‘Why I did it’

cat1

The Globe’s peppy personal finance columnist called me this week while I was stacking frozen squirrels in the giant, underground walk-in freezer beneath my bunker. So, he goes, is this real estate market really in recovery? And I go, nope. Just blame the dope, since these mortgage rates are the crack cocaine of housing. And read the damn blog. I’m busy.

Meanwhile my email inbox looks like the liver of a French goose – jammed with questions from people around the country wondering the same thing. Is the bad time over? Are we back on a cycle that will again bring years of housing price increases, squeezing out young buyers and leaving cautious renters eating drywall dust?

Of course, my answer’s unchanged. This will end badly, and residential real estate will be remembered as an obsession for which we all paid dearly. The reasons for this view have been copiously inscribed here in past posts, so I will not repeat. Some will have an immediate impact on the market, and some will click in over decades.

While I love real estate, and own a few pieces of it, I’d never allow this asset class to constitute more than 40% of my net worth, nor would I buy anything other than a distressed property in this market. I sure wouldn’t buy retail.

But, of course, hardly anybody listens to me except the saucy barmaidens at Joey’s. Take RJ, for example, who just poured his heart out thusly:

Thank you so much for the time an effort you put into your blog. I find it informative and entertaining.

I generally agree with your ideas and wanted to share with you my situation as it shows that there are times that buying may make sense if you are doing it for the right reasons. I am currently involved in a government relocation required by my work and until recently I had convinced my wife that we should rent based on my concerns about the Edmonton market being overpriced.

Ultimately we decided to buy a house because the places that we would need to meet the needs of our family of four (with two young kids) was going to cost $1,900 – $2,000 a month. I was willing to pay these rates because of my belief that the market is still not affordable for average families, but as I looked at the numbers of days on the market in the Edmonton area and the fact that the suburb I ultimately bought in had already seen a 25% decrease in average price I began to re-evaluate renting.

I decided that I would risk a further decline in price because I did your rent to ownership comparison (see below) and I believe that in the short term the market may remain volatile. In fact if I rent a single family dwelling I may have to move a few times over the next few years as landlords decide to sell. Note the rental market in the suburb I want to live in is relatively small for the house I want (ie. 3 bedroom single detached dwelling). This of course is exactly what you preach which is that real estate is relatively illiquid and as a father of a family of four I do not want my young children to feel that they have no roots (I will likely stay at this posting 5-10 years).

The rent vs.ownership comparison did was taken from your November 1, 2008 which I agree is priceless:

Down payment $415,000.00 (which would earn $12,450.00 in a 3% GIC after reduction at marginal tax rate of 40% this would be a cost of $7,470.00)

Mortgage payments $ 0 (I was able to pay cash for my home because of significant appreciation in my previous home which was in a boom town)

Maintenance – $1,000.00 (it is a newer home)

Insurance – $600.00 (rate in Alberta)

Property Tax – $4,000.00 (Annual property taxes for this house

Annual Cost of ownership = $13,070

Annual Cost of Renting = $22,800 (using the lower end of the range ie. $1,900 a month)

Based on your formula I appear to be an exception to the rule. Note I have calculated the price rent ratio and it is 18.2 which is still above historical norms, but again I decided to buy a place to live not an investment.

At the end of the day I am fully prepared to see the value of my house decrease over time and I realize it may well be as high as another 25%. The fact that the house was listed for 160 K more in May 2007 than I bought it for in May 2009 gives me some comfort that I have mitigated some of the downside risk.

Hey, dude, you do what you want. Just because you feel horribly guilty and conflicted, no need to run back here and justify your actions. You want a house, go buy one. The starving, homeless realtors in Edmonton are extremely grateful.

But let me say this: Your calculations are a little wacky. First, you plopped down $415K for a house, and then argue that this money could have earned you only $7,470 a year after taxes, if invested. Actually, a good chunk of this could have gone into unused RRSP room, or a TFSA, and escaped tax completely. You also could have invested in the preferred shares of the big banks, and earned a 7% return and enjoyed the tax break dividend income provides. You could (as previously suggested) invested in the oil biz, and looked forward to capital gains on which you’d pay half the tax that GICs attract. And many more options beckon.

I mean, pal, give me 400 large and I’m pretty sure I can turn that into an income stream of at least $25,000. So, that means you could retain the $415,000 in liquid assets, throwing off enough income to rent you the big house – instead of having a big house you own, and no other cash. And I haven’t even added in the other five grand a year (in after-tax income) for property taxes, insurance and maintenance that you’d face as a homeowner.

But wait.  You are “fully prepared” to see your house drop in value by a quarter, losing $100,000 in equity? Do you like pain, RJ? Did you accumulate that money just to whizz it away? Or is this the price you’re willing to pay to avoid your kids “having no roots”?

Get a grip. They’re children, not spruces. Canadians move on average once every six years whether they rent or own, and the short people seem to cope a lot better than their stressed-out parents. So, if you must own a house for your own private reasons, just do it. We’ll understand.

Right, pack?

139 comments ↓

#1 Carrie on 06.17.09 at 11:55 pm

Garth,

I cant see Alberta Real estate losing much more projects are already gettin get dusted off the shelf more work on the way which will bring in migration. Edmonton grew by 30000 people just last year. I get it higher interset rates, higher inventory, but thats slowly gettin eatin up as well. Im not saying you dont have valid points but do you maybe just maybe go to sleep at night thinking this might back fire on you. You did say in one of your posts a few months ago that sellers were all going to list in spring thinking there was goin to be a spring rush and guess what there was contrary to what you said.

Prediction: I f you thought prices were expensive in may 2007 in Edmonton just wait what 2010 brings.

#2 hobbygirl on 06.18.09 at 12:24 am

I think I would agree with RJ, I dont see a problem when someone wants a home as a place to live versus looking at it as an investment tool. If I was staying put long term, I don’t see it as a problem (my humble opinion).

My parents bought their home of 40 years for $ 7,000 during a regional forestry BOOM in the early 60’s, and I sold the estate home for $104,000 during our forestry bust. I know inflation factors in, but overall my parents had the freedom to do what they wanted in the house and renovate to their hearts’ content all those years. You can’t do that with renting.

Quality of life also needs to be balanced with fiscal responsibility, and after all, you can’t take it with you.

#3 Barb the proof reader on 06.18.09 at 12:27 am

Sorry, Garth, I was mesmerized, trying to figure out what you meant by “Right, pack?”. But then I looked up the word ‘pack’ to see if it jogged a memory..

Of course. Got it:

noun An organized group of criminals, hoodlums, or wrongdoers

Hmm – I think you mean us.

.. or wolves.

Speaking of predators, I heard some news about cougar attacks in BC?

Those older women should be ashamed of themselves.

#4 taxpayer like you on 06.18.09 at 12:35 am

I keep reading where the big mistake was made when people started looking at their home as an “investment” yet nobody does this more than Garth. RJ has simply traded homes, price was only relative.

Now Garth has suggested investing in the banks and oil stocks. Wow, like those are rock solid and never lose value. But yes they can spin off a dividend income.

“So, if you must own a house for your own private
reasons, just do it.” That says it all.

#5 Munch on 06.18.09 at 12:37 am

MWAhahahahahahaha!

Give it to him Garth, right between the eyes!

$400 K bokke and he buys a house???

Woooo-hooooo!

Stupid is as stupid does!

Munch

#6 Dave on 06.18.09 at 12:41 am

9 hyperinflations of the past

http://www.mint.com/blog/finance-core/hyperinflation-the-story-of-9-failed-currencies/

this seems to be a hot topic around here. Some might find the article interesting

#7 Lance on 06.18.09 at 12:44 am

Take it from an ex-Edmontonian… a 25% decline in prices may just be the beginning. We bought a home in Edmonton in 2004 for $175k and sold it in 2008 to a greater fool for $350k. At $175k, the house was already overpriced… so is it entirely conceivable that your $415k house could be worth less than $200k in a few years’ time? Absolutely.

Edmonton is a one trick pony town. As the oil goes, so goes Edmonton real estate… and without jobs, there are precious few compelling reasons to live in a place that only gets 7-8 hours of winter light and temperatures dip to -40. Jack interest rates to 8%, another dip in oil prices and the exodus will begin en masse.

I say rent for sure.

#8 Sean in E-Town on 06.18.09 at 1:28 am

Sir, I judge you for this decision as much as I’d judge anyone for buying an annuity that paid out 5.49% but your principal must remain untouched and will enjoy no nominal appreciation for about 15 years. It’s not a horrible move, though certainly not remotely close to optimal. It’s the bond side of your portfolio, and you’re not 80 years old, so it’s probably not the best asset allocation.

Garth’s right. If you want to do better, you certainly can. Also, you can rent a great 3 bedroom in this city for less than 1900 a month, easily. Heck you can rent a somewhat smallish one for 1200. So do what a not-so-immediately indulgent parent should. Save the difference so you can give your kids a full ride through university or 2 years backpacking through Europe or a 40% down payment on their own home should they desire. Leave a real legacy, not memories of the bigger house we used to live in. I have those, and I’m glad my dad crammed us into a town home when I was 12. I never wanted, had my golf paid for like some kids get their hockey paid for, (FYI, golf’s cheaper than hockey at that age)

Here: Live where I grew up for 1400/month. http://edmonton.en.craigslist.ca/apa/1227218470.html

or here for 1300 http://edmonton.en.craigslist.ca/apa/1227211423.html

Don’t like that neighborhood? Howabout having your kids steps from Mill Creek Ravine for 1350? http://edmonton.en.craigslist.ca/apa/1224311346.html Next to the French quarter (warning: quarter may not actually comprise 25% of city) As well as theatres, shopping, quality schools, and one of the older, established, neighborhoods in the city. Come on, what upwardly mobile Edmontonian doesn’t want to live in Old Strathcona?

Go look some more, sir. You’ll get way more than what you think you can for way less. Wait for liquidity issues to bring house prices down significantly. My own calculations on one bedroom entry level properties and the traditional Edmonton price-rent ratio of 12.5 indicate that if we were down to historic economic values, we’d be looking at 70K or less for a 550 sqft. 1 bedroom. I imagine stubbornness and greater-fool arrogance will keep us in the high 70s / low 80s when all is said and done, and I will likely nod and swallow then.

#9 Mrs Loquacious on 06.18.09 at 2:22 am

Um, RJ ‘s logic seems a little wonky to me. Renting may cost $23K/year, but if the property dropped 25% in 2 years, he’d have lost twice as much as what he would’ve paid to rent for 2 years ($100K lost vs. $46K). PLUS he would be out another $11K for 2 years’ worth of insurance and property tax and maintenance.

Sure, this assumes his home value drops 25% in the upcoming year(s), but given this economic climate, I wouldn’t bet against that happening. But that’s just me, the frugal bear.

#10 Mike (Authentic) on 06.18.09 at 4:59 am

Garth :”You are “fully prepared” to see your house drop in value by a quarter, losing $100,000 in equity?”

Excellent point, one I believe most forget in a falling market. While I do believe eventually (even those who bought at the peek) will recover their money (might be 21 years later) they will. But in those 20 years your money could have done a lot better and not have been beaten up by inflation and QE.

Simple interest will help pay rent as you watch homes go down.

In Calgary we are watching many homes that are still on the market for sale (after 6-18 months) that are averaging a 33% off from original list price. (Examples if anyone wants them). So don’t believe the numbers CREB spews out.

Mike

#11 Bottoms_Up on 06.18.09 at 6:07 am

Easy come, easy go.

#12 David Bakody on 06.18.09 at 6:19 am

“Ditto” another poor federal employee … who must move out of Ottawa perhaps only to return for a promotion …. I have never forgot my visit to Ottawa in the early 80’s (recession) and was shopping and I asked a merchant if there were any sale items …. he said “SALE” if you want to see sale items go to Montreal! My heart bleeds for you RJ!

#13 Basil Fawlty on 06.18.09 at 6:40 am

A buddy moved to Edmonton a year ago and two of us did everything, except beg him not to buy. Well he bought, and at least he is honest enough to admit he should have rented and watched the market soften, without losing equity.
We are still near the top of the largest credit bubble in world history. Yet, people expect even more equity appreciation. Suckers.

#14 Mike B on 06.18.09 at 6:48 am

Question is Rent Where? In Toronto, nice apartments for a family of four is minimum 1700 and houses are easily 2500 -3000 plus utilities. If you can find a deal…key word IF… you will likely need to put cash into it… You are cornered either way…rent is expensive and ok for short term unless you find a deal. Houses here are minimum 550k plus all repairs. I like the theory of renting and also being out of debt but in this city you are truly boxed in…

#15 cj on 06.18.09 at 7:03 am

I call BS…if you can get this guy “at least” a 17% return on his money your in the wrong business.

A 17% return is $70,000. I suggested $25,000 was reasonable. — Garth

#16 Sean in E-Town on 06.18.09 at 7:13 am

“Prediction: If you thought prices were expensive in may 2007 in Edmonton, just wait what 2010 brings.”

I’m guessing a rent-price ratio of 13, Carrie. If prices fall to meet rents, then generations forward will have an actual opportunity to improve their lives by buying a home. If rents rise to meet prices on this god-forsaken stretch of burnt-out-topsoil, then 2010 brings me to a minimum wage job in Winnipeg, 50% down on a $70K bungalow, and more disposable income there than I have ever had here. And if not there than flin flon, or some other small town where a house can be had for less than 50 and a greenhouse is easy to build. Hell, I’d even live in Woolerton *spit*

#17 pbrasseur on 06.18.09 at 7:24 am

Well invested that 400K could easily double in the next 10 years, the same is unlikely for a house unless we get another mega bubble. What is far more propable is that house prices will at best stagnate in years to come.

Blowing all that money on a house right now would be IMHO extremely foolish.

#18 Chris L. on 06.18.09 at 7:36 am

I told this agent ‘like’ at least 10 times the answers to today’s questions he asks today over the course of 8 months. Just read the blog posts. Man, people are immune to reasoning aren’t they. Geez, he’s finally starting to sound desperate! lmao!

http://www.homesinguelph.ca/cs/web/blogs/guelph_real_estate_blog/archive/2009/06/16/why-now-is-a-good-time-to-buy.aspx#1559

“Focusing on one part of our conversation, “buyers appear to be sitting on the fence”. This is one thing that I cannot understand. Yes, I understand that if a buyer is unsure of their job status, that they would be hesitant, but those who are confident that their job is safe have no reason to wait of sit on the sidelines.

The most common comment that I hear is; “I am waiting for the bottom to fall out of the market so I can get a good deal” My comment to this is, you are missing out on the best deal of all, interest rates that are less than 4%! – I know I make my living selling homes and of course, I like it when homes sell, and I would not blame you if you said that I am just trying to give you a sales pitch, but those of you who know me, will agree that I am straight forward and would not throw a sales pitch at you, but rather pass on the plain old truth and honesty to go with it.

Come on people, real estate values in our area and the surrounding areas have not fallen to the bottom of the barrel, on the contrary, they have remained relatively healthy.”

#19 skeptical on 06.18.09 at 8:19 am

What I can say is “easy come, easy go”. You sell high, you buy high.

When it is the home you live in, it is not a disaster when you are not taking on new debt.

However where I live in Ottawa, I am told prices never go down because when the boom ends and prices drop, people wait until the next boom to sell and move on ( I know plenty who have waited 15 years & more in houses that did not suit them anymore, rather than sell low and buy low.

Such is human nature.

But to get back to Garth’s advice, even if banks are a bit uncomfortable to be in at the moment, 3% interest for 5 years is already gone. You can now get 4% with the big banks and it cannot get much lower. There will also be new opportunities coming up; there always are.

#20 Devil's Advocate on 06.18.09 at 8:28 am

The only thing propping real estate values up at this time are artificially low interest rates. The monthly cost of owning a home (save for a larger required down payment), in Kelowna, B.C., today is not a lot more than it was seven years ago even though a median home has increased from $226,000 to $436,000. Why? Because of low interest rates. Mortgage payments on that median home in 2003 after a 25% down would have gone up something in the order of $300 per month taking into consideration a larger down payment requirement and the interest rate differential (using 6.5% for 2003 and 2.5% for 2009 and yes they were that low but not now)

I mean really, in the whole scheme of things, $300 per month is not a whole lot of money. Apparently many agree with me as a whole lot of people seem to think it’s still a better choice to buy than rent. Don’t get me wrong I don’t mean to say I believe so.

Median prices have fallen to $436,000 today from $500,000 this time last year. Median price was as low as $396,000 at the beginning of the year. Interest rates are at historical lows. I can understand how so many think this is the time to jump into the market – cheap money, cheap houses. And so we have experienced a bit of a mini boom over the course of this year thus far. But will it last.

I remember all too clearly those 18% or higher mortgage rates of the 80’s. Will the go that high again? Maybe not, let’s hope not, but I have learned in my years to never say “never”. If rates were to jump to even 8% would cause the payments on that median house in Kelowna to jump by as much as $900 per month. Now I don’t know about you but I figure a $900 per month increase to a median family is a whole lotta cash.

Should interest rates rise so it would better than 30% fall in values to bring the monthly payment back into perspective. I don’t think it’s going to come to that but some equation of falling values and increasing rates is bound to take place after this mini-bubble is through.

#21 dd on 06.18.09 at 8:29 am

“Is the bad time over?”

Too funny. Have families paid down their huge debts yet?

#22 Devil's Advocate on 06.18.09 at 8:42 am

My best advice; If you must buy, consider what you can afford at an interest rate of 8.0%, take the lowest rate you can find and increase the monthly payment to what that 8.0% would have caused them to be. And, if you don’t have 25% to put down, and potentially loose in equity loss, don’t buy in the first place… you can’t afford it.

#23 Bill-Muskoka (NAM) on 06.18.09 at 9:14 am

If you are interested in just how unreal the financial markets are then watch Breaking The Bank on PBS’s ‘Frontline’.

I suggest getting out your Domino set to visualize the action. They all have claimed wealth by buying the debt of their competitors. Reallly simple actually, they had NO wealth to begin with, just paper I.O.U.’s, which is why there will be no recouping the ‘Lost Funds’. They never actually existed except as computer entries for future gains.

The one unaminous conclusion is that the era is OVER. Where did it come from? The fine hallowed halls of academia at Harvard and M.I.T. Business Schools who, like any other seminary of religious teachings, taught them to BELIEVE! Damn that horrid Beast REALITY!

#24 Devil's Advocate on 06.18.09 at 9:17 am

and, yes, I am a “house pimp” (REALTOR).

#25 Da HK Kid on 06.18.09 at 9:18 am

Garth, is the stupidity getting to you yet! Is is to me!

I’m in KL (Kuala Lumpur) these next few days getting my family settled. It’s a buyers market, over leveraged RE lovers getting called in on loans.

As my agent said, there are some smart owners trying to get out right now but very few keen to buy. The others are in some euphoric state of denial. The last group have big bucks and just dont care, for now!

This is what my RE agent is absolutely candid about as she tries to find me 25% off the ask of my new RENTAL.

This will be my last post which says GET OUT NOW! You all are boring me with your BS justifications for buying!

#26 Mike (Authentic) on 06.18.09 at 9:23 am

#1 Carrie ” I get it higher interset rates, higher inventory, but thats slowly gettin eatin up as well. Im not saying you dont have valid points but do you maybe just maybe go to sleep at night thinking this might back fire on you. Prediction: I f you thought prices were expensive in may 2007 in Edmonton just wait what 2010 brings.”

First time poster Carrie. Your profession… Realtor? Non-O&G employee? Edmonton home owner/flipper? Alberta winters are aweful, Edmonton’s worse as they don’t get the Chinook and the city is too much grey concrete, although they do have the “white mile”.

Garth has been right more than not and he has backed up his predictions with facts. Where are your facts to back up what you are saying? We know Taxes will go up, property taxes up, income taxes up, HST (GST+PST) up, services up, interest rates up and even unemployment up.

I don’t think Garth has trouble sleeping at night with his predictions, although if you have money riding on him being wrong then it’s ill lost
loot.

REMEMBER one fact: NO PLACE IS “DIFFERENT” HERE — Not Vancouver, not Calgary, not anywhere in Canada, not anywhere in the USA, not London or Paris or Tokyo…

#20 Devil’s Advocate “The only thing propping real estate values up at this time are artificially low interest rates.”

Too true as well as a lot of new buyers who didn’t do their own due-dilligence and listed to a house salesman (aka Realtor).

Mike

#27 My_View on 06.18.09 at 9:27 am

Wow, the guy paid the house out right in cash. And he did not mention if he has a lot of liquid cash, I assume he does. Yet this blog bashes him for doing so. Unbelievable, why would anyone ask if they should buy or not on this blog, the answer is the same, RENT, don’t even think about it, RENT for crying out loud, just RENT!

#28 Calgary_rip_off on 06.18.09 at 9:29 am

Chris L.:

Always interesting that people who sell properties advise to buy when principals are high and interests are low. That is very bad advice. Interest rates have only one place to go: Up. If interest rates go up, people wont be able to afford high principal houses. The principal rate in calgary makes it so most people cant afford anyway.

#29 Toronto C9 Renter on 06.18.09 at 9:30 am

Even with the most compelling economic predictions, all we can know is that a particular scenario will most likely play out “eventually”. Specific timing, on the the other hand, nobody knows.

There are countless examples
– Jim Rogers says commodities will skyrocket — eventually;
– Peter Schiff says US dollar will depreciate below 50 yen –eventually;
– Some say high inflation and interest rates- eventually;
– Some say Oil at 100$ plus
– Garth says Canadian real estate appreciation will reverse as money becomes more expensive.
– etc, etc, etc.

Many of these theories are logical, reasonable, probable. But specific timing is anybody’s guess.

Personally, if anyone tries to tell me they know “when”, I assume:

1. They are a fool
2. They are a lier
3. They want something from me

#30 infernalmachine on 06.18.09 at 9:33 am

If only any of this applied to the City of Toronto which despite its lackadaisical commitment to transit and its try-too-hard approach to culture is where I would like to buy. But it seems my little city is bucking the downhill trend. Why is this Garth? Should I just rent until 2020?

#31 M I K E on 06.18.09 at 9:47 am

Just a food for thought.

415K at current market price gives you 38,500 per year from one of the monthly income funds from a major bank.

Garth you make it sound so easy to get preferred shares in the banks, They’re usually gobbled up before anyone can touch them.

Cheers

#32 Mathew Gibson on 06.18.09 at 9:51 am

Renting is the right way to go, financially. I think this is pretty clear. But there can be a lot of problems associated with renting, and many additional costs, especially for families with small children, such as RJ.

1. Renting doesn’t allow you to alter the house. Some landlords are more reasonable than others, but many won’t even allow you to repaint a room, let alone put up additional coat hooks near the front door for your young children.

2. Parents want (and need) to give their children experiences. This can include gardening. Most landlords won’t permit you to alter the garden, digging up the lawn to create a space for growing veggies (or setting up a blind to hunt squirrels). Just one example. Others might include a sandpit, or planting a tree.

3. Renting is rarely medium-term. Landlords divorce, decide to sell, or just decide they don’t like you. The result is always the same, having to move on. Fine if you are a single person and can load everything into the back of a car; terrible if you have a family, especially one with young kids. And it can be expensive. And soak up a lot of weekends when you could be otherwise having quality time.

4. Changing location frequently can also be really disruptive to the ability of your children to cement friendships and propser at school. You can say “Well try and see your freinds often” but the reality is that it doesn’t happen, and they have to start from scratch again, which isn’t as easy as you might think.

There’s a lot more to the rent/buy equation for families (especially those with younger children) than the simple dollars and ‘sense’ that someone without children might consider.

#33 Bill-Muskoka (NAM) on 06.18.09 at 10:03 am

Speaking of predators, I heard some news about cougar attacks in BC?

Those older women should be ashamed of themselves.
#3 Barb the proof reader

OMG, I almost spewed my tea out over that one Barb. ROFLMAO! What a line!

I am still wondering where all those Cougars were when I was a young man? “Hello Mrs. Robinson!”

#34 Munch on 06.18.09 at 10:06 am

Hey Buddy

If you’re “quite prepared” to lose money, then throw it my way – I’m extraordinarily prepared to receive it!

At least this way you’ll know who to hate when you lie awake at night boiling in bitterness.

Munch

#35 Bill-Muskoka (NAM) on 06.18.09 at 10:16 am

Garth,

Perhaps you have forgotten what it is like to be a younger man and have dreams for your family’s future? I see the key to the letter from RJ as being:

‘I have the money, the honey, and I want my children to have the things I had! (or did not?)’

All very honourable and healthy. There is a lot more to a family than just money. It is very important, but should not be the sole basis for decision making. I think RJ did a smart analysis and chose wisely. He seems to have a solid job, a defined term of location, and did well with his former residence at sale.

A key factor is the freedom (provided you have the funds to do so) of rennovating/remodeling a place to make it YOUR home! That is where owning versus renting becomes a rather neglected part of the human pysche.

We just finished a major patio project, and the pride in having done it for us is truly priceless. It didn’t cost much (about $400) in materials, a lot of sweat labour, but compared to the POS Aspenite platform that was there it is beautiful. I can say ‘I built that!’, and I guess there is a lobe in my brain that needs to be fed occassionally? Part of being human!

#36 PTDBD on 06.18.09 at 10:31 am

Alberta to borrow $5 bbbbbbillion?

At $20 oil things ran quite smoothly. At $70 oil they run up a deficit? Hmmmmmm….!!!

#37 bigpictureguy on 06.18.09 at 10:36 am

RJ already pulled the trigger to purchase a home but yet he still needed to confirm his decision with Garth?

As Garth clearly pointed out RJ justified the rent vs buy calcs by skewing and favouring “buy”. But let’s put that aside for a moment. I laugh when people say I can live with a 20% drop in the short term as their time horizon is a 10 year hold. I know a HK person who purchased in 1987 and cannot unload their million dollar condo in downtown toronto on Front and University at break even after spending 200K in upgrades.

The problem with this assumption is that this depression is a “normal one” with a regular 8-10 year cycle. If you think 2008 Q3/Q4 drop has passed and the worst is over you haven’t seen anything yet. This will be a very long and protracted one.

The problem is the average “joe blow” cannot grasp the seriousness and complexity of the situation and key catalysts. Also other “experts” in the past have cried “doom” with previous recessions and the market bounced back fairly quickly.

Garth let the sheep get slaughtered. They can only see what’s in front of their nose – low interest rates and slight pull back on real estate price.

What people can’t conceptualize long term is that there will be a huge paradigm structural shift on consumption behavior and health care due to boomers and aging population.

This will have a dramatic implications across government, taxes, companies and real estate.

When that equity of $415K takes a 40% hit let’s see and test if the the 10 years of patience will hold. For some reason people can “live” with this with RE. Must be because of the “BOOMER” model of the last 20 years of everything must go up. The problem is they didn’t factor in their own “black swans” of spending behavior and greed.

#38 Keith in Calgary on 06.18.09 at 10:44 am

Gee….let’s see…..he is obsessing about the miniscule differential result of a rent to own calculation, which BTW is flawed, as you can rent a nice house in Edmonton for $1,500…..spending $1,900-2,000 isn’t really necessary……..

Yet he is fully prepared lose $100K of his own cash to buy it…….so, why bother with rent to own calculations…….? Just do it…….the title of this blog describes him perfectly.

#39 Flip on 06.18.09 at 10:44 am

lol… I think he is the greater fool I unloaded my house to in May!

A few things don’t sound right with RJ’s statements:

You can rent a $750,000 house for $1900 to $2000 per month in Edmonton right now – arguably, out-of-towners may not know where to look… I suggest Kijiji.ca, Craigslist.com, rentboard.ca or rentfaster.ca as online resources.

RJ’s IRR (internal rate of return) is only 3%??? He is either super conservative – or a realtor trying to make a case in ownership/purchasing utilizing “kids need a home, not a rental” as an emotional sales pitch.

BTW… taxes on a $415k house in Edmonton is not $4000/year – more like $2600 – although this works in purchasing’ favour.

#40 Freedom85 on 06.18.09 at 10:46 am

Hi Folks,
Interest rates are the lowest in history of interest rates and central banks. Bank derivatives are the wild card that will be the game changer. The last crisis was caused by sub prime lending (mainly US banks) and credit default swaps (AIG). CDS represent 7%of the overall derivative market and it helped to cause significant crisis. Interest rate derivatives represent a significant percentage more (90+% of outstanding derivatives) and interest rate have the potential to become more volatile over the next two/three years. To be profitable, derivatives models require stability of rates. When interest rates become more unstable as a result of the bond market breaking down, both long end and short end interst rates will start to render these derivatives less profitable. Canadian financial institutions will not escape this problem. God help us if the day comes when one of these institutions can’t roll over their short term debt. We’ll have much bigger concerns than buying houses…….

#41 bigpictureguy on 06.18.09 at 10:54 am

” Bill-Muskoka (NAM) on 06.18.09 at 10:16 am
Garth,

Perhaps you have forgotten what it is like to be a younger man and have dreams for your family’s future? I see the key to the letter from RJ as being:

‘I have the money, the honey, and I want my children to have the things I had! (or did not?)’”

If RJ is truly happy with his decision and after weighing out the pros and cons and can live with the worst case scenarios IF they happen, then why even send an email to Garth?

Garth’s message is about informing potential risks, timing and probabilities of occurrence. RJ reviewed and weighed out both qualitative and quantitative factors. RJ obviously felt that there is little down side risk in the long term.

I’m sure Garth stance is “why buy now with so much uncertainty and risk”? If the market dropped 20% in short term that’s 80K or 130K before tax! That’s a significant discount worth waiting for no? Or is that the price he is willing to pay for a peace of mind of owning a home?

Funny how people will negotiate like a pit bull for a simple item with the locals while vacationing in a third world country but they don’t mind walking away from a potential 130K discount.

#42 squidly77 on 06.18.09 at 10:58 am

carrie said

Prediction: I f you thought prices were expensive in may 2007 in Edmonton just wait what 2010 brings

me too…the price shock will sink you
may 2007….$451,900
may 2008….$397,414
may 2009….$373,197
may 2010….$308,756* EST

#43 D from London, ON on 06.18.09 at 11:03 am

#23 – Bill-Muskoka (NAM)

There were far fewer Mrs. Robinsons in your day due to demographics (and for this you can shake your fist at previous generations!). Since you are a 1st cohort boomer, your Mrs. Robinsons would have had to be born in the Great Depression and during WWII. A glance at a chart of birth rates during those unfortunate decades would show that birth rates were low, while in your time they were off the clock. Therefore the ratio of Mrs. Robinsons to Bills was quite low (…but I suppose it was ‘happy hunting’ times for MR. Robinson!).

The reverse is true today – lots of Mrs. Robinson boomers and Gen Xers compared to the declining birth rates of young Gen Y/Millenial Bills…therefore the current explosion in older women/younger man relationships (and I suppose much less opportunities for boomer and Gen Xer Mr. Robinsons…).

#44 Greg W., Oakville on 06.18.09 at 11:07 am

Hi #86 . . . fried eggs and spam . . . on 06.17.09 at 9:54 pm,

FYI anyone, re: public water fluoridation

Why public water fluoridation needed to end now!

The latest ‘good’ science from around the world is pointing/’screaming’ that it is doing much harm to the human brain and body! (I attended the UofToronto world fluoride conference in Aug 2008; ‘its effects on the brain and soft tissues of the body’. (I wanted to here first hand from the scientist and researchers from around the world about the good science based evidence regarding fluorides effects; all of witch is toxic/bad for your body. I now do not drink the city water with fluoride added and use glass or stainless steel water bottles, not BPH containing plastic bottles.)

http://www.fluoridealert.org/

This link above contains good information based on the latest good science evidence. Not to mention the number of PhD’s, Medical Doctor, Dental Researchers and even Nobel Prize Winners, calling for the end of artificial water fluoridation!

With the ever growing list of medical and disease issues related to fluoride exposure how could any critical-thinking, informed, ethical person still think forcing everyone/human beings to consume fluoride compounds by added them to public drinking water (and some heavy metals also.) is still justified is unbelievable (Quit Mad or perhaps a Sociopath?).

If you take just one disease associated with fluoride exposed, how could any ethical and informed person in good conscious not want public water fluoridation to STOP now?

What other fluoride exposures do you have besides some western public drinking water?
See the fluoridealert.ORG link above, left column, under the ‘health effects database’, the ‘sources of fluoride exposure’.

Get informed for your own family’s health.
Brital water filters do NOT remove fluoride!
Reverse osmoses with an ion exchange filter can remove fluoride. The home units work but you don’t know when they stop working.

Even the basic science has still not been done regarding skin abortion of fluoride in baths, showers, pools and hot tubes. Don’t you think this type of basic science should have been done before public water fluoridation was ever started? And why wasn’t it???

Tell your governments and tell then to stop artificial water fluoridation NOW! Be prepared to run for office to get the job done for your families and fellow human beings health in your area.

The India Governments safe water drinking laws has a rider regarding fluoride in the water that says ‘the lesser the better’. India has the basic lab equipment (~$2,500) to test blood and urine levels of fluoride before treating illnesses/symptoms that might be because of fluoride. Why can’t your western medical Doctor get this simple testing done here???

‘Believe in myth avoids the discomfort of thought’.

Another source/link for good information is
‘ the FLUORIDE Journal’
http://www.fluoride-journal.com/

#45 RJ on 06.18.09 at 11:18 am

Guilty as charged I was conflicted. I have made my choice, however and sleep just fine. But a few points in rebuttal:

If there is a guaranteed 6.25 % after tax return (25 K per year on 400K) out there I would love to know what it is, but think that rate of return in today’s climate has to have a risk premium built in which means the income stream may not always be there to pay for my rental accommodations.

If primary residence decreases in value and I need to move within Canada it is quite likely that the house I end up buying elsewhere has gone down as well.

Renting for the short term would be me trying to time the market and any subsequent moves as landlords decided to take their properties of the market (yes I realize it is a choice want to continue to live in a single family dwelling) would be non-deductible costs of renting.

In terms of my numbers being wacky I took the 3% GIC figure from your November 2008 post and I currently have no TFSA, RESP or RRSP contribution room and will be more than able to continue to max out these going forward as my cash flow will be increased by not having mortgage payments. This guaranteed increase in cash flow also allows my wife to continue to be a stay at home mom.

I agree that property taxes and maintenance are paid in after tax dollars, but so is rent.

My point was simply that even if you are a real estate bear (I think I am) there may be times it makes sense for a person. That doesn’t mean that I want to lose 100 K in equity, but amortized over the next ten years I will have still lived rent and mortgage free in the home and that has to be worth something. Also ten years from now there may be no loss in value or there may even be a very modest inflation adjusted increase (after all the peak of the market was 2 years ago in Edmonton)

From Garth’s post I take it, given the strong downside risk he foresees, he believes it can only make sense for personal reasons and not financial. He may be right, but I can’t help but think since none of us has a crystal ball that all alternatives also have real risks (peak oil may not happen and bank preferred shares dividends could be overwhelmed by depreciation in share price).

Thanks also for the opinions of the pack they are almost always thought provoking.

#46 Jam on 06.18.09 at 11:21 am

Garth,

You have always said variable is the cheapest rate to go as you can always lock in.
Is now the time?!
I thought you said rates would be low at least for a year yet, long term have just gone up.
LOCK IN OR WAIT?!!!

#47 Got A Watch on 06.18.09 at 11:28 am

There are no “solid” jobs in Canada these days, except in Government, the vampiric blood sucker career for those who could not make it in the private sector. The last bubble of bubble heads. If we fired every Government employee today, no one else would notice.

If the economy does not turn around by next year, which looks highly unlikely to me, even the last bastion of delusion, the Government Union member, will be in danger of a layoff. And the private sector will down-size again, and then one more time, if they don’t go out of business altogether.

Anyone who buys real estate in this environment is the definition of ‘The Greater Fool’. Good luck, you’ll need it. And no sympathy from me for idiots.

Real estate is just sliding down the slippery ‘Slope of Hope’. Seeing how many clueless people there are, still, the bottom is many years away yet.

Since postponing the inevitable has never worked for long, the present situation in Canadian real estate is just making things worse, by presenting the illusion that if you buy now at these prices you will be fine.

The last to board the train will take the biggest financial hit. If you bought before ’98 and did not re-fi, you will be fine. Most everyone else will end up underwater.

If you think it can’t happen here, you are truly ignorant. I was a Realt(ho)r (TM) back in a previous bust in Ontario real estate (’89-’92 roughly) – it was common to see people “walk- away” then. I remember entire townhouse complexes in Brampton with a ‘For Sale’ sign on almost every lawn, all vacant with lock-boxes, looking pretty forlorn. Everyone was selling, and nobody was buying, and prices plunged.

Some bravely stupid people I know personally were underwater on their mortgage for about 12 years, in Mississauga, until the value of their house finally climbed back to what they paid in ~’91.

It will happen this way again, and it won’t be the first or last time. Real estate has it’s clear boom’n’bust pattern, like any other market.

#48 PTDBD on 06.18.09 at 11:33 am

The Great Disconnect

Increasingly, the media spin is getting more and more confusing.

The comments in response to an Washington Times article about The Federal Reserve illustrate the breadth of this disconnect.

http://www.washingtontimes.com/news/2009/jun/16/plan-gives-fed-sweeping-power-over-companies/comments/?cpage=2

You are not familiar with the Federal Reserve? The Wikipedia summary is an eye opener. They control your life!

– I hear that the economy is improving, yet Airline employees are being asked to work for free

– I hear that GM went bankrupt and asked our government for money, yet I constantly see their optimistic commercials on TV telling me how progressive and “in business” they are.

– I hear that the housing market has bottomed, yet the Federal Reserve still creates money out of thin air to buy debt of Freddie Mac which buys the mortgages.

– I hear that we are in deflation from the nice lady on the morning news. She goes on to say that she will now list the things going down. She mentions that gasoline is up but is way below the record levels of last year. She says that food is up 6%. She then stops her broadcast. (short list)

#49 Barb the proof reader on 06.18.09 at 12:04 pm

Garth, your numbers add up, RJ should have rented. But, given the importance of location, location, location, RJ factored he’d have to move a couple of times. Moving can be stressful for some people. RJ decided he would personally shoulder the guilt of losing lots of money so that his family would not have to face moving. (I think he got it wrong about kids when he said ‘roots’ — too sentimental — stress could be considered though).

What RJ has done is that he’s ‘pre-spent’ or gambled a big, huge whack of money in order to protect his family from the possible future of a potential risk of the chance there’d be stress from moving a couple of times. Is that value? Nuh, but then, perception is everything.

#50 Alex on 06.18.09 at 12:07 pm

“Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.”

Avoid debt!

#51 Dave on 06.18.09 at 12:08 pm

In Toronto, nice apartments for a family of four is minimum 1700 and houses are easily 2500 -3000 plus utilities.

——————————————————

this is with a live- in butler right? Have a look outside of the bridal path area

#52 Wealthy Renter on 06.18.09 at 12:11 pm

I really appreciate this post. We are in the exact same position. My wife and I have crossed the $400K threshold for a downpayment. While we are in no panic to buy a house, we don’t have the stomach for the markets. I lost thousands in the dotcom bomb, and we avoided the recent cash with our money making 4%. My wife put 20K in mutual funds as a post doc ten years ago, and to date, the returns are negative.

Rationally, my wife and I believe Garth’s assessment that the markets will recover first, and perhaps take flight. My wife is a Chinese immigrant and grew up where people were half starving (no kidding, she ate black flour and can tell which tree leaves can be used in rice.) We are risk adverse, and we will save enough to retire. We are not sinking most of our money in the market.

Mike B,
I agree with every single word you wrote about renting in Toronto. The stock of rental housing in west Toronto is pretty much shite and expensive, which I think has contributed to the recent housing boom in the GTA. Dropping a million for an “exclusive” mcmansion is folly and so is dropping $550K for a 1962 bungalow which needs work in a B- neighbourhood.

So, we rent and wait. Life is wonderful. Our kids are healthy and happy, and my gosh, the CAS has come to take them away for not having a backyard. We have plenty of food on the table and simple needs.

#53 Nathan in Edmonton on 06.18.09 at 12:36 pm

This guy traded one over price house for another, and now owns a paid off house – not a bad position to be in.
Dmitry Orlov’s blog features a massively detailed new post of our current condition; it’s defiantly worth a read. Topic 13. Fastest way to lose all your money stands out. http://cluborlov.blogspot.com/

#54 bigpictureguy on 06.18.09 at 12:39 pm

The key difference with RJ and others is that he has 0 debt/mortgage risk and cost.

Just principle risks and losing out on better returns in exchange for stability and peace of mind.

His gamble? Only potentially losing 20% principle long term. My bet is 40-50% haircut on top of the current discount he bought at.

Edmonton is not Vancouver or Toronto or Calgary. The fundamentals don’t justify or support existing prices. That’s the bottom line. Accept or Deny.

#55 Barb the proof reader on 06.18.09 at 12:55 pm

16 Sean ETown Hell I’d even live in Woolerton (spit)

Hilarious Sean, fond Corner Gas memory (lol).
No Woolerton (spit) clip, but did find 1st scene:
http://tinyurl.com/dfclx8

#56 bigpictureguy on 06.18.09 at 1:08 pm

RJ,

Check this out. Right in your neck of the woods.

Edmonton Housing Bust Blogg
http://www.blogcatalog.com/blog/edmonton-housing-bust

See this chart? Comparing Edmonton vs select major US and Canadian Cities. Incredible… Edmonton is the most bubbliest! Edmonton is the solid line with the highest peak. Like I said earlier. You ain’t seen nothing yet in terms of drop – bank on major correction of 50% haircut. On top of existing discount.

http://dynamic-evolution.com/ehb/090122uscanii.jpg

#57 Barb the proof reader on 06.18.09 at 1:17 pm

10 Mike (Authentic Calgary.. we are watching many homes.. still on the market.. 6-18 months.. averaging 33% off original price (Examples if anyone wants

Mike, I’ll back what you said.
There’s a mix in my hood; granted, there’s some projects re-starting, but that’s far overshadowed by the long-term ‘for sale signs’, empty houses, new rentals formerly owner-occupied, strange appearance of ‘for rent’ signs.. rarity in yrs past, and houses that never sold after 2 years but the builder either moved in or has an acquaintance squatting. And yes, so far prices are down fairly dramatically.

#58 bigpictureguy on 06.18.09 at 1:19 pm

RJ,

Check this out. Apparently it’s not different in Edmonton.

Edmonton Housing Bust Blogg
http://www.blogcatalog.com/blog/edmonton-housing-bust

Edmonton Prices vs other select major cities. Surprise! Edmonton is the most bubbliest. Bank on a 50% haircut.

http://dynamic-evolution.com/ehb/090122uscanii.jpg

#59 Calgary_rip_off on 06.18.09 at 1:20 pm

If interest rates go up, the word in Calgary will be “Noone leaves and noone comes”. The ultimate in a stagnant mess. In the words of my landlord: “You’ll be renting forever here”.

It’s a waiting game. Wait until the right moment to tell him and all the other landlords to start packing because you refuse to subsidize their evil capital.

#60 JAY on 06.18.09 at 1:22 pm

Squidly says..

me too…the price shock will sink you
may 2007….$451,900
may 2008….$397,414
may 2009….$373,197
may 2010….$308,756* EST

Hey Squidly you aint playing in the Alberta bubble sandbox anymore. How do you figure prices will go down with oil at $100 soon and natural gas on its way up soon. Interset rates will rise but at the height of the boom a five year fixed was 7.25. So it will not make that much of a difference strong in migation and employement as well with projects resuming there is alot of positives for real estate.

#61 Repatriated Expat on 06.18.09 at 1:35 pm

Heard a stat on the radio this morning I believe that was from CIBC:

– Home ownership at record levels, 68%
– 9% are second homes

If for no other reason, this shows how over-invested housing is compared to traditional rates of home ownership.

From a general market perspective I’m glad people are still buying houses, I no longer have the wherewithal to experience too many more inflated asset busts. Thus I rent. All the same I still don’t want to hear about the carnage in the event of a housing bust.

Probably the biggest thing that keeps me out of the housing market is realtor fees. I seem to end up moving every 3 -5 years. An estimate of realtor fees I paid for in selling 3 properites over the last decade assuming 5% of sales price is almost $40,000. Somehow I doubt that the realtors spent 2000 man-hours (50 weeks full-time).

My last realtor worked at Walmart before she took the community college realtor course. I hired her because she was a co-workers wife, she seemed capable enough, and she suggested a lower price point than the more experienced realtors. At that point I just wanted out of the US market before the other shoe fell.

I would have made out ok on the last sale, if it weren’t for the realtor fees. In my case it was a financial wash with no gain or loss, but I’m still so greatful just to be out of that NV market.

The small town I lived in measured the housing collapse in 100K increments. When I sold, houses over 300k weren’t selling. Then a year later, houses over 200k weren’t selling. I stopped asking at that point.

#62 My_View on 06.18.09 at 1:37 pm

#45 RJ

Nice post, I am in the same situation as you, more or less. The herd on this blog will always be negative no matter what. Some here are praying for double digit rates, which will solve everything. It’s interesting that we all gather here for the love of (eventually owning) a home and Garth of course but mention home ownership and it’s the 21st century plague. I strongly agree with you on the markets, I took a beating on tech stocks, and 1 of my risky RRSP’s didn`t pan out too good. So what if my home value goes down. I’m not selling, I’m living. It’s not timing the market; it’s your time in the market.

#63 Rasputin on 06.18.09 at 1:42 pm

RE Post # 10 – Mike (Authentic)
I hear you. Out in Redwood Meadows where my ex lives, the same 20 houses have been for sale for the past 5 months. It’s not an entry level area so no wet behind the ears rookies are looking to buy out here. Some of these houses have been on and off the market for well over a year. Get this. They are asking for 10% more than what the (few) houses sold for last year. No one seems to be facing reality out here in rural Alberta either. So right now it’s a stare down between buyers and sellers. Actually the sellers are staring and the buyers don’t exist. Who is gonna blink?

#64 JeffinPickering on 06.18.09 at 1:43 pm

Further to #46, when is the right time to pull the trigger on fixed?

We bought a house last fall, got a sub-prime mortgage (prime – 1/2 pt), and the house we bought was well within our means (our mortgage is 1/3 of what we were approved for, and we put $70K down).
We are paying bi-weekly and maximizing our payments now with the rates so low.

Obviously, right now, there is way too much spread between fixed and variable to pull the trigger, but how close should one let them get before locking in?

#65 David on 06.18.09 at 2:10 pm

Reading letters like those of RJ, make me think this guy has already formulated a conclusion and is looking for the discrete answer that “proves” his conclusion is the correct one. No one in his right mind would invest $415K exclusively in one asset class like a GIC 3% return in perpetuity. Returns are likely to vary with market conditions over the time you are living in one place.
That definition of roots is specious. “My Mom and Dad own a McMansion is South Edmonton, ergo, I have ROOTS”. RJ must have a special place in his heart for thousands of rootless children in Edmonton whose parents rent and through great adversity manage to bring up their children.

#66 Nostradamus jr. on 06.18.09 at 2:55 pm

Mike authentic, Vancouver Bear, dd et al,

Now is the time to gather all your friends/relatives to buy a home on the North Shore here in Vancouver.

…As the safest place in the world during these turbulent times…sharing a 4 bedrm, 2 bathhome amongst 4 families will be fun…as long as one is living in Paradise.

#67 ts harpoon on 06.18.09 at 2:57 pm

OFF topic: “The American Empire Is Bankrupt”

(I believe we are tied to the hip to America)

“Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt.”

http://www.truthdig.com/report/item/20090614_the_american_empire_is_bankrupt/

#68 squidly77 on 06.18.09 at 3:00 pm

jay
you have already taken an $80,000 hit and yet you still dont get it !!
where abouts is the oil located in edmonton last time i checked it came from ft mac and that 440 km away sraight up the hwy of death (63)

you may wish to read this….
Natural gas is the largest single source of resource development revenue for Albertans, accounting for more than $42.6 billion in royalties paid to the Government of Alberta from fiscal 2000/2001 to fiscal 2006/2007. This total represents about 63 per cent of all provincial revenue from non-renewable resources over that period.
http://www.energy.gov.ab.ca/NaturalGas/Gas.asp

#69 PTDBD on 06.18.09 at 3:08 pm

oh my, what do I spy?
Why it’s a perpetual prosperity paperprestidigitizer recovery machine!

While people here are taking the mortgage gears apart and examining them in fine detail, please factor the prestidigitizer into your calculations. (Divide all by infinity)

– grunts are being heard that The Fed will have to add further stimulus and if they don’t then we will go into the Double Dip that brought on the Depression. But, quantitive easing does have its problems, therefore the Fed needs the power to sell debt to shrink their balance sheet. Who will they sell to? Maybe Freddie Mac? (see Romer on Bloomberg)

British banks will need more capital to finance the recovery as governments print more money says the czar of Moral Hazard.

#70 squidly77 on 06.18.09 at 3:09 pm

it amazes me that people like jay who has made the biggest financial transaction hes ever likely to make doesnt understand the economy of his own province
natural gas price chart

Alberta will take in more money from gambling than it will from oilsands royalties, according to provincial budget forecasts for 2009-10.
http://www.cbc.ca/canada/calgary/story/2009/04/27/cgy-alberta-gambling-revenues.html

#71 DM in C on 06.18.09 at 3:13 pm

I agree with David #65. I find the ‘roots’ argument to buy a house questionable. Kids are very accommodating and adventurous. Perhaps it’s the parents who want/need the ‘roots’

Over the last 10 years we have moved to three provinces, owned two houses and rented six.

Our boys have had the opportunity to experience life in a big city, small town and places in between. Thanks to social networking they are still in contact with friends from each place — moving nowadays doesn’t mean you leave relationships behind (like when I was a kid).

Families provide the roots — not houses. Our boys are well adjusted because we sit down and have dinner together as a family every night. We can because we’re not working two jobs to afford a mortgage so a house can give us ‘roots’.

Illiquid roots tied to a house would have prevented me from taking job offers across the country. I’m still not sure I want to buy where we are now. Definitely not in this market, regardless.

#72 JoeCalgary on 06.18.09 at 3:15 pm

Follow-up to comments re fake protesters of the other day:

http://www.commentarymagazine.com/blogs/index.php/totten/70412#comments

Massive mourning rallies now begin, right out of the 1979 playbook.

Mad mullahs, your days are numbered!

#73 Bill-Muskoka (NAM) on 06.18.09 at 3:18 pm

#43 D from London, ON

Thanks for the keen analysis. Just my luck! LOL All we had to choose from were the few who would, and most would not! What ever happened to good old fashioned ‘mentoring’ back then, eh? Ah, well, maybe the next go around (if there is one???) things will be different? Techno-Sex via 3-D holographic imagery, Direct To Brain Stimsim (i.e., Brainstorm), and no STD’s? ;-)

#74 rjag2034 on 06.18.09 at 3:22 pm

Hold on here, he bought the house clear title, so all he’s done is parked his money thats it. Doesnt matter where the prices go until he needs or has to sell. Until that time, its parked.

If he was only going to stay there 2 years then sure its a problem, but 5 years or even 10, who knows what’ll happen.

In the meantime its like he buried it in the back yard thats all.

#75 Barb the proof reader on 06.18.09 at 3:39 pm

Garth, O/T but do politics beckon? Change has gotta happen, and it will come, if good people step forward, like this senior official inside Transport Canada, blowing the stimulus whistle?

http://contrarian.ca/?p=1003

… and this one:
Federal Tories appear to be using infrastructure stimulus spending to reward Conservative ridings

http://thechronicleherald.ca/Front/1127819.html

… I never get tired of seeing really bad pics of Baird
http://www.nationalnewswatch.com/index.php?option=com_frontpage&Itemid=1

#76 Investor on 06.18.09 at 3:58 pm

ts harpoon

OFF topic: “The American Empire Is Bankrupt”

Obviously you have not taken an accounting class. Saying that US is bankrupt without any hard data is just pure ignorance. Ah article like this obviously show up when times are bad, but once this turns around this article will be a distant memory. I can bet you if US sold off all of its assets it would be swimming in cash.

Plenty of people wrote of the British Empire long time ago and somehow the Brits have managed to come back every single time.

#77 Eduardo on 06.18.09 at 3:59 pm

Squidly,

The oil sands royalty rates are a function of when the projects pay out their capital. They only pay 1-5% until they payout the project, then 25-30% after. The majority of the royalties are coming down the road.

Also Squidster, royalties aren’t the only sources of income from these large projects, they also employ thousands which pay income tax and spend $ in Alberta.

Natural gas is also a declining industry in Alberta. Tight gas is still truckign along but the majority of North American gas growth is in the US shales and in BC. Granted, I acknowledge the important of NG to the juniors and drillers (who account for the majority of non-construction related unemployment in Alberta).

Also, if oil price is going to be 100 as Garth predicted, us Albertans are going to be struggling to find a place to put our cash and it will go back to us getting pillaged by the rest of the country.

Either shut the #$% up when our economy is doing poorly or shut the @#$* up and don’t ask for monstrous transfer payments when we are booming.

If we didn’t get pillaged every time we boom then maybe our economy would be more diverse.

Also, Squidly. Edmonton does have oil and gas related industry. It is a major pipeline hub, has a Petro-Can Refinery, Shell Refinery/Upgrader, Imperial Oil refinery and related chemical plants.

It is also the future site of all non-Fort McMurray upgraders because of the features above.

#78 Bonnie N BC on 06.18.09 at 4:10 pm

Please indulge me Garth

Okay this has nothing to do with real estate although my husband thinks my doom and gloom about the real estate market in BC is so negative and unfounded. (Never mind…)

Don Newman will have a final Friday show tomorrow which will celebrate his years in broadcasting. I encourage all of you to watch as he deserves our respect for his balanced reporting over the years.

#79 Eduardo on 06.18.09 at 4:14 pm

I forgot to add Squidly that the lots of equipment for those refineries and Fort McMurray is made in fab shops in Edmonton.

Either you don’t know all this or you’re just making outrageous comments to attack Jay.

#80 CM on 06.18.09 at 4:16 pm

Barb, the cougar attack comment was…perfect!
—–
Garth, I’ll see if I can find that squirrel recipe in my mom’s old cookbook.
—–
The future economy – everybody is going their own way. Alliances are being forged and deals being done. Where the U.S. would once have been calling the shots, they are now not invited to the meetings, even in an observer status.

But yesterday, the U.S. house agreed to $106M (billion?) more for war funding. Where is this supposed to be coming from? Roll the presses – here it comes. This is madness.

From economist Michael Hudson:

The Ending of America’s Financial-Military Empire

http://www.counterpunch.org/hudson06152009.html

#81 smw on 06.18.09 at 4:32 pm

#60 JAY

Its not supply and demand driving the price of oil, its speculation and USA monetary inflation.

And just to add, the USA is threatening to unless some of its strategic petroleum reserves.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=200906171404dowjonesdjonline000772&title=us-reps-file-bill-to-tap-spr-to-counter-oil-price-rise

http://www.forbes.com/2009/06/18/oil-paolo-scaroni-eni-business-energy-oil-markets.html

Maybe the only way the USA can pay China back.

#82 Harry (not S) on 06.18.09 at 4:33 pm

#25 Da HK Kid said: “I’m in KL (Kuala Lumpur) these next few days getting my family settled.”

Have a great time in KL. I stayed in KL for 4 years back in the 80s. My first year was in PJ, and the rest of the time in Bangsar.

You are in a good place. Once you start getting into Malaysian cuisine there will be no going back!

I moved back to Canada because it seemed to make sense from a 30-something point of view. From my current age-52 frame of reference, the prospect of reading all your future postings on the merits of life in KL fill me with envy.

I expect that once I retire I will be spending winters in Malaysia. My destination of choice will be Penang. It’s less polluted than KL and only a couple of hours of driving gets you to the Thai border.

You are so lucky to be able to walk to the local pasar malam to pick up some choice durians.

I rented all the time I stayed in KL. At one time I stayed in a brand new link house in Bangsar (fancy expat neighbourhood, for those unfamiliar with KL). It probably had at least 2000 sf. I can’t recall the price, but it was perhaps 25% of what such a place would cost in Canada. Our property manager put us in touch with a local woman who came in several times a week to do all our house cleaning and laundry. The wages for this sort of service are incomprehensibly low by Canadian standards. Life in KL is good.

Harry (not S)

#83 smw on 06.18.09 at 4:44 pm

#26 Mike (Authentic)

On your point of artificially low rates:

http://ca.finance.yahoo.com/q/bc?s=^TYX&t=6m

Canada, on the collective of the “G” nations followed the majority down to 0.25%.

And, on the collective, we’ll follow them up.

#84 Calgary_the_prize on 06.18.09 at 4:46 pm

Jay:

WHAT exactly is positive about real estate in Calgary?

1)$200K above real value.
2)too close together houses.
3)no trees.
4)bad traffic.
5)crappy municipal and federal government.
6)interest rates to rise.

You too can become an ant fighting in a hill of ants. Anyone who wants to move here, its no picnic. Dont expect to get ahead here in Calgary renting or buying. Perhaps you should review the stats. 2005: Median house price about $250K. 2007: Median $450K. $200K in two years? YOU WANT TO SUPPORT THAT? That’s the definition of INSANITY.

#85 Barb the proof reader on 06.18.09 at 4:48 pm

Besides all the economic turmoil & tricks, there is one bottom line that will start to unfold like a snowball downhill.. and no one disputes it. Boomers will be cashing-in houses for retirement.
What’s to stop that avalanche? Nothing.
In due course, people will be disappointed, and a few devastated, by the price they get for their big house.

#86 DM on 06.18.09 at 4:55 pm

“Bank of Canada says bank capital ratios too high” – REUTERS June 18, 2009
“Canadian banks, ranked as the world’s soundest, should use their large capital cushions to increase lending now that financial market uncertainty has abated, the Bank of Canada suggested on Thursday.”
“the bank’s conditional pledge to keep its key interest rate at a historic low of 0.25 percent until the end of June next year, and noted the bank could ease credit further if needed through unconventional measures.

WTF? Why are our politicians and bureaucrats such idiots? Or are we the idoits for not calling them out for screwing with us right now? Wait until all these policies cause us to become even more screwed later!

But is anyone really going to complain when $$$ is just being thrown at us? Will we ever realize that easy McLoans are just a fast ticket to McBankruptcies because they’re not based on sound economic fundamentals?

GOD HELP US!!!!

#87 Victoria Boy on 06.18.09 at 5:03 pm

My wife and I just had our second baby. We currently own our home (valued at approx 475K now, and owe 200). Neither of us make serious money (30K + 50K). We live simply and conserve where we can. Our second car is a scooter to save money (which has alreay paid for itself 2x over).

My wife does not want to go back to work after mat leave, so she has decided to do a daycare to earn some income. Needless to say, we started to look for a bigger home about 8 months ago (one that could more easily facilitate a daycare). So we started fixing up the house in order to get maximum dollar for it (bathroom reno, new paint, etc, etc).

After calculating the costs for a realtor, property transfer tax, closing costs, etc, we realized we would be 30K in the hole before we even moved out. Unacceptable! Instead, we are spending 10K in renovations and are hunkering down for the long haul.

If people continually try to upgrade (by moving) they put themselves at a big disadvantage. For those of us that dont make alot, a move every 5 years puts you back finantially 150K (before inflation) over 25 years. Inflation can easily double or tripple that, and thats before interest, taxes, or anything else. Whats worse, you have NOTHING to show for it (thats not buying you any more house, thats just the fees). My in-laws have lived in their current place for 35 years.

My point? There is some real wisdom there….

Garth – Reading “After the Crash” now. I hope your wrong, but suspect your right. Preparations are under way, just in case. And a big ‘Thank You!” for your perspective.

#88 peter wiener on 06.18.09 at 5:17 pm

# 74 rjag2034

don’t even know where to start with your comments as they are completely inane.

yeah, its parked all right!
all of it parked in one asset.

it’s value is quite variable (but bought at almost record highs at the end of an interest rate cycle).

it is illiquid, and when you can / do sell you get to take a 6% commision hit.

between taxes, maintenace, decoration, etc., etc., you need 3 to 5% appreciation in REAL TERMS to break even on your capital (statistical history does NOT support this possibility)

you don’t have the flexibility (nor security) of having $400K cash at a time when cash is being held in increasingly high regard.

its value as potential collateral for financial flexiblity (i.e. loans, refis, etc.) is DECREASING not increasing

yeah, great investment!
plenty of upside!
can’t lose!
its EDMONTON after all!

GET REAL!

Man, I’m glad there are people like TJ an rjag2034 out there to treat their money so cavalierly!

and RJ, come back in two years when you are down that 100K or more and tell us how it really ‘….doesn’t bother you’

sure thing, pal

#89 DM in C on 06.18.09 at 5:31 pm

#84 – That’s the definition of INSANITY.

Nah — Insanity is doing the same thing over and over again and expecting a different result.

That applies to a lot of things in our society these days, doesn’t it? :-)

#90 Bill-Muskoka (NAM) on 06.18.09 at 5:42 pm

Oh, and now the TRUTH is REALLY coming OUT! Be warned that there are those who are NOT holding Canada’s interests as their first priority.

Senior official inside Transport Canada blows stimulus whistle?

I wondered how long it would take for the media to discover that the infrastructure stimulus spending has everything to with patronage, and nothing to do with what is good for the nation. [Deputy Minister Louis] Ranger.

Projects are selected based on the needs of the Conservative Member of Parliament in that riding as the first criteria. As a long time bureaucrat, I am used to dealing with politicians who revel in self-interest. Baird however, is the nastiest, most partisan creature to have ever run a large department. What is best for Canada isn’t even remotely of interest to him – what is best for his party and his own political ambitions drives his agenda entirely.

US SECRET communication on Canadian Abousfian Abdelrazik currently exiled in the Sudan, 19 Jul 2006

Actual Document

And this comes as NO SURPRISE either!

ISPs must help police snoop on internet under new bill

Internet service providers would have to make it possible for police and intelligence officers to intercept online communications and get personal information about subscribers, under bills tabled Thursday.

“We must ensure that law enforcement has the necessary tools to catch up to the bad guys and ultimately bring them to justice. Twenty-first century technology calls for 21st-century tools,” said Justice Minister Rob Nicholson as he announced the new bills with Public Safety Minister Peter Van Loan at a news conference in Ottawa.

Yeah, sure, RIGHT (Far Right Power Perverts) who are scared to death they will be OUTED! TOO LATE BOZOS!

#91 Bill-Muskoka (NAM) on 06.18.09 at 5:53 pm

#75 Barb the proof reader

Sorry to duplicate, but my links are better! ;-) Still, this is a MAJOR story and one that should get the attention of every Canadian who hasn’t succumb to the Blue Kool-Aide or is brain dead!

If the bureaucrats spilled the beans (aka, Blew the whistle) more often the politicians would never try their stunts. God preserve the honest government employees who are the TRUE watchdogs of Canada’s present and future. In factm, they are the ones we should be electing to office. They actually know the in’s and out’s of the government, and know what needs to be changed to make it work efficiently for CANADIANS. Enough of these politco Wannabes who are just whores looking for power. Elect QUALIFIED PEOPLE to OFFICE! Any profession except politics requires training, education, and EXPERIENCE. But we keep electing smiling LIARS to represent us? What are we CRAZY? Most of these Ministers couldn’t manage a Pay Toilet operation, much less their portfolios. Time to WAKEUP Canada!

#92 squidly77 on 06.18.09 at 6:11 pm

eduardo

these upgraders and the spin off jobs happened during
this time frame….construction period
shell scotford acjv upgrader 8 billion 2001-2003
imperial strathcona 7 billion 2003-2006
petro-can strathcona 8 billion 2005-2008
shell upgrader exp 1 8 billion 2007-2009

so as you can see that construction in the edmonton area began in 2001 thats when the workers came
the same ones cant be counted again and again for each project and when shells done early in 09 thats it thats all its over

and as far as ft mac is concerned
i will just point to the mega-projects
suncor millenium 1998-2001 5 billion
shell albian sands 2001-2003 4 billion
syncrude ue1 2003-2005 8 billion
opti-nexen long lake 2005-2008
cnrl horizon 2005-2008
all mods vessels etc were constructed or shp/rec between the above time period

there are now no more major projects planned for ft mac
the most likely one to go if any is suncor voyageur
kearl lake and fort hills are mine sites only their bitumen will be upgraded stateside via keystone

so now where will the 70,000 tradesman and the 160,000 spin off workers do for work next year…

combine the above with the fact that more then 60,000 fewer homes will be constructed next year in alberta

the natural gas industry has now shut down almost completely throwing tens of thousands out of work

the forestry industry here in alberta has been knee capped and mills are closing

i love alberta and i am an albertan and although the specs and realtors deem me as a doom and gloomer my posts are anything but….they are simple cautionary posts warning people not to get carried away with the alberta economy

its good at doing two things really well
firstly due to oil our province can create gargantuan booms that very few places on earth will ever see

but the flip side is alberta can create gargantuan busts like very few places on earth will ever see

this thing gonna go right off the cliff….

#93 Tony on 06.18.09 at 6:14 pm

Two things greed and stupidity go hand in hand. The guy couldn’t just buy a townhouse or an apartment unit in Edmonton that’s 50 percent off its’ June 2007 highs. Two things the poor bloke doesn’t get. There is “NO” where else to live unless you move to a century house out on the east coast. The cost of living in Edmonton is dirt cheap!There is no where else to move to unless you leave the country or are retired and can move to a place like Bancroft or some humble abode for 100 grand in the middle of no where. Second the price of oil seems to be going up. A prudent investment may be to buy land which has fallen 90 percent in value in the last two years in well selected areas of Leduc. Living in another province and giving professional business and economic advice i can tell you the mindset of everyone and i mean everyone in Alberta is the same. This means a huge swing in one direction up or down in real estate prices in the future. With the price of oil being manipulated higher on the futures’ market like before it likely will be home values will be much higher in the future in all of Alberta.

#94 squidly77 on 06.18.09 at 6:17 pm

the graph below stops at $350,000 we topped out at $442,000
http://www.investingintelligently.com/wp-content/uploads/2006/09/calgary-house-prices-1973-2006.jpg

its mainly non albertans that believe that the boom will last forever and ever…some of us have seen it all before

#95 Scared for youth on 06.18.09 at 6:28 pm

What is most disconcerting of all is even when the house prices start the spiral down the realtors still profit up to 7% from offloading homes they list.
Scary yes; reality yes ; ethical when the market gains were atrocious without warning young first time buyers, NO

#96 Future Expatriate on 06.18.09 at 6:41 pm

#50- Alex, I LOVE that quote!!!

Thanks!

#97 Peykan Hillman Hunter on 06.18.09 at 6:54 pm

They think hard times are over? Wait until this Fall per Gerald Celente. Mid-W.

#98 Dan in Victoria on 06.18.09 at 7:03 pm

Hey RJ are you happy?Money is a renewable resource.It’s hard to hang onto though.How many people dream of owning their own home and never achieve it?How many people are jealous of someone getting ahead?You can cross that one off the “To Do”list.Good bad or whatever the desicion is made.Only time will tell.

#99 Barb the proof reader on 06.18.09 at 7:58 pm

67 ts harpoon: “Empire Bankrupt” (I believe we are tied by the hip to America) ..“Barack Obama, and criminal class…”

I had figured Obama was the kind of guy who wouldn’t harm a fly.

But apparently I was wrong… even Peta is up in arms:

http://www.reuters.com/article/newsOne/idUSTRE55H4Z220090618

#100 dgd on 06.18.09 at 8:04 pm

Eduardo

Squiddly is just hell bent on the collapse of Alberta real estate.

It’s kinda pathetic isn’t it.

#101 Canadian Army Guy on 06.18.09 at 8:09 pm

#77 eduardo:

Do not waste your time with that squidly77 guy.

He does not seem to be too stable to my liking…

#102 John m. on 06.18.09 at 8:25 pm

Well my comment’s will not be appreciated by the masses of “boomer bashers” but (be patient) this couple has two children………so there is a couple hundred tax dollars at least per month ..probably more + subsidized day care of our evil boomers tax dollars (let me add..we payed for this..we did not have anyone paying to raise our children nor did we have the taxpayers of canada paying for someone to look after our children while our spouses went to work . By what figment of anyones imagination is having children the responsibility of the populace? Vote buying schemes are the destruction of our country………..an example….i have a neighbor…4 children..i year apart in age #5 on the way,,own their own home…3 cars,she doesn’t work…(well occaisionaly to get the suppliment )He makes minimum wage…(im sure boosted by welfare) spends the weekends partying playing on his 4 wheeler………life is good…..and boomer bashers it really sucks that in a few years you might have to contribute a few of your tax dollars to give us elderly boomers a basic standard of life in our golden years……your appreciation is noted..lick me :-)

#103 Grumpydawgs on 06.18.09 at 8:35 pm

Garth Dude, it takes a lot og guts to hold your ground against the conventional wisdom that ‘happy days are here again’. Good for you. I agree there is no possible way this can’t end very badly. Crack heads?low interest junkies, whatever they may be, always end up in the doo-doo. It’s just a matter of time. What people seem to lack generally is patience and memory.

keep the aspidistras flying chum.

#104 Jonathan on 06.18.09 at 8:48 pm

I just want to get into an entry level home, even a fixer upper in an older area of mississauga.. apparently those go for $450K for a 2 bedroom. I rent a house south of lakeshore, a few homes away from the lake. $1,475, utilities and everything else in. I’m right next to the waterfront trail and get to walk around all of Port Credit’s amazing lakefront parks. I don’t think $1,475 would cover the mortgage interest for a home on my street. My daily commute when I work from head office is a quick drive up Mississauga Rd. It’s wonderful.

I can’t handle the new north Toronto suburbs.. i’ll never be able to live along a derry rd & mavis home, in the midst of row housing and identical homes for 60 miles in any direction. The mcmansion lifestyle is much more affordable, but let’s face it, it’s not really a life. No parks, nothing to do but polish your stainless steel appliances and granite counter top. Possibly stop in and spend your money on something useless at Best Buy. Depressing. I wouldn’t pay half of what the builders charge.

But I don’t want to rent. I want to landscape, and build, renovate. I want a home for all the reasons why a man should want his own home. At 28, a degree and working towards accounting designation, 80K income from an amazing career, zero debt and 50K in the bank, I can’t afford a house in a decent neighbourhood. This sucks! What have I worked so hard for?

Poor guys on Mississauga Rd. – one of the nicest rds to live on anywhere. Two power of sales in multi-million dollar homes.. bank has reduced this dream property of mine twice in the past month (by $400K). Looks like a $4 million dollar home in good times, priced now at $1.59 million.

http://www.realtor.ca/propertyDetails.aspx?propertyId=8398537

#105 RJ on 06.18.09 at 9:01 pm

#102 John M.

I am not a boomer basher and I am willing to help support you and my parents in their old age. That said my wife stays at home by our choice to look after our kids, but even when she worked the taxes she paid more than offset any child care deduction.

I believe the 25K + I paid in Income taxes last year more than offset the $2,400 a year I will get in a universal child care benefit until my eldest turns 6.

Also don’t forget that benefit is taxable and therefore reduces my spousal amount by $2,400 which means it is taxed at my marginal tax rate.

John M., I doubt you are complaining about the governments decision to let people pension spilt (and neither am I).

What I would love to see is income splitting for any age group just like Garth advocated in the past.

#106 Samantha on 06.18.09 at 9:17 pm

Well RJ, the deed is done. (pun intended)

In your letter, you have clearly outlined the justification and rationalization that motivated your decision to purchase. It is that process and part of human behavior that I think is an important lesson here.

We can think of real estate as an item that is marketed to us in a calculated way via the media. There are statistics from real estate boards brandished by many realtors who would support your decision. Home improvement shows tantalize the consumer with a myriad of products that they can use, if only – if only the consumer is a homeowner.

But what about self-marketing? Your letter is a good example of selling yourself on something.

When you spoke of rental costs for a family of four, you immediately stated in your next sentence: “I was willing to pay these rates because of my belief that the market is still not affordable for average families, but as I looked at the numbers of days on the market in the Edmonton area and the fact that the suburb I ultimately bought in had already seen a 25% decrease in average price I began to reevaluate renting.”

The key part of the above sentence is the phrase “not affordable for average families”, which is followed by a disjoint reflection on market stats. It tells me that you consider yourself not an average family. And why? I think the answer might be found in this statement:
“Mortgage payments $ 0 (I was able to pay cash for my home because of significant appreciation in my previous home which was in a boom town)”

It appears that you realized a “significant appreciation” read “dollars” from boom town real estate values. In other words: easy money.

People have a tendency to burn through easy money quickly – be it real estate, lottery, or inheritance.

Once you acquired this new wealth (real estate windfall) it became easy to think of yourself as “not an average family” and richer than the norm. The combination of the two can make for some interesting decisions.

The incongruence of your logic (self-marketing) is also found in these statements:

“I am currently involved in a government relocation required by my work…”

“…and as a father of a family of four I do not want my young children to feel that they have no roots (I will likely stay at this posting 5-10 years).”

Rent or own, RJ, it sounds to me like you are going to be moving due to your work, therefore, the justification of homeownership v. rental doesn’t make sense to me. If you have to sell in 5 years, the outcome might not be as favorable as the one your experienced in “boom town” times.

The issue of your children having roots has nothing to do with own v. rent. It has everything to do with transferable qualities such as the love and nonmaterial security (traditions for example) created by the parents in the family unit.

Someone mentioned in another post favoring ownership v renting about gardening as an experience for children. Well, there is container gardening (including a really fun upside down pail technique for growing tomatoes) that would work very well for renting. As for painting or decorating, I have done these things with many landlords over the years. All it took was their permission after mutual discussion and agreement. There are also many portable decorating ideas that work for the rental lifestyle.

Your concern about landlords selling is possible, however, with the 2010/2011 fallout yet to come in the USA 0 interest/ARM mortgages which will impact us, I doubt that landlords (who bought high) will want to take a further bashing as the real estate markets tumble. I believe that there will be many accidental landlords who will be only too happy to have a responsible family as long term tenants.

RJ, your decision is your decision, and I truly hope it all works out for you and your family. I really do. The purpose of my post was to illustrate the way we justify and rationalize our decisions in life and also, that caution is needed when deciding what to do after realizing a financial windfall, regardless of how it comes.

Also, Barb #3

“Speaking of predators, I heard some news about cougar attacks in BC?
Those older women should be ashamed of themselves.”

OMG – You got both of us that time – I got the screen again and hubby took out the printer with his coffee. I have resolved to keep paper towels by the computer.

#107 . . . fried eggs and spam . . . on 06.18.09 at 9:20 pm

Anyone remember Zorpheous from Garth’s old political blog? Apparently, he called it kwitts today. Pity. Still can’t spell! — http://thewingnuterer.blogspot.com/
——
Even before time began, this was already in the works. For a cartoon, it’s fairly straight-to-the-point! — http://dailybail.com/home/how-the-fed-was-born.html
——
Great link from The Automatic Earth re: deflation and more. Nos. 3 and 10 are right on the money! — http://tinyurl.com/kwr62j
——
One can only guess why there has been a sharp drop in income taxes in the US. Would it be people who have lost jobs permanently, can’t get anything else and when is it going to happen here? — http://tinyurl.com/mzb4jw
——
Just to keep y’all updated as to where we are ultimately headed (minus the financial flim-flam-funk) — http://tinyurl.com/lfttrh
——
T. Boone Pickens is quite interested in Alberta oil — http://www.bnn.ca/news/10192.html — but with a few posts saying recently that oil may hit US$200 – 250 / brl., without the oilsands, one can only question why he is here.

#108 RM in Oakville on 06.18.09 at 9:25 pm

#91 Bill-Muskoka (NAM)
#75 Barb the proof reader

Hate to break it to both of you but Harper keeps getting elected because no credible alternative has been offered by any of the other parties. Discuss.

#109 dgd on 06.18.09 at 9:31 pm

#103 GrumpyDawgs

If you think this is Orwellian you must be lost in a time warp.
Look at the world we just got everyone involved. Unleash the energy and the ideas.
This will be great……..life is good!

#110 ts harpoon on 06.18.09 at 9:58 pm

#76 invest-hoe
“Obviously you have not taken an accounting class” -Whatever. And do you know otherwise? Right. Your resume must match notables such as NYT’s Paul Krugman, Janice Stein, Nouriel Roubini, Jeff Rubin, James Howard Kunstler and PBS to name a few. I doubt that you were consulted on the issue. Watch for updates pal: http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/

#111 ts harpoon on 06.18.09 at 10:09 pm

The peak oil crisis: the year of the dollar by Tom Whipple
“For the foreseeable future, these investors have nowhere else to turn, for the minute they stop buying or try to sell significant quantities of U.S. obligations, they would immediately crash the dollar and their worst fears would be realized…”

http://www.energybulletin.net/node/49258

#112 dd on 06.18.09 at 10:22 pm

.#68 squidly77 on 06.18.09 at 3:00 pm

Natural gas is the largest single source of resource …

that is right. Until NG turns the corner Alberta will be laying off workers. Oil is nice …. the cream on the top, however it is the NG that pays the bills.

#113 dd on 06.18.09 at 10:24 pm

#101 Canadian Army Guy on 06.18.09 at 8:09 pm
#77 eduardo:Do not waste your time with that squidly77 guy. He does not seem to be too stable to my liking…

Hey CDN Army GUY … get out and travell a bit and open your eyes. There is more to life than Ontario.

#114 Eduardo on 06.18.09 at 10:25 pm

Squidly, you don’t understand the industry, clearly don’t work in industry, clearly are hoping for utter decimation of the industry, don’t believe in higher oil price, etc…

You are the average non-O&G Albertan who hates the industry because it inflates prices, the reality is that higher salaries support the prices. Sucks to be you I guess.

#115 Eduardo on 06.18.09 at 10:32 pm

Also squidly, without knowing it you pointed out something supportive of oil prices… you said 60,000 houses less will be built.

a) that number is comeplete false (along with your jobs numbers and capital costs, but I won’t even argue with you about that because I work for one of those companies and know the details about them all.)

b) if all those things you say have already happened, things can only get better as oil has increased and NG is near a 6 year low.

You can’t count increasing unemployment for people who are already unemployed.

Bottom line, I said I’d stop arguing with you because you don’t post facts. The reality is you post false facts, so I try to correct them. It’s just too hard because you keep posting false or outdated ones. Please stop posting faulty facts.

#116 Calgary_is_insane on 06.18.09 at 11:10 pm

Squiddly is not doom and gloom.

He’s realistic. Cost of housing in Calgary is INSANE. Someone wrote the conventional wisdom of what insanity is. Wrong. Calgary is INSANE. $200K up in 1 year?(2005-2006). That cant end well.

1)Property taxes
2)People less inclined to stay here(except for work).
3)WHO will buy these properties?

There are thousands and thousands of people in Calgary that stay but are forced to because their jobs are here. The reality is that many are FORCED to work more than one job to stay in a property of any sorts. If I had to do that I would leave in a heartbeat. I stay because my job is easy and pays well.

If a person who makes good money such as myself($90,000/year and rising) and my wife doesnt yet work doesnt want to buy and really isnt able to, what about the person who makes less than that? Maybe they should get a job in the oil industry? Not stable, an unwise choice.

Realtors and bulls take notice: Its a WAITING game. Those who have the most intelligence will wait. If things dont work out, they will leave. Its not if, its when. Alberta is not a nice province. Ignorant mind set, corrupt politicians, and too expensive. Renters hold all the keys.

You cant even go on field trips here to watch your child without a police check. That’s a police state. As if some parent is going to stage an abduction at their child’s school. Right.

It would be best is Squiddly77 was in charge of the Herald and all the realtors because they are all insane and he would tell them what to do:

1)Get prices in line with inflation
2)Raise interest rates to 12%
3)Fire Ed Stelmach and Harper.
4)Rental controls on landlords in Alberta.

#117 squidly77 on 06.18.09 at 11:31 pm

eduardo
i have worked for catalytic for 29 years
it was once call delta catalytic then it was called delta engineering then it morphed to dilcon constructors then to mcdermot catalytic then to stearns catalytic then to just catalytic then to jacobs then to jacobs engineering

we have laid off 2,675 engineers so far in calgary
4,350 maintenance people throughout alberta
and more layoffs are coming

we have also had over 25 billion dollars of work deferred
WorleyParsons (formally colt engineering) our biggest engineering competitor has laid off close to 4,000 engineers in calgary alone

#118 taxpayer like you on 06.18.09 at 11:34 pm

106 Sam

That was a pretty lengthy critique of RJ. But I think you
mis-interpreted him. He originally felt buying was beyond
the average family, considered renting, but said he “re-evaluated” after crunching some numbers. He never said
he wasnt average.

As far as the easy money thing goes, real estate is
relative – sell high buy high or sell low buy low. We
dont know the details, but it sounds like he sold at or
near top dollar, then scooped a place at 28% off the
original list price. He’s upgraded, but has no mortgage.

My own house has gone from $250K in 2002 to $450K. No mortgage either. Dont blame me, I didnt put the price up. And I dont really care if the supposed “value” falls.

What I dont get about so many bloggers here is that they criticize when people speculate that their home
value will go up. Now we’re criticizing someone who says
he doesnt care if it goes down.

Now back to Franz Lizst. Apparently he was quite the ladies man. Would it be out of line to describe him as a “sexy romantic”?

#119 Eduardo on 06.18.09 at 11:35 pm

“Renters hold all the keys” then a few lines down… wait for it… “Rental controls on lanlords in Alberta”, AHAHAHA.

THE MARKET PRICE IS AS MUCH AS THE MARKET CAN BEAR. YOU MAKE 90k PER YEAR SO YOU CAN BEAR A LOT. The average income is 50k per year so the market can too.

3.5 times your gross income is 335k DAM CLOSE to average house price. Don’t be an idiot… your wife doesn’t even work.

Go move to Oshawa, I hear there’s cheap houses.

If what things don’t work out? Your salary keeps increasing because of the oil and gas but so does housing. Then you lost out for being a moron.

If you’re worried about rates lock in a 10 year mortgage. You should be able to pay that off before renewal with a 90k salary if your wife starts working.

STOP BEING RETARDED EVERYONE, HOUSES AREN’T FREE. THEY ALSO SHOULDN’T COST 1-2 YEAR’S SALARY!

Garth, what the hell have you done with these people?

#120 squidly77 on 06.18.09 at 11:40 pm

i guess the internet sucks for some as does history
alberta housing starts down 75.1% in alberta
http://www.finance.gov.ab.ca/aboutalberta/spotlights/2009_0430-housing-market-update.pdf

#121 Barb the proof reader on 06.18.09 at 11:40 pm

RM Oakville 108“Harper keeps getting elected because”

RM, are you talking about that feller you’ve drooled over for the past year here on Garth’s blogs, Steve ‘The Biggie U-Turn’ Harper? …ain’t he the one who spurted quite the election promises? Saa-aay…?….was he just lying during the election? or was he just that big of a moron to not see this coming? (lol)

#122 dgd on 06.18.09 at 11:55 pm

#116 Calgary is insane

Yes you are. If you want Squiggly77 to run the show.

In fact damn depressing.

I have seen him post on here for the last 6 months and it’s always the same embellished info with the “sky is falling or has fallen or will fall” depends on his mood.

In his posts the Alberta market crashes everyday.

Silly stuff really. So much good info out there and he doesn’t get it. Oh well…..

#123 CalgaryRocks on 06.18.09 at 11:59 pm

If a person who makes good money such as myself($90,000/year and rising) and my wife doesnt yet work doesnt want to buy and really isnt able to, what about the person who makes less than that?

Dude, if you can make 90k driving an ambulance around in Alberta anyone can. Your job is probably really worth 50K so you should kiss Alberta’s ass for allowing you to make double what you are worth. Don’t confuse intelligence for being overpaid.

#124 RJAG2034 on 06.19.09 at 12:11 am

#88 peter wiener
Yup you’re right and I’m wrong. So what you’re implying is that everybody should sell their house and rent…right? Who’s gonna buy them all?

My comments are based on the fact that he is going to be there for 5+ years and while I dont agree with putting all my eggs in one basket he did and I’m not going to fault him for that. Next to giving 1/2 of it to some broker to charge commissions on and probably lose a chunk of it, would he be any further ahead? I doubt it.

But dont be a lemming, Garth encourages freethinking and not everyone is a renter. Life is a gamble, you could buy a house wisely or not, you could buy stocks wisely or not, but at the end of the day its forces beyond our control that have the final say. All we can do is try and place as many safeguards as possible in place to protect ourselves.

#125 Barb the proof reader on 06.19.09 at 12:27 am

106 Samantha: Barb #3 I have resolved to keep paper towels by the computer

Samantha, I apologize for the mess (lol). I especially enjoy reading your posts. And your diagnosis of RJ was ‘right’ on, regarding his “Rationalization”, and the incongruence of his logic. But most of all you’ve put your finger on the unspoken weakness in RJ’s decision-making process, the tendency to burn through easy money quickly. Now that you’ve pointed that out, (his windfall — easy come, easy go), I hope RJ and others reflect on all you said. And in particular about providing children with love and feeling safe.

#126 nonplused on 06.19.09 at 12:40 am

Garth – who said nobody listens to you? I knew the economy was headed for disaster in 2006, but it was your blog that convinced me to list in 2008 (I was searching for alternative real estate opinion and found your site) and then reading your book “Greater Fool” after listing that convinced me to ignore the lofty lists in the area and “get it done”.

Let’s hope Mr. Dollar holds! It won’t, long term, any better than it has over the last 40 years, but hopefully we’ll have figured out the way out before it breaks.

Where I disagree perhaps is that I do not believe stocks are the guaranteed way to future riches. The US government is intending to bail out any and all banks and unionized manufacturing entities. This will severely distort the economy, and may lead to a “lost decade” like Japan. Some stocks will do well, but the indexes may not.

#3 Barb the proof reader

I love cougars. No need to be ashamed ladies!

I know the “martyrs” are rewarded in heaven with 70 virgins each (not from my high school obviously), but I will take one or two ladies who like to have a good time over 70 head cases any day.

#7 Lance

Summers in Edmonton are actually quite pleasant. They are 300 meters lower to sea level than Calgary. So, where as in Calgary the sun setting means 4 degrees get a jacket move inside, in Edmonton you can still sit and drink beer on the deck. Plus lots of lakes, Calgary has only freezing cold reservoirs.

32 Mathew Gibson

Renting has allowed me to be near where my 2 oldest children and their crazy mom is. I don’t have to “invest in a home”, just rent near where they are.

Children don’t know whether you are renting or whether it’s weird. They only care if you are their when they need you.

36 PTDBD

Farmer Ed. I suspect a conspiracy.

#50 Alex

Nice quote. Truer words were never spoken.

#63 Rasputin

Redwood Meadows is on a reserve and subject to a 99 year lease, which the band can “renegotiate” every time there is an election. It’s the only thing worse than leasing crown land. They will all be for sale soon, with no buyers.

Redwood Meadows sits on a fairly “business minded” reserve, so things are not too bad. But the folks who leased lakeside land in BC and spent 100’s of thousands developing cabins eventually wrote the property off and walked away.

#72 JoeCalgary

We know nothing of Iran other than that the US has a full scale propaganda mission under way the same as before the Iraq war. It’s thousands of miles away and none of us have ever been there.

#91 Bill-Muskoka (NAM)

Electing “qualified” people to office is impossible because you all want something for nothing, somebody else to pay for it, and there are better employment opportunities for productive people elsewhere. You will get what you deserve: arrogant meddlers who know not what they do, and don’t even know they don’t know.

#101 Canadian Army Guy

Ad Hominem attack. You are hereby banished from all conversations requiring logic.

#115 Eduardo

You know all the details but won’t share? 77 is probably wrong but you won’t even talk? Go to the back of the line with Canadian Army Guy, Realturd.

#127 Barb the proof reader on 06.19.09 at 12:57 am

Bill-Muskoka 91 my links are better!

Bill, mom always liked you best.

“And this comes as NO SURPRISE either! ISPs must help police snoop on internet under new bill”

Hey Bill, regarding the Refoorm party’s snooping bill, it’s so “Them”! And so needless, the ISPs admitted they already willingly provide that info in cases such as suspected child porn. Like my husband said, this is all about the extreme righties, the ones who make the tory-types look bad, wanting to be able to get their noses into everyone’s business, their political business that is. They’re insecure paranoid types, and they wish, wish, wish they could be spies on everyone. I can see the glee in their eyes as they rub their chubby little hands together, ‘oh boy, oh boy, oh boy, I’m James ‘Van Loon’ Bond, double-Ohhh-seven!’ :)

But, who will pay in the end, for their spy toys they will inevitably (by their nature) abuse?

Us.

#128 Bill-Muskoka (NAM) on 06.19.09 at 8:00 am

#99 Barb the proof reader

I watched President Obama’s ultra swift strike on ‘The Daily Show’ and laughed myself silly. Finally, a real leader who is not afraid to be HUMAN.

Now, if only he could as easily SWAT the likes of Rush Limburger, Ann Coulter, Bill O’Reilly, and the entire Fox (Faux) News (Not) bunch of Nazis as easily.

#129 Bill-Muskoka (NAM) on 06.19.09 at 8:07 am

#127 Barb the proof reader

Van Loon a 007? ROFLMAO! More like a 0000000000007 denoting both his waistline and intellect.

The Cops are all for it of course because they are trying to do something good to nail predators. If you get the chance watch ‘Mental’ and see how parents have to learn to communicate with their children. If they did then all the internet spying would be a far less justifiable approach.

Parents need to learn three things.

1. It is their house and they are in charge.

2. Kids need, and respect, limits.

3. Grow up, be the adult, and do not hesitate to say NO!

#130 Da HK Kid on 06.19.09 at 8:45 am

Harry #82, thanks for the note. My move to KL was to reduce my cost of living from HK by at least 60% but equalized to HK wages. In addition, I think KL will surpass SING but they are again export GDP driven but didnt play out as a big bubble Asian Country like SING-HK-CHINA has.

The food and domestic production of local food is a great bonus for everyone. Max tax 26%. MM2H no tax.

To All, there are greater ways to reduce debt that being not how much you make but the take home.

Harry, we will be in Damansara Heights. All Canucks should look at the MM2H program for retirement. Live in Penang if you wish like Kings.

I’m not talking part in this program but it’s getting sweeter all the time.

Harry et all, if you are in KL, look Da KL Kid up shortly.

#131 Soylent Green is People on 06.19.09 at 9:46 am

Re #71 DM in C on 06.18.09 at 3:13 pm

Families provide the roots — not houses. Our boys are well adjusted because we sit down and have dinner together as a family every night.

We can because we’re not working two jobs to afford a mortgage so a house can give us ‘roots’.


This above is so perfectly and well said. Working mother’s are all, well I work because we need the money, eg I need the money for new vehicles and expensive mortgages. These things are not needs, they are wants.

Meanwhile strangers are raising their babies and teachers are horrified at the children’s lack of manners and emotional intelligence.

I’ve worked in day care, I love children, but the daycare kid received about 50% of what I gave to my own child.

Anyway, my two bits on this RJ guy, he’s also forgetting that life happens. What is he going to do if:

– he finds out his wife is having an affair or vice versa and they divorce

– what if he’s cleaning out the eavestroughing and falls off the ladder and breaks his neck

– what if one of his kid’s gets sick and has to be in a hospital far away for a long time

– what if his parents are destitute and need money to eat or pay bills or on and on

Everything is fine if the future is what you want it to be, but the future is never what you plan for.

Look around the corner sheeple.

Sh!t happens.

.

#132 Calgary Rip off on 06.19.09 at 9:50 am

Calgary Rocks:

Do you have 9 years of university with 3 degrees? Not. I dont drive ambulance. Im underpaid. Thanks.

#133 Soylent Green is People on 06.19.09 at 10:04 am

Re #123 CalgaryRocks on 06.18.09 at 11:59 pm

Dude, when was the last time you got laid.

You are so cranky all the time.

.

#134 CalgaryRocks on 06.19.09 at 10:20 am

#132. 2 degrees here budy. Finance and Computer Science.

I’m seriously underpaid. I have people all over the world making millions with my intellectual property. But what am I to do? As a professional I get less protection than a GM dolt that barely graduated high school.

#135 Bill-Muskoka (NAM) on 06.19.09 at 12:28 pm

#126 nonplused

Sorry to read you have such a poorly informed opinion of fellow Canadians who do a job you wouldn’t.

#136 Bill-Muskoka (NAM) on 06.19.09 at 12:39 pm

#108 RM in Oakville

Sad but true I think. Ignatieff does not do it. Bob Rae would, but there are too many who still blame him for something he did not cause. The Liberals are being run by a bunch of Back Room Morons.

As to Harper, I think he has toasted his own petard with true Conservatives. The CRAPpers will support him, but they would support Bush or Hitler as well.

Poor Jack Layton is the only one with any real charisma, but Jack jacks off too often with his mouth.

Some where there must a Barack Obama waiting to show Canada what real leadership and a ‘Git ‘Er Done’ attitude is.

Parliament is a worthless lot at this point as far as Canadians are concerned. It is not any better than any other banana republic corrupt hegemony.

Where are the true Statesmen (persons) who put country first?

#137 barb the proof reader on 06.19.09 at 2:32 pm

Soylent Green is People #131, ‘Families provide the roots — not houses’ .. plus, your note that RJ also forgot that life happens..

So true.

#138 Samantha on 06.20.09 at 6:22 pm

#118 tax

Your point does raise that possibility, however, I wonder if his re-evaluation have occurred if he still identified with being of “an average family”.

And yes, back to Franz Lizst…

“Apparently he was quite the ladies man. Would it be out of line to describe him as a “sexy romantic”?”

Well, some say his reputation was exaggerated, however, it is also said that his concerts provoked some swooning ladies to rend his gloves and scarves in the battle for a souvenir.

Could it be that Franz, a man without a “big deck” commanded such a reaction because of his “grand piano”?

#139 Al on 06.21.09 at 11:32 am

Garth: “When it takes 70% of disposable income

What does that disposable income consist of. I thought disposable was after food, clothing and rent?