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Some weeks ago I alluded to an email thread circulating among various Toronto real estate ‘experts’. The term was so loosely defined that it included me.

The editors of a swishy magazine in the uppiest-scale part of the GTA Republic wanted an update on a forecast piece done last winter. So instead of taking us all to a fancy lunch and transcribing our thoughts, they made us do the typing. Welcome to the new media reality.

The subhead chosen for the page was a portion of one of my comments. “So, was I wrong?” I wrote. “Duh. Of course I was wrong. I actually attributed common sense and rational thought to the people of Toronto.” As you know, I was sure the residential real estate market would wither under the weight of unemployment, crushed family finances and recessionary caution. But, no cigar.

Instead the Bank of Canada decided to crash interest rates to nothing, encouraging massive borrowing by people I thought were already hideously indebted. The real estate industry reignited its marketing machine, irresponsibly telling people prices would rise forever and they must buy now while rates were low. And the cash-starved media decided to sacrifice its last ethical goat on the altar of lineage.

As a result, we got news like this week’s. Resales in Toronto surged by 27% last month and prices romped ahead 7.5%. Across the country sales jumped by 18% and home values bounced ahead 11%. So, in August of 2009 a home is officially the most expensive ever.

Over the last couple of weeks I have published details of some of those recent sales. Typically they have been consumed in bidding wars between inexperienced first-time buyers whacked out on money borrowed at the lowest VRM rate and with the longest possible amortization. Won’t bore you with my thoughts once again. But it’s not too hard to see where this is going.

For now I will assume the dunce’s chair in the corner. Go ahead. Hurl your tomatoes and invective. I can take it.

But, my fellow experts, don’t get too damn smug.

So, here’s the article. Right-click and select ‘view image’ to enlarge. Or get glasses. (Or go here.)

text


128 comments ↓

#1 hal smith on 09.15.09 at 10:39 pm

No dunce cap for you Garth. You were spot on until until the government changed the rules in the middle of the game.The great unwinding is coming and the next decade will be a very interesting one and painful for many.

#2 Chris L. on 09.15.09 at 10:42 pm

You’re killing us Garth. I mean, I go around telling everyone to watch their cash and wait and look at the fool I’ve become. I’m waiting, paying down what debt I have and I’m a fool for doing it. Next I’ll be priced out of the market forever and have to binge on debt at a much higher rate :) Different times we live in, I’ll say. It’s not over yet though, lots of time left to keep writing new history. But yeah, you were wrong, we all were. The world no longer works on logic and truth, only perceived logic and truth. It’s a hazy world created by the elite only to appease it’s peasants. By the way, I really love the MSM right now. Have they ditched the “green shoots” lately. I think we’re onto real recovery…yeah that’s the new one. Serve me some more…oh and the recession is over. Okay.

#3 Kurt on 09.15.09 at 11:11 pm

“No man ever lost money by underestimating the intelligence of the American public.” – widely attributed to P.T. Barnum.

#4 FrankInVictoria on 09.15.09 at 11:13 pm

Here is a PDF version, a little easier on the eyes.

http://torontocondos.com/bjl/2009RealEstateRoundtable.pdf

#5 lgre on 09.15.09 at 11:24 pm

“You’re killing us Garth. I mean, I go around telling everyone to watch their cash and wait and look at the fool I’ve become.”

That is your mistake, say nothing..people will do what they want regardless of what happens tomorrow. Immediate gratification is what most look for. I say nothing to noone around me about RE or investing. Let people do what they want and make their own mistakes..at least nobody can blame you for it later.

#6 rp on 09.15.09 at 11:29 pm

Hey in Vancouver sales *doubled* over last year’s admittedly catastrophic number. And look at the stock market – WOW! I mean, companies are losing more and more money and yet their stocks are going higher and higher. Last call for fake wealth! Join the reverse economy, where less contraction equals more growth, debts are assets, and insolvency is big profits!

#7 Planet Janet on 09.15.09 at 11:41 pm

Wrong??? I don’t think so.

As always, timing is the hardest thing to predict.

Just wait for it.

#8 my eyes are old, so is my computer on 09.15.09 at 11:51 pm

Garth, could you post the link to your article; when I right-click the image, there isn’t a ‘view image’.

It would be a great help.. easier than getting out the old magnifying glass lol

#9 Just Janice on 09.16.09 at 12:04 am

If one jumps out of a 100 story window and does not hit the ground by the 75th story, they do not assume that they will avoid death, because if the ground was going to hit them, it would have done so by then. We’re at the 75th story and most everyone has assumed that the ground will not be hit simply because it hasn’t happend yet.

The dollar is heading higher, that’s going to hurt and when the bubble bursts, that’s going to hurt some more.

#10 BAD on 09.16.09 at 12:25 am


Why next economic crisis will be worse

By bailing out all but Lehman, world authorities have created the worst “moral hazard” problem in the history of finance. Knowing that Uncle Sam or Whitehall or the Diet will bail them out, financiers will continue to have every greed-driven incentive to grab for the effortless upfront fees from their reckless behaviour, knowing any cataclysmic losses will be “socialized.”

Enough said…

#11 BobbyV on 09.16.09 at 12:30 am

you may be wrong but eventually you’ll be right …..

The longer the Govt of Canada prolong this bubble, the harder it will fall and it won’t be pretty once it starts unraveling…. The market is being held together right now due to simple supply and demand (Very low supply) which is completely out of the norm.

#12 nonplused on 09.16.09 at 12:31 am

They say in the forecasting business you can forecast “what” or “when”, but never both at the same time. “When” is coming. Probably soon. I don’t know what but I’m thinking it can’t be pretty.

#13 JoeCalgary on 09.16.09 at 12:32 am

“US credit shrinks at Great Depression rate prompting fears of double-dip recession”

“Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation.”

http://www.telegraph.co.uk/finance/financetopics/recession/6190818/US-credit-shrinks-at-Great-Depression-rate-prompting-fears-of-double-dip-recession.html

It’s far from over.

#14 Nostradamus Le Mad Vlad on 09.16.09 at 12:48 am

#129 pjwlk at 7:46 pm — “. . . Saving & investing the difference between renting and owning is the key to success.”

Agreed. If I am ever single, the net amount from selling the home would go into dividend-paying shares (lower tax rates than GICs, CSBs, Annuities, etc.), then rent an apt. / condo.

All I would need is a roof over my head, and in the long run, renting is a better option than owning for a single.
——
For now, maybe you sucked but a forecast is just that — a prediction of when and / or where something might happen.

Choose the Toronto Maple Leafs to win Lord Stanley’s Jug, and you will be a winner, but on an alternate universe!
——
For those that want to focus on RE and mundane stuff like that, please ignore the following. Besides, Garth may delete this anyway.

Remember Bills C-51 and C-52, how they were both re-introduced as Bill C-6 when the CPC won the last election? 10:25 clip of what it entails. — http://smallsizeurl.com/483/ (comment from wrh.com)
“Constitutional lawyer, Shawn Buckley presents the truth about Bill C-6 and the loss of fundamental freedom in Canada if the bill passes.”
——
Mentioned before that there are plenty of things happening which most will never hear of. This is one of them. — http://smallsizeurl.com/482/
“Putin refused to sign off on an Israeli air strike against Iran and . . . refused to take a bribe in gold and Euro currency that was offered to Putin by Netanyahu in return for the Russian Federation’s acquiescence to an Israeli air strike on Iran. . . . Again, folks, remember that the Federal Reserve is BROKE and cannot afford to release this information.”

In a way, this — http://smallsizeurl.com/484/ — goes with the preceding.
“Soros is a real life version of Dr. Evil—with Obama in the role of Mini-Me. Which is not as humorous as it might at first sound. In fact, it’s bone-deep chilling.”

The so-called elected leaders are only where they are now, because the ‘elite’ allowed / wanted them to be there. They are no more than pawns in a chess game.

What is interesting is that Soros and Obama have left-leaning policies, whereas a lot of the western world has right-wing govts. in place.

The storm clouds are gathering around us, said Junkyard Wolfhound. About time to take shelter.

#15 Munch on 09.16.09 at 1:23 am

The hare and the tortoise!

Regards

Munch

#16 ohtwo on 09.16.09 at 2:03 am

Ugh. This ‘rebound’ just makes me feel sick. I’m a 39-year old Vancouverite who finally felt financially positioned to buy a place about two years ago. At the time, my partner and I were so dismayed by what was within our $400K price range that we decided to wait it out. The behaviour of buyers was just completely irrational, and we were sure that a major correction was imminent.

Now, fast forward to fall 2009 and I’m despairing. Sanity has not prevailed. A recession has happened, but nobody has learned anything. First timers are entering into bidding wars and financing their lives away because it really does look like prices will never EVER drop here. If a recession doesn’t restore some sort of balance, then what the hell will?

#17 Daystar on 09.16.09 at 2:03 am

I was chatting with a realtor in August at a family reunion (he elected to join our family by elect through marriage on my mothers side, but I grew up with him in high school, so we’ve been familiar for a long time, nice guy). I ask him how things are going and he says, “great!” “Things have really picked up. They were slow this winter with the recession, but April on has been excellent.”

So I asked him what he figured would happen over the next 3 years or so. He tells me that he figures home valuations will continue to rise. I ask him, is this because he thinks interest rates will continue to be so low? The realtor says, “yeah” and looks at me with some seriousness at that point, knowing I know why things have gone well for him.

Then I asked this realtor, “why do you think interest rates are going to remain low” for 3 years or more?

He tells me its government policy. He likes what the Conservatives have done, “we need a pop in valuations and when the recovery ignites, interest rates will remain low and we will be fine.”

Then I asked this realtor friend of mine from way back if he was still thinking of selling homes 3 to 5 years from now. He said, “yeah, I like it. I think I’ll still be doing it til’ I retire” (10 to 15 years).

And thats when I told him to brace for the worst well before 3 years go by. I told him that when nations start to declare positive GDP, especially the U.S., the cheap rate policy is over as nations begin to fight inflation and compete with their currencies and attract investors to buy their debt during positive growth. He said, “if rates do go up, people can still lock in for 5 years at cheap rates before hand”. I said, “yeah, but lots of people float with VRM’s.” And he agreed. Lots do.

I told him about the “wealth effect” that the U.S. went through with their cheap rates through 2001 to early 2005 and what expensive rates did to their housing market from 2005 on and how they lock in for 30 year terms automatically and it didn’t help them without having to go into much detail on the near collapse their bond market and spin the nation into an ugly recession through a “poverty effect” created by low RE valuations.

Then I told him that we’re next.

He thought about it and was kind of shocked. He didn’t want to hear negatives. He wasn’t into believing that these good times would end and possibly sooner than he thought. I asked him if he still didn’t believe me, that the G20 was flooding their nations with cheap rates to revive financials (and housing market in the U.S.) and that once this was acheived and that the world economy recovery would be the sure end to cheap rates and that there was all kinds of historical information as a reminder of what would happen to our markets once interest rates rise and that valuations stood to make major corrections in the neighborhood of 30 to 40% or more in some locations long before 3 years are up. I then put it to him that commissions would drop for realtors and houses wouldn’t turn over so quickly, that it might not be good for realtors to make a living through a busted bubble thats coming.

I saw some pain on his face and asked him if he was still skeptical and doubted what I was saying.

He said, “no… I”m wondering right now whether or not I can hold onto my mortgage with current regulations 3 years from now when it comes time to renew.”

The moral of this story is simple, readers. When you can see something coming, you move out of its way or you get hit. There are always opportunities, even in hard times (oh, and by the way, there will be good times in other nations while Canada suffers, hint, hint!) I’ll have a story or two which offers major hope to those who believe what I’ve said as time rolls on.

#18 Blobby on 09.16.09 at 2:15 am

I’d imagine that quote will bite your backside when/if (looks like election is long shot now) you do run for office…

Which is a shame, you’re the only politician i’ve ever listened to in my ENTIRE life (living in 8 different countries) who has EVER talked any sense whats-o-ever!

#19 NOBODY on 09.16.09 at 3:16 am

How sobering…
One factor can change it all, right?

Real estate is still a great investment if you stay in the place for 30 years. Don’t look to flip.

RE resale prices have soared to almost double its real value in past 6,7 years.
When rates go back up and by the time those 2% mtg rates are back to 5%, listings will be up and prices will go down again… Unless rates never go up again.

Record sale for Calgary home: 13,1M

http://www.calgaryherald.com/business/Spectacular+estate+home+fetches+record/1973906/story.html

#20 Coho on 09.16.09 at 3:20 am

I read somewhere recently that there are multi generation loans offered in parts of Europe.

If only humanity could apply its resourcefulness for the common good rather than to exploit the many through its various sytems like religion, economics, monetary, financial…and of course resource wars under the guise of spreading “democracy” to line the pockets of the money junkies.

Yep, nothing like looting countries by taking money from those who have the least and giving it to those who have the most. Ah, then again, if TPTB didn’t treat the planet and it’s people like a rental mule, they wouldn’t be human would they?

#21 Grumpydawgs on 09.16.09 at 3:20 am

No, Garth, you were right , it was the crazies in the finance ministry who thought by pouring low interest gasoline on the fire they could extinuish the conflagration caused by a low rate bubble which had brought the world to its knees. And they say the public is the one with a short memory. LOL

#22 Mike (Authentic) on 09.16.09 at 3:53 am

You were not wrong Garth, in fact, you were right in so many ways. Now, there is absolutely no debate the Canadian RE is in a bubble. Fueled by QE and cheap interest rates, media and house salesmen and buyer ignorance as well. No one could forsee interest rates dropping so low and staying there for a year thus far.

The buyers are not thinking about tomorrow or even a year or two down the road, they are thinking in this moment right now. Not much thought is given to what mortgage rates will be in a 5 years time. Who their buyer is going to be and what happens if they can’t afford the house anymore and can’t sell it.

But like any fire you add gasoline to, it instantly burns hotter but dies faster in the end. If people are so determined to jump into that gov’t induced gasoline fueled inferno, there isn’t much anyone can do about it.

Housing is in a bubble, interest rates can only rise. The inferno is consuming it’s fuel at a faster and faster pace before it dies out.

At least you saved some!

Mike

#23 Mike (Authentic) on 09.16.09 at 4:03 am

Just finished reading the whole article.

Brad J. Lamb isn’t a very nice guy is he? Just reading his “statements” gets my back up and I’m sure many others as well. I didn’t think a smug, self-serving and “rub-it-in-your-face” attitude got you anywhere in life.

Garth, you handled yourself professionally and with dignity in the article, well done for not going to Brad’s level.

Mike

#24 Future Expatriate on 09.16.09 at 4:19 am

Garth, a very wise man once said “It’s not over until it’s over.”

And when this is over, and it will be soon enough, it is really going to be “OVER.”

All they’ve done is prolong the inevitable agony. And when the roadkill starts falling out of the sky, it’s not going to be you who deserves blame.

#25 Onemorething on 09.16.09 at 4:28 am

That’s funny, all the top RE investors I know are out of RE and all my insiders selling stocks at a rate that will make your head spin.

Agreed, the only thing we are wrong about is timing but dont worry, it will buy us even more SINCE CANADA IS LIKELY THE ONLY PLACE ON EARTH THAT DIDNT HAVE A CORRECTION IN RE.

We’re screwed and face it, when all is said and done, Canadians will be a stain on the road as their the worst for not seeing it coming.

Remember, and I repeat this over and over, debt is constant, valuations are variable and when you’ve run out of ways to service your debt after the RE takes a wicked tumble, you will spend the rest of your life trying to pay off that debt.

I’ll take the $500K home for $300K at the bottom with 40% down (in which the banks will gladly give you a special mortgage rate on when this time comes) even if posted rates are 12% in 5years.

But how many of us will be around? Will the neighborhood look the same? Will you even buy at the bottom or will you sink your teeth into 10% bank dep returns and say the hell with it and rent.

RE ownership is NOT AN OPTION!

At least the US let’s you off with a slap on the wrist ready to play in 7 years post keys in mailbox.

#26 David Bakody on 09.16.09 at 4:41 am

So these homes will continue to rise and all will be well while people continue to borrow more money to buy things they do not need. A greater fool will pay 10% 20% more for a home that has real true value of 50% less. There are sad stories about to come sooner rather than later, think? can governments continue dish out stimulus money and loan money at .025% forever while they borrow at 5% …. do tell us how MSM? Pay down debt and save wisely and that ladies and gentlemen has been a true statement for the working class for a long, long time.

#27 ca on 09.16.09 at 5:44 am

Garth —

You can expect more of the same if the U.S. decides to extend/expand the housing credit — which seems likely.

http://www.calculatedriskblog.com/2009/09/streitfeld-housing-tax-credit-debate.html

#28 Jan Etter on 09.16.09 at 6:29 am

It’s not so much that people are missing common sense and rational thought, but rather that common sense and rational thought is overwhelmed by a potent mix of fear at being priced out of the market, a general lack of basic personal finance knowledge (well-represented by the hapless couples profiled in Gail Vax-Oxlade’s TV show), the psychological need to own one’s home and/or “move up” and the MSM’s tendency to report TREB/OREA/CREA spin-doctored press releases as fact and the lack of critical reporting and analysis on this in the MSM. In the age where Wikipedia is treated as a reliable source, news is obtained from 10-word scrolling by-lines on CP24 and media reprinting insubstantial AP and Reuters feeds, no wonder the general populace doesn’t understand what is going on.

#29 PVC on 09.16.09 at 6:37 am

You will be wrong about rocks(gold) to.

#30 Taipan on 09.16.09 at 6:39 am

Just loving it garth. I was talking to an experienced businessman the other day, and he said, is it just me or has the world gone mad.

No i said.

Its like some irish wolf hound has just deposited his dinner in the middle of a beautiful canadian red cedar floor, and then somebody has come along and wallpapered over the top and then declared. No problem, its all over.

But then people happen to step on it and it oozes out everywhere, and before that there was this smell. Things werent right, but the problem had been fixed. Yet there was this sickening smell that wouldnt go away.

Sooner or later the stain will emerge, whcih everybody can see and nobody can avoid.

#31 Ray MacDonald on 09.16.09 at 6:48 am

My daughter and son-in-law bought a house a couple of years ago in Ottawa. I was sure they were close to the peak at that time. Apparently I was wrong as well.
I’ve encouraged them to pay off their mortgage as quickly as they can, given the historic opportunity to reduce principal while rates are this low. If we continue to be wrong, at least they’ll get out of debt sooner and can move on to whatever opportunities await them in life.

#32 Joe Tilley on 09.16.09 at 7:05 am

I love how you pull no punches Garth and just tell it straight like you see it. Agree or not, I always find you thorougly entertaining and a breath of fresh air. Expect a donation from here in New Brunswick once your nominiation is official and the Harper misfits are given the much deserved non-confidence vote!

Out of curiosity who’s the bigger jackass, Kanye West or Stephen Harper? :-)

#33 Tanya on 09.16.09 at 7:26 am

While you’re at opposite ends of the spectrum on a lot of things, Gail Vaz-Oxdale and you have a lot in common on this front. I read her blog almost ever day http://www.gailvazoxlade.com/blog and she’s been warning about people being in over the heads for a long time. Maybe they were just asking the wrong experts.

#34 Samantha on 09.16.09 at 7:50 am

First, from Paris today:

“Downturn may cost 25 million jobs in OECD countries”

http://ca.reuters.com/article/topNews/idCATRE58F1ZP20090916

The real estate roundtable (e-table would have been a better term) was a joke, except for your comments Garth.

Lamb says the recession is over. Bully for him.

I say it isn’t, and that article quoted above supports my position.

The interest rate issue pales by comparison to the job loss pandemic happening globally. The US is one of the hardest hit countries and we rely on their trade. So how could anyone think that we will not be further impacted here in Canada?

Unemployed people can’t buy houses. People who lost jobs and are now technically employed but only on a part time basis cannot buy houses.

Oh wait, then there’s the people who already took the plunge and will lose jobs and their houses, too. The Boomer dump might just be preceded by the unemployed first time home buyers dump. Wonder how prices will start to look then?

One of the articles I read this morning (no link) talked of job skills and retraining, blah, blah, blah…same old, same old. How does any sensible person think that “retraining” is going to fix anything? Retraining – for which jobs? How about job creation? And more specifically, the creation of full time, reasonably well paying jobs that don’t involve big box stores.

The OECD article quoted above does not comment on the domino effect behind the 25 million jobs on the line. Those jobs represent companies who will impact other companies and industries which means that number could get a whole lot higher.

#35 Mikey on 09.16.09 at 7:53 am

there is no house out there worth a bidding war unless it is way under value.its crazy how people get caugt up in the moment.

#36 Grantmi on 09.16.09 at 8:19 am

Greedy little Hobbits! They Trickies us!!!!

Front page of National Post… – Real Estate Booms

Front Page of Financial Post … – “THE RECESSION IS VERY LIKELY OVER!” – Uncle Ben.

The end of the LOTR: RETURN OF THE KING ended well…. I’m not sure the end of this picture will!!!

Move Along! Nothing to see here!!

#37 View from the south on 09.16.09 at 8:29 am

I’ve got a friend here in Windsor, opened a new restaurant earlier this year. The local (Can West Global) paper asked him about his chances in this recession – his reply was something like – I’ve decided not to participate in this recession and so its not a problem.
Guys got balls, (oh, and money, so taking a loss on this venture for a while probably has some tax benefit.) Just like that Lamb guy – just ’cause you say it, don’t make it so.

#38 Investor on 09.16.09 at 8:35 am

Jobless rate to hit 10%, OECD says

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/jobless-rate-to-hit-10-oecd-says/article1289458/

#39 BDG YYC - That sucking sound isn't you Garth. on 09.16.09 at 8:36 am

That great sucking sound you hear is that of the GREATEST fools getting sucked through all 4 engines. This is truely a tragedy in the making for these these trusting, for the most part innocent and insuspecting souls. To a large extent “we” (as a society at large) are failing ourselves by failing them in that we have allowed ourselves to diverge from rational financial values and the moral sense that brought us to the point where prosperity morphed to indulgence.

Used to be that we worked to give our kids opportunity – and we tried to give them the values/tools to succeed. How the hell did we get to a place devoid of morals and principles and so detached from common financial sense that we so blindly turn a generation of twenty and thirty somethings into BAG-HOLDERS ?

I fear this will end badly in many perhaps unanticipated ways and when, not if, it does our boomers and institutions are going to be rightly vilified and will likely find the steaming contents of those pretty bags getting thrown in some well deserving faces.

But hey, enough of such foolishness … where’s my sammich … we got a ‘lection bubble ‘ta tend to party-oners :-)

#40 smw on 09.16.09 at 8:36 am

#25 Onemorething

I’ll take the $500K home for $300K at the bottom with 40% down (in which the banks will gladly give you a special mortgage rate on when this time comes) even if posted rates are 12% in 5years.

Good point, even though rates are low, banks haven’t had to be very competitive with all the low rate options.

Home equity and cash in hand are two very different beasts.

#41 Patrick on 09.16.09 at 8:42 am

You WERE wrong. You DID suck. But same could be said for all of us who are wary of buying RE in a mania, especially those like me who never bought.

I’m experiencing exactly the same urge to jump in that I had in the tech peak of early 2000. I got tired of waiting on the sidelines while everyone else got rich. I started to believe that there WAS a new paradigm. So against better judgement, I jumped in … and got badly burned. Had to start all over again.

This blog is like having an AA buddy who you can call when you’re feeling that temptation.

We’ll grab a beer, okay? — Garth

#42 Kris on 09.16.09 at 8:42 am

October is coming….

#43 jshum on 09.16.09 at 8:42 am

I’m not in debt but I’m screwed. I can’t invest in a house, I don’t know how to invest in the stock market. I have a decent job but i know 30 years from now when I retire I will have no house to live in and not enough money to live a very minimal lifesyle. People in debt win. I can only pray and hope the house prices come down. Even if they do they might go back to to level they were last year

#44 Gord In Vancouver on 09.16.09 at 8:47 am

Garth – don’t worry about it.

You may not have a Harvard doctorate in economics but this statement did a better job of summarizing Canada’s real estate bubble than all previous media efforts combined.

Instead the Bank of Canada decided to crash interest rates to nothing, encouraging massive borrowing by people I thought were already hideously indebted. The real estate industry reignited its marketing machine, irresponsibly telling people prices would rise forever and they must buy now while rates were low. And the cash-starved media decided to sacrifice its last ethical goat on the altar of lineage.

#45 PeckedToDeathByDucks on 09.16.09 at 8:49 am

running on debt fumes…net foreign sales of long-maturity U.S. securities

$70.7 billion in June
$7.4 billion in July

#46 Devil's Advocate on 09.16.09 at 8:50 am

http://torontocondos.com/bjl/2009RealEstateRoundtable.pdf
End of article under the picture of you (Garth) it says “Turner says that low interest rates are here to stay, so avoid rush buys.” Now I am sure you didn’t seriously mean that in any other way but facetiously.
As for Lamb… what a buffoon! I would almost admit to being embarrassed by him belonging to my profession, but noticed after perusing his website http://torontocondos.com that neither he nor any of his “team” are designated anything but “sales people”. There is a big difference between a “Real Estate Sales Person” and a REALTOR. Which leads me to question why they are not REALTORS. Is it because they choose not to be bound by our ethics or because we would not have them? Six of one half dozen of the other I suppose.

Garth “in real estate, timing is everything”. Unlike Mr. Lamb neither you nor I have a crystal ball. All we can do is use, to the best of our ability those attributes we do have which Mr. Lamb so clearly lacks, to make our best judgements. Unlike Mr. Lamb, I doubt neither you nor I would ever tell someone what to do but rather give them some advice from our perspective that they might choose for themselves what they ought to do best for themselves. There is, today and always, honour in that.

The article you linked to is not the one posted above (today), but the previous piece from last winter. — Garth

#47 dave on 09.16.09 at 9:00 am

Here’s what a good, hard property price bust looks like..
http://www.bloomberg.com/apps/news?pid=20601068&sid=aDNRNO_7POaI

From my perpective (Dublin), I’m watching Canada with morbid curiosity. Van/Vic/TO/Calgary, all of it, looks like the mother of all bubbles.

#48 back to the future part 4 on 09.16.09 at 9:05 am

we are indeed following the same old trick the Americans used. If I recalled correctly before their crash they also have very low interest rate and housing booming like there’s no tomorrow. Their upside is the financial companies can package their deals into something else. I am wondering what do we have under our sleeves for the lenders to give out money to almost anybody.
Proof? 2 days ago I received a letter in my mailbox a NON profit company want to help people to buy a property. As long as you have an income between 26k-56k they’ll lend you the 10% for down payment. I am not sure if it’s a scam or the condition behind it. 0 interest rate for 3 years or no maintenance fees are being offered on a condo purchase.

In any case a lot of US economists blamed the housing melt down on the 1% interest rate left unchanged for too long, 2 years I think.

Bingo we are on the same path, let see if Canada can learn something from other’s mistakes or is it?
On another note the HST + low interest rate forcing people to buy in a hurry at the moment and not worrying at the current situation. Let these 2 factors passed and people will fear the unemployment rate + falling retail #s
If the situation got really bad after who knows they might change the rule and exempt housing from HST. They changed it 3 times already.

#49 Calgary Rip off on 09.16.09 at 9:12 am

J Shum and Chris L.

Consider yourself fortunate you didnt buy at the top. The worst you are in for is renting, but you arent going to lose thousands.

Consider this from crackpot mario at the Calgary Herald: First accurate article Ive ever seen by him: http://www.calgaryherald.com/Alberta+economy+roughest+patch+since+Economics/1999619/story.html
Let’s see if he continues his madness of bubble propaganda.

I work in health care and there are talks of layoffs. Luckily Im not a manager and I have several staff above and below me protecting where I am. I am further away from the teeth. If I get laid off though, Ill just move back to British Columbia. Got family there. Calgary sucks anyways. Bunch of conservative deluded people who think they are New York City.

Hopefully the interest rates hit 15%-that would be really really fun to watch in Calgary as everything goes to hell in a handbasket. :)

It’s equally amusing that a mormon just got elected here in alberta-what is it with these people that think they are right wing. If you look at the early history of mormonism, if anything, its extreme left wing, like me. I dont go to that church cause they’re all conservatives, but the scriptures are ok. Hopefully that dude will have the poser conservatives going far left and housing will drop off a cliff.

#50 Your_missing_the_point_AND_the_peak on 09.16.09 at 9:27 am

Garth, I respect your honest assessment at this point. As I’ve alluded to earlier, that honesty is worthy of respect and indeed some admiration. Seriously.

Indeed, this is as good a time as any to admit failure. As ‘someone’ said awhile back, if you think this run-up was bad, wait until TREB can start reporting YoY numbers against 2008’s prices during Q4. Prices will seem to the general public to be going up 10-20%!!!

Garth, you delayed my post last time and subsequently few people got to read it (yes, I’m arrogant). It is as important today as it was two days ago (and I’ve omitted the nastier bits, Garth):

That 2009 is supposed to be 1990 all over again in Toronto Real Estate is supposedly a given around here. Not so.

2009 smacks of 1988. One year after the 1987 stock market crash. Several years into the S&L Crisis that rocked US real estate. Several years before deficit reduction became a talking point (no doubt this is what Garth is back in politics to address). And, I almost forgot, 1988 was just before two years of massive home price surges in the Toronto market.

Additionally, sales levels are following the same pattern, cratering in 1987 after the stock market crash (i.e. 2008), surging spectacularly in 1988 when the sky didn’t fall (i.e. now), and declining thereafter until 1990 (i.e. 2011).

You can see all this at Randi Emmott’s site (enjoy…): http://www.randi-emmott.com/market.htm

Basically, the peak has not been reached.

Right now your only choice is to buy now, or cross your fingers, and calculate if $60K-$100K burned on rent money over the next five years (approximating an early and safe market bottom akin to 1993) is worth it to be a “vulture”.

Now on interest rates… It is only now that the Associated Press (i.e. MSM) in the US is starting to build a case for deficit reduction (i.e. the brutal but elusive interest rate rises that Garth is talking about):

http://www.msnbc.msn.com/id/32838975/ns/business-economy_in_turmoil/

“Half of those surveyed said deficit reduction should be a national priority over increased spending on health care, education or alternative energy.”

Of course this is all baloney, but this is how it starts. Deficit reduction will creep slowly into Obama’s policy making at first (anyone remember Clinton?), and once there is a real recovery, then the game starts. And Canada will follow, But that is so far off (2011 at least).

The original post is here: http://www.greaterfool.ca/2009/09/13/맙소사/#comment-42734

No, you’re not arrogant. — Garth

#51 The 'VULTURE' on 09.16.09 at 9:27 am

Garth, go easy on yourself…You will have your day…

Garth you do not suck nor are you wrong…Time will tell and destroy the financially illiterate…just you wait and see….wealth is not created by the debt route way that these first time buyers are travelling…Only the RE’s, bankers, media (advertising) and sellers are creating real wealth….

#52 Soylent Green is People on 09.16.09 at 9:29 am

Brad is so tall and ‘confident’ looking, I would buy anything he wanted to sell… anytime, anytime… Tall men make more money than short men, fact of life.

Stinson can’t afford a nice pair of shoes? He should lose the wig as well. He looks like that crazy singer guy who killed the hat check girl, what his name, Phil Spector…

I wonder if this picture is a cut and paste or were you all actually standing together? I’m thinking it’a a cut and paste. Couldn’t they have issued some dress guidelines beforehand? The picture would have looked better, but then, what the ‘eff do I care…

I like how the ladies are cozied up to G.T. like bookends.

Richard wore his outfit from the day before. Wonder where he spent the night.

G.T. next time iron your pants.

#53 hhmmm this is interesting on 09.16.09 at 9:50 am

Everybody buying a house these day because of cheap interest rate. I wonder what happened to rental market when everyone has a house to live in. Those who bought for investments are screwed then?
There’s always cause and effect. Don’t think 0% interest come free.
“freedom is not free” – at least that’s what the Americans think.
we’ll let the market play out for now. bailout the losers when time come.

#54 Live Within Your Means on 09.16.09 at 9:58 am

#30 Taipan on 09.16.09 at 6:39 am

Its like some irish wolf hound has just deposited his dinner in the middle of a beautiful canadian red cedar floor, and then somebody has come along and wallpapered over the top and then declared. No problem, its all over.

But then people happen to step on it and it oozes out everywhere, and before that there was this smell. Things werent right, but the problem had been fixed. Yet there was this sickening smell that wouldnt go away.
…………..
Reminded me of this joke.

There’s no fury like a woman scorned!

On the first day Margo packed all her belongings into boxes, crates and suitcases. On the second day, she had the movers come and collect her things. On the third day, Margo sat down for the last time at their beautiful dining room table by candlelight, put on some soft background music, and feasted on a pound of shrimp, a jar of caviar, and a bottle of Chardonnay.

When she had finished, she went into each an every room and deposited few half-eaten anchovies dipped in caviar down the curtain rods.

When Margo’s husband Ralph returned with his new girlfriend Tracey, all was bliss for the first few days. Then slowly, the house began to smell. They tried everything, cleaning, mopping, and airing the place out. Vents were checked for dead rodents, and carpets were steam cleaned. Air fresheners were hung everywhere.

Exterminators were brought in to set off gas canisters, during which they had to move out for a few days, and in the end they even paid to replace the expensive wool carpeting…..Nothing worked. People stopped coming over to visit. Repairmen refused to work in the house. The maid quit. Finally, they could not take the stench any longer and decided to move.

A month later, even though they had cut their price in half, Ralph and Tracey could not find a buyer for their stinky house. Word got out, and eventually, even the local realtors refused to return their calls.

Finally, they had to borrow a huge sum of money from the bank to purchase a new place. Then Margo called Ralph, and asked how things were going and he told her the saga of the rotting house. She listened politely, and said that she missed her old home terribly, and would be willing to reduce her divorce settlement in exchange for getting the house back.

Knowing his ex-wife had no idea how bad the smell was, Ralph agreed on a price that was about 1/10th of what the house had been worth, but only if she were to sign the papers that very day. She agreed, and within the hour his lawyers delivered the paperwork.

A week later Ralph and Tracey stood smiling as they watched the moving company pack everything to take to their new home – including the curtain rods!

#55 Jonathan on 09.16.09 at 10:01 am

The economy we see today in Canada is more of what we have seen in the past thirty years. We were overly optimistic about the debt levels we could afford to pay back tomorrow. We felt immune. Canada has learned nothing from the mistakes of the USA. Nothing.

Today we are binging on more debt than ever. The banks are lending it because the government is insuring it.

Our time will come. Within one year we will be as indebted as America, yet our incomes are less. I give it a 75% chance that we will hit the maximum debt level that our economy can sustain within the next year – and that’s with the low interest rates. If interest rates rise, then our maximum debt wall would have been hit two years ago.

At least when the US bubble popped, prices were much lower and the global economy was ‘healthier’ than ever. Today the global economy is in depression and the only thing propping up global GDP is 4 trillion in global stimulus. Who could be bullish on Canadian real estate?

#56 Lucy on 09.16.09 at 10:02 am

Has anyone seen Gerald Celente’s interview with Russia Today, September 14th on YouTube? Unfortunately Garth, the gold bugs will love it and the rest of us, (thanks to you) are preparing for what will undoubtly happen in our lifetime.

#57 pezzazz on 09.16.09 at 10:12 am

Garth, I’ll take Beardo over Kojak every day of the week.

#58 Jonathan on 09.16.09 at 10:16 am

#50 Your missing the point…

“Now is like 1988”

There are no similiarities between the crash of 1987 and 2008. There was no recession in 1987. Mortgage debt levels were still very low and had alot of room to grow – even after the bubble between 1988-1990. Furthermore the mid-90s-2000 had the tech bubble to bring them out of the doldrums and allowed North America to see 4-5% economic growth. Furthermore mortgages averaged 20 years and as such, were much smaller after 5 years. Today the average loan is in the 30 year range. We aren’t paying down the debt.

With that one comment you proved how little research you have done and as a consequence, how ridiculous your opinions are.

Today we have record debt levels (mortgage credit has grown 10x since 1980 or 4.3X inflation adjusted). We have a Canadian economy in the shitter. We have China at 50% capacity and churning out products for 1/2 the price we can. We have India who can build software for labour rates 1/10 the price.

We’ve borrowed against a dream. Against something that doesn’t exist. Yet that debt with those massive amortizations will keep costing our economy growth for the next thirty years. We should only be so lucky as America to be able to default on the debt. To future generations of Americans, subprime has actually been a saving grace.

#59 Jonathan on 09.16.09 at 10:21 am

One thing that pisses me off is the “scaremongering” technique. That if you are a bear, then you are like a conspiracy theorist, hiding away in the closet waiting for all hell to break loose. It’s ridiculous.

The facts are the facts. Debt levels are the highest ever reached in mankinds history. Saving levels are the lowest and will continue to fall as long as savings interest rates are below the rate of inflation. Productivity in Canada is at its lowest since World War II. Innovation is non existent, since debt was simply used to prop up failing companies, or to merge or acquire competitors, to buy commercial or residential real estate, or to consume.

Had all that debt been used to increase our productive worth tomorrow then my tune would be different. But we have borrowed against something that will not exist. This isn’t rocket science.

#60 David Bakody on 09.16.09 at 10:26 am

From CBC News while Steve visits with President Obama ….. “Unemployment will reach high in 2010: OECD” that means over 10% in both US & Canada

So I would say Mr. Garth Turner is not far off the mark … remember flood tides come after the storm and they wash deep ashore into area’s people once thought were safe!

#61 guava.ca on 09.16.09 at 10:33 am

http://postcity.godengo.net/Post-City-Magazines/September-2009/Fall-Real-Estate-Roundtable/

#62 Canned Goods and Buckshot on 09.16.09 at 10:34 am

As has been repeated here before:

“The market can stay irrational longer than you can stay solvent”

John Keynes

#63 PVC on 09.16.09 at 10:38 am

Garth even knows more about money than the world’s most successful finacier J.P. Morgan

“Gold is money and nothing else” – JP Morgan, testifying to the Pujo Committee, 1913.

As JP Morgan pointed out early last century, gold is money, and nothing else. Grasp this simple fact and you understand gold. More to the point, gold is international money. It always has been.

Come back when you have something interesting to add. This is tedium. — Garth

#64 David Bakody on 09.16.09 at 10:40 am

Addendum to my last:

From the Guardian….

Unemployment hits highest since 1995Those claiming benefit increased to 1.6 million, the highest since May 1997, note the article reads that unemployment world wide could reach 25 Million! not rocket science here manufacturing and consumer spending and added debt and debt defaults will enter into area’s never before seen. So y’all think your house will be worth more? Give your head a shake …. and where is our MSM with the truth and professional insights to inform their readers with the truth? Where dam it!

http://www.guardian.co.uk/business/2009/sep/16/unemployment-rises-recession

#65 Live Within Your Means on 09.16.09 at 10:40 am

The problem is the MSM media is cash starved so they’ve prostituted themselves to the RE market. One can’t visit an MSM website without being bombarded by RE ads. And, all these media pundits who say the recession is over are in denial. Its all about putting a positive spin so that consumers will go out and max their multiple charge cards to keep the economy spinning. Yet, our exports have fallen. What will happen next spring when the Renovation Home Credit (or whatever its called) is over and people have maxed out their cards to gain a few measly $$$ off their taxes. They’ll be paying more in interest charges than they would ever gain from this reno vote buyers scheme. Wonder how many unemployed there’ll be in the reno/construction industry next summer.

#66 PVC on 09.16.09 at 10:52 am

Buy something from someone because he is tall and ‘confident’ looking?

Soyent green you are green.

I just heard Juan Del Potro is giving up tennis and becoming a real estate agent in Toronto.

Look out Brad he’s got a 4-5 inches more on you.

#67 Seilfworcehtsa on 09.16.09 at 10:55 am

Govts gobsmacked the financial industry with gobs of money and it recovered rather quickly …perhaps only temporarily…and money flowed to the stock markets as money is wont to do. And RE got a good share…especially in Canada and up she goes like a see/saw with a fat pig one one end. You see your value grow and inevitably you will say, “I saw my value go. The fact is the economy is still sick except for the financial industry which off-loaded its risk to the taxpayer and sucked in wads of newly created money. The winds of trade wars are blowing from east to west and west to east and the dogs of war are straining at their leash. These are interesting times we live in….be careful what you wish for, you will probably get it.

#68 tjmikey on 09.16.09 at 11:03 am

With everything we know, moving forward, I have to wonder if it’s this generation that will witness the break-up of Canada/absorption by the USA.

We keep on showing them our belly, we keep on sucking at their teet.

We can’t make it without them…..and they know it.

Think about it….they could bring us to our knees…..easy.

#69 Men With Hats on 09.16.09 at 11:45 am

Be thankful we do not live in biblical times .
If a prophet made a prediction and it did not come to pass
the penalty was death .
Ouch !

#70 JM on 09.16.09 at 11:50 am

#68 tjmikey

It’s not that hard a scenario to imagine given the fact that the U.S. will protect their interests (meaning our resources) without a second thought.

There are more tanks in upstate NY than Canada has in total. While that may seem strange to some people, geographically it’s a very short drive to Ottawa.

#71 Mightymouse on 09.16.09 at 11:53 am

Need a little help finding an old post…

I’ve been searching through all the old posts here trying to find one that Garth did about the cons of buying real estate in the USA… I’ve been contemplating purchasing in California while waiting for our local market to unwind. If someone could guide me to the post I would appreciate the help.

Thanks!

Try this. — Garth

#72 jd on 09.16.09 at 11:58 am

I was wrong too. I bought in early July and never thought the rebound would be so strong. I caught a property at a reduced price well below assessment and appraisal. I expected prices to go down and they could very well go down from here. Who knows? The only issue I have is when people absolutely guarantee something will go up or down. Who knows? I think the market right now is being driven by gut feelings that all the money being printed for budget deficits by the USA and Canada has to mean inflation in our future. So people are getting ready for higher prices in everything including houses. As they print more and more money everything goes up in dollar values; especially your most important asset. Low interest rates are the icing on the cake.

#73 Chaostrology on 09.16.09 at 12:05 pm

Denial is not a river in Eygpt!

It is however, the rogue economic wave washing over Canada presently.

Most people singing in this choir understand that all good things must come to an end, eventually.

Therefore, our economic situation allows the choir members a little more time to prepare for when TSHTF.

The herd has suddenly found one last LOC in the form of cheap, socially underwritten mortgages and true to their training are racing to the trough. We all know what happens when the herd is fat enough. uummhh, bacon.

May 2010, the real instability begins and the party will continue for 8 years. The house party will get totally out of control and your parents won’t be happy when they get home! (you’ll be grounded for life)

In the meantime, choir practice is scheduled daily.

#74 Genghis on 09.16.09 at 12:19 pm

This bubble has gone on for far longer than anyone expected. The longer it goes on the more this is taken as proof that it is not a bubble.

This is not such an easy situation to be in Garth, but you handled it really well. Your replies are excellent.

On a related topic:, some interesting commentary in last week’s Globe and Mail regarding government debt, from Harvard economics professor Kenneth Rogoff:

http://www.theglobeandmail.com/news/opinions/a-financial-crisis-becoming-a-debt-crisis/article1276882/

#75 Herb on 09.16.09 at 12:26 pm

Well said, Garth. That’s why we love ya, Dude.

#76 jess on 09.16.09 at 1:24 pm

financial shakedowns cause more than just bubbles.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aXX9.46XaVU0

#77 jess on 09.16.09 at 1:26 pm

hum…sounds familar

Sept. 16 (Bloomberg) — Ireland plans to spend 54 billion euros ($79 billion) buying real estate loans to purge the country’s financial system of the toxic assets that are crippling what was once Europe’s fastest-growing economy.

The government’s new National Asset Management Agency, or NAMA, proposes to pay a 30 percent discount on the 77 billion- euro book value of the loans, Finance Minister Brian Lenihan said in a speech in parliament in Dublin today. The current market value of the debt is about 47 billion euros, he said.

“We are here to help the economy and the people by putting our financial system back on track,” Lenihan told lawmakers. “NAMA will ensure that we avoid the Japanese outcome of zombie banks.”

In what may be the biggest financial gamble in 87 years as a sovereign state, the government will become the owner of loans for property developments that are plunging in value. Ireland is suffering the worst economic slump of any developed nation since the Great Depression, according to the Economic & Social Research Institute in Dublin.

#78 Barb .. a reader in Calgary on 09.16.09 at 1:35 pm

The moral of this story is simple, when you can see something coming, you move out of its way or you get hit
#17 — Daystar

Daystar,
I hope the realtor friend takes action to benefit from your good info.. at least he recognized that he’s standing dead centre on the path.

#79 nonplused on 09.16.09 at 1:36 pm

Funny but it’s all talk about whether to convert all these abandoned holes in the ground into parkades here in Calgary. What is going on in the media is something different than what is going on at ground zero.

#80 H.J. on 09.16.09 at 1:38 pm

Massive debt in the US and it’s ultimate outcome … this is not scaremongering, this is reality in the USA and it’s effect will ripple throughout the world … we’re headed many years of economic woes …

http://market-ticker.denninger.net/archives/1439-WARNING-Deflationary-Collapse-Dead-Ahead.html

#81 Duane on 09.16.09 at 1:50 pm

What I want to know is, will Ottawa and the BoC try to bail out lenders when the real estate bubble pops? Will they bail out mortgage holders? Are there laws in place to prevent that?

I will be REALLY pissed off if my tax money bails out ANY mortgage holder!

#82 Eduardo on 09.16.09 at 1:55 pm

Quick note to all the Eduardo/NG haters who said I was so wrong on NG and it’s goign to 1 $. The short covering doesn’t seem to think so. 2.50 to 3.75 in a couple weeks?

Alberta… Deficit… shrinking as we … speak.

NG strip prices increasing…

#83 J Walker on 09.16.09 at 1:59 pm

#89 Duane wrote:

“I will be REALLY pissed off if my tax money bails out ANY mortgage holder!”

What do you think Garth was warning us about when Flaherty traded BILLIONS for the nations riskiest loans. Of course his defence was that they were all CMHC covered, so the tax payer was on the hook anyway. No debate and certainly no vote.

Make no mistake, we will all pay the price for this in taxation.

#84 Calgary_Rip_off on 09.16.09 at 2:00 pm

And house prices to new levels of affordability at $500K, Eduardo. It’s cocaine time!!!

#85 Eduardo on 09.16.09 at 2:05 pm

I was still wrong though… like Garth on housing I can also admit it for now.

#86 CM on 09.16.09 at 2:08 pm

Eduardo:

Just curious as to why Suncor and Encana are so anxious to get rid of their NG assets?

#87 Mikey on 09.16.09 at 2:09 pm

Garth,But it’s not too hard to see where this is going. are you atill saying the market will go down?

#88 andthen on 09.16.09 at 2:18 pm

Duane your a Canadian we already hold most of the bad assests and high risk mortgages.
The tax payers took all the loses and the banks got to report on all the “profits” they made.
So as long as the rest of us keep paying for these idiots to run up prices, the sky is the limit.

#89 jess on 09.16.09 at 2:24 pm

Bad debt is just being rolled over (something is better than nothing)…so what happens in two to three years?

The Moodys/REAL CPPI
http://web.mit.edu/cre/research/credl/rca.html

#90 dd on 09.16.09 at 2:25 pm

#41 Patrick

…But same could be said for all of us who are wary of buying RE in a mania, especially those like me who never bought….

Ya. Best time to buy is when nobody else what to. Easy to say, however.

#91 POL-CAN on 09.16.09 at 2:34 pm

A few posted links to the Daily Mail article on the “ghost fleet of the recession” in the last couple of days.

The people at ZeroHedge actaully took it a step further to show just how dead global trade is:

Thousands Of Rusting Ship Hulls Are A Fitting Tribute To The Speculative Market Bubble

.
.
.
The bottom line: world trade has collapsed, shipping lines, once flourishing, have become graveyard archipelagos populated by rusting ship skeletons. Yet all of this is beyond the land, and thus far from sight. Of course, who needs trade when you have a speculative market trading in its own bubble, hitting yearly highs day after day, thanks only and exclusively to the Chairman’s printing press. It is a pity these ships can not sail in the sea of hundred dollar bills that is being created each and every day at the Federal Reserve, whose only use these days it seems is to buy junker stocks and to feed the algos that lift whatever offers are stupid enough to float in the equity market.

http://www.zerohedge.com/article/thousands-rusting-ship-hulls-are-fitting-tribute-speculative-market-bubble

#92 andthen on 09.16.09 at 2:37 pm

It is over we are saved

http://money.cnn.com/2009/09/16/autos/fiat_chrysler/index.htm?postversion=2009091614

“That is that Chrysler is over, basically,” he said of Chrysler’s flagship car brand. “Within five years, you’re going to see nothing.”

This one states that the US is might default and put the world in a depression.

The $12.1 trillion debt ceiling is fast approaching ‘over the limit’ status. Unless Congress raises it, Uncle Sam won’t be able to pay what the country owes.

http://money.cnn.com/2009/09/16/news/economy/debt_ceiling/index.htm?postversion=2009091610

#93 JeffinPickering on 09.16.09 at 2:48 pm

“80 Duane on 09.16.09 at 1:50 pm What I want to know is, will Ottawa and the BoC try to bail out lenders when the real estate bubble pops? Will they bail out mortgage holders? Are there laws in place to prevent that?”

Well, if by “lender” you mean CMHC (since it’s their ass on the line for the junk less than 20% down mortgages), then YES, of course the gov’t will bail them out – just like they already have – by continuing to buy toxic morgages.
Do you think the banks would put their ass on the line to money to people who can only put 5% on houses they could never afford otherwise? They aren’t stupid. If there were no CMHC, not a one of these Greater Fools would have been allowed to ‘borrow’ the money to ‘buy’ a house.

#94 H.J. on 09.16.09 at 3:02 pm

Huge stinking pile of bad debt will pull the US nad world economy down for years …

http://market-ticker.denninger.net/archives/1439-WARNING-Deflationary-Collapse-Dead-Ahead.html

#95 robbreid on 09.16.09 at 3:05 pm

You and I, both know you’ve been correct all along.

Clearly the Americans dumping 10 trillion of cash and loan guarantees has only prolonged the inevitable.

Oh how soon people forget, when a pendulum swings one way, sooner or later is swings the other.

The longer it takes, the bigger the Swing!!!

I like to think of it as, Compounded Pendulum . . .

#96 likemostofus on 09.16.09 at 3:05 pm

Obviously trying to predict the housing market based on rational indicators such as personal debt ratios, unemployment rates, inevitability of higher interest rates, etc, does not work. So stop it Garth, it makes you look bad! Find something else to do with that important information.

Emotion drives the housing, always has, always will.

#97 jess on 09.16.09 at 3:37 pm

some added $monthly on the latch key

“But clearly there is no new money on the horizon,” he said, adding that people should start planning for changes in child care services.

He said child care is one of several “tough” issues council will have to consider when it sets its budget.

“It will be a difficult budget year,” Seiling said.

#98 Mike (Authentic) on 09.16.09 at 3:39 pm

This is a little disturbing. Does the CDN gov’t know something we don’t?

Feds send body bags to flu-stricken Man. reserves
http://lfpress.ca/newsstand/News/CanadaWorld/2009/09/16/10940416.html

“Aboriginal leaders in Manitoba are horrified that some of the reserves hardest hit by swine flu in the spring have received dozens of body bags from Health Canada.”

Followed by this bit of disturbing news:

Alberta Health Services reports Canada’s second drug-resistant swine flu case
http://www.google.com/hostednews/canadianpress/article/ALeqM5h7j2pe8genTGlc9ZBuEVG-1yx1oQ

Mike

#99 Cam on 09.16.09 at 3:46 pm

#80 Duane – If anything goes sideways in this real estate game, your tax dollars will certainly go to mortgage holders. Mortgage holders have their investments secured by CMHC. CMHC is you.

http://americacanada.blogspot.com/2009/07/cmhc-and-our-government.html

This is an excellent piece of research.

#100 pks on 09.16.09 at 3:49 pm

Wow, the smarmy-ness of “condo king” Brad J Lamb is difficult to understate. There’s just something about a guy like that being asked his opinion on real estate that seems so fundamentally ridiculous. Did they never hear the expression “never ask a barber if you need a haircut”?

My favorite part is when he asserts that not only is the recession over, but that this is a great time for buyers, and that these are the lowest prices we’re going to see for a decade.

I was actually just giving a friend the advice that this is the best time for _buyers_, and that these are the _highest_ prices we’re going to see for a decade.

Mr Lamb actually has a wikipedia page.

http://en.wikipedia.org/wiki/Brad_J._Lamb

Interestingly, he first got involved in the property business in the mid-80s toronto property boom. When I first saw his opinions, I assumed that he was 35 or younger, and therefore doesn’t actually _remember_ the last property crash in the late 80s/early 90s.

But he was _working in the industry_ when that happened. He’s got no excuse. He knows, from personal experience, that housing doesn’t just magically go up in value, forever. He knows from personal experience that real estate prices go up and down, just like any other investment.

Here’s a question nobody asked Mr. Lamb – if real estate _always_ goes up, full stop, then why does anybody invest in anything else?

#101 industrial guy on 09.16.09 at 4:08 pm

Organization for Economic Co-Operation and Development reports unemployment to rise to a record postwar high. The recession is over?

Hmmmmm … I think your ”I sucked” is a little bit premature. You’re not to blame for getting it wrong so far. We all misjudged the level of desperation guiding the economic actions of the Government of Canada…..

The only way you could be wrong Garth is:

1.only non-home owners become unemployed
2.none of the potential buyers in the market for new or existing houses lose their jobs.

These are very long odds indeed. I wonder what the probability of this scenario occurring is?

The economic Tsunami is still building. The auto industry situation if far from over. Auto parts suppliers will record a small rebound in August and September as the Detroit Three ship to build dealer inventories depleted during the Cash for Clunker extravaganza. Everyone in the industry expects car sales are going to fall off a cliff from October to next March unless the US Government has billions to hand out in another Cash for Clunkers program.

The decision by the domestic auto industry to drop the leasing option has forced a lot of consumers over to the imports. The CAW wants the Federal Government to punish us for not choosing our bloated, inefficient auto industry over its competitors with high import tariffs. It’s true, Korea has tariff barriers which exclude our cars. I’m sure there is a huge pent up demand for V8 powered SUVs in a country with $7.00 per gallon gas.
GM tried to sell cars in Japan and the entire exercise was a disaster.

#102 Eduardo on 09.16.09 at 4:08 pm

Divesting producing assets to invest in higher quality undeveloped ones.

#103 TJ on 09.16.09 at 4:12 pm

The essence of Comedy is timing. I think it’s fair to s say the same rule applies in Real Estate.

I sold a week before the stampede here in Vancouver, and left a bit on the table. Do I feel bad? NO – lucky.

No conditions, they didn’t even get an inspection (* we just had a new roof and new pipes put in, so I guess they think that’s enough). Insane, is more like it. No inspection? Anyway…

IF you are crazy enough to believe that all is well and this is a perfect time to become a Real Estate magnate you are on the other side of the trade from a lot of Real Estate experts and insiders, pal.

Last night on the late news in Vancouver, we had the spectacle of a young Engineer who had just closed on his first overpriced Yaletown box in the sky and he was going to buy another one, because it ‘seems like the good times are back and this is a great time to INVEST’.
Sure – the Stock Market is the place to be too – why not?
The WORST is over, we have stepped away from the precipice, happy days are here again.

THEN you read this.
Now if this story doesn’t scream “DANGER, WILL ROBINSON…..” I give up:

For the latest two week period ending yesterday, insiders purchased just $4.6MM in stock while selling an astounding $471MM in stock.
That is a $217MM jump over last week’s reading of $254MM. The trend in insider selling has been negative for quite some time, but even more alarming is the total lack of insider buying.

Insiders sell for a number of varying reasons, but it remains confounding that the equity markets can be so convinced of an economic rebound while insiders give a resounding vote of no confidence in their own companies via purchases of their own shares.

Perhaps the lack of organic growth via revenue growth has insiders less than convinced of the economic rebound.

http://tinyurl.com/qjhcy4

#104 young & foolish on 09.16.09 at 4:34 pm

patience is key here …..

it seems that all Western governments are determined in unison to try and prevent asset deflation from taking place, even though this is a natural eventuality in business cycles …… their solution, flood the world with
more money

will they succeed in making a lead balloon float?

#105 newcomer21 on 09.16.09 at 4:58 pm

Brad Lamb is absolutely correct when he refers to your opinion as “doomsday prognostication.

The Canadian Housing market has proven itself to be amazingly resilient despite the century’s biggest commodity boom-crash cycle, world wide banking crisis, investment house crisis, US subprime crisis, US housing crisis, world wide recession.

All of these factors should have given you that once in a century opportunity to be right. Dont’ run in Dundern because that will be the third strike and you will lose.

Actually, it’s Dufferin-Caledon. And other visitors should know that behind your new anonymous identity lies a professional Conservative troll. Adios, provocateur. — Garth

#106 rory on 09.16.09 at 5:38 pm

http://www.rollingstone.com/politics/story/29988909/sick_and_wrong/1

Another nail in the coffin that calls itself the USofA… good article actually explaining what is going on in the US health care debate …hope Obama is keeping his magic bunny close ‘cuz that appears to be all that he has going for him.

So we may have in fact a political crisis vs a financial one as some pundits have eluded too…amazing how a few bad apples in the right places can screw it up for all.

#107 Rob on 09.16.09 at 5:56 pm

Someone, perhaps YOU Garth, Needs to shout from the highest mountain that we, as a society, the un-informed, are being robbed by out-of-control real estate idiots (agents). Please help the average citizen. And it seems you let them off lightly. Give em hell garth.

#108 Jeff Smith on 09.16.09 at 6:02 pm

See here, jobless rate will go up. Yet the greaterfool movement is still going strong.

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/jobless-rate-to-hit-10-oecd-says/article1289458/

#109 auditor general on 09.16.09 at 6:44 pm

Garth. As a rational person who actually makes predictions he believes will come true (not hopes will come true) you are wasting your time apoligizing here. Not sure if you’ve noticed but 8 out of 10 people who post here aren’t qute that picky when it comes to accuracy. Most are quite happy to predict the imminent collapse of canadian real estate, the implosion of the monetary sytem, the collapse of BMO the day before fantastic earnings, H1N1 killing half the worlds population, asteroid striking the earth next week etc..etc. And yet they come back after their prediction date posting as confidently as ever, as though nobody has noticed. They must find your frustration perplexing.

I’m not frustrated. Just amused. — Garth

#110 Your_missing_the_point_AND_the_peak on 09.16.09 at 6:45 pm

#58 Jonathan.

I agree with a lot of the hard reality you are talking about. But this (GTA home pricing) is a bubble after all.

Regardless of historic debt levels, they are only important if the banks restrict access and force people to wake up. As you know, people will eat lint if they can still afford a mortgage: title to a home is the hallmark of middle class status–and in a capital economy, status is capital.

As for access, the debt instrument is in full gear in Canada and free money and confidence are the potent ingredients of exuberance. They will thrust prices further than you can expect. So far in some cases (as I argue above), that they never reset to previous levels.

1987 did not have a recession, but the scare is what matters. As we have seen in Toronto Real Estate, the actual reality is not important to many buyers. All that matters is if buyers are scared or not AND if the banks will lend. Right now, our banks are lending furiously, and the recession is over to boot (as far as headlines go, and with some pretty convincing evidence too). Overall, and in the wider sphere outside this blog, confidence is building. No trader worth his salt is fighting this in a big way right now.

Don’t listen to me, even the quiet, studious, and well informed fellows are saying the same thing: Tim Duy’s Fed Watch, Doug Henwood’s Behind the News and Liscio Report are putting out easily accessible and sober analyses of recent US trend data and this all points up from here, on fundamental grounds. How far up is of little consequence; it’s better than down.

Of course, the reality is that a jobless recovery–especially a long and drawn out one–is painful. However, as long as the pain is borne by the poorest (i.e. those that can not afford houses, no way, no how), it will be ignored. The rich are rich, the true middle class have mutual funds and other market exposure, and the poor just lose their jobs and push on (perhaps to EI, which is the wrinkle in all this).

Canada DID have a recession in the 90s, and it was uniquely severe. That killed real estate. Now the US is in this state (worse actually), but Canada is not there yet. It is how all these things allign that will control the market.

Right now, I don’t see debt overhang being an issue while the overnight rate is held low longer (with much transparency even), and our strong dollar doesn’t absolutely destroy our economy.

In time, you will be right. But will you be right IN TIME? Prices can skyrocket and leave previous levels in the dust. At which point, there’s little point being a “vulture”. Get it?

#111 rKr on 09.16.09 at 7:04 pm

Garth, all your base are belong to Brad Condo-King Lamb. Period….

http://postcity.godengo.net/Post-City-Magazines/September-2009/Fall-Real-Estate-Roundtable/

#112 NKVD Black Raven on 09.16.09 at 7:17 pm

Amongst other things Garth said jobless recovery – sure looks that way presently. Unless we get an RE correction Canada is going to look so unattractive & expensive to new comers.

#113 FTHB (forget that house buying) on 09.16.09 at 7:31 pm

Actually, it’s Dufferin-Caledon. And other visitors should know that behind your new anonymous identity lies a professional Conservative troll. Adios, provocateur. — Garth
—————————————————–
Garth, it’s sick that our government wastes resources sending trolls to tarnish your image. It’s also pretty much clear which posts belong to these trolls. Just another example of Harper doing anything to win….

#114 George on 09.16.09 at 7:49 pm

Bro, we need someone like you in Ottawa so please stop slashing your wrists politically. Politics 101 never under any circumstances whatsoever say “I sucked”. Anyone reading this blog knows your personal integrity is fully intact. but whoever the wanna be “Crap o nut” minister running against you is they probably have the kindergarten skills to cut and paste your words your blog and spew it back at you. Can you at least for a moment suspend doing some “right thang” and own a little more soulless prick from hell political acumen?

Sniff. I’ll try. — Garth

#115 Paul on 09.16.09 at 8:09 pm

So are you telling me that back in March when I said I didn’t have to sell now but would in 2 years …your reply was “you have a small window, jump through it” is not correct now?

We did sell after 2 1/2 months with lots of interest but only 1 offer after a $30,000 price reduction. Across the street has tried to sell but failed, similar house and price,down the street still listed but no sales, started 40,000 above us and recently reduced to still 28,000 more then what we sold for.

So I’d say things are not as rosy as some want us to believe.

#116 Zed on 09.16.09 at 8:18 pm

Garth,

Maybe you should run for Parliament in Kanada. See below

—-

GC: I must be mistaken, Dmitri, but I thought I saw a sign that spelled Canada with a “K” back there.

Dmitri: Oh, you must have been away from our country for a long time, comrade. We have been spelling it that way ever since The Save back in 1972.

GC: The save?

Dmitri: You know, Tretiak’s big save on Paul Henderson alone in front of the net. … Well, after that everyone in this country pretty much gave up on capitalism and joined up with the system of the future. A lot of us changed our names, too. I used to go by “Dave” but somehow Dmitri seemed more fitting with the new era.

GC: How interesting. How is it working out for you? Is there a lot of unemployment?

Dmitri: Unemployment? Ha! Comrade, are you joking? Haven’t you heard of the KMHK?

GC: KMHK?

Dmitri: You know, the big state agency, Kanada Maximizes Housing Kapital. It’s the agency that employs, directly or indirectly, about 17% of the population. Every time people in Kanada are in need of work the government just borrows more money and the KMHK builds more houses.

GC: That sounds strangely familiar, Dmitri.

The rest of the article is worth a read:

http://marketdepth.typepad.com/marketdepth/2009/09/welcome-to-kanada.html

#117 Nostradamus Le Mad Vlad on 09.16.09 at 9:02 pm

As The World Churns (sorry, Turns). It occurred to moi that the sun rises in the east and sets in the west (at least in the northern hemisphere, until the pole shift happens).

Hence — http://smallsizeurl.com/488/ — followed by #148 (Bad Idea — prior column) WillsDad on 09.16.09 at 2:26 am — “. . . Korea of course. Something to think about Canadians…”

Sentences from the link: “. . . Manufacturing output in August at China’s factories grew by 12.3 percent . . . but two standouts were steel output (up 29 percent) and auto production (up 90 percent).” — Where did all that NEW mfg. come from? The west of course, traveling east! Also . . .

“Investment in factory equipment and construction, commonly called “fixed investments,” rose by 33 percent in the first eight months of 2009 to $1.65 trillion. . . . Retail sales climbed 15.4 percent in August . . .”

WillsDad is right. Change, as always is happening with factory closures and retail shopping outlets closing at ferocious speed here.

Other than collecting pogey, and expecting govts. here to bail sheeple out (which they can’t), the working class must have a change in mindset to adapt to new ways of life.

Sun is setting on the west, and rising in the east. Paradigm shift!
——
Hmmm. Four economists gonzo; is there a pattern here, and what does it lead to? — http://smallsizeurl.com/487/
——
Further evidence of how the elite are ‘downsizing the population’, through wars, pointless pandemics, etc. http://smallsizeurl.com/kgb/ — Quote from wrh.com:
“They do not call Afghanistan the Graveyard of Empires for nothing. The last military commander to actually conquer and hang onto Afghanistan was Alexander the Great, and he only kept it for three years.”

The US invaded Somalia today (OIL), is expanding its military strike capabilities in South America (Colombia), added 3,000 more troops to Af’stan (what for?), is close to signing a deal with Turkey (borders Iran) — at some point, they will be so thinly stretched there won’t be enough troops to defend Israel.

Then Dimona is blown skyhigh (Russians / Chinese?), nukes and all. Dimona is fifty miles from Gaza.

#118 Halifaxfamily on 09.16.09 at 9:11 pm

Garth,

You are right, but that call is quite an easy one. The question now, is, can you use any of your background knowledge, especially in an era where the rules are constantly changing, to predict the big downturn?

If you predict the timeline on this, I will be one of your groupies!

#119 Dan in Victoria on 09.16.09 at 9:20 pm

Its kinda funny how the people who rely on the real estate market are all “buy now,best time ever,you’ll get left behind,super affordable etc”and then there’s the ones who don’t rely on it,what are they saying…..hmmm.Look at it this way have you ever seen a used car that was all shiny and detailed up,nice black tires,under the hood all new shiny looking hoses, not a spec of grease on it.Clean as a whistle,Nice new paint job.Gee that looks pretty good “I’ll buy that”.Then it starts, the shiny hoses were only shiny on the top where they were sprayed, bang it blows out,then the flat black spray job on the rad leak lets go,Then the motor slowly starts oozing oil again,Then all those “undercoated” parts on the steering start to fail,Then horrors of all horrors the spiffy paint job starts to bubble where the rust was bondoed over.Oh No!!! i’ve been sold an illusion.You can cover this up for only so long, look beyond our borders, look beyond our continent,the rust is starting to bubble up.

#120 taxpayer like you on 09.16.09 at 9:35 pm

“And other visitors should know that behind your new
anonymous identity lies a professional Conservative troll.
Adios, provocateur. ”

I guess that means “the leader” has an opening. Garth can I use you as a reference?

And before we bash “bubbleicious” BC any more, take a look at these stats for Vancouver Island exc Victoria.

http://www.relocationbc.com/statistics-vanisland.asp

Look at those prices just nicely deflating ever so smoothly and gradually, and those sales numbers being oh so consistent? Why cant the ROC figure this
out? It really is different here!

#121 wetcoaster on 09.16.09 at 11:51 pm

Way to whack them Garth,nothing better than a good ole can of whup-ass !

The sheepherder says:

“LAMB: Inventory levels of new and resale housing are getting dangerously low. Prices are set to soar if we don’t see a real change in supply soon.”

I sold my first house at the peak in 81, the inventories were low then as well but it didn’t keep prices rising once affordability went beyond stupid. Too many paper princes think the party won’t end, it always does. That was no correction,it was a warning shot.

#122 Sean in E-Town on 09.17.09 at 5:47 am

Yeah, I’m with you Garth. I fail to see how apartments that are selling for 180-200 months (after condo fees and utilities) rent in a market like Edmonton, where the going Rent-price-ratio was 150, are suddenly going to burst forth, uncorrected, into higher values and crummier returns on investment.

#123 Skye on 09.17.09 at 12:36 pm

For all this irrational exuberance I blame…. Craigslist! Since the implosion of classified ad revenue, newspapers’ #1 source of income is RE ads. Unfortunately, many people still consider newspapers an unbiased source of information, when in fact most are shills for their corporate or advertiser interests.

I wonder if it’s possible for this bubble to get re-inflated for another 5, 10 years just in time for the boomer crash. I think I’m going to start those Chinese language lessons again…

#124 steven rowlandson on 09.17.09 at 1:12 pm

Garth although its tempting to admit error I think you would be wise to wait. A drop in interest rates that triggers a increase in sales and prices but not an increase in incomes is going to be short lived.
Also if and when rates rise then the trouble will start and it doesn’t take a rocket scientist to figure out why.
There will be alot of mortgage defaults and no qualified buyers at any price. At least not at any price a bank or a home seller would find acceptable. Don’t be surprised if 40 or 50 years worth of real estate price inflation gets wiped away to the point where market wages and market prices are brought into proper balance.
No doubt that will be the kind of event to inspire a horror movie.

Steven

#125 pjwlk on 09.17.09 at 6:46 pm

#100 industrial guy on 09.16.09 at 4:08 pm

“The CAW wants the Federal Government to punish us for not choosing our bloated, inefficient auto industry over its competitors with high import tariffs.”

Oh Jesus, another auto industry know-it-all… Our auto industry is anything but inefficient. I’m not sure where you got your business degree and data from but I’d ask for my money back if I were you… Also the CAW is not asking for tariffs to punish you for anything. All they are looking for is an even playing field, one of which does not exist as you’ve just alluded to with your comment about Korea.

#126 Bill on 09.17.09 at 6:55 pm

AbitibiBowater to suspends at several plants, affects 1,500 jobs in Canada
http://ca.news.finance.yahoo.com/s/17092009/2/biz-finance-abitibibowater-suspends-several-plants-affects-1-500-jobs.html

“MONTREAL – AbitibiBowater announced Thursday that it will suspend production indefinitely at several Canadian and U.S. mills in a corporate streamlining that will affect about 1,500 Canadian workers. ”

About 400 Nortel employees in Canada could lose jobs in Avaya sale
http://ca.news.finance.yahoo.com/s/17092009/2/biz-finance-400-nortel-employees-canada-lose-jobs-avaya-sale.html

“TORONTO – As many as 400 Nortel Networks employees in Canada stand to lose their jobs as part of the company’s bankruptcy sale of its Enterprise division to Avaya Inc., The Canadian Press has learned. ”

============================

Things are just swell, and the recession is over!

Yay!

#127 bill on 09.18.09 at 11:24 am

I had a vision last night : I see crowds of people converging on a condo tower. They have pitchforks and rolled up realestate flyers burning as torches… A bald person looks down from the decrepit tower at the roiling masses and hurls pieces of stucco at them and at the top of his lungs urges them to BUY….. they fill the lobby with the aformentioned realestate flyers and set the tower ablaze….

#128 Henry on 09.26.09 at 11:47 pm

“No one could forsee interest rates dropping so low and staying there for a year thus far.”

Mike(authentic), I find it funny how you can say this when you clearly could see this QE policy panning out with Bernanke. Then Carney followed suit with every move Bernanke did within 1 month. Carney even went so far as to make an informal guarantee to Canadians that rates will be low at 0.25% until at LEAST June 2010. How could you “not see it coming”?! Take those blinders off.

I, like many here, believe Canada is doing the wrong thing. But hey, this is the state of affairs and this is the way it’s gonna be. You dont like it? Run for office and see if you can make a difference. Doesn’t change the fact that Garth was wrong in this foolish world of ours. Look for rates to REMAIN low for longer than 2010…

If rates all of a sudden rise like many renters would like to see, you’d have instant increase in crime. Civil unrest is likely. You think our government will allow that to happen? How will you feel in your newly acquired home at “rock bottom prices” when you can’t even let your kids play safely in the backyard?