Party like it’s 2007

cliff

I swear. Some days.

Commodities tanked Monday, taking the stock market with them. Serious doubts are rising about the reality of a broad-based global recovery. Merrill’s new hot-shot girl economist (HSGE) rattled Bay Street with a warning Canada’s economy will likely swoon again after it plumps a little. Thirty-six people have died from swine flu in this country. Lots more to come with unknown economic consequences of a new pandemic. And Ottawa’s budget cop is warning us the feds are walking us into huge jobs losses and $156 billion of new deficits over the next five years.

So what topped local newscasts in Toronto, Edmonton and Vancouver?

Of course. Record home sales. Giddy buyers. Rising prices. Oh happy day, 2007’s back!

As I’m sure you know, real estate sales in Toronto and Calgary soared 27% over year-ago levels in June. In Edmonton, the hike was 38%, and in Vancouver, 75%. GTA prices are at the highest point ever, and the industry spokesguy says this is “testament to the fundamentally sound housing market,” and  that “an increasing number of households have been confident in purchasing a home in the region’s affordable and diverse housing market.”

There is little doubt, the bubble’s back. At least in selected areas – which exclude Ontario’s manufacturing rust belt, cottage country, and swaths of BC’s nether regions.

Why?

Three reasons. First, the greatest amount of sales activity is (in Toronto’s case) in the $300,000 range, and is being driven by first-time buyers. These kids have just experienced the first real estate price decline of their shiny new lives. When the last one happened (1990-3) they were pulling their Oreos apart. They think real estate always goes up (cuz it always has since they started paying attention) and that this is a generational opportunity to buy.

Second, we are financially and economically illiterate.

Third, this is what happens when central banks fail us.

The last time these guys completely blew things was following Nine Eleven, when the Fed doused interest rates in order to stem a terrorist-induced recession. The unintended consequence was a mother of an asset bubble, as cheap mortgage money wildly inflated real estate, the results of which we live with today. This time around, the actions were more extreme, more widespread, more radical and more abrupt. To think there will not be more collateral damage is naive.

The HSGE referenced this in her excellent report. Central bankers, she hints, have massively overdone it. And with the first signs of inflation, consumer excess or bubble behaviour, they will probably overreact on the other side, ramming rates higher.

Hmm. Think we may have just seen the calatyst? There are bidding wars now from Toronto to Phoenix, in an environment of the cheapest interest rates since ever. Seems if you make money basically free, consumers will do what your dog does when the kibble bag breaks open.

Of course, this will not last. Once interest rates rise, affordability dies. Those who scarfed big 3% loans will have to start budgeting for renewals at two or three times the price. And that’s just one of the issues we know lie ahead.

That $156 billion in borrowed government money will bring with it higher taxes. This will happen as renewed global growth, however tepid, rekindles energy prices, sending gasoline and home heating costs far higher. The Canadian petro-dollar will also rise in value against the US greenback, which is unhappy news for manufacturers, exporters or anyone left standing in the tourist biz. And did I mention pandemic? Whatever.

The point is (and I’ve been making it for a couple of months here), there are many more known negatives to worry about than the elixir of cheapo money can cure. But then, that’s almost gone.

Current prices are unsustainable. Current buyers are gamblers. Current sellers are sainted. This will not end well.

There’s limited space in my bunker. Only those with gold wristbands can stay. Beat it. This area’s being cleared.

HOWE STREET BANNER

For Garth's latest podcast, go here.

127 comments ↓

#1 Dan on 07.06.09 at 10:50 pm

I am one of those that bought at the peak.. and not because I was not aware of this website or because I did not belive what you ‘preached’. We had our reasons. As much as I would like to think that the RE is going up again I have to say that I agree with your recent comments. On a side note on the previous posting, we have a VR of prime -0.75 open mortgage (25% down) with an amortization of 25 years and accelerated bi-weekly payments. I think that we’ll stick with it for the reminder of the 4 years and not close.

#2 dd on 07.06.09 at 10:58 pm

“Current prices are unsustainable. Current buyers are gamblers. Current sellers are sainted. This will not end well.”

And what does the RE industry do? Pump and dump. It seems that Canadian buyers have no clue on what is happening.

#3 Denis on 07.06.09 at 11:18 pm

Thanks Garth … Great Post!

“June 2009’s sales-to-inventory figure is the highest we’ve seen in the past twenty years. This means that the imbalance between supply and demand – favouring sellers – was greater in June 2009 than any other month in the past twenty years, including Toronto’s real estate bubble in the late 1980’s.” (Alarming Imbalance in Toronto’s Real Estate Market – http://tinyurl.com/md6nr3)

Pop! … If this isn’t a leading indicator, I don’t know what is!

#4 Nostradamus Jr's Analyst on 07.06.09 at 11:37 pm

Interest rates to double based on the Federal Reserves own studies.
First time home buyers – how do you like the sound of 9%?

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5754447/US-lurching-towards-debt-explosion-with-long-term-interest-rates-on-course-to-double.html

Hey, is that Nixon in the photo?

#5 davers on 07.06.09 at 11:37 pm

Seeing the new housing stats for Vancouver nearly knocked me off my chair. 3 more months of this and I am moving to Vegas where I can buy a 3 bedroom home with a pool and hot tub for the price of a really old crappy 1 bedroom leaky condo in a bad area of a suburb of Vancouver (about 130 american, 150 canadian).

I am at a complete loss for the price disparity. I know, jobs, best place on earth, olympics blah blah blah.

But a place 15 mins away from downtown Vancouver is literally 8 times more expensive than a comparable place in Vegas 15 mins from the strip.

#6 It was decided long time ago on 07.06.09 at 11:38 pm

Today was decided long time agoWhen naive consumers sold their SOULS to evil marketters of everything.

Their know they are inheritedly week, and prove it so my making on efforts-other than consume more -and this is thier way of trying to take everyone down with them. It has happened before and will happen again.

Solution is capital reserves, transfrontalier mobility and impeccable & transerable qualifications

For the rest, you’ll suck it hard

#7 It was decided long time ago on 07.06.09 at 11:42 pm

Today was decided long time ago when naive consumers sold their SOULS to evil marketters of everything.

Their know they are inheritedly week, and prove it so by making no efforts -other than consume more -and this is thier way of trying to take everyone down with them. It has happened before and will happen again.

Solution is capital reserves, trans-frontalier mobility, impeccable & transferable qualifications and know when to gamble early in the game next time.

For the rest, you lost, game’s already over dudes

#8 Crash on 07.06.09 at 11:55 pm

We are being lied to by the special interest groups and the media and even our own government who are all in these groups’ back pockets. Why don’t we hear about the swine flu in the media, or the wrecked economy with the record job losses mounting daily? Or all the other stuff going on? This should all be front page news, but instead it’s relegated to the back pages if it’s reported at all. We are living in the mother of all spin deceptions and it’s a good thing we have blogs like this where we can rely on each other to learn what’s really happening. The media and special interest groups and our own government certainly do not have our best interests at heart.

#9 ottawa pete on 07.07.09 at 12:17 am

Just drove Ottawa to Picton and back today through Perth, Westport, and Kingston via County 10 and 401: LOTS of for sale signs on what I assume are primarily cottages, but clearly some are year round homes. Westport appears to be devastated – it’s prime cottage/tourist season and multiple stores and restaurants are out of business. Many for sale in Picton too. I could be wrong but it doesn’t look good from my driver’s seat.

#10 Republic_of_Western_Canada on 07.07.09 at 12:20 am

Riddle: What do duct tape and green shoots have in common?

#11 Nostradamus Le Mad Vlad on 07.07.09 at 12:38 am

“. . . Think we may have just seen the calatyst? . . . [Not yet — steady now] . . . $156 billion in borrowed government money will bring with it higher taxes. . .”

To quote a line from Pink Floyd’s song “Money”: “I’m all right Jack, keep your hands off of my stack. . . .”

So if sheeple are laid off / have homes foreclosed / can barely afford to eat, yet the feds. raise taxes, which won’t be paid by sheeple anymore, as there is no income coming in to pay for them, what number of scenarios could play out?

Well, here’s a theoretical one, although the answer lies a couple of sentences below the out-take. And now for something completely different; this should sell Billions Of Barmy Bunkers! — http://tinyurl.com/l4uygp

“A cataclysmic attack throws the United States [North America] back to the dark ages, with no electricity, no communication or transportation networks, and no medicines. The most vulnerable members of society—the very young and the very old—begin to die off first, but soon hundreds of thousands of people, millions of people, begin dying. Rogue bands of lawless predators, living by rule of force rather than by rule of law, prey on weakened communities. The government, crippled, can’t come to anyone’s rescue.”
——
Although there was triple-digit oil last year, it didn’t sustain.

T. Boone Pickens said a month or so ago that it may go to US$300 / brl. Link here — http://tinyurl.com/l3tyxb — (Jeff Rubin) says it will hit three figures within 12-18 months.

If there was ever a reason to carpool / downsize / either work from home or move and live closer to work, this is an idea whose time has come!
——
Commodities, S&P going bananas, etc. — http://www.conspiracyplanet.com/
——
#103 Nostradamus jr. at 6:51 pm — “. . . civil unrest in China, . . .” — Guess who is behind the ‘civil unrest’ in China and Honduras?

The CIA spent US$400 mln. to overthrow the democratically-elected govt. in Iran and failed dismally to install a new “puppet regime” — like the Shah of Iran was — so they are taking their frustrations out on China and Honduras! — http://tinyurl.com/ko58au /\ http://tinyurl.com/m5vxep
——
California getting closer to junk-status. — http://tinyurl.com/mf28e4 — Comment by wrh.com.

“One has to wonder just how soon the US and UK will no longer be able to keep their financial obligations, and just what will happen if in fact there are massive defaults by both countries.”

#12 kc on 07.07.09 at 12:52 am

I wonder if the feds will be issueing IOU’s instead of rebate cheques in the spring of 2010… Sucks to be living in California right now, and double sucks if your pay envelope is signed by Arnie… Just think there are 17 more states that are in as deep of despair in the USA. talk about damned if they do and damned if they don’t, I can see Barack flipping quarters in the white house… heads bail out Cal… tails they sink…..

cheers

#13 Industrial Guy on 07.07.09 at 1:10 am

So some economist says more economic pain is coming. When did the pain stop?

Just attend an auction at one of the many industrial bankruptcies occurring across the province. $100,000.00 machines in excellent shape are selling for pocket change. Many times it costs more to move the machine than to buy it. This is the reality of the manufacturing sector. The uncertainty brought on by the bankruptcies of Chrysler and General Motors and the exodus of manufacturing to off shore suppliers has not subsided. In many small towns and cities in Southwestern Ontario, it’s not a recession. It’s an absolute wipe out. If Merrill’s hot-shot new economist thinks “Canada’s economy will likely swoon again after it plumps a little”. For hundreds of thousands of worker in the manufacturing sector, the “plumping” has not occurred either. I think in a few months we’ll be replacing the word swoon with something like Stumble ….. Fall …..Collapse.

The big city housing markets are not immune to this decline. All the low interest rate policy of the Federal Government has done is to delay the next real estate market crash. This may be a cynical view of government policy, but it sure looks like they were willing to risk a much move severe downturn in the housing market for a few months of positive news on housing sales. Was the timing of a potential Federal election a factor here? The problem is, no matter how attractive you make mortgage rates, you can’t buy when you’re credit is maxed out.

The real estate industry was more than happy to separate the latest fools from their money and drive the newest wave of panic buying. After all, it’s a great time to buy. There are commissions to be earned.

Thanks to this flirtation with credit disaster, we’re now turning into a country of savers and that means much more unemployment in the short run as demand for consumer goods decline.

Canada’s Employment Insurance program just delayed the inevitable. The real effect of all those lost jobs in the manufacturing sector last Fall is about to hit home in the next 90 days. As EI benefits run out, expect to see a plenty of motivated sellers in Southern Ontario.

A lot of 50 something workers who have been employed all their lives, paid taxes, bought homes, raised families are are now going to experience the unthinkable. Lining up for welfare benefits.

There is a lot of anger building out there. Thousands of displaced factory workers are asking how did this happened to me?

#14 Munch on 07.07.09 at 1:18 am

Beautiful, Garth!

Beautiful!

#15 Popeye the sailer man on 07.07.09 at 1:31 am

What do people think about the Manulife one program?

What are some pros and cons?

Would this be good if We are expecting a large windfall this year?

http://www2.manulifeone.ca/en/aboutmanulifeone/

I would love to hear from some that are on the program.

#16 Kelly McMae on 07.07.09 at 1:40 am

Some people find their “bunker” in community. Common good and mutual interest will trump all this trivial tribulation in the end of the beginning of the end.

#17 JoJo on 07.07.09 at 2:01 am

GTA Resale Housing Market Posts Best June on Record
TORONTO, July 6, 2009 –
In June 2009, Greater Toronto REALTORS® reported a record 10,955 sales, up 27 per cent from June 2008.
“The record result in June is testament to the fundamentally sound housing market in the GTA,”
said the Toronto Real Estate Board’s newly appointed President Tom Lebour. “An increasing
number of households have been confident in purchasing a home in the region’s affordable and
diverse resale housing market.”
The average price for June transactions was $403,972 –up by two per cent compared to the same month last year.
ONLY IN CANADA FROM ALL WESTERN COUNTRIES
RE PRICES STILL RISE?
Once interest rates rise, affordability dies. Those who scarfed big 3% loans will have to start budgeting for renewals at two or three times the price.
Well from bank of Canada we got information about the same interest till JUNE 30th 2010. So We’ll wait a while.
And till next July avg. price $ 500,000 and in 2011 your prediction 15% correction about $ 425,000 and 7% interest SO, Garth even if the prices fell 15%, about 425 K and you get 7% interest next year who is again looser ?

#18 Coho on 07.07.09 at 2:30 am

It is my understanding that the traditional maximum mortgage payment of no more than 30% of monthly household income has been revised to 40%. Is this correct? If so, then not only are low interest rates luring first time buyers, but so is the relaxed new standard of monthly mortgage payment to monthly income ratio.

Hmmm…this will not end well. Hey I think I just read that somewhere…..

#19 Future Expatriate on 07.07.09 at 4:16 am

I’ve got a gold wristband.

#20 HalifaxFamily on 07.07.09 at 5:09 am

Garth, it’s sad to see. Everyone we talk to thinks that things are rosy as well. It’s hard to argue with facts when emotions and cheap credit seem to drive purchases nowadays. We’re not talking about houses, but everything else of lesser value as well. We’re trying hard to pay down our debt as fast as we humanly can.

#21 Mike B on 07.07.09 at 6:33 am

G.T. Failed to mention the IOU s the state of Arnold is giving out… Coupons to be redeemed in Oct/09 at almost 4% interest… California has greater GDP than all of Canada…If toronto sales rival 1989 then this should be a red flag to not buy!!! Tons of 1mill plus product on mls so GT is right … Entry level buyers driving the market.

#22 Nick on 07.07.09 at 7:29 am

#9 Ottawa Pete

I saw the exact same thing you did when I was visiting Picton about 2 weeks ago. Lots of for sale signs, I counted 12 for sale signs while driving from Bloomfield into Picton (Bloomfield is 10 minutes away from Picton).

There’s a good restaurant in Picton, amazing food if you go there. The place was practically empty when I was there. The next day in Picton I could over hear the owner/head chef talking to a local produce store owner about how bad business is. Normally he has the restaurant at 3/4 capacity on the slow nights. The night I was there he was lucky to get 1/8 of the tables filled.

#23 pbrasseur on 07.07.09 at 7:43 am

Garth, since you are so clever (and you are) you should make more efforts to read behind the spectacular headlines.

This is a serious recession but the sky is not falling and despite all the negativity a recovery is brewing.

http://www.forbes.com/2009/07/06/june-jobs-report-losses-economy-recovery-opinions-columnists-wesbury-stein.html

“…A wide array of economic data supports the case that the U.S. economy is in recovery. The overall ISM Manufacturing index hit 44.8 in June while the production index hit 52.5. The economy is almost always growing when these indexes are at those levels. Meanwhile, the four-week moving average for initial claims for unemployment insurance is down 43,500 (or 7.1%) in the past 2 1/2 months, again something that almost never happens unless the economy is expanding…”

etc…

My take on Canadian RE is that yes it’s overpriced in many areas and will go down some, but (as things go typically) far less brutally than in the US. Those who are expecting (hoping) for a spectacular crash will most likely be disappointed. The downside is that the better readjusted US RE market will favour the US economy while the still inflated Canadian RE market will remain a drag for a long time, that will add to several other Canadian structural problems. But again no spectacular failures, more likely a long and slow decline…

#24 Ben on 07.07.09 at 7:45 am

#13 Industrial Guy: excellent post. The hollowing out and idling of Ontario’s machinery is extremely worrying.

Garth: without a doubt, this is the unleashing of pent up demand among first-time homebuyers who are waking up from the winter of discontent, lured by cheap money. They do not have the perspective to know that real estate can go down, or the maturity of thought to fully comprehend the magnitude of what they are doing.

I’m young myself, and bought 4 years ago. I am fortunate to have had the good fortune to have gotten my mortgage under control in that time. I would not want to be starting today in the same situation I was 4 years ago. It’s one thing to assume such a massive liability in the middle of a boom, and quite another to rent cheap money at the leading edge of a long-term recession.

Lord have mercy on these young people, for they know not what they do. And by Lord, I mean responsible taxpayers, because we’ll be bailing them out in 5 years.

#25 Bill-Muskoka (NAM) on 07.07.09 at 8:04 am

Garth,

NO, no, the BIG news is Michael Jackson died! You can tell by the MSM’s obsession with the story.

Michael who? — Garth

#26 David Rockefeller on 07.07.09 at 8:07 am

Look out, Garth is eying your gold wristbands.

#27 Munch on 07.07.09 at 8:11 am

Someone once said [polite coughing into sleeve] that “in life you are either going to have to pull up your socks to get somewhere in life, or pull down your panties – but either way you are going to have to bend.”

God help the young people! They expect everything for nothing, and only Garth stands between them and financial suicide.

Same thing happening here in South Africa – all except the Garth piece.

What kind of human beings are we that we will sell our Young down the river, up the creek without a paddle, for monetary (not even spiritual) gain.

Quite like the ancient times, when the Elders would haul a 12 year old human sacrifice out of the crowd and hurl them from a clifftop to appease the Gods – except nowadays we know better – or do we?

#28 Munch on 07.07.09 at 8:17 am

Just had a long think about my earlier post

Yes, we do know better but no, we are no better – than our ancient forefathers

#29 pjwlk on 07.07.09 at 8:46 am

Garth: I’m happy to see the extended effort you are now making to support your arguments with more URL links to factual data. It really helps cut your nay-sayers off at the knees.

#22 Nick: Your comments remind me of a sign outside of a restaurant in northern ontario that said. “Come on in for something to eat before we both starve to death”.

#30 Industrial Guy on 07.07.09 at 8:53 am

pbrasseur … I’m on the road, everyday visiting businesses all over southern Ontario. You’re right. The sky isn’t falling. That happened for the most part last year.

The US economy was hit a lot harder and faster than we were. sinec these economic indicators you quote are relative to previous years numbers don’t let some “positive growth” numbers fool you. If we compare economic output to the same period last year it’s easy to be positive. Last years numbers were terrible.

#31 Herb on 07.07.09 at 8:57 am

In manufactured news, not even the meaning of language is sacred.

A “seller’s market” used to mean a market in which supply was so low that sellers set the price and conditions of sale, in short, few sellers and lots of buyers. Now we have lots of houses for sale, but few buyers. The RE industry now choses to call this a “seller’s market”.

Obviously there are lots of would-be sellers, which actually would make this a “buyer’s market”. But the RE industry must not admit that discouraging reality, so it’s time for Orwellian newspeak.

If it didn’t work, they wouldn’t do it. Flaherty should get on with the financial literacy campaign.

#32 Sheldon on 07.07.09 at 8:59 am

I wish I had a POS bunker :(

#33 landlord on 07.07.09 at 9:22 am

Garth, this is from your post last year around this time:
What lies ahead? As I have said, a 15% decline in the national average selling price from the 2007 peak will be with us by this time next year, and possibly sooner.

you were bang on. but unfortunately we peaked again.

Ask Mr. Carney why. — Garth

#34 Gord In Vancouver on 07.07.09 at 9:23 am

Still more proof that Garth was right

http://www.canada.com/news/national/Personal+bankruptcies+soar/1766968/story.html

#35 Larry on 07.07.09 at 9:43 am

I’m glad i have a gold wrist band. Calgary is as usual still in denial yeehaw.

#36 PTDBD on 07.07.09 at 9:45 am

Cliff? Negatives? Bunker?
The Garth is like, sooooo bleak!

Instead, roll down the windows in that prestidigitizerpaper pleasuremobile. Breathe deep the gathering glowing glimmer of yellow smog. Admire the green growing shoots sprouting from the cracks and potholes in the winding highway. Lastly, consider your driver, that Bozo brain-damaged politican navigating around the corner. He and his 8 bubble blowing buddies have a plan and not a worry in the world as they gobble goose drippings and the finest Italian Vino red.

:-) going forward :-)

#37 timbo on 07.07.09 at 10:01 am

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUfTEANzaIFQ

Banks will likely report losses for the second half of this year and much of 2010, according to the report. O’Connor said “normalized” earnings will take longer to achieve than most analysts predict, and he said the eventual level of normalized profit will likely be lower than current estimates.

“This is being driven by consumer losses remaining elevated longer than expected, commercial and related losses possibly reaching to 10 to 11 percent in 2009 to 2011,” O’Connor wrote.

Well I guess its not over yet as the economy chases its tail down the sewer. printing like mad is the norm for the next couple of years.

#38 Reg on 07.07.09 at 10:02 am

Off Topic Question – Can someone please explain to me why mortgage insurance should not be purchased?

Thanks.

Massively overpriced, designed for suckers and ingenues. — Garth

#39 Mr. Roper on 07.07.09 at 10:09 am

The pandemic is way overblown. Don’t just look for negatives. More people die of the normal flu annually than this so called ‘deadly’ swine flu. Garth, you’re the last person I thought would buy into that media hype.

I said the economic implications are unknown. Anyone who saw what SARS to the Toronto economy knows the power of media hype. Consumer perception is fiscal reality. — Garth

#40 Maureen on 07.07.09 at 11:05 am

Reg #38. Mortgage life insurance is “declining term” Premiums remain fixed for the life of the policy but the insurance only pays out the balance of the mortgage at the time of death. Again, the average mortgage in Canada is refinanced or paid out in 3 years. If you wish to change lenders you will have to reapply for insurance which may be at a higher premium because you are older..or your health may have changed meaning you no longer qualify for life insurance. You lose leverage with the lender when negatiating the rate because they know if you change lenders..your insurance premium will rise or you won’t qualify. If you want life insurance, best to arrange a separate term policy which is not tied to your mortgage.

#41 Coho on 07.07.09 at 11:08 am

For any of those in doubt as to which direction and ultimate outcome this global economic crisis is taking us:

http://www.vancouversun.com/Pope+calls+world+political+authority/1767302/story.html

Of course there is always a “moral” basis and “logic” behind these problem – reaction – solutions which are used to shape and control society the way the ruling elite sees fit.

Yep…a NWO under a one world government. That’s just what we need. Another wrong to “fix” other “wrongs”.

#42 wakeup & smell the coffee on 07.07.09 at 11:22 am

Fury over public sector pensions in the UK! Follow the debate also in US & Canada @:

http://fairpensionsforall.blogspot.com/

However, the situation is also serious in Canada with US $335 billions of unfunded public pension liabilities or 27% of GDP (page 6 of following report).

http://www.bnac.org/files/BNAC%20Public%20sector%20pensions%20BN49%20-%208%20June%2009.pdf

If you can’t mouse click this, report is easy to find (June 29, 09 posting) at http://fairpensionsforall.blogspot.com/

Knowledge is power, if it does not kill you lst, I guess.

#43 wakeup & smell the coffee on 07.07.09 at 11:28 am

http://fairpensionsforall.blogspot.com/

#44 Bill-Muskoka (NAM) on 07.07.09 at 11:32 am

Michael who? — Garth

Did you mean ‘Michael What?’ Best role he ever had was as an alien in ‘Men in Black.’ The medical examiner is said to still be classifying him but not sure if it is as animal, mineral, vegetable, black, white, male, female, or simply a cornicopia of pharmaceuticals. Apparently Elvis is contesting for the title of King of Pop (pills that is)

So, how is the weather out there in parched Alberta? Anyone know? I heard they have a major drought and no rain? Crop outlook bleak as drought ravages Prairies!

Oh, and what is this? Drought spurs call for federal help Can it be that they now want to benefit from being part of Canada? Bet they are still unbelievers of Climate Change. Got to hold to those ideologies until the brutal end.

Hey, what happened to all that oil money we have been told makes them the center of the universe? Ottawa gives Alberta infrastructure cash, but health dollars unlikely I thought Alberta was the economic engine of Canada now?

CALGARY — Alberta’s request for extra health care dollars is not in the cards, unless it becomes a have-not province, a senior federal Conservative indicated Monday, as the provincial and federal Conservative caucuses met in Calgary.

Alberta’s recession-battered economy underlay many of the issues raised in a five-hour meeting between the political cousins.

Alberta Premier Ed Stelmach said he emerged from the meeting with assurances the two governments would work together to aid drought-stricken farmers, ease the impact of looming climate-change rules on the oilpatch, and bolster infrastructure spending — Ottawa promised the province $222 million on Monday — to stem rising unemployment.

The Alberta government had recently expressed concern the Harper government wasn’t giving the province’s issues the attention they deserved. On Monday, Stelmach said the lines of communication had been restored.

“Canadians and Albertans expect us to work together,” Stelmach said.

Boy, I bet they are going to be so, so mad at Steve? What happened to the Firewall and seceding from Confederation we have been told will happen?

Meanwhile I am seeing more and more For Sale signs going up along the ones that have been up for months.

#45 Mathew Gibson on 07.07.09 at 11:33 am

OK, I give up.

What do duct tape and green shoots have in common?

#46 ncoffee on 07.07.09 at 11:37 am

Re: #39 Mr. Roper

“The pandemic is way overblown.”

Actually, the way the media has acted has been appropriate, considering this is a virus that could evolve into something very nasty quite easily.

Highly respected scientists are still debating the implications of this new arrival — so how can anyone not immersed in research and scientific education be confident in their opinion regarding this complex subject? You really can’t just shrug it off because enough people haven’t died yet. Personally, I’d prefer that we deal with these sorts of things BEFORE a whole bunch of people die. Crazy, I know.

Eventually, our system of easy global travel/export will produce some very dangerous viruses — that’s pretty much a certainty. We’ve been lucky so far, but it’s just better to be prepared; a game-changing virus won’t show up with a t-shirt proclaiming it’s arrival.

#47 malbadon on 07.07.09 at 11:58 am

Popeye the sailer man on 07.07.09 at 1:31 am
What do people think about the Manulife one program?

M1 (and the better versions with no monthly fee from Canadian Tire and National Bank) are only good fits for certain people (the financially lazy people who can also resist the urge to run out and buy a Porsche on their debit card). You can do the same thing with combinations of accounts from banks with better rates (most of them even have all-in-one type accounts now, it just takes more work.

I have it, its allowed us to absolutely decimate our mortgage in the past 3 years, with only two years left to go based on our current rate of paydown. That’s a good thing, but even I acknowledge that we could have done even better with better rates had we just been actively financially engaged people who set up the required accounts and mortgages that allowed more than a 10% extra paydown.
We aren’t, so something that just puts our paycheques against our outstanding loc and then beats us over the head with a large negative balance every time you take money out, was the next best thing.

Reg on 07.07.09 at 10:02 am

Off Topic Question – Can someone please explain to me why mortgage insurance should not be purchased?

My understanding:
Mortgage insurance. You have a mortgage of 500k, 5 years later you die. Your mortgage is worth 450k now, mortgage insurance pays out the 450k only.
Term Life insurance. You die, family get 500k irregardless of the house.

#48 LurkingLola on 07.07.09 at 12:17 pm

#36 Reg:

Mortgage insurance that is sold with the mortgage depreciates as you pay down the mortgage. For the same premium, you can purchase life insurance that will retain its value.

#49 PTDBD on 07.07.09 at 12:24 pm

green shoots snapped up in produce aisle…the grocery store parking lots are full
Boost in Food-Stamps helps Economy

April increase from $525 to $606

#50 JM on 07.07.09 at 12:25 pm

Born in 1971, I’m waiting to foot the bill for all the boomers ready suck up all the benefits like OAS, CPP and healthcare.

Even with all this looming, I might still be OK with a paid for house, over $250k saved for RESPs / RRSPs. I know my house won’t go up 10x or more in value like my parents did but I have a roof over my head & still employed (so far).

Everyone should be forced to read the Wealthy Barber & the Milionaire next door in high school.

Garth – how did so many boomers blow it so badly in the last 30 yrs with many of them having nothing to show for their time?

Thx

Being a financial idiot is not restricted to one generation. I think today’s first-time homebuyers qualify nicely. — Garth

#51 Got A Watch on 07.07.09 at 12:35 pm

The economy has been on the downslope here in Ontario for several years now, it’s just continuing. The MSM only just caught up, sort of. It’s easy to see why they are so RE positive, look how many pages in the paper they buy. My local small-town weekly newspaper has at least 30 pages of ‘for sale’ ads, if not more, plus ‘special edition’ puff sections.

Yet there is an economic base, it is just much smaller than what was the norm 5 years ago. Governments have not gotten the message yet, and the public sector unions are out to lunch as usual. Raising taxes now will choke the economy.

Government tax revenues have taken a massive hit from diminished economic activity at every level. Last year they got a brief windfall at the gas pumps, but that is over. The price of oil will likely make new lows in the face of a glut of stored supply, and natural gas – ca$h cows for the Governments, slaughtered again, especially Federal. The ‘Budget Watchdog’ is probably under-stating the case, if anything. The balance sheets are red ink for decades out now.

Deficits to pay for social programs can’t be afforded any more. The present spending trajectories at all levels of Government in Canada are delusional. In an age of shrinking credit, the way Government’s function today is obsolete. Politicians and public sector unions will be the last to face the truth, the public will be way ahead.

Buckle your seat-belts folks, turbulence ahead.

And if you think it’s bad here, compare with other places. We are seeing the biggest plunge in global GDP ever. Global trade and demand have withered. Look at the ‘Baltic Dry Index’ etc. Power consumption in China slumped so much, they stopped keeping track of it, too negative.

Canada will still be a better place to live than just about anywhere else. If families and communities come together, we can ride out this global economic storm. You might have to move your obnoxious brother-in-law into your basement.

On a business level, it means more innovation at the small business level. There is a ‘green revolution’ train rolling out, there will be jobs in it for those with the technical qualifications. Get on it. It’s an economic reality, whether you agree with popular ‘global warming theories’ or not is irrelevant. Every facet of the economy will be facing change, and there is opportunity.

Maybe I’m still pumped from Canada Day, but I love this country. It’s summer, and time to get outside and enjoy that great outdoors we have.

#52 BOB on 07.07.09 at 12:35 pm

Read Garth’s book “After The Crash” I enjoyed reading it but next time fix all the typo errors before going to print. The book was a good read and helped get me to think about where we could be heading. However, building wealth in realestate will always work if you know when to buy and make your money when you buy the house not when you sell. I agree though that we should not be purchasing in Canada, but the US has some great deals. Florida, Arizona are two areas I have been looking and boy there are homes that once sold for 250K now selling for 45K (Orlando).

Sure, worry about my typos while Arizonians take you to the cleaners. Makes sense to me. — Garth

#53 Eduardo on 07.07.09 at 12:44 pm

Hey Bill,

As long as we aren’t seceded we should get some of the benefits instead of just getting pillaged all the time. This is the exact reason why Ontario is hilarious… They’ve received x billions of dollars in bailout money and government jobs and then they have the gall to scoff at the same farmers who recently were screwed by the government over Mad Cow and not bailed out at all.

At least Garth knows that the economic engine of Canada is no longer the rust belt and that oil is going to 100$ and beyond. Then you’ll be crying the blues asking for larger transfer payments again.

In the meantime, you make me sick Bill.

#54 ottawa pete on 07.07.09 at 12:44 pm

#22 Nick:

I heard a unfortunate story about a Picton restaurant while I was there – no doubt the same one. Apparently is a very fine establishment, but there is no way most of the locals can support it, so it is almost completely dependent on tourists. The weather certainly hasn’t helped.

There are some amazing old waterfront mansions in Picton – not McMansions, but unique architectural treasures.

#55 Eduardo on 07.07.09 at 12:48 pm

Also Bill, if you weren’t such an ignoramus you would see that the Alberta government has just committed to spending a portion of the 2 billion dollars it has to support CO2 projects.

http://alberta.ca/home/NewsFrame.cfm?ReleaseID=/acn/200906/2638932A61D80-09C7-C9F7-CCD99F5E0113E39A.html

Wait a minute, what are all the power companies in Ontario doing? The provincial government? Nothing? Ohhhh okay, just checking.

Stop trying to start a juvenile inter-provincial pissing match. We’re in this together. — Garth

#56 dd on 07.07.09 at 12:48 pm

#33 landlord

“but unfortunately we peaked again.”

Peaked? Calgary is still off 15%ish from the 2007 highs.

#57 Eduardo on 07.07.09 at 12:54 pm

Bill, you should also know that the Scotford CO2 project will offset 80% of the current emissions generated at Scotford, or 40% of the total after Expansion 1 is complete in 2011.

Here’s a pamphlet for you:
http://www-static.shell.com/static/ca-en/downloads/about_shell/what_we_do/oil_sands/quest-public-disclosure-v9.pdf

#58 Eduardo on 07.07.09 at 1:00 pm

Stop trying to start a juvenile inter-provincial pissing match. We’re in this together. — Garth

Comment on Bill’s BS post then.

#59 Eduardo on 07.07.09 at 1:04 pm

I do apologize though, I was just trying to refute Bill’s nonsense about making it seem like Alberta is doing nothing about climate change. I posted only facts as well.

#60 Winnipeg the Exception on 07.07.09 at 1:13 pm

Winnipeg had a modest price increase… once again. Even if prices do go down 15%, it is hard to justify waiting a few years for the decrease all while paying rent. Higher interest rates will eat up the housing decrease anyways.

Good luck seeing oil at $100 a barrel and the Canadian dollar at par. I see oil at $60 and CAD at 1.30. Being a currency trader, CAD won’t see par again for a very long time.

#61 Munch on 07.07.09 at 1:15 pm

Typos are typos, Garth!

They don’t belong!

Apologise!

I sorey. — Garth

#62 Gregor Samsa on 07.07.09 at 1:19 pm

@50: green revolution? jobs for technical qualifications? not in the next 20 years my friend. Canada has sold and shipped to China its ability to do anything other then dig stuff out of the ground. I am an unemployed electronics engineer and I have never seen a job market so dismal for high tech. There isn’t so much as a sniff of these green jobs around. You need to understand that all of our stuff comes from somewhere else. We don’t know how to make things here anymore, and are being absolutely killed at it by the Asians who work for 1/4 our cost (they don’t have bloated public sectors to prop up like we do). Where is the high tech innovation happening in the world? It’s not happening in Canada, it’s happening in ASIA, where all of our high tech stuff comes from. Canada’s version of high tech is about C02 capture and getting better at digging stuff out of the ground. How exactly are we going to turn that into a green revolution?

#63 Ultraman on 07.07.09 at 1:37 pm

Mortgage/Loan insurance

One onther fact to consider: Like any group coverage, coverage is issued with minimum questions asked, so higher risk for the insurer, therefore higher premiums for you. In other words it’s a good deal if you have health issue that could prevent you from obtaining regular coverage but if you are healthy you will be paying to cover the insurables.

#64 Alex on 07.07.09 at 2:02 pm

Garth, I fail to see the relevance of the gender of the Merrill analyst.

There is none. But now you know it, and won’t forget it. — Garth

#65 R on 07.07.09 at 2:07 pm

Lets see here. The average house price in Vancouver today $515K mortgage @ 3%. Add to this job losses higher taxes hyperinflation swine flu Olympics. Year 2014 same house now valued at $200k @ 9%. You do the math.

#66 Bill-Muskoka (NAM) on 07.07.09 at 2:27 pm

Eduardo,

Which oil company do you work for? Glad to see I fired your fingers up. Now, comment on what Ed Stelmach had to say? Afterall, we are ALL in it together…right?

After all the East bashing I have read by Albertans, it is nice to read they do, after all is said and done, have a NEED to be part of Canada. Maybe like Quebec who loves the MONEY! Canada = kanata = VILLAGE. meaning all of us working together and caring about the WHOLE of the Canadian population.

BTW, as to Alberta’s efforts on Climate Change and environmental solutions…How is that fine, pure water flowing down towards Edmonton and Calgary from the Tar Sands? Potable is it? I am sure the cattle will be happy to get a drink until they start mutating into something far worse than bovines with BSE! I see things are still just ‘ducky’ out there!

BTW, the links I posted are from ALBERTA and the Prairies, not the Eastern media.

#67 The Great Gazoo on 07.07.09 at 2:43 pm

Interesting article in Globe about a country escaping the global recession:

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/lessons-learned-poland-weathers-slump/article1208379/

Without over-analyzing, the basic concepts are in line with the messages of Garth’s blog:

1 – Don’t allow long term and excessive debt

2 – Develop tangible domestic products (see Garth’s messages on importance of employment in particular manufacturing sector), don’t base economic devleopment on amassing huge debts based on leveraging for speculated future revenues

3 – Learn from your past economic policy mistakes

These succesfull policies apply to real estate in Canada, don’t accumulate excessive long term debt and speculate about future earnings… it never works out in the long run!

Unfortunately, Canada is doing none of this and a crash is inevitable.

Untill we realize how to develop a sustainable economy, we will be forever in a bust economy.

No more Polish jokes I guess?

Ok one more… why do Polish last names all end in “ski”.. cause they can’t spell “toboggan”!!

#68 MenWithHats on 07.07.09 at 2:43 pm

“Statistics are like bikinis – what they reveal is suggestive, but what they conceal is vital.”
Irrationality is the predomnant fact of today’s market .
It is not rational to invest in an asset you know will be depleting .
The US releases data showing that the number of new home sales have dropped dramatically and unexpectedly, pointing towards a recession.
Logically, the markets should drop on this news.
In reality, this data that points towards recession increases the possibility that the Fed may cut its overnight lending rate, and thus the markets actually went up. WTF?

#69 Samantha on 07.07.09 at 2:44 pm

Yep…the party’s on…the hangover is going linger….

http://thechronicleherald.ca/Front/9012496.html

#70 Reg on 07.07.09 at 2:51 pm

Maureen, LurkingLola and Ultraman – thank you for your answers. I now understand the difference. Much appreciated.

#71 infernalmachine on 07.07.09 at 3:11 pm

Oh lookie at the latest bull from the killing floors of the Toronto Real Estate market…

From Friday July 3rd’s Globe & Mail

328 Sunnyside Ave., Toronto

Asking price: $899,000

Selling price: $953,400

Previous selling price: $485,000 (2001)

Taxes: $5,608 (2008)

Lot size: 29 by 140 feet

Days on the market: six

Listing agents: Barbara and Peter Polson, Royal LePage Real Estate Services Ltd.

So let me get this straight – whereas in the early 2000s the slightly above average middle-class family (say two middle managers or one lawyer) could buy a nice old single family home in an OK (but not super duper) area for $480K. Same home then sells for $950K merely 5 years later?

Fark this crap. We don’t have a middle class anymore. Young 1st time buyers like I may one day be are no longer able to buy homes in the GTA. I want to live where I work, not 95 min away in Miltonia or Georgetownia.

Garth – you know this is a bubble. I know this is a bubble. But unless the sellers paved the floors of this home in solid 18K gold, how were they able to get away with doubling its price in 5 years? Will this idiocy reverse itself? Or should I just move to Sudbury?

#72 smw on 07.07.09 at 3:22 pm

Check this out on the HB Natural Gas Bull ETF:

http://ca.finance.yahoo.com/q/bc?s=HNU.TO&t=2y

Quite the two year chart, with a reverse split, more importantly, look at the volume growing from March to July…

Now what all the little Canadian Casey Serin wanna be’s should do is leverage their newly aquired castles, and start dumping their HELOCs into some of these lifetime bargains(And I’m not talking about housing).

#73 Eduardo on 07.07.09 at 3:59 pm

I already said I work for an oil sands company but I have not specified.

I also didn’t say that I think we need to be a part of Canada. I was just saying that I’d like to see ANY benefit whatsoever while we are, but that’s an unrelated issue.

I drink tap water everywhere I go. How’s that Great Lake water doing? That’s a huge environmental disaster too.

I did see that your comment was from Western media. It had a comforting feel.

We can slam eachother back and forth about oil, cars, water, cows, farmers, steel, centre-of-the-world syndrome, bailouts, transfer payments and, of course, “reasonable” home prices but I’m going to stop before Garth gets mad.

After all this is OntarioLiberalBoomerAutoBlog.

Apologize, or that was your last comment. — Garth

#74 Eduardo on 07.07.09 at 4:08 pm

Sorry Garth

#75 likemostofus on 07.07.09 at 4:23 pm

As for your reasons for the new boom in sales… there’s nothing stopping them:

1) there will _always_ be ignorant first time home buyers.. (ie the greater fools in your terms)
2) the public always be financially and economically illiterate – most people are dumb and that’s just the way it is.
3) Either the central banks fail us again (apparently good for real estate) or they won’t fail us. Is there anything wrong with the banks doing their jobs?

So I guess prices will continue to go up forever! Yay!

Wait a minute….

#76 Nostradamus jr. on 07.07.09 at 4:25 pm

>>There are bidding wars now from Toronto to Phoenix<>That $156 billion in borrowed government money <<

…Garth, where and from whom is Canada borrowing the $165 Billion?

tia

#77 Nostradamus jr. on 07.07.09 at 4:27 pm

As to my previous post…

…Garth, people see the writing on the wall…money is just paper, with all the printing it will soon be deflating… course one can use it to pick one’s teeth…while a house is a shelter and a home.

#78 ncoffee on 07.07.09 at 4:38 pm

Re #73 & 74 —

Between this stuff, the banning and return of Nost. Jr., plus Munch’s regular posts, I gotta say — this blog is getting to be pretty hilarious!

I used to come here for the RE talk … but now it’s just for the high drama and laughs. Still worth it.

#79 stench on 07.07.09 at 4:56 pm

Wait til one of you have to make an insurance claim,the whole industry from autos to disability claims are going out of their way right now to screw you royally.

They will do all in their power to twist your words and make up new names and terminology in order to to deny you your claim benefit. It is disgusting what is taking place and this is in workplaces with big names behind them.

Meanwhile the real estate agents are busy over assessing homes to sucker clients that their shack is worth 40-50 % more than their assessment. These agents should be called dream killers as they mislead these sheep to the slaughter.

The world is coming to a serious crossroads and it aint going to end pretty when one side is in total distrust of the system and the other is blind to the reality.

#80 beast on 07.07.09 at 4:58 pm

LOL you guys are noooooooooooooooooobs !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

#81 just a guy on 07.07.09 at 5:03 pm

infernalmachine

The neighbourhood has improved noticeably in the last 5 years.

The Globe article also notes that a lot of work has been done on the house. It doesn’t say when, but it’s quite possible that the current owners were the ones who put a lot of cash into upgrading the kitchen and washrooms.

Just a few reasons why the price would have gone up justifiably…the owners aren’t selling the same thing that they bought in 2004.

(though doubling in 5 yrs is a little steep)

#82 supersocco on 07.07.09 at 5:10 pm

Can’t we have at least 5 years of 0% like Japan?

#83 jwk (nee jwkimba) on 07.07.09 at 5:15 pm

We bought a beaten up 2bed 850sf co-op (in an impeccable building) for 110k in Etobicoke. We’ll put 15 in to fix it up. I just hope we can close it time to put our downtown toronto bachelor on the market @ 225k. We owe 47k on the bachelor. This is working out nicely.

Dear Toronto home buyers: please keep buying for one more month! Thanks, love ya. JK

#84 jwk (nee jwkimba) on 07.07.09 at 5:23 pm

#71. It will reverse. It has to. There just aren’t enough millionaires to go around – at 8% anyway.

We are laying low in Etobicoke for a few years, making some babies then deciding what to do with the 100k downpayment we’ll have when we want a house….

#85 wayupnorth on 07.07.09 at 5:32 pm

#66 – good link! While the article is short on detail it points out three important things affecting everyone today. First economy is always local and in Poland a large number of their population are still subsistance farmers that can only afford to consume little and while it didn’t say so I suspect produce the majority of food consumed in the country. Second because their economy didn’t bubble they aren’t experiencing the resulting fall from the top other countries who did are feeling. Third they invested in a fair and generous social safety net that is now paying dividends as the majority of their population is contributing to the economy.

Now compare that to Canada where only 5% of our population are farmers most of whom only grow for the food corporations and would starve themselves if there was a food shortage. 80% of the food on our shelves is imported despite the fact that we could grow 200% or more of the food we need and only really need to import bananas etc.that we can’t grow here. Just watch a few episodes of the 100 mile diet where people living in an area that should be easy to eat locally find it extremely hard to eat a varied local diet.

In our race to make the most profit we still have an ancient boom/bust give away our resource economy for pennies on the dollar rather than make things for local consumption and export the excess. in other words Poland is running the old fashioned way while we followed the rest of the pack without the safety net of ensuring a strong national market.

While Canada once had a good social safety net We have allowed it to fall apart and now have the worst of two worlds, an expensive system that fails to help most people enough to make them productive citizens. Even worse we based all our government and private plans on two bubbles, real estate and stock market that now leave the average Canadian in limbo and too afraid to spend money they will need in the future which is further driving the depression we are in.

# 67 – The only reason the stock markets are working irrationaly are not even diguised anymore inside trading as well as banks using sophisticated computer trading programs to move the market where they want. (see story on former Goldman Sachs employee that stole the system and sold it. The company actually admitted in court yesterday that it could alter the markets. Check out Market ticker site.) and finally the known fact of two dummy trading companies set up by the U.S. government to prop up the market. Still want to own stocks now?

#86 Nostradamus jr. on 07.07.09 at 5:41 pm

Seriously Garth…Where and from whom is Canada gonna borrow that $165 Billion?

…Regardless of whether who lends them the dough or if Ottawa just prints more… the Loonie loses its value…therefore home values inflate.

And we know rule #101 Location, X’s2, X’s 3

Toronto and Vancouver will have the jobs, Socialized, Unionized or International.

Halifax can’t because Europe and the Eastern North American seaboard are sinking into the abyss.

But Toronto could be in trouble because too many manufacturing jobs have been lost and TO has a huge population.

Vancouver is golden…wealthy Asians and likely even wealthy Californians…or whats left of’em…lol
(pop 900K)

…Actor Jeff Bridges was a guest on 101 FM, Bro Jake show this a.m…. said he’s moving up here…(North Shore no doubt)..He said the North Shore reminds him of a cross between San Francisco and Idaho.

#87 Toronto C9 Renter on 07.07.09 at 6:29 pm

to 72, SMW…

Agree on Natural gas, as you know it closed at around $3.35 today which is crazy cheap, shale gas or not.

Unfortunately WHEN it will turn back upward is anyone’s guess, and in the mean time HNU decays pretty badly just due to contango, settlement etc. Really just a day trade in my opinion

Do you have a strategy to hold HNU without losing money while you wait??

#88 Bonnie N BC on 07.07.09 at 6:58 pm

Oh Garth

I am so confused as to the state of real estate in my neck of the woods on the Sunshine Coast – kinda cottage country. I have a real fixer upper listed for 359k to the left of us and a beautiful well maintained home listed for 399k to the right of us. Actually, our house is the true cottage sandwiched in-between.

One believes he can cash in (way, way, way too late buddy) and the other a widow who wants to be closer to her grand children on the Island.

But both have the perception that 10k lower is the maximum. Huh?

If you really want to sell your house drop below the magical number of 299k and wait for multiple offers. Price your house the same as the rest – you will not sell this summer.

#89 David on 07.07.09 at 7:06 pm

“Fundamentally sound housing market” sounds like famous last words for a bubble on its last up leg.
Check it this wonderful post housing bubble photo essay.

http://www.nytimes.com/slideshow/2009/07/05/magazine/20090705-gilded-slideshow_index.html

#90 Nostradamus Le Mad Vlad on 07.07.09 at 7:09 pm

#67 The Great Gazoo on at 2:43 pm — “1 – Don’t allow long term and excessive debt . . . Canada is doing none of this and a crash is inevitable.”

Both govts. are printing and spending wildly and foolishly, almost as if they KNOW there isn’t a cat in hell’s chance of ever paying the debts / deficits off.

So if MPs, etc. in charge keep feeding sheeple BS, reassuring them that things are okay then the suckers will keep on (unknowingly) adding to their forthcoming woes.

Sooner or later, the deck of cards will crumble, as it did in ancient Rome and plenty of others.

Speaking of the good times — http://tinyurl.com/kjptpb

Now India, China, Russia and a number of other countries are looking at the possibility of heading in a new direction, sans the greenback. It also makes for strange bedfellows — http://tinyurl.com/m4dqma

China seems to have cut back on buying commodities, the IMF has released excess gold to sell to others — there is a whiff of change in the air, the times they are’a [slowly] changing!
——
Anyone recall Dr. David Kelly? The good ol’ m$m (at the time) said he committed suicide. Not so — he knew too much and was about to let on. — http://tinyurl.com/mboz7f
——
Civil unrest? Mahatma Gandhi is a good example, except the times are different now. — http://tinyurl.com/nwj9gu

“I mean people taking to the streets. Or mass resistance. Or crackdowns because the government fears we might do something to upset its apple cart. It’s going to happen. Somewhere. At some time. It’s going to.”
——
“Bioweapons, Dangerous Vaccines,
And Threats Of A Global Pandemic” — http://tinyurl.com/nl7pyk

“In his August 14, 2008 article titled, “The Pentagon’s alarming project: Avian Flu Biowar Vaccine,” F. William Engdahl cited:

“alarming evidence accumulated by serious scientific sources that the US Government is about to or already has ‘weaponized’ Avian Flu. . . .”

#91 Onemorething (aka DaHKkid) on 07.07.09 at 7:10 pm

Just packed my 40′ containers for Kuala Lumpur arrive in August. Cant wait to see the backside of HK actually and the cost of living issues, KL is at least 50% lower!

We leave for Vancouver tomorrow for 10 days in Deep Cove and 10 in Whistler (yes you can play ice hockey all around Asia but you cant beat a Canadian Hockey School for your son)

I’m sure these locations are good examples of denial and manipulation. Looking forward to having a discussion with the bullish RE owners or first timers on how incredibly insightful they have been.

Boys in Ottawa area, you can make the drive to Picton and see the carnage along the way but unless you are going to go self sufficient and build that bunker, dont touch anything rural right now.

ZERO rates lick Japan, sure why not, they’ve had a great 15 years of stagflation. This would mean a almost 15,000 DOW would sit around 3,000 for at least 7 years.

Garth, great post and agree fully on the negatives of these flu scares. We moved to HK during SARS, it was an insane time. RE was dumped. $1M USD properties in their low, came back and sold for $3M.

You needed 30% down so I did’nt have about $800K to put down. SARS taught me you have to be ready for it.

btw, S&P closing close to 878 – – – Be warned!

#92 Vancouver_bear on 07.07.09 at 7:11 pm

64 Phil on 07.04.09 at 8:57 pm

Wow, you can get a beach house in HAWAII for less than that dump in Vancouver… Unbelievable!

http://www.mls.ca/propertyDetails.aspx?propertyId=8107598

http://honolulu.craigslist.org/oah/reb/1245598838.html

Right on Phil!

Shacks in Hongcouver are more expensive than a nice beach house in Hawaii….something is terribly wrong here. I think it’s time to move to a Hawaian paradise from this dull, rainy, dumpy, moldy, violent, dreadful best place on meth….Hongcouver.

#93 kc on 07.07.09 at 7:22 pm

#44 Bill-Muskoka (NAM)

“So, how is the weather out there in parched Alberta? Anyone know? I heard they have a major drought and no rain?”

Want to know what is scarier?? grasshoppers…. we are going to see crop destruction if things don’t turn around soon… hmmmm 1930’s dust bowls anyone?

#94 905er & Spouse on 07.07.09 at 7:24 pm

#80- Beast:
What is a Noob?

#95 Mike in Etown on 07.07.09 at 7:30 pm

Mortgage insurance also comes with post-claim underwriting… your family could be up a creek because a tick box wasn’t checked or details not provided accurately.

As an insurance advisor, I recommend term insurance to cover off mortgage debt with your family as a beneficiary and stable premiums for ten or twenty years.

It is very, very affordable relative to mortgage or creditor insurance. Hit google….

#96 smw on 07.07.09 at 7:35 pm

#82 supersocco

NIKKEI from 1985 – 2009
http://tinyurl.com/dkszh2

Example of ASSET DEFLATION in Japan
http://tinyurl.com/lygbsk

The rest of that article with the Japan Asset Deflation chart is below.

http://tinyurl.com/qt5mxu

The ironic thing is Canadians that state it “can’t happen here’, think they’re so much smarter than American’s, they have no concrete facts about why it won’t happen here, just spin and hope and the perception the greed stops at the border. Yet many Canadians are ignorant of the RECENT history in Japan.

It took two years after the NIKKEI started its decent for the real estate bubble in Japan to pop and crash a la USA.

I heard the construction numbers are back to October 2008 numbers, just before the removal of the 40YM.
If the Bank of Canada can hold rates till next June, you might get another decent spring and summer in real estate but there isn’t enough left in the tank for RE to continue to keep the economy afloat with these upcoming deficiets and shrinking tax base along with lingering unemployment.

We’re playing out of the Bank of Japan’s play book, smells like a stagflation and a lost decade, or two.

#97 john m. on 07.07.09 at 7:36 pm

i just read that they also predict another 700,000 lost jobs next year…wonder how many of our property hungry first time buyers will be losing their jobs? The dishonesty of the Harper government in every aspect of this recession (depression) will send a lot more lambs to the slaughter IMO. Job security in the private sector is vanishing more daily. I shudder to think what next spring will bring.

#98 Greg W., Oakville on 07.07.09 at 7:43 pm

Hi Garth, re: Swine flu

Swine flu may be a lab error: Aussie researcher
http://business.smh.com.au/business/world-business/swine-flu-may-be-a-lab-error-aussie-researcher-20090513-b2zh.html

Tamiflu developer: Swine flu possibly man-made
http://www.examiner.com/x-6495-National-Intelligence-Examiner~y2009m5d14-Tamiflu-developer-Swine-flu-possibly-manmade

You can find the above articals, news videos and more at http://www.reddit.com site, search under ‘swine flu’ .

#99 Barb ... reader, Calgary on 07.07.09 at 7:48 pm

I was born with a “small gold wristband” so-to-speak, via parent’s good genes, the common sense to always live within my means. That’s guaranteed metaphorical bunker entry!

So, anyway, I tried to get into the funeral with it today, but they said my gold wristband was suspiciously tiny.

#100 smw on 07.07.09 at 8:07 pm

#87 Toronto C9 Renter

Haven’t touched it, yet. There is the HNU (Bull) and the HND (Bear) so I guess you would bet on the direction you think it will go.

There is also the HUN which I believe is the fund you have to pay attention to backwardation and contango.

Anway, I have a bit of time to decide, I’ll talk to my finance guy as well as study up on ETFs. If not there are a ton of nat gas trusts that would be ok to pick away at.

#101 timbo on 07.07.09 at 8:39 pm

trademark’s?

http://www.zdnetasia.com/news/hardware/0,39042972,13029218,00.htm

good luck garth..

#102 Cordoroy Cowboy on 07.07.09 at 8:41 pm

#50 The Wealthy Barber and the Millionaire next door?
Both pretty lame reads. IMHO but to each his own.

Please don’t say that you are recommending Rich Dad Poor Dad. It is Financial porn at its very worst.
http://www.johntreed.com/Kiyosaki.html

Oh and Death to the nasty boomers that suck the life from your fragile bones. Hope you will survive the scourge.

#103 Wermacht 6th Panzer rumble on the Steppes on 07.07.09 at 8:42 pm

Garth that is a really cool photo above – I get vertigo just looking…

#104 timbo on 07.07.09 at 8:48 pm

They are talking about you now….

Garth

had to laugh at one comment

domain names…buy now or be priced out forever….

lol. Good luck in the battle…

this is not to be taken as mean-spirited. Just throwing out what I hear.

#105 dd on 07.07.09 at 8:50 pm

.#77 Nostradamus jr.

…while a house is a shelter and a home…

Sure it is. But not at $700k. The higher the price for food and energy the lower the price for housing. Even in Vancouver.

#106 dd on 07.07.09 at 8:53 pm

.#72 smw

…Check this out on the HB Natural Gas Bull ETF…

Watch out. You should hold these for long term plays. U will lose money. If you are so hype on these look at straights or the service sector (dillers, fracks, pipe companies).

#107 Bottoms_Up on 07.07.09 at 9:15 pm

http://www.vancouversun.com/news/more+arrested+after+racist+attack+caught+video/1768710/story.html
—————————————————–
Another ‘great’ reason to move to B.C. (well, at least Courtenay), you’ll be surrounded by intolerance.

#108 Bottoms_Up on 07.07.09 at 9:24 pm

.#98 Greg W., Oakville on 07.07.09 at 7:43 pm
———————————————
your posts border on the level of the National Enquirer….they make me laugh…keep it up!!

#109 Bottoms_Up on 07.07.09 at 9:30 pm

Look at this reason cited as one of the driving forces behind the Romainian real estate bubble:

“Inflation due to the activities of real estate agents; before 2002, very few real estate agencies were operating in Romania, but today there are approximately 10,000; since they are unregulated, and because there is also no code of ethics for real estate agents (in fact, anyone can claim to be one), many ordinary Romanians believe that the agents are artificially increasing the prices demanded by sellers.”

#110 Jonathan on 07.07.09 at 9:34 pm

Canada’s economy suffered from 3 things that triggered this recession:

1. High oil prices
2. High CDN dollar
3. Falling Home prices

So everyone thinks that a rebound will occur.

Ok so if a global rebound occurs then it will immediately lead to:

1. High Oil Prices
2. High Canadian Dollar
3. High interest rates leading to a decline in Home prices

Which will immediately lead into the next leg of this recession – which will be much worse for Canada since we are even more leveraged today than we were even just a year ago.

Sorry to point out the facts of the current economic environment – but this recession will not end well nor will it end quickly.

Commodities will be very volatile over the next twenty years.

#111 Bottoms_Up on 07.07.09 at 9:37 pm

http://en.wikipedia.org/wiki/File:800px-The_Great_Asset_Bubble.jpg

‘The Great Asset Bubble’

A great schematic of money vs gold reserves vs fantasy assets.

#112 rory on 07.07.09 at 10:04 pm

To Blii & Eduardo

Bill you said : “BTW, as to Alberta’s efforts on Climate Change and environmental solutions…How is that fine, pure water flowing down towards Edmonton and Calgary from the Tar Sands?”

Umm as far as I know all water east of the Rockies goes either to Hudson’s Bay or north to the arctic …no north-south rivers here …do not know if any that passes through tar sand country makes it to Lake Superior – I kimda doubt it but southern Hudson.s Bay is Northern Ont.

As to all that other stuff …just posturing…0il is oil and oil is going to be needed for a long time…does not matter if it is clean or not …it is oil and it will fuel many coffers …doesn’t matter if the US will not buy it or eastern Canada or even Europe …that leaves lots of other places, like Asia, that will.

Bottom line … when the oil crap hits the fan, no one will care where the oil comes from when the Petro Canada at the end of the block is out of gas.

However, the right thing to do is minimize the damage but to shut it down will never happen as the consequences are too great …maybe in 30 years or until fusion happens – hello back to the future…IMO.

Oh yeah …implications for RE …bust and boom for the West …always will be…but that is kind of like everywhere is it not…just more frequent out west.

#113 taxpayer like you on 07.07.09 at 10:49 pm

102 Cowboy

For me TMND is one of the best reads out there. No secret formula, just hard work and sacrifice. I go back to
it now and then just to “re-fresh”.

The thing I really liked about it is how the wealthy measure themselves. Its not about the money, its about achieving. The security and freedom from worry are the by-products.

If anybody hasnt read it, they should, just to know they’re (hopefully) doing the right thing. If you got little from it, could it be a sign of “big-hat, no cattle”?

#114 dd on 07.07.09 at 11:05 pm

.#110 Jonathan

“Commodities will be very volatile over the next twenty years.”

But will be the only place to make money.

#115 meggie on 07.07.09 at 11:06 pm

#102
Oh, and yes death to those nasty boomers who will suck the life out of your bones.

Are those “nasty boomers” not the very ones that gave life to your bones? Are they not your parents or even your grandparents? How callous can you get.

#116 AppleCrunch on 07.07.09 at 11:37 pm

I see housing going back to 1998-1999 price levels.

#117 BOB on 07.08.09 at 12:37 am

Sure, worry about my typos while Arizonians take you to the cleaners. Makes sense to me. — Garth

How can u make such a comment? If I bought in late 2006 a house in Arizona, you would be right. However, if i buy in late 2009 or 2010 at a 50%-75% discount, how can that be Arizonians taking me to the cleaners?

Please explain. btw keep up the good writing. I have read most of your books and a few years back you were right about Compton in Alberta. What do u think of that company now?

#118 BOOM on 07.08.09 at 2:29 am

Eduardo,

How is your $7 summer natural gas trade coming along, you petulant little ass. Yes, the one you called about 4 months ago.

#119 Zoronqueen on 07.08.09 at 2:33 am

To:
#78 ncoffee on 07.07.09 at 4:38 pm
Re #73 & 74 —

Between this stuff, the banning and return of Nost. Jr., plus Munch’s regular posts, I gotta say — this blog is getting to be pretty hilarious!

I used to come here for the RE talk … but now it’s just for the high drama and laughs. Still worth it.– I totally agree, LMAO.

Where are the gold bugs lately, haven’t heard much….

#120 JM on 07.08.09 at 8:32 am

#102 – people need to start somewhere with reading how to be responsible for themselves.

Keep in mind I said the books should be read in High School or for those people who don’t know how to find their way out of a paper bag financially speaking…

Rich Dad Poor Dad is / was lame.

#113 – nice to see someone read the book & gets something from it.

#121 malbadon on 07.08.09 at 10:05 am

#117 BOB on 07.08.09 at 12:37 am

How can u make such a comment? If I bought in late 2006 a house in Arizona, you would be right. However, if i buy in late 2009 or 2010 at a 50%-75% discount, how can that be Arizonians taking me to the cleaners?

BOB, I believe it was Garth himself who said “When tourbuses of Canadians are having to be brought in to buy houses at that price because people in Arizona still won’t, who is the Greater Fool?”

#122 smw on 07.08.09 at 10:06 am

#106 dd

Thanks for the info, thats what I’ve been reading/hearing. I want to accumulate units nat gas or grains and looking at the best way to do that with the least risk.

And day trading, while working a full-time job sounds risky!

Commodities sat still during the 90’s recession, but I can’t see them sitting much longer then a couple years this next decade, so if I can get some commodity based assets on the cheap now, buy low sell high?

#123 Cordoroy Cowboy on 07.08.09 at 1:49 pm

#15 Meggie The boomer comment made by myself was totally facetious. I love boomers, I is one. I hate people whining about the boomers…you are right they are our parents, grandparents etc, And they brought a lot of good with them. Not to pick on any one generation but some of the echo boomers love to whine about missing out on THEIR just due because of the Boomers. If the subject was thoroughly dissected they might be giving the boomers kudos for the many advancements they innovated and paving the way for them in other areas.
Maybe by sheer numbers they are upsetting the apple cart, but really without malicious intent.

#113 loved the big hat no cattle line. glad you enjoyed the book. I guess I found it lame as I was raised to live within my means and it is second nature to me, however lots of people have to be taught. I still found the book tedious and repetitive. Lots of meaningless charts etc. It could all have been said in half the print. The wealthy barber is the better of the two IMHO. But like I said to each his own. Too bad a basic course is not taught in elementary school and expanded in high school.

#124 TJ on 07.08.09 at 6:25 pm

Canada’s housing market has rebounded from an “awful winter” and could be poised to stabilize by the end of the year, one of the nation’s largest real estate firms said Tuesday.

In its market survey forecast, Royal LePage revised its outlook for the national housing market, predicting a two-per-cent decline to an average house price of $297,500 by the end of the year. That’s slightly higher than the $297,000 the company was forecasting in January.

http://tinyurl.com/koj4hd

** Come on.

The job numbers stink. Whole Countries are broke….and la-di-da, no sweat here?

I have it on good authority that buying into a Co-Op here in Vancouver, has seen the interest rates jump to DOUBLE prime.
That has never happened before, in such a short time frame.
What does that tell you?

The U$D is hanging on, if for no other reason that it is the settlement currency on all trade.
CAD, meanwhile is tied to commodities.
If the perception is that the world needs less metals and Oil prices are down – we get killed.
Great for exporters, crappy for you and I if we like to eat Oranges from Florida.

Wake up crew – we have hit an asteroid – and it’s all hands on deck.

#125 bill on 07.08.09 at 10:35 pm

There are strategic guys who can not afford the market go south. Like in Toronto, new off job contractors just found their gold mine in the old town, flipping old (at first buyer price) to renovated newer houses (into million dollar houses). This cooked themselves. Hope they can come out clean before August.

Last summer and fall’s buyers will come to their closings. This will be a double curse for the metros in the next two months.

#126 Eduardo on 07.09.09 at 12:55 am

Boom, that was a 6-7 dollar call by the end of the year… it’s July.

#127 BOOM on 07.09.09 at 12:34 pm

Sure, Eduardo… I believe three and a half months ago you were predicting 6-7 gas for the summer.

http://www.greaterfool.ca/2009/03/22/underground-in-edmonton/#comment-23363

http://www.greaterfool.ca/2009/03/22/underground-in-edmonton/#comment-23364

Of course, since you’re such a genius when it comes to natty, we’ll be seeing you at the NGX Stampede party tonight, right? Unlikely.