Garth interviewed on CBC-TV’s hit show, “The Hour” about his current bestseller.
Financial author unrepentent about gloomy view
No shortage of people who want to hear Garth Turner’s dark market forecast
By Derrick Penner, Vancouver Sun – February 5, 2009
With stock markets still in turmoil and further drops in Canadian real estate markets predicted through 2009, former Ontario MP Garth Turner is finding no shortage of audiences for his message.
As bad as Canada’s economic situation might seem now, Turner argues it could get much worse with longer-term turmoil in financial markets and continuing precipitous declines in real estate.
The former politician and longtime financial journalist says people should prepare for the worst, even if they hope for the better, in his latest book, After the Crash: how to guard your money in these turbulent times.
His key advice: pay down debt, save money, stay away from buying real estate, find a financial adviser and diversify your investment portfolio.
So far, Turner said in an interview, events on his book tour have drawn large crowds — about 900 last Saturday in Victoria, 400 to 500 at an engagement Sunday in Nanaimo and another large gathering Tuesday night in Surrey.
Turner’s next local event, sponsored by Dundee Wealth Management, is tonight at the Plaza 500 Hotel on 12th Avenue at Cambie Street.
“[The interest] certainly underscores the anxiety people are feeling about their finances,” Turner said in an interview. “People are looking for every shred of information I think they can find.”
The overriding question he hears from people is, “Where is my money safe,” Turner reported.
Not everyone is a fan of his message, especially those in the real estate business who point to forecasts, such as that by Bank of Canada governor Mark Carney, that the Canadian economy will begin recovering by the end of the year.
Turner is unrepentant about his doomsaying role, declaring “there is no reason to give people false hope right now.”
People are free to ignore him, Turner added, and many do. And he’s offering no conclusions about how the recession will shake out and when and how the recovery will happen.
“It’s impossible to have a conclusion,” he said.
What he wants, though, is for people to discuss the range of possibilities for the future.
“I’m not a Bank of Montreal staff economist,” Turner said. “But I do think my perspective gives an independent point of view where I don’t have a vested interest in selling a product or trying to get people to borrow a mortgage from my bank.”
Turner said he speaks what he believes, which is that we’ve entered a deflationary period such as we haven’t seen since the 1930s, and few people have experience with these conditions.
“That means we’ve got to talk about it,” Turner said, “and there probably is no right answer to this because we don’t know how it is going to turn out.”
In the meantime, “there is nothing wrong with caution right now. If [the book] can instill concern and caution in people, I don’t think that’s a bad thing.”
How to guard your money in these turbulent times
Book urges middle-class Canadians to get depression-proofed
Quietly, growing numbers of Canadians are snapping up home safes, hoarding cash, buying gold and installing generators, and a new book on the current financial mess predicts this is just the start of a rush to prepare for possible depression.
Garth Turner, whose 2008 best-seller ‚ Greater Fool‚ correctly forecast the current residential real estate meltdown, now says ‚ “doing nothing is no longer an option” for families facing a collapsing economy. His latest book, After the Crash‚ explains why the money contagion now sweeping the world will affect everyone, and could devastate those who fail to get ready.
• Big new drops in house prices.
• Neighbourhood food shortages.
• Firewood at $300 a cord.
• Electricity outages.
• Trouble for the Vancouver Olympics.
• A pension crisis.
• Cancellation of some credit cards.
• Empty Big Box stores.
• Desperation in the suburbs.
• Even a devastating run on a Canadian bank.
Turner says any of these‚ or all of them, are possible over the next two years or more, after the crash of the biggest bubble economy in history. Even a concerted effort by governments around the world, zero interest rates and trillions in new spending may be unable to prevent a deflationary spiral which will cost millions of jobs, drop real estate values in Albertan oil country by half, indebt governments and see more Boomers become Wal-Mart greeters, he says.
But Turner also lays out an action plan for investors, homeowners, retirees and families which can blunt many of the effects of the economic and financial storm. He details how to get out of devaluing real estate, even in a crashing market. How to trash the biggest threat possible in a depression — debt. How to build a “bad day box”, get cash without attracting attention, and make your mortgage tax-deductible. Turner also has rules for “vultures” looking for bargain properties, guidelines for buying safes and generators and a survival guide if 2010 turns into a rerun of 1930.
“Nobody knows yet how this story is going to end,” Turner says‚ “but odds are things will get far worse before they improve. Home values and stock prices might not come back for a generation. Some banks could fail. Governments will be crippled with debt. But that doesn’t mean individuals need to be victims. Only those who fail to prepare are certain to pay the price.”
After the Crash is every bit as provocative, prescient and prodding as Greater Fool, and is required reading for middle class Canadians determined to stay that way. We’re in the midst of the most profound and sweeping financial crisis in 80 years. Garth Turner explains why, in stark and understandable terms, and provides roadmap to better days.
Turner is currently Canada’s most influential personal finance author, a two-time member of the federal Parliament, speaker and entrepreneur. He has authored nine best-selling books, run the country’s tax system and is a frequent commentator on the economy and real estate in newspapers and on television. He is a leading source of financial information on the web, at www.GreaterFool.ca.
For more information, or to arrange an interview or excerpt:
Jennifer Fox (416) 862-7777, Ext 222
‘The world according to Garth’
By Julian Beltrame, Canadian Press
OTTAWA — Garth Turner is finding that the scarier things get, the more people pay attention to his doomsday alerts.
One reason is that he’s out of politics, he says, so his economic forecasts are no longer seen as possibly tainted by partisanship.
But more important may be that the former MP’s alarmist book about collapsing housing prices in Canada – “Greater Fool,” which he began writing last December when the sky seemed to be the limit – has turned out scarily bang-on.
If he turns out to be as prescient with his soon to be released new book – After the Crash – Canadians would be well advised to heed his warning and on how to survive the economic collapse.
Turner, who has worn a number of hats in his career including entrepreneur, journalist, broadcaster, author and combative politician, is predicting hard times for Canada over the next two years and he hasn’t ruled out a good old fashioned depression.
“We’ve had a crash. America has crashed, stock markets crashed, Wall Street crash, real estate crashed and the global economy crashed,” he says of the events of the fall.
“The world as we’ve known it is gone. You are not going to get credit cards in the mail, you are not going to get lines of credit easily. Those days are gone. The question now is are we going into a bad recession, are we going into a depression?”
Turner believes Canada’s gross domestic product will plunge five to eight per cent from the beginning of the recession, which he believes began after Labour Day, to the end, which he says won’t come until the spring of 2010.
As well, he expects housing prices will plunge another 30 per cent next year – on top of the 11 per cent drop so far this year.
‘His book about collapsing house prices in Canada has turned out to be scarily bang-on’
For the first time since the Dirty Thirties, Turner expects many Canadians will wind up owing more on their homes than what their home is worth, particularly those who purchased in the last two years with little down payment.
That’s not a depression, as he sees it, but pretty darn close.
Most economists – but not all – would scoff at such doom and gloom, to which Turner replies: That’s what they said when he predicted Canada’s housing market was on the same disastrous path as America’s.
“It’s a relatively straight forward to weave some pretty ugly scenarios,” says Douglas Porter. “He’s probably not too far out of line to say things could be very ugly if policy makers make missteps or don’t step in to support the economy.”
Porter places greater faith in the massive economic stimulus packages being proposed around the world, and in Canada. Prime Minister Stephen Harper is pegging the deficit next year at up to $30 billion, mostly as a result of increased spending to help the economy.
The Bank of Canada and Ottawa have also injected over $110 billion in liquidity – cash -to grease the money markets, and interests rates have been chopped.
Turner agrees those bold actions could stave off the worse, but they also may not, he adds.
“We’ve never had this amount of money thrown at an economic problem, so we’re in uncharted territory,” he says.
“But by the same token, they are blowing their wad all at once, so this better work because we are out of bullets.”
Garth’s 2008 best-seller was right on the mark
The timing couldn’t have been better for Garth Turner’s early Spring 2008 book on real estate and its impact on personal finances. At a time when the US was clearly heading for recession, stock markets roiling, a global credit crunch overwhelming banks and a climate crisis lurking, the Canadian real estate market was immensely vulnerable. And while ‘experts’ reassured Canadians and encouraged new buyers, Garth Turner was raising the alarm. Just in time.
More than 700,000 US families lost their homes in 2008 and millions more are now threatened. House prices have collapsed as much as 40% in some markets, amid predictions of another 25% slide. New home sales are down over 70% in some markets like Vancouver. There are 20,000 new, empty houses for sale in Phoenix, streets of foreclosures in California and desperation in Florida. What happened?
In this prescient, timely and important new book, Garth Turner examines the myths and counters with the facts. He dissects the American subprime experience and finds, startingly, the problems go far beyond mortgage products, and also reach into Toronto, Calgary and Vancouver.
Real estate, especially after 9/11, has become a mania in North America. But emotion is colliding with massive debt, and the results are not pretty. Who’s at fault? Greedy investors? Central bankers? Industry Pollyannas? Self-serving media? Garth Turner funds there’s plenty of blame to go around.
This book is a wake-up call to all those who own real estate, or dream of it. There will not be many Greater Fools left in the market soon,
Don’t say you were not warned.
Garth Turner has an interesting post up on the blog for his book, Greater Fool: The Troubled Future of Real Estate. For those who are unfamiliar with the book, in a nutshell it discusses the subprime crisis in The U.S. and explains why Canada is in line for a similar real estate bust, albeit for different reasons than in the United States. While this may seem obvious now, the book was published back in March, when many real estate experts were still saying that Canada would be immune to the type of crash than our American neighbours have seen. Since that time, real estate prices in most parts of the country have declined significantly, and as such Garth’s book has proven remarkably prescient.
In his blog post, Garth talks about what we can expect to see in the next six months. Some of his points include:
• Eastern cities, including Toronto, will have markets fall another 10%, for a peak-to-Spring decline of 25%.
• Albertan cities will decline another 10% as well, for a rout of 30%.
• Vancouver will crash 20%, taking the average price down 25%, on its way to 40% prior to the 2010 games.
• Montreal and Ottawa will decline about 12% by Spring from the peak, while Maritime cities will escape absolute reductions, and merely flat-line.
Given Turner’s prior success in prediting how things would play out in Canada’s real estate market, it seems wise to heed his advice. Obviously, it’s not what you want to hear if you are planning to sell your home. On the bright side, for those looking to buy a home, things are becoming more affordable.
Realtors and their professional associations are, understably, the group that is most upset with current trends. An article in the Toronto Star provides a couple of revelatory quotes:
“Just stop reading the newspaper and watching the news” Polzler said to enthusiastic applause.
“The need is paramount now to accentuate the positive,” said Gary Hockey, president of Coldwell Banker Canada. “We have to create some positive spin so we don’t get dragged down to the doldrums.”
It’s obvious that they are running scared, with good reason. It seems a bit disingenuous to say that all that needs to be done is to create some positive spin. Over the past half-decade, realtors managed to take 0-down, 40 year mortgages and spin them into a real estate bubble. While it is not surprising that realtors want to keep attitudes toward real estate purchases positive, it seems a bit reckless to suggest that realtors and others ignore the news. Denying reality isn’t going to make things better. (Review posted on Oct 28, 2008)
Canada not immune from subprime crisis: Garth Turner
By Jonathan Chevreau, Financial Post
The U.S. real estate crash is about to sweep into Canada, says Garth Turner in a just-published book entitled ‚ Greater Fool. Turner ‚ entrepreneur and real estate investor, says the problems underlying the American subprime crisis ‚ “go far beyond mortgage products and also reach into Toronto, Calgary and Vancouver.”
In a nutshell, Turner urges his Canadian readers to sell their real estate if it makes up much more than a third of total family net worth and consider renting until the storm passes. He suggests baby boomers sell their “McMansions” while they can still get decent prices and find more reasonably priced modest homes located near hospitals, public transit and other amenities.
The book is timely enough, considering it includes such recent news reports as the line-ups for downtown Toronto condos: line-ups he says were largely fabricated for the benefit of gullible media types. “When bungalows in Vancouver cost $900,000 and resale homes with no parking in midtown Toronto are $1 million, it’s only forty-year mortgages and an embracing of debt that sustain the unsustainable,” Turner writes in the Key Porter published book, subtitled The Troubled Future of Real Estate.
He warns that overextended young Canadian couples are buying into several real estate myths, “egged on by real estate marketing machines and reassured by economists paid by our largest lenders.” They “cling to the absurd belief that paying too much for something is okay” and that “there will always be a greater fool willing to pay more.”
Turner does not believe the American housing crisis was caused by subprime mortgages extended to otherwise unworthy borrowers. “That was but a symptom” of the real disease, which was the rush into real estate that followed the flood of cheap money Alan Greenspan unleashed following the shock of 9/11.
With 5% down mortgages and the new 40-year amortization schedules, Canadian homeowners are just as overextended as their American counterparts, Turner argues. He also notes that subprime [or near-prime] loans are also available in Canada through firms like Toronto’s Exceed Mortgage.
“The inevitable conclusion is that the current Canadian real estate market is floating on a sea of unrepayable, and perhaps unserviceable, debt.”
Among the myths Turner identifies:
1- Unlike stocks, real estate is a riskless investment.
2- Houses [always] appreciate
3- Canadian lenders are more conservative [than U.S. subprime lenders]
4- Industry experts are worth heeding
5- You need some place to live anyway
6- A house is a great investment
7- Better to be an owner than renter
8- Rising markets are normal
9- Real estate profits are tax-free
10- Canada is different
And here are his recommendations (or what he terms ‚ “strategies”)
• Wait and see what happens
• Hang on and hope for the best — a downturn of just a few years
• Liquidate now, invest the proceeds and rent
• Sell with a long close, hope the contract is honored, then buy back into a declining, buyer’s market
• Ignore it all
• Diversify, and promise you’ll never be so foolish again.
Turner suggests buying real estate with a future and that empty-nester boomer couples will be downsizing into bungalows, townhomes and condos of 750 to 1500 square feet. Access to urban services will be important. In other words, ‚ “buy real estate with a fighting chance of retaining its resale value.”
And for those thinking of buying a second home, Turner’s one-word recommendation is ‚ “Don’t.” Those who want cabins on a lake or farms with a pond should rent instead, because overextended investors will be dumping their country retreats before their urban principal residences.
And finally — here I’m talking to anyone who viewed the recent video blog interview with Mark Dziedzic — Turner warns Canadians not to get sucked into buying “bargain” foreclosure properties in the United States.
Turner closes with the disclaimer that “my views may be prescient or be proven wrong. Regardless, there will be a greater fool.”
Well, that’s covering all the bases.
And what do I think? Turner makes some good points and he’s certainly been around the real estate block a few times. I wouldn’t disregard his points out of hand. Personally, I’ll be hanging on to our own Toronto residence, but then it already qualifies as a modest home near public services, it’s mortgage free and does not exceed a third of our net worth. Nor do we own a second property.
However, if I were among the many people tuning into TV shows like “Flip this house” and thinking of speculating on real estate, I’d certainly want to consider Turner’s arguments before borrowing money in the hope of instant riches at this stage of the game. It’s one thing to have a paid-for home you live in and quite another to be speculating on real estate on the hope prices will always rise and a greater fool will arrive to save you from your greed and foolishness.
Much of Turner’s criticisms are directed at people who have saved nothing for retirement or even for emergencies and who live beyond their means, buying more house than they need with such atrocities as 40-year amortizations. I agree with Turner that if the only way you can afford a home is through a 40-year am, then you’d be better off renting and waiting until you do have enough money saved to buy a more modest home. Thankfully, the new Tax-Free Savings Accounts (TFSAs) Canadians will have by 2009 will help young Canadians take such a prudent approach to home ownership.
Whether the real estate market cracks before then remains to be seen.