The waiting game

Rent versus buying calculator (NY Times): here

Chart from Calgary Real Estate Market Blog

Hi Garth,
I’m a regular viewer of your website. I find it informative, and I plan to get a copy of your book with the same title.

I live in the Niagara region (Welland) and I’ve noticed many houses are over-valued, even down here. It’s been that way for a few years. I’ve seen many houses on the market for a number of months now, and only a few have lowered their prices. It’s crazy. My wife and I will be looking hard for a little bigger house in the next couple of years. (We live in a semi, that we paid $119,000 for 4 years ago and owe less than $80,000 now) I’m selfishly hoping prices will come down, but many people around here seem to think it won’t happen. Their reason for thinking this way: many people re-locating from the Toronto area with their big bucks will keep prices high, and land is becoming less available to build on. What are your thoughts?
John

As I’ve said for many months, sales volumes have to crash first, then prices will trickle down afterwards. Right now, resales in Canada are off 18%, but prices are down only 2-3% on average, and as much as 10% in certain markets, like Edmonton. We are in the early stages of this correction, and price reductions will be much more dramatic by October. Year-over-year, I am sticking with my prediction of a 15% national dive by this time next year, with some markets off twice that amount. If you want to move up, sell now with a long close, then hold off a buying decision until at least the end of the year.

Dear Mr. Turner:

I am an avid reader of your books and am in the middle of your newest, Greater Fool and I am enjoying it, especially since I have been around real estate my whole life. (My parents were real estate agents in GTA for over 35 years) I am 36 years old.

I am confused however about the following comment made on page 262 of your book called 2020: New Rules for the New Age in the chapter for Personal Strategies as follows: “Remember the folks lined up on Yonge Street in Toronto to buy gold at 1,000 an ounce?” When might this have been? I understand history to only have had gold reach 1,000 in March, 2008. This book was published in 1999 as you know. In the 1980s gold reached 850 an ounce and I understood this to be the highest point until March 2008. (have I missed a piece of history?) Or is this comment just a hunch as to what may be.

I suspect gold will explode.

Anita

Gold indeed hit $850 US, which was $1,000 an ounce Cdn at the time, in 1979 and, yes, people were lined up around the block in downtown Toronto to buy it. Greater fools, of course, as the price soon crashed from that pinnacle. It took almost 30 years to achieve $1,000 again, making this one of the worst investments around. Bullion explode again? Don’t count on it, since the collapse of the US dollar has not sent gold prices skyward in relative fashion. Now, maybe if the US nukes Iran….

Hi Garth:

I would appreciate your opinion re my real estate situation. I am considering a move back east (Kitchener/Waterloo) to where my family is. I live in Coquitlam, a burb of Vancouver. I live in a one bedroom apartment and just received a $16,000 + special assessment fee as the siding needs to be replaced. However, the Strata company has also included a whole ton of other things they’d like to do in that amount – so we are having a Strata meeting to ratify – or not – what they have proposed. There are 42 units in this building which is 26 years old.

Anyway, the figure is out there… and it will cost a lot to redo the siding. So, my question is: should I try to sell now or wait? I just read your article about the change in mortgage rates as of Oct. and this has me more concerned. I know I would have to pay for the assessment, plus I don’t want to have to take a loss on my apartment as well. Should I wait until the work has been done on the apartment and then it would be potentially worth more… or sell now?

BTW, I am unemployed now – was laid off a few months ago – so would also be looking for a job out east (and am looking now). Your thoughts? Wisdom?

Frances

Too late, dude. You have to disclose this assessment request when you list the property, and certainly if you get an offer this information will be made known during the purchaser’s legal investigation. Your selling price will have to reflect the cash outlay required by the strata board. As for selling, you definitely do not want to wait.

Garth,
I sent you an email via your greater fools site, not sure if you got it. I have just read your book again and I say you are bang on. I’ve also read your blog site and find it frightening at how some people really disregard what you have to say.

I too got caught up in the real estate frenzy and sold a small townhome in 2006, and then got scared and bought a small (fixer upper innter city house that could flood, etc. as the the neighbors I learned had sump pumps installed) in May 2007. I like many, thought the US meltdown would never occur here. Further, my realtor told me prices may stabilize but they will only go up. Then I read your book and did some digging for myself. I found most of what you said is absolutely true in the searching I did. It took me years to get a proper downpayment for my first townhome, which was pretty basic. At the same time, everyone around me was buying and upgrading to McMansions with talk of low interest rates, stainless steel gloss and that granite, not to mention those brazillian cherry hardwood floors!!! And these were all nurses – just like me, many of them single just like me. Some even bought second properties in Calgary to rent out. I got out of the bubble in 2006 when things started to go crazy in Calgary, but got scared as things just kept going up and got back in. Big mistake!!!!

I decided to get out of this crazy boomtown and put my house on the market in April, and it sold 5 weeks later with a 30,000 loss. However, I got out. Fortunately, I have my home proceeds of 200,000 to set aside and fortunately in addition to that, while everyone was paying down their McMansions, I salted away another 1/4 of a million in RSPS and savings.

I have moved to rural B.C. close to Vancouver and currently rent. Someone this morning told me prices may go down 10% maybe here, but no more – it’s too good of an area for that. I kept quiet but couldn’t help but think that if the balloon in Vancouver loses all of it’s gas, the one here will too. I am quite sure a lot of the people who own property here also have a principal residence in Vancouver.

I don’t think the crash will be as severe here as in the U.S. and I think from what I’ve read we are two years behind the U.S. But the crash will be hard enough to deliver a severe blow and drop prices quite a bit. Further, I already see listings here that say “hot price” “reduced” “hot new price” “summer sizzling price” – these words in my mind translate into people getting scared and desperate to sell. And a couple I know in Calgary have had their house listed for 3 months!

So that’s my comment – hope you enjoy it. I’ll just sit back now and see what unfolds – and perhaps I’ll be fortunate enough to find a small 1000 square foot bungalow that isn’t like the 700 square foot dilapidated dive I left behind in Calgary.
Cathy

Smart girl. — Garth

62 comments ↓

#1 Brian on 07.18.08 at 11:23 am

Great post from real people not your cheerleader Realtors and financial program host. Buy Silver and wait.

#2 Calgary rip off on 07.18.08 at 11:37 am

Hey Garth.

Great website. Too bad you arent an MP here in Alberta. You are needed here.

So from your graph, how bad do you suspect it will get in Calgary?

In Hidden Valley, NW calgary, on mls.ca there were no houses available under $400,000 in 2007, now the cheapest is $329,000. What is the likelihood these houses in Hidden Valley for example will hit the $250,000 range, do you think its likely to go that low?

It’s quite possible, but that would be a 20%+ further correction. That might take six desperate months to achieve, and a contining erosion in buyer confidence. Hey, good idea about politics. Maybe I’ll run in Calgary SW. — Garth

#3 Pol-Can on 07.18.08 at 11:41 am

Garth… Great blog….

Just an example of what is happening in C02…

MLS # C1426451 just reduced 80K this week from 579K to 499K. This is a new listing (no more then 3 weeks old), a full reno, and is sitting empty…..

Prices are dropping on houses that are not moving most likely because they were listed too high… These same houses are sitting on mls for months…

The ones that were in good shape and priced right are still selling although slower then before…..

We are on our way down….

#4 Brian on 07.18.08 at 12:25 pm

To Cathy: if prices are going to tumble in urban Vancouver, (and they are,) what do you think will happen in the outlying areas?

Chilliwack is already running at 8+ months (!!) of inventory, and Surrey’s next.

The whole “wealthy people keep moving here and there’s a shortage of land” argument is a logical fallacy. Utterly and completely pervasive, yes, but a fallacy nonetheless.

#5 pete on 07.18.08 at 12:39 pm

Hey Garth you are a true conservative unlike the neo-conservatives who now run and ruin this country. What happened to the conservative party which seems to have gone mad?

#6 kabloona on 07.18.08 at 12:51 pm

I just about gagged when I read Ozzie Jurock’s blather about Western Canada being “paradise” in the Vancouver Sun yesterday:

“We may have a downturn, clear out our own overbuilding in places and yes, we may see a lowering of prices. Markets become the stories people tell about them and today the nay-sayers are out in force and negative stories about Vancouver, Calgary and Edmonton abound.

But whatever the short term outcome this is still paradise – the whole world wants to be here. Living in Western Canada is being close to being in heaven on earth. The environment is majestic, the climate outstanding, the views spectacular. There is a very special flavour here. In Alberta call it the crisp mountain air, the sweeping wide open spaces, in B.C. call it the pert ocean spray, balmy sunsets, beach-roses in February and asters in October. There is a Western Canadian flavour. A flavour unlike any other.

This is the best place in the world to be….and that means that our real estate prices will always be higher than elsewhere…eventually.”

#7 Mark on 07.18.08 at 1:46 pm

I read Ozzie’s article yesterday too. What made me gag was the question from a reader who said he had purchased nine presales. NINE!! Boy, that would make me very nervous indeed. If he is not alone, and I hear anecdotally that 40%+ of all condo purchases in Vancouver are by investors, then there will be big trouble for them when interest rates go up and rental income doesn’t cover their mortgages. They will dump their units and prices will fall. I see that is happening today in Calgary.

Love your website Garth. I don’t know where you find the time!

#8 $fromaSia on 07.18.08 at 2:20 pm

Ozzy is on crack, on my way to work I saw him on Hasting smoking up.

B.C.’s like heaven eh? Heh, Hastings is Hell.

Looks like Heaven is next to hell!

#9 Michelle on 07.18.08 at 2:25 pm

Most of Toronto’s excess/investor condo building will be finished by 2010. Perhaps those in Vancouver will wait til after the 2010 Olympics to dump their pre-builds. Does anyone know of anyone building an Ark? I’d like to invest because it’s going to be one hell of a flood.

#10 kabloona on 07.18.08 at 2:47 pm

The whole pre-sales scam was set up to spur speculation, IMHO. Now a bunch of dummies are going to get caught holding the bag, so to speak….

#11 hal on 07.18.08 at 2:49 pm

I heard a realtor on the radio yesterday saying that Kelowna real estate is dirt cheap compared to London and Paris and New York etc and almost fell out of my chair.Helllloooo……….this is Kelowna, 100,000 people, hot in the summer, cold in the winter, overcast from November to April, air quality sucks if there is a forest fire within 200 miles, tiny economy dependent on tourism which is down 30% this summer, most jobs pay about 9 to 12dollars an hour so if you don’t bring your wealth with you you are HOOPED because you sure won’t make any money here.And neither will your kids. Most jobs are tourism and service industry and don’t pay diddly. London and Paris and New York? Gimme a break.

#12 Newbie on 07.18.08 at 3:00 pm

I relocated to Vancouver this year and was hoping to invest in real estate property here. We “sold” our condo in our home country to use that entire amount for a substantial downpayment in Vancouver. The buyer has paid us partially but there were snags and we had no choice but to withdraw the sale and return their money. We were extremely disappointed at the thought of not being able to purchase a property here in Canada.

On hindsight, it was a blessing that we withdrew the sale of our condo in our home country at the last minute. We opted to rent it out instead and got a nice 9% yield on that asset. This is enough to pay for the rent of our downtown apartment.

Reading the Greater Fool made me realize that had we liquidated our assets in our home country and moved it to Canada, then we would be drowning in debt right now … and for the next 40 years.

#13 hal on 07.18.08 at 3:04 pm

Oh yeah, I forgot to mention………the beaches are small and rocky and most of the shoreline of Okanagan lake is private so unusable to the public. Golfing is great though if you like to stand around in 35 degree heat for 6 hours. And Big White is awesome if you like skiing in the fog. But Silver Star is not foggy so you can always ski there if you don’t mind the biting wind and the chapped face. But the scenery is beautiful if you ignore the 17km long strip mall that extends from Westbank to Winfield with Kelowna in between. And there’s lots of time for looking at the mountains off in the distance in the hour it will take you to drive those 17 kilometers. …Just my opinion, I’ve been here for 15 years and plan on leaving when I retire.

#14 patriotz on 07.18.08 at 3:29 pm

“To Cathy: if prices are going to tumble in urban Vancouver, (and they are,) what do you think will happen in the outlying areas?”

Rural BC is going to get absolutely clobbered. The forest industry is in the tank, tourism is in trouble, and the only thing keeping the economy moving is RE. Now how long can you keep going building houses for – who? Ozzie can carry on all he wants about fresh air and flowers, but if you’ve got no economy you’ve got nothing to support RE prices.

Oddly the only places in the southern Interior which have a real industrial job base, Trail and the Sparwood area, are also quite reasonably priced compared to the 200K ghost towns and Kelownafornia.

#15 Mark on 07.18.08 at 3:35 pm

Problem with that Rent Vs. Buy Calculator… Uh. Only let’s me select -10% maximum. What about -30% return for 2 or 3 years? :)

#16 sss on 07.18.08 at 4:03 pm

Mark, this calculator is for counting your profit for a long term, not for the current moment. Therefore, that number must reflect the average price increase, which is usualy about 5% in the long run – it just can’t be even 0%. I consider average 5% price and 3% rent increase, which gives the result of 3 years – not so bad, though.

#17 Once a Conservative on 07.18.08 at 4:09 pm

Pete, Post #5

Just want to update you.. Garth was once a Consevative but is now a Liberal

#18 timbo on 07.18.08 at 5:11 pm

Tim in Calgary

Garth , if you have not seen this university lecture yet you should. Explains in 3 parts how real estate works in a bubble and I believe is very similar to our condition now.

http://www.youtube.com/watch?v=uyOWuczlJCA

when on utube just look to the right for the other parts

have a good day all

#19 Midas on 07.18.08 at 5:41 pm

Garth’s comment: “Gold indeed hit $850 US, which was $1,000 an ounce Cdn at the time, in 1979 and, yes, people were lined up around the block in downtown Toronto to buy it. Greater fools, of course, as the price soon crashed from that pinnacle. It took almost 30 years to achieve $1,000 again, making this one of the worst investments around. Bullion explode again? Don’t count on it, since the collapse of the US dollar has not sent gold prices skyward in relative fashion. Now, maybe if the US nukes Iran….”

Sorry Garth but you are dead wrong about gold and silver. If you think that the price of gold going from 250 to 1000 is not a skyward leap then I wonder how you define skyward! Equities are toast or soon will be, treasuries will not be worth the paper they are printed on when inflation hits double, possibly triple digits in the US and the rate at which they are printing dollars triple digit inflation is not out of the question. Real estate will go down down down and once again you are wrong, it will not recover in 2009, it will not hit bottom till 2011-2012 in Canada if it hits bottom that soon. When the world’s reserve currency becomes history taking the global economy with it all paper currencies will devalue – so what will be left that people will have faith in from a monetary perspective? Only that which has never lost their value as real money, gold and silver! Do you think China and Russia and the other creditor nations that hold trillions of US dollars will continue to do so as the dollar continues to sink faster than the Titanic? Or will they invest these worth less (not worthless yet) dollars in real hard assets? On the top of the list of real hard assets sit gold and silver and what do you think will happen to the price of these ‘precious’ metals when they start doing just that? And comparing economic conditions in 1979 to 2009 is like comparing the invasion of Grenada (remember that one) to WW II, the scale of the problem 30 years down the road is that much greater. In ’79 dollars gold should already be 3000 an ounce and soon will be. My advice to all Canadians, sell your house and buy gold or better still buy silver and wait and watch, 3-5 years down the road you will be able to buy all the RE you want and where you want it and you will be able to pay cold hard cash for it, cold as in gold.

You bullion bunnies are always amusing. — Garth

#20 timbo on 07.18.08 at 5:52 pm

And one more thing, this comment from another lecture at the 36 minute mark woke me up to what happened 2 years ago in calgary. Ponzi effect and it gives chills. The video is slow at first but pretty well everything on it does have a Calgary and Canada connection.

http://www.youtube.com/watch?v=BiqEacwADlE&feature=related

Have a good weekend

#21 Anonymous on 07.18.08 at 5:57 pm

Our place was on the market in Alberta for seven months. We kept it in showroom condition the whole time including buying fresh flowers for the bathroom each week.

No offers for seven months. And on the morning that we finally received the offer (before work) we were washing the floor to make it shine. To us it was just another showing… but we promised each other from the beginning that every potential buyer would get the same experience.

We worked our ass off trying to sell our place. We sold in May, 2008.

95% of people selling give up after the first month. Then the houses go to hell, and they don’t care anymore. Alberta is full of these kinds of people.

#22 Cathy on 07.18.08 at 6:31 pm

Brian and Patriotz
Thanks for your comments – I have no intention of buying in rural B.C. – great place to save bucks earning the same wage I would in the city, but with a lower cost of living. I just plan to wait it out – there’s lots of options out there.

#23 JC on 07.18.08 at 9:03 pm

Despite some of his detractors, I think Garth is soft sudsing the incipient downturn.

As the US recession gathers steam, Asian exports will be impacted which will only compound their own coming economic correction (China’s stock market has been sliding badly the last year). So not only does Canada lose exports to the US but Asia, the #1 consumer of Canadian commodities, will stop buying. This adds up to a SERIOUS recession in Canada, which is when Real Estate REALLY tanks. The Canadian real estate correction has already begun — in a BOOM economy — imagine what happens thru two years of recession.
And West Vancouver looks like it is set to be the poster child of same, with conservative estimates of a 45% correction gaining traction among those in the know…

#24 Midas on 07.18.08 at 9:47 pm

Well said JC, I wholeheartedly agree.

#25 VANFinancialPlanner on 07.18.08 at 10:02 pm

Read your book over Canada day long weekend (brilliant!)…and couldn’t agree with you more on everything you have said, as I have been saying the same thing to my clients over the last few years (although, not as eloquently as you).

The real estate mania the last few years in Vancouver is so 99-00 with Tech stocks (& I learned the hard way as an Advisor)…we know happened there.

Just in case people do NOT think there is a real estate bubble here in Canada, I suggest they read chapter 2 of the classic book “Manias, Panics & Crashes”, C. Kindleberger

Anyways, gonna buy a few copies of your book to give away to my clients, thanks again.

#26 patriotz on 07.18.08 at 10:09 pm

“Therefore, that number must reflect the average price increase, which is usualy about 5% in the long run – it just can’t be even 0%.”

Long run increases only apply from a reasonable price base, i.e. value based on earnings, not the top of a bubble. The long run increase for gold is about the rate of inflation, but the increase from 1980 to today has been practically zero. Or look at the stock market from 2000 to today.

The long run price increase for housing has really been about 3%. We have been experiencing a bubble, which means prices have to go down substantially before the long run trend is restored.

#27 Future Expatriate on 07.18.08 at 11:59 pm

Garth, come now, “IF the US nukes Iran?”

Unfortunately for the entire planet, it’s a matter of how soon. And then the “bullion bunnies” will be in their heaven, IF there’s enough of an infrastructure left to trade and barter in in whatever village they’re stuck in.

Unbelievably good TV show in the US last year called “Jericho”, hopefully it played in Canada as well. Of course, MUCH too good for TV and a little too uncomfortably prophetic.

#28 prairie gopher on 07.19.08 at 12:01 am

I asked this question before on another blog and no one answered. I sold my house at the end of ’07. We did well. We now have the proceeds invested in the bank in term deposits, so they are guaranteed. If our economy goes to shit, what happens to cash?? I guess it doesn’t matter if the government goes belly up.

#29 Jas on 07.19.08 at 12:44 am

UK property developers struggling to offload their properties.
UK property developers in desperation to sell you a home.

“Pay for 75% and get 25% free for up to 10 years!”
“100% yours, only 75% cost”

http://www.guardian.co.uk/money/2008/jul/19/houseprices.firsttimebuyers

#30 Popping-bubbles on 07.19.08 at 9:35 am

House prices in the UK and the US are likely to fall for another two years, the chairman of one of the world’s most powerful banks has warned

http://news.bbc.co.uk/2/hi/business/7515088.stm

#31 patriotz on 07.19.08 at 9:46 am

We now have the proceeds invested in the bank in term deposits, so they are guaranteed… what happens to cash?

First remember that deposits are guaranteed up to 100K per depositor per bank.

That said, you will get your money back, no matter what. CDIC will be backed up by GoC and BoC should the need arise. The Government simply must honour the obligations of a Crown Corporation.

The question is how much that money will buy (inflation threat), but if the money is to buy a house, I don’t think you have much to worry about, because bank failures will cause house prices to go down even more.

#32 $fromaSia on 07.19.08 at 10:21 am

PAtriotz the word/term your looking for is, “underwriters.” For insured banks.

#33 Peter on 07.19.08 at 11:58 am

GTA prices:

April: avr. $ 399.000
May: avr. $ 398.000
June: avr. $ 395.000
July (2weeks) avr. $ 379.000 !!!

Inventory for 2 weeks of July:

Although the number of available properties has increased 25 per cent compared to a year ago. (TREB, July 17) !!!!!!!!!!!!!!!

See the prices next few month! It is THE CRUSH!

#34 Suzukimum on 07.19.08 at 12:18 pm

T-shirts for sale at :

http://ihatemortgagebrokers.com

#35 Sam on 07.19.08 at 12:54 pm

What the jokers say..

>>The Canadian Real Estate Association announced this week the first drop in housing prices nationally in almost a decade, but characterized it as a one month blip that is not likely a sign of things to come.
That news was followed by the Toronto Real Estate Board’s (TREB) latest figures, which showed that the average price of a home in the GTA during the first half of July was $379,072, which is a 1% increase from the $374,254 recorded in the first two weeks of July 2007 and a 9% increase from $346,267 recorded during the same period in July 2006. The board has emphasized comparisons to 2006 in order to “present a more accurate perspective” of this year’s resale housing market, since 2007 was an overheated year.<<

#36 $$$$ on 07.19.08 at 1:15 pm

Anonymous #21
You house took seven months to sell becasue it was over priced ….DUH DOesnt matter how squeeky clean the shitter was, no one over pays in this market. I just bought a house- because I needed one for my merging family. It started a bit under $800,000 and after a few months on market and a few reductions, we got it for well under $700,000

#37 $fromaSia on 07.19.08 at 2:14 pm

Garth, you think Gold has a chance of hitting $3000?

It might be realistic considering inflation and all this flooding of extra printed money introduced by the bank these last few of years!

Maybe in 30 years. — Garth

#38 Soon To Be Returning Expat on 07.19.08 at 2:48 pm

Hi Garth,

My family and I will be moving back to Canada after being in North Carolina for the past 10 years.

We are looking for homes in the Durham Region (close to parents) and have been watching the regions market for the past 1.5 years. We have noticed that homes are sitting on the market much longer than they used.

Do you think these suburbs (Whitby and Ajax) will face a correction? If so, will it be large or small? Will GM’s struggles affect areas outside Oshawa? And when do you think it’ll be the best time to buy in this area?

We are flexible on time, but ideally we’d like to be back by next summer.

Thanks for a great website and any time you can spare in answering my questions.

#39 lgre on 07.19.08 at 3:33 pm

Anonymous #21 – your house being on the market for seven months means that it took that long for you to find a greater fool, what would happen if every house took that long in this market? house price decline!

cleaning your house every 3 hours is great (whatever floats your boat) but it has nothing to do with you selling, I’m sure if someone found a speck of dust on your furniture they wouldn’t walk out if everything else like price and market value was in order.

#40 lgre on 07.19.08 at 3:33 pm

Anonymous #21 – your house being on the market for seven months means that it took that long for you to find a greater fool, what would happen if every house took that long in this market? house price decline!

cleaning your house every 3 hours is great (whatever floats your boat) but it has nothing to do with you selling, I’m sure if someone found a speck of dust on your furniture they wouldn’t walk out if everything else like price and market value was in order.

#41 macchiato on 07.19.08 at 4:03 pm

“So not only does Canada lose exports to the US but Asia, the #1 consumer of Canadian commodities, will stop buying.”

That’s not really true, in fact Canada exports like 10 billion a year of goods to China and much less to India, a lot to Japan, but nothing compared to what goes to the States. It’s all about the USA.

China is bidding up prices of some commodities, but we don’t send much their way anyway.

#42 Shifty on 07.19.08 at 4:10 pm

$$$$
You’re dead wrong, presentation is everything. Some of our gems are bake some banana bread just before showing and make a fresh pot of coffee with small sign saying help yourself. Clear all counter tops and don’t forget to clean out dishwasher. Clean the damed windows. Vacuum the rugs before every showing, put out flowers and use air freshener. Take fluffy or rover with you. Put on some soft background music. Have a lasting relationship with a paint brush.

#43 crashing yuppy on 07.19.08 at 4:58 pm

Tough LOVE for some on this site that need it

If you overpaid for a house or were in a bidding war your life as you know it is over. You are now in HELL

Name me one other thing in life that people are willing to “overpay for” ……. absolutely nothing.

For every other thing that is large ticket (Car, Computer, Heating Air Conditioning System , Stocks Bonds etc.) there is a price (MSRP) which is the MAXIMUM price you would pay.

Why for the Love of GOD would you pay over what is asked for the largest purchase of your life, which by the way, you will live or die with for the rest of your days.

I feel no sympathy for you.

Either sell now or live is a Submarine for the next 3-5 years for you will be living underwater.

I f you have a shred of brains in your head, sell now, cut your losses rent and move on.

#44 Calgary rip off on 07.19.08 at 6:18 pm

Crashing Yuppy:

I dont think overextended house value has anything to do with Hell. I believe that Hell is undefinable by persons living. Having your health, clean drinking water, available foods, not freezing to death, those things are necessary, everything else is a privilege.

I remember distinctly moving to Calgary in 2007, March with a low rental vacancy rate. I rented my bosses house for a while before my family showed up from B.C. I looked at about 20 rentals. It was unbelievable the amount of persons competing. The way I got a great rental, in fact the nicest place I have ever lived in, was I wrote the landlord a cheque for the rent first month right in front of another family. Unfortunately many people at that time were doing the same thing with their home purchases, which is foolish, but the dynamics of home buying has so many variables.

It is best if those underwater soon do sell, both for them, and the local economy. There are many including myself who are waiting to get into a decent home however unless consumer confidence plummets to a new level, it doesnt appear that house prices at least in Calgary will go back to where they were before the boom. Its still out of control and ridiculous. Most of these homes built around 1997 and selling for around $320,000 are still WAY overpriced. I imagine that house new was $220,000 tops when purchased in ’97, but the market value controls prices.

Instead of telling people to sell a better approach would be to write all the local realtors in Calgary; Ed Jensen of the real estate board; and Mario T. at the Calgary Herald. All these individuals are at the core of the centre of excellence for establishing mass delusion in Calgary, effectively preventing a mass plummet in consumer confidence here, so people get desperate and try to sell, which will hopefully happen.

#45 Lorne on 07.19.08 at 6:30 pm

Please get a grip my bear friends… this is just the real estate cycle! Sure we’re entering the latest phase of an abnormally long cycle (as many nations are), and yes average house prices are certainly on their way down in this wonderfully vast resource rich country. However, my only advice to my fellow bears right now, is careful not to miss the bottom… it’s already upon us in one region. Like it or not the world will always need our energy (fuel and food) and the day that changes, well… may we all rest in peace. Sure developing nations will continue outcompeting many of our traditional manufacturing sectors, but many areas of our country have very bright futures. The keys to investing are to leave emotions behind (fear, greed, jealousy, etc) and just follow the economic numbers. Psychology can be swayed in the short-term, but the numbers always win in the long-term. Life’s too short to live all of it on the dark side! Doubt Garth will let me post this… perhaps not quite negative enough. Loved your book Garth.

#46 Sam on 07.19.08 at 6:32 pm

crashing yuppy – well said!

#47 Lewanda on 07.19.08 at 6:54 pm

In case anyone was wondering why ‘one of these things is not like the others???’ in the graph above… it’s because that ‘one’ small area has the largest energy reserves on the planet, lower personal and corporate taxes than any of the others, and the lowest unemployment rate ever recorded. If you think it’s ‘not like the others’ now, wait until you see how differently it behaves over the next two years! :0)

#48 Future Expatriate on 07.19.08 at 10:35 pm

Lorne #43, the US won’t ALWAYS need your fuel… within a decade great huge chunks of the eastern rockies are going to be producing 10-20 times the output of Alberta or more. And if TBone Pickens gets the great plains turned into windfarms producing natural gas soon enough, GREAT NEWS! Alberta will only be producing fuel for Canada and your gas prices should go way down and hopefully that would make up for the complete loss of the oil export economy.

#49 Future Expatriate on 07.19.08 at 10:38 pm

$fromSia #37:

Gold for $3000 CAD – in 30 years

Gold for $3000 US – in 30 weeks

Gold for $3000 BOTH – the day the US begins nuking Iran.

#50 midas on 07.19.08 at 11:12 pm

Mr. Turner finds us ‘bullion bunnies’ to be amusing whereas in fact we are anything but (a)musing; on the contrary we are always musing which is why we research and study and draw sound conclusions that cannot be refuted. However there is no reason for anyone to take advice from us ‘bunnies’ but it might behoove Mr. Turner and our fellow Canadians to take advice from a respected US Congressman and Presidential candidate, Congressman Ron Paul on the value of holding Gold and Silver in times of financial turmoil. The following quote has been taken from one of Congressman Ron Paul’s articles on http://news.goldseek.com/RonPaul/1205726520.php
“Holding gold is protection or insurance against government’s proclivity to debase its currency. The purchasing power of gold goes up not because it’s a so-called good investment; it goes up in value only because the paper currency goes down in value. In our current situation, that means the dollar.

One of the characteristics of commodity money – one that originated naturally in the marketplace – is that it must serve as a store of value. Gold and silver meet that test – paper does not. Because of this profound difference, the incentive and wisdom of holding emergency funds in the form of gold becomes attractive when the official currency is being devalued. It’s more attractive than trying to save wealth in the form of a fiat currency, even when earning some nominal interest. The lack of earned interest on gold is not a problem once people realize the purchasing power of their currency is declining faster than the interest rates they might earn. The purchasing power of gold can rise even faster than increases in the cost of living.”

Gold will not hit 3000 in 30 years, it will more likely hit this milestone in 3-5 years if not sooner. Even by the end of the year it will hit 1200-1300. So if a 20% return on your money does not fit your investment goals then keep on buying term deposits or even real estate. They will both give you the desired negative returns as will any other investment vehicle other than gold and silver. Since Mr. Turner does not recommend real estate or gold and silver, perhaps Mr. Turner can suggest some investment vehicles that will both maintain their value and grow in value!

#51 patriotz on 07.19.08 at 11:27 pm

Yeah OK Lewanda, so just why have house prices in Calgary and Edmonton fallen 10%+ in the last year while oil prices have doubled?

We’re waiting.

#52 $fromaSia on 07.20.08 at 12:10 am

Thanks Garth, as I said earlier though, what do you think will happen with all the extra printed money that has poured out into the market the last few years?

My concern is that since the dollar will be considerably devalued through record market bank cash injections, whats a buck worth? $3000 may be worth today’s $1000 3 years from now? Only time will tell I guess.

One thing is that China is selling their US dollars for a more stable currency. This will hurt USA!

#53 TrueGritCalgary on 07.20.08 at 2:06 am

Calgary rip off, that $320k house probably sold for 100k or less, in 1997. I bought a house in N.E. Calgary in 1998, for 130k. Sold it in 2006, for 360k.

#54 Keith in Calgary on 07.20.08 at 2:30 am

Anyone notice in the graph of housing prices that Calgary went up most dramaticaly in the shortest period of time out of all of the cities shown ?

#55 David on 07.20.08 at 2:59 am

Reading posts like Lorne’s do not reassure anyone except the hopeless optimists.
There are qualitative and quantitative differences between normal business cycles and asset bubbles.
Based on historical trends the bottom Lorne speaks of might come somewhere between 2012 and 2015, so do not be calling an early bottom.
When the non conventional oil sands production in McMurray are ramped up to 5 million barrels a day by 2020 (that is discounting all the environmental devastation to all the water basins east of the Rockies Front Range in Alberta). Five million barrels of the world’s dirtiest oil does not even constitute a statistical rounding error with respect to imports. There are hundreds of post coal age communities in rural Scotland and invariably there will be devastated post peak oil age communities in Alberta and Saskatchewan.
Collecting economic rent from Canadian natural resources is NOT entrepreneurship. That might be the case if and only if one considers the Clampett family of Beverly Hillbillies fame as a family blessed with great business acumen.
Your advice is priceless, take fear, greed and jealousy out of investing. Take all of that out and why on earth bother investing at all?
It might be a good time to give Garth’s book a second or even third reading, as apparently some of the nuances of the arguments escaped people like Lorne.

#56 Mike.slob on 07.20.08 at 3:16 am

Is the Real Estate in Canada real Market?
Nope,because all RE industry belongs to Banks.
And if the Real Estate Market going down the biggest loser will be Banks.So prices can’t fall down dramaticly,but 5% lower prices for next year is possible!
Last year GTA resales volume was 93,193 plus about 10,000 new homes and total volume was over 100K.
This is 20% of Sales volume in Canada for 2007.
The Banks can’t accept decrease of prices in GTA because their major Market in Canada is GTA.
May be will be correction, but will be very difficult sharp move down in GTA.
Anyway Don’t buy any property till August 2009 and will see.

#57 Mike.slob on 07.20.08 at 3:20 am

Brampton,Burlington,Bowmanville,Bratford are
still HOT ZONES but BBBB will see crash in 2009.

#58 MarcFromOttawa on 07.20.08 at 9:26 am

Good post Midas that article was interesting. Hopefully Mr.Turner will provide some insight on where to invest money considering inflation is around 5%-10%. I have yet to read his book (library has 50+ person lineup) maybe he has suggestions in there.

P.S. You did a good job on the Michael Coren Show Mr. Turner. It’s a funny day when Conservatives and the NDP team up on human rights issues and a Liberal emphasizes economic benefits.

#59 smwhite on 07.20.08 at 12:20 pm

Lorne, I think thats what happening, people are finally getting a grip and realizing that to many people have pushed housing from an asset to a liability with the ramped speculation.

As you state this RE cycle is “abnormally” long (thanks to our 40 year friend stretching things out) the downturn will be abnormally long. Housing has 10 years speculation currently built into it, you can’t have it both ways, that speculation has to bleed out or allow personal wealth to grow to catch up.

Claiming Canada is “resource rich” and therefore validates the speculating, flipping and no equity positions in housing is as valid as Lawrence claiming crime rates are down across the country and its good for real estate… Have we given up on immigration and running out of land in Canada as the RE saviour already?

As for fear, greed and jealousy, these are the emotions that RE has been playing with for the past six years to pump people into press wood shacks.

There is currently an abundance of housing that will allow many Canadians the opportunity to purchase a home over the next five years, with lower principal then currently available but at higher interest rates. Bottom hasn’t hit in any Canadian market, its only starting. Don’t worry, we won’t have to worry about calling bottom until 2011 – 2012 when the two year run of 40 year mortgages go for renewal; we know rates will be substantially higher then they are today, ouch!

During the bad times the RE industry is only too happy to point out that on average housing pumps out returns of 4% – 5%(Before WWII it was 3%)per year. Get your calculator out and see what year we have to get to to get that 4% – 5% balance back.

Has there been an “event” that justifies it? Thousands of men coming home like WWII(The ONLY time there has been a RE boom that diddn’t end in a bubble bursting)?

Only event I am privy to is the central banks “no money miracle” of 2002 when we started printing obscene amounts of paper…

Sweet dreams…

#60 Lorne on 07.20.08 at 2:51 pm

Guys and gals, I’m on your side. Everyone can see this is a fairly large bubble that’s already bursting! Garth is absolutely right that Canada will correct anywhere from a 0.1% to a 30% correction depending on the area (averaging 15%). I’m simply reminding people that just like the US, it will not be evenly spread (ie. California vs Texas). Places which have little or dwindling economic prospects will be hurt the worst (ie. West coast, southern Ont and many areas of Quebec). However, places like the prairie provinces will lead the way out of the correction. For instance, Alberta has already corrected over 5% – which I’m ecstatic about. I’ve been crunching the numbers on some residential investments in two areas of that province. Some of the latest numbers pushing me are contained in these articles:
http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=591420bb-afc3-4773-85e7-5845364d3c1d
http://www.canada.com/calgaryherald/news/story.html?id=200bc20d-b59a-490d-ba58-82bb399d8405

this next one might partly explain why it had such a fast correction

http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=fc0a64ae-f481-41b5-a79a-84e2419893e5

…i also don’t mind what their premier did with that recent $4 Billion… no doubt it will create a lot of high paying technical/engineering jobs

Anyway, later y’all!

PS Future Expat Companies have been trying for decades to release the deep ‘rock’ oil from the Colorado/Utah areas you’re talking about. Even if they figure out the technology in the next few decades to ‘heat it underground’ and then ‘slowly’ release it, it would take astronomical oil prices to make it economical.

#61 pete on 07.20.08 at 4:34 pm

Mike Slob said “Brampton,Burlington,Bowmanville,Bratford are
still HOT ZONES but BBBB will see crash in 2009.’

Don’t know about the other three but Brampton is colder then the north pole. Went to visit a friend and only saw for sale signs everywhere. It wasn’t even funny. Of all the for sale signs only two where sold and one of then was a home that sold two months ago but the sign hasn’t come down yet. Many no money 40 year immigrants and other 40 year no money people live in Brampton IMO. From talking to a local friend realtor he said the market is dead and prices are falling. He doesn’t think my theory of majority are 40 year no money down but does believe it is aleast half.

#62 pjwlk on 07.20.08 at 11:14 pm

Crashing Yuppie: “Name me one other thing in life that people are willing to “overpay for” ……. absolutely nothing.”

$7 for a cup of coffee and a piece of pound cake at Starbucks… http://youtube.com/watch?v=6APROqglxLE