You what?

baby1

Global swine flu pandemic. Surging mortgage rates. Miss California fired. Socialists in Nova Scotia. Holy snap, are these the End Days?

Maybe so, but life goes on. People get pregnant, go crazy, and start watching all-night marathons of ‘Flip this House.’ Fortunately, some of them know enough to come here before the lights go out. Like Chris.

Okay dude, spill.

My wife and I are in our early 30’s and recently got the fantastic news that we’re expecting our first child. This, as you might expect, has necessitated some lifestyle changes. We’re in the process of putting our condo on the market and searching for a (marginally) larger home.

We’re both penny pinchers. We have no consumer debt and have managed to put aside almost 100k in RRSPs. We’ve also been aggressively paying down our current mortgage and have a little over 140k left on it. Our mortgage is also due for renewal in less than three weeks.

I know the entire point behind your blog is to warn people about the follies of purchasing RE unwisely. Are we about to make a big mistake? We’re not looking to purchase RE as investment. We’re looking for a place to call a home and start a family in. If everything goes as planned, we’ll be able to put a 40% down payment on our new place and would approximately add another 100k to our mortgage.

We’re not wide eyed babes. We know the dangers going into this and have decided that the benefits outweigh the risks. But I can’t help thinking, what if we’re wrong. The banks and RE agents will only give us one side of the story, is there a variable that we can’t see?

Thanks for all your help. Keep up the good work. – Chris

Well, you guys obviously have no life. Mortgage under control, a hundred grand in the bank, no debts – an impressive tally for people in their early thirties. So, a reasonable question is, why do you want to blow it now?

Your plan seems to be to spend $400,000 on a small house, which will mean (presumably) wiping out your impressive savings while adding $100,000 to your home loan. Then you’ll have a bigger house, a new kid, no cash reserve and a $240,000 mortgage. That’s a lot of change, some of it totally unnecessary.

Since you hang around this blog, Chris, you must have read an overwhelming body of information on why this is a dangerous time to buy real estate. Mortgage rates will be rising, the economy moribund and energy costs surging (among other factors) – all dampening housing demand. The Canadian real estate market has not even seriously corrected yet, and our current tryst with deficits and debt means higher taxes and less disposable income. There are thousands of 40-year mortgages to reset in the next few years, and high unemployment will be chronic.

So, why now a house when the odds are it will be worth less in a year or two than on the day of closing? This is a big move. With more overhead, more debt and less cash, you are making your family far more vulnerable to nknowns (like job loss) with this strategy.

I mean, why do you need a house when you get a baby? Can’t a move wait at least a year? What’s the rush? Or, if you’re determined to have that special baby room thing, consider selling the condo now in this frothy market, then renting a bigger home for a couple of years. You can increase your savings dramatically, spend less each month than you would owning, have no property taxes or maintenance to pay – and wait for prices to erode.

If the object is to maximize financial security, your plan sucks. You say you’ve weighed the risks and benefits, and reached this conclusion – but what are those benefits? If building equity is  uncertain, and losing equity a distinct possibility, while you pile on debt and blow your nestegg, what’s the point? After all, you can get what you hunger for with a lease.

Amazing, but I hear people in Europe actually raise children in apartments. Apparently not all of them become deviants.

Hey Chris, buddy, don’t blow this. The next time you see a hundred grand might be never.

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For Garth’s latest podcast, click here.

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129 comments ↓

#1 Future Expatriate on 06.11.09 at 11:16 pm

One could argue that the children who most become deviants are the ones whose parents are BOTH working two jobs to keep up the house, the mortgage, put food on the table, and letting the schools and their kids’ peers, also bereft of attentive parents, raise them on the streets.

It takes a lot of money, but more importantly, TIME to raise a kid right.

You can raise a decent kid with time and no money, but not with money and no time.

Ask GHW Bush…

#2 $fromA$ia on 06.11.09 at 11:35 pm

Uh Garth, Vancouver has a hot market in RE right now.

It’s really sizzling, even BOOB Rennie is on his high horse.

We better hurry Garth and buy a house in Vancouver before we’re priced out!

#3 nonplused on 06.11.09 at 11:38 pm

I’d sell the codo and rent for a while. It’s a good way to get to know what you like in a house and what you don’t. For example I have learned that an oversize single garage with heat and a 9 foot door is almost as useful as an undersized 3 car garage with 8 foot doors. And 3 acres is way to much to mow, even with a kickass tractor. Also gives you an idea how important it is where the bridges and roads are. Besides, everyone moves every 5 years on average anyway, so why poor all that money into renovations? Come over to the renting side of life.

#4 Lance on 06.12.09 at 12:03 am

Garth nailed it on the head.
Sell your condo, go rent a house (gives you everything you’d get with purchasing one except the headache and lost equity) for a couple of years and wait for the market to crumble and save yourself a hundred g or more. Best return on investment you’ll have ever made.

#5 Naramata on 06.12.09 at 12:31 am

Babies don’t care where they live ….a dresser drawer is fine to sleep in… …lots of love …cloth diapers are a lot more comfortable and a heck of a lot cheaper — nursing is best …. walks to a park in a stroller …DO NOT STRESS YOURSELVES OUT MORE!!!! ……save your energy for them!

#6 Munch on 06.12.09 at 12:39 am

Fantastic!

#7 Garthlover on 06.12.09 at 12:41 am

Garth, This was the most ingenious sentence you ever wrote:
“…….If building equity is uncertain, and losing equity a distinct possibility….”

Sadly, too many sheeple don’t realize that. The longer I live, the more fascinated I am by the stupidity of some folks. Case in point:

Today, someone from Victoria told me AGAIN that Victoria is IMMUNE to any RE crash, because Victoria is DIFFERENT. I asked why, seeing that indeed Victoria’s prices have fallen before, in 1982, 1991, 1997, 1999, etc. He said, verbatim:

“Let me simplify this for you….(YES, because I am a bumbling moron…) The reason that Victoria prices will NEVER go down is because this planet has 7 billion people on it, ALL OF WHOM WANT TO LIVE IN VICTORIA…”

All I could envision was starving masses of people on little islands and continents all over the world, wringing their hands desperately and asking ‘God-dess’ to magically get them to Victoria somehow.

I know not how I kept a straight face. Who was it that said “There’s a jackass born every minute?”

#8 NorthOf49 on 06.12.09 at 12:43 am

Chris, you should take Garth’s advice and seriously consider dumping the condo and renting a home. You would be surprised at the number of boomers I know who are now renting out or thinking of renting out their suburban palaces after plans to sell go sour. My wife and I gross $250k combined and can easily afford to buy and carry a large home in the GTA. Instead, we got smart, got shrewd and worked hard to land a 3600 sq ft 4 bedroom home in Ancaster for $1,500/mth rent. How? The house was previously on the market for $550K but it wouldn’t sell because it was overpriced and needed significant maintenance. The owners were also empty nesters and desperate to go back to the homeland. They had no mortgage on the property but egos wouldn’t let them sell it below its perceived value so we jumped on the opportunity and offered to rent it from them but put some “sweat equity” into fixing it up to help “restore the value” of the home. So, we get cheap rent in nice digs with lots of room for the kids. Sure, my sweat helps build his equity but its a small price to pay for what we get and no mortgage or city taxes to boot. No risk that the owners will want to come back from overseas and live in the house as its too much house for them. There is the risk that at any time they could sell the house out from under us but with their fixation on a $550K selling price and the direction the resale market is going, I don’t lose sleep over it. Take a look at suburban rentals and don’t be afraid to get financially creative with the landlord, especially if you’re handy with a hammer or wheelbarrow.

#9 palebird on 06.12.09 at 1:01 am

Excellent commentary Garth…it is just the north american way, that is all…don’t know any better and is not directly their fault…I have always thought that, in a more perfect world, everybody in north america would travel for six months around the world and then come back here and see what happens as they establish themselves and their lives, we might have some more imaginative approachs to life other than buy the biggest house, newest car, etc and look cool to somebody…give me a break…

#10 Self employed on 06.12.09 at 1:03 am

After reading your book and considering my options, I actually considered selling my house with the condition that I would lease it back for couple of years. After a few years I’d simply offer to buy it back at the then current market price and hope the new owner didn’t knife me during the negotiations. Because I run my small business from my home and I’d like to secure it against power grid failure, I decided that I was not prepared to give up control for all the hassle of dealing with the real estate parasites. I strongly believe said parasites might soon have a food shortage as the general population finally figures out that you can’t have tens of thousands of monthly job losses without some kind of negative effect of the housing industry. Generally speaking, people on UI aren’t buying houses. With no jobs to be had and when their UI runs out they’ll be forced to bail on their house. I think this is going to get ugly. Things look quite normal as you drive past all those houses to work don’t they?

#11 Naramata on 06.12.09 at 1:09 am

…..in addition to the “lots of love” …add lots of music…and lots of reading……add a support circle of friends. ..to keep you sane. It ain’t easy but it is the best!!! By the time your child is 3 or 4 …it is kind of cool to choose one place to live ………..but then again ….people who move give their kids other “gifts”…I don’t think it really matters. You have to decide on your own priorities …and it is not “just about you ” any more. It is about creating a healthy and loving environment — how can you best do this???

#12 Calgary_rip_off on 06.12.09 at 1:17 am

Garth you make some valid arguments which may apply in Ontario. In some cases they also do apply in Calgary.

The bottom price for a reasonable place is probably $1k a month in Calgary. You mention saving money by renting. Not really here. That’s one of the problems. Its even worse if you buy. You get less house buying for what you could rent for. For $1600 rent I get a decent house in a decent area. That amount doesnt even qualify for a mortgage. However, Im sure that the landlords mortgage is less on this place than rent. Most of the homes in the NW are worth about $200K. Given the market, increase that by $200K. So it really isnt possible here to save, at all. Some would argue it is, but who wants to live in Falconridge in a basement suite that has kids?

That’s the dilemma. You want a decent place to live, and that costs. How are you going to get a down payment? Sure you can do the 12 year loan for the downpayment. Its still ridiculous. So the renter really doesnt get ahead here.

Please report on any inside info on crushing hikes for interest rates. If you see Stephen Harper or anyone in Parliament, suggest(demand?) setting mortgage rates at minimum 12%. That ought to correct the situation for renters who financially should qualify for a mortgage but have been priced out by speculators and people who arent entitled to have bought a house on easy credit.

It will be a good thing when interest rates are sky high. I await the coming party with interest rates on a high.

#13 . . . fried eggs and spam . . . on 06.12.09 at 1:32 am

“Miss California fired. ” — Can I replace her pretty pleeze? Huh? Huh?!

“. . . wait for prices to erode.” — BINGO!

Sell, then if possible, rent back from the new owners (good source of income for them as well).

Around Fall 2011, start looking and do so slowly. Have the mortgage set up as a tax-deductible one (or RRSP, not sure which), and as long as one, if not both has / have jobs, you’ll be fine.

Information is free. Use it and enjoy an adequate to good lifestyle. Get to a Certified Financial Planner — one who has to earn their money — print out Garth’s column on a RRSP-type mortgage and get the best deal possible.

Don’t become debt slaves and ruin your lives. That’s what sheeple are for — they do that willingly and happily!
——
Y’all know there is a supervolcano in Yellowstone, which has been rubbing it’s nose recently (lots of small tremors). Now Mt. St. Helens may also be sitting on one. — http://tinyurl.com/m5k838
——
I Can See Clearly Now, ‘coz Life Is Like A Box Of Molasses! Shortly, the US banks will flood the country with foreclosed / empty homes which is an effective way to kill the economy.

The elite must be rubbing their hands in glee, wot with a pantomime of a pandemic, people getting angrier at watching their wealth disappear, etc. Seems the new Nostradamus link I posted a few days ago was closer to the mark than originally thought. — http://tinyurl.com/nzgmqp

Speaking of the elite — http://tinyurl.com/m3my8a

Oil. Who’da thunk it?! — http://tinyurl.com/km2k4u — This will hurt China a little — http://tinyurl.com/nh2qwu
——
Japan seems to be divesting itself of US bonds / treasuries / wallpaper! — http://tinyurl.com/nzxalq

If any of you follow soccer (football over ‘ome), Manchester United sold Cristiano Ronaldo to Real Madrid for 80 million quid (pounds).

Over the course of his new six-year contract, he will generate close to half a billion pounds in revenue for the club.

This is how unrealistic the game has become. Blown out of all proportion, it’s a cattle market, plain and simple.

#14 David on 06.12.09 at 1:35 am

The variable Chris can not or does not want to see is called SYSTEMIC RISK. Here is the official definition; “Risk that affects an entire financial market or system, and not just specific participants. It is not possible to avoid systemic risk through diversification.”
Exactly how much evidence do people like Chris and his wife need to draw a conclusion?
I spent the 6 of my first 8 years on this planet living in rented houses until my parents had enough dough to purchase another nice home for cash at a reasonable price.
There is no way to avoid the inevitable housing market collapse, but there certainly are ways to personally avoid becoming a victim and losing hundreds of thousands of dollars in the process.
Real estate agents really are very unenlightened on economic meta trends, so asking them questions and expecting a cogent response is impossible.
There is always the risk of being wrong. The first is opportunity cost, the lost benefits by an action not taken. The other risk is buying a home at bubble prices and facing uncontrollable interest rates spikes and declining home prices. Pick your poison.

#15 Fritz on 06.12.09 at 2:12 am

Hey Garth: Go out for a ride or else you’ll end up looking like the kid in the photo.

#16 Vanman on 06.12.09 at 2:51 am

So I guess there is no point in buying a house for the next 5-10 years, or ever, is that the point here? Seems like this is a better time then ever to lock into a fixed rate for 5-10 years if you already own. As a buyer, how much would prices have to fall to justify paying double the current interest rate down the road? It doesn’t really matter though because it always seems to come down to the how much people can afford to pay and how much pressure there is on the rental market.

It seems that prices will never fall substantially for first time buyers in places like Vancouver until the pressure has eased off the rental market (which is unlikely to happen anytime soon) because well, for some reason people are moving to Canada (must have something to do with all the beavers here). So many renters are tired of playing the game of rising rents, leases, and being treated unfairly by cheapskate landlords. With vacancy rates under 1% in some areas of Vancouver of course there will be an endless supply of buyers who will want to own their own place as soon as they are able to. Whenever housing prices weaken a new flock of investors and first-timers sweep in because they know that rents are unlikely to go down. As much as Garth would not like to admit the renting game is not such an easy one. So that said when is rent going to go down…. probably not until supply keeps up with demand. But without companies building rental units this is unlikely to happen anytime soon.

My advice to this guy is to live where his lifestyle will make him the happiest without risking everything (which I don’t believe he is doing) or he can cross his fingers and wait for an opportunity to come down the road, eventually.

#17 Phil on 06.12.09 at 3:06 am

In Canada two words that seem to go together better than any others are “Nesting” and “Owning”. I don’t know anyone who had kids and kept renting. They bought into the dream, and now they rent money from the bank and “own” a depreciating asset. Watch those bond rates boys and girls, this is gonna get nasty…

I feel bad for the kids!

#18 Samantha on 06.12.09 at 3:16 am

Hi Chris, and congratulations to you and your wife on the news that your first child is on his/her way.

Garth has given you some excellent suggestions and points to ponder.

I would like to present to you a couple of points taken from your own words:

“We’re in the process of putting our condo on the market and searching for a (marginally) larger home.”

If the house is only going to be “marginally” larger than your current home (the condo), then is it not possible for you and your family to remain where you are?

Perhaps your condo will be sufficient in terms of space with proper organization, and possibly a reduction in “stuff” that can make additional room for your baby.

and

“We’re looking for a place to call a home and start a family in.”

Chris, you and your wife do have a place to call home right now. You have your nest and a sensible nest egg.

These are strange times. So many things are in a state of flux. There are opportunities to be had, but the downside is that a misstep can be catastrophic.

I have watched some of the internet broadcasts on home foreclosures and homelessness. One of the most disturbing videos I watched was about a company that “cleans up” foreclosed properties. People, more specifically, families just left everything behind – clothing, furniture, dishes, etc.

What was most upsetting, and something I will never forget was something else they left behind – their childrens’ toys.

Chris, your current home and nest egg is enough, or it can be if you and your wife recognize it as such. A happy, secure home with parents who are not stressed out over a bigger mortgage payment, and who have cash in the bank to handle an emergency, is a pretty nice start for your little one’s journey in this life.

#19 Sean in E-Town on 06.12.09 at 5:39 am

However, we should warn Chris of the inverse… I for one was raised in rental housing (both the detatched and attached variety, until I had long since passed the point of no return) And I ended up a horrendous deviant. Yes, “I was a Teenage Orchardite!”

#20 Darryl on 06.12.09 at 5:40 am

Chris Chris Chris.

If you’ve been reading this blog for a while, did you expect any other answer for GT. You won’t need a larger home for at least 2 years. It’s easier living in a smaller home not having to cut the grass , shovel snow , rake leaves and the other fun stuff. With the extra time you can look after baby properly . And to sleep during the day after no sleep at night.

Oh ya… Congrats!

#21 David Bakody on 06.12.09 at 6:17 am

Hey Chris ….. good news, good work, well done and all our hats are off to you for what you and your supporting wife have accomplished …. did you get that part…. supporting wife? she’s a keeper so why put financial stress into a marriage where there is none? In retrospect I often thought the nice apartment I gave up to rent a place for our daughter to sleep and all the stuff we bought was a bad move as we were saving under a RHSP and only had one year or so into it.

Stay put for now, you answered your own question but were in too much of a hurry to ask us and did not read your own words: We’re looking for a place to call a home and start a family in. Look around you Chris …… all you need is a safe crib, a stroller and some usual baby things …… and your new bundle of joy only wants love and attention ……not money stress …. time will find a home near good schools …. then make the move with lots of security and plan for #2 and who knows a stay at home mum if she chooses ….. now that’s called real financially stability! Bon chance

#22 Rob in Onterrible on 06.12.09 at 6:17 am

Chris, good job on putting away $100K. I used to live in Europe and Garth is right. Lots of people raise kids in apartments. Rent is cheap there compared to here but homes are 3X the price.

You don’t need a baby room or even grass for the kid to play on. The baby will sleep beside your bed to make those diaper changes and feedings easier at 3:00 am.

As for grass. Well, now we have a townhouse with a yard but our daughter prefers to go to the park.

My advice: sell the condo now and rent a home. Sure, you won’t be building equity but if you spend $15K a year on rent and home prices drop by $30K per year, you are still ahead. Owning a home is nothing more than glorified renting from the bank. At least if my toilet breaks the landlord comes to fix it.

#23 A Parker on 06.12.09 at 6:23 am

“I hear people in Europe actually raise children in apartments”

I am getting this printed on a t-shirt. Time to spread the message.

#24 Bottoms_Up on 06.12.09 at 6:28 am

Chris, know this: the swiss chalet in Kanata has a coupon out: “two can dine for $12.99” (with no restrictions like ‘Mon-Thurs. only’). This restaurant is hurting in a government town, and my conclusion is $hit has hit the fan. Rent my friend, and hoard your ca$h.

#25 Real Estate Deal or No Deal on 06.12.09 at 6:50 am

Chris,

I am in a similar boat:

* Expecting in the next two weeks our first child
* No debt (paid off $60 K in the last year)
* Have enough for 20% down

However, I currently:

*Rent
*Can’t find a place in the area I want to buy
*Work from home and need more space as I live in a rented condo

I have decided to suck it up, move to another rental and pay rent for another 2 years.

Do I want to do this “No Way!”

But for all the reasons Garth posted, I am going to rent.

If you want the house of your dreams, sell then rent and wait for it … you will have more money to put down, and the prices will be dropping shortly which means you will pay less over the life of your mortgage.

Don’t blow it.

#26 Chuck D on 06.12.09 at 7:26 am

I’m going to be the contrarian here and say you buy. I don’t think that real estate is going to depreciate as much as people here think it will. I think it won’t go up much in the next few years but if you can cover the mortgage payments without much trouble at double the interest rate then do it. I don’t think you can find a decent house to rent for less than 2k a month. So in a couple of years you’ve paid 50k in rent plus utilities. The only thing you haven’t paid is property tax. You’re mortgage payment and property tax combined should be around 2k.
As usual there is too much sky is falling stuff on here. Things aren’t great right now and they eventually will improve, till then so you pay a little extra every month for a house big deal. I question how many people on here took Garth’s advice over a year ago and sold their homes to rent. I suspect it didn’t happen en masse.

#27 Barb the proof reader on 06.12.09 at 7:28 am

Hey Chris,
Big congratulations to you both on expecting your first baby, and for getting to where you are. Good job. Don’t blow it.

#28 rogerscableman on 06.12.09 at 7:34 am

if so guess you wife will stay home for a while., You should buy a semi-detached house which has a walkout basement so that u can rent it out, dump the condo and renting is not a good choice.

#29 Big Al on 06.12.09 at 8:00 am

Those of us hoping RE will reach more affordable levels in York Region better take their head out there *ss, especially if your looking to buy a home in the Woodbridge/Maple area. This market is an anomoly.
Example, friends just signed a contract on a 2500sq home on a 40 X 110 lot in the Jefferson Forest area in Richmond Hill. The exact same home built by the exact same builder in Woodbridge is being sold for $580,000.00 – and they are selling. The salesperson in Richmond Hill said the builder is absorbing the HST, but come this weekend, the ‘sale’ ends and the HST will be paid by the purchaser. These homes will have a closing date of August 2010.
I can honestly see buyers in these areas willing to pay this tax increase, hence, these markets will not be affected.
You have been warned.

#30 Chris L. on 06.12.09 at 8:05 am

I’m one week into a newborn in a small apartment that I own. I rent out two other units. I renoed the attic for a few thousand in preparation two years ago and just in case. It’s 50/50 split with whom think what we do and how we run our lives is proper. Since our mortgage is paid-for, we can both work as much as we please. Thus, my wife is off work for a year collecting EI. Are we in a small place, yes. Is it duable, very. Is it pleasant? Define. If I had to trade this for full time struggle, forget it, it’s great, perfect and ideal. Don’t trade your freedom and security for stuff. Not enough room, go visit family, go to the park as mentioned. Babies don’t need much, even a shoebox would be enough. Trust me on this one. Baby would rather sleep on mom and so takes up no extra space in this house than otherwise. You can easily get away with 4-5 years if you have a living room. Besides baby gets used to sleeping under all conditions and noise which will be an asset when they get older. Put that crib in the living room and enjoy your freedom. That, or rent like said.

#31 613 Happy where I am on 06.12.09 at 8:07 am

23 Parker:

Actually your shirt should read: I hear peoplein Europe actually raise children in apartments….
and Hong Kong
and New York
and “gasp” Toronto

#32 FP on 06.12.09 at 8:31 am

Hey Chris,
We have a 6-month old daughter and we rent. We sold our house in the ‘burbs in July 2008 because the commute was killing and we wanted to move back to Toronto to be closer to work, save on transportation costs (have you checked out the prices for GO and Metropasses recently?), have more time, more money in the bank and NOT have to worry about maintaining a home or have both parents going back to work in order to support a crushing mortgage. We are currently in a 1600 square foot apartment right on top of a ravine with lots of parks and trails around us and my husband gets to work in 10 minutes (imagine what we would have to pay to BUY a similar sized place in the same location). We have central air, a dishwasher and a washing machine. The building is clean and mostly tenanted by older empty nesters who stop and chat to our daughter all the time when we take her out for a walk with our dog. We have diversified investments (as opposed to one “real estata investment”) that pay us decent dividends on a monthly and quarterly basis and most of all, we have OPTIONS on how we want to raise our daughter. I honestly believe that we can give her a better quality of life because we are not house poor…if we don’t like the public school system, we can opt for a private school, if she shows any interest in science or art or music or sports, we have the option of being able to let her explore her interests further. We can travel, go to museums, volunteer our time on causes like raising money for vegetable gardens for orphanages in Haiti. We can take the time to let her sit and crawl on the grass instead of worrying about having to mow the grass! A child is a lot of work and even though we were somewhat prepared for it, we were taken aback by how MUCH work it actually is. A house and all it entails is also a lot of work and unless you have a great support network, one or the other will have to give way. The only thing we miss about being in an apartment is the self-sufficiency that Garth advocates but we are looking at ways as to how we might achieve that while living in the city (requires more out of the box thinking but that’s why we read Garth). Anyway, Chris, you and your wife are the ones who are ultimately going to decide what is important to you and your family and what are the priorities and values that you want to raise your child to embrace. As long as you stay true to your principles, I don’t think it will be hard to live with the decisions you end up making! Good luck and Congrats on the wee one.
FP

#33 Chris no longer in England on 06.12.09 at 8:32 am

I’ll throw a few things in here. Chris, I was living in Europe until Friday last week, and hence feel no shame in renting (with a child in tow) in Canada, even though I was a home owner for the past 18 years. I don’t think it is mandatory to hang a notice on the front door that says “Only Rented”. We are renting until something comes up that we really want, at a price we really want to pay. Until then, we stay where we are. Large amounts of money don’t come and go on a regular basis. I am treating the money we have right now as a once in a lifetime opportunity, so do not intend to blow it (pardon the pun).

Second, a baby takes up very little room. Even the equipment for a baby takes up very little room. You have around a year to 15 months before the growing army of large plastic tractors, cars and other things for toddlers to ride on, plus big “activity” tables start crowding out your condo and force a move. We moved from a small house to a much bigger one when our son was 15 months old and that was about the right time.

Grass? You do not need grass until quite some time after this. Kids don’t need to run in and out of a garden playing until they are at least 4 or 5 years old and you feel comfortable about what they are doing – until then you take them to the park, sit on the grass, watch them in the play areas and supervise them at all times. So, you don’t need grass either … yet.

As for the contrarian view, yes you could just buy the house anyway, particularly as you can afford it. But if it is only “marginally” bigger, and as you can do without the space and the grass for another year, why try and guess by how much prices will go down once more people have lost their jobs and homes? Why not wait and see? The picture I think will be a lot clearer next year and you will still be able to buy should you feel you really must.

My son grew up in a big enough house, but with no garden to speak of (just a small courtyard out the back) and shows no signs of any special deviancy yet. Granted it is early days, but I am hopeful of a decent result. His only crime was to kick balls around inside the house as though he was outside, and then he got plenty of extra exercise with me chasing him. [NB: This did not start happening until he began to play competitive soccer at the age of 7, so you still have plenty of time to get the grass before your own child follows suit.] Now he has a large grassy area and 10 acres of woods to rampage around in and he is taking full advantage of it.

Don’t make the mistake of trying to provide everything a growing child might possibly need while it is still only a baby (or a bump in this case). Think about the coming stages and take them one at a time and prioritise. The priority now is enjoying the bump and planning for its arrival. It will be new and stressful, so don’t stress yourselves out by trying to do everything at once – you really don’t need to. Best of luck.

#34 Grantmi on 06.12.09 at 8:34 am

Vanman…. Vacancy rates are going up in the Lower Mainland!! Just released figures in this weeks Vancouver Sun. And they contribute the increase to FIRST TIME home buyers leaving their rental and buying a home. Yea! Right. More like the kiddies are heading back to Mom and Dad’s basement bedroom more like it after loosing their yob!

If they are buying a home!! Somehow they should have been reading Garth’s Blog… They will get burned.

We’re still sitting it out… more price drops to come. I’m seeing “4 sale” signs up now over a year on some homes! A YEAR!!!!

“Move along… nothing to see here!”

#35 PTDBD on 06.12.09 at 8:39 am

There was a lot of enthusiasm about natural gas investing here and on BNN yesterday. Beware, Bubble-vision calls it “The Widow Maker”, for good reason.

HNU has undergone a 1 for 4 reverse split and HND (the downside) was so profitable that they split 5 for 1 on April 15.

What really irks me is that the greedy suppliers won’t give the home owner an opportunity for a five year lock in at these prices. when it was at $13 they were sending me emails about the great “lock-in” opportunity.

#36 peter wiener on 06.12.09 at 8:44 am

It never ceases to amaze me how mathematically challenged some people are, particularly rabid home buyers in Canada. They also have no way to assess the risks that they are assuming in buying an overpriced asset at the pinnacle of a 10 year plus bull market in real estate. I am amazed that with this lack of critical thinking that this Chris guy can hold a job that remunerates him enough to even contemplate buying a home. The math is simple, people like Chris (an admitted lurker here for some time) are just are either too lazy (doubtful in this case) to do it or too rabid to buy a house. I suspect he is getting tremendous pressure from the “better half” and is losing the battle in convincing her. This is a bad decision on so many levels that it can only be the result of flawed ‘commitee’ compromise!

#37 Bill-Muskoka (NAM) on 06.12.09 at 8:50 am

And now for something completely different BUT very related.

So, the RE industry is having a little spat are they?

Suit puts real estate fees in spotlight: Outcome of landmark lawsuit against realtor body could result in lower sales commissions for agents

A realtor’s lawsuit against the Toronto Real Estate Board could put the sometimes controversial issue of real estate fees under a legal microscope.

And the GTA developers still want to expand more, and more.
Why the rush in Simcoe?

The Ontario government is in the awkward position of inviting comment on a growth plan while signing a deal affecting a specific development in the same area. That is putting the cart before the horse.

Anyone who thinks Queen’s Park is run by the people need a little couch time with a Shrink.

Beautiful day today. Enjoy it!

#38 Gord In Vancouver on 06.12.09 at 8:52 am

Finance minister Jim Flaherty, on BNN today, said……..

….that Canada, unlike the USA, didn’t have a housing bubble. This guy has obviously, never visited Kelowna, Vancouver, or Calgary.

#39 D from London, ON on 06.12.09 at 9:00 am

You may recall that I made a post that confessed my desire for a trophy house, and the demons that whisper in my ear on a sunny Sunday afternoon. I can relate to Chris’ situation here as we too would risk relative financial security for nothing more than to satisfy “house-lust”. Luckily for my wife and I, only one of us seems possessed by the demon desire at one time – so far. When not possessed we agree that staying put is better than incrementing our lifestyle and massively increasing our financial risk.

That is not why I am writing, however. I am writing to add to the discussion on renting vs. buying, and apartments vs. houses. As part of my due diligence in following this blog I have done some quick research into renting a suitable house here in London, Ontario. It would seem that there is not a lot of stock available that would replicate or reasonably increment our current house (which we own with ~ 50% equity, after switching costs deducted). However, there are a lot of nice 2 and 3 BR apartment-sytle condos in great locations available for rent.

I suggested to my wife that as we have only 1 small child, we could sell our current house and rent one of these condos preferably downtown (hey, this is London, so don’t imagine Toronto or Vancouver when I use the “d” word). Not only would we reduce our costs, but we would increase our savings and massively reduce our maintenance time (I owned one of these as a bachelor and I loved, loved, loved that part of the deal). Our child could experience a different style of living for awhile, and as a bonus, according to Mr. Turner et al we would likely be able to have our pick of trophy homes to buy (or even rent) for a much more reasonable price in 5 years time or less…

Well, SHE WENT BALLISTIC! You would think I was suggesting we join a Satanic cult, or commit suicide or something. I felt dirty and like I had betrayed her by even suggesting it (like in the movies: “I don’t even know who you are anymore!” and “What happened to the man I married”, lol). I knew the idea wouldn’t be well received but I was shocked at the vehemence of her rejection of this idea.

Why is the brainwashing regarding both renting and apartment-style living is so deeply set in Canadians? My wife is assuredly not the only one who feels this way. I ran the scenario past my parents in general conversation and my mother reacted in a similar manner (dad thought it sounded reasonable).

Anybody got anything to add about this brainwashing?

#40 Bill-Muskoka (NAM) on 06.12.09 at 9:01 am

#33 Chris no longer in England

I have been meaning to say ‘Welcome to Canada!’ Hope all is going smoothly during your transition?

#41 Alex on 06.12.09 at 9:03 am

I was born and raised in the apartment in Eastern Europe – only 5% of people in my 1mln city lived in houses.
Actually in Moscow, the biggest city in Europe (25mln people) – there is not a single house! Still managed to raise Pavel Bures and Garry Kasparovs in apartments:))

#42 Toronto C9 Renter on 06.12.09 at 9:09 am

#35 PTDB — “…HNU has undergone a 1 for 4 reverse split…”

Agree, over the last few years NG has been declining steadily. This, I think, is the reason many of us are interested now.

No doubt there is still some downside risk, and don’t expect another stellar day like yesterday anytime soon. However, at $3.80ish, at interesting play none the less

#43 Alex on 06.12.09 at 9:11 am

to #8 NorthOf49

I here you pal, I am renting a 3 bed 3 washroom detach house in Mississauga for $1,300 – rental rates have come down tremendously here!

#44 Repatriated Expat on 06.12.09 at 9:18 am

In my west Mississauga neighborhood, an MLS search for single-family detached house listings within a 25 square kilometer area of my work/home shows:

– 84 houses for sale at less than $425k (median single-family detached house price reported in TREB in the W20 area in April 2008 was $424k)

– 528 houses for sale asking more than $425k

My townhouse rental is $16 200 / yr, or 3.8% of the median selling price.

Walking the dog around the cookie-cutter McMansions with manicured lawns can make me feel like I don’t rate on a socio-economic level. But I sure sleep well at night given sequential ongoing job restructurings at my company – and I don’t even work for the auto industry.

As for my house down payment, I’m using it to calculate how long I can support the family given a job loss. There is enough demand on the food banks for people who really need it, not real estate investors.

Best case scenario several years down the road, I still have a job, and still have the cash to buy a better house for less money.

#45 Toronto C9 Renter on 06.12.09 at 9:32 am

On Renting. ..

We found that, unlike purchasing, the really nice stuff is often not listed by agents.

Often word of mouth, friend-of-a-friend. For example– “…our friends just learned they’re transfered to Europe, don’t want to sell, they have a really nice place, perhaps you should talk to them…”

#46 Dean on 06.12.09 at 9:34 am

I agree with Chuck D – 26. As long as you’re living within your means it’s not a bad time to trade up. 3 years from now, prices MAY be lower BUT rates will be higher. Unless you’re going to save the down payment (wait until you see the cost of diapers — you’re not).

Think neighborhood if you’re looking to settle down and don’t be afraid of a smaller house (just make sure you’ve got two bathrooms and enough bedrooms). Make sure you’re near good schools and facilities like hockey rinks.

From a purely monitary standpoint, Garth is likely right. But there’s more to life than money, and putting down roots in a good community in a house with a yard has it’s benefits too. Having a happy wife sitting in your backyard with your newborn baby has some value as well :)

#47 Devil's Advocate on 06.12.09 at 9:39 am

Prices have gone up in most markets for the first half of this year despite economic fundamentals which would suggest they should have done otherwise. I do believe it is nothing more than a “dead cat bounce”. Prices need to correct in line with historical trends since at least 1981. In the city I reside that would suggest a further 15% drop. Given the likelihood of a continued increase in interest rates that is more likely to happen than not.

I don’t think property values will fall quite so much as many of the RE Bears predict or hope for. I do on the other hand hold a contrarian view to the rest of my colleagues and would suggest that there is no panic to buy right now. We are in a state of uncertainty on many fronts which I am sure will divulge the direction the economy will likely take for a few years hence by late summer early fall.

My recommendation to you is to shop, shop, shop between now and then. Hook up with a good REALTOR you have a comfortable confidence in who will not pressure you but rather help you do your due diligence on the market between now and September when you will then be in a better position to make and informed decision and the general economy and RE markets will have disclosed their true colours.

Home ownership is more than economics and finance. Raising children in a stable and adequate home environment has significant rewards that your children in later years will reap the many benefits of. Still an economically sound household is the primary foundation of a happy life for all.

Congratulations on the pending new arrival. Enjoy this time and PLAN. There is no need to jump into single family home ownership quite so fast. It’s not like the market is going to experience anything like the past five years… quite the contrary.

Last bit of advice… if and when you do decide to buy a single family home consider resale. Investigate where the market will be for that home in the future (5 to 10 years). While you may think you plan to live the rest of your days in that home, if you buy without considering resale opportunities (demographics and such) you may find you have not alternative but to stay there for the rest of your days. I think Garth would agree with me that there are homes which will become more popular and homes which will become less popular as neighbourhoods and cities as well. Choose one which will experience only greater popularity with the changing times.

Again, there is no rush take the time to watch things unfold as they may and educate yourself to the degree that you know what, when and if to take that leap.

Your condo is not likely to experience as much a drop in value as single family depending on where it is located. Still selling it and renting in the interim might not be a bad bet as I suspect you will see, overall, prices start to decline once again as this Bear Market Rally quells. Renting is not a bad thing. In fact, as odd as it might seem coming from a REALTOR, my next newsletter touches on the benefits of being a renter vs home owner. It is only relatively recently that home ownership was considered such an indication of self worth. It is not… especially right now.

#48 young & foolish on 06.12.09 at 9:48 am

… um…. like….. this “downturn” seems so like a real economic/social shift ….. like the end of Reganomics !

where will new real growth come from? Government? Ha!

#49 Mike Brudy on 06.12.09 at 9:49 am

Re: “Anybody got anything to add about this brainwashing?” from D in London:

We sold our house in Feb. 2008 since I changed jobs and we moved to a new town and have rented since. There is a huge stigma with renting in our society particularly in smaller cities and suburbs – many neigbors have noticably changed their attitude when they realize we are “renters”.
An example; we rented a townhouse in a new subdivision for three months last summer. The unit next to us had been sold and a young couple moved in – they seemed to be tight for money – they had very little stuff with them (minivan’s worth of furniture and possesions and used blankets for window coverings). The amazing thing was that the guy was quite condescending once I told him we were renting and started preaching to me about the buyer’s market that had emerged (remember this was last summer).

The pressure to own a home is significant, it has become the “must have” thing to own along with flat screen TVs, blu-ray DVD players, lazy-boy outdoor furniture and brand new leased BMWs. It is really hard to go against the grain – some folks can’t stand the “shame” of renting or not having the latest gadgets, cars, etc.
Just remember – cash is king.

#50 ShelteredFromTheStorm on 06.12.09 at 9:52 am

Re: “Anybody got anything to add about this brainwashing?” from D in London:

We sold our house in Feb. 2008 since I changed jobs and we moved to a new town and have rented since. There is a huge stigma with renting in our society particularly in smaller cities and suburbs – many neigbors have noticably changed their attitude when they realize we are “renters”.
An example; we rented a townhouse in a new subdivision for three months last summer. The unit next to us had been sold and a young couple moved in – they seemed to be tight for money – they had very little stuff with them (minivan’s worth of furniture and possesions and used blankets for window coverings). The amazing thing was that the guy was quite condescending once I told him we were renting and started preaching to me about the buyer’s market that had emerged (remember this was last summer).

The pressure to own a home is significant, it has become the “must have” thing to own along with flat screen TVs, blu-ray DVD players, lazy-boy outdoor furniture and brand new leased BMWs. It is really hard to go against the grain – some folks can’t stand the “shame” of renting or not having the latest gadgets, cars, etc.
Just remember – cash is king.

#51 peter wiener on 06.12.09 at 10:31 am

re #39 D from London

It seems to be a peculiarity of insecure people or peoples (meaning whole nations) in generally English speaking countries to put so much emphasis on home ownership. Having lived in 16 countries in my life (and I mean a minimum of 9 months per country) I can tell you that the more developed the country, the greater the obsession about housing, particularly as a “security blanket” and as a sign of status. On the other hand, in less developed countries, I found little housing obsession and a lot more happiness in general. I think it can be attributed to how the subject nation or person views life and the importance or relevance of residential real estate to the psyche.

For instance, Italians I know living in Canada have a greater emphasis on the STATUS their house reflects than in Italy. Perhaps it is because the kind of housing Canadian Italians enjoy are prohibitively expensive and out of reach financially for most Italians, but I find my relatives living in modest homes and apartments in Italy way more relaxed and ejoying life than the work-a-holics busting their humps 24/7 to pay for the 5,000 to 20,000 ft monsters in Canada. The Italians I know prefer eating and living well with modest digs in keeping with their means to living in 5,000 square feet and eating crap food, driving a crap car, no savings, cheap clothing, no travel etc. so that they can carry it.

Look around you in Toronto, Vancouver, Calgary – show me the happiness factor in the cretins I deal with everyday who obsess over their homes and smugly think they are somebody cause they have a big house (usually with a comensurately large mortgage). Then I tell them I rent a one bedroom and they gasp as I am the principal in the deal they are working on (meaning its my dough that is paying their fees, etc.) and could buy any ( and I do mean any) of their homes , several times over at least for cash, plus I am retired and am younger than they are! That’s usually when they go real quiet or mumble/blurt out – “my (wife/husband) had to have it”. That’s when I hit them with the biggie question: WHY? It’s fun to watch them squirm, cause deep down they know that they admitted one of three things; a) they are spineless in dealing with their partner; b) their partner is a status-seeking insecure person or 3) that housing has a big place in their own pathetic grasping lives and gives them some ‘noticeability’ that their lack of self worth can’t.
Face it, there are deeply ingrained insecurities in many people’s lives and “ownership” of residential real estate seems to be an antidote for some of these people.
It’s then that

#52 MM on 06.12.09 at 10:36 am

I agree with #7, the people in Victoria do think they are immune to the RE going down and everything slowing down, they should all wake up!! my husband and I are both in the industry and his work has slowed down and I can see it in my office but try and tell anyone you know and they just laugh at you and say you do not know what you are talking about, I guess we will have the last laugh when we are OK and they are not.

#53 anon - GTA on 06.12.09 at 10:37 am

Renting a house ? Stay in the appt…

Isn’t there a good chance that if the owners are renting the house, they are doing so cause they can’t sell it for the price they want… and are waiting for prices to appreciate to sell it?

If prices appreciate (good luck with that), they would sell it and kick the renters out…

Hell, In the next 2 years, if prices fall as expected, the owners wont be able to rent it anymore… then wouldn’t/couldn’t banks foreclose these? and kick the renters out?

Why rent a house? rent an appt….

#54 PTDBD on 06.12.09 at 10:41 am

Just to satisfy my personal curiosity…how many of you read or heard Carney’s presentation yesterday? (link posted on yesterday’s Blog topic) True, he has to follow the American economic pipers, yet he is the most influential decider in the things discussed here…namley investments, currencies and interest rates.

His view contrasted quite sharply with Harper’s “rosy” presentation. In fact, he made some quite remarkable pronouncements which seem to include an amazing act of confession for past economic irreseponsible management sins and a vision of a seismic world shift.

So, did anyone consider this significant? Or are they just more empty words from someone out of touch with your reality? Is economic contrition and responsibility ahead for Western countries?

#55 peter wiener on 06.12.09 at 10:44 am

re #48 young and foolish

BINGO!

you may be young, but you are certainly no fool as your insightful and concise post indicates

as Chuck D. (sorry Garth, I’m not really a rap music fan, so don’t ban me from this blog pls) said repeatedly;

“Don’t believe the hype…”

#56 Dave on 06.12.09 at 10:49 am

Those of us hoping RE will reach more affordable levels in York Region better take their head out there *ss, especially if your looking to buy a home in the Woodbridge/Maple area. This market is an anomoly.
Example, friends just signed a contract on a 2500sq home on a 40 X 110 lot in the Jefferson Forest area in Richmond Hill. The exact same home built by the exact same builder in Woodbridge is being sold for $580,000.00 – and they are selling. The salesperson in Richmond Hill said the builder is absorbing the HST, but come this weekend, the ’sale’ ends and the HST will be paid by the purchaser. These homes will have a closing date of August 2010.
I can honestly see buyers in these areas willing to pay this tax increase, hence, these markets will not be affected.
You have been warned.

——————————————————–

oh yeah? well, I know a family who I consider somewhat conservative and bought in Woodbridge 15 years ago. Prices in the area I imagine are in the 450,000-500,000 range now. She lost her job and now they’re struggling. If this economy remains the same for much longer (one year plus…which it will), they’ll have to get the heck out of there.

Did I mention they were conservative? could you imagine the rest of the 40 somethings that are to their neck in debt?

#57 peter wiener on 06.12.09 at 10:57 am

#44 Repatriated Expat

next time that you are made to feel inadequate when looking at others’ homes in the neighbourhood, think about how much money those fools are spending wastefully in that pursuit on trying to impress you and have a laugh at their expense. it will make you feel better about the wonderful and thoughtful discipline you are displaying to your family, particularly your children.
You have no idea of their finances nor perhaps the drama / trauma that that soon to be white elephant causes / is causing them / will cause them.
Rejoice in your freedom from this insanity, be strong and patient. Works for me.

#58 Dave on 06.12.09 at 10:59 am

I’m going to be the contrarian here and say you buy. I don’t think that real estate is going to depreciate as much as people here think it will.

————————————————–

and here we have Mr. Benjamin Graham. Spare me with this assumption that you’re opposite the herd. The norm around here doesn’t represent the norm in society. You’re insulting contrarians by calling yourself one. Maybe you should do some number crunching before you think or thunk or whatever it is you claim you’ve done. Real estate opinions are like noses- everybody has one.

#59 THE GREAT GAZOO on 06.12.09 at 11:01 am

First time poster long time reader.

I think a support group is in order for recently married followers of Garth.

I am in the same situation, 30yrs old, just married. We are planning in about a year+ to start a family.

Thankfully about a year before I got married my brother forwarded me a link to Garth’s blog and after following it for a while – I was sold – we are renting right now 1 bdr, ~650sqft in Toronto for $1300/m ALL inclusive. … good enough for newlyweds…

Because of Garth I now still have about $150k in savings and working in automotive parts industry I can sleep soundly at night knowing whatever happens in this really dire economy – as many people have been let go where I work including suppliers and customers – my wife and future family will be ok …

#60 peter wiener on 06.12.09 at 11:04 am

#38 Gord in Vancouver

Why would you give a “tinker’s damn” about what Flaherty says. His mumblings have as much to do with reality as the comments the homeless often utter out loud to no one in particular. At least the homeless often have the tragedy of mental illness and disadvantage as a valid reason for their ravings. Flaherty is just a turd, plain and simple and you know there ain’t NO WAY to polish a turd!

#61 peter wiener on 06.12.09 at 11:11 am

#38 Gord in Vancouver

Sorry about the inaccuracy of my last post.
Really, Flaherty is not a turd, that would be a gross inaccuracy. No, he’s bigger than that – he’s a humungous bag of sh2t!

Btw, Garth, if you do run for office again and want someone to contribute to the outing of these pieces of sh2t (er, sorry, traditional politicians) let me know pls as my contempt for these turds knows no bounds.

#62 Slice on 06.12.09 at 11:11 am

For $1350 I’m renting a large 3-bedroom house with foyer, double garage, on a corner lot with fruit trees in the backyard in Mississauga. It was advertised for $1550 monthly but that was just to keep the lowlifes away. As soon as the landlord saw we were normal people he said we could have it for $1350. We are now into our fourth year with no rent increse.

I have great landlords who immediately fix all problems and never bother us. I figure at least $350 of my monthly rent the landlord forks over for property taxes.

You just have to look a while to find a quality rental. They are out there.

Slice

#63 Nathan in Edmonton on 06.12.09 at 11:15 am

Congratulation Chris, having a baby is wonderful. I agree with the comments here on a home being what you make it and a condo is just fine raising a child. A number that is thrown around a lot is no more than 30% of your income should be spent on housing, I’m not sure if that’s net or gross, but I believe, especially if you have a child, no more than 20% of your net income should be used to service your mortgage. Children are expensive, especially if you need daycare. Our daycare cost take about 11% of our net income, but that is a number we can absorb because our housing costs are small and we have little consumer debt. As for all the cost we can’t control, like food, property taxes, utilities, even auto insurance that are all increasing, it’s nice to know (for now at least) I have a financial buffer and do not have to worry about the mortgage payments.

#64 smw on 06.12.09 at 11:50 am

#38 Gord In Vancouver

I think “didn’t” is the key word in that sentence.

As in, we didn’t have a housing bubble, until “I”, Jim, implemented the 40 year mortgage, allowed no money down mortgages, allowed the G7(aka the USA and UK) to dictact economic policy to a country that was doing very well being conservative and ignoring the hysteria.

Yeah, in 2006, we didn’t… In 2009, we do.

#65 OttawaMike on 06.12.09 at 11:57 am

#26 Chuck D on 06.12.09 at 7:26 am
“So in a couple of years you’ve paid 50k in rent plus utilities. The only thing you haven’t paid is property tax”

Chuck, buddy, what you are forgetting is the guy can partially pay his rent from the investment income earned from that 100k$+.
What about maintenance costs?-100$ month minimum, Property tax is not something small, most places it is around 300$/month. As you readily admit there is not much hope for upside on the home’s value over the next few years. So you’re really advocating financial risk taking for the pleasure of saying” I own this place”

#66 Rhino on 06.12.09 at 12:25 pm

And, meanwhile, a close friend no longer in pharmaceuticals, is seriously considering selling her house as she cannot find a decent job and one salary is not enough.

Reality check. Plan for the worst scenario. It seems to be happening an awful lot lately…

#67 Soylent Green is People on 06.12.09 at 12:44 pm

This guy should rent.

Once I found myself in Sofia Bulgaria, I was amazed how everyone lived in apartments and raised their families and seemed pretty happy to me. Most of these apartments were teeny tiny, one bathroom, turning balconies into kitchen to gain a few extra feet of space.

They didn’t have telephone directories, car insurance and cooked food without using printed recipes lolo My son’s Bubba was amazed at my measuring cup. What a concept! She just used a coffee cup.

Also, their quality of life seemed much better, i.e. spending a lot of time in cafes and bars drinking and socializing and having a good time instead of working themselves to death to pay for a house and keep weeds off the lawn.

Under communist rule in Bulgaria the women were paid for three year maternity leave. Three years!!!! Contrast that with so-called rich country of USA who offer 3 months mat. leave. Who is taking better care of children? Not the States.

Re babies, you actually don’t need to buy much for a baby, hence more room in condo. Baby is like houses, people may say you HAVE to have this, this and this, but you really don’t.

Re #39 D from London, ON on 06.12.09 at 9:00 am

Re why women don’t want to rent versus buying:

Renting is a terrifying prospect because renting with other units she would be exposed to other’s cooking gross smells / cigarette / drug use / noise / drunks / swearing / racist spews in front of small children / harrassement from hillbillies / on and on and on.

Women tend to spend more time in the home when they have children. Children can drive you insane crazy. Adding in other tenant’s bad behaviour and you have a mental break-down in the making.

Trying to be calm and patient with my son was difficult when living in bad apartments. My son is high maintainance, that guy never stops chit-chatting and dancing and shooting imaginary guns and asking a million questions that leave me slack-jawed.

Now, a detached house on the other hand, much better to rent I agree on that.

#68 Devil's Advocate on 06.12.09 at 12:51 pm

I agree that renting has an unwarranted stigma attached to it. At the end of the day, whether you own your home outright or rent it, there is a cost and it is after all is said and done a sound approach to home ownership should be that it is a consumable not an investment in anything other than lifestyle choice. Renters, right now in this economy, are generally far ahead of owners given the likely course we are headed toward. It may not stay that way for long. On the other hand as the markets trend toward equilibrium, a process which will only be exasperated by further government intervention, something has to give as owning a rental property nor a principle residence makes much sense today. I look forward to rising interest rates which are, in my opinion, currently falsely low to help promote a return to a sensible equilibrium in the real estate markets as all others.

On the thought that “cash is King” that may be so today but given the course on which we are headed I see the only logical conclusion being inflation, probably hyperinflation, most notably south of the boarder. Will we follow suit? Probably as we have demonstrated a tendency to step in stride with out American cousins just a few steps back. As such inflation will erode the whole notion of cash being King as we need buckets of the stuff to buy a loaf of bread.

If you have the time, watch this video, or at least skip through it in order to get the jest of the message. Sorry about the Gold Standard part. He, I don’t think speaks so much of a need to return to the Gold Standard as to have some checks and balances in the monetary system which would hold government accountable and negate their ability to print fiat note after fiat note thus devaluing the worth of your well earned saved dollars.

http://www.youtube.com/watch?v=tU8jCa_dKTM

#69 Investor on 06.12.09 at 12:55 pm

Amazing, but I hear people in Europe actually raise children in apartments. Apparently not all of them become deviants.

That is correct. Plenty of families live in apartments and many siblings share rooms. Imagine that. I think in some respects its an obsession of 30 something year olds to buy a house once their start a family as it seems they will be percieve as lower class if they don’t get one.

If I were Chris, I would stay in the condo, save as much cash as I could in the next 5 years. Cash is king in this environment. The real estate correction will take years.

#70 Mrs Loquacious on 06.12.09 at 1:00 pm

Chris, first of all, congratulations! :) Babies are a blessing and a joy.

Next, please consider yourself incredibly fortunate to have been featured on this post, and to have so many sage advisors provide you with some viable alternatives to the MSM and bank cheerleading. Sometimes, it is valuable to see the “other sides” to put things into perspective.

Here are my 2 cents on the matter, though I have no illusions about being wise in matters of economics and RE. I’m facing a similar situation as you, in that my hubby & I (early 30’s) are just about to start a family, and we have a decent little nest egg under our belt. The difference is that we do not own any RE; we are renters, and therefore, we are mortgage-free.

IMHO, the best thing that you can provide for your family is a sense of security. In this very strange economic age, there is no certainty in RE nor in many of the investments that, growing up, you & I saw climbing only in the upward direction. The winds of change are blowing, and not necessarily in the direction that we would want.

Pay no heed to the RE enthusiasts that seem to think that only homeowners with large houses can be good parents, or that “nesting” is synonymous with “owing” – a point well made by “Phil” on his comment. Challenge conventional thinking, since the mob mentality can hardly be considered wisdom for the ages (sheeple, anyone?).

Differentiate between wants and needs. What your baby (babies?) will need are two loving and committed parents, a roof over his/her head, and food. The things that the world says a baby “needs” are oft wants in disguise, items that are designed to help keep you in competition with the Joneses and fuel the companies’ bottom lines. Does a baby really needs his/her own room complete with multiple pieces of matching furniture? A backyard with a giant plastic jungle gym?

Those are priorities we have had to reassess as we figure out our living arrangements in our 2-bdrm pad. As I reflect on my childhood, I realize that what I loved most wasn’t a bunch of toys in a large house. What I loved was having my mom at home, and being able to play under a blanket or in a giant cardboard box with my sisters. I don’t remember my time on the swing set in the backyard, but I do remember going to the park and squealing with glee as my folks pushed me higher and higher on the swings. I shared a bedroom with 2 sisters until I was 14, and truth be told, those were sometimes the best moments of my day; I would never want to have traded that for my own bedroom at the age of 5.

Be patient. Obviously there will likely come a time when your 6′ teenager isn’t going to be able to feel comfortable in a small apartment. I believe that just as there is a season to rent, there is a season when it is wise to buy (or rent larger). However, if what Garth and many others have forecast is true, then you would be better served unloading your place before its value collapses further, and wait until a more favourable time before considering another RE purchase. If you have anything right now, it’s time!

Enjoy the life. You are having a baby! :) This little one will only be little for so long, and most parents I talk to lament the fact that their children grow up so quickly. I can only imagine how much more quickly that time seems to slip by when the parents are busy working two jobs or fretting over finances because of another hike in the interest rates. Live simply, and avoid any decision that will ensnare you in a debt that you cannot afford, or that requires you to sacrifice this precious time with baby in order to stay above water.

Good luck with your decision-making, Chris, and I hope that you will choose wisely and as a result, live well!

#71 Eduardo on 06.12.09 at 1:05 pm

Hey Garth,

Your rising energy cost argument is completely moot. People who live in condos as opposed to apartments and people who live in houses as compared to house leases/rentals can expect the same increases in energy costs.

If you think that the increases in heating aren’t going to get passed on you’re the fool.

#72 Investor on 06.12.09 at 1:07 pm

US Foreclosure filings up 18 percent from a year earlier. It’s not looking pretty.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aHEpXU3Pg_oU

#73 CalgaryRocks on 06.12.09 at 1:35 pm

#67. Yeah, communist eastern Europe. Those were the days. Too bad the people that actually had to live there didn’t think it was such a great system.

Especially in Bulgaria where they were literally starving. I can rent you my garage if you want to live the Bulgarian dream. I’ll shut the furnace in the winter to make it more authentic.

#74 Paul on 06.12.09 at 1:37 pm

#16 Rents are significantly down in Vancouver and vacancies are up. Just browse Craigslist for the evidence. A lot of accidental landlords out there. I negotiated a decrease when renewing my lease based on showing the landlord a huge list of alternative places I could get for less – smart landlords will be flexible if it means they get good, reliable tenants.

#75 realtor in Toronto on 06.12.09 at 1:38 pm

I guess I may be in the minority here, but I believe in owning. I don’t think that renting has a stigma, as many people have said, but buying does give you an asset. That said, though, trading in plenty of savings and a condo for a larger (and more expensive) home in this market doesn’t quite add up. I may not have put it in quite the same way you did, Garth, but I agree.

#76 tjmikey on 06.12.09 at 2:20 pm

Just watched “The International” last night.

Lousy movie, but WHAT A LINE!

The two main figures in the plot are interviewing an Italian political candidate about the financial activities of a certain bank.

The interview goes on…..the candidate explains that in countries of conflict, the banks aren’t interested in profit, they are interested in controlling the debt.

Something like “The bank want’s governments and their people to be slaves to debt”.

Food for thought.

#77 Downsized and Delighted on 06.12.09 at 2:22 pm

Chris – I have the thrifty gene also, so I relate to what you are saying. Because you have the gene, I don’t have to tell you to buy only as much house as you can afford. Buying a house (especially in a good neighborhood) to raise a family in is the most important and satisfying thing you will ever do with your money. No other purchase in your whole life will mean more to you. (not cars, vacations, not even money in the bank)

For all the naysayers on this forum – trying to time a market (real estate or otherwise) can be very tricky. People who obsessively try to time markets inevitably end up losing money in the long run – because they can’t resist the urge to gamble. And gamblers ALWAYS lose.

Buying a home for your family is never a gamble unless you go out and buy more house than you can afford.

#78 bryan35 on 06.12.09 at 2:32 pm

In some areas of Canada owning a home and paying a mortgage is cheaper than renting. Sometimes it is a lifestyle choice to live in a house rather than rent an apartment.

#79 Dad was wrong on 06.12.09 at 2:33 pm

#32 FP said “Hey Chris, We have a 6-month old daughter and we rent. We sold our house in the ‘burbs in July 2008 because the commute was killing and we wanted to move back to Toronto to be closer to work, save on transportation costs…..We are currently in a 1600 square foot apartment right on top of a ravine with lots of parks and trails around us and my husband gets to work in 10 minutes…..”

FP’s history sounds very familiar :)

We sold our empty McMansion and moved from the soulless suburbs last summer and now rent a lovely apartment right on Toronto’s waterfront with views over the lake, which has way more space than our 5-month old baby girl needs right now or will need for quite a while and anyway, stairs are just dangerous, you don’t need ’em.

Instead of spending 3 or more hours commuting a day I’m just minutes away from work, which mean I get to spend valuable time with my daughter instead of stuck in a car or GO train or whatever like my dad did.

Sadly, myself and FP are very much the exceptions to the rule as all of my colleagues, on getting the baby news, leave the downtown condo and buy a house in some outer suburb. And as someone who’s lived and worked in Europe, yes it is just a North American thing as the rest of the world quite happily live and raise kids in apartments. In fact certain areas (like South America) view apartments as more desirable (and safer) than houses.

#80 David Bakody on 06.12.09 at 2:34 pm

Buyers face hike in mortgage rates as inflation fears mountComments (100)
Buzz up!
Digg it
Rupert Jones, Miles Brignall and Heather Stewart guardian.co.uk, Thursday 11 June 2009 20.25 BST Article history

Homebuyers are facing their first rise in mortgage rates for a year in a move by banks and building societies that could extinguish the nascent recovery in the housing market.

#81 David on 06.12.09 at 2:42 pm

Chris says he has thought this through and the benefits of home ownership outweigh the risks. If that is the case, why write dumb letters looking for self validation? Spending $400K on a tiny home that this family will obviously outgrow in short order is a benefit, if one wants to see it that way. Risk? The possibility of seeing all that hard earned equity getting rubbed out in declining market for one reason. There is the distinct possibility of interest rate spikes which will mean paying a whole lot more to live in the same place when nothing else has changed. Try moving up to better digs and selling the place when there are few potential customers with incomes to support buying a $400K entry level home.

#82 POL-CAN on 06.12.09 at 2:43 pm

Why is it that renting has “unwarranted stigma attached to it”?

Who cares what other people think? Trying to keep up with or impress morons is what got us into this mess of over consumption….

Do what is best for you and to hell with what other people think.

Remember that most of the real wealthy do not flaunt it, yet those that are “pretend wealthy” do. Until they no longer have a job anyway….

#83 rory on 06.12.09 at 2:44 pm

#51 peter wiener you said:

“…in the cretins I deal with everyday …plus I am retired and am younger than they are!…WHY? It’s fun to watch them squirm, cause deep down they know that they admitted one of three things; a) they are spineless in dealing with their partner; b) their partner is a status-seeking insecure person or 3) that housing has a big place in their own pathetic grasping lives …”

Nice to put people down for no reason except for ones own ego …you get beat up lots when you were a kid … as to being younger, smarter, retired sooner, richer, ‘jerkier’ you only have to remember one thing – there is always someone bigger, smarter, younger, richer than you…always… wonder what they think of you?

Sorry all …PW pushed a button…this kind of ‘no respect’ crap really gets my heckles up, makes my blood boil, you get the pic …it makes me think Wiener is the cretin.

from http://www.urbandictionary.com/define.php?term=cretin.

A ‘cretin’ is usually linked, but not limited to the following:… People whose sole purpose in life is to drain the life-force (i.e. human spirit, positivity, ambition and general well-being) from people whose success in life is related to said character traits.

Sounds to me like Peter W…just IMHO.

#84 Nostradamus jr. on 06.12.09 at 2:55 pm

Vancouver named world’s most livable city
Updated: Tue Jun. 09 2009 07:36:02

ctvbc.ca

Vancouver has been named the world’s most livable city.

The Economist Intelligence Unit (EIU) announced Monday that Vancouver is the best city in the world to live, followed by Vienna, Austria and Melbourne, Australia.

http://www.eiuresources.com/mediadir/default.asp?PR=2009060801

With a rating of 98 out of 100, with one being “intolerable” and 100 being “ideal”, Vancouver topped the charts, “benefiting from strong Canadian infrastructure,” according to the study’s authors.

The study’s authors say the cities with the best scores usually tend to be mid-sized, are in developed countries with a low population density, and benefit from cultural or recreational availability.

These cities experience lower crime levels or infrastructure problems that can be caused by large populations.

…DN…
I think what many of us Vancouverites forget is that we still live in a reasonably priced city when compared to New York/London/Tokyo etc. It is expensive for Canada but not on a world stage.

“Move along, nothing to see here” Nostradamus jr.

#85 My_View on 06.12.09 at 3:02 pm

Its not timing the market, its your time in the market.

#86 Barb the proof reader on 06.12.09 at 3:08 pm

Andbody got anything to add ….?
–#39 D from London, ON

D, I see two replies already, with good points, albeit different. Her reaction, that strong, would really be for more than one reason.

@ 51 PW took an interesting perspective, focusing on relative insecure feelings your wife may have about where you “ought” to live — perhaps your wife’s knee jerk reaction, whether by society peer pressure and/or lack of worldliness.. You know your wife best so only you can evaluate if all, none or part of this applies.

@ 67 SGIP had another interesting perspective, that your wife already sees that type of living as perhaps a prison-like atmosphere. And she’s right too, it can be that way, been there.

Depends on the circumstance. No doubt you’d choose carefully. And if your wife is being quite cautious, but you just happen to know that you wouldn’t pick ‘that’ kind of building, don’t take offense, your wife is just protecting her territory and doesn’t have your view point –yet. And for her to have that reaction is a fairly normal, actually quite normal, communication thing that always sorts itself out whilst you tell her more about your idea. Life’s like that, that will happen a hundred times before your happy 50th anniversary.

Since there are probably multiple reasons for her reaction, and you asked, here’s my two cents. Correct me if I’m wrong. Sometimes, I’m saying sometimes, a spouse may detect or suspect for whatever reason, that the next move could end up as the last one for awhile. But then sometimes a little too much caution can muffle a good idea.

So even with your due diligence looking up a great place to rent, and your good experience with a location, you’re going to have to keep with your patience and good communication skills before you ‘both’ share that vision of moving to downtown London apartment living.

BTW I can see both her viewpoint and yours. I’ve lived in a big London apartment on the eastern (old) edge — hated it. Then a 50’s up & down by the Thames/UWO, then Cherryhill.. Finally, (albeit 35 years ago), found an apartment almost downtown, large upper of an old brick heritage home. Lovely… walking to restaurants, groceries, village shopping, right above Harris park. (I could even walk to the nearby disco.) Then 20 & 10 years ago respectively, an uncle, then later a nephew, both as bachelors, owned condos there, both loved the location and their buildings.

Since you already know and feel it’s a good idea to check out DT apartment condo living for yourself, try to ask her what part of the idea seems bad. Humour her and then ask her to humour you by going and looking at one of these places. You never know, seeing is believing sometimes. And she just needs to see it, feel it and believe it for herself. Sorry for going on but seems you really would like to make that move, and every little bit helps.

#87 TorontoBull on 06.12.09 at 3:21 pm

@73
there are more people starving in Bulgaria (and many other ex communist countries) now than 20 years ago…
be careful with statements which are simply not true.
@ Garth
if I remember correctly at the end of last year or the beginning of this year you posted that there will be real estate opportunities within 1 year. I think it is safe to say you were a bit off on this one.
@Chris – congartulations!
buddy go and have some fun (spend some of those money) before the baby is born, because you might regret that you didn’t later…

#88 @Garth 2 on 06.12.09 at 3:26 pm

People are confused here. An answer for the victim:

In contemplating home ownership, one should not be driven to take an indignant antisocial tack (Mr. Wiener this means you) against the majority of society and their choices.

Perhaps your wife can not articulate her need to own a house in terms you understand; however that doesn’t mean she has no arguments on her side.

As loathsome as it may be, the aspiring North American middle class will attempt raise children in a house, not an apartment. What does that mean for you? It means the perils of renting are real in Canadian cities. This is NOT Europe and we don’t have well-heeled communities springing up in typical city rentals, measuring brown rice with used coffee cups and growing their own heirloom tomatoes off the balcony… yet.

There is wisdom in the ownership of real tangible assets. Garth will talk about inflation, but must deviate from simple arguments in explaining why in inflationary times, your home value could decrease. In fact, it is a counter-intuitive prediction–evenly distributed inflation should increase RE value and also wipe away your debts.

People struggle to own a home because it has intrinsic value. Garth can convince you that it is less than you think… but it is NOT nothing. Other wealth stores often will have less utility and/or transparency. With a family you want to minimize risk.

On to risk then… Home ownership is not the issue here. It is the debt you incur in buying a house that is risky. You must be able to walk through several scenarios that could occur in relation to your solvency before entering into mortgage debt. If you have cash enough to buy, and some cash or near-cash RRSPs that cover any mortgage debt, you aren’t necessarily making a mistake. A decent neighbourhood for your family pays its own dividend.

But! …if you have mortgage-debt that has no way to be paid down other than by decades of tiring away at work, you are taking a BIG risk.. and not just a financial one. For most, work is simply hell. Because of the two-income trap, you may not just be leveraging your finances, but also your relationship and your ability to stay on top what is really important to your family’s well-being.

Be very careful. And by the way, you have the time now to contemplate further. The RE market is not going to rocket skyward for a little while (correction or not). So take your time and be sure.

#89 ShelteredFromTheStorm on 06.12.09 at 3:41 pm

Re: timing the market. Choosing to buy vs. rent is a personal choice, however I think there is significant risk in entering the market right now.

I go by one rule. The price you pay for a house doesn’t change, but the interest rate will.

So, given that interest rates will (as they have in the last week) go up, RE will drop in price (that’s what always happens – it isn’t “different” this time).

If you look at historical interest rates http://www.bankofcanada.ca/pdf/annual_page53.pdf you will see that during the inflationary period of the 70’s and 80’s we had double digit mortgage rates (5 year fixed). Only in the last 10 years has it dropped below 7%.

So, given the gov’t deficits that are coming we will have inflation. Rates will go up to chase down the inflation – there is no getting around that.

I would rather pay less for a house in a couple of years at a higher interest rate than pay current prices at a lower rate knowing I’d be screwed in 5 years (or sooner with a variable rate).

#90 ralph on 06.12.09 at 3:57 pm

Save your money and stay in the condo. Only thing I would suggest is soundproofing your place as much as possible. If it’s a concrete building you should be OK. And if the neighbors still don’t like it…..to hell with them.

#91 ritenote on 06.12.09 at 4:03 pm

Hey Garth,
Looks like the clock is ticking. Might have to make a decision about the political career sooner rather than later? Halton needs you Mr. Turner.

#92 Increasing that 1% on 06.12.09 at 4:28 pm

There are definitely things you cannot put a monetary value on…you could just never figure it out as long as you live…you’ll never know…

Time and full attention for your child , spouse, and own health, are priceless !

#93 M R Ducks on 06.12.09 at 4:37 pm

Raised two happy kids for their entire lives in a small rental house (without even a yard) in Eugene, Oregon because we could never afford to buy anything although we certainly wanted to for all the usual reasons.
It worked out OK. The eldest has his own computer business that is doing quite well and the youngest now is finishing off getting her graduate degree.
A safe and stable home(rented or owned), loving parents and friends (that is most important) is what is important to children.. they could care less at any age whether their parents actually owned the house they all live in. “Home” is an attitude.

#94 Adrian on 06.12.09 at 4:46 pm

I’m in pretty much the same boat as Chris.

We’re expecting our first child in Oct. Of course that lead to many discussions on relocating from our current 1br 700sqft apartment to something a little bit more spacious. We ended up signing a 1 year lease for a condo in a complex where I initially wanted to buy. This is a great way to test drive the place and see if we really want to live there, or in a condo in general.

Today, we live well and comfortably. We’re both 33, have no debts, all our vehicles have been paid for with cash and we have a total of about 250K in various investments and RRSPs. We don’t make a lot of money, but we live within our means. Our goal is to continue on this track, and buy only if the right opportunity presents itself. This means at least 20% off the current market. If it doesn’t happen I’m perfectly ok with renting for the rest of my life or relocating to a more affordable part of the world.

Now, my girlfriend is very reasonable (bless her heart), and even though she’s not quite convinced a housing crash is likely to happen here in Canada, she’s aware of the possibility. This made deciding to lease a rather painless process.

Not our relatives though. They think we’re making a huge mistake. In fact, I just got off the phone with my sister where we argued for about half an hour, about our choice to continue renting. She seems to think we throwing money away, and that $1600/mnth for a 1400sqft condo rental could be better spend carrying a mortgage. Of course, she like almost every other house owner I’ve talked to, conveniently ignores other fees associated with ownership, such as taxes, maintenance and interest. In her mind, I could be SAVING myself that entire amount if I buy. I’m amazed at the level of mathematical incompetence in my family, and this is a highly intelligent and educated person with a professional position in medical science.

I am really tired of trying to defend and justify my position. Now, whenever someone brings up the subject I tell them, “I should have bought before. I missed the boat and now I simply cannot afford it”. This seems to shut them up.

#95 Bill-Muskoka (NAM) on 06.12.09 at 4:51 pm

For all those comparing renting versus buying and complaining about living conditions I suggest try spending a year with a Bedouin Tribe living in the desert and heat. You will be thankful for any shelter after that experience. You can sign up for free travel and the tour at Canadian Forces.

Barring the inability to join our fine ranks you can travel to Phoenix, heck anywhere in Maricopa County, Arizona, and get your arse arrested. Sheriff Joe Arpaio will give you room and board in his luxury desert Tent Jail. You’ll even get a fine pink jumpsuit to wear.

Sorry the only granite you will find there is under your feet. It’s in its native form called ROCK! But the fresh air will make you feel invigorated after about 11PM at night when the desert cools down. No need for nose hair trimmers, the daytime air will incinerate any you came with.

#96 Live Within Your Means on 06.12.09 at 4:57 pm

I see nothing wrong with renting, especially in today’s turbulent economic times. As a few have said, a baby only requires loving parents, food, stimuli, and a roof over it’s head. Babies are often more intrigued with a box (than the endless toys contained therein) or pots and pans. Our youngest nephews & nieces have been overly spoiled and have little appreciation for what they have. I blame the parents & media.

I grew up in rented houses & apartments, mostly 3 girls to a room. We also managed to live with 1 bathroom for 8 & considered it normal. Yes, I’m dating myself.

Now we have more space than we actually need. My DH has at times talked about selling; has a workshop and has to store/maintain his 2 bikes somewhere. I won’t buy a condo (been there). We love our neighbours and area & that is a big consideration for us. If something should happen to DH, I’d sell and rent an apt. in a minute. Yep, we’re boomers and no debt, with a secure income, but we did it the old fashioned way – not buying more than we could afford on one salary.
………

Chris, formerly from England. Welcome to Canada and I wish you much happiness and prosperity.
…………

Thought I had the swine flu this week according to the symptoms. Just starting to feel a bit better this aft.

We’re off to Europe for 3 weeks on Monday.

A bientot.

.

#97 Barb the proof reader on 06.12.09 at 5:14 pm

Friends down the street rented a walk-up condo for 20 years, partly due to great location, walkable to DT Calgary, but also needing to save a down payment, and await market opportunity. They were happy and didn’t care what anybody thought.

I could say neither do I, I don’t care what people think, but then there are moments when I wonder if our ancient countertops could be misconstrued by some as being my taste preference rather than something I’m “putting up with”. I shake myself out of that moment and back to reality… if I’m judged by my countertops, that ‘judge’ isn’t someone I’d want to hang around with. Anyway, from experience our ‘granite endowed’ friends all have a great time at our little hovel.

#98 OttawaMike on 06.12.09 at 5:30 pm

#54 PTDBD on 06.12.09 at 10:41 am
Re: Mark Carney’s speech
Yeah, I had to look up the meaning of some of his words.
But I found his tone to be very negative on many aspects of the current economy. He earns some credibility for being frank though.
Interesting that the transcript is tucked away on the B.O.C.’s website. Here it is again:
http://www.bankofcanada.ca/en/speeches/2009/sp110609.html

#99 peter wiener on 06.12.09 at 5:40 pm

hey # 83 rory,

little Freudian slip on your part perhaps?

in other words, maybe it was you who were beat up as a child (and are likely still taking that beating every day from your significant other or whoever shapes your pathetic opinions for you) nasty eh? hostile yeah!

All joking aside, so is agreeing to a devastating financial decision that may really hurt their family in the long run by destroying their savings/wealth. It’s like you are asking me to respect people who are enslaving / indebting themselves willingly as they don’t have the discipline to wait, but rather GAMBLE on unaffordable homes to fill some immediate want that may well end up costing us all if they lose their home ( which at today’s elevated prices, almost guarantee POS for some).

Wake up, every spendthrift has indulged themselves and now the prudent and the frugal get to pay with for it with higher taxes, higher inflation and higher stress. And when you call them on it, they have nuthin’ to say!
Makes me laugh really when you think about it.

Rory, perhaps you should reread the post – in a calmer manner and point out where you think I am unfair.

“I am not a monster……..” haha!!!

#100 peter wiener on 06.12.09 at 5:52 pm

# 83 rory

oh yeah, find a real definition for CRETIN , cause you may need to know what it really means when I label you one for misinterpreting my post.

cheers buddy!

#101 Sail1 on 06.12.09 at 6:03 pm

I wonder, how many people that frequent this blog actually own a house?

#102 Da HK Kid on 06.12.09 at 6:37 pm

Readers lack of ability to grasp the obvious – Unbelievable!

Garth’s ability to dispense truly life changing advise – Priceless!

Chris = Toonces! Oh Nooooooo!

#103 MenWithHats on 06.12.09 at 6:37 pm

Taking Garth’s advice is the only sane thing to do .
Any other way your liquidity disappears .
It is,very , tough to regain a positive position .
Even if the baby has to sleep in your bedroom in a crib.

Far prederable than wiping out your hard earned position .
House proces are definitely sliding .
Carriage trade homes ( 500,000 plos) may have a small market .Who cares as it is less than one per cent of the entire RE market .
Find a nice hous house and try and make a nice lease arranhement .

#104 The Coming Depression on 06.12.09 at 6:38 pm

Not sure if this was posted, this is BIG Really BIG! The federal reserve opened up trading accounts to prop the market up? We have been fleeced..again:

http://thecomingdepression.blogspot.com/2009/06/fed-opened-multiple-accounts-to-trade.html

#105 905er & Spouse on 06.12.09 at 6:53 pm

Chris,
If Garth is correct, a home worth $400 now could be worth a little over $300 sometime in the next couple of years or so. That’s a lot, plus interest you would pay if you buy now.

We have a baby and a preschooler and are renting a house after selling our own. It is not optimal, but it frees us to really assess where we want to live. We tour different neighbourhoods, assess schools, check out parks, hiking trails, amenities, green space etc. Also, it’s hard to know what you want in a house until you live in one. Especially when you have children. Your view of what is desirable will likely change between now and a year or two from now. Good luck.

#106 Nostradamus jr. on 06.12.09 at 7:07 pm

Uber Guide rates Whistler #1 Ski Resort

Plus, West Vancouver’s Cypress Mountain Skiing & North Vancouver’s Grouse & Mount Seymours Skiing ( all 3 R downhill)

North & West Vancouver, (the North Shore) have 12 months of outside recreation, not found anywhere else in North America…plus all the Vancouver (Olympic) Sports venues…& Vancouver has but 900K citizens.

Move along, nothing to read here…Nostradamus jr.

#107 905er & Spouse on 06.12.09 at 7:23 pm

I also think you don’t need all that “baby stuff” and babies and young toddlers don’t need much room…

In fact if you do ‘attachment parenting’ (do a google search, it’s coined by Dr. Sears) like we did you could use those long hallways in your condo building to walk baby to sleep in a sling. Or even a stroller. Don’t have to worry about the weather. Sounds arduous? Just wait, you’ll see what I mean!

#108 jo blo on 06.12.09 at 7:28 pm

Great advice. Sell, rent for 2 years, and have your pick of cheap houses in the near future.

#109 Guardia Civil Tricornio on 06.12.09 at 7:42 pm

Real estate buyers should feel a little like Poland @ the end of the War – all that hard work fighting for nothing.
There is no justice – justice is out the window conrad.

#110 Charles T. on 06.12.09 at 7:55 pm

It looks like the little girl has just been told what her share is of the government debt and the unfunded liabilities in Medicare, Canada Pension Plan, and the Old Age Security Program that has been passed down to her, and she is not very pleased about it.

#111 taxpayer like you on 06.12.09 at 8:02 pm

Sail1-101

I’ve wondered that too. Maybe Garth could take on on-line poll/survey. Cover a variety of real
estate/financial/employment topics. Just the general stuff like own/rent/province etc. How ’bout it Garth Vader, dark lord of RE?

My guess is you own a house, and now are wondering if this is the right thing. Just remember we’re not on HGTV here. Some people just dont want to own. Some people just have to own.

#112 Soylent Green is People on 06.12.09 at 8:08 pm

I was in Bulgaria in 1994 and did not meet anybody starving or not having heat. Since then I hear updates monthly from my ex-relatives.

I assume some of them are hungry with no heat. But I don’t know any of them.

Also, almost everybody there is seething with jealousy from watching American media; they think we are living the high life over here and they want it too.

My ex-husband and I agree if they only knew the truth here (for many it is all work, no play, growl at your neighbours), they wouldn’t have to be so jealous of the fake affluenza lifestyle over here. They are better off eating food straight from the farm, plenty of exercise, and spending quality time with friends and family, etc. etc.

My ex-husband was born and raised in Bulgaria with his two siblings, a ginormous family for that country. Dirt poor farmers. They were very well taken care of by their resourceful and hardy parents, had food and heat and medical care. Bubba and Dedo did work themselves hard hard hard, but Jesus people, they are like 90 and 94 respectively, mobile with most of their faculties, still living on their farm.

I’ll never forget the big-boned ladies driving city buses in their housedresses in Sofia, blew me away.

As a feminist (family oriented one) I was so impressed with the professional females over there, these women commanded respect.

#113 CalgaryRocks on 06.12.09 at 8:33 pm

@73
there are more people starving in Bulgaria (and many other ex communist countries) now than 20 years ago…
be careful with statements which are simply not true.

http://tunnelvision.sulekha.com/blog/post/2007/05/17-years-after-the-fall-of-the-communist-regime.htm

#114 rory on 06.12.09 at 8:57 pm

#99 peter wiener

I reread your #51 post in the suggested calmer manner …nope didn’t change my opinion …now the reply you did in #99 after ‘all joking aside…’ is what and how you should have said it in the first place…good piece.

See, if you play nice people might even like you, in time …rofl….later.

#115 lgre on 06.12.09 at 9:02 pm

“Not sure if this was posted, this is BIG Really BIG! The federal reserve opened up trading accounts to prop the market up? We have been fleeced..again:”

HR 1207 is close to passing, once the Fed gets audited they are toast..I’m sure it will be a battle to get there..but the more they resist, the guiltier they look..

Trading accounts are no surpsie, the market is fully manipulated at this point.

#116 Barb the proof reader on 06.12.09 at 9:13 pm

#102 Da HK Kid “Readers lack of ability to grasp the obvious – Unbelievable! Garth’s ability to dispense truly life changing advise – Priceless!”

For everything else – there’s comedy.

:)

Hey Da HK,
I found the original segment with Steve Martin.
http://www.dorks.com/videos/Toonces-the-Driving-Cat-Part-1.html

#117 . . . fried eggs and spam . . . on 06.12.09 at 9:29 pm

Summer’s here, albeit a month or more late. Nevermind!

On CHBC-TV news last night, a report said that three condo projects in Penticton, two of which had not even begun building yet had come to a screeching halt. There was also a large piece of land up for sale (seem to recall it was court-ordered, but not sure).

The third, which had 35 units (including a penthouse) were to be sold at “significant discounts”, e.g., the penthouse was originally slated for $1.6 mln., now going for $699,000. The remaining units were cut by at least $220K.

In today’s KDC, a full-page ad said that new condos in Lake Country (just north of Kelowna) were selling for $169K and up, well below the original selling price. Again, a court-ordered sale.

In combination with plenty more thruout the world, the link I posted last night, about oil possibly reaching US$250 brl., Money and Markets column today says (all in US$):

“From their recent lows … Crude oil prices have more than doubled — to $72 a barrel from $33.55. Gasoline prices have surged 62 percent to $2.62 a gallon from $1.62.

“Gold prices have tacked on $147 an ounce. Platinum is up 27 percent and silver has soared 45 percent. Wheat prices are up 17 percent, soybeans have jumped 49 percent, and corn has rocketed 25 percent. . . . easy money-driven commodity and resource inflation — the unintended consequences of the Fed’s attempts at bailing out anyone and everyone.”

Back To The Present and Future (declining manufacturing here in the Okanagan). In 2003, Western Star Trucks shut down here and moved to Portland, Ore.

The annual contribution to Kelowna was $45 mln., a substantial amount of which went into property and city taxes.

They have since left Portland and gone to Mexico. The company I referred to yesterday, Northside Manufacturing which is closing next month, is also moving to Mexico.

Co-incidence? Well, one thing that both companies said was that land and labor costs were cheaper and less taxes had to be paid.

So with Ford, GM and Chrysler all having brand-new plants in various parts of the world — Brazil, China, India and Russia — there is a major change in the methods that businesses use around the world work.

Another bedroom / furniture store is closing up shop. As it is family-owned, chances are that the family saw the writing on the wall some time ago, and has been downsizing for some time.

The boom times, they are long gone, just treading water now. However, the next two links are quite revealing:

GM Foods and the Rockefellers (part of the Elite) are synonymous with one another! — http://tinyurl.com/mfynqr

‘A total population of 250-300 million people, a 95% decline from present levels, would be ideal.’ – Ted Turner to Audubon Magazine, 1996

In keeping with the planned ‘population reduction’, it has to start somehow, somewhere by some means or methods! — http://tinyurl.com/mpltpo

“Dozens of US cities may have entire neighborhoods bulldozed as part of drastic “shrink to survive” proposals being considered by the Obama administration to tackle economic decline.”

Webmaster’s Commentary: “All we need is a good plague to kill off all the useless eaters that would live in those shanties and the whole world will be beautiful again!” — Official White Horse Souse

If neighborhoods will be eliminated and people ARE still living there, what happens to them? Ahhhh! Pig / Bird / Human flu conveniently appears to sweep those discarded sheeple away!

#118 Barb the proof reader on 06.12.09 at 9:34 pm

As a teen, a particularly fun and spunky friend used to say that men who buy corvettes were just trying to compensate for the size of their.. uh, ‘peonies’.
When Nancy saw a corvette drive past us, she’d yell to them “Sorry about the size of your peni_!”
I never forgot her hilarious antics, and as a teen yelled it out a time or two myself.

So, to those renters who are insecure or worried about what people might think, just think of those insecure people who just HAD to buy a big house to compensate for their lack of, um, er, uh.. self confidence.

#119 POL-CAN on 06.12.09 at 10:11 pm

#112 Soylent

My first time in BG was last year in July. We were there to visit my gf’s parents who still live in downtown Sofia. From my short stay there plus the drive to Greece and back, I can back you up. No one is starving. As for heat well yes there was that incident between Russia and Ukraine this winter which caused a lot of discomfort for most eastern countries. Not the first time and not the last time for sure.

As for the “envy” I think the rest of the world is under the impression that things are paradise like here in NA. Anyone that has lived on both sides knows that the NA paradise is a mirage. I much prefer the life style over there and I am working on living it here.

To give a quick excample of what I mean. My parents came to Canada in 84 from Poland with 2 pre-teen kids and $20. They left everything behind: house, car, family, friends. All to give their kids a better chance then they had.

In the mean time the rest of the family stuck it out. Some of them worked abroad for a while but always returned home with the US$ and as things improved they got much further ahead then my parents and never had to work as hard. Why did they not have to work as hard? They had family, connections, did not need to learn a new language, did not need to go back to school etc. So as things improved in Poland they prospered.

In the mean time my parents knew no one. They did not form any solid ties with anyone their age here. My mother had to go back to school because she could not find work despite a masters degree in chemistry. She worked hard and has been with Environment Canada for over 20 years. Dad was luckier as he managed to put together a 35 year career in hi-tech (tel-com). He retired at 60 (not by choice) as there simply is no more R&D type work around unless you are willing to work for the military complex. They still to this day wonder if they made the right choice in 84. They do not regret their choice, they just muse about what might have been.

So how did their kids do? That is a story for another time :)

On a brighter note we are off to visit my family in Poland next week. With a quick detour to Prague we will end up in BG again at the end of the month. This time we will stay there for 2 weeks and will drive from Sofia to the coast stopping along the way. Will report on rural life there next month.

#120 Soylent Green is People on 06.13.09 at 2:04 am

#119 POL-CAN on 06.12.09 at 10:11 pm

Interested to read your comments re BG. I feel BG helped changed my life re how am I going to spend the short amount of time I have here on the planet, work versus play. Hanging out with my kid or sticking him in stranger care.

These people in BG def. had so little, but gave it all to me, prob. as an exotic foreigner. Strangely, I did find them rather xenophobic. They couldn’t believe I married one of them. Why would I marry someone flat broke with no connections lololo, I saw potential (this is the man I want my child to spend his weekends with :), he was well educated, Masters in Civil Eng. and he’s doing very well for himself, self-employed, owns nice house near Y&E, paying off ex-wife, pays tons of taxes…

I noticed many BG’s never smile for photos, teeth issues.

Your Polish parents remind me of my Irish parents. They came here 1955 to try and make it big. Next thing you know Celtic Tiger reared it’s head and we were all sitting here in Ontario cursing ourselves for being in Canada instead of Ireland. But now Ireland has crashed and/or is crashing. Are we relieved? I’m not, it’s going to come here too.

I could write a book about driving from Sofia to the Black Sea. I was car sick the whole way there and back, north and south routes, up and down those hills. My bil smelt bad and I had my head out the window like a panting dog. The state of the washrooms, oh God, I stopped drinking so I wouldn’t have to use them, holes in the ground with a grate. Well, there were no cold drinks to buy anywhere anyway.

My bil screaming at gypsies to get away from me, blatent racism… Loved the 25 cent rum and cokes, take the whole family out for dinner for 40 bucks, my fav. food banitza, flaky pastry with egg and feta cheese, yummm

This was back in the 90’s, I’m sure things are much better now. Enjoy your travels, a nice way to spend your time. My ex is thinking to send my son and I there this summer. My son goes all the time, told his father it was like going back in time. He gets to run free and chase chickens.

Nazdraveh!

#121 bigpictureguy on 06.13.09 at 12:03 pm

It’s just sickening to continue see devoted fans of Garth’s blogg asking the same stupid questions on whether to buy right now thinking their situation is any more unique than others.

It goes to shows how strong societal and media pressures play a part in clouding judgement and independent thought.

Grow up people. Garth has armed you with sufficient facts and key risks to make an informed decision. He is not your father to hold your hand for every single decision.

#122 Chris no longer in England on 06.13.09 at 12:56 pm

Bill-Muskoka (NAM) #40: “#33 Chris no longer in England

I have been meaning to say ‘Welcome to Canada!’ Hope all is going smoothly during your transition?”

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

Lovely, thanks Bill. The landlords have even planted a veg garden for us. They are here at the moment and about to walk us around it and show what has been planted. I just hope I don’t kill it all. My country education is about to begin!

#123 Chris no longer in England on 06.13.09 at 1:03 pm

D from London, ON #39: “Anybody got anything to add about this brainwashing?”

Sounds like it is just the women that are brainwashed. Must be something in the hairspray. Note to self: do not buy Canadian hairspray.

#124 Sarah on 06.13.09 at 5:54 pm

#88 @Garth 2 wrote:

“Home ownership is not the issue here. It is the debt you incur in buying a house that is risky. … If you have cash enough to buy, and some cash or near-cash RRSPs that cover any mortgage debt, you aren’t necessarily making a mistake. A decent neighbourhood for your family pays its own dividend.”

Thanks for this comment! We recently “traded up” to our second owned property. The first one we purchased for $35K (no, I’m not missing a zero) and the second one now we paid $112K. Both were purchased in cash.

We traded up to a better house, better city (tourist/vacation spot), better location (just off downtown waterfront), better amenities (farmer’s market, movie theatre, rec centre/concert hall, billiards club, restaurants).

I know what Chris means when he says they’ve considered the financial downside but decided it’s worth it: our trading up was done for purely lifestyle reasons. We managed OK being 5 hours away from a “city” with nothing but grocery stores, Walmart and a Canadian Tire, but we decided we wanted more for ourselves.

The difference is, we made essentially (in simplified terms) a one-time payment to upgrade. Since we owned the last house, we were already paying property taxes, maintenance, utilities and insurance. Those costs didn’t change significantly when we moved, although some went up a little and others actually went down. (We have been living well below our income means for the past 2 years though, so this wasn’t really an issue for us.) We are just as protected against future instability as we were before (ie we didn’t take on any debt), and probably even more so as this new house has better resale appeal than the last one given its size and location. (We actually outbid our current neighbours to get this property.)

Sometimes you do decide to pay for lifestyle choices. I wouldn’t have gone into debt for it, but I was willing to make a one-time payment for it. And, even though I had a mild panic attack realizing we’d paid over $100K for a house, you have to admit that we haven’t done that poorly at finding the deals!

#125 Grumpydawgs on 06.13.09 at 6:05 pm

Gath , people may raise kids in apartments in Europe true. But the apartments aren’t 558 sq ft., are they. In vancouver the average sq,ft., of a new condo is under 600 sq ft running in the 350,000 range.

Dr David Foote has already opined the impossibility of family units overwhelming the supply of condos.

The interpersonal crime rate in Vancouver condo districts is ratcheting higher. I suggest that like rats in a cage they are lashing out due to the infringrmnt of natural boundaries. if single people are being driven to drunkeness, drug use and an unholt desire to stab their neighbors then perhaps the condo idea has reached is inevitable conclusion. They are not fir for human occupation. Stress and lack of personal space is a killer.

#126 Da HK Kid on 06.14.09 at 3:26 am

BTPR, that was awesome! Thanks for the link!

#127 conan on 06.14.09 at 2:34 pm

http://www.lvrj.com/business/47992801.html

Decent article about the problems in American real estate.

The mortgage people and the builders conspired to raise property values . Perhaps only 5k to 10k a property but it all added up and ……

#128 D from London, ON on 06.14.09 at 9:56 pm

#86 Barb

Thanks for your comments. My wife has put the “cone of silence” down on further discussion about renting. I’m gonna have to find a very smooth way to bring up this subject again.

I mentioned once that moving is something that both parties must agree on, or it isn’t going to happen. I see the benefit where it could stop couples from making mistakes they would have made on their own, but I can now also see where it could very much narrow the range of acceptable accomodations.

#129 hopeful skeptic on 06.14.09 at 10:59 pm

Chris,
I can relate to your situation. We were in the same spot ourselves.
What to do? Stay in a condo (mind you it was a large condo) or make the jump to a house?
It’s easy to say stay in the condo, but as parents we do want the best situation for our kids, and we imagine all the things you can’t do in a condo, like summer parties, outdoor games, bike riding, backyard pools, etc.
On the other hand, it is true that adding a huge financial ball and chain is not good for the family either. That will result in less money and time for other enjoyable things in life, like fun family vacations to Disneyland, or other places. Or most important of all, time away from work for you to spend time with the child.
Samantha in one of the earlier posts raised some excellent points.
However, bottom line is that it should be a “lifestyle” decision not a money decision. I follow Garth’s advice to a point but always with a grain of salt. He never predicted this spring spike in real estate. He says it will eventually ebb away again. Maybe. Maybe not.
But your home is your castle and I while I agree one should always be as financially prudent as one can, there are more important things in life than money.
If you and your family will be happier in a house then buy one. If it goes down, then it goes down.
Stay in your home for long time and you will see it rise again.