Risk

risk11

So, is it over?

A couple of recent surveys, trumpeted by the media of course, show the real estate bug is biting again. For example, more than half the people questioned in Victoria in the last few days said it’s a good time to buy a house. This is somewhat astonishing, seeing city home sales plunged 46% in January from the same time in 2008, to an 18-year low. The average house price actually took a dive of $22,000 in a single month.

So, why on earth – in the midst of a declining market and tumbling sales – would folks have this perception everything’s cool again?

Well, realtors say it’s because interest rates are on the way down. You can get a 5-year mortgage on sale right now at around 4.5%. That means the average Victoria home at $526,148 with an average 15% down payment ($78,000), would carry for $2,872. With property taxes, that would be about $3,400 monthly, requiring an income of $122,000 to qualify for traditional financing.

So, hell, why aren’t we all buying? It takes but $90,000 in cash (adding in closing costs) and an income of $122,000. Why wouldn’t real estate be on fire thanks to cheap rates?

Maybe because the average income in Victoria is $56,179.

And this is how we got into the mess (as did the Americans). When the average family cannot afford the average home, except by going into extraordinary debt requiring 50% or 60% or more of disposable income, real estate is overvalued.

So, why would a majority of people be thinking fondly of house-buying, as the surveys show?

Maybe it’s the misunderstood nature of risk. A good company’s stock can fall by 40%, and investors freak and bail, even though it is destined to rebound, based on profitability and cash position. But when the value of a house in a good neighbourhood tumbles an equal amount, it’s interpreted as a bargain – a temporary aberration on the path to continual price appreciation.

And this is why real estate is so dangerous. It is an emotional commodity more than a financial one. Throw in a glass sink, some bamboo floors, a media room and lots of stainless, and common sense exits. A house becomes a giant physical symbol of our worth, our accomplishments and, above all, our good taste and ability to afford. Even if we can’t.

In this aspect, the housing market is not really a market. Certainly not like the stock or bond markets, which value assets with far less emotion and infinitely more long-term predictability. And yet Canadians have chosen to put 83% of their family net worth into real estate and less than 10% into financial assets. This makes us one of the less diversified people in the world, and some of the most vulnerable during a housing meltdown.

Which, of course, may be exactly what we’re living through.

So, would you buy $526,148 worth of stocks or bonds when such a portfolio was losing $22,000 a month and 46% of investors had bailed? Just because you could borrow money cheaply to do so? R U nuts?

In Victoria, apparently.


118 comments ↓

#1 dd on 02.14.09 at 9:01 pm

Victoria … People have always been priced out of the market for years. For the majority of people moving from the island is the best option if you want to prosper. If you stay you strave.

That is why I cannot even believe the fall in home values. It turely does seem like one of the “best opportunities to buy.” The hope is that people will move to the island from around Canada to retire. But this time … people may not be able to sell their house in Calgary, Vancouver, or Toronto first.

#2 Nebbio on 02.14.09 at 9:13 pm

As you have mentioned previously in this blog “wait until the Spring”. When the Spring selling season arrives the utter fallicy of these real estate boosters will be exposed for all to see. There is going to be a flood of new listings and buyers will be few and far between. If you are looking to buy patience will be rewared. This situation will be further fuel by the dismal unemployment numbers. Unemployed people do not buy houses.

#3 Nick on 02.14.09 at 9:45 pm

I totally agree Garth. I’m here in Victoria and can’t believe the garbage that people will pay 400,000+ dollars for. I guess your recent talk didn’t convince enough people. :)

Ah well, hopefully I can get a good deal in 2011 when the foreclosure sales start.

#4 B on 02.14.09 at 9:50 pm

Hey Garth,

What do you think will happen in the commercial real estate market?

#5 James Pike on 02.14.09 at 9:58 pm

Great picture~!

#6 Disbelieving in Victoria on 02.14.09 at 9:58 pm

I was out for a Valentine’s breakfast with my Sweetie and there were couples around us talking about what a great time to be able to get into the market. Apparently there where a few people that didn’t take the opportunity to attend your talk at the Conference Centre. Too bad for them.

#7 Roger on 02.14.09 at 10:01 pm

Don’t believe the media spin about Victoria real estate. Prices have been dropping since April 2008. The recent buying activity the agents are talking about is mainly under the median price of 475K. Mostly first time buyers that have never seen market crash before. The smart money is just sitting on the sidelines. Inventory above 500K is still piling on and there are lots of price reductions. The mid to high end homes are moving slowly. I suspect the moveup market is stalling as buyers try to get a “subject to selling my home” clause accepted. Sellers aren’t interest in these kind of offers.

If you click my name you will see my stat gallery which shows prices and sales history for the last five years.

#8 squidly77 on 02.14.09 at 10:20 pm

it would be interesting to know exactly who conducted the poll..sooner or later theres gonna be a crash

#9 Dave99 on 02.14.09 at 10:21 pm

Garth,

You mention that 83% of a Canadian’s net worth is in housing?

A few months ago I was looking on the BoC’s website, and it showed the ratio as closer to 40%.

Perhaps your figure excludes locked in investments (RRSP/Pensions)? If not, could you reference the source? (I’m not disputing, just curious)

#10 squidly77 on 02.14.09 at 10:26 pm

trust your politicians..
http://parkerchris.pwp.blueyonder.co.uk/vocationvocationvocation.html

#11 robert on 02.14.09 at 10:35 pm

Ahh, Victoria, Land of the newly wed, the nearly dead, and real estate speculators. Where $400,000 for a 3 bdrm 1 level 1910 shack in a ramshackle neighborhood beside the highway is touted as a good buy for first time home owners as its close to amenities and has easy access. I’m waiting until the Olympic bills come rolling in and our municipal /provincial taxes skyrocket to cover that mess. Construction is flatlining, unemployment is jumping, McJobs won’t cover the mortgage. The other hidden factor is the geriatric “time bomb” which is beginning to overload our local medical system. The end of retiree road is in the over-crowded emerg wards, extended care and under funded geriatric care facilities. It isn’t going to get better.

#12 $fromA$ia on 02.14.09 at 10:39 pm

BTW Garth, Have those people poled in Victoria are probably old and retired. They have no clue what it’s like to fork out a half million bucks when they bought and paid for their homes within 10 years…. Remember when you could purchase a home for $24k? How about $119K?

Go figure, if your over fourty and bought then you most likely are much better off than younger people.

#13 $fromA$ia on 02.14.09 at 10:40 pm

(Have) sorry garth I mean Half not Have. I am tired!

#14 Dan in Victoria on 02.14.09 at 10:40 pm

My family has lived just outside Victoria in the western communities since 1932 we’ve pretty much seen it go from farmland and logging to strip malls and houses.The past twenty or so years has had a huge change in the type of people who now live here.They all seem to think that the rest of Canada is going to pack up lock stock and barrel and move here,buy us out for big money and then we’re going to move to the interior or the warm sandy beaches of the tropics or where ever and count all of the money that we made.Its crazy.I’ve been in constuction for 38 years and have never seen anything like the last few years,the greed has been unbelivable.A young fellow worked for me and wanted to buy a house,had to “get in”before he couldn’t afford it.I sat him down and did the numbers,basically one cheque a month just to pay the interest,nothing on the principal,then you had to pay off the principal,pay for taxes,car loan,food……etc.All his friends were getting rich he said,his parents helped him out,sadlyI don’t think he’s gonna be rich.

#15 john on 02.14.09 at 10:52 pm

In the Weston Downs area of Woodbridge homes are still selling quickly and at or near their listing price. Can it be that certain areas will be immune to an expected correction?

#16 Nick Papageorgio on 02.14.09 at 10:57 pm

THANK YOU GARTH!!!!!!……..You so hit the nail on the head. I live in Victoria, and have lived here all my life. I sold my place to a greater fool in mid 2007 and did not buy after that because I knew where the market was going, and this is just the very very start. My friends and family have been and still are so critical of my decision that I don’t hear from some of them anymore.

Whatever you do at a cocktail party or a family get together in Victoria, (and I think some of your Victoria bloggers will agree with me), you can talk about politics and you can talk about religion, but DON’T TALK ABOUT REAL ESTATE!!!!. If you ever have a contraian veiw on real estate in Victoria, they start looking for the labotomy scar on your head!.

Garth, I’m surprised you got out untouched two weeks ago at your lecture here in Victoria.

Even though homes are on the market longer and prices are down, the reaction of Victoria citizens doesn’t surprise me one bit.

#17 CaptainAwesome on 02.14.09 at 11:09 pm

I’m sorry, but enough with pessimistic views on everything to the point when people start being scared of real estate just because it fell. It goes up and down all the time. And did before and it did now. It will rebound.

So why buy right now? Because it’s cheap. Buy low, sell high, that’s how people get rich. When everybody is selling, buy. When everybody is zigging – zag. That’s the only way.

“So, would you buy $526,148 worth of stocks or bonds when such a portfolio was losing $22,000 a month and 46% of investors had bailed?”

Good god, I would. So, something fell in price, but 100% will go back in value (let’s not speculate when). I’d be buying tomorrow.

#18 Jon B on 02.14.09 at 11:09 pm

Yes most people who live in Victoria are nuts. I know this because I used to be one of them. I’m not nuts anymore. I sobered up to reality years ago.

#19 Meet POKEY on 02.14.09 at 11:12 pm

Today the US government is unveiling a new mascot to help educate the public on the finer aspects of its efforts to simultaneously stimulate and bail out the economy. Meet POKEY THE CONDOM.
POKEY allows for inflation, halts production, destroys the next generation, protects a bunch of pricks, and gives you a sense of security while you’re actually getting screwed.

#20 vicguy on 02.14.09 at 11:17 pm

As a victorian resident of 40+ years I can testify that Victoria has been an affordable place to live in up until the ridiculous house prices bubble that started some 6 years ago. The affordability ratio has been between 3 and 4, instead of 7+. I can not detect any improvemennts in the city that would make it any better or irresistibly desirable. It just rains more and the expected major earthquake is more overdue than ever. I just hope it does not hit on a miserable rainy day, that is between September and May.

#21 Aizlynne on 02.14.09 at 11:31 pm

Real estate is over valued Garth, but being taxed to death does nothing to help those who would like to buy a home.

If we had a REAL fiscally sound budget, government would have been chopped. But alas, we have PMO Sellout so what do you expect.

You gotta wonder how much disenfranchisement people will stand before real change is made.

#22 polecat on 02.14.09 at 11:37 pm

I live in Vic and have seen many people with less income and no down payment buy these places.They are quite happy.My wife and I make a decent living compared to average in town but still rent and save cash.The houses are not worth it.Even new ones made with unqualified trades people and shoddy materials.I think we will see quite a few problems down the road with a lot of homes in the area.By then the contractors have folded and owner is left holding the bag.The town is a ticking time bomb job wise,it is just easy to ignore and say everyone wants to retire here because of the weather.Us younger folk cannot afford to buy there,let alone retire on the island,as nice as it is once you leave the city.Too bad,it is a nice place but is getting ruined for all the same reasons that have been discussed on this blog.I’ll just sit on the side and hope my cash is safe in the bank.By the way Garth,the wife is sending me you book,I’m working out of country for a bit so I need some decent reading material,just hope I’m home before everything gets too crazy,cheers…

#23 Sail1 on 02.14.09 at 11:43 pm

Outcomes that are considered highly unlikely are ignored, and the decision is made using the “best” set of information available. While the average consumer can reasonably say that their decision to be involved in the real estate market is a rational decision based on economics and not an emotional decision, the reality is that the scales begin to tip in favor of emotional involvement in the real estate buying process when there is the perception of improving economic conditions. That perception is now clearly vanished for an uncertain period of time but the emotional attachment is clearly evident.

#24 CAL on 02.14.09 at 11:49 pm

I have been following your blog since your days as an MP, Garth, and have always appreciated your insightful comments. We have kids in Comox and Victoria and they are tuned into your blog as well. They are tenants for now and chomping at the bit to buy into the housing market but, thanks to your sage advice, are sitting on the sidelines, watching. Your comments are much appreciated.

#25 OntarioHouse on 02.15.09 at 12:29 am

I’m not sure if I believe in the truth or accuracy of these “surveys”.

#26 Kilt on 02.15.09 at 12:33 am

“You can get a 5-year mortgage on sale right now at around 4.5%. That means the average Victoria home at $526,148 with an average 15% down payment ($78,000), would carry for $2,872. With property taxes, that would be about $3,400 monthly.”

Bah, property taxes are too high. Change the repayment terns to 35 years and you only need $90,000 a year income. Add a basement suite rental and/or more likely a grow op, and you have no problems covering the payments. Home sweet home.

Side note – Feb numbers for Vancouver and Calgary are looking up a bit when compared to the slow January. DOM is decreasing, sales to list is increasing, selling/asking prices are even showing mild improvements. I can’t really understand it. I still don’t see many deals out there, and I would be very nervous about making a purchase right now.

Kilt.

#27 Popeye the sailor man on 02.15.09 at 12:36 am

This is what is happening with my property for sale north of Victoria BC.

The house (6BR/6bath inc 3BR in-law-suite) was listed in early Nov for $437,000 then early Dec. dropped to $415,000, we got some viewings but no offers, in early Jan. dropped to $390,000 we had some more viewings and a low ball offer under $360,000. Currently listings that were comparable have sold or delisted and we are the best deal for 4br+ 4bath+ under $400,000. The Low baller has come back @ 98% of asking, and we also had a new Viewing on Friday, 2 Viewings on Saturday one a repeat, and a fourth viewing tomorrow. We have just accepted the new offer. Hope it goes well.

In early 2008 we where told that we could get 450,000 to 460,000 take 450,000 as peak price we are currently about 15% down year to year. Just thought some people might like to see a current real life example.

#28 bailoutsLOL on 02.15.09 at 12:37 am

Another solid post GT. Your point about houses being illiquid and representing too much of a persons net worth is an important one …. covered in Niall Ferguson’s “Ascent of Money” as well (great book).

This is what is going to make this recession that much more painful ….. labour mobility will not be as high as in previous recessions since home ownership rates are highest in history, yet pretty much everyone in every part of the country is sitting on a landmine if they sell right now.

#29 Bruce on 02.15.09 at 12:48 am

I gotta say, the thing I most look forward to when you put up a new post is the picture. This has got to be the best one since your ‘Market update’.

#30 Glenn on 02.15.09 at 1:24 am

I never thought things would get this bad in Canada. I just checked the Philadelphia (my old stomping grounds) bubble index and it is expected to be 21% by 2010. Bad yes, but nothing like the 46% bloodbath in Victoria and elsewhere. My wife and I have been giving very serious consideration that our prayers for protection and guidance were actually answered…just not in the way we expected. Had we actually gotten into Canada in 2006 as we hoped to, we almost certainly would have been washed away in the current collapse. As it turns out, we have spent the last few years consolidating debts and lowering costs instead of pouring money into the overly bloated Calgary rent swindle. Perhaps we owe Canadians a debt of gratitude for being so two-faced and malicious. New Hampshire and Washington state are quite literally on the verge of secession, as their State senates have voted on and passed resolutions to that effect. Other states are lining up similar plans should Obama place further restrictions on firearms, free speech, or worse…war with Pakistan. On the other hand, both my wife and I loved Montreal. May you live in interesting times, indeed.

#31 Chris on 02.15.09 at 4:59 am

Victoria and Vancouver have been in there own little world for as long as I remember. People pay a premium to live in the rain. Victoria is especially bad, the newly wed and the nearly dead indeed. The only reason I stay is because all my family is here. The rental market is easily the worst in BC as well. The landlord is selling the house I live in, and trying to find a new place to live is painful. Most rentals cater to students and there are a ton of dumps out there. Today my husband and I looked at a moldy, decrepit 3 bedroom shack in Swan lake for 1550 + utilities. It took me 3 months to find the place we are currently living in. The sad thing is that the shack in Swan lake will be rented by tomorrow.

#32 SaraBeth on 02.15.09 at 6:34 am

With a glut of homes on the market and no buyers, will rents come down too?

#33 Johnny Five on 02.15.09 at 8:07 am

Check this out:

http://www.realtor.ca/propertyDetails.aspx?propertyId=7763416

Prince Rupert. And there are hundreds of homes exactly like this. A failed forestry town. Small shack homes that are not falling apart – they HAVE fallen apart – and the realtors STILL think they are worth $60K. In any other rural community they wouldn’t be worth $600. I didn’t realize the kool-aid flowed that far north.

#34 HalifaxFamily on 02.15.09 at 8:14 am

http://www.cbc.ca/money/story/2009/02/13/house-january.html?ref=rss

Garth, how do you explain what is happening in Halifax? Is that a statistical aberration?

I read another article that Westerners are moving back here….

…but I don’t buy that for a moment.

#35 Herb on 02.15.09 at 8:28 am

To-day’s Star has an interesting column in which Naomi Klein expresses reservations about President Obama’s approach and bailout/recovery plan at http://www.thestar.com/comment/article/587538

There is a question she should have been asked: Do you consider the bailout/recovery plan merely a disaster, or a ploy in what you have called “disaster capitalism”?

#36 Kitchener on 02.15.09 at 9:15 am

I’m trying to find links on how kitchener is affected by this housing bubble or cottage country. Can’t seem to find any. Any help?

#37 Sail1 on 02.15.09 at 9:22 am

#15 john

Predominantly Italian neighborhoods, you know the old saying, if his brother in law has a home in a gated community, he to must have one to. Its the Italian way, envy may keep prices from dropping to quickly, at least in Woodbridge Ontario. By the way in case you think I may be slandering Italians I am one.

#38 hmm.. on 02.15.09 at 9:25 am

#19 Meet POKEY

good one , and to the point.

#39 Torquemada on 02.15.09 at 9:37 am

The survey you discuss Garth. Is it a survey of:

1. Owners of property – If so, then they are likely to believe that this is a great time to buy regardless of affordability. No one wants to feel that his/her primary asset is overvalued.

2. Potential buyers – The only people whose opinion about real estate actually matters.

The people who believe in these polls are the same fools who believe Re/Max and the CREB to give them independent advice. Unfortunately real estate is a game of greater fools and there still appear to be a whole heck of a lot of them out there.

#40 Bottoms_Up on 02.15.09 at 9:45 am

Rents will come down due to speculators not wanting or unable to sell their spec. properties, thus increasing the supply of rentals on the market.

Loved the Pokey condom post (#19).

Popeye, thanks for the real life example.

I just don’t understand why humans would pay a premium to live in rain for 275 days a year. I would much rather live in -15oC temps with bright sunny, happy days (just as it is right now in Ottawa).

#41 Jeannette on 02.15.09 at 9:48 am

People from Victoria are the only ones I have met who carry photos of their house with them to show people while on vacation. Pretty weird.

#42 Calgary37 on 02.15.09 at 9:53 am

It seems that Jim Sinclair has seen something that he does not like!

Here is an excerpt from his latest post:

Officially “Out Of Control”

Posted By Jim Sinclair On February 14, 2009 @ 8:22 pm

URL to article: http://jsmineset.com/index.php/2009/02/14/officially-out-of-control/

“This communication is to inform you as of 2/13/09, “It is totally out of control.” There is no longer any means of reversal of the beginning of the final phase of the downward spiral now solidly set in motion.

For your sake, protect yourselves immediately.

Be prepared for disruptions in distribution common to hyperinflation.”

Read the Rest at above URL:

Be Prepared.

#43 RandomPoster on 02.15.09 at 9:57 am

Garth,

There is nothing more corrupt or dishonest than Wall Street, at least with a home you have something tangible that you can live in. But I agree that house prices will come down further.

I’m looking to buy and have been watching a few that have been on the market for 6 months+. Here is a list of 5 houses with their house prices 3-6 months ago and their asking prices today:

1.4 million -> 1 million
920 K -> 720 K
729 K -> 589 K
589 K -> 520 K
580 K -> 499 K

I think they drop another 30-40% before it is all said and done.

#44 ThumbsUp on 02.15.09 at 10:01 am

Interest is low, it will be lower for years to come, remember the rates are set by FED & central bank? it’s artificial.

House price is lower than it’s peek, it will keep going down for decades.

Money will move to where there will be better return, jobs will follow, there will be little growth in North America over the next 2 decades.

#45 North Vancouver Citizen Jr. on 02.15.09 at 10:15 am

Except for “Vancouver Proper”
(City, Richmond, North & West Vancouver and parts of Burnaby…20 minute drive)

….Yes the rest of BC is “Bubble’sh”

1/
Impressive statistics Garth regarding Victoria…but you forget to to include “rental income”.

You forget to mention that all recent sellers and long time renters are in fact currently rent these suites…..so the cost of the mortgage financing you describe drops…doesn’t it.

2/
As you describe “blue chip stocks drop dramatically…but they rebound….Vancouver Proper is the single “Blue Chip city in Canada.

China and Asia are eyeing Western Canada’s natural resources…they still need food and the natural commodities from the three Western Provinces and the last time I looked Vancouver Proper is still the gateway in and out.

…Have I ever mentioned that Vancouver Proper will become the Next Financial/Trade/Leisure Capital of North America?

#46 Kevin on 02.15.09 at 10:17 am

Garth if everything you say is off as much as your property tax in the article above it would appear we don’t have much to worry about. A $525,000.00 home in the greater Victoria area would have a tax bill af approximately $3,000.00 a year not the $6,000.00+ that you’ve estimated.
So much for taking what you say with a grain of salt.

While this is not exactly true (since properties are assessed on individual merits, and I have researched many) even if it were, that would change the monthly carrying costs by a whopping $250, rendering a negligible to the income requirement. Did you have another point, or was that you best shot? — Garth

#47 Popeye the sailor man on 02.15.09 at 10:17 am

#41 jeannette,

My parents made bussiness cards with there contact information on the back and a full color picture of there large house on the front shortly after they bought it.

#48 Bottoms_Up on 02.15.09 at 10:24 am

For Ottawans:

http://orebweb2.oreb.ca/avg_oreb_sale.shtml

In only 2 time periods has Ottawa real estate declined since 1956, in ’61 and ’62, and ’94, ’95, ’96.

Looking forward from 1956 the value of real estate doubled in 14 years, 6 years, 9 years, and 17 years.

Looking backward from today it doubled in 11 years, 15 years, 10 years, and 15 years.

However the past 50 years has been a great period of economic growth and prosperity; the future may not be so fruitful. A recent Maclean’s article makes a good case that generation X may be the first generation to not make more money or have a better lifestyle than their parents (adjusted for inflation of course).

My gut tells me we are perhaps in another down cycle where there may be 2 or 3 years of negative returns in Ottawa. We may also be at the beginning of the longest cycle of real estate doubling ever seen (definitely greater than 15 years…perhaps if it doubled in 20 years that would be too generous?)

#49 Generation 'Downer' on 02.15.09 at 10:26 am

The Toronto Star has come up with a new term for many of us – “Doomers”!
http://www.thestar.com/news/gta/article/587952
Personally I prefer “realists” but each to their own.

Now back to the theme of Garth’s posting:

I had an RE conversation with a colleague last Friday who’s about to sell his house in the outer GTA suburbs and move into downtown Toronto close to our office (I did the same last year). Overall a good decision and I’ve more or less convinced him to sell right now rather than wait until the usual Spring period.

However he’s also completely convinced that now is a great time to buy and looked at me like some kind of social pariah when he found out I was a ‘renter’ (my brother-in-law also did the same, assuming I’d obviously bought my apartment). He trotted out the same arguments we’ve all heard; “low interest rates”, “Canada’s different (than both the US & UK)”, “prices won’t fall much more here, 10% at the most”, etc., etc.

With plenty of people around like this I think there’ll be one or two dead-cat-bounces in RE this year before (or even if) they all really get what’s happening.

#50 Bottoms_Up on 02.15.09 at 10:31 am

Thanks Calgary37, scary, very scary.

#51 Bottoms_Up on 02.15.09 at 10:34 am

Garth, I think your next post should address Jim Sinclair’s warning.

#52 wondering on 02.15.09 at 10:56 am

@Popeye – Your location doesn’t help. I can’t imagine wanting to commute from Shawnigan Lake every day. I know people do – or from Duncan, even – but what a waste of time, money, and gas.

#53 Bob on 02.15.09 at 11:08 am

Heads up…TD is raising interest rates on credit lines. Just got a letter Friday. We have perfect credit and they’ve notched us up to prime + 1.5%. We’ll leave the line open but won’t use it anymore and will be consolidating our assets with another FI.

#54 dd on 02.15.09 at 11:18 am

#45 North Vancouver Citizen Jr.

…Have I ever mentioned that Calgary will become the Next Financial and Trade Capital of North America?

#55 Irene on 02.15.09 at 11:19 am

Thumbsup44, I don’t care what the interest to buy a home is or if its a good deal but it seems to me if you don’t have a secure job and who has, considering buying a home should take into account how am I going to pay for it and still buy groceries and support my family. The interest could be at 0% but you still need a good paying job to afford it. I for one would not even consider it. I would wait for a little security in these ecomomic times.That’s my opinion and I’m sticking to it.

Cheers

#56 dd on 02.15.09 at 11:24 am

#42 Calgary37

There is no longer any means of reversal of the beginning of the final phase of the downward spiral now solidly set in motion.

Be prepared for disruptions in distribution common to hyperinflation.”

…. so tell me, if we are in a downward spiral don’t prices decrease? Why worry about hyperinflation when most goods are cheaper tomorrow?

#57 ThumbsUp on 02.15.09 at 11:35 am

#55 Irene on 02.15.09 at 11:19 am

Money will move to where there will be better return (Not north America, definitely not RE), jobs will follow, there will be little growth in North America over the next 2 decades.

What you said is exactly what I meant.

#58 Gord In Vancouver on 02.15.09 at 11:35 am

#16 Nick Papageorgio

Whatever you do at a cocktail party or a family get together in Victoria, (and I think some of your Victoria bloggers will agree with me), you can talk about politics and you can talk about religion, but DON’T TALK ABOUT REAL ESTATE!!!!. If you ever have a contraian veiw on real estate in Victoria, they start looking for the labotomy scar on your head!.

Here in Vancouver, real estate has gone from being the main conversation topic to one that’s quickly changed once someone says “real ….”.

It’s almost come to a point where traditionally shunned topics such as RRSP contributions/amounts have become more popular than real estate in this highly leveraged city.

#59 Blanche M on 02.15.09 at 11:43 am

Garth;
I read with horror the number of houses being purchased in Victoria at this time. I cannot help but think the Gov’t spend, spend plan to get us out of this financial pit, has some responsibility. It has never worked in the past, debt begets more debt. It is what got us here.
Some people will never own a home simply because they do not have the financial resources, for these poor souls to be sold a bill of goods, telling them that it is ok to borrow beyond their means is down right criminal. Owning a home is one thing, but to own a ” house” to show the world you have arrived, is not just foolish but down right ridiculous.
Better to put food on your table folks, don’t buy that over priced monster of a building ,plant a garden.

#60 Gord In Vancouver on 02.15.09 at 11:43 am

#32 SaraBeth

With a glut of homes on the market and no buyers, will rents come down too?

Probably not because most investors can’t afford to finance a larger percentage of their investment properties.

Of course rents will fall as supply increases. That is already happening in Toronto and other centres when would-be flippers are turning into reluctant landlords. — Garth

#61 Gord In Vancouver on 02.15.09 at 11:52 am

……..That means the average Victoria home at $526,148.

……..Maybe because the average income in Victoria is $56,179.

Victoria’s not that bad.

Vancouver posted a higher average home price but an identical average income figure. What’s scary is that the latter figure, for Vancouver, was probably inflated by high, but temporary, construction worker salaries.

#62 Investx on 02.15.09 at 12:21 pm

Yup. Even the “Get Rich (Quick)” gurus are out in full force, preaching that it’s a great time to get back into real estate. Here’s an example, Darren Weeks:

As I go across the country putting on my “How to Get Rich in Canada” events I see that many people are confused and fearful about getting involved in Real Estate in today’s market. They see the prices of houses falling or stagnating in many areas of the country. They hear about people losing their jobs and going into foreclosure. They watch TV and see broadcasters lamenting the state of our economy and painting a bleak future. Visions of the “Great Depression” fill their minds and thoughts.

It’s all very depressing, and in my opinion it’s all a bunch of B.S.

Now is a great time to get involved or get more active in Real Estate! Whenever the ‘masses’ are running scared, there is a phenomenal opportunity for the few who grab the bull by the horns and take action…that is what I am doing, that is what many of my fellow professional Real Estate investor friends are doing, and that is what you can do as well!

#63 1 Bore E. parking lot on 02.15.09 at 12:40 pm

Stocks or bonds are so much more boorish than a home.
You spend your working life feeding them to build a number on a piece of paper.

#64 Future Expatriate on 02.15.09 at 12:42 pm

Glass bowl sinks are the most idiotic fad since crystal chandeliers. Great, not enough to have to clean the inside of the sink, now you have to clean up the outside as well. There is a reason people have been countersinking sinks in counters for the last seventy years.

At least granite countertops are practical when they’re not outgassing radon.

I am going to laugh ten years hence when everyone is throwing those damn bowls away and completely redoing the bathroom cabinets and counters because they sit too low for countersunk sinks.

Never underestimate the evil genius of home fad sellers and marketers.

#65 Future Expatriate on 02.15.09 at 12:43 pm

Victoria uptick = DEAD cat bounce.

#66 Calgary37 on 02.15.09 at 12:45 pm

#56 dd on 02.15.09 at 11:24 am said:

“…. so tell me, if we are in a downward spiral don’t prices decrease? Why worry about hyperinflation when most goods are cheaper tomorrow?”

****************
These are the words of Jim Sinclair, so I do not know the real reason for why he used them.

In regards to deflation and inflation, they are happening simultaneously.

For example, big ticket items like houses, cars and TV sets are slowly going down in price while staple items are going up. For example, the food and non-food items in your local Safeway have been going up in price over the past year or two. If Safeway’s distribution system seizes up for some reason, there will be a shortage of items in their stores. This shortage would eventually drive up the price of those items causing hyperinflation.

That would explain why Jim used these words, “Be prepared for disruptions in distribution common to hyperinflation.”

However, I do not know what specific event(s) has spooked him to issue this type of warning.

I will now use this opportunity to pass on another piece of advice for those persons who do not have a Cash Reserve stashed away in a safe place.

It is time to start accumulating 5s, 10s and 20s to build up your own Cash Reserve. Sometime later this year, you may be very happy that you had this Cash Reserve handy.

Be Prepared.

#67 Indicator on 02.15.09 at 12:56 pm

#60… to validate Garth’s statement, here is an example of where Toronto rent has come down considerably.

Current: a 2 bedroom and 2 bathroom Toronto Tridel Condo with a 900 s.f. will rent at $1400.

Last year: same unit would rent for $1600.

…and with the glut of condos for rent coming into the market, the price is coming down.

#68 sold in 2007 on 02.15.09 at 12:59 pm

Check this out:

http://www.realtor.ca/propertyDetails.aspx?propertyId=7763416

Prince Rupert. And there are hundreds of homes exactly like this. A failed forestry town. Small shack homes that are not falling apart – they HAVE fallen apart – and the realtors STILL think they are worth $60K. In any other rural community they wouldn’t be worth $600. I didn’t realize the kool-aid flowed that far north.

90% of these homes are owned by agents who are also slum lords of the same properties

they are trying to sell homes for 100k+ that are rented for 450.00$ per month.

#69 geoff on 02.15.09 at 1:04 pm

I’ve lived and worked in Victoria since the early 70’s; seen a few of the ups and downs here during that time. What most people who intend to migrate here don’t realize is that cost of living is higher than practically any other area of Canada, services are limited and are likely to get more expensive. Ferry lineups, delays, increasing fees. Imagine having to pay $100 each way just to drive from Calgary to Airdrie. The other problem is the “Island” discount. With limited opportunities and a seemingly endless pool of eager “greater fools”, employers and landlords here are primed to fleece the newcomers. Want a decent pay check, good benefits, and living costs that allow you some freedom of choice? This ain’t the place.

#70 Grantmi on 02.15.09 at 1:34 pm

Man of the street report:

My landlord just came back last week for a holiday here in Vancouver, after being away for a year on a work transfer with his company.

The place where he is, is worst there than here. Tons of people getting laid off, and more to come. He’s a bit nervous about being the outsider overseas guy working in the company while all the rest of their countrymen are loosing their jobs left and right.

We talked about the RE market here in the lower mainland of Vancouver…. and I was waiting for him to tell me he was going to raise my rent. He said nothing.

(I was too afraid to ask him to lower it actually… but if this market keeps up I probably will. Since it will be more of a hassle for him to find a renter of this place then to keep me in and taking care of the place like I have been while he’s away!)

Anyway… I can’t mention the company he’s with. But it’s a Fortune 500 company in the worldwide infrastructure industry… and the inside info. from within their company.. they are forecasting this recessionary decline to continue for TWO MORE YEARS before it even starts to turn abound.

TWO MORE YEARS! Ouch!

#71 kitchener1 on 02.15.09 at 1:38 pm

For people thinking of buying I would AT LEASt wait until
Aug-sept-oct nowmatter where you are in Canada.

there will be a glut of inventory come spring. Most listing agreements are either 3 or 6(the majority) months. The houses that will be listed March-April-May will have been on the market for 5-6 months buy then.
The economic picture will be worse off as more layoffs are coming and and the ones that have been announced will have worked there way through the system.

#72 ThumbsUp on 02.15.09 at 1:47 pm

#36 Kitchener on 02.15.09 at 9:15 am
Here are some links for you, yeah Kitchener

http://www.agent1800.ca/resource/uploads/January2009SalesStatistics.pdf

http://therecord.blogs.com/netgain/2009/01/housing-headline-sparks-debate.html

In my opinion, it just got started. Best time to sell, if you can find a buyer.

#73 US Denial (2006), now occurring in Canada on 02.15.09 at 2:11 pm

from foxnews, 2006:

A recent national survey of homeowners by the L.A. Times shows ‘widespread faith in the real estate market.’ The worst possible scenario, that prices would ‘stay the same’ over the next three years, was selected by just 5 percent of homeowners. That total was less than the 6 percent who said they expect to see a rise of 31 percent or more. No matter how much talk of a bubble there may be, homeowners continue to demonstrate that they have no clue about the ramifications of one. And this is in an environment in which prices actually are falling! The denial runs so deep, it’s not even denial anymore.

When a market starts to turn, it doesn’t have to be quick. It’s more likely to be slow and painful – like boiling a frog.
…prices that went up gradually tend to come down gradually over many years. That means slow housing market busts can slowly boil investors who don’t have the cash flow to hold onto their properties until the market turns again.

http://www.foxnews.com/story/0,2933,195550,00.html

#74 Midas on 02.15.09 at 2:15 pm

No areas or regions are immune to the correction; just that people in some areas are more delusional such as in Woodbridge or Thornhill or Leaside. My friend in Thornhill listed his house a few days ago and has two offers already. This does not mean that Thornhill is immune, just that there is a greater supply of greater fools in these areas, as in Kitsilano or Yaletown. The greater the fool the greater the fall. Don’t underestimate the power of human self-delusion, RE is going down another 20%, at least, in the GTA and maybe more than that in Vancouver. Don’t make your decisions based on the delusions of these greater fools.

#75 john on 02.15.09 at 2:37 pm

I live in Victoria and I’m really starting to hate it here. All my family is here so I’m kind of stuck since I have a young child and we’re planning on having another and we want them both to be with our family.

I read your book last spring and you saved me from financial disaster. My wife and I own a small place that we bought near the beginning of the bubble and were about to move up but we’ve decided to just tough it out in this place. We pay less than rent even with depreciation, taxes, and all the other costs.

Anyway anecdotal story here. Lately a lot of our friend’s financial situations have come up in conversations. I always kind of assumed these people were just like us and would save up for purchases and not go into huge debt for things. I was so wrong. I’m astonished. Most have racked up $40,000 PLUS in line of credit debt on top of their mortgages. NO RRSP contributions, no savings just a houseful of chinese crap. What an eye opener. I’m kind of scared for them because surely some of them will soon lose their jobs.

Anyone have advice on how to deal with things like this? I will not preach to them or offer any advice I’m talking about what do I say or do if disaster strikes? I feel so bad for what’s about to happen.

#76 UBC Frank on 02.15.09 at 2:39 pm

Great time to buy in BC? Sure, if you’re a kool-aid drinker.

http://www.vancouversun.com/Homes/Majority+feel+good+time+real+estate+poll/1279274/story.html

Gee, what looks familiar about this?
Oh yeah, American kool-aid drinkers 2 years ago.

http://www.gallup.com/poll/27211/Public-Still-Says-Housing-Good-Buy-PostBoom-Decline-Evident.aspx

That turned out well, didn’t it?

#77 tom on 02.15.09 at 2:42 pm

Re: Victoria real estate. There is a bit of movement here. A good buddy of mine is an RE agent and has sold 3 properties in the last 8 mo’s. Mind you, 2 of them were investment homes he was carrying and sold at discount, and the last sale was a low end townhouse in a dead end neighborhood. He’s thinking of leaving the biz for his old job… school teaching. Oops, they’re closing schools here and laying off teachers every year.. Oh well, there’s always car sales…

#78 Bobby on 02.15.09 at 2:42 pm

Who believes these surveys anyways. You can make statistics read anything you want.

I’ve been looking at property all over Vancouver Island as I think there will be some great opportunities in September, after summer is over. In Victoria the market has slowed considerably and up island it has stopped. The only sales are considerably below list price. For example, a Mt Washington condo just sold for $60,000 under list. I guess the 1 sale in 2008 was the motivator. In Victoria, many homes are languishing on the market. All it takes is one $1 mill + sale to move the average. Look at the median price, it is remarkedly lower. There are hundreds of empty condos on the market. They aren’t selling and won’t rent for anything close to covering the costs.

Many of the realtors I have talked to are now taking a different view when dealing with potential clients. It is hard to say prices will rise this year when clearly they are falling. Legitimate buyers and sellers have grasped what is happening and are choosing their agents accordingly.

Just wait, it is going to get a lot better.

#79 Shifty on 02.15.09 at 3:20 pm

Just to clarify some facts, Victoria doesn’t rain constantly as some posts indicate. The facts are Victoria’s rain fall is 22 inches average per per year and the climate is considered grass land. The Pacific ocean moderates the temperature, warm winters, little snow, and moderate heat in the summer. The place is a garden, rich green all year long, clean air and sweet water. The one truth is that, a well paying job is difficult to find and cost of living is high. One of the statements that rings true is that “if you can survive in Victoria you can survive anywhere”. My personal view is that I’d rather eat hamburger in Victoria than steak anywhere else.

#80 CM on 02.15.09 at 3:26 pm

Re Bill in Muskoka (NAM)’s link from a few days ago on Mother Jones – it was really interesting to see the groundswell of support for arresting and trying war criminals if the countries were unwilling or unable to do so themselves.

There have been a few recent tries at citizen’s arrests. John Bolton (otherwise known as Bonkers Bolton) was speaking at the Hay-on-Wye writer’s festival in Wales this summer when George Monbiot attempted an arrest. It was well known beforehand that this was going to take place. Cops or security prevented Monbiot from reaching the stage and Bonkers Bolton was hustled off quickly. He left the country pretty soon after.

The U.K. was a signatory to the International Court in the Hague, which means that Blair and his cohorts could be tried (I live in hope).

One interesting thing – the U.S. still has a law in place which is known locally as the Invade the Netherlands Act or the Hague Invasion Act.

“The long and short of it is that America will use military force against the Netherlands to free any of its nationals held by the international criminal court (ICC) at the Hague. ”

http://www.guardian.co.uk/Archive/Article/0,4273,4456801,00.html

Maybe the law is being kept on the books in hopes that it could be extended to former government members, too.

—–
A local news program (Kingston, ON) was lauding the still solid housing market and number of housing starts. I don’t know where they were getting their numbers from.
Certainly in the outer areas houses are on the market for ages, even with lower prices and other enticements.

The double whammy about this mess is that, if you lose your job, you can’t sell your house and move to find work.
—–
And my anti-Afghanistan rant for today (you knew it was coming):

The average cost to keep a soldier in Afghanistan from the U.S. is $725,000 a year. That’s almost a million in Canadian money. I don’t think the costs are any less for us. With an average of 2,500 soldiers there in one year, that’s $2,500,000,000. That’s a lot of Canadian living wages. And when you consider the after-war costs of medical and psychiatric care, disability, broken families, orphans etc., is this something we should be doing in these troubled times?

I think you probably know my answer to that.

One final thing – Tom Walkom’s piece on the recent budget, written by Stevie and enabled by Ignatieff, points out a few things people may have missed.

What you missed in that budget bill

“…But Harper is also using the opportunity provided by this slump to quietly ram through laws that punish two groups his governing Conservatives have long had in their sights – public sector workers and uppity women.

At the same time, he is quietly introducing measures to weaken environmental laws affecting rivers and lakes, limit federal oversight of most foreign investment and scale back some of Canada’s few remaining restrictions on foreign ownership.”

http://www.thestar.com/comment/columnists/article/587488

What a prince!

#81 charliegosurf on 02.15.09 at 3:30 pm

risK or Ksir

the mirror effect, are you the same person that you believe you are or just a reflexion in a reflective world.

love that K in the pic, it stands for

Kit-kat are for sharing
Kuestion yourself about integrity
Kap your belonging$
Krave equal treatments for all
Kanadiens and Kanadians are the same
Krooked are the firstnations mentality
Kebek has Kulture, ameRIKANS too kinda.
KOUkouver aint the center of the world
Krap the planet is in
Killing the economik belief’s.
KomiK is this world.
Krazy are the $erious people’$.
Kamikaze are the fool$.
Kanuck’s we all are, krazy and krazed but quiet about it.
K.O. the future is for now.
Kings 4 can only be beaten by A’s four.
Kaput is your portofolio.
Kaboum is the n-amerikan auto industry.
Katrina was just a demo.
K is in obama firstname.
Kool-aid is the real-estate world official drinK.
Kill the Sqkirell but share the harvest.
Krash are for there to remind yu why to not K.
Killing and 911 the phone number are so related.
Korn flakes and kosama bin laden are rebels in a field.
K-nine’s are the ultimate fool’s.
Kraving for more to buy, you are!
Kristianisation will always be a pipe dream.
KARMA is the ultimate BOSS.

BEWARE The K-time are rollin in & the RocK’s always get washed away with water no matter how big or hard it is….Surf’s up

#82 RJAG2034 on 02.15.09 at 3:32 pm

Could be because the sun is shining, the flowers are poking their heads out of the ground and that always make people feel a bit better.

Dont worry, reality will prevail, not everyone in Victoria is rushing out and snapping up those ‘bargains’

#83 wellwell on 02.15.09 at 3:52 pm

Garth:

With this post, you have transcended your customary roles of financial guru and proto-libertarian politico. It seems that, ultimately, you will have to be considered something of a public philosopher. What is the value in those things we value? One can still remain humble while trying to answer that difficult question.

I remember fondly your speech at the 1993 leadership convention, when you told the country how you consulted your neighbours and asked what they would say if given the chance. It seems to me that there is a natural progression from that moment to this, and I hope you will eventually share your well-seasoned and considered thoughts about the nature of true wealth and self-delusion.

#84 kitchener1 on 02.15.09 at 3:59 pm

RE: the comments about the RE market in Kitchener-Waterloo area.
It is noticably slower then lasy year, lots more homes for sale and much longer times on the market. Prices have yet to drop–same pattern as elsewhere, listings are skyrocketing but movement in price is minimal. I am seeing tons of forsale signs on lawns all over the place, some that have been for sale for at least 5-6 months.

Lots of manufacturing layoffs have hit this region, thats why I suspect we are seeing an increase in listings. In my opinon many homes here are overpriced compared to other GTA burbs (Kitchener is not a part of the GTA FYI) New SFH start at 250-275K but a larger home in a nice area will run you 300-350K. Compared to Toronto I think its a bit much.

Here is an example of a listing in a nice Toronto area for 399K
http://www.realtor.ca/propertyDetails.aspx?propertyId=7910959

The other point is that Kitchener is a smaller city compared to Toronto or Brampton etc.. so the pool of buyers is smaller as well.

The funny thing about these cities is that a lot of new buyers would not have qualified if had not been for the 0 down 40 year mortgage yet in right now (in worse economic times then when they brought) they expect to sell their homes for 50-100K more then when they purchased them 1-3 years ago.

#85 Marie on 02.15.09 at 4:14 pm

Calgary37
“However, I do not know what specific event(s) has spooked him to issue this type of warning.”

Methink its the passing of the US bailout package. Obama borrow and spend package wont re-inflate the bubble.

The most important reality is Peak Oil which will turn upside down the traditional business cycle of rebound following decline. Peak oil will not allow the economy to recover. We’re in a plateau right now. The contraction of the economy is not such a bad thing, it will slow down oil consumption and buy us time to come with solutions to adapt to the decline of fossil fuel.

From Robert Hirsh, author of a very important report (2005) on the risk of peak oil:

“Today, the situation is worse, and the reason for this is that it is now obvious that world oil production is already on a plateau. It has reached a high level, and has leveled off. The point at which oil production will decline is probably not far away.

If the world started (to implement solutions) 20 years before the peak oil problem, we would have stood a very good chance of beating the problem and could have avoided significant negative consequences for our economy. As it turns out, we now don’t have 20 years; we don’t even have 10. It wouldn’t surprise me at all if oil production begins to decline within the next few years.”

#86 Grantmi on 02.15.09 at 4:15 pm

Ok! Reading this this weekend was depressing!

Harry Dent is calling for 15 more years of slowdown!

(I just puked on my keyboard!!!) :->>

“The stimulus works when the generation is still rising and needs to spend more money, buy more houses and get their kids in college,” he said. While retirees may still go on cruises and live relatively well, they are expected to spend less and focus more on saving for retirement.

“It’s not going to turn the economy around,” Mr. Dent said, predicting another strong stock market crash late in 2009 or in 2010, followed by an even deeper downturn into 2010 and 2011. As for de-leveraging, the economist expects that trend will continue into 2012 or 2013 before the economy can expand again.

http://www.financialpost.com/story-printer.html?id=1288738

#87 dodgedabullit in Alberta on 02.15.09 at 4:30 pm

Greetings: I just loved that description of POKEY– The CONDOM. I fired that off to my family members with the following added: “Sources in Ottawa indicate that in order to use the Canadian version, the lucky receipent will have to bend over”.

#88 Vancouver_Renter on 02.15.09 at 4:59 pm

I am both amazed and frustrated at the never-ending PRESSURE we get from family and friends to buy a house, even with the world entering the mother of all economic contractions and unaffordability at historic highs. Several writers here have cited this stigma. The assumption is that you must be one or more of the following in order to be renting:

1. Unambitious. Low-income trailer trash lifestyle.
2 No savings and poor credit, because if the banks would let you buy a house, you surely would.
3. Maybe worthy of my sympathy because you may have suffered some kind of unfortunately financial tragedy where life savings were lost.
3. One of those nutcase “end of the world as we know it” reckless speculators.
4. Just plain out of touch with reality because everyone knows that “now is a great time to buy!”
5. Someone who needs to “move on with their lives and start LIVING!”
6. Inferior to me. Hasn’t yet achieved home ownership in his life.

Tell someone you are renting and they immediately pigeonhole you into one or more of these categories and get a smirk or concerned look on their face.

It is so annoying!!!!!!

For the record:

1. I have a plan and carefully manage my portfolio.
2. I’ve owned several homes in the past.
3. I do a lot of financial research and believe that history is on my side in my decision.
4. I could pay cash for a very nice Vancouver house today, if I so desired.
5. While everyone else is working hard to pay their mortgage on their house, I work 1/2 time in my own business and spend every other day outdoors with my young kids. This is possible, in part, because our rent is a fraction of the cost of supporting house ownership.

#89 Future Expatriate on 02.15.09 at 5:30 pm

“Shifty” #79: Good luck dumping your properties…

#90 ThumbsUp on 02.15.09 at 5:43 pm

#84 kitchener1 on 02.15.09 at 3:59 pm
Nice write-up on KW.

I’m looking at 30-40% drop in the next few years.

#88 Vancouver_Renter on 02.15.09 at 4:59 pm

Nice comments on Rent vs owning.
I’ll add one to your list – I’m bearish on Real estate.

individual house does not appreciate in value, especially when bought at the height of last 3-4 years.

#91 Bottoms_Up on 02.15.09 at 5:52 pm

#68 sold in 2007 on 02.15.09 at 12:59 pm
—————————————–
Here’s a more realistic $60,000 (Windsor) home:

http://www.realtor.ca/propertyDetails.aspx?propertyId=7769938

#92 Herb on 02.15.09 at 6:03 pm

CM,

your #80 took me gack to garth.ca. Ah for the good old days of political blogging!

#93 Shifty on 02.15.09 at 6:09 pm

#89 Future Expatriate
I don’t need good luck, it’s called planning and hard work, you should try it some time.

#94 Dave on 02.15.09 at 6:11 pm

I am both amazed and frustrated at the never-ending PRESSURE we get from family and friends to buy a house, even with the world entering the mother of all economic contractions and unaffordability at historic highs. Several writers here have cited this stigma. The assumption is that you must be one or more of the following in order to be renting:

1. Unambitious. Low-income trailer trash lifestyle.
2 No savings and poor credit, because if the banks would let you buy a house, you surely would.
3. Maybe worthy of my sympathy because you may have suffered some kind of unfortunately financial tragedy where life savings were lost.
3. One of those nutcase “end of the world as we know it” reckless speculators.
4. Just plain out of touch with reality because everyone knows that “now is a great time to buy!”
5. Someone who needs to “move on with their lives and start LIVING!”
6. Inferior to me. Hasn’t yet achieved home ownership in his life.

———————————————————

you have described my situation perfectly. I just don’t know what to do. There’s that stigma attached to someone who rents now. I have money to put a significant down payment down but I’m choosing not to. I’m at the age/situation people expect me to buy a home. I rather save money and invest elsewhere..

Is there someone out there that can help with this situation? How can I tell people I’m renting but I have savings while being humble at the same time? People feel bad for me because I’m not going to buy!! What do I say, “I have more cash than I have debt, don’t feel bad for me?”. Its a catch 22.

Sorry if I’m coming across as arrogant from what was sated above

#95 Shifty on 02.15.09 at 6:11 pm

#89 Future Expatriate
I don’t need good luck, it’s called planning and hard work, you should try it some time.

#96 Jelly on 02.15.09 at 6:25 pm

Investx,

You said;
“Now is a great time to get involved or get more active in Real Estate! Whenever the ‘masses’ are running scared, there is a phenomenal opportunity for the few who grab the bull by the horns and take action…that is what I am doing, that is what many of my fellow professional Real Estate investor friends are doing, and that is what you can do as well!

Don’t you think you’re a little too soon on the whole, let’s buy real estate bandwagon? (Or too late, however you want to look at it.)
Please, do go out and buy LOADS of it, you deserve it you schmuck!
In 2 years or so, you will certainly feel like an idiot as we get better deals since you bought just when all the trouble STARTED!

#97 ralph on 02.15.09 at 6:55 pm

What is so special about Victoria to justify those high prices? Sure the weather is nicer there then most parts of Canada. However, you can buy a decent place in some town on the prairies and still be able to fly somewhere warm with the money left over. Especially if you are looking for a place to retire.

#98 Kitchener on 02.15.09 at 7:35 pm

#90 I’m looking at 30-40% drop in the next few years.
Where is that?

#99 TheFirstRick on 02.15.09 at 7:35 pm

#54 dd on 02.15.09 at 11:18 am #45 North Vancouver Citizen Jr.

…Have I ever mentioned that Calgary will become the Next Financial and Trade Capital of North America?
============
PSSSSSTT!! Just ignore him, he is as half baked as his dad!!

#100 jks on 02.15.09 at 7:35 pm

# 88 Vancouver Renter

Seems as with many other things in life doesn’t it? We did it, got ourself into a bottomless pit of debt, we got married (and are honestly unhappy) we had kids, etc. etc. so you should probably take that path also. We don’t own any of our “possessions”, we’re just sort of borrowing them from the bank, but we sure are well off. It amazes me how people look at all that as “wealth”. I met someone once who was in the process of getting approved for a mortgage. He had a hard time grasping the concept of why a car he was not even close to paying off was not considered an asset. After much explanation as to why, simply because in his eyes, it being in his possession qualified it as such. The guy, from what I could tell, had stiffed basically every utility, credit card, etc. etc. He gets approved no problem. Not only that, the advice given that the first 3 months of owning a house are pretty expensive, with furnishings, closing, etc. or to go lower than what you got approved for. No sir, max that thing out. That whole spectacle was rather foreboding to me in terms of where it was all headed. Talking to people that based most of their buys on the “per month” cost, financed to the hilt on every damn thing. Zero fear of debt… Scary, I thought to myself.

#101 TorontoFamily on 02.15.09 at 7:36 pm

#34 HalifaxFamily

We too saw the CREA media release last week and are questioning the numbers for Halifax. We will be relocating there soon and have been watching the real estate market closely. There seems to be a surplus of homes on the market especially in the new build burbs and very little movement (if any). This seems to concur with your previous posts. However, one of the recent news articles described a local RE agent whose phone was “ringing off the hook”, but this doesn’t seem to fit with what we have been observing.

We looked at the CREA NS site, and their last numbers posted were for November 2008. We too are questioning the positive RE stories regarding Halifax. Do you know if there are any more current RE numbers?

I will be speaking about this Monday night in Halifax. — Garth

#102 North Vancouver Citizen Jr. on 02.15.09 at 7:38 pm

Ontario Population…2006

—Toronto…2,503,281
—Mississauga…668,549
—Hamilton…504,559
—Brampton…433,806
— Markham…261,573
—Vaughan…238,866
—Windsor…216,473
—Kitchener…204,668
—Oakville…165,613
—Burlington…164,415
—Richmond Hill…162,704

GM Go Boom?

“”The UAW stopped negotiations with GM last night.””

http://market-ticker.denninger.net/archives/798-GM-Go-Boom.html

How will a bankrupt GM/Chrysler and all their related industries affect Ontario?

tia

#103 go green on 02.15.09 at 8:13 pm

64 Future Expatriate on 02.15.09 at 12:42 pm Glass bowl sinks are the most idiotic fad since crystal chandeliers. Great, not enough to have to clean the inside of the sink, now you have to clean up the outside as well. There is a reason people have been countersinking sinks in counters for the last seventy years.

At least granite countertops are practical when they’re not outgassing radon.

I am going to laugh ten years hence when everyone is throwing those damn bowls away and completely redoing the bathroom cabinets and counters because they sit too low for countersunk sinks.

Never underestimate the evil genius of home fad sellers and marketers.

Wow do I agree Future Expat. I believe they were invented by men, along with the majority of the toilets that are currently on the market. Far more difficult to clean. I know in our house I’m the only one who cleans them. We bought a couple of Aussie Caroma 3/6 litre toilets – well designed & easy to clean. And bathroom vanities with storage that are as high as kitchen counters. Actually, we put in higher than standard kichen countertops as we are both a bit above average height. Easier on the back.

#104 Vancouver_Renter on 02.15.09 at 8:48 pm

#94…. I face the very same problem. The minute I tell someone that I’m renting, they make all kinds of negative assumptions. I’ve actually heard things like, “Well, when you save enough for a down payment…” and “Oh, we saw you working hard so we assumed you aren’t renters…”

How do I say to them, “I’m renting… BUT I actually have a university degree, healthy net worth, good income, no debt, my own business, long-term financial plan, and subscribe to numerous investment publications and probably could run circles around you when it comes to an understanding of today’s economic issues. So, really, I’m not the trailer trash, uneducated, crack-smoking, dead-beat dad, maxed out at Money Mart, ex-wife beating lazy bum without a plan or brain that you assume I am.” ;-)

#88… I also appreciate what you are experiencing. We have friends who have huge mortgages, car leases, and credit card debt. Yet they LOOK like they are wealthy. They wear fancy clothes and drink their lattes. Their respective parents sleep well at night because they only see the illusion and not the reality. The reality being that, a job loss here and a couple 10s of percentage drop in real-estate prices, and these people will be completely WIPED OUT in short order.

This is one reason why I kind of welcome the idea of an economic shakeup. Our debt bubble has allowed pizza boys to compete with higher-income, prudent savers for houses and other assets. It’s time for the boys (with credit) to be separated from the men (with actual money). Let’s see how many pizza boys show up at an open house to bid against me when mortgage rates are someday 15+% again.

#105 canadianoil on 02.15.09 at 8:59 pm

#79 Shifty

Amen Brother!

My house in Victoria;

1988 Sold for 500K
1996 Sold for 850K
2004 Sold for 1 mill
2008 assecessment 1.5 mill

Sell? Not a chance!!!

How do you know what your house in Victoria is worth when your computer is in Singapore? — Garth

#106 Da HK Kid on 02.15.09 at 9:30 pm

#88 Vancouver Renter

And this is why you will do extremely well in the future. I believe these sheeple are increasingly getting worried day by day and are wondering if you are on to something.

They will unfortunately move from pity toward you to loathing you for being the smarter. You cant win if you are the few that associates with the many.

One thing for sure, you wont get this from the posters on Garth’s site. Have fun with it!

#107 ThumbsUp on 02.15.09 at 9:42 pm

Garth had a post on this

Ending the myth of the frugal Canadian

http://blog.macleans.ca/2009/02/15/ending-the-myth-of-the-frugal-canadian/

“Canada’s household debt-to-disposable-income ratio now exceeds that of the U.S. As of the middle of last year, the typical Canadian household now owes a little more than 1.3 times its annual disposable income, whereas the average American household owes a little over 1.2 times its income. That’s all debt, including mortgages, when compared to our income after taxes and interest costs.”

#108 TrueGritCalgary on 02.15.09 at 9:55 pm

#101, “However, one of the recent news articles described a local RE agent whose phone was “ringing off the hook”, but this doesn’t seem to fit with what we have been observing.”

“ringing off the hook” might mean sellers anxiously phoning realtors to list their properties. It’s all a matter of verbal nuance.

#109 Meet POKEY on 02.15.09 at 10:34 pm

#56 dd

Not to defend Jim Sinclair (he does enough of that himself), but his theory is a little more complex than just “hyperinflation”. He thinks that the disruptions occurring in the economy will eventually impair production and transportation of vital goods at some point, a worry that Garth shares to some amount I think judging by his Xubia website.

If I understand the argument correctly, for example, we may have falling automotive sales & prices now and it’s bankrupting the auto manufacturers. But once they shut all the plants and send home the workers, they will not be able to restore production all that quickly in the event the economy recovers, especially if that recovery comes on the back of massive over stimulus. At some point in the future, there may be enough money around but no new cars. The same can happen to any consumer good that is being taken off line due to the economic contraction. How are we going to buy lumber once they have shuttered all the mills? Oil companies are slashing exploration budgets even as production continues to decline, because of the massive reduction in demand. But if demand returns, can they find new gas and oil in time? That is the dilemma Sinclair is addressing.

Although Sinclair believes in a hyperinflationary outcome to the situation, most of his advice isn’t that much different than what I’ve come across in “After the Crash” so far. Get a safe, have some emergency cash in it, go off the grid as much as possible, store food and grow a garden, take personal security measures, and by gold. Only Jim thinks you should by lots of it and take physical delivery.

Oh ya, Sinclair also has a “Pakistan” theory. He thinks the situation in Pakistan could devolve into a major disruption in the Middle East in a very short time with little additional warning.

#86 Grantmi

The nice thing about Harry Dent is that he always forecasts a trend great once it is underway but never gets even close on how it will turn out. For that, somehow, he’s earned a nice living.

#103 go green

I wonder why they don’t have glass toilet bowls? Just an idea.

Garth’s comment to #105 canadianoil

Ha, ha, blog trolls beware. Trolling works best on lightly moderated sites like stock exchange forums.

#110 Meet POKEY on 02.15.09 at 10:35 pm

PS the “Meet Pokey” thing wasn’t my original. But I also forgot to change my post name back!

#111 Wealthy Renter on 02.15.09 at 11:53 pm

“I am both amazed and frustrated at the never-ending PRESSURE we get from family and friends to buy a house, even with the world entering the mother of all economic contractions and unaffordability at historic highs. Several writers here have cited this stigma. ”

With due respect, there is no need to feel stigmatized by being a renter. There are plenty of reasonably affluent people who rent their homes.

My wife and I know two genuinely wealthy couples (with $ millions in safe investments.) One couple bought their first house in their forties, and the other has just retired to Victoria, and looking to buy their first home. The former couple would still be renting, but they made an investment steal of a lifetime picking up a 2700 square foot home near the Oakville Go station for around 300K (circa 2000.) Yes my friends, this is how ridiculously priced real estate has become. The latter couple lived well in a nice condo in the Yonge-Shepherd area. They lived downtown for a long time, and liked the freedom of being able to live on their terms and move on a whim if they desired.

In my little brain, it makes sense to for couples with significant means to rent and save their money. Even with the insane boom of the last few years, my wife and I are way better off buying now, when compared to even a few years ago. We are not rich, but our jobs let us sock away enough cash, that if prices take a modest shave over the next year, we will be able to pay cash for a modest single home in a decent area.

Do what is best for your family.

#112 Investx on 02.16.09 at 12:31 am

Jelly wrote to Investx:

Please, do go out and buy LOADS of it, you deserve it you schmuck!
In 2 years or so, you will certainly feel like an idiot as we get better deals since you bought just when all the trouble STARTED!

If you read again, you might understand that this was not me talking, but the Get Rich guru that I was quoting.

#113 René Kabis on 02.16.09 at 2:50 am

You want risk? I’ll give you risk: The Kelowna housing market.

The latest Real Estate (OMREB) numbers for Kelowna are out, and man am I shocked.

• Average home price for April of 2008 (market peak): $553K
• Average home price for January of 2009: $412K
• $ drop from peak: -$141,239
• % drop from peak: -25.5%
• Average monthly drop, in $: -$15,693 per month
• Average daily drop, in $: -$515.47 per day
• Annualized drop, in $: -$188,319
• Average monthly drop, in %: -2.8%
• Annualized drop, in %: -34%
• Months of Inventory: 41 (3 years, 5 months)

What is scary is that we are still in our “slow season”. We have yet to see the “spring thaw” when “homeowners” (i.e., desperate flippers and speculators) wanting to sell pile onto the market in droves in an attempt to take advantage of the spring selling season.

I strongly expect that we will see skyrocketing numbers of units of all kinds on the market. I expect to see MOI exceed 60 (5 years!!!) by April or May of this year; June at the absolute latest.

I fully expect home prices to be more than 34% down by April of 2009… the annualized drop is just an estimate based on past performance (including a better than expected December for average home prices). In fact, I fully expect average home prices to meet my predicted drop of -50% by either April or May of this year.

That means that the price of a home will have fallen by 50% inside of twelve months. Remember, the annualized rate is only 34%, and it isn’t even the Spring Bloodbath season yet (we have another three months to go). That additional 16% will be awfully quick to disappear once J.Q. Public realizes the carnage that is in store for any homeowner that *needs* to sell.

It is obvious that my initial predictions (in late 2007 – early 2008) made on the Castanet.net forums were WILDLY AND IRRATIONALLY OPTIMISTIC. Those predictions were ones I had expected Kelowna to reach some time in 2010 or 2011, NOT 2009. As such, I am revising many of my predictions sharply downward in a strongly pessimistic nature. I hope to at least match market trends, not lag behind them in such a strong manner.

And to think that I was roundly mocked as a ‘doom and gloom(er)’ (on the Castanet.net forums) for my predictions a year ago. How quickly things change.

BONUS:

Kelowna is worse off than ANY OTHER CITY in Canada, for both % as well as $ plunge from our market peak:

http://www.canadian-housing-price-charts.235.ca/images/Jan09-Plunge.jpg

HOLY EXCREMENT!!

Now THAT is a RISKY MARKET!!

http://www.west-kelowna.ca/

Remember, any home will sell quickly at the right price. If it doesn’t sell quickly, then it isn’t at the right price. Cut deep, and cut fast, and you just might be able to get to the right price before it becomes unsellable at any price.

#114 barb the proofreader on 02.16.09 at 3:04 am

#105 canadianoil………
[….]

“How do you know what your house in Victoria is worth when your computer is in Singapore?” — Garth

Garth,

:) I love it when you I.P. someone.

#115 Mike (authentic) on 02.16.09 at 7:36 am

Shifty “Just to clarify some facts, Victoria doesn’t rain constantly as some posts indicate. The facts are Victoria’s rain fall is 22 inches average per per year and the climate is considered grass land. The Pacific ocean moderates the temperature, warm winters, little snow, and moderate heat in the summer. The place is a garden, rich green all year long, clean air and sweet water. ”

Sweet water? Is that what Victoria is now calling its raw brown drinking water now?

As B.C. Prepares for 2010 Olympics, Victoria Continues Sending Sewage to Sea
http://environment.about.com/od/waterpollution/a/canadasewage.htm

One of the worst offenders is the quaint city of Victoria
http://www.alive.com/7036a17a2.php

The Capital Regional District has stalled on sewage treatment since the 1970s. Gov’t named Victoria as the country’s worst sewage polluter
http://seattlepi.nwsource.com/connelly/277267_joel12.html

Victoria Homelessness captiol of Canada
“Victoria’s moderate climate and relative warmth when compared to the rest of Canada, in conjunction with steadily increasing costs of living has created a disproportionately high population of homeless people.”

Been to Victoria, I like it, but hey, just don’t drink or play in the water.

#116 dd on 02.16.09 at 10:49 am

#66 Calgary37 o

“These are the words of Jim Sinclair, so I do not know the real reason for why he used them.”

It is not what Jim Sinclair says what should matter. What do you think?

#117 Victorian on 02.16.09 at 1:31 pm

I’m not sure why everyone is ganging up on Victoria. I moved to Victoria from Vancouver and I wouldn’t live anywhere else. I have travelled the world, and yet come back here. There is a sense of community, love of the environment, architecture (rare for Canada) and its a relatively safe place for kids. There are good jobs here, you just have to work a little harder to get them than you do in Toronto or Vancouver- but here you can reach anywhere in 10 minutes or less- not many big cities can compete. The current housing correction is a good thing, and will make it even more affordable.

#118 Future Expatriate on 02.16.09 at 10:16 pm

#93… you need far more than luck and rosy bs posts; you just don’t have the smarts to realize it.