2007: Desperate TO condo buyers. This weekend: Disaster

A decade ago it occurred to me the future of the Internet was video. So I gathered some people, built a mobile digital TV studio inside a cube van, and started broadcasting eight hours a day of live content based on financial news. The whole thing cost $50,000 to launch.

A couple of weeks later two execs from one of the country’s largest media conglomerates invited me to lunch and talked millions. I knew then the dot-com era was over. Sheer speculative greed had replaced rational action. Even big-time suits had lost their minds, and their perspective.

Not long afterwards, my web venture was broadcasting breathless reports on the meltdown of the Nasdaq, decimated investors, and lost billions. The  media company was swallowed whole by a competitor.

Today the Canadian housing market is at a similar point. I have used postings here lately to explain. Today I will elaborate on why it is absolutely inevitable that real estate has a troubled future. It may not crash with US-style velocity, but anyone who has bought recently, is buying, or does so in coming months will feel the sting. It could be a life-altering experience for those who thought money would stay cheap or property values ascendant.

First, a word to this guy. Like most real estate professionals he, too, has lost perspective. There is a time to buy any particular asset, as there is a time to sell. Houses may almost always rise in value over 20-year spans (at least they have for a generation of cheap oil and endless growth), but this argument’s irrelevant. Today the average mortgage is held for little more than three years, before homeowners move on. Today real estate is an investment commodity. And it’s at where Nortel was circa 2000.

If you have little equity, if you cannot sustain a loss, if all your net worth’s in a house: Time to get out.

I say these things as a real estate owner and investor. In my entire adult life, I’ve never been without property – usually several of them. I buy and sell regularly. Real estate is a lasting portion of my financial portfolio. But I have no illusions for the next few years.

Nor should you.

Let me show you why what happened in the United States, Britain, Spain and most of the developed world will happen here. I made this argument in the Spring of 2008 in my book, Greater Fool, and fundamentals have not changed. In fact, we are now set up for an even more significant decline.

First, houses in this country are seriously overvalued.

The average house at its peak (which is now) costs $319,200, or 7 times the gross national per capita income. This compares to the peak US house price (2006) of $230,000, which was 5 times income. It’s obvious that we have allowed this asset to become inflated, and that the housing market is a bubble.

Second, our banking and mortgage insurance system (as described here) has allowed this bubble to continue bloating while market forces in other countries have forced a correction. The reason: CMHC.

Canada’s housing insurance agency, run by Ottawa and accountable to the Minister of Finance, is in the business of froth. It provides endless amounts of cheap insurance for high-ratio loans (with minimal down payments), so banks can simply shovel off the risk to the feds.

At the present time, it guarantees about $630 billion in mortgages. This is an astonishing amount of money, equal in size to half the Canadian economy. And what assets stand behind this? Securities worth $8 billion. This means 98% of its liabilities are not covered. This is a worse situation than that which faced US mortgage giants Freddie Mae and Fannie Mac, which lost 90% of their market value.

The danger? As real estate values inevitably correct, since the average home price can only be supported at artificially-low interest rates, our banks will be backstopped by a federal government now running its worst-ever deficit. Over $600 billion in mortgage risk belongs to the taxpayers – and Ottawa is already tapped out. How can this end well?

Third: Purposefully or not, government has blown huge amounts of air into this bubble. As the Americans allowed the bar for house financing to be lowered with subprime mortgages, we did the same with 40-year amortizations and zero down payments. Those developments, which came into effect in late 2006 just as the US bubble was bursting, goosed Canadian house prices to unheard-of levels.

And now, after amortizations have been shortened by just five years, our central bank has ushered in subprime-style teaser loans. By dropping its key lending rate to the lowest point ever, it’s allowed 3% mortgages to further inflate house values, in the absolute knowledge those rates will be doubled or tripled in the years ahead. The impact on housing affordability may be devastating.

The conclusion should be obvious: The housing crisis has not been avoided in Canada. We’re not different or special or smarter than the rest of the world. It’s coming.

As a real estate investor, I need to know this.


#1 TJ on 07.18.09 at 2:48 pm

A new Political force will evolve from this looming fiscal Tsunami. That is what scares me even more than this unavoidable precipitous drop in living standards.

I have always wondered why this little band of some 38 million, mostly living along the border of the United States, can actually believe that ‘things are different here’.

Did you read Mr. Turner’s CHMC numbers?
They make Fannie and Freddie’s numbers look like, uh, Goldman Sachs?

Here in Vancouver (* know, here he goes again)…this article will add to angst of Vancouverites.

Full disclosure – I have been totally against spending our hard earned money on this Olympic hoax, from the day we announced we applied to get these “games”.

A guy that goes down a mountain quicker than anyone else is not a hero by any definition.

A hero can be found in the face of any of our troops in harm’s way.

>Dave Cobb has his Games face on. Screwed on tight. Executive vice-president and deputy chief executive with Vancouver’s 2010 Olympic Winter Games organizing committee (VANOC), he’s the main numbers man, responsible for delivering six months from now a break-even mega-party.

Can he manage? His expression doesn’t change.

Then came the global economic meltdown. None of the 2010 ­ sponsors has reneged, not even bankrupt GM. But some of the agreements now look profligate. Some analysts say expected returns to the company – advertising dollars especially – will have to be adjusted downward, perhaps severely.

Even small deals are hard to come by, now.

This week, after months of inactivity on the sponsorship front, VANOC announced it had signed up ALDA Pharmaceuticals Corp. The New Westminster, B.C., company will supply the Games with hand sanitizer and disinfectant cleaning products.

“These are products for the times we are in,” offered John Furlong, VANOC’s CEO. “Infection control” had to be introduced for the Games to avoid disruption from H1N1 and Norwalk viruses.

VANOC is still looking for sponsors and suppliers to round out its roster.

>What next, The King of Floors?


#2 lili on 07.18.09 at 3:28 pm

Ooooh kewl. It’s coming. Kewl imagery too. Canada is on the brinkkie doo. Rates will rise 0.002%, spawning an all out flash flood of listings, prices will drop everywhere, CIBC will be insolvent, the world will take notice, The Economist magazine which only two months ago published an article on the strength of Canadian banking will six months later print a damning article on Canadian politicians meddling in BoC policy and mortgage regulation that crashed even the strongest financial example in anglo-western finance, a plague will ensue, the Liberals will take power, the public purse will be pillaged, Fed rates will rise another 0.002% again to curb a treasury glut, and we will all need Generators and Food Packs!!!

BTW, anyone know where I can buy some generators and food packs online???


The article you reference shows The Economist does not quite ‘get’ Canadian mortgage insurance, but does demonstrate the risk lies with taxpayers. The rest of your comment says quite a bit about you. — Garth

#3 Charles T. on 07.18.09 at 3:30 pm

Trump Park Avenue Penthouse Duplex Falls From $51 M. to $31 M.

This week’s Observer checked in on last year’s most lush listings: Of the 10 New York properties that were asking over $45 million in late 2008, only one has sold, and half have fallen off the market without a sale. “The timing was not good, so I didn’t get any offers,” said Victoria Shtainer, who listed the $51 million duplex penthouse at Trump Park Avenue until it was taken off the market late last month.

Friday the apartment went back on, but at a discount that would make even Julian Schnabel blush. What was most recently a $51 million tag (which comes out to $8,226 per square foot) is now $31 million (or $5,000).

The broker is Adam Modlin, known for his athlete and oligarch clientele. Reached on his cell phone, he said he was with someone important and couldn’t speak.

Update, Friday 1:44 PM: Mr. Modlin phoned back to discuss the apartment: “I would challenge someone to tell me about another penthouse on Park Avenue where you can entertain 100 of your friends on your terraces,” he said.

As for Mr. Trump’s price cut: “I got together with him and we discussed it. He asked me my professional opinion on where I think it could sell, and where I think it needs to be priced, and he agreed with $31 million,” the broker said. But why not a smaller chop? “Mr. Trump is committed to selling the apartment. And we made an adjustment that is appropriate for today’s market.”


#4 Al on 07.18.09 at 3:31 pm

On this:

in the absolute knowledge those rates will be doubled or tripled in the years ahead.

Why will those rates increase with central bank rates at a quarter percent. Wouldn’t those bank rates have to rise first? With us, seemingly, moving in a deflationary direction, why would they?

#5 jess on 07.18.09 at 3:33 pm

immigrants buying houses???????
hum visas
By Mac Margolis | NEWSWEEK
Published Mar 14, 2009
From the magazine issue dated Mar 23, 2009
As the global economy worsens, the trend is likely to pick up speed. The International Labor Organization projects the slump will destroy 52 million jobs worldwide this year, and demand has collapsed in the energy sector, light manufacturing, construction and the health and hospitality services industry—all magnets for migrant workers both foreign and domestic. Result: up to half of the 13 million guest workers in the oil fields and service industries of the Gulf states may be sacked in the coming months, forcing them to hit the road. In Japan, where giants like Toyota are stumbling, 10,000 of the 317,000 Brazilian temporary workers living there have lost their jobs in the last four months. Because housing is usually linked to work contracts, many are now leaving.

Over the last several months in Brazil, hundreds of former guest workers have straggled off the plane from Japan at São Paulo’s international airport every week. Other former guest workers are homeless in Japan’s big cities. “People are sleeping in churches and in parks,” says Yoshico Mori, a Roman Catholic nun who works with the Brazilian workers in Japan. “More people might be going home if they had the money for the return fare.”

Meantime, some 20 million Chinese peasants who flocked to the cities to stoke the mainland’s booming economy are now shipping back to the countryside as assembly lines and blast furnaces go silent in Shandong, Dongguan and Shanghai. A similar phenomenon is playing out in India, as urban factories are shuttered. Worse, there is no relief in sight. “This is the worst economic crisis since the Great Depression, and for migrants it is probably going to get a lot nastier,” says Demetrios Papademetriou, head of the Migration Policy Institute, a U.S. think tank.

Many natives are happy to see migrants go home. A November survey by the U.S.-German Marshall Fund found that at least 80 percent of those polled in the United Kingdom, France, Italy, Germany, Poland and the Netherlands want stronger border controls, and at least 73 percent are demanding tougher sanctions for hiring illegal immigrants.

immigration blowback??????
The Czech Republic is handing out $649 and a one-way plane ticket to any unemployed immigrant who agrees to leave the country. Spain is offering $14,000 per person to 100,000 eligible foreigners willing to leave for at least three years. Only around 1,400 have signed, but with one in six of Spain’s 5.2 million immigrants out of work, Madrid expects some 20,000 to take the buyout this year.

#6 Investx on 07.18.09 at 3:34 pm

Great post, Garth.

That RE agent you referred dismisses what you say because it’s “negative”, as opposed to addressing fundamentals, which you did amazingly here.

Thank you for your insight!

RE agents like Mr. Argentino should be ashamed of manipulating his potential customers using the “negative” card.

#7 Mark on 07.18.09 at 3:43 pm

Just read the page of the first link guy. Im confused. I’ve not lived in North America long, but it seems to me two things are true:

1. The American news stations (fox, etc) are deeply conservative and “anti-liberal”. But yet republicans will always moan that the news and media are too liberal

2. The canadian news always try to put a positive spin on ANYTHING even vaguely real estate related – but those who support the real estate market keep moaning that the media are always putting negative spin on things.

Now is this just me being blinkered and one sided in the things i read/see? Or does anyone else find this weird?

#8 rory on 07.18.09 at 3:43 pm

Income and perception support house prices …so where is each.

We now have rising unemployment and no idea where new jobs will come from. We have garbage workers striking asking for more money would thousands would gladly take their jobs (for less) …I could write pages.

Perception is becoming more visible via the US and world housing markets that maybe house prices can go down…gotta love the internet …it can even get by MSM.

Like GT says, when the suits show up to offer big money for nothing be very afraid …just like the realtor GT links too …when a P.Eng is selling RE it says alot …like he can make more and easier money flogging homes than something productive like engineering or he sells home ‘cuz he cannot get a decent gig as a Eng…either way neither bodes well.

#9 poker face on 07.18.09 at 3:45 pm

fire down the hole. Bloor 1st condo finally admitted they are going down. All those line up at the corner almost had me going. In a poker game I wouldn’t put all my money down in uncertainty and yet in real life people put down everything in a single chance. Should they be wrong it’ll take a long time to come back up. Their poor children will suffer the consequence. Start cutting up those coupons they come in handy.

#10 dondiego on 07.18.09 at 3:53 pm

This time it’s different.


#11 BoB on 07.18.09 at 3:55 pm

While I agree with your argument the following is a bit of a stretch:

And what assets stand behind this? Securities worth $8 billion. This means 98% of its liabilities are not covered.

Granted the homes are overvalued but are not completely worthless either.

This is insurance. CMHC does not have title to the properties. — Garth

#12 CTM on 07.18.09 at 4:07 pm

Mr. RE Agent Blogger makes not one (1) actual ARGUMENT to support his claims. He merely spouts a bunch of anecdotal crap.


#13 lili on 07.18.09 at 4:14 pm

Pray tell Garth, what don’t the nameless editors at the Rothschild’s private press understand about CMHC mortgage insurance?

I don’t know what my post says about me except that I’m bitter that I don’t have a crystal ball. However, I do at least admit it. Now, having saved up my money, avoided the draw of said crystal ball, I needs me a house.

When do I buy?

#14 Industrial Guy on 07.18.09 at 4:29 pm

It’s just disaster delayed. Our National unemployment support programs and the Government’s low interest policy have delayed the coming plunge in RE prices. The economic fundamentals are terrible. Unemployment is still rising. This charade of part time work and self employment doesn’t fool anyone. These are acts of desperation by working people who’s EI benefits are running out and they can’t find a real job..

Their next move will be to liquidate assets and diminish lifestyle expenses to levels they can support on part time salaries, welfare benefits and Canada Pension plans. Major expenses like mortgages will have to go. Expect a flood of houses on the market in the Fall as the panic sets in. All these factors are coming together at the same time. How Canada’s charter banks will react is another unknown factor. How will they react to a landslide of customers suddenly falling behind on their mortgages. It’s like the Perfect Storm.

Our unemployment situation is more than a temporary national tragedy. Most of these jobs are gone forever. The machines these Canadians worked with were exported in containers overseas or sold for scrap metal. Machinery builders in Southern Ontario have been decimated. If our manufacturing sector does recover. It will be by using foreign made technology. Not good news if you’re an engineer looking for a job.

The message from Statistics Canada about deflation is very troubling. The media attempted to spin it as a one shot deal resulting mostly from dropping fuel prices. If you drill down into the data, almost all sectors reported deflationary movements. Massive Government spending could not stop the Canadian economy from sliding into deflation.

There isn’t any agreement amongst economists where the economy is headed. Some see continued recessions for the next five years. Other see a slight recover in 2011. The devastation of the manufacturing sector in Southern Ontario is so complete, it will take a decade for employment number to return to historic levels. Lower consumer demand and the protectionist policies of the USA will be serious barriers to any recover.

Canada, as a Nation, needs to embark on a co ordinated industrial recover strategy. Let’s focus on things we do best in markets we excel in. We need to create the positive conditions necessary for industrial growth. Infrastructure, Taxation, Education and investment money are all key elements. Negotiating free trade agreement with low wage suppliers like South America and Korean must guarantee us unfettered access to these markets.

We need to rely less on the U.S. for our economic salvation and negotiate a free trade agreement with the European Economic Community …..

#15 Jackie on 07.18.09 at 4:46 pm

Interesting site and blog from this RE agent. We know this man personally and our experience was horrible. I won’t bore you with the details but I would not trust any spin from this man. I would NEVER use him as my RE agent in any dealings.

#16 Real Estate Deal or No Deal on 07.18.09 at 4:50 pm


You should buy now … as you obviously don’t heed to any of Garth’s advice.

Cheap interest rates … and some deflation … Go For it!

#17 bigpictureguy on 07.18.09 at 5:09 pm

2007: Desperate TO condo buyers. This weekend: Disaster

Garth the link doesn’t work. Did thestar take it down?

Fixed now. — Garth

#18 David on 07.18.09 at 5:10 pm

CMHC is an AIG in the making. If defaults ever get above 1% CMHC will be insolvent. Heaven forbid, if future home mortgage defaults in Canada get the 10% level which is where rates are heading south of the border in California and Florida. Even assuming a more modest 5% default rate in Canada will leave the taxpayers scooping up mounds of rotten turd assets for those who should have never bought a home in the first place at bubble prices with no down payment.
Realtors like Mr. Angelino can crank out all the dreck they want about positive thoughts for housing and horse feathers about supply and demand being the prime determinants for housing. Good on him, he got his commissions up front and the rest of us are left to pick up the pieces when the crash arrives.

#19 nota bene on 07.18.09 at 5:23 pm

Hi Garth,

Love your blog and perspective on what’s going on in the market. I’ve been sitting on the sidelines for a few years waiting out the insanity in the GTA and saving lots for a down payment in the meantime. You’ve suggested investing in preferreds, etc… for long term investors, but where would you recommend putting short/mid-term savings for a home? I was fortunate to miss much of the big market tumble last year, partially benefited from some of the upswing in the past few months but am now parked in 100% cash thinking this bounce back has lost steam and might be a bear trap. GIC’s, money market funds, and high rate savings accounts barely seem worth it right now. Where would you place money that’ll eventually be used towards a home in 2-4 years?

nota bene

#20 Huntsville Black Fly on 07.18.09 at 5:25 pm

Car sales go to China bike lanes come to Canada.

The U.S. is sitting @/= to the British Empire of 1909.

#21 Keith in Calgary on 07.18.09 at 5:27 pm


Regarding realtors and others who are part of the REIC. I have noted with some seriousinterest that the following point I am about to make drives them absolutlely insane when put on public bulletin boards by bears such as myself……..to wit:


The next time you are confronted by a real estate “professional” remember that people like myself, Garth Turner and others here who try to convince you of the errors of your ways, and the exceedingly dangerous perils of the Canadian housing bubble derive no income nor financial benefit from doing so. None whatsoever.

Ask the real estate “professional” what is in it for them when they try to tell otherwise.

#22 Charles T. on 07.18.09 at 5:27 pm

This is insurance. CMHC does not have title to the properties. — Garth

That statement reminds me of AIG and credit default swaps.

#23 Dan in Victoria on 07.18.09 at 5:30 pm

Well I read that guy’s blog that’s five minutes of my life i’ll never get back.Doe’s he not understand that people cannot handle these payments on a continous basis,if they are unemployed or interest rate changes?Sure a few of us can but not many.He blurps out some facts ? and figures? to cover his butt,but its all buy,buy,buy the sky is the limit.Sorry I base my descions on intelligent,well thought out scenarios.Not back ground noise.One thing I learned long ago if I had trouble understanding something enlarge it,think outside the box,so how high can houses go?ask yourself,how high?It has to stop doesen’t it?Then it will correct.So when do you buy?

#24 Al on 07.18.09 at 5:53 pm

This is insurance. CMHC does not have title to the properties. — Garth

Interesting thought , so who ends up with the worthless property?

If nobody else wants it I will take it. Burn it down, use the foundation to farm fish, throw the wood ash from the fire onto the postage size yard that came with the house and grow food for my duck which will crap in the fish pond feed the fishes then I will eat the fishes then crap in the garden and grow food for my duc … Ohmygod I has invented perpetual motion.

#25 Nostradamus jr. on 07.18.09 at 6:08 pm

It’s different for the North Shore, Vancouver.

…We gots lots of water, ‘lectricity and trees to burn.

#26 Chris L. on 07.18.09 at 6:11 pm

QUOTE: “Mr. RE Agent Blogger makes not one (1) actual ARGUMENT to support his claims. He merely spouts a bunch of anecdotal crap. Interesting.”

You are right…I think, I tried to skim to the logic and facts, you know the premises to support the conclusion but they, if present, were very well hidden. He lost his chance to persuade me, thus I wont buy.

#27 Mike B on 07.18.09 at 6:14 pm

While I do agree with 99% of GTs insight you must admit people have to live somewhere and don’t always have the option to wait and see. Renting is not always an option. I also believe the second level insolvency of the US and the high Can dollar will play a bigger role than some other forces…
Perhaps if you buy smart for location and price and mortgage rate you will fair ok… In general I feel that RE is hardly an investment unless you buy REITs… which I would not buy anyways.
With equities you can buy with the momentum and as that changes you can sell … not so easy with RE however if yoy buy midrange you should usually find a buyer … High end carriage trade is not so lucky even with the influx of wealthy immigrants who are alleged to be entering the country with bags of cash to buy RE…
I suspect we will cool by fall and remain flat for perhaps a year or two. Unless rates rise considerably close to double digits I see a slow RE cycle and no big discounts.
Having said that there seems to be a large swath of POS properties out there as banks are unwilling to keep this crap on their seemingly pristine books.

#28 AM on 07.18.09 at 6:28 pm

Well, the Gentleman gave his 2 Cents Worth…….


Garth, it must make you feel good to know that the gentleman is walking around with two articles and one of them happens to be yours….all these many years later !


Word of mouth advertising ( referral ) is generally the most reliable.

# 15 Jackie….thanx

#29 $fromA$ia on 07.18.09 at 6:32 pm

Tj #1 “Did you read Mr. Turner’s CHMC numbers?
They make Fannie and Freddie’s numbers look like, uh, Goldman Sachs?”

And Canada has printed more money proportionally than the United States!!!

Like Garth said, it’s comming! :P

Garth, inflation may be worse in Canada than the USA when it hits although our currency is based more on commodities especially oil…

#30 hal smith on 07.18.09 at 6:33 pm

The bubble MUST continue, it cannot be allowed to fail. Prices MUST rise and cannot be allowed to falter. If real estate craters the boomers are PH*CKED with a capital PH and they can’t retire. That is why many if not most are in denial and encouraging the young to take on giant risky lifetime mortgages. The bubble must not fail. Truth and common sense must be denied.Enslave the young to pay for your retirement and financial mismanagement.

#31 nonplused on 07.18.09 at 6:58 pm

Even if CMHC has to make a rather large payout, say 20% of insured mortgages default and the recovery rate from liquidation is say 70%, the payout should be around $37.8 billion. (630 x 0.2 x 0.3) Still a substantial sum but compared to some of the government’s other commitments rather manageable.

Even a 50% loss on 50% of the mortgages would only be $157.5 billion. Chump change really. It would only increase the national debt by some 20%.

(I am being sarcastic. Yes I am alarmed by the numbers.)

#32 Gregor Samsa on 07.18.09 at 7:04 pm

Hey Industrial Guy, although you are 100% correct, your coordinated industrial recovery will never fly. Canadians are not interested, and such a movement would never gather enough political strength. What Canadians want are plum public sector jobs with guaranteed job security, fat pensions, 5 weeks vacation, paid volunteer days, and liesurely lifestyles. Don’t get me wrong, it would be great if all Canadians could enjoy this, not a select few, but Canadian manufacturing is competing with Chinese factories where the employees LIVE at the factories in dormatories, get no benefits, and get $5/hr to work like dogs. Do you see the problem here?

#33 Republic_of_Western_Canada on 07.18.09 at 7:05 pm

#14 Industrial Guy –

Canada as a nation does NOT have to embark on any industrial ‘recovery strategy’. That’s merely indicative of a self-centered regional Ontario attitude to try to put the whole mess back that way it was. It’s also indicative of a problem which has finally made it’s overpopulation, excess immigration and wild consumerist consumption unsustainable.

It’s problem should have been addressed decades ago. When things got so inefficient and unimaginative there that the only thing coming out of it is mostly plastic buckets, beer bottles, and car seats, mere assembly of things, and PEng whores flogging RE, something should have been done then.

What we first have to embark on is higher value-added resource refinement such as petrochemical plants and upgraders and food- and even mineral-processing plants first. That way, commodity feedstock will not be lost foreever by shipping raw commodity hydrocarbons to the U.S., Ontario, and Chinese for example, or raw minerals to U.S. or Japanese steel plants. In the mean time, Ontario can go back to farming whatever it used to farm, working in the mines, and making pulp for cardboard boxes.

Before you have manufacturing, you should have a healthy resource-processing and refinement industry keeping those profits ‘at home’. Then, you can build on that financially and structurally by reinvesting, establishing engineering design and manufacturing by taking advantages of cheap input materials, transferable engineering/mgt knowledge from resource refining and nuclear power generation, and low cost of transportation of heavy feedstock by proximity to it. No acquired debt is necessary if you already have money (gold) in the bank.

Once Alberta has re-accumulated wealth and industrial infrastructure by gradually making progressively higher value-added hydrocarbons, and Saskatchewan has done the same through nuclear power generation, fuel rods, and agricultural products, has then what’s left of Ontario should be coerced to manufacture all we need at half market price to ensure the solidarity of Confederation. We shall call it the National Manufacturing Program (NFP).

And then make sure you don’t fuck things up by letting suburban domestic rodents financially exploit everything under the sun, wastefully consume stuff ad nauseaum, and letting the Ontario mafia skim things so badly that you can’t compete internationally anymore.

Hope you enjoyed your last post, you regional racist. — Garth

#34 pbrasseur on 07.18.09 at 7:23 pm

This one’s really good. Nice work Garth!
It’s a pleasure to read you as always.

If you come to speak in Montreal (will you?) I will attend if possible.

#35 J on 07.18.09 at 8:04 pm

Of the 900 billion in mortgages in Canada, 650 billion are insured by CHMC. Gives you an idea where all those price appreciations come from.

High risk, high ratio mortgages only. Geeze we are so different up here.

#36 wetcoaster on 07.18.09 at 8:10 pm

It used to be that if you went the CMHC route you were either broke and had no business even owning a home, or stupid for paying the fee plus the threat of one mortgage payment screw up and they would nail you. Now it’s suddenly trendy to be going in with nothing down and a gazillion year mortgage. My how times change or is it just that people are now more stupid than before ? I think the latter.

#37 Bobby on 07.18.09 at 8:17 pm

You are all taking this realtor’s comments way too seriously. Let’s remember he is a salesman trying to sell something. So, it is important that he create hype to encourage the sale.

What is more important is that being on commission, if he doesn’t make a sale, he doesn’t get paid. So if facts or negative press reduce his opportunity to make a sale, the obvious approach is to encourage his prospective buyers to ignore the negativity. In fact that is the jingle of a realtor here in Victoria.

If a cheapy finished condo here in Victoria is $300k and you can buy a 3 BR home on a golf course in Phoenix for the same price, I’d say the prices are out of balance. Or put another way, Victoria is way overpriced. But hey, I’m not selling houses on commission!

It’s gonna get ugly!!!

#38 aaron on 07.18.09 at 8:52 pm

At the present time, it guarantees about $630 billion in mortgages. This is an astonishing amount of money, equal in size to half the Canadian economy. And what assets stand behind this? Securities worth $8 billion.

Sorry Garth your numbers are incorrect. CMHC’s financials are available on line

As of December 2008 CMHC insured $408 billion of mortgages. CMHC cannot insure more than $450 billion without amending the National Housing Act. They also have 8 billion in equity plus another 7 billion in unearned premiums and provisions.

The $233.9 Billion of securitized mortgages represent a portion of the $408 billion already insured and do not materially increase CMHC’s risk.

I feel so much better. — Garth

#39 Nostradamus Le Mad Vlad on 07.18.09 at 9:13 pm

Things sure move fast. Around 3 p.m PST today, a small grass fire was spotted in Glenrosa, West Kelowna; 4 p.m., thousands — the whole community — were evacuated and now, at 6:50, three homes are gone, 12 are at risk. — http://www.kelowna.com/

Updates: The Gellatly and possibly the Cove Resort areas have been evacuated, Gorman Bros. lumber mill is being hosed down because the fire has grown exponentially, Hwy. 97S is shut and because of the strength and patterns of the wind, the planes are having a helluva ride in dropping their retardant. Summer’s only just started.
“. . . he, too, has lost perspective. . . . what happened in the United States, Britain, Spain and most of the developed world will happen here . . . we are now set up for an even more significant decline. . . . our banking and mortgage insurance system has allowed this bubble to continue bloating . . . our banks will be backstopped by a federal government now running its worst-ever deficit.”

Sheeple have no perspective. They graze in fields, eating ’til content then eat more. A sheep dog rounds them up, tucks them away for the night. Then it all starts over again. Nothing learned, nothing gained. Lambs to the slaughter.

The CPC lied re: Income Trusts, and I have no doubt they are merely following orders from the elite. The one thing of interest are the banks. Last week a few posters put up the same link re: the stability of banks, what would happen in the case of a major housing / economic slump.

The second half of ’09 and following will be mighty interesting — for those who survive it. This pre-designed colossal meltdown is nothing more than a chess match, and pawns (sheeple) are being hung out to dry.
The Dark Side of Walter Cronkite (short article). — http://www.lewrockwell.com/blog/lewrw/archives/030242.html
An interesting link from 2008. The whole thing was compiled in 1994, and we’re seeing the effects now. — http://www.womensgroup.org/ — Excerpt:

“A World Central Bank which should have five functions: (1) stabilize global economic activity, (2) lender of last resort to financial institutions, (3) calm jittery financial markets, (4) regulate financial institutions and (5) create and regulate new international liquidity.”
This is a reality check for the cost of the US healthcare system. Again, I suspect it’s drawn up and implemented by those who stand to benefit the most, but not the present administration. They are puppets doing the barf work.

http://www.naturalnews.com/026643_health_health_care_America.html — Excerpt:

“Now, under the new Obama health care reform bill, you’ll have to pay an additional eight percent of your payroll as a new tax to cover the costs of Big Government running its new sick-care system where nobody gets healthy, but everybody gets hammered with new taxes.”
Re: Iran’s last two elections. Ahmadinejad won both by approx. 62% of the votes, with 80%+ voter turnout. No trouble occurred following the first, yet the second, almost identical in terms of numbers, is labelled a fraud.

Do I smell something rotten from USrael? Is grass green?! Look for more of the same — innuendo, verbal diarrhea (rhetoric), etc. to toss the present govt. out. 1953 all over again — when the Shah was put in via the CIA / Mossad — except this time China and Russia will team up.

Add to that both China and Russia said today that an attack on Iran will lead to world war.



#40 Alexis on 07.18.09 at 9:33 pm

to #19 nota bene

the safest way to protect savings would be buying hard assets like silver or gold bars or coins. They can be bought and sold at any bank.

Sure. Pays no interest, no income, no dividends and fluctuates in price hourly without capital protection. Great advice. — Garth

#41 Nostradamus Jr's Analyst on 07.18.09 at 9:34 pm

How many times do you see the words “remarkably resilient” in this Vancouver Sun article describing the spending habits of the Canadian consumer.


Thanks, CANWEST – for letting us know it’s okay to keep spending.

#42 Future Expatriate on 07.18.09 at 10:10 pm

This is NOT looking good….

Complete US economic collapse by end of September?”

Not necessarily Garth’s “end of capitalism”, but call it a “restructuring”.

#43 Future Expatriate on 07.18.09 at 10:12 pm

“Sure. Pays no interest, no income, no dividends and fluctuates in price hourly without capital protection. Great advice. — Garth”

Only in the case of a complete currency collapse.

#44 dd on 07.18.09 at 10:32 pm

.#41 Nostradamus Jr’s Analyst

…How many times do you see the words “remarkably resilient” in this Vancouver Sun article describing the spending habits of the Canadian consumer….

Those words were used to describe the American consumer sometime in 2005.

#45 Industrial Guy on 07.18.09 at 10:38 pm

You really should get over the National Energy Program “Republic_of_Western_Canada” . The 1970’s are ancient history and ex Prime Minister Pierre Trudeau is still dead. Any Psychiatrist will tell you it isn’t good to keep all this anger trapped inside for such a long period time.

You will only have a healthy resource-processing and refinement industry if you have markets for your products. You seem somewhat out of step with your own Provincial Governments. Billions have been invested in promoting economic diversity in Western Canada. Over the years, some of this support has also come from taxpayers in …… Ontario.

The Premiers of BC, Alberta, Saskatchewan and Manitoba are not fools. They know first hand about the volatility of resource based economics. Markets can turn on a dime. Oil, forestry and Potash are great examples. They all know that historically, economies based on manufacturing has been relatively stable. The unemployment numbers over the last 12 months are up significantly in Wild Rose Country also. Family debt levels are at all time highs….and yes …your RE markets are doomed also.

So, we’re all in the same boat. Isn’t National Unity great??

I stand by my original statement, the only hope for Canada is a co ordinated industrial recover strategy. This downturn isn’t a localized event. Manufacturing jobs have been lost in Richmond BC, Medicine Hat Alberta, Swift Current Saskatchewan, Brandon Manitoba and yes in Ontario and Quebec.

Republic_of_Western_Canada ……. in support of national unity and fairness……. you’re welcome to make plastic buckets, beer bottles, and car seats in Alberta too.

#46 dd on 07.18.09 at 10:44 pm

…The average house at its peak (which is now) costs $319,200, or 7 times the gross national per capita income. This compares to the peak US house price (2006) of $230,000, which was 5 times income. It’s obvious that we have allowed this asset to become inflated, and that the housing market is a bubble…

I never hear realitors talk these numbers up. Even on the North Shore of Vancouver.

#47 betamax on 07.18.09 at 11:03 pm

Meanwhile, Vancouver Port volume is way down, imports 35% less than this time last year, so at least some of those “remarkably resilient” consumers have cut back on expenditures. The full effects of the the recession are yet to be felt.

#48 betamax on 07.18.09 at 11:03 pm

Here’s the link for the article on Vancouver Port volume:


#49 Basil Fawlty on 07.19.09 at 12:40 am

An interview with Eric Sprott from this week. Unlike our finance minister, he did see this financial trainwreck coming. Sprott is one intelligent individual.

#50 Nostradamus Le Mad Vlad on 07.19.09 at 12:43 am

Windy, and the smell of smoke is in the air now, as there is supposedly another smaller fire, on the east side of the airport.
In The Okanagan Saturday, two articles were of interest. One — “Vale Inco strike could be long one”. The way unions are cutting off their noses to spite their faces, management may simply let the workers rot, as it is to their advantage.

Get rid of high-priced labor — such as GM and Chrysler have done (Ford shortly), send the work overseas for cheap labor and Bob’s Yer Uncle — no one is buying anyway, as folk are tightening their belts (at last). Everyone loses, and that’s what the elite want.

Second comes from the UK, where Britain’s Unite Union called for job action in September on Barclays Bank because of a proposed closure of a pension plan. The union represent 25,000 workers.

Now, let your minds / thinking caps travel off to The Try-Lite Zone for a nod and a wink; hypothetically suppose that the US economy ventures beyond The Gates Of Hades in Sept. as well.

Everything seems so co-ordinated, the universe is unfolding as it should then the pandemic takes hold, so sheeple start having mass panic attacks.

Moi? A Wendy’s Baconater, with extra bacon. Merci!

The second half and the continuation of The Cycle Of Nines is well underway!
White Underclass is a politically-correct term for us white trashes!

Swiss banks are running outta space to store gold bullion. Excerpt:

“. . . Swiss news website 20 Minuten Online reports that Swiss banks are running out of secure storage space for gold bullion held by investors and institutions. Fears of hyperinflation, the economic downturn and the success of gold index funds (ETFs), which are supported by physical gold, has led to a run on precious metals investment – and in gold in particular, and in the necessary secure storage space in which to hold it.”

Two sides of China. Not everything is wonderful.



#51 $fromA$ia on 07.19.09 at 1:10 am

#40 Alexis

Sure. Pays no interest, no income, no dividends and fluctuates in price hourly without capital protection. Great advice. — Garth

The early bird gets the worm.-$ P.S. Seems Polititions are in love with FIAT $$$. Don’t worry Garth’s just mad cause you can’t burn gold.

#52 Vancouver_bear on 07.19.09 at 1:45 am

25 Nostradamus jr. on 07.18.09 at 6:08 pm

…We gots lots of water, ‘lectricity and trees to burn.

did you mean goats? ‘gots’ is not a word…

don’t forget that when it rains really hard the tap water turns brown and you have to boil it for at least 10 minutes…..before you can flush your toilet.

#53 Coho on 07.19.09 at 2:04 am

#7 Mark,

Media here and particularly in the USA spin facts and thus obfuscate the truth. They deliberately do this to confuse people so they remain in their traps or fall into more traps.

You’ll notice on CNN where they’ll have a democrat and republican put opposite spins on the same issue and in the end, no solution is arrived at. Just more party rhetoric and finger pointing leaving the viewers to just shrug their shoulders as they say “whatever” afterwards. It’s all a dog and pony show.

Some politicians may be sincere and feel strongly about their position, which goes to show how programming and indoctrination affects everyone. In the end though, the truth is elusive, and so are the real solutions. By real solutions, I mean ones that benefit the people, as opposed to the “problem-reaction solutions” that chip away at our civil liberties.

I suspect that media is censored by the very ones who control the money supply and our so-called representatives in Ottawa.

Because we have a vote we are deluded to think we can control what happens in Ottawa. Not so. It is like we are given the wheel of a ship that isn’t connected to the rudder. We think we’re steering the boat, but not so…someone else is.

#54 Stuart on 07.19.09 at 4:38 am

Suppose we will have a new “Canadian Energy Policy” to destroy the West economy again like thiry years ago. Marc LaLonde destroyed thousands of peoples lives then.

#55 Mike B on 07.19.09 at 6:59 am

Something anecdotal… Went to my bank on Friday to do a bank draft… The teller remarked that there has been a very noticeable increase in fraudulent drafts so I needed to provide alot of ID. She also remarked that there seems to be alot of desperate people strapped for cash. The media reports are underestimating the severity of things out there she argued. She remarked that she was looking to buy a house but found that any price drop in her west end of Toronto was minute at best… She will wait it out.
I have also noticed restaurant traffic to be pretty light even for midsummer cool evenings.
Malls seem busy but lineups at stores are short.
except for apple stores of course.

#56 miketheengineer on 07.19.09 at 8:13 am


This is one of your best posts yet….still don’t know why this stuff is not front page news…blows my mind away.

Reminder to all: Stock up on food, canned and dry goods. Don’t know what the next 6 months are going bring.

#57 Seanmhair on 07.19.09 at 8:27 am

Funny…I ran into an acquaintance last night who is a real estate agent here in Windsor. When we last spoke (about a year ago) she was bemoaning the fact that sales were down 25%. Now she tells me that sales have sky-rocketed, citing the low interest rates. Never been busier, she said.

Happy times are here again!! http://bit.ly/EhnRB Folks here are of the opinion that the worst is over. Partner & I are sitting back, watching people spend money they don’t have, with no eye to the future, shaking our head and NOT investing in real estate!

#58 Downsized and Delighted on 07.19.09 at 8:35 am

While I agree with you that interest rates have nowhere to go but up (duh), I do not agree that this will result in a meltdown of the real estate market. In fact, locking into a super low interest mortgage right now would actually hedge the purchase against rate increases. This is essentially the same move as short selling the long bonds (which the big boys are doing en masse right now). And you get a house to live in.

If you can get a mortgage that is transferable (which I admit I have no clue as to whether this is possible still), you will add value and saleability to your property. This is why house prices went UP in the 80’s while interest rates were going up at the same time.

Where did I ever use the term ‘meltdown’? Don’t exaggerate – it weakens your points. Interest rates that double or triple over the next number of years will force a real estate correction — bad news for those who bought when rates were lowest and prices highest. Locking into a low rate for five years will not avoid the future. Real estate as an asset class will be impacted. And, no, mortgages are not transferrable to a new owner. — Garth

#59 gold bugger on 07.19.09 at 9:12 am

@Keith: how old are you? Salesman make money by selling stuff. A realtor is a salesman. If you want to get hung up on the fact that realtors like to refer to themselves as professionals, that’s your problem.

@Industrial Guy: You need to play nice. PET and NEP might be in YOUR past, but they play huge in Alberta politics. When those taps get turned off, it’ll be YOUR @zz freezing in the dark, not ours.

Can you Western separatists get past empty schoolyard threats? Tedious already. This blog will not tolerate it. — Garth

#60 Bottoms_Up on 07.19.09 at 9:25 am

The 7:1 ratio in Canada gets even worse when you look at certain regions. For instance, the ratio in Vancouver is closer to 12:1. However, other cities the ratio is less, such in Montreal.

Also, been seeing more empty places for sale, investors looking to cash in on their real estate investments. I’d like to hear more from these people–it seems they know what’s coming down the pipeline and are not talking!!!! So thank you Garth, for telling us what everyone doesn’t want us to know.

#61 Herb on 07.19.09 at 9:43 am


reommend you add “imbibe MSM and political soporifics” to your perpetual motion cycle at #24.

You wouldn’t be able to crap enough to keep things going, but adding barfing might help.

#62 RJ on 07.19.09 at 9:44 am

Anyone up there sitting on big , fat, RE gains should thank god for shmucks like that agent posting his garbled trash, and liqidate your holdings yesterday.

#63 Dom-GTA on 07.19.09 at 9:52 am

I have followed this blog since about May of last year and really thought that when prices started to fall at the end of last and the beginning of this year that we were finally headed in the right direction (from an affordability perspective).

This Spring and summer have really confused the heck out of me. I know that people aren’t earning more today than they did last year and last year it was hard enough to afford. A number of family members and business colleagues have actually taken pay cuts in the last 6 months to help their companies weather the storm and yet here we are back at the “peak”. Wow!

As a family of 4 with a stay a home mom and me earning $119K last year (albeit with not great credit due to a previous failed business) we can not see ourselves affording or wanting to buy a $400-$500K slapped together house that will fall apart before a 25 or 30 year mortgage is finished. Property taxes are ridiculous $4500 a year for minimal service, garbage collection once every 2 weeks in the burbs and currently no garbage collection in the city. Water taxes above and beyond. Childcare costs that would completely eat my wife’s net income were she to return to work I simply don’t see how this can end well.
Now looking to buy in the Niagara-on-lake region an agricultural property that will let us get off the grid and grow our own food. Have horses for transport if oil really ever does go to $200 ( I do believe we will see $25-30 before we see $200) .
I am starting to believe that the real wealthy in the future will be the same who were wealthy during the feudal times and those are the land owners.

#64 Rick on 07.19.09 at 9:52 am

Mike “Something anecdotal… Went to my bank on Friday to do a bank draft… The teller remarked that there has been a very noticeable increase in fraudulent drafts so I needed to provide alot of ID.”

Funny, I went to the bank and we started talking about the economy. She was saying the economy was really bad and getting worse, while I played devil’s advocate with the propaganda from the media that everything was great . She said from her point of view with the customers she deals with daily that the situation is “really bad” and will take years to fix. After we talked for a few minutes I told her I was only being sarcastic .

#65 Munch on 07.19.09 at 10:10 am

#2 = beeg, beeg asshole!

The Munch

#66 dd on 07.19.09 at 10:10 am

#51 $fromA$ia on 07.19.09 at 1:10 am

…The early bird gets the worm.-$ P.S. Seems Polititions are in love with FIAT $$$. Don’t worry Garth’s just mad cause you can’t burn gold….

And it is not consumed. Every stick of gold ever produced is still on this planet unlike other commodities.

#67 J on 07.19.09 at 10:38 am

#33 Republic of Western Canada

Have you even visited Toronto?

So many westerners are so smug about their resources. You didn’t do anything. The forces of the universe created those. You’ll run out. And your fifteen minutes will be over.

Try building things or having something called a diverse economy out there. Try building something from scratch. From talent. Try getting 80% of the fortune 500 companies to locate there. Try having a talent pool the size of Ontario’s. And Albertans, how about trying to graduate from highschool – as so many of you do not.

So smug, yet so naive. You didn’t do anything. You didn’t invest your prize. You spent it. There is nothing to show for it. No investment funds for our children. What do you know about confederation. About protecting Canada’s future. Nothing.. Stop taking credit for all the things you had nothing to do with.

#68 john m on 07.19.09 at 10:41 am

Excellent post Garth.how can it be any other way? A very frightening future indeed.

#69 Gord In Vancouver on 07.19.09 at 10:54 am

Another excellent post Garth.

I cannot agree more with your comparison of today’s real estate market with the late 90’s tech bubble. I can still clearly remember when naive investors bought up truckloads of tech stocks in mid/late 2000 (market crashed in spring 2000) thinking that they were getting a heck of a bargain. Most of these investors ending up losing money as the FUNDAMENTALS of the companies they invested in were still crummy.

Until Canada gets a real estate market that has respectable fundamentals (e.g. normal price/salary ratios, stable unemployment) and is free of gimmicks (abnormally low interest rates, 40 year/nothing down mortgages), the money on the sidelines will NOT pour in.

#70 zoogler on 07.19.09 at 10:56 am

Squidly77 has finally gone over the edge. Here’s what he posted on the Alberta Bubble Blog:

DELETED. Go read this trash for yourself. — Garth

#71 Maria stuck in the US on 07.19.09 at 10:58 am

Interesting, all your comments. Well, I’m a Canadian living in the US and married to an American, or a Merkkan – as he calls himself.

We own our home free and clear, in an rather upscale “active adult” community in Arizona. Twice, in ’06 and ’07 we tried to sell it – reasonably priced – without success. The idea was to return to Canada as both think of it better than we think of the US.

Long story short, as I write there are houses here sitting unsold for over three or four years, their original prices dropping steadily…by 30, 40 or 50%. Weekend “open houses” are a forlorn hope on the part of agents; no one shows up…Personally, we feel trapped, and there are no renters either.

Sure, we have a roof but we no longer think of whatever “equity” we have in the house as something easily tapped as the liquidity is gone. My point is that even if we could sell and move we’d never buy again. Home ownership as a protection against inflation, or as a tax free appreciating asset is no longer valid, unless you have a long, long life ahead of you.

#72 rory on 07.19.09 at 11:17 am

Hey all;

For all the regulars this will be nothing very new … a good concise list of why housing is not yet at the bottom …again it is US based.

The new arguement, in Canada, now seems to be that somehow we are de-coupled from the rest of the worlds housing woes ..the only word of wisdom is “when in doubt – punt”.


#73 CTM on 07.19.09 at 11:29 am

To: Republic_of_Western_Canada

From: Bill Cosby…


#74 char on 07.19.09 at 11:31 am

Dear Garth,

I question your decision to censor certain posters, for ex. # 33, not because I agree with him, but because I oppose all censorship. period.

Yes, this is YOUR blog. I enjoy it because I like to know what people are thinking. If we are indeed moving into the worst depression in at least 100 yrs (I think we are), society will polarize. Isn’t it better to look right at regionalist, racist resentments, in fact look at them with a magnifying glass ? Personally, I want to know exactly what’s coming.

Furthermore, your censorship is oddly selective. Look at post #39. I personally have libertarians leanings. However, there’s a faction of libertarians who believe that the economic collapse is being engineered in a plot by freemasons, illuminati and “Jewish bankers”. Note #39’s reference to “USreal” and “CIA/Mossad. So regional racists are bad, but global racists are fine ?

That this stuff has found it’s way into a real estate blog shows how widespread it is. Let’s look right at it !

#75 timbo on 07.19.09 at 11:47 am


video of south park that will make you laugh….

#76 Downsized and Delighted on 07.19.09 at 12:17 pm

Didn’t mean to exaggerate by using the term market meltdown. No, you didn’t use that term, but you did say a U.S. style correction was coming our way. Do the homeowners in Ft Myers Florida think “meltdown” is an exaggeration?

I did not say that, either. My words about the market correction: ‘It may not crash with US-style velocity, but anyone who has bought recently, is buying, or does so in coming months will feel the sting.’ Be accurate. – Garth

#77 Boombust on 07.19.09 at 12:42 pm

#55-Mike B

We went to the casino in Coquitlam last night. (A 30 minute drive from Vancouver)


Maybe people are trying to “raise” a little cash?

Either that, or they have money “to burn”!

#78 rory on 07.19.09 at 12:49 pm

From zerohedge.com

“Jones Day’s Chrysler Charge To Taxpayers: $12,702,190.19
Chrysler’s little parade in bankruptcy court to make sure a few hundred thousand unionized workers retain their jobs for another year or two is finished. And here is the bill to you, dear taxpayer (or rather the first of many): Jones Day’s invoice is in the mail. Everyone take out their wallets and please split the $12,702,190.19 equally. After all, now that we are all benefiting form having a much leaner, much more competitive Chrysler around, we should all be happy to pay each and every lawyer who made it possible. ”

A little more outrage for us common folk …and this bill is for only one month …average cost $500 per hour for 27,209 hours for 30 days….unreal.

This means in one day one lawyer billed more than than the GDP – per capita (PPP) of the entire world …and this is taxpayer money and people wonder why we are in trouble …the rich get richer and the poor will revolt, surely…our std of living has no where to go but down …hopefully we can drag these bottom feeders down with us…lawyers, RE agents, financial anything…all same big pot …sorry …a costly bunch of overhead.

I am being a little broad scoped, but when you need this many people involved at these price points your systems are out of whack and too costly to carry …that is where we are.


#79 Peter Wiener on 07.19.09 at 1:36 pm

re #71 Maria stuck in the US

“My point is that even if we could sell and move, we’d never buy again.”

Just need a couple hundred thousand Canadians to think that way. They may just one day.

#80 Elle on 07.19.09 at 1:41 pm

THE DESERT IS BURNING AGAIN!! In my early childhood, my eyes would eagerly search the dry sage brush hills for signs of the Realestate Dreamers attempts at taming the desert of BC’s Okanogan. Amongst the thistles, splinters of wooden flumes and posts, that were pounded into the hillside to carry precious irrigation water to the new orchards below … are all that’s left of those particular RE dreams. The Okanogan still is hot and arrid, water source is a problem here … is any desert home buyer even thinking about that?? Was one forest fire, that had the potential to decimate the area, not enough to make people think about where and how they were building. In the DESPERATE pursuit, at any cost, of four walls and a roof … is it worth it? I am so sorry for your losses from this fire. Please don’t keep going back for more!

#81 timbo on 07.19.09 at 2:14 pm

port traffic is a damn good red-flag to Canadians on how the economy is really doing.




It is strange how exports and imports are dropping while homeowners still believe that housing prices will rise.

#82 wayupnorth on 07.19.09 at 2:27 pm

Fun with numbers!

Many here including myself are calling for 20% down and 3x income mortgages to become standard again as they have proven over history to be the only stable way of buying property. In the states any real financal people are calling for 35 year fixed interest traditional mortgages because the Alt-a and alt arm mortgages like our 5 year amortzations are causing the present collapse as well as in two years when many come up for renewal.

So lets take Garths $300,000 7x annual average income mortgage. This means that under any real mortgage system any house costing that amount would only be affordable to 25% of the top wage earners. A $600,000 house affordable only to the top 12% of wage earners and a $900,000 house affordable to the top 6% of wage earners.

What is affordable to Canadians? $150,000 house could be affordable to the half of us that are above average wage wise. $75,000 would be affordable to three quarters of us who earn more than minimum wage.

Based on those numbers anybody thinking house prices are going to remain where they are is certifiable because there are not enough working Canadians to afford the number of houses people think are worth $300,000 or more.

One thing these numbers show is that there is a huge market considering that we seem to all want to own our own houses. Any builder making $100,000 to $200,000 places to live could make a fortune. Instead of wasting money on votes what if our government spent stimulous money on guarenteeing $10,000 to the builder for every $100,000 or less unit sold and $5,000 for every $200,000 or less unit sold. For a while every unit would sell as fast as it came on the market and many people could get into ownership with a real chance of paying down their mortgage quickly and getting themselves into a good position to afford those $300,000 dream homes.

Oh you say your house is worth more han $300,000? I suggest you drink some more kool aid and change the colour of your glasses and watch more CNN. Just don’t try and sell your house for say……50 years or so.

#83 Barb ... reader, Calgary on 07.19.09 at 2:48 pm

#59 gold bugger

PET and NEP do not play huge in Alberta politics any more — time and reality have revealed that the hyping, spinning Alberta Conservative energy cabal overspun their slant to the point where no one trusts them anymore and no one believes their spin anymore save for a few sheep.

#84 CM on 07.19.09 at 2:51 pm

The HarpoCons are getting a lot of flack for spending our money to advertise themselves. They have a long history of that, what with the 10%-ers during the elections, and since. But the latest are their supposed “public service” announcements which are thinly veiled self-advertising. The one about the home-renovation tax credit is the one in the crosshairs in the last few days.

You all must have seen it, the young couple fixing up their house and saving their receipts to get their “up to” $1000-and-change tax credit. I look at those people and think that there’s no way they could live in a mortgage-free house. To get that much of a credit you need to spend $10,000. Wouldn’t that be much better spent paying down their debt? $5000 each in a tax-free savings account, even with low interest, gets them to the same place, if they have the money spare and the roof isn’t actually falling in on their heads.

Reminds me of Harpo and Flaherty telling everyone to go out and buy big screen TV’s with the savings they realize from a 1% drop in the GST.

Funny, if it weren’t so tragic. Nowhere in the “Aren’t the HarpoCons WONDERFUL” home-reno ad was the amount you’d have to spend. Accidental? I don’t think so.

My friend just sold her house. Closing in a couple of weeks. She’s holding her breath and keeping her fingers crossed. If that sounds painful, it probably is.

#85 TJ on 07.19.09 at 3:03 pm

Casinos are always packed when people are getting down to a hope and a prayer.

Look, it’s nearly 16% unemployment in the California and Michigan, if you use non-imputed number, and I will wager we are well over 10% in BC.
*If Oil drops much further – the layoffs at the Tar Sands will start to gather traction.

Some anecdotal evidence of trouble:

Some stores already have Pre Christmas like sale prices.

My buddy runs a small eatery here in Vancouver. He’s been open since late 80’s and he’s never seen anything like this.

“I can tell people are counting pennies – if I get a pizza order, I used to be able to sell them some Soft Drinks – not anymore.
If I run a special – that is the only time I see more traffic and more take out orders….”

Over in West Vancouver, an eagle eyed friend has noticed a Quiznos and a few other shops down,and shuttered. (*This is a ritzy part of the GVRD).

Have you been in a Hudson’s Bay Company, or a Sears lately?

I was at Home Depot – and didn’t have to wait in line at the paint counter. Never happens.

I have a friend who sells cars at a Honda Dealer here – he says it’s very slow. He still sells, but he is down to throwing everything at the customer he can get, to close the sale.
Even more frustrating, he has noticed more customers try to get financing and are getting turned down.
“If people can’t borrow money to buy a car, where is this Dealership going…..?
(*this guy is a tremendous sales talent and I could feel his pain and uncertainty).

Tourism and Hotels are sweating through a bleak Season. Everyone is praying that the Olympics will save them. *Sure – they’d do better if we threw them a bound binder of testimony from the Mulroney Inquiry.

Hang on tight bunky, I think it’s going to be a very rough Fall.

#86 David on 07.19.09 at 3:04 pm

It is probably too late, but I want to make a suggestion. Minimum down payment of 25% or 5% risk premium for CMHC insurance. That sounds harsh, but the collateral damage from the housing bubble collapse will be just as harsh and leave more casualties than financial prudence and proper underwriting standards could ever have done. This would clean the detritus of the housing bubble with a thorough Darwinian flush. Time for some cold shower therapy with respect to the housing bubble.

#87 Eduardo on 07.19.09 at 3:35 pm

Re 74 I agree.

In general I want to make a couple comments that need to be understood before we can have balanced discussions without East/West bashing. Keep in mind this is from a Western perspective. This is not in defense of ROWC’s post but in lots of ways J in 67 is offensive with the “you didn’t do anything” although it receives no attention.

Anyways, here it goes:
-Canada should not be ashamed of being resource rich and having a large resource based industry
-Countries with large resource bases can be more competitive globally if properly managed
-It is important for Canada to have a diverse economy
-Regional economies are bound to be specialized in certain industries
-Centralization/localization of certain industries can lead to greater efficiencies
-Resources do not extract themselves. It takes technical expertise which is not necessarily readily available.
-Manufacturing does not work by itself and also requires expertise and a strong business model
-Both industry that produce raw materials and industry that converts them to finished goods employ Canadians and are important part of a diverse economy
-All industries and economies are cyclical
-Energy prices will increase. This is a certainty.
-Canada has more recoverable energy in the ground than anywhere on earth
-These secure energy supplies will benefit all industry and consumers in Canada
-Canada has 30% of the world’s potable water and a large amount of quality farmland

All I’m getting at is that resource development/management is not easy and neither is manufacturing which is why both are in downturns currently despite the best efforts of management. Both need to be managed with a longterm view.

Ultimately, technical and business acumen and innovation combined with good leadership will be required to get us out of the mess. This is true on many levels: individuals, communities, companies, municipalities, provinces, all the way up to the feds. We can’t be scared of changing the status quo.

#88 Eduardo on 07.19.09 at 4:03 pm

Also, can we please stick to talking about what we know… Example: in 85 “*If Oil drops much further – the layoffs at the Tar Sands will start to gather traction. ”

a) anyone who knows about the oil sands would not call them the tar sands
b) the statement isn’t true in the first place because most layoffs have already happened. The worst was over and done with at 35-40$ oil and since NG has been so low for so long in addition to the royalty changes.

I’m with Garth… “Don’t exaggerate – it weakens your points. “

#89 T.O. Guy on 07.19.09 at 4:24 pm

Hey Garth
You said in your piece that RE goes up over a twenty year span but I remember the peak of the late eighties and the 90/91 recession. In the late eighties there were houses near my area going for $700-800 then the recession hit and those prices came down, today (housing bubble, low interest rates) those same houses are selling for $700-800. So if a person purchased back then and held for the last 18 years they actually show no capital appreciation. Do you think we’re in a similar state now or was the last housing boom a special situation and this time around it won’t be the same?

Good observation, and we could see an eerily similar situation. — Garth

#90 jess on 07.19.09 at 4:28 pm

•NHA MBS are exempt from non-resident withholding tax — an important consideration for foreign Investors and Canadian expatriates who would normally pay this tax.

#91 jess on 07.19.09 at 4:30 pm

very rough Fall …do you mean because of el nino?

#92 Soylent Green is People on 07.19.09 at 5:33 pm

For the US readers who are looking for change…

An Important Political Message From Peter Schiff




#93 Jmack on 07.19.09 at 5:34 pm


Top 25 affordable places to live in the states….Last time I checked, we had more land here. What would 100G get you in Canada??? Could you still get a house anywhere in Canada for 100G?…

You need to travel more, dude. — Garth

#94 Dan in Victoria on 07.19.09 at 5:42 pm

My wife just informed me that 6500 houses have been evacuated in Kelowna and that a few homes had been lost… our hearts go out to those people.But she was upset that in our time of need we have had to send one of our best fire fighting tools south of the border to make a living.Google you tube Martin Mars Performs for crowd.

#95 wayupnorth on 07.19.09 at 6:26 pm

Check out the Market ticker site and the u-tube “Main street yes we can” for a solution that Garth and others here have been preaching for a long time.

Then check out the three videos below for how delusional the U.S. media is right now and what is really happening.

This is just one of several sites warning that implosion south of the border is just months if not weeks away.

#96 dd on 07.19.09 at 7:15 pm

.#85 TJ

..*If Oil drops much further – the layoffs at the Tar Sands will start to gather traction…

Where have you been? The oils and NGas companies already sent thousands of people off home in late 2008 and early 2009.

#97 eddy on 07.19.09 at 7:17 pm

just to clarify a point about Toronto prices: between the late 80s and today, prices have, more or less, doubled.

Just to clarify: that is 30 years. What’s the inflation-adjusted rate of return? — Garth

#98 Bottoms_Up on 07.19.09 at 7:21 pm

More anecdotal evidence of what’s to come: my experience with deflation to date (everything seems to be on sale!!):

1) My Roger’s phone bill has gone from $50 to $30, and I now get extra long distance and an extra feature. My internet is now faster for the same price.

2) Alcohol. Both at the liquor store (wines are typically $1-2 off) and at restaurants (Kelseys: 2oz martini’s for $5; other pubs downtown Ottawa: 2 pints for $9 plus free oysters; draft and 1 oz mixed drinks for $3.50)

3) Car servicing. Down hundreds of dollars.

4) At Shopper’s Drug Mart: Allergy pills. Shampoo.

5) clothing at Moore’s is basically 2 for 1 or 50% off. I’ve even been given a $50 voucher!

Although I love all these ‘deals’, I’m concerned what it says about our economy and where we’re headed….

and this says it all (from #82):

“Based on those numbers anybody thinking house prices are going to remain where they are is certifiable because there are not enough working Canadians to afford the number of houses people think are worth $300,000 or more.”
I would like to see some real estate bulls post numbers to dispute this.

#99 bofh468 on 07.19.09 at 7:55 pm

#93 – Dan in Victoria:

The plane you see, the Hawaii Mars, is kept down in California as it’s contracted to the US Forestry Service. You can bet that right now, it’s not performing.

The other plane, the Philippine Mars, is kept at ready in Port Alberni.

The fires here in Kelowna are’t large enough for the Martin Mars planes. There are a bunch of Dash-8’s dropping retardant on the blazes as they are.

I think you’ll also find there’s probably a reluctance to bring in large bombers as these fires aren’t as remote as the Okanagan Mountain Park fire from 2003. These fires are near urban areas – buildings that they’re trying to save wouldn’t fare very well having 60 tons of water dropped on them.

#100 john m on 07.19.09 at 7:57 pm

#88 Eduardo on 07.19.09 at 4:03 pm

Also, can we please stick to talking about what we know… Example: in 85 “*If Oil drops much further – the layoffs at the Tar Sands will start to gather traction. ”<<<< lol well the layoffs have gathered traction!!!!

a) anyone who knows about the oil sands would not call them the tar sands<<<<<perhaps not they would probably call them the largest destruction of the world's environment in mankinds history!!
b) the statement isn’t true in the first place because most layoffs have already happened. The worst was over and done with at 35-40$ oil and since NG has been so low for so long in addition to the royalty changes.<<<<<<<<<< lol you really should take a serious look around…your living in a dream world financed by mother nature which will not be tolerated too much longer.sit back and listen you talk too much :-) :-) !!

#101 MarkArgentino on 07.19.09 at 8:24 pm

RE:#6 regarding “manipulating potential customers” I’m trying to educate them and tell the to read the negative (and postive) news, listen to the numbers, but my first pont was that as long as there is demand for real estate and the supply is limited, then prices will remain about stable or increase.

I also stated that although I cautioned my clients in 2002, 04, 06 and even 08, prices continued to rise.

I agree with you on the ‘real estate’ press machine, that TREB and CREA and others from our real estate industry almost always attempt to issue only positive press releases, turn the spin the market postive even if the months results are negative. I am ‘ashamed’ of the fact that the real estate industry attempts to manipulate the press into almost always believing that real estate prices and volumes of sales are ever increasing.

Again, and I stated that Garth and many others presented detailed analysis and facts and statistics and attempted to support the fact that we’ve reached the Zenith, I just don’t belive it. Even if our prices in the GTA or Canada drop 5 to 10% in the next year, it will not be the end of the world and prices will recover and increase beyond our current ‘zenith’, that was one of my points.

All the best!

#102 MarkArgentino on 07.19.09 at 8:38 pm

To Garth,

You are very sure of the market collapse when you say “it is absolutely inevitable that real estate has a troubled future” and I agree that money will not remain as cheap as it is today, but I don’t feel a collapse in the market the way we did in the late 80’s. This is not an investor fueled market, it’s an interest rate and greed and lack of common sense fueled market.

Yes, you are correct that people hold their mortgage for 3 or maybe 5 years and move on and the HUGE mistake they make is that they renegotiate their new mortgage on their new purchase back to 25 (or longer) amortization to afford the new payments. The banks will almost always persuade the buyer to go back to the 25 year amortization because it’s in their best interest to do so, figuratively and literally.

Yes, I agree that if you have little equity and can’t weather the storm, maybe you should get out now and buy something more affordable.

As I stated in my post to your comments about the market being at a zenith, “I certainly hope he is wrong” and that is my hope for everyone in Canada. Only time will tell and you can bet that I will blog back here and on my site again in 6 months or a year from now to update the progress (or regress) of the real estate market.

So Garth, seriously, if you believe that the housing crisis has not been avoided in Canada and that “It’s coming” are you selling your principal residence and your investment properties at today’s Zenith and then buying back into the market again after this collapse, in 1, 2 or 3 years or whenever we hit bottom after the imminent collapse? I’ll bet you’re not.

All the Best!

#103 BK IN NOVA SCOTIA on 07.19.09 at 8:49 pm



Follow the link. — Garth

#104 MarkArgentino on 07.19.09 at 8:49 pm

TO: #28 AM

Yes, I specifically started my post with “My 2 Cents Worth” thinking eventually someone would comment as you did and my point was that we are all entitled to our opinion and so are you and Garth, just that his opinion carries a little more weight and influences a few more people than you or I do :-))

All the Best!

#105 jess on 07.19.09 at 9:00 pm



#106 Dan in Victoria on 07.19.09 at 9:02 pm

Post #98 bofh 468 ummm…..Thermo gel. Look a little further into what the planes can do.May I suggest you watch you tube,Martin Mars thermo gel saves homes,LISTEN to the commentary,Watch the pop can bit,and look at the structures and plastic cup tests as the plane is dropping.Its some wonderful technogly that has been figured out by a bunch of loggers,and the original dream of Dan McIvor,Order Of Canada,Canadian Aviation Pioneer.

#107 CalgaryRocks on 07.19.09 at 9:09 pm

3) Car servicing. Down hundreds of dollars.

Canadian Tire is 100$/hour in Calgary for car work.

Also, 230$ bucks to change transmission fluid at minute lube. The guy said it was ‘special’ fluid. Haha. At this price it’s cheaper to cut on my consulting sideline and do oil changes profesionnally. I can make 1000/hour if I apply myself!!!

#108 Simon on 07.19.09 at 9:16 pm

The problem with “20% down and 3x income” is that all the players have done everything they could to drive prices up far beyond that level and no one would do anything, or create the conditions necessary to, adjust prices downward to that level. Far too much of our economy depends on keeping RE at inflated prices.

#109 905er & Spouse on 07.19.09 at 10:23 pm

RE:#33 Republic_of_Western_Canada

Maybe that is what Steven Harper is up to.

Is that why the Conservatives are supporting any petro-initiatives and doing all they can to undermine any industrial recovery?

#110 bofh468 on 07.19.09 at 10:38 pm

#101 – the other problem is refilling. The only place it can refuel is Sproat Lake, So at a cruising speed of 250mph (probably generous) it’s at least a three hour round trip for each refilling.

It is not practical as a suppression tool in the Interior. We do, however, have a bunch of Dash-8’s and DC-10’s which hold an impressive amount of water and are capable of refilling in Okanagan Lake.

#111 random guy on 07.20.09 at 12:50 am

re #96 … late 80s to today is 20 years, not 30

#112 Ottawa on 07.20.09 at 1:04 am

Things are looking pretty bad – maybe there is some substance to this Russian Prof who has been predicting the demise of the US for a decade.

Cool story and raises the practical questions of what we are going to do with all this land coming Canada’s way.

#113 taxpayer like you on 07.20.09 at 10:06 am


Heres a link for you


The bombers are not restricted to refilling at Sproat Lake.

#114 Gideon Sword on 07.20.09 at 10:18 am

That’s really strange. We’ve been recently at Lablaws (Forrest Hill). There was a MASSIVE sale (most items were 50% off). Coffee, tea, unensils, juice, etc,etc. I’ve been shopping at this location for 9 years and NEVER seen anything like that.
What is supposed to mean?

#115 KnuckleBuck on 07.21.09 at 2:46 pm

Hey Garth,
How many investment properties do you own? And how many of those have you purchased in the past 12 months?

You first. — Garth

#116 MarkArgentino on 07.21.09 at 8:27 pm

Hi Garth,
I’ve commented directly to you and a couple of others on this blog post and you state “Respectful, wide-ranging discussion on the topic of the posting is encouraged, and will not be censored” so not sure why my posts are not appearing…