Mass. confusion


$1,555,000. 30 by 103. Toronto. Here.

There are four and a half million people in Boston, where the average house price is less than $340,000. That’s a decent improvement over a year ago. In fact, in the state of Massachusetts, the average house price has nosed above the $300,000 mark for the first time in a year.

Still, the average  is 9% less than last year, and sales are down 2%. Local realtors say the only reason buying has strengthened is because of cheap mortgage rates and a gift of $8,000 that the Obama gang is giving every new home buyer.

I mention this because a business news radio station in Boston asked me to be their guest Thursday on a show devoted to real estate. I received an intro suggesting I might have personally run the Canadian government and written all the books here. Close.

Anyway, here’s the thing they wanted to know: If you guys up there have a real estate bubble, and you saw the disaster that happened to us, why isn’t your government stopping it?

Radio silence.

I mean, how’d ya answer that without sounding like a northern rube?  Say, well, you know we’re different, eh? Or, our banks are a lot smarter than yours?  Or, there’s this border thing that repels your cooties? Or, gosh, you mean you’ve had some housing troubles down there? Or, but we have the Olympics?

In any case, I just stated the obvious: The government has no balls.

Policy-makers including the Bank of Canada and the feds made conscious decisions to inflate our housing market even while yours was taking a dive. They sanctioned long amortizations and zero downpayments, then dropped interest rates to dust, and have a federal agency which buys all the mortgage risk from the banks and transfers it to the taxpayers. As a result, I added in my best Bostonian flat-a accent, today we have mortgages given without income verification, financing extended to people without savings and legions of new home owners who would be under water if prices declined by just 5%.

And that was a shock, for an obvious reason: The Canadians are losing it.

Today 15 million American households have negative equity, and 2.5 million more are about to join them. Fully 58% of all the families in Florida with mortgages, for example, owe more than their houses are worth. Their equity vanished as property values collapsed after being allowed to reach a point of unaffordability. Will cold Canadians not repeat this – at least in part – once the federal gush ends and rates move higher next year?

But this is not really about houses. Instead, it’s the economy.

My Boston buds made it clear to me that there has been nothing – not job losses or stock market chaos included – that has impacted people as much as the stability of their homes.

Between commercials, I was asked another obvious question: Don’t you worry about what’s coming?

Those Americans. Such idiots.

+ + +

A quick word to all those people who keep emailing me for ‘evidence’ it is possible to make at least 5% on your money these days: Stop it. Get some advice.

Here are four more words: Canada real return bonds. So far this year, 7.7%.


#1 Terry Coleman on 08.20.09 at 9:47 pm

100 % certainty that Toronto is experiencing a rip-your-face-off parbolic bubble blow-off!! If you’re buying right now, YOU’RE THE DEFINITE LOSER!!! Most intelligent people can see how crazy Toronto prices are right now and if you want a snapshot of your future look at what is happening in the USA RIGHT NOW!!! All everyone has to remember is this, “DEPRESSIONS TAKE TIME”, just wait a while everyone and you too will know from experience what our Grand Parents lived through during the 1930’s.


#2 Who Is Your Daddy? on 08.20.09 at 9:57 pm

If you want to make more than 5% on your money, buy some preferred shares. It’s easy, instead of buying ECA, you buy (I made this up, not sure if there actually is an Preferred shares usually pay a hefty dividend, and on the date of maturity you are bought out of your shares usually at a higher price.
On another note: Jim Cramer’s ‘Mad Money’ runs a segment called ‘Am I diversified’, whereby he quickly analyzes people’s portfolios of 5 stocks and makes a yes/no decision. I suggest Garth implement a similar segment called ‘Am I a Greater Fool’?

The five tenants could be:

1) combined yearly gross income
2) purchase price of home
3) % downpayment
4) length of amortization
5) consumer debt (including car loans) to income ratio
Ok, I’ll go first. Garth, am I a Greater Fool?

1) 95,000
2) 305,000
3) 25,000
4) 30
5) 0.2

#3 Crash on 08.20.09 at 10:02 pm

BC now has a 3 billion dollar deficit just from June of this year and is forcasting deficit budgets for the next four years. The finance minister has also announced that the public should expect cuts to ‘discretionary’ spending (what does that include? Healthcare…?). So it’s not looking good in LotusLand.

#4 Smart on 08.20.09 at 10:07 pm

I am wondering if RE priece correction in Toronto wll be about 15-20% as per Garth – so what ? Minus 20% is nothing for today’s maket and if this is what really coming then RE bubble will still be on.

#5 john m on 08.20.09 at 10:21 pm

“In any case, I just stated the obvious: The government has no balls.”……..gotta love ya Garth :-) ..and how very true! The future of a Country has no priority over a few months good standing in the polls.

#6 polecat on 08.20.09 at 10:26 pm

Hey Garth and all.I’m in victoria and saw a condo development offering 0%financing for 2 years.Was 2%2 months ago.Seems they are getting antsy.How can a builder or whoever is running that show do that?Just curious,not looking to buy anything but I don’t understand how these things work,I’m just a worker bee.

#7 Best place on meth (aka NJ's Analyst) on 08.20.09 at 11:07 pm

Half of US mortgages to be underwater by 2011.

Apparently the US doesn’t have busloads of wealthy Asians to reflate their real estate market like we do in Vancouver.

#8 Shawn Allen on 08.20.09 at 11:08 pm

Negative equity is not good.

But it need not be a disaster.

There is negative equity in just about every new car that drives off the lot. So what? As long as the payments are made all is good.

All you negative equity types, just keep making your payments.

Luckily in Canada you can’t easily walk from your negative equity house like they could in the States which as I said a few times is what lead to banks flooding the market with cheap foreclosed-on houses.

Make your payments people. If you have to clean toilets to do it and your wife does too, well do it. Make your payments.

The Canadian economy and house prices are counting on you!

#9 roial1 on 08.20.09 at 11:30 pm

Verification from an other source for Garth’s “truth”

#10 Coho on 08.20.09 at 11:33 pm

Gee how things have changed. A few decades ago the parents and grandparents of us baby boomers were telling us how hard things were to come by and how tight money was for them. But very soon we’ll be telling our grandchildren how “good” things were for us and try to explain why they’ll face a life of servitude much much worse than even their great great grandparents endured.

“Why couldn’t you stop it grandpa?” the child will say. “Didn’t anyone warn you guys…?”

#11 wetcoaster on 08.20.09 at 11:48 pm

No fear Garth, we have Captain Gordo out here in La La Land about to drop a possible $3 Billion defecit bomb on us in a couple of weeks with a host of layoffs and major service cuts. The fuse is lit, God help us now.

#12 HouseBuster on 08.20.09 at 11:56 pm

#3 I never understood why any city would want to host the Olympics.

#13 Elle on 08.21.09 at 12:34 am

Garth & the Bunch,

What I know, about why our government isn’t stopping
the impending disaster, surrounding the Real Estate Bubble, is not very impressive, really, ……..which is pretty much the same situation with the balls! This site is very enlightening.

I suppose the “powers that be” know what side their bread is buttered on and don’t want to step on any toes or rock the boat (how’s that for a string of cliches?)…….they like their high positions and huge salaries and those massive pensions aren’t too shabby either. They don’t stand up because they don’t want to lose it…………and the Sheeple just smack their collective head, shrug their shoulders and keep running high speed after the carrot on the stick!


#14 Nostradamus Le Mad Vlad on 08.21.09 at 12:46 am

“. . . The government has no balls. Policy-makers including the Bank of Canada and the feds made conscious decisions to inflate our housing market even while yours was taking a dive.”

Allowing that Paulson and Carney worked together at GS, that GS has benefited greatly from the bailouts, Carney dumped a wad of cash into our banks’ laps, doesn’t all this begin to raise red flags for what has since transpired?

IF the policy-makers made those choices, knowing full well in advance people would be caught over a barrel then one should investigate further as to who stands to benefit from all this, as someone obviously will.

The govt. DOES have balls, knew precisely what it was doing then, when Cdns. were focused on what was happening down south, neatly and quietly engineered our own downfall while we weren’t looking. This means that it almost certainly was a pre-planned meltdown all the way along.

If people started to realize the truth in all this, there would be a replay of the French Revolution. The Bilderberg Group, the elite and their associates will be overjoyed at the way this is playing out, and it’s not over by a long shot.

Mass Confusion? YOU BET YER ASS!

“. . . They sanctioned long amortizations and zero downpayments, then dropped interest rates to dust, and have a federal agency which buys all the mortgage risk from the banks and [ transfers it to the taxpayers ].”

The rich are getting extremely wealthy on regular folks’ backs.

“. . . we have mortgages [ given without income verification, financing extended to people without savings ] and legions of new home owners who would be under water if prices declined by just 5%. . . . Canadians are losing it.”

Within the square parens is the cotton candy which all sheeple love — Money For Nothing and Everything Else For Free.

This is where sheeples are letting themselves down, as they get caught up in the glitzy neon lights and that is their freedom of choice.

Do’t bother with research or investigation, start ultra-large (instead of being modest — don’t flaunt something that isn’t mine), and tie oneself to a barnyard mess of muck for the rest of one’s life.

Terrific way to raise a family — no different than being galley slaves on the old Greek and Roman boats.

What of the swine flu drivel? Interesting how all these ‘world-side disasters’ seem to fall nicely into place, like stacks of pancakes. The date of the filing / patent date is also curious. —
“You are off on the filing date. It is not 08/28/2008 it is 08/28/2007 one year earlier! A Much Bigger smoking gun then you thought.”

On Mish’s site yesterday. it said “Manhattan Commercial Real Estate Office Sales Plunge 91%”. Hitting a dead-zone, are we?!

One more, and this is also a good reason for the introduction of this Paranoid Pandemic: “Rep. Bachus: Social Security Could Face Default Within Two Years”, the key word being ‘Could’.
Remember the good ol’ days of yore, when water was plentiful and free? Not any more! —
Coming to a place near YOU! —
The joke of the day for y’all! —
“The United States economy is now out of the emergency room and appears to be on a slow path to recovery.” . . . It is not our view. From where we sit there is no recovery underway…and there never will be one.”

#15 Happy Renter in North Van on 08.21.09 at 12:54 am

Garth – God bless you! First of all, I hope you didn’t say anything bad about the Red Sox or else I will curse you until the Rapture… Second, I’m happy you let our American cousins know things aren’t that different here… just late…

#16 LS on 08.21.09 at 12:55 am

@#2, Who Is your daddy

I’m gonna say you’re ok. With your twenty five thousand _PERCENT_ down payment I don’t think you’ll be foreclosed on.

Here’s ours:
1) 120,000
2) Buy a house in this market, are you insane?!
3) 30
4) Max 10.
5) 0

#17 Onemorething on 08.21.09 at 1:25 am

Roubini weighs in with this summary. Roubini while I like the way he runs the numbers is not keen on exposing the physiological warfare that will occur in my opinion.

* H2 2009 Pick-Up in GDP Growth a Temporary Phenomenon
* Auto Sector Impact Overstated
* A Smaller-than-Expected Boost from Inventories
* Residential Investment to Disappoint
* W-Shaped Impact of Fiscal Stimulus
* No Signs of Consumption Revival
* Weak Outlook for Private Investment
* Consumer Retreat Will Be Structural
* Higher Structural Unemployment
* Less Credit in the Economy
* Corporate Restructuring Will Hit Productive Investment
* Public Sector Will Be a Drag on Growth
* Rebalancing Growth

If you want the real deal use MISH, if you want the skinny with bite especially in RE for Canada, you gotto go GARTH!!!!

#18 Blobby on 08.21.09 at 1:29 am

@#3: quote : “BC now has a 3 billion dollar deficit just from June of this year ”

No you mis-understood. It has a 3 billion dollar loss in revenue.. I.e. it has 3 billion dollar LESS coming in to PAY for its deficit.

Come september there will be more taxes to sort that out. my money is on “socially acceptable” tax hikes like beer, cigs and fuel.

.. Dont see them being stupid enough to raise PST – not with the HST coming.. mind you .. if campbell isnt interested in a new term next time around….

#19 Anon on 08.21.09 at 1:39 am

Regarding RRBs- it is funny that there is such a thing that offers explicitly broken out inflation adjustment by the government. The reason it is funny is because the same government makes sure that such inflation adjustment is taxed as ordinary income. This exposes in plain sight the scam of the whole financial system and our tax system- if you have money, it will be confiscated via inflation, and if you try to compensate for inflation, it will be confiscated via taxes on the difference between the real value and the nominal value. So if you have money, you better spend it… in which case part of it will be confiscated again via sales taxes, property taxes, etc. The whole system is designed to make it impossible for people to be able to retain their savings simply by saving!

#20 confused and a little crazed on 08.21.09 at 2:26 am

#3 crash,

but apparently the Whistler olympic athletes lodge completed on time and on budget. the athletes whistler village looks like a ski lodge. Though the rooms are smaall they are very Posh…so who cares if we are in a defecit for 4 years we will will have the nicest Visitor quarters for 4-6 weeks all paid by the tax payers. I sure the BC patients waiting for their hip/ Knee replacement surgery will be glad to hear his surgery is postponed for another 6 monthes so someone could enjoy the attractive decor. but speaking as an athlete . I rather have massages , chiropractor, hot / cold muscle bathes for aches…anything to help me win and recover. Not nice curtains and color matching furniture .

olympics now is about having “FACE” so sad

#21 Mike (Authentic) on 08.21.09 at 2:38 am

It is interesting that the American’s see what is coming for Canada (economy, RE), but the typical Canadian does not. And where is the investigative Canadian reporter anymore? Would they not love the opportunity to do some real research reporting and make it big in their career?

American’s (I am sure) buy real estate in Canada (like we do there) and it would be interesting to know if they stopped buying it because they see something “we” don’t.


Good tip on the Canada real return bonds Garth.

#22 Steve on 08.21.09 at 2:39 am

Well, Americans shouldn’t be surprised–Canada followed them into Prohibition, too.

#23 Mike (Authentic) on 08.21.09 at 2:48 am

I believe in the Kondratieff Cycle and wondered if we were now out of the Winter winter cycle very early (unlikely, but I had to know) or still in it.

I was listening to Jay Taylor’s financial radio show last night (May 5 rerun) and they had Ian Gordon on (Kondratieff Cycle) and drew a connection between the DOW in the 1930’s and DOW chart today (See below). Also he said on May 5th we would have the DOW go up to about 10,000 before the final crash. Well, the DOW is close to that now.

Look between #1 and #2, it’s that quite close to what the DOW chart looks like today?



#24 JoeCalgary on 08.21.09 at 3:15 am

OK, I’ll play devil’s advocate: when all the central banks of the major western countries were lowering their interest rates, what choice did BoC have? What role did LIBOR play?

#25 nonplused on 08.21.09 at 3:27 am

7pc? To much risk. Folks, it’s time to batton down the hatches and climb in the storm shelter. I wish I knew what to invest in to come out good, but I don’t. Make sure you have what you need to “dry camp” for a year.

Who’s Your Daddy: ask a GM shareholder about your plan.

Crash: dream it’s not just BC but the town, the country, all your neighbors, and their dogs too. Now realize you aren’t dreaming. There’s a bad moon on the rise.

#26 Samantha on 08.21.09 at 3:55 am

“Anyway, here’s the thing they wanted to know: If you guys up there have a real estate bubble, and you saw the disaster that happened to us, why isn’t your government stopping it?”

FWIW, here’s how I would have answered that question:

Gee, probably for the same reasons your government didn’t stop it from happening on your side of the border.

But why repeat it? — Garth

#27 T. J. Fahey on 08.21.09 at 4:28 am

MLS link is to wrong house. Should be: C1662606.

#28 anon09 on 08.21.09 at 4:31 am

Buffett’s false promise

#29 anon09 on 08.21.09 at 6:02 am

Brown’s U.K. Budget Leaves Cuts for Next Government

#30 wjp on 08.21.09 at 6:35 am

“Here are four more words: Canada real return bonds. So far this year, 7.7%.”

Also please note Real Return Bonds in Canada have no deflationary protection, if we run a negative CPI, bonds holders can lose a portion of their principal. Unlike I bonds in the U.S., here you get to participate negatively when the country slips into depression. Not that that can happen here in Canada “We are different”! LMAO…

#31 David Bakody on 08.21.09 at 7:39 am

Interesting ….. A Canadian on Yank TV talking about the economy, you should be honoured Garth. having said that most will not get it anyway, and here in Canada most will not either. Nothing changes, nothing changes. The hawks are waiting for the next round of Greater Fools to think they have found the winning $$$$ plan.

#32 Torquemada on 08.21.09 at 7:51 am

#3 I never understood why any city would want to host the Olympics.

And I never understood why a city that gets no snow would want to host the Winter Olympics.

#33 Bobby G on 08.21.09 at 7:59 am

#34 Mike Hunt on 08.21.09 at 8:08 am


Our government will keep this charade going on for many years to come. The oh-so-cozy system that we have in place in Canada with CMHC, the banks et al make it way too easy to steal from the future to pay for past mistakes and current desires. The best part of this system: the politicians and other PTB don’t have to ask any of us if we agree – they just go ahead and do it and tell us after the fact, if at all… just like any good banana republic would.

Anyone notice how Garth has changed his tune re: the “crash” in Canada? Now he says it will be a 15% to 20% “correction” – hardly much at all given the rampant appreciation we have seen. It seems that even Garth has realized that our PTB have a stranglehold on the levers of control and will do whatever it takes to keep the party going.

This will end badly, just not for many years.

#35 Al on 08.21.09 at 8:22 am

Took a look at the featured house (#27 TJ’s link)

4 Bedrooms
5 Bathrooms


#36 T.O. Bubble Boy on 08.21.09 at 8:25 am

Thanks to T.J. Fahey for posting the right MLS link…

I actually didn’t think that the house in Garth’s link was that bad! While $865k is obviously still beyond what 95% of Canadians would truly qualify for, it’s still infinitely better than the $1.55M house in the pic.

The $865k house is near Yonge & Eglinton (and actually at the low/middle-end of prices for that neighbourhood), and it has 4 beds/4 baths, which is much larger than most of the 3 bdrm / 1-2 bath houses that are typical of Midtown Toronto. Also – the lot is huge for a house in the city! (30×200 ft)

Is it scary that I could see a bidding war on that place?

#37 Herb on 08.21.09 at 8:30 am

#s 3 and 32,

for Olympians (especially local and international committee members) its perks and prestige, for advertisers, builders, politicians and suppliers it’s haydays, for sports fans it’s entertainment. What’s not to like?

Oh, for taxpayers it’s liable to be expensive, but when did they ever count for anything?

#38 jeff gardner on 08.21.09 at 8:35 am

Reading the “I never understood why any city would want to hose the Olympics”, I was reminded of an interesting little tidbit that the Mrs. and I learned during our mini vacay to Lake Placid last winter.

Lake Placid went into debt to prep for the Olympics (twice). Do you know one of the things the gov made them agree to in order to make it a go? They had to turn the Olympic Village into a medium-security Federal prison! It still stands as such today.

Maybe our gov will turn Vancouver’s into low/no income housing for junkies, or perhaps for all those that are buying $1m houses now and will have to run for the hills in 5 years?

#39 conan on 08.21.09 at 8:40 am

Re: 6

How day do dat?

If the Condo is 500 k then 2 years of “interest only ” financing is 30 k @3%.

But because of the miracle of business relationships,
In this case the builder is steering work to a particular lender.

A) The builder will receive a referral commission.

B) The lender will receive a mortgage commission

C) The homebuyer seems to be getting a deal

What is really happening though?

This is a 30 K reduction in the selling price of the condo but it is being disguised as a lending promotion.

No need to blatantly say that condos in this building have lost more value. Instead turn it into a sales promotion .

#40 POL-CAN on 08.21.09 at 8:44 am

Speaking of insanity in home prices in Toronto, here is one just up the street from our current rental.

20 Jan 2009 … C1542576 – C02 – 447 CONCORD AVE,TORONTO, Ontario, Canada – $269900

19 Aug 2009 … C1686925 – C02 – 447 CONCORD AVE, TORONTO, ON – $639000

Yes it was a complete gut. It had to be done as the house was ready to fall over. Yes they did a nice job.

But approx 400 k for less then 8 months work with maybe 150 K in reno expenses? That is insane IMO. Seeing what it was I would not touch this one at even half the current asking.

This market will blow up. There is no question there. It is simply a matter of time.

As someone posted yesterday. Sales and ave/med prices are already sliding down as they do every year due to seasonal factors.

#41 POL-CAN on 08.21.09 at 8:56 am

#2 wrote:

The five tenants could be:

1) combined yearly gross income
2) purchase price of home
3) % downpayment
4) length of amortization
5) consumer debt (including car loans) to income ratio
Ok, I’ll go first. Garth, am I a Greater Fool?

1) 95,000
2) 305,000
3) 25,000
4) 30
5) 0.2

# 16 responded:

I’m gonna say you’re ok. With your twenty five thousand _PERCENT_ down payment I don’t think you’ll be foreclosed on.

Here’s ours:
1) 120,000
2) Buy a house in this market, are you insane?!
3) 30
4) Max 10.
5) 0

So here is my 2 cents based on needing a multi-family house in down town T.O.:

1) 220,000 or more
2) 600,000 to 750,000 – *
3) between 10 and 25
4) 25
5) 0

* – Not until you can get a real house for this amount in the right hood. And so we wait for the inevitable decline.

#42 Art on 08.21.09 at 9:02 am

Great post, right down to the point. From my perspective, it is the economic policy formulated by the government what matters in the long term. I must say I also loved “Shoeless” since it was like putting your money where your mouth is.

I think the Canadian goverment might be just betting on a quick V recovery from US, which would probably help Canada avoid the big foreclosures fiasco. I dont think it is going to happen, though…

#43 Immigration!!!! on 08.21.09 at 9:03 am

What you dont talk about is immigration.
Dont you think you need to take that into consideration Garth? I mean how many freaking immigrants come to this country with pockets full of cash every year?
What about the owners outside canada? A lot of condos are owned by people living outside this country.
Concord projects are a perfect example, 50% of the investors are from china,russia,iran,korea and other coutries.
I would LOVE to see the RE market crash but I just cant see it because the government would keep the rates here if they have to and we will always have immigrants as well as out of country owners.

#44 Calgary Rip off on 08.21.09 at 9:19 am

Hi Garth,

Interesting you should mention massachusetts. Thats a very nice state to live in. The cost of housing is ridiculous, though, compared to Texas. Again the Detroit argument though, why would you want to live somewhere just because it is cheap?

Some of the readers here may think all Americans are idiots. It is important to realize that each geographical region of the USA is very different. The northeast mentality is very very similar to Canada’s. You do not see the ignorance that is the mainstream in the south. Remember the revolutionary war? Those attitudes are still present, just quieter. So most of the idiots are based in the southern states, not the northern ones(look at 2 elections ago for evidence-the last one they got it right). Its amazing that the USA hasnt split into maybe four parts, with the west coast being one part, the inner part being #2, the northeast, and everything else on the east coast below washington d.c.

The USA really isnt relevant to Canada other than the trade links. Its another world. Who cares what happens down there anyways?

It looks like your blog is taking effect on the mls for Calgary. The prices are starting to come down hard. Still overpriced though. Who wants to pay $300K for a condo? That’s so unrealistic. Even so the mentality of what is acceptable and worthwhile is changing. It will be a dream if the “alberta advantage” returns when jobs were decent paying and housing was cheap. As for now it remains a live circus.

What’s with this>”The Canadian economy and house prices are counting on you!”, Shawn Allen. Shawn do you support housing prices that are a rip off? Would you support $5/litre gas? Your post makes no sense. Support production and consumerism to be a cog in the machine. As my wife says, if everybody were like me, the economy would crash. So be it. I wasnt born to mindlessly consume.

#45 miketheengineer on 08.21.09 at 9:25 am

Garth et al:

I was looking at the MLS for the city of Chatham, in Southern Ontario. Modest 3 bedroom homes about 100k or less. Regular city lots, etc. I don’t think crime is a big issue there.

Guess what, tons of selection too. GTA is like a big dart board, with Toronto being the center, red. The cities outside Toronto will go down first. St. Thomas, Chatham, Windsor, etc. These places are getting hit hard now. The ripple effect will hit us soon….depending on what happens in the USA. Sooner or later, GTA homes will go down. I bet a Tim’s large double double on it. How much depends on:

Swine Flu Crisis (real or fake)
US Dollar – Devaluation.
Terrorist activity

We are at the mercy of the USA…..but Obama will save us all, not to worry.

#46 pbrasseur on 08.21.09 at 9:38 am

Seems that despite the BoC and the government best efforts Canadian real estate has peaked, this time probably for good:

#47 JeffinPickering on 08.21.09 at 9:53 am

How many immigrants come to this country with pockets full of cash every year?

Not that many, and certainly nowhere near enough to prop up or save the economy.
As for owners outside of Canada, what bearing does that have? It doesn’t mean their properties can’t plummet here.

And as for the rate, the BoC can keep prime down all the want. It will cease to have any bearing on mortgage rates. The evidence is already there – prime is already detached. We got a mortgage last year for prime minus .5. You don’t hear that now – it’s now 4.5-5.5%, despite the prime lending rate hovering around 2.25%.

#48 Eduardo on 08.21.09 at 9:59 am

Hey Calgary ripoff,

I just sold my condo above list for close to 300k for 930 sqft in less than 14 days so somebody wants them.

The difference between Calgary/Alberta and other areas is that jobs are coming back here when NG goes back up from 7 year lows and when oil hits 100$.

#49 rory on 08.21.09 at 10:04 am

For your reading pleasure titled “The Crime of Big Government”.

#50 Devil's Advocate on 08.21.09 at 10:19 am

In the US there has always been a reluctance to let banks become too big. A bank that becomes too big becomes too powerful. US banking legislation tends to follow the line of thought of Thomas Jefferson who said;

“I sincerely believe… that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.” –Thomas Jefferson

“I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.” Thomas Jefferson

“I own it to be my opinion, that good will arise from the destruction of our credit. I see nothing else which can restrain our disposition to luxury, and to the change of those manners which alone can preserve republican government. As it is impossible to prevent credit, the best way would be to cure its ill effects by giving an instantaneous recovery to the creditor. This would be reducing purchases on credit to purchases for ready money. A man would then see a prison painted on everything he wished, but had not ready money to pay for.” Thomas Jefferson

Yet US banks found way to become, effectively, one large banking institution through the selling of notes of debt consolidated and sold to one further up. It did not matter to the bank whether the borrower could repay the loan or not, it would soon not be their problem as they sold the assets to another larger institution which was not so interested in the repayment of the debt as the enslavement of the indebted. A pusher wants you addicted so you then become dependant upon them. It is about future profits… it is about control. What they had was a Ponzi Scheme with a select few large institutions at the top and many, many banks below feeding them the product (consumer debt) which would be collateralized and sold in the financial markets. We can all see this clearly now. Yet, as clearly as we see the mechanics, we seem blind to where it leads – the giving up of our liberties and enslavement of our peoples through a life of servitude in perpetual debt.

The failure of the US banking system is a consequence of what they tried to avoid – too large to fail institutions with which their enormous size came enormous power.

Banks are business enterprises, their product is debt. The more people the banks can sell their product to (lending) the higher their profits. It is not different in Canada than the US other than in Canada we have a select few banks rather than the US system of limiting size.

If you don’t think banks have undue influence on government, even in Canada where banking legislation is perceived to be well placed in the public interest, you might wish to investigate further. Canadian banks are very much multinational and very large in size. They (Canadian Banks) are no less profit driven than their US counterparts.

Thomas Jefferson died in debt. He was against slavery although he did own slaves. He would have freed his slaves but could not as the bank held a chattel on them and their slavery was of his own to the bank.

What is the root cause of our economic woes? Banks, not government. Banks are our governments and banks do not and will not have such a social conscience as you might believe… not in the US and not in Canada. The focus of the banking industry is not your welfare. The focus of the banking industry is not even to provide you with some valuable product or service today. The focus of the banking industry is your enslavement through debt to them upon which you forfeit your liberties and the fruits of your labour long into the future.

“We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds…[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers… And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]… till the bulk of society is reduced to be mere automatons of misery… And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.” Thomas Jefferson

#51 Devil's Advocate on 08.21.09 at 10:24 am

Watch the movie “The International” entertaining and thought provoking.

#52 Devil's Advocate on 08.21.09 at 10:45 am

In my Kelowna neighbourhood a typical 3 to 4 bedroom home built after 1980 of 2,000 to 3,000 square feet;

IN 2003
Was originally listed for a median $327,450
Subsequently reduced to a median $327,450
Sold for a median $320,500
After a median 39 days on the market

Was originally listed for a median $639,900
Subsequently reduced to a median $599,900
Sold for a median $582,500
After a median 66 days on the market

Was originally listed for a median $509,900
Subsequently reduced to a median $489,900
Sold for a median $480,000
After a median 65 days on the market

These numbers are consistent with what we have experienced in our own home. Bull market? I don’t think so.

The alarming thing is we have seen a 17.59% drop in values in the last 12 months despite the Bull claims that the recession is over. Even more alarming is, clearly the lack of economic fundamentals indicates to all but the blindest that this thing is not yet over… it has only just begun.

#53 andrew black on 08.21.09 at 10:46 am

I have to say that the quality of the non-real-estate investment advice one can get on this blog is no different than what a real-estate agent would tell you when one inquire about a listing. Absolutely disconnected from the reality.

I don’t know want Garth is smoking, but the rate for Canadian real return bonds currently sits at 1.8% and the highest in the last 12 months was 2.6%. – As the name says, the rate is linked to CPI and the deflation would force this rate even lower.

Regarding the preferred shares which have been recommended many times here, what one needs to understand that they are still socks and the market volatility these days is higher then ever. As an example, BMO.PR.J – one of Bank of Montreal’s preferred issue, pays 28.1 cents dividend every 3 months. It currently sells at $21.46 and the low in the last 12 months was $13.25. So, if you follow the advice and put your money in this stock you can discover after a while that you made indeed a 5% return from dividends but in the same time you have lost half of the capital.

Of course this cannot happen because, as real-estate value, stocks value can only go up :)

If you buy bonds solely for the yield, you deserve to be confused and short of capital. Perferreds enjoy not only a high yield but favourable tax treatment. Investors normally buy them for income, not capital gains, thus short-term equity price fluctuations are meaningless for many. Any stock investment can always be married with a call or put option to eliminate capital losses. You sound like you get your advice from the financial guy in the booth in the grocery store. Good luck. — Garth

#54 Future Expatriate on 08.21.09 at 11:02 am

#8 – Negative equity IS a disaster. People stop remodeling, buying furniture. Big box home stores go out of business. Ditto contractors and construction workers. Negative equity in homes spreads throughout all segments of the economy. People who are poor AND also house-poor start saving and quit spending.

#55 Money Matters Toronto » Toronto Real Estate Bubble on 08.21.09 at 11:04 am

[…] his latest rant here. August 21st, 2009 | Category: Uncategorized | Leave a […]

#56 Future Expatriate on 08.21.09 at 11:04 am

#12 – That’s easy to answer. Graft and corruption. A very few become even more wealthy while the rest of the population get the shaft and pay the bill. Welcome to Capitalism 101. Feudalism 101-110 required precourse.

#57 POL-CAN on 08.21.09 at 11:10 am

#45 miketheengineer

I was lucky to get out of the market in Chatham in the summer of 2007.

Had to sell due to a pending divorce. The house was at the higher end of the market which was almost dead at the time. We listed in Nov of 2006 for 325 K factoring in a 10K discount and RE fees. We did not sell until June 2007 at 295 K. After all the fees we were left with a nice 40 K hair cut after all expenses. All my work (complete reno) and all the money invested in materials over 3 years was a waste. Still, I feel lucky that we were able to sell at all.

Windsor was already hurting at the time. Nothing was selling. Things have gotten much worse down there in the last year. My former in-laws have been trying to sell for almost a year and are not hopefull.

BTW… I heard on the radio yesterday that the un-employment number in toronto is now at 11.5 %. Just like the storm/tornado, the housing crash will eventually arrive here as well.

#58 ???? on 08.21.09 at 11:15 am

seems like Garth only replies to people who offend him:)
I can’t be rude but I will try and ask you again Garth
Can you write a little about immigration? What effect do they have on the market? what about the rich people in the world that own property here? They do not have mortgages they dont care about the rates!!!!
Has anyone checked the toronto RE market latley? Condos sell like condoms in days, hell they sell faster than condoms…. People are buying like crazy.
I looked at a few places 3 months ago that were selling for 260-270 and now same units are selling for 300-310 this is insane. I am getting the feeling that I will never be able to own a property because I have been sitting on my ass waiting for a correction that might never happen.

Immigration’s impact on Canadian real estate values is about nil. It amounts to 0.625% of the population annually. As for buying now, go ahead. We’ll watch with interest. –Garth

#59 Cam on 08.21.09 at 11:21 am

What incentive do Canadian residential real estate lenders have to limit their credit risk on mortgages? CMHC bears the downside risk. Lenders are getting great spreads over prime or GoC’s.

If the lenders have to pay into a CMHC contingency fund similarily to how US banks pay into FDIC, then I can understand at a certain level of loss, the banks will bear risk through increased premiums to CMHC. Otherwise, I don’t understand why they’d stop pushing the paper.

I haven’t had many bartenders or blackjack dealers cut me off. The more I drink or gamble, the more they make. They bear very little downside risk. I get the hangover or the loan shark. The business the banks are in with residential lending in Canada is distastefully analagous to bartenders & dealers.

#60 Got A Watch on 08.21.09 at 11:21 am

In the future, I think the immigrants will be going, not coming. They will be leaving Canada, to return to their origin countries, where the economic opportunity will be.

There will be no point coming to Canada, where the taxes will be sky high and the opportunity low. This nation faces years of structural decay. Which is natural after years of over-exuberant expansion, but fatal to a “consumer” culture that run on constant “growth”.

#61 R on 08.21.09 at 11:28 am

I have said it before and I will say it again. Walmart and Canadian Tire are going to be the last employers standing. Get your resume’ in now before all the jobs are gone. Congratulations to all the vultures out there who have the smarts to circle and wait. I am happy to say I’m part of the flock. In a few short years all the sheeple who bought overpriced crap with cheap money are going to be good eating!

#62 andrew black on 08.21.09 at 11:47 am


You are trying to fool people again :)

Assuming that a bond issuer doesn’t get the rating changed, the value of the bond increases with 1$ when BoC rates go down 1%. In your case, we need to assume that BoC drop the rates more than 5.9% from January to date.

Trying to hedge a long stock position using put options is tricky as well. First of all, nobody sells options for preferred share in Canada. The cost is usually high – for our example, considering the regular share not the preferred one, it would be $4.1 per share for the next 5 months, which means about 2% per month. Remember that most of the hedge funds lost a lot of money this year.

I couldn’t say that DCT – dividend tax credit – is not something good to have but is not very different then the new home renovation tax credit. The benefits and the shortcomings have been discussed here in the past. It also applies only to Canadian stocks.

I have a degree in economics and more then 25 years of investment experience and I wouldn’t mind reviewing your postings before they are published. Just to make sure the numbers make sense.

Based on the above comments, that’s a sobering offer. I’ll pass, thank you. — Garth

#63 PTDBD on 08.21.09 at 11:53 am

Up! Up! Up!
– RECORD increase in existing home sales in States – up 7.2% since last year

– condo sales up 48% in southen Florida
– single family homes up 56%

Those are foreclosures being vultched. Do your homework. — Garth

#64 My_View on 08.21.09 at 11:57 am

Garth has always maintained his stance on a 10-20% correction, those who have followed this blog would know. It’s the blog dogs who write the “Crash”, although I can see why the followers would think that when things like “this will not end well” is always written. For those who follow Mr. Ripley’s site (very good analysis IMO), there was a correction late winter early spring of 2009. You know the time when squirrely talk was everywhere, the sky is falling, and we are all doomed. Toronto for that matter was down 14%, Vancouver, Edmonton and Calgary were down almost 20%, so did Garth say “release the hounds”?, no and I don’t think Garth will ever say that for that matter. It was a short correction but never the less a correction and many people took advantage. So will there be another CORRECTION? Yes, but no crash. The states market has hit bottom, the market will be turning around by 2010 IMHO. Although others would argue I’m nuts, blah, blah, and blah, whatever. The $’s that was sitting on the sidelines is moving its way back in, many deals to be had.

The government has no balls. I love it; Garth has the biggest sack on the hill, IMHO!

#65 Devil's Advocate on 08.21.09 at 12:07 pm

I am afraid there is no palatable way out of this current economy and the wretched manner in which people have been lured into riveting their future liberties to the chain of public and private debt. Unfortunately, if it is true that history repeats itself, the mechanism by which we will release ourselves from such mass servitude will come at a high cost of collateral damage.

Alarming truths are being learned, but only by a few. By far we are, or better put “have” been, led down the garden path by bait that is so addictive once consumed we blindly seek nothing but more of it, not clear of mind to what we once were, never to be again “liberated”. Only a dramatic social event of global proportions will be so strong as to tip the scales. We, such a complacent people, will avoid such an event as the collateral damage so clearly scares us into continued servitude and submission if not for our own safety for those we love. Yet our children’s futures will be not of their own making but enslavement by our doing – or not as the case may be. They are borne into a life of servitude with no hope of liberation by way of anything less than the spilling of blood as has always been the way.

I am at the point of giving up. My warnings are received as nothing more than lunatic rhetoric. That or they are understood as plausible evaluations we simply do not want to accept. But in our denial we sail down a heading with a strong wind to our advantage but a destination unknown or at least denied. The destination is not one we might otherwise choose but for our complacency that we would rather take the easy route than the one which requires more manning of the sails. A ship leaving port without a destination, ultimately, has one just as does the ship with a carefully planned route.

Much like the saying “When I go I want to go like my grandfather did, peacefully in my sleep, not like the passengers in the car he was driving at the time.” I long for such sleep.

Today’s news: the federal deficit was $5 billion in June. That’s $60 billion on an annual basis – 50% higher than Canada’s worst previous showing during the early Nineties. In other words, this is unprecedented. The last deficit crisis gave us the GST and 20% interest rates. Buckle up. — Garth

#66 Keith in Calgary on 08.21.09 at 12:10 pm

Had a client at work yesterday tell me he finally sold his Penticton BC property after 4 price reductions and having it listed on the market for 2.5 years !!!

The look of exasperation and sense of relief in his words and on his face was most noticeable.

#67 Absman on 08.21.09 at 12:10 pm

As I read posts each day, I hear a lot of negativity about our country and econonmy but all the negative outcomes are things that may happen in 2 to 5 years if im not mistaken.

What do you think may happen to Canada’s economy, especially the western provinces in the next few months leading to December. Is it going to be the same old “our economy is recovering” talk while houses sell for rediculous prices or are there actually going to be some serious results showing that we are in a downward spiral. Any comments because Im confused.

#68 Calgary Rip off on 08.21.09 at 12:12 pm

Garth looks like some of your readers are overconfident in their Calgary mls listings.

It is true that people want to buy property here in Calgary.

Many just dont have the funds or the stupidity to do so.

The current mls stats reflect a dropping market when the mls listings come up on the map of Calgary.

$300K for a condo? Id rather be dead.

#69 Gerry on 08.21.09 at 12:19 pm

Garth’s stated year to date return for Real Return Bonds is right on (if not a bit low). Just take a look at iShares Real Return index fund (XRB.TO). Closed on Jan 2, 2009 at $18.16, closed yesterday at $19.72. A gain of $1.56. Add to that a cash distribution of $0.23434 on June 25 and you could have made $1.79434 for every $18.16 you invested on Jan 2. That’s a YTD return of 9.88%. Will it continue at that rate? Probably not. But people have certainly been driving the price of real return bonds up this year.

#70 prairiegopher on 08.21.09 at 12:36 pm

Here’s another example of people being suckered into taking on debt

It doesn’t matter which side of the border you live on, you need to keep your hand over your butt!

#71 Devil's Advocate on 08.21.09 at 12:38 pm

Seems to me the “Vultures” are those who have not now but anxiously wait to accumulate that which others will loose. I don’t see substance backing most of their comment but plenty of hope not unlike that of waiting to win a lottery. They will not be giving those homes away for free.

When the market corrects as they so anxiously await, I suspect they too will suffer such economic harm that they will not be so interested in such material things. They are not so unlike those they criticize.

#72 The 'VULTURE' on 08.21.09 at 12:39 pm

More Money Than Brains

This is a BUBBLE stoopid.

Hardware floors..check

Granite counter tops….check

2 feet between the houses (what can grow between the houses, gravel perhaps?)…check

Downward slope driveway (try getting out of the garage in the winter!)…check

Windows that look out onto the neighbors brick wall 2 feet away (better get some thick drapes..nice!)…check

30 foot wide property with no front yard (no swingset in the backyard for the kiddies either..air rights you know)…check

Ceasar stones (gotta have em’)…check

Crown moldings (makes me feel like Donald Trump)…check

Small patch of brown and yellow grass for a front yard (do I cut the grass with a pair of scissors or do I let my dog do the chewing)…check

I am sold!

Here is my cheque …

…because my banker has more money than brains to give me this kind of loot.

#73 The Other David on 08.21.09 at 12:42 pm

Think you have mortgage insurance? think again

TD bank esp

#74 lgre on 08.21.09 at 12:46 pm

48 Eduardo on 08.21.09 at 9:59 am

buying a cond has to be the poorest RE purchase anyone can make. I just rented a 1+den with 2 spots down at lakeshore area for $1050/ incl all utilities.

Now, if the same condo was bought and paid for in would still cost me around $700/m with condo fees and prop taxes..not a bright investment, include the mortgage and $1700+…condo fees are through roof. There is a condo near a friends, a 3 bdrm is worth $100k due to condos fees being $800+/m..poor purchase.

#75 JET on 08.21.09 at 12:46 pm

I like the subtle change from “Mass” to “Mass.” – very clever!

Lots of pumping going on today… a sure indication a turn is about to happen.

#76 Daystar on 08.21.09 at 12:51 pm

The Cons just ran up a 5 billion dollar deficit in June… while in July, their pick Mark Carney tells us in July that the recession is over a half a month into a 3rd quarter with 2.5 months of numbers yet to be written in stone.

With this kind of governmental forcasting and ballooned spending in the face of revenue declines, its easy to say that these idiots have no clue as to what they are friggin’ doing. :-(

#77 andrew black on 08.21.09 at 12:52 pm

#69 Gerry … Canada real return bonds is a security issued by the Bank of Canada while XRB.TO is a mutual fund managed by Barclays PLC and traded on TSE.

Weighted average term of the bonds in the fund is 21 years – underling bonds have been issued by the BoC in 1988.

I believe that the discussion is about where one can invest today and not what people could have done 21 years ago.

#78 David on 08.21.09 at 12:57 pm

Shawn Allen has it wrong about negative equity and the automobile analogy is at best at poor one. Sure keep paying increasing amounts on an asset going down in value. It is unlikely that many people will stay in those same homes for the next 35 to 40 years which is what they signed up when they made their mortgage agreement. Keep kicking the can down the road. Even a mild price correction will create a legion of unhappy home debtors stuck in the negative equity trap unable to sell their homes without experiencing substantial financial losses. If you have any doubts look at the statistics for US cities like Las Vegas and Fort Mers. Worse yet, those diligent enough to continue paying off their bubble priced mortgages and wishing to sell are having to price their homes in direct competition with Banks REO’s and a huge shadow inventory of surplus homes lingering haplessly on some bank’s balance sheet as a good asset.

#79 conan on 08.21.09 at 12:58 pm

20 % interest rates in any type of short order would fry the economy.

My gut feeling is we will not see that forever ever ever.

You guys google jk wedding yet?

What do you think of it.

#80 Iguana on 08.21.09 at 1:05 pm

But people have certainly been driving the price of real return bonds up this year.

Great, but now, is there a bear real return index fund out there?


#81 Samantha on 08.21.09 at 1:08 pm

Re #26 and “But why repeat it? – Garth”

It should have never been repeated, ever.

I had originally written more re my post #26 but deleted it.

Much of what I wanted to say has been quite eloquently stated in #14 by Nostradamus Le Mad Vlad, particularly in paragraphs 2,3,4 and 5.

Our real estate bubble and creative financing doesn’t make sense to any reasonable person. However, I’ll bet it makes perfect sense to those who will be the ultimate beneficiaries of this era. I believe that holds true for the US, UK and anywhere else this housing bubble has popped up (or should I say – propped up).

For many years, I have slowly sifted through information, with particular interest as to who benefits from certain events. In short, I follow the money and see who profits. I watch the moves made on this global chessboard and study the alliances, strategies and outcomes that unfold, all of them fueled by the love of money and power.

Over time, I stopped asking why our government allows it. Why destroy manufacturing? Why destroy the middle income earners and worsen the condition of low income people? Why allow large corporations to develop a stranglehold over consumers? Why destroy what Canada is and more importantly, what this incredible Country can become?

So now, I do what I can to counteract what is: Shop for locally, regionally, and/or nationally made products and encourage others to do the same. Follow municipal politics to understand issues and voice concerns or suggestions. Help others.

These actions of one person don’t seem like much, but together we can effect change – peaceful, positive change. If we act responsibly and give of our time to become involved at a local political level (like cleaning up our own back yard first), it could change everything.

On the other hand, if we do nothing, nothing will change. I refuse to give up doing my small part. I hope others continue as well.

Hope this made sense, Garth – too little sleep and too much pain these days – doing the isotope tango. Apologies if I offended earlier.

No offence at all. Hang tough. We are with you. — Garth

#82 dd on 08.21.09 at 1:11 pm

It is funny. You see the lofty prices making the news everyday, the media pushing the “recovery” story to beat the band, and consumers actually believing that this is the bottom of the cycle and thinking “the house prices can go the way of the US … it is different here.”

YA sure it is.

#83 David on 08.21.09 at 1:11 pm

Further reading on the perils of the negative equity trap.

#84 robert on 08.21.09 at 1:12 pm

#45 Mike…
I am familiar with this market (being a recent emigrant of Chatham Kent) and the reason housing is inexpensive is simple. Lackofjobitis. Unfortunately, as you point out, this malaise is spreading eastward with great rapidity. London now has the highest unnemployment rate for a city its size in Canada. My wife was a casualty in January and has not been able to find work since. Neither of my teenagers could find summer jobs either – too much competition from unemployed adults. The only business booming here is General Dynamics. They make the light armoured vehicles that are in such demand over in Afghanistan.

#85 dd on 08.21.09 at 1:20 pm

#20 confused

“apparently the Whistler olympic athletes lodge completed on time and on budget”

And I hear that the Olympic might be on budget. Of course don’t count the Sea-to-Sky hiway and the BC “volunteers” in the official expenses.

#86 living on th edge on 08.21.09 at 1:21 pm

Just heard on the morning Vancouver Island CBC radio that in October there will be an influx of Chinese tourists to Vancouver. Not to come and see all of our wonderful natural beauty but to check out the “cheap” real estate, which apparently is more affordable than in big city China. Guess if I had trillons of dollars extra to spend, the west coast would be my choice too.

#87 dd on 08.21.09 at 1:25 pm

#24 JoeCalgary

…what choice did BoC have?…

None, however, how about upping the downpayment for housing and restricting credit? How about Keeping the GST at 7% until we paid the total debt off. How about looking 20 years in the future and dealing with the most important question facing Canadians … demographics.

#88 dd on 08.21.09 at 1:27 pm


…Up! Up! Up! RECORD increase in existing home sales in States – up 7.2% since last year…

I have heard in a typical recovery, at this point in time, sales should have be up 20%. Stop with the BS buddy.

#89 Dorf on 08.21.09 at 1:29 pm

Wow ! Love this site !
So this is where they have been hiding all the smart people. I don’t have anything to add, just lots to read, thank you.

BTW: My home is currently assessed/valued at 247% of my purchase price of 12 years ago. Improvements have not been considered in this valuation, just the market. I live in a rural area that is nice, but very few properties are moving and lots are for sale. Much cheaper than in the city.

Am I really being pessimistic thinking it is all artificial ?
If the prices are good, why aren’t the other properties selling at this valuation ?

If I thought I could get my current valuation as a sale price for my home, I’d be out tonight and you can keep all my stuff too.

#90 dd on 08.21.09 at 1:30 pm

#60 Got A Watch o

…the opportunity low…

You migh have a point, however, we will be the commodity basket to the growing world. Oil, food, potash, water, copper, ….

#91 kitchener1 on 08.21.09 at 1:40 pm

RE is all about market sentiment and emotions, thats the problem with investing in it. When the tide turns its going to be a long crash.

As for immigration, it will not drive the RE market, nor has it ever. Sure there are a few isolated cases but its not a market dynamic in anyway.

#92 Peter on 08.21.09 at 1:59 pm

$1,555,000. 30 by 103. Toronto.
4 bedrooms.

Bedroom 4 Second level 2.90 m x 2.82 m

It is not bedroom!
It is ward in jail!

only in Canada this jail ward is called “bedroom”

#93 Jmack on 08.21.09 at 2:01 pm

Gordo misses the deficit Numer by a mere 2.6 billion dollars….from 450 million max to 3billion…..slight miscalculation….just slight. Amazing how 7 years of boom money and cut services savings just evaporates… try blaming it on the NDP this time.

#94 VOODOO on 08.21.09 at 2:01 pm
Garth here’s one for your link–Mexico on track or already in a depression

#95 Men With Hats on 08.21.09 at 2:16 pm

“You can get much farther with a kind word and a gun than you can with a kind word alone.”

Al Capone

#96 Coho on 08.21.09 at 2:33 pm

Devil’s Advocate,

Great posts!

#13 Elle,

I believe “the powers that be” that most people refer to are not the visibly rich and affluent nor political, corporate, financial, etc leaders. A more accurate description is those which are pulling the strings behind the scenes whose power controls central banks, governments, corporations, education system and all aspects of our society which in turn greatly influences how we “live”. No one butters their bread, rather they are the ones that do the buttering, the conditioning and programming of the masses to suit their hidden agenda.

Going with the flow and using “common sense” (herd mentality) can be dangerous to one’s wellbeing whether it is financial, physical, emotional, or spiritual. It takes a great deal of effort (a strong will) to swim against the ever blackening waters of society.

#97 steven rowlandson on 08.21.09 at 2:53 pm

Hello Garth.
$1,555,000. 30 by 103. Toronto.
It looks like a $45,000.00 house to me with a bit of stone work to jazz it up a bit.
Given the existing list price and using a responsible approach to buying such a property I would have to earn $ 518,333.00 per year and given a 2000 hour work year get paid $259.17 per hour. Also I would have to come up with a $388,750.00 down payment and the balance financed over 25 years.
To do this I would have to go from a pre tax profit of $11.00 hour to getting $259.17 per hour.

Frankly I don’t think this is going to happen even if Prime Minister Stephen Harper stepped aside and gave me his job.
Even with the prime ministers salery I still couldn’t buy such a house at least not with out cheating and then maybe.
Is canada’s real estate market an over inflated bubble
based on lunatic price expectations?
Absolutely right it is!


#98 Gord In Vancouver on 08.21.09 at 2:56 pm

UBS to Meet Canadian Tax Agency to Discuss Accounts

#99 Elle on 08.21.09 at 3:12 pm

What?? Same post – three differnt names!

Now I AM, confused!!

Great post # 73 – Other David
RE: Mortgage Insurance

Canada Life, one of the biggest, is the Underwriter!
What a rip off! Take a look if you’re considering it.

#100 D from London, ON on 08.21.09 at 3:12 pm

#84 – Robert

London has one of the highest unemployment rates in Canada, and it is getting worse. You are correct about jobs in the city – I commute eastwards now to my current job and I believe it is due to the shortage of jobs the farther west in Ontario you go (as I have a very marketable skill set). Head west down ‘automotive alley’ and see all of the plant closures down here.

I find that there are 3 groups of people in London right now (probably like everywhere else in Canada these days):

1) people who still have the same jobs, and their friends have the same jobs, so everything is A-OK and “hey, what recession”? – “should I be looking to move up to a bigger house right now”? (there is a large MUSH sector in London that remains thus far unaffected by the current economic clusterfuck);

2) people who have lost their jobs, or their friends or spouses or relations have lost their jobs, EI is running out and job postings and/or calls for interviews are non-existent (similar to our friend Mike the Engineer); and

3) people who didn’t work before and have always received some sort of transfer payment, like welfare, disability, pension(s), or were living off savings, etc.

All three of these groups seem to circulate without much intercourse with the other groups.

For Groups 1 and 3 it’s business as usual. For Group 2 things are bad and will start getting much, much worse this winter. Their numbers are growing, and we may even fall into this group soon, through no fault of our own (e.g. downsizing, shut downs, etc.). Resources used by Group 3 are experiencing growing demand by Group 2 and there is not enough resources for the growing demand (e.g. foodbanks).

As a current member of Group 1, I find it difficult to get easily accessible news on Group 2 from the M$M (no surprise…). Why should people in the GTA be aware of what’s going down here when we don’t even get much info and we live here?

#101 Eduardo on 08.21.09 at 3:16 pm

RE 74 Igre: I agree condos are the stupidest thing ever and I would never buy one again. I was a young first time buyer at the time and I didn’t realize how poorly managed those buildings are which is why I sold. If they were managed properly they would be good alternatives but only in inner city environments, condos have no business being outside of core areas.

…But now that I sold, I’m going to buy a house. I need a place to live, I have a prime -0.9% mortgage I can port, I have a down payment and renters. Worst case scenario is that once the central banks start hinting of raising rates and I lock in 10 years at 6% and don’t worry. Problem solved.

#102 Darcy on 08.21.09 at 3:54 pm

Garth for King!

#103 The 'VULTURE' on 08.21.09 at 4:13 pm

Look on the downside…

If you want to have a pool for the kiddies in the back yard and after spending this kind of loot….a used bath tub is a perfect alternative. Not much more room in the backyard then to put a used bath tub and maybe one broken lawn chair. Your dog will not like it but he will be too busy out front chewing on your burnt yellow and brown grass.

Happy home warming pals…

#104 JoeCalgary on 08.21.09 at 4:24 pm

“UBS to Meet Canadian Tax Agency to Discuss Accounts”


Now, if only they’ll open the Schreiber/Airbus accounts for the Germans, too….

#105 Dad was wrong on 08.21.09 at 4:26 pm

Today’s news: the federal deficit was $5 billion in June. That’s $60 billion on an annual basis – 50% higher than Canada’s worst previous showing during the early Nineties. In other words, this is unprecedented. The last deficit crisis gave us the GST and 20% interest rates. Buckle up. — Garth

The other significant news here, as predicted would happen by many, is that govt. tax revenue has decreased $2.7 billion down to $18.2 billion from a year earlier, a drop of around 13%. At the same time spending has gone up a whopping 25% from the same period.

That’s like losing all your overtime hours then deciding to go buy a big TV and have a holiday in Hawaii.

So glad I’m renting right now.

#106 Men With Hats on 08.21.09 at 4:34 pm

I have a degree in economics and more then 25 years of investment experience and I wouldn’t mind reviewing your postings before they are published. Just to make sure the numbers make sense.

Based on the above comments, that’s a sobering offer. I’ll pass, thank you. — Garth

“We don’t need no stinking bodges ! “

#107 JoeCalgary on 08.21.09 at 4:37 pm

To all the swine flu deniers, please consider the surge capacities of emergency depts at many Canadian hospitals, then read this from New Zealand:

“There will be people who die because they were denied access to other treatments.”

#108 john m on 08.21.09 at 4:51 pm

$1,555,000. 30 by 103. Toronto………wow! I spent a good share of my life buying and selling real estate and one rule i always followed was picture the piece of land without a building and estimate the value of the lot add on the value of the building or what you could do with it total those figures and see if you are in the ball park to make a profit——-this is so far out of touch it is beyond belief!What the hell are people thinking?

#109 Subversive on 08.21.09 at 5:17 pm

@ 95 Steven

I’m all for affordable housing, but if you think you should be able to afford to buy a house on $11/hr, get real. Find a way to improve yourself, the country doesn’t owe you anything.

#110 Two-thirds on 08.21.09 at 5:18 pm

Sobering news for those who think China will lift the world out of the hole:

“Aug. 21 (Bloomberg) — China plans to tighten capital requirements for banks, threatening to curb the record lending that’s fueled a 60 percent rally in the nation’s stock market, three people familiar with the matter said.”

More signals pointing to a sharp contraction in the markets as early as September?

This guy has a good discussion on the matter:

#111 TJ on 08.21.09 at 5:19 pm

I am bearish, as is Mr. Turner – but, believe it or not there are some well respected thinkers who have a dimmer view of the next thrust of the fiscal calamity. I read this and told my bud, Chicken Little to get a helmet and start digging the bunker.

Like Garth.

This from Roger Wiegand from WeBeatThe

-Get ruthless in elimination of personal debt. Go through your expenses and check book culling out and stopping as much fluff as possible.
-Own physical gold and silver. If you have a slim budget start with one silver coin and work your way up from there.
-Fill-up the pantry at home. Store some water.
-Keep 30-90 days of cash in your hand in the house.
-Own a generator. The grid is coming apart at age 50, or higher. There is no money for repairs.
-Sell your cars and get a pick-up truck. Pay cash if possible.
-Plant a garden.
-Network with friends and neighbors to help each other. Give to charity to the best of your ability.
-Get out of the stock market except for precious metals shares and trades. Most all paper trades are open to being wrecked by an imploding system.
-Good shorts are major stock markets, retailers, the US Government, any government programs, real estate and its taxes, urban area living, and trusting the general news.

In a word; Yikes.

#112 RM in Oakville on 08.21.09 at 5:45 pm

Garth’s home listing link is hilarious. To wit:

“…Beautifully Crafted Stone & Stucco Exterior…Solid Maple & Glass Door…Granites, Caesar Stones, Hardwoods, Crown Mouldings, Wainscotting…Halogen Pot Lights, Gas Fireplaces & State-Of-The-Art Kitchen…”

In other words, it’ll appeal to the typical bubble-headed, materialistic, highly-leveraged power couple with more debt than brains.

#113 RM in Oakville on 08.21.09 at 6:01 pm

#81 Samantha on 08.21.09 at 1:08 pm

One of the most eloquent and lucid posts I’ve ever seen on here or anywhere, and I couldn’t agree more. Thank you.

#114 Peter Wiener on 08.21.09 at 6:36 pm

# 37 Herb


#115 lgre on 08.21.09 at 7:13 pm

#86 living on th edge on 08.21.09 at 1:21 pm

There must be a lot of stupid Chinese in the world..just shows you that brains aren’t needed to make money..I can think of a dozen places in the world to spend my ‘extra’ money on RE over Vancouver..who comes up with this sh$t?

#116 bcgirl on 08.21.09 at 7:15 pm

Re #81 Thanks Samantha, you said it so well. You’re another reason this is such a great blog.

#117 Nostradamus Le Mad Vlad on 08.21.09 at 7:18 pm

Ergo, it is NOT recommended eating a forkful of pure horseradish without vast, copious quantities of ice-cold liquid to dowse the post-inferno rage.

At lunch today I didn’t, so I thought of England, lay down on the floor in a Japanese restaurant and cried with tears of joy. A stick of dynamite would have been easier to ingest!
“. . . from the financial guy in the booth in the grocery store. Good luck. — Garth” — Possibly the closest version of reality in the lives of GS and JP Morgan I’ve ever encountered. —
#57 POL-CAN on 08.21.09 at 11:10 am — “. . . heard on the radio yesterday that the un-employment number in toronto is now at 11.5 %.” — and — “. . . The last deficit crisis gave us the GST and 20% interest rates. Buckle up. — Garth”

Combined with the second para. from Ron Seymour’s column today in the KDC: “Tourism is in the dumpster this summer, Kelowna’s unemployment rate is near record levels [ close to 12%, not including those who have given up looking altogether ] and those who do have jobs are guarding their pennies as rumors of the recession’s demise seem greatly exaggerated.”

Ron was writing about the effect the HST will have on restaurateurs and other service providers when it comes in next July, just prior to the ‘lympix and Garth chimes in with a report on June’s $5 bln. deficit.

An underlying trend is happening now. #65 Devil’s Advocate on 08.21.09 at 12:07 pm — “I am at the point of giving up. My warnings are received as nothing more than lunatic rhetoric.”

There is a razor’s-edge fine line between genius and utter lunacy. Sheeple have chosen the latter path. As experience is the greatest teacher, let them be to experience it for themselves. To each their own (and their own responsibility, too).

#81 Samantha on 08.21.09 at 1:08 pm — “. . . fueled by the love of money and power.”

Not a Christian, but in the New Testament St. Paul, the architect of modern Christianity clearly states “. . . for the love of money is the root of all evil.”

Money is simply a tool, so it is dependent what people use that particular tool for. A lot of sheeple love that particular tool, ‘tho.

If used within reason, then people would live a content and adequate lifestyle — neither too much nor too little, just enough — and certainly not overboard with clutter.

One thing: Those “behind-the-scenes”, or elites must be investing their moolah in a few good investments, because for all ‘downs’, there has to be the equivalent number of ‘ups’.

Find out what those ‘ups’ are (investments which the masses don’t even look into buying), then buy ‘contrarian’ and one can have a relatively good retirement. Good post.

Has anyone heard how Bill C-6 is doing (it replaces Bills C-51 and C-52 which died when the election was called). Chances are it is aligned with Obama’s new health care plans for the US, which give big pharma (and big oil) much greater control of our lives.
#86 living on th edge on 08.21.09 at 1:21 pm — This is what Nostradamus Jr. was saying all along — North and West Vancouver will be more widely known.

NOT Vancouver / Burnaby / Surrey / Coquitlam, etc. Those will be suburbs of the above.
Look at the lead-in to one of the paras. here (below). —
“Now some elite opinion favors Ben Bernanke’s reappointment, . . .” — The elite have their people in place, and they will do all they can to keep them there.

O/T, but a few days ago I read that scientists believe there are at least 20,000 pieces of space junk — meteorites, comets, etc. — floating around, and have discovered 6,000 of them.

Just need one the size of SkyDome to land exactly at 1600 Pennsylvania Ave. and all the world problems will be solved, ‘coz none of us will be here anyway!
Remember the ‘Bank Holiday’? Try in the next couple of weeks. —
“FDIC’s $13 billion against $220 billion liabilities”

#118 jess on 08.21.09 at 7:19 pm

c.o.d. …but 7 months in advance?
Ofgem, Britain’s energy regulator, yesterday warned Britain’s big six gas and electricity suppliers that it would launch a full investigation unless action was taken to ease new credit restrictions on 250,000 small businesses.

The power companies have told some of these customers that they must pay their energy bills seven months in advance.

#119 dd on 08.21.09 at 7:49 pm

.#108 Two-thirds

…Sobering news for those who think China will lift the world out of the hole …

Short term there is no way they will be able to lift the world out of the hole. Their economy is only 10% of the US (GDP) and they save like there is not tomorrow. If the US doesn’t spend who is China making the goods for?

#120 eddy on 08.21.09 at 7:54 pm

that listing, at full list price has land transfer taxes to miller and dolt on e-gulity of $54,400- now that’s an outrage! that’s for data entry taking a few minutes! Miller has managed to bubble-inflate the value of homes under 500k And shrink the supply of all listings. People who would normally sell and upgrade can save a bundle staying put and doing additions. why feed the pigs?

#121 X on 08.21.09 at 7:56 pm

Funny how during the bubble the TV series about flipping homes, and reno’s were on all the time.

Recession times now call for an evening of ‘Til Debt do us part’.


#122 jess on 08.21.09 at 7:58 pm

Fears of widespread fraud on the mortgage books of Britain’s high-street lenders emerged after Chelsea building society today admitted that it had uncovered fraud of up to £41m.

“There is a significant fraud and professional negligence problem in most lenders’ loan books.

“What is different about the current wave is that the full extent of the problem is probably not known by many lenders, as in many instances the accounts are still performing and interest rates are low.

“In many cases the properties are unlawfully tenanted and the rent is being used to service the borrowing. The likelihood is, however, that these accounts will default at some stage in the future, particularly if interest rates rise.”

#123 john m on 08.21.09 at 8:16 pm

110 RM in Oakville on 08.21.09 at 5:45 pm

Garth’s home listing link is hilarious. To wit<<<<<<<<<<<looks like a previous fixer upper with a lot of cosmetics to me,sitting on a piece of dirt that probably is non-conforming

#124 Herb on 08.21.09 at 9:06 pm

Men With Hats @ 104,

your spelling is getting atrocious: it’s “steenking badges”!

#125 Joshua on 08.21.09 at 9:10 pm

Does anyone have any predictions about the RE market in calgary come september, October, November. I have a large downpayment to put on a house but am still cautious that the price of houses will drop. I would really like to hear someones point of view on this matter.

Someone let me know to comfort my mind. Garth…anything?

#126 Jonathan on 08.21.09 at 9:14 pm

You could invest in a REIT.. they pay 9% plus or minus the capital gain. LOL

#127 Jonathan on 08.21.09 at 9:17 pm

#117 dd

China’s nominal GDP is more like 35% the US economy (not 10%)… and in terms of PPP (purchasing power parity) it is more like 75% of the US economy.

#128 Peter Wiener on 08.21.09 at 9:18 pm

# 63 PTDBD

Are you simple?

The increases are large because the comparables numbers from the standstill market of last year were so low. The % increase is large because of foreclosures and short sales which were finally approved after months in the pipeline, the $ 8,000 credit for home buyers, the return of 3% NHA mortgages and an increase in affordability. IN ABSOLUTE TERMS THE SALES ARE NOWHERE NEAR THE PEAK MONTHLY TRANSACTION NUMBERS. It is the PERCENTAGE CHANGE that may be a record that you are refering to. I guess you swallowed the spin. Do a little research and understand what it is you are trying to report here, please.

#129 Peter Wiener on 08.21.09 at 9:20 pm

in # 122 re # 63 PTBDB

should read the 3% downpayment NHA mortgages

#130 Peter Wiener on 08.21.09 at 9:28 pm

# 64 My View

Yeah pal, that’s why CALPERS and other big pension funds are WALKING AWAY from their RE investments (both residential and commercial) BY THE BILLIONS – cause they think the markets have hit bottom.

F’ing nonsense, they are giving up because they now know that they are throwing good money after bad and that the projected scenarios (and their attendant cash flows) are fantasy. THEY HAVE NEVER ABANDONED PROJECTS AND WRITTEN THEM OFF EVER BEFORE (they are not trying to save their interests at all) – and certainly not in years where 25% or more of their total assets have evaporated!

Think it might have something to do with where they see the bottom?

Do a little research before you decide to grace us with your opinion.

#131 Peter Wiener on 08.21.09 at 9:43 pm

# 125 Jonathan

source of your outrageous claims?
simply total bs or your opinion otherwise.

#132 Peter Wiener on 08.21.09 at 10:01 pm

# 81 Samantha

Sincerely sorry to learn of your dififculties. Recently a sister (late 40’s) and older buddy (75) both successful recoveries and apparently clear of it now. I don’t dare want to sound trite, but yeah, hang in there. If your post is any indication, we can’t afford to lose good people like you. A prayer tonite for you and your fight.

#133 robert on 08.21.09 at 11:23 pm

#98 D
Bang on with your London employment status classification. I live in amongst group #3 (it’s cheaper) although would not call myself a card carrying member. From my vantage point these folks (all running air conditioners during the coolest summer ever and ordering take-out at least twice a week) are blissfully unaware of the shitstorm coming down the pike. They have no savings, no house and many do not own a car (I’m sure they would if they could get financing or take care of all those demerits). This group is enviable in only one way: their complete ignorance allows them to sleep far better than the other two groups. It must be group #1 members though, who are playing real life monopoly with all the “distressed price” housing on the market in this city. It is impossible to impress on people the difference between cheap housing and cheap financing. With respect to the latter, the enablement of our so-called world class banking system is borderline insane and will have severe consequences for lender and borrower alike. I do not know how low house prices are in Windsor or will get in London (someone posted the other day that POS housing was selling like hotcakes there, but there were also more people killing themselves too) however I have an acquaintance in his 70’s whose father bought houses in Windsor during the Depression for ten cents on the dollar. Interestingly a lot of the vendors were the same smug types as the folks buying this summer thinking they are getting the deal of a life time!

#134 Men With Hats on 08.22.09 at 1:08 am

#122 Herb on 08.21.09 at 9:06 pm

Men With Hats @ 104,

your spelling is getting atrocious: it’s “steenking badges”!

I stand corrected . Thanks teach .

#135 Tony on 08.22.09 at 1:10 am

#2 Who Is Your Daddy?
Preferred shares just like common shares tank when the stock markets fall. Stock market indexes are in for a huge fall as nothing justifies valuations trading at more than double where they should be. The last crash was caused by stock manipulation. Stocks are being manipulated upwards big time to try to squeeze all the short sellers. Insider trading is presently on the sell side by a factor of over 30 to 1.Again when the bear market rally ends preferred shares will be pummeled along with the common.

#136 LB on 08.22.09 at 1:45 am

#81 Samantha

Yes, you are quite right. More people realizing that the current democracy we live in is very imperfect and still evolving, understanding that the best way to continue to improve upon it is by CIRCUMVENTING governments and all large institutions through INDIVIDUAL voice and local action, which is what renders these large organizations REactive rather than PROactive, and propels us closer to a real democracy.This blog, and others like it, are a beginning to that. Thank you for contributing to it, and take care.

#137 cashman on 08.22.09 at 8:51 am

I love this house. Let me see if my math is right. The builder bought the property about 1+ years ago for say $400,000 + closing costs of say $10,000 then proceeds to put another $400,000 into the house=$810,000 builder’s cost. $1,155,000 -810,000 (cost)- 60,000 real estate commission= $285,000 profit! Bring on the suckers, ahem, buyers.

#138 wayne on 08.22.09 at 4:27 pm

Devils Advocate, Excellent posts today! I often enjoy reading them.

#139 wayne on 08.22.09 at 4:33 pm

Why are the condo fees so high in Calgary? We are seeing in the 350-600 range.

#140 Dark Wettler on 08.23.09 at 12:59 pm

Immigration’s impact on Canadian real estate values is about nil. It amounts to 0.625% of the population annually. As for buying now, go ahead. We’ll watch with interest. –Garth

That figure of .625% I assume to be a National average, though I haven’t seen it published myself. Immigration to the US runs just over 1%. Immigration to areas like the Lower Mainland and Okanagan have been running over twice that for several years but are predicted to come down to the national average over the next decade.

There are clearly areas in the country where immigration has had an impact on demand for housing. In the future this may be offset by an aging population and corresponding increase in the mortality rate.

My area in the BC Kootenay region as well as North Sunshine Coast to Mid Coast areas of the province are actually forecast to have net negative population growth going forward, as I’m sure will be the case in many areas of the country.

Curiously, the Squamish-Lillooet region is forecast to have the greatest population growth in BC by a wide margin, over 100% by 2031.

The point is that though immigration has impacted certain regions differently, one cannot assume it will help to put a floor under real estate prices in places like Vancouver in the future.

#141 jwk (nee jwkimba) on 08.25.09 at 10:37 am

#137. I think I saw that exact house in summer 0f 2008. Wife and I were out looking. It was a post-war 2 bed brick bungalow surrounded by McMansions. Loverly interior, stained glass windows, crystal door knobs, original wood, just beautiful. It is not near lawrence, it is closer to 401. you can hear the traffic on Avenue road from yard. It is not near *anything* and you would be driving to buy milk, the paper, groceries, to the park etc. List was 850k. We were amazed/astounded/horrified.

Sad, but not surprised to see the buyer tore it down and rebuilt. But , say 800k + 400k to build. Margin is not that great for builder. Carrying costs must be a killer.

new house looks souless and void to me.

#142 jwk (nee jwkimba) on 08.25.09 at 10:41 am

P.S. we paid 113k cash for a 2bed co-op south of lakeshore in etobicoke. We’ll put in 20k to have it gutted and redone. (reno started on Aug 17th.) If we ever sell it, we’ll do the VTB thing.

We list our downtown condo this week and should clear 150k on it. We plan to sit tight by the lake for a few years and see what happens in the housing market.

1) 105k
2) 113 +20
3) 100%
4) 0
5) 3% (MBA loans)