Waves

As I complete the manuscript this week for my new book, I’ve reached many conclusions. One is that, whatever happens with the Obama Miracle Rescue Plan, residential real estate here and in the States has four istrikes against it:

*        Price: It took the market eight years to inflate, and it may take just as long to deflate. How can anyone expect that a 15% dump in Toronto or Calgary prices can balance out prices which doubled in many areas between 2004 and 2007?

*        Affordability: No matter what the dollar cost of a property is, the key factor is the ability of a buyer to afford it. When unemployment goes up, affordability goes down. This recession (or whatever it ends up being) will be with us for a few years. Millions of  families will require a long time to pay down the debt they walked in to so casually during the bubble years. Going forward, they’ll be cautious about making the same mistake again. This is a key reason housing prices could stay dramatically lower for much longer than most experts (and all realtors) expect.

*        Demographics: The downward drag imposed on real estate by the Boomers is just getting started. When these folks understand their RRSPs and 401(k)s are not going to rebound fast after the crash, they’ll be trying to unload houses. For all of us, this is uncharted territory. For the first time in Canadian history we will experience a third of the entire population hitting retirement age simultaneously.

*        Energy: Oil prices may have crashed along with stock values in 2008-9 (and will be rising again in the inflationary times to come), but energy consciousness is here to stay. That has changed real estate tastes, and will continue to do so. This is why natural gas-sucking five-bedroom McMansions with hot tubs and three car garages are so, so 2006. The years are at hand when people will need to worry not only about their job security, but also weather events and food. Climate change and energy can take a back seat to economic distress for a while, but eventually the impact of peak oil, food inflation, stable power sources and environmental refugees into Canada will seize us.

In total, we have a perfect storm blowing down house prices. A battered real estate sector in turn becomes a massive anchor on economic growth. It erodes family wealth. It makes us feel poorer. It collapses discretionary consumer spending – bad news in an economy which is more than 60% dependent on people shopping.

But it’s only started – important news for anyone who’s been thinking of selling.

By the time this deflationary bear market in real estate is over, we’ll see that it came in two waves. The first started in the US with the popping of the housing bubble in the beginning months of 2006, and was followed in the Spring of 2008 in Canada by a dramatic decrease in sales, leading to a gradual but steady slide in prices. The second wave came in the States with the explosion of negative equity and corporate layoffs that followed the stock market crash of 2008, and in Canada is likely to begin at the end of 2009 or the spring of 2010 as we all understand there is nothing unique about the country, and no northern antidote for housing contagion.

– Globe and Mail

123 comments ↓

#1 mayor windy Miller on 11.22.08 at 11:26 pm

Energy -stable power sources-

By that Garth I assume you’re talking generation.
Each sodding Mc Mansion can have a mini wind turbine on the roof, something akin to the old TV antenna. Solar panels to help generate heat are another possibility.

It will also help to get rid of ancient fridges and air conditioners lurking aplenty in low income rental buildings and elsewhere. This is a tech & massive legislative challenge.

#2 Simon on 11.22.08 at 11:48 pm

I’d imagine the impact of the “housing contagion” varies pretty widely according to the motives of the people living in them; a place to live, an investment, the sole store of wealth, etc.

Then you get into where one’s real estate is located; an area where the price has skyrocketed and is now sliding. Somewhere where the price hasn’t gone through the roof?

Type of housing; condo, farm, single family?

There are lots of factors determining how an individual property changes in value. Ditto the circumstances of the owner.

#3 Brian on 11.23.08 at 1:03 am

Garth, is it inflation or deflation that’s coming? You can’t seem to make up your mind:

> Energy: Oil prices may have crashed along with stock
> values in 2008-9 (and will be rising again in the
> inflationary times to come)

and:

> By the time this deflationary bear market in real
> estate is over, we’ll see that it came in two waves.

I have made this clear previously – deflation is the immediate enemy, and inflation will follow several years hence as a result of government actions taken to counter the first threat. — Garth

#4 The Coming Depression on 11.23.08 at 1:06 am

I would sell as fast as possibly possible, you can always buy back your home in a year for 50% less. Just finished talking to a realtor at an open house here in Vancouver. Downtown its eerily quiet on a nice sunny day with no lookers, no buyers and no calls. No sales, just dead. dead. dead….she stated

#5 midas on 11.23.08 at 1:15 am

Since Economic Sovereignty is a thing of the past so is political sovereignty. If we have no freedom to determine our economic fate then the fiction of Canada as a sovereign nation will soon be revealed as exactly that – a fiction. The US sneezes and the whole world catches a cold; this fact clearly shows that there is no economic independence in the world any longer. Unfortunately the US is not just sneezing it has full blown double pneumonia. The loss of economic sovereignty that began in earnest with comrade Trudeau and gathered steam under Herr Mulroney with NAFTA and ‘FREE’ trade will soon result in a compete loss of political freedom for the people of Canada and all the other nations of the world. We will soon be a truly global village united through a common currency and no longer sovereign nations able to make decisions about our political direction by ourselves. No more dollars, pounds, yen, francs, rupees, yuan etc. etc. We will soon have a shiny new global currency and at last that which Alexander and Caesar and Genghis Khan and Napoleon and Hitler only dreamed of will have become reality with possibly not a shot being fired. Coup D’monde (pardon my French!)
Is this a natural evolution or is it something more sinister? The magnitude of the ‘Economic Crisis’ is truly breathtaking with the largest corporations and banks falling daily like dominoes. So no one in power worldwide foresaw any of this coming? Or is there an unseen hand, a wizard behind the curtain pulling the strings that are today bringing down mighty corporations and will tomorrow bring down mightier champions of yore, that which we knew as SOVEREIGN NATIONS! And when all the nations of yesteryear do become one big happy family (imagine there is no country – O John where art thou? Thy Utopia beckoneth! ) will the former nations of the world be happy? and family? or just big? And who then would run this planet and from where? And for whose benefit? The world is being conquered right before our eyes and we sit and worry about the price of housing! The Utopia that many have wished for in reality will turn out to be the BRAVE NEW WORLD! Take your pills and go to sleep, no need to wake up children! Big Brother loves you all!

#6 The Tallyman on 11.23.08 at 1:51 am

And for many that manage to keep their jobs it will probably involve 1/3 to 1/2 wage cuts and job sharing.
Going to be very hard to keep heat/lights on in the big house.

the jig is up and it’s going to be a long slow row to hoe.
I was going to say to recovery but this age of instant millionaires will not be seen again.

The homeless may get a break though as many McMansions may get turned into affordable rooming houses.

#7 David on 11.23.08 at 3:29 am

With house prices increasing at rates of 50-70 % above the rate of inflation or family income growth there was a point at which the wall would be hit. This problem will affect families at all income levels.
It is impossible to revivify a deflating housing bubble, especially a bubble sustained by declining or stagnant family incomes or family incomes threatened by job losses. The voodoo 0/40 mortgages stand a very good chance of becoming zombie debt. By zombie debt, I mean non performing mortgages kept on the books as good assets. Ottawa has bought $75 Billion already and apparently just added another $6 billion potential zombie mortgage debt instruments this week.
Given the current state of things, a good number of baby boomers are heading into their Golden Years with massive wealth losses from real estate and investment portfolios.

#8 Peter on 11.23.08 at 3:52 am

Garth,
Well done, I read your book and fully agree. Only thing is, when you talk about this second wave hitting Canada at end of 2009 or beginning 2010, don’t you think it will be felt a lot sooner than that? I have noticed a definite acceleration of events and wonder if it could come sooner?
Regards and thanks

#9 Ydgrunite on 11.23.08 at 4:50 am

Garth,

I truly value your insights and the lengths to which you go to educate your fellow citizens, but please try to cut back on the hyperbole.

The Boomers have had a major impact on society at every stage of their life, but they were born over a period of twenty years. To say that “a third of the entire population [will hit] retirement age simultaneously” makes it sound like every one of the 10 million Boomers was born on the same day.

The situation that we face is dire enough. There is no need for exaggeration.

#10 garthfan on 11.23.08 at 7:07 am

first!!!!!!

#11 Samantha on 11.23.08 at 7:42 am

With respect to the new “4 strikes yer out real estate baseball tournament”…

Affordability – I wonder if those who have substantial mortgages will continue to pay down their debt, particularly in the face of declining real estate values. I suspect for many, it will be very tempting to merely walk away.

Affordability reached a saturation point during this bubble debacle, not only for homeowners, but for renters as well. In bubble areas, people can’t work enough hours in a day to put a roof over their heads, be it rented or purchased. Some will move back in with family, while others will couch-surf with friends. These people are not included with the statistics for people who are homeless. They should be factored into these stats, for that would be a much more accurate indicator of how many people have been truly impacted and to what degree.

If there is more demand for an affordable rental market, particularly for families, where will this type of housing come from? Existing apartments? It sure won’t be condos, because no one can afford to pay the inflated rental prices.

Demographics – I think that the reverse will happen with new retirees trying to stay in their homes for as long as possible. Particularly when some of them may be converting their homes to accomodate the prodigal sons or daughters (with children in tow) who return home, poorer but wiser (hopefully).

This might actually be a good thing and ease some of the burden on senior support and care. As the parents age, their children can shovel the driveway and do the tasks of maintaining the home that the parent finds difficult.

Home support helps people stay in their homes and out of institutional environments. We don’t have enough community senior support established to serve this mammoth group of retirees as they age (e.g. meals on wheels, home support nurses etc). Some folks are quite lucky and able to be totally self-sufficent until well into their early ’80’s, however, a catastrophic health event, such as a stroke, or diagnosis of an illness such as Parkinsons can occur much sooner.

Energy – Aside from heating, it also takes a lot of energy to clean and maintain a McMansion, and not so great for an aging population, or for a younger couple with children who realize that the road to hell is paved with the endless polishing of stainless steel appliances and granite countertops.

It’s about time people stopped behaving like petulant children, pouting about the size of the master bedroom ensuite bathroom or whether the kitchen has that “Chef” feel to it. Perhaps a gazillion square feet aren’t necessary? Funny how other people lived in more modestly sized homes for many, many years. They raised their families and no one seemed the worse for it.

Ah, but the real estate spin doctors convinced us otherwise when a plethora of stylists hit the airwaves to show us how to paint, laminate and stage our homes. Front foyers are no longer an entrance, they are the equivalent of a real estate fashion catwalk.

No longer could we decorate our homes, no, no, no – we had to “style” them. Why? To try to prop up the real estate market – to try to justify that the inflated prices were set in marble.

I live in a home built in 1951. 896 square feet with a huge yard. 2×6 ship lap construction. Original thick maple floors. 2 bedrooms and 1 bathroom. Not once have I or my husband felt deprived or claustrophobic. We live simply.

I hope that whatever comes, it will teach people to live sensibly and connect with the joy that comes from simple living and freedom from the hamster wheel pursuit of material things.

#12 Future Expatriate on 11.23.08 at 9:33 am

#10… nope!

#13 Joanne on 11.23.08 at 9:50 am

I have been following these financial events over the past year or so. I could see the house of cards ready to collapse. I regret not following my intuition and moving my portfolio into a more secure position. I ve lost about 35% already. My advisor suggests to stay the long course because I have 15 years before I retire. However my gut sense is telling me I might not have anything left to invest after this nightmare senario plays out. Should we believe the bankers now ? Any fool could see, money nor houses grow to the moon forever. I don’t know how these events will play out, but I’m getting that gut sinking feeling we’re in for the shock of our lives. The kind of reality our grandparents or our parents lived through. God help us if its too late to correct this mess were in.

#14 Mountain Girl on 11.23.08 at 10:09 am

#11 Samantha –
Well said.
And to add to your comments on living simply, I think we collectively need to remember that what is a simple lifestyle to us is still unheard-of luxury for most of the world’s population. It is important to keep a global perspective on all of this.
I also like the fact that you are looking for the good things that could be forced upon us in hard economic times. Rather than feel deprived and hard-done-by, why not look at some of the social issues that could potentially be ameliorated, if not solved, by choosing to live simply and to take care of each other? It’s not all that bad. It could be a tremendous opportunity to change for the better. And sometimes change only comes with a crisis.
I’m not a Pollyanna. I don’t think this change is going to be easy. But if I don’t have any faith in the rest of humanity at all, then I guess I do have to take the quasi-hysterical advice (?) of Coming Depression from the previous Cowgirl post and go buy myself a gun! :)

#15 brazer on 11.23.08 at 10:10 am

garth, it would be great to get your $0.02 on reverse mortgages…that’s something that has not appeared on this blog insofar as i can remember.

one has to wonder how these firms are going to pay all these people that hold these contracts as the value of these homes continues to plunge downwards.

#16 Downsized and Delighted on 11.23.08 at 10:20 am

The U.S. housing bubble is based on different factors than Canada. The biggest bubble areas are Florida and Las Vegas, both second home markets. You cannot forecast similar results in Canada (except in our second home markets like Muskoka ). Do you have any idea how overbuilt this recreational property market is in the U.S.? That’s the problem! All those people jumping into the market to make money when times were good!
Every Joe Blo owns a second property down there! Real estate agents own 3 or 4!

What should you worry about in Canada? Any area of our market that was purchased primarily for investment and which the owner would never have bought if housing prices were stagnant. Not too hard to figure this out: 1. Properties for flipping 2. mcmansions over 2 mil 3. recreational property 4. land (or tear down houses) 2. second homes of any sort 5. homes bought with little or no down payment
All of these situations will result in a price correction EARLY on. Once that happens, why would prices continue to drop?

You will NOT, REPEAT NOT, see prices plummeting 40% or more on modest, single family homes in good neighborhoods. This INCLUDES BABY BOOMER homes
(if they are MODEST). And for the less modest baby boomer homes that will see a greater price correction, after this INITIAL correction, prices will level off again.
Many will simply stay in their homes, and the rest will
continue with their plans to downsize with slightly reduced profits.

So I predict a rather long period of stagnant growth in housing, with limited supply, but the best bargains will show up early!

So, people don’t actually live in Miami or Las Vegas? — Garth

#17 Kash is King on 11.23.08 at 10:43 am

#5 Midas. “And who then would run this planet and from where? And for whose benefit? The world is being conquered right before our eyes and we sit and worry about the price of housing! The Utopia that many have wished for in reality will turn out to be the BRAVE NEW WORLD! ”

Someone on one of Garth’s earlier threads left this link,and it is worth posting again, given what you are pointing out.

http://video.google.com/videoplay?docid=-515319560256183936&ei=mYL5SOr2MKO2qAPJu9CQDg&q=the+money+masters&hl=en

It’s particularly chilling when you overlay today’s events, and consider this clip was made in 1995!

Although it’s 3.5 hrs long, it’s worth watching the whole thing.

It’s troubling to think that most people are not aware that the Federal Reserve is indeed a private-for-profit corporation…

#18 cj on 11.23.08 at 10:48 am

hi garth…great site!!

for a city like calgary which clearly needs a significant correction for many of the reasons you stated. I do however wonder, in an inflationary environment wouldnt people buy homes? and in calgary with peak oil, wouldnt calgary and Alberta be in the perfect position to prosper from that? I am long term bullish on Alberta, Sask and BC for that reason and therefore i think a person should be ready to jump into this market with a long term view….am I missing something?

#19 Wesley Moxam on 11.23.08 at 11:09 am

Anyone see this?
http://images.theglobeandmail.com/archives/RTGAM/images/20081121/whousing_gallery1122/reresaleprices500x350.jpg

#20 wealthy renter on 11.23.08 at 11:42 am

I have tried to post this twice with no success. It is on topic. It is an interesting read for bubble watchers. I am surprized it made it through an editorial board that was very bullish on housing a few years back.

http://www.businessweek.com/magazine/content/08_48/b4110036448352.htm

#21 Dave on 11.23.08 at 11:44 am

After following the derivitives market and it’s implosion for the last two years I don’t believe it is accidental at all.

We get the main stream media deliberatly ignoring it, until a few short months ago, now screaming doom and gloom at us daily.

The “to big to fail” tactics by the US treasurey and the Federal Reserve was employed to as a scare tactic to frighten the public.

Linking the financial collapse with home foreclosures was an attempt to shift the blame to consumers and make the public think that mortgages are the root of the problem.

The problem is the fiat money system, fractional reserve banking and central banks being allowed to issue currency. No fiat money system in history has survived. Fiat money eventualy defaults to it’s true value…..nothing.

#22 john on 11.23.08 at 12:15 pm

Great post Garth !

#23 Bottoms_Up on 11.23.08 at 12:28 pm

Ok, I finally had to watch Peter Schiff (6 minute you tube video), and it is worth the watch. He’s telling everyone the bottom is going to fall out of the US dollar, and the host says “I’m long the dollar because the Chinese are commies”…I couldn’t believe it! What a well-thought out arguement…definitely worth the watch because he explains the current macroeconomic situation in simple terms

http://thecomingdepression.blogspot.com/search?updated-max=2008-11-22T11%3A20%3A00-08%3A00&max-results=4

#24 Bottoms_Up on 11.23.08 at 12:32 pm

‘Zero carbon emission community in Edmonton’

http://www.canada.com/ottawacitizen/news/story.html?id=c71125fe-0b67-419c-93f7-4aca837f5541

The lowest price, $179,000, is for a room in a seven-person co-op model home. From there it moves up through 10 more options to $845,000.
——————————————-
Great idea but are people going to pony up the cash?

#25 squidly77 on 11.23.08 at 12:38 pm

“The upswing usually starts with an opportunity – new markets, new technologies or some dramatic political change – and investors looking for good returns.

It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble.

In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: ‘a larger and larger group of people seeks to become rich without a real understanding of the processes involved’.

Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is ‘distress’, which generates unexpected failures, followed by ‘revulsion’ or ‘discredit’.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.”

http://www.deanlebaron.com/book/ultimate/chapters/mania.html

stage 3 ?

#26 squidly77 on 11.23.08 at 12:42 pm

You will NOT, REPEAT NOT, see prices plummeting 40% or more on modest, single family homes in good neighborhoods

couldnt agree with you more..40% will be the first leg down
followed by another 30% down
bubble cities price drops will be astounding..

#27 Bailing in B.C. on 11.23.08 at 12:59 pm

#11 Samantha

Another advantage of people living modestly in smaller spaces is that they might actually teach their children how to behave. How many people live in 3000sqft houses where the children have every computer game known to man and no ability to behave. Put them in a 1000sqft box over Winter, with nothing but each others company for entertainment, and see how long it takes to sort them out.

#28 Downsized and Delighted on 11.23.08 at 1:10 pm

Garth: Due to the “homesteading” property tax rules (limiting increases to 3% for those who lived in Florida as a principal residence), one can easily see that if the majority of homeowners actually lived there, the tax base wouldn’t cover the cost of running the state. Therefore, one can easily deduce (even without looking – which makes it even more apparent that hardly anyone lives there fulltime) that the majority use their properties as a second home.

The homesteaders weren’t the problem anyway, they would lose their big tax incentive if they moved, so they tended to stay put. You can’t blame the run-up of prices on the homesteaders – that’s for sure.

#29 bc girl on 11.23.08 at 1:18 pm

#16 Downsized and Delighted

Hmmm, I have to disagree that it is so different here in Canada than the US.

In my area, modest homes are dropping quickly from what I can see. I sold my modest home in a good neighbourhood in April ’08…my now previous neighbourhood is seeing price drops that are astonishing as far as I’m concerned. In the preceding 2.5 years our homes tripled in value, I knew that was somehow wrong, didn’t make sense…so I got out because my intuition knew it couldn’t hold. All I knew about the buyers of my house was that they had equity from a house they had sold…that’s the only thing that prevents me from feeling worried for them.

I agree with Samantha and Mountain Girl, that there will be benefits to this economic collapse in terms of families and communities of friends working together.

#30 Downsized and Delighted on 11.23.08 at 1:23 pm

I personally have high hopes that Obama will get to the root of the problem with the U.S. financial markets. The stock market is going to undergo massive regulatory changes in the future. It is so obvious now that the run up of oil prices, and food prices was primarily due to speculation in the market. And the huge decline is exaggerated by the same factor. And the currency (Cdn $) situation right now makes it impossible for good companies to carry on business with the United States. Again, caused by investors flocking to U.S. currency for short term protection – but the backlash against Canadian companies is a disaster. And those damned hedge funds keep pounding away at the market with their deleveraging.

These are the problems that WILL get sorted out in the near future. If you turn the markets (real estate and stocks) into a big roulette wheel, the results are what we have now.

I think Obama will be the greatest president in the history of the U.S.! (because he isn’t a egomaniac and he knows how to benefit from listening to other people who know more than himself)

#31 rant in Calgary on 11.23.08 at 1:51 pm

Downsized and Delighted #16,

“All those people jumping into the market to make money when times were good!
Every Joe Blo owns a second property down there! Real estate agents own 3 or 4!”

Not just “down there”, up here too. They are halting sub-divisions and condo projects because nobody needs/wants them. (over supply)

Have you seen all the re-sale homes that are empty?

Many realtors own 3 and 4 properties,

#32 kc on 11.23.08 at 2:21 pm

#6 The Tallyman

“And for many that manage to keep their jobs it will probably involve 1/3 to 1/2 wage cuts and job sharing.”

Last month where I work we had to take close to a 10% pay cut, We are also on a work share, the wheels have to run 2 days a week (1 and 3 the next week 2 day average) the company found some program that the Feds have that wave the 6 week waiting period for UI. otherwise we are shut down. you Don’t think this is killing some fellow employees? working 2 days a week then subsidized by UI.

16 Downsized and Delighted

“You will NOT, REPEAT NOT, see prices plummeting 40% or more on modest, single family homes in good neighborhoods.”

I have to argue your logic here. We rent a house built early 80’s in a peaceful neighbourhood. When I first moved into this house there were 5 houses for sale in the imediant area. After searching MLS they all were listed in the $380’s, the house I am in needs work and general fixing, however, she is a solid built house and does our needs fine with roughly 2200 sq ft. The price thou to buy would be extremely over inflated. I would top the pice at $220,000 in a realistic market. when you place Rent/ratios this is near in line as rent for this place is $1600. let me add that in the last year in my area I have seen only 1 house sell with many for sale signs on lawns, today thou I see only 1 sign in a 3 block radius. 40% declines are not unrealistic.

#33 pbrasseur on 11.23.08 at 2:38 pm

@ Downsized

“You will NOT, REPEAT NOT, see prices plummeting 40% or more on modest, single family homes in good neighborhoods. This INCLUDES BABY BOOMER homes”

Oh yes you will!

And I’m not even a gloom&Doomer!

When people start losing their jobs and put those houses on the market in the middle of an already slowing RE market and credit crisis. Prices WILL melt!

#34 Anonymous on 11.23.08 at 2:59 pm

To Future Expatriote,
Your comments addressed to me yesterday were very kind, thank you.
To pjwlk,
What kind of sister/brother am I? I have had my sister stay with me – she feels better and goes off her meds and hitchhikes back to Vancouver. Currently, there are social networks that give her support. Incidentally, we have no other family – our parents are both deceased. I understand where you are coming from, it is something difficult to understand if you have never experienced it. She is now 44 years old, and was diagnosed when she was a 3rd year dentistry student at UBC.
I do my best to keep in contact with her and frequently make trips to Vancouver to locate her which is not easy – sometimes I find her, sometimes I don’t.
She’s never out of my mind and with what is coming I fear for her even more.

#35 Just a Girl on 11.23.08 at 3:03 pm

Reasons why people ‘live simply.’

Because you have no choice (ie. poverty);
Because you have a choice, and choose TO;
Because you have a choice, and choose NOT to;
Because you live unaware you even have a choice.

There are many individual definitions of ‘living simply’ and this is why those that do (according to their own personal definition), get frustrated with those that don’t.

Anyone who has travelled outside Canada to areas of extreme population and underdevelopment, will get my point. Living in a crumbled building without electricity, picking through garbage is one definition of ‘living simply’, if that is the only reality you know …. if it isn’t, some might see it as plain ‘survival’ ;)

In North America, I would venture to say that ‘living simply’ might involve a collective set of values that includes some rejection of materialism and consumerism, the conservation/wise use of resources, and sharing what one has, with others who do not. Close enough for a working definition? :)

A couple years ago I participated in one of those big walks for cancer, for personal reasons. Having lots of time to think while walking 7 hours that day, I recall reading the back of one man’s t-shirt. It went something like:

“Less for self. More for others. Enough for all.”

Anyway, back to real estate. There is one thing we can all agree on, especially in a growing developing society.

Land is precious. (So is energy, water, air, food, sunlight.)

#36 The Coming Depression on 11.23.08 at 3:59 pm

Geez I have to get you guys educated. Please go and listen to Peter Schiff ( Dramatic and Scary) and Gerald Celente (food shortages, collapse by 2012) and see where Real Estate will be going to. Click “THE COMING DEPRESSION” name.

#37 DumpNowOrRegretLater on 11.23.08 at 6:02 pm

I agree completely with Garth’s take on “short-term = deflation, long-term = inflation, perhaps even hyperinflation.” This is a concept that even some of the economic experts on CNBC are not understanding. The current credit “wipe-out” is deflationary, and the response to this will be the printing of huge amounts of money in the years to come, which will be massively inflationary. We’re in for a massive roller coaster ride!

This is my first time posting, but I’ve been reading for months and I still cannot find any significant flaws in Garth’s reasoning. Keep up the excellent work!

#38 john on 11.23.08 at 6:08 pm

@ Downsized

“You will NOT, REPEAT NOT, see prices plummeting 40% or more on modest, single family homes in good neighborhoods. This INCLUDES BABY BOOMER homes”

—your dreaming there are no exceptions –all things are relative.

#39 Future Expatriate on 11.23.08 at 7:02 pm

#33… you are most welcome. While I won’t go so far as to say North America needs a depression to regain a bit of humanity and empathy, it will serve to do that. We would also do well to remember that the last Depression did finally achieve the largest and most affluent middle class in history in twenty years’ time, until deregulation and people who had no business participating in the stock market (through 401k’s and other scams) repeated the disaster of the roaring 20’s and destroyed the middle class once again.

This time a great hunk of the nouveau riche will be in the bread lines with the middle class. You’ll be able to recognize them by their belligerent attitudes. Good folks will protect your sister from these cretins.

#40 john on 11.23.08 at 8:00 pm

NOBODY BELIEVES—a very scary scenario,too many people who know nothing else but easy credit,easy living and a multitude of toys.—when reality hits the shock waves will be phenominal>>> where are we headed?——–i have a yard full of squirells and a very good gun :-)

#41 Derrin on 11.23.08 at 8:04 pm

I told you Garth you are one bubble too early.
It’s the next bubble. It’s going to be big with lots and lots of fiat floating around after it explodes.

#42 Muskoka Lassie on 11.23.08 at 8:30 pm

Well I dare say it is about time that many new’veau riche get their comeuppance.

For many decades, more than I wish to admit to, has seen many dozens and dozens of uncultured families move into this wonderful Muskoka landscape, with their aluminum hull boats, outboard motors and garishly souped up chevrolets and Fords.

Whatever happened to our beloved BMW stationwagons?

and back in our fair City…Rosedale has lost its joi de vivre…multi cultural neighbourhoods now filled with multi racial children…I’m not referring to the staff but to actual neigbours who celebrate so many strange holidays.

What has happened to our once beautiful Province?

D.

#43 Calgary rip off on 11.23.08 at 8:58 pm

Just got a call from a marketing agent for Robyn Moser, realtor in Hidden Valley Calgary. This lady said there will be tons of foreclosures in Calgary in 2009. To listen to some people talking you would think they were talking about buying bread. Buying houses should be a once in a lifetime event. All those bastard flippers who buy houses such as REIN or whatever those numbnuts are called should be exiled permanently. Its one thing to buy a bad house, renovate the thing and then profit off your work. Nothing wrong with that.

In any case, wait it out if you are renter and then take your aim and execute.

As far as the depression coming I dont see it being worse than living in 1300’s Europe before the Renaissance. Unless of course there is a war.

#44 Mike B on 11.23.08 at 9:07 pm

T.O. Girl requested some real life real estate stories from TORONTO. This Sunday the 23rd of Nov. went to do some open houses. In the hood where we rent the houses are very very expensive so I decided to see one around the corner. A builder is living in it with the bare essentials, a bar fridge , microwave. Asking price for this gem….1.6 million. even though it has been on the market since June. Agent spin..this vacant house with scant backyard, one better than most she argues, is for the super rich who require the finer things in life/. Translation… rich lawyers, doctors who have no time to compare houses and are dumb and blind. To boot this house, barely six months old, has water stains near the back door. Needless to say I gave here the spiel on the market but was informed that the market in T.O. was down a mere 10% and won’t likely go much more. Why I asked? Because they got a report from someone from the Royal Bank saying the market should bounce back in 6-9 months. Of course she has no MBA, lives in a 600 sf townhouse with hubby , and has been in the biz for 2 years. Good person to be putting your life savings in the hands of.
The other houses I visited all had reduced prices and had been on the market for at least two months. One agent was quite savvy about the stock market and the financial situation in the world and was unsure where the house market would go but admitted it could likely go down at least 40%. He also mentioned the biggest problem is that he would get not only low ball offers but had conditional offers that required financing and the buyer’s own house to sell first. As anyone knows these offers are basically useless . In all he was not optimistic and felt he would have to put the house on the market for lease.
A third agent at another house was all full of beans and felt the house was built by the almighty himself. Who could ask for anything more I thought.
There is a sea of houses out there and sellers are looking at last years prices and buyers are looking at next years prices. When will it all collide? December should be a slow month and start to show signs of seller fatigue . January will be the break point in my opinion as houses that have sat for 5 months will be desperate . Hold on buyers and be prepared for hostile agents who are not willing to negotiate.

#45 Lifelong Investor on 11.23.08 at 9:35 pm

Muskoka Lassie,

You are the one that sounds uncultured!! Your post reeks of racism and intolerance. Muskoka and Rosedale do not represent the most diverse cross-section of society. I am very well aware of the culture of caviar and diamonds, as I own homes in both Rosedale & Muskoka (Lake Joe), as well as West Van (All for over 40 years). Muskoka / Rosedale would be much better served if racial diversity went beyond maids and landscapers. In this day and age I am appalled at such an ignorant post. You are the one who I would hate to have as my neighbour, much less be cornered by at a cocktail party.

#46 Blacksheep on 11.23.08 at 9:36 pm

#29 Downsized & Delighted,

Lets take stock: -Auto sector collapsing, big 3 on the
verge.
-Oil sector projects, being put on hold
due to $50 oil.
-Housing starts/sales plumeting,
prices correcting.
-Retail buniness starting to colapse.
-Canadain banks starting to faulter,
being offered $75 billion in support.
-TSX off 51% in less than 12 months,
with boomers losing needed wealth.

When the 2007 peak value of a 25 yr old, 2000 sq ft box home [modest] hit $ 450K in the fraser Valley [B.C.]the
writing was on the wall.

This is a bubble like all other bubbles, emotionally driven, both on the way, up and down.

I think we will count ourselves lucky if housing limits its price correction to 40%.

I do business in Van. and have heard unsettling storys
of large layoffs starting, with whole businesses just ceasing operations.

North america has become a consumer driven economy.

In 1930 we manufactured things and farmed, now we buy cheap stuff from Asia.

I am deeply concerned about family and friends, most i feel are underestimating the severity of this now unfolding economic crisis.

# 29 D&D,

“I think Obama will be the greatest president in the history of the U.S.!”

Obama is well spoken and charismatic, but can not change the fundamental problems facing the U.S.

The U.S. has $ 55 TRILLION in debt & liabilities it cannot pay.

U.S. AAA rating is at risk, sooner or later one country will publicly refuse payment in U.S. $, and there will
be a loss of confidence in the dollar, no one will want to
hold $ or finance the U.S. any longer, i think sooner.

China is said to be buying 4000 tons of [email protected] $95 billion , representing only 5% of U.S. $ being held.

I feel The U.S. is no longer in control of its own financial destiny.

Take care BS

#47 laughatyou on 11.23.08 at 10:00 pm

muskokalassie;
must be tough to be white these days, eh ?
you mention “uncultured families” in your posting, but
who are you to judge on what is ‘cultured’ when you
make a posting like that…
staff ?
you still having your cotton fields harvested by imported and bought labour ?
strange holidays ?
what, is this canada in the 1800?s
wake up or take the time machine back to where
you stumbled up from…
zzzzzzz……

#48 APCM on 11.23.08 at 10:12 pm

Muskoka Lassie, I hope that was your attempt at humour. I, too, would like to see easy credit eliminated. But I suspect even if it is you’ll be disappointed to see that many of your “actual neighbours” will remain happily where they are because they likely have more money and assets than your other neighbours. Some of the wealthiest people I know (including members of my own family) are immigrants or first-generation Canadians. Maybe it is you who are unsightly.

#49 My_view on 11.23.08 at 10:21 pm

This blog is attracting a lot of crack pots lately.

#50 Downsized and Delighted on 11.23.08 at 10:34 pm

Garth – I have no tolerance for racial slurs. I hope you will remove the offensive post.

#51 Bailing in B.C. on 11.23.08 at 10:36 pm

I feel like an evangelical christian who won’t shut up. I know that we are all going to hell and I feel obliged to tell everybody, even if they don’t won’t to hear about it. This evening I made a bet with a friend about prices in Squamish (Half way between Vancouver and Whistler). She owns a two rental properties and is in the process of building a house for herself. She bought low and gets a great rental return. The bet we made is for a glass of wine. I wanted to bet $500. She thinks that prices in Squamish will be higher after the highway is finished just in time for the 2010 olympics. No amount of stats or logic will change her tune. There are none so blind as them that will not see. Feb 2010 (when our bet is due) she will not have the cash to buy me a glass of wine :)

#52 confused and a little crazed on 11.23.08 at 10:54 pm

to 34 just a girl,

Land is precious to a point. There is still plenty of land in Canada and condos are made to provide more land.

Infrastructure is poorly set up . why does Corp Hq alway have to be D/T We live in a age where it’ss emails/ media movie camera meetings. I can have ameeting with someone downtowwn while I am in langley using my labtop media camera. I don’t have to fight traffic, parking and pay absorbant prices for a office d/t. the money can be better spent running the company. In business the bottom line matters and the way tech is happening. Real time nation/ internation corporate boardroom meeting will be just a click and a password away.

OOPS there goes the D/T housing prices and airplanes will be more for vacations as opposed to business.

sorry airlines

#53 nonplused on 11.23.08 at 11:04 pm

#6 The Tallyman

not possible to convert McMansions into rooming houses as they hardly have any bedrooms. You can’t even convert them into family dwellings. Only good for housing boomer egos.

#54 nonplused on 11.23.08 at 11:13 pm

#13 Joanne

You should know better than to listen to financial advisors. They all suffer from 2 fallacious delusions: The “efficient market” theory and the “can’t time the market” theory, both of which are false.

If you had followed the advice of your financial advisor and stayed in stocks, you haven’t made a penny since 1998! If you inflation adjust the prices you are down 45% in purchasing power. But how many financial advisors suggested shining up the portfolio with a little gold in 2001? You’d be up 3 times, more than offsetting for inflation.

Bottom line: Financial advisors don’t know what’s coming any better than anyone else. It’s their job to sell stocks and financial services.

#55 nonplused on 11.23.08 at 11:18 pm

#16 Downsized and Delighted

So, if we get a 30% correction in something measureable, like the mean or median house price, are you going to continue to tell everyone the modest boomer house is immune? What is the milepost at which point you might consider reversing your opinion?

We should check into this in the spring!

#56 $fromA$ia on 11.23.08 at 11:54 pm

Hey Garth, You won’t see current home prices come back to early 2008′ levels till probably at least 2015!!!

I am thinking more like 2020!

As well, I think society that has seen really good pay raises ( although don’t keep up with the stupid high cost of R.E.) will be rolling back!!! Wages will be last to get hit in the deflation scheme, we’ll need the lay off’s first!!!

#57 $fromA$ia on 11.23.08 at 11:55 pm

Layoff’s will probably be ocurring for a while now.

BTW, I am laid off!

#58 midas on 11.23.08 at 11:58 pm

Squirrels: Art imitating life

I was watching the movie ‘To Kill a Mockingbird’ with Gregory Peck and in one scene his kids bring home a farm boy for dinner; the boy is served a roast and he comments: “I ain’t never had a roast; all we’ve been eatin’ is squirrels and rabbits…”

This time around I think it’s the city folks that will be feasting on our furry friends; our farmer friends should do OK for themselves.

#59 Another Albertan on 11.24.08 at 12:15 am

Another couple of anecdotes to put into perspective the industrial pullback that will likely occur in Alberta in 2009:

1) On a inspection/tour of a well-known Edmonton metal fabrication shop working steel for electric transmission towers for use on a Fort McMurray industrial site expansion: “This is the last major order we have in our pipeline. We have no work scheduled for 2009 yet.”

2) From a rep from one of the major pipe and piling suppliers: “Our 2008 revenue will come in around $80 million. Our projection for 2009 is currently at $3 million. No, you did not hear wrong.” (My jaw hit the floor for this one…)

#60 Jim_s on 11.24.08 at 1:02 am

Absolutely amazing that as global events are unwinding and as these once-in-a-100-year event are happening, we still have people posting comments about “hope”.

Geeze…. I “hope” everything works out good too…. I sure “hope” Obama can fix global gluttony and greed….

In the mean time, asset values have fallen 35% + and will go further. Your hope has paralyzed you into a state of misguided, temporary, comfort at an irrecoverable expense.

Get your hopeful head out of the sand, Downsized and Delighted!. The world is changing. Either comply, or go down with the speculators (assuming of course you’re not one and have nothing to lose, but I don’t think so).

#61 Happy Renter in North Van on 11.24.08 at 1:19 am

Muskoka Lassie… God I hope you’re trying to be satirical but having worked with the Muskoka and Rosedale set, you probably are a real-live WASP saying exactly what’s on her mind…

#62 The Tallyman on 11.24.08 at 1:27 am

#43 Muskoka Lassie

Lily White…. they’re coming for you!

#63 David on 11.24.08 at 1:39 am

Deflationary cycles put net debtors and mortgage holders at a net disadvantage, while inflation helps shrinks debt values. The events of the past few months are pointing towards deflation, which can be just as brutal and corrosive as rampant inflation. Nothing to cheer about in any instance.

http://www.thenation.com/doc/20081208/howl

#64 Jimster on 11.24.08 at 2:38 am

Deflation followed by hyper-inflation, I understand the concept and tend to agree, But I do wonder if it will be that simple.

Sure the central banksters are printing lots of fiat, but lots of it is being destroyed too. What is 4000 points on the DOW compared to say 2 Trillion recently printed.

So I see this more as wealth simply concentrating in the elite few.

Moreover, what all this really amounts to is fraud. If there is no recource other than to go to ‘authorities’ like the OSC and SEC, who seem to be prepared to sit back and do litlle, this will not end well at all.

PS: A really good segment on CBC Sunday tonight about how rampant white collar crime goes un-challenged in Canada and what a ‘corrupt’ joke we have become internationally. For those who think it wont be as bad here I would suggest the contrary. I will take a little longer , but will be worse and last longer.

I predict Obama and his ‘Clinton cabinet who started this bubble’ will do nothing and be less liked than Bush when he leaves office.

#65 anonymous on 11.24.08 at 2:51 am

#33 anonymous,

Umm… that’s my name. Get your own. There is only one anonymous around here.

#66 jelly on 11.24.08 at 2:58 am

Mountain Girl,

You wrote an amazing post on Cowboy Kiss posting
defending the environmental destruction in Canmore.
You totally sold me,
I wish I had such a way with words…
thanks for the insightful comments.

#67 anonymous on 11.24.08 at 2:58 am

Just to let everybody know here that Edmonton is going to post MONSTER-HUGE sales for November. Although prices will be down.

Maybe it’s the massive losses in the TSX and/or the fall in oil and gas prices, but every shithouse in Edmonton has been sold in the past three weeks. Maybe they think it’s the bottom or a safe place to invest. Who the hell knows?

It’s very, very unusual.

Anyway, I have yet to figure out what goes on inside the head of the average, redneck living in Alberta. It’s like being surrounded by Hank Yarbo (Corner Gas) everywhere I look.

The chart that was posted by Garth would explain what I am seeing currenly in Edmonton.

What about the rest of Canada? What the word on the street? Are you seeing shitboxes starting to move again?

#68 Central Banker on 11.24.08 at 3:18 am

#40 – Hey Derrin, Care to elaborate?????

#69 CTA on 11.24.08 at 7:12 am

#41 Muskoka lassie ….”back in our fair City…Rosedale has lost its joi de vivre…multi cultural neighbourhoods now filled with multi racial children…I’m not referring to the staff but to actual neigbours who celebrate so many strange holidays.”
Let’s see…You’re probaby a baby boomer, went to an all white school and university paid for by upper middle class wage earning parents..and racist as all hell.

#70 john on 11.24.08 at 8:15 am

“Technical Recession”—I watched both Harper and Flaherty use this term to describe the state of our economy ……hmmmmmm is that the same as a “real recession”? “Technically speaking of course :-)—Well whatever –the bottom line is no matter how they try to “sugar coat it”, it is going to cost the taxpayers big time!

#71 Republic of Western Canada on 11.24.08 at 10:15 am

#58 Another Albertan – True, but many big initiatives would already have started to complete their heavy construction phases by now, regardless of whether the present financial implosion happened or not.

#72 john on 11.24.08 at 10:31 am

anonymous–Anyway, I have yet to figure out what goes on inside the head of the average, redneck living in Alberta. It’s like being surrounded by Hank Yarbo (Corner Gas) everywhere I look.

OMG–LMAO!

#73 kc on 11.24.08 at 10:40 am

45 Blacksheep

When the 2007 peak value of a 25 yr old, 2000 sq ft box home [modest] hit $ 450K in the fraser Valley [B.C.]the
writing was on the wall.

You said it !!!! We are also in the valley

#74 Mike B formerly just Mike on 11.24.08 at 10:44 am

Muskoka Lassie is a schill posting. Please “joie de vivre”
someone is posting just to get people to do counter posts
Just doesn’t make any sense… some kid thinking his posting is funny. Just ignore it.

Unrelated….. so you hear the US is at level two insolvency .
Yup… bankrupt as you can get and getting more bankrupt. This is much much worse than they were in the great depression. Unless they pull a Zimbabwe and wipe out their own debts they are pretty much sunk… and the almighty Canada… sunk as well… not to mention the rest of the world. Obama hasn’t got enough fingers to plug all the holes in the dyke. Going to be a bumpy ride in 2009 in ALL SECTORS not just auto and manufacturing. That’s all the sunny news I have for today. Carry on.

#75 Downsized and Delighted on 11.24.08 at 10:50 am

My nieghborhood: Average boomer house purchased 1986 price $350,000; peak price $1,000,000, current price $900,000. I think it might go to $750,000 (25% decline), all of you think 40% to $600,000.

Typical country property price at peak $400,000. Less 25% $300,000, or your 40% decline $240,000.

$1,000,000 less 400,000 Pocket $600,000 (peak prices)

$900,000 less 360,000 Pocket $540,000 (current 10%)

$750,000 less 300,000 Pocket $450,000 (25% decline)

$600,000 less $240,000 Pocket $360,000(40% decline)

I’m saying that at a 25% decline, there might still be motivation to make that move. But move down to a 40% decline, far fewer people would make that move.

It’s not the babyboomers who will hurt from this price decline – it’s the next generation that bought from them at the peak, and the next generation that won’t be getting the big inheritance (but maybe the reverse mortgage business is the star of the future!)

Can I predict the future? EVERY bit as well as all of you and Garth. In other words, no!

#76 squidly77 on 11.24.08 at 10:55 am

edmonton home sales to be at lowest level in 9 years

http://www.edmontonrealestateblog.com/my_weblog/2008/11/weekly-update-2.html

edmonton hooped..

#77 Muskoka Lassie on 11.24.08 at 11:03 am

Dear friends, if I were racist I would not have multi cultural staff.
But isn’t it a little strange to see one’s own neighbour, the male of the household, being picked up mornings in a black limousine with three well dressed guards who all seem to wearing hidden paraphenalia?
I mean, surely, where do they conduct business?
The “gentelman” came by a few weeks ago to introduce himself at our own front door!, without a written request or prior invitation.
He asked if there would be a block Xmas get together, on Xmas day no less!
Thankfully, this year the entire family will be in the Cayman’s for Xmas.
Oh the thought of a block party at this gentleman’s home. He plans to have a nativity scene on the front lawn, in Rosedale!, something to do with his proud Eastern European heritage.

#78 squidly77 on 11.24.08 at 11:06 am

edmonton a city of 1million will record less than 1000 sales this month..totally crashed
http://www.edmontonrealestateblog.com/.shared/image.html?/photos/uncategorized/2008/11/01/oct08sales_2.jpg

#79 Stu on 11.24.08 at 11:13 am

#41 Muskoka Lassie,

Do you type using your thumbs, and with your tongue sticking out one side of your dribbling mouth?

#80 MM on 11.24.08 at 11:13 am

#68 CTA, your point? Or are you just trolling? Let’s see more contribution relevant to the post and less personal attacks.

#81 smwhite on 11.24.08 at 11:16 am

Yep, heard it myself this morning on the radio, the honorable members are now officially putting the public on the deflation warning and we will be in a technical recession come the spring, or as people that haven’t had their brain rot out of their skull call it, A RECESSION!

Can Harper or Flaherty think more then 30 days into the future? They are going to fight the small deflation problem with the best way they know how, with inflation…

The deflation in progress right now is a result of overpriced assets and yet government thinks the normal correction in the markets is bad, even though it was never sustainable…

Welcome to the party you helped create boys. Now we need your magic solution, continue working with the governments of the world, buy them a coke and hold hands.

Hey, jobs won’t be a problem, you need large armies to hold/conquer strategic points during war. Nothing makes you more desperate then being hungry…

The new Weimar republic, just south or TO…

#82 $fromA$ia on 11.24.08 at 11:33 am

Down Sized and Delighted, 25% is not enough.

Gov has taken 40 years off the table.

Going to be even more job loss.

Rates will go up viciously in the next 5 years.

Whatch 25% go to 40%…

#83 Another Albertan on 11.24.08 at 11:55 am

70,

You are obviously seeing a different microcosm compared to that which I have exposure. Many “big initiatives” are multi-phase programs that have sub-projects that still run into the hundreds of millions of dollars, nevermind the obligatory de-bottlenecking and production-related construction.

Until recently, few had the belief that many suppliers, constructors and trades would start to grind to a halt. A pullback of 10-20% of workload, yes. Outright cancellation of work, no.

#84 Bottoms_Up on 11.24.08 at 12:06 pm

A ‘technical recession’ is the official term of a recession: “A technical recession occurs when the level of real national output declines over two successive quarters causing a contraction in the total volume of production in the economy.”

Maybe the Mayan civilization foresaw these troubled times:
On the winter solstice in 2012, the sun will be aligned with the center of the Milky Way for the first time in about 26,000 years. This means that “whatever energy typically streams to Earth from the center of the Milky Way will indeed be disrupted on 12/21/12 at 11:11 p.m.

#85 Downsized and Delighted on 11.24.08 at 12:25 pm

I don’t “debate” racism. I’m outta here.

#86 The Tallyman on 11.24.08 at 12:36 pm

#43 Mike B

Mistakenly referenced #43 in my response to
#41 Muskoka Lassie.

Sorry Mike

#87 Keith in Calgary on 11.24.08 at 12:40 pm

What is with Harper anyways ? Saying deflation is a problem yesterday in Peru, and that he is concerned about it? Do those idiots in Ottawa ever pay for anything with their own money ?

Deflation is the only way to revive our dying economy, and allow people to live reasonably within their means.

The gubmint should allow Canadian banks to fail, and allow the B of C to open retail branches with 100% deposit guarantees.

Careful what you hope for, cowboy. Deflation kills. — Garth

#88 bob on 11.24.08 at 1:12 pm

#79 MM, maybe you and Muskoka Lassie should take your whiney, why isnt the world all white, attitudes and try to get a little perspective. Muskoka Lassie you are obviously a shill troll who is trying to have a little fun playing the race card. you make yourself sound sooooo stupid for lack of a better word. MM thats my point. take it. leave it. shove it.

#89 poorguy on 11.24.08 at 1:34 pm

“B.C. apartment sales drop by half”

http://www.theglobeandmail.com/servlet/story/RTGAM.20081124.wbcrealestate1124/CommentStory/Business/home

#90 Anonymous on 11.24.08 at 1:42 pm

Muskoka Lassie,
You’ve demonstrated extreme poor taste and have shown yourself to be at the height of rudeness. A cultured lady or gentlemen would never speak nor think this way.
We earn one another’s respect and You certainly haven’t earned mine.

#91 Andrew toronto on 11.24.08 at 1:42 pm

If deflation is happening now for a few months , what will happen once the inflation kicks in , after all that stimulas makes it way through the system,, should we be buying Gold Garth like some are saying and if yes where and for how long … any commets appreciated..

http://news.goldseek.com/GoldSeek/1227297780.php

It’s all in the book, coming soon. — Garth

#92 Trekie2 on 11.24.08 at 2:05 pm

#76 Muskoka Lassie

Stop posting while your ahead…..and just go away….

#93 TheComingDepression on 11.24.08 at 2:51 pm

According to this article the US TREASURY COLLAPSE IS IMMINENT!!! Click my name above

#94 islander on 11.24.08 at 3:10 pm

Did anyone else catch the discussion at Globe&Mail online with one of Scotiabank’s spinners?

http://www.reportonbusiness.com/servlet/story/RTGAM.20081121.whousingdiscussion1124/BNStory/Business/home

She figures home prices should only drop 5% next year before recovering. Either the banks are in denial or they’re paddling hard to generate business.

#95 613 Happy where I am on 11.24.08 at 3:11 pm

Samantha, you rock, girl!

This is exactly what I have been saying in previous posts… most people have too much house and the expenses to heat and maintain these mega mansions make these places white elephants in economic recessions.

I live in a cozy little townhouse which has been home for 20 years… it was the first and only place I have ever bought, and I intend to live there for another 20 plus years. The fact that it is right downtown and I dont need a car are added bonuses…

You and I have our act together… I wish I could say the same for the rest of the people who bought into the real estate game….

So to recap…. A small house with less expenses is looking pretty darn attractive to buyers these days… no wonder I get a number of solicitations from real estate agents every week and some have been bold enough to disturb me while I am eating supper … I turn them away but not before they hear my views on their tactics…

I wish you people alot of luck in unloading those huge places out in the middle of suburbia…

#96 APCM on 11.24.08 at 3:16 pm

#41 Muskoka Lassie

I think people become more racist when times are tough. They are afraid of losing their place in society to the “outsiders” and are distrustful of others, blame other people for their problems, etc.

I think this sheds great insight on how the economy is affecting some segments of the middle (or upper-middle??) class

So #41 Muskoka Lassie, I’m guessing you’re only a couple of asset depreciations away from being the middle class that so offends you.

#97 Wealthy Renter on 11.24.08 at 3:41 pm

Muskoka Lassie is classic forum troll, albeit a racist and ignorant one. Don’t feed her. As a person pretending to be uppity and culturally pure, he/she should at least be able to spell rather simple words such as paraphernalia, gentleman or nouveau.

#98 patriotz on 11.24.08 at 3:42 pm

Garth, is it inflation or deflation that’s coming? You can’t seem to make up your mind:

Asset price (stocks, houses) and consumer price inflation/deflation are not correlated. They can move in different directions.

There was a stock market bust (deflation) in 1973 at a time of high consumer price inflation. The BC/Alberta RE bust (deflation) of the early 80’s also took place at a time of relatively high consumer price inflation.

Rising consumer prices without matching increases in wages is negative for house prices, which is one of Garth’s points I believe.

#99 Muskoka Lassie on 11.24.08 at 5:23 pm

Dear friends, pardon my grammatical errors.
Now to the discussion at hand.
#94 “613 Happy where I am”. I so relate to you. You see I also have lived in only one home since a wee tot, the summer home in Muskoka too.
Ah the wonderful memories of dear Uncle Leith, he raised me you know, the splendid hay rides on the hot summer evenings, during fall, maple tree’ing for syrup, or attending the Royal every winter, even saw Big Ben jump the world record there one year, Ah, Big Ben.
Ms Happy where I am, shall we meet?, Perhaps I can invite you over for tea?
If you do not drive i can send my car to get thee.

ttfn

#100 Lifelong Investor on 11.24.08 at 6:03 pm

Nice Forum Garth. I read everyday with interest. For the record I believe everyone should be holding at least 20% in gold. Lots of canned goods in the pantry isn’t a bad idea either…My preference is white flaked tuna packed in water.

Cheers,
LI

#101 poorguy on 11.24.08 at 6:24 pm

“Even Tiger is taking hit”

http://www.reportonbusiness.com/servlet/story/RTGAM.20081124.wgmtigerwoods1124/BNStory/robMarketing/

#102 Keith in Calgary on 11.24.08 at 6:35 pm

Garth……

Having personally lived thru the rampant inflation of the mid to late 70’s (I am 48 after all)………and then the subsequent deflation of the early to late eighties……….all I can say is, bring on the deflation.

It is the lesser of two evils. Let our banks and governments collapse, as long as our currency remains relatively worth something in terms of it’s purchasingpower, and overall prices drop significantly, all is well.

When our currency suddenly becomes worth nothing and the price for everything skyrockets, you have trouble, because then it becomes “Mad Max” time…..and you better buy kevlar and SPAM.

Remember, the Weimer Republic did not collapse because of deflation.

#103 poorguy on 11.24.08 at 6:42 pm

” TD to raise $1.2-billion ”

http://www.reportonbusiness.com/servlet/story/RTGAM.20081124.wtdshares1124/BNStory/Business/home

Wasn’t TD supposed to be the best bank on the planet
a while ago ,immune to US problem.

Boys, we are tracking US with some time lag.This is
beginning.Stay tunned.

#104 The First Rick on 11.24.08 at 7:02 pm

#98 Muskoka Lassie on 11.24.08 at 5:23 pm Dear friends, pardon my grammatical errors.
Now to the discussion at hand.
#94 “613 Happy where I am”. I so relate to you. You see I also have lived in only one home since a wee tot, the summer home in Muskoka too.
Ah the wonderful memories of dear Uncle Leith, he raised me you know, the splendid hay rides on the hot summer evenings, during fall, maple tree’ing for syrup, or attending the Royal every winter, even saw Big Ben jump the world record there one year, Ah, Big Ben.
Ms Happy where I am, shall we meet?, Perhaps I can invite you over for tea?
If you do not drive i can send my car to get thee.

ttfn
=========
Too funny. I’m glad a few of us got it.

#105 bob on 11.24.08 at 7:03 pm

moskoka lassie, time to up the medication. present dosage is not working. I do have to say though , WASPS are a hoot!

#106 Jimster on 11.24.08 at 7:12 pm

Anyone who thinks Canada will escape this is any way is DELUSIONAL!

Could it be that only thing keeping Canadians from the current reality is MASSIVE FRAUD?

Who is Guarding Your Money?
http://www.cbc.ca/sunday/2008/11/112308_8.html

#107 brazer on 11.24.08 at 7:25 pm

Prairies see biggest-ever consumer confidence decline in November: survey
http://ca.news.finance.yahoo.com/s/24112008/2/biz-finance-prairies-biggest-consumer-confidence-decline-november-survey.html

CALGARY – Once thought to be a bastion of stability, resource-rich Western Canada is beginning to experience the same economic malaise that has gripped the rest of the country, two reports suggest.

A survey by the Conference Board of Canada published Monday says consumer confidence in the Prairies dropped 7.4 percentage points between October and November – the region’s biggest decline on record.

That was the worst drop for any region in Canada,” said Todd Crawford, an economist for the Ottawa-based think-tank.

=====

this is going to hurt.

#108 Sail1 on 11.24.08 at 8:40 pm

Does anyone have any questinons Adrienne Warren.

http://www.reportonbusiness.com/servlet/story/RTGAM.20081121.whousingdiscussion1124/BNStory/Business/home

#109 Canned Goods and Buckshot on 11.24.08 at 8:41 pm

Muskoka Lassie,

If its not Scottish, it’s Crap!

#110 timbo on 11.24.08 at 8:43 pm

something interesting to read.

http://www.forbes.com/forbes/2004/0607/218.html

I have gone strictly to a cash position, thks garth, and am now trying to research deflation and when to spot the turn to buy into the inflation (hyper-inflation cycle).
My best guess is California housing price 3.0 – 1.0. Affordability will return and defaults will subside, hence banks will be solvent. prices rise (oil/commodities), and that is were my money will go on the ride up.

I think that doom is not in the cards as lending nations have to do everything necessary to hold up their main source of consumption (USA). They even might give the US a year off paying interest (Germany-post ww1) to consolidate. And if a country does try to run the dollar the US will just close the window. (guess)?.

I believe the deflation we are seeing is on purpose and I hope it works. The inflation we saw last year was really slowing the economy down. (Gas/food). Deflation should give more money back to the taxpayer as long as it does not go to far, unemployment . Just a newbie speculation so give me a break. lol.

If anyone has any info on the depression cycle ,70’s cycle of events. What collapsed and what went up and why, share it as I am probably wrong but I am trying to see the opportunity in this. (lemons to lemonade).

I no longer point the finger of blame as there is no purpose to that action. I will always remember and tell my kids to get out when people start acting like maniacs in a real estate market. Real estate is the biggest market we have and bubbles are a serious threat to the stability of a nation. Next bubble, let say 2070.

Thanks again Garth for the book , gave me months of warning.

#111 Derrin on 11.24.08 at 8:49 pm

CENTRAL BANKER

There has to be another bigger bubble. The conditions for strong inflation still exist. That haven’t disappeared.
The money supply is expanding rapidly. Sure, initially deflation as the economies contract on fear. But the policy makers will over correct once again. Then the economy will run hot again with huge amounts of American currency. Thus driving prices to a new level and a new bigger bubble. People will jump on board again. The herd mentality. This next bubble will bring the end of the American dollar and a new fiat.
It won’t be gold!
That’s my view.

#112 hal on 11.24.08 at 9:08 pm

Not to worry people, it’s just a “technical recession”, not a real recession. We don’t have those here. This is Canada and we are different. …..no no, our banks are ok, they don’t need to be bailed out. Our banks were voted best in the world…….And it’s a great buying opportunity by the way………nope, just a technical one, not a real one, all good by springtime…….

#113 Sabra from Israel on 11.24.08 at 9:15 pm

Happy Hanuka..recently landed from the holy land, the Jewish side..checking out this country, have sponsorship, have experience, can drive a tank and shoot 98% from a 100 metres..transferring >50K shekels for downpayment or to start my own business.
Open to suggestions
Open also to marriage with wealthy Jewish woman 30-40, kids ok
Menachim

NOTE TO BLOG: This post is from the same person who posted recently as “Muskoka Lassie.” This is a blogroach. Kill it with inattention. — Garth

#114 CTA on 11.24.08 at 9:38 pm

#68 MM “CTA, your point? Or are you just trolling? Let’s see more contribution relevant to the post and less personal attacks.”

I’m here to read what Garth has to say..I’ve been reading Garth way back when he was the money columnist for the Toronto Sun and a subscriber to his excellent newsletter way back in the 1980’s.

#115 Dave on 11.24.08 at 9:48 pm

So far the banks have been bailed out to the tune of $666.1 billion. Is this the dreaded mark of the bust?

Oh well, Obama will not be outdone. His “dream team” to correct the economy has been recruited from the same bunch of clowns who started this mess….central bankers.

It seems they are determined to go to any length to bail out the financial sector.

#116 john on 11.24.08 at 9:57 pm

Harper and Flaherty are going to break our country.As far as infrastructure spending goes they better save our money to build more prisons and staff them because crime is going to become rampant.Our population is a whole different generation than the people that weathered out the last depression. Those people were used to hard times and living off the land and getting by on little. People today will not be able to cope! Very scary.Its not a time for Government spending .

#117 GTA001 on 11.24.08 at 10:43 pm

Garth:

Historically do economies in this situation experience a hyper-inflationary depression before a deflationary depression finally sets in?

#118 $fromA$ia on 11.24.08 at 11:26 pm

Garth GTA001 Asked a good Question care to answer or speculate?

Inflation can cause economic chaos and destroy the value of currency, but it also destroys debt and punishes the lenders. Deflation is the opposite, raising the value of money, increasing debt budens and rewarding lenders. Depressions are associated with a rapid decline in economic activity, which could only be inflationary if a government made the deliberate decision to increase the money supply while the economy was contracting. This, I would wager, will not happen in this crisis. A US admin that did that would be cut off from the international financing now keeping the country afloat. — Garth

#119 Keith in Calgary on 11.25.08 at 12:36 am

Seen US M3 lately ?

#120 nonplused on 11.25.08 at 1:45 am

#110 Darrin

The last bubble is always gold. It doesn’t depend on anyone else’s promise. A gold coin in your safe is a gold coin in your safe, even when your bank fails.

All other asset classes with the exception maybe of realestate, farming and mining in a country with strong property laws, depend on someone’s promises. When they can’t deliver, the asset is worth nothing.

US 30 year bonds anyone? I think not.

30 years ago you could buy gold for $50 an ounce. Ya, ya I know people who bought at the peak of the bubble at 850 are only back to par now, but that was a short lived thing.

Try and buy a gold coin on e-bay right now and you’ll see where we are at. The spot price on COMEX is disconnected. The physical supplies are all already gone.

But I agree there may be another big bubble first. It’s US treasuries and it’s about to pop!

#121 Derrin on 11.25.08 at 7:54 pm

nonplused

Good luck paying for Garth’s book on Amazon.com with an ounce of gold.
You gold hounds are funny.
Fiat has been around since the days of Rome. Just understand it and you can relax a little and not think your happiness will come from the destruction of the economy.
I have never seen a clan(gold bugs) of people so bent on having gold become the currency of the day. Have a look around we aren’t living in caves anymore.
Cheers
Many economies have had their currency go bust. Example Germany: I don’t see them running around with gold coins jingling in their Leder Hosen.

Relax a little and enjoy the fear.
The DEBT MACHINE will carry on.

#122 Panic Profit on 11.26.08 at 1:53 pm

Question:

Does anyone know how I can SHORT Canadian real estate?

You short US real estate by buying SRS on NYSE which is a fund that does the opposite of the Chase Schiller index.

#123 Ian on 11.26.08 at 4:16 pm

So, people don’t actually live in Miami or Las Vegas? — Garth

Your response to #16 made me laugh. Up untill I read that I thought you knew what you were talking about. Yes people live in those cities but a huge percentage of the population is second home owners. And another huge portion of the population services those second home owners. Can you say the same about Calgary? I surely do not need to expand on that since I assume you have at least some common sense. I understand that you have to make a living selling fear but at least try not to be condecending to those with opposing opinions.

Give any source that confirms “a huge percentage of the population is second home owners,” in either Miami of Las Vegas. — Garth