Painfully obvious

The next big story: Deflation

Calgary real estate still ‘safe haven’!

(You read it here first. Actually, after the Calgary Herald…)

This post below is from my current events web site. — Garth

TSX plunges 700 points in panic sell-off
Oil at $63 helped stocks to a 4-year low

Some visitors here have accused me of being a merchant of doom. You are accentuating the negative aspects of the economy, they cry! This is a global phenom, and not Ottawa’s fault, they admonish! Lighten up, they beseech!

Well, a few sober words of response.

First, the economy is going to crap and we’d all better get used to the idea. Stock markets continue to look for a bottom, and the depth of the global recession is yet to be known. There will be no quick fix, and not even President Obama will have one. In fact, his election may well make things worse for a while (if Washington tries spending its way out of this).

It’s expected that 200,000 people lost their jobs in the US this month (we’ll know in a week or so). We also expect Ottawa will have a deficit next year of at least $10 billion – which will mark an historic erosion in national finances of almost $24 billion since Mr. Harper assumed office in early 2006.

We should anticipate the US stays in recession for two to five more years. Stocks will not stop losing value until there is some glimmer of a recovery on the horizon. Commodity prices, including oil, will stay weak for the same reason, since global demand will continue to fall. Some industries – travel, consumer electronics, home furnishings, car sales and, of course, real estate – will be very poor indeed.

The consequences are painfully obvious. The oil sands, for example, will be in considerable trouble as expansion plans are cancelled, the cost of production exceeds world oil prices and Alberta goes from boom to quasi-bust (but with billions in the bank). Homeowners in every city will see their net worth take a hit and selling will be a painful, protracted experience. Unemployment will rise sharply as key industries (building and selling cars, new home construction) fizzle. But the collapse of the Canadian dollar – to as little as 70 cents US – will suddenly make some slagging exporters competitive again.

Public finances will deteriorate quickly as corporate taxes fall and the number of working people erodes. A deficit in Ontario has already been announced, and BC and Quebec will follow – accounting for 70% of provincial finances. As mentioned, the feds will be in the same boat with monthly deficits by January, at latest.

These are just routine assumptions, based on events which have already transpired. There is no doom involved in making them, and anyone who refutes these realities is delusional. We should all be preparing. The only real regret I have is that the election just passed was fought more on puffin poop, mangled English, sweaters and a far-off carbon tax than on a collapsing economy, plunging real estate, lost jobs and an immediate recession.

Now, if you want to get quite depressed, we could talk about how the destruction of our credit-gorged economy is coinciding with the inevitable effects of climate change, the arrival of peak oil and the advent of the greatest age wave in history. But that would beg a painful question: Why are our leaders not talking about this? Is there a plan? What is it?

Economy. Energy. Environment. Demographics. If you think things suck right now, wait a decade.

So, if leaders aren’t ready, are you?

Much more to come on this, whether you deniers like it or not.


#1 My_view on 10.27.08 at 6:56 pm


Once again, great post. I’m wondering if I should even wait & buy a home in a year or two. Maybe three to four years for bottom. But that whole boomer thing makes me nervous.
I’m trying to convince the wife we should just move to a better rental. We have no debt, great savings/investments and a stress free lifestyle.

#2 MarketWatcher on 10.27.08 at 7:01 pm

Garth, I have 25% saved up for a down payment on a house that I am holding since I read your book. Where should I invest it? Wait? If so, till when? Please give me some suggestions. I am sure there are a lot of us on your blog with the same question.

Thanks in advance!

Posturepedic. — Garth

#3 Jim Flaherety's blinkered buttocks on 10.27.08 at 7:16 pm

The recently falling Canadian dollar could pose a re-think amongst the big 3 (2?) on closing plants up here.

I’ve heard today the major global transportation companies are pooing themselves with fear over their fallen stock values. Energy-wise when oil was high they could pass the increase off via a fuel surcharge to their customer base. Not so with stocks.

Obama is a better choice through a lengthy U.S. recession, should there be high unemployment and the threat of civil unrest he would be better aligned for keeping Americans together.

Your right Garth too bad there isn’t a vision for the wider picture.

#4 s.p on 10.27.08 at 7:18 pm

no matter what subject I read about on the web, it seems to be frenzied of worry.

prices of real estate are not going to bottom out.

Notice how it is the renters who wishfully forsee it falling to 40 and 50% less.
In their dreams, and they say they are smart because they been saving for the last 10 years my thought of that is doubtful, it is not a society of savers or has not been an economy where people can save much.

prices may go down a little but I don’t think much in toronto which has had steady low increases for years.
Whereas calgary and vancouver went crazy in increases so may have more of this so called talk of decreasing.
yes food prices are going up, less people feel safe to buy a home because of the economic crisis talk.
Right now it is just talk.

This fellow Garth makes money by selling books apparently, and needs a subject. real estate fear for people who have been fearful for the last ten years to buy is a good selling subject to the fearful.

Renting is not a bad idea for now to see a small decrease and also because by the time you pay land tax, the interest on your mortgage payments and over priced maintenance costs, you just might be ahead.

No prices won’t go back to 1996 or whatever some of these people are hoping for.

Yes housing prices always go up

and because there is not a mortgage crisis in this country like the USA, you might not get all the great deals you hope for as…..
people are selling now, not at reduced prices.
If prices do reduce much, people will not sell and there will be less on the market to choose from.

#5 dd on 10.27.08 at 7:20 pm

” … climate change, the arrival of peak oil and the advent of the greatest age wave in history. But that would beg a painful question: Why are our leaders not talking about this? Is there a plan? What is it? … ”

What? Why would our leaders even ask this question? Canada has a balanced budget and is looking fine going into 2009. HA

#6 Rasputin on 10.27.08 at 7:27 pm

No disrespect intended but what exactly could a liberal government have done differently? Raise taxes on a middle class that is about to get kicked in the nuts? The deficit, if we have one, would come no matter who is in power because of issues far beyond the scope of our national policies. I respect you a great deal Garth and I am truly grateful that your web site exists and you share your wisdom with us.
That said, the only position I can see Stephan Dion taking, if he were facing this, is the fetal position under his desk with his thumb in his mouth.

Where in my post did I mention Liberals? The time has come to look for bipartisan solutions unless you want a mini-depression. Every citizen should be asking, where’s the plan? — Garth

#7 Helmut on 10.27.08 at 7:49 pm

Allways liked your comments on current events unfolding.. I agree with you

#8 Rose-Marie on 10.27.08 at 7:56 pm

Hi Garth,
All of what you speak about is very concerning indeed. Doom and gloom is not a way to describe it, but rather a reality to come to terms with. Could you please comment on whether or not you feel land (residential building lots) will in fact be affected in such a negative way as houses?

Building lots can actually be more impacted since buyers are scarcer who plan to build, and have the means to do so It’s always cheaper to buy a resale, after all. — Garth

#9 mountainbiker on 10.27.08 at 8:00 pm

I currently rent a condo in Calgary. When I got home from work today a realtor had left a flyer that asked in one is considering the sale of their suite. The realtor went on to say that foreclosure is not the answer.
Not sounding too good!

#10 T.O. Girl on 10.27.08 at 8:09 pm

Houses in central Toronto are still priced high, looks like sellers are at 07 prices and buyers are at 09 prices!!! I think they are priced too high for some those dumps
$650 000 for semis and post war bungalows what actual fool would even consider buying those now! oh wait those idiot speculators or greater fools with the high mortgages. I am glad people are finally waking up and not paying these sellers ridiculous prices, a good example would be Leaside wow homes are way overpriced too many fools to mention in 07 overated.
home prices will fall 30-40%, people are having a hard time keeping up with bills, higher property taxes and worried about their jobs NOT A GOOD TIME TO INVEST IN REAL ESTATE!!

#11 brazer on 10.27.08 at 8:11 pm

here is a real estate agent who is being proactive on trying to make a buck off the coming crisis:

This is crap. Under a POS in Ontario you are not allowed to list a property below market value simply because it is a power of sale. The vendor/financer must gain an appraisal and then market the property in that range, lest the owner have grounds to sue for selling too cheap. This guy is playing folks. — Garth

#12 brazer on 10.27.08 at 8:15 pm

there are so many of these sites popping up….gee i wonder why.

#13 My_view on 10.27.08 at 8:29 pm


“prices may go down a little but I don’t think much in toronto”

A little bit? LOL agent. How about alot.

#14 anonymous on 10.27.08 at 8:32 pm

Here’s the deal with Alberta. We are all liars. Every last person living in Alberta is a braggart. Even our cats and dogs are living it up. People from Ontario seem to eat it up. But it’s all smoke and mirrors.

When I evedrop on people sitting next to me in a resturant, you still hear the same old bullshit about how rich they are, how “in demand” they are, etc. In the old days, electricians and plumbers weren’t at the top of the food chain. That’s just unnatural. Like the undead.

Don’t believe for a minute that those “billions in the bank” are going to save Alberta. The government is spending like a drunken rig pig who’s coked-up to the gills.

My prediction stands… Alberta is going to bust HARDER than the 1980’s. Get out while you can.

#15 My_view on 10.27.08 at 8:53 pm

I`m not worried……

#16 The Tallyman on 10.27.08 at 9:00 pm

#1 my_view

I was planning on picking up a bargain in a yr or so too.
but it just isn’t real estate any longer, the whole world is flipped on it’s ass.
Even if house prices fell to 1996 levels this is not a good time to gamble. (job security being a major factor)

So I’m going to happily and thankfully move to a better rental and remain debt free.
Can’t put a price on that kind of freedom and piece of mind.

#17 POL-CAN on 10.27.08 at 9:07 pm

Went to an open house a few weeks ago… Fully detached house in the Bloor/Dovercourt area of Toronto…. Complete reno plus addition, 3 bedroom, 4 bath…

Listed at 725 K… A couple of weeks later down to 699 K… A few weeks later (last week) it is at 599 k and still there…..

Houses are falling in price… The longer you wait the more you will save…. 25 % off peak by spring is looking like a sure bet as we are down almost 15 % already….

#18 squidly77 on 10.27.08 at 9:09 pm
and the beat goes on..

as far as being a gloom and doomer goes
if you ask me what the weather is like outside and i reply its pouring rain
its not because i want it to rain..its because its raining
some of us just paid attention to those darkening clouds thats all

every stock market in every corner of the world is on life support..this has never happened to this degree before in human history

this really is the big one..
ok ok i wont tell you its falling..

#19 POL-CAN on 10.27.08 at 9:13 pm


Some agents are listing way below normal and then expect multiple offers. I for one do not think this ploy will work this time around.

My goal is to wait until spring and then go after the full renos that are sitting empty with big time low ball offers. No conditions, take it or leave it as there are more where that came from :)

#20 dboy on 10.27.08 at 9:32 pm


Can you please send me a kilo of what you have been taking?

I’ve owned real estate since 1993 and believe me, real estate does not always go up!

#21 s.p on 10.27.08 at 10:00 pm

no I’m not an agent, just not a wishful renter that is in a panic frenzy hoping the market down.

Get real people you are all frantic because you don’t like your current situation. That doesnt change real estate to suit you, it is wishful thinking.

Most of you are accusatory as in hope of a better place through devistation to a country, selfish.
It’s not happening so try to go back to work and any one saving for the last ten years afraid to buy, keep saving for another ten years, you should have $200 to invest by then.
Because you can’t save in this economy.

The only people on this sight is frightned people and this web is designed for that as is that book.

So relax, there is no golden rainbow at the end of your

bubble will burst going on for the last ten year plan.
Why does ding dong think I have to be a real estate agent to not agree with a frenzy of stupid thought.

No I am just a home owner that has made much money from it in the past, not rich but close.
When all you people are scared like you always are year after year many people will be taking what you call risk and making money.
You’ll see, there is not going to be easy cheap pickings for you like you think.

#22 s.p on 10.27.08 at 10:16 pm

in fact get your own real estate licence as they don’t do much for the 25 thousand they want.
From what I know, put your ad on the internet.
and when buying a place all they do is open the lock box.
Haven’t found a agent in to yet that knows anything of the buildings or cares.

That’s a rip off here, what is the fee for, bad…no advice.
A licence, you can open your own lock and save 25
p.s. I’m from vanc. that has much betterr service so you are actually paying for something, it is not good here.

#23 905 GenXerGurl on 10.27.08 at 10:19 pm

I’m with you TO girl. I have to say it is such a relief to see housing prices starting to come down. Here is a summary of our experiences…

We bought a townhouse in Brampton in 2004 for ~200K.
We are both professionals with advanced degrees and couldn’t believe that this is really all we could comfortably afford with our plans to raise a family. We looked around at some of the people in the larger detached homes and could see they make less than we do! I am sure most of them could not afford to buy their own home at today’s prices with the incomes they bring in! What happened?!

Also, those really nice neighbourhoods, like in South Mississauga, it was mystifying to us who has been buying all the homes at the prices they have – tiny, run down old 2 bedroom bungalows for 500K (NOT kidding)- nice neighbourhoods, good schools, but STILL!

We realized one day that our combined income of 140K put us in the top ~10% of family income groups. When I learned that, I just about had a heart attack. How could it possibly be then, that we could really only afford this little townhouse in Brampton? What about the other 90% of the population- they don’t seem to live in small townhomes in Brampton.

We figured we could never really afford a comfortable home like our parents had. It all just made no sense…. We decided we had just been steamrolled by the baby boomers and decided to go into real estate investing as a way to finally purchase a nice home in a nice neighbourhood. (Hey, if you can’t beat ’em, join ’em, right?). THEN we came across Garth’s book, thank goodness.

So, we will wait for our next home purchase. It would have been great to sell and rent, but with we have to think of the distress 2 moves would cause our children. Who knows, we may even have to take a loss on this home by the time we sell it!!

It is really sad though, many of my GenX and GenY friends bought in the last two years. Similar incomes, most spent ~450K, Yikes! AND they got TOWNhouses! I pray they don’t get sick, lose a job or have to sell for some reason. It is also sad, our parents would never dreamed of spending so much of their income for a house.

#24 jazzguy on 10.27.08 at 10:30 pm

It will take double digit prime rates and some spectacular but necessary failures to restore confidence in the monetary system, and get rid off malinvestment. A massive inflation is very possible. Politically, it might be the only option for some countries, i.e the USA. People are lousy at predicting bottoms, but how’s 2014-2017 sound? In the meantime, keep solace that during the great depression, 70% of people were still employed. As we’re entering the “Greater depression”, maybe that figure will be similar. This credit binge took years to build up. It will not end so simply.

#25 905 GenXerGurl on 10.27.08 at 10:32 pm

So if we are having deflation, what does that mean for interest rates?

#26 Marcus Aurelius on 10.27.08 at 10:36 pm

TO Girl (#10) has it right: We are at the inflection point in the ‘classic’ (read : non-fringe) central Toronto neighbourhoods, where the vendor has convinced himself that there’s still a chance that these insulting real estate agent listing (churning) and pricing, bid fakery and other games will catch a ‘2006-7’ price, and serious buyers (including even the possibly dumb Greater Fools of the next cycle downturn) have finally figured out that wasting time on these current listings is useless. The ‘calm’ that you hear in Toronto is just the dead silence of ‘no sales’ – the only thing a real estate agent hates, as it’s all about the “churn and burn”, at any price level or trend.

Leaside is a ‘poster case’ of stupidity gone rampant. Who the heck would pay $1.5M for a refurbished centre plan salt box near beautiful industrial Laird Drive? But some Greater Fools now have very large mortgages (and no few regrets) about being snookered into “Leaside” : the perfect ‘not quite top drawer’ neighbourhood that hooked the wannabe Yuppie professionals (much like Armour Heights/Cricket Club, where shark-like agents pumped and dumped many of these insecure louts into a 20/25-foot-lot infill that went from $700K to double that 8 years later, thanks to the wonders of the modern real estate boiler room.

This mirrors the state of the retail securities industry in Toronto, where brokers have nothing left to say to their clients, and no one who will listen to them seriously as prospective clients – in short – they have a job in name only, and the phones are not being used at all.

For those inclined to write incisive social commentary about the abject fall of the self-regarding Toronto professional Worker Bee Wannabe, these are wonderful times. Pasta Fagioli is about to rediscover its hard scrabble roots. No more will it be a $25 item on some chi-chi Toronto restaurant menu. That guy who used to pay the tab to eat it along with a 20% tip to have it served to him and his larvae is now learning to make it at home, because his $5K/month mortgage together with the Montessori or de facto reform school tuition he’s paying for his ADD progeny mean that some economies are in order, and cheap peasant food makes sense today.

#27 greaterfooled on 10.27.08 at 10:39 pm


i see this scenario:

house prices will drop to certain level and then go sideways for a few years until average income levels catches up to make the price of the house affordable.

#28 smwhite on 10.27.08 at 10:59 pm

#20 s.p

If you’ve made much money from real estate, where do you have all the that money invested right now?

Real estate? Best way to become a real estate millionaire?

Start off as a real estate billionaire…

Notice how it’s those individuals that didn’t really do anything other then buy real estate before the implementation of inflation by central banks, come on to this blog to defend the irrational price gains.

Anyway, your a little late to the party s.p, should have been on here with that kooky talk back in March when there were only cracks in the foundation of the Canadian economy and the sputtering of the American economy.

Your choosing to look the other way, market dropped 8% today alone, 25% in the month, dollar is down 25%, the money that was used to kept you “artificially” rich is evaporating.

So keep looking the other way, I understand, I mean, isn’t it fear that brought you here to this site, to mock chicken little Garth and all his little hatchings, cause your scared?

Less people are going to have access to credit to push those home prices higher, Canadian prices have been declining and will continue to follow the same trajectory as everything else in the past month, down!

Like Garth says, sit back and relax, its only a two to five year hangover.

#29 outtacontrol on 10.27.08 at 11:07 pm

I love how these economists are just now saying maybe there might be deflation sometime next year. The Automatic Earth has been talking about this since last year and predicted 99% of what’s happened in real estate and the global financial collapse. By the way, if you understand that deflation is a monetary phenomenon and that the vast majority of “money” was in the form of credit in the shadow banking system, and that that supply of credit has been imploding for well over a year, it is not hard to see that we have been experiencing deflation for quite some time. Falling real estate prices, stock markets and melting credit default swaps give you an indication of how much deflation there has been.

If you want to know what the “experts” will be saying in a few months, check out TAE now.

#30 outtacontrol on 10.27.08 at 11:10 pm

(link hopefully fixed, try google if not)

I love how these economists are just now saying maybe there might be deflation sometime next year. The Automatic Earth has been talking about this since last year and predicted 99% of what’s happened in real estate and the global financial collapse. By the way, if you understand that deflation is a monetary phenomenon and that the vast majority of “money” was in the form of credit in the shadow banking system, and that that supply of credit has been imploding for well over a year, it is not hard to see that we have been experiencing deflation for quite some time. Falling real estate prices, stock markets and melting credit default swaps give you an indication of how much deflation there has been.

If you want to know what the “experts” will be saying in a few months, check out TAE now.

#31 pjwlk on 10.27.08 at 11:19 pm

Spoke to my RE friend last night who works at a builders sales office in Oshawa on the weekends. She says that they’ve only sold 2 homes in the last 3 month!

Last friday I helped my daughter move into her new townhome in Milton, Ont. Yeah, the same one I begged her not to buy last year. The first thing I noticed was the large number of units up for sale that aren’t even finished or occupied yet. My guess is lot of speculators got caught with their pants down… an now just need to bend over…lol.

#32 Ultraman on 10.27.08 at 11:20 pm

s,p says,
“Notice how it is the renters who wishfully forsee it falling to 40 and 50% less.”

Notice how it is the owner who innocently believe that RE price can’t drop by much.

For full disclosure I’m an owner who bought early 2003 and always firmly believed that prices will go back to that level + inflation.

#33 dd on 10.27.08 at 11:23 pm

“Economist who foresaw crisis warns of deflation”

If the US is going to borrow massive amount of money I do not see this happening long-term. The government will use all its fiscal and monetary leverage to make sure that inflation will take over. Yes they have passed a bail-out package worth $700 Million but they are just starting to spend the money. Watch a massive infrastructure program announcement in the weeks to come.

With a trillion dollars of US debt hitting the markets in 2008, a trillion in 2009, and a trillion in 2010 inflation will take hold. Hugh borrowers must have inflation to pay off debt or it will be a death spiral. Hopefully the US can engineer itself out of this one.

#34 Gord In Vancouver on 10.27.08 at 11:29 pm

Garth – looks like you ended up being right – big time. I, too, knew that real estate/economic conditions outside of Alberta were too good to be true.

Here in Vancouver, many of us were brainwashed, by the media and business people, into thinking that 2010 would shield us from economic doom and gloom. Other factors used by market bulls were Asian immigration, our mild climate, and growth limits imposed by the ocean and mountains.

Reality is settling in and the bloodshed is now just starting to appear:

Bankruptcies In BC Are On the Rise

Agents dropping out of real estate business

Real estate project delays are now the norm.

#35 dd on 10.27.08 at 11:31 pm

#13 anonymous,

Have you left yet?

#36 POL-CAN on 10.27.08 at 11:34 pm

# 24 905 GENXer Gurl


The BOC prime rate will go down in the next few months… The FED will probably cut this week (0.5 % or 0.75 %) and out monkeys will follow….. That you can bet on…. Will the banks pass that saving onto you the consumer? Maybe a portion of it….

A year out I can see interest rates begin to rise and head for the low teens at best to stem the hyper inflation that will be the result of all the baliouts/rescues/currency problems worldwide….

If they just let everything go BK things might have been less severe…. As it stands we are in for a global cluster fu#ck…..

Pay of all your debts and save like you have never saved before….

#37 dd on 10.27.08 at 11:35 pm

#24 905 GenXerGurl,

Don’t buy any big ticket item with credit or debt. It will be like owning a car. The debt will be there, however, the asset will be worth less.

#38 POL-CAN on 10.27.08 at 11:35 pm


and our monkeys will follow

#39 Charles on 10.27.08 at 11:45 pm

The following paragraphs are taken from an article titled “The Age of Prosperity is Over”. This article was posted on the Wall Street Journal web site on Oct. 27, 2008. The article was written by Arthur B. Laffer.

“When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.

No one likes to see people lose their homes when housing prices fall and they can’t afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house’s value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.

But here’s the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn’t create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.”

The following is the link to the article”

The Age of Prosperity is Over

#40 rant in Calgary on 10.27.08 at 11:59 pm

905 GenX,
I agree with you. It’s funny how intelligent educated people thought 50 to 60 percent price gains in house values were normal, and sustainable. In Calgary, my Doctor was buying starter homes for $375k and thinking they will be worth a million in 3 years?
I told him he should get a second opinion!

#41 bob on 10.28.08 at 12:03 am

SP, please pick up a newspaper or watch your local news even. your “wishful renters” hoping for the country’s devastation theory is truly ignorant and shows how really little you know about what is going on in the financial and real estate markets today. please inform yourself with facts before you spout off your obvious lack of knowledge in current affairs. or keep your head up your butt which ever is more comfortable for you.

#42 Bailing in B.C. on 10.28.08 at 12:11 am

my_view #12

The sentence you quoted from s.p. made a lot of sense to me.

“prices may go down a little but I don’t think much in toronto”

At least part of it did, the bit that said

“I don’t think much”

s.p. any idiot could make money on real estate over the last 7 or so years. You are obviously a case in point. Look at the stats. No doubt your gains are all on paper. Getting nervous yet? Or are you too stupid?

By the way, what is “devisitation”? I’d be fascinated to know.

#43 Nicholas P on 10.28.08 at 12:33 am



The Hegelian Dialectic… a.k.a Problem-Reaction-Solution.

A technique studied, practiced and adored (at The University of Calgary) by Straussians like our sweater wearing friend.

Peak Oil and Global Warming are part of the psy-op of artificial scarcity and environmental destruction guilt burdening the masses. It will continue until we beg them for their “solution”.

#44 nonplused on 10.28.08 at 1:21 am

#24 GerXerGurl

Interest rates will go down, deflation in asset prices will rule, then the market will realize that the governments around the world printed more money than needed to facilitate trade at that time, inflation will rise, and so will interest rates. It’s a time honored cycle but it’s deflation of asset prices for now and low interest rates. Looks like most central banks are heading for rates that are lower than inflation is now! And in this environment that can last a while – Japan did it for 20 years! I don’t know how long but watch the gold price it is usually a good indicator. It fell during disinflation into 2002 and rose with inflation during the housing bubble. Now it falls again. When it starts going up in some years time so will interest rates. Not that the 2 are directly linked but there seems to be a strong correlation. When people have lots of money they buy bling. Emerging markets like India are large physical gold markets due to cultural biases. Right now they are getting killed (although it’s hard to buy physical gold and silver right now which is weird – some sort of a “run on the bank” I suppose.) But when those economies recover (assuming they do), they will increase bling purchases along with food and energy and inflation will creep back in, which drives interest rates. But that could be years away..

Garth, why don’t you combine the 2 sites? I find them both pertinent to the same macro issues at this point.

#45 Mike.Slobodan on 10.28.08 at 1:31 am

Unbelievable,Today Gold price going up $ 14 and gold stocks hit down 10%, as Barick Gold.
I agree with #23 jazzguy that A massive inflation is very possible. But that mean will be higher house prices and higher gold price. Monetary sistem is broke in Canada. The Loone has dicreased over 33% than
$ US?
WHY? The oil price and gold price are same as last september, so what’s going on with $ CAD?
If we are having deflation in US than interest rates must be over 10%. Deflation can not be with FED interest rate 1.50 % and soon maybe 1%.
US is in recession,so massive unemployement,housing crash,” low” FED interest rate, many banks bancrupted,the same prices of oil and gold as 2007, so why is $ US stronger over 30% than Euro and CAD.
If this scenario was happened In any other country than their currency gone in toilet.
TSX will going lower about 5,000. Oil soon $ 30/barrel and gold $ 650/oz.Than 200 $CAD= 100 $ US.
US can print money and $ US is stronger than ever?

#46 kc on 10.28.08 at 2:02 am

Garth and fellow readers, please allow me to post a bit of a lengthy tid bit I found about bubbles and China with a direct Question for you garth.

this was written back in 2005 however, very insightful to what is happening today.


1920’s Housing Nostalgia
In an informal interview, Mr. Thomas Kendig, a longtime client who remembers the real estate market of the 1920’s, told me that today’s housing market reminded him of the real estate speculation of the 1920’s. In the 1920’s version of the housing bubble, after the bubble burst, massive foreclosures resulted.

In another nostalgic trip down Memory Lane, we find that the destined-to-be-infamous interest-only mortgages of today are nothing new, as they were first used during the Roaring 20’s. The big difference between then and now was that in the 1920’s interest-only mortgages were “fixed” for the life of the loan (usually 5 or 10 years), not adjustable like they are today. At the end of the term borrowers would simply refinance. However, real estate prices collapsed and most interest-only loans went into foreclosure contributing to The Great Depression of the 1930’s.

Today’s interest-only mortgages are far more dangerous than the 1920’s style, not only because they are tied to an Adjustable Rate Mortgage, but also because after the initial term, the payment is raised to the full amortizing level. The ultimate dangers with today’s interest-only mortgages is that either the borrower’s payments will rise so high that he or she won’t be able to make them, or that the price of the property will drop so far that the mortgage is worth more than the value of the home.

Of course, it’s very easy to see how both of these events could happen simultaneously to millions of Americans, effectively “trapping” them in their own home! Therefore, today’s interest-only mortgages are much riskier and potentially more harmful to the borrower.

In Sarasota, Florida, the housing bubble has gotten so ridiculous that “work force housing” is a big issue. That’s where workers such as teachers, police officers, and nurses live in government-subsidized housing. In other words, these hard working people will now be reduced to living in today’s equivalent of low-income housing projects. How degrading is that?

By the way, no society in the history of the world ever thrived without a prospering middle class. Will this time be different? The middle class obviously has no place in a society that has exported most middle class jobs in favor of speculative asset bubbles.

The China Syndrome: Bursting the Local Market Theory

Absent from most discussions of the booming housing markets in California, Florida, and the northeast U.S. is the direct connection between the U.S. housing market and events concerning the global economy, particularly our business relationship with China. To understand how this works, let’s look at the highly disturbing U.S.-China economic relationship:

Because of its low-wage work force, and huge investments from western and Japanese corporations, China has created a big trade surplus, most notably with the U.S. With the profits from this enormous trade imbalance, China buys large quantities of U.S Treasury Securities, essentially lending money to the U.S. to the tune of an estimated $300 billion in 2005. The Chinese do this to keep the value of their currency low, in order to make their goods cheaper in the global marketplace.

All this money coming into the U.S. keeps interest rates artificially low here, fueling a massive housing bubble. The housing bubble in turn fuels a larger U.S. economic bubble creating artificially inflated wages, autos, medical care, etc. The result is that the U.S. goes deeper and deeper in debt to China and the rest of our lenders, while Americans live lavish lifestyles in an enormous debt-driven housing bubble. This is not a formula for long-term prosperity for America, but it is the corner the Federal Reserve has painted us into.

The U.S is highly dependent on low-interest loans from China. If the Chinese were to ever change its currency policy and stop buying U.S. Treasury Securities (i.e. loaning the U.S. hundreds of billions of dollars a year), U.S. interest rates would skyrocket, and the housing bubble would collapse, creating an avalanche of bankruptcies and a financial crisis in the U.S. at the same time.

Garth, Do you have any information about China’s buying of Canadian Bonds? and if they are large buyers what will the outcome of this be for us?

On a different note when you read this from a few years back how she is unfolding now and how these stories are the same… it is scary looking forward now.

#47 Westcoaster on 10.28.08 at 2:18 am

You are living in a dream world, dude. Give your head a shake. My money’s on Garth here, as nasty a picture as he paints. I think we are heading for a “perfect storm” of the boomers aging, the economy wanting, and a distinct dearth of people who are actually willing to work for a living.
I am in the “health care business” (physician). Something Garth has not talked much about here – there is also an evolving coming in health care. Look at the family physicians in your community – the average age is between 50-55, right? Some of them, with this recent economic downturn will be re-thinking their retirement plans (Freedom 75 instead of 55) just like anybody else, but barring that there will be a rush for the doors in 5-10 years. Throw that into the mix with few docs to replace them (despite the feds and the provinces efforts to allay that, there are very few physicians coming into the system willing to take on full service family practice) and you have another nasty variable to toss into the mix. The sooner we come to terms with that (and try to come up with some real solutions) the better.

#48 jelly on 10.28.08 at 2:30 am


#49 JC on 10.28.08 at 2:37 am


You have been prescient on real estate prices. But you are gorging on gloom in a few other instances:

Global warming, if it were actually occurring (its not — we are into a likely 30 years stretch of cooling, begun a year or two ago), it would be a boon during a down economy via lower heating costs and an elongated growing season.

The US may very well be in for a moderate-depth recession as long as three years, but even the gloomiest among Austrian economists (the only bunch to call the present crisis accurately, apart from Nouriel Roubini) assert it is unlikely to be much longer than that, and probably less than two years.

The demographic issue is also not as threatening as you imply: Boomers will work longer, stay in their homes longer, and in some case remain healthy longer. Yes, a largish segment will burden healthcare, but our socialist system being what it is, care will be rationed.

So while a Great Reckoning, or a soviet-style collapse may well be in the chutes in the coming decades, THIS recession will not be the end of the world.

Housing dies, yes. Hyperinflation is next.

#50 David on 10.28.08 at 2:37 am

Alberta is no better prepared for a bust now than it was in the mid 1980’s. If oil prices revert back to the 2003 price levels of $30 US a barrel, times could really get hard there in Alberta.
S.P. your arguments are trivial and simplistic. The housing bubble did not generate any new wealth or add to productivity. No one here is as gleeful as you suppose. Bubbles have real consequences for real families and now that the financial system is a total shambles you should at least acknowledge that the bubble came at a real cost with a very steep price tag. People who should have known better turned a blind eye.

#51 jelly on 10.28.08 at 2:38 am


Are you for real?
Look, wrong blog site, go elsewhere,
no one is interested in your silly rhetoric,
we’ve heard it all before…
It’s just that most people have enough sense
in October 2008 not to be so stubborn and
ignorant about the situation. Do you know
nothing about history, markets, and what
has been going on WORLDWIDE?
Go buy a few books, seriously.
Time will show you are a fool.

#52 jelly on 10.28.08 at 2:41 am


Try not to smoke so much before writing,
your posting is all over the place and
hard to follow.

#53 subzero on 10.28.08 at 3:25 am

I am renting in woodbridge, on right now. Do not know how long I should wait to buy a house. Looking to move into Newmarket, ON as my job will be there soon. Just gave up a house that I was going to buy from Mattamy Homes, but reading stuff off here helped me save my money from going down the drain.

#54 Future Expatriate on 10.28.08 at 5:11 am

Don’t drink the Obama Kool-Aid; because of the great vast unpolled Middle America, Diebold, ES&S, and various highly effective conservative voter disenfranchisement programs of minorities that are still in place, Obama will soon be back in the Senate where he can “hate on Hillary” for the rest of his very short and lamentable failed career.

President McCain will NOT try to outspend this crisis, either. He KNOWS there’s no money.

And truth be told, Obama was far more likely to nuke Iran (Biden ANNOUNCED it for God’s sake with his upcoming “test”) than McCain is, because McCain KNOWS the US can’t possibly afford it, where Obama saw an endless gravy train.

#55 GenXer on 10.28.08 at 6:36 am

Deflation is pretty much the opposite of what we live financially every day, so think of everything being reversed.

Typically deflation would suggest low interest rates, as the value of money actually rises over time. In fact in a highly deflationary system, it is theoretically possible to see negative interest rates – where banks would have to pay people to take loans. That is, the cost of taking out a loan at positive interest rates would be so high, that banks would have to compensate individuals with low or negative rates.

The problem is the lack of liquidity in the system – banks can’t afford to lend to us at decent rates because they don’t have the funds available to lend right now. Makes you wonder – what happens if no one can afford a high interest rate loan, but that is all the banks can offer?

If the banks believe we are going to see deflationary times, why are they increasing interest rates on 5 year mortgages to such high levels? Does this suggest that they believe inflation is the next wave, or are they just stuck with so little liquidity that they can’t help us?

#56 brazer on 10.28.08 at 7:25 am

Second-worst session in Toronto market history as investors dump shares in wave of margin selling

When the margin call comes, you’ve got little choice but to sell.

That’s what investors did yesterday with a vengeance, clobbering Canada’s main stock index into a collapse of 8.14 per cent. The plunge was second only to the 11 per cent drop of Oct. 19, 1987, the day known as “Black Monday.”

“It’s particularly worse right now because there are no buyers,” he said yesterday.

Metcalfe predicts today “is probably going to be bad again” because margin selling could continue.

#57 brazer on 10.28.08 at 7:28 am

Experts say it’s matter of time until the credit crunch derails one of many GTA tower plans

“The question is whether all these buildings are still going to be built a few years from now. I think you’re seeing a real possibility that some won’t be going up.

About 300 projects were selling in the Greater Toronto Area in the first half of the year – more than in any other North American city.

#58 brazer on 10.28.08 at 7:32 am

Top realtors criticize housing `fear attack’

“We are being overwhelmed by the negativity, the market has not slowed down that much, it’s like you’re going from 150 kilometres per hour to 120 kilometres, it feels slower, but it’s still healthy,” Michael Polzler, executive vice-president of ReMax Ontario Atlantic Canada, told more than 1,000 realtors yesterday at the annual general meeting of the Toronto Real Estate Board.

“This is a fear attack that will blow over,” said Stephen Wong, chair of Living Realty Inc. “We do not have the same problems as the United States.”

“The need is paramount now to accentuate the positive,” said Gary Hockey, president of Coldwell Banker Canada. “We have to create some positive spin so we don’t get dragged down to the doldrums.”


these crooks can “spin” themselves into oblivion as they continue trying to deceive…shame.

#59 brazer on 10.28.08 at 7:34 am

Iceland hikes key rate by 6 percentage points

REYKJAVIK — Crisis-hit Iceland’s central bank raised interest rates by a massive 6 percentage points to 18 per cent on Tuesday, just two weeks after it had eased policy to soften the blow from the country’s financial meltdown.

#60 APCM on 10.28.08 at 8:02 am

More on Toronto:

Condo projects in jeopardy

Experts say it’s matter of time until the credit crunch derails one of many GTA tower plans

The credit crisis and slowing economy are frustrating real estate developers’ planning and could derail some Toronto condominium projects currently under way, prominent Canadian developers say.

“I think we’ve definitely oversold the market,” said Brian Johnston, president of home and condominium developer Monarch Corp. and a past president of the Ontario Home Builders’ Association.

What has happened in Calgary and Vancouver will take place in Toronto. It is an inevitability, which I forecast here a couple of months ago. Condo city is grossly overbuilt. — Garth

#61 dd on 10.28.08 at 9:48 am

At least we get a glimps of what the world will be like under peak oil. Except oil will not be $60 a barrel.

#62 smwhite on 10.28.08 at 10:35 am

Another brain buster prediction from Merrill Lynch Canada, first it was that housing prices in Canada were coming down, now deflation(Guess they’ve been watching the bouncing markets), next is Christmas on the 25th of December…

Lets be more specific, its asset deflation because with the drop in the dollar, prices for consumer goods and the necessities aren’t coming down.

The only thing deflating is people personal wealth and retirement funds… Work longer!

#63 Calgary Rip off on 10.28.08 at 10:42 am

You have great courage Garth.

Especially in times of mass delusion.

Your take on things is refreshing after reading the Calgary Herald. I generally start my morning seeing if you have anything new posted.

Again your posts exemplify the idea that a person should focus on what they have, what is right in front of them.

This is especially true in Calgary. With the current lending practices, Ed Jensen preaches that a single family house has increased in value in October.

I hope that you are right about things collapsing in Alberta. The way things are priced it seems that Calgary is more of an exclusive club designed to keep people out than boost its economy with real jobs and real people.


#64 RS on 10.28.08 at 10:43 am

SP – You are the “greaterfool” !

#65 smwhite on 10.28.08 at 10:48 am

A good read on the bust in the Texas oil patch from 1986, oil at $15 a barrel.

I have trouble believing this can happen again with growing demand of energy from the east but oil has already dropped from $140 to $60 which is about 60%.

I’ve found this info on Texas on the “Federal Reserve Bank of Dallas” website…

The early eighties recession was triggered by a decline in energy prices and a sharp U.S. recession in 1982. This recession started the bursting of the Texas energy bubble and led to a loss of 200,000 jobs between 1982 – 1983 in Texas, or roughly 3% percent of employment.
Commonly referred to as “The Bust,” the net result of lower crude oil prices which plunged by two-thirds, falling from $36 to about $12 per barrel.

By 1985 this recession was complicated by the elimination of tax incentives that had stimulated over investment in REAL ESTATE. The bust resulted in the loss of another 200,000 jobs, or 3% percent of employment.

#66 From the Hip on 10.28.08 at 11:19 am

It fascinates me why people can’t understand that whatever goes up must come down. It is a fundamental law of physics, and the economy. You are INSANE if you don’t see that this is the natural trend happening in the economy right now. Garth has been right on with his analysis, he may not say it in a nice way but he is sincere, we have had way too many years of people saying things are great. We need people to tell it straight. People like Garth won’t be popular in time like this because we are looking for people to say everything is going to be fine.

I am of the belief that North America and possibly the world is entering into a REPRESSION, not quite a Depression but more that a Recession. This is an area that we have not been in for some time as a global economy. I am very afraid that many of our leaders are not smart enough to deal with it. Alan Greenspan definitely was not and we are all paying for it.

Canada is not immune from what goes on the in the US and will suffer a similar fate. Remember a year ago when all of the economists were talking about decoupling from the US and how the state of the US economy does not affect the world. What planet did that theory originate, the United States is by far the largest single country consumer in the world and more specifically our largest trading partner. We are in big trouble! Canada is far from safe. Canadians have spent a long time living outside of their means, the banks and credit card companies have grown a generation of people who have beer budgets and champagne tastes and allowed them to buy the best and pay later. I live in High Park/Bloor West area of Toronto and almost 80% of my street is over-extended. I bought 7 years ago and have a manageable mortgage with a 15 year amortization. But I am worried, It is disgusting that there are people out there with 40 year mortgages. What in the world were we thinking as a nation to allow people to buy something they will never ever own.

This brings me to the Toronto housing market, I really believe we are as doomed as Vancouver and Calgary. We went up slower and will come down a little slower. However, it will come down. If you are in a house, plan to stay there for a 5-10 years because it will take that long for the next cycle to come through. I do feel bad for my neighbours but they all seem like well educated nice people but they are all going to be in a tough position, unable to pay their mortgage and not able to sell. The agents will trade in the BMWs. Can’t say I am sorry about that, they have done very well over the last several years and they are the ones who introduced us to bidding wars. It was a disgusting ploy by greedy agents to raise prices. Good luck friends, and thanks Garth for the blog. Contrary to your enemies, I believe you do care about Canadians and the advice you give in your blog is very responsible.

#67 mountainbiker on 10.28.08 at 11:58 am

Ed Jensen just doesn’t get it – like is this guy dense or cunning enough to appeal to those who don’t critique the issues or are so inexperienced (like I was), that they just don’t know any better.
Realtors have made a killing over the last 6 years, and if I had earned that kind of money, I wouldn’t have reinvested in in BMWs, Landrovers, Cadillacs (they drive those boats too), and more real estate. Rather, I would have bought a modest place sans stainless steel, granite and rare exotic hardwood that takes centuries to regrow. I would have invested the rest, (well maybe splurged on a high end mountain bike for my annual drive to Mecca aka Moab and the Canyonlands) but not these guys, they just got greedier and more crooked. I dealth with a couple here in Calgary for a real estate purchase (I’ve since sold it). They had been in real estate for years. The house I bought had knob and tube wiring and when I asked the realtor about it, he said he’d never heard of it. What a load of ____ that was!!! The home inspector (their choice) was no better. When I went to buy insurance for the house, I learned it would be over $1200.00 and so I spoke to the realtors about this. They suggested I use the previous owners insurance company and not say anything. (more evidence of the pervasive lack of ethical practise in their industry). Of course I didn’t, if there were ever a fire, the inspectors would find the bad wiring. Anyhow, I sold the place and am so relieved.
There were other issues as well — I went through a huge learning curve and learned that the broker I spoke to was only there to support the nasty couple that sold me my home.
I have spoken to other people who have all had similar experiences. It’s a corrupt industry!!!!

This industry is as corrupt as Wall Street.

#68 Realtor on 10.28.08 at 12:08 pm

Iam a realtor in a small Central Onario town. We have been hit hard lately by a large automotive parts plant closing, large layoffs at another large automotive parts plant, and many more layoffs at forestry industries in the area. There is alot of uncertainty about other plants & industires closing and more layoffs in our small town.

A trend that I’ve seen just begining to occur in my small town market is a big difference from the asking price and what people are actually getting for their house. I think that people are finally starting to catch on that the economy is in tatters, and our sale prices are starting to reflect that.

In our town the residential volume of sales is off by about 20% from last year. For sometime now we have seen the decline in the volume of sales in our town, but had not seen price declines, and I think we are just starting to now see declines in residential values in my area.

My personal opinion is that over the next 6-12 months we are going to see prices decline even further and we are going to go through very uncomfortable times.

It’s not easy sitting across the kitchen table with sellers right now trying to determine what they should do and if they can sell their homes without losing money.

Our economists and politicians keep saying that we are not in a recession in Canada and that we will avoid problems with our real estate market, but from my perspective in small town Canada, it sure feels like a recession to me.

None of this will be news to you Garth, as real estate trouble seems to be a growing epidemic across Canada. However, I thought my “small town” perspective might be of interest to you as many Canadians live in small towns just like mine.

#69 Downsized and Delighted on 10.28.08 at 12:11 pm

GenXerGurl:”Also, those really nice neighbourhoods, like in South Mississauga, it was mystifying to us who has been buying all the homes at the prices they have – tiny, run down old 2 bedroom bungalows for 500K (NOT kidding)- nice neighbourhoods, good schools, but STILL!”

Want to know who bought one of those little bungalows? Me, in 1980 for $87,000. Then I sold it in 1986 for $220,000. The market was in the dumpster then too, not unlike now. So did I go out an rent an apt?
No! I bought a great big old house on a fabulous lot in the best area in Mississauga for $350,000. And, I just sold it for $l.3 million.

So did I go out and rent an apt? No, I bought another one of those little bungalows for $750,000. You can tell from the price that it’s a little better than the first one.
But, it’s still the land value that keeps the price high.

So am I worried about losing 30 percent of the value of my current house? Not really. I’m worried about where to put my cash. So having $750,000 in my house is the easiest decision, because I need somewhere to live.

#70 Buy_canned_foods on 10.28.08 at 12:23 pm

Three things:

1) 1000 boomers turning 60 every day for the next X years (selling ‘family’ homes to move into ‘retirement’ homes)

2) Canadian house prices 70% higher than US prices (lots of room to fall)

3) History has shown that real estate is not a good (long term) investment, it only protects against inflation

Boomers are NOT going to be buying 2 and 3 houses in retirement (as realtors would like us to believe)…but regarding the bubble bursting they say ‘Canada is different’ and ‘it can’t happen here’…. but with prices so high I think there’s a lot of room to fall.

People, please buy a house as a HOME, not as an INVESTMENT. You will make more rational decisions this way.

Realtors and news agencies, please stop duping the public into believing real estate is a good investment. Let’s see some accurate, truthful reporting about what real estate really is: bricks and mortar, shelter, a little bit of land, a place to escape and to raise a family.

Let’s get rid of real estate fees and pay agents a salary. No commission, but perhaps a bonus for the # of units sold, but not tied into the selling price.

#71 brazer on 10.28.08 at 12:33 pm

Home prices see record plunge

NEW YORK (Reuters) – Prices of U.S. single-family homes plunged a record 16.6 percent in August from a year earlier and plummeted more than 30 percent in Las Vegas and Phoenix, Standard & Poor’s said on Tuesday.

#72 brazer on 10.28.08 at 12:38 pm

U.S. consumer confidence plunges to lowest on record; home prices keep falling

WASHINGTON – Layoffs, plunging home prices and tumbling investments have pushed consumer pessimism to record levels in October, a private research group said Tuesday. Wall Street shook it off, though, focusing instead on higher global markets amid optimism the Federal Reserve will ease interest rates further.

The Conference Board said the consumer confidence index fell to 38, down from a revised 61.4 in September and significantly below analysts’ expectations of 52.

That’s the lowest level for the index since the Conference Board began tracking consumer sentiment in 1967, and the third-steepest drop. A year ago, the index stood at 95.2.

#73 Dawn in Calgary on 10.28.08 at 12:38 pm

“I really believe we are as doomed as Vancouver and Calgary.”

But…. but…… according to the CREB and the Calgary Herald, real estate is where we need to invest and Calgary is a ‘safe haven’.


I am getting tired of the spin. Tired of living in this city. Tired of hearing how good Calgary has it. Tired of the lies. Tired of the deceit. Just shut up already.

I’m heading back to the hot tub with my tin foil hat.

#74 brazer on 10.28.08 at 12:46 pm

Real estate industry braces for downturn

VAUGHAN, Ont. — Tough times lie ahead for Canada’s residential real estate market next year, with a brighter picture for 2010, industry officials predicted Monday.

A crowd of more than 1,000 real estate agents and brokers gathered at the Toronto Real Estate Board’s (TREB) annual general meeting Monday for a pep talk aimed at worried salespeople, many of whom have yet to live through a downturn.

As things get rocky, agents will drop out, brokerages consolidate and cut costs, and everyone will have to make better use of technology, a panel of eight Canadian real estate company representatives said at the event…

The meeting came on the heels of a mid-month report from TREB showing sales for the first half of October in the greater Toronto area plummeting 21 per cent from a year ago, and the average resale home price dropping by 15 per cent…

Some other words of advice from the panel included “not reading the papers or watching television,” with media headlines being blamed for some of the fear hanging over the housing market.


i almost fell out of my chair laughing when i read that last paragraph…good lord.

#75 bill on 10.28.08 at 12:51 pm

Shame on the greedy people who patted themselves on the back for their ‘brilliance’ on purchasing real estate the past couple of years. Little did they realize that even a turkey flies in a hurricane! I do feel sorry for the families trying to make a life for themselves who buried themselves into debt because of their mortgage.

At least there is a sense of a bottom in the stock market. The crash in Canada’s real estate market has just begun.

#76 Bruce @mortgagehelp on 10.28.08 at 12:54 pm

I am worried that I waiting for prices to drop, to buy in.. But what if inflation kicks my ass with high rates… renting is much easier, but I want a house

#77 Ed Sager on 10.28.08 at 12:57 pm

Seems that Mario T. and sidekick Ed Jensen are once more whistling past the graveyard: “… nope, nothin’ wrong here in Calgary, everything’s just fine…”

#78 dd on 10.28.08 at 1:48 pm

#75 Bruce @mortgagehelp,

If you want a house buy a house. If you plan to live in it and not move for 15 years you might do ok.

Choose the house and location wisely. Read Garth’s latest book on this subject.

#79 Mike B formerly just Mike on 10.28.08 at 2:05 pm

SP as others have indicate you bring no insight to this blog. As for accurate info… you are sadly lacking in that area as well. I can personally tell all that the Toronto market is completely different than last year. In the up and coming bayview village area, for example, house were going for well above asking a year ago. Stinkers, stuff that needed it all. A few of those were bought by investors who watched “flip this house” and put a bit of cash and time in the house and then added a hefty 200k to the price and tried to sell. Didn’t sell. One such house sold for 35K over asking last Sept. Was fixed up a bit and was asking well over 850K this year and it sat there for 6 months until finally it sold for about what he paid for it, 740K. I saw alot of houses on the weekend and not a soul went into them when I was there. One was completely done up top to bottom. New kitchen, baths, basement, patio, roof, driveway etc. Up for months at 799 K just reduced to 759K. Junkers were going for that price last year. Good ones were going for 80K over asking. This was a vacant house so clearly they were either gazillionaires or just got in over their heads were looking for the big home run and timed it wrong. Even the agent felt the new price was still too high. Go figure that one. We will be buying in the next 6 months we hope but will be very very agressive with price asking for at least 10-15 below asking price regardless of condition.
Toronto may not go down 40% but it should hit at least 15-20% and many many areas more than that.
SO SP , may I call you BH, butt head, or maybe bone head because your info is so so wrong.
They say the stock market is 6 months ahead of the real economy. With stock markets crashing and jumping I would say next year, certainly after the US election, things will be quite different and prices will head much lower.

#80 Downsized and Delighted on 10.28.08 at 2:13 pm

# #75 Bruce @mortgagehelp

I clicked on your name and you appear to be American?
So are you wondering whether now is a good time to buy in the U.S.A.? Not enough available? Prices too high?

I find this very curious.

#81 905 GenXerGurl on 10.28.08 at 3:13 pm

#68 Down-Sized and Delighted- that is so great you were able to down size at the right time and retrieve your investment in cash. I can appreciated your predicament of downsizing and the least expensive home in your neighbourhood is 750K. ;)

My only point is that is that for the average buyer there becomes a ceiling where it doesn’t make sense anymore. I have been watching houses in certain areas for years. I saw one listed for 350K in 2004 and now it was listed again last fall for 527K, now 498K. It has been reduced again and it may only sell for 350K again. I saw some others- listed at 399K that sold over the asking price in 2007. Now they have been re-listed at 599K. They will not likely get that price as there seem to be scores of them around in that price range. I am saying a year and a half later, who would pay that?

Also, some of these 500+K places were selling ” for lot value only, no showings”. There won’t be much building going on there anytime soon as there are already scores of luxury homes for sale, several not even up yet!

If anyone is looking for a deal on a luxury home, south Mississauga seems to have scores and scores of houses over 800K- 3-4 million. (Most of the listings!) Probably a lot of these people don’t want to be the last one at the party when the music stops and be the greater fool. Some will likely have to sell at bargain basement prices as there are so many to choose from.

#82 613 Happy where I am on 10.28.08 at 3:30 pm

I would like to respond to #22 – 905GenXerGurl…

I understand what you are saying… I was born and raised in Ottawa and I still live there….

When I got married, my husband and I looked carefully at our situation… we didn’t make alot of money and we both did not drive due to disabilities so it was absolutely necessary that we find a place within walking distance of a grocery store. We did not want oodles of space and we didn’t want to be stuck in the suburbs with cookie cutter housing…

We looked for quite some time but found what our real estate agent dubbed “the last bargain in Centertown” … a small, 3 bedroom, 1 and a half bath end-unit townhouse right downtown within walking distance of Garth’s old place of employment.

We did nothing to the place to fix it up… just paid down the mortgage and watched as real estate values rose all around us… our friends were all moving up into 2500 sq ft plus houses in the suburbs while we just sat there, very happily content with what we had…

2 year ago, I kicked my husband out and promptly renovated the townhouse with new kitchen, bathrooms and flooring throughout, and now am the envy of all my friends in our 50’s, who are now looking to downsize from their mansions and move downtown to sardine can-sized condos.

There is not one for sale sign within a four block radius of our place… why??? because Centertown is not as expensive and yuppified as the Glebe, and there are small townhouses and detached houses sprinkled among great big places which were broken up years ago into apartments.

My son and I are very happy where we are… Sometimes you just get lucky in the real estate game… It really has nothing to do with how much income you make… it’s how well you play the game of buying and selling and, sometimes, waiting for the right opportunity. Its also knowing what you have is truly what you need and being satisfied with what you’ve got…

If I were to sell I would make a 300% profit over what we paid for it 20 years ago, but, I aint selling…

I know a good thing when I see it…

(and as a postscript to this comment, I grew up in Rockcliffe Park in a huge house… watch my mother work and clean every single day. I hated housework so a small space was a relief!!!!!)

#83 john on 10.28.08 at 5:18 pm

Markets stabilized.

We are all greater fools, wishful thinkers and overreacted.

Personal impact:

Gas bills reduced
Line of credit reduced
Didn’t plan on moving anyways

I believe a good majority are in this situation and we are hoping to capitalize on people who have overextended themselves.

I have given up waiting for the big bomb to drop as it’s not going to happen. We’re all wishful thinkers but it’s time to move forward folks.

#84 OntarioHouse on 10.28.08 at 5:58 pm

Downsized and Delighted:
Since house prices are on the decline now, wouldnt it make sense to wait? This is not some hope and fantasy, stats show that prices have begun to fall!
If waiting a little bit can make a differerence in purchasing power (townhome vs detached) or if you can end up with a smaller mortgage, then why not???
Its not always a good time to buy (unlike what real estate agents say).

#85 islander on 10.28.08 at 6:39 pm

Buy Canned Foods wrote: Let’s get rid of real estate fees and pay agents a salary. No commission, but perhaps a bonus for the # of units sold, but not tied into the selling price.

OK, Stalin, agreed. Now do I get to decide what YOU get paid?

This is the problem with democracy. People who don’t have the slightest clue about economics run around with their asinine suggestions on how to fix things.

Just the other day I was reading the Letters section of one of the country’s fishwraps and four people suggested Conrad Blackheart, Lord Tubby of Fat Harbour, should be let out of his hotel suite, errrr, prison cell for penning an op-ed piece calling for Comrade Roosevelt-style redistribution schemes to combat today’s melting financial picture.

That’s all we need. More welfare. Supported by a criminal who dedicated his entire working life to throwing working stiffs onto the street while lining his own avaricious pockets. And getting brain-dead voters/taxpayers to cheer for it.

We aren’t doomed because house prices are going down. We aren’t doomed because our RSP and investment accounts are shrinking. We are doomed because government is meddling. Our own band of crooks have handed CMHC $26 Billion so far. That’s inflation. And it will only become apparent to the economic dimwits of this country when it shows up in the form of $12 loaves of bread.

#86 john on 10.28.08 at 7:10 pm

It’s been 7 months of watching this and I see very little impact…time to move forward folks..we are all wishful thinkers myself included…time to move forward

#87 OntarioHouse on 10.28.08 at 8:39 pm

Little impact? Are you for real? Prices have already dropped substantially. Wait until 2009, that will be the year of massive impact. What we’ve experienced so far is only the beginning of the biggest Canadian housing bust in history.

#88 Downsized and Delighted on 10.28.08 at 9:24 pm

Gen X Gurl: “Also, some of these 500+K places were selling ” for lot value only, no showings”. There won’t be much building going on there anytime soon as there are already scores of luxury homes for sale, several not even up yet!

If anyone is looking for a deal on a luxury home, south Mississauga seems to have scores and scores of houses over 800K- 3-4 million. (Most of the listings!) Probably a lot of these people don’t want to be the last one at the party when the music stops and be the greater fool. Some will likely have to sell at bargain basement prices as there are so many to choose from.”

I will be the happiest person here when the building stops – but it hasn’t yet. But the neighborhood has changed so drastically this time. The number of smaller affordable homes has been forever greatly reduced due to all that building of monster homes. So I see my current home as a pretty safe bet. ALL of the older homes in this neighborhood are sold on the basis of lot value, whether or not you choose to live in them.

The funny thing is, I hold alot of resentment toward the monster home builders who came here and ruined this neighborhood, so if they are struggling now, I won’t be losing any sleep over it.

The only bargain I know of was an old house on a huge lot for $880,000, but it sold within a week.

#89 Downsized and Delighted on 10.28.08 at 9:33 pm

Ontario House:”Downsized and Delighted:
Since house prices are on the decline now, wouldnt it make sense to wait? This is not some hope and fantasy, stats show that prices have begun to fall!
If waiting a little bit can make a differerence in purchasing power (townhome vs detached) or if you can end up with a smaller mortgage, then why not???
Its not always a good time to buy (unlike what real estate agents say).”

Well sure, I agree if it is your first purchase – take your time and decide where you want to buy and then go looking for as long as it takes to find something good.
When nobody’s buying, you have a good chance of having a lowball offer accepted. The trouble with waiting too long is the really good properties won’t come on the market at all (most people I know can afford to wait to list their property till the market recovers).

#90 dd on 10.28.08 at 10:18 pm

#85 john

What do you suggest?

#91 john on 10.28.08 at 10:19 pm

Time to move forward everyone. The bailout foiled the explosion and had it not happened at that time it would have been great.

#92 Blacksheep on 10.28.08 at 10:21 pm


Your comment,

“Get real people you are all frantic because you don’t like your current situation. That doesnt change real estate to suit you, it is wishful thinking.”

You don’t seem to understand what is happening.

Mass deleveraging is taking place.

Peak assest prices from 12 months ago are now

Business values, stock p/e ratios, commodity prices,

and yes, REALESTATE Values.

When an asset is gaining value you hold it,
when an asset is declining in value you liquidate it.

I turned of the MSM and did some research.

I sold my home this spring, BECAUSE a major price correction was coming.

I did not sell my home, WISHING a price correction
would come.

It’s time to accept reality, and take defensive action to protect ones wealth.

Something wicked this way comes.

#93 OntarioHouse on 10.28.08 at 11:18 pm

People who are older with paid off homes (or mostly paid off) should be ok.
These are the following people who wont be so lucky:
*People who have over streched themselves (taken out too big of a mortgage). Those who bought recently. The slightest wind will knock them over. If they loose their jobs (recession) they’re screwed. In the past if someone ran into trouble they could simply sell, now its different. The market is frozen, they’res no buyers. Miss a payment or two and you know what happens.
*Flippers. They thought they would make a quick buck and never intended on keeping the property. Now that the market has turned they’re stuck with a house and a heavy financial burden.
*Builders who miscalculated demand and over built. Too much supply for too little demand.
These are the ones who will bring the prices down. These are the ones who will be forced to sell at reduced prices. Good deals will be coming.
* And people who bought their homes before the boom can afford to sell for less, because the homes that they will be buying will also cost less so the market drop will not affect them.

#94 Buy_canned_foods on 10.29.08 at 12:01 am

Hey #84, I’ll let you in on a little secret: buyers do not need Realtors.

The Canadian public is an educated public (approximately 50% with a university education); hire a good lawyer, do your due diligence, and you can purchase a house on your own (and at the same time get the price reduced because you’re not bringing a Realtor to the table)…so I thought my suggestion of ‘salarizing’ them was valid…


I clicked on the ‘safe haven’ at the top and loved this:
“And it’s hard to negotiate the best deal when the market has turned the corner and everybody’s buying,” said Jensen.

Still Spinning, Still Playing the Game. Still trying to feed the buying ‘frenzy’. I Love it.

#95 Marcus Aurelius on 10.30.08 at 2:53 am


It seems that Garth’s bloggers are tentatively moving to a realization that the future of the ‘take-it-or- leave-it 5% commission’ may be cloudy. The cracks in this dam in Toronto were really started by Mayor Miller, courtesy of his buddy, Dalton McGuinty (who gave Red Dave the power to tithe real estate transactions in Toronto in the first place). That extra 2% land transfer tax, on top of an equally-useless 2% tax at the provincial level, caused Vendor wheels to start seriously turning – as the real estate lobby knew it would.

Even though the cut-rate commissions brokers were blackballed out of town (virtually) a few years ago, the Miller Council robbery is going to accelerate the simple math here:

Sale Price (a nice little crapcan in central TO): $1 million

McSquinty/Miller Mafia Vigourish: $40K to Buyer (4% LTT)

Agent Prostitute Fee: $50K from Vendor – 5%

(usually split, if the Buyer is dumb enough to think that a Purchaser Agent Agreement adds any value to the process of buying a house. 20% of Toronto agents today are less than 2 years’ out, and most of the ones I see barely speak English, and wouldn’t know Forest Hill
from some backward, Third World anus of a town where they likely came from. Think Borat, with a Certificate from the good folks at OREA).

So – with Sales heading for ‘Quiet Time at the Nursing Home’ territory, try this out on your listing agent, if you’re a potential Vendor these days:

“How about you work for 3%, because the Purchaser is going to make his Offer AFTER factoring in that extra 2% tithe from Miller that he has to pay for the Deed, and because your lobby creates so many ad campaigns about how you’re my ‘partner’, you can share the pain too. Or, I can step outside and throw a stick, and hit 25 agents who haven’t closed squat so far this year, who will be happy to work for $30K on this sale, and not $50K (and even be happy to split that with another equally-useless colleague). And if you are not really happy with that, I can smile and sign your silly little listing agreement at 5%, and we can have this conversation again when I’m looking at an Offer of less than my List Price, and I tell you that we need to amend the commission terms for me to be able to sign it back and sell (which is, after all, the trigger event for you to pay your bills).

As a Buyer, if you don’t sign a Purchase Agent agreement (and you stay away from any agent parasite who can try to argue that he/she tipped you to a Listing), you’ve just acquired at least $25K of negotiating room on that $1M listing.

The worm is turning on an ‘overbuilt’ real estate prostitute sector in Toronto, and the predictable oversupply problem in end-of-cycle Toronto becomes a leverage point for you on pricing and transaction costs.

If you sign a Listing Agreement at 3% (or less), Red Dave isn’t as scary anymore. Which is probably something the City of Toronto is counting on you to do, as soclally-correct Torontonians can’t exactly ask Council to kill the LTT, and force the garbagemen, little militant socialists from Scotland who drive the TTC buses, or any of those nasty (but demographically-acceptable) ladies hired to watch poeple actually do work at City Hall take a pay cut, much less earn a real living ‘out there’, can we?

Once we all realize that the 5% commission is open to negotiation (and it will be, as these agents sit around the office drinking coffee for the next few months, after their big wahoo Conference of Denial), where does it stop? The MLS monopoly is so ripe for antitrust action (even from our laughably-weak regulator in Ottawa) that once that door is kicked in, the whole house of artificially inflated commissions will start to crumble.

I never thought any good would come of greed, stupidity and David Miller’s fartcatcher Council, but some small cultural advance will occur when a free market in real estate transactions results in much lower commissions.

#96 buy_canned_goods on 10.30.08 at 11:13 am

As a buyer/vendor then, we are actually the ’employer’ of real estate agents. THEY should have to submit their resumes to us, and we interview them to find out what they bring to the table, and how much they’re willing to work for. Sounds good to me.

#97 Panic Profit on 10.30.08 at 4:54 pm

What’s the “BLOOD ON THE STREETS” buy signal?

I don’t believe be are even close to the bottom for real estate or stock market – we have a lot of pain coming.

(BTW – I’ve been shorting the US and CDN indexes for over 1 year)

Investment gurus will tell you to buy when there is “Blood on the streets”

In your opinion… What things should we be looking for as a buy signal that we’ve neared a bottom?

Thanks for your feedback