Dear Garth

INVISIBLE

I read your blog daily and love it.  I am concerned that there’s been a lot of talk about fixed rate mortgages rising, but what of variable?  I bought a house 3 years ago near Kitchener and got a 5 year variable rate from ING (ING Prime minus 0.65).  The rate hasn’t moved at all since December of 2010 (it’s been 2.35% since that date).  I’ve been reading a lot on your blog about fixed rates and how they are only going to rise (already started).  So when do variables follow suit?  I have a 10 year rate hold at 3.69% that’s about to expire early next week and I’m thinking of pulling the trigger on it, but I’m just trying to understand what variables are going to do in the short, medium and long term.  I realize it’s all speculation, but do you have an opinion on when these are going to start to creep up?  Tough to add another 1.34% if speculation turns out wrong.

Thanks, Kelly

Ace question. Lots of people been spooked by the back-up in rates lately. My mortgage buddies tell me 10-years are as popular as duct tape at a Conservative caucus meeting. Without a doubt, a decade-long mortgage at anything less than 4% will look ridiculously cheap half way through the term, but that does not necessarily mean it’s wise to cash in your 2.35% gift for something far more costly.

Fixed-rate mortgages jumped because of the bond market, not the central bank. Best thinking now is that the economy sucks enough the Bank of Canada won’t jump its rate until at least this time next year, and then the moves higher will be incremental. That means locking in to a long-term commitment with a substantially higher monthly makes no sense. Let it expire. Your best bet is to wisely invest the extra money you would’ve put into the 10-year payments over the next two years, then slam it against the principal upon renewal. Make the bank hate you.

Hi Garth: I read your site and I like it quite a bit. Despite that I did buy a house a couple of years ago. A cheap house (relatively). I live in Winnipeg and don’t make a ton of money (35k a year), but unless you’re living in rough areas rent is usually more expensive then a mortgage.

So I looked and looked, avoided “hot” areas, set my price and stuck to it. 120k in on a 950 house with a double lot in a good area. 24 year mortgage and I actually had 20% down.  The house was whatever the opposite of “a pig with lipstick” is. A physically abused model after a night of binge drinking and a fist fight with her boyfriend? Structurally stable and livable but some love and care was needed.

I generally think I did all right and that this sort of purchase wasn’t the general “insanity” that we see. From reading your articles you often swing between everything being a lost cause and there still being a “good” way to buy a house. I guess I’m wondering, did I manage to avoid the traps? Some days when I read your article I feel like I did all right. Other days I get a sinking feeling in my chest. Is there still a good way to buy a home? Is it possible to get wet without drowning? Do I need a life jacket? Thanks Garth. From Dave

Calm down. It’s a cheap house. The mortgage carries for around $400 a month, and even with property tax and insurance, that’s at least two hundred bucks less than the average rent of $770 in The Peg. Of course, to get it you gave up $25,000 in savings so make it a priority to try and recover that as soon as possible. Open a TFSA and dump that $200 a month in there, and not in a damn GIC.

Relax, Dave. You and the abused model make a fine couple. Just don’t let her be too demanding.

I read your blog everyday and I would like to say thank you for what you do. I was just wondering if you have any quick links to charts and graphs on interest rate and house price historicals. I have been in some heated arguments with friends and family on how Canadians are house horny and the path that our country is on is unsustainable. The masses are demanding charts and graphs to back up what I say. So just wondering if you have anything. Actually I debate my wife the most. She thinks a simple rise in interest rates will only raise the average mortgage payment by 10 bucks. Talk about a laugher. I imagine she gets her info from a real estate agent. Can you help? Ryan.

Whether interest rates rise or not, housing is dangerously overvalued, since the link between prices and incomes has been broken. That’s resulted in a record level of household debt and a now-stuttering economy. The savings rate has declined, as has investing. Four in ten families have trouble paying monthly bills and now CIBC says almost 60% of people are retiring with unpaid loans. Almost three-quarters of people are without pensions, and yet seven in ten have houses. If it were not for 3% mortgages, house values would be at 2007 levels – which means when rates normalize, that’s what your wife should expect.

But if you’re writing to a blog for help and charts, hell, just buy her a house. You’re cooked.

Hi Garth, my friend just told me about your website, it’s awesome!  I have so much to learn.  I’m not sure if this is correct protocol but I have a question for you.  My partner and I rent a home in Vancouver, B.C,  $1200 a month.  We are both self employed and make about $17,000 – $23,000.  I have a consolidation loan paying out $600 per month for the next 4 years, he (my partner) has a credit card debt of $12,000 (11.5 % interest rate) and a line of credit debt of $15,000 (7% interest rate).  Here’s my question, I just received a $30,000 settlement for a car accident, what is my best game plan with that money? My partner thinks investing it but I think we should at least pay off his credit card then do something with the remainder.  Any suggestions? Thanks for your consideration!

We have a third family member, a beautiful rescue mutt named Buster Reeko,  and he thinks we should spend the money on squeaky balls.

It ain’t sexy, but the best thing you can possibly do with the money is to pay down debt with non-deductible interest of 11.5% or even 7%. The odds of you making after-tax returns to rival that are about zero. So just do it.

And what’s with your partner having consumer debt equal to an entire year’s income? I hope this is an old wound, and no indication he’s spending more money than he makes. Because if that’s that case, I’m with Buster. Keep the dog. Dump the squeak.

134 comments ↓

#1 Old Man on 07.22.13 at 7:12 pm

Here is the bottom line as those that own homes have nothing to worry about if the market tanks, and with the next mortgage renewal the bank might turn nasty on you for more cash. So if all fails hand in the keys, and just disappear, and leave Canada as hear that Cambodia takes the losers, and you can get a visitor visa that will last for years.

#2 bob on 07.22.13 at 7:12 pm

Whoa… this is dangerous territory.
Your Partner has 27K debt
You have 30K settlement.

I don’t know what partner means, but if you pay off his debt, you’re just gifting him money. How the heck did he get that type of debt to begin with?

#3 Toronto and GTA Sales and Stas -July 20 on 07.22.13 at 7:16 pm

http://recharts.blogspot.ca/2013/07/to-and-gta-condo-sales-and-stats-july-22.html

http://recharts.blogspot.ca/2013/07/gta-sfh-sales-and-stats-july-22.html

http://recharts.blogspot.ca/2013/07/to-sfh-sales-and-stats-july-22.html

Technically the GTA markets in are in recession

http://recharts.blogspot.ca/2013/07/technically-re-market-in-gta-is-in-full.html

#4 crazed and a little confused on 07.22.13 at 7:25 pm

Hi Garth,

What is the term which you move your company pension to your self directed RRSP. I want to use my RRSp to buy a town home/ eventually thereby paying myself instead of the bank to own a home.. if it never drops fine. i just look for good returns in the stocks/ etfs

thanks garth. i owe you a beer when you come visit the best place in the world.

It’s called ‘commuting’ and you can transfer a RRPP into a LIRA (locked-in retirement plan) which operates as an RRSP, but withdrawals are not possible until your retirement age is achieved. — Garth

#5 QE or Not to QE That is the question on 07.22.13 at 7:33 pm

Housing down in the USA.You know why, yeah rates are going higher. SOon it will go down again, and guess what, Bigalow BEn will have to INCREASE QE. Yeah that’s right. What tapering??? This is Japan on steroids. Nevermind the lost decade, it will be the lost century until we have WW3 and take out Iran and all other enemies.
Like Michael Corleone once said”I don’t wanna kill everyone, just my enemies.”
That is US foreign policy and the military industrial complex will rise again, even devaluing the green back even more.

What recovery- smoke and mirrors.

Hey did u see gold today- yeah right Garth – a crash??? It serves no purposae gold- except that its only the real form of money EVER.

THE BUGS ARE BAAAAAACKKKKK BABY!!!!

Peter SCHIFFFFFTTTTT to the house.

#6 Cow Man on 07.22.13 at 7:35 pm

Garth’s full service blog site. How long before you start running a dating service Hon. GT?

#7 takla on 07.22.13 at 7:52 pm

hey Gath,do you think the general population is beginning to get the message….Greed,avarice,ignorance and stupidity have been the prerequisites for the horny house buying legions the last decade,sadly thier getting spanked now.Oh well ,live and learn…On a lighter note…TWINKIES ARE BACK!!

#8 @6 Dating service between RE agents or mortgage brokers and potential buyers? on 07.22.13 at 7:54 pm

you know how it is, when the real world disappoints and rejects you, you use on-line dating service hopping the hump is less visible

#9 Andrew on 07.22.13 at 8:01 pm

Do banks in Canada offer mortgages with longer than 10 year terms?

#10 Heather Nova on 07.22.13 at 8:01 pm

A big shout-out to Climate Change Denier. Enjoyed your comments yesterday. What’s more interesting and incongruous, however, is that readers of this blog are willing to accept the media’s biased news about climate change, but when it comes to real estate reporting, the media’s all wrong. Cognitive dissonance runs rampant on this blog.

#11 Tutto Bulla Merda on 07.22.13 at 8:06 pm

listen to some wisdom

http://www.youtube.com/watch?v=lvsZhylL44c

#12 TurnerNation on 07.22.13 at 8:08 pm

This one is good.

https://twitter.com/GSElevator

GS Elevator Gossip ‏@GSElevator 7 May
#1: There are only 2 paths to happiness in life. Stupidity or exceptional wealth.

#13 tigerbaby on 07.22.13 at 8:09 pm

> QE or Not to QE …

fine adjustments are being made continuously to guide the economy back on track, it may be counter-productive to think in terms of one extreme vs the other

the “big picture” trend seems to be economy gradually improving, debt gradually eliminated, and metal values gyrate towards long term means

#14 Donald Trump on 07.22.13 at 8:10 pm

From last post

#179 Old Man on 07.22.13 at 5:04 pm

#177 Donald Trump – who is this man called Maurice Strong as have never heard of him before, so learn something everyday in life. I must check this guy out, as need to be educated.

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

Maurice Strong?

He’s a Canadian and one of the biggest backroom Bilderberg types on the planet.

He is apparently holed up in China.

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

I agree that the climate changes, (gee in December it sure a lot cooler) but I don’t believe in this copyrighted Leftie BS.

Its a communistic method of wealth extraction and future subservience. If these morons were sincere, they would put corks in volcanos…any volunteers?

#15 espressobob on 07.22.13 at 8:13 pm

Qe or not to Qe That is the question.

Yup! Just keep buying into this, PLEASE. Nothing personal, but I would like to buy your position!

#16 tigerbaby on 07.22.13 at 8:17 pm

> Peter Schiff, Marc Faber, Eric Sprott etc

anyone knows how much are their net worths, and which billionaires have money under their respective management?

#17 Low Interest Rates on 07.22.13 at 8:20 pm

You know the newbs are living so beyond there means when 2.5% interest rate climbing to 4.5% worries them.

#18 A Nightmare on Bay Street on 07.22.13 at 8:20 pm

On the fourth letter :

I agree with #2 Bob on the dangers and questionnings about paying a debt that do not belong to you.

Or am I so cold hearted that I do not believe in real, “life time long” love ?

No. I dont. “Life time love” just happen. Your hopes wont help either way. Life is complicated.

If you hear any argument saying : “If you dont help me, well you dont love me” or “I would do the same if I were you”, run. Just run. Nobody knows what he would do.

I would never accept, personnaly, that my girlfriend pay my old bills and late tickets “because she love me” and be ok with it. Never.

#19 Bill Gable on 07.22.13 at 8:30 pm

Pay down the debt! No question. No ifs ands or buts, and promise me that you and your friend will never, ever allow yourself to be put in this position again.
$5,000 bucks at 22% – minimum payments of $150.00, will take nearly 14 years and 15 K to pay off. Now think about what is owed now.

You keep our eyes glued on this blog. Mr. Turner is constantly warning us about the “D” word, and so listen up and I hope you get this mess behind you.

#20 Victor V on 07.22.13 at 8:32 pm

#4

LIRA

#21 Chickenlittle on 07.22.13 at 8:33 pm

“This is also true for renewals. While most homeowners think an existing mortgage will be automatically renewed so long as payments are current, it’s simply not the case….A drop in property prices, of course, means less financing since conventional mortgages cover only 80% of the value of the home. So a $600,000 home with a $480,000 mortgage, which loses 15% of its value due to flood-prone location would qualify for only $408,000 in financing. The homeowner would have to find $72,000 to pay the lender in order to receive a renewal…”
“Surprise”, July 21

WOW!! I know you harp on about rising interest rates, but isn’t this just as scary?

So even a small drop in a home’s market valuation can leave you with something like one of those “surprise” condo repair fees that condo owners pay.

I know you were talking about the flood damaged homes, but would this also apply to areas that cool off and lose value?

I just want to clarify to make sure that I understand you.

If so, then that is SCARY!!!

#22 Canadian Watchdog on 07.22.13 at 8:38 pm

Video interview Toronto's chief planner, Jennifer Keesmaat, the woman with the plan (created by developers) that will destroy the city as we know it.

BuzzBuzzHome exclusive with Toronto Chief Planner Jennifer Keesmaat: Part 1
BuzzBuzzHome exclusive with Toronto Chief Planner Jennifer Keesmaat: Part 2

Firstly, this poor woman has been severely inculcated by her institutional peers into believing that she's actually doing more good then harm by ways of bureaucratic planning. She admits Toronto has a congestion problem; but like all bureaucrats say coming into office: it's the last guy's fault. So her new plan will fix everything, yet it's pretty much doing what prior city planners have been doing, and that is more densification, immigration, walking, living local and buying tiny condos because that is the only option for newcomers. So how's that plan working out for Vancouver with talent now fleeing?

Secondly, she implies higher property taxes rather then development charges as a better way of funding city transit. Well Jenny.. have fun getting public support on that front when development charges are the lowest in GTA. Who do you work for again?

I got a question for you: Why have new condo sales been declining year-over-year for several months now? Would that have anything to do with the time you spend on proposing painted bike lanes and parking spots for flying unicorns? Please tell us more about your fatuous vision of Disney World Canada. No seriously, how long do you think GTA's condo futures market has before collapsing on your watch?

I've read and listened to her ideas, but now concluded this Bambi is nothing more then another muppet owned by developers and architects. These bureaucrats along with their cronies have absolutely no experience or clue how much risk comes with selling homes like wheat on a commodity exchange. I research Hong Kong's primary market and keep in touch with government interventions to stabilize the market, and I'll tell you: the regulations being imposed just to prevent a collapse would be considered undemocratic (maybe even unconstitutional) here in Canada.

Do you really this happening here?

Hong Kong Property Agents March Against Measures to Curb Prices

"Property transactions in the city plunged to a two-decade low in the second quarter in response to a doubling of stamp duties on buyers and sellers, and tightened regulations on marketing material of new apartments. About a third of Hong Kong’s property agents may lose their jobs over the next year if the government persists with its real estate curbs."

Price controls? Stamp duties? What's the Canadian equivalent? Are we ready for this? No. That's why when the SHTF, city council, developers, agents et al will panic.

For those who read my earlier posts on presale (forward market) versus resale (spot markets), I'll leave you with this short excerpt from an academic paper concluding what happens to resales after a forward market collapses.

Do the Forward Sales of Real Estate Stabilize Spot Prices?

#23 Victor V on 07.22.13 at 8:39 pm

http://ca.finance.yahoo.com/blogs/pay-day-/downsizing-isn-t-just-retirees-empty-nesters-162220556.html

“There seems to be a trend with younger couples who own homes in the suburbs downsizing now rather than waiting until they retire to do so,” Aboulhosn says. “Moving back to an urban centre gives them more access to amenities perhaps not found close to a suburban home without having to jump into your car. They can save the time in commuting to work, save money, and spend more on their lifestyle needs.”

The rewards of a smaller, more manageable homestead pay off.

“The pride of ownership still exists; however, they want it without compromising their lifestyle,” she adds. “They want to have more cash available to travel, do activities with their kids as well save for retirement. This is difficult to do when 40 to 60 per cent of their income goes towards debt obligations like a mortgage.”

#24 AisA on 07.22.13 at 8:42 pm

“Whether interest rates rise or not, housing is dangerously overvalued”

Period. What don’t people understand? What else matters when it comes to any asset? DANGEROUSLY OVERVALUED. Back away and don’t look back.

Good luck to any flippers come fall… falling flippers… yes definitely a connection there.

#25 HD on 07.22.13 at 8:43 pm

#18 A Nightmare on Bay Street on 07.22.13 at 8:20 pm

I second your comment.

This couple has way too much debt compare to income.

Did she/he consider taking care of her/his consolidated loan first?

I don’t know why he has all that consumer debt but why would she/he pay for the ‘fun’ he had spending that money then?

Time for him to sacrifice and make it up to himself.

It always catches up to you at some point as it should.

Best,

HD

#26 Kilt on 07.22.13 at 8:56 pm

Keep the 30k. Your partner got himself into the debt, let him get himself out. If you come along and pay it off he will just rack up more debt again. People need to learn from their mistakes.

Kilt.

#27 takla on 07.22.13 at 9:01 pm

re tigerbaby #13….buddy are you related to the Bernank or what?im not tryin to pee in your kornflakes but you have to get out and read some financial data…..Detroit plus multiple major cities bankrupt,Pensions/401k being skimmed all over,massive debt to gdp,unlimited central bank printing,bond bubble, ect ect.awwww im getting depressed again…

#28 Donald Trump on 07.22.13 at 9:03 pm

Hey Old Man….

Kate Middletons kid looks like you…what gives?

#29 *NAKED APE* on 07.22.13 at 9:04 pm

@ #6 Cow Man …..

“Garth’s full service blog site. How long before you start running a dating service Hon. GT?”

I think it’s great! One day a week should be devoted to the Q&A stuff. Give us an idea of where the herd has fallen.

And I’m sorry that the Global Warming comments yesterday knocked ya to your knees Garth. All the ‘denier’ comments just goes to show how little people are actually paying attention to what’s going on around them on the planet right now. It’s very, very sad…..

And I worry about the generations to follow us that will have suffered because of our greed and lust for money.

#30 T.O. Bubble Boy on 07.22.13 at 9:04 pm

Dear Garth,

I’m sitting on a bunch of $USD thanks to cashing out some company stock and selling off 1/3 of my Berkshire Hathaway holdings today.

Keep the cash in $USD, or convert to $CAD?

Also – what is the best way to get back to $CAD without getting nailed by the banks with crappy exchange rates? I’ve read about getting your online brokerage to journal over a dual-listed stock from an American Exchange to the TSX, and that seems like the cheapest way. Any other options to consider?

P.S. now that you’re back living in the city, where do you park the Hummer? No city parking spot would fit that thing.

#31 Victor V on 07.22.13 at 9:15 pm

Realtors caught in market downdraft revisit retirement plans

http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/hewing-to-a-new-reality/article13323262/?cmpid=rss1&utm_source=dlvr.it&_rob_utm_medium=twitter

Alice and Arlin have suffered a drop in income, mainly because they are B.C. realtors caught in a market downdraft.

She is 52, he is 66. With commission income sagging, they are revisiting their retirement plan, which is to pay off their real estate loans and sell their two rental properties when the market recovers. The rentals are operating at a loss.

#32 Old Man on 07.22.13 at 9:28 pm

#28 Donald Trump – take a hike as had my money for Wednesday, and now must pay up to several women in my rant room, and this is going to add up.

#33 Freedom First on 07.22.13 at 9:34 pm

I think the dog is the smartest of the trio. The dog is the only one debt free. The dumbest one is the one who got the 30,000$ payout. Paying someone elses debt while you are in debt? You 2 deserve each other. Dumb and Dumber. Sorry Garth, you are kinder than me but I am trying to work on it. Freedom First.

#34 Stupesing in Cabbagetown on 07.22.13 at 9:41 pm

The boyfriend’s huge debt has rightly set some warning bells ringing. To paraphrase Dr. Phil, you don’t solve money problems by throwing money at them, you solve them by changing behaviour. If you pay-off his debt, will he be in the same position a year or two from now? You may be wasting your windfall on someone who won’t value and appreciate your sacrifice. Have him prove his commitment to your common goal before you hand over a penny and proceed with great caution. In a few years you may deeply regret your act of loving generosity.

#35 vangrrl on 07.22.13 at 9:44 pm

Buster Reeko definitely deserves some treats… !! :-)

#36 AK on 07.22.13 at 9:45 pm

#30 T.O. Bubble Boy on 07.22.13 at 9:04 pm
“I’m sitting on a bunch of $USD thanks to cashing out some company stock and selling off 1/3 of my Berkshire Hathaway holdings today.

Keep the cash in $USD, or convert to $CAD?

Also – what is the best way to get back to $CAD without getting nailed by the banks with crappy exchange rates? I’ve read about getting your online brokerage to journal over a dual-listed stock from an American Exchange to the TSX, and that seems like the cheapest way. Any other options to consider?”

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

A no brainer. Keep it in real money. U.S. ($$).

When converting and it’s a large enough amount, you can try norberts-gambit

#37 Bargains everywhere on 07.22.13 at 9:47 pm

#30 T.O. Bubble Boy on 07.22.13 at 9:04 pm

I’ve read about getting your online brokerage to journal over a dual-listed stock from an American Exchange to the TSX, and that seems like the cheapest way.

Yup, get your broker to journal it over to the Canadian side and sell it. All you pay is the broker commission (ask for the online rate – they’ll give it to you) so you’ll get the actual exchange rate and the only fee you’ll pay is your $9.99 trading commission. That’s it!

It’s best to do it with a stock that has good volume on both exchanges so that you’ll get the true exchange rate (due to arbitrage). When I transferred some money into US dollars I bought Potash (POT) on the TSX and then immediately sold it on the US side to get US dollars without paying exchange fees. It worked great!

#38 Hoser72 on 07.22.13 at 9:51 pm

Thanks for the answer to question #1. I had the same question and I’ll follow your advice.

#39 As Is Old Man on 07.22.13 at 10:13 pm

Housing Bubble is back in California:

http://tinyurl.com/k2fyesx

#40 KommyKim on 07.22.13 at 10:22 pm

RE: We are both self employed and make about $17,000 – $23,000. I have a consolidation loan paying out $600 per month for the next 4 years, he (my partner) has a credit card debt of $12,000 (11.5 % interest rate) and a line of credit debt of $15,000 (7% interest rate).

Your “partner” should try filing for “consumer proposal”. It’s like bankruptcy, but nowhere near as punishing. He’ll only have to pay 25-35 cents on the dollar and it won’t effect yourself if done right. ie: Close all joint accounts, credit cards etc first.
I know people who’ve done this and was shocked that they got to keep their house, investment property, cars, etc. And get this, 30K of it (120K total) was owed to revenue Canada!

#41 Boomer21 on 07.22.13 at 10:23 pm

A question for Garth and the dogs. I am taking out a homeline and one bank has offered 1/2 point over prime. That would be 3.5%. Is there room to negotiate a lower rate? I have no debt stick to the rule of 90 so I am ok. Doing some renos that will be paid back with a GIC coming due in 6 months. Thanks guys

#42 Canadian Watchdog on 07.22.13 at 10:33 pm

#39 As Is Old Man

Nice find. I like how total sales volume is declining while prices soar in the 20-30% range. Must be booming.

#43 About to buy on 07.22.13 at 10:51 pm

I’m about to make an offer on an apartment in the Vancouver area (Burnaby to be precise.) I need a place to live and I’m sick of renting. I’ve got enough for the 20% down and I’m pre-approved at 2.89% fixed for five years. Seems like as good a time as any.

What are the three documents I should read about the risks of the current market before signing on the line that is dotted?

#44 45north on 07.22.13 at 11:29 pm

Nightmare on Bay Street: I would never accept, personnaly, that my girlfriend pay my old bills and late tickets “because she loves me”. Never.

a man of integrity

ChickenLittle: So even a small drop in a home’s market valuation can leave you with something like one of those “surprise” condo repair fees

yep

Canadian Watchdog: talking about Toronto’s Chief Planner Jennifer Keesmaat: I’ve read and listened to her ideas, but now conclude this Bambi is nothing more then another muppet owned by developers and architects. These bureaucrats along with their cronies have absolutely no experience or clue how much risk comes with selling homes like wheat on a commodity exchange.

well I agree with the statement “these bureaucrats have no clue how much risk comes with selling homes like wheat”. You have posted that construction on new condo buildings on Toronto has come a year or two years after they went on sale. I’m pretty sure that I understood that there is substantial risk that sales will not cover the cost of construction. Why worry about developer’s fees if the developers are bankrupt? Ergo she suggests costs be covered by property tax. The only alternative would be more money from the Province which seems a rather faint hope since the Province is running a deficit. Yeah I do see a problem.

Victor V: Alice and Arlin have suffered a drop in income, mainly because they are B.C. realtors caught in a market downdraft.

yep

#45 shiny mirrors on 07.22.13 at 11:30 pm

I get enormous amounts of Schadenfreude when I read stories like the fourth one …. Hmmm yeah … -_- …..

#46 Donald Trump on 07.22.13 at 11:32 pm

#32 Old Man on 07.22.13 at 9:28 pm

#28 Donald Trump – take a hike as had my money for Wednesday, and now must pay up to several women in my rant room, and this is going to add up.
==================================

I dunno Old Man…spitting image of ya

http://www.google.ca/search?q=hellboy+photos&tbm=isch&tbo=u&source=univ&sa=X&ei=1_jtUf6LCMiZjAKbioGwDQ&ved=0CCoQsAQ&biw=1067&bih=718

#47 Cici on 07.22.13 at 11:33 pm

EEK! I wouldn’t necessarily say RUN, but I would definitely say DON’T pay off partner’s debt.

You may love him, but partner’s debt is partner’s responsibility, NOT YOURS.

The claim money is yours, and you need to invest it – WISELY and conservatively.
And although you seem to be more responsible than him with money, you are not in a financial position to be picking up the tab for anyone else, and nor should you be.
Hope you take this advice, and hope your partner wakes up and realizes he needs to fast track a budget and a plan to bury this debt within 3 to 5 years MAX (but hopefully three). He’ll definitely need to take on some extra work to pull in the $ he needs to get the job done.
In the meantime, if he needs help, lend him your moral support, but not a dime!

#48 George on 07.22.13 at 11:37 pm

Here’s how Goldman Sachs is making your beer more expensive

#49 Cici on 07.22.13 at 11:40 pm

#10 Heather Nova

Excellent observation. It baffles me that some people don’t get climate change. They must never get outside…

#50 T.O. Bubble Boy on 07.22.13 at 11:42 pm

Thanks for the advice on USD/CAD conversions… the Norbit’s Gambit approach (journaling over a dual-listed stock) seems like the best bet.

I noticed an article from MoneySense that describes using the DLR and DLR.U ETFs for this purpose:
http://www.moneysense.ca/2012/01/20/norberts-gambit-a-better-way-to-buy-u-s-dollars/

Any thoughts on these ETFs vs. using something like POT or RBC or other dual-listed stocks?

#51 Cici on 07.22.13 at 11:52 pm

#14 Donald Trump

That is the least intelligent thing anyone has said on this blog in a really long time.

Wealth extraction indeed (sarcasm)…yup a left-wing communist plot to end civilization…

Can’t you rightwing nut bars ever come up with more convincing arguments?

Get off the Internet, turn off the TV and take a step outdoors; not only will you notice firsthand the chilling or burning effects of climate change, you’ll also realize that there are NO communists in North America, and that there NEVER were any (ok, well maybe 1% of the population, but they’re a minority, not a threat).

#52 Jane24 on 07.23.13 at 12:11 am

I’m with the others. Do not gift your $30,000 to your boyfriend. His mess so his problem. He will just run up debts agin and where will that get you.

Keep the money and dump the bum. Plenty of fish in the sea.

Cannot believe that Garth told you to pay off his debts. Really Garth!!

Cheers

#53 Alex G. on 07.23.13 at 12:12 am

Hey Ryan (from the post) and anyone else interested in “charts and numbers”. Here’s a great site that will provide you plenty of free data on Canada (and most other countries); anything from interest rate trends, to bond yields, to debt-to-GDP ratios: http://www.tradingeconomics.com/canada/indicators

Enjoy!

#54 vangrrl on 07.23.13 at 12:24 am

A law was passed in BC a few months ago that common law couples share assets and debt equally upon separation. No different than a married couple. So regardless whether these two are married or common law, his debt is hers and hers his.
At least they rent, and that’s a good price in these parts!

#55 Van local on 07.23.13 at 1:58 am

Garth, I thank you so much for your knowledge and the time that you spend educating and keeping “joe public” informed. I was thinking of how to help out family and friends without the sometimes heated debate on real estate. Of which I refer to you and your wisdom. I then thought…. Why stop there… Everyone should know about this blog. Would you be adverse to having a run of bumper stickers or the like to help spread the wisdom? After all the media is sponsored by real estate companys. The truth must be shared to the masses. No?

#56 Tony on 07.23.13 at 2:04 am

Kelly get a clue. TBT got hammered last Friday followed by a big upward move in most commodities yesterday (weak U.S. dollar). America is slipping back into the recession they never came out of. Interest rates will plunge in America. The best mortgage to have if you unfortunately didn’t sell your house is a variable rate mortgage. Canadian rates will fall even more than American rates as the real estate market crashes. Sell your house and buy uranium stocks on the venture exchange where they aren’t ten times overpriced like on the TSX and the NYSE.

#57 Tony on 07.23.13 at 2:11 am

Re: #36 AK on 07.22.13 at 9:45 pm

Did you ever check the share price of each stock or company held in Berkshire Hathaway? You would be further ahead financially if you bought each stock separately rather than buying Berkshire Hathaway.

#58 Observer on 07.23.13 at 2:12 am

Just a note: Looking at east vancouver in http://www.mls.ca:

Just about 7 months ago (last time is looked) there were very few house which sold for less than a Million. Today the majority of the houses are under a million and not only 998,000, but have gone down to 918,000.

Listings are up, even though prices have been reduced!

#59 Tony on 07.23.13 at 2:13 am

Re: #30 T.O. Bubble Boy on 07.22.13 at 9:04 pm

Convert to Canadian dollars now.

#60 QuestioningSusan on 07.23.13 at 2:36 am

>>Hi Garth, my friend just told me about your website, it’s awesome!

Do you write your own sycophantic emails, or does your boyfriend do it for you?

#61 devore on 07.23.13 at 4:26 am

Well, yesterday’s blog was nausetting. Garth sure knows how to stir them up.

Visiting the Okanagan this week. For sale signs seem to be a little less prevalent this year. But you can still look down any street and see plenty of signs. Whatever kind of property you are looking for, is available in multiples.

New wine finds this year, still on Naramata bench, Laughing Stock and La Frenze. Yum. Highly recommend anything they make, although some will be sold out by the time you read this (sorry). Don’t be chicken, just buzz the LFNG guys, they will let you in, by appt only, you will not regret it. Lang and Blue Ruby are still kicking butt, but Misconduct is wising up, and prices are higher. Boo on them, but you gotta make a living.

#62 Canuck Abroad on 07.23.13 at 6:15 am

Garth, I disagree that the person in your third example should pay off his/her boyfriend’s debt with their windfall. As several people have already said, the boyfriend will just rack up more debt. Money wasted!!

The windfall should be used to pay off their own consolidation loan only – it should not be wasted on the boyfriend. At 600/month for four years, that loan alone will cost more than 28K. Pay it off. Then dump the loser spendthrift boyfriend.

These two have 55k debt between them – about three years gross pre tax income. How does this even happen?

#63 Derek R on 07.23.13 at 6:32 am

I agree with the other posters that you shouldn’t just pay off your partner’s debts. However you could loan him the money @ 6% pa which is a better deal than he is getting from the credit card company or the bank.

That way you get a good return, he gets a cheaper deal and the money isn’t leaving the household. Better off in your pocket than in the banks.

If you decide to do that get some collateral from him. Write it into the loan agreement (oh yes, put it in writing; this is serious cash) that $30,000 worth of his toys or whatever become your property if he welches on the deal. You’ve got to have a plan B just in case.

#64 Bargains everywhere on 07.23.13 at 6:51 am

He (my partner) has a credit card debt of $12,000 (11.5 % interest rate) and a line of credit debt of $15,000 (7% interest rate).

I would have to agree with the others on here. DON’T pay off your partner’s debt. That size of debt with that salary is a red flag that someone isn’t managing his money well. Guaranteed that you’ll pay off the debt and he’ll eventually run it back up again. I’ve seen it before.

Better to invest the money (in your name) and if you want to help your partner out, you two need to sit down and come up with a plan of how his debt will be paid back. Perhaps you could contribute some of the dividends you might earn on your windfall while keeping the principal safe.

Love is grand, but remember 50% of marriages/partnerships break up. If you pay off his debt, you will likely end up with nothing if you or he decides to leave. Don’t expect him to pay you back. It won’t happen. That money will be gone.

#65 C on 07.23.13 at 7:44 am

Any tips on how to get US or other foreign exposure in my tfsa without all the withholding taxes? I’m working on maxing it out but want a bit of geographic diversity in the meantime.

#66 AK on 07.23.13 at 7:55 am

#57 Tony on 07.23.13 at 2:11 am
Re: #36 AK on 07.22.13 at 9:45 pm

“Did you ever check the share price of each stock or company held in Berkshire Hathaway? You would be further ahead financially if you bought each stock separately rather than buying Berkshire Hathaway.”
====================================
Hey Tony,

I agree with you Bud. I didn’t advise to keep Berkshire. I advised to keep the money in the best currency in the world. “The U.S. Greenback”.

The U.S. Dollar will rock going forward.

#67 Craig on 07.23.13 at 8:10 am

Am I still in blog purgatory?

Interesting;

Bernanke Seen Tapering QE to $65 Billion in September

Federal Reserve Chairman Ben S. Bernanke in September will trim the Fed’s monthly bond buying to $65 billion from the current pace of $85 billion, according to a growing number of economists surveyed by Bloomberg News.

One more reversion to boorish blog behaviour and you’re history. — Garth

#68 Penny Henny on 07.23.13 at 8:25 am

From TO Solds,
http://www.torontomls.net/PublicWeb/CL_CF.asp?link_no=49913179.206100&t=l&fm=F

104 Fourth St,
sold twice on the same sales report.
first for 425,000 and then for 465,000.

a bit of spit and polish and 40k return.
minus all the onerous fees, leaves you next to nada?

Penny Henny

#69 Ralph Cramdown on 07.23.13 at 8:36 am

#65 C — “Any tips on how to get US or other foreign exposure in my tfsa without all the withholding taxes?”

– Buy a low cost US ETF that trades in Canada like VUS.TO
– Buy US companies that don’t pay dividends like BRK.B
– Buy UK dividend payers; there’s no dividend withholding tax. It’s probably cheapest to buy the ones that trade as ADRs in the US. . Google “withholding tax rates” to find a list of other countries and their rates.

#70 Ralph Cramdown on 07.23.13 at 8:41 am

“104 Fourth St, sold twice on the same sales report.”

The two contract and sale dates don’t make much sense. More bad data from the consummate professionals at TREB and its membership.

#71 Fed-up on 07.23.13 at 8:51 am

From the comments section of the Globe and Mail:

Leaside Hack
9:30 PM on July 19, 2013

“The life of the realtor is glamorized in this paper and everywhere else.

The reality is that for 90% of the agents it is a life of living from one cheque to the next. Most die relatively young and near poverty.”
1 reply
Report Abuse
Score: 7
Liz Bennet
7:28 PM on July 20, 2013

“As someone in this industry for 25 years – you can’t even begin to imagine how accurate this is – I have seen so many driving big Mercedes and filing bankruptcy in their 50’s or even later. It has been heartbreaking to watch so many nice people end up dying from heart attacks and poor after years in Real Estate. It’s a great career if you have another income to offset the down times and are a bit more frugal.”

Interesting to say the least.

#72 Ralph Cramdown on 07.23.13 at 9:02 am

“104 Fourth St, sold twice on the same sales report.”

After a bit of research, I’m going to guess that the house was listed as a co-brokerage with two different agents, and when it sold, one agent just lied about the price to keep his/her stats looking good. What could it hurt?

#73 Canuck Abroad on 07.23.13 at 9:13 am

#69 Ralph Cramdown on 07.23.13 at 8:36 am
#65 C — “Any tips on how to get US or other foreign exposure in my tfsa without all the withholding taxes?”

****

I am confused by this. Garth can you help??? Why is anyone paying withholding taxes on US investments if they are not American. I just fill out a W8-BEN form and avoid all withholding that way. Does this form not exist in Canada? Can it not be used in a TFSA?

#74 Ralph Cramdown on 07.23.13 at 9:13 am

Canadian May retail sales prints far higher than predicted with the biggest dollar increase in vehicles. Wasn’t the great Poloz saying that the Canadian consumer is starting to delever? I don’t think they all paid cash…

#75 Westernman on 07.23.13 at 9:17 am

Cici @ # 51,
You poor kid, you are so dangerously naive and trusting…
The weather is carrying on much as it always has and yes North America has Communists – lots of them – they call themselves Liberals.
Moreover, for your own good you should stop watching and listening to MSM (especially the CBC ) or you are going to end up flat broke on a street corner with some bull$hit protest sign clutched in your hand.

#76 CrowdedElevatorfartz on 07.23.13 at 9:20 am

Total agreement with the others.
Invest the money.
Your partner’s debt is (gasp!) his debt. AND his problem to deal with. He needs to understand their are no “bail outs” on debt.
But for the sake of harmony perhaps make him a deal. If he can pay off half the debt in a year( or so). You will pay the other half of the debt.
That way he’s focussed on “rapid debt payments” for an entire year and perhaps the lightbulb may finally go off in his head as to what “debt” and “obligation” actually mean.
That way if you both split up, which (statistically speaking) you eventually will.
You’ve only blown half your “winnings” on the money moron.

Big squeeky balls……with stripes.

#77 Penny Henny on 07.23.13 at 9:26 am

#72 Ralph Cramdown on 07.23.13 at 9:02 am
“104 Fourth St, sold twice on the same sales report.”

After a bit of research, I’m going to guess that the house was listed as a co-brokerage with two different agents, and when it sold, one agent just lied about the price to keep his/her stats looking good. What could it hurt?
——————————————————-

So what I interpet from your comment is ” After basically no research this is my best guess, since I really don’t know much about these things”

#78 Ralph Cramdown on 07.23.13 at 10:02 am

#77 Penny Henny

If you’ve got a better theory that fits the facts, please share. Same house:
W2629379 2013-05-08 $462,000 2013-06-21 $459,000 2013-06-29 $449,000 Reported sold 2013-07-18 for $425,000 by RE/MAX WEST REALTY INC.
W2648186 2013-05-27 $469,900 Reported sold 2013-07-17 for $465,000 by SUTTON – ROYAL REALTY

Your theory?

#79 someone on 07.23.13 at 10:08 am

In the Globe and Mail:

“Developers feeling unappreciated for community contributions”

“Developers are growing increasingly exasperated that they get little or no credit for huge contributions they make to everything from culture to parks to daycares in the Lower Mainland – contributions increasingly required by area cities…

Urban Development Institute “is fully prepared to challenge any ‘fluffy’ press announcements by municipal officials/mayors/councillors regarding public amenities paid for in part or whole by [fees charged to builders] and which do not properly and fairly reference the development industry,” said one recent internal e-mail from the institute to its members. The institute provided a series of announcements from Vancouver demonstrating the problem.”

http://www.theglobeandmail.com/news/british-columbia/developers-feeling-unappreciated-for-community-contributions/article13358335/

#80 JmH on 07.23.13 at 10:27 am

#53 Alex G.
re your link: http://www.tradingeconomics.com/canada/indicators

Thanks for the extremely useful link! Tons of data and trends all in one place! A great addition to my investing tool box!

#81 David McDonald on 07.23.13 at 10:35 am

Hi Garth,
It’s nice to read letters from ordinary people asking for financial advice. I guess this is what sustains you against the hate mail and even the sometimes extreme comments from the blog dogs.

We may be just at the precipice before a large drop in RE prices or we may just be a the start of a long slide down. If either eventually plays out buying real estate is a bad investment. Nevertheless there is almost no echo of this in the mainstream media so people making the biggest financial decision in their lives are in the dark. Your blog is the only constant reminder of the danger.

#82 Bargains everywhere on 07.23.13 at 10:39 am

#75 Westernman on 07.23.13 at 9:17 am

Moreover, for your own good you should stop watching and listening to MSM (especially the CBC ) or you are going to end up flat broke on a street corner with some bull$hit protest sign clutched in your hand.
____

Oh, that made me laugh out loud today. Thank you.

#83 daystar on 07.23.13 at 10:55 am

#61 devore on 07.23.13 at 4:26 am

What, something I said? (insert innocent smile :)

“but what of variable?” – Kelly

Totally ace question. Not that my opinions are continually correct but I’m with the heavy batter here with Garth in that the BoC will keep rates where they are until next year meaning the pressure is off with variables until next year, likely the latter half of the year but I do have to say that its not always wise to thread the needle. Keep the finger on the pulse and follow this blog if terms expire this year or next as ultimately, the banks themselves set rates.

We should see some movement next year in Canada ahead of the U.S. fed I believe when it comes to variables and it will be incremental but the bond markets are where the true action is until next year and its totally true what Garth has been saying in the past in terms of posted rates with 5 year terms right now.

If one looks at rate hub:

http://www.ratehub.ca/best-mortgage-rates/5-year/fixed

TD and BMO will still give 3.59%. Royal is more sticky with credit right now and CIBC, BoNS, cheap rates aren’t in the cards so if folks are looking around or should I say, able to switch banks and look around, TD and BMO are the places to be with 5 year terms. 7 and 10 year terms, lets just say personally, if I had a term expiring within the next year, I wouldn’t thread the needle with variables and 10 year terms and go long but that’s just me right? :

http://www.ratehub.ca/best-mortgage-rates/10-year/fixed?mortgageAmount=250000&amort=25&province=SK

4% mortgages over 10 years are to me, dirt cheap compared to what the market will be facing 2, 3 year from now and beyond and if I’m wrong, geez, if the consumer can’t manage 4%, they shouldn’t be shopping but read the contracts! 10 year closed mortgages aren’t for everyone either so…. good luck readers.

#84 Penny Henny on 07.23.13 at 11:22 am

#78 Ralph Cramdown on 07.23.13 at 10:02 am
#77 Penny Henny

If you’ve got a better theory that fits the facts, please share. Same house:
W2629379 2013-05-08 $462,000 2013-06-21 $459,000 2013-06-29 $449,000 Reported sold 2013-07-18 for $425,000 by RE/MAX WEST REALTY INC.
W2648186 2013-05-27 $469,900 Reported sold 2013-07-17 for $465,000 by SUTTON – ROYAL REALTY

Your theory?

——————————————————
Let’s ask Mikey?
Mikey, can you shed some light on this??

#85 Bob on 07.23.13 at 11:23 am

Garth,

I’ve been reading your blog for almost 5 years now. Everything that you’ve said seemed to have made sense at the time. I formulated my own opinions and refrained from buying a home in B.C. because I thought a big correction was coming.

Now, I’m giving up faith though. As you’ve mentioned before, there’s more to owning a home than purely financial reasons.

Do you think a correction is still in the cards for B.C.? Or, have you softened your outlook, like most others seem to have. Please tell me that realtors, the real estate boards and all their frankennumbers have not been right afterall.

The BC correction is ongoing. — Garth

#86 Donald Trump on 07.23.13 at 12:25 pm

#79 someone on 07.23.13 at 10:08 am

In the Globe and Mail:

“Developers feeling unappreciated for community contributions”

“Developers are growing increasingly exasperated that they get little or no credit for huge contributions they make to everything from culture to parks to daycares in the Lower Mainland – contributions increasingly required by area cities…

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

It is quite an extortion game.
Case in point.

Person near me wants to do a commercial development on a corner. He has to surrender…at his cost…enough land to widen the road at the side and the front of his property. Apparently this stipulation on corner properties exists throughout the City.

In addition, he has to pay for the cost of installing a turn signal at the traffic light. Rough estimate….$200,000.

Traffic light is intriguing given the area has had massive growth , so what are they picking on him?I guess because they can.

The City can save on these basic capital costs and piss the money away on bread and circuses.

#87 Bob on 07.23.13 at 12:38 pm

#85 “The BC correction is ongoing. — Garth”
————————————————

Can you provide any of your own estimates on how severe of a correction it might be?

Kelowna?
North Vancouver?
East Vancouver?
Fraser Valley?
Squamish?
Victoria?

Would you like me to change your oil, while I’m at it? — Garth

#88 father on 07.23.13 at 12:39 pm

garth all the bears in b.c. are giving up, all the blogs are packing their bags even the pooch whisperer (your favourite)

#89 Holy Crap Where's The Tylenol on 07.23.13 at 12:41 pm

Just returned from America land of the free and home of the brave. Business trip not pleasure. The word I received straight from my business associates is that things are still extremely touchy in America. They blame President Obama and his Obama-care plus every other diversionary tactic you can think of for killing the economy. I say tell them that this failure was a well-oiled plan already running down the tracks years before Mr Obama even took office. He just inherited this mess. One associate said he is going to go dump his gold before he losses any more of his investment. So let me get this straight? Gold is not a good investment; when gold is up, neither America nor ordinary Americans are likely to do very well. Traditionally, this has been the case. The periods during which gold has been a good investment (the 1970s and the 2000s) have been terrible for the economy, and appalling for the average citizen. Now the shiny metal is down and could soon deflate too epic lows. So therefore the economy should be doing well. Correct? Housing appears to have some small upturn in value there. Is there a time lag? It sure appears that the economy is not doing well and that the average American is quite frankly screwed.

#90 kommykim on 07.23.13 at 12:53 pm

RE: #65 C on 07.23.13 at 7:44 am Any tips on how to get US or other foreign exposure in my tfsa without all the withholding taxes?

Simple. Don’t put it in a TFSA. Put it in an RRSP. Canada has a reciprocal agreement about withholding taxes on RRSPs but NOT TFSAs. In a cash account (non tax sheltered) you have to apply to get the US taxes back.

#91 craig on 07.23.13 at 12:55 pm

Is the price of gold a precursor to weaker economic US data and further QE in the Fall?

Starting to look like it, as many had gold pegged as dead. I’m not a gold guy but keeping an open mind is the only way to survive these days.

We’re a week away from Aug and still no strong data anywhere supporting this RE crash that was predicted by many.

A correction yeah but so what. Everything, at all time highs, corrects and if you try and time it, odds are you’ll lose.

2nd Q numbers will tell the tale for the rest of the year.

Hold onto your hats…

#92 Basement Dweller on 07.23.13 at 1:01 pm

Subprime?

If Canada has a “subprime” in its housing market it would surely be imploding now.
Last summer the Feds reduced their amor rate to 25 years and this summer they are faced with a half a percent increase in rates.
Or they can opt for the variable mortgage instead.

As the 3% percent mortgage holders lose their guaranteed rate by the end of August we will get a better sense of the market conditions.

#93 Dad on 07.23.13 at 1:01 pm

See son, whats yours is hers and whats hers is hers.

She wants half, shell be told by everyone not to give you a dime.

Still want to get that ring?

#94 EB on 07.23.13 at 1:20 pm

#10 Heather Nova
“readers of this blog are willing to accept the media’s biased news about climate change, but when it comes to real estate reporting, the media’s all wrong”

I know, right? The media is also trying to sell me lines about how smoking causes cancer and the stars aren’t just the campfires of our ancestors in sky. Follow the money.

#95 Robbie on 07.23.13 at 1:28 pm

#85 Bob
As a Realtor in the Greater Victoria area, I can assure you a correction has been underway for a while…varies according to area and property type but, as an example, I just saw a price reduction on a townhouse that now has the asking price 20% less than it sold for over 5 years ago! Remember, asking prices are not selling prices. In this market, Buyers are resisting dropping their prices and it can take many months or even years for the prices to be reduced to where the listing will sell. Sadly, that ends up with the Sellers “chasing the market down” and the price reductions are usually too late. That said, certain properties have held up well, price-wise, but that has mainly to do with location and acreage.

Well put. — Garth

#96 frank le skank on 07.23.13 at 1:32 pm

#87 craig on 07.23.13 at 12:55 pm
I would love to hear your definition of a crash vs a correction. Can you assign some percent values to each? Its seems to be the popular sentiment among concerned RE pumpers however no one seems to be able to tell me the difference between a crash and a correction. Is it that a crash is a violent, very fast paced decrease in value? Is a correction a slow paced decrease in value. Will they and at the same pricepoint or is there a difference?

#97 Realtor # 1 on 07.23.13 at 1:47 pm

# 85 Bob

I don’t blame for losing faith. We have seen several changes to mortgage rules and yet no effect on the market. Your last hope is that rates rise fast so prices decline, however beware, if the banks return with prime minus again you will have no hope.

In late 2010 mortgage rates were %3.52 with 35years –
thats $412 per 100k; today (3.39@30) its $442 per 100K or 2.89% @ 25 – $467 per 100k borrowed and yet no price shock!

Why are prices retreating to those levels? Because its a nominal increase.

Do your own research – track a few homes and look and see what they are selling for its a simple as that, forget average prices, days on market and asking prices they mean nothing.
Subscribe to tosolds.ca and see for yourself.
Just because a home sold for 5% less than asking means nothing; the final price is what matters! I can ask too much or too little, in the end its the selling price that counts.

#98 Rational Optimist on 07.23.13 at 1:52 pm

92 Basement Dweller on 07.23.13 at 1:01 pm

Canada has a subprime mortgage segment: I know, as a few of them are my neighbours and coworkers. I have read that late 2011 and early 2012 were the peak (last year’s sales were not good), so you won’t see them around until their renewal time- 2016 or so.

“As the 3% percent mortgage holders lose their guaranteed rate by the end of August we will get a better sense of the market conditions.”

This is a really good point. Let’s say holds are 90 days (some 120, some 90 or 60). The early days of June plus 90 days equals September 1, so we have to wait a few months yet to see if the pop up in bond yields and mortgage rates had some additional effect. I bet you’re right that the August Y/Y numbers will look fairly rough.

Prices are sticky, right? We all know people with anecdotes about stubborn sellers who refuse to lower their prices and have been on the market for some time. As sales slow, they’ll have to, but there needs to be some real catalyst for sellers to lower their prices.

The catalyst will be people who had put 10%, 5% or less down on a house in 2011 and 2012, and who can not afford the increased payment at the end of their term.

#99 father on 07.23.13 at 1:59 pm

garth I think the blog dawgs want you to take out your crystal ball to see how much prices are going to drop lol

#100 Craig on 07.23.13 at 2:14 pm

#96 frank le skank

I’ve said all along I expect a correction of 10-15%.

It’s normal and healthy when prices get extreme.

As far as a % for a crash, best to direct that question to the crash experts, who have been bashing RE for years now. Although I do recall some of them saying 40% to 50%

The US didn’t even hit that number and they had a complete financial meltdown.

#101 Realtor # 1 on 07.23.13 at 2:16 pm

#98 Rational Optimist

“The catalyst will be people who had put 10%, 5% or less down on a house in 2011 and 2012, and who can not afford the increased payment at the end of their term.”

They would need to renew at an increase of 1.5 percentage points from their initial rate for any real increase in their mortgage rates. You will need rates to be in the mid 4s.

Subprime in America was very different rates rose with years not every 5 years. They can also choose the variable rate or a 3 year rate.

#102 Junior Garthologist on 07.23.13 at 2:26 pm

#99 father – garth I think the blog dawgs want you to take out your crystal ball to see how much prices are going to drop lol
—————————————————
Yeah! The blawg dawgs want the blawg gawd to predict the future!

#103 Old Man on 07.23.13 at 2:31 pm

I just want to give a message to those in the east who are thinking about moving west, as if things blow you will be coming home. Now lets look at Real Estate as a ratio of income, so are you going to chase a salary for high expenses? Forget the illusion as the net is the key, and do your homework adding in the important factors in life which money cannot buy, as life is what you make it as a husband and wife.

I did some research with a target town in Nova Scotia, and one can buy a nice home now for under $100K that overtime might need a few updates, so a husband and wife working making a modest combined income of about $75,000 a year has it made. The town I chose has a population of about 9,000, and two major Canadian corporations are based there too; not to mention so many other ways to earn a living.

Perhaps for the wise it is not the time to move west, but to move eastward into the Maritimes; those with money this might be an opportunity to cash in the chips for a better lifestyle free of debt to do other things in life, and you will have nothing to lose by giving it a try. Time to think out of the box a bit as there are alternatives with great opportunity.

#104 Seth Perry on 07.23.13 at 2:37 pm

This Real Estate Agent apparently didn’t pay his photographer / web guy.. oops!

brianschiebel.ca

#105 Statistics! Statistics! on 07.23.13 at 2:39 pm

Prices are going down and down and down. But when I try to find a listing that would reflect that I can’t! Why! Why!Why!

I WANT A CHEAPER HOUSE:)

I’ve waited since 2007! How much longer, Garth. When will we see prices recede to at least 2007 levels?

#106 Bob on 07.23.13 at 2:52 pm

#87 – “Would you like me to change your oil, while I’m at it? — Garth”

#99 father – “garth I think the blog dawgs want you to take out your crystal ball to see how much prices are going to drop lol”

#102 Junior Garthologist – “Yeah! The blawg dawgs want the blawg gawd to predict the future!”

—————————————————–

Gee, and I thought you guys were experts… As for predicting the future, I also thought that’s what Garth did.

#107 Gyga on 07.23.13 at 2:58 pm

Garth told us to wait
6 years of low interest and at least 30% of increase value
Missed an opportunity of a life time.
Although it is hard to blame Garth for that insanity

(a) I told you not to have too much net worth in a house. Waiting was your decision. (b) Low rates have been in effect four years, not six. — Garth

#108 T.O. Bubble Boy on 07.23.13 at 3:05 pm

For the currency conversion approach, there are hundreds of dual-listed companies:
http://www.superstockpicker.com/canadian_US_stock_symbols.html

Something like BCE, RBC, TD, CN Rail, etc. with high enough volume and low-ish volatility seems like the best fit.

#109 Mister Obvious on 07.23.13 at 3:08 pm

#54 vangrrl

“A law was passed in BC a few months ago that common law couples share assets and debt equally upon separation. No different than a married couple”
———————

To be accurate: only those assets and debts that were acquired or incurred from the time of cohabitation.

But I will admit, sorting even that out might turn into a nightmare too.

#110 Bobby on 07.23.13 at 3:15 pm

For # 95 Robbie,

I’m a buyer, looking here in Victoria and your description of the market is quite correct. Many of the homes that I’ve been looking at are languishing on the market. Some have price changes, but they are minimal at best. Speaking to some listing realtors, they use comparables that sold at the height of the market. I’m left wondering if it is the realtors or the sellers that are out of touch.

I’ll take my time. But just wondering how some realtors are hanging on with the slow sales?

#111 frank le skank on 07.23.13 at 3:24 pm

#100 Craig on 07.23.13 at 2:14 pm
I’ve said all along I expect a correction of 10-15%.
——————————————————
I can’t say that I read every comment but I was not aware you predict a 10-15% correction. I find it interesting that you make such a distinction between crashers vs the correctionalists. From reading your posts I would have assumed you were a RE pumper. You have rhetoric similar to a RE agent but the opinion of a contrarian.

#112 jess on 07.23.13 at 3:39 pm

cheaper house… how about this 10sq ft.er! Perhaps they can ship these out to those boom fracking towns

Chinese sleepouts ‘cheaper than renting’
By Anne Gibson

Sleepouts built in China are insulated, double-glazed, have a deck and are being sold in New Zealand from $9990. Sleepouts built in China are due to arrive in New Zealand in containers in the next two months. Under 10sq m, they do not require building consent
The prefabricate sleepouts use assembly line construction.
that are insulated, double-glazed cabins with a deck are being advertised for $9990 to $12,000.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10901609

Time limits
“u shapes”?
http://www.therecord.com/news-story/3904613-people-make-mistakes-in-predicting-how-happy-they-will-be-study-says/

#113 Rational Optimist on 07.23.13 at 3:42 pm

101 Realtor # 1 on 07.23.13 at 2:16 pm

No one is saying that subprime in Canada is exactly the same as it was in the U.S. The question is usually asked whether it exists, and definitely it does. Not all subprime lending in the States was characterized by teaser rates, nor did it have to be to cause problems for many borrowers.

The most popular mortgage term for Canadians is the 5-year closed. Not only that, but the popularity exceeded its usual level in 2011, with an increased number of buyers opting against the variable rate as discounts were not as generous as they had been shortly before. A lot of mortgages will be coming due in 2016 and 2017, many with borrowers who have very little equity, and may be close to the new ratios even without an interest rate increase.

You don’t think rates will be in the mid 4s by 2016? If they’re not, we’re in bigger trouble anyway. They could be a lot higher, though. 6% could happen. I’m not saying everyone who bought after 2011 in certain circumstances will be needing to sell. But you can’t say that no one will. There’s a lot of risk, and enough people for whom one setback could cost them their homes that it will happen with at least some of them.

#114 craig on 07.23.13 at 3:56 pm

#109 frank le skank

You have rhetoric similar to a RE agent but the opinion of a contrarian

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

Refreshing, no?

#115 Donald Trump on 07.23.13 at 4:01 pm

DELETED

#116 rosie "moving forward" on 07.23.13 at 4:12 pm

This is how it played out in the states. A violent correction, crash if you will. Of course it will be different here. http://www.condo.ca/real-estate-prices-skew-wealth-stats-between-canada-us/

#117 Timing is Everything on 07.23.13 at 4:18 pm

Low rates have been in effect four years, not six. — Garth

Of course. It’s not 2015 yet.

;-]

#118 Bob on 07.23.13 at 4:39 pm

#107 Gyga – “Garth told us to wait
6 years of low interest and at least 30% of increase value
Missed an opportunity of a life time.
Although it is hard to blame Garth for that insanity”

“(a) I told you not to have too much net worth in a house. Waiting was your decision. (b) Low rates have been in effect four years, not six. — Garth”

———————————————————-

So, now how many of you blog dog forecasters think that we are going to correct at least 30% nationally just to get back to 2007 levels? Oh yea, in 2007 this blog was also predicting a bubble.

No blog in 2007. — Garth

#119 Uwinsome on 07.23.13 at 4:47 pm

Well, it looks like the Elfin Deity (or F if you prefer) like this blog likes to affectionately call him – WAS RIGHT.

He correctly engineered a soft landing for real estate.

Pop the cork Vancouverites – you won!

#120 Old Man on 07.23.13 at 4:52 pm

#105 Statistics Statistics – I have a bargain for you like an Honest Ed’s special parked for you on a lot. Buy my sordid home trailer for $15,000 and we have a deal; am an honest man as it might need a few updates, but it looks good.

#121 jess on 07.23.13 at 5:02 pm

“Church of Finance” metaphor

Clayton Christensen of Harvard Business School, one of the world’s foremost authorities on (genuine) business innovation

he asks : Why is financial capital flowing disproportionately to innovations that do not produce jobs?

http://www.deseretnews.com/article/765617333/The-new-church-of-finance.html?pg=all

#122 Observer on 07.23.13 at 5:02 pm

#87 craig on 07.23.13 at 12:55 pm
I would love to hear your definition of a crash vs a correction.
==============

I alway thought a correction is 10% whereas a crash is approx greater than 10 to 25%

But there’s more, its also the duration. If its a single blip for a short duration its a correction whereas if is a long buildup of consequitive drops is a crash!

If you look at the Okanagan and whistler, the prices have not corrected its crashed. and still crashing. Anymore crashing would be considered a WIPEOUT.

Look at detroit Real estate it did more than crash

#123 Greg on 07.23.13 at 5:10 pm

Hi Nastra, I just wondered if you had heard about this.
“In most free and democratic countries, journalists hold governments accountable.
Stephen Harper is trying to put an end to that….”
For more info and to Please join the campaign by signing the petition!
http://www.friends.ca/freethecbc/care2/
(Sorry Garth it’s not about houses.)

#124 Snowboid on 07.23.13 at 5:12 pm

#100 Craig on 07.23.13 at 2:14 pm…

Many folks we know (including ourselves) purchased US real estate in 2010 for about 35% of the peak value from 2006.

Some places we looked at were less than that, but required too much to renovate.

Not saying this will happen in Canada, but in the Okanagan condo prices are already down 20-30% from peak.

You are probably correct that the Okanagan prices will only go down 10-15% more – that’s what we are banking on.

Patient as ever…

#125 Greg on 07.23.13 at 5:15 pm

Hi Nastra, This doesn’t bode well for people’s health.
“Despite a number of studies linking exposure to the chemical with diseases including types of cancer, the EPA is increasing the amount of glyphosate allowed in oilseed and food crops….”
http://rt.com/usa/monsanto-glyphosate-roundup-epa-483/

#126 Robbie on 07.23.13 at 5:18 pm

#110 Bobby
Mostly it is the Sellers who are out of touch and want to list at unrealistic prices. A Realtor earns his/her living through sales so listing too high definitely reduces the chance of a sale. Of course, some Realtors will agree (or suggest) to list very high to get the listing and then wait until the asking price is slowly reduced until it (hopefully) finally sells. I’ve had a couple of Sellers insist they wanted to list at far too high a price and I have told them I won’t list the property at that price. Of course, it does help that I mainly work with Buyers and I have other sources of income. How are Realtors surviving? The top 5% (who make most of the money) are still doing pretty well, it’s the others, especially the ones in the bottom 50% of sales who are really suffering.
Bobby…P.S. Don’t do your Real Estate searching without a good Buyer’s Agent who can show you the current sales, not “comparables” from years ago and give you honest opinions on properties and prices…the Seller’s Agent can’t do that. There are some realistic Sellers out there…it is just a matter of finding them.

#127 jess on 07.23.13 at 5:29 pm

private equity /hedge

The zombies of Mayfair Private equity firms and hedge funds with their hidden fees don’t just skew markets – they often aren’t even very good. So why is your pension probably invested with one?

By Nicholas Shaxson Published 04 July 2013 8:41

http://www.newstatesman.com/economics/2013/07/zombies-mayfair

#128 Realtor # 1 on 07.23.13 at 5:36 pm

like I mentioned earlier if interest rates is the catalyst for
a crash it should have happened already.

It is more expensive today to borrow money than it was three years ago. In 2009 rate was 3.65% in 2010 3.5%
with 35 year amor periods. Today its 3.5% 25y/30y amor periods.
You will need to wait for interest rates to be well into the 4s and variable to be in the mid 3s

#129 bill on 07.23.13 at 5:39 pm

#119 Uwinsome on 07.23.13 at 4:47 pm
thanks for the laugh man!
what a card!

#130 Bobby on 07.23.13 at 6:12 pm

For #126 Robbie,
Thanks for your feedback. Unfortunately, I haven’t had great luck with realtors, whether as a seller or a buyer.
In a recent purchase, my realtor made great overtures about being a so called “buyer’s agent”, but I only got the info if I asked for it. You would think a recent sale in the same building would be worthwhile information, wouldn’t you?
Unfortunately, since realtors are paid on commission, and the seller is paying that commission, they are only getting paid if they facilitate a sale. So….from where I sit it corrupts the information process.
I would like to hire a realtor on an hourly basis, as it would hold both of us to account. Until then, I will keep looking on my own.

#131 Van guy on 07.23.13 at 6:19 pm

Garth,

Did you catch Ron Paul today on cnbc? Just wanted your opinion on what he said about Detroit and $ printing.

Thx!

Ron who? — Garth

#132 TurnerNation on 07.24.13 at 7:16 pm

Get ready for a methane tax? CrowdedElevator guy…

I am a global warming denier. Soon to be jailed, I am sure, along with those who question historical events (9.11, and earlier…)

http://www.cnn.com/2013/07/24/world/climate-arctic-methane/index.html?hpt=hp_t2

Scientists have long worried that thawing the permafrost soil of the high northern latitudes could release large quantities of methane, a greenhouse gas far more potent than carbon dioxide. U.S. and Russian scientists who study the region say methane has already started bubbling up from the floor of the East Siberian Sea — a region believed to hold to 50 billion tons of the gas.

#133 Lisa on 07.25.13 at 7:31 pm

Thank-you for your reply Garth, we are taking your advice!
Just for the record, my partner did not create his credit card debt alone – I was kind enough to help.
We are both ashamed that we let our debt get away from us. Here’s hoping we’ve learnt a lesson or two and will no longer live beyond our means.
Buster will get one new squeaky ball a month.

#134 Lisa on 07.25.13 at 9:46 pm

I’m shocked at the negative responses but grateful for the positive, helpful ones. It is sad the number of people who have never experienced a true partnership. My partner helped put me through Grad school and and paid for my physical therapy after the car accident. We do not have many toys but we eat well and live happily. We got into this mess together, we get out of it together.
Thanks for all the feedback!