W

wolf1

W. Remember that.

Seven months ago one of my buddies called and told me what his plan was.

“We can get to the cottage in six hours, and I’ve got 500 gallons of diesel laid in for the generator, plus there’s a woodlot for the stove,” he said. “And it’s remote, in Quebec, so marauders shouldn’t be an issue. I’m just not sure about how to lay in enough food in case we have to stay there through the winter. And cash, how much…?”

Just last November we were all screwed, or so it seemed, on the cusp of a neo-1930s collapse. Financial system collapse, corporate collapse, supply chain collapse, even government collapse suddenly looked more than plausible. In the matter of a few days many people realized they were completely unprepared (unlike my friend) for anything other than life as normal.

Credit and debit cards, but no cash. No gas in the car. No savings. No refuge. No plan. Omigawd. People with the bulk of their net worth in a house, devoid of financial assets or immediate cash, heavily in debt and absolutely dependent on a job were like straw beach huts in the path of a tsunami.

If only those folks had been able to get, say eight or ten months’ warning, it would have made all the difference. They could have sold or downsized while people were still buying houses. They could have wiggled out of debt, started planning for harder times, saved some money, stashed some cash, reduced overhead, refinanced or simply reduced spending.

But where are we today? Green shoots, baby. It’s almost over!

That’s the cry from the media, the realtors, the bank economists and the politicians. Houses are selling again. Prices are rising amid bidding wars. “Only” 42,000 people lost their jobs last month in Canada last month, and, hey, GM will be outta bankruptcy before you know it. Care for a Buick?

Of course, it’s in the naked self-interest of all those people to encourage ingénue first-timers to dive into the mortgage soup and run up their LOCs buying new HD televisions and cars with cameras in the back bumpers. It’s only consumer spending – massive new amounts of is, supported by billions in new debt – which will rescue this economy. Maybe.

The trouble is, all this gardening talk has convinced many Canadians we are on the cusp of 2006, when we’re actually much closer to where we were this time a year ago. As I have been saying for some time now, this is not the end of the crapstorm. The great recession will not end in a V – rapid decline and quick recovery – but probably be a W, with a second plunge coming which will be just as unnerving as the first.

So I shake my head when some folks scoff that my prediction of a 15% national real estate price decline has not yet materialized or my comment that we would see a “faux” spring real estate market in 2009. Fact is, the current bubble would not exist if desperate governments had not cut the price of money to near zero.

As Toronto real estate appraiser Barry Lebow said on the weekend, “There are going to be tremendous changes in real estate… There are just not enough first-time buyers and the ones buying today, those people are not really buyers, You know what they are? They are renters of cheap money, variable-rate mortgages of 2.99% . If mortgage rates were 8% to 9%, these people wouldn’t be buying. It’s an artificial market. One hiccup in the rates and it’s all gone.”

Yup. And that’s about where we are headed, into a series of events which will make people who bought houses at full price in May of 2009 – with car companies bankrupt, millions out of work and governments plunging into massive debt – wonder what the hell they were thinking.

A day ago a poster here ripped into me saying, “I have to ask: do the predictions that don’t work out not count? I mean, who is being careless here? People actually acted on that prediction and sold their homes in a rush for less than they could have received because they believed you were correct. And, clearly, you were not. So maybe it’s time to be a little humble here.”

But all is not as it appears. I’ll wager that two years from now anyone who took my advice and bailed out of their real estate in early 2009 will look like a genius. Anyone who bought when Phil Soper and the Vancouver Sun told them to will look like a fool.

And anyone who learned from last autumn, and is acting now, will look anything but humble.

103 comments ↓

#1 Da HK Kid on 06.07.09 at 11:09 pm

Everyone is still searching for immediate resolve and forget about what happens when the Kool-Aid where’s off!

I have never seen a V, but I must submit that there is as much likelihood of a L shaped as there is with a W.

The WSJ had a great article recently talking about the pain of the upscale residential RE market. Here is an excerpt which is key;

The biggest factor in this second wave of foreclosures is the inability of distressed homeowners to sell in order to pay off their debts. Prices in bubble cities such as Los Angeles, Phoenix, and Miami are down less at the high end of the market than at the bottom, according to data from Standard & Poor’s/Case-Shiller home price indexes. But that’s cold comfort to people who haven’t managed to sell at all. According to research by the National Association of Realtors, there are enough $750,000-plus homes on the market to cover more than 40 months’ worth of demand at the current rate of sales. That’s four times the rate of oversupply in the housing market as a whole.

40 MONTHS PEOPLE! This is why that sweet McMansion you’ve always dreamed of in VAN or TO is going to be very cheap down the road BUT, is that neighborhood still going to look the same to these buyers???

I see at least one more correction to complete the W but with all the bubbles having different timings but all related to the supply of cheap money it is extremely hard to see how the W can be it! Maybe two W’s turning into an L!

If Oil is in fact the new GOLD (BLACK GOLD) and we find ourselves with over $100 oil again, be ready for reverse globalization as without the consumer spending and the cost of imported goods relying on transportation ie. cost of oil, we could see more evidence of a serious L shaped recovery.

#2 john on 06.07.09 at 11:19 pm

When you were making your predictions of a real estate correction, did you not think there was a possibility rates would plunge to offset this?

#3 Jon B on 06.07.09 at 11:33 pm

“Renters of cheap money”. I like that one. Given their numbers, perhaps Canada will become a failed state, economically that is.

#4 poorguy on 06.07.09 at 11:35 pm

Roubini and other economist are predicting
“W ” recovery is guaranted ,look at the 10 years note
yield,all the so called green shoot going to turn yellow.

#5 Phil on 06.07.09 at 11:42 pm

Well put Garth, this thing has just started. It took a decade to create this mess (25 years according to some) it may take just as long to unravel. And when its done we will have to become accustomed to a new lower standard of living and no longer rely on debt to prop it up. The “Real Estate Market” as we have known it will be complete history.

#6 landlord on 06.07.09 at 11:45 pm

no offense but not everyone in November thought we were screwed…the posters on this blog are probably not a good sample of the majority as they seem so defeated already with no skin in the game.

#7 JoJo on 06.08.09 at 12:06 am

NO MONEY DOWN MORTGAGE IS BACK!
Housing prices in Toronto Area again top high.
I read news on Internet from USA and Europe,and Bravo
Canada is number One in the world for Green shoots, baby. TD Canada reported that if goverment will continuing with the same level of ” Green shoots” after 5 years Federal deficit will be over $ 172 billions.
It’s insane we are number one country in the world for Taxes and WHY Goverment of Ontario again spent our money for bail-out of GM and Chrysler .
When I’m watching new builders houses I can just cry.
Also food,oil,clothes,property taxes,education fees are every day more,and more expencive.
Inflate or die,

#8 im-poster on 06.08.09 at 12:20 am

…And this new topic is exactly where I was coming from in my post in the last topic. A lot of people may not believe Harry s dent and his predictions, but since his newest book has come out he has been acurate. The drop in the markets in the fall of 2008 was only the opener to the final act of late 2009, possibly 2010. These green shoots we are seeing are a response of the markets to the huge financial stimulus being injected into the worlds economies. Once they dry up, and they will quickly, we will see the next leg down. We all know many reasons why this will happen, but the main few are
1)We have just come off the biggest boom in history, busts of equal proportions always follow…
2)Demographics. The next large group of buyers looking to buy starter homes will not be of age to do so for about ten more years on average. They are the echo boomers, the kids of baby boomers. Most people buy their first home at around age 30. Any way, I am no expert on this stuff, but if you look at demographics, it all makes sense. When people talk of the lost decade in Japan, that would have happened no matter what, simply because their population was aging. They had no where to grow…same as us, for the time being. I would love to hear what others think about this. Garth has mentioned many times about the boomers retiring soon, needing to sell the ir mcmansions, but there will be no buyers…
A few other interesting points Dent makes is that we are due in N.America for a large terrorist attack as they have an indentifiable ten year ( approx) geo political cycle of repetition, and between 2010-2020 we should have WW3 based on his 80 year major war cycle. It is scary, but it all makes a lot of sense…

#9 . . . fried eggs and spam . . . on 06.08.09 at 1:09 am

“No plan.” — The greatest compliment anyone can give to a world-class Sheeple or Sheeple-ette!

Good post on the ups and downs of life, gaining speed each and every day. It is relatively easy for us bloggers here to realize what and when all this stuff happens, and take different courses of action to adjust to varying circumstances in life.

Sheeple will be hit hard, ‘tho. Pity, but they, like everyone before them, must go through the hard times to appreciate what the good times are like. No blame games to play with anyone.

“. . . supported by billions in new debt – which will rescue this economy. Maybe. . . . It’s an artificial market. One hiccup in the rates and it’s all gone.”

Now, where and when will this hiccup occur? For myself, I figure it will be shortly after the Olympics have wrapped up, maybe Feb. / March 2011 and from then on, things thruout the world really get hot under the collar.

Then again, one guess is good as another.
——
Sneaky banks with sneaky profits to pull the sheet over loan losses. It may / may not include credit card and other losses, but one can see why the US banks will be flooding the re-sale markets with foreclosures in a few months, except there is hardly anyone left to buy them. — http://tinyurl.com/n9vbrn
——
From gold-eagle.com, suggesting all markets are heading to hyperinflation. Why not? Hell, I ain’t been there and done that yet, so let’s give it a go! — http://tinyurl.com/lyn4ay
——
A Canadian story, no less! — http://tinyurl.com/kjwn4q

#10 rick in Surrey on 06.08.09 at 1:11 am

I attended the Cambridge House World Resource Investment Conference today in Vancouver. I heard from many professionals that they are expecting a substantial crash in the stock market by the fall of this year. The fact that Main Street is bailing out Wall Street is not helping this crisis end any sooner or any easier. The only ones benfitting are the banks and the defunked car makers. The actual problem of people over spending has yet to be addressed or even acknowledged for that matter. The US Federal Reserve and even the Bank of Canada supressing interest rates is only encouraging people to borrow “cheap money” (for the time being). This will only cause further defaults down road as interest rates climb in the not too distant future.

I believe the general public is going to be in an even bigger state of shock and confusion when this next crash hits. They have been buying into the brainwashing spin doctors that the worst is over and that there are “green shoots” showing in the economy. Well folks, we all know what makes green shoots grow in our gardens…and the media, banks, realtors and politicians are all spreading it on the public really thick! When interest rates start to climb, unemployment numbers don’t decrease and individuals massive debts (personal and to the government) get realised, the news will act like a big soaking of “Round-Up” on those little green shoots.

Don’t believe the hype folks, this current economy is a house of cards about to collapse. Take precautions now, stay out of real estate, keep your debt down, buy gold bullion(as a hedge against inflation) and watch your stocks VERY carefully.

Good luck to all.

#11 ET on 06.08.09 at 1:35 am

FROM WHERE I STAND the problem with your future prediction for Real Estate is that it is based on a straight line expectation of future events. You provide only one doom and gloom outcome. In reality many variables exist that will come into play during the next several years. The Real Estate market adjusts in harsh economic times as it has in the past. Home owners who are not planning on moving within the next 3 years should hold on as it is still the best security available to the average man and woman over time. You have to live somewhere! Why pay rent and why pay all those costs in Real Estate fees lawyers fees and moving expense when it would be more comfortable to stay where you are and take a price adjustment of maybe – 10% 15% for a short while. History teaches us that while the economy may stumble, in time it always moves ahead. If we have a W recovery it will be short lived as have most of the catastrophic events witnessed in the past couple of years. We live in a Roller Coaster economy. Real Estate inventories in the US are historically high. This is not the case in Canada, In fact in some markets like Ontario inventory is shrinking fast so is the volume of sales when compared to the peek of 2007. The storm clouds are gathering but the sky is not falling, at least not anytime in the near future from where I stand.

#12 Too Old Bob$ on 06.08.09 at 2:46 am

“Credit and debit cards, but no cash. No gas in the car. No savings. No refuge. No plan. People with the bulk of their net worth in a house, devoid of financial assets or immediate cash, heavily in debt. If only those folks had been able to get, say eight or ten months’ warning.”

It wouldn’t matter Garth. Most people wouldn’t believe it anyways they would continue on with their ways. Who wants to hear bad things when there’s a good feeling about buying and creating a feeling of wealth with nothing. I blame the Money lenders, Government, Parents and the School system. Why do we have to learn about finances and economics after we leave school. I think all students should be taught the basics of economics and the true value of investing, saving and credit vs debit.

I have a little story about my kids. One is 14 and 12 year old twins. They get an allowance monthly, but must balance a book to show what goes in and what comes out. They have GICS, savings and debit cards, but with a limit that Mom controls. Any purchases that are of no real value eg: junk food, games, movies, they must pay for. Dad is always talking money, economics and why all their friends get pulled out of school to go to Disneyland or why their Parents drive new vehicles, but really don’t own them. Also most of them have new Houses with Motorhomes, you know the drift. They seem to get it and never ask for anything that is outrageous.
About a 2 months ago my 12 year old boy was competing at a Taekwondo competion. He holds a double Black Belt and kicks like hell. His Mom said that if he wins a Gold then he will get to go to Junior Nationals in Quebec. He told me that he didn’t really want to win because there is a recession on and we couldn’t afford to go. Whoa! I said not to worry, if you win a Gold we will find enough pop bottles to cash in and go. I guess all that crap that Dad feeds them must sink in somewhere. I’m hoping they take some knowledge with them when they leave home. Time will tell.

PS. he came in second, the boy he was sparring with kicked him in the foot thus major pain and lots of limping around. The boy beat him by 1 point. :(

#13 kc on 06.08.09 at 3:15 am

W or \/\___/ ??? My call would be a flat lined W.

Here is a great essay for those who might want to read one comparing the outlook from the ’29 crash and the next leg down that is about to hit.

Why the Present Depression Will Be Deeper than the Great Crash of 1929 (June 4, 2009)

http://www.oftwominds.com/blogjune09/depression06-09.html

#14 DontBelieveTheHype on 06.08.09 at 5:19 am

Indeed – the house behind us was bought by a flipper reno’d in 6 months (not by pros) and sold to a young couple for 100k more that he paid. I don’t know how a couple in their late 20s can pay $300k for their first home and not see what is coming!
BTW, Garth – I guess you saw the G&M article this morning? http://www.theglobeandmail.com/report-on-business/green-shoots-how-about-a-double-dip/article1172629/

#15 David Bakody on 06.08.09 at 6:16 am

From this mornings CBC News…..

The world’s airlines will collectively lose $9 billion U.S. this year — nearly double the previous projections — and face a slow recovery as the economic crisis saps air travel and cargo demand, an industry body warned Monday.

Get it nearly double ? …… just like all other predictions from Harper’ Sheeple couched in the list of money grabbers Garth mentioned ….

Some time ago I said 2015 before the dust settles to what is left to grow ….. would I like to be wrong YES! but each day more bad news hits the press World Wide, America’s debt is now 11.5 Trillion and they are still in Iraq and Afghanistan, Harper has plans to extend to 2015 under a fuzzy blue cloak. Chrysler is now in court just when they was hope for a last life line to save some jobs ….. and soon EI/UI will run out as will all those long hard years of RRSP savings. And ladies and gentlemen the “Senior Boomers” are about to flood hospitals and Dr’s Offices leaving with a hand full of prescriptions .

PS: Speaking with a salesperson from J&J they expect diabetes to rise dramatically ….. dare I say why?

#16 wjp on 06.08.09 at 6:21 am

I have to agree with the economics of your article Garth, one cannot not replace a consumer led bubble with another consumer led bubble propped up by easy and cheap money, somewhere down the line this debt has to be paid. The only place I would disgaree is with your W recession, I see the first three strokes of the W (we are in the 2nd) but the last line going up will be far more longated than elevated.
We are looking at ten years of recovery from the third stroke down on…imho…

#17 Mike B on 06.08.09 at 7:11 am

“second plunge” meaning stock market.. Seeing as you mention it.. When?? And how much of a plunge? USA or the whole world because asia seems hell bent on a recovery regardless of fundamentals.

#18 My_View on 06.08.09 at 7:32 am

Since we are half way through the W, will there be a After The Crash Part Deux?

#19 pbrasseur on 06.08.09 at 7:54 am

“Fact is, the current bubble would not exist if desperate governments had not cut the price of money to near zero. – Garth”

That may be true but….

This is hardly a bubble, maybe a mini bubble, a temporary anomaly, sales and construction are still way down from previous highs in most areas. You are correct in saying this should be short lived, sales should either stagnate or go back down as soon as rates go up (which has already started). Fundamentals for RE is not good, job losses and credit access in particular are enough to guaranty that.

The price of money is low indeed but loans are more difficult to get and despites the government’s best efforts to continue its easy money scam, credit is not flowing as before.

Fact is: All this newly printed money is NOT CIRCULATING, therefore is not (for the moment) generating inflation. The government could print hundreds of Trillions in new money, if it is not circulating but sitting is some bank’s vault there won’t be any inflation anytime soon. Fact is we are still in a deflating world, stagnating at best.

My worse fear comes the way politicians are piling on public debt only a few years before the great demographic shock of boomers retirement. If all goes well there will be a period of growth which will melt some of this debt relative to GDP, but that’s a big IF and that also supposes that politicians would be responsible enough to use that period to put public finances back in order, another big IF. Frankly when I listen to Obama I really don’t gave the impression that he gets it!

It is likely that some years down the road at least one major OECD country will default on this debt and the nanny state explosion that will follow will trigger a crisis that will make this one look like a walk in that park.

#20 Da HK Kid on 06.08.09 at 7:55 am

Like said, maybe a W fused by an L. Government intervention will be around for years. One major drop that we have already had, second one coming then the twice bitten all shy scenario. Just because the Govnt flooded system with cash to avoid a Depression doesnt mean we will escape a lost decade.

#21 john m on 06.08.09 at 8:11 am

As you stated previously in one of your posts Garth,,the crash has happened—–I think you are absolutely right and we have not even came close to the collapse that is coming.We are getting a temporary false economy from a whole lot of borrowed money…the root problems are still there and getting worse daily,we can’t borrow our way out of this mess and we can only borrow for so long…what then.The root problems that we had in November are only a token of what we have today hidden by an influx of borrowed money. Easy credit,and debt in a booming market got us here,easy credit and debt in a collapsing market and propaganda to herd in the sheeple for slaughter spells disaster. That cabin in Quebec sounds good to me,and better every passing day.

#22 Nostradamus jr. on 06.08.09 at 8:24 am

>>>Nonplussed<<<

“””Nostradamus, Jr. is living in a land locked isolated enclave which, while suitable for the socialists that live well there via taxing the death out of the rest of the province, can’t possibly be a destination for major companies with large regions of interest. 2 at capacity rail lines that probably never should have been built, an impossible Trans Canada highway, and an airport 3 hours away in traffic are still the only way to access the largest economy in the world. We have better access from Alberta.”””

…lol…With the new Sky Train/Airport Line…access remains at @ 1 hour but now without having to drive a car.

Watch and learn w/ the Olympic coverage on Vancouver.

…As to the North Shore, (North & West Vancouver)…I’m no socialist but I definately feel the elitist living here.

Like I posted earlier, imo, Garth missed the boat for not laying his new roots on the North Shore.

#23 cowgirl kiss on 06.08.09 at 8:35 am

Friend of mine just bought his 3rd house in Calgary – single guy from Italy. He has a job as a marketer in the oilpatch thinks that real estate and renting is always going to be the way to wealth. I explained my position – whoa boy – all is not as it seems – and was told that it is people like me are who are keeping the economy down. Told him it would be a good time to sell all 3 of his houses. He said he can’t because he bought on a high and needs more profit to get out. Has one on the market though – for sale by owner.

He feels that with locking in low rates and having renters he will do well.

Sigh.

#24 mattbg on 06.08.09 at 8:36 am

@ Too Old Bob (#12), I think your approach is a good one, but I think such an education in finances is beyond the capability of the school system to provide.

First of all, they are accountable to the government who have quite clearly set a policy where they encourage the citizens to spend rather than save. When things start to go bad, we are told by our leaders to go out and buy cars, fridges, and freezers. I don’t hear many suggest that we should be saving for hard times.

Second of all, learning about money requires handling of money, paying for things, saving for things, and suffering real, material consequences if things go wrong so that you really “feel it”.

What the school system could do, perhaps, is try and find a way of integrating an understanding of economic cycles into the system… but, even then, if the kids don’t have a foudation to understand what it really means to them then they’ll just graduate with an A but have a general “whatever” attitude about it…

Remember, this is a school system where kids receive sympathy for outbursts in high school History class such as, “why do I have to spell properly? This isn’t English class!”. Integration of subjects is very poor… and finance and economic cycles are something integral to everything we do.

A lot of people believe that it’s OK to not be good at something like math if they’re good at something else. I think this is a consequence of the school system… this specialization into a small set of fields to the exclusion of all others.

Numerical and language literacy in Canada is terrible. The first problem is that you will have trouble getting someone to admit that they have a problem with literacy — that they can’t read anything beyond something trivial, understand complex logic, or do basic math — yet it underpins our entire understanding of and functioning within the world.

#25 Jonathan on 06.08.09 at 8:38 am

Good post. I agree.

It’s a market based on low interest rates. That’s why its basically only first time buyers who are 25-30 years old. I’d say only 20-25% of this group is educated politically and economically. Those guys aren’t buying – it’s way too much risk. If home prices had fallen another 10-15% in Toronto for instance, then i’d say there was potentially a good risk to reward relationship.

Nevertheless, I have spent alot of time looking at homes online and going out to see them. I can’t find anything in the neighborhoods that I am looking for under 400K. Right now I rent for $1,475 (all in), in a beautiful house, only five homes away from the lake. It would cost me at least 650K to maintain my lifestyle. Doesn’t make sense.

We’ll see.

#26 Devil's Advocate on 06.08.09 at 8:40 am

While overanalyzed and complicated, I tend to favour the simple premise of “Elliot Wave B” theory which suggests that this recent bout of optimism is nothing more than a psychological trap or “Bear Market Rally” or “Trap” in which investors at all levels believe (hope) the bottom has been achieved. All the gains of the recent months might be lost two fold as we return to the corrective trend more in line with the real economic fundamentals or lack there-of.

Green shoots?!? What green shoots? There is nothing other than false promise offered by those who’s self interest compels them to lie to us twisting the facts. The mere propensity of people to allow themselves to be led away from the cold hard facts toward something more palatable, even though nothing more than a carefully orchestrated con, is what will cost us the greatest as we continue to deny the realities and pile on yet more debt, stretching the rubber band yet closer to the breaking point, when we should be doing the opposite. Quantative Easing?!?! There is no “easing” in that act it is nothing more than piling on more debt.

The harsh corrective Elliot Wave C will occur and wipe out, two fold, all those gains of this recent Wave B.

V, W, U or L? Who knows? We’re not near the bottom yet.

#27 tjmikey on 06.08.09 at 10:26 am

I think what we are going to see is a “stair” type of decline and recovery.

Flat line, down, flat line with a blip up, then down, flat line, down, etc…until we reach “bottom” or in the case of stairs, the basement.

At the basement level are looking at the new flat line economy for a number of years and then we will start walking the stairs back up.

The next run up will more than likely be built on the back of new IPO’s in new energy technology.

There are trillions of dollars in cash (not debt) waiting on the sidelines.

#28 Sam Gardener on 06.08.09 at 10:32 am

Green Shoots. I see lots of them.
Summer Squash flowered yesterday:)
Carrots,Beans,corn,cauliflower,beets,radishes,winter squash, rutabega, cilantro, savoury,basil,chives,potatoes,onions,brussel sprouts,broccoli,tons of tomatoes,swiss chard,5 varieties of lettuce.
Only the parsnips arent coming up so fast, but then again i dont like parsnips.
Already ate the onions and arugula(lettuce). Delicious.
Hope the bees start pollinating the summer squash .

#29 LS on 06.08.09 at 10:44 am

>> Like said, maybe a W fused by an L.

>> V, W, U or L?

Well, if we’ve learned anything today, it’s that our letters do not have sufficiently complex shapes to represent the economy. Perhaps the Chinese have some better choices in this area? There must be be at least one character that looks like a crater, right?

#30 RS on 06.08.09 at 10:51 am

Garth I hope you are right. I have been waiting it seems like forever to buy a house. I can not believe this bubble is taking this long to burst. At this rate I will probably retire in my rental (I’m 39)

Rs

#31 PJB in Sydenham on 06.08.09 at 11:07 am

How many of you are waiting for the prices to go down so that you can take advantage of the market and buy real estate while it’s cheap?? I am talking about people who are planning to buy real estate for investment purposes so to rent out their properties and perhaps sell them later after it’s paid off or maybe keep it for additional income and equity. If the market is going to seriously crash soon, those who are sitting on the capital are going to have a field day buying up the spoils. Gee.. Am I allowed to post this kind of information?

#32 ncoffee on 06.08.09 at 11:15 am

“I’ll wager that two years from now anyone who took my advice and bailed out of their real estate in early 2009 will look like a genius.”

Garth,

We actually did take your advice and made the break back in March (as you may have surmised … ) I really appreciate your blog posting today, taking the time to break down your take on the spring market. My apologies if my post yesterday was a little harsh; by taking on my complaints head-on, you’ve definitely won me over again.

Also, let me say that this blog has been a great resource for RE information and education over the years and I’d hate to appear unappreciative.

So thank you.

#33 Nathan in Edmonton on 06.08.09 at 11:47 am

L, then another L, then another L, then another…

We haven’t even started to recover; maybe we’ve plateaued (those of us that still have a job anyway). We’ve resumed and accepted a new normal — although at a reduced standard of living; to some that’s just giving up the annual vacation or weekly nights out, but we all know it’s not 2006 anymore.

John Michael Greer calls this catabolic collapse and it’s just the start of the “long decent”. Personally, I’m going to enjoy these calm periods, because the next dip is coming.

#34 Cash money on 06.08.09 at 11:50 am

It is simply amazing how little the general public knows about the amount of debt that the Canadian and American governments are piling on. What is truely frightening is the effect that the demographics of the baby boomers will have on the ability of the citizens of both countries to eventually pay this off. Add to that the horrendous state of personal finances of the average Man in both these countries a d you have a receipe for stagnation and hard times for the foreseeable future. Lastly, add to that the fact that we as nations produce far less tangible “stuff” than we did in the 40’s and 50’s when we were the economic powerhouses of the world. How do we extracate ourselves from this mess if we are not as industrious as we once were and if we no longer have the know how and the means of production to do so? We have become the singing grasshopper in Aesop’s parable. And this is truely sad.

#35 late to the party on 06.08.09 at 12:03 pm

My little story.

I have 100K in cash saved over 5 years and was looking to buy a little house in New Horizons area of Coquitlam, BC. Nice area with river, lake and parks. 1 hour driving time from Vancouver. Something in 400-500K range. Standard 20-25% down mortgage. Took me 5 days to get pre-approved.

Anyway. I got 6 listings from my RE agent on Monday. By Friday 5 of them were sold. Literally market jumped 50-100K in one week.

Looks like thanks to our masters in Ottawa owning a home is out of the question again.

#36 if you don't like it on 06.08.09 at 12:09 pm

So there’s one thing I need help understanding and I’m sure you guys can help.

Is it better to keep spending $1200 on rent in a townhouse OR buy the same townhouse (love the area) for $250,000 (after putting down $20,000) and lock in at a rate of 3.60%. (I plan on living there for at least the next 5 years, not looking to flip it or anything, I’m actually only going to live there)

It’s just that everyone keeps saying the market is going down, and yes it has but not by very much in my area.

Is it better to keep holding out, hoping the prices to crash while I get older and keep renting? I know a lot of people think all young homebuyers are idiots but what about the people in their late 30’s early 40’s that still rent, make the same amount of money as those younger homebuyers and have just as much cash saved up as the young homebuyers, are they considered idiots too?

So really what is better, having a house paid off by the time your 45 or just entering into the house market when your 45? All to save a few bucks, that in the long run does it really matter?

#37 poorguy on 06.08.09 at 12:11 pm

I was wondering who are those fools pouring money
in RE right now ,after reading this news I got my answer

http://www.thestar.com/news/ontario/article/647115

#38 john m on 06.08.09 at 12:39 pm

OTTAWA (Dow Jones)–Canadian Finance Minister Jim Flaherty said Monday government measures to ease credit conditions are having a “real impact” and less than half of a C$125 billion program to buy insured mortgages from banks has been used as liquidity improved in recent months.

Flaherty said more than C$115 billion has been provided through the so-called extraordinary financing framework to help households and businesses access credit.

“This has had a real impact on credit conditions in Canada. Household and business credit is growing and average interest rates have fallen steadily,” Flaherty said in a statement. “-wall street journal today…………………………..but wait was it not easy credit and too much debt that caused the problem in the first place….all it tells me is the flock of sheeple heading over the cliff is getting larger.One thing for “jim”he is consistant with his constant flow of B>S>

#39 @Garth 2 on 06.08.09 at 12:46 pm

#32 ncoffee, I didn’t see any comment from you at all.

This is confusing. It sounds like you made a reasonable post, suitable enough to be countered in the next blog post by Garth.

What happened to it? Does someone have a link to it?

#40 john m on 06.08.09 at 12:59 pm

A Nova Scotia court was to begin hearing an argument on Monday to block the Halifax Chronicle-Herald from publishing a story about an audio recording involving federal Natural Resources Minister Lisa Raitt.

Justice Gerald Moir was to oversee an emergency hearing scheduled to start in Halifax at 2 p.m. AT from an as-yet unidentified applicant seeking a publication ban.

The Chronicle-Herald has not reported anything on its website. The paper’s Parliament Hill reporter Steve Maher has declined to comment.

Dimitri Soudas, a spokesman for Prime Minister Stephen Harper, said the federal government has no involvement in Monday’s Halifax court hearing and would not comment on the case.

The Conservative party also said it was not involved in the injunction, the CBC’s Rosemary Barton said.

The CBC has hired a lawyer to try to get access to the tape.

In the audio recording, Raitt reportedly makes comments about her portfolio and a cabinet colleague. The nature of the comments and the way in which the paper obtained the recording remain unclear.<cbc news……………….interesting :-)

#41 Maureen on 06.08.09 at 1:00 pm

I’d like to share some recent experiences as a mortgage broker. I have a client who refinanced his mortgage in Jan 2007. He is a self employed tradesperson who is feeling the full effects of this recession. He needs to pay off some current liabilities. Impeccable credit. Assessed value of house $319500. In our province, the government opted to use 07 values rather than 08 values on the 09 assessment. In 08 the property had been assessed at 356000. Due to the nature of the property, the mortgage needs to be CMHC insured. The lender approved the application and forwarded the file to CMHC for approval who came back and said they would only recognize a value of $216000. This is over $100000 less than assessed value. Comparing MLS info from Jan 07 and May 09 for the specific geographic location of the property shows an increase of 12% in value. Of course I can have a full appraisal done to establish value but that will not guarantee a mortgage approval for the client. So what happens? Client is forced to sell the house at a bargain price. Seems to me that CMHC is the tail wagging the dog.
With respect to first time buyers renting cheap money. I have been concerned too that my clients will find themselves unable to make payments when rates go up. For years I have advised clients to take a variable rate mortgage. At a time when my counterparts are busy refinancing client’s mortgages to lower rates and having clients incur huge penalties, I find myself receiving calls and emails from clients thanking me for recommending a variable rate. Of course this isn’t paying my bills, but I am now telling those clients to watch the rates and forward economic information to them on a regular basis. For the first time in 27 years of writing mortgages, I am recommending 10 year terms. I always recommend that client’s make a payment based on a fixed rate 5.25 % for example when choosing a variable rate which as you know has the effect to significantly reducing the amortization. It also prepares the client for a larger payment when they choose to lock in. I think there is an opportunity to be responsible with your client’s future in this economy.

#42 Jeff Smith on 06.08.09 at 1:02 pm

#8 im-poster on 06.08.09 at 12:20 am
A few other interesting points Dent makes is that we are due in N.America for a large terrorist attack as they have an indentifiable ten year ( approx) geo political cycle of repetition, and between 2010-2020 we should have WW3 based on his 80 year major war cycle. It is scary, but it all makes a lot of sense…

While I don’t know if there are upcoming terrorist attacks, I have to agree that the world is due for another major war (WW3). In fact that all the major powers of the world is purchasing/building arms like there is no tomorrow. They are preparing for war. When the world is up to its nose in arms, its inevitable that these arms will be utilized. Luckily no body will be able to defeat North America because we have the most powerful military on earth, with the most up to date equipment and training.

#43 nonplused on 06.08.09 at 1:06 pm

At some point I’d want to be in real estate at least with one foot, because it’s real and I fear a tsunami of inflation down the road as the governments of the world suck up all the available credit with their multiple trillion dollar collective deficits and have to turn to the printing press. That event may come eventually, but I think the credit market collapse has to complete first. I think the Alt-A and commercial mortgage default crises still lies ahead for the Americans, and for Canadians we are just now at the bottom of the first inning.

There are a lot of popular names jumping in the inflation camp lately, including Mark Faber and Jim Rogers. But I don’t see how house prices can go up until wages go up, and wages don’t go up when unemployment is high.

#44 Sail1 on 06.08.09 at 1:24 pm

#31 PJB in Sydenham

How many of you are waiting for the prices to go down so that you can take advantage of the market and buy real estate while it’s cheap??

I think primarily this is the main reason people read this blog. If by some slim chance Garth is right on what he is preaching, you may come out ahead. But folks don’t put all your eggs in one basket. If I had listened to Garth, I would have missed some good opportunities a few months back.

#45 hagbard on 06.08.09 at 1:33 pm

“even government collapse suddenly looked more than plausible”

What are those govt issued pieces of cloth & paper going to be worth if the govt does collapse? No one looks to govt to put value into gold or silver.

#46 Bill-Muskoka (NAM) on 06.08.09 at 1:37 pm

Relax folks! All is well!

Because Economy on the mend, Flaherty says

Meanwhile, as the World Turns, there is an anonymous ‘someone’ seeking to silence a NS newspaper by an Injunction sought to prevent story about Raitt

#47 Canadian Army guy on 06.08.09 at 1:44 pm

Well, in the spring of 2008, I sold my third flip in Alberta where I was posted and took the money and ran to Ontario upon retirement from the forces, where I bought a $275K home cash.
Well, last fall I took some equity out and bought a 31′ travel trailer in case of and have $30K in the bank also in case of…
Speaking for myself, with very little debt, a good retirement income and a part time job, bring on hell, Garth.

#48 Dan in Victoria on 06.08.09 at 1:46 pm

I think I’m starting to understand our finance ministers understanding of all this.”Sir, Mr.Turner is stating on his blog that we will have a W shaped recovery”.”Right we’ll fix him,remove the letter W from the alphabet”Problem solved.

#49 David Bakody on 06.08.09 at 2:22 pm

So the plot thickens ….. when first we try to decieve …..

Court hearing begins over Raitt audiotape
Last Updated: Monday, June 8, 2009 | 1:33 PM ET
CBC News

A Nova Scotia court began hearing an argument on Monday to block the Halifax Chronicle-Herald from publishing a story about an audio recording involving federal Natural Resources Minister Lisa Raitt.

This you know Garth as do thousands of others and perhaps more important the many volunteers who stood behind you in last election. You were all/are honourable people working within the guidelines laid down by Elections Canada ….. the Conservatives did not and now it appears justice is just beginning for both them and Minister Raitt.

#50 JoJo on 06.08.09 at 2:26 pm

Fact is, the current bubble would not exist if desperate governments had not cut the price of money to near zero. – Garth”

Yes Garth, and price of money is still near Zero….
NO MONEY DOWN MORTGAGE IS BACK!
Housing prices in Toronto Area again top high.

Will see global financial meltdown Hyper-Inflatory Depression and Wars. When goverments taking too much influence in the market than will be very bad.
(like Germany between 1920-1940).

Second: Is not any capitalist regulation in Canada and USA.Goverments rip-off workers and bail-out Stock Markets and Corporations.

What is comming next, Ford may fill up bankruptcy

and.. here is the excuse

Obviously Ford couldn’t compete with the “better financed” rivals GM and Chrysler.

Ford doesn’t want to pay its invoices either.

What about Air Canada,Revenue of City of Toronto, Vancouver Olimpics. $ Billions printing for all corporations and where is bail out for workers?
And why goverment employment rise over 40% in last 3 years?
What about 250 K new immigrants in 2009, and 250 K new grad. students.
Welcome to goverment employment, again?
Mr.Bernake is stingy when you compared with Canadian
bail-outs. And Bravo, Canada is number One in the world for Green shoots, baby. And it’s shame, Canada has the highest income taxes in the world for workers.
TD Canada reported that if goverment will continuing with the same level of ” Green shoots” after 5 years Federal deficit will be over $ 172 billions..

Inflate or die.

#51 David on 06.08.09 at 3:04 pm

Economic prognostications seem to be an alphabet soup of W, V and L shaped curves. None are particularly appealing and bespeak an economy in tatters. Paying home prices far in excess of rental value makes no sense whatsoever. Hope the realtors and putative home owners enjoyed the bubble and cashed out quick.

#52 wjp on 06.08.09 at 3:28 pm

All the above comments mean nothing “Flaherty is optimistic on world economy” (on BNN) meaning we are out of the woods! We all know how accurate Mr Flaherty has been. Start spending immediately!!!

#53 Rhino on 06.08.09 at 3:28 pm

Do realtors do this?

Lately, walking or cruising around the West Island, I am finding lots of houses with “Sold” signs on them, that NEVER had a “For Sale” sign out front. I am talking overnight type if thing.

I see more and more properties that are not maintained, long weedy grass, and “dark windows” – but no For Sale sign out.

Are realtors just keeping the “For Sale” signs off listings to try and float the idea real estate is still scarce, and hoping to keep values up? They then maybe show something listed that had no sign up.

Or, just trying to save $$$$ on signage?

Weird…….

#54 905er & Spouse on 06.08.09 at 3:30 pm

Hey ncoffee: We feel the exact same way to the word. Bailed out in March and waiting…very appreciative of the blog.

We were planning on purchasing more RE ’til we read this blog. Really glad we did…even if the waiting is killing us.

#55 wjp on 06.08.09 at 3:31 pm

Now on the flip side…
http://www.reuters.com/article/newsOne/idUSTRE55753O20090608

#56 Dark Wettler on 06.08.09 at 3:35 pm

I like to drop in now and again to see what the people at large are thinking but I see the same names dispensing the same dribble all the time. It looks as though those with interesting counter-points have long since left the space, no doubt tired of being heckled for having something original to say.

‘…Those who see it as a medium of exchange are as nuts as you are disrespectful. — Garth’ Disrespect? You are a hypocrite.

Called a housing correction, and now you feel that you have the prescience to dispense all kinds of investment advice. A prize winning radish could have seen the correction coming.

Garth, you really should go back into politics. You have an obvious hatred for things that can’t be created out of thin air. You flip flop so often it’s nauseating. You argue your side by taking peoples points out of context.

Besides, I bet you miss having someone’s caucus to sit on.

By the way , Da HK Kid, how is that deflationary trade going long USD [#9 on 04.02.09 at 11:28 pm] working out? Sold commodity currencies CAD and AUS at exactly the wrong time. Now that’s what I call tough love!

#57 @Garth 2 on 06.08.09 at 3:46 pm

Garth, just so we don’t misunderstand (and since I have acquired a distaste for backward-looking revisions), could you clarify the “big wager”?

I take it that you are saying that for a representative Canadian RE market, like say Toronto, you expect the following:

1. At least a 15% drop in TREB average price overall from highs established this year (or last). What is the time frame; you post strongly suggests a two-year time frame? Is that correct?

2. A secondary dip in economic indicators that form a “W-recovery”. The obvious indicator will be the stock market, but perhaps you expect the dip somewhere else? Which economic indicators will illustrate the “W” pattern?

By the way… this recent news will probably push Toronto higher, unless equities correct:

http://www.theglobeandmail.com/report-on-business/canadas-economy-one-of-first-to-recover-oecd/article1173099/

#58 American Canadian in Calgary on 06.08.09 at 3:55 pm

Good post Garth.

My Dad in Boston was saying several months ago that I should hold off buying a house in Calgary said job worries, and that the market was not in a good spot. Talked with him yesterday. He said because interest rates were low now is the time to buy. Said he was a CPA full big shot accountant and he knows it all. Thats exactly why it isnt the time to buy. When rates skyrocket the ridiculous median of $400K has only one place to go: Down. In Calgary principals will be forced through the floor as they should be. Its amazing people would rather buy with low interest rates. Doesnt it make sense to buy when rates are sky high so the principal is really low and you can just increase your payments and pay the principal off faster? Your thoughts?

#59 DM on 06.08.09 at 4:26 pm

Garth, I actually do value to what you say and have heeded your warnings for some time now. My fiance on the other hand does not. We bought a house in Oakville for $380K last month (down from $420K). If houses fall by 15% in 2 years (if you are correct), we should still break even. By then we should only have an $80,000 mortgage. I can live with that….but wish me luck in just case!

#60 Downsized and Delighted on 06.08.09 at 4:30 pm

I hate to say “I told you so”, but I came on this site in early 2009 around Feb. and told this board that sales were picking up in my neighborhood, but guess what? No one wanted to hear it. And now, sales are red hot in my neighborhood, and probably yours as well.

Will they stay red hot forever? Of course not – but you won’t know when it’s changing if you don’t keep an open mind, and your ears open!

#61 eddy on 06.08.09 at 4:58 pm

re: sell and sit on cash. i wouldn’t. money should be rotated. invest short term within the bubble. all real estate is local, every deal is unique , waiting for the ‘big drop’ could be costly. inflation and quantitative easing have already eaten Everyone’s savings.

#62 Devil's Advocate on 06.08.09 at 5:22 pm

Maybe a bit off topic…

I need to buy a new vehicle within the month.

I WILL NOT buy a GM or Chrysler.

Did you hear me GM and Chrysler? I WILL NOT buy your product because you asked for and took bailouts like petulant spoiled children.

My son, who also needs to buy a new vehicle by the way, was always taught to learn and make good on his own mistakes at his own expense as an education is a bargain at any price. He will not buy a Chrysler or GM product either.

The bailouts you have been granted will prove to be a valuable education for the taxpayer. Again an education is a bargain at any price so in that I take some degree of consolation that we will gain something in return but it will not be a stronger better General Motors or Chrysler.

#63 David Bakody on 06.08.09 at 5:27 pm

#5 Phil on 06.07.09 at 11:42 pm

Exactly ….. and check (s) go to the taxpayer aka working class …. always have and always will ….stop and think ladies and gentlemen, who fight the wars and who live out of harms way?

#64 john on 06.08.09 at 5:47 pm

#56 @Garth 2

A 4 year window for Garth’s prediction.

Did you just make that up? — Garth

#65 Bill-Muskoka (NAM) on 06.08.09 at 5:51 pm

#54 Devil’s Advocate

Well, we bought a new 2009 Dodge Caliber, our second after trading in our 2007, for two simple reasons.

1. We love the design, performance, and styling, and consider it the best vehicle we have ever owned.

2. It was and is the best value for the money.

So, getting back to, and staying with the basics of auto purchasing, we exclude all the silly politics and emotions. The vehicle is the best overall one we have found based on research and experience for our real needs.

We, likewise, would never buy a GM product because GM’s styling, pricing, and value are poor in our opinion.

Ford is also not on my list of features and value.

The Japanese vehicles do not have the same features as standard and are much higher in price. For what?

Having owned GM, Ford, and foreign vehicles we changed to Dodge years back and have been very pleased with their products, service, attitude, and dealers.

There is a tad bit of ‘education’ that comes with age and experience. It’s so nice to be free to choose despite the herd’s mentality led by the MSM. I call it FREEDOM, which is the same as being freed from DUMB thinking.

#66 Bill-Muskoka (NAM) on 06.08.09 at 5:55 pm

#57 American Canadian in Calgary

LOL. Sound slike my brother. I got him a T-shirt when he retired that read ‘I’m retired. I know everything, and I have lots of time to tell you all about it.’

He thought it was great. The rest of the family understood what it REALLY meant! ;-)

#67 ncoffee on 06.08.09 at 5:59 pm

#38 @Garth 2

No worries — as you noted, Garth 1 dealt with it directly in the blog posting today, so you didn’t really miss anything.

#68 . . . fried eggs and spam . . . on 06.08.09 at 6:35 pm

#101 nonplused on 06.07.09 at 11:00 pm — “. . . the Coucahalla, which, of course, you have to pay to use. And which will get you to Kamloops or Kelowna. Nice spots to vacation. But even worse places than North Van to set up a business . . .”

Actually, it’s spelled Coquihalla, then the Coquihalla Connector from Merritt thru Kelowna.

A few months prior to the May prov. election, Gordon Campbell, premier of B.C. had a nice photo op. taken of himself, and several other politicos removing the toll booths, so it’s free to use.

However, I wouldn’t be surprised to see toll booths go up there again, as it’s a very good income stream for the govt. Govts. have also been aware of flip-flopping on their choices. Ask IT investors!

I agree that Kelowna and Kamloops are not much better than North Van. to set up businesses; Vancouver and especially Prince Rupert would be much better bets.

If and when Prince Rupert has extra rail lines put in place, then lumber for export could be shipped out from there, rather than having 18-wheelers using highways in the lower mainland.

With a few large storage tanks built in that vicinity, oil and gas pipelines could be extended there from the Arctic Circle and Fort McMurray, thus letting oil tankers berth offshore, then transporting oil and other essentials overseas, bypassing Vancouver altogether.

Prince Rupert would then be a solid location to attract new citizens and, if Vancouver and Seattle’s port taxes are lowered and matched, would be good tourism starting and ending points.

Probably won’t happen for two or three decades, ‘tho. Too much other stuff happening in the world.

#69 hakim bey on 06.08.09 at 6:35 pm

According to the commentators taking a darker few of things, O\one of the things we are supposed to be doing right now is reducing our debts. But should things get as bad as they are predicting re: societal collapse, then what is to lose by just walking away from one’s debts? Wouldn’t the whole system of debt collection/garnishment/credit ratings be in as dire straits as everything else?

#70 . . . fried eggs and spam . . . on 06.08.09 at 6:45 pm

Moving ahead with the FFFBEM.

Proper title is “Fast Free Flowing Bovine Excrement Meter”, “The Bullshit-Omoter” for short. Titles are freeware, can be used by anyone for any purpose, but is usually reserved for the garbage rhetoric spewed out by govts. of all sorts, and believed by sheeple worldwide..
——
#40 Jeff Smith at 1:02 pm — “. . . we are due in N.America for a large terrorist attack as they have an indentifiable ten year ( approx) geo political cycle of repetition . . .”

The link I posted a couple of days ago, with Seattle being a potential target, could be on the horizon. Won’t be China or Russia, ‘tho — look for a large false flag op., carried out by the CIA / Mossad and coming from N. Korea or Iran (which doesn’t have nukes, anyway).

“Luckily no body will be able to defeat North America because we have the most powerful military on earth, with the most up to date equipment and training.”

Slightly different perspective — the US and Russia are roughly equivalent, with approx. 10,000 nukes each. The remainder, such as the UK, France, Germany, Pakistan, Israel, India and a few others hold between 100 – 1,000 nukes.

One thing worth recalling is that Russia and Iran have better than 20% of the world’s supply of oil / gas between them; further, Russia has a vast stake in the Arctic Circle with plenty of the same there.

Putin will already have put their military forces into top mental and physical shape, plus they have China working with them and Iran as well. Japan has also re-entered the arms building industry, as their economy has gone to the dogs as well.
——
#48 JoJo at 2:26 pm — “Ford doesn’t want to pay its invoices either.

What about Air Canada,Revenue of City of Toronto, Vancouver Olimpics. $ Billions printing for all corporations and where is bail out for workers?”

May be a bigger picture to look at here. The various famines in the last few centuries has bought population levels back to manageable levels, and that’s what the elite have been working on for some time now.

Combined with #40 Jeff Smith’s post above, with WW3 happening sooner or later, it will be a convenient method of population reduction — starve folk — for them to have more of a depleted planet.

In the long run, they are defeating themselves.

#71 CalgaryRocks on 06.08.09 at 6:47 pm

Are realtors just keeping the “For Sale” signs off listings to try and float the idea real estate is still scarce, and hoping to keep values up? They then maybe show something listed that had no sign up.

When you list your house it won’t show up on MLS for 3 days or so. It gives your realtor a chance to run it through with his own or his firms customers.

When we sold a house in Calgary it sold in 3 days and the sign never even went up. Ah, the good old days! Lol!

#72 Nostradamus Jr.'s Analyst on 06.08.09 at 6:49 pm

I thought this was going to be an article attacking the last president.

What a disappointment.

#73 conan on 06.08.09 at 6:54 pm

Garth you should play poker. Look what is happening to your political opponent.

#74 David Bakody on 06.08.09 at 7:04 pm

Perhaps Stephen Harper should not have cheered so loud the night Garth Turner fell from office. “To the victor go the spoils of war” Halton County should have been left to the people without millions of extra taxpayer dollars pumped in ( 10% ers) to fuel lie upon lie for a win for poor unsuspecting Lisa Raitt who could now be asked to fall on her sword.

News Alert
Judge rejects request by Raitt’s former aide to block release of audiotape

A Nova Scotia judge has refused an injunction to block a Halifax newspaper from publishing a story about an audio recording involving federal Natural Resources Minister Lisa Raitt.

#75 Bonnie N BC on 06.08.09 at 7:27 pm

Oh really Garth

I know this is all about real estate but the Minister in question deserves some comment.

Pretty please…

#76 JO on 06.08.09 at 7:29 pm

The bond market will collapse no later than the fall…we could still have one last rally over the next 2-3 mts or so, but by fall and into 2011, watch out…this will occur no matter which outcome happens: deflation (more likely), or high inflation. Imagine what renewing mortgages wuill be like when rates go from 4.5-5.50 to 8-10 % ? By the way, want to sell ? Good luck, you will be down 15-20 % plus commissions and sale expenses..and in some communities (Oshawa/Windsor?), bankers will not only say you need to pay 30-50 % more on the monthly, you also have to pony up 10-20 K in cash to pay down the mortgage balance to at least match the home value…while the prudent savers waiting to buy will eventually be stuck with higher rates due to the high credit losses that must be covered in the rates charged via deafult premiums…folks, your friendly gov’t has been selfishly making it easy for the weakest borrowers to get into overpriced home..these people, whoever buys with 0-15 % down, are NOT home owners, they are merely renters paying high priced rent to banks..

God help them when the bond market goes into the inevitable serious bear market within the next 3-4 months. The jig is up and the world will officially transition into an deflationary depression before 2015..oil should be under $ 25/brl in 12 mts from now…i expect it to bottom before January 2011..do buy it if/when it hits a new low..

As usual, the fiat money, fractional reserve (highly leveraged to boot) monetary system – combined with large oversized gov’ts who live off high tax/complicated tax systems will lead to the destitution of the majority of the population soon enough. Sadly, most citizens will only realize this once they are owing more on a home that has dropped in value 30-50 %, lost their job, seen their pensions reduced 30-50 %, or seen their purchasing power drop by 40-60 % if we go via high inflation…wake up everyone, the world will be totally different in 2015..thanks to years of central bank and gov’t intervention in markets..this is not the work of “free” markets…you can thank your gov’t and central bank for the tragedy

JO

#77 @Garth 2 on 06.08.09 at 7:45 pm

#66 ncoffee

It must have been moderated then? This is frustrating since you appear to be one of a handful of people actually following Garth’s recent advice to the letter.

Seemingly, your disappointment and misgivings about a financial strategy that has clearly left you feeling led astray can not be aired on this blog.

Also, I can not possibly understand why all such concerns are waived once you are directly exposed to the orthodoxy of “the Garth”.

The moderation of posts (to which I have been exposed) has definitely increased commensurately with Garth’s recent media exposure.

Actually, why did I even bother writing this…

#78 David on 06.08.09 at 7:46 pm

If You Don’t Like It , if you look at the numbers, $1200 monthly rent is about the equivalent of the monthly mortgage payment @3.60% before taxes and maintenance. Over 5 years you would pay almost $40K in interest that you will never see again and most definitely face the possibility of higher payments when money becomes much more expensive to borrow. At the end of 5 years of owning that town home you will still owe almost $200K. Building more equity and sitting on the sidelines waiting for the price correction might be a better idea.

#79 David Bakody on 06.08.09 at 7:47 pm

So the a handful of Bankers Run Canada!

Later in her conversation with Ms. MacDonnell, Ms. Raitt tells the man driving them around Victoria that Liberal Leader Michael Ignatieff had backed down from defeating the Conservative government on a budget a few days earlier because he got a message from Canadian bankers.

“They did it at the Canadian Council of (Chief) Executives, there was three presidents of major banks who stood up in the room — and this is not from cabinet so I can talk about it — stood up and said, ‘Ignatieff, don’t you even think about bringing us to an election,’” said Ms. Raitt.

“’We don’t need this. We have no interest in this. And we will never fund your party again.’ That was very powerful. So he heard it from very powerful people in the industry. He was definitely muzzled.”

And so goes the Real Estate Industry ….. sell, sell houses or else …. Greater fools or what?

#80 Da HK Kid on 06.08.09 at 8:01 pm

#55 Dark Wettler,

I’m not a day trader! But buying AUD at 65 cents and selling it a 76 did well, it tested 78 again yesterday. I dont own any CAD, I dont see the point! AUS has a real finance minister who cares about fiscal policy.

I also picked it up at 72 sold for 92 Oct 07.

Dont worry all, if AUD crosses the 77.10 point its on its way down again to 70 and pick it up again.

Glad you came back though to make your strong impact on the blog.

#81 [email protected] on 06.08.09 at 8:08 pm

Q post – Garth, your next article should be titled with an L or R or even J or M, but definitely followed by a BIG E.

#82 BRIAN on 06.08.09 at 8:11 pm

Got an appointment to lock my mtg in on wed.
5 year closed rates just went up .2% today… damn
lock ’em in boy’s they’re going higher.

#83 smw on 06.08.09 at 8:38 pm

#74 Bonnie N BC

Good help is hard to find, even in a recession…

#84 Da HK Kid on 06.08.09 at 8:48 pm

Oh yeah, on the deflation issue. Alive an well. Have you noticed that all the printed money is not in circulation??

TARP money is coming back, second wave down coming soon!

#85 taxpayer like you on 06.08.09 at 8:58 pm

JoJo 49

“Canada has the highest income taxes in the world for
workers.”

Please provide reference

#86 CTM on 06.08.09 at 9:06 pm

Good Morning Garth!!! Things are hoppin’ in Halton I bet.

http://www.theglobeandmail.com/news/politics/raitts-comments-on-sexy-isotopes-crisis-released/article1173397/

With both my parents being cancer survivors who have undergone, and may yet need more, radiation treatment, I can think of nothing less sexy than an isotope shortage.

But Lisa Raitt is right about one thing. She’ll get ALL the credit!

#87 dd on 06.08.09 at 9:09 pm

taxpayer like you on

“JoJo 49….“Canada has the highest income taxes in the world for workers.” Please provide reference”

What? It is a fact. U don’t need to provide a reference.

#88 Lance on 06.08.09 at 9:09 pm

At some point, we forgot to look at the sticker price of a house in terms of total dollars and instead just looked at what the monthly payments were, then decided whether we could afford that and bought the house, not really caring what the total cash outlay was. We’ve had such a great run of low interest rates that far too many people forget what it was like 2-3 decades ago when interest rates were much, much higher than they are now.

Sure, that $400,000 35-year mortgage at 3% is only $1,600 per month… but when it’s up for renewal at 6%, those payments are now $2,300 per month (and a whopping $3,400 per month at 10%!!!). And that’s the trap with mortgages: You pay down so little of the principle in early years that you are subject to a huge interest rate risk. With 30-year treasuries climbing fast, I suspect we’ve seen the lowest mortgage rates we will see for a long time, if ever. Rates will start climbing slowly at first, then gain momentum. And thus we shall begin the next part of the W. And don’t even get me started about what will happen to inflation and interest rates when we collide with peak oil in the next few years.

Lambs to slaughter.

#89 PenGun on 06.08.09 at 9:27 pm

Indeed CTM. Now comments at the Globe & Mail on ‘Sexy Isotopes” is closed.

Nice.

#90 CTM on 06.08.09 at 9:33 pm

Off topic sorta: Sorry Garth!

The “Sexy” tape links are here. “Wow!”

http://thechronicleherald.ca/Front/9012061.html

#91 Barb the proof reader on 06.08.09 at 9:46 pm

Garth, good thing the lady who replaced you in Halton doesn’t have a family member dealing with the isotope shortage, otherwise she’d have to actually be ‘concerned’ about the shortage.

#92 Jonathan on 06.08.09 at 9:49 pm

#7 JoJo:

“NO MONEY DOWN MORTGAGE IS BACK!
Housing prices in Toronto Area again top high.
I read news on Internet from USA and Europe,and Bravo
Canada is number One in the world for Green shoots, baby. ”

Really? I did a quick search and I can’t find any information that says zero down mortgages are back, or that housing prices in toronto top high, or that we are number one for green shoots..

Can you please provide links?

Thanks

#93 Iain on 06.08.09 at 9:50 pm

Meanwhile, in Belfast: http://forums.moneysavingexpert.com/showthread.html?t=1740575

#94 boom time on 06.08.09 at 9:55 pm

Friend just sold a townhouse in edmonton in 3 days, what recession…………….

#95 Barb the proof reader on 06.08.09 at 9:58 pm

#52 Rhino,
I don’t know about your area, but my real estate agent was talking about the #1 real estate agent in our area a couple of years ago, and she said he almost always leaves his sold sign up for more than six months, and at the time he’d leave the sign out as long as the homeowner would tolerate it.
Taking that into note, I started counting when my friends bought nearby in October.. the realtor took the sign down last week.. the sold sign was left up in front of their house for over seven months.

#96 taxpayer like you on 06.08.09 at 10:51 pm

dd – jojo

I found this

http://www.pubquizhelp.com/misc/tax.html

Doesnt seem to jive with what you present – even if you add the provincial tax. Yeegads, look at Denmark and the Netherlands!

Again, your reference please. I’ll keep looking too.

#97 taxpayer like you on 06.08.09 at 11:08 pm

dd – jojo

Found this too. Take a look at where the top rate kicks in in Denmark. Makes Canada look generous.

http://www.kpmg.com/SiteCollectionDocuments/Individual-income-tax-rate-survey-2008.pdf

But lets party. Fraser Institute says today was tax
freedom day.

#98 landlord on 06.08.09 at 11:43 pm

dd and jojo – learn to use google. you’re not even close:
http://www.worldwide-tax.com/

#99 ncoffee on 06.09.09 at 12:48 am

Re: #76 @Garth 2

“Seemingly, your disappointment and misgivings about a financial strategy that has clearly left you feeling led astray can not be aired on this blog.”

Whoa, hold on for second there. Let me just clarify a few things, then maybe we can just drop this.

For a number of reasons, selling this spring was a great decision for my wife and I, so there’s no disappointment or misgivings to be found here. None.

Additionally, like most here, I do think real estate will be a gamble for quite some time, so I’m glad we’re out of the game currently.

More than making some sort of commentary on my own situation, I was trying to make a point about taking responsibility for one’s failed predictions. I didn’t say I was personally impacted by this one (we made out fine), only that some people must have been, and so it mattered.

Also, I can’t really say Garth censored my post or anything like that, considering he actually took the most damning portion of it and addressed it directly, in front of everybody.

So, like, let’s take it easy.

#100 Mike (Authentic) on 06.09.09 at 5:27 am

“JoJo 49….“Canada has the highest income taxes in the world for workers.” Please provide reference”
“dd.. What? It is a fact. U don’t need to provide a reference.”

Not even close dd! Here is a referance and fact:

http://en.wikipedia.org/wiki/Tax_rates_around_the_world

or if you like pretty charts: http://upload.wikimedia.org/wikipedia/commons/3/36/Income_Taxes_By_Country.svg

Canada’s average is close to 32%, while Belgium is 56%!

Mike

#101 Mike (Authentic) on 06.09.09 at 5:36 am

81 BRIAN on 06.08.09 at 8:11 pm Got an appointment to lock my mtg in on wed.
5 year closed rates just went up .2% today… damn
lock ‘em in boy’s they’re going higher.”

You are smart for doing that on the beginning upcurve in mortgage rates! The rates will go up faster than they did going down wait and see.

Good move.

Mike

#102 Dark Wettler on 06.09.09 at 4:29 pm

‘#79 Da HK Kid on 06.08.09 at 8:01 pm
I’m not a day trader! But buying AUD at 65 cents and selling it a 76 did well, it tested 78 again yesterday. I dont own any CAD, I dont see the point! AUS has a real finance minister who cares about fiscal policy.’

I’m sorry, Da HK Kid, I did assume you were a trader as you have been describing all matter of trades and pontificating regarding future market action. Just know that when someone calls me a dummy I will call them out on it.

The trade you describe above is not the one that you wrote about in your earlier post. The AUS has risen from ~ 6800 and is now at 8020 over the period. The USDX has moved from ~ 8650 down to 7983. CAD ~8100 to 9091.

‘#9 Da HK Kid on 04.02.09 at 11:28 pm
For me, I just sold about 75% of my AUD over the last few days as I picked it up at 0.62 sold for 0.71 back into the USD. I have sold my Gold at peak and watching it come back, my call is $750-$800 retracement min.’

‘#83 Da HK Kid on 05.20.09 at 6:10 pm
The fundamentals of GOLD as a hedge while notable is not going to work this time. The USD being the global reserve currency with 64% of all paper money being USD is still the reason why the USD will not fall off a cliff.’

Governments can talk intrest and exchange rates against trend for a little while, but no goverment has ever had success manipulating against trend for any period of time.

Asset price deflation and consumer price inflation can occur at the same time. Even your man Garth has flip-flopped on that one. Hyperinflation is a currency event, not an economic event. You are foolish to dimiss the possibilty. If the USD stages a meaningful (above 9000) rally I will formally apologize to you.

#103 Peter on 06.10.09 at 9:54 am

Good article about a way to prosperity for most of people:

http://www.moneyandmarkets.com/what-the-dramatic-turn-in-the-us-saving-rate-could-mean-to-you-34151