The emotional house

‘Garth Turner is no Nostradamus’

Mr. Turner:

Thank you for five years of enlightening reading on the real estate landscape in Canada- you are truly a lone voice in the wilderness.

My situation is as follows:

– 30 years old

– sole earner in a three-person family (homemaker wife and a one year-old son)

– income of $140K a year

– currently renting a 2+1 bedroom condo in North York for $2200 a month

– $70K in savings

I am facing increasing pressure from my spouse to purchase a home so that my son can have a yard to play in/we can have “breathing room”. My dilemma is this- I fully realize that a correction in the real estate market is inevitable, but am concerned that waiting for prices to reach a reasonable level could be four years off, at least. In the meantime, my son’s formative years will be spent in a rather antiseptic condominium.

Am I better off renting a home and sweating it out, or is it reasonable, even in this over-priced market, to purchase a home if it is not for investment purposes but solely out of necessity? Thank you for your time.

You are asking for a financial answer to an emotional question. The reason you pose for buying a home is pressure from your wife you so your one-year-old can have a backyard (which he will not likely appreciate for at least a couple of years). The financial answer, of course, is to wait to purchase since prices have only started to stabilize, and will be lower by this time a year from now. The market downturn will be years in length, although at this point is is impossible to know the duration.

If I were you, and making decisions based solely on the best possible financial security of my family, I would find a nice house and take out a two-year lease, then buy. But she’s your wife, not mine.

Hi Garth,

I have always looked to you for mortgage advice and took your advice when we built our home 4 1/2 years ago. We locked in for 5 years at 4.75, a move we didn’t regret. We are coming up for renewal in a few months, and it looks to me like the rates will continue to fall a bit, but my question is, should we try to negotiate and lock in the rate, or go variable? I really miss your newspaper column and financial advice, and wish that you would consider touching on this subject in your weblog once in awhile.

Thanks! Tina

Without a doubt, go variable. Rates are falling substantially, and will continue to do so for the next year at least. Might as well enjoy the ride down, and if the bottom looms, you can always lock in with a phone call. While you’re at it, change the monthly payment to a weekly one, or shorten the amortization period by five years. You will save gobs of money. By the way, my real estate site is

Hi Garth,

I read your article in the editorial page of the Vancouver Sun, which sent me out immediately out to acquire and read your new book. I appreciate your direct approach and all of your ideas and information regarding the future of real estate. They make total sense, a bright light in the confusing sea of both positive and negative information that we receive daily about the Canadian real estate market.

My husband and I are currently trying to make real estate decisions to support our future early retirement in Feb 2009. We own a debt free home on Pender Island which we want for a main retirement residence. We also want a second place in an urban area of Vancouver or in the lower Lonsdale area in North Vancouver.

Currently we own a debt free house (900K) and a rental one bedroom condo (330K with 40 K debt) in North Vancouver. The house is a two storey with a lg one bedroom suite on the first floor, side by side duplex style. It also has the potential for a basement suite.

We are trying to decide quickly after reading your book which of the following options to pursue that we have been considering :

Sell the house, keep the rental condo, renovate it and move in ourselves.
Sell the house, keep the rental condo, buy another 2 bedroom condo for ourselves.
Sell the house, keep the rental condo one more year before selling and rent a condo for us to live in now.

Keep the house to live in, rent the suite, renovate for a rental basement suite to collect rent for retirement income and hopefully in our lifetime prices will climb again.

The real estate agent we recently consulted is suggesting we put the house almost immediately in May to catch the peak selling months of May and June. If we can’t make the move this soon she suggests waiting until next spring. This would be ideal waiting until our retirement, however after reading your book I’m thinking that may be too late.

Any advice you can give us will be most appreciated.


Simple. Sell the house. Could be that never again in your lifetime will it be worth what it is now. Why would you keep almost a million bucks in a seasonal home, unless you are multi-millionaires already? If not, then it makes vastly more sense to rent a seasonal home and purchase one principal residence. Since you already own a condo in Van, what’s wrong with that?

The idea of retirement is to simplify and consolidate, not to accumulate properties and debt, or futz around with tenants. You’ve made the money, so cash out and spend it, for God’s sake.

Hi Garth

I really enjoy your blog and I look forward to reading your book. My question to you is can you please explain to me why you think housing prices will decline over the next 6 to 18 months? The BofC just cut interest rates again and there’s no sign of inflation anywhere, March coming in at 1.4%, so I don’t get it. The BofC is lowering rates, as it did today, and the big banks will soon follow with the lowering of mortgages rates why are prices going to decline so much? I understand the effect of inflation and why the central bank will increase rates to fight it but it doesn’t look like inflation is playing a part right now or in the near future thanks to the strong dollar.

Thanks. Confused and Not sure.

Dear Confused: (a) Find $21.95. (b) Buy my book. It’s all in there.

Garth – a couple of questions.

First, have you followed your own advice and sold your house, and moved into a rental?

Second, you say in your book at the end (talking about Canadians buying real estate in the US) “why would you buy when everyone is selling?” Well, from a long-term investment perspective, that is exactly the right time to buy. Sellers outnumber buyers and a cash buyer has a very strong negotiating position. There is a huge selection of properties. Given your background in personal finance, I can see you offering that type of advice to people managing their stock market portfolios, so why is the opposite true for real estate? Is it really better to buy real estate when the buyers outnumber sellers and there are bidding wars all over the place?

You say that the real estate boom is over “for a generation,” but it is cyclical, just like the stock market, and the cycle time seems to be between 10 and 20 years. That’s not really “a generation.”

I’m lucky enough to live in my house mortgage-free, so I’m fairly well insulated from property value cycles. I don’t doubt there will be a down-cycle in real estate prices in Canada, and there will be losers just as there are in the stock market cycles. But eventually, it will cycle back up. You are telling people it is over for them in their lifetimes, and I think that’s alarmist and almost certainly not true.

I am reminded of the Y2K disaster theorists, the most famous (Canadian) one being Jon Chevreau at the Financial Post, who wrote a book urging people to liquidate all of their stock market holdings before 2000 because the worlds financial computers were all going to crash on 1/1/2000, and everyone who didn’t have their assets under the bed in the form of bank notes would be wiped out. He missed out on a big part of the stock market boom as a result, as did anyone who took his foolish (no pun intended) advice.

Regards, Nick

Yes, I always follow my own advice, which is why I am so deliriously happy. I own two properties, free of financing and exactly the kind of housing which will appreciate according to the demographic, economic, social and climatic changes identified in my recent book.

As for US properties, my advice not to buy has been echoed by Yale economist Robert Shiller and stems solely from the obvious fact the American market is in decline, and is far from hitting bottom. A piece of real estate bought now will be depreciating, as much as 15%, over the next couple of years – hardly a smart financial move. Besides, Canadians have trouble getting mortgages on US properties, which means you have to tie up a lot of cash.

As for the long-term validity of my advice, I could care less if you take it or leave it. Good luck.


#1 Michelle on 04.25.08 at 1:21 pm

Hi Garth:

Read your book and it was the scariest novel I ever read. A total page turner (pardon the pun). I totally agree with what you have said which is why I’m standing on the sidelines. But my question is: with oil, gas, wheat, grains and meats set to rise. Will that set off inflation in the near future? And if so will the Bank of Canada step in and raise rates despite our high dollar?

That is a possible scenario, however more likely are continuous rate declines for the next year or so while the US economy stagnates. This appears to be leading to stagflation, which is completely bad news for most consumers. The last time we suffered this kind of condition was more than 30 years ago. It all supports by theory that real estate is cooked. — Garth

#2 Dom-GTA on 04.25.08 at 1:33 pm

Emotional house. That is such a diificult position to be in and is probably a lot of what is causing these price issues as well.

I can empathize wth the situation. Good luck.

#3 Lisa on 04.25.08 at 2:50 pm

Hi Garth,

Hoping you can give us a little advice. We just moved from Nova Scotia to St. Paul Alberta. House prices are rising by $10,000 every six months or so. We are renting and really want to buy a house, however, we had bought a bit of land in Nova Scotia to build a house on in case we could not afford a home here by summer of 2009. Our Alberta relatives are putting a lot of pressure on us to stay here although our gut tells us we would be foolish to buy a $200 000 mortgage with no money down that the bank says yet to. What do you think?

#4 Rob on 04.25.08 at 7:40 pm

Confused and Not sure,

1.4% inflation? Do you even live in Canada? Have you purchased gas or food during 2008? 1.4% inflation is an obvious scam, a lie.

Every time the price of gas goes up, the value of houses in the suburbs and remote suburbs goes down.

#5 wolfey on 04.26.08 at 2:52 am

well I know gas has gone up to $1.30/ litre and bread is getting more $. ultra cheap bread used to be 99 cents not $1.19 . More expensive bread $1.89 to $2.29. so it is more expensive slowly but it all adds up. i know my favorite tofu dessert went from $5.73. to $6.49. So Ireally don’t think it is 1.4 % which the Gov’t would like to believe. i lso believe retail is suffering here in Van as well…they are really pushing the promos. a phone call from the bay about $25 credit if I buy some 24 hour thing

#6 wealthyrenter on 04.26.08 at 10:42 am

Rob and Wolfey,

I think everybody in this forum has experienced sticker shock on gas, groceries and restaurant food over the past few years. However, Stats Canada has an internationally sound reputation for accuracy in its data collection. There is no real reason to doubt the inflation numbers for the last quarter.

When inflation hits food and fuel, the impact is relative to individual families. For instance, high food inflation will bury financially a single mom with three teenagers as compared to a double income couple with no kids.

The high dollar and the extra purchasing power for Canadian based retailers has helped as well. I am cheap (not thrifty,) and usually retailers have to pry my savings out of my cold, dead hands (joke.) However lately, I often find myself leafing through Canadian Tire ads and recently, I have been purchasing some really cheap and very good quality products.

I think the real question is what impact skyrocketing fuel prices will have on the macro economy. About a year ago, I saw a panel of economists on BNN and they were unanimous in saying that $150 / barrel oil would be catastrophic for the world economy and grind it to a halt. I would guess that bar has been moved recently, but I can’t see how sky high oil prices could be good for a geographically expansive, manufacturing centre like Ontario where people drive monster SUVs from the burbs to go to work each day.

#7 Keith in Calgary on 04.26.08 at 1:17 pm

Real inflation, as measured by our pocketbooks, is currently out of control IMHO. Anyone here remember the 70’s ? This is much worse.

Now, after inflation……comes stagflation…….then our economy declines rapidly and slowly spins out of control as a result. Small businesses and medium sized ones fail because their pockets are not deep enough to hold out the effects of slimmer margins,lower sales and price increases. People lose jobs and the spiral continues.

Guess the idiots at the Fed and BofC prefer to punish consumers with horrible inflation instead of bank failures. Which is where the punishment belongs IMHO.

In other news……today’s Calgary Herald has 136 pages. 48 of which are direct and indirect advertisements for the REIC. 35% of the total “news” paper page count…….heh.

#8 wealthyrenter on 04.26.08 at 3:47 pm


The perception of inflation being out of control is truly dependent on individual circumstances, choices in lifestyle and perhaps geography. The only place I can see where Canadians have experienced massive inflation is buying a home, and home related upgrades etc.

Virtually, every item I would want to purchase has gone down in price or stayed the same over the past five years: tvs, computers, dvd players, clothing, even carefully planned vacations. Even beer is cheaper if you go buck a beer!

A basket of groceries at the local Fresh Value is about $20 a week more compared to five years ago. However, I would concede a large family would feel the pinch. My 26″ Toshiba TV was $900 in 1998, and it only costs about $5-$10 more per week to gas up my Corolla. The rise in gas prices doesn’t bother anybody driving a gas sipper. I drive 500 km a week to work and back as gas is cheap with all due respect. Try driving in Europe.

Even my 2006 Corolla was only $1000 more than my 1999 Corolla. I am comparing prices off the lot, and the new car is loaded with way more features.

Even rent is cheaper in a city of Toronto. We pay $1350 for an 1800 square foot condo. The previous occupants (Toronto policemen,) paid $1700. Top drawer tenants can find excellent places to live in this city for little money.

Your circumstances may be different, but I can’t see any inflation, and certainly not hyperinflation.

#9 Future Expatriate on 04.26.08 at 7:42 pm

Wealthyrenter, I guess you don’t have much use for gas, food, or heating oil. If you did, you’d realize that hyperinflation is already just about beating all prior rates, but if it continues we’ll soon be at Weimar Germany levels.

But who cares about food and heat and gas as long as beer and your Toyota is cheaper, eh?

#10 Vancouver guy on 04.26.08 at 8:44 pm

I believe that the “official” inflation statistics specifically exclude fuel and food costs from the calculation, since they tend to fluctuate wildly and would obscure the “true” inflation of most goods.

That’s all well and good, except when food and fuel prices start going off the charts, and suddenly your inflation numbers start being detached from reality.

#11 Dom-GTA on 04.27.08 at 9:34 am


Thought that article with the “Garth isn’t Nostradamus was hilarious. I read through the article and had a chuckle at the thought of a VP from an Atlantic Canada RE company would say something like that.

What else would you expect from someone who’s whole livelyhood depends on the bubble continuing. Who are going to be among the hardest hit when this goes south? RE companies and agents of course. Can’t count the number of articles in the US which talk about agents, brokers, Flippers etc…that are losing their shirts and shorts.

I like Garth Nostradamus better than some RE shill, he actually sounded kind of desperate…that whole stick your head in the sand…”we don’t have leveraged loans….etc…too funny.

Enjoy the beautiful Sunday, i was at an Open House yesterday and got the typical RE agent pressure “Tie up the house, you don’t want to lose this opp….won’t last, and when I kept asking how many visits he had had for the open house and how many people had called, he finally admitted I was the only visitor…

#12 Keith in Calgary on 04.27.08 at 12:12 pm

Where do you live Wealthy Renter…….? PEI ?

In Calgary our monthly grocery basket is now up 50% over 2003.

Dine out “anywhere” and it’s up 50%…….

Gas….needs no explanation.

Clothing is more expensive.

Rent here has gone up 50% since 2003.

I can afford these increases, I just don’t want to pay them.

#13 SMWhite on 04.28.08 at 2:26 pm

Don’t get me started on inflation…

Energy is the underpinning of the economy and whether it fluctuates or not isn’t an excuse to ignore it.


When you hear the term “Core CPI” you would think that it includes the basic necessities but it doesn’t.

CPI includes those (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, inter-city transportation and tobacco products) but when you here the media spew Core CPI data from Stats Canada you never hear them say “Core” its always just “CPI”.

Talk about Jedi mind games.

Point is the more confused the media and government can make you the more you’ll sit in the corner sucking on your thumb and not ask any questions.

A lot of people have gotten greedy and party time is over, as much as Jim Flaherty is to blame for being a dumb ass and not lower income tax instead of the useless GST cut, banking industry, real estate industry, media and the common Joe all have to accept the big spoon of medicine on its way.

#14 Tom on 04.28.08 at 10:47 pm

Not sure if they offer it in Canada, but definitely in the US there are several organizations that allow you to essentially insure the value of your house, and the prices I see googling around are as low as $15 per month in some cases, but range up to $125 per month (the one in Chicago below) for $100k houses.

Most were created to help spur developments in transitional areas, but they offer contracts on any size house from what I could gather. Seems like a cheap piece of mind to me:

Obviously you can dabble in futures markets too, but this seems a little out of reach for common folk like me.

#15 Peter on 04.30.08 at 3:08 am

Of course they dont want to publish the real CPI, or inflation figures… if yes, our banks will be going belly up with the storm down south and a storm brewing up north, plus, our interest rates would have to go skyrocketed to 12 % or 13 % or even more…Obviously, the govt just have lots that you don’t want to know or they don’t let you know before some crap hits the fan…good luck !! Good thing to know is that my fiancee got a pay raise of 8 % this year instead of 3 % (which they generally do that every year) from her company, my fiancee ask her colleague and she was told that the company make some good money last year (not important). Secondly, her colleague told her including herself got a 8 % wage increase because she heard from the managers saying that this is to curb some of the inflation this year with high gas prices and groceries…

#16 Alleyne on 05.01.08 at 11:39 am

Hi Garth,

What are your thoughts on the Montreal Real Estate Market? I just purchased a 1002 square foot 2 bedroom with indoor parking condo in Old Montreal for 337,000 with a 20% downpayment. This will be my principal residence. My bank evaluated the property at 346,000 so I believe that I paid a fair price for it. Economic Reports that I read say that housing in Quebec should increase by 5% in 2007 and 3% in 2008. I earn approx 115k a year and have approx 100k in RSP. After reading your blogs I am wondering if I should have rented! What are your thoughts on the Montreal Real Estate Market

#17 been there on 05.04.08 at 2:39 pm

I live in Regina and have 2 grown sons interested in purchasing a home. My strong discouragement and reiterating the high interest rates of the late 70’s, early 80’s when house prices jumped considerably and interest rates followed resulting in many walking away from their mortgages, has had some effect on their decision to bank money for now.
While interest rates have remained consistently low, the cost of homes has made up for this resulting in ridiculous payments and making builders/ realtors wealthy as a result of this current bubble.
History is repetitive despite what we are brainwashed into thinking.

#18 Islander on 05.25.08 at 6:03 am

Not that I don’t agree with much of what Garth say, because I do, but The Strategy recommended people borrow up to their necks against their houses and pile into the stock market, just as NASDAQ was about to melt down and DJIA, S&P and S&P/TSX 60 flatline in inflation-adjusted terms.
Now you’re looking to this failed politician for his crystal-clear view of real estate’s future?

Wrong. Re-read the book. I argued against mantaining a large amount of static, non-proucing real estate equity, suggesting you borrow against it with a tax-deductible investment loan, putting the money into diversified basket of financial assets, including well-run mutual funds. Not stocks. Had you done that, with today’s stock market at a record high, you’d have achieved both goals – gaining financial wealth and also remaining exposed to real estate. I gather you have a reading comprehension problem. — Garth