What problem?

under control1

Some weeks ago I mused the mess we are in will turn out to be a W. Big slide, followed by a hopeful, bubbly recovery, followed by a massive dump, and then – finally – a real recovery.

I now have company. The World Bank said about the same thing this week, and doubled its forecast for negative growth. Meanwhile star economist Nouriel Roubini was adding this voice. Oil prices will ensure this recession stays around, he said, forecasting that a barrel of the stuff will hit $ 100 next year. Which is exactly what this blog told you.

In fact, my three predictions hold: Hundred-buck oil, prime rate doubled and Canadian dollar at par. And all of them are bad news for family finances, the economy and jobs. The swamp we fell into last year will stay dangerous for a long time yet, and anyone who thinks we will go from a rerun of the 1930s to a rerun of the 1980s in eight months has been watching way too much Lady Gaga.

This is what makes the economic conmen so troubling. Especially those in positions of media influence and public importance. Like the CEOs of big real estate companies. Like some federal politicians. And like the Canadian Real Estate Association.

After all, why did the markets tank on Monday (the TSX dove 450 points)? Because the W scenario is credible, realistic and probable. Equity markets, real estate markets and, most worrisome, consumer confidence have raged higher over the past few months. Less than a year after the wheels came off the economy, and we were consumed with stories of the Great Depression (looking for useful pointers), we’ve got multiple offers, bidding wars, rising house prices and a 646-square-foot condo in a so-so Vancouver building listed for over $800K. Oh yeah, and unethical press releases written by unrepentent realtors, broadcast by uncaring media.

Is somebody going to look out for the naive and the young, now being told the coast is clear? Or do we watch them being mowed down next year? Obviously CREA has made its choice.

Now for a happy letter. Apparently there’s some sanity left out there.

Hi Garth,
I am 30, I live in Waterloo and work for RIM.  I bought from a builder 5 years ago, and watched my home increase in value steadily each summer. After reading your book last summer, I was convinced that selling was the right move.  Of course, just as you explain in your book, everyone I spoke with told me I was crazy to want to sell only to turn around and rent.  So I ended up sweating the decision out and listing late in August, without a realtor.  Well I paid for my hesitation with mental duress throughout the winter.  There were lots of calls, and people showed, but never an offer.  I actually did stay calm throughout the whole experience, but people around me were convinced I would have to sell for considerably less.

In the end I got lucky.  As you mention in your blog, the wave of cheap money this summer picked up the market in a hurry.   I went from zero offers, to having a counter offer for my asking price!  I sold my town for $244,900, and will be sitting on 95k in equity when I close in August.  No agent, and being close to the end of my 5 year term meant that I pocketed an extra 12-16k!  It was a proud moment when I closed the deal on my own.

Anyways, I wanted to say thanks for the advice.  I will be moving out of this place in less than 2 months, and everytime I get a little depressed about the change, I always refer myself back to the facts you have listed countless times.  I am absolutely convinced it’s the right move, and I look forward to watching the events over the next 2-5 years unfold…with popcorn in hand!

I’ll be looking for ways to invest my money wisely.  Now that I am no longer in debt, I’ll also be increasing my automatic RRSP deductions from my paychecks, so I can catch up on my contributions (as well as opening a TFSA).

Cheers!

HOWE STREET BANNER

For Garth's latest podcast, go here

114 comments ↓

#1 JO on 06.22.09 at 10:07 pm

Agree with at least one more 12-18 mts decline in GDP before things stop dropping hard. Oil will hit under $2/BRL in the second half of 2010, before stabilizing there and exploding higher past 2012.

If SP500 holds 875, we may still get one final burst up to 973-1006 before starting the worst part of the decline that will accelerate very rapidly into Sept-Nov..I am planning for a SP500 into low 400’s within 9 mts or so.

Next phase of crisis, accelerating fall/late 2009 will be a bond market decline of historic proportions. Imagine stocks and most bonds crashing hard together for up to a year. God help anyone renewing a mortgage fall 2009 onward. Deflation remains the major long term theme – despite occasional USD scares. USD scare possible late Spring/Summer 2010.

RIMM boy – Good job. You are either contrarian or a victim.

TO Strike – if i can offer one piece of advice to these practioners of extortion, it is to watch the events unfolding in California. The public sector unions have played a major role in running the joint into the ground. These greedy, entitlement minded, labour cartel members have a bizarre notion of reality. This is what happens when gov’t gets to big – and unionized. Many of the services, especially garbage collection, should be done through competitive bids outsourced to contractors and managed closely by a few city people..done the way good companies do, taxpayers would get quality garbage removal at a fraction of the cost – especially long term costs as no pension nor health costs would apply..please ignore those decieving radio ads the unions are running.

BTW, I am not a union basher – have quite a few family and friends who are members…but the silly demands are frustrating most.
JO

#2 JO on 06.22.09 at 10:07 pm

That is oil should hit under $ 25/BRL, NOT $ 2.
JO

#3 Future Expatriate on 06.22.09 at 10:08 pm

Got paper?

Buy matches…

#4 OttawaMike on 06.22.09 at 10:26 pm

Ok, the T.O. garbage strike is way off topic but I have to wade in as a former member(no not a garbage man) of that now striking CUPE local.
Their shear numbers in the outside worker’s ranks caused the garbage collectors to hijack that local years ago. I had the unpleasant experience of attending a couple of monthly hall meetings. Drunkenness, fist fights, verbal assaults; all part of the agenda.
The 18 bankable sick days are a farce, most municipalities have cut or modified that years ago. They have a 3 days off, no Dr. note policy, so many members take these mini holidays and have no sick days in the bank in case of actual sickness.
I have no sympathy for anybody striking in these times.
The OMERS pension is gold plated and public pensions have been kicked around somewhat in this blog.

On the counter side the collectors do have a very hazardous, physically demanding job. Not many kids plan that as a career. Privatization is a way to reign in the unions but they usually cannot do the job for less$.
At least the money paid to public sector workers is spread around more evenly albeit that should be thinly and evenly. A private operator would send the profits back to head office or buy a bigger boat for his chateau dock.

#5 smw on 06.22.09 at 10:29 pm

Asian markets are burning up as we speak, opening up down 4%. Are we back to the bulls and bears tug of war.

Your damn straight.

Your getting another dose of deflation. Great time to borrow 400K.

#6 dd on 06.22.09 at 10:31 pm

Anyone see the Calgary Herald home section this past weekend? The usual husband and wife realitor team say this is the best time to buy a house in Calgary. They run the “numbers” and compare the oil price run up from 1998 to 2008 to house prices. They predict that house prices will increase 64% in the next five years because of the increase in oil prices … .

However the team doesn’t really give the hard facts. They just banty numbers around. Nothing mentioned of Natural Gas, which is the real driver of wealth in this city, and the near to mid term outlook on these prices. No mention of all the layoffs. No mention of the increased home ower distress. Just a “i know the prices are going to go up” bull sh*t pitch.

#7 Samantha on 06.22.09 at 10:59 pm

Garth, I always enjoy your articles and the effort you have put forth to educate people. In the part where you said:

“Is somebody going to look out for the naive and the young, now being told the coast is clear? Or do we watch them being mowed down next year?”

I wondered if you ever speak to University students, or Community Colleges, or other types of post-secondary institutions? It sure would be a great way to educate “the naive and young”.

Also, I think it would give them some hope. If you spoke to young people it would help them understand how to navigate these confusing and difficult times. Maybe you do this already, but just a thought…

Today’s letter is wonderful, and congratulations on becoming debt free with a nice nest egg. Good for you!

#8 nonplused on 06.22.09 at 11:07 pm

The left wing tip, which should appear in the right window, is absent. Somebody needs to fix up this Photoshop!

Average prices and sales volumes are still below peak here (Calgary), and average days on market, while improving, is still not the stuff of raging bull markets.

If the cheap money gets pulled, look out below!

#9 TS on 06.22.09 at 11:16 pm

Hi Garth… I watched an interesting piece from The Foundation for the Study of Cycles… an organization founded back in the depression era by economist Edward R. Dewey. This non-profit research group is calling for the current mini stock rally (in the US) to sputter out by the end of 2009, followed by a ‘perfect storm’ that will see stocks enter a severe bear market that will not bottom out until 2012. (good to note that this organzation accurately predicted in 2004 that the stock markets would begin their rapid decline in September 2007).

At any rate, your belief that we will soon be hit by “phase 2” of the recession or a ‘double whammy’ as you call it, certainly appears to have some support with the research scientists at the foundation.

As far as RRSPs are concerned it would appear that many boomers will be putting off their retirement plans by at least 5 years since it is very likely that their retirement savings will be hammered for a second, and more prolonged time, beginning later this year or in early 2010. The big threat is that this next market downnturn may last for at least 24 to 30 months, so boomers will see protracted losses in their investments. That, coupled with a slow recovery in 2012, will mean the loss of about 5 years of compound growth that would have critical to their retirement funding plans.

As this second phase of the recession hits later this year or early next, it is logical to assume that house prices across Canada will be hit very hard indeed. Especially if the Foundation is correct and the downturn does not bottom out until 2012.

All of the ‘greater fools’ that you have been talking about on your blog for some time now will no doubt take it squarely on the chin.

We’ve been trying to talk our neice into selling her townhouse in Toronto and renting…but to no avail. We fear that she will become another mortgage foreclosure statistic in the not too distant future.

#10 Jeff Smith on 06.22.09 at 11:16 pm

I get it. Garth’s other talent is in utilizing photoshop.

#11 taxpayer like you on 06.22.09 at 11:20 pm

Interesting post, oh dark lord of real estate. But the poster shouldnt ask “is selling the right thing?” but rather “why did I buy in the first place?”

There was still a $150k mortgage left at the time of the sale, and with 5 years of rising prices, I gotta ask what was the original price? I think he/she was close to maxed
on the purchase, and wasnt comfortable with a dropping value which again may push that mortgage balance to close to 80% of the value.

From reading this blog for months now, its obvious there
are people who just dont like the “burden” of owning real estate, be it the mortgage, cutting the lawn whatever. Of course there are also people who “must have”. There is no absolute right or wrong. Many people cant stomach the stock market either (-400 – ya so what, suck it up!).

This poster should be wary of getting back in to real estate. If you have to ask “is it the bottom?” then it probably isnt. I cant remember a “bottom” that magically corrected in a season. Be patient, very patient.

OK. Can we get Nostra back now Plueeeez?? Can we can
we??

#12 tjmikey on 06.22.09 at 11:20 pm

Not meaning to be completely negative, but I do wonder…with all that we know and whatever it is that’s coming down the pipe during the next year or so.

How is it that we turn this around?

We have a global economy that is built around the global consumption of a bunch of stuff that we really don’t need.

Consumers are waking up to this for sure.

Everybody I know have pretty much stopped spending and have sworn off “stuff”. Living day to day seems to be the norm, and saving as much as possible.

To much stuff and too many economies depending on the excesses of North America.

I just don’t see a way out, or |I don’t understnad the way out. The big problem is that the key to a turnaround is the USA consumer has to spend and spend and spend. Hard to do when you have sweet FA.

#13 landlord on 06.22.09 at 11:25 pm

roubini and the world bank must be reading this blog!

#14 Al on 06.22.09 at 11:29 pm

I think you added one too many zero’s to the barrel :0

TSE 4000 this time next year. Dow 3000. SPX 400.

Only then will the recovery start.

There is no way we can clean up 30 years of binging on debt the way most economists are predicting, Roubini being one of them. My contrarian view anyway. Served me well so far!

#15 Increasing that 1% on 06.23.09 at 12:05 am

2 months still seems like a potentially agonizing time to wait and wonder if it will actually close

As I’m finding, it can be difficult to find appropriate rental if you have pets.
Percentage of homeowners with pets must be quite high.
Frustrating how some Landlords just blatantly say ‘No Pets’ regardless of type of pet, responsibility of owners…
Allergies for people can come from all different sources- that are not banned (As can damage to a place)
Discrimination against pets

#16 Coho on 06.23.09 at 12:35 am

From my understanding, a “V” economic event is a sharp downturn followed by a sharp recovery in a relatively short perod of time. A “W” event describes basically the same except with a brief bear rally inserted in there, does it not? Wasn ‘t Roubini talking about a longer “U” or “L” shaped event just a few months back?

Isn’t predicting a protracted economic downturn while calling it a “W” event a contradiction? I’m wondering where along the “W” the pledged USD14 trillion in Wall Street bailout money figures in the coming “recovery”.

At any rate, if or when the hidden string pullers (the ones that ordered the crash to happen) decide the recession is over, then it’ll be over and few will have a true undertanding why things have picked up, just like few seen the crash coming or understand why it happened in September 08 and not sooner or not later.

#17 Nostradamus jr. on 06.23.09 at 12:43 am

Garth if you are gonna be leader of the

DELETED

#18 Munch on 06.23.09 at 12:50 am

Garth

Munch asks “Who or what is “Lady Gaga”?”

The context is unknown to Munch.

Thank you

Munch

#19 Nostradamus Le Mad Vlad on 06.23.09 at 1:02 am

“Lady Gaga.” — She is hot (musically speaking) and I’m not! Turns out some great tunes.

” . . . without a realtor.” — If it is a seller’s market, there is no better way of putting in the effort and hard work to keep $15K – $25K.

If it is a buyer’s (or flat) market, forget it. Our previous home in the lower mainland sold in less than a month (in the early ’90s).
——
So much for forecasts — they are nothing more fresh air experiences, full of emptiness! — http://tinyurl.com/ktrqb9 — Goes back to Xmas 2007.
——
Re: AfPak. Guess Cdns. are in this as well, but the m$m is not reporting this. I am dumbfounded. — http://tinyurl.com/oebwva
——
Like Garth, Dylan Ratinger is no longer controlled by the m$m, so he is free to ask as many pertinent questions he wants. Almost none would have been on CNBS! — http://tinyurl.com/lrvo6d
——
From TheAutomaticEarth. — http://tinyurl.com/krvb5s

“The smartest players in the US stock market – the top insiders who run public companies – are not betting their own money on an economic recovery,” said Charles Biderman, chief executive of TrimTabs. . . . $930 billion is owed on US credit cards, or $3100 for every single American citizen.”

What is the total CC debt for Cdns.? Any guesses? Is liquidity disappearing? — http://tinyurl.com/ku4woc — “Short on the Treasuries, short on equities, short on COMMODITIES.”

Speaking of commodities — http://tinyurl.com/nnw9v4

#20 Coho on 06.23.09 at 1:19 am

If or when things turn around economically, I wonder how many of us will remember the exposure of the evil behind the global financial system, real estate boards, big pharma, wars for profit, the oil barons, etc. Will we have learned anything about the kind of world we live in, or will we be in denial and in a “don’t ask, don’t tell” state as “we, the sheople” are lulled again into a state of complacency while being led over the cliff by the “Pied Pipers”?

It’s interesting how communications technology and weaponry (good for Big Brother) continues to advance at such a quick pace, but advances in cures for diseases and more efficient energy usage have been minimal. But of course, there’s not nearly as much profit in cures as there is in the “treatment” of disease…and a car that gets 25 miles rather than 75 miles to the gallon is much more profitable for big oil.

Yes, let’s hope the current system survives so the exploitation of the lower class and what’s left of the middle class can continue.

#21 Barb the proof reader on 06.23.09 at 1:48 am

Media, politicians, Real Estate… Garth, those are all your battlegrounds. You’ve been a successful trooper on the side of good in all those areas. So here’s a bit of heartening news, for you and for all of us, or at least a change of pace. Maybe the revolution has begun… we’ll always know you’ve done your part, speaking up against wrong-thinking authority, and now here are some rookies speaking out — and in unison:

Conservative Shelly Glover, Lib. Justin Trudeau and NDP Megan Leslie offer a remarkably similar assessment of Parliament.. Disturbing. Disappointing. Harmful. Infuriating. Glover said “I was shocked. We spend an awful lot of time in Ottawa participating in theatre. And I call it theatre because much of it is orchestrated – and that’s unfortunate because I could be doing much better work for my constituents on the ground . . . and unfortunately I’m here playing the game of politics.”

http://www.thestar.com/news/canada/article/654911

#22 Barb the proof reader on 06.23.09 at 2:24 am

“Is somebody going to look out for the naive and the young”–Garth Well, the insanity will only end when it burns itself out. But I’m sure glad you’re saving a few people along the way. The public can be fooled, but not forever. Bad Real Estate, bad politics, bad Media, bad education — it will all come full circle, bite it’s own tail, and implode. Once the public gets good and burned, they’ll start paying attention:

“We do not do a good job in Canada about teaching and learning about our basic institutions.”

Well Garth, again, it’s all about educating Canadians, and I think you are more than doing your part to get good, honest information out there.

By the way, congratulations to the “happy letter” Writer in Garth’s post above. And Cheers, to you.

#23 Jack the Lad on 06.23.09 at 4:09 am

Garth,

So it’ll be W shaped you think.

So who here has got the guts to start shorting the market on this basis?

#24 Onemorething (aka DaHKkid) on 06.23.09 at 4:40 am

I believe the manipulation will find us retesting lows in the stock market, oil coming back to $45-$55 range and an absolutely wicked “L” shape. Stong USD policy holding it around $0.82-$0.86.

It’s interesting that in the Great Depression of 1929, markets rallied but found new lows through 1930-31 before settling at a bottom. Bernanke who claims to the be ultimate study of the GD is using different tactics however these will end up giving us new and unknown results.

Ben the Buffoon is also coming up for renewal at the fed so you can bet he has to be very careful with any critical changes like actually letting the free markets work to find the bottom sooner the better for everyone.

I’m afraid more massive manipulation is on its way and we will be stuck in a very bad place for some time while families end up under water everyday, unemployment climbs another 7% on top of already 9%+.

The oversupply of housing will last for 3-5 years at least and interest will rise a long with stricter lending practices as banks will be challenged again until we all learn the lesson once and for all.

As for our writer from RIM, good work buddy, you make us proud. You landed the plane even after a first attempt that didnt play. That’s called getting it done!

Weight lifted, get out the Lazy Boy and popcorn and watch the show!!!

#25 Canadian Army Guy on 06.23.09 at 5:24 am

I am noticing some posters discussing about the government debt load. How much it’s in the hole, etc.
The US government are a zillion time in more trouble than us.
I want to ask anyone out there what would be the repercussions on a debt repayment default for Canada as a worse case scenario.

Russia has done so in the early 90’s
they seem OK now…

#26 Mike (Authentic) on 06.23.09 at 5:38 am

Garth “(a) W recovery.”

I would agree, a V recovery would seem unnatural right now given that the markets went up but nothing seems to be fixed in the world to sustain it.

A W recovery is most likely what it will be then. I don’t see things getting better till we find “historical norms” (note, not crashes) in houses, stocks, interest rates, taxes, incomes, etc.

Luckily in this case people have short memories so they will forget the 00’s “bubble” was “normal growth” and once they stop wanting that “normal bubble growth” then things will be back to normal.

On Bloomberg news yesterday a forcaster made a good comment:

“One of the indicators that the housing maket returns to normal is when buyers start talking about the areas schools, parks in walking distance and the neighbours next door rather than what the house sold next door and the how much of a investment this house is”

Mike

#27 David Bakody on 06.23.09 at 6:15 am

#4 OttawaMike on 06.22.09 at 10:26 pm

I am with you Mike, not sure how much they make, AND I have always said give the working class a raise and they put it directly back into the local economy even buying on time rather than savings. Such is life in the trenches of home town society.

I would say it is now time for a new Internet word Garth Turner Toll Us So (GTTUS) in gust of future financial ill winds ……

I let a small GIC roll over at my bank for a year …… I looked on line and almost fell off my chair .2% “Point two Percent” !!!! It’s only for a year so no sweat. I have others that mature at over 7.5% so who will pay the difference as we know banks like to make money ….. once again GTTUS.

#25 Canadian Army Guy on 06.23.09 at 5:24 am

China struck a deal of a life time with the Yanks ( too complicated to explain) soldier but know this China needs America and America needs China’s cash reserves and exporting market. Money makes for strange bedfellows ….. WTO ….starts with “World” as does WMF.

#28 Bottoms_Up on 06.23.09 at 6:38 am

Increasing that 1% on 06.23.09 at 12:05 am:
“2 months still seems like a potentially agonizing time to wait and wonder if it will actually close

As I’m finding, it can be difficult to find appropriate rental if you have pets.
Percentage of homeowners with pets must be quite high.
Frustrating how some Landlords just blatantly say ‘No Pets’ regardless of type of pet, responsibility of owners…
Allergies for people can come from all different sources- that are not banned (As can damage to a place)
Discrimination against pets”
———————————————–
Landlords have NO LEGAL RIGHT to not rent to someone with pets. All you have to do is tell a white lie “I have no pets”, rent the damn place and move in. If you ever get queried later on, just say you’re looking after your sick mom’s cat/dog/fish/bird/snake etcs. They cannot throw you out because you have a pet.

#29 eddy on 06.23.09 at 7:00 am

the guy in waterloo probably made the right decision. because it’s in waterloo. if it was in toronto, i would not sell and sit on cash waiting of prices to fall. speaking of sitting and doing nothing, david miller has created a garbage strike. i just don’t get it. i paid extra land transfer tax to buy this year, municipal tax rates were raised for houses this year, on top of that i pay extra for garbage pick up, i pay to dump, and i ask- what is miller doing with the money? decorating his office?

#30 ts harpoon on 06.23.09 at 7:02 am

#25 Canadian Army Guy

I cannot provide an answer to your inquiry on the repercussions of a default debt payment but here is a link to interesting background information on the Soviet collapse written by someone who “lived to tell about it”. KnowhatImean Soldier?

http://www.energybulletin.net/node/23259

#31 travelite on 06.23.09 at 7:08 am

If you really believe we are going through deflation, it’s hard to come up with a rational explanation of oil hitting $100 a barrel short of an international incident

Manufacturing, GDP, money, employment, wages = deflation. Commodities = inflation. Not so hard. — Garth

#32 hagbard on 06.23.09 at 7:23 am

Some morning reading:

http://www2.macleans.ca/2009/06/22/can-they-pay-it-back/

#33 AM on 06.23.09 at 8:14 am

#11 Taxpayer
“But the poster shouldnt ask “is selling the right thing?” but rather “why did I buy in the first place?”
There was still a $150k mortgage left at the time of the sale, and with 5 years of rising prices, I gotta ask what was the original price? I think he/she was close to maxed
on the purchase, and wasnt comfortable with a dropping value which again may push that mortgage balance to close to 80% of the value.”

People by RE for different reasons, we don’t know about RIM Guy. Being familiar with the area, I would have to say that Rim Guy’s property appreciated around $60,000. If your a single person that is totally relocatable within a community, why not take a profit if you firmly believe the drop is coming. You can rent in that community for half of the mortgage+taxes per month. If prices correct, Rim Guy makes out like a bandit. If they don’t, well you roll the dice and take your chances; he is obviously comfortable with his decision.

From another perspective, Rim Guy would be in a position to be putting money away for a larger down payment with the rent option, likely far more than paying down the principle on the existing mortgage.

#34 Kris on 06.23.09 at 8:17 am

Garth, did you ever hear back from the highly paid young Torontonian woman who was considering quitting her job and rethinking priorities? I would be interested to hear what path she took.

#35 ts harpoon on 06.23.09 at 8:26 am

Thanks Garth. Excellent introduction to your latest post, and I have recently learned that other notables share your informed view of the mess we are in. Thanks for taking the time to inform yet one more time with feeling. IMO “the spring market recovery is of the dead-cat variety”.

Thanks to Jeff Sanford of Canadian Business magazine(Summer Issue 2009) he reports that Nouriel Roubini, Eric Sprott, Meredith Whitney and Ian Gordon are effectively saying the same as G.T. and it is my belief that Garth Turner is skating (without a contract) for Team Canada.

Gordon suggests we are in the winter of a Kondratieff Cycle (defining boom/bust cycles). The boom in credit creation and increases in outstanding debt is what brings down the system. This happened in the 30’s and it’s happening again today.

Roubini suggests that the U.S. consumer is shopped out, saving less, and debt burdened. They are hit hard by falling home values so they cannot use thier homes as bank machines. Roubini also considers “debt deflation” and to be careful not to buy into all this good news.

Meredith Whitney states that stocks, houses went up in value as a result of the expanding credit. The increase raised oil prices and the Great Recession got underway. Whitney also suggests an underlying debt deflation scenario.

According to Eric Sprott, what we are seeing is not a recession or a depression but an outright collapse of the postwar economic order. The U.S. has an accrued liability of US$55 trillion. There is no way to maintain that. Sprott states that rising oil prices will check any further growth.

The above excerpts suggests Good work by Garth.

#36 lgre on 06.23.09 at 8:31 am

“the guy in waterloo probably made the right decision. because it’s in waterloo. if it was in toronto, i would not sell and sit on cash waiting of prices to fall. speaking of sitting and doing nothing, david miller has created a garbage strike. i just don’t get it. i paid extra land transfer tax to buy this year, municipal tax rates were raised for houses this year, on top of that i pay extra for garbage pick up, i pay to dump, and i ask- what is miller doing with the money? decorating his office?”

do you still feel Toronto is great? it will get even worse in the years ahead, 80% of income will go to housing in some form, with nothing to show for it.

#37 wjp on 06.23.09 at 8:34 am

Great laugh as Moody’s confirms the U.S.’s AAA rating, then says if they do something about heir debt and if the world continues to view it as a reserve currency.
That’s a bit like, I will pay off my mortgage if I have the money????
http://www.reuters.com/article/newsOne/idUSTRE55M1SV20090623

#38 molson cdn on 06.23.09 at 8:38 am

1. i pray for a cdn=1.oo USA dollar
2. $100/oil barrel= albertans back to work-more tax revenue. more small car sales, etc…
3. higher mortgages? lets all hold hands a pray for this -“Hail Mary full of grace”-the vultures are patiently waiting

So far i don’t see any problems, just great forecasting.
Keep up the good work garth.

One more thing, i hope the toronto municipal workers win the right for 2 hours of internet use per week(a.k.a. porn sites) while getting paid.
Isn’t it ironic that Miller unsuccessfully tried to stop Porter Airlines (just voted the best new company in canada) when he came into office, and successfully stopped the construction of the proposed bridge at bathurst street. Well, now that the ferry service is on strike, all the islanders are going to have to turn to cannabilism or swim!

Always a pleasure to have PMSH visit. — Garth

#39 dd on 06.23.09 at 8:43 am

#1 JO

Oil might hit $25. It will stay there for a day and settle farther north of it. Avg production cost world wide is somewhere in the $35-40 range and marginal production I hear is in the $60+.

#40 dd on 06.23.09 at 8:46 am

Canadian Army Guy

If “the US government is a zillion time in more trouble than us”, then we are 1/10th of a zillion.

#41 dd on 06.23.09 at 8:48 am

#13 landlord

“roubini and the world bank must be reading this blog”

Remember roubini also predicted that oil would hit $25 sometime in 2009.

And we came close. — Garth

#42 Joe on 06.23.09 at 8:52 am

Why is a high Canadian dollar a problem? All it means is that we have to subsidized the lazy who cannot compete with others in the world. I also heard the other day that oil could not go below $30 per barrel. Why? Because those employed by these companies in a recession can’t reduce their salaries like the auto workers have had to do. More of their entitled to their entitlements again I soppose.

#43 dd on 06.23.09 at 8:53 am

#14 Al

“TSE 4000 this time next year. Dow 3000. SPX 400.”

If markets didn’t hit their lows in Oct and Nov when the world was coming to an end and the depression was knocking on the door then it is very unlikely that these low will be reached. TSE will ride oil. TSE @ 4000 is oil at $20. SPX @ 400 is business with 0 earnings. YA.

#44 dd on 06.23.09 at 8:57 am

#31 travelite

“f you really believe we are going through deflation, it’s hard to come up with a rational explanation of oil hitting $100 a barrel short of an international incident”

Oil might hit $100 if investors jump out of $US and buy into more commodities. On a fundamental basis inflation is still a couple of years away … too much oil in the pipeline, too much spare capacity in plants world wide etc.

#45 sutluc on 06.23.09 at 8:57 am

#25- Canadian Army Guy

Armed forces and national police would likely stop being payed, among many other unpleasant effects.

#46 David Bakody on 06.23.09 at 9:01 am

“GTTUS”

Bad news from across the pond ….. but hey Harper/Flaherty and our MSM/CREA say the recession is over and we are on the way up?

Negative equity hits one in six prime mortgages Sunderland hardest hit as new figures reveal the extent of UK’s negative equity crisis

http://www.guardian.co.uk/money/2009/jun/23/mortgages-negative-equity

Read the comments .. appears many Brits think much the same as we do

Oh happy days …..

#47 RIM Guy on 06.23.09 at 9:17 am

I enjoyed reading all of the comments!

AM – you were pretty much bang on with your analysis.

I had bought the townhouse for $173k, and I currently have approx 146k left on the mortgage. I had rented out a room in my house for most of the 5 years I spent there, and this money was key to help prevent me from feeling cash strapped from my mortgage.

Last summer I decided it was time to cash out, I liked the idea selling when I was not pressured to sell. Since I had no agenda, I could simply turn down the ridiculous offers that came in throughout the winter. It also allowed me to be 100% flexible with any buyers timelines. My girlfriends career is also just starting. She will be doing contract work for the next 2 years, so the ideal location for us to live could easily change, and this was another plus of renting!

I agree with everyone, there is a potential flipside, and my gamble could be wrong!

#48 Canned Good and Buckshot on 06.23.09 at 9:32 am

Eddy #29

Please expand on your comment contrasting RE in Toronto and Waterloo.

#49 Devil's Advocate on 06.23.09 at 9:48 am

I came across an email I sent to a mortgage broker friend on May 18,2006 at 9:00AM

“I am absolutely convinced that we are headed toward, at the very least, a “soft landing” is not a severe market correction. Real estate is a sound long term investment strategy that has for as long as anyone can remember gone up about 5% per annum. That is a reasonable increase on all accounts when measured against any other economic indicator. Recently however we have seen increases of over 15% per annum which has peaked the interest of speculators just as it did in the early ‘80’s. A speculator by nature is looking for a high gain in the short term unlike an investor who typically looks longer term.

I’ve been saying “this can not continue” for 4 years now. For 4 years we have seen exuberant gains in the real estate market. Again, anything over 5.0% is, in the long run, unwarranted and will, ultimately, gravitate back to that 5.0% through a soft landing or quick correction. Which lies ahead? I do not know… I believe we may well go into 2007 before seeing such correction but I firmly believe it is about to happen one way or another.”

I am a REALTOR who tries to do the right thing. Back when I wrote that email I was ridiculed by my piers for my warnings. I believe in organized real estate and that the MLS system is the greatest tool to the benefit of buyers and sellers alike. My own mother was prepared to sell her home in another city for a whole lot less than she did before I hooked her up with a good REALTOR. Even after paying commissions she realized $50,000 more than she expected. Did the buyer pay too much? In retrospect they might be thinking so today but that was then and this is NOW. They were not forced to buy. In fact, I understand they had their eyes on the house some time before and would likely have been prepared to pay more!

REALTORS must be in an optimistic frame of mind to be able to do the job for their client. No one puts a gun to the head of a buyer to make them buy. Half of our business is protecting the interests of sellers. Houses sell for “market value”. If you put a price of $100.00 on a home that had a market value of $250,000 what do you think it would sell for? Chances are reverent bidding would ensue and push the price beyond the market value. My point is REALTORS do not set nor influence housing prices they only tell their client where the market values are TODAY. Real estate is still a free market.

Now I don’t condone the reckless SPIN of CREAs more recent press releases but to condemn CREA for trying to send a positive message in an otherwise very negative world of late is a little harsh and I believe many sellers would agree. CREA represents an industry which has some significant influence on the state of the economy. If you are considering buying or selling find yourself an individual REALTOR who adheres to the CREA code of ethics (http://www.crea.ca/public/realtor_codes/realtorcodejan08.pdf) but has an otherwise economic philosophy and outlook which is more in line with that of your own such that it fosters a “comfortable confidence” in your relationship with them. What do you think GM dealers would say if GM said “don’t buy gasoline powered cars because electric cars are the future… when they don’t have any to supply to those dealers”?

Cars don’t cost $400,000 and aren’t bought with 95% leverage. — Garth

#50 Uncertain on 06.23.09 at 9:56 am

So if this is infact a W scenario, what impact will this have on the correction of houssing prices? Are we still looking at a 30% correction and would that be from June 2009 or from April 2008 (which some say was the peak of the market)? How long will it take for the corretion to be fully realized? What is your opinion when the best time to buy would be given that there should be some correction coming…. 6, 12 or 18 months or longer?

#51 BoB on 06.23.09 at 10:05 am

We were stoned and bought a house a few weeks ago. Any suggestions on what we do now? The payments are all manageable and the wife is pleased but I’m wondering if we have time to flip it at a profit to some other Greater Fool.

#52 My_View on 06.23.09 at 10:06 am

ITS ALL SPECULATION!

#53 Nostradamus jr. on 06.23.09 at 10:21 am

Garth =

DELETED

#54 905er & Spouse on 06.23.09 at 10:29 am

RIM guy,
Congrats! We did a similar thing too…

I’ve noticed there are some great rentals listed on the dreaded MLS /realtor.ca that the public can access. I’ll bet there are some good ones in your city.

There are lots of rentals in posh areas in Oakville and Mississauga in homes that would have easily gone for $700-800K range or more if sold. Some are renting for $2000/month and would probably go for less. Try $1600-1800. Just make a (rental) offer! Live in a beautiful home in a posh neighbourhood with a 300ft deep treed lot for a fraction of what it would normally cost! Let someone else subsidize your rental! Hell, this one’s got a pool too!

http://www.mls.ca/propertyDetails.aspx?propertyId=8269468

I looked at this after I saw an interview with Peter Schiff who does exactly that. Finds the most beautiful place he can find for a great price. He doesn’t want to buy a depreciating asset.

#55 Barb the proof reader on 06.23.09 at 10:43 am

#4 OttawaMike: “the collectors do have a very hazardous, physically demanding job. Not many kids plan that as a career. Privatization is a way to reign in the unions but they usually cannot do the job for less$. At least the money paid to public sector workers is spread around more evenly albeit that should be thinly and evenly. A private operator would send the profits back to head office or buy a bigger boat for his chateau dock.”

OttawaMike, you got it just right. Nasty job, exposure to freak injuries, and private sector collectors have the additional hazard of slack company attitude toward safety, exposing yard employees to a pit of industrial toxins washed from the trucks, etc. It’s citizen’s money, we need to reign in greed on all sides and I hope the unions get the message and the cities under strike hang tough until reason prevails. There’s plenty enough stupid, furious people and greed, what’s needed is smart and reasonable people at the table.

#56 Calgary rip off on 06.23.09 at 10:44 am

Garth:

An update on Calgary:

1) Lots of people writing the Herald criticizing the realtors convention last saturday.
2)Lots of Re/Max and Wong the high priced realtor on prime time local channels.
3)Many people fearing for their jobs in Calgary:
1)Hiring freeze on all staff at local hospitals.
2)EI submissions up.
4)Inventory not increasing in the mls listings and pricing is stagnant.
5)Mario Toneguzzi at the Herald saying in a neutral tone that vacanies are up in office space.
6)Natural gas is stagnating.

Anyone reading this: Dont buy Calgary real estate until it hits 2003 levels for pricing-if that ever happens-unless you like paying too much.

Where the majority of Albertans got the idea that their properties were worth $400K? $400K is for a mansion, not a typical house!!!

Time to reprogram the views of all Albertans, especially those in Calgary…..you live on a prairie where the the Premier is a farmer……

#57 Onemorething (aka DaHKkid) on 06.23.09 at 10:51 am

Tick Tock S&P 878.88 on its way?

Lots of BEARS coming to drink today I see!

#58 Tim Bit from Timmins on 06.23.09 at 10:57 am

Re: Nostradamus Le Mad Vlad stating “now that Dylan Rattigan has left CNBC for MSNBC,he no longer is controlled by the M$M” and is free to comment with impunity on financial matters pertaining to the economy. Horse feaathers!!!! The conventional wisdom exists that MSNBC (part of the NBC network) all controlled by General Electric is in the tank for the Obama administration. Both networks act as cheer leaders. GE in its insatiable greed wants the potential trillions of dollars it foresees in the enactment of the Obama health, business and military policies. The CEO Jeff Imelt has become a confifidant of the President and sits in as an economic advisor on strategic policies. It appears the only American network giving a realistic account of what is happening with regards to the current administration is the Fox news network.

#59 Toronto C9 Renter on 06.23.09 at 11:16 am

Nice picture. No doubt the guy on left will soon be saying – “Quick! Inflate the Autopilot!!”

Re comment –“I’ll be looking for ways to invest my money wisely….as well as opening a TFSA…”

If you’re like us, this might be a big challenge. Our house sale closed in July 08. Met with numerous money managers who all said “great time to buy, the banks look cheap etc etc.” But ulimately it didn’t feel right and we stayed on the sidelines, thank goodness.

As for TFSA’s, we figured why not get really agressive and put them into direct trading accounts. We’re essentially day trading with them. Its fun to see how high (or low!) I can get them before the next $5000 increments go in. My target is a min of 100% gain / year…we’ll see.

Bottom line though, big decision when your net worth suddenly becomes 100% cash and you must to decide how to invest it. You begin to understand what your personal Risk Tolerance REALLY is

#60 Barb the proof reader on 06.23.09 at 11:17 am

Alberta is now the worst in the country for mortgage delinquencies, at least 3 months behind on over 2500 mortgages. (Lenders start looking to foreclose at 3 months.) Calgary had 3500 foreclosures Apr-Feb, double the 12 months prior, tripled between Jan-May.

Phil McDowell of the Mortgage Alliance in Calgary tells the Calgary Herald “with resale prices on the rise, delinquencies should begin to level off soon.”

:-/

Here we go, how do you know when they’re lying? When they open their mouths. (“with resale prices on the rise, delinquencies should begin to level off soon.”) .. :o And, true-to-form, the Herald never checks the bullsh!t meter.

#61 Increasing that 1% on 06.23.09 at 11:26 am

#28. Bottoms Up

@ Pets in rentals…
————————————————
Thanks for that.
Funny enough, or not, I had an e-mail from friend just before reading your post, and you confirmed what was sent:

Landlord may refuse tenancy up front based on pets. Once in, regardless of lease agreement, tenant may then obtain pets and as long as they’re legal to own (city by-law, provincial, federal, international law – no sabre-toothed rabbits) the landlord has no legal way of terminating tenancy nor any legal way to adjust rent. Tenant is, of course, always responsible for damage.

#62 Calgary Rip off on 06.23.09 at 12:19 pm

Bob Truman(realtor in calgary): said today:

1. I have clients who have sold their homes and can’t find anything worth buying right now.
2. Prices have to stabilize or go down if the market is to remain healthy. With higher interest rates on their way, the sales will dry up if prices continue to rise. Higher inventory will put some downward presure on prices and keep the wheels turning.

Other factors this year are increasing unemployment and increasing interest rates(albeit still low). For sellers, is the window of opportunity going to disappear soon?

Uh yes Bob. No one wants to buy a $400K house that is only worth $180K. Its been like this for 4 years.

#63 Dean on 06.23.09 at 12:28 pm

Here in Alberta, we’re in trouble. Business is non-existent. $100 Oil might save us from the worst of it, but another drop to $35 might just pop the bubble. The recent RE boom just serves to push us a little closer to the edge of a US style meltdown.

There is a big disconnect here from reality. When I talk to people who own or run businesses they shake their heads at how bad it is. If real recovery doesn’t come in the next 6 months it could get very ugly. The cracks are starting to show.

#64 Devil's Advocate on 06.23.09 at 12:32 pm

Cars don’t cost $400,000 and aren’t bought with 95% leverage. — Garth

Agreed, still there is a whole lotta expensive iron on the street which was financed beyond reason to any sucker who had a pulse. At least when buying real estate you have an agent who should be representing and guarding your best interests. And I think we would both agree, be it a car or a house, to buy with only 5.0% down is an indication you can’t afford it in the first place.

#65 somecatchphrase on 06.23.09 at 12:34 pm

IMO, one of the greatest issues facing Canada is the need to diversify our trade beyond the United States. Closer ties with overseas trading partners are essential if we are to survive the decline and fall of the USA.

Here is a link, courtesy of today’s Globe and Mail that reports on a legitimate “green shoot” for the Canadian economy. Unfortunately, this green shoot will probably take years to bear fruit. It provides some reason for long term optimism nonetheless.

“An ‘urgent’ call from China”

http://www.theglobeandmail.com/blogs/nobodys-business/an-urgent-call-from-china/article1193093/

#66 Seeker of the Truth on 06.23.09 at 12:39 pm

“the US government is a zillion time in more trouble than us”

In trouble? Not likely. The US dollar is backed by nothing anyway, the Federal Reserve can just print more money – they might as well be printing Monopoly money. Without massive debt, there would BE no US economy, that’s how it continues to perpetuate.

The US, or should I say the Banking Elite who own the US (soon to own most of the planet at this rate) are just waiting to offer a solution … the Amero, and the North American Union:

http://video.google.ca/videoplay?docid=5420753830426590918

#67 dd on 06.23.09 at 12:55 pm

#63 Dean

“The cracks are starting to show.”

What do you mean starting? If you are a gas service company the crack is a gulf right now. There have been massive layoffs and not a lot of people are getting call backs to start the summer drilling season.

#68 Repatriated Expat on 06.23.09 at 12:57 pm

From Reuters today on the global housing market.

“The global economic renaissance will remain in grave peril until banks and investors quit mourning the end of a long-dead real estate boom and face up to losses inflicted by years of reckless lending and spending.”

This is an article peppered with words like shock, denial, and attitude pandemic.

Glad the CREB has the omnipotent perspective to assure me that it’s different my neighborhood.

#69 dd on 06.23.09 at 12:58 pm

#51 BoB

“flip it at a profit to some other Greater Fool”

After fees and moving costs are your really going to gain? This is not 2007.

#70 dd on 06.23.09 at 1:05 pm

When the Herald runs out of real estate in the city bs, they turn to rec property and the good deal to be had. They polled Calgarians on rec properties and found that many Gen Xers think this will be a good investment in the coming years. Of course there was no backup for possible increases or downside risk analysis.

#71 David on 06.23.09 at 1:07 pm

Letters like the one from RIMM Guy offer some valuable insights. Back in more sane times it was a question of what type of house a family should buy. With the distortions caused by the housing bubble and the financialisation of home ownership families were forced to think about whether they can even afford a home or not. After 5 years of ownership the actual equity had grown by $27K which is about right for the first five years of a mortgage. The dollars spent were 20 cent equity and 80 cents interest cost. Rimm sells and now has $95K in cash. About $40K of that cash is an expense recovery on the interest paid by holding that mortgage. Add in all the taxes, utilities and maintenance paid and the net gets a bit smaller.
Hot popcorn always went well with the featured horror show when I was a kid. $95K in cash at 30 and few worries is great. Real estate is the upcoming feature financial horror show and yes Frankenstein will get up off the table.

#72 AL B on 06.23.09 at 1:09 pm

TO #54

“I’ve noticed there are some great rentals listed on the dreaded MLS /realtor.ca that the public can access. I’ll bet there are some good ones in your city.

There are lots of rentals in posh areas in Oakville and Mississauga in homes that would have easily gone for $700-800K range or more if sold. Some are renting for $2000/month and would probably go for less. Try $1600-1800. Just make a (rental) offer! Live in a beautiful home in a posh neighbourhood with a 300ft deep treed lot for a fraction of what it would normally cost! Let someone else subsidize your rental! Hell, this one’s got a pool too!

http://www.mls.ca/propertyDetails.aspx?propertyId=8269468

I actually checked this place out, and it’s a run down dump that’s surrounded by million dollar homes. It’s been on the rental market for months.

#73 pjwlk on 06.23.09 at 1:17 pm

#28 Bottoms_Up: “All you have to do is tell a white lie “I have no pets”, rent the damn place and move in.”

That’s pretty lame advise! What happens when the landlord you just fooled turns around and poisons your pet?

#74 dd on 06.23.09 at 1:19 pm

#50 Uncertain

“Are we still looking at a 30% correction and would that be from June 2009 or from April 2008. How long will it take for the corretion to be fully realized? What is your opinion when the best time to buy?”

Best time to buy? When house prices are undervalued compared to income and other investments measurements and after factoring in the cost of maintaining the property in a high energy, high interest rate, high inflation world.

So don’t focus on the time element but on the fundamentals that make it a good time to buy real estate instead of renting.

#75 dd on 06.23.09 at 1:28 pm

#49 Devil’s Advocate

“If you are considering buying or selling find yourself an individual REALTOR who adheres to the CREA code of ethics but has an otherwise economic philosophy and outlook which is more in line with that of your own.”

What? Ethics? Their job is to sell RE or starve. Ask them where think the RE market is heading in the mid-term and if it isn’t as bright pricture all they say nil. Unemployment and foreclosures are increasing and all they have to say “this is the best time to buy RE.” Come on … All asset classes go through cycles. This is the time to look at energy and agriculture, for example. This is not the time to consider RE in Canada. It is way to overvalued compared to the REAL fundamentals.

#76 Calgary99 on 06.23.09 at 1:31 pm

Is Nostra-damn-ed Jr. a real person? I am amazed by his persistence! Go somewhere else Nostra… take a dip in the Pacific.

#77 Dean on 06.23.09 at 1:31 pm

#67 — What you’re describing is one of the cracks — think big picture. The drilling industry woes aren’t going to destroy the Alberta economy alone. It’s a leading indicator of bad things to come though.

Wait and see what happens if royalty revenue stays low next year. The government has managed to hide this year’s massive defecit, but next year the knives will be out. Think public sector job cuts and cancelled stimulus projects.

The oil sands construction is pretty much over until we see an extended period of $80 oil again (and Obama doesn’t kill dirty oil entirely which he might since the US isn’t producing it). Oil companies are still finishing off projects that they were doing when Oil was $150 (that was only 10 months ago). Once those are done, there’s nothing in the…er…pipeline.

Meanwhile we’ve got a drought, swine flu in some pigs, still have some mad cow, US food labelling is screwing our cattle producers, the forest industry is dead because of US policies, and the price of gas will likely stay low for a long time because of over supply/low demand, and the royalty frameworks are better in BC and Sask.

So, too many (overpriced) homes, shrinking job market, high cost of living, every important industry in peril, and rapidly shrinking tax base. Those are some big cracks.

But high Oil/Gas prices does buy a lot of crack filler.

#78 CalgaryRocks on 06.23.09 at 2:33 pm

Our own striking Baseej in Toronto are stopping people from legally dumping their garbagge at designated locations.

Clearly that should be punished with heavy fines. Of course, when the Baseej do it, it’s not illegal. Just like in Iran. One of them found it’s way under a car. I’m guessing this is going to be a long, hot, smelly summer in Ontario.

Call me a union hater, I’m in good company right now.

#79 dd on 06.23.09 at 2:35 pm

#77 Dean

“What you’re describing is one of the cracks — think big picture.”

It only starts with the drillers. Roy rev is 65%ish of gov revenues and the coppers are getting low.

And Obama will not kill dirty oil. Period. It is just talk. You will see when the dust settles that the US needs cheap energy to grow. All the BS about dirty oil will be out the window @ $100 oil.

Forest industry is dead. Yes and it will only come back when the US housing industry recovers.

Wait until there is a Horn River discover in Alberta. The royalty frameworks will mean little (a few % point difference) when there will be billions to be made.

So, too many (overpriced) homes, shrinking job market, high cost of living … you got that right.

#80 Seilfworcehtsa on 06.23.09 at 2:45 pm

Here are the facts: it is 2021, the tsx and the Dow are bouncing of 30,000, RE has more than doubled during the past decade in most markets, inflation has averaged better than 5% per year for the previous 10 years with US inflation rates approaching 10%. Many home owners are paying down mortages with inflated dollars, lease rates for a 1 bedroom apt. in TO have risen from about $1000mth to a little over $3000mth. Many would be home owners have purchased automatic butt kicking machines and placed them on their balconies. Harper and Flaherty have brought back the 40 year mortgage and Iggy, having stuck his finger up his butt, has never been able to return Harper’s one finger salute. Oh yes, President Palin has promised to wrestle inflation to the ground and I still just want to wrestle her.
In the mentime look out for the return of the swine flu next autumn. It could turn into a nasty little critter and do some real damage.

#81 Shiner on 06.23.09 at 2:59 pm

Nice Lady Gaga usage Garth. And way to keep up Nostra’s ban. I enjoy almost seeing what he has to say.

#82 Uncertain on 06.23.09 at 3:23 pm

#74 dd

Thanks for the info. I’m only looking at the timeline as we wanted to move prior to my son starting school next Sept (2010). We want to buy a home not just a house but also want a good neighbourhood, good school..etc. For us this is not just the financial aspect but the hopes of not having to move again for atleast 20 years… just wondering if we will be able to get a little more for our money next year at this time…. thanks again, any and all advice is appreciated!

#83 PTDBD on 06.23.09 at 3:24 pm

What problem? …just sprinkle some fiat dust on it and poof! goes the Prestidigitizermoneyprinterproblemsolver –

low coast loans of $8 Bbbbbillion to Ford, Nissan and Tesla. “
There is money there” says Energy Secretary.

can we haz one too, eh?

#84 Two-thirds on 06.23.09 at 3:34 pm

#49 Devil’s Advocate

“If you are considering buying or selling find yourself an individual REALTOR who adheres to the CREA code of ethics but has an otherwise economic philosophy and outlook which is more in line with that of your own.”

I do agree with this statement and have had a tough time finding a realtor that agrees with GT.

Nevertheless, having a code of ethics and *enforcing* it are two different things.

Could you please elaborate on how exactly the RE boards in Canada monitor, enforce, and discipline the ethics/lack of of their members?

More to the point, how do RE boards monitor/prevent agents from acting unethically in any given transaction?

If I’m buying a house using an agent, how can the current system prevent him/her from inevitably seeking the highest possible commission, which in practice results in less money paid to the seller and more money paid by the buyer?

Aren’t they supposed to try to get the best deal *for their clients*?

Please, talk to us about the many ways in which the current system ensures transparency, full disclosure, and ethics among realtors in Canada.

#85 JoeCalgary on 06.23.09 at 3:41 pm

#63 and #77, Dean, I could not agree more! My three small businesses continue to have ample customers, but…the customers are simply not paying! They’re using me as a banker and, while my bills require payment, the decreased business income makes that difficult. I should mention that I never have and won’t resort to using credit to pay my company bills…so the collection agencies are getting a strong workout.

To those of you recommending that you cheat new landlords by sneaking in animals after you have agreed not to, stop it. First, how ethical is that? Second, you may be from Ontario from whence I have seen this “sneak them in” recommendation time and again.

May I remind you, though, that landlord/tenant relations are regulated by the provinces and that they thus vary accordingly? Read what AB gov says from these links:

AB gov services

More specifically:

house rules for all tenants

“Some reasonable rules would be restricting Christmas trees, pets, ….”

The property I occasionally rent out has show gardens that also provide myself, my family, my friends, my neighbours, and the local food bank with homegrown food. Animals get loose in it over my dead body.

Enough with the attempts to get others to follow your misbehaviours already!

#86 Barb the proof reader on 06.23.09 at 3:56 pm

Shiner: Nice Lady Gaga usage Garth

Okay, you got my curiousity, so I looked it up..

… just another ugly commercial whore, er, singer, who has to use sex and antics to try to sell it’s otherwise ordinary music.

#87 Bonnie N BC on 06.23.09 at 3:58 pm

Garth

You always present the facts as you understand them – I am always surprised that people hang on to the myth of upward mobility in real estate as is the case in BC.

I was highly criticized at a recent family gathering for saying we have at least another 30% adjustment in real estate in the Lower Mainland and other hot areas within BC.

And then there was this in the Vancouver Sun today:

http://www.vancouversun.com/business/real-estate/Recreational+property+with+British+Columbians+survey/1709929/story.html

I worry that people think the worst is over and are merrily oblivious to logic. I wonder how many will become underwater if they are not already when they buy a recreational property. Yikes!

#88 dave99 on 06.23.09 at 4:11 pm

#86 Barb,

??! Wow. What an ugly thing to post about someone you’ve never met and know nothing about. Your comments says little about Lady Gaga, but rather a lot about you.

#89 Vankouver on 06.23.09 at 4:30 pm

Hey Garth – great letter today. Congrats to our RIMM friend for selling. As for Gaga – she’s a superb pop queen with some great advice about developing a good poker face.

Vankouver

#90 DM in C on 06.23.09 at 4:40 pm

#86 Barb

“… just another ugly commercial whore, er, singer, who has to use sex and antics to try to sell it’s otherwise ordinary music.”

Whoa, harsh Barb. Just because you don’t like it doesn’t mean it’s bad. Oh wait, you’re one of those boomer “get off my lawn” types, aren’t you?

Let’s see if I can compare for you. I bet your parents thought the Beatles were long haired hippie freaks, right? Sacrilege! And that Keith Richards, what’s that?!

Oh, but their music was actually good, right? Only reason it’s lasted so long is because the boomers keep pushing it down our throats. Classic Rock aka geezer rock.

Back to RE — two house on my street. Identical floor space, layout, condition (checked out open house on both), lot size. One lists for $424k. The other lists for $519k. Asked the realtor for the $519k one what is the difference between her listing and many others about $100k less. Her reply? The owners won’t drop the price.

Three weeks later, neither house has sold. The $519k one is now $499k.

Same street, I rent for $1,600.

#91 Marc on 06.23.09 at 4:50 pm

Best thing about the Vancouver civic workers strike a few years ago, was the free golf at unattended, or picketed courses. Torontonians, get out and play at any municipal courses, before the grass gets to long. Got hard to putt near the end of the strike as the greens were more like the rough.

#92 squidly77 on 06.23.09 at 5:15 pm

is that flaherty and carney in the pilots seats

#93 squidly77 on 06.23.09 at 5:15 pm

http://www.edmontonjournal.com/Business/Mortgage+defaults+soar/1723557/story.html

oh boy..

#94 Another Albertan on 06.23.09 at 5:33 pm

An interesting anecdote…

I took my car to my mechanic – a guy who specializes in Autobahn cars. A year ago, I would have to wait a few days to have my car looked at, nevermind serviced. Yesterday, I drove straight onto a lift and had 3 guys immediately working to fix a broken hose clamp.

The owner indicated to me that things were slow. How slow? Like “just over $2000 in gross sales in April” slow. Here’s a guy who services and rebuilds a lot of different vintages of German rocketships and has a lot of well-heeled clients. They simply aren’t bringing in their Porsche 911 classics and BMW E24 machines… even for oil changes. What was thousands of dollars per month in “toys for boys” discretionary spending passing through his till is all but dried up.

He also relayed colour commentary about payment scenarios equivalent to JoeCalgary’s above.

#95 Dave on 06.23.09 at 5:33 pm

Manufacturing, GDP, money, employment, wages = deflation. Commodities = inflation. Not so hard. — Garth

————————

not being sarcastic here but I think your explanation is stagflation…no?

#96 Dave on 06.23.09 at 5:43 pm

We were stoned and bought a house a few weeks ago. Any suggestions on what we do now? The payments are all manageable and the wife is pleased but I’m wondering if we have time to flip it at a profit to some other Greater Fool.

—————–

wow, you have the nerve to call someone else a greater fool? haha. Good luck with that. There’s one chair short in the game of musical chairs. I think you’re the one I see standing.

#97 Dean on 06.23.09 at 5:43 pm

#79 — “And Obama will not kill dirty oil. Period. It is just talk.”

I disagree. Right now is a perfect opportunity to look like an environmental crusader with very little short term impact to the US economy. I agree with you that at $100+ oil and low supplies this probably doesn’t happen — but what is the current price again?

I’m not saying that it’s going to happen, but I think there is a big bullseye sitting there as long as oil prices remain low and supply high.

#98 Increasing that 1% on 06.23.09 at 5:51 pm

# 85. JoeCalgary

“Enough with the attempts to get others to follow your misbehaviours already!”
——————————————————–
Chill,…
feels like getting sent to Principal’s office

Personally, I do not condone being dishonest about having pets – and have not been.
However, I do not believe the ‘No Pets’ rule should just be a blanket one – as I do have caged pets, and as a homeowner have been aware how to be responsible for them in protecting my home, and would do this even moreso if renting. Main point though, I think, is:

“Tenant is, of course, always responsible for damage”.

Also, as in the links you provided, there could be special arrangements made between landlord and tenant – ie: tenant can do total steamcleaning/ whatever’s done in hotels – to ‘de-animalize’ room – or that can be incorporated in cost to tenant over what non-pet owners pay…
Some situations need to be looked at more individually.

As for something like your gardens – that’s damage – and the tenant would be responsible for that like anything else. Then again if you choose a responsible tenant that wouldn’t happen in first place.

In regards to the ‘Ontario’ reference, funny, since it doesn’t seem to be common knowledge here.
I’m sure it never happens in any other Province…..

#99 Dan in Victoria on 06.23.09 at 6:03 pm

Good Day,ladies and gentelmen.Thank you for flying Greater Fool Airways.Your pilot today is “Ace Turner”Please place your seat backs in an upright postion before buying real estate.Please insure your seat belt is buckled tightly,there will be some nasty turblence,and some severe ups and downs in real estate.Emergency exits are located below the FSBO sign at the front and in the …rear… below the franchised real estate signs.Survival equipment is located on the pages and links of this blog,Proper manuals are located in the back of seat pouch in front of you,recomended reading, Greater Fool and After the Crash.Please note that in case of being underwater your seat cushion can be used as a floatation device.Just try to stop the flood of listings with it.In case of sudden drops in equity and or interest rate hikes, oxygen masks will fall from the ceiling.Our destination today will be Bubble City,on the outskirts of Location,Location,Location.Your flight will be at a median height of 350,00 dollars and may go as high as 550,000 dollars.Dropping to 200,000 dollars.Maybe.Depending on our calculations.The out look for today,and the future, is depressing.Please enjoy your flight.And thank you for choosing GFA.

#100 CS on 06.23.09 at 6:29 pm

Good to see someone else cautioning readers not to just sneak pets in. The laws are very different from province to province and advice to flaunt the rules and do what you want could get some pet lover stranded on the curb with their pet in some provinces because it IS legal to evict tenants who have signed an agreement stating ‘no pets’.
Everyone should do their own due diligence. Check the by-laws and rental/tenancy office of the particular area you live in before making decisions about renting and pets.

#101 Nostradamus Le Mad Vlad on 06.23.09 at 6:58 pm

#32 hagbard at 7:23 am — “Can they pay it back? The U.S. is about to go broke and they’ll take us down with them”

Good link. See http://tinyurl.com/lv5jbf — “Ron Paul: Obama’s ‘goal’ is economic collapse” — A further link — http://www.fpif.org/fpiftxt/4768

Comment by wrh.com sums this up nicely! (By the end of this summer.) — http://tinyurl.com/n28ydb — “Good reason to kick off WW3!”

Also, Bankster “Holiday” Planned for September? — http://tinyurl.com/q39ecq
——
Not only looking out for this Sept., but heads up! Possible vaccinations for Cdns. Me? Never! Give me liberty or give me death, but NEVER give me something I don’t need nor want! — http://tinyurl.com/npdskd

“Under Canada’s official pandemic plan, the entire population would ultimately be immunized against the H1N1 swine flu.”
——
The Iranian plot thickens even more! Make no mistake, the CIA / Mossad are the chief culprits here, but what is surprising is that Soros seems to have his hands in this. — http://tinyurl.com/l4t3v2 \/ http://tinyurl.com/p8gakb

This may be one of the motives (reasons) re: Soros’ involvement — http://tinyurl.com/kwmkmz

Interesting to note that Russia has built two nuke power plants in Iran, so Iran can keep its population warm during the winter. Putin and Medvedev are quite happy with Ahmenjadine, and have already said that they will defend Iran if asked.

One of the main motives for this “uprising” stems from the fact that the US is broke, it needs to cause diversions and distractions worldwide to take attention away from the fact they can no longer look after their own citizens.

Now maybe y’all realize that the karmic pace of time has speeded up!

#102 jess on 06.23.09 at 7:10 pm

surpressed welfare stats until after the b.c. election?

http://www.theglobeandmail.com/news/national/british-columbia/welfare-report-suppressed-during-bc-election-campaign/article1192813/

#103 jess on 06.23.09 at 7:43 pm

not that isn’t a man with hope

http://www.economicdisasterarea.com/index.php/news/man-destroys-his-house-i-have-nothing-to-lose/

#104 dd on 06.23.09 at 8:01 pm

.#92 Dean

#79 — “And Obama will not kill dirty oil. Period. It is just talk.”

Right now is a perfect opportunity to look like an environmental crusader with very little short term impact to the US economy. I agree with you that at $100+ oil and low supplies this probably doesn’t happen — but what is the current price again?”

The key word that you outlined is “to look like.” At the end of the day nothing will happen. Yes the current price is $70ish dollars. $70 bucks in a recession is very expensive. Just a couple years ago it was $30.00 in a bullish economy! The US taxpayer cannot efford another x amount added in taxes (and they will vote to back it up).

#105 Boombust on 06.23.09 at 8:07 pm

“I worry that people think the worst is over …”

I’m beginning to think maybe “they” are right.

Everything out here on the Wet Coast is too weird for words.

#106 eddy on 06.23.09 at 8:37 pm

Buckshot said, “Please expand on your comment contrasting RE in Toronto and Waterloo.”

I was just being flippant. I don’t know the Waterloo market. Generally I think Everything is overpriced in southern ontario. when i see prices in collingwood or muskoka i think they are way too high.
I believe that a lot of Toronto is undervalued, especially Scarborough. Toronto gets around 80000 new immigrants a year, and many of them want to buy houses. Torontonians just have to deal with a socialist city hall which takes money from people who work (miller land tax and user fees)and gives it to people who don’t work.
in spite of that, price appreciation for investors has been decent.

#107 Toronto C9 Renter on 06.23.09 at 8:39 pm

to #101 Mad Vlad…

Seriously Vlad, how many global conspiracies can we digest in one week??

And by the way, why do they always involve some Dr Evil type spreading pandemics, inciting revolutions, and generally just bringing the world to it’s knees in various ways?

By the way, I heard Brangelina actually caused the Bear Stearns crisis – pass it on! I couldn’t find a link to it, but I’m sure you can

#108 The Coming Depression on 06.23.09 at 9:12 pm

The “banker holiday” came from my site it was copied and sent to every site in the world

#109 Increasing that 1% on 06.23.09 at 10:06 pm

Got a nice rental !
…even did it the honest way with the pets.

Rim Guy:
Congratulations on eventually selling yourself, and still having that equity coming out. Good luck on finding rental…let the good times roll…

#110 Bob and Doug .....the Canadian Bro's on 06.23.09 at 11:11 pm

IT’S ALL CONTEXT FOLKS…..

You can only speculate if you have more than you need. Even though we are running up debt ratios we have more than we need….

Have you ever been to Vegas. Context is the key……right now money is cheap and prices have dropped from their highs…………”deal or no deal”

Next year is another story.

#111 Devil's Advocate on 06.23.09 at 11:38 pm

MY ANSWERS FOLLOW YOUR QUESTIONS IN BOLD

#49 Devil’s Advocate

“If you are considering buying or selling find yourself an individual REALTOR who adheres to the CREA code of ethics but has an otherwise economic philosophy and outlook which is more in line with that of your own.”

I do agree with this statement and have had a tough time finding a realtor that agrees with GT. THEY ARE OUT THERE.

Nevertheless, having a code of ethics and *enforcing* it are two different things.

Could you please elaborate on how exactly the RE boards in Canada monitor, enforce, and discipline the ethics/lack of of their members? I ENCOURAGE ANYONE WHO BELIEVES THEIR REALTOR HAS ACTED WITH IN A MANNER AS TO CONTRAVENE THE CREA COSDE OF ETHICS TO CONTACT THEIR LOCAL REAL ESTATE BOARD AND DISCUSS IT WITH THAT BOARDS ETHICS ADVISOR. WE ARE A SELF POLICING PROFESSION AND HAVE A DUTY TO REPORT IMPROPRIETIES OF OUR MEMBERS AND ENCOURAGE THE PUBLIC TO DO SO AS WELL.

More to the point, how do RE boards monitor/prevent agents from acting unethically in any given transaction? WE CAN NOT ACT ON THAT WHICH WE DO NOT KNOW. AGAIN, IF YOU BELIEVE A REALTOR HAS ACTED IN A MANNER NOT BECOMING OF OUR PROFESSION LODGE A COMPLAINT PLEASE. YOU MAY BE CONFIDENT THAT IT WILL BE DEALT WITH KEEPING THE PUBLICS BEST INTEREST FIRST AND FOREMOST.

If I’m buying a house using an agent, how can the current system prevent him/her from inevitably seeking the highest possible commission, which in practice results in less money paid to the seller and more money paid by the buyer? IN BRITISH COLUMBIA WE HAVE “BUYERS AGENCY” AS AN AGENT OF THE BUYER THE REALTOR IS DUTY BOUND TO ACT IN THE BEST INTEREST OF THEIR CLIENT. AS WELL CONTAINED WITHIN THE STANDARD BUYERS AGENCY AGREEMENT THE REMUNERATION IS SPECIFICALLY SPELLED OUT AS AGREED TO BY THE BUYER AND THE AGENT. ANYTHING IN EXCESS OF THAT AGREED REMUNERATION IS RIGHTFULLY THE PROPERTY OF THE BUYER TO DO WITH AS THEY SEE FIT AS ARE ANY OTHER BONUS OR INCENTIVE OFFERED TO THE REALTOR.

Aren’t they supposed to try to get the best deal *for their clients*? YES.

Please, talk to us about the many ways in which the current system ensures transparency, full disclosure, and ethics among realtors in Canada. THE CREA CODE OF ETHICS AND ANY SUPPLEMENT BY YOUR PROVINCIAL REAL ESTATE ASSOCIATION AND OR REAL ESTATE BOARD IS TO BE ADHERED TO BY ALL REALTORS. THE CREA CODE OF ETHICS IS OF A HIGHER STANDARD THAN THE LAW REQUIRES. THE WORD REALTOR IS A TRADEMARK DESIGNATION OF THOSE WHO AGREE TO BE BOUND BY THAT CODE OF ETHICS AND CONDUCT THEIR BUSINESS IN A PROFESSIONAL MANNER WHICH UPHOLDS THE HIGHER THAN LEGAL STANDARD. WE ARE SELF POLICING AND YOU CAN TRUST THAT WE DO POLICE OURSELVES WITH VIGOR TO MAINTAIN THAT HIGH ETHICAL STANDARD WHICH THE PUBLIC MAY RELY UPON.

FURTHER NOTE:

#112 Barb the proof reader on 06.23.09 at 11:47 pm

#90 DM in C Just because you don’t like it doesn’t mean it’s bad. Oh wait, you’re one of those boomer “get off my lawn” types, aren’t you?”

DM, the opinion of “whore” came from my two friends, thirty-five year old moms who then described her music video — Lady Gaga humps a blow up dolphin in a baby pool. Do you want your teenagers or kids watching that? If so, then you would similarly approve of a man gratuitously humping a child’s toy, and ergo you would allow your kids to watch that too? I think the young mom’s said it all when they described her as a whore.

. . . .

#88 dave99 someone you’ve never met and know nothing about

Same answer for you Dave, I went to THE experts for the opinion, moms in their thirties spoke… Lady Gaga is notable for selling sex. The description of whore selling gratuitous commercialized sex, stands. You don’t need to meet one to know what they are.

Garth’s reference says it all.

#113 Devil's Advocate on 06.23.09 at 11:48 pm

FURTHER NOTE: While I appreciate Mr. Turners concerns over how CREA presented these most recent statistics Please understand that there are two parties to a transaction with somewhat conflicting interests.

When we are working with a buyer we are duty bound to investigate a property with all available reasonable due dilligence in order to help the buyer determine the suitability to the buyers intended use and enjoyment and probable market value of the property in that then marketplace.

When we are working with a seller we are duty bound to get that seller the highest price the market will bear.

Our professional bodies do have a duty of care to both parties and while those stats may have indicated the market is something other than it truely is in the minds of critical thinkers there are others who would equally take issue were CREA to have published an equally negative interpretation of the stats. The fact is these first six months have been quite bullish. The sustainability or being at the precipitice of a fall from grace is a matter of personal opinion (I suspect the later more the likely outcome). Neither CREA, I nor Mr. Turner have a crystal ball. At the end of the day buyers and sellers alike must make their own call but in these uncertain times it is more important than ever to do your due dilligence.

#114 Sophia on 06.24.09 at 9:51 am

Okay, so here’s a question: half of my RRSPs are in two funds that focus on Canadian natural resources. They have of course dived, wiping out the extraordinary gains they made from 2001-2008. They have recovered somewhat, but aren’t near where they were in June 2008. Should I hang on to them, since oil will go up again, or should I sell them, since the whole stock market is expected to crash more?