My, my. Could I be wrong? Just a bearded broken-down piece of meat? (If you saw ‘The Wrestler’ imagine me now with flowing blonde locks, a bursting heart and tights.)

After all, my words of caution to those people rushing into real estate deals seem to be falling on deaf ears. According to the MSM, we are on the cusp of recovery and hot property is all the proof necessary. So, this week’s new housing report was heralded as wonderful news, even though starts are down by a third nationally, and have been squished by half in Ontario. Big Bank economists have been lining up at microphones, saying since car and house sales are the first things to crash when recession hits, it makes sense they’ll soar when recovery noses out of the earth.

But, car sales are still dismal. The preponderance of real estate sales are to inexperienced buyers. And today’s jobs report shows the economy’s still a dangerous thing, especially in Ontario. But, whadda I know?

If I’m right, then a buying decision delayed until this bubblette bursts will be richly rewarded. If I’m wrong, people not buying will see home prices continuously soar to the point where average folks can never afford one. Then the only ones who will own real estate will be… meh… reporters and bank economists? And Phil Soper.

Seriously, residential real estate in the US, Britain, Germany, Spain and most other western countries has corrected substantially in price during this recession. Consumers have pulled back. Debt levels have moderated. People have learned caution.

But not here. Household debt is racing higher. Bidding wars have erupted. Mortgage lenders are swamped. Credit is expanding. Real estate is selling new price records. And our economists say this is good news. Amazing.

Cue the crowd.

Hey Garth!

I have been reading your blog entries and find them fascinating and so helpful.  After reading Pierre Burton’s book “The Great Depression” about a year and a half ago, I saw so many similiarities between our times and transfered all of my investments out of high-risk and managed to miss the brunt of the fall.

I see firsthand what is happening to our manufacturing industry….I work in an area of Scarborough that was once booming with manufacturing, and now is a street filled with “for sale” signs as the companies either closed down or moved the jobs to the U.S.  These were great high-paying union jobs that are now gone to never return.  The street is now like a ghost-town…..everyone else seems somewhat blind to it, but maybe it’s just too scary to look at the reality of the situation.

There are a couple of questions I had and I would really appreciate your insight.  Should I transfer all of my RRSP’s (about $35,000) to a locked-in rate (not sure exactly what the rate is, but I know it’s pretty low) for the next three years.  I am torn with what to do….I want the security but I am afraid I will miss out on the upswing of the market.  My husband and I are both in our late thirties.

My mortgage rate is up for renewal in February 2010.  However, I can renew through Royal Bank (who currently holds my mortgage) as early as October 2009 providing it is through their bank.  Otherwise I have to wait or I will be hit with penalties.  My fear with waiting is that I will get caught with the higher rates.  Any advice?

On a side note, I have a mortgage of $260,000 on a property worth about $360,000 (right now anyway l.o.l.).  We are dedicated to paying off our mortgage within the next seven years -which for us is certainly achievable, my husband and I have a joint income of $180,000 and both have the advantage of having company cars with gas cards.  My husbands job is secure with a great pension plan (one of the few remaining!)…I work in sales, but with industry drying up it is certainly scary times for everyone.  Our ultimate goal is to buy a cottage property when we have finished paying off our mortgage.  I just wanted your insight into what is going to happen with the cottage properties…they are so expensive!  In your opinion, is this pricing trend in cottage properties going to continue?  Will they EVER be affordable?

Thanks so much! – Sara

Interesting, Sara. I’ve seen the empty urban streets, as well, the shuttered factories and the endless signs trying to lease or flog vacant commercial properties. Hard to know how we can be on the verge of an economic renaissance, when the manufacturing jobs have vanished and the entrepreneurs have given up.

In any case, you guys sound okay, but need a kick in the rear. First, you don’t have enough money saved (just $35,000) at your age, and for your income bracket. Get serious about this. I mean, with $180K coming in and a manageable mortgage, what the heck are you doing with the cash?

Second, do not even think about putting this retirement money into a three-year GIC, which will pay you dust. You’re three decades away from withdrawing this to live on, and growth – not capital preservation – should be your goal. Over the period of time markets will go up and down a thousand times, so trying to time them is futile. Find some good growth assets, stick it in, and forget about it for a decade.

As for your mortgage, paying a penalty to achieve early renewal is pointless. Rates may well rise a little by the autumn, but they are not going up 2% or 3%. In fact, October could bring another market mauling, with bond yields rising and rates falling. Just wait. Ask me again when the heat comes on.

Finally, a cottage. Are you serious? You have a hundred grand (maybe) in equity, and enough invested cash to live on for six months – and you want to buy a second property that you’ll visit four weeks a year? Where do you plan on getting the money? Have you thought about what your net worth would look like after that escapade? Why can’t you rent one for a few summers?

Most cottages are owned by Boomers. Like me, most Boomers are disintegrating at a hell of a clip. Just wait, save, budget and ensure this is a need, not a want. It you still lust for one, then realize the best buying days are five years off.

By that time, I should have these damn tights on.


#1 Bottoms_Up on 07.09.09 at 11:23 pm

Sara, take heed of Garth’s advice, rent a cottage (waaaay more cost efficient) and buy some decent funds…I recommend XIU (tracks 60 of the top companies in Canada) and FXI (tracks companies in China)…these would be good 10 year bets, have very low MER fees and I believe they both pay a dividend.

On another note, regarding media spin, how does this get you:
CBC “The National”, has 3 people on to talk about the real estate market.
2 are bullish (Patricia Croft, Mark Mullins), 1 bearish (Jim Stanford). The two bulls at the end of the conversation were allowed to comment on ‘the economic green shoots’. The bear was not allowed to comment. Brutal.

#2 Nostradamus Jr's Analyst on 07.09.09 at 11:27 pm

>>>But not here. Household debt is racing higher. Bidding wars have erupted. Mortgage lenders are swamped. Credit is expanding. Real estate is selling new price records. And our economists say this is good news. Amazing.<<<

Gee Garth,

It almost sounds like Canadians are the dumbest people in the world :)

Tomorrows unemployment report is expected to show another 35,000 – 45,000 jobs lost in June.

Green shoots, my ass.

#3 Republic_of_Western_Canada on 07.09.09 at 11:36 pm

Too much insulation makes you forget how cold it gets outside.

The collective financial furnace in Canada is now barely sputtering along on vapours. The population at large won’t really care about the Big Chill going on all around us until that furnace seriously quits.

The other half of the problem is the present psychotic, twisted domestic fad of trying to marry earlier and/or squeeze out pups faster than the neighbors are. This politically-correct overpopulation binge is the core reason for the current housing insanity, sky-high real estate and mortgage debt.

A collective bitch-slap to all the golf and country-club minivan-driving married-with-kids gravy-sucking weenies is long overdue. Howls of anguish will float through suburbs from coast to coast when screwed financial policy can no longer perpetuate the massive, stupid debt to support them.

#4 Devil's Advocate on 07.09.09 at 11:45 pm

Hard to know what’s going to happen?

It does not matter what form money takes. Clay tablets, dollar bills or gold bullion it’s all fiat notes based on a “trust” that the promise which backs it is good. None seems less trustworthy than the fiat dollars our governments are hell bent on churning out of the printing presses, each new dollar devaluing those previous.

The root of the word credit is credo; Latin for “I believe”. It’s hard to believe in any promise, especially that of government, these days. Certainly much of what they do is to create an illusion that all is well that we might “believe” in. But is that enough?

The evolution of money and finance is the essential back-story behind all history. Our economic systems have gone through many a tumultuous time in the past. I suspect we are at the precipice of yet another significant change in the way we run our financial affairs. At the very least, if we are lucky, we will revisit the notion that money is a portable storage of accumulated wealth through effort rather than a borrowing against future expectations which may never materialize. On the other hand, like so many civilizations before, we may wake up one day soon to find our world quite upside down with yet another collapse of empires the rise and fall of which will be recorded in history as yet another consequence of economic malpractice.

We do live in interesting times.

#5 Mark on 07.09.09 at 11:55 pm

Where does it say their ages?

(i want to make sure they’re not younger than me, when you say “should have more at your age”)

Thirties. — Garth

#6 nonplused on 07.10.09 at 12:02 am

It’s no use, Garth. Bubble mania has taken off here again.

See, we had a chance to wind our bubble down before things got really bad because we were 18 – 24 months behind the US in “bubble progress”. But house prices hadn’t crashed here enough to teach the pleabs that the stove was hot, so a little mortgage manipulation by the Goldman guy running our central bank managed to get everyone back in.

The same low interest rates in the US are now “pushing on a rope”, because a healthy dose of fear exists down there.

But no fear here. We didn’t get burned enough to be afraid of the fire.

Here is the real problem. Our banking system could have avoided most of the problems going on state side if we would have voluntarily backed away from the flames. Instead, this mini bubble is going to mean, at the end of the day when our market “exhausts”, the result will be every bit as bad for us as it is state side.

Why is it that the only type of ruin good enough for most people is “total ruin”? We had a chance to back away from the precipice, and we used the chance to back up just to get a good run at it.

I’ll be waiting to see what September looks like.

#7 Grumpydawgs on 07.10.09 at 12:16 am

Garth , the world is upside down, but it won’t do us any good to start pulling our underwear over our heads in the morning. This phony baloney economy is elastic due to the short term ability of the government to play silly buggers with intrest rates. This is not something that can persist. But it has been enough to drag a few more FTB’s into the shark cage and get a few big developers out.

The budget office is foreceasting 500K unemployed this year and 700K next, does that sound like an enviornment to buy real estate in?

Canada has a very small MSM, any papers who aren’t desperate for revenue are threatened with ‘loss of access’ if the beans get spilled and so the people of Canada are being soaked by a vacumn of little to no objective information. Flarhety hates this guy and is trying to smile it away but the welfare rolls are growing fast and it’s no laughing matter.

I talked to a banker friend and he says the re-fi blitz is over, meaning the market is slowing down. precious little over 500K is selling. A few builders have struck out on their own desperate for a paycheque but the bank isn’t financing them. It’s all small money, not the smart money that would be in the game if a trend was in motion.

You’d have to be a complete idiot to jump in now. Its all hype no substance. A true ‘dead cat bounce’ if there ever was one.

#8 rory on 07.10.09 at 12:19 am

Hey all …I am into the wine (and whining) …some where there is a saying about brains and money and how the two are not correlated in any way or fashion … Sam and Bill were a worthy story …these two are whatever…talk about being doomed if these are the future…and they are supposed to be the smart ones based on salary …rofl.

Being mean on purpose ‘cuz it is true …you guys seriously need to get your brains working …like some have said before …if you guys are players you would not be asking for this kind of advice or even advertising the fact you need this kind of basic help…you would know what to do …HELLO!! …anyone home.

#9 Nostradamus jr. on 07.10.09 at 12:52 am

Dear Sara,

…re: your $35K cash on hand.

Invest the money into one of my secure with great return funds…you will get like 10% a year, compounded.

If that is not good enough, then invest it in my Gold A-1 secret investment fund where you will see a return of 14.5% ROI, also compounded.

yours truly,

Nostra Madoff jr

#10 Lance on 07.10.09 at 1:01 am

As the ING commercials say: “Save your money!”

$35k is not nearly enough in savings with that income, it should be well over $100k by now.

Cottage is a huge waste of money unless you plan to use them for the entire 3+ months of summer: you’ll sink as much or more in to it every year just paying taxes and upkeep as you would pay for a nice rental each summer. No mortgage to worry about, no worry about losing a mountain of equity (or being underwater) when the cottage market dries up completely (it’s already drying up). And the best thing about renting is that you can change your location every year! You can score a beautiful place for less than $1,500 per week. 4 weeks of blissful cottage living right on the lakeside for $6,000. Way cheaper (and nicer) than owning a crappy old cottage that’s 2 or 3 blocks from the water’s edge!

#11 Nostradamus Le Mad Vlad on 07.10.09 at 1:14 am

“. . . a bearded broken-down piece of meat? . . . imagine me now with flowing blonde locks, a bursting heart and tights. . .”

Yeeaagghh! What a brutal and revoltingly angst imagination, so time to trade up for a new one!
If there are plenty of Greatest Fools there, please send some here. We would like to have the option of selling and moving on or before Victoria Day 2010.

If not, we’ll stay, as this is a nice home. Despite all the market turmoil, our investments have at least held their own, even increased slightly.
Hysteria at its finest, courtesy of the m$m! Of course, the MP who stated that Britain would be better off with a population of 30 mln. may see his words come back to haunt him. — http://tinyurl.com/l65kkp
Dubble-bubble-trubble — a new bubble in China. — http://tinyurl.com/nvbha5 — I mentioned earlier that if Ron Paul gets his way, the chiefs at the Fed would do all they could to stop it.

The verbal diarrhea is heating up! — http://tinyurl.com/mwpgq8 . . . and this heading — http://tinyurl.com/kwka9m — shows how desperate some people are to keep Ron Paul out!

These three headings from different articles (no links) are loosely tied together:

“California Dreaming: Bankruptcy Nightmare /\ Food Stamps Reach 33.8 Million in April, 5th Consecutive Monthly Rise /\ Continuing Claims Soar By 159,000 To New Record; Initial Jobless Claims Skewed By Autos

Michael Moore’s new film out shortly — http://tinyurl.com/kud9l4 — Intro.: “It’s got it all — lust, passion, romance and 14,000 jobs being eliminated every day.” — Michael Moore

#12 jd on 07.10.09 at 1:36 am

“It you still lust for one, then realize the best buying days are five years off.” That statement brings up a very interesting idea. Mr.Turner, what does your ten year investment timeline look like? Is Canadian
demographics driving your investment philosphy or the USA recession?

#13 Dave on 07.10.09 at 1:50 am

when a simple man and a professional have both reached the same consensus on an asset class, be worried. Three days ago it was a guy who had his dad buy him his house, two days ago it was a real estate agent, yesterday it was a 20 something hippy, and today it was an auto glass business owner. They said the eact same thing “now is a great time to buy real estate….buy real estate rates are great!”.

Do people realize how scary this is? I’m seeing it in my everyday life. These are the words uttered by people around me. The question is: if all these different classes of people are saying buy, who is it that’s left that hasn’t bought??? There’s very few left. This mania has captured all classes of people to the point that the simple man gives advice on real estate as if he’s an expert! That’s a pretty scary thought. I had someone with a psychological malfunction tell me it’s great time to buy real estate just last week (this guy collects some sort of disability and doesn’t have a job). The above is fundamental analysis at it’s best. I get to hear and see consumer sentiment. I’m not meeting anyone that agrees with me on horrid the situation is. The position the masses have taken that this asset class at any cost is a sure shot, is complete validation that this market is a bubble, it has topped, and the down-side risk is so tremendous that I’m afraid for people that have mortgages and debt.

#14 Repatriated Expat on 07.10.09 at 4:54 am

The housing bubble in canada seems to have only perpetuated the appeal of real estate. Unfortunately, perception and recent history seem to reinforce the idea that real estate is the only good place to put money these days.

No mention of non-registered savings, but if the rrsp’s are any indication I don’t imagine much of an emergency fund.

My favorite definition of Optimism: you just don’t fully grasp the situation.

#15 Sam Mcboldon on 07.10.09 at 5:04 am


#16 Munch on 07.10.09 at 5:11 am

Garth in tights???


That image won’t leave my head, and it’s buggered up my weekend!

#17 Canadian Army Guy on 07.10.09 at 5:15 am

What is happening now sure is strange.

On the one hand, we have layoffs and rapidly rising unemployment.
On the other hand we have record home resales across the country.
Now, new homes are built at a rate of 8% more than a year ago…


Something gotta give?

These days that we live could be simply an adjustment as manufacturing jobs are yesterdays way. (Even though economic forecasters have said so for 20 years now)…

Don’t go and rush to stack up on squirrel meat just yet.

10% unemployment means that 90% are still working.

Remember, if you lost your job, do like me: join the forces.

#18 DG on 07.10.09 at 5:20 am

You don’t need to go as far as Scarborough to see depressed streets. Try walking the strip of Yonge between Eglinton and Lawrence. Seems like every other store is at best having a fire sale and at worst closing for good. Or Yorkville, where all the luxury boutiques seem to be dropping like flies. My wife spoke with an owner whose sales are down 80% from a year ago.

That said, I have some anecdotal evidence that sales are picking up. I did a deal recently with the owner of a large European car dealership. June was their best month ever, while six months ago they were by his own admission figuring out how they would be able to keep the doors open.

#19 David Bakody on 07.10.09 at 5:54 am

Dittio for now ….. I am off to Tim’s then going to pick up a ode friend to go the country and buy a good $5,000
(on the road) I found for him. I once read that the second richest man in the US drove an old Nissan pick up truck around town. No mention of him buying cottages that he would never use!

#20 DonDiego on 07.10.09 at 7:09 am

Another Greater Tool/Fool…


#21 Down South on 07.10.09 at 7:21 am

Here is what the Windsor Star has to say about RE in my town.
Read the comments following. No one around here believes we’re done bottoming out. In fact, we’re waiting for the next kick in the ass.


#22 Herb on 07.10.09 at 7:37 am


there are only two reasons to buy a cottage:

1. you like hard labour, and
2. you like burning money.

(We sold ours last fall, with Garth’s scribblings providing the final nudge. But don’t impose on our gratitude, Garth. The picture of you in leggings was bad enough – spare us the tights!)

#23 Toronto C9 Renter on 07.10.09 at 7:54 am

Still trying to erase the mental picture of Garth in tights so I can safely eat breakfast!

Fully agree on Garth’s cottage advice. Only buy if you can EASILY “afford it and forget about it”. Perhaps a cheaper one in a more affordable area such as Eastern Ontario north of 7, but forget Muskoka, G. Bay etc.

At current prices, cottages are not investments, but rather major expenses. Maintenance, property tax, hydro, road fees, toys etc. etc. Even if a cottage does appreciate, (doubtful as rates rise), capital gains tax will erode your gain.

Garth’s advice to rent is spot on! Perhaps find one you like and return year after year if that’s your thing. Alternatively, you have the flexibility to try new parts of the country each year which can be very rewarding.

Disclosure statement :) — I have a cottage, and do understand the motivation to own one….but I bought it long ago in a very different market! Would not do it today. Also, at times I regret always going to the same spot, and wish I was renting so I could try some other parts of this beautiful province!

#24 lgre on 07.10.09 at 8:06 am

Toronto has the second largest unemployment rate at 9.6 after windsor..but we have RE going up..yeah, I would say there is something wrong here.

#25 VOODOO on 07.10.09 at 8:31 am

Hey MSM, tell it like it is–joblessness hasn’t “inched” up, it has EXPLODED!! up, take a look:


“Since the labour market peaked last October, more than 450,000 full-time jobs have been lost, only partly countered by the creation of 84,000 part-time positions.”

Do the calculation: at an average salary of 40,000/yr, times 450,000 jobs, that’s $18,000,000,000 (18 billion, yes 18 billion) NOT CIRCULATING through our economy (what’s our deficit again?). How’s that for a headline?
I hate it when people say “there’s still 90% employment”.

#26 Jonathan on 07.10.09 at 8:34 am

Warren Buffet

– still lives in his $475,000 house he purchased in the 70s. (was) Net-worth consistently rose over 40 years to $70 billion.

Ingvar Kamprad, President and founder, IKEA

– drives 16 year old Volvo. Net-worth $30 billion +.

#27 Devil's Advocate on 07.10.09 at 8:35 am

My wife and daughter went for a three day two night shopping trip to Vancouver this week. Hotels which are normally full had a selection of rooms for them to choose from. Taxicabs which normally take a half hour to show up suddenly materialized as soon as they hung up the phone.

While at lunch in a funky tight little cafe they overheard talk not of buying McMansions but selling to greater fools and living on a houseboat in the straight.

One cab driver commented that he expected there would be more security guards in the city than tourists visiting the 2010 Winter Olympics.

In our own city of Kelowna it seems we have exhausted the supply of first time buyers and subsequently those upgrading after having sold them their more modest home. Might be the typical summer lull, but it feels different… like a calm before the storm.

We are due for an economic revolution of sorts. Economics is the back-story to all history, some good, some bad. There is little question that these economic times are a significant blip on the Richter Scale of economic history. How it might affect social history will surely be no less profound. It is not the economy you need to worry about. The economy is resiliant and elastic. Fundamental economics is about supply and demand. Today we live in an economic illusion as the laws of supply and demand are kept behind a curtain of SPIN, false promise. We don’t live within our means. We live on credit… credo… “I believe”… trust that “they” will perpetuate our speculative dreams. It’s all an illusion… A magician knows the truth but does not tell his audience for that would negate his ability to put on a show from which he draws revenue. There was once a time when municipalities need do nothing more than provide downtown parking, today they must entertain with large public theme parks and aquatic centers. So too is it with federal governments; we need not save for a rainy day as we expect our governments to provide for us. This is coming to an end. This is the change these challenging economic times are signalling. Check history and the correlation of evolutionary economic events. “Evolution” need not be a bad thing although it is a longer slower process than revolution.

As Gerald Celente says “when people are about to loose it all, they loose it”.

#28 gwcanuck on 07.10.09 at 8:36 am

Using the formula from The Millionaire Next Door, their net worth should be age x family income / 10. Should be around $700k. Sounds like they are WAY behind.

#29 George Popovic on 07.10.09 at 8:38 am

MSM is not blowing hot air just in the business and real estate arena, it goes way beyond that. The other night, I watched CBC news just to catch up on recent events.

I heard about a problem with medical record information leak out west, I heard that people on the street thought that this summer is really cold but a meteriologist quickly fixed that by saying that that is just a perception and this summer is really not that different. I also heard that there is a sex scandal with Italy’s PM.

Wow, what fantastic information.

I did not hear that buses exploded in Iraq killing a number of people, I did not hear that US drones killed a bunch of villagers in Pakistan, I did not hear that the death toll of swine flu is getting up there. I did not hear that California is going bust and a number of other states are in real trouble as well. I did not hear the UK PM warn about the next economic slide.

What happened to independent reporting in this country?

#30 PTDBD on 07.10.09 at 8:41 am

Yes bearded one, you’ve obviously missed a crucial piece in the Canadian mosaic puzzle. CBC Radio’s morning market report attributes the New Home buying to new immigrants chosing to buy instead of renting.

(pls don’t do a Nostroban on me)

#31 Chris no longer in England on 07.10.09 at 8:44 am

Had a chat with a (young, 30s) financial adviser a few days ago. He disputed that I would eventually be able to pick up the kind of property I would like, at a price I would like to pay, and told me that in his opinion prices wouldn’t drop much more. In fact, I know I can already get the kind of thing I want for the price I want to pay (but would have to make some compromises) so I’ll just wait it out and pick my moment.

It did interest me that part of his argument against my decision to wait is that he is currently looking around for a second house which is how he knows what the prices are doing! We had a bit of a steely-eyed stand-off across the desk and I ended up by telling him that I will get what I want, just wait and see – which seemed to amuse him no end. He has grown up in this area and I have lived in Canada for a month, but I still felt that my instincts on this are better than his.

He did suggest we consider buying a friend’s house which is currently listed because the friend has already bought some land and is starting to build another house (which is why the current one has to go). So not much financial caution happening around here. I said that when the price of the friend’s house is reduced to the level I wish to pay I might consider it! I can tell he thinks I’m a nut but he’s too polite to say so.

Everywhere I look there are For Sale signs, in some places 1 in every 3 or 4 houses is for sale. At the same time, a realtor I know tells me things have picked up so much she has been working 12 hour days. Yesterday on my travels I saw only one “Sold” sign outside a house, so not sure what is selling, or what her 12 hour days actually consist of!

#32 Herb on 07.10.09 at 9:02 am

What June increase in unemployment?

Canada lost about 7,400 jobs in June as the national unemployment rate rose to 8.6 per cent, Statistics Canada said Friday, reporting 47,500 full-time jobs were lost while 40,100 part-time positions were added.


Part-time equals full-time? Why do we accept shit like this from our government? It is revolting, and we should revolt!

#33 Seanmhair on 07.10.09 at 9:05 am

Not just the MSM. In a city with an (official) unemployment rate of 14.4 %, this dude is flogging real estate recovery.

Bargain prices will spur housing rebound, says realtor http://bit.ly/PbVKr

Pent up demand??

My arse.

#34 Solitario on 07.10.09 at 9:12 am

“If I’m right, then a buying decision delayed until this bubblette bursts will be richly rewarded. If I’m wrong, people not buying will see home prices continuously soar to the point where average folks can never afford one.”

Very likely, the truth is somewhere in between.
Canada doesn’t have the rental surplus US have. Very little rentals were build in the last 30 years. Immigration to Canada is much larger proportionally then immigration to US. And of better quality…
Canada’s “bubble” was considerably smaller then US’s, the lenders were much more conservative.
The saving rate was much bigger then in US.
The generation after boomers is bigger in size.

“Seriously, residential real estate in the US, Britain, Germany, Spain and most other western countries has corrected substantially in price during this recession. Consumers have pulled back. Debt levels have moderated. People have learned caution.”

Not so sure about Germany…
Anyway, I don’t think Canada’s falls in the same cathegory. US, Spain, Ireland, Island, UK and much of Eastern Europe were in a huge bubble. All of them are importers of energy…
Canada’s more like Australia…

Generally speaking, I find you’re a little too cocky in your predictions…today is the first time I see a “If I’m wrong” statement…maybe because the oil prices and interest rates seem to be going the other way…?

Taking me literally? :-o — Garth

#35 Joe on 07.10.09 at 9:31 am

On BNN yesterday they had Carl Steiner who talked about his book on oil at $20 per gallon. He spoke of areas in America which have suburban sprawl and how people will be moving back to the centre of the cities and the land would be reclaimed for farming. The genius BNN interviewers could not put together that if 10’s of thousands of people had to move back to the city then all the equity in these homes would be wiped out with large losses to the economy. Bury your head in the sand and it will go away such is our media in Canada.

#36 real estate on 07.10.09 at 9:39 am

I’m very interested in any posts with you, I respect and often try to visit you. Thank you.

#37 Uncertain on 07.10.09 at 9:42 am

So when the bubble bursts will we further declines than your orginally predicted 20 to 30% ? Or will you keep your earlier prediction?

I think it’s nuts that people claim its a great time to buy…”the rates are great”…get a grip people they will not stay low forever.

We were planning to buy next year but might hold off for a larger downpayment. I have created a spreadsheet full of calculations detailing total housing cost including principal, taxes, insurance , heat, water, etc using a interest rate of 7%….. this way going forward I know what I’m comfortable with.

My husband and I have decided that after all things have been paid including everything related to a home add in our other variable expenses (TV, phone, cars, savings, RRSP, etc) that we want a minimum of $1000 monthly to use for the fun extras in life….

Is that enough? With this calculation we can only afford a home worth $360K…. which in our hood (need to be close to Lakeshore West GO Oakville – Clarkson) does not leave a lot of choices for us…. hopefully prices will change so that we can get a modest comfortable home.

#38 Devil's Advocate on 07.10.09 at 9:43 am

2005… Daniel Arnold…

Interesting foresight…


#39 tf on 07.10.09 at 9:45 am

Garth could you please stop talking down the cottage market. I’m trying to sell a beautiful $500,000 cottage near Parry Sound and can’t even get any people walking thru. The market is dead. Don’t forget they aren’t making anymore lakefront property.

Did you say a $350,000 property? — Garth

#40 Devil's Advocate on 07.10.09 at 9:57 am


#41 PTDBD on 07.10.09 at 10:02 am

How much is $10,000 Million worth to Canadians? How many tax returns is that?

It’s not woth that much I guess. That’s how much Canadians loaned to the IMF this past week. Did you hear about it on the News last night? Nooooo…Instead, you heard about Harper being a little late for the G8 photo session.


#42 VOODOO on 07.10.09 at 10:08 am

“Don’t forget they aren’t making anymore lakefront property.”
Geez, with only 243,000 km of ocean coastal shoreline, I guess that’s room to build only 10 million cottages with 25 metres of oceanfront:


And that’s not including lakefront shoreline! Canada doesn’t even have an official estimate of how many lakes there are (perhaps another 10-20 million cottages could be built on lakes):


#43 Eduardo on 07.10.09 at 10:11 am

Good article in 38.

Does anyone have a good link related to Canadian age demographics discussions?

#44 Gord In Vancouver on 07.10.09 at 10:13 am

#32 Herb

Part-time equals full-time? Why do we accept shit like this from our government? It is revolting, and we should revolt!

Notice how regional numbers weren’t provided. It almost looks like they’re in cahoots with the real estate industry.

#45 Eduardo on 07.10.09 at 10:20 am

Sorry if this is a repost… I don’t think it pasted properly.

-large cohorts of the baby-boom reached age 15 between 1961 and 1981, they greatly contributed to the
rejuvenation of the 15 to 64 years age group. In the mid-1970s, persons aged 15 to 24 years were 2.4
times more numerous as those aged 55 to 64 years. Consequently, in that period, the ratio of potential
entrants to the labour market to potential leavers was at its highest.

-With the aging of the baby-boomers, there has been a decrease in the ratio of young adults to persons on
the threshold of retirement. In 2006, that ratio was approximately 1.2, or half of what it was thirty years

-This trend is expected to continue in the coming years. According to the most recent population projections,
this ratio should fall below one in 2013, meaning that the number of persons aged 55 to 64 years would
start to exceed the number of persons aged 15 to 24 years.

#46 Edmonton Appraiser on 07.10.09 at 10:26 am

Well, my Edmonton appraisal company just had its biggest month ever in June. Lots of sales and refi’s; yep, bigger than anytime during the bubble. Oh, and a lot more divorces and foreclosures too, quite sad.

I don’t think its a good time to buy but why is everyone doing it?

Check this out… (I used a banks online mortgage calculator to do this simple calculation)

Buy Now
$300,000 mortgage, 5.5% 10 Year Term, 25 Year Amortization = Total Paid over 25 years of $550,000

Buy Later (Where I think prices should be)
$225,000 mortgage, 11% 10 Year Term, 25 Year Amortization = Total Paid over 25 years of $650,000

I used a 10 year term because I don’t understand why anyone would do a 5 year term right now, the rate is low, but good luck on the refi in 5 years. Obviously I am speculating on the house price down the road and the interest rate as well. Also, this doesn’t take into account the interest rate from years 11-25 but perhaps this is what people are looking at when they decide to buy?

What if prices don’t drop significantly? Our economy is setup for long term amortization of purchases for everything. 8 years for cars, 3 years for tv’s, 35 years for houses. This is the only reason why things can be purchased.

What’s to stop the Gov’t down the road from bringing in 50 year amortizations for houses when interest rates are too high and people can’t afford the monthly payments?

As much as I’d like to believe that prices will drop heavily and things will become “sane” again, I just don’t know anymore with how much the Govt’s are tinkering with things.

I recall talking to my Grandfather a year ago about housing. I asked him how much he paid for his first house in the ’50’s and how much he made in a year. They were almost identical! So by that standard, the average income would need to be $350,000 to afford an average home in Edmonton.

I think I will rent for life!

An 11% rate is completely unrealistic within five years. Run it again at 8%. — Garth

#47 TF on 07.10.09 at 10:28 am

Re: TF #39
Listed at $500,00
Yes I would take $350,000.
Partner will not

Expensive partner. — Garth

#48 Future Expatriate on 07.10.09 at 10:31 am

How do I crash thee? Let me count the ways….

The Ghost of Housing Past”

Excellent analysis.

#49 Eduardo on 07.10.09 at 10:37 am


Re your response in 46 the difference is 550 buying now compared to 515 buying later in total cost at 5.5% and 8%.

#50 Solitario on 07.10.09 at 10:42 am

#35 Joe,
Carl Steiner doesn’t know what he’s talking about.
Without substantial monetary stimulus (money printing) and hyperinflation we won’t have $20/gallon oil any time soon. But that’s when your rent is going to be $10000 not $1000…and your salary will be $30000, not $3000.
The shale gas is the game changer. We’re not even going to need LNG. Energy is going to be dirt cheap for the next 20 years and beyond. No oil is going to be used for heating. Cars are going to be converted to CNG from gasoline.
Mark my words and remember them when at the end of this summer Canadian and US gas storage will be full to the brim and tens of thousands wells will have to be shut in.
Just ask Boone Pickens…ask him about the wind farms too…

#51 JT on 07.10.09 at 10:42 am

#34 Solitario

Canada’s bubble wasn’t much more conservative by any means. It was still very aggresive lending that continues to now.

Canadian’s owe as much per capita in mortgage debt as Americans.

If you include provincial and municipal debt in total government debt, our debt to GDP ratio is 69%. In America, the states are not permitted to run deficits – hence the California issue. To put it into perspective, Alberta is running a 5 billion deficit. If Alberta had as many people as California, it would be running a 50 billion deficit – twice what the deficit is in California that is supposedly breaking the state.

Americans don’t have 40 year ams. Canada did.

In the United States, mortgages were securtized. In Canada, we socialize and securtize risk up front via CHMC.

Home prices have doubled since 2001.

Mortgage debt has doubled since 2002.

Canada’s GDP growth rate for the past five years has been identical to that of the United States. We’re not so decoupled.

Taxpayer funded pensions and health benefits are more generous in Canada, so the costs to the system will be greater – despite a slightly larger post boomer crowd thanks to immigrants coming to Canada (in many cases temporarily).

Do you own any oil fields? I don’t. I know Exxon has some, China has many, Middle East governments, Suncor etc. But I don’t. We import workers from Russia & the US to work on the fields because we don’t have enough from Canada. So how do I benefit? Sure the government gets some extra tax revenue, but really, how am I benefiting? All the profits head back to the US and China so what difference does being an export country mean to me? All we do with the tax revenue is ramp up government spending. It’s not like we are investing it. And at the end of the day, who is going to pay the hundreds of billions to clean up the aftermath of all this commodity extraction. Our children.

Not to be negative, but I think you need to stop listening to the arrogant “Canadian” mentality that we are somehow different than the US. We really believe it. But most of it is not true.

#52 from victoria on 07.10.09 at 10:51 am

Hi! People Victoria are still as smug as ever. They are saying the reason we have not been hit is because we are an Island and therefore untouchable.

This should be interesting to watch in the next few years.

#53 PTDBD on 07.10.09 at 10:54 am

“Well, what’s all that mean for us? For our family?”

Her question stopped me in mid gulp? She has a way of grounding me. When I go off on my balloon-like flights of fancy she quickly jerks my chain and tethers me back to earth.

I was expounding to her about the G8, the lack of cohesion among the leaders and the fact that Hu went back to China so that he wouldn’t have to participate in the moronic clustercluck. I told her of China’s statement to the G8:

“We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies’ exchange rates and promote a diversified and rational international reserve currency system.”

I emphasized that China was finished hinting, suggesting and was now stating that the world had to switch to a new currency reserve system. Their statement was ignored by G8 leaders…not even heard by some.

In my usual frothy, manic mania I expounded on irrationality of the current currency system, how Banks create new money through lending and then leverage those digital credits many times over. I emphasized how silly we are to carry around the ball and chain of money all our lives but never really take the time examine this mechanism closely.

“Yea, yea, yea…well, what’s all that mean for us? For our family?”, she says.

#54 Live in Ontario on 07.10.09 at 10:56 am

I think everyone is underestimating the banks in regards to this market.

I think the Canadian banks learned there lessons very well from the meltdown last year.

They know full well that the government will not allow them to fail and that they can get free money even if they are lending cash to all the Greater Fools who want it.

They are in a no risk situation. They don’t care if people can pay because they know the government will bail them out.

We are screwed.

#55 Devil's Advocate on 07.10.09 at 11:02 am

An 11% rate is completely unrealistic within five years. Run it again at 8%. — Garth

We have always been of the opinion that 8.0% is a rate reflective of a stable economy on the shoulders of which higher or lower rates are indicative of something economically amiss. In any event prevailing interest rates are a function of short term monetary policy (government) or in the longer term bond markets (free market) both trying to effect market moderation toward that equilibrium 8.0%.

What compels you to believe “11% is completely unrealistic”? Might not the pendulum swing that far, or further, as it has in the past?

#56 The Great Gazoo on 07.10.09 at 11:10 am

Forget it Garth, we are fighting a losing battle.

Media today reports June job losses where only 7,400 and the headline is that the rate of job losses is slowing and we are heading into recovery.

Yet only one major paper this morning… well down in the article… reported that in fact full time jobs free-falled a further 47,500 in June.

The losses in full time jobs were offset by gains in “self-employment” and “part time” jobs.

I am certain that the government wants us to be in debt, the banks control the government, they make money off of our debt, the best way to do that off of the common folk is through real estate, real estate finances the media through major advertising for their propaganda and there you have it… a news release that there is a job recovery in June! BUY HOMES NOW, WE HAVE BOTTOMED OUT ALREADY!

I am a flabby spartan, you are a burnt out wrestler – we cannot fight this cause ourselves..

#57 Eduardo on 07.10.09 at 11:12 am


I agree that shale gas is a huge game changer and I like the Pickens Plan as well but I think you are overestimating the economics. Really only the Haynesville, Horn River and existing production is economic at these prices.

Keeping in mind price differentials from the various regions as well really leaves you only with Haynesville being economic (and marginally at 3.50 NG).

#58 Eduardo on 07.10.09 at 11:14 am

To add briefly, the reason that production has not fallen off more severely is that there’s a backlog of wells that were drilled last year and are being tied in now. As those go into production the shale declines will be more apparent. Keep in mind as well that shale declines are much more severe.

#59 Devil's Advocate on 07.10.09 at 11:16 am

I wonder if with all the economic stimulus (printing of fiat notes) inflation, especially in essentials like food, might become a real issue. Then with an aging demographic which has already seen much of its wealth deteriorated and more to come in falling real estate values which have traditionally been their greatest storage of wealth that they might demand higher rates of return on that which they have left. Why would a retired or soon to retire boomer invest in speculative stocks and bonds rather than stick the money in their mattress so to speak.

A rising cost of living on a fixed income or dwindling savings might well be the inevitable plight of a largest portion of our population in not too distant coming years. They will demand a higher rate of return. Yet they will no longer be contributing to the economy but rather drawing down on it. Those in their late 30’s may balk at paying higher taxes to fund the social service programs relied upon by these retirees but that will not stop their insatiable appetite. They (retirees) will simply demand a higher rate of return on the savings they have left… especially in such economically challenging times as we surely do face. Credit does not come from the government it comes from individual investors of which the boomers constitute a most significant portion.

#60 Solitario on 07.10.09 at 11:17 am

#51 JT,

And yes, I do “own oil fields”. I own CPG, BTE.UN, COS.UN, PWT.UN and others…I bought them on a HELOC. I paid my mortgage off since then. Still have the HELOC, pay 2.25% interest. They pay me a monthly distribution/dividend, about 6%…I get to deduct the interest at tax time.

The governments get tens of billions in tax revenue and royalties. How do YOU benefit from this revenue?Ask the government…ask Mr.Turner, he was Minister of Finance.
I think YOU do benefit a lot…not as much as you should though…lots of it is pissed away in Afghanistan, on other un-necessary military expenses, on non-bid contracts to Bombardier, in Chuck Guite scandals, on GM and Chrysler, on grants given to Nortel, Bombardier and other companies where the CEO’s are getting tens of million dollar bonuses, on 40$ salaries to high-school dropouts stacking shelves at LCBO, on striking Toronto city workers cashing 18 “sick days”/year, on $150k cops, on Clitheroe’s $300k car allowance, $6 million bonus and $25k/month pension, on Ontario’s ehealth thievery…

#61 dg on 07.10.09 at 11:18 am

“An 11% rate is completely unrealistic within five years. Run it again at 8%. — Garth”

Tell that to someone in the late 70’s early 80’s

#62 PTDBD on 07.10.09 at 11:24 am

Obama at G8 – a picture crying out for a caption

#63 Industrial Guy on 07.10.09 at 11:24 am

Fames Swiss born Psychiatrist Elizibeth Kubler Ross came to media attention in 1969 with her book; “On Death and Dying”. In her book Dr. Kubler Ross identifies the five stages of death: denial, anger, bargaining, depression and finally acceptance.

Garth, If we look at the letters you feature daily on this Web site. Canadians are all stuck in the denial phase when it comes to RE. It’s obvious, this patient should be dying if not for the life support artificially low interest rates have provided. We seem to forget history and the fundamental risk in playing with markets. The following are Canadian mortgage rates in five year increment since 1980:

1980 14%
1985 11.8%
1990 13.5%
1995 9%
2000 8.3%
2005 5.8%
2009 5.5% and lower

It would be foolish for us to be lulled in to complacency by this sham of a RE market. Historical mortgage rates in Canada are much higher than those available now. If rates were to move to their historical norms of around 10% ……. Not a pretty picture, is it.

“My, my. Could I be wrong? “. You’re not. Maybe your timing is a little off. But who could foresee such dramatic intervention by the Federal Conservative Government. It’s the kind of policies one would normally associate with the NDP.

A correction in market prices downward is coming and like in the experience USA, it may come quickly. If the Canadian RE markets are indeed about to make the transition from boom to something close to the present market in the USA. We need to prepare for some really hard choices.

Are some RE markets dead in the USA?
Karina Pallagst, of the University of California, Berkeley’s Institute of Urban and Regional Development said there was “both a cultural and political taboo about admitting a decline in America. Places like Flint, Michigan have hit rock bottom. They’re at the point where it’s better to start knocking a lot of buildings down”.

Could this be Windsor and Chatham in a few years? As their principal manufacturing industries close and production continues to move South to Mexico or offshore. Whats will be left? Bulldozing vacant sub devisions?

Sounds like some people in the US have reached the acceptance stage.

#64 ncoffee on 07.10.09 at 11:35 am

Re: #46 & #49

So … play the waiting game (five years or so) before buying, and maybe save $35,000 over 25 years? That’s a little over $100 per a month extra saved. So, given that those numbers are realistic to do guesswork by, the difference between buying now or waiting would hardly be life-changing … or, put another way, the difference would be about as life-changing as choosing to not eat out once a week.

Someone wanna set me straight here?

#65 Dan in Victoria on 07.10.09 at 11:49 am

Talked to a couple of the fellows I deal with in the construction industry this week wholesale sales.Diffrent companies(large national)both said they are down 35% so far this year and still falling.They also said that profit margins were now being shaved to single digit and soon break even would be acceptable.The suppliers that they purchase from were offering stupid terms(120-180 days in some cases) I can see a look of panic on both of their faces.They were pretty smug last fall when I said that things were going to unravel,and were grinding me this spring when the bubble was re inflated.I think its starting to sink in.

#66 LS on 07.10.09 at 11:53 am

I wonder why people are criticizing this couple’s “meagre” savings of 35k…

I always thought that the first priority should be to pay off debt. My brother bought a house 6 years ago with his wife, and by pouring all their money into the mortgage it is almost paid off (1 more year). He just turned 30.

So isn’t it better to get that mortgage debt out of the way as fast as possible than to start saving? Wouldn’t you save more in interest than you are likely to make in your investments (unless you want to get very risky)?

When we buy we’re going to do the same. With a bit of dedication and buying restraint I don’t see why we would have a mortgage for longer than 10 years at max.

#67 Dan in Victoria on 07.10.09 at 11:54 am

Tights Huh? Tights around here are when you can’t get the bib overalls on!My wife frequently reminds me of this,but I always tell her I have the body of a Greek God,not sure of which one though.

#68 Jack the Lad on 07.10.09 at 11:57 am

Maybe the person who wrote the letter just started making $180,000 per year (combined income).

That might explain why they’re behind.

Out of curiosity, in Canada how much would a couple grossing $180,000 actually Net once you subtract taxes, EI, CPP and all the stuff.

What would be their approximate net income?

#69 Barb ... reader, Calgary on 07.10.09 at 11:59 am

People I know are selling their prime waterfront cottage on Weslemkoon, a gorgeous lake (and great bass fishing). Although they’ve enjoyed the cottage for decades, I agree with Garth, cottages are definitely a want, not a need.

#70 Coop on 07.10.09 at 12:07 pm

The problem with RBC and TD saying they see an end to the housing drop based on the spring/early summer real estate market is this: real estate is very seasonal, the market heats up every spring not matter what is happening in the economy. People with kids usually sell/buy in spring so that the are all settled for the new school year.

To base an economic turnaround on spring real estate is not very good economics, these are bank economists, right?

#71 Tom from Mississauga on 07.10.09 at 12:10 pm

Wow Sara. My situation is scary similar.

Pierre Burton’s Flames across the Border. Excellent. Oh, and Garth’s books.

I missed the big drop with bonds last year and switched some to stocks for the rally, recently put 1/3 of my RRSP into 3y GIC last month figuring the stock market has topped out. 3.5%. If deflation is for real it isn’t that bad. Leave some in cashable though.

The industrial park i work in has “for lease” everywhere.
The bus I take use to be standing room only this time last year. Now I could fire a shotgun and not hit anyone.

Put some money in that RRSP. Borrow it for nothing. That’s what I did in Febuary, as a hedge against losing my job (I can draw out at bottom tax rate).

Don’t worry about that mortgage rate. It’s going to stay cheap for a long time. I’m variable till Aug/10 and am going to miss that rate. Will probably continue with var. product.

The cottage. Go with Garth.

#72 VOODOO on 07.10.09 at 12:13 pm

#31 Chris no longer in England on 07.10.09 at 8:44 am
Know what you see, not what you hear.

#37 Uncertain on 07.10.09 at 9:42 am
$1000 to blow every month sounds fantastic, keep it up!!

#73 D from London, ON on 07.10.09 at 12:17 pm

Oh my God, where are all of the personal attacks and blaming of yesterday? Have I stumbled on the wrong blog?

I might even have to clean up my own act… :-)

#74 Barb ... reader, Calgary on 07.10.09 at 12:22 pm

#31 Chris no longer in England,
Chris, as I recall, you said you’re along the corridor. I’m so glad you’re waiting before buying. That’s my old territory so my husband and I have kept an eye on that area and discuss it with with relatives and friends regularly over the years.. prices, (as you say and very well know), will drop.

And run as fast as possible away from that ‘advisor’ :)
(Nice of him to push his friend’s property at you, eh?! lol)

#75 Brendan on 07.10.09 at 12:31 pm

Any idea of where land prices may go? Specifically 3-8 acre range.

#76 VOODOO on 07.10.09 at 12:32 pm

#21 Down South on 07.10.09 at 7:21 am
Wow, even ‘after the crash’ they’re still pumping the market…good luck to all in Windsor, best to be on your way elsewhere….

#77 Soylent Green is People on 07.10.09 at 12:34 pm

‘Save our CEOs’


‘Capitalism: A Love Story’ to be released Oct. 2, 2009

Michael Moore’s opting to spoof romantic conventions in titling his upcoming documentary “Capitalism: A Love Story,” which addresses the causes of the global economic meltdown.

“It will be the perfect date movie,” Moore said in an announcement Wednesday. “It’s got it all — lust, passion, romance and 14,000 jobs being eliminated every day. It’s a forbidden love, one that dare not speak its name. Heck, let’s just say it: It’s capitalism.”

#78 MenWithHats on 07.10.09 at 12:49 pm

Miss Piggy may want to read Sam’s cautionary tale before leaping into anther property face first .
Owning a vacation home is a waste of assets .
No job is one hundred percent secure unless you are self employed and one hell of a money manager .

#79 pjwlk on 07.10.09 at 12:57 pm

Sara, remove the greed portion from your considerations and the answers will become much more clear.

Forget about the cottage. It’s like having two homes to pay for, maintain, pay taxes on. Not to mention twice the headaches. You can rent a nice cottage in a different location for a week every month of the summer and still be way ahead financially. I know a half dozen cottage owners and they all say the same thing. I currently lease a lakefront lot in Haliburton for the price most people pay for property taxes. BTW did you know that the two things most cottage owners worry about most? 1) Is someone is going to break into my place and steal all of my stuff. – 2) Is my roof going to cave in from all that snow. Why not let somebody else worry about all that crap whilst you have yourself a worry free holiday?

#80 Alex on 07.10.09 at 12:58 pm

to #17 Canadian Army Guy

maybe that is exactly what they want young unemployed men to do – join the army? Germans tried that in 1930’s…and lost 15mln soldiers in Russia only.
Not an option for me bro.

#81 robot in disguise on 07.10.09 at 1:12 pm

An indication of where the housing market is headed:


Based on the numbers contained in that article, the average house now costs approximately $417,000. Mortgage rates are currently at 3.7%. Looking up historical mortgage rates, the average rate over the past 20 years is 8.03%.

The article also states that at current levels, the average house costs the average household 45.9% of their pre-tax income. I was curious to see what percentage of household income would need to be devoted to mortgage payments assuming an average household earning an average income who purchased an average house.

Assuming a down payment of 10%, a $417,000 would leave the borrower with $375,300 remaining to be paid (not including any closing costs).

A 25 year mortgage at current interest rates (3.7%) requires a monthly payment of $1919.34.

At 8%, the historical average, the same mortgage would cost the borrower $2904.09/month.

If the $1919.34 costs 45.9% of pre-tax income, that means that the household is making $50,508.94 a year (a little low for Canada, but may apply to the earners in the area discussed in the article). The same borrower, at the higher interest rate of 8.03% would be paying $34,849.08 towards their mortgage every year.

The problem here (if it’s not already apparent) is the fact that $50,508.94 is the individual’s pre-tax income. After tax, that individual would expect to pay approximately $12,372 in taxes and CPP/EI contributions. The individual is left with $38,136.24. With $34,849.08 going to mortgage payments, the average household, with the average house, at average interest rates would have 3,287.16 as disposable income every year… barely enough to pay the property tax.

This situation is only marginally improved if the household is dual income with an ability to take advantage of lower marginal tax brackets (two income earners earning $25,254 would bring home approximately $42,000), or if they have a 40 year mortgage (mortgage payments drop to approximately $2617/month). Assuming both those changes, the household is left with 10,000 of disposable income per year.

We ARE screwed.

#82 rory on 07.10.09 at 1:21 pm

#43 Eduardo …you may know this already …

Harry Dent’s book ‘the great depression ahead’ is based on demographics…US and the world …the library should have a copy.

#83 Sara on 07.10.09 at 1:36 pm

“Sara” here…just wanted to clarfiy a few points about my “meagre” savings l.o.l. There are a few reasons why we haven’t been able to save more…first and foremost we have young kids. Paying for daycare in Toronto for the past seven years at $1,000 per kid per month sucked up a lot of our income. We are finally out of that phase! Also, our income has gone up significantly only within the past three years…before that I was working a less taxing job because of having young kids and going to school…with me earning two degrees, a professional designation, and working on my masters degree within the last ten years has also sucked up a lot of our “disposable income.” It has, however, paid off because my earning potential has gone up significantly as a result.

My husband does not contribute to an RRSP, but rather a defined pension plan so his contributions don’t show up as “savings” but will certainly pay off in the end (well, they better anyway!).

I won’t consider buying a cottage until I have my mortgage paid off. I am thinking now I might not consider it at all :-).

I feel very fortunate to still have my job – many around me have already taken a hit and there is NOTHING out there and NO ONE is hiring! It’s grim.

On a side note, I had a recent conversation with a prominent real estate agent in my area who has been around a long time and has seen it all. He mentioned to me that he had tried to deter many young couples from biting off more than they could chew in the real estate department, but they wouldn’t hear of it. My Mom has always referred to us as the “instant gratification generation”…we want it all and we want it now. Now we are going to pay for it…big time!

#84 rory on 07.10.09 at 1:43 pm

#64 ncoffee

Since people move every 5 years or so (at least in the past) what are the implications 5 years from now esp if your 10 year mortgage is not portable…could be way bigger than $100 bucks a month.

#85 rory on 07.10.09 at 1:46 pm

#68 Jack the Lad

try this site for income tax … http://www.taxtips.ca/calculators.htm

#86 Canadian Army Guy on 07.10.09 at 1:51 pm

#80 Alex wrote:

“to #17 Canadian Army Guy

maybe that is exactly what they want young unemployed men to do – join the army? Germans tried that in 1930’s…and lost 15mln soldiers in Russia only.
Not an option for me bro.”

You are pushing the issue a bit far, my friend!

I’m just saying that if someone lost their job (unfortunate) the Cdn Forces will hire them right now.
In some cases, with an upfront bonus in which a candidate’s previous experience is a must.

When you have to provide for a family, a secure job is a plus, bro.

#87 View from the south on 07.10.09 at 2:36 pm

#76 Voodoo

My neighbour, retired, is busy getting her home ready to sell. She just bought a 2 bdrm wartime in a decent area here for 37,500 (POS). She thinks this house will fetch about 100k. A home down the street was listed for 100k for the last two years, that guy gave up! In a city of 200,000 there are close to 3000 MLS listings – everyone wants out.

Location? — Garth

#88 jess on 07.10.09 at 2:51 pm

nice vertical line

Series: USG15LSTL, Net Loan Losses / Average Total Loans for U.S. Banks with average assets greater than $15B

#89 X on 07.10.09 at 2:53 pm

An indicator of where the RE market is heading.

Anyone been into a builders sales home/trailer lately. They are all selling off product. No new phases planned in the near future. Closing up shop for the time being. They do make good profit on the townhomes (entry level products that are selling well currently) but even the builders don’t want to pay sales people to sit in the sales homes not to sell anything. Plus they wouldn’t look like a reputable builder if the have to adjust their prices downwards. So many of them are closing shop (for the next 6-12 months they tell me), until the bubble bursts.

I live in Markham…so I can only tell you like it is in my neighborhood.

Although I am sure that next year the RE agents/marketers will try their best to tell us how despite rising rates, prices are dropping, so NOW will be the time to buy and get a good deal. Don’t miss out.

Every year, same message from them, different spin.

#90 TS on 07.10.09 at 2:54 pm

Hey Garth…great post. The following link has some interesting statistics about the increasingly fragile state of the US economy, and specifically how the financial sector is in for another huge crisis just around the corner.

Some people may look at these numbers and say “well that’s in the US, not here in Canada”. Make no mistake we will be hit by further declines in the US since our economy is tightly integrated with the US (one of the reasons that Canada just racked up one of its worst trade deficits in history last month). It will mean further declines in manufacturing and related employment. And, as any economist will tell you (other than Harpo – oops sorry – he’s not a real economist) there will be significant ripple effects throughout the economy as manufacturing continues to erode.

The other thing to keep in mind that the US economy is an excellent example of what happens when average consumers go on a credit buying spending spree. At some point all those bills need to get paid and that’s when the proverbial s*** hits the fan.

Anyway, this makes for some VERY interesting reading.


#91 Downsized and Delighted on 07.10.09 at 3:13 pm

Agree with everything you said Garth (how about that?)
except to say that this couple can’t afford to rent a cottage unless their expectations are very low (which seems unlikely given they are going through $180,000 grand a year with almost nothing to show for it). Has anyone seen the Muskoka rental rates lately?

Muskoka sucks. — Garth

#92 Just a Girl on 07.10.09 at 3:18 pm

#83 Sara

It’s hard to encapsulate the big picture of one’s financial standing, in the small vignette of a blog. No worries. We all have very unique circumstances, some fortune, some hard luck, some charity, some choices.

Regarding the cottage, I’d echo the sentiments of other bloggers here. Why lock up your money, incur additional RE risk, and accumulate more, unless you are planning to live there full-time. Rent, be free.

Besides, we are an overly consumptive society. The one car garage is now a 2-car garage. Cars are more efficient, but there’s more of them on the roads. The 1000 SF house is now a 2500 SF house. We need walk-in closets for all our clothes. Etc.

Don’t bite off more than you can chew. It feels good to have money in the bank, when an unexpected expense arises (or a fantastic opportunity presents. Talk about instant gratification then!

#93 Cara on 07.10.09 at 3:19 pm

I read about all the investments, etc. here and age situations and theoretical “should have” savings amounts at certain ages, yadda, yadda, yadda. I come from parents who made every financial mistake possible (and are now paying for it in spades in their late-50’s-early-60’s with no hope of retirement in sight). I have been reading Garth’s blog for about 9 months now. I am wondering, how can I learn what I SHOULD be doing, as opposed to what I shouldn’t?

I am in my early 30’s, married to a great guy in his mid-40’s. He thinks that flipping real estate is the way to make money – we’ve built and sold 4 houses and worked our way up to having about 250, 000 in equity in our current home (at current market values). We have no debt, credit card or otherwise, I drive a 10 year old vehicle, he drives a work truck with a gas card. All we pay monthly is our utilities, mortgage, life insurance, groceries, etc. I am currently in school (2 years left) to become a nurse. We have about $35,000 in savings, and we are living on his income alone. 3 children all school-age. No daycare costs.

Of that $35 000 in savings, $15 000 is going towards tuition for myself over the next two years. We are also trying to finish our basement, so figure we’ll eat up nearly another $10 000 to get that finished (we need the space, our home is only 1900 sq ft).

We don’t have much money each month to play with, but we do have a large Home Line of Credit. My husband has already used it to speculate on building a home with a friend/partner (which nearly ended disastrously last fall with the market crash here). Thanks to the blog, I saw the crash coming about a month before it really hit hard here, talked the guys into dropping the house price SUBSTANTIALLY and getting rid of it. With the house sold, we paid back the HELOC and thanked our lucky stars. Now he’s been playing the stock market in his head, and he figured if he’d invested the HELOC monies in the market playing American bank shares, he could have doubled his money. I say, “NO WAY” are you going to be speculating in the market with borrowed money! But, then I see people here talking about investing with their HELOC and wonder if I’m being too cautious?

What should we be doing? I’m trying to be responsible, stay debt free, finish school and then hit our mortgage with everything we’ve got. My husband is more entrepreneurial and is willing to borrow money to invest it and see a larger return?

I’m asking all you blog dogs what you would do if you were us… I’m trying to hold him back from building yet another bloody house, or playing Monopoly with our HELOC. What SHOULD we be doing? I’m watching the blog and can answer further questions if needed.


#94 View from the south on 07.10.09 at 3:39 pm

Garth, I’m Down South and View from the south (depends on which computer I’m working at) living in Windsor.

Website I post to called scaledown.ca has a post on Windsor’s shrinking population- conversation/comments may be of interest.


IMO southwestern Ontario still has a ways to go before we’re stable. W/O manufacturing and with low population density and aging population our city’s finances are going to be a wreck. At least with the city on strike the parks are blooming with wildflowers.

#95 TS on 07.10.09 at 3:43 pm

.#66 LS on 07.10.09 at 11:53 am
I wonder why people are criticizing this couple’s “meagre” savings of 35k…

I always thought that the first priority should be to pay off debt. My brother bought a house 6 years ago with his wife, and by pouring all their money into the mortgage it is almost paid off (1 more year). He just turned 30.

So isn’t it better to get that mortgage debt out of the way as fast as possible than to start saving? Wouldn’t you save more in interest than you are likely to make in your investments (unless you want to get very risky)?

When we buy we’re going to do the same. With a bit of dedication and buying restraint I don’t see why we would have a mortgage for longer than 10 years at max.

Sound thinking LS! Eliminating all debt as quickly as you can not only saves you hundreds of thousands of dollars during your life time, but it also a tremendous stress reducer. You are also eliminating debt which is paid for with AFTER TAX dollars – another huge consideration.

Going for the shortest amortization period you can afford also helps protect you from rising interest rates in the future as more of your monthly mortgage payment goes towards the principal on the loan. This is exactly what my wife and I did years ago. Sure, we did not have the retirement funding put away early on that we would have liked, but we have since easily caught up and are back on track for our ultimate goal. Eliminating a mortgage does wonders for your cash flow in later years!

Here are some practical examples to illustrate the point:

Let’s assume a $200,000 mortage with four different scenarios: 5 year amortization, 10 year amortization, 25 year amortization and a 35 year amortization. Then let’s take three interest rate levels of 4%, 8% and 12% (my wife and I lived through the days of 22.5% mortgages so we can tell you 12% is well within the realm of possibility).

So, let’s look at the monthly payments and the impact of rising interest rates.

First a 5 year amortization, something that your brother can relate to… the monthly payments would be $3,580, $4,042 and $4,420. So, you can see that even if mortgage interest rates TRIPLED from 4% to 12% the effect on monthly payments is only $840 or a 23.5% increase.

The second is a 10 year amortization at 4%, 8% and 12%. The monthly payments would be $2,022, $2,412 and $2,836. With a short amortization the increase in monthly payment is $808 higher, an increase of 40% when mortgage rates have TRIPLED.

Second scenario, a 25 year amortization at 4%, 8% and 12%. The monthly payments would be $1,052, $1,526 and $2,064. The monthly increase is $1,010. This represents a 96% increase when mortgage rates TRIPLED.

Now a 35 year amortization at 4%, 8% and 12%. The monthly payments would be $882, $1,402 and $1,986. This yields an increase of $1,104 per month, or an increase of 125% when mortgage rates TRIPLED.

Now let’s look at the total cost of borrowing under the various scenarios. For illustrative purposes we will assume that the interest rates are flat for the entire term of the mortgages.

5 year amortization:

4% = 60 payments x $3,680 = $220,800 – $200,000 principal = $20,800 interest cost

8% = 60 payments x $4,042 = $242,520 – $200,000 principal = $42,520 interest cost

12% = 60 payments x $4,420 = $265,200 – $200,000 principal = $65,200 interest cost

10 year amortization:

4% = 120 payments x $2,022 = $242,640 – $200,000 principal = $42,640 interest cost

8% = 120 payments x $2,412 = $289,440 – $200,000 principal = $89,440 interest cost

12% = 120 payments x $2,836 = $340,320 – $200,000 principal = $140,320 interest cost

25 year amortization

4% = 300 payments x $1,052 = $315,600 – $200,000 principal = $115,600 interest cost

8% = 300 payments x $1,526 = $457,800 – $200,000 amortization = $257,800 interest cost

12% = 300 payments x $2,064 = $619,200 – $200,000 principal = $419,200 interest cost

35 year amortization

4% = 420 payments x $882 = $370,044 – $200,000 principal = $170,044 interest cost

8% = 420 payments x $1,402 = $588,840 – $200,00 principal = $388,840 interest cost

12% = 420 payments x $1,986 = $834,120 – $200,000 principal = $634,120 interest cost

Obviously the numbers all point to the same conclusion. PAY CASH FOR EVERYTHING YOU CAN AND TRY NEVER TO BORROW. If you feel you must borrow for a house – always go for the absolute shortest amortization schedule that you can afford. Better still, look for the best house you can afford at a predetermined short amortization like 10 years.

#96 john m on 07.10.09 at 3:59 pm

Canada lost about 7,400 jobs in June as the national unemployment rate rose to 8.6 per cent, Statistics Canada said Friday.

While 47,500 full-time jobs disappeared in the month, roughly 40,100 part-time positions were added.

The June jobs report was not as bad as had been feared by market watchers.

Economists had a consensus forecast that the country would lose a total of 40,000 jobs in June, although some outlooks expected losses to total 50,000 jobs. Most economists also expected the unemployment rate to come in at 8.7 per cent…………what a misleading statement!!! the bottom line is!–47,500 full time jobs were lost-part time jobs do not offer security,a future or any stability so in actual fact we lost 7,500 more than they predicted.

#97 jess on 07.10.09 at 4:19 pm

are IOUs securities?
…what a safety net

#98 ts harpoon on 07.10.09 at 4:39 pm

Via Metafilter:

Champions of Reversible Destiny, architects Arakawa + Gins believe that people die because they’re too comfortable. Having lost their life savings through Bernie Madoff, their bewildering East Hampton Bioscleave house – and, presumably, immortality – can now be yours for only $4million. [via the always awesome It’s lovely! I’ll take it!]


#99 X on 07.10.09 at 4:44 pm

#93 Cara – keep being responsible. Pay off whatever outstanding home debt that you may have.

No need to discuss RE, as you already visit this website.

In regards to your hubby speculating on the market. You might want to discuss some of your options with a CFA or two. Then take some time and digest what ever their recommendations were, before acting.

Oh…and finish school! Set a great example for your kids showing them how important education is.

Good Luck.

#100 TJ on 07.10.09 at 5:10 pm

The Great Credit Contraction Cometh.

We know from logic and experience that saving money – not spending it – is the key to getting wealthier. Saving money gives you capital. And it’s capital accumulation – in the form of factories, roads, ships, buildings, machines…and raw savings – that gives people the ability to produce more. It may take a man with a shovel a whole day to dig a decent grave. Give him capital – in the form of a backhoe – and he can bury everyone in town. That’s why capitalism works. It rewards the fellow who saves his money.

Yet every yahoo economist in the year of our Lord 2009 takes news of rising savings rates like the death of Michael Jackson. If households don’t consume,
they reason, how can a consumer economy grow?

The problem is that you can’t really grow an economy by borrowing and spending.

Recent history proves it. Despite the biggest splurge of borrowing and spending in history, the US consumer economy barely grew at all. (*Editor: Canada fared marginally better).

“In the five years to December 2007,” reports Grant’s Interest Rate Observer, “America’s credit market debt climbed by nearly 57%, to $18 trillion.

However, in the same half-decade, nominal GDP was up by only $3.3 trillion.”

For every five dollars people borrowed, they only increased their incomes by $1. Imagine that the borrowing had an average effective interest rate of 10% (credit card debt can be much more expensive).

At that rate half of the additional income earned between 2002 and 2007 had to be used just to pay
the interest.

** And the contraction of credit is just starting.


#101 David Bakody on 07.10.09 at 5:14 pm

#96 john m on 07.10.09 at 3:59 pm & Garth

Breaking News both GM & Chrysler are back on track and no doubt will be able to pay executive bonuses to boot Big Time! ….. so Mr’s Harper and Flaherty are indeed economic geniuses. Add this to record home sales and it appears the Canadian Shield held strong ……. now for their next trick>

#102 Mike (Authentic) on 07.10.09 at 5:25 pm

Alberta Unemployment.

What didn’t get headlines is Alberta had the greatest increase of unemployment by DOUBLE any other prov/terr in Canada.

YoY Alberta unemployment is up 107.8%

Now, if that isn’t a ringing fire alarm bell I don’t know what is.

Check your prov out:

#103 Soylent Green is People on 07.10.09 at 5:36 pm

re #83 Sara on 07.10.09 at 1:36 pm “Sara” here…just wanted to clarfiy a few points about my

My heart just breaks hearing about your kids being institutionalized in stranger-care their whole lives. So sad for them.

ps People, get your dreams and ambitions out of the way BEFORE you have kids. Kids should come first in your life, not dead last.

#104 Dan in Victoria on 07.10.09 at 6:00 pm

Post #93 Cara Your hubby is in his mid forties,last down turn he was about 18 or so.He has NO idea what it is like NONE.At this stage of the game he proabably figures hes a fininacial wizard,and hes unstopable.It’s easy to make money in a rising market.The real SMART ones know when its time to take a rest,sure theres some money too be made still, no doubt about it.If he keeps going hes going to find out just how smart he really is.He’s already dodged one bullet(Thanks to Garth and others) I’ve seen this time and time again.Greed, plain and simple.Read some other blogs,The Automatic Earth,Dan W,Mish Shedlock etc.Is hubby smarter than these people?He had better understand that natural selection will take place in the economic jungle.How much of his hard work is he willing to give back?How much are you willing to pay for a lesson?Only you and him know.

#105 BBC on 07.10.09 at 6:41 pm

oops, addressed to Cara:

Save yourself and your children….cut him off or divorce him!

#106 Nostradamus Le Mad Vlad on 07.10.09 at 6:46 pm

Well, that was about as exciting as cuddling a wet fart. Just for the halibut, I googled “hidden and real canadian unemployment figures”.

This — http://www.threesquirrels.com/?p=785 — seems to be one of the better links, although anyone is free to gaggle what they choose.

We are retired now, but both of us remember the early ’80s, the unemployment and high interest rates then, which hovered around 18-22%. Out-take:

“Jobless benefits in Canada are well below the average for OECD countries and, despite recent federal government enhancements to the system, remain more meagre than in previous recessions”

Seems history, as usual, will repeat itself. As Garth has previously said, interest rates have only one way to go, the same way as unemployment — up.

BTW, the three squirrels in the link above are in no way related to Garth, neither are they anyone’s free lunch!

With the ‘net ‘noise’ about the stability of Canada’s banks over the last few weeks, added with the soon-to-be Cdn. foreclosure / default rates increasing, CC debt sitting unpaid, how long before this — http://tinyurl.com/lwbc7u — happens here?

Kelowna’s new housing starts were down 80% YOY in June, in today’s KDC. The Okanagan Valley is not much better, with new condos in Penticton and Vernon being auctioned off. Read between the lines!
For the gold bugs — http://tinyurl.com/m7fenx
These two — http://tinyurl.com/lhckgr \/ http://tinyurl.com/knwe5j — kinda go together.

First is one way for a company to get rid of the union (close the plant); second shows that Americans’ EI (or whatever they are called) benefits are running out soon. Same here.

#107 Cara on 07.10.09 at 6:51 pm

Dan – thanks for weighing in.

I realize that some people make their bucks in a downturn, but not everyone can.

The man my husband works for (who owns several businesses in AB) got his start back in the recession of the early ’80s – he built houses then. The only 4 houses built in that year in this town! He got the vulture deal of a lifetime then – bought a million dollar piece of land from the bank for $100 000. People with cash back then did fairly well he said.

We know what NOT to do – any more real estate trade, build and flip (I’ve dug my heels in, kicking and screaming. He still thinks there’s potential! LOL) but we don’t know WHAT to do.

Garth says “Buy bank preferred shares” etc. The problem is, how? There are a million “investment advisors” out there – some of them take a weekend course then hang out their shingle. The really good ones seem to want to have tens of thousands to play with. What do “normal joe-schmoes” have to do in this kind of environment? Should we be leveraging some of our equity to get it working for us (even 100 000) when things are “cheap”?

Or, do we stay completely out of “debt” (if investing your HELOC is considered debt)?


#108 john m on 07.10.09 at 7:08 pm

#101 David Bakody on 07.10.09 at 5:14 pm –how true David.when the days get shorter and the snow starts to fly a whole helluva lot of people are going to be hurting.I wonder how many of those 47,000 people that lost their job and their future last month were sucked in to the house buying craze? The misleading propaganda that we are hearing–supported by the Harper government is no longer just a vote buying-face saving scheme it is criminal to the believers IMO

#109 ritenote on 07.10.09 at 7:17 pm

Ah, Mickey Rourke in tights…Economy? What economy?

#110 Mike B on 07.10.09 at 7:28 pm

“Best buying years are 5 years out” do I understand correctly … Do not buy for another 5 years in Canada… That is a long time to rent

The context was cottages. — Garth

#111 R on 07.10.09 at 7:31 pm

#52 Victoria and Vancouver Island are about to crash.And when they do it’s going to be ugly. Nothing left to keep the island afloat.Only the super rich boomers/geriatrics and they can only live so long. Just wait and see what happens this fall when the prov. government starts laying off the civil servants. Welcome to the new northern B.C.

#112 Dave on 07.10.09 at 7:37 pm

What should we be doing? I’m trying to be responsible, stay debt free, finish school and then hit our mortgage with everything we’ve got. My husband is more entrepreneurial and is willing to borrow money to invest it and see a larger return?

you’re too emotional. Your husband is the same. You’ve done the right thing by driving older vehicles and getting into the medical field. It seems like your wise with what you spend but make bad decisions investment wise.

The game the two of you are trying to play is not for you. You’re reacting on emotion and were fortunate to come to this blog before disaster hit you. Who is advising to borrow against your home to buy bank stocks????? if you don’t understand it don’t do it. You have to spend a lot of time to do research if you want to get into a market or onto a trend that no one is on. You and hubby are acting like part of the herd and you will get hurt by continuing with that type of speculation.

My advice is: find a few index funds and dollar cost average. Every month buy $100, $200, $300 worth (or whatever you can afford) and keep doing that for years. It’s an easy and smart way to do things.

This is what Benjamin Graham (the man who taught Warren Buffett and several other billionaires) to do. You minimize risk and maximize during downturns using this approach.

If you’d like, read his book “The Intelligent Investor”. It’ll teach you to be calm and thorough rather than impulsive. Impulse with very little information ruins families.

#113 gold bugger on 07.10.09 at 7:49 pm

Now we have army recruiters trolling this blog?

I might need a paycheque every second Friday, but I’m not willing to step on to a landmine to get it.

#114 Downsized and Delighted on 07.10.09 at 8:13 pm

95 TS: I was already taking into account the equity that the couple had on their home which was only around $100,000, plus the $35,000 RRSP. Imagine everyone else was also. The $100,000 was probably due more to a market increase than the couple paying down the mortgage. So it seemed reasonable to assume that their savings was only the $35,000.

#115 Downsized and Delighted on 07.10.09 at 8:15 pm

Agree that Muskoka Sucks also. Too many noise machines and nothing to do but get drunk.

#116 Prairie gal on 07.10.09 at 8:41 pm

I don’t know if I can keep reading this blog… its too depressing. I’m in my mid-thirties, and after toiling away at university to earn two professional degrees (complete with substantial student loans), I have nothing to show for it but debt and some letters behind my name. I make under $70,000 as a public servant in a job I love after hating private law practice (where I earned very little being so junior). I own no real estate and have a 12 year old car. According to the posters here, by all measures I am an abject failure, financially. In retrospect, taking my time during school to do french immersion during the summers and traveling for a year before being chained to a desk has put me so far behind the pack I might as well just give up ever getting ahead.

Here in Regina, real estate has tripled in the past 5 years, vacancy rates are below 1%, leaving me living with my parents struggling to pay off debt, wondering how I will ever dig myself out of this hole! No kids – not now, not ever. Can’t afford them. Nowhere to put them. Where did I go wrong?

Sorry, just had to rant. All this obsession about money makes one lose perspective sometimes.

Go back to Paris, babe. — Garth

#117 Jonathan on 07.10.09 at 9:17 pm

#77 Soylent Green is People

haha love the name

hate michael moore. I can’t listen to that left wing propaganda. His points don’t make any sense.. and the way he backs them up are so trivial.

The movie IOUSA, just released, would be a better pick in my opinion.

#118 JT on 07.10.09 at 9:25 pm

#116 Prarie Gal,

Sounds like you are fairly frustrated with your financial sitch.

When I completed university I had a small debt of about $12K. I had worked during my summers which contributed about 20K to my student living expenses, and my parents through in about the same.

As soon as I started working I put $600 a week into the student loan. I had it paid off in less than 4.5 months.

After that I just saw my bank balance rise and rise.

You need to put 100% of your income into your debt while you are living with your parents. You won’t be able to pay the debt down nearly as fast, if at all, once you move out.

#119 Dan in Victoria on 07.10.09 at 9:58 pm

Cara post#107 Go read The Automatic Earth,40 ways to lose your future-Markets and the Lemming Factor.And I mean READ it, understand it!!!! If your’re looking for some sort of investment manual to do this, that, and then this…and then take your money to the bank, forget it.Research,experience,hardship,hardwork,risk,interpatation,analization,gut feeling and luck all combined with TIMING is what it’s going to take.Pushing the submit button on here does not lead instantly to great riches.It is a tool,figure out how to use it.What’s the rush for anyhow?

#120 Ben on 07.10.09 at 10:14 pm

Hey prairie girl, keep your chin up!

I hammered 30k in debt in less than 11 months when I got out of school, on a salary probably close to yours, after perks and overtime. I even had to pay rent and make payments on a new car too. If I can do it, so can you. Take a cut in your spending while your overheads are still low, and put every cent toward the debt – it’ll go before you know it.

With your debt gone, you’ve got a great education, a stable job you love, an excellent salary, a gold-plated pension, and 30 years to build up one heck of a nest egg and have a great time all at once.

Stop complaining about what you don’t have, take stock of what you do have, and grab your life, your debt, and your future by the horns!

#121 jess on 07.10.09 at 10:55 pm

Jonathan IOUSA?
i must say if i had a billion dollars i could surely feed quite a few folks rather than advertising which feeds few.

#122 Bertie on 07.10.09 at 11:36 pm

#117 Jonathan “hate michael moore. I can’t listen to that left wing propaganda. His points don’t make any sense.. and the way he backs them up are so trivial.”

What are you a puppet???

He’s a film maker who loves to uncover greed and show the truth. It’s pretty clear.

What part of “truth” is it that you don’t understand?

#123 Cara on 07.10.09 at 11:36 pm

Thanks for the advice Dave. I appreciate it.

So IXNAY on the accessing the HELOC – no panic right? Just invest monthly whatever we can. We don’t have a lot of extra – Hubby is big on giving to charity (religious practice of tithing). Our accountant thinks we’re nuts, and sometimes I wonder if he isn’t right. And yet somehow we manage to keep out of debt and save, and give. Sometimes I wonder if we shouldn’t be giving that money to ourselves, but I’m too afraid to stop and find out. LOL

Thanks again.

#124 Bobby on 07.10.09 at 11:40 pm

A touch of reality here in Victoria. Big headline today that building starts are up 46% in June. However, once you read the article you see that it is up from May. Wow.
The article goes on to say that starts are down 39% from the same time last year and 48% from the peak.
Speaking to a contractor you get the real picture. A lot of workers and equipment sitting idle and many being owed a lot of money given that many projects have stopped.

#125 Gregor Samsa on 07.10.09 at 11:57 pm

Prairie Gal, you are in desperate need of some perspective. You have a good job with government, with benefits, job security, and a pension. Unless our economy totally implodes, you basically have a job for life, will get continous raises throughout that time, and will be taken care of after you retire. I would trade places with you in a heartbeat.

Surely making 70K a year with your level of benefits you can pay off your debt. Where does the money go? I find it hard to beleive you cannot afford even the most outlandishly priced apartment in Regina at 70K per year.

Compare that with me: I was foolish enough to get an Engineering degree, and have been in an ultra-competetive job market my entire career (2002 grad), have been constantly looking for work my entire career, I couldn’t find work when I graduated, when I finally did get a job I was laid off a few years later when my job was transfered to China (they even asked me to train my replacement), I am currently unemployed and have trouble even finding jobs to apply to.

Here is my rant: our entire North American society is due for a harsh re-adjustment. We have forgotten that it was innovation and hard work that got us our wealth, and have replaced those things with this idea that we can gain wealth from nothing (housing & stocks). The people that FEED off of society (public sector, housing, medicine, stock brokers, financial analysts) have overtaken the people that produce the wealth (manufacturing, high tech, natural resources, farming). This is an unsustainable economic model. China, where everything is made, will come out of this the winners. If you have kids, the best thing you can do for them is to teach them to speak Mandarin (and I am 100% serious when I say this).

#126 Dave on 07.11.09 at 12:51 am

I don’t know if I can keep reading this blog… its too depressing. I’m in my mid-thirties, and after toiling away at university to earn two professional degrees (complete with substantial student loans), I have nothing to show for it but debt and some letters behind my name. I make under $70,000 as a public servant in a job I love after hating private law practice (where I earned very little being so junior). I own no real estate and have a 12 year old car. According to the posters here, by all measures I am an abject failure, financially. In retrospect, taking my time during school to do french immersion during the summers and traveling for a year before being chained to a desk has put me so far behind the pack I might as well just give up ever getting ahead.

I can’t make out if you’re serious or not, but if you’re at home with your parents and making $60,000 plus with no car payment or mortgage payment, you’re in a good position. If you dig deep you can really save a lot of money every year. I was in the same position making a bit more than you, so I know. Pay off your debts and then pay yourself first!! You’re in a good position, but you have to take initiative.

#127 dd on 07.11.09 at 2:12 am

.#116 Prairie gal

…I make under $70,000 as a public servant in a job I love after hating private law practice (where I earned very little being so junior). I own no real estate and have a 12 year old car. Where did I go wrong?…

So what do you do? Forget about RE for now. Pay off debt and sock it into stocks ie … energy and ags.

#128 Chris no longer in England on 07.11.09 at 12:46 pm

ncoffee #64: “So … play the waiting game (five years or so) before buying, and maybe save $35,000 over 25 years? That’s a little over $100 per a month extra saved. So, given that those numbers are realistic to do guesswork by, the difference between buying now or waiting would hardly be life-changing … or, put another way, the difference would be about as life-changing as choosing to not eat out once a week.

Someone wanna set me straight here?”


In five years time you’ll know whether you kept your job or not??

#129 Chris no longer in England on 07.11.09 at 1:30 pm

Barb #74: “Chris, as I recall, you said you’re along the corridor. I’m so glad you’re waiting before buying. That’s my old territory so my husband and I have kept an eye on that area and discuss it with with relatives and friends regularly over the years.. prices, (as you say and very well know), will drop.

And run as fast as possible away from that ‘advisor’
(Nice of him to push his friend’s property at you, eh?! lol).”


Cheers Barb. I have found myself in an ideal situation, but more by accident than design. We are new to the country, so need to find our feet and make sure we are living in the right area before we make it permanent and buy where we are currently renting; we have the sale proceeds from our house in England but there will be at least as much again from another property (hopefully now sold, we are awaiting confirmation). So at the moment half our money is in the bank and the other half is tied up in RE. To all intents and purposes we are “unemployed”, though my husband has a writing job he brought with him from England (full time work for him will not start probably for another month) so at the moment we are pretty much living on what we called “spare money” put away while we were still working in the UK.

None of the above makes me feel this is the ideal time for us to buy property, so while others on this blog agonise about why shouldn’t they buy something now, I am quite content not to – until we know exactly how much we do have, how much it costs to live, what income is eventually coming in, do we like it enough here “in the corridor” (ha! sounds like a punishment from my school days..) to stay and settle?

We are not far from Trenton and PEC, so I was interested to read comments the other day from a couple of people who had driven through Picton and counted up the For Sale signs. I also noted those, as well as others closer by, but having nothing to compare it to (i.e. how many were there last year, or the year before?) I didn’t take that much notice. Now it has got me wondering just why so many people want to move.

I am guessing that it must be hard to earn a living out here if you are not a farmer or involved with the military or the tourist industry in some way. Not everyone has the luxury of working from home, and like my son’s school friend’s father (who wants to go back to the city) there might be many plans to migrate back to Toronto hidden behind those For Sale signs.

In any case, whatever their individual reasons, the mere fact there are so many properties for sale around here makes me think prices can only go down. The school friend’s house has been listed for a while but although they have had viewings, nobody wants to buy. Maybe potential buyers are trying to look at all the other houses too – that would certainly take up a lot of time!

As for the financial adviser, I was picking his brains about what we might do with a few hundred thousand while we wait. Being cautious where money is concerned (i.e. I don’t want to go back to work and have to earn some more) I am interested in parking it in various places to grow, modestly if need be, rather than taking any chances on higher risk options.

So … everyone feel free to comment (I know you will)!

#130 Dave on 07.12.09 at 12:20 am

Here is my rant: our entire North American society is due for a harsh re-adjustment. We have forgotten that it was innovation and hard work that got us our wealth, and have replaced those things with this idea that we can gain wealth from nothing (housing & stocks)


you’re right on most of the above. Gaining wealth from trading houses cannot last – we’re seeing the result of that. You’re definitely wrong when it comes to gaining wealth with stocks as it is totally possible and totally sensible. The stocks I own I feel like I’m funding good business with money so that they can expand. I’m into a lot of energies. I feel there’s a problem with baseload energy. The money I invest is helping what I believe has to happen in our society. How isn’t this productive? I”m funding these industries and companies so that my family and I can have clean and cheap energy.

how is this a bad idea?

#131 Bottoms_Up on 07.12.09 at 7:53 am

.#130 Dave on 07.12.09 at 12:20 am
Dave I hate to break it to you but you’re not funding a company when you buy a stock–your money is going into the pocket of the person selling the stock. (the company raises cash at it’s inital share offering, after that the stock just changes hands between investors).

#132 Bottoms_Up on 07.12.09 at 8:01 am

.#129 Chris no longer in England on 07.11.09 at 1:30 pm
Well Chris we’re happy to have you in Canada. A good UK friend of mine has recently taught me some English speak such as ‘dosh’ and ‘swot up’. Don’t use these terms here though, because I think most Canadians don’t know them.

As to where to park your dosh for some modest growth–I’ve swotted up and now suggest checking out various companies preferred shares. They typically pay a decent dividend, and there is a ‘guarantee’ that on the date of maturity you’ll get a certain share price (the company buys the shares back off you on a certain date for a set price). Preferred shares can bounce around in price because they’re not as heavily traded. And there’s also the risk if the company goes bankrupt you’ll lose some money.

Good luck!!

#133 Job on 07.12.09 at 8:12 am

123 Cara on 07.10.09 at 11:36 pm
Tithing? The biggest scam going. My buddy is the accountant for a church–it’s business as usual! Preachers are some of the best sales people out there (they would make great university lecturers or infomercial hosts), and I don’t believe indirectly making you feel bad for not giving your hard earned $$ to the church is ethical. 10% of your paycheque could set you up nicely in retirement (or buy you a brand new car every few years). You don’t need to give money to a church to be a kind, giving, caring and contributing human being.

#134 Bottoms_Up on 07.12.09 at 8:21 am

.#116 Prairie gal on 07.10.09 at 8:41 pm
You’re not alone. 11 years of university education here (that’s ~$55,000 gone to tuition, plus time not earning a substantial wage or getting promoted), similar job, no real estate, no savings. It feels pretty dismal, especially when many got ahead in the housing boom. But the saving grace for us is that we have not swallowed the kool-aid, and I am told our education will pay off in later years. Hang in there, you’re actually lucky to be able to live at home and hammer down that debt (and have a decent paying job in a relatively cheap city).

#135 taxpayer like you on 07.12.09 at 10:59 am

Re 134 Bottoms:

11 years post sec?? What we’re you thinking? What we’re you studying?

It sounds like you fell victim to the “post secondary education industrial complex”. Now I’ve got 6 years post sec myself, the first two in tech school, then a return a few years later to obtain engineering degree. I’ll probably
never know whether it has really paid off financially or not, but in both cases, the skills learned were marketable, with the degree allowing me quicker and further advancement and more career options. Like Michael jordan, I couldnt accept not trying.

Young people are continually pumped to get an education, but I think in too many cases, a poor choice is made for the sake of the degree. Now if its what you
truly love and want to do with your life that’s great, you’ll find related work somehow. But I know bartenders with BAs, labourers with BScs, computer techs with philosophy degrees etc. IMO it looks like a big waste of time and resources.

#136 taxpayer like you on 07.12.09 at 2:29 pm

I shoulda stayed in school longer and learned to spell

not we’re…….WERE

#137 Bottoms_Up on 07.12.09 at 6:37 pm

4 years undergrad
7 years PhD
0 debt – priceless
0 equity – shitty

#138 Petes chance on 09.30.09 at 3:13 pm

I was really having a good day being unemployed (after 27 years in the same place)and unable to find work. I hated my job, treated us like crap but the pay was good. Well now the Mexican workers have my job.

Optimistic and looking forward to a great future with a new outlook and perspective on life.

I still smile everday, enjoy what I have, dream a lot, and try hard to work on what I can.

Try to avoid negativity in everything I do, need to, have to surround myself with optimistic people.

So, imagine my dismay finding you all!

I have read this blog and felt worse about the economy and my future that I have in the past several months.

I still believe the future is what you make it. If you are right about the next great depression..oh well we better start planning now…guess I get a head start.

Government spending and monetary policies throughout the world as well as the baby boomer demographic will have a definitive impact.

In regards to this and a comment before, dropped financial advisers a long time ago. Found it funny how they can loose my money and still get very well paid. “Oh, well lets put your money in this! Seen him driving away in his Mercedes after…hmmm!

Oh, I did much better than they did and still do!

In regards to the housing, these are Canadian stats. Some areas are building others are not. Fundamentals in certain regions need the housing starts such as in areas of Alberta and Saskatchewan. People still need places to live and demand fuels supply.

So whats next. Cottages sound like they are out or are they? What does this demographic of retires want out of their final years? Assuming of course they planned for retirement!

Smaller homes, small or affordable cottages, travel, recreation, golf, warm winters, see the world while preserving capital for many years to continue doing what they enjoy.

No matter how you cut it this group has enjoyed a privileged life. They are not ready to give it up heading into the final years. They are planning!

As am I. This is the only time I am reading this blog. I just had to comment. Garth, great blog and information in here but WOW!

Do you have one on the positive aspects of the economy? Might like to join in there!

Everyone, yup you are right. The economy is changing and comes a time to think out of the box and this may be it.

Quick question maybe someone can answer!

How many people became millionaires in the past year?

How many will this year?

And how many in the next two?

Not saying I have a chance at this, but out there someone is figuring out a way to do it!

Outside the box!!!!!

Have fun everyone….CYA