Risk, part 2

A                           B

Some people have argued passionately on this blog that the stock market is the definition of risk. They harbour fears the 1930 experience will be played out again, and a second sickening slide will come, ultimately robbing investors of 89% of their invested sum. This seems based on an irrational fear of financial assets, images of Bernie Madoff and an inbred fear that anything you can’t pee on the side of isn’t worth owning.

Fair enough. Stocks have been scary lately. Hell, everything’s scary. But when it comes to stocks, bonds, mutual funds and the like, at least there is a broad, public market in which valuations are determined. Stocks trade relative to each other, and based on the financial health and prospects of the businesses underlying them.

This is where real estate – at least residential real estate – is fundamentally different. My argument, deeply held, is that real estate investors will come out of this mess far worse off than equity holders. Stocks may have lost half their value, while real estate is down about a third, but stocks will recover long before housing does, and it may be 2020 before a house in Edmonton or West Van once again achieves ts 2007 pinnacle.

This is because the real estate market is not really a market. It’s just a just swap meet where people come to bid on things based on  emotion, hormones or their own perceptions of supply and demand. Unlike a share in RIM, which is worth the same in New York or Kelowna and tied to corporate profitability, the value of a house swings wildly, uncontrollably and irrationally from market to market. House prices are dictated by the local economy, geography, neighbourhood demographics, surrounding housing stock, local taxes and societal trends, just as much as interest rates, consumer confidence and the availability of credit.

Over the last few years in Canada we have grossly distorted home values. Sellers were greedy. Buyers were fools. Ottawa primed the pump with Canadian subprimes. Realtors were irresponsibile. The media was  bought off. We borrowed more mortgage debt than ever before to gobble houses many could not afford at prices which won’t be seen again for years. There’s plenty of blame to go around.

And one lesson is this: When assets get plumped for no good reason, they can get bombed just as easily when the tide turns.

So, look at the houses above.

The one on the left has 2,978 square feet, the one on the right 2,634 square feet. The one on the left was built 80 years ago, the one on the right, 63 years ago. The one on the left sits on a lot 35 by 160, and the one on the right on a lot 50 by 120. The one on the left has 6 bedrooms, and the one on the right has 5 bedrooms.

They are both active listings at the moment within downtown neighbourhoods of two large cities.

The house on the right is listed at $998,000. The house on the left is for sale at $300. (That’s not a typo.)

Can you guess where?

And then tell me why residential real estate is more stable than Research in Motion.

126 comments ↓

#1 Mike in Etown on 12.18.08 at 10:55 pm

Vancouver methinks….

#2 y3maxx on 12.18.08 at 11:02 pm

Best Quotes of November 2008

Kevin Depew, Minyanville
One the most remarkable things to me is how the American people have been sold on accepting, even preferring, inflation over deflation. It is truly amazing that government and central banking bureaucrats could successfully instill the belief that lower prices for assets are bad. The reality is that lower prices are only bad for artificially-constructed economies.

Deflation is necessary to restore market and economic stability. It is not without pain. But inflation, even mild inflation, is like an intoxicant that slowly destroys the body over time even as its narcotic properties mask the pain. By comparison, hyperinflation is ruinous. How ruinous? Consider this passage from Adam Fergusson’s book, “When Money Dies: The nightmare of the Weimar collapse”:

“In hyperinflation, a kilo of potatoes was worth, to some, more than the family silver; a side of pork more than the grand piano. A prostitute in the family was better than an infant corpse; theft was preferable to starvation; warmth was finer than honour, clothing more essential than democracy, food more needed than freedom.”

This is important to understand. The argument against deflation and inflation is both academic and political. Present economic elites benefit from inflation and suffer terribly in deflation. Therefore there is great incentive for the small minority, the 2-3% of wealthy who control the vast majority of assets in this country, to continue to press government and the Fed to maintain the present course of inflation over deflation.

#3 O'Really on 12.18.08 at 11:04 pm

The house on the right appears to be infront of a West coast fir, so I’d hazard a guess at YVR, perhaps a post-war 40’s box in an established neighborhood. The left appears to be a derelict that had been ill-used for short term rentals (possibly a college town in Eastern Canada)

#4 Realtor on 12.18.08 at 11:06 pm

My guess the house for $300 is in Detroit, U.S.A.

#5 wealthy renter2 on 12.18.08 at 11:13 pm

“And then tell me why residential real estate is more stable than Research in Motion.”

Because when firewood cost $300, there will be no one buying black berrry’s, other than the edible ones.

#6 VanMark on 12.18.08 at 11:15 pm

Ooooh, I love a contest! The one on the right must be Vancouver westside. The one on the left is probably big city USA, I’ll guess Detroit. Might be New Orleans.

Nice example. A real eye opener.

#7 WorriedSaver on 12.18.08 at 11:20 pm

Thanks Garth for providing this forum, which has helped me and my family immenseley already (we sold in July).

I am wondering, what is the actual probability of a bank withdrawal holiday/closure occuring in Canada, and if it were to happen, WHEN might it be most probable?

We put the proceeds from the sale of our house into cashable GICs of a major bank, but are now thinking maybe it is best to buy CSBs instead. We plan on moving to another city and buying a house down the road, roughly in a year when the market is down. However, we don’t want a situation in which we can’t access our funds.

What do you, and others on this forum, think?

#8 Jeff on 12.18.08 at 11:21 pm

“Ooooh, I love a contest! The one on the right must be Vancouver westside. The one on the left is probably big city USA, I’ll guess Detroit. Might be New Orleans.”

I agree!

#9 Realtor on 12.18.08 at 11:23 pm

I have a friend who just got back from Detroit U.S.A. where he was surprised to see that you can take bus tours of the foreclosures. The pamphlet that he recieved for the area he was about to tour showed more than 20 houses for less than $1,000 with the cheapest house being $250. All properties on city services, houses all over 1,300 sq. ft. Just hard to believe! And we think our prices have crashed here in Canada!?

#10 Ronno on 12.18.08 at 11:24 pm

I’ll bet it’s A=Windsor, B=Detroit. That would be something!

#11 dboy on 12.18.08 at 11:29 pm

Quick call 911 Alberta has lost 30 percent of its realtors! Well that’s a start:

http://www.youtube.com/watch?v=cutj6N3p6Eg&feature=related

#12 canmoreguy on 12.18.08 at 11:31 pm

My guess would be Vancouver BC and Hamilton ON

Thanks for all your insights Garth.

#13 Ultraman on 12.18.08 at 11:59 pm

The chic shack on the right, without a doubt, is on Vancouver West side, 3000 block of West 7th or something. 100% of the value is on the land and I’m confident that there’s a fool out there waiting to buy it.

El castillo on the left, I have no idea, Detroit sounds like a solid bet.

#14 crs on 12.19.08 at 12:36 am

B Looks like Vancouver East Side or Burnaby. But yeah, somewhere in Van.

A Ottawa, Calgary, Winnipeg?

My bet would be on RIM versus Real estate, but then I’d probably rather invest in AAPL.

#15 goerbels on 12.19.08 at 12:36 am

Even if houses were $300 in Vancouver I’d still not live there. The narcisstic, arrogant and terribly rude people of Yaletown, North Van, West Van, and every other foreign-finance-fuelled neighborhood completely destroy and override the natural, architectural and project-planned beauty of that City.

Last time I was there I asked two different women walking down different streets the same question: “Why are you pushing your dog in a stroller?” Not unexpectedly, they were so self-absorbed they didn’t even hear the question, and continued walking down the street.

#16 Gord In Vancouver on 12.19.08 at 1:06 am

A = Detroit, Michigan (dumpy ghetto area)
B = Vancouver, BC (west side)

If I’m right, this is an unfair comparison because many areas of Detroit are more intimidating than Baghdad at night.

No, I’m not a Vancouver real estate pumper – check previous posts that feature my name and email.

http://www.greaterfool.ca/2008/12/08/siyonara/#comment-11372

http://www.greaterfool.ca/2008/12/10/walking-away/#comment-11526

http://www.greaterfool.ca/2008/12/12/ooops/#comment-11664

http://www.greaterfool.ca/2008/12/13/how-we-failed/#comment-11754

#17 Toronto Market Watcher on 12.19.08 at 1:08 am

“This is because the real estate market is not really a market. It’s just a just swap meet where people come to bid on things based on emotion, hormones or their own perceptions of supply and demand. Unlike a share in RIM, which is worth the same in New York or Kelowna and tied to corporate profitability, the value of a house swings wildly, uncontrollably and irrationally from market to market. House prices are dictated by the local economy, geography, neighbourhood demographics, surrounding housing stock, local taxes and societal trends, just as much as interest rates, consumer confidence and the availability of credit.”

Garth, just a splendid explanation of the differences in the residential real estate and equity markets. You’ve nailed it! And if I may say by extension that it is precisely these differences which render residential real estate market pricing/valuations to take time to adjust in declining or rising real estate markets. While I agree that fear and greed are the emotions that drive both of these markets, equity markets in my view, especially these days with the dissemination of information through all available technologies are much more efficient. And I don’t think anyone would argue that the emotional element that goes into the purchase of a house adds great to the irrationality of house prices.

#18 holgs on 12.19.08 at 1:09 am

And then tell me why residential real estate is more stable than Research in Motion.

I’m not arguing for housing here, but rather against your recommendation of RIMM.

One thing to keep in mind when recommending stock buys is always the underlying macroeconomic fundamentals, which are only going to get worse in the short to medium term (next few years), especially for makers of business equipment.

Take your recommendation of RIMM for example. Have you thought through what will happen to their buyers as they lose their white collar jobs? Blackberry’s are extremely useful when you have a job; people don’t buy Blackberry’s for personal use – that’s what iPhones are for. As the economy worsens and Bay street lays off, what will that do for the future of RIMM? It’s quite simple, really.

Of course, there are screaming buys in the stock market right now, but that is only if you do as Warren Buffet does and focus on the real value stocks. As a whole, the stock market has further to drop before it reflects the true impact of this recession.

RIMM is going to get hit to the same scale as Harley and the the recreational gang has been hit, now that the recession has begun and people are losing jobs.

Where did I ‘recommend’ it? — Garth

#19 Zoronqueen on 12.19.08 at 1:41 am

My guess:

A=West/North side Vancouver
B=Ottawa

#20 Seeking Knowledge on 12.19.08 at 1:47 am

Oil hit 36 today.

I live in Fort Mac and I don’t see much drop in house prices, yet.

Anyone already selling squirrel jerky?

I hope it’s not as expensive as beef jerky:(

Florence

#21 Another Albertan on 12.19.08 at 1:50 am

An old friend wanted to ensure that the message was crystal clear when he told me a personal story at dinner earlier this week:

Edmonton, 1981.

They purchased a 10,000-sqft home in old Riverbend for 15% below the list price of $975k. Replacement cost at the peak would have been between $1.4 and 1.5M.

Within 4 years, a private evaluation placed the property somewhere near $300k – if you could find anyone who would/could take it.

In 1998, the property was sold for $550k – one of two properties in Edmonton sold that year for more than a half-million. For those bad at math, this is a $275k loss over nearly two decades.

This fellow has been heavily flush and liquid for 40 years and was more than able to absorb this hit. Everyone else’s mileage may vary in today’s climate.

#22 nonplused on 12.19.08 at 1:54 am

Well, I am onside with Garth’s overall strategy but disaggre with the timing.

If you don’t know what you are doing in the markets, and especially if you are one of those people who buys lottery tickets or thinks you can beat the VLT, hire a manager! Managing money takes a lot of energy and experince.

It’s like why you didn’t replace your buster water heater your self. It isn’t that hard, but do you want to learn about the gas fittings and buy the tools and rent a truck to get the new one and dispose of the old one yourself? It’s not hard to do but if you only do it now and again it isn’t worth the time and effort to learn how. It just doesn’t pay when a pro can do in 4 hours what will take you 20.

But I think the timing is off. We need to wait and see which companies are still going to be there next year. Then deploy.

#23 islander on 12.19.08 at 2:51 am

Garth writes: “This is because the real estate market is not really a market. It’s just a just swap meet where people come to bid on things based on emotion, hormones or their own perceptions of supply and demand.”

The stock market is not really a market. It’s just a casino where punters place their bets based on emotion, hormones or their own perceptions of what might go up (black) or what might go down (red).

Garth continues: “Unlike a share in RIM, which is worth the same in New York or Kelowna and tied to corporate profitability, the value of a house swings wildly, uncontrollably and irrationally from market to market. ”

A share in RIM, while the same price in every market, is tied to what we’re told is the company’s profitability (at least until earnings are re-stated), and can swing wildly, uncontrollably and irrationally from day to day, hour to hour, even MINUTE to MINUTE. House prices, for all their volatility, do not crash in a MINUTE.

Garth continues: “House prices are dictated by the local economy, geography, neighbourhood demographics, surrounding housing stock, local taxes and societal trends, just as much as interest rates, consumer confidence and the availability of credit.”

Stock prices are dictated by the local, national and global economy; geographical risk of the underlying company; local, provincial and federal taxes; social and consumer trends; interest rates, consumer confidence, and the availability of credit.

Just as good houses like the one on the left can be had for $300, good companies like Teck Cominco can be left hanging out to dry by these very same factors.

Next….

#24 patriotz on 12.19.08 at 4:33 am

I am wondering, what is the actual probability of a bank withdrawal holiday/closure occuring in Canada

None, because the BoC can just create money out of nothing and deposit it in the banks to replace any deposits taken out by the public.

#25 Kash is King on 12.19.08 at 7:15 am

I was surprised that the overpriced box on the right wasn’t 900sf. Guess I’m missing something for 2634sf? lol. Clearly the lot is what is “worth” 1 mill.

#2 y3maxx- good post. ” …on how the American people have been sold..”.
The late George Carlin did a great piece well in advance of this crisis that had a lot of foresight, and what he was warning us of actually came to pass. Here he is on youtube:

http://www.youtube.com/watch?v=kJ4SSvVbhLw&feature=related

#26 Rob in Onterrible on 12.19.08 at 7:59 am

Ok, I’ll try. House on the right I thought was Fort Mac for sure but nope, it wasn’t there so I looked on MLS and found it:

MLS®: V741549

Vancouver somewhere. Are you kidding me? Paradise can’t be THAT beautiful.

House on left I guessed Detroit but couldn’t find it there on MLS.com. Then I looked nationwide in Canada and the US and still couldn’t find it. I give up. It must be a foreclosure (I didn’t check that) or sale for the value of the back taxes but I doubt that it is home that this being sold like 99% of other homes. Correct me if I’m wrong.

Rob

#27 pbrasseur on 12.19.08 at 7:59 am

Left=Detroit
Right=somewhere on the west coast.

Nice post Garth, you’re a obviously a smart person. You are right about common stocks of course. For my part I think company stocks are probably the less risky and best investment you can make at this point, as long as you buy well capitalized good companies, there are hundreds of them out there these days, especially on the US market.

In the short term the stock market can be crazy, emotional, even totally irrational and frankly there is not much point in trying to make sense or be affected by those day to day fluctuations and mood swings. Instead you should concentrate on dividends and your companies performance.

In the the long run however the market will always end up reflecting the true value of assets. Don’t take it from me, take it from Warren Buffet, Charlie Munger and others like them: for common stocks this is the best buying opportunity in a generation (best since the 70’s).

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=2&oref=slogin

One more thing, (according to Ben Graham) common stocks offer a (not perfect but) reasonably good protection against inflation, that makes sense and it could come in handy at some time down the road…

To all, make yourselves a favour and read The Intelligent Investor by Benjamin Graham. It’s not a “bible” or anything like that, it’s just common sense combined with experience.

#28 CD on 12.19.08 at 8:55 am

$300 DOLLARS?
or $300K

Garth says not a typo, so that means $300 DOLLARS.
Big difference.
If its $300, then no way is that in Canada at all (for all those people guessing Ottawa or Hamilton).

#29 Kash is King on 12.19.08 at 9:16 am

Risk is assessed on knowing all the facts.

Can you ever really be sure of those facts?

You assess if it’s more of the same:

“New SEC chief gave Bernard Madoff’s son a job ”
by Rosie Lavan ,Times Online

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5364345.ece

#30 MikeB on 12.19.08 at 9:21 am

Very much appreciate your comment about how real estate does not fall within the normal parameters and metrics of assessment of value. Here in Toronto over the years I have seen shacks on tiny parcels of land sell for astronomical amounts of money. Even yesterday I saw a house, mutual drive, “4 bedrooms” barely big enough for a bed , crappy basement, ancient kitchen, ie a money pit, on a 23 foot lot asking 699K BUT in the description saying come to us with an offer of 600K.
How desperate is that. Nonetheless, the point is that the price was really a desire by the seller not based upon anything more than that. Each buyer got caught up in emotion and drove prices to over $170/psf . No ocean view , no forest, no garden or deck , just house and blades of grass without even a place to park your car.
Of course the listing agent felt that because others had sold for well over 700k that this was a steal. When it was built some 70 years ago it was worth maybe 5000
Even in the 80s the house was not worth much more than 300K. Now they think they can dump a piece of crap on the market and scoop 600K. Buyers are relatively dumb and just follow the crowd. Realtors are commissioned sales people so they are biased. Real estate needs a serious correction and rethinking of what the asset class is really about. It is a place to dwell, not really an investment. Last time I checked an investment was supposed to go up not down.
Problem is , the governments around the world are essentially drinking more of the koolaid and suggesting we can kickstart the economy by getting people to spend more money that they don’t have. Everyone knows thats how we got to this mess in the first place.
A thriving economy and high debt are at odds with one another. This is no long term solution.
Stocks today are a safer bet if you pick the right place to put your cash, ETFs seem ok. Real estate as an investment is just dumb. As a place for joy and happines it does the job just fine. Did I mention the realtor lived int a 2.4 million 4000 sf self built custom home that he lives in all himself. Some joy that is.

#31 Sask Lady on 12.19.08 at 9:23 am

Good post Garth.

It looks like the people who bought houses in Saskatchewan at inflated prices could be in for a bit of a shock too. PotashCorp just gave temporary layoff notices to 940 workers at their mines… It has to be an ugly time for anyone living paycheck to paycheck.

Potashcorp:

http://www.thestarphoenix.com/Business/Potash+production+hibernation/1094337/story.html

#32 David on 12.19.08 at 9:27 am

House A is probably in Detroit or Cleveland. House B is most likely Vancouver.
I would probably buy House A and spend a few bucks making that Edwardian beauty into something worthwhile. Not much anyone can do with House B especially at $998K.

#33 Chris L on 12.19.08 at 9:33 am

Clearly this argument applies to big cities and pre 2001-03. I remember value in RE before the onslought of ‘investors’ moved in. I remember telling my RE agent at the time after purchasing my second rental that things were happening too soon and too fast. I wasn’t dumping properties yet and was still looking at others. I had to bow out of the market. Not because of any other reason that I couldn’t find a deal. To me that was a rental I could pick up and make money the day I bought it, even if I had to do some work or change it to suite my needs.

I still like RE since I can touch it. A lot of cities are exempt from huge market crashes, primarily the smaller ones. I’d like to see a comment about Guelph specifically. It would be hard to see it crash. While we did have a run up and have lost steam, our affordability is still in check. Houses rose to 280k avg at their peek and are now coming back to 250k. 2001-03 I think avg would have been 180k-225k. Obviously a duck is a duck, but there must be a value by which it makes sense to keep RE over a stock. All businesses can go bust, but RE is always worth ‘something’ even if just for firewood :)

If your tenants pay your mortgage and you make a profit that supports any time you put into it, there’s no reason to dump RE.

I agree that a personal house is not an investment. But a profitable rental property is.

#34 eh on 12.19.08 at 9:33 am

You can make money in the stock market whether it is going up, down or sideways. You trade based on what the market is telling you. “RIMM” was an incredible opportunity and today I will collect $$$ based on the strategy I employed and using technical analysis.

I feared the stock market a few months ago…then I signed up for several courses. I was skeptical at first…not anymore. I decided to go against Garth’s advice and become a self directed investor. Simply because, it was the right decision for me. I wanted to learn something new and make money doing it.

Just like reading Garth’s book to learn about real estate, if you don’t want to hire a financial advisor, get educated on the stock market. Investing in the stock market is not gambling…that is a myth (unless you don’t have the education, then it is gambling). Would you buy a house without learning about mortgages, monthly cost, house ownership, taxes or even doing a house inspection???! Unfortunately, some did. Talk about rolling the dice! Yeeesh!

As for the Bernie Madoff story…HAHA! The media loves these stories…what is the media’s overall bias on the stock market? Why it is bearish cause that is news! Does this news affect the stock market…of course…and it can be taken advantage of.

Not to be a commercial but if anyone is interested on stock market education, I can post the name of the website (with Garth’s permission of course) or provide my e-mail.

#35 Tony on 12.19.08 at 9:37 am

Hmmm…

RIM 52-week high: $150.30
RIM currently: $46.73
No hormones or emotions in the stock market…Ha ha!

Are you stating that there is no irrational exuberance in the stock market like there is in the housing market?

Call me when RIM gets back to $150 bucks or when my house gets down to 32% of it’s 2007 value…I suspect I won’t be hearing from you for a long time!

Unlike houses, stocks are liquid. There is no land transfer tax, realtor commission, legals or moving costs to buy and sell. And a transaction is done in minutes. This is one of today’s dumbest comments. — Garth

#36 JO on 12.19.08 at 9:51 am

Mike B, good commentary. At least with the stock market, I can hedge if I want to, sell and buy most issues within a minute, and buy a basket of high quality stocks to spread the risk around. Yet, so great is the government/central bank ponzi scheme to inflate RE and encourage massive consumption financed mostly by debt (essentially making a large segment of the public that is reckless with money debt slaves) that you can generally buy stocks on margin that is 50 % or else you’ll have to borrow against a house to get more – for a house which is illiquid and subject to the whims of many local factors, you can borrow 95 % (and at times still 0 if you use the cashback/no DP products). A home is a lousy asset. It’s worth is mainly a factor of emotional perspective. It does provide peace of mind once paid off and also becomes a place of great memories. These are valid reasons to own. But in terms of financial reasons, we have been and will continue to be in a period of inflated home prices which are noe on the way to a long and painful fall and rising utilities/property taxes. There is absolutely no rationale financial reason to buy a home for the next 18-24 months at least. You might as well cal lit financial suicide.

Excessive debt, interest rate micromanagement, fractional reserve lending, borrower and bank greed, government programs such as CMHC and CDIC are among important contributors to this mess. More credit and spending of money we don’t have is not going to get us out of this mess.

#37 Kash is King on 12.19.08 at 9:58 am

Risk: Casino was rigged?

Ex-Lehman employee, others charged with insider trading
2008-12-18

http://dailynews.muzi.com/news/ll/english/10084851.shtml

#38 dd on 12.19.08 at 10:07 am

Dear Calgary Rip off,

So what are you going to say about this?

#39 M I K E on 12.19.08 at 10:11 am

Huh $300.00 for a house….Is this for real?
This has got to be in Detroit unless Garth is starting a new blog entitled ” April fool’s day “

#40 Mountain Girl on 12.19.08 at 10:30 am

Garth, while I agree with your assessment of stock market vs. real estate market in general, I have been a little surprised by your relaxed attitude towards your investments and financial advisor. I suppose that you are educated and experienced enough to know that your fellow is doing an excellent job of managing your money, but I don’t know if the average Canadian is able to assess that for themselves as easily.
I read a book that I consider to be the “Greater Fool” of investing for Canadians, because it opened my eyes to the amount of sketchy, unethical behaviour in the market and how little protection or recourse consumers have if their financial advisors aren’t acting in their best interest. The book was “The Naked Investor” by John Lawrence Reynolds, and it is full of scary stories about how financial advisors, fund managers, banks, etc get rich on the investments of Canadians, at our expense.
Up until reading this, I thought that I was being a prudent young miss by tossing all my RRSP contributions into mutual funds (recognizing that I have no experience in the stock market, this seemed the safest and most logical way to invest). I am now in the process of finding a financial advisor with whom I can develop the kind of relationship that you enjoy with yours. It’s good in a way that I am starting this relationship when the markets are in the kind of shape they are in – it will let me see how well she handles the tough times right off the bat.
However, it requires massive amounts of homework on my part to research all her suggestions and to understand all the products. Like many other posters here, I think I am probably unusual in that I consider that homework mandatory. Most would not be bothered.
I guess I feel that while the stock market may be a better long term bet, it is still rife with deceit and exploitation. I would like to see better protection for investors, just as I would like to see better lending practises and reforms in real estate.
Has anyone else read “The Naked Investor”? Any thoughts on the book or the stories in it?

I know John Lawrence, and have little respect for him. He mischaracterized me in the book and refused to correct his mistakes even when presented with evidence. Turns out he was ripped off personally by some quack he hired, and that made him a bitter man. Pity. — Garth

#41 Illusion on 12.19.08 at 10:41 am

I would guess Detroit for the house on the left. One thing I have found when looking for houses to buy on the internet is that they all look great. Look closely at the picture of this house, the front steps are falling apart, the windows look in disrepair – properly haven’t been painted in years. It wouldn’t surprise me if this an abandoned house that has been completly gutted inside. We seen this pictures before – these are foreclosed houses that the banks can’t unload.

#42 Westcoast Girl on 12.19.08 at 10:53 am

1. Garth, wish I would’ve “discovered” your site 1.5 years ago, would’ve saved me 4 months on RE market now and about 150K…….at least I found this now, found out I have a passion (family/friends may term it “addiction” or “all-consumption”) for economics and and absorbing stuff you write, others write then sifting through to take the gems I can. So to everyone out there, THANK YOU.

2. Read the fine details folks: Garth didn’t recommend buying RIMM, it was an example, an analogy based on two entities we’re all familiar with.

3. WRT #34 eh on 12.19.08 at 9:33 am: I’ll take any and all nuggets of information you want to offer…only a fool thinks they know everything and can learn nothing more…i’m no longer a fool. Wiser, but poorer, but no longer a fool =)

Cheers all – and fingers crossed, as conditions are being removed on the sale of our house today. A cautious Happy Dance will be happening….

#43 Westcoast Girl on 12.19.08 at 10:56 am

PS: First thoughts that came to mind
A = West Van
B = Detroit or Cleveland

#44 Tony on 12.19.08 at 10:56 am

Unlike houses, stocks are liquid. There is no land transfer tax, realtor commission, legals or moving costs to buy and sell. And a transaction is done in minutes. This is one of today’s dumbest comments. — Garth

I’m thinking that if I bought my house for $400K in 2007 and today decide to sell it for 32% of that value – net of LTT, legals, commission (a.k.a. idiot tax), moving costs etc. – it would be a very liquid asset. Who cares if I can buy or sell a stock in a minute – if I can only get 32% of what I paid for it? If I’m a long term player (which I am), then being able to sell in a second shouldn’t be a really big priority. I own both stocks and real estate, so I’m looking at this issue from both investment perspectives. Of course, I’m not selling books but I am wondering who’s made the DUMBEST comment of all today.

List it today. Let us know when closing day is. — Garth

#45 Jelly on 12.19.08 at 11:00 am

I would guess the one on the right is in Vancouver,

and the one on the left is in Detroit.

There have been houses going for $1 all the way up to

$100, makes you wonder what kind of neighbourhood

it is. In fact, I was looking at some real estate in

France yesterday and they were throwing in a free

house in the US, but did not say where…

My guess, rust belt USA…

#46 Mountain Girl on 12.19.08 at 11:08 am

Oops! Sorry Garth! Did I just accidentally pour some lemon juice in the paper cut? :)
I read the book awhile ago and I don’t remember any reference to you. I’ll have to re-read it now!
For the record, I do read all these books (including yours :)) with a grain of salt. That being said, I still think he has a point about how easy it is to get taken for a ride. I had the same attitude you describe in your earlier post about your money guy: you like to let him deal with the money stuff – you pay him to be the expert. I would like that, too, but I’m pretty leery about doing that when I still have trouble understanding what exactly all my investment reports mean! After realizing how much mutual funds are costing me and how many ways I am paying for someone to “manage” my money, I think there needs to be a lot more “buyer beware” in investing in the stock market. Just as we need that in all aspects of real estate.
I’m off to re-read Naked Investor for bitter Garth references!

#47 Bottoms_Up on 12.19.08 at 11:08 am

left (A): on a toxic dump site

#48 AAa on 12.19.08 at 11:17 am

House on the left I would guess is not in North America.
Even if the house itself is not liveable the land should be worth far more than $300.

“thinking outside of the box..”

#49 Jelly on 12.19.08 at 11:20 am

Zoronqueen,

You gotta be kidding me, Ottawa, our country’s
capital, not that horrible of a place to be,
parliament etc, etc. and you guess houses
for going for a few hundred dollars?
You must be smoking something….
get a grip!

#50 Jelly on 12.19.08 at 11:28 am

Is anyone actually buying these houses? ($1-300)
They must be! I heard thieves are breaking into
houses and stripping everything, kind of not
worth it, plus imagine going to check on your
rental and coming up with a tag on your toe?
(A friend of mine wanted me to join her to buy
some rentals in the states on the cheap (Detroit-yikes!!)and I said, isn’t that one of the crime capitals, where there were riots and fires set on halloween, years ago?She dropped the idea when I said we would need personal guards to keep us from suffering a terrible death. )We really have no idea what true crime is like in the US compared to Canada…

#51 Kash is King on 12.19.08 at 11:35 am

Garth, I understand what you are saying about RE/vs/stocks.
RE can be very illiquid at certain times like you’ve written before.
Stocks can always be bought/sold in an actual blink of an eye.
I have stocks that I’ve held a long time…dope… and still do in-and-outs, including options and ETFs (short ones too). All very fascinating, but it can leave you unnerved wondering if everything is completely as it seems(or should be). But, chin up and tally-ho ,right?

As an extreme example, I once calculated that if I’d plowed the cash into JDS shares in 1996 that we instead plowed into buying our house in 1996, they would have been worth $26million at the peak. Of course don’t ask what they’d be worth now!

I’ve wondered about hiring a pro, like you said, but finding someone you REALLY trust that much is kind of daunting, maybe I’m not as well connected as you.
I do get a sense that I could do better, and I do need to extend some thanks to you in cementing our decision to sell our place this summer, and rent instead. I had been thinking along those lines since the American RE market began to wobble. Who are we to have thought we’d be different.

#52 Calgary rip off on 12.19.08 at 11:36 am

Hey DD what’s up dog.

Real estate is not stable. Here in Calgary the media and the general population wants rip off prices. Take a poll if you dont believe me. People who bought their houses for $100K actually believe they have $300K in equity. Its to the point that its actually Satanic. The Calgary housing market is pure evil and greed. Some of the bloggers here dont believe the housing market in Calgary will crash. It probably wont because not enough people want to rent until prices bottom. As it stands right now this Calgary market is on the edge of the knife, looking straight down into the abyss. Its not a bad thing that oil is $38 per barrel. Oil is something needed. Rather than even have it as a traded commodity, that crap should be outlawed. It should just be supply and demand. Economics is complicated and my 3 degrees arent in that department so lets just say I dont understand it fully I wont comment on something so complicated. I dont believe Alberta oil is doomed. They will continue to operate like they did in the old days when oil was cheap. Hopefully these savings transfer to unreal estate here in Calgary. But I wouldnt count on it. At least in Calgary its not as crazy as that shack listed on the right for $900K. I would personally pay for the lobotomies required for the owner and the unrealtor trying to unload that onto some unsuspecting soul. I believe that changes will be implemented in January when Parliament is allowed to function as usual and hopefully the minority government that created this mess with the 0 40 loser loans is thrown out on their asses by the majority of Canadians who did not vote conservative.

#53 smwhite on 12.19.08 at 11:43 am

#27 pbrasseur said:

One more thing, (according to Ben Graham) common stocks offer a (not perfect but) reasonably good protection against inflation, that makes sense and it could come in handy at some time down the road…

I concur, owning solid companies will help hedge against the upcoming inflation. Cash and equivalents are king right now because of the amount of “disinflation” or deflation depending on which camp your in.

They only problem right now is trying to figure out when to catch the falling knife.

I had heeded Grahams advice almost two years ago(after 4 years at 10%) and moved into a 75% cash/bonds and 25% equities position. I have since moved close to a 50/50 split in late November and will probably look at moving into a 33%/66% position in the late winter, because of our connection to the USA I have a majority of my exposure to Asia and Europe.

I believe that many Canadians are making huge emotional mistakes with their wealth, moving money out of solid companies and into cash at this point, its too late, they are going to get caught with dollars that can’t buy as much as they could yesterday.

Also, right now I believe that the banks, fully aware of the psychology of the market, are hording cash right now because they are buying up these solid companies with solid balance sheets, with RE holdings and no debt.

The banks will start lending when the cost of money goes up(or money supply goes down whichever you prefer), until then, they’re shopping Wal-Mart style on Bay and Wall streets, 50% off.

#54 The Tallyman on 12.19.08 at 11:49 am

Detective work:

There is a MLS logo in pic A that might hold a clue, unfortunately I had no luck seeing anything readable when I enlarged the pic.

Also, I would only consider buying that house if they were willing to throw in the recliner!
Sittin on the porch eatin squirrel… don’t get any better than that.

#55 Gonzo on 12.19.08 at 11:51 am

Hey… this recession may not be so bad after-all.
“Squirrel melts”
http://www.collegehumor.com/video:1894404

#56 bearish on 12.19.08 at 11:52 am

L-Montreal
R-Vancouver West side

#57 smwhite on 12.19.08 at 11:53 am

#44 Tony

Ask all the RE longs in Japan from 1985 on how they’re doing…

#58 Calgary rip off on 12.19.08 at 12:01 pm

Those houses look similar to selecting a life partner or dating.

The house on the left could be similar to paying someone for services but without any solid foundation for a relationship. In that neighborhood she might look good, but on second inspection what lurked below the surface as risks to mortality was significantly ominous. You wouldnt risk the small initial outlay for the years of pain and suffering possible from that one encounter.

The house on the right is similar, but in a different way. She looks kind of crappy, advertises as crappy, probably an encounter wouldnt cause immediate dysfunction and death, but over time the high cost would be slowly crushing. The cost is up front, and the risk is up front, but there may be no other option is what some pursuers of this encounter may figure(especially in Canada). What’s ironic is people would choose her, considering she offers so little and charges so much.

The point is that you should pick NEITHER. Prefer to remain as you are, because both potential partners while looking really good(on the left but deadly) and so so(with the bluff of noone else available on the right).

Be done with crappy houses like the two above.

#59 miketheengineer on 12.19.08 at 12:16 pm

Garth:

I went shopping on Friday. While everyone else was buying xmas gifts, I was collecting nuts. I managed to get my “alergy” meds stocked up and some instant soups. I have bought and paid for the few that I bought this year. I spent about 50% less this year.

I also discussed my “emergency” plan, with my parents, in case it gets really bad. They have a wood stove, but apparently no wood. So we have to correct that situation. Can anyone give me advice as to when to get the stock pile of wood?. Now or wait till spring? I don’t think things will go crazy till summer, but one never knows. I also need to check it and make sure it works, no squirel nests in it.

What are other people doing to prepare?

#60 Future Expatriate on 12.19.08 at 12:34 pm

Folks, you may THINK that the land under the one on the right is worth a million dollars, but not when NO ONE IN THEIR RIGHT MIND would build a HI-RISE on it FOR at the very least, the next FIFTEEN YEARS.

As far is it being worth more because it’s better “kept” and in a better neighborhood, neighborhoods reflect values, not the other way around. When the value on that box reaches $70,000 and below (and it WILL), it and its neighbors won’t be any better kept up than the Detroit special on the left.

There are already entire neighborhoods in Sacramento and Las Vegas full of formerly BRAND NEW $600,000+ houses (that would be priced up here for more than a million) that look worse than Detroit slums because they’re all vacant trashed foreclosures and banks can’t GIVE them away at any price.

Behold your future.

#61 Andrew toronto on 12.19.08 at 12:38 pm

my guess is the first one (A) Vancouver has was determined to be in mls by one of the posters . my guess the second one (B) maybe the east coast st john newfoundland or newbrunswick

#62 Richmond Rich Renter on 12.19.08 at 12:38 pm

B – Vancouver
A – Winnipeg or Regina

#63 Richmond Rich Renter on 12.19.08 at 12:42 pm

Is (A) – 300,000 or 300.00 dollars?

If so, I change my answer. (A) – has to be from Detroit.

Garth, what’s the answer???

Three hundred bucks. Exact locations tonight. — Garth

#64 From the Hip on 12.19.08 at 12:53 pm

Garth,

I don’t know what to make of you, sometimes your columns are amazing like this one and other times I think you may have just finished a big fatty and are seeing squirrels that may or may not be in your backyard.

Keep up the good work, and let us know where you get your chronic.

From the hip.

#65 Marc on 12.19.08 at 12:58 pm

Garth,
You’re exactly right when you talk about the stock market. Although there is short-term volatiliy, which can be extreme, in the long run it is by far the best place for people to invest. And for anyone that does not feel comfortable investing themselves and they don’t trust giving their money to a financial advisor, I always suggest simply investing in index funds. In contrast to mutual funds, there are no annual expenses and they do not require a person to devote any of their free time to watching the market; and the best part is that the market is ridiculously cheap right now. Don’t let other people’s fear of the market ruin this once in a lifetime opportunity.

#66 charliegosurf on 12.19.08 at 1:04 pm

HUM, house a has t be on the east coast, maybe ottawa, it’s the opposition party house, that’s why it’s worth 300…lol, or it’s buildt on a pet cemetary, or the old dump..does it come with a free car too??

house on the rigth B is definitly in van, not westvan at all, more like eastvan, hastings area or broadway…it comes with extra’s, like free homeinvasion sessions, homeless ornements in the backyard, bedbugs in the wall, bestplace in the world license plate,extra80$

real eastate will always be more stable than rim, coz people will always need a place to live in before having a phone…like tony’s will always be tony’s,lol

#67 Iain on 12.19.08 at 1:16 pm

Keep buying low cost index funds – don’t invest in individual stocks.

#68 Torquemada on 12.19.08 at 1:36 pm

I think the house on the left is from a movie set. You know, just the facade of the house. Kind of like they built for cowboy movies. $300 for a 2 dimensional movie prop, that sounds about right.

#69 crs on 12.19.08 at 1:42 pm

#59 LOL

It seems to me that there needs to be a second blog splintered from this one… maybe cannedpeaches.ca? or perhaps lesserfool.ca?

#70 Jelly on 12.19.08 at 1:52 pm

Calgary Rip Off,

Funny post!

What neighbourhood/city/type of house
would your wife fit into?

(Be honest-just want a laugh, not trying
to insult you)

#71 Darryl on 12.19.08 at 1:53 pm

B…Fort McMurry

A …Cleveland

#72 $fromA$ia on 12.19.08 at 1:53 pm

Garth, you need to get an interview with BNN network.

I’d love to see you and Kevin O’leary discussing Flaherites Residential Follies.

I think you both would do Canadians justice in bringing out the facts and the proper blame for the stupidity that has not been introduced.

Why doesn’t Flaherty just come out and appologize for his mistake!!!

Also, REDUCE TAXES not introduce BAILOUT DEFICIT!!!

#73 Jelly on 12.19.08 at 1:58 pm

Calgary Rip Off,

If my husband were a house, he would be over rated,
probably in a city like Winnipeg or Calgary.
Bungalow, old style with frequent problems with
plumbing and roofing… ha ha ha
risk of foreclosure,
oh yeah, totally expensive for what you get…

#74 jesse on 12.19.08 at 2:00 pm

B is Van Westside or North Vancouver. No way Van Eastside with that price level, even on a larger lot. Love the beatle damage on the front lawn. Looks like the owner really cares about the appearance. Lot value only.

#75 MissedTheBoat on 12.19.08 at 2:00 pm

“Three hundred bucks. Exact locations tonight. — Garth”

Garth, you are a real tease. Good thing you are not a woman….;)

#76 crs on 12.19.08 at 2:04 pm

$300!!! I change my answer to Reykjavik.

#77 squidly77 on 12.19.08 at 2:07 pm

L..quebec city
R..vcr

mean while it appears that the NDP wants a
zero down 50 year government backed low interest mortgages availale to all canadians..in fact they are demanding it
http://www.geocities.com/Colosseum/Park/2070/ohyeaman.GIF

#78 Westcoast Girl on 12.19.08 at 2:22 pm

Ooooh, wonder if Garth is playing joke on us while at the same time painting an eerie picutre…wonder if Garth had found two houses in the same neighbourhood – one in foreclosure, one for just under a mil….and neither of them with any takers?

Holy crap. What the heck would you do if you were the just-under-1-mil homeowner trying to sell with a $300 house for sale a few blocks away?

#79 The Tallyman on 12.19.08 at 2:35 pm

#59 miketheengineer

Buying wood now sure beats paying $300 or more later.
Buying now also allows the wood to season…
Better burning and less risk of chimney fires.

Unfortunately I have no fireplace or woodstove,
but if I did… I’d be stocking wood pronto.

#80 Waiting for a Deal on 12.19.08 at 2:37 pm

A. Detroit
B. Vancouver

#81 The Tallyman on 12.19.08 at 2:47 pm

#59 miketheengineer

Strategic relocation for city people.

We all can’t vacate to the countryside but some things can even be done in the city.
Any body buying a condo or planning an apt rental:
Consider a unit sandwiched between 2 floors…
Heat stays trapped in longer and results in lower heat requirement.
Pipes will probably not get to freezing point.. even in harsh Alberta deep freezes!

#82 Richmond Rich Renter on 12.19.08 at 2:47 pm

Ok…now that we’ve decided where (B) is from (city wise) lets make the guessing more challenging by saying where in the city. My guess is Marpole area or near the Oak Street Bridge (industial area). If you look at the picture close enough, you’ll see a warehouse next to it. Lot value only here.

#83 American Expat & Future Canuck on 12.19.08 at 2:49 pm

Hi everyone,

The blue house on the right is in Vancouver (MLSID #: V741549) (2138 W 16TH AV Vancouver, BC V6K 3B2).
http://tinyurl.com/47lrgk

The yellow house on the left is in Detroit (MLS ID #30663912) (Somewhere off of Van Dyke Street, one of the major thoroughfares in Detroit).
http://tinyurl.com/3kh3tn

Lol…but $300 is still too expensive…how about a house for $1 in my old hometown of Syracuse, NY. (http://www.syracuse.ny.us/CatalogofHomes/Main/Default.html) The city there is actually giving away tax delinquent houses there for $1… all you have to do is promise to fix them up….any takers???

But I agree with Garth the stock markets have always been a leading indicators and real estate has always been a lagging indicator. Anyone trying to time entry into or exit from the market is basically trying to catch a falling knife…many will attempt it but very few ever succeed. However, hunkering down and devoting all your efforts into just protecting your finances (eg…all cash position/ all eggs in one basket) and ignoring the advice too diversify and grow those same finances is being foolish and shortsighted to say the least. At some point, to make any real returns on your equity, you have to take some calculated risk and venture back into the equities market.

#84 whiterock on 12.19.08 at 2:52 pm

The house on the right screams Vancouver. Typical of the many crappy houses in greater Vancouver. This one happens to be on the west side and is one of a number(5 to be exact) that are listed for less than one million in that particular area. Imagine bottom feeding for that amount.

In 1972(when I bought my first house in the Fraser Valley for a little over 2 times my starting salary) that west side house would have cost me at the most about 4 times my starting salary at that time(~$8500). That identical job today commmands a starting salary of~$45,000. So using the same metrics that house should cost about $180,000.

Now that won’t happen but what would or should be the new multiples when trying to tie in individual or family income to housing prices?

#85 The Tallyman on 12.19.08 at 2:54 pm

House (A) certainly has a French feel

Quebec? Louisiana? Carolinas?

Garth, I’d like to buy a vowel

#86 Kevin in Wpg on 12.19.08 at 3:00 pm

What a ridiculous comparison! Try comparing homes in similar neighborhoods and regions. Vancouver with Seattle comes to mind.

How is this comparison any different to the smoke and mirrors the real estate boards have been pushing for years?

#87 blacksheep on 12.19.08 at 3:00 pm

Bearish # 56,

You beat me to it,

-Vancouver-B
-Monteal-A

#88 CD on 12.19.08 at 3:15 pm

is no one reading previous posts?

#83 already gave the answers WITH proof.

A: Detroit (MLS # 30663912 – look it on up http://www.realtor.com)

B: Vancouver (MLS # V741549… http://www.mls.ca or http://www.realtor.ca)

#89 dd on 12.19.08 at 3:16 pm

#52 Calgary rip off,

It is the investments front that I was suggesting. Garths blog has been turning some of our attention to the possible rise in value of the market. I know, you think everything is evil that has the work stock, house, or investments added to the name.

Expand your mind and start thinking about other opportunities besides a cheap house.

#90 The First Rick on 12.19.08 at 3:19 pm

A Detroit
B Vancouver

For those who have been paying attention, Detroits city council is currently demolishing entire neighbourhoods that have been abandoned and become derelict. For those who have never been to Detroit, the city has had similar neighbourhoods for decades. You can live cheap if you don’t mind the high odds of getting murdered, increasing to absolute certainty if you are a white boy.

The people suggesting house A is in Canada, you are joking, right??? House B is of an architectural style *only* found in Vancouver. That was a gimme.

#91 dd on 12.19.08 at 3:23 pm

#52 Calgary rip off,

“The Calgary housing market is pure evil and greed.”
Why? Supply and demand … nothing evil against that.

“Some of the bloggers here dont believe the housing market in Calgary will crash. It probably wont because not enough people want to rent until prices bottom.” That is changing

“Its not a bad thing that oil is $38 per barrel.” … yes that is very bad. We might get use to cheap oil once again and not push for fuel effeciency or limiting green house gas emissions.

“Oil is something needed. Rather than even have it as a traded commodity, that crap should be outlawed. It should just be supply and demand.” That is what it is.

#92 chris on 12.19.08 at 3:27 pm

Hi Garth,

The problem with your comparison is that the prices for each reside in different parts of North America. You are not comparing the price of a house before to a price of a house now. Detroit is in shambles, but Vancouver so far is holding up. I agree with you that Vancouver will fall in the months ahead.

What if you compared, for example, NT (Nortel) at its peak and at present? $200 and now it’s worth 0.32 (0.032 adjusted for reverse split).

The stock market is a leading indicator. I agree that it will have better holding value than real estate in the weeks and years ahead.

#93 Calgarian on 12.19.08 at 3:29 pm

#86 Kevin in Wpg

Reading comprehension must be a challenge for you.

#94 Mike B formerly just Mike on 12.19.08 at 3:36 pm

HEY RIM is up today over 12 %. If you bought yesterday at close you would be laughing all the way to the bank.
Doubt you can buy and sell a house on the same day and make over 10%.
My guess is the $300 house is Detroit Michigan and the
1 mill is in New York State.. maybe a suburb say Queens?

#95 The Tallyman on 12.19.08 at 3:38 pm

#83 American Expat & Future Canuck

Great job solving the mystery!
Canada can always use a few more problem solvers like you.

#96 Mya on 12.19.08 at 3:54 pm

Irrational, emotional buying is not limited to local markets and real estate. Anyone remember the tech bubble? I would argue that the worldwide real estate bubbles we are seeing now are directly attributable to efforts to mediate the fall-out from the tech bust in 2000.

#97 dekethegeek on 12.19.08 at 4:10 pm

Vancouver BC on the Right !
Sydney, Nova Scotia on the Left( just across from da Tar Ponds By’) !
Hey ! Maybe we could cut down all the Pine Beetle infested trees in BC and ship ’em back to Newfie Scotia ( Sorry I meant Cape Breton !) shove them into the Tar Ponds ( largest toxic waste site in canada ! Wooo Hooo! Cancer never looked soooo easy!) and Light ’em up like candles !
Use the heat from the 100 year fire that will ensue to boil water, create steam , generate electricity, develope industry, create more toxic goo and VOILA ! A perpetual motion machine . Right here in Canuckda! Who woulda thought it was that easy.

#98 Ron on 12.19.08 at 4:13 pm

House B looks like Victoria, possibly Oak Bay area.

#99 Jonathan on 12.19.08 at 4:27 pm

must be detroit for the cheap home..

#100 squidly77 on 12.19.08 at 5:02 pm

#96 mya..bingo

when all the tech money left housing in 2005 (USA) the next target was commodities..now that ones busted to

#101 DJ on 12.19.08 at 5:25 pm

#83 already gave the answers WITH proof.

B: Vancouver (MLS # V741549… http://www.mls.ca or http://www.realtor.ca)

A: Detroit (MLS # 30663912 – look it on up http://www.realtor.com) = Property Information

Lower RENTS for $300.00, Not sold for ….
Upper rents for $250.00. Great investment opportunity with this 6 bdrm brick Multi-family. Both units (upper/lower) include living, dining, kitchen & 3 bdrms. Needs some TLC, but priced to sell !! Property sold in as-is condition. Buyer to sign ACR with City of Detroit prior to closing. For sale @ 3,000, L/C AVAIL @ 5,000. EMD to be held by listing broker and be certified or cashier’s funds. Proof of funds required with all offers. !k

#102 marcus aurelius on 12.19.08 at 5:34 pm

Garth – seconding Toronto Market Watcher (#17): you have pithily summarized the whole ball of wax (macro-style) with this last piece.

What is the difference, in last analysis, between a major exchange-listed equity and residential real estate (in Toronto, as a prime example)? Information.

Information – and fair access to it – is the cornerstone of a reputable and functioning securities market. It is the difference between a market you may want to invest in – e.g., SEC-regulated markets in the US and equities that trade on the NYSE – vs. markets you would be nuts to invest in – e.g., CDNX or the old Vancouver scum exchange for boiler-room riff raff, betting on a mining company that was converted into a tech play so that a dozen pump-and-dump mini-dealers and their mafia friends can takey your money because Canada has a laughable record of securities enforcement.

Therefore, as Cicero said – Qui Bono? (who benefits?) from withholding information about the residential real estate market? In answering that question, consider why there is no transparency re actual sale price information, or why CREA and TREB and other self-interested parasitical interests don’t want you to see how the ‘swap meet’ is really conducted.

#103 Jonathan Tonge on 12.19.08 at 5:34 pm

For those guessing Hamilton it most certainly is not. A comparable house in Hamilton would go for 125-175K. Unless it was right next to Stelco, then maybe 75K.

#104 Jonathan Tonge on 12.19.08 at 5:36 pm

B is such an ugly home. Who puts windows on the corners of their home?

#105 Diabolo on 12.19.08 at 5:48 pm

Vancouver is no New York or Tokyo…
Detroit is no Somalia…
But almost a million dollar difference ????… Wooo.. its crazy out there.
Lot of people in Vancouver are going to get hurt.. I am really sorry for them.

I remember a similar stuff in Edmonton. Walking near the Lessard area and I asked the open house folks about the price. Quote $900,000. It was a nice house and I bet the similar house in suburbs of Washington (Virginia) or even in Ottawa would cost less then $400,000.

Karma is what comes to my mind !

#106 * on 12.19.08 at 5:52 pm

If I buy house A, do i get the dead body that’s on the front lawn? That would be sweet.

#107 squidly77 on 12.19.08 at 6:15 pm

* said..If I buy house A, do i get the dead body that’s on the front lawn? That would be sweet.
geez i didnt notice that..good eye

#108 real estate expert on 12.19.08 at 8:00 pm

The $300 house is in Stockton California,

The $999K house is in Halton Ontario

#109 Calgary 2008 on 12.19.08 at 8:03 pm

Not sure about A, however B most likely an Alberta investment property priced betweek $400k and $500k.

#110 squidly77 on 12.19.08 at 9:00 pm

gulp….
http://2.bp.blogspot.com/_pMscxxELHEg/SUwYM4k4_VI/AAAAAAAAEDo/WJdKl_ymxNg/s1600-h/OilPricesPCE122008.jpg
better think twice before coming to alberta..bring enough gas and food money so that you can at least get home

#111 reboot on 12.19.08 at 9:10 pm

Bear markets can be frightening but they are necessary.

http://www.theglobeandmail.com/partners/free/globeinvestor/investment/nov08/online/bear.html

#112 Iain on 12.19.08 at 9:11 pm

Fred’s take on the economy: http://blip.tv/file/1528079

#113 JET on 12.19.08 at 9:33 pm

Garth,

Why did my comment about house A actually being for rent @ $300 not show up? Did I say something wrong?

Thanks.

Incorrect. — Garth

#114 Manx on 12.19.08 at 9:34 pm

@Kevin in Winnipeg:

Any reliable blogs or sites discussing the bursting of Winnipeg’s bubble?

#115 EJ on 12.19.08 at 9:58 pm

#114 Manx:

Finding Canadian info in a sea of Americana is difficult. Finding Canadian info that doesn’t relate to Toronto, Vancouver, or Calgary is even more difficult. Needless to say, there probably isn’t a reliable blog on Winnipeg RE.

But who needs one, right? It’s all up-Up-UP! Some fool economist has most wpg’ers convinced that wpg will “weather the economic storm better than all other cities”, it’s the “sweet spot” that everyone is jealous of. I mean, IKEA is coming to wpg, right? That’s World-Class, no? And a museum of human rights, no doubt that will act as a bullet-proof vest to shield winnipeg from major global economic meltdown. We’ve got a “diversified economy”. And “we don’t boom, so we don’t bust here” is the clincher. That is, if you ignore the huge boom in RE that took place for no reason that was based on fundamentals..

Yep, Winnipeggers are being fed the same lines everyone else has been fed, and they’re buying it hook, line, and sinker. The only reason the main-stream-media has ANY credibility left as far as the economic situation goes is because people are just so desperate for any reassurance, they’ll believe anything positive. Even if it’s a total lie.

Oh, and Winnipeg RE sales are down 25% YoY in November.

#116 ThumbsUp on 12.19.08 at 10:02 pm

What I learned from Garth’s book – People can make/lose money in both RE or stock market, as long as we’re not greater fools.

As a business, RIM has reached its market share capacity, even Jim Balsillie the co-founder was looking at purchasing NHL team instead of investing back into his own company, that is not a bullish sign.

#117 JET on 12.19.08 at 10:12 pm

Incorrect. — Garth

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Perhaps you are right Garth, but I think it’s a teaser to get calls by the agent.

See this: http://www.realtor.ca/propertyDetails.aspx?propertyId=7595691

Do you really think something like this is actually for sale at $888?

Make an offer and tell us. Go in low, say $800. — Garth

#118 JET on 12.19.08 at 10:28 pm

Make an offer and tell us. Go in low, say $800. — Garth

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No thanks. I can smell a rotten squirrel. I can just see it now. It’ll either be, “sorry it was a typo; it’s actually $888k” or “you have to assume the 800k mortgage on the property”

#119 Jelly on 12.19.08 at 11:25 pm

That $888 house has got to be the rental price per month.
I have seen houses like this advertised in Newfoundland in this manner…

Anyone confirm this?

#120 Jelly on 12.19.08 at 11:30 pm

In case anyone is unclear houses are SELLING for $1 up to a few hundred dollars. It is not for rent,
people (banks etc.) just need to get rid of ghetto fixer uppers that are in horrible areas that will see no growth.
Who wants to handle headache tenants that are hardcore poor and cut throat. Who wants to get killed in a neighbourhood when checking your house.
There is a reason even those houses are not selling.
Those suckers that have bought will regret it…

#121 Manx on 12.19.08 at 11:39 pm

@EJ:

No question Winnipeg has drunk — and forgive me the horrible cliche — the real estate Kool-Aid, but surely there must be some sources sanguinely assessing the slippage surrounding the Red and Assiniboine?
I mean, Winnipeg is a city that has seen no population growth, income growth below inflation, is run by socialists at city hall and at the legislature, and depends on tax dollars from the rest of Canada for the bulk of its provincial budget and much of its employment income via grants, transfers, EI, First Nations funding, and other federal programs, not to mention the paycheques countless federal employees. In a way it really is a government town. Many studies have shown that every dollar of this sort of spending displaces double that amount in domestic wealth creation…add rent control and other inanities in there, and how DO we explain the 45% increase in real estate values the last few years?

#122 Future Expatriate on 12.20.08 at 10:24 am

#78 Westcoast girl said:

Holy crap. What the heck would you do if you were the just-under-1-mil homeowner trying to sell with a $300 house for sale a few blocks away?

Easy enough to find out. Get in your time machine to the end of next year and ask the people in Oak Bay and Broadmead, Victoria on Vancouver Island.

#123 Future Expatriate on 12.20.08 at 10:29 am

#104: Frank Lloyd Wright. You’ve probably never heard of him, he made modern houses. Starting in the teens of the LAST century.

And rolling over in his grave at all the vomitous cardboard gingerbread Victoriana passing for housing these days he spent his entire life trying to get away from.

#124 Future Expatriate on 12.20.08 at 3:18 pm

#106… that’s not a dead body on the front lawn, it’s a “character” “feature”. You pay extra for that. Without it the house would be $100.

And in BC, $100,000 less. Such a wonderful “character’ “feature” in BC would put that lovely “character” “home” well over a million.

Of course, it will sit there until it crumbles into dust, because it seems greater fools of late have become extinct.

#125 Jmack on 12.21.08 at 12:09 pm

Your house is only worth what someone will pay for it.

#126 jess tree on 12.21.08 at 9:03 pm

1) windsor
2)calgary