, and be liquid. It works, for sure……IF you can get rid of the: but, but, but, but, but, but. I don’t know how Garth keeps answering the insane so politely. Mind you, Garth has had a lot of practice, I mean, look who his peers used to be. They couldn’t deal with his sanity either.

#57 Tipler on 07.15.13 at 12:51 am

Hi Garth,

Do you think that as USA is starting to recover and they are our major trading partner that this will not translate into better economic outlook on our side? If it does and our CEO’s start to reinvest the money that is sitting on sidelines that will translate into optimism and great stimulus for us. We could potentially avoid housing correction again.

#58 Frank on 07.15.13 at 12:57 am

No crash in site. Patiently waiting for 5 years and all that has happened is that house prices have gone up so much that even if someone bought 5 years ago and a crash or correction happens those people would still be much more ahead that those that decided to rent hoping for a very cheap house. Just the facts.

A generalized and meaningless statement. It depends on the market, the housing type and the financing. There are lots of 2007-8 buyers who, after commission and occupancy costs, would never get their initial investments returned to them. Real estate corrections are inevitable, natural and required. Deal with it. — Garth

#59 NoBSHere on 07.15.13 at 1:32 am

>>the US will rebound more quickly than Canada

Dream on. Perhaps you mean that it will collapse more slowly.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/07/20130712_seriously.jpg

#60 Buy? Curious? on 07.15.13 at 3:11 am

Harper is shuffling the deck. Justin Trudeau, the Prince of William of Canada, is scaring conservatives.

http://www.youtube.com/watch?v=5WxPyUzWSPA

#61 joe on 07.15.13 at 3:32 am

Interest rates go down housing prices go up.
Interest rates go up housing prices go down.
Vegas gives better odds, get off the hamster wheel
people.

#62 James M on 07.15.13 at 6:30 am

Moving in to my rental today. Brand new single family home in the suburbs of the nations capital. 3 bdrms, double garage. $1750 per mth. Why buy? So happy to be renting aftervtaking a year to sell my house

#63 bigrider on 07.15.13 at 6:58 am

Blah, Blah Blah.

Everything Garth said about interest rates going up and house prices going down a crock of BS.

He don’t know how many Italians there are in the GTA ready to soak up excess supply of houses.

Brick lickers, house humpers and land laying extraordinaires are the makers of tomato sauce.

#64 Craig on 07.15.13 at 7:36 am

The debt per person in Canada, that some folks are all upset about, is actually dropping.

In 2012 it was over 250% of debt to income ratio but in 2013 it’s estimated to come in at 160%. Lowest level in 3 years and it may indicate folks are more focused on this issue, then some give them credit for.

The numbers I’m more concerned about are the Gov’t debt to GDP ratios

Canada is in trouble but the US is a disaster and how they’ll spin their way out of it is beyond me. 1.8% growth won’t solve that problem!

Canada’s Debt to GDP – 84.5%

http://www.tradingeconomics.com/canada/government-debt-to-gdp

US debt to GDP – 101.6%

http://www.tradingeconomics.com/united-states/government-debt-to-gdp

In just 5 years the US has gone from 65% to 101%

That is insane!

Household debt was not at 250% of income. Furthermore, the rate of debt to income can diminish while the actual debt continues to rise. There has been no absolute diminution of family debt. Suggest you stick to selling houses. — Garth

#65 Craig on 07.15.13 at 7:54 am

Household debt was not at 250% of income. Furthermore, the rate of debt to income can diminish while the actual debt continues to rise. There has been no absolute diminution of family debt. Suggest you stick to selling houses. — Garth

1 – You are the one that posted the 250% chart on your blog.

http://www.greaterfool.ca/2013/07/03/stats/

2 – This is your quote from that blog;

Now here’s Ipsos, the polling people, to show us just how badly real estate has screwed up personal finances. An astonishing one in 10 families has already gone over the edge into that abyss the Bank of Canada calls “highly indebted.” To achieve this unique status you must have debts equal to or greater than 250% of gross income, and a killer mother-in-law.

The chart and article referenced 10% of people. The average remains over 165%. Aggregate household debt continues to rise every month. — Garth

#66 Craig on 07.15.13 at 8:05 am

I’m not a real estate agent, nor do I have anything to do with that industry in any way, shape or form, aside from being a dumbass homeowner.

You assume that anyone who doesn’t agree with you must have has some sinister ulterior motive.

I find this blog interesting so I post here. That’s it.

Lighten up.

I was trying to find a kind way of understanding your myopia and turgidity. — Garth

#67 TurnerNation on 07.15.13 at 8:24 am

If any dividend Dawgs own SC.TO you just made 30% coin today. While you were sleeping.

#68 Ralph Cramdown on 07.15.13 at 8:29 am

#63 Craig — “In 2012 [debt per person in Canada] was over 250% of debt to income ratio but in 2013 it’s estimated to come in at 160%.”

It’s surprising that you would consider that to be in any way plausible. We all paid off debt equal to an average of 90% of our incomes, in a single year? Discovered gold mines in our back yards? Defaulted on a year’s salary worth of debt, which was written off by our lenders? Do you have any idea what any of those scenarios would do to the economy?

When an economy with modest population and income growth is running 60-65% on consumer spending and 10%+ on real estate and construction, the party has to keep going just to stand still. Any consumer deleveraging would have a huge negative impact unless offset by large government spending increases or a big jump in our net exports — and if either of those happened, why would consumers be paying down debt in the first place?

In passing, I note that the bull thesis has changed from “going up forever!” to “not going down!” Just that one change to the forecast affects a lot of investors whose business cases didn’t make sense without capital gains, and first time condo buyers (getting on the property ladder is great when prices are climbing, but when they’re flat, you’re just spending a few years paying off agent’s commission, land transfer taxes, CMHC fees et al., and burning up your first time buyer’s credits)

#69 The Llama on 07.15.13 at 8:50 am

@ Craig’s posts #63, #64

Jeez guy, do you even read what you quote before you quote it? GT’s blog post clearly states “1 in 10 families…” so to say the debt-income ratio has dropped from 250% to 160% in a year is realtor-level misrepresentation.

#70 TurnerNation on 07.15.13 at 9:23 am

Thinking, a local Groceteria making a bet on the Depends and ED trade (SC.TO)? Boomers you have been assimilated.

#71 Daisy Mae on 07.15.13 at 9:30 am

#12 Michael: “House next door has been on the market for 8 months first listing at 2.8 mil now down to 2,025,000, ouch!”

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

Aren’t the sellers simply being greedy?

#72 Dupcheck on 07.15.13 at 9:38 am

Maybe debt is portrayed by some as a legal way of stealing money from the rich.

#73 Smoking Man on 07.15.13 at 9:41 am

CSIS issues a warning to govt workers going overseas.
Honey Trap..is infidelaty that rampent.LMAO

http://www.theglobeandmail.com/news/national/csis-warns-travelling-officials-of-dangers-abroad/article13210491/

In other news crea issues stats..looking go

 http://creastats.crea.ca/natl/index.htmgm

#74 AK on 07.15.13 at 9:56 am

#66 TurnerNation on 07.15.13 at 8:24 am
“If any dividend Dawgs own SC.TO you just made 30% coin today. While you were sleeping.”
——————————————————————–

Based on the current trading price for SC, the market is expection another offer, possibly from either ‘WAG’ or ‘CVS’.

#75 TheCatFoodLady on 07.15.13 at 10:16 am

#53Mr. Obvious:

I certainly see the issues with older people you describe. My disabled spouse doesn’t need me here 24/7, so I do a fair bit of part time cleaning & gardening. My clients tend to be parents of boomers as well as early boomers who’ve just retired. The boomer parents, having gotten through a depression & WW2, did well. Their homes appreciated, as did their salaries & wages. Right now many are sitting on tons of equity in mini-estate homes they’re having trouble maintaining – hence my part time jobs!

Many have sold, are selling or seriously thinking of selling. They’re having trouble wrapping their mind around the new economic realities. One gentleman sat on a large exurban estate home for almost a year – determined to ‘get what it’s worth’. He did get what it was worth at the time but being stubborn cost him 8 months of empty house plus his rent. He’s still focused, not on what he got which I thought was a very decent price but on what he thinks he ‘lost’. His buyers are already trying to sell the place – they bought too stretched & to their dismay the value is well down from what they paid.

This gentleman & I constantly talk finance. He’s convinced the Main Squeeze & I could buy a little condo – he ‘knows’ there are plenty of grant & low cost loan programs for the poor. There may be but we WOULD be eating cat food! He thinks I’m a greater fool for investing our little nest egg; why don’t I stick to nice, safe, GICs. He’s proud to have put his entire equity money into GICs at 2% & once asked me plaintively: “Wouldn’t you rather be GUARANTEED an annual 2% return?” Even when I did the math for him based on his money, showing what he’s losing annually to taxes & inflation, he couldn’t/wouldn’t see it. He delights in telling me when markets are down; it ‘proves’ my investment philosphy is ‘wrong’. He felt sorry for me during the ‘week from hell’ when bonds went nuts; couldn’t believe that even on paper I was still ahead.

I know several others who want to sell out of big places, don’t have the health or energy to maintain them but are determined to wait until ‘normal’ values return. What can you say? For decades, their paradigm worked. To them, dropping values is a blip.

The young have grown up with record low interest rates. To them it’s normal & won’t ever change & they’re convinced prices will do nothing but go up & up. They must buy in… NOW!

And locally, most listings are languishing. They’re priced too high for the neighbourhood. Those selling quickly are realistically priced, well presented & properly advertised. I hope the buyers are equally realistic about carrying costs, etc. The banks are only paying lip service to long term affordability.

I’m afraid there’s a lot of pain still to come out there & it’s sad.

#76 TorontoBull on 07.15.13 at 10:43 am

@Garth
home ownership for urban areas, such as the City of Toronto, is generally lower compared to suburbs or rural areas. 75% is incorrect…

My reference was GTA, which is now. Link? — Garth

#77 Babblemaster on 07.15.13 at 10:48 am

#3 east van

——————————————-

Very well written and erudite paper but, nobody cares. Most people talk and think in sound bites. Reading this paper requires way too much effort for most. Much easier to just follow the heard.

#78 Post Haste on 07.15.13 at 11:04 am

The averages are definately driving down from when we bought. In 2002 the average 5 year fixed was 11% then, we did a stress test based on 3 factors – we first calculated if we could hold a mortgage once renewed at 11% – could only one of us carry a mortgage if need be – did we see ourselves in the long term in case the housing market went flatline…all worked out – and that was our bases if we could afford our first home.

I do want to add one view to Garth’s post yesterday – the best time to list a property on your own – when either a neighbour or a few houses away list with an agent. Twice my brother has listed on his own – and twice he sold within the month.

If you can pass on the savings from the agent’s fees – plus, a contract would surely be provided by a real estate lawyer – possible buyers are brought into the area by the other listing – it’s a sweetheart of a opportunity…cheap is no reason to fear selling on your own…

#79 frank le skank on 07.15.13 at 11:14 am

#50 Heather Nova on 07.14.13 at 11:35 pm
The use of an anonymous bloggers vitriolic denial as confirmation of a Real Estate downturn is one of the best leading indicators related to the health of the housing market and consistent with all the other evidence I’ve heard against a RE downturn. Solid rebuttal, I’m sure you’ve changed a lot of minds on this blog.

#80 TnT on 07.15.13 at 11:29 am

Garth….

When dealing with home owners with homes valued over $1.5 million do they even care about interest rates going up 1 % and losing $90,000 in net worth on paper?

Don’t know any, do you? — Garth

#81 Julie on 07.15.13 at 11:54 am

Had a client say to me how he couldn’t believe a 350k condo in North York takes almost half his after tax income to afford. Think about that, $90k salary buyer complaining a $350k condo is almost unbearable in total payments for mortgage, condo fees, prop taxes, cable, etc.

That’s when you know the crash is coming. When 90k salary can barely afford a lousy condo….

Whats the average salary anyways? Lol…..
——————————–

Depends..if you actually work for a living it’s less. If you don’t work for a living and push paper around a govt office then it’s much much more. Plus you get a golden pension.

#82 craig on 07.15.13 at 11:58 am

I was trying to find a kind way of understanding your myopia and turgidity. — Garth

And you’re bilingual.

:)

#83 -=jwk=- on 07.15.13 at 12:21 pm

So what will the renters chant now – renting a car is better than buying one?

About 50% of new cars sold *are* rented – they call it ‘leasing’. People do that because they are able to make a rational, emotion free, economic decision w.r.t their cars. Same can’t be said for housing where 75+% own.

Me? Own several houses, but rent the one I live in in Toronto and due to flood loss just bought a new-to-me car (a 2010 which seemed to be the sweet spot of modern tech and good value).

#84 harboursnug on 07.15.13 at 12:25 pm

My niece is following the masses.

Going to the bank to see if she can pull equity out of her 2 story duplex.

Wants to redo the siding and upgrade the windows.

#85 Spiltbongwater on 07.15.13 at 12:26 pm

I really need to meet a suger mama/milf with money. this working for a living is really inconviencing my life.

#86 Penny Henny on 07.15.13 at 12:48 pm

#83 -=jwk=- on 07.15.13 at 12:21 pm
So what will the renters chant now – renting a car is better than buying one?

About 50% of new cars sold *are* rented – they call it ‘leasing’. People do that because they are able to make a rational, emotion free, economic decision w.r.t their cars. Same can’t be said for housing where 75+% own.
————————————————
FAIL.

In 2008 nearly have the new cars sold were being leased, now that number is approx 16%.

It appears to be 20%. — Garth

#87 HDJ on 07.15.13 at 1:00 pm

Garth, Not crazy about the nine weird photos at the top of your webpage. Detracts from the serious and valuable nature of your views and advice. I’d chuck them.

#88 Mister Obvious on 07.15.13 at 1:22 pm

#75 TheCatFoodLady

Things change don’t they?

The electric starter superseded the hand-crank as surely as the memory stick superseded the floppy disk. The cassette tape superseded the phonograph which was in turn superseded by the compact disc followed rapidly by the MP3 player. I won’t belabor it further.

The gentleman for whom you were doing gardening and cleanup work is a victim of his own intransigence. Home purchasers don’t care much what a property is ‘worth’ to the seller, only what it will cost them as a buyer. That specific value is not set by one stubborn individual but rather, by the aggregate of recent sales in the local market.

The group collectively known as “the masses” never get ahead of the curve. They are the curve. Or more accurately, they are the great lump that forms the fat belly of the curve. One may bungle along with them in an ‘after-the-fact’ sort of way or take a short walk up to the bow, see what’s coming over the horizon plan accordingly.

As a young man I clung desperately to every new idea or innovation that struck my fancy and considered each one to represent the final stage of development. I did this partly because I was prone to making large emotional investments in prevailing ideologies.

I was also too lazy and fearful to abandon what I already understood in favor of embracing untested processes that did not necessarily look like progress.

Here’s where the boomer generation has a large advantage. For a large part of our lives we have been privileged to witness the perpetual crumbling of the ‘state-of-the-art’. By now we should realize this is a process and not a steady-state. Such knowledge is strong armor. The wise will don it and the rest will eventually take an arrow.

#89 Bargains everywhere on 07.15.13 at 1:35 pm

If Poloz decides to follow a weak dollar policy in order to boost our slowing economy, won’t the comparatively lower rates in Canada keep the housing game going on here a little while longer?

#90 Ralph Cramdown on 07.15.13 at 1:40 pm

#80 TnT — “When dealing with home owners with homes valued over $1.5 million do they even care about interest rates going up 1 % and losing $90,000 in net worth on paper?”

I think you’re confusing millionaires with billionaires. There’s three or four orders of magnitude difference between a Mitt Romney type who’s politically tone-deaf enough to casually offer a $10,000 wager or mention that he bought his wife a couple of Cadillacs, or a John McCain who can’t remember how many houses he owns, and a mere high-net-worth type.

Most self-made millionaires will never be rich, stupid or lackadaisical enough to not care about losing $90k, because it represents a great sports car, a boat or a downpayment on an investment property or business. Maybe for the people playing with daddy’s money, but it doesn’t take too many similar losses to be back in the middle class with the kids in public school again and the maid’s hours cut to twice a week.

#91 Squatter on 07.15.13 at 1:41 pm

#88 HDJ – Garth, Not crazy about the nine weird photos at the top of your webpage. Detracts from the serious and valuable nature of your views and advice. I’d chuck them
——————————————–
I strongly disagree with you, I love Garth’s pictures, except the third one from the left, I think he looks too serious!
Will they be on the cover of your next book Garth?

#92 jess on 07.15.13 at 1:42 pm

=====
Chinese police claim GlaxoSmithKline channelled bribes through travel firms to inflate sales and prices

‘You could say the travel agencies and GSK were criminal partners. Among the partners, GSK was mainly responsible. In a criminal organisation there is always a leader.’

…A GSK spokesperson said: ‘GSK shares the desire of the Chinese authorities to root out corruption. These allegations are shameful and we regret this has occurred.’

http://www.thisismoney.co.uk/money/markets/article-2363932/GlaxoSmithKline-channelled-bribes-travel-firms-claim-Chinese-police.html

#93 JRH on 07.15.13 at 1:53 pm

#3 East Van. Thanks for the link. I think we are going to find out that we’re not as smart as we think we are !

#94 jess on 07.15.13 at 2:44 pm

the duchy
…The tax privileges of the Duchy are often defended by claims that it is a private estate (is the monarchy private?), or that it is a private trust for the benefit of the Duke of Cornwall, or that somehow the Duchy and the Duke merge into one.

An ongoing freedom of information case has lifted some of the legal murk surrounding the Duchy to reveal its economic substance: it is a legal person in its own right.

https://theconversation.com/prince-charles-must-go-public-with-tax-dealings-16097

#95 Penny Henny on 07.15.13 at 2:50 pm

In 2008 nearly have the new cars sold were being leased, now that number is approx 16%.

It appears to be 20%. — Garth

—————————————————
American website.

Canadian is 15-16%
http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/video-whatever-happened-to-those-great-car-leasing-deals/article6001336/

More evidence why most people are financial failures. Using valuable after-tax income to buy depreciating assets. Amazing. — Garth

#96 jess on 07.15.13 at 2:52 pm

long austerity ?

spanish corruption was dripping out until the flood gates opened with text messages between Barcenas and Rajoy were printed by the El Mundo newspaper

http://www.guardian.co.uk/world/feedarticle/10885197

#97 Victoria - the Original on 07.15.13 at 3:06 pm

And prices continue to soar in certain hoods in Toronto???? Where does the money come from?

http://www.huffingtonpost.ca/2013/07/15/toronto-house-prices_n_3599582.html

A ‘report’ by Royal LePage. Duh. — Garth

#98 Penny Henny on 07.15.13 at 3:23 pm

In 2008 nearly have the new cars sold were being leased, now that number is approx 16%.

It appears to be 20%. — Garth

—————————————————
American website.

Canadian is 15-16%
http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/video-whatever-happened-to-those-great-car-leasing-deals/article6001336/

More evidence why most people are financial failures. Using valuable after-tax income to buy depreciating assets. Amazing. — Garth
———————————————————

I was/am very involved in the automotive industry and unfortunately it is not so black and white. Many more factors involved. Enough to fill a blog.

Penny Henny

There is no reason to spend after-tax money buying a new car when dealers will finance/lease for less than inflation. — Garth

#99 Holy Crap Where's The Tylenol on 07.15.13 at 3:34 pm

According to a research report from Will Dunning Inc., if mortgage rates rise just one-half point more than current levels over the next two years (an absolute slam dunk) then house sales in Toronto will decline 15% and prices will retreat 6%. Hmmm. Six per cent of $1.5 million is $90,000. Meanwhile, look at what last summer’s drop in maximum mortgage lengths, from 30 years to twenty-five, did to high-rise sales. That was the equivalent of a 0.9% rate hike, and new condo transactions have plunged by half, with construction down more than 40%.

Patiently waiting for these increases Garth, I’m not getting any younger!
I wonder if and when this crash occurs how many cherry picking vultures will swoop in and feed on the carcasses across Toronto? The interesting thing will be a few years after the crash will it all start another cycle?

#100 Old Man on 07.15.13 at 3:40 pm

Any comments about the shoppers drugmart buyout? I just don’t see the gross sales or profit advantage if they mess with the crossing of products, as that is already in place somewhat. It is like an equation that going too far one way with product subtracts from the other business; seems like a power control move to me.

#101 Spiltbongwater on 07.15.13 at 3:46 pm

There is no reason to spend after-tax money buying a new car when dealers will finance/lease for less than inflation. — Garth

Do you factor in the markup on the vehicle when working out what the finacing lease costs are? You can save thousands by purchasing the car in cash at any dealer. Car dealers are not finacing/leasing vehicles for less then inflation. Just because it says 0% financing, doesn’t make it true.

So go ahead and spend money on a piece of machinery whose value will go to zero. Makes total sense. — Garth
.

#102 SRV on 07.15.13 at 3:51 pm

“But all that will change with a few more months’ worth of positive numbers out of the States”

Just what data are you using for these gems of wisdom… when US GDP expectations have been recently cut in half, and with 1.5% growth in 2013 the consensus… even with Ben dumping $85B a month on Wall Street!

You sure you weren’t a R/E Brokers (old habits die hard)?

GDP ‘cut in half’? You guys are a riot. — Garth

#103 Penny Henny on 07.15.13 at 3:57 pm

I was/am very involved in the automotive industry and unfortunately it is not so black and white. Many more factors involved. Enough to fill a blog.

Penny Henny

There is no reason to spend after-tax money buying a new car when dealers will finance/lease for less than inflation. — Garth

——————————————————-
1.who said anything about buying with cash.
2.Financing is still buying
3.who needs to offer discounted rates if you are selling all of your allotted inventory.

not always black and white.

#104 TnT on 07.15.13 at 4:00 pm

Heed all warning signs

http://www.theprovince.com/business/fp/expansion+would+late+poor+retired+boomers+study/8661205/story.html

#105 Dad on 07.15.13 at 4:03 pm

#99 Penny Henny on 07.15.13 at 3:23 pm

Son, listen to your friend Garth, it is the fundamental idea behind time-value of money.

And call your mother.

Dad

#106 TnT on 07.15.13 at 4:07 pm

So go ahead and spend money on a piece of machinery whose value will go to zero. Makes total sense. — Garth

****

Does this include a 2 wheel hog? :)

#107 Old Man on 07.15.13 at 4:08 pm

Leasing a car is the best way to go if you can charge off the lease payments according to the rules defined by the Tax Act. Paying for a car in cash with after tax dollars is one hit, and driving it off the lot is another hit called instant depreciation. This debate of buying vs leasing will go on forever, but act according to you own well defined personal circumstances.

#108 TnT on 07.15.13 at 4:08 pm

#101 Old Man

Any comments about the shoppers drugmart buyout?

**********

I think it has more to do with Target coming to Canada.

#109 rosie "moving forward" on 07.15.13 at 4:28 pm

This looks expensive. Some times you just have to buy those pieces of machinery even though the value does go to zero. That, usually, takes a long time, unless it’s a Kia. http://www.harley-davidson.com/en_CA/Content/Pages/Rentals_and_Tours/rent_a_harley.html?locale=en_CA&bmLocale=en_CA

#110 Spiltbongwater on 07.15.13 at 4:29 pm

So go ahead and spend money on a piece of machinery whose value will go to zero. Makes total sense. — Garth

Of course it makes perfect sense. Do you think I can deliver pizzas on a bicycle? And LOL at you saying a vehicles value will go to zero. Last I checked even a car that is not worth fixing and 30 years old, a wrecker will still pay $250 to tow it away. What do you do in Toronto, throw the vehicle in the lake?

#111 Old Man on 07.15.13 at 4:35 pm

#104 Penny Henry – you should know full well that the time for a new car is when the maker declares a national sale for all dealers to clear the lots at huge discounts. They want them to disappear to make way for the suckers to buy the latest models at full price months ahead of time, and reduce the price further with a trade in, and make them pay dearly.

Now the stage is set for a deal on a lease for 3 years with an option to buy at a low cost of money which one can offset with an investment set aside which after-tax pays double to make the lease payments; not to mention that part of these lease payments can be written off it the vehicle in question is spit between personal and business use to earn income. What a deal!

#112 Old Man on 07.15.13 at 5:03 pm

#111 Spiltbongwater – Mr. Turner is correct as tried to turn in a Ford Tempo once to buy a company car on the lot as a downpayment and they offered me $1,200.00. This is when I went for a National sales deal, as stated above, and demanded $4000.00 which they accepted on a huge capital discount with a lease agreement to hoop them all.

#113 jess on 07.15.13 at 5:08 pm

contrast the story cbc did a story on n. dakota shale boom by against this article
The Fracked-up USA Shale Gas Bubble
By F. William Engdahl

and the paradox of the US “shale gas revolution.”

#114 Craig on 07.15.13 at 5:28 pm

SRV – the best EVER !! (RIP)

This graph spells US recovery??

I see a financial collapse on the horizon that will dwarf 2008!!

United States Government Debt To GDP

The United States is expected to record a Government Debt equivalent to 101.60 percent of the country’s Gross Domestic Product in 2012. Government Debt To GDP in the United States is reported by the U.S. Bureau of Public Debt. the United States Government Debt To GDP averaged 60.28 Percent from 1940 until 2012, reaching an all time high of 121.70 Percent in December of 1946 and a record low of 31.70 Percent in December of 1974.

Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. This page includes a chart with historical data for the United States Government Debt To GDP.

http://www.tradingeconomics.com/united-states/government-debt-to-gdp

There will be no collapse. Stop pretending you’re a macroeconomist. You’re scaring the kids. — Garth

#115 Dean Mason on 07.15.13 at 5:55 pm

What happened in 2000 when 5 year fixed rate mortgages reached 8.00% to 8.25%. They declined all the way down to 2.89% after 13 years.If they ever reach that point again,what do you think will happen?

They will fall gradually again.The main point is if you pay your mortgage off faster instead of piling more debt of all types,this is a non issue.Unfortunately,most Canadians don’t know how mortgages,credit cards,car loans etc. really work.They are clueless.

Also,when short term interest rates are near,the same or the higher than long term interest rates it is almost a certainty that a recession is here.Look at 2000,2007 perfect examples.

#116 Old Man on 07.15.13 at 6:03 pm

Now there are two organizations in the business world in Canada that need to be watched; one is Real Estate and the other is Car Dealers – trust them not, so get smart and hoop them all, and then there is Caesar who changed the chairs on the Titanic and all is well. My car deal with all the crap added up had gross retail price of about $25,000.

I called GMAC to exercise my buy option for cash to transfer the title to me, and the list was a nightmare but did this all myself, as was taking control, as they needed oh so much. You will never guess after 3 years what it cost me to own this asset with a cheque for GMAC – $7,600 with no more than 20K on the dial, and the title was transferred in my name, so did I hoop them good?

#117 craig on 07.15.13 at 6:12 pm

There will be no collapse. Stop pretending you’re a macroeconomist. You’re scaring the kids. — Garth

Yeah ok, lets ignore a jump from 64% debt to GDP to 101% in just 5 years. Now that’s healthy economy in recovery correct?

Extrapolate that to 2018 and tell us again to buy amerika

I don’t care what you buy, but the S&P is ahead this year 19.33%. Too bad you missed it. — Garth

#118 Spiltbongwater on 07.15.13 at 6:22 pm

@Old Man, How can Garth be correct that a vehicle will eventually go to zero when you state the dealership offered you $1200? That is $1200 above $0 the way I see it.

I have heard many people talk about instant depreciation when you drive a vehicle off the lot. I really think that argument is irrelevent, unless of course you are wishing to sell the vehicle the day after you drive it off the lot. If that is the case, I would question the decision of why the purchase was made.

#119 Penny Henny on 07.15.13 at 6:44 pm

#99 Penny Henny on 07.15.13 at 3:23 pm

Son, listen to your friend Garth, it is the fundamental idea behind time-value of money.

And call your mother.

Dad
——————————————————

Sorry but your in my house now.
Back to the moldy basement.

Penny Henny

#120 Old Man on 07.15.13 at 7:19 pm

#119 Splitbongwater – I made no purchase, but a deal with a lease with GMAC after hooping them with a huge capital loss on a brand new car, and selling my dog for $4,000 to reduce the net. There is no purchase without a title, but with an option to buy after 3 years on a lease pulled the trigger on GMAC to buy it back for a bargain, and they wanted not as they made this hard for me.

#121 Whinepegger on 07.15.13 at 7:49 pm

@ #3 East Van

Read all 84 pages of that article. Tim Morgan makes Garth sound like Mr Optimist Canada. And we all know what the Optimists Int. mission statement is: “By providing hope and positive vision, Optimists bring out the best in kids.”