Queue of Fools

US housing headed for Depression status?


This week the streets of Toronto are witness to further evidence of speculator mania. For the third time in recent weeks, a lineup of paid surrogates (representing realtors, who no doubt represent their well-informed and cash-confident customers) are passing days and nights in idle chatter awaiting the magic moment when a new condo sales office opens. The queue is on Yonge Street, south of College.

UPDATE: See this frenzy of paid text ads and web pages at the top of Google search, whipping up the mania for these units (Fall 2011 occupancy – 3 1/2 years from today).


#1 peter on 04.23.08 at 11:45 am

A couple years from now, those people who bought these units, will be financially grabbing their ankles.

#2 Dom-GTA on 04.23.08 at 12:53 pm


How can so many peple still be getting this so wrong after everything that has happened in the last 24months?

Do other people know something we don’t? For all the compelling reasons you mention in your book I am concerned but it seems that we are still in the overwhelming minority.

When you advise “buy the worst house on the best street” If as an example, houses on my street are selling between $1.5 and $2.0 million dollars, there are a few older houses that are selling for $500K to $600K and being torn down and rebuilt into 5000 sq ft mansions. Would you recommend then buying one of those older houses?

I am trying to understand the worst house on best street comment. Obviously that only applies if you can afford anything on that street.

I would have to stretch to afford $500 or $600K but could do it, but then I would be stuck in a dump on the nicest street.

Any input is appreciated as always.


#3 Noz on 04.23.08 at 1:39 pm

Let’s hope so…they are lower than scum.

#4 jill on 04.23.08 at 6:10 pm

The ironic thing is that, at first blush, those people in line look homeless.

#5 Future Expatriate on 04.23.08 at 6:23 pm

Hey, everybody’s gotta work, right? Nothing more than paid shills. Not fooling anyone, anymore. But they’ll keep it up, desperate last developers in the line to try it. Once it translates to NO SALES AT ALL, it will end.

#6 Rick on 04.23.08 at 8:16 pm

The realty business is due for one hell of a shake-up. These over paid con artists do absolutely nothing to add value to the product they sell. They hype the market, create illusions which only results in housing being less attainable for the average shmoe.

At the end of the deal, they cannot even complete all the paperwork for you, you still have to see a lawyer!! How laughable. I sold my last property without a realtor and when I buy again in a few years, guaranteed, no realtor.

An I envious? Definately. I actually had to go to school and work hard for my money and never even considered conning people out of thier money as a viable career.

#7 Jeff on 04.23.08 at 10:18 pm

Try being a Realtor if it’s so easy. Most Realtors actually work very hard and don’t make as much money as you think. Expenses can run as high as 40%. And if a Realtor sells nothing there is still a fixed cost of at least $10,000 to be in the business. The majority of Realtors actually make below the minimum wage and many less than being on Welfare. Most are very honest people that bring the buyer and seller together and create a binding contract of purchase and sale. For sale by owner is highly unsuccessful and I’ll leave that to you to google the results.

#8 Alex on 04.23.08 at 10:19 pm


When looking into the world of real estate brokerage, an important points must be emphasized. That is your position as consumer and the agent’s position as supplier. To begin with, you should know how the consumer may not be as important to a real estate company as is the salesperson. The salesperson or agent possesses an unusual position of advantage with his or her employer.
The agent, seemingly at the bottom of the corporate ladder, is your closest and sometimes only contact with the industry when you are in process of buying or selling house. What you must realize, however, is that you are probably dealing with the strongest and most important force, up to and including the actual owner of the firm.
Fortunately, however, the agent’s power rarely exceeds that level. Licencing authorities with significant regulatory powers do exist and frequently are called upon to exercise those powers.
You, the consumer, may be reluctant to call upon these bodies to discipline agents and that may be one reason why so many disasters do occur.
Agents have been known to leave one employer to join another and, in process, to bring with them their past clients. Employers regularly make a habit of luring a good agents away from competitive firms. It is a fact that the agent can create the client loyalty and practice their skills under any number of corporate logos. Employers are not unaware of this power.
The product that real estate company sell, therefore, is not houses. It is not service and it’s not expertise. Real estate companies actually sell an environment that enables agent to do their job.
In real estate, the normal world of business practice is thus reversed. To be successful, the employer must recruit good agents to produce revenue and must retain them to ensure a future in the business. This is the source of the biggest problems in the real estate industry today.
Employers make unreasonable compromises every day in order to satisfy agents and thus stay in business. They can not exercise serious discipline without running the risk of losing personnel and eventually profits. They are forced to cater to the agent in a manner that not only threatens their own business but also welfare of the consumer.
The agent is in rare position of advantage in the employer / employee relationship. Imagine a top producer in a real estate who is annoying a client. The client calls the boss and complains about the treatment he has received. The boss promptly fires the agent and, in the process, says good-bye to forty thousand dollars in commission-split revenue for the firm. How about three agents who are accused together on a complaint from a client buying a house in a huge project being marketed by the team? Does the boss fire all three and lose well over six digits of revenue?

You be the judge.

#9 Crikey on 04.23.08 at 11:41 pm

This an interesting link about when its appropriate to “call the bottom” of the housing market. Want to know when the “bottom” is finally in? The “bottom” will be close when buying real estate make sense as a sound business proposition.

“What’s a sound business proposition? making a profit from day one, without the aid of any tax shenanigans. At the real bottom in real estate cycles, you can buy a house or apartment and rent it out at market rates–and make a profit on day one in cash-accounting terms.
If you can’t rent the property out for a profit from day one, it isn’t the bottom. ”


Admittedly, this essay is intended for the U.S., but it should give some food for thought about how far away from reality housing prices have gotten, as well as how deluded speculators currently are.

#10 Al on 04.24.08 at 1:55 am

“They hype the market, create illusions which only results in housing being less attainable for the average shmoe.”

Last time I checked it was buyers like you frothing at the mouth, at the door of a hot new listing, not the Realtor. Why don’t you start taking responsibility for your own actions instead of blaming everyone else for your problems?

Realtors provide a service in facilitating arms length transactions between parties and make sure contracts are air tight before shipping them off to the….LAWYERS which most of the time simply register the property in land title office and help fill out the PTT exemption form.

It always comes down to this. Without fail, everytime. RE market is hot, seller loves his agent for bringing 5 offers to the table. Not so hot market? Blame the Realtors. Or, we paid too much. Actually you paid market value, which is set by the last people that bought a comparable property you are looking to buy :) That is ofcourse unless you wanted the house so bad and were afraid of “missing out forever” you got sucked into multiples and paid far too much over ask.

Did you know since 99% of listings are sold via MLS, market value as we know it included RE fees? So when shopping FSBO, its quite reasonable for a buyer to deduct 6 and 3 off the asking price :)

#11 Keith in Calgary on 04.24.08 at 2:22 pm

70% of all the buyers taking out mortgages today in Canada (over the last 2 years) are using sub-prime financing.

That is………40 year amortizations and CMHC or Genworth insurance.

Maybe I am old fashioned, but if you need 40 years to pay for something, maybe you shouldn’t buy it.

People who buy $500K condos have a life that does not involve lawn chairs and sidewalks. Nothing is that urgent…….I’d like to find one of these idiot lineups one day, take a camera and start intervgiewing prospective purchasers……you’d catch the REIC planted shill immediately.

RE is the only occupation where you have to deliberately lie in order to make an income.

#12 Vince on 04.24.08 at 9:54 pm

I just finished reading Garth’s book and still do not have clarity on my issue…

I have two options:

1. Pay down my mortgage (about $100,00 left on a $230 K home) I’m in a position to pay this off completely by the end of this year. (I’m leaning this way…)

2. Invest my cash ($100K) into a pre constructed condo (Charlie and Gallery are my 2 options) in Toronto. I would find a renter to cover all my costs and hold onto the property till I m happy with the profit.

My concerns:
– pre constructed condo’s are $400-500 K… that’s just a lot of money, period, for a 2 bedroom…

– I don’t want to wait more than 5 years to flip it and make a profit

– Where SHOULD I invest if this is a bad idea?

If you had cash to invest… where would you put it?

I appreciate ALL your feedback and would love some “to do” advice instead of just “not do” advice.

Waiting eagerly for you valued feedback.

Pay off the house. Then take an investment loan based on your net worth (not against the house), and use the proceeds to create a $100,000 portfolio of good mutual funds paying you tax-deferred dividend income or capital gains. This way you (a) secure your real estate without debt, (b) create a portfolio that is earning you real money without the hassles and risks of a tenant, (c) do not take on $300,000 or $400,000 in non-deductible debt and (d) create an annual tax deduction of $6,000 or so because of the tax-deductible interest, which (e) you can invest in an RRSP for a further tax reduction. Buy a condo at the top of the market, with a negative monthly cash flow and a honking new load of debt? Are you nuts? — Garth

#13 vultur on 04.25.08 at 1:33 am

Ignore Darth. Take your equity and visit a wealth management firm. Find one that has earned 10%+ over the past 10 years. That shouldn’t be impossible.

Give them a shot to earn 2% and 20% and with any luck you will come out way ahead.

#14 curious to know on 04.25.08 at 10:06 am

Thank you for your book & web site. I would appreciate if you were to clarify whether you meant to advise Vince to invest in a mutual fund paying tax advantaged dividend or capital gain rather than tax deferred dividend or capital gain.

I have had a real estate fund that returned capital rather than income until I redeemed it. But at redemption the income was taxed at the rate of interest/employment income, not at the rate of capital gains or dividends.

Best regards.

#15 SP on 04.25.08 at 11:34 am

Garth … as a past subscriber to your real estate newsletter & reader of your previous books I wanted to congratulate you on your latest book. I went out & bought a copy (& have recommended it to my friends). ‘Greater Fool’ is an informative & interesting read. It certainly is not what we want to hear about the real estate market……but, I think you are “bang on” as you have been in your past market predictions. Keep up the good work in the House of Commons ….. I enjoyed your interview with Mike Duffy on CTV !!!!

#16 Bruce McCormick on 04.25.08 at 3:17 pm

A closely related phenomena to the market madness described in ‘Greater Fool’ is the enduring popular appeal of fringe subdivisions as a place to live. The modern suburb is functionally almost identical to the post-war models, and their various limitations – yes, even for families with kids, and kids themselves – have been explored for 50 years in story, song, movie and essay. For those who missed that, personal experience or past spikes in the cost of gas going back to the 1970’s help make the point. But…people still line up to live in former cornfields, most of which became less, not more, interesting places after the corn was ploughed under. And, as you illustrate, many folks readily commit to incredible debt levels to do something that has been questioned, discredited and often persuasively ridiculed for fifty years.

I don’t think we can blame the real estate, development and financial services industry for responding to such an uncritical market with the same old, same old stuff. It is more curious how a population having reasonable literacy levels, lengthy public education and free flow of information or ideas keeps buying these Edsels. Quite independent of your focus on excessive debt financing, suburban houses at any price were always predicated on cheap gas and cars, feasible commuting and usually continuous multiple wage earners in a household, or they would be uninhabitable. One’s nest and nest-egg hangs by very slender threads indeed.

As a former planner (downtown Toronto) I would be the first to agree central areas of our cities and towns rarely provide interesting or affordable alternatives in a readily accessible way. But had more people decisively rejected the absurd geography of the typical new suburb, I believe more such alternatives would have been produced. Yes, even by the big, bad developers. But it takes two to tango.

Bruce McCormick

#17 Keith in Calgary on 04.25.08 at 5:47 pm


The glory days of quick TV flips, or for that matter, even longer ones with, if you’re lucky, cost carrying tenants, are over.

RE is no longer an investment IMHO.

#18 ch on 04.29.08 at 3:20 pm


I live in a 30yr old Edsel as you call it. it’s smaller model at 1300sf. – I’m no harvard graduate, but I dont believe I’m a total dummy either.

I bought it because:

a) Affordable, being very debt averse I’ve paid 80% of my 25yr mortgage in 8 yrs. I should be done in another 2.
b) Single, Detached – therefore I dont have to listen to neighbors paryting, other peoples toilets flushing, and all that other stuff that I miserably endured while living in hi-density hell.
c) My house is unfashionably small with low ceilings and rooms. Very cheap and easy to heat. (maybe a hangover from the time it was built – the energy starved 70s)
d) Quiet crescent: No empty buses driving by, no panhandlers, no crowds of people.
e) It’s a smaller development, stores, schools are walkable, but not too close that I have endure traffic and noise. (5 mins school, 20mins stores)
f) Finally I dont need to live right in the middle of “city culture” – restaurants, theater, and all the other things most 416rs mention when they look at me derission when I tell them where I live. …considering the interest level I have and the frequency I take advantage of such things, I’m quite happy to travel to it. A small inconvenience next to having to live with noise & crowds.

But that’s just me. to each their own.

sprawl, pollution and ever increasing commute times and costs do concern me, but it would never, never, make me live downtown again. I would just a soon jump off the roof of a hi-rise than live in one again.

While hi density living may suit some people, maybe even a majority, it is not for everyone. I value quiteness and open space. I enjoy my quiet backyard.

Admittedly, I dont know what the answer is. Suburbs are not it, I enjoy living one, but I’m not blind, I can see the issues it causes. But neither is hi-density city living.

Perhaps the distant past when towns were smaller, but industry/jobs and housing were built closer together, but maybe that has problems too, seeing as it seems to no longer exist.

I bought my house as place to live, not as an investment, but for good old fashioned shelter. The “investment” part is just gravy.

#19 Lawrence on 04.30.08 at 11:42 pm

Winnipeg Free Press April 3 2008

Winnipeg continued to increase at a double-digit pace during the first three months of this year, according to a new national survey by Royal LePage Real Estate Services.

The real estate firm said a severe shortage of homes for sale and strong buyer demand drove up selling prices for all three major types of homes during the first quarter.

The greatest escalation was with detached bungalows, where prices jumped by an average of 19.7 per cent to $229,125. Condominium prices increased by 13.1 per cent to $138,000, while the cost of a standard two-storey home rose by 10.1 per cent to $242,943.

The agency said Winnipeg was one of several cities that bucked a widespread trend toward more moderate price hikes in the first quarter.

“Buyer activity in Winnipeg was extremely vigorous during the first quarter and propelled the housing market to its current strong state,” said John Froese, a broker with Royal LePage Prime Real Estate in Winnipeg.

#20 Bruce McCormick on 05.01.08 at 10:35 am


My generalizations may imply stereotypes, and of course ‘the suburbs’ are diverse and undoubtedly work for some. They will always be with us. My comments target recent decisions by individuals, municipalities and the industry to continue the same pattern now and were made here because so many examples Garth Turner’s book describes are newish single-family subdivisions whose value tanked soon after the paint dried. Where else do we see the most recent planning decisions about a product with such a long lifespan are arguably the worst?

I don’t see high-rise condos as a panacea, not because the neighbours are too close but because their mechanical complexity is a liability to the occupant whose ‘ownership’ doesn’t permit him to deal with any problems except by way of writing large cheques. They should be rentals. With house problems, a trip to Home depot and a little sweat can usually fix it.

What is missing from contemporary housing production is lots of compact (yeah, dense) low-rise freehold units within easy reach of community facilities, sufficiently versatile to accommodate families with kids, the same people when they age and for the present, their cars. It will inevitably accommodate some difficult neighbours as well, but no amount of planning checks anti-social behaviour. We got ‘em here, and you got ‘em there.

I think the underlying message in the book that started this discussion is that if more people sensibly ‘bought their house as a place to live, not an investment’, or, if purchase not really practical rented living space instead of renting large sums of debt capital, the present and pending mess would be smaller.


#21 ch on 05.08.08 at 3:48 pm

Hi Bruce,

Just wanted to add, I wasnt being in anyway critical of your earlier comments, in fact I agree with much of what you had to say, but I felt compelled to reply with some of the reasons that, this surbuban dweller at least, prefers to live in the ‘burbs.

As to why they keep getting built despite all we should’ve learned by now – my theory is developers with large bags of money dangled in front of cash strapped municipalities looking to grow often overrides talk of sustainable, or at least more sensible development.

I could probably live in a more compact townhouse or semi (ie compact lowrise freehold) if the construction was better, and the walls not so thin – noise/privacy issues again – but my experiences in these types of buildings were not happy ones, and for me that’s one more reason I opted to live in single detached home. (albeit a smaller one)
And, yes, I bough it as a nice place to live and raise a family. not to make money on.

But, I’m getting way off topic.

House prices are crazy, I dont see how the economy is justifying these prices – surely this many people can’t be earning this much money, if they are, where am I going wrong ?

I work hard, I make OK money, well above “average” on which I support myself and my wife and kid. I live in a modest home, which will soon be paid for, and drive a six year old ford taurus, which I bought lightly-used and paid cash for.

I see people, often younger than me, buying these huge homes at the now inflated prices, driving a fancy foreign car and I can’t help but think to myself (perhaps with a touch of envy) “How are they affording this” “do people really have this much money”.

For a while I’ve wondered if it this is real.

Or is borrowed prosperity – an illusion of wealth built on a mountain of debt, for which people are paying thousands to service ?

After reading this website, and learning of 40yr (!) mortgages, I’m now suspecting it is just that – an illusion.

I haven’t read Garths book yet, though I plan too. – being frugal, I requested my local library purchase it, so I can borrow the book, and save the $20 and then put it toward my dwinding mortgage. Downside to that is I have to wait a while. (Sorry Garth ! – but hey every little helps)

#22 Lawrence on 05.12.08 at 3:21 pm

Toronto market still favours sellers
Some houses selling behind the scenes

From Friday’s Globe and Mail

May 9, 2008 at 11:46 AM EDT

Sellers still have the advantage in a sluggish Toronto housing market as buyers compete for the relatively few properties up for sale, according to data from the Toronto Real Estate Board.

April numbers show a 7 per cent drop in the number of sales in the Greater Toronto Area compared with the record pace set in the same month last year.

Still, April’s activity was an improvement over the dismal showing in the first quarter of 2008, TREB statistics show.

House prices are up in the resale market, meanwhile, with a 5 per cent jump in the GTA in April over April, 2007. The average price in the GTA stood at $398,687, compared with last year’s $379,025 in April.

#23 Lawrence on 06.04.08 at 12:25 pm

2006 Census: Changing patterns in Canadian homeownership and shelter costs

In 2006, Canada’s homeownership rate reached its highest level since 1971, according to a new detailed analysis of data on housing, homeownership and shelter costs from the 2006 Census.

At the same time, the percentage of households spending 30% or more of their incomes on shelter, a measurement of housing affordability developed by the Canada Mortgage and Housing Corporation (CMHC) and the provinces, increased slightly. Most of this increase was for homeowners with mortgages as opposed to renters or mortgage-free owners.

Of the 12.4 million households in Canada, more than 8.5 million, over two-thirds (68.4%) owned their home, the highest rate since 1971. At the same time, the proportion of Canadian households that rented their home slipped from 33.8% in 2001 to 31.2% in 2006. About 3.9 million households rented their home in 2006.

The increase during the five-year period continues the long-term trend in rising homeownership that picked up in 1991 after a period of low growth during the 1980s.

In 2006, an estimated 3.0 million households, or 24.9% of the total, spent 30% or more of their income on shelter, a slight gain from 2001. Among homeowners with mortgages, the proportion was 25.7%, up from 23.6% in 2001. Some of these households may have chosen to spend more than 30% on housing, but the census does not provide information on intentions.

Households in the Atlantic provinces continued to have the highest homeownership rates in the country in 2006. Those in Newfoundland and Labrador had the highest rate, 78.7%. Households in Quebec had the lowest provincial rate at 60.1%.

#24 Lawrence on 06.23.08 at 11:52 am


Here is some “good news” to balance off your selective and negative (might I also suggest self serving – book sale related) approach to Real Estate News.

Having completed my purchase this spring in Palm Springs, I am happy to see volume pick up and the perceptions begin to change.

Picking the bottom in a real estate market is not nearly as important as avoiding the top. When I purchased US dollars for my transaction on February 28, the rate was sitting at 1.028. Since that time, the CAD has sagged and money saved on the “buy” would be lost on the currency conversion so I am happy with the timing. I purchased highly desireable condo at a very good price – 40 percent less than the price in 2005 with currency that was 30 percent stronger than in 2005.

All the chicken little’s of the world, most of whom have cleaved to your ample chicken little bossom will miss the opportunity to make a smart purchase during this time. From coast to coast to coast, your advice is all the same – rent don’t buy – and it is not good advice.

There is money to be made in real estate right now and places like Toronto, Calgary, Victoria, and Edmonton stand to shake off the over supply quicker than you realize and will make gains of 5 – 10 percent in the coming year.

Here is some news of interest to Canadians.

Coachella Valley – Palm Springs Real Estate News

April housing sales strongest since September 2005

April’s housing sales marked the strongest year-over-year showing the Coachella Valley has seen since September 2005.

The 912 homes sold in April reflect a 3.8 percent drop from the year before – a marked improvement compared to typical year-over-year declines that have hovered around 30 percent.

The sales also mark a 25.1 percent increase over March, according to a monthly analysis of the valley DataQuick Information Systems released this week.

A bulk of April’s sales were resale homes, which made year-over-year gains.

It comes as median prices are down to $301,000 – the lowest since September 2004 – and as local real estate agents are touting the Coachella Valley as a prime buyers’ market.

“We’ve seen little baby steps, little baby steps (in the market upswing). Now you’re starting to see full strides,” said Sam Schenkl, executive officer of the Palm Springs Regional Association of Realtors, which represents 1,500 agents and brokers.

DataQuick’s April analysis also shows:

The resale market continues to drive housing sales.

A total of 496 existing single-family homes sold, up 2.5 percent from April 2007. There were 276 resale condos sold in April, up 1.5 percent from a year ago.

New construction continues to struggle, though sales rose over previous months. A total of 140 new homes were sold. That’s a 27.1 percent decline from April 2007.

The valley’s median price of $301,000 was down 22.8 percent from April last year.

The most expensive home sold in April was a $7.7 million home in Indian Wells.

April’s sales continue an upward swing that began in the fall. It’s the highest number of monthly sales since July.

Coldwell Banker’s local offices recorded about 300 open escrows in April, regional vice president Ron Gerlich said.

The company is “right on track” to see the same in May, Gerlich said.

He noted there continues to be a number of people looking at homes but not quite ready to commit to a purchase.

“Second quarter, I’m sure we’ll be in better shape,” Gerlich said of the increasing sales trends. “There’s all sorts of activity.”

Experts credit renewed confidence from investors, notably Canadians, for helping boosting April’s sales.

Many visitors who have enjoyed the desert all season want to buy before they leave and summer starts.

“People have been holding off; now they’re ready to make the move,” Schenkl said.

#25 Lawrence on 07.08.08 at 11:18 am

– – –
June MLS® Sales and Dollar Volume Second Highest in 105 Years
Winnipeg – Contrary to what some people may be hearing or thinking based on national negative real estate stories, the Winnipeg real estate market shone brightly in June 2008 with the second best results in the association’s 105-year history. Only May 2007 outperformed it in sales and May 2008 ever so slightly in dollar volume. The threshold of $300 million in monthly dollar volume sales was broken again for the second month in a row with $317 million in MLS® sales activity. This puts year-to-date dollar volume over $1.3 billion. With six months remaining, it is a relatively safe conclusion to say WinnipegREALTORS® will have back to back years of over $2 billion in MLS® sales.

You provide a good example of misinformation in full flight. According to the Winnipeg Real Estate Board’s release today, here, these are the facts:

New listings in June, up 16% over June 2007
Total listings in June, up 28% over last year – almost a third.
June sales increase over June 2007, 0%
Year-to-date sales, down 2%

Nice job spinning. I hope potential buyers in that market see that with flat-to-negative sales and a 28% mushrooming in listings that anyone buying now will be paying too much. — Garth

#26 Lawrence on 07.09.08 at 11:21 am

Coachella Valley housing June sales continue to show strength. Prices up for second consecutive month

The median price rose to $309,000 in May. That’s up 2.7 percent from the month before but down 21.8 percent from May 2007.