Market update


Within recent memory, Toronto’s Dufferin Mall was a place where merchants spent the last part of the day hauling heavy metal barricades over their shop fronts and praying. With reason. It was a dump.

These days, thanks to condo developers and gentrifiers, who live elsewhere, it’s being turned into a place where young couples think the future is dawning. This is a story that’s been played out in hood after hood in the GTA. Some have worked – Queen West, the Garment and Distillery districts. Some have flopped – Leslieville, the stockyards.

But this is not about ambitious couples buying houses in areas where the disadvantaged live, at least until they must flee. Instead it’s about one piece of evidence the bubblette now enveloping some cities is doomed – pricked by a lethal combo of inexperience, greed and herd instinct on the part of a very dangerous set of buyers.

Not far from the mall, as reported the other day in Toronto Real Estate News, a ‘starter’ home came on the market. These days in Toronto, that means something listed at around $400,000. This one was typical of many dives in the area, riddled with knob-and-tube, powered by an obsolete electrical system, with a decades-old furnace, leaky windows and a Flinstones kitchen.

So what happened? There were 17 offers, and an all-out bidding war. The place ended up selling for close to a half million dollars.

Real estate analysts, objectifying realtors and those without their hearts in the mouths attribute this kind activity to supply and demand. The number of active listings has dropped steadily since the buyer’s market of earlier this year, while the number of buyers has soared thanks to cheap mortgages, pent-up demand and media-induced housing frenzy. So, they say, demand outstrips supply, causing prices to rise. Just economics. Move along.

As usual, that’s only part of the story.

Young couples have been fed a diet of misinformation which is not doing them any favours. Most of them were 15 or younger when the last recession came to town, and have little idea how slowly the economy repairs. They believe the real estate market is back on its feet and will soon price them out forever because the recession’s over. And why not? It’s on the lips of Mark Carney, Ben Bernanke and housing industry leaders daily.

Lenders meanwhile are back at their old practices of giving loans to people who have little chance of  actually repaying them. Zero-down deals abound, and couples with a combined income of $100,000 can get loan commitments for five or six times that level.

Borrowers, in fact almost all of us, apparently learned nothing from last autumn’s near-death experience. Household debt is back on the rise. Mortgage totals have eclipsed previous records. Consumer spending on large-ticket items like cars and (especially) houses is the sole bright light in the economic firmament.

Everyone seems oblivious to the fact that a new round of borrowing – even at low (one-time) rates – will certainly lead to two inescapables: Higher taxes and more interest.

So, there’s good news and bad news.

The good news is those who have been waiting for real estate to correct and are dismayed at the lunacy around them are far closer than they realize to bargains. If there is anything that forces the Bank of Canada to review its free-money monetary policy it will be asset inflation in the housing market. And higher rates will be toxic in the killing fields around Dufferin Mall or Kitsilano.

The bad news is obvious. These bidding wars will litter the streets with dead. Guess who?


#1 Nostradamus Jr's Analyst on 08.01.09 at 9:30 pm

Tonights photo is appropriate.

From what I’ve been reading, something is about to blow up this fall.
Could be part 2 of the financial meltdown – the real deal this time, or the much anticipated attack on Iran and the major fallout that comes with it, or something else that’s really big and really frightening.

I’m getting an uneasy feeling that the real estate market will be the least of our worries in a few weeks.

#2 lathnplastr on 08.01.09 at 10:08 pm

Mark Carney increase interest rates? What will he do for an encore, have apoplexy. Is there any way that it could be controlled by changing the mortgage insurance policy instead?

#3 hal smith on 08.01.09 at 10:15 pm

The bubble will not pop quickly or easily if ever people. Here in BC (bring cash) the prov. govt. just harmonized our PST with the GST for a total of 12% sales tax starting in June 2010 . That means the sales tax on new homes will jump from 7% to 12%. Taxes on real estate commissions and lawyers fees will go form 7% to 12% as well. Notice the timing here folks? The tax goes into effect after the Olympics and the spring buying season, ensuring that the spring market will be on fire, further inflating the bubble. Buy now because you will pay more after June 1st!!!! And it won’t end there folks. Because they have 10 more months to think up new ways to pump more helium into this bubble. And they will because they have to. Picture this : we are lost at sea with no rescue possible. We have a leaky life preserver and we have to keep inflating it to stay afloat. If we don’t, we will sink and we will die. Our rulers know this so they are going to keep on inflating the bubble until God Himself or the sharks below intervene. They will not willingly stop inflating the bubble. Take it from there……..

#4 Coho on 08.01.09 at 10:21 pm

The short lived middle class will be no more by the time the ruling elite has finished wringing us dry. And just as the baby boomers get ready for a liesurely retirement, the rug is being pulled out from under. The younger generations? They’ll be in servitude. It’ll be back to the vast majority subsistence living with few services just as it always has been.

#5 Bob on 08.01.09 at 11:07 pm

I think this fall will be a disaster for toronto real estate.

#6 Zirpy McZirpirston on 08.01.09 at 11:12 pm

I dunno about that. Japan managed to keep its interest rates low for an awfully long time. Ours may not be going up any time soon (although the bet on the CAD means that lots of people believe that it will).

In spite of low interest rates, Japanese housing still crashed. In spite of the low rates, United States continues its crash, as does England and Spain.

Why is Canada’s real estate market so darn frothy when the rest of the western world isn’t?

To claim that interest rates are the only thing keeping this market going may be ignoring some other important factors.

Now, if only I knew what those factors were.

#7 nonplused on 08.01.09 at 11:12 pm

Maybe if FASB is successful reintroducing mark to market accounting rules, the fireworks will start. They suspended M2M due to political pressure, but my understanding is that there is a desire to fall in line with “international” accounting standards, and also that the accounting profession is getting sick of signing off on statements that obviously can’t be verified. If it happens, the banks will go back to being insolvant (they are anyway, but they don’t have to report it right now), and the rally in stocks is probably over.

#8 blueskies on 08.01.09 at 11:28 pm

love that opening graphic!

#9 Daystar on 08.01.09 at 11:50 pm

Well, I don’t know if anyone has picked up on it yet, but…

What really blows my mind is that we know historically that the last quarter of last year (- .8%):

And first quarter of this year(-1.4%):

has a falling GDP, hence, a 2 quarter recession soon to be three once June numbers come in (and it could actually be four negative quarters with the 3rd quarter revisions of last year, but I digress). We also know that April (- .01%) and May (- .05%) for example, were both negative and June is likely to be negative or flat, creating a 4 quarter GDP slide of between .negative .05 to 1% real GDP.

But what is surprising is Carney’s declaration that the recession is over ahead of July-August-Sept or 3rd quarter numbers.

Folks… thats a future projection that hasn’t happened yet, based on a ramp up in commodity valuations in base metals and oil over the last month that hasn’t been fully supply demand based, a future projection on an economy that hasn’t happened yet.

Lets consider this for a moment… why is BOC Mark Carney making a prediction like this ahead of the numbers? Will commodity valuation rises in the summer and market inflation be enough to boost commodities and financials to the point of predicting a postive 3rd quarter not even a month old? Folks, its spin, its conjecture, its hot air, its foolish… in short, its propaganda feeding a real estate and mini real estate market bubble and bubbles crash hard when they are based on lies.

Smart money knew the high valuations of 2008 couldn’t last. But does it know that the valuations we are experiencing right now, if not based on demand or technicals but speculation in the face of demand that has not yet happened… does smart money know what will happen when speculation is replaced by facts and fear?

You bet it does.

2 things have happened here that are driving the markets. Appreciation of real estate led by rock bottom interest rates coupled with appreciation of an oversold winter stock market combined with speculation, have inflated personal equity meaning more money pumped into the markets. The second thing is supply and demand. Many don’t know the true extent to the demand that has signifigantly fallen in every aspect of the world economy. Take Canada as a commoditiy driven economy example. They don’t know that China has built up their copper supplies and the price of copper, the base metal everyone watches, is about to fall from the end of building inventory buys. They don’t know that the real estate bubble is at its peak and has nowhere to go but down as interest rates have nowhere to go but up. They don’t know that as these two realities combine, we will see a major shrinking in the markets and real estate valuations creating a prolonged Canadian recession. September could be a stinker with base metal inventories building in copper and the rest… well… they’ve been building since last year, no demand to speak of…. and that weak demand will continue in through the winter and that, folks, is what might very well lead Canada into a prolonged recession that might be lucky, and I mean real lucky if we see a positive GDP quarter in the 3rd quarter. Even if the 3rd quarter is positive, it will be driven by commodity valuations driven by copper speculation (and to a lesser extent, oil) only and the 4th and 1st quarters of this year and next won’t be good and a good chunk of consumer confidence and trust in our BANK of Canada and federal government will be gone because alot of people will remember a Flarehty pick in the Bank of Canada that declared arecession dead wrongly, well ahead of its time.

Be very wary, investors/homeowners and concerned citizens for our youth… there is going to be a recession round 2 beginning before years end, assuming and I certainly won’t, that the third quarter GDP is positive and it will take alot more than propaganda, rock bottom interest rates, speculation and spin to get us out of the next recession… assuming highly dumbly, I might add, that this one is already over before the numbers come in. It will take earnings… real earnings… real demand… real growth before things really turn around and that might be measured in years, not quarters.

Can you tell I’m a bear?

#10 Nostradamus jr. on 08.01.09 at 11:54 pm

>>And higher rates will be toxic in the killing fields around Dufferin Mall or Kitsilano<<

Garth?…Uhmmmm, where in the GTA is Kitsilano located?

Have they renamed Milton with Kitsilano, trying to "elevate" Milton, but its not working?

…Your blog tonite makes an excellent point…compares to the U.S. rebates of "Clunkers for Cash"….low teaser interest rates in Canada is equivalent to new car cash rebates……..because a few years down the road there will be no "newbie" home buyers nor new buyers of autos…they've bought today.

Garth…when I run for Western Canada's Dicta…I mean Prime Minister, will you join me as my Western Canadian Finance Minister'?

#11 Nostradamus Le Mad Vlad on 08.02.09 at 12:38 am

A wee ditty (title of the song is good) to begin 2nite’s Eclectic Showhomes of Whorehouses, which resemble Sheeples Living A Fantasy Island Life (it doesn’t exist) . . .

. . . with a couple of lines from “Bittersweet Symphony”, a song by The Verve . . .

“. . . trying to make ends meet / You’re a slave to money then you die . . .”

In solidarity with the nuke pic at the top of Garth’s current post, this is for those who enjoy Living Life In The Fast Lane — EAT UP! (and NOT yer veggies) . . .
As most of us are like the person spoken of in the first para., it means —
Never knew flags were so expensive to fly! —
“. . . higher rates will be toxic in the killing fields around Dufferin Mall or Kitsilano.”

Kitts? If Goldfinger Barfs has moved their top employees there, there is only one possible outcome — IT’S ‘QUAKE TIME, BABY, ‘coz they’re all on The Road To Hell Part II!
Sure is fun playing around with words and / or sentences. For instance . . .

“There were 17 offers, and an all-out bidding war. The place ended up selling for close to a half million dollars, pricked by a lethal combo of inexperience, greed and herd instinct on the part of a very dangerous set of buyers. With reason. It was a dump.”

“Young couples have been fed a diet of misinformation which is not doing them any favours dropped steadily since the buyer’s market of earlier this year, while the number of buyers has soared thanks to cheap mortgages, pent-up demand and media-induced frenzy[ied] part of the story.”

Angels fear to tread where fools rush in. I ain’t no angel, and I’m not about to become an old fool either!

P.S. Who Mark Bernanke / Ben Paulson / Hank Geithner / Timothy Carney? The Four Musketeers? The Four Horsepoops Of The Apocalypse?

Sumwun figure it out and lemme know!

#12 rubberduckie on 08.02.09 at 12:40 am

I’ve been renting for a year, and for the most part have really enjoyed my rental property. When I encounter annoying bits, I just remind myself how much money I’m saving! These last couple months have been a bummer though. Boooo!

#13 Future Expatriate on 08.02.09 at 1:35 am

Survival of the fittest. Anyone who can’t look at the aftermath of 1929 and all the BS “rallies” that finally fizzled away to naught, perhaps deserves their fate.

There’s three types of people in the world; the wolves, the sheeple, and the rest of us former sheeple and a few reformed wolves who keep an eye on the wolves and try and warn the deaf, dumb, and blind sheeple.

Some do listen; others perish at their own ignorance.

#14 Tony on 08.02.09 at 4:48 am

I don’t see higher interest rates for at least another 3 years. I see another 50 percent or more drop in stock market valuations over the next 3 years and a double dip in all Canadian real estate prices with the exception of Alberta.

#15 David Bakody on 08.02.09 at 6:20 am

Some time ago we found a nice home just outside of then city limits and a bidding war erupted …. how could it be I asked myself I offered a fair price and it was excepted? The RE person fed me some line ….. to which I said “FINE, let them have it” still in the same home and life in my world is just FINE! Off to Tim’s and a morning sail then to Halifax to listen and watch a free concert on the waterfront ….. and that suits me just FINE>

#16 somecatchphrase on 08.02.09 at 6:21 am

For anyone that’s interested, here is a very well written overview of the inflation versus deflation debate.

“The Great Reflation Experiment: Implications for Investors”

#17 kathy on 08.02.09 at 6:32 am

I have stood by for the past two years and not bought my house for “the free market” to correct itself. The recently updated Natinal Bank house price Index shows that prices are going back up again in Toronto. So i am thinking that i have missed the boat to buy a house and prices will not come back down because of cheap money. Being a contrarian does not work as Gov tries to be populous hence going with /helping the flow.

Sure, Kathy, prices are going up forever. — Garth

#18 Chris L. on 08.02.09 at 7:57 am

So the bank jumps in next month with a rate increase to buffer buying non-sense? This only serves to temporarily increase spending by sending the last cull into slaughter before “homes are un-attainable” through low borrowing. After that… slow increases in interest rates month after month as inflation increases via high government debt spending. The real estate market slowly peters out until the sentiment is obvious “real estate increases couldn’t last forever, duh” And of course everyone always knew that, it was obvious.

Really interesting crash course. Have a watch:

#19 john m on 08.02.09 at 8:50 am

Interest rates will go up and the Government won’t do a damn thing about it.Anyone who was involved in real estate in the 80’s will remember well the recession that swept across Canada starting in the east. Interest rates sky rocketed,mass unemployment,homes in some areas lost more than 50% of their value,an assumable mortgage at 10% was a bargain,rates rose in the 18% range and there was no government intervention. The banks do what they want and they are in the business to make money. As bad as things were in the 80’s it was not a global recession such as we have now.A correction is coming and i think it will be devastating

#20 Fisher on 08.02.09 at 9:28 am

It is so similar to last summer it is uncanney. There were obvious flaws in the RE system but still people were buying. We all know what happened in Sept.
We (N.A.) are so vulnerable right now. A spike in oil would be enough to bring us down. The servarity of this is being udermined by our politicians who say things like “The reseccion is over”. Sounds like “the war is over in Iraq” speach. People need to take cover and hide. Pay off debt, learn to eat off $100/week, and get in shape. How can anyone trust these people after what we know now about Iraq, about harper and his lies, and about how this economy has been managed the past 10 years. It is the same people in power now who assure you that things are on the up and up. And THEY are making plans for our future? 40 Years ago this would never have been allowed. People would have remembered the great wars, the great depression, and what they were told the whole way throughout. The children of the Veterans never listened or learned a thing (atleast in this part of the world). If a goverment fails (they tell you one thing and something completely different happens) there should be serious questions raised about their competence. Telling people that you were trying to instill confidence in the markets is tantamount to treason. And for harper to now tell us the reccession is over is the last straw. He would tell us the polar ice caps were growing again if he had visited the artic in the winter. This is July people, the economy always grows a little better in July. I predict another market crash this fall. And if this happens there must be accountability.

The liberals are loving watching Harper fail. They could do no better and they know that. Lets keep him in office for a few more months they say. If I was Iggy I would push him out right now with a manifesto mailed to every Canadian. This lack of proffesionalism is a huge safety hazard and he should be hanged. He has done the wrong thing at every turn to protect the livelyhoods and future of ordinary Canadians. Without a Canadian made approach we are doomed like the rest of them. But, the Liberals also know that the gulf of mexico is warmer than ussual and we have few big winds coming. If oil shoots up to $150 and we are faced with an election, rational thought will not prevail. Maybe Harper should be allowed to botch up one more event. A par dollar and $150 Gasoline.

Not having much invested interest and being poor most of my life I can only watch it with the same fastination as watching a car crash happen from afar.

#21 Yogger on 08.02.09 at 9:56 am

My wife and I have just paid off our student loans. We hate debt with a passion and will only go into debt for a home. Which was our next step. I always assumed that RE was the best investment because 1) you’ll always need a place to live and, 2) RE has always appreciated over MY lifetime.

In the past few years I’ve heard a nimiety of messages regarding RE. If you miss the RE train now, you’ll never get in (or pay twice as much later); I’ve heard that renting is just throwing away money (and this is what my wife has thought up until recently). I’ve heard that this new wave of RE will widen the gap between the rich and the poor – thus effectively eliminating the middle-class.

As I watch the ridiculous housing market in Edmonton, I can’t help but think that people are absolutely out of their minds. The houses bought may be new, but they were built during the boom and have nothing but problems (I currently rent a condo that was a boom product – and I can’t wait to get out of it). But it’s not just the house quality – it’s the prices.

I have friends who say their Edmonton house is now worth $375G when they bought it for $354G. This got me thinking. There is no way that I would pay that much for a house (on a small lot) located in the centre of a big maze of other overpriced houses – is it just me or are they nuts?

Garth, you talk about the bubble bursting – and I, too, believe it will (hopefully soon); this fantasy world cannot last forever. However, I’m curious as to what you think about the timing of the burst in Edmonton… will the bubble last longer in Edmonton (or Alberta) than elsewhere in Canada?

#22 Peter Wiener on 08.02.09 at 10:30 am

re #3

Why are you are so confident about this “government’s” ability to levitiate the economy in the face of a global recesssion?

NO GOVERNMENT IN MODERN FINANCIAL HISTORY HAS EVER “SAVED” THEIR ECONOMY from the ultimate ravages of their incompetence.

Keep dreaming Hal or better yet, take evey cent you have and buy BC real estate.
I didn’t realize until your posting today that you were from BC – that no doubt accounts for your delusional thinking. Sad really, you can’t even learn from your own Province’s history – take a look at the past 40 years or so.

#23 Peter Wiener on 08.02.09 at 10:42 am

#16 Kathy and all other uninformed market observers

For Toronto. Calgary, Vancouver and other super inflayed housing market price charts.

Can you say “double top”?

Learn to say the words – you may be hearing them a lot from BNN types in the next little while or you can do 2 minutes research and see what happens historically when markets such as the Cdn real estate market create a “double top” pattern.

And, oh yeah, notice in every BUBBLE market how much faster prices drop than rise over time. People only generally acknowledge this after having lost heavily much past peak prices.

#24 Got A Watch on 08.02.09 at 10:43 am

Carney knows the GDP stats will be manipulated to show an “increase” for Q3 and Q4, so the recession will “be over” on paper, and so the headlines and pumper MSM outlets can trumpet victory. Harpoon made a critical error in being too quick to echo Carney, and is now trying to back-track at high speed, as he has belatedly realized voters won’t agree with that call.

Karl at Market Ticker has de-constructed the US GDP numbers, and they show in fact an actual continual and worsening decline – “Baloney. Not only is the GDP still falling it is still falling at an increasing year-over-year rate.

The second derivative will not go positive until the slope of that line turns upward and we will not see an actual y/o/y increase until (of course) the line goes over zero. So long as the line slopes downward the decline in GDP – the economy as a whole – is accelerating.”

That’s the truth never reported in the MSM. If Canadians think they can escape reality here, while our largest trading partner and the rest of the globe continue to suffer sharp and continuous GDP declines…well, Nostro has some magic cookies and Vancouver real estate to sell you. ‘Never a better time’. LOL.

In the real world, there will be no recovery apparent at street level this year or next. Those who think “China will pull us out of this” are also delusional, they are in decline along with the rest of the globe. Statistics coming out of China are just flat out lies – electrical power consumption was still plunging, so they stopped tracking it, a clear indicator to me. Very similar to the way “statistics” are reported here, in fact.

The sustainable level of global economic activity going forward looks to be a much reduced level. This is the new normal, and it is a death knell for a “consumer economy” where “72% of GDP comes from consumer spending”, even if consumers can be coaxed to spend freely once again – the number who can do so have been reduced substantially, and for a long period. With ‘Boomer’ demographic facts looming, maybe for several decades.

There is no going back to the irrational economic exuberance of 2006, even if sentiment improves. Those days are over, and they won’t be back. The economy will grow in the future, but the glory day heights of the recent past will not be seen again within most of our lifetimes.

Carney and politicians at all levels are emotionally invested in recreating the past, and getting “credit flowing again”. Which only proves how clueless they are, you simply cannot fix an over-indebtedness problem with greater debt and more easy credit. These policies in fact insure their worst nightmares will come to pass, no matter how much they intervene.

I remain uber- bearish, surveying the landscape. Note, this has little to do with how I trade the markets, I just trade the price action based on technical analysis. YMMV.

#25 lgre on 08.02.09 at 11:02 am

11 rubberduckie – renting and owning can both be a bummer, my friend has been living in his house a week…and half the house burned down last that is a bummer…if it were a rental, it would be no issue..but now he has a whole lot of problems being the owner.

#26 jess on 08.02.09 at 11:09 am

what about bank owned homes? (since banks like the highest price possible with no conditions ) could this be driving some of the market ?

#27 DW on 08.02.09 at 11:17 am

” The good news is those who have been waiting for real estate to correct and are dismayed at the lunacy around them are far closer than they realize to bargains”.

The big question is how closer?

There’s no doubt a serious correction is on the horizon; this fall or after the next big stock market selloff. Maybe as # 1 states the Israel- Iran nuclear conflict which could set off a chain reaction of events.

For those who think it’s business as usual, real estate is on the rise again, look again and smell the roses. Times like these will make or brake. I feel sorry for those first time buyers who are jumping in right now caught up in the propaganda that says all is well buy now or you will miss out. We live in an instant generation, where even Macdonalds isn’t fast enough anymore. So real estate hunters on the trail for a kill must have it at all cost.
The bargains are just around the corner…. That escape property in B.C with an ocean view will soon become affordable.

As the guy on the commercial says ” Save your money”. It’s the best policy right now and will reap dividends later.

#28 Smart on 08.02.09 at 11:22 am

32 Story Highrise in Florida Has 1 Tenant

In case you did not realize just how bad the condo bust is in Florida, this story will clue you in: Florida highrise has 32 stories, but just 1 tenant.

#29 The Vulture on 08.02.09 at 11:40 am

Your Wake up Call – School is in Session

The apparent lack of financial intelligence that goes on in the real estate market at times can be really unbelievable. The “record” current low interest rates are low for a reason people and I can assure you that it is not because the “recession is over”. The central bank seems to be running out of ideas to juice the economy back to life. When a young couple (first time home buyer for that matter) only believes that they will never get into the market if they don’t buy “NOW!” fuels the insanity and herd mentality not to mention the “free money nonsense” and don’t worry about the overall debt obligation but focus on the monthly payment.
A $700,000.00 mortgage still has to be paid back regardless of the interest rate!
Low (er) monthly payments and/or longer amortization periods is a mirage at best and lures the illiterate into thinking that they are getting something for nothing. I would rather have buy a $350,000.00 home with a 200,000.00 mortgage at 7.55% (25 year payback) than the same home for $700,000.00 with a $550,000.00 mortgage over 40 years.
Don’t be a slave to your banker, be financially intelligent. The longer you are tied to your banker’s desk the more money he makes off of you. The more a home costs the more the real estate agents make (and their brokers). First time home buyers time to crack the books open (Garth is your economics teacher) and save yourself from being suckered and robbed blind. Class is in session…..

#30 Bobby G on 08.02.09 at 11:49 am

3rd hour part 1 is a great Sunday listen

#31 hal smith on 08.02.09 at 11:56 am

#21 Peter Weiner :
I’m confident that the govt. will do whatever it takes to keep the bubble inflated because the alternative is “death”,and Survival is our strongest instinct. The demand for housing and bidding wars is like a sublimated sex drive, our second strongest instinct. Figure it out……..
Me personally? I’ve lived in BC for 60 years and I’m well aware of the history. I saw this coming in 2003, sold my house, paid cash for a smaller home and invested the rest. My income stream is so diversified that it’s redundant and it’s as safe as my adviser can make it and if it collapses it means that the economy is no more. I’m “bunkerized” and I have a generator. I’m armed. I have a stash of food, water, cash, and ammo. If there’s a “last man standing ” it will be me. I’m not a red neck survivalist but I take precautions. And you know what? I’m still scared shitless for my kids and their future. Yep, they bought into the scam too. Frightening mortgages, lines of credit, car payments, credit cards,big ticket vacations, and a life style I could never envision at their age. I have that lifestyle now if I want it but it took me 60 years to earn it.
This bubble is gonna hard to pop if it ever does.

#32 MenWithHats on 08.02.09 at 12:11 pm

New home construction
is down thirty per cent nation wide .
This is a number that matters .

#33 very disappointed on 08.02.09 at 12:23 pm

Garth, I understand that the sensationalized writing style on your blog plays to the audience; you seem to be channeling Bill Aberhart.

But with all the jabs at non-believers, especially at those with legitimate economic counterpoints, I have to conclude finally that you have little to no clue what is going on out there, or worse, you don’t have the courage to really say what you think.

You can’t have it both ways: moderate recovery, attractive alternative investments to housing, rising commodities, and sure-fire inflation beating strategies on one hand… and destabilizing real estate, record unemployment, an exposed CMHC, and a “cash is king” economy on the other. These things don’t mix readily.. and you’re not connecting the dots.

If you had an argument that has a sober take on the market rally, rising Canadian real estate, bond markets, US central banking and the Japanese lesson, you might make some sense of this.

For now, however, you are dreadfully populist (albeit for the wrong constituency), and dead wrong most of the time, ESPECIALLY on Toronto real estate.

I like your shoot from the hip style, but I really thought you had an understanding of the economics underneath, which you omitted mainly to streamline your editorials.

But now… not so much.

It’s a blog, sis, not a textbook. The narratve style of this communication requires reading posts as contemporary chapters in an unfolding historical novel. When you get that, come back and learn that economics is the result of human behaviour. — Garth

#34 nada on 08.02.09 at 12:25 pm


Look at the earnings of Canadian energy companies this past quarter – horrible. Now look at their stock prices. Sure, they’re down from their peak but are they really in line with current performance?

Or look at oil prices – near $70 a barrel still in the face of declining demand despite production cuts.

It’s the same with Alberta RE – prices do not currently match the underlying fundamentals.

So it comes down to one of two things – either AB RE, oil prices & energy stock prices will sink to match current recovery, or the ‘real’ recovery is so close around the corner and the current bad fundamentals are really just a slight blip and we’ll be back to 2007 by the end of Q3.

If you believe the former, just watch the TSX and that’ll indicate the ‘when’ for you.

It’s nice to see that some people do understand that having a mortgage is actually ‘renting’ too – you’re just renting money from the bank rather than a place to live from a landlord who’s responsible for that flooded basement or those leaf-clogged gutters.

#35 yeasayer on 08.02.09 at 12:32 pm

Garth, not sure why you keep dumping on leslieville. It’s completely different from Queen W and “garment” as you call it. Lots of young families moving in and plenty of resources such as clean parks (ie: no Christie Pitts) as well as a close proximity to downtown. Would love to show you around sometime. But I guess it’s easier to slag an area if you don’t visit it.

I have sniffed it often. — Garth

#36 Munch on 08.02.09 at 1:08 pm

Brilliant, Garth, brilliant!

#37 confused and a little crazed on 08.02.09 at 1:19 pm

If or when The market collapse .. How do we complain to the govt not to further support CMHC and their overzealous guarantee of mortgages because they will blow thir budget sky high if the market downturn occurs and as a tax payer I dont want to help the greater fools.

because the govt will keep blowing the bubble ..changing polices aand maaking new ones we could have a seesaw stocket market …hitting highs and lows like a messed druggies getting a new hit …what do u think and where do i protest the cmhc polices

#38 Eduardo on 08.02.09 at 1:45 pm

re yogger in 20:

Why is a house that is 3.5 times the average household income so unbelievable to you?

#39 Herb on 08.02.09 at 1:48 pm


meant to thank you for your debunking of the Home Renovation Tax Credit the other day, but failed to get around to it.

You are absolutely right of course. The old New GoC advises to “Put Your Tax Dollars Back Into Your Home”, and advertises the chance to “Save up to $1,350 on home improvements purchased before February 1, 2010.” [] And then the saving turns out to be 15% of the slick 15% tax saving, plus whatever percentage your province will allow you to deduct.

Being bribed with your own tax money is one thing, but being bribed with a promise of your own tax money that is 85% smoke and mirrors is something else. We have real geniuses in our Finance and Revenue departments. Pity they are not working for the taxpayer.

#40 NKVD Black Raven on 08.02.09 at 1:49 pm

Garth you’ve done your bit – “helped get the women & kids into the boats.” The smart can sense what’s coming. It will take years and years for things to get back to where they were. We are in a world of hurt.

#41 PTDBD on 08.02.09 at 2:28 pm

All I know about the Markets I learned from the cartoons

We’ve had our Wile E. Coyote moment. Stepped off the cliff, hung suspended in mid air, and finally looked down. We saw our fate and heard it from Paulson. Our politicians did not like the view. Not one bit.

The Deus-Ex-Machina paperprestidigitizer was unveiled and has carpeted our foothold on reality. Problems are now solved by throwing gobs of money at them. People are not spending for Christmas. Send them cheques. Kids are dropping out of school, pay them to attend. Businesses can’t make money, take them over. Banks are insolvent, drown them in a sea of liquidity. People don’t buy cars, offer them cash fro clunkers. When that Billion runs out during the first week, then throw another 2 Billion at it. People can’t pay their mortgage, pay it for them.

Hey gang…it’s a solution and it’s working and they won’t stop.

#42 Keith in Calgary on 08.02.09 at 2:32 pm

Well, in Calgary SFH sales are down 15% month over month, and prices are down $11,000 or 3% for the month of July alone. Condos are flat price wise, and sales are down 5% month over month.

SFH average prices are down $70,000 from their $505,000 high in July of 2007. Condos are down $47,000 from their May 2007 high of $332,000.

So, someone who a bought a SFH in that period, and at that price, who would have sold today, would theoretically have lost roughly $100,000 by the time you factor in a price discount from list, and the property pimps commission. Now, let’s add in thier mortgage payments and operating costs shall we ? Nah, why would you do that, it would just make it a $130,000 – $150,000 loss………

Overall sales volume ticked up in June and July year over year due to FTB’ers “walking the plank”, but there are only so many greater fools to go around.

Re-read the above to see what awaits them.

#43 lgre on 08.02.09 at 2:34 pm

#28 The Vulture – nice post, but look on the bright side..if we dont have illiterates mortgaging their life away with the big ball and chain, how are we bank shareholders going to reap the rewards, the stupid can be beat with a little creativity. The banksters are hard to beat, so why try, join them in the good times..dump them in the bad.

#44 young & foolish on 08.02.09 at 2:37 pm

All those poor young families … what should they do?
Rent and wait until RE returns to 3 times average family earnings? Where should they go?
And all those so called “up and coming neighbourhoods” will return to the less fortunate? Us really.
I guess we really don’t have a “middle class” anymore since everybody is loaded up with debt …. it’s just an illusion of wealth.

#45 Suzukimum on 08.02.09 at 2:42 pm

More delusions about home ownership. Go to:

#46 Chris L. on 08.02.09 at 3:23 pm

The renovation tax credit is moot. The gov gets it all back and then some. You essentially get something you could get anyway just by asking or bartering with a retailer. Most will give you the 15% off if you ask the right way. When you spend your 10k on materials or hire a contractor, this income gets reported since you need receipts to claim it right. So now the government gets the 15% (more or less) from the sale of the goods which goes on the retailers books as 50% income since they mark it up that much and then when you hire your contractor goes 30% back into income tax since your contractor will have to report it rather than take cash. How can people be so dumb as to fall into this incentive program anyway, creative people make their own incentives….negotiate! I’ll never understand how spending money leads to savings, perhaps that incentive is lost on me. I’d personally rather keep the money in my pocket and ACTUALLY save it. Anyone else out there wanting to save money…I’ve got lots of savings for you!

#47 Rob on 08.02.09 at 3:51 pm

i live in the dufferin mall area, those houses there are all garbage….those buyers aren’t very smart.

its not different this time people
A bubble exists when asset price inflation rises beyond what incomes can sustain……
job losses, falling wages, yep nice bubble here.

Here is a blurb from none other then Martin Armstrong

Real Estate has been hailed as the greatest investment of all time – at least post-World War II. But the wealth created by real estate is mainly an illusion created by currency movements. During the 1970s, a Porsche 924 cost as little as $10,000. By 1980, a Porsche was going for more than $50,000. People saw foreign cars as a good “investment” because you could drive them around for two years, and still get your money back. The same thing took place in England in 1985. A Ferrari that was $50,000 in the US, could suddenly be purchased for $30,000 in Britain when the Pound fell nearly to par with the dollar – $1.03. Because Ferrari could not afford to sell their cars in England at a substantial discount, they raised the price of the car to 40,000 pounds. However, the pound then rallied back to nearly $2 as the G-5, formed in 1985, manipulated the dollar lower by 40% to increase trade. Suddenly, that same Ferrari was now selling for nearly $80,000.

The point I am illustrating with the European sports car example is that the fluctuations in currency of 30-40% in a short time period, created the illusion that the cars were the real investment. However, the value of the car was related to the indirect swings in the value of currency. The rise in foreign car values throughout the 1978 instilled the image in American minds that a good German car held its value and was thus better than an American car. This image, created by the decline in the dollar after 1971, produced the age of inflation added to by OPEC. This period in time also created the “brand” image for foreign cars. This did more to destroy the American car industry than any other event.

What we must also come face-to-face with, is that the same source of capital appreciation in foreign cars caused by the decline in the value of the dollar, has been the steadfast momentum behind Real Estate. A home purchased in 1955 for $14,000 at the peak in 2007 rose to $300,000 on average. The question becomes, after excessive property taxes, does real estate really provide a good long-term investment? Most would just answer yes. But you are being paid with dollars that have far less in purchasing value. Add up the taxes paid, and you find out in real net terms, the same fluctuations in currency that make cars appear to be investments, do the same to housing.

Of course, there are segments of the real estate market which outperform the drop in currency and exceed other areas by 50% or more in “capital appreciation.” This is the natural business cycle that takes place. You will notice that the rise in real estate after a setback, starts typically in the City. It spreads from that center to the less central portions of the city, and then to the suburbs. As the suburbs are still rising, you will begin to see the core city district peak. That will be the first sign that the cycle is over. This manner in how real estate rises and falls was something that emerged from our studies at Princeton Economics monitoring real estate trend from Europe, America, Asia, and Australia. It always was the same pattern.

But what if the current economic decline is running much deeper and is along the lines of the Great Depression insofar as the total collapse in real estate values? Today, the cycle is far more volatile because of the widespread loans on real estate that did not exist during the Great Depression. The length of debt on mortgages post-World war II is far greater than what existed in anytime during the past. As banks were willing to lend for 30 years, it drove the price of housing up to meet the available cash. If there were no mortgages and property could trade only for cash, the value would drop substantially. So it has been the availability of money that has also accelerated the rise and fall in the value of real estate.

It was the S&P Real Estate Index that peaked with the Economic Confidence Model on 2007.15. This is the target market that will see the greatest fall. We are now facing a very serious possibility that the decline in real estate may not be over for at least 4.3 years into 2011, but the more likely scenario of a minimum of 10 years with the outside shot it will never again be an “investment” as we know it.

How could real estate decline for so long? The two contracting factors that are conspiring against real estate are (1) the Debt Crisis cutting off available capital to keep the bubble expanding, and more importantly, (2) the collapse in state revenues. The states and municipal districts rely upon property taxes. The greater the mortgage crisis, the greater the foreclosures, and that suspends the tax revenues as well. This causes the collapse in state and local revenues forcing states to raise taxes even higher and this is precisely the combination of a debt crisis that ends societies and has been the destroyer of civilization. When it goes to extremes as it did in Byzantium, it even destroyed capitalism reducing the average worker into a peasant who was forced to sell himself, his family, and future children into servitude just to survive.

#48 Mark on 08.02.09 at 4:15 pm

Im confused. Im single – I earn $100k a year. I’m not bragging, but that seems to me to be more than a lot of peoples joint income..

Now i’ve just used the CMHC mortgage calculator garth linked in his last post:

According to this, putting interest rates at around 7% and 20 year mortgage – the absolute max i can afford with 100k down is around 350k!

How are people getting more than that? What are the banks offering them exactly? Okay, I can get 500k if i push it up to a 35 year mortgage.. But who is realistically buying these places for more than that?

Are people scamming the banks by telling them they earn more (surely easy for the banks to find out?) or are the banks lending much more than these people can realistically afford (And causing our own subprime problem?)

Im interested what i could actually get a bank to offer me.. I might make an appointment – it seems a REALLY dodgy way of working to me!

#49 My_view on 08.02.09 at 4:31 pm

How has the stockyards flopped? Dufferin mall metal barricades? Sherway & Yorkdale use metal baricades too. (Closing time) Garth, do you get out much? Dufferin and College is a great area. Older homes suck, newer homes suck, but the house you live in is the best! Everybody Real Estate is dead for the next couple of decades! Current bubble, higher rates, and lets not forget the dreaded boomers……

#50 $fromA$ia "Garths Nugget Boy" on 08.02.09 at 4:37 pm

” And why not? It’s on the lips of Mark Carney, Ben Bernanke and housing industry leaders daily.”- Gaths thread

Lets not give Mark Carney too much credit, he’s Flaherty’s puppet.

As you know the USA economy is showing signs of reversal Canadian’s is still diving, still diving with young Canadians purchasing big ticket items (homes) at inflated values.

THIS IS NOT GOING TO END WELL HERE. Canada has printed more money proportionally than the USA and our economy still hasen’t turned around.

Theres not a chance Canada can take that stimulous money off the table fast enough.

Liberals and Conservatives are now playing a game of chicken. Each party is darring the other to call this free money purchasing of homes. Canadian citizens(homeowners) are being taken for the ride.

Will the housing bubble pop? Conservatives are gambling on inflation to justify home values and Liberal can’t say anything because the thought of Canadians homevalues being corrected is very unpopular.

#51 $fromA$ia "Garths Nugget Boy" on 08.02.09 at 4:40 pm

U got money? The bank is not rewarding you for it. Buy assets avoid the devalue of your money.

#52 Industrial Guy on 08.02.09 at 6:07 pm

It’s almost been a year since the “Soft Landing” became a CRASH LANDING.

EI benefits are running out …… and all that’s available is McJobs.
The super low interest rates worked. Families in Canada are now crushed under record amounts of debt. The supply of Great Fools is running low……
New home sales can’t get out of first gear.
Unemployment is rising in Canada’s two biggest “Have” provinces….Ontario and Alberta…

In case you have not heard, Canadians are not invited to take part in the recovery south of the border. Many of my clients have been told by their US distributors. Foreign companies (that’s us) are now banned from bidding on projects which are funded with “Government Stim money”..

The Government in the USA and the Government in Canada have one thing in common, they are making all this good economic news up. How is the “Cash for Clunkers” program, basically tax money to buy cars a good news story??? Consumers are trading their US made gas guzzlers for made in American made Honda’s and Toyota’s. Geeez …… like the needed the help.

Car sales number will be out Monday in the US. Expect there to be a significant increase over the same period last year. A lot of analysts in the US will say …it’s a sign the recession is over. It isn’t.
Just remember, how bad the Detroit Three sales were in July, 2008. In August and September, things actually got worse. Pickup trucks sales were off by over 50%. The major layoffs in the auto sector started in earnest about 30 days later.

Unless the Governments of Canada offers to cover the down payments on everyone’s next house purchase. This market has just one place to go ….. There isn’t an endless supply of fools and unemployed people don’t buy houses. Anyway, with all of this economic uncertainty, how could anyone seriously think of buying a house right now?

Stay liquid. Stay mobile. Collect Squirrel recipes.

#53 Nostradamus Le Mad Vlad on 08.02.09 at 6:39 pm

“Randomly Organized Chaos” was someone’s description of the universe, and as Earth is part of the universe it stands to reason that What Goes On In Vegas Is Everyone’s Business.

A Hitchhiker’s Guide To Wendy’s Baconaters —

The Theory Of Conundrums leads to #1 Nostradamus Jr’s Analyst on 08.01.09 at 9:30 pm —

“From what I’ve been reading, something is about to blow up this fall. . . . the real deal this time, or the much anticipated attack on Iran and the major fallout that comes with it, or something else that’s really big and really frightening. I’m getting an uneasy feeling that the real estate market will be the least of our worries in a few weeks.”

The US and Israel know full well that Iran is Russia’s seventh-largest trading partner, Russia has already stated that an attack on Iran is an attack on itself (and thus will be met full-force), China has stated it will support / defend Russia and Iran.

Russia and Iran hold at least 20-25% of the world’s remaining oil and gas supplies (that is why China is interested), and Russia supposedly owns 49% of the Arctic Circle (the rest is up for grabs).

There are also huge gas deposits right off Gaza, in the Meditteranean — hence the attacks recently.

WW3 + NWO = population reduction, a convenient, world-wide swine flu outbreak, famines, crop failures, water shortages, etc., most of which were planned several years ago.

Unfortunately, no one took into account the “Randomly” part, which lends to external forces (such as good-sized asteroids hitting), so what are the real reasons for this, or any pre-planned attacks?

The Love Of Power over all, but “Power corrupts. Absolute power corrupts absolutely”. All that will be left is a disorganized world, where chaos rules supreme.

However, humanity has risen from the ashes before and will do so again.

BTW, an error (mine) which I will correct — the end of the Mayan Calendar is Sunday, Dec. 23, 2012 — two further days in which to prepare for Xmas and the English Premier League Soccer!
#50 $fromA$ia “Garths Nugget Boy” on 08.02.09 at 4:40 pm — “U got money?”

No, but it is fun to mess around with something I don’t have! So, One Million Cdn., a quarter divided each into baskets of:

Agriculture; Health; Energy; Monthly Dividend-Only Payouts.

So I’m filthy rich and dead! So what? Had a blast during the process (see Garth’s lead-in pic., as that roughly resembles my stomach after eating Curry and Rice)!

#54 wayupnorth on 08.02.09 at 6:57 pm

Great posts today!!!

A small but growing number of peole are starting to get it. Market ticker blog talks of how the next bank failure bankrupts the U.S. equivelent to CMHC without major federal funding. I wonder how many mortgages default or decline in house prices put our CMHC in the same position?

Nathen’s economic edge site basically is describing the end of the U.S. along with many recent posts on Mish’s site and the Automatic Earth. These along with probably a hundred other sites I have picked up from reading this blog and links etc. alone. One underlieing trend on all of them is we are witnessing the end of an era and it will take at least two generations to get back to where we were last spring so trying to return to the past is a waste of time and money. We ain’t gonna get there in our lifetime.

If you step outside the box you see that globalism and “free trade” are dead as is uncontrolled capitalism. Corporate control over all of our lives is proving to be as big a millstone as Communism in Russia an China and either we throw off the oppresers or we will face lives of serfdom.

If you think this is a recesson or depression think twice as we are going to see a complete change to how the world has opperated since WWII. The idea of one size fits all that pushed the expansion of capitalism at all costs is coming to an end. What China needs to fix it’s problems is opposite to what is needed in the U.S. which is 90 degrees different to what Canada needs to do. As many sites Ihave read recently have said, we need to start looking locally for solutions but in the cming period of protectionism we need to be carefull to find real trading partners with similar values and economies because the corpoate experiment of global trade will die in the orgy of greed being carried out up till now.

#55 Ronaldo on 08.02.09 at 6:58 pm

It would be interesting to know what the average age of the current buyers is because there can’t be many over the age of 35 with much available cash or equity to be able to buy into this market and we all know that their parents, the dreadful boomers, have taken such a hit on their retirement funds in the past few months that they certainly don’t have the cash to shell out for a down payment. Right now they are wondering how the heck they are going to retire after losing 30 to 40 percent of their stash. So, where is the down payment coming from to buy these overpriced properties? Post #50 Garths Nugget Boy, I hope that when you same buy assets, you are not talking about real estate. You want to see money devalue, just slap your 100 g’s on a chunk of real estate in Vancouver or Toronto right now and you will see it disappear within a year. Like the Gal with the accent says, SAVE YOUR MONEY. And Garth, that is a great image at the top of this blog. Yep, the boys in Ottawa will do anything to keep this bubble inflated. Keep an eye on those foreclosure rates. The fun has just begun. I just feel sorry for those poor young people who are going to be sucked in once again. What could those clowns on the hill be thining of?

#56 gold bugger on 08.02.09 at 7:01 pm

@32: The reason Garth contradicts himself and does not provide logically consistent answers to difficult economic questions is because he’s a charlatan with a large following of dope-eyes sheeple. If you followed the advice in his books, you’d be broke several times over.

He is not qualified to offer investment advice.

I have no advice, only opinions. Say, I notice gold is where it was a year ago. Bummer. — Garth

#57 45north on 08.02.09 at 7:49 pm

#36 confused: How do we complain to the govt not to further support CMHC ?

I sent Garth’s blog on CMHC to my MP and to CMHC

from Oliva (assistant to David McGuinty)
Please be assured that I will share your email with Mr. McGuinty for his consideration. The points raised in Mr. Garth Turner’s latest article are very compelling.
In the meantime I have taken the liberty of forwarding your email to Minister Diane Finlay given that the CMHC falls under her direction and is a part of her Ministry’s portfolio.

from Peter Hunter of CMHC: Thank you for your comments. I have forwarded them to the Corporate Relations Office for their information and consideration. The staff in the Corporate Relations Office will work with the CMHC Insurance Division on a response to the issues that you have raised and will send you the reply once it has been prepared.

I would write to your MP and Diane Finlay.

I am willing to make a presentation to CMHC.

#58 Paul on 08.02.09 at 8:01 pm

So does this mean rates are going to rise?


5-Year Stepper GIC 5 years 1st year 0.50%
2nd year 1.50%

3rd year 2.00%

4th year 2.75%

5th year 6.00%

Effective Annual Yield 2.533%

1st year 0.50%
2nd year 1.50%

3rd year 2.00%

4th year 2.75%

5th year 6.00%

Effective Annual Yield 2.533%

#59 OttawaMike on 08.02.09 at 8:01 pm

Home Renovation Tax Credit:
It should be called the Kill the Underground Economy Tax Credit. While the govt. has done a great job of advertising this program they have not done a great job of ‘splainin it.
Many homeowners think the entire 1350$ is refundable off the top of their project.
The real payoff will be the contractors who collected EI and worked cash on the side will now have to issue invoices and remit taxes. This revenue stream will far exceed any piddly 10% refund that may not even pass reading in the house.

#60 john m. on 08.02.09 at 8:40 pm

#56 45north on 08.02.09 at 7:49 pm..Good for you ..hope you post the should be very interesting

#61 Joseph on 08.02.09 at 8:46 pm

US Recession Is Over – Greenspan

Alan Greenspan stated that, barring unforeseen events, the US economy could grow by up to 2.5 per cent this quarter. His prediction yesterday was far more bullish than the 1 per cent growth expected by most economists. “The reason is there has been such an extraordinarily high rate of inventory liquidation that production levels are well below consumption, ” Mr Greenspan told ABC television network.

Unforeseen events in this unpredictable world is the wildcard. Hate to have a healthy economic recovery dependent on smooth sailing ahead on choppy waters.

#62 Barb ... reader, Calgary on 08.02.09 at 8:55 pm

Herb and Men With Hats,

As I understand it, the reno tax credit is not even approved by parliament yet – correct? (and I too thank MWH for pointing out the “real” savings .. I saw that and had forwarded it to my neighbour the other day who is doing their renos as we speak).

So I don’t know if anyone else here has mentioned the HRTC is not actually approved, on the government website it still says “The Home Renovation Tax Credit is a proposed tax credit.”

Proposed. Sheesh. Is that true? Is Harpo again prematurely and improperly tooting his horn and advertising it all over the place, telling Canadians to go forth into that trap, but no guarantee? Isn’t that just like the ‘buy a green car credit’ awhile back.. that was yanked before many people could claim.

I heard through the grapevine.. an upper Alberta Con says Harper cannot possibly be re-elected. Good. Finally. Hopefully.

#63 eddy on 08.02.09 at 8:57 pm

i agree -Ottawa will do anything to keep the bubble inflated. inflation is in fact official policy of every government/ it’s the only way out of the mess. low borrowing is here to stay. to a government, more debt all around is the same as printing money- inflation makes stupid people feel rich. if rates go up, deep depression, riots, etc will follow. i don’t agree with renting and sitting on cash. cash is fine, After you own your own principal res outright

#64 Cordoroy Cowboy on 08.02.09 at 11:01 pm

Okay, so no “advice”, but can I get an opinion please?
Garth et al.

Lots of opinions favoring the rise of interest rates on this blog. Lots of bears and squirrel eaters as well. I have a plan to conserve my assets. Here it is.
I cash in all the mutual funds in my RSP while the market is going up and before the next run to the bottom and I wait till the interest rates start rising and then I build a ladder of fixed income with GIC’s. I remember my parents kicking themselves for not locking in their GIC’s for 5 years at 15% in the 80’s. Although 15% is extremely lofty, I would be happy with 5% guaranteed, instead of mutuals that eat away at my capital in the form of fees and that are going down(or soon will be again). When the market bottoms(I know, I know, you can’t time the markets. But guess what, I think you can to a degree and why not try, the talking heads sure don’t know SFA) I would also pick up a few bargain blue chip dividend payers that have bottomed out when the bigger crash comes with maybe 30% of my portfolio money. I still love dividend payers and even though they are not always efficient to carry in an RSP, if there is ever a large sustained upturn again, I could shelter some large capital gains if things are bought at the bottom. Meanwhile I could collect dividends and get paid to wait. My non reg is full of dividend payers and has done good by me for many years so I will leave that alone and take what comes. As long I get regular dividends, I will stick by the portfolio that i have built over the years and I dare say I think I will always get my dividends, they may go up and they may go way down but I will still have them rolling or trickling in.

I am thinking that it might be a great strategy. If interest rates go up as many have predicted maybe GIC’s will be in favour again. Safe, secure, CDIC insured
and relatively lucrative when compared to the frothy stock markets as of late and most certainly in the future.

I’m laying this strategy out there…knock some holes in it. I would relish the feedback.

#65 Nostradamus Le Mad Vlad on 08.03.09 at 12:44 am

#60 Joseph on 08.02.09 at 8:46 pm — “US Recession Is Over – Greenspan . . . told ABC television network.”

ABC is the ‘unofficial / official’ mouthpiece for the WH. No doubt Greenspan is good at what he does, but there is an awful lot of tomfoolery going on behind the scenes.

“Unforeseen events in this unpredictable world is the wildcard. Hate to have a healthy economic recovery dependent on smooth sailing ahead on choppy waters.” — Choppy waters? See links following.
Now back to the usual verbal diarrhea. — “… according to the usual Israeli sources.” Courtesy

Notice the word bomb. It is singular, meaning only one. It hasn’t been built yet, and probably never will be, as Iran signed on with the IAEA in 2003; Israel hasn’t.

Where in this article is mention made of Dimona, the not-so top-secret nuclear weapons manufacturing facility built in Israel, which could eradicate Muslim countries (and probably itself in the process)?

Any ‘net search on ‘nuclear warheads in dimona’ would show somewhere between 300-650 nukes or so.

What’s the betting this is the reason for the US and Israel speeding up their so-called ‘invasion’ of Iran, to conveniently get people to forget all about the economy?

Apparently, Iran has eight weeks to comply (with what, no one knows) and the Pentagon is speeding ahead with a 30,000 lb. bomb . . .

This is also quite interesting . . .
For those who may have forgotten . . .

“It should be obvious that this “virus” is not natural and is a product of “reverse engineering” in U.S. Army labs. Given all of the other information, that is the only conclusion that fits. It completes the puzzle very nicely.”

#66 nonplused on 08.03.09 at 1:10 am

#13 Tony

I think real estate prices in Alberta have to come down regardless. We have all the factors for new supply at low prices: Plenty of undeveloped land within commuting distance of the major centers (and I mean plenty!), available trades no longer being siphoned to Fort Mac and in need of a job, and building materials costs have begun to act more reasonable. It does not cost a builder as much to build a house as they are currently selling them for, so that means supply will continue to grow.

Maybe if we get $200 oil again the oil companies will start hiring again and go crazy with wages, but right now they aren’t doing much besides trimming costs. That means downward pressure on wages over all.

You can pretty much judge the state of the oil companies by looking at either provincial tax revenues (way down), or oil company profits (also down). These are not the things booms are made of.

#22 Peter Wiener

It wasn’t even a “double top”. Calgary, Edmonton, and Vancouver are all still well off their highs. Only Toronto, Montreal, and Ottawa made modest inroads above the old highs, but they never had quite the same bubble. What we had was an enthusiastic spring rally. Housing rallies every spring. Zzzzz….

#49 $fromA$ia “Garths Nugget Boy”

Carney is Geithner’s lacky, not Flaherty’s. They all take their orders from stateside.

#67 confused and a little crazed on 08.03.09 at 1:35 am

45 north,

thanks for the info

#68 Mike (Authentic) on 08.03.09 at 1:41 am

I’ll state it again, I really don’t want to see anyone financially hurt. But this is getting sersiously ridiculous.

If buyers want to step out in the way of a moving train en-mass, there isn’t much I/we can do to save them all. It’s like they are lemmings dropping off a cliff, you do your best to save as many as you can, but they keep coming!

I believe June was the peek of the peeks, and the grinding of the foolish will start now.

Splat, splat, splat… saved a few more… splat, splat, splat…


#69 Mike (Authentic) on 08.03.09 at 2:17 am

#47 Mark”putting interest rates at around 7% and 20 year mortgage – the absolute max i can afford with 100k down is around 350k! 500k if i push it up to a 35 year mortgage”

– I got you $748,731 with a 2.65% (5 yr PC var mortgage) and your numbers above. That’s a 7.5x mortgage to income ratio. Unbelievable! It would be interesting to see if you could actually get this at a bank.

$100k a year and holding a $748k mortgage for a “$848k starter home!”. Humm, wonder what payments would be on that $2,367/mo 2.65% mortgage when rates go up to 8%….

– Did anyone post this year? Apparently only a small % of newly unemployed are getting benefits in the USA as 36 out of 50 US States are now insolvent and cannot afford to pay them UI in cash. (CNBC)

#41 Keith in Calgary “Calgary SFH sales down 15% month over month, prices down $11,000 or 3% for the month of July alone. Condos are flat price wise, and sales are down 5% month over month. SFH average prices down $70,000 from $505,000 high in July of 2007. Condos are down $47,000 from their May 2007 high of $332,000.”

I’ve been watching the stats almost daily there and at the beginning of July it felt it was the “Turning Month”, now summer is usually the “peek price” season and it falls till January/Feb. But what I think will happen this year is when it falls it will be made worse because people will equate it to “the economy” (which is true, but a mostly unsaid thory, as they have been told the economy is different in Canada). Thus there should be a quick, harsh drop by December.

If that happens, 2010 will start of like 2008 ended.


#70 David Bakody on 08.03.09 at 6:34 am

Local Real Estate sales appear to be a shift in housing rather than new construction …. Seniors moving into low priced Condos and rental units with the younger people buying oven ready homes in established neighbourhoods. Good for sales, bad for new home sales, bad for lumber marts, bad for landscaping supplies, and even bad for the furniture business with garage sales up.

#71 Mike (Authentic) on 08.03.09 at 6:52 am

Looks like the stock market will open up today (futures), CNBC is forcasting triple digit gains today. Guess there must be more people unemployed, businesses failing and consumer+gov’t debt.

Oh, the banks are posting huge gains in profits thanks low savings rates, free gov’t bailout money and telling people “they are richer than you think”

Strange days indeed when logic can’t compete agaist greed.


#72 Genghis on 08.03.09 at 7:40 am

In the city of Ottawa there are some neighbourhoods where houses are selling for less than asking price. Only thing is these neighbourhoods are built in a flood plain, where a river ran 40 years ago (the river was moved to make way). Over the last decade there has been chronic flooding for reasons the city still can’t really explain, but apparently having something to do with soil conditions and water table levels.

After a recent storm parts of this neighbourhood were looking a bit like post-Katrina.

Here is a semi-detached that sold for a whopping $2,900 off the asking price. Only $10,000 in repairs were required.

Hmmm, buying a house with 50cm of water in the basement, in an area that has experienced chronic flooding (800 to 1,000 houses in surrounding area affected) and the city is at a loss to explain the cause, let alone propose a remedy. ($7 million was spent in flood prevention work after a devastating flood earlier in the decade, with no apparent improvement). It seems that this is the kind of neighbourhood you need to look at in order to buy a house for less than asking price in Ottawa in the current housing market!

Despite the problems the real estate agent in the article states that this area is desirable.

Hundreds of families in the area have been through some devastating times, the most recent incident just a few weeks ago. I feel very sorry for these people.

#73 wjp on 08.03.09 at 8:28 am

#63 Cordoroy Cowboy…
I have no problem with the scenerio you have painted but human nature being what it is, I am sure when interest rates are 1 1/2%, one would be happy with 5 %, but when rates hit 7 %, it is odd how the lust for 11% arises.
As far as the stock market is concerned, it has changed over the years from an investment vehicle to a crap shoot, wouldn’t put anything in there that I couldn’t afford to lose.

#74 Mike B on 08.03.09 at 8:52 am

The answer to whether there will be a correction or not in T.O. Real estate as usual lies somewhere in the middle
The first question … what would possess the BOC to contemplate raising rates. As GT suggests, housing inflation. Prob is that if rates start to rise those locked in to preapproved rates may panic and create a bigger frenzy. Those unapproved may also panic and add to the madness. Can he change the rates out of sync with other central banks… Doubtful… If all central banks start to raise rates thr govts cost of borrowing goes way up which, in the case of US, would spell disaster. My fear is that we are locked into low rates and escalating prices for some time. Perhaps when unemployment subsides there may be an increase in rates . Unfortunately just as we entered the recession some months behind the US we lowered our rates in sync with them well ahead of what should have been our housing correction.
Mr Carney will do whatever the Americans want him to do especially his buds from Goldmann Sachs.
The answer as I prefaced may lie in the middle… he may raise the rates max 1-2 percentage or so. Will real estate prices correct… Perhaps a tad but not b4 the RE weasels goose it for all its worth.

Canada cannot independently set interest rate policy because of the floating nature of our currency. We will follow whatever the global trend is, and specifically that in the US. Do not be deluded into thinking Mark Carney has free will. Only a loose lip. — Garth

#75 Mike (Authentic) on 08.03.09 at 8:54 am

#72 wjp “As far as the stock market is concerned, it has changed over the years from an investment vehicle to a crap shoot”

Agreed. There seems to be a great disconnect between stock market today and the economy and labour market. I’ve been watching it daily and I’ve lost to see logic in the market moves. When it should go down, it’s up, and the stock market just ignores bad data like it doesn’t exist.

Speculation, emotion, greed, that’s what is pushing the market up.

#63 Cordoroy Cowboy…

Yes, I like your strategy, but I’d avoid the stocks (reasons above) myself. Can you really afford to lose 30% of your savings? I can, but I don’t want to. Risk vs Reward.

GIC’s are good solid investments, the only risk to them (vs reward) is inflation. If inflation is lower than your GIC returns – tax rate, then you are golden.

A little over a year ago, the phrase “The Easy Money is Over” took hold and I still agree.


#76 kw on 08.03.09 at 9:30 am

I remember Mar 9 the morning all the equity markets flew out of the gate like a horserace. All the news on was as negative as could be. No-one with a sane mind should have been jumping into the markets. ( lies to sway the sheeple?)
Was this the morning that all the insiders (Banks, Insurance, Corps, etc.) started spending their bailouts to take advantage of 50% sales of stocks.
Now as this phony rally keeps rising everyone in the msm (globeinvestor included) has put such a positive spin on the economy. Get the sheeple to jump in after such an extreme rally as the insiders start selling again. Kind of reminds one of Mar. 2000 the dot-com bust.
Fool me once, shame on you. Fool me twice……

#77 Mathew Gibson on 08.03.09 at 10:43 am

#6 Zirpy McZirpirston

And others who look to japan’s experience and hope that interest rates will remain low for over a decade …

The Japanese experience cannot occur here. Japan managed to maintain low interest rates because it was nestled within a global economy that was growing and providing a market for its goods. This is not the case any longer, not for Japan, and not for any of the developed economies.

#78 CalgaryRocks on 08.03.09 at 10:54 am

Herb on 08.02.09 at 1:48 pm MenWithHats,

meant to thank you for your debunking of the Home Renovation Tax Credit the other day, but failed to get around to it.

The math was not correct. Here is how it works:

10,000 (Maximum) – 1000 (Threshold) = 9000;

9000 * .15 = 1350 = Maximum TAX CREDIT or maximum amount you pay LESS in federal tax. (NOT 1350 * .15)

TAX CREDIT is not the same as a TAX DEDUCTION

“Unlike a tax deduction that only reduces the amount of your taxable income, a tax credit reduces the amount of tax you owe. ”


#79 Devil's Advocate on 08.03.09 at 11:55 am

Nothing is quite as upsetting as Garth’s statement that “in fact almost all of us, apparently learned nothing from last autumn’s near-death experience.” While certainly severe, the global economic meltdown of last year really was largely averted with little impact on the balance sheets of most who escaped relatively unscathed. I don’t think we, me included, fully appreciate the severity of last fall’s fall from economic grace. It was averted to a large degree to be sure, simply postponed in all probability.

It is inconceivable that our governments could have negated or repaired the mechanic fatigue in the system such that we have a long clear road ahead. The “Credit Crunch” was, in reality, a lenders return to sanity. But sanity is not something the government can stand within the time constraints of their term in power. The answer; infuse money into the system and tell lenders to continue being insanely irresponsible in their lending. How is that going to return us to a stable economy? It can’t and it will not. It has simply postponed the enevitable…

#80 MenWithHats on 08.03.09 at 11:56 am

Same lies as always .

A key component in Canada’s Economic Action Plan, the Home Renovation Tax Credit provides a 15% income tax credit on eligible home renovation expenditures for work performed or goods acquired between January 27, 2009 and February 1, 2010. The credit may be claimed on expenditures exceeding $1,000 but not more than $10,000 and will provide up to $1,350 in tax relief.
Actual money returned $236.00 .

#81 Dave on 08.03.09 at 12:03 pm

Agreed. There seems to be a great disconnect between stock market today and the economy and labour market. I’ve been watching it daily and I’ve lost to see logic in the market moves. When it should go down, it’s up, and the stock market just ignores bad data like it doesn’t exist.


if what you’re saying was true, people like Warren Buffett, Peter Lynch, and Jim Rogers would be losing their shirt – but they’re not. You’re totally off. Markets swing back and forth based on psychology but companies economic fundamentals reigns in the long run. If that weren’t the case, the richest stock market investors in the world wouldn’t be the richest. Their strategy is exactly what you say doesn’t work. You’re contradicting Benjamin Graham… far too many great and proven investment people and ideas stem from Graham’s opinion in which you oppose

#82 Dave on 08.03.09 at 12:07 pm

Yes, I like your strategy, but I’d avoid the stocks (reasons above) myself. Can you really afford to lose 30% of your savings? I can, but I don’t want to. Risk vs Reward.

GIC’s are good solid investments, the only risk to them (vs reward) is inflation. If inflation is lower than your GIC returns – tax rate, then you are golden.

A little over a year ago, the phrase “The Easy Money is Over” took hold and I still agree.



I didn’t finish reading the rest of your post before, but your above take explains it all. You’re just misinformed. I’m confused why you’d throw your opinion out there when you have zero understanding about the topic.

#83 OttawaMike on 08.03.09 at 12:13 pm

#71 Genghis on 08.03.09 at 7:40 am
Re: Flooding Kanata
Part of the problem there stems from an at capacity, sanitary sewer system. Development farther out in Stittsville has used up all the extra capacity in the system. More future taxpayer expenses for all the sprawl. Add in 6″ rain in an hour, saturated soil, storm sewers overflowing and pumping stations running flat out. The result is what you describe.

#84 OttawaMike on 08.03.09 at 12:26 pm

#61 Barb … reader, Calgary on 08.02.09 at 8:55 pm
Ms. Reader,
This program has been so badly handled. Example: I have had people think that when I sell/install a new hi efficiency furnace for 3800$ they are entitled to the 1500$ energy efficiency rebate + the home renovation tax credit so the furnace is only costing 300$. If you dig/go to the CRA website it sort of tells you about it but you have to poke around.
I believe this topic was somewhat covered last week on here.

#85 OttawaMike on 08.03.09 at 12:30 pm

Oops that should have read cost 1000$ instead of 300$…
I guess I don’t understand either.

#86 Got A Watch on 08.03.09 at 12:46 pm

note – The stock market has little to do with “reality” as you perceive it, and only then over long periods. What you “expect” simply does not happen very often. It will, eventually, but mostly when a lot of “investors” (I use the term loosely) are positioned the wrong way.

Canada has some great Blogs, the information is out there, for those who want to read it. The Financial Ninja has “Employment: Not a Lagging Indicator At These Levels”:

“In Canada, the government has been busy proclaiming the end of the recession… even as the employment situation continues to deteriorate.

Just to be clear, employment may be a lagging indicator during normal economic cycles. This occurs because consumers continue to spend even as some jobs are lost or bonuses reduced. They often go into debt to maintain themselves in their accustomed style during slowdowns. However, when job losses are severe enough, as they most definitely are now, the loss in purchasing power to the economy is so great that employment becomes a coincident and even a leading indicator. Simply put, people can’t spend until they have a job and they won’t spend once they have that job until they have dug themselves back out of some serious holes.” Much longer post at the link.

You won’t read that in the MSM. The very concept is poisonous to our “consumer culture”. If “consumers” don’t “consume” as much anymore, for years… let’s just say it’s going to get ugly.

For one example, I see Canada is wildly over-built now in most areas on “big box” and strip mall style retail, located on transit un-friendly suburban arteries. Or how about “warehouse/industrial space”? Some Bank near you probably owns a piece of that albatross. As has happened in the USA, it will dry up, it is inevitable.

“Vacancy” and “For Lease/Sale” will be the dominant business sectors. The only activity in many areas will be the old newspapers blowing across the empty parking lots.

#87 Barb ... reader, Calgary on 08.03.09 at 12:49 pm

#79 MenWithHats


Thanks again for that. I found the article I was looking for about the RENOVATION SCAM by Harpo — that the credit is not even law yet, despite the millions he’s spending promoting himself about it.

Same old, same old, eh, the guys a one trick pony, fool the people as much as he can.

“Reno tax credit pushed by PM, but not law yet”

“Prime Minister Stephen Harper urged Canadians on Wednesday to take advantage of the home renovation tax credit, even though the credit hasn’t actually been approved by Parliament.

The 15 per cent credit is the subject of a massive advertising campaign and is designed to be part of the government’s economic stimulus package.”

“There has never been a better time to renovate your home,” Harper said.

The Finance Department intends to introduce the HRTC as a bill later this year.”

But a number of things might happen this fall that could derail that plan said Keith Brownsey, a political scientist at Calgary’s Mount Royal College.

Reno credit timing ‘pure politics’: critic

One customer who was looking to buy an area rug from a Calgary flooring store said she was shocked when she was told the HRTC is not a done deal. “I don’t understand why it hasn’t passed because they have been talking about this for quite a long time.”

The owner of the store said he doesn’t appreciate the fact “the Harper government is spending taxpayer money on ads promoting the credit” when it’s not guaranteed.

And Men, as you say, it only amount to about 200 bucks in hand anyway.

#88 OttawaMike on 08.03.09 at 1:46 pm

It looks like the same guys administering the Home Renovation Tax Credit here are advising the US on the Cash for Clunkers program(or “buy a GM” as it’s otherwise called):
They should get Madoff and Jones to advise on these schemes as part of their rehabilitation to society.

#89 Eduardo on 08.03.09 at 2:11 pm


Could you please make the affordability argument for Edmonton (as an example) based on average household incomes of 100,000 and 375,000 average houses, the 33% gross income rule, and/or other affordability rules of thumb that you have referred to in the past. You’ve also referred to the affordability measures in the RBC report in other and they seem to be roughly inline with historical ranges (granted a bit high, 5-10%? ).

It would clear things up for yogger, myself and others.

#90 Andrew on 08.03.09 at 2:29 pm

Calgary recorded record sales in July. More than the boom years of ’06 and ’07. The average and median prices were down, but the sales price per sq ft went up.

#91 Barb .. a reader in Calgary on 08.03.09 at 3:06 pm

#83 OttawaMike
Thanks Mike, I appreciate hearing about the actual breakdown of the figures as well as other instances of people who were led astray — I totally agree this sort of program is all Harpo politics.
But as well, the link above points out it’s not even guaranteed there will be any reno credit at all.
We mentioned that to our neighbours and they were shocked, they’ve already spent the full amount on a patio they would not have otherwise done. They dove right in over their heads, and worse, they thought it was a $1500 rebate! They are the very prey Harper was dangling for.
I missed reading here last week as I was in London where my bro has just done some renos. I didn’t ask if he was expecting any so-called tax ‘credit’ but considering his timing, and the fact that he is presently unemployed for the first time in 45 years, perhaps they, too, were mislead by Harper’s false ads.

#92 CalgaryRocks on 08.03.09 at 3:21 pm

88 MenWithHats on 07.31.09 at 12:57 pm Okay dummies listen up .
Those of you stupid enough to jump at the government’s phony ” Home Owner ” tax credit and spend ten grand to get bacl a magnificent sixteen per cent of $1350.00
You are just,plain dumb .
All NRTC’s are the same, you are only allowed to deduct sixteen per cent of the total credit .Wow ! $216.00 Loonies.
You are better off playing roulette .
If my math is wrong I am sure Garth will correct me .

Fortunately, your math IS wrong. It’s 15% of 9000 not of 1350. So, 9000*.15 = 1350 is the maximum amount of tax you will save.

On your Schedule 1 you will write down 9000$ as the amount you spent on renos and then at the bottom there is a box that says “Multiply the amounts above by .15”. So, again, 9000*.15 = 1350 that you will save in income tax.

Hope that makes sense.

#93 jess on 08.03.09 at 4:05 pm

if this isn’t law how can this be printed ahead for tax season?

#94 Eduardo on 08.03.09 at 4:11 pm

#95 jess on 08.03.09 at 4:26 pm

credit cards and commerical real estate are the next problem for u.s. banks. Credit card debt survives bankruptcy. Maybe the jubilee will come since business and consumer are broke and what would be the likelihood of collecting any money in the future from such impoverished people.

#96 Eduardo on 08.03.09 at 4:55 pm

Anybody know what the best source for family incomes is? This is the best I can find…

It does not show increases for 2007 and 2008 so I am wondering where we are at now.

Anybody have a better source for median income?

Here are household spending numbers for 2008 but I don’t think those include savings and they don’t split it into metro areas.

#97 Eduardo on 08.03.09 at 4:56 pm

Sorry thats only for 2007 but I did find the metro areas as well.

#98 steven on 08.03.09 at 5:04 pm


I think 100k is too high. This site:
pegs the *median* income at 73 in 2006, and assuming a 5.9% increase (as was for 2001-2006) we end up with 86k in 2009. That leaves housing at 259k for the *median* home buyer. btw I think median is probably more relevant than average here anyways

#99 Herb on 08.03.09 at 5:16 pm

Calgary Rocks @#91,

15% of $9,000 is no doubt what tempts people to renovate. HOWEVER, if the maximum amount of home renovations that can be entered as a non-refundable tax credit is $1,350, your actual tax saving is 15% of that $1,350, or $202.50 in federal tax, plus whatever percentage your province will allow as a deduction from provincial tax.

It depends on what you are allowed to enter as a “Federal non-refundable tax credit” on Schedule 1: the whole eligible amount to $9,000, or 15% of it. We will have to wait for CRA to come clean on that, but it better be the maximum eligible expenses laid out, or there will be a lot of unhappy people.

It is an indictment of the credibility of our government and income tax system that we should even be having this discussion.

#100 very disappointed on 08.03.09 at 5:39 pm

Garth.. first of all, thanks for responding… however as has been the case since Q4 08, I can’t make much sense of your mood or meaning.

Personally, I love historical novels. But that is because most good ones don’t undertake dangerous foretelling at the expense of a proper and thorough account of the facts (and where appropriate, figures).

I was motivated to respond again after I stumbled on this post from you last year (I admit to curiously gadding about for info on the incongruous and yet similarly beguiling Ms. Fitts):

I’m sure you do not shy away from claims that you are particularly susceptible to hubris. Of course there is evidence, but take this statement on Toronto realty for example:

“Values have declined absolutely, and will continue to fall … This is an investment disaster, and the story has barely started to be told.”

At this, the gauntlet was thrown, and any person commenting that GTA housing might not succumb to a fate worse than death was promptly shouted down by the bleating die-hards.

It all seemed so inevitable, your blend of self-assuredness mixed with short-term data appeared so incontrovertible. But you and the rest were wrong. You didn’t see the central bank committing to sustained record low lending rates… mean reversion be damned. You also didn’t see overwhelming pent up demand for housing amongst youngsters–enough perhaps to prop up the entire market.

Garth, this is not a condemnation. Not in the least. But I believe you can do better. Better than I can for sure. But perhaps not well enough to lead with predictions. Perhaps there is further depth to your arguments, perhaps you are indeed plumbing the depths of the forex situation, non-headline commodity news, or things besides what’s hot over at seekingalpha.

But based on what you blog here, how would we know?

#101 Eduardo on 08.03.09 at 5:43 pm

At first I thought 100k was high but I don’t think so considering the spending data from 2007 and I found this as well although it is only for individuals.

It does say that the average for ALL workers is 946$ / week in Alberta. If you are a coupled family the income using that would be 946 x 2 x 52 = ~100k

#102 Eduardo on 08.03.09 at 5:56 pm


shows median family incomes at 80k in 2006. The increase in 2007 and 2008 was large until October/Novermber ish? Based on the numbers I see there and from increases shown in the monthly data, 95-100 k is reasonable.

The monthly data even shows a >3% increase from April 2008 to April 2009 in Edmonton (while I realize that doesn’t account for unemployment increases) it’s saying that average wages for workers with jobs is still increasing.

#103 Basil Fawlty on 08.03.09 at 6:26 pm

“Say, I notice gold is where it was a year ago. Bummer. — Garth”
Don’t be bummed out Garth, it will rise.

Amused, not bummed, Mr. Faulty. — Garth

#104 Dan in Victoria on 08.03.09 at 6:46 pm

While not entirely on the subject here,(delete if you want Garth)a friend who I only see a couple of times a year sent this to me today.It made me think of the young people starting out in todays world not knowing.But it shows you what its like to have great friends and family, That’ll be there for you.

#105 CalgaryRocks on 08.03.09 at 6:46 pm

#98 Herb on 08.03.09 at 5:16 pm
Calgary Rocks @#91,

15% of $9,000 is no doubt what tempts people to renovate. HOWEVER, if the maximum amount of home renovations that can be entered as a non-refundable tax credit is $1,350, your actual tax saving is 15% of that $1,350, or $202.50 in federal tax, plus whatever percentage your province will allow as a deduction from provincial tax.

9000 is the number. 1350 is 15% of that, thus a 1350 maximum tax CREDIT.

There really is no doubt there. Just go read on the rev can site and schedule 1 of your tax return that deals with NRTCs at the federal level.

#106 Fred on 08.03.09 at 6:59 pm

Talk about a haircut

Hugh Hefner and his wife, Kimberley, have sold their personal residence, next to the Playboy mansion in Holmby Hills, for $18 million. It had been listed since early March at $27,995,000,0,1621268.story

#107 Grantmi on 08.03.09 at 7:20 pm

This leaky condo cancellation is going to be FUNNNNN!!! It was a complete BLACK HOLE if you ask me!

They have doled out on average $42K per condo owner over the last 11 years. ON AVERAGE!! How many condo owners are into for more???

The only thing I can see the BC Gov doing is extending the 5 year repayment plan (w/out interest).

I’d be interested to see the stats on how many of these owners have NOT paid back their loans.. and now have a lean on their property come selling time.

To me! This will ultimately be a HANDOUT! The BC Gov. will never get back 1/2 their advancement to these folks. Another $670 Million pissed away on BC tax papers money!!!

Move along!! Nothing to see here!!

#108 Yogger on 08.03.09 at 7:34 pm

Thanks Eduardo…

#109 Eduardo on 08.03.09 at 7:52 pm

I’m thankful gold stayed where it was last year. It’s better than you did in stocks Garth, and better than housing as well.

Garth can you please comment on the median/average income as it relates to affordability?

#110 jess on 08.03.09 at 8:00 pm

so with probes going on how can this market be working?

ABCP the continuing saga…

and investors want ASAP answers

Financial Post

Key to the regulatory probe is an e-mail that had not been widely disseminated. It was sent by Coventree on July 24, 2007 mostly to representatives of investment firms, among them Scotia Capital, National Bank Financial and RBC Capital Markets, a few weeks before the ABCP market seized.

Sources say staff at the securities commissions argue that the Coventree memo served as an early warning of the imminent crisis in the ABCP market. As part of their investigation, they probed the inventories held by the banks before the Coventree memo was sent and how much they were reduced after receiving it.

Four Canadian financial regulators are targeting some of the country’s largest bank-owned investment dealers in connection with the sale of asset-backed commercial paper shortly before the $32-billion market collapsed in 2007 and are said to be seeking fines and penalties worth tens of millions of dollars.

#111 Canadian against idiootic Liberals on 08.03.09 at 8:06 pm

‘NEW YORK — U.S. stocks rose on Monday, pushing the S&P 500 index above 1,000 for the first time in nine months, as data on the manufacturing sector underscored optimism that the economy was recovering.

The Nasdaq closed above 2,000 for the first time since early October in an extension of the stock market’s recent rally, which has been fueled by stronger-than-expected earnings and data suggesting the recession may be abating. On Friday, the S&P 500 wrapped up its best five-month streak since 1938.

Adding to the positive mood, Ford Motor Co gained 4% to US$8.33 as the auto maker reported its first year-over-year monthly sales increase since November 2007. Car buyers took advantage of a government program to trade in gas guzzlers.

“There are increasing signs that not only have we come back from the precipice and then stabilized, but we’re poised to start to grow, and the market is celebrating that,” said Jim Awad, managing director of Zephyr Management in New York.,

Hey Greatest Fool!

Still disseminating lies I see. Get a life Turner. I know you won’t post this but its the only way I am sure you will read some of anything I send. You have to edit this whereas you can just delete my email. I don’t care if anyone else sees this I just want you to know that there are many Canadians like me (I talk to them and have names) who view your blog as quasi treason. What happens to you Garth when all your fear mongering comes home to roost!

Thank you for coming by, Mr. Flaherty. — Garth

#112 very very disappointed on 08.03.09 at 8:21 pm

Canadian against idiootic Liberals – “Still disseminating lies I see. Get a life Turner.”

This guy makes the cut, avoids being moderated, but my comments disappear. Hmmm.

#113 $fromA$ia "Garths Nugget Boy" on 08.03.09 at 8:30 pm

Ya, so what do you say when theres not enough taxes collected to cover social security!!!

#114 Industrial Guy on 08.03.09 at 8:38 pm

Hey “Canadian against idiotic Liberals” you’re not drilling down into the data.
The recession is over? Lets look at car sales for last month. Are we back to pre recession levels? Was June 2009 really a better month for Ford compared to June 2008.
June 2008 wasn’t a great month for any of the Detroit Three. Gas prices had just peaked around $1.47 a litre and consumers were dumping their SUVs and buying smaller cars. So, a 24% increase means we’re just getting a little closer to normal. This good news doesn’t address the crushing amounts of debt the Detroit Three have amassed since the crash in 2008. I guess us taxpayers will continue to bail them out. Isn’t funny how all this “good” economic news is tied to huge amounts of Government money? The “Cash for Clunkers” program is brilliant! Everyone’s taxes will be raised in the future so you can have a new car today.

Chrysler ….. is history. How can they survive with these sales figures? GM isn’t much better off.

Lets look at sales figures in Canada for June, 2009
2009 2009 2008 09/08

Chrysler 9,161 22,048 -58.4%
General Motors 22,034 31,887 -30.9%
Ford 27,373 21,959 +24.7%

Honda 11,942 14,918 -19.9%
Toyota 17,198 20,871 -17.6%

Hyundai 10,104 8,049 +25.5%
Kia 5,200 3,772 +37.9%

Hyundai and its sister company KIA also had a great month. Together, they sold more cars last month than Honda. Too bad they stopped manufacturing in Canada.

What does all this mean? More lay-offs? Yes.
More plant closings? Yes.
More dealers closings? Yes.

Where’s the fear mongering? I know this is only one sector of the economy, but read the facts buddy.

#115 When, Garth? on 08.03.09 at 8:46 pm

Garth, when you’re constantly preaching something that will be inevitable, like a market correction, you’re going to be right…eventually.

You’ve been spewing the same thing over and over and over again for the past I-don’t-know-how-many years, but the market has dictated that you are WRONG, especially in Toronto.

Your predictions were wrong about a flood of listings in the spring with no buyers around, yet you preach the same thing over and over again. You know what? You will be proven right some time in the future and then you’ll be laughing at everyone because you were “right.”

You’ve probably made a lot of people miss out on buying opportunities because of your constant fear-mongering, yet you even admitted to buying another home!!

Get a life, Garth. Like a true politician, your motto should be: “Do as I say, not as I do.”

Are you angry at me because you didn’t buy a house in Burlington? Relax, you’ll get over it. — Garth

#116 OttawaMike on 08.03.09 at 9:27 pm

We are merely standing in the eye of the financial hurricane now. It’s all calm and everybody has hope but we have to face the destructive winds going out of this just like we did going in last year.

#117 Nostradamus Le Mad Vlad on 08.03.09 at 9:36 pm

#73 Mike B on 08.03.09 at 8:52 am — AND —

#108 Canadian against idiootic Liberals on 08.03.09 at 8:06 pm —

“Do not be deluded into thinking Mark Carney has free will. Only a loose lip. Thank you for coming by, Mr. Flaherty. — Garth, with further additions by JiminyMarkusFlabbergastedCricket

Maahh pleasure! Didja awl notiss Aye can’t spel mi naym write? YYYEEEHAAWWW! That’s why I’m The Finance Minister and, YOU’RE NOT!

Hep me, hep me massa — whud am I supposed to be doing here?! No charge for the info. of course.


Wait a sec . . . didn’t The Big Kahuna already use that one? Oh what the hell! It’s all just a fun-filled game of friendly charades between friends!
Remember what I said? IT’S ‘QUAKE TIME, BABY! —
Note how the US and Israel spent US$400 mln. + to try and blow the election in Iran and lost, so now a different tactic (second link); the govt. in Georgia is a US puppet . . .

Commment by — “If this goes “hot” (coupled with more military destabilization in Pakistan), these together are signs of a potential Israeli/US strike on Iran.

“Problems in both countries would mean that Russia would be limited as how much they could supply by land.”

Unless China comes to Russia’s and Iran’s aid.
This is another variation on the same theme — the planet is running out of oil. A poster on one of Garth’s previous posts provided links which stated that there was plenty of undiscovered oil, a theory which I tend to believe.

It is the greedy oil barons who are hoarding it, keeping prices roughly at the same levels yet profiting immensely from good sale prices.
Troops were never fat fighting WW2 or the Korean War, so possibly a change in western dietary habits — junk food — is one of the causes.

#118 Solitario on 08.03.09 at 9:53 pm

since you have Flaherty’s IP address (Canadian against idiootic Liberals), please do me a great favor
and transmit my (one finger) salute.


#119 CAILiberals on 08.03.09 at 9:54 pm

Hey Industrial Guy,

The auto sector is just one piece of the pie. This problem was on the books and factored in long before this brief recession. Show me the figures for raw materials, auto, utilities, manufacturing, real estate, retail sales in Canada and oil, all together and the numbers will be trending upward over all in the last four months.

The problem is most of Turner’s followers are myopic Ontario residents who cannot see past the golden crescent. The economy is much bigger than the manufacture of cars. Canada stopped being a manufacture based economy 30 years ago, with the onset of the info economy. This is a time to adjust, not moan about doom and gloom. I was on this site one year ago and predicted then that this would be a short lived recession and I am sticking to my guns. Besides, what possible good can come from negativity. Furthermore, this doom and gloom all resides in Turner’s bitterness regarding his failed political career. I am not saying this to be mean, just that it needs to be considered when he is making his dire predictions. We’ll all know by years end, and my bet is a lot of people here will be eating crow.

FYI I did live in TO from 1994-2001 doing graduate education at the U of T. My impression then was that TO was in sharp decline. But this does not mean Canada will go with it in general.

At the same time I do respect my friends and associates there and wish them all the best. I just find Turner to politically motivated to be objective on the economy. That will likely disqualify this for posting but he will get my point at least. Here’s hoping.

If I didn’t matter you wouldn’t be here. — Garth

#120 Devil's Advocate on 08.03.09 at 10:01 pm

#114 When, Garth? on 08.03.09 at 8:46 pm

As I have so often been told of late “even a broken clock is right twice a day”.

I anticipated a Bull Market Rally in all markets this Spring… I did not expect it would sustain itself through summer.

I expected a flood of listings this Spring. Didn’t happen; inventories shrank.

I expected frantic sellers fighting over the last remaining fool. There ended up being plenty a fool – enough so, in fact, that bidding wars ensued.

I expected a whole lot of serious hurt… but it never happened… yet.

That what Garth and I expected has not yet happened, just as you point out, does not mean it won’t. It will… you know that, I know that and Garth knows that. What you clearly do not realize is; that with each passing day we are able to postpone the inevitable the momentum builds such that the thunderous crash with which it will inevitability fall upon us will catch you by utter surprise resulting in your demise.

Maybe I am wrong. Clearly I have been before. But then… maybe I’m right. One way or another I will be here to see such unfold. Can you say the same?

#121 squidly77 on 08.03.09 at 10:02 pm

I just want you to know that there are many Canadians like me (I talk to them and have names) who view your blog as quasi treason. What happens to you Garth when all your fear mongering comes home to roost!
treason my ass, we need guy fawkes back
having the guts to stand up to government is patriotic
to do not is treason for its not what has your country done for you but what have you done for your country

that remark left by “Canadian against idiotic Liberals” seriously pisses me off..pisses me off big time

#122 bigpictureguy on 08.03.09 at 10:13 pm

Funny how people blame Garth for missing “opportunity in purchase RE” thinking there would be a collapse.

YOU are accountable for your decisions. Did YOU PAY for his advice? He owes you nothing!

The collapse will happen but will be difficult to predict timing as we are live in uncertain times and government intervention has propped up the bubble some more via bailouts and low interest rates. The end will be ugly.

Mark my words!

#123 CAILiberals on 08.03.09 at 10:20 pm

Hey “squidly77” pissed off.

In war time such talk as is carried on here by Garth and his ilk, is considered a defeatist mentality, which leads to a lowered moral, which leads to confused and angry people. This is not treason, but it has historically been considered akin to it, or aiding and abetting it at least. You yourself seem to be a victim of such vitriol.

We are not in a war, but if we do end up in one sooner than later, the talk on this site will be decidedly anti Canadian, like it or not. Do you want to be part of that?

Brave words coming from an anonymous poster giving his email address as [email protected]. Tell us about patriotism and service. — Garth

#124 Rural Rick on 08.03.09 at 10:25 pm

“there are many Canadians like me (I talk to them and have names) who view your blog as quasi treason. ”

Pretty cool Garth
Treason and it’s only Monday

#125 CAILiberals on 08.03.09 at 10:31 pm

Hey Garth,

You are right. It does matter to me. I read very widely across the economic spectrum and I can give you one positive story for every negative. I don’t weigh them out and decide on the basis of a majority of negative or positive analysis’. I know that data can be twisted to any end, and made to support any claims. I just think that the evidence is so divided between these options that it is dangerous to be overly negative, as well as overly positive. If I am going to err however, it will be on the side of the positive, since negativity only begets more negativity. So here is my challenge to you. Find something positive to say and maybe we will see the negative in a different light, when it comes from you.

You accuse me of ‘quasi treason’ and hide behind a digital veil. No lessons to be learned here. — Garth

#126 CAILiberals on 08.03.09 at 10:39 pm

I would be glad to give my name and email address to you but frankly I don’t trust you. How do I know one of your henchmen are not going to track me down and do damage? Give me some assurance of confidentiality and I’ll be glad to enter the debate legitimately. Besides, you did not respond to my comments. Does it help to be negative?

As soon as my roving death squads get off break, we’ll IM. — Garth

#127 Industrial Guy on 08.03.09 at 11:50 pm

Canadian against idiotic Liberals One month of good retail numbers does not make a trend . As for your comments about resource prices. Come on, Give me a break, Sure nickel prices are on the rise. The world’s largest producer of the stuff is on strike.
I monitor 6 industrial metals every morning on the LME (London Metals Exchange). Aluminum, Copper, Nickel, Zinc, Tin and Lead. Where is your great rise in demand for raw materials? As for utilities ….. Wholesale electricity rate have crashed this year in Ontario.
OIL? are you kidding? The US reserves are rising and this is the high demand “Driving Season”. The only reason gas prices are rising in Canada is because we have a near monopoly situation when it comes to refining capacity. The dry gas pumps in Alberta this week are proof of that.
Anyway, where is unemployment rising the fastest in Canada? Ontario and Alberta of course.
If the resource sector is so good, why then are we seeing all the lay offs in Northern Ontario?
Info economy?? Not yet buddy. You have been watching too many reruns of Max Headroom. Canada’s high tech sector has been hammered during this recession. Their customer base was the manufacturing sector …. DUH!
But enough of this reality check. Let all take our SOMA and think good thoughts and the recession will just go away.
Oh, just in case you have forgotten. Ontario is the most populous province in Canada. Canadian against idiotic Liberals … We’re BIG and we matter.

#128 MenWithHats on 08.04.09 at 12:24 am


Either Doug or Viviane can claim the total home renovation expenses of $7,600 or they can split these expenses between them as long as the total amount claimed is not greater than $7,600. As a result, their maximum HRTC is $1,140 ($7,600 x 15%).

I was wrong I calculated it at fofteen per cent .
Herb’s numbers are accurate .

#129 MenWithHats on 08.04.09 at 12:31 am

Meant to say I calculated it at 16 per cent .
Bottom line is we won’t know until the new tax forms are printed .
This was per schedule one .

#130 BigAl (Original on 08.04.09 at 1:29 am

#122 CAILiberals

If you’re talking about wartime, I’m confused as to what you would be going to war to defend? Freedoms? To stop tyrants who have arbitrary arrests based on suspicions and accusations? Maybe even the evils of torture? You would be going to ‘war’ to fight against these things elsewhere, so you could introduce them in Canada? So we have to give up our freedoms in order to preserve them…..uh huh.

In your world, MLK and RFK should have been arrested and locked up and glorious victory would have been had in Vietnam. And those of us fighting for greater benefits for veterans should shut up and be locked up too, as it might lower morale. But your Stazi-like nightmare world goes beyond just military ‘security’…your police state extends to people giving opinions on which way the markets and economy will go. Anyone saying anything other than ‘up’ should be locked up too??

Buddy, corrupt military, totalitarian, fascist regimes exist all over the world. They already exist…there’s no need to turn Canada into one of them. And, they would be glad to have you. And it would be a dream come true for you. There, any negative talk about the government, or the economy, is met with a swift and righteous ‘disappearance’. Government informants ensure this (usually about a third of the population – neighbours, coworkers, etc). Everybody listens and reports on everyone else. I’m sure you’ll be happy there.

Seriously, you do see the schizo nature of your position, I hope?

#131 BigAl (Original on 08.04.09 at 1:47 am

#122 CAILiberal said:
“We are not in a war, but if we do end up in one sooner than later, the talk on this site will be decidedly anti Canadian, like it or not. Do you want to be part of that?”

Not-so-veiled threats of future detention and arrest for giving opinions on the markets and economy on this blog.

People like this guy exist! They froth at the idea of a totalitarian state, of wartime, of the hope of being an ‘informer’ (against people talking about the economy no less).

Amazing…simply amazing.

#132 Mike (Authentic) on 08.04.09 at 3:08 am

#81 Dave “I didn’t finish reading the rest of your post before, but your above take explains it all. You’re just misinformed. I’m confused why you’d throw your opinion out there when you have zero understanding about the topic.”

My opinions, like your opinions Dave are just that, opinions. Mine come from financial experience and background, as I assume yours does as well. To say someone has “zero understanding” is immature and I’m sure you don’t want people to think of you in that manner.

Funny you should bring up Warren Buffett as he is the people I use today to show why bonds are better than stocks as he said that himeself about two months ago on CNBC*. *That would be a financial channel if you never heard of it.

Here is your quote:

“The investment world has gone from underpricing risk to overpricing it. A few years ago, it would have seemed unthinkable that yields like today’s could have been obtained on good-grade municipal or corporate bonds even while risk-free governments offered near-zero returns on short-term bonds.” 9 Jun 2009 – Warren Buffett on CNBC

and… since you are a fan of Benjamin Graham, I’ll leave you to mull over “Graham said that the stock investor is neither right nor wrong because others agreed or disagreed with him; he is right because his facts and analysis are right.” “investment is most intelligent when it is most businesslike”


#133 bigpictureguy on 08.04.09 at 5:40 am

If I didn’t matter you wouldn’t be here. — Garth

Cailiberals thinks Garth bro is just being negative? LOL LOL

I can cite many respected investor gurus who think along the same dude. Grow up and open your eyes Cailiberables.

#134 CalgaryRocks on 08.04.09 at 12:14 pm

#128 MenWithHats on 08.04.09 at 12:31 am
Meant to say I calculated it at 16 per cent .
Bottom line is we won’t know until the new tax forms are printed .
This was per schedule one .

Oh please, you guys are being ridiculous. Call a freaking accountant if you don’t believe me.

Hell, call 10 of them, they’ll all tell you the same thing.

Have you noticed that on your schedule 1 it is your allowable expenses that get multiplied by .15, NOT your tax credit? Seriously, stop digging.

#135 Schroedinger's Bull on 08.05.09 at 4:34 am

I am a designated accountant.

Here is the actual text from the CRA’s website, easily found by searching “Home Renovation Tax Credit”:

“Under proposed changes, you can claim a non-refundable tax credit on your 2009 income tax return based on eligible expenses incurred for work performed or goods acquired after January 27, 2009, and before February 1, 2010, under an agreement entered into after January 27, 2009, related to an eligible dwelling. The HRTC applies to eligible expenses of more than $1,000, but not more than $10,000, resulting in a maximum non-refundable tax credit of $1,350 [($10,000 − $1,000) × 15%].”

So if you spent $10,000 (or more) on eligible expenses, then you would reduce your Federal tax payable by the lesser of (i) $1,350 or (ii) your total Federal taxes payable.

Stop arguing, the bloody thing isn’t even in the ITA yet.


#136 P.A. on 08.07.09 at 4:37 am

I like to look at economic fundamentals so I ask:

Why all the talk about Toronto? I didn’t even know there was a real estate boom in Toronto.

Obviously, Toronto’s real estate market is in trouble. I can’t believe there are people there who think otherwise. The only reason anyone lives there is for jobs. When there’s economic trouble and the jobs go, why on Earth would anyone live there?

End of story for Toronto. There’s nothing more to it – seriously, I don’t even know what the discussion is about.

Much more interesting is Vancouver. For one, what the HELL DO PEOPLE do in Vancouver? Before you can talk about the economic fundamentals of Vancouver, you have to figure out what it’s economic fundamentals even are! If any!

Besides the port and tourism, all of Vancouver’s industries are absolutely microscopic. Surely tourism can’t sustain a city of 2.2 million people? So what’s up?

I can’t believe there are still building condos in Toronto because here in Vancouver they stopped. If you’re more optimistic than Vancouver real estate developers, you’re in trouble.

In this city (Vancouver) there is virtually no new homes being added to the market, and existing inventory is getting sucked up by first time buyers.

Obviously, if there was an INDUSTRY in Vancouver, I would assume that once it tanked anyone involved would sell their homes. However, I’m having trouble identifying what that industry would be.

Please share. From what I can find out from newspapers:

-there are 65,000 people who work at the port
-25,000 who work at the airport
-10,000 in the software industry
-10,000 in the rest of the high-tech industry
-there about 100,000 in the local construction industry

Still I don’t see how those core jobs support a city of 2.2 million. We don’t have headquarters of any major corporations, and only a few small satellite offices.

Obviously we get some bonus because we’re actually a nice city to live, provide views that are drop dead gorgeous, and land is scare (what with the ocean and mountains, and border).

But seriously? Any ideas on how Vancouver actually works?