Rotting in Toronto


Garbage could be the least of coming worries.

In the first 15 days of this month 4,437 houses sold in the greater Toronto area. That was a staggering jump of 27% over last July – when the world was bustling and we had no financial crisis.

In the same two-week period, buyers paid, on average, $394,750 for each of those houses, up 4% from the same month a year ago.

This is remarkable. Not only because real estate sales volume exploded by almost a third, not only because prices rose more than twice the rate of inflation, and not just because Toronto real estate has just achieved a new pinnacle of valuation. It’s incredible since we are in the worst recession since the 1930s, the industrial base of southern Ontario has been hollowed out, that 47,000 more people lost full-time jobs last month and governments are plunging the country into debt at the fastest pace in several generations.

What are buyers thinking? Or expecting?

A new report by the University of Toronto’s Rotman School of Management concludes the economy crashed by an annual rate of 6.6% in the last three months (10% is a depression). Ontario unemployment will top 10%, it says, and stay high for years. And the chief economist at High Frequency Economics says another 413,000 manufacturing jobs will be lost – which is 2.4% of all the workers in Canada. Already we have seen 221,500 factory positions eliminated in a single year.

Sadly, I’d say, most of these jobs will never come back.

But, it gets worse.

* I am told by bankers that virtually all of the new mortgages being written for first-time buyers have maximum 35-year amortizations.
* I am told by a CMHC analyst that the average downpayment in Canada (among all buyers), has collapsed to just 6% of the purchase price.
* The combination means a 10% drop in house prices in the next year or two would put all recent buyers into negative equity.
* And I am told by mortgage brokers that lenders routinely apply for high-ratio insurance to avoid appraisals of properties that are not worth the selling price, or to make unrealistic refinancings work. And it’s all approved.
* Our system of government-backed mortgage insurance means most borrowers are okayed, even for huge amounts, since the banks bear no risk. These high-ratio mortgages are securitized as mortgage-backed securities, of which there will be close to $400 billion by the end of the year and $1 trillion by 2011.
* This allows first-time buyers with a combined gross income of $100,000 to qualify for loans of $500,000.
* This has allowed Canadian house prices to rise to historic levels in the middle of a recession while US real estate has lost a fifth of its value in the past year.
* It has created a Canadian real estate bubble more significant than that rendered by the American subprime fiasco – which destroyed billions in middle-class wealth.
* And it is now all supported by artificially-low interest rates, which will not last.

“If the mid-month results carry forward,” says Toronto Real Estate Board president Tom Lebour, “we may see the best July on record.”

Remember this moment.


For Garth's latest podcast, go here.


#1 X on 07.20.09 at 8:36 pm

Yes, remember the peak…

So if we have a RE slide here in Canada, the banks would lose money if the homeowners stopped making mortgage payments (ie: lost their jobs, refused to make payments for a home in negative equity)….but if homes went down into negative equity what would happen to CMHC?

#2 Bobby G on 07.20.09 at 8:44 pm

Jim Morrison said it best

#3 Samantha on 07.20.09 at 9:17 pm

“What are buyers thinking? Or expecting?”

I read this entry and thought back to when I was young and wanted to do something or have something because “everybody else does it (or has it):

I recalled something my Mother used to say to me at those times:

“If everybody jumps off a bridge, are you going to do it, too?”

There is an incredible freedom of spirit that comes from not being shackled to the sway of public opinion, fads, peer pressure or herd mentality.

The chains these buyers are willing to wear for the sake of a house will weigh them down with far more than the weight of financial hardship. Those chains will end their freedom to enjoy life and crush their spirits when reality and disillusionment set in.

Buying a house shouldn’t mean financial slavery. Freedom is a precious thing and it is priceless.

Don’t jump off that bridge.

#4 john m on 07.20.09 at 9:26 pm

Wow what a frightening scenario………how can this be i wonder …are all the powers that be so consumed by greed for financial or political gain they overlook the inevitable or are they just simply stupid. ???

#5 Dragon Slayer on 07.20.09 at 9:35 pm

Public/herd mentality toward real estate is not surprising. Imagine the sentiment if real estate had gone down 5% yoy for the past 8 years? Everyone and their mother would think you’re crazy to buy. So, the reverse is true: everyone and their brother think you’re crazy not to buy.

However, we have the priviledge of foresight. Check Garth’s record–he wrote a book in 2000 telling people to invest in real estate, and wrote a book in 2008 telling people to get out of real estate. He’s been right before. Garth, thank you for your crystal ball.

Buying real estate in this economic downturn is foolish. Mortgage rates should be at 8%, and the average house in Canada at $220,000. We’re in for a crazy ride.

#6 Basil Fawlty on 07.20.09 at 9:44 pm

Most people just do not understand the dire financial and economic situation. They have lost the aversion to debt that previously exisited, and fail to comprehend the coming consequences associated with the falling US dollar. The total incomprehensible deriviatives market is estimated at over a quadrillion dollars when on and off book bets are tallied. This is simply insane and effectively means that many of the worlds largest banks are broke. Countries, States and Cities are bankrupt and more are added to the list weekly. Massive cutbacks in public services and government employment are occuring now in Europe and North America. While government and personal debt continues to increase.
There are ways to protect yourself, but the money-bunnies will start doing backflips and waterless bellyflops if the subject is discussed. Too bad, so sad.

#7 kitchener1 on 07.20.09 at 10:03 pm

Great write up Garth, when the CMHC bubble blows its going to be the BIGGEST scandal in the history of Canadian politics, mark my words.

Remeber Fannie/Freedie in the US, well thats the future of CMHC, great write up on the analyst web site, I have been following CMHC for many years, I never thought it would get to were it is today.

Love the stat about banks only adding 0.01% of the mortgages to their books from 07-09, talk about taking the contrarian view–they are pushing mortgages and RE all while only adding 0.01% to their books.
If you want to see what is really happening in the real world, FOLLOW THE MONEY and see where this leads.

The American-Canadian blog writer sums it up best with this quote from his blog

“At this rate, by the end of 2010 the Government of Canada will be insuring over $1 trillion in mortgages and loans or 77% of GDP”

Even a 1% default rate will mean the end of the way fiscal policy is written in Canada.
Everyone especially the 25 and under crowd forgets how many years of budget cuts it took along with the dreaded GST to balance the budget

Garth is right when he said that anyone under 35 is screwed, we are, our tax rate is going to hit 60% in the next 10 years to pay for all this foolishness

#8 Tim_in_Ottawa on 07.20.09 at 10:15 pm

Its not going to be pretty when the bottom does eventually drop out of the Canadian real estate market. I have told my friends my opinion about how a real estate bubble is being inflated but no one will listen. I suppose this opinion is wide spread as we have seen by the housing market record prices and sales. I may be wrong to believe that there is a link between housing prices and unemployment but perhaps I am mistaken.
In Ottawa, where the federal government is spending more than any federal government has ever spent, there will be cut backs in spending (i.e. – job cuts) and increases in taxes, otherwise we may all get a devaluation of the dollar.

#9 Investx on 07.20.09 at 10:20 pm

How is it that the Bay Street is engaging in the same risky practises like they did in the US? Ate they really that stupid or do they know something we don’t?

#10 Jeremy on 07.20.09 at 10:26 pm

Oh I’ll remember this moment indeed. I cannot believe how many stupid people there are in this world. What do they think houses will be worth 600000 700000 average across Canada one day. Maybe when I’m grey in 2040. These people are signing their financial death warrants. I’ll rent my 859 000 (Oak Bay Victoria BC) dollar duplex for 1100 a month thank you.

#11 LB on 07.20.09 at 10:45 pm

Hmmmm. If the banks are taking no risks on giving mortgages, and pay no interest to Depositors, while mortgagees can walk away and CMHC collapses in the process- who is going to be left holding the bag? Methinks only the taxpayer (via government bailouts) and cash Depositors whose money has been used for these mortgages in the first place.

#12 Chris no longer in England on 07.20.09 at 10:52 pm

I could buy a house, but I bought a canoe instead. Cheaper, more fun, lots of fresh air, plenty of uncertainty (will I capsize and get dumped in the lake?).

I left the UK six weeks ago and my shipping container still hasn’t turned up. It got sent to Singapore by mistake (arrived there yesterday). So I have a nice empty rented house, a car and a canoe. Am I bovvered?


#13 Joseph on 07.20.09 at 11:04 pm

Samantha’s blog entry #3 is exceptional. My determination to stay out of the frothy real estate market (here in Ottawa) has been steadily eroded by watching practically all of my peers buying better homes, making me sometimes feel extremely inadequate in providing the very best for my family. Though we often read that it is the wives that pressure husbands into buying homes they are not ready to take on, in my case it can be said that it is the wife that has kept me from buying into the “dream home” trap. More power to women the likes of my wife and Samantha. Sometimes us guys need to see that fortitude to hold us up when we are ready to jump off that proverbial bridge.

#14 Ghost of Tom Joad on 07.20.09 at 11:17 pm

Holy crap Garth! Most people are feeble-minded and pathetic and they are going to suffer for this. Your article proves this.

#15 Eduardo on 07.20.09 at 11:25 pm

What happens if rates stay super low for 10 years and inflation is allowed to take hold?

Pigs will fly. — Garth

#16 Nostradamus Jr's Analyst on 07.20.09 at 11:37 pm

Perhaps these young FTB’s were taking the sage advice of one Brad J. Lamb – Big City Joker and his top 10 list of how to buy a condo.

#1-7 seem like sound and reasonable, but #8, #9 & #10 really egg the dewey-eyed youngsters on in a way that would make Schwartzenegger blush.


#17 Nostradamus jr. on 07.20.09 at 11:39 pm

1/””We are in the worst recession since the 1930s, the industrial base of southern Ontario has been hollowed out.”” (Garth)

…Friends, astute Ontarians have been quietly relocating to Vancouver for nearly twenty years….shhhhh

USPS May Be Unable to Make Payroll in October and Retiree Health Plan Costs, Unions’ Letter to White House Says

July 19, 2009

On July 14, unions representing United States Postal Service (USPS) workers wrote the White House with “extreme urgency” asking for a meeting to address lack of funding for both employee payroll in October and health benefits for retired employees.

“[USPS] top executives are now saying that the USPS will default on a $5.4 billion payment to prefund future retiree health benefits on September 30, 2009. And its government affairs representative are now telling Congressional staff that the Postal Service may not be able to make payroll in October and will be forced to issue IOUs instead.”……..

#18 maridion on 07.20.09 at 11:42 pm

to John m (#4)

They are not stupid; my experience.

#19 Gregor Samsa on 07.20.09 at 11:45 pm

What Garth’s findings tell me is that most people are completely oblivious to the state of the economy. People are being driven by this twisted “Canadian Dream” that has sprung up (well not as much sprung up, as hard programmed by too much TV) that demands we own a property, and fill it with crap, and renovate it.

Here in Calgary there is already a glimpse into the future. Everyone and their dog has a basement suite or a third room to rent in their house or condo. There are literally hundreds of rental postings every day, some of them with a real air of desperation about them. What happens when the rental market is saturated, but you need to rent a room to pay your mortgage…

#20 wayupnorth on 07.20.09 at 11:47 pm

On your podcast you made a good arguement that house prices in the future will be tied closely to the economy unless the government continues its game of artificially keeping them high but there are few if any options left to do that. You also made a good point of the fact that pretty well all trade agreements will either be reopened and changed or ignored going forward in light of the major changes happening daily. At the end you were negative about the tide of growing protectionism which I disagree with.

I stated a few days ago that all economy is local whether your community, your region, provence, country or even your place in the world. In order for any economy to work you have to produce as much as you consume and to grow you need to produce more. We know the world cannot produce everything it needs anymore so our world community is a net consumer and only by finding ways to consume less can we rebalance the economy. Until this imbalance occurs it cannot grow to raise the standard of living overall.

Canada has unique problems in that we are big time net consumers of food and finished products while only selling huge quantities of resources for pennies on the dollar and a few manufactured goods still. This makes us huge consumers also as a country which can only be corrected by turning our natural resources into something before selling them, growing most of our food again and getting rid of the huge underclass of people in jobs that add cost to goods but no value, like salesmen, lawyers, accountants and their offshoots.

Every region of the country is rich in some resource but end up being consumers because we only grow 10% of our food and less then that of consumer goods and slightly more of manufacturing and construction products. All we need is a government to ecourage trade and movement of our resources as well as manufacturing accross the country to meet our needs. This may mean electricity production in the east and B.C. to supply the prairies oil production and shipment of that oil to refineries across the country to supply all of our petrolium needs for example.

In the U.S they are now looking at bulldozing communities or suberbs no longer needed because they no longer produce anything as well as run down housing in old neighbourhoods that has century old infrastructure that needs to be replaced before rebuilding anew. Every local community of any size will ultimatly have to come to grips wth whether it should continue or not whch will depend on saving existing businesses that actually produce something or start new ones. One thing becoming very apparent now is that service industry jobs of just about any description are going to all disappear if there is nothing in the community to bring in new money.

I don’t think we will see protectionism like the last depression but when we rewrite our trade treaties we need to make sure that there are common wages, environmental policies and quality and safety features in them before we can continue to trade with other countries. Almost every country except Canada recognizes that until countries like China bring their standards up to ours we have no money left to flow one way into ther market and we will have to shut down the flow of goods until they buy as much from us as we buy from them which requires a common minimum wage of about $10 per hour U.S. so that third world workers can buy our goods as well. This of course will also mean the end of “cheaper is better” mentality in our country and a return to a world of fewer but high quality goods.

#21 Nostradamus Jr's Analyst on 07.21.09 at 12:00 am

A brilliant BNN interview here with Brian Ripley, CEO of consulting group Oakes Ripley & Associates Inc and Pascal Gauthier, TD Bank economist – 13 minutes very well spent on the current real estate market and where it’s headed

Garth, if you haven’t watched this yet you’ll be very interested.
Hell, it may even remind you of your own media appearances.

#22 reno on 07.21.09 at 12:33 am

Fools rush in where angels fear to tread.

Is it any surprise that there is pent up demand that will take the bait of the current market.

Unless one lived through the ’30s Depression or was a student of economic history, how many would appreciate how prices can keep collapsing in a deflationary spiral.

Anyway, who is to say that the inflationists aren’t right? Perhaps all this money printing is having an effect just about now. In which case; leveraged, hard assets might just be the very place to be.

#23 mino3 on 07.21.09 at 1:08 am

With CMHC fanning the flames (insuring subprime loans), is there no end to the madness?

No seriously. With politicians gladly putting taxpayers on the hook for this ponzi scheme, what will it take to return to normal?

I lost faith in “the system” a while ago…

#24 LS on 07.21.09 at 1:10 am

The mind simply boggles… What else is there to say?

(Good thing I’m not in charge of this blog, it would be pretty boring).

#25 kc on 07.21.09 at 1:16 am

Hey Garth, you have any comment on this strange bedfellows? There were questions before in the press about how much of GS already owned the US government… well looks like Obama and company is really selling off the farm to pay for the them nukes. (ooops sorry, the war on terror)

“Goldman Sachs in Talks to Acquire U.S. Treasury Department”

“Sister Entities to Share Employees, Money – In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to Goldman spokesperson Jonathan Hestron, the merger between Goldman and the Treasury Department is “a good fit” because “they’re in the business of printing money and so are we.”

The Goldman spokesman said that the merger would create efficiencies for both entities: “We already have so many employees and so much money flowing back and forth, this would just streamline things.”

Mr. Hestron said the only challenge facing Goldman in completing the merger “is trying to figure out which parts of the Treasury Dept. we don’t already own.”
Goldman recently celebrated record earnings by roasting a suckling pig over a bonfire of hundred-dollar bills.”

#26 Happy Renter in North Van on 07.21.09 at 1:17 am

Garth, it will be much easier for main stream prognosticators to say (in 3 or 4 years)… “There’s no way we could have seen this coming… Who knew things could end so badly”… We’ve seen what happened in the US… You’d figure seeing how this movie ended in the US would give a teeny tiny bit of common sense… but alas, not even a rat fart’s worth of insight has crossed the tiny brains of our policy makers…

#27 Sam on 07.21.09 at 1:44 am

>>The combination means a 10% drop in house prices in the next year or two would put all recent buyers into negative equity.<<

but Garth when is this going to happen…!?!?? I see no chances so far.. :)

#28 Munch on 07.21.09 at 1:54 am

{golf clap for Garth}

Remember this moment indeed!

And remember those who were shouting the loudest!

There’s a special little corner of Hell reserved just for them.

Burn baby burn!

#29 Future Expatriate on 07.21.09 at 2:01 am

It’s simple. The latest gov policies are nothing more than locking the second and third class passengers behind the gates on the lower decks of the Titanic.

Making sure first class can get in the lifeboats unimpaired. Only THIS crew and captain fully intend to take the last lifeboats and only those locked below decks will be going down with this ship.

#30 JoeCalgary on 07.21.09 at 2:07 am

“From left field, Brazil, Canada pull money out of Treasurys”

(And, yes, I know that’s a strange way to spell that word.)

#31 kc on 07.21.09 at 3:07 am

2 Bobby G on 07.20.09 at 8:44 pm

Can you see the USA sitting across the table from China “now you listen here, and you listen good… you will lend us 23 Trillion becuase you need us” …. gotta love them yanks. However, what shape are Canadian banks really in, oh wait, of course they are good, CMHC holds the bag, and us taxpayers can bend over and take it when the shit hits the fan… gotta love the people who forget history and now we get to repeat it.


#32 mizzy on 07.21.09 at 3:16 am

Have a read of the blog article Garth posted in this post. The link is below. If anyone has any problems understanding how the Canadian housing market came to be quite so inflated, this article goes a long way in explaining it.

#33 Squidly77 on 07.21.09 at 5:12 am

The bloodbath is coming. Realtors have pumped the market yet again.
Families everywhere will lose big. Calgary home prices will drop, drop, drop.
There is a recession on right now and RE sales are exploding. The CREB’s henchmen at the Herald are pumping real estate.
Calgary is doomed as RE prices will nose dive by 40% by christmas.
That $500K home will be worth $300K. Merry christmas. Thanks Bob.

Whatcha gonna do at renewal?

tick tock tick tock

She’s gonna blow huge, Bob.

#34 crs on 07.21.09 at 5:36 am

I just came home from playing poker and all I can think is that home-buyers are on tilt….

It’s a good way of describing it, because their decisions are not just ignorant any longer, they are just plain stupid. It’s as if they are frustrated that what they have been fed for so long isn’t true so they are trying to force it for one last chance. Maybe, just maybe, what they have been working towards all these years isn’t a big fat lie fed to them by their baby-boomer elders.

Wake up… wake up… stop working overtime just to pay off your outrageous dreams of grandeur! All your doing in the process is distancing yourself from life. And paying the banks, the taxman, and the little people that do the things that you could do yourself given more leisure time.

Stop working for the sake of buying! Slow down, try creating something just for yourself. At the very least you’ll find a little piece of happiness in the process.

#35 Bottoms_Up on 07.21.09 at 6:07 am

“The global crisis is far from over, has only just begun, and Canada is no exception, Mr. Ferguson said in an interview before delivering a presentation to public-policy think tank, Canada 2020.

Policy makers and forecasters who see a recovery next year are probably lying to boost public confidence, he said. And the crisis will eventually provoke political conflict, albeit not on the scale of a world war, but violent all the same.”
What? You mean Canada’s not different and that Harper’s lying to us? That can’t be!!

#36 David Bakody on 07.21.09 at 6:12 am

Garth have you factored the early/semi retirement factor of empty Nester’s selling their homes and moving into apartments and taking part time jobs? I have noticed here in Dartmouth that new apartment buildings are filled prior to completion. New housing is almost at a standstill while well priced older homes ready to move into inside and out sell in a flash.

#37 Mike B on 07.21.09 at 6:24 am

The numbers in T.O. may also be skewed by large sales. Lots if those puppies. A large increase in POS properties may indicate banks want these dumpers off their books to boost cash reserves and to make hay while the sun shines. I still see some houses get sold then come back after the first buyer does not get a mortgage . Regrettably I see this mania continuing the flatlining till next year or two.. Good stuff will sell fast.

#38 pbrasseur on 07.21.09 at 7:09 am

For my part I’ve been saying for a long time that CMHC is equivalent to taking over from banks the risks associated to loaning, and when you do that you definitely screw-up the laws of the market that would normally balance this industry. It is this type of government intervention along with central banks low interest rates that are responsible for the current economic crisis.

Other countries including the US has similar schemes but force is to admit that (unfortunately) ours is particularly efficient. The mechanism is so perfect that market principles that would normally prevent people with so money to obtain such loans don’t seem to apply any more, even during a deep economic slump.

But that is of course an illusion, the market ALWAYS gets its ways in the end, in this case it means that the return back to reality from this unsustainable debt driven fiesta could be quite brutal.

One other thing I’ve been saying for a long time is that the greatest risks for our society come from politicians and their intervention in the economy. The CMHC and the likes which created this monstrous world wide bubble are a perfect example, yet the lesson is lost on most…

For a while I’ve been thinking that the RE deflation would not be as brutal in Canada as it’s been in the US, now I’m not so sure.

#39 POL-CAN on 07.21.09 at 7:34 am


in light of today’s topic via TAE:

Negative Equity Nation for 1 out of 5 Homeowners: The Psychology of the 10 Million American Homeowners with Zero Equity

I think that once we turn down again later this fall, it will not take us long to “catch up” to our southern neighbours.
With an average of only 6 % down, the current crop of buyers are fuc*ed pretty much from the start and never mind which way interest rates go.

I remember the last peak of 1989 and the bottom of 1996 well. People were walking away….

Garth, maybe a recap is in order?

#40 POL-CAN on 07.21.09 at 7:43 am

now banks are walking away from homes…

again via TAE:

Bank ‘walkaways’ from foreclosed homes are a growing, troubling trend

#41 X on 07.21.09 at 7:44 am

So if CMHC is short…the gov’t insures their loans right?

Which means we pay for it. Which would among other things destroy consumer confidence here, and probably the Harper gov’t, and raise our taxes even more.

#42 Anschutz on 07.21.09 at 7:54 am

So with all the doom & gloom regarding RE, what’s a person to do?

i recently sold my home in Alberta and moved back to Winnipeg. Although RE prices are not like Toronto or Calgary, they still seem high for the city. if I choose to rent and wait awhile to see how this plays out… what do I do with the cash sitting in the bank. I’m no expert but it would seem hard assets are the place to be in an inflationary environment. Would be very interested in knowing how best to protect what I have.

#43 Chris L. on 07.21.09 at 7:54 am

If you plan on renting your basement to cover your mortgage, think again. Listings locally have exploded over saturating the market driving rents down. For the first time in a half decade I considered raising rents, but I was defeated by low call volume. A search on popular free listing service revealed over 200 competing and mostly for basements. Hoped up on HGTV and unaffordable mortgages. I used to be in the minority and now (unfortunately) I’m doing what’s popular. Too bad for them I can afford to lower rents to meet the market. For most, they will need to keep rents high to cover costs of maintenance of all, including mortgage costs. You should have bought when it wasn’t cool, you fool! Now you should short sell and move into someone else’s basement before it’s too late! Interesting times and opportunities ahead for a few, for many, it could mean a lot of pain. Rents might go back to the stone age before we find balance.

#44 Happyplace on 07.21.09 at 7:54 am

I wanted to see a condo unit that I’d been interested in, so asked the agent to let me know the asking price before I made the appt. (fearing the worst). I was right – the same unit that was asking $289,000 only three months ago, now asking $369,000! The greed of people is unbelievable. Time to bail on Toronto.

#45 Cendrine on 07.21.09 at 8:14 am

kc, you were taken in. That article was from the Automatic Earth but if you had clicked on the red headline you would have found that it was from a website devoted to political comedy and satire. These days, however, truth can be stranger than fiction.

#46 dd on 07.21.09 at 8:18 am

…* This has allowed Canadian house prices to rise to historic levels in the middle of a recession while US real estate has lost a fifth of its value in the past year….

Ya … that is only for 2008, don’t forget to add in 2006 and 2007 losses.

#47 TorontoBull on 07.21.09 at 8:35 am

Garth, you are absolutely right that CMHC (easy credit) and low interest rates are keeping the real estate rolling in Canada. I am not that convinced that nominal interest rates will go up for some time though. If you look at Japan’s experience, intereste rates have been low for two decades now. Real interest rates are increasing due to deflation.
Now my question to all here is what can we do to prepare for the collapse that comes. If the US gives us a glimpse into the future we, the taxpayers, will be bailing out all the suckers that bought in the last 5 years.
What can we do to protect ourselves?

#48 Devil's Advocate on 07.21.09 at 9:24 am

Many are still living under the delusion that they are, as that TD Bank commercial said, “richer than you think” in as much as their homes have not fallen so much in value and their HELOC is still alive and well breathing on the life support of low interest rates. These people continue to take holidays, eat out and buy big screen TVs. Go to the malls and check it out. “Green Shoots” my ass. Government is pumping the system through monetary policy knowing all the while that a day of reckoning lies in wait on the horizon. But they don’t care about tomorrow, their mandate is four years at best, beyond which, should they be re-elected, they are hopeful that the Tooth Fairy will have visited and left a few pittance under their pillow that might be enough to carry them through a subsequent term.

I fear we have not seen anything which might remotely resemble that which the future holds in store for us. We are all too busy living in the present. Clearly this is so as best demonstrated in the mindset of today’s First Time Buyer who is not thinking about their financial future or if so is doing so in a foolhardy speculative gamble. I believe the chances of winning big in the lottery are better than averting financial Armageddon.

The future is not so unpredictable. Demographics and irresponsible spending, at both the personal and governmental levels, both have very predictable outcomes. The writing is on the wall clear and visible for all to see. People just don’t want to accept it and why would they – it ain’t pretty. Blogs such as this which describe the truths are constantly ridiculed by those who don’t want to accept the realities and offer little more than SPIN, hope, false proof of recovery given such never before heard of names as “green shoots” and “quantitative easing” because there is no otherwise validity to their argument.

It’s all a Con Game. A “confidence game” (persons of any level of intelligence are vulnerable to deception by experienced con artists. Confidence tricks exploit typical human qualities like greed, dishonesty, vanity, honesty, compassion, or a naïve expectation of good faith on the part of the con artist ) in the truest sense of the words. Instill confidence in the citizenship. Lull them into a false sense of security. Part those fools from their money for the good of the economy. Governments are the biggest crooks of all time. They don’t know what they are doing. They are like George Carlin’s skit on Religion . How can we trust them to know how to fix this when they didn’t see it coming in the first place?!?! Or did they?

Thanks for this most recent editorial Garth which so clearly explains the origins of this pending crisis.

#49 Eduardo on 07.21.09 at 9:24 am

Garth, you’ll be happy to know that I’m selling my condo into strength in the Calgary market.

#50 Nostradamus jr. on 07.21.09 at 9:45 am

# 41 X

>>So if CMHC is short…the gov’t insures their loans right?

Which means we pay for it. Which would among other things destroy consumer confidence here, and probably the Harper gov’t, and raise our taxes even more.<<

…hmmmm…So all Canadians guarantee CMHC and our current low interest rates…that makes us all business partners…doesn't it.

…hmmm X's 2

Friends, the strong Cdn Loonie guarantees low interest rates for a long time to come.

#51 smw on 07.21.09 at 9:48 am

For some central banks, mainly in Europe and Asia, resurgent inflation could force them to eye the use of higher interest rates to control rising prices.

#52 Doug from Calgary on 07.21.09 at 9:48 am

The new buyers using max amortization and minimum down must be thinking “what can I afford per month?”.

So moving forward (and looking back), a quick calculation on the mortgage calculator shows that a 1% interest rate change = 10% house price change to keep the same monthly payment (ballpark for typical 30/35 year amort.).

So maybe some upward room for prices still while interest rates incredibly low, then “10% price drop per 1% interest increase” when rates start to change?

#53 Devil's Advocate on 07.21.09 at 9:52 am

“When a Roman carpenter had finished building a new house, he was forced to stand under the doorway as the scaffolding was pulled away. If the roof ended up on his head, it was considered his punishment for erecting a dangerous structure. That way the homeowner avoided injury and the carpenter could never endanger another unsuspecting customer. We may have come a long way since those days, but when the roof comes down on the economy, the only people standing under the doorway are the poor fools who bought the place. The CEOs, economists and policy wonks responsible for the mess are already down the street, building a whole new development.”

#54 Larry on 07.21.09 at 10:02 am

Come on Squidly here are some bargains in Calgary
There is no recession here in Calgary even if we are risk takers
The bow river will be renamed the river of denial.
Garth you will never be invited to Calgary i’m afraid unless you fancy a cold one in my rented house in North Haven cheers.

#55 Farnsworth, Hubert J. on 07.21.09 at 10:03 am

I would very much appreciate if someone could explain the apparent disparity between Toronto and Vancouver rents. If anything, I’d expect Vancouver rents to eclipse those in Toronto on like stock. However, from reading many comments about renting over the last year on this blog, it appears as though Vancouver rents are substantially lower than Toronto rents. For example, renting even the most modest one-bedroom (450-650 sq.ft.) newish condo in downtown or midtown Toronto (with parking) can easily cost you $1400-$1800 monthly. Yet I repeatedly see posters in the GVA, where residential real estate is even more stupidly expensive than the GTA, claiming rents on such units for many hundreds less. Is Vancouver really more expensive to buy in, AND that much cheaper to rent? If so, what’s that about?

#56 Devil's Advocate on 07.21.09 at 10:16 am



#57 Andrew toronto on 07.21.09 at 10:34 am

Garth I heard on the radio this morning andthe annoucer said quote my words.. The reason we haven’t seen a lot of stimulas released in Canada is because Harper doesn’t believe in it and is using tactics in releasing it , because he suspects we would’nt need it , But will be there is case we do latter , so this huge defict everybody’s talking about, might not be has big…The radio annoucers opinion,,

Any thoughts of this theory ..I think it may have some merit, why use up all your bullets let everbody else use theirs first and see what happens, hold on to them for has long has you can. But that would be giving him to much credit..

#58 kc on 07.21.09 at 10:35 am

45 Cendrine

LOL, ok that was good for the laugh then, i was wondering why I had’nt heard anything about that one, however, at today’s strange world it could be more than true and wouldn’t surprise me in the least to wake up one morning to find that it happened.

thanks for the heads up, it was 1am when i read it last night.


#59 Don on 07.21.09 at 10:51 am

Check out this tear-down a few blocks north of Yonge and Finch in TO. $360k for a lot? And you have to pay to demolish the old building. I saw a “sold” sign on it this morning.

#60 VOODOO on 07.21.09 at 10:51 am

More con.

More spin.

“Policy makers said Tuesday that Canada’s gross domestic product would shrink 2.3 per cent this year, compared with an earlier estimate in April that the economy would contract 3 per cent.

GDP will expand 3 per cent next year, compared with an earlier call for growth of 2.5 per cent next year, the Bank of Canada said in its latest policy statement .”
I guess since their *estimates* say GDP will *only* shrink 2.3% this year and then miraculously grow by 3% next year means it *must* be true, and things are rosy here in Canada!!!

But tell me this: how do we come out of a 6% annualized spiral decline (which we’re now actually in) between now and December? Is housing going to prop us up?

#61 VOODOO on 07.21.09 at 10:59 am

Ooops, Canadians are driving more so I guess that means everything here is OK!

“This April, Canadian consumption of gasoline rose to an all-time high, even as the recession was still eating away at economic activity and gas prices were creeping up.

It’s another sign that the global recession has not been nearly as corrosive in Canada as in the United States, Mr. Cross said, and that employment and incomes are not declining as much here.”
have they even considered this could be due to people taking ‘staycations’, or driving around to look for work because they’re unemployed? The MSM is really grasping for strings, gasping for air, to prop up this bubbly, smoke-and-mirror economy…

#62 Fool me once... on 07.21.09 at 11:04 am

Interestingly enough, BNN is reporting the banks think we’re out of the woods, I just don’t get it.

#63 Downsized and Delighted on 07.21.09 at 11:26 am

Ok, so now you’re comparing our market to the U.S. You like to scare the bejeesus out of young couples (families) making their first home purchase – don’t you?

So is our market like the U.S. ? Not even close. At the peak of the U.S. upswing, everybody owned two houses (except for those who couldn’t afford one – so they just owned the one). But it was artificial demand that caused that market to go bust. (everyone wanted a second home in Las Vegas or whereever to make their fortune).

And you are comparing that to young couples in Toronto with great incomes but low savings financing their homes with longer amortizations? Apples and oranges my friend. These couples will stick out any market downturns and they will bring up families in nice neighborhoods in nice (not ostantatious) houses.

And everyone on this blog will be waiting for them to go bust. Don’t hold your breath!

#64 mto on 07.21.09 at 11:28 am

* I am told by a CMHC analyst that the average downpayment in Canada (among all buyers), has collapsed to just 6% of the purchase price.

Garth, I think this would have been staggering if true, but I believe the graph was misinterpreted. What it actually shows is the total equity accumulation in the house due to price appreciation alone (assuming a 0% downpaymnet). This does not reflect the actual downpayment made on the purchase.

The graph does show the price doubling in the past 7 years, but we already knew that real estate only goes up and up, having absolute no correlation with incomes. Worked well for the US… oh, wait, it didn’t.

#65 Dawn in Calgary on 07.21.09 at 11:52 am

Devil: That was Scotiabank’s ad, and they still run it — saw it before a movie last week.

In the ‘scary because it’s true’ category: Market Ticker’s post today

“I’m sorry, I can’t resist conflating Obama and Hoover.


This idiotic statement:

US President Barack Obama defended his administration’s response to the economic crisis over the last six months, declaring: “The fire is now out.”

“I think that we have stepped back from the abyss. I think we’ve put out the fire,” he said in an interview with PBS, according to a transcript released by the TV station.

Uh huh.

Mr. President, may I direct you to the following statements?

“I am convinced that through these measures we have reestablished confidence.”
– Herbert Hoover, December 1929

And, of course, most closely-related to your comment:

“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
– Herbert Hoover, President of the United States, May 1, 1930

Just as with the administration in 1929 and 1930, which refused to deal with the issues that had led to the crash in ’29 and thus provoked The Depression of the 1930s, government has this time refused to deal with the underlying cause of the collapse in 2007 through the fall of 2008 – the irresponsible granting of credit to persons who were unable to pay.

Just as in the 1920s asset bubbles were mistaken for “economic growth” and claims that the government and Federal Reserve had headed off the oncoming train were made.

Just as in the 1920s and immediately after 1929 those who have identified the underlying cause of the problem, both before it occurred and afterward, have been repeatedly ignored and denied a seat at the table of policy debate, while those who actually caused the collapse are those who are looked to for “answers.”

We know how this approach turned out in 1930.

Einstein tells us that one definition of insanity is “doing the same thing over and over but expecting a different result.”

Mr. President, with all due respect: Are you insane?”

#66 gold bugger on 07.21.09 at 12:00 pm

Wayupnorth writes: “…when we rewrite our trade treaties we need to make sure that there are common wages, environmental policies and quality and safety features in them before we can continue to trade with other countries. Almost every country except Canada recognizes that until countries like China bring their standards up to ours … we will have to shut down the flow of goods until they buy as much from us as we buy from them, which requires a common minimum wage of about $10 per hour U.S. so that third world workers can buy our goods as well. This of course will also mean the end of “cheaper is better” mentality in our country and a return to a world of fewer but high quality goods.”

Ahahahahahahahahahaha, choke, cough, ahahahahaha, breathe……

You think we’re just going to mandate that the developing world pay first-world wages to its unskilled labour? Shut our borders to trade until everybody else plays by OUR rules?

The only thing that Smoot-Hawley fantasy would result in is a dramatically LOWER standard of living for Canadians.

Just because I prefer $1 T-shirts, $2 ginch, and $500 washing machines does not prevent you from wasting your money on $45 hemp T-shirts made in Toronto or $2500 10-speeds made in Sherbrooke. And good luck with that $75,000 Chevy Cavalier. That’s your right as a Jim Stanford apostolic bone-head to overpay for domestic goods.

But don’t lay your “moralistic mumbo-jumbo disguised as sound economic policy” at my wallet.

Canadians have overwhelmingly benefited from trade. It’s not even debatable.

What’s sad is that your vote for the local Communist might cancel my informed vote, if we happen to live in the same riding.

#67 Enuff on 07.21.09 at 12:20 pm

Okay already, I get it (about 500+ times now!) real-estate bad, renting good. So what to do with any cash in the interim? Garth’s not fond of gold. Inflation is a possible threat due to the billowing government deficits that will need to be serviced by tax-payers.

I wonder how “stupid,” on the part of the government and business, this all really is?

The Tax-free savings accounts are almost too good to be true, unless there was a desperate need on the part of the banks to shore up their cash reserves in time for the current lending frenzy. Is our cash safe with the banks?

Hard to believe that Toronto can’t work out an agreement with garbage collectors. But then think how much money the city is saving during this walk-out, without appearing to be intentionally making politically unpopular cut backs in services.

If nothing is really as it appears then what’s a person to do? Head to the country and prepare for self-sufficiency like Garth?

Smaller communities know its members and look after each other. You’ll know you’ve left it too late when you’re stopped by 3 tractors, abandoned side-by-side across the main roads into town.

We have clearly identified the problem (over and over again) who has some proactive options/solutions so we don’t have to all feel like sitting ducks?

#68 Nostradamus jr. on 07.21.09 at 12:22 pm


…The Canadian Loonie continues strong vs the U.S. Dollar… 91 cents.

If the Loonie keeps its strength….Canadian Mortgage interest rates could even be lowered from here.

#69 wetcoaster on 07.21.09 at 12:30 pm

Garth, only more signs to keep guns out of the hands of Canadians.

#70 Bill-Muskoka (NAM) on 07.21.09 at 12:49 pm

And now for something completely different!

Mysterious, Glowing Clouds Appear Across America’s Night Skies

Longest Solar Eclipse of the 21st Century

Look UP (If you are in the area of the eclipse tomorrow morning) as this will not happen again until 2132.

#71 Future Expatriate on 07.21.09 at 12:50 pm

#64, Dawn in Calgary, to Obama: “Mr. President, with all due respect: Are you insane?””

I’ll answer for him, as he’s too “busy”.

“Let’s see Dawn, I was born in Kenya as first, a Kenyan citizen and secondly, a British citizen, I had to take on Indonesian citizenship to go to school in Indonesia and travel to Pakistan later (as US citizens were barred from entering the country there), the US requires Presidents to be natural born citizens, I’ve spend (at some counts) over a million dollars in legal fees keeping my real birth certificate and all my college records (where I took foreign aid as a foreign national) secret, Larry Sinclair’s book just hit Amazon and Borders claiming I smoked crack while he snorted cocaine and performed a sex act on me, twice, once in Larry’s rented limo and a couple of days later in a hotel room and I’ve never even bothered to try and refute it because I absolutely can’t…

Yes Dawn, there IS a Santa Claus, I’m NOT him unless you’re Goldman Sachs or some other in the club Wall Street whorehouse, and I’d guess you would have to say I am most definitely and irrevocably and certifiably insane because I thought for a single second I’d be a better more effective President than Hillary Clinton and that none of the truth about me would ever come out, and even if it did, you’d be too stupid to believe it with all the rest of the sheep. After all, you put up with George Dumbya Bush for eight years, didn’t you?

Next question…”

#72 613 Happy where I am on 07.21.09 at 12:55 pm

You would think the smell of all that rotting garbage would be plenty of people out of the mood to go house hunting…

Why people are still katowing to the god of real estate in the midst of a bad recession where house prices have only one direction to move has me shaking my head in disbelief… Are people really that naive???? Or do they have insider information about the economy that the rest of us don’t know about…

I tried to explain the Canadian economy to a British friend I met online and he can’t believe how dysfunctional it all sounds… he says we better be prepared to fall further and faster than the other countries have…

It is not looking good….

#73 Devil's Advocate on 07.21.09 at 12:56 pm

#66 Enuff on 07.21.09 at 12:20 pm

Patience… we know what the future holds in store, not necessarily Armageddon but a severe correction. In the meantime hold on to your cash. Opportunities will abound and available cash and good credit will afford you the preparedness to take advantage of them when they are most undervalued. Not this year, but next year you will clearly see that cash sitting in your account doing nothing was simply waiting not as a vulture but rather as caution against that which would otherwise deplete it.

Patience is difficult and might not result in profit so much as averting otherwise disaster. When all others are falling off the cliff you might then, having approached with caution, not be one of them. That in my mind is substantial reward enough.

#74 Two-thirds on 07.21.09 at 1:04 pm

“These high-ratio mortgages are securitized as mortgage-backed securities, of which there will be close to $400 billion by the end of the year and $1 trillion by 2011”

Who is buying these securities? It seems hard to believe that, after the mess in mortgage-backed securities in the States last year, investors will continue to have an appetite for these products.

Or do people around the world truly love Canadians?

Most of the time, when we travel outside North America, people assume we are Americans :(

#75 Mark on 07.21.09 at 1:17 pm

According to news 1130 this morning.. “Brace yourself for long queues at the checkout as we come out of the recession”


#76 David on 07.21.09 at 1:28 pm

Financial responsibility is so passé. Offload as much counterparty risk as possible, get the profits upfront and play the game of pass the parcel. Forget about actually saving up for a down payment or having an actual income that can support the costs and responsibilities of home ownership. That cool 6% average down payment barely covers realtor fees and conveyancing costs.
It was a great game while it lasted. Banks got a government guaranteed spread at no risk, buyers had no equity to lose in the first place and realtors got commission cheques up front regardless of the weak underlying fundamentals in the industry.
The day of reckoning is nigh and it will not be pretty.

#77 john m on 07.21.09 at 1:36 pm

Ah yes “things are different in Canada”…thanks Harper and Flaherty for telling us that over and over and over again. Well its only a matter of time till we find out how really unique we are. “Our Banks are solid”…well they sure as hell should be… how can they possibly lose when we the taxpayers will cover any loss and be denied any of the profits….hmmmmmmmm. Why H & F even gave them $75 billion for their coffers so they could pump out even more high risk mortgages secured by the taxpayers with the governments blessings and encouragement…..hmmmmmmmmm what a sweet deal .There will only be one group who are losers and that will be the taxpayers of Canada……. a loss which has the potential to be so staggering it could undo all the countries progress and standard of life since confederation. Its happening already around us…….

#78 Devil's Advocate on 07.21.09 at 1:43 pm

“Facts do not cease to exist because they are ignored.” Aldous Huxley

The core of Mencken’s social philosophy was relatively simple. He believed it is the nature of human species to reject what is true but unpleasant and to embrace what is obviously false but comforting.

Ignorance is bliss and the vast majority of our population chooses to be ignorant and comfortable believing in lies and SPIN. Greater fools abound in numbers far greater than you and I and we are at their mercy as they speed us toward that cliff in a vehicle in which we are passengers. As the story goes “When I die I want to go peacefully in my sleep as did my grandfather, not like the passengers who were in his car at the time”.

#79 Mike B formerly just Mike on 07.21.09 at 1:59 pm

There is a school of thought that the western world has put itself into a similar situation to what Japan did for the past 10-15 years. Banks are nationalized or supported.. rates are ultra low… gdp will hover around nothing …and real estate values slowly erode. I do believe that real estate has had its day but also feel that the alternative is to wait it out which could essentially take many years . Not everyone can do that and many intend to keep any home they “buy” for a minimum of 7-10 years… Condos… well that’s another thing… designed to be bought and sold… a broker’s dream world would be nothing but condos around 500-900 sf..
If you keep a house over 7 years you likely won’t make much money given todays retarded prices but you also might not loose money unless you are mortgaged to the you know whats. Toronto is a runaway train of insanity and who knows when it is safe to jump on OR off..

#80 Dawn in Calgary on 07.21.09 at 2:08 pm

Bank of Canada tantalizingly close to declaring recession over, brightens outlook

By Julian Beltrame, The Canadian Press

OTTAWA – The Bank of Canada has brightened its outlook for the Canadian economy, saying Tuesday it now thinks this year’s downturn won’t be as deep as previously forecast and 2010 growth will be stronger.

The bank did as expected in keeping its key policy rate at the historic 0.25-per-cent low and repeating a pledge to keep it there until the spring of 2010.

But in a surprising move, the central bank said it is reducing the amount of money it is making available to chartered banks in order to support borrowing and lending because the need for such extraordinary measures is waning.

And it came as close as it has ever done to predicting the end of the most severe recession since the Second World War.

“There are increasing signs that economic activity has begun to expand in many countries,” the central bank said in an accompanying statement.

I give up. I’m not strong enough to argue against this any longer. It’s tiring, and I’m tired of being tired.

Where do I sign for my 5% down/35 mortgage? The value of the houses can only go up!

#81 VOODOO on 07.21.09 at 2:15 pm

Between 1996 and 2008, the population of Canada grew 12.4%.

During this same time period the supply of dwellings INCREASED 25.5%.

Thus there is a glut of product out there. But guess what (#62) Downsized and Delighted? This glut is likely offset by the proportion of Canadians that own more than one property!!

33% of 12.4 million dwellings are rented; thus 4.1 million dwellings are either 2nd/3rd/4th properties for owners, or owned by corporations. Thus I am confident not more than 4.1 million Canadians (families) own more than one home. (12% of our population)

What was the ratio in the US before their crash??

This information is from the pdf file below, release in June, 2009:

#82 JoeCalgary on 07.21.09 at 2:30 pm

#65, gold bugger, I’m with wayupnorth on this one. Those of us who once knew quality and product safety and want it back see the coming depression as a way for that to happen.

Are you thinking that none of the contaminated gluten that killed and injured pets entered human food products when 800 tons of it was imported? I guess you missed the articles about chloroform, a carcinogen, being used in blankets and undergarments to prevent wrinkling and, if you did see them, assume that would never happen to t-shirts.

As for the $500 washing machines and their fellow large appliances, did the exploding refrigerators with their faulty electronic components fall under your radar?

Keep on using the liquid soap that gives hand rashes and cracks and the toothpaste that causes sores near the mouth; they, too, are so nice and cheap! An insider’s book might give you an idea of exactly how those cheap products have evolved:

Garth’s blog is all about wise ideas for financial security; wise ideas for personal use items beyond large financial investments come in helpful as well. “Penny-wise and pound-foolish” is as relevant today as it has always been.



#83 JoeCalgary on 07.21.09 at 2:34 pm

Sorry, I take that back.

It was the laptops that exploded, not the refrigerators; the latter just started house fires.

#84 Keith in Calgary on 07.21.09 at 3:09 pm

So today the circus performers who run the Bank of Canada kept their .25% deposit rate the same, and said that we will start come out of the recession within 18 months +/-…….


How can anyone with half a brain believe these morons ? Apaprently, according to them, a rebound in business and consumer confidence will do it.

Here’s a hint……consumers in Canada have more debt than our American brethren and are defaulting on it at much higher rates. A dramatic shift in consumer thinking as it relates to spending has also taken place…….

#85 jess on 07.21.09 at 3:12 pm

investors flip these just like people flip houses . it keeps the fee factories busy.

NHA MBS investments offer investors the liquidity associated with an active secondary marketplace. (The securities can be bought and sold readily through Canada’s financial industry.)

” MBS are exempt from non-resident withholding tax — an important consideration for foreign Investors and Canadian expatriates who would normally pay this tax…
Through NHA MBS, the Government of Canada provides you with the opportunity to invest in housing. This, in turn, will benefit Canadians as well as help secure your own future financial well-being.”

#86 jess on 07.21.09 at 3:34 pm

Bernanke told the panel that paying interest on the reserves banks hold at the Fed would play a key role in helping the central bank tighten monetary conditions when the time comes. By increasing the amount of interest it pays, the Fed can encourage banks to park excess cash at the central bank.
The Fed’s monetary policy report detailed a number of other measures that Bernanke also outlined in his newspaper piece.
The report said the Fed could arrange so-called reverse repurchase agreements with financial firms. The Fed would sell securities from its portfolio, taking cash out of the system, with an agreement to buy them back later at a higher price.
It could also offer “term deposits” similar to certificates of deposit to banks. Bank funds held at the Fed in such instruments would not be available for lending.
In addition, the Treasury Department could issue securities and leave the funds on deposit with the Fed, or the Fed could sell some of the securities it has accumulated.

#87 The Coming Depression on 07.21.09 at 3:37 pm

Hyperinflationary Depression Remains Likely As Early As 2010

#88 Fencesitter on 07.21.09 at 3:37 pm

Hi Garth – love the blog and discussion.

I am interested in your take on the announcement today by the BoC keeping rates at 0.25% till mid-June 2010 (if the $ co-operates) – and improving their growth projection up to 3% growth in 2010. Impact on housing market and how many grains of salt this is worth?

#89 Shifty on 07.21.09 at 3:39 pm

Went to renew my 18 month 4% term savings account at the bank the other day. New rate 1.5%. So I inquired what are people doing and the bank clerk said they are investing in the stock market. I’m off to Home Depot to check the cost of a home safe.

#90 Nostradamus jr. on 07.21.09 at 3:51 pm

Bank of Canada tantalizingly close to declaring recession over, brightens outlook
Tue Jul 21, 12:50 PM
Julian Beltrame, The Canadian Press Email Story IM Story Printable View
By Julian Beltrame, The Canadian Press

OTTAWA – The Bank of Canada has brightened its outlook for the Canadian economy, saying Tuesday it now thinks this year’s downturn won’t be as deep as previously forecast and 2010 growth will be stronger.

…Garth…perhaps you haven’t taken into account the strength of the Loonie vs other currencies and the relative safety Canada provides its citizens vs other countries who are about to begin warring with each other.

#91 Nostradamus Le Mad Vlad on 07.21.09 at 4:42 pm

Satan and I had an enjoyable, free-spirited debate last night, with ideas bounding back and forth. I asked how life was treating her; she raised her claws and simply said,

“The universe is unfolding as it should, all things are in their rightful place and there is nothing new under the sun.” I persevered and asked why she had chosen last night to interrupt the ‘net (hence no posts from moi).

She gaily laughed, saying some friends had imbibed a little too much, thus letting their hijinks become involved with, and messing up other peoples’ lives. She apologized, apologies accepted, we bid each other adieu and went on our separate ways.

BTW, to the ladies here, he says hello; to men, she says (in a very sexy, sultry tone) hi and to sheeple — Watch Out Below!
#7 kitchener1 on 07.20.09 at 10:03 pm — “Even a 1% default rate will mean the end of the way fiscal policy is written in Canada.”

#9 Investx on 07.20.09 at 10:20 pm — “. . . or do they know something we don’t?”

#64 Dawn in Calgary on 07.21.09 at 11:52 am — “. . . declaring: “The fire is now out.”

Neville Chamerlain said roughly the same thing to the Brits in 1938, and that turned out well, didn’t it?!

As mentioned in prior posts, it is a well-designed pre-planned takedown, not only of fiscal means, but many other parts as well, such as increasing violence, robberies, etc., all done by people who normally would be working hard, living reasonably sensible lives and generally getting along with one another.

But these are no longer ‘normal’ times any more, as there is no such thing as normal. Halliburton seems to be a spot of bother, so listen to (Dick Cheney) the war drums beating louder. WW3 is not too far off, now.
“. . . another 413,000 manufacturing jobs will be lost – which is 2.4% of all the workers in Canada.” — This is where those jobs are headed —

“. . . government-backed mortgage insurance means most borrowers are okayed, even for huge amounts, since the banks bear no risk.”

If the banks bear no risk, then who is / are the govt.? YES! SHEEPLE ARE! AND SHEEPLE DON’T REALIZE IT!

But we are not sheeple, so there has to be an opt-out clause for sensible folk like us somewhere in the Constitution! Why should we be held responsible for someone else’s cock-ups?

“. . . of which there will be close to $400 billion by the end of the year and $1 trillion by 2011.”

The previous couples who asked questions as to what they should / shouldn’t do: Remember Bernie Made Off With Billions, Bre-X, Nortel, Enron, etc. They were all too big to fail right, so where are they now?

The best mortgage is a dead mortgage. For those about to jump in the deep end of being a slave to a bank, swimming lessons are highly recommended. Or life-jackets.
The only way a person gets swine flu is if it is injected. As Baxter already had this vaccine pumped and ready to go the previous year, here is a hypothetical question: Was the swine flu added during the mixing of this cocktail? Commentary at the start of this clip is good.

By now most of you have guessed that I am not going to bother with having a shit shot. There are better things to do in life, and this is one of them.
In case anyone hears differently from the controlled m$m. Comment following by—new-atomic-chief

“Under the Nuclear Non-Proliferation Treaty, signed by both the US and Iran, Iran has a legal right to build nuclear power stations. Under Article IV or that same treaty, the US is OBLIGATED to assist Iran in building power stations. If the US were in Iran, pouring foundations and helping to lay the pipes, then we could be assured of the power station’s peaceful intentions.” Israel has never signed the NNPT.

#92 David Bakody on 07.21.09 at 4:56 pm

From CBC News …..

Bank of Canada ups economic outlook

Could it be that the banks have a $$$$$ interests big time in spouting off good news to encourage customers and justification for bonus money? nah never! and the media supported by Senators Wallin and Duffy would also agree no doubt.

#93 Einsam Solo on 07.21.09 at 4:57 pm

I know two couples who have recently taken the plunge into home ownership. They have previously been bankrupt as individuals and as couples, but somehow they qualified for mortgages.

They are not concerned about the potential crash of home values since they believe the worst that can happen is to go bankrupt, go live with the folks for a while then start again.

I guess bankruptcy doesn’t have the stigma attached that it once did.

I should mention these couples never keep a car longer than three years before they trade in on this year’s model.

So have I wasted my life being a frugal, stingy, tightwad miser? Maybe I should live it up and go bankrupt.

#94 wayupnorth on 07.21.09 at 5:19 pm

#65 gold bugger
Rather than go into a long rebuttal I will agree with you that I have had a fantasy of Fair trade since the first free trade agreements were signed by the corporations. I saw then that they all missed one feature namely any common wage or safety and environmental standards. Just like I predicted last year Obama’s sudden interest in global warming is only to force changes to world trade to benefit America and any country that goes along with it. Notice how Chna is no longer protesting but is frantically buying up resources ahead of the meeting and working overtime to clean up their act and get new alternative energy products rolling out of their factories today not tommorrow? The fact that the States can’t find a bottom to the real estate market because the only bottom to wages is 1 cent an hour leads me to beleve that some sort of world wide minimum standards will be looked at fairly soon in order to create a real bottom. If you bothered to read up on China’s problems which are greater than our own you would realize that their only way out is to raise wages considerably to build a local economy as exports dry up.

FANTASY… In 1940 it was fantasy to think man would go into space and stand on the moon.

In 1840 the idea of everyone lighting their homes with something other then fire was a fantasy

In 1740 the idea of travelling faster than the fastest horse was a fantasy

Lets try a new fantasy. Dragging around your slab of gold and having a merchant shave off a piece for every purchase. Wait we tried that a couple thousand years ago and it usually ended in bloodshed and a lot of dead people. Nope can’t get my head around that one so I think I will stick to my own fantasy.

#95 Lance on 07.21.09 at 5:44 pm

We’re sucking the last few dewy-eyed home buyers out of the marketplace by offering them mortgage terms that will financially enslave them for the rest of their lives… and when they’ve bought houses, there will be no one left lined up behind them to buy.
Last year I was figuring the Canadian housing marking was due for a 10-20% drop. Now I suspect it’ll be much more like 40-50%… and take a good 10 years to find a bottom before prices even *think* about going higher again. Get ready for a long, protracted real estate bear market.

#96 Dave on 07.21.09 at 5:57 pm

NOBODY, I repeat, NOBODY, ever had their own version of “Obama and the Goldman Sachs boys” running the world’s largest economy at the time.


You need a session with Mad Max.

This group will not only repeat the worst mistakes of the past; they will outdo them by all possible measurements of degree.

According to plan.


and prior to Obama and Goldman Sachs there was an economy that never ever saw post bubble contraction like it, but in that instance, the same thing transpired……………DEFLATION

everything points to deflation. There was nothing ever like the 1929 depression to the people of 1929. The 1929 depression was the biggest. During that time, some people like yourself today, assumed hyperinflation would be the end result – they were wrong. The end result was deflation from 1929-1937.

have fun trying to disprove history

#97 Greg W., Oakville on 07.21.09 at 6:02 pm

Hi Garth, FYI July 21, 2009 5 1/2 min youtube update by Dr. Ron Paul regarding his effort to audit the Fed through HR 1207

#98 Drew on 07.21.09 at 6:02 pm

Dawn In Calgary – Just be a little bit more patient. Sooner or later the central bank is going to have to say uncle and start increasing interest rates back to more normal levels. It’s not going to be pretty when this bubble bursts and these high-yielders who are caught up in the current feeding frenzy get blown out of the water.

#99 Dan in Victoria on 07.21.09 at 6:04 pm

So I haven’t got around to this before,I read day after day of people carrying on. What about this? What about that?I’ve been following this blog for just about a year.I can’t ever recall anyone saying Hey Thanks this worked out for me.I thought things were getting pretty sketchy economically last summer and early fall,winter.I can’t remember the date, or Garths post but his prediction of lower interest rates tipped my decsion to change my normal investment stragety.Without getting into details it nearly tripled my investment income,Also paying attention to Garth and a couple of other bloggers on here made me think of a diffrent way to go about something else,savings of 350 bucks a month.So pay attention to the message.(And PS if you make a little extra help someone out)THANKS Garth

#100 Jeff Smith on 07.21.09 at 6:22 pm

#5 Dragon Slayer on 07.20.09 at 9:35 pm Public/herd

However, we have the priviledge of foresight. Check Garth’s record–he wrote a book in 2000 telling people to invest in real estate, and wrote a book in 2008 telling people to get out of real estate. He’s been right before. Garth, thank you for your crystal ball.

OH yah I remember that book. It was titled ‘the strategy’ or ‘the plan’ or something like that. I think it might have been published in 1998 or 1999 instead of 2000
Buying real estate in this economic downturn is foolish. Mortgage rates should be at 8%, and the average house in Canada at $220,000. We’re in for a crazy ride.

I have always advocated having a diversified portfolio, and one way of achieving that is trading real estate equity for financial assets. Canadians gamble mightily by putting over 80% of their net worth in one address on one street. — Garth

#101 MenWithHats on 07.21.09 at 6:32 pm

What Carney,Flaherty and Harpo know about economics would fit in a ,very,small thimble .
Carney is beaking off because he likes the sound of his head ratteling .

#102 bobtugnnut on 07.21.09 at 6:46 pm

if you look at this site from a credible guy in Van

his ” plunge o meter ” shows that by 2015 average price in calgary will be $265,000.

Garth, with this information, when do you buy? If you expect a price drop from the peak in Calgary of 15% to as much as 30% well, all of Calgary has already dropped the 15% and some areas have dropped the 30% would this not be a good time to buy then? Please comment…

#103 Nostradamus Le Mad Vlad on 07.21.09 at 7:19 pm

Soon, all of us will expire. Here is a look at The End Of The Universe! —
Two-minute clip about what I said earlier — the pre-planned fiscal and other takedowns. —
This is one of the drawbacks of living on the west coast. —
Is there a lesson for Obama and Harper here? One may hazard a guess in the affirmative!
Things are moving forward very quickly now! Excerpt and comment from below. —

“It is increasingly clear that WHO and Baxter are just elements in a much bigger criminal organisation that is moving forward in a synchronised and coordinated way to fulfil the “elite” agenda of global population reduction in the coming months and years while putting in place a global government of which WHO will be an arm.”

“The US Government has declared it illegal for people harmed by the new vaccine or the families of those killed by the new vaccine to sue either the government or the vaccine makers.


#104 El in Edmonchuk on 07.21.09 at 7:48 pm

Crazy, contradictory times we are experiencing up here in Edmonchuk. I screwed up big time in 2005 by selling my condo due to terrible neighbours and condo board, tried to take my time to find another place (vowing NEVER to live in an apartment again, ever) while staying with relatives, saw the market go up 40-50% over 2006 losing six bids and finally walking away from it all. All at the ripe ol’ age of 40.

Well, 4 years later (age of 44 sigh) I nearly got a great loft last fall but listened to a local ‘expert’ with many ‘friends-in-the-know’ (developers, real estate people) who warned him there would be a bloodbath here in spring/summer of ’09 with prices dropping another 20% due to oversupply so DON’T BUY THE LOFT! So… I didn’t …

Well, here I am, mid-summer of ’09, in good ‘ol Edmonton, the world’s in a great recession, prices continue to drop all over the civilized world and there is absolutely nothing, nada, nyet of value in a decent price range (for me, single income of about $65k, looking at a $230k purchase, maximum) in this city. And I’m not referring to the 1960’s style woodframe walkup that so dominates this ‘average’ city (it really isn’t that great a place, crappy location …) that are affordable but terrible buldings (and apartments to boot). I checked MLS listings today (as I have everyday) and I swear that crappy low income townhomes (selling for, yes, $90k in 2005) that were asking $230k a week ago are now back to the $270k range!

At my age I’m beginning to think that I’ve blown my chances for ever owning real estate again and will be stuck paying $1100 rent for the rest of life (today’s dollars) in a crappy walkup in this average city. And, I really need to get out of my current place and vowed to have signed papers by the end of summer, getting back on my feet and not having a mortgage, etc. that eats up over 60% of my income – ain’t looking that way and time’s passing me by.

What do I do – this has been an incredibly frustrating experience and, regardless of what people are predicting here, I really no longer see the light at the end of the tunnel (I was sooo convinced four months ago that housing would be affordable here – nope). The msrket’s gone berserk here due to the low rates (of which I have a 3.5% approval – but NO decent housing).

#105 john m on 07.21.09 at 8:25 pm

All i have to say at this point in history is………..i remember when you Garth stood up in parliament and objected to the sub prime mortgages and voiced your one stood alone…….a very sad day for our country! Some support from the “sheeple” would have changed our future………Time to “suck it up sheeple”….we will all pay for that day and the lack of courage of our “sheeple” representatives…………christ does this country need a change!!!!!!!!!!!!!!!!!!!

#106 dd on 07.21.09 at 8:27 pm

#103 El in Edmonchuk

…At my age I’m beginning to think that I’ve blown my chances ….

El, housing is still too high compared to salaries (40 years old or not). Buy when prices are reasonable to common metrics. Why buy now to lose 40K in two years? Focus on value not time.

#107 dd on 07.21.09 at 8:33 pm

.#89 Nostradamus jr.

…Bank of Canada tantalizingly close to declaring recession over…

Ya, this is the same BOC that had to pull back the rosy prediction at the start of 2009.

…Garth…perhaps you haven’t taken into account the strength of the Loonie …..

Ya, the housing is different here because house prices always go up on the North Shore.

#108 Gord In Vancouver on 07.21.09 at 8:47 pm

Online test – 5 key indicators to help you determine whether you’re living beyond your means.

#109 john m on 07.21.09 at 8:50 pm

Curiously enough while the future of Canada is in dire straits..desperately in need of some serious guidance,the Harper government has filled our mailboxes with 10% about the “long gun registry”??? A farce i agree but is this the time and place to be spending their time trying to create a popularity poll when our whole democracy is headed to hell in a handbasket??????? —SHAKE YOUR HEADS SHEEPLE-ITS ALL FOR POWER –FK THE PEOPLE OR OUR FUTURE……….AND WE ARE GETTING FK’D

#110 Greg W., Oakville on 07.21.09 at 9:27 pm

Hi Garth, You may find this radio talk show interesting. link to CBC radio show ‘Ideas’ that was on tonight 9-10pm with a different take on globle climate change (just to muddy the water), and an economic link/angle too it.
(I assume you can down load it in a few days??)

Tuesday, July 21
“The science is settled” is now the mantra of climate change activism. Those who disagree are either in denial or in the pay of an oil company. But long time environmentalist and energy activist Lawrence Solomon says no, the science is not settled. He talks with Ideas producer David Cayley.

#111 Kelly McMae on 07.21.09 at 9:33 pm

#65 gold bugger “Canadians have overwhelmingly benefited from trade. It’s not even debatable.”

I’m curious to hear in more detail how we’ve all ‘overwhelmingly’ benefited. Please share some details and examples.

#112 Patiently Waiting on 07.21.09 at 9:37 pm

El in Edmonchuk,

We’re all getting older and that sucks. But why beat yourself up over whether you own or rent your apartment?

I sort of get when young families with kids go all ga-ga over needing a place of their own. They can paint the kids rooms, install a swing-set and have pets. But beyond that, what is the big deal about owning?

Renters don’t answer to a condo board, just a landlord. I’d much rather deal with a decent landlord. The landlord will also come around to fix or replace things. Renters can also easily move away from terrible neighbours.

Is renting so bad?

#113 john m on 07.21.09 at 9:52 pm

#103 El in Edmonchuk on 07.21.09 at 7:48 pm .sit back and wait EI…time is making you money and saving you from disaster

#114 Future Expatriate on 07.22.09 at 12:45 am

#95 A Depression is a Depression is a Depression, whether it be a deflationary one, a hyper-inflationary one, or a hyper-stagflationary one like the one we’re in now that’s worsening.

Things are not going to get “back to normal” or ever get better for decades.

#115 Small Business on 07.22.09 at 1:24 am


Don’t you dare buy a house… I want to buy at some point and I refuse to enter the market until a standard home goes for 170,000-200,000 in the GEA.

The money has got to run out at some point. This ridiculous house of cards cannot stand forever.

#116 El in Edmonchuk on 07.22.09 at 9:44 am


Who wants to pay rent to live in a crappy walkup all of their lives? When oil prices rise again (and they will) this city will be as crazy as it was last year – actually continues to be. I really would never know there was a recession in Edmonton, restaurants and bars are full, malls are very busy, the traffic seems to be getting worse. Seriously – when you reach this age panic sets in. Have you tried to find decent accomodation for under $1300 in this city? Please guide me if so.


Not sure if it’s going to happen amigo. You’re talking a 30-40% correction from today’s values. I’d say we may see another 10% at most but who really knows? The fact remains that the pickings are very slim for an ‘average’ home (what does that mean anymore BTW?). Houses in the crime ridden Alberta Avenue area are still asking $240-$280 and it’s my opinion that are’s only getting worse with crime.

Have a look at this beauty on 97 st. and 106 ave. for $240ish:

If you know this area at all, well, I don’t need to dwell any further abut the price.

I do agree about this place being very overpriced still for what it is. So frustrating.

#117 Mark on 07.22.09 at 10:28 am

oil is still cheap…

#118 dd on 07.22.09 at 2:32 pm

#115 El in Edmonchuk

…Who wants to pay rent to live in a crappy walkup all of their lives?…

Well that answers your question. So why are you waiting to buy?

#119 Bill-Muskoka (NAM) on 07.22.09 at 4:21 pm

Well (Oil well that is), it appears things are going against the consumer AGAIN, thanks to Canada’s so-called Competition Bureau (They are the ones who eliminate effective competition to screw the general public it seems?)

Suncor swings to loss on lower oil price

Suncor announced late Tuesday that the Competition Bureau approved its planned merger with Petro-Canada (TSX: PCA). With that key hurdle cleared, the company expects the transaction to be a done deal on Aug. 1

The Competition Bureau approval was granted on the condition Suncor sell some 104 gas stations in southern Ontario, the only region where there is overlap between Petro-Canada’s stations and Suncor’s Sunoco-branded outlets.

Figures, as Sunoco is generally the LOWEST PRICED source in our area. Does this mean we will all be using Tar Sludge for fuel in our overpriced cars and trucks?

#120 Small Business on 07.22.09 at 7:48 pm


I take the view that the housing market had a 150 percent rise in price in a matter of two years…. Could the opposite not also occur?

I’m just pushing 30, so perhaps I do not have the urgency to buy property like you seem to have.

Yes, I do know the 97st area. Yes, the price is absolutely ridiculous.

Why participate in this gong show?

It is not like we are living in one of the top cities in the world where such pricing can at least be somewhat justified. This is Edmonton.

In the end … do what you feel comfortable doing… Hopefully it will work out for you…

#121 L’entrepreneur boursier » Archive du blogue » Apocalypse immobilier ? on 07.26.09 at 12:52 pm

[…] bientôt s’effondrer ! C’est du moins ce que prétendent cetains blogueurs (ici, ici et ici).  Selon eux, la grande coupable de la bulle immobilière canadienne serait la Société […]