End of story

brad lamb1

The Condo King: on your knees, people.

With the snow still fresh, I was asked to be on a panel of ‘real estate experts’ (whatever the hell that is) to dissect the future of Toronto’s upscale housing market. I wrote about it here, and provided a link to the article which appeared some weeks later.

My message was that danger and uncertainty lay ahead, no recovery on the horizon. Nor was there reason to believe Canada would be immune to the housing meltdown which had hit the US, Britain, Spain and most of the developed world where people had lived beyond their means, borrowed their brains out and gone prone before the alter of housing.

This weekend, the magazine that assembled the panel has asked for an update, to take the form of an email thread among the participants – TO’s reigning condo king, one of Canada’s best-known economists, an architect to the stars, a radio financial guy, a realtor specializing in million-dollar homes, a flamboyant property developer, and lonely me.

I won’t scoop the mag, but this is a typical response from one of the bulls:

I will take the credit for being 100% correct.  I had indicated at the time that the worst was over and that we were seeing the start of the Toronto market rebound, that December was a de facto bottom and buyers should jump in immediately or miss the best buying opportunity of the last 10 years.  A couple of you were certainly of similar thought.  Lets be kind and say that the others were badly misreading the signs, or unable to.  As for the future, the recession is over and real estate has recovered – end of story.

Hmmm.  So what has happened in the GTA since the robins returned and the garbage accumulated?

As you may know, we have an echo-bubble. Sales in June were higher by a third, and the average house price – far from declining – has actually risen, to achieve its highest point in history. There are multiple offers all over the place resulting in a mounting buyer frenzy and some silly results. As reported here, a home in Leaside (70-year-old brick houses, 30-foot lots, no garages) recently sold for $116,000 over asking price, and for close to $1 million.

So, was I wrong?

Duh. Of course I was wrong. I sucked.

I actually attributed common sense and rational thought to the people of Toronto. It occurred to me they’d realize we were in the throes of a global recession caused by excess debt, inflated asset values and policies which have systematically exported production jobs to Chindia, leaving us with an economy in which we sell each other shoes and houses.

I assumed they’d know low interest rates had only one direction in which to travel, and they’d remember the way things felt the last time Ottawa plunged itself into unrepayable debt, leading to inflation, double-digit mortgages and a fat new sales tax.

It seemed so obvious they’d look to the States and see what happens when real estate values are allowed to fly too close to the sun, and where a stunning 19 million homes now sit vacant and unwanted. After all, when houses cost five times annual income there, the jig was up. But in the Golden Temple which is Toronto, that ratio has levitated to seven. And I was convinced they’d equate the damage done by subprime mortgages and an insouciant American lending industry with our 0/40 mortgages and the facts banks will lend indiscriminately thanks to CMHC shouldering all the risk.

This led me to conclude most people would clearly see the dangers in letting first-time buyers in with little or no skin in the game, taking 95% or 100% mortgages, and risk being plunged into negative equity if house prices softened even a little.

And I sure figured mounting unemployment would weigh on the citizens of Metropolis. After all, the industrial base of hinterland Ontario has been hollowed out with 225,000 manufacturing jobs erased in a single year. Family income has been stuck in the ditch and it seemed like the last thing people would do is borrow huge sums to buy houses priced at the peak when job security wasn’t.

But I was wrong, according to my panelist colleagues. The people have been smitten again, lured into a new episode of Flip This House by the drug of 3% mortgages and the certain knowledge that this is a smart move, since house prices will rise forever.

So, when is the next price correction? When it takes ten times income to buy a home? Twenty times? When all citizens have become real estate millionaires by selling out to aliens, or maybe refugees from Vancouver?

The unreality is overwhelming. An entire society has raced from denial back to speculation, leaving guys like me in the rearview mirror. I’ll forever be discredited, wasted, rebuked, scorned. Mocked in a mag delivered to homes where true inner peace comes with a rise in equity.

How could I have been so shallow?


#1 Future Expatriate on 07.25.09 at 9:21 pm

He who laughs last laughs best.

#2 Alberta Ed on 07.25.09 at 9:23 pm

Two words: Greater Fools.

#3 Nostradamus Jr's Analyst on 07.25.09 at 9:30 pm

Only 7 times income in Toronto?

PUSSIES! Gangcouver has you beat again – we’re at a nice fat 9 TIMES, baby!

Don’t despair Garth (as if you actually are), the problem with real estate bulls like Big City Joker is that they have no long term perspective or they choose to ignore it because they’re pumpers/promoters.

If prices fell 15% last year but are up 3% over the last 2 months then snake-oil salemen like Lamb will cry out “Here ye, here ye: real estate up 3% since May – last chance to get in or you’ll miss out!”, and so on and so forth and blah, blah, blah…

I don’t know why any sensible person would even care what he has to say, I see him as a circus freak/sideshow peddling what he needs to to make a buck.

The point is that you know and I know and a lot of other people know what’s going to happen over the next few years, so if others want to disregard this and get sucked in by promoters than let them. They can pay the price.

I really don’t care, more opportunity for me.

#4 Nick Cave on 07.25.09 at 9:40 pm

well, to paraphrase Frank Zappa, stupidity is more abundant than hydrogen

#5 Bob on 07.25.09 at 9:45 pm

You will be proven right in late 2009…
My father bought two condominiums~ :)
It’s just so funny how he thinks condo price will move up~ :)

#6 john m on 07.25.09 at 9:49 pm

“We can’t solve problems by using the same kind of thinking we used when we created them.” –Albert Einstein …………. You were right Garth….reality is coming its only a matter of time–god help the people who haven’t listened

#7 eddy on 07.25.09 at 10:12 pm

true value is determined by supply and demand and Everyone knows this intuitively, so they stake their claim in a shrinking supply. There is Always a scarcity of houses in ultra Primo locations. There is no compelling evidence that prices in Toronto will drop- just a history of inflation. Logically they should drop; however, home buying is emotional . Often it’s a life decision made without regard to ‘experts’ , markets, trends etc. I’ve seen more money made in the game than on the sidelines.

#8 Phil on 07.25.09 at 10:20 pm

Garth will be proven right, although it may take 5-10 years before this country is a real estate wasteland.
We all knew the interest rate cuts would keep the party going a little longer – and make the hangover that much more painfull. Dead cat bounce, nothing more.

#9 hal smith on 07.25.09 at 10:22 pm

Garth: Can they keep interest rates at zero for 10 years like Japan did to keep the economy from crashing?

#10 bcgirl on 07.25.09 at 10:22 pm

Amazing that people will still listen to the “experts” in real estate. I’ve seen the condo king on television, OMG, he’s just slightly full of himself.

On another topic, oil depletion and food production, there’s an excellent documentary on Google videos called Natural World: Farm for the Future produced by the BBC.

Keep up the good work Garth, always a pleasure to read your blog!

#11 confused and a little crazed on 07.25.09 at 10:22 pm

Hey Garth,

tough column…in greater van it’s already 10 x the ave income but it doesn’t matter, debt is the new black. It’s not how much you make it’s how much you owe. The olympic village condo for athletes cost the tax payers a little over 410 k per unit which will be later turned to social housing. Even the homeless people people say that’s stupid for a little less than half the govt can build the same # condos on the east side or have double the amount of units…take your pick.

But the govt say they might change the units for private purchases . Is the govt going to make money from this or more profit for a select few paid by the majority? The money could be better spent for more medical diagnostic equipment or subsidized gym/ bus passes for our olympic athletes who sacrifice to represent our country. Just try to maximize benefit for all with the money we have. Is that too hard?…maybe it just me

If you’re wrong and suck …I guess i suck to

#12 Keith in Calgary on 07.25.09 at 10:29 pm


That is not happening out here in Calgary…..and it just proves what we in the west have known all along about Torontonians.

#13 Q on 07.25.09 at 10:30 pm

If one looks like a pig, one thinks like a pig. And pigs only care about what’s in front of them.

#14 Jon B on 07.25.09 at 10:32 pm

Garth your approach to predicting the future of real estate is far too reasonable. It uses way too much common sense and is knee-deep in assumptions of an intelligent population. Most people are stupid. Factor this variable into your thought process and you will better understand the current RE buying frenzy.

#15 LS on 07.25.09 at 10:46 pm

Speaking of new taxes, BC is getting nervous about the bill from the olympics and is bringing in the HST. This of course means that many many things that previously were exempt from PST will now have the full HST payable, including restaurant tabs, used vehicle transactions (note, buy another motorbike before next july), all sorts of services, etc. A huge cash grab, and I suspect it’s just the beginning.

#16 dd on 07.25.09 at 10:54 pm

…But in the Golden Temple which is Toronto, that ratio has levitated to seven….

7x earnings. Wow. And the Condo Kings still think the sky is the limit for house prices? Who can afford this kind of money?

Within five years there will be higher taxes, energy costs, interest, and food costs. On top of this wages will not move with inflation.

So tell me Garth, with all these increasing costs and flat revenue how can this boom go on?

#17 dd on 07.25.09 at 10:58 pm

.#3 Nostradamus Jr’s Analyst

…Gangcouver has you beat again – we’re at a nice fat 9 TIMES, baby….

Nost Jr Analyst. Are you saying the North Shore of Vancover is riddled with Gangs? How can this be? I thought it was the tourist Mecca of the Western World?

#18 blueskies on 07.25.09 at 11:00 pm

I’ll forever be discredited, wasted, rebuked, scorned. Mocked in a mag delivered to homes where true inner peace comes with a rise in equity.

you’ll always have your bunker……..

#19 Peter on 07.25.09 at 11:00 pm

# 5 to Bob
Because you father great fool !!!!!

#20 psdluke on 07.25.09 at 11:03 pm

Both BOC Governor Mark Carney and Minister of Finance Jim Flaherty were both out last week telling us the worst is over, impeccable recent track records, they both called the recent debt crisis and equities implosion correctly didn’t they? nothing to concern yourself with there.

Most likely the only thing holding up the economy is the housing ATM, if they lose the money people take out of their houses to consume their done and I think they see it coming, hence the pronouncements.

Housing bounce or real substainable growth in housing prices? The fundamentals say the former, loss of jobs, faltering economy, tax receipts way down, etc but the psychosis of the masses may prove us wrong.

It is a fact that most people who lost everything in the great depression didn’t lose it on the first drop but kept buying the dips until they lost everything. Wonder if they had bottom callers back them?

#21 Joseph on 07.25.09 at 11:08 pm

You are not wrong yet. It’s called hubris, a cyclical habit of not learning from past mistakes (1920’s revelling led to 1930’s suffering). I’d say that we still have another 6 months before we really know for sure as to whether the real estate market in Canada will go on its merry way. If 6 months passes and I find that the real estate market continues to be stable, then I will agree with you, and say that we missed the boat. But I want to see the state of the real estate market 6 months from now before admitting a mistake. The international economic difficulties we are experiencing are by no means over, despite proclamations from the US Fed. Also, from my conversations with peers, the primary reason they have continued to purchase real estate is because they have watched their parents do extremely well in real estate for decades, and they really have no other idea how to make money in this country, besides their parents’ tried and true method, nothing more. If enough of them cling to this philosophy, the market really perpetuates itself. But I for one am still of the belief that it’s not over yet. I will need to see what takes place in the next 6 months. We can’t have you assimilated too.

#22 Industrial Guy on 07.25.09 at 11:12 pm

If the Chair of the Bank of Canada is correct and the recession is over …. To quote 1980’s television spokesperson Clara Peller: ..”where’s the beef?”

I decided to take a drive through the ravaged manufacturing heartland of Canada today looking for all the “Green Shoots”. I have some positive news to report. The “For Sale” sign business must be doing very well. Almost every closed factory has one … or two and the green shoots of Springtime which peered through the cracked pavement in the parking lots of these factories have now become …. trees.

Canada is an exporting economy and as everyone in this country knows, is the largest trading partner of
USA. Their economic crisis is far from over. Unemployment South of the border is still rising. How can there be a true recovery in Canada until the situation improves in the USA? Our ability as a nation to manufacture consumer goods and extract raw resources from the ground far exceeds our capacity to consume them.

So, how do you end a recession? You pull out the Government credit card and spend like a drunken sailor. Then you drop interest rates to historical lows and go fishing for Greater Fools. Big surprise…. a whole bunch took the bait.

We leaped from a surplus to a $60 Billion deficit with mind boggling speed. So the Minister of Finance has bought his way temporarily out of this recession. Well, I hope he has a high enough spending limit on the National credit card to keep this charade going. Just like our drunken sailor, we all know someday someone is going to pay for this hangover..

Congratulations taxpayers of Canada. You have been volunteered!

But seriously folk ….. How fair is it to create a lot of contrived economic activity today by dumping a huge debt on our kids and possibly their kids?

#23 Nostradamus Jr's Analyst on 07.25.09 at 11:14 pm

How come Brad only has 69 fans on his Facebook page?


For a guy with a lame-ass TV show/infomercial, he’s not much of a Big City Anything with that kind of pathetic following.

#24 BoB on 07.25.09 at 11:15 pm

Real estate as a religion these days so I’m not surprised how things have turned out with the low interest rates. It will all end badly eventually but I think there’s opportunity to flip houses over the next six months to the greater fools. People are generally dopes and it’s gonna take a lot to cure them of this religion. Right now they just see the dips like the tech stocks as a “buying opportunity”. The craziness will continue until the rates start to move up and / or the unemployment rates rises significantly.

#25 Investx on 07.25.09 at 11:17 pm

I’m curious to see what happens this fall.

I never understood how Canada had the equivalent of the US RE market: 1-year teaser rates and subprime. 0/40 mortgages are not necessarily subprime (which is defined by low credit worthiness.)

Do we have ALT-A’s and Option ARMS like in the US?

Maybe Canada is different?

But how can we afford houses 5x average household income?

Do these low rates increase affordability that much?

#26 BoB on 07.25.09 at 11:20 pm

Oh yeah Garth you’ll like this… We bought with 5% down and CMHC also let us borrow another 10% of the price for renos! Yes, we’re gambling on the short term using the crazy conditions that CMHC allows. We gotta get the renos done and sell this place quick!

#27 Devil's Advocate on 07.25.09 at 11:36 pm

As one too who predicted a rather more severe correction late this Spring and is blown away surprised at the actual results… thus far… I consider myself to be in good company. I’m just not quite so apt at eloquent sarcasm and will say simply… It ain’t over ’till the fat lady sings or farts as the case may be.

#28 eddie on 07.25.09 at 11:46 pm

not that you were wrong or going to be wrong Garth…. your timing is off…as an investor in the stock market would say, “if we could all time the market peaks and bottoms perfectly, there would be no market…”

..the bubble will burst….just when…

#29 Haha on 07.25.09 at 11:52 pm


Garth….I gotta give you credit for admitting you were wrong…

eating crow is never easy….careful with those feathers getting stuck in your throat…

It’s about those feathers over your eyes… — Garth

#30 ph on 07.25.09 at 11:55 pm

BoC declared the recession is over. Move along, there is nothing to see here! :)
However, the real economy is more than just a number, but what lies behind those number. The positive Canadian GDP growth will not be driven by jobs creation or increase in production and export. Canadian manufacturing sector still remains sluggish. Unemployment still goes up. The GDP growth is fueled by debt spending. Government stimulus money, cheap credit and housing contribute to the GDP growth via consumption spending, brokerage fee, bank services fee, realtor fee, remodeling and other job creations. In other words, Canadian are more indebted than ever. Such growth may last a few quarters, but it is unsustainable. The world may has adverted a banking crisis, but Banks still haven’t unloaded their toxic assets. The situation is just less bad, which is far from getting better.
After a bearish winter, optimism is back in vogue. Let the ‘real estate expert’ have their day. The aftermaths of excess spending will be felt much later, just like a hang over, but instead of a headache you may end up losing everything.

#31 lili on 07.26.09 at 12:05 am

I could be wrong, but sarcasm aside, Garth is admitting he was wrong. Hopefully, this is the first post marking the capitulation stage, and if we avoid reverting to snap judgments, snappy rhetorical retorts and similar jibes, Garth can redo the math, and figure out exactly where he went wrong and why.

Then… we may get some refreshing insight on what lies ahead. The question is not whether Canadian real estate can remain strong in a downturn (it has now shown that it can), rather it is whether Canadian real estate can maintain long term stability.

Unfortunately for this blog, if you had all your net worth in a home starting in Jan 2008, you’d be better off today than having had all your net worth in stocks; this is the truth that most Canadians can understand (they don’t really understand margin anyway) and Garth must contend with that reality first before he can make plausible sounding predictions.

You are 100% wrong. — Garth

#32 Joseph on 07.26.09 at 12:27 am

I quickly read through your blog the first time around not picking up on its patronizating characteristic, which was evident when I re-read it a second time. No need to post this particular entry (being somewhat of a correction) but I am glad to see that you are still onbaord with us contrarians, so to speak.

#33 Virgil on 07.26.09 at 12:35 am

90% of people don’t think independently. They rather prefer to do what “the leaders/experts” tell them to do… It’s the herd conservation instinct. People feel safer in the heard…

We are not far off from the animals… Only the predators are lonely and think independent. The herd stays and moves together and feeds the predators…

Most of the young buyers don’t know how to calculate the interest/payment without an online calculator, but they all know how to drive an SUV…They don’t even know how much principal they will have to carry 2 years latter and how much they will have to pay at a higher interest rate.

Looking from outside, it’s illogical that young people borrow so much money; but if house prices decrease they can always dump them. They have no other assets anyways. SUV ownership can go to mom for $1 (before declaring bankruptcy) and Bank can’t get it. Banks can not go after their RRSP either…. Some closing costs will be lost, but with no money down that will be just a small loss comparing with the loss they would take if they kept those homes…Because they are young, they would rather stay without credit for a number of years than paying 35 years on a house worth 100k less than their mortgage.

#34 Jeremy on 07.26.09 at 12:36 am

I could have sworn last summer the official story was something to the effect of “We are down month over month but year over year we are still up” So now the story is “We are down year over year but we are up month over month.” How come I don’t get to be so selective when I’m arguing with my wife?

#35 $fromA$ia "Garths Nugget Boy" on 07.26.09 at 12:48 am

With all do respect Garth, I’ve been following you for a while, like you I’ve been banging my head against the wall. I am wondering when Canadians are going to get a reality check in terms of fundamentals and purchasing homes responcibly within their means. This isn’t going to happen. I am sure the mass population is expecting the Government to come to the rescue.

I think it’s time you capitulate. This Goverment is going to inflate itself out of it’s mess.

If they didn’t print the monopoly money the bubble would of burst in RE. The USA may be better off than us as I mentioned in your last thread because we are still loose lending big money to the RE BUBBLE. F_ CK ME! THIS IS CRAZY!!!

GARTH, I back your thoughts but resistance is futile. I go with GOLD. Theres no other options. Upcomming inflation will help Canadians pay their homes off faster as well as help this nation pay off it’s deficit faster.

Welcome to the jungle.

#36 Nostradamus Le Mad Vlad on 07.26.09 at 12:49 am

” . . . An entire society has raced from denial back to speculation, . . . How could I have been so shallow?”

Theoretically, you could have stayed in politics, become Minister of Finance (if not PM) in perpetuity, taken Canada in a completely different direction and we all would have lived happily ever after. Theoretically.

But theories, like the Avro Arrow, are usually confined to the scrapheap, because they make too much sense.

As to the first sentence, a large part of humanity is claiming a patent on zombie-like stupidity. Let them!
The upscale, luxury hotels in the toilet. —

To keep y’all up-to-date with other stuff — http://rense.com/general86/whdo.htm

“1. Canada, Sweden, Norway, France and other countries have announced intentions to vaccinate every man, woman and child. To do so, they are ordering 2 shots per person of untested, unsafe and unnecessary Swine Flu Vaccines from a variety of manufacturers. The US Departments of Homeland Security and Health and Human Services both stated in early 2009 that they would do so “beginning with those who want it”. (Fact, 2009)”
First, a song called U.S.S. of A — http://www.youtube.com/watch?v=Dn5-Vw9Do0g — which leads to —

Put these two together (from two sites) and see where we are headed! —



“This news story, among others lately, signals a turning point in the great machine which is the New World order.

“Using clergy to quell dissent? What next?”
Spitzer could be correct with his assumptions, because what affects America affects us. —

The story is slightly absurd, but the clip is hilarious! —


#37 gold bugger on 07.26.09 at 1:16 am

You’re not wrong. You’re just early.

#38 JoeK on 07.26.09 at 2:09 am

Hey Garth,

Don’t beat yourself up over this. I made the same mistake in December – I believed in common sense. I allowed my ex-wife to buy me out and I walked away with 230K from a property appraised in July’08 at $860K. My Ex’s share, after debt, would have been about $205K. (Well, the lawyers did say that I would have been entitled to about 60%).

After 5 months on her own (and a new boyfriend), she figured out it was too much work to maintain the place, so now she’s got it listed for sale at $1.18 million. It’ll probably sell north of $1,000,000. How smart do you think I feel? Location? BC’s Lower Mainland.

On a more positive note, our local radio station, CKNW and their premier host, Bill Good, had a 20 minute interview with Sunil Ram, an international security expert and analyst, with whom Bill Good talks often about international affairs. Sunil was commenting on his vision of Canada and it’s economy. Sunil rattled Bill Good’s cage so much with his forecast (makes your forecast seen like the sunny side of life) that Bill Good will have him back on Monday (July 27th) to explain further. To sum it up – he called Mark Carney and the ‘talking heads’ “absolute morons” or that they are lying.

Anyone can listen to that interview by going the the CKNW Audio Vault (http://www.cknw.com/other/audiovault.html) and selecting Friday July 24th, 11AM, then sliding the time bar to 6:20 into the 1 hour segment.

I feel your pain Garth, in my wallet. Cheers Bud.

#39 Don of the Basement on 07.26.09 at 2:10 am

Okay…i’m in..I’ve seen the numbers and heard the arguments and they are convincing…utterly. The problem is, I am in a crappy basement apartment with my wife, and have been saving and waiting for this train wreck to happen so that (primarily) we’re sure we won’t be on the train when it happens. But i’m concerned about starting a family (which we’ve been putting off), concerned about our health (moldy basement), i’m concerned about our accepted standard of living (ie the longer you do something the more normal it becomes for you)…So forget the RE Machine, it is these pressures that are now squeezing me…which leads me to my point/question….

I’ve been looking at the rental market offerings and the prices are ridiculous as well…(in Burlington-Oakville area)…If so many first timers are going after the easy loans and buying homes..shouldn’t that mean there would be a plethora of cheap great rental properties available? Where are they? I want one.

#40 Joe Realtor on 07.26.09 at 2:11 am

Ugh. Every time I have to book showings I pray that my clients don’t want to see one of Lambs listings.
All the salespeople there seem to think they’re above it all and that their sh*t don’t stink.

#41 rick on 07.26.09 at 2:37 am

That’s it garth? You were wrong or are you being sarcastic?

#42 jd on 07.26.09 at 2:38 am

They say if you hold to one position long enough, one day you will be right. I would agree that bidding wars for houses at this time makes no financial sense. However every market is different. Canada has become many real estate markets rather than one homogeneous market. So at any one time, in any one place it could be a great time to buy or sell or hold or stay out. So if anyone tries to lump the entire Canadian market into a ‘buyers’ market or a ‘seller’s’ market they would be wrong all of the time in Canada. If you do your homework on your area then you can decide for yourself.
I think one reason people are buying right now is that they sense inflation coming back. And history tells us that whenever inflation returns house prices go up. Assets go up to offset the declining value of the dollar in an inflationary environment. That is why many US housing markets are taking off right now. The US is printing money like crazy. Inflation is sure to follow. It always has; but maybe this time it’s different?

#43 Jeremy on 07.26.09 at 2:45 am

its stuff like this that truely makes me feel humans are stupid and doomed as a race. No one looks at the numbers. But who knows the government can’t let this fail and they probably won’t.

#44 Mark on 07.26.09 at 3:13 am

@5 – bob…

Erm, its a bit weird you want YOUR OWN FATHER to lose money?!?!?

#45 Dale on 07.26.09 at 4:52 am

Posting #5 Bob you need family counciling.

#46 HousesforDummies on 07.26.09 at 5:32 am

So Garth is this the beginning of the inflation we’ve been hearing about from the goldbugs? This one has got me stumped. I didn’t think prices could go higher with a weaker job market in Canada. And I didn’t think the goldbug inflation would hit Canada due to the rising dollar.

#47 David Bakody on 07.26.09 at 6:13 am

Yet another person I know was told to pack up and move to hold his job ….. Now a word on our false economy. “less people working longer hours for less pay and benefits = larger profits” coupled with higher prices for goods and services for all levels of government results in a lower standard of living and the corralling of the middle class.

#48 somecatchphrase on 07.26.09 at 6:15 am

I’d much rather speculate on falling rents than rising house prices.

“The Surge in Rental Units”


#49 Mike B on 07.26.09 at 6:26 am

Just to clarify…As a buyer , I certainly saw alot of inventory in Toronto in Jan-Mar but by no means any screaming bargains. Some massively overpriced ones bought less than a half dozen years ago went from a 45% premium to 40% premium. Houses that were close to train tracks/ highways or power corridors saw reductions. Premium ones, custom built, sat but had zippo price reductions even if vacant. So the thought about missing the boat is bunk. I think the turn in T.O. Real estate was when one of the local mags printed a headline cover of “buyers market” but if you read the article it focussed on flippers. Also, alot of the volume in sales is due to condos.
A sellers market??? In some cases… leaside had been like that for decades.
As pointed out … Low rates counteracted any chance for a price correction. So my take is that not until rates go up ALOT will you see capitulation from sellers… Possibly 12-18 months. When unemployment lingers things will be impacted . A realtor I know indicated that next year you may see as high as 10% of listings next year as POS at least according to their bank gurus. A correction will happen and a buyers market will be obvious as it was many times in the past.

#50 Mike B on 07.26.09 at 6:30 am

Condo king being 100% correct…hey even a broken clock is right twice a day.!!!!

#51 Bottoms_Up on 07.26.09 at 6:51 am

A title for Garth’s next book:

Sheeple part deux: the 0/40 Canadian ‘homeowner’

#52 ca on 07.26.09 at 7:22 am

I remember when, in 2005, a few brave analysts advised people that the stock market was overvalued. At the time, they were ridiculed as being cassandras. We all know how that turned out!
Hang in there.

#53 miketheengineer on 07.26.09 at 7:23 am

Garth et al:

The sell off will be starting soon in Ontario. There were 2 big automotive suppliers that went bust last July. I know engineers at both. My friend John called me last night to ask for advice. Has been unsuccessful, even for home depot type jobs, seems he is over qualified. He is desparate. They don’t have work, and I think EI has run out, or will soon. What do you think is going to happen when they can’t pay the mortgage?

They can pump all they want, cause the greater fools will jump in……the recession is over, but make no mistake, the “depression” is here for many, many people. And this will be the biggest depression in History.

#54 Stephen on 07.26.09 at 7:49 am

Years ago I used to work for a large Canadian chartered bank. One thing I noticed as I was new to credit back in 1999:
Standards were getting lax by the older rules.
I was taught by the old school lenders, net worth, job security, current debt ALL mattered.

We then had the Head Office type folks come in and were pushing the new system. If the software said approve…you approve—no questions asked. Negative net worth did not matter, income verification did not occur, even if you had a ton of debt, as long as you fit in the ratio and existing credit was good, you were good to go.

These were unsecured loans, credit lines, credit cards and overdrafts for 10 k or under—if you knew how the system worked you could sometimes get one of each.

I felt back then it was wrong to grant a loan that you knew in your gut was no good. The explanation I was given was that to question the loan is a waste of time from approving more loans. It was simply a cost of doing business, and not to worry this was a model that would prove to make more profit in the long run. This was a conscience effort to compete against the European and American banks (who were probably being told they had to do the same thing to compete against the Canadian and Australian banks).

I don’t know how it works now or the past 10 years, but there was a change in the lending standards of banks in Canada 10 years ago. It was way easier to get unsecured credit.

#55 Herb on 07.26.09 at 8:03 am

Didn’t your experience as a politician show you that people do not act on the basis of rational thinking? It’s wishful thinking all the way – until reality bites.

Wish you were wrong, Garth, for all our sakes, since the comeuppance will affect us all.

#56 X on 07.26.09 at 8:10 am

Patience. The rest of the world has had their RE bubble burst. Not saying that Canada’s will burst however a correction is in order.

Rates at historical lows, will affect RE (and all lending) even if the rest of the economy is in a downturn. (even if they tell us the recession is over)

One poster stated that they only put 5% down, and still received 10% of the house value in lending for reno’s. How different is that from a 0/40 mortgage?

#57 Darryl on 07.26.09 at 8:33 am

“hal smith on 07.25.09 at 10:22 pm

Garth: Can they keep interest rates at zero for 10 years like Japan did to keep the economy from crashing?”

Why not ? what’s the worst that can happen? Our dollar will come down!?
I don’t think thats a bad thing.

The BOC will probably keep the over night rate very low for years. Longer term mortgages are not as easy to control though.

You have 11 months of this. Period. — Garth

#58 Chris no longer in England on 07.26.09 at 8:39 am

I think the smitten people ought to worrying not just about interest rate rises and job losses, but how the government is going to claw back the billions, or maybe trillions, lost in the “recession”. As always, the UK government is leaps and bounds ahead, finally putting the finishing touches to something they set in motion while I was still a home owner there. If something like this was adopted in Canada, imagine the revenue from homes with:

a view
a pool
a patio
a sunroom
overlooking golf course
overlooking farmland
spacious interior
parking space(s)
etc. zzzzzzzzzzzzzzzzzzzzzzzz

A tax on barns would really do some damage around where I live!


(Mail on Sunday “Secret Labour tax on having a patio..”)

#59 X on 07.26.09 at 9:00 am

Why you should still be worried about the economy


Speed pays on the stock market


If an average guy created this computer program first, and made so much in profits, he would be in jail. It doesn’t seem fair to other traders.

And how much debt is still on banks books? I have heard that the American Tax Accountants are trying to change the tax laws too keep the debt off of the books for a longer period of time….can’t find link…will post if I find it again.

Same for Derivatives.

#60 Across The Fence on 07.26.09 at 9:06 am

This was posted by a BC realtor back in March, I’ve seen no improvement in the USA ,so the time line is still very close….

“I left B.C.’s Lower Mainland 2 years ago in preparation for this disaster and moved back to a small town on the West Coast where I had previously moved to (1993-2002) in preparation for the late 80’s early 90’s downturn. B.C. small towns follow the cycle about a year after the Vancouver area. In my career, the real estate food chain, always and predictably, collapses as follows: the U.S. goes first, then Ontario and the East about 2 years later, then spreading west to B.C. and Alberta a year to 18 months later, and finally, small towns a year after that.”

#61 david on 07.26.09 at 9:22 am


One factor that I find may be missing from your posts is the role that media concentration plays in all this. There must surely be correlation with Vancouver’s real estate bubble (which is lasting longer than most global cities), and their media ownership situation.

#62 Darryl on 07.26.09 at 9:32 am

“You have 11 months of this. Period. — Garth”

I guess that gives us one more spring market to sell. I’ll start cleaning the carpets and painting the walls now . :)

#63 Crashing Yuppy on 07.26.09 at 9:32 am

Some of you do not know sarcasm when you red it.

Garth is playing with you. Of course he does not think he was wrong, the correction and meltdown in coming and will be here in 2010.

Interest rates are going to strangle many of these 0/35 ers. Just wait. Many , and I mean many, of them cannot absorb a 2-3% increase.

Money gets tight, fights start, divorce happens, houses go on the market all together driving uo supply. This will end very badly and I think Garth would still bet his hog on it.

Am I right or am I right?

#64 robert on 07.26.09 at 9:39 am

” I actually attributed common sense and rational thought to the people of Toronto. ” – Garth Turner


C’mon Garth this is Toronto your talking about…… the city that has the Maple Leafs winning the Stanley Cup every September and not making the playoffs the following spring.

#65 rick on 07.26.09 at 9:41 am

Mike B “A realtor I know indicated that next year you may see as high as 10% of listings next year as POS at least according to their bank gurus. A correction will happen and a buyers market will be obvious as it was many times in the past.”

Does any one know what the POS in this sentence means?

#66 Boombust on 07.26.09 at 9:44 am

Well, I think things are beginning to get ugly for the Vancouver condo market. At least in the outlying areas…

A flood of rental listings, below flippers/”investors” costs are now popping up all over.

“Green shoots” anyone?

#67 DaleFromCalgary on 07.26.09 at 10:22 am

I think Toronto has something in their drinking water. In Calgary, the CREB’s statistics (http://www.creb.com/public/seller-resources/housing-statistics-archives.php) show these for median sale prices:
Single family homes: June 2008 = $408,000 while June 2009 = $399,000
Condominiums: June 2008 = $282,000 while June 2009 = $265,000

On an anecdotal basis, I don’t recall ever seeing so many For Rent signs, and I was here during the last oil collapse of the 1980s.

I paid off my house in 1997 and immediately friends started asking what kind of bigger house I would then trade up to. I couldn’t make them understand that the whole point of paying off a mortgage is to then stay out of debt forever.

My investments now are physical gold and silver (just rented a second safe-deposit box to hold them) and physical conventional oil (mineral rights and partnerships in producing wells) plus cash in the chequing account for unexpected buying opportunities. I don’t mind the sheeple buying real estate as it reduces the competition for bullion and oil.

#68 Nathan in Edmonton on 07.26.09 at 10:36 am

I think you’ll be proven right as early as this fall. Our correction will come fast and fierce. This is the last hurrah… no more bubbles, no more bailouts… we’re a much poorer country now than we were a year ago; the debt keeping the depression at bay is unsustainable. Governments have blown their last wad on trying to maintain the status quo, instead of finding any real solutions. We can’t stop what’s coming.

#69 keesio on 07.26.09 at 10:42 am

LOL I can’t believe some of you took Garth’s admittance of “defeat” seriously. Obviously you don’t read his blog enough to recognize his sarcasm.

#39 – Don of the basement: I’m in the same boat as you. I rent a basement unit for cheap allowing me to save a lot of money. I have lots saved up in “high” interest saving accounts waiting for RE market to come tumbling down so I can buy a condo/home for a reasonable price. I’m getting sick of the basement and itching to move out ASAP. One thing I am considering is renting a nicer place. Yeah it will be more expensive but doing the math, it won’t be too much more than fees + property tax + interest payments. I won’t be saving as much money but my standard of living will go up a lot (life’s too short to live in a place you can’t stand if you have the means to get out of there) and because you are renting, you didn’t sink a huge percentage of you savings and take on debt for a home that is over priced. Then when the market does come down, you can still get that place.

#70 Onemorething (aka DaHKkid) on 07.26.09 at 10:47 am

Stock Market – Buy when everyone else isnt!!!

Same for RE market!

Manipulators like this one pictured above have an exit strategy, it just doesnt include you (sheeple) in it.

Canada from all evidence seen missed the 1st correction in RE and will be much worse off down the road. Its very scary stuff estimating what could occur in Canada.

Hanging up in Whistler for the last 10 days proves that the hotels are very busy but the townhouses and houses are at very low capacity.

Funny thing, when I rented my property up here (when the Sh&t Hit the Fan) the owner was really worried and was willing to sell for around $900K on a property valued at $1.4M.

In a double correction it should go for $700K and that doesnt even account for what happens after the Olympics.

I will only buy property when its at the bottom and when rates are double digit percentages. I will pay cash for the house. In prime areas like Toronto or Vancouver when $1.5M are offered up for 50% off but again only if these are destinations that are in great shape for my family to live and prosper.

The House will not be an investment as 10 years of flat growth after the correction say 2012-2015 in Canada is going to have to be home.

#71 Got A Watch on 07.26.09 at 10:49 am

POS – Power of Sale (foreclosure equivalent in Ontario)
POS – Piece of S***

Probably both apply, depending on your POV (Point of View)

Garth – I would not be too worried, and I am sure you are not. You erred in thinking there was any common sense out there, that’s all. The old cliche about never under-estimating the stupidity of the public is entirely true. Most consumers are dumb as posts, and Lamb is the living proof – he’s dined out his whole career on thick consumers willing to wildly overpay for his POS in the sky. Saying he has zero credibility is being charitable.

Hopefully, when the inevitable down-turn comes, ole Brad will be over-extended trying to build a bunch of new crap condos, and go bankrupt. A fate so richly over-deserved. Whatever he says, do the opposite, and you will be fine.

I assume #31 Lilli represents the clueless bulltard crowd to a tee. You know, the kind who have never looked at along term chart of real estate in Toronto or anywhere. If she had bothered, she would discover that real estate is in fact like all other assets – sometimes it goes up, then after that it goes down again.

Nah, this concept is obviously way too far over their heads. After a 10-12 year Bull market in real estate, they come to the “no brainer” conclusion that real estate can only go up some more, and then some more again after that. Good luck, you’ll need it.

I really had a good laugh at her “logic” in the statement “Unfortunately for this Blog…”. Ha ha ha. 1 year is no time frame to judge anything’s long-term performance. Most investors with at least half a brain would conclude that after an asset has risen in price for more than a decade, it is due to fall back. And an asset class that has fallen sharply is likely to go up afterwards. The logical conclusion of her “argument” is to sell real estate now and buy stocks, not the reverse. Sorry.

The sure road to bankruptcy is to chase a market, and buy high, only to sell low later. Like today’s first-time buyers. The time to buy real estate was 10 years ago, and 10 years from now. Except for those who like to lose money.

Whatever the Boolish sentiment now, this Fall will see it reverse, again IMHO. Traditional stock market crash season is Sept-Oct, and this year looks no different to me. We are just seeing a rally in risk now, and when it reverses, the US $ will rise, CDN $ and resource prices will fall back etc.

All of the Government “bailouts” around the world were aimed at “restoring” the consumer “confidence” so they can consume again, just like 2005. But those times are over, and trying to rewind the clock won’t work. Every dime in “bailout” money has been poured down the black hole of bad credit and phony “value”, never to be seen again.

#72 Nostradamus jr. on 07.26.09 at 10:53 am

“”The safety of a person’s own home beats out crooked & manipulated stock markets, manipulated gold & silver and even preferred dividends of crooked banks every single time.””

Nostradamus jr…..1511 A.D.

#73 Bill-Muskoka (NAM) on 07.26.09 at 11:06 am


You erred by believing there is such a thing as ‘Common Sense!’ The last prime example of that fallacy was Mike Harris! People are well absorbed into the Matrix of Consumerism, Globalism, or any other feel good ‘ism’ the media promotes.

I still like wearing my Scar hat from Disneyland which has Scar and the three hyenas on the front and reads on the back ‘Help! I’m surrounded by idiots!’ Which I simply term ‘Citiots.’

Now, everyone go listen carefully to the words of the Eagles song ‘Life In The Fast Lane.’ and try to get a clue.

#74 Jonathan on 07.26.09 at 11:08 am

You can predict the market but you can’t predict the government. Three men (harper, carney, flaherty) are harder to gauge than 30 million. What they have done will cost our country trillions in the long term.

All I can say to you Garth is that this deserves a second book Greater Fool 2.

What the government has done will end up making real estate melt to a much faster degree than without it.

If the government keeps propping up real estate, our country will become extremely indebted (we already owe more, as a percentage of GDP, then ever before). High home prices require first time buyers to max out on mortgages – that leads to the middle class being home poor, the poorer cohert ends up can’t afford entry level homes, homes requiring two incomes leads to lower birth rates (can’t afford to raise a child).

#75 Dean on 07.26.09 at 12:06 pm

Garth, unfortunately you put this upon yourself. If you’re going to make predictions, you need to follow the cardinal rules of covering your ass. If you need guidelines, just look at anything the Bank of Canada has put out in the last two years.

Here is how you should have worded things:

I predict house price to drop by a significant amount, acknowledging that there are significant upside and downside risks due to certain sectors of the economy that might be more protracted and delayed than initially expected. Also further increases cannot be precluded due to serious spillover effects and underlying external macroeconomic risks to the real estate market as well as domestic factors and that might be more gradual or extreme than expected.

#76 Rob on 07.26.09 at 12:08 pm

I have been in bullion for years, i have friends that adore real estate and many times said it can only go up. They used the excuse last year it went down for a bit but look at it now, its back up again.
this is a big bubble, when everyone is talking about it because of the low interest rates.
i want to see a Dubai style 1 month crash of 50% like in January to shut these people up once and for all, we wont have a real estate bubble again in our generation.
Back to basics.

#77 Republic_of_Western_Canada on 07.26.09 at 12:18 pm

“I actually attributed common sense and rational thought to the people of Toronto.”

Say WHAT??

Residual colonialism and servitude, dude. Which means it’s the conditioned duty of the masses to nail themselves to the cross, upon command, of whomever appears to be appointed king du jour.

#78 Grantmi on 07.26.09 at 12:24 pm

#39 Don of the Basement on 07.26.09 at 2:10 am

..shouldn’t that mean there would be a plethora of cheap great rental properties available? Where are they? I want one.

Hang in there Don! We’re in the same boat so to speak! Renting a home in Never NeverLand on the left coast!

I’m about to ask MY landlord for a cut in rent as of Sept! (End of your lease)

I think the timing is right.. and I’m a damn good tenant, and I think he’d prefer an awesome renter then take a chance to put the place on the rental market again and get some low life family. (Which others in the area have gotten.. and stayed less then 6 months, each time!!)

This slight of hand in the current RE market is a perfect time to be asking for a longer rental term from your landlord IMO. (S)He might have punted if you had pressured him a couple of months ago to ask for a decrease since he’s worried his value has gone done.. and say what the hell.

“I don’t need the hassles and sell!!”

But now you can say!

eh! Cheap rates… you’re PAYING LESS for that Mortgage… and now the market is on the rebound.. and you’re home is holding it’s value! SEE! (teeee heeeee)

“Move along! Nothing to See here!!”

#79 Future Expatriate on 07.26.09 at 12:25 pm

It is not surprising at all how those drunk on realtor and gov Kool-aid would read Garth’s height of sarcasm as capitulation.

What IS surprising is how many are actually out there, visiting this blog, and posting triumphal “told ya so’s”.

If things were going so swimmingly, then what the heck are thesefor?

And these?

Do these look like whomever made them is planning for boom times?

#80 dd on 07.26.09 at 12:27 pm

#72 Nostradamus jr.

…”The safety of a person’s own home beats out…

Only a dumba$$ pays 9x earnings for a house.

#81 Samantha on 07.26.09 at 12:46 pm

Garth, your insight and message wasn’t wrong. The people rushing to answer the siren call of your counterparts on that panel are wrong.

You know the path they are choosing is foolish and imprudent, as do many others who follow your blog. The problem is that these buyers don’t know this yet. They will discover, once our real estate market does collapse, that perpetual growth is not sustainable.

They will also discover that we will follow the debacle unfolding in the USA. Our time lag is about 2 years. This will be about the same time they discover the dependency of Canada upon USA trade, and get a crash (pun intended) course in history, geopolitics and economics.

Then they will discover how denial and speculation have been fostered and encouraged by those who profit from all things real estate. Then they will realize that not only have they been played for fools, but also that they are indeed, the greatest fools.

Let the mag hags mock and scorn, Garth. You tried to warn them and they didn’t listen. At the end of the day, that is a more honorable endeavour than that of those greedy few who would lead the naive and ignorant to make such foolish decisions.

Keep them in the rearview mirror. Keep looking forward. Crack the throttle and let them eat dust for now. There are still many miles to go before this ride is over.

#82 Nostradamus jr. on 07.26.09 at 12:52 pm

…Why Vancouver will become China’s home away from home…China’s single, most important connection to North America…

>>China’s New Plan To Take Over The World

Thanks to its smart strategy of lending th U.S. money to buy its products and services, China owns $2.2 trillion in Treasuries and other foreign paper. This makes China rich, but it has also left it exposed to getting clobbered if inflation destroys the value of the dollar. If China starts dumping Treasuries to protect itself from inflation, meanwhile, it will destroy the value of the rest of the paper it holds.

So now China has a new plan. Use those dollars to buy stuff. Companies, land, natural resources, you name it.

Smart! The moment China tries to buy stuff in the US, of course, everyone will freak.<<


#83 Peter Wiener on 07.26.09 at 12:59 pm

What’s all the fuss?

Those that NEED to buy now should buy now. Just remember that seldom do you NEED to do anything, rather, you choose to do so.

From my position, I encourage everyone to go buy a house as soon as possible. This will eat up demand and money in the economy, which means that neither sufficient demand nor money will be there in future to pull the economy out of its swoon. That’s when you find out what your house is really worth and so will I.

In my last posting, I suggested that it will be two years minimum before I’d even look to buy and I am not changing that forecast at this time. I think by that time we all have a better idea of what has befallen us and what awaits us in the future.

The only caveat to waiting 2 years is what happens to the currency vis-a-vis QE and gov’t intervention in the mortgage market.

The best way to remain patient is to look at historical graphs of the NASDAQ, the NIKKEI, Us home price indexes, etc. where multi year super bull markets convinced EVERYONE to invest, only to collapse in ruin, one after another, in essentially the same way. If your logical mind can’t draw a comparison for the Cdn real estate market, then by all means go ahead and buy.

I am really heartened by the tone of this blog lately as bullish posters get more and more smug in their views and the bears start to capitulate. Key word here is capitulation, cause that’s what happens usually just before the big break. Read any good text on markets, they will confirm this.

Most real estate market followers are too OBJECTIVELY uninformed, are unable or unwilliing to do their own research and end up following the herd – right off the cliff! But this behaviour, as noted above, is not restricted to housing.

#84 Daystar on 07.26.09 at 1:08 pm

So, when is the next price correction? – Garth


When it takes ten times income to buy a home?

Between 2018 and 2021. Its cyclical

Twenty times?

That would be the end of Capitalism as we know it… or the end of an empire.

When all citizens have become real estate millionaires by selling out to aliens, or maybe refugees from Vancouver?

This one is thought provoking. Consider for a moment that one of the basic fundamental principles of life is non-owership. Only the human race dares practice ownership contrary to one of the great laws of life, the law of impermanence… contrary to all rational logic. For me, it would take quite a bit for me to believe that a scientifically advanced alien race would still sadly stumble upon the concepts of ownership the way the human race has. Yes… quite a bit. Refugee’s from Vancouver on the other hand… lol!

The unreality is overwhelming. An entire society has raced from denial back to speculation, leaving guys like me in the rearview mirror. I’ll forever be discredited, wasted, rebuked, scorned. Mocked in a mag delivered to homes where true inner peace comes with a rise in equity. – Garth

You’re baiting us with this, right?

A wise poster predicted it last year in the fall on your old blog. He said that there would be a shortlived hard crash followed by a mini bubble (driven by speculation, as I recall) and then another crash, lasting much longer, much more drawn out, the real recession. What did he base it on? Interest rates.

And again, as you know, interest rates are the singular, most important factor in all this. Why for example are homes flipping for peanuts in the U.S. compared to Canada? Try a near 4% spread in the cost of borrowing for a home for starters. U.S. mortgages are close to double the cost of debt service for the same sticks and bricks.

Logic dictates that all the points you’ve made will come home to roost and that the only thing preventing this from happening right now is rock bottom interest rates which in time, will have nowhere to go but up.

Our federal governments have decided in their self styled infinite wisdom that we can simply borrow our way out of a recession. Who do we borrow from? And when will our creditors tell us “yeah, we’ll allow you to keep spending beyond your wise means, but it will cost you in higher and higher interest rates.”

Interest rates have nowhere to go but up Garth, you’ve said it yourself many times. And it will. What do serious investors look for? Those interest rates to climb since, as you also know, mortgage affordability shrinks and so with it, goes the valuations of real estate and as real estate valuations shrink, you also know personal equity shrinks. This means spending and investing contractions which will shrink the markets and further shrink personal equity and the indeniable spinning vortex excellerates from there.

So when will interest rates rise?

Mark Carney has said that he won’t touch interest rates until June of 2010.


So why do I say November things get rocky in the markets and beyond? More than any other reason, its about valuations. Things again, are cyclical. IF there is no good news in the markets, no earnings, no commodity valuation increases, no growth, the trend is to sell and since valuations have popped a good chunk, logic says there is nowhere to go but down. Good investors might take a gamble with solid stocks that will rise in a churning market, (even the good ones have been known to gamble) but…

There are cycles involved here, but fundamentally, the markets have inflated by more than 40% since an over sold November and it hasn’t been from earnings. Unemployment has climbed, bankrupcies… but interest rates are at rock bottom and won’t be ’til June. So why November? Smart money always gets out before misery unless it has nowhere else to go.

This could well be the last quarter of growth for the next 3 or 4 quarters, for starters. People who don’t believe this, are probably the same people who once stated, “Canada cannot do well with the U.S. in a recession”. I’ll simply remind them that they can’t be right on both. As well, technically, mining has taken a good pop from falling copper inventories on the LME which began in early spring, leading base metals out of the basement, the one good thing that has happened this year besides a higher price of oil for commodity owners. This trend has reversed itself last week and considering that copper output already dropped 8% globally since last fall, this can’t be good. (it sure isn’t good for Canada and its market, heavily laiden with mining and energy stocks) It means asia is slowing down which is also predictable. Again, the U.S. is in a recession and the numbers just keep getting worse.

And oil has been robust but where has natural gas been? Why is Alta hurting? Put it together, folks. Commodities won’t be as shiny as it once was for a while yet. November combined with what is likely a high market index and once interest rates start rising again in June…. smart money bails in November (strick that, before November) and like most every other big wave that hits a beach, it hits hard. Don’t get caught in the riptide.

How could I have been so shallow? – Garth

And so sure of yourself through it all… like myself… I could be wrong on the timelines, just like you and live to regret the telling of this post to the end of my days. Cut out the blemish on the apple, leaven the loaf, we’ll still shine up ok, because at the end of the day, its not if, its when. Haha! :-]

#85 Dan in Victoria on 07.26.09 at 1:17 pm

Reminds me of Lex Luthor, who is the undisputed master of Metropolis and lord of all he surveys…. http://www.batman-superman.com/superman/cmp/luthor.html maybe him and the rest of the real estate cartoon characters will soon be erased.

#86 Nostradamus Jr's Analyst on 07.26.09 at 1:23 pm

#65 Rick: Does any one know what the POS in this sentence means?

I’m quite certain it has a different meaning than this POS.


#87 Dan in Victoria on 07.26.09 at 1:24 pm

So I was thinking that the universe always makes sense and self corrects…sort of.Then I remembered Planck’s constant http://ebtx.com/ntx/ntx27.htm so maybe this could be applied to what has happened in the real estate market.But ultimately it will correct.

#88 David on 07.26.09 at 1:27 pm

It is highly unlikely most of the bearish blogmeisters here will humbly prostrate themselves before any real estate permabull experts taking credit for being 100% correct. End of story with a fairy tale ending no less. One has to wonder if the experts actually look at any actual market data and if they did, they might reach a very different conclusion. Between 1984 and the beginning of the bubble in 2005 real inflation adjusted median incomes did not budge and people can check out Statscan if they want.
This guy must be the only one declaring the recession over beside Carney and Harper. Minimal down payments, weak fundamentals and absurdly low interest rates were a great mask that will eventually be removed when the correction begins in earnest.

#89 T.O. Guy on 07.26.09 at 1:31 pm

I’ve been a loyal reader for a long while now and I had thought and hoped that house prices would come down so that I could eventually jump in.
I’ve been spreading the news of the coming RE correction for over a year now to family, friends and coworkers and all the while getting and feeling the heat from all directions that I was a complete idiot and missing the boat on this next wave of price appreciation.
I have realized as you have stated many times that RE is a very emotional purchase and when emotions are involved common sense does not exist. (reminds me of relationships, the head is never used)
It is on this point that I have stopped expressing my views on RE to everyone I know and I’m tired of looking like a complete fool.
So I have to make a choice to either wait this new bubble out which doesn’t look like it’s going to end soon or jump in like anyone else is and get a super low mortgage rate and hope for the best in five years when I need to renew my mortgage. Wish me luck.

#90 R on 07.26.09 at 1:45 pm

Has anyone thought about what the swine flu panademic could do to all of us and the economy? Not only here but in the U.S. as well. Here in Vancouver we are hosting alot of people this winter. We are just asking for trouble! IMO this will not end well. I hope I’m wrong.

#91 Munch on 07.26.09 at 1:50 pm

Hey Garth?

Here is some wild advice, from the tip of Africa.

Ignore it at will – I promise I won’t be offended!

Let’s examine the facts – the real estate bubble is alive and well in Canada, DESPITE the obvious facts as so eloquently laid out by yourself. Garth, resorting to sarcasm is not going to help, and is not becoming of you. So please, rather refocus your efforts and try something different! What you have done to date has obviously not worked, and you have had very little impact.

They say the definition of insanity is doing the same thing and expecting a different outcome.

In that sense, Garth, you are probably driving yourself insane.

Do something different, garth!

Or do the same thing, differently!

Stop banging your head against the wall, Garth!

Listen to me, Garth!


Reach, further!

Different, Garth!


Thanks for listening!

Fondest possible regards, Munch

#92 Patiently Waiting on 07.26.09 at 2:14 pm

“Does any one know what the POS in this sentence means?”

Power Of Sale, its an Ontario term.

#93 wetcoaster on 07.26.09 at 2:15 pm

“So, when is the next price correction? When it takes ten times income to buy a home? Twenty times? When all citizens have become real estate millionaires by selling out to aliens, or maybe refugees from Vancouver?”

Garth, there is no mention of this word “affordability index” any longer, it is passe,out of vogue and only for idiots that don’t think prices will just keep on going.

The other thing that is passe is the nonsense talk of “if the prices go up another 10%-20% then who are these next greater fools and how much money will they have to make to actually qualify ? ” Oh right , we’re all getting a 20% pay hike next year so no worries there.

What about all those condo cancelations and walkaways along with developers who wanted another 30% more or get lost ? How fast the MSM and RE pump machine soon forgets, those are bad news stories and oh so passe.

#94 joel brico on 07.26.09 at 2:24 pm

Here is one of the stock markets old sayings:

“Markets can remain illogical longer than you or I can remain solvent”

My re-write for the saying for the RE market:

“RE market is illogical and we are insolvent but don’t know it yet”

RE is one market were we go insanely insolvent with the belief of becoming solvent in the future.

Any can care to write their own?

#95 Rich Grover on 07.26.09 at 2:25 pm


maybe everyone has already seen this one, but she’s beaut.

#96 HJD on 07.26.09 at 2:38 pm

I’m beginning to wonder who actually are the sheep.

#97 Daystar on 07.26.09 at 2:39 pm

When it takes ten times income to buy a home?

Between 2018 and 2021. Its cyclical

My mistake, I was thinking 10 times multiples Market Cap vs. corporate book value for some reason, in which case, barring a world war or world disaster of epic porportions, we should see 10 times multiples i the markets between 2018 and 2021.

In answer to your question, the likelyhood is… never. Its a trick question. But one can never say never so it might be wise to imagine what kind of scenario it would take for such an event/anomaly to occur.

So what could breed such a scenario if it was ever to occur? Peaking worldwide populations and chronic shortages of basic goods and services could do it, combined with rock bottom interest rates. If such a thing was to occur, it means commodity inflation is on a runnaway train driven by population consumption at such a frenzied pace that the value of a commodity becomes number one in terms of the big three: intellectual properties, construction/manufacturing and commodities.

Real estate affordability would have to be spurned on by interest rates at or near zero and generally, when commodities inflate at such a pace as I”m thinking is needed, interest rates would not be cheap under major commodity inflation levels. But… things can change as quickly as goverments with or without vision. One of the big factors I might be overlooking is… population growth spinning out of control world wide? Propaganda? Government mortgage policies offering 100 year amortizations with fixed low fixed interest rates? Its not to say that 10 times income to buy a home could not be achieved, but what government in their right mind would want to take us there?

It seems as though this Conservative government wants to go there. They believe that high real estate valuations spun by cheap interest rates and propaganda enticing as Garth has directly stated, first time buyers, is is our saving grace as personal equity inflates across the board and so will our markets and consumer spending. Unfortunately, they won’t think (or did but it doesn’t matter) of what happens when interest rates are forced to rise, and what will happen to real estate valuations as affordability shrinks and all the new home buyers facing negative equity as real estate valuations drop leading to Canada’s subprime scenario recently experienced in the U.S. or shrinking personal equity shrinking the markets and consumer spending… Unfortunately, they won’t think of increased taxes, or reduced spending which should have been done a year or more ago. Instead, they’ve decreased taxes and ballooned spending… The fallout is ballooning national debt they won’t have to deal with as they’ll be long gone, in opposition blaming increases in taxes on the next governing party and when interest rates rise, a mini real estate bubble collapse of which, the pancake will kick start the real recession will follow and you all know the rest.

The feds should have gone with low interest rate policy, that much I can agree with… (not rock bottom, though) but coupled with reduced spending and leaving the GST alone and much tighter CMHC restrictions then they had and they didn’t do it. They had years to do this, went the wrong direction from the start and still won’t do it. CMHC will take some heavy (and I do mean heavy) losses starting a year from now and there will be a lot of red faces in Canada, I can assure you all.

And do I really have to say this? It is Conservatives, Liberals, NDPer’s Greens and others alike that will end up paying for such major blunders. We will all pay for such stupid mistakes such as 40/0’s or… more sinister intentional planning that gives the rich time to bail and find a greater fool as they know cash really will be king in the near future under the scenario about to happen and that folks, that kind of dark, is the more likely scenario where these government policies are not from fools, but much more likely, from those who are corrupt. Tell me… under that scenario as it is the most likely… dear Conservative voters… do you still like your goverment of choice? How many years did it take for Republicans to wake up to the strong possibility that their leader, GWB, was a fool? (or much more likely corrupt and or both) 5 years? 7? 8? And at what cost is their nation experiencing now from such leadership?

Voters… pay attention!

And interestingly, speaking of scenarios, I’ve stated repeatedly with my own collegues that commodity valuations will propel Canada and moreso, the U.S. out of this recession (not recession defined by “Carney”ism, but defined by logic) and I’m predicting agricultural products above all to be the big driver for the U.S but its 5 years or more away. Can food products become worth more than energy? Grain, for those who don’t know this, is worth a third less than a gallon of gas by the pound. In time agricultural products will be worth much, much more. When one thinks about it (and I mean really hard), what else can the U.S. do to boost exports? (besides protectionism, more wars, legislating their corporations back to manufacturing at home again, but these things along with a pennies on the dollar greenback will take decades to happen). Not much.

The U.S. manufacturing base has been decimated, their financial, political and military system turned inbred and corrupt, where is their strength? They are an empire in serious decline and it will take bare bones basics for them to maintain, never mind further slip on the world stage. It will take luck, larger world populations, some drought and some badly needed leadership and with what I’ve witnessed… but they have Hollywood and Iggy Pop so there is hope, lol! (And their mortgage rates could go down coinciding with the housing bottom and that could be enough to give them a framework to build on leading them out of the recession as well)

Oh, God, the time, I’ve got work to do. Y’all have a great day!

#98 PTDBD on 07.26.09 at 2:50 pm

Do you remember the dot.com mania?

It took a looooong time for reality to take hold and fortunes were made while the scoffers stood on the sidelines shaking their head in disbelief.

It’s hard to maintain the rational position while the irrational are raking it in.

Some theorists are indicating that the inflation/higher interest cycle is not necessary were we to change our monetary policy. No mortgage rate increases. Possibly no more taxes if these measures were adopted. (See Web of Debt references on Friday’s blog) Yet, none of you responded to these possibilities.

I suppose it’s a learned response – maybe the lesson of the elephant tied by a mere string applies here.

#99 Shifty on 07.26.09 at 3:24 pm

Carney and Flaherty are singing from the same song sheet. You get only one guess who the conductor is. I seriously doubt the recovery is going to be this quick or easy.

#100 betamax on 07.26.09 at 3:29 pm

I remember someone writing that an irrational market will generally inflate to the point of doing the maximum amount of damage to the maximum number of people before correcting. Seems accurate in this case.

Nature abhors a vacuum, so why not suck all the fools with easy credit into the bubble before imploding?

#101 Bobby on 07.26.09 at 3:36 pm

I remember when the so called experts were calling Nortel a screaming buy when it fell from $124 to $65.

Of course there were the experts who just this time last year. spoke of prolonged growth.

No, just look to the US to see what will happen. All the charts are lagging the US by 2 years.

Don’t believe everything you hear. Sadly, many do.

#102 $fromA$ia "Garths Nugget Boy" on 07.26.09 at 3:38 pm

The housing correction will be through inflation in Canada.

The USA is different because the lenders stopped lending as loosly as CANADA. Thats why USA RE is down and CANADA is still riding high.

There are two options here.

1.) Garths’ idea of long term deflation with artificially low rates and a housing correction . (Which hasn’t happened as of Late especially)

2.) An unforseen inflationary spike because of false inflationary measuring perameters (CPI is a joke) that no economist has been following properly. This will cause home values to stay in the upper range with the price of everything else rising to justify real estate prices.

This isn’t JAPAN this is a world wide issue. Don’t expect years of deflation and low rates. It’s not a cure for mistakes and Government financial medalling.

#103 jess on 07.26.09 at 3:46 pm

refinancing: robbing peter to pay paul
and don’t forget the commerical from home depot that told you to buy now and don’t pay the interest til’ 2010.

#104 Samantha on 07.26.09 at 3:56 pm

#96 HJD

“I’m beginning to wonder who actually are the sheep.”

The sheep are the ones who will be bleating “baaail me out, baaail me out” or “baaad decision, baaad decision” once they encounter the consequences of their fiscal foolishness.

#105 dd on 07.26.09 at 4:12 pm

#82 Nostradamus jr.

…”Smart! The moment China tries to buy stuff in the US, of course, everyone will freak”…

China tried to buy California energy firm Unocal Corp in 2005 and the US would not allow it becuase of Washington “national security.”

You should have predicted that one 500 years ago.

#106 TheFirstRick on 07.26.09 at 4:28 pm

#63 Crashing Yuppy on 07.26.09 at 9:32 am


Am I right or am I right?


Youz is right!

#107 Coho on 07.26.09 at 5:47 pm

From Mish’s site,

Wonder if this was a forseen or unforseen consequence. The bank bailouts have turned the majority of people from blaming home/credit card owners for defaulting on payments to a 62% figure now blaming the banks for lending them the money.

Since the banks’ risk through gov’t action has been ultimately put on the shoulders of the people, their actions are now seen as irresponsible and unaccountable, which was the sentiment of the people towards themselves before.

Socializing losses while keeping profits privatized is the order of the day.

#108 ralph on 07.26.09 at 6:07 pm

Came across this headline today:

“British economists apologize to the Queen over financial crisis”


Now I am really convinced that the world has gone to hell in a hand basket.

#109 Nostradamus Le Mad Vlad on 07.26.09 at 6:38 pm

Today’s Fantastically Freaky Krazy :-P Kornucopia Of A Konspiracy Theory comes straight from freelance journalist Jim Taylor’s column in The Okanagan Sunday (e-mail [email protected] , no site). Headed “Corporations care only for themselves”, here are a few excerpts.

“. . . the global economic downturn. Individuals are losing jobs and / or savings. Businesses are closing. Corporations seek bankruptcy protection — although Nortel, which almost single-handedly boosted the TSE to record levels during the dot com bubble, managed to hand its executives $45 mln. in bonuses while under bankruptcy protection from its creditors.

“. . . in the midst of oil prices that plunged from US$150 to under $40 / brl., Chevron earned its biggest profit in history. . . . Chevron moved from the sixth- to the fifth-largest corp. in the world, and into third in the US, right behind Exxon-Mobil and Wal-Mart (Royal Dutch Shell and British Petroleum push into the top five worldwide).

“. . . Chevron’s annual income is greater than all but 36 countries. . . . Since 2002 Chevron’s profits have increased by 2,100 per cent. [ NOTE: It is expected that companies make reasonable profits, but that is a little exorbitant. ]

“Chevron’s oldest refinery is in Richmond, California. When voters passed a measure that would have increased Chevron’s taxes by US$16 mln. / yr., Chevron took Richmond to court. The whole state is teetering on bankruptcy.”

Etc., etc. Indeed, WE THE PEOPLE are being led straight down the garden path to hell (like good sheeple) — via the pre-planned, worldwide fiscal takedown, this knick-knack of a pandumbic and, more than anything, people’s moods are turning nasty and violent.

Are elephants really scared of mice? Well, there are more than enough elephants in the room to squash us into oblivion, but if we all turn into Rotten Rodents, scare the bejeezus outta them, maybe they will find a nice, large black hole to get Comfortably Numb with one another!
#97 Daystar on 07.26.09 at 2:39 pm — “The U.S. manufacturing base has been decimated, . . .” — Covers small business and figures for US manufacturing, etc.


#110 wayupnorth on 07.26.09 at 7:14 pm

#105 DD

The U.S. is smart enough not to let other countries buy up their companies or even arge amounts of real estate, unlike our history. China now owns a mine in the Yukon, oil company in Alberta and I believe another mine in B.C. that I have heard of up till now. It is probably more since Canada is the only country in the world I know of that allows anyone to buy up our companies without going through some sort of strict accountability with regards to national interests. The joke of the government whining about Stelco and what used to be Inco in Sudbury shutting down is a good example of loose, unenforcable and weak rules when it comes to takeovers.

Its a good time to buy a house if whats left of our industry is going to be owned by Chinese companies brnging their own ideas of business here.

#111 David on 07.26.09 at 7:17 pm

The world is a very complex place in which we live. It takes more than one person who may have a personal opinion on how things may turn out.

We are not out of the woods but there are some encouraging signs.

#112 Basil Fawlty on 07.26.09 at 7:26 pm

Interest rates, set by the federal government, are below market given the associated risk of repayment. The question is why is the government creating a situation where borowing money is so easy when the underlying economy in Canada and most of the world continues to deteriorate? Is it because they have few other options and are trying to keep the economy afloat by any means possible? They know what happened when the credit bubble burst in the US and yet they are pushing more credit on the public at a time when personal savings rates are increasing.
They are pushing more debt on an underlying economy that lacks the ability to pay it all back, which is pure folly. Carney and our economic “leaders” are just plain dangerous to the future of our country and it’s social infrastructure. We are approaching endgame here and it will mean massive cutbacks in government spending and a social disaster. If you think this is sensationalist, just look at California, Ireland or Iceland. Oh yeah, and unemployment benefits have not even run out yet. Our leader should be circling the wagons, but instead they are throwing gasoline in the bonfire.

#113 Soylent Green is People on 07.26.09 at 8:23 pm

Check out those peepers! I don’t care how crazy he is, he can Brad my Lamb any day….

[email protected])(#& MERCY

#114 Jonathan on 07.26.09 at 8:48 pm

So he took credit for calling the bottom.

Did he call the high in early 2008? Did he ever say that prices would fall?

These guys would be pumping it no matter what. They were calling the bottom all the way along.

#115 tech4monkies on 07.26.09 at 9:02 pm

Hello, long time reader (great site!) and first time poster….

Had abit of a shock with the bank this week that I’d like to share: sold my house and instead of paying the standard 3 months interest penalty, its now the IRD (interest rate differential) penalty, which just means they calculate all the money that the bank WOULD have made over the term and THIS is your new penalty. ouch.

What is going to happen to all these younger sheeples with 25 year terms when they try to sell or get out? Its legal, but its immoral in my opinion.

This sheeple is SLOWLY waking up from its long slumber! Keep up the great posts here. thanks

#116 john m on 07.26.09 at 9:04 pm

Well the facts are out there..its reality!….we are fortunate to live in one of the most resource rich countries in the world..we don’t have a political party to represent us that is willing to give us some cold hard facts for the betterment of our country….question period in our parliament should be an embarassment to every citizen but sadly enough people vote for the idiots that perform there daily while nothing is achieved…….(do other countries conduct business that way?)………we are headed for disaster and most likely depression…we are-and have been fortunate to see what is happening around us with an opportunity to view the mistakes of others and prepare–have we? (NO) … our political leaders are trying to fraudulently protect their futures a day at a time relaying false data . People swallow this crap ???? –it boggles my small mind. Well if nothing else..if just watching one session of question period doesn’t convince the world we are the stupidest generation on the planet……our actions are..:-)

#117 Coho on 07.26.09 at 9:59 pm

Even though we’ve had an 18 month preview of what has befallen other countries affected by the global financial crisis, our gov’t action or re-action to the “mistakes” of other countries has been to do the same thing. Thus, it is logical to conclude that our leaders” have been dictated to by the the administrators of this planet to do the same thing so that we’ll all fall like dominoes.

#118 nonplused on 07.26.09 at 10:38 pm

#31 lili

“Capitulation”, as a market term, happens at market bottoms with great selling pressure, not at market tops. Capitulation is marked by large volume at lower and lower prices, not by rising prices What we have here is “Momentum”.

I keep posting this guy’s charts, particularly this one, but nobody looks at them:


The dude doesn’t draw the trend lines, but if you know how to print a chart and draw trend lines with a ruler, the conclusion is clear: big rally, downtrend intact. In all markets. Toronto is way up, but it’s still below the trend (never had a bubble like out west), so the big news is little news really. The market needs to go above the old trend and stay there for a couple of months to confirm a break to the upside. Yet it hasn’t even taken the trend.

We have a rally every spring, whether the market be up or down, as shown on the charts. This has been a heck of a spring rally in Toronto, but no where else.

#34 Jeremy

Why not? Everyone else is, including her.

#38 JoeK

Reminds me of a saying: “My Ex took me for half my net worth. I thought it was cheep at twice the price!”

Or a comment on the market meltdown from a New York Hedge Fund manager: It’s like getting a divorce, only I still have my wife!”

#57 Darryl

The dollar coming down is always a bad thing for the wage earner. Here is how it works: 2007 Yamaha V-Star 1800 at $0.80 on the buck: $17,000 plus GST, shipping, and assembly. At near par: $12,800 out the door. You figure out how much you want to pay. It applies to anything you buy.

#119 Mike (Authentic) on 07.27.09 at 6:22 am

There are people who believe money is the end-all-be-all of life. The Condo “King” is one of them.

Guess they are not wise enough to know there are other much more important things in life than cash. And unless you bury yourself in a gold-plated coffin (MJ Style), then you can’t take it with you anyways.

I’m following your advice still Garth, I believe in what you say. It just takes time and not a lot of us have the patience we should have to wait.


#120 brett on 07.27.09 at 2:28 pm

#118 nonplussed.

thanks for that chart, I have been looking for charts like those……


#121 Ronaldo on 08.01.09 at 11:57 am

It seems there is no shortage of “Greater Fools”still wandering about aimlessly without a clue what is taking place in our economy. There is absolutely nothing you can do for them Garth. They will have to learn for themselves just as thousands of others before them. Remember back in 1980 when the “Greater Fools” were rushing to the bank to lock in mortgages at 22% convinced that rates would continue to rise. Will we see the same insanity repeat itself when the rates turn around from their all time lows and rise once again to at least 8% in the next couple years. What a trap that is being set by our wonderful Gov’t and Central Bank only to keep the bubble to grow even larger so that it can pop with a bigger bang. Insanity.