House lust

ZERO %

A depression ‘possible’

________________________________________________________

Spotted this week in Newmarket.
Loaded with upgrades, plus wheels = desperate.

Dear Garth: First off, I have passed your website on to at least 10 business contacts of mine. I have yet to come across anything like it before. Genius. Ready for a challenge?

My wife and I can really use some sound advice from someone with grit like yourself.

4 years ago, before I was married, I bought a new town home with family in the st.clair & keele area. Purchase price was 280k. I managed to get blood from pennys and contributed the vast majority of the 25% down pmt (75k). I now have half the home rented (yes I’m Italian) and am enjoying low payments. Last September my lovely wife and I finally saved enough cash to buy our dream detached home in a new development @510k w25% down in the weston rd and sheppard area.

Sounds great eh? Here’s the problem…it’s not built yet and won’t be ready unitl july 2010!! Without getting into legalities we have the option to walk away next week with our deposit of 40k in full given these delays are far beyond the limitations of our agreement.

Given we are living in our own home now, have good careers, and don’t really need to move.. Should we walk and become vultures in the market ( which we are leaning to do so) or wait it out and milk the builder for as much as we can. We would love to take advantage of what’s coming our way economically and position ourselves well for the future. Oh yes, I’m 26. Can you feel my excitement? At this moment the home at weston is said to be woth 550k+ given the negotiated upgrades and location.

Perhaps we should buy a condo in 6months and keep the home? Garth, I would really appreciate your advice on this one. I truly feel fortunate to be in this situation but need to make the right decisions now to secure our future. We have both sacraficed so much to get to were we are today and can smell opportunity.

Sincerely, Albert

Okay, so you bought the townhouse you bought in 2004 for $280,000 and you’ve signed a deal for a new house worth $510,000. You have a mortgage on the existing house of $205,000, and have put down $40,000 on the new place, presumably from cash. Did she make you do it, or was this your Hawking moment?

It means if you buy the new house, and manage to dump the TH for market value (in that area, about $329,000), you’ll have roughly $125,000 in cash. Add in the $40,000 downpayment, and that makes $165,000 to put against the $510,000 purchase price. Then deduct $33,000 in commission on the TH, $12,600 for land transfer tax and $10,000 for legals and moving, and you have about $110,000 to invest, which will net you a mortgage of $400,000.

So, you go from having $125,000 in equity, a $205,000 mortgage and $40,000 in cash to having $110,000 in equity, no cash and a debt of $400,000. Albert, you need a Harley. Badly.

Apart from the fact this is financial suicide, why on earth would you buy a home that won’t be built for a year and a half? In this real estate market that’s an eternity (and it sounds like the project has already been delayed). The builder could be belly-up by then or the market might have crashed.

Also, it’s a bad idea to buy real estate from plans, with a record number of resales on the market at rapidly falling prices. I mean, why buy retail when you can get it wholesale? Why risk money on housing stock that doesn’t exist, and may never be built? Stop being an immature buyer who thinks a new house should be like a new car. You’re only 26. Learn to paint.

As for purchasing a condo or being a vulture, I’d say it makes more sense to diversify your finances instead of swallowing extra real estate. We are at the absolute end of the boom, and not even at the end of the beginning of the bust.

By the way, when other young couples bought homes in the end stages of the last Toronto housing boom, you were six. When they finally got their money back again, you were 21. Try getting excited about something else.

Advice: Walk, dude.

Garth vs. the Realtors: here

90 comments ↓

#1 nonplused on 12.15.08 at 7:06 pm

If this dude can walk away and get his $40,000 zeros back he should definately do so! That’s got to be an opportunity of a lifetime.

Down in Pheonix there is a new wave of forclosures as all the “vultures” who were buying “deals of the century” out of foreclosure are now going into foreclosure themselves.

This thing is not going to make a V bottom.

Looks like something is brewing in the Canadian banking industry:

http://housingdoom.com/2008/12/14/canadian-abcp-pyramid-built-pointy-end-down/

Again looks like our banks are some of the most secure in the world because they don’t have to report anything that might make investors insecure.

#2 Calgary Renter Looking for Home on 12.15.08 at 7:21 pm

Garth,
Their “dream detached home in a new development ” is now valued at 550k+, not their current home.

Wow, this kid is in a hurry to grow up. Why don’t you buy the new home and watch the grey hairs grow exponentially. I think you still have ‘boom fever’.

Don’t buy the home. Can you honestly say it is going to hold a 550k value over the coming months/years? I think not.

#3 Jonathan Tonge on 12.15.08 at 7:36 pm

Hey Garth,

I believe Albert was saying that the house he purchased for 510K is now worth 550K.

Sounds like he must have used some of the equity in his ‘family’ owned home as a down payment since I don’t know very many 25 year olds with 125K in cash sitting in the bank. In fact I don’t know a single one that’s not in debt. That’s 5 years worth of after-tax income for the average 21-25 year old (35K a year).

This story smells of a young guy who hasn’t learned his lesson yet.

#4 dd on 12.15.08 at 7:44 pm

“I have yet to come across anything like it before. Genius. Ready for a challenge?”

Wow … and your question is …? And what challenge are you talking about?

Buy buy buy … load up to the nuts man. Bigger the better. All new paint and new smell.

#5 Mike B on 12.15.08 at 8:02 pm

I certainly hope people don’t neglect to read the next blog “part deux” below because it is important for that message to get out. It is truly a troubling report and makes subprime look like pocket change.

#6 My_view on 12.15.08 at 8:02 pm

Albert,

My suggestion, get the deposit back. I agree with Garth as for were this market is heading and especially by 2010. As for the Weston home who you kiddin. Double in value in 4 years. Yeah right. That’s the former stock yards and on a good hot day the stench reminds me of the cows that were once slaughtered there. Can you smell the irony?

#7 Havoc on 12.15.08 at 8:15 pm

You guys are being kind of harsh; he does have a legitimate question (Garth obviously thought so). Although, if he’s been reading this blog, the answer should be painfully obvious to him:

Take the money and RUN! Don’t even think about buying RE in the short term.

#8 Gordon C. on 12.15.08 at 8:21 pm

As for the “WET COAST” of Canada, it really sucks to be a Real Estate Appraiser. Sales activity is at the lowest point in ten years. That puts us back to pre-boom times which were a flat half dozen years. Prices are declining and in my city at a rate of 2 percent a month or roughly 25 percent a year for single family homes. Condo prices have rolled back to the Q1 prices of 2007. As for properties with 5 or more suites, there is no market for them and multi-family properties have stopped selling.

Lots of calls for divorces and I expect requests for court ordered sales to accelerate by Q2 2009.

#9 vicguy on 12.15.08 at 8:29 pm

Seems to me there is a case to be made for another variant of the sign in front of the above picture: Get a new home for every new car! Might even apply Victoria the Invincible.

#10 Calgary_rip_off on 12.15.08 at 8:32 pm

This guy at age 25 has too many options. Time to screw it up and watch what happens. Good luck with buying that as the market is crashing. You’ll be digging yourself out for a while.

#11 Wealthy Renter on 12.15.08 at 8:32 pm

“down in the weston rd and sheppard area.”

You must be talking about the West Town Development – the main construction firm at the location has been advertising 100K price reductions for their “Executive townhomes.”

That is pretty much the worst large scale, in-fill development I have ever seen in terms of location. It is surrounded on all sides by some of Canada’s most crime-ridden neighbourhoods, and backs on the 400.
Lovely.

There are much better places to drop your 500K. You can get a solid (but much older) home around Eglington and Royal York for a little more than that price.

#12 Jolm on 12.15.08 at 8:33 pm

Low mortage approvals at banks and
high home prices , high unemployment
lower consumer sales, the list goes on.
all the above = deflation
why less mortgage approvals = less money
printing .

#13 Chris L on 12.15.08 at 8:38 pm

Dude, run. Why do you NEED a bigger house? What’s wrong with the other one…is it broken? Man what a world we live in…trading stuff for our freedom. Pay off what small amount you have left on your mortgage and be free. Take that chunk of change your tenants pay you and travel, spend, whatever. Get out of the rat race. Sheesh, it’s simple. Buy a house with two units, pay the house off, live free and clear and come and go as you please. Call no one boss. If you don’t like your tenants, then go rent another place with the income from the other unit and you’re still up one units worth of rent.

Working full time, for 35 years is not mandatory, it’s just what (stupid) people do.

#14 Kilt on 12.15.08 at 9:05 pm

How does he know the house he wants to purchase for $510k is worth $550k unless he puts it up on the market and tries to sell it. Sounds like a friend of mine last year who bought a $300k condo and told me a month later it was worth near $400k. Now he would be lucky to get $250k minus fees. A home is only worth what someone will pay for it. Think about it, you are considering walking at $510k because you think you can get it cheaper.
Pretty sound advice Garth.

Kilt.

#15 lgre on 12.15.08 at 9:25 pm

Albert – if you have the option of getting your money back then get it and run fastttt.

Several years ago I bought into an investment condo that never happened..Once they changed the rendering I was given the option of getting a bigger unit for the same price or getting my $50k dp back, I took the lather and what a great choice it was. The builder went bankrupt shortly after and took everyone with him..some people lost their life savings in this investment. Stinson, I’m sure some people heard about this.

#16 The First Rick on 12.15.08 at 9:51 pm

Looks like the Realturds got the National Post story yanked. The CanWest propaganda machine rolls merrily along.

#17 squidly77 on 12.15.08 at 9:53 pm

great title..i thought that i was in love with a particular lady once..but once committed i soon discovered that there was no love ..expensive !!
heres a bunch of re lusters below presented in picture
http://flippersintrouble.blogspot.com/

expensive !!

#18 islander on 12.15.08 at 10:20 pm

Don’t Walk. RUN.

#19 islander on 12.15.08 at 10:23 pm

@The First Rick: Check yourself.

National Post front page online (http://www.financialpost.com/)
still links to the story as of 7:22 Pacific.

#20 anonymous on 12.15.08 at 10:38 pm

A bunch of people flooding back into Edmonton this week. Everybody who was up there is saying Ft. Mac is shut down.

I have to admit, it’s a little shocking. I’ve been saying for a while that Alberta is going to implode making the 1980’s look like a little blip.

It’s like somebody turned off the key and closed the door. You bet, this is going to be a problem for housing.

$500,000 houses in Ft. Mac will be $100,000 in one year. It will be a spectacular supernova disaster as people fall all over themselves trying to dump their overpriced garbage homes. Get your lawn chairs and popcorn… the show just started.

#21 AAa on 12.15.08 at 11:29 pm

With all the jobs being wiped out in Ontario
I’m surprised the house prices in the GTA are not sliding
as fast as other regions of Canada. Anyone
have thoughts on this and how long this will last?

#22 How low can they go? on 12.15.08 at 11:48 pm

Financial Post makes some predictions on how low Canadian prices would go if we followed the American trend.

http://network.nationalpost.com/np/blogs/fpmagazinedaily/archive/2008/12/15/how-low-could-they-go-if-canadian-prices-follow-u-s-trends-certain-cities-will-experience-a-major-slide-in-house-prices.aspx

Toronto looks like it’ll be able to pick up the pieces, but every other city appears to be in serious trouble.

I remember an older article on this blog, where Garth alluded to a 15% dump for Toronto being not enough to correct for the bubbliness here. Given these numbers, Garth, do you still think we’re going to exceed the drops our neighbours to the south have experienced?

#23 The Tallyman on 12.16.08 at 12:13 am

That 40k down payment is a known factor “right now”
Spinning the wheel for what “might be” in a year or two?
Like so many others have stated, get that money back and run.

Regarding the pic at top anybody buying an overpriced house while the equity melt is still in free fall may very well be living in that “free” vehicle.

#24 Waiting for a Deal on 12.16.08 at 12:41 am

Good Advice, Garth.

I will be a father for the first time in June, will need to move, and will be in the position to buy but will rent for at least another year …. with the recent decrease in real estate prices I think I will get that $300,000 home in Durham for $210,000 … heck might even pick up a renter in Oshawa … they will be really cheap … students will still need a place.

#25 Zoronqueen on 12.16.08 at 12:47 am

Albert,

I agree with the rest run…. If you can get your 40K back, if you lose on the deposit you may considering hiring a lawyer like Garth said before…

Who is telling you the home is now worth 550K ?? It is suprising cause it’s not even completed. It’s worth nothing at this point. Maybe the lot price??

If you are able to sell the townhouse. Considering doing so and renting. Then holding on to the home that maybe worth 350K down the road with a 4OK deposit and having to pay the rest with the townhouse money…. although not the smartest thing to do but an option…

#26 Investx on 12.16.08 at 1:36 am

“By the way, when other young couples bought homes in the end stages of the last Toronto housing boom, you were six. When they finally got their money back again, you were 21. Try getting excited about something else.”

Garth, can you provide the stats which demonstrate this? All I’ve found is a chart from this page, showing the (GTA) bear market not being that long :

http://www.realestatehelpdesk.ca/Help-Market%20Statistics.htm

#27 Blacksheep on 12.16.08 at 2:01 am

With Alberta in trouble, RE prices in Kelowna & Osoyoos
are going to tank.

#28 Mike on 12.16.08 at 2:02 am

500k for a new house at Weston/Sheppard, yike !

Like the poster above, if I’m dumping 500k into a home in Toronto, at least put it in a neighbourhood that has been around for a few generations. An old home with some energy efficiency upgrades would be a much more lovely place to LIVE than a rickety built shack in a soul-less cookie cutter neighbourhood that has crappy surroundings. Heck, a 500k monster home in Willowdale on a sidestreet of Yonge is infinitely more appealing imo.

#29 Armageddon on 12.16.08 at 2:59 am

It’s clearly aparrent.. Albert doesn’t get it after reading and folllowing your blog Garth.

Let the kid find out the painful way.

#30 dd on 12.16.08 at 5:24 am

IEA “Global oil supply will peak in 2020, says energy agency”

Yes … energy prices will rebound.

http://www.guardian.co.uk/business/2008/dec/15/global-oil-supply-peak-2020-prediction

#31 timbo on 12.16.08 at 6:26 am

#20

all this shutdown begs to really ponder how many mainline o&g jobs just got cut and how many service o&g jobs are going to be affected. 50K? I know my housing sector has collapsed completely and my company is running on a bare-wire to try and hold out. I thought that this would be a slow slide but wow does this really move fast.

3-6 months from now foreclosures are going to run wild with all the unemployment.

Watch, corporations consolidate, banks merge, all to become to big to fail. Here comes Canada’s tarp and tax dollars to the rescue.

This is surreal in a way. looking south and watching the US fumble with the problem we are now going to face and knowing deep in my heart that our government is going to use the same toothpick approach to break the stone.

#32 Million Dollar Journey on 12.16.08 at 7:44 am

I agree with you Garth. With all that equity and cash that the young couple has, they should look at diversifying the money instead of funneling it all in real estate.

#33 brazer on 12.16.08 at 8:31 am

Toronto’s condo boom is heading for a bust
http://www.yourhome.ca/homes/article/554394

By the end of September, there were 33,919 condos under construction in the Toronto metropolitan area – more than three times the city’s annual average – said economist Will Dunning in a report on the rental and condo markets.

“This very large pending inventory is setting the stage for a substantial correction,” Dunning said in an interview yesterday.

#34 vtj on 12.16.08 at 8:33 am

Albert,

Take Garth’s excellent advice and walk. The future’s much too uncertain to be gambling with such a huge yoke around your neck at this time.

You’ve done extremely well for yourself given your age and unlike some of the bitter posters on this blog, I applaud you. Your objective now should be to chill, let the dust settle and continue to build on your excellent foundation when things become clearer. Good luck.

Cheers,
vtj

#35 Jonathan on 12.16.08 at 9:02 am

AAa says “With all the jobs being wiped out in Ontario
I’m surprised the house prices in the GTA are not sliding
as fast as other regions of Canada. Anyone
have thoughts on this and how long this will last?”

Toronto’s economy is very diverse, that’s why it is still holding up. When you hear a loss of 5,000 jobs, you have to keep in mind that is absorbed amongst 10 million people. The service sector in Toronto is much larger than manufacturing. You have the majority of the Fortune 500 with Canadian head offices in the GTA, plus all the Canadian banks, insurance and investment firms. Of course all those other companies are taking huge hits right now, so we’ll have to see how that unfolds in 2009. It’s not going to be pretty.

Manufacturing has been shrinking for thirty years now. The big 3 employ half as many people in Ontario as they did ten years ago, yet by 2005 we beat out Michigan in the number of cars we produced. The point is, there is no longer room for low or medium skilled manufacturing at Canadian wages. We’re not competitive enough given that a guy in China can build it better for a tenth the pay. We need to strictly focus on high-tech, capital intensive manufacturing or the manufacturing of goods that are to heavy or large to ship from China. We can compete with China there.

#36 CD on 12.16.08 at 9:02 am

So then, when would be a good time to buy?
In 6 months, in a year, in 5 years, now?

Not to flip, not to just live in for a couple of years and then move to a larger home, not to “invest”, but the “forever” home?

We’re looking for the home that we plan on living in for the rest of our lives (looking at established communities, not the cookie cutter homes where the neighborhood changes after 2 years – been there, done that).
We have a decent down payment, and home prices have already started falling in the area that we’re looking at. If they fall just a little bit more, I am seriously considering putting in an offer on a home that we have fallen in love with.
The price was already lowered about $25K after it originally listed and there was absolutely no interest. Its now been on the market at the re-listed price for about 2 months.

The mortgage will be affordable for us (nowhere near our “limit” in terms of what we were pre-approved for), but I’m still worried about buying a home in today’s market.
Reading this blog is what stopped DH and I from seriously looking at homes earlier in the year (back when all our friends and co-worker were still calling us crazy for waiting — they were all saying “the market is just going up up up!!)

Should I just wait, and hope another home that I fall in love will eventually go on the market?

#37 smwhite on 12.16.08 at 9:20 am

“I’ve never seen such uncertainty in terms of looking forward to the future”.

I wouldn’t worry about it folks, it’ll only be a technical depression…

#38 Ratpick on 12.16.08 at 9:22 am

Albert,

Don’t walk — run! You’ve done well up to this point. It’s time to cash in those chips and walk. I was in a similar situation to you in 2000, with stocks and the tech boom/bust. I took one last big gamble, very late in the game, and poof! All that hard saving through my 20s — gone.

As we say in aviation, it’s better to be on the ground wishing you were in the air … than in the air, wishing you were on the ground.

#39 Waiting for a Deal on 12.16.08 at 10:11 am

Here is an interesting article regarding deflation in the USA.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081216.wusinflation1216/BNStory/Business/home

Looking forward to your new Book Garth.

#40 Jake on 12.16.08 at 10:28 am

Albert,
I guess I am at a similar point in my life. I am in my mid – twenties and married. My wife and I bought our first house in ’04. It was a large and beautiful 2000 square foot home in Alberta for around 250K. We put down our 25% and took on a ~180K HELOC to cover the rest. Not surprisingly our house nearly doubled over the next 4 years and after selling our house in late ’07 and paying off our cars/student loans, we were left with around 250K in our pockets. This summer we moved to Edmonton and began house shopping. We were preapproved for ~500K, but after living with the 180K Heloc on the previous house, we decided to look for a nice half duplex for around 300K. We ended up finding a beautiful, fully finished half duplex in an established neighbourhood for 320K. All said and done, we are left with a 80K line of credit on the property. I think the interest was around $280 last month. I guess my point is, just because you have some equity does not mean you are rich. Easy come….easy go. You did little to earn it besides getting lucky, as was the case for myself. Forget your equity and focus on eliminating your debt. 20 somethings don’t deserve to be in their dreamhouses yet. Sadly I think we have forgotten how hard our great grandparents worked for the modest lifestyles they attained. The wake up call is coming. Go simple man, don’t let the imaginary house money go to your head.

#41 vtj on 12.16.08 at 10:31 am

#35 Jonathon: Great post.

#36 CD: If I were you, I would take a worst case scenario and then do the math to see if it would be prudent for me to purchase that home at this time. By worst case scenario, I mean that I would see if I could carry the home on a single income, all while not being forced to eat watered down Lipton soup every day until my better half found a new job (had to go through this when my parents bought their first home in the mid-seventies – not pleasant, but hey, builds character).

In terms of carrying costs, I would be sure to factor in all expenses, not just mortgage payments but all the other costs such as property taxes, water heater rental (if any), utilities costs, renovation/repair costs etc.

IF the numbers looked good at this point and,
IF I had researched the neighborhood and was certain that I’d be buying in a good location and,
IF I saw this place as a home for my family and not an investment and, finally,
IF I didn’t plan on selling for at the very least 10 years (15 is probably better) then, I’d go ahead and buy it.

I’ve essentially described what I’ve recently done myself this past year. I bought a home with over 60% down, the proceeds for which came from the sale of my first home which I purchased in ’98 and which we paid off in 2006. FYI, I did not get any handouts from relatives when I bought my first home and no, I’m not a hermit and yes, I do have kids and yes, I feel that we live well. We have no other debts besides a low interest car loan which will be paid off within 2 years (we bought a Civic, not a monster SUV in ’07 which we plan to keep for at least 10-15 years). Even if my spouse and I both lose our jobs, we’ve put aside enough liquid savings to cover 6 months worth of expenses so that we don’t have to worry about losing everything while job hunting or coming up with creative ways to generate income as the need arises.

Some people on this blog would disagree with buying anything at this time and probably with merit. However, I don’t feel over-extended and am comfortable with the degree of risk that I’m exposed to. You need to find your own comfort zone and then make the best of it.

Sorry for this long-winded post, but I hope it was useful. Good luck.

vtj

#42 Jake on 12.16.08 at 10:32 am

Garth,
I remember all of the bikkering in Alberta about the annoying MP who would not fall into line. Thanks for being different man,
Jake

#43 Larry on 12.16.08 at 11:09 am

Retail christmas sales in Calgary are on a par with 2007, no bust happening here.

#44 HalifaxFamily on 12.16.08 at 11:50 am

Unbelievable. What are people doing? The media has caused us to think that we are financially invincible by having highly leveraged illiquid assets.

I appreciate your candor and your slightly abrasive tone Garth. Keep it up!

#45 HalifaxFamily on 12.16.08 at 11:54 am

Weighted CREA average? That is unbelievable. It reminds me of the Simpsons episode that I accidentally happened to catch with my son this weekend.

Marge became a realtor (that was where we started watching) and she ended up selling a ‘murder house’ to her neighbors. Anyhow, part of it was her boss telling her how to ‘sell’ houses…

Reminds me of what is happening here. There is sugar coating of the real issue – the downward spiral of the market. Beware flippers!

#46 Al on 12.16.08 at 11:54 am

I have a conundrum similar to Albert’s. Last week I decided to shoot myself in the foot, but I just got my gun today. I don’t actually have to shoot myself in the foot, but it seemed like such a good idea last week. What should I do?

#47 kitchener1 on 12.16.08 at 12:05 pm

#26 Ivestex
Garth, can you provide the stats which demonstrate this? All I’ve found is a chart from this page, showing the (GTA) bear market not being that long :

In some areas of the GTA, people that brought homes in 1988-89-the peak of the last boom had to wait until 2001-2002 to break even, I think thats what Garth was refering too.

#48 MissedTheBoat on 12.16.08 at 12:07 pm

Man, things sure are gettin’ tight.

Is nothing sacred anymore?

http://www.channel3000.com/news/18284258/detail.html

“Authorities said that a woman in her late 20s or early 30s stole three kettles filled with donations since Wednesday and tried to take three more but was stopped by alert bell ringers and store managers.”

This could be an alternative to, or even complimentary to squirrel meat…bon appetit!

http://ca.news.yahoo.com/s/capress/081215/koddities/food_peru_guinea_pig

“Guinea pigs can feed seven or eight for about C$4….The idea is to give the people a tasty, economical option…”

#49 Diabolo on 12.16.08 at 12:23 pm

Larry on 12.16.08 at 11:09 am Retail christmas sales in Calgary are on a par with 2007, no bust happening here.

Larry, How many people do you think know what’s happening out there ?? For some folks in their over-priced shoe boxes, its business as usual(You are richer than you think)… until reality hits…

“Most people see things only when its obvious”

#50 David on 12.16.08 at 12:42 pm

“There are three kinds of lies: lies, damned lies, and statistics.” Benjamin Disraeli
Hard to make out what the CREA is trying to peddle as good news for real estate. There are no good numbers to massage into a rosy picture, so now it an issue of skewness. Totally pathetic at best and totally dishonest at worst.

#51 smwhite on 12.16.08 at 12:46 pm

#43 Larry

Better question your “source”…

———-

http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=8894f959-bae7-4ee8-ab81-7f585b7065d8

“She says in Calgary there have not been many job layoffs, nor has there been a huge spike in bankruptcies.”

———-

Define huge!

———-

http://www.lethbridgeherald.com/content/view/13509/26/

“Personal bankruptcy filings across Alberta — 667 in October — were 50 per cent higher than the same month a year ago, he notes.”

———-

Keep drinking the kool-aid Larry.

#52 POL-CAN on 12.16.08 at 12:54 pm

Garth…

Not sure if you have seen this:

Fred Thompson explains bailouts

http://www.theospark.net/2008/12/fred-thompson-explains-bailouts.html

Priceless :)

#53 squidly77 on 12.16.08 at 1:05 pm

some graphs of the gta historical prices
http://realosophy.typepad.com/photos/uncategorized/2008/05/16/cmhc_mls_prices.jpg

this one is curious
http://www.zimbio.com/pilot?ZURL=%2FToronto%2BReal%2BEstate%2Farticles%2F679%2FNo%2BCrash%2BExpected%2BToronto%2BCondo%2BMarket%2BCMHC&URL=http%3A%2F%2Frealosophy.typepad.com%2Fphotos%2Funcategorized%2F2008%2F05%2F16%2Fcmhc_mls_sales_4.jpg

#54 Bottoms_Up on 12.16.08 at 1:07 pm

Jake, good to see you have your head screwed on straight.

VTJ, thanks for the advice.

Albert, do your own research, take some of the advice here and make a decision that suits you, your family and your lifestyle. Also assess whether or not your job/income is secure.

#55 Monty on 12.16.08 at 1:17 pm

Chris L. post #13, you summed up the essential. Brilliant.

#56 squidly77 on 12.16.08 at 1:44 pm

gta inflation adjusted re prices from the highs in 1989 till now

$254,000 in 1989 + 4%
$264,000 in 1990 +4%
$274,000 in 1991
$285,000 in 1992
$321,000 in 1995
$376,000 in 1999
$440,000 in 2003
$514,516 in 2008

so inflation adjusted the bear housing market ended when ? hahaha your still in the soup

housing is a lousy investment always has been and always will be

btw..no property taxes or maintenance are included in those numbers..

#57 vtj on 12.16.08 at 1:59 pm

#40 Jake: It’s great to hear from young people who, as “Bottoms_Up” puts it, have their heads screwed on straight. Keep it up!

Cheers,
vtj

#58 Andrew toronto on 12.16.08 at 2:07 pm

rate cut coming in 10 minutes history about to be made.
first time ever it will go below 1percent .. U.S is making history in all the wrong places

#59 Jonathan on 12.16.08 at 2:42 pm

WARNING TO EVERYONE – 2:30 Tuesday December 16

In Tuesday’s statement, the Fed also said it is “evaluating the potential benefits of purchasing longer-term Treasury securities”

In effect the US is borrowing from itself. Ie. print money in exchange for Treasuries. Wait until everyone finds out their treasury bills and dollar bills are worthless. That’s a great long-term solution. I wonder if this policy is sustainable.?? Is now a great time to buy gold and silver?

Garth?

#60 Waiting for a Deal on 12.16.08 at 3:04 pm

#43 Larry … Common sense is simply uncommon.

#61 Vancouver Renter on 12.16.08 at 3:07 pm

It never ceases to amaze me that people can have read your book, seen this blog, and still ask such stupid quesions! Then again, at least he was smart enough to write and ask.

#62 Larry on 12.16.08 at 3:19 pm

#43 Larry

Better question your “source”…

I heard it on 660 news on the way home from work :)

#63 Mike B formerly just Mike on 12.16.08 at 5:23 pm

Just what the US and world needs…. 0 percent interest rates.. Are these people smoking crack or what. Low interest rates in order for banks to start encouraging lending and people to start getting loans and into more debt. Perhaps I should make a little call to my credit card company and suggest they readjust the interest rate I pay on the card. Wonder what they might say??

#64 The Tallyman on 12.16.08 at 6:08 pm

#46 Al

Don’t ruin that shoe!
It can be used as leverage at political gatherings.

#65 The Tallyman on 12.16.08 at 6:11 pm

Harper is really referring to his upcoming Depression when he gets chucked out of “Boss” position in Feb 09.

#66 Rob on 12.16.08 at 6:13 pm

#3 Jonathan Tonge on 12.15.08 at 7:36 pm
Said:
I don’t know very many 25 year olds with 125K in cash sitting in the bank. In fact I don’t know a single one that’s not in debt.

I’m 24, a renter, no mortgage, no student loans, no credit card debt, I have a good career and I am a principle shareholder in my own busines, no business debt either. Maybe I’m just not normal.

#67 Calgary_rip_off on 12.16.08 at 6:22 pm

A bunch of people flooding back into Edmonton this week. Everybody who was up there is saying Ft. Mac is shut down.

I have to admit, it’s a little shocking. I’ve been saying for a while that Alberta is going to implode making the 1980’s look like a little blip.

It’s like somebody turned off the key and closed the door. You bet, this is going to be a problem for housing.

$500,000 houses in Ft. Mac will be $100,000 in one year. It will be a spectacular supernova disaster as people fall all over themselves trying to dump their overpriced garbage homes. Get your lawn chairs and popcorn… the show just started.

Ah, right. Oil is still a not needed commodity. Come on, Ft. Mac will only shutdown completely if it is totally unprofitable to run with oil prices at $10 per barrel. Otherwise, why wouldnt it keep running? Everything needed runs on petroleum. And Mobil 1 0w40 is a vehicle’s best friend in dangerous arctic conditions. So this scenario played out is unlikely despite wanting it.

If the bubble conditions hadnt happened perhaps everything would still be reasonable and flying high. Going up too fast too soon is bad. Crash!!!

#68 dd on 12.16.08 at 6:36 pm

“I think it’s obfuscation of reality. They come up with a house price index instead of giving you the median price or the average price,” said Mr. Turner. “It’s an attempt to gloss over reality and the reality is we are in a semi-free fall in terms of real estate sales.”

Too funny. I always scatch my head over year over year house price decrease numbers. It really never adds up when you look at your typical house in the typical neighbourhood.

Prices are down. Period. Don’t sugar coat it. However, as a realitor would say … this is the best time to buy … prices will not be this low for long.

#69 dd on 12.16.08 at 6:39 pm

#59 Jonathan,

Not yet on the gold or silver front. There is no fear of inflation yet.

If prices keep deflating so might gold and all other assets except money.

#70 dd on 12.16.08 at 6:45 pm

#20 anonymous.

$100k house in fort mac a year from today? Might, you never know. However where what will the price of oil be 5, 10, 20 years from today?

With a decline rate of 8% a year I don’t know how oil will stay at low price levels for long.

#71 dd on 12.16.08 at 6:47 pm

#67 Calgary_rip_off,

Hey … I agree with you for once.

“Ft. Mac will only shutdown completely if it is totally unprofitable to run with oil prices at $10 per barrel. Otherwise, why wouldnt it keep running? Everything needed runs on petroleum. And Mobil 1 0w40 is a vehicle’s best friend in dangerous arctic conditions. So this scenario played out is unlikely despite wanting it.”

#72 dd on 12.16.08 at 7:00 pm

Funny,

With all the oil and gas cap x programs coming to a sudden stop and or a large deduction you can really see where this will all lead.

Energy prices are going to be substantially higher in the future. Enjoy low prices while they last.

#73 brazer on 12.16.08 at 7:04 pm

Sun Media cutting 600 jobs
http://business.theglobeandmail.com/servlet/story/RTGAM.20081216.wsunmedia1216/BNStory/Business/home

TORONTO — Canada’s biggest newspaper publisher, Sun Media, is cutting 600 jobs in Western Canada, Ontario and Quebec as it restructures in the face of harsh economic conditions.

The chain, owned by Montreal-based media giant Quebecor Inc., said Tuesday the cuts will trim about 10 per cent of its work force and most will fall by the end of the year.

======

no merry xmas for these folks sadly.

#74 brazer on 12.16.08 at 7:06 pm

U.S. consumer prices plunge by record 1.7%
http://business.theglobeandmail.com/servlet/story/RTGAM.20081216.wusinflation1216/BNStory/Business/home

Consumer prices, an inflation barometer, last month fell by the largest amount on records going back 61 years as energy costs posted nearly double the decline of the previous month, the Labour Department reported Tuesday.

Prices fell 1.7 per cent, surpassing the previous record decline of 1 per cent set in October. It was the largest one-month decline dating to February 1947.

==========

deflation with a capital D….not good.

#75 The Tallyman on 12.16.08 at 7:09 pm

People starting to hit back

Downturn Spurs \’Survival Panic\’ for Some in the US

#76 Alan Yeung on 12.16.08 at 7:09 pm

Ft. McMurray is shutting down because oil sands production is not profitable below $30-40/barrel. (The break even point used to be $30/barrel before the serious inflation in the area in the last couple of years.) Everyone in the industry can read the writing on the wall, with oil at $44 and falling.

#77 Jim on 12.16.08 at 7:40 pm

Albert,

This is all great information for you to consider. Please remember at the end of the day you need to live with your decisions. The majority of these responses are from an investment point of view. – Short term –

If your intentions are to live in the home over the long term, then focus on what you can afford in a worst case scenario situation. (Forget about the market because you are not looking to sell) I say see what kind of deal the builder is willing to give. Just ask.

You sound like someone who can save up an extra 50 -75k in the time before you move in. Can you handle a mortgage of 320,000 over the long term with at your income level?

Also, I remember when I was in my twenty’s.. out of school, in debt and living at home. You are miles ahead, good for you.

Ignore the ignorant individuals who say you are “undeserving” or “supposed” to be in a different situation based on your age.

I would bet these are the individuals you will be buying from in the future…

Jim

#78 Gonzo on 12.16.08 at 7:49 pm

Why are the politicians running like crazy, pumping money in, and cutting interest rates to avoid this recession? House prices coming down is a good thing. The problem was the over-inflated bubble built on excess credit to people who couldn’t afford it. A bust is the solution. We need companies to fail and people to lose their jobs and houses in order to shed the problems with our economy. Sure a deep recession/depression may ensue, but the recession is necessary to decrease consumption and focus more on saving and production. In the near term, deflation is a real possibility. This will suck, but by printing money and bailing out everyone to try to avoid this, it will lead to us coming out of a deflationary recession into a hyperinflationary depression — which is when things get really scary (even squirrels could get expensive). The U.S. is destined down this path with the ridiculous Fed policies. Hopefully Canada won’t follow closely behind.
Raise interest rates, cut government spending, and stop all bail-outs. MAKE us save. God knows we won’t do it on our own.
Anyone looking for a more knowledgable/reputable source on this, check out Peter Schiff

#79 charliegosurf on 12.16.08 at 7:50 pm

loosing lust…

http://www.vancouversun.com/Whistler+gondola+tower+collapses/1083212/story.html

this could affect real estate around the hood, im so happy i moved away but still so worrried for the lost soul who belives in their pinky$ world…

piggies on the run…i sense this so badly all week. i wonder what next…hope this will alarm people that we live un a dangerous manmade world, it’s around you every day,lookout!

BY THE WAY GARTH, ISNT A 0% RATE, at least not an interest thing, maybe a rate, but most of all, maybe my negative interest rate is not so far fetch from reality….

0 is the absolute number, not a number if you remember your math class, maybe i dont too,lol, it;s the ultimate bakancing act, it’s what should be the wage of evrybody, the fortune of all bodies, the goal of all 000ne.

#80 ThumbsUp on 12.16.08 at 7:59 pm

Real Estate mutual fund halt redemption –

http://www.cbc.ca/money/story/2008/12/16/funds-redemptions.html

#81 Jonathan Tonge on 12.16.08 at 8:11 pm

Calgary-rip-off.. i think S&P stated if oil hits $38 a barrel that many plants in Fort Mac will shut down? This is why Alberta is giving them a royalty break when oil is still in the $40 range.

Did anyone read that Great West Life and London Life just halted redemptions on their Canadian real estate funds? Apparently the insurance companies can’t liquidate the funds holdings (ie. Canadian real estate) as quickly as investors want to get out.

#82 Andrew toronto on 12.16.08 at 8:33 pm

New $3 Trillion Bailout Is Coming to the Masses

Have they completly lost it now .. how will this force people to save ..bailing out people in default .. perhaps they know the alt-A mortgages are coming due has was demonistrated in the mortgage meltdown post..

question I got how does this help anybody to save and change their way , did the japanese do this in the 1990’s , I know they tried quantative easing.. doesn’t look like that wored.. wonder if we have any charts for any type of alt-A mortgages here in Canada ..

http://www.bloomberg.com/apps/news?pid=20601039&sid=a.YJmSfnHD9o&refer=columnist_hassett

#83 squidly77 on 12.16.08 at 8:34 pm

Did anyone read that Great West Life and London Life just halted redemptions on their Canadian real estate funds? Apparently the insurance companies can’t liquidate the funds holdings (ie. Canadian real estate) as
quickly as investors want to get out.

people invest in theses risky risky funds because of quick and easy profits..well they are finding out now what the cost of there risk will be..it aint cheap

i think that boardwalk is one of the biggest REITs in canada
get out if you can..because these realy are ponzi schemes dressed up as hedge funds..same with commodities
last one out pays the most
http://ctvdb.globeinvestor.com/invest/investSQL/ctvx.show_chart?pl_comp_id=156619&pl_errmsg=&iaction=Chart&pl_primary_listing=BEI.UN-T&iaction=Chart&pl_additional_listing=0&pl_period=60W&pl_chart_type=+&pl_sh_movement=0&pl_long_movement=0

so many people have no idea what they are invested in
whats in your RRSP ?

#84 squidly77 on 12.16.08 at 8:55 pm

auto bailouts are useless
the problem is not building the cars..its selling them
theyll just keep building cars into oblivion

subsidizing the forestry industry is useless..its not that they pay there employees to much
its the lack of people buying the lumber
they will keep building lumber inventories into oblivion

all they are doing is kicking the can down the road..the problem will still be there only it will be much bigger

the problem is high priced real estate..people spend so much of there disposable income on shelter

that that they can not buy the products that other industries produce for example autos and lumber

the economy has been destroyed because of over priced homes
the prices must come down fast

#85 squidly77 on 12.16.08 at 9:16 pm

addition to the post above

consumers have hit the wall world wide they have simply run out of money to keep the ponzi game alive
every thing is over built
to many cars to many houses to much of every thing
this was painfully obvious to me

we are going to have a major recession for sure
taking our medicine will be nasty
but take it we must
and we are going to have to accept the fact that we will have much less for a few years maybe longer
and yes many many people will lose there homes
the REIC have destroyed the world wide economy

all the crap bailouts that the NDP and Liberals want wont solve a thing..nothing

#86 reboot on 12.16.08 at 9:17 pm

it will fall like dominoes..

1st the residential housing market, then as businesses go under as consumer spending dries up, the commercial real estate market will be the next to fall.

#87 poorguy on 12.16.08 at 9:22 pm

Dumped my mutual funds today.I am pain free now.
No RE,No Stocks,No investments.
Got some Cash,Stable career.Was looking to buy condo
in Miami but will hold for few more months.Will be fun to
watch where GTA RE goes from here,my prediction is
50% .Thanks every one for some good advice.

#88 OntarioHouse on 12.16.08 at 9:46 pm

Even if a low ball offer doesnt get accepted (for now), its a great way of demoralizing sellers and helping them see just how much their house has gone down in value. After a while they’ll get the message.

#89 Jake on 12.17.08 at 12:45 am

#77 Jim,
Albert only got miles ahead of you because he had his name on a title during the boom. So did I. I made a few hundred thousand in a couple of years doing nearly nothing. Sorry if i don’t feel that special. Despite what you have said, I still feel that Albert does not deserve his dreamhouse and the 320K mortgage. I don’t think any decent person deserves a ball and chain that size. Unless you are a Neurosurgeon Albert, I would play it conservatively whether you are in for the long term or not. Just imagine if lending rates went way up over the long term… scary. If you live your life out of a sense of gratitude rather than entitlement, you will be happy with the smaller house and the smaller mortgage.

#90 crashing yuppy on 12.17.08 at 6:47 am

Hey CD,

Your problem is falling in love with any house. Always, repeat, always be prepared to walk away.

Go ahead and make an offer if you want but you need to factor in the next 1 to 2 years depreciation.

Go lowball, or regret it in 6 months,

All signs point to further price softening.