Lousy endings

VETTE

Updates. First, the continuing saga of moldy cowboys.

Days ago I told you about the travails likely facing a slew of people wanting to buy, sell or mortgage properties in the wrong parts of Calgary. Those are the soggy bits, of course, that prime real estate along the shores of the Bow River where the waters leapt their banks three times in the last eleven years.

As I expected, everything is back on the table. That includes almost 1,000 deals where buyers and sellers had a transaction pending when the rains came and the rivers swelled last month. Unknown are the number of homeowners  (plus those in poor, drowned High River) who have mortgages coming up for renewal.

The issue’s simple. What are the houses now worth?

This question’s deeper than it seems. The concern on the part of mortgage lenders, plus insurers like CMHC and Genworth, is not just for those places with trashed basements and ruined drywall, but for property values in wide swaths of land where nature is pushing back. That led this week to lenders like Scotiabank sending mortgage brokers a list of postal codes within which every deal is to be reopened and all properties inspected or reappraised. Says the bank: property owners will pay for it.

For example, if you live in Calgary in a house in a hood in a zone with a certain prefix (T2N, T2P, T2R, T2T, T2S, T2G, T3B, T3C, T2V, T2H), you’re affected. The value of your home may be reduced, which means the buyer qualifies for less in the way of financing, which could blow up your deal. Also of concern, as I mentioned, is what this does for mortgage renewals. And in it lies a lesson about real estate and the lenders most people rely upon.

Let’s revisit my example. A home valued at $600,000 has a $480,000 mortgage. The appraised value drops 15% – devalued because of its location in a flood-prone zone or (more likely) due to a general market decline. The maximum loan-to-value for a conventional mortgage is 80%, which means the mortgage company will renew only $408,000 (that’s 80% of the new value of $510,000). But the homeowner owes $480,000, which means he or she has to pay $72,000 in order to retain the mortgage.

This is not a far-fetched scenario. Every time a mortgage comes up for renewal in Canada, it’s open for negotiation. Just because you kept your payments current and gave TNL@TB home-made fudge at Christmas is no guarantee the loan will not be reviewed, reduced or denied. It does not take a flood to do this, as the US experience demonstrated. But I guarantee 99% of Canadian homeowners will never give it a second thought, and never prepare.

Why? Because real estate always goes up. Everyone in Calgary knows that.

Which bring us to BC, with trepidation.

Yeah, yeah, I know what all those posters said here two days ago about the tsunami of horny HAM pushing Van-area real estate values eternally higher. Despite the fact 94% of buyers are Canadian residents, with 88% being local, it’s always easier to blame others for something you just did yourself – like getting suckered into the housing vortex in a dysfunctional market.

At least Kate admits it.

I got sucked into the real estate market about a year and a half ago with ideas of someday “moving my way up” and having a ritzy condo somewhere in Coal Harbour in Vancouver, and basically living the dream.  I gave up my 1 bedroom apartment in Olympic Village that I was renting, to chase the white rabbit, and ended up buying a 1 bedroom place in New Westminster.  Went from living by the water and biking to work, to living in the ‘burbs and driving 45 minutes to work each way.  And for what?  The idea that has been fed to me since birth that if you own a place you’ve really made it, you’re independent, and it WILL pay off.  Real estate is an investment after all….

Fast forward to a few months ago, where I met my wonderful boyfriend Jason (who is a dedicated reader of your blog) and he started giving me facts that I simply can’t ignore.  So I got in touch with some real estate agents and the news I received was not pretty.  I purchased my place in the fall of 2011 for $206,000.  Today?  It would list at $190,000 – and that’s still no guarantee it would sell at that price.  That’s not even close to enough for me to break even.  I’d walk away with probably between $15,000 – $20,000 in debt.  It makes me sick to my stomach.  But the burning question is – if I wait until this time next year, will my place then list for $170,000?  Do I “wait it out” as they say?  Or do I cut my losses and get the “F” out??  I’m stumped!!

If Kate lists for $190,000 and is lucky enough to sell for $180,000, she’ll net about $170,000 after commission, break fee and legals. If she bought with 5% down, she’ll need a cheque for at least $25,000 on closing day, and also will have forfeited her $10,000 down payment. That’s a loss of 350% in two years – plus she surely paid more a month as an owner (mortgage plus strata fees and taxes) than it would have cost to rent the same digs. The negative ROI is, thus, staggering.

And the answer to her question? Simple. Get out. The losses accrue monthly. There’s no reason to anticipate a recovery in the coming years, and many to expect worse. As thousands of young Kates realize real estate’s a dangerous asset they were seduced into, the market will shred.

Did I ever mention this won’t end well?

167 comments ↓

#1 Steve French on 07.25.13 at 5:11 pm

what is this i see?

is that a dagger i see before me?

could it be?

to be or not to be….

the fiercest of firsters?!

#2 guelphstudent on 07.25.13 at 5:18 pm

It is so sad that majority of people are oblivious of what’s to come. At the same time it is their fault, instead of watching America Got Talent, they should be researching the housing market before jumping in and trusting their Realtor. Some people truly behave like sheep!

#3 robert james on 07.25.13 at 5:20 pm

Kelowna tops in Canada for crime .. It would certainly be nice to get DA `s perspective on this … Move to Kelowna !!! We are Number 1 !!! Whoo Hoo !! LOL http://www.castanet.net/edition/news-story-95604-1-.htm#95604

#4 Bill Gable on 07.25.13 at 5:21 pm

Kate – you can take some comfort, sadly, that you are NOT alone.
Mr. Turner is right of course. (*The Bearded Oracle knows much) Cut your losses. Then move back to a rental DT and forget giving up your life, sitting on Public transport.
RE will be radioactive in Vancouver for a decade. Save your pennies and swoop in and vultch when prices approach the norm. Right now, the price valuations are lunatic and I think that Real Estate Boards should be hauled up in front for a Parliamentary enquiry, to explain their side of this lending nightmare we are starting to see unfold.
What will be clear for all to see – the banks got greedy and flew too close to the quants in the basement, and now the CDO’s and garbage Derivatives of the ‘shadow banking’ system, are starting to smell.
No, this will not end well.
Kate. Again. Take your lumps – but get out – NOW.

#5 Rob on 07.25.13 at 5:26 pm

Oh well, she learned the hard way. The question is how long will she take a beating until she makes the tough decision of taking a small loss now or a lot bigger later ( thats if it sells once the fear kicks in, or has a job when renewing mortgage). So Garth, what will you do with that $1000? Keep it in cash until a undervalued stock comes under your radar. Dividend paying over the next decade or so will bring you more happiness then driving your hummer for 20 min.

#6 Steve-O on 07.25.13 at 5:28 pm

I looked at a condo recently. A guy bought it by himself but then he found a girlfriend and they moved into a different location together so now he needs to sell his place.

It seems surprising that single people who know they want to find a partner were buying property that would not be compatible with their future relationship plans. Clearly everyone thought that it would always be possible to sell when they needed without taking a loss and they weren’t planning on being able to hold the property for many years if they needed to.

Are there any stats on this?

#7 Old Man on 07.25.13 at 5:29 pm

There was a time in my life that blew a headbolt on a leased car, and no part could be obtained in North America for a few weeks. So they gave me a loaner vehicle which was a Corvette; no problem with me, as this was a hoot in my life. This was a car that needed to be taken home for my daddy to take a ride, and on hwy 401 was low on the road passing all the cars as was an amazing power vehicle on the road. My dad was happy as gave him a great ride with the pedal on the floor in a small town, and he loved it.

#8 zeeman1 on 07.25.13 at 5:32 pm

7th!

#9 craig on 07.25.13 at 5:39 pm

Yikes!

North pole turned into lake from global warming

Startling footage from the North Pole, showing a lake where dense ice should be, has left people shocked by the devastating effects of global warming.

http://www.cbc.ca/news/yourcommunity/2013/07/north-pole-turned-into-lake-from-global-warming-3.html

#10 Uwinsome on 07.25.13 at 5:39 pm

KELOWNA is Number #1 – in Cities across Canada for crime. This should help the sales and property values.

http://www.vancouversun.com/news/Kelowna+highest+crime+rate+Canada+report/8706871/story.html

#11 Unknown Marketer on 07.25.13 at 5:39 pm

I read about Kate and I ask myself when did owning a depreciating asset ( New West Condo ) and in debt improve her status in the world vs renting ( No Debt ).

The price we pay for “Status”. I have met a ton of people like Kate. When she stops worrying how it looks she will make better decisions. And I think there a lot more stories like Kate playing out right now. GT is right this does not end well.

#12 Mister Obvious on 07.25.13 at 5:44 pm

” The idea that has been fed to me since birth that if you own a place you’ve really made it, you’re independent, and it WILL pay off. Real estate is an investment after all….”
——————————–

Real estate most certainly is an investment but its a non-sequitur to say that it WILL pay off. That’s the point that is always missed.

Lots of investments do not pay off. Believe me, I’ve had dozens of them. Why should a house be any different. An investment should not escape due diligence simply because one lives in it.

#13 Crowdedelevatorfartz on 07.25.13 at 5:47 pm

Get OUT while you still can.
$25k loss will feel like nirvana…………

#14 Sebee on 07.25.13 at 5:51 pm

What a lucky guy! He new to keep the old Mustang in the garage.

Now he can get himself the new/better/faster Stingray Vette.

#15 Jesse on 07.25.13 at 5:51 pm

Steve n me need to get a life.

#16 Mike on 07.25.13 at 5:52 pm

Could have been worse Kate, at least you didn’t purchase a condo in Richmond’s flood zone.

#17 Mark on 07.25.13 at 5:53 pm

Kate found a keeper. :)

#18 schuler on 07.25.13 at 6:00 pm

Would those postal code lists have affected those with mortgage renewal, even if they were not flooded?
My house was in T2T, and I sold in May, 6 weeks before the flood. My mortgage would have come up for renewal in 2 years. And more of a worry, what would that have done to my HELOC?
Fortunately, mortgage and HELOC were paid out.
One of those “what ifs”.

#19 FK on 07.25.13 at 6:01 pm

Thanks very much for your blog. Only started reading 1 month ago, too late now since I bought a 640k house in Stouffville.

#20 Finally on 07.25.13 at 6:07 pm

I’ve warned many of my friends of the same scenario Kate is in now. Too bad nobody listens to me. My best friend bought a pre-completion 550 sq foot investment property condo in Olympic Village for $350K that is completing in August. Trying to flip with another 100’s of new listings now. Good luck!

#21 Julie on 07.25.13 at 6:16 pm

We just got out of our 2+den in Chilliwack to rent a nice big house. Could not be happier…….thanks Garth.

Oh and as for the “climate change” remark yesterday with the snow in Brazil? Everyone knows climate changes. Has been for 4 billion years. People are just pissed that govt feels it can TAX YOU on it is all. What’s next? Breathing tax?

Cheers

#22 Siva on 07.25.13 at 6:16 pm

Today on Income Property a couple bought a semi detached house $300,000 over their budget hoping to rent out the basement. The house cost $750,000. Basement has been vacant for five years as no one wants to live in it. Now they are investing another $56,000 so they can rent out the basement for $1400 a month. It scares me just hearing those numbers.

#23 DaveCalgary on 07.25.13 at 6:18 pm

Well, that’s the problem of viewing real estate as a short term investment and not a home.

#24 JL on 07.25.13 at 6:23 pm

“This is not a far-fetched scenario. Every time a mortgage comes up for renewal in Canada, it’s open for negotiation”

This is hyped up fear Garth and you know it. You’re old enough to remember that we have had several major market corrections in Canada over the past 30 years and every single time the Banks rubber stamped the renewals even though they knew 100% for certain that the borrowers were under water.

Why on earth would a bank holding a mortgage with a homeowner who has never missed a payment not renew the mortgage?? The idea of not renewing even if a homeowner is under water is completely illogical…

The bank is going to not renew a mortgage and create a massive headache for itself because they are afraid that an owner may default in the next few years which would then create a massive headache for themselves and potentially have to foreclose… So guaranteed headache by not foreclosing to avoid the POSSIBILITY of a foreclosure in the future.

No sane, thinking person would suggest that will happen en masse.

#25 Derek R on 07.25.13 at 6:24 pm

Prime property is along the banks of the Elbow (Elbow Drive, etc.). Property along the Bow (eg Bowness) is, shall we say, a little less than prime.

#26 But real estate always goes up on 07.25.13 at 6:26 pm

And this is just one example of someone with a 200k house. This scenario is magnified on those 500k shoe boxes in the sky.

So happy to be renting :)

#27 Ahead of the Curve on 07.25.13 at 6:27 pm

Well, I feel bad for Kate. I can’t imagine buying into a property without considering the impact a real estate correction would have.

I guess this strategy worked well for current boomers, but times are different now. I’m not sure I would advise Kate to sell, for 2 reasons. 1- not sure what is costing her now, versus what she wants to rent. 2- banks often have hefty penalties with breaking mortgages, and if that is her case, the cost could be even more substantial.

Good luck Kate and all who have followed her investment strategy!

#28 CalgaryFloodBoom on 07.25.13 at 6:32 pm

Garth,

Any chance you can say hi to RE agent Bob in Calgary? I know he’d appreciate it.

His pumping and anti-Garth message has reached a fever pitch recently and I’m afraid he might go over the edge unless someone pays attention to him soon.

Actually, I think he just really, really needs a sale.

#29 World Traveller on 07.25.13 at 6:36 pm

The question is did she buy it for investment or to live in. Shouldn’t she just live in it and try to enjoy the place? Or she regretting the commute and change off lifestyle, in that case she should have researched her choice more.
Could she not rent the place and move back? Or will the rent not cover it?

#30 Ronthecivil on 07.25.13 at 6:36 pm

Why lock in the loss? If she is making a decent wage it’s not like she might not be way over her head payment wise.

If she is then ya, I guess figure out a way to sell.

If not just start making double payments and what not to get your mortgage down faster.

Not a perfect solution but she has to live somewhere and while it might not be the most cost effective solution to simply up the payments in the meantime. And should things slump simply double down at that time and get the coal harbour place she wanted in the first place.

#31 Freedom First on 07.25.13 at 6:40 pm

Garth, it is truly heart breaking to read and see so many sad stories of Canadians on the losing end of their own financial decisions. Leveraging for any asset, especially when it means going “All In” on an asset like RE, is tragic enough. Now, add up all of the details of what can go wrong in doing this act of insanity, details that 99% do not even know or consider, it is a disaster waiting to happen. And it does. Which is why Warren Buffett says “there has been more money lost on leveraged RE than all other assets combined…..by far” and also why Garth is writing his free blog imploring people to be: balanced, diversified and liquid in their financial affairs. It boggles my mind on a daily basis when someone takes one thing out of context that Garth writes, and argues with it, when, if they took the time to just read his blogs daily, Garth spoon feeds everyone all the information you need to know to keep from being financially castrated. Like the post Garth wrote today, the devil is in the details. The consequences of what you don’t know, are horrific, and, you never even saw it coming. Funny, that’s what MSM always writes after a financial catastrophe “Nobody saw it coming”. Well, this is why Garth says “play safe, be defensive” for a reason, always be balanced, diversified, and liquid. Or, there will be consequences. No exception. And don’t forget, “Always blame yourself”. Forget HAM or any other bs excuse. Garth, I think I’m getting kinder, and I don’t even argue with morons anymore. Freedom First.

#32 visorman30 on 07.25.13 at 6:41 pm

I run into this counter argument from coworkers etc. where they say that if they just live there long enough then they won’t need to realize the loss and incur those transaction fees.

Is there much of a rebuttal for someone who is legitimately looking to stay put for 10+ more years?

#33 Consider your options carefully on 07.25.13 at 6:44 pm

Oh Kate! The options!
1) Wait it out: if this is what you choose, be prepared for the long haul. Personally, I would not count on a rebound for at least a decade. This means counting your costs over that period and comparing to renting (and the loses you will suffer selling now) over the same period. This will help you decide whether it is worth it.
2) Double Down: Pour as much cash into the place as possible in the hopes that you can reduce payments on renewal and make it profitable to rent it out. If you can cover (all) costs with the rent then you have actually turned it into an investment and you will care less what happens to the price. Even if you just break even on the rent, at the end of amortization you are left with an asset some one else paid for. Of course, this means renting yourself. I have done rough figures for G. Van. and think you need about 50% equity in a property to break even renting it out at current prices. So many variables though… If you are thinking of this route, know ALL your costs. Mort., Strata, water/sewage, taxes, Insurance and a contingency fund for unforseen special assessments (my experience is that Strata counsels never charge enough to cover that eventual envelope replacement.)
3) Get out, GET OUT NOW!: This is a cut your loses approach. Hon. GT did some quick numbers but, he left out a few smaller ones. Base line, expect loses. Longer you wait, higher the loses. But, there are ways to lessen the impact. You do everything you can to get the highest price and be ready for a quick deal. This means Staging, prepacking, having a place to go with short notice. These will ensure that you are not putting conditions in the deal that will make buyers reluctant. Everything you can do to make it as easy for them as possible will help close a deal. You can also list yourself, this will lower your buyer pool but, also save big $$$ and may attract serious buyers (if pushy lowballers…) Goal here is to reduce loses and be able to get out anytime they want possesion. Nothing will kill the horniness of a buyer like a three month wait while you find a rental.
4) Walk away: You just walk away. Declare bankruptcy. This one really hurts though so, think long and hard. Talk to pros. Liquidate everything you can without penalties. This is last case scenario but, you may end up better off depending on your assets, income etc and what the loses actaully are. I don’t know anything about this route except that a friend has gone through it and came out alive (barely.)

#34 Burnt Norton on 07.25.13 at 6:44 pm

Been there, done that, got the t-shirt.

Join the club, Kate.

Take the hit then get a fee-based advisor.

May the force be with you.

#35 kilby on 07.25.13 at 6:46 pm

We are so lucky to be out of Vancouver but have to sell a 2 bedroom condo in Victoria this fall, not expecting much but as we have had it ten years we will likely break even.

Interesting news today that Kelowna has the highest crime rate in Canada (2012) that can’t be good for the real estate market there……

#36 valleyrenter on 07.25.13 at 6:49 pm

Sure seems like most of the houses in Abbotsford for sale are Reno flips or belong to the floral print couch crowd.

#37 darkselling on 07.25.13 at 6:54 pm

People who buy housing and consider a sale after two years should expect to lose money regardless. Transaction fees, mortgage fees (IRD, break fees, porting fees), moving fees, buying or renting something new, etc. The ongoing debate aside (and Garth’s continued Calgary bashing without decent research vs. a few silly stories) if you’re considering buying a house you should at least intend to live there for 5-10 years. If not you’re asking to lose money.

With respect to having to pay down a mortgage at maturity – I have yet to witness that happening. Maybe it will one day, but I doubt it. Banks would just end up passing the problems onto themselves when people walk because they can’t come up with x many dollars.

#38 Babblemaster on 07.25.13 at 6:58 pm

Kate, you sound like a wonderful girl and your boyfriend is lucky to have you. You actually pay attention to facts. How refreshing!

Cut your losses Kate. This won’t end well.

#39 Musty Basement Dweller on 07.25.13 at 7:02 pm

I feel for Kate. Hearing real life numbers really drive the sad facts home. I wish that the hundreds of idiots that I still constantly hear saying “you’re throwing your money away on rent” or, “why pay someone else when you can pay yourself”., would realize the math involved investment wise in stories such as Kates.

#40 aggie on 07.25.13 at 7:17 pm

Kate, get out, now. See Garth’s chapter on how to do exactly that, in his book, Money Road. Pronto!

I am so glad I did exactly that, except that I received the book and read that chapter just after I’d signed with a kindly ‘friend of the family’ realtor — instead of with the whippersnapperliest agent in the area. Had we moved faster and with more immediate commitment to the cause, I know I could’ve sold sooner at a better price.

Nonetheless, I count myself lucky for having sold my condo after only 2 months on the market, when other neighbours took much longer to sell. I swung into action as soon as that book arrived! Some of those condo listings are still, over a year later, sitting there, stuck.

Anyway, I sold mine at 20K below purchase price, which was almost the same as what I still owed (thanks to zero down and the CMHC fee that had been tacked onto the mortgage — like they say, some people take more time buying a dress than they do buying a home, with no clue what they’ve signed on to), had to pay the shortfall, for which I was able to retain a line of credit and take the past year to repay.

I’ve been happily renting (close to work, shops, parks!) ever since, and recently was finally able to start up a TFSA, never having had the spare cash before. I am now growing my equity, following a lot of the advice given here. This would never have been possible had I hung on to that condo, with the ever-swelling strata fees, property taxes, and special levies.

Good luck, Kate, and keep checking this dear pathetic blog regularly for more advice!

#41 craig on 07.25.13 at 7:17 pm

Kate, you come to a blog loaded with renters and ask if you should sell your condo and rent.

Do you seriously expect an unbiased opinion?

ON PAPER, you’ve lost $16,000

How much of the mortgage have you paid off in 1 1/2 years?

How much rent money would you have thrown away by renting for 18 months?

I’m not telling you what to do but you should do a lot more investigation, before making such a serious decision.

Buying and selling is very expensive and you wouldn’t want to be kicking yourself if that condo is worth $225K 5 years from now.

Realtor porn. Run, Kate, run! — Garth

#42 peter schift on 07.25.13 at 7:19 pm

if the usa is rebounding and facebook is sooo hot
then why is gold rebounding as well? what is the market
telling us? caterpillar is in the toilet- what does that tell
u? the world economy is going no where fast.
sell real estate and prepare to buy eeal money.
remember q e is not training wheels it is the whole
bicycle

#43 robert james on 07.25.13 at 7:20 pm

Move to Kelowna and buy a house or two.. You will have that Okanagan life style and be able to rub shoulders with some of Kelowna`s fine citizens like these guys… http://www.youtube.com/watch?v=KGb3h7AAHE4

#44 aggie on 07.25.13 at 7:23 pm

p.s. I kinda don’t believe you entirely, Garth, but there I go, probably being naive again.

I’ve always been assured that there’s never any problem with renewing a mortgage if you can still make your payments, that the original agreement and terms would always be honoured and grandfathered.

Would they really, truly re-evaluate the value of the property and make you come up with $$s if your recalculated equity is too low!!??

#45 El Blanco Loco on 07.25.13 at 7:27 pm

New West? Anything east of Main is dreadful. Sell.

#46 Saskatoon-Living on 07.25.13 at 7:30 pm

Admit it Garth, it’s different here in SK:

http://www.thestarphoenix.com/business/money/Saskatchewan+household+worth+fastest+growing+Canada/8708016/story.html

#47 Nemesis on 07.25.13 at 7:37 pm

@Kilby/#36

RE: KelownaKrimeRate

Now you know why they’re hosting a TattooFestival next month…

[NoteToSmokingMan: That's Anomie@Werk, so to speak. ...& why the OkiNogan is my SocialLaboratory.]

#48 Vangrrl on 07.25.13 at 7:38 pm

Lived at Olympic Village by the water and biked to work? Kate, you were already living the dream.
One thing though, did you meet Jason in New West?? ;)

#49 takla on 07.25.13 at 7:40 pm

re #24 JL the problem many will encounter here is renewals for the aged baby boomers.Bankers can do math better than most and if your carrying 200-300 tho or more morgage debt and you and your wife are 55+ that gives the two of you approx 10 yrs of employable yrs to pay that debt.Good luck.Add on top of that miserable outlook the fact your home value is deflateing ,,,interest rates riseing …well you get the picture

#50 Don Ercole on 07.25.13 at 7:41 pm

Plus – what are Kate’s monthly condo fees? Hope it’s not a highrise…or a 3 story wood frame construction built in the 70’s. Yikes! The ring of highrises around Toronto are in the same boat. Monthly fees in the $500 range (and higher) is death. The infrastructure that provincial/federal gov’ts face (paid for by the taxpayer of course) are the same nightmare that condo owners face across the country. People on the wet coast can buy and live cheap in abbotsford (chicken manure dumped on the homeless) or Chilliwack (no manure there) – but it ain’t as sexy out there as it is at hastings and carrall. Real estate is a great future if you buy low, and prepay the heck out of the mortgage. When you buy at age 25, you want to think about living in the place at age 45…but think about it now not later!

#51 Smartalox on 07.25.13 at 7:47 pm

Kate I too, was in the same boat as you. Six years ago, I had paid off my debts, and had ‘arrived’ in life, so I went out and bought a condo. It was in a great location, the ultimate bachelor pad. The problem was that the first woman I had over, stayed. Three years out a five-year mortgage term later, I sold my place and had to write a cheque for $12 000 to cover the cost – mostly the break-fee for the mortgage – and moved into a rental.

I’m still bitter about the break fee, but I feel a lot better because I:
– sold a year before a special assessment was ordered (my bill would have been $55 000)
– currently rent twice the space for less than my mortgage payment, never mind the monthly cost of condo fees and taxes
– plowed thousands of dollars into TFSAs, RRSPs and non-registered investments.

In the three years that I’ve been renting I’ve more than made up for the money that I lost on the sale.

#52 TO and GTA Sales and Stats -July 25 -Avg SFH sold in TO -200K under June average (866K) on 07.25.13 at 7:48 pm

http://recharts.blogspot.ca/2013/07/416-and-905-condo-sales-and-stats-july_25.html

http://recharts.blogspot.ca/2013/07/905-sfh-sales-and-stats-july-25.html

http://recharts.blogspot.ca/2013/07/416-sfh-sales-and-stats-july-25.html

#53 Daisy Mae on 07.25.13 at 7:52 pm

#21 Julie: “Everyone knows climate changes. Has been for 4 billion years….”

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

Yes. Alot of fuss about nothing.

It’s called ‘evolution’.

#54 T.O. Bubble Boy on 07.25.13 at 7:54 pm

Garth’s word is spreading… Toronto Life actually calls their RE articles “Real Estate Porn” now!
http://www.torontolife.com/toronto-real-estate-porn/

Speaking of Toronto Life, their latest “The Chase” article is just silly… a 27-yr-old chases down a $600k-$800k house because “After renting for eight years, mostly around Bloor and Christie, Julia wanted to buy a house downtown but couldn’t afford one.”:
http://www.torontolife.com/informer/toronto-real-estate/2013/07/09/july-2013-the-chase/

Well, gee… if you can’t afford one, obviously you should buy one!

Who says Gen Y doesn’t know how to manage money?

#55 Nemesis on 07.25.13 at 7:54 pm

Addendum:

I almost forgot…

…and more than likely why Premier KrispyKlark has decided to FeatherHerNest there.

#56 Suburban Princess on 07.25.13 at 8:02 pm

I do commend Kate for initially renting in Olympic Village and not buying in!

I feel Kate’s frustration; I suspect we’re about the same age. It hurts to realize that the well-meaning advice we’ve been fed since birth turned out to be harmful.

And Steve-O, thanks for the point about single people buying real estate. For my immigrant Boomer parents – the original HAM back in 1975 ;) – the (decent) career happened first, then the marriage/family, and then a house quickly afterwards. Though I haven’t hit the first two milestones, they’re still hoping that I get that house (and they’re willing to give me money to help!) Thanks Garth for giving me the strength to not take the bait.

#57 Donald Trump on 07.25.13 at 8:06 pm

Wealthy people say ” your first loss is your best loss “.

There is not even a speck of evidence that prives will be maintained let alone increase.

Cut your losses ASAP.

#58 Kilt on 07.25.13 at 8:14 pm

94% are Canadian Residents.

I would be interested in seeing how many home purchases in Vancouver (especially at the high end) have been made by people who have obtained residence in the last 10 years.

Or how about how many are investors or high net worth immigrants.

Kilt.

Ten years? You serious? — Garth

#59 waiting on 07.25.13 at 8:18 pm

Kate – you sound like a smart girl! You might have made a mistake but you’ve realized it. You also found a smart guy.
Many years ago my new husband and I decided to use all the money we received as wedding gifts ($2000) to buy physical silver. It was a few months before the Hunt brothers cornered the silver market and we bought at the absolute top just before it all crashed. I had a lovely silver doorstop for many decades … and learned some good lessons the hard way. It seemed like such a loss then, but seems funny now.

#60 Blobby on 07.25.13 at 8:28 pm

$200k to live in new west??!?

I hope at the absolute least – that it’s a big apartment. I wont ask if it has a nice view – as a nice view of new west, just doesnt happen.

#61 takla on 07.25.13 at 8:30 pm

By the way,it would have been a far LOUSIER ending if the classic 65’shelby mustang in the garage had bit it instead of the cookie cutter corvette.looks to me like the home owner had a home equity loan or two to afford those rides………

#62 craig on 07.25.13 at 8:35 pm

There’s no reason to anticipate a recovery in the coming years, and many to expect worse. As thousands of young Kates realize real estate’s a dangerous asset they were seduced into, the market will shred.

Did I ever mention this won’t end well?

Realtor porn. Run, Kate, run! — Garth

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

Garth, you keep making all of these grand statements and continually change your tune.

Once and for all, tell us how long this drop in RE will last?

What percentage of a drop from the highs do you anticipate?

2 pretty basic questions.

For Kate, already happened. All she needs to know. — Garth

#63 Daisy Mae on 07.25.13 at 8:36 pm

Global TV News: “Canadians are feeling richer….while drowning in debt…”

#64 Donald Trump on 07.25.13 at 8:39 pm

Kate…congratulations on the new baby…. George.

Careful with the in-laws…they took out yer hubby’s mom.

#65 johnanddagney on 07.25.13 at 8:45 pm

Ok, sold the house, listen to garth, research etf’s, ready to take the plunge, then July 19 blog “Humans”. “Be careful…markets flying too close to the sun…time to go out back for a smoke”. Now what? Market overheated? Wait on sidelines for pull back? Advice please and thank you!

#66 shane on 07.25.13 at 9:13 pm

Garth, do you think the town of Airdrie which north of calgary a good place to buy a house?

Boring. — Garth

#67 Nemesis on 07.25.13 at 9:18 pm

“Run, Kate, run!” — Garth

Heed that advice, Kate.

Sometime in the late ’80’s I was working a story on Vancouver’s then wealthiest PropertyMagnate [not one of the UsualSuspects, but rather a modest WestVan SplitLevelRancher based, PickUpTruck driving immigrant/orphan from the SubContinent. The SexKitten 2nd TrophyWife had a Jag, natch.]…

Among other things… he shared this Pearl:

“I never went broke selling too soon.”

#68 Old Man on 07.25.13 at 9:21 pm

#54 Daisy Mae – I answered your question in the last posting, but your name has me stumped, as have only seen such in West Virginia in my travels in life. :)

#69 valleyrenter on 07.25.13 at 9:22 pm

#51-Don Ercole, don’t forget the brand new 1800+sqf townhomes to be had in Agassiz. Talk about what the real price of a home should be.

#70 valleyrenter on 07.25.13 at 9:23 pm

Starting at $225,000

#71 Mark on 07.25.13 at 9:25 pm

“Why on earth would a bank holding a mortgage with a homeowner who has never missed a payment not renew the mortgage??”

Because the collateral no longer supports the loan. So if a renewal is offered up, the underwater portion will be only financeable at unsecured rates (ie: 10%/annum for that much debt, if not more).

The bank regulators enforce this by the amount of capital they force the bank to hold. So don’t expect the banks to give good rates on loans that are either underwater or are on the verge of becoming underwater.

In business, this is known as a financing death spiral, where poorer metrics mean higher rates, and higher rates cause further deterioration of metrics.

#72 Boomer 21 on 07.25.13 at 9:30 pm

#61Blobby, beg to differ, Queens Park in New West is a beautiful area. Heritage homes, most of them renovated. Family centric, on the Sky Train line. Very walkable city. Queens Park is beautiful. It may have seen harder days 10-15 years ago but is now becoming a very vibrant family focused neighborhood. Been there a few times and have been impressed with the development and the attention to preserving the old homes. Good mix of new and old.

#73 Luc on 07.25.13 at 9:32 pm

Environics says Canadian are getting richer…
http://www.ctvnews.ca/canada/canadians-getting-richer-as-average-net-worth-tops-400k-report-1.1382779

half of the $400k is in real estate youpi ;-) !

#74 Sebee on 07.25.13 at 9:50 pm

As if CBC running a story about selling 1/4 of your house wasn’t funny enough, new bylaw just gave homeowners a new choir. Again…hilarious.

http://m.thestar.com/#!/news/new-bylaw-burdens-seniors-with-maintaining-boulevards-along-busy-streets/cf9654c121cc89cb5366d8f19d53dc82

#75 SCIBIDUBADEBUMBADO on 07.25.13 at 9:53 pm

With Goldman Sachs moving aluminum around from warehouse to warehouse everyday so they can scam the honest players in the market out of 5 or 6 billion over the last several years.
And with Goldman and friends again getting a gift of up to 80 per cent of the copper market to manipulate as a monopoly.
Garth how are we supposed to feel as individual investors in a “free” market that is partially rigged.
Sure we can get lucky and bet with the Goldman Sachs’ and Friends. But we don’t have the inside track like them. These criminals seem to have the government in their pockets everywhere.
Marc Carney is ex Goldman
So was Henry Paulson who steered 700 billion the banks way.
So are many others in Europe and the USA
http://www.independent.co.uk/news/business/analysis-and-features/what-price-the-new-democracy-goldman-sachs-conquers-europe-6264091.html
http://prof77.wordpress.com/politics/an-updated-list-of-goldman-sachs-ties-to-the-obama-government-including-elena-kagan/
It seems like the tentacles of a Giant squid.
Sure there is room for fastidious investors to fight over the scraps but it really feels like the odds are against us.
What say you?

#76 TheCatFoodLady on 07.25.13 at 10:00 pm

We boomers grew up hearing our parents & grandparents enthusiastically touting home ownership. Most of our grandparents came over dirt poor, ready to work HARD. They came from countries & situations where home ownership was for the RICH. My grandmother was from a family of 13 kids & the family rented the bottom half of a ‘two up, two down’ in the UK. They weren’t complaining. The day they paid off their mortgage here is a day they remembered with pride to their deaths. For our parents, home ownership was a good move. Real estate went up & up. If they went in with a healthy down payment, they did well.

Times have changed. The ‘population pyramid’ necessary to support rising home values no longer exists – we haven’t reproduced ourselves. Our immigration rates don’t support rising values either. Add to that an increasing number of elderly who will sell to avail themselves of equity, who can’t maintain the old family home & the direction points… downwards for home values.

Sure – there will always be hot areas – follow the money; the boom/bust cycles. Certain types of homes will do well – small, easy to maintain bungalows in adult communities that support senior living, well built & located condos… the latter though have been overbuilt.

Doing your research is a must & there’s no one right answer that fits all – we’re individuals with differing lives.

Kate – you’ve made a mistake – MAYBE. We don’t know the entirey of your financial picture & it’s none of our business. You’re smart enough to be questioning. So check out & price out your options. Try to take the least painful hit & whatever you decide – don’t beat yourself up. We ALL make mistakes & imagine if you’d decided you’d made a huge financial blunder with a ginormous mortage, kids to support, perhaps a rocky marriage & a job at risk. Now THAT would be truly terrifying.

Garth’s essential message remains the same – diversify, retain a measure of liquidity & remember that the purpose of money is to… LIVE, to avail ourselves of as many choices as we can in life while still covering the needs.

As in housing, there’s no perfect portfolio for everyone. We have the responsability as adults to do our own research, make the best choices we can based on what we know & in the final analysis, we have to be able to sleep at night.

It’s a GOOD life out there, no matter how much or little we have. We’re not competing with anyone but ourselves. If your wants revolve around a classic Mustang – make it happen. If your wants are more along the lines of a fresh churned real ice cream at the end of a long hike – nothing wrong with that – cheaper than a Mustang although not as head turning.

Think, act & enjoy the life you make for yourself. We could sure be a lot worse off!

#77 DaveCalgary on 07.25.13 at 10:01 pm

I admit that I just started reading about a month ago, so maybe I’ve missed more info in prior posts, but it seems like all of your Calgary posts have little to no data in them. Your info always consists of 1 sarcastic line of Calgary housing will go up forever and then provides no data or facts to support a rise or a fall in the Calgary RE market. In comparison, your BC and TO posts contain detailed facts regarding the declining markets in those areas.

Having done some research recently into both the rental and SFH markets I don’t see the reality taking place in Calgary that you are espousing.

#78 Lousy endings — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer on 07.25.13 at 10:03 pm

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

#79 DaleFromCalgary on 07.25.13 at 10:11 pm

#67 – re: buying in Airdrie. Well, it is above the flood zone mostly, unless you want frontage on Nose Creek. But the problem with Airdrie is that if you work in Calgary, you’re looking at a minimum one-hour commute each way. And don’t forget what Highway 2 is like in winter. And don’t forget what Deerfoot Trail is like any time of year.

#80 Steven on 07.25.13 at 10:14 pm

Real estate is an investment after all….

No Garth. Real estate is just a place to live and right now it costs too much.

#81 rosie "moving forward" on 07.25.13 at 10:14 pm

Interesting times. Which one are you? http://www.peggyhedrick.com/images/fish.jpg

#82 Steve on 07.25.13 at 10:19 pm

One of the big problems in the US was labour mobility. If you are stuck with a home you cannot sell, you cannot move to where the jobs are. Young people should be really sure that the area they choose to live in, is where there is employment options.

#83 roxy on 07.25.13 at 10:28 pm

I keep getting notifications from my credit card statements saying there are new rules…if you miss 2 payments within a certain amount, your interest rate doubles or quadruples.

Are they anticipating something….?

#84 Ray Skunk on 07.25.13 at 10:43 pm

I looked at a condo recently. A guy bought it by himself but then he found a girlfriend and they moved into a different location together so now he needs to sell his place.

It seems surprising that single people who know they want to find a partner were buying property that would not be compatible with their future relationship plans. Clearly everyone thought that it would always be possible to sell when they needed without taking a loss and they weren’t planning on being able to hold the property for many years if they needed to.
——————————

Not here.
Broke up with my ex last year. Sold our house (in Stouffville, #19). We both went to renting condos in Toronto.

Her reason: not enough cash to buy again (she sold her previous condo and used the equity to pay down personal debt). She wants to buy again though, hates renting.

My reason: reading this blog and realizing that within a year or two, I’d find somebody else and I’m not in the mood to shell out $20k in realtor commissions every two years.

Where are we today? I’m about to give up renting this condo to move into a shared rental with my new gf. I’ll halve my rent, continue to add to the dp for a house, and strike when the market is good.

She’s happier renting her place – although our realtor keeps trying to convince her to buy now (even though she has no dp to speak of). I tell her not to listen to him. I give her stats. He doesn’t call me. I wonder why.

#85 Old Man on 07.25.13 at 10:45 pm

#77 TheCatFoodLady – Imao, as was born in a small town in a house that was the hospital center, but we had it all in life. There was one IGA grocery store; a real Chinese laundry; a butcher shop; a dairy bar; a movie theatre; two dime stores; a baker; a golf course; a sporting goods store; a Canadian Tire store; a barber shop; one restaurant; a beer outlet; a strip joint at the local hotel; an arena; and a fairgrounds that the train would roll in for a massive fair.

We had it all, and a truck would come with coal to load up the coal bin for the furnace, and will never forget the horse on the street pulling a wagon for the milk shoot, as tickets would be there for milk, cream, or butter to be exchanged. This was a great life living in small town Ontario, and all was well.

#86 OK Kingpin on 07.25.13 at 11:00 pm

This sounds like another great example of societies blind sprint towards the unknown.. keeping up with the “trends” and the false ideas impregnated into the minds of those who don’t know any better..

http://mayer320.wordpress.com/2013/07/10/middle-class-average-joe-vs-the-joneses/

#87 Cici on 07.25.13 at 11:19 pm

Here’s another potential nightmare waiting to happen for many homeowners in cities like Toronto and Vancouver who can only afford their homes by renting out their basements.

What happens when all these unloved condos that are already not selling are joined by all of those pre-build units in the pipeline? Surely prices will depreciate and there will be more available for rent, and probably at attractive prices.

When that happens, who’s going to pay $1400 to live in a musty basement suite?

Economic tsunami on its way…get out while you can.

#88 Snowboid on 07.25.13 at 11:29 pm

#3 robert james on 07.25.13 at 5:20 pm and
#10 Uwinsome on 07.25.13 at 5:39 pm…

A neighbour pulled his HD out of its’ winter siesta from the garage this spring and hooked up the charger to the battery.

Left it the backyard while he went for breakfast downtown – came back 2 hrs later and the hawg was gone. They did leave the charger, however.

No one saw it being taken, and the federalis never found it.

His truck has also been stolen, but was recovered, albeit damaged.

Other friends and relatives have had similar property crimes, but we haven’t had any problems since we moved back here in 2010.

The quoted article talks about the 1.5 million visitors over the 2 summer months inferring part of the blame to them for the high crime stats – from our walks and bike rides downtown over the last couple of weeks I think the city manager meant 1,500 visitors.

It’s the worst we have seen it for tourism, beaches are almost deserted, restaurants are empty, looking to be a bad tourist season this year!

Unless they are all waiting until August to show up?

#89 Uh Oh Canada on 07.25.13 at 11:30 pm

Hi Garth,

I finally took your advice and emptied out all my money from the Orange guy’s shorts to invest in ETFs and REITS. I am a late bloomer and am currently educating myself on investing 101. I’d like to know what your opinion is regarding penny stocks. I came across some info during my reading and would like to know if I should stay away or proceed with caution. Thanks in advance.

#90 bill on 07.25.13 at 11:32 pm

whoa ! low rider….really slammed in fact.
KATE : bail out now!
A friend of mine was in a sort of similar position -and then there was a new assessment.
40 g’s on top of what they had already paid into this turkey.
but it gets worse: the condo kangaroo council took the lowball bid.
get this: they are sticking the old and moldy insulation back into their ‘repair’ job.
I have seen the pics and its pretty grim.
how the hell do they get away with this?
I gather a couple of other young families have bailed as well.

#91 Dave on 07.25.13 at 11:48 pm

Garth,

It would be nice to see stories published from people that have had success in real estate. Most of the stories that are shared in these blogs are super negative about people that have only recently invested in real estate. The vast majority of Canadians have owned their homes for much longer and have built up substantial equity.

For instance, I’ll try to briefly share my story with you….

I purchased my first home (a triplex in TO) for $345,000 back in 2006. At the age of 26 I invested my entire life savings – $35,000 into this property. It provided an excellent source of passive income and was a roof over my head for a couple years. I sold it in May 2013 for $590,000. That’s $245,000 more then my purchase price. However, since it was a rental property, I’ll have to make a huge RRSP contribution this year to minimize the income tax.

My wife and I purchased our 2nd home in 2008 for $370,000 and just sold it a month ago for $675,000. Yes I will be paying my RE agent 4% commission…. but big deal. This mother-load of nearly $300,000 in capital gains is all tax free!!!!!! Yes, tax free, tax free, tax free. That point cannot be stressed enough.

Anyways, the point I am making is that my net worth went from $35,000 at the age of 26 to now over $700,000 at the age of 33. Clearly there are many other factors that make up my net worth, but I could conservatively attribute over $600,000 to my rental income over the past few years and the 2 properties appreciation in value.

I feel like I’m bragging now, although sometimes I just get so bummed out always reading these downer stories from these people who get in over their head and expect to make a quick buck.

Evaluating a real estate transaction after only 1 or 2 years is foolish. Real estate is a long-term investment that will see ups and downs but over the long term has proven to rise at slightly higher then the rate of inflation.

(a) It’s not 2006, and the risks are substantially higher. (b) You gambled by having 100% of your wealth in one asset, and could have been wiped out in any correction. (c) Your numbers do not add up, suggesting exaggeration. (d) I’m happy you can brag. Now diversify. — Garth

#92 Yitzhak Rabin on 07.25.13 at 11:57 pm

In 2011 everyone I can think of inquired about why I hadn’t bought a house yet: Parents, siblings, countless friends, fellow workers, girls I dated, cousins, girlfriends of cousins, the Royal Bank and more.

When uninformed people are in unanimous agreement about something it’s time to stay far away.

Amazing how people figured a debt financed bubble and bust cannot happen here. The same thing in the United States, UK, Spain, Italy and Iceland had only happened 2 years prior and for the same reasons. The attitude in Canada was still the bubble mentality of real estate always goes up and “it’s different here”.

I have noticed this type of talk has suddenly quieted down.

#93 Bast on 07.26.13 at 12:09 am

I live in T2N in Calgary (Sunnyside) and feel for my neighbours, especially those who got flooded out twice. But I rent (and in a building that remained totally dry), so I will not feel any impact. Higher rent? Not unless they change the original red shag carpet in our hallways any time soon…winters in Spain soon.

#94 Carpe Diem on 07.26.13 at 12:12 am

Kate,

Is your condo built with concrete, plywood or OSB?

OSB … sell now. Actually, New West sucks …. sell now!

On other notes:

It is very sad seeing all homes being in Ottawa West (Kanata) built using OSB. Aside for the few built on rocks and plywood there are a bunch of 2-3 level condos being built using OSB and are built on the Carp River wetlands … very sad.

Here is some sad news from Ottawa and bottom feeders preying on the weak ….

http://www.ottawacitizen.com/sports/Golden+Oaks+outstanding+promissory+notes+mortgages+total/8707960/story.html

http://ca.news.yahoo.com/family-loses-life-savings-rent-own-debacle-100612052.html

#95 pointofclarification on 07.26.13 at 12:12 am

Garth. On a high ratio insured mortgage, a bank cannot force you into a failure and a claim on the insurer at renewal. You may want to call your friends at Genworth to get your facts correct. It is right there in the insurance contract. I pay $5K for an insurance premium, and low and behold, I actually get something in return. If I get into payment trouble, the insurer and lender must make an effort to save my ass – right there in the contract. And the bank cannot force a claim on the insurer because the value of my house has arbitrarily changed at a point in time. Remember, my insurance premium buys me a policy that is for the life of the mortgage, not the term of the loan.

When you pay for high-ratio mortgage insurance, you are not insuring yourself. You are funding the premium to insure the lender against your default. If you default, the lender is covered, but you still must pay your full obligation. Hope you get that. As for my example of a mortgage potentially not being renewed if property values fall, it was clearly for a conventional loan. — Garth

#96 Realist on 07.26.13 at 12:18 am

One thing with floods are they are definitely not something new or never occurred in many places in Canada. I can recall several floods over the years in Alberta that have affected small towns causing wash outs of highways through the towns as well as destroying many homes. The towns were small in size and were not worthy of any major news coverage. The difference with the Calgary and area floods is the explosion of people since the late 90’s . This has created massive building in “flood prone areas”, due to space restraints at those locations. It may have been wise to build elsewhere which we now realize. Another thing which is very common all over the world and has become mainstream is people want to be located near water. I recall working in Australia and many of the elders told me that many poorer people lived near the water and the more affluent lived near land areas only in the 1950’s/60’s. They mentioned they could of picked up heaps of this land near water for next to nothing at that time. This definitely has changed in the present day where you have to pay a kings ransom to be located near water in Canada i.e. Calgary at the Bow River. Modern engineering has eliminated many issues with flood areas but sometimes you just can’t beat mother nature.

#97 LS in Arbutus on 07.26.13 at 12:25 am

Kate,

Even in a market that’s going up it’s hard to break even on a condo. Then things like strata council, crappy neighbours, special assessments and the like, you couldn’t PAY me to buy a condo.

Now, it’s pretty much a no-brainer this market is headed down. Even if your place doesn’t depreciate anymore, you’re still STUCK in a sh*tty box in New West having to commute to work.

Sell and rent and be glad you didn’t leverage yourself to the max and make a loss of $50,000 or more. BTW, I know a couple that bought a house on the west side, at the top for $2.4 million. (On a 33 foot lot and renovated to boot! That is, no one’s dream home.) I figure the market’s dropped about 10% since they bought, so they’ve lost $240,000 in a year and this is before closing costs etc.

Thankfully there are STILL greater fools to sell to if you price right. The market’s cooked but most haven’t realized it yet.

By the way I assume you’ve seen the website, “Vancouver Flippers in Trouble.”

If you sell, you might want to share your story there.

http://vancouverflippersintrouble.wordpress.com/

Let us know how you go.

#98 Tony on 07.26.13 at 12:46 am

Re: #19 FK on 07.25.13 at 6:01 pm

Stouffville could rival both Vancouver and Victoria in terms of percentage losses from peak values. That has to be one of the worst places in all of Canada to have bought in recently or right now.

#99 Son of Ponzi on 07.26.13 at 12:53 am

New Westminster, B.C.
Traffic Congestion Capital of Canada.

#100 KommyKim on 07.26.13 at 1:16 am

RE: #43 peter schift on 07.25.13 at 7:19 pm
if the usa is rebounding and facebook is sooo hot
then why is gold rebounding as well?

Because the market has Alzheimer’s and has forgotten about the US FED tapering talk. Gold prices will taper right along with the FED’s tapering.

People have to quit blaming the RE problem on realtors, bankers, and even the horny virgins. The RE bubble is primarily caused by low interest rates. I’d much rather have higher interest rates and lower RE prices. This makes for lower transfer taxes, lower Realturd commissions, and makes extra mortgage payments worth it.

#101 Peter on 07.26.13 at 1:43 am

Hi Garth,

I have to disagree with your advice to Kate, Kate think long and hard and speak to professional accountants before you decide what to do.

I own rental properties (no condos) never liked them. None of the houses I bought would have a return in the first year and a half because a lot of your expenses are front loaded , you paid land transfer taxes, legal , CHMC insurance (5% down) and then selling , IRD penalties , realtor fee, more legal , and moving expenses.

It seems to me that you do not like your new location , commute etc. , and that does not mean you have to stay there or sell.

Based on the limited details in the article, I will assume your mortgage payment is around 918mo (190k , 25yr AM at 3.2 closed for 5 yrs) , plus condo fees and bills , I am guessing another 500mo(could be more)

Of her payment, your equity (portion of payment against principle) will increase by at least 5000 a yr off your mortgage on a possibly depreciating asset , not good , but here is my suggestion.

Rent out your condo , and move to where you like to live , it essentially becomes a small business , and make sure every expense you have related to that condo is added to the losses, pencils , pens , paper , gas , cell phone (to answer call from tenants) and I am assuming rent will not cover all your bills, but those losses count against your income , and if you make 40k yr , your marginal rate is 25%, which you will get back a quarter of your losses back in tax returns, again, I am not an accountant , you need a professional to explain it.

And if at the end of 5 years , you can decide to sell at a loss, less the IRD from breaking the mortgage, your Capital Loss will be tax deductible , and can be carried forward indefinitely, and the market may be worse , but it may be better, no one on here , including Garth knows for sure , my bet for Vancouver in general is not positive , but still does not mean you should sell.

Regarding the loss if she sells , Kate would not be on the hook for the 25k loss, if she paid 5% down , she has CMHC insurance , and CMHC collected premiums from ALL the people who bought with less than 20% to cover those losses , CMHC has made a lot of money for Canadians and there would have to be ALOT of Kates before the tax payers would have to bail out CMHC. But I recommend saving more for a down payment , reducing the CMHC premium.

Garth , when you call a house a depreciating asset , I think that includes every house , regardless of the market (needs to be maintained at a cost to keep its value, chattel) , it is the land and where the land is located is what usually makes a profit. And I don’t think we own land in Canada , we own the right to rent it from the government via property taxes , owning land is illegal in Canada , we have a 99 year lease, so I am a happy renter too.

Kate , you made a terrible mistake buying on emotion and dreams and listening to sales people. I agree with your family that your home purchase should give you comfort and stability over time , and a sense of pride but your timing was bad and so was your location choice. I like reading this blog and I respect Garth and many other readers comments, but do not sell on emotion and dreams (renting paradise) , think it through, you already paid land transfer taxes, CMHC insurance premium, you are too early in the game to start counting , there will time enough for counting , when the dealing is done.

If you decide to rent out your condo, understand it takes a lot of work , and that who you choose to rent to will make or break any property , take your time and do your due diligence, including income and credit checks with verification, and you may lose money for a time, but you seem young enough to wade through many more corrections in the market.

And lastly, banks are not in the business of foreclosing on houses , if you have made all your payments and have lost equity there is no advantage to the bank to force you to sell and every months payment means less risk to the bank (more paid back), and foreclosures are bad for the bank , great for buyers ,I am sure. The houses in Calgary are very special circumstances and the government and all the wonderful people who sent money for homeowners and renters in the flooded areas means it will not happen the way you described . I think that is terrible way make your point how home ownership can be risky (but it is). Location is everything.

Good Luck Kate , I would like to know what your renter boyfriend saved during the last year and a half. Rents may increase faster than your value will melt, and once your mortgage is paid , your boyfriend will still be paying rent , you are already in the game , I hope you don’t give up that easy.

#102 Canuck Abroad on 07.26.13 at 1:50 am

Great comment no.34 “consider your options carefully”.

Garth I think you rushed to conclusions. Yes, Kate will take a large loss IF she sells now, but it’s not clear she needs to sell. Surely she bought it to live in not to flip? So, umm, live in it. Duh…She might break even in 10-20 years.

#103 Observer on 07.26.13 at 1:52 am

9 craig on 07.25.13 at 5:39 pm

Yikes!

North pole turned into lake from global warming

Startling footage from the North Pole, showing a lake where dense ice should be, has left people shocked by the devastating effects of global warming.

http://www.cbc.ca/news/yourcommunity/2013/07/north-pole-turned-into-lake-from-global-warming-3.html
=================

You know people can blame fossil fuel, etc etc. But the real cause of the problem is just plain and simple. Over population. When China got into the game with its billions of people, now all wanting the North American Way, it was a no brainer that comsuption will go up and etc etc. We been killing our farmlands to build these ghost cities hoping population will grow and grow and grow to fill them up.

But the problem is the earth cannot substain this many people and like house flies we will comsume until there is nothing left. And then we will starve ourselves to extinction!

#104 Tony on 07.26.13 at 2:15 am

Re: #78 DaveCalgary on 07.25.13 at 10:01 pm

The Edmonton real estate market just croaked meaning you can’t sell a house or condo at any price no matter how much you reduce your asking price. Calgary is next.

#105 Trevor on 07.26.13 at 2:29 am

You know, its great to say now that the Kate’s of the world made a horrible mistake. It wasn’t always bad. The game changed and no one is giving it any press. That’s the issue. As evidenced by 4 different sales centers in the same New West are selling 4 different towers to groups of people right now, today.

#106 nubbers on 07.26.13 at 2:35 am

Oh dear Kate. Been there, done that yada yada etc. Only much worse. You are only out by a fraction of an annual income.

Bail out now before you are out by a multiple of an annual income.

#107 Rental bargains on 07.26.13 at 3:27 am

Love the Olympic Village, renting a new $375,000 condo for $1450 a month, poor landlord has to pay the $250 strata fees and property taxes. I say sell and move back

#108 RBC on 07.26.13 at 3:28 am

I work at RBC’s mortgage Centre. I can tell you that you Will Not get or need another appraisal at renewal as long as you stay with the current lender. And as long as the mortgage is insured. If it is a conventional mortgage, at your first five year renewal you will definitely have at least 35% equity. So no problem again.

#109 raisemyrent on 07.26.13 at 4:13 am

So for all of you doubters and conspiracy theorists, I now know first-hand that Garth posts emails verbatim.
You can call me Jason.
I’m beating Kate to the punch here, but the next question is, where is the 20-25k going to come from? Personal Loan? Line of Credit? Can you come to the bank with what you sold the flat for and ask for a loan on the rest?
One thing Kate forgot to mention is that she just doesn’t have that kind of cash in hand… and as it keeps going down, it just gets worse… kind of a downward spiral

#110 r on 07.26.13 at 4:20 am

If bank gave mortgage to any breathing soul why they will deny it because appraisal value is low. If CMHC is insuring them why bank will have problem in renewing mortgage its not their risk. Any way cost of improving your score or getting appraisal value higher is $1000 of course its bribe and illegal but it works and reality of life. How do you think all self employed get qualify for such expensive mortgages

#111 MEANWHILE IN EUROPA on 07.26.13 at 4:37 am

Can be almost depressing to see what may happen in YYC.
Though we moved on to Europe, our hearts will be in Calgary forever.

#112 betamax on 07.26.13 at 4:40 am

In the 80’s housing crash, many had to walk away from their home because they couldn’t come up with the cash when refinancing. Won’t be different this time.

#113 devore on 07.26.13 at 4:54 am

#32⁠ Freedom First

Exactly. The reason you get insurance and put on your seat belt is not because you know something bad will happen, you do it precisely because you DON’T know. If you did, you could simply avoid it.

#114 Future Expatriate on 07.26.13 at 5:44 am

#9 About global warming? You know why it’s too late? The oil companies want it. There’s a lot of oil under the arctic, and they want everyone burning oil until the planet looks and feels like Venus, so that’s what we’re going to get. And weather? The jetstream has been sidewinding crazily for almost two decades now as there’s no longer a firm continent of ice up there to circle. So depending where you are in the sidewind, it’s either going to be much cooler than seasonal or much warmer than seasonal, and storms are going to be more intense and more frequent. And when that unseasonably warm sidewinding jetstream hits the arctic, MORE melt. But have no fear; the oil companies are in charge, control all the right wing politicians and a quarter of the left, and nothing bad will happen.

Until it does. Can’t wait to see what a methane explosion does to an arctic undersea oil rig…

#115 David McDonald on 07.26.13 at 6:05 am

@#24 JL
You probably aren’t old enough to remember the massive hike in interest rates in the early 1980’s. We bought a house and were searching for a mortgage. As my wife and I went from office to office we encountered tearful people who were being refused a mortgage renewal even though they had paid faithfully for many years. No dice, they had to repay the mortgage since their income did not qualify them for the increased monthly. Many were forced to sell into a down market.

A sharp lady at TD bank offered us a commercial loan to bridge the next year at 19%. We tightened our belts for a year and then got a traditional mortgage the next year at a much more affordable 10%. Pretty horrible but then again we bought the house at rock bottom price so when the interest rate problem disappeared we had the house of our dreams we could afford.

#116 Steven on 07.26.13 at 7:02 am

If you all think Toronto and Vancouver real estate prices are insane check out Hong Kong prices.
This is what happens when real estate stops being a place to live and starts to be an investment.

http://realestate.classifieds1000.com/Hong_Kong

Seven million people in 400 square miles. Canada has 34.4 million in 3.8 million square miles. — Garth

#117 Edward on 07.26.13 at 7:56 am

Hi Garth, I tell young people looking for potential mates that if they can think rationally to think twice if you are jumping into a potential marriage with someone with a Toronto condo mortgage. If they marry that guy or girl, they are marrying into that mortgage too.

#118 TurnerNation on 07.26.13 at 8:10 am

Pic is kinda like: Fun fun fun till daddy takes the T-bird away. But mother nature took the Vette and spared the horse (‘Stang).

#119 craig on 07.26.13 at 8:11 am

Coincidence;

1 – rates are at historic lows

2 – house prices are at historic highs

3 – rates jump a point – house prices drop a bit

78% of Boomers in Canada own homes. That is a lot of stupid people according to the renters rage here.

My guess is of the remaining 22% that don’t own homes;

– 15% can’t save the money for a down payment, for whatever reason – unemployed, divorced, health issues, etc.

– 7% choose to rent and are as bitter as can be for missing out on the huge capital – tax free – gains we homeowners have realized.

Garth, when you say it will not end well, what does that mean? When does RE ever end?

Stock markets go in cycles – bear and bull – so does RE.

It seems to me that people here paint a picture of either owning a home and not having any investments or renting and having thousands in free flowing capital.

That is simple not true and a misleading statement.

It takes discipline to own a home and manage your after tax dollars, especially in the first 10 years. It’s tough but in the end you own your home and will reap the capital gains down the road.

OR

At $2000 a month, you can chose to throw away $720,000.00 over 30 years. Also, these are after tax dollar, I might add.

Good luck

I choose to rent my principal resident in the big city and put all those zeros to work creating tax-efficient income. Claiming renters are unemployed, divorced or bitter just suggests you, as a realtor, are desperate. If I were you, I’d stop. Embarrassing. — Garth

#120 Dave on 07.26.13 at 8:30 am

Post #92. I swear on my life those numbers I had given are precise.

The point Garth should be stressing is that Real Estate is a long term investment and should not be evaluated on just a 1 or 2 year time-frame.

A relatively tiny sliver of home owners in Canada are negative in their homes – the vast majority are sitting on equity through their homes appreciation over the past few year. However this good news story that reflects the MAJORITY of Canadians goes untold on this blog. That’s sad…

PS – I am not a real estate agent.

The majority of people have the bulk of their net worth in one asset the value of which they cannot control, which can turn illiquid easily and which is financed at rates that will only rise. PS – you should be. Your numbers still do not square. — Garth

#121 Dame Edgar on 07.26.13 at 8:37 am

I am watching you people. You be nice to Bob !

#122 The Man From Nantucket on 07.26.13 at 8:45 am

RE: #43 peter schift on 07.25.13 at 7:19 pm
if the usa is rebounding and facebook is sooo hot
then why is gold rebounding as well?

Is gold really rebounding?

Been a few big jumps in the last little while, but, really, it’s just managed to touch the 50…..which still trends the other way.

Proceed with caution.

#123 CrowdedElevatorfartz on 07.26.13 at 9:03 am

@#46 El Blanco Loco ( loosly translated into The Stupid Whitey)

Your comment
“New West? Anything east of Main is dreadful. Sell.”

Apparently Burnaby isnt on your hit list of the ” The Best Places on Earth”. 600,000 people living “east of main” would probably disagree

Let me guess, you typed that incredibly crass response whilst sitting at the Robson St. Starbucks sipping a $9 Ice Frappacino and breaking a sweat over the latest indeciferable news that the brainy 24 Hours publication has to offer…….

#124 Grantmi on 07.26.13 at 9:15 am

Buying and selling is very expensive and you wouldn’t want to be kicking yourself if that condo is worth $225K 5 years from now.

Lol…. Oh stop…. It hurts… I can’t stop laughing…. Oh oh…. Ok. I’m done.

#125 T.O. Bubble Boy on 07.26.13 at 9:25 am

@ #120 craig

- 7% choose to rent and are as bitter as can be for missing out on the huge capital – tax free – gains we homeowners have realized.

You haven’t realized any gains until you sell.

I’ve realized 20%= gains on my U.S. equity investments over the past 6 months, and have the cash in my bank account… how’s that house?

#126 Ralph Cramdown on 07.26.13 at 9:33 am

#120 craig — “It takes discipline to own a home and manage your after tax dollars, especially in the first 10 years. It’s tough but in the end you own your home and will reap the capital gains down the road.”

Dude, the ’80s called and they want their financial planning advice back. These days, who spends thirty years at the same job and then retires with a defined benefit pension? Owning a house ties the typical two incomes required to a small geographic area, meaning they can’t take advantage of better economic opportunities as the economy evolves — well, they can, as long as they spend $30-50k on agent commissions, mortgage break fees and land transfer taxes.

By the way, your rallying cry, quoted above, makes a great slogan for Low Expectations Inc. After thirty years of hard work, my family and its money hope to have a hell of a lot more to show for it than a dwelling free and clear. You say real estate is cyclical… So what part of the cycle do you think we’re in right now?

#127 Steven on 07.26.13 at 9:47 am

Seven million people in 400 square miles. Canada has 34.4 million in 3.8 million square miles. — Garth

Garth when you consider the land mass of china and the rest of asia there is plenty of room. Just like Canada. Do some google earth tourism of western china and central asia, plenty of room. It is just a question of affordable access with out the banks and realtors spoiling things for settlers that wish to escape financial slavery.

The reference was HK, not China as a whole. — Garth

#128 The Prophet Elijah on 07.26.13 at 9:57 am

My question is for those in High River who were in the red zone, or whatever, whose homes were completely destroyed and had a mortagage, do they get a break from the lender, or just declare bankruptcy and never get another mortgage? Can’t even imagine the emotional trauma.

#129 Agio on 07.26.13 at 10:23 am

I don’t care about Kate or animal shelters. Let’s talk that grand. Local food bank of your choosing and I, here in the ‘everyone is rich that they can’t afford to furnish their Mcmansions’ city of Edmonton will match to the Marian Center in the Downtown Core. I’ll provide verification even! You of course I trust ( send me the receipt, telephone number and who you give the funds to)

#130 Daisy Mae on 07.26.13 at 10:33 am

#57 Suburban: “It hurts to realize that the well-meaning advice we’ve been fed since birth turned out to be harmful.”

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

It was good advice…for those times.

#131 Daisy Mae on 07.26.13 at 10:41 am

#69 Old Man: “#54 Daisy Mae – I answered your question in the last posting, but your name has me stumped, as have only seen such in West Virginia in my travels in life. :)”

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

Ever heard of Daisy Mae and Lil’ Abner?

#132 Sparky55 on 07.26.13 at 10:43 am

@#117 Steven
If you all think Toronto and Vancouver real estate prices are insane check out Hong Kong prices.
This is what happens when real estate stops being a place to live and starts to be an investment.

http://realestate.classifieds1000.com/Hong_Kong

Seven million people in 400 square miles. Canada has 34.4 million in 3.8 million square miles. — Garth

***************************
Note that the price listed is in HK$ (The website seems to be adding USD to the number in some cases)
Honk Kong dollars today are $7.76 to 1 USD dollar

Although still absurdly high, it’s not as bad.

#133 George on 07.26.13 at 10:53 am

Metro Vancouver is crawling with maggots this summer! As part of the regional Zero Waste Challenge, households across Metro Vancouver have been given Green Bins for organic kitchen waste. Things to put in your Green Bin: food waste such as fruits and vegetables, meat (including bones), cooking oil, and breads, as well as food-soiled paper like tea bags, napkins, paper towels and pizza boxes , as well as yard waste. They come around and empty out the Green Bins once per week.

So that means every household has a box of rotting, festering kitchen scrap in the back yard that only gets emptied out once a week. Given the heat we’re experiencing this summer, maggots are starting to be a problem with these Green Bins. I would expect other insect populations to be on the rise. Also rodents such as mice and rats love boxes of food left out for them in every backyard.

Spend a million dollars to buy a dilapidated bungalow in the Greenest City (there are signs in Vancouver boasting it is the Greenest City) and live with the smell of rotting vegetable waste and delight in all the wildlife like maggots and rats!!!

http://www.vancouversun.com/news/yuck+issue+Maggots+find+homes+Metro+Vancouver+green+bins/8709550/story.html

#134 m on 07.26.13 at 10:54 am

#62 Need a close up of the back end of the Mustang. It could be a 66′.

#135 TheCatFoodLady on 07.26.13 at 10:54 am

#131Daisy Mae – exactly. Times & conditions change. The boomers were heavily buying homes that couldn’t be built fast enough – driving up values. I’m pleased for those who realized a good gain. I don’t own right now, never will again probably, but feel no jealousy or resentment towards those who bought well &, should they choose to sell, realize a nice gain.

We’re in a different part of the housing cycle as stated here previously & I expect for many sectors of housing in many areas, it will be a long downturn. If you’re buying a HOME, the numbers overall work & you can make the home work for you under different conditions – no problem.

As an ‘investment’…? Not for me. I look at it this way. I put down a minimum down payment, hold a 25 year mortgage at a historically average interest rate & by the time I’ve paid off the house, I may end up having paid twice it’s ‘value’ in interest. If I spent $1000 on a stock, MF or any other investment & ended up, after all was said & done, with something worth $500, I’d consider I’d made a damnedf bad investment. Why is housing any different is you’re looking at from an investment? Even if you get lucky & a renter covers your costs, you’re still paying a multiple of the home value, (or having it paid for you). I’d rather take the money, (that’s just me), & invest it elsewhere.

But that assumes I’ve done as much research into renting as owning & believe me, it’s WORTH carefully checking out the rental market before signing a lease. You can do well for yourself… or get screwed. I’ll take doing well for $200, Alex & use what I save to better my life.

#136 dick bove on 07.26.13 at 10:59 am

whoops…

Buying banks can be ‘dangerous investing': Bove

http://www.cnbc.com/id/100916763

The reference is to US banks. And why would you do that? — Garth

#137 Daisy Mae on 07.26.13 at 10:59 am

#91 Bill: “…council took the lowball bid. get this: they are sticking the old and moldy insulation back into their ‘repair’ job.”

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

This is happening because strata councillors are the most ignorant people on the face of the earth?

#138 Gyga on 07.26.13 at 11:01 am

The whole idea of coming to Canada was to get more room. RE was cheap and in tersm of sf per peson the standards were much higher then in my country.
Now people live in shoe boxes and actually proud of it.
What a joke.

#139 CalgaryMike on 07.26.13 at 11:07 am

GG Garth lol… You talk about Calgary real-estate then give an example of someone in Vancouver. Calgary IS NOT Vancouver.

You wrote, “because of its location in a flood-prone zone or (more likely) due to a general market decline”

AHAHAHAHAHAH Market decline in Calgary? What planet are you living on? The houses that got flooded will get renovated better than before and end up selling at a premium in 6-12 months when everyone has forgotten about the flood. This market only goes up. This isn’t Vancouver. People here actually have tons of money and jobs, houses sell the next day they’re listed and there is no place to rent. It’s a hot and tight market. Face reality and facts, not your own prejudices against Calgary

Take a look at Calgary’s boom-bust real estate cycle. It was always ‘different this time.’ — Garth

#140 Donald Trump on 07.26.13 at 11:23 am

Seven million people in 400 square miles. Canada has 34.4 million in 3.8 million square miles. — Garth

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

That leaves about .1 square mile per person.
I am staking my claim and posting ” No Trespassing” unless I get a good HAM offer.

#141 Piccaso on 07.26.13 at 11:30 am

From Billionaire to Millionaire in One Day

Brazil businessman Eike Batista has seen better days.

Last March the Brazilian tycoon ranked as the world’s eighth richest person with a net worth of $34.5 billion. His net worth today: $200 million, according to Bloomberg Billionaires.

Batista, who has been called the Donald Trump of Brazil, may have suffered one of the “worst wealth losses in history,” says Bloomberg Billionaires Index editor Matt Miller. “He was the face of Brazilian capitalism. He’s mired in debt. This is a tragic fall for him.”

http://finance.yahoo.com/blogs/daily-ticker/billionaire-millionaire-one-day-134444038.html

#142 Louis on 07.26.13 at 11:34 am

#102 Peter was probably the sanest comment so far.

In RE you lose at lot of money every time you move, so you need to plan your moves carefully. Don’t buy if there is a chance that you will need to move in the next few years.

Buying you primary residence can still be reasonable choice if you live there for a long time. Compare the amount you pay in rent with your owning cost including the interest part of you mortgage. The equity part of your mortage goes in your pocket and can make you richer if 1- Your cost or less than renting 2- The cashflow work for you.

My house is full paid, evaluated at 560k$ on my municipal tax bill. I paid 270k$ for it in 2004, I had 140k$ cash and financed the rest on a 15year mortage. I increase my payment 3 times and made extra payment to clear the house fast. I’m 44 now, no rent or mortgage.

According to the blog I should sell my house now and rent to diversify because most of my net worth is in the house… doesn’t make sense. I live in a nice neighbourhood, close to my work, nice school for my kids… I don’t care if my house is valued at 100k$ or 1000k$, as I have no intention of selling it.

#143 TnT on 07.26.13 at 11:50 am

#19 FK

Stouffville has been played… it is now flooded with product and prices are collapsing fast.

Bought 1st house in Stouffville 2002 and sold 7 years later for 77% higher than what I paid.

Bought 2nd house in Stouffville and sold it for 41% higher in 18 months back in April 2012.

There is no way anyone will see that kind of return on investment from a small town in the middle of farm fields again….

Renting and have invested all my profits with a very reputable investor while I soak up the fun in The Beaches

Thanks Garth

#144 Ogopogo on 07.26.13 at 11:51 am

Kelowna #1!, Kelowna #1!, Kelowna #1!… in crime. Am I the only one cheered by these stats? My first thought when I read this was: any news that helps to take the gas out of this real estate windbag is welcome news indeed.

Now here’s a comical predicament for our fair town: will out-of-work realtors turn to crime and thus contribute further to the death spiral of RE sales? The irony would be delicious!

#145 calgary_rip_off on 07.26.13 at 11:53 am

#78 Dave Calgary

I have read Garth’s website since its inception. For a long time I really wished that the crash/decline he was predicting would happen. I didnt see it happening so I stopped reading and let my wife do all the house looking as I had given up on looking.

I moved to Calgary from B.C. in 2007. Calgary’s housing market in 2007 was and is insane. I remember lining up with prospective renters to find a place. At the same time I was preparing for licensing for work and my family was still in B.C. I managed to rent a house in NW Calgary, interviewing as a tenant during a showing with another family. I wrote the first months payment on a check and gave it to the landlord right in front of the other family. 2007 was a very aggressive time and prices were at their peak. Since then prices have not gone up or down very much in Calgary.

Being from another place, things in Calgary move very very slowly. It is the prevailing prairie mentality in terms of timing. You must be very very patient and have your skills keen so when an opportunity arises you are prepared to strike like lightning. No, property values do not always go up and you are taking a risk in buying anything, but prolonged renting is also a risk unless you are a boomer preparing to retire, because long term it is likely that things will go up. For example, bought house in 1981 Calgary, managed to hold on through the craziness, and still own the property now. Guess what? Doing nothing the property has more than likely at least doubled in value, if not. The real value may be the same but the market commands double.

It is unwise to look at all angles. In Calgary in general I have seen properties to generally go up. However, I waited in 2007 to buy a place to test 1)my new job’s stability, and 2)I wanted a bigger downpayment to properly buy a mortgage. Even if I had bought in 2007 I likely in the short term would have lost/stayed even, so renting at that point until 2011 I didnt lose/earn by renting/buying so it was irrelevant. However, there is a point after around 5 years that buying becomes more positive as you likely will lose money if you rent longer than that in Calgary given that most rentals here are the same if not more than a mortgage.

It is a tradeoff, and you must do a cost benefit analysis for renting vs. buying. I agree completely that Calgary is and remains a total ripoff and totally cutthroat for properties, but it is like this everywhere. If you wait, who is really benefitting, you or the landlord? Yes, you take a risk in buying a mortgage, but life is not without risk. It is unwise to live life in a reactive manner. If I lived like this I wouldnt ever leave the house as Calgary driving is dangerous and life is dangerous and people for the most part are not to be trusted. Finding balance between short term and long term is the answer. To do this involves correct self talk in interpreting conscious present events so your unconscious is trained correctly. I am grateful for all the things that do work correctly each day and the fact that most people seem to get their underwear on correctly at the start of the day: 1)Running water that no longer tastes like grass after the floods, 2)dont get shot at walking down the street, 3) lights and electricity work, 4) most if not all the food I buy is not only available for purchase and I dont get sick or drop dead after eating it, 5) car runs most of the time without problems and I dont get hijacked while driving to work by masked gunmen. Dont laugh, in some parts of the world all these things happen regularly everyday. In Canada and most parts of the USA, people are like domesticated pets who have been treated well, and life is better this way.

#146 CalgaryfloodBoom on 07.26.13 at 11:57 am

Dame Edgar,

You mean First Place Bob?
Then I say Bob Who?

#147 Retired WI Boomer on 07.26.13 at 12:12 pm

Times change. RE was smart 40 years ago to buy, stocks not so much bonds ok. 30 years ago RE good stocks good. bonds good. 20 years ago ditto. 10 years ago RE still no, stocks not so, much bonds yes.
Today RE yes stocks cautious bonds no.

Naturally, that is a US perspective, we haver seen the folly of over priced, over indulged RE you’re 6 years behind on RE and can look forward to RE losing value as you lose jobs!

Its a recession when your neighbor loses his job, a depression when you lose yours.

#148 frank le skank on 07.26.13 at 12:26 pm

#19 FK on 07.25.13 at 6:01 pm
Thanks very much for your blog. Only started reading 1 month ago, too late now since I bought a 640k house in Stouffville.
———————————-
change your name to f#$ked.

#63 craig on 07.25.13 at 8:35 pm
Once and for all, tell us how long this drop in RE will last?
What percentage of a drop from the highs do you anticipate?
2 pretty basic questions.
——————————
Those are 2 ridiculous questions. Garth, while you’re at it can you post the next winning lottery numbers?

#109 RBC on 07.26.13 at 3:28 am
If it is a conventional mortgage, at your first five year renewal you will definitely have at least 35% equity. So no problem again.
———————-
Please tell me you’re the janitor at the mortgage center.
On a 400K mortgage (80% of a 500K house) with 40 year amortization you would pay off $25,538 in principal. Including your DP you would have 25% equity.
On a 400K mortgage (80% of a 500K house) with 25 year amortization you would pay off $55,225 in principal. Including your DP you would have 31% equity.

#149 frank le skank on 07.26.13 at 12:27 pm

Those number are principal paid after the first 5 years.

#150 William Bell on 07.26.13 at 12:39 pm

Hong Kong RE are controlled by just a handful of super rich developers. Government and land developers has close ties and relationships. It’s a monopolized market.

If you want to compare HK RE to a type of industry here in Canada, you should compare them to our telecom companies, NOT our RE industry.

#151 EB on 07.26.13 at 1:31 pm

#104 Observer on 07.26.13 at 1:52 am – Yes, we’re in genuine danger of a mass die-off of some type in this century due to population/food issues amplified by climate change. The *Earth* will be just fine – ocean levels rose by literally 100 meters at the end of the last ice age and the world adapted as it always does. But a quick fix from the Earth’s perspective can take millenia, which will be cold comfort for everyone who has to deal with the new normal.

#152 Daisy Mae on 07.26.13 at 2:12 pm

#101 Observer: “But the problem is the earth cannot substain this many people and like house flies we will comsume until there is nothing left. And then we will starve ourselves to extinction!”

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

The earth is 4-1/2 billion years old. Constantly changing. And will continue to do, so regardless of what/who we want to blame.

#153 Daisy Mae on 07.26.13 at 2:45 pm

#134 George: “Things to put in your Green Bin: food waste such as fruits and vegetables, meat (including bones), cooking oil, and breads, as well as food-soiled paper like tea bags, napkins, paper towels and pizza boxes , as well as yard waste. They come around and empty out the Green Bins once per week.”

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

“Meat, including bones”? No wonder you’re attracting maggots…and soon, rodents. My kitchen compost includes only fruit/vegetable scraps. The pizza boxes go into Recycling. ;-)

#154 al on 07.26.13 at 2:52 pm

“..Hong Kong RE are controlled by just a handful of super rich developers. Government and land developers has close ties and relationships. It’s a monopolized market..”

Chairman Mao couldn’t have said it better

#155 Daisy Mae on 07.26.13 at 2:57 pm

#143 Louis: “In RE you lose at lot of money every time you move, so you need to plan your moves carefully…”

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

A few of my neighbours have moved ACROSS THE HIGHWAY…into condos. I just have to shake my head.

#156 45north on 07.26.13 at 3:08 pm

The issue’s simple. What are the houses now worth?

great writing Garth

I purchased my place in the fall of 2011 for $206,000. Today? It would list at $190,000 – and that’s still no guarantee it would sell at that price.

right now Kate has not decided to sell and prices continue to hold – well more or less. When Kate decides to sell everybody else will too. Tipping point.

robert james: It would certainly be nice to get DA `s perspective on this

DA is out at the mall syphoning gas

Craig: Kate, you come to a blog loaded with renters

I own my house Craig.

Nemesis: I never went broke selling too soon.

nice one

#157 Happy Apartment Dweller on 07.26.13 at 3:20 pm

I am proud to be part of this blog community. The unwavering support from my pale faced, musty, damp quarters dwelling compatriots, and even the twisted criticism from Garth when I come clean and announce a stupid investment decision..it all feels wonderful.

When I’m met with the: “Oh…you’re only Renting now..?.” reaction from people, I think of you here on this blog and know you will be there for me.

Cheers.

#158 Donald Trump on 07.26.13 at 3:25 pm

Oh boy…more enviro- Leftards….

Why not donate body to science while still alive….after go to Polar Bear Habitat and spread honey all over Al Gore and Maurice Strong.

#159 Crowdedelevatorfartz on 07.26.13 at 5:10 pm

@#159 Mr. Trump
We could also double the polar bear population by capturing a bunch of brown or black bears and dipping them in white paint………
But I do like your idea of smearing politicians in honey and using them as bait for bears…..
It has a poetic justice kind of feel to it.
Mike Duffy, naked, smeared in honey, tied to a post, in grizzly country…….
We can raise money for charity but placing an online camera there and allow people to be on a) the type of bear. b) time of day, c) length of wait, etc.etc.etc.
We’ll get that money back some how!!!!!!!
I’ll supply the paint brush

#160 Ralph Cramdown on 07.26.13 at 5:11 pm

“If you wait, who is really benefitting, you or the landlord?”

Both of us, I should hope. The landlord gets my rent, which easily covers his expenses and earns him a decent return (because he bought before this stupefying run-up in prices). I get a place to live for less than the payment on a comparable purchase, and I get to invest my capital at a return which I believe will exceed what I’d get in an abode.

The flaw in many of these “paying your landlord’s mortgage” analyses is the assumption that the landlord bought today at today’s prices. When you become a landlord, you realize that you’re competing with other landlords who have much lower cost bases. They say “a stock doesn’t care who owns it,” — i.e. cost basis has nothing to do with price action. A rental unit doesn’t either. You pay market costs, some of which were locked in when you bought and some of which change every year, and you get to collect either market rents or indexed rent-controlled rents, depending on where the unit is and whether your tenants move. I’m glad this is such a complicated subject. If it was simpler, I’d probably be paying more in rent.

#161 Harry Wilson on 07.26.13 at 6:58 pm

Dear Crowdedelevatorfartz (#160)

Tying the naked Mr. D to a post would be unnecessary cruelty for the viewers, as it would remove much of the drama. I believe it would be more exciting to attach him to a bungee-jumping cord that would offset 80 to 90% of his weight, allowing him to leap 30′ vertically, and up to 50′ laterally. Now that’s a reality show that would almost be worth getting cable for.

I’ll email my auto-cad guy, W. E. Coyote, and get him working on it.

#162 Daisy Mae on 07.26.13 at 7:34 pm

#113 Betamax: “In the 80′s housing crash, many had to walk away from their home because they couldn’t come up with the cash when refinancing. Won’t be different this time.”

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

There ya go! Just as Garth stated. The banks are not going to be giving anyone a break…they’re not in the business of being ‘kind’. Business is business.

#163 Agio on 07.27.13 at 6:27 am

Dave@92
Dear Dave
As Turner apparently lacks the ability to write in an easy, understandable manner on this ‘pathetic blog’ of his I’ve taken it upon myself to clarify a few things for you and any others who have less than average comprehension skillz. I will of course do this by talking about me but I’m not bragging!
I bought my 1st house in 1987 (with zero help from no one) I am now 49 so wasn’t I just the lil overachiever? I have since that time bought and sold quite a few properties and I’m not even a realtor-no need to improve that gene pool. I’ve made quite a few dollars in RE and if I’m not mistaken Turner himself has. In the great false shortage of 2007-08 in the city I live in, that would be Edmonton I dumped the 3 rental properties I had and there was much rejoicing. Okay, I rejoiced.
My current principle residence (it’s stylin) which I bought in 2000 for 229k CASH I’ve kept, because you know, I live in it. I’m told by reliable actual good realtors-all 2 of em that I could sell this rascal now for 650ish. I think 600 but what the hell.
So enough about me and my financial RE prowess. Let’s get on to simplification.
Mr. Turner does not care about those that have made money in RE. He might even own a bit himself nowadays and he may have made a couple dollars in RE his own self. He cares not about those who have ZERO debt and own their own home (He may think they’re idiots for not cashing in on the single biggest tax free gain they’re ever going to have whilst the cashing is good if it’s their only asset but I digress) He gets positively orgasmic if you subscribe to the rule of 90 and have a balanced portfolio of INVESTIBLE assets.
This illustrious aforementioned group is a lot smaller than you think. Most people, contrary to what Scotia tells ya, aren’t richer than they think.
Mr. Turner is concerned with those folks (that would be the majority who have tapped off all of their money, usually a wee amount) and are now leveraged to the nuts in their principle residence. Thusly he does spread the word in an incomprehensible manner about the pitfalls of buying into an over inflated asset that is mucho illiquid and will of course go down as all over valued thingys do just coz you can or your insipid life sucking boomer parents or in-laws tell you to. A home is not an investment vehicle, it’s a home. He’s trying to help those who have made a mistake or more often than not, he’s trying in his own convoluted way to stop folks from making a mistake.
Congratulations on your RE success and you’re welcome.

#164 bingo0000 on 07.27.13 at 8:08 am

“That’s a loss of 350% in two years”
I don’t think it can be three and a half times the amount of the initial investment. Did you mean 35% ?
When you talk percentages, is always a good idea to say percentage of what. Is this a percentage of the initial investment ?
Or is it: a loss of 35,000 in two years ?
You don’t have to publish this, but rather correct the text.

No correction required. She invested $10,000 and lost $35,000. — Garth

#165 andrew on 07.27.13 at 2:57 pm

so much for Garths perdictions..

TORONTO – Home prices in Canada are showing no indications of falling this year, a survey by Royal LePage suggests.A report by the real estate company…

http://www.huffingtonpost.ca/2013/07/09/house-prices-canada-2013_n_3565556.html

Royal LePage? Seriously? — Garth

#166 andrew on 07.27.13 at 2:59 pm

Maybe its jus pausing garth before it goes higer.. canada seems to be different after all EH

Construction Jobs Soar, Housing Starts Soar — Is The Bubble Back?The Huffington Post Canada | Julian Beltrame, The Canadian Press | Posted 06.10.2013 | Canada Business
Read More: Canada Housing Bubble, Housing Starts May, Real Estate Canada, Condo Overbuilding Canada, Housing Market Canada, Construction Jobs Canada, Construction Employment Canada, Overbuilding Canada, Housing Bubble Canada, Housing Canada, Canada Housing Starts, Housing Starts May 2013, Housing Starts Canada, Cp, Canada Business News
——————————————————————————–

A large and unexpected jump in the number of housing starts across Canada in May has some worried about overbuilding in the housing market. Housing…

#167 andrew on 07.27.13 at 3:02 pm

Jim Flaherty: No Housing Bubble In Canada, Thanks To Me

I guess the government can dictate whatever it wants at the end of the day .. Hey if F says tehre’s no bubble than there isn’t one

http://www.huffingtonpost.ca/2013/05/23/jim-flaherty-housing-bubble-canada_n_3327310.html