Subprimal, part deux

on the teat1

The price of newly-built homes in the 6,000,000-person GTA stabilized last month, which means they stopped falling. The realtors and developers say this is more proof the storm may be over, since ‘people are buying again.’

This complements the resale market where, as I’ve been showing you, all hell is abreakin’ loose. Sales are up by a third over last year and homes have just hit a new record high valuation – astonishing, in the middle of a recession.

That’s the headline news. There is always an understory.

The last post demonstrated clearly how subprime lending practices have returned to the market with a vengeance. Mortgage originators are shovelling money out the door, often with no income verification and no appraisal. Borrowers are lined up to get their hands on the cheapest funds since money was invented. Naturally this tidal wave of bargain financing is spurring house sales and fuelling higher prices.

The understory, then, is how this recession has played a role in destroying – albeit temporarily – the checks and balances which keep a market stable, and assets affordable.

First, the price of money has been artificially crashed by central bankers and federal governments desperate to prevent a deflationary economic correction after several decades of an inflationary credit-crazy excess. So, when mortgage money can be had in the 2% range, how can you expect people not to gorge?

Second, although everyone knows what caused the financial crash of 2008 – an unregulated credit bubble begetting asset hyperinflation – nobody is apparently willing to do much about it. Certainly not now, when governments are desperate to see people spending their brains out. Therefore, we have the kind of subprimal, fog-a-mirror lending practices described here yesterday.

Third, government has become the greatest profligate of all, as overspending today ensures a worse tomorrow. Forgetting recent history, most Canadians think a $50 billion annual budget shortfall in Ottawa is somebody else’s problem. It’s financially impossible now for higher interest rates and stiffer taxes within the next few years to be avoided. Not when federal stimulus money is, for example, paying Bill Clinton’s $175,000 speaking fee at Toronto’s upcoming fall fair. As if he needs either.

But here’s another small example, of why this will end badly – and how easy money has perverted a marketplace. It comes as an email from another front-line mortgage player:

This mortgage was funded recently. The clients transferred by military.  He is in the service and she’s on a long term disability.  The combined income is $81,900.

They sold their condo for $296,000.  They had 100% financed it in 07 with a purchase price of $289,000.  The payout on mortgage including penalty was $305,000, so they were under water by $10,000.

They purchased in new town for $281,220, and the downpayment came from client’s credit line – 5 year rate at 3.74%.  Here is where it get’s interesting.  By virtue of being in the military these costs are covered for the client:

Real estate commission and GST on sale $14,295. Legal fees on sale, $500. Portion of mortgage penalty paid by military, $7200. CMHC Fee on new mortgage, $14,061. Land transfer tax, $3,624. Legal fees for new mortgage, $1,500. Buy down of fixed interest rate, $6,400. Plus moving expenses.

The total: $47,500. Can we afford this?

No-money-down real estate buyers who sold for a loss, and then immediately buy, once again with nothing down. They get 100% financing with the risk absorbed by the taxpayer-backed CMHC. Even the insurance premium is paid by you. All closing costs are handled with public money.

And this sale will be reported by the local homebuilders’ association as more evidence consumer confidence is back.

Sadly, that ain’t all.


#1 squidly77 on 08.12.09 at 11:05 pm

theres a load of banking danger dead ahead
be cautious and be very careful all is not well

#2 JET on 08.12.09 at 11:16 pm

A must watch video of Elizabeth Warren, head of the US Congressional Oversight Panel speaking about the true state of US banks’ toxic assets due to mark-to-magic and the pending doom of commercial mortgage resets:

#3 conan on 08.12.09 at 11:23 pm

If you are an executive in private industry and get transferred to another office then all of these costs would be covered in a negotiated package.

If he is an officer and we “need” him some place else then that’s the cost of doing business.

#4 Jeremy on 08.12.09 at 11:41 pm

This is a perk of being in the military. Not even the RCMP get this. Due to regular moving around the country every 3-7 years the military will pay for just about everything. You get an 8 day house hunting trip to new location. Legal fees on purchase, CMHC fees paid for, first months bills (electricity, food, cable hookups. utilities) A move from Halifax to Victoria will cost the military on average of 40k, and the member will pocket 10k after its all said and done.

#5 Investx on 08.12.09 at 11:44 pm


Thanks for continuing to expose this, Garth.

#6 polecat on 08.13.09 at 12:18 am

Fisrt,thank’s Garth.Been following you for a long time.Quite an education on behalf of you and all contributors.Seen this from both sides,friends who bought and the tricks the brokers got them to use to get financing,and peolpe losing jobs at the same time.Know a lot of people in the trades and this does not add up.Lots of layoffs yet people buying homes like crazy(not layed off people).No economist but this does not add up,scary actually.Lot of homes built with cheap materials in last few years,some years in the near future there will be a lot of sorry homeowners.Not just underwater,but roofs leaking,cracking foundations et al.Boom times were great,not enough qualified trades and sketchy inspectors.Money made by many,price to be paid by all…

#7 Larry on 08.13.09 at 12:19 am

OMG it’s even worse then i thought.

#8 TJ on 08.13.09 at 12:26 am

Since struggling to right the ship in 1987, with Greenspan alongside ‘The Great Prevaricator – Ronald Reagan and the Plunge Protection Team, just about everything has come unglued.

Beyond logic, Banks think it is prudent to hand unsuitable candidates more credit to go crazy with, and the rainy day seems to ‘never’ come.

Soon as the Economy tries to do what nature intended, and correct, the Keynesian trained fanatics in silk suits pump in a Trillion dollars of YOUR money here and a Trillion dollars there – and quantitatively drive us into the poor house.

There is no way that this can end well.

You can blow that bubble gum bubble til’ it is the size of Phil Spector’s hair – but when it blows, and it will – a lot of hair is going to have to get shaved off somebody’s scalp.

My bet is that CHMC and CDIC are both looking at the books and praying that the dearth of mezzanine RE debt that poisoned Caisse Populaire, doesn’t start seeping onto their balance sheet.

Everyone is Fat and happy when the big checks are being cashed. The Boss sells enough yard clippings as Primo, and hits the number – he’s a hero and everyone gets a nice bonus.

Right now the grow op is about to be shut down – and only a few people are trying to tip you off.

#9 hongcouvercrackhead on 08.13.09 at 12:36 am

for all u dum


#10 jimmy on 08.13.09 at 1:28 am

1st time poster-Long time reader. Thanks for helping me stay out of the market! Everyone I know can’t believe I’m not diving in head first. I don’t bother to tell them why. I don’t need an emotional debate/attack from all sides.

Here’s a little snippet from the CBC.

Cheers Big Ears

#11 Elle on 08.13.09 at 1:45 am

Oh gee, isn’t there someone else who could get their grubby little hands into the tax payers pockets, in this transaction!!?….. who could suck dry every gold lined avenue that is open to these spenthrifts …. silly me…
of course, here’s another one they just thought of…HST

#12 Mike (Authentic) on 08.13.09 at 2:08 am

People are saying it’s the “Return to Normal”. We politely disagree with them as it seems that side of the fence is growing daily, thanks to the various economic and financial illusions out there by the media (etc). It seems even my investment advisor is telling me that the recession is now over and it’s time to buy stocks.

Yesterday, CitizensBank said this in their FX Commentary, which I wanted to share here as I think it will uncloak some of those illusions above.

“Late yesterday, it was reported that Canadian bankruptcies jumped 9.1% in June and over 51% from a year earlier. This is the kind of data which reveals much about the state of Main Street Canada and could have an impact on the length of the recession and the pace of the recovery. Certainly this is a blow to the notion that the recession is over and puts into question the rosy growth forecasts put forth by the Bank of Canada in last month’s Monetary Policy Report.”

Speaking of Citizens Bank, it’s a casulty of the recession we are in as they are closing their doors on personal banking:

“we’ll no longer offer savings and loans products. The bank will become a non-deposit taking bank and thus, is selling most of its residential mortgages, consumer loans and real estate secured lines of credit to TD Canada Trust.”

Oh, what a world.


#13 Munch on 08.13.09 at 5:05 am

Ja, what a mess!

It’s going to end very badly though – the markets are rolling over, and this is NOT going to be pretty!

Garth, you have yourself on record as predicting all this – that’s nice, but it won’t win you any friends – but you DO have the satisfaction of knowing that you saved many a poor soul from the fires of real estate hell – that will have to be your consolation.

Sometimes, I think most people DO understand all this, but they are just ignoring it, hoping it will go away!


#14 Darryl on 08.13.09 at 5:40 am

Shame. While our soldiers are using old weapons and out dated tech. Hope this guy is a general .

Maybe we can call him General state of the economy.

#15 David Bakody on 08.13.09 at 6:30 am

Moving our military families around a country that is 5 1/2 times zones wide is big business and has been for years and will continue. The sad part is it comes at a cost that is reflected on the overall operating cost which leads to funding in recruitment, training and yes modern equipment replacement.

As for our National Real Estate people using these numbers in their sales pitch this is but only one ….. The crunch is coming soon as a economy based on stimulus money is but smoke and mirrors. This coming March could be the perfect storm that seals the middle class coffins shut. Yesterday while looking for a new stove
(plain and simple) the salesman (older) made mention when I said I might be back to-morrow said: ” I be here, matter of fact I be here till I die” ….. so much for freedom 55/65 so much for freedom period!

#16 steven rowlandson on 08.13.09 at 6:43 am

Hello Garth.
How to make things right in the real estate market?

First of all ban combining incomes to buy real estate punishable by a fine equal to twice the price of of the house the the buyer is trying to purchase.

Secondly only the mans income can be used for the purchase and there must be a minimum down payment of 25% in unborrowed cash. No second mortgages allowed. The purchase price must not be more than 3 time the mans pretax income and preferrably less.

Thirdly all real estate transactions should be subject to federal and provincial sales tax on the price of the property and that tax may not be paid with borrowed money.

The result will be a massive collapse in real estate prices to 5 or 10 cents on the dollar which would make estate affordable again to most working men and would
there by make personal finances conducive to family formation.

One more thing since immigration is just a crutch for the real estate market and womens lib it therefore should be shut down. Population growth only through canadian men and women getting married and having babies.

I expect the bankers, real estate agents and feminists to oppose this set of reforms. But that kind tells you where they stand doesn’t it?


#17 miketheengineer on 08.13.09 at 6:58 am

Many people are “hurting in Hamilton”. The Salvation Army food bank has seen an increase of 30% and NOW IS OUT OF FOOD.

This is the start of huge problems. If you are working right now, please go to your fruit cellar, and donate some of it to your food bank.

Trust me, you will feel good after you do it.


#18 Bill-Muskoka (NAM) on 08.13.09 at 7:15 am


First, the price of money has been artificially crashed by central bankers and federal governments desperate to prevent a deflationary economic correction after several decades of an inflationary credit-crazy excess.

Well, how can I say this? The ‘cost’ of money is ZERO, other than for printing/stamping/materials! Usury, which is a chosen cost added on by those who produce nothing is what causes inflation. Inflation and those supporting the theory that it equates to ‘growth’ are the real reason we are on this self-made mess.

The ‘theory’ has been WRONG all along. One cannot make gains merely by instituting artificial value added. At some point there is a ceiling to it, and people have SMACKED their widdle heads HARD against it.

We have too many people producing absolutely nothing tangible who think they deserve to become millionaires simply by shuffling paper. That is the cause of the RE market mayhem. Canadian RE prices are insanely out of touch with any comparative reality. I would say by a factor of 2 to 8 depending on the locale.

You WILL have to make serious adjustments. Pretty much like that needed surgery…now or later, only waiting is going to make it worse.

The economic theory we have been operating under has just joined the rank of false beliefs like the 6 thousand year old flat earth where the sun rotates around it.

#19 Happyplace on 08.13.09 at 7:34 am

Garth – I think hongcouvercrackhead’s post is more racist than anything we’ve seen from Nostradamus (not to mention illiterate).

#20 Bill-Muskoka (NAM) on 08.13.09 at 7:47 am

#15 David Bakody

Me too! I find myself getting annoyed at those who have worked for government and corporations who have made the rest of us pay for their pensions while they simply went along with the flow, never taking a stand for what was right.

Most people, since about 1970-80, have not had pensions provided. in fact, the whores in government have passed laws that allow these companies to skate by any fair labour laws or benefit provisions while their CEO’s take Golden Parachute packages and stockholders get paid BIG dividends.

Right now, the U.S. is in real turmoil (Mostly created by ignorant fools and the media) over a National Healthcare Program. That debacle has raged on for as long as I can remember. They could easily adopt our Canadian system, and in fact, CIGNA Healthcare has used the Canadian model for years. I used to have CIGNA coverage when I lived in the States and it was excellent. So is our Canadian healthcare.

The current furor is nothing more than ignorant FUD promoted by the greedy little bastards in the insurance industry and AMA. Their key concern is NOT being able to disallow claims when people become ill.

Pretty much like a lot of our insurance companies who think they are entitled to raise rates if they have to pay claims. Sorry, but the whole idea of insurance has been one of shared risk, not a free for all money grab. Lloyds of London mandates that all their ‘members’ are liable to pay claims.

The concept of No-Fault insurance, as practiced in Ontario especially, is a joke. Insurance companies DO HAVE TO pay claims, and that is a known factor in their industry. That should not entitle them to drastic rate increases. A friend mentioned yesterday his auto insurance went up $600 a year. He has had no claims, no accidents, and asked why the increase? The insurance company whined ‘There have been a lot of claims in your area (Postal Code).’ What a crock of crap. The innocent pay for the assholes as usual with no recourse.

We have, and are, witnessing, the death throws of a corrupt and underregulated scam, and at the same time that other economic realities are coming to a head.

Oh, my 81 y.o. window neighbor told me the other day that her OAS has been cut because Oddawahaha increased her CPP (or visa versa) claiming she had too much income. Those are her only income. Nice to know the real Death Panels reside right here in the Best nation on Earth, eh? She worked as nurse for over 30 years and gave and gave. Nice treatment of our elderly by the Harper Goon Squad.

Will I be able to retire at 65? Not a chance in hell unless I win the lottery, which is one of the poorest gambles one can make. I will work until I die thanks to decades of set-backs by incompetent fools monkeying around with our economy. One reaches the point they simply do not have the physical energy or stamina to do it all over again. May a pox be upon them all.

#21 Phil Ossifur on 08.13.09 at 7:47 am

Garth, have you read Lyndon Larouche on the neccessity of “physical economy”, and “public credit”? The solution is to write off the derivatives– stop all bailouts and go to a New Bretton Woods, agreed?

#22 Taipan on 08.13.09 at 8:01 am

I recently rang my local member in parliament and asked him to introduce a bill to stop the planet rotating as i wanted to get off.

Place is full of nutters. Cripes they seem to legislate stupidity at the drop of a hat so it shouldnt be noticed.

I turn 50 next month. Ive seen the 70s, the 80s and 90s recessions. Ive seen the 18% home interest rates and paid them. Ive seen collapsing house prices in the ppast. Nothing of this is new.

The only thing new is the amount of spin as if they think it will change things. Which it wont.
Garth, when you were in parliament, you didnt happen to see a bloke with a beard, a large boat, huge pet collection, and very worried about a flood, because he would have been one of the few people with any sense.

This is going to get very bad very quickly.

I seem to remember a western government trying to support their currency, and the traders taking money off them. The currency eventually collapsed.

Im sorry but this will end very badly and it wil be gutting for those people who believed the hype.

#23 Seilfworcehtsa on 08.13.09 at 8:38 am

Good stuff Garth!…..the picture is a great allegory…how do you do it?…makin bacon so to speak. Contented little piglets today…tomorrow somebody’s breakfast and the old sow will be feedin another lot.
And as for Harper and his CONS…don’t let them fool you…they think Govt debt is the cats meow and they are happy as pigs in s…

#24 kenken on 08.13.09 at 8:41 am

watchout for the Commercial Real Estate downturn (already started), climaxing with the CMBS of USDbillions-trillion maturing in the next 3 years

as for the housing market strength in Canada … indeed its all due to the Asian community and First time buyers. Asian families migrate to Canada and buy houses with their money or black monies (undertable not declared revenue from their side businesses) and 6-10 ppl live in the houses. And they get mortgages using their ‘cheats’.

Heard of those who make false salary slips or employer reference letters (to increase years of work and salary). All this is well when int rates are low and mortgages affordable… what happens when rates increase?

btw am Asian too and not racist or conservativist

as for the stock market…experts are saying there is not much to substantiate and justify the rally in the last few months and September is gonna see a correction….will we? Obviously it has to happen since equilibrium has to be reached and it always revert back to the long term trend
only hic here… there is so much money around from the savings ppl are making, the stimulus funds, the money banks are not lending…has to go somewhere…either commodities (incl oil) or stocks…this could cause the rally to artificially continue but until when!!!

#25 Justin on 08.13.09 at 8:42 am

Unless you’re a very seasoned investor now is the time to be deleveraged (except some Silver and Gold) and waiting on the sidelines with your Cash. When you see the snowflakes begin to fall again you will be thankful that you waited as a nasty bear market and round two of the recession/depression will again be upon us.

Almost nothing has been fixed that caused this economic maelstrom in the first place. In fact the steps taken to alleviate the crisis have insured a lengthy and painful journey into a very reduced standard of living for us in the Western World.

Point to Ponder: All of the Government and Media cheerleading telling us that the recession is either over or has found a bottom has done nothing to unglue the price of Gold ($958.20) or Silver? That’s notable since Gold is purchased by investors largely for protection against currency inflation and the resultant devaluation ($USD Index $78.34) ; i.e. very unhealthy economies. Apparently many investors aren’t buying into the “good times are coming again” hype.

#26 young & foolish on 08.13.09 at 8:44 am

It’s a “managed economy” folks, not a real free market.
Garth is correct that central banks and governments are desperate to prevent a deflationary spiral.
The trillions and billions being promised as “stimulus” are taking us into uncharted territory. Naturally, everybody is becoming nervous and scared as a result. This new trajectory is outside comprehension.

#27 Gord In Vancouver on 08.13.09 at 8:47 am

Garth said:

By virtue of being in the military these costs are covered for the client:

Real estate commission and GST on sale $14,295. Legal fees on sale, $500. Portion of mortgage penalty paid by military, $7200. CMHC Fee on new mortgage, $14,061. Land transfer tax, $3,624. Legal fees for new mortgage, $1,500. Buy down of fixed interest rate, $6,400. Plus moving expenses.

The total: $47,500. Can we afford this?

I oppose all forms of subprime but, almost hypocritically, don’t oppose Canadian military people receiving this type of real estate support. Our country is obligated to provide military assistance to its allies but constantly struggles to recruit people; hence this “byproduct” is necessary.

If Canada expands this program to cover real estate costs for refugees, single parents, and other disadvantaged groups, then we have a serious problem.

‘Garth’ did not say that. He reported it. You are being a divider. — Garth

#28 kenken on 08.13.09 at 8:51 am


here’s a bit of economics:
Prices are determined by market forces of demand and supply…lately there has been government intervention to manipulate demand and supply but, if history stands for anything, the free market economy always has the last word and takes over (capitalism by JM Keynes in the 1930s) and government intervention is merely short term solution without any success guarantees.

according to OPEC and other oil producing countries, demand is low and will be in 2010 (makes sense with no investment around). As for supply, they are not changing much….hence oil price rally of late is merely speculation and hoarding by many.
Gold and precious metals are usually the outlet when stocks are not performing well and are risky. Prices are holding up only because there is so much money around. Same can be said of stocks price rally.

What is difference between Canada and US? Less supply and more demand in US. More affordability in US. Yet prices are lower (and getting lower) in the US. Market forces are driving prices down to its long-term trend…10% further decrease will get it back on that trend line since 1939.
What about Canada then? prices so far above the trend line…

question is…how long will it take? noone would have believed it if 5 years ago, the US were told that the RE bubble will burst…
but here in Canada, people are being warned…yet, they are fools not to heed the advice!

In the end, the market forces will dictate again and this does not bode well for Canada!!!

#29 PTDBD on 08.13.09 at 9:06 am

Feats Don’t Fail Me Now

Up! Up! Up!

Look on high, on the tightrope. That’s my Uncle Sambenke. The family loves the guy. In fact we depend on him and most sincerely hope that he succeeds in his feats of levitation and prestidigitation. We want to nominate him as “Man of the Year”.

Unfortunately, he has had his problems of balance lately, but has convinced us that he is levelling out. He has a liquidity problem. You see that bottle in his back pocket? He’s sworn to lay off the stuff, but there he is still a swigging away, even on the tightrope. He says he’ll do it at a slower pace. Just one or two more drinks and that’s it.

Jeeze, I hoped that he’d go cold turkey. but, when times get tough, he just drinks more and more. He really scares me when he comes up with those fancy names for it…like quantitative easing. Hi hope times don’t get tough again.

He used to be supported by wires and bonds. Those are now gone. Today is his first time working without a net.

#30 Munch on 08.13.09 at 9:10 am

I really liked the “blow the gum bubble” analogy – worked for me!

#31 Munch on 08.13.09 at 9:11 am

“and a huge pet collection”

you guys are funny, funny today – nice!

#32 Help ME on 08.13.09 at 9:19 am

Guys please help me out here.
I am 28, getting married next year. I have a low 6 figure salary and no debt. My car is paid of and I have about 40k in cash and will have another 40k by the time I get married. I am shocked that RE is hot in the middle of a recession and we never really got any corrections here in Canada.
I have been looking at MLS for the past 6 months everyday and every decent place I find is sold within days and most go over asking price.
I have found a condo unit downtown Toronto for 380K that will be ready next summer just before I get married. This is a 700 sqf pent house with 10 foot ceiliings and ….. I will have 25% down payment and we can easily afford a 20 or even 15 year mortgage.
I have been waiting for a correction but I feel like it will never come. Is it crazy buying a condo for around 520$ per sqf in downtown toronto? The same unit in Vancouver is at least 1000 per sqf!
Please help me out, what should I do? I dont like the renting idea.
I know that all this craziness is because of low interest rates but the GOV will do everything to keep the rates low to save the RE market here.
Please give me some advise I dont know who to talk to and this has been putting a lot of presure on me and has made life misrable for me.
Thanks in advance

#33 brett on 08.13.09 at 9:23 am

Well there has to some benefit for risking your ass in zionist wars.

#34 View from the south on 08.13.09 at 9:41 am

I caught part of an interview on CTV Canada AM this attractive woman was telling the primped and polished host that there are two kinds of debt. Good debt and bad debt.

Good debt being borrowed money that is invested in assets that you know are going to increase in value. Like a mortgage? Yes, exactly. Mortgages are good debt because everyone knows that real estate always appreciates.


#35 Jason on 08.13.09 at 10:10 am

#9 hongcouvercrackhead

Well the 16 unit condo I rent in was 100% foreign owned in 2005. Offshore money, not Albertans, lol.

The smart money of course are selling their units to dumb FTHB’s.

#36 Rasputin on 08.13.09 at 10:34 am

Attn: Bill Muskoka
By any chance did you save for retirement? Did you buy shares in those companies that pay massive dividends to their shareholders? Just asking.
We are so far down the nanny state slope that it’s disgusting. We are all whiny dependants on the state. Just the way Trudeau wanted it. Our grandparents (who knew what real adversity was) would surely puke.

#37 X on 08.13.09 at 10:42 am

#16 -‘ I expect the bankers, real estate agents and feminists to oppose this set of reforms. But that kind tells you where they stand doesn’t it?’

Uhh, no. It tells us where you stand. Moron.

#38 jess on 08.13.09 at 10:45 am

would this be a carrot or a stick

Make the cost of wage increases deductible from corporate income tax and make the savings from layoffs taxable as corporate income


=======the anger that builds…
also in regard to China it seems their town halls are not calm either.

Town hall in Sichuan stormed

Meanwhile in the Southwest Province of Sichuan, the same human rights monitor reports that on the evening of 14 July a thousand parents stormed the town government building in Jiusicheng Town, smashing office appliances, beating the town head. In the clash with police that followed 10 were wounded.

#39 Expat on 08.13.09 at 10:51 am


I’m not impresssed with your choice of examples for this post. Taking it from the top, it sounds like the couple purchased in their price range (3.5 x 82k = $288k).

Next, there is an implication that the disability is feeding at the public trough. I consider disability an insurance that you can’t afford to be without and critically need to collect when a disability does happen to you – the bills keep coming in when you are laid up. Would you decline the insurance payment for the greater good if you, for example, cracked up your Harley, because it may increase premiums for your demographic group if you collect?

The part of this article that really rubbed me the wrong way implying a member of the military shouldn’t be compensated for early payment penalties, etc., when they are re-assigned. He can’t walk down to the human resources office and resign if the move “doesn’t work out” with their home purchase terms. They didn’t buy a McMansion as a get rich quick investment, it sounds like they bought a condo in their price range at typical terms as a home. Should they have to take a bath because the military, which by the way is fighting a war, re-stations the husband?

I share because I care. Keep up the good writing.

The point is as stated: People are buying homes who do not have savings, and can only do so because of manipulated interest rates and the transference of risk from the private sector. Stop trying to be a social engineer. This is about economics. Besides, would it not be more cost-effective for the DND to pay employees’ rent? — Garth

#40 Dawn in Calgary on 08.13.09 at 10:53 am

Garth, why do you allow postings like #16 – – an obvious troll. He’s just posting crap like that to get the discussion off the topic.

#41 Live Within Your Means on 08.13.09 at 11:13 am

#16 steven rowlandson on 08.13.09 at 6:43 am

I expect the bankers, real estate agents and feminists to oppose this set of reforms. But that kind tells you where they stand doesn’t it?


It certainly tells me that you’d rather we lived in the 19th century.

#42 Live Within Your Means on 08.13.09 at 11:18 am

So much for past and future GDP growth.

A lost decade of growth
Many real indicators put us back to where we were 10 years ago

#43 JoeCalgary on 08.13.09 at 11:20 am

France and Germany exit recession

#44 conan on 08.13.09 at 11:30 am

Re: 16

I think that would crash the economy. All manner of people would become unemployed.

The real estate market cannot be treated that way. Well not in one foul swoop anyway.

BTW You have a medieval viewpoint of women and I am sure your going to get flamed badly.

#45 Keith in Calgary on 08.13.09 at 11:34 am

#32 Help Me…….I doubt you are who you say you are. People who make a low 6 figure salary can spell correctly.

#46 Peter Wiener on 08.13.09 at 11:37 am

re #39 Garth in your reply

You nailed it – Social Engineering!

Except the people doing the engineering have no accountability, an unlimited budget from our taxes and no real experience (by definition).

And they think they know best, despite the fact that all their efforts just make housing more expensive for all of us. The only thing engineered will be lots of losses if you are are on the wrong side of their policies.

#47 Peter Wiener on 08.13.09 at 11:44 am

#39 Expat

Did you read what you wrote before posting?

It was an excellent example and provides insight on many levels to the problem mindset affecting real estate and the economy of this country.

Perhaps you share the delusion or perhaps you simply didn’t get the gist of Garth’s posting. Either way, I think it is helpful in illustrating how emotional a topic housing has become which, in and of itself, is telling as to where we are in the RE cycle now.

#48 lgre on 08.13.09 at 11:54 am

“I know that all this craziness is because of low interest rates but the GOV will do everything to keep the rates low to save the RE market here”

Saving it from what? at the end of the day people like you and I buy RE..if the average income is below $30k/y who is buying over priced RE once rates return to the norm, nobody. It’s a waiting game, if you cant wait then with the consequences later.

This dumb idea that big bro is going to prop up the economy forever is nonsense…why are we losing jobs if the government has these special powers as some believe..because it has no powers..just like Obamarama has no powers to stop the foreclosures, jobs losses and so on….the market will dictate not the dictator himself.

#49 wondering on 08.13.09 at 11:56 am

@ #16 steven rowlandson

Only the man’s income to be used? Where do you live, the dark ages?

Why not say “only the higher income” -or perhaps, to be more prudent “only the lower income”?

#50 Genghis on 08.13.09 at 12:04 pm

According to Deutsche Bank the carnage in the US residential housing market is far from over. They predict that 48% home owners will be under water by 2011 (currently 27% are under water)

I can’t see how the market in Canada can remain unaffected, considering the price run-ups in some markets are higher than the peaks reached in the US. It is just a matter of time.

#51 taxpayer like you on 08.13.09 at 12:07 pm

38 Jess

“Make the cost of wage increases deductible from
corporate income tax and make the savings from layoffs
taxable as corporate income”

That is how it works. At least in my small business corp.
The govt doesnt care. They get their tax somewhere along the line. I can take it as a wage, and pay personal income tax, or pay the lesser corporate tax and take a dividend, and pay the tax on the dividend. The game is rigged to make sure there is no clear advantage.

#52 miketheengineer on 08.13.09 at 12:11 pm

Garth et al:

I was talking with my Mom in Hamilton today. Her best friend’s son sell’s homes there. She told me that it is now very very slow, so slow he was complaining about it. Apparently this guy never wines, and is always upbeat.


#53 JM on 08.13.09 at 12:15 pm

#16 – wow, that must be a nice set of sheets you put on your horse to match that pointy white hat of yours. You do know that historically most Canadians are derived from all sorts of immigrants, right?

#32 – sit tight & wait. Here’s some simple math for you, if you get an initial mortgage rate of 3% and it rises to 4.5% on renewal it sounds cheap but your interest payments went up 50%. My parents never had a mortgage with less than 10% interest but the wage to house expense ratio was way lower.

Sit tight and save, renting is fine while you save. I did and it worked out fine. Buy what you can afford & is affordable (not now) and pay it it off as soon as possible. It’s that simple.

Good luck.

#54 artisuseless on 08.13.09 at 12:20 pm

It’s silly for people in the military to buy at all, knowing they have to move every few years. This should NOT be subsidized. I agree with Garth – they should have a decent rental allowance – it would be cheaper for taxpayers too.

Also, this ‘zero-down’ is beyond stupidity and will ruin this country’s finances for decades. People who can’t afford to front even 10% down in CASH have no business buying ANY real estate.

I already stay clear of bond funds that have anything to do with CMHC too. I don’t know when this will all blow up – I’ve been expecting it for months now but who knows. The TSX is just stupid now too. As are oil prices.
It could still go on for years now, it seems.

#55 rory on 08.13.09 at 12:37 pm

#16 steven rowlandson you said:

“First of all ban combining incomes to buy real estate punishable by a fine equal to twice the price of of the house the the buyer is trying to purchase.”

So far so good on your comments + it would be a way to get house prices down to a more reasonable level but use whomevers income the couple prefers to use as the basis for the mortgage …2 can work but only 1 salary is allowed and they decide which one to use – not the mortgage company, gov’ts or racist bigots/’maleophobes’ like your self.

I was wrong in giving Infernalmachine (he just wanted to kill all the boomers) the ‘tool of the month’ award …you are now at the head of the class …seriously, where do you people come from to get ideas like this …please do not say religion made me do it.

P.S. – In keeping with today’s theme – our military is fighting and dying in Afghanistan for women’s rights and the right to live a safe and secure life and you want to change that here in dear, old Canuckville by going back 200 years …maybe you should move to a country more in line with your thoughts…would be easier on ya and us.

P.S. #2 – and I ain’t no stinking banker, real estate agent or feminist and I oppose it (meaning you).

#56 Chris no longer in England on 08.13.09 at 12:45 pm

steven rowlandson #16:

“Secondly only the mans income can be used for the purchase …… The purchase price must not be more than 3 time the mans pretax income and preferrably less.”

Dear Steven, I certainly hope all these men are earning a good salary. When we bought our first house, I was earning a lot more than my husband who wasn’t long out of university. In fact it took a good 10 years before he earned more than I did. You can blame this on womens’ lib if you like, and no doubt I should have been paid a pittance for my experience and skills as I am just a woman, but in the UK where I come from this is illegal.

“One more thing since immigration is just a crutch for the real estate market and womens lib it therefore should be shut down. Population growth only through canadian men and women getting married and having babies.”

I am not sure how immigration is a crutch for womens’ lib, perhaps you could enlighten us? Please also provide a copy of your family tree so we can check just how Canadian you are. Somewhere in the back of it will be an individual who was just as Canadian as I am! NB: Note to self – keep son out of the Canadian marriage market (can’t have him contaminating the gene pool).

“I expect the bankers, real estate agents and feminists to oppose this set of reforms. But that kind tells you where they stand doesn’t it?”

Haaaaa!!! Those damned feminists! Worse than bankers and realtors.

#57 if you don't like it on 08.13.09 at 12:54 pm

#32 just wait a rent dude, 700sq ft is a SMALL condo. Are you and your wife wanting kids soon? If I was you I would save up more and buy a place you guys can grow into, like a house or half a duplex. Widen your search a bit outside of downtown.

#58 rick on 08.13.09 at 1:00 pm

WTF is going on Garth? The Canadian housing market is the biggest ponzi in the world. How can people with no money and/or 0-5% down payment be allowed to buy homes? Been waiting for 3-4 years now and prices are still crazy in a recession where many mnay people have lost their jobs? What world are we living in? Will the ponzi ever end? Everyone with a brain knows this is just a ponzi but people feel the government will do whatever it takes to keep it up, even if it ruins Canda and our dollar. What is a person with financial sense to do in this manipulated ponzi?

#59 rory on 08.13.09 at 1:04 pm

Hey all …

By rereading #16 comments and the feedback I get when I comment on public sector pensions … it appears that the public sector pension issues hit closer to home as in screw with my pension (even though keeping your pension at a certain level hurts others) and I will hurt you but abuse basic human rights, in writings, well that appears to bring out less outrage …hmmm very curious.

Please don’t feel that I am soft and cuddly but any person (M of F) should have the RIGHT not to fear walking down a street anywhere at anytime regardless of race, religion or any other beliefs.

Now is Canada soft on bogus refugee claims and a host of other immigration policies – yeah you bet we are …but be a legit refugee and a benefit to this country when immigrating, I say, welcome…IMO.

Fairness to all but the rules need to be know and adhered to …

‘Canada is soft on bogus refugee claims.’ Link to verify this statement? — Garth

#60 Nostradamus jr. on 08.13.09 at 1:09 pm

>>#9 hongcouvercrackhead

for all u dum shits out there who think rich asians r gonna save the hongcouver real estate market, NOT!

“oh but this asian family paid 2.1M for some fixer upper down the street”.

your little anecdotes are just dat… anecdotes!
look at the landcor data u friggin numb nutz. 2% of bc real estate is purchased by foreign buyers. TWO PERCENT!
and half of that 2% is probably albertans.

so u all either retarded or in denial.
either way its an insult to retards and egyptians.<<


…Perhaps you should join the Canadian Military…

#61 David on 08.13.09 at 1:15 pm

Help ME, probably does need help. First off, the existing down payment and anticipated future down payment will not magically rot because of refusal to pay ridiculous prices on a 700 square foot condo. Secondly having children in the future will make that over priced apartment offering the privilege of ownership and not renting inadequate for future needs. There is no scarcity of condos at that 700 square footage range and, if there is, some sharpie huckster will be hawking his newest development. Even if Help ME can afford a mortgage with a 15 year amortisation and has the income to support the purchase, it makes no sense to wildly over pay for an asset that will have a declining value in the future. Once the housing price correction begins in earnest, there is the very real possibility of being on the wrong side of the bank ledger and suffering future financial losses which are entirely avoidable by simply refusing to buy today.

#62 jess on 08.13.09 at 1:22 pm

BANKS r walking huh?

TOXIC TITLES – property default go to go court and you no longer own the property ,the house is returned to the bank. NOT SO ……. WHAT !!!!!!!!!!!!Now I know insanity prevails.

#63 S on 08.13.09 at 1:26 pm

Real estate commission and GST on sale $14,295 – I’m okay with that

Legal fees on sale, $500 – Okay with that, too

Portion of mortgage penalty paid by military, $7200 – WTF?!

CMHC Fee on new mortgage, $14,061 – WTF?!!!

Land transfer tax, $3,624 – Sure

Legal fees for new mortgage, $1,500 – Why not

Buy down of fixed interest rate, $6,400 – What is this?

Plus moving expenses – Of course

I have no problems with DND paying closing/moving costs. I do, however, have a problem with DND paying the extra premiums that it takes for a couple that should not be buying a house, to buy a house. That is ludicrous in my opinion, and is where the line should be drawn.

#64 rory on 08.13.09 at 1:31 pm

#32 Help ME

You picked a bad day for me …lol … so your educated, and make good coin yet at the most basic level – day to day stuff your lost …says one major thing about you – your overpaid for your level of maturity… grow up and make adult decisions …just like the ones you should be making at work.

This blog will tell you to rent, get married at your own risk, but buy if you have to as long as your eyes are wide open but if you want real advice as what to do – ask mommy.

#65 Chris no longer in England on 08.13.09 at 1:32 pm

The latest Europe2020 public announcement (dated June, but I haven’t seen this link posted yet).!-Global-systemic-crisis-in-summer-2009-The-cumulative-impact-of-three-rogue-waves_a3359.html

#66 S on 08.13.09 at 1:32 pm

Re: #39 Expat

“Next, there is an implication that the disability is feeding at the public trough.”

Unless I misunderstood your post, it sounds like over-sentitive paranoia to me! Just because he mentioned disability income, doesn’t mean he implied anything about it. I guess since it’s the wife he mentioned to be on disability, as a woman I should be standing up and shouting “sexist!” and accusing Garth of implying that women are weak and therefore more likely to be on disability or some BS like that.

Re-read his post, please.

#67 Ronaldo on 08.13.09 at 1:46 pm

I have just decided that I am no longer going to try and convince people of what is taking place down below and in our own country with regards to what is being discussed on these forums. They tend to look at you as though you are some kind of whacko and don’t know what you are talking about as they rush off to Home Depot to cash in on the latest windfall our fine gov’t has come up with in the Home Renovation Tax Credit, I repeat, Tax Credit. These same people are likely jumping back into the mutual funds they dumped back in November and again in March for fear of missing out on the next big run. When the markets start to correct again and that is not going to be too long from now, they will bail out again and who will they blame then? No wonder the gov’t can get away with all that they do, raise gas taxes and then give us all a cheque for $100 bucks (B.C.) so that we are made to feel like we got something for nothing. Its like going to the Casino and losing $500 bucks and they give you $20 bucks as you walk out the door and you say, geeze, are they ever nice to their customers. Oh, and now we can look forward to another tax called the HST. Wonder if we will get a cheque for that one too. We are so pathetic.

#68 Barb .. a reader in Calgary on 08.13.09 at 2:05 pm

steven rowlandson #16,

Why don’t you just move to the next step in your campaign and ask for euthanasia of all women (to put women out of their misery of being “feminists” as per your word). That way, all women would be gone, and then men like you will be quite happy in your little mans world.

Oh wait, you still need your imprisoned baby making machines.

Guys… chill. — Garth

#69 Ronaldo on 08.13.09 at 2:10 pm

View From The South #34…..I too saw that interview this morning and felt exactly as you did….what a joke. I too was LMAO.

#70 Nostradamus jr. on 08.13.09 at 2:12 pm

All you renters are whiners.

…0 down, 3% down…whatever.

If the govt is lending your own money back to you to buy shelter for cheap…why aren’t you taking it?

You guys dont see that there is no where else to keep safe the money you are saving…the world is in a depression/recession.

Ottawa is simply protecting the country and its citizens.

…and Vancouver will become the next financial, trade, culture and leisure capital of North America….

Just connect the dots friends.

#71 Barb .. a reader in Calgary on 08.13.09 at 2:16 pm

#67 Ronaldo “I have just decided that I am no longer going to try and convince people….”

There’s pitfalls in trying to convince people of anything… they are either too defensive, too misinformed, ignorant, or have a vested interest in maintaining the status quo.

Special rule: Stay out of delicate areas of people’s psyche, like donuts:

Besides, no one has a sense of humour anymore.

#72 Two-thirds on 08.13.09 at 2:18 pm

#16 steven rowlandson

Congratulations! Your post has won today’s “Despoticus Maximus” award.

Your prize consists of a one-way ticket to your choice of:

1) North Korea
2) Pakistan
3) Saudi Arabia
4) Myanmar
5) Venezuela

And a dinner party with the top government officials at your chosen dream destination.

Thanks for posting.

#73 Marc on 08.13.09 at 2:18 pm

#67 Ronaldo on 08.13.09 at 1:46 pm

Your statement made me think about the Canucks scratch and win tickets. Tickets are $10 each, and claim to have 25% of tickets being winners. Most common “winner” is $5, which I view as a $5 net loss, not any sort of win. Free ticket, I consider a push, and anything over $10 is a win in my opinion.

#74 Wealthy Renter on 08.13.09 at 2:36 pm

Interesting Macleans Article: quotes Mish, and reiterates just about everything Garthy has blogged about in the past few months.

#75 Wealthy Renter on 08.13.09 at 2:37 pm

Sorry, must proof-read, Garth not Garthy. :)

I thought you had the hots for me. — Garth

#76 Ronaldo on 08.13.09 at 2:38 pm

#32 Help Me……….not certain that your post is “for real”but if it is, here is my advice to you. Stash your $80 g’s, and hopefully by this time next year this whole mess will have started to unravel, otherwise, buying in now will likely guarantee that you will lose the entire $80g’s and you will end up with a mortgage worth much more than the value of the $700 s.f. penthouse. I believe you already know the answer to your question of “Is it crazy buying a condo for around $520 s.f. in downtown Toronto”? Not only crazy but insane. Take the time to research what happened in Japan in the early 90’s and you will have the answers to your questions.

#77 JET on 08.13.09 at 2:43 pm

Just saw this in a Toronto condo listing (C1683468):

“No More Showing Time Slot Until Aug 15, Half Hr Appt, No Double Booking, Multiple Offers Registered, Presenting At 8Pm On Aug 14.”

How ridiculous is that? You can put in an offer on the 14th but you can’t see the property until the 15th!!!

#78 Azza on 08.13.09 at 3:00 pm

47,500? It’s rent for 3 years. I think military should just pay (reasonable) rent for let’s say 1st year and if somebody wants to purchase RE – they are on their own.

#79 JeffinPickering on 08.13.09 at 3:01 pm

You’re out of your frigging mind if you buy that condo.
1. It’s overpriced.
2. The BoC can only keep rates down for so long. Besides, note that while the BoC has kept rates down, the banks are slowly creeping their mortgage rates up regardless.
3. In 5 years (or less) it will be absolutely worth less (or worthless as the case may be) when you decide you then want to sell to buy a house.
4. What can you really afford if one of you loses your job? Six figure salaries are like bullseyes in this economy and the bossman is carrying an elephant cannon so as not to miss.

#80 rory on 08.13.09 at 3:03 pm

#59 Rory …GT you said:

“‘Canada is soft on bogus refugee claims.’ Link to verify this statement? — Garth”

Okay, I was a little loose with the explanation and got caught.

From the article:

“We have many legitimate refugee claimants, and of course we have lots of people who are going through our immigration system in very large numbers legally, but we are spending an enormous amount of money on bogus refugee claims that encourages those claims.”

I should have said we spend lots of money on bogus refuge claims versus saying ‘soft on bogus refugee claims’ …big difference, I admit.

I still have the perception (obviously not provable by me) that Canada is soft and fuzzy place to try for a backdoor entry at least for a number of months or years before deportation or one bolts and hides.

#81 Kurt on 08.13.09 at 3:04 pm

“…and Vancouver will become the next financial, trade, culture and leisure capital of North America….” – I’m beginning to thing this a running joke. In my business, there is occasionally hype about new materials. This is lampooned with “Gallium arsenide is the material of the future – always has been, always will be.” Or perhaps let’s take research into type I diabetes – “This research should lead to a cure within five years” – people with the disease have been hearing this for nearly two decades now. Or perhaps nuclear fusion – “Commercial development is just around the corner – and has been since 1972.” Or maybe Southpark: “You killed Kenny – you bastard!” So some dark and rainy, over-crowded, absurdly expensive, over-worked, over-taxed shoal of socialism on the wrong side of the US border is going to become a) a North American financial capital AHAHAHA! b) a North American trade capital AHAHAHA! c) North American cultural capital (New York, Los Angeless and Nashville are going to wither and blow away?) AHAHAHAHA! d) leisure, when pretty much everyone needs two incomes to support their mortgages AHAHAHA! It’s such a great place, and it has humorists like you, too, NDJ, you are just *so* funny! Your comeback to hongcouvercrackhead was *so* clever: “go join the army” AHAHAHA! “…and Vancouver will become the next financial, trade, culture and leisure capital of North America….” AHAHAHAHA! Man, you crack me up!

#82 Jayman on 08.13.09 at 3:21 pm

An 1100 sq ft semi located north of the beaches in Toronto sold on Tuesday for over the asking of $450,000. You need a down payment of about $100,000 to avoid CMHC! This is the formula. Stage the house. List Thursday. Agent showing Friday. Open house Saturday and Sunday. Take offers Tuesday night. Put up the sold sign on Wednesday.

Under listing which I don’t believe was the case in this instance is illegal in the US, according to my agent, but not in Canada. It should be along with many other things.

#83 jess on 08.13.09 at 3:24 pm

greed is backfiring on the rental conversion turned condo (remember all the people who were now suddenly homeless) because the mantra was that private sector can handle housing better lol…

The House is considering the measure, which focuses on apartment buildings with units that are either rent stabilized or receive government subsidies.

Many developers during the housing boom bought rent-regulated apartments by borrowing against the properties themselves and betting they could make hefty returns by converting them into market-rate buildings.

However, thanks to the recession and the collapse of the real estate market, many developers are now struggling to make mortgage payments, let alone finance repairs and upkeep of the properties they own.

“Just about everyone who purchased an asset in 2006 and 2007 is under water, especially the rent-stabilized complexes bought in upper Manhattan, the Bronx and Brooklyn,” said Dan Fasulo, managing director of Real Capital Analytics, a real estate research and consulting firm.

There already have been casualties. Larry Gluck of Stellar Management and partner Rockpoint Group last October defaulted on their loan for Riverton Apartments in Harlem.

More recently, developer Kent Swig lost control of Sheffield57 to hedge fund Fortress Investment Group after he defaulted on loans used to convert the former rental building into a condominium.

#84 Nostradamus Le Mad Vlad on 08.13.09 at 3:29 pm

test test 1 2 3

am i alive here on the other side?

#85 kw on 08.13.09 at 3:35 pm

How can the msm keep up with this crap
Canada seen moving up in economic rankings

#86 View from the south on 08.13.09 at 3:51 pm

#69 Ronaldo
Who the hell was she?

#87 Chris no longer in England on 08.13.09 at 4:09 pm


“Oh wait, you still need your imprisoned baby making machines.”

Guys… chill. — Garth

Come on Garth, we’re enjoying ourselves now!

#88 Chris no longer in England on 08.13.09 at 4:32 pm

Another perspective on subsidised real estate for the armed forces here in Canada. A financial adviser I know based in Trenton (home of 8 Wing CFB) told me that when forces personnel in the area move on and need to sell their houses, they are content to accept a low price because the government makes up the difference. This keeps prices reasonable around Trenton. Whether this is true or not I have no idea, but if it is, they really are in a win-win situation.

UK forces live in housing provided for them. Depending on where they are posted, this can often be badly maintained, leaky and inefficient (I seem to remember a big uproar a couple of years ago about their accommodation in Germany).

My son’s soccer coach is based at 8 Wing and he and his family now own a house in the area. They have moved many times in the past 10 years and his daughter (aged 13) has been to six different schools. He is applying to be an officer and if he is accepted will spend a few years at university which means they can stay in their current house for the next 10 years.

The mls has plenty of houses listed with the promise “only 10 minutes from CFB Trenton”, so realtors around here seem confident of a steady stream of military buyers.

Unfortunately for me, none of them seem to be selling $600,000 waterfront properties they will accept $200,000 for when they are posted elsewhere, so I’ll just have to wait for the Crash!

#89 Anon - GTA on 08.13.09 at 5:35 pm

Always bet against the herd…

Everyone is talking of getting off stock market.

Think, we will see another huge rally leading to RRSP season, and Feb may be time to get off before this mess corrects…

#90 dd on 08.13.09 at 5:52 pm

#70 Nostradamus jr.

“You guys dont see that there is no where else to keep safe the money you are saving…the world is in a depression/recession.”

Sure buddy. Can’t eat a house if you have no job and no money. Vancouver house prices are falling off a cliff.

#91 Live Within Your Means on 08.13.09 at 5:55 pm

#80 rory on 08.13.09 at 3:03 pm

Another POV by a former chairman of the Immigration and Refugee Board

The bogus refugee myth

Most rejected refugee claimants, even those from Mexico, don’t fit the stereotype of the queue-jumper bent on abusing the system


#92 My_view on 08.13.09 at 5:57 pm

#48 lgre
“Saving it from what? At the end of the day people like you and I buy RE..if the average income is below $30k/y who is buying over priced RE once rates return to the norm, nobody. It’s a waiting game, if you can’t wait then with the consequences later.”
Those are the Can stats, yes but 30k a year. Where’s that, Nfld? Everyone I know makes a lot more than 30K in the big smoke. (Work harder) Hey, DND why not (they work very hard and risk everything). Rent allowance or home allowance, it’s the same money and they deserve it, very bad example. Politicians deserve the allowances (sarcasms) and they are the ones who send the DND to war! But the politicians are way more fiscally responsible people ()!

#93 Nostradamus Le Mad Vlad on 08.13.09 at 6:28 pm

Friends, Romans, Countryoffsprings — y’all trooly do have smokingly beautiful thighs —

but lend me thine creative white spaces a’twixt thouest ears!

Apparently, I was so enraptured in a multitude of conspiracy theories that I made the mistake of clicking my heels three times, saying “Oh shit” and being carted off in the recycling truck.

From there, I became used confetti paper in the Wonderful World Of Bre-X (Where Nothing But Smiling Happy Faces Exist), to be dumped on Wall Street at some point in the future!
Back to the conspiracy theories. This link may have been posted other bloggers, but it has a good POV, namely that all is not well in Canada with the banks.
Excerpt: “. . . the Canadians have not yet accounted for the impending wave of mortgage, consumer loan, and corporate loan losses. They will by the end of 2009. It’s impossible to avoid. ”

Another —
“. . . the United States is no longer in control of its fate. . . . at the end of August, a financial breakdown is due, and a shutdown of US banks is planned. . . . The USGovt creditors are in control. The August Hat Trick Letter reports have identified five major factors pointing to a severely stressful period of time at the end of August and into September.”

It will be an ideal time to shut down banking systems for at least nine days (S-S-M-F-S-S). Put all this together, a couple of false-flags from now on [Fall ’09 – Spring 2010] and it is patently obvious that the ones behind the scenes must be rubbing their hands in glee at the mayhem they have caused.

Pity sheeple and piglets, for they are about to be roasted alive.

#94 Samantha on 08.13.09 at 7:19 pm

Yesterday, I had the opportunity read a MacLeans’s article while waiting to see the Dr. The article was from a June 2009 issue (date not etched in stone – I could be wrong as I read several articles while waiting).

Anyway, this one particular article dealt with the “Ego Boom” and how that has impacted consumer spending. The phrase “Ego Bubble” could just as easily be substituted for “Ego Boom”.

For some time, consumers have been the target of the “You” advertising campaigns. Examples: “You deserve to have it your way.” “You’re richer than you think.” Consumer egos have been thoroughly stroked and conditioned to believe that they have arrived and deserve it all now, even if they need scads of credit to substantiate any of it.

It makes sense that people would be willing to pay such outrageous prices because of this marketing technique. It gets at the very essence of self-worth and self-esteem.

So, after some reflection it occurred to me that the crash and burn in the real estate market is at least partly contingent on the “Ego Bust”, which will be a point where people stop believing the “You” marketing.

In a way it will be like a very wealthy person who suddenly finds him or herself destitute. They must adjust to live within the confines of a lower standard of living, which can be quite difficult. But, a further difficulty lies in the need to reframe their self image. They no longer can view themselves as a person who deserves and has entitlement to wealth. The “You” marketing strategy no longer applies to them.

It will take time, but I believe that a sense of sanity will reassert itself once people break free of the effect of this type of marketing and define themselves and wealth much differently.

#95 Confused on 08.13.09 at 7:43 pm

I am like Help Me. We are from Calgary and just sold our house but have decided to rent and wait to see what the RE does. What do I do with the equity we have. I don’t want to push the panic button, but this all makes me nervous. Do I just keep the money in the bank, do I buy gold and silver?. We have already been burned once by an investment with Concrete Equities so needless to say I am nervous about who to trust.

#96 WillsDad on 08.13.09 at 7:58 pm

Garth, what do you think the percent drop to the average or median house price will be in Canada once this whole thing bottoms out?
I’m coming back to Canada in 5 years and am wondering what I’ll need to buy a 3 bedroom fully-detached house near a lake in Ontario.
I have $140,000 cash, debt free (paid down credit cards worth $11,000, student loan of $26,000, Alberta Health Care (oxymoron) areers of $900, while saving and paying child support.
Saving $40 Gs a year, so should have $340,000+when I return.
One more question: will the job situation be much better for us gen-Xers in 5 years? I’m wondering about the retirements of boomers in teaching or really all areas of the job sector.

#97 justjanice on 08.13.09 at 8:16 pm

Bank of Canada might say the recession is done…even France and Germany might say the recession is done…the US is saying ‘recovery in sight’….and perhaps recovery is in sight, but nothing meaningful. Bottom line, Canadians, and Americans are overleveraged to the hilt and until they repair their balance sheets there can be no meaningful recovery. The level of debt is higher this year, not lower.

There is such financial mischief, that what appears to be wealth is debt and what appears to be security is risk. You do not own a home until the mortgage is paid. You do not realize a capital gain until you sell a share. Money is not real until you spend it – just spend it wisely and keep your eye on what you are ‘really getting’. I’d rather be a woman with no debt, a paid for house, a paid for car, and all the useful things I need with a modest income, and modest savings than one who is at the whim of the money lenders and her employer. Many live in luxury, one paycheck away from financial disaster…

#98 Dan in Victoria on 08.13.09 at 8:16 pm

Amazzzzzing bunch of ranting today.My god… we’re paying for a canadian soldier to be moved around the country…outrageous…must be stopped….waste of money, blah, blah, blah.Right or Wrong,At least the money does circulate in Canada,I find paying Bill Clinton $175,000 of “stimulus money” to flap his gums for a few hours to be a far more disgusting subject.But then again thats just me.Oh by the way, is that taxpayers money…..?

#99 Future Expatriate on 08.13.09 at 8:22 pm

#89 If “everyone is talking of getting off the stock market,” then the smart thing to do would be to get off it now, and then buy once “everyone” who was “talking of getting off the stock market” got OFF it.

Stupid to be the one holding the check when everyone else has left the restaurant after excusing themselves to go to “the bathroom.”

I thought the idea was to sell high and buy low, not the reverse.

#100 Help me on 08.13.09 at 8:44 pm

Thank you all for your comments.
To be honest with you people around me are pushing me in buying something and cheap mortgages are attractive.
I will most certainly wait until this summer and see what happens. I thinking renting would be a smart choice because these rates are unreal.
One more thing I gorgot to mention is the fact that most people I talk to say that a number of condos and houses here are owned by people living outside this country. I cant argue about that and most of these people have Money. Vancouver is a perfect example. They are another reason why RE is where it is now in Canada. The latest project at Young and Shepperd is 85% sold and prices are in 500$ per sqf by the way:)

I was not born here, moved to Canada about 11 years ago and believe me my job doesnt require english skills and spelling. And i only shared my salary to get real advice thats all.

Thank you all

#101 Help me on 08.13.09 at 8:46 pm

Oppps I meant this winter :)

#102 jess on 08.13.09 at 9:08 pm

…”Think about the so-called liars’ loans from recent years: like those Texas real estate loans from the 1980s, they never had a chance of paying off. Sure, they would deliver big profits for a while, so long as the bubble kept inflating. But when they inevitably imploded, the losses would overwhelm the gains. As Gretchen Morgenson has reported, Merrill Lynch’s losses from the last two years wiped out its profits from the previous decade.

What happened? Banks borrowed money from lenders around the world. The bankers then kept a big chunk of that money for themselves, calling it “management fees” or “performance bonuses.” Once the investments were exposed as hopeless, the lenders — ordinary savers, foreign countries, other banks, you name it — were repaid with government bailouts.

In effect, the bankers had siphoned off this bailout money in advance, years before the government had spent it.”
Akerlof, George A. and Romer, Paul M.,Looting: The Economic Underworld of Bankruptcy for Profit(April 1994). NBER Working Paper No. R1869. Available at SSRN:

During the 1980s, a number of unusual financial crises occurred. In Chile, for example, the financial sector collapsed, leaving the government with responsibility for extensive foreign debts. In the United States, large numbers of government-insured savings and loans became insolvent – and the government picked up the tab. In Dallas, Texas, real estate prices and construction continued to boom even after vacancies had skyrocketed, and the suffered a dramatic collapse. Also in the United States, the junk bond market, which fueled the takeover wave, had a similar boom and bust.

In this paper, we use simple theory and direct evidence to highlight a common thread that runs through these four episodes. The theory suggests that this common thread may be relevant to other cases in which countries took on excessive foreign debt, governments had to bail out insolvent financial institutions, real estate prices increased dramatically and then fell, or new financial markets experienced a boom and bust. We describe the evidence, however, only for the cases of financial crisis in Chile, the thrift crisis in the United States, Dallas real estate and thrifts, and junk bonds.

Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.

#103 WaitandSee on 08.13.09 at 9:42 pm

Hi everyone,
I am French (from Paris) and moved to Vancouver one year ago (just “before the crash” , funny). We sold everything before moving here and have the cash to buy a house in North Vancouver, beautiful BC (Bring Cash, I really like this one ! ), but guess what : we won’t buy anytime soon, NO WAY. Looks completely crazy around here (even more crazy than Paris, how possible…)

Keep up the good work Garth
Good luck eveyone, please use your brain :-)


#104 Nostradamus jr. on 08.13.09 at 9:46 pm

>#74 Wealthy Renter

Interesting Macleans Article: quotes Mish, and reiterates just about everything Garthy has blogged about in the past few months.<

…Was I mentioned or quoted?

#80 Rory

…Canada has no serious Refugee problem,,,yet.
If this world recession/depression deepens…WATCH OUT.

#105 Victor on 08.13.09 at 10:18 pm

I’ve read a number of comments over the past few days and wonder who you people are. My guess is that, since you have all the answers, most of you are wealthy but inexplicably deride people in authority, income generating opportunities and real estate ownership. Stop complaining about “shareholders receiving BIG dividends” and buy some of the stock that pays those dividends….get on board!
Mr. Turner, your commentary reminds me of Howard Ruff’s newsletter during the late 70s….”the sky is falling, the end is near, the banks are stealing your money, sell your real estate, don’t buy real estate, buy gold….”, etc. The buy gold was good advice…buy silver was even better. As for real estate, my financial wizard wife who believes investments are deposits of under $100 thousand in a savings account or GIC in banks, insisted we buy a house as soon as possible. “But Honey, look at what Howard Ruff and Doug Casey are saying”. So we bought a house…… endured downturns and upturns….paid the house off….topped up the RRSPs…..helped the children with down payments on their homes (one even lives in the GTA)…..retired early…..lost some money in the market meltdown but haven’t missed any meals. But I’m just a farm boy with a speech dysfluency and barely a high school education so I didn’t know any better.
People…there will always be changes in the economy, in the markets, and, of course, in real estate prices. If you need a place to live….buy a house (wisely) and make it your home. When its paid for, the purchase price won’t matter. Here’s a saying from Chinese culture….”When is the best time to plant a tree? Twenty years ago. When is the next best time? Right now!” The same applies to real estate….and don’t concern yourselves with what someone else is doing, where they’re moving or what they’re buying.
Life IS beautiful!

Maybe the kids need scaring. — Garth

#106 Repatriated Expat on 08.13.09 at 10:22 pm

Glad to see that Canadians are not such an apathetic lot – according to these posts, but then again I never really thought we were.

This housing market run-up is so long in the making I’m starting to doubt my choice with regards to renting more and more these days. Risk cuts both ways, but how does one hedge against potential housing inflation, REIT’s?

#94 Sam, great points and I see that entitlement all around these days, but I don’t think it was all marketed. My three sisters all ranging from welfare mom, to low/middle income earner, to PhD high-level income earner all seem just a bit more financially arrogant to me over the last few years.

I guess it is human nature to want to be one of the “elite” whatever the definition and no matter how delusional. I don’t agonize over difficult times ahead of us and I believe that is what will separate out the prudent, resourceful people from the optimistic people.

I remember reading about a year ago how a majority of Canadians were about two paychecks away from bankruptcy. Not good news heading into in a recession with high levels of unemployment.

A recently-departed friend and worker used to keep a sign above his desk that defined optimism as “not fully understanding the situation”.

#107 ArunPillai on 08.13.09 at 10:34 pm

Hi Garth

Seems like your predictions started working again. Plz see

#108 charliegosurf on 08.13.09 at 10:37 pm











@ N



#109 kc on 08.13.09 at 10:45 pm

#32 Help ME

DUDE!!!! Get a life and suck it up…. rent and don’t drink the pink juice… if you want to go out and buy then do it… if you want to learn some interesting shit start at the very beggining of this blog’s archives and read from there… low 6 figures and come in here crying about renting???? what is this magical notion that owning a place will make you rich? or make you more powerful? make you a person instead of a loser? suck it up cowboy and do what you feel is right…. don’t walk up to the craps table with MORE than you can afford to lose.

#110 charliegosurf on 08.13.09 at 10:48 pm

“Liberté, égalité, fraternité, ou la mort!” (“Liberty, equality, fraternity, or death!”)

#111 45north on 08.13.09 at 11:31 pm

Bill – Muskoka I guess Bill with no qualification would be too common to post. There have been a lot of claims in your area (Postal Code).

Speaking of car insurance and car accidents. I saw a young man driving a car over the speed limit while texting – like texting on his Blackberry or iPod. In case of an accident can an interested party demand to see his phone records?

#112 Dan in Victoria on 08.13.09 at 11:53 pm

Post#105,Who are you people?Well Victor I’m a big dumb construction worker,proudly second generation able to stand and walk,First generation able to communicate in simple grunts.Yeah Victor, you’re right, the past thrity years of real estate is going to be like the next thirty years.So whats a 1970’s dollar worth today? When its paid for the purchase price won’t matter.Hmmm…(Been South Lately on your retirment trips)?Gee Victor, what about the in between part?You know that inconvient payment at the end of every month?Clean the bugs off the windshield.

#113 Jonathan on 08.14.09 at 7:53 am

#105 Victor

While I appreciate your optimism, can you please put yourself back in America in 2006. Would your argument hold that now is always a good time to buy real estate? In Canada the kids can’t just ‘walk away’ from their homes when real estate takes its turn – they will be filing for bankruptcy. So think twice before offering this advice to loved ones – they won’t forgive you when their families go broke and as a result, families split up. Think twice.

#114 Bill-Muskoka (NAM) on 08.14.09 at 11:59 am

#36 Rasputin

Yes, I had saved and built several businesses. Thanks to the 1980’s fiasco it was all wiped away to save the arses of the banks who made bad loans to foreign countries so the U.S. could buy ‘friends’ abroad.

I never fully recovered. I do not play the stock markets, nor do I gamble. I do this weird thing and actually work for my money, invest it back into my own company where it adds real ability in equipment and knowledge.

We have investments, but they are very conservative in nature. We took a 30% hit this year, but things are slowly coming back by keeping our investments where they were and being patient.

#115 Bill-Muskoka (NAM) on 08.14.09 at 12:06 pm

#111 45north

I do not understand your comment regarding qualifying statements? As to those who love their cell phone more than their life, I suggest giving them a friendly reminder of the danger they are causing to themselves and others. I did that with a woman who almost caused and accident last week and she thanked me.

As to using a cellphone, with Bluetooth and training I see no real hazard. texting while driving is as insane as watching a DVD, using your laptop, or playing cards. The only time I use my cell phone while driving is to report some arsehole to the OPP. Otherwise I wait until I can either stop or do so with no traffic or hazard around.

I also have years of experience as a pilot multitasking as in flying the plane, talking to air traffic control, monitoring all the instruments in IFR conditions. That is far more tasking than driving do to the ‘gravity’ of the situation you might say. ;-)

#116 We Are All Anonymous Millionaires on 08.14.09 at 8:12 pm

#90 DD

“Sure buddy. Can’t eat a house if you have no job and no money. Vancouver house prices are falling off a cliff.”

Sorry to disappoint small dd, but Metro Vancouver housing prices have been “rising” during the Spring bounce. Prior to the bounce, house prices had fallen 14% percent from their peak in Feb 08, and now they are only 5% down. While still down Y-O-Y, they have recouped some of their earlier declines nicely. In short, they are not falling off a cliff….

#117 Brandon on 08.15.09 at 12:57 am

It is obvious, that if you want a deal like the military family, is to JOIN THE MILITARY!

#118 conan on 08.15.09 at 11:14 am

“We have investments, but they are very conservative in nature. We took a 30% hit this year,……”

That is the line all of the bank and stock market advisors are spinning. 30% loss is terrible. You never had your investments set up the way you wanted them in the first place.

Conservative portfolios lost 5.55 % last year.

I can not think of a better time then now to re-allocate your portfolio so that it reflects your investing values.

#119 robert on 08.16.09 at 8:29 am

Mr. Turner
I am wondering how it is that our banks are so renowned for their prudence and fiscal probity. Are they not enabling the reinflation (temporary) of the RE bubble? I am not that old but I can still remember when everyone working in a bank wore a suit. Presently everyday is casual Friday and every employee is a salesperson. Hell, the people I see working in A&P are more conservatively dressed. Confidence inspiring? Hardly.

#120 steven rowlandson on 08.16.09 at 8:56 pm

Response to live within your means.

Life in the 19th century might be an improvement over life in the 20th and 21 st century. After all money was real, land was cheap and there was moral and social order. Don’t worry about my opinion though.
Worry about my enemies who run the world who created the hybrid H1N1/H5N1 /spanish flu virus and released it so that they could sell dangerous vaccines
to get rich and knock off 60 to 90% of the human race or so they hope. Next to them I am all right.
As for my previous advice I still think it is good advice and short of a serious depression or a killer plague, I think its the only effective shock therapy to restore financial sanity regarding real estate.