A tinge of yellow

calgary-for-sale1

Amid some evidence of where the real estate sits at the moment, here are a few predictions on price declines for 2009:

•    Bennie Tal, CIBC, -10 to -12%
•    Carl Gomez, Bentall Capital, -25 to -20% in Alberta and BC, -10% in Toronto

Of the four economists the Toronto Star interviewed for a weekend piece, only those two would actually stick their necks out. And the Star story, BTW, was a good example of the media boosterism I referenced in the past post. You know… ‘nobody saw this coming’… ‘Canada’s economy is better than any other country’… ‘no subprime crisis here’… ‘won’t be as brutal as the correction of 1989’. In fact, Canada’s largest paper this weekend carries a front-page story headlined, “There’s reason for hope in the economy. An analysis of why the worst may be behind us.”

star While we all hope for better days, they won’t come through wishing, or even yellow journalism. Consumers, savers, investors, home buyers and sellers have a right to good information, and the mainstream media has an obligation to deliver it, whether advertisers want to hear it or not.

In reality, it’s a godawful time for real estate, and it’s going to get progressively worse through 2009, for the reasons we have exhausted on this blog. Chief among them will be unemployment, as witnessed by the layoffs just announced at CTV, Sun Publishing, Global and other media giants. Yes, it would be nice if sunny stories about the economy and housing got people buying again, but that would be a fraud.

In Toronto the latest numbers (they are now 20 days old) show a year-over-year sales decline of 48% in the housing market, with prices having fallen 11% in one year. In Calgary, sales in December were 47% lower than a year ago, with prices down 17%. In Vancouver (where it takes them a long time to count), month-old numbers (the latest) show a 70% sales decline and a price tumble of 13% between May and November.

Real estate spokespeople continue to say the modest price declines here prove Canada is not the United States, and nobody should expect locusts. As Calgary economist Todd Hirsch put it in the Herald this weekend, “It’s still not like they’re experiencing in the United States, for prices there are down like 35 or even 40%.”

Actually, the average decline for 20 major US centres is 17%, year-over-year, so Todd should watch his exaggeration. True, some places like Miami, Vegas, Phoenix, Stockton and most of southern California are housing disaster zones, but other markets, especially in the Northeast, have held up fairly well. Real estate, after all, is an intensely local commodity, and people living in individual markets have a massive influence on prices, along with the big stuff like interest rates, credit availability, tax policy and economic policy.

This is why most Canadian markets are in for such a clobbering.

* We are not an international mecca for investment capital.
* We are massively impacted by commodity prices. (They have collapsed, in case you missed it.)
* And we have too small a domestic population to absorb existing housing stock without serious dilution, once the locals shake off their media-induced delirium and rejoin reality.

Thus, cities like Vancouver, Calgary and Edmonton have a good trip down ahead of them still. Regina, Winnipeg and Saskatoon, ditto – places where there is now little underpinning of the housing market. Toronto and the GTA, not so much, given a population base of 6 million and a more diversified economy.

So, my 2009 predictions stand: Vancouver – 21, Victoria -18, Kelowna – 38, Edmonton -16, Calgary -15, GTA -14%. This will bring our big-city decline from the peak in late 2007 to the end of 2009 to about 25%.

But that, of course, will not be the end.

Falling prices mean plunging valuations for all homes.  And while worth may decline, debt will not.

As we know, it was not the crashing price of houses that levelled America, but negative equity and the consequent futility of home ownership. If I were a high-priced Bay Street economist, I’d be worrying about that.

73 comments ↓

#1 LiveinOtta on 01.03.09 at 10:02 pm

Garth, I have been reading your postings for quite a while and found it very informative. Wondered what is your prediction regarding the RE in Ottawa 2009?

Your information is greatly appreciated!

#2 Dead Doctor's Bugatti find on 01.03.09 at 10:10 pm

Yeah Garth I read that hogwash in the Star this afternoon. I [also] found it interesting that 52% of Ontarians want out of Afghanistan before 2011 – hear that Mr Harper? I found the article on the American cocktail waitress walking from her condo more poignant for what’s gonna happen up here..

The best the Star managed recently was a cartoon of Harper & Flaherty as Don Quixote & serf riding out to fix the economy…

#3 Krazy Canuck on 01.03.09 at 11:03 pm

Garth,

I enjoy your site, but are there any cities east of GTA?
I’m sure some people in the far east would like to see some numbers fo their cities.
In all fairness, I have seen some cities mentioned with much less negative numbers, but lately it’s all Vancouver to GTA.

#4 derrin on 01.03.09 at 11:05 pm

It isn’t easy to find media with a positive outlook on 2009 but if you do……….. Garth is with be there to be the Killjoy.

One or two articles that show a little light at the end of the tunnel and out comes the fire hose.

I like Squidly 77 posts at least I can see the figures and see that his idea of a crash is not my idea of a crash.

Squidly I challenge you with all your info from various websites….etc.
Take the amount of sales from approx 2006 to the peak in Calgary.
Take that against the amount of homes in Calgary.
Now find out what the percentage is.
What percent of the whole market in Calgary invested their hard earned cash at the top of the market.

I think you would find the number to be insignificant.
Let me know.

Life is good……..if you don’t live in Miami.

#5 Sularezi on 01.03.09 at 11:19 pm

Yeah… I read that article this morning, no surprise to see thestar.com aligned with the realtors and bankers. BTW, they all go at the same parties and pubs…
The good fact is that readers are criticizing the lack of correct and factual information.
Back to the real estate and its numbers. I find your predictions a bit too soft for 2009. The declines will be bigger in the markets that went up fast and furious. Vancouver, Calgary, Edmonton.
It’s nice to buy a house, and raise your kids in it. Yet, the times we live now, and the fear of the unknown, will make many potential buyers sidelining for a while, maybe until 2010 and so.

#6 ThumbsUp on 01.03.09 at 11:33 pm

The Party of 10-20 year global RE bear market.

This is my version of prediction based on the 3 factors illustrated in Garth’s “Greater Fool” and the latest posts by Garth & all the friends here, with our not-so-diversified economy in a competitive global market in mind.

1. We’re at (near) zero interest rate till 2010, with a YOY price decline as Garth predicted;

2. As inflation takes hold, Fed & Bank of Canada will raise rates aggressively to curb grocery bubble (yeah, the next bubble), results in 10% mortgage rate;
3. Starting 2015, nobody wants to buy a home with a 10%+ rate, home price keeps dropping;

4. This will bring us to 2020

#7 Mike B on 01.03.09 at 11:33 pm

As far as Toronto is concerned … The january numbers will say it all. As houses come back onto listings AT LOWER prices some will sell … bought by neophites or just dopes… maybe the likes of real estate expert poster. Still think TO will feel the effects of auto industry multiplier effect. Just go outside of the city limits and see all the for lease and empty factory buildings It all adds up.

#8 Glenn on 01.04.09 at 12:03 am

Well, maybe Michaelle Jean (the direct agent of Queen Elizabeth) will request a few trillion from the UK? No…wait, they are bankrupt too.

#9 double mike on 01.04.09 at 12:19 am

-14% means a modest bungalow, which is $450K now will be around $390K. I don’t see it as a return to affordability. At least it’s not nearly enough for me even to start paying attention.

#10 David on 01.04.09 at 12:26 am

The mainstream media in Canada did not see the development of the housing bubble and refused to write much about the subject. Now that the housing market is collapsing, the media is falling all over itself calling an early bottom. Virtually all the commentary in reports came complete with industry friendly statistics supplied by the realtors themselves. Independent reporting on the causes and consequences of the asset bubble in housing was virtually non existent and dissenting opinions were hushed into silence. All the really bad stuff was happening thousands of miles away in American Sun Belt exurbs and the contagion was far away.
Predicting the levels of price declines in housing is an art rather than a hard science. No doubt prices will decline for homes, but the rate of acceleration is a moot point. Housing tends to be a lagging rather than leading indicator in the economy and the bubble in Canada is finally bursting at a time when most other countries home prices have already experienced at least two years of asset price deflation with no signs of abatement in price declines or mortgage defaults. Expecting a different outcome here is expecting far too much and realtors expecting a return to the housing bubble salad days will be sadly disappointed.

#11 nonplused on 01.04.09 at 12:28 am

Well, I am no high priced Bay Street econo-missed-it, but I have been panicking for so long now I think I’ve gone nuts! Still have most of my money but not sure what that will be worth soon either. It can decline in value to (purchasing power).

I have read enough Misses to believe that al debt fueled crack up booms eventually lead to a collapse of the market involved through liquidation, or more likely (because it’s a political decision) a complete collapse of the currency system involved. I think the folks hoping and praying for a return to happy days at the Best Buy are in for a shock. We face either a great deflation or a great inflation. I agree with commentators like Garth who have rightly forecast deflation in the near term, but I fear all the bail out mania is only exasperating the debt situation, although transferring it from the banks to the taxpayer. But guess what? It’s the taxpayer who’s loosing his job and going into foreclosure, which is what’s causing the problem in the first place. So we’ll transfer the financial problems from the circling vultures to the already dead carcass. Oh ya, that should work. I guess if some smart guy on the hill has already determined that the consumer/taxpayer is doomed already, maybe it makes some sense to feed the vultures on the carnage, but that can be the only sane explanation for the bailouts. Since the little guy is going to default, have him take responsibility for all the problems leaving the fat cats free to drive their Bentleys over to their mistress’s apartment after a rousing round of golf.

#12 Winnipeg is No Different on 01.04.09 at 12:29 am

‘Consumers, savers, investors, home buyers and sellers have a right to good information, and the mainstream media has an obligation to deliver it, whether advertisers want to hear it or not.”

Excellent point, Garth. As a further example, the Winnipeg Free Press noted that, unlike most other places, prices are even “rising slightly” in Winnipeg. They back this up by noting that average prices in Nov. 2008 were $190K up 4% from Nov. 2007 when prices averaged $182K. However, the WFP neglected to mention Nov. 2008 prices were down 9.5% from the peak of $210K in May 2008.

Another recent article claimed that the Winnipeg economy and consumer spending were both fine. Further, Boxing Day shoppers here reaped extravagantly great deals due to national retailers being forced to offer the same discounts across the country (when such discounts were unnecessary in robust Winnipeg).

The problem is that the average person takes this info at face value. When I say I think housing prices will fall, the average person says “I don’t know …’they’ say things are still going up in Winnipeg”.

#13 colette on 01.04.09 at 1:39 am

In the spruce Capital of the World in north central BC we have had the booms and busts all too often. The last big boom left me wondering just what was supporting it…for the bottom had fallen out of the lumber industry that was the main employer.

The city lost thousands and thousands of citizens to Alberta. And many of the ones who stayed had mom and the kids in town while dad worked in the oil fields.

The jobs that replaced these well paying were service industry with big box, Walmart, Home Depot and call centres…because of these new corporations come to town there was an appearance that the economy was great.

House prices shot up. New subdivisions full of $400,000 + were developed.

The lumber industry is worsening…one of the major mills burnt this summer and was not replaced, another is asking for a reduction in local taxes. The oil jobs are in danger.

What will happen when there is no where for dad to go to make the wages to sustain the mortgage for mom and the kids? What will happen when more mills close? How long before the big boxes start tightening their belts?

When the busts happen as in the past houses they can drop by half.

But even half is too high if there is no one able to buy.

#14 $fromA$ia on 01.04.09 at 2:17 am

Vanouver 21% further to fall? Is that on top of the aleady 15% dop since the high in early 2008?

My may math is correct you mean 36% drop within one year or is it the diffference so another 6% drop?

#15 BBC on 01.04.09 at 2:39 am

‘So, my 2009 predictions stand: Vancouver – 21, Victoria -18, Kelowna – 38, Edmonton -16, Calgary -15, GTA -14%. This will bring our big-city decline from the peak in late 2007 to the end of 2009 to about 25%.’

Garth,
Just a little confused…do you mean Vancouver -21(etc.) from 2007 – end of 2009?
Thanks

That is the 2009 decline. — Garth

#16 Just In Time on 01.04.09 at 2:45 am

I agree whole heartedly with the Kelowna prediction. What keeps Kelowna going? Money from Alberta, and the forestry. OK, maybe at one time the fruit industry but come on, most of it comes from California anyway.
The only other major “industry” in the area is tourisim, and that is seasonal at best. How many houses (or should I say condos) can be bought on a Sammy J Peppers cook or waitress income?
I look at the massive condo/apartment blocks they torn down old beautiful houses for on Harvey ave, and shake my head knowing that it’s a losing battle for those builders. Kelowna got too hot, too quick, it’s gonna be a hard ride down.

#17 Bobby in Victoria on 01.04.09 at 2:47 am

What Canada needs is a Case/Shiller index that exists for all major markets in the US. Anyone familiar with this reference will see that there was a bubble that would inevitably burst. Moreover, one can see how far prices have yet to fall to follow historical trends.

The last person you want to ask for accurate and reliable advice is anyone affiliated with the Real Estate industry; mortgage brokers, realtors and developers. They have a vested interest in maintaining the hype. That is why they are always putting a positive spin on any new data.

I asked a realtor once at an open house to show me how a $350,000 condo that would rent for $1200 was an incredible investment. I never got an answer.

Just ask yourself. If your realtor said prices are goimg to fall another 10-15% by summer 2009, would you buy that house or condo in the next while.

Oh, I thought so.

#18 Happy Renter in North Van on 01.04.09 at 4:00 am

Garth, thanks for pointing out there is no way Canada can “decouple” from what is happening in the US Real Estate Market…. I’ve noticed there are a lot more “happy stories” circulating in Op-Ed pieces in the past few days… Even the perenially curmudgeonly David Olive from TorStar is now delivering his “don’t worry, be happy” columns… He must have been admistered a severe beating from his masters upstairs….

#19 islander on 01.04.09 at 5:29 am

1. The media exists to sell ads. Useful or accurate information periodically fills the space between those ads. But it’s not Mission Critical and often at odds with the effort to sell more ads.

2. Journalists are rarely experts at anything other than collecting quotes, writing stories that fit their preconceived notions, and the inverted pyramid. I only ever met one who had taken the securities course, but I’ve worked with hundreds who wouldn’t know Groucho from Karl, John from Vladimir, or Milton from Elliott.

Getting one’s economic information from mainstream journalists is like building a house according to a picture a kid in art college might draw, or buying a car on the recommendation of the teenager down the street.

#20 Downsized on 01.04.09 at 7:00 am

Garth,
Would Barrie, ON be insulated in any way from the type of decline you expect for the GTA in 2009?

#21 Kash is king on 01.04.09 at 7:49 am

Garth: ====> “Consumers, savers, investors, home buyers and sellers have a right to good information, and the mainstream media has an obligation to deliver it, whether advertisers want to hear it or not.”

========================

Fortunately we still have freedom enough to simply ignore these organizations by not buying their product, or advertising in same.

Matter of fact point these things out to everyone you know, and encourage them to do the same.

I’ve long ago stopped buying papers, and get my news on-line on various independant sites… Garth’s included.
When I have seen a local paper, I have been shocked by how few private “for sale” ads there are. I remember pages and pages of them years ago.
Papers have been irrelevant day-old-news for a long time now.

Another bonus is that I can get my local weather forecast in Imperial/Fahrenheit instead of being force-fed Trudeau’s foreign metric crap.

#22 eddy on 01.04.09 at 8:05 am

they generally give the star away for free because no one buys it. i was getting it delivered for free and i called and canceled it anyway, i’m surprised thy are still in business since no one buys their overpriced classifieds anymore.
The MSM wants to avoid panic, if they put “the world according to Garth” in the Saturday “homes” section, they wold spoil some folks weekends

#23 Bottoms_Up on 01.04.09 at 8:45 am

Garth, what would be your advice to first time home buyers (with no equity) looking to buy in the next 1-3 years? Given everything I’ve read on your blog, I’m assuming the answer would simply be to wait and hoard cash while keeping a keen eye on prices. Is this covered in your new book? Thanks.

Wait and watch, absolutely. Also take $40,000 in your downpayment cash and dump it in an RRSP, so you can get a fat tax refund, which can then be added to your downpayment (you can withdraw $40,000 tax-free from your retirement plan to buy a house). You should be in no rush, however some excellent opportunities will be here by the summer. Yes, of course, the new book has an extensive section of current real estate market conditions, and strategies. — Garth

#24 real estate expert on 01.04.09 at 9:08 am

1/

“”Toronto and the GTA, not so much, given a population base of 6 million and a more diversified economy.””

Garth…Don’t you mean, the GTA is totally dependent on the Fed “bailout”….otherwise it could be be a similar 50% total drop like back in the early 1990’s?
(I relocated to Vancouver in /89 but kept one rental property in TO from /89 right thru to /05)

No, as written. The GTA is receiving the lion’s share of both Canadian immigartion and migration, and as the new home business collapses, the best chance of inventory absorption compared to smaller centres like Calgary or Vancouver. And, check your numbers. Average prices did not fall by half in the last crash – but they did take more than decade to recover. — Garth

#25 Jonathan on 01.04.09 at 9:50 am

I don’t know if anyone noticed, but the Condo section in the Saturday Toronto Star doesn’t exist anymore, and the New in Homes section has only two advertisements. The builders are no longera advertising. The Toronto Star can now afford to be honest! Unfortunately, the next question is whether they can afford to keep printing?

#26 Jonathan on 01.04.09 at 10:05 am

Hey Garth,

The US is currently printing a ton of cash to fund its liabilities. Lucky for them, the world since September has demanded more greenbacks due to risk aversion amongst investors and banks.

Having said that, once the world economy rebounds, demand for greenback will significantly reduce. This will force the US to buy back greenbacks and reduce the amount of currency printed or else risk the dollars value. Unlike Japan, the US has both a massive trade and government deficit, so there is no easy answer for them. Inflation is perhaps the only result and it will skyrocket under these conditions.

The central banks will be forced to increase the interest rate to keep inflation in check. This will create a second recession of equal severity.

Have you factored in increasing interest rates into the future of Canadian real estate?

No rate hikes for at least two years, and perhaps five. — Garth

#27 kw on 01.04.09 at 10:32 am

what is going on house price in waterloo region, they droping same as GTA. because waterloo region depend on auto industry.

#28 Trekie2 on 01.04.09 at 10:53 am

Interesting article on the Bail out money given to the banks…

http://www.foxnews.com/story/0,2933,470824,00.html

#29 MBS-guru on 01.04.09 at 11:09 am

#25 – Jonathan: The Star condo & home section has been moved to Thurs quite a while back.

From the front lines, mtg apps is at the lowest in the past 6 years for December at our financial inst. We avg about 6 pre-approval apps per day for most of Nov and Dec when we avg over 50/day last year during same time last year. Pre-apps are a very good indicator of future sales in the next 3-4 months as people who are planning to buy are the ones sending in pre-apps.

#30 Andrew Toronto on 01.04.09 at 11:13 am

Garth , for some one that sold there house last year can we still take advantage of putting that money into an rrsp like mentioned above and get a tax credit.to buy back into the market by summer. Or are we out of luck .. and don’t qualify for a first time homebuyer because we owned a house before?

The rules are here. Sorry, dude. — Garth

#31 Andrew Toronto on 01.04.09 at 11:16 am

Another question why is the government coming out with a tax free account , why not make all accounts tax free ,, or is there a qualification for this account ,, something doesn’t sen right.. apparently you can buy stocks or interest incurred on this account is not taxable..Any thoughts on this

My thoughts on the TFSA are here. — Garth

#32 OttawaMike on 01.04.09 at 11:20 am

LivinOttawa wrote:
“Garth, I have been reading your postings for quite a while and found it very informative. Wondered what is your prediction regarding the RE in Ottawa 2009?”

Here is a historical price chart to 1956:
http://orebweb2.oreb.ca/avg_oreb_sale.shtml

As you can see prices are fairly steady other than the recession of ’61 where they saw decreases. The last major price drop was ’95-’96 when the feds laid off. There were some great deals back then.
It appears that the total price run up in the 80’s exceeded this recent run. I’m still not convinced this market’s pricing is sustainable and past drops have always lagged a couple yrs. behind the busts in other major Canadian centres.

#33 ThumbsUp on 01.04.09 at 12:26 pm

#27 kw

KW is in a bigger bubble than GTA, fueled by the RIM hight-tech hype. in 3-5 years as RIM runs out of cash and going nowhere but the next Nortel, it’ll crash hard.

#34 Grant on 01.04.09 at 12:39 pm

You know things are REALLY bad.. when people are now killing their kids and themselves after they loose their yobs and can’t pay the bills!!

http://tinyurl.com/Suicide-4dead

Sad… but I fear more of this to come!!

#35 Jonathan on 01.04.09 at 12:48 pm

Thumbs up says: “2. As inflation takes hold, Fed & Bank of Canada will raise rates aggressively to curb grocery bubble (yeah, the next bubble), results in 10% mortgage rate;”

The grocery bubble? Interesting. What is going to bubble in terms of grocery? Are you talking about food or simply grocery stores will bubble?

I feel that gold will be the next bubble. So many investors have talked gold up so much that the slightest sign of inflation will spark a mad rush to it. I could see gold bubbling in a few years time.

#36 nonplused on 01.04.09 at 1:08 pm

#13 colette

Mom can pay her own damn mortgage it’s the 2000’s.

One of the other things that may come out of this downturn is a long overdue rewriting of the marriage act (or its abolishment). The laws we are operating upon right now assume a farmer and his wife running a farm and homestead together, each doing about 50% of the work although not necessarily the same work. Contrast this with the “Desperate Housewives” idea of the rich guy working 12 hours a day in the law office while his wife sleeps with the pool boy and you get the idea of how outdated this model is.

The law still works ok for those couples who start with nothing and each earn about the same. For second or late marriages or unequal earning potential couples it is outdated and needs to be replaced. In the same way we all look after our own retirement now instead of the company the idea of a joint asset relationship needs to be replaced.

There are a lot of hard working liberated women out there looking after themselves as they should. Time for the law to be written to that standard.

#37 Keith in Calgary on 01.04.09 at 1:14 pm

Garth…..

Todd Hirsch is the ‘chief economist”…….or whatever you want to call him, for Alberta Treasury Branches, our quasi government bank. I have watched him on the news spewing hyperbole for 2 years now, and he has been wrong on absolutelyevery single thing he has said.

Economists, or those who receive their salaries in the mainstream of “economics” never say things that are really bad or truthful, as it would go against the party line, because to do so would upset the balance amongst the others, put them in a critical light, and the dissenter would be branded an outcast and never find work again within their closed group think community……sound familiar ?

None of them can be trusted……

#38 ThumbsUp on 01.04.09 at 1:28 pm

#35 Jonathan “I feel that gold will be the next bubble. So many investors have talked gold up so much that the slightest sign of inflation will spark a mad rush to it. I could see gold bubbling in a few years time.”

“Grocery bubble” is a term coined for inflation /stagflation, (food, not the store). I agree gold is in the middle of the next bubble.

Garth stated couple of days ago, it’s perceived dangerous and irrelevant in the real economy, I can see gold bubble pop overnight even at the 0.25% rate hike.

#39 kitchener1 on 01.04.09 at 1:34 pm

RE#27 and 33

The Waterloo/Kitchener region will see some dramtic declines in 2009. There have been some huge layoffs in Kitchener/Guelph lately. Lear and Bud (A frame) have let go of thousands off employees as well as a large parts manufactor in Guelph. I think the total lay off number is between 3000-5000 jobs lost in 08 for Kitchener/Waterloo/Cambridge/Guelph.

Kitchener used to be a great xburb as it was somewhat self dependant with almost no commuters to the GTA. Today I see tons of for sale signs in all areas with no action, many nice houses up for sale for 6 months plus. Rental vacancies are through the roof, bad news as it means more people are moving out then in.

The waterloo region is heavily dependant on manufacturing jobs and the service industry that feeds that.

Sorry Garth but I think the waterloo region will see much larger declines then Milton

#40 Keith in Calgary on 01.04.09 at 1:38 pm

Looks like there is another condo tower that silently bit the dust in Calgary. I could be wrong……but……

I drive past 1303 – 2 Street SW once or twice a day during work hours…….”Centuria on the Park” is what this tower is called…..their sales office on the corner of 17 Ave SE and Macleod Trail has been closed now for 2 weeks +/- and there has been no construction on the sit for 4 weeks. It is a big hole on the ground with concrete parking garage walls poured and some partial work done, now it is all fenced off and there has been no one there for weeks.

Contractors work in -25…..and they work in snow……so it ain’t the weather that stopped it. And builders don’t sit around with the interest clock ticking either…..

#41 real estate expert on 01.04.09 at 2:15 pm

Kelowna is dead meat….if there are a glut of condos…I would agree. Retirees prefer year round “mild”.

…BC has a lot of retired Cdn $$$, retired Asian $$$ invested here…I grant you that a lot of American $$$ will find its way back to the U.S…..but the Asians and Canadians living in BC couldn’t conceive the thought of moving to Toronto.

“”Toronto and the GTA, not so much, given a population base of 6 million and a more diversified economy.””

Garth, sorry to disagree…in fact you just painted your post a typical “Centre of the Earth” opinion.

…Toronto is a lot closer to those $10K homes in Detroit than is the rest of Canada…the whole Great Lakes region is dead meat unless US and Ottawa come to the $$$ rescue.

Ontario is a manufacturing Province..it cannot compete with Asia…unless Canada/U.S. initiate protectionism or the World goes to war.

…Based on your arguments, do you really believe Ottawa will send $3/$4 billion to Oshawa but not a penny west to Manitoba, Saskatchewan, Alberta or BC… the base of the Conservative Party support?

I’d rather live amongst 2 million “who have” than with 6 million “have nots”…and you are also saying that the GTA continues to attract an influx of immigrants?…Better be rich ones vs penniless ones looking for work.

just my two cents

…Have I ever mentioned Vancouver will become the next financial/trade centre of North America?

Has anyone called you an idiot today? — Garth

#42 re-aligned on 01.04.09 at 2:41 pm

Regarding journos, Islander wrote that they could not tell, “Groucho from Karl, John from Vladimir, or Milton from Elliott.”

Absolutely true and well-put. I’d like to add a 3rd point to his two. Media concentration must have a role in providing an echo chamber for the RE pumpers. When television news stopped being a “loss leader” on network TV, it also essentially stopped being news.

Praise to the gadflies on the interwebs and other alternate media and sympathy to those who haven’t been connected to contrary viewpoints readily available here and elsewhere. I raise my squirrel to that. ;-)

#43 Foreign Investor on 01.04.09 at 3:32 pm

Advice from Realtors that I have received lately….

1.) We are entering more of a “normal market” now.

2.) The market is only going to drop 5% so if you make an offer now that is 5% less and they take it….why wait?

3.) That is what it (In an inflated bloated market perhaps) costs to build the home.

4.) They have made xxxxx partners of the golf mega project (WOW – partnerships are magical) and everything is okay now.

5.) This short downturn will be all over by spring.

6.) BUY NOW….don’t waste your money on rent!

7.) This 329K property will be worth 399K by spring.

8.) This is going to be the next Whistler….

9.) We will see a 5 – 10% increase in prices with the Spring Selling Season.

…and my favourite….

10.) The Americans are coming to buy this valuable property.

An “Open House” is great because that is where you can get the real facts on what is happening in the real estate market!

#44 Bobby in Victoria on 01.04.09 at 3:53 pm

“Real Estate Expert” and his drivel is an example why most savy buyers don’t look to Realtors for expert advice.

#45 qustioning on 01.04.09 at 4:51 pm

-14% for calgary in 2009??

should be double this number…otherwise, the RE price in Calgary is still way higher that it should be…

Patience. — Garth

#46 Jelly on 01.04.09 at 5:02 pm

Garth,

I believe you know what you are talking about regarding real estate. I read your Little Book of Real Estate Wisdom years ago and I really liked the easy reading and recommendations for purchasing particular future properties. I for some strange reason remembered your first name and looked you up at Chapters and then found this blog. Great site, quite addictive actually.

My question to you is: Will land/acreages go down a lot in Alberta as well? Or due to food prices, wheat etc, should I not expect prices to decline a large amount
for land? It is my bread and butter, construction, so while it may take a while to build again, I am curious…

Please answer, just your opinion, not holding you to anything obviously, just what you know please.

Thanks

There’s no immediate reason why commodity prices will rise until the global economic situation stabilizes, so expect declines in AB land values – and I’m assuming you mean large agricultural acreages. Eventually climate change will force food prices drastically higher, but I hear Alberta will be a desert. — Garth

#47 real estate expert on 01.04.09 at 5:02 pm

“”Has anyone called you an idiot today? — Garth””

??????????????

#39 Kitchener 1 writes….

“”The Waterloo/Kitchener region will see some dramtic declines in 2009. There have been some huge layoffs in Kitchener/Guelph lately. Lear and Bud (A frame) have let go of thousands off employees as well as a large parts manufactor in Guelph. I think the total lay off number is between 3000-5000 jobs lost in 08 for Kitchener/Waterloo/Cambridge/Guelph.””

#48 Jelly on 01.04.09 at 5:15 pm

Garth,

You said,

“Wait and watch, absolutely. Also take $40,000 in your downpayment cash and dump it in an RRSP, so you can get a fat tax refund, which can then be added to your downpayment (you can withdraw $40,000 tax-free from your retirement plan to buy a house).”

Can you do this with a second home as well or does it only apply to first home purchases???
What would you do to get out Teachers Retirement that has been sitting there making a measley 2%?
How could you get it out tax free if you are not retired yet?

Dying to hear what you have to say about that, we are taxed so much, I love to snatch money out of the taxman’s hands!!

Thanks Garth!

Sorry, Home Buyer’s Plan only for first-timers, and a principal residence. As for unlocking your pension money, I have no idea what the terms of your vested amount are. Have you got an advisor working on this for you? Good ones do this kind of thing all the time. However, these days 2% ain’t looking shoddy. — Garth

#49 supersocco on 01.04.09 at 5:18 pm

“Has anyone called you an idiot today? — Garth”

I would, except I just skip past this loon’s comments now. I wish there was an ‘ignore user’ button on here.

#50 confused and a little crazed on 01.04.09 at 5:24 pm

Thumbs up,

I do agree with the increase in prices for food.My groceries bill is up across the board for pretty much everything even when oil is down. This will more difficulty for families who recently bought a sfh. There house is worth less and food costs more.

real estate guy,
I buy a lot of supplies for an academic institution from medical to computer supplies and all of their head offices are in ontario where there is the TSX, You might of heard of the toronto stock exchange. None of them have warehouses in Van Bc. They have distribution centres in Alberta.

why you ask…it’s too freaking expensive in BC. It is more cheaper to truck in over here from either Alberta or Ontario. The vancouver stock exchange no longer exists for a reason and with technology . I can have a multimedia conference with someone in toronto. They don’t need to come here where the cost of living is the highest in Canada. Contracts can be signed via fax/ email attachement while the official hardcopy draft can be couriered over via Fed ex or UPS. The business community is not going to set up an stock exchange here because you said so.

But you probably don’t believe me. But at least I tried

#51 Midas on 01.04.09 at 5:47 pm

Gold is not a bubble; gold has never been a bubble; gold has for millennia been MONEY and the most commonly accepted form of payment between countries and individuals. Central banksters hate gold because it is a competing currency that has intrinsic value as opposed to paper that is hardly different than that used for another purpose. Soon the stench of paper money will surpass that of the white stuff you flush down every morning and then gold alone will be left standing as an acceptable currency. Were it not for the shenanigans of Central bankers we would never have had some much counterfeit paper money in circulation and none of our present day problems would have occurred.

By the way trillions in money are only possible with a computer; if the money had to be actually printed this much money could never exist. It is a bit surreal but all these trillions in losses and debts are just digits in a computer’s memory. Unplug the damn computer and start all over again but HAL won’t let you do that now, will he???

#52 its that simple on 01.04.09 at 6:08 pm

There will be four bottoms in the Housing sector. Two are New homes transactions & new homes prices. The other pair is Existing Homes sales & prices. Prices peaked for both New Homes & Existing homes in 2007Q1.

The increase in monthly transactions is important to the Economy ‘cuz it brings on increased revenues in furnishings, landscaping/gardening, appliances, etc. The passing of the bottom of Prices for both categories is important ‘cuz the subsequent “wealth effect” affects consumer demand and durable good sales.

A return to the mean is both natural and necessary for economic stability. In the early 80’s & 90’s, we saw the Fed raise rates to embattle Inflation psyche. The upward effect on mortgage rates left less Disposable Income for consumers to spend on holidays, clothing, durable goods, etc … and Recessions ensued. The purpose was to quell overheating Economies. And it worked.

In 2001, the Fed lowered interest rates to draw the Economy out of its Technical Recession. The consumer, recently burned by the Dotcom fiasco, invested in Real Estate rather than the Stock Market. Low interest rates made it easier to buy more expensive homes for the same monthly servicing; and housing inflated. At the same time, new sub prime mortgages flourished; and was compounded by rampant fraud by buyers, mtg brokers, appraisers, lawyers, lenders, and mtg aggregators. Greater Demand than Supply and the Realty Bubble was under way. As Existing Home Prices attained levels of 4.7 x’s Median Family Income, it was clear that irrational exuberance was fuelling the frenzy.

The USA norm for Median Existing Home Prices is 3 x’s Income. With higher prices, folks were drawing from their Disposable Income to spend on higher monthly mortgage payments. This left less funds for family budget spending on holidays, clothing, durable goods, vehicles, etc. Add to the fray the higher energy costs for transportation and heating fuel and we had the recipe for Recessionary disaster. The Fed recognized this scenario unfolding and attempted a succession of lower Interest Rates to keep the Economy humming … but could not avert a -0.2 GDP growth rate in 2007Q4

#53 its that simple on 01.04.09 at 6:13 pm

i copied that from this website. I think canadas situation is abouyt the same.

http://trendlines.ca/economics.htm

also interesting from same site…

American House Prices peaked in 2007Q1. The correction under way is a return to the mean that will most probably result in a further $46,000 decline in median Existing Home Prices by 2012; and the shedding of a further $26,000 for the New Home Median Price by 2010.

This scenario would return Existing Home Price to its 3 x’s Income trend; and 4 x’s Family Income for New Homes. By this metric, today’s Prices should be only 147,000 & $200,000 respectively. This would erase gains since 1997 & 1999 for the two categories.

After Peaking at 4.7 x’s Income in 2007, Existing Home Price had corrected to 4.2 x’s Median Family Income by July. The New Home Price Median has declined to a factor of 4.5 from 5.2 x’s Income.

It is probable that new price highs for New Homes will not be set ’til 2015; Existing Home Prices must wait ’til 2021.

#54 TheFirstRick on 01.04.09 at 6:19 pm

#47 real estate expert on 01.04.09 at 5:02 pm “”Has anyone called you an idiot today? — Garth””

??????????????
===========
Certainly no Mensa meetings breaking out at this dudes house.

#55 its that simple on 01.04.09 at 6:23 pm

Does anyone know what the average income in Calgary is then? I cant see house prices sustained at even the levels they will be after 2009. I think Prices will continue to decline in Calgary and more bubbly areas for a few more years-till about 2012- then flatline for several years.

I bought a house in beddington in Calgary in 2003 ( just your average neighborhood). Bungalow, 1200sq ft, good shape. No garage. I Paid $160,000 and put in a suite in basement for $20,000 ( yes it was nicer than upstairs when done). I sold it recently for $345,000. My realtor ran the MLS history on it, and it went something like this

built in 1981, on the market for $116,000

1981-$116,000 Sold

1985-$64,000 didnt sell ( not a typo $64,000 )

1988-$74,000 didnt sell

1991-$112,000 sold

1994-$124,000 didnt sell

1998- $116,000 didnt sell

2003- $169,900 sold to me for $160,000.

Prices will get back to historical norms/”affordable” via inflation-decline in value- and rise in wages. When all those things converge to houses back to 3x earnings, that will be the bottom IMHO

#56 Shifty on 01.04.09 at 6:45 pm

Victoria is overbuilt in the condo/attached housing sector with sales dropping off and stalling. Interestingly when talking to a few realtors, I enjoy needling, they still maintain an optimistic view of sales in 2009. What I find is they have a genuine belief that nothing has changed- I pity their clients. I don’t see a level of professionalism beyond sell, sell and sell some more-be careful out there folks.

#57 landlord on 01.04.09 at 6:48 pm

#55: “Prices will get back to historical norms/”affordable” via inflation-decline in value- and rise in wages. When all those things converge to houses back to 3x earnings, that will be the bottom”

this “3x earnings” is a guide for people looking to buy homes (at best) but it’s a tenuous connection with the broader real estate market. i’ve never really understood why people use this number.

#58 ThumbsUp on 01.04.09 at 7:09 pm

#51 Midas: “Gold is not a bubble; gold has never been a bubble; ”

Sorry I’d argue today’s gold is already priced at the future $ value of the white stuff, in other words, it’s a leading price indicator of the future inflated paper $ value, it may go up further, by how much ? I don’t know.

#59 dd on 01.04.09 at 7:20 pm

#41 real estate expert

“…Have I ever mentioned Vancouver will become the next financial/trade centre of North America?”

Yes you have several times … a broken record.

You should be busy buying now.

#60 ThumbsUp on 01.04.09 at 7:42 pm

#52 its that simple, Appreciate your data and insight, there is one thing though, “The increase in monthly transactions is important to the Economy ‘cuz it brings on increased revenues in furnishings, landscaping/gardening, appliances, etc. The passing of the bottom of Prices for both categories is important ‘cuz the subsequent “wealth effect” affects consumer demand and durable good sales.”

Capital spent on real estate (residential especially) does support the economy – for a short period of time. It may not support sustained growth to our GDP. why, it’s consuming. Imaging you as a CEO with $1mil , will you buy a house or spend it to boost your business.

Well, something for the economist & politicians to worry about.

#61 Strataman on 01.04.09 at 8:13 pm

#47 real estate expert on 01.04.09 at 5:02 pm “”Has anyone called you an idiot today? — Garth””

realestate expert is very typical of a whole bunch of realitors in Vancouver. I actually work for a few “rich asians” who I might say are really decent clients. They are an item i high end condos and Van West homes however far far from dominant even there. The ones I know think the vast majority of Vancouver realestate is way over priced, and for the experts information they NEVER buy anything but prime penthouses or really upscale SFH’s which they did about 6 years ago. They don’t even look now. Grow up a bit and realize Vancouver is a second home for these people and the only financial centers they are interested in are in Asia! Vancouver …financial center hahahahaha that is so damn funny actually! The only head office we have here of a quasi financial wannabe is VanCity which by the way will likely be the first financial institution to fold..sorta like the Howe street Stock Exchange. It has millions in unsecured non existent equity in GUESS WHAT? Home Equity loans! :-) Which by the way Mr. Expert are not covered by CMHC insurance!

#62 Future Expatriate on 01.04.09 at 8:35 pm

#2: Harper wants Canadians to fight the terrorists in Afghanistan, so you won’t have to fight them in Amerika….

and/or

Harper wants Canadians to fight the terrorists in Afghanistan, so Amerikans won’t have to fight them in Amerika.

Such a deal…

#63 Keith in Calgary on 01.04.09 at 9:17 pm

#55 It’s that Simple……

Hope this helps…….

The median average family income in Calgary is $65,488…….source “STATSCAN” which is linked below……

http://www12.statcan.ca/english/census01/products/analytic/companion/inc/calgary.cfm

Which, coincidentally only supports mortgage of $255,000 amortized over a period of over 25 years and using a rate of 6.0%. This is at $1,631 a month which is a 30% GDSR……….and I am not accounting for the payment property taxes, utilities or insurance in this calculation.

The median SFH house price ending DEC 31/08 was $380,000………so unless you have 33% down, you are outside the norm.

So, what was that stat again….something like 40% of all mortgages granted in Calgary last year were CMHC insured ?

Prices are gone continue to drop big time…….

#64 Doubting Bennie Tal on 01.04.09 at 10:17 pm

Has anyone done a scorecard on Benjamin Tal’s predictions? I remember him saying many things regarding the stock markets, real estate market, the strength of the Canadian dollar, etc. I haven’t heard him correctly predict anything. I find it hard to believe his “opinion” on how much real estate will fall in Canada.

#65 Bobby in Victoria on 01.05.09 at 12:00 am

For #56, I couldn’t agree more. A colleague of mine in financial services said he never takes realtors as clients. He said they believe their own hype.

#66 Midas on 01.05.09 at 12:00 am

It maybe time to start investing in oil again if this Israel / Hamas conflict becomes a regional one. Well oil shooting back towards triple digits maybe good news for Alberta but it will surely wreak more havoc on world markets. What think ye Garth?

#67 Midas on 01.05.09 at 12:04 am

I predict that when all is said and done the average price of a SFH will be under 6 figures in Canada, it may be 2012 before this happens but if I was a betting man I’d bet my house on it.

#68 Midas on 01.05.09 at 12:22 am

#19 Islander
“2. Journalists are rarely experts at anything other than collecting quotes, writing stories that fit their preconceived notions, and the inverted pyramid.”

I am a bit more cynical; I would venture to say that journalists for major publications or national TV are actually DISINFORMATION PUPPETS who deliberately obfuscate the truth to forward the agenda of their puppet masters. They are liars and their job is to tell lies even when they know that which they are writing or broadcasting are lies. All news stems from a single source; the job of journalists is to merely relay the news in their own words and sometimes not even that. Haven’t you noticed whether it’s the Toronto Star or the Vancouver Sun the national news is the same. Haven’t you noticed whether it is the CBC or CTV the news is pretty much the same or slanted exactly the same way? You mean to tell me that there is only 30 minutes worth of newsworthy information out there in the whole world and every darn journalist or new anchor thinks it is THE SAME INFORMATION that is important enough to report as news? I bet you many times more people died in conflict in Africa today than in this Israel war; you mean to tell me that ALL JOURNALISTS worldwide find only this conflict to be newsworthy? It is the ministry of truth my brothers that reports the news that we earthlings need to hear. Long Live Big Brother!

War is Peace
Ignorance is Strength
Freedom is Slavery

Emmanuel Goldstein is the enemy and don’t you ever dare question that boy! Peter Mansbridge said so!

#69 east of the gta on 01.05.09 at 12:27 am

still no prediction for montreal? is that because it won’t be hit (as bad)?

#70 TheFirstRick on 01.05.09 at 1:23 am

#64 Doubting Bennie Tal on 01.04.09 at 10:17 pm Has anyone done a scorecard on Benjamin Tal’s predictions? I remember him saying many things regarding the stock markets, real estate market, the strength of the Canadian dollar, etc. I haven’t heard him correctly predict anything. I find it hard to believe his “opinion” on how much real estate will fall in Canada.
=========
Scorecard? When he speaks, hardly anyone can understand him.

#71 Investx on 01.05.09 at 2:15 am

#63 Keith in Calgary said:

The median average family income in Calgary is $65,488…….source “STATSCAN” which is linked below……

http://www12.statcan.ca/english/census01/products/analytic/companion/inc/calgary.cfm

————————————————–

Uh, this is a 2000 statistic, not a recent one. From your source:

“In 2000, one-half of families in Calgary had income above $65,488 …”

#72 littleblackduck on 01.05.09 at 11:37 am

Midas , the reason all the news in Canada is the same is because they all pull from the same sources: the Canadian Press and press releases. In fact, I’d say about 90% of everything in a newspaper originates from a press release – whether a paid source like Canada Newswire, etc. or individually like the city police and so on. They are also bandwagon jumpers – they tend to follow what they think everybody else is saying.

There’s no conspiracy, just no budget for investigative news and lazy journalism.

As for gold, the spike the past year was on the expectation of future inflation, as someone pointed out. I argued that gold to inflation was like the Miami condo to the baby-boomer retiree – the prices skyrocketed in anticipation of events way too soon before they were about to actually occur, and now may not occur at all any time soon. Those baby-boomers portfolios took such a hit they have to delay retirement by several years for some of them, and in the near term we’re now looking at global deflation…

#73 Simon on 01.05.09 at 11:06 pm

Apparently there was a piece in the weekend Toronto Star that showed little or no price decreases in most markets outside the wildly overheated ones; Toronto, Vancouver, Calgary, Edmonton, etc.

What is happening outside the ones we keep seeing used to claim a real estate “meltdown”?