The damage: 15% to 50%


Photo: Langley Financial Planning Blogspot

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Fourteen months ago I forecast that housing, a collapse in the real estate market, and the crumbling family finances resulting from it would be the big story to come. Nine months ago I wrote a book detailing exactly why this would happen. Five months ago it was published. And now it’s happening. Don’t act surprised. There’s lots more to come.

The evidence is overwhelming. Real estate sales levels are plunging in every major city, from 42% in Vancouver to 12% last month alone in Toronto. At the same time, the number of people trying to sell their homes has exploded. More than 64,000 resales are on the market at the moment. In the GTA, the choice for buyers compared to this time last year has mushroomed by a third.

Falling sales and rising inventory. This means supply is outpacing demand and we all know what ousing costs at exactly the same time as 40-year loans were being made available, seducing people into far bigger, more expensive homes than their salaries justified. The Canadian dollar should not havcomes next – price declines. In some markets, like Calgary and Edmonton, it’s already a reality with average home prices down more than $40,000 in each city. The next on the hit list (in this order, I would say), are Vancouver, Toronto, Victoria, Regina, Winnipeg and Saskatoon. In those last three cities, the reduction in home values could look more like Armageddon, with drops of up to 50%. In Vancouver, it will be about 30% by this time next year, and in Torontopolis, 15% with more pain to come after that.

The housing woes will not be over by next summer, either. This is a story which is just beginning. After all, let’s remember the US real estate crash started in September of 2005 and is still going strong. There’s at least 12 more months of falling prices to the south of us, which will bring that real estate bust to four full years.

Can the same happen here? Quite likely, although I’d bet more on a two-year down market before things stabilize, thanks to our commodity-laden economy. No thanks to the government, however, which helped turn a boom into a perilous bubble by allowing zero-down purchases and 40-year mortgages, both about to be phased out this autumn.

In fact, we have a perfect storm in Canada for falling housing values: We allowed bankers to get sloppy and greedy with those “innovations” in home financing. We are seeing disposable cash flow sucked off by record high energy prices. The heartland of real estate – southern Ontario – is suffering as the auto sector chokes and manufacturing jobs flee. Household debt levels have hit all-time highs, and our national savings rate is zero. Worst of all, family incomes stagnated at the same time housing costs (and prices) escalated.

The proof of impending trouble is irrefutable. As I have said so many times, when the average family cannot afford the average home, then prices will tumble. This can be temporarily delayed (or made worse) by financial junk like subprime mortgages in the US or forty-year ams in Canada. But it cannot be stopped.

As Merrill Lynch Canada economist David Wolf correctly points out, the average house here is now equal to four times the average household income. During the last boom market (1989) which ended in bust, that ratio topped out at just over three times income. In the United States, where there is a real estate depression, the ratio at the peak was less than it is here right now.

So, housing is overvalued, by between 15% and 50%, depending on the city you call home. This means a crisis looms for many. Those who bought within the last two years will certainly soon realize they paid too much. Those young buyers who got into homes with nothing down will owe more than they own. The hardest hit will be those who must sell, and find that it takes months – perhaps years – to find a buyer, with constant price reductions necessary to do so. People who decide to give up and walk away will find Canada is not America. We not have “short selling” or “jingle mail” here. You’re liable for every dollar of your mortgage, plus costs, even if the debt far exceeds the value of the house you are surrendering.

But, hopefully, most families will be able to stay where they are, weather the storm and carry on. It’s instructive to realize, however, that anyone who bought a house in 1989 in the Toronto area (the top of the last cycle), had to wait for 13 long years just to break even. And this downturn will certainly be more severe than that one.

Could government have done anything to prevent this real estate disaster from being imported into Canada? In a word, yes.

Forty-year mortgage amortizations, introduced in the Harper government’s 2006 budget, were a huge disaster. They have lured tens of thousands of young couples into debt many of them will never be able to service. (Remember that mortgage costs have increased 9% in the past year.) Zero-down financing, approved by Canada Housing and Mortgage Corporation, should not have qualified for mortgage insurance coverage. Because it did, developers have sold thousands of homes and condos to people with no money. That never turns out well.

In the end, of course, we’re all to blame. We went real estate nuts. We walked into obscene levels of debt. Bankers traded profits for prudence. Realtors were insanely irresponsible. The media was uncritical and slavish, while publishers raked in real estate ad revenues. Politicians did stupid things with unintended consequences. HGTV slipped into non-stop housing porn.

But, as I said, it’s just starting.

134 comments ↓

#1 freud on 08.07.08 at 9:59 pm

the market reach the psychological tipping point when there is a mad exodus to get out of “can’t lose” investment real estate at any price rather than slowly bleeding cash outflows to death

#2 APCM on 08.07.08 at 10:00 pm

I think the coming housing situation will reveal just how debt-addicted Canadians are.

#3 DD on 08.07.08 at 10:33 pm

Garth,

You say that the downturn might only be two years in Canada (I know it is only an estimate), however, the forces are still at work for a greater downturn re: high energy costs and demographics. So long term we could see a drifting down of house prices for years to come?

How about the Calgary house market? I figure that the avg family is paying 4x to 4.5x median salary for a median cost house in Calgary. Do you expect the prices to come more into line at 3x median salary? The oil and gas sector spins a lot of money out, however, there are only a number of people that really benefit. The average Calgarian is finding it expensive in this city. Would the prices not fall in line with annual wage or GDP gains over the years?

I just sold my house and now renting downtown. I did it for a number of reasons. Firstly I want to walk to work. The drive time and stress is getting to me. Secondly, I figure that we are saving around $15,000 year in driving related costs (we are in the process to selling the 2nd car). Third, the life style. And forth, I wanted to capture my gain because I really don’t know what the future holds (I won’t be able to make a gain like a did in the last couple of years).

Your thoughts?

DD in Calgary

#4 My_view on 08.07.08 at 10:44 pm

As fast as home asking prices (not value) have doubled or even tripled in major markets in a year. They will tumble just as fast and hard. I strongly agree with Garth and others wait a couple of years, maybe even longer (baby boomers). I also think it will take a decade or more for a real estate bull market to happen. Man, I love these cycles.

Garth, I completely agree with the fact that people will/should be downsizing from those energy pig homes. Energy was something no one question a decade ago, times have changed. Plus one thing everyone will be forced to learn from this economic credit crunch melt down, “cash is king”.

#5 JO on 08.07.08 at 10:49 pm

Bingo ! Good words Garth in the last paragraph. Stakeholders are to blame in the end. Central banks lowered rates far too much and below inflation for too long, governments allowed changes to mortgage insurance disguised as “innovations, appraisers over valuing properties, banks playing along and granting loans through weak underwriting, and borrowers who in many cases were reckless and simply could not manage money..and of course the RE agents and MB who just cared about closing deals …as you alluded too, many of the late stage borrowers should not have been given money, but they still borrowed money that was not theirs (it belongs to depositors and investors and what happens now when good potential borrowers need money? – thats right higher rates because of the deadbeats) to buy an overinflated asset they really didn;t need or bought too much of it. It comes down to individual responsibility. Anyone involved in this charade has to take responsibility and not blame the other for the consequences. I appreciate you bringing this to light in your commentary and think it is important this message get out. Lets hope we shut down the eventual bailout parade heading to Ottawa in the next 3-5 years. Like so many others, my ancestors came to this country not even speaking the language and eventually bought a home during a period of very high rates, yet despite not knowing what amortization or term meant, their generation generally handled credit and money far better than most of the last 7-8 years..there is no subsitute for personal responsibility.

#6 sm on 08.07.08 at 10:52 pm

I noticed you didn’t mention Ottawa in your list of cities.
Do you think it will be hot less hard than the rest?

#7 Brian on 08.07.08 at 10:56 pm

I love it. I can’t wait to see all the yuppie scrum losing their downtown Toronto condos. Then I can pick up a few some for 0.30 to 0.50 cents on the dollar. Gold, Silver, and Oil are the places to put money now.

#8 Roger on 08.07.08 at 11:13 pm

Victoria is tanking now!! Inventory up 34% and sales down 33%. House prices have dropped 3 months in a row.

Check out the stats @
http://photoshare.shaw.ca/gallery/needinbox/

#9 Lance on 08.07.08 at 11:54 pm

You can’t use Calgary and Edmonton’s recent price declines as lead indicators of a broader Canadian real estate market meltdown as the price declines in these two cities are more due to the rapid price appreciation (prices up 100% in a year!) and subsequent pullback than a reaction to an overall looming trend. We should also include Saskatoon in this group.

I fully concede that Calgary and Edmonton real estate is still way over-priced, and while the price declines in the last year are due to the market cooling off after overshooting their marks, the price declines you speak of, Garth, will likely impact these two cities after they occur in Vancouver and Toronto. I look to those two cities to lead the descent with the rest of Canada following closely behind. 20-30% declines certainly seem possible at this point.

#10 Calgary rip off on 08.07.08 at 11:55 pm

Garth,

Calgary home prices are 100% over their real value, double what they are worth. The real estate situation in Calgary is i-n-s-a-n-e.

Regarding rent to own, go see that slimeball Sheldon at Empire city. He’ll try to sell you a home for $500k in Sherwood, and when you ask about rates for the mortgage he’ll be evasive and then when you ask about amount of rent going to the principal he’ll tell you around $300 per year. What a RIPOFF!!! But that is typical Calgary crap.

Again, to anyone reading this blog, unless you have a $150,000 per year job or are wealthy, dont come to Calgary!!! You’ll waste your money!!! You might as well erect a teepee because there are no trees and thats what it looks like going east from B.C. heading into Calgary on Highway 1: A WALL of houses. What’s even better(or worse depending on your emotional state at that very moment) is that most of those hastily constructed q-u-a-l-i-t-y shacks are around $400 grand.

Its kind of like…manic depression…if you are a renter you want the whole thing to collapse due to the arrogance and lack of tangible value…but on the other hand….if that were to happen, your job would be tanked…so either way, unless price drops by around 80% you might as well approach it one day at a time…get up out of bed, drive(slowly) through that thar stoplight and get to work….

#11 i'm_debt_free on 08.08.08 at 12:03 am

this is scary!
http://www.torontolife.com/features/sinking-feeling/?pageno=1

#12 rant in Calgary on 08.08.08 at 12:07 am

Speaking of HGTV
Big City Broker….
The epitome of the Arrogance and Negligence of the Real Estate Industry.
On one of “Brad R Lamb’s” selling extravaganzas, he sent some people home and invited them the next morning for a “Special” sales opportunity, to which he raised the purchase price… What a hero!

#13 i'm_debt_free on 08.08.08 at 12:16 am

scary scenario

http://www.torontolife.com/features/sinking-feeling/?pageno=1

#14 md on 08.08.08 at 12:25 am

Similar comment to sm – your thoughts on Ottawa?

#15 Peter on 08.08.08 at 12:38 am

It was last year when some ethnic media decided to pump up real estate by broadcasting people line up to buy condos, homes, censored part of the story about a real estate correction is coming (the talking head did NOT say its a correction but they was saying “very short price hiccups” few months ago, advertising for developer about new condos and homes..suddenly, i start to realize those developers are doing less advertising on that tv station, the talking head are not hiding the real story now with what the Merill guy told us about and start saying it will be a correction and some kind major correction in parts of the city..How can they dare to hide and lie ?

#16 Mark in Whistler on 08.08.08 at 1:12 am

Garth, any thoughts on Whistler? Any resort town for that matter? Does the well to do foreigner/Vancouverite with his vacation property care about this real estate bust? What about the locals in the service/hospitality industry who are trying to buy something on the lower end or in the case of Whistler Housing Authority a price controlled condo/townhouse (e.g. athlete’s village) for local working employees only which represents a sub-market of qualified buyers. Just wondering how shielded or not a resort town is compared to your typical suburban row house development. Some say a place like Whistler is the last to enter recession and the first to come out.

BTW, I bought in 2002 in Ottawa and was happy to sell in 2005 but I think I timed myself to the american market, not knowing the subtle differences between there and here in Canada. Thanks for providing the canadian perspective.

Cheers,
Mark in Whistler.

#17 The damage: 15% to 50% ? « Vancouver Bubble on 08.08.08 at 1:47 am

[…] August 8, 2008 · No Comments http://www.greaterfool.ca/2008/08/07/the-damage-15-to-50/ […]

#18 Blacksheep on 08.08.08 at 2:12 am

Garth,
you continue to be right on target.

just sold my home to protect gains.

If people do some research on bubble

mentality/history, they will learn,

once the mind set of the masses shifts and sees

the bubble for what it is, the decline starts.

Bubbles over the past 150 years show statisticly that

the duration/increase of the bubble is rougly

proportional to the duration/decrease and they even

tend to over correct.

I owned a home in Van. suburb, in three years price

went from 216K to 440K in tax assesed value.

After doing 10K in reno’s, sold @ 410K just to get out.

The above info does not consider:

-Our prime customer [USA] is in terrible shape finacially.
-The housing boom in Van. has been fueled by the housing boom in Van, not by oil in Alb. or manufacturing in Ont.
-Large numbers of baby boomers are approaching retirement, creating more downward pressure on realestate.
-Inflation is here, intrest rates will go up, lending is
tightening.

#19 soesoe on 08.08.08 at 2:14 am

Garth, what do you think will happen to housing/condo pricing in cottage country North of Toronto? My mother who is 60 years old has a home across the street from Georgian Bay in Meaford, Ont. She wants to sell in the next 4 years so she can live closer to me. Do you think these “desirable” retirement/lifestyle friendly communities will hold or increase in value ?

Great article! My husband and I are renting in Vancouver.

#20 Cory on 08.08.08 at 2:25 am

50% down in Regina? Really? I live here, don’t own property but I still feel skeptical. Jobs appear to be coming here which would keep demand up in my eyes, but I guess if wages aren’t high enough then prices will fall. Not sure, but I would guess a 50% decline is far too pessimistic. Maybe 15%.

#21 The One on 08.08.08 at 8:43 am

Canada posts biggest job loss since 1991 Recession

Canadian economy lost 55,200 jobs in July

JOHN PARTRIDGE

Globe and Mail Update

August 8, 2008 at 7:47 AM EDT

The Canadian economy lost 55,200 jobs in July, when economists had forecast an increase, but the unemployment rate shrank to 6.1 per cent, Statistics Canada said Friday.

The employment figures showed the biggest loss in jobs since February 1991, when 57,000 disappeared as recession gripped Canada. The bulk of the July losses – 48,000 – came from part-time positions, while the hardest hit sectors were business, building and other support services, and educational services.

“Statistics Canada seems to have caught up with what we’ve been reading in the newspapers for months, that a lot of plants were closing and a lot of jobs were being shed,” CIBC World Markets economist Avery Shenfeld said. “There were particularly heavy losses in the private sector, which is, again, a worrisome sign.”

In fact, the only significant gains came in accommodation and food services, Statscan said. The public sector also showed some gains.

Economists had predicted the addition of 5,000 jobs, the same number unexpectedly shed in June. They also had forecast the unemployment rate would remain steady from the previous month at 6.2 per cent.
However, Statscan said the rate edged down because many people, particularly youth, left the labour force.

“Canada’s economy is clearly downshifting, in response to the downturn in the U.S. and to the run-up in the [Canadian dollar],” BMO Nesbitt Burns economist Jennifer Lee told clients in a note.

“Of relief to policy-makers, the slackening labour market is taking steam out of wages,” she added, noting Statscan also reported that the increase in average hourly earnings slowed to just under 4 per cent, year over year, the smallest gain in more than 12 months.

#22 The One on 08.08.08 at 8:44 am

Cooling housing market exposed to crash
Canada’s housing market has entered a “sustained downturn”

Alia McMullen,

Financial Post; Published: Friday, August 08, 2008

http://www.financialpost.com/story.html?id=709437

Ed Kaiser, The Journal, File

TORONTO – A big decline in commodity prices could spell disaster for Canada’s housing market, which already appears to have entered a “sustained downturn,” David Wolf, an economist at Merrill Lynch Canada, warned on Thursday.

He said while the risk of a housing market crash was small, an “outright bust” in commodity prices would make the scenario “a rather more serious threat.”

The recent trickle of data has shown a significant slowdown in the country’s housing market, following its record pace of growth. Demand has eased, supply continues to creep up, credit conditions remain tight, and house-price growth has turned flat, with declines in some regions.

The value of building permits in June fell a seasonally adjusted 5.3 per cent from the previous month, indicating that construction activity in the coming months would likely be lower, Statistics Canada figures showed Thursday. The data is notoriously volatile, but the trend rate of growth for residential building has declined since the beginning of the year.

“Canada’s housing market is entering a sustained downturn, in our view,” Wolf said. “It does look like Canadian houses finally got too expensive, and builders too aggressive, for the underlying demand environment.”

He estimated that markets with the strongest price growth in recent years, such as Regina, Saskatoon, Vancouver, Victoria, Calgary, Edmonton, Sudbury, and Montreal, were all more than 10 per cent overvalued. On a national basis, Wolf predicts house price growth to remain flat.

Merrill Lynch expects commodity prices to moderate over the medium term, a scenario that would aid in the housing market downturn but not cause an outright bust.

Others, such as CIBC, have a more bullish forecast for commodities, namely oil, expecting prices to continue to rise. This would continue to support Canada’s terms of trade by bringing in higher export revenue relative to the amount spent on imports.

But Wolf said the risk of a housing crash would become “a serious threat” if the recent correction in commodities continued because it could cause the terms of trade to deteriorate.

The price of light crude has fallen about 18 per cent since peaking at a record high of $147.27 US a barrel on July 11 continued. Light crude for September delivery settled at $120.02 US a barrel in New York on Thursday.

“The takeoff in commodity prices since 2002 has driven an enormous improvement in Canada’s terms of trade, accounting for much of the strong growth in Canadian national income that has, in turn, provided the fundamental underpinning for the housing market boom,” Wolf said.

A Bank of Canada working paper by senior analyst Hajime Tomura released earlier this year argued that a decline in the terms of trade would likely cause house prices to fall. It said that “if households are uncertain about the duration of an improvement in the terms of trade, then house prices will abruptly drop when the terms of trade stop improving.”

#23 prairiegopher on 08.08.08 at 8:48 am

Regina’s real estate shot up like a rocket last year. But, I think the party is over! Many listings now say reduced(still over priced). Nothing has really changed here except people got gold fever. Wait until reality hits..owe the sting!!!!!

#24 AM on 08.08.08 at 8:57 am

Agree with you fully, Garth.

Job stats are out this morning; down 55,000. Let’s see how the TSX responds. Anybody out there feel good about your recent real estate purchase? Good luck to you.

I think the Vancouver “best place on earth mentality” going to change after they get their 50% haircut. The main stream media is starting that wheel in motion.

Toronto on the other hand has 1989 to consider and their prices have not run up too, too much for that reason. I would give them the 15% drop. Their market might be save by people who want to move closer to the core because of the cost of gas.

If you want to get a feel for where the dust is going to settle, go back to 2003-2004 prices.

#25 Its Coming!! on 08.08.08 at 9:50 am

Cooling housing market exposed to crash

http://www.financialpost.com/story.html?id=709437

#26 Mike.slob on 08.08.08 at 9:56 am

Employment Statistics July/08:
Private -95,300 jobs
Public +29,500 jobs
Self-employed +10,600 jobs
Total Employment in Canada July/08 -55,200

Avg. Hourly Earnings, perm. workers (y/y %)
March/08 4.7% and July/08 3.8%

http://research.cibcwm.com/economic_public/download/labourc.pdf

#27 U.B.A.B. on 08.08.08 at 10:08 am

I have been a follower of this Blog since the beginning, and now I have a serious question. My father is 2 years away from retirement and I have been trying to get him to sell his very large family home for a smaller townhouse or semi-detach.

But he’s not budging, he told me that he needs to fix up the house before he sells it, and it will take 2 years to fix it up… windows, doors, furnance of in 20 year old home. I tried explaining to him that people will see it and price the house accordingly.

At the same time, my mother who want’s to hang to the house, wants to switch the remaining mortgage into a 40 year, so that they would be paying peanuts for the rest of their lives ($<500/month for a 3200 sqft house with a legal 1600 sq ft basement apartment?) – and then when they die, the kids will deal with the mortgage.

Is her reasoning correct? I do want them to stay in the house, but the operating cost of this white elephant is preventing them from significant savings.

#28 freewheeling on 08.08.08 at 10:15 am

who would ever have thought that lending loads of money to people that can’t afford it was a bad idea?

#29 $fromaSia on 08.08.08 at 11:16 am

Who would ever think that its the people that took out these unpayable mortgages that are responsible not the lender. Its the nation now that will be paying for years in taxes to make up the Governments mistake of loose lending standards.

God help us our finance minister doesn’t have a clue.

#30 Rob in Madrid on 08.08.08 at 11:19 am

i’m_debt_free Very interesting article it sounds exactly where the UK was 2-3 years ago, first time home buyers were being priced out of the market surprise surprise the market has gone on to tank. I personally believe that Canada is in for a major correction. You won’t see a 50% decline but a 15-20 percent isn’t out of the relm of possiblity.

#31 Expat in NC on 08.08.08 at 11:34 am

Another story pointing to the same:

http://www.reportonbusiness.com/servlet/story/RTGAM.20080807.wbrethour0808/BNStory/robColumnsBlogs/home

I have seen a LOT more stories popping up recently about the housing market in Canada. I guess there is no hiding it anymore.

#32 leah on 08.08.08 at 11:35 am

I have a large family. I remember last year our RE agent said with a smug grin you can only get a decent family home in Victoria for around $1.6 million. That is a house well built with no work to be done to house a family of 7. Most homes in Victoria are very very dated and poorly built with cheap materials from the 60s, 70s and 80s.

When I said how expensive homes were he said well people just fly in here and throw cash down because everyone wants to live here – in Victoria?????? It is going to be a playground for the wealthy of Canada.

To many people in the RE industry the Calgarians were the new rock stars. They loved to brag how people would fly in a throw down $$$$$ in cash. Buy million plus houses and fly out again.

Well, we are home owners and I just can’t wait for the crash. I was so sick of the arrogance that even though our property will take a big hit it will be worth it to see the [email protected] eating grins wiped off the faces of people in the industry.

Wanted to rent but with 5 kids, 4 cats and 2 dogs it was impossible.

We will have to sit tight for about 10 years in a house we really don’t like.

But, it will be worth it.

#33 TrueGritCalgary on 08.08.08 at 12:00 pm

Calgary rip off, I generally agree with what you say. However, why do you always have to be so over the top. You are coming off as being jealous,spiteful and angry. Remember this, when real estate collapses, people you know and love will also get caught up in this crisis. It’s one thing to argue that prices are too high, it is another to cheer for a total collapse of the wealth of most Canadians.

#34 mohican on 08.08.08 at 12:02 pm

Nice picture. I took it!

http://langley-financial-planning.blogspot.com/2008/06/photos-of-real-estate-bubble-hood.html

There are more fun pictures from my neighbourhood in Surrey there.

PS – It would have been polite for you to credit the creator of the content. Keep up the good work Garth. I don’t always agree with you but people need to hear different points of view and work on their thinking.

#35 Calgary Rocks on 08.08.08 at 12:21 pm

Is her reasoning correct? I do want them to stay in the house, but the operating cost of this white elephant is preventing them from significant savings.
===============================

Your parents want to enjoy their big house and all they have worked for all their life for as long as they can.

They are obviously not interested in living in a shack so that they can save money for your inheritance. Deal with it.

#36 Calgary Rip Off on 08.08.08 at 1:05 pm

TrueGritCalgary:

I am “over the top” as you put it. Ive always lived my life this way. Am I jealous? Absolutely. Am I angry? Yes again. The situation in Calgary is insane. The economy will suffer from the lack of affordable housing here. If prices do not correct to close to baseline, workers will choose NOT to come here. That is the reality. Friends of Ed Stelmach and the wonderful Conservative party have chosen not to have rent controls. This further worsens the economy. Outside of my family, I am neutral towards most people as they are to me. As I said in my earlier post, I would more than likely be out of a job if the economy were to collapse totally. Additionally, it is impossible to get away from the reality that the individuals who bought in times of the boom will get their money back if they bought their home for ethical purposes as a place to live, because they wont be moving for another 20 years, unlike the speculators and realtors whose sole goal was to extract as much money as possible from the buy and sale of homes. So in effect the equity of honest hard working Canadians is not at risk, so much but rather the unethical businesspeople who have sought profit in real estate. Its one thing to enjoy your real estate appreciate after you buy it, that’s natural. Its another to have a false boom that will lead to bust. I dont want that, however I do want an opportunity for a reasonable house at a reasonable price. That is not to be found in Calgary.

#37 Phil on 08.08.08 at 1:32 pm

The whole BC economy is now based on building, buying and selling each other real estate. Now that it’s all coming to an end we are in big trouble.

My biggest fear is a huge taxpayer bailout of the banks via the CMHC just like the US bailouts now underway. We are supposed to be smarter, but in the end we are just the same greedy people, eh?

#38 everythingzen on 08.08.08 at 1:55 pm

#34 “Outside of my family, I am neutral towards most people as they are to me”

Therein lies your problem friend. KARMA.

You get what you give in this life and in future lives. We’ve never met though I consider you a friend and wish you a happy and peaceful life.

If you can’t afford to own or don’t choose to own then rent. Your anger hurts you the most and does little to alleviate your suffering. We don’t achieve happiness through owning things- we achieve through doing things.

May all beings be happy.

#39 Sleeping At Night on 08.08.08 at 2:09 pm

Hi Garth,

After reading your book I decided to sell my $380,000 Surrey townhouse – coincidentally it’s just two blocks from the posted photo above.

Closing was two weeks ago and we are now happy renters of a new house with a backyard (my two little kids love the grass). Now our only stress is deciding what to do with the sale proceeds.

Thank you for the peace of mind …

#40 cmh on 08.08.08 at 2:24 pm

#32 True Grit in Calgary,
I can empathize with your comments – no one wants to see anyone suffer.
My parents were much older than I and grew up in the great depression – had hard jobs and had to retire while we were teenagers.
I put myself through university, and had to leave the small town where I grew up at that time to attend academia in the big expensive city of Vancouver. No online, or college universities at that time.
I saved to pay off student loans, then saved some more, actually 2000.00 a year for many years to purchase my first modest townhome in Calgary. That was all I could afford to save with rent, etc. and not the best wage.
When I purchased my little modest townhome, my manager at the time stated quite arrogantly, “Well I hope it has a yard” – later, people my age were buying expensive homes four times their annual salary, and with less than I put down. That was their business, and I said nothing; however, they would frequently make derogatory remarks about my modest little home while being smug about their home.
Some of these people then went on to buy more properties, in fact one person told me she’d be a multimillionaire one day thanks to the real estate she owned, in addition to what she’d inherit from her parents as they had money up the wazoo!
I assume you are referring to people like myself who have worked hard to get a downpayment and purchase a property and probably have never had anything given to them.
Unfortunately, I have little sympathy for the people I have described above.

#41 U.B.A.B. on 08.08.08 at 3:06 pm

To #33 – Calgary Rocks – thanks for the response!

Actually, you got it the other way around. I don’t want their money now or when they are dead – I want them to enjoy it. Your right, they worked *very very* hard all their lives, and they should enjoy it.

But what I dont want to do is have to subsidize them later in life due to poor financial decisions today (for other reasons, fine)…That is why I was asking fellow bloggers in post #26 if they should:

1.) take the equity in the home now by selling now
2.) do nothing for 2 years (just fix up the house), or
3.) change over from whats left of their mortage to a brand new 40 year mortage (with something like 60-70% downpayment) .. so they are basically renting the house for the rest of their lives.

#42 David on 08.08.08 at 3:07 pm

I had to read Leah’s post twice. $1.6 million for a decent family home in Victoria? A 50% price correction would still leave homes like that unaffordable for a solid two income middle class family. It really looks like the insatiable appetite for cheap mortgages turned into an out of control binge. Moving forward into an era of more rigourous mortgage underwriting standards and higher interest rates folks who either overpaid or think their homes are priceless will be stranded. It really sounds like the realtor was not only smug, but also an innumerate and illiterate dunce (as many of them are in reality). $1.6 Million is 15 times local median incomes and this idiot is smiling?
As for Calgary Rip Off cheering the collapse, his feelings are not atypical of what is happening in Calgary. Canada is just on the verge of seeing a once in a lifetime real estate bubble explode. The only true path to affordable housing now is a massive crash and price correction. Those calling an early bottom in 2010 are wishful thinkers. When it comes to real estate in Alberta remember that famous rancher quip about “all hat and no cattle”.

#43 HouseforSale on 08.08.08 at 3:09 pm

If it goes down 50% in Stoon, some Donald Trump wannabes I know are going to be crushed.

#44 Calgary Rip Off on 08.08.08 at 3:10 pm

Everything Zen:

You havent said anything I dont already know and believe in. You can be angry about situations, its not anyone’s fault what has happened about real estate. Perhaps it is better to deny all emotions and act like zombies, a requirement of many professions. Just grin and act phony. Fortunately when not at work, this isnt a requirement, again the self-protective neutrality against acting as a doormat.

#45 Mountain Girl on 08.08.08 at 3:14 pm

I am glad that there is a bit of a discussion about the anger and bitterness that can be expressed on this site at times. I think many of us who decided that real estate was too expensive got a lot of flack for that decision, even indirectly. It gets pretty tedious to hear people spout off the old “renting is paying someone else’s mortgage”, as if they had any idea what they were talking about. My choice to rent was situational at first, but is now a critically-analysed, educated decision. When I explain to people that I rent a whole house in a sought-after downtown neighbourhood in Calgary for less than a third of what it would cost me to own it, I still get blank looks. I try to tell them how to work out the real cost of owning, but they insist that renting is costing me $__x 12 months every year.
I reply that I am banking far more than my rent every year in savings and investments and that real estate is only one way to acquire wealth, but again … blank looks. It’s partly a problem of education, I think. As a populace, we are terribly ignorant about money matters, and seem determined to stay that way. People understand real estate as the only safe sure thing, and they are loathe to let go of that.
I have had to work on not giving in to irritation from all those ignorant comments. It wears on your nerves, particularly when you really have done your homework and know that you really don’t deserve the sort of smug condescension that renters often get on this topic.
What helped me let go of the personal negativity on real estate?
The realization that I have my plan and it’s a sound one and it’s going to work for me whether the market tanks or not. I have a downpayment goal. When I get there, I’ll see what it gets me. My goal is flexible in that it is both a definite figure and a percentage – whichever I get to first. If prices fly out of control again, then maybe homeownership really isn’t a good choice for me. I will still have a roof over my head and money in the bank, regardless.
And Calgary Rip Off, my husband is also a paramedic. We also have a solid income and we would not be comfortable buying most things on the market in this city today. Calgary has been good to us, job-wise, but if it gets too expensive, we’ll go. There are a lot of young professionals thinking just like us and that doesn’t bode well for the economic health of the city. So you’re not alone, my friend!

#46 nonplused on 08.08.08 at 3:30 pm

Calgary Rip Off…

Farmer Ed has done just about everything wrong so far EXCEPT refusing to implement rent controls. Rent controls lead to reduced rental construction which leads to rental shortages, which exasperates the shortage of affordable housing. Oh, sure, it’s great for you if you are already in a rental and the government goes and imposes a rent control, but it means no new rental properties so people who haven’t got one have to buy. In some cities that have rent controls, eventually owners start taking the properties condo because the rent falls so far behind the market value of the property.

It’s econ 101. Impose price restrictions and you create shortages. It’s been proven every single time it’s been tried in every single city everywhere in the world it’s been tried. It’s also been tried with commodities in places like Venezuela and the US (70’s) and has had the same effect. It’s about the only economic theory that has been absolutely proven in all cases. Price controls = shortages.

The reverse is also true. Imposing minimum prices like OPEC does leads to oversupply.

As the price of houses in Calgary normalizes rents will as well. There are going to be a lot of investors with condos they need to rent out over the next few years. If they can’t cover costs, the banks will reposes them and sell them on to a new investor at 50-70 cents on the dollar and they will rent it out. But sooner or later market forces will correct the problem. The worst thing the government could do at this point is intervene. Governments always make whatever they are fixing worse. They can’t help it.

#47 BKH on 08.08.08 at 3:37 pm

“In the end we are all to blame”

Not so Garth. Love your blog and agree with almost everything you say, but we are not all to blame. Renters are not to blame. Homeowners who stayed in their homes are not to blame. Those of us who have been warning everyone about this for years are not to blame.

#48 Sphinx on 08.08.08 at 3:47 pm

“People who decide to give up and walk away will find Canada is not America. We not have “short selling” or “jingle mail” here. You’re liable for every dollar of your mortgage, plus costs, even if the debt far exceeds the value of the house you are surrendering.”, so what happens if I stop paying my mortgage?, am I going to be jailed? how about going bankrupt and let the bank eat it’s own … Garth, please explain what you mean the owner is liable for every dollar.

#49 nonplused on 08.08.08 at 3:52 pm

What Garth mean s by “liable for every dollar” is that in Canada once the bank liquidates your house the come for your car, your RRSP, your stocks and bonds, your chequing and savings accounts, and all the change they find under your mattress. They will even turn you upside-down and shake out your pockets. I am not sure I they can garnish wages but I wouldn’t be surprised.

#50 TrueGritCalgary on 08.08.08 at 4:00 pm

cmh, you and I are concerned about the same folks. I too have very little sympathy for the speculators and those who wanted to act like “big shots”. However, I am very concerned about how other people’s circumstances can eventually affect me directly ( i.e. too many foreclosed homes on my street will furthered lower the price of my house , economically stressed out neighbours, family and friends will make my life less enjoyable, etc). Ideally, I would like to see prices stagnate for a decade and/or drop, at most, another 10%. But I know this is probably wishful thinking. I bought back in early 1998, so I am not too worried about losing all of my gains.

#51 brazer on 08.08.08 at 4:04 pm

We Managed to Sell Our Home And Keep Our Marriage Intact
http://online.wsj.com/article/SB121806259835418475.html

“When we put our Dallas house on the market for $490,000 in February, we thought it would sell in weeks with little discounting.

Talk about being delusional.

We ended up lowering the price of our house five times before it finally sold last month. We didn’t get our first offer until late June, and it was $102,000 below where we had started.”

#52 nonplused on 08.08.08 at 4:15 pm

Here is another thought about the Alberta market longer term:

Farmer Ed’s new royalty program is basically a tactical admission that conventional oil and gas in Alberta is “played out”. Since there will be declining production and drilling from here, it makes sense for the government to grab all the revenue it can. You can’t attract drilling with low royalties when there isn’t anything left to drill for.

What this means for Alberta 10 years from now is staggering. The majority of our oil production in 10 years will come from the tar sands. (Oil sands is a misnomer, there is no oil there. It’s tar, just like they used to call it before the public relations campaign.) Alberta has enough “tight gas” (shale, coal) to heat Calgary and Edmonton for 100 years, but this stuff comes out slow and at great expense so it won’t be flowing east to Ontario and the Northeastern US. The majority of the rest of Alberta gas production will be consumed right here in Alberta to keep the tar sands flowing.

What this means is that in 10 years the Alberta economy will support significantly fewer jobs than it does right now. (Less oil & gas = less workers no matter what the price.) That and the implications of all Farmer Ed’s new spending programs, which are permanent commitments that soon (10 years hence or so) will not be funded, are hard times ahead, deficits, rising taxes, and the like.

However, the implications for Ontario are even worse. All those new gas fired electric co-gen plants will be gathering moss. Homes heated by gas in Ontario will not be heated at all. Ontario has 10 years to supplement their hydro, nuclear and coal energy production with (hopefully) renewables on a massive scale or they are going to have some cranky winters. Yet so far as I know, nothing is being done at all.

The same is true for the Northeastern US. And given the propensity of the US to “liberate” energy assets, who knows what sort of interesting times we are in for ahead? There simply won’t be enough gas coming from Alberta for everybody. That’s why Bush was so keen to get a pipe to the arctic built. They can’t see another way to keep the pilot lights on in that region as Alberta declines. But that got killed too.

For those who doubt the above, I invite you to do a revue of the history of oil production in Alaska and the respect taxes on such. It was one of the designers of the Alaskan tax grab that Farmer Ed hired to draft the new taxes in Alberta, and that ain’t no coincidence! (Alaska has been on decline for years, currently producing about half their peak production. No new development is proposed as none seems feasible. They have a lot of gas left though.)

#53 islander on 08.08.08 at 4:24 pm

Illuminating post, Mike. The numbers behind the headline are important.

Private sector jobs – the only ones that matter – are down 95,300.
Government added 29,500 to its work-for-welfare rolls and 10,600 people are so discouraged they printed a hundred business cards and started calling themselves ” consultants.”

I’d say the -55,000 headline number grossly understates the situation.

Also, I’ll second the earlier motion that too much of Victoria’s housing stock is junk. I could count in the single digits the number of houses I’ve shown to clients that I’d consider moving into.

But after a while I start sounding like a broken record pointing out the knob&tube wiring, the cast iron pipes, the moldy drywall, the rotting framing, etc. When people have the fever, they will buy anything. Sellers quickly figure out that they don’t have to renovate or even maintain their homes to get top dollar in a boom. Some houses I’ve been in I’d be embarrassed to list.

In addition to lower prices, perhaps the upside of a bursting bubble will be homeowners compelled to put some effort into their homes. And I don’t mean granite countertops, heated-tile floors or stainless steel appliances. I mean basic stuff, like insulation (you’d be surprised how many older houses here have little or none), upgraded wiring and panels, modern plumbing, moisture abatement, and (dare I say it in a place that bills itself as the City of Gardens) some decent landscaping.

I give my sellers a laundry list of things to do before I’ll list their house. No effort on their part = go list with some other shmoe. I challenge all realtors to take the same approach with their vendors. Sellers, buyers and realtors would all be better off for it.

#54 Mountain Girl on 08.08.08 at 4:28 pm

nonplused #44 –
I see your point, but that doesn’t clear my mouth of the bad taste it got watching Alberta landlords use all sorts of nasty tactics to force low income renters out of low-cost apartment buildings, only to turn those units into crappy condos at boom prices.
Ed Stelmach sat by and watched as seniors, AISH-recipients, and low income families hit the streets, then he refused to do anything sustainable to help them. The government offered a one-time rent subsidy and asked the landlords to be nice. Seriously. That was their solution to watching the less fortunate lose their shelter.
Shocking and shameful.
And it kind of had the same results you say that rent controls have.
I rented in Toronto for 8 years and I never had any trouble finding affordable housing. Rent controls were well-established by that time.
So, I’m afraid I don’t agree with your theory. It certainly doesn’t match my experience or observations, anyway.
My landlady, by the way, was one of the few that did not impose enormous rent hikes on her tenants. She thought it was disgraceful and said that she had seen markets go up and down before and it wasn’t worth losing good tenants over greed. Wise lady and one of the reasons I’m very happy to stay a renter.

#55 Calgary Rip Off on 08.08.08 at 4:31 pm

Mountain Girl:

Paramedics are the guys I see when on call at the hospital helping to save people with heart attacks. Nice discussion there about the market. Very logical.

Nonplused: Good view on rental controls. How do you explain though the issue about apartments into condos and lack of rent controls? Im not so sure that rent control is always a bad thing, however your argument appears sound.

#56 Wealthy Renter on 08.08.08 at 5:04 pm

“Toronto on the other hand has 1989 to consider and their prices have not run up too, too much for that reason. I would give them the 15% drop. Their market might be save by people who want to move closer to the core because of the cost of gas.”

AM, you are probably right, but I don’t agree with your statement that prices have not run up too much. A pretty mediocre, starting, SFH home in decent area (near decent schools) will run you 600K plus per year in west Toronto. Heck, this barely gets you a townhouse.

I assume it is more in the core. The home below (I hope this link works) is a great example. The home is minutes from Dixon / Islington (a blighted, ugly neighbourhood,) the local high school sucks, and you can almost see the pilots as the planes fly over your house. This home is right on a Pearson flight path. At best, this is a C- neighbourhood, minutes from the next Jane/Finch.

Toronto may not correct, but it WAY overpriced.

http://www.mls.ca/PropertyDetails.aspx?vd=&SearchURL=%3fMode%3d0%26Page%3d1%26vs%3dResidential%26ret%3d300%26sts%3d0-0%26beds%3d0-0%26baths%3d0-0%26aid%3d3366%26MapURL%3d%253fAreaID%253d6369%26mp%3d550000-650000-0%26mrt%3d0-0-4%26trt%3d2%26of%3d1%26ps%3d10%26o%3dA&Mode=0&PropertyID=7069901

#57 brazer on 08.08.08 at 5:13 pm

Loonie falls below 94 cents US as oil prices continue to drop and weak jobs report
http://ca.news.yahoo.com/s/capress/080808/business/sagging_loonie

“The Canadian dollar fell more than a cent to well below 94 cents Friday, its lowest level in about a year, after oil prices continued to fall and a weak jobs report suggested the Canadian economy is slowing sharply. “

#58 Mountain Girl on 08.08.08 at 5:39 pm

Calgary Rip Off –
Sorry! I thought I read a post a while back where you said you were a paramedic.
Do I assume then that you’re an ER doc?
If so, it just proves the point further – both households are earning well above the median income (maybe you a little more than us :)!) and neither of us would buy in Calgary because it’s not affordable. That’s from young professionals in good earning years.
And we’re not alone, or the sales in Calgary wouldn’t be dropping as fast as they are.

#59 neutral on 08.08.08 at 5:47 pm

Calgary Rip OFF is a typical egoistic person, who want everything around to burn down just for the reason of making own little benefit. He/she went not far from those specs, who actually made the RE mess.

#60 curious on 08.08.08 at 5:50 pm

Garth and everyone, I have a purely hypothetical question here. Say there’s a property I’m interested in, has been on and off the market for five years (obviously overpriced). Through research I find out that the seller has tax liens including interest and penalties going back for years, and the seller has somewhat of a criminal background. The seller lives elsewhere, the property is vacant and unrented, and I come to the conclusion that they don’t want to sell, as long as it’s on the market they don’t have to pay their taxes, basically. Could they be planning to leave it on the market long enough to “sell” it to the government in a tanking market once the liens reach the appraised value of the property (which will be FAR above true market value when all is said and done.)

Am I on the right track or way off the mark here, and is there any recourse through the government I might have to work out a sale (perhaps from them before the confiscation) at a fair price?

#61 David on 08.08.08 at 5:58 pm

The minor correction crowd have things oh so wrong. Minor corrections only happen when prices show small signs of being out of touch with local incomes and rents. Such corrections are usually swift and neither party wins or loses too much on the transaction. A bubble going through a major correction offers plenty of opportunity for substantial losses and there are few parties willing to step forward and eat the bitter harvest. The $1.6 million home in Victoria example is an extreme example, to say the least. Homes like that need a 90% inflation adjusted price correction just to get in line with local economic fundamentals.

#62 AM on 08.08.08 at 7:21 pm

Wealthy Renter

Or you can have this gem in Vancouver for 819K. On the surface, what looks like the better deal? I agree that there will be some amount of correction all over and after living in both Vancouver and Toronto, I can’t see how Vancouver is going to escape a 50% haircut.

http://www.mls.ca/PropertyDetails.aspx?vd=&SearchURL=%3fPage%3d2%26Mode%3d0%26vs%3dResidential%26ret%3d300%26sts%3d0-0%26beds%3d0-0%26baths%3d0-0%26aid%3d6576%26MapURL%3d%3fAreaID%3d6576%26mp%3d800000-1000000-0%26mrt%3d0-0-4%26trt%3d2%26of%3d1%26ps%3d10%26o%3dA&Mode=0&PropertyID=7241879

#63 Parent of future home owners on 08.08.08 at 8:01 pm

Most markets are cyclical, and older people have seen and survived ups and downs in the market owning maybe 7 – 10 houses in a lifetime. I think there is certain pleasure of ownership, vs. renting, living in a nice neighborhood, doing the place up as you like it, and raising a family in a stable place you know is yours. So homes are great to own and it is also a worthwhile aspiration in life. So if prices come down it should be thought of as a GOOD thing. Our children can afford somewhere of their own too. Speculators with second homes will lose some money, but most knew it was a risk, same as all investments.

But in this falling market I think location will be very important. Homes in walking distance of downtown or close to good public transport will remain robust, distant suburbs, homes in new dormitory areas will drop more. Gas prices will fall now, but in a short time who can say they will not be up again.

#64 TrueGritCalgary on 08.08.08 at 8:32 pm

AM, I burst out laughing when the link you posted opened up. Crazy!

#65 David on 08.08.08 at 8:48 pm

Neutral, your comments are disturbing. You believe that people who get financing at 40 years with nothing down mortgages are entitled to 50% annual price increases. You need to be informed that the party is officially over. You have two choices, go puke in the bucket or contribute some cash equity. The bears did not make this mess, so go and find someone else to blame for this crisis. Your idiotic style of argumentation is quite amusing. For own little benefit huh? People who flipped crap properties were Mother Teresa’s right?
Maybe Neutral and EverythingZen can provide the path to peace and enlightenment. Please more Deepak Chopra flumdiddle.

#66 Roger on 08.08.08 at 10:17 pm

Leah,

Interesting post on Victoria. I think you used to post on the Victoria bear blogs. Prices are dropping in the Victoria market right NOW!! Median price is down 5% and average price 8% from April of this year.

Hope to read your posts on the local RE blogs one day soon. The bears are having a field day!!

#67 Bluesman on 08.08.08 at 10:31 pm

Garth,
Kudos to Mohican for the photo!

http://langley-financial-planning.blogspot.com/2008/06/photos-of-real-estate-bubble-hood.html

#68 Roger on 08.08.08 at 10:50 pm

For those interested in seeing whats happening in the Victoria real estate market check out the statistics slide shows @
http://photoshare.shaw.ca/gallery/needinbox/

#69 Roger on 08.08.08 at 10:51 pm

For those interested in seeing whats happening in the Victoria real estate market check out the statistics slide shows @ photoshare.shaw.ca/gallery/needinbox/

#70 Daigo on 08.08.08 at 10:59 pm

A couple of you have touched on it above but Vancouver has only had one economy……Construction. It’s been feeding on itself for 2-3 years already. It’s has exploded by virtue of the fact that a rookie drywaller or painter is charging $100 dollars an hour. Insane unrealistic sums of money have been made. These are the folks buying up condos on spec. These are the buyers purchasing cars, electronics, jewlery, furniture etc etc. A business Prof recently summed it up perfectly. It’s like the old “Kerplunk” game with all the balls still in place and only one stick holding it up. I believe Vancouver is going to be very affected, perhaps in my opinion worse than other areas for this reason.

#71 Calgary rip off on 08.08.08 at 11:01 pm

Mountain Girl: No, Im not a ER physician. I work in the cath lab and am in charge of the patient’s vitals during fixing of coronary arteries while the doctor is working. It is immensely satisfying to see people survive their heart attacks and know they can go back to living. By the way, I make $32/hour and double that for callbacks. How crazy is it that with these wages, home ownership is a struggle? Calgary house prices are…whacked. Im looking at leaving this mess because after 1.5 years I am disgusted by this real estate fiasco.

Neutral: Yes Im egotistical by having wants and needs. I should appeal to you and not have any. Thats the ticket. Or have no emotions to please the zen person. Please. If everything crashes neutral, Im probably out of a job. So I figure that myself and working class folk are better with a severe price correction that needs to happen in Calgary if the city is to survive. Take a look around in the service industries here if you dont believe me.

The real estate is still a joke here. What price correction?

#72 charles on 08.08.08 at 11:03 pm

Garth, in your post, you make the following statement: “We walked into obscene levels of debt.”

I strongly agree with your statement. To accomplish this “walking into obscene levels of debt”, and your “greater fool” theory, it takes two things to happen. One, people have to be willing to borrow this money, and two, the financial regulators in Canada had to allow all of this “debt” (that is being created out of thin air) to be injected into the economy.

My question to you, is, in recent decades, have the financial regulators in Canada, (mainly the Bank of Canada) allowed the pumping of far too much debt into our economy.

In the last year, the money supply in Canada has increased by 14%, and in the last 5 years, the money supply has increased by about 50%. (Since the early 1970’s, the rate of money supply growth in Canada, on a chart, has gone up at a 45 degree angle.) Do you think the Bank of Canada has allowed too much of an increase in Canada’s money supply in recent years (and decades)?

In your blogroll you have a link to the website called “the automatic earth”. I think this is a great website for realistic financial news, even though it portrays a really negative economic future for most of us. I am curious to know what your relationship is to that website.

Another equally great website for realistic economic news is, and you have to put the following into google because I do not know how to post a link on your site, is

“money matters” elaine supkis

Garth I really appreciate your straight forward discussion of the facts, as it affects Canadians, but could you please consider toning down your criticism of Stephen Harper and the Conservatives, because I think the problem of a lack of respect for money in this country started with Mr. Pierre Trudeau in the early 1970’s, and the rampant increase in the money supply in Canada has gone on under all governments in this country since that time. (Also the Liberals have been in power in this country for the majority of time since the 1970’s.)

Could you, or someone else please post instructions on how the more technologically challenged amongst us can post a link on your site.

Thank you.

#73 Bluesman on 08.08.08 at 11:13 pm

Garth,

Why won’t my posts come through? I’ve sent two now trying to acknowledge Mohican at langley-financial-planning.blogspot.com/2008/06/photos-of-real-estate-bubble-hood.html for the photo you used in this post. Great photos, Mohican!

#74 Bluesman on 08.08.08 at 11:33 pm

Kudos to Mohican at

langley-financial-planning.blogspot.com/2008/06/photos-of-real-estate-bubble-hood.html

for the photo shown above.

#75 Keith in Calgary on 08.08.08 at 11:52 pm

The wife and I were looking at MLS listings today of places we would have bought a while back. The same places we have been tracking for the last 24 months since we opted out of the “game”.

We have saved between $100-150K (depending on the listing) by not buying anything and simply renting. Our hard earned downpayment would have disappeared into thin air had we fell for the “REIC” schtick……..

Calgary Rip off…..

You won’t be out of work…my wife is physio with the CHR…..there are tons of jobs to be had in health care. It is the one recession proof occupation we have right now.

#76 Keith in Calgary on 08.08.08 at 11:55 pm

Forgot to mention that there is another $150K to drop before buying in Calgary makes sense.

#77 Everythingzen on 08.09.08 at 12:20 am

To David and Cal Rip,

Your frustrations are understandable friends. I can appreciate how not being able to afford the home that you want in the city that you want to live in when you are earning a good income would be difficult.

However, your anger at the situation doesn’t do anything to improve your situation. Renting isn’t a crime! And I’m not merely saying that because I’m a landlord either.

It sounds like you have a great career that’s challenging and rewarding. I bet someone with your intelligence could earn more money if you really needed or wanted to do so. That may get you the house you want and believe you need. You really don’t need much to be happy though, remember that!

Emotions are natural and are very healthy. Anger and bitterness are not. I appreciate and respect your opinions and actually agree that Calgary housing pricing are quite high- I’m done buying property for this cycle myself- but all I am suggesting is that for your own well being consider channeling your frustrations into a positive pursuit instead of one that wishes harm on others. I know you don’t really wish anyone else (flippers, speculators, builders, agents, etc.) to suffer harm- you wouldn’t have a chosen a career as a medical professional if you did.

May we all be at peace.

#78 cmp on 08.09.08 at 1:03 am

calgary rip off,

my situation is even bad.I make close to 43 dollars/hr in Red Deer. most of the decent properties are way expensive ….375+.

#79 calgary on 08.09.08 at 2:50 am

A house value is what anyone (fool) is willing to pay for it. In Calgary, over 12,000 people have purchased property this year that is “worth-less” now.

#80 David on 08.09.08 at 4:01 am

Calgary Rip Off, the bubble was everywhere and not just Calgary. Orange County California had a bubble, so did Vancouver, BC and so did South Florida and so did Winnipeg, Manitoba.
The bottom is a long way off at this moment and renting right now is much better. That Vancouver listing at $819K is so pathetically laughable and falls into line with my contention that some markets in Canada may well need a 90% price adjustment. The property itself needs a minimum of $50K in upgrades to become a nominally attractive rental property that could barely collect $1500 to $2K a month in rental revenue. That would mean debt servicing costs would be 4 times the potential cash flow from this obsolete piece of crap property.

#81 David on 08.09.08 at 4:41 am

Here is a great little calculator on real estate cap rates.

http://www.forbes.com/fdc/rentorsell.shtml

#82 squidly77 on 08.09.08 at 6:31 am

this is for all the frustrated realtors and specs out their..

#83 Brent on 08.09.08 at 8:35 am

Brian,

“Gold, Silver, and Oil are the places to put money now.”

When did you last check the price of Gold, Silver or Oil. Commodities stocks are all tanking right now and have been for the last month, now the Loonie is tanking too.

#84 Brent on 08.09.08 at 8:38 am

Lance,

Victoria and Van 35% over priced.
Edm and Cal are still 25% over priced.
Saskatoon, a whopping 50% over priced.

Just as they over shot on the way up, they will over shoot on the way down.

#85 prairiegopher on 08.09.08 at 9:34 am

Does anyone on here have an opinion regarding property in a recreational area such as Sylvan Lake?? I am looking at different areas in the Edmonton/Calgary corridor and Sylvan looks interesting. Anyone with any experience they can share? Some people say property is better insulated in these types of areas.

#86 pbrasseur on 08.09.08 at 10:20 am

Oil, real-estate, commodities, $CAN.

Seems to me much of the Canadian economy is sitting on a bubble.

If all these deflate at the same time were are in for quite a ride. At present this seems to be the most likely scenario.

Reality is back, with a vengeance!

#87 Mountain Girl on 08.09.08 at 11:11 am

Prairiegopher – Garth has posted a number of articles on the decline in sales in cottage country out east which might have some interesting points to consider and apply to Sylvan Lake (just check the archived posts).
Vacation properties certainly wouldn’t be immune to price corrections. That wouldn’t make sense. If the average household can’t afford a principal residence, who’s going to shell out for a luxury like a cottage?
Sylvan Lake is overrun with tourists for two months out of the year. After that, it’s just another little prairie town. As far as I have heard, it’s been overpriced for awhile based on the summer crowd. I can’t see any reason for that place to be insulated from a price correction.

#88 Mountain Girl on 08.09.08 at 11:30 am

Keith in Calgary and Calgary Rip Off-
I completely agree on how far the correction needs to happen in Calgary before I would consider buying. I have another gauge for the market that impacts my decision to buy: the cost of owning has to make sense compared to the cost of rent.
Right now, the market would really have to drop to make me consider leaving our cheap, awesome little rental situation.
The other consideration is the rip off factor: the newer houses are cheaply made and ugly. The stories of how fast some of those neighbourhoods were slapped up make me nervous about the potential hidden problems that are sure to surface within the first five years of owning such a place.
The older bungalows are squat, ugly cement boxes. Some of them have nice big yards, but not all of them.
I rarely see houses in Calgary that make me wish I did own one.
You look at mls or even just at the many many properties with the for sale signs up and you aren’t even tempted. They aren’t worth half of what they’re asking, in my opinion, and a house is supposed to be worth what someone will pay for it.

#89 Sold Out of Cowtown on 08.09.08 at 12:08 pm

Gold, Silver, and Oil are tanking because the US dollar is gaining. Gold is at $858 USD, or $915 CAD.

#90 Rick on 08.09.08 at 1:10 pm

Everyone, isn’t it about time that Everythingzen just STFU?

#91 loren on 08.09.08 at 1:50 pm

to prairiegopher
Sylvan Lake has one of the best medium/long term outlooks being situated an hour from Calgary/Edmonton and on Red Deer’s doorstep (surprisingly has a huge job base of it’s own too). But if you’re going to buy there, wait ’til winter. There’s still lots of inventory in the 400 to 600 range to clear out and you’ll steal some of them by winter. But don’t wait much past Feb, as Red Deer’s inventory has reduced drastically in the last few months and that will start to eat away at sylvan’s inventory this fall/winter.

#92 Re-diculous on 08.09.08 at 2:08 pm

Mountain Girl

Per your post #43, very well put!, especially:
“… It’s partly a problem of education, I think. As a populace, we are terribly ignorant about money matters, and seem determined to stay that way. People understand real estate as the only safe sure thing, and they are loathe to let go of that.”

#93 Calgary rip off on 08.09.08 at 2:23 pm

Garth,

wow this blog is great!!!

Everythingzen, anger is a natural emotion as the result of frustration. I totally agree with you that if I am not making enough income do something else!!! Absolutely. I am taking steps to get out of Alberta to where I can make a more direct impact positively on helping to save lives, where I can work side by side with physicians, and taking a pay cut slightly to boot, but in a more affordable area. Its not all about money, otherwise I would have become a real estate snake agent. Like I posted a while ago: The things that make me happy: Clean water, edible food, good people, my health, not freezing to death in winter. Those things make me happy. You are deluded to think its not a piss off about the current Calgary situation. I am grateful that the guy I rent a house from is fabulous. I do my utmost to maintain his property as I really respect him for choosing me above others when the vacancy rate was less than 0.5%. The rent is around $1600 a month which is normal. Guess what? Thats also a mortgage!! So…its a bit normal to be pissed off!!! I guess you can surpress your emotions until you get coronary disease, either that, or get hammered after work, or just live a life of mediocrity, your choice. Zen does not equal passivity, Einstein.

MountainGirl: Your views about the bungalows and hastily constructed houses are accurate and your viewpoint is bang on.

Hopefully these blogs will be read by potential buyers out there and Calgary and will dissuade them. Mario T. and others at Calgary Herald and Ed Jensen would have everyone in a panicked buying mode right now.

#94 David on 08.09.08 at 4:43 pm

EverythingZen, if you read some of my posts on previous threads you will notice that I have in fact owned two homes in my lifetime, in Alberta no less. I rent a two bedroom apartment, which for a divorced male working variable shifts is more than adequate. I have money for a down payment, but see no need to over pay on some shabby property that will inevitably experience a severe price decline over the next few decades. The fact that the housing bubble has represented the most obscene squandering of capital resources in Canada’s history is lost on you or you can not apprehend some of the arguments made here.
Prairie, Sylvan Lake is nothing special and probably a bad buy. Aside from Lesser Slave Lake and Cold Lake, the lakes in Alberta are mostly muck bottomed swamps with much green stuff floating on the surface. I checked some of the real estate guides in Alberta for Sylvan Lake properties pricing a few months ago and was horrified at the pricing and the quality of the properties. A person can save an awful lot of money by not buying one of the those properties and staying at or building a cottage at places that actually have a nice beach. You might want to check out prices in Lacombe, AB. Quite a pretty rural Alberta town close to Red Deer and some wonderful well preserved architecture there.

#95 holgs on 08.09.08 at 4:53 pm

Hey Garth,

First of all, Garth, no offence, but phrasing this post as if you’re the only one who saw this coming when you only wrote the book 9 months ago is kinda, well, not really cool. Totally respect what you’re doing now, but the phrasing of this article makes it sound like you’re some kind of prophet. There have been housing bubble blogs in Canada and the US for more than 4 years now, even if they were more or less populated by “looser doomsday profits(sic)”… Actually, your timing couldn’t have been worse… You’ll probably get some of the blame for the crash finally occurring!

Second. Us bears are not to blame at all. I’ve actually convinced a few friends not to buy in Victoria, and that was way before your book was published… Granted, if they had sold now, they’d be up, but they probably wouldn’t have sold, and instead would be spending their paper gains on new TVs.

Third, EverythingZen, nobody here is wishing “harm” on anyone. Hoping that houses drop in price so that those of us that are more reasonable and have actually saved a down payment is not necessarily wishing harm on others, is it? – Not directly, anyway. “Harm” is cancer or a car accident, whereas losing money that you yourself gambled betting on riches, – well, that was your choice, wasn’t it? I don’t wish harm on people in casinos either, but I don’t have to pity them when they lose all their winnings, right?

I was the only one to bring this up in the House of Commons; to oppose 40-year mortgages when the legislation appeared; to question the minister of finance about the government’s actions making the market worse; and the only Canadian to write a book warning the market here would tank. Did I claim to be the only person blogging away about this? Nah. But I was one of the few who tried to do something about it. Sorry that fails your test of cool. — Garth

#96 Housing Bear on 08.09.08 at 5:47 pm

Was driving along Bayview (N. of Sheppard) and noticed an alarming number of For Sale signs along the six or so blocks I drove past. I counted two “New Price” markings as well (there is one other I noticed on Willowdale). Given this empirical evidence, and the fact that the average sale price for housing in the GTA dropped 6% in July from June alone, I think Garth’s 15% drop prediction for Toronto is overly conservative…

#97 Bill on 08.09.08 at 5:55 pm

Garth,

In paragraph 8 you indicate David Wolf is correct in comparing household income to home value but in paragraph 9 you discount any observations made by him regarding existing values.

In his report he indicates some cities in Canada are in fact undervalued and Toronto, for example, is at “essentially fair value”.

In paragraph 9 you state “So, housing is overvalued, by between 15% and 50%, depending on the city you call home.”, but that’s not even close to what the Merrill Lynch report indicates.

I’m not suggesting that the future is rosy for the real estate sector in general but just curious to know why you refer to certain aspects of a Merrill report as being correct and at the same time misquote other aspects of the report?

August 7, 2008 at 2:47 PM EDT

Canada’s housing market is entering a “sustained downturn” amid excess supply and as higher prices deter new buyers, an economic report said Thursday.

As a result, house price appreciation will stall, with Western markets “most vulnerable to outright declines,” according to Merrill Lynch Canada economist David Wolf. He expects home builders to pull back “substantially” in response.

The country is not facing an outright bust because credit “excesses” haven’t been as extreme in Canada as they have in other countries such as the U.S., he added in a report titled, “Peaked: Canada’s housing market in depth.”

But some markets in Saskatchewan and British Columbia now appear to be overvalued, he said. Mr. Wolf calculates fair value using variables such as current prices, affordability and long-term average valuations.

Mr. Wolf is most concerned about Saskatchewan, where the doubling of house prices in Regina and Saskatoon over the past two years “has led us to estimate that these markets are now close to 50 per cent overvalued.”

In B.C., Vancouver’s and Victoria’s housing markets are now up to 35 per cent overvalued, he estimates.

Markets in Alberta, meantime, have become slightly less overvalued in the past year.

The rest of the country looks “better balanced,” he said; housing in Toronto is at essentially fair value.

Slowing activity and moderating prices will likely dampen both inflation and economic growth in Canada. Mr. Wolf sees cooling residential investment knocking 0.6 percentage points off real gross domestic product next year, as consumer spending also eases.

The housing slowdown could cut overall inflation by 0.5 percentage points by the end of next year, he said.

#98 EverythingZen on 08.09.08 at 6:18 pm

David,

Again, your anger and your ego appear to be clouding your thoughts. I recognize that the markets are out of sync and suggested that’s why I haven’t bought property here in Calgary for a while. I think that sometimes you read but you don’t absorb information because you can’t see through your anger.

I’m not suggesting that you can afford a home, can’t afford a home, don’t want to own or otherwise. It makes no difference to me friend! This blog is dominated by a tornado of anger that benefits no one except perhaps Mr. Turner but even his karma will undoubtedly lead him towards further suffering in the long run if he maintains his own storm of negativity. Let the data speak for itself. Let the public absorb it. No need to call people fools or begrudge those looking to turn a profit or maybe just earn a living from real estate.

Consider that the market is just that- a market. If the signs that you (and I) are reading suggest that now is not a desirable time to buy property if you are concerned about the short term value then simply don’t buy it.

The external world does not determine your level of peace- that comes from within you.

#99 mike on 08.09.08 at 7:19 pm

EverythingZen …. Clarity is a zen attribute. An attribute you so lack… As you continue to point out, you own property that you lease out…. God help your tenants, but what you fail to point out is that the bank holds the real keys to that property. You are but an indebted sot hoping to keep that property until it can be sold and you cash out. You have no more insight or clarity of thought than anyone least of all David. Good luck with your endeavours as a self righteous Donald Trump wanna be. Many of us have owned property and many have more than a 7 figure portfolio and feel real estate had run its course for the foreseeable future. So be off little boy and hope the bank doesn’t pull the rug from under your Trumpness.
owner when

#100 squidly77 on 08.09.08 at 7:47 pm

garth.. i have been mocked and have been called many names for years by the so called housing bulls (i wonder who they might be ?) and enjoyed every minute of it
poster 97 obviously has much to lose and even when staring right into the some face of reality..they still deny
they cant see the forest because the trees are getting in their way
watching people lose of all kinds money is not what the majority of your readers want..the ones that bought in the last 2 years even if they put 15% down are going to get a very severe and pain full financial pasting..its now too late to get out especially in calgary..nothing will save these folks now..lessons in life i guess
i believe that what most of your readers want is a fair shake without entering into a life of financial serfdom to keep the bankers happy
nobody should tale out a mortgage of more than 25 years
40 year mortgages are just plain stupid period
never mind the REIC screaming their crap about home ownership is for all..the REIC are the only ones that have benefited by people using these ninja shim sham products as it just prolonged the boom

home ownership is not a right..it is an earned privilege
if you cant put 25% down you have no right owning a home or should i say a mortgage

guess what would happen to home prices if it was that way and sales dropped 90%..ah ha you got it.. the prices would go down..way down so that your now 10% down payment will turn into a 25% down payment

this housing bust is now totally unavoidable
its happening now out west and will in no time spread eastward wiping out equity and wealth like a plague of locusts descending on a field of crops

something for the great people of ontario a truly beautiful province
when people spend too much money on shelter they have none to spend elsewhere..it starts with cars and trucks and soon spreads..too much of peoples money is going onto their mortgage or rent payments and they have none to spend on anything else

#101 nonplused on 08.09.08 at 10:01 pm

25% down as a minimum? I don’t know when I bought my first house about 10 years ago, I got a 5% down mortgage from CMHC. But back then they would only insure up to $170,000. Ha ha that doesn’t even buy a small condo now. But I believe part of the reason prices were so much more reasonable back then was because CMHC wasn’t throwing $500,000 at first time homebuyers. They (CMHC) caused this mess.

That $170,000 bought a nice 3 bedroom bungalo in Varsity with a huge back yard and trees in that day. Like I said now you can’t get a condo for that and I can’t imagine what the new owners would expect to sell the house for. Probably over 500 grand.

#102 APCM on 08.09.08 at 10:03 pm

This is something I’m wondering, what is the average downpayment for a house/condo in different markets in Canada.
A friend of mine who worked in a real estate office told me (about 2 years ago ) that the average downpayment for a condo in downtown TO was 40 grand.

#103 jrochest on 08.09.08 at 10:12 pm

A good interview with David Wolf, author of the Merrill Lynch report, from BNN.

This link is to a full program: the Wolf interview is last on the show, at about 40 minutes into a 49 minute program.

http://watch.bnn.ca/#clip72331

#104 nonplused on 08.09.08 at 10:14 pm

Mountain Girl #54

You had no trouble finding affordable rent in Toronto? That’s not what I’ve heard but I have to admit I’ve never lived there. Also they have a terrible condo boom going on there, worse than Calgary does from what I understand, and I can’t see how that would have gotten off the ground if affordable rentals were readily available.

As to the miserable behavior of landlords during the boom, I concede people are apes. But everyone was acting badly from the bankers on Bay Street to the brokers at Alpine Mortgage to the realtors. Why wouldn’t the landlords cash in? They, of anyone in the market, knew that the prices in the market made no sense given realistic rental incomes for the properties. So they sold them. That’s what I would do too. (Did, with some commercial properties.) That’s what happens in a bubble, everything goes crazy. But I don’t see how rent controls could have done anything but accelerate the rate at which landlords were cashing out.

Once the bubble is over there will be lots of new condos for rent at reasonable prices. The vacancy rate is already on the rise.

If you want to see seniors, AISH-recipients, and low income families hit the streets in a big way, give rental owners a sniff that the government is going to target them to exclusively bear the costs of subsidizing these groups. Those houses will be bulldozed for condos faster than you can say “government intervention”. If a subsidy is deemed necessary, it has to be levied equally across all of society.

The best way to prevent all of these problems is to make it illegal for governments to print money that isn’t backed by any assets and to impose reasonable lending standards on the banks and the dastardly CMHC. Then we wouldn’t have bubbles and rents wouldn’t go crazy.

#105 squidly77 on 08.09.08 at 10:50 pm

the point to my post was that the easier it is to buy a house the more can buy a house
nobody in their right would buy a house in this market..your competing with people that you shouldnt be
in other words that guy with a 0 down no doc 40/yr loan is costing you and your family some serious cashola
i see alberta real estate collapsing 70% plus
a 25% crash in calgary would do nothing for affordability
$550,000 minus $137,500 (25%) woud still mean a sfh in calgary would cost $412,500 and thats still way to high
check this out
and this stupendous massive bubble

#106 Republic of Western Canada on 08.09.08 at 11:07 pm

#85 prairiegopher,

Sylvan Lake was nice once, a place where the upper middle class from conservative Calgary would go to over the hot summer months, using cheap gasoline. Kids of those people and the kid’s friends would go out there to party and mix a bit with the more rural people. It was sort of like ‘American Graffiti meets rural Alberta’ with a little bit of Woodstock thrown in. But it’s a good 2 hour drive away from north Calgary and doesn’t have too much else besides erstwhile cheap prairie real estate to recommend it.

It has since been socially supplanted by more expensive properties out in B.C., which are a little farther to drive to, but more scenic and closer to downhill ski areas.

Considering that Calgary in summertime has a lot more to offer now that it did 35 years ago, Sylvan Lake is best left to the people of Red Deer who like to come out with their ski boats on Saturday afternoons. (And retirees doing a little ice-fishing, and locals on their snow-machines.)

#107 Another Albertan on 08.10.08 at 12:21 am

@102:

The banks have all this info and they are not going to share it…

What you really want is not the average but the distribution of initial principal over the universe of property values, ideally with a third dimension of the age of the people seeking the mortgage.

The other factor that people rarely want to discuss is the amount of “help” they have received in the form of gifts from parents, inheritance, etc. Many purchasers in the 20 and 30-something demographic are loath to admit that, after spending years paying off student loans and such, that the $50k down was really $15k of their own money and $35k from the parents. At the older end of the spectrum, the $1M+ mansion looks like a reward for reaching the pinnacle of success in business, but it sure helps if the SL55 AMG in the garage was supplemented by a 250k estate left by the grandparents.

So to answer your question, as I’ve mentioned a number of times on this blog in the past few months, you need to reverse-engineer many of the numbers in real estate and finance for yourself and apply some logical conditions to the assumptions.

Is it possible for a 20-something to purchase a 500k house on their own with 25% down? Possible, but improbable without “other sources”. Is it possible for a 30-something, dual-income professional couple to put down 40% on a 600k place? Possible and more probable, but the devil is in the details. Is it possible for a 50-something, divorced professional to buy a house with cash? etc, etc, etc, etc.

The point is that if you are going to ask for an average, you need to understand the boundaries by which that number is calculated. Comparing oneself to others is a dangerous game at the best of times, so it should be done with apples to apples when possible and not oranges to pineapples or giraffes.

#108 nonplused on 08.10.08 at 1:05 am

great graphs squidly77, but they look to end in 2006. 2007 was another straight up year of equal magnitude, i believe. 2008? well, the fat lady hasn’t sung yet but it definately won’t be up another 30% i think. 2009 will be the year the “averages” show the big move if there is one.

#109 EverythingZen on 08.10.08 at 1:42 am

David #99

#110 EverythingZen on 08.10.08 at 1:48 am

David #99,

Again, it is not about my personal financial circumstance. Worry not about my fate, it is not a concern of yours and it does nothing to alleviate your suffering.

Do you not realize the source of your pain is not my good fortune or your neighbour’s but rather it is within your own mind and heart to live a life free of jealousy, anger, rage and envy? Let go of your attachments and you will find a clear mind. I have no attachment to my assets. My business judgment, for better or worse, will determine my financial karma. I cannot control anyone’s action or mind but my own. The same goes for you or our dear friend Mr. Turner.

I wish you unending happiness and success as I do for all human beings.

Be happy friend!

#111 holgs on 08.10.08 at 3:26 am

“Nah. But I was one of the few who tried to do something about it. Sorry that fails your test of cool. — Garth”

The fact that have done and are doing something about it is very cool. As a politician, though, isn’t that your job? Representing all of us little guys? Anyway, I mistyped – I was referring only to the phrasing of this:

“Fourteen months ago I forecast that housing, a collapse in the real estate market, and the crumbling family finances resulting from it would be the big story to come.”

14 months ago? That’s not necessarily early adopter status!

Anyway, having followed all of the US and Canadian blogs RE blogs while real estate was still on its way up in the US, I can see the same patterns have emerged here that occurred in the US a couple of years ago; the owners in denial and wannabe Donald Trumps are coming out of the woodwork to deny the obvious trend.

Keep it up! And don’t take any criticism too seriously. It’s a great forum for you to get input from the rest of us, and vice-versa.

#112 brazer on 08.10.08 at 11:04 am

U.S. economy blowing in the wind
http://www.thestar.com/Business/article/475482

Between them, the Wall Street “innovators” with their packaging of debt-bombs distributed to banks, brokerages, hedge funds and pension plans worldwide, in tandem with Main Street predatory lenders who originated the “product” to be packaged by talking people into buying homes they couldn’t afford, created “a once-in-a-hundred-years run-up in housing prices,” Kenneth Rogoff, a Harvard University economist, told Business Week. “And now we’re seeing a once-in-a-hundred-years collapse. It’s very, very difficult to do much about it.”

#113 squidly77 on 08.10.08 at 11:39 am

huge massive bubble updated
updated..huge Gargantua bubble collapsing
i doubt that another bubble of this magnitude will ever be seen again..until the next generation forget about this one

Posted above. Thanks. — Garth

#114 John on 08.10.08 at 12:42 pm

You should see the mood in the Alberta oil patch workers at the summer vacation campfires in BC. There is genuine fear in their faces. They’re all talking about how housing is tanking, the oil patch projects are finished, and they don’t know what they’re going to do. I think I attended the last hurra of the big sky boats, the big RVs, the million dollar waterfront cottage in the middle of nowhere, the huge brand new super duty trucks. It’s all over and they all know it.

#115 Rick on 08.10.08 at 12:46 pm

#107 Another Albertan

Yes, to the supplements. In BC it is primarily drug money. The pot crop is estimated at 6 Billion a year alone. Where do people think all this moola is going? The RCMP wants us to believe it is crossing the border and being exchanged for guns an coke. If that was the case every BC citizen would be packing 3 illegal handguns and an once of cocaine. Absolute BS. This drug money has fed the real estate monster in BC and the government turns a blind eye to the crime and salivates over the property transfer taxes and the like.
Columbia of the north.

#116 mike on 08.10.08 at 12:50 pm

Hey Zen boy …Trust me no one gives a rats ass about your financial success or situation …it is your infantile belief in your possession of something that in your minute crevace gives some sub atomic level of importance to your insights about finances and the housing market that annoys the planet. Clear enough for you Zen Head?

#117 EverythingZen on 08.10.08 at 1:54 pm

#116 mike

Do you not sense the rage within you and damage that it causes?

The housing market is neither good nor bad. It just IS.

Take that information, free of ego or emotion, and apply your best judgment to your financial decisions. Let go of your anger. It only serves to frustrate you or no one else.

#118 Mike on 08.10.08 at 4:08 pm

#117 Loogen No need to let go of something that isn’t there Zen Head..no anger.. just annoyance at your insistence that you bring some cerebral insight into this blog. Clearly not the case. Safe to safe most of us have more cash and sense to not buy now . Most likely we have more than you purport to have. However none of us parade the fact we have money but you do. We do not spend time telling others that we have money in order to impress others. That is tacky and in no way does your indebtedness in real estate garner you any level of respect or expertise. You bring nothing to the party except boisterous lunacy of a drunken 20 something.
So if you can’t bring some true insight … save us the first year university philosophy because this ain’t the place for it. OK ZZZZZZen.

#119 canadianoil on 08.10.08 at 11:12 pm

Victoria as viewed from away

#120 canadianoil on 08.10.08 at 11:12 pm

http://www.ft.com/cms/s/0/f132ed86-65aa-11dd-a352-0000779fd18c.html?nclick_check=1

#121 Peter on 08.10.08 at 11:22 pm

Garth, All I can tell you all is all of my friends who bought homes and condos across the GTA in the past 3 years are CURRENLY NOW HOUSE RICH BUT BANK ACCOUNT POOR…For them, they are currently STRESS OUT in (From Top as the MOST STRESSFUL ONES to the Bottom) Property Tax, Condo Fee (If Applicable), Energy & Water Bill, Auto Lease or Finance, Auto Insurance, 0% Interest Buying Offers Took 6 – 12 months ago, Credit Card Bill with All Sorts of Expenses (Including Gas & Groceries), Food, (Last but no lease) – *Life Insurance* (Most of my friends are underfunded or no money to buy that because after all of those expenses minus from what they earned, they really got NO MONEY OR Its Not Up to Them to protect their family because perhaps the minimum they can do is to feed their family UP..)

#122 Peter on 08.10.08 at 11:23 pm

This is In ADDITION to MORTGAGES OR HOMELINE OR UNSECURED OF CREDIT OR STUDENT LOANS !!!

#123 EverythingZen on 08.10.08 at 11:24 pm

Mike,

Consider channeling your negativity towards a more productive goal. You may very well have more money than I have friend. I never suggested otherwise. Financial success does not equate to happiness or inner satisfaction.

I wish you great success with all your real estate and non-real estate investments. You success does not come at my expense and vice versa.

#124 Keith in Calgary on 08.11.08 at 11:36 am

“Financial success does not equate to happiness or inner satisfaction”

People who say money doesn’t make you happy don’t f-in have any………

#125 Mike on 08.11.08 at 2:29 pm

“People who say money doesn’t make you happy don’t f-in have any………”

AMEN Keith in Calgary Correct you are

#126 Keith in Calgary on 08.12.08 at 1:57 pm

With apologies to Ben Affleck…..heh.

#127 patientbuyer on 08.12.08 at 8:41 pm

I am in my 30s and live in Toronto. I went looking for a condo two years ago. At that time, I was looking at 1 bedrooms, with 550-650 sq. ft. for between $180,000 and $200,000. Most of the units I saw were not that great… too old and worn out… or too small… or with a view of a concrete wall (seriously!), but at least they were fairly reasonably priced then, and a number of brand new 1 bedrooms were priced between $190-200,000, some with a small den and or locker and parking space (which I don’t require but would rent out).

I did manage to find a fantastic new unit with a big terrace that was listed in March 2006 for $197,500. Unfortunately, I didn’t get that one, as I was outbid by another buyer on the first day it went on sale.

So I’ve been renting a bachelor in downtown Toronto, a ten-minute walk from work, for $720 a month instead (vs. about $450 a month for condo fees and property tax alone in a condo). It’s okay for now. However, I’ve been keeping an eye on the market since I was actively looking and would still like to buy one day. What I have found, however, is, quite frankly, astonishing:

Units that were in my preferred price range just over 2 years ago are now priced between $235,000 (usually the lousiest ones, often without a locker let alone parking, and many basement or main floor units in plywood construction townhouses — no thanks!) to $300,000!!! That’s an increase of $55,000 to $120,000 in less than 2 and a half years.

New condo buildings are even worse. Pre-construction pricing (160,000-180,000 when I was looking a couple of years ago, and 140,000 a couple of years before that) are now routinely advertised, “from the low 300s”.

My salary of nearly $80,000 qualifies me for a mortgage of around $270,000 and I have about 20 grand saved up. I have decided, though, not to buy (as have a couple of my friends who’ve been through similar experiences) until the prices start to reflect reality, I’ve heard lots of stories of buildings that are half owned by investors, often sitting empty, etc., and the rental market is very soft here (for example, the free rental guide is about 2-3 times bigger than a couple of years ago and landlords are offering free TVs and/or a month’s free rent, etc. to move in).

So, when people say that the market is going to tank, at least for condos in Toronto, I definitely believe them. People have got too greedy and insist on getting a windfall amount for their condo rather than a reasonable return on their investment.

I feel sorry for anyone who’s bought a condo recently. I think they’re mostly a rip-off. And God help anyone with a 40-year no down payment mortgage. Once those buyers dry up in October, and with the new doubled land-transfer tax, there’s a serious correction coming.

#128 patientbuyer on 08.13.08 at 8:27 am

Here’s another example I forgot to include. When I was looking, I looked at a (pre-construction) building on King St. West. They had some nice 1-bedroom units for around the $200,000 mark (pre-construction pricing, which gives you a discount). One of the units I looked at is now listed on Monarch Homes website at $335,000! For ONE BEDROOM. I mean, seriously people. Who’s going to pay that?

#129 Dave in Calgary on 08.13.08 at 11:42 am

128 patientbuyer

“One of the units I looked at is now listed on Monarch Homes website at $335,000! For ONE BEDROOM. I mean, seriously people. Who’s going to pay that?”

A fool. Keep being patient.

Not that my opinion means much, but I am taking the same approach as you in Calgary, and I think it’s the right thing to do. It’s better to rent than to be a fool.

#130 Zebedee on 08.13.08 at 3:48 pm

There was an ad in Calgary Kijiji I saw yesterday where someone is willing to pay if you assume their mortgage. It’s all going south in the near future.

#131 MBS-Economy on 08.13.08 at 4:39 pm

That 1 bdrm in king west is worth $250K max (Including parking space). Whoever is buying that is getting majorly ripped off. Hahaha. But hey, there’s a sucker borned every minute so we’ll see ……

#132 Disgusted on 09.01.08 at 7:50 am

Knowing the stock market and seeing what could happen to the Real Estate for the past 10 years, I have disgusted with the people who were selling the reverse mortgages to Seniors to help their children buy a home. This could put two households in a jam. They were selling these reverse mortgages knowing the makets would fall.
One only has play the music backwards and see how much they spent on advertising knowing they would re-coupe that cost plus much more.
Low life for sure.

#133 Dave in McMurray on 09.02.08 at 2:53 am

I have been looking at residential real estate in Fort McMurray for about a year and a half now and have noticed that the price of houses are starting to drop.

There are a few hundred listings of homes and condos for sale, but the prices are still outrageous.

There also seems to be a number of forclosures and lots of empty housing.

What do you think will happen in this town over the next couple of years? Oil has lost almost a 1/3 of its value in the last couple months….

#134 Cory in Winnipeg on 12.01.08 at 9:57 pm

The sooner we accept the Canadian Housing market has been overcooked and needs to adjust, the better, not least because mapping out the future requires an understanding of what has happened. This is only likely to happen when a number of illusions have been shattered. The first is that Canadian policy-making genius and not global economic forces have been largely responsible for the successful globalization of Canada. There is plenty of self-congratulation (some of it deserved) for the policy measures that have helped Canada become an economic success, but no serious debate on how a small country (population) with an open economy can manage the effects of globalization. Secondly, the property boom needs to be recognized as the alchemic combination of high expectations and cheap money. One positive aspect of a correction in the property market is that housing is likely to approach affordable levels. Canadian politicians need to accept the bursting of the property bubble as an economic coming of age and play their part in adjusting downwards expectations of wealth, wage and inflation. They must begin to focus on where we would like to be in 10 years, and not just in 10 months. And I repaet, the property crash is not an economic disaster but a coming of age, all the denial in the world won’t stop it.