No money? No prob.

Hey Garth,

This has to be the most foolhardy instrument ever invented; there is absolutely no incentive for borrowers to keep paying their mortgage–even if they can afford it–when they go upside down. Does the CMHC insure no money down mortgages?

Ward in Vancouver,

Yes, it sure does – for both owner-occupied homes, as well as investment properties. Plus, major lenders like Scotiabank offer a “100% Mortgage Program”, and government-backed loan insurance is a key component of it.

And they say we don’t have a subprime problem in Canada. Where’s the difference?

Hello Garth,

I own a home in Kelowna BC that I plan to sell in the very near future. I was planning on going through ReMax, however a few people have approach me inquiring about the house. Would it be wise to sell privately or is it better to go through a Realtor?

Thanks, Heather

Obviously if you use the services of a realtor you will be paying commission, typically 3% to 6% of the price these days. If you have people approaching you directly to buy the property, you’ll be tempted to deal direct and save the fee. However, be aware that most buyers trying to bypass a listed property are also looking for a deal, and expect a discounted price equal to or exceeding the commission. Second, if your property is in demand and in a still-hot city like Kelowna, using a realtor could result in multiple bids and a higher-than-expected sale price.

Also be aware you’ll need an experienced real estate lawyer to assist you with the offer to purchase in the absence of a realtor, since you’d be a fool to sign without professional assurances about the binding nature of the offer, conditions and the guarantee of a firm close. I have bought and sold dozens and dozens of properties, and never once regretted paying for the expert advice I relied upon.

Mr. Turner,
I just finished reading Greater Fool earlier tonight. Your criteria for a house on p.218 fit most of mine. But where in Ottawa will I ever find such a property? We have been looking for almost a year and I am not optimistic I will ever find one.

We live in a well-built townhouse in Kanata which is 15 years-old and 1050 sq. feet without the basement. We have looked at both new and resale houses for about a year now. But nothing meets our criteria. We like our house but circumstances have changed since 2004. Since an overpass by our house was built, the noise and air pollution have increased. I feel like I am living in LA as we hear fire trucks, ambulances and police cars zooming down the road behind our little backyard daily. We became parents and I home school my daughter who is six. My husband works in our basement. He is happy as he saves time and money from not having to commute. Because the three of us spend most of our time in the house we (I admit it is mostly me) would like to have a bigger house which is around 2,000 sq. feet. We don’t have a mortgage and the house which can sell for $210,000 in the current market is about 20% of our net worth.

I would like your advice on what is the best direction to take:

1) Shall we put the money into replacing the 15 year-old carpet and windows and continue to live her for the next 12 years until my daughter goes to university? My husband doesn’t want to move if we put money into renovating the house.

2) Shall we wait for the real estate market to tank in Ottawa and then buy something in the suburbs? What is your view of the real estate market in Ottawa given it is a government town where the employment is more stable than other Toronto and other cities in the west.

Enjoyed your book and we don’t want to be Greater Fools like some of our friends and neighbours. It is too late to buy them a copy of your book. Thanks and look forward to your advice.


Real estate isn’t just an investment asset, but also a place to live, so you must use both criteria to determine the best course of action for your family. Sounds like you are living cheaply at the moment, and the move to a home about double the size would put you solidly into mortgage debt. Is it worth the change?

Second, what’s this crap about waiting 12 years for your six-year-old to become a 18-year-old university student? Your choices are far wider than that, especially when you are home-schooling (and why would you want to do that, BTW?). Realistically, wait for the local market to soften (it is already happening – I know), and in the meantime, spruce up the house to make it more appealing. Get hubs out of the basement, and start renovating.

Hello Garth,
My boyfriend and I recently read your book, and we’re great fans of your theories. You mentioned several points about baby boomers & opportunities in the urban core which I totally agree with.

Over the past 6-8 months, we have been looking at several larger (approx 800 sq ft) 1 bedroom / 1+solarium units at the Toronto waterfront, in older condos (around 15-20 yrs old), and we’ve placed several bids. The first bid we placed in Nov 2007 was for $225k, it was sold for $230k. And in Apr 08 we lost for another bid (same building, same layout) for $255k, which was sold for $275k. Both condo units were in similar condition, so to me, that was quite a shocker. A 40%+ annual increase (20% increase in less than 6 months) is a bit crazy… even for downtown core.

However, we need to move out this summer, and we’re debating whether to pay rent (expense of $1200 – $1400/month) and wait for mid-2009 (or even later), or buy now knowing prices will drop in 2009 / onwards, betting that it doesn’t drop more than 6% ($17k on a currently $275k condo unit)?

Some factors we’re considering that “may” make our property a bit more immune to the burst, please let us know how you think these factors will weigh in:
1) Toronto Downtown core – heart of downtown, walkable distance to Union Station
2) Larger “livable” unit sizes – approx 800 sq ft
3) Waterfront – how much value is unobstructed lake view worth? We recently debated between unobstructed lake view $289k vs. partial lake view at $250k.

Any advice is much appreciated, thank you.

Get a grip. There are 16,000 units built, or being built, on the railway lands alone, and 56,000 new condos in the pipeline in Toronto. This is a delusional market in which overbuilding will yield a 1991-style meltdown, with price reductions of up to 30% in some buildings. There are thousands of recent buyers who went into the market merely to flip, and will be turning into reluctant landlords, happy to garner whatever rent they can get to cut monthly losses.

This is not a time to buy, but to rent. There is absolutely no advantage to buying a condo when you can live in the same unit for thousands less as year as a renter, and have these wretched losers subsidize you. Why, exactly, do you want to assume a big debt and higher monthly charges to live in the same place? I don’t get it.

Hello Garth, Your book, Greater Fool, tends to compare the Canadian real estate market to the market in US cities that have had a rough ride since the subprime fallout. Some fortunate US cities, such as Portland, Dallas and Charlotte have had flat prices or modest appreciation. Do you think the Canadian real estate market could be likely to have a similar soft landing? Thanks.


Real estate is a local commodity which is affected by national as well as neighbourhood factors. Yes, some communities in the States have escaped the meltdown, but not those which saw rapid price escalation in the years prior. So, this is likely a useful rule of thumb: What goes up fast, comes down hard.


#1 3rdman on 06.01.08 at 7:41 pm

Re Toronto condo market:

Not much demolition (if any) happened last Thursday at the 1 Bloor site. I don’t know what the supposed 800-odd crowd saw worth watching.. maybe they were rent-a-crowd..?

Signs on site “demolition starts at 2pm” why would you begin at 2pm of all hours? Just get on with it or don’t you have enough greater fools?

#2 news from Ottawa-Gatineau on 06.02.08 at 8:55 am

I just went to an about-to-be-completed development of modest “track” homes in Gatineau across the river from Ottawa. Homes occupied by very young families.

The builder was currently offering “Teaser” rates of 3.5% through a Caisse Populaire.

We counted 17 of these new homes already on the market for resale. Wondering what is going out there?

#3 squidly77 on 06.02.08 at 11:43 am

hello vultur how are you ?

#4 squidly77 on 06.02.08 at 11:45 am

you there vultur ?

#5 vultur on 06.02.08 at 12:10 pm

Get a grip. There are 16,000 units built, or being built, on the railway lands alone, and 56,000 new condos in the pipeline in Toronto. This is a delusional market in which overbuilding will yield a 1991-style meltdown, with price reductions of us to 30% in some buildings. There are thousands of recent buyers who went into the market merely to flip, and will be turning into reluctant landlords, happy to garner whatever rent they can get to cut monthly losses.
30% Darth Mortgage? Really? By when? Can we quote on that? By your logic new condo prices should fall on average from $400 per square foot to $280 per square. Is that your prediction?

Remember Darth Mortgage, your credibility is on the line.

#6 Keith in Calgary on 06.02.08 at 1:06 pm


Actually, if you count inventory the way the “REIC” used to last year until they changed their stats, there are 15,600 RE listings for sale in the Calgary area (it was up to 16,200 last month)…..and thousands are still under construction. Almost 10 months if inventory…….heh.

Canadian RE is like an overcooked TV dinner.

For Bernice…..

Rent, wait it out, and bank the difference…….I just singed a lease last week for $1,550 a month on a beautiful high end rental property in Calgary, located in one of the most desireable locations in the city…..for 1/3 of what it would cost to live there if they were for sale and I had to mortgage one.

#7 Andrew on 06.02.08 at 1:22 pm

And south of the Border .. Americans tapping in their 401k’s

Now It’s Official: Consumers Are Hurting

It has been truly remarkable how consumer spending has held up, well, appeared to hold up, in the face of strong headwinds. Household debt to equity at record levels. Fewer refis to facilitate dis-saving as an illusion of prosperity. Home equity lines cut back. A deteriorating employment market (not-so-bad employment stats masking a fall in the number of hours worked). And the economists’ cheer that “inflation has not become embedded” translates into “just because gas and food cost a lot more, don’t expect a raise.”

The fact that consumers were continuing to rack up expenditures was seen as a sign of economic resilience, a sign that those who thought the US was in for a recession or a long period of stagnation were all wet.

In reality, the health of consumer outlays had already started looking dubious in April. While retail sales ex autos were up in nominal terms, on an inflation-adjusted basis, they were lower than the year prior.

But no economic trend is official until it is duly noted in the Wall Street Journal. Today, in “Pinched Consumers Scramble for Cash,” the Journal describes how consumers who have borrowed to bolster their lifestyles are now caught between debt service and ongoing expenses. The story focuses on measures taken by those in extremis:

As consumers max out their credit lines and banks clamp down on lending, many older and middle-class Americans are resorting to pricey, often-risky alternatives to stay afloat. Some are depleting their retirement accounts, tapping 401(k)s for both loans and hardship withdrawals. Some new fast-cash options allow homeowners to squeeze equity from their houses — without the burden of monthly payments. One new product offers a one-time payment. In exchange, the company shares in as much as 50% of any future gain or loss in the property’s value, typically collecting proceeds when the house is sold.

Americans are resorting to these more extreme measures due to the combination of dwindling jobs, falling home prices, shaky credit markets and a sharp run-up in food and energy prices….

Many people are resorting to more conventional means of borrowing: In March, consumers had a record $957 billion of credit-card and other types of revolving debt outstanding — up about 8% from a year earlier, according to preliminary data from the Federal Reserve.

But businesses are reporting greater demand for newer cash-raising techniques. Reverse mortgages are gaining new favor. Secured by a home’s equity, this vehicle can provide consumers with a lump-sum payout, a line of credit, periodic payments or a combination thereof.

Also flourishing: niche products that quickly unlock the value of a particular asset. Life settlements, once marketed mainly to the wealthy, have grown in popularity as companies target smaller policies….A number of companies cater to people who’ve won personal-injury settlements — which are often paid over a period of years — by buying them out up front, typically for a sum much lower than the amount of the payments sold. Reserve Solutions Inc. of New York offers debit cards to help workers access funds from preapproved 401(k) loans.

In life-settlement transactions, sellers….. often receive only about 20% of their policy’s face value. People who sell the rights to their legal-settlement payments often forfeit much of those payments’ value….

While 401(k) loans generally carry reasonable interest rates, individuals who take them lose some of the valuable power of compounded returns — jeopardizing their retirement security in the process.

Reverse mortgages often involve high fees and costs, which often add up to as much as 5% or 6% of the home value. A homeowner or his heirs must typically sell the house to repay the loan, which becomes due when the borrower leaves the home for more than one year or dies. So an owner who becomes incapacitated and needs an assisted-living facility for more than 12 months could face a huge balance due immediately.

Despite the risks, business in the fast-cash lane has been accelerating. In 2007, 18% of workers had taken a retirement-plan loan within the past year, up from 11% in 2006, says a recent survey by Transamerica Center for Retirement Studies. The number of federally insured reverse mortgages is also ticking up. From January through April of this year, lenders originated 40,068 such loans, compared with 37,020 in the same period last year.

The Financial Industry Regulatory Authority recently issued investor alerts warning consumers about the high costs of reverse mortgages and the opacity of the life-settlement market. More broadly, it also cautioned that some cash-now transactions could hurt consumers’ ability to qualify for certain benefits, like Medicaid. A lump-sum payment from a life settlement or reverse mortgage could leave an individual with too much cash to be eligible for such programs…..

Even the most financially savvy consumers are breaking some time-honed rules. Paul Herman, 51, is an attorney who represents consumers with debt and credit issues. He recently started a new law practice and went through a divorce. At the same time, his Boca Raton, Fla., house sat on the market for months without selling. With money getting tight, he went to his bank to investigate a business loan. But “with the rates I’d have to pay, it wasn’t worth it,” he says.

He tapped into his retirement savings instead, taking one loan and one taxable withdrawal. His logic: “Why plan for retirement if you can’t make it today?”

#8 Andrew on 06.02.08 at 1:25 pm

I guess when people are in dennial and won’t lower their price hoping to hang in teir for a rebound..

they tap into their retirement savings instead, taking one loan and one taxable withdrawal. their logic: “Why plan for retirement if you can’t make it today..

Not looking pretty at all down south…

#9 kabloona on 06.02.08 at 1:32 pm

He said “up to 30% in some buildings”….I think that’s pretty conservative, actually. Personally, I feel vancouver and Toronto condo markets are set for a big correction….worse than the last one. Just my $0.02…

P.S. The “Darth Mortgage” moniker is getting really stale…. ;-)

#10 Keith in Calgary on 06.02.08 at 1:52 pm

Bernice……here is a post I made on another blog… describes your situation.

I don’t care whose mortgage, or what portion thereof, that I pay, and unless the property is free and clear….IT ALL GOES TO THE BANK ANYWAYS, just as if I had I owned it myself……heh.

But, if it is 1/3 the cost of the asset, and I bank the difference, without the attendant financial risk and legal obligation of repayment of the balance…..where do I sign ?

My new rental residence is a 3 year old 100% luxury rental complex, 2 BR 2 BATH 1,048 sq. ft. in Mission (Calgary district)… is not a condo with some owner occupied suites, so I am not going anywhere unless I don’t pay my rent obviously.

Let’s do the math shall we…….

$500K (equivalent purchase cost “today”) over 20 years at 6.5% is $3,702 PI. I am doing a zero down example here, because renting is the same as zero down. I am also doing a 20 year amortization because 40 years is downright stupid and irresponsible.

Taxes are $200… is $75….utilties are $75…condo fees are $400… roughly $4,452 a month to own the same, or similar, unit of the same size, style and location…..versus $1,550 of rent.


Can I save the roughly $3,000 a month difference ? Well, we’ve been doing that, and more, for 5 years now.

So let’s run the numbers and make a comparison……

I would have paid the bank $148,529 of interest in this period. My mortgage principal would only have been reduced by $73,591…..

If my property was sold for the same price in 5 years (fat chance), and I needed to get my money back, I’d have to sell it, so subtract $19,000 of RE fees from the $73,591 of mortgage paydown for a net gain of $54,591.

I can save $180,000 not including the compound interest I would have earned during this period.


I am $125K ahead by renting…

No ownership risks…..

No devaluation risk (which is huge right now)…..

I have total flexibility if I need money or want to change my lifestyle….

Why do people buy again ?

#11 JD on 06.02.08 at 2:21 pm

consumer confidence plummeting:

Just 38.2 percent believed it was a good time to buy a big-ticket item such as a house or a car, down from 45.8 percent a month earlier. That compares to 48.8 percent who think it’s a bad time for a major purchase, up from 42.8 percent.

#12 Dave in Calgary on 06.02.08 at 2:36 pm

Is there really a harm in acting like adults here?

Vultur’s opinions are not popular on this site, so it would seem, but at least he is voicing them. I don’t agree with his logic, but should he not be able speak his mind? Or, are we going to collectively tell each other that we are all right and not let anyone else speak? There are two sides to every story. If any of us were correct 55% of the time, we could go to Bay Street and make billions.

And Vultur, Garth said “reductions of up to 30% in some buildings” not “An average of 30% in all buildings”.

This is a real estate blog, not a debate on abortion or prison sentences for rapist… can we not keep it fun and informative??

I am learning a lot from this blog, enjoy every angle whether I agree with it or not, and I’d hate to see it regress into a shouting match.


#13 Andrew on 06.02.08 at 2:46 pm

One more for the road…

plus TREB just released may fugures for GTA .. sales down 19percent over last year in May..

Consumer confidence plunges

Globe and Mail Update

June 2, 2008 at 10:10 AM EDT

Consumer confidence in Canada has plunged and is at its lowest point in more than seven years, according to a monthly survey by the Conference Board of Canada.

The board said its consumer confidence index dropped seven points to 85.8 in May, the lowest level since the index moved to monthly assessments in December 2001.

The index was fixed at 100 in 2002, but was trending slightly below 100 for most of 2007. By the fall of 2007, it started to decline, dropping off steeply in the last two months.

For the May survey, every region showed waning confidence, and all four questions asked in the survey saw the balance of opinion turn more negative, the board said. The biggest declines were seen in consumers’ attitudes about future income conditions and making major purchases.

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By region, central and Eastern Canada were the most pessimistic.

Some economists have declared Ontario to be in recession. And with last week’s release of first-quarter growth data for all of Canada showing a contraction for the first time in five years, economists now say the entire economy has stagnated – even though labour markets continue to produce jobs and money is gushing in to the energy sector.

Consumer confidence has toppled in most Group of Seven countries in recent months, as the United States wrestles with recessionary conditions and the global credit crunch takes its toll on banks and the financial system. Rising oil and gas prices have also taken a bite out of consumer confidence, something the Conference Board of Canada believes is significant in Canada too.

The board notes that the last time consumer confidence dropped off significantly was in the fall of 2005, when hurricane Katrina prompted gasoline prices to soar.

The Bank of Canada has pointed to consumer confidence as a major risk factor in how the economy holds up going forward.

#14 Andrew on 06.02.08 at 2:47 pm

Sorry looks like someone already posted the consumer confidence link … thanks JD

#15 Andrew on 06.02.08 at 3:24 pm

Lenders foot the bill for abandoned homes
Foreclosed homes that lie vacant and rundown need their lawns mowed and their yards cleaned up. Cities say taxpayers shouldn’t have to bear that burden.

The city will have to pay someone to come in and clean up the lot, board up the windows and cut the lawn. Similar scenarios are playing out in communities all over the country wracked by soaring foreclosure rates, where vacant, rundown homes are springing up as quickly as the weeds in their yards.

But now these communities are fighting back, demanding that property owners – often the banks that repossessed the properties – pay to keep these houses from falling into disarray. The state of California as well as Providence, R.I., and Trenton, N.J. are all pushing initiatives to prevent taxpayers from having to bear the burden of the housing crisis.

This floreclosure thing is getting down right nasty ..pretty soon townships will be sueing banks to maintain vacant lots which they can’t sell..

#16 Popping Bubbles on 06.02.08 at 3:29 pm

Vultur… I think by way of writing a book, having this website, and being quoted repeated in the press, Garth has plainly staked his reputation. What have you done besides ignore data and analysis, and throw out assertions (without fact), taunts and insults?

I don’t know if prices will decline 30% but having watched what’s going on in Toronto it is a reasonable call. I particularly like the attached article which cites two industry sources as saying that investors (speculators) have been taking 50% – 60% of supply. And the amount of new supply in the pipeline is unbelievable. It is going to be a gong show.

#17 Another Albertan on 06.02.08 at 5:03 pm


#18 Emma on 06.02.08 at 7:02 pm

As someone who bought a downtown condo in Toronto at $275 per square foot four years ago… a 30% drop to return to that price level doesn’t strike me as at all unthinkable… or unlikely.

#19 Dawn in Calgary on 06.03.08 at 10:33 am

This morning on newsradio in Calgary the term ‘bubble popping’ was actually used.

Between RE softening and the news that the GM truck plant will close, alot of cowboys will be crying into their boots soon.

Home sales plunge from last year’s levels
Market cools, but prices remain stable
Mario Toneguzzi, Calgary Herald
Published: Tuesday, June 03, 2008

Calgary’s resale housing market again showed dramatic cooling signs in May with monthly sales and average prices dropping for both single-family homes and condominiums compared with a year ago, according to Calgary Real Estate Board data released Monday.

MLS sales during the month fell by more than 31 per cent for single-family homes and by almost 35 per cent for condos compared with May 2007.

In the single-family market, the average sale price in May was $479,564, a decline of nearly two per cent from a year ago, while the median sale price dropped by nearly four per cent to $419,000.

#20 Peter on 06.04.08 at 10:50 pm

We did not hear realtor’s for a long time about this price drop, even it was dropping in sales, these guys and gals are not coming out except they are keep pumping it on the TV (Pulse 24) and saying, house price is cheap, keep buying, keep loading, we got nice mortgage financing option with 0 % down and 40 yrs junk…

#21 pjwlk on 06.04.08 at 11:32 pm

Dave in Calgary: I don’t think most people mind an intelligent debate, and personally I don’t mind listening to the opinions and arguments of others provided they are based on facts. However there is no value that I can see in insulting people for their beliefs as vultur has regularly done, particularly when those beliefs are well supported by research. That in my opinion is not acting like an adult.

#22 Simon on 06.19.08 at 11:41 am

Here’s how I look at it, for a 5 year ownership.

$400k condo, 100% financed

Closing Costs:
6% Realtor fees (when I sell)
2% Other closing costs
=$44k total (or $8.4k per year)

Monthly Maintenance Costs:
$350 condo fees
$250 Property taxes
$100 utilities
$200 various renovations/etc
=$10,800 annual total

Total annual ownership costs
$10,800 maintenance+
$8,400 closing costs spread over 5 years
=$19,200 annually
=$1633 per month

My 5.5% mortgage interest costs are offset by an average 5-6% property value appreciationg.

My principal paydown appreciates at 5-6%, and is recouped when I sell.

So how is the $1600 I pay for ownership over the five years so much worse than renting a similar unit for $2000+ (in the Toronto market)? And if I own longer that 5 years, the deal gets even better (as I spread the closing costs over a longer period0

I understand that if indeed the bubble bursts then many units will depreciate. But most investing analysts and economists are like monkeys on a dart board. (anyone remember the 12 analysts who 100% predicted a drop in tbe BoC rate 2 weeks ago)

Just my 2 cents.

#23 Simon on 06.19.08 at 5:00 pm

I mistyped $8.8k as $8.4k.

The $1633 monthly is correct, but the $19.2k should read $19.6k


#24 Daggerdon on 06.23.08 at 1:49 pm

The problem with this discussion is that everybody seems to think that Canada is one real estate marketplace, which is the furthest thing from the truth.
I live and working in Metro Vancouver, a market that lagged the nation for the period from 1992 to 2002 and which enjoyed real estate value declines in some sectors over that 10 year period.
The market from 2002 to present certainly reversed that trend and Metro has led the nation in price increases and building permits as well. If any place seemed likely to have a major correction coming it would seem to be Metro Vancouver, however…
I just reviewed the building occupancy statistics and the net in migration reports and realize that Metro Vancouver has virtually a zero (.5%) vacancy rate in newly constructed condos and houses during April 2008. There has been a significant increase in houses and townhouses for sale, but prices are still up about 10% from last year, and for good reasons…. people are still migrating here in large numbers… even larger numbers since Ontario’s economy appears to be slumping so badly.
So be wary about comparing Toronto, Calgary and Vancouver… the Canadian marketplace is really a number of quite distinct submarkets with very different economic dynamics at work.