You want logic?

Spock Kirk

In kicking around the money business for many years, as newspaper columnist, business editor, a network TV talking head, book author, radio guy, financial speaker, a gig running the country’s tax system, blogpreneur and (soon) something radical, I’ve come to understand there are but two emotions.

Of course, fear and greed. People in the financial business know they power 98% of investor decisions. Greed, for example, is what kept otherwise smart millionaires glued to Bernie Madoff, who gave them incredible returns in good years and bad. Fear is what provoked millions of stock and fund investors to panic and bail last autumn, even though they sold at the moment of capitulation.

Greed is what makes people buy assets when they’re at their most expensive. Fear drives them to sell when they are cheapest. Thus, fear exaggerates losses and greed erases gains. Nothing changes. Buy at the top. Sell at the bottom. It suckers us all

Today, of course, palpable and debilitating fear seen eight months ago is melting into unbridled greed. Why else would normally successful, professional and savvy people try to outbid each other for houses nobody wanted a season ago? After all, these are folks that would never buy a car that way, even though it’s worth hundreds of thousands less. They’re also the ones piling back into the stock market, many of them on margin, after a 40% rise since March. Would they rush to buy anything else whose price rose 9% a month? And why weren’t they shopping at Easter, when everything was on sale?

Emotions. That’s why. When they roil, logic goes limp.

And this brings us to humid, smoggy, fetid, emotional Vancouver.

Hi Garth: I’ve been in a running battle with my girlfriend for over a year now on buying real estate in Vancouver: she is itchy to buy and I am content to rent. And of course, the more it looks like the worst is over, the more she is tempted to throw all our savings in to catch the gravy train. I’ve given her all the arguments about why it’s preferable to rent than to own in this city at this time, although she understands the arguments greed and emotion always prevail in the end. Like most people, a) she does not like writing cheques to landlords even though owning means writing cheques to banks instead; and b) she believes inflation will eat away her savings if we don’t buy and leave our cash in GICs.

So, last week I came up with what I thought was a very original argument:

To rent a $20,000 mid-sized car from Avis/Budget for a month, you’d pay ballpark $750. Expressed another way, 20000/750 = 27 months of rental to pay for full cost of a brand new car.

To rent a $500,000 2 bedroom and den in Fairview/Yaletown/Kits/whereever, you can expect to pay ballpark $1800/month rent. The ratio here is 500,000/1800 = 278 months (or 23 years) to pay back the principal cost.

It is about 1/10th as expensive to rent housing as it is to rent cars. The return on capital just doesn’t come close.

As I expected, this very compelling argument failed to have the desired effects. It leads me to a very sensible conclusion: all the logic and reason in the world cannot prevent a housing bubble. It’s driven by emotions and the masses will always do what they’ve done: walk into the slaughter. By the way, my girlfriend is a very successful lawyer with a BA in Economics to boot. Intelligence and education count for nought.

Just thought I’d share this with you. — Hank

P.S. To win the housing debate,  I had to resort to threatening to leave her if she signs on any dotted lines. Fire must be fought with fire.

Nice try, brother. But we both know you were bound to lose this one. These days it seems to be a Mars and Venus thing, too. Nesting girlfriends, even smart, lawyerly ones, just can’t see any logic in having piles of money lying around when it can all be thrown at a home you do not actually own.

Of course, her arguments lack reason. It’s cheaper to rent than own exactly the same accommodation, even with rock-bottom teaser mortgage rates. And while the interest on savings may be minimal, in a deflationary age (that’s now) even bags of cash grow more valuable. Your g/f has to admit she wants to buy in at the top of the market (pre-Olympics, average SFD price $701,384), and that there’s absolutely no evidence Van prices can continue to rise in the near future as mortgages escalate and affordability plops.

You say she sees a gravy train? I see a train wreck. So do you. But you love her. So I like the sign-and-I’ll-leave thing. Nice touch.

Now print this blog and leave it on her pillow. Let us know how that turns out.

OK, beam me up.

HOWE STREET BANNER

For Garth's latest podcast, go here.

114 comments ↓

#1 squidly77 on 07.27.09 at 10:22 pm

whats a realtor got to do with it
http://albertabubbleblog.blogspot.com/2009/07/blog-post_7999.html

#2 ArunPillai on 07.27.09 at 10:26 pm

Hi, Did you see this?
http://www.vancouversun.com/business/Monday+Trading+hits+high+2009+rising+home+sales/1834519/story.html

Is this means everything is fine now or going to go down again?

#3 TaxHaven on 07.27.09 at 10:28 pm

Agreed. But it can only get more difficult sitting in cash. The current market rally is looking more and more like the current housing market. Those of us who advise and invest on the fundamentals sit in shorts or cash, while those short the housing market rent. We stay out of overbought consumer, financial or RE stocks. They stay out of the housing market.

How long can this rally continue? It was supposed to be over long ago…the longer it continues the more we look like Dodo birds…

#4 Onemorething (aka DaHKkid) on 07.27.09 at 10:48 pm

It’s simple! The longer this rally continues the more sheeple join the ranks. Do you honestly think the elite are buying up RE right now?? no freakin’ way!

When it comes time to pounce, there will be less players at the table so mucho yield for those who have been patient during these uncertain times.

#5 Samantha on 07.27.09 at 11:02 pm

Hank –

“I’ve been in a running battle with my girlfriend for over a year now on buying real estate in Vancouver: she is itchy to buy and I am content to rent.”

Hank, sex and money are the two main reasons for divorce. You are not married, yet and here you are in this “running battle” that has gone on for “over a year now” about whether to buy real estate or not.

It is especially bad that you actually had to “resort to threatening to leave her if she signs on any dotted lines.”

This is a big red flag that you should pay attention to. There would be a lot less divorce if people sat down and recognized these issues before marriage.

True compatibility over time is measured by you and your partner’s position on major life issues such as real estate (the biggest purchase of your lives) and child bearing (when to do it and how many) and child rearing.

Money management enters into all of the above life issues. Based on what you have written it sounds like you and your girlfriend are polarized on a very important money management decision.

Threats are not a way to solve this situation. It might be a good time for both of you to sit down and talk about the values you hold surrounding this issue. For example, some people want a house at all costs and don’t consider timing the purchase – they just want they want when they want it. And this attitude can carry over to many other aspects of their lives.

If your girlfriend wants a house at all costs and you don’t, then one of you is going to feel resentful sooner or later, so it’s better to deal with this now.

There are many things couples can squabble over, but a successful relationship (and a happy one) runs like a well oiled machine with both partners of the same (or very similar) mind on the big issues.

Good luck,

Live long and prosper.

#6 Nostradamus jr. on 07.27.09 at 11:14 pm

>>And this brings us to humid, smoggy, fetid, emotional Vancouver.<<

…Vancouver is a sh*t hole, humid is a good day, usually its covered in a blanket of smog, fetid worse than Toronto and we've no interruption of regular garbage pickup…leaving "emotional"…if you throw in "rich" then you have the worst combo going, emotionally, rich b*st*rds who live in Vancouver.

No question, the new underarm pit city of Canada…the long time previous underarm pit of Canada was St. John New Brunswick but Vancouver takes the crown away.

#7 greyhound on 07.27.09 at 11:29 pm

Where is the money coming from to fund all those low-interest-rate mortgages? It used to come mostly from Asia; now governments are increasingly creating it out of thin air.
How much of the current 40%+ rise in the stock market (since the March low) is because of “quantitative easing” liquidity being invested by the big institutions that the federales have saved?

Unfortunately, at some point our foreign friends will intervene in this little game. The trick will be in figuring out when that might happen. And being prepared for it when it does.
Until then, it’s up, up, up and away!

#8 Grantmi on 07.27.09 at 11:37 pm

New Caption!!

Spock – “Captain! If you don’t buy a home now at these low interest rates…. you’ll forever be living with those damn Tribbles!”

Kirk – “Totally illogical Mr. Spock. Totally Illogical”

#9 Denis on 07.27.09 at 11:40 pm

“Now print this blog and leave it on her pillow. Let us know how that turns out.”

Hahahaha… Nice touch!

#10 dd on 07.27.09 at 11:48 pm

…that there’s absolutely no evidence Van prices can continue to rise in the near future as mortgages escalate and affordability plops….

Even when you spell it out in black and white there are people living in North Van that still don’t get it.

#11 Fool me once... on 07.27.09 at 11:52 pm

Well Hank, I guess you’re going to miss that girl.

#12 Larry on 07.28.09 at 12:20 am

Hank leave her she just wants to ruin you financialy.

#13 What the..... on 07.28.09 at 12:37 am

Hank – we are in the process of putting our Vancouver (westside) house on the market for people just like your wife. We couldn’t resist trying to get $200k-$250K more than we would have gotten at the beginning of this year.

Garth, does this make us vultures?

#14 Devil's Advocate on 07.28.09 at 1:07 am

Hank

You have a girl friend who is a successful lawyer with a degree in economics to boot?!? Way to go Dude! She is working… earning a reasonable income herself based on your indication she is a “very successful” lawyer. She has financial voting rights far in excess of many women in a relationship.

The Venus/Mars thing has legs. Were it not for the nesting instinct of women many many more men would live in a camper on the back of a pick-up or sail boat in the straight. Why do we men work? To get women. Birds do it with fancy coloured feathers humans do it with a bulging wallet. It’s what we do.

When you go on a trip your GF likely brings a lot of baggage along… It’s what they do. Best advice I’ve heard in choosing a woman is “before you do take her camping”. That one act will tell you a lot. It will also let you know what you can expect to wake up next to every morning for the rest of your life.

Another good bit of advice; “Happy wife, happy life”. If you don’t keep her happy it’s gonna cost you a whole lot more than a house in the long run my friend.

Women buy houses not men. Trust me I’ve sold enough of them to know.

Bottom line… quit your bitching, man up and buy the house. After all what’s a few hundred grand when it comes to matrimonial bliss or the dog house? In fact go all the way Dude… ask her to marry you… commit. Or, you can always go buy a pickup and camper or sail boat in the bay and chow down on steak and/or crab with different company each night. Sort of like the camping test.

#15 Disappointed Canadian on 07.28.09 at 1:19 am

Hank forgot to add the hidden cost!!!
Mortgage costs
Maintenance
Taxes
Lawyer
Real Estate fees

So it go through the roof…. So technically it is cheaper to rent!

FOOL FOOL FOOL!!!!

#16 Kilt on 07.28.09 at 1:37 am

If you have the money for the 20% down, and you are sick of renting, why not buy. Will you be able to buy the same house cheaper in 2 years, maybe! Garth is trying to point out that if you can only afford to buy at 3% interest rates, with 5% down and a 35 year mortgage then now isn’t the time to buy.
Rather than just say no, we are not buying, why not throw out a time frame. Tell her to wait 6 months, or until after the olympics. A little patience probably won’t hurt right now.
Another argument I use to justify not buying a house/apartment for $500,000. Ask yourself how long it would take you to save up that much money.

Side note to Garth – There is nothing wrong with buying on margin as long as you don’t overextend yourself and you are aware of the fundamentals of the company your are buying into. You can also generate very good returns selling options on the purchase shares. I am averaging 6% yield per month. And this option income is a conservative approach to any downside swings. It limits your gains, but no need to be greedy

Kilt.

#17 confused and a little crazed on 07.28.09 at 2:35 am

Well…if this is a recover, then fine.

I bought some stocks in may – june. Some are up to 20 %others down 20 % but i ‘m still getting dividends on all 2 -5 % . Homes don ‘t give dividends. But if the whole markets tanks that’s fine to. I just use my remaing cash to buy a place. But not to worry bernanke will save us . how bout a 400 Billion stimulus part deux. He said himself he will not be the finance guy working thru the 2nd depression. he ‘ll print $$$ no matter how much to keep it afloat and let the next guy worry about the consequences

#18 Mike (Authentic) on 07.28.09 at 4:15 am

Great topic.

Fear are Greed… Well, I just feel into that trap (again) trying to play the currency game (US to CDN).

$2000 USD in paypal for the past week, did I exhange it right away to CDN? No, held out, waiting for “a better return” and what happens? I lost $100 waiting…

But there is a good example, greed (hoping the USD goes up) and fear (selling USD to CDN now) because I worry I’ll get less tomorrow.

Luckily I don’t play stocks. haha.

Mike

#19 Mike (Authentic) on 07.28.09 at 4:31 am

Even those who sit and ponder what to do, if waiting is getting too much, you REALLY SHOULD at least wait till winter. It’s the best time to buy a house historically. Low inventory but lowest prices of the year too.

It’s like waiting to buy a 2009 new car when the 2010’s start to come out. You’ll get the best deal on that 2009 vs a few months ago. I just makes economic sense.

So wait till winter. (at least)

Mike

#20 wjp on 07.28.09 at 4:45 am

It must be difficult to sit on cash and watch the Real Estate Market and the Stock Market head higher. I only wish I had that problem! The only thing directly affecting our family is the continual rising prices at the supermarket this year, and the new tax on everything coming in mid 2010.
I have had my long standing opinion confirmed through this recession however, the average person does not belong in the stock market as Garth said above “People in the financial business know they power 98% of investor decisions”.
Governments and large financial institutions drive the markets and unless you are on the inside, you are at their mercy. Funds invested in the market should be considered the same as those in a poker game, if you can’t afford to lose it all, don’t play!

#21 David Bakody on 07.28.09 at 6:10 am

Good analogies Hank …. as for the car think …. just renting a car on week end (s) and holidays is even better. Take a cap or bus to work …. hello in NYC even richer people to it hello? To-days news of hotter than hot weather in BC spells even more trouble for home owners …. hello again? news that State Mass is raising taxes 25% to cover cost of keeping utilities up is a sign of what is to come in North America ….. hello hello again? AND FOR THE LOG why are people and our backboneless media not catching on to all this STIMULUS money spending …. who is going to pay the piper, our past and present MP’s and Senators? try the middle class and wannabe millionaires that’s who!

#22 Bottoms_Up on 07.28.09 at 6:47 am

Your girlfriend is part of the borg, and she is trying to assimilate you…..(you all know where this is heading)….”resistance is futile!!!!”

#23 charles on 07.28.09 at 6:48 am

…there are but two emotions,… fear and greed…
Nasty way to go through life. If you relate to this statement get help, and I dont mean financial advice.

… and (soon) something radical,…
Can we start a betting pool on what you are up to?
Space tourist?
Founding a Political Party?
Giving away your wealth to join a monestary?
Pornography?
Teaming up with Holmes on Homes?
Nascar?

#24 Happyplace on 07.28.09 at 7:24 am

#5 Samantha – Great post!

#25 Bill-Muskoka (NAM) on 07.28.09 at 7:31 am

Ah, Garth, the true test is to ‘Live long and prosper!’ That requires wisdom, logic, and that seemingly rare characteristic called PATIENCE!

One should note that the very phrase denotes the necessities of long (time) and prosper which is like driving the 400 highways. One can hug the arse of the person in front of them (granting control to the other driver) and play the Rubber Band Traffic Flow scenario, or they can simply space themselves out so the adjust with the speed of the total volume but never have to brake of stop. They are still part of the flow, but have the buffer to avoid the waste of time, energy, stress, and accidents.

Perhaps there is a major lesson for everyone in that simple bit of wisdom whether it be driving or investing?

#26 Toronto C9 Renter on 07.28.09 at 7:34 am

I’ve been keeping an eye on the market and last week decided to buy a relatively modest detached home in the Moore Park / Rosedale area of Midtown Toronto.

It was an estate sale, needed a bit of work but nothing I haven’t done before.

So I dutifully submitted my offer at the appointed time. I added 40k over list just for good measure.

I was somewhat suprised (but not that much, really!) to learn that I was but one of ten sheep with the same idea.

When the dust settled, my cash was returned and I plan to put it back into the stock market over the next few days.

Perhaps I’ll try again in a few months, guess we’ll see!

#27 Frank on 07.28.09 at 8:26 am

http://www.ritholtz.com/blog/2009/07/real-estate-quote-of-the-day/

“National New Home Sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.”

-Mark M Hanson

#28 moneywoman on 07.28.09 at 8:35 am

To Kilt,

Regarding selling options on shares you own, if it was so safe and easy, why isn’t everybody doing it?

#29 Greg W., Oakville on 07.28.09 at 8:47 am

Hi Garth,

I have also heard about the three great motivators of people, Fear, Greed, and Glory.
One or all can often be used to explain the motivations of a person.

#30 Denis on 07.28.09 at 8:48 am

Record number on unemployment: Statistics Canada says 778,700 are collecting jobless benefits http://bit.ly/glkdG

Recession’s over though … Right Carney?

#31 DrC on 07.28.09 at 8:50 am

Buy me a house, buy me a house! I need security. Hank, if that security isn’t inside your g/f’s heart and head now, then nothing you can ever do, nothing you can every buy will ever put it there. Because after the house it will be the boat. Or a bigger house. Or a new car. More, more, more. Peace of mind comes from within. Good luck.

#32 smw on 07.28.09 at 8:52 am

#2 ArunPillai

Yes, it totally makes sense that a small gain in home sales(not prices because they are still dropping) provided the rally in the TSX.

Pigs fly, monkeys shoot out of peoples asses and canada is immune to low corporate earnings…

http://image.orientaltrading.com/otcimg/k1a.jpg

Think its time to get ready to short the DAX, FTSE, TSX, DOW, HANG SENG, STRAIGHT TIMES and NEKKEI.

http://image.orientaltrading.com/otcimg/k1a.jpg

#33 dawson on 07.28.09 at 9:09 am

How about this:
http://www.theglobeandmail.com/report-on-business/record-number-on-unemployment/article1233425/

#34 Gord In Vancouver on 07.28.09 at 9:14 am

Mark Carney was right !!!!

Looks like our economy is recovering !!!!

http://www.canada.com/benefits+jump+record+level/1836200/story.html

#35 Wesley Moxam on 07.28.09 at 9:17 am

New unemployment graph: http://beta.images.theglobeandmail.com/archive/00146/jobless_146401a.jpg

Hey, it kinda looks like the housing price graph over the past decade! Using a Realtor’s logic, better get a job now before you’re locked out forever!

#36 Alberta Girl on 07.28.09 at 9:26 am

Regardless of what Mark Carney says and what Garth Turner says, it’s hard to let logic win sometimes. I work for a major oil company and almost all of my family lives in Ft. Mac. It amazes me the hundreds of resumes a day that arrive at my place of employment every single day, the numerous calls from desperate men (and a few women) that are in need of a job. Not any job though, they still want their $50 an hour and camp pay etc, etc.

My siblings tell me about all their neighbors that have three big trucks in their $700,000 bungalows filled with new furniture and pool tables and RV’s and quads and dirt bikes in the back yards…. they are all on the brink and the table is about to tip. How long can you have this much credit to pay off and hold the wolves at bay? My sister said on Friday she knows of 14 families that simply drove to the bank and gave them the keys and walked away. That was just last Friday in Fort McMurray.
Go figure. The same sister just sold her 1200 sq foot home for $660,000. Thats 30K more than she bought it for in 2007. This is pure craziness and logic has simply gone out the window…. Mind you, logic has never been plentyful in Ft. Mac.

#37 Mike (Authentic) on 07.28.09 at 9:30 am

EI roll hits highest level since 1997

Tuesday, July 28, 2009 | 9:14 AM ET
CBC News

The number of Canadians getting regular employment insurance benefits in May reached 778,700, the highest level on comparable records going back 12 years, Statistics Canada said Tuesday.

During the month, the number of people getting EI benefits grew by 9.2 per cent, or 65,600, from April.

“Since employment peaked in October 2008, the number of regular EI beneficiaries has risen by 278,300, or 55.6 per cent, with increases in all provinces and territories,” Statistics Canada said.

Alberta showed the fastest increase, and that province, plus B.C., Ontario, Saskatchewan and Manitoba all recorded their largest number of EI recipients since 1997.

In Alberta, the number of regular beneficiaries grew by 16.8 per cent to 57,000 in May.

Statistics Canada also reported that following two months of small declines, the number of initial and renewal claims received rose 5.2 per cent in May to 332,800, also a 12-year record. Individuals must first submit a claim to receive EI benefits.”

Sad news. Guess the stock market went up on this news today eh?

People lose jobs = market goes up.

#38 Munch on 07.28.09 at 9:38 am

Hmmmmmmmmmmmmm!

Nice Garth, nice!

Your “Case Study” today reminds Munch of this story.

“I am going to watch my wedding video in reverse later.

I love the part where she takes her ring off and walks down the isle backwards, gets in the car and fbuggers off.”

Love, Munch

#39 $fromA$ia "Garths Nugget Boy" on 07.28.09 at 9:45 am

#11 Larry on 07.28.09 at 12:20 am
“Hank leave her she just wants to ruin you financialy.”
____________________________________________

At least have sex a few more times, maybe you can start a fetish, have sex with her with Spocks pointed ears and Garth’s funky Cowboy boots on. Nice :P .

Its your money, its your call not hers.

#40 smw on 07.28.09 at 9:51 am

Sure I’m not the first to see this…

http://globeinvestor.com/servlet/story/RTGAM.20090728.wjobless0728/GIStory/

A lot more jobs have to be shed for corporate savings in order for the current valuations in the markets to be justified.

Think we got ahead of ourselves a little? We just witnessed the greatest destruction of wealth since the great depression and my TV and newspaper says its over? Even quicker then the DOT COM crash?

Who doesn’t love fiction?

Its in the best interest of those in power in Canada to do what they can to continue the game in hopes that the “wealth effect” will convince people to spend.

Saving is for suckers, at least today it is.

Something, somthing, somthing, money for a rainy day?

#41 smw on 07.28.09 at 9:56 am

#12 What the…..

This makes you smart, and apparently awake to the signs of stress on the sytem.

You’ll be a vulture when you buy the place back for 20% – 30%.

Its an oppurtunity of a lifetime. To sell.

I originally thought Garth ‘s book(Greater Fool 2008) was too late to the party, when in fact, he and it showed up just in time…

#42 Boombust on 07.28.09 at 9:58 am

I have a sister like her…

I can explain until I’m blue in the face and then she’ll say, “So, when are you going to buy?”

#43 Chris no longer in England on 07.28.09 at 9:59 am

But Frank, #26 – new home sales in the US just jumped 11%, and “the recession is over”!!!

http://tinyurl.com/lxfg7a

On another note, I am now speculating on how many bitter, wary, divorced males hang out on this blog. I have to laugh at some of the comments that appear whenever we hear some hapless victim’s girlfriend wants to buy a house. Women are not expensive, exotic pets that you have to dig deep into your pockets to support, nor do they all suffer from this mysterious “nesting” disease once they have had their feathers trimmed and settle down.

If we are going to generalise, then it’s long been my observation that many men would happily live in a pig sty without even noticing or caring when it is pointed out to them. I think it more likely that these “nesting” women are trying to find a decent balance in decent surroundings, rather than being hell-bent on wantonly destroying the joint finances.

But, in order to do so, should they buy a house at the moment?

Nope!

[Men, clean up a bit around the place]

#44 jussupow on 07.28.09 at 10:01 am

# 34 brilliant

#45 Samantha on 07.28.09 at 10:01 am

#37 Munch – ROFLMAO!

Too funny – best post ever!

You pay attention to Munch, Hank – you don’t want to be doing this in a few years.

#46 FY on 07.28.09 at 10:15 am

“By the way, my girlfriend is a very successful lawyer with a BA in Economics to boot. Intelligence and education count for nought.”

You are absolutely right on this one. What I’ve learned is that education means absolutely nothing for most people. Whatever they learned in schools about physics, maths, logic, philosophy, economics simply go into one year and out from another. They can not counter the overwhelmingly powerful influence of culture/background/superstitions/familial influence.

To say they didn’t learn them well to know when and how to apply them in real life is a compliment.

— a given-up realist

#47 Keith in Calgary on 07.28.09 at 10:18 am

Garth…..

Congrats to your writer having the cojones to stop his girlfriend in her tracks by threatening to dump her if she continued on her path to buy RE.

I went thru the same nesting phase battle with my new wife as did your recent contributor. She had constantly been egged on to buy something by her work colleagues and her friends who were all in massive maount of debt and over their heads (it seems that utter fools just cannot bear the sight of someone else that is unlike them).

After much reasoned debate she was able to see the logic, facts, and reason behind the position I took as to why we should continue to rent.

Fortunately for me, as she immigrated here from a country that has seen numerous currency collapses, runaway inflation, bank holidays, etc, she understood why the argument against buying was rooted in a sound basis. Maybe 5% off all the property sales in her home country had mortgages, as where she was from everyone pays cash for their RE.

The people buying today (for the most part) are totally devoid of life experience and were raised during the 3 decade long credit bubble where they saw their parents falsely prosper as a result of same.

Problem for them is, eventually the mathematics take over and there is no were to run.

#48 S on 07.28.09 at 10:30 am

Can’t you take a step back and let her do what she wants to do? She is your girlfriend after all, not your wife. Let her buy it on her own, in her name, with the mortgage and all other liabilities in her name. If you live with her, offer to pay her what you are currently paying for your share of the rent. Then, should things no longer work out, you can walk away and will be no worse off than you were before. Should you get married, then you can either buy into the property at its current market value when you do, or you can ask her to sell it and you can buy a new place together, splitting it 50-50. Or, she can keep it as an investment property and buy something else with you for both of you to live in.

#49 Bill-Muskoka (NAM) on 07.28.09 at 10:32 am

#45 FY

As a wise university professor said ‘All people are made up of three parts, cultural, experiential, and spiritual.’

That together with the fact that we have very few who have Mastered self-discipline (logic and philosophy) of their thoughts (aka Spock) other studies show that people think emotionally first and only rationally when they decide to, and usually only in a critical situation with imminent consequences for inappropriate choice. Thus the human race evolves slowly.

Experiential knowledge playing the key rather than education, yet education can inform us of dangers and consequences IF we choose to stop thinking inside the Box created by cultural and spiritual beliefs we so carefully are taught.

Those seeking to ‘persuade’ others in following an emotionally based course of action have Mastered their technique. These the ones the Sheeple choose as leaders because it ‘feels’ better to hear what does not counter what they ‘feel and believe’ is Truth.

#50 Denis on 07.28.09 at 10:45 am

#34 New unemployment graph: http://beta.images.theglobeandmail.com/archive/00146/jobless_146401a.jpg

“Hey, it kinda looks like the housing price graph over the past decade! Using a Realtor’s logic, better get a job now before you’re locked out forever!”

Actually … It would be better lose your job before you get locked out of EI payments forever. :p

Everyone’s jobless! Now’s a great time to jump on the bandwagon, lose yours too and join in on the EI payments! Woooooohoooooooo!

#51 Got A Watch on 07.28.09 at 10:48 am

Stock prices rise on layoffs, as investors perceive lower corporate costs down the road. So yes, the stock market can rise on unemployment increasing.

Of course this can’t last, eventually all the excess employees are laid off, and short of going out of business entirely, there are not many more costs that can be cut.

If you dig into the numbers reported by many large corporations, this is how they managed to eke out better earnings this quarter. It is a trick that can only be pulled once, maybe twice. They are just hoping that things improve a bit by next earnings report. Hope is the plan.

Of course, once earnings have fallen by a large percentage, any slight increase can be announced with great fanfare by MSM talking heads. “Huge gains!”… if you failed grade school math. Loss, the new gain.

This is the favorite method of Realt(ho)rs (TM) too: prices fall by 30% from last year, then rise 3% last month. Headlines scream “Real Estate Rising – New Boom On!”. The MSM just abets them to lie right to your face.

This form of short-term cherry-picking of statistics to create false impressions of new growth is endemic to our society at all levels. One of the main reasons we are where we are today – everyone focuses on the short-term end end-of-month/quarter, no one cares about anything farther down the road. Thus proper long-term planning does not happen, as it is seen as just a cost with no definable payback. 5 or 10 years down the road might as well be 100 years, nobody (or very very few) pay any attention. Politicians never do, they know they won’t be in office by then.

Governments, corporations, academics – they all think with the small head. By the time that nebulous future actually arrives, everyone assumes they will be retired, or working somewhere else, or have won the lottery, or that they personally won’t be affected, it won’t be THEIR problem. Why worry, somebody else can deal with it down the road. Anybody else but them.

At all costs avoid contemplating the real situation, and how to get there (a viable future) from here.

#52 $fromA$ia "Garths Nugget Boy" on 07.28.09 at 10:49 am

#47 S

Thats all good if her investment does’t go into the red.

It’s just as bad as dating a girl with five kids from a broken marriage and you are a younger male by 10 years.

This compares to zero down and 40 year ammorts.

#53 $fromA$ia "Garths Nugget Boy" on 07.28.09 at 10:50 am

#48 need I mention it compares with negative equity?

#54 Munch on 07.28.09 at 10:59 am

#45

“What I’ve learned is that education means absolutely nothing for most people.”

You got THAT right, Batman!

I have always said the same. My “party trick” example has been the medical profession, where I pronounce that medical doctors are “very well trained, but poorly educated”. What I mean to say is that medical doctors generally have very little appreciation of the world outside of their offices. Treat an appintment with your doctor as a business meeting. For example, next time your doctor keeps you waiting for half an hour beyond your appointed time, send him or her a bill for YOUR time wasted.

Too many universities are doing too much “training” of graduates, and too little “educating”.

It suits the “nutty Professor” image for them to do this … I think!

Maybe not, but my original point stands – good “education” is too often really just a good “training”.

Thanks for listening

Dokta Munch :o)

#55 Cheque Mate on 07.28.09 at 11:01 am

One shill makes you larger,
One shill makes you small.
The shrill that Mother Bernanke gives you,
Doesn’t do anything at all.
When logic and proportion have all gone dead.
When the black night screams
It’s off with your head.
Remember what the Ravi Batra taught…
“It’s Greenspan’s Fraud, Greenspan’s Fraud”

Bernanke – sacrifice is required

The end game approaches. All possibilities exhausted, strategies failed, gambits abandoned. The king must be tipped. The Fed must fold. They are not the rescuer as they claim. They are the movers of the lost game of greed and excess., now cornered in a web of debt.

Congress will have to coin the new money of the realm. The Interest and Bank games will have to be stopped. Government will lend directly to the people, the originators of the wealth. Printing of new money will only be supported by new growth.

As with all rebirth, the process will be painful and chaotic.

#56 Munch on 07.28.09 at 11:02 am

PS:

What does one have to do to get a very rare (and highly esteemed) “comment” from Garth at the end of one’s post?

I wanna join that Club, before I die!

Garth, be a gentleman and toss me a bone.

Yours, Munch :o

You are too reasonable. Besides, I have thing for South Africans. — Garth

#57 pbrasseur on 07.28.09 at 11:02 am

I know this is slippery terrain but it really seems real estate is driven by two major forces:

1) Women, that’s the nest thing. Plus women seem for some reason often uninterested by financial products and investment in general.

2) Immigrants, especially those from poor countries where property rights and contracts are not well protected, currency value is unreliable and owning land is about as secure an investment you can make. They tend to distrust financial products and use RE for investment instead.

#58 Ozzie Jurk on 07.28.09 at 11:17 am

So does the same “cheaper to rent” apply if:

1. You’re paying cash for the full amount.
2. Buying a mid-range house in a cheap area ($300k)
3. Municipality with a low tax rate
4. Can do most of my own maintenance.
5. And a wicked negotiator and will buy privately.

Often overlooked, ignored, or dismissed is holding cash carries risks too. Cash does lose value, often very quickly. At least if you own your house, at the end of the day, you own your house. You have something to show for your money.

#59 Marc on 07.28.09 at 11:30 am

On another note, I am now speculating on how many bitter, wary, divorced males hang out on this blog.
#42 Chris no longer in England on 07.28.09 at 9:59 am

In a few months when the divorce is final, you can add me to your list. Girlfriends are much cheaper then wives. Same benefits, less hassle. Perhaps I am just bitter, but my soon to be ex. took 1/2 our savings, which was her half imo. and bought a condo so she could spend her crazy time by herself. Now that the asset has dropped after she bought at the peak, she wants me to take on some of the liability, while the 1/2 she left me has appreciated to more then what she used. Funny how if her asset appreciated, I would never have gone after any equity, as it is not mine imo. Undueing this marriage is going to cost more then the ceramony, with no drinks or dancing. Is it right to want to have a party when the divorce is final?

#60 smw on 07.28.09 at 11:36 am

#31 smw

Just to add to that post,house prices in the USA were down 17% YOY…

—————————————

So is employment a lagging indicator?

NO!

It takes 2 – 4 weeks to get your pogey after submitting, you are paid a max of up to $750 approximately every two weeks, and approximately 6 months to 18 months to find gainful employment.

Alberta and Ontario are the leaders in lost jobs, and these jobs leaving aren’t Timmy’s and Wal-Mart greeter jobs. These are high paying manufacturing or resource based employment.

So if you have a $2000 month mortgage, how do you eat, pay the light bill and maintain your mortgage payments let alone how enough cash for discretionary spending.

Guess I didn’t get my HIX.T and HXD.t calls in, on time today.

#61 gold bugger on 07.28.09 at 11:40 am

Henry Ford: “I have an idea that will revolutionize automobile manufacturing and turn my company into a billion-dollar enterprise.”

moneywoman: “If it’s such a great idea, why hasn’t somebody thought of it already?”

/rolls eyes

#62 ginner on 07.28.09 at 11:47 am

‘@ Samantha & Hank’

I could not agree more with Samantha about the bigger important picture. It’s not about being right or wrong on the housing market, it’s about communication on a critical issue with your partner.

Like many others on here, I have had similar conversation with my spouse since we have been married and for the year proceeding that, in reference to housing. I came to quickly realize that I was not getting to the heart of the issue with her. I was building a compelling case that would flatten any Bay street economist, and she was not listening. Moreover she is a graduate student in Sciences….so not really armed with any classical Economics brainwashing.

For us….I had to understand her issue which was wanting security and stability. In order to get the desired outcome I needed to show how making that kind of a committment would actual result in greater instability and insecurity than renting. The economic models still are required to build the case, but at a much higher level.

She needs to feel like you are understanding her needs and are going to be able to address them….and you actually can….by renting.

Also, don’t foget you are fighting against many generations that believe in land ownership and two generations of consumerism that has taught that it is ok to fund today’s spending with debt. That’s not easy to overcome.

#63 confused and a little crazed on 07.28.09 at 11:52 am

hey hank,

i did that math example you showed your GF with using my own housing as the source of analysis. My place is older and a little less covenient in terms of transit and shopping but based on my math on a similar sq ft space
T/ h 300k own/ 700 rent= 429 month approx 36 years
w/o adding main fees , insurance etc

i think renting is better i would be over 65 before i pay it off

#64 bubbleboombust on 07.28.09 at 12:01 pm

“…Vancouver is a sh*t hole, humid is a good day, usually its covered in a blanket of smog, fetid worse than Toronto and we’ve no interruption of regular garbage pickup…
No question, the new underarm pit city of Canada…the long time previous underarm pit of Canada was St. John New Brunswick but Vancouver takes the crown away.”

But…but…but…we’re…we’re the tourist and cultural mecca of North America.

#65 encanto on 07.28.09 at 12:11 pm

DrC on 07.28.09 at 8:50 am

Buy me a house, buy me a house! I need security

I do not think this lady is asking Hank to buy her a house or that she lacks security. Hank mentions the Lady`s profession, states she does well at it. He also mentions that she has the ability to spend`their`savings, so he obviously trusts her and that she has provided some of the savings. How do you know that she has not earned most of the savings, which gives her the ability to spend it. Hank does not say what he does, or if he is even employed.

Let`s not be so fast to assume and attack. Aren`t we here to learn and help others. I have been readng this blog for a short few months, but I read it daily, and appreciate the wealth of information you have given me and the great web sites you have shown me.

While buying is likely a very bad idea, so is assuming that she wants to spend his money or that she wants to ruin his finances. It would obviously ruin her,s and her credit reputation as well.

#66 BigAl (Original) on 07.28.09 at 12:16 pm

#50
Corporations’ and governments’ obsession with hiring young bulls now instead of seasoned, older workers caused some of this. Its ridiculous that a fresh MBA is automatically given a six-figure salary with no experience. It is these young bulls that are all risk and no long-term-thought. This youth-centric, high-risk, culture is partly the cause of a lot of these bubbles – tech, housing, ect.

There was in fact an anthropologist who came to this conclusion about the Wall street bubble who compared it to elephant societies where the old bulls are necessary to keep order and continuity. He concluded that the financial sector had lost that in its zeal to hire everyone under 30. I wish I had the link, but I forgot it…..

#67 Kilt on 07.28.09 at 12:28 pm

To #28 Moneywoman.

Depending on how you play options they can either be very conservative, or extremely risky.
I go the conservative route, and the downside to the options is that you limit your gain.
So, if I buy a stock today and sell a 3 month option from a 10% premium. I limit my gain to 10% over 3 months. So during a big market rally I miss out. For this reason I keep my regular portfolio of stocks and just option the stocks purchased on margin.
There are many factors to consider when buying/selling options and I would not (and did not) say it is an easy thing to do. I was only pointing out to Garth that purchasing shares on margin isn’t necessarily a bad thing to do.

Kilt.

#68 Soylent Green is People on 07.28.09 at 12:30 pm

#5 Samantha on 07.27.09 at 11:02 pm Hank –

So well said Samantha, I got the same vibe when I read today’s blog, this sucker should leave this g/f and find someone who can support his side of the team. I’m not saying she’s a bad g/f, just they are not a match. Clearly they are on the opposite page financially, which as a divorced person knows where this could lead.

I can already see them getting divorced before they even start their marriage. Instead of complaining about your g/f, you should be boosting each other up, everybody on the same page. That’s how you start out a long term relationship; not at opposite ends of the boat. Dude, please go forward very cautiously. We fear your safety and the well being of your unborn children.

Remember, the effort it takes to get married…, it is 100X more effort to get divorced.

If she’s illogical (to you) at this point, imagine her with two kids and going through a divorce. Bhwaa ha ha ah haha


Men work because they are bored and can’t easily amuse themselves at home. They need a vehicle to drive, they never seem to care about commuting times, they need an “office” to “go to” to feel “important”. Ever watch a former mgt. type guy retire. It’s unbelievable watching them figure out how pathetic their lives really are without ‘work’.

#43 Chris no longer in England on 07.28.09 at 9:59 am

Good post Chris.

#69 Elle on 07.28.09 at 12:33 pm

How logical is the Harmonizing sales tax ….. due to be featured soon! Seems it will only punish the poor with an extra 7% tax on the essentials! A Province reader writes ….”This is pure horse s..t and the HST should be forever known as the Horse S..t Tax after being given to us by a government absolutely full of it.

#70 jess on 07.28.09 at 12:47 pm

2005 and 2007 more than $8 trillion in securitized products were issued globally.

these products WERE the “heart of the market”
====================

Alistair Darling appeared to threaten Britain’s leading banks with a competition investigation yesterday if they do not step up loans to households and businesses despite their protestations that lending is down because of the recession.

“It is very important that each and every bank knows that there is someone looking over their shoulder. I want to make sure that we … have a competitive banking system in this country,” the chancellor said, following a summit with bank bosses yesterday.

Darling told the banks he was concerned about the price they were charging for credit and their potential increasing profits. The profit on a two-year mortgage has risen 450% in the past two years.

look over your shoulders sheeple!!!!!!!!!!!!!!!

#71 Munch on 07.28.09 at 1:06 pm

Garth

Many thanks and multiple genuflections!

I am not worthy! :o

Regards

Munch

#72 dd on 07.28.09 at 1:19 pm

#36 Alberta Girl

…My sister said on Friday she knows of 14 families that simply drove to the bank and gave them the keys and walked away. That was just last Friday in Fort McMurray…

Hey Al Gal thanks for the info. With all the number floating out there it starts to sink-in when you can put faces to what is really happening.

#73 Republic_of_Western_Canada on 07.28.09 at 1:20 pm

Looks like all that speculative oil in Garth’s swimming pool is gonna be staying there for a while longer.

http://www.maritime-connector.com/NewsDetails/4389/lang/English/OPEC-braces-for-sharp-drop-in-oil-prices.wshtml

Maybe the chipboard doghouse denizens can rent out their basements on the cheap, to Cushing and the supertanker leasers, for a little income on the side.

#74 CinToronto on 07.28.09 at 1:35 pm

While I’m sure there are many women that want to “nest,” there is a lot of evidence that suggests that women are much better at managing finances than are men. By evidence I mean studies, statistics, etc., not just anecdotes from blogs. For one example, see this article from the Guardian/Observer from a few months ago:
http://www.guardian.co.uk/business/2009/jan/25/bust-tenon-recovery-bankruptcy-ruth-sunderland

The real estate agent who says that women do the house-buying in his experience is simply observing the well-known fact that women manage the finances in most households.

But if you want to traffic strictly in anecdote, I’m a woman and I have no interest in buying a house when every indicator says run for the hills. My father bugs me about this every week (and incidentally, refuses to move to a smaller retirement house because that would signal a lowering of status). My partner’s brother came up with the “why rent, you’re just throwing money away,” gem just last week (this from someone who is probably $200,000 in debt, in part from a line of credit for almost $100G.) I highly doubt that we can blame the housing bubbles around the world on women.

#75 Seanmhair on 07.28.09 at 2:02 pm

In kicking around the money business for many years, as newspaper columnist, business editor, a network TV talking head, book author, radio guy, financial speaker, a gig running the country’s tax system, blogpreneur and (soon) something radical

MORE radical??!!

Oooooo…Garth. The suspense is killing. Wishing you all the best with whatever you have up your sleeve.

Post script: I am trying html tags. My apologies if they don’t work. Relatively new @ this stuff.

#76 David on 07.28.09 at 2:08 pm

Ultimatums are not the best negotiating tactic with girlfriends or anyone else.
Inviting the lady to examine the bear case for real estate and reading all the facts and arguments might be just as persuasive. The other question to ask is whether or not short term bubble gains can ever offset substantial long term debt commitments with the possibility of increased payments and a declining market should you need to sell? By currently renting, you and your girlfriend are not taking on any risk of declining property values or increased payments when interest rates rise to historically normal levels.

#77 Denis on 07.28.09 at 2:13 pm

Bahahaha! Flaherty throws Carney under a bus!!!

Too early to say recession over: Flaherty
http://bit.ly/mBZQG

Don’t these guys talk to each other?

#78 jess on 07.28.09 at 2:23 pm

bankruptcy-remoteness
Bankruptcy remote – A key concern in securitisation transactions to ensure that the transfer of assets of the originator to the investors’ representative or SPV is not affected by bankruptcy or distress of the originator. This necessitates certain legal precautions in structuring the assignment of receivables, as also so constituting the SPV that it can neither be taken to liquidation by the shareholders of the originator, nor by those of the SPV itself. Further, the structure should also ensure that the SPV would not be treated as the subset of the originator by substantive consolidation. Such a structure is called bankruptcy remote structure.

==================
…”the lawyers of bankrupt Lehman Brothers recently filed in English courts a request to overturn the concept of bankruptcy-remoteness for special purpose vehicles (SPVs). If granted, this request could spell the end of securitization as a once-upon-a-time multi-trillion credit product, regardless of how many PPIP or TALF revisions the administration throws into the CRE fire.
According to available reports, and an analysis by CreditSights, Australian investors in a synthetic CDO issued by the Dante Multi Issuer Secured Obligation Program (a Lehman SPV) are attempting to collect the SPV collateral following the bank’s bankruptcy.Furthermore, the bank’s US lawyers are now suggesting that principle of bankruptcy-remoteness goes against bankruptcy law, arguing that collateral should first pay off in the money swaps before paying off investors.”

#79 Artguy on 07.28.09 at 2:29 pm

Hi Garth et al,
Thanks for the informative blog.
First point. Hanks analogy is inaccurate. The most glaring faults are the assumption of fixed costs over time and depreciation.
Owning a home that you can comfortably afford beats renting imho. Having said that I would wait a bit and observe the trends and save some money.
Second point. I’ve had the pleasure of seeing a great deal of Canada and the planet. It’s a beautiful place and some of the Haters here should take some of their money and time to travel a bit.
If you can’t see the charms of Vancouver, TO, or Winnepeg for example, don’t be afraid! It may not be too late for you.
Best regards.
Artguy

#80 Artguy on 07.28.09 at 2:49 pm

No offence to the folks in Winnipeg!
Cheers. Artguy

#81 Dan in Victoria on 07.28.09 at 2:59 pm

Post#56 Munch, you bid too low ,should of held out for a Garth “Bobble Head”

#82 Dan in Victoria on 07.28.09 at 3:02 pm

Post#55 Cheque Mate, LMAO on those words What are you going to call it? BENNY AND THE ink JETS?

#83 Steve on 07.28.09 at 3:11 pm

I think everyone is missing Garth’s real knock, which is not so much about her sex, but her education as a BA in Economics. To wit, an Economist, who wants to buy at the height of a bubble.

And to add my 2 cents, I think it was Chomsky who noticed that people with more education tend to be more propagandized than your average person, so maybe it was the years of education that did her in.

#84 Hank on 07.28.09 at 3:16 pm

I had a good chuckle reading all the comments on my letter to Garth! First of all, to all those who think I was serious about dumping my girlfriend over this disagreement: have no fear, it was all said in jest for humour. I wouldn’t dump her for all the dingy one and den gin-joints in New West and Surrey. In fact, I am in the lucky position that both of us have to be on-side in order to be able to afford a purchase, i.e. we both have a vetoe on buying.

For those who were speculating on our backgrounds: we are in similar financial positions, with Venus with the higher income while Mars has more savings. Good lawyers may bill more than engineers, but we are far better at analyzing numbers and keeping what we earn.

The whole point of my letter to Garth was to illustrate how poor the return on investment for R/E in Vancouver is. You can only make it big by buying at the start of a bubble and sell near the top.

My question to everyone is: does it feel like we are at the start of a housing bubble or can you hear the surf pounding on those menacing rocks just below the cliff edge dead ahead?

P.S. #23 Charles, we know that there is more than just greed and fear. For example, irony, humour, sarcasm.

#85 Halifaxfamily on 07.28.09 at 3:17 pm

It gets sillier and sillier all the time. Unfortunately, it’s tough to argue with the herd that’s going over the cliff.

#86 TJ on 07.28.09 at 3:19 pm

This anecdote from a prominent blogger in America – regarding people ‘walking away’ from homes, or renting them to people, not disclosing the fact they have been foreclosed.

Just tell me why this isn’t possible here:

“As far as how I feel personally/morally about the whole situation (and the fact that this is happening all over America) is that people really disappoint me. I guess it bothers me that I am in a home that is now worth ½ of what we paid for it, but I’m not just jumping on the bandwagon and taking the easy way out. I think people need to be more responsible and follow through with the actions they initiated when purchasing a home for such a price. Don’t get me wrong, I do sympathize with those who are truly having a hard time and cannot make their payments (those that got caught up in the greed from the banks/lenders), but I know several instances (even friends of mine) who are just walking away like it’s no big deal. I think it’s wrong and irresponsible. I think it’s eventually going to affect those of us who are continuing to be responsible and dealing with the mess we got ourselves into. We can’t even refinance our home because its value is so low compared to what we owe on it.

http://tinyurl.com/33r99u

#87 CM on 07.28.09 at 3:19 pm

re #77 Denis – “Don’t these guys talk to each other?”

Word is that Korn Kob Kory Teneycke, the communications director, has resigned. Not that he ever actually communicated anything, but still…

As a result, all communications have come to a screeching halt. He wants to spend “more time with his family”. Uh-HUH. Don’t they KNOW how ridiculous that sounds. That, and “pursuing other options”, or words to that effect.

It sounds more like bare-tailed rodents making a quick exit from sea-going vessels that have suddenly exhibited negative flotation characteristics. Must be that ark that Harper was steering through stormy seas with a steady hand on the tiller, or whatever it he told some business gathering.

HELP! I’m drowning in clichés and bafflegab.

Never mind. I heard that Sandra Buckler is coming back, Harper’s former noncommunication minister. Back to his outstreched arms? Ewwww. Brain bleach required.

Once Buckler’s back, she’ll let Flaherty and Carney know exactly what they’re supposed to say.

#88 Kestral on 07.28.09 at 3:29 pm

To #42 Chris

Hey Chris, don’t be so smug, you’re just one divorce away from being one of those ‘bitter guys’ you are taunting. Pride goeth before the fall, there but for the Grace of God go I, etc…

For the record, I’m not married, I don’t want to get divorced and lose half my assets.

#89 nonplused on 07.28.09 at 3:37 pm

If you are interested in where the US economy (and thus, likely, the world) is headed, this might be the most important slide show that has come out in a while. From Dave Rosenberg and the people at Zero Hedge:

http://www.zerohedge.com/article/end-end-recession

Hank,

Sign a cohabitation agreement separating your assets and let her buy the house. It’s her damn money! Then you pay her rent and everything is fine.

PS. buying a house together is a bigger commitment than marriage these days, so be careful. A house is a life long financial commitment, whereas marriage only has a 1 year notice period according to the divorce laws. She may be trying to say something else.

#90 Peter Wiener on 07.28.09 at 3:58 pm

re # 74 CinToronto

1. Women are more detail oriented, have smaller egos, tend to do thing cautiously and by the book and generally have more discipline than men. These are all really good attributes when it comes to handling or dealing with money.

2. You sound like the most money-savy and forthright of your family (I almost can’t believe your comment re your father’s retirement accomodations – he should have lost his ‘status’ ego a long time ago).

3. Despite the limited financial acumen of your immediate family, you sound like you’ve got your head on straight when it comes to real estate – congrats.

4. Guys have their strengths too, but unfortunately, a lot of the mistakes we make are very costly (eg. new boat vs. new shoes).

DISCLAIMER: I’m a single male who grew up with lotsa sisters!

#91 Increasing that 1% on 07.28.09 at 4:12 pm

Hank,

Yes, please stay unmarried, and do consider stopping wasting eachOTHERS’ time, as you may love her but loving does not a marriage make. (Helps, but…)
You are only going to end up driving EACHother crazy, (as some of the divorced men have professed happened to their exes – through no influence by them of course)

BTW, some people just don’t deserve to have money as they have no sense of responsibility- isn’t there a little story about that in The Bible ?…

#92 FY on 07.28.09 at 4:14 pm

#62 “Like many others on here, I have had similar conversation with my spouse since we have been married and for the year proceeding that, in reference to housing. I came to quickly realize that I was not getting to the heart of the issue with her. I was building a compelling case that would flatten any Bay street economist, and she was not listening. Moreover she is a graduate student in Sciences….so not really armed with any classical Economics brainwashing.

For us….I had to understand her issue which was wanting security and stability. ”

For women, nesting is an urge. You can’t use logic to counter an biological urge. If you don’t get it as a man, try to imagine your urge to turn your head/eyes with the sight of a beautiful passing woman – now – can logic always winning to prevent you from doing that ?

Standing from this angle, men will start to understand the difficulty using logic to rein in an “urge”.

#93 CinToronto on 07.28.09 at 4:44 pm

Hey All:
Just wanted to clarify that I didn’t think that Garth was making a gender statement with his example (women want houses more than men), but that some posters have definitely turned it into that.

Peter Wiener–thanks for the response, very witty! I have read that women in the US, particularly the under 30s, are catching up in the bankruptcy race because they have been purchasing foolish “luxury” items, like must-have Coach bags. But honestly, it’s my Mom who wants a smaller house now. Dad will never give in! As for the rest of the family, I just refuse to talk to anyone about the housing market now, and get my daily consolation from Garth’s blog.

#94 David Bakody on 07.28.09 at 5:06 pm

Had a chat with RE person this morning and mentioned how lucky RE people are with booming sales ….. not really because house prices are up are due to few houses on the market …. no building going on and the Condo sales are down. You can always get a better picture of the truth when you talk with someone who’s pay check is directly affected.

#95 eddy on 07.28.09 at 5:55 pm

This guy must have a mortgage for appearances

http://www.abcnews.go.com/Business/story?id=8169165&page=1

#96 $fromA$ia "Garths Nugget Boy" on 07.28.09 at 6:01 pm

Garth, use this image on this link from e-bay for your next thread. I didn’t look to see if there was any Canadian Trilion Dollar bills but even then there wouldnt be enough room on the paper for our prime ministers big hair dew.

http://cgi.ebay.com/50-TRILLION-DOLLAR-BILLS-play-money-fun-practical-joke_W0QQitemZ230358311260QQcmdZViewItemQQptZLH_DefaultDomain_0?hash=item35a26ce15c&_trksid=p3286.c0.m14

#97 Nostradamus Le Mad Vlad on 07.28.09 at 6:08 pm

I have been vaguely contemplating two parts of Garth’s latest post for a while now, situated in the far recesses of The Twilight Zone sucking on jelly babies with my legs crossed between my nostrils (I lead a thrilling life, believe me!).

Contemplation for longer than a nanosecond is no longer possible pour moi, as the Ever Expanding Creative White Space between my Earlobes begins wobbling uncontrollably, leading to a gargantuan implosion of dead matter, thus expanding my intestines.

Garth does not need the experience of being a high-powered radical RE agent, fooling most of the sheeple all of the time, reporting on said issues, landlord, businessman, etc., so all I can surmise (from the pic) is that . . .

Garth is Captain of his own Ship; Spock, a metaphor for the non-emotional side of himself signifies a partner; the line “. . . and (soon) something radical, . . .” could mean the formation of a new political party with Garth (or partner) at the helm.

There is no shortage of MPs / people who would be willing to join his cause, campaign and run.

Then again he, along with the rest of us are getting on in life, which could lead to — http://www.dilbert.com/
——
Banks + Investment Houses. Generally referred to as “Sympathy For The Devil[s]” (Rolling Stones), they suck the life from us, which leads to yet another Perpendicular Prang.

Guest columnist in today’s KDC is David Bond, an author and retired chief economist with HSBC (e-mail [email protected] , no site).

It would be interesting to chart the bankruptcies and decline of the US banking system since 2005, when the overall economy started unravelling. Bond’s column is headed “Europe banking threatening to prolong recession”.

I have written before that everything has a cycle, runs its’ course — i.e., Birth, Life, Death then re-birth. The Euro banking system, along with the the US is a shambles, mainly because of the unemployment, disappearing manufacturing and resource jobs, etc.

Anyone recall when Flaherty and Harper said something like “. . . as strong as the northern shield”, or similar? Well Northern Rock (I understand) is a bank in the UK which isn’t in particularly good shape.

A brief excerpt: “Put another way, for each dollar of capital, the bank can hold no more than $12.50 of mortgages, loans, bonds or other financial assets.

“Several countries allowed their financial institutions to hold much less capital, so that leverage, instead of being 12.5 to 1, soared to 40 to 1. At that level, if only 2.5 per cent of loans default, all of the capital is wiped out and the bank is bankrupt.”

There are plenty of other figures comparing Europe to the US, but how strong, and resourceful are the Cdn. banks? Could they be heading toward The Vast Expanse of Nothingness, sooner rather than later?

#98 dd on 07.28.09 at 6:19 pm

Recovery?

Another 15 people let go at work. YA.

#99 Hank on 07.28.09 at 6:28 pm

It’s fascinating how my letter, which was intended to be a back-of-the-napkin illustration on the very dubious ROI value of investing in property in Vancouver, has been interpreted in so many different ways by readers. It never occurred to me that there is a battle of the sexes angle to it. People see what they want to see, which is ironically how bubbles are formed, aren’t they?

As for BA in Economics, I also happen to have one myself. I can attest without any reservation that a formal education in economics is probably the last thing you want if understanding global finance is a goal. I could scarcely believe some of the nonsense that was taught and the total lack of balance. Goes a long way to explaining the current predicament.

I agree with Artguy #79, why post hate about cities here? It is irrelevant to the conversation. I love Vancouver, but most of the comments I hear about how wonderful this city is and why that will support indefinite property value appreciation are naive and ignorant in the extreme. It is laughable to hear talk of Vancouver being more special than London, New York, or Hong Kong, all of which experienced major price setbacks recently. After all, part of our charm is precisely because we are a sleepy, provincial backwater of a city. Some of us need to get over ourselves a bit. Or at least start using our passports.

#100 conan on 07.28.09 at 7:44 pm

“a gig running the country’s tax system, blogpreneur and (soon) something radical”

hmmm. Garth somthing radical?

The most radical thing you could do IMHO is…..

a) become a real estate agent

b) rejoin the Conservatives

c) become the new pitchman for SHAM – WOW

What are your new plans Garth?

But wait! Order in the next 15 minutes, and we’ll throw in this beautiful mansion in Surrey… — Garth

#101 Another Alberta on 07.28.09 at 7:49 pm

66:

That is a variation of the view held by Donald Coxe that few portfolio managers around today had directly experienced the 1970s as professionals.

#102 Jim on 07.28.09 at 7:49 pm

San Diego’s Condo Market goes from Fizz to Fizzle
http://www.latimes.com/business/la-fi-condobust27-2009jul27,0,881890.story?ref=patrick.net

Parallels with Vancouver…

Jim

#103 Samantha on 07.28.09 at 8:43 pm

#84 Hank

“The whole point of my letter to Garth was to illustrate how poor the return on investment for R/E in Vancouver is.”

and from

#99 Hank

“It’s fascinating how my letter, which was intended to be a back-of-the-napkin illustration on the very dubious ROI value of investing in property in Vancouver, has been interpreted in so many different ways by readers.”

It wasn’t hard Hank, considering that you devoted the bulk of your letter to describing the situation and issues with your girlfriend. I find it fascinating that you could possibly be surprised by the responses to your letter.

“It never occurred to me that there is a battle of the sexes angle to it. People see what they want to see, which is ironically how bubbles are formed, aren’t they?

I suggest you read your letter again and look at the amount of information devoted to your domestic debate over real estate.

I, and others here, did not “see” what we wanted to see. We read what you wrote.

If you wished to make a commentary on the “dubious ROI value of investing in property in Vancouver”, then you could have omitted most of the personal information in your letter and simply used paragraphs 3, 4 and 5:

“To rent a $20,000 mid-sized car from Avis/Budget for a month, you’d pay ballpark $750. Expressed another way, 20000/750 = 27 months of rental to pay for full cost of a brand new car.

To rent a $500,000 2 bedroom and den in Fairview/Yaletown/Kits/whereever, you can expect to pay ballpark $1800/month rent. The ratio here is 500,000/1800 = 278 months (or 23 years) to pay back the principal cost.

It is about 1/10th as expensive to rent housing as it is to rent cars. The return on capital just doesn’t come close.”

Again,
Good Luck.

#104 Devil's Advocate on 07.28.09 at 8:54 pm

“#74 CinToronto on 07.28.09 at 1:35 pm The real estate agent who says that women do the house-buying in his experience is simply observing the well-known fact that women manage the finances in most households.”

If you are referring to my post #14… in my experience it is not womens financial accumen which leads to their influence in house buying… far from it. It is the nesting instinct, pure and simple and god help any man who might stand between that and the house they have their heart set on.

When I show a couple homes to consider, generally I can tell which one they will buy by the delightfull expression on HER face and sping in her step and the subsequent look in the guys eyes like a deer caught in headlights knowing that despite the cost he’s writing a cheque on this one.. Women are drawn to a home like a man is to sex. And THOSE are the fundamentals of the buying rational. There is no rational. People buy on emotion and later rationalize their decisions. Think about the last time you bought anything with even the slightest degree of sex appeal… and houses have sex appeal.

#105 ralph on 07.28.09 at 9:48 pm

Consider this, many relationships fail because of financial stress. Like real estate this one may not end well.

“Hell hath no fury like a woman scorned”

#106 supersocco on 07.28.09 at 9:48 pm

re#102
Interesting to see that Canadian Developers are pointed out several times in that article.

#107 JO on 07.28.09 at 10:02 pm

If you were to plot a long term chart of Canadian RE prices since 2002, it would look a lot like the chart of SP500, only that we got a double top in Canadian RE prices much, much faster. I would love to somehow add in some basic indicators such as MACD lines/ MACD Hist and slow stoch and see if they came out suggesting the classic bearish signals…of course even if they did, this does not mean RE has to go down, but with the extreme optimism and large double top, one has to be very concerned as the most likely course for prices over the next 3-5 yrs is a devastating collapse. I am holding out for at least 30 %.

Caveat emptor.
JO

#108 jusuppow on 07.28.09 at 10:57 pm

#5 #103 and whatever

oh spare us ur ridiculously annoying moralité lecturing. And the guy is telling it as it is but NO you keep hammering it home with your mumbo jumbo. Hank is all right. His girlfriend is all right. you on the other hand not so sure.

#109 Denis on 07.28.09 at 11:00 pm

#107 JO … That would be an AWESOME Chartoftheday!

#110 Samantha on 07.29.09 at 8:06 am

#108 jusuppow

“Oh spare US” – More than one of you in there jusuppow?

Not so sure about you.

#111 artisuseless on 07.29.09 at 9:39 am

I have the perfect solution – if she likes warm escapes in the winter, buy her a house in Florida. They’re going for as low as 40K on the gulf side (near Ft. Myers – nice area, still in the 20s in Jan/Feb). Tell her what it went for in 2005. Maybe then she’ll get the hint of what house prices will eventually do at some point in Vancouver & will also appreciate the retirement nest egg.

#112 Flounder Digest on 07.29.09 at 1:19 pm

Hank,

The flounder fish in the sea urges that you listen to Samantha’s post#5. As for her comment #45 on comment #37: playing the video backwards is only funny when you are a spectator.
“You don’t really know a man until you know both his wallet, and his woman (George Bernard Shaw).” That statement is a measure of the importance of these issues.
Bill-Muskoka (NAM)’s comment #49 sagely implies that much of our higher education educates us out of our common sense. You recognize this. But applying this recognition to personal experience is for you, as for many, woefully problematic. After all, you did avow ” It never occurred to me that there is a battle of the sexes angle to it (Your comment #99).” Wow, from this angle it is, before anything else, an obviously Mars/Venus deal.
You’ve demonstrated a capacity to live in the eye of a hurricane. Wouldn’t you like to discover what it’s like living with a woman when, on the crucial issues, you see eye to eye?
Thanks, Samantha. Without your comment #45, I wouldn’t have thought beyond saying “Hank, threatening to walk if she signed . . . now that, that took/takes balls!”
Never underestimate the power of a woman, both for good and the not so good. Playing with fire is dangerous.
As “Get A Watch (#51)” persuasively argues, we‘ve become a society run on half-baked ideas.
“You Want Logic?”
Samantha, in comment #103, shows how to think things through. Therefore, I believe Samantha, since she’s done your thinking for you, deserves the last word:

“There are many things couples can squabble over, but a successful relationship (and a happy one) runs like a well oiled machine with both partners of the same (or very similar) mind on the big issues.

Good luck,

Live long and prosper (Comment #5).”

“Like a well oiled machine . . .” life doesn’t come much better than that.

#113 taxpayer like you on 07.29.09 at 8:27 pm

Everybody re-read Hanks original letter and simply swap the he/she roles. You’ll see it has nothing to do with gender. It goes both ways.

#114 Ronaldo on 08.01.09 at 1:30 am

Buy her a condo in Maui. They’re going cheap right now. Heck you can rent one for $85 bucks a night right across from Kamaole Beach. When this market turns and Garth knows it will, it will be a slaughter. I hold the gov’t responsible for allowing this madness to continue and the banks who are foolish enough to lend money on obviously phoney values. Two years down the road we will have the largest foreclosure rates ever seen in the country when interest rates hit 8 percent or more and home prices come crashing down like there was no tomorrow. And that will happen around the same time the stock market crashes again and oil hits 200 bucks a barrel. Wait and see.