Illiquidity’s a bitch

John Deere workers have a brew after learning their jobs are toast.

The housing market is not really a market, but more of a barometer of economic health. One big reason for this is that houses are illiquid. Unlike stocks or mutual funds, there is no instant sale to a waiting buyer, no deposit of funds in your investment account 48 hours later, and no ability to just get it all done with a worryless phone call.

Selling real estate is one hell of a lot harder than buying it. In days like this, it can takes months. Or years. The actual selling price on closing day can bear only a passing relationship with the asking value – and then you have to shell out for commission and legals and moving.

A few hundred thousand young couples are about to learn this sobering fact in the last few months of 2008 and during all of the miserable year to come. Lured in by 0/40 schemes, seduced by lifestyle advertising and mesmerized by what other members of the herd were doing, they jumped in naively, and now sit with shrinking equity and steadfast debt. When they come to sell – even for exactly what they paid – they’ll be tens of thousands in the hole.

Meanwhile, real estate values, as I said, reflect the larger economy in a time like this, once buyer insanity has been stripped away. Right now, consider this, among other things:

  • The national economy is about to slow to a snail’s pace, says the OECD. Even Ottawa’s most recent 1% estimate of growth could be optimistic – and that will mean a deficit next year.
  • The deindustrialization of Ontario – Canada’s manufacturing heartland – continues at a frightening rate. Eight hundred more jobs in the 60,000-town of Welland yesterday, on top of 1,000 auto parts plant workers in Guelph the week before, on top of 400 truck jobs in St. Thomas, 2,000 assembly plant positions in Oshawa, 400 kitchen cabinet factory workers in north Toronto – and the list goes on. People without jobs don’t buy houses. They sell them. Friends and neighbours fearing job loss are also sellers.
  • Commodity prices are wildly unpredictable, as the collapse in oil from $140 or so to barley more than $100, and a $24-an-ounce plunge in gold bullion shows. As growth in China slows, as the US staggers into an increasingly vicious vortex of despair, as war and climate change spread new uncertainty, global consumer confidence has only one direction in which to travel. This is particularly bad news for the economy of Western Canada, where new mountain ranges of debt were quickly thrown up, based on the assumption crude was going straight to two hundred bucks a barrel and stay there forever.

All of this is to state the obvious: The explosion in resale listings across Canada is but the first phase of a market meltdown which will soon move into widespread price reductions in all markets. Those price drops will be between 15% and 50% (as I previously forecast), based on local conditions. My numbers may well be revised in early 2009, and it won’t be for the better.

If you are a seller waiting for the storm to pass, don’t. It’s just blowing in. If you’re an anxious buyer, relax. The longer you wait, the less you will pay. If you’re a realtor, consider a career change. But I sure as hell wouldn’t recommend politics.

Yikes (Edmonton version)!

304 comments ↓

#1 Dom-GTA on 09.03.08 at 9:00 am

It is amazing to see that most still do not believe what is being said…I have dozens of colleagues, family and friends that continue to live their lifestyles according to what they perceive as increased value of their homes.

1 guy told me he was going to buy a house with the 80K increase in value from the sale of his condo. When I asked if the condo was sold already, he said no he was waiting for further appreciation.

I almost choked but obviously could say nothing.

#2 Allan in Toronto on 09.03.08 at 9:13 am

>>> If you’re a realtor, consider a career change. But I sure as hell wouldn’t recommend politics. <<<

I like that, Garth. You are still the best.

Just a minor point, did everyone knows that when you mention to people that you are renting, they look at you sort of in a funny way, almost implying the thought “what is wrong with you” or “if you can’t afford a house in this low mortgage era, something is really wrong” … ha, ha.

I am giving up trying to convience people that the obvious is often not the obvious.

#3 Guest on 09.03.08 at 9:36 am

Garth,
Completely agree with your housing rap… however, I don’t think lower oil prices will be a compelling part of the story going forward.
It’s difficult to assume China slowing given their economies move from export dependent to domestic led growth… big change in last few months- if exports dropped to zero they’d still be at 8.5% growth. They also have $1.8Trillion in reserves (along with a budgetary surplus) to buy growth in the short term… don’t count scarce resources (oil) out yet. Demand destruction out of western economies will not be able to hold energy down.

#4 prairiegopher on 09.03.08 at 10:36 am

Well said Garth! Real estate debt is certainly the biggest cost for most families, but what about money owed for renovations, furniture, the new toys because of the equity, and on and on it goes. So many families will be torn apart because of greedy people offering easy credit and the buy now pay later mentality. My father farmed for 40+ years. I could never understand why he wouldn’t buy things until he had cashed his grain cheques. Now I understand!! Even though he sometimes had bumper crops standing in the field, he didn’t have the money in his pocket. Thinking you have money and actually having it are two different things. We need to implore that way of thinking into our lives again. Well done Garth!

#5 $fromaSia on 09.03.08 at 11:17 am

Garth, the BOC says that inflation is low?

Garth, your take on inflation please?

Other than energy, the story is deflation. — Garth

#6 Keith in Calgary on 09.03.08 at 11:43 am

The BofC is full of liars. Mark Carney is an idiot…..as is Flaherty, the Finance Minister. Garth should be our Finance Minister.

Inflation (except RE prices and autmobiles) is out of control if you are a regular consumer.

The BofC should be raising rates 2-3%….not thinking about lowering them. We are already in a period of mild consumer stagflation despite what these liars will tell you, if the BofC lowers rates we will be just like living in the 1970’s……..only worse this time.

#7 squidly77 on 09.03.08 at 11:47 am

oil was in a bubble..a clever one as it distracted everybody
from the 2,600 pt drop crash in the dow industrials
the tsx was temporarily spared but will now get a pasting
all those holding energy stocks just like housing the sooner you sell the better you will fair
Canada is about to take its sour tasting medicine
get your finances in order now !!

#8 cmh on 09.03.08 at 12:00 pm

I have a question. If we are in deflation mode, there is now less money to go around and likely people will start to default on their mortgages, what is this called?

#9 Mike B formerly just Mike on 09.03.08 at 12:02 pm

To be clear there should be a definite market correction in GTA area… namely outside of subway areas first. HOPEFULLY that will erode the enormous expenses of homes close to subways and central locations in Toronto.
So far I have surely seen a stall of houses but some , oddly enough have sold. Some big ticket ones are just collecting dust even in the expensive areas. Keep in mind the affluent areas often have old money and paid off their house decades ago so you may not get that bargain in rosedale or forest hill . C4 has over 21 pages of listing of detached .. well over 200 homes for sale in that one area alone. C12 has 17 pages . So two primo areas alone have almost 500 detached homes not to mention the condos/towns/apts/semis etc.
Today I got a fresh set of listing from the agent, normally just 2-3 but today 10. Still quite pricey indeed and no sign of sellers dropping the prices till they have to. Hopefully come October/Nov we will see a distinct change in flow from seller to buyer

#10 George Popovic on 09.03.08 at 12:19 pm

Interesting comment from TechTicker regarding real eastate prices in the US. Conclusion reached by analyzing the price-to-rent ratio using the Case-Shiller price index.

After two years of price drops…

“Despite early signs of a turn in the housing market, prices still have a long way to fall. In fact, we’re probably only halfway there”

http://finance.yahoo.com/tech-ticker/article/52640/House-Prices-Still-Too-High-Despite-Collapse?tickers=fre,fnm

Hold on Canada..put on your seatbelts.

#11 Greg on 09.03.08 at 12:22 pm

Real estate prices slide, listings pile to 12-year high
Carla Wilson, Times Colonist
Published: Wednesday, September 03, 2008

The average price of a single-family house in Greater Victoria slid to $549,914 in August, almost a five per cent drop from July and the lowest average since spring of last year.

Fewer sales and a rising inventory have had their effect on the capital region’s real estate, Tony Joe, president of the Victoria Real Estate Board, said yesterday. “It causes things to soften a little bit,” he said.

But don’t count on massive price drops, either — the likelihood of that happening is “pretty slim,” Joe added…

http://www.canada.com/victoriatimescolonist/news/story.html?id=10b096ea-7c36-4426-a7ce-8b4fe3fa41ca

#12 U.B.A.B. on 09.03.08 at 12:33 pm

To #4 – Prairiegopher

Thank you for explaining the difference between thinking and actually having money.

We are renting, and my wife and I has been dying to get into the market because all of our friends bought houses even those they make less then we do. But then we look at quality of our lives – of not having any debt over our heads, and not spending money until we actually get paid – or more importantly – the money is *budgeted/allocated* to spend for a particular item.

#13 squidly77 on 09.03.08 at 12:34 pm

another death nail delivered to the realtors and specs
cash back mortgages are toast

#14 Brittanny on 09.03.08 at 1:02 pm

Garth, so if realtor and politician careers are out, what would you suggest? Seriously, I value your opinion and am looking for a change at the age of 50.

Used cars. — Garth

#15 Stoneleigh on 09.03.08 at 1:07 pm

I would argue that deflation is the story across the board, including energy. Deflation is a contraction of the money (and credit) supply relative to available goods and services, not falling prices, although falling prices generally happen as a result of deflation.

Falling prices do not necessarily mean greater affordability however. Nominally less expensive assets will not be cheaper if purchasing power is falling faster than price, as is very likely to be the case in a general deflation.

Food and energy really are not an exception, although their relative value should certainly increase as a far larger proportion of a far smaller money supply chases essentials in years to come. They should fall in price like everything else, albeit less so, while becoming more and more out of reach for many (if not most) people. Deflation ruins the middle class, creating a dangerous world of dashed expectations.

My view of the future for oil is that speculation in reverse combined with later demand destruction should send prices much lower temporarily (in nominal terms). However, economic depression engenders animosity, and the great powers already know that oil is finite, global production is peaking and oil is strategically vital (ie with oil goes hegemonic power). That backdrop is likely to lead to resource grabs and war on a far larger scale than we see now, which is likely to have as great a negative impact on supply after a time as deflation will initially have on demand.

A global market for oil is likely to be a relatively early casualty as supply is tied up in bilateral contracts or simply fought over. In other words, oil ceases to be fungible, leading to huge disparities in availability and price in both spatially and temporally. In addition, piracy and sabotage of vulnerable infrastructure (by those with nothing left to lose) are likely to reduce supply directly and indirectly.

In a capital-poor world, following the deflation of the largest credit bubble in history, private enterprise is unlikely to be able to bear the risk (both financial and physical) associated with the energy extraction business, opening the door for much greater state involvement. Making that business even more political than it already is is not a recipe for maximizing supply. On the contrary, it is likely to lead to much greater central control, with predictable consequences in terms of corruption and repression.

#16 smwhite on 09.03.08 at 1:08 pm

Smells like stagflation…

China as big as it is has prospered from the spending spree of the USA, as has Canada. The Hang Seng is down about 20% from peak as is the TSX. Without the magic wallets south of the border all net exporters are going to have some growing pains.

As for the current oil situation, I got a “fuzzy” feeling that after the upcoming election in the USA, the USA oil reserves “shrink”.

As for gold, its managed to fall at a somewhat slower pace then oil this summer, oil is down about 27% from peak and oil is down about 23% from peak. These are the last two shining stars of the Canadian economy and their looking very bland at this point.

The drop in oil this summer should alleviate some pressure on CPI and help with those 4th quarter profits that apparently our current government is very wary about.

#17 brazer on 09.03.08 at 1:10 pm

“Other than energy, the story is deflation. — Garth”

more likely to be stagflation.

#18 brazer on 09.03.08 at 1:17 pm

#9

“Keep in mind the affluent areas often have old money and paid off their house decades ago so you may not get that bargain in rosedale or forest hill.”

affluent areas certainly corrected in the post-89′ area.

garth, your thoughts on this…?

#19 David on 09.03.08 at 1:20 pm

I hope that everyone here reads The Automatic Earth. Essential reading!

#20 city boy on 09.03.08 at 1:20 pm

Garth, would this be a good time to own a house and rent it out?

#21 smwhite on 09.03.08 at 1:20 pm

My bad…

As for gold, its managed to fall at a somewhat slower pace then oil this summer, gold is down about 27% from peak and oil is down about 23% from peak.

#6 Keith

I had that same opinion of Carney, unfortunately any rate movement up will push the value of or dollar up and we’re already removed 55,000 jobs from the economy in July.

This is the problem when you ride the coat-tails of a fool aka the USA economic machine…

I read a nice piece in CNN where it was “expected” that rates in the USA would crank up 2% before end of 2009.

I figure that will all depend on who becomes the next president. There are a lot of chinks in the armor of the North American economy right now.

#22 Stoneleigh on 09.03.08 at 1:29 pm

For more on the connection between energy and finance, see today’s Debt Rattle at The Automatic Earth.

#23 clarification needed on 09.03.08 at 1:53 pm

Please sir, would you kindly clarify whether the climate of war alluded to in the above ‘as war and climate change spread new uncertainty’, is of a possible invasion of Poland by Russia.

Best regards.

#24 The Tallyman on 09.03.08 at 2:07 pm

To #11 U.B.A.B.

Like you the wife and I are renters by choice too. (for last 5 yrs)

Earlier this summer we were itching to buy a house and believing that Calgary was going to remain out of our reach forever… we hit the road and checked out many places in B.C., SK, and as far as Brandon Man.

Luckily for us we never bought anything, and discovered this blog and got to see the true RE picture.

There were a few times we almost signed our life & freedom away and I can’t thank Garth enough for sparing us that fate.

As for buying… yes we’re still antzy and anxious to buy but real estate in Cowtown is still a fool or a rich man’s fantasy.
It has been a long frustrating 5 yrs of renting and every rent hike was an added kick in the teeth.

Can’t fathom how Retirees on fixed incomes are coping with those astronomical prop tax increases of
200 – 300 % due to market value assessments.
Something’s wrong here,
It seems the city’s biggest panhandler Bronconnier (every time you see him on TV… he’s got his hand out whining for more money) never stops to consider that unlike todays salaries of 100k or more, many seniors bought their homes in a different era when min wage was a buck an hour.
“come on you old farts get out of those wheelchairs!
there’s a circus that needs funding and by god you’re gonna pay it!”

Market Value = legalized thuggery & Theft on society’s most vulnerable.

Seniors made the mistake of sensibly buying a $45,000 house and are now having it stolen to subsidize the mental illness of the movers & shakers of today.

Garth, this is an area that sure needs looking into.

As for me, gotta be a little more patient… prices are coming down.

#25 The Tallyman on 09.03.08 at 2:13 pm

To # 13 Brittany

Garth, so if realtor and politician careers are out, what would you suggest? Seriously, I value your opinion and am looking for a change at the age of 50.

U-Haul dealers

Grief Counsellors

#26 Rasputin on 09.03.08 at 2:39 pm

More on inflation vs deflation. For what it’s worth I think the main theme of the next 10 years will be…drumroll…BOTH. I think we will see deflation in everything associated with debt. Can you think of any assets or consumer items that are bought on credit? Like nearly all of them! Prices for stocks, real estate, cars, consumer electronics, boats, etc are going to get pounded. North America will have the worlds biggest garage sale soon. Inflation will be the trend everywhere else. Energy, if peak oil is even remotely true, can do nothing but get more expensive. Everything produced with high oil inputs like food will also go through the roof. The perfect storm, the stuff you NEED gets very expensive while the other stuff like your assets get cheaper. Used cars indeed may be the job choice of the future.

#27 Rasputin on 09.03.08 at 2:44 pm

“I read a nice piece in CNN where it was “expected” that rates in the USA would crank up 2% before end of 2009.”
I’m sure that’s a bit of propaganda. They are trying to hide the inflation by containing the price of gold. Gold is the yellow canary that sings when inflation is a problem. If inflation become blatant in the US the foreign suckers, er central banks, might stop buying US treasuries. If that happens, well, how do you say “checkmate” in Mandarin?

#28 BBC on 09.03.08 at 2:56 pm

You are preaching to the choir…(you are still God right?). Your website is always interesting and I share your views with regards to the econ. and real estate. Do you think that once real estate corrects itself that we will ever see these ‘over-valued’ prices in Vancouver again???

#29 nonplused on 09.03.08 at 2:57 pm

Deflation??? The money supply is expanding at 15% per year! Oil is up 5 times in 5 years! Gold is up 3 times in 5 years! Food is out of control! The only thing that’s gotten cheaper around here is cheap plastic stuff from China I don’t need, and refurbished laptops. Whether deflation is defined as decreasing prices or decreasing money supply doesn’t matter we don’t have any of it around here.

However, we do have a fair amount of deleveraging going on, which is reducing the prices of things people buy with credit, like houses and cars (and tractors).

Both gold and oil were well above their 200 day moving averages, which were both pointed up on a pretty good angle as it was. A serious correction was inevitable and may not be over yet. But it’s a little early to call the bull dead yet. There are no signs yet that any central bankers are serious about aligning the supply of money with demand any time soon so the only plausible outcome is inflation.

Think about it: it is paper that they can print. You think you can trust a bankster or policruption with that? Forget about it. The dollar has lost 95% of its purchasing power since it was taken off a commodity based standard, and it’ll loose the other 5% too, over time. Maybe less time. It isn’t pennies that are getting to expensive to mint, it’s dollars that are getting too cheap.

Anybody betting on deflation can’t read a chart. Paper money becomes worthless, eventually, every time. It’s never happened any other way in the whole history of exchange.

#30 Keith in Calgary on 09.03.08 at 2:58 pm

smwhite….

Carney really is monkey see monkey do when it comes to the US.

We have to raise rates now and take the pill…..in a decade it is over…..lower rates now and it’ll just fuel the stagflation that currently exists and the pain will take 2-3 decades to erase.

#31 smwhite on 09.03.08 at 3:02 pm

Man I’m having a day… gold is down about 23%, oil is down about 23% from peak…

How much truth to the rumor that the drop in oil is from the banks and brokerage houses covering their asses from their loses in the mortgage and commercial paper markets?

#32 $fromaSia on 09.03.08 at 3:22 pm

Garth, the cost of food is way up. I would hardly call this deflation.

I agree with your energy comment though.

#33 sarcasm on 09.03.08 at 3:37 pm

#13

Garth, so if realtor and politician careers are out, what would you suggest? Seriously, I value your opinion and am looking for a change at the age of 50.

Used cars. — Garth

Hey Garth,

Please don’t insult used car sales people.

How about suggesting an “Artist”, Realtors will just drop the “Con” before Artist. They already know how to paint a rosey picture in a gloomy situation.

#34 Noz on 09.03.08 at 5:26 pm

People without jobs don’t buy houses. They sell them. Friends and neighbours fearing job loss are also sellers.

The interesting thing is…to who?

#35 unbalanced on 09.03.08 at 5:26 pm

Garth is telling it like it is.

#36 Another Albertan on 09.03.08 at 5:32 pm

@26:

The Russians and Chinese play “Chess” while the Americans play “Monopoly”.

As a colleague of mine says, this should be the quote of the year.

#37 squidly77 on 09.03.08 at 5:46 pm

for the average person:
the largest monetary purchase will probably be a house and house prices are deflating
your second most costly item will probably be a auto
and auto prices are deflating
costs for appliances/electronics is alsodeflating
food and energy costs are most certainly going up at alarming rates..but if you can save $1,000 month on your cost of shelter wouldnt you gladly pay an extra $40 a month for fuel ? and fuel prices should moderate this year

but inflation is truly hurting people on a fixed income
as there major purchases are probably the necessities of life..food and utilities

so i guess weather we have inflation or not depends on your personal situation
for myself these are deflationary times for others maybe they are the opposite..i do believe that we will have higher interest rates going forward but nothing will happen until US/Canadian elections are over

#38 nonplused on 09.03.08 at 5:47 pm

Eric Jansen from iTulip.com has another good article today clearly identifying the “deflation” scare for what it is, a central bank cover story (excuse) for massive money pumping, and a sham:

http://www.itulip.com/forums/showthread.php?p=45890#post45890

From the article:

“Since the 1929 to 1933 deflation spiral episode in the US there has not been a single other example in history, despite all of the pre-conditions, such as over-indebtedness and asset price inflation, while dozens of inflationary events have occurred as a result of debt repudiation and currency depreciation.”

(Note that the first government “re-pricing” of gold occurred in 1933, effectively ending the US “gold standard”.)

There can be no deflation in an unbacked paper money system because they can never run out of zeros to print. It’s just a matter of where the new money shows up. Until 2006 in the US (2008 in Canada) it was going into housing. Before that it was tech stocks. Maybe next it will go into commodities or something I don’t know but general prices have been rising for 80 years and I don’t see why that would stop now.

Even after the big real estate crash of 1982, you’d think that today’s boomers would know better than to speculate in real estate because that’s where most of them learned the meaning of the word “bankrupt”, but it’s been primarily that same generation driving yet another real estate mania to even more absurd heights. But really, they had no choice with all the money that was being printed. Real estate can correct 50% from here, but in 20 years it will be more than double again because inflation can not be stopped in our financial system.

#39 smwhite on 09.03.08 at 5:48 pm

Man I’m having a day… gold is down about 23%, oil is down about 27% from peak…

#29 Keith

I agree, pony up now and it’ll pay dividends in the future.

Then again, the reason we’re in this pit of despair is because the Republican party didn’t want to pay the price after the .com crash and 9/11 and lowered rates way to low to begin with.

#40 squidly77 on 09.03.08 at 6:07 pm

isnt it curious that when basic shelter was climbing violently higher showing yoy price gains of 15-30%
and virtually pricing the majority of Canadians out of home owner ship we hardly heard any complaining ?
in fact we were told the opposite..that these are indeed the very best of times

but when oil goes up there is national outrage ?
trying to predict human nature is impossible
even trying to guess what makes some people think the way that they do makes makes my brain hurt

#41 dd on 09.03.08 at 6:22 pm

Another great read by Eric Sprott:

http://www.sprott.com/pdf/marketsataglance/08_2008.pdf

#42 islander on 09.03.08 at 6:30 pm

Deflation? No way.
Governments print money.
More money chasing fewer goods = rampant inflation.
Until the brightly colored paper is completely useless for anything other than wiping one’s rear end.
There’s never been an exception in the history if fiat money.
Never.
USD increases are dead-cat bounces. Lots of short covering on oil and gold.
Long term do you bet on something useful like oil; something eminently tradeable like gold, or something guaranteed fraudulent, corrupt and incompetent like politicians and their central bank puppets?

#43 dd on 09.03.08 at 6:49 pm

#32 Sarcasm,

You could look at a trade. Really. There are 100k trades people needed in the oil patch. When the price goes back up to $150+ a barrel again they will start to take people from all ages and backgrounds.

Yes you have to go back to school, however, you are 50 and far from retirement.

#44 Peter on 09.03.08 at 6:52 pm

Be sure to check out this Canadian Mortgage Backed Securities Report (From 1988 until now), you will be amazed the amount of MBS issued in supporting the housing market…This is Stunning !!! (You can compare 1990 – 1996 and compare 2001 – now and onwards) …http://www.cmhc.gc.ca/en/hoficlincl/mobase/upload/r303a_eng.pdf

#45 dd on 09.03.08 at 6:55 pm

#14 Stoneleigh,

This deflation on the enegy side is only short term. Google “Peak Oil” and you might change your tune.

#46 Peter on 09.03.08 at 6:56 pm

If you all are telling me Canadian Banks and Financing Arms are OUT of any trouble..Look at the report and THINK OF a BIG BUBBLE that they all are making !!! With 2008, we have already $58,249,683,830.33 of MBS issued to Investors..In 2006 and 2007, we have a red hot of $58,446,930,419.30 & $85,672,903,553.22 MBS issued..Add these 3 years together, we have over Trillions of MBS issued..If economy, household and commercial finance HITS the fan next or years to come…Be sure to check about the prices of those Bank and Finance Companies Stocks…Also, Be sure that more ABCP or Make to Model Investment Vehicles Hid from the Bank to HIT together….and we will all KABOOM !!!

#47 David on 09.03.08 at 7:18 pm

The spectre of a 2% interest rate reset on mortgages would mean a 22% hike in monthly payments and would accelerate the pace of housing price correction. If the government wants to get the correction over with quickly and brutally 5% would certainly do the trick. One of the unpleasant side effects would be wiping out a considerable amount of middle class net worth tied up in housing. Cheap mortgages were a substitute for savings and such a sudden reversal of monetary policy would definitely cause more than its share of angst and family wealth reduction. Non discretionary family income for housing is already wildly out of whack from the historical patterns that existed from the time of Sir Wilfred Laurier to the brief Paul Martin interregnum.
One has to speculate as to why there is in fact such a growing imbalance between listed properties and actual sales.The people trying to sell have to live somewhere and one would assume that would be in another house, unless of course house prices are completely out of line with local rents and incomes and home debtors have seen the writing on the wall and do not like the message.
For the Big Five Canadian Banks homes appreciating at 50% per year looked like decent collateral and actual ability to pay with stricter down payment requirements, actual stated incomes and the potential for default to occur if family incomes dropped or interest rates rose was virtually ignored. The textbook on prudent lending was turned into a charred cinder.

http://www.guardian.co.uk/money/2008/sep/02/houseprices.property

#48 David on 09.03.08 at 7:19 pm

The spectre of a 2% interest rate reset on mortgages would mean a 22% hike in monthly payments and would accelerate the pace of housing price correction. If the government wants to get the correction over with quickly and brutally 5% would certainly do the trick. One of the unpleasant side effects would be wiping out a considerable amount of middle class net worth tied up in housing. Cheap mortgages were a substitute for savings and such a sudden reversal of monetary policy would definitely cause more than its share of angst and family wealth reduction. Non discretionary family income for housing is already wildly out of whack from the historical patterns that existed from the time of Sir Wilfred Laurier to the brief Paul Martin interregnum.
One has to speculate as to why there is in fact such a growing imbalance between listed properties and actual sales.The people trying to sell have to live somewhere and one would assume that would be in another house, unless of course house prices are completely out of line with local rents and incomes and home debtors have seen the writing on the wall and do not like the message.
For the Big Five Canadian Banks homes appreciating at 50% per year looked like decent collateral and actual ability to pay with stricter down payment requirements, actual stated incomes and the potential for default to occur if family incomes dropped or interest rates rose was virtually ignored. The textbook on prudent lending was turned into a charred cinder.

#49 APCM on 09.03.08 at 7:26 pm

#32 – I think Garth meant used cars are going to be a great industry in the next couple of years when people offload the cars they can no longer afford to make payments on. But that was just my take on it.

#50 APCM on 09.03.08 at 7:28 pm

PS – I already know one couple who is completely maxed out but have a great house, designer clothes, etc. One job loss and one extra kid and the BMW was the first to go.

#51 anonymous on 09.03.08 at 7:30 pm

China isn’t buying ANYTHING right now. Hedge funds long commodities are blowing up left and right.

This is all very bad for the TSX and Canada’s economy.

#52 Ilargi on 09.03.08 at 7:49 pm

Garth is right on: deflation it is.

Still, he’s wrong about the “except for energy” part. You either deflate or inflate, you can’t do both at the same time. You can’t inflate energy, and deflate cookies. Energy inflation therefore means nothing. And besides, energy prices will plummet, simply because purchasing power will.

Supply and demand. Minus the demand.

Milton Friedman et al may have obscured the definition of inflation, to the point that any rise in prices is now labeled as such, but that won’t stick. Prior to Friedman, there was no such confusion; for good reason.

I see, heavily promoted and endlessly repeated in the media, terms like gas inflation, consumer inflation, price inflation, and consumer price inflation. And I keep thinking that in the end, it will lead to cookie inflation. Which obviously is a nonsense term. But then, so are the others.

Prices can rise through scarcity, speculation, and more, and also for instance because cookie makers go on strike. But that is not inflation. For inflation, you need an increase in overall money and credit supply vs goods and services for sale.

Claims that the money supply today goes up 15% or more are unfounded. The money supply is shrinking. Even from the central banks it is, let alone from the non-bank financial system that has created most of the credit in the past two decades.

We have come to see credit as money, and they are not the same thing.

You cannot have US homeowners lose $4 trillion in one year, and still have inflation. It is not possible. You cannot have lending terms that are so much stricter that mortgage approvals in the UK fall 70%, and still have inflation. Nobody can afford a home, but home prices are down (not yet truly in Canada, but wait a few months). That is deflation.

If you would want to argue for inflation in one corner of the economy, or one product if you will, it would have to be housing prices over the past decade, which often doubled, tripled or more, if you look globally.

No matter where gas prices are (wait, did you notice oil is down 25%?, and gold?), paying a few more nickels for gas doesn’t cost anywhere near as much as your home loses in value.

A few months ago, I calculated it as 16 times more. In the US and UK, the average citizen has lost anywhere between $20.000 and $40.000 in “net worth” through housing depreciation. In one year. Try to put that in your tank, in extra expense.

It is already getting so bad and so clear that the only reason why oil and gold prices are down so much is simple: deflation.

Central banks and governments, even if they would want to, which I highly doubt -to put it mildly-, cannot possibly print enough money to cause inflation. Well, not as long as there are international bond markets. Once those collapse, it’s anybody’s guess.

Case in point: while the US real estate “value” went down those $4 trillion mentioned before, the Fed put back in way less than 10% of that. And that was in emergency windows loans, which they want repaid.

Perhaps the main issue harks back to the definitions: when gas and vegetables and cookie prices go up, people call it inflationary. When housing prices go up, they call it “wealth accumulation”. And that is precisely why Friedman is such a perverse influence on our economic insight.

I try to provide an overwhelming supply of what this means, daily, on The Automatic Earth, to which Garth very kindly links at Greater Fool. And I keep saying that Garth needs to be obligatory reading for every Canadian.

#53 GrandePrairiegirl on 09.03.08 at 8:09 pm

For those waiting to buy your time may come as soon as the Cdn election is done in October.
Stephanie Dion today announced various amendments to his “Carbon Tax”, I believe they are to the benefit of farmers,fishers,truckers,loggers. I feel that should Dion win the carbon tax will be pushed through regardless of what joe citizen says. Economy will slow to a near standstill and anyone in Alberta may as well lean over and kiss their a**s goodbye. The new and improved NEP coming soon to a neighbourhood near you.

#54 Roger on 09.03.08 at 8:32 pm

Single family home (SFH) average and median prices have dropped rapidly four months in a row in Victoria. Click on my name to see a graph that tells the story.

#55 Marcus Aurelius on 09.03.08 at 9:52 pm

I think Mike B. has it right (as does Garth) re GTA forecasted price drops. He noted that C4 and C12 (‘newer/turn-over’ and ‘older/1960s’ central areas, respectively) have listing numbers on the rise. Certainly C12 (and some parts of C4 closer to Ave Rd.) are good, relatively protected areas, but vendors are still in the Denial stage. Fall will soften some of these folks up like ripe cheese.

One market segment that this blog sometimes ignores is the trade-up buyer. Admittedly, a renter is in the best position (if he has cash) to exploit what’s coming by Q1/2 2009. Playing the ‘trade-up’ game can be tricky in a ‘bursting bubble’ market.

Any thoughts from the board or the moderator on the age-old question: whether to list first (and go to market with a signed sale, a quantified ‘haircut’ for your banker and perhaps a longer wait than you expected) or grind a vendor and buy at your price first (trying to time the ‘low’), before listing?

Clearly, the balance is between quantifying the (hopefully, smaller absolute dollar) ‘hit’ on your sale and avoiding a squeeze on timing the buy (assuming you can make economic moving plans, if you can’t close a purchase near the sale closing) versus the spectre of bridge financing (where you’ve first beaten up the poor vendor who bought late in the cycle and/or has the penny drop on how badly he’s been screwed by all of the systemic factors discussed here) – because you now may wait a lot longer than you think to sell your smaller/cheaper place and take a (proportionately) smaller ‘haircut’. This assumes a uniform decline in area pricing, of course, which isn’t always the case if you’re selling in one of those areas lying realtors called ‘prestige’ and trying to move to those fewer areas that really are ‘prestige’ in the GTA.

If the areas are ‘apples-to-apples’ – i.e., you like your area but want to move up – it may pay to quantify your equity first (list and sell) before going to market as an all-cash buyer looking for pain and suffering among the fools.

#56 JO on 09.03.08 at 10:52 pm

I agree with comments that most action in the economy except energy is deflationary. All signs continue to point strongly to some sort of intense deflation for a while. In terms of possible careers in the next 5-10 years, Garth is right about used cars. FYI – My dad co-owned a service station (fixed cars, sold gas, and sold used cars) and actually prospered from 91-94 which as we all know were some testing times. I also think anything to do with alternative energy, asset repossession/credit collection, and military/security will be hot areas, at least in relative terms. As for politics, gotta love the ironic timing of the auto money from the PC s and also the cash to fight street gangs in TO. Yes, I know Garth is a Liberal but he is on government committees and has a voice and the Liberal party is facing these same issues if elected. The focus for any government in dealing with sectors such as the auto industry is not to throw taxpayer money into these poorly managed organizations. I would support re-training and transition assistance to allow these workers to get into something new. Yes it is hard, but these band aids / mini-bailouts are pathetic. It is about time that someone stands up for the majority, tax paying, hard working middle class population who is struggling economically in what is still one of the world’s highest taxed countries. It is outrageous to see politicians taking money that is not theirs to spend it on poor “investments” without any accountability whatsoever. If any government wants to grow our economy on a sustained basis and enjoy strong tax revenues consistently, the formula with the highest chance of success as proven in history is: cut lower/middle income taxes / keep consumption taxes at levels which generate good revenue (10-12%?) / work to remove trade barriers / cut small business/corprate income tax, and focus on education and training. I got to post this on a PC party website. And that is what i am going to do. I encourage everyone to write / talk to your local MP to make your opinion known about these issues and blatant vote-buying nonsense. Take it easy.

#57 calgary-edmonton on 09.03.08 at 11:19 pm

hi, guys, just to share my story with you. since work location moves from calgary to edmonton, i have to sell my house in calgary and buy one in edmonton. in the last fall when i first thought to sell the house, it maight be sold around $550K, but right now when putting it on the market, it is hard to see i can get a value of $500K. the house locates in Panarama area in calgary, which is relatively newer and booming community. at the time early 2006 i bought the house, there were huge amount of speculative buyers, and they were trying to sell the houses when the drop started in last fall, and some are still doing that. What they did and do puts negtive effect on the market, and makes the real house owners, like me, to be worse.
On the another hand, i am going to buy a house in Grandview heights of edmonton. what is happening there is there are few houses existing on the market, even the prices drop by the fact of the overall market, but less and less. actually the lands price over there are more than the houses themselves, even they are realy old, most were built in 1960s.
i am not sure if i am stupid to do so, i mean buying a old house with high price on the dropping market.
the real estate is crazy!

#58 Rasputin on 09.03.08 at 11:21 pm

There is nothing that gets people with an interest in economics going like an inflation vs deflation debate. Most inflationistas believe that bonds and treasuries at 3% are certificates of confiscation if “inflation” is 6%. Sounds about right. Not so fast. What if you are saving for a house and house prices are deflating, like right now for example? You gain on your meagre interest and you gain on the housing deflation. It all depends on what you are saving for. That sure clouds up the argument. We all look at the same data, read the same articles and reach different conclusions. It goes to show that it’s very possible to have a great grasp of the situation and still get your butt handed to you if you are wrong. We are in uncharted waters now.

#59 Rasputin on 09.03.08 at 11:37 pm

I respectfuly disagree with Mr Jansen regarding inflation. Yes the fed can print all the zeros it wants but how do you get this money into circulation? When people stop borrowing , that becomes a huge problem. People do stop borrowing when they are maxed out. We all heard of Bernanke’s speech where he mentioned the helecopter drop etc. The problem is how do you do something like that without being blamed for the destruction of the economy? You can print cash but you cannot print real wealth. When credit collapses so does money supply and money velocity. Think like a central bankster for a moment. If credit has expanded to it’s limits, deflation gets you ownership of all the foreclosed assets and you get to keep your banking monopoly. Does that sound good? Or would you rather have a currency (your inventory) ruined along with your reputation. Plus the barbarians at the gates with all those nasty pitchforks. This is a long winded way of saying that inflation is the head fake and deflation is the end game.

#60 The Tallyman on 09.03.08 at 11:42 pm

Anybody catch those cheesy new TD Bank commercials on HGTV.
Their angle is telling folk how much they’ve put into their abodes and should be hanging onto them.
Setting them up like deer in the headlights where they are afraid to bail before RE really plunges.
Yes people hang on to those properties, the TD certainly doesn’t want to become the owner.

They are the experts and you should trust them!
Ya right.

#61 Rick on 09.03.08 at 11:43 pm

#48 APCM on 09.03.08 at 7:28 pm PS – I already know one couple who is completely maxed out but have a great house, designer clothes, etc. One job loss and one extra kid and the BMW was the first to go.
———————————————
Personally, I’d choose a kid over a Bimmer anyday. But that is just me and probably why I never really ‘fit’ into the ponzi scheme.

#62 Roger on 09.03.08 at 11:50 pm

Victoria has had a speculative bubble in real estate just like Vancouver. It is now deflating and prices have dropped for four months in a row. The local real estate board VREB publishes monthly stats but their graphs are quite limited. I have taken several years of VREB data and prepared a more extensive set of graphs in slideshow format.

Readers interested in the Victoria market might like to see the slideshows and judge for themselves. Just click on my name and select the Greater Victoria Stats Analysis slideshow. You can pause and single step the slides and if you click the big X the presentation will run full screen. The slides are updated at the first of every month.

#63 Noz on 09.03.08 at 11:51 pm

You cannot have US homeowners lose $4 trillion in one year, and still have inflation. It is not possible. You cannot have lending terms that are so much stricter that mortgage approvals in the UK fall 70%, and still have inflation. Nobody can afford a home, but home prices are down (not yet truly in Canada, but wait a few months). That is deflation.

That’s why I think Americans are going to get hit hard…and deservedly so. They are too dumb to have good leaders..they don’t deserve it frankly. Who they have in power is a mere reflection of themselves. To be fair though, I don’t think Canadians are fairing any better to pat themselves on the back.

Idiots like McCain and republicans in general want to LOWER taxes…LOWER? They want to do LESS of everything except military of course. That’s non-negotiable.

The US population is so under water economically that it’s impossible to even begin speaking of how screwed they are…it’s that bad. So bad that it doesn’t seem bad. Yet they want to put less money into things that need money….like schools?

The housing market is a direct result of how delusional people are …both on the lending and borrowing sides. Both are culpable.

#64 smwhite on 09.04.08 at 12:01 am

#51 GrandePrairiegirl

The economy is has already come to a stand still, its web sites like this that allow the few of us that are tired of being fed dog crap from the MSM to share our sentiments istead of saying, is it just me or…

I used to agree that Dion’s carbon tax sounded like NEP 2.0 but if a carbon tax is done correctly, like chopping a percentage of that fat tax we’re already paying at the pump and using it for the green program, it won’t hurt anyone.

In fact with the proper incentives it might be the only bright light during what is going to be the doldrums, besides the RE repo market.

I’m guessing the announcement by Dion to bring relief to our commodity based industries is his realization that you can’t tax a country already on the brink of recession.

On another point, is it just me or is there a lot of similarities to the late 70’s, and is Obama the next Jimmy Carter?

We sure as heck know Bernake isn’t Volker.

#65 smwhite on 09.04.08 at 12:03 am

#35 Another Albertan

The Russians and Chinese play “Chess” while the Americans play “Monopoly”.

Mind if I borrow that?

#66 Just Waiting on 09.04.08 at 12:07 am

I looks like some of the listings I’ve been following are starting to reduce $5000 from their original listing price.

Thornhill currently at $624,500 House was listed originally $629,000 (Good area houses will never go down yeah right).

http://www.mls.ca/PropertyDetails.aspx?PropertyID=7190692

Stouffville currently on mls under N1456559 at $369,900. Originally listed under N1415136 at $374,900 could find old listing anymore.

http://www.mls.ca/PropertyDetails.aspx?PropertyID=7479808

Looks like RE is good investment lets see how far down this roller coaster ride will take us! :)

#67 Stoneleigh on 09.04.08 at 12:13 am

#44 dd,

You suggested I Google ‘peak oil’. In case you may be interested, Ilargi and I used to be co-editors of The Oil Drum: Canada – the main Canadian peak oil website. We focus on finance at the moment as the timeframe for financial crisis is shorter than for peak oil, at least partly because of what depression will do to demand (thanks to lack of purchasing power, where demand is not what you want, but what you are ready, willing and able to pay for). Rest assured that we factor peak oil (as well as climate change, environmental degradation, population and ecological carrying capacity) into our worldview.

Those who do not get their financial affairs in order in the short term may not have a long term to worry about. They will have no freedom of action to deal with the inevitable energy shortages of the future. Deflation is devastating as it ruins debtors and creditors alike, and does so very quickly once critical mass has been reached.

#68 My_view on 09.04.08 at 12:14 am

Canada has not felt serious inflation, yet.

The CD$ has been protected by oil and commodities. Now that oil & commodities are coming back to earth and this lowing the value of the CD$, we will start to feel the burn. BOC will have no choice to start the % hikes in the next year.

#69 No fool on 09.04.08 at 12:33 am

Has the CREB website actually changed the manner in which it’s displaying and reporting current stats?

Bummer.

#70 David on 09.04.08 at 12:40 am

Calgary-Edmonton, Grandview Heights maybe 50 years old, but the houses there are tanks construction wise, renovations no problem. Grandview is part of old respectable South Edmonton, not as good as ultra respectable Windsor Park, but decent none the less. Better areas generally drop less even during a crash than weak lousy areas. Areas like that will get top dollar however defined even in the worst of times. The time to buy might be a way off, but keep your eye on Grandview area, many old folks heading off to nursing homes in a few years. Get some nice reno gear from Menards in USA bring it back yourself to Edmonchuk. Be patient like the sniper waiting for the good shot. Good area, just find a good target.

#71 anon on 09.04.08 at 1:25 am

No one seems to think that the crash can come and come fast – in the ’80s my husband and I owned a house in the west side of Vancouver that was city assessed at $339,000 – the following year the city assessment was $135,000. Sure, interest rates were higher then but nontheless, when the crash hit, it hit hard.

#72 Future Expatriate on 09.04.08 at 1:46 am

#13 Brittany

Garth, so if realtor and politician careers are out, what would you suggest? Seriously, I value your opinion and am looking for a change at the age of 50.

TENT MAKERS/”CAMPING” GEAR

#73 Call_A_Spade_A_Spade on 09.04.08 at 1:53 am

I am going to jump into this inflation vs. deflation too.
So here’s my 2 cents, but the truth is I am not sure.

However, when entering any debate I think it’s important that everyone is on the same TIMEFRAME & PERSPECTIVE. I think this is a very important concept because as with all the above comments, everyone can be right but also be wrong depending on the timeframe & perspective.

For example, not as much in this blog but when debating someone about real estate, bulls say, “…2% drop is not a crash”. Well no, but I am not looking at the last month, I am looking into the future. Or, “…I bought my house in 1999”. Then I wouldn’t argue that you’ve made a bad purchase. But if you bought in Calgary or Edmonton last year, then you’re down. Timeframe & Perspective is key.

What I know is that Central Banks want inflation. Inflate or Die. However, they want inflation that benefits them or the economy they control. They wanted inflation in the stock markets like the dot com, then when that busted they wanted inflation in real estate, both happened, both blew up. What they don’t want is inflation in commodities or precious metals. Why? Because they (the US) can’t benefit or control it. The US doesn’t have oil or commodities. Think how energy has made Russian, Iran, etc. stronger.

The problem is, the Fed can create inflation by credit creation but they can’t always control where it goes. They did for awhile through the stock markets and pushing real estate. Remember Alan Greenspan’s sub-prime mortgage is not a problem but a benefit to the American people. ya right!

Back to my point about Timeframe & Perspective. We’ve had a massive inflation in the stock markets since the early 80’s and real estate for the past 5-6 years until 2005 in the US. And we now have deflation in real estate and stocks for the past 2-3 years. However, we also have inflation in energy and precious metals for the past say 7 years. And recently a deflation in energy & gold in the past several months.

So,#50 Ilargi, I think you are wrong. You can experience both inflation & deflation. But again its about perspective. Let me explain.

From the average person perspective. You have both, you have U-flation. Everything U need, like energy, food, you have inflation. Everything U don’t need, like your car, house, Xbox, you have deflation. Point is the little guy always gets screwed.

If you are a American living in the US using $US buying energy & food, you are definitely experience inflation. If you are a Canadian buying US imports for the past several years, you are experiencing deflation because our dollar has gone up.

If you live anywhere in the world and bought Gold in 2000. You are experiencing deflation because your purchasing power with gold for the pass 6-7 years has gone up. In another words, priced in gold, everything except for energy & commoditites has pretty much gone down. That’s why gold is a inflation hedge.

Perspective & Timeframe!!!!

Of course, it’s not so black & white and not absolute. But that’s why I say that everyone can be right and wrong. I think its a mish-mash of things all at the same time.

Another point is, inflation is defined by credit creation. I think Rasputin made this point, if the credit stops at the banks and doesn’t get down to the average person which it has for the pass 20+ years. Do we still have inflation?

I don’t know the answer to that question. All I know is that the people that has access to the credit first benefits and the people at the end (99% of the population) suffers the consequences. That’s why the banks are holding onto their credit to try and save themselves. Yet all the wall street boys have benefitted from the massive bubbles through bonuses for the pass 20 years.

I don’t think or believe that this energy or commodities story is over yet or it’s a bubble, YET. My reasoning is that with the massive additional credit created since the sub-prime collapse, the people with access to the credit first (banks, hedge funds, etc.) need to put that money somewhere, basically they need to bet on something. Hmmm…. real estate, nope. tech stocks, nope. equities, nope. energy & commodities may seem like a good bet.

See, in a fiat credit creation economy, central banks want people to bet on things. They don’t want you to hold onto money, they want you to speculate and money follows money until everyone is in. Then the people in first bails and everyone else is left holding the hot potato.

The other important point is. All commodities & gold is priced in US dollars. The more dollars that’s created and the less commodities (finite) there are. Price has to go up almost regardless of demand increases. Unless we have total and I mean total demand destruction.

Ever wonder why all commodities & gold is not only priced in $US but are traded in the US? It’s all about control. But can the US maintain this control? I don’t know, other markets are popping up.

If you’re Brazil and you’re selling oil to the Chinese. Would you want to go through the US? Why would you except US paper when you want to buy Chinese goods? It’s a simple concept but I am sure many many countries are asking the same question.

My personal conclusion is that you have to understand and accept both inflation and deflation. Understand that it’s not black and white and try to take advantage of it. They move in different timeframes and overlap sometimes. Use both to your advantage on a practical way as oppose to the academic definitions. For example, don’t buy a house, car, plasma tv right now because the prices will go down. I can’t wait to get my house & sports car in a few years for cheap (both are lifestyle choices, not a investmeny).

In the meantime, if energy, commodities & gold bottoms and goes back up then ride the inflation to your benefit.

#74 patriotz on 09.04.08 at 1:59 am

Keep in mind the affluent areas often have old money and paid off their house decades ago

Yep, that’s what they always say. In fact the upscale areas see just as much speculation and mortgaged-to-the-hilt buyers as anywhere else.

Prices in the West Side and North Shore of Vancouver are falling faster in the current bust than the city as a whole.

#75 calgary-edmonton on 09.04.08 at 2:00 am

Thanks to #67 David!

#76 crashing yuppy on 09.04.08 at 7:37 am

People just dont get it.

They equate renting with the lower class or “transients”. I am so tired of the “you’re throwing your money away argument”.

Truth is most people will never make a dime in real estate going forward. Yes money has been made big time in the past, but that ship has sailed.

I am a homeowner, and some of you will say “thats fine for him to tell others to rent” but in this ecomomy it is the right thing to do unless you have a large downpayment and are in for the long haul.

#77 Don Ho on 09.04.08 at 8:12 am

#59 Roger
Very illuminating presentation, I wish I had similar data for the Toronto area. Thanks for sharing.

The first chart (page 2) shows month over month active listings, new listings, and sales. It is mind boggling when you see the number of active listings vs sales from May 08 to Aug 08.

As someone else pointed out in a previous thread that if we have 80,147 new listing, could we actually have 500,000 active listings?

Does anyone know whether similar data (active, new, sales per month) is publicly available from the TREB (at least in raw form)? Or is the TREB not that transparent with the data?

#78 lgre on 09.04.08 at 9:51 am

It looks like there are still alot of dummies in T.O buying condos with inlfated prices, I was watching the news last night and certain areas they are saying have increased in the double digits…

#79 Stoneleigh on 09.04.08 at 10:37 am

#70 Call_A_Spade_A_Spade,

Ilargi’s point is that inflation and deflation are monetary phenomena (ie an increase or decrease in the money supply relative to available goods and services), NOT rising or falling prices. You cannot have both at the same time, although you certainly can have substantial changes in relative prices.

Relative prices may change for many reasons, one of which is inflation or deflation of the money supply, but price changes are a lagging effect. If you want to understand what is going on, you need to look for leading indicators such as the availability of credit. Also, extrapolating current trends into the future is not very helpful as it doesn’t allow for anticipating discontinuities. It’s comparable to driving forwards while looking only in the rear view mirror.

We are already seeing a substantial contraction of credit, which constitutes perhaps 99% of the effective money supply. Credit functions as a money substitute only during the expansion phase, and its loss during contraction is what leads to an implosion of the money supply (ie deflation).

Central banks exist to midwife credit, but can do very little once confidence is gone. In a very real sense, confidence IS liquidity. Without it there there will not be willing borrowers and lenders, which are a prerequisite for credit creation. Central bankers may try to ‘print money’ (well, actually monetize debt, but it amounts to the same thing), but they cannot increase liquidity in the face of credit contraction. Their actions will cause interest rates on long term debt to rise to economically fatal levels, but will not increase liquidity as scarce cash will merely be hoarded, as banks are already doing. This greatly reduces the velocity of money, which acts to worsen credit contraction. Welcome to the liquidity trap.

#80 Call_A_Spade_A_Spade on 09.04.08 at 11:47 am

#76 Stoneleigh – I agree with you and Ilargi’s point is correct. I made a mistake of calling him ‘wrong’.

However, my point is about from which perspective. Yes, you can only have inflation or deflation from a truly pure academic definition, either credit expansion or contraction. Not both.

But from a practical everyday perspective for the average person, I believe you can have both. You can experience deflation (home prices dropping) and inflation at the same time (cost of living going up).

I guess what I am saying is, the little guy always gets screwed in a fiat system.

#81 Automatic Earthling on 09.04.08 at 11:55 am

It’s humorous to see people trying to educate Stoneleigh and Ilargi on the inflation vs. deflation debate, or suggesting they “google peak oil.” It’s akin to a group of amateur physicists at a bar pushing their half-baked theories on black hole formation onto Steven Hawking.

Thanks for participating in the discussion here, I & S, and for all the work you do over at TAE. I discovered your blog via the link here at the Greater Fool, so I should thank Garth too. It’s a sign that he knows what’s up.

#82 CinToronto on 09.04.08 at 12:00 pm

Hey JustWaiting, check out this listing. It was originally listed at $359,000, near Danforth and Coxwell, but now it’s listed for $299,000! The original asking price was definitely too much, but it shows that the pricing strategy really backfired and they have to start again.

http://www.mls.ca/PropertyDetails.aspx?PropertyID=7174750

I got the new listing from my neighbour, a real estate agent, this morning. It will be MLS E1458403 , which isn’t up yet, but you can see the new price on the realtor’s website,
http://www.sutton-security.ca/index.htm

if you do a property search.

#83 Noz on 09.04.08 at 12:39 pm

They equate renting with the lower class or “transients”. I am so tired of the “you’re throwing your money away argument”.

Well…how else could they dupe millions of people to going into debt up to their eyeballs and not blink an eye? They play on people’s emotions, on people’s weaknesses, on their insecurities.

Few people can handle being called stupid. Calling the general populous stupid, when you are in an authoritative position, is a guarantee for them to listen.

They throw in words like MUST HAVE, NEED, REQUIRED, etc…and you end up with a nation of idiots who are on the verge of placing a Dr. Strangelove into office and some hillbilly sidekick.

Go figure.

#84 Sam on 09.04.08 at 12:40 pm

now how can you justify this….

http://www.torontosun.com/Money/2008/09/04/6656086-sun.html

#85 squidly77 on 09.04.08 at 1:00 pm

GULP..GULP..GULP..GULP
bye bye e-town

#86 GenXer on 09.04.08 at 1:33 pm

OK – so this is loaded with RE propaganda, but what are your thoughts? Particularly the report from the Economist referenced: “Globally, Toronto’s housing market while cooling, is not overvalued – at least according to a recent study of 59 cities by the Economist.”

http://www.thestar.com/Business/article/490233

Home sales up in 905 area

Priced out of downtown, buyers head to Caledon, Markham, Mississauga.

Sales are down, price appreciation is slowing and an uncertain economy could mean further stumbling blocks ahead for the Toronto housing market.

But buying in the right neighbourhoods could mean beating the odds in a flat or declining market, a report released yesterday by ReMax Ontario Atlantic Canada says.

According to ReMax, an undervalued suburban market is outperforming a downtown core that has already seen substantial price appreciation. And suburban neighbourhoods may continue to outperform downtown areas over the short term as some buyers have been priced out of the core.

“Price-sensitive purchasers clearly broadened their search perimeters, looking to Toronto’s bedroom communities for more affordable detached housing,” ReMax executive vice-president Michael Polzler says.

For the first six months of 2008, the top three performing neighbourhoods for single detached homes in the GTA were all in the 905 area.

Mississauga’s Lorne Park, where an average home now costs $679,914, showed the largest increase at 13.63 per cent. Caledon came in a very close second with a 13.62 per cent increase to $500,812. Markham was in third spot with a 13.5 per cent increase to $616,025.

Suburban areas also held top spots for condominium price increases.

Willowdale, Lansing gave the best return on investment this year with a 14.66 per cent rise in values to $296,854. Thornhill, where average prices increased to $290,709, was in second place with a 13.3 per cent increase. The top performers all beat the year-over-year average price increases in June – which saw a 4 per cent overall annual increase in the Toronto market for all classes of housing, including detached and condo properties. While prices are holding steady, sales are down substantially while listings are up. Unit sales of resale homes have decreased every month this year compared to year-ago figures, as buyers have many more to choose from.

But not all areas saw values increase. Former top blue-chip performers such as Forest Hill and Chaplin Estates saw prices drop by 5.42 per cent to $867,231, from $917,000 a year ago.

Condominium prices meanwhile, declined in the Dovercourt Park, Christie Pitts, Annex, Casa Loma and Yorkville neighbourhoods by 6.82 per cent to $598,085 according to ReMax.

One reason may be a new Toronto land transfer tax introduced this year that is substantially more than that paid for 905 homes, says ReMax realtor Jamie Johnston, adding, “this has certainly impacted the single detached home market.”

Another way to assess return on investment is in the rental market.

Globally, Toronto’s housing market while cooling, is not overvalued – at least according to a recent study of 59 cities by the Economist.

Investors looking to buy a property to rent will still do well in Toronto, where gross rental yields are about 7 per cent, one of the highest for cities in the developed world, compared to 4 per cent in London.

This is a bogus report, and will shred what’s left of Re/Max creds. Sales of higher-priced homes in the 905 have been collapsing, so price news means nothing. The real estate industry’s self-dealing is almost as shocking as the way the MSM gves it attention. Both are misleading Canadians. — Garth

#87 Housing Bear on 09.04.08 at 2:33 pm

Have a look at TREb’s press release:

http://www.torontorealestateboard.com/consumer_info/market_news/news2008/nr090408.htm

I know I am not “seasonally adjusting”, but average house price in GTA and Toronto proper have dropped for the fifth consecutive month, on a month-over-month basis.

Sales volume has dropped for the fourth consecutive month as well. Just compare the figures in the press release archives for the past few months and see for yourself.

#88 Sphinx on 09.04.08 at 2:33 pm

not related to the topic here or the canadian market, but the message is ‘it does NOT always go up’

http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression?tickers=%5Egspc,fre,fnm

#89 Mike.Slob on 09.04.08 at 2:33 pm

OOOUCH, It’s nice!

The Greater Toronto resale housing market closed out the last full month of summer at a “steady pace”, Toronto Real Estate Board President Maureen O’Neill reported today.
The Greater Toronto Area (GTA) average price increased one per cent, to $364,886 when compared to last August’s figure of $361,890.
There are currently 25,076, properties available for sale in the GTA, which represents a 31 per cent increase from the 19,145 active listings a year ago. Increased choice has resulted in properties remaining on the market for an average of 36 days compared to 33 days a year ago.
“Despite August’s moderate sales, the 57,364 transactions that have occurred this year are within 14 per cent of the 67,146 figure recorded a year ago,” said Ms. O’Neill. “In light of the fact that 2007 was a record year, our current market can certainly be characterized as stable.”
“These healthy figures substantiate that when undertaken as a long term investment, buying a home is one of the smartest financial moves you can make,” said Ms. O’Neill.
She is sick person at all….

#90 Mike.Slob on 09.04.08 at 2:38 pm

With 6,318 transactions recorded last month, sales in the GTA declined 22 per cent compared to the record August 2007 figure of 8,059.

#91 Pete on 09.04.08 at 2:39 pm

Vancouver Sun’s slowly coming round:

“Buyers see hope as home prices decline”

http://www.canada.com/vancouversun/news/story.html?id=4ffb2c40-ff8b-43d7-b7ce-207a61440685&p=1

Interestingly, the G and M also reported today that the number of immigrants coming to Vancouver (what many people point towards as the key to keeping prices high here) has decreased.

#92 Pete on 09.04.08 at 2:41 pm

I should add to my above post – that was the front page story in today’s Vancouver Sun.

#93 CinToronto on 09.04.08 at 2:41 pm

TREB’s August report is just out:

http://www.torontorealestateboard.com/consumer_info/market_news/mw2008/pdf/mw0808.pdf

Prices in Toronto proper are actually down 1% yoy, and inventory for the whole GTA is up 31%. I’ve been waiting for this for so long, I might have to lie down to let it all sink in.

#94 Mike.Slob on 09.04.08 at 2:46 pm

OOOUCH, It’s nice!

With 6,318 transactions recorded last month, sales in the GTA declined 22 per cent compared to the record August 2007 figure of 8,059.

The Greater Toronto resale housing market closed out the last full month of summer at a “steady pace”, Toronto Real Estate Board President Maureen O’Neill reported today.
The Greater Toronto Area (GTA) average price increased one per cent, to $364,886 when compared to last August’s figure of $361,890.
There are currently 25,076, properties available for sale in the GTA, which represents a 31 per cent increase from the 19,145 active listings a year ago. Increased choice has resulted in properties remaining on the market for an average of 36 days compared to 33 days a year ago.
“Despite August’s moderate sales, the 57,364 transactions that have occurred this year are within 14 per cent of the 67,146 figure recorded a year ago,” said Ms. O’Neill. “In light of the fact that 2007 was a record year, our current market can certainly be characterized as stable.”
“These healthy figures substantiate that when undertaken as a long term investment, buying a home is one of the smartest financial moves you can make,” said Ms. O’Neill.
She is a sick person at all….

#95 Paula on 09.04.08 at 3:01 pm

Hello Garth, I have some advice to ask: I bought a house 5 years ago in Toronto and have completely renovated it. My intention was always to sell it. Selling it today I could have about $$170,000 to 200,000 in my pocket. My husband and i purchased a little house in Upper Forest Hill with intention of building a house for ourselves. The plan was to finance the construction ourselves with our own money and the money we get from the sale of our current house. With everything that is happening in the market I don’t know if this is the best way. I think I have three options. One is to stick to the original plan and sell the current house and build the new one. We stay there and ride all this out. The second option is to keep both houses and rent the one we can get the most money from and live in the other and wait. The last option is to sell the current house we are in and pull out the equity and live in the Forest Hill house and not build until it makes more sense. Is there another option I am not considering and which do you recommend?

#96 Vince on 09.04.08 at 3:02 pm

That newspaper article is very picky regarding what data it is highlighting. Why would they show the data as to the end of June. Trends have really fallen off a cliff since June. The Canadian employment report is out tomorrow. That will be big.

#97 squidly77 on 09.04.08 at 3:21 pm

that graph was generated by a poster named BAD and posted on the http://albertabubble.blogspot.com/ along with many more graphs

#98 squidly77 on 09.04.08 at 3:25 pm

that edm graph was generated by BAD and posted on the albertabubble

#99 TorontoBull on 09.04.08 at 3:37 pm

from TREB
“In the City of Toronto the average price declined one per cent to $377,990 from last August’s $381,681. Compared to the August 2006 figure of $344,419 however, the average price in the City of Toronto has increased 10 per cent.”
http://www.torontorealestateboard.com/consumer_info/market_news/news2008/nr090408.htm
They are still spinning the numbers as they report 1% increase for GTA

#100 CinToronto on 09.04.08 at 3:42 pm

Moderator–since my comment hasn’t been approved yet, you can replace it with the one below, which uses a tinyurl.

TREB’s August report is just out:

http://tinyurl.com/6jgnr3

Prices in Toronto proper are actually down 1% yoy, and inventory for the whole GTA is up 31%. I’ve been waiting for this for so long, I might have to lie down to let it all sink in.

#101 George Popovic on 09.04.08 at 4:39 pm

“U.S. House Price Decline Could Be Worse than Great Depression, Economist Shiller Says”

http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression?tickers=%5Egspc,fre,fnm

Fasten your seatbelts…..

#102 pete on 09.04.08 at 5:11 pm

I sure enjoy seeing that Edmonton chart showing how quickly inventory and new listings are dropping. Crazy how the rest of the country’s inventory is climbing while Alberta has been dropping since Spring. Wonder what this means?? hmmmmm
I just checked ereb.com ‘s August report and sales are up 18.6% over last year! (guess you can see that from the above chart how much higher the red line is this Aug from last Aug). Wow, funny how Edmonton’s the only major canadian city where sales are now climbing. What could this mean??

#103 aloha on 09.04.08 at 6:06 pm

GTA sales down 22%, prices up 1%.

http://www.torontorealestateboard.com/consumer_info/market_news/mw2008/pdf/mw0808.pdf

#104 squidly77 on 09.04.08 at 6:29 pm

edmonton price graph
calgary house price
all the new updated charts here
these charts are not pretty for alberta

#105 Rob on 09.04.08 at 6:55 pm

#75 lgre
#81 Sam

my $.02 is that there are still a healthy line up of stupid young lemmings taking the bait on the 0/40 deadline and jumping in in Toronto. it’s one of the last bastions of denial — it will take some time to get through to these people.

several weeks ago i believe this was a potential scenario on the board here [how long ago that seems] that would keep the summer market afloat a little longer – just in time for fall election for Flaherty to escape with his neck still intact — let’s hope that doesn’t happen [not that I give a rat’s a– for a Liberal minority either].

#106 t-bear on 09.04.08 at 7:24 pm

I sold my townhouse in June 2008 for $200k more than I paid for it in 2004, and moved into a sweet rental. I now live in a million dollar house for under $1500/month including utilities. Lots of RE-owning friends think I’ve gone crazy! I try to go over the math with them, but they get that sourface reaction…. you know, like I’m trying to make them do Grade 11 Algebra against their will. Maybe they think that since they graduated high school they shouldn’t have to “do math” any more!

#107 BAD on 09.04.08 at 7:31 pm


I see my Edmonton Residential Chart made it all the way here.
A look at the absorption rate for Edmonton generates another YIKES!.

#108 3rdman on 09.04.08 at 7:44 pm

Mr Harper-head smarten up, call our troops home and prep them to protect our northern sovereignty and it’s emerging shipping lanes.
Old glory and the bear have eyes & claws ..

#109 Zebedee on 09.04.08 at 8:23 pm

NZ real estate agents bill passed

September 5, 2008 – 7:17AM

The Real Estate Institute will be stripped of its powers over New Zealand’s 18,000 agents and a new, independent authority will be set up under legislation passed by parliament.

The Real Estate Agents Bill establishes the Real Estate Agents Authority, which will oversee licensing, set industry standards, set fees and levies and deal with complaints and disciplinary action against agents.

Associate Justice Minister Clayton Cosgrove introduced the bill after numerous buyers and sellers complained about being ripped off by agents, and the lengthy and often ineffective in-house procedure for dealing with those who broke the rules.

Mr Cosgrove went head to head with the institute and he was criticised for talking about sharks and rogues in the industry.

The bill passed its final stages under urgency and Mr Cosgrove said people who had problems with agents would get a fair go for the first time.

“The new authority will deal with complaints quickly and effectively,” he said.

“It will not cost consumers anything to lodge a complaint and they will not be required to hire lawyers because the authority will represent their case if it is referred to the disciplinary tribunal.”

For the first time there would be consumer redress, including compensation of up to $NZ100,000 ($A82,071).

“The most important people in this whole deal are the honest real estate agents and the consumers,” he said during the bill’s third reading debate.

“I look forward to working with the industry. We will get rid of the bad guys. We will restore and promote the positive work of those in real estate, and restore the faith consumers should have in this industry.”

National opposed the bill, and MP Kate Wilkinson said property managers should be covered by its provisions.

“Property management isn’t in it, although it’s an integral part of the industry,” she said.

“Of course we support legislation that protects consumers but this legislation is a missed opportunity, a disappointment.

“We do not have a workable piece of legislation and at the end of the day the consumer will not have more protection than under existing legislation.”

Mr Cosgrove said property managers could easily be brought under the legislation if there was evidence that they should be.

The bill passed its third reading by 65 votes to 53.

http://news.theage.com.au/business/nz-real…80905-4a3m.html

#110 Toronto Crash on 09.04.08 at 8:40 pm

Toronto Real Estate Prices Drop in August

http://www.movesmartly.com/2008/09/toronto-real-es.html

#111 Mike on 09.04.08 at 8:49 pm

BOGUS REPORT is being kind to this BS. Why do all realtors refer to the price of houses in Toronto or surrounding regions in relation to the world. Toronto is not New York or London or Paris or Milan … not even Vancouver. Funny these realtors keep saying real estate is a local thing … very localized .. BUT when they want to argue that prices are not unreasonable even when us buyers and the mere facts show otherwise they somehow jump to a world perspective. How can anyone take these baffoons seriously. People pay more money to live in NY because they get paid more AND they live in apartments. The percentage of the average canadians income that goes to home purchases is staggering regardless of what a house costs in 56 other countries. Please disregard this report as the bum wipe paper it really is.

#112 Wesley Moxam on 09.04.08 at 9:20 pm

I live in the Dundas & Ossington area. My neighbour’s duplex was put on the market in June @ $625k. 3 weeks later the price dropped to $589k, then on down to $529k before being taken off the market.

~ $95k drop, and no sale. There are two brand new units being built down the street (original was torn down). They may be tough to sell, at least for what the builder thought that they would originally go for..

#113 Marcus Aurelius on 09.04.08 at 10:42 pm

Right-On Garth, in your comment back to GenXer’s posting of ReMax spin.

But the realtors have it bang on with respect to the predictable effect of the extra 2% LTT grab (a $20K aggregate extortion hit by Government for every $500K of sale price in Toronto). Land Transfer Tax at both the pre-existing Ontario level and the new municipal level is a rake-off to support waste at both levels. Period. There is no value or service associated with this stick-up other than to look for deeper pockets to keep these government hiring porkbarrels going few more years. Whether it’s a bloated number of municipal employees or a bloated number of Ontario Government employees (Motto: “No incompetent, but otherwise politically correct applicant refused. Just watch the one person who does the work around here, and you’ll do fine”)

The LTT must be reduced or eliminated. The realtors were hell-bent to stop this 2007 initiative because they know that eventually a smart seller will ask them to ‘share the pain’ on what they care about most in life – a bloated, league-leading commission monopoly. (Can anyone say: “I’d love to accept that Offer, but your bullshit 5% has to be renegotiated now to 3%, because I won’t pay for Red Dave’s skim”?) The very thought of that kind of ‘client conversation’ makes the collective sphincters of these broker and agent parasites pucker. Red Dave is an unreconstructed lefty dillettante, which is no great shock to anyone. The real culprit is Premier Dalton and the Boys, who gave the Toronto Looney Left the power to implement the wrong tax, at the wrong time, for the wrong reasons.

#114 brazer on 09.04.08 at 10:46 pm

‘Panic’ grips global markets
http://www.theglobeandmail.com/servlet/story/RTGAM.20080904.wheinzl05/BNStory/Business

“You’ve got people saying, ‘We’ve got to get out in front of this before we get crushed,’” Mr. Stephenson said.

#115 brazer on 09.04.08 at 10:47 pm

TSX 3-day loss near 1,000 points
http://www.reportonbusiness.com/servlet/story/RTGAM.20080904.wmarkets0904/BNStory/Business/home

“Now that we’ve broken through 13,000, 12,500 becomes a must-hold,” said Joe Ismail, an analyst at Maison Placement Canada Inc. “If it stays below that, that indicates we have further downside to go and there will be an even nastier correction phase from the top-to-bottom.”

#116 wealthy renter on 09.04.08 at 10:57 pm

Toronto real estate down 1% YOY?

http://www.marketwire.com/press-release/Toronto-Real-Estate-Board-896514.html

#117 REA Confidential on 09.04.08 at 11:08 pm

The data for August 2008 is out, price dropped 1% in Toronto, inflation was 4% this year, so not too much of a price drop: Only -5% (not very bad, unless the trend accelerates)

I quote:

Within Toronto proper, the average actually
fell one per cent to $377,990 from last
August’s $381,681

Units transacted within the
City of Toronto, at 2,437, were down 25
per cent from the 3,243 recorded in
August of 2007, while down 10 per
cent from the 2,706 figure in the same
month of 2006.

Housing Market Indicators
August 2008 vs August 2007
——————————
Sales 8,059 vs 6,318 (-22%)
Listings 19,145 vs 25,076 (+31%)


Source: http://www.torontorealestateboard.com

#118 dd on 09.04.08 at 11:22 pm

Deflation? In some asset classes.

Anyone playing less for food, gas, or energy compared to a year ago?

Build any plant, mine, or oil upgrader and try and keep on budget anywhere in the world. The $2billion project becomes $4billion in four years. These costs are being pushed down to the consumers. All metals will be higher in the not to distant future. This means that mosts good will be higher. Hopefully productivity will offset some of the cost increases.

Look outside of Canada, UK, and US. Higher inflation is everywhere. It is coming here soon.

#119 Waiting for a Deal on 09.04.08 at 11:44 pm

Hey Garth,

You running again?

#120 $fromA$ia on 09.05.08 at 12:52 am

#35

Here I am a huffin and a hurtin I just gave birth to another Albertan’.

#121 jim on 09.05.08 at 1:49 am

Perception is a dangerous thing. I’ve definitely witnessed the trenches of human psychology tonight by reading your comments on the above Edmonton graph. Even the slowest of bulls or bears should be able to see precisely what that graph points to in the very near future – price increases. And to top it off, sales are up in Edmonton by over 18% (ereb.com)

There’s only one possible conclusion to your comments on Edmonton… you must be bulls disguised as bears to try and strike fear into sellers for monetary gain. Which while i don’t agree with, hey whatever makes you guys feel like you’re contributing to the world.

#122 brazer on 09.05.08 at 7:51 am

for those that have not yet seen professor robert schiller speak…here is his latest $0.02. check out this clip.

http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression

#123 crashing yuppy on 09.05.08 at 8:43 am

T-Bear,

You will have the last laugh on your friends.

As as far as TREB’s stats: Figures can lie, and Liars can figure

#124 Expat in NC on 09.05.08 at 10:01 am

Here is a snippet of an article from the Globe and Mail:

OTTAWA — A swelling number of individual Canadians overwhelmed by their debts pushed bankruptcies up 17.2 per cent in July from a year earlier.

The Office of the Superintendent of Bankruptcies said Friday there were 7,908 bankruptcies in July, up from 7,478 in June and 6,747 in July 2007.

Personal bankruptcies rose 6.3 per cent from June and were 19 per cent higher from July last year.

Business bankruptcies fell 1.9 per cent from June and 6.4 per cent from the level of July 2007.

The 7,452 personal bankruptcies and 456 business bankruptcies in July brought the 12-month total to 89,346, compared with 85,939 a year earlier.

#125 Rob on 09.05.08 at 11:28 am

Toronto August numbers by district here:
http://realosophy.typepad.com/MarketWatch/AugustPrices.xls

note that clicking this will trigger your spreadsheet software/Excel for those that are web-challenged …

#126 Its Coming!! on 09.05.08 at 11:32 am

Can someone please explain this, what the heck are these people talking about???

http://www.shelteroffshore.com/index.php/property/more/5-reasons-canada-property-market-wont-crash-10040/

#127 Future Expatriate on 09.05.08 at 12:25 pm

#108 Thirdman:

How’s this for an idea? Bush puts his missile “defense” up in Poland, talk Russia out of nuking it and starting WWIII in return for allowing them to put an identical system stretching in from Quebec to BC. Split the missiles up between provinces. ;)

M.A.D…. it’s a beautiful thing. Blessed are the peacemakers…

#128 Peter in TO on 09.05.08 at 12:33 pm

RE:#126

It is interesting how the website you referred to quotes experts without actual references or individuals identified. Wow! I heard an expert say the market is going to drop 98%!?!!? Is that credible? WHat the heck makes these people think that their website is without references. Even with references I ma weary of anything involving the Realestate industry or others such as banks that are teetering on the brink of some major write-offs.
JMHO

Peter

#129 Stoneleigh on 09.05.08 at 12:58 pm

#118 dd,

I don’t dispute that we have seen rising prices, but that is not inflation. It is a lagging effect of the global credit expansion that has hugely expanded the effective money supply in recent years. The expansion of the money (and credit) supply relative to available goods and services is inflation, and one of its effects is to cause prices to rise (all else being equal, which it rarely is).

Those rising prices tell you what has happened already, not what will happen. It is much more useful to look forwards than backwards. Credit contraction is a leading indicator of asset price falls, especially when asset prices have been supported at unrealistic levels for so long by easy credit. We are now seeing declines in oil, gold, silver, real estate, esoteric financial instruments etc, which is exactly what you expect to see at the beginning of deflation (although oil and precious metals may see a counter-trend rally soon). Cash is king in a deflation, and banks are already hoarding it accordingly.

Looking at prices alone, rather than underlying monetary changes can be confusing, as monetary changes have predictive value whereas mere price movements do not. Many other confounding factors can act as relative price drivers, especially in nominal terms.

#130 Mike.Slob on 09.05.08 at 1:28 pm

Today news:
Toronto’s S&P/TSX composite index was down 237.82 points to 12,576.32 and down 2,578.48 points from record high 15,154.80 at 18 June/2008.
This is the same value as Dec/2006.
GOLD -$ 799/oz
Silver-$ 12/oz
Oil -$ 105/barrel

However the RE prices in GTA still going up.WHY?
Because this is not Market at all,WHEN THE OWNER OF THE HOME DECIDES WHAT PRICE TO LIST IT AT, NOT THE AGENT OR MARKET TREND.PERIOD.

#131 patriotz on 09.05.08 at 1:51 pm

I don’t dispute that we have seen rising prices, but that is not inflation

Sure it is. It’s consumer price inflation.

Consumer prices and asset prices are independent. It is not unusual for asset prices (including housing) to fall as consumer prices rise – it also happened in the 70’s, 80’s, and 90’s. It’s called a bear market.

We are not going to see consumer price deflation (I mean in aggregate, not individual components). The BoC will see that it does not happen, and if you don’t understand how, think of a word beginning with “Z”.

#132 Peter in TO on 09.05.08 at 1:51 pm

Mike,

You are comparing apples and oranges.

On a instant basis you see the market change up and down due to the high liquidity.

On an individual stock you may see a large differential between the bid and ask prices. If the volume on the ask increases without a counter balance on the ask this puts pressure on the ask to lower their price. All of this is transparent and instant.

Now with the Toronto real estate this is no transparent and not immediate. I don’t think that any agent will be pushing their client to drop their price as the client feeling ripped off will jump to another agent who will paint a rosier picture for them. However over time as the property sits and more signs go up the homeowner will get the idea……….

#133 Peter in TO on 09.05.08 at 1:53 pm

Correction to above…

On an individual stock you may see a large differential between the bid and ask prices. If the volume on the ask increases without a counter balance on the bid this puts pressure on the ask to lower their price (Be the first man out before all the bids are cleared). All of this is transparent and instant.

#134 lincoln on 09.05.08 at 2:10 pm

Garths,
what do your think re: #126 is it possible prices stop goings down soon, to be flat or so coming?

#135 FP on 09.05.08 at 2:37 pm

Within Toronto proper, the average actually
fell one per cent to $377,990 from last
August’s $381,681

Units transacted within the
City of Toronto, at 2,437, were down 25
per cent from the 3,243 recorded in
August of 2007, while down 10 per
cent from the 2,706 figure in the same
month of 2006.
================

Before August 2008, TREB could compare sale numbers to 2006 and show that even though sales were down from 2007 (“an unusually strong year”), they were still higher than in 2006. Now sales in Toronto proper are DOWN 10% even when compared to 2006. What benchmark metric are they going to use next? 1975’s sales figures???!?!?!

How long can you keep spinning the lies?

By the way, has anyone noticed that in the prices shown for GTA neighbourhoods (see map in Toronto Star article), they show that MEDIAN prices are up (half of houses sell below median prices and half of houses sell above median prices). I find it interesting that they do NOT tell you how much BELOW median half of the houses sell for and how much ABOVE. If half the houses sell for $50K below median and half of houses sell for $10K above, you would still have a lower average price.

I would love to see the raw data that has NOT been massaged by the propaganda-churning shills at TREB!

#136 y3maxx on 09.05.08 at 3:15 pm

San Francisco/Vancouver Real Estate

S F is 50% – 100% more expensive than Vancouver

#137 Don Ho on 09.05.08 at 4:04 pm

#126 Its Coming!!
Looks like an advertisement attempting to draw in housing investors, flippers, RE savants, … (Greater Fools?), etc from outside Canada.

#138 Downsized and Delighted on 09.05.08 at 7:36 pm

#9 – Areas of old money like “Rosedale” are full of investors tearing down old houses and building new, or renovating in a grand way. Seems to me these investors will be the first to head for the hills as the market slows (and I don’t mean Forest Hill!). So there will be lots of price reductions in Rosedale in the coming months. But don’t worry about the “old” money in Rosedale – they won’t be affected by the correction in the market other than to finally have peace and quiet again in “their” neighborhood.

#139 lincoln on 09.05.08 at 7:39 pm

This guy says BUY! Dont rent!
http://www.calgaryluxuryhomesearch.com/media/buy_or_rent_vid.html

#140 Rasputin on 09.05.08 at 8:04 pm

Jim…Brittany Spears called. She wants her brain back.

#141 lgre on 09.05.08 at 9:53 pm

lincoln – that guy is a fool, and anyone listening to him is also one, I would have no remorse for the person who bought and lost his life savings in the upcoming years due to taking this media pigs advice.

I’m not talking about you, just stating my $.02

#142 Carm on 09.05.08 at 10:15 pm

This video is a look into the future of the Canadian Market. Anyone who is still in denial about the housing market on the decline should look at this video taken in 2006 about the Real Estate Market Prediction for 2007 in the U.S.

http://www.youtube.com/watch?v=yoZV5jt9puc&feature=related

What’s best about this video is the smug on the face of the two moron Realtors who I’m sure are selling French Fries at McDonalds by now… extra ketchup please

#143 mike on 09.05.08 at 10:41 pm

Inflation Deflation 1% up 1% down blah blah
what matters is the fact that bankruptcies are seriously which is text book sign of bad things to come. Furthermore it substantiates what Garth and his book have been pointing out for months. Canadians are in just as much debt as our brothers to the south… The ones we say we are nothing like… bankruptcies lead to a drop in confidence and hence economic malaise at best. To boot our U.S. cousins governments books area a disaster. The US is in so much debt they are essentially insolvent. Not the greatest thing to happen to our biggest trading partner. But hey we are different… never gonna happen here… right????

#144 pjwlk on 09.05.08 at 11:00 pm

Just heard a comment on the radio Thursday morning from a Haliburton Realtor that prices for cottages in his area have had a “soft landing” and that they are not expecting the 30% drop in price like the high end cottages in the Muskoka region. Did he say 30%?!!!

I also spoke with a realtor friend of mine over the long weekend who is currently standing in for a Ajax developer friend at his sales office while he went on vacation. She told me that not one person came into the office over the weekend. To be fair though, full blown advertising just started this past week and the sales office grand opening is this coming weekend…

#145 pjwlk on 09.05.08 at 11:27 pm

#49 APCM That reminds me, a couple of weeks ago I was talking to a guy who owns a used car lot in the St. Catherines area of Ontario. He’s been having a tough time getting the same prices on the used cars at the auction as he used to and said that in many instances bidders are paying close to retail prices for the cars. Looks like the party’s over…

#146 nonplused on 09.05.08 at 11:48 pm

Ilargi #52:

Check out what Bill Gross is suggesting they do to fix the problem in the US:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaVfH47UrqgA

The policruptions and banksters are going to give us inflation, and lots of it, they just haven’t figured out who gets the free money first yet.

Also your premise that falling house prices equals deflation seems to confuse houses with money. Nobody has lost anything in the housing market. Everyone who had 1 house before still has exactly 1 house. No deflation in houses so far as I can see.

However, a lot of people who borrowed a lot of money against thier house are going bankrupt. That is not the same thing as loosing money either. The money still got spent and whoever recieved the money still has it. It just means the bank isn’t going to be paid back. But realistically they didn’t have any skin in the game anyway, because they just create the money upon loaning it through the miracle of fractional reserve banking. And the government is going to bail them out, so no worries.

What we had was a housing bubble! There was no productive wealth created, just a delusional “repricing” of the existing housing stock. Deflating bubbles are not deflation because the money never existed in the first except in people’s minds. Thinking “I can sell this piece of dirt and a stick for $1,000,000” is not the same thing as actually having a million dollars. These silly notions an go out of people’s minds again too and it still won’t cause deflation. Real deflation is when there isn’t enough money to go around, and that’s not what’s happening. The money supply is increasing.

M3 money supply in the US and it’s equivalent in Canada are not decreasing, they are increasing in the range of 10 to 15% per year in every major western country. You can’t just throw theories like that out there because you like them. All I did was type “money supply” into wikipedia and I got this article with nice graphs:

http://en.wikipedia.org/wiki/Money_supply

I don’t see any falling money supplies there. They are all going straight up. Exponentially.

House prices will go down because a bubble just popped, but general price levels will continue to rise as they always do.

#147 nonplused on 09.06.08 at 12:07 am

jim 121:

what graph are you looking at? the one I saw had falling sales, rising listings, and unprecedented inventory. I did not surmise price increases would be the normal way to work that out.

#148 Oz - numbers say -12% in Central TO on 09.06.08 at 12:13 am

hmm, not sure if someone can compare the East, West, North, but Central Toronto dropped 12% in average price from August 2007. the numbers talk;

http://www.torontorealestateboard.com/consumer_info/market_news/mw2008/pdf/mw0808.pdf
AUG 2007 Central (all C1 through C15) Avg price = $489,024

http://www.torontorealestateboard.com/consumer_info/market_news/mw2007/pdf/mw0708.pdf
AUG 2008 Central (all C1 through C15) Avg price = $436,120

This is a year to year drop of 12% in price in Toronto Central MLS districts.

Comments welcome

#149 nonplused on 09.06.08 at 12:40 am

more inflation opines:

If interested, go to Wikipedia and search “money supply”. There is a nice article complete with graphs. For all the countries listed money supply is going exponentially up. In not one case is it going down. This isn’t the 1930’s! Money isn’t tied to anything and therefore can (and will) be created at will! Here is a little catch phase I thought up to sum it up: “paper money inflates, hard money deflates”.

Also here is Bill Gross suggesting the US government “monetize” everything including the kitchen sink. (i.e print up money out of thin air and use it to buy anything someone wants to sell):

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaVfH47UrqgA

If the big guys on wall street are cheering for that kind of action, think “Weimar Germany”. “Zimbabwe” also comes to mind.

Our two so called Steven Hawkins on deflation seem to think falling asset prices and deflation are the same thing. They are not. Asset prices are set at the margin and rightly are not included in the money supply. What we had was a housing bubble. This means that a fraction of the housing stock changed hands at unrealistic prices. But you can’t just go and mark to market the whole mess and say there is “this much new money”. There is no new money, just funny ideas in people’s heads about how much they might sell their house for.

Look, I can take a stick and poke it in the ground and tell myself “I can sell this partially developed property for $1,000,000” if I want to, but that doesn’t make me a millionaire.

In the same way, falling asset prices do not equal deflation and they have no bearing on what cost of living items like food, clothing, fuel, transportation, taxes, health care, visits to the dentist, tuition, utilities, a cat, neutering your cat, buying cat food, cat nip, kitty litter, kitty toys, a cat scratching post, and then having to buy damn mouse traps anyway, in short everything you spend the other 70% of your income on (30% being debt service). Just because I realize I can’t sell my stick in the ground for a cool mil doesn’t mean I or anybody else “lost” any wealth. It was just a stick in the ground! And last I looked, we haven’t “lost” any houses either. The economic wealth creating capacity of the housing stock (measured in people living under a roof or something, whatever it is houses “do”) is exactly the same! Just a little easier to buy now.

Granted, there are a lot of people who borrowed and lent a lot of money based on phony baloney appraisals, and to them will come much woe. But the credit default cycle is actually inflationary (adds to the money supply) because the payees to whom the borrowed money was paid still have it. Sure, the bank is not going to get it back, but they never had it to start. They invented it out of thin air upon making the loan. So now we actually have new money out there that wasn’t there before and no obligation to remove it back to the bank over time. And then the government bails them all out anyway.

We can (and likely will) have a depression, but if so it will be a hyperinflationary depression. Money just can’t go up in value if you can always print more. It’s never happened. Ever. Over the whole world though all of recorded history. Predicting deflation in a paper money system is like predicting a new atomic particle. No one has ever seen it before and likely what you are proposing is entirely new to human thought. It’s a central bank boogie man and nothing more.

Actually some of the ancients even got pretty good at creating inflation in coin based currencies using debasement, but that’s a whole ‘nother story.

#150 nonplused on 09.06.08 at 12:43 am

Sorry if this is a double post, I appear to be suffering technical difficulties.

more inflation opines:

If interested, go to Wikipedia and search “money supply”. There is a nice article complete with graphs. For all the countries listed money supply is going exponentially up. In not one case is it going down. This isn’t the 1930’s! Money isn’t tied to anything and therefore can (and will) be created at will! Here is a little catch phase I thought up to sum it up: “paper money inflates, hard money deflates”.

Also here is Bill Gross suggesting the US government “monetize” everything including the kitchen sink. (i.e print up money out of thin air and use it to buy anything someone wants to sell):

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaVfH47UrqgA

If the big guys on wall street are cheering for that kind of action, think “Weimar Germany”. “Zimbabwe” also comes to mind.

Our two so called Steven Hawkins on deflation seem to think falling asset prices and deflation are the same thing. They are not. Asset prices are set at the margin and rightly are not included in the money supply. What we had was a housing bubble. This means that a fraction of the housing stock changed hands at unrealistic prices. But you can’t just go and mark to market the whole mess and say there is “this much new money”. There is no new money, just funny ideas in people’s heads about how much they might sell their house for.

Look, I can take a stick and poke it in the ground and tell myself “I can sell this partially developed property for $1,000,000” if I want to, but that doesn’t make me a millionaire.

In the same way, falling asset prices do not equal deflation and they have no bearing on what cost of living items like food, clothing, fuel, transportation, taxes, health care, visits to the dentist, tuition, utilities, a cat, neutering your cat, buying cat food, cat nip, kitty litter, kitty toys, a cat scratching post, and then having to buy dang mouse traps anyway, in short everything you spend the other 70% of your income on (30% being debt service). Just because I realize I can’t sell my stick in the ground for a cool mil doesn’t mean I or anybody else “lost” any wealth. It was just a stick in the ground! And last I looked, we haven’t “lost” any houses either. The economic wealth creating capacity of the housing stock (measured in people living under a roof or something, whatever it is houses “do”) is exactly the same! Just a little easier to buy now.

Granted, there are a lot of people who borrowed and lent a lot of money based on phony baloney appraisals, and to them will come much woe. But the credit default cycle is actually inflationary (adds to the money supply) because the payees to whom the borrowed money was paid still have it. Sure, the bank is not going to get it back, but they never had it to start. They invented it out of thin air upon making the loan. So now we actually have new money out there that wasn’t there before and no obligation to remove it back to the bank over time. And then the government bails them all out anyway.

We can (and likely will) have a depression, but if so it will be a hyperinflationary depression. Money just can’t go up in value if you can always print more. It’s never happened. Ever. Over the whole world though all of recorded history. Predicting deflation in a paper money system is like predicting a new atomic particle. No one has ever seen it before and likely what you are proposing is entirely new to human thought. It’s a central bank boogie man and nothing more.

Actually some of the ancients even got pretty good at creating inflation in coin based currencies using debasement, but that’s a whole ‘nother story.

#151 The Tallyman on 09.06.08 at 12:46 am

To #139 Lincoln

Plen T. Wong with that realtors advice

#152 rant in Calgary on 09.06.08 at 3:12 am

If I hear one more person say “Alberta is different, Real Estate won’t go down”(anymore). I’m going to eat my White Stetson cowboy hat.
All these stock option employees flexing their leveraged muscle to keep up with their redneck buddies. They purchased the house, quads, trucks, R.V., flat screen, ect…. all on credit.
Less talk of $200 oil these days. Hmm….How’s your energy stocks doing now (Wealth effect bulls)?
Premier Stelmach scaring oil company investment out of the province with his oil royalties, we’ve got the dirty oil sands making headlines, expensive to live here, poor service at most retail outlets (lack of staff ).
Went through a new $350k infill, listed for 1.2 million.

Alberta sure has a lot going for it.

#153 dd on 09.06.08 at 3:15 am

…. above all else ….

They key indicator to watch in the US over the coming months is the unemployment rate …

#154 dd on 09.06.08 at 3:28 am

130 Mike.Slob

Mike what do you mean buy this statement

” Because this is not Market at all,WHEN THE OWNER OF THE HOME DECIDES WHAT PRICE TO LIST IT AT, NOT THE AGENT OR MARKET TREND.PERIOD.”

The seller might want to list it at x price … doen’t mean that the potential buyer will pay it.

#155 dd on 09.06.08 at 4:05 am

#129 Stoneleigh,

Yes cash is king in deflation times. However, looking at the credit pull back without looking at the greater supply and demand equation can be just as dangerous. Furthermore some things are just more expense … increases in money supply or not.

Oil is still at $108. Last year it was $80 and the year before $60 and ten years ago it was at $10. Why? Most of the cheap oil is gone. Companies have to drill deeper, use more steel, use more technology, and it takes greater time to bring the oil to market. Oil might go back to $80 in the short term but not for long. China, india, and the world is too hungry for the stuff. Just look how much we consumer today … approximately 87Million barrels of oil. 1000 barrels a second.

With oil the world is dealing with greater demand and flat supply (if not less supply in the future) in the long term.

How about food? With more of China and India moving into the middle class and the increasing world population there will more demand for potash. Potash is the main stuff to grow food. And more demand will equal higher prices for food. Yes potash has backed off from the short term high, however, long-term it is up. Why? Because it will be harder to find the stuff etc. I don’t think you will see the price of food drop like you will see the price of housing drop. Do you really think your food budget will be more or less next year. How about in five years? I bet society will be paying more for food as a percentage of their budget compared to today.

Deflation. I not looking back to the past six months or five years. Look long-term. Oil and some other products are in short supply and demand is growing. Prices will rise for some key products.

#156 Toronto Crash 1991 on 09.06.08 at 5:46 am

Toronto REal Estate Market Officially Down Year/Year

First Time Since 1996

http://www.thestar.com/article/491019

#157 smwhite on 09.06.08 at 11:03 am

y3maxx, San Fransico is more expensive is it? PROVE IT, your sound like somebody that has spent the last week at the RNC. You were bitching months ago because Garth was using USA RE data to point out what loose monetary plolicy does for home prices and now your trying to use it to back up the Vancouver market. Man your weak.

Jim, same with you, I look at that “graph” an see a big fat tumour has grown. Prove there will be an increase using fact and logic, not more of your same verbal diarrhea, cause I said so(More like you NEED increases to save people like yourself whom are in complete denial) doesn’t cut it.

Just more and more uninstantiated claims from the “bull” side, or as I like to call them, the [email protected] side.

Jim, guess who’s sounding like they’ve been watching too many episodes of the X-Files, so get a safety strap sewed on to your tin foil hat and keep that thing on pretty please.

#158 brazer on 09.06.08 at 11:28 am

Government may soon back troubled mortgage giants
http://news.yahoo.com/s/ap/20080906/ap_on_bi_ge/mortgage_giants_crisis

“The news, first reported on The Wall Street Journal’s Web site, came after stock markets closed. In after-hours trading Fannie Mae’s shares plunged $1.54, or 22 percent, to $5.50. Freddie Mac’s shares fell $1.06, or almost 21 percent, to $4.04. Common stock in the companies will be worth little to nothing after the government’s actions.

RIP.

#159 cmh on 09.06.08 at 12:18 pm

Lincoln #139
Re: your link to the realtor on the 60 minute blurb. He is smooth, slick and acutely aware of how he can manipulate the public.
I have no doubt that he is also astute enough to know exactly what is underway in the global economy and the impending collapse of the Canadian housing market.
This video totally creeped me out!

#160 mike on 09.06.08 at 12:59 pm

Carm 142 love that video … Looks more like a bad hollywood movie. The two smug A-holes look like a couple of b grade actor soprano wanna-be s. They look and sound like a couple of thugs berating the smart investor guy. It is the likes of those two mugs that pushed the poor buyers into something they could ultimately never afford. Do they care… they already got their commish. and don’t care about the aftermath .

#161 Keith in Calgary on 09.06.08 at 1:33 pm

#148…….ROTFLMAO !!!!

Infommercial BS like that video cracks me up……..not a single one of those clowns would dare submit to a taped interrogatory with a knowledgeable RE bear.

They’d be made to look like a “greater fool” than they aready are

#162 LuckyLondoner on 09.06.08 at 1:47 pm

LOL!

#126 posted

“Can someone please explain this, what the heck are these people talking about???
http://www.shelteroffshore.com/index.php/property/more/5-reasons-canada-property-market-wont-crash-10040/

The “Expert” in the video actually states:

“The market overall, allows us to purchase in this market”

He also pushes buying with no money down and says you having nothing to show for renting – while if you buy you are paying down your mortgage (neglects to mention how much principle you would be paying down on principle during the first year of a 0/40).

He is trying to find Greater Fools

#163 neutral on 09.06.08 at 2:19 pm

Sorry guys, I usually spend a little time here on this site, as it becomes a bit boring reading repeated posts about the same thing, which is quite obvious without proving it to each other. I’m more interested about Garth’s comments, which sometimes are strange. I remember, he told the rates will go down soon, but did not explain about that. Now his new point about cars is the same unclear. Few people here were trying to resolve the riddle, but Garth as usual did not give the answer. Garth, I give up. Tell me the truth about rates and used cars. Those comments make me visiting this site.

#164 Carm on 09.06.08 at 3:07 pm

Mike 157. That video is harlirious to watch and will post it again on a new blog for everyone to see. I’d love to play this video to the morons who lined up at the Trump condo downtown or the Marylin Monroe look alike condo in Mississauga. It will be interested to see when the market crashes because the next line they’ll be in is a welfare line. You know the world is messed up when people working these jobs with an average to below average pay cheques are driving BMW’s and Audi’s. Live within your means people because those haven’t will pay big time and those have shall will reap the rewards once are recession is in full gear.

And for the love of God people, stop watching stupid shows like Flip This House on A&E because those who are trying to dump their houses now will just get customers who Flip them the bird when they find out their asking price

#165 dd on 09.06.08 at 4:04 pm

The answer to whether oil prices will go up long-term. It will affect everything else.

http://ca.youtube.com/watch?v=4nyMZ2jIcmQ&feature=related

#166 Stoneleigh on 09.06.08 at 4:37 pm

#152 dd,

I am well aware of peak oil and the surrounding energy issues, having written about them myself for years as an academic in the energy field. I agree that oil production is peaking globally and that we are on the downslope of Hubbert’s curve. The net energy situation is even more serious (taking EROEI into account). But in this case that is not the point.

The point is that demand will not keep on increasing as purchasing power is about to fall off a cliff – globally. In economic terms demand is not something you want, but something you are ready, willing and able to pay for. The destruction of credit, which constitutes the vast majority of the effective money supply, will leave many (if not most) people unable to afford more than a fraction of the energy they purchase now.

Of course it will make up a far larger percentage of budgets than it does now (as will food), but not necessarily because its price has increased. I predict that energy will fall in price in nominal terms at least temporarily) due to demand destruction, but that it will simultaneously become less affordable as purchasing power will fall faster than price. As I said above, economic upheaval will also affect supply, although that will take longer, so that prices are quite likely to rise further down the line.

Where prices rise against a backdrop of a collapsing money supply, they are going through the roof in real terms. I fully expect that to happen, but only after significant demand destruction due to different respective time lags. That is why I think price will fall before they rise to new heights.

People are likely to have so little money in a few years that they may well be priced out of the energy market almost entirely. If they have difficulty affording the nominally cheaper energy that demand destruction will cause, then affording it after a supply crash will be far worse.

#167 dd on 09.06.08 at 5:18 pm

#129 Stoneleigh,

Again … this doesn’t look like defation over the long-term.

http://www.financialpost.com/reports/oil-watch/story.html?id=772092

#168 y3maxx on 09.06.08 at 6:33 pm

SMWHITE…

Prove it?, ok……..

San Francisco…

http://www.pacunion.com/homes/SearchAction.cfm?State=CA&SearchType=MultiCity&PropertyType=House%2CMobl%2CLand%2CRent%2CComm%2CMulti%2CFarm%2CCondo&QS=1&City=San+Francisco&PriceLow=500000&PriceHigh=1000000000&Submit.x=26&Submit.y=6

North Vancouver….

http://www.mls.ca/PropertyResults.aspx?Mode=0&Page=1&vs=Residential&ret=300&sts=0-0&beds=0-0&baths=0-0&bt=2&aid=3637&MapURL=%3fAreaID%3d6571&tte=1&tt=1%2c2&mp=0-0-0&mrt=0-0-4&trt=2&of=1&ps=10&o=A

#169 lgre on 09.06.08 at 7:06 pm

“And for the love of God people, stop watching stupid shows like Flip This House on A&E because those who are trying to dump their houses now will just get customers who Flip them the bird when they find out their asking price”

Anyone with half a brain watching those shows should be able to see that most of the flippers are not making any money at all.

The selling prices that they claim to MAYBE get are all guestimates not actual sales, on top of that they always forget to factor in agent costs, lawyer fees and carrying cost while their planned 4 week flips ends up taking 4 months.

#170 charles on 09.06.08 at 7:22 pm

Great discussion on the inflation deflation debate on this web site the last few days. It is an incredibly complex topic, and an extremely important one. Thank you to all the posters.

The following is from an article on The Globe & Mail web site titled “When inflation isn’t really inflation”, and was written on Sept. 3, 2008.

“The bottom line?” Mr. Hall asks. “Inflation remains a key concern but its sources are concentrated. If commodity price declines persist, headline price growth could fall rapidly.”

But wait. Mr. Hall’s musings are instructive – but perplexing, too. In what way can price increases for particular things be considered inflationary in the first place? Isn’t “inflation” a phenomenon of sustained, economy-wide price increases? Isn’t “inflation” a debasement of the currency? In what way do random price increases signal this debasement? Aren’t singular price increases simply specific indicators of supply and demand?

Take oil. Let’s say that, whatever the cause – peak oil, speculators or dysfunctional governments – the price of crude oil doubles in a short period of time. In this case, consumers must necessarily spend more at the pump and the energy component of the CPI rises. They must necessarily, however, spend less on other things and the “other things” component of the CPI falls. Category changes aside, these consumers spend the same amount of money.

The “average” cost of living doesn’t change. Prices simply do the job they are supposed to do – alerting consumers to shortages and advising conservation.

Most people now, though, use “inflation” to refer to all price increases. Even economists. The academic argument is that a specific price increase causes people to expect price increases in everything; that these expectations induce real inflation. In recent speeches, U.S. Federal Reserve Board chairman Ben Bernanke has asserted both propositions – that single-product price increases are inflationary and that expectations of inflation are a principal cause of real inflation.

“Inflation has remained high, largely reflecting sharp increases in the prices of globally traded commodities,” he said earlier this year. “The latest round of increases in energy prices has added to the upside risks to inflation and to inflation expectations.”

But commodity price increases can be inflationary only when they have somehow forced up prices across an entire economy. As U.S. economist Frank Shostak noted earlier this year in an essay on the oil price bubble: “Consumers will not be able to increase their demand for goods, nor bid the prices of goods higher, without first having more money. Consequently, the amount of money spent per unit of goods will stay unchanged.”

Mr. Shostak is chief economist at M.F. Global, the big New York-based international broker, and an adjunct scholar with the Mises Institute, a think tank named for the famous Austrian economist Ludwig von Mises. Mr. Shostak adds: “Irrespective of people’s expectations, people’s monetary expenditures on goods cannot increase without an increase in the money supply. No general strengthening of price increases can take place without an increase in the pace of monetary pumping [by central banks].”

Contrary to popular definition, Mr. Shostak says, inflation is not really about a general rise in prices but rather about increases in money supply – which are largely invisible. When people say that they have been hurt by price increases, they really mean that they have been hurt by increases in the money supply. When they say that businesses have ripped them off, they really mean that the Federal Reserve (or the relevant central bank) has ripped them off.

All the sensational price increases of the past year notwithstanding, there is not much authentic inflation in the Canadian economy. Indeed, in the coming year, the country could well experience some gentle deflation – if the Bank of Canada permits it.”

The following is the link to the article in case anyone wishes to read it.

When inflation isn’t really inflation

#171 3rdman on 09.06.08 at 9:21 pm

Driving up Avenue road (Toronto) today never did see so many open house signs on the corner entrances of each side street. Particularly north of St Clair and up to Wilson.

#172 squidly77 on 09.06.08 at 10:49 pm

calgary herald sept 06-08

“According to Battistella, active listings on the MLS (multiple listing service) of concrete buildings built in the past five years is around 80 per cent, and the standing inventory of finished, but unsold, units is something like 60 per cent.”

oh boy its started
the great calgary condo crash has begun

#173 squidly77 on 09.07.08 at 12:09 am

HELP HELP HELP..Ii am outta cash

#174 Matt on 09.07.08 at 2:59 am

#165 – y3maxx… you must go to the Republican school of spin, because the differences in the properties you are showing is ENORMOUS! How can you even compare those ?!?. Did I miss something? I didn’t realize a large, gorgeous piece of architecture could be compared to something with a 1970’s pickup parked outside and modest leather furniture from the Brick inside… And the large stone pillars on the San Fran house really match up with that old deck that’s been painted brown…

Maybe we should compare those San Fransisco houses to some Sheik’s house in Dubai, and then we can all talk about what an amazing deal San Fran is when we do a comparison of “like” property.

Sheesh.

#175 Stoneleigh on 09.07.08 at 9:00 am

#167 Charles,

Just as inflation is a monetary phenomenon, as Frank Shostak explained, so is deflation. The person who wrote that article appears to become confused near the end your your quote where he calls for ‘some gentle deflation – if the Bank of Canada permits it’. He seems to be suggesting that prices may fall slightly, but that is not deflation by Frank Shostak’s definition (or mine).

Secondly, there is not such thing as a ‘gentle deflation’ in monetary terms. Deflation may initially pick up momentum slowly, but unfolds with frightening speed in its later stages (grounded as it is in destabilizing positive feedback). The reasons for this is that credit functions as a money equivalent only during expansionary times. Once expansion morphs into contraction, credit largely ceases to be so considered. As credit forms well over 90% of the effective money supply, its loss causes the money supply to crash, which is deflation.

Finally, the Bank of Canada does not have the power to prevent deflation. The coming financial calamity will reveal how little power central bankers actually have once confidence is gone. They exist to midwife credit, but that requires willing borrowers and lenders, and those will be virtually non-existent in the coming years.

If you would like to understand how our fractional reserve banking system has led to the credit bubble and what its consequences will be, then I suggest you google ‘Money as Debt’ – an extremely good 45 minute video available free on the net.

#176 mike on 09.07.08 at 9:14 am

Carm 161 Not hard for people to drive beemers or audis … They just lease them and park them in front of their 99% financed 5000sq/ft mansions… after all money is free… right? and of course their interest only mortgages
give them more money left over to buy that 40ft boat on credit. What a perfect life… Unless the market tanks… but we know that will never … those two asses said so… Hey good enough for me… buy buy buy before its too late

#177 Carm on 09.07.08 at 10:06 am

Igre, I agree with you 100%. But anyone with half a brain would not be lining up downtown to buy a $600,000 condo for a telephone booth with plumbing ie the Trump Condo and walk away and think they got a steal. And well all seen how many of those “Half a Brain” morons there were. Or taking out 40 year Mortgages with zero down. Unfortunately there are a lot of gullable people who dont do their research.

You’d be surprised how many people buy condo’s without asking for a Status Certificate of the building before purchasing. Status Cerfiticate, incase anyone reading doesn’t know, is the status of the building financially and any future repairs needed. Many people buy a condo and then are surprised to find out that their maintenace fees doubled. So unfortunately there are a lot of half a brain idiots, especially in Toronto where I’m from… ie electing David Miller twice.

#178 Mike on 09.07.08 at 10:51 am

Here is the most important video people should watch in their lifetime. It is recent and it dispells the myth that home prices always rise, kinda what Garth has been saying for quite some time, and that the cost of a house is really a depreciating asset. It is an interview with well respected Robert Schiller and it is a very recent interview not at all dusty or dated. Please watch it and learn that unlike the asses on the posting that Carm referenced to there are some seriously smart people out there giving valid and credible advice and information.
http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression-Economist-Shiller-Says?tickers=%5Egspc,fre,fnm

#179 WetCoaster on 09.07.08 at 12:37 pm

Prove it?, ok……..

Y3MAXX, #165, that has got to be one of the loopiest excercises in cherry-picking, ever. At least try to choose some listings that are *somewhat* similar.

http://tinyurl.com/6xv2up

http://www.malcolmhasman.com/index2.html
scroll down and look at some other areas of Van.
(thanks to a poster over at vancouvercondoinfo).

BTW, San Francisco should be more expensive than Vancouver. It has a more diverse economy, a better climate and more history.

Monaco is also more expensive than Vancouver, so what?

#180 Greg on 09.07.08 at 2:20 pm

You guys are a bunch of morons if you can’t see that Edmonton is past it’s bottom! After looking at Aug numbers i know i’m buying!

#181 ks on 09.07.08 at 2:36 pm

What will be the effect on Canadian Real Estate Market of Fannie, Freddie resucue?

#182 Downsized and Delighted on 09.07.08 at 4:15 pm

Paula #95: I don’t think Garth is going to answer your question, but if you read the Greater Fool, presumably you will know what he would say. He says that to weather the coming downturn in the real estate market you should have no more than 25 % of your net worth invested in real estate, that you should only invest in a property that you can stay in for the next 10 years (because that could be how long you might have to stay); and that you should not buy more house than you really need, and that it should be near public transit and in a location that will appeal to others.
So, take the gross value of the two properties, (realistically), add any other assets you own (stocks, cash, etc.), and deduct any loans, mortgages, credit card debt. etc. That is your “net” worth. (please forgive if this seems to be stating the obvious but I have noticed some postings on this site that don’t appear to understand what net worth is). By saying that you could pull $200,000 out of one property, you are not telling us anything. Maybe you put $200,000 down on the property to begin with – not likely, but you understand my drift. Or, more likely, you think that the property has increased in value. So if you want an opinion, tell us what is each property worth, and what are the mortgages? Now tell us which one you could see yourself living in for the next 10 years? (maybe neither?) And just for the record, your choices may also be limited by your principal residence allocation.

#183 Calgary rip off on 09.07.08 at 7:04 pm

Lots of posts on here lately. Not too much of interest. Only God knows what will be brought to Calgary.

I dont see much change here. Still overpriced shacks. I dont see any research showing much of a crash either.

Perhaps after October 15th the real estate will reach a reasonable level. Im not holding my breath as Calgary contains many arrogant homeowners, who probably will just pull their house off the market if they cant sell it.

Unless houses revert to pre boom prices, the prospective homeowner is fu$%#d!!

#184 lgre on 09.07.08 at 9:11 pm

hey Greg buy me one to while you’re at it, 2 if you have enough change left.

#185 dotava on 09.07.08 at 9:29 pm

#177 Greg on 09.07.08 at 2:20 pm

Good luck Greg.
Was it “rush” on open house?
Going out – just for curiosity to see; in a middle of showing time we where the first (probably the last too).
Good help you if you are RE or buyer.

#186 JO on 09.07.08 at 10:25 pm

Huge news this weekend: So off we go to an election on Oct 14. Don’t think I am going to vote. Fannie and Freddie in the US get some temporary help which will do absolutely nothing to the long term housing and economic situation except to prolong it and make the eventual bust even worse: As i have opined before, the bet I am making is some sort of intense deflation first, then in the end an inflation/currency devaluation to complete the crisis. As for housing, a huge condo project here at Lakeshore/Parklawn in Etobicoke is priced in the stratosphere. I walked in to satisfy my curiousity: Average price over $ 500 / sq foot. Price supposedly includes a parking spot but get this, you got to pay $ 35/M in “parking” maintenance. Regular maintenance fees to start ar .48 cents/sq foot. Agent on hand could not answer how much of that fee was going into the reserve fund. What a disaster in the making: Agent said the project was 95 % sold out. About a year ago, the first phase in this project sold out as people and the media waited overnight to get in. Talk about the greater fool’s paradise. I have lived in this neighbourhood for 20 years now. I have no doubt that the poor souls who “own” this overinfated piece of notthing in the sky will not be able to give their units away for 50 cents on the dollar by 2011. In fact you can say that about most condo project built in the last 4-5 years in the GTA. Anyone have listing stories for any thing in south Etobicoke ? A house just sold on our street privately. Word is that $ 440K was asking but final sle was close to $ 410.

#187 lincoln on 09.07.08 at 11:13 pm

oh i found out that video is two years old that i pozsted

#188 The Tallyman on 09.08.08 at 12:05 am

To # 169 Squidly77

from that article “Where is Calgary’s economy headed in 2009?

Adam Legge, vice-president and chief economist for Calgary Economic Development, and Don Drummond, chief economist for TD Bank Financial Group, will offer their views at the 2009 Economic Outlook Sept. 15, at the Hyatt Regency’s Imperial Ballroom. Tickets are available through Ticketmaster until Sept. 8, at $75 each.”

Unbelievable that the sheep will fork out $75 to hear Grand Pooba spin…. step right people still a few seats left on the Titanic!

Sickening.

#189 $fromA$ia on 09.08.08 at 1:42 am

As for the hardworking gents in the picture on this thread….. they should be in politics. Maybe on the Conservative Party whiping Flaherties A$$.

#190 Mike.Slob on 09.08.08 at 2:26 am

Does Mr.Vultur now turning in Neutral as Mr.Neutral?
#160 neutral on 09.06.08 at 2:19 pm
Why such a “Neutral” idiots still visiting this site?Because is quite obvious that RE Boom is OVER in Canada and next step is CRASH.

#191 Toronto Crash on 09.08.08 at 8:45 am

Toronto housing prices drop first time since 1996

Sales down 25%, Inventory up 31%

TORONTO STAR

Sep 05, 2008 04:30 AM
Lisa Wright
Business Reporter

The Toronto housing market has finally been swept up in this summer’s national pricing trend, recording an average 1 per cent drop in prices last month compared with the same time last year, while sales continue to slide across the GTA.

It’s the first time this year – and probably even the first time in a dozen years – that the Toronto Real Estate Board has recorded a decline in the city’s resale housing prices, although up until last winter the board had been compiling statistics for Toronto and the GTA together.

“Generally the trend has been up in the last decade, but we think it’s the first time (housing prices in Toronto have gone down) since 1996,” said real estate board president Maureen O’Neill.

According to the group’s latest report, the average price for a home in Toronto fell one per cent to $377,990 compared with $381,681 last August.

Meanwhile the Greater Toronto Area average price increased 1 per cent to $364,886 when compared with last August’s figure of $361,890. In the 905 region, the average price increased 2 per cent to $356,657 from $348,563 over the same period.

Canadian average home prices fell in both June and July, with the bulk of the decline in the western provinces.

O’Neill said she’s not too worried though about the recent drop in Toronto prices since the housing market is seasonally slow in the summer months, and 2007 was a “banner year” in the local industry.

But some industry watchers are starting to wonder what’s ahead.

“The extent of it is surprising. It would seem to be an acceleration of the trend in the sector,” said TD Securities economics strategist Millan Mulraine.

“It’s also not surprising since the listings have increased and sales are declining, so prices adjust to reflect the shift.

“If houses aren’t affordable then something has to give,” he explained.

“It will be interesting to see if this is more than a one-month blip,” Mulraine added.

With 6,318 transactions recorded last month, housing sales in the GTA declined 22 per cent compared with the record August 2007 figure of 8,059.

In Toronto, there were 2,437 sales in August – a 25 per cent decline from the 3,243 transactions recorded a year ago – and the eighth month in a row that sales have slid in the city.

Compared with the 2,706 sales recorded in August 2006 though, this represents a 10 per cent decline, noted O’Neill, adding sales had increased 20 per cent between August 2006 and August 2007.

“Despite August’s moderate sales, the 57,364 transactions that have occurred this year are within 14 per cent of the 67,146 figure recorded a year ago,” she said.

“In light of the fact that 2007 was a record year, our current market can certainly be characterized as stable,” she added.

There are 25,076 properties now available for sale in the GTA, which represents a 31 per cent increase from the 19,145 active listings a year ago.

With an increase in listings, properties remained on the market longer – an average of 36 days compared with 33 days a year ago.

#192 Mylene on 09.08.08 at 9:26 am

The markets will be interesting today. Fannie and Freddie saved…real estate will flow differently.

U.S. stock futures jump on Fannie, Freddie seizure
By Steve Goldstein
Last Update: 9/8/2008 9:22:00 AM

LONDON (MarketWatch) — U.S. stock futures leaped Monday after the government seized mortgage giants Fannie Mae and Freddie Mac, guaranteeing that trillions of dollars in mortgage-backed securities won’t default anytime soon and triggering hopes that banks will resume lending to both customers and each other.

“Whether this is the beginning of the end or merely the end of the beginning is yet to be determined, however it is certainly the hope that this move will begin to calm the housing market and allow mortgage money to once again flow,” said Paul Nolte, director of investments at Hinsdale Associates.

Futures for the Dow Jones Industrial Average ($INDU) surged 272 points to 11,493, indicating a sharply higher opening on Wall Street.

S&P 500 ($SPX) futures rose 34.70 points to 1,275.80 and Nasdaq 100 futures rose 29.50 points to 1,799.50.

U.S. stocks finished last week with steep losses, with the Dow industrials losing 2.8%, the S&P 500 dropping 3.2% and the Nasdaq shedding 4.7% after a string of profit warnings and gloomy economic indicators around the world.

But moves to shed risk came to a halt on Monday as the U.S. government stepped in to run Fannie Mae (FNM) and Freddie Mac (FRE), the giant mortgage buyers.

“As house prices, earnings and capital have continued to deteriorate, Fannie and Freddie’s ability to fulfill their mission has deteriorated,” said James Lockhart, the head of Federal Housing Finance Agency which will now oversee Freddie and Fannie.

The two companies will be run by the government indefinitely, with the two current chief executives to be replaced and the government investing up to $100 billion in each firm to keep them solvent. Treasury will receive warrants to purchase common stock of each GSE representing 79.9% of the common stock.

“Putting the GSEs into conservatorship to bring liquidity back into the mortgage market will be viewed positively by investors in our opinion and should result in a rally in financial stocks,” said Paul Miller, an analyst at Friedman, Billings, Ramsey & Co.

Preferred stock shareholders will be “second, after the common shareholders, in absorbing losses,” Treasury Secretary Hank Paulson said Sunday. The FDIC said it will help small banks with Fannie and Freddie exposure absorb any losses.

The New York Stock Exchange halted pre-market trading of Fannie and Freddie, although in Frankfurt trade, Freddie Mac shares lost half their value, trading at $2.55 per share.

U.S. Treasury prices tumbled Monday as traders showed renewed risk appetite in the wake of the U.S. government’s decision, with yields on two- and ten-year bonds each rising 11 basis points. Analysts said the government now will have to issue more debt.

The currency market also reflected rising risk appetite. The low-yielding Japanese yen got punished across the board, notably against the higher-yielding currencies like the British pound and Australian dollar which have suffered over the last month.

The U.S. dollar rose 0.8% to 108.51 yen and rose 0.3% against a basket of major currencies.

International stock markets surged, led by financials including UBS (UBS) and Mizuho Financial. The Nikkei 225 rose 3.4% in Tokyo and the CAC 40 gained 4.7% in Paris.

In pre-open deals, Citigroup (C) rose over 10% and Goldman Sachs (GS) added close to 5%. Bond insurer Ambac Financial (ABK) rose 14%.

The ultra-short exchange traded fund (SKF) lost over 12% in pre-market trade.

Analysts were quick to caution that the credit crisis wasn’t necessarily over because of the move.

“Government actions continue to attempt to maintain the status quo among financial institutions,” said Richard Bernstein, chief investment strategist for Merrill Lynch, who advised selling financials into strength.

“There has yet to be a remedy that approaches the credit crisis as a systemic problem. As with the Bear Stearns situation, the GSEs are being treated as a one-off problem.”

There was financial news outside of Fannie and Freddie.

Washington Mutual (WM), one of the lender’s most affected by the credit crunch, has ousted Kerry Killinger as chief executive.

Lehman Brothers (LEH) meanwhile has launched a sweeping shake-up of senior management, including the departure of some of its international operational chiefs, the Financial Times reported.

On the deal front, Altria (MO) has agreed to pay $69.50 a share, or over $10 billion, for smokeless tobacco maker UST (UST). UST had gained 25% to $67.55 on Friday on speculation of an Altria buyout.

ConocoPhillips (COP) will contribute as much as $8 billion for a 50% share of an Australasian natural gas business with Origin Energy, which has been fighting off a takeover bid from BG Group.

#193 MikeB on 09.08.08 at 9:33 am

Fanny and Freddie Bailout…. nothing more than a temporary bailout at best. a bandaid by most savvy people. But holy crap the suckers out there are lined up around the block to buy some of the futures stock like the mess is all over. Is it me or is it everywhere I turn there is just such a glutt of idiots holding up banners saying the worst is over. I just don’t get it. No wonder it is hard to buy a house in Canada… the inmates are running the jail.

#194 y3maxx on 09.08.08 at 10:08 am

You gotta start at the $1.5 million price range in SF, then compare to North van duplexes…duhhhhhh

San Francisco…

http://www.pacunion.com/homes/SearchAction.cfm?State=CA&SearchType=MultiCity&PropertyType=House%2CMobl%2CLand%2CRent%2CComm%2CMulti%2CFarm%2CCondo&QS=1&City=San+Francisco&PriceLow=500000&PriceHigh=1000000000&Submit.x=26&Submit.y=6

North Vancouver….

http://www.mls.ca/PropertyResults.aspx?Mode=0&Page=1&vs=Residential&ret=300&sts=0-0&beds=0-0&baths=0-0&bt=2&aid=3637&MapURL=%3fAreaID%3d6571&tte=1&tt=1%2c2&mp=0-0-0&mrt=0-0-4&trt=2&of=1&ps=10&o=A

#195 Paula on 09.08.08 at 10:32 am

#179 Downsized and Delighted.

Thanks for the help. Because I am too emotionally involved this is hard for me to see. Also, I did not read Garth’s book , I just read his site.

To answer your question: Property 1 is worth approximately $380,000 and the mortgage is at $160,000. This is why I say if i sell there will be more or less $200,000. I purchased the second property for $590,000 and have a mortgage of $472,000. Houses in the same condition have sold anywhere from $590,000 to $720,000 but lets say it is worth what we paid considering things are falling. We put down $118,000.

We bought the second property with the intention of building and staying there for 10 years. That was assuming we were selling the first property to help finance construction and building new. Now I don`t know if it makes sense to build at this time. If it doesn`t make sense should I even be selling the house I am in or should i just rent one, live in the other and ride all this out.

Thanks

#196 Paula on 09.08.08 at 10:52 am

#179

I just did the networth calculation and if we have $200,000 in cash, $118,000 in equity in new property, we have $150,000 in cash, we will have 25% networth in real estate. If we do not sell the property we are in we will have 68% in real estate. If i did this right then it makes sense to sell now. As for building, it would not make sense at all because all of our networth would be in the property because we would be using all that money to build.

If we are planning to stay in the property for 10 years does the fact that most of our networth is in the house be as important. The new house is a small 2 bedroom bungalow so definitely not more house than we need, is very central and close to transportation and in a desireable area. As it is I don’t think the house itself will be too desireable to others and realistically to get any more value from it, we need to build new or wait a long time. I guess this is the dilemma now – to build or not to build. Based on networth the answer is no but based on the potential for the area, the answer is yes.

What do you think?

#197 mats on 09.08.08 at 11:18 am

#177 Greg

Now that’s a good one! Is a continuing trend of falling prices a bottom?
Smart – you’re not! Desperate property pimp – you are.

#198 Dropper on 09.08.08 at 12:36 pm

Calgary Rip-Off,

You have to be patient, man. Even in a crash things move slowly. For example, the UK market is crashing but that means a drop of only 2% or so a month. Now many people would say that’s nothing. Ha, 2%, big deal. But over a year that is a 25% decline. Realistically speaking, even in a collapse, you cannot expect any more than 4% a month. Things are just getting started here, give it time.

#199 WetCoaster on 09.08.08 at 12:53 pm

You gotta start at the $1.5 million price range in SF, then compare to North van duplexes…duhhhhhh

y3maxx, you said San Francisco is priced 50% to 100% higher than Vancouver. (Something you pulled out of your hat and imagined that it was pertinent).

Now, all of a sudden you’re talking about NORTH Vancouver duplexes…WTH are you babbling about? Then again, who cares. It’s over already. Get used to it.

#200 Greg in Vic on 09.08.08 at 1:38 pm

Most Canadian housing markets overpriced: UBC study
‘Decade-long boom is over,’ be prepared for declining values

Vancouver Sun

Published: Monday, September 08, 2008

VANCOUVER – Homeowners in the majority of Canada’s urban centres should be prepared for the possibility of housing price declines, according to a news release by researchers at the Sauder School of Business at the University of British Columbia.

Their study shows that with the exception of Toronto and Edmonton, houses in Canada’s major cities are overvalued, priced up to 25 per cent higher than they should be to balance with rents – given interest rates, holding costs and historical rates of price appreciation.

“The decade-long boom in Canadian markets is over,” says Tsur Somerville, the study’s lead author and Sauder’s Real Estate Foundation of B.C. Professor in Real Estate Finance…

http://www.canada.com/victoriatimescolonist/news/story.html?id=c804030a-dd13-4a19-8747-1a4e7666c4b2

#201 Greg in Vic on 09.08.08 at 1:50 pm

Here’s a link to the full study from Tsur Somerville and Kitson Swann at the Sauder School of Business in YVR:

http://cuer.sauder.ubc.ca/download/research/working/ownercost.pdf

#202 Downsized and Delighted on 09.08.08 at 4:36 pm

Paula: First let me say that you have done well in real estate. I think you are analyzing the situation well. I’m assuming you are relatively young with no kids. If you have kids, you will obviously want to be in the best neighborhood you can afford.

Your net worth is $488,000
Consisting of 220,000 Equity 1st home (45%)
118,000 Equity2nd home (25%)
150,000 Cash (30%)

If you sell property 1, you will have no more than 25% of your net worth in real estate, plus you will be in a great area. Building new would put you way over the 25 % . In fact, you could end up with 100% of your net worth in your home. So building right now doesn’t make sense. Garth would definitely say don’t build.

What would Garth do? He would say to either sell both homes and rent; or to sell home number 1 and live in home number 2. If you can’t see yourself in either of the homes as they are for the next 10 years, renting doesn’t seem like a bad option to me either. You will probably be able to buy your dream home in a few years for a bargain!

Garth would definitely tell you to have only 1 home, or no homes. He does not see this as a short term correction, but rather a long term trend of flat or lower real estate values.

Hope this helps.

#203 neutral on 09.08.08 at 4:46 pm

187 Mike.Slob on 09.08.08 at 2:26 am
Sorry, I missed the point in your hysterical post. Yes, it is quite obvious that RE boom is OVER, therefore this is not interesting for me. I mentioned the reason, why I’m here. But what your interests are? “RE boom is OVER” is unclear for you? Don’t believe it? You are looking for more evidence here on this site?

#204 Expat in NC on 09.08.08 at 5:25 pm

Here’s an article on cbc.ca titled “Urban real estate values set to plunge, UBC expert forecasts”:

http://www.cbc.ca/money/story/2008/09/08/bc-080908-real-estate-study-ubc.html

#205 dd on 09.08.08 at 6:35 pm

#177 Greg,

Tell us when you actual buy and we can track your process. Maybe we will turn out to be a bunch of morons. Go on … test your courage and buy into this market.

You guys are a bunch of morons if you can’t see that Edmonton is past it’s bottom! After looking at Aug numbers i know i’m buying!

#206 dd on 09.08.08 at 6:36 pm

#177 Greg,

Tell us when you actual buy and we can track your process. Maybe we will turn out to be a bunch of morons. Go on … test your courage and buy into this market.

#207 Mountain Girl on 09.08.08 at 6:48 pm

JO #183 –
Do you mind me asking why you aren’t going to vote? I’m not judging you, I’m just wondering what your reasons are. I’m seriously annoyed that an election has been called at all, myself, but I still plan to vote.
On that note, does anyone plan to attend any open houses or debates in their riding?
I will try to and I plan to ask questions about the 0/40. I’d like to bring some attention to that one, among many other issues. If I do, I’ll let people here know what was said. I’d be interested to hear from people in other parts of the country if they hear anything on that topic in their ridings.

#208 Johnny on 09.08.08 at 7:10 pm

Hi Garth. I’ve been waiting for your book since about 1987.That’s about when I started to have ill feelings about over exaggerated economies, runaway house pricing and bullshit Canadian attitudes (particularly in Ontario). Seems like most city folk wanted to behave like movie stars and big wheels. Couldn’t be happy with a nice little house, a car and Saturday night hockey. Their bullshit antics extended all the way up to cottage country where they built godly monumental summer homes and destroyed the very fabric of the land. Look what they’re doing to towns like Midland Ontario. Makes me gag.

I hope they all gag on their bank bills.

Learn some humility.

#209 Calgary rip off on 09.08.08 at 8:02 pm

Latest Calgary Herald article:

House prices overvalued by up to 25 per cent, study warns

Doesnt take a rocket scientist to figure that. How about 100% overpriced? A house worth $180,000 in Hidden Valley is “priced to sell” at $400,000.

All the owners/realtors/whoever/whatever that support these prices are idiots.

#210 Aaron on 09.08.08 at 8:05 pm

First off, i’m a big fan of the website/book, and have been watching the market for the past 6 months… things are looking a lot better (to purchase in my case) than they were 6-12 months ago!

What I have seen with the statistics is just amazing how fast the prices inclined, i’d really like to see some newspapers from a year or two ago with the real estate ads in them. I will check the local library and see what that turns up.

But the underlying idea I hope that is starting to come across to people is that you should be able to get more house for your buck. Or so to speak, the perceived value is changing.

Thanks for all the opinions, I always look for new updates on the site!

#211 Rasputin on 09.08.08 at 8:39 pm

The CREB is STILL showing median sales price for the last 30 days at. $400,000. That’s what, 3 weeks in a row. LYING BS’ers.

#212 Dave in Edmonton on 09.08.08 at 8:41 pm

I had no idea how much of a Real Estate propaganda machine the Edmonton Journal was until now. Today’s from page headline:

Houses overpriced everywhere but Edmonton: report

http://www.canada.com/edmontonjournal/news/story.html?id=70fb8481-6084-45e5-b4a1-9605c1aed839

When you analyze the report you quickly see the data was poorly gathered and the conclusions barely supported. The “researchers” actually used craigslist as a source from rental data. The report compares rent prices to ownership and draws conclusions based on the relationship. The headline could have just as easily read “Edmonton Rent Prices Way Too High” but that would not have calmed the herd the way this “news” item was intended.

Shame on the Journal and the reporter (Bill Mah) for spreading this bull.

#213 Dawn in Calgary on 09.08.08 at 10:19 pm

#208 — Rasputin:

That’s funny, on Sept 2 it WAS below $400k (not quite three weeks in a row). Must have been quite a week to bring that median back up:

Sept 2 2008 Report:
Calgary Metro Area Single Family Statistics
New Listings Last 24 hrs: 46
Active Listings: 5,551
Sold, Last 30 Days: 1,088
Avg Sale Price, Last 30 Days: $ 440,469
Median Sale Price, Last 30 Days: $ 398,000

#214 dd on 09.08.08 at 11:14 pm

#206 Calgary rip off,

You might be right, however, people are picking houses up eventhough the prices have dropped 10% from the 2007 highs. Will they go to $180K? If you are so certain you should be shorting some kind of Edmonton or Canadian real estate index.

Make some money off these “idiots” then … .

#215 Noz on 09.09.08 at 12:52 am

Hi Garth. I’ve been waiting for your book since about 1987.That’s about when I started to have ill feelings about over exaggerated economies, runaway house pricing and bullshit Canadian attitudes (particularly in Ontario). Seems like most city folk wanted to behave like movie stars and big wheels. Couldn’t be happy with a nice little house, a car and Saturday night hockey. Their bullshit antics extended all the way up to cottage country where they built godly monumental summer homes and destroyed the very fabric of the land. Look what they’re doing to towns like Midland Ontario. Makes me gag.

I hope they all gag on their bank bills.

Learn some humility.

Johnny,

You should go to some other blogs of other realtors and add this sentiment of yours over there too. Perhaps it’ll keep their bullshit spin in check.

#216 Mark on 09.09.08 at 1:50 am

Expat in NC, that UBC study was bought and paid for by Realtors. Its methodology is severely flawed. What else do you expect?

#217 patriotz on 09.09.08 at 4:03 am

“Urban real estate values set to plunge, UBC expert forecasts”

This “expert” is saying that Vancouver, by far the most expensive city in Canada, is less overvalued than Ottawa, which is the cheapest million+ city outside Quebec.

The “study” was directly funded by the BC RE industry.

#218 Mike.Slob on 09.09.08 at 4:03 am

#200 neutral on 09.08.08 at 4:46 pm
Yes, it is quite obvious that RE boom is OVER, therefore this is very interesting for me. “RE boom is OVER” is very clear for me. And I Do believe it.
I’m looking for more evidence here on this site for RE Crash in Toronto what is quite obvious,too.
“RE Crash in Toronto” is unclear for you?
You Don’t believe it?

#219 guest on 09.09.08 at 4:08 am

Just found this blog and love it.

I lived in Vancouver in 2000 and moved down to the States. Last year when I came back to buy a summer place and was shocked by the high price. Also in 8 years, Vancouver has become busier and more crowded place than I remembered.

Anyhow we bought a duplex between Kitslano and Point Grey in August 2007. We spent lots of effort and money to furnish the place and finally got it finished this August. And we decided to sell, since we just don’t spend enough time here (we have other houses in other places).

The realtor from whom we bought the house told us the market was really tough: more listings and slower sales. We were concerned.

But before we even got the hosue ready for sale and listed, the realtor brought a buyer and we sold the house right away, with 6% more than what we paid last year. Of course, we don’t make money if you deduct commission and taxes.

I wonder if we are just lucky or the market is not as bad as people think.

What is your opinion?

#220 pbrasseur on 09.09.08 at 10:53 am

This blog still active or Garth gone campaining?

Relax. I’m here. Campaigning, yeah. But also saving up for a nice, scary new post. — Garth

#221 y3maxx on 09.09.08 at 10:55 am

Mercer Report/2008…The World’s best places to live…

http://images.businessweek.com/ss/08/06/0611_mercer/index_01.htm

#222 lgre on 09.09.08 at 11:05 am

Aaron – it’s going to be a while before you get more house for your buck, the only thing that chaged in the market is that listings are up, the couple of % reductions hardly do anything when you are talking about 50% overpricing.

guest – there is always a greater fool, market does not matter.

#223 Mr.Simpleton on 09.09.08 at 11:23 am

Guest, nice try.
Are you the guy who got the job to be a blogger posting positive spin for BCREA?

#224 Noz on 09.09.08 at 11:48 am

GUEST:

Well…out of 6 billion people at least one sucker had to be found.

I despise what people like you do…let me be frank. Actions like yours…i.e. buying and flipping, etc….is what has caused alot of the problems we see today in housing. Actions like yours has fed into the greed that has essentially eroded the essence of what housing is supposed to be…a place where people live, grow up, live their lives.

You got lucky…like many others. But my heart wouldn’t have bled if you lost it all. Don’t take it personally. You are faceless to me…but your actions are what I despise.

#225 U.B.A.B. on 09.09.08 at 12:06 pm

Fannie Mae, Freddie `House of Cards’ Prompts Takeover (Update2)

By Dawn Kopecki

Sept. 9 (Bloomberg) — Fannie Mae and Freddie Mac used accounting rules that created a “house of cards” as the housing market descended into its worst slump since the Great Depression.

While the two largest mortgage-finance companies met regulatory requirements for their capital, reviews by the Treasury, the Federal Housing Finance Agency and the Federal Reserve found they probably wouldn’t weather the highest delinquency rates on record, lawmakers and regulators said.

“Once they got someone looking closely at Fannie and Freddie’s books, they realized there just wasn’t adequate capital there,” U.S. Senator Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, said after a briefing by Treasury officials. “They found out they had a house of cards.”

Treasury Secretary Henry Paulson and FHFA Director James Lockhart seized control of Fannie and Freddie less than a month after Lockhart, whose job is to oversee the companies, declared them “adequately capitalized” under law. The discrepancy highlights the flaws in legislation and in the regulatory oversight of Fannie and Freddie that didn’t demand they keep more assets as a cushion against losses, according to Joshua Rosner, an analyst with Graham Fisher & Co. in New York.

“Fannie and Freddie’s accounting during the housing crisis appears to have been more fantasy than reality,” said Rosner, who first highlighted problems in 2003, before the two companies were forced to restate about $11.3 billion in earnings.

`Not Adequate’

Washington-based Fannie had $47 billion of regulatory capital as of June 30, about $9.5 billion above what FHFA required, according to company filings. McLean, Virginia-based Freddie’s capital stood at $37.1 billion, a cushion of about $2.6 billion over FHFA’s standard, filings show.

“They met the legal definition,” Lockhart said in an interview with Bloomberg Television yesterday. “As I have been telling lawmakers for a long time, that legal definition was not adequate.”

As their stock prices declined and yields on their debt rose to the highest in at least 10 years above benchmark rates, the FHFA saw “big questions out there,” Lockhart said.

“The issue is that the exposures are continuing and continuing to grow and it looked like in the future there were going to be significant issues and they were going to have capital problems,” Lockhart said.

Lockhart said he brought in financial examiners for the Federal Reserve and the Office of the Comptroller of the Currency to help with a review of the companies’ finances. Treasury also sought help from Morgan Stanley officials, who prepared a report after trawling through the accounts.

`Too Low’

After looking through the finances, Fed examiners deemed their capital reserves too low, Dallas Fed President Richard Fisher said yesterday.

“We concluded that the capital of these institutions was too low relative to their exposure,” Fisher said in response to an audience question after a speech in Austin, Texas. Further, “that capital in and of itself was of low quality.”

Fannie counted $20.6 billion in so-called deferred tax credits toward its $47 billion of regulatory capital as of June 30, according to company disclosures. Freddie applied $18.4 billion in deferred-tax assets toward its $37.1 billion in regulatory capital in the second quarter.

Fannie and Freddie have posted four straight quarterly net losses totaling a combined $14.9 billion and have said they anticipate more. The tax credits don’t have any value unless the companies are generating profit.

`Not Even Real’

“That’s not even real money,” Shelby said.

Senator Christopher Dodd, a Connecticut Democrat and chairman of the Senate Banking Committee responsible for oversight of the companies, said yesterday he plans to hold hearings on why the Bush administration didn’t act sooner.

“Why weren’t we doing more, why did we wait almost a year before there were any significant steps taken to try to deal with this problem?” Dodd said in a Bloomberg Television interview. “I have a lot of questions about where was the administration over the last eight years.”

Market Value

After more than eight years of debate, Congress passed a law in July expanding Lockhart’s authority to raise capital requirements, curb growth and to take over the companies’ operations in a conservatorship or liquidate their assets under receivership. The legislation also gave Paulson temporary power to inject unlimited sums of taxpayer money into the companies.

The companies just four years ago admitted to $11.3 billion in earnings misstatements that led to $525 million in federal fines, tighter regulatory controls and the ouster of the CEOs.

Paulson said he stepped in to prevent a collapse of the companies, protecting investors owning more than $5 trillion of Fannie and Freddie corporate debt and mortgage-backed securities while potentially sacrificing holders of the common and preferred stocks.

The companies yesterday lost the majority of their market value, with Fannie falling 90 percent to 73 cents in New York Stock Exchange composite trading, its lowest level since 1982. Freddie dropped 83 percent to 88 cents, the lowest since the regular common stock began trading 20 years ago.

Fannie today climbed about 15 cents, or 20 percent, to 88 cents at 10:12 a.m. in New York trading. Freddie was unchanged at about 88 cents.

#226 dotava on 09.09.08 at 12:12 pm

Guys – don’t expect much respond from Garth – we are in election mode. :-)
Anyway hope is that Garth and his activist will explain to Conservatives voters that there house value will plunge thanks to present government (0/40 – Canadian subprime) and that is better to vote even for “marihuana” party (hopefully they will vote better than those two – no offense).

#227 brazer on 09.09.08 at 1:07 pm

Lehman shares plunge on fears of deal fading
http://www.reportonbusiness.com/servlet/story/RTGAM.20080909.wlehman0909/BNStory/Business/home

“Lehman’s stock plunged as much as 45 per cent in late-morning trading, and is down more than 90 per cent this year. The stock fell as low as $8 before recovering a bit to $9.89, down $4.26 or 30 per cent, at midday.”

first it was bear, then indymac, then frannie n’ freddie…next will be lehman?

#228 Noz on 09.09.08 at 1:29 pm

I see freedom of speech is high on your list Garth…good to know as a politician.

#229 $fromA$ia on 09.09.08 at 1:32 pm

Guest, were the buyers obliviouse immigrants as it sounds that you have been fairly oblivious yourself since being away from Luscious Vancouver.

#230 Noz on 09.09.08 at 1:35 pm

OK…now I’m confused…first the post disappears, then re-appears, then disappears…and THEN reappears…

What the…

#231 lincoln on 09.09.08 at 2:41 pm

#216
consider yourself lucky. WHen selling in any market, any house can sell in days or weeks or months. You were fortunate there was a buyer looking for a home like yours right when you wanted to sell. Most sellers are not so lucky these days…

#232 Calgary Rip Off on 09.09.08 at 2:42 pm

Nice comments dd.

Yes in Calgary people will pay whatever is required of them.

Like I said, there are almost a million idiots ready to support the rip off prices in this city. Its truly disgusting and nauseating. I am visiting the mls site and the other blogs less and less because I dont want to get permanent hypertension from all the greed and lust I see. Its truly disgusting.

I highly doubt houses will go back to $180,000 prices. The greed wont let it. Tragically it equals that people in the service sector WONT move here because the wage housing disparity is so large. DONT MOVE TO CALGARY UNLESS YOU ARE GETTING HIGH WAGES-OTHERWISE BE PREPARED TO BE SHAFTED.

Apparently in Calgary it is too much to ask to pay prices for what things are actually worth. Its all about market value and that crap. Makes me want to fling mud on the walls of some of the inside of those new shacks.

If I find a house that has payments I can afford and is decent, nothing spectacular, but not in a crappy part of town with gangs, guns, attack dogs, the hood, uneducated, then buying will be more attractive.

Other than that I would presently rather enjoy my family, job, hobbies, and breathing(being alive and not frozen to death) than worrying about what the market will do, because most of those people are a bunch of kids running around in suits. Its a pathetic joke and its disgusting.

#233 No Fool.... on 09.09.08 at 2:49 pm

GUEST #216 Said:
“We spent lots of effort and money to furnish the place and finally got it finished this August.”

“we sold the house right away, with 6% more than what we paid last year. Of course, we don’t make money if you deduct commission and taxes.”
_________________________________
Run some numbers, my friend.
There’s no way you made a penny in this endeavour.
If you account anything for the value of your time (which might be either extremely low or very high – depending on accounting methods), you’re in the hole on and off paper.

#234 holgs on 09.09.08 at 3:10 pm

Something I posted for y3maxx a few weeks ago but he obviously didn’t bother to read:

Foreclosures smack home prices – down 29.3% – San Francisco

Foreclosures smack home prices – down 29.3% – San Francisco

“(08-19) 14:28 PDT SAN FRANCISCO — Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area’s median price in July, sending it down nearly 30 percent to a level not seen in more than four years….”

Also, from the same article linked above:

“According to MDA DataQuick, the median price for both new and resale homes and condos in the Bay Area stood at a 53-month low of $470,000, compared with $665,000 a year ago, a slide of 29.3 percent. For resale homes, the median was $485,000, a 34.3 percent drop from last July’s $738,500.”

Comparing the West Coast of Canada to the Bay Area / Florida is sooo 2006… Shouldn’t they be comparing their real estate to ours, now that OUR real estate is so much more valuable than theirs?

“Prices in San Francisco will level off and start increasing again… look at Vancouver! They have an HIV infection level comparable to Botswana, but their prices are DOUBLE ours!”

– Anonymous SF Realtor(R), 2008

#235 prairiegopher on 09.09.08 at 3:16 pm

Garth, is this blog done until after the election? The reason I’m asking is because ther have been more pieces of evidence pointing to a big drop in almost everything in the past few days and nothing has been said here. Just wondering.

#236 My_View on 09.09.08 at 3:21 pm

Dam, the TSX is taking a beating. I love when this happens. Time to buy like a drunken sailor……

#237 shelley on 09.09.08 at 3:54 pm

re: election – any thoughts on whether any party would ever consider making interest on mortage a tax deduction (similiar to the US)

#238 Noz on 09.09.08 at 4:10 pm

You got lucky.

#239 neutral on 09.09.08 at 4:12 pm

Mr. Garth did not put any more bad news for quite a while. People start starving. Mr. Garth, please put more wood into the RE fire – people are getting cold.

#240 pjwlk on 09.09.08 at 4:42 pm

Hamilton Spectator article: Local Real Estate sales plunge by 20% since last month!

“But it does not signal a slip toward a housing crisis like the one in the United States, says the area realtors…”

Yeah…okay…

#241 Downsized and Delighted on 09.09.08 at 5:09 pm

Guest: I looked at a Half Duplex in that same area a couple of years ago. I assume your property was a half-duplex? I was shocked at the high prices.
One thing I did learn about that market was that view properties are highly desirable. Did your property have a view? If not, I do think you did well, because that market has definitely softened. It has not stalled totally however. But in time, I think it will.

#242 T.O. GIRL on 09.09.08 at 8:20 pm

What exactly does housing starts mean?? and how are we up in Ontario? what effect does this have on real estate and prices going forward?

can someone please answer this question for me?

#243 Sam on 09.09.08 at 8:31 pm

now who are these people buying houses..?!??! mind boggling..

http://canadianpress.google.com/article/ALeqM5jsY-zLSrB0Bq3Y4_1AMlMppLP2Bw

#244 squidly77 on 09.09.08 at 10:14 pm

i like scary posts

#245 smwhite on 09.09.08 at 10:33 pm

#217

Relax. I’m here. Campaigning, yeah. But also saving up for a nice, scary new post. — Garth

Does it go a little something like this? Worldwide stock markets are back to late 2005, early 2006 levels…

Thats a lot of dollar cost averaging happening…

http://ca.finance.yahoo.com/q/bc?s=^GSPTSE&t=5y

http://ca.finance.yahoo.com/q/bc?s=^DJI&t=5y

http://ca.finance.yahoo.com/q/bc?s=^FTSE&t=5y

http://ca.finance.yahoo.com/q/bc?s=^HSI&t=5y

With housing levels in the USA for example, now at 2004 levels after starting their declines in 2006, can we expect the Canadian housing market to follow suit and over the next couple years to fall to 2006 levels?

#246 lgre on 09.09.08 at 10:37 pm

housing starts – The number of residential building construction projects that have begun during any particular month.

It’s all new contruction, it dosnet really mean anything..resale market is what dictates the price not new construction, I witnessed first hand how resale is coming down and the dummies who believe that the builders price is what reflects the actual price. They are all buying into negative equity without realizing it..but when they wake up it’s too late.

I went to a builder in brampton to see what they had a few months back, a single car detach, 1700sqft was going for $320 right behind some train tracks. Now you were able to purchase and older resale around 10 years old for $265.. yeah the newer homes have a walkin closet but it’s not worth another $55k to me. I now see those same houses for $249-259.

i sold my 8 month old new home back in may, the same house now is going for $10k less, go figure!

#247 Rick on 09.09.08 at 11:41 pm

220 Noz on 09.09.08 at 11:48 am GUEST:

Well…out of 6 billion people at least one sucker had to be found.

I despise what people like you do…let me be frank. Actions like yours…i.e. buying and flipping, etc….is what has caused alot of the problems we see today in housing. Actions like yours has fed into the greed that has essentially eroded the essence of what housing is supposed to be…a place where people live, grow up, live their lives.

You got lucky…like many others. But my heart wouldn’t have bled if you lost it all. Don’t take it personally. You are faceless to me…but your actions are what I despise.
——————–
Noz, WELL SAID. Who needs healthy communities for grounded families? What difference will it make if dad only sees the kids on weekends due to the two jobs necessary to feed the bank? What impact could the neighbours 3 tenants have on the neighbourhood? So on and so on. Current trends in housing have done more to fracture the middle class than anything else in the history of this country. Blessed be the crash.

#248 JD on 09.10.08 at 12:03 am

Rip-Off
http://www.mls.ca/PropertyDetails.aspx?PropertyID=7236600

#249 kestral on 09.10.08 at 12:18 am

No new articles lately, is Garth busy with the election?

Patience. I will return in a few hours. — Garth

#250 CalgaryRocks on 09.10.08 at 12:21 am

I despise what people like you do…let me be frank. Actions like yours…i.e. buying and flipping, etc….is what has caused alot of the problems we see today in housing.

=====================

‘Flippers’ don’t just buy and sell. They also put a lot of work and money into a property before selling it. If you had the skills and the imagination to turn a property that is falling appart into something that someone wants to pay top dollar for, you would do it too.

As a property owner, I’d rather have a flipper buy next to me and improving the property and the neighborhood rather than some white trash that will store parts from his 6 cars on the front lawn.

In fact one of the real problems in Calgary is dummies that see fully renoed properties on their street selling at a premium thinking they can get the same $$ for their piece of crap with original 1964 paint.

#251 rant in Calgary on 09.10.08 at 1:02 am

Noticing some competitive price reductions going on in Calgary. The Wolves are getting hungry.

#252 Sam on 09.10.08 at 2:58 am

folks .. this market is not crashing.. i am bored and going home…

http://canadianpress.google.com/article/ALeqM5jsY-zLSrB0Bq3Y4_1AMlMppLP2Bw

#253 GenXer on 09.10.08 at 4:51 am

Hi T.O. Girl,

Housing starts are defined as: Economic indicator that measures the number of residential units on which construction is begun each month. Monthly percent changes reflect the rate of change of such activity. The level of housing starts is widely followed as an indicator of residential construction activity. …

The CMHC just announced that housing starts increased on an annual basis to 211,000 units in August from 186,500 in July. This sounds pretty impressive until you read through the stats:

Canada-wide, housing starts have been tracking like this:
2003 – 218,426
2004 – 233,431
2005 – 225,481
2006 – 227,395
2007 – 228,343
2008 – 211,000 (as per the last report)

Those new August figure is the lowest housing starts figure in 6 years and a 7.5% drop in housing starts from last year – which is hardly an impressive stat.

Not to mention that this is a 12-month moving average, and the best months of construction are behind us – not to mention the tightening of the credit market and loss of high-risk mortgages leading into the fall. The proper way to look at changes in the overall industry is to gauge year over year changes. Last year housing starts (annually adjusted) for August were 226,500. This equals a 7% drop in housing starts.

Of course, I say “proper way” in referring to a correct financial analysis. If I were the CMHC and were interested in issuing positive-spin propaganda, I would use month over month figures and point out the 13% upswing in housing starts, rather than the 7% year over year decline.

#254 GenXer on 09.10.08 at 4:57 am

Hi Everyone – on housing starts, just saw this now. Wow, I thought I was a pessimist on housing, but the Financial Post is the clear winner in this department…

http://www.financialpost.com/story.html?id=780662

Toronto’s condo craze drove national home construction higher in August, but undress the figures and the Canadian home-building sector continues to slow and will likely drag on economic growth, economists say.

The seasonally adjusted annual rate of new-home construction jumped 13.1% to 211,000 units in August after falling by 13.6% to 186,500 in July, Canada Mortgage and Housing Corp. figures showed yesterday.

“The jump in August starts provides some optimism, along with last Friday’s August employment report, that the economic picture may not be as bleak as the GDP numbers implied in the first half of this year when the economy recorded essentially no growth,” said Paul Ferley, assistant chief economist at RBC Financial Group.

Nevertheless, Mr. Ferley expects home-construction activity to continue its downward trend. He said most of the increase in August was a result of a rise in the volatile multiunit segment, such as condos and townhouses, which makes monthly movements in the new home construction indicator notoriously volatile.

In August, construction of urban multi-units soared 25.2%, while single homes increased at a much slower pace of 2%. But in the first eight months of 2008, actual starts in rural and urban areas combined were down an estimated 4.3% compared with the same period last year.

“As well, the earlier deterioration in affordability will likely reassert a downward trend in the starts data going forward for the remainder of this year and through 2009,” Mr. Ferley said. “Thus, despite the upward surprise in the August starts data, we still expect starts to average a little above 180,000 next year, down from a recent annual peak in 2006 of 229,000.”

Pascal Gauthier, economist at TD Bank Financial Group, said the hangover from the condo craze in the Greater Toronto Area was skewing the national figures. He said the remnants of this condo boom would likely provide marginal support to the sagging economy in the near term, but the effects would soon wear off.

“It is only a matter of time before the softer existing home market conditions, also present in Ontario, are reflected into the market for new condos,” Mr. Gauthier said. “While there remain a number of projects in the pipeline that could keep starts near the 190,000-to-200,000-unit level for the balance of this year, our expectation is that Canadian housing starts will be nearer a lower but still healthy 175,000-to-185,000 unit level in 2009-10,” he said.

#255 Future Expatriate on 09.10.08 at 5:34 am

[New] “housing starts” are how many new houses or condos or units in new developments are started, or begun. In a boom market, tons of developers are building new houses; thus tons of “housing starts”. In a crashing market, no one is buying, current developments go unsold and unwanted at any price, [new] “housing starts” go into the toilet, and many developers go out of business. A huge ripple effect ocurrs across the entire economy as construction workers are laid off and leave the area, the home centers downsize or go out of business as people quit putting money into their depreciating homes, etc. [New] “housing starts” are merely another indicator (although a huge one) that the market is crashing and continuing to crash. Housing starts will not increase until a market has turned around significantly.

#256 dotava on 09.10.08 at 8:51 am

#239 neutral on 09.09.08 at 4:12 pm

Garth started “RE fire” but he doesn’t have to add the “wood” – just go outside, look around and see how many signs is there or even better take 2 hours of your Sunday spare time and check any open house. Did it by myself last Sunday as I posted early.

#257 Popping Bubbles on 09.10.08 at 8:56 am

T.O. Girl

Patience! Builders build, that is what they do. This is why new construction always exceeds demand at the end of the cycle. By the time construction companies have bought the land, spent money on planning, approvals and the like, they might as well go ahead and build to recoupe their investment. Even if they sell units at 30% less than today’s prices than simply walking away from in-flight projects.

In the meantime, while they build, demand keeps falling and inventory keeps rising. When the new projects are complete (if they even get built), they will add to the glut of housing inventory available for sale.

The result? Even bigger price declines than if builders had removed their foot from gas pedal sooner.

Housing prices in Toronto are at over 4x incomes, compared to 3x income at the PEAK of the last housing boom (which the Toronto market took about 10-years to recover from). Toronto prices will be coming down hard and fast.

#258 MBS-Economy on 09.10.08 at 9:37 am

Many of you don’t understand the stats regarding “Housing Starts”. A condo that was sold 3 years ago with 500 units and is now just completed in August is included in the August housing start. That’s how absurd this statistic is ………. in other words these numbers mean nothing.

#259 Finanzkrise on 09.10.08 at 9:45 am

The Vancouver Sun has once again dutifully published almost verbatim a defensive report from CMHC; this time stating that the Canadian housing market is still very robust and ‘defies slump predictions.’

http://www.canada.com/vancouversun/news/business/story.html?id=6fe2e081-4309-4945-80d9-99219f077201

#260 Rich Renter on 09.10.08 at 9:46 am

Yes, Sam #243. I know who is buying these houses and Something needs to be done about the immigration policy!

I was talking to a coworker yesterday. She has a “friend” that just moved to Vancouver, the family bought a house for 900k. The husband “parked” the wife and 3 kids here but he still works and lives over-seas. Since the wife has no income, she claims “low-income”, enjoys all the benefits that Canada has to offer such as free health care, free education, pays no taxes, govt paid monthly child suppliments, etc. The husband enjoys a huge income but works in a country that doesn’t take much in the way of taxes.

To sum up the story? The family has a huge house, very large income, pays zero taxes in Canada, has full benefits, education, health care, Canadian passports, safety, security, a future pension, monthly child bonus’ all thanks to the Canadian tax payer.

Is our Government really that stupid???

#261 smwhite on 09.10.08 at 9:50 am

#234 holgs

y3maxx is living in Candyland, down on Lollypop Lane.

He also doesn’t factor in the 50% higher salaries those in San Fran make versus Vancouver, actually the median salary in Vancouver is actually lower then that of Ottawa or Toronto.

But after seeing that Vancouver was called the 4th greater place on the planet to live, I stand corrected, the speculation and unsustainable growth is justified, by one article.

I guess the people working in the service industry will just pitch tents in the lush green parks and foothills of the Rockies, cause we know the average price of a home to the average salary is no longer arms distance apart.

http://www.payscale.com/research/US/City=San_Francisco/Salary

http://www.payscale.com/research/CA/City=Vancouver/Salary/by_Years_Experience

http://www.payscale.com/research/CA/Country=Canada/Salary/by_City

#262 patriotz on 09.10.08 at 10:53 am

any thoughts on whether any party would ever consider making interest on mortage a tax deduction (similiar to the US)

Let’s hope not. It is one of the worst tax policies anywhere in the Western world and is directly responsible for fueling the housing bubble and huge personal debt in the US.

Subsidies to buyers (like mortgage deductibility) only make housing more expensive.

#263 brazer on 09.10.08 at 12:41 pm

Ford cuts 500 Oakville jobs
http://www.thestar.com/article/496561

“Ford is cutting another 500 jobs at its assembly plant in Oakville because of falling demand in the U.S. market.

The company confirmed today it will phase out the remainder of a third shift in its body and paint shops starting next month. ”

not good.

#264 The Tallyman on 09.10.08 at 1:34 pm

#260 Rich renter

re: I was talking to a coworker yesterday. She has a “friend” that just moved to Vancouver, the family bought a house for 900k………….

That’s how myths get started.
As a home owner who 10 yrs ago lost his & had to go begging for social assistance discovered that “property owners” are not entitled to assistance.
I was callously instructed to sell my property.

Makes you want to stand up place your hand over your heart and sing “o Canafart”

#265 smwhite on 09.10.08 at 1:35 pm

This is a great two part video with Peter Schiff talking with Australia media. It speaks volumes of whats about to take place in the world economy.

http://www.youtube.com/watch?v=l9uPEeVQ5Yc

http://www.youtube.com/watch?v=qAwt3__sJgo

#266 The Tallyman on 09.10.08 at 1:56 pm

Saved by Canadian Tire!

Just a bit more on the begging for assistance thing.
This happened after Unemployment benefits ran out.
Even promised to payback all $
and that I only required assistance for 1 or 2 months max…

Anyway, after finding out that homeowners are only entitled to the “finger” in this wonderful country I had to get creative in avoiding default in my mortgage payments.

As a last resort I made several trips to Canadian Tire and got cash on the canadian Tire card.
At the bargain rate of only 28% interest… ya right.

I know… this is insane,
but when your back is to the wall
what else can you do!
luckily a job came in a few weeks and I managed to come out of it OK and with my home intact.

You quickly see how quickly the money lending vultures begin to swarm when you are down on your luck.

#267 Dr Phil on 09.10.08 at 2:02 pm

Must be a Greater/Bigger fool…

A less than a year old 2,500 square foot house close to Bathurst north of Major Mac (Quite north of Toronto) listed in the mid $600,000s with hardly any back yard or space between houses, was on the market for months…and finally sold in the low 600,000s. The new owner must think he or she got a great deal/steal and has true bragging rights (high fives all round!!!).

I’m amazed at these brave (ignorant?) souls who are oblivious to the current state of the local and global economy. This same neighbourhood has smaller single car garage homes listed just under $600K.

#268 Mike.Slob on 09.10.08 at 2:11 pm

Canadian Economy is going down.
Today news:
$ 762 /oz
$ 10.9/oz
$ 102.4/barrel
yesterday TSX hit low 12,146 points.
I’m positive that in US is coming bad recession and also
Ontario,Quebeck,BC and Alberta will be in recession too.
About new housing starts in Canada will see worst decline from November 2008 and during 2009.
However 2009 will be very,very difficult year for US and Canadian economy and RE Market . The RE market is crashing and continuing to crash.
About RE Market in GTA we will see double digits declines of sales to March 2009, and after that is comming recession and higher interest rates.

#269 $fromA$ia on 09.10.08 at 2:43 pm

PatriotZ

So is non declared rental suite income, it makes housing more expensive and everybodies doing it.

#270 jelly on 09.10.08 at 2:44 pm

Garth,

That’s a week now that there has not been a new
posting. I need my real estate gossip-PLEEAASE!

#271 Noz on 09.10.08 at 3:02 pm

CalgaryRocks:

‘Flippers’ don’t just buy and sell. They also put a lot of work and money into a property before selling it. If you had the skills and the imagination to turn a property that is falling appart into something that someone wants to pay top dollar for, you would do it too.

Oh please…what imagination? Every single flipped property looks the same. Hardwood floors, granite countertops, stainless steel appliances, hidden/resessed lighting…sound familiar? The only difference is what brand of items they use…BFG. It doesn’t take much to be a flipper…just being an asshole is enough.


As a property owner, I’d rather have a flipper buy next to me and improving the property and the neighborhood rather than some white trash that will store parts from his 6 cars on the front lawn.

That’s where you are wrong. Flippers have no sense of community. They couldn’t care less who they sell to so long as they make a profit. I can’t even begin to understand how you could think that.


In fact one of the real problems in Calgary is dummies that see fully renoed properties on their street selling at a premium thinking they can get the same $$ for their piece of crap with original 1964 paint.

And you think flippers produce quality rebuilds? They look out for their bottom line and then take off. Some sucker comes and buyers a greedy flipper’s redo and 6 months later the house is falling apart.

These are parasites..nothing else.

#272 POL-CAN on 09.10.08 at 3:20 pm

#262 patriotz

We in Canada do not pay taxes on the profit of sale of our primary residence. In the USA I belive that they do…. Not sure what is better in the long run… I guess it depends on where in the boom/bust cycle you sell….

Also… Even if a portion of the interest was a tax write off, it would go a long way in helping off set the excessive amount paid in interest over a typical life of a mortgage. (Compound interest is a b$&@h)…..

So what is better? Capital gains on sale profit or x number of years of compound interest?

#273 neutral on 09.10.08 at 4:12 pm

Dear theatre visitors! “RE Crash” movie has been cancelled until farther notice. Your tickets will be refunded. Sorry for the inconvenience.

#274 lgre on 09.10.08 at 5:25 pm

“Since the wife has no income, she claims “low-income”, enjoys all the benefits that Canada has to offer such as free health care”

free health care???? wow, you really got my blood boiling on that one, we pay an enormous amount of tax just to get “free health care” on top of that the health care industry SUCKS, I would rather pay half the taxes and supply for my own health care like the U.S. I have been wating for knee surgery for the past 7 months and they are telling me thats its going to be another 5 at least. Free health care? In the U.S I’m sure this would of been done along time ago. Sorry to get off topic but nothing is for free, we pay a hefty fine for people who go to emergency and take up doctors time just to get a band-aid, I’ve seen it done. I’m done venting

#275 lgre on 09.10.08 at 5:25 pm

“Since the wife has no income, she claims “low-income”, enjoys all the benefits that Canada has to offer such as free health care”

free health care???? wow, you really got my blood boiling on that one, we pay an enormous amount of tax just to get “free health care” on top of that the health care industry SUCKS, I would rather pay half the taxes and supply for my own health care like the U.S. I have been wating for knee surgery for the past 7 months and they are telling me thats its going to be another 5 at least. Free health care? In the U.S I’m sure this would of been done along time ago. Sorry to get off topic but nothing is for free, we pay a hefty fine for people who go to emergency and take up doctors time just to get a band-aid, I’ve seen it done. I’m done venting

#276 David on 09.10.08 at 5:36 pm

Even with mortgage interest deductibility in the USA, there is no evidence to suggest it made the crash there better or worse. Joe Clark brought the issue up briefly in the 1980’s and wound up making a fairly hasty retreat when even the most mainstream economists skewered the idea. Not going to happen in Canada.
The Mulroney government in its infinite wisdom killed the RHOSP programme which actually used to tax system to encourage families to save and have larger down payments. That probably will not be coming back in any of our lifetimes. When the taxation system is used for things other than raising revenue the end result is market distortion and imbalances. That was the problem with the income trusts in Canada. Having similar economic entities like income trusts and corporations taxed at vastly different rates was not going to work. Even if there was a deductible component on housing interest costs, it is unlikely affordability and accessibility would be enhanced. Hardly a shrewd use of fiscal policy.

#277 Observer on 09.10.08 at 6:30 pm

Garth,
I know you’re bombarded with questions but I’ really like to hear your thoughts on this. While the bubble is inevitable and surely coming to fruition, different locations in Canada have economies based on different industries. Some of these industries are more resilient to the impact of a serious downturn in housing prices. Take for example Alberta. It has a strong (for now) oil industry. A substantial portion of the population working for the oil industry are not reliant on the Housing industry, so by virtue of this the rest of the economy will still survive albeit at a slower rate. These workers will still be able to buy furniture, go to dinner, lease a new car etc. Similar condition applies to manufacturing in the east. While they are having issues of their own, it’s not directly impacted by conditions of the housing market.
But take the west coast, the Vancouver lower mainland. The biggest industry (legal that is) we have is all housing related. It’s been the largest contributor to the local economy for the last few years. So much so that much of the labor force has shifted to trades. Drywallers,, painters, electricians etc are making incredible sums of money like no time in history. These are the people supporting all the smaller industries such as furniture, cars etc. Many of these workers are also further fueling the RE by investing (speculating) in second homes and condos. My only conclusion therefore is that when the turn starts to accelerate on the west coast it could potentially have a much bigger impact of the greater local economy. It’s comparable to the game of Kerplunk, all the balls are still in play but there’s only one stick holding them all up.

#278 wealthy renter on 09.10.08 at 6:47 pm

Rich Renter,

I have a better one.

My wife and I recently went to visit her retired high school principal who lives in Mississauga. He and his wife have lived in Canada for over ten years and were turfed out of their son’s home. They own multiple properities in their country of origin. I have visited one of them.

Both have never had a single day of paid employment in Canada, and if you factor in the old age security they both collect, their sparkling new, subsidized 1-bed room senior’s home, and all kinds of programmes they have access to (health care,) I would guess they receive close to 40K in subsidies & welfare.

To top it off, they consume virtually nothing in Canada. They spend three months a year in the old country, where they shop and bring back suitcases full of clothing, electronics and very cheap medicines etc.

This is not an anti-immigrant rant. My wife is an immigrant, as are most of my friends. There is simply a stunning amount of money directed at social programmes in this rich country.

#279 Ryan Lewis on 09.10.08 at 7:50 pm

i really don’t mind if prices go up or down, i just hope that people act sensibly and make up their own minds using numerous sources, both bullish and bearish. economists lately are just guessing, look at jeff rubin at cibc who changed his mind a week after putting forecasts on both the price of oil and the tsx. even your ‘messiah’ garth has been wrong before…http://stockbullz.com/What-Garth-Turner-Wrote-In-1999

so take everything with a grain of salt. the sun will come up tomorrow

#280 lgre on 09.10.08 at 8:45 pm

“Rip-Off
http://www.mls.ca/PropertyDetails.aspx?PropertyID=7236600

Some ill person will soon buy that..god help their soul

#281 David on 09.10.08 at 10:03 pm

Igre that is a real home of genius. It reminds me of my grandparents abandoned homestead house. When times got better grandma and grandpa subdivided their large yard and put up a new home and let the old homestead house lie fallow. The realtor details are pretty sketchy regarding age. At $837 a square foot the bargains just keep coming down the pike. Awfully expensive for an old timer don’t you think? I doubt the 7 Star hotel in Dubai had construction costs per square foot rivaling that priceless Richmond gem.

#282 Rich Renter on 09.10.08 at 11:46 pm

Yes Igor! You and I are paying a lot in taxes for Health care, education, etc. My point was, this family (and many others in the Vancouver area) aren’t paying ANY TAXES AT ALL!!

They receive the same (if not better) benefits and better services than you and I do. We not only pay for ourselves and we are paying for them too.

It makes me very angry. I’ve lived in Canada all my life, have worked and paid taxes since the age of 16, put myself through university, continue to work my a$$ off and continue to think that the only people that get ahead in life are those that either scam, steal, or cheat the system.

#283 Noz on 09.11.08 at 1:23 am

We in Canada do not pay taxes on the profit of sale of our primary residence. In the USA I belive that they do…. Not sure what is better in the long run… I guess it depends on where in the boom/bust cycle you sell….

We in the US do not pay gains taxes on sales profits either SO LONG AS profits are below $250K for a single person or $500K for a couple.

#284 Noz on 09.11.08 at 1:26 am

I would rather pay half the taxes and supply for my own health care like the U.S. I have been wating for knee surgery for the past 7 months and they are telling me thats its going to be another 5 at least. Free health care? In the U.S I’m sure this would of been done along time ago. Sorry to get off topic but nothing is for free, we pay a hefty fine for people who go to emergency and take up doctors time just to get a band-aid, I’ve seen it done. I’m done venting

I doubt you’d say that IF you were living in the US. My wife and I pay almost 40% in INCOME taxes alone…PLUS we have to buy our own healthcare….which is a lousy HMO.

This tax value does not include all the other extraneous taxes we pay in the oh so “cheap” US of A. Alot of mis-information about the US flying around I must say.

#285 Noz on 09.11.08 at 1:29 am

Even with mortgage interest deductibility in the USA, there is no evidence to suggest it made the crash there better or worse.

Deductability of mortgage interest is simply a scam used to brainwash people into thinking they absolutely NEED to buy a home to get ahead in life.

In reality, on an average priced $400K home, I’d have to spend $40K a year to get back $10K in taxes. Big whoop. I could rent a place for $20K and put the $10 in my pocket as a difference.

Granted, I’m not taking into consideration home appreciation..but let’s get real. Real long-term appreciate after all taxes, expenses, maintenance, etc…is low at best.

#286 Zoronqueen on 09.11.08 at 1:55 am

MOVING UP IN EDMONTON

Well, we took the plunge and bought up so we went from a 120K mortgage to 300K. We are still trying to sell our house. If we sell we will have made 200K in the 5 years we lived in our old home so it’s not too bad. And based on our income the house is 3.1 X our income which is average on the grand scheme of things.

In our situation, I see ourselves breaking even in terms of value. 5 years ago 300K would have probably bought us around the same kind of house/lot/area. The only difference is we need the bigger now and not then. Also if predicted right in 20 years when we are ready to move we would cash in and move to Vancouver/Victoria when we can afford to retire there.

We are a x generation young family type. So in a few years we will have perhaps my moher in law moving in.

Any comments Garth or others?

#287 Mike.Slob on 09.11.08 at 3:00 am

#273 neutral on 09.10.08 at 4:12 pm
Dear theatre visitors! “RE Crash” movie has been cancelled until farther notice. Your tickets will be refunded. Sorry for the inconvenience.

Hmm,Dear Mr.Neutral!
RE Crash in GTA will be between April/09 and July/09,
and till February/09 or the next six months you’ll see
only double digits decline of sales in GTA.

Facts about RE Market in Toronto Area :
From Jan/2003 to Aug/2008 in GTA were sold 480,854
Resales(MLS) properties,plus about 95,000 new builded properties and sold by owners(est).
Total sold RE properties within of 5 years and 8 monts are over 575,000.
Do we have in Toronto Area increse of population over
one million to suport this Market. No.
From 2003 to 2008 in GTA you can see growth of
population about 520,000 (including over 150,000 newborn, kids and seniors). So it’s very simple you can see difference on the Market
between 65,000 to 95,000 properties in GTA are oversold in that period,
maybe as investment(for rent) or just to flip it.

*Also, for you more bad news in the near future:
The Best Scenario in Canadian economy will be…

-Canadian Real GDP Growth 2008 for now is less than 0.8%,and many analists said that in Ontario will be
in negative GDP.
-B of C Overnight Target rate for June/09 3.50 %
for Dec/09 4.00 %
but this is the best scenario for increase of interest rates from current 3%.
-Canadian Unemployment Rate:
February/2008—- 5.8%
August/2008——-6.1%
December/2008—-6.5%
– Ontario Unemployment Rate:
August/2008——-6.5%
December/2008—-6.9%
-Housing starts in 2009
between 175,000 to 190,000

In every Western country in the world you can see that RE Market(2007/2008) has price correction down between 10% to 30%: USA,UK,
New Zealand,Australia,Spain,Ireland,
Germany,Portugal,France,Holland,Italy,etc.
But Canada is different! However what is coming
Tightening of loans,credits and mortgages.
No more Zero down and 40 years mortgage from Oct/08
Higher property taxes between 5% and 10%(Mississauga will increase taxes 10% every-year
for next 4 years).
Less new Immigrants,Less visitors,and less investments because Canada has the highest taxes and insurances in the World (just after Sweden).
Net Avg.salary in Toronto Area is between $2,500 and
$ 3,500 per month,so how you can support still increase of prices in GTA.
Thank you for your ticket but you should tell us just one bright side of economy and how you see that buying or investing in RE Market will make positive return after 3 years. If you have any positive story Mr”Neutral” than welcome,maybe I will change my mind.
Or can you see TSX stock market:
TSX is down about 20% from high pick in June/08
Oil price is down about 31% from Jul/08
Gold price is down about 27% from Mar/08
Silver price is down about 47% from Mar/08
You should explain your “possitive” facts or many from this theatre visitors will say another Idiot without any fact.

#288 Schroedinger's Bull on 09.11.08 at 3:12 am

#260 You have been misinformed.

The Income Tax Act says that in order to be considered a non-resident for tax purposes, one must sever all or substantially all of their residential ties to Canada.

If he has a spouse, a residence, a Canadian Passport, and children in Canada, he’d be taxed as a Canadian Resident on his worldwide income, regardless of where he earns it, unless there’s a tax treaty with the country he currently lives in. Even if there was a treaty, he’d still legally have to file a tax return to claim the treaty exemption, and in doing so, would legally have to file a tax return for his spouse. His Spouse would also have to file a tax return that noted HIS income, and doing so would eliminate any rightful claim for social benefits provided he makes more than whatever the minimum family income is for claiming such a benefit. She would certainly be entitled to a tax credit for her children, but she’d only get that if she filed a tax return, so I don’t know what sort of payments you refer to, unless they are provincial or some sort of social program. If that’s what they are, then she’s lying, pure and simple. It isn’t the fault of the law that people break it.

If it pisses you off that much, report them to the CRA. Maybe you can scoop up their house when it’s in forclosure and they’re being deported.

#289 anonymous on 09.11.08 at 5:31 am

Observer,

Alberta is driven by construction not oil. Soon, you will see.

#290 Mike B formerly just Mike on 09.11.08 at 9:01 am

TWO THINGS FOLKS

ONE Toronto listings have gone through the roof… maybe that time of year you say but I am getting a ton of listings every day from one of my brokers. Are they cheap…NOPE… still at skyhigh prices for stuff no one ever wanted although a couple are renovated I am sure by a flipper.

TWO
We have yet to hear of the condo development stopped in Toronto posted on a previous blog topic thread a couple weeks ago. Any news yet??

#291 Calgary_rip_off on 09.11.08 at 10:08 am

Zoronqueen:

That is a tentative plan you mention. There are so many variables. You do not know what will happen in 20 years. You may not even be alive then. Or the world may be nuked. If neither of those things happen, the economy may have tanked. There is no way to know now. It is good to have plans though.

Why would you want to retire in Vancouver/Victoria? Do you like rain? Much nicer is Creston B.C. Eastern B.C. beats western, hands down, anyday. Kamloops is also better than Vancouver/Victoria. I have always liked inland better than the ocean. Are you a fisherperson?

#292 Calgary Rocks on 09.11.08 at 10:48 am

I doubt you’d say that IF you were living in the US. My wife and I pay almost 40% in INCOME taxes alone…PLUS we have to buy our own healthcare….which is a lousy HMO.
==================================

I’ve lived in Florida and the overall taxation is comparable with that of living in Alberta. Our employer paid for most of our health care.

The difference is that when I want to see a dermatologist in Florida I call him up and get an appointment within the week.

In Alberta dermatologists are ‘specialists’ believe it or not. So I need to go to my GP 1st, who by the way is clueless and only has 30 seconds to look at me, because he has 200 other people waiting outside. (The people outside are all waiting because they have the sniffles by the way. Chicken soup works but since the doctor is ‘free’ it can’t hurt to pay him a visit, I guess)

Anyways, the GP gets to swipe my medial insurance card first. (Waste of taxpayer money right there), then he can refer me to a dermatologist, get me an appointment that doesn’t even fit within my schedule as a person with a job, and barely 6 freaking months later I get to see this remarkable dermatology specialist! Oh yes, ‘free’ health care is great unless you actually want to use it.

Luckily we’re still young but I am pretty sure that in the long term we’ll move back to the US so that we can actually get some good health care as we start to need it more. I would rather pay for my doctor’s visits cash and buy catastrophic health insurance rather than die on some bureaucrat’s waiting list.

#293 Noz on 09.11.08 at 1:12 pm

What do you think people go through with HMOs? PPO’s are not offered by most firms and if they are, you end up paying about $50-100 a week from your paycheck..AND THAT’s being partially subsidized.

Sorry but unless you’re wealthy and rich, you won’t see a good doctor either. They’d rather leave you dead on the side of street rather than take you into ER only to find out you have no insurance.

There are so many cases in the US of people being transfered to alternative hospitals….even under severe trauma which results in excessive deaths…simply because the patients didn’t have insurance coverage adequate enough for that hospital.

Paying for a doctor’s visit cash and having catastrophic health coverage is risky. Most insurance companies here…EVEN WITH coverage, usually try and stick any ailments and treatments under “experimental” and deny coverage.

I guess if you have cash, then it doesn’t matter does it…all you need to do is spend the $50K for a surgery and you’ll be just fine.

#294 Downsized and Delighted on 09.11.08 at 2:30 pm

286 zoronqueen: If I were you, rather than thinking about 20 years from now which nobody can predict, I would concentrate ALL of my efforts into selling that first house before the rest of the people in Edmonton realize that the market is tumbling.

#295 Calgary_rip_off on 09.11.08 at 4:11 pm

Calgary Rocks: Are you American or Canadian? Im American by birth and a Canadian by marriage. So the United States is so great huh? You should move there then. The United States is garbage. The medical system is fantastic IF you have the insurance. Good luck if you have a car wreck and you have no insurance. I know because I lived most of my life there. If you are not satisfied with the Canadian system, either move there, or get elective procedures done there, or persuade Canada to join the United States and do away with the border crossings.

I really dont know why Canadians think the United States is so great. Nothing great about it really. And this is coming from an American who was born there and chose to leave. My Canadian wife wants to go there for a family vacation, which I’ll go along with, but I personally would never be caught alive there. Its NOT the greatest country in the world. Canada is.

#296 hkris on 09.11.08 at 4:54 pm

If all of you talking about “CRASH”
Why builder keeps launching new subdivision. Example in Caledon.
http://strawberryfieldsforever.ca/

#297 Expat in NC on 09.11.08 at 5:00 pm

I have to agree with Calgary Rocks above regarding Healthcare in the US. The only reason I am bringing this up in a “housing” blog is to clear any misconceptions.

I have lived and worked in Canada for 10 years following my graduation from UW. I have spent the last 10 years (almost exactly to the day) working here in NC.

Without any shadow of a doubt, living in NC is cheaper than Ontario. Income tax is less as is the sales tax.

But the key point I want to make is healthcare. I have to pay for my works group healthcare, which is about $450/month. It is a lot, but the healthcare here is amazing. No other way to say it. My wife needed an MRI and within 3 days of visiting her doctor she was having it. No waiting months and months.

Dental care, physicians, hospitals are first rate. Duke Medical is 20 minutes away and is a world renowned facility.

Let me qualify this by saying that I can only talk about the healthcare around me…not in the US in general. Last time I stated this someone on this board started spouting statistics and numbers about how “bad” the system was here. I am not talking about the system, I am talking about my experience. Numbers and stats won’t change things for me here.

US healthcare has its issues as not all areas are like where I live, but try not to think that the quality of ALL healthcare down here is poor. And don’t think for a minute that healthcare in Canada is “free”.

Oh, and we bought a house here and getting 1/3 of the interest I paid on my mortgage back when I did my taxes was nice (although you should never use that fact to determine what you can afford).

#298 No Fool.... on 09.11.08 at 5:18 pm

Rich and Wealther RENTERs:

My grandmother came to this country for the first time about 20 yrs ago.
She never worked a day in her entire life, inside or outside of Canada. Once she gained Canadian Citizenship, which wasn’t difficult at all (though she didn’t speak a word of english), she qualified for a seniors pension. We’re talking upwards of $1000/mo.

The Canadian government paid for her to live in an old-age home (room & board, healthcare, etc.) for 10+ yrs. Amazing!

Am I personally embarrassed about this? No. It’s the system. Am I embarrassed for our nation? Yes! It’s the reason our system blows. Was the service provided my g-mom free? No, I’ve been paying exorbitant amounts of taxes since I was 14 yrs old. I’ve maintained a healthy lifestyle, put myself through school (multiple levels too) and never been in debt for longer than a period of 2 yrs (student loans only!).

I’m a visibile minority and I think we friggin’ let way too many “charity cases” into our country. This issue is a sideshow compared to housing. That’s the scary part.

#299 lgre on 09.11.08 at 8:35 pm

we need a healthcare blog..lol

I understand that the healthcare in the U.S is not perfect, but I would still rather have reduced taxes and everyone responsible for their own healthcare just like dental. The problem is that if they put the healthcare back into the citizens hads then the government wont have any money to skim off of and put in their own pocket to buy $5k persian rugs and fly to the bahamas every 2nd weekend with our money. Anyone who is for the canadian healthcare system obviously never really experienced wait times like I had. I thought the system was ok until I REALLY needed it.

#300 Zoronqueen on 09.12.08 at 1:32 am

My 0.02 on health care.

This my current scenario, I’m an RN just put on Short term disability because I am waiting for knee surgery.

1) MRI wait 2 weeks not too bad considering the average wait is at least 6 weeks, but I am only 32. Knee surgery in a public clinic at least 6 months to wait, plus 2months rehab. Amount of time on insurance disability 8 months min for 66% pay.

2) Going to a private clinic in Vancouver–MRI 1 day, surgery 3 weeks. rehab intense–3 weeks. Cost around 8000

What work will cover for is 1) so it is in my best interest physically to do 2) however, financially it is in my best interest to do 1) as I get to rest for 8 months with pay.

Is that messed up or what?

#301 David on 09.12.08 at 6:15 am

The USA has the worst health care system ever devised by humans. They can keep that crap south of 49 and suffer for eternity for all I care. Lets see, the worlds biggest economy and health care takes 15% of GDP. One third of the population has no health coverage at all. The system is dominated by parasitic insurance companies who deny needed services. Better to spend that money on a criminal war in Iraq that the USA will never be able to pay off.

#302 Andrew toronto on 09.12.08 at 11:35 am

Central bank saw disaster coming
In his first interview since retiring from Bank of Canada, David Dodge says many central bankers recognized that trouble was afoot as early as 2003, but Wall Street and other regulators didn’t listen
Article Comments (30) JACQUIE MCNISH

From Friday’s Globe and Mail

September 12, 2008 at 2:44 AM EDT

Many of the world’s central bankers saw signs of a credit crisis five years ago, said former Bank of Canada governor David Dodge, but no one foresaw the “period of great financial danger and unrest” that followed the meltdown in credit markets last summer.

“We’ve known for a long time, going back to 2003 and 2004, that we were building up to a global problem that needed to be resolved,” Mr. Dodge said during an interview to mark his new career as an Ottawa-based senior adviser to one of Canada’s largest law firms, Bennett Jones LLP.

The biggest danger, he said was the overheated U.S. housing market and proliferation of mortgage-linked securities, which left global investors and major financial institutions exposed to billions of dollars of losses. Some powerful critics such as former U.S. Federal Reserve Board chairman Alan Greenspan privately warned for years “that a disaster was waiting to happen” in a real estate sector fed by historically easy access to mortgages, he said. But Wall Street and other regulators turned a deaf ear.

“It was very hard to get reform because there was the perception that if you make mortgages more accessible, you are helping homeowners, but what you’re really doing is driving up home prices.”

Enlarge Image
For seven years, David Dodge helmed the Bank of Canada with a cautious tongue. Having taken a job at a law firm, he’s happy to speak his mind. (Tibor Kolley/The Globe and Mail)

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In a wide-ranging interview during which he discussed monetary policy for the first time since retiring from the bank in January, the 65-year-old bureaucrat and academic was uncharacteristically blunt about “ridiculous” mortgage investment innovations.

Mr. Dodge pointed to the soon-to-be ended private sector life of U.S. mortgage backers Freddie Mac and Fannie Mae as “stupid” and the U.S. Treasury’s intervention into the sale of hobbled Wall Street giant Bear Stearns Cos. Inc. as “brilliant.”

Mr. Dodge’s sharp language is a departure from the careful central-bank-speak that defined his seven years at the helm of the Bank of Canada. Market watchers who devoted careers to parsing his language for nuances that could reshape currency and interest rate outlooks will now have to recalibrate their Dodgemeters for much franker economic assessments.

Even seven months after leaving the central bank, he occasionally catches himself when he loses that well-rehearsed central banker reserve and openly shares his unease over market dangers. For example, when applauding the Washington-managed takeover of Bear Stearns, he said: “This was a huge systemic problem and if any of the major counterparties would have gone, the whole house of cards – no, I should say, the whole system – would have frozen.”

Part of the appeal of joining a law firm, Mr. Dodge said, is the freedom he will have to speak out about economic issues. Unlike most retiring central bankers who move on to lucrative posts at investment banks or hedge funds, Mr. Dodge said he believed “I wouldn’t have the freedom to talk about issues” if he worked for a financial institution “engaged in selling certain kinds of products.”

Unleashed from his central bank duties, he is planning major speeches in the next few months at the C.D. Howe Institute and the University of Western Ontario’s Ivey School of Business to give his take on the roots and remedies for a global credit crunch that is choking economies and toppling once untouchable financial institutions.

While he declined to discuss his planned speeches in detail, it is clear a major focus will be the financial system’s failures in recent years and the need for more co-ordinated regulation.

Much of the blame for the current credit crisis, he said, is the evolution of mortgage-backed securities that allowed banks to shift increasingly risky U.S. mortgage loans off their balance sheets into poorly understood securities sold around the world.

The “ridiculous” motivation behind the mortgage-backed securities, he said, was for banks to avoid the cost of setting aside capital reserves as required by bank regulators to cushion against potential losses. Once the mortgages morphed into securities, he said traditional caution about credit risk was abandoned and regulators learned too late that the innovations would trigger billions of dollars of losses.

“All of us didn’t recognize the extent to which it would come back to hurt financial institutions,” he said.

The solution, he said, will be a more centralized and interventionist approach. Financial innovation has shifted billions of dollars of one-time bank products such as mortgage loans into virtually unregulated markets that need more transparency and tougher accounting standards.

One answer, he said, would be to regulate investment firms with the kind of credit and capital rules that govern retail banks. Investment houses such as Bear Stearns and Lehman Brothers Inc. were heavily exposed to the real estate crisis through the sale of and investment in mortgage-linked securities, but unlike banks they were not required to set aside capital reserves to cushion against losses.

Changing the regulatory regime, he concedes, will trigger “an enormous fight” from investment bankers and pose a “very difficult challenge” for rule makers who have to write laws for a constantly innovating market.

Maybe that’s why, he says with large grin, “working for a law firm is such a good fit.”

VERBATIM

On the roots of the global credit crunch:

What we had was a financial system where leverage increased quite substantially while credit controls declined. Financial instruments were introduced and nobody had any idea about the risks.

On the need for greater government intervention in financial markets:

We have moved so much into the market in rather complex ways that it is hard to see how we can avoid systemic crises without bringing all of the big system financial players into some sort of collective regulatory oversight.

On the failure of wiser heads to restrain Wall Street:

So much of this originated from trading books and traders don’t come at things from the point of view of credit risk. Alan Greenspan spent the last decade saying this is a disaster waiting to happen. It was very hard to get reform because there was this perception that if you make mortgages more accessible, you are helping homeowners.

On why Canada didn’t need a Freddie Mac/Fannie Mae style intervention:

We didn’t get ourselves in the stupid position that the Americans did with Freddie and Fannie. … To pretend that these [players] can operate according to private sector principles is just lunacy.

On the writedowns by banks on mortgage-linked securities:

All of us didn’t recognize the extent to which these off-balance-sheet products would come back to hurt financial institutions. There was a sense that if they were off balance sheet, they couldn’t be hurt. These products were designed to avoid capital reserves. It was ridiculous.

Amazing .. and now they bail them out only in america, funny how he doesn’t mention the 40yr mortgage adding to housing price increases

http://www.reportonbusiness.com/servlet/story/RTGAM.20080912.wrdodge12/BNStory/Business/home

#303 Downsized and Delighted on 09.13.08 at 10:50 am

298 No Fool: This country would be nothing without immigrants. They are an investment in the future of Canada. You obviously have alot to offer the country, but you wouldn’t be here were it not for your grandmother! Do all of the men in your family “agree” that your grandmother “never worked a day in her life”?

#304 BALROG on 10.07.08 at 2:03 am

NOZ called it. The Americans are unintelligent. With a military budget higher than all the other countries in the world put together, it totally blows my mind when you consider the lack of health care and the levels of poverity in the country. And now their cowboy-credit practices have caught up with them.

That being said, I am one of the speculators he so despises. Anyone wanna buy a condo in West Edmonton??