Underground in Edmonton

edmonton1

Mercedes sells itself to Abu Dhabi. GM and Chrysler teeter on the brink. Washington readies a $1 trillion plan to sop up toxic bank wastes. Just another day in 2009.

An MBA student called me Sunday, doing research on Canadian subprime mortgages (a reader of this blog, as it turns out – home of the best damn post-grad gruel in the land). He said he was having a tough go with his thesis, since his profs were convinced, “Canada did not have a subprime problem.”

Of course, the wilful and deliberate relaxing of mortgage standards in the very middle of this country’s greatest real estate market turned a boom into a bubble. Zero-forty loans not only inflated values and set the scene for collapse, but their impact will not really be known for four or five years – when all those negative-equity baby homeowners face a loan renewal. Should be interesting.

Some days it’s hard to know how we messed up so badly. Car companies, banks and real estate are all in decline. Governments are burning through the next generation’s lunch money. People thinking screwy.

Like Jeff in Edmonton.

I with my girlfriend have just sold her condo and have moved in with her parents. I own a home in Edmonton which i rent out and so the house pays for itself  in terms of the mortgage and bills. We were planning on moving back to my home, renovate it, live in it for a couple of years and then move on to a newer home. Now we are thinking of staying on with her parents, letting the renters continue renting my home as it pays for itself and then save for that newer home we hoped to have in a couple of years. My girlfriend is a nurse and i am an Engineer so we feel at least her job is quite safe relative to what’s going on out there with other people.

I find you talk a lot about house prices in B.C. and Ontario and i’m curious what your outlook is for the Alberta and especially Edmonton market. Alberta seems to be a little more fortunate than other parts of the country in terms of employment and i’m curious if my province will rebound first relative to other provinces. We are looking at purchasing that newer home in the latter half of 2009 or early part of 2010. Is this worth doing? Or should we be waiting a bit longer into perhaps the latter part of 2010 as you mention house prices will continue to slide. Since my current home pays for itself i assume keeping it rented is a good idea instead of perhaps moving back into it.

See what I mean?

Guy buys house, rents house, gets girlfriend, moves into her parents’ basement to save money so he can buy a house. What’s wrong with this picture?

I mean, cowboy, you’ve already got a house which is paying you no income over expenses, and you’re living below grade? This is how you got to be a smart engineer? Has she taken your temperature lately? Why should other people live in your residence, especially since this negates your ability to reap any tax-free capital gains the property might give you?

Also, if you have a house, why do you need to buy another bigger, newer house when you are presently living in a basement? Do you just like contrasts? Have you noticed we are in the middle of a housing recession which could last five years, or a decade?

As for Alberta, I’d park the smugness. It’s a local myth the economy is in better shape than other parts of the country, just like deluded BC dudes think everyone wants to move to their over-governed and unaffordable province and Toronto dwellers believe an endless stream of immigrants will propel them up the food chain.

The province is largely a one-trick energy pony, and Edmonton bears witness to that. The average house price is down 18% or $78,000 from the peak, and there is no reason to believe oil prices will be spiking seriously higher in the next year. The Alberta housing bubble was destined to pop early and pop hard, since it was based on an economy dangerously fuelled by commodity prices.

Good luck, cowboy.

If you need more abuse, I am speaking in Edmonton on Thursday afternoon at four, Northlands.

Breaking news: Canada to fight mortgage grief with new brochure.

.

112 comments ↓

#1 Aizlynne on 03.22.09 at 9:07 pm

Have fun in Edmonton Garth … you’ll need it!!

Housing prices have dropped both here (Calgary) and in Edmonton. Houses went up 50% in both cities so if you bought your home 5 years ago, you are not out a thing. I can still get $150,000 over what I paid for my house.

However, I do anticipate a further drop in housing prices. As long as we cling to the US, we are doomed. However, if we can move our trade partnerships into the emerging economies, we will be much better positioned. The banking crisis does not affect China — this is where the new super power is emerging.

I enjoy your blog Garth .. although you do tend to exaggerate the state of things in Alberta at the present time. Perhaps you are a futurist and just don’t know it.

#2 taxpayer like you on 03.22.09 at 9:18 pm

Regarding canadian bank bailout. Not quite how I understood it. Comments?

http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20090330_10008_10008

#3 wpepper on 03.22.09 at 9:23 pm

This is a lengthy but easy to read article from Rolling Stone magazine that’s making its way around the internet.

The Big Takeover
The global economic crisis isn’t about money – it’s about power. How Wall Street insiders are using the bailout to stage a revolution

http://tinyurl.com/csm2yp

#4 lightning_kash3 on 03.22.09 at 9:35 pm

Garth, will you come to Speak in Calgary?

#5 James Pike on 03.22.09 at 9:53 pm

taxpayer like you: Re article

Somehow I just loved reading the banks having to pay fees to sell their mortgages to CMHC. I suppose there is some anger I need to deal with.

#6 dd on 03.22.09 at 10:08 pm

When are you speaking in Calgary?

When I’m invited. — Garth

#7 Got A Watch on 03.22.09 at 10:09 pm

Alberta may have a strong economic base. But you can’t escape the law of averages forever. Every economy moves in cycles, and after a good run, it always comes time for a correction.

Of course most people who have experienced that long good run can’t believe it can end. Many consumers today have few memories of the last deep recession, they were too young. So you have a good portion of the population who won’t realize the party is over till it is well too late.

Nobody remembers the ‘Great Depression’ anymore, which is why it can happen again, as the warning signs are ignored. A primary argument of the “generational cycle” theories like Kondratiev Wave or Generational Dynamics.

#8 dd on 03.22.09 at 10:12 pm

#1 Aizlynne on

…The banking crisis does not affect China — this is where the new super power is emerging…

So goes the US go goes the world. China sells to the US and the world. Manufacturing capacity is running at 75%. This is not going to be an instant springback from China.

#9 nonplused on 03.22.09 at 10:14 pm

#2 taxpayer like you,

Makes sense to me. Why would the banks want to sell insured CMHC loans back to CMHC to raise liquidity, when they don’t want to write new loans?

Not that you can’t get a loan, you sure can, but standards are up a bit.

Because CMHC loans are insured, they don’t engender write downs until there is a problem with CMHC, which we don’t yet have, and may not. So it makes sense to hold performing loans.

#10 Da HK Kid on 03.22.09 at 10:15 pm

For anyone who does not see Garth’s blog as an absolute benefit, especially for residential RE advice is toast, to be toasted or just plain lost!

Here’s another kicker that is coming I believe. All the bad banks with sub-prime ie Citi BOA as an example are now forced to write down as much debt or cash in to supply as much assets as possible on their books NOW!

Here’s the tug, homes in Arizona at peak for $450K now $220K are being flushed lower as banks like Citi dump foreclosed properties at $135K bringing vulture investors in but killing the $220K owners still trying to survive. These are 25/75 owners or lets face it 50% down on $450K your already under water.

If this is the case, Citi, BOA Fanny Freddie and any bank even potentially in Canada offering 0-40’s could enter into the same spiral.

This could be another very strong drop in a bottom finding mission that could take again years. While this example is in one of the worst hit in USA, it still is valid for any bank owing any property anywhere who needs to get assets back on the books for survival.

#11 dd on 03.22.09 at 10:16 pm

Jeff in Edmonton.

…Alberta seems to be a little more fortunate than other parts of the country in terms of employment and i’m curious if my province will rebound first relative to other provinces…

Alberta is a one trick pony. Commodities. If the US and Europe limp out of this great recession at 1% GDP, then oil and natualy gas prices may not spike up tomorrow.

Cool your heels cowbody. What is the rush. And you are foolish. I would want to hang onto housing for an investment. Better returns elsewhere. Sell the home or live in it.

#12 kc on 03.22.09 at 10:22 pm

#1 Aizlynne stop drinking the China kool-aid….. They are in for wake up calls pretty soon. You forget to include in your statement that they are run by the Government, and you can’t 100% believe what the Gov tells you… so, China is going to fall. and watch how the US T-bills party turns out. China BULLS are going to be shot down in flames.

#13 westcanguy on 03.22.09 at 10:24 pm

Garth, If you are able to spend any extra time n Edmonton, you’ll see that most people here don’t yet see what is happening. Casino’s are packed, restaurants are packed and you couldn’t find a parking spot at West Edmonton Mall on a saturday if your life depended on it. When we fully feel the brunt of a hard bitch slap from the world economy here in good ol Oilberta, many will wonder what happened.

I’d really like to hear your talk at the Farm and Ranch show this week but I’ll be damed if I’m going to pay $12.00 to park on a lot that you have to walk 4 blocks to get into the venue and then another $10-15.00 admission to rub elbows with farmers and ranchers weeding through crop production displays, lawn and garden tractor displays and the never ending line up at the mini-donut stand.
Surely there could have been a better event for you to speak at. I could be wrong but I’m thinking you’ll be speaking about real estate for the most part, among other things. I’m not sure farmers and ranchers will resonate nearly as much as city folk.

#14 dd on 03.22.09 at 10:28 pm

“When are you speaking in Calgary? When I’m invited. — Garth”

Well I will talk to the mayor and get the white stetson ready.

#15 dd on 03.22.09 at 10:33 pm

#10 Da HK

… All the bad banks with sub-prime ie Citi BOA as an example are now forced to write down as much debt or cash in to supply as much assets as possible on their books NOW!…

Not only the “Bad bank with sub-prime” but all the good banks with grade A loans. This real estate mess is hitting all banks. And don’t forget all the other loans; student loans, commerical loans, equity loans, car loans ….

#16 Taxguy on 03.22.09 at 10:42 pm

Garth, one correction. The fellow living in the basement doesn’t automatically lose the ability to treat the house he’s renting out as his principal residence for capital gains purposes.

You’re right to flag that there may be tax issues, though, and he should probably get some advice.

If it generates income, yes he does. — Garth

#17 taxpayer like you on 03.22.09 at 10:52 pm

#9 non-plused replied:

“Because CMHC loans are insured, they don’t engender
write downs until there is a problem with CMHC, which we
don’t yet have, and may not. So it makes sense to hold
performing loans.”

Yes, it does. Especially when the banks get that little fee charged that #5 James likes so much.

I had basically thought the whole $75B was a done deal.
At “only” $14B so far, its almost encouraging. Maybe a
$30B bailout total. Yippee!(?)

Was good to read a little about the mechanics of it. Anybody else have any other sources?

#18 Hd on 03.22.09 at 10:55 pm

Here is one for you Garth. USA is now more socialist than Sweden. While Uncle Sam shovels the rubles at GM and Chrysler, Sweden Says No to Saving Saab, (NY Times)

#19 Sally on 03.22.09 at 11:00 pm

A little something I’d like to see in all you doomers’ bomb shelters :)

http://www.littlediggs.com/littlediggs/2009/03/how-about-a-wine-cellar-for-all-of-you-wine-lovers-who-are-space-starved-.html

#20 Another Albertan on 03.22.09 at 11:00 pm

The Wall Street Journal is reporting a takeover of Petro-Canada by Suncor. We’ll see what Monday morning’s pre-market announcements bring…

If this pans out, every oil and gas company in Calgary is potentially “in play” (and as I explained a few posts back, this means everyone will be looking for possible dates to the prom…)

Eat… or be eaten.

#21 etown on 03.22.09 at 11:11 pm

i agree on house prices dropping big time, but as far as work, there’s still alot of small projects going on, there are massive shutdowns that are about to start. That will help out some what,

these mass lay offs up north does not represent Alberta well, as 50 percent of fort mac is easterners and foreign workers. There are plenty of locals still working. and that will slowly grow as these large oil companies start shutting down incentives for eastern labor force, like free flights, travel money, schedules that are based around people that live out east ( 21 days on and 7 off)

I like the idea of 4 days on and 3 off, like the old days

i see major benefit’s in whats going on. but i do see lots of pain for locals in Edmonton and Calgary as there value will be destroyed, should be lots of foreclosures/firesales

#22 Alberta Girl on 03.22.09 at 11:12 pm

Alberta is in bad shape. I was born in Fort Mac (5 generations and still counting), raise in Emonton and lived the last decade or so in Calgary and am back in E-town, so I’ve seen it all. I am old enough to have my Grandparents talk about the depression ( farmers in Diamond City, had it pretty hard) and young enough to remember people couldn’t sell their houses in Calgary in ’81 for $100….so they walked away. The true numbers are not the ones you read in the papers…. houses are down WAY more than the papers say, unemployment is way up and Garth is right about saying, people won’t acknowledge what’s going on until they see Budget moving vans and foreclosed signs on their neighbors lawns.

Looking forward to hearing you speak on Thrusday Garth!

#23 Vik_regrets_moving2cowtown on 03.22.09 at 11:16 pm

Bank of America Stuck With Real-Estate Chief’s Unsold House
http://www.bloomberg.com/apps/news?pid=20601109&sid=a6WwnMO8EfAQ&refer=home

#24 Alberta Girl on 03.22.09 at 11:20 pm

I type to fast, I meant Thursday Garth!

#25 Hkumar on 03.22.09 at 11:41 pm

Garth,

I can not attend your speech at Northlands, can you post more dertail about Edmonton real estate future please?

#26 Eduardo on 03.23.09 at 12:25 am

dd re 11

Gas prices will be between 6-7 dollars in the summer and oil will be back at 60 dollars.

I’ve said it before and I’ll say it again. Alberta is certainly not recession proof but we’ve seen our drop before the rest and disposable income is WAY higher here.

When applying the “32% rule” people were talking about in the other thread they don’t account for the fact that people grossing 65k take home a lot more and their dollars go much further because of no provincial sales tax. What is the rule for % of disposable income. If we look at it this way I think housing is more affordable.

I agree that the layoffs in the juniors and EPCMs are hurting the economy though.

There’s also still a lot of help wanted signs for 15$ an hour jobs… they might not be the 65k jobs but it’s not like there’s no options.

#27 Eduardo on 03.23.09 at 12:34 am

Garth, I’d also like clarification on how the economy isn’t better off than other places considering:

-gross income is highest in canada
-unemployment is low
-employment is high
-the personal exemption is high
-no sales tax

Energy does not have to “spike” higher for people to drill for gas. 6-7 will do fine to get some activity going again and we’ll see that in the summer.

#28 ralph on 03.23.09 at 12:56 am

“While the U.S. economy is crashing, gun sales are up 26 per cent in January and February compared to last year.”

This may not be a good time to travel to the U.S. They are mad as hell down there. Just because they screwed up there economy doesn’t mean they have to be so grumpy about it.

#29 Two-thirds on 03.23.09 at 12:58 am

Garth,

Where can I find more info on your speaking engagement in Edmonton? How do I register to attend?

But more importantly: will there by cajun squirrel chips at the event?

:)

Open to the public, pay admission at the door. Follow the aroma. See ya. — Garth

#30 Republic_of_Western_Canada on 03.23.09 at 1:16 am

apegga boy – Sell the house to the renters and live in the basement w/ girlfriend. Bank the cash.

Remember, as long as you’re working and then spending time w/ girlfriend out on the town or wherever you should not be at home just staring at the walls anyway. In urban areas, a house is just a status symbol and a cage to keep kids in.

#31 Grumpydawgs on 03.23.09 at 1:59 am

Thank you for FINALLY putting this fact in writing for all to see,

“Zero-forty loans not only inflated values and set the scene for collapse, but their impact will not really be known for four or five years – when all those negative-equity baby homeowners face a loan renewal. Should be interesting.”

It is mindboggling how many people don’t understand this very basic point! This exactly why I tell people that it is not deflation if thier house price comes down. House prices aren’t ‘value per se’ they are just ‘bubble’ ergo artificial and with revert to the mean, which lies around 1997 on the progression charts ( BC) and IMHO that is exactly where this will all end up. We’ve got -50++% to get there.

#32 David Bakody on 03.23.09 at 6:27 am

Ladies and Gentlemen …… it would be so easy to say to the whole world …. “See this is why we are in this dam mess we let those so called young smart fellows run the country” but I will pass …. oh the hell with it, degrees to this bunch s what is on a thermometer.

More latter off to Tim’s … to chat about the news “We are finally going to get that long promised Made in Canada Price from PETO Canada …. and the banks are calling in all their 40 yr mortgage holders for a chat …. now won’t that be interesting ( Your next great topic Garth? ) and bets some kinda long term fixed rate? for those who read here “buyer beware” and for others taxpayer beware …. and for all those educated profs …. give your head a shake …. hello why the chatter anyway?

#33 SaraBeth on 03.23.09 at 7:14 am

#1 Aizlynne on 03.22.09 at 9:07 pm

you wrote: “I can still get $150,000 over what I paid for my house. ”

That is of course if someone buys it….eh?

#34 Glenn on 03.23.09 at 8:27 am

Sounds advice, but dont discount this kid out of hand. He was smart enough to get a decent education AND smart enough to not marry. He should have enough sense to dump that house even if he merely breaks even. The bad news is his “girlfriend” will eventually grow bored with him if (when?) he loses his job. Living in her moms basement is a recipe for disaster. Just watch out for the new “shaking up” laws feminists have shoved down our throats that grant full alimony to females that manage to hog tie a guy for 3 to 7 years, with or without marriage. Hes sitting on the fence, and could go either way, but it could be much worse.

#35 Average guy The Third on 03.23.09 at 9:10 am

This may be an unpopular for those who wish to bash basement boy but it appears he may be smarter than the rest of us. If the housing story unfolds as expected and prices continue to drop for the next few years, when he eventually moves into the house he will trigger a deemed disposition and thus create a capital loss. He can carry that loss back 3 years and apply it against any capital gains (for a tax refund), or he can carry the loss forward indefinitely. And if he needs to replace carpets or do other repairs he may be able to write those expenses off as well, as long as he does the repairs prior to moving into the house. As far as living with the inlaws, that’s a whole different story. He may have to be Survivorman to last. (The foregoing is not meant as tax advice. Please contact your accountant)

That only applies to income earned from the home and claimed as such, not to personal income from other sources. Your scenario is also flawed because to have a “deemed disposition’ he will be required to furnish professional appraisals (not a realtor’s opinion) laying out the market value of the asset. Your statement that he can carry a loss forward ‘indefinitely’ applies only to income the asset earns. Additionally, the cost of any repairs may only be deducted against income earned from the home, not personal income, and he has stated the house carries itself, but does not have a positive cash flow. Back downstairs with you. — Garth

#36 dave99 on 03.23.09 at 9:16 am

Jeez Glenn #34,

For a guy supposedly getting action from a 105lb blonde eastern european hottie you seem to have a lot of pent up frustration towards women.

#37 North Vancouver Citizen Jr. on 03.23.09 at 9:27 am

“””just like deluded BC dudes think everyone wants to move to their over-governed and unaffordable province””””

1/
…lol…like Quebec and Ontario aren’t overgoverned.

2/
Difference is Q & O are reliant on the U.S. and Europe for their economic futures….A growing Snowremoval w/ die’ing Financial/Manufacturing Industries respectively.

BC trades w/ Asia….and Vancouver/Hongcouver will emerge as the next Financial/Trade/Leisure capital of North America.

3/

“Deluded BC citizens”……as in “Centre of the Earth Ontario citizens”…lol

The symbol of BC is the “per-pay gas pump law.” — Garth

#38 smwhite on 03.23.09 at 9:32 am

#26 Eduardo

http://www.theglobeandmail.com/servlet/story/RTGAM.20090316.wmortgage0316/BNStory/National/home

More disposable income means, a fool and his money is soon parted.

More “disposable” cash (especially based on assumed wealth) creates more speculation.

#39 60ish on 03.23.09 at 9:34 am

“Why should other people live in your residence, especially since this negates your ability to reap any tax-free capital gains the property might give you?”

Wouldn’t he still be eligible for tax free capital gains on the house (assuming that someday he can sell it for more than he paid for it), by moving back into it for a year or two before selling?

The clock starts when he moves in, not when he bought it. — Garth

#40 60ish on 03.23.09 at 9:38 am

#34 “Just watch out for the new “shaking up” laws feminists have shoved down our throats that grant full alimony to females that manage to hog tie a guy for 3 to 7 years, with or without marriage.”

It could work the other way around, too. He could go after her for alimony…! :)

‘What’s sauce for the goose…’ ,etc.

#41 dd on 03.23.09 at 9:43 am

#26 Eduardo

“Gas prices will be between 6-7 dollars in the summer and oil will be back at 60 dollars.”

With so much NGas on the market I don’t see 6-7 short term.

#42 Mel on 03.23.09 at 9:48 am

Re: Edmonton book tour stop — I understand that Garth is on at 4 pm, in the Gallery between Halls E and D.

http://www.farmandranchshow.com/featured-program-envirotech

#43 smwhite on 03.23.09 at 9:53 am

Canada’s Dirty Subprime Secret…no surprise to most here

http://business.theglobeandmail.com/servlet/story/RTGAM.20090313.wsubprime14/BNStory/Business/home

Ottawa, Banks Take Action to Rescue Mortgages …but why, everything is A-OK?
http://www.theglobeandmail.com/servlet/story/LAC.20090323.RMORTGAGES23/TPStory/National

#44 Average guy The Third on 03.23.09 at 10:08 am

Garth my assumption is that the house will be worth less than he paid for it when he decides to move into it, thus creating a capital loss which can be used to offset any capital gains of any nature from the previous 3 years(which may include stock market gains). This capital loss can be carried forward indefinitely. Yes he needs a certified appraisal but that is $250-$300 well spent. I may be flawed but my reasoning isn’t.

#45 jess on 03.23.09 at 10:20 am

heads up?

http://www.ireport.com/docs/DOC-233609
She marvelled at AIG executive James Hass’s colonial house, which has stunning views of a golf course and Long Island Sound. The Fairfield house is “another part of the world” from her life in nearby Bridgeport, which flirted with bankruptcy in the 1990s and still struggles with foreclosures and unemployment.

————-

#46 WillsDad on 03.23.09 at 10:24 am

Sorry, but I agree with Glenn. The way that men are treated by the system in Canada is criminal. Women have fought for “equality” but now they have a system that says they are helpless and a man is responsible from splitsville-to-the-grave. If I were a man forced to pay alimony I would get fired from my job and then go work in Asia under the table. Let the women take care of themselves, they aren’t babies.

#47 PTDBD on 03.23.09 at 10:29 am

A moment of honour and reflection for our four soldiers returning to Canada today, for those wounded and their families.

#48 Bill-Muskoka (NAM) on 03.23.09 at 10:47 am

Some days it’s hard to know how we messed up so badly. Car companies, banks and real estate are all in decline. Governments are burning through the next generation’s lunch money. People thinking screwy.

Garth,

It is really pretty simple. The belief that we are all Movie Stars with Zillion dollar incomes, because the ‘other guy has it’, and the ‘Idol’ shows, and all the totally BS lifestyles have caused people to forget reality. They live in a fantasy of Madison Avenue’s (The Marketeers Wall Street) carefull crafted delusions, and they do so willingly without fear. It is your basic ‘Monkey See/Monkey Do’ scenario.

Who is to blame? EVERYONE that plays in the Greed and Prosperity Sandbox. Apparently their parents (if they know who they are?) never told them that you can get worms from playing in sandboxes because Da Cats like to use them as litter boxes as well.

I have no delusions of changing the world but I have and will continue to change MYSELF! That is the ONLY real answer. The rest will catch on as they always do after they stop swallowing the Hustles that are now a common part of our materialistic society.

Reminds me of an old story about caterpillars. So the story goes someone took a number of caterpillars and placed them end to end around the rim of a flower pot. The caterpillars followed each other until they all died of starvation, yet in the the middle of the flower pot was plenty of food.

Remembering a few basics are essential:

1. Your income today is ALL you have to work with. Choose wisely how you use it or commit it for tomorrow.

2. Your house is your home not an investment.

3. Your car is for transportation, and nothing more. It will not get you more recognition from anyone who matters, nor laid more often.

4. Food, shelter, and clothing remain THE essentials for EVERYONE!

5. If you are making friends by buying them then seek real friends. You will have a few real firneds in life, and the rest are acquaintances.

6. The mirror is for more than your appearance, it lets you look into your soul…try it DAILY!

8. Remember that the majority of people are just like you. Try getting along with them as best you can. Learn to love yourself in a healthy manner and you will learn to love others as well…in a healthy manner.

9. Do not be a Loser by associating with Losers.

10. You were given a brain, and real freedoms, try exercising both regularly.

#49 Bill-Muskoka (NAM) on 03.23.09 at 10:55 am

Garth,

Here is a hilarious idea for you laugh over being a former MP. Get rid of all the tax laws and do this. Exempt the first $25K from taxation, then everyone pays 15% and no exceptions.

Cap personal primary home mortgages at 1% simple interest. All other mortgages will be considered as secondary.

Also allow all interest paid to be written off as it is actually taxable income to the receiver.

Yeah, I know, when Hell Freezes Over…right?

#50 wjp on 03.23.09 at 10:56 am

#37..too bad this guy isn’t a Canadian.

#51 David Bakody on 03.23.09 at 11:27 am

Hello? Wake and smell the roses …. 40 year mortgage with no money down and up to 30% drop in housing values ….. all that left is a wooden barrow and the Niagara River!

This is all bad news:

Lenders might offer a range of potential solutions, including: converting a variable interest rate mortgage to a fixed rate to protect the borrower from a sudden interest rate increase; offering a temporary short-term deferral of payments; offering payment flexibilities; extending the term, or amortization, to lower the monthly required payment; negotiating a special, unique, payment arrangement, or adding already missed payments to the mortgage balance.

Add missing payments when people are out of work ….. and ladies and gentlemen there is the good old governments who are raising utilities costs and not lowering property taxes …. and the cost of upkeep to try and secure what investment has not been lost and list goes on …… Harper/Flaherty … Reaganomics 101!

Garth I like you do wish this never happened but the word “Poetic Justice” is ringing out …. those Con boys
selected few) in Tim’s almost came out of seats a few months ago when I mentioned our bank bailouts …. they thought we (government/CHMC) were going to make billions from our taxpayer loan guarentee’s. What a freaking joke. When you are in hole stop digging!

For smart people here for goodness sake sell quick and cut your losses and rent, then deal with creditors. Chalk it up as bad night at the Casino ….. it far easier to pay off debt having a cash flow than: Singing “16 Tons of #9 Coal and deeper in debt” that is exactly how they kept the minors/and their children in the coal mines, the company just kept giving them stuff and adding it to their company store bill ………

#52 MikeB on 03.23.09 at 11:30 am

Rally or no rally today what the Fed is doing and Geithner is proposing smacks of sheer desperation and the fact that they know things are worse than what they are telling us. Best to buy some etfs into the rally then bail bail bail if you can garner at least 10%.

Real Estate.. forget it … in my hood where I rent… stuff comes up and stays up for months and the sellers just don’t get it. Small lots are selling for 800K to 1 million. How retarded is that. We’ll stay on the sidelines for now

There will be more pain to come in both real estate and the bonehead stock market. Simply no fundamentals JUST MENTALS.

#53 POL-CAN on 03.23.09 at 11:39 am

Ahhh memories

http://www.youtube.com/watch?v=yG5e1oaen-M&feature=related

Leonard Cohen – Everybody Knows

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
Thats how it goes
Everybody knows

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Everybody talking to their pockets
Everybody wants a box of chocolates
And a long stem rose
Everybody knows…

#54 Mike (authentic) on 03.23.09 at 11:39 am

“Breaking news: Canada to fight mortgage grief ” – Garth

Well, if that doesn’t scream “DON’T BUY A HOUSE NOW!” I don’t know what would other than…

get the wax out of your ears and…

DON’T BUY A HOUSE NOW! Canada is NOT different than the USA, than the UK, than Japan, than Spain, than Germany, than…

Mike

#55 dave99 on 03.23.09 at 11:52 am

http://torontorealtyblog.com/2009/03/23/how-many-condos-will-never-be-built/#more-1832

Ouch. She’s on the hook for a second deposit of $32k in a month for a pre-construction condo and has none of it.

#56 keesio on 03.23.09 at 12:12 pm

Garth – regarding your comment:

“Zero-forty loans not only inflated values and set the scene for collapse, but their impact will not really be known for four or five years – when all those negative-equity baby homeowners face a loan renewal.”

Does that mean that the best time to consider purchasing a home may be in 4 -5 years instead of the near term?

#57 Alberta Thrasher on 03.23.09 at 12:28 pm

I’m in a similar predicament as “basement boy”, except my combined income with my girlfriend is slightly lower and my job is less than stable (newspaper). As tempting as it is to finally be able to jump into the first-time homebuyers’ cult, a home in Edmonton costing upwards of $300k is still too much for what it should be priced at. I feel as if I’ll always be sitting out on the sidelines.
Garth, when you do make it to Edmonton (counting the real estate militia let’s your motorcycle cross the Yellowhead) take a good look around the town and gander at how far our collective heads are up our fool’s paradise butts. If one didn’t know better, you’d swear Edmonton’s streets still run with milk and honey.

#58 Rhino on 03.23.09 at 12:45 pm

Garth,

I found a neat resource that might help you explain to the common folk about the mortgage problem.

An AMAZING little cartoon video “The Crisis of Credit” that seriously describes the whole sub-prime mortgage situation, what caused the problem and resulting melt-down.

A must see for folks “on the edge of understanding”.

Enjoy!

http://vimeo.com/3261363

#59 North Vancouver Citizen Jr. on 03.23.09 at 1:04 pm

#50 wjp

>>#37..too bad this guy isn’t a Canadian.<>“Breaking news: Canada to fight mortgage grief ” – Garth

Well, if that doesn’t scream “DON’T BUY A HOUSE NOW!” I don’t know what would other than…<<

….Correct, do not buy a house east of Manitoba.

Do buy a house in (Port Alberni), BC….take advtge of any foreclosures in BC.

Did you know Vancouver/Hongcouver will soon become the next Financial/Trade/Leisure capital of North America?

…You heard it here first…

#60 Rhino on 03.23.09 at 1:19 pm

37 North Vancouver Citizen Jr. on 03.23.09 at 9:27 am

Typical air-head commentary.

What about this:

“Updated: Canada’s 10 most dangerous cities include 5 in B.C., says …”

“Five of the top 10 cities are in B.C., although Vancouver comes in at a surprisingly low No. 9. The others are Prince George (4), New Westminster (6), Chilliwack (7) and Victoria (8).

Regina tops the list, although it was in a virtual dead heat with Saskatoon and Winnipeg. Only one eastern city, Halifax, made the top 10.”

http://communities.canada.com/theprovince/blogs/newsroom/archive/2008/03/13/canada-s-10-most-dangerous-cities-include-5-in-b-c-says-maclean-s.aspx

Seems boom town pays a price by attracting riff raff…

Having lived in Van, it is a nice place, but your rhetoric is just annoying and complete pipe dream.

And that data was collected before the latest murder binge your fine city is experiencing.

Typical western based eastern basher. Facts and figures do not count…

#61 Got A Watch on 03.23.09 at 1:21 pm

If the rest of the globe falls into Depression, I guess it takes a special kind of kool-aid to think “It can’t happen here. We are different.”

Yeah. OK.

This kind of thinking almost guarantees that in fact, it’s not different. The mass delusion that everything is just fine persists, and so few are prepared for the inevitable correction.

It also makes the recovery farther away in the delusional last-to-fall areas. They end up being 18-24 months behind the rest of word going down the recession path, digging their heels in all the way. Catching up means things fall faster and harder to reach that bottom that is down there somewhere.

There is a word to describe irrational over-confidence: stupidity.

Hope for the best, but plan for the worst.

#62 Got A Watch on 03.23.09 at 1:27 pm

I wouldn’t even bother with North Vancouver Citizen Jr.

Either he’s just a troll trying to get a rise out of everyone, in which case you cut off his oxygen by not bothering to reply to his idiotic statements.

Or he really believes the tripe he writes, in which case I would say he is just a classic case of cranial-rectal inversion.

A textbook example of “It’s Different Here This Time!” kool-aid. Don’t drink that.

#63 Chris L. on 03.23.09 at 1:29 pm

Garth a comment on the blog:

http://www.canadianmortgagetrends.com/

Mortgage Commentary

* The always vocal Garth Turner calls fixed-rate mortgages “dumb, extreme and costly.” He says “Why the hell” would you lock in now when you can do so later “with a phone call when it becomes apparent” rates are going up. It sounds like Garth has a “greaterfool-proof” way to predict interest rates. We’ll keep watching his blog in the hope he shares it with the public.

Do you need any more proof? — Garth

#64 dd on 03.23.09 at 1:42 pm

#59 North Vancouver Citizen Jr.

“Do buy a house in (Port Alberni), BC….take advtge of any foreclosures in BC”.

So buy the house and rent it out? Let it sit? The community may … may come back in the future but you can’t rent it because the whole community is for sale and you can let it sit because that would void the insurance and invite crime.

Did you know Calgary will soon become the next Financial and Trade capital of North America?

…You heard it here first…

#65 . . . fried eggs and spam . . . on 03.23.09 at 1:54 pm

#28 ralph at 12:56 am — “While the U.S. economy is crashing, gun sales are up 26 per cent in January and February compared to last year.”

http://tinyurl.com/d9ymk5

It is not just the US economy that’s crashing, it is across the globe — my brother and GFriend live in SE China, just over from Hong Kong.

Civil unrest / violence is rapidly expanding worldwide, as seen by marches and street riots in France, Greece and thruout most of Europe. Stuff is happening which most don’t even know about, and the msm barely gives it lip service. See link above.
******
#52 MikeB at 11:30 am — “. . . Best to buy some etfs into the rally then bail bail bail if you can garner at least 10%.”

Question: I figured that ETF’s were in the US only, briefly reading about them on Money and Markets, The Daily Reckoning and Money Morning.

As they go against the grain and seem to have really good short- and medium-term potential, does one need a broker and a fixed amount of money to get in?

Seems like a relatively painless way to get going, so thanks in advance!

#66 Barb the proofreader on 03.23.09 at 1:55 pm

#48 & #49 Bill-Muskoka (NAM) “It is really pretty simple. Remembering a few basics are essential…”

Those were all great points Bill.

………

O/T but of note… Grave and belittling mockery of Canada’s Afghanistan Mission by Fox News. (Four more Canadian soldiers killed this week, bringing to 116 Canadian soldiers who have died in Afghanistan).

How to lose friends and alienate countries“: http://www.youtube.com/watch?v=tcJn5XlbSFk
Warning: Not a great cerebral discourse, rife with hypocrisy considering the imperialistic Fox News types who bring us war.

#67 This guy is smart on 03.23.09 at 1:59 pm

I know of a similiar story, this guy lived with his wife’s parents and at the same time built custom (he was his own contractor and hired sub’s) and then sold the house, just living in them long enough to take advantage of the no tax rule. Again living in his wife’s parents basement again he would build another house grander than the last. After 20 years of doing this he now lives in a $5,000,000 dollar house with no mortgage. Go figure.

PS: he studied and understood the house market and what people wanted.

I guess there are still some people in this society that are doer’s and at this time in our economy cycle we need a lot more of them.

#68 Dave on 03.23.09 at 2:00 pm

hey Garth ever consider visiting Toronto for one of your talks? I’ve been watching your schedule, and nothing! Why places like Sarnia? Come to the main stage..

#69 Just In Time on 03.23.09 at 2:00 pm

#60 Rhino

BAH! I almost wet myself laughing reading Chilliwack is in that top 10 List. That list is bang on. The houses are over priced and nepotism runs rampant. If you’re not a member of the right church, then your business will fail.
The town is the dumping ground for the displaced homeless. And you pray that the rental next door is a grow op, not a drug dealer.
That town is a write off.

#70 Jeremy on 03.23.09 at 2:13 pm

Garth, I own a small corporation. I currently also ‘own’ my own home. If the market keeps declining and the price of my home drops well below the mortgage value, is there anyway I can use the decline in home value as a Capital Loss for my corporation if we sell the place?? Currently, the corporation does not own the home. Any advice you can give me would be great as my experience in the area is very limited.

Your business would have to buy your home from you at fair market valuation (for real money, unless you owe a big debt to the company), and then from that day forward a capital loss could be used by the business if the house declined in value, but only if it were sold and the los cystallized. — Garth

#71 TheComingDepression on 03.23.09 at 2:34 pm

In case you missed 6o Minutes last night. Here is Obama LAUGHING at the current economic crisis..”Are you punch drunk”?
http://www.youtube.com/watch?v=VNu9xjUwPEk

#72 Rhino on 03.23.09 at 2:36 pm

Hmmmmm…

Here in West Island Montreal, it seems like houses are getting listed as signs are popping up like mushrooms this week. There must be 10 or 12 more new in a 5 block radius from my home.

I have turned away on 2 occasions realtors going door to door seeking new listings. I guess they need the listing bonus as houses are not selling so good. I am getting weekly solicitations from agents via the mails.

Top that off… I just got a ReMax notice from 2 agents – if the house does not sell in 90 days – THEY WILL BUY IT!!! Seems listings for houses like mine are 2.69 x the price I paid 15 years ago. Hmmmm……. NAH!

Is this desperation? Spring Fever?

Still, on my daily dog walks, only 2 houses show “sold” out of the dozen or so I passed by over the 3-4 winter months. I did notice a couple driving a tiny economy rental car taking the addresses of 2 new side-by-side listings on my street that popped up over the weekend.

Bargain hunters?

There will always be some sales, and this certainly starts to look like a buyers’ market.

#73 David on 03.23.09 at 3:03 pm

Pity the MBA student trying to make a convincing argument to those living in the academic world as opposed to the real world. The world of pure theoretical finance leaves little room for descriptions of reality. Academics by their very nature prefer pristine untested models and ever so elegant equations. An environment of manias, panics, crashes and bubbles makes it difficult to offer discrete elegant solutions like;

http://www.financial-risk-manager.com/risksrv/risks/credit/copula.html

There was a great deal of high risk lending on mortgages in Canada. The major difference is that Canada has an oligopoly banking system and the originators had a much larger capital base to engage in reckless lending (read 0/40) and shift the ultimate risk to CMHC. The USA has a very diffuse banking system and with demand for mortgage debt high during the housing bubble it was easy for the bank originators to pawn the sub prime risks off to those on Wall Street wanting to securitise mortgage debts through CDO’s or cover losses through credit default insurance. Canadian banks did not securitise debts simply because they did not have to do so, not because they are more virtuous or cautious than US bankers. All this presupposes that the good MBA student has professors willing to accept that there was a housing asset bubble and that asset bubble was driven by cheap and easy to obtain mortgages. House prices increasing out of line with fundamentals and historical averages should provide ample evidence to support the case.
The engineer story defies description. Buy a home and not live in it and then move in with in laws. Rent the home out for what is probably a minimal income and hope for things to get better. This guy is subsidising the renters and bearing all the risk of future price downturns and interest rate hikes. The real estate industry is always looking for mullet investors like that.

#74 Taxguy on 03.23.09 at 3:13 pm

Garth, your in-line answer to my comment about the tax impact of renting a principal residence is incorrect, or at least incomplete. Even if the taxpayer has begun to use the property for the purpose of gaining or producing income (i.e. is not merely offsetting expenses in respect of the house by renting it out), he can — probably — make an election under Income Tax Act subsection 45(2) to, in effect, deem the house to be his principal residence for up to four years. There are important qualifications around that, which is why I said he should get competent advice. But the point is that it is possible under some circumstances to rent out a house for a few years without unpleasant tax consequences.

Sure, go ahead and try it. I’ll be watching CRA swoop. — Garth

#75 Two-thirds on 03.23.09 at 3:16 pm

#26 Eduardo :

“Gas prices will be between 6-7 dollars in the summer and oil will be back at 60 dollars. ”

Even if natural gas went up this summer (reasons?), residential demand for it will be at its lowest point, easing pressure on prices. Reduced industrial activity should reinforce this trend.

Oil at $60 does not bring a recovery with it… New oil sands projects require ~$90/barrel just to break even, according to a couple of studies published in Q4, 2008.

And… Suncor just bought off Petro-Canada. Say bye-bye to your Petro-points, folks.

The latter to me signals just how tough the times are in AB now, and the pain to come in the short term.

Thankfully, there will be a recovery once enough mergers/acquisitions take place and oil demand comes back… When?

Well, that’s the big question, isn’t it?

#76 Flip on 03.23.09 at 3:26 pm

So…

This Globe and Mail article claims that the province of Alberta had 5300 foreclosures in 08/09
http://www.theglobeandmail.com/servlet/story/RTGAM.20090313.wsubprimefactbox14/BNStory/National/home?cid=al_gam_mostview
but that Edmonton only had 548 (of which 330 sub-prime) and Calgary 1035…
So… where are the other 3800 or so?

Are they not being reported in the article because the banks are “holding on” to them and don’t want to crater an already soft market?

If we split these numbers using the province’s 1/3 – 1/3 – 1/3 population split between the two major cities and rural – it means the real number could be around 1800 homes?

According to the Edmonton Real Estate Board, there were 7097 MLS listings in Edmonton in Feb 09 – can you just imagine if these properties were dumped on the market…
http://www.ereb.com/MarketActivity/March.html

#77 Investx on 03.23.09 at 3:29 pm

55 dave99

http://torontorealtyblog.com/2009/03/23/how-many-condos-will-never-be-built/#more-1832

“Ouch. She’s on the hook for a second deposit of $32k in a month for a pre-construction condo and has none of it.”

How do they have the right to ask for another deposit? And why?

#78 Tony on 03.23.09 at 3:30 pm

I still have many townhouses and apartments in Edmonton from deals that fell through before June 19th 2007. That for all the people who still live in Edmonton was what’s known as the “last day of the boom”. That was the day old David Dodge cracked the real estate market in Edmonton right down the center with his one quarter percent rate rise in the bank of Canada rate. Facing the facts Edmonton fell so far in price mostly because of white flight similar to what happened to Scarborough, Ontario back in the late 1980’s. So Edmonton which was much higher in price than all the satellite communities around it is now lower in price. This gives renters no option there’s nowhere to go to now. Edmonton seems to be a city of rent jumpers who live their lives by jumping out on rent and utilities almost to the days they die of old age. It’s sad as i don’t really see this in any other city in Canada just Edmonton. For all the people in Edmonton the old adage now is “where are you going to go to”? I’d really like the people who live there to answer that one. For all the people living there i’ve got news for you your real estate prices won’t go much lower. The most likely scenario is the US dollar will eventually tank and oil will be back above $100 US. People are flocking to Alberta from Ontario because of the three progressive raises in the minimum wage law over three years which of course will put the unemployment rate in Ontario sky high. For anyone who doesn’t believe this look at what happened in America in any state when the minimum wage was raised. The raise in Ontario Canada was a huge one over three years. In Edmonton i already see many 50 percent or more off sales from the peak in 2007. Most of these places carry for much less than they rent out for simply by buying them on a line of credit for cash “on the barrel”. The time to buy is soon i’m looking to start buying around October or November this year. The rental situation from what i’m seeing is getting better the North West area is mostly rented out, the North East area is finally starting to rent mostly out and the West and South West areas are of course always rented out. I will be picking up all the bargains in the West and South West areas as these are just too good to pass up on. I’d like to tell the people of Edmonton your real estate values were never overpriced they were always under priced relative to the rest of Canada except maybe in the year 1980.

#79 Keith in Calgary on 03.23.09 at 3:40 pm

Uuuuhhh……..Daimler AG didn’t sell themselves….they sold a 9.1% stake with no board seats or managment input.

Largest shareholder. — Garth

#80 Banklender on 03.23.09 at 4:22 pm

Regarding tax free capital gains for your principal residence:
You can still claim the property as your principal residence in the next 4 years after you move out and rent it out. If the owner did an appraisal when rent it out and the value declined when he moves back or sells it, he can claim the capital loss and carry it forward infinitely to offset anyother capital gains. The owner doesn’t need to claim it as his principal residence or as a rental when he rented it out. He only needs to claim when he moves back or sells it. He can use this policy for his own advantage. So if there is a capital gain, he can claim principal residence. If capital loss, he can claim deemed desposition and get the capital loss (needs a prefessional appraisal and can be done retro-respectively).
Regarding rental loss, it CAN be used to offset any other income as long as you can show CRA within a reasonable time period (not specified how long) your rental will turn profitable. If anyone using a secured line of credit and paying interest only, your rental loss claim normally got declined because it failed the reasonable time period test. If you use mortgage, since you paying down principal and your interest cost will decline so you shouldn’t have problem to claim the rental loss. In a stable real estate market to use rental loss to offset employment income is a good strategy to increase personal wealth for high income earners.
Lots of bears (I am a bear) using mortgage payment to calculate rental cashflow and claiming whether you better off to rent or to buy. Normally I use the interest payment amount (using financial calculator to calcualate), property tax, stata fee, maintainence expense, depreciation, vancancy plus a certain per centage reserve to calculate whether cashflow is positive or negative. The regular mortgage payments including principal payment. Under current situation, no one should buy rental properties in metro Vancouver area. All cash flows are negative.
Rental loss is deductible from your other income and the tax refund should be included in your cash flow calculation.

#81 David Bakody on 03.23.09 at 4:32 pm

The more you here the more confused you/I can become, housing in the ditch, jobs in the tank, wages falling, multi mega mergers and now the stock market is up and all will be well soon? Add to this America is not worried about their debt nor their creditors as they will just buy their own treasury bills. If anyone can explain all this in plain simple English go for it. Me I still believe it is all about a complete job, pay and benefit restructure for the good ode labour force which of course provides profits big time here at home. (moving all those jobs off shore and then having high fuel costs kinda killed that plan) Now as for those billionaires who bit the dust …. the real big boys could care less, matter of fact it cut down on their line ups to their fancy ball rooms in their play palaces. Then again what the heck do I know and it really all does not effect me because every day above green is a good day.

The good news is the dynamic duel (Harper/Flaherty) have not got clue of what happened, what is happening and have not got a clue in Hell what to do ….. and each day more and more Canadians are starting to see it. Gun Registration? Hello, with a couple of million unemployed/or without good work and counting …. who can afford bullets let alone a gun. Time for an elected Senate, now that will create a dozen or two good jobs!

#82 Banklender on 03.23.09 at 4:33 pm

#67 This guy is smart

Tell me who that person is and I will report him to CRA. They are not smart, they are just cheating our current system.
Under CRA rule, if a person keeps building homes and selling them, he is deemed in the business of property building and should treat all his gains as business income. If you said he made 5 million dollars, he owes CRA a lot of money, if you consider the interest plus penalty. He hasn’t been caught doesn’t mean he will never been caught.

#83 Ben's a Clown on 03.23.09 at 4:44 pm

#12 KC – What does China have that the US doesn’t? Industry. They’ll do fine when they and the rest of us forget the US.

#84 Flip on 03.23.09 at 4:49 pm

#77 Tony – This vulture made me think of speculators in the Edmonton market and what is about to happen once the largest of its kind – Ever Edmonton RE development gets to the people move-in stage in just a few months:

Century Park:
2900 unit – one billion dollar project – slated to house 5000 people… plus another 320,000 sq/ft of retail space…
http://www.investedmonton.com/blog/2009/02/edmonton.html
http://www.connect2edmonton.ca/forum/showthread.php?t=685

Folks laid out big bucks in a hurry when this puppy was being pre-sold in what was the height of the rush.
Today – I wonder how many locals pundits are foolish enough to fork over $407,000 for an East facing 775 sq/ft box on the 6th floor… And how many folks that have, are now seriously considering alternative options.

Who knows… maybe Tony will buy them all, just so he can rent them out at exhorbitant prices to the thousands of folks that will move to Edmonton in the upcoming years…

yes, this is meant as sarcasm… as Statcan reported last week:

Employment fell by 24,000 in Alberta in February, the second notable decline in three months. February’s drop in employment pushed the unemployment rate for the province up by a full percentage point to 5.4%, the highest in almost six years.
http://www.statcan.gc.ca/daily-quotidien/090313/dq090313a-eng.htm

#85 dave99 on 03.23.09 at 5:01 pm

#71, TCD,

No. He is not laughing at the crisis.

He is maintaining a sense of humour in the face of adversity. It is called leadership.

Would you rather see him looking terrified and overwhelmed?

Oh. wait. I forgot who I am asking. You would prefer that wouldn’t you?

#86 Bill-Muskoka (NAM) on 03.23.09 at 5:04 pm

#66 Barb the proofreader on 03.23.09 at 1:55 pm

Barb,

Thank you. As to Fox News (a definite oxymoron), does any intelligent person expect anything else from them? I certainly do not, have not, and will not. Fox stands for Fatassed Oblivious Xenophobes, the entire damn lot of them.

They make the Klu Klux Klan and Neo-Nazis look good! And to think, people worry about Al Jazeera being aired in Canada? Pathetic Bigots!

Hell, even Eugene McCarthy was civil compared to these bunch of braindead, inbred, miscreants of obnoxious emissions!

Personally I hope there is someday soon a ‘missile mishap’ that sends a heavy duty Cruise Missile into their headquarters. But then, they are the greatest voice of the Redumblican Party for all to see worldwide! LOL

#87 pbrasseur on 03.23.09 at 5:36 pm

For the gloomies, nice interview with Mark Mobius, emerging market fund manager. As you will see potential growth is coming from all over the planet, and only beginning.

http://www.bloomberg.com/avp/avp.htm?N=av&T=Mobius%20Says%20Stocks%20at%20Beginning%20of%20a%20`Bull-Market’%20Rally&clipSRC=mms://media2.bloomberg.com/cache/vP5vMkikBogg.asf

#88 Two-thirds on 03.23.09 at 5:46 pm

#77 Tony:

“The rental situation from what i’m seeing is getting better the North West area is mostly rented out, the North East area is finally starting to rent mostly out and the West and South West areas are of course always rented out.”

A cursory search on kijiji shows 2,955 ads for rental properties today in Edmonton, while rentfaster Edmonton shows 697 units in Edmonton proper.

http://edmonton.kijiji.ca/f-housing-house-rental-W0QQAdTypeZ2QQCatIdZ43

http://edmonton.rentfaster.ca/index.php

Even though some ads in kijiji are not for rentals per se, is this what a “mostly rented out” city should look like?

Many of the ads in kijiji are “rent / rent-to-own” and many of them *in the SW* are new units!

Can we all say “accidental landlords en masse”?

LOL

#89 Another Albertan on 03.23.09 at 5:51 pm

Eduardo, there is a but a slim chance for gas to recover to 6 or 7 dollars by the summer.

AECO gas did not participate in the Henry Hub rally. Why? Because the AECO basis is undermined by a strengthening Canadian dollar (or weakening US dollar). The weakening US dollar is what is driving the oil market right now too. The oil rally drove the HH spot pricing. Inventories are still building and demand is still down. Distillate levels are still very high because diesel and jet fuel demands are tied to economic strength.

US LNG imports are slightly above last year’s level and the gap between European and HH prices has converged, so there is a much higher chance of more US LNG imports this summer.

Right now, the ONLY thing that is abating gas prices from continuing to drop is the expectation of decline in supply.

In the interim, we are still going to have record levels of gas in storage in both Canada and the US and the possibility of overseas LNG looking to dump cargo in the summer.

Don’t forget that western Canada is predominantly gas-oriented, especially the juniors. Cheap natty also cripples the provincial government’s income stream from royalties.

#90 dd on 03.23.09 at 5:52 pm

#77 Tony o

“People are flocking to Alberta from Ontario because of the three progressive raises in the minimum wage law”

Tony smell the coffee. It is expense to live in this province. The min wage will not do anything.

#91 dd on 03.23.09 at 6:11 pm

Edmonton, March 3, 2009:

Charlie Ponde, president of the REALTORS® Association of Edmonton … The average price of most types of residential property slipped down a notch in February

“Consumers continue to be confused by housing figures originating from American or Canadian sources that do not reflect the condition in local markets.”

Charle, why are we confused? The American and the Canadian markets are in the tank. Should Edmonton be different?

#92 canuck on 03.23.09 at 6:47 pm

The couple that are living in the basement of his girlfriend’s mother’s house…did his own mother die from being taking advantage of? Talk about a cheapskate! If either of them were my kids they never would have been invited to stay. My daughter, the bank manager, would know better than to ask! :-0

I don’t expect I’d be invited to stay at her place either if something happens to her father, my hubby…works for me. Why would I want to–my day wouldn’t be my own. I’ll be staying in MY house ’til the undertakers come to take me out in a box!

#93 kc on 03.23.09 at 6:49 pm

82 Ben’s a Clown on 03.23.09 at 4:44 pm
#12 KC – What does China have that the US doesn’t? Industry. They’ll do fine when they and the rest of us forget the US.

I am having a bit of trouble following your comment. Today as it stands the factories of China are being shut down, hence lack of need for the products. Over production and exploitation of cheap labour has decimated domestic jobs. You saying that these overseas factories are going to rebound in short order if they can empty their warehouses? Telus has just announced opening a new call center in the phillipines (making 4 of these off shore) you feel that your job is safe when at the drop of a pin your boss would love to offshore it for CHEAP Labour?

#94 Ben's a Clown on 03.23.09 at 7:04 pm

#85 Bill – Joe McCarthy?

#95 Eduardo on 03.23.09 at 7:12 pm

Natural gas will be 6-7 in the summer due to AC demand and fear for rebuilding in time for the winter.

Everyone who said NG inventories are still rising is a complete moron… we aren’t in shoulder season yet…

NG supply has come off at least 5 bcf/day to match demand and is falling drastically due to decline rates in the shales. That being said, inventory is ~15% above the 5-year average. Regardless, NG will be 6-7 in the summer. Guaranteed.

The Petro-Can buyout should be another sign that people think we are at the bottom… uts, now petro-can… people buy at the lows of cycles… not the tops.

#96 josh on 03.23.09 at 7:15 pm

weather or not you like Alberta, its the place to be for the future.

Especially for the whether. — Garth

#97 Sun Yat-sen suit on 03.23.09 at 7:17 pm

#28 ralph

Population of United States: 300 million
Number of guns: 270 million.

[Source National Geographic.]

#98 Peak Oil on 03.23.09 at 7:26 pm

Another Albertan

The latest US Gas supply increases have come mostly, if not all, from US Shale plays. Barnet, Haynesville, Fayetteville shales. Note: Looks like the Barnett has peaked (production wise) Fayetteville still has room for production growth but not at these prices. Haynesville though is currently the goose that laid the gold egg, because Haynesville wells may be the only wells economical at these prices. Notice I wrote “may” because at these prices I don’t even think they are economical.

A little info on production profiles of shale gas wells. Barnett shale gas wells have initial production of 2-8 mmcf/day and decline %60-%70 during the first year, %50 next, %30 next and then decline at %10 over the remainder. Fayetteville shale wells are similar to Barnett only they don’t have as high initial production, only .8-3 mmcf/day. Haynesville are completely different story, they can have intial production of 28 mmcf/day but decline at a higher rate, around 80-85% for the first year. From there they decline similar to Barnett and Fayetteville wells. This is why at the current price only Haynesville shales may be profitable and why most shale drillers have moved there operations there.

Average conventional gas well in the US decline at 36%, shales at 60-85%. So now add in the decline of gas drilling and the US is setting it self up for a gigantic supply crunch. This supply crunch should start showing its ugly head around the fall/winter of 2009 and even though the ecomony (or becase of it) will still be limping along.

As far as LNG goes, LNG may only supply at most about 2-4 bcf/day of gas to US during 4 or 5 months this summer/fall. It won’t be enough to make up for the 4-5 bcf/day of new gas well supply destruction that is going to happen in the US by the end of this year. Sure storage may increase but don’t forget storage is only a supply cushion, not a demand cushion. So during the winter if there is not enough actual supply coming out of new wells the storage cushion will be used up very quickly. Thus producing a supply crunch and higher prices.

The last time this happened was at the beginning of this decade. Drilling declined due to low prices and within a year of that drilling decline, gas prices doubled. We now have shale gas which will help ramp up production quickly but still not quick enough to mitigate the coming price spikes. Also back then you didn’t need to drill as many wells to keep supply balanced like they do now. So this time around it gonna hurt and hurt real bad.

JMO

#99 Sun Yat-sen suit on 03.23.09 at 7:33 pm

#80 David Bakody

Would be most interesting to obtain and read copy of CIA’s psychological profile of Prime Minister Harper.

#100 Eduardo on 03.23.09 at 7:37 pm

RE 88 as well… there is no chance of increased LNG other than contract volumes at this price… they would be losing money massively.

You don’t need to talk about diesel etc because I wasn’t talking about crude… only nat gas. Crude will be a slow recovery.

Also, if you are talking about comparing Henry to AECO, generally AECO trades at a huge discount and the discount is not as big, even as a % of the total.

#101 View on 03.23.09 at 7:40 pm

#65, Fried Eggs and Spam

This is the list of many ETF’s in Canada.

http://etf.stock-encyclopedia.com/category/etfs-listed-in-canada.html

#102 jess on 03.23.09 at 7:50 pm

http://business.smh.com.au/business/bankruptcy-rates-rise-for-middle-class-20090324-97zn.html
The rise in bankruptcies has grown more prevalent among families and professionals, according to a report by University of Melbourne professor Ian Ramsay and researcher Cameron Sim, indicating debt-stress is becoming a more mainstream problem.

”This is strong evidence that bankruptcy is becoming more of a middle class phenomenon,” said Professor Ramsay in a statement. ”Bankrupts are increasingly coming from higher status occupations, have increasing levels of personal income and household income, and have increasing asset and property ownership levels.”

———————-
Japan’s economy logged its worst performance in almost 35 years in the last quarter of 2008, contracting at an annualised pace of 12.1%.

The first quarter of 2009 may turn out to be just as bad and public spending of up to Y20 trillion ($302.41 billion) may be needed to revive the economy, Finance Minister Kaoru Yosano said Sunday.

#103 dd on 03.23.09 at 8:07 pm

Eduardo

“The Petro-Can buyout should be another sign that people think we are at the bottom… uts, now petro-can… people buy at the lows of cycles… not the tops”

Does that count Teck and the Fording deal?

#104 timbo on 03.23.09 at 8:15 pm

to fox news :

insult our culture and our troops who lost their lives will you! I’m in Alberta and we can always turn off the oil for a day or two. Fn Aholes, pardon me.

and now for something completely different
http://www.youtube.com/watch?v=clPYfaTvHT0

#105 North Vancouver Citizen Jr. on 03.23.09 at 8:20 pm

#60 Rhino

>>>Updated: Canada’s 10 most dangerous cities include 5 in B.C., says …”

Regina tops the list.<<>>Either he’s just a troll trying to get a rise out of everyone…Or he really believes the tripe he writes<<<

……hmmmm, many posters enjoy my insight…over the last few months here on this blog site I’ve posted on 1/future/growing potential Immigration to Canada problems as the World Depression Cycle takes hold…2/Potential Political upheaval as Western Canada considers seceding from Eastern Canada…3/”Manifest Destiny” ideology taking hold in the U.S….4/U.S. armed forces conquering Cuba…5/and my becoming Garth’s Finance Minister after he becomes Prime Minister.

…But this is a real estate blog…..so I provide eloquent Vancouver/Hongcouver factoids.

Got a watch…on which side of the Demarcation Line do you reside?….(Manitoba/Ontario border)

#106 Eduardo on 03.23.09 at 8:36 pm

No… Teck doesn’t count. But they sure were stupid to take on that much debt.

#107 Future Expatriate on 03.23.09 at 8:59 pm

#71- Obama was stoned. A doper. Pothead. I’d post the link to the pic but it didn’t make it through last time.

#108 Bill-Muskoka (NAM) on 03.23.09 at 9:15 pm

#93 Ben’s a Clown on 03.23.09 at 7:04 pm

Yes! Thank you for the correction!

#109 dotava on 03.23.09 at 10:00 pm

#12 kc on 03.22.09 at 10:22 pm
&
#8 dd on 03.22.09 at 10:12 pm

I was about to respond to “dd” just for friendly reminder that China with this entire decline will have growth around 9% (frankly I can’t recall when last time we had that level) additionally they have population of almost 1.5B – looks for me that they have enough people turning “economy wheel”.
I really don’t understand how lying ourselves and wishing others downturn will help us get out of this ditch?!?

#110 jsm on 03.23.09 at 11:13 pm

He is not necessarily losing out on sheltering any capital gain.

But he should see a tax accountant about a section 45 election to ensure that he would qualify.

#111 JoeCalgary on 03.23.09 at 11:30 pm

China’s rate of growth is presently 6.2%, and falling. It needs 8% just to maintain. Each year it has 20 million new graduates entering the work force. The country’s best customer is no longer buying, and its other customers are too suspicious of the quality of its products and of the damage it is doing to the environment and to its people in producing them.

And it is worrying about the declining value of the US Treasuries it holds.

#112 ralph on 03.24.09 at 5:30 pm

Yes, I know things are getting ugly in other countries as well. People are taking to the streets to protest. But us Canadians are such a polite bunch, aren’t we?

It really disturbs me that nearly half of all eligible voters in this country don’t even bother to vote during government or civic elections. Shameful!

Now with a economical crisis upon us maybe come next federal election more people will get off their arses and vote for somebody. Even if they are all duds.