What fire?

burn1

Less than three per cent. Savour it. That’s all keeping us from a depression at the moment.

When an economy contracts by 10%, deflation emerges and unemployment soars, that is about as close as you’ll get to a textbook definition of a 1930s-style meltdown. And our central bank just revealed the economy shrank by an annual rate of 7.3% in the first three months of the year. Way too close for comfort.

This, natch, was why the Bank of Canada rushed to slash interest rates to basically zero this week, and why it now warns that unless you start spending your brains out, it’ll unleash the dogs of liquidity.

This is called ‘quantitative easing’ which actually means the bank starts creating new digital dollars with which it buys up debt like corporate bonds. In the ultimate Ponzi scheme, the state bank uses new national currency which it makes out of thin air to purchase debt securities held by private investors. We, the taxpayers, get to clean it all up later. Or your kids. Whatever.

This will happen, says head banker Mark Carney, if the inflation rate – scheduled to go to almost zero by the end of the year – tips into true deflation. That will cause the floodgates to open, sending a Red River-sized torrent of cash washing over the nation.

But, I hear you asking, what will this mean in Burlington?

Good question. Over to Chad:

I know you’re a very busy man and chances are slim that you’ll get a chance to read or respond to this email.   But good, sound, unbiased real estate advice is hard to come by in these crazy times so it’s worth a shot!  The reason I am emailing you is because I was a Greater Fool….

At the top of the bubble (August of 2008), I put $20 000 cash down on a town house in to be built in the spring of 2010. (that is if the builder survives until then).   I did this all against the advice of a good friend of mine who happens to follow your blog and read your books.  I truly was a greater fool.

I am 31 and my wife and I currently own a condo/townhouse.   We paid $198 000 for it and put the minimum 5% down on it at the time of purchase.   We don’t have any credit card or LOC debt.   My wife still has 2 student loans that we are paying down (she had 5 and we’ve aggressively paid off 3 of them so far) and we’ve got one car payment.   Our combined income is in the $120 000 range.

My concern is this – I bought at the top of the market.   As housing values continue to decline,I’ll have to come up with a mortgage for $300 000 on a house that is now worth $250 000, I am going to have to come up with a hand full of cash.  I also see that even if the bank values the house at $250 000 at the time of my mortgage, if what you are saying, housing values could continue to slide and I’ll be in even more do-do in a few years.

My question is this – should I just walk away from my down payment and chalk it up to a valuable lesson?  I have no interest at this point in sinking more money into the declining real estate market.  I’m much rather live frugally in our small town house and invest in energy and healthy care equities.

I just bought and read After the Crash.   Wow…

Chad, say it ain’t so. You bought a house that isn’t built yet. You put twenty grand in real money on the table. You did this (oh, the horror) in the summer of 08. You live in a home you haven’t sold yet. The new house you bought (which doesn’t exist yet) is now worth less than the mortgage on it which you have not arranged. No bank will give you such a loan.

Not only a fool, Chad, you also managed to screw yourself over six times. Impressive. But at least you have come to the right place for advice. The blog dogs are waiting, all slobber and bravado in their pit.

Choices: (a) Walk, telling the builder the deal is off, and demand your money back. Try to be heard above the laughing. (b) Sit tight and hope the builder loses your name and address. You will never see the $20,000 again, of course. If the guy feels like suing you, he has a case. You will have to hire a litigation lawyer and file a defence. Kiss another five grand goodbye for a retainer. (c) Hire a lawyer now to represent you in negotiating a settlement. Another twenty might do it. (d) Do nothing, roll the dice, hope the guy fails. (e) Move to White Rock and take a new identity.

Yeah, Chad, not an appealing list, but given what the great banker had to say this week, this is no time to be loading up on new debt, no matter how cheap it may be. If you go ahead with the mortgage, be prepared to see payments soar with any renewal in the next few year. Steel yourself for more years of declining values, and pray a greater fool shows up to rescue you from your well-deserved misery.

But at least you came here. I forgive you. Rest your soul.

110 comments ↓

#1 Mike Oxlong on 04.23.09 at 10:39 pm

Chad save you bacon and at least get a builder mortgage approved (2 years out) from a bank (not a mortgage broker they can’t do these). They will do the appraisal now and get you approved now and guarantee the interest rate for at least 2 years. And yes this is a firm commitment if you can close within 24 months. At least you won’t get sued.

#2 Kurt on 04.23.09 at 10:42 pm

Chad:

Oh boy. Start looking for a lawyer *now*. Find yourself a good one and sort out action plans for each of the likely outcomes – builder collapses, builder looks aquiescent, builder looks aggressive. Then wait. Sorry, dude, that’s one expensive object lesson. Hope it works out for you – you folks seem to have the tactical discipline to rescue a strategic mis-step.

#3 JET on 04.23.09 at 10:55 pm

Chad and his wife should sell their current house while the spring market is still in this mini bubble – if successful in selling, they will perhaps neutralize their overpayment of the new house. This will at least get rid of one mortgage. They should then rent something modest and try to pay off her loans. They can still try and get out of the deal with the builder as per Garth’s suggestions. Or, they can try and sell the agreement of purchase and sale to the new property, and hope someone is crazy enough to buy it in this crazy market. If they can’t or don’t have the will to try and get out of the new transaction, well, at least they only have one mortgate to deal with.

#4 vanman on 04.23.09 at 10:57 pm

Put your current townhouse up for sale, if it sells first then you’re going to have to rent until your new townhouse gets built. That way, you’ve only got one mortgage to kick around.

Stay in your current townhouse or get ready to move to the new one, both places will depreciate in value.

#5 Katheran Milne on 04.23.09 at 11:00 pm

. . . and speaking of “creating currency from thin air” anyone interested in how this really works should visit http://www.chrismartenson.com and take his “crash” course! Very informative and easy to follow.

Isn’t this just a fascinating and exhilarating time we live in! Hi Judy, Jim and Rick!

Katheran Milne
Renting Realtor

#6 Grantmi on 04.23.09 at 11:11 pm

ah…. one of my favorite songs of all time!!

Watch out
You might get what you’re after
Cool babies
Strange but not a stranger
I’m an ordinary guy
Burning down the house

Hold tight wait till the partys over
Hold tight were in for nasty weather
There has got to be a way
Burning down the house

… Talking Heads

I think maybe this might be the better option! Wait for the builder to burn down the house! Probably easier for him to collect the insurance!!!

Happened in Walley, BC about a month ago! And the builder was on TV crying crocodile tears…. “Oh my goodness!!” “We’re GOING TO REBUILD!!! Trust me!!”

You haven’t seen a follow up to the piece since!!!

“Move along…. nothing to see here!!!”

#7 Cameroni on 04.23.09 at 11:15 pm

Yikes, rotten luck.

I would start by selling the place you own and reside ASAP. With all the problems you have already it should be a relief to know that it can’t all get a whole lot worse. Real Estate declines are in a nasty downward trajectory in the States, Canada is just starting to catch up now. After Carneys speech today and references to marginal (zero) growth in the Canadian economy and a reduction in interest rates to almost nothing you know the government is worried. We are in the beginning stages of a deflationary death spiral and that fat mortgage you are holding now will look like a mountain of ugly debt in a few years if things don’t turn around.

Lets remember that in the last depression housing prices fell 95% in some urban regions. So why is now different with some zip codes in California and Florida already down by 50% and more, or places like Vancouver where declines are already double digit.The Case Shiller index in the US is down 15 consecutive months in a row now and Canada is following the American lead albeit in a delayed fashion of more than 12 months.

That means you know already where we are headed in this country and now the Government and forecasters have confirmed that we will actually be hit harder than the US because of our branch-plant economy. Do you really want to hold on until bankruptcy is your last option on two devalued properties? Sorry I don’t have any sunnier advice. Your story is just so dismal.

Cam

#8 Concerned Citizen on 04.23.09 at 11:22 pm

If you look at the fundamentals ie. a house should only be worth 3.5 times that of the median family income etc. You will find that the Canadian Housing prices are still WAY TOO HIGH.

For those of you who do not like to hear this or disagree and think this kind of talk will “Scare” people into Selling Too Low; maybe TOO MANY people were scared into buying WAY TOO HIGH in the 1st place.
Does “Better buy now or be priced out forever” ring a bell?

The fact remains that if you refer to the stats(statistics canada), the current PRICE of Canadian Houses across the board Exceed the Fundamental Values by a Long Shot.

I can only HOPE that they come back down to the fundamental value (Approximately 30% lower than now) so that the Common Middle Class Canadian Citizen can have a CHANCE to AFFORD the purchase of a new home.

For the sake not only of us NOW but for our CHILDREN as well.
Otherwise we will see the MIDDLE CLASS DISSAPEAR FOREVER.

If you have children or care about future generations I Hope you would agree.

IMHO Anyone who would disagree does so purely out of PERSONAL GREED

The big question that should be raised here is HOW did the Canadian Government ALLOW this to happen in the 1st place and what REGULATIONS are going to be put into place to make sure this DOES NOT happen again in the Future.

#9 ts harpoon on 04.23.09 at 11:23 pm

‘Quantitative easing’ by Marketplace

The last weapon. Quantitative easing. Senior Editor Paddy Hirsch explains what this “nuclear option” is…

http://vimeo.com/2606496

#10 kitchener1 on 04.23.09 at 11:23 pm

Man, you are in a tough spot. If I was you I would do the following:

1. Is it a large builder, are they traded on the TSX? if so get all of the finanicial info that is available on them. If it is a small time builder start talking to the local trades/ building supply stores etc..

2. Talk to the builder, slim chance but they might be willing to keep your downpayment and let you walk away clean. If the answer is no then:

3. Start writing to every local and regional newspaper editor/TV producer, start your own website detailing your experience with the builder etc… be careful not to slander the builder but get your story out. The builder might want to work with you to stop the negative press. There are literally thousands of people in the same situation as you yet, almost no coverage in the main street media.

3. If all else fails, try to sell your interest in the development for 15K or 10K, someone might buy your interest in the development and you minimze your loss. The buyer would assume your 20K deposit for whatever you sell it for.

Do all of these things NOW, there is a little bump in the spring RE market so act fast.

#11 Larry on 04.23.09 at 11:30 pm

Suck it up Chad, if the house had risen in value you’d be bragging to the renters at the summer barbeque.

#12 Paul on 04.23.09 at 11:30 pm

Support your Red and White. Ha, ha,ha,ha….to funny.

#13 Grantmi on 04.23.09 at 11:32 pm

Ooops!! (Time flies!! This fire was back in October 08)

But as I suspected! Nothing has been done since…. and now the builder is threatening to sue those owners if they don’t complete their purchase!!

http://www.theprovince.com/news/Quattro+buyers+seek+assurances/1441341/story.html

Me smell’em more smoke!!!

;-)

#14 Davinci on 04.23.09 at 11:43 pm

Garth you are forgetting an unlikely choice of selling the property with a 10K discount. He can sit outside the sales office and try to sell to fools walking in.

If he gets any of that money back or not he should buy PHYSICAL gold or silver and wait for that printing press money to show him with wealth. If you are thinking about buying gold or silver go to your bank now and ask if they are having a hard time keeping up with physical demand.

My banker started buying gold and silver in September when I came in to buy some and at that time TD Bank sold me the last few ounces they had anywhere in the country. I wanted more but they offered me silver and gold derivatives (certificates) in stead. I said no thanks.

Do your own research it will give you the conviction I already have about gold.

“A Bank Note: They get printed on ordinary pieces of paper, or something. We use expensive presses and lots of ink and make these things, then we stick them in a vault and pay people to stand around guarding them. They have no more utility than ordinary pieces of paper, which we leave lying around on our desks. Anyone watching from Mars would be scratching his head. Would not an item with limited supply in the universe be a better storage of wealth?” – Leonardo Davinci (that’s my real name by the way, my parents where drunk when they named me.)

#15 I want one of these! on 04.23.09 at 11:54 pm

Wow! This is all just so MUCH more exciting than renting. It sounds so awesome and all; where can I get to be a “home owner”??

#16 thinLine on 04.24.09 at 12:11 am

Garth – if what you’re saying will actually happen, anyone holding significant cash savings will see them devalued by this magic money infusion. Can you remind us again what to do with these savings if RE is not the place to put it?

I guess I’m confused by the last paragraph where you state that this is no time to be loading up on new debt, yet in previous blogs you said that inflation (the result of printing the dollars you mentioned) should make debt payback easier to handle, not harder. Are you maybe saying that even though this new money will be created out of thin air, there will be deflation for the next few years?

#17 Grumpydawgs on 04.24.09 at 12:30 am

A lot of people like Chad are victims, lets be kind, lets bail them out. We’ll use the quantitative easing digital dollars from the BOC to set up a fund in order to purchase all the inventory anyone wants to sell, at peak prices, and then give it away in a big community lottery based on whatevers left after the summer kegger.

This is the great Canadian dream I have, a land where no one loses, no one takes responsibility for themselves and when you do stumble, the government will save you from even your own folly. It’s a free country so lets make it free. We’ll be like a new kind of Taliban, the Canadian Taliban and we’ll interpret all the BS the government and MSM whores as gospel and right. It’ll be a new and kinder radical movement.

Lets face it, the reality of paper currency is that it doesn’t exist, it’s value is solely in the imagination of the holder, so whats the problem with throwing it away on a bit of glad handing. Theres always more.Think of all the happiness we would create.

What does it matter if a loaf of bread is one dollar or one thousand, it’s all relative to the amount the government says it’s worth. When a million isn’t enough, we’ll make it a billion. I love Canada, it should be a trouble free life for those of us so fortunate to live here. We own the printing presses so lets crank ’em up and every one will be a winner because ” It’s diffferant here” and nothing will ever change that. The rich immigrants will come, the eastern retiree’s will keep flooding down the Trans canada in giant motor homes with thier cash and slightly goofy accents, and real estate can only go up right?

lets blow off this recesssion bummer and load up on debt we won’t have to pay back until we’re all on OAP and CPP. The children can screw themselves, lets have our fun now. The only reason God gave us children was to let us know what hell is like anyway.

#18 The Coming Depression on 04.24.09 at 12:53 am

Real Estate will NOT come back. A bubble is just that..a bubble. Like the rest of the bubbles it will take decades..do you have time?
http://thecomingdepression.blogspot.com/2009/04/bubbles-do-not-come-back-you-should-be.html

#19 rick in Surrey on 04.24.09 at 12:58 am

Unfortunately for Chad he is one of many, many people who put cash down on an invisible building. Not only has the value dropped out on it, legally you cannot simply walk away from your deposit. The builder has counted on the sucker, um, I mean buyer to come up with the balance of the sale price upon completion of construction. Just ask the many fools in Yaletown in downtown Vancouver that tried to do just that a couple months ago. They got threatened with a law suit before they could finish wiping their hands of the deal. Good luck Chad, you will need it!

#20 . . . fried eggs and spam . . . on 04.24.09 at 1:06 am

“. . . the state bank uses new national currency which it makes out of thin air to purchase debt securities held by private investors. . . .The new house you bought (which doesn’t exist yet) . . .”

A match made in heaven, doncha think?

Creating non-existent currency thru artificial means and then jump-starting inflation, which leads to higher interest rates; however, like Chad’s house neither has manifested into any shape or form.

One question, which anyone may answer:

Who are the private investors? The elite for sure, but who actually knows any of them?

Until WW3 and local wars begin across the globe, they are making a killing of the average person’s back with this turmoil.
*****
On CHBC-TV news tonight, KPMG (I think) said that corporate and personal bankruptcies had risen by a third in the valley this year. At local supermarkets, the price of fruits has gone up by around 20%, with produce and meat hot on its tail.

According to the IMF, Ukraine’s economy will sink 8% this year, and will probably antagonize their population, with plenty losing their jobs.

Thousands turned out in Georgia for protests aimed at forcing President Saakashvili to step down. Now Germany is in the soup. — http://tinyurl.com/cuuc3s

The US issues another $7 bln. or something in Kleenex money — http://tinyurl.com/cmn73g — the UK bailout is now equivalent to their GDP — http://tinyurl.com/dz4uoq — and Carney will press the high-speed button on the Cdn. presses.

So when does the rush to inflation and higher interest rates start creeping in?

I didn’t realize this, but now I do — http://tinyurl.com/9gpwpt — “A guy who can’t figure out his own taxes is supposed to fix the economy?”

#21 hobbygirl on 04.24.09 at 1:13 am

I was at an open house this weekend and was surprised that the real estate agent was not alone but was accompanied by a banker ready to seduce prospects into believing they ‘are richer than they think’. Maybe this is commonplace in the big cities but it’s a new sighting where I come from.

The wolves are no longer in hiding.

#22 The Coming Depression on 04.24.09 at 1:18 am

Uh oh Garth made the Vancouver Sun.
http://www.vancouversun.com/News/Garth+Turner+tell+ruffles+media+feathers/1527519/story.html

#23 Jeremy on 04.24.09 at 1:22 am

Not that it relates to this poor guy, but my topic is on divorce and real estate. I know one guy and his wife are divorcing cause she went crazy. But they’re trying to sell there house in Deep Cove (Near Victoria BC) for like 700000 and it hasn’t had any biters in a year.

Another couple I work with, shes living in her bosses basement suite while he lives in the house for sale house of 600000 up on Triangle Mtn (Victoria BC). He won’t let her drop it below 595000 and they are paying a mortgage of 1800 every two weeks or something like that. Ouch…..

#24 squidly77 on 04.24.09 at 1:26 am

go for the new ID..

#25 Jack the Lad on 04.24.09 at 1:32 am

Chad:

With a $120,000 combined income and only student loan debt, why are you worried?

If your income was low, I’d be worried, but you make a reasonable income (not rich, but not poor). You stay in your house long term, and it’ll recoup what you paid for it eventually.

Besides, you signed your name on the dotted line. You gotta take responsibility for that.

Why does now one want to take responsibility for their actions these days? I guess in the era of federal bail-outs for everyone it should come as no surprise…

Make a decision you later regret… ask society to bail you out…

#26 Jay Currie on 04.24.09 at 1:34 am

Yes, do get a lawyer but, before you panic, take a look at the actual documents you have signed. It is possible there may be outs, or, you may be able to say to the builder that you are willing to postpone the occupancy date if he is willing to refund/pay interest on your deposit. And so on.

And, yes, you are underwater on your mortgage but as I read this you only paid 198 on a house worth – at present 250. Selling is still an option. But, perhaps, not for long.

Joining us on the rental side while the bubble bursts may be your best bet.

And, while you are chatting with the lawyer, see what options you have in terms of you wife taking the total proceeds of sale in her name. If your builder gets stroppy, you may want to hit him with the bankruptcy option. At that point who has what cash in whose account becomes important.

Good luck!

#27 The Machinery Guy on 04.24.09 at 2:01 am

This is insane.
I remember all the economists saying a year ago ….”The fundamentals are sound….we ‘re heading for a soft landing”. Then we discovered all our engines have failed, the wheels fell off and the pilot is having LSD flash backs of the Dirty Thirties.

Then it was ..”Oooooops! Sorry …we got it all wrong, but a recovery will happen next Tuesday, next month, in the Fall of 2009 , second quarter 2010” ….. some time before the return of Halley’s Comet”.

We now know the real answer is …The recover will start when Hell freezes over or when General Motors can build a profitable small car.

I am very impressed by these new technical terms from Mark Carney. Wow!! “Quantitative easing” It’s a masterpiece of techno jargon. So, if I understand this correctly. This is the economic equivalent of a Hail Mary pass. Just flood the banks with money and hope the average Canadian will somehow borrow more from their maxed out credit cards and lines of credit. Doesn’t sound promising, does it?
I guess it’s better than “desperate attempt to do something because nothing else is working”. Every Canadian could grasp that concept and we sure don’t want that to happen.

Garth, I was just wondering. Is there a Ministry of Important Sounding Technical Terms in Ottawa? Are they hiring?

#28 JoeCalgary on 04.24.09 at 2:03 am

“Ailing GM eyes new China plant”

http://business.theage.com.au/business/world-business/ailing-gm-eyes-new-china-plant-20090420-acja.html

#29 Da HK Kid on 04.24.09 at 4:55 am

Yup, suck it up and get some good advice from a pit bull of a lawyer. Hopefully they can find some type of loop hole especially if the builder is a smaller one so you can pull out.

A $20K lesson is better than a $50K or $100K one, what’s up with all those student loans man????

I was born and raised in Burlington, I would be looking in TO for that legal advise bro!

#30 john m on 04.24.09 at 5:20 am

“This is called ‘quantitative easing’ which actually means the bank starts creating new digital dollars with which it buys up debt like corporate bonds. In the ultimate Ponzi scheme, the state bank uses new national currency which it makes out of thin air to purchase debt securities held by private investors. We, the taxpayers, get to clean it all up later. Or your kids. Whatever.”………Very scary scenario–i don’t really understand the end result of this..could you explain Garth? thanks

#31 Steve on 04.24.09 at 6:41 am

Kurt.

Good, lawyer! Good God, that’s an oxymoron!!

Chad … with the recent bump up in home sales (and interest in real estate by 1st time buyers), I bet you could find someone to take over your contract with the builder for free (you lose only 20 grand).

If the builder refuses to consent to the assignment of the contract to the new buyer, you have a bona fide defense when he sues you for not closing 2 years from now.

That’s your cheapest, safest, cleanest way of our your nightmare.

Don’t piss any money away on lawyers.

Good luck.

#32 Kash is King on 04.24.09 at 6:42 am

Maybe a possible step for Chad & his wife would be to sell their existing townhouse now while there is still a bit of a market, then rent something (storage also) until the new place is completed. Presumably they would free up some equity to counterbalance the drop on the new place, thereby alowing the bank to issue a new mortgage on the new underwater house.
They’d have to think this through carefully, since it is a big step.

#33 Kash is King on 04.24.09 at 6:43 am

*allowing

#34 David Bakody on 04.24.09 at 6:53 am

Chad …… you are joking right? Oh I hope so ….. if not I hope you have some strong parents and grandparents in your corner. Go to them (NOT FOR MONEY!) but mental support …… before you go to lawyer go to your bank and tell them everything …. and that there is no way you can now take on the responibity of a mortgage for the shear strain of it all will most likely end in you loosing your job and possible your marriage ( all could be true) …. and pray my dear boy! Next stop go to your friend and tell him what an ass your were and go out (do not drive) and have a few pops together …. then Chad roll up your socks and do this: Pay down debt and save wisely while living within your means for the rest of your life! Most likely what your grandparents have done …. get it grandparents!

#35 JO on 04.24.09 at 7:26 am

Remember the words Qauntitative Easing and Carney (along with Bernanke). There will be nothing easy about it.

These programs will simply make things worse in due time. WHile the treasury market may have a final push up over the next 2-3 months, look out to the fall for the emergence of a long term bear market in long government bonds that will wreak havoc in the RE market and economy.

I have no doubt that within 2 years, we will see the BofC changed (it should be gone – central banks, fiat money, and fractional reserve lending are not elements of a free market system) and Carney gone. QE is a massive “experiment”. Central bankers, being the parasites they are, are simply doing what they do best – attempt to rob the working/middle class. Yet another program your friendly government uses to intervene blatently in the economy by goosing artificial demand through falesly low short term rates and allowing credit to explode through a highly leveraged fractional reserve system (a gov’t sponsored counterfeting operation).

So for now, enjoy these “low” rates. A deflationary induced bond market crash is on its way. Yes, inflation will matter, but probably not for a while. If the CAD $ goes to below 60 ( very possible before year end), kiss your savings good bye. Nobody ever mentions what these actions do for the people who did the right thing and lived prudently. Everything is designed to punish the prudent and help the masses that became / were enticed to become willing debt slaves.

As for Chad, check out your options. RE will be a catastrophe in the next 3-5 years. You could have rented a nice place for much cheaper and no risk to your life…try to go against the herd. If 80-90 % of the population hold a string opinion on any asset / strategy, forget them, and base actions on the best of the 10-20 % who share the contrarian opinion.

JO

#36 Da HK Kid on 04.24.09 at 8:02 am

Guys, its a given that they should sell their existing house now, RENT immediately as to stop the rate of bleeding.

You can then take your monthly savings, and any equity left on the existing unit to deal with your losses and get on the good foot.

Start NOW! Feel better sooner! Good Luck!

#37 Happyplace on 04.24.09 at 8:23 am

Chad, you signed a legal agreement so don’t waste money trying to get out of the contract. You must like the new location or you wouldn’t have signed up. Sell your current residence while you can. Believe it or not, a lot of people out there still think everything is o.k. (they haven’t discovered this site). You can then rent for a while and probably negotiate a lower rent too.

Garth, can I get one of your books without the ‘notification sticker’?!

#38 Jacqueline on 04.24.09 at 8:30 am

This is ridiculous. He’ll take the gain on his present home but not the loss on his new home. Wow! Just sell your home and take the new one. You signed. Take some responsibility. You are not poor. You can afford the mortgage, etc. You want the money so you can go invest in something else, do you?

#39 Basil Fawlty on 04.24.09 at 8:34 am

Does Mark Carney honestly expect a country that is already up over it’s head in of all kinds of debt to start spending again? We have just gone through the biggest credit induced economic expansion in history and the central bank wants us to borrow and spend more? This is beyond irresponsible, we need new economic managers and fast, before the country is ruined. Who in their right mind would try to cure a credit/debt problem with more of the same? It’s like giving more whiskey to a staggering drunk. When the right measure is to remove the punch bowl. God save us from these incompetents.

#40 Bill-Muskoka (NAM) on 04.24.09 at 8:36 am

Chad, you have integrity to admit your mistakes. Granted you are financially damaged, but you have given a lesson to others. You will recover. Keep your head up and walk tall.

#41 ally ally oxycontin free on 04.24.09 at 8:37 am

#31 Steve on 04.24.09 at 6:41 am

Don’t piss any money away on lawyers.

Sounds like good advice on liquidity. Looks like the U.S. Fed are taking Mark Carney’s advice on “I’ll do it, if’n we have to!”

“In 2007, 89 percent of the Fed’s assets were in risk-free Treasuries. Since then, that number has plummeted to a scary 24 percent.The Fed now also owns more than $355 billion of mortgage backed securities and $61 billion in debt issued by Fannie Mae, Freddie Mac, and Ginnie Mae. Term auction credit comes to $455.8 billion. Those are short-term loans against just about anything and everything — from auto loans and credit card receivables to Brady Bonds and CMBS.

The Fed is also holding $238 billion in commercial paper as part of an October 2008 program to help corporations fund short-term debt obligations. And it has $111 billion in so-called “other loans.” This all-purpose category includes loans made to primary dealers ($12.9 billion), bailout baby AIG ($45.1 billion), and loans made as part of the Fed’s Term Asset-Backed Securities Loan Facility ($5.1 billion).

Finally, the Fed has lent money to so-called “Maiden Lane” LLCs that acquired dodgy asset portfolios as part of the Bear Stearns and AIG bailouts. The grand total there comes to $72 billion.”

http://www.moneyandmarkets.com/the-fed-our-next-troubled-bank-2-33348

#42 Rob in Onterrible on 04.24.09 at 8:50 am

Hi Chad,

FWIW here’s my advice listed from least painful to most painful.

Don’t bother with any lawyer. They only take your money and make empty promises. Later, they run for office and become politicians. Well, most of them anyway.

I personally would look at the builder’s financial situation like #10 suggested. There is a chance he’ll go under but then you won’t get your $20K back. I assume you need that money to pay off debt so that’s prolly not an option.

What does the contract say exactly? There must be some kind of exit clause. Like what happens if you have to move to the Yukon for job reasons? You may be able to change jobs and move for employment reasons and get out the contract with your deposit. Highly unlikely but worth a shot.

I would talk to the builder and make up a story. Like, I’m employed in automotive, soon to be laid off, may have to move out West and ask the builder if he will sell the unit for you and refund your deposit less any selling fees.

Try selling it yourself to another Greaterfool this spring while they are all spring fever because real estate only ever goes up.

Sell your existing house and cancel the contract. Use any equity in your current home to offset the $20K loss in your new unbuilt home.

Do nothing and loose everything.

Please let us know what you decide.

Rob

#43 Signal Loss on 04.24.09 at 9:21 am

Be careful about shopping your agreement to somebody else. There might be anti-flip clauses in the agreement. You may need to negotiate with the builder anyway to allow you to assign your deal to someone else (who you’d argue is actually interested in closing, can be in funds faster and is generally a better bet going forward than you). The problem is that just because you sell your deal on to someone else doesn’t necessarily mean that you’re no longer exposed to legal action from the builder: say the new guy fails to close – have you been released from your covenant with the builder to close just because you’ve unilaterally decided to assign the agreement to someone else without the involvement of the vendor? Spend $3,000 and get a lawyer to review your situation and lay out a plan for each eventuality. You’ll have to dribble more over to the lawyer if he/she actually has to engage with builder’s counsel, but what is $6,000 in the grand scheme? Let your lawyer lose sleep over how to deal with this – that’s what they do.

#44 Soylent Green is People on 04.24.09 at 9:27 am

My ex bought a bungalow in North York, Toronto, C04 oh about Summer 2007, razed it and built a stunning new house… STUNNING! I harped on him over and over if he doesn’t sell before the elections Fall08 he was totally screwed. SCREWED I tell ya!

He put the house up For Sale Feb09 for 1,299,000. He added an extra 100K as he thinking was, well, everybody’s going to low-bid so let’s just add extra to begin with, pretty much the opposite of what I would have expected anyone with a brain to do.

A month ago he received an offer for $1,100,000, he signed it back for $1,399,000, just to be an a–hole. I was scared out of my mind he would be stuck with this house. The low ball offer was from a father buying his daughter and her husband a house. Everybody on the street and agents were telling him he should have grabbed that offer and run for his life, he will never sell anywhere close to his asking.

Last night he received two offers, one low ball and the other $1,250,000. Sold, close in one month, pop the champagne. Again, same situation, different people, a father bought his daughter and her husband the house, they are childfree couple. No other house on the street has ever sold for this much money, again, the opposite of flipping house advice which is never aspire to be the most expensive house on the street.

Garth, I’ve lost all credibility with my ex-husband. I blame you for this.

n.

p.s. re some comment above; it’s always possible a husband could drive his wife crazy by acting crazy himself only when she’s around thereby forcing a divorce and everybody thinks the wife is crazy but they NEVER see the crazy husband acting crazy. More common than you’d think.

p.s.s. I just wanted to comment re renting. I know renting is a better financial option right now while the market crashes and burns, but I wanted to point out that renting can really take a toll on your emotional and physical health if you live with nutters who blast their music night and day, that is a torture where you just want to kill them and/or yourself, so please don’t go on how great renting is, it can be really difficult to rent and be at the mercy of inconsiderate hillbillies. And I could go on for day with other renting issues re loud fighting, bugs, smoking, drugs, bullying, harassment, etc. etc

#45 lgre on 04.24.09 at 9:28 am

My advice, sell the current home, still a lot of greater fools running around like mentioned by others.

You can try to get out of the contract but it may be hard, specially now when new construction is down about 70%.

A family friend who is in Burlington also had some issues, he bought a resale for $420k and expected his current home to sell for $350..he reduced the price 2 times and waited and waited..when the gates opened this spring and the fools came out running he managed to get $310k for it. Btw, he had 2 houses for about 3 months..dont get in that situation.

#46 Jill on 04.24.09 at 9:30 am

#11 Larry
“Suck it up Chad, if the house had risen in value you’d be bragging to the renters at the summer barbeque.”

Atta Boy!

#47 Just a Carpenter on 04.24.09 at 9:33 am

I am coming down on the side of the builder here. I assume that Chad got caught up in the bubble game and when he signed thought he was going buy new at today’s prices and sell his old place in 2 years not thinking there could be a downside.

Will my broker give me my money back cause I bought in at the peak? Does the house give back your money if you decide to fold, or the lotto return your 2 bucks when your numbers don’t come up? Get a life people, you take risks, you gotta take responsibility!

#48 dd on 04.24.09 at 9:39 am

Chad,

Deal with it today:

1) Talk to the builder and then
2) Talk to a lawyer

#49 PTDBD on 04.24.09 at 9:39 am

What fire?

Exactly, those flames rising from the burning house are “lower than expected”….so, all is well :-) going forward :-)

#50 vtj on 04.24.09 at 9:46 am

From http://www.yourdictionary.com:

integrity definition

in·teg·rity (in teg′rə tē)

noun

1. the quality or state of being complete; unbroken condition; wholeness; entirety
2. the quality or state of being unimpaired; perfect condition; soundness
3. the quality or state of being of sound moral principle; uprightness, honesty, and sincerity

Chad, whatever you do keep # 3 above in mind as you go forward and you’ll sleep better at night, guaranteed.

Good luck

#51 Got A Watch on 04.24.09 at 9:47 am

“Quantitative Easing” – When the Government prints fresh digital “money” on a PC keyboard, and uses it to buy up worthless paper from speculators who should have known better, but failed to do any due diligence.

Effect – Lowers the value of the currency but fails to spur increased lending. Notice how the CDN $ moved up almost 2% in one day on the news that QE was not starting just yet. When QE is announced as a go, the CDN $ will fall, probably to the 75c range vs US $ at first, lower, maybe much lower after.

Solution – buy precious metals with both fists. 100% allocation may not be enough.

Yes, I hear the anti-gold people screaming, gnashing their teeth, and foaming at the mouth in rage. There is only 1 cure – take the shiny golden pill, neo.

This is the goldbugs dream scenario. They have been talking about this for 10 years or more, in the metal head forums where they lurk.

Funny, those tinfoil hat wearing goldbugs – they have been right about almost everything so far, and years in advance.

#52 Cameroni on 04.24.09 at 9:51 am

Kudo’s to Kitchener1. He has his thinking hat on and I applaude his idea. Yes definately, sell your interest if you can and do it quickly. There is less time than you think to get out. You may even give it away if that is your only option.

I also agree with the other author who suggested spring will see a little real estate bounce. You will want to take advantage of that. Now I know this is a big investment but it is no different than any buy you might make on the stock market. Once in a while you buy a dog and it declines in value. You would be a fool to hold it. What do you do? Sell of course, take the loss and live to invest another day. No crying, no tears and no recriminations. That’s life, so run with it and pat yourself on the back for having saved your own bacon in a crisis.

In “The Art of War” it is not considered cowardice to flee an adversary greater than yourself. So unless you have the fortitude to combat an economic decline like we are having now, your best bet is to flee (sell) for your own financial safety.

Cam

#53 Shawn on 04.24.09 at 9:51 am

For Depression by that definition we need 10% GDP decline in a year.

7.3% in Q1 is annual or more properly annualized number. So actual GDP drop in Q1 was 7.3/4 = 1.8%.

Not nearly so scary.

By your definition a depression would equate to a quarterly decline of 2.5%, and we are at 1.8%. Not so scary? — Garth

#54 Alex on 04.24.09 at 10:13 am

China admits to building up stockpile of gold:

http://www.financialpost.com/news-sectors/story.html?id=1530063

China would like to increase its gold reserves to 5000 tonns from todays 1050 tonns, and they had only 600 tonnes 3 years ago! Bunnies they are! Apperently they are converting paper to real money…

Is gold still finished?

#55 Eduardo on 04.24.09 at 10:15 am

Garth,

Come lecture Calgary, you can stay in my condo!

#56 905er & Spouse on 04.24.09 at 10:32 am

Garth,
We knew you were a biker, but a Hell’s Angel?

It’s just a social club. Really. — Garth

#57 lgre on 04.24.09 at 10:36 am

On a second thought, hold on Chad..Carney is making another prediction..stimulus is working and we should be ok in 2 weeks. Wasn’t it yesterday, Carney was talking about using ‘unconventional measures’..wow, the lies are so rampant I can’t even keep up.

http://finance.sympatico.msn.ca/investing/news/breakingnews/article.aspx?cp-documentid=19355295

#58 Flip on 04.24.09 at 10:54 am

Chad,

You have a couple of options:

Before anyone sues anybody – they first check to see if there is money to be gotten. The builder and his lawyers will do an equifax check on you and then decide how to proceed (i.e. sue you or not)

What you need to do is make yourself look as bad as possible (financially that is) and not worth going after.

 Stop paying off your loans – max up your lines of credit and apply for as many credit cards as you can (and go buy gold or cashable bonds)
 Go to Vegas and “launder” your money into American cash.
 Sell your townhouse now and move into your parent’s basement.
 Learn Spanish and go visit South America.

Run Forrest run…

That or… suck it up princess. You made the decision and rolled the dice. Honour your commitment and get ready for a lifetime of tough, honest and frustrating work paying off other people’s (and your own) mistakes/greed/speculations. In 30 years, you’ll laugh about it as one of these “hard lessons learned” while your 2.3 kids pay 50% income tax on a salary that is lower than what you and your wife currently earn.

Knowing what your options are before making an informed decision is smart. What you do next will define you as a person. The trick is living (happily) with your decisions.

and right now, you don’t sound very happy…

#59 rory on 04.24.09 at 11:06 am

Morning all …
Got this little gem from http://www.whenbubblesburst.blogspot.com
“More than one-third of Americans and one quarter of Britons will end up with a mortgage loan greater than the value of their home.”

Had not since this kind of number previously …looks like the folks profiled here will have lots of company.

#60 Nathan in Edmonton on 04.24.09 at 11:13 am

Come buy in Alberta; lots of tourists with our British looking beaches…
http://www.macleans.ca/article.jsp?content=n232288021

#61 Bill-Musoka (NAM) on 04.24.09 at 11:14 am

#48 dd

The photo reminds me of how Harper and Dim Jim deal with our nation’s crises! They are called upon to act buit then realize ‘Oh My! A PHOTO-OP!’ ;-)

#62 Greg W., Oakville on 04.24.09 at 11:28 am

Hi #9 ts harpoon on 04.23.09 at 11:23 pm,

Thanks for the info video link.

I found it interesting when he said the Federal Reserve is Uncle Sam.
The Federal Reserve is not Uncle Sam but a private bank, run buy the people behind the curtain.
The Federal Reserve took the power to print the acid backed money from Uncle Sam.

The Fed Bankers are worried there ponzi scam with collapse. If it does we’ll all feel the pain big time! An Apocalypse of sorts, are you ready? I, and most of us aren’t.

It’s worth remembering that constant growth is not sustainable.

For more on the Federal reserve, I found this movie informative,
http://video.google.com/videoplay?docid=-1656880303867390173
or this interview with the director,
http://video.google.com/videoplay?docid=-3254488777215293198&hl=en

#63 cowgirl kiss on 04.24.09 at 12:05 pm

I am a single lady who bought a spec condo in Canmore two years ago and put 5% down. When the possession date came around last June, I hadn’t sold my house and the bank would not loan me the money under those circumstances. When I saw the condo, it was awful – really poorly built – and prices had started to flatline in Canmore. To make a long story short, I walked and lost my $15,000. It was one of the best days of my life. I knew that I had narrowly escaped what could have been the worst year of my life. How did I do it? I had my mortgage broker e-mail the condo builder and she told them that I did not qualify for the mortgage at this time. After a “sorry to hear that” sort of letter from them and a trip to the contract lawyer to confirm that my money was gone forever, I slept like a baby.

#64 Glenn on 04.24.09 at 12:06 pm

Poor Chad. His wife racks up the student loans, then “we” (read: HIM) pays them off.

In another 10 years Chad will get served with the inevitable divorce papers, and the house “he” paid for will now become “hers”.

All he needs now is a few kids (read: her little 8 lbs annuities) thrown in for good measure and he will be a top notch Greater Fool.

#65 Delay Closing on 04.24.09 at 12:21 pm

Don’t worry. If the builder delay the closing for more then 120 days, you will have an option to opt out from the contract and have your money back + interest.

#66 Makeorbreak on 04.24.09 at 12:58 pm

Chad, no. 42 is right.

You do not want to deal with a lawyer. Besides, chances are that your builder will not sue you. Really, who has the means to sue these days? My advice is sell your present condo, rent until your house is ready. You will recoup your money over time.

#67 PTDBD on 04.24.09 at 1:19 pm

Look, another shiny thing:

Like dem shiny granite countertops? I certainly did. They add value and quality to a house. I was checking on stone prices and was dismayed to come across some radon gas references. Then I did a search for “radon and countertops”. Wowzer.

#68 dd on 04.24.09 at 1:39 pm

#38 Jacqueline

“Take some responsibility”

Are you kidding? Why? People walk aways from deals everyday. If the builder needed $20k because of higher costs would they suck it up? No … they would pass it along to the owner.

Walk.

#69 dd on 04.24.09 at 1:41 pm

#63 cowgirl kiss

How did I do it? I had my mortgage broker e-mail the condo builder and she told them that I did not qualify for the mortgage at this time.”

Better yet. I like it.

#70 PTDBD on 04.24.09 at 1:53 pm

Geithner releases Bank stress test rules named Supervisory Capital Assessment Test – SCAT

Scatology the biologically oriented study of excrement (as for taxonomic purposes or for the determination of diet)
Will it pass the smell test?

#71 Jon B on 04.24.09 at 1:53 pm

Chad: That’ll be one expensive learning experience. A comedy of errors. What were you thinking?

#72 Chris in England at the moment on 04.24.09 at 1:56 pm

Nathan in Edmonton #60 “Come buy in Alberta; lots of tourists with our British looking beaches…
http://www.macleans.ca/article.jsp?content=n232288021

Alberta, we will overlook this if you pay the reasonable
fee of £248 billion for the use of our photograph. (That should plug part of the hole in the UK’s finances in the next couple of years.)

#73 CS on 04.24.09 at 1:57 pm

#64 – Glenn

W-o-w. Little burned and bitter are we??? Chad said ‘they’ made a combined income of $120,000 – for all you know, he makes $20,000 at McD’s and she makes a $100,000 at her corp. job for which she shelled out the big bucks to get the degree to get the job. Maybe she took the chances on him buddy. And if they have children, how on earth do they end up becoming just ‘hers’. He probably knew she had student loans, chances are she didn’t suprise him with that tidbit on the honeymoon – there are couples who love each other, who pool all their resources, who make it be about ‘us’ – and not about me – and they are the ones that make it. Food for thought my friend.

#74 Two-thirds on 04.24.09 at 2:06 pm

“But at least you came here. I forgive you. Rest your soul.”

You forgot to add: “and sin no more”, Garth.

:)

#75 Two-thirds on 04.24.09 at 2:09 pm

Has Garth pulled a Strong-bad here with the constant replies to reader e-mails?

It sure seems like it, which I welcome 100%.

Now if only “the cheat” would make an appearance on this blog, my Friday would be perfect.

LOL

#76 Aston on 04.24.09 at 2:14 pm

“Quantitative Easing”… I remember reading a study that concluded that nothing the government does actually helps bring an economy out of recession, at least, in a real and quantifiable sense.

On the other hand, if the government did nothing, its citizens would panic, driving the economy down even further. Basically, the gov’t has to at least make it appear to be proactively doing something to boost consumer confidence.

#77 ralph on 04.24.09 at 2:38 pm

Chad:

One potential problem in getting out of this mess is your $120,000 yearly income. With that amount it might be hard for them not to sue you. It is time to plead poverty.

#78 . . . fried eggs and spam . . . on 04.24.09 at 2:40 pm

#27 The Machinery Guy on 04.24.09 at 2:01 am — “. . . will start when Hell freezes over or when General Motors can build a profitable small car.”

I understand GM is now, or will very shortly be building new, small to medium-sized and very fuel efficient models at their brand new plant in China, Ford has new plants in Brazil and Russia and Chrysler is opening shop somewhere else as well.

Why? Lower wages and almost no benefits, plus unions are almost non-existent. With new robot-like technology on assembly lines now, and except for costs of basic maintenance on these plants, the net profit from each car sold is probably in excess of 75% of what it cost to build.

So milk the taxpayers here, soaking up as the sun as much as possible then move elsewhere — easy — and welcome to Hell!
——
#54 Alex on 04.24.09 at 10:13 am — Re: Gold.

Is this one reason why the IMF sold a bunch of bullion a few days ago? Also, who bought that gold?

#79 barb the proofreader on 04.24.09 at 2:47 pm

“and why it now warns that unless you start spending your brains out, it’ll unleash the dogs of liquidity.
— Garth”

Garth,

DH & I have done our part to save world economy :) We spent & borrowed to travel :o

Just returned from our silver anniversary in Hawaii (avoiding bad turbulence).

Canadian tourists ALL spoke of leagues of friends losing jobs, [especially on Vancouver Island.]

Many Hawaiian island businesses closed/suffering badly. I’ll say one thing, it’s a good time to travel — no congestion.

[But, what’s up with that ridiculous Vancouver Airport!? Yikes. We hiked for ages through mazes and passages and switchbacks just to get to connecting flights. It was a bigger challenge than “The Amazing Race”.]

#80 Farmer Ben on 04.24.09 at 2:48 pm

Went I first read the story about Chad I could not believe a nice young guy that *Got done in* by putting $20,000.00 down on a pile of dirt. The sales person must have had his or her pants belted at his or her upper chest to stop him or her from laughing all through the signing of this deal.
What took place was,*A romance at midnight at the Oasis!*
You could try to find out if all the phases of this townhouse project are sold out. If not and you picked out a unit that was in the last phase, you could ask the builder if they want to kill your deal because in these times the builder may not get a builder draw from the bank–or to start the last phase. ( IF you are lucky just maybe?)
If not ask a lawyer to explain your problem. ( On the first visit which is the best bang for you buck)

On the quantitative easing! Where does the B of C get the idea that may work? It sounds like drunk talk from the back seat of a old chevy in the early 70s.
We the people will pay for all this later when he has left the B of C. We will be pregnant with a dollar at 50 cents U.S.

#81 Two-thirds on 04.24.09 at 2:49 pm

#51 Got A Watch:

I’ve read your posts over the previous months and have always appreciated your insights.

I’m neither a gold bunny nor a paper $ defender. I just have managed to live within my means, be debt free, and have savings to worry about. And I would appreciate some advice from sensible folk such as yourself.

For those of us who have a decent pile of savings, the effects of quantitative easing and all such gov’t meddling actions on the CAD are a real concern.

As a renter, buying a safe and purchasing bullion/coins is not an option. Plus, I am sure there are pretty hefty premiums on gold right now.

As an alternative, I was looking into converting some (all?) of my savings into a basket of foreign currencies. The Euro seemed to have some pretty solid performance vs the CAD. I know that in the short term, the USD will hold its value better than the loonie, but it scares the crap out of me what will happen once the consequences of the trillion-dollar bailouts be on the USD. Not worth the risk, IMO.

Call me crazy, but I’m also thinking that the Australian dollar (AUD?) might be a good bet, given their proximity to China and natural resources. In fact, the Yuan might also be a decent bet, especially now that China has started offloading their USD-denominated assets. This might be more of a long-term move, so I’m unsure if it matches my short-mid term objectives.

So what to do? Buy gold or metal ETFs? How safe are these? Are there other cheap ways to own metals? Do you guys have suggestions?

If I buy foreign currencies, I’d go with traveller’s cheques, since I do not have a safe and I do not intend to rent a box at a bank. I’m cheap, so I want to minimise my investment costs and preserve the liquidity and value of my savings after the almost guaranteed drop in the CAD.

When will this happen?

Well, if I knew that, I would not be posting here, would I?

Thanks for any suggestions.

#82 Flip on 04.24.09 at 3:00 pm

Quantitative Easing:
When your proctologist applies a copious amount of glob on his rubber gloves before performing a thorough prostate exam…

#83 . . . fried eggs and spam . . . on 04.24.09 at 3:29 pm

Suppose that the world’s major banks have combined net losses of US$5 or six trillion — http://tinyurl.com/d58afx — which may lead to the present fiat system being regurgitated into something new.

As a commodity, gold is doing quite nicely — http://tinyurl.com/dksvbc — which leads to the question I put forth earlier — who bought the gold from the IMF (China)? — http://tinyurl.com/cjk9tq

The Telegraph questions today, after one of the worst UK budgets ever, if it is time to leave the UK. Their debt looks to be out of control for more than two decades hence — http://tinyurl.com/c7znj4

Germany is facing civil unrest and a second banking mess up, Spain, Ireland and plenty of others’ unemployment is growing — it appears the west is sliding and the east is coming strong again. Another cycle and more changes.

After all is said and done with gold the the fiat monetary systems, along comes the possibility of food shortages — http://tinyurl.com/d9eo6r — so one way or the other, we’re in for a helluva ride!

#84 Too Old Bob$ on 04.24.09 at 3:34 pm

Whoa! hold the horses.
I was doing my daily exercise on the Skiing Machine ( so I can impress the girls in Kelowna when I go there ), when low and behold a news item came on the radio. A small interview with Carney. Question was: “when do you think we will come out of this downturn, recession and the economy will improve?” OK wait for it! Mr. Carney says: ” EVENTUALLY” what the?, I almost fell off the dam machine. So there everyone, nothing to worry about. Go buy stuff, get in debt, because the Big Guy says we will come out of this and life will be good for everyone. You doomsters need to get a life, come on now why wouldn’t you believe him. Har har he he!!

Here’s my prediction for guys. EVENTUALLY: we will get old, you will get gray hair, women won’t look appealing to you no matter what they look like, women won’t look at you anymore, buy a coffin or urn, you’ll need it, you’ll need lots of medicine, your Doctor will want to talk to you with a rubber glove on….I could go on. If you want anymore predictions, just let me know because as you can see it is easy to do.

Chad, I suggest you talk to the builder about splitting the downpayment, if not then get a lawyer and split 3 ways. If none of those work then talk to some of the guys in the link (new identity) that Garth posted, they could probably help you.

#85 David on 04.24.09 at 3:37 pm

An era of zero interest rate policies and some clown developers are asking for $20K cash advances to help finance their project 30 months in advance. That in itself should be a Red Flag with regards to how viable this development will be in the future. Sounds like if you follow through that you will at some point in the future most probably a.) have to walk half a mile to find your nearest neighbour and b.) walk past rows and rows of yellowed M&M Meats flyers so your kids can find a playmate.
A $20K deposit write off and selling your existing property is preferable to a life time of penury. Low interest rates are no substitute for unsustainable principal.

#86 wjp on 04.24.09 at 3:39 pm

#70…Judging by the market, the answer to your question is yes. Go figure!

#87 RS on 04.24.09 at 3:52 pm

You’re screwed dude!

#88 TUT on 04.24.09 at 4:19 pm

Golden exercise in futility.

Using 1,000 $/oz as reference price for gold and 32,000 oz/ton we may calculate some “gold equivalent” weights for several actual figures.

China’s currency reserves in US$1,2 trillion = 37,500 tons of gold (5,000 tons = 160 billion).
USD GDP US$14 trillion = 437,500 tons of gold
World GDP US$80 trillion = 2,500,000 tons of gold

Estimated total gold production from 1835 to 2007 = 160,000 tons.

Make your own conclusions and have fun.

#89 jess on 04.24.09 at 4:29 pm

one thing we can all say with certainty is that there will be lots of contract rippin’ in the future. Especially since mr. lewis thought he had a card to play.

Have there been any leading cases in Canada interpreting MAC clauses?

#90 Grumpydawgs on 04.24.09 at 5:14 pm

And so the GESTAPO Tactics begin against the citizens of Vancouver. Remember we discussed how Olympic venues and the IOC overlords would be ringed with razor wire, barking dogs and shoot to kill nazi cops and IOC mercenary’s. It’s already started. I will now forecast the first ‘precautionary arrests’ to begin very soon, we will definatley see the community of the protest movement and DTES culled. Rememeber, the court houses will be closed ‘for security reasons’ as are all public buildings, if you are arrested expect to stay in jail for weeks, even months, before you can see a magistrate. There will be a huge backlog of detainees so your jail time could be extended indefinatley. NAZICOUVER here we come.

“METRO VANCOUVER — When 73-year-old Peter Scott reads something he doesn’t like in a newspaper, he cuts the offending article out, stuffs it into an envelope, scribbles his opinions on the outside in black felt pen and mails it off to the object of his ire.

Recipients have been prime ministers and premiers (all of them, he says), MPs and MLAs and not a few mayors and councillors. His notes on the outside are a way of getting attention.

For the most part, he says, he’s simply ignored. Once in a while, someone will write back. But never in all of his many years of writing biting notes has he ever had the reaction he got this week from the police protecting the Vancouver Organizing Committee for the 2010 Winter Olympics.

http://www.vancouversun.com/sp…..story.html

#91 hagbard on 04.24.09 at 5:17 pm

Sit tight and wait for the revolution.

#92 North Vancouver Citizen's Analyst on 04.24.09 at 5:23 pm

Hey, am I mistaken or is that the photo from the G20 meeting?

#93 Nostradamus jr on 04.24.09 at 5:37 pm

>>>Welcome to debtors’ prisons of the 21st century.<<<

“””Edwina Nowlin, a poor Michigan resident, was ordered to reimburse a juvenile detention center $104 a month for holding her 16-year-old son,” the New York Times wrote in an editorial.

“When she explained to the court that she could not afford to pay, Ms. Nowlin was sent to prison.”””

http://dissidentvoice.org/2009/04/guilty-of-being-poor/

#94 Davinci on 04.24.09 at 5:44 pm

#81 Two-thirds

The Central Fund Of Canada (CEF) or goldmoney.com is a good place to store wealth, don’t even think about the Perthmint.

With that said I don’t recommend you do that, because like a gun you don’t buy it and just keep a receipt in the house, because in the unlikely event you will need it you can’t defend yourself with a receipt. Thus you can’t buy something with a receipt, so keep a few silver and gold coins on you at the bear minimum.

But before you buy a single ounce of gold or silver do a lot of research. Buy the book “A guide to gold and silver investing”, read what’s going on in the gold and silver markets and how it’s priced, and learn what IS money. Once you do you will become a gold bug like I did over a year ago when I got out of the market at the top.

I hope you invest the time to do the massive amounts of reading I did. It will give you conviction with absolute confidence in what you are doing.

Then again I went above and beyond and read technical documentation and cross referenced the data so I doubt you will be as thorough as I was. I just could not believe what I was reading, basically the world’s population has been tricked into believing a storage of wealth exists in a piece of paper.

#95 Dee on 04.24.09 at 6:08 pm

Mr. Garth? There are two stories that have been tumbling around. I am beginning to wonder if they’re somehow linked but I can’t make the connection. Just wondering if you or anyone else on this board has any thoughts about it.

http://www.nakedcapitalism.com/2009/04/guest-post-breaking-news-china-has-been.html

http://ca.news.yahoo.com/s/capress/090424/national/us_cda_mccain_gaffe

#96 Dan in Victoria on 04.24.09 at 6:08 pm

Looks like you dug yourself quite a hole there Chad.Now you’re talking about investing in energy and health care,what if these tank?Are you going to whine then too?Lets look at this, you have ten grand tied up in your present place.Sell it now.If your lucky you may have something left over or break even after its all said and done,remember its now depreciating,its no longer a wise investment with what you have in it.Also if it really tanks you still have a 188,000 dollar mortgage,whats it going to be worth in a few years?Now the second place,twenty grand down…..what in the @#!&^# were you doing?Go find a suit (lawyer)and pay for some proper advice,maybe your smart friend can help you out,be careful, some of them will suck you dry.GET MORE THAN ONE OPINION, DO NOT COMMIT.Pay them for their time.Do your research find out everything you possibly can about the contracts etc.USE YOUR OWN JUDGEMENT.Also keep in mind the builder has a contract with you that he also must honor,and there maybe some time frames that he may not be able to meet.Do not grant an extension,do not say anything,do not sign anything period.DO NOT let them know that you are in grief, they will take advantage of it!!!If you find a legal loophole that you can exploit,fine.If not hope that the builder screws up,it does happen.Go and do your fact gathering,and come up with a plan,whatever it may be, sitting there hoping it will go away will not happen. Its going to cost you some$$$$ get over it.Next time think before you commit,look at it in a good way and from a bad way(worse case scenario),also, making money is easy at times,hanging on to,or making it in the bad times,those are the smart people.

#97 TUT on 04.24.09 at 6:18 pm

Davinci

Please enthrall us mortals with your acumen to understand what is the “real” difference between believing that “wealth exists in a piece of paper” as opposed to “.. in a piece of metal”. Isn’t it the word “believing” the key to both delusions?

Last time I tried neither paper not gold helped a lot to make a humble omelette, so I really need to know :)

#98 Dan in Victoria on 04.24.09 at 6:27 pm

Also Chad,besides this blog read these http://theautomaticearth.blogspot.com Ilargi has a good read for you today.Also read this http://patrick.net/housing/crash.html

#99 john m on 04.24.09 at 6:43 pm

Well Chad my advice is “bite the bullet for the 20 grand” it will probably be the cheapest and id bet the builder is in more financial trouble than you are and he will not be suing anyone and is a victim as well? Just my thoughts.P.S……id bet the project is no longer feasable and will not be completed.

#100 dd on 04.24.09 at 6:55 pm

#92 North Vancouver Citizen’s Analyst

“Hey, am I mistaken or is that the photo from the G20 meeting?”

Oh that is a good one.

#101 Calgary_police_state on 04.24.09 at 7:06 pm

Chad:

You took a risk, its not the end of the world. Things could be worse. You could be injured, unable to work, or have no job. As it stands, with a $120K/year income you are sitting pretty.

I talked to a dude I worked with today and he said me paying in the $1500/month for renting a nice house is too much. He said I should downsize and move my family into something for $1100 a month in Calgary so I can save up while I wait. Wait for what, suffer for what? Just because the market is insane(still) in Calgary why should I be forced to conform to it? All of the people in Calgary I know complaining about this drop of prices are ones who bought before 2004 when there was a shade of reality in pricing. The amount of greed and delusion in Calgary is amazing.

The foreclosures are mounting as I write this in Calgary. This stems from people trying to max out their mortgage payments and a stupid oil dependent economy.

Consider yourself lucky Chad that you have such a good income and are not injured and/or half dead. Do you really think that the price of that condo will never come back up? Thats not realistic. I wish more of the sellers in Calgary had your mentality, then they would all panic and revert to pre 2004 prices and I could get a shack or hole in the wall to live in for a decent price instead of sellers demanding top dollar for shoddy hastily constructed drywall on a small mud lot.

This isnt likely to happen though. In the future, do everyone in Calgary a favour and write to Mario Toneguzzi at the Calgary Herald, he’s severely misinformed and thinks Calgary itself is a silver lining.

#102 Kris on 04.24.09 at 7:22 pm

#92 – Too funny! I don’t see Harper in the photo, maybe he’s out back peeing on the fire?

#103 ACS on 04.24.09 at 7:27 pm

“Residential real estate is about to get very weird.

In the coming months, housing-market data is likely to show price stabilization in many of the country’s hardest hit areas. Pundits, government officials and real-estate professionals will loudly proclaim the worst of our real estate woes are behind us. Back in reality, however, this data will simply reinforce the axiom that there are lies, damn lies, and statistics.”

http://www.minyanville.com/articles/C-citigroup-bac-mortgage-housing-wfc/index/a/22344?ref=patrick.net

#104 jess on 04.24.09 at 7:42 pm

as the society gets more desperate ….desperate people will do more desperate things.

PUBLIC WARNING ABOUT KENWORTH SOLUTIONS
The Financial Institutions Division of the Saskatchewan Financial Services Commission (SFSC) has been made aware of an Internet based advance fee loan brokering scheme that is alleged to be operating out of Regina, Saskatchewan.

Kenworth Solutions is purporting to offer online credit application with the promise of providing loan proceeds upon the receipt of a signed acknowledgement and the remittance of a portion of an insurance policy premium to secure the loan amount.

When consumers have inquired with Kenworth Solutions, they have been provided with various application forms along with a false licence issued by the “State of Saskatchewan” authorizing Kenworth Solutions to carry on business in North America, Europe, Asia and South Africa. This is not a legitimate licence issued by the SFSC, and appears to have been developed to convince consumers of the company’s legitimacy.

Consumers should be aware that Kenworth Solutions is not licensed by SFSC and The Trust and Loan Corporations Act, 1997 does not allow for loan brokers to charge any kind of an advance fee.

Any consumer who has paid an advance fee to an unlicensed loan broker may wish to contact SFSC at 306-787-6700.

#105 Jonathan on 04.24.09 at 7:52 pm

1929 – unemployment 3.2%

1930 – GDP falls 8.6% – unemployment 8.7%

1931 – GDP falls 6.4% – unemployment 15.9%

1932 – GDP falls 13.0% – unemployment 23.6%

1933 – GDP falls 1.3% – unemployment 24.9%

1934 – GDP rises 10.8% – unemployment 21.7%

1935 – GDP rises 8.9% – unemployment 20.1%

If you take out government stimulus out of today’s GDP, then you would see a contraction of about double what occurred in 1930.

The US is spending, in stimulus and bailouts, at a rate of 2 trillion per year. That is over 14% of GDP. Therefore one can assume that the economy would be contracting at over 20% of GDP without the stimulus.

#106 Jonathan on 04.24.09 at 7:56 pm

Just to add to the previous post, that the 7% contraction includes 100% of all government stimulus:

GDP = Consumption + Government Expenditures + Investment +Exports – Imports

#107 Da HK Kid on 04.24.09 at 8:45 pm

On Currencies, I was very bearish USD but seeing all the money being printed globally, ie. QE – Quantatative Easing, still the rush to USD in flight to safety and 64% of worlds currencies in USD and may I add my view on the US Admin/Fed Ponzi scheme to manipulate their own and potentially global financial industry and finally the US debt owned by China and others in USD.

I am long USD!

I will however agree that the buying power of the USD or any currency at this point will lesson over the next 5 years.

If I am wrong on the USD and there is a correction vs. other currencies, I do not see a major devaluation. I see the USD index rangebound between 0.83-0.87 for some time.

The only currency I have called correctly in my mix is the AUD which I purchased at 0.63 and sold for 0.72 recently and back into USD.

While I am Bullish Asia and China’s ability to turn their ship on a dime, they are just marginally better off than the ROW right now. They will produce press and GDP and growth numbers to whatever suits them.

Currency traders beware of the pitfalls of doing so unless you are going to watch the markets 24-7 pip by pip. But the QE pattern is forming so there is money to made, like the 10% I made last 1.5 months on USD-AUD pairing.

#108 dd on 04.25.09 at 2:40 am

#101 Calgary_police_state

“paying in the $1500/month for renting a nice house is too much.”

Hey for $1500 … two bed two bath steps from the CTrain in downtown Calgary. It is a great deal. Sold one car, walk most places, drive only on weekends, can only buy so much for the apartment because don’t have the room, “central”, more time to do stuff (save time on work-home travel).

Ya $1500 expensive? I think not.

#109 cowgirl kiss on 04.25.09 at 10:59 am

In my situation (#63) I was a single lady with a limited income and I was able to get out of my contract because I couldn’t afford to get into it. I had my house on the market and did not have an adequate income to sustain 2 mortgages. My plan was to sell my house and move into the condo.

If you do not have the ability to buy the condo, then the contract goes to the next step of losing your deposit. It was simple and there were no law suits or threats of a lawsuit. They said that their expenses would not be covered by my 15K and that I was getting out with the better deal. They had to pay the salesperson, fees to the bank to cover the property until it sold, (and they were not selling any at the time), and so on.

Hope that helps.

#110 Another Albertan on 04.25.09 at 11:22 am

@108 –

You do realize that 101 is the former Calgary Rip Off guy? The writing style is a dead-ringer… at least he is not (yet?) raging like his posts from late ’08…