Part deux

bubble1

Is this blog a fraud? A brave anonymous poster suggested as much a day or two ago. People were “duped” into coming, he said, expecting the dirt on a real estate crash that never came. Obviously the guy is a wannabe vulture, hot to pick on the bones of the previous greater fool.

So, what happened to the bust?

The latest realtor numbers, trumpeted from its deathbed by the MSM, are sizzling. May prices hit the highest point in history – an average of $319,700, which means prices have rebounded by 16% in the last five months. Of course, the average number is inflated by sales activity in some of the country’s pricier markets, including a big condo dump in the Lower Mainland. A more meaningful median price was not provided.

Still, it’s enough to make some people think I’m blowing smoke with my talk of a poor future for residential real estate. I mean, if prices are even higher now than they were at the market’s zenith last year, I’ve gotta be wrong, right?

Maybe. Wouldn’t be the first time, God knows.

But the fact is the current market buzz is the result of human emotion at work. When prices were falling and houses cheaper, buyers retreated in horror. But as prices hit an all-time high, sales volumes increase and multiple offers are flying all over the place. This is precisely what happens in the stock market, when buyers rush in at the top, only to sell in a panic at the bottom. After all, there are but two emotions when it comes to money: Greed and fear.

I can point out the absurdity of this self-destructive action, but you can’t expect me to corral it. If people want to be the greater fools, buying once again at the tippy-top of an unstable market, we can only watch in fascination. Clearly the near-death experience we all had last autumn failed to teach any lessons.

Evidence?

* The Bank of Canada said wisely this week that household debt is the greatest risk to the financial system. In the past year the real net worth of families has dropped about 7%.

* Canadians now have debt equal to 140% of disposable income. In Europe, it’s 90%. In the US, epicentre of economic malaise and the disappearing middle class, it’s 170%.

* The country’s national and provincial finances are deteriorating. The $50 billion national deficit and soon-to-be $600 billion federal debt will bring higher taxes, higher rates and higher inflation, as night follows day.

* Mortgage rates are rising, giving a taste of what will be a more-or-less relentless advance over the next few years. And I haven’t even mentioned climate change, peak oil, rogue Pakistan nukes or the Boomer age tsunami.

* And look at this – no-money-down real estate is back! At least three of the big banks are now shoving money at mortgage brokers, trying to get them to entice their young victims, er, clients into 100% financing. What a great idea when prices are at an historic high…

The deal is simple – the banks will “gift” the 5% down payment when the dewey-eyed kiddies sign up for a five-year loan at top rates. All they need is 1.5% of the purchase price for closing costs. Does this sound familiar? Like the 100% financing program the government said it was shutting down last October?

As one mortgage broker told me: “I met with some clients on Friday who had already been pre-qualified with a 5.45% rate.   Usually, these offers involve the client proving he has the 5% downpayment on deposit + 1.5% closing costs.prior to closing and the lender advances the 5% “gift”  at closing.   In this instance, the client does not have to show any verification of downpayment from their own resources. These mortgages are insured by both CMHC and Genworth.

Of course, I pointed out to the client that by participating in this offer, he would actually pay over $12000 more in the five year period by virtue of the combined principal and interest payment based on the higher rate. That is $12000 more after  the 5% lumpsum gift had been discounted and based on a 2.85% rate available on a variable rate mortgage.

If the client pays the mortgage out early he is subject not only to an interest differential penalty based on the higher rate he has been offered but also to a prorated claw back of the cash incentive.   Again I cautioned the client to be sure they were commited to this for the full five years, as all lenders know the average life of a mortgage in Canada is under three years.

So it appears that 100% financing is alive and well in Canada….only now the lender gets to charge a premium rate.

Indeed. Egged on by the real estate industry, misled by self-dealing experts, misinformed by the media, indebted by the bankers and hooked on the crack cocaine of politicians’ cheap money, first-timers are being led to the altar. After all, somebody has to be sacrified.

And so, no bust. Instead, a bubble. This one destined to be short, gassy and dangerous. Just like me.

scotia

One bank's no-money-down pitch.

144 comments ↓

#1 nonplused on 06.15.09 at 11:53 pm

Prices are at an all time high? Really? What’s this guy smoking then?

http://www.chpc.biz/

#2 sensible buyer on 06.15.09 at 11:53 pm

Time and again I have mentioned, any sensible person in this madhouse looks like a total wacko. Ours is an immigrant family, sitting on a handsome downpayment here in Lower Mainland and year after year we have waited for this insanity to end. Both of us are professionally employed. At times, it shakes you confidence when every Tom Dick and Harry is driving past you in their beamer. It sucks big time to be proven wrong, year after year by somebody who was dropped out of high school. All because a bunch of hooligan politicians thought of rewarding the gamblers. It sucks big time.

#3 LS on 06.15.09 at 11:57 pm

It is just batshit crazy out there. Could Garth the Destroyer be wrong? Absolutely, but that just doesn’t make any f’ing sense. Prices are just stupid right now. Even if it weren’t a bubble I wouldn’t want to buy right now. If house ownership means taking on that much debt then I don’t want to own a house (and we make almost twice the average family income in BC).

#4 Basil Fawlty on 06.16.09 at 12:00 am

” Those who ignore history are doomed to repeat it” What we have now is a continuation of the credit bubble that created the biggest financial crisis in world history. Cheap credit at unprecedented low rates with increasing unemployment and the US dollar walking the razor’s edge. Many of the worlds largest economies are on the ropes including the US, Germany and the UK etc., and they want me to buy a house now! This is like when George Bush told everyone to buy a Hummer after 9-11. Damn it people the worlds largest investment banks are gone and many of the largest banks are being held up with money created out of thin air, sitting on their balance sheets. Buying a house now, forget about it. Take the money and retrain yourself wih a skill that will be in demand for the new frugal, localized and self reliant economy. Wake up, turn off the TV, and start thinking outside the box. To quote Jim Lehey; ” There is going to be a shitstorm in the trailerpark tonight” Good luck.

#5 Nostradamus Jr's Analyst on 06.16.09 at 12:02 am

As someone on another blog put it:

This time last year it was 3:00 am, people were heading for the exit and the party was winding down.
Then the government brought out a couple of bottles of low-interest vodka that it had been stashing away and the party started right up again.

Now it’s 4:00 am, the die-hards are still partying, but headache in the morning is going to be a whole hell of a lot worse.

#6 Nostradamus jr. on 06.16.09 at 12:07 am

Garth, Dark Wettler, Vancouver Bear…

…What is apparent, Toronto & Vancouver, Canada’s Big City’s Real Estate Values are not at all getting hammered, but in fact attracting the majority of buyers.

In these times of turbulence they are where “Safety and Future” lies for those with $$$.

Canada’s Hinterlands continues to slide.

…As for the future, Toronto will become Capital of another Welfare Province, joining Quebec and the Atlantic Provinces.

Vancouver will become the next Financial, Trade, Culture and leisure capital of North America.

#7 Steve on 06.16.09 at 12:09 am

A few friends here in Vancouver have been duped by low interest rates and “reduced” prices. All are buying condos that they can barely afford, with employment prospects that are tenuous at best. One friend employed in tourism (he only just went back to full time after being laid off through much of the winter) has purchased an older 2 bedroom unit with his gf for $350,000. Here comes 25 years+ of debt slavery for a box in the sky that will be 43 years old by the time the mortgage is paid off (not that they’ll own it by then, but jeez, who would buy knowing that?!?)

#8 Coho on 06.16.09 at 12:22 am

The banks aren’t worried about these young teary eyed first time buyers as being too risky because they have parents…baby boomer parents.

The boomers have the wealth…they are the ultimate targets. When their first time buyer kids get into trouble in the next few years, their boomer parents will tap into what is left of their wealth to bail out them out.

In the near future, many boomer parents will view their kids’ mortgage troubles as their fault because they encouraged their children to buy, buy, buy while they could. Can you imagine a young couple being pressured into buying a home they don’t really want to buy and three years later interest rates have doubled and their house is worth 20, 30 , 40 percent less?

Yep, they’d be out with a very large hat in hand to mom and dad come re-mortgage time.

#9 Grumpydawgs on 06.16.09 at 12:26 am

The sirens song of low intrest rates pushed at a time when anxiety was at it’s highest was a master stroke by the Feds, I gotta admit. But, as you’re mom told you ” Two wrongs don’t make a right”. The intrest rate gambit has ond hoovered the last remaing suckers off the bottom of the barrel and went for the ones hiding in the cracks as well.

The whole real estate/low intrest jet fuelled economy was a pyramid scam fallen for by the dumb and a crack addicted government who revenues went shooting to the moon every time they stomped on the low rate gas. You’ve seen what happens to carck addicts after a couple of years haven’t you. Do you think the Canadian economy looks like a robust 20 something? No, it looks more like a tweaker who stole his Mom’s last dime.

It’s a suckers game. It’s all premised on finding more suckers to pay up. The question has to be, if all the suckers are in the game now at zero intrest rates where will the next crowd come from to support expansion. We gotta have more expansion you know or the whole house of cards comes tumbling down.

To me it’s like watching someone get progressively more inebriated. Theres a point when they fall out of their chair.

#10 rog on 06.16.09 at 12:50 am

I used to think its a bad idea to buy real estate…Now i am in doubt. I am 44 years old have about 30000 in RRSPs and have some contribution room left. I am about to buy a property which has basement apartment in Mississauga. The property is listed for 320000. I am putting 5% down payment and my payments work out to about 1600 including tax. ( mortgage rate is 3.99 for 5 years fixed and 35 year amortization.) The basement is currently rented for 900. My payments including utilities would be about $1300. I am dealing with a company that will give me half of their commissions when i deal with them for purchasing a home. If I were to rent, i would pay more than my mortgage. If the market goes down which i am assuming it might, i am okay for 5 years and i think its worth the risk….

#11 . . . fried eggs and spam . . . on 06.16.09 at 12:50 am

Maybe you should run a new and different head at the top — ” the apocalyptic dark side of the earth “.

One way or the other, people / sheeple / zombies here are going to be put through the wringer, no matter all the pleading, whining and bleating, and it’s going to hurt, especially the zombies / sheeple.

“. . . I haven’t even mentioned climate change, peak oil, rogue Pakistan nukes or the Boomer age tsunami.”

Don’t bother. We’re so busy looking after ourselves, no one is bothered anymore with the other trash being handed out freely all over.

BTW, you forgot to mention India’s 100 (or so) nukes, along with France’s, North Korea’s, the UK’s, Israel’s, Germany’s and a few other countries, whose numbers total between 100 to 1,000 nukes.

Then again, with nukes in abundance all over, there’s not much point in collapsing real estate, climate change and peak oil, is there?!

“Egged on by the real estate industry, misled by self-dealing experts, . . .” — Are these the very, very kind people who lend us kwillions to enslave us to the poorhouse, then won’t bail us out when we need help?

‘Coz if so, these suckers are going down with us all the way to hell on a sunny day!

#12 Future Expatriate on 06.16.09 at 12:53 am

Agreed: There is nothing as short-lived as the gaseous methane bubble forced out of the dead cat’s rear end as it bounces off the floor.

And that goes for all markets.

#13 betamax on 06.16.09 at 12:58 am

The current (temporary) historic low rates are functioning as nothing more than teaser rates, the same scam that goosed the subprime market in the US, encouraging first-time fools to buy more than they could afford and leading to widespread defaults when the rates rose a short year or two later. We’ve learned nothing, and it’ll be no different here.

#14 . . . fried eggs and spam . . . on 06.16.09 at 1:01 am

The following is way more interesting!

Now that the second half of ’09 is well underway, the downfall is now asserting itself in an ever-abrupt manner. — http://tinyurl.com/my5wvn

“Baxter International Inc. announced today that it has completed testing and evaluation of the A/H1N1 influenza virus . . . is diligently working to deliver a pandemic vaccine for use as early as July.”

Webmaster’s Commentary: “Baxter is, of course, the same company that sent out a vaccine test kit with live bird flu virus in it!

“And the last time there was a mass vaccination program for swine flu back in 1976, the vaccine killed 50 times as many people as the flu did, and left many more with permanent neurological damage.

“So you will understand if I behave rudely to anyone pointing a needle at me.”

In a nutshell, this is an extremely efficient method of downsizing, then re-arranging us which is why this continent will eventually be borderless.
——
I did not know this, so again the Comment from wrh.com explains it far better. — http://tinyurl.com/lny4yw

“But China’s pragmatic policymakers also know there is no practical alternative to the dollar as the world’s main reserve currency.”

Webmaster’s Commentary: “That last paragraph is dead wrong.

“The US Government, through an Executive Order signed by President Kennedy, gives the government THE ABILITY TO PRINT ITS OWN CURRENCY, and not use currency coming from the Federal Reserve.

“The banks and the Fed don’t particularly like this one bit. The last President who actually did this (Lincoln) wound up assassinated, and the last President who signed this executive order (Kennedy) wound up assassinated as well.”
——
In case you missed this, The American Empire Is Bankrupt — http://tinyurl.com/lclaku

“The United States, which asked to attend, was denied admittance. Watch what happens there carefully….It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency.”

Also applies with the preceding. — http://tinyurl.com/kwamzc — Comment courtesy wrh.com:

“Not mentioned until the bottom of the article (and then quickly dismissed) is the real agenda, which is replacing the dollar as the world’s reserve currency.

“If that happens, the party is really over.”
——
The ONLY story here is not the story itself, it’s the picture (scroll down a little). Rest of Comment by wrh.com. — http://tinyurl.com/ncdkug

“Anybody who doesn’t think all the “news” coming from Iran isn’t a propaganda cover for the repeat of the 1953 US-backed overthrow of Mossadegh, note that the sign in front of the camera is written in English … in a country where the primary language is Farsi!”

Just as the CIA / Mossad / Indian secret service were responsible for the Bombay bombings a few months ago, they are now meddling in another country’s elections.

However, this — http://tinyurl.com/kn5wp9 — may be a true-blue false flag or for real.
——
BTW, “Inquiring minds want to know what’s really going on here.”

Webmaster’s Commentary: “The number $134.5 Billion is such a nice number. According to a Wall Street Journal article on March 30, 2009, there was $134.5 Billion remaining of the TARP funds. What an odd coincidence!”

I have now invested all US$134.5 bln. and own the four (former) western provinces of Kannaduh!

#15 Small Business on 06.16.09 at 1:02 am

A ‘base’ 1000 square foot house goes for $250,000 to $300,000 here.

I refuse to be a slave to my mortgage and will only buy if I can put a downpayment of 30%.

30% of $275,000 is $82,000 dollars.

I have no rich uncle or ‘well off’ parents to mooch off. I have to find a way to come up with 82,000 in savings.

Nice!

I refuse to live a life of voluntary slavery to make a high mortgage payment.

Fight the power and kick a babyboomer right in the crotch.

Cheers.

#16 Gord In Vancouver on 06.16.09 at 1:11 am

The deal is simple – the banks will “gift” the 5% down payment when the dewey-eyed kiddies sign up for a five-year loan at top rates. All they need is 1.5% of the purchase price for closing costs. Does this sound familiar? Like the 100% financing program the government said it was shutting down last October?
_______________________________

Didn’t these clowns learn from America’s subprime nightmare?

And so, no bust. Instead, a bubble. This one destined to be short, gassy and dangerous. Just like me.
__________________________________

Garth – you rock !!!!

#17 Increasing that 1% on 06.16.09 at 1:52 am

That picture of Mr Housing bubble, and the “IF I POP, YOU’RE SCREWED”, should be part of all kids’ education, let alone adults.
T M I , Garth, about being “gassy” :/
lol

#18 Increasing that 1% on 06.16.09 at 2:08 am

Being “in the trenches” of selling (woohoo), and waiting for close, prices down 7-8 % from peak, and took much longer for area houses to sell then at peak -nothing flying off the shelves, but just in last week @3 sold in very close proximity– this is in SW Ontariariario Nostradamus Jr and numerous other titles, “Yours to Discover!” land : )

#19 Mike (Authentic) on 06.16.09 at 3:05 am

Garth said – “After all, there are but two emotions when it comes to money: Greed and fear.”

What an interesting point you bought up, it’s quite true but I would like to point out another word: contentment

Contentment with having enough money, not having to worry about bills, taxes, debt, etc.

When I was 20ish I discovered a little Wisdom early on, lift isn’t about aquiring ever bigger digital numbers printed in your bank book but about helping others and being happy in what you do.

In my 30’s, I found out that helping others and putting them first was truely the way to be successful in life.

And no, I’m not religious at all (in case some might think that is where it comes from).

Mike

#20 Mike (Authentic) on 06.16.09 at 3:11 am

When I see homes sell today I feel a gut wrenching twist in the pit of my stomach for many of those who bought without doing proper due dilligence.

Buying a home is the most expensive purchase one usually makes in life (even more so today) and if buyers actually saw (handed over) physical cash they earned to the seller I think they would have second thoughts.

Just think how long it takes to earn $300,000.00 after tax and do they want to even risk 10% of that? I wouldn’t and I’m sure I’m not in a minority.

As Garth (the wise) says, Taxes and Mortgage rates are sure to rise like the sun. And that burning sun is sure going to be burning those who didn’t put on sunscreen.

I’m very happy that Garth decided to create this blog, share his experiences and provide a forum tell others what is happening out there. He/We could not help them all but we did help those who came, listened and decided.

Mike

#21 Mike B on 06.16.09 at 3:29 am

Look….as much as I would love to see a noticeable correction RE priced especially in Toronto, it will likely NEVER happen unlesd there is a global psneunami or interest rates climb to close to double digits..Possible … but not likely…

#22 Rog on 06.16.09 at 3:44 am

This has been one of your best updates Garth.

I cannot believe what were seeing out there today. We got into this problem due to debt and to get out of it goverments encourage more debt.

Don’t they know all they are doing is delaying the inevitable? My guess is they know they just don’t want it to happen on there watch. Because they know they would never be re-elected.

Oh well the more that buy now the more desperate sellers and foreclosures there will be in the future……see you then :)

#23 wjp on 06.16.09 at 5:20 am

Now Garth, why wouldn’t they (the greater fools) jump into such mortgages? After all, we are the bail out society!
Maybe the greater fools are we, who have no debt, no mortgage and no chance of keeping up with inflation that is to come at the end of this cycle.
If the banks have enough invested in mortgages there is no way this government presently in power, or any other for that matter, who will let them lose or go under.
The idea today is to get one so far into debt that the lenders cannot afford to let you collapse!
Nice to see the death of capitalism and the re-birth of socialism, only problem is, it will be the end of the middle class…not to worry, although their mortgages may be stretched forever, they will have granite counter tops!

#24 wjp on 06.16.09 at 5:24 am

Cash-strapped?
http://www.reuters.com/article/wtUSInvestingNews/idUSTRE55E5GQ20090615

#25 David Bakody on 06.16.09 at 6:10 am

We have now entered the era of “Super Loan Sharks” via your friendly neighbourhood banks.

As many have said soon the rules will change for the Rental Industry and then all will be captured in the governments (big business) money pit ….. as they turn the great money vacuum on high speed sucking the last penny out of the middle class.

Easy come easy go! just like governments involvements in Lotto’s and Casinos Think?

#26 Herb on 06.16.09 at 6:33 am

Robert Reich, in conversation with Bill Moyer, at http://www.pbs.org/moyers/journal/06122009/transcript1.html

… [B]etween 2000 and 2007 … [y]ou had for the first time a lot of people in the middle class buying shares of stock, getting involved, thinking, “Oh, this is great, greatest thing since sliced bread.” They were lured into a speculative bubble. And that speculative bubble burst obviously leaving behind a lot of middle-class people who have lost their homes and their savings and their 401(k) plans, 40 percent of them.

The only people left standing … [are] a lot of people at the top. … [B]y 2007 … the top one percent was taking home 21 percent of total national income. Now, when they’re taking home that much, the middle class doesn’t have enough purchasing power to keep the economy going. … And over the long term, we’re not going to have a recovery until the middle class has [the] purchasing power it needs to buy again. …

Essentially, capitalism has swamped democracy. You see, there’s no such thing really as pure capitalism without rules and regulations that set limits on profit making, because otherwise it’s everybody out for themselves. Otherwise, nobody can trust anybody. Otherwise, it’s the law of the jungle.

I mean, we rely upon government to set the boundaries. This can’t happen because it’s fraud. That can’t happen because you’re stealing something. This can’t happen because you’re imposing a huge burden on other people. But unless you have a democratic system that allows the rules to be created not by the companies but by the people and the people’s representatives reflecting what the public needs, not what the corporations need, you’re going to have a system that is not a democracy and it’s not democratic capitalism. It’s super capitalism without the democracy. (Emphasis added.)

Nothing has changed, but they are reinflating the bubble because it worked so well the last time.

#27 Bottoms_Up on 06.16.09 at 6:42 am

Those buying in Vancouver right now are buying on the initial downslope of this crazy roller-coaster:

http://cuer.sauder.ubc.ca/cma/data/ResidentialRealEstate/HousingPrices/housing-pri-vancouver.pdf

#28 Maurice on 06.16.09 at 6:42 am

Amigos; Historically politicians have always inflated their way back into office. Bribe the voter with debt. Just wonderful isn’t it?

#29 Repatriated Expat on 06.16.09 at 6:51 am

Interesting how Canada’s economy is in the same deflationary boat as all other western countries, except when it comes to housing. House prices in the US, UK and others just seem to working lower and lower over longer and longer periods.

It makes me think that when housing prices in Canada eventually deflate, it will be all the more brutal than if it had happened earlier.

I also noticed that everytime job layoffs come up in a conversation, it doesn’t take long for people to express concern about being able to keep up house payments regardless of how much equity they have or how long they have owned.

Employment income is where the rubber hits the road, so keep an eye on unemployment numbers becuase there is not much leaway for Canadians to provide the cashflow to maintain mortgage payments otherwise.

I don’t think there are many people who want to be in a housing bubble, but the facts show otherwise.

#30 Joe on 06.16.09 at 7:10 am

Ah come on bank presidents won’t be able to make big bonuses if you cut out their neat little tricks of “increasing ” profits.

#31 Devil's Advocate on 06.16.09 at 7:45 am

This has been one of the biggest bubbles in recent history since the Roaring 1920’s. How possibly can anyone think we could manage to regain control after such a short time?

On the other hand it does appear that the Spin Masters are doing a good job convincing yet Greater Fools that the worst is behind us. Could it be some new economic order I am too old to grasp hold of? I can’t get my head around the logic. To me it seems we are only postponing and compounding the inevitable. But then I thought a correction was due back in 2004. What do I know? Apparently “squat”.

What I should be doing is riding this puppy for all it’s worth, taking advantage of those Greater Fools who’s folly is going to cost us all in the end. At least then I would be somewhat better prepared for that day I suspect looms on the horizon. Maybe it is just that we are just the last to come to this realization; that this is the new economic order – rape and pillage or be raped and pillaged.

#32 wjp on 06.16.09 at 7:54 am

This is one of the many reasons to dump C.N.R, stock in favour of C.P.
http://www.reuters.com/article/newsOne/idUSTRE55E6BM20090615
The north/south corridor will become less prominent in our future and the east/west and particularly to the shipping corridor off B.C. will become the dominant player. This, assuming of course, the CPC switches much of its’ trade from the U.S. to China & India…there is a new 600 pound gorilla in the room!

#33 dd on 06.16.09 at 7:56 am

Wow, the industry just keep going and going. Of course the ground gets further and further away.

#34 dd on 06.16.09 at 7:58 am

#6 Nostradamus jr.

…What is apparent, Toronto & Vancouver, Canada’s Big City’s Real Estate Values are not at all getting hammered, but in fact attracting the majority of buyers….

U actually believe you own BS.

#35 David Bakody on 06.16.09 at 8:02 am

Just left Tim’s and was speaking with a friend who came home for the summer from Mexico and stopped in California where RE is in a sad state very sad he said as he saw empty units beyond belief. He just bought an ode Van and plans to but a bed and stuff in it and play hippy 2009 style ……also saw on TV many now are dumping RV’s for fancy tent trailers ….. we mentioned all this and he said people will find cheaper ways to travel and live …… so why not homes?

#36 Samantha on 06.16.09 at 8:09 am

You’re not wrong, Garth. Sheeple have been conditioned to think of themselves as investors and accept debt as a “norm”. It is so much easier to herd them down the road to serfdom that way and keep them corralled with greed and fear.

The nonsense continues with the Royal Banks’ announcement yesterday:

http://www.financialpost.com/story.html?id=1699312

How quickly they forget their May 29, 2009 $850 Million write down and comments, particularly those that relate to the USA economy:
http://www.montrealgazette.com/business/fp/Writedown+triggers+loss+Royal+Bank/1642688/story.html

If one eliminates the propaganda, it becomes clear that the banks are committed to keeping our “barrista economy” (credit to Jeff Rubin for the term) alive.

Yes, by all means – let’s consume and forget all about unemployment, global economic conditions, the pending tsunami of USA ARM and 0 interest mortgages about to reset in 2010 and 2011 (the fallout of that one will not be restricted to the USA), the tangled web of derivatives that now enshrouds the world, etc.

The herd is about to go off a cliff.

#37 Da HK Kid on 06.16.09 at 8:10 am

Just watch for the S&P to test 878! If this happens run for the hills kiddies!

As for frauds, they are out in full force fighting for the last little chunk of your flesh. Some know it’s there last meal some dont, some dont care.

Some people need a good kick in the teeth to put it all into perspective.

Anyone buying property right now is going to screw us over so I guess I’m willing to pull my boots on. Maybe I’ll do some kicking and afterward look for a good shining!

Bubble inflators! oh it’s going to suck to be you!

#38 mattbg on 06.16.09 at 8:27 am

Honestly, I have no idea what is holding this market up. I didn’t expect it at all. But the fact that it’s somehow being proppped up doesn’t mean that the people indulging in it know what they are doing.

Likewise, I am amazed that the personal debt bubble has been able to go on for so long. I’d have expected it to reach a saturation point long ago.

Still, I will continue to stick to what makes sense. Indulgence doesn’t do anything for me, personally, anyway, and always leaves me with regret on the other side.

#39 My_View on 06.16.09 at 9:03 am

Debt here, debt there, everywhere is debt. Of course the banks want people to have debt and for that matter the government only cares about 2 kinds of peolple, the home owner & business man, not the renter.

We all knew they would get krafty with the 0 down thing gone. On another note it looks like the USA R/E has found the bottom. Start your engines…

#40 Jonathan on 06.16.09 at 9:17 am

Everywhere I go people are saying what a deal real estate is..

I usually say (avoiding getting into too much detail) “It costs over $400K to get into a an entry level fixer upper in my community.

I receive the response – it will be $500K in a year when the recession is over.

There is your answer – pure speculation. People are only buying in fear of higher prices and low interest rates. They are also counting on a huge economic rebound.

#41 bigpictureguy on 06.16.09 at 9:21 am

Ah Garth, it’s futile to convince your doubters/skeptics. They want a sure thing when you say “bust”. Again it’s the sheep who can’t think for themselves and synthesize many factors and variables that may delay eventual outcome

The simple sheep want easily digestible and packaged answers. So they can blame others if things don’t work out.

But hey are you surprised Garth? George Bush was elected for 2 terms!

#42 BoB on 06.16.09 at 9:22 am

So the govt. manipulates the low rates to goose the economy but they’ll have no control keeping them low in the future? The bears sound like the bulls 12 months ago – very dismissive and absolutely sure they’re correct. If rates skyrocket like people say what does that do for all world economies? Remember despite China and India’s growth they both absolutely depend on the health of the US market. With China holding so much US debt they don’t want, and can influence, higher rates in the US.

I don’t think there is much, if any upside, in a real estate purchase today but I also don’t believe it will drop more than 10 – 15% max. Lock into a 5 year rate and you know your payments for the next 5 years and can work on paying it down faster. Interest rates skyrocket at the end of term? Interesting prediction 5 YEARS out! What else is going to happen in 5 years? Where will the Dow or TSX be? Gold? Oil? Pretty hard prediction to make with any certainty…

#43 Gonzo on 06.16.09 at 9:31 am

Attention bloggers:
Today’s grammar lesson: Proper use of the word “they’re/their/there”
They’re: i.e.- they are. Use: “They’re the ones who created this mess”
There: Use: “There is no good that can come from this.”
Their: Use: “Their giant ponzi scheme is to blame.”
That is all.

#44 smw on 06.16.09 at 9:32 am

How could this happen, didn’t they(Canadian Banks) learn anything from the American situation?

I believe they have, they realize, it isn’t them on the hook. They’ll collect their service fees and help prop up their beaten down quarterlys, maybe in hopes that people will run to financials to invest with any premature dribble.

No risk to the banks at this point, the highley indebted new home owner will take on the risk with the innocent tax payer.

It will play out the same here as the US(maybe not to the degree of a 50% drop), banks might get stuck borrowing from CMHC again, but thats about as bad as it can get for them, they know that. Their customers don’t have that option.

Fire up the no-money down housing miralce…

People slagging Garth right now are the same idiots that are either working the teet of the system, hoping that their smooth RE dealings/stupidity and greed will pay off, just like all those ARMs and ALT-As are going to work for the non-sub-prime crowd in the US.

Its been said around here many a time, cash is king.

#45 Future Expatriate on 06.16.09 at 9:39 am

Hey, the more people who asininely buy now, the more people will be forced to sell in the next few years and dump the market down far faster and far further than it could have bottomed without them.

So, let’s have a toast to the greatEST fools of all time!

#46 Jonathan on 06.16.09 at 9:42 am

I also keep hearing that Toronto and GTA prices have no appreciated like in the west. Well they have actually – in the developed older areas.

Toronto prices seem much lower because of the massive development of 70,000 homes per year in north Toronto. That reduces the average price.

#47 Dean on 06.16.09 at 9:48 am

I for one am actually glad that the madness will continue for a little while longer. Having the housing bubble pop right in the middle of this terrible drecession would not be good for Canada. Delaying even another year until the economy starts to recover would be a good thing.

I see a lot of comments in this blog that almost seem hopeful of some major collapse. It’s one thing to acknowledge that people have been bamboozled by the current hype machine, but still another to wish them ill. These are real people with hopes and dreams, and children to support. These are our friends and brothers and children and parents that are being sucked in.

Frankly, it makes me sad to look at the current state and to have that sinking feeling as I see so many people climbing on board. I hope that Garth is wrong…even though logic tells me otherwise.

But I leave you with this thought: I have tickets to a Jonas Brothers concert. My kids begged me to take them (don’t worry, I made them work for it). If the Jonas Brothers can get me to their concert, then anything is truly possible.

#48 Vancouver_bear on 06.16.09 at 9:50 am

#6 Nostradamus jr. on 06.16.09 at 12:07 am

What are you smoking man? Clever ppl will flee from Van if this madness won’t stop. Have you ever been anywhere else than North Vancouver? I’ve been to few really nice places and Vancouver sucks big time if you dare to compare.

#49 Nostradamus jr. on 06.16.09 at 10:00 am

>>>#32 wjp on 06.16.09 at 7:54 am This is one of the many reasons to dump C.N.R, stock in favour of C.P.
http://www.reuters.com/article/newsOne/idUSTRE55E6BM20090615
The north/south corridor will become less prominent in our future and the east/west and particularly to the shipping corridor off B.C. will become the dominant player. This, assuming of course, the CPC switches much of its’ trade from the U.S. to China & India…there is a new 600 pound gorilla in the room!<<<

..Careful wjp…or else posters on this blog may start calling you Nostradamus jr’s twin brother.

#50 Bajwa on 06.16.09 at 10:09 am

We are an addicted bunch of sheeples. Our addiction is cheap money.

#51 RJ on 06.16.09 at 10:11 am

I can think of three reasons for this phenomenon.

1. Discouraged yankees headed north evacuating the rotting, bloated, stinking, corpse that used to be a nation.

2. Recognition of Canada’s enormous resource base in relation to her population, making the future look as bright as the Sun.

3. Canada is just a bit late to the real estate crash, kinda like the California/Florida situation in the US two years ago.

#52 Naramata on 06.16.09 at 10:18 am

Prices in Penticton and region….$600 k last year …maybe $500 k now

A rental house I had valued at $350 k last year ……today maybe $250K ..

Yeah ..prices are down. …all you have to do is look at the weekly real estate paper ….prices still don’t make sense for a “purchase as rental” like they used to here 10 years ago.

#53 Dr. Doom and Gloom on 06.16.09 at 10:30 am

Saskatoon Pays Your Downpayment

http://www.thestarphoenix.com/Business/City+committee+backs+mortgage+program/1700397/story.html

The current global economic situation can be better understood when you stop thinking that the government is screwing up, and start thinking that they’re doing it on purpose.

I heard ABC just got purchased by the White House for a universal health care infomercial. When the government owns the press (like they don’t already), we are in for a real ride. Thank god that the internet is here now where free thinkers can still voice their opinions (let’s see how long that lasts under Obama’s NWO).

#54 John m. on 06.16.09 at 10:34 am

Shocking how this can be allowed to happen.75 billion ++ of Our tax dollars were used to bail the banks out of the mess we are now in for exactly the same lending policies.Our country is sadly lacking in leadership and management of our tax dollars. IMO

#55 D - Ottawa on 06.16.09 at 10:36 am

Nearly ten years ago I bought my first brand new townhouse because my rent kept increasing by 5-8% every year (rent control allows any increase up to the max rent). With 25% down, it was cheaper to have a 3 bed, 3 bath townhouse than rent my one bedroom apartment in the same central area of Ottawa.

In 2006 with 50% down, we purchased (now married) a much larger and newer semi-detached home with a 14 year amortized mortgage. In about 10 years we will be mortgage free while many others will be stuck as life long renters. One of my neighbors loved their rented house (and its location) but is being forced to move because the landlord sold the house.

Maybe many people will sell and house prices will drop. Demand for rental properties will then rise and many renters will be squeezed by higher rents.

Where I live my property value has increased moderately every year for the past 10 years. If it drops, then so what, I have well over 50% equity and my mortgage payments plus city taxes are lower than rent would be.

My point is that it’s not so bad everywhere and some housing markets are in better shape than many people here think. I admit that I bought my first house at a very good time. People really should buy with a substantial down payment to save on CMHC fees and to start with some equity.

D. from Ottawa

#56 Calgary Rip off on 06.16.09 at 10:44 am

Garth, it makes no sense that sales would pick up in real estate when prices are high, that’s very very strange, but it does happen.

My wife fears of being priced out forever in Calgary because her and I disagree on market value. As it stands today, prices are still $200K above what houses are worth in Calgary. She thinks that I will want to rent forever, which isnt true, if a house here cost around $250K, that’s reasonable.

Interestingly, the CREB had stats to report real estate picking up again. This was on the radio. The realtor my wife has selected interestingly emailed us 12 houses in one day that had prices reduced. The wife thought this was a glitch in the system.

I dont understand why the CREB thinks bubble prices are positive. With greater prices comes greater taxes. If something is expensive, it doesnt make it more attractive and more alluring. If anything, the cost makes it that much more less attractive to buy. Its not like the dry wall was made with environmentally breathable materials that are at a premium on a $500K house in Calgary. Chances are the wood wasnt even treated with fire retardant.

So what you have now is a continuing bubble still in Calgary. You have delusional owners and realtors for the most part. Many owners actually think their shacks are worth in excess of $350K which is unbelievable. There is a 5-8 foot width between you and your neighbour, the house is not 4000sq. ft, and there isnt really anything special about anything, its like get ’em thar shacks up and built on that hill right quick so we can pack ’em in like sardines. Disgusting.

If interest rates go as high as they did in the 1980’s, Calgary people that bought are going to be in the abyss. Fortunately, I wont be one of them, I researched stats which demonstrate that until 2004, houses in Calgary were reasonably priced. The nice thing about being “priced out” is that at $90,000 a year income I dont have to pay for the slimeballs in Calgary that have created this mess.

#57 DM in C on 06.16.09 at 10:55 am

Interesting bit of truthiness in the Calgary Herald today. Huh, seems first time buyers expect too much, want it all now, TODAY.

http://www.calgaryherald.com/business/First+time+home+buyers+expectations+high+Coldwell+Banker/1701042/story.html

Big surprise to anyone? That no one wants to buy modest, move up gradually? That first timers want granite, 4 bdrms, 2 car garage Mcmansions for their first house?

I cannot understand what happened in this world over the last 10 years. Our first house – bought in ’99, was in the suburbs outside a good size city — a great bungalow with developed basement — and on a lot that Calgary would dump 3 houses into. Sure, the kitchen cupboards were blue and from the ’70’s, and the carpet was shag green, but it was solidly built and we could live there for a long time. Too bad we had to move out of province only one year in. Cost? $72k

I often think we were very lucky to go through a bankruptcy not long after (job loss, mismanagement, etc) — because of that, we missed the credit boom of the last six years entirely. We learned how to pay for what you want, don’t buy what you can’t afford, and live on cash. There is no way in hell I’d buy a $500k house — and we make $150k/year now.

#58 Bobby on 06.16.09 at 11:00 am

If you look at a chart comparing Canadian prices to that in the US, you will see that we are following the same pattern. Only we are 18 – 24 months behind. The US market took a big dip then rebounded strongly making many believe that they had hit bottom. Then reality hit and you have what you see today.
So what has changed here in Canada. Nothing. In fact, there are warnings that Canadians are more indebted than ever. What killed the US goose. Resetting interest rates. The same thing will happen here in Canada, rising interest rates. Just have a look at the bond market.
Or you could ask a real estate professional. Ha Ha

#59 hagbard on 06.16.09 at 11:26 am

#26 Herb

Nonsense. This was all created by people with a great deal of political power, not by “capitalism”.

#60 JoeCalgary on 06.16.09 at 11:35 am

My block alone now has ten empty houses.

Is anyone else noticing their neighbours vanishing?

#61 Increasing that 1% on 06.16.09 at 11:37 am

#14. …..fried eggs and spam……

Re: mention @H1N1 vaccine…development @ July…
————————————————–
Here in -lovely Ontario- a Health Unit is preparing for the possibility of mass vaccination for those who want it.

#62 Nathan in Edmonton on 06.16.09 at 11:40 am

#47 Dean on 06.16.09 at 9:48 am
It truly is madness — how is this bubble being sustained, or really slow to deflate, in this economic crisis? I don’t think it’s so much hoping for collapse as just a return to common sense; something that usually happens in harder time. Unfortunately, a major collapse seems to be the only remedy for this bubble and I do believe it a question of when not if, but will people sitting on massive down payments still want to buy or will they need that money just to live?

#63 Investx on 06.16.09 at 11:45 am

“…as all lenders know the average life of a mortgage in Canada is under three years.”

Doesn’t he mean the life of a mortgage TERM in Canada is under three years?

#64 Investx on 06.16.09 at 11:49 am

Fried eggs and spam . . . on 06.16.09

“Anybody who doesn’t think all the “news” coming from Iran isn’t a propaganda cover for the repeat of the 1953 US-backed overthrow of Mossadegh, note that the sign in front of the camera is written in English … in a country where the primary language is Farsi!”

Yeah, cause all those people protesting in the news footage are actors.

#65 Mrs Loquacious on 06.16.09 at 11:50 am

Question – what about real estate investment clubs? A lot of people I know have been actively recruiting and joining these things, and I’m guessing that in the past couple of years they made some money. How will they be affected by the climbing mortgage rates and dropping RE values? I know of one person in an investment club who is currently on the prowl for distressed homes.

I have no idea how these clubs work, but any insight you can provide would be great? I just want to be able to have some fodder to refute them with when they come knocking on my door…again. ;)

#66 Two-thirds on 06.16.09 at 11:50 am

“This one destined to be short, gassy and dangerous. Just like me.”

That makes two of us, Garth.

:)

#67 PTDBD on 06.16.09 at 12:07 pm

What moral hazard? Some credit card companies willing to forgive 1/2 the balance. Sweet. Who pays?

Give the people credit
those that max out their debit
no need their greed to repent
eventually, the credit cards relent.
“I’ll gladly pay you a hamburger tomorrow for two today.”

Credit Bailout: Issuers Slashing Card Balances

plastic is elastic…..party on dudes and dudettes

go forth and do as your government does, as the broke car companies do, as Air Canada is doing, as…

#68 lgre on 06.16.09 at 12:09 pm

It’s the stupid ‘investment’ propaganda that has programmed the sheep to believe in RE as an investment..the only people that benefit from high prices are banks, agents and government..unfortunatelly the average sheep will never see that..hence why they will be slaves for the rest of their lives..I have friends who cant even leave their house because they dont have 2 pennies to rub together after their housing payments..what an investment!

Take a look at how much of your hard earned income gets eaten up by the taxes, interest and inflation…inflation and interest can easly be beaten…taxes can be reduced as well..but who’s listening? nobody of course..lol

#69 JAY on 06.16.09 at 12:29 pm

Hey Garth,

Could you tell me how peak oil will hurt real estate in Alberta?? As oil and natural gas rise it will create jobs that in turn will help out real estate. Am I wrong? If i am let me know why? Thanks Garth

#70 confused and fed up on 06.16.09 at 12:34 pm

“…The country’s national and provincial finances are deteriorating. The $50 billion national deficit and soon-to-be $600 billion federal debt will bring higher taxes, higher rates and higher inflation..”

So buying houses to hedge against “guaranteed” inflation in the near future is not a bad idea, isn’t it?

Can anyone help point out anything wrong with such thinking?

Cheers!

Wait and see. — Garth

#71 Barb the proof reader on 06.16.09 at 12:34 pm

The story goes on,
the promises still untrue,
money only transfers
from the many, to a few.

I’m a poet and I didn’t know it.

:)

#72 Christopher on 06.16.09 at 12:38 pm

I have been following you Garth since 2002 and you rock! People really frustrate me with their easy ideas to get rich. Especially here on the west coast where “house” is the word doesn’t matter who you are or what you do it is house house house! So sad but it is the economy, without it where would we be?

#73 Dr. Doom and Gloom on 06.16.09 at 12:43 pm

#64 InvestX

“Yeah, cause all those people protesting in the news footage are actors.”

Remember the shots that came out shortly after the “overthrow” of Hussein? The one where the people are pulling down the statue. It was proven that it was a setup by the media – they actually asked the people to do it. Don’t be so surprised by the propaganda – it didn’t go away when soviet Russia fell, my friend.

Wag the dog.

#74 David on 06.16.09 at 12:50 pm

Our August financial institutions are still trying to keep the bubble alive, its all about short term profits and long term problems. This nothing down real estate used to be in the realm of late night infomercials featuring hucksters with liquid tans and tropical shirts selling audio tape packages like, HOW I MADE MILLIONS BUYING AND SELLING HOMES WITH NOTHING DOWN! , or MY 100 SECRETS OF REAL ESTATE SUCCESS REVEALED! Financial charlatanism has gone mainstream in Canada since 2006. There is a mystical quality to selling people overpriced homes they can not possibly afford with no skin in the game. This fail proof real estate system has worked wonderfully in Florida and California and given the wonderful Canadian banking system, nothing down is still working its wonders here.

#75 Got A Watch on 06.16.09 at 1:04 pm

hahaha Canada’s Harper calls U.S. deficit “dangerous”

“OTTAWA, June 15 (Reuters) – Canadian Prime Minister Stephen Harper called the U.S. deficit “dangerous” on Monday and said it would eventually require tax increases — a path he said his Conservative government would avoid.

Harper replied: “The Liberal Party cites the United States as their fiscal model … In the United States the deficit is running at four times the size of our deficit. It is a dangerous, long-term structural deficit that existed even before the recession began, one that will require tax increases eventually.”

“That’s not a direction we want to go,” he said.

The U.S. Treasury declined to comment on Harper’s remarks.”

Pot calling kettle, come in kettle.

Dim Jim assures us the deficit will be eliminated by 2013 now. Why do I not feel re-assured.

#76 Tom Jeffries on 06.16.09 at 1:08 pm

I get in verbal ‘fistfights’ over the economy – and I am accused of being a doom and gloomer.

Look, bottom line when you see these two factoids from Garth:

* The Bank of Canada said wisely this week that household debt is the greatest risk to the financial system. In the past year the real net worth of families has dropped about 7%.

* Canadians now have debt equal to 140% of disposable income. In Europe, it’s 90%. In the US, epicentre of economic malaise and the disappearing middle class, it’s 170%.

That means a lot of folks are BANKRUPT. They are living on helocs, and Credit cards, to make up their monthly shortfalls.

Fear and Greed run markets, and right now we are at the ‘deer in headlights’ phase again.

All levels of Government will have to raise taxes (*up 8.5% this year here in Vancouver – just wait til after the snow job – er, the Olympics).

What’s next?

More financial trouble for a lot of people.

The Banks are trying to get you on the debt wheel, and keeping you there just like they did back in Dickensian England.

Oh and more scary numbers for you:

25 percent of all U.S. mortgages are exceed the value of the homes the mortgages are financing. In the case of half the homes that are underwater, homeowners are paying a mortgage that’s now 20 percent higher than the value of the home.

#77 Grumpydawgs on 06.16.09 at 1:12 pm

City of Vancouver council agrees to allow Vanvouver developers to build 205 sq ft condos. Wow what an increase in the yield for the developer. Instead of 300 units on your plot you can build 600:)

The plot thickens.

I have said before thar the COV finds i all a windfall because they get to collect a huge number of new Property tax cheques every year while having to spend nothing on services. The money is all getting blown on huge raises for city staff and the leaches who love them.

#78 Makeorbreak on 06.16.09 at 1:24 pm

“And for those who like their meat fresh, there’s the option of urban hunting. In Racine, Wis., a 51-year-old laid-off mechanic told me he’s supplementing his diet by “shooting squirrels and rabbits and eating them stewed, baked and grilled.” In Detroit, where the wildlife population has mounted as the human population ebbs, a retired truck driver is doing a brisk business in raccoon carcasses, which he recommends marinating with vinegar and spices.”

http://www.nytimes.com/2009/06/14/opinion/14ehrenreich.html?_r=2&pagewanted=all

#79 malbadon on 06.16.09 at 1:24 pm

Mrs Loquacious on 06.16.09 at 11:50 am

Question – what about real estate investment clubs?
======================

You mean companies like Concrete Equities?
http://tinyurl.com/ksvdtj

Seems not everyone is swimming in Scrooge McDuck sized pools of money.

#80 Barb the proof reader on 06.16.09 at 1:35 pm

#59 hagbard wrote to #26 Herb: “Nonsense. This was all created by people with a great deal of political power, not by “capitalism”.”

Herb is right, this is created as a result of the power of money brought about by unregulated capitalism. The capitalists ‘theory’ has different camps, a camp that suggests no regulation and a camp that suggests regulation. Unfortunately, the ‘no-regulations’ camp keeps sticking their hands into everyone’s pockets pressuring politicians to allow the ‘no-regulation capitalists’ to do even more pick-pocketing, so to speak.

When you get ahold of money, that’s a great way to keep building more money. With more money – you can advertise – and lobby – to your advantage – thereby building yourself further money. That’s unregulated capitalism, your purist form. It’s something that people with normal money are powerless to do, or control. Something has to even the playing field. People with normal money just don’t have that power.

The top 1% will naturally just keep getting richer, they have that advantage.
(BTW Herb,
You left out the best of the quote by Robert Reich:
“The only people left standing — and I hate to say this because I sound like a class warrior and I don’t want to sound like a class warrior — is a lot of people at the top… Look, I’m not one to cast blame at anybody… There’s enough blame to go around… But the fact of the matter is that as late as 1980, the top one percent by income in this United States had about nine percent of total national income.
But since then, you’ve had increasing concentration of income and wealth to the point that by 2007 .. the top one percent was taking home 21 percent of total national income
.”

The top 1% gets richer. And richer. And richer. And it gets exponential. It also leaves everyone else with less.

In other words, when capitalism is allowed to go offleash in the park, they use their money to pressure and fool government into looser and looser collars, and longer leashes, and more leash-free areas, and the next thing you know, they’re peeing, barking and jumping all over everything.

Their money gives them the power to lobby for their own personal interests, and what they’re interested in.. is prying more money out of consumers wallets. The ‘no regulation’ camp of capitalists have made it their game to use their accumulated money to pressure government officials into obeying, and it seems to work well, since government officials are scared or for various reasons behaving like they are afraid of the dogs… and in some cases they are naturally complicit. The no-regulation capitalists sick their lobbyists on the politicians — while using advertising to fool the politician’s own voters, thereby further undermining the power of any politician to represent. It’s a nightmare and more people see it that way.

There’s nothing wrong with democratic, fair and regulated capitalism. It just never seems to have existed yet.

#81 dd on 06.16.09 at 1:36 pm

#56 Calgary Rip

…The nice thing about being “priced out” is that at $90,000 a year income I dont have to pay for the slimeballs in Calgary that have created this mess…

CR, you are not priced out of the market. Just smart enough to know that everyone else is paying too much.
Wait … it is only the cheap money that is lifting the prices. It will turn.

#82 Barb the proof reader on 06.16.09 at 1:38 pm

Oops, sorry, I forgot to get rid of the italics for the last four paragraphs.

#83 RS on 06.16.09 at 1:56 pm

I don’t get it. Why would banks raise interest rates only to make lots of people default on their mortgages? Wouldn’t they keep the interest rates low to keep everything from crashing. Please someone explains this to me.

It’s the bond market, dude. — Garth

#84 rory on 06.16.09 at 2:13 pm

Hi all, this is from msn.ca …

“…In its analysis of 14 small and medium-sized cities, the Conference Board says Ontario’s manufacturing communities are suffering the most.

Among the eight hardest hit, seven are in Ontario. The
exception is St. John’s, N.L., which will experience a 3.6 per cent gross domestic product retreat this year due to sharply reduced oil production.

The other members of the slumping eight are Sudbury, Ont., at minus 4.0 per cent, Thunder Bay, Ont., minus 3.1, London, Ont., at minus 2.8 per cent, St. Catharines-Niagara, Ont., minus 2.7 per cent, Kitchener, Ont., minus 2.6 per cent and Oshawa, minus 2.5 per cent.”

Really!!!!!!!!!!!! …wow…didn’t see that coming either …lol.

I guess when GM and Chrysler showed up as bankrupt in MSM newspapers they figured something must be a foot and had to respond…yeesh …rofl at my tax money exiting stage left.

Just think you could have written this study and got a pension to go with it, in our spare time, watching Oprah …talk about being a little behind the curve …like hello…spend the money to tell us what and how to fix this instead…we know we are in a pickle in these places already.

More ammo for Jr’s prediction of the Ont. welfare state.

#85 if you don't like it on 06.16.09 at 2:25 pm

The townhouse 2 doors down from us just went on the market for $47,000 more than we paid for ours (we bought 7 months ago) and ours is a bigger end unit! I was shocked at this. So I emailed the real estate dude and he said they’s had about 14 viewing in 4 days. So there’s people looking, I’m interested to see how long it takes to seel and what they sell for.

#86 Cave Spot on 06.16.09 at 2:40 pm

Hi Garth, when your book was published in March 2008, average housing prices in the Greater Toronto Area were $380,338. For May 2009, average prices were $395,609. Compared to many other asset classes (stocks, oil, cash, etc.) during that time frame real estate has outperformed.

What timeline are you expecting prices to drop in the GTA and will you be revising your predictions?

#87 CD on 06.16.09 at 2:40 pm

Did the banks take back all the mortgage debt that the government took off their books in the first place to keep them afloat? Are we going to be expected to foot the bill for these mortgages as well?

#88 JoeCalgary on 06.16.09 at 2:44 pm

For those who think the protestors are fake, go here:

http://www.commentarymagazine.com/blogs/index.php/category/contentions/contentions?author_name=totten

Between one and two million in the streets in Tehran alone yesterday.

#89 Samantha on 06.16.09 at 3:04 pm

#57 DM in C on 06.16.09 at 10:55 am

“Big surprise to anyone? That no one wants to buy modest, move up gradually? That first timers want granite, 4 bdrms, 2 car garage Mcmansions for their first house?”

Incredible isn’t it? What happened to the concept of starter home? Half of the fun was fixing it up and working magic with some paint and elbow grease.

I don’t understand how these people can afford not only the house, but also the cost of repairs and maintenance, utilities, and furniture to try to fill the monstrosity up.

A recent article I read (unable to remember source) stated that people who bought homes with extremely large master bedrooms are now putting in walls so they can create a feeling of coziness and warmth. Yeah, I would imagine a person would start to feel kind of weird in an 800 sf bedroom with a bedroom suite and a chaise lounge. It’s like two people seated at each end of an 12 ft dining table and trying to pass the salt.

I can see a time when the “chef’s kitchen” with granite and stainless steel appliances will be considered passé and no different than any other fad.

I highly doubt that many of these McMansions could be subdivided and refurbished as rooming houses due to their construction quality. That is a shame, because we’re going to require more rental units when the foreclosures begin.

I wonder if there should be interventionists who rescue first time buyers from appointments with enablers such as realtors, bankers, and sadly, sometimes family members, and deprogram them. The concept could even become a new TV channel. Move over HGTV – and make room for SHTV. Sensible Housing TV where people learn to purchase space they will actually use and recognize that a soaring foyer is wasted space.

And, good for you for taking a tough situation and having the courage to face it fully and learn from it. Your experience and refined financial skills will protect you from the siren call of the McMansion.

#90 Tom Jeffries on 06.16.09 at 3:12 pm

14 viewings in 4 days….but how many offers…?

What kind of conditions, IF they get an offer…?

The kool aid machine is working over time at Real Estate offices and at City Hall’s all over the Country = they need people to pay taxes on the ‘asset’, and the agents want ‘the commish’.

There used to be 10,000 agents in Vancouver at the height of this past boom.

The bust has winnowed it by 75%, and only 5% of those agents have sold anything in the last year.

Newspapers biggest revenue stream is the “Weekend Real Estate” section.

Do you think that the Paper is going to tell you the truth?

Sure, yeah, right.

#91 Bob and Doug ...the Canadian Bro's on 06.16.09 at 3:22 pm

Until you see a JUMP in rates…….real estate will not collapse. We are in the second bubble and it will only deflate later with higher rates and commodity prices.

Still way too much money sitting around doing nothing. Cheap money…….low rates.

Deflation is still the word of the day in Canada.

#92 Bob and Doug ...the Canadian Bro's on 06.16.09 at 3:38 pm

Garth you commented on climate change and energy yesterday – “We’re not even seriously talking about change, let alone dealing with it. The die’s cast. This is now an unsolvable situation. Sadly.” — Garth

Unsolvable seems a little over the top don’t ya think?

It seems we are seeing a huge shift in N America. This could be the next driving force for the new economies of the 21st century. Even some of the new players are getting in on Solar and Wind Power.

This commitment to new energy could put a dent in the price of oil and coal in the future. We have seen serious declines in usage over the last year. Fuel efficient vehicles, smaller homes, LRT, and ….

I think you are short sighted on the massive opportunity this is for North America and Europe to be front runners in the next tech step up.

Cheers,

Of course there is a massive opportunity, but it is too late to reverse the carbon content of the atmosphere. — Garth

#93 peter wiener on 06.16.09 at 4:19 pm

I am astounded to learn that zero down is making a comeback. Our previous BoC head (David Dodge) publicly called the head of CMHC when they announced the 0 /40 yr am. availability and told them that it was ‘imprudent’ to allow its availability. In addition he gave the head of CMHC a serious dressing down for announcing such a product without letting the BoC know as it could directly affect the capital markets in Canada, the value of the Cdn dollar etc.

David Dodge, arguably the best BoC governor ever, announced his retirement shortly after this event and many are convinced that he (a well know frugalista) could not abide the political piss-away of tax money and was not going to go along with this fiscal insanity.

If you read this blog and want to buy a house, I have a few suggestions;

1. Go for it, but I suggest that you use a zero downpayment / 35 yr am and be prepared to walk should the price decrease more than 12 to 15%.

2. Stop asking others if it is ok to buy. Just go do it.

3. Don’t forget to lie about how much you paid in 2009 when others ask you as it could reflect very badly on you in futureotherwise.

4. Don’t ever return to this blog as you already know best and have made your purchase.

5. Run out and tell others to do as you did.

This way we exhaust the pool of buyers, the faster, the better. When they are done, so will be the market and we can get on to the real business of marking prices to reality, the concept that seems to have escaped ANY MORON even contemplating buying ANY real estate at ANY price now.

Some people are profoundly stupid and hey, I’d rather they lost their money than me mine. Garth is very right in preaching patience, especially now.

#94 VOODOO on 06.16.09 at 4:33 pm

An email I received from an Iranian I know who LIVES IN IRAN:

“About presidential election in IRAN,yes, it was rigged.

Just a couple of hours after finishing voting time, when official started to release the election results , many of Iranian were shocked, because about 70 % of Iranian were Supporters of reformist candidate Mir Hossein Mousavi and did vote to him. Angry crowds took to the streets to protest against President Mahmoud Ahmadinejad’s re-election, in spite of Mr Mousavi’s post-election call to avoid violence. As you probably watched in internet websites ( youtube, facebook,…) or on BCC , CNN, CBC TVs, police and security guards attack to people and beat them . Last night, they attacked to the some universities dormitory in Tehran, Isfahan, Shiraz, and several students were injured by gunfire.

The websites of pro-opposition supporters are inaccessible, and the government has periodically shut down access to social networking sites, making it difficult for information to reach the outside world.

After releasing election results, in addition to daily demonstration, every night at 9 p.m. Iranians supporting Mousavi scream Allaho o Akbar (God is great) from their roof tops as a sign of opposition towards Ahmadinejad’s re-election. They also scream “Down with Dictator” “where is my vote” “give back my vote”

Hopefully we will win.

I will update you”
——————————————————–
These are the facts from the inside my friends. The election was rigged.

#95 peter wiener on 06.16.09 at 4:36 pm

oh, and by the way;

each and every one of you reading this blog should be apoplectic (very angry) that your fed gov’t has essentially bought the Cdn taxpayer up to Cdn $ 125 BILLION of mortgages (which are insured by the tax payer thru CMHC) from the Cdn banks (without approval of the taxpayer thru Parliament!!!!!!!!!!) so that the Cdn banks can go lend more high loan ratio mortgages., make fees and keep homes unaffordable – your tax dollars at work!

So, go ahead, buy a house at values that have been inflated in part by by your tax dollars. I hope you lose your shirt because in real capitalism, that is what happens when you buy overpriced assets.

If you don’t lose your shirt, the rest of us will and your house value will still lose value.

Buying a house today = loser in the future

Simple equation really, as Garth has pointed out too many times already. If you can’t see this, by all means be the next victim, but hurry up would ya, we want to get on with the crash!

#96 Calgary Rip off on 06.16.09 at 4:59 pm

Igre, DD, and JoeCalgary=straight shooters from Calgary. A breath of fresh air after reading the Calgary Herald/Bob Truman’s blog.

Calgary is a nice city. It’s about time it was priced the way it used to be.

Garth, coalition Ignatieff to triple mortgage interest rates please.

#97 David Bakody on 06.16.09 at 5:02 pm

Every area is not the same but with all the chatter about Nova Scotia growing and not effected by the economic crisis may not be all that true wrt RE. We have more seniors per capital than any other province and many have moved to the Halifax area into new apartments and assisted living residents. There are more country homes for sale than ever. I took a drive to new area where new homes once were spinning up like those yellow lawn flowers and there is little or no movement …. good existing homes are selling well as they always did …. not sure about any price increase but I do know many were priced to sell as many older people were under the gun to move into those new rental units. I would also suggest the reason for the new “Free Mortgage Plans” (Free being no down payment) could it be a new improved 45 yr Flaherty plan?

#98 Devil's Advocate on 06.16.09 at 5:14 pm

#91 Bob and Doug …the Canadian Bro’s on 06.16.09 at 3:22 pm “Until you see a JUMP in rates…….real estate will not collapse. We are in the second bubble and it will only deflate later with higher rates and commodity prices.”

Good point Bob and Doug. Unfortunately I fear that is a double edged sword which will not only cause prices to fall but put those overleveraged recent fools into a most precarious position when staring at their new renewal rate among other things (unemployment, upside down equity, foreclosure, etc.). I expect, quite possibly, we will have another solid year before that starts to happen which is just when, so we are today being told, the recession should be showing significant signs of improvement.

It’s like waiting for a needle to pierce the skin, you know it’s gonna hurt but with that pain will be a good dose of what will cure us. Some are afraid of needles and will avoid them at all costs.

#99 Samantha on 06.16.09 at 5:54 pm

This article is timely and worth the read.

http://www.doctorhousingbubble.com/personal-story-by-a-lawyer-from-a-previous-asset-bubble-can-we-learn-from-the-past-and-how-will-the-housing-decline-impact-you/

#100 David Bakody on 06.16.09 at 6:06 pm

#83 RS on 06.16.09 at 1:56 pm

Jump out of your box Sir/Madame we are and have been in a Global Economy for years ….. Canada is tied to the US and the world is tied to the US ….. sit back and read this …. and think where & who has $12 Trillion invested in the US of A and who the are the world’s police force …. of course there is world economic crisis but only one country we know can pull us out ….. for a host of reasons … the biggest one is the buying power of over 300 million people … hello Canada’s 32 million would be lucky to be able to buy a box of popcorn …. the yanks take our goods and sell them as they see fit.
gota run …

http://watchingamerica.com/News/29248/should-china-reduce-itshold-on-the-american-national-debt/

#101 Eduardo on 06.16.09 at 6:19 pm

HAHAHA… All you people who say they are priced out and they make 90,000 or 150,000 in calgary are complete fools.

THE AVERAGE SALARY IN ALBERTA IS 50,000 (HIGHER IN EDMONTON AND CALGARY). TO OWN A SINGLE FAMILY HOME YOU NEED TWO PEOPLE TO MAKE A FAMILY. 2×50,000 = 100,000.

100,000 times 3.5 gross income (generous in Alberta considering our tax rate is so low) = dam close to MEDIAN HOUSE PRICE IN EDMONTON OR CALGARY.

It’s not overpriced.

Also Garth, CO2 is removed from the atmosphere by trees. The problem is that the rate of removal isn’t as large as the rate of generation. But yes, the atmosphere can fix itself if we let it.

It’s also funny that some of the people complaining want to buy 2000 sqft houses instead of living modestly.

You guys should note that following the great depression it took until the 60s for the 10 yr bond to get back to where it was in the early 30s. I’m not saying that it will again because I believe in inflation but if that’s the case then I have an inflating asset, you have inflating rent. If you think deflation is the course of the day, then prepare for a long period of easy money circa Japan or the 30s.

#102 Janet on 06.16.09 at 6:21 pm

Garth

What do you suggest. I have savings, I make the average household income of a family in Manitoba. I went to university and thought I would have enough for a home. I was not completely sure what I wanted to do about my life. Now I am looking at 150,000 to get anything in Winnipeg. With my savings the problem of which they are locked in GICs, I would still be looking at a 100,000 mortgage. If I dumped all of it in could maybe lower it to 80 or 70,000. This, if I had a car, would leave me to saving close to nothing a month for a house in an area I don’t want. It is probalby a shadier area of town. If I had bought before the “boom” I would have a house by my parents which is what I would have wanted. And as you say people are jumping in and the price are still going higher. I think that is very much the case here. So that means I might have to join the crazy band wagon or what is more likely the case, I will never be in a house. I highly doubt it will ever drop enough and if it drops it will just drop to the value it was at 2 or 3 years ago which will still streach my check. And let me tell you garth, I am mad as hell. These people, some of them working at walmart, bet, and they will win and still make money on their houses. And the debt our canadian government that came about because of this craziness and people buying houses they couldn’t afford in the states, I will be paying for that. And guess what, I still will not be in a house because these people bid the prices up on the houses and they won.

#103 WillsDad on 06.16.09 at 6:46 pm

I have a request to many of the posters on this blog.

If you make a comment about what seems to be happening in your community in regards to the housing market, could you please tell us what community you are living in? Otherwise, we are left to assume.

Cheers.

#104 hagbard on 06.16.09 at 7:19 pm

Barb, the govt is a tool for special interests, so there are no surprises who’s benefiting from the collapse. The bubble wasn’t created by capitalism, it was created by govt meddling and the US Federal Reserve system (a private corporation, btw) that wouldn’t exist without govt mandate. So long as people like yourself (the majority, I’m afraid) believe the problem is capitalism and not govt tinkering, we’re doomed to live like those in the former Soviet Union since that’s where we’re headed.

#105 . . . fried eggs and spam . . . on 06.16.09 at 7:21 pm

FYI — From today’s Angry Bear . . Noted for the Record

105 years ago today, James Joyce lost his virginity. Eventually, he wrote a very funny book about the day.

May all our days be as productive.
——
And now for something completely different . . . IT’SZZZ!

#70 confused and fed up 12:34 pm — “… The $50 billion national deficit and soon-to-be $600 billion federal debt will bring higher taxes, higher rates and higher inflation..” . . . \/ combined with /\ . . . #75 Got A Watch at 1:04 pm — “. . . Canada’s Harper calls U.S. deficit “dangerous” . . . Wait and see. — Garth

Are The Keystone Kops running the show now? When ‘zit gonna be our turn? I vote for Nostradamus Jr. to be Minister of Finance, but all other places are up for grabs!
——
#61 Increasing that 1% at 11:37 am — “. . . a Health Unit is preparing for the possibility of mass vaccination for those who want it.”

Thanks very much, but I won’t be attending! Great way to reduce cannon fodder, ‘tho. BTW, a follow-up. — http://euro-med.dk/?p=9152
——
#94 VOODOO at 4:33 pm — “An email I received from an Iranian I know who LIVES IN IRAN:

“These are the facts from the inside my friends. The election was rigged.”

There is something quite ugly happening in Iran. I guess one question that needs to be asked: Who stands to benefit from all this?

Benazir Bhutto knew there was a better than average chance she would break on through, because she is on record (YouTube) as saying that Osama biin Laden was murdered some time ago (the US’s and m$m’s conveniently resurrecting saviour-of-the-moment).

By silencing and nullifying any chance of that info. being made publicly known, and placing pressure on Pakistan, it took attention away from the CIA / Mossad doing their dirty work.

It will probably lead to another Crusades — ultra right-wing Christians versus Muslims killing each other. Who stands to benefit? Not too hard to figure out.

Two links. Text following is from second. — http://tinyurl.com/nkemk7 \/ http://tinyurl.com/nbykrx

“Were these legitimate Iranian people or the works of a propaganda machine? I became curious and decided to investigate the origins of the information. In doing so, I narrowed it down to a handful of people who have accounted for 30,000 Iran related tweets in the past few days. Each of them had some striking similarities –

1. They each created their twitter accounts on Saturday June 13th.
2. Each had extremely high number of Tweets since creating their profiles.
3. “IranElection” was each of their most popular keyword
4. With some very small exceptions, each were posting in ENGLISH.
5. Half of them had the exact same profile photo
6. Each had thousands of followers, with only a few friends. Most of their friends were EACH OTHER.”

#106 Barb the proof reader on 06.16.09 at 7:33 pm

#104 hagbard on 06.16.09 at 7:19 pm

Ha, Hagbard, obviously you don’t know me. I dare say I’ve discussed the fed res for 30 yrs. You need to look at the larger picture. To fully understand greed, ignorance and meddling, take a step back and realize whose running the meddling.. it goes way beyond gov’t …. it started long before the fed res.. you aren’t looking deep enough nor anywhere near far back enough. Again, follow the money.

#107 Nostradamus jr. on 06.16.09 at 7:34 pm

6% Mortgage Rate Threshold

…It is this man’s humble opinion current high real estate values can be sustained as long as mortgage rates stay below 6%.

aka…Real Estate #101

#108 @Garth 2 on 06.16.09 at 8:01 pm

Garth, hats off to you. It took many months, an absolute avalanche of data running contrary to your view, and a massive equity reversal, but you finally admit that you got it wrong on Canadian real estate.

To date, no one could have reasonably used your book to “vulch” property (unless they sold in mid-2008, sat on cash until January and bought-in right after New Year’s)… wait a minute.. isn’t that exactly what YOU did?

Nonetheless, I still think you have a point on the future of real estate. However where you contrast its dismal future versus your rosy projections for equities (specificity aside), I still don’t understand your rationale. Neither apparently does Yves Lamoureux.

Actually, I am not wrong at all, impatient little one. Yves who? — Garth

#109 Basil Fawlty on 06.16.09 at 8:14 pm

“So long as people like yourself (the majority, I’m afraid) believe the problem is capitalism and not govt tinkering, we’re doomed to live like those in the former Soviet Union since that’s where we’re headed.”
Obviously no one wnat’s to live like the majority of the former Soviet Union. However, the government tinkering was in response to a full court press of corporate lobbying. The Glass Steagal Act in the US for example, which was put in place after the depression to seperate investment banks from the money in normal banks, was repealed by corporate lobbying. The capitalists did not like limits on their ability to leverage capital, so they spent millions in lobbying to have the Act eradicated. The government parties are financed by capitalists, and he who pays the piper calls the tune. Government tinkering rarely occurs to meet the demands of the average person, it is done to meet the demands of big money.
Capitalism has provided much in increasing our standard of living, but the problem is it ignores externalities such as clean water, clean air, climate change, financial crisis, increasing cancer rates and human rights.

#110 Investor on 06.16.09 at 8:19 pm

Party on like its 1999!!!!!!!!!!

#111 Investor on 06.16.09 at 8:20 pm

Twin Peak Bubble will not end well.

#112 JoeCalgary on 06.16.09 at 8:45 pm

#103 Agreed, and will do, WillsDad. Kind of thought my name would give a hint, but the emptying location to which I referred earlier is outer inner-city, gorgeous flowering old trees throughout. The speculators increased property values here times five! Now they can’t sell them and, apparently, no one can afford to rent them, either.

#113 Da HK Kid on 06.16.09 at 9:26 pm

June 12, 2009 10:33 AM by Ryan McMaken | Other posts by Ryan McMaken | Comments (11)

“No one really knows what anything is worth anymore. Some sellers appear to be kidding themselves…”

So says David Whitford in this nicely detailed piece about real estate in Phoenix. Overall prices in Phoenix, by the way, are off 53 percent from the peak, and have seen the biggest decline in the nation.

There are some interesting contrasts in the piece. Notable is how at least some the over-70 crowd wasn’t caught up in the speculation and the bust. Those who are too old to be Baby Boomers weren’t taken in by the profligacy of that generation. Says one 73-year-old: “If you’re going to retire early, you can’t have a lot of wives you’re paying, you sure as hell can’t have kids in college, and you can’t have a lot of debt. You gotta get your debt down, get your bills paid, pay for your car. And then when hard times come, you don’t participate.”

I once had a Baby Boomer try to explain to me his theory of how it was smart to maximize mortgage debt for some reason or other. He probably won’t be retiring any time soon.

But what struck me here was the section on how prices are all over the map in Phoenix. “Some sellers appear to be kidding themselves…” says Whitford, and this is hardly peculiar to Phoenix.

It’s pretty clear that a great many sellers are still in denial about the current economic situation. And this includes banks who own foreclosed properties. Often, the banks are asking for the most ridiculous prices.

One real estate agent remarked to me recently that she has never experienced a time when people were so clueless about the true value of their homes. Banks will price foreclosed homes at 500K only to have them sell for 350K many, many months later. And this is in the relatively healthy market in Denver. Individual sellers aren’t much better.

But can we be surprised when we have economists like those at Wells Fargo who recently declared that there will be economic growth in the second half of 2009, and that the recession will be history by 2010? Many have already convinced themselves that the next boom is already in place.

#114 Da HK Kid on 06.16.09 at 9:29 pm

June 16, 2009 3:34 PM by Greg Ransom | Other posts by Greg Ransom | Comments (7)

“To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

— Paul Krugman in 2002

#115 dd on 06.16.09 at 9:36 pm

.#108 @Garth 2

All equities are not created equal.

#116 OttawaMike on 06.16.09 at 9:39 pm

Of course there is a massive opportunity, but it is too late to reverse the carbon content of the atmosphere. — Garth

In a recent interview. A former Brit and NASA scientist, James Lovelock who pioneered the study of planet’s atmospheres:
http://en.wikipedia.org/wiki/Gaia_hypothesis
contends the Earth is broken beyond repair, he basically says get all your emergency gear and plans in place and Canada will become an island nation taking environmental refugees. I for one, hope he’s wrong.

#117 Gord In Vancouver on 06.16.09 at 9:41 pm

Vancouver real estate developer decides to wait until 2011.

http://www.bclocalnews.com/tri_city_maple_ridge/tricitynews/news/48183332.html

#118 dd on 06.16.09 at 9:43 pm

.#101 Eduardo

… All you people who say they are priced out and they make 90,000 or 150,000 in calgary are complete fools….

House prices in Calgary and E town ain’t no screaming deal either. Buy when asset are undervalued.

The people that are going to profit from this little upswing are the boomer and others that sell out now. Higher interest rates, food prices, demographic shift, taxes, and energy prices will keep a lid on prices in the future.

#119 Bottoms_Up on 06.16.09 at 9:52 pm

http://west-kelowna.ca/images/canadian_home_prices.jpg

The graph you’ve all been waiting for. US resale prices super-imposed on Canadian prices.

Move along….nothing to see here!!

#120 Future Expatriate on 06.16.09 at 9:52 pm

Better think about what will happen to the Loonie and the real estate “bounce” when THIS happens.

Next week.

Remember… “THIS” is a four-letter word!

#121 Bottoms_Up on 06.16.09 at 9:53 pm

http://calgaryrealestatemarketblog.files.wordpress.com/2008/02/one_of_these_things_is_not_like_the_other_a_comparison_of_calgary_house_prices_to_the_us_real_estate_market_large.png

And another one….

#122 Bottoms_Up on 06.16.09 at 9:56 pm

http://calgaryrealestatemarketblog.files.wordpress.com/2008/01/canadian_reit_firesale_no_decoupling_from_us_real_estate_large.png

And yet, a third.

#123 dd on 06.16.09 at 10:09 pm

.#101 Eduardo

Look South …. house prices are still headed down. Are we any different?

#124 peter wiener on 06.16.09 at 10:18 pm

to #108 Garth 2

You are exactly the kind of blog poster who will simply “disappear” when Garth’s predictions come true, (maybe not on schedule, but just as devastating when they occur).

Garth, on the other hand, is here day in and day out dodging the slings and arrows thrown by ANONYMOUS posters like yourself, attempting to give well reasoned advice and NEVER disappears should the story not unfold exactly as he has suggested.

Contrast his position and commitments to this blog with yours for a minute and then follow his advice regarding patience. That way you won’t look as silly as the decline of the Canadian real estate market unfolds.

#125 Bottoms_Up on 06.16.09 at 10:29 pm

Jim Cramer just called a bottom in the US housing market. Guess that means Canada’s will come in 2 years…

#126 Bob and Doug ...the Canadian Bro's on 06.16.09 at 10:55 pm

New energy is rattling the old boys club(oil).

http://ca.news.yahoo.com/s/afp/090617/business/us_economy_energy_warming_oil

They are worried their product will be obsolete.
In the future.

#116 Ottawa Mike – How does he know the earth is broken…….is he the creator.
We don’t even know how we work.
Why even account for this pessimism. Look at the opportunities out there. It’s awesome.
What a great time!

Cheers,

#127 Eduardo on 06.16.09 at 11:00 pm

I agree with you dd that house prices aren’t deals but they are not grossly overvalued and keep in mind the migration into Alberta is helping and will continue to do so in a higher oil price environment. There is nothing to suggest that if oil returns to levels seen last year (not even the peak) and stay there, that the housing market has a reason to contract further other than unemployment which should improve.

Even if NG prices improve and oil stays where it is the Alberta recovery will be intact along with the housing market.

I also agree that taxes will be increasing as well but I’m not convinced that property and other household taxes will be the medium to do this.

The demographic shift is another point that I agree with but most old people who own a house and stay in it until they are ready to die. It’s not like they hit 60 and purge their houses immediately. If you agree that the process of washing out boomers from home ownership (if they own their house outright with no mortgage remaining) will take 15 years then its certainly no freefall coming, maybe just a balanced market.

Keep in mind that for people who own their houses outright mostly think in terms of income. They can either choose to pay nothing, or sell and pay rent… most will choose the former.

#128 Eduardo on 06.16.09 at 11:05 pm

dd,

To be honest, I think we are different.
-we don’t have or didn’t have a cascade of lenders going under and forcing people into selling their homes.
-we didn’t have as many of te BS mortgages (granted we had some)
-there is no such thing a pick your payment mortgage here
-loans here aren’t non-recourse and interest isn’t tax-deductible so people don’t have the incentive to keep pulling equity our of their home

Those are all worth something?

I agree that Vancouver is the stupidest market in the world.

#129 Bob and Doug ...the Canadian Bro's on 06.16.09 at 11:08 pm

#120 Future Expat

The end is near……..whooooooooo oh no. The American Empire of Imperial reign is dead.

Silly stuff really……..don’t ya think.

But I imagine your a crazed gold bug just waiting to rule the world with your gold and silver……..arrrr and your pirate ship too.

Hahaha……you guys are hilarious.

#130 TheFirstRick on 06.16.09 at 11:37 pm

#108 @Garth 2 on 06.16.09 at 8:01 pm Garth, hats off to you. It took many months, an absolute avalanche of data running contrary to your view, and a massive equity reversal, but you finally admit that you got it wrong on Canadian real estate.

To date, no one could have reasonably used your book to “vulch” property (unless they sold in mid-2008, sat on cash until January and bought-in right after New Year’s)… wait a minute.. isn’t that exactly what YOU did?

Nonetheless, I still think you have a point on the future of real estate. However where you contrast its dismal future versus your rosy projections for equities (specificity aside), I still don’t understand your rationale. Neither apparently does Yves Lamoureux.

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

In my little town on Van Isle THE SAME houses listed today are anywhere from 50 to 100K less than they sold year or two ago. BC Assessments database provides the sales info. I know what I speak, I went to the open houses THEN and NOW.

You’re nuts buddy. Let me guess, Realturd???

#131 Barb the proof reader on 06.16.09 at 11:48 pm

#112 JoeCalgary,

Joe, I was going to mention to you earlier, similar neighbourhood, not just empty ones, but more rentals. Close-in, rim of inner-city, gorgeous flowering old trees. The speculators increased property values times five six.
Sample small old bungalows within a few doors of each other:
1990 $130K
1999 $230K
2004 $500K
2006 $780K

#132 Mike (Authentic) on 06.17.09 at 3:16 am

#89 Samantha said: “Big surprise to anyone? That no one wants to buy modest, move up gradually? That first timers want granite, 4 bdrms, 2 car garage Mcmansions for their first house?”

“Incredible isn’t it? What happened to the concept of starter home? Half of the fun was fixing it up and working magic with some paint and elbow grease.

A recent article stated that people who bought homes with extremely large master bedrooms are now putting in walls so they can create a feeling of coziness and warmth. Yeah, I would imagine a person would start to feel kind of weird in an 800 sf bedroom with a bedroom suite and a chaise lounge. It’s like two people seated at each end of an 12 ft dining table and trying to pass the salt.”

———

Samantha we had a master bedroom in our last house 38′ long and 30′ wide. It had a ensuite, walk-in closet, library, skylights and a vaulted ceiling to boot! At the foot of a queen bed you were looking at a wall 28′ away! You get used to the size but it doesn’t feel “homely” though.

Starter homes: Remember when they meant AFFORDABLE homes? Small, 1000sq/ft homes, 3bdr, 1.5bath, standard lot, detached garage. Then young people would move it, love it, do it up “their style” and have their first kid in? They create a wonderful neighbourhood. In 2004, we bought one for $178k in Calgary SW, sold for $238k in 2006, now it’s $335k today. In 2004 we only qualified for $229k starting out!

Who can afford to buy it now?

Mike

#133 Future Expatriate on 06.17.09 at 6:53 am

#129 “Silly stuff really……..don’t ya think.”

Let’s see, what part of in hock to the Chinese for several trillion dollars don’t YOU get?

Let’s see, what part of trying to take over the Mideast’s oil by bombing, shooting, and raping women and babies “to save them”, ALL on China’s tab don’t YOU get?

Back to your worthless paper-pushing and beer guzzling to forget how bereft of morals and ethics you are.

#134 Samantha on 06.17.09 at 7:40 am

#132 Mike (Authentic) on 6.17.09 at 3:16 am

“Samantha we had a master bedroom in our last house 38’ long and 30’ wide. It had a ensuite, walk-in closet, library, skylights and a vaulted ceiling to boot! At the foot of a queen bed you were looking at a wall 28’ away! You get used to the size but it doesn’t feel “homely” though.

Starter homes: Remember when they meant AFFORDABLE homes? Small, 1000sq/ft homes, 3bdr, 1.5bath, standard lot, detached garage. Then young people would move it, love it, do it up “their style” and have their first kid in? They create a wonderful neighbourhood. In 2004, we bought one for $178k in Calgary SW, sold for $238k in 2006, now it’s $335k today. In 2004 we only qualified for $229k starting out!

Who can afford to buy it now?”

Mike –

Wow! 38 x 30! That’s bigger than my house (which is 896 sf). I would need a compass, map and possibly a snack just to get showered and dressed in the morning (lol).

Yes, I remember when starter homes meant affordable homes. They were diamonds in the rough and it was fun to work on them and fix them up. I remember the creativity that went into them with really beautiful results.

You are so bang on – “they did create a wonderful neighborhood.” It was the effort and care that people put into their homes and yards. People shared ideas and tools, and they helped one another.

Working on a house was part of the bonding process for young couples. They scraped paint, sanded, painted, ripped out rugs, refinished floors, and sweated together to make their house a home. In that process, the young couple would get a chance to know each other on a different level and work together as a team for a common goal.

Now, a “starter” home means never having to pick up a paint brush. Everything has to be “move in ready”. It’s sad, because many of the first time buyers now don’t experience that bonding process, with each other, and also, with their home through effort and work put into it.

“Who can afford to buy it now?” I don’t know how anyone can afford to buy at these prices. The 0/40 mortgages would have enabled some people to buy (over their heads, mind you). And now, this “new” product with 5% down gift back or however it works. It all goes back to income. A person’s income can only support so much debt. However, I think these types of mortgage products combined with low interest rates have people believing that they truly qualify for these overpriced houses.

The bank or mortgage broker tells them they “qualify”. Maybe today on the bank’s terms they do, but not long term on life’s terms. And, certainly not in a way that they can build other assets (savings being the big one).

I really hope that we can get to a place in this mess, where first time buyers are able to return to the small, affordable starter home. A home where they can begin to build their lives in a much less stressful and saner way.

Right now, that’s still possible in smaller, rural towns like where we are. If a person(s) can work out employment (self-employed, telecommute or job in town or in Brandon about an 1 hr away), then it becomes possible to enjoy lower prices and a really nice lifestyle. Our new golf pro is from Alberta, as are another couple who moved here about a year ago, plus the BC folks.

But, that aside, it would still be nice to see the larger communities and cities return to realistic pricing.

#135 Bob and Doug ...the Canadian Bro's on 06.17.09 at 10:26 am

#133 Future Expat

Oh to be so pure……..arr just like an ounce of gold.

I do like beer. I didn’t know it was immoral.

As for paper pushing. Never tried to push paper…. I tried to push a car once when it broke down. I found it difficult to get it moving.

If you believe THIS than you must understand THAT. THAT is your skewed little world is quite that simple –
Those nasty Americans and their imperial reign and quest for the black gold. The Chinese own the Americans with all the T-bills they have.

Get real buddy. Just keep reading what you find on those doom and gloom blogs – they will keep spoon feeding you with that crap and you keep chewing it up.

#136 Dan in Victoria on 06.17.09 at 12:01 pm

Hmmm…remember when you were a little kid and your older brother or sister said i’ll give you fifty pennies for that one dollar paper bill?Same old same old,you were supposed to learn then.

#137 Barb the proof reader on 06.17.09 at 1:35 pm

#57 DM in C Thanks DM, for the article. Interesting.
#89 Samantha Samatha, so true!
#132 Mike (Athentic Mike, is it still called a “starter” if we’re in it 27 yrs later!? (lol) BTW we rented it then bought it, green shag wall-to-wall– and that’s the first thing we ripped out after the papers were signed. Who knew green shag would come back in style?

“master bedroom 38’ long 30’ wide” — Mike, “Wow! 38 x 30! .. bigger than my house (896 sf) I would need a compass, map and possibly a snack just to get showered and dressed in the morning (lol)”
–Samantha”

Samantha,
Great laugh! I had better stop drinking coffee when I read your comments, LOL! .. hurts to get coffee up the nose. I will think of DM, Mike’s and your comments next time I squeeze around the bed in our small master bedroom and dash across a hallway to get to our single bathroom :) If only I could squeeze an en suite in our 1100 sf!

I loved the comments on diamonds in the rough, creativity and bonding experience, too. Humble beginnings build a person, a couple, a family. And over time, that’s what bonds neighbours into being a “neighbourhood”, building together through hard times. It’s the physical aspect, step by step learning. Those who grow up comfy and land a big salary seem to be grasping to figure out why they feel as empty as their big houses feel. A young friend of mine has slowly figured it out though, and went from ‘perfection’ to a slow realization that comfort and love mattered more than having a perfect house.

#138 Future Expatriate on 06.17.09 at 4:34 pm

#135- About those doom and gloom blogs… they’ve been right so far. About everything. Oh, their timing might be off a few months. But inevitably, they’re always proved right.

As far as pushing paper or no, if you’re not part of the solution (a return to a real monetary standard based on a physical limited resource man cannot create out of thin air) then you’re part of the problem.

But keep drinking. Don’t worry, be happy.

#139 dgd on 06.17.09 at 9:54 pm

#138 Future Expat

We can only hope with your tag that you plan to move to another planet.
If you don’t think paper money has brought prosperity to more of the population on the planet…….well I’ll have some of the brew you are drinking.

Life is great my friend.
Enjoy ……what is there to fear it gets better every day.

Gold is for hoarders and a hoarder is someone that doesn’t want to share.

Cheers,

I think I’ll have a beer. …….and try pushing some paper.

#140 dgd on 06.17.09 at 9:57 pm

#138 Future Expat.

Sorry I changed my tag as I cleared my cache.
Not to confuse you.

It really is Bob and Doug Mackenzie……

#141 Davinci on 06.17.09 at 10:33 pm

Buying gold will not make you rich. Owning gold will keep you whole. Just like the people in Iceland who purchased gold 1 year ago they are even Steven without the loss of purchasing power the Krona suffered.

That’s the point of money it holds value, thus that’s why it’s money.

#142 Pender on 06.17.09 at 11:26 pm

I have been looking to find out which banks offer the free down payment mortgage. BNS at 5 to 7 year terms and TD at 6 year term. Anyone find the third one?

#143 Future Expatriate on 06.18.09 at 2:36 am

#140- no need for the heads-up… I could smell your breath from here and knew right away who it was, eh?

#144 Tony on 06.20.09 at 2:44 am

#39 My_View
I suppose you’ve never heard of the phrase “the second round of mortgage foreclosures in America”?