Dominion of debt



Canada Day, 2011.

Gas is $1.42 a litre, and a five-year mortgage hovers close to 8%. Effects of the crash of Autumn, 2008 are still being felt, even a year into an ‘official’ recovery. Unemployment is chronic and the federal government’s deficit will still top $40 billion with no hope of a balanced budget for at least half a decade. As a temporary measure, the GST’s been raised 1%.

Chrysler Canada is gone, of course, along with the notion of daily newspapers and network television. Newspapers and TV still exist but everyday publishing and local TV news are in their death throes. As for Chrysler, all that remains is a $4 billion bill which will never be paid.

The big story is real estate. Just two dozen months after the market entered a classic sucker’s rally, replete with roaring prices, multiple offers and predictions of ever-higher valuations, homeowners despair. Since the summer of 2009, when the national average house price reached its zenith – despite a recession – homes have eroded by 15% overall, and as much as 44% in some areas of British Columbia.

Among those most impacted: first-time buyers, lured into in 2009 homeownership by historic low teaser interest rates, offers of no-money-down financing from the big banks and credible predictions made by respected groups such as the Canadian Real Estate Association, that the market had “returned to pre-recession levels.”

Cassy Luneau and her husband Vache, both 27, spent Canada Day on a Parliament Hill bench, which has been their residence since deserting their home in Mississauga three months ago.

“We’re still in shock,” she says. “I mean, we listened to the real estate guy, and read the papers about housing getting more and more expensive, so we did what everybody was doing – what our parents wanted. We got a mortgage from the bank and they gave us a gift of money just for closing, to help pay for it. We just wanted a nice new house with stainless and granite and stuff. How were we supposed to know mortgage rates would go up and house prices go down, so after, like, a year we owed more than the place was worth. We couldn’t afford to sell it, and with Vache losing his job at the airport, we couldn’t afford to stay. So we came here. I mean, it’s all their fault, right? The politicians. I hate the bloodsuckers.”

Canada Day, 2009.

This week the most authoritative gauge of US house prices showed they tumbled 18% in the latest period. The Case-Shiller Index indicates American real estate has lost 34% of its value since peaking two and a half years ago.

The best guess is that while the pace of the price decline has moderated a little, it will continue for another two years. By that time, American homes will have eroded by between 40% and 50%, more than during the Great Depression, wiping out the life savings of millions of middle-class families.

By the middle of 2009, house prices are back at 2003 levels. It’s reasonable to assume another 10%-15% decline, putting them at 2000 levels by sometime in late 2010. Thus, an entire decade will have been lost. This comes amid news the Obama administration is seriously considering bulldozing sections of cities such as Flint and Detroit to wipe out housing stock, create natural areas and try to stem a real estate-induced urban collapse.

Will this happen in Canada?

Dozers, unlikely. A price correction, absolutely.

We continue to run roughly two years behind the Americans in this real estate saga. There is no escape.

Hence, two years from now, some heartbroken people will wish they might have read these words.


O Canada

Navistar lays off last 1,000 at Chatham truck plant

TV stations in Montreal, Hamilton, sold for less than $5,000

Air Canada at risk as union rejects compromise deal


For Garth's latest podcast, click here.


#1 Bob and Doug .....the Canadian Bro's on 06.30.09 at 11:06 pm

Fiction isn’t in my diction….oh sabretooth soothsayer.

Come on 2011………

What is this the blog? At least the realtors and CREA take numbers and twist them.

You just make this crap up.

#2 Larry on 06.30.09 at 11:10 pm

Happy Canada Day everyone. Nothing to report here in Calgary, houses are selling all over the city and i personaly know 3 couples who bought because they could afford the 3.5% interest rate. Me the renter is still considered some sort of alien and a whacko.

#3 ottawa pete on 06.30.09 at 11:12 pm

I just tried one of those mortgage calculators. This one actually has a rent vs. buy analysis feature – however it does not allow negative values to be entered into the “Yearly Appreciation on the Home” field – the default value is 4.5%….a negative value is considered “invalid”…clearly the real estate industry never considers a decline in value a possibility.

#4 Ted on 06.30.09 at 11:13 pm

April 2009
Turner says that low interest rates
are here to stay, so avoid rush buys.

Say what?

The central bank says they will be in force until mid-10. But mortgage rates have already started to rise with the bond market. Higher rates within two years are an inescapable reality. — Garth

#5 Black on 06.30.09 at 11:41 pm

Didn’t we lag US 1.5 years before? I see this repeated everywhere in the media and it makes no sense. There isn’t even correlation between provinces much less countries. Absolute rubbish that has been repeated so often people accept it as truth.

#6 stillwaiting on 07.01.09 at 12:18 am

Dear Garth,

I am glad you put out this post, unlike most crystal ballers, you have put numbers to your predictions and this blog will serve as a future record of your credibility or lack of it.

Have been reading your post for about 18 months now and it is one of the reasons we have not jumped into buying our first home yet. But as a 30 something in Toronto with an 8 mth old, I have to say I am still waiting for the 10-30% price drop that you predicted. The faux spring market has happened but is it just a blip? – I guess the next 6 months will be telling. Lil Bubba is starting to crawl and this apartment is getting pretty cramped, I don’t know if I can wait out another 18 months.

Could this mini-rally keep going or plateau for that long?

#7 nonplused on 07.01.09 at 12:29 am

Obama’s bulldozer idea is about the most cynical thing I have ever heard. Bulldoze houses to add price pressure to the market? Un-freaking-believable. I could see it if the house is decrepit and a liability, but they shouldn’t be bulldozing livable houses while people are living in tent cities. Sell the houses for what they will fetch, adjust taxes accordingly, and somebody will live in them. Maybe “Habitat For Humanity” could get on it somehow, and the banks could get a deduction for donating unwanted houses. HFH could then “refurbish” them using occupant labor like they build new ones. Just an idea.

#8 Bottoms_Up on 07.01.09 at 12:31 am

Happy C-Day,

Random stories/thoughts:

Spoke with a 30 yr old realtor recently. This person recently became a real estate ‘professional’ less than 1 year ago, and they told me it was the easiest way to make a living. Go figure.

Spoke with another realtor about a recent condo sale in Alberta. Units typically go for over $500,000 in this complex. The seller accepted ~$460,000, and everyone else called it a ‘distress’ sale to maintain the illusion their units are ‘worth’ over a 1/2 million.

Another story from a realtor–a place in Quebec was sold for 169,000 last year, the buyer painted it and just unloaded it for 269,00 (obviously to a greater fool).

More buyers need to scrutinize their purchases instead of blindly buying/believing. If they will shop around to save $3 on toilet paper or $10 on a pair of jeans it doesn’t make sense to not shop around or drive a hard bargain for the biggest purchase of their lives (we’re talking differences of thousands if not tens or hundreds of thousands of dollars)!!!

Here in Ottawa (Kanata) I’ve noticed multiple townhouses on the market for many MONTHS (with some price reductions). Yet a realtor has actually tried to tell me that supply is limited. Actually another realtor mentioned it is the weirdest market he’s ever seen (there are some good apples in the business that tell it like it is).

Also in Kanata newly built townhomes are standing vacant; builders are unwilling to reduce their prices and buyers have dried up. The fall and winter should be a very interesting time for real estate.

I wonder how other countries view Canada’s current real estate market? (what with the bubble popping in the US and the UK)

Friends of mine that make ~$120,000 combined just got preapproved for $600,000 @ 3.95% (1st time home buyers with no equity/assets). There’s nothing like spending over a 1/2 million of money that’s not yours with no skin in the game.

#9 Bottoms_Up on 07.01.09 at 12:36 am


A colleague of mine just came back from there. There are expanses of neighbourhoods that contain only 1 home that is lived in while dozens of houses on the street remain vacant. Michigan is now giving $25,000 to those that will buy a house, maintain it and live in it:

#10 victoria reader on 07.01.09 at 12:39 am

Kids are the only reason i am not renting right now.

#11 Bobby on 07.01.09 at 12:49 am

My guess is that most Canadians, including many realtors, have never heard of the Case/Shiller Index.

#12 Onemorething (aka DaHKkid) on 07.01.09 at 12:50 am

I would agree with that prediction!

Sub Prime re defaults on the rise, Option Arms and Alt A’s on deck and now Prime getting sucked into it. It is unavoidable that homes will go from 34% down currently from peak to 45-50% down in the US.

How can anyone in Canada seriously not see what is going on with the US market and expect nothing to occur here.

Canada for the most part avoided the initial downturn just by timing of the equity bubble in the US but eventually it comes home to roost. It will be twice as bad since no correction occurred.

#13 vanman on 07.01.09 at 1:04 am

House of Tools, which has been in business for more than 40 years and operated stores in Alberta, British Columbia and Saskatchewan employed more than 200 people, many of which had been with the company for 25 years or more.

Sad. Didn’t even make the news.

#14 Kelowna Gal on 07.01.09 at 1:39 am

HAPPY CANADA DAY…. I guess. There seems to be a selling frenzy in Kelowna. The condos are moving. Hallelujah. I feel sorry for those that are jumping in and buying right now. I am so glad that we didn’t buy a couple of years ago. Our friends and family thought that we had lost our minds because we didn’t jump in and buy when everyone else was…that would have been at the top of the market. Our family ridicules us because were the “renters.” It’s a choice that we have decided to live with. We have no debt and we save every month. When the prices drop we’ll buy. After reading your blog today Garth I can’t help but feel a little sad with what is going on….it’s bittersweet. I hate to think how deeply this is going to impact everyone no matter how much we have prepared.

#15 kc on 07.01.09 at 1:42 am

how are things doing in the US’s houseing market? glad you asked… if we are 2 years behind the curve, this may help explain what Garth’s post of the day states. nice read.

By Mike “Mish” Shedlock

“U.S. Housing Market Deteriorates as Foreclosures Soar”

(last paragraph, wrap up)

“Prime Loan Math in Units

There are 22.8 million prime loans. 2.9% of that is 661,200. That’s a lot of potential housing supply.

Jobs Are The Key

Unless the job market quickly improves, expect those numbers to soar. Here’s a hint: the job market is unlikely to significantly recover for years.

This was a very damning report on the state of housing.”


#16 Canadian Army Guy on 07.01.09 at 2:32 am


Your prediction is about as good as anybody’s.

Study and analyze current and past trends and patterns, try to guess the future…

So if things get that bad that soon, you better tell folks here about squirrel meat recipes.

squirrel a la king or squirrel a la Garth anyone?

Anybody up for some yummy fried sea gull?

#17 kc on 07.01.09 at 3:03 am

This article will enlighten you about BIG BAD banking practices, It is a well written piece that explores the scams of Goldman Sachs and how they propped up bubble after bubble. This is written in Rolling Stone Magizine, and don’t be put off by the length for it has a couple great kickers at the end.


#18 Samantha on 07.01.09 at 4:50 am

Will the bottom ever come? Based the articles linked in this post, it might be later than we think. The solutions South of the border aren’t promising and will only protract this mess for all of us. After reading them all I could think was look out below….

The following article illustrates the disaster that is “a simple plan” (phrase refers to a movie of the same name where a simple plan required increased cover up and ultimately ended in disaster) thinking for the California mortgage debacle and not heeding the lessons of Japan’s meltdown.

California now has an idea from the Milken Institute (let’s hope it stays an idea) they have christened the “homeowner principal forgiveness vesting plan”. The idea is not to foreclose and let the banks take the hit on these toxic mortgages. No, no, no. They want to refinance the drowning homeowners and launch them on the good ship Fannie Mae with the Treasury barge trailing behind with part of the cash.

Economic environmentalism has arrived – just recycle this crap, ignore the fact that people won’t be able to pay because they don’t have the income (or any income considering their burgeoning unemployment rates), and above all don’t let the banks take the hit. (Why should they when the people who didn’t become involved in these toxic mortgage products will be taking one for the team for many, many years to come?)

Funny how the eco-economic thinking can be applied to mortgages, but deferred for a bulldozer solution to vacant houses.

Here’s the link:

And if anyone is still up to a read, here is another article that has a depressing graph illustrating the Alt-A asteroid collision course timeline. There is also a good explanation of the lunacy of their workouts (and I ain’t talkin’ Jane Fonda).

There is much, much more and it is worth the read. Let’s all hope we get those trade agreements rolling with other countries because based on the USA’s trajectory, we are going to need them.

#19 Mike (Authentic) on 07.01.09 at 4:58 am

Garth, you paint a good prediction picture of 2 years from now. Not over blown, not fear mongered, but balanced. Well done.

But to be honest I didn’t like reading it. Even though I’m sure all of it will happen, I hate to see so many (like in the USA) here in Canada get hurt. Even if it is from their own lack of due-dilligence, forsight and morals.

2 more years, that will be a hard-to-swallow bitter pill for many wanting to buy a home. But they are comforted with the feeling of not only saving money on the house they might have bought but also they can sock it away in a secure investment and make money while they wait. A Win-Win situation for a waiting home buyer.

In Calgary another home we thought was sold a year ago came up for sale again, this time $230,000 cheaper: ($829k vs $598k)

It’s truely amazing that we actually went to look at it and thought about buying it (hey, $800k was a good deal a year ago for it). But we held off and are waiting.

Amazing that whoever ends up buying they would have effectively made “$230,000 after tax, plus interest” by waiting just 10 months!

That should be someone’s advertising slogan:

“MAKE $23,000 a month by doing NOTHING other than twiddling your thumbs; ask me how today”


#20 Bruce on 07.01.09 at 5:15 am

happy Canada Day everyday…

I am going to find myself a nice piece of free Federal Canada Day Cake… and watch a parade.

Thanks Garth for you blog… I am one of those long time listeners, who would like to buy a home for my family… but am waiting for a drop…

If any of your people think housing always recovers.. check out some MLS numbers in New Glasgow, NS or CB, NS….

both sides of a duplex for 45K, fully rented out.

#21 Mike (Authentic) on 07.01.09 at 6:23 am

If you blame the baby boomers for draining the CCP, for taking gen-X/Y’s jobs, their greed, pushing for seniors discounts or for just being “all my way or the highway” attitude, then here is something else you can add to the list. Now they have the option to never leave.

N.S. ends mandatory retirement
Published Wednesday July 1st, 2009

HALIFAX – Canada Day will provide a break for thousands of workers in Nova Scotia, but it will also mark the end of forced retirement for people who reach 65.

Previously, employers were allowed to discriminate on the basis of age by requiring employees to retire at 65.

A news release from the Nova Scotia Human Rights Commission says the changes bring Nova Scotia in line with other provinces and international jurisdictions.

Krista Daley, the commission’s chief executive officer and director, said mandatory retirement undermines a person’s dignity and sense of selfworth.

She says there will still be situations where “an employer can require a person to retire, but it can no longer be based on a uniform and artificially constructed age limit.”

“While some people may want to retire at some date past 65, such workers are often among the highest paid on the staff, which often means they don’t want to leave.

An employer may be motivated to encourage older workers to go into retirement to make room for younger workers who would be paid at a lower rate.

And in a situation where there are layoffs based on seniority, older workers may be pressured by their colleagues to take retirement in order to help a younger person, perhaps with a family to support, to avoid layoff. ”

#22 av on 07.01.09 at 8:35 am

a must read

#23 Bill-Muskoka (NAM) on 07.01.09 at 8:42 am


What is it with you and Chrysler? That is at least the second time you have chosen them as your target.

#24 Fisher on 07.01.09 at 8:45 am


Prices are still rising and everyone still thinks I am an idiot for not buying. $50 bil + deficit and people here believe that there will not be goverment layoffs. They seem to think Ottawa will boom because people will move here from less fortunate areas and buy looking for work.
Ottawa will have to layoff gov workers. And cut grants, and funding. Then they will have to raise taxes and sell assets. You cannot run a ship with that kind of loss without paying for it somehow.
Kanata has hightech and Nortel, lots of industry and parks (as long as the Sens stick around they should be OK).
Orleans is all houses and box stores with no industry or professional work at all (and it is way larger than kanata).
Ottawa south still has no four lane highway into the city and rampant crime. Transportation is a mess and planned sprall is massive.
Downtown is fueled by Tourism and Gov workers. Tourism will be the first clue things are array and then brown baging gov workers will finish it off.
Ottawa has always until recently been a boring city. Cold in winter and too hot in summer. It is now one of the best places on earth to live with activities galore all year round. But I fear for the people around me. I can see Ottawa slipping back to what it was 10 years ago. It can see Ottawa becoming a place to leave.

#25 molson cdn on 07.01.09 at 8:46 am

garth, great forecasting! in 2 years, things are going to get uuugly.
you neglected to mention the cost of Hydro; the construction of 2 nuclear reactors at darlington generating station. that should add additional billions to the provincial debt and cost overuns. additionally, the cost of heating your home will increase but the cost of COOLING your home will go thru to the moon and force many to sleep outside with the raccoons.
a couple of suggestions: if you are going to buy a home (who can resist), get a 10 yr mortgage. garth predicts 8% 5 yr rates (i forecast 12-15% 5 yr rates). buy a home with extensive insulation, (preferably foam insulation becuse of the sealing qualities),energy efficient appliances, gas heating, install a wood stove/fireplace for contingency measures, buy low wattage light bulbs.
since the #1 rule of real estate is location, location, location;. you pay more for location but when its time to unload it, you will have success.

#26 mikewasanengineer on 07.01.09 at 8:52 am

Hey Garth:

Great summary….this will come to pass. You forgot to mention some of the not so nice things. That may happen.

1) US bank Holiday – If it happens, what is affect on Canada, do we go down as well?
2) Food Shortages – and high prices for some items.
3) Civil Unrest – due to the lack of employment
4) Decreased City/Provincial/Government services.

Companies are loosing money. Hence they won’t pay taxes. Less taxes is not good for the government.

You painted a great picture, but I fear you left out some other “potential” negatives….

#27 Finanzkrise on 07.01.09 at 8:59 am

Great post, Garth!

Nice portrayal of two years down the road under a scenario of anemic GDP recovery with even slower job recovery, and a steady real estate decline.

Just curious, are your odds on a Depression scenario still around 20%?

I’m very curious about Q2 / Q3 results at the big US banks and Fannie & Freddie, and where TARP #2 is going to come from and how the bond and equity markets take to it…

#28 Nostradamus jr. on 07.01.09 at 9:10 am

…Happy Canada Day to all…

>>>the fact that a handful of banks, most specifically Goldman Sachs, constitute the majority of NYSE trading volume – and they’re trading for their own book, not for customers, will no longer be disclosed.<<<

…Garth, every investment tool is tainted or skewed against we Retail Investors.

Care to comment?

#29 wjp on 07.01.09 at 9:10 am

473,000 jobs gone in the U.S. – still bleeding jobs…

#30 wjp on 07.01.09 at 9:11 am

Another bad signal for the U.S. Housing Market

#31 wjp on 07.01.09 at 9:13 am

Cash Crisis looms in California…

#32 wjp on 07.01.09 at 9:25 am

More pain for U.S. Consumers…

#33 Glenn on 07.01.09 at 9:28 am

To #1 Bob and Doug, if you or anyone has not guessed it yet, here is the deal.

Few, if any, of those Garth chooses as examples are “real”. They are most likely an amalgam of the personalities and situations Garth runs into as he goes about his business.

Actually, every letter posted on this blog is genuine and came to me unsolicited. There will be many more, I am sure. As for the entry today, the opening paras are clearly conjecture. It’s a literary technique that even has a name – fiction. — Garth

#34 wjp on 07.01.09 at 9:30 am

Today’s news appears to be quite negative for the U.S. and quite possibly its’ trading partner Canada. It is China that is pushing oil and commodities higher and thus the DJ as well. I hope that Canada is pushing hard to increase its’ trade with China because the U.S. economy looks a long way from recovery IMHO…higher commodity and energy prices will only delay or completely choke off any recovery in the US. 85% of our trade is with the US…good luck to us…

#35 Michael B. on 07.01.09 at 10:01 am

For those who haven’t heard about this yet, here is a good article coming out in this months Rolling Stone magazine. It shows just what a manipulated scam our economies and markets have become. This fleecing was done courtesy of Goldman Sachs. I’m sure there are many many more pulling the same stunts.

#36 Dean on 07.01.09 at 10:04 am

The wider the gap between Canada and the US housing, the more likely we’re going to see a major plunge. Our economies are too tied together to sustain this difference. So either their prices will come up or ours have to come down.

#37 gookgobbler on 07.01.09 at 10:34 am

The lunacy here knows no bounds. Everyone here seems to hate politicians… except for Garth of course. How ironic.

When a ridiculously self-serving yet miraculously comprehensive future prediction is made by Garth, everyone here seems to act as if true wisdom has been imparted. In fact, this view of the future is dripping wet with greed and ignores the equally plausible possibility that another bubble will emerge that will prop up Canadian estate values until the next crash. The entire US administration and its corporate backers are working tirelessly to reflate the economy in some fashion. Ignore this at your peril.

This blog is undergoing an intellectual death throe so severe that commenters must now be completely unquestioning and dangerously incurious in order to swallow the rhetoric.

Garth has accurately laid out the downside risk, and a risk it is… which the market has priced in. But to suppose that fate can be so easily prescribed from recent history (i.e. 1.5 years lags etc…) totally discounts the nature of the market to invent new futures, complete with wrinkles that surprise everyone.

Please people, use your imagination.

Like you? — Garth

#38 45north on 07.01.09 at 10:42 am

what about immigration from the US? things are getting tough in the US
Very quietly some Americans will move north – instead of a once-a-year visit to Canada it will be two twice-a-year visits.

I was in Montréal a few years ago helping my son at a hockey tournament. I woman with a strong New York accent left her purse at the booth. I picked it up and ran downstairs to look for her. I ran past a group of people speaking French, I looked around but couldn’t see her, finally I turned around and saw her in the French group. Americans will invisibly blend with Canadian society.

#39 Nostradamus jr. on 07.01.09 at 10:50 am

>>>Executives with Heat and Frost Insulators and Allied Workers Local 118 took photographs over a six-week period that suggest pipes were being walled in without the necessary insulation to prevent mould or energy leaks.

” we can tell you that the underground parking, some of the mechanical rooms, certainly don’t meet the specifications and standards the work was tendered at,”…”The mechanical insulation is either missing or its done at a substandard level.”<<<

hmmmmm…The mould problem in BC is about mould in outside walls due to inadequate roof overhang.

…check any underground concrete garage and you will see exposed water pipes.

Garth, you are good.

With your blog today, you are pushing out by 2 years your prognostication of "See, I told you so".

…and that kind of Journalistic technique is called what?

#40 Got A Watch on 07.01.09 at 10:55 am

A big Happy Canada Day! to everyone. With all the bad news, the truth is, Canada is still a great place to live.

Yes, we have further hard times ahead, as we discuss here everyday. But compare those problems to what is going in many other nations around the globe – and be thankful you live in Canada. We are still the greatest place to live, and I mean that. I love everything about this nation, almost, and those quibbles are not worth worrying about for long on Canada Day.

Get out and enjoy the day and the season. Take pride in your country, the greatest on earth. A radio show just stated a recent poll says “90% of Canadians think this country is the greatest on earth” – yes, it is.

Wave the flag, drink some great Canadian beer or wine, enjoy a BBQ of your favorite foods, watch some fireworks, enjoy some time with family and friends. The bad economy will still be there for years, no point in obsessing about it on July 1.

And a big maple-glazed donut to Garth, for hosting this Blog. Sometimes the discussion gets loud and boisterous, like a night at the local pub, but almost everyone’s heart is in the right place.

I totally reject those who want to divide and diminish this great nation, it deserves better. Yes we have problems, but who does not? I remain optimistic over the long term, no matter how painful the next 8-10 years will be, in the long haul, even that is but one chapter in a large history book.

Canada is a nation to be proud of! Eh!

#41 jeff on 07.01.09 at 10:55 am

Interest rates are already starting to climb. I had a letter from my bank yesterday that they are having trouble raising money and therefore Aug 1 my LOC interest rate is going from prime to prime plus 1.

#42 TJ on 07.01.09 at 11:08 am

Happy Birthday Canada.

Garth is perhaps painting a picture that is too rosy.

Our largest trading partner – the USA is insolvent and they are the folks that buy a great deal of what we sell.

How are the Excited States doing?

Private-sector jobs in the U.S. fell 473,000 in June, according to a national employment report published Wednesday by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

The expected loss exceeds the 400,000 drop forecast by economists in a Dow Jones Newswires survey and suggests that layoffs may be worsening.

Separately, the Institute for Supply Management’s manufacturing index rose a bit to 44.8 in June from 42.8 in May. The number indicates the sector is contracting at a slower pace.

Meanwhile, spending on U.S. construction projects resumed falling in May, sent down by the soft housing market and a government sector scrambling for revenue in the recession.

However, a measure of pending home sales rose in May. [*Many of these are BO properties, foreclosures or forced sales skewing the numbers.]

The property slump is hitting home for Sheila Bair, chairman of the Federal Deposit Insurance Corp. — one of the few regulators who saw trouble in the housing market before the bust.

Last week, Ms. Bair removed her 14-room colonial in Amherst, Mass., from the market after cutting its sale price by $100,000 from an initial $795,000 in April, according to the listing sheet. It’s across the street from Emily Dickinson’s house in the college town.

Restaurants: 21st Consecutive Month of Traffic Declines in the United States.

Switzerland’s recession probably deepened in the second quarter after the economy contracted at the fastest pace in almost 15 years in the previous three months, Economy Minister Doris Leuthard said.

“We’ll certainly have a difficult second quarter because exports may show further negative results in some sectors,” Leuthard, who will become president of the Swiss Federation in 2010, said in an interview in Bern yesterday. Asked whether the current quarter may be the low point, she said “yes.”

But don’t worry – it’s different in Canada – that’s what some of the pundits say.
We have a large wall up protecting us? NO.

In this age of ‘Globalization’ we are all in the same canoe heading to Niagara Falls, and this time the River Patrol isn’t going to be around to save us.

#43 peter wiener on 07.01.09 at 11:23 am

Happy Canada Day to all and a special thanks to Garth Turner for creating this blog where we can all take a shot at predicting the future of Canadian real estate and air our views in a great forum.

I read some of this blog almost every day and am entertained on almost each visit. Thanks to all who follow and contribute to it as it gives us all an idea of what Canadians are thinking.

#44 Bailing in B.C. on 07.01.09 at 11:23 am

I have been trying to reply to Jan for some time regarding why my name links to Chris Martenson’s web site, but for some reason my comments are not being posted.

Having my name linked to Chris’s website is my way of spreading The Crash Course, which has been mentioned on this website several times before (although not lately) If you have not done so yet you should check it out.

I am not Chris Martenson, nor am I pretending to be Chris Martenson.

Glenn I know from first hand that a least one of Garth’s letters is completely genuine, and I have no doubt that the rest are also.

I fail to see why some people find these letters so unbelievable.

There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.

#45 905er & Spouse on 07.01.09 at 11:28 am

OMG! This is the top story in The Star Business section.

Basically it’s a reprint of a Century 21 “research” paper that finds tiny pocket of homes that have gone up dramatically year over year and generalize it to the whole city.

So for instance High Park is up 7% so the city of Toronto is one of the “10 blue chip ‘hoods'”.

I can’t even believe The Star would print such drivel.

It cheapens the whole newspaper.

This seriously must be the last gasps of the housing market.

#46 905er & Spouse on 07.01.09 at 11:30 am

Posted this yesterday but deserves repeating.

So, we’re in Mississauga today and we see this condo development with this big sign outfront that says:
“10% down
$20,000 cash back
From the $190,000″

I’m thinking 10% of $190K is $19K this seems to be no money down, unless my math is horribly wrong.

I can’t believe that people would allow themselves to be bribed with their own money.

This isn’t even considering that the $20K that they are getting back they will be paying interest on for 20-35 years.
Really….what are these people thinking!

#47 Kevin F on 07.01.09 at 11:40 am

Garth. Thanks for all the words of wisdom you share with us on this blog and through your books.

Thanks to your advice, I (conditionally) sold my condo in Calgary yesterday for over 99% of asking. Also thanks to your advice, I used the MLS even though I didn’t want to pay all the commissions. Thankfully, I found a discount broker who offered a MLS listing for only $495. For an extra $195, he’d handle all the negotiating and paperwork too!!! So, I listed with him, sold in 6 days for over 99% of asking price, and saved myself about $3500 in commissions. I can’t recommend this broker enough. His professionalism, personality, trustworthiness, and work ethic were excellent. I hope this will help some of your readers preserve their capital and accomplish their financial goals. Also, I get no kickback for this. I’m just so happy to have saved so much money that I feel a need to spread the good news to others who can use it.

Here’s my original listing:

Here’s the brokers website:

Kevin F

#48 Nostradamus Jr's Analyst on 07.01.09 at 12:21 pm

A truly riveting and spine-chilling futuristic tale of horror – should have been called “24 months later”.

Add some raging monkeys and we have a blockbuster.

Happy Birthday, Canada!
You don’t look a day over 130.

#49 Dawn in Calgary on 07.01.09 at 12:27 pm

Happy Canada Day everyone. I’m going to light the BBQ, have a couple drinks, and enjoy the day in my well-kept, well-priced rental.

I have a question for those whose families and friends give them a hard time about renting — why are they so concerned about what you’re doing? Is it to justify their own decisions?

We’ve bought and rented many times — not once has my family or friends made any comment about it. Maybe you need different friends?

#50 Marina on 07.01.09 at 12:27 pm


Just a couple of days ago someone on this blog wanted to take legal action against those who writes about “Bank Holiday”. So be careful. People are getting crazy during economy downturn.

#51 Marc on 07.01.09 at 1:06 pm

People are getting crazy during economy downturn
#50 Marina on 07.01.09 at 12:27 pm

Not just the economic downturn. I read of at least 12 suicides related to Micael jacksons death. Words do not describe how pathetic some peoples lives must truely be.

#52 Industrial guy on 07.01.09 at 1:19 pm

Yhe Darlinton expansion is now on hold. In case you have not noticed, Ontario is dealing with a major OVER CAPACITY problem this year. Just visit the Independent Electricity System Operator Web site at: and see how low demand has dropped. Wholesale prices for electricity are in the negative numbers on holidays and weekends.
It’s not a recession in Southern Ontario. It’s a full bore Depression. I work in the industrial sector. The only “green shoots” I have noticed are weeds growing in the parking lots of closed factories. The Navistar situation is being played out in small towns all over Southern Ontario. This downturn is far from over. The GM bankruptcy could be much worse for Ontario than anyone could have expected. Depressed yet? Keep that Prozac handy. You’ll need it.

#53 Basil Fawlty on 07.01.09 at 1:36 pm

Happy Canada Day everyone, be happy, even with Harper at the helm.

#54 Mark on 07.01.09 at 1:36 pm

“Kids are the only reason i am not renting right now.”

How do kids prevent you from renting??!??

#55 Cash is King on 07.01.09 at 1:37 pm

#23 Bill-Muskoka (NAM) on 07.01.09 at 8:42 am Wrote


What is it with you and Chrysler? That is at least the second time you have chosen them as your target.

Chrysler’s saviour and buy out buddy Fiat only builds small cars. Obama and Company have staked the Chrysler buyout to North American’s new found love of small cars. A love that has not happened yet and will not happen until gas is $5 a gallon. That is still a few years away. By that time Fiat will be out of money and hope.

Add to the short term cash flow is that minivan sales as a percentage of the market are plunging. 3rd shift at the Windsor plant is finished with no plans for recall.

Garth, many of us would love your opinion on “Bank Holiday’s” Not only has been mentioned on this blog but also on national US syndicated radio shows. (Rush and Dennis Prager. Thanks

#56 Cash is King on 07.01.09 at 1:40 pm

Sorry – Mike Gallagher on Tuesday, not Dennis Prager

#57 Andrew on 07.01.09 at 1:50 pm

Calgary’s June statistics from

Calgary condo sales up 33% from last year.

Median price up $23,000(9%) since Jan.

Inventory down 44%

#58 Repatriated Expat on 07.01.09 at 2:08 pm

Ending up broke and without a job is a dangerous mix when you have mouths to feed, the food banks are depleated, and you have nothing to lose.

Social unrest manifested by polite Canadians protesting on Parliment Hill in 2011? I’m thinking riots in the streets, and not the post hockey game 20 year olds blowing off steam.

It took the actions of only a few separtists to enact Marshal law during the 1970 October crisis.

#59 Mike B on 07.01.09 at 2:27 pm

Can anyone explain the implications of a bank holiday>>???

#60 Charles T. on 07.01.09 at 3:02 pm

U.S. shale gas supply casts ‘dark clouds’over Alberta.
Province warns loss in gas revenue will batter budget.

Over two days at the legislature late last week, Treasury Board president Lloyd Snelgrove laid out the Alberta government’s fiscal health to a motley group representing roughly 90 special interests, from health care and education, to businesses and municipalities.

“The hastily called meetings were highly unusual. Pre-budget talks have rarely occurred so early in the year, no less during summer.

Then again, the next provincial budget will be the Stelmach government’s toughest, with tanking natural gas prices one of the main culprits behind eroding revenues.

The province’s economic outlook has been battered by the commodity’s depressed value, a global recession and lofty Canadian loonie. A$2-billion mixture of spending cuts and tax increases–which the government first warned about in April–grows more likely by the day.

“Times are changing and they’re changing very quickly, and we just want to be prepared,” Premier Ed Stelmach said in Calgary.

While many factors affect Alberta’s fiscal well-being, natural gas development is a prime contributor to government coffers, the oilpatch and small towns across the province.

This point was drilled home repeatedly last week, as the premier warned Albertans of “dark clouds ahead” in the emergence of U. S. shale gas and his government rejigged royalty rules again to aid producers.

Natural gas is the largest single source of energy revenue in Alberta, accounting for two-thirds of non-renewable resource wealth and vastly outpacing riches reaped from oil development.

The speed of shale gas development in the United States has taken many in Alberta by surprise.

Technological advancements have untapped the unconventional gas’ potential. Low cost and easily deliverable, shale has been the chief contributor to a 35 per cent spike in U. S. natural gas supply, according to a recent report from the U. S. Potential Gas Committee.

U.S. shale gas supply casts ‘dark clouds’over Alberta

#61 jess tree on 07.01.09 at 3:49 pm

wage deflation
David Rosenberg

#62 infernalmachine on 07.01.09 at 4:41 pm

living here in toronto, just looked at MLS again to convince myself i’m not insane for renting…

a condo of a comparable size (2 bed, 1000sq ft) and a slightly crappier location than my apartment (i’m in etobicoke in a spot small bungalow houses are selling for $600k) — they’re going for $250K plus. not to mention condo fees ($350 and up) and teensy little balconies (mine is 90sq ft)…. the nicer condos are $329 and more, just for the pleasure of a few more feet of balcony space.

i rent my place for $1275 and they gave us a month free just to move in. they also just replaced our fridge.

why in the hell would anybody want to buy in this kind of farked up market here? there’s no such thing as an entry level market here in toronto, unless you’re two lawyers with no kids.

15% correction? can’t happen soon enough. i hope for more. $450K for a shitty little aluminum sided bungalow built in 1945 isn’t kidding anybody.

#63 WAB on 07.01.09 at 5:04 pm

Vancouver’s market (and the lower mainland’s) is hot, hot, hot. Inventory for all property types is sitting at 3 months; some bidding wars; and prices are inching up, eroding the 14% decline in prices from February 08. All this is taking place amidst the worst recession in decades? Does it really matter what the state of the economy is in this city?

During 2002-2007, people were running out and buying at a time when BC had record low unemployment numbers with historically low interest rates. In 2009, people are running out and buying when the provincial unemployment rate doubled in the last year, and we have the lowest interest rates in history. Good times or bad, people want to buy here.

You will never see a crash is this blessed city. IF interest rates rise, all that will do is shut out a few FTBS, helping create rising inventory levels, and a slow decline in prices.

Of course that is what occurred during the Feb 08 to December 09 period in Vancouver. Those conditions, coupled with lower interest rates, fueled the current mini-boom. The point – there will always be buyers that will run in to take advantage of the decline in prices in this city, helping to reverse any slow decline in prices.

There will be no crash here. Business is as usual whether its good economic times or bad economic times. Move along. Nothing to see here except the average home hitting the million dollar mark in the next few years…

And while some FTB’s will undoubtedly be burned after they renew at higher interest rates, that will be be in five years! Maybe then the next generation of FTBs will be ready to pick up the slack, and drive prices higher

I cannot wait another five years for this “crash” to occur….

#64 Nostradamus Le Mad Vlad on 07.01.09 at 5:50 pm

From Garth’s “With Glowing Hearts” post (comment #28), and in combination with the current “Dominion of Debt” post, a rerun of the 2:47 clip which shows Obama’s projected budget deficits for the next eight years, as compared with Presidents from 1900 to dubya’s completion.

The clip is worth watching, as one is able to have a clear view of where the west / world is very quickly headed, in a direction that was completely unexpected by sheeple, who never foresaw the present meltdown happening.
“A neat little 2:47 ditty from Matt (last name unknown) who is known as ‘10000Pennies’ on youtube. Matt’s thinking can be found on his blog at —

Link at end re: Soros . . . “His profits are staggering. On September 16, 1992, he famously made a billion dollars in one day by betting against the Bank of England and the pound sterling. In July 1997, he contributed to the Southeast Asian financial crisis by shorting the Thai baht. In early 2000, he supposedly suffered losses on tech stocks, but some analysts now suggest that the burn of the NASDAQ was controlled and that Soros helped to start the fire. By last November, he was betting the U.S. dollar would plummet. As the London Independent reported (November 28, 2003), his activities were contributing to a growing belief on Wall Street that the dollar would slide even further.”

#26 Grantmi on 06.30.09 at 8:31 am — “Garth.. this is pretty racist IMO!! from Nostradamus Le Mad Vlad!!

“For today’s may / may not be a conspiracy theory —

“Agreed. It’s trash, and should not have been posted. — Garth”
Racist (trash) or not, by watching the clip and glossing over the two links posted below, one can see that someone else other than Obama is pulling the strings.

All I point out is that there are much bigger things taking place than what we can ever know, which is another reason why people like Murdoch and the elite want to have complete control of the ‘net.

I make no apologies for posting and saying what I did. Whether Garth posts this is his prerogative.

Links: — and —

#65 TJ on 07.01.09 at 5:51 pm

As if you don’t have enough to worry about when you buy a home. *This is dedicated to Mike Holmes.

At the height of the boom in 2005, more than two million houses were built in the U.S., according to the National Association of Home Builders, a trade group. Criterium Engineers, a national building-inspection firm, estimates that 17% of newly constructed houses built in 2006 had at least two significant defects, up from 15% in 2003.

Because of tumbling real-estate values, those stuck with faulty houses say repairs often cost more than the homes are now worth. Many say they can’t refinance their mortgages or sell, and they have no equity to leverage for repairs.

Any similar stories in Canada, folks?

#66 TJ on 07.01.09 at 5:59 pm

Instead of “green shoots” (those which international media, experts and the politicians who listen to them kept perceiving in every statistical chart in the past two months), what will appear on the horizon is a group of three destructive waves of the social and economic fabric expected to converge in the course of summer 2009, illustrating the aggravation of the crisis and entailing major changes by the end of summer 2009 more specifically, debt default events in the US and UK, both countries at the centre of the global system in crisis.

These waves appear as follows:

1. Wave of massive unemployment: Three different dates of impact according to the countries in
N.America, Europe, Asia, the Middle East and Africa
2. Wave of serial corporate bankruptcies: companies, banks, housing, states, counties, towns
3. Wave of terminal crisis for the US Dollar, US T-Bond and GBP, and the return of inflation.


#67 David on 07.01.09 at 6:15 pm

Happy Canada Day to all the bloggers.
The unhappy economic prospects are totally the result of man made stupidity, greed and incompetence and there is plenty of blame to go around.
Finding the true bottom in housing in Canada is a going to be a painful and rough ride down with no soft landing and years of flat lining before anything like a normal recovery can begin.

#68 Stasi leather trenchcoat on 07.01.09 at 6:42 pm

Do 90% of the First Nations and Quebec feel this way about Canada or were they left out of the poll?

What poll? — Garth

#69 lgre on 07.01.09 at 6:44 pm

“Because of tumbling real-estate values, those stuck with faulty houses say repairs often cost more than the homes are now worth. Many say they can’t refinance their mortgages or sell, and they have no equity to leverage for repairs.

Any similar stories in Canada, folks?”

owning a new house in the last 2 years, I can tell you that the build quality along with the material used is very award winning builder by the I’m sure the problems will arise very soon..

The wind in Milton has removed shingles from many houses, 6 month old there is some proof of poor quality.

#70 Rick on 07.01.09 at 6:56 pm

Garth is right about Chrysler as sales continue to crash.

“The sharp declines at GM and Chrysler, down 34% and 42% respectively, were caused in part by tumbling fleet sales, as the companies tightened their inventories and dealers reduced their stock of vehicles. Fleet sales fell 49% and 95%, respectively.”

“Chrysler’s 42% decline to 68,297 was led by a 48% drop for cars. Chrysler, which didn’t produce any vehicles for fleet sales in June, reported it finished the month with 195,272 units in inventory, down 56% from a year ago and representing a 71-day supply”

#71 Rick on 07.01.09 at 6:59 pm

Chrysler can try to spin all they like but it seems there is a growing boycott of chrysler products. Was talking with a buddy and he was talking about how he also heard of the chrysler boycott. Even with all the discounts with chrysler dealerships being forced to close and chrysler sales were horrible.

#72 Industrial guy on 07.01.09 at 7:23 pm

OH wow!!! The wire services are saying … Great news! Car sales rebounded slightly in June 2009. However ……it’s time for a reality check.. June was when car & truck sales started to plummet last year. This makes the year-over-year difference with June 2009 numbers look more positive, when in fact they are worse. Ford saw sales drop just 10% last month compared to the same month last year. It’s not as great as it sounds. They were down over 30% in June 2008.

Of course, If your sales are off year to date by over 30% like in the case of GM and 40% like Chrysler, it’s a complete disaster. Is the situation with the North American auto industry getting better? NO, it’s not. It’s actually getting much worse. With sales numbers like these, it’s a certainty more plant closings are coming. Guess who will be back asking for more government bailout money?

The next wave of unemployment is coming and it’s going to be a huge in Southern Ontario.

On the other hand, there is some good news if you live in Cambridge or Alliston ….. Honda and Toyota’s 30% sales decrease is not necessarily as bad as it looks. They both experienced huge spikes in sales of their popular, fuel-efficient models last June 2008. So, for them, its less of a drop and more of a return to normal production numbers.

#73 john m on 07.01.09 at 7:42 pm

Great post Garth (as always) it amazes me how so many of the younger people are so gung ho to jump in thinking things are going no where but up?Every thing has a reason whatever it be…stock market…real estate..etc….basic common sense when you weigh the factors has a hell of a lot more negatives than positives.Everyone who puts their future in jeopardy at the mercy of the financial institutions should be doing some serious thinking before taking the leap. IMO we are living in a false economy created by a huge influx of government funding (taxpayer’s dollars) which is only temporary the crap getting ready to hit the fan is piling up daily.

#74 Bottoms_Up on 07.01.09 at 8:00 pm

#63 WAB on 07.01.09 at 5:04 pm
You obviously haven’t seen this chart (don’t you know that history repeats itself?):

#75 Comfortable in a coma on 07.01.09 at 8:46 pm

External quality is easier to see and fixable. The poor quality of Vancouver condos is hidden and costs your pension to fix.
The delusional buyers in Vancouver are not only paying too much, they get to pay again when the rotting walls are discovered.
Another built in problem is faulty copper tubes, they break and flood the inside walls, carpets, cupboards and personal goods.
I have a good friend who has borrowed money three times as the condo building continued to fall apart. Once his share of the bill was $30k, once it was $25k and the last bill was for $50k. He has now lost his home and his pension funds and will spend the rest of his life in a care home on gov’t funds. All because someone convinced him that the safest place to put his retirement funds was into a Vancouver condo. Can’t lose, it’s different out here. Ha ha ha!

#76 ottawa pete on 07.01.09 at 8:55 pm

U.S. raises home refi plan’s loan-to-value ceiling to 125%

“The new loan-to-value maximum of 125% means an eligible homeowner with a $375,000 mortgage could refi if his or her house is worth at least $300,000. But the borrower still would have to be able to afford the new loan, and income requirements are an increasing problem as unemployment soars and many workers are forced to take pay cuts.”

#77 ottawa pete on 07.01.09 at 9:00 pm

Just six families helped by government Mortgage Rescue Scheme

‘Britain is facing a reposession timebomb’

#78 Solitario on 07.01.09 at 9:28 pm

life is passing by…
plus, Mr.Turner is a smart and honest man, but he is often wrong…

And I’m willing to bet he’ll be wrong in his predictions…because they are contradictory…if the mortgage rates will be substantially higher, that could mean inflation…and that will make everything go higher, real estate inclusive…nothing wrong up to this point…it could happen…but chronic/high unemployment and inflation don’t go together…
And high unemployment (no economic recovery) and $1.40 gasoline don’t go together…and $1.40 gasoline (it means $120 oil) and lower real estate prices…(Canada’s a big oil exporter, Alberta’s booming again, trading account back in black…) …don’t go together.

Go get a home for the little one…life is passing by.

#79 Solitario on 07.01.09 at 9:42 pm

your attack on Obama’s totally unwarranted…demolishing empty housing in empty former neighborhoods was not his idea…and you’ve got pretty much everything else wrong…Flint municipality can no longer afford to maintain infrastructure for 200k people, the city has only 100k now…entire city blocks are empty, houses abandoned long time ago, degraded…everything of any value, piping, wiring removed… only activity: homeless, drug dealers…With a much lower tax base, Flint can no longer afford to maintain the sewers, have police patrol those streets…
I’m sure they’d give those houses for free to anyone who’d want to maintain them and pay property taxes…no takers yet.

#80 lgre on 07.01.09 at 10:03 pm

“if the mortgage rates will be substantially higher, that could mean inflation…and that will make everything go higher, real estate inclusive”

really? that’s the opposite of the 91 era, rates were 15% and houses plummeted..I know, my parents bought in that time. Inflation erodes the currency but you cant have high rates and high wont work, who’s gonna buy?’re forgeting that housing is supply and demand..once rates are high demand plummets due to affordability..your argument is text book, not reality.

#81 Barb the proof reader on 07.01.09 at 10:29 pm

#17 kc banking practices.. scams of Goldman

Good to see that Goldman Sachs article in Rolling Stone. One quote says it all:
”an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy”
As for Goldman’s game in Canada, here’s some Commenters posts on Garth’s blogs even 2 years ago:
”This corrupt game is rigged by the US for the US. Goldman Sachs is the broker. Welcome to the backwater state called Canada. Once again Canada’s main stream media failed to score in uncovering the blatantly obvious. Is it possible they also play for the other team?”
”the concentration of power is starting to look unhealthy. A
clan of former senior Goldman staffers is now in a position to help”
And someone sums it up well:

#82 Jonathan on 07.02.09 at 12:00 am

#63 WAB

You say what.. that there will NEVER be a crash in Vancouver real estate..

Buddy you need to look at Vancouver’s real estate history – it’s all about crash and burn.

Vancouverites incomes don’t support half of the current valuations on real estate – let alone a million. This current real estate market is more cause for concern than relief – even president of CHMC said so.

#83 Jonathan on 07.02.09 at 12:01 am

#68 Stasi

Well if they don’t, then I’d like to get my taxes back.

#84 nonplused on 07.02.09 at 12:50 am

#10 victoria reader

I have kids and I am renting, and they know it. But it’s the biggest house we have ever lived in, with lots of room in the yard (4 acres! 2.5 groomed) for a trampoline ($240 at Canadian Tire). Owning vs. renting means nothing to the kids, so long as their school/friends/soccer is close by.

#79 Solitario

You didn’t read my post very closely. I allowed for destruction of derelict homes and suggested salvaging others through charities that are now busy building new ones. Whether it applies to Flint in particular I can’t say, but there are a lot of homeless people out there right now and the government is proposing destroying homes instead of “modifying” them. I don’t mind being criticized but please criticize what I said and not some straw man argument you propose I said.

In some cases destroying homes might make sense. But with homelessness a problem in every city, maybe we have a solution and a problem merely needing to be connected? Maybe not in Flint.

#85 nonplused on 07.02.09 at 12:55 am

#79 Solitario

They won’t avoid maintaining the roads and sewers unless they can bulldoze entire communities. Are you advocating forced relocations?

Give the salvageable housing to Habitat for Humanity, and bulldoze the derelict properties, and then give the land to Habitat for Humanity. It’s seems like a solution custom fit to the problem.

#86 gold bugger on 07.02.09 at 2:12 am

WAB, I’m interested in your definition of “never.”

What a badly disguised real estate shill you are. How much is your commission? Professional curiosity.

#87 Future Expatriate on 07.02.09 at 5:13 am

#1- As if ANYONE listens to you drunks.

#88 Samantha on 07.02.09 at 9:13 am

Two quotes, one about mortgages and the other inflation, from “Towers of Gold – Feet of Clay” by Walter Stewart published in 1982. For brevity, I have omitted the references for data, however his sources are well documented in the book.

The first quote concerns mortgages from page 225:

“Consider the mortgage. Canadian banks are into mortgages in a very big way, and mortgage rates have been shoved up in recent years to unprecedented levels. There was a time, before the banks got into the act, when buying a mortgage was a long term proposition. You trotted around to the trust company – or mortgage firm or insurance company – filled out the forms and, in due course were assigned a mortgage, for, say, twenty-five years at 7%. The trust company did very well out of the transaction, in its role as mortgagee; the mortgagor did less well, but at least he got his house….But after the 1967 Bank Act amendment, the banks took over a major part of this market. In 1963, all the chartered banks in Canada held less than $100,000 in residential mortgages; a decade later, they held $2.3 billion. From a fraction of one percent of the market, they shot to twenty-eight percent; today they hold more than $55 billion in mortgages. They are now the dominant player in the mortgage game. Their availability – with branches almost everywhere – their easy access to funds and their gigantic size gave them an instant edge on their competitors, which they have never lost.”

The second quote concerns inflation from pages 227 and 228:

“”Real interest” – the economic rent of money – has historically run at about 3%. That is, if inflation is running at 5% and interest at 7%, the lender is the loser; if inflation is 5% and interest is 9%, the borrower is the loser. By making high interest rates the weapon to combat inflation, we have handed the banks an excuse to widen this gap. In 1981, inflation ran at 12.5%, and interest rates ranged from 16.5% to 22.75%. That is only for Prime loans; the gap was much wider for consumer, credit card and mortgage loans. Such a gap adds to inflation; it cannot help but do so, because it piles onto the ordinary push behind rising prices the extra impetus of an inflationary surge in one of the chief components in every transaction, the cost of money.

That is why I say that banks are in the business of inflation.”

#89 Denis on 07.02.09 at 3:54 pm

So … We finally found a place to rent after selling our condo and I wanted to do a quick rent vs. buy comparison and here’s the raw numbers:
We’re renting – 2 BR + HUGE Solarium / 2 Bath (Total 1300 sq ft + Parking in North York – $2000/month all-in including Rogers VIP cable)

#503 – Asking $347k – $680/month condo fees (1200 sq ft) + 2 parking spots
#807 – Asking $365k – $723/month condo fees (probably >1300 sq ft with those fees)
#2007 – Asking $375k – $681/month condo fees (1200 sq ft?)

Nuts! Say we were to put down our liquid cash now that we pulled out of our condo of $125k and get the lowest priced one at the average for c14 of 95 cents on the dollar ($329,650 – 95% of asking) … That’s 37.9% down and a $204,650 mortgage (5 year at 4.49% – ING’s rate) is $1,131.54 ($750.97 Interest + $380.58 Principle) per month.

$1,131.54 + $680 condo fees = $1811.54 / month and we haven’t even paid taxes yet which will probably be higher than the $195/month we were paying at the old condo we once owned since it’s bigger. Let’s say $225/month. That’s $2036.54/month + cable … We’re at 2136.54/month (all-in to compare apples to apples). All to force a savings of $380/month (which is slightly eaten up by the extra $136/month cost of owning above renting).

At a 3.94% annualized decline (calculated based on the Toronto’s decline from 1989 to 1996 using TREB’s Market Watch) which is fairly conservative considering that we’re already down 9% since peak levels in Aug 2008 – … On a property that’s worth $330k … We’d also be losing $13,002 / year or $1083.50 / month with is significantly higher than the $380/month of “forced savings” minus the additional cost of ownership … So that “forced savings” quickly disappears as does another $703.50 per month from the 125k down payment.

It’s good to be liquid right now.