Loser

loser1

You know you’re in a housing bubble when bankers privately reveal that 95% of their new mortgage customers finance 95% of their purchases. When almost 100% of new mortgages have the longest approved amortizations – 35 years. When houses with crumbling basement walls but new stainless countertops attract fourteen offers. When the average house price hits an historic high in the midst of a recession. When buyers panic because they think they’ll be priced out. When emotion trumps rational thought. When debt’s nothing. And greed rules.

As dark as all that is, darker still is the growing sense in Canada that owning a home is no longer an earned privilege. But a right.

That’s when a bubble becomes a bomb. The collateral damage can be morality.

This arrived today from Alberta:

I know you’re a very busy man, but I trust your judgement and value your opinions.  I’m a daily greaterfool blog reader (for at least the last year and a half), and thank you for all your time and effort you’ve put into it.  I hope that you can spare a moment to shoot a nugget of advice in my direction.

I rent a house in from some old guy who wants to sell the house and move to Victoria (Victoria eh?  Way to fight the stereotype).  We love the house, and have absolutely no interest in moving.  He wants to sell the house to me, and he’s asking fair current market value for it.  I know he’s still paying for the house, and it’s on a HELOC at prime plus 0.5%.  Assuming I could convince him to sell it to me through a VTB mortgage (for say the next three to five years, upon which time I’d move the mortgage to a bank because I don’t know how much longer he’ll last and I don’t want to fight with his estate executors) at his HELOC rate plus a little bit, my monthly mortgage would be almost exactly what I’m currently paying him in rent.  I figure that this would benefit me in the following ways:  Insulate me from price increases because I’ve already bought it for x amount, and insulate me from significant price drops, as if the price of the house falls by more than what I’ve already paid him, I could just walk away from the deal and let him take the loss (with no effect on my credit report), then buy it when he lists it at a lower price.

Do you see any reason why I should not try to pull this off?  I am a very convincing man, and I figure the odds are better than 50/50 I’d be able to convince him to do it.  He’s a first time landlord, a kind man, and definitely not trying to rip us off.  Do you have any other suggestions about how to handle this?  (Ideally more than “grow some morality”, or “get a conscience, you crook”). — Chris

After you grow some ethics, along with a set, you might ask yourself why the guy would ever sell you a home with a VTB when the property’s already subject to financing?

Fact is, to ink a purchase and sale agreement with you, the owner/landlord will have to agree to discharge the existing home equity line of credit on the day of closing. And how’s he going to do that when you presumably give him no money? Are you that convincing, dude?

Even getting past that little roadblock, there’s the issue of the VTB rate you need to pull this thing off – prime plus a half. Why on earth would the old guy give you financing at 2.75%, locked up for between three and five years? Without a doubt, the prime rate will be double what it is now within 36 months, and could be three times higher in 60. He’d be foregoing income on hundreds of thousands of dollars – just so you could own his property for the same amount you’re now paying him to rent it. Are you on drugs?

Finally, as for your strategy of stealing the house from this senior who (you say) has treated you with kindness and respect, you’re actually asking me for an opinion on “walking away from the deal.. letting him take a loss…” and then vultching it when he is forced to list? And you’d do this even assuming he gave you financing to buy his home with no money down, at a bargain rate?

You may be a regular reader, but you’re also a narcissistic, greedy, self-centred, compassionless loser. If you want a house, pal, buy one.

May you get mugged by a guy in a walker.

184 comments ↓

#1 Concessionman on 09.16.09 at 9:53 pm

lol!

#2 Ben on 09.16.09 at 9:57 pm

”You know you’re in a housing bubble when bankers privately reveal that 95% of their new mortgage customers finance 95% of their purchases. When almost 100% of new mortgages have the longest approved amortizations – 35 years.”

I would love a credible source for this quote as I debate the average down payment and amortization constantly with my father, who works as a loans officer at a credit union. He strongly disagrees that the average down payment is 5% and average amortization is 35 years. He still believes banks and consumers are much more conservative.

Can anyone help me out? And I’m looking for CREDIBLE sources please.

#3 Best place on meth (aka NJ's Analyst) on 09.16.09 at 10:01 pm

The dude asked you to shoot a nugget in his direction, and boy did you ever.

So Garth, is Brad Lamb the smug looking prick in person as he appears in TV/photos?

#4 sd on 09.16.09 at 10:04 pm

This guy is lucky you don’t post his name, what a creep! This is the type of mentality that created the housing bubble and will ultimately bring it down.

#5 Arthur Kurwa on 09.16.09 at 10:26 pm

Hold on. Is this poster by chance Brad Lamb?

#6 Shawn Allen on 09.16.09 at 10:29 pm

Agreed…

I was checking the CMHC site to see what is allowed in a mortage.

http://www.cmhc-schl.gc.ca/en/co/buho/buho_007.cfm

Basically if you have little other debt your mortage payment can be 32% of your monthly income less monthly property tax and monthly heating cost.

$100,000 gross household yearly income at 3.5% interest assuming property tax at $300 per month, heat at $150 allows you to buy $580,000 house. You are allowed a $2217 dollar mortage payment.

The formula takes no account of all your other living costs no account of your income tax rate, your payroll deductions, (some people for example are required to put over 10% into a pension, that is not deducted from the 32%) the number of dependents. Just assumes 32% of income works as a maximum for everyone.

If the mortage rate is variable at say 2.5% now you can get a $681,000 house.

At a around $175,000 income (typically a dual income family) you can easily get a $1 million house with 5% down. And yes CMHC will officially allow you to borrow the “downpayment” if you have good credit and little other debt.

This is an “insurance” company with very unsophisticated rules. It takes no account of the fact that interest rates are at a bottom, no mimimum interest rate is required in the calculation. No accurate picture of total family expenses is required.

The banks of course will write these mortgages all day long as all the risk is with CMHC.

It’s a recipe to allow people to buy more than they can afford.

My theory is lots of newly unemployed people are right now paying the mortgage with a credit card or line of credit and praying for a new and good job. If no high-paying job appears, then finally they will have to stop paying the mortgage.

Where are the statistics on Canadian home foreclosures?, delinquencies?

Why are the figures Garth quotes about 95% of mortages being 35 years and 5% down, private? Bank annual reports are over 100 pages but I don’t think such useful tidbits are revealed.

Where is the ‘Statistics and Reporting” section on the CMHC site?, I am sure they have some data buried in there someplace, but I don’t see any monthly reports section.

I can get lots of data for U.S foreclosure figures and delinquencies, but no for Canada

#7 J Prime on 09.16.09 at 10:31 pm

I cannot believe how people live with themselves. I guess someone like this can’t learn what it is to be ripped off in their elder years until it happens to them. I guess that is why what comes around goes around. Sickening.

#8 dd on 09.16.09 at 10:32 pm

“When the average house price hits an historic high in the midst of a recession.”

You really have to take stock of this sentence. Just like the stock exchange at this moment … so much price based on hope.

#9 Jody on 09.16.09 at 10:33 pm

Why am I not surprised this asshole is from my home province of Alberta. When the crash comes and all the assholes living out here are forced to sell because they can’t afford a $400,000 cardboard box with their $12 an hour job on seismic or their mommy and daddies inheritance runs out I will laugh like hell, bring it on, it’s what these wankers need.

#10 Calgary_rip_off on 09.16.09 at 10:34 pm

Nice post Garth.

That letter shows how it really is in Alberta. Cold and lonely.

#11 DonDiego on 09.16.09 at 10:45 pm

What a sick society when people are trying to dupe the elderly. And doing it so brazenly and openly to boot.

And Garth, I’m sure your segments on shorting the RE market(soaking others) contributed to that young scum’s antics, motivations and desires.

#12 Dan in Victoria on 09.16.09 at 10:46 pm

You need more than a nugget of advice,you need to really understand who and what you are.Remember something, it evens out in the end.Why do you want to prey on a elderly man who has treated you fairly?”I am a fairly convincing man”,more like coniving.Your assement is far too kind Garth.

#13 Kurt on 09.16.09 at 10:59 pm

Thank you for illustrating the line between astute business practices and unethical behavior.

#14 Sheldon on 09.16.09 at 11:01 pm

Lol.
That’s incredible on so many different levels.

#15 Fritz on 09.16.09 at 11:01 pm

Yahoo! and Garth tells it like it is! Bravo! Unfortunately it is also further evidence you will be of little to no use in Ottawa. That putrid cesspool of human waste will suck you down to negate any and all good you could ever do. Just like last time. No matter what party either. You would do far more good running some type of independant MSM outlet to get your (our/Canada’s) message out. Be even more outspoken, and give your scooters some airtime too. To get a lot of readers/ listeners/ viewers you could even put Nost on !!!!!!!!!!!!!!! That’ll get them going!

#16 Shawn Allen on 09.16.09 at 11:04 pm

In my earlier post I meant to say I agree that 95% of buyers going 5% down and 35 year amortizations is a housing bubble.

I don’t agree the fellow who wrote in was a narcissistic, greedy, self-centred, compassionless loser (or anything close to all of that.

I guess you say that mostly for entertainment value and to keep the blog interesting and controversial.

The guy asked a question if the owner agrees to sell on the terms desribed and non-recourse then so be it.

Agreed the guy needs to be told this might not be fair to talk the old guy into this . But to stomp all over him perhaps is unfair.

I mean it’s your blog, do what you want, but over-stated personal attacks like that may not reflect well on you.

#17 Shawn Allen on 09.16.09 at 11:06 pm

Sorry for multiple posts,

reading closer, the guy said,

Do you have any other suggestions about how to handle this? (Ideally more than “grow some morality”, or “get a conscience, you crook”). — Chris

So maybe he asked for it, still the bashing was over done I think.

#18 nonplused on 09.16.09 at 11:08 pm

Harsh response Garth, we are all just trying to be a bit like Wall Street now. “Greed is Good”.

I agree, one should never be out to intentionally take advantage of our fellow man. But the trend is being set by all the “home equity reverse mortgage” companies. Crooks every one of them.

Something Doug Casey said today rings true. Maybe Congress (and our parliment by extention) really still is the best of the land. The possibility being that the rot is actually in the foundations and the average American (or Canadian) is every bit as crooked, dellusional, coniving, and self centered as our elected leaders.

#19 FrankInVictoria on 09.16.09 at 11:10 pm

Not everyone knows a banker who will talk to them off the record. I think of them as commission salespeople anyway and don’t trust them.

I found this Stats Can info that seems to show the same a crazy trend in increased CMHC insured mortgages: threefold increase in just a few years.
At least I think that what’s the “National Housing Act mortgage-backed securities” are. I am sure the readership here will enlighten me if it isn’t so.

http://www40.statcan.gc.ca/l01/cst01/fin21-eng.htm

#20 Charles T. on 09.16.09 at 11:10 pm

The stimulus is working.

#21 Bogdan on 09.16.09 at 11:14 pm

“I am a very convincing man” – sorry dude, but this sounds so gay. Here is an idea, blow up the old guy, maybe you’ll get the house for free and paid cable as a bonus.

#22 PopThatBubble! on 09.16.09 at 11:26 pm

Good call Garth:

Is this what society has degenerated into ?
Vulture wannabees ripping off the elderly ?

What is this senior was YOUR DAD Chris … you’d be screaming blue bloody murder .

#23 Dubble on 09.16.09 at 11:29 pm

Hi Garth,
I have been following your blog for a few months now and would like to thank you for your work. I would also like to thank fellow bloggers for sharing their opinions.

6 months ago I was feeling trapped as a renter and was about to take a mortgage. We got preapproved for an amount much higher than we can afford. My gf and I both have student loan debt, I also owe a small amount for a TV bought with a 1 year no payments plan. My gf also owes $6000 on her visa. We were about to buy at one of the worst possible times imaginable.

Based on this blog and a little common sense we have decided to hold off and rent for another year. We live in Saskatchewan and it seems everyone around us are buying houses/condos. Many are borrowing their down payments and paying 45% more for houses than they were worth 4 years ago.

We are lucky and my parents are willing to toss up $20,000 for us as a downpayment. We have decided to pay down debts this year and enter the home once our student loans, and my girlfriends visa are payed off.

Between the two of us we earn $70’000 per year. We will be purchasing a home for no more than $200’000 and be financing for no longer than 20 years.

I wanted to let you know that I appreciate your input, and that your words are not falling on deaf ears. You saved me from making one of the worst decisions in my life.

Thanks again!

#24 Men With Hats on 09.16.09 at 11:35 pm

Wow ! Actually asking for advice,on a public forum,on how to steal a senior citizens home from beneath him .
Bet this idiot gets punched out every Friday night at the bar .If not he should .
Friggin’ little thief !

#25 hongcouvercrackhead on 09.17.09 at 12:29 am

haha stupid overleverage SOBs.
5pct down with 35 year mortgage is same as bending over for the bank for the rest of yer fucking lives.

PS: why do all Brad Lambs picture have him wearin shit eating grin? i dont care if he got a few bucks, still the biggest douchebag in town

#26 Wow on 09.17.09 at 12:38 am

Your choice of words in describing the sick plan of this disgusting creep is admirably restrained.

#27 Suzukimum on 09.17.09 at 12:50 am

Chris, you are an immoral crook. I hope you will be struck by lightning.

#28 Nostradamus jr. on 09.17.09 at 1:19 am

Very nice blog post Garth.

…It shows you’re back to Political Independent status.

salute

Nostradamus jr.

#29 Munch on 09.17.09 at 1:25 am

bwahahahaha

“Mugged by a guy in a walker”

#30 confused and a little crazed on 09.17.09 at 1:39 am

thanks Garth,

we all have old parents/ Grand parents . we would n’t want someone to screw with our elderly family member …how can condone or help someone screw someone elses

No money down…walking away…this isn’t a bank . this is an elderly guy just trying to have a nice retirement. If you want to low ball him be upfront about it and do it. Show some honesty here. The wall street basterds are the ones who got us into this mess…I wouldn’t want any part of unscrupulous business practices

#31 CS on 09.17.09 at 1:57 am

Geez buddy, you are a piece of work. God help us if you are any example of the younger generation – you say ‘we’ in your letter, so there’s a g/f or wife in this equation? And she thinks trying to con a kind, and fair senior who’s been good to you is a good idea? At least you deserve each other if that’s the case. Yes, I just bet you are a convincing young man, most with low morals and no thought for anyone but themselves are. Is there any senior in this world that you actually like – parent, grandparent, uncle, friend? Imagine someone trying to pull this disgusting con job on them, hoping to stick them with a loss should times turn bad so they can be utterly impoverished in their old age. This kindly old fellow is a fellow human being, not an object to be manipulated for your use and greed. I’d ask if you were raised by wolves but I understand they have some sense of care and compassion for those in their pack, so I guess I just have to wonder what the hell is the matter with you. Don’t do this – one day you might wake up, grow up and find yourself deeply ashamed when it’s too late to take it back or make it right.

#32 Mike (Authentic) on 09.17.09 at 3:32 am

Reminds me of the opportunity I had last year but couldn’t do it out of moral reasons.

A 87 year old, widow, sweet old lady, who lived in the same house for 60 years, fell ill and didn’t have much money. They had to move her to a home for the aged and they offered us to purchase her home to raise funds.

The deal. $3000 a month to pay for her care till she passed. This on a $650k home.

We passed, just couldn’t do it morally to “bet on her lifespan” to get a deal. She sold the home in for $600k in a week.

Morals, honor and values are worth more than money.

Mike

#33 jabba on 09.17.09 at 4:28 am

Well said garth. What an loser!

#34 Robert1 on 09.17.09 at 4:30 am

The best investment I ever made. Timing is everything and the top of the bubble is NOT the time.

Time Period: Early 80’s
Bank Mortage Rate: abt 18 %
Asking Price: $ 78 000
The Home: abt 15 Year Old Detached
Owner: Home Free and Clear

The Offer: Vendor Take Back at 0 % – 10 Years

The Counter Offer:

House Price: $68 000
VTB: 13 %
Term: 6 Years

THE DEAL:

House Price: $68 000 + All Sellers Fees ( incl real
estate )
Downpayment: $ 10 000 ( I think )
VTB: Term 6 Years
VTB Interest: 0 % – YES 0 % When Banksters Were 18

And yes Mr. Turner both parties, seller and purchaser were very happy and stayed in contact. Was it a ‘ top of the market purchase’ ….. hardly. Was it tough making those payments, you bet, no vintage scotch for 6 years. Was it worth it …. damn right, dude.

You literally almost couldn’t give a house away back then. Are those days lurking once again on the horizon ?

Buy At The Top At Your Peril !!!

#35 NOBODY on 09.17.09 at 5:33 am

He sounds like a realtor, no?

Seriously.

Garth wrote:

“You know you’re in a housing bubble when bankers privately reveal that 95% of their new mortgage customers finance 95% of their purchases.”

This must be a lending practice as banks obviously do it. Big deal. You can buy a car with $0 down. Why not buy a house with 5% down?
We, as individuals have no power in changing lending practices. We can bitch about it all day, but tomorrow, Joe 6 pack across the street will secure his $400K mortgage at 3% for that overpriced shack.

So, this is not a RE bubble but now a massive thermo-nuclear RE bomb?

Should this whole thing knock us all back to the stone age then… or not.

Interest rates will remain low for the foreseeable future- hell good bond yields are bringing mtg rates down again 10 days ago… Supply & demand.

What if this RE initiated recession will be a RE led recovery?

#36 David Bakody on 09.17.09 at 6:36 am

May you get mugged by a guy in a walker.

“DITO-DITO-DITO”

Well dude you are doomed because even if y’all made this up, your thought process is trash …. and trash is what will if not already will become of your life. Just in case you have not figured this out this fine older man just might have many fine people on his side who could and would allow him to reach out from his grave and rattle your gage “Big Time”

#37 steven rowlandson on 09.17.09 at 6:48 am

To the home buyer wannabees out there.
If the house costs more than 36 months pay and you don’t have a 25% downpayment based on that 36 months pay price tag then you should not attempt to buy the house. If you are married do not include your wifes income with your pay either.
The reason being is that the second income gives you a margin of safety and allows for some of the finer things in life. Also if you do what most canadians do you will pay too much and when and if the economy goes south you risk losing your house. So be smart and don’t touch what you can not afford. And don’t bend over for the financial sodomites either. Stand up straight like a man and don’t let any one talk you into doing some thing foolish that benefits them to your detriment and financial embarrassment. If the house price is higher than you can afford base on the above guide lines then figure out your purchase price base on 36 months pay and tell the vendor what you can pay. If he doesn’t like it walk away and look else where. T o avoid getting financially buggered you have to be a hard nosed scrooge like home buyer. Its your financial life on the line and financial survival is the name of the game.

Steven

#38 DrC on 09.17.09 at 7:01 am

While I find the psychology of scum like Chris reprehensible, one must scratch a little deeper to find out where he learned this entitlement mentality – could it be that the selfish, greedy, narrcisisitic attitude he has is learned from his landlord’s generation? Boomers have presided over a generation of play now, pay never; leaving this timebomb of debt for gen x/y to clean up. No-one owes me a living – but some in my generation like Chris have other ideas. Ideas learned from watching their parents.

#39 angrylittlefella on 09.17.09 at 7:21 am

I didn’t realize that human excrement could write.
You have a good heart Garth.

I may be angry but I love them oldies.

angrylittlefella

#40 The 'VULTURE' on 09.17.09 at 7:29 am

What Comes Around Goes Around

Boy, this vulture gives all vultures a bad name! LOL…

I have actually walked away from several power of sales after having seen the sad state of affairs of some of the families and their own destructiveness. It is really depressing and sad sometimes…I actually struck up a friendship with one homeowner and suggested several methods to get his family’s finances back on track. I even suggest Garth’s book “Greater Fool – The Troubled Future of Real Estate” to read. He said he could not afford to buy anything at the time as he was literally broke. I returned later on in the day with a brand new copy of Greater Fool and Rich Dad Poor Dad as a gift to him. His eyes lit up and swelled with tears and he thanked me profusely. I said to him, don’t thank me, thank the authors for having the courage to tell it like it is and for being strong and not caving in to outside pressures and market forces.

I look upon myself as an opportunist (as all vultures should) and have actually saved some families from severe dire straits by helping them out of their financial difficulties and relieving them of their debt obligations.

To take advantage of someone when they are down is wrong both morally and ethically.

To take advantage of an opportunity in business that comes up can be a shrewd and wise move. You just have to know when to pull the trigger and when to walk away…It is all one’s own choice based on their integrity and ethics…

Shame on this guy…what comes around goes around…

K
A
R
M
A

#41 AM on 09.17.09 at 8:14 am

#6 Shawn Allen

I tend to agree with most of your post, but the following point left me scratching my head…

“At a around $175,000 income (typically a dual income family)”

I wouldn’t call that typical…maybe fortunate or few and far between.

#42 JeffinPickering on 09.17.09 at 8:27 am

“As dark as all that is, darker still is the growing sense in Canada that owning a home is no longer an earned privilege. But a right.”

That’s nothing new. In fact, it’s been the case since my parent’s generation (now 60) decided that their first humble house didn’t cut it, and they were entitled to more and bigger. So, for a good 20-25 years now, at least. So, most of todays twenty-somethings have learned it straight from the nest.

I would say “darker still is the undeniable reality that every subsequent generation thinks it has to one-up the one that came before it, whether they actually own their showy things or not”.

#43 dave99 on 09.17.09 at 8:31 am

#2 Ben,

Garth’s quote refered to new mortgage customers. Whereas your quote from your father refers to average customers. Perhaps that is part of the difference?

#44 dave99 on 09.17.09 at 8:34 am

#6 Shawn Allen,

You wrote “The banks of course will write these mortgages all day long as all the risk is with CMHC.”

My understanding is that the CMHC only insurers 20% of the purchase price. Any loss beyond that would be paid by the bank. To others, I’m open to a factual correction, but please include a creditable link.

#45 Arthur Kurwa on 09.17.09 at 8:37 am

“I am a very convincing man”

…does this goof have a gun??

#46 Makeorbreak on 09.17.09 at 8:38 am

I know a young person who works for the feds (good salary, pension, etc.) that just bought a condominium in Hull, Que., for $92,000. She put in $0 downpayment and is in debt. Since she needed $8,000 to replace the floors and the kitchen countertops (which are perfectly fine as is), she got approved for a $100,000 mortgage amortized over 35 years.

So when the mortgage is up for renewal in a couple of years, she will probably go bankrupt and lose the place, since she will have hardly paid any equity on it. Seems like the banks are still playing by these dirty rules. Wonder for how long, though.

#47 dave99 on 09.17.09 at 8:38 am

wrt the original poster…isn’t the “elderly person” in question the one who is actually seeking to take advantage of a less fortunate, poorer person, by selling the house at market price at the peak of a bubble?

Ka-ching! Idiot comment of the day. Congratulations. — Garth

#48 Samantha on 09.17.09 at 8:41 am

First, to you Chris, daily reader in a quandary. The unknown factors in your ‘simple plan’ are the long and short term repercussions you and your spouse/family will face from engineering and executing an ethically bankrupt deal.

What goes around does come around, and sometimes when you least expect it. The universe has a way of balancing it’s books, too. You might not be the one to answer for this deal, but maybe someone you care about will pay for it, and I’m not talking money.

Onward:

From The Toronto Star, our Banks are going shopping. How nice.

Our banks are in a solid position, and they are looking at US banks in trouble that can be had for bargain prices.

The bank bail out contagion better not spread here if their acquisitions prove to be an unwise choice. Our wallets will already be picked clean from the real estate shopping spree, CMHC, unemployment, gutted services, higher taxes etc.

They are also looking at acquisitions in other countries. Worth the read. An excerpt follows below:

http://www.thestar.com/business/article/696899

“The timing is looking increasingly opportune because banks outside Canada remain under pressure to decrease leverage on their balance sheets and many could be had for bargain prices.

Keenly aware of their enviable strength, Canadian bank executives yesterday dropped strong hints that they are finally ready to go shopping for those “once-in-decades” deals.”

#49 pbrasseur on 09.17.09 at 8:41 am

Shawn Allen

You bring some solid good points in your #6 post.

Indeed one major flaw of the CMHC is basing their affordability calculation on current interest rates as opposed to property value. Of course if they did introduce some measure of property value in the equation it would help put a cap on home price inflation and somehow prevent the bubble from getting bigger.

But that’s not the goal, the goal is to spread easy credit to stimulate the economy short term and damn the consequences…

The only painless way out would be to have rates stay very low for a long time (years) while the market levels off and personal income catches up until price/income is back to historical ratios.

Frankly I doubt this rosy scenario will happen, and even if it did we’d still have a problem: Canadians still spending too much on homes.

As for the lack of transparency and poor information in Canada that’s also a serious problem, thank god we have the internet…

#50 David on 09.17.09 at 8:42 am

Everyone is jumping on Chris for trying to talk someone into a bad business deal, but I don’t hear a lot of scorn for the “poor old senior” who bought his house for $50,000 and now wants to sell it for $500,000.

I guess its “fair” if young people get screwed by a corrupt system intent on propping up a housing bubble…and poor old seniors should screw them for every cent they can get?

Or charge $3000 a month in rent on a place they bought for $50,000?

Poor old people. Other than most of the public money being thrown at them, and interest rates being kept low to bubble up their asset values…they get nothing.

That’s a winning attitude. — Garth

#51 Albertguy on 09.17.09 at 8:53 am

May be a bit off topic but it seems Austrailia as well as Ontario (and Xurbia) promotes the idea of residential solar power generation where excess power is sold back to the grid at various rates per kilowatt hour.

Now, it strikes me as an awfully good idea and one that promotes green homes , improves resale value and one that should provide new industry opportunities and jobs here in Canada – something we will desperately need in coming months and years.

Any idea what other provinces in Canada promote this and if not WHY NOT? – doesn’t appear Alberta does!

#52 David on 09.17.09 at 8:55 am

I know Garth.

It makes sense that the poor senior, who bought his home and could pay for it on one paycheck, while the other parent was able to stay home with the kids, it was through his own personal brilliance that the home went up by a factor of 10 over the last 30 years.
He DESERVES his $500,000 for it.

And if he can talk some poor young “Greater Fool” into a really bad business decision that will doom him for the rest of his life…then he SHOULD, right Garth?

But, heaven forbid the young guy applies the same business decision, and LEGALLY talks the old guy into a similar bad decision…he should be publically stoned!

Meanwhile Evil Chris, and his significant other, can take the next 35 years both working and maybe pay off a house that the poor old senior was able to pay off in 15 with one job.

Oh, and I suppose they can pay for the poor old seniors health care while they are at it, and get one of the jobs that wasn’t shipped off to China on the poor old guys watch. And pay down some of that poor old guys debt.

Its a pretty strange and uni-generational view of “corrupt” you’ve got here.

Ah, but I’m sure there’s a wave of angry mall walkers ready to peck-type on their keyboards in response right now.

David

I feel sorry for you. Almost. — Garth

#53 pezzazz on 09.17.09 at 8:56 am

I’m shocked to see so many blog dogs here seem surprised at this behaviour. The only thing that keeps me sane during this period is that I can rely on the fact that there are sleazy bastards like this all over the place. Most of these people are trading real estate for higher and higher principles. This is the same population that is steering our ship over the waterfall. As long as I can rely on the “real politic” behaviour I can predict our direction. It’s when the sleaze doesn’t know what to do, when they can’t believe where they’ve ended up, that’s when my fangs come out and that’s when I make bastards like this pathetic waste my own personal old man.

Buy the house and someone from our team will give you a sweet deal in 3 years when you’ll be wishing you were wearing depends.

#54 Samantha on 09.17.09 at 9:05 am

#40 David –

“but I don’t hear a lot of scorn for the “poor old senior” who bought his house for $50,000 and now wants to sell it for $500,000.”

Problem there David, with someone who bought a house and then the market changed? I guess if it happens in your lifetime, you altruistic soul you, you’ll just sell your house for what you bought it for.

Utter nonsense, blaming this old man and seniors in general for the real estate bubble.

You want to blame someone fine, but at least get your facts straight about who inflated the bubble and how the financial sector, among other players and factors sustained it.

This perception about seniors being the cause of societal economic woes is absurd.

It’s a google search world David, start reading and educating yourself, so that in future you can refrain from making ignorant, baseless, and ageist comments.

#55 jshum on 09.17.09 at 9:06 am

I hope it is a bubble and that it pops and it is not like germany where houses are so unafordable everyone just goes buys cars

Everyone is buying a house. i don’t know how they afford it. I know a duel income home where both a working retail jobs (one walmart) that got a house.

I believe the number my bank gave me is 32% of your income. Sometimes I see stuff and wonder if that is a actually happening

#56 Calgary Rip off on 09.17.09 at 9:27 am

Hi Garth.

It’s interesting that one of your readers said that a person should have 36 months of income and 25% down. In what world? You would likely have no house ever except maybe northern Manitoba or Houston Texas with those criteria. That would bring the house to $150,000 for myself. Try saying this in Calgary, it’s what is needed to collapse the market.

Here’s a nice house in Calgary, but priced double what it is worth. If the interest statistics skyrocket this type of listing is going down hard.

http://www.realtor.ca/propertyDetails.aspx?propertyId=8675458

%%ripoff.

#57 Devil's Advocate on 09.17.09 at 9:32 am

There are no bad children just bad parents…

Chris is a real prick, to be sure, but how did he get that way? He is a product of poor upbringing just as are all the “entitled” generation. Look around; see all the spoiled little snots doted upon by their parents. Most everyone expects life to get easier and thus they buy today what they want believing they will come by the means to pay for it later.

Chris is not so unique. There are a lot of Chris’ out there… self centered little shits to one degree or another.

Who’s the ultimate bad parent? Government. Like a bad parent who takes the easy road rather than disciplining their child, our government succumbs to our temper tantrums feeding us at the expense of our own futures. Shinny new undeserved toy fire engine – artificially low interest rates; they are the same thing.

And yes Lamb is the DH he appears… physically and mentally.

#58 mattbg on 09.17.09 at 9:38 am

Garth, based on whatever you’ve written in the past, I think this guy must have assumed you were a fellow sociopath. He wouldn’t have otherwise been so revealing.

It’s my talent of bringing out the best in people. Like you. — Garth

#59 Devil's Advocate on 09.17.09 at 9:52 am

#50 David

Understand one thing very clearly David…

It is the Echo-Boomer generation which most recently pushed housing prices to the brink as they are seduced by ultra low interest rates and the promise that real estate values do nothing but go up, up, up. In my profession I see your generation daily in a buying frenzy for everything turnkey and financed on the “Do Not Pay Until 2013” department store credit plan, Dodge lease and 100% financed brand new home filling a postage sized lot in the Burbs. It was not so much this way 10 or 20 years ago. You Echo-Boomers are competing foolishly with one another bidding up prices… you fools. Oh but please continue… Remember David… houses only sell for what the greatest fool is willing to pay. I can ask what ever I want for mine but it is the greater fool who ultimately determines the price.

While I will share some of the blame for the some of the consequences of my (Baby-Boomer) generations consumeristic self indulgence you are every bit to blame. Yes you are the product of our poor upbringing but you, and your friends, seem to want to only increase the levels stupidity. I mean really Bud… we’re not doing this anymore… we’ve stopped spending… that is why the economy is tanking Lil’ Buddy… because the largest demographic the world has ever seen is pulling out of the game.

Grow up David… there are no parents left around to give you hush money to quiet your temper tantrum.

#60 Mathew Gibson on 09.17.09 at 9:55 am

#20 Charles

Presumably that’s a squirrel on that skewer …

#61 BDG YYC - Hmmm ... ? on 09.17.09 at 9:56 am

Hey Garth … seems I may have a problem getting a link posted intact. May have to be copied and pasted into a browser to activate. (???) Strange.

http://www.leap2020.eu/GEAB-N-37-is-available!-Global-systemic-crisis-In-pursuit-of-the-impossible-recovery_a3797.html

#62 Bill-Muskoka (NAM) on 09.17.09 at 10:11 am

When houses with crumbling basement walls but new stainless countertops attract fourteen offers.

A definite reflection of how totally superficial people have become. The true essentials, i.e., structural integrity, electrical, plumbing, insulation, sewage,, etc. go unnoticed by most and then they wonder if the bank will extend a LOC to pay the contractor to make things livable and safe.

But what the Hey, eh? They got those granite counter tops, whirlpool bathtubs, and all the latest fad in appliances.

Losers indeed, and they have no idea how much they are going to lose. Good thing there are Home Inspections required…LOL. Yeah, right, another industry born to fleece the general public using superficial ‘inspections’ to tell you ‘It’s OK!’.

#63 David on 09.17.09 at 10:13 am

Devil’s Advocate

Entitled generation?

You mean the generation that used up the cheap oil on cars the size of tanks, ran up the national debt for future generations to pay back, and wants the country to keep spending more on Health Care (for old people) and Seniors Transfers than everything else combined?

That generation of self-entitled people?

The first generation not to replace themselves, on average, yet vote for social pyramid schemes like CPP the require an increasing population to be sustainable?

I agree. We have a serious problem with a very self-entitled generation running our banks, our government and our hospitals.

But what the heck…Live for Today. Run up the debt, and put it on my Grandchildren’s tab.

Aristotle had it right. The golden mean for age is about 50. After that, people are far too willing to sell out their principles for lucre.

Garth – I appreciate your near sympathy. And for the record, I appreciate what you are doing with this website, alerting generations of gullible people that housing at 7 times income is not sustainable.

However, I’m 34, with 7 figures in cash, half RRSP, half Non-registered thanks to some 2003-2007 bubble investing (had more, but I waited too long into 2008 to bail). I’ve also got a management job with the government.

So I’m doing fine. My wife gets to stay at home with the kids.

But most people in my generation are putting the kids in $1000 per month per kid day care, and both working to pay off their inflated taxes, and their inflated mortgage. They don’t make as much inflation adjusted as people their age did 30 years ago, but all their bills are higher, thanks to the bad policy choices of the older generations. And they’ll be stuck paying off the debt of people who lived above their means.

So I don’t need the sympathy, but my generation does.

Because if you think we’re going to sit by and watches taxes skyrocket and schools spending continue to get cut while boomers continue to gripe for more and more health care spending…think again.

#64 Chris in Alberta on 09.17.09 at 10:14 am

Humm, I seem to have been vilified here because I spoke of only my potential personal gains. It’s interesting that nobody (myself included) mentioned the benefits to the old guy under my little conjured-up scheme. Benefits such as: If the market doesn’t correct enough to warrant the walk-away I was speaking of within the term of the VTB, or if the market does correct and I suck it up and didn’t walk away, the old guy would have a steady stream of income via whatever rate he’s charging me on the VTB, and if he had to borrow any money to make up the difference between what he currently needs to discharge his HELOC and my down payment, that interest would be tax deductible. I’m not sure (but wouldn’t doubt) if he could write off a portion of his new house in BC (and all associated bills) for the purpose of administration of this business arrangement, not to mention the biggest benefit to him, which would be if the market doesn’t correct (or if it continues to go up) within the term of the VTB, and I flake out/lose my job/lose my life/can’t pay him anymore, he gets the house back (which has with appreciated in value, or remained at the current valuation), all my payments, downpayment, and the only thing he pays taxes on is the interest that I’ve paid him and I’m not sure, but potentially the capital gains on the appreciation of the house, if this appreciation even happens. That chance for his significant monetary gain alone may be worth the lost potential returns on the money he could get if I bought the house in one shot from him through a bank. From this angle, it may turn out to be quite a good arrangement for him.

But because there’s also a chance for me to shelter myself from potential losses, I’m today’s anti-Christ.

FYI, the mortgage would be for well within the 3-3.5x annual salary rule of thumb, but thanks for assuming I’m a financial moron.

#65 David on 09.17.09 at 10:19 am

One final comment:

Most people in my generation don’t really get it yet. They don’t know enough about the way the world works to understand why things are so much tougher now than they were for their parents. Because we are JUST BEGINNING to see the downside of what’s coming to us. After another 5-10 years, there will be a lot more people my age angry about what has happened, and what is happening.
And assuming we don’t have a bunch of drooling 80 year olds that won’t leave their jobs because no 85 year old wants to fire them, we’ll be close to running the show.

So when the generation above me votes to spend $1 million per job to bail out GM, run up massive debt for my generation to pay, to save the value of their RRSP, and to inflate the housing bubble a little further…some of us are paying attention, and can connect the dots.

#66 Jonathan on 09.17.09 at 10:26 am

#50 David

I can’t help but agree with you. Fair market price for this place isn’t fair because we don’t have a free market – we have a government stimulated market buttered up with pile of debt.

Nevertheless, business is business. You can’t look at the macro environment and blame it on individuals. You can’t work out a crooked deal to make the market fair.

#67 rory on 09.17.09 at 10:39 am

From KD over at Market Ticker: “We must change our economic course now and accept the contraction that MUST COME in order to save our economic and monetary system.”

It always is interesting to watch how we Canadians will beat up on CEO’s, bankers, etc for making so much money compared to the middle class. Do not get me wrong I think the gap is outrageous.

But when the same Canadian middles class is compared to China or India what do we say …close our borders, their quality sucks, we need to keep the high paying jobs here …can anyone see difference here. It is all perspective and what side of the fence you sit on and is delusional thinking – the unions, the gov’ts, our entitlements, our protecionism cannot save us from this.

An oversimplification but I think I got it …the world is a global community in terms of trade. We got rich by selling our stuff for big bucks to the world. Plain and simple.

If we cannot sell this stuff or do not have stuff to sell we contract. Plain and simple.

If your stuff is the same as their stuff then the lowest price wins. Plain and simple.

If we only sell internally then again, the guy that has cheaper tomatoes wins. We grow tomatoes but not TVs …where are the TV’s going to come from and how do we pay for them if we have no trade outside our borders …it is a spiral.

Unless we can sell our stuff for more money then we pay out in costs today we lose. …supply and demand is still the basic economic model.

Our standard of living has nowhere to go except down as the gap between us and other worlds narrows – they go up and we go down. They want what we have, wouldn’t you.

I really do not see any other alternative at present as long as the status quo is maintained. Sure, our resources may insulate us somewhat but can we support the whole country on them alone??? I would say no…again, all IMO.

P.S. – As for today’s post…what a tool!!! ditto for some of the posters actually trying to condone and understand this poor soul. As far as the rest – quit with the senior crap (I am not a senior) …all ages, all, races, all demographics, everyone gets used up and beat up by the greedy (remember – greed is not good) … I cannot believe the lack of respect we show to our different groups esp. seniors who actually had to sacrifice something in life unlike the rest of us who have never been in a great depression, nor really hungry, put up with a world war, and only 2 channels…so what does that tell us …our greed has gotten us and our moral compass points straight down….shame on us…we deserve everything we will be receiving if we do not change …IMO.

Ok, I can breathe now.

#68 Smith-Martin on 09.17.09 at 10:45 am

#50 David
We have to remember ,’We all grow old’ Having said this I have to bring to your attention, the fact that many seniors who own their own homes,did it on one income that was much less then most people earn to day,
They served in the military during war time, they help in a labour movement that saw wages increase, pensions,health care.
They lived with in their means, saving and buying things they needed when they had the money to pay for them.
You may not believe this ,but there was a time when people used a commodity to purchase goods that was not plastic… It was called cash…real money.
Most of these seniors, daily went off to work,they brought their own coffee and lunch with them, spending little on what today is considered necessities, but they thought foolishness. They had a code.. if you could not pay for it ,You did not need it.
Don’t knock them simple because now in the twilight of their lives they would like to live in a warmer climate and enjoy the fruits of their lifelong labour.
Be kind,we all grow old.

#69 daystar on 09.17.09 at 10:45 am

#48 Samantha on 09.17.09 at 8:41 am

Lets consider a moment what will happen to Canada once interest rates rise. Housing valuations will tumble, the economy will lag heavily in construction, retail, fiancials, services and consumer spending as a whole and Canada will likely spin into a recession. How long will the recession last? Until it corrects. 3 years… ?

And during this time (likely to kick off next year, summer/fall) the feds will be taking losses with CMHC and federal/trade deficits which they too, have created. All of this new debt will create a lower loonie as the feds look to sell bonds in a tougher environment. So for banks right now, they know this is coming. The last people to know it right now are the fools buying homes at or near the peak of a bubble.

What is the banks best way out? Invest out of the nation into nations that are at or near the bottom of their RE valuations and nations that will experience a pop in currency…. just as… any other wise investor would.

Oh, and did I mention the old brokers rule of thumb when it comes to the markets? When RE does well, the markets do well. When RE sags, the markets sag. The markets are heavily effected by national RE valuations. Banks know this. (Exerienced, highly successful investors also know this and a surprising number of commenters sure don’t, bleating on about how the bubble hasn’t peaked and that housing is the place to be, without ever actually thinking in terms of what other investments RE competes with for profit and under what environments and timelines it takes for investments to play out, such bleaters of “RE is the place to be” and “we haven’t peaked”, it is arrogant, foolish and wreckless of them to go there) And considering what banks know looking forward, its not hard to see why they would want to invest outside of Canada now.

As for readers looking for the stats out there, I would think that CMHC would be the first place to look, although I haven’t done so.

And as for Garths biting nature of this post in regards to the letter above, sometimes a person has to be “nasty” and “blunt” to get the point across. “I can be quite convincing” is a code for, I can “hard sell” or “apply pressure” pursuasions to close a deal. My assumption is, this is one of those cases where Chris, the author of such a letter, knows “nasty”and “blunt” quite well.

The moral of this story is simple. Whats more than fair to me is less than fair to someone else. The reverse is also true unless that is ones will to be at the short end of the stick, Samantha puts it best. I’m likened to believe as well that forces in the universe do observe and keep tabs for good reasons.

Karma is best explained as, “nobody gets away with nothing.” Sometimes, its the opposite of what people thinks in how this all plays out. It looks rough and edgy, but… take today’s story as an example. Chris, the guy who wrote this letter above is actually struggling with his own morality enough (it shows) to quiry Garth on the subject and Garth lets known his views that one is thinking like a loser to contemplate it… because thats exactly what it is. It sounds rough, and direct and blunt, but this is right and wrong we are talking about. Clear as crystal is how one often has to be when it comes down to nipping things in the bud like this.

Have an excellent day, y’all. ;-)

#70 Artisuseless on 09.17.09 at 10:50 am

@ #50 David

People of that generation didn’t feel entitled to own a big house in their 20s. They started small and often started families in rented apartments, moving into a small house when the kids were school age and only by the time the kids were in high school could a lot of them afford the nice big house. These days 25 year-olds want to move into the exact same lifestyle straight from mummy and daddy’s.

Also, houses could be bought back the ‘on one paycheck’ because there wasn’t all the stupid financing there is these days that has blown house prices out of proportion.

#71 Webster on 09.17.09 at 10:52 am

Everyone was enthusiastic about getting on the bandwagon when Garth wrote about VULTURES.

Nobody asked who might be selling those houses. It could have been old people in a lot of distress. All of you were quite willing to be a “Chris.”

Most of you on this blog would jump at the chance to buy a house in foreclosure if it was valued at 75% of market price. You care nothing for the family who lived there, with kids who need to eat and get a good start in life, but will now be out on the street just so you can indulge yourself and take advantage of the situation.

Indignant hypocrites. Shallow. Spare me your self-righteousness. Excuse me while I puke.

#72 jussupow on 09.17.09 at 10:53 am

And y r u sorry for him, Garth? Wtf is the difference between you nice vulch (shorting) ideas and Evil Chris? Are we so sissy emotionally attached to the old-man all of the sudden? Wtf is the difference between the old-man and the poor shmacks u have advocating to dump the house to NOW? Ah, I see. The old guy versus the faceless sheeple. It does not really matter that the poor FTB get enslaved for the rest of their lives. They are just freaking numbers. No faces attached. The seller (following your nice strategies) hoards the loot and off he goes. And that is ok for you and the rotten blog readers (vast majority). How nice. Sheeple. You (all) love the word don’t you? Sheeple. As in noone in particular. Let’s ruin them, wtf. They deserve it, now don’t they? But the poor old man… no no no Evil Chris. How dare you? Hypocrites.

Learn to read. My ‘shorting’ strategies accounted for a scenario in which a purchaser (like Chris) walked away from an offer to purchase or reneged on a mortgage. In both instances, the contract-breaker deserved no mercy. Nor does this loser. — Garth

#73 Barb .. a reader in Calgary on 09.17.09 at 10:56 am

Chris “must have assumed you were a fellow sociopath. He wouldn’t have otherwise been so revealing” — mattbg @ #57

It’s my talent of bringing out the best in people.
Like you. — Garth

And Garth, isn’t that just the thing, some people can’t tell the difference between moral and immoral.

Chris, to blithely muse with calculation that you could just walk away from the deal and make this kind man take the loss — that’s the thing — you ought to give your broken moral compass a shake because it’s off kilter.

#74 Niergen on 09.17.09 at 10:56 am

If I remember correctly, Garth you suggested something very similar to Chris one. The only difference is the Seller can do a bad thing to the Buyer, which is what you called Greater Fool. The Seller does not need moral or ethics thing?

I have never advocated walking away from a legal contract, and never will. That is theft. — Garth

#75 David on 09.17.09 at 11:05 am

“I have never advocated walking away from a legal contract, and never will. That is theft. — Garth”

Intergeneration war aside, I have to agree with that.
A contract is a contract.
If we lose rule of law, we lose everything.

#76 Soylent Green is People on 09.17.09 at 11:11 am

Hmmmm, if Garth had praised Chris’ plan instead, I wonder how the comments would have gone then…

Just a thought… are you thinking or following?

#77 Barb .. a reader in Calgary on 09.17.09 at 11:25 am

#50 David –

The gaping holes in your tirade against Garth and seniors are this:
a) No one HAS to buy a house.
b) Newbies don’t immediately need a “perfect” house.

Ergo, if the price is bad, buyers shouldn’t be buying it.

When we bought our home we were in our late 30’s and 40’s and when it was finally paid off we were in our 40’s and 50’s. It needed all sorts of basic work and we did that slowly over the years. We never pulled out perfectly good materials and threw them away, we still have our 1951 cupboards, countertops and floors. A bit of paint and we’re fine. If someone wants to buy it for ten times it’s price, that’s their dilemma not mine, because it just means that they want to buy what I have.. which means they envy what I have.. and I think you know what envy is.

A feeling of discontent and resentment aroused by and in conjunction with desire for the possessions or qualities of another.

#78 Barb .. a reader in Calgary on 09.17.09 at 11:37 am

And again, there’s #73 who can’t tell the moral difference either. Or can he?

Hmm. Or perhaps these im “posters” are just the herd of trained seals who dump their comments on Garth’s blog and twist anything said, in lame attempts to smear the man they see as their enemy? Gee. Why would a group do that?

#79 Rhino on 09.17.09 at 11:37 am

OFF TOPIC
… but funny. About the “Bubble”. Worth looking at!

The History of Jobs In America

“Paul Kedrosky points to this very cool tool for visualizing the jobs people have done between 1850 and 2000; you click on any one or write it in the window and see how they have changed. Kedrosky writes “Too bad it ends at 2000, thus taking away the fun of watching the profusion of real estate agents and mortgage brokers.” But what about “green jobs”? Can one get a sense of what people are doing, and what the trends are?”

http://www.treehugger.com/files/2009/09/the-history-of-jobs.php#ch02

You will be AMAZED at the growth in real estate agents….

#80 Eric in Calgary on 09.17.09 at 11:44 am

Wake up Chris….. the old man is doing you a favour!! You piss him off by proposing a deal like this, he’ll put the house on the market, get multiple offers over “fair market value” and you’ll have to move your sorry a$$ out of the house you love. Last I checked it wasn’t a buyer’s market. Accept the freakin’ deal if you love the house so much.

#81 David on 09.17.09 at 11:48 am

No one needs a house?

Well, no, actually that is one pretty basic need.

Agreed, no one has to OWN a house, which is why I sold my house in Mid 2007 and have been renting since.

However, to rent anything decent for a family costs over $2 K a month, closer to $2500 in my town. That’s for a 30 year old 4 bedroom place with not a lick of stainless steel or granite in site, a long commute from downtown.

In other words, one hell of a lot more of a typical person’s salary today than the “frugal” old seniors ever had to pay for HOUSING, to rent or own.

People want to dump on today’s generation, fine, a lot of my generation are pretty clueless about the world, and have over-inflated expectations (gee, I wonder who TAUGHT THEM THOSE).

But the numerical facts are, the average young family today spends LESS of their income on clothes, LESS on eating out, LESS on discretionary spending, with the difference being large increases in HOUSING, and TAXES.

So cut the crap arguments about the spoiled generation being the young one. The numbers don’t support that.

#82 Alberta Ed on 09.17.09 at 11:51 am

In the key of media bias, I note that today it was announced that Canada’s inflation rating was a “negative 0.8” per cent. Isn’t that the same as “deflation”?

#83 Devil's Advocate on 09.17.09 at 11:56 am

#75 Soylent Green is People

The whole “Vultch” thing is beyond me other than it is typical human behavior some (like Chris) are just more laden up with than others.

I say keep it up, speed it up, run our economy and country into the ground. The sooner we do the sooner we will collectively come to realize how badly we are screwing up and set about to fixing it properly… if it is not then too late. I actually voted with this very thought in mind last time. There are simply not enough politicians who call a spade a spade, as I trust Garth will, who you can trust to do the right thing although it may not be the popular thing.

Campbell in BC is telling us the HST will be good for our economy?!?!? Of course we need it! We need it for one reason only. We need it because we have had such a long run of buffoons in office spending money willie nillie, and now tax revenues have fallen so significantly they must find new ways to pay the debt of lunacy past. Problem is the HST is a consumption tax and no one is going to be spending, thus no additional revenue. Lagging behind that is the probable lagging economy and high unemployment in which reduced overall incomes will result in lower income taxes. It’s lookin’ mighty bleak ahead…

Brace yourselves folks, as Garth says, you can expect three things 1.) Increased taxes, 2.) Increased interest rates and 3.) Increased unemployment.

#84 andthen on 09.17.09 at 11:56 am

Garth do you think they will raise rates? I am starting to think they are trying to wipe out debt with inflation.

I also think the USA will crumble if rates go up, do they have enough muscle to dictate rates?

#85 Adam on 09.17.09 at 12:18 pm

“I am a very convincing man”

I think you need to remove ‘very’ and ‘vincing’ from that statement to arrive at what you truly are. No more, no less.

Garth is far too kind. May you get hit by a bus. And survive.

#86 Men With Hats on 09.17.09 at 12:19 pm

Hilarious ! All these morally bankrupt idiots defending the thief Chris .
You are no better than him . Your excuses are ludicrous .
Saying that Garth approves of such illegal activity is a huge insult to the man .
Nope. Chris is a loser and anyone backing his play are just as filthy .

#87 Dan in Victoria on 09.17.09 at 12:20 pm

Post # 63 Yeah,nice try.

#88 industrial guy on 09.17.09 at 12:26 pm

THE CANADIAN PRESS
OTTAWA–” Canada’s annual inflation rate remained firmly in negative territory in August for the third consecutive month and economists now believe the Bank of Canada will keep interest rates at record lows for at least another year. ”

Isn’t negative inflation usually called DEFLATION?
I guess I missed the memo telling Canadians not to use the “D” word.

Deflation is now here and oil is still moving up in price. It’s not that far from $100.00 a barrel. Unemployment is out of control and another year of low interest rates will keep the RE markets steaming along …. disaster avoided …. for now.
Garth your economic projections seem to be very accurate. Please work on your timing though. You seem to be roughly 6 months ahead of the country. I guess that makes you an Official Visionary.

#89 Kelly McMae on 09.17.09 at 12:28 pm

Nice! Way to stick up for the old-timers. I wonder what percentage of the population actually think like this guy?

I’m going to be optimistic and say %18.

#90 Devil's Advocate on 09.17.09 at 12:28 pm

#80 David

“But the numerical facts are, the average young family today spends LESS of their income on clothes, LESS on eating out, LESS on discretionary spending, with the difference being large increases in HOUSING, and TAXES.”

I call BullShit.

While at the tail end of the Baby-Boomer generation, I can tell you that we spent and spend a whole lot less on clothes, eating out and discretionary spending than your generation. When we bought our first house, financed at 18.0% interest, in the early 80’s it took a sizable chunk out of our modest earnings. Taxes then were not so far off what they are today but then and today they are a long, long, long way off what they will be in the future because of what BOTH your generation and mine are currently doing to the economy.

You sound like you have your $hit together on a lot of fronts, but you have one heck of a chip on your shoulder. While the Baby-boomers are guilty of a lot Echo-Boomers are not so innocent that they will not be thought of badly by Gen-Xers

#91 Kelly McMae on 09.17.09 at 12:31 pm

#51 DAVID

You seem angry. Maybe you should move to the states, or maybe you already live there.

#92 jussupow on 09.17.09 at 12:31 pm

Garth, you don’t get it do you?

It is not about legality. Do not mix these things. The blog dogs vehemently attacked the poor guy on purely moral grounds. You build your attack on ethics. And from that perspective there is no difference between ur case and Chris’s. Someone gets parted of one’s (hard earned or otherwise does not matter) money – the sheeple the greater fools. The other party just (mercilessly) takes advantage of the situation. This was the mild objection to you ‘strategy’ when you came out with it and the theme form some of us today. You have no moral authority to school him. None whatsoever.

Crap. — Garth

#93 dave99 on 09.17.09 at 12:34 pm

#84 Adam,

You wrote “May you get hit by a bus. And survive.”

Charming. And you presume to criticize the OP’s character? Unreal.

#94 Ben on 09.17.09 at 12:45 pm

“You know you’re in a housing bubble when bankers privately reveal that 95% of their new mortgage customers finance 95% of their purchases. When almost 100% of new mortgages have the longest approved amortizations – 35 years. ”

Okay….so no one seems to be able to find a source to support this statement. Perhaps the originator of this statement might be able to provide a source for me. How about it Garth? Or is this just your gut feeling? And if it is just a ‘gut feeling’, could you in the future differentiate between hear-say and a credible, supportable statistic?
It helps your credibility, you know.

My credibility, as opposed to that of an anon blog poster? Trust me. The numbers hold. — Garth

#95 critical thought on 09.17.09 at 12:52 pm

I see people jumping on the hate wagon. Doesn’t anybody realize this is a mutually beneficial relationship? Has no one read post no. 63? It works for both parties in all but two instances. Of those, one instance the buyer is benefitted, and in the other the seller is benefitted. Chris is a creative businessman, not a con man. I’ll repeat, this is a mutually beneficial relationship.

Also, it seems like Chris is trying to protect his family. Is it now that someone who thinks outside of the box to protect his family is a terrible person? Would you harm your family in order to help someone outside of it take your money?

Besides, it all depends on how the contract is worded. Walking away may not be a breach of contract/stealing. Or maybe Chris will be held liable for any depreciation on the house, and the missed payments. Impossible to jusge a contract without reading it.

#96 Other Ben (not #2) on 09.17.09 at 1:00 pm

#80 David,

I see you’ve been following Elizabeth Warren’s research. Interesting stuff isn’t it?

#97 The FATcat on 09.17.09 at 1:03 pm

#89 Devil’s Advocate

I’ll somewhat confirm #80 David’s statement regarding historical spending based on something I’ve read recently. Bit older tho, as it is based on US stats 1915-1990
http://findarticles.com/p/articles/mi_m1153/is_n3_v113/ai_8873289/?tag=content;col1

Based on Statcan’s numbers that I can find between 1997-2007 household spending is virtually unchanged.
http://www.statcan.gc.ca/pub/62-202-x/62-202-x2006000-eng.htm

#98 JM on 09.17.09 at 1:04 pm

wow so many priceless comments so little time.

While David is ranting, he’s not entirely wrong and the frustration is warranted. I’m 4 yrs older than him.

If one more boomer bonehead tells me I don’t know how to save, I need instant gratification and that my costs of living are not proportionally higher than theirs were I’d snap too.

I save, work hard and live well within my means yet I see huge portions of the generation before me clearly not understanding they were statistically lucky being born when they were. Better yet, they’re the largest voting block that will continue to have their way.

Back to work so I can save more to pay for my parents and their friends CPP, OAS & health care. And yes, at least one of them understands what I am talking about.

#99 Partisan Spectator on 09.17.09 at 1:11 pm

To #16 and #17 Shawn Allen

I think that most of Canada’s internal issues are from nauseating political correctness and everlasting attempts to soften reality. Sometimes the bashing leads to the healing.
If not agree, fancy a swindler is about to betray your father.

#100 lgre on 09.17.09 at 1:17 pm

I’m going to have to disagree with the comments about boomers being responsible for the RE boom we have going on. I’m blaming it on my generation, first time buyers are the reason why housing is bubblelicious now. Boomers are not first time buyers but 25-35 year old are. I have no factual numbers on this, just my opinion based on what I’ve seen and also recognize that without first time buyers there is no market.

#101 critical thought on 09.17.09 at 1:20 pm

Sorry for the double post, but, one more thing:

This man’s plan may not be perfect, but it’s this kind of critical thought and creativity from which the solution to the mess we’re all in together will eventually stem.

#102 Live Within Your Means on 09.17.09 at 1:36 pm

#46 Makeorbreak on 09.17.09 at 8:38 am
I know a young person who works for the feds (good salary, pension, etc.) that just bought a condominium in Hull, Que., for $92,000. She put in $0 downpayment and is in debt. Since she needed $8,000 to replace the floors and the kitchen countertops (which are perfectly fine as is), she got approved for a $100,000 mortgage amortized over 35 years.

So when the mortgage is up for renewal in a couple of years, she will probably go bankrupt and lose the place, since she will have hardly paid any equity on it. Seems like the banks are still playing by these dirty rules. Wonder for how long, though.

………….

Just reading the posts & tweeked on to yours MOB. My niece, who’se doing a masters at Carleton, is renting a 10X10 ft for $400/mo (yep, thats right) in Hull from a 29 yo gal who bought a condo. She works for the feds & has a good paying job. No idea what she paid for the condo. Another girl from BC (sudent) is paying a bit more for a slightly larger b’room. But, they also have to pay utilities. My niece only has to give 1 mo. notice thankfully. I wondered if the utilities would be prorated based on sq. footage but haven’t had the chance to ask her. Apparently my niece gets along with them fab. She’s too busy to ‘skype’, however.

I shared LARGE flats with 1/2 others in Ottawa in prime areas (within 5-10 mins. walking distance to Parl. Hill in late 60’s/early 70’s but never paid more than 25% or so of my salary). Those were the days my friend. !!

#103 David on 09.17.09 at 1:43 pm

“Boomers are not first time buyers but 25-35 year old are.”

Yup. But Boomers are the fifth time buyers. Who still own the first four.
Boomers (specifically ex Goldman Sachs boomers) are the ones who drove interest rates down to insane levels.
Boomer parents, aunts and uncles are the ones trying to convince all my friends that they need to get out and buy houses, because you can’t lose.
Boomers are the ones who developed all the “financial innovation” that saw banks and people get leveraged absurdly on the notion that ‘house prices can’t fall”
Boomers are the ones who voted to bail out AIG, BAC, C, FHM and FNM, GM, Fred’s Window Emporium, and anyone else who was “too big to fail” to protect their 401K’s and RRSP’s.
Put the debt on our (ever growing) tab.
And build another seniors retirement complex while your at it.
Boomers aren’t responsible for the bubble?

Are you serious?

OK, I suppose Alan Greenspan’s generation is complicit as well, by association.

These age-based generalisms diminish your arguments. Sadly this gives you a credibility equal to anyone else who reduces society to competing groups. Jews. Boomers. Arabs. Blacks. GenXers. It’s all ugly, and lazy. — Garth

#104 Barb .. a reader in Calgary on 09.17.09 at 1:51 pm

“So cut the crap arguments about the spoiled generation being the young one”

— David @ #80

David, how stupid do you think people are?

You said:

“to rent anything decent for a family costs over $2 K a month, closer to $2500 in my town. That’s for a 30 year old 4 bedroom place with not a lick of stainless steel or granite in site, a long commute from downtown.

-and-

In other words, one hell of a lot more of a typical person’s salary today than the “frugal” old seniors ever had to pay for HOUSING, to rent or own.”

I can’t believe you let those statements come off your fingers and you have the nerve to call them facts. You didn’t check any facts.

Then you define your need to have a “decent” place by using your terms of “stainless steel, granite, commute” as though those luxuries justify your bottled whine.

Those are luxuries, pure and simple. I don’t own any granite and my stainless steel is my ancient knives. I took 3 buses to work at times. My rent and my mortgage were .32 of my income.

And here’s more facts…. my 92-year-old dad, truly one of your much-hated “seniors”, had a mortgage payment in the high $80s — 32% of his income. So David you shoot blanks at him! His annual income in the $3K range was appropriate for a monthly mortgage payment of $85 or $89 per month.

If you’re going to blunder at Garth you ought to use real facts and check your envy at the keyboard.

#105 CS on 09.17.09 at 1:53 pm

#75 – if Garth had praised this guy’s plan – I would have been both shocked and disappointed and probably would have quite reading his blog. I doubt very much that many people would have just agreed, no matter what he said – after all, our common denominator is that we are the ‘anti-sheeple’!

#106 andthen on 09.17.09 at 1:53 pm

As long as bank will give a kid with his first job and no money $300 000 then starter homes will be $300 000
It is not the Boomers or the Genx

North America consumes and does not produce.
But they can produce money out of thin air(credit)
Fractional lending and “asset” reserves

As seen in the states once the credit starts to run dry the wheels fall off the bus.

Philadelphia will shut libraries, playgrounds and courts by Oct. 2 if the state doesn’t grant a tax hike and pension relief. Other cities also could face dire straits

http://money.cnn.com/2009/09/17/news/economy/Philadelphia_budget_crisis/index.htm?postversion=2009091711

#107 dd on 09.17.09 at 1:54 pm

#47 dave99

“selling the house at market price at the peak of a bubble?”

Come on. The price is the price. Peak or no peak.

#108 CS on 09.17.09 at 2:01 pm

#94 -Also, it seems like Chris is trying to protect his family. Is it now that someone who thinks outside of the box to protect his family is a terrible person? Would you harm your family in order to help someone outside of it take your money?

Teaching my family how to con others seems much more harmful to them then the agonizing and horrid pain potentially inflicted by…moving? Moving may be annoying and inconvenient, but you have to stretch alot to call it harmful.

#109 David on 09.17.09 at 2:06 pm

Straightforward to Chris, either rent the place until he sells it from under your feet or give the gentleman today’s fair market value for the property without trying to play a bunch of gambits and gimmicks. Comprendre hermano?? Pretty simple actually and if you do not like my answer, so much the better. If I were his children the only thing Chris would be getting is an eviction notice.

#110 CM on 09.17.09 at 2:14 pm

“Where are the statistics on Canadian home foreclosures?, delinquencies?”

Kevin over at EdmontonHousingBust is a guru at finding/sharing stats from a variety of sources.

He focuses mostly on Alberta, but you can clearly see the trend in mortgage arrears. Here’s his chart:

http://dynamic-evolution.com/ehb/090819-1.jpg

Based on data from CBA:

http://www.cba.ca/index.php?option=com_content&view=publication&id=69&Itemid=56&lang=en

Nationally arrears stand at 0.42%. Alberta continues to extend it’s ‘lead’ as the next highest rates were in Atlantic Canada and Ontario where they held from May and came in at 0.46% and 0.43% respectively. Saskatchewan now has sole possession of the lowest rate at 0.22%, and Manitoba is next at 0.25%.

So how does that compare to the U.S. housing bust?

http://www.calculatedriskblog.com/2009/08/mba-forecasts-foreclosures-to-peak-at.html

Note, these US stats are are for people one month behind on payments, as opposed to the Canadian arrears what are three months behind… and as the 3 month mark is when foreclosure proceedings typically start, our arrears figures have more in common with the US foreclosure numbers for comparative purposes.

So, the U.S. peak is at about 3%, while ours has hit 0.6%. Still a ways away.

It looks like it took the U.S. about a year and a half after their housing peak (mid 2006) for the delinquency rate to hit 1%.

Then about 1 year after that to hit 2%.

Then about 4 months after that to hit 3%.

A snowball indeed.

If we were to follow the same pattern, our arrears rate would hit 1% at the end of 2009, 2% at the end of 2010, 3% in the spring of 2011.

CM

#111 PopThatBubble! on 09.17.09 at 2:14 pm

Is democracy at ALL levels of Gov’t dying?

Citizens battle to be heard at local town halls

http://www.vancouversun.com/ne…..story.html

QUOTE:

In the middle of summer, council tried to sneak through the annexation under the alternate approval process outlined in the Local Government Act. It’s a reverse-onus thing that other cities such as Powell River have tried to use to ram through unpopular developments.

Under the alternate process, unless 10 per cent of the eligible voters go to city hall or to the city’s website, get an elector response form and indicate that they are opposed to council making a decision without a referendum, council is free to do what it wants.

Amazingly, a group called Citizens for a Livable Cranbrook managed to get nearly double the 1,475 signatures needed.

The referendum is set for Nov. 14 and will cost $37,000. It’s a cost that may have been avoided if Mayor Scott Manjak and councillors a) had made the annexation a central part of their election campaigns last November; and, b) held public consultations after they were elected

=========

But public debate was effectively ended in August when the East Kootenay regional district board fobbed all decision-making power off on the B.C. government with a request that it designate the site as a resort municipality.

Conveniently (and perhaps with Jumbo in mind), the Liberals enacted legislation in 2007 that empowers the government to establish resort municipalities and appoint people to run them. There will be no elections in resort municipalities set up under this legislation. Local council members will be appointed by the province.

Premier Gordon Campbell and Community and Rural Development Minister Bill Bennett, whose riding is just down the road, insist that citizens’ in-put will be sought. But there’s no necessity for it.

Residents are livid. They already live with the effects of massive and rapid development in Invermere, Radium, Revelstoke and Golden.

Local newspapers are full of letters blasting the regional district directors and the province for ignoring citizens and their opinions. And some citizens are trying to gather 5,000 names on a petition to have the regional district’s request overturned.

Interesting, isn’t it? On the one hand, there are all these politicians wringing their hands about voter turnout declining at all levels. And, on the other, when issues that go to the heart of communities come up, politicians only listen to what citizens have to say after they are forced to mobilize to be heard.

PS Garth..this sounds much like your gravel pit story on the Election blog.

#112 Increasing that 1% on 09.17.09 at 2:15 pm

#80(+ your other postings above)- David

I am no financial expert, # 80…David, but you are full of sh*t.

Your display of ageism is disgusting – no different in incomprehensibility than racism, sexism, etc..

You sound like a former telemarketer who conned elderly vulnerable people in their own homes, and justified it to yourself. Now you’re still probably doing something in a similar vain- and convincing yourself it’s all ok, as you try to convince others.
———————————————————-

#25. hongcouvercrackhead

“5pct down with 35 year mortgage is same as bending over for the bank for the rest of yer fucking lives.”

–Never heard it quite put that way

#113 Barb .. a reader in Calgary on 09.17.09 at 2:16 pm

#63 Chris in Alberta “I seem to have been vilified here because I spoke of only my potential personal gains. It’s interesting that nobody (myself included) mentioned the benefits to the old guy under my little conjured-up scheme.”

Oh my goodness Chris, do you really not see that you are now just re-twisting the angle? Now you want to seem like a nice, volunteer vulture helping out a kind man simply because you have the skills to trick him VS sitting by while he is vultured by a complete stranger?

Oh, wait, he wouldn’t give a stranger that deal.

And heaven forbid he put it on the open market and get more than you offer.

Worse still, he might even find a buyer who is honest and wouldn’t walk away.

But you want to snap up his house before all that. You want to use your relationship and your skills to get to him first and convince him not to look for a better offer. You want to catch him quick in your trap.

Chris, you are a self-professed Confidence Man (“I am a very convincing man”) and it shows.

Chris, don’t try to justify it. You are setting up a nice guy using coercion and pre-meditated mal-intent of walking away from a legal contract.

#114 David on 09.17.09 at 2:17 pm

Barb,
Your anecdotal evidence aside, the statistics on house prices and income levels through time is pretty easy to check.
As for the percent of disposable income that young families spend on Tax and Housing as opposed to discretionary, Moneysense carried that article sometime in the last year.

Garth – ouch. I’ve been called lazy before. But never ugly! I could retort that I have been called worse things by better people, but I would hate to be thought of as unoriginal.

I suppose I do tend towards sweeping generalizations of a complex problem to hit home a point.

#115 David on 09.17.09 at 2:32 pm

I know, I know, Grandpa walked 87 miles to school when he was a kid, in eight feet of snow, uphill, both ways…but for all those who are interested in INTELLIGENTLY debating the issue, try reading.

http://www.canadianbusiness.com/my_money/planning/article.jsp?content=20081201_20012_20012

http://www.canadianbusiness.com/my_money/planning/article.jsp?content=20070928_17200_17200

#116 rory on 09.17.09 at 2:41 pm

#62 David
And you have a management job in the gov’t …man talk about being part of the problem and not the solution …yep, your public service contribution is going to change the world …pzzz.

#82 David you said:
“In other words, one hell of a lot more of a typical person’s salary today than the “frugal” old seniors ever had to pay for HOUSING, to rent or own.”

Then you said this in #62:
“However, I’m 34, with 7 figures in cash, half RRSP, half Non-registered thanks to some 2003-2007 bubble investing (had more, but I waited too long into 2008 to bail). I’ve also got a management job with the government. So I’m doing fine. My wife gets to stay at home with the kids.”

Betcha the ‘old guy’ your criticizing never had it so good when he was 34 … he might even trade you for your warm coddled life that your still are living.

#117 Makeorbreak on 09.17.09 at 2:43 pm

http://dailycapitalist.com/2009/09/15/economic-megatrends-that-will-drive-our-future/#more-1855

#118 David on 09.17.09 at 2:44 pm

I guess I can’t post direct links on this page?

Ok, then for anyone who wants proof of my assertions that things are tougher for the modern family than they’ve been in many generations, go to the Canadian Business Online Website, then search for:
“War on Family”
“Squeezed”

Then you’ll have some actual numerical facts to go along with your anecdotal evidence.

#119 rory on 09.17.09 at 2:49 pm

David, hi …so your management in the gov’t …today is Thursday …a good day for working yet you have spent X amount of hours over many posts blogging about crap when the only crap should be your ass getting kicked down the hall for being a first rate slacker …get back to friggin’ work …set the example for your staff or maybe you are the example …yikes.

#120 Makeorbreak on 09.17.09 at 2:52 pm

Livewithin your means:

The friend that bought the condo in Hull must have paid around $150,000. I think you mentioned once the condo was in ‘Le Plateau’, which is a new development where condos are sprouting like mushrooms. Most of them look like this:

http://recherche.centris.ca/centris/images/inscription/PV/821/662/0/QMc0QL7r0cqo_MEDIUM.jpg

If your niece pays $400 a month, it looks like a good deal to me. Utilities are not expensive, these condos are heated with electricity. Electricity is (still) cheap in Quebec, and their condo fees are about $100 a month (for the time being).

My young friend bought in an older area, in a tower built in the 1970’s. Her condo fees are $168 a month.

http://recherche.centris.ca/centris/images/inscription/PV/801/872/2/xMsjbFRa5u7T_MEDIUM.jpg

#121 D in London on 09.17.09 at 2:57 pm

# 97 – JM

I watch the Gen-Xer and Boomer baiting going on and wisely keep my head down in the trench and my helmet screwed on tight. This fight is even better than the “Gold-is-not-money … Is-too, Is-not” fights.

The lack of any evidence presented by both sides is alarming. The boomers are just as guilty as David for throwing out their observations as “facts”. There are a lot of “-isms” being tossed about, and we are dangerously close to demonstrating Godwin’s Law here.

Let me contribute a link supporting David’s position and hopefully lift the tone of this conversation:
http://money.cnn.com/2007/05/25/pf/mobility_study/index.htm?cnn=yes

Or, you can all just go back to mudslinging…

#122 Barb .. a reader in Calgary on 09.17.09 at 3:00 pm

Garth, a laugh for you, germane to those taking advantage of people and misrepresent..

Bob, a 70-year-old, extremely wealthy widower, shows up at the Country Club with a breathtakingly beautiful and very sexy 25-year-old blonde-haired woman who knocks everyone’s socks off with her youth, appeal, charm and who hangs over Bob’s arm listening intently to his every word. His buddies at the club are all aghast. At first chance they corner him, ‘Bob, how’d you persuade her to marry you?’
‘I lied about my age’, Bob replies.
‘What, did you tell her you were only 50?’
Bob grins, ‘No, I told her I was 90.’

#123 Live Within Your Means on 09.17.09 at 3:35 pm

#94 JM on 09.17.09 at 1:04 pm

wow so many priceless comments so little time.

While David is ranting, he’s not entirely wrong and the frustration is warranted. I’m 4 yrs older than him.

If one more boomer bonehead tells me I don’t know how to save, I need instant gratification and that my costs of living are not proportionally higher than theirs were I’d snap too.

I save, work hard and live well within my means yet I see huge portions of the generation before me clearly not understanding they were statistically lucky being born when they were. Better yet, they’re the largest voting block that will continue to have their way.

Back to work so I can save more to pay for my parents and their friends CPP, OAS & health care. And yes, at least one of them understands what I am talking about.
………….

JM – Did you, and most of your friends work Thurs, Fri evenings and all day Saturday while going to high school? I did, plus I also babysat from the time I was 10 yrs old. Granted I was very mature for my age. At 13, I spent every aft. after school (and an extra bus ride) babysitting a 2 yr. old while his Mom (an American) was nursing their latest. Her hubby was a French Quebecer who had studied psychiatry in Mass. but wanted to potentially return to PQ & practice some day. He did 4 yrs in Mtl at St. Jean de Dieu. so he could. They wanted me to go live with them when they moved back to Mass. She had become an older sis to me. They even had a neph that they thought I’d like. :-)

Jim – you sound VERY angry. Each generation has its challenges. Do I feel bad about what our younger generation is up against? You bet. But, I’m also optimistic. They’re a smart generation and will find their way, just as their parents did.

Prolly related too much about me, but ‘m a nostalgic old fool.

#124 Men With Hats on 09.17.09 at 3:44 pm

Note :
Garth does not counsel criminal activity or morally reprehensible scenarios .

#125 Nostradamus jr. on 09.17.09 at 3:47 pm

No bubble here on the North Shore

Deep Cove, North Vancouver…

1/MLS# V780317

Listing of cottage u had pic of on ur blog a few days back…

Sold full price $999K

2/MLS# V780307

Sold full price $1.399 million

3/MLS# V767642

Sold Ask $4.48 million…Sold $4.325 million

…Have I ever mentioned Vancouver will become North America’s Financial, Trade, Culture and Leisure Capital?

Nostradamus jr.

#126 Rhino on 09.17.09 at 3:47 pm

#118 rory on 09.17.09 at 2:49 pm

Whoo hooo!!!!!

Excellent post!

Biggest smile today…..

#127 JM on 09.17.09 at 3:51 pm

#120 D in London

I definitely need a helmet just to follow this argument.

http://www.thestar.com/business/investing/article/696888

Who’s footing the pending bill for people who can’t save? Mudslinging not required, everyone take a deep breath & chill…

#128 TJ on 09.17.09 at 3:52 pm

I hit the ceiling when I read this guy’s post.

Now that my blood pressure is down a bit – I will let the late and much loved John Winston Ono Lennon have the last word on this humanoid: “He’s a swine”.

#129 lgre on 09.17.09 at 3:56 pm

#102 David on 09.17.09 at 1:43 pm

yes, I’m sure GS’s board of directors are all bald, white males with big pot bellies, but there are a lot of people responsible for the bubble, including bankers, RE agents, brokers and most of all the BUYER..the buyer is the most responsible, nobody is threatened to be hung or shot if they dont buy RE, that is a choice they make..I know the rates have made it easy for them to take the plunge, but the 25-35 year olds are the ones who are jumping in without knowing how deep it is.

I was dating a girl a few months ago who at 27 and with a 3 y/o decided that she was going to buy a $280k semi with a $42k salary and $10k down..because it was a great deal and everyone goes through it, that was her justification. All her friends have bought and now she must as well. The only people convincing her to buy, where her own peers.

#130 Ben on 09.17.09 at 3:59 pm

“My credibility, as opposed to that of an anon blog poster? Trust me. The numbers hold. — Garth”

What would you like to know, Garth? My full name? Occupation? Place of residence? I’d be happy to give them to you over email. While perhaps not as accomplished or educated as you are, I’m also not an idiot. I teach for several fine post secondary institutions and have two Master’s degrees.
I don’t doubt your numbers. I would love to be able to prove this to my father and finally settle the discussion. But I can’t very well say “a friend of a friend of Garth Turner says….”. You understand that. Now, do you have a reliable source, or is this just hear-say? “Trust me” isn’t going to cut it.

Ever heard of research, professor? — Garth

#131 Bilbo Bloggins on 09.17.09 at 4:00 pm

Everyone talks about Alberta and Ontario being expensive.
That’s nothing.
Oh please, we got the biggest mother of all bubbles in BC.

If the benchmark price for an SFH in Alberta drops by $100,000 (which is very realistic), I can see BC price dropping $200,000 or more.

Plus your salaries are higher.

#132 JM on 09.17.09 at 4:04 pm

#122

Without too much detail & boring stuff

– worked every summer since I was 13
– spent some time in the Army reserves
– worked every different shift conceivable while in university including w/end midnights
– finished school debt free w/out parental help, as did both my siblings
– continue to bust my butt to teach my kids the right things to do

The best thing for all generations is to be armed with financial literacy so that no one gets run over by unexpected events. There are no “free” hand-outs, someone has to pay eventually… :)

#133 pjwlk on 09.17.09 at 4:11 pm

Recovery my ass!

Hey, seems like the government is getting ready for a flood of bankruptcies in the not so distant future – and what better way to do it but to stick to the peons again…

From the Sep 17th hamilton spectator : http://www.thespec.com/News/Business/article/634548

“In Hamilton, consumer insolvencies jumped 35.5 per cent for the 12 months ending in June, according to the latest data available. Individual bankruptcies in the city rose by 32 per cent while consumer proposals — where a debtor negotiates a reduced payment to creditors in order to avoid bankruptcy – climbed 44.5 per cent.
In Ontario, insolvencies grew 33.2 per cent during that time. The national increase was 31 per cent.”

“The federal government is more than doubling the length of personal bankruptcy for some individuals”

“The timing shows a blatant disregard for the current financial hardships facing many Canadians,” said Hoyes.

#134 rory on 09.17.09 at 4:15 pm

Found the perfect set of ‘rules’ for todays discussion …Bill was not a boomer when he made his cash …this is great and oh so appropriate.

http://www.slideshare.net/olliebray/bill-gates-life-is-not-fair-get-used-to

#135 Ben on 09.17.09 at 4:21 pm

Ever heard of research, professor? — Garth

That’s cute Garth. Of course. However, I can’t seem to find the source. Rather than keeping a simpleton like me in the dark, why not just tell me where you got the info from? Evidently, you are en expert at research. I’m sure, then, that you understand the importance of citing a source. May I have it please?

Proprietary, I’m afraid, teach. The only accurate source for this is the lenders themselves. Trust me, the number holds. — Garth

#136 Live Within Your Means on 09.17.09 at 4:25 pm

#119 Makeorbreak on 09.17.09 at 2:52 pm
Livewithin your means:

The friend that bought the condo in Hull must have paid around $150,000. I think you mentioned once the condo was in ‘Le Plateau’, which is a new development where condos are sprouting like mushrooms. Most of them look like this:

http://recherche.centris.ca/centris/images/inscription/PV/821/662/0/QMc0QL7r0cqo_MEDIUM.jpg

If your niece pays $400 a month, it looks like a good deal to me. Utilities are not expensive, these condos are heated with electricity. Electricity is (still) cheap in Quebec, and their condo fees are about $100 a month (for the time being).

My young friend bought in an older area, in a tower built in the 1970’s. Her condo fees are $168 a month.

http://recherche.centris.ca/centris/images/inscription/PV/801/872/2/xMsjbFRa5u7T_MEDIUM.jpg

Hi MOB – My niece is on Ave. des Jonquillers. I did a google map search. It would take her 1 -3/4 hours to get to Carleton by bus IIRC. She’s managed to get her parents’ old car so that might work out. Yes, PQ electricity rates are lower than Ontario.

Awaiting to hear from her how she’s making out. She’s my ‘daughter’ I never had.

My niece used to live in the plateau area of Mtl. with her boyfriend.

#137 Calgary Rip off on 09.17.09 at 4:29 pm

Nostradamus Jr.:

B.C. is not the greatest place on earth. And it will never ever be a hot spot for north america. That’s the ego of british columbia talking. And British Columbians have enormous egos. It’s some kind of pseudo British crap with no class.

One place that is nice is Texas. The whole state. Cheap food, cheap real estate, and plenty of space. And hot weather. You dont have to ever turn your heat on in Houston.

Texas shows what Canadian real estate really is, for the most part: Overpriced crap. There’s only a few places left in Canada that are priced reasonable: Thunder Bay and some places in Manitoba. Otherwise its all a joke.

And Vancouver is sorry and not worth the hassle.

#138 Live Within Your Means on 09.17.09 at 4:34 pm

#131 JM on 09.17.09 at 4:04 pm
#122

Without too much detail & boring stuff

– worked every summer since I was 13
– spent some time in the Army reserves
– worked every different shift conceivable while in university including w/end midnights
– finished school debt free w/out parental help, as did both my siblings
– continue to bust my butt to teach my kids the right things to do

The best thing for all generations is to be armed with financial literacy so that no one gets run over by unexpected events. There are no “free” hand-outs, someone has to pay eventually…

Sorry for all my detail & boring stuff.

#139 kitchener1 on 09.17.09 at 4:35 pm

Dave is right about the boomer generation.

Look at the new EI bill proposed by the con’s and tell me that is not geared to the boomers. Wait until you hear more cries from the boomers, Garth is already talking about how no one can live of CPP. I agree but why were’nt the boomers complaining about that 15 years ago? Guess it only matters when it effects them personally.
Garth you said yourself that anyone 30 or under today are screwed. That bill was specifically designed to those who are 45 and older. Politcal pandering at its best. At its just the start. While the liberal proposal was not the best at least in included everyone.

Guess those who are 35 years or younger who worked at multiple companies don’t matter.

That is an unreasonable characterization. Is it not fair that those who have contributed to UI/EI for decades gain a few more weeks of benefits if unemployed in the worst recession since the Thirties? Are you utterly without compassion? — Garth

#140 Ben on 09.17.09 at 4:55 pm

“Proprietary, I’m afraid, teach”

Fair enough. Thank you, sir. If you do come across that published information, would you be kind enough to post?

#141 Live Within Your Means on 09.17.09 at 4:58 pm

#80 David on 09.17.09 at 11:48 am
No one needs a house?

Well, no, actually that is one pretty basic need.

Agreed, no one has to OWN a house, which is why I sold my house in Mid 2007 and have been renting since.

However, to rent anything decent for a family costs over $2 K a month, closer to $2500 in my town. That’s for a 30 year old 4 bedroom place with not a lick of stainless steel or granite in site, a long commute from downtown.

In other words, one hell of a lot more of a typical person’s salary today than the “frugal” old seniors ever had to pay for HOUSING, to rent or own.

People want to dump on today’s generation, fine, a lot of my generation are pretty clueless about the world, and have over-inflated expectations (gee, I wonder who TAUGHT THEM THOSE).

But the numerical facts are, the average young family today spends LESS of their income on clothes, LESS on eating out, LESS on discretionary spending, with the difference being large increases in HOUSING, and TAXES.

So cut the crap arguments about the spoiled generation being the young one. The numbers don’t support that.

Hi David – can you provide stats re you’re last sentence above. I can’t find stats, just what I see.

#142 Joe Realtor on 09.17.09 at 5:09 pm

Re: Rate hikes

I got a letter from TDCanadatrust today.

I was fortuntate to miss out on the prime hikes for my SLOC earlier this year. I was told that I was grandfathered in.

That will come to a blazing end in November.

Even for the Banks “best” customers, you’ll now be charged Prime plus 1% as of November 16.

So when Prime is back to 5 or 6% a year or so from now, you’ll be paying 7 or 8%.

If you’re willing, they’ll give you a bit of a break if you lock in some of your balance for a fixed period.

#143 Barb .. a reader in Calgary on 09.17.09 at 5:09 pm

#114 David

I read the links. You’ve cited snippets of the report out of context to support a stunted view instead of the larger view which the report intends, which is, that there should be a national debate over how to increase the wealth of average citizens.

The problem is that citizens are susceptible to greed — instead of being practical, they lust and chase beauty and convenience in their shelter. They don’t bother saving, they just go for the ‘here and now’ types of instant gratifications and stupidly spend every last penny to do so.

You said:

“But the numerical facts are, the average young family today spends LESS of their income on clothes, LESS on eating out, LESS on discretionary spending, with the difference being large increases in HOUSING, and TAXES.”

The article you cite says:

“She adjusted the figures for inflation and found that, among other things, families are spending 32% less in clothing now than they did a generation ago. The reason? Most people don’t dress up as much, which means fewer suits and fewer expensive dress shoes.
In addition, foreign manufacturers are churning out most of the goods we wear for lower prices, in real terms, than 30 years ago.”

In other words, people are lucky now, “things” are cheap. They should have more money left over.

David, there should be more money left over but there’s no money left over. No savings. Why? Because of GREED for instant gratification of best location and luxury amenities. So they stupidly do not put the extra money into savings, it is instead routinely now thrown full force against a trophy house — and our media and the greedy snake oil salesmen lust them on, urging them to ignore savings and instead to throw greater and greater portions of their now more available income into alleviating their envy.

#144 X on 09.17.09 at 5:10 pm

#93 Ben – if you want to check Garth’s facts walk into the local bank, and check with the mortgage officer….had one in as a client about 2-3 weeks ago..they told me the same thing Garth stated.

#145 Gb on 09.17.09 at 5:14 pm

This dolt will get what is cominh his way.

What a horrid picture of life in Alberta!

Greed and no moral compass. What a twit. You should have posted his name Garth…

#146 jimmy on 09.17.09 at 5:14 pm

It seems like a reasonably safe and potentially profitable idea; but then again so does mugging old ladies.

I don’t mind a little ‘vulturing’ when the bubbles burst, that’s just natural selection. But this guy is taking advantage of the weak, not cleaning up after the greedy.

#147 Nathan in Edmonton on 09.17.09 at 5:28 pm

The boomer bashing continues… personally I don’t resent the boomers for the opportunities they’ve had that I my not have. Most boomers are scared for the future and they should be, their wealth will be heavily drained in the next decade as home values, investments and pensions lose value. Any younger person hoping for some big payout of an inheritance will be very disappointed.

#148 JM on 09.17.09 at 5:56 pm

#137,

My apologies, I meant not too much detail on my boring stuff, not implying yours was. It can be read both ways I see.

At least we agree about living within our means.

#149 Smith-Martin on 09.17.09 at 6:05 pm

#97 JM
I am 75,worked all my life,started at the huge salary of .38cents an hour, dressed well on my modest wages,by buying a sewing machine. Paid cash for everything I purchased,as did all my peers,
Housing was cheaper because wages were so low, We saved and when we were able to buy a home,we bought what we could afford,kept it in good care and maintainance. There were no pension plans to begin with our generation worked to gain, pensions , Health care and Employment insurance.
We built this country with sweat, blood, and tears.
We cared for our families, and worked for the future and betterment of the country,and all who live here.
Should we not have some comfort in our twilight years. Just for the record I worked until I was 67, raised a family,made my own,and the cloths for my family, I also planted a garden ,and preserved the produce I grew.
Things are tough,and will probably get worse before it gets better, but that is not the fault of seniors who have earned the right to any pensions they are paid today, they made sure todays generation would have things better then we had.
Suck it up and take responsibilty for your own life style.
You choose to keep up with your peers.

#150 Devil's Advocate on 09.17.09 at 6:10 pm

“You know you’re in a housing bubble when bankers privately reveal that 95% of their new mortgage customers finance 95% of their purchases. When almost 100% of new mortgages have the longest approved amortizations – 35 years. ” Garth

As a REALTOR who has some first hand experience dealing with such, I will concur with Garth’s statement here provided he, or the banker who privately revealed to him, is talking about “new mortgages” as in “first time buyer mortgages”. In which case, from my experience yes 95% of first time buyers are financing 95% or better of their purchase.

I’d even go so far as to say that better than 75% of ALL purchases are 75% or more financed, based on my experience of late. Very few buyers who finance are entering into conventional mortgages (25% or more down payment). Do they have more money than they put down? I suspect for the more established crowd yes they do, but at today’s ultra low interest rates they would rather load up on mortgage and sink their equity into easy money speculative dreams like the stock market. I’ve seen some evidence of this but Garth would likely be in a better position to confirm the extent of it’s proliferation.

WOA now there’s a scary thought… not only is the government feeding first time buyers “Economic Crack Cocaine” they’re hookin’ the older folks on it too. Who said just because you’ve got a few years under your belt you’ve learned anything?

But I am only a near credible source far from absolute.

#151 Santa on 09.17.09 at 6:12 pm

jussupow, don’t fret. There is a difference. Back then, when Garth had advocated how to short the market it was different. Garth wasn’t decided yet on running again. Now he is. Now he needs old guys’ votes. Big difference.

Isn’t it Garth? You are a new man now.

#152 Five percent on 09.17.09 at 6:13 pm

@Ben:

Check out Page 5, Figure 4 in this CMHC publication:
http://dsp-psd.pwgsc.gc.ca/collection_2008/cmhc-schl/hn/nh12-198/NH12-198-2008-11E.pdf

“Proprietary”, eh Garth? ;)

Yup. That data is more than a year old. Mine is days old. — Garth

#153 Makeorbreak on 09.17.09 at 6:31 pm

LWYM:

The condos on Des Jonquilles are less expensive. They sell for about $110,000. Their condo fees are around $200, which I find expensive.

http://recherche.centris.ca/centris/images/inscription/PV/820/012/0/TCtEcScHPk2F_MEDIUM.jpg

We have a ‘Le Plateau’ area in Hull too. It isn’t far from the ‘Jonquilles’ area, which is the Manoir des Trembles area.

#154 Nostradamus Le Mad Vlad on 09.17.09 at 6:48 pm

#32 Mike (Authentic) on 09.17.09 at 3:32 am — “Morals, honor and values are worth more than money.”

Class act; this is the best response. No matter the outcome, one feels good about themselves by doing the right thing.

#70 Webster on 09.17.09 at 10:52 am — “. . . jump at the chance to buy a house in foreclosure if it was valued at 75% of market price. You care nothing for the family who lived there, with kids who need to eat and get a good start in life, but will now be out on the street just so you can indulge yourself and take advantage of the situation.”

Interesting. People still let emotion run rampant over their lives, and it is very easy to let greed — a basic, negative emotion — take over when one sees a really good deal, not clueing into the fact that their gain is someone else’s pain.

‘Spose humanity still has much to learn about assisting others. See #32 Mike (Authentic)’s post. Yesterday, the Kelowna Food Bank launched a new initiative, collecting enough food for children. Kelowna has at least 12% unemployment now, possibly higher and donations, either cash or food are way down.

#137 Live Within Your Means on 09.17.09 at 4:34 pm — “The best thing for all generations is to be armed with financial literacy so that no one gets run over by unexpected events.”

Bang on! If Financial Basics started from Grade 3, cont’d thruout college and / or university, we wouldn’t be in the mess we are today! Too late now!

#146 Nathan in Edmonton on 09.17.09 at 5:28 pm — “. . . their wealth will be heavily drained in the next decade as home values, investments and pensions lose value.”

Noted, but a large portion of this could easily have been avoided had the boomers (I am one) chosen to invest, either in RRSPs or non-registered plans rather than getting a larger home (time bomb) with another mortgage, just because “everyone else is doing it, so we will follow suit.”

Better to have an adequate, long-term pension, combined with a smaller, debt-free home.
——
Bulls / Bears / Balls Market; which to choose? — http://smallsizeurl.com/490/

For our neighbours in Europe — http://smallsizeurl.com/on/

#155 NKVD Black Raven on 09.17.09 at 6:55 pm

.. I am a very convincing man..

I pick up on something there – Confidence trickster? Schizophrenic..?

#156 Devil's Advocate on 09.17.09 at 7:00 pm

#146 Nathan in Edmonton

And had the Boomers not done it (screwed up the economy) their offspring surely would have. The next generation should learn from the screw ups of those prior, while they are still young and resilient enough to benefit from the education. Alas, just as my son is hell bent on learning not from my mistakes but from those of his own, history repeats itself.

While an education is a bargain at any price it would be nice if society could move forward improving at a more rapid pace by learning from our forefathers.

We aren’t learning a whole lot new here folks. Want proof of that google and read the quotes of Thomas Jefferson. It will scare you how must foresight he had.

#157 Live Within Your Means on 09.17.09 at 7:00 pm

#146 Nathan in Edmonton on 09.17.09 at 5:28 pm
The boomer bashing continues… personally I don’t resent the boomers for the opportunities they’ve had that I my not have. Most boomers are scared for the future and they should be, their wealth will be heavily drained in the next decade as home values, investments and pensions lose value. Any younger person hoping for some big payout of an inheritance will be very disappointed.

Gee Nathan – Glad you don’t resent we boomers :-) Our investments just went up 20% and we plan on leaving our inheritance to our nieces & nephews. My PIL’s have already assigned their home (in France) to their 3 sons. They have the right to live in it, but as soon as they move out, the sons inherit it. It’s done for tax purposes. My PIL’s will be 79 & 80 next year. We hope they’ll be able to continue to live on their own, in their home, for several years to come. They have enough investments to cover them to live in a ‘home’ for several years. If their money did indeed run out, I know that’d we’d be there to assist.

#158 Devil's Advocate on 09.17.09 at 7:16 pm

#136 Calgary Rip off

Sorry Dude but British Columbia is one heck of a nice place in the Canadian scope of things. Long summers and short mild winters compared to the rest of the country. And our mosquitos aren’t bigger than the seagulls. The other provinces have their bragging rights as well but I see very few moving from British Columbia to Ontario or Alberta for anything other than jobs. What I do see is a whole lot of Ontario and Alberta moving to British Columbia.

Hey… ya earns yer money where ya have ta and ya spends it where ya wanna. Ya all seem ta like spending yer hard earned dollars here… and fer as long as it lasts were happy ta take ’em. But then were a bunch of dope smokin’ backwood hicks… right?

#159 D from London, ON on 09.17.09 at 7:20 pm

# 146 Nathan in Edmonton

I like your post. It is true that “every dog has his day”. We are nowhere near the last chapter of the Boomer story yet (though we are closer than they like to think, judging by the “60 is the new 45” attitudes). Just because they had it good so far doesn’t mean the good times will last forever.

As the M$M tells us, many boomers are heading for deep poo-poo. While they represent the biggest demographic, biggest voting bloc, etc. etc. they are by no means the only voters. Sooner or later the tax money is gonna run out, and when it comes to funding schools, libraries, highways, and basic healthcare versus keeping Joe and Jane Boomer in the clover, well, that’s gonna be one hell of a fight.

I think a lot of Gen Y/Baby Boomlet kids who thought they were gonna inherit big $ from their parents are gonna inherit their PARENTS instead. Back to the traditional 3 generation home again.

Think of it as an opportunity. Grandparents often see grandchilden as a way to correct the things they did wrong with their own children (for the betterment of all!). Maybe taking all the money off the table will help us all focus on what really matters.

Maybe looking at this sea-change in our society from a different viewpoint might give us some hope.

#160 kitchener1 on 09.17.09 at 7:21 pm

That is an unreasonable characterization. Is it not fair that those who have contributed to UI/EI for decades gain a few more weeks of benefits if unemployed in the worst recession since the Thirties? Are you utterly without compassion? — Garth

Garth, I am all for the older generation being looked after. At least the liberal proposal would have helped every age group out not just one. I thought we were all equal, thats what makes Canada great. I don’t resent the bill just that it should include all Canadians, is it less significant if a 36 year old loses a job then someone who is 46?

The point I was trying to make is that this bill is just the start of politcal pandering to the boomer generation. I don;t blame the political parties, they have to pander to win the election and boomers are the largest voting block.

I am all for CPP increasing and agree with you 100% that people cannot live on that alone, I give my mom at least $400 every month to supplement her CPP just so she could enjoy her retirement years. The CPP issue is going to be front and center very soon, if not this election then the next.

But why is it only now becoming an issue? because the boomers are 5-10years out from having to use it and they want it to make sure they are looked after.

As a politican, you know that when issues become personal they become priority, 4 years ago UI was not even an issue, now its THE issue, just like CPP will be the issue in a few years.

Boomers call us (gen X) uncompassionate, cold, entitled etc.. but they are just as uncampassionate, cold etc.. unless the issue effects them personally.

Its kind of ironic anyway, I do not hold grudges against them.

The boomers had it better then any other generation and I beleive that they will also have it the worse then any generation in their golden years due to their inability to properly plan for retirement. Its sad but true. No other generation is going to work as long into their retirement then the boomers, they will be working well past 65 to account for their lack of fiscal planning.

#161 Dan in Victoria on 09.17.09 at 7:21 pm

People try to put us down
Just because we get around
Things they do look awful
I hope I die BEFORE I GET OLD
Talking bout my generation.
Gee I see it hasn’t changed in 40 years
At least we knew how to have fun
Maybe listen to these guys, thats how I take it now
http://www.youtube.com/watch?v=b-JhtQYaKOM

#162 Dan on 09.17.09 at 7:31 pm

I think quite a few people are losing track of who’s really to blame for the problem.

Yes, the current generation has paid and will pay far far more for housing than previous generations. Have a look at the Australian stats, I’m fairly confident they will closely match Canada. Particularly relevant to the argument between David, Devil’s Advocate, Increasing that 1% and others is the 7th graph down which shows interest payment burden against interest rates. In 2007 the interest payments were higher than those in 1989, despite rates being almost halved. The reason is the size of the principal dwarfs loans in 1989.

http://www.whocrashedtheeconomy.com/blog/?page_id=365

Of course interest rates have come down since 2007, but how long can this be sustained? Sure, if you are Japan with a large trade surplus, you can issue debt at 0.5% because everyone knows you can pay. Your people save, are essentially forced to invest in government bonds, and the low interest rates can go on forever provided you maintain a trade surplus. In a debtor country with a negative balance of payments, this just isn’t going to happen. What sane creditor would lend for decades at 0.5% to a country where the borrowing just gets bigger and bigger? That pays its interest bills with new debt? (hint hint, good luck USA/UK). Interest rates are going North, probably spectacularly so, although probably not for a while. After the economic collapse in Argentina they were 100% for quite a while. Sure, Canada and Australia can sell off our resources to pay debt (selling the farm to buy milk), so our rates won’t be that high, but they certainly won’t be 0.5. What do you think? 10? 15? 20? I don’t know, but the size of the principal these days means a 30 year amortization is almost normal, exposing everyone with a large loan to absolutely colossal financial risk.

The boomers aren’t to blame, although those who are selling now will probably do well. Ordinary people look at rapidly inflating property prices, retreating into the distance far beyond their capacity to accumulate savings, and think “why bother saving. I should buy now or it will be worse next year”. Ordinary people don’t understand money creation, bond markets, the compound interest paradox, who thinks about that sort of thing? We assume that’s just the way the world works, then get bitten later on.

The banking system is to blame. Debt for a non-productive asset is bad enough at 30% deposit. As the deposit required gets smaller, the loan becomes exponentially larger. For instance, with a $50000 deposit, banks requiring 5% deposit means you can have a $1,000,000 loan. 6%? Only $833,000. 7% deposit? $714,000. With very small deposit requirements, a tiny change in deposit requirement creates an enormous change in loan size. At these stupid extremes banks have absolutely no margin for error, and they either knew it, or should have known it. For decades we have been slowly moving up the price curve as banks loan more money. Soon, we will be moving back down it again (not sure when, but I suspect “soon” covers it, years at most, not decades). It isn’t possible to keep going up very far, because nobody can afford to service the loans.

Don’t ever forget who created this disaster. Yes, boomers who sold in the bubble have profited from the impoverishment of current mortgage holders. Yes, people taking out 95-100% loans are imbeciles. However, the burden of responsibility should rest on the people who do this for a living. Bankers should be able to calculate risk properly, and ensure the financial system is run cautiously. They failed spectacularly, and their failure isn’t even close to being properly recognised. Was it stupidity, conspiracy, or a combination? How do we fix the problem? (Hint for idiots: it isn’t going to be fixed by taking on more debt). Refuse to be distracted by a generational conflict, and focus on the real cause.

#163 Onemorething on 09.17.09 at 7:51 pm

Wow, lots of action today Garth!

Sounds like everyone wanted a turn on the couch!

Facts Figures mapped around Manipulation, let the controversy eat you up or thrive in it.

Hey, if Canada is getting you down, move, I hear MUNCH has a few extra rooms in RSA eh!

#164 George on 09.17.09 at 8:06 pm

Garth, you should also consider television writing as another career to place on the pedigree. Many people have such distorted understanding. This buddy’s reality is sitcom based. He probably never grew up with a father in the house. Timing is everything. Thanks for posting prior to my naieve inquiry about these soon to be rest home grannies down the block I’ve had a close eye on the last couple of months.

#165 Men With Hats on 09.17.09 at 8:09 pm

Ever heard of research, professor? — Garth

Anonymosity thy name is Ben .

#166 dd on 09.17.09 at 8:54 pm

Reality Check … on house prices in Calgary for August 2009:

Medium house price = $400,000
Medium family income = $90,700 (est 2009 and probably decreasing becuase of unemployment)

$400/$91 = 4.4 x.

Prices for a levle market would be in the 3-3.5 range
Prices for undervalued market would be 3.5

Therefore in general house prices should be $91 x 3.5 = $318,000 to not overpay in this market. Prices still have to fall 20% to be in the money.

#167 Barb .. a reader in Calgary on 09.17.09 at 8:56 pm

#157 D from London….”I think a lot of Gen Y/Baby Boomlet kids who thought they were gonna inherit big $ from their parents are gonna inherit their PARENTS instead.”

:) LOL!!! Good line D !!!!! And only too true.

#168 Barb .. a reader in Calgary on 09.17.09 at 9:09 pm

“Garth, I’m sure your segments on shorting the RE market (soaking others) contributed to that young scum’s antics, motivations and desires.”
— DonDiego

Hey Garth,
It’s fun to spot the gang who incorrectly portray what you’ve written, in their daily attempts to smear you, but today the pickins were way too easy. They’ve gotten lazy, eh?

#169 Grantmi on 09.17.09 at 9:17 pm

You know you’re in a housing bubble when bankers privately reveal that 95% of their new mortgage customers finance 95% of their purchases. When almost 100% of new mortgages have the longest approved amortizations – 35 years.

That’s funny!

I remember reading a 2009 CMHC report saying that 38% of households (in 2009) intended to buy a home are planning to make a down payment of more than 20%.

And savings is the top main source of these down payment for households intending to purchase these home.

45% – Savings
23% – Equity from sale of current residence
10% – RRSP/Home Buyers Plan
5% – Investments
4% – Bank Loan/Credit Union Loan

Who is right??

Move Along!! Nothing to See Here!!

#170 BigAl (Original) on 09.17.09 at 9:31 pm

This has been, for me, the most disturbing blog yet.

If the ‘old guy’ in Chris’ story has been genuine and nice to him, and Chris really wants to stop renting, then he should just take his down payment and buy another house. There are deals around.

But that’s not even close to the absolute visciousness of responses…telling someone you hope they get mugged??? Run over by a bus, and live??????????????????????????????????????????

Repulsive.

#171 taxpayer like you on 09.17.09 at 9:34 pm

The worst thing about living in BC is you dont get to blog until the very end. Then you find out Rory has stolen your material again.

David – a million cash. a govt job and that gold-plated pension?? That’s incredible. Almost too incredible for somebody who blogs all day…..

D from London – yeah I rmember the day you showed up and we pounded on ya (me included). But you’re OK. All ages have screw ups and successes.

Barb – I remember in Calgary going to a party with some professional people. Some basically admitted that it didnt matter if they got raises or made more money, it just got spent on nicer cars, homes and vacations. Most people have to be strapped for a few years to discipline themselves. “Beware the executive lifestyle”.

#172 POL-CAN on 09.17.09 at 9:37 pm

# 161 Dan

Excellent post… Golf clap :)

“They failed spectacularly, and their failure isn’t even close to being properly recognised. Was it stupidity, conspiracy, or a combination? How do we fix the problem? (Hint for idiots: it isn’t going to be fixed by taking on more debt). Refuse to be distracted by a generational conflict, and focus on the real cause.”

Conspiracy it is. But it is not excactly a secret as hundreds of years of history show.

Too bad we never learn our lessons.

#173 Garth Vader on 09.17.09 at 9:48 pm

“It’s my talent of bringing out the best in people. Like you. — Garth”

Shame it never worked with Harper and his cronies!!!

#174 Shawn Allen on 09.17.09 at 10:03 pm

CM # 109 kindly provided us a link to mortgage foreclosure data

Based on data from CBA:

http://www.cba.ca/index.php?option=com_content&view=publication&id=69&Itemid=56&lang=en

Ahh nothing like some real data (and a source, I agree with the professor data without a source is unreliable)

Shows delinquencies are only 0.42%, less than 1 in 200.

Not that is only counting people three full months or more behind.

Still, it seems low given the unemployment and given the number of people who seem to take on the largest mortgage they can get leaving no wiggle room if one spouse loses a job even temporarily.

My theory is that there are a lot of people out there paying their bills by borrowing even more money. Heck this is actually good for your credit rating until the day comes you are tapped out and can’t borrow any more to make your payments.
I suspect lots of consumers are running up more and more debt, especially the recently unemployed. They really have little choice. If the job is lost and the payments are large, there is no way to cut back spending enough to make the payments. Borrowing more to pay the bills can be the only option. But it can only work so long. These consumers are basically running their own personal ponzi scheme against the lenders. And the lenders keep sending out invitations to get another credit card. And if an unemployed person has a line of credit available, they are not likely to tell the bank of their new situation. Instead that line of credit becomes emergency cash. But only for a while.

More Sh*t to hit the fan yet I am sure…

#175 Eduardo on 09.17.09 at 10:25 pm

#165 dd – Your income is where you’re wrong. I’ve had this argument and made the point about a million times. The income has increased 5% YoY.

http://www.statcan.gc.ca/pub/72-002-x/72-002-x2009004-eng.pdf

See that on page 74 for example.

There are multiple other sources showing wage increases for those who have maintained their jobs.

946 a week times 52 weeks is ~49k average income for all workers. Therefore median family income is 98k so your 20% number is overstated although I agree that based on the 3.5 metric it’s overpriced.

#176 TakingResponsibility on 09.17.09 at 10:42 pm

Oh my . . .

Ethics and Emotion and Economics!! I love it!

Neuroeconomics, anyone?

For anyone interested in emotions, economics and the brain, the following video entitled: “Curious: Decisions, Decisions” is interesting. In it, CalTech’s Camerer and Quartz explain Neuroeconomics – the study of what exactly is happening in the brain when faced with moral/economic decisions – They use the following dilemmas:

-the trolley dilemma
-the ultimatum game
-the Ellsburg paradox (… Daniel Ellsberg – The Most Dangerous Man in America!!)

http://www.youtube.com/watch?v=JXG5TcdXmno

The video is somewhat long but I found it helpful in understanding why Garth’s “letter writer – Chris” AND individual comments in response to this post primarily consist of a personal narrative that positively moralizes the commentor’s own economic situation and decisions.

Bluntly put, we will always tell ourselves that we ourselves are moral so we don’t “feel” uncomfortable/responsible (pain).

Cheers

#177 dawson on 09.17.09 at 11:35 pm

http://www.realtor.ca/propertyDetails.aspx?propertyId=8566305
it happens here also.

#178 Soylent Green is People on 09.18.09 at 12:04 am

#148 Smith-Martin on 09.17.09 at 6:05 pm

Old lady… YOU ROCK!

#179 D in London on 09.18.09 at 7:30 am

# 170 – taxpayer like you

Yeah, I remember the day I got the boomers whipped up into a frenzy and got out the Gen Xer vote. Good times, good times…

I learned 2 things from that day that have helped me since (both posting AND reading in this blog):

1) If you’re gonna post something bound to stir up controversy, bring some sort of references (hyperlinks) with ya. Without outside sources, the posts degenerate into “he said – she said” (like my favourite “Gold is not money” theme).

2) As #175 TakingResponsibility alluded too, we ALL see ourselves and “our peeps” as moral, hard-working, straight-shooting actors in society. It is always the “other” that is to blame. Many times it is, but that doesn’t excuse us from examining our own actions and how WE benefit from some circumstances. All generations would benefit from seeing things more clearly, the good and the bad.

To borrow a phrase from the Bible (and I am not a biblical kind of dude): “Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye?”

Despite that I still like to ride my favourite hobby horse (“the Boomers ruined the world”!). Old habits die hard. But I try to keep it down to a dull roar by counting my blessings and admitting my own errors and misdeads.

#180 JM on 09.18.09 at 8:50 am

Nicely said D in London.

Time for me to step off this train. The concept of discussion with an opposing opinion is getting lost amongst comments of suck it up, keeping up with my peers and other clutter.

I don’t recall saying seniors should not have a good life, I don’t recall complaining – I was simply answering someone’s question of whether I worked in my teens.

For those more experienced than myself, I have so far in my life watched my father work for 52 yrs starting as an apprentice at 13 y.o. and follow his work ethic in my field.

Bye for now the train just pulled into my stop.

#181 gold bugger on 09.18.09 at 11:39 am

It says something about your misanthropic correspondent that he not only plots to defraud a kindly old man but he wants credit from you – in advance – for doing so.

I’m actually saying a little prayer right now that the tenant drops dead today.

#182 Adam on 09.18.09 at 1:02 pm

#92 dave99

I do. Spare me your sanctimony, feel free to stand beside your brethren, the bus is coming. Destination: Karma.

#183 dave99 on 09.18.09 at 1:45 pm

#168 Grantmi,

You asked, who is right? Why can’t they both be right?

The CMHC figures refers to the PLANS of ALL homebuyers.
Garth’s figures refers to the ACTIONS of NEW homebuyers.

#181 Adam,

You asked that I spare you the “sanctimony” from my post at #92? I suggest that you reread your post at #84, and then reflect upon the meaning of “sanctimony”.

Perhaps you should think about the definition of “irony” while you are at it.

Wishing you continued good health! ;-)

#184 dd on 09.20.09 at 8:57 pm

.#174 Eduardo on 09.17.09 at 10:25 pm

Check your math

I am not overstated by 20%. Maybe 8% using your method. Furthermore you are comparing averages to median prices. Use avg to avg or med to med but don’t mix the two.