Walking away

In Toronto and Calgary buyers of new homes are enraged as builders dump inventory at price reductions of up to $70,000 in the same neighbourhoood or on the same street. Why? Because the values of their own properties have been automateically reset, costing them lost equity, or putting them under water, with their mortgages suddenly exceeding the worth of their homes. This is the first step on a dangerous path which has been well travelled in the US.

Meanwhile condo buyers in Toronto and Vancouver are walking away from their brand-new digs, abandoning deposits on units they bought at top-of-marlet values. Not wanting to be the Greater Fools, they’re vanishing, turning a developer’s bad dream into a nightmare.

To view another MSM report, click here.

87 comments ↓

#1 Lance on 12.10.08 at 10:10 am

“Not wanting to be the Greater Fools, they’re vanishing, turning a developer’s bad dream into a nightmare.”

And the nightmare has only yet begun…

#2 dd on 12.10.08 at 10:17 am

60 Minutes of Oil

http://www.clipsandcomment.com/2008/12/07/video-cbs-60-minutes-the-oil-kingdom-december-7-2008/

#3 lgre on 12.10.08 at 11:13 am

the oriental lady has confirmed why we had a bubble..6 condos for a couple.

#4 colette on 12.10.08 at 11:20 am

and everyone thinks students are dispicable when they go in debt to get the education so a company will hire them and then they don’t get jobs because they don’t have experience, or the economy collapses, or the perception that certain education is useless…

perhaps these homeowners who if their financial situation has not changed and can still afford the same payments that they were approved for, but rather their pride has been stung for getting caught up in the hoopla and were already greater fools were not alowed to walk away from their houses just because the equity is reduced the same way students have been denied the chance to start afresh after they have gotten themselves in debt for a plan gone awry the economy wouldn’t go into a tailspin.

#5 RJT on 12.10.08 at 11:25 am

“I buy 3, and my husband buy 3”

And they say there is no speculation in Canada!

#6 Seeking Knowledge on 12.10.08 at 11:27 am

Garth,

Since I couldn’t go to Edmonton, I just ordered “Greater Fool: The Troubled Future of Real Estate” and “After the Crash: All You Need to Know About Getting You – and Your Finances -Back on Your Feet” this morning from “http://www.chapters.indigo.ca/”. They will ship the second book on Feb.1 or around that time.

I am really looking forward to reading them.

For the 30K I put down on the house that haven’t been built, I have decided to seek legal advice since the builder is reluctant to return the money.

I never signed a contract since I originally need to put down 140K. I handed 30K because there were many interested buyers at that time. So it was like a security deposit and the builder handed me a printout receipt paper. Now, I don’t know if that is a good or bad thing. I just have to wait until I talk to a lawyer. Next time I will not be putting money down on something I cannot see. Lesson larned.

I’ll get back to you after receiving and reading your books.

Thanks:)

Florence, Fort Mac girl

#7 Jace on 12.10.08 at 11:35 am

#3:

Am I a bad person for hoping that that little old lady and everyone like her go bankrupt as a result of their greed?

#8 Mike B formerly just Mike on 12.10.08 at 11:38 am

The real nightmare out there is really only understood by a very small percentage of people. Real estate is but a portion of what drives the world economy or a portion of what the state of the real economy is.
THE REAL PROBLEM is derivatives… current assessments take it at over 600 TRILLION which is around $10 for every dollar of GLOBAL GDP. If but a small percentage of this turns sour… high high risk of this then you will not be too concerned about condos but will be concerned about life with huge deflation.
What got the world out of the depression, a time I might add that had no derivatives and much lower Government debt, was the global project best know as World War II.
On Real Estate.. I spoke with a couple of very experienced agents in the Leaside area of Toronto yesterday and their comrades are basically shocked at how slow things are. Stuff is just not selling even in the “great” area of Leaside. They fear that January and February will be brutal. My take… brutal is not even close to describing what it will be like globally and locally.

#9 Keith in Calgary on 12.10.08 at 11:40 am

Notice how the receiver for the developer “huffs and puffs” but does not specifically say that they will sue people who do so, because the negative PR would be devastating…….and, if you walk from a $70K shortfall, less your $20K deposit, they are certainly not going to spend $20K on legal fees (avergag court of Queen’s Bench legal fees for a civil tort that goes to a trial) to try and recover the remaining $50K…….

Notice the asian lady being interviewed at the end of the story, she says “I am going to buy 3 units and my husband is going to buy 3 units”……back in 2004.

Schadenfreude……..

#10 Diabolo on 12.10.08 at 11:52 am

Vancouver is Canada’s Miami…

#11 dotava on 12.10.08 at 12:06 pm

#4 colette on 12.10.08 at 11:20 am

This system relay on stupid and uneducated people – much easier to manipulate them than smart and educated people.

#12 HalifaxFamily on 12.10.08 at 12:07 pm

My eyes nearly dropped out of my head when I heard that lady saying “I buy 3, and my husband buy 3″.

Did they buy them with cash or did they get mortgages on them? If this is the case, then our banks are in deep trouble. Deep trouble. The housing market, at least in those highly speculative areas, is in deep trouble.

They may have paid cash – you never know – but it’s unlikely. Wow, to lose your shirt that way is quite humbling and will financially devastate you for a lifetime or more for most people. I hope they paid cash.

#13 Danno on 12.10.08 at 12:09 pm

I know that building! I use to live just down the street from it… It has been selling it’s “last units” for at least 1.5 years. Interesting to see that their prices have come down from the low 400’s.

#14 dd on 12.10.08 at 12:17 pm

#6 Seeking Knowledge,

If you have to eat the $30k so be it. It might be cheaper than losing a $100k.

#15 Calgary_rip_off on 12.10.08 at 12:18 pm

So these people purchased condo’s in Calgary for $300K. What do you expect? They are getting screwed. That is what you would pay for a SFH in normal times. They should have used their heads and realized that the housing costs was equivalent to what was happening in the oil industry. Blame it on oil, because in Alberta there isnt much else. No trees in Calgary and it looks like Brooklyn(the whole city). There is a solution to b.s. housing that is overpriced, inefficient at heating(go to Germany to see a model of house that requires no heating or cooling the windows and insulation factors are surgically precise-but this wouldnt go over well in Calgary, Im sure).

http://keetsa.com/blog/wp-content/uploads/2007/09/nuclear_explosion.jpg

#16 squidly77 on 12.10.08 at 12:23 pm

for some strange reason the title of the post caused this to pop into my mind..
http://www.youtube.com/watch?v=OCAjmuA1HDk

#17 CJ on 12.10.08 at 12:37 pm

In calgary things are finally starting to unravel…a builder spec home in cranston (new burb) was listed for $900K this spring, builder dropped it to $800K this summer, currently listed at $650 and no buyers in sight…his cost is $750. Trouble in paradise!!

#18 passerby on 12.10.08 at 12:58 pm

don’t be too quick to laugh at the oriental lady…she’s probably the one having the last laugh. the interview was in 2004, if she flipped the condos in 2006 or 2007, or even early 2008…she has already made a fortune. condo prices now are only back to 2006 levels…i have friends who did the same thing in 2004, and they all wisely sold as early as 2006.

#19 Larry on 12.10.08 at 1:04 pm

#15 Calgary rip off, There are trees in Calgary for a city that is located 3000ft above sea level. The only problem with this city is that it has been the scene of mass speculation from 2005 to mid 2007. The RE will bust and with that the average family like mine will be able to afford the average house. I’ve lived in Europe and your incorrect about houses there being built to standards that do not requiring heating or AC. Wood insulates 15 times better then cement does.

#20 Bobby in Victoria on 12.10.08 at 1:31 pm

Funny how a developer wants to hold a buyer to a contract in a falling market. Yet, they want to break the contract when they can’t build them for the sale price they marketed them for.

The precedent was set in Coquitlam but the shoe is now on the other foot. If a developer fails in court to enforce a contract watch everyone bail and head for the exits.

Sadly, many believe the hype of the RE industry, especially the realtors. There are condos for sale on Mt Washington ski area that have been for sale for over 5 years. Yet, the ads say get in quick!!! Ha Ha

#21 dotava on 12.10.08 at 1:34 pm

#6 Seeking Knowledge on 12.10.08 at 11:27 am

BTW – I save the book for my children and grandchildren. I hope they will not need it but just in case.

#22 dd on 12.10.08 at 1:35 pm

#15 Calgary_rip_off,

Blame it on oil?

There was a rush of people into Calgary in 2005 – 2007. Yes oil had something to do with it. But Alberta is more natural gas driven than oil.

Demand was greater than supply. People thought that they would get priced out of the market. Emotions can play a lot into it.

If Alberta or Caglary is all that bad move.

Oil and gas are going to be around a long time. Yes it might go down to $20 bucks but the world is addicted to the stuff and will always need more.

#23 dd on 12.10.08 at 1:36 pm

#18 passerby,

That is right. You could have made a killing over this time period. There is a time to buy and a time to sell.

#24 dotava on 12.10.08 at 1:39 pm

#19 Larry on 12.10.08 at 1:04 pm

Not quite – I helped to build few houses there (different part of Europe including Germany) and can tell that quality here is way lower for the same amount of money.

#25 BC Resident on 12.10.08 at 1:43 pm

U.S. Factoids

…adjusted for inflation median income is where it was in 1979.

…this is what happens when you systematically destroy the middle class and make them bid against slave labor.(China)

…this is something that Greenspan knew but was never willing to admit in public. He was the Wizard of Oz after all.

http://clusterstock.alleyinsider.com/

#26 Andrew toronto on 12.10.08 at 2:08 pm

all the rage these days .. The U.S. Treasury issued $32 billion worth of 4-week bills yesterday, at a rate of 0%. Not 0.2%. Not 0.001%. “Investors” paid 0% for the right to have the government borrow their money for one month. In the history of the American bond market, that’s a first.

Investors lined up around the block for these things. The Treasury received $126 billion worth of bids for the bills — four times the amount available. Buying was so zealous yesterday that, for a brief moment, the rate on the 4-week bill was actually negative… a few traders paid the government to take their money.

This morning, the 3-month T-bill yields a pathetic 0.01%. The two-year note comes with a 0

unreal…

#27 The First Rick on 12.10.08 at 2:20 pm

#4 colette

That was a run on sentence to be proud of.

#28 Chincy on 12.10.08 at 2:21 pm

#18…my thoughts exactly…she probably sold out and some late 20’s early 30’s couple is now screwed.

#29 dd on 12.10.08 at 2:24 pm

Calgary Rip Off …

“Anybody who WANTS $45 per barrel of oil is STUPID.”

“Im looking forward to $0.50 a liter in Alberta”

“Perhaps the people are dumb here that WANT the price to stay high.”

Ah Ripoff you have so much to learn. With low energy prices there will be no incentive to move off oil. We will just keep sending CO2 into the winds.

Lower energy prices will just mean less inventment in the industry and inturn less supply over the long term.

When we come out of this recession all society will pay dearly for it. Higher energy prices, higher construction prices, higher inflation.

#30 pbrasseur on 12.10.08 at 2:38 pm

Bottom near in US?

Wells Fargo CEO sees progress in housing market

http://biz.yahoo.com/ap/081210/wells_fargo_outlook.html?.v=1

Wells Fargo is one of the best if not the best bank in the world.

#31 lgre on 12.10.08 at 2:38 pm

‘Am I a bad person for hoping that that little old lady and everyone like her go bankrupt as a result of their greed?’

well all I can say is that the tables have turned, talking to the builder my parents bought from a few years ago..he was telling me that one big builder in ontario is in really rough shape financially, due to extending over to the U.S and loosing a large sum of money in that market.

#32 Monty on 12.10.08 at 2:45 pm

Larry, you cannot complete quality of the houses in Europe with North American. The overall value is far better in Europe.
Other then cement and double brick, you get windows that you don’t need to replace every 10 years, roof too etc.
You get less space than in these cardboard palaces, true.

#33 Another Albertan on 12.10.08 at 2:49 pm

Ah, Clusterstock… started by one of the most infamous dot-com analyst-pumpers and staffed by Dealbreaker.com alumni.

If readers only knew from whence this came… at least DB has crass reader comments and hyper-cynicism working for it.

Everyone else’s mileage may vary…

#34 Bottoms_Up on 12.10.08 at 2:50 pm

Knowledge tidbit in that clip: “buyers are liable for the difference between what they agreed to pay and what the unit is currently selling for, less the deposit”

That means the couple who bought that townhouse in Toronto (a previous post on this blog), if they walk away, could be sued for $20,000, for a total loss of $40,000. Best to suck it up and move in!

#35 The Immigrant Qustion on 12.10.08 at 2:51 pm

I know a number of people first hand that just lost their jobs … feeling things get scarier by the day, maybe I am too anxious…Anyway, can anyone use some scientific methodology and build a probable forecast on what will happen to the GDP, real-estate and our standard of live if only 5% of the 3 million IMMIGRANTS start leaving GTA and kiss goodbye to its icy roads and sidewalks?
I think most immigrants have a plan B on their minds, and that is to cash their easily doubled equity (owners) or GICs (renters) and flee back to swet sweet and hot HOME where weather (and some other important things) are so much warmer…

The big question is : WHEN IS THE PERFECT TIME TO FLY BACK while maximizing acumulation of fatty-golden wealth to ensure a stylish Big Hakuna early retirement?

More layoffs, wage freezes to come
http://business.theglobeandmail.com/servlet/story/RTGAM.20081210.wlayoffs1210/BNStory/Business/home

#36 JO on 12.10.08 at 3:17 pm

What most condo “owners”, real or not, do not realize is that many, if not most, of these structures built over the last 3-4 years and the ones now being completed are an embarassment in building standards with poor build quality and bloated cost structures thanks to the five star hotel amenities many of them have. Make no mistake, most of these buyers will come to regret the day they “bought” a box in the sky. There is no land lot upon which most of the value of a RE asset is based (size of land lot and location of it contribute a lot to any real asset’s value). 3-4 years from now, the typical condo buyer in downtown TO or Vancouver will see 40-60 % price declines (should do worse relative to non-condo properties) , condo fees exploding at 4-5 % per year and averaging 5-600 / month, and no ability to sell the asset at any price except for pennies on the dollar. In 5 years time, many of these buildings will have so many repair issues that the pity amount they pay into their reserve funds (8-10 % or so on average from what I hear – should be closer to 14-15 %) will not come close to even covering the required maintenance. Special assessments and/or massive condo fee increases are in store. Condos are the RE equivalent to small/mid cap high beta stocks in emerging industries – they are a great ride up if you buy them in the right market conditions and sell them before the nasty bear, but they are absolute disasters on the way down. Listing times for condos with high maintenance fees can easily outstrip comparable non-condo RE properties. These people walking away after putting a deposit are actually making a bright decision.
JO

#37 Calgary Rip off on 12.10.08 at 3:22 pm

Correction: Blame the migration to Calgary on natural gas and/or the speculations driven wild by 0/40 2005-2007. Once oil is gone, the next phase will be coal powered.

Interesting that the fear of insecurity led to decisions leading to more insecurity. If a person is unsure that the market may continue to go up it is usually best to wait to buy a house, and buy for the right reasons, not out of fear. So the rationale follows then that there are many sheep led to slaughter in Calgary? Agreed. That is demonstrated by the mindlessness of real estate in addition to the voting mindset: Hardly anyone voted and those that did voted for the Conservative(american) party.

#38 Whattodo? on 12.10.08 at 3:29 pm

Garth,

I find this website to be both educational and entertaining. A friend of mine recommended I read the books because of the situation that I am in.

I have lived in a well established neighborhood (built in the 50’s) in Calgary for about nine years. The house we bought was small but close to schools and shopping as my wife does not drive.

About a year ago we purchased another home in the same area (a little larger to accommodate more children), but still within walking distance to all amenities. We bought the second house as the prices were dropping so at the time we thought it was good to make our move. Definitely did not expect it to continue to drop but oh well.

We made the decision to keep our first property as a rental for investment purposes. We have of course seen a decrease in the value of both our homes but are in no way turned over in either one. The rental has great tenants and pays for itself.

As I said we still have equity in both houses but are concerned with the continued economic conditions. I have been trying to find some information to find out just how overvalued housing in Calgary still is. In my research it seems in our area the decrease has not been as severe as what some of the outer suburbs have been or is it just a matter of time?

I really enjoy where we live, the big trees, mature parks and the ability to walk to everything instead of drive has great value to us.

So do we cut and run, putting our money somewhere else, because nothing is looking to good right now or ride it out?

Thanks again for the great articles and posts

#39 JO on 12.10.08 at 3:43 pm

Garth, could you post a story on what are considered to be the best exurbs in Ontario for the future ? I have been doing some research and note Carelton Place and King City come up, but there must be more – hopefully a couple west of TO ?
Just curious
Thanks
JO

#40 dekethegeek on 12.10.08 at 3:49 pm

Geez all this talk about “melting condo values” and i was driving down Broadway near Commercial (Vancouver) this morning and i glanced over at a 4 year old condo site COVERED in tarps! Hmmm leaky and devaluated ! quite a Condo Combo
hahahhahahahaahahahahahahahahahahahahah

#41 Marc on 12.10.08 at 3:56 pm

#26, I think “investors” are looking for a return of their money, not a return on their money these days.

#42 subprimenow on 12.10.08 at 4:20 pm

I hope the lady that bought 6 condos goes bankrupt…
Actually wait a minute – that means the banks get stuck with the loss and unload it on the government which in the end means WE ALL BOUGHT THOSE CONDOS!

#43 khoek on 12.10.08 at 4:27 pm

I walk past that building everynight on my way down to the seawall for a run. There are never more than 4 or 5 lights on in the entire building. That place is a ghost town.

#44 buy gold on 12.10.08 at 4:36 pm

I can tell you one thing if my house or condo goes down more then 40% i’m walking away from it!! why the hell should i pay a mortgage if my mortgage is worth more then my house. Sue me !!!

#45 Dave on 12.10.08 at 4:44 pm

Toronto, Minto King West condo development cancelled
http://www.theglobeandmail.com/servlet/story/LAC.20081210.BARBER10/TPStory/?query=minto

#46 Stuff on 12.10.08 at 4:45 pm

Off topic a bit…

So a realtor I contacted a while ago emailed me asking me if I needed help looking for home. I tell him we are waiting to see what the market does and would only buy a home now if, and only if, we found an AMAZING DEAL for around 300K. I emphasized the whole “DEAL” thing and give him details of what I’m looking for.
He told me he’d do a search.

He then emails me back a list of homes, that no doubt took no more that 47 seconds for him to concoct, listed at 299,000 or less that were on main streets in the crappier parts of the areas I told him I was looking at. Not one house was over 300K.

I thought for sure he would send me 2 or 3 homes at 330, 320 or heck even 305 that he thought we could get for 300K. But nope. No effort what so ever. Imagine me telling him I wanted a home at 370K for 300K…

Am I just being too picky? Shouldn’t a realtor in this market be more of a go-getter?

Anyone know any good, aggressive realtors?

#47 smwhite on 12.10.08 at 5:09 pm

As for the family of “investors” that bought six units, well regardless if they bought in 2004 and sold in 2006, the negative effect will hurt somebody’s pocket book regardless. Somebody owns those condos, and as stated by myself and many others here, once that snowball starts rolling and people start trying to get out of the market, we’ll large price drops.

Amazing how some people worked their whole lives, near retirement and piss their money away on a roll of the dice, multiple RE investments near the top…

The good news is if you pulled your money out of stock in 2003 and landed it in RE, well you’ve protected your “worth” better then the stock market.

Bad news is that liquidity thing… The more MSM starts to let the peons and serfs in on the little secret out there, the more panic will ensue.

My neighborhood now has three post war brick semis for sale, all 330K to 350K all within 200 feet of one another. None have moved. A year ago, they’d last 30 days.

I’m expecting minimal drop of 10% before the spring…

Times have certainly changed, what a surprise! ;)

#48 Lothian Vasquez on 12.10.08 at 5:15 pm

Calgary Rip Off:

If only your knowledge of economics and the local market matched your anger.

Newsflash: Calgary area real estate peaked summer of 2007. Oil peaked summer of 2008.

Real estate in Calgary had already declined by about 10% before oil even began to get crazy.

And real estate in Calgary will likely continue down another 20%, bottoming AFTER oil has resumed an upward arc.

Look for oil to begin soaring again by spring, first as an inflation hedge for currently sidelined investment capital, and later in the year due to resumed demand pressure as the rest of the world recovers from their recession (even if it lingers in the US through 2010).

#49 Future Expatriate on 12.10.08 at 5:24 pm

#46: Any “good, aggressive” realtors are finding another bit more ethical and lucrative line of work.

Like publishing squirrel recipe books, for instance.

#50 Another Albertan on 12.10.08 at 5:26 pm

#38 – Your situation is remarkably similar to that of a colleague of mine…

House in Altadore, 1950’s bungalow, bought in 2000 for $200k, minor upgrades, no real renos, legal basement suite, rented top and bottom on average 11 of 12 months of the year, cashflow positive (barely). In the past few years, houses like this were demo’ed left and right (implying that the land was the only thing valued)

Assuming long-term inflation @ 3%, the house would be worth ~ 250k. @5%, slightly under 300k.

Was put on the market (“priced appropriately” ???) a few weeks ago at $498k. A few tire kickers but nothing more. At the peak, they feel this could have sold for $550k or so.

498 is essentially 12 percent compounded annually for 8 years starting from 200.

A hard reversion to a reasonable long-term mean will yield at least a 200k haircuit – or about a 40% drop.

Compared with heavy-bubble US markets, this is on par with Case-Shiller numbers for expected declines.

When asked my opinion on price, I informed the owner that I wouldn’t pay more than 325. Ironically, there was 100% agreement, yet they were still going to try to find a fool to take it off their hands. No such luck so far…

I have other friends (both in commercial real estate) trying to move a 90 year old house in South Calgary. They are asking $640k for a house that has a nice view but would have also been bulldozed in the past. $640 for a century-old home and houses under 2 years in age within 3 blocks with similar views for $675.

Personally, I believe that the price discovery process in Calgary over the next year is going to be very painful for many sellers. Your mileage may vary.

#51 G on 12.10.08 at 5:38 pm

#46

That realtor will be out of a job real soon. What a piss poor effort. He didn’t even listen to what you told him you wanted him to do. Guess he is oblivious to the fact that homes aren’t selling at the list prices/selling quickly these days.

He just blew a chance to make some possible commision in the future finding you a good deal.

#52 George on 12.10.08 at 6:07 pm

There was a 30 billion bond issuance in the states where treasury yields actually went negative. I wonder if this is a trap herding sheep into perceived safety and locking up their money before the great dollar devaluation begins. The Fed asked Congress today if they could own their own debt directly not tied to treasuries. I want to get to Canada. Ill take a little socialism over mutant biker zombies marauding for spam anyday. I think it will be more the grapes of wrath than road warrior there, I just can’t get the realtors in BC to accept what I consider are reasonably fair “wussyboy” low ball offers considering the fundamentals that exist right now. Some respectable analysts – the Dr. Doolittles of currency markets think the US dollar is about to run its deflation course and begin to inflate big time. Which will mean inflation then controls and then rationing. Any ideas how to loosen up a realtor?

#53 squidly77 on 12.10.08 at 6:11 pm

there were some who tried to warn..
http://www.youtube.com/watch?v=B8r-nDBx5Jg

this video should be placed into the housing bust-up hall of fame

#54 BC Resident on 12.10.08 at 6:31 pm

8 really, really scary predictions
…..Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market’s sharpest thinkers and what they had to say about the future is frightening……

http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html

#55 dd on 12.10.08 at 7:03 pm

#37 Calgary Rip off:

“Correction: Blame the migration to Calgary on natural gas …s Once oil is gone, the next phase will be coal powered”

Ripoff … always blaming someone or something for your mess.

“buy for the right reasons, not out of fear.”

Yes I bought out of making money … an investment.. sold it and made money.

Thank you

#56 Joren on 12.10.08 at 7:27 pm

Stuff, it’s often a case of damned if you do and damned if you don’t.

If he’d sent properties listed over 300, there are people out there (not directed at you here) that would get their knickers in a twist because they think he’s trying to upsell you. “I wanted properties under or equal to 300”. It doesn’t click in for many that just because it’s listed at 310 doesn’t mean they’ll get 310 for it.

I’m not seeing much of a difference in the way a lot of Realtors are doing business yet. I tried showing 2 different clients the same property over the past 2 weeks. Neither time we could get in to see it. First time because it was vacant and not convenient for someone (?) and second time because the key wasn’t where it was supposed to be, and after paging the agent to call me, and not getting a call back. Hey, thats keeing your clients best interests at heart! – we moved on and bought another unit in the same building. Too bad because it would have been perfect for either client.

Most of the times in this industry I just shake my head. I’m hoping a slow down weeds these idiots out – but it often seems like they’re the ones that luck into great listings/sales. (Like a “high roller” with an unlocked multimillion dollar listing that had a broken lock and wouldn’t return my calls to let her know that her listing was wide open to whoever wanted to walk into it)

#57 Derrin on 12.10.08 at 7:45 pm

The BBC has an article on the Alberta Tar Sands:

http://news.bbc.co.uk/2/hi/americas/7762226.stm

#58 My_view on 12.10.08 at 8:07 pm

Nicely said Garth, your Memo to Michael on Garth’s other blog is one word “brilliant”.

#59 Joren on 12.10.08 at 8:09 pm

#46
Where are you located? I could probably set you up with someone if you’re in the GTA.

#60 Anon on 12.10.08 at 8:12 pm

While I enjoy Garth’s commentary, this post really seems anecdotal at best and does little to shed light on the extent to which this is actually happening.

I work for one of the larger developers in Toronto, both high-rise and low-rise. While new sales have certainly fallen off a cliff, existing purchasers are keeping up with deposits. So far, we haven’t really had people walking away from deposits. Of course things can change, but with our company we really aren’t seeing people walking away.

Wait. — Garth

#61 Bottoms_Up on 12.10.08 at 9:03 pm

#53 squidly77 on 12.10.08 at 6:11 pm
————————————
I love the guy blatantly laughing at Peter. He’s eating his shorts now!!

#62 Bottoms_Up on 12.10.08 at 9:12 pm

Investment advice from the link in #54:

“Virtually the only asset class I know where the fundamentals are not impaired – in fact, where they are actually improving – is commodities. Farmers cannot get a loan to buy fertilizer right now. Nobody’s going to get a loan to open a zinc or a lead mine. Meanwhile, every day the supply of commodities shrinks more and more. Nobody can invest in productive capacity, even if he wants to. You’re going to see gigantic shortages developing over the next few years. The inventories of food worldwide are already at the lowest levels they’ve been in 50 years. This may turn into the Great Depression II. But if and when we come out of this, commodities are going to lead the way, just as they did in the 1970s when everything was a disaster and commodities went through the roof.

What I’ve been buying recently is agricultural commodities. I’ve also been buying more Chinese stocks. And I’m buying stocks in Taiwan for the first time in my life. It looks as if there’s finally going to be peace in Taiwan after 60 years, and Taiwanese companies are going to benefit from the long-term growth of China.

I have covered most of my short positions in U.S. stocks, and I’m now selling long-term U.S. government bonds short. That’s the last bubble I can find in the U.S. I cannot imagine why anybody would give money to the U.S. government for 30 years for less than a 4% yield. I certainly wouldn’t. There are going to be gigantic amounts of bonds coming to the market, and inflation will be coming back.

In my view, U.S. stocks are still not attractive. Historically, you buy stocks when they’re yielding 6% and selling at eight times earnings. You sell them when they’re at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they’re still very expensive by that historical valuation method. The U.S. market is yielding 3% today. For stocks to go to a 6% yield without big dividend increases, the Dow will need to go below 4000.”

#63 Just a Girl on 12.10.08 at 9:13 pm

do not have criminal convictions … and have not declared bankruptcy.

If you declare bankruptcy, you will not qualify for jobs that require you to be in a fiduciary position of responsibility (ie. sign any cheques, manage any money, make any large scale decisions) or position of trust (that would include my job) … you will not be able to serve as a director on a nonprofit (or any other) board …. you will not be able to get a loan for anything …. in other words, you will have to work long and hard to regain trust, credibility, and reputation.

It is not the easy way out. Bankruptcy is a desperate last resort, when all other options have failed — just make sure you explore ALL your other options. My mother was in an extremely difficult financial position and worked with consumer credit to establish a payment schedule over a long period, that helped her preserve not only her credit worthiness but her dignity.

Just a comment, for what it’s worth :)

#64 Just a Girl on 12.10.08 at 9:17 pm

Hmmm, I’m not sure what happened to the first part of my post. It vanished into cyberspace. I prefaced that post with comments to think twice before declaring personal bankruptcy, as it not only destroys your credit worthiness, but greatly and negatively impacts your employability. Many employers hire professional services to do background checks on job candidates, to ensure what they declare on their resume is the truth, including jobs held, education credentials declared, a criminal records background check, and a credit history.

#65 OttawaMike on 12.10.08 at 9:18 pm

I have listed my 2 acre estate house in east Ottawa due to a few factors but Garth has been a strong influence. The locals all tell me Ottawa is an immune island, blah..never goes down..blah.( I’ll take my chances renting, thanks)
I have some family members in T.O. also selling, one in Etobicoke just dropped his price 65k$ and the other at Yonge/Eglinton lost a month old signed deal after refusing to lower the agreed price 20k$.(buyer used a 2nd home inspection as a reason). I suggested she give him the 20k$.
Here’s the mandatory squirrel reference and yes do I think we’ll need more firepower:>)
http://tinyurl.com/6g4gmf

#66 brazer on 12.10.08 at 9:22 pm

Office Depot will close 112 stores
http://www.thestar.com/Business/article/551413

BOCA RATON–Office Depot says it will close 112 stores over the next three months and open fewer stores in 2009 in an effort to cut costs.

The office-supply retailer will reduce its store base to 1,163. Locations being closed include 45 in the Central U.S, 40 in the Northeast and Canada, 19 in the West and eight in the South. Office Depot also will close six of its 33 North American distribution facilities.

#67 brazer on 12.10.08 at 9:25 pm

Nortel `a viable partner for the long term’
http://www.thestar.com/Business/article/551385

Nortel Networks Corp. (TSX: NT) is insisting it is “a viable partner for the long term,” after a report it has hired legal counsel to explore bankruptcy court protection from creditors.

Nortel shares plunged 28 per cent to a new low of 46 cents early today on the TSX, trading later in the day at 49.5 cents, down 14.5 cents or 23 per cent.

#68 brazer on 12.10.08 at 9:27 pm

Rio Tinto to cut 14,000 jobs, Canada gets off easy
http://www.thestar.com/Business/article/551388

Rio Tinto said Wednesday that the job cuts – 12.5 per cent of its 112,000-person workforce, which includes 13,000 in Canada – and other operating-cost reductions will save at least US$1.6 billion a year by 2010.

#69 Gord In Vancouver on 12.10.08 at 9:56 pm

Can you blame the 16 H&H unit holders for walking away from their assignments?

If Vancouver real estate prices drop by 12%, a conservative estimates based on recent media reports, some of them will incur at least $40,000+ of negative equity

loss = $72,000 (($600,000 average price * .12) )

down payment = $30,000 (conservative estimate if $20,000 stated by Global)

negative equity = $42,000 ($72,000 (loss) – $30,000 (down payment))

When the average private sector Canadian salary is about $49,000, a losing H&H holder will have to fork out about 1.5 years of take home pay to get out of his/her mortgage.

This means no more fancy dinners in Yaletown, 2 tall lattes a day at Starbucks, Canucks games, or fancy cruises. Priced out Vancouverites rarely contribute to RRSPs so I didn’t include them :)

Average private sector figure:
http://www.canada.com/nanaimodailynews/news/business/story.html?id=75c2d14d-ff88-4c82-9463-8f0d91f255de

H&H data:
http://www.handhyaletown.com/

#70 The First Rick on 12.10.08 at 10:00 pm

#60 Anon on 12.10.08 at 8:12 pm
I work for one of the larger developers in Toronto, both high-rise and low-rise.
============
C’mon back in about a year and update us on your employment status, OK? Promise?

#71 Anon on 12.10.08 at 10:20 pm

#60 Anon on 12.10.08 at 8:12 pm

C’mon back in about a year and update us on your employment status, OK? Promise?
=====================

Sure thing, but do I get a prize if I still have a job?

Over the next year, we’ll be building what was sold in 2006 and 2007 and the first half of this year. The real test will come at the end of 2009 when we’ll be moving on to stuff that we are trying to sell now.

#72 dotava on 12.10.08 at 10:53 pm

#29 dd on 12.10.08 at 2:24 pm

Don’t try to make “smart” comments (is not attaching) – “Calgary Rip Off” biting you all the way. :-)
BTW – Don’t try to blend – is not working.

#73 dotava on 12.10.08 at 11:05 pm

#32 Monty on 12.10.08 at 2:45 pm

You sound right but – don’t forget that “master bedroom” is used for sleep (and other “activities” why is not bad to have shower attached) but what is the point to have sleeping room 16’x16′ (time before car where ok – LOL) – maybe is better that we have Family/Dinning (fun) rooms bigger instead.

#74 dd on 12.10.08 at 11:05 pm

#68 brazer

I fail to see where Canada gets off easy in this decision

“RT will shed 14,000 jobs around the world …

Rio Tinto said Wednesday that the job cuts – 12.5 per cent of its 112,000-person workforce, which includes 13,000 in Canada”

Ummm 14,000 total job cuts and Canada is out 13,000.
Seems like Canada’s job loss is taking the majority of the bad news.

#75 Simon on 12.10.08 at 11:08 pm

Loved the woman quoted on the Global BC link who said she bought 3 units and her husband bought 3 units.

Tragic case.

#76 dotava on 12.10.08 at 11:35 pm

#54 BC Resident on 12.10.08 at 6:31 pm

One of the things that I do not understand from the article (regardless that I have big/huge respect to Mr. Roubini) but what he said “…U.S. GDP growth is going to be negative through the end of 2009…” and “beginning with China, are in a severe slowdown” doesn’t make to much sense – since -> prediction for China growth is (down from around 10%) to around 7%. Let’s imagine what we will do what we will/where doing if we have just half of that Chinese growth (I will be more than happy with 3.5% with condition that inflation stay below 3%).

#77 dotava on 12.10.08 at 11:48 pm

#60 Anon on 12.10.08 at 8:12 pm
What guys you should do – if you don’t like to stay out of the job. Don’t cheer when “Titanic” approaching the ice. Don’t wait until Japanese (no pun intended) or Korean’s make better cars. I lived in Europe when Ford/Chrysler where prestigious cars – but now – face it we fell behind. One of the key reasons is free thinking – express yourself but don’t be stubborn – work with others as old saying “donkey & man are smarter than just a man”.

#78 Zoronqueen on 12.11.08 at 2:08 am

Whattodo?

Well it depends on how much equity is in your house. We are in Edmonton with 2 homes as well. However we bought our first home in 2002 so if we don’t sell our 1st home then our equity in our 2nd home would be only 20% 100K compared to the 40% 200K.

So if your homes are losing value then you woulI be losing equity as well. If I were you I would do what someone suggested. Price it right. and get a buyer, make sure its a realtor realistic with the times.

I’m doing that when my contract with my current realtor ends as they are not in touch with reality.

Continuing to rent it could mean losing equity plus capital gains tax…

#79 Happy Renter in North Van on 12.11.08 at 4:32 am

Post #65, OttawaMike, how much were your family members originally asking for their place in Etobicoke? Was it a 10% knockdown or greater?

#80 Larry Yatkowsky on 12.11.08 at 4:45 am

@Gord in Vancouver,

you forgot to add in the “specific performance” and legal costs when and if H&H takes it to court. Only out for some will be bankruptcy. What’s that cost?

#81 OttawaMike on 12.11.08 at 8:34 am

Question:Post #65, OttawaMike, how much were your family members originally asking for their place in Etobicoke? Was it a 10% knockdown or greater?

Answer:Asking price was a market value(3 months ago) of 450$K. The house is immaculate :2 f’places, 4 bdrm.,inground pool, granite, stainless. My cousin is in the building trade. He reduced his price 15%.
The other place is near Leaside area and the walk away buyer realised prices were tumbling to below what he paid. Hence the 20$k “adjustment” demand.

#82 Gord In Vancouver on 12.11.08 at 9:56 am

#80 Larry Yatkowsky

Unfortunately, BK is the only way to teach some people that there’s no such thing as a quick buck.

#83 Tom on 12.11.08 at 10:20 am

#54 I don’t find those scary. I see a move away from obsessing over and chasing wealth all the time (something Americans seem to have taken to extremes) to just living and working. Go back to basics and we’ll all be happier.

Since relocating to Europe temporarily a couple of months ago I’ve become much less worried than I was. More people here do just focus on living and working rather than accumulating “stuff”. Europeans have faced much more hardship than Americans and are used to living more frugal lives without being obsessed with wealth. They also seem to place more value on relationships with families and friends than on material possessions. Let’s face it, poverty to most Americans means just the one TV and no car.

Despite our proximity to the US, I really think more Canadians should look to Europe and elsewhere for ideas, news and inspiration, as well as the Americans.

#84 Popping Bubbles on 12.11.08 at 11:22 am

Mass foreclosures possible: Bank of Canada

(of course they changed the title after to something less panic inducing)

http://www.thestar.com/business/article/552151

#85 Jonathan on 12.11.08 at 3:10 pm

Same webpage:

Foreclosures are up (IN BC)

http://canwest.a.mms.mavenapps.net/mms/rt/1/site/canwest-globalbc-pub01-live/current/launch.html?maven_playerId=globalbcallvideo&maven_referralPlaylistId=24845d5c80768d2d50c292ff8e60a971d5a69e38&maven_referralObject=3282889

#86 Just a Girl on 12.11.08 at 8:06 pm

#83 Tom

Best post in this blog. Thank you.

#87 anonymous on 12.11.08 at 9:41 pm

#83 Tom,

That’s a really great cliche you’ve got there.

You go ahead and live the simple life… I’m just treading water for the next few years before I turn back into a shark.

I love money.