Choices

Another newsy day. Another bold GreaterFool prediction nailed. If this blog were only humble, it would be, well, less pathetic. But first to Laura, our daily example of why people blow themselves up.

“Hi Garth,” she says, then sucks up for a while (it’s now mandatory). Turns out L’s married, 30ish, baby, some money in RSPs and TFSAs and a $200,000 mortgage on a little, geriatric Van house (“my husband bought it before the craziness”) now worth $1.6 million – “land value only.”

“I know what you probably want us to do,” Laura adds, “sell the house and run – but it’s too convenient for work, babysitting, rental suite etc. Eventually (5 – 10 years) we will have to tear down/build or gut/renovate or sell/buy once our family grows as the house isn’t ideal. My question: We were gifted $100,000. Do you suggest we plunk some onto the remaining mortgage balance or invest otherwise?”

As I sped down the 401 in semi-autonomous mode, I texted:

Why would you plow even more money into a bloated real estate asset?
Yes, and you are insane not to sell.
Regards,
Garth

Laura was not intimidated, or impressed. “Thanks a lot for your response. I know, I know…a million and half in the bank, we’re crazy not to sell. But we’ve been saying prices are crazy since it was at $700,000 and rental prices are insane. Is there any end in sight?” And she ended it with a big smiley emotithingy.

Of course Laura & hubs are gambling by not selling. They risk leaving the biggest capital gains tax-free windfall of their lives sitting on the table, suffering from that recency bias we delved into days ago. They believe prices will go up simply because they have gone up – even knowing the market has detached from the economy.

In this case the house is a piece of junk which L admits will never be their forever home. Plus they have a dude living in the basement. So why hang on and risk a market correction that cost them hundreds of thousands? “It’s too convenient.”

Life’s all about choices. Making them is easy. Living with them, not so much.

$     $     $

So the Fed raised its key rate on Wednesday, as we told you it would. The American central bankers also said they plan two more in 2017, which will take the level to about 1.5%, or a full point above the Bank of Canada’s. Stock markets did not tank in reaction, but spiked higher, with a triple-digit advance for the Dow. Why? Because higher rates only come with economic expansion, growth and the potential for more inflation – which also means fatter corporate profits.

As written here a few times, this is the end of deflation, negative rates and cheap money. Interest rates will be normalizing over the course of a few years, with the expectation of six or seven increases in the next 20 months. The US economy is moving forward with virtual full employment. Global growth is in the 3% range. China has bucked up. The deplorables look like they’re losing the Dutch election. Even the European Central Bank is talking about backing off on its policy of papering over everything with money.

Laura’s house may go to $1.8 million. Nobody knows. But it could also slide as rates increase and Canadians climb to reach new pinnacles of personal indebtedness. The odds of a correction now outweigh the likelihood of an advance. It’s just a matter of time…

$     $     $

…and bank economist Robert Kavcic says he knows. Two years. The BeeMo egghead states that’s how long it’ll take our bubble markets (Toronto, particularly) to retrace the path of 1989 when boom turned to bust.

“At the rate we’re now going with 20-per-cent year-on-year price increases, assuming stable mortgage rates and continued income growth, we’ll be at 1989 valuation levels in about 24 months,” he told clients. In case you missed the historic post here on the Eighties Massacre, prices peaked, then crashed more than 30% and took over a dozen years to recover.

Kavcic’s analysis is based on unsustainable price increases and the growing amount of family income that’s being devoted to servicing mortgages. At the current pace, we get to the tipping point in 2019. But wait. That projection is based on today’s mortgage rates – with a fiver available in the 2.5% range – holding, which we can be certain won’t happen.

If you’re still reading this, Laura, we’ll end this post with a comment from a Simon Fraser U prof who’s just penned a paper on what comes next.

“When housing bubbles unwind, there is major collateral damage and people are hurt through little or no fault of their own. And the historical record is that they do unwind, essentially without fail.”

Choices, babe.

187 comments ↓

#1 Ann-imal on 03.15.17 at 6:16 pm

“When housing bubbles unwind, there is major collateral damage and people are hurt through little or no fault of their own”

Except for the people that own the 99,000 empty homes in Toronto that aren’t actually for sale or rented?

https://betterdwelling.com/city/toronto/toronto-has-over-99000-unoccupied-homes-heres-where-they-are-interactive/

#2 TurnerNation on 03.15.17 at 6:21 pm

Furrrst rate hike of year.

#3 Post on 03.15.17 at 6:22 pm

Not so fast G. You also said CAD would drop.

As US rates rise. Pay attention. — Garth

#4 common sense on 03.15.17 at 6:22 pm

Sell Laura..take the profits and run…

#5 turn of the tide on 03.15.17 at 6:23 pm

I though for sure the US dollar would rise against the loonie today with the rate hike announcement.

It went down more than 1% – if anyone knows the reason why, I’d love to learn something new today. Thanks.

#6 RentYVR on 03.15.17 at 6:24 pm

“As written here a few times, this is the end of deflation, negative rates and cheap money.”

You need to add the disclaimer that this only relates to the US. Our Central Bank continues to say and signal that the era of deflation, low rates and cheap money will be here for quite a bit longer.

#7 Vancouver Brit on 03.15.17 at 6:24 pm

Garth, I have to ask, why did the loonie surge against the USD after the interest rate hike? Shouldn’t it have been the other way around?

Probably because four hikes were priced in. — Garth

#8 rknusa on 03.15.17 at 6:24 pm

the markets focused on Yellin’s cautious tone and the CAD went up a cent

huh?

more cheap money for longer!

#9 Blobby on 03.15.17 at 6:25 pm

Garth – so why did usd drop and cad rise (a lot for one day!) on news of fed rate increase? Shouldn’t that be the exact opposite? I’m confused! But willing to learn!

#10 Oldman on 03.15.17 at 6:28 pm

So what happens to dividend paying shares like bank stocks or preferred ETF’s when Trudeau takes away the dividend tax credit?

What will a “balanced” portfolio look like when this is gone plus an increased capital gains rate?

Maybe I’ll keep my house.

#11 Leo Trollstoy on 03.15.17 at 6:32 pm

…and bank economist Robert Kavcic says he knows. Two years. The BeeMo egghead states that’s how long it’ll take our bubble markets (Toronto, particularly) to retrace the path of 1989 when boom turned to bust.

Every wrong prediction of the banks always takes “two years”. Far enough removed so it seems plausible and forgotten.

Anybody that gives a two year+ time horizon is saying that they have no idea what’s going to happen.

Canada’s economy is recovering so the slide in the CAD is over. Debt is meaningless because payments are easy. Jobs are plentiful here as well. Toronto renters will get squeezed as there is nothing to stop rising RE prices

#12 Dwight Botnen on 03.15.17 at 6:32 pm

You are SO right Garth (as usual). Life is all about choices.

#13 Leo Trollstoy on 03.15.17 at 6:35 pm

Except for the people that own the 99,000 empty homes in Toronto that aren’t actually for sale or rented?

What percentage of that of the total supply?

Correct. Meaningless.

#14 Alex on 03.15.17 at 6:36 pm

I wonder what will happen to the TSX index once this RE correction happens. Moreover with the 50 to 75% increase in tax on cap gains, might be time to reduce my exposure to the looney even more.

#15 crowdedelevatorfartz on 03.15.17 at 6:36 pm

Laura.
Seriously?
$1.6 million and you just got a 100k windfall?
Sell.
Invest everything.
Put your stuff in storage.
Take a 1 year sabbatical off work and travel with hubby and the munchkin all over the world….
Come back and rent for one year and then look at buying again.

#16 Taxman on 03.15.17 at 6:37 pm

“Maybe I’ll keep my house.”
………………………………………………………….
The reaction of CAD and other currencies says that the FED is going to be very cautious on rates going forward.

If T2 brings in his tax the rich measures, your own house may be a better bet than a ‘tax-inefficient” balanced portfolio.

#17 The Technical Analyst, CSTA, CPD on 03.15.17 at 6:41 pm

“Stock markets did not tank in reaction, but spiked higher, with a triple-digit advance for the Dow. Why? Because higher rates only come with economic expansion, growth and the potential for more inflation – which also means fatter corporate profits.”

Sorry Garth, that isn’t exactly true. I was on the live FED call from 1:50 to 2:45pm today.

The reason is the US dollar crashed 2% after the FED decisions, which was because the market was expecting a VERY hawkish FED decision (4 hikes) and didn’t get it. With the USD down so much, the stocks popped up.

If anything, a HIGHER FED rate will hurt markets (except financials). The inflation was just 1.9%, hardly “robust”.

The FED had to raise today as well as if they didn’t both the USD and the S&P/DOW would have tanked hard.

We had a slide at the end of the session as well with strong selling and BEARISH MACD indicator.

The TSX went up (as well as EEM) because they work INVERSE of the USD.

#18 Capital Gainz on 03.15.17 at 6:45 pm

Garth – When T2 imposes a 75% capital gains tax, do you see a “softening” of home prices in all the hubris markets like Vancouver and Toronto? Or is that basically the catalyst for a sustainable crash? 10-15%, or more?

And many realtors suggest under supply to market is what’s exacerbating home prices, indefinite price escalation and all these bully offers and bidding wars, what are your thoughts? When does this truly end?

#19 not 1st on 03.15.17 at 6:45 pm

Garth, T2 is taking our economy in the opposite direction (more taxes, capital gains etc), why would the TSX not get hammered as a result?

Does the american boat lift our dingy as well regardless of whatever stupid policy we put on ourselves?

This is where you can prognosticate again for us.

#20 Shooter on 03.15.17 at 6:45 pm

Cad appreciated on the back of oil today and USD fell on weak real wage growth and GDP revision down. Current hike was priced in.

Anyone know actual total listings data/trends? Seeing conflicting reports

#21 Shooter on 03.15.17 at 6:48 pm

The real estate boards in Ontario need to hand over their data ASAP, nobody can or is unwilling to make any decisions as it stands

#22 not 1st on 03.15.17 at 6:48 pm

I am willing to bet dollars to donuts they reinflate the whole thing to massive proportions. The US economy could be supercharged with trump in office. With that sort of inflation stalking the land who knows what will happen.

Trump has picked a fight with every other group except the fed. Whats he waiting for? I would love to see him hammer on them for a while.

#23 Smartalox on 03.15.17 at 6:51 pm

Overture, curtain! Lights!
This is it, the night of nights!
Who knows what heights we’ll hit,
On with the show, THIS IS IT!

#24 Sam the Sham on 03.15.17 at 6:53 pm

Congratulations to Garth for predicting the rate increase correctly! Are there more to come? We’ll have to see what the future holds.

#25 zee on 03.15.17 at 6:55 pm

Robert is saying two more years of price appreciation. That’s nuts!

#26 RentYVR on 03.15.17 at 6:57 pm

@#7 VancouverBrit

Classic case of buy the rumor sell the news. That’s also why gold miners ripped it today too.

#27 joblo on 03.15.17 at 6:57 pm

Love the toilet.
Sign should read:
Ask Kanada for a Demonstation!
High consumer debt, housing bubble, increasing taxes on everything
(Income, Carbon, possible capital Capital gains, possible Dividend tax credit,)
Crony capitalist governments, Commies, rising CDN $,
blah blah blah.
until the big flush we just might need the weed T2.

#28 @careeraftschool on 03.15.17 at 7:03 pm

With all due respect, I disagree with you Garth. My recommendation is:

1) Laura should put the $100k towards her mortgage
2) Then she should come see you about ETF’s that would be ideal for her RRSP, TFSA, RESP and unregistered accounts.
3) She can then borrow against her house and invest. Interest will be tax deductible on investments in unregistered accounts. The dividends might even cover the interest payments.

If Vancouver house prices continue to rise or stay where they are she wins. If they go down her investment portfolio should grow and provide some income. Hard to get investment loans when you have negative equity.

I am not a financial advisor, I got this from reading your blogs over the years.

#29 -=jwk=- on 03.15.17 at 7:09 pm

They have a 1.6M lottery ticket, but won’t cash it because it would be inconvient?. Hey Laura, give me your house and I will happily pay your rent for the next 20 years. How about $5000/month?

Here’s a little 6 bedroom 4100sf’er you might like.

http://www.kijiji.ca/v-house-rental/richmond-bc/6-bedroom-house-for-rent-at-richmond-east/1246939992?enableSearchNavigationFlag=true

Deal?

#30 Damifino on 03.15.17 at 7:10 pm

#4 common sense

Sell Laura..take the profits and run…
————————-

For sure. But one other thing Laura, prepare yourself for a big drop in social rank. I’m just saying, in case that sort of thing happens to be important to you. If you’re like me and couldn’t care less, you’ll be flying.

#31 Goulka on 03.15.17 at 7:13 pm

If the capital gains tax rate goes up, the dividend tax credit vanishes and you pay your advisor fees, what’s left on a 6% return?

#32 Trumpocalypse2017 on 03.15.17 at 7:14 pm

BEWARE THE IDES OF MARCH!

Trump is unraveling as I write, his own GOP finding ways to stab him in the back over his crazy allegations against Obama.

He will be seeking major distraction very quickly, including war.

That is…..If… he is not removed from office. Which will prove just as chaotic.

#33 rainclouds on 03.15.17 at 7:14 pm

Presumably the figs Laura presented are based on assessment?

Very possible in the current market they will realize less than expected.

#34 TLG on 03.15.17 at 7:17 pm

Demand will always outstrip supply when : interest rates are at all time lows and there is no capital gains tax on speculators and foreign earned money. Until this is addressed the average Canadian will not be able to afford the average home.

#35 Doug t on 03.15.17 at 7:25 pm

One “experts” opinion – nobody knows dick that’s what I’ve come to learn. And hey as we well know our trusted “bank” economists have our backs WTF OMG LMAO

#36 technical analysis? on 03.15.17 at 7:28 pm

all the big 6 canadian banks were down today on a super strong market. good to see the scumbags not participating.

#37 Andy on 03.15.17 at 7:35 pm

What you are arguing makes sense, yet look at Vancouver, even with the small correction finally occurring, houses are way far above their fundamentals. If it is anything like Vancouver, this could go on for years. It is still going on in Vancouver, many of us have been on the sidelines for longer that 7 years.

#38 NOTHING SURPRISES on 03.15.17 at 7:37 pm

Laura, sell, take the $1.2 million along with whatever savings, invest @7% = $90,000 a year minimum income and retire !!

You have the world by the tail in your early 30’s.

Wake up girl!!!

#39 Andrew Woburn on 03.15.17 at 7:41 pm

It appears all those nice ladies at all the banks are seriously p’d off.

‘We are all doing it’: Employees at Canada’s 5 big banks speak out about pressure to dupe customers – Business – CBC News

http://www.cbc.ca/news/business/banks-upselling-go-public-1.4023575

#40 Adam Smith on 03.15.17 at 7:46 pm

Anyone have any idea if Victoria is likely to drop the same or will the nice(ish) weather and 15% foreigner tax on Van keep the money coming and this market bloating obscenely.

#41 crowdedelevatorfartz on 03.15.17 at 7:55 pm

@#32 Trumpocalypse2017

I appreciate that you recognize my patented “rights” to Apocalypse2017.
Sadly , I must inform you that I’ve looked ahead into the future and wisely booked………
Apocalypse2018, Apocalypse2019 and Apocalypse2020.
So…..dont even THINK about usin’ them names when the time comes around……..

#42 acdel on 03.15.17 at 8:00 pm

The thing with “Hog Town” my understanding is that they cannot expand outwards due to some law regarding a green belt or something like that which was not intact in the 80’s. With the most populous city in Canada, absorbing numerous newcomers, unable to expand outwards prices going up is only natural…

All of you reading this, do you really believe that Hog Town prices will collapse, as mentioned before it is not the 80’s, I understand prices are ludicrous and interest rates will eventually rise in Canada, although I do not believe anything significant in the next year or two. I am asking out of curiosity since I do not live in that city/province? Thanks!

#43 conan on 03.15.17 at 8:06 pm

It is like living in a winning lottery ticket. Instead of a year to cash it in though, there are years to act. It does not “phase” them, if when they sell, come out $1.4 m or $700K ahead of the game. Big slash in house prices, they don’t care.

https://www.youtube.com/watch?v=jVy1Gsq5mdo

#44 Broken record on 03.15.17 at 8:11 pm

A housing bust is not going to happen! I repeat, a housing bust is not going to happen!

China and India were not the Number 1 and Number 2 economic powers in 1989. Too much foreign money being stashed into Canadian real estate from $350K condos to $10M mansions. Developers love this money too much to let the Canadian government stop this cash flow.

This is a permanent shift in prices, a new homeostasis! All the bank economists will be wrong! Don’t expect them to be correct with this.

#45 I'm stupid on 03.15.17 at 8:14 pm

What about the fine print in the chart that says “down payment equal to half of annual income”. We need more info on the metrics used to graph that chart.

#46 TRT on 03.15.17 at 8:19 pm

#5 turn of the tide on 03.15.17 at 6:23 pm
I though for sure the US dollar would rise against the loonie today with the rate hike announcement.

It went down more than 1% – if anyone knows the reason why, I’d love to learn something new today. Thanks.

—–

USA id done raising rates by the ned of this year. Most likely 1 or maybe 2 at most before recession comes around.

You really think the Multi-trillion dollar bond market would allow for rates to rise?? Its too big to fail.

All markets expect three increases this year. There will be no US recession. I suggest you try plumbing. — Garth

#47 TRT on 03.15.17 at 8:21 pm

…and I expect the US Dollar to fall like crazy going forward as soon as it sinks in that the tightening is done.

Today’s rate hike was 100% expected and already priced into the currency. Loonie declines will come with further Fed tightening, and in advance. — Garth

#48 Apocalypse2018 on 03.15.17 at 8:27 pm

BEWARE THE IDES OF MARCH!

My spirit brother Trumpocalypse2017 has said it well.

However, in my recent hiatus from this blog, I have come to appreciate that it may take some time for the Trump disaster to unfold. 2018 will be the year of that come to full fruition, I now expect.

So I will be posting for a while under this namesake, Apocalypse2018.

As well as ApocalypseNOW.

Because it IS coming.

Prepare your families, have multiple survival plans ready. Appreciate the relative calm you have experienced to date, for it shall not return.

#49 Sewer Rat on 03.15.17 at 8:33 pm

http://www.calgarysun.com/2017/03/14/alberta-carbon-tax-rebate-outrage-province-demands-cheques-back-from-the-dead

Don’t ya love the bit and the end about the $10.09 carbon tax charge for cremation.

#50 Vancouver Dudes on 03.15.17 at 8:34 pm

#29 -=jwk=- on 03.15.17 at 7:09 pm
They have a 1.6M lottery ticket, but won’t cash it because it would be inconvient?. Hey Laura, give me your house and I will happily pay your rent for the next 20 years. How about $5000/month?

Here’s a little 6 bedroom 4100sf’er you might like.

http://www.kijiji.ca/v-house-rental/richmond-bc/6-bedroom-house-for-rent-at-richmond-east/1246939992?enableSearchNavigationFlag=true

Deal?

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

I Canada, renting is or losers dude.

#51 jay on 03.15.17 at 8:34 pm

#45 Good point about down payment being equal to half a years wage, now it should read down payment equal to whatever mommy and daddy and Christy Clark give you for down payment.

#52 genbizx on 03.15.17 at 8:36 pm

oh eeeeew there’s such a supply shortage…raise rates 1% today and keep it going and the supply will flow like fibs from a real estate agent

#53 Wrk.dover on 03.15.17 at 8:37 pm

I got storm stayed at Pearson in December, and didn’t want to drop $370 for five hours in the Sheraton, so I slept in an unoccupied wheel chair in the concourse.

Would I pay 1.6 million to crash at Laura’s?

#54 Rexx Rock on 03.15.17 at 8:38 pm

With the 1.6 million in RBC 5 year 1.91% gic paid monthly you’ll get $2546.That should cover your rent and it’ll be safe and conservitive and you don’t have to worry about losing the principle.In 5 years do it again and maybe get a higher 3%.

Why would they lose the principal? And why would anyone ‘invest’ money for less than the inflation rate, for a pittance in interest that’s 100% taxable? — Garth

#55 bigtowne on 03.15.17 at 8:41 pm

Fed Governor Janet Yellen sees the economy moving up. The inflation is serious enough to not ignore. Our own Bank of Canada Governor believes we are still in the GFC of 2008. My Cliff energy bars have been reduced in size and are half the size of a 2016 bar but the price is the same. This downsizing in products and packaging is ubiquitous but common for many brands and consumer staples. My Cliff energy bar now has the appearance of a small cookie one would give to a toddler or small child. The Cliff Bars have “NEW” on the packaging highlighting the new flavour. This magic marketing disguises the diminishing size of the bar hoping folks don’t notice they are getting half a bar but paying at the same old full price.

#56 JohnSaccy on 03.15.17 at 8:41 pm

Reason for Loonie surge today-

Loonie, Peso Jump After Peter Navarro Says He Wants US, Canadian, Mexican Trade “Powerhouse”

http://www.zerohedge.com/news/2017-03-15/loonie-peso-jump-after-peter-navarro-says-he-wants-us-canadian-mexican-trade-powerho

#57 technical analysis? on 03.15.17 at 8:43 pm

Loonie declines will come with further Fed tightening, and in advance. — Garth
___________________________________________

you are completely wrong about that. there will not be any further CAD$ decline. it’s seen it’s worst days for this cycle.

the FED is ultra accommodating with US CPI at 2.7% yoy. Canada will be raising rates mid-year as that moron Poloz won’t have any choice. Canada is averaging 38,000 new jobs a month since August, WITH oil prices at $50

Forex moves are notoriously volatile and famously impossible to predict. However if the rate gap between Canada and the US grows, the loonie will likely suffer. — Garth

#58 traderJim on 03.15.17 at 8:47 pm

Things that will make the loonie fall: Trump or Mnuchin start badmouthing NAFTA, strong US economic data. Both possible. Junior’s budget? Maybe, but I don’t really think anyone cares.

But barring those things, the path for the loonie now is temporarily higher.

June is a long time away, and the loonie can rise right back to 76 or 77 cents, easily.

Then we’ll see if Yellen is all hot air in June, or continues to be the most dovish Fed Chair in history.

I’m betting she continues her dovishness, a leopard doesn’t change its spots.

My bet is for 2 measly 1/4 point hikes this year. Meaning maybe 1 more late in the year, that’s it.

Asset bubbles galore, woo hoo!

#59 plumbers on 03.15.17 at 8:51 pm

All markets expect three increases this year. There will be no US recession. I suggest you try plumbing. — Garth

—-

Economists should not “design the tap” or “lay the pipes” of economic policies. The market doesn’t need “economist-plumbers” (or “economist-scientists,” for that matter) any more than it needs government intervention in the first place.

http://www.zerohedge.com/news/2017-03-15/what-economists-are-not-and-shouldnt-try-be

#60 45north on 03.15.17 at 8:51 pm

Andrew Woburn: from your link: Many bank employees described pressure tactics used by managers to try to increase sales.

here’s pressure tactics:

https://www.youtube.com/watch?v=Q4PE2hSqVnk

#61 cramar on 03.15.17 at 9:05 pm

U.S. credit card debt likely to get an immediate hit.

http://www.marketwatch.com/story/with-a-fed-rate-hike-credit-card-holders-could-pay-an-extra-16-billion-in-fees-2017-03-15

The average U.S. household now has $16,000 in credit card debt!?? Yikes!

It will be a game changer when the rate hikes eventually hit Canada.

Live within your means dogs! Live within your means! Eschew debt! Howl to the moon, “Eschew debt!”

#62 Cheap Houses on 03.15.17 at 9:11 pm

Full employment in the USA (70 million on food stamps). 3% GDP (Europe nope, USA nope, Russia nope, South America nope, Canada nope and everyone knows China’s GDP is totally fake). Sorry. Not but those of us in the real world do not buy into your Rosiness. Great Depression part deux ahead.

There is no indication, even remote and fuzzy, of an economic depression. I’m worried about you, though. — Garth

#63 Vanrentor on 03.15.17 at 9:15 pm

#15 crowdedelevatorfartz on 03.15.17 at 6:36 pm
Laura.
Seriously?
$1.6 million and you just got a 100k windfall?
Sell.
Invest everything.
Put your stuff in storage.
Take a 1 year sabbatical off work and travel with hubby and the munchkin all over the world….
Come back and rent for one year and then look at buying again.

Exactly. We sold last year and found a nice rental. Last year we went to Puerto Vallarta 3 times as well as Banff and Europe. So far this year South Africa and Puerto Vallarta. Tomorrow we are off to San Francisco to play Spyglass. We will wait for a buyers market to jump back in. If that doesn’t happen we will rent here and buy elsewhere. It is nice to be liquid.

#64 TCContrarian on 03.15.17 at 9:15 pm

Laura, Laura, Laura…

I know this is wasted effort as you’re not likely to overcome the effects of ‘recency bias’…but-

I sold my (almost) lovely house (ie. not a dump), with ss appliances, new roof and flooring amongst other improvements, for a lot less than $1.6M just so I can step aside from the impending decline (which WILL come).
And to be able to invest a larger amount in a way that only few of us can do (contrarian).
A year and half later, I’ve nearly doubled my net worth and living debt-free in a nice rental (detached with plenty of space).
Guess what dear Laura: it’s not convenient to pack up and move, but neither is going to the gym and working out. And that’s why only about 1% are, well, the 1% – they’are able to do THAT which is inconvenient.

TCC

#65 westcdn on 03.15.17 at 9:16 pm

IHCTD9 mentioned he gave up on charities except for a couple he trusted. So did I. I reviewed the financial statements of “charities” on the Canadian Gov website and was shocked so much was absorbed by “overhead”. I used to be a regular blood donator but I walked away after reading their financial reports. The friendly nurses aren’t volunteers. They are paid employees who pull down a ton. Can you say 10K$ a month plus and this was 4 years ago. And they have the best brainwashed clients in the world. All they do is stick a needle in my arm and draw a pint. I think the only volunteers are the ones who hand out cookies and set up the beds.

Then the Blood Cross service sells all the blood they collect to US refiners who extract the plasma and keep the blood cells. Then Canadian hospitals buy the plasma from the US refiners. Can you say scam? If Canadian Blood Services want my blood in the future, I want to get paid along with the telemarketers who call me incessantly from Ottawa.

At least T2 only wants my loot – is it surprising given he has never worked a private enterprise job where you are only good when you produce. Good riddance is all I can say. Btw, I could not vote Conservative, Liberal, or NDP in the last Federal election so I threw my vote for the Green Party. The man seemed decent and earnest. Jason Kenney was my MP, I have no use for the man although I will admit he is not corrupt.

#66 rknusa on 03.15.17 at 9:22 pm

re: …and bank economist Robert Kavcic says he knows. Two years. The BeeMo egghead states that’s how long it’ll take our bubble markets (Toronto, particularly) to retrace the path of 1989 when boom turned to bust.

took about three years to hit bottom down here in the US after 2007

#67 economictsunami on 03.15.17 at 9:27 pm

So the Fed hikes for the third time in 11 years; (based mainly on surveys/sentiment soft “data”) just as the Atlanta Fed GDPNow prints a 0.9% thump.

Add in the contrived unemployment rate/ “firming inflation” and the Fed found their needed cover early this year.

GDPNow Forecast Dips to 0.9%: Divergence with Nowcast Hits 2.3 Percentage Points – Why?

“From February 3 to March 10 the FRBNY Nowcast Model rose from 2.9% to 3.2%

From February 1 to March 10 the GDPNow Model fell from 3.4% to 0.9%

Both models use many of the same data inputs”

https://mishtalk.com/2017/03/15/gdpnow-forecast-dips-to-0-9-divergence-with-nowcast-hits-2-3-percentage-points/

No wonder the Fed is F.U.B.A.R. …

Just a hunch. But the Fed probably knows more than you. — Garth

#68 dogman01 on 03.15.17 at 9:28 pm

I was creamed by the income trust Halloween massacre;

Garth will my Preferreds be creamed by a new Tax grab on Canadian Dividends?

http://www.bnn.ca/investing/video/tax-changes-to-capital-gains-and-dividends-could-surprise-investors%7E1077450

#69 rknusa on 03.15.17 at 9:29 pm

re: re: …and bank economist Robert Kavcic says he knows. Two years. The BeeMo egghead states that’s how long it’ll take our bubble markets (Toronto, particularly) to retrace the path of 1989 when boom turned to bust.

took about three years to hit bottom down here in the US after 2007

WTF – pardon me but two more years of crazy price hikes similar to the last two years THEN a bust?

better raise them rates now Poloz and get this financial bloodbath underway asap otherwise the damage will be even worse and more longterm

#70 Geenie Wilson on 03.15.17 at 9:30 pm

Garth, Atlanta Fed revised down to 0.9% GDP. Do you think this is a bottom and reverses course up to 2-3%? If it goes down, what would the Fed do with rates?

#71 MF on 03.15.17 at 9:31 pm

#55 bigtowne on 03.15.17 at 8:41 pm

Saw that. The regular Cliff bars are smaller and the price is the same.

The “new” one is a joke. Tiny little children’s snack and more expensive.

Glad you mentioned this. Every time I buy one I ponder the same thing.

MF

#72 Capt. Serious on 03.15.17 at 9:32 pm

I was at a hockey game last night in Ottawa, and two young ladies behind me carried on a lengthy discussion about everything. I feel I know them now. Anyway, the one girl, early 20s, is trying to decide if she should buy a house whilst she is about to be unemployed going back to teacher’s college. “Might not be a good idea with me going back to teacher’s college.” Ya think? I can’t make this up. The other girl talked about knocking down a house on a property she knows of and building her dream home with her about to be hubby. (Fiancé is not so keen. His name is Ryan. I know too much.) No starter home for them, apparently.

#73 MF on 03.15.17 at 9:33 pm

#42 acdel on 03.15.17 at 8:00 pm

Speculation is rife here. Many with “investment” condos and houses.

Nothing goes up forever and this gasbag is no different.

MF

#74 Cheap Houses on 03.15.17 at 9:35 pm

#62 Cheap Houses on 03.15.17 at 9:11 pm
Full employment in the USA (70 million on food stamps). 3% GDP (Europe nope, USA nope, Russia nope, South America nope, Canada nope and everyone knows China’s GDP is totally fake). Sorry. Not but those of us in the real world do not buy into your Rosiness. Great Depression part deux ahead.

There is no indication, even remote and fuzzy, of an economic depression. I’m worried about you, though. — Garth

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

Thank you for your concern. But when so called conspiracy theories continue to come true while govt, the MSM, the now establishment Silicon Valley keep lying to the public – I will take my chances with my own sources thank you.

#75 Ardy on 03.15.17 at 9:36 pm

Garth, I understand your suggestion to take the profits and run. But what about the flip side of that transaction.

To sell, some greater fool will have to buy. There may be many of these transactions before the correction takes place. At that time, the last line of buyers will be left holding the bag.

They will either lose their shirts or go bankrupt. Mind educating me on the eventual fallout for the economy?

RD

#76 april on 03.15.17 at 9:39 pm

#71 – If people are dumb enough to buy[and they are] in this market that’s their problem. No sympathy!

#77 Smoking Man on 03.15.17 at 9:44 pm

Well Demmark dident work out like I thought. USDCAD pulled a George Costaza. For no reason USD got crushed.

Killed on Bonds Killed on Fx will I bought at 1.31 so made a bit. Still in the trade.

Since Trump won all my models have been going in reverse.

Going to start doing the oposite of what my mind is thinking.

Starting with..I’m a feminist…

#78 Damifino on 03.15.17 at 9:45 pm

#32 Trumpocalypse2017

Trump is unraveling as I write, his own GOP finding ways to stab him in the back over his crazy allegations against Obama.
————————————–

Please tell us why the GOP would care if Trump made a crazy allegation against Obama.

#79 not 1st on 03.15.17 at 9:46 pm

Garth, doesn’t this wild bill morneau guy get a earful from bay street once in a while?

Surely not dumb enough to mess with canada’s investment climate in a recession is he?

#80 Wrk.dover on 03.15.17 at 9:50 pm

To the best of my knowledge, possibly from a piece on 60 minutes, the CEO of the Salvation Army lives in a walk up, over a store front, in a poor part of somewhere.

There is a trustworthy charity.

#81 mike from mtl on 03.15.17 at 9:50 pm

Again, worth repeating, mr. BoC said himself to not follow FED lead. Read as: holding out for as long as possible. I’m willing to put in the pot the BoC does’t raise until at least 2020, perhaps 2025. Plenty of excuses.

As much as I’d wish this garbage to end, for BoC (who’s not so stupid as some assume), they’ve got loads of reason to do whatever they wish.

Keep no more than 20% in CAD direct, ALWAYS hedge away from poloz peso. In fact until we lose our AAA rating, I’d abandon CAD$ entirely.

See you in five years!

#82 Mattl on 03.15.17 at 9:56 pm

Laura can afford her house, its in a place she loves, and rents in her area are ridiculous. As in, 40k a year. Why would she sell? And this blog would have given her the same advice the past 8 years.

Maybe its the right advice now, or maybe she picks up another 400k equity. One thing is for sure, if she would have been reading here 5 years ago and taken the advice given here she would have left 700k on the table in net worth and spent 200k in rent.

But hey congrats on calli the rate hike!

If she had sold and invested the $700,000 the rent would have been paid out of yield. — Garth

#83 crossbordershopper on 03.15.17 at 10:00 pm

cant afford to live in Toronto, dont want to anyway, millions of canadians dont. But, life goes on, as long as you have a doctor close by, a bank, a tim hortons, a shoppes, a good discount grocery store, and a canadian tire. your good. you can live in lots of places for a home less than 100K, and have a good life, toronto is a joke, it surprises me so much of the people who work there, make good money and rent, and never have anything, no savings, no pension plan etc. these kids are stupid. you end up with nothing in the end. no pension, no realestate, just experiences, and when dimensia sets in, you dont even remember if it really happened or not. waste of a life to make money for the big corporations who dont care about you.

#84 Smoking Man on 03.15.17 at 10:08 pm

Spent the day on the couch feeling sorry for myself watching Netflix all day. Watched the arrival. Pretty cool. Real aliens ain’t that ugly. They look like us.

At leased 100 times during that flick I wanted to hit the liquor cabinet but I didn’t. Hope happebs when you have something to look forward to. To me it’s 9pm

Talk about putting off instant gratification. Ahhhhh

It’s going down smoth. Well worth.the wait.

I don’t know how long I can hold out without something to stimulate my brain.

All I can do is try.

130 JaketheSnake on 03.15.17 at 1:17 am
For your movie title.

Spectaculos

#85 45north on 03.15.17 at 10:17 pm

westcdn: If Canadian Blood Services want my blood in the future, I want to get paid along with the telemarketers who call me incessantly from Ottawa.

better to give than receive

#86 rknusa on 03.15.17 at 10:22 pm

re interest rate rise today and rise of CAD nearly penny

rise in Canadian dollar was apparently attributed to Yellin’s cautious tone regarding pace of future interest rate increases

sharp rise in dollar just shows how the fortunes of Canada are dangerously tied to the Feds interest rates and once these rates normalize Canada’s housing economy is burnt toast

The Canadian dollar did not so much rise as the US$ fell. — Garth

#87 Leo Trollstoy on 03.15.17 at 10:26 pm

Canadian economy stable so CAD is stable. Not rocket science. Interest rates low forever, payments easy.

http://www.financialpost.com/m/wp/news/economy/blog.html?b=business.financialpost.com%2Fnews%2Feconomy%2Fcanadas-job-growth-soars-beyond-expectations-to-15300-as-full-time-hiring-jumps&p=2&pubdate=2017-03-15

#88 Millenial905er on 03.15.17 at 10:38 pm

Renting is fine and good if you’re outside child rearing age (i.e. a university student or wearing “thirsty underwear” as Garth likes to put it). In Laura’s situation, however, renting is the pits. Imagine getting your child into a daycare or in a good school only to have the owners decide THEY want to sell and invest. Now you’re pooched. Good luck scrambling to find alternate accommodations, especially if you want to rent a house. The rental market isn’t always a great one, particularly in big cities like TO and VAN. That’s what infuriates me when I hear people pushing future generations into crappier accommodations with the statement “not everyone can live in a house”… Well ok, then maybe we should reconsider how many people we let into this country. When 1 in 6 Canadians are living in poverty, we can’t take care of ourselves, and we have a problem. This is why the masses are becoming protectionist. We’ve been told to accept globalization at our own expense… We’re living in worse conditions than our parents did. This is progress? No, Laura, unless you’re willing to move away from Vancouver, hang tight, your equity isn’t going anywhere.

#89 Self Directed on 03.15.17 at 10:39 pm

Houses still going up in GVRD and the Fraser Valley. Yes it’s true. Condos, Townhomes, and even plenty of detached housing… all going up.

There is no crash, only bubbles called Vancouver, Calgary, Regina, Winnipeg, and everything else east of Manitoba.

Laura don’t sell. Not yet. You have plenty of time to get out. The market will stay sticky.

Christy will get re-elected. I wish it wasn’t true. But the tired and stupid people of BC will vote her in for a 3rd time because they believe the political messages on the Global TV channel. It’s not even a good smoke and mirror show, yet it’s working. Pathetic.

Poloz won’t raise rates. They can’t. The housing market depends on it. Housing is the Great Canadian economy. Housing is the ultimate status symbol. With or without a house, your future is full of uncertainty. Maybe we shouldn’t care so much.

#90 Barb on 03.15.17 at 10:41 pm

Laura,

S E L L.
Invest.
Wisely.
With Garth.

#91 };-) aka Devil's Advocate on 03.15.17 at 10:49 pm

The economic paradigm we adhere to is one of growth at all costs, albeit unsustainable in the long run.

The advantage owners have over renters is all forces will collaborate to keep the Ponzi scheme alive kicking the can down the road for some future generation to deal with.

We won’t let it fail. You can count on government to keep it going.

#92 Sir James on 03.15.17 at 10:56 pm

The news today about the arrest of the ring-leader of the ‘Russian’ hackers was from Ancaster, and who was also charged for hacking the Kremlin, seemed to indicate he was being paid for his crimes by flipping houses?

#93 Karma on 03.15.17 at 11:05 pm

#61 cramar on 03.15.17 at 9:05 pm
“U.S. credit card debt likely to get an immediate hit.

http://www.marketwatch.com/story/with-a-fed-rate-hike-credit-card-holders-could-pay-an-extra-16-billion-in-fees-2017-03-15

The average U.S. household now has $16,000 in credit card debt!?? Yikes!

It will be a game changer when the rate hikes eventually hit Canada.

Live within your means dogs! Live within your means! Eschew debt! Howl to the moon, “Eschew debt!””
……………………………

The writer of this piece quoted a website who can’t do math. $779 billion in US Credit Card debt. It says “average household” has $16,748 in CC debt.

$779,000,000,000/$16,748 = 46,513,017 households in the United States.

Population of the United States is about 320,000,000.

By their calculation, there is about 6.88 people per household in the United States.

Clearly, they are wrong.

#94 Smoking Man on 03.15.17 at 11:10 pm

Unless msm can figure out a way to put 100gs in white picket fences .

Doomed

#95 It's me, Laura on 03.15.17 at 11:10 pm

Thanks again for your input Garth (and foolish followers). Everything always looks good on paper – but reality is another thing. (btw, convenience = less than 2km to work/family/babysitting and our home is pretty nice, just small)

@15- already traveled the world when single and with hubby before baby
@29 – there are many reasons why I would never live in Richmond
@33 – it’s actually assessed at $1.8 million

YVR housing has been inundated with foreign $ and this is why we are so hesitant as it seems to be never-ending. So many of our peers have moved out to farm country as it’s the only place they can afford (talk about inconvenient). I’ve been following the blog for years and was telling my friends not to buy at $700,000 7 years ago. Thankfully they didn’t listen to me, bought and are now selling for $1.4 million. 7 years ago was supposed to be the “peak” of the bubble. So was 4 years ago, and so was last year. There’s no guarantee.

So…we shall see.

PS…Happy belated Garth ;)

#96 Smoking Man on 03.15.17 at 11:16 pm

Yeah

https://youtu.be/JSUIQgEVDM4

#97 Mrs Hubris on 03.15.17 at 11:18 pm

BC home prices down 12%. Sales averages returning to 2000 levels.

http://www.newstalk770.com/syn/112/284876/b-c-home-sales-down-in-february

Gord MacDonald
March 15, 2017 07:07 am

B.C. home sales down in February but returning to long-term averages:
Home sales are returning to long-term averages, all the way back to 2000, according to the B.C. Real Estate Association.

Cameron Muir, who speaks for the Association, says sales were down nearly 32% last month when comparing to the same period last year.

He says the decline is a result of slower sales in Vancouver, compared to the rest of the province.

Home prices are down too, averaging around $688,000, down 12% from a year ago.

“A year ago, we saw about 44% of homes sales in B.C. were sold in the Greater Vancouver area, that’s fallen to 37%. Just simple math, because home prices are much more expensive in Vancouver, that pulls that average prince in the province lower.”

And the total number of all sales plunged 40%

Comment: Have not seen these figures elsewhere in the Canadian MSM today. Any idea why not? These came via an Albertan radio station.

#98 Karma on 03.15.17 at 11:25 pm

#89 Self Directed on 03.15.17 at 10:39 pm
“Houses still going up in GVRD and the Fraser Valley. Yes it’s true. Condos, Townhomes, and even plenty of detached housing… all going up.”

That’s not what Zolo.ca says as of March 15 at 8pm PST:
https://www.zolo.ca/langley-real-estate/trends

Price Growth:
White Rock: down 45.7%
Surrey: down 18.5%
Vancouver: down 17.4%
Langley: down 16.7%
Port Moody: down 15.0%
West Van: down 13.1%
Burnaby: down 11.4%
New West: down 10.8%
Maple Ridge: down 10.2%
Coquitlam: down 8.8%
Delta: down 6.7%
North Van: down 3.7%
Richmond: down 3.4%
Port Coquitlam: up 5.3%
Pitt Meadows: up 6.6%

Not sure if this is based on Average Price or Median Price.

Regardless, it’s ugly!

#99 'Of course Laura & hubs are gambling by not selling. ' on 03.15.17 at 11:29 pm

gambling? good grief

it’s not like they are sitting on gold bars. Cmon. They can LIVE in it (or pay shit load in rising rent) or rent it and get positive cash flow.

they are golden any way you look at it. Even if she corrects, she will rise. If they listened to you they would have sold a few years ago, ugh…..

#100 boonerator on 03.15.17 at 11:29 pm

Laura says “rental prices are insane.”

True, but that’s from your present perspective.

If you sell and net $1M, and invest it to get 6% income, you could get $5000 a month to rent a palace.
Then your present income goes to regular expenses.

When prices go down, you’ll still have the $1M to buy again at a lower price.

And if you have snobby friends, make sure the palace has lots of stainless steel, granite etc.

#101 westcdn on 03.15.17 at 11:38 pm

Why did the markets (equity) rip to the upside? My answer is Kathleen Hayes who had the audacity to ask Yellen why she would raise interest rates in the face of an economic slowdown. The answer was dovish.

Quote: Kathleen Hayes from Bloomberg called out Yellen for the state of the economy being in the tank — juxtaposed against nonsensical Fed Reserve tightening. Clearly, she hasn’t a legitimate reason to hike rates, other than to draw down the economy and cause a crisis.
Yellen said ‘policy remains accommodative’ yet she’s fucking hiking. That’s like me punching you in the face, whilst saying ‘I’m here to help.’ When Hayes asked if the Fed would continue to tighten should the economy continued to wallow in the doldrums, Yellen gave herself some wiggle room, saying ‘policy wasn’t set in stone.’

I am still riding the bull for a few weeks more. My maples have bounced back sharply over the last few trading days led by my preferreds. The pro’s now seem clueless.

#102 Nonplused on 03.15.17 at 11:41 pm

“Life’s all about choices. Making them is easy. Living with them, not so much.”

Another great quote from the great quote generating machine that is Garth. I’ve got a couple millennials living in the basement I would like to understand that, but no such dice. And actually looking back on it I made a couple terribly bad decisions as well.

So, back to Laura. Give your husband a big kiss and maybe something more he’d like. To have only $200,000 to go on something now marketing for $1.6 mil? Genius. But that’s the problem with real-estate. Not only is it fairly illiquid, even if you do sell it it’s disruptive to do so. You need some place to live, so if you sell you have to move and rent. Now $1.6 mil will pay a lot of rent, no matter how crazy the rent actually is, but you still have to move. It’s not like selling your CEF shares when gold pops.

I think this is one of the reasons people tend to hoard real estate. Selling is messy. You have realtors, lawyers, movers, land transfer taxes, capital gains if it was a rental, assessments, land surveys, inspections, etc. And then you still have to find somewhere to live that works for work and school. It’s a mess.

If Laura can capitalize on the gain, that’s great. But if she can’t they should probably just look at their costs as compared to their means and needs and just let it go. Sure, it won’t be worth as much in a few years as it is now, but that was all imaginary money and it will still be worth more than they paid. “Market timing”. “Buy and hold”. “Your house is not an investment, it’s a place to live”.

This is the worst of all bubbles. We’ve converted rotting wood into the most expensive thing in Canada. Location, location, location just when the internet is making location irrelevant. We’re doomed.

#103 WUL on 03.15.17 at 11:43 pm

Laura:

If you do not own land, you cannot be appointed to the Senate. Account for that. Pension accompanies the appointment. You’re welcome.

#104 bdwy sktrn on 03.15.17 at 11:47 pm

L’s married, 30ish, baby, some money in RSPs and TFSAs and a $200,000 mortgage on a little, geriatric Van house (“my husband bought it before the craziness”) now worth $1.6 million – “land value only.”
——————–
linda – keep the place unless you are leaving town.

when it’s 2.6m you will be kicking yourself.

see you on the drive.

(unless you try to rent , and subsequently get bounced to bby or worse.)

the lovely blog had me thinking of selling back in 2010. same arguments then. china keeps getting bigger, van is NOT going down.

#105 Ed on 03.15.17 at 11:50 pm

Question, so if house prices do increase by 30% yearly for 2 years, and then goes down 30% over 10 years, even with a 2% inflation the value of the home will still be similar to right now. If that’s the case then buying now still seems reasonable if you can afford it? Or do I have my math wrong and the correction may me more than 30% if it takes 2 more years before a correction starts.

#106 not 1st on 03.15.17 at 11:55 pm

Garth must be facepalming somewhere now.

Geez Laura, you have no idea. Pass on a tax free gain of $1.6 mill just so you can get to school and the babysitter a little quicker. I guess you can justify anything in your own illogical mind.

#107 traderJim on 03.16.17 at 12:04 am

Re: Charities

By chance I had a business deal with the parents of a young man who started his charity at a young age and became quite well known for it.

Now, a decade or two later, the parents, both retired from very modest careers live in a gorgeous penthouse and own several more million dollar properties.

They also own the building where famous kid’s charity is headquartered. I believe the public record shows the value of the building at $8M, and that’s before the latest craziness.

Hmmm. Now how would a couple of retired civil servants come up with many millions in net worth. Hmmmm.

Famous kid is now starting a new type of ‘for profit/charity hybrid’. I kid you not.

Guess that will help explain the high life if a reporter ever decides to look into it.

#108 #100...6% income? on 03.16.17 at 12:08 am

where you getting that from? junk bonds?

unless you’re selling covered calls, can someone tell me what vehicles one is using to generate 6% from a portfolio? keep in mind this income will be TAXED…:)

#109 Mousey on 03.16.17 at 12:26 am

My two cents worth: keep the house and the renter for now. Invest the $100,000 gift. When you need the extra room, reclaim the rental and renovate the entire home to suit your needs. This is all premised on the assumption that you love the location and convenience of being in town. When the “convenience” factor is less important, ie. when the commute is improved, the kids are in uni, or you don’t like the location anymore – that is the time to cash in your chips (and go for a nice vacation on the Italian Riviera.)

#110 WUL on 03.16.17 at 12:33 am

Laura:

No more facetious remarks. Keep the house. No more inflation risk. Shelter,warmth, a place for the kids, gardening, paint the walls paisley, no cooking smells wandering down the hallways and no landlord.

Commenters here will say but with a 5 to 7 % return you will be on easy street. And we shake our head at the promises made by realtors. Promises like that made in a prospectus garner a stern finger wagging from your local securities commission.

Put the value of your home out of your mind and enjoy your life.

#111 Entrepreneur on 03.16.17 at 12:46 am

I can hear the whishing whirling sucking sound of water/house prices. Is this the falling knife, thinking house prices are falling bad time to bad? And how many people will think this to cause the unknown correction?

#112 Fortune500 on 03.16.17 at 12:51 am

One has to admit, to those young people who are trying to decide whether to save and invest, or leverage into the housing market, stories like Laura’s have enormous power and resonance.

A 30% eventual reduction that might start in 2 years, will not make a lick of difference. Almost no mid-30 year old would have been able to save and invest their way to 1.6 million in net worth using traditional saving and investing. The low interest rate environment, tied with our government-supported primary residence investment policy has fundamentally changed the mindset of an entire generation of investors. Many on here gambled and lost by not following the herd. The real game-changer is that this time, the herd is supported and fully backed by a government and an electorate.

#113 westcdn on 03.16.17 at 1:06 am

#85 45north

“Better to give than receive” – Blood Services.

I hear you. Many times I don’t like my choice but I won’t back down if I believe my course is true – just me trying to understand…

#114 T-Rev on 03.16.17 at 1:11 am

Gartho I try only to wright when I’ve got a perspective to add that I don’t see in the the main post or the comments; I think you’re only half right on ol’ Laura this time, although you may have the benefit of more info about her you didn’t include in the post.

I think this is less a financial choice for Laura than it is a lifestyle choice right now: she doesn’t fit your definition or an over-indebted moisture by any stretch. Babe has $1.5M in net worth (maybe more, dunno her whole story), owes a measles $200K, and is coming into her prime money making years. She has zero risk, other than a lack of asset diversification and a potential “top” in the YVR real estate market we’ve all been calling for a decade now (see previous posts on the folly of market timing). She loves the location, the commute, the community, and only owing $200k that renter is in there because she’s smart and humble, not ’cause she needs the cash.

Point is, it’s a lifestyle option at this point: what will maximize her “enjoyment of time”, to quote one of my fave GT posts. If her and hubs are the kinda folks that would like to live carefree, travel the world, rake in an easy $90-105k/yr in tax advantaged investment income, maybe work a bit remotely or seasonally back in Canada, raise the babies as bohemian vagabonds, then sell now and do it, you’ve been handed a gift few who have ever lived have had. BUT, if selling the house means renting a place in the same hood, grinding out the same 9-5 (more like 7-7 in the modern world), taking your four weeks vacation to Mexico/Hawaii/Disneyland every year, and losing the stability and security and sense of home they currently enjoy, they should keep the shack. By the time they outgrow the place, it’ll be paid for and they can rip it down and build a modest house and still only have a $400k mortgage.

Yeah, they might lose 30% in a correction. They might also gain that much in a continued climb; I think prices are nuts but I thought they were nuts a decade ago. The only wrong move is to become an over-indebted debt slave who CAN’T leave that job you hate because the bills are bigger than your dreams, or to take on so much risk that you can’t sleep at night and could be destroyed by a correction. She’s in neither of these situations, and instead had found herself, at the tender age of 30, with a beautiful family in a location and community she loves with a short commute, great child care options, financial freedom and the ability to choose whatever path makes her happy. Which is exactly what you’ve coached people to do for a decade now. I think Laura deserves a big hi-five no matter what she decides to do, girl has life by the tail.

So yeah, she should go full tribal feral hippie wanderer if that’s for her and the fam. But if it’s not, stay put where your life is happy and healthy. Tear the house down when the babies get too big, or maybe boot the renter and reno. Set down roots, but don’t chain youself to a house. Don’t chain yourself to a damn thing, come to think of it. Freedom is happiness, and you are free as it comes. Options are all yours right now Laura, and by having those options you’ve already followed Garth’s advice. Now ignore him and the rest of us and chose what makes you happy.

#115 Tony on 03.16.17 at 1:12 am

Re: #95 It’s me, Laura on 03.15.17 at 11:10 pm

The Chinese all do the same thing. As of now you’ve seen all the Chinese buy at the same time but what happens when the Chinese all sell at the same time? Take a look at the boom and bust cycles in housing in China. All the action went from housing into stocks then back into housing. The recent action in the bitcoin where most of the money came from China. Maybe the flip side will be worst than the 80 percent price drops on Miami condos when the market went bust in America.

#116 Ponzius Pilatus on 03.16.17 at 1:28 am

For the Euro skeptics:
Holland goes moderate, France will do the same.
So will Germany.
Trump is a lame duck.
America is on its own.
China is on the move.
A new world order.

#117 YVR on 03.16.17 at 1:50 am

#98 Karma

Its average and detached homes aren’t selling because of the 15% tax.

Thos homes that are selling are attracting bidding wars.

Makes perfect sense if you do the math.

#118 domain on 03.16.17 at 1:59 am

“Another newsy day. Another bold GreaterFool prediction nailed. If this blog were only humble, it would be, well, less pathetic. But first to Laura, our daily example of why people blow themselves up.”

Well gold is up 2.2% in 14 hours.

And the US dollar is down 1.2% in the same period.

You nailed part of it, but not all of it.

Miners rewarded today, as did other parts of the market.

Lets see how the next 3 months go.

#119 jess on 03.16.17 at 6:59 am

“She said the worst part of her job was having young families in her office who agreed to re-mortgage their homes because of debt.

“We told them we were helping them, but essentially we were extending more credit so the vicious cycle would … continue and we, in turn, would make a sale,” she said.

http://www.cbc.ca/news/business/banks-upselling-go-public-1.4023575

#120 OMERSOM on 03.16.17 at 7:00 am

Wow wow wow, Her family could have 1.4 million tax free in the bank and they aren’t selling!!!! Hello MCFLY anyone home???? I would up root my immediate family and plant roots somewhere else cheaper find other jobs somewhere else whatever….instant millionaire…book plane tickets once a year to go back to van for a visit…….not to mention little johnny’s college fund would be paid wow wow wow some people must be in La la land

#121 Alex on 03.16.17 at 7:06 am

All that renting vs buying talk is funny.
When you have found your dream home, I don’t see any problems in keeping it forever. Our home is a 1.4M mansion all paid for in cash and we love everyday we spend in it. Upkeep is 28K a year including energy, pool fees, insurance (premium non conventional one), gardeners, yearly small renovations, etc.
But we also have much more than that in a very liquid portfolio.
We would never have bought a 1.4 house if it was representing more than half of our net worth. Also, it would cost now 1.7M to build it again so we bought it below its real value. We are also a quarter century from our retirement day so plenty of time to reach my goal of a 10M portfolio !
Buy what you can really afford.

#122 Wrk.dover on 03.16.17 at 7:12 am

1/2 the people on earth live on $3.00/day.

Laura has 1370 years of pay at hand, and wants to live close to work and daycare….

Because Canada

#123 Inertia on 03.16.17 at 8:09 am

Garth, you need to ask the Lauras of the world a better question: ‘if you did not have the house today, would you take $1.4M out of your non registered account to buy that house?’ If the answer is no, then Laura’s problem is simply inertia, i.e. it is hard to take the action to sell it.

#124 TurnerNation on 03.16.17 at 8:27 am

I’m Born & raised and over educated in this nauseating mind kontrol system of a country.

Hand a Kanuck a 1-3 million cash payout and…they’ll say “but it might go higher!”. And won’t take it.

Settling instead to be in the SYSTEM. Paying taxes, long commutes, record costs for basic services like transportation, telecommunication, electricity.

Oligopolies and ‘Smart Centre’ shopping places.

Your “choices” here in Ontario – you are free to leave at any time!

Westjet or Air Canada
Loblaws/Shoppers Drug or Sobeys
Starbucks or Tim Hortons
Lib or PC
Petro Canada or Esso
Rogers or Bell.

Any so on.
Learn to love Big Brother. Learn to love The Party.
Hard Work Brings Freedom (“Pay your fair share”)

#125 crowdedelevatorfartz on 03.16.17 at 8:31 am

@Laura
Well.
What its assessed for and what it sells for are two entirely different things.
But the arguement is moot if you have no intention of selling.
Save that assessment.
Pull it out in 5 years and think ” shoulda, coulda, woulda”
Count your lucky stars you married a guy smart enough who bought in and paid the mortgage down…. instead of a “gasp” , renter……
Prices are dropping. Sales are dropping.
Good luck

#126 The Endowment Effect on 03.16.17 at 8:31 am

Besides recency bias, there might be another cognitive bias leading to Laura’s reluctance to sell her $1.6 million property: the endowment effect (also known as divestiture aversion). People generally have a tendency to attach more value to things simply because they own them.

“Suppose you hold a ticket to a sold-out concert by a popular band, which you bought at the regular price of $200. You are an avid fan and would have been willing to pay up to $500 for the ticket. Now you have your ticket and you learn on the Internet that richer or more desperate fans are offering $3,000. Would you sell?”*

Here’s the Wikipedia link to the endowment effect:

https://en.wikipedia.org/wiki/Endowment_effect

*Kahneman, Daniel. 2011. Thinking, Fast and Slow. Toronto: Doubleday Canada, p. 293 (and all of Ch. 27).

#127 Ezra on 03.16.17 at 8:38 am

“As I sped down the 401 in semi-autonomous mode, I texted” Never have I read daily blogs that are simultaneously more poignant and hilarious! Thanks Garth.

#128 Gaile Browston on 03.16.17 at 8:41 am

Easy for the peanuts gallery to make all these comments, but they do not have “skin in the game.” Is selling too early like trying to “time the market”? Stock markets are at all time highs and everyone is saying to buy. If the housing market was crashing no one would suggest to buy because it’s “catching a falling knife.” If new or current BC govt ditches the foreign buyers tax, then up the prices go again. Who can predict politics? Not the Hillary/Trump Pollsters.

#129 Victor V on 03.16.17 at 9:22 am

Markets around the world are on a record breaking tear this morning fuelled by the Fed’s ‘dovish hike’

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/investing/market-moves/markets-around-the-world-are-on-a-record-tear-this-morning-as-investors-applaud-feds-dovish-hike&pubdate=2017-03-16

LONDON — World stock indexes surged to record highs on Thursday while the dollar traded close to a one-month low after the Federal Reserve hiked U.S. interest rates but signalled no pick-up in the pace of tightening.

#130 Lee on 03.16.17 at 9:25 am

The last time there was a major pullback in real estate in Toronto interest rates were not rising much. Between 1989 and about 1996 they fluctuated between about 12% and 14%. That had little impact on the overall monthly payment. It was house prices themselves that made houses unaffordable. So for those of you saying that nothing bad will happen until mortgage rates go up, you are wrong. Of course, I don’t know why market corrections last so long. I do not see why investors and sideliners don’t just jump in when prices begin to fall. I guess they are just waiting for prices to go lower. Anyway, don’t expect the 30% drop in Toronto to happen any faster than over 7-8 years like in 1989-1996. I would say there is more holding up the market now than then such as more two income families, access to family money, and while wages are rising slowly there are more higher income earners. I still say buying now and begging later is always your best strategy.

#131 Victor V on 03.16.17 at 9:29 am

Pattie Lovett-Reid: Mortgage insurance premiums are about to go higher

http://www.bnn.ca/pattie-lovett-reid-mortgage-insurance-premiums-are-about-to-go-higher-1.698023

The Canada Mortgage Housing Corporation is hiking the cost of mortgage insurance for homebuyers March 17 – just one more piece of regulatory requirements requiring homeowners to hold more capital to offset risks in the stubbornly hot real estate markets in pockets of the country.

The increases apply to those who require insurance when they don’t have a 20 per cent down payment. This alone isn’t expected to have an impact on the market but when coupled with other changes it could start to add up. In the past year, higher down payment requirements on a portion of a home worth over $500,000 to 10 per cent, and the decrease in amortization – and now an increase in the cost of mortgage insurance. Put it all together and there will be some, especially first time homebuyers, having to sit on the sidelines a little longer.

#132 };-) aka Devil's Advocate on 03.16.17 at 10:01 am

#97 Mrs Hubris on 03.15.17 at 11:18 pm

Here’s a link to another confirmation of what you mention about tumbling real estate in Vancouver.

I am compelled to remind you however that, a month does not a year make, nor a trend.

Being “in” the industry I am not seeing or hearing anything but how “HOT” the market is further exasperated by low inventory.

Young wet behind the ears REALTORS® think it’s great and continue to pump it with Facebook shills. The more seasoned understand it for what it is.

Education is a bargain at any price and there is no better education than experience.

#133 };-) aka Devil's Advocate on 03.16.17 at 10:02 am

Oops, here is that link #97 Mrs Hubris on 03.15.17 at 11:18 pm.

http://www.repmag.ca/market-update/bc-sales-continue-to-slide-222828.aspx

#134 Grantmi on 03.16.17 at 10:04 am

#84 Smoking Man on 03.15.17 at 10:08 pm
Spent the day on the couch feeling sorry for myself watching Netflix all day. Watched the arrival. Pretty cool. Real aliens ain’t that ugly. They look like us.

Since when is ‘The Arrival’ on Netflix???

#135 TurnerNation on 03.16.17 at 10:07 am

If these Foreign Buyers are so smart and not herd animals why aren’t they buying houses in USA – where it’s cheaper and greater population of renter serfs?

A 1.7m house…assuming a massive 700k down payment and the entirety of a 100k gross income is a requirement for service of its mortgage, taxes, insurance, utilities, maintenance.

Think of it…you cannot quit or be fired. Working for your house.

M41ON

#136 Grantmi on 03.16.17 at 10:19 am

#89 Self Directed on 03.15.17 at 10:39 pm
Houses still going up in GVRD and the Fraser Valley. Yes it’s true. Condos, Townhomes, and even plenty of detached housing… all going up.

Maybe you should change your handle to Self Delusional!

#137 TiredDad on 03.16.17 at 10:21 am

Garth, I’m father with a toddler, renting. The housing inflation, in Toronto, is also affecting rents lately:

– My colleague, on Windemere, living in a condo, says that over the last 4-6 months, two bedrooms increased from 1950 to 2150. Condo speculators who bought the units for 50k more need to maintain a margin.

– At work, the newer employees, who make 45k a year (tech company) are putting a lot of pressure on management to increase salaries because of Toronto rent cost. We cannot hire only 80k a year workers.

– There are “singles” at work that have moved-in together in order to afford rent and still have a good quality of life. The worst I heard is 4 singles living in a 3 bedroom.

#138 James on 03.16.17 at 10:23 am

#77 Smoking Man on 03.15.17 at 9:44 pm

Well Demmark dident work out like I thought. USDCAD pulled a George Costaza. For no reason USD got crushed.

Killed on Bonds Killed on Fx will I bought at 1.31 so made a bit. Still in the trade.

Since Trump won all my models have been going in reverse.

Going to start doing the oposite of what my mind is thinking.

Starting with..I’m a feminist…
_____________________________________________
It was Holland you uninformed far right Breitbart Newsreader. I bet you believe Breitbart News whom promoted the falsehood that President Obama was a Kenyan-born. In June 2016, Breitbart News falsely claimed President Obama supported terrorists. In March 2017, Breitbart News published a story by conservative talk radio host Mark Levin claiming that Obama had wiretapped Donald Trump during Trump’s 2016 presidential campaign. President Trump repeated the claims on his Twitter feed less than 24 hours after Breitbart News ran the story.
Is this where you get your facts?

MuslimDutch Prime Minister Mark Rutte on Wednesday claimed a dominating parliamentary election victory over anti-Islam lawmaker Geert Wilders, who failed the year’s first litmus test for populism in Europe.

#139 Eks dee Sipal on 03.16.17 at 10:28 am

#74 Cheap Houses “I will take my chances with my own sources thank you.” – (Applause) Always remember that the established media are high-placed liars for the central bank. Even Trump wouldn’t ever cross the Fed.

Think. Who owns the BoC? The bank was chartered by and under the Bank of Canada Act on July 3, 1934, as a privately owned corporation.

https://en.wikipedia.org/wiki/Bank_of_Canada

Why would a privately owned corporation have your best interests in mind? Simple rhetorical question.

#140 Sean on 03.16.17 at 10:49 am

Hey Garth, could you do an analysis of the consequences of cancelling and re-listing property in Toronto to trick buyers? Seems like it might be a big problem according to this article from this morning. It actually would be fraud in most other industries.

https://betterdwelling.com/city/toronto/if-toronto-real-estate-is-so-hot-why-the-45000-cancelled-listings-last-year/

#141 YVR on 03.16.17 at 10:56 am

So much for the future.

Canada has banned drones; can’t be flown near buildings, cars, people, at night, over 90 m elevation, and within 9km of an airport.

And we have people on this blog thinking self driving cars are just around the corner. Newsflash for you: will not happen in our lifetimes. Hilarious.

#142 Mark on 03.16.17 at 11:16 am

“The US economy is moving forward with virtual full employment”

Yet some of the lowest labour participation rates ever, and most positions are still receiving hundreds of applications. Doesn’t sound like ‘full employment’ to me. Sounds like a bunch of delusion though, which is why the UST yield curve is going to invert soon and the country will be right back in an official recession, if its not already there.

A bit of a Trump-induced short-term confidence will not be able to carry the economy. The Fed will be proven to be wrong.

#143 };-) aka Devil's Advocate on 03.16.17 at 11:25 am

#137 TiredDad on 03.16.17 at 10:21 am
Garth, I’m father with a toddler, renting. The housing inflation, in Toronto, is also affecting rents lately:

– My colleague, on Windemere, living in a condo, says that over the last 4-6 months, two bedrooms increased from 1950 to 2150. Condo speculators who bought the units for 50k more need to maintain a margin.

Duh,

What did you think, landlords are stupid and won’t pursue a current market Cap. Rate?

Whether it is owned free and clear, mortgaged to the hilt or rented the user/inhabitant is going to pay the opportunity cost one way or another.

Market Rent is a product of the Housing Market.

Eventually wages will follow, but there will ALWAYS be those who think they are entitled to a better lot in life at their beck and call.

Mess with the invisible hand, prepare to be bitch slapped.

SHIFT happens, learn to ride the tide. };-)

#144 Smoking Man on 03.16.17 at 11:26 am

The Truth is out there

https://www.youtube.com/watch?v=Om6DQY-cl3Y

#145 Penny Henny on 03.16.17 at 11:49 am

#13 Leo Trollstoy on 03.15.17 at 6:35 pm
Except for the people that own the 99,000 empty homes in Toronto that aren’t actually for sale or rented?

What percentage of that of the total supply?

Correct. Meaningless.

//////////////////////////////////

Toronto pop approx 2.8 million.
Lets assume 2.8 persons per household, that gives us 1 million homes.
99,000 empty homes, lets round that up to 100,000.
10% empty homes. Meaningless? Maybe not.

#146 cramar on 03.16.17 at 12:03 pm

#108 #100…6% income? on 03.16.17 at 12:08 am
where you getting that from? junk bonds?

unless you’re selling covered calls, can someone tell me what vehicles one is using to generate 6% from a portfolio? keep in mind this income will be TAXED…:)

—————

Just saw last evening on Nightly Business Report (PBS) some expert talking about the unprecedented bull market and said that if you invested in the S&P 8 years ago with dividends reinvested plus capital gains it works out to 19% per year for your portfolio!

So if you do not have to take the profits, dividends, or interest for living expenses, you are laughing.

As always, your mileage will vary.

#147 Victor V on 03.16.17 at 12:12 pm

Email blast received from a popular Toronto based mortgage broker.

======

Hey there,

I have an exciting Mortgage/Line of credit product available that allows us to bi-pass the maximum loan-to-value regulations of 65% Loan-to-value (or 35% down).

Details:

– I will refinance a home or condo to 80% of the value (or 20% down), pay off the existing mortgage, and leave money for renovations and/or investment property purchase!

– Interest only payment!

– Low interest rate!

– Available for purchases and refinances!

– Only pay interest on funds being used from line of credit

Email or call me if you are anyone you know needs my help and advice.

#148 Capt. Serious on 03.16.17 at 12:12 pm

Sometimes I don’t understand people. We actually have recent examples of house prices correcting in many developed economies around the world. Even in our own country this has happened in the recent 30 years. Yet we have people carrying on like prices will never decline. It’s very curious.

#149 actually... on 03.16.17 at 12:17 pm

‘It is like living in a winning lottery ticket. Instead of a year to cash it in though, there are years to act. It does not “phase” them, if when they sell, come out $1.4 m or $700K ahead of the game. Big slash in house prices, they don’t care.’

……

we DO care. I LIKE my overvalued house. If it corrects 20%, i DONT care. In time, it will rise again. Kinda like the folks that bought the Nasdaq a few before it burst-well over a decade to get to even. Unfortuantely, it’s not shelter; cant reside in the Nasdaq.

keep in mind a lot of ‘gurus’ had the housing peaking a few years ago. What if I sold then? :)

#150 boonerator on 03.16.17 at 12:20 pm

where you getting that from? junk bonds?

unless you’re selling covered calls, can someone tell me what vehicles one is using to generate 6% from a portfolio? keep in mind this income will be TAXED…:)
————————————————————–
I took the 6% from Garth’s estimate of a well balanced portfolio.
As well, RBC and probably others have funds that pay around that, high MER and all.
Taxable yes, but not all at marginal rate, a lot being dividends and return of capital. So if it is a net 5%, that is still a lot of coin from more than $1M.

#151 Shortymac on 03.16.17 at 12:35 pm

@TriedDad (http://www.greaterfool.ca/2017/03/15/choices-13/#comment-505735)

Yeah, the rental prices have gotten insane in Toronto.

My husband and I do live with 2 single friends in a 3 bedroom top floor of a bungalow. It’s kinda tight, but for 1700/mon inclusive within 15 mins of a subway you do what you have to do.

We would like to rent a house but the prices have dramatically increased. Can’t find anything below 2000/month minus utilities. It’s nuts.

Right now we’re just hoping for prices to drop a bit and the insanity to end.

#152 A Reply to #139 Eks dee Sipal on 03.16.17 at 12:49 pm

“Soon after the Bank [of Canada] opened, a new government introduced an amendment to the Bank of Canada Act to nationalize the institution. In 1938, the Bank [of Canada] became publicly owned and remains so today.” Here’s the link:

http://www.bankofcanada.ca/about/history/

#153 Leo Trollstoy on 03.16.17 at 12:49 pm

Canadians would rather say that they own a $2m home than say that they have $2m in an account.

Weird.

#154 Penny Henny on 03.16.17 at 12:49 pm

“As I sped down the 401 in semi-autonomous mode, I texted” -GT

I hope your car has lane departure warning and adaptive cruise control or as I like to call them ‘text assist’.

#155 n1tro on 03.16.17 at 1:13 pm

The USD went down yesterday for the simple reason that the US economy is still shit. The only reason USD goes up is because it is a safe haven and good to hold during times of high interest rates.

Yesterday’s rate “hike” still puts the benchmark at around 1% which is what the rate was when Greeenspan set it to as an “emergency” during the pop of the dot com bubble.

Investors with half a brain can read through Yellen’s doublespeak. The Fed is “confident” that now is a good time to raise rates…but not “confident” yet to unwind anything on the Fed’s the balance sheet?

The market is due for a correction and the Fed knows it. By increasing rates, it gives them some room to decrease them when the next shit hits the fan event.

Notice that precious metals when up yesterday also which is contrary to the meme that increasing interest rates are negative on gold prices.

Being diversified is the best defense here.

Wrong as usual. — Garth

#156 DM in C on 03.16.17 at 1:14 pm

Oh Laura: “btw, convenience = less than 2km to work/family/babysitting and our home is pretty nice, just small”

If you sell and move somewhere cheaper you won’t have to worry about work/babysitting. Spend the time with the kiddo.

SMH. Excuses to justify inertia. Sitting on a lottery ticket.

#157 Boots on the Ground on 03.16.17 at 1:23 pm

I find it no coincidence that Shiller’s most recent paper published in January is on “narratives” and their role-acknowledged and unacknowledged- in Economics. Got through to page 10 of 58 pgs so far.

Here’s the words:
http://cowles.yale.edu/sites/default/files/files/pub/d20/d2069.pdf

And here’s the sound: https://www.aeaweb.org/webcasts/2017/address.php

#158 n1tro on 03.16.17 at 1:44 pm

“Just a hunch. But the Fed probably knows more than you. — Garth”

Sure, assuming everyone in the comments section is an uneducated deplorable. But the Fed knowing more than someone that went through business school. Very doubtful.

“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

“House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

Ben Bernanke quotes in response to questions about the rapid rise in housing.

http://www.businessinsider.com/bernanke-quotes-2010-12#nov-21-2002-1

#159 ...dominating Dutch parliamentary election victory on 03.16.17 at 2:22 pm

Firstly, I am not a Wilders fan or of xenophobes like him but here is a comparison vs. the last election:

Rutte lost 25% of his seats
Wilders gained 33% more seats

A win is a win I say, still, the gains that Wilders made in NL give pause to any one and the victory was not dominating.

Glad for the final result though.

#160 Dan.t on 03.16.17 at 2:26 pm

What is wrong with people in Canada? House porn, house lust and probably the most indebted nation in the world and still a housing prices are insane or pos box in the sky is all that matters…. banks OWN virtually each and every under 40 Canadian give or take and Canadians just love debt??? It’s weird. It’s like a bad group think experiment gone wrong- travel , see the world, but no, 20 years olds are obsessed with real estate… I guess nothing will change anytime soon.

#161 Victor V on 03.16.17 at 2:28 pm

Purpose-built rental developments in GTA crucial to prevent ‘full-blown affordability crisis’: CIBC

http://business.financialpost.com/personal-finance/mortgages-real-estate/purpose-built-rental-developments-in-gta-crucial-to-prevent-full-blown-affordability-crisis-cibc

#162 Josh in Calgary on 03.16.17 at 2:28 pm

#152 Leo Trollstoy,
“Canadians would rather say that they own a $2m home than say that they have $2m in an account.

Weird.”

I think you’re right on there and it is a weird facet of our culture. People would never “say” they paid $2 million for a house, but they would have people over for a house warming and most people would know that it was a $2 million house. Ooooh. Aaahhh.

But if you were to ever say, well I have a $2 million balanced portfolio that averages 8% growth, or even hinted about it … what an arrogant prick you are.

#163 cramar on 03.16.17 at 2:30 pm

Just thinking about Laura and Hubs. They don’t state what they work at for a living, whether it is something they want to do for the rest of their lives, or is there something else?

For example, if they were entrepreneurial, they could sell, invest $1.5 mil., live off the returns, and move to small-town Wherever! No rental suite, no babysitters, no commuting, raising the kids themselves, while working the home business doing something they love. Or maybe Laura could work part-time selling ice cream in a great natural location.

There are so many options and possibilities. But maybe their purpose in life is to own a home where they are, and support renters, babysitters, and a 9-5, instead of financial independence.

#164 YVR on 03.16.17 at 2:37 pm

For all the readers questioning why Toronto prices are rising.

The BoC and the Gov know exactly what’s causing it. Don’t be so naive people.

#165 YVR on 03.16.17 at 2:38 pm

Everyone else with ‘theories’ is out to sell you something.

#166 westcdn on 03.16.17 at 2:40 pm

I was thinking about my comments on charity. I am not heartless. I give to the Red Cross, the Mustard Seed and the food bank. I will give loose change to panhandlers if they strike me as true. The Salvation Army has entered my radar.

I would like to see everyone happy but I have limited means and have to make choices (I have to live with).

#167 Self Directed on 03.16.17 at 2:43 pm

#136 Grantmi on 03.16.17 at 10:19 am

#89 Self Directed on 03.15.17 at 10:39 pm
Houses still going up in GVRD and the Fraser Valley. Yes it’s true. Condos, Townhomes, and even plenty of detached housing… all going up.

Maybe you should change your handle to Self Delusional!
……………………
I wish I was delusional. But unfortunately it is true. The lower end detached housing (under 1.5M) is hot and selling.

The Zolo data does not tell the whole picture. Ask Flop, he’s been investigating and sending out Pink Snow reports, but it’s not everywhere.

Here is an example: 1285 River Dr. Coq (bare land strata)

Assessed: $822,000
List: $1,049,000

Grantmi, please tell me how many more commas are in the list price.

It’s the buyers and sellers that are delusional. I’m neither right now.

https://evaluebc.bcassessment.ca/property.aspx?_oa=QTAwMDAzWFhCWA==

https://www.zolo.ca/coquitlam-real-estate/1285-river-drive

#168 A Reply to #142 Mark on 03.16.17 at 2:45 pm

In my opinion, the U.S. economy is at, or close to, full employment, taking into account the frictional, structural, cyclical and voluntary components of unemployment that exist at any time.

Here’s the latest (Mar. 10, 2017) news release from the Bureau of Labor Statistics:

https://www.bls.gov/news.release/pdf/empsit.pdf

As of Feb. 2017, of the 94.7 million persons who were not in the U.S. labour force, 89.1 million (94.1%) did not want a job, 3.3 million (3.5%) did not search for a job, and 0.6 million (0.6%) were not available to work, leaving only 1.7 million (1.8%) marginally attached to the labour force. Here’s the link:

https://www.bls.gov/web/empsit/cpseea38.htm

The Bureau of Labor Statistics has reported that the official unemployment rate was 4.7% as of Feb. 2017; it calls this measure U-3, but it has 5 other measures of unemployment (U-1 to U-6). All 6 measures have fallen since Feb. 2016. Here’s the link:

https://www.bls.gov/news.release/empsit.t15.htm

“After rising steadily for more than three decades, the overall labor force participation rate peaked at 67.3 percent in early 2000 and subsequently fell to 62.7 percent by mid-2016. In recent years, the movement of the baby-boom population into age groups that generally exhibit low labor force participation has placed downward pressure on the overall participation rate.” — Monthly Labor Review, Sept. 2016

https://www.bls.gov/opub/mlr/2016/article/labor-force-participation-what-has-happened-since-the-peak.htm

Here’s the civilian labour force participation rate:

https://www.bls.gov/web/empsit/cpseea03.htm

#169 not 1st on 03.16.17 at 2:50 pm

Garth how do you like our govt now?

http://www.theglobeandmail.com/news/politics/world-should-follow-canadas-tax-the-rich-plan-morneau-tells-g20/article34319769/

#170 Ace Goodheart on 03.16.17 at 3:11 pm

What will be interesting is the reaction to markets when the Fed decides to start divesting itself of all of the junk mortgage securities that it bought up during the aftermath of the 2008 crisis.

You can see the extent of this “asset pile” (if we can call it that, perhaps another type of “pile would be more appropriate) here:

https://fred.stlouisfed.org/series/MBST

#171 rainclouds on 03.16.17 at 3:27 pm

#95 Laura @33 – it’s actually assessed at $1.8 million

If you factor in the 17.5% depreciation in Vancouver (per ZOLO) -313,200 =Actual value closer to 1,486,800, And currently, (since March 2016) falling.

You are quire correct, It will be interesting to see how this unfolds. we all have different requirements, At my age (59) I value diversity of assets and a comfortable retirement over living in a specific domicile. My Yaletown rent is a small percentage of net investment revenue. Portfolio continues to grow.

One of the few advantages of being Older is seeing history repeating

http://www.huffingtonpost.ca/2016/04/25/toronto-real-estate-1988_n_9762348.html

I’m going with patience, history, fundamentals, debt loads/ Garth/ Schiller/IMF/Economist/ Bank CEO’s Jarolowski/ Cohodes/ Kay…..

What I’m not doing is believing anything the corrupt RE industry or hapless governments spews out as “facts”

In a few years we need to compare notes as I am sure we will both be OK with our first world problem:-)

#172 Londoner on 03.16.17 at 3:31 pm

#95 It’s me, Laura

Good call Laura. Don’t sell too soon. If foreign ownership in Vancouver is really only at 5% then it’s only getting started. Also, renting with children is difficult even if your investment income covers it (trust me).

#173 Bill on 03.16.17 at 3:31 pm

#5 turn of the tide on 03.15.17 at 6:23 pm

Markets were predicting a 100% chance that rates would rise. It was priced in. Markets are forward looking and just plain do the opposite of what you would expect them to do sometimes. This is why traders who react to the news as it happens usually lose money. Janet Yellen’s comments were also more dovish as the Federal Reserve will maintain it’s balance sheet and reinvest proceeds from maturing securities. She also discussed how GDP would likely stay positive, but low, as it is now. This is bearish for the US economy and therefore bearish for the dollar.

Gotta pump those interest rates while you can so they can be dumped when the house of cards collapses again.

#174 dr. talc on 03.16.17 at 3:35 pm

Learn to love Big Brother. Learn to love The Party.
Hard Work Brings Freedom (“Pay your fair share”)


ha ha ha
Das Tomb: Karl Marx’s Resting Place Has an Entry Fee

http://hoaxbusterscall.blogspot.ca/2017/03/from-george-michael-to-karl-marx-famous.html

#175 okay, but.. on 03.16.17 at 3:41 pm

I took the 6% from Garth’s estimate of a well balanced portfolio.
As well, RBC and probably others have funds that pay around that, high MER and all.
Taxable yes, but not all at marginal rate, a lot being dividends and return of capital. So if it is a net 5%, that is still a lot of coin from more than $1M.

………..

i thought you were talking about yield? generating 6% cash flow from the portfolio. Garth’s balnced global portfolio does not yield 6%. No chance.

yield and return are different

#176 Ben on 03.16.17 at 4:18 pm

I’ll dissent from popular opinion on Laura’s situation. Lifestyle is worth something, and if I was living in the city I wanted to live in, close to work and family and almost mortgage free, I’d stay put. Commuting an hour twice a day isn’t worth having the money in the bank if you were to sell and buy somewhere close to vancouver that is more affordable. I’m curently renting in Vancouver, and being evicted every 18 months when your landlord sells to developers is annoying. Buying is a bad decision for me right now, so I’m not entering the market. But just because you can sell your house and have a mountain of money in the bank doesn’t make it a good idea. What’s your current lifestyle worth to you? That’s a value judgement that no stranger on a blog can make for you.

#177 A Reply to #156 Boots on the Ground on 03.16.17 at 4:27 pm

I think you’d enjoy Shiller’s and Akerloff’s book Animal Spirits. They write about how stories (or narratives), together with confidence, fairness, corruption and bad faith, and money illusion are five different aspects of animal spirits affecting economic decisions.

#178 The Technical Analyst, CSTA, CPD on 03.16.17 at 4:38 pm

EEM – Emerging Markets

On a separate note, the Emerging Markets yesterday broke their technical resistance levels and are hitting new highs today, confirming the bullishness.

EEM P/E and CAPE ratios (14) are quite attractive vs USA (26.4) and Canada (20.5) so they are not in the bubble zone.

So, if you are looking for VALUE out there to invest in, look into the Emerging Market Funds like ATB211.

#179 Ronaldo on 03.16.17 at 5:08 pm

#104 bdwy sktrn on 03.15.17 at 11:47 pm

L’s married, 30ish, baby, some money in RSPs and TFSAs and a $200,000 mortgage on a little, geriatric Van house (“my husband bought it before the craziness”) now worth $1.6 million – “land value only.”
——————–
linda – keep the place unless you are leaving town.

when it’s 2.6m you will be kicking yourself.

see you on the drive.

(unless you try to rent , and subsequently get bounced to bby or worse.)

the lovely blog had me thinking of selling back in 2010. same arguments then. china keeps getting bigger, van is NOT going down.
—————————————————————–
A young couple, friends of the family, purhcased a home in Vancouver, Mt. Pleasant area back in 2008 for around $800m. In January of 2010 I was strongly suggesting they sell since we were in a major bubble. They didn’t believe me and gave all the reasons that have been given on this blog for not selling. Well, they just sold the place for 1.8 million having done nothing to upgrade the place which is basically a tear down. Guess who is looking like the real fool now?

#180 New condo's set to CRASH on 03.16.17 at 5:09 pm

New condo’s owns will soon be under rent control. This will lead to lower rents. Condo’s owners set to be very cash flow negative.

#181 The Wet Coast on 03.16.17 at 5:41 pm

I guess this should have occurred to me sooner. By realtor commissions are off 40%. Wow a 40% haircut in salary.

If I understand what is happening correctly, there won’t be a huge number of folks defaulting on their mortgage. But, in 10 years lots of folks will re-amortized a couple of times and still have a 25 year mortgage, even though they’ve lived in the house for 10 years. The mortgage rate will be much higher and they will have 10 year old cars, and vacation at the local lake. No big crash, but a lifetime of house poverty. Retirement for many will be just a dream.

#182 #176 on 03.16.17 at 6:04 pm

‘So, if you are looking for VALUE out there to invest in, look into the Emerging Market Funds like ATB211’

…….

this is NOT an emerging markets fund.

ATBIS INTERNATIONAL EQUITY POOL – SERIES O

it is an international fund. IN addition it’s series O. No retail investor can purchase series O

#183 ohlord on 03.16.17 at 6:25 pm

Lets get the fact straight. First prices go up based on supply and demand. No supply + High Demand = High Prices. Simple. Supply includes people selling their homes. People are not selling their homes because of new approval rules and regulations. Supply Drop. Demand still high as ever. So prices go up. So not sure WTF this guy is talking about.

#184 ohlord on 03.16.17 at 6:30 pm

And people that blame foreigners for the rise in home prices are just plain stupid and know nothing about what is actually going on in this market. Do your research instead of whining about not being able to afford a home. Owning a home is not a right just like owning a Ferrari is not a right.

#185 };-) aka Devil's Advocate on 03.16.17 at 7:32 pm

#182 ohlord on 03.16.17 at 6:30 pm

And people that blame foreigners for the rise in home prices are just plain stupid and know nothing about what is actually going on in this market. Do your research instead of whining about not being able to afford a home. Owning a home is not a right just like owning a Ferrari is not a right.

Hang on…

Economics is the backstory to all human history. And demographics is the backstory to all economics.

North Americans are not keeping up with replacing themselves amid this increasing world population yet our North American populations are increasing.

You do the math…

Don’t get me wrong, I am a welcoming Canadian happy to embrace the immigration of those who wish to embrace our North American multicultural society, but don’t kid yourself… Immigration has a LOT to do with it.

Simple supply and demand.

#186 Boots on the Ground on 03.17.17 at 3:39 am

#175 A Reply to #156 Boots on the Ground on 03.16.17 at 4:27 pm

I think you’d enjoy Shiller’s and Akerloff’s book Animal Spirits. They write about how stories (or narratives), together with confidence, fairness, corruption and bad faith, and money illusion are five different aspects of animal spirits affecting economic decisions.

—————————————————–
Thanks! Irrational Exuberance and Phishing for Phools really hit home with me- will put that one on the to read list as well!

#187 Victor V on 03.17.17 at 10:21 am

Personal Investor: How the federal budget could ding your investments

http://www.bnn.ca/personal-investor-how-the-federal-budget-could-ding-your-investments-1.699062