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Earl Jones1

Buy now or never, Part Deux.

The destructive financial decisions people all around us now make are not reached in isolation. When folks buy assets at their most expensive and take on debt which will only grow harder to pay, they do so because they believe the risk is offset by a bigger reward. Usually, that’s greed.

It`s what got folks buying worthless dot.coms. It created a frenzy to get into Bre-X. Greed propelled Nortel to $130 a share. It led reasonable people into the arms of Bernie Madoff and Earl Jones (above).

And along the way, greed always has friends. One of them is the media.

The real estate pumpers understand that. It’s why Royal LePage and Re/Max issue reports on cottages, first-time buyers and luxury homes. They know each one is good for free, uncritical ink from an uncaring, lazy media. Real estate ‘news’ ain’t news anymore – it’s lifestyle infotainment, usually run word-for-word from corporate news releases. Trust me. I know.

Sadly, though, the printed and broadcast message is then used by the uninformed to justify their actions. Real estate sales numbers are subsequently reported as evidence of the market’s health. It’s a vicious circle of manipulation and consequence.

Fresh evidence came Wednesday with the release of a Coldwell Banker puff piece comparing Canadian real estate prices with those in the swishiest US markets and international destinations. Of course, there is no comparison between say Rome ($1.2 million US for a middle-class house) and Vancouver ($1.174 million US), except that people in BC are on drugs, while Romans live in a city of 2.8 million people that was once the capital of the world and cradled most of our civilization and art. Other than that, it’s a great tool to use if you just bought a shack in North Van.

Nonetheless, as the realtor’s release-cum-story asserted: “While Canadian home prices have been on the rise again following a brief market downturn, today’s historically low interest rates have kept the dream of homeownership within reach for most of today’s homebuyers,” says John Geha, president of Coldwell Banker Canada Operations ULC. “It is particularly interesting to compare the affordability levels now seen across North America and other global centers. Compared to many major markets throughout the world, Canadian real estate looks like a bargain.”

Yeah, right. The average income in this country is $70,500. The average house now costs 4.6 times the average income. In Toronto, where average income is $72,800, it’s 5.4 times. In Vancouver, where the average income is $68,900, it’s 10.6 times.

The US real estate bubble imploded when house prices hit five times income.

Coldwell Banker should be ashamed for making invalid comparisons and reaching dumb, sweeping, irresponsible conclusions. But the company doesn’t care. It got ink, which was the point. The media which reported this – from the CBC to the Globe and Mail – are probably more culpable for carrying the piece without comment or context.

The biggest losers, of course, are the ones who will swallow this stuff.

But it’s too late. Here’s another one.

Enola Gay is in the air.

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170 comments ↓

#1 dd on 09.23.09 at 9:28 pm

Eduardo … lets see what kind of averages you come up with.

“The average income in this country is $70,500. The average house now costs 4.6 times the average income. In Toronto, where average income is $72,800, it’s 5.4 times. In Vancouver, where the average income is $68,900, it’s 10.6 times.”

#2 The_Mo on 09.23.09 at 9:47 pm

Out of curiosity, does anyone know the average income in Calgary and Edmonton?

#3 Eduardo on 09.23.09 at 9:59 pm

I already showed you my average income in Alberta and the average price.

http://www.calgaryherald.com/business/Alberta+average+earnings+continue+rise/1940315/story.html

962 weekly average earnings * 52 weeks * 2 average earners for a single family home = 100048

Average house price in Alberta less than 352,000 (forecast of 337,000)

http://www.crea.ca/public/news_stats/pdfs/aug09rpt.pdf

Therefore, Alberta single family home average 2 person single family home household = 3.37 times

Yes, I realize these don’t account for medians…
Yes, I realize that house prices in Calgary are more than Alberta…
Yes, I realize incomes in Calgary more than Alberta…
Yes, I realize that there is higher unemployment than normal…
Yes, I realize the economy runs on NG which is less than 4$…
Yes, I realize that the unemployment rate in Alberta is ~7% now…

#4 Roman Numerals on 09.23.09 at 10:02 pm

If it’s $1.2 million US for an average house in Rome, does that mean that the average household income for a Roman is $325,000?

I doubt it.

Using a simple multiple to calculate the “true” value of a house is probably a bad metric. So what is a good metric?

It means the average Roman rents. — Garth

#5 Chaostrology on 09.23.09 at 10:02 pm

Example-Canwest/Global

This Canadian co. owes the banks billions and has a dwindling revenue stream and is hemoraging big time.
to wit: closing tv stations in B.C.

Looks like their bankers make a call or two and presto chango the recessions’s over and it’s a great time to buy a house, car, holiday. Yaayyy!

The only way they live to see another day is to knuckle under to the money men.

I miss Jack Webster. We can only imagine how much fun he would be having right now.

#6 Mel Eager on 09.23.09 at 10:03 pm

“While Canadian home prices have been on the rise again following a brief market downturn, today’s historically low interest rates have kept the dream of homeownership within reach for most of today’s homebuyers,” …..

…..and you get to be a homeowner for a full 5 years!

Then comes the rude awakening.

Mel.

#7 Eduardo on 09.23.09 at 10:04 pm

Using the 823 national average number the 2 earner family income is 85,000 this compares with the average family income garth states of 70,000 which suggest that some of those families are single earners. I would agree with Garth that single income families would have trouble owning a home.

#8 FTHB (forget that house buying) on 09.23.09 at 10:04 pm

Is the average income individual or household?

If individual, then a single person could buy nice digs at current prices 3.5 x = $240,000

And a two income family could buy a sweet place (well, outside of Vancouver anyway) for $480,000

Where’s the bubble?

That is household income, of course. — Garth

#9 T.O. Bubble Boy on 09.23.09 at 10:06 pm

Average Income = pre-tax or after-tax?

(Stats Can is saying after-tax, but I’ve seen similar stats listed as pre-tax before)

Gross household income. — Garth

#10 Eduardo on 09.23.09 at 10:07 pm

Or it would suggest that families have 1 below average earner, which is a likely scenario for a part time worker.

#11 GG on 09.23.09 at 10:14 pm

What can we do Garth. When it comes to luring buyers
people act like the stupid fishes with their puny brains.

#12 Coho on 09.23.09 at 10:23 pm

Today, the real estate machine is yelling to first time buyers “Buy now while interest rates are still at record lows because tomorrow you’ll be priced out of the market.”

Tomorrow, the real estate pumpers will be telling the first time buyers, “Take advantage of the lower house prices caused by rising interest rates because the day after tomorrow house prices are expected to rise again and you’ll be priced out of the market.”

The day after tomorrow…more of the same. Good time to buy or bad time to buy, salespeople HAVE to sell so they pressure kids that they HAVE to buy, with of course, backing and blessings from the media, government, and the BoC.

They’re saving the “If you love Canada then you’ll buy a house for your country” for when things get really really really bad!

#13 Boombust on 09.23.09 at 10:24 pm

And?

#14 canadianoil on 09.23.09 at 10:35 pm

Singapore is a small island-nation (only 93 sq. km.) at the tip of the Malaysian Peninsula in Southeast Asia. With a population of 4.6 million, it also has one of the highest population densities in the world. It boasts of a high standard of living (one of the highest in Asia.)

Buying prices average US$12,295 per square metre, somewhat lower than last year’s average prices of US$13,686.

Most new properties are pre-sold.

Hong Kong has one of the most developed mortgage market in Asia.

Hong Kong is known for having one of the most expensive real estate sector in the world.

Canadian real estate is enviably inexpensive in the eyes of most sout east Asian nations.

Therefore, if you can afford Canadian real estate, buy it!
Otherwise S.E.Asians will buy your property and rent it back to you!

#15 Bobby on 09.23.09 at 10:44 pm

Now, I’ll bet most don’t even know what the Enola Gay was. Or how it got its name.

It’s gonna get ugly.

#16 vanzee on 09.23.09 at 10:48 pm

I’ve always been suspicious of the fact that real estate agents bother to advertise sold houses in local papers. Why would a business spend to advertise a product that was no longer on the market?

#17 Fool me once... on 09.23.09 at 10:51 pm

Yes Children, all, is good, all is right. Quickly now, line up on the left, take a long sip and swallow the lovely cup of Kool -Aid. Things are going to be fine.

#18 Shawn Allen on 09.23.09 at 10:54 pm

Where did this 3.5 times gross family income rule come from?

It depends on interest rates clearly at low rates the multiple can be higher. When interest rates hit even 7% that multiple must fall hard.

I bought in 1995 and paid roughly 1.2 times our combined gross income. For a then 13 year old 1600 square foot two stoery with a half decent lot size in Edmonton suberb.

I could have gone to 1.5 times income. Probably could have qulaified for 2.5 times income or twice what we paid. But in no way would I have considered going to two times our income. too rich for me.

I scrapped up 25% down payment in order to avoid the CMHC fee. Then paid the mortage off within ten years.

In retrospect I would have made a big gain by buying the absolute most expensive house I could afford in Edmonton in 1995. But I have no regrets. Once having lived in that kind of house I am sure we would not have wanted to move. (No gain until I would sell) So today we woulkd be in a house worth about $1 million and paying high taxes and probaly still paying the mortgage.

We are so much better off for having bought probably 1/2 the house the price we could have qualified for.

I will take the lower stress of an affordable mortgage anyday rather than a budget crushing type mortgage

Call this strategy Buy half the house you could and pay it off 3 times faster… Then, once paid off, start your retirement savings in earnest…

#19 Shawn Allen on 09.23.09 at 11:00 pm

Prospective home buyers should sweat the direction of home prices.

90% of homeowners should not sweat it.

You need a place to live. And you don’t want to rent.

So you keep your house and who really cares what the price does within reason? Most of you have substantial equity in your houses and it really does not matter much how that equity varies.

Any of you near 50 or older should have a LOT of equity and should have a good start on retirement savings.

A house is an expense not much of an asset – cerainly not a liquid asset (since you can’t realistically sell without buying another one) so don’t sweat it.

Worry about your job security. If you have a good job, a 30% drop in the value of your house is a mere annoyance. Loss of the good job could be a deadly to your finances.

#20 BCing You on 09.23.09 at 11:03 pm

The October 2009 Money Sense magazine is echoing some of Garth’s warnings: In “The all-Canadian Wealth Test” article. On pages 32 and 33 it says :

Warning 1: A typical Canadian owes more than 142% of disposable income compared to 91% back in 1990.

Warning 2: The insolvency rate for Canadians 55 and older is 5 times higher than in 1990.

Warning 3: A lot of Canadians, including older ones, are more dependent on real estate than ever before and many have a lot of debt due to this fascination with real estate.

The article does not make any predictions but it simply states these warnings in one small section of the article.

#21 nonplused on 09.23.09 at 11:07 pm

“Elnora Gay”??? Ha, ha let’s hope that stays a “market analogy”.

Here is my big fear. Garth has correctly pointed out that governments around the world are attempting to borrow at a simply unprecedented rate presently. In fact at 4 times the closest precedent. There seems to be no way to stop the bleeding either, taxes can only be raised so much, no one is in favor of scaling back government, the military commitments seem difficult to exit, and looming in the background are rising interest rates, which would only compound government deficits at the worst possible time (they would have to borrow more to meet the increased debt service charges). Worse, if rates do rise, it would be “Elnora Gay” for the already limping economy as debt servicing costs went up for everybody.

So it seems the government (many governments) will not be able to escape large deficits, potentially for years. The question I have is, “from whom will they borrow the money?” I don’t have any to lend. I don’t know who might. Pension funds? They are already in crises. Institutional investors? That’s putting the same uniform on a bunch of individual investors and calling it a new source of funds. China? They can only lend us back the money we pay them for their iPod production. Since we aren’t buying as much from them, they can’t buy as much from us, and now have problems of their own as factories sit idle. The Middle East? I suppose the US will always buy oil, so they may have some, but no more than the price of oil and the ability of the West to buy will allow.

So where will the funds come from? If my fears materialize, (and I am not the only one with these fears), there isn’t enough free capital at current rates available to meet the forecast combined borrowing needs of all levels of government across the developed world. That means that there may be no choice but for central banks to step in and print money (i.e. add electrons to certain memory locations of the computers at the banks) and buy the government debt outright. (Quantitative easing). But that extra money will come into the system eventually as the government spends the money and it trickles out there.

So what do we end up with? I don’t know. But inflation in the midst of rising rates seems like the obvious answer to me.

Will the inflation get to real estate? I think it has to eventually. But the question is how can it get there fast enough when the other side, defaults brought about by higher rates, likely works much faster.

So it should be a deflationary (assets) bust followed by an inflationary boom (not sure in what). Ok, that scenario is horrendous, but not serious. (Only keeps the lawyers busy and everyone unsure of what their pay check will buy.)

But what if all the new money and rising rates lead to a collapse of the US dollar? Again, horrendous but not serious. The world has survived that before. Heck, even Argentina is still there. But much personal wealth was destroyed.

But it does beg the question: How do you protect yourself? Cash is king right now, but I think the government deficits are a game changer.

#22 Dean-oh on 09.23.09 at 11:10 pm

I have been observing R/E prices for a couple of years now, with the intention to eventually buy, a 3 – 10 acre hobby farm in B.C., well outside a major city. I have not seen prices go up in the last several months at all, in fact, I’ve witnessed many of them dropping their asking price. The vast majority just sitting on the M.L.S. month after month. Is it just me? Is it the type of property I’m looking at, or the areas? Are any of you seeing prices drop in your area? Please tell us the area and type of property. I’m thinking this current R/E bubble is concentrated the major cities, and mostly with lower to middle end homes. Thanks!

#23 Cabin_Boy on 09.23.09 at 11:32 pm

I wonder how many divorces there will be when the deck of cards fall. Relationships are more strained than budgets these days. If the house goes…will the nagging for granite tops and finished basement wife stick around? Won’t be a happy ending for many families.

#24 Gord In Vancouver on 09.23.09 at 11:33 pm

The average income in this country is $70,500. The average house now costs 4.6 times the average income. In Toronto, where average income is $72,800, it’s 5.4 times. In Vancouver, where the average income is $68,900, it’s 10.6 times.
____________________________________

Those must be household incomes as there’s no way the average individual Vancouver salary can be $68,900. Vancouver has much more competition for jobs than other areas and doesn’t have enough manufacturing/economic diversification.

#25 are we being inflated? on 09.24.09 at 12:05 am

read this!

http://www.dnaindia.com/money/column_america-is-repeating-japan-s-follies_1292530

#26 George on 09.24.09 at 12:12 am

Being wrong in our society has always been much more lucrative than being right.

#27 jmcanuck on 09.24.09 at 12:59 am

I was just walking down the hallway in my apartment building and someone had dropped a piece of paper. I glanced at the paper to see if I could get the apartment number of the owner. I saw from the letterhead that the letter was from Fresh Start BC and while I found the apartment number of the owner and put it under their door I couldn’t help notice that the letter was basically about the obligations of that person to get out of bankruptcy and/or help correct their major dept problem. It seems like everywhere I look I see people deep in dept. I’m like the kid in The Sixth Sense…I see dept people. I’m saving my dollars and renting for now. My wife and I are both in well paying jobs and have managed to save a fair bit of money. Positive equity and money in the bank feels good right now. We are waiting for the market here in Victoria to come back to reality once this version of Tulip mania implodes. Better to rent than become a dept slave for life. We’ve been able to travel and enjoy life in the meantime since we are not house rich money poor. I find it amazing how many people are oblivious to the world around them. We truly have learned nothing from the past and are destined to repeat the same mistakes. The same people who caused the problems are now trying to fix them. What a mess!

#28 Sylvia on 09.24.09 at 1:17 am

Check out these listings in Europe. FYI 1 Euro = Approx. $1.6

http://realestate.classifieds1000.com/Germany/RP/HISTORIC_WATER_MILL
http://www.viviun.com/AD-103153/
http://www.myfrenchrealestate.com/residential-property/France/7984841.html
http://www.myfrenchrealestate.com/residential-property/France/4729957.html

Population of Germany = 82,369,552 Territory: 357,021 SQ KM
Population of France = 61,538,322 Territory: 547,030 SQ KM
Polpulation of Canada = 33,212,696 Territory: 9,093,507 SQ KM

Not that I’m recommending relocating to Europe but considering the population density of just these two countries and comparing real estate prices something here does not make sense.
With our relative underpopulation and abundance of land real estate in Canada should be much cheaper than it is in the above jurisdictions. Go figure…

#29 vantown on 09.24.09 at 1:18 am

Usually, that’s greed.

I think you’re dead wrong. No one I know buys a home because they’re greedy. They buy it because they want to be homeowners, and not to be renting when they retire.

People in BC are on drugs, while Romans live in a city of 2.8 million people that was once the capital of the world and cradled most of our civilization and art.

I think you’re absolutely right; we desperately need a new art gallery in this city of 2.1 million. Seriously, it seems that the people on BC who are on drugs (or whatever their/our source of delusion might be) generally don’t know this, so it doesn’t matter. As long as enough people think Yaletown compares favourably to Upper West Side Manhattan, and are willing to pay for it like it is, it is equivalent. Simple as that.

Enola Gay is in the air.

This is getting tired. How long is it going to circle? Maybe it hasn’t even left the ground. Maybe there is no bomb. You’ve been so wrong for so long about this, I think something more concrete is called for. How about some actual predictions, with dates? This is the only bear blog I’ve seen where the author doesn’t really put a stake in the ground; it’s just “people are fools, it’s a house of cards, anyone who dares question this is an even bigger idiot” ad infinitum. Given the utter lack of success so far in predicting a crash or severe correction (c’mon, admit it, in 2006, never mind late 2008, you didn’t think we’d be seeing record prices in 2009), I think it’s reasonable to expect something more.

#30 Anon on 09.24.09 at 2:37 am

So hopefully this comment isnt buried too deep in the list…but I am curious about what the group thinks:

If homes in Vancouver have gotten to damn expensive relative to the average income, then what is to stop the Toronto market from following suit? I am assuming that at one time, the Vancouver market was reasonable, and perhaps it has just kept inflating insidiously. I would be the first to say that hopefully that doesnt happen in TO, but why not? It seems crazy that VanCity prices would have gotten to 10.6 x the average income, so why not have something similar in TO? Are we any different? Are we any brighter?

And these average incomes Garth speaks of…are they household incomes or individual personal incomes? I am guessing it is the former, not the latter.

Anyone got any thoughts?

#31 andthen on 09.24.09 at 2:46 am

The “Men” that print money out of thin air now own $1.45 trillion US worth of mortgages.
If the rates whent up and everyone lost thier homes they would own this land.
They control the rates and it looks like the rate hikes are going to be 3 months early

The U.S. Federal Open Market Committee voted Wednesday to slow the pace at which it buys mortgage debt and will end the program three months early.

http://www.cbc.ca/money/story/2009/09/23/federal-reserve-rates.html

#32 Mike (Authentic) on 09.24.09 at 3:15 am

Greed is the adult version of musical chairs.

We love when the music plays (making mo’ money), it makes us forget that at any unpredictable time it will suddenly stop and you could be the one without a chair.

#33 al jones on 09.24.09 at 3:16 am

Well Garth Canadians are truly out to lunch. I am emailing you from Nice France on the Riviera right now. For the price of a Vancouver shack you could by a beautiful condo close to the beach, with tropical weather year round and no humidity and non of Torontos pollution. I,ve been here 2 weeks with sun every day. Who wants cloudy Van? Of course I can afford to be here because I,m mortgage free.

#34 Mike (Authentic) on 09.24.09 at 3:20 am

“In Vancouver, where the average income is $68,900, it’s 10.6 times.”

Wow, and how do banks actually lend on that gross income debt ratio? Just from this example we can see Vancouver is easily way overpriced by 50% vs Toronto.

And if I was asian, why would I buy in Vancouver when I could buy further south where it is not as rainy, cold, grey and still has mountains?

Olympics — Well, I haven’t see a Hosting City yet prosper by having the Olympics. They seem to be an enormous debt maker. I think after they are done this year the prices in Van will correct as the hype will be gone.

#35 David Bakody on 09.24.09 at 6:14 am

60-20-20-20 is well underway and the rich and powerful are ringing their hands with glee. The fall of Rome is peanuts compared to what Garth is speaking about. to be continued……….

#36 DrC on 09.24.09 at 6:55 am

5x? Man you guys are slow – with massive tax subsidies (negative gearing, depreciation and capital gains tax exemptions), ridiculous interest rates and govt spruiking to first home buyers, Australia is at an average of 9x income. When that bubble bursts you’ll hear it even from this side of the Pacific.

#37 cashman on 09.24.09 at 6:58 am

Wasn’t it Mike Douglas who portrayed Gordon Gecco as the Wall Street sleeze bag and coined this famous phrase: “Greed is good”. Indeed, greed is good, especially if one is the Bank, the Gov’t and of course your friendly neighbourhood realtor. I now understand why Mark Carney and his band of merry men want this bubble to continue; its in their best interest. More tax money, more commissions, everyone wins. Except that the party is going to end at some point and someone is going to have to pick up the pieces: the taxpayer. But don’t worry Stephen Harper and his band of merry men have our best interest at heart don’t they? They wouldn’t dupe us would they? More interestingly, I keep thinking of this old saying ‘lies, damn lies and then there are statistics’. While Re/max and Royal LePage keep trotting out the statistics, one should bear in mind this party can’t continue forever and will eventually end. So, go on all you first time buyers, listen to your realtor and keep spending, spending until the break of day or you break your bank account.

#38 Foggy on 09.24.09 at 6:59 am

Viewed another way – a $450K house with 100% financing in a conventional mortgage @ 3% today carries for $2130 per month. At 4%, to finance the same house with the same payment, the price has to drop to $405K. At 6% it drops to $333K and at 8% it’s $279K. Either that or the “same” buyer has to come up with a lot more income. Which is impossible. So your house de-values.

#39 BCR on 09.24.09 at 7:03 am

How out of whack is this 10.6X earnings multiple versus history, say over 20 years? Is it one, two, three standard deviations out or in line?

#40 Frugalistas on 09.24.09 at 7:18 am

I wonder about those average income calculations. Do they include dividends from company ownership? I’m sure there are a lot of small businesses in Vancouver (potentially large ones too) where owners pay themselves via dividends. Would that reflect in income calculations? Likewise, money that is imported from Asia and has nowhere to go – that is not in the income equation either, I believe. I’m sure the sums are huge.

Think of the fathers who are working in Asia, whose families are in Vancouver but without jobs. The money still flows, but the income is zero.

Any comments? I think that true incomes are actually underestimated in Vancouver.

#41 Onemorething on 09.24.09 at 7:18 am

Yes Garth, the Sheeple have installed strings so that the ponzi’s can make them dance some more.

The “L” shape does not stand for the recover but for all the LOOSERS out there just lopping it up.

Again, loosing faith in our kind!!!!!

#42 Don't Believe the Hype on 09.24.09 at 7:18 am

Strange times indeed. Flaherty is extending the mortgage buyback program at a time when bank profits are very high and the housing market is at an all time high http://www.theglobeandmail.com/report-on-business/crash-and-recovery/flaherty-set-to-extend-mortgage-backstop/article1299101/

#43 Frugalistas on 09.24.09 at 7:19 am

The same applies for Calgary, where company ownership and partnership sounds to be very common. Incomes may be highly underestimated, and that’s why the market seems to float higher than most would predict.

#44 JO on 09.24.09 at 7:24 am

I am assuming the average income # s are household income. 5.4 times is rich. Sadly, a notable part of our so called “GDP” growth came from excessive credit issuance. BofC stats last month showed the rate of credit growth was about 8% or so prior to 2001 era, then exploded higher to 12-14 % since then. So our incomes are artifically inflated, our assets are artifically inflated thanks to all this debt issued mainly due to gov’t intervention to satisfy the appetite of all the wannabe debt slaves. The “value” of our incomes and assets as seens by the sheep is nowhere near the current stated or nominall values. People do not realize that a major driver of their income and asset price “rise” has been the significant drop in the value of our money as this huge mountain of debt was used to buy goods and services – hence requiring Canadians to spend more dollars to buy assets and pay our wages.

So it comes down to realizing that the next several years will see the true level of demand/GDP come forth – without the impact of 12-14 %/yr growth in credit. Sadly, the record level of debt cannot be serviced as GDP settles in at much lower, sustainable demand.

Expect to see the income input in your ratio come down notably in the next few years, along with asset prices. That is a double whammy and very lethal for most 0/5/10/even 15 % downpayment “homeBUYERs”.

Renters will live in paradise as is the case in much of the world…and in many areas of Canada/US (not all areas but most). A huge stock of rental homes will flood the market as has been seen in much of the US thanks to delusional sellers holding off for a better market that will not come until well after 2015. Ironically, the fast rise in rental supply will pressure rents even more, driving more of the weakest buyers and speculators owning homes into POS, and so on.

JO

#45 The Vulture on 09.24.09 at 7:41 am

++ PSYCHOPATHS ARE NOT JUST IN THE MOVIES ++

Ever met a psychopath?

Do you know the traits and tell tale signs of a psychopath?

Do you know how to protect yourself, your business, your career and your family from a psychopath?

You may work right beside one or have a boss that is one. Your spouse may be a psychopath. They are very dangerous to the health of your business or the corporation that you work for. They are in all walks of life but usually seek power, control and wealth and are manipulative, cold, calculating and habitual liars.

It could be the real estate agent that you are working with or the mortgage broker that gave you the loan. It could be the CEO of the building company that you are buying the new home from or the seller of the re-sale home. It is a tough world out there…guard yourself through knowledge and beware of these financial predators or pay a mighty price, possibly even death. Google psychopathy for greater insight. A great book to read is “Snakes In Suits” (When Psycopaths Go To Work) by Paul Babiak (Ph.D.) and Robert Hare (Ph.D.). In these chaotic and troublesome times psychopaths tend to thrive and remain undetected until it is too late. They operate under stealth but are easier to detect if you know what to look for. Study your enemy and plan your actions in such accordance.

— Traits of Psychopath —

1) Lies about his/her credentials and expertise.
2) Values people only by what they can do for him/her.
3) Shifts blame (successfully) to others for their own mistakes.
4) So ruthless, cold, calculating, manipulative, hard hearted, insensitive and unfeeling that it is downright scary to be around them.
5) Emerges unscathed from attempts to stop their quest for power, money, fame or absolute control.
6) Gets promotions and recognition that others deserve.
7) Interpersonally superficial, grandiose, deceitful.
8) Highly narcissistic.
9) Lack empathy, remorse, accountability, doesn’t accept responsibility.
10) Impulsive, lacks life goals, irresponsible.
11) Poor behavioral controls and skill set, antisocial behaviors and mannerisms.
12) High sense of entitlement, views others solely as a function of their own needs.
13) Will abandon their victim when they have achieved the means that they initially set out to accomplish.
14) Frighteningly explosive, out of control anger and emotional outbursts.
15) Inability to accept blame, be modest or act predictably.
16) Pathological liars and living in a world of fantasy.
17) Inability to act without aggression towards others by such means as bullying, intimidation and coercion.
18) Will steal your dreams, drain your bank account, destroy your marriage, lead to wars or rumors of wars, create chaos and leave a trail of destructiveness.

What does this have to do with economics, business and real estate…everything.

#46 Anxious on 09.24.09 at 7:59 am

Is it my imagination or is the realestate spin start to back fire? I’m wondering if all the happy-happy-joy-joy news of sales up 27% and prices up 7% whatever is luring sellers into the market and scaring away buyers? I’m noticing more listings and yet fewer sold signs in the T dot. I’m also noticing that the starters in Riverdale/Leslieville were bought by speculators as either to be flipped or rented because I see them relisted a year or so later tarted up and going for 100K more than original listing or out to be rented as a recent reno? And yet no one now is biting. Hmmm…perhaps they scared away all the fish and all that’s left is hungry sharks?

#47 One More Time on 09.24.09 at 8:10 am

I remember all the comparisons of Canadian real estate to the big world markets in 1989. Hmmmm.

#48 Nostradamus jr. on 09.24.09 at 8:24 am

Looks like the avge household Rome income is only $28K Euros….

http://www.payscale.com/research/IT/Country=Italy/Salary/by_City

#34 Mike
“”And if I was asian, why would I buy in Vancouver when I could buy further south where it is not as rainy, cold, grey and still has mountains?””

…Because when u ask’em, they will tell u “is very good location, many relatives here, from North America, closest location to Asia, soooo many people living in Asia, soooo crowded there, soooo much polution there, soooo much room in Vancouver, after 5000 homeless problem solved, real estate prices going up, maybe double from here…and they all say, every single one of’em…Vancouver going to be North America’s Financial, Trade, Culture and Leisure Capital.

Nostradamus jr.

#49 David Bakody on 09.24.09 at 8:25 am

I read/heard that the main reason the markets recovered was due to downsizing and wage concessions imposed c/w multi billions of taxpayers money reaching far into the future of taxpayers. Makes sense to me. Garth has mentioned it before that a complete generation will never work again in long term jobs resulting in a pension c/w health care benefits. These are the exact types of people big business wanted to remove, what savings and financial accumulation they had acquired was literally stripped from them overnight and because they were proud Canadians who inherited fine work ethnics from their parents they moved along for the most part in silence. Soon the stimulus funds will run dry and governments will have to reach into their bag of tricks for yet another gimmick ….. is there one? who knows, will the people believe them? can they find yet another bad man to blame? or will the great messiah ” Obama” take the blame and the neocons return to bare arms in yet another world conflict against heaven only knows who. We all know what happened the last time as the world gave in and cowed down to a point of not taking a water bottle aboard an airplane in our bare feet!

Perhaps soon the working class with just work and work until they drop while the rich enjoy the luxuries of life c/w all the security and non crowed venues void of those dare I say simple working class class and once high middle class people. yes 40-20-20-20 world order is close at hand. ( first post was in correct math)

#50 Gord In Vancouver on 09.24.09 at 8:29 am

#40 Frugalistas

1.I wonder about those average income calculations. Do they include dividends from company ownership?
______________________________

If this was the case, then Toronto, Calgary, and Montreal, which have more executive employees/head offices than Vancouver, would make the latter’s figure look even more obscene.

2.Likewise, money that is imported from Asia and has nowhere to go – that is not in the income equation either, I believe.
__________________________________

Money earned overseas isn’t included in the equation as doing so would create a figure that isn’t reflective of the economic conditions/earning potential within the city that the person actually lives in – no fair comparisons could be made with other cities.

#51 Fairviewer on 09.24.09 at 8:38 am

Flipped on an an old CD by Chris Rea last night. English musician, Road To Hell was released in 1989. Interesting timely lyrics to Road To Hell (Part II)…

Well I’m standing by the river
But the water doesn’t flow
It boils with every poison you can think of
And I’m underneath the streetlights
But the light of joy I know
Scared beyond belief way down in the shadows
And the perverted fear of violence
Chokes a smile on every face
And common sense is ringing out the bells
This ain’t no technological breakdown
Oh no, this is the road to hell

And all the roads jam up with credit
And there’s nothing you can do
It’s all just bits of paper
Flying away from you
Look out world take a good look
What comes down here
You must learn this lesson fast
And learn it well
This ain’t no upwardly mobile freeway
Oh no, this is the road to hell

He saw this mess coming 20 years ago! Rock and roll!

#52 bombmaking on 09.24.09 at 8:47 am

Aren’t you happy you saved the house market by subsidizing the banking profits?

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/flaherty-set-to-extend-mortgage-backstop/article1299101/

#53 dontcallmeshirley on 09.24.09 at 8:52 am

Garth,

The centrepiece of your interest rate escalation hypothesis is that banks must compete for scarce dollars in the “marketplace”.

Flaherty just extended the mortgage purchase program. Effectively, the G is giving money to the banks – they don’t have to compete for it.

If you don’t want to stoop and answer questions about money printing how about discussing why the G can’t “purchase” mortgages indefinitely. 5 billion here, 8 billion there, every year.

Should you return to the lofty height of an MP you must propose that the G return to publishing the M1, M2 etc numbers monthly. This is the only check against this abuse.

Printed money is the breast implants of the economic world!

The chartered banks have nothing to do with bond market yields. Learn a little, then form an opinion. Works much better that way. — Garth

#54 dd on 09.24.09 at 8:56 am

#3 Eduardo

Sure. 3.37x house price to avg salary in Alberta. However you slice it this is not the reality in Calgary. Period.

#55 Live Within Your Means on 09.24.09 at 8:57 am

Flaherty set to extend mortgage backstop

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/flaherty-set-to-extend-mortgage-backstop/article1299101/

I guess one of the only ways to beat them is to join them by buying some preferred shares in the banks cause we Cdns will need the money once all of our progressive social plans will be decimated. Just what the con plan has been all along. I feel sad for those who are being duped by this con policy & the banksters.

#56 PeckedToDeathByDucks on 09.24.09 at 8:59 am

Flaherty set to extend mortgage backstop

(as I understand that article)
= our Banks are making money on this
– the Government is also making money, they say
– interest rates are being kept down
– home prices are being kept up

This scheme is certainly made to sound like a perpetual motion profit formula. Why would anyone want to turn it off? I like the part where it says the Government (us taxpayers) makes a profit. The cheque is in the mail.

Harper’s UN non-appearance was refreshing. He is finallly realizing his true role. When it comes to Canada, our World Stage is the Tim Horton’s coffee shop.

#57 Kurt on 09.24.09 at 9:12 am

@Eduardo – If I recall correctly, single parent families now outnumber two parent families. In addition, the woman still usually gets custody and women on average earn less than men do (for reasons that have nothing to do with sex discrimination.) I’m not really sure how to model this – my guess is that it effectively splits real-estate into two markets – one for DINKs etc., and one for families. People migrate slowly between the markets. Problems arise when one or the other gets saturated. Because the DINK market promised higher margins, it got over-built, and was additonally subject to price speculation.

#58 kw on 09.24.09 at 9:17 am

In response to Dean-Oh #22
Prices along the north shore of mainland Nova Scotia are falling on the less expensive properties. The pricey properties along the ocean are holding their price as of yet but very, very few are selling. I laugh at the folks who think that their places near the water are worth so much since they are on the water or water view. I can go and park and walk on the beach or sit and watch the sunset or sunrise and not have to pay the 300 thou premium. Check out the mls for yourself. You can buy a hobby farm for 100 thou or less. Look inland even 10 or 20 clicks. Just don’t expect to get a good paying job anywhere in this province unless you are with the government leeches. Get a guard dog to protect your property when you are away. The thieves are thick in this neck of the woods.

#59 $fromA$ia "Garths Nugget Boy" on 09.24.09 at 9:17 am

“Harper’s UN non-appearance was refreshing.”

“If the Canadian Housing Bubble doesn’t POP, The Liberals DONT HAVE A CHANCE!”

Actually, I’d like to think that Harper & Flaherty are running on borowed time as long as the finanials are lending loose.

#60 Live Within Your Means on 09.24.09 at 9:20 am

#8 FTHB (forget that house buying) on 09.23.09 at 10:04 pm

I was reading part of Garth’s post to hubby this am and he asked the same question. I assumed it was household income. Also assumed this was gross household income. Am I correct Garth?

Yes. — Garth

#61 GregW., Oakville on 09.24.09 at 9:21 am

Hi Garth, FYI anyone, you might find this of interest enough to look further into the issue.

There’s a book and video that is avalible. Might even be in your local video store still.
http://en.wikipedia.org/wiki/Manufacturing_Consent:_Noam_Chomsky_and_the_Media

Manufacturing Consent: Noam Chomsky and the Media (1992) is a multi award-winning documentary film that explores the political life and ideas of Noam Chomsky, a linguist, intellectual, and political activist. Created by two Canadian independent filmmakers, Mark Achbar and Peter Wintonick, it expands on the ideas of Chomsky’s earlier book, Manufacturing Consent: The Political Economy of the Mass Media, which he co-wrote with Edward S. Herman.

The film presents and illustrates Chomsky’s and Herman’s propaganda model, the thesis that corporate media, as profit-driven institutions, tend to serve and further the agendas of the interests of dominant, elite groups in the society….

#62 Live Within Your Means on 09.24.09 at 9:25 am

#15 Bobby on 09.23.09 at 10:44 pm
Now, I’ll bet most don’t even know what the Enola Gay was. Or how it got its name.

It’s gonna get ugly.

I didn’t so I looked it up on Wiki.

#63 Live Within Your Means on 09.24.09 at 9:30 am

#18 Shawn Allen on 09.23.09 at 10:54 pm

We did the same, except we paid it off in 7 years by doubling up our mo. payments. I don’t think they had bi-weekly or weekly back in those days. No regrets whatsoever.

#64 GregW., Oakville on 09.24.09 at 9:34 am

Hi #59 $fromA$ia, (Garth, please delet if this is a repeat, not sure it went through 1st time. Thanks.)

re: “Actually, I’d like to think that Harper & Flaherty are running on borowed time as long as the finanials are lending loose.”

Don’t forget about the $56 Billion they borrowed
against your and your grand kids labor. Witch is being added to all the other hundreds of billions still owed/borrowed by the Canada Federal Governments. And then there is al the other layers of government. And that before talking about company and persons debt.
(And that’s just what they are admitting too. Remember the Ontario/Fleherty debt they kept hidden until the after the election/next governing party look more closely at the Ontario books.)

So much debt and just one finite planet we all need to live on.

Just my two cents.

#65 Dunand on 09.24.09 at 9:36 am

Do the realtor company pay the newspaper to post that publicity ?

http://www.theglobeandmail.com/report-on-business/housing-market-to-see-significant-growth/article1299678/

#66 Live Within Your Means on 09.24.09 at 9:45 am

#20 BCing You on 09.23.09 at 11:03 pm

IIRC, I saw one of the guys from Money Sense on TV the other day and part of the calculation used to determine your net worth is to include what your house is worth TODAY. I immediately thought this was rather misleading as he did not take into consideration potential rising interest rates and the possibility of defaults. Anywho, follow the link on this site:

The all-Canadian wealth test: Household income and net worth worksheets
Use these worksheets to calculate your household income and your net worth to determine your overall financial health.

http://www.canadianbusiness.com/my_money/planning/article.jsp?content=20090918_125030_6572

I suspect there maybe other fuzzy things. I haven’t done it.

#67 Mike (Authentic) on 09.24.09 at 9:45 am

# Eduardo “average income in Alberta. $100k ”

Could the average Alberta family be making 45% more than any other average family in Canada? I doubt it. I would say we are 10% more ($78k), but not 45% more ($100k).

Mike

#68 ALE on 09.24.09 at 9:52 am

The chartered banks have nothing to do with bond market yields. Learn a little, then form an opinion. Works much better that way. — Garth

DCMS was suggesting that QE can have the effect of reducing bond market yeilds by competing for bonds on the buy side – not that banks influence them. Why so condescending?

Because it is impossible. This is make-believe monetary policy and shows a fundamental misunderstanding of how central banks and bond markets work. — Garth

#69 Got A Watch on 09.24.09 at 9:53 am

Back in the day before idiocy ruled the real estate markets, the affordability metric was: 3 X average household (or family, whatever, the exact make-up does not matter, it was assumed back then it was husband/wife) annual income = average 3 bdrm home price for that geographic area.

So if the average family income last year was $70,000…the average 3 bdrm detached in that area should sell for around $210K. I believe average family incomes will be declining due to this ongoing economic contraction, probably for the next few years, before they once again move up towards $70K.

So there is no rational or logical reason why real estate prices continue to bubble up in an era when family incomes are falling, only the madness of crowds in irrational exuberance, encouraged by the MSM mass propaganda campaigns.

And any rise in interest rates will kill the “affordability” that the Realt(ho)rs(TM) are always pointing to, as #38 pointed out above. The math does not lie, only your Realt(ho)r(TM) and Government do that.

Those who do not think these things “matter”, please go out and buy all the house you can, now. Good luck with that.

I’ll just point out that after California peaked at around 10-12 X average family income home prices, real estate declined more than 50% now, and still falling. Huge waves of foreclosures are now about to break onshore, which won’t help real estate prices recover. Never mind the over-built situation after years of frantic activity – you get way too many houses vs demand anyway, regardless of other factors.

But “it can’t happen here!”, “it’s different in Canada!”, “the Government will never raise interest rates!” they say, over and over. Keep repeating that mantra if it makes you feel better, it won’t change the facts. The rest of the world, which controls our economic destiny (Canada is a small fish in a big pond, compared to other nations) does not care about how stupid Canadian “consumers” got to be from too many years of easy credit.

#70 Eduardo on 09.24.09 at 9:59 am

dd – Find an average and median Calgary income then.

#71 Eduardo on 09.24.09 at 10:02 am

Mike in 63 – It’s about 20% more per earner than the canadian average. If you look at my other posts I say that my assumption was that you have 2 average earners. But if you compare my national average per earner with Garth’s number per family it suggests that each family has 1 less than average earner or 1 earner who is above average.

I also said that I agree that owning a house with 1 earner is hard.

2 average Canadian earners ~ 85,000
2 average Alberta earners ~ 100,000

1 average Canadian family ~ 70k as per garth
1 average Alberta family ~ ??

Priceless. — Garth

#72 Makeorbreak on 09.24.09 at 10:05 am

Some more BS

http://www.calgaryherald.com/business/Calgary+home+value+triples+since+pace+slower+than+other+cities/2027974/story.html

#73 Larry on 09.24.09 at 10:07 am

Just back from my 3 week vacation in Brittany France where the boomers are slowly but surely selling their homes and moving into appartments. There will be a glut of houses for sale here in 5 -10 yrs time and yours truely will be waiting :)
Just to give an idea of the price difference between Calgary and Brest here are 2 links http://www.realtyexecutivesapex.com/search_mls_map_results.php?mls_search_type=ALL&mlss_cid=&DATA_TYPE=-1&PRICE_min=0&PRICE_max=20000000&AGE_min=0&AGE_max=-1&BEDROOMS_NUM_min=-1&BATHROOMS_NUM_min=-1&SIZE_min=-1&chkSaveSearch=0&txtSearchName=&txtResultCount=67 MLS®: C3390196 = $799,900 CAD or 500K Euro
and from France http://www.oceaneimmobilier.fr/fiches/4-40-26_1018834/brest.html 237K Euro or $379 CAD.
Yeah i know the population is not the same nor the view but why such a difference.

#74 LS on 09.24.09 at 10:08 am

Even though I hope for the housing market to come down, I’m starting to believe that in certain markets, maybe the high prices really are a new norm.
I was just in Munich, Germany, and prices there are the same as here. Is everyone in a bubble? Unlikely. No, I think the difference is that in Canada people still expect to own a house, while in Europe and Asia most normal families live in condos all their lives.

As our cities become more populous (Vancouver and Toronto are there already), and land pressure weighs on others (Victoria with ocean on two sides and ALR land on the others), I think we can’t expect the average house to be affordable to the average earner. Houses will be reserved for the rich, while everyone else lives in condos. It’s already like that in most places in the world, I don’t see how we would escape.

That said, we still plan on buying a house in Victoria, but it’s going to be a 1000sqft thing. I can’t see myself ever living in a 2200sqft place in victoria, like the Coldwell article used as a comparison.

Just like in Rome the price for a 2200 square footer (a mansion over there) is stratospheric even though incomes are low. That doesn’t indicate a bubble, that indicates that that size of house would never be purchased by an average earner, and no-one would expect to be able to afford it.

#75 Larry on 09.24.09 at 10:09 am

On another note why do 35 yr mortages with a fixed rate of interest not exist in Canada. My brother inlaw was shocked to hear that we have to renew every 5 yrs in Canada while in France you borrow today and get the rate for the lenght of the loan.
I think that this will change in Canada in order for our kids to purchase a home or are they already priced out forever LOL.

Why would any financial institution lock up funds for 35 years? If that were a requirement, mortgages would be extremely costly, and rare. — Garth

#76 David on 09.24.09 at 10:25 am

People seem to be ignoring some facts in this whole Housing price vs. income debate:

1. Your income is a useless number in knowing how much you can afford to pay.
Your AFTER TAX INCOME is the important number, you can’t spend the government’s money on your house…and if you look at the ratio of House Prices to After Tax Income, we are much more expensive than ever. Taxes are much higher percentage of income than they used to be.

2. Incomes are coming DOWN. We are at the top of the income bubble for some time. Median incomes are dropping as unemployment rises, and big bonuses fall. House prices will need to fall even faster than median income falls to catch up to historic norms.

3. Debt levels are much higher than ever. We are the only G7 country still adding to personal debt levels. So, the income left after debt service is much lower than the income.
If you took an “adjusted for other debt service costs” income vs. housing prices, the picture would look a lot more grim.

#77 Larry on 09.24.09 at 10:31 am

#75 Garth. That’s how banks do business in the USA, UK, France and Ireland to name a few and their still in business.

No it is not. — Garth

#78 BDG YYC - Hmmm ... ? on 09.24.09 at 10:38 am

Household incomes …

Working with averages when it comes to house prices and household incomes might be a perfect way to generate some feel good analysis but it doesn’t do much in terms of getting a grip on reality.

Hard reality #1 … the majority of households DON’T bring in the average household income. That’s right … fewer folks are “average” than you might think.
Hard reality #2 … about 2/3 of total household income is earned by the top 40% of households and almost half of total income is earned by the top 20%. Sooooo … that leaves 1/3 of total income to split among the bottom 60% of households. The bottom 20% split barely 5% of total income.

So … to get really real … maybe we should take a look at the picture a little differently by throwing out the top 20% (by the way … the top half of those pull in about 2/3 of the total income of that 20% slice) … and lets also throw out the bottom 2o% (not likely to own a home anyway). Which would leave us with the middle 60% of households. Now … since we know that about 70% of households own homes … and likely almost all of the top 20% own a principle residence and also likely account for most of the resort and rental ownership … we can probalby throw a number like 75% at an effort to figure out how much of the total residential property that the middle 60% of households are on the hook for at the moment. That also gives us the opportunity to deduce that about 1/6 of these folks non’t currently own homes … and are basically the pool of new buyers.

Now for some real reality …

1. The average after tax household income for the top 20% is …… about $120k/yr.
2 The average after tax income for the bottom 20% is about $12K/year.
3. The average after tax income for the middle 60% is about $50k/year. This means that it is likely that more of these folks make less than $50K than make more and that most of the crop of new home buyers that need to be stuffed into the ownership pool in order to support real estate prices and to continue to push home ownership above 70% has to for the most part come out of the bottom reaches of household incomes somewhere well below $50K.

Now … can a household making say $40K manage to muster together every available dime of after tax income to get on board the “last chance train to homeowner riches” … and can home ownership get beyond 70% ? Well of course they can ! Of course it will !!!! As we all know … poor homeowners are financially very resiliant and the backbone of our robust and ever to endure housing markets.

Here’s a little income stuff …

http://www4.hrsdc.gc.ca/[email protected]?preview=1&iid=22

PS … You might want to take note of the regional disparities … seems Ontario and BC are in fact “special” cases.

#79 Jmack on 09.24.09 at 10:43 am

http://www.realtor.ca/propertyDetails.aspx?propertyId=8565631

Another classic westcoaster…They have the gawl to say “completely renovated”….look at the laundry and backyard… “More money than brains” as Dad always said.

#80 $fromA$ia "Garths Nugget Boy" on 09.24.09 at 10:53 am

David, thanks for your post. I quote you below.
“3. Debt levels are much higher than ever. We are the only G7 country still adding to personal debt levels. So, the income left after debt service is much lower than the income.
If you took an “adjusted for other debt service costs” income vs. housing prices, the picture would look a lot more grim.”

Thanks your Conservative Gov. for the loose lending policies stilll in effect. A proped up housing market is keeping the Conservitives in powa!! It’s really lame, what the Conservatives are doing to Canada is not Canadian nor Conservative.

I’d prefer somebody thats JUST VISITING! :P

#81 Calgary Rip off on 09.24.09 at 11:14 am

Hey Garth, check out the latest crap from the Herald: http://www.calgaryherald.com/business/Home+value+since+pace+slower+than+other+cities/2027974/story.html

It will be funny when Calgary goes under what this dude will write. Other bulls like Eduardo will probably justify the implosion under the misguided assumption that the realtors and oil people are regrouping for the next boom at which the median house prices will be $800K in Calgary for a 800 sq. ft. detached shack.

#82 George on 09.24.09 at 11:19 am

#22 Dean-oh, I’ve been looking in Nelson BC and yes there have been considerable price drops on properties above 600K. It’s been difficult to get a realtor to actually work for you, however, and of course “Nelson is different” good luck. The locals have been telling me that a million dollar property was absolutely unheard of five years ago and now there are several that sit on the mls collecting cyber dust.

#83 Eduardo on 09.24.09 at 11:34 am

http://www.muchmormagazine.com/2008/07/average-canadian-family-income-now-70400/

Here’s some family incomes for you from a quick google search.

Calgary at 90-95 k in 2009, at an average house price of 450 Calgary is high at ~5 times.

#84 taylor192 on 09.24.09 at 11:35 am

To #29 vantown

Yes the scaremongers were wrong about the 2008 collapse:
– they failed to take into account 35 (and 40 for a brief time) amortizations
– they failed to see that the banks of the world would unite to lower interest rates

So perhaps the scaremongers will be wrong about a subsequent bubble collapse:
– banks will hold interest rates near 0% indefinitely
– there will be an infinite supply of new buyers able to afford housing
– housing will continue double-digit gains indefinitely

Do these predictions sound absurd to you? How about some more reasonable ones:
– banks will increase rates slowly
– the majority of home owners will find a way to renew their mortgages in 5 years
– some home owners will obviously have a difficult time renewing, and this will be a higher percentage than currently
– house prices will level off (for a LONG time!)
– home owners unable to sell their houses for their asking price will take them off the market and accept whatever their mortgage terms are

I think these are more reasonable cause:
– average price of a condo in the GVA is $440K (June 2009), and $550K in metro Vancouver. With 10% down on a 4% 35yr mortgage, this requires a household income of $90K in the GVA or $110K in metro Vancouver to meet the 42% TDS
– 8% of households make > $90K, so eventually the number of new buyers will stabilize or decrease
– this will stabilize or decrease the market as a whole (since new buyers are needed for current buyers to move up)
– we’ve already seen signs buyers are not getting their asking prices and taking listings off the market. Active listings are way down, and few are being relisted

Then again, we could all be wrong and tons of new immigrants with deep pockets will come here and snap up land at a bargain compared to Hong Kong.

Off-topic: The thing that scares me most about Vancouver is how little Vancouverites save/invest outside of real estate. Much of Vancouver’s wealth is tied up in real estate, so any hit to prices will be devastating to the economy. Vancouver’s economy is highly service based, with little manufacturing, construction/logging/mining dwindling, and only 1 company headquartered here.

If people stop spending money, where is everyone going to work?

On immigration: The quota is about 215,000 people a year, which amounts to roughly 50,000 families, of which perhaps a quarter are ready to purchase houses, which is month’s supply in Toronto alone. No salvation there. — Garth

#85 Eduardo on 09.24.09 at 11:36 am

I’m not a bull… I just don’t think it’s as overpriced as you all think for a family with 2 earners unless you’ve been laid off.

#86 Eduardo on 09.24.09 at 11:37 am

RE: BDG YYC – Hmmm … ?

Not 100% of families are homeowners. The bottom 1/3rd don’t own houses anyways.

#87 Keith in Calgary on 09.24.09 at 11:41 am

My father and I were talking RE this morning over coffee.

We calculated, quite accurately from his filin gcabinet full of records, that they spent $270K over the last 30 years paying for and maintaining their house in Calgary. A property that today is paid for, and worth $325K +/- due to the credit/RE bubble……..it still costs him $5-600 a month to carry it however, because you always have to pay the taxes, utilities, insurance, as well as maintenance.

The wife and I have saved $275K of cash in the last 8 years while renting here in Calgary.

RE, what a great investment……

#88 taylor192 on 09.24.09 at 11:52 am

My broker recently gave me this real example:

A couple in their early 20s with no education both work at Loblaws. They each make $25K and have a household income of $41K after tax. This means they can afford a mortgage of $1450 at 4% over 35yrs, or a house worth $330K. This is 6.6x their total income, or 8x their after-tax income.

He would not give this couple a mortgage, cause its a recipe for disaster if rates increase or prices drop. He did note that many other brokers would be more than willing to give them a mortgage, and one did. So they went out and purchased a $300K single home in the burbs.

Arg.

This screams for more regulation. More and more new buyers are maxed out with no room to breathe.

#89 David on 09.24.09 at 11:57 am

The trouble with “recreational property” is that anyplace that had an Ocean, Lake, River, Stream, Creek, Mountain, Hill, Golf Course, Warm Weather, Pristine Wilderness, or Urban Center other was a “special tourist attraction” that could justify thousands of condos that could only go up in value.

We just have to pretend that there is anyone that doesn’t already have 3 or 4 properties that is left to buy them.

As Garth has stated many times, its a pretty basic problem – You got a whole lot of forced sellers that are going to meet up with a much smaller pool of buyers.
And its going to be happening for a long time.

#90 van house hunter on 09.24.09 at 12:09 pm

#22 Dean-oh, a 1 year old 1200ft2 duplex in the Mount Pleasant area of Vancouver situated on 12th originally asking $830K dropped the price to $699 on the weekend. of course this pushed at least three fools to put offers down. dont know if it’s sold yet….

#91 Artisuseless on 09.24.09 at 12:12 pm

“They know each one is good for free, uncritical ink from an uncaring, lazy media. Real estate ‘news’ ain’t news anymore – it’s lifestyle infotainment, usually run word-for-word from corporate news releases.”

That could be said for ALL business news in Canada, not just RE. There’s very little ‘news’ at all in Canadian newspapers.
Even ‘local crime’ is just a copy-paste from press releases issued by the police.

I used to work for one of the paid newswires so trust, me, I know.

#92 Artisuseless on 09.24.09 at 12:16 pm

A little experiment/lesson for your readers:

Get an article that covers RE. Then do a search in either http://www.newswire.ca or http://www.marketwire.com for the companies/organizations mentioned in the release.

Here’s the example for Coldwell Banker: http://www.newswire.ca/en/releases/archive/September2009/23/c7876.html

#93 Chaostrology on 09.24.09 at 12:49 pm

Re: #48 Nos jr.

I think Jr. is right about Vancouver.

The little village by the sea is no longer representative of Canada and may occupy a pocket of indestructibility regarding real estate prices.

Vancouver is an international phenomenon.

The main groups driving this phenomenon are Asian with various subsets.

Some have arrived with money, some have arrived with a dream. A dream or money makes no matter, they all buy real estate. They drive the market. They change the demographic and ultimately they change the face of the city.

If you live in the GVRD you know how the larger city breaks down regarding cultural make-up. You understand that critical mass has been reached for these cultural groups to the point where cultures are no longer absorbed, but now stand alone.

Indians have no need of learning to speak english as they can conduct their life as if living in India, with very little inconvenience. They can live like rich Indians, with all the freedom of living in North America.

Ditto Chinese. Ditto Iranians. Ditto Koreans. Ditto Viet Namese. Ditto, ditto, ditto.

India migration began in the 60’s, Iranian’s with the downfall of the Shah in the 70’s, Hong Kong Chinese with the hand over in the 80’s and many smaller cultural groups in the 90’s and mainland Chinese in the 2k’s. The latest migrant group consisting of Mainland Chinese really only have 1 foot in the door, they own real estate. I think that it is fair to say that a million dollars is not necessarily a big deal for them to buy into the country.

The next migration may be rich Mexicans, fleeing to safety.

Time will tell if boomers will be able to continue to cash out in Vancouver on the coattails of economic migration.

We can only hope.

This not a rant, it’s just the way I see it.

Please don’t flame me.

#94 David Bakody on 09.24.09 at 12:49 pm

TSX follows world markets lower
Last Updated: Thursday, September 24, 2009 | 11:38 AM ET Comments27Recommend16CBC News
The TSX followed world stock markets lower on Thursday as investors worried that the G20 summit might move for the withdrawal of support measures for the fragile global economy.

So ladies and gentlemen what Hon. Garth Turner has been saying for quite some time appears to be correct … governments printing money passing it out like candy with no …repeat no plan to pay it back was done so investors could get their mitts on it. What was not mentioned and what Garth Turner has said … a million times! the taxpayers now and years to come will have to do so via higher interest rates and liquidation of stocks, bonds savings and of course real estate to pay for it…. “OR” print more money borrow at 5-6% and continue to loan it out at .025%

Now ladies, gentlemen, & the MSM do not just love Mr’s Harper/Flaherty and that sign “Accountability & Transparency” ….. and to think those dam Liberals ran this country for years with balanced budgets and acquired a $13, 000,000,000 surplus with a $3,000,000,000 emergency fund shame on them how dare they, just who do they think they are/were anyway. Things to-day are booming the money printing presses are going 24/7, perhaps 2,000,000,000 unemployed sitting around with beer and popcorn our children and grandchildren will owe more than $600,000,000 billion and senior boomers will have more friends than they dreamed of having to bunk together and share meals on wheels supplied for by Mr. Harper …… yup let the good times roll!

Sad eh, or is this just a bad dream?

#95 ValueHunter on 09.24.09 at 12:56 pm

Does anyone know why our banks, the world’s most solid banks, need this mortgage backstop?

Will taxpayers be holding the bag?

http://www.theglobeandmail.com/report-on-business/crash-and-recovery/flaherty-set-to-extend-mortgage-backstop/article1299101/

#96 Men With Hats on 09.24.09 at 1:15 pm

Enola Gay B-29 Superfortress built to carry nuclear devices over Nagasaki and Hiroshima . It flew the nuclear device ‘ Little Boy ‘ and dropped it on Hiroshima .

Enola Gay was named after colonel Paul Tibbits mother,
pilot of the Enola Gay .

Dropped on Japan on 6 August 1945.

#97 money counting on 09.24.09 at 1:21 pm

Jimbie put $125 billions into the shark banks. Another $75 B to help the poors in CHMC.
In the end he basically giving people money to make money…hhmmmm…sound familiar…I heard this somewhere from the news…PONZI
You know the outcome of all PONZI scheme. A picture on the news. Get ready for part III replace that white hair guy with Jimbo in there…ah who am I kidding

#98 dd on 09.24.09 at 1:25 pm

#71 Eduardo

It is an overpriced market Eduardo. How about affordability? Seems like all regions are more affordable, however, that is mainly a reflection of cheap cheap rates. 40 is the upper limit. Imagine when interest rates increase!

http://www.rbc.com/economics/market/pdf/house.pdf

#99 Evangeline on 09.24.09 at 1:28 pm

Greg W Oakville
((The film presents and illustrates Chomsky’s and Herman’s propaganda model, the thesis that corporate media, as profit-driven institutions, tend to serve and further the agendas of the interests of dominant, elite groups in the society….))

Gee, considering that corporate media supported Obama like he was a god and took every opportunity to trash W, does that mean 0 is serving the interests of the dominant groups in society and W wasn’t?

#100 T.O. Bubble Boy on 09.24.09 at 1:36 pm

These stats are confusing me now – either the average income tax level is much lower than I thought, or these stats don’t come from the same pool of data…

“Market Income” (before tax) is listed here:

http://www40.statcan.gc.ca/l01/cst01/famil22a-eng.htm

This shows an average pre-tax income of $77,300 in 2007.

However, when you look at after-tax income:

http://www40.statcan.gc.ca/l01/cst01/famil21a-eng.htm

This shows an average after-tax income of $71,900 in 2007.

So, $77,300 – $71,900 = $5,400 Average Income Tax? (7%???)

#101 Bertie on 09.24.09 at 1:42 pm

#33 al jones

“The” al jones from pin cushion?

#102 Barb the proof reader on 09.24.09 at 2:06 pm

#26 George “Being wrong in our society has always been much more lucrative than being right”
==========

That’s a misguided statement.

However, “Lying has been more lucrative than Truth” and that’s why truth in advertising had to be asked for in the laws, not that the law can always be easily applied with such widespread and lucrative lying going on.

That’s why today’s citizens should be working much, much harder to force honesty in ALL areas of business transactions, and to hold people’s and corporation’s feet to the fire to be fully truthful… should apply to politicians too, just this week I heard and rec’d several more lies from Harpo & Co.

#103 jess on 09.24.09 at 2:09 pm

“export recovery?

Baltic Dry Index
http://www.dryships.com/pages/report.asp

#104 Barb the proof reader on 09.24.09 at 2:24 pm

#49 David Bakody re: markets recover by downsizing

David, as mentioned by Michael Moore last night on Larry King, Moore pointed out in his documentary Roger & Me (20 years ago) that GM Flint, MI laid off 30,000 U.S. workers when it was doing very well, simply to a squeeze a bit MORE profit outsourcing to Mexico. It destroyed the town and chaos and complete devastation ensued from which they’ve never recovered.

Roger & Me was the first film to document the following: (1) downsizing of corporations, and (2) outsourcing of jobs to developing world nations. GM’s closing of several plants in Flint and opening new plants in Mexico is a prime example of outsourcing.

http://en.wikipedia.org/wiki/Roger_&_Me

Moore’s newest documentary, Capitalism: A Love Story, will be released next week, and is already a monster hit with all right and left – a must see.

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

It will probably be a transforming documentary of our times.

#105 ALE on 09.24.09 at 2:44 pm

Garth,

Because it is impossible. This is make-believe monetary policy and shows a fundamental misunderstanding of how central banks and bond markets work. — Garth

How does our situation differ from that in the U.S. where QE is felt to have suppressed mortgage rates?

“A sudden end to the Fed’s purchases [mortgage-backed securities and housing- agency bonds] might push up mortgage rates by a half to one percentage point, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York. ” – Bloomberg, Sept 23 2009

#106 nonplused on 09.24.09 at 3:00 pm

“Canada has massive housing bubble”

http://howestreet.com/articles/index.php?article_id=10886

Be interesting to see how long direct intervention by the BoC and CHMC can keep it floating. But that is what it is, simple as that. CMHC is not acting as an insurance agency any longer. If they were, they would be concerned about things like debt/income ratios and downpayments. Instead, they now only look at payment to income ratios and nothing else. That is what the banks in the US were doing when they thought they could “securitize” the mortgages away. But the idiots at CMHC have appearently forgotten that there isn’t anybody for them to pass the risk on to. Besides the taxpayer of course.

#107 Just a Girl on 09.24.09 at 3:05 pm

I really don’t understand why it is so hard for some people to understand, why some housing markets perform better than others.

Let’s for a minute level the playing field. As of right now, for one minute only, all the land and house prices in the entire world are the same cost per square foot. All currencies are equal. In other words, shop wherever you like! Waterfront, lakefront, mountains, prairies, small towns, large towns …. England, Canada, Africa … it’s all the same!

And, let’s see how long that level playing field lasts ;)

#108 Jason on 09.24.09 at 3:07 pm

I had no idea this crap was going on in Canada!
Sounds like absolutely nothing was learned from the US housing collapse.

“In October, the federal government pledged to buy up to $125 billion in federally insured mortgage-backed securities.”

http://www.cbc.ca/money/story/2009/09/24/ottawa-mortgages-profit.html

#109 BAD on 09.24.09 at 3:08 pm


While on the topic of average income and average RE prices one should also try to determine what an “average priced” RE property is. To illustrate my point I’m presenting extreme cases (non-existent):

1. Average priced property is a 500 sq. foot one bedroom “apartment-condo” in a bad area of the town.

2. Average priced property is a 4000 sq. foot walk-out bungalow with attached and detached garages on a few acres of land backing onto a lake with private marina.

In both cases the “average priced” property is about 3.5 times average family income.

Thus based on what the averages are saying the real estate markets in both cases are balanced, affordable and there’s no issue with shelter prices.

Using only a fragment of the whole picture one can present it as an indication of anything that suits one’s purpose. Thus it is important that anyone interested in purchasing a property does research on what the actual local market presents for a given price, and how that compares to other locations.
Also, I find it difficult to even begin to compare locations like Rome to say Edmonton, Calgary, Toronto or Vancouver.

#110 David Bakody on 09.24.09 at 3:08 pm

Barb:

Did not see Larry King …. but I am well aware of Michael Moore …. I remember the way back when the government was first to impose/offer early retirement they by eliminating middle management, this allowed many large companies to do the same …. good by middle management and rewards of an easily life prior to retirement. We who were around at that time know what happened …. all the worked flowed up and down as required ( mostly down) and profits went up. Nothing in politics happens by accident just like the surprise visit to Caledon by Mrs. Harper not to mention early visits by Santa Clause. For the good people of Caledon careful because once Harper has you on your hands and knees …. there will be a price to pay to rise up.

#111 dave99 on 09.24.09 at 3:13 pm

#100 T.O.Bubble Boy,

The footnotes at the bottom indicate that the first figure is based upon
“Average market income is the sum of earnings (from employment and self-employment), investment income, (private) retirement income, and items under Other income”

and the second is based upon
“Average income after tax is total income, which includes government transfers, less income tax.”

The two measures are different, and in particular the second includes gov’t transfers (presumably includes CPP, OAS, EI, Family Benefits, etc)

#112 nonplused on 09.24.09 at 3:41 pm

This will happen to CMHC and CDIC eventually too:

http://www.bloomberg.com/apps/news?pid=20601039&sid=aEKc7Yh8ogXw

All insurance schemes are in essence Ponzi frauds because they rely on statistical assumptions about how much of the net insured portfoliio will ever be called upon at one time. So the overall pool supposedly insured is many times larger than the amount of capital available. The hope is premiums come in faster than payments go out.

But the mountain of theoretical obligations under certain conditions is always capable of producing larger draws than statistics would suggest, for example when the game changes. A deflating housing bubble would be an example of a game changer.

Oh and get a gas out of this one:

http://www.bloomberg.com/apps/news?pid=20601068&sid=aGTlTs4oqR_Q

Who wasn’t expecting home sales to fall?? House sales always fall in the autumn, nevermind the fact that the economy is collapsing before our very eyes! US data to be sure but Canada will have their own version.

#113 T.O. Bubble Boy on 09.24.09 at 3:42 pm

RE: Flaherty’s Shopping Spree…

Despite what the media spin is, the *ONLY* goal for this latest Flaherty scam is to keep the housing bubble going until the next election. Flaherty/Harper know that inflated house prices = sheep feeling happy about their situation.

This is a PONZI scheme, there’s no other way to describe it:
1) Banks make crappy loans.
2) Government buys crappy loans, and doesn’t tell anyone how much money they lose on them.
3) Banks make more crappy loans. With the money freed up from the Government buying the first ones.

… rinse … repeat

The only way I see this stopping:

1) Banks run out of people to sign up for crappy mortgages.

2) Banks decide that they can make more money from packaging up the mortgages in other forms.

3) Countries/Banks decide to stop buying Government debt.

4) We get a new Finance Minister — one who doesn’t have short-term blinders on and can see past the next election date when making decisions.

Also – does the Conservative Government *HAVE TO* copy every move that the US Government makes? Do we ever consider that our 2 countries might actually need different types of governing?

US bails out banks with TARP –> Canada bails out banks (who apparently didn’t even need it)

US buys GM –> Canada too!

US buys more mortgages (TARP v2) –> Canada buys more mortgages

I’m waiting for Harper & co. to come out with proposals for reforming the health care system, pulling out of Iraq, opening borders to Cuba, and Cash for Clunkers.

#114 CalgaryRocks on 09.24.09 at 3:45 pm

We calculated, quite accurately from his filin gcabinet full of records, that they spent $270K over the last 30 years paying for and maintaining their house in Calgary. A property that today is paid for, and worth $325K +/- due to the credit/RE bubble……..it still costs him $5-600 a month to carry it however, because you always have to pay the taxes, utilities, insurance, as well as maintenance.

The wife and I have saved $275K of cash in the last 8 years while renting here in Calgary.

We made 80k in just 3 months, flipping just 1 house in Calgary.

Your father only spends 600$/ month for a house and he has 350k in equity. His average over 30 years is about 700$ per month. You can’t rent anything decent for this kind of money.

You imply that because over the last 8 years you missed the biggest re boom in history, you saved almost 3000/month by renting, instead of owning. There is no such discrepancy unless you compare owning a mansion with renting your dad’s basement.

We own a house in Calgary since 2005 and our mtg is now less than 1k/month plus 200k+ in equity. And another 80k sitting in the bank from above.

RE’s been really good to us.

#115 BDG YYC - Hmmm ... ? on 09.24.09 at 3:45 pm

#86 Eduardo … not sure what your point might be but actually its about 30% of households that don’t own homes. Also 28% of households have incomes of less than $25K/year. My point is that we are scraping the bottom of the bucket in terms of the available supply of new home buyers to prop the RE market supported by lax lending standards, historically low interest rates, and CMHC’s willingness to insure an increasing volume of dodgy mortgages which equates to a government subsidy. At a 70% home ownership level the math says we’re about maxed out unless somebody finds a way to get households in the $25K to $30K income range into homes they can actually hang on to.

http://wpcontent.answers.com/wikipedia/en/thumb/8/8f/Personal_Household_Income_U.png/350px-Personal_Household_Income_U.png

#116 jussupow on 09.24.09 at 3:46 pm

OT. Nice piece by Mish. Japan. Yeah, no doubt about it. Higher interest rates? Petrol at 100? Inflation? Rates lower, oil to 20, are you kidding(?). RE? darn… all I can say in US it is going substantially lower.

#117 Coho on 09.24.09 at 3:48 pm

Here’s an “unbiased” report from Remax that the “housing recession” was the shortest lived ever and that “the worst is definitely behind us.”

It has been reported that a pack of wolves recently arrived and living on the other side of the fence at XYZ Chicken Farms Inc. near Chilliwack submitted a report to the editor’s desk at the Vancouver Sun drawn up by their resident expert that there has never been a safer time for them chickens, despite their presence next door.

The editor neglected to ask the wolve’s why they left the forest, but did ask why they chose to live next to the chicken farm. The alpha wolf answered that the scenery was nice and there was plenty of fresh local corn available. And like Mr. Kruger on Seinfeld, who signed his name to a $20K cheque for George to give to the “Human Fund” charity did, the editor shrugged his shoulders and said “Whatever”.

http://www.vancouversun.com/business/Real+estate+bounce+back+seen+rising+sales+housing+prices/2029033/story.html

#118 Men With Hats on 09.24.09 at 3:56 pm

“The bounce-back that began in early spring has made this recession one of the shortest on record for real estate.”
Reason is the damn recession ain’t over yet,idiot .
We all wait with baited breath for the other shoe to drop .
When it does the fallout will be horrific .
Can you say Nagasaki or Hiroshima ?

#119 Men With Hats on 09.24.09 at 4:00 pm

God ! I would love to see a round table discussion between Garth and this clueless bunch of gang members .
They don’t know whether their asses are bored,reamed or punched .

#120 dave99 on 09.24.09 at 4:18 pm

#108 Calgary Rocks,

You ignore the opportunity cost from the returns which could have been realized had the money been invested elsewhere.

Also, you state that nothing decent can be rented for $700/month. While that may be true in 2009, surely that was not the case 30 years ago.

Is this really the full extent of your ability to analyze these financials? Really? Really??

#121 Live Within Your Means on 09.24.09 at 4:20 pm

#73 Larry on 09.24.09 at 10:07 am

Larry – Hubby and I spent 3 wks in France this year to visit family & friends. We spent a few days in Dinan with an old friend of his & her partner – he hadn’t seen her in 30 years , but it was like yesterday for them. What a great time we had. We also went to Mont St. Michel & St. Malo, etc. I’d dearly love to live in France for half the year, but at my age, etc. doubt it’ll happen. Maybe in my next life. BTW, hubby’s old friend lives in a renovated 17/18th century home overlooking the River Rance.

BTW, if anyone wants to rent a car for min. 21 days, I’d suggest Renault Eurodrive.

http://www.resa.ca/page3-a-rach.html

All insurance is included, brand new car. We’ve gone w/them 3X and totally satisfied in comparison to other rentals.

#122 Missing the Point on 09.24.09 at 4:28 pm

107

The point is that while it took their Dad 30 years to pay off a 325k house and accumulate 325k, with all the boom bust cycles, they have close to the same “equity” (275k) after only 8 years, regardless of whether they live in a house or a condo. Its a roof over your head after all.

You, after 5.5 years have 280k in equity/housing profits. So while on a per year basis of net worth growth you are slightly ahead, these guys have done a phenomenal job saving as an alternative form of wealth generation. Of course, if you were to factor in your taxes and maintenance, you might even be more comparable to their net worth.

RE has been good to you, and renting has been good to them.

#123 Gary on 09.24.09 at 4:30 pm

A la Globe and Mail, here’s an opportunity to ask a real estate “expert”:

http://www.theglobeandmail.com/real-estate/real-estate-is-hot-again/article1300003/

“After a gloomy winter, the real estate boom is back in the Toronto area. Bidding wars have returned, with some house sellers nervous that they won’t find a new property to buy after they sell their own home. The speed of the recent rebound is matched only by the sharp recovery in prices, which can be attributed in part to low interest rates. In Canada, the Vancouver and Toronto markets, which fell fastest during the correction, have seen the strongest rebounds.

Agents in Toronto are advising clients to buy before they sell if they can’t risk having to rent or move in with family. Inventory of listings isn’t keeping up with demand, especially in the mid-range $600,000 to $1-million price bracket.

What does it all mean to you? Toronto Real estate expert John Pasalis will be online to discuss the state of the housing market in Toronto. Submit your questions in the comments field on this story or in the box below, and be sure to come back when we’re live at 12 p.m. ET on Friday.

John Pasalis is the Broker owner of Realosophy Realty Inc, a Toronto-area real estate brokerage. A graduate of the University of Toronto, he holds a B.Sc. in Economics. Mr. Pasalis began his career in real estate 10 years ago, first working as a portfolio investment manger and then moving into sales. He is a frequent contributor to MoveSmartly.com, a prominent Toronto real estate and neighbourhoods blog. “

#124 (IHNM, WMM) I Have No Money, Where's My McMansion? on 09.24.09 at 4:38 pm

My collegue also got the letter from TD increasing HELOC interest rate by 1%. Is that a breach of contract?

#125 Jan Etter on 09.24.09 at 4:49 pm

#93 Chaostrology – I haven’t been to Vancouver in years but the waves of immigration you describe is essentially identical to the GTA. Certain areas in the GTA, particularly the “905” area code, have developed into enclaves based on a particular wave (this is supported by 2006 Statscan Census data as well as by observation, e.g. all the stores in a particular area are in a language other than english).

This phenomenon of enclaves is of course not new to the Toronto area but the difference in recent decades is that many of the waves are primarily made up of the wealthy and educated classes of a particular country coming to Canada to escape a bad situation, whereas many previous waves were the “poor, tired, hungry masses” who did not have the economic means to be investing in real estate en masse and so quickly upon arrival. It will be interesting to see if certain enclaves remain enclaves in the next 10-20 years as the neighbourhoods mature or whether there will be diffusion of the enclaves.

While macroeconomic factors will undoubtedly have the greatest impact on Canadian real estate, it’s wise to at least consider the mitigation that neighbourhoods and enclaves will have on local real estate prices. For example, if you think there is the “right” mix of political factors in a particular country/area now that will result in another large wave of wealthy educated immigrants in the time horizon that you plan to “cash out” in that area, and there is already an enclave in that area of a particular country/area of origin, then you can try and swing the odds in your favour by owning in that area. On the flip side, if there is an enclave consisting of a lower socio-economic immigrant wave and you foresee a further wave(s) to come with similar characteristics, then the odds work against you. I wouldn’t go so far as to hope that these factors will fully mitigate the impact of a bubble burst but I don’t doubt you will see a difference in 10-20 years based on these immigration patterns.

Immigration (in total) amounts to 0.007% of the Canadian population annually. Dream on. — Garth

#126 CalgaryRocks on 09.24.09 at 5:03 pm

#120 dave99 on 09.24.09 at 4:18 pm #108 Calgary Rocks,

You ignore the opportunity cost from the returns which could have been realized had the money been invested elsewhere.

Like Nortel or Lehmans?

Also, you state that nothing decent can be rented for $700/month. While that may be true in 2009, surely that was not the case 30 years ago.

The guys pays 600$/month for a house while you pay double to rent a 2 bedroom appartment, has 350K in equity and has had the opportunity to live in his own house for 30 years, raise a family and provide stability for his kids. What’s wrong with that?

#127 hal smith on 09.24.09 at 5:03 pm

Enola Gay might be in the air Garth but so is Bockscar, the B29 that dropped the Fat Man plutonium bomb on Nagasaki 3 days later. The new Bockscar is carrying free money and is dropping it all over the country to keep this bubble happnin’. And this Bockscar isn’t gonna run out of gas soon………..

#128 Rob in Nvan on 09.24.09 at 5:22 pm

#112 nonplussed (re. link #2: existing home sales unexpectedly fall)

Thanks – as posted here a couple of days back, economists were also “surprised” by a retail sales drop in July. My understanding is their forecasting accuracy is low (witness 1 year ago). Maybe that’s why they call it the dismal science.

http://eprints.lancs.ac.uk/7020/1/000020.pdf

“one of the most disturbing findings is that recessions were generally not forecast prior to their occurrence” p10

“on the other hand they were willing to forecast the end of recessions even to the end of predicting such turns too quickly” p11

I can’t locate the link, but I recall a similar study came out earlier this year, perhaps out of Britain; the general conclusion as I recall it was that economists as a whole were “too optimistic” and tended to under-predict downturns (translation: “biased”?).

#129 CalgaryRocks on 09.24.09 at 5:27 pm

#122 Missing the Point on 09.24.09 at 4:28 pm 107

The point is that while it took their Dad 30 years to pay off a 325k house and accumulate 325k, with all the boom bust cycles, they have close to the same “equity” (275k) after only 8 years, regardless of whether they live in a house or a condo. Its a roof over your head after all.

Yes, clearly saving that kind of money is great. But, if they had bought a house 8 years ago in Calgary, for say 100K that house would be worth about 350K right now (conservative). That’s 250K in equity right there.

The payments on a 100K house would be low enough so that they can still save their 3K/month that they do now.

Therefore, had they bought a house their net worth would be roughly double. 285K+200K

All speculation and would’ve could’ve. The point is that it is false to say that renting during the biggest RE boom in history is somehow a great strategy.

#130 taylor192 on 09.24.09 at 5:35 pm

#93 Chaostrology

You are on the right track, yet I doubt Vancouver is as immune as you think.

Certain cultural groups view housing very differently. Asians are known to save every dime to afford housing. Indians view housing a right of passage with marriage. Wealthy foreigners send their children to school here, buying them a condo and car as well. … These cultural differences could keep the housing bubble inflated in Vancouver… yet as Garth pointed out, it would take a lot of immigration to do so.

For every wealthy Asian, Indian, … you see driving an exotic sports car, count the number sitting at a bus stop. There is a lot of wealth immigrating here, yet not as much as you would perceive.

Another cultural difference that works against the bubble is multi-generation families living in one household. Asian, Indian, … immigrants tend to do this, kids, parents, grand-parents under one roof. It raises their buying power to have multiple generations contributing to afford the $M homes in metro Van. Yet it also decreases the number of immigrants that could purchase real estate, by grouping them into one household.

#131 jess on 09.24.09 at 5:36 pm

Have any readers here read this?

The Big Investment Lie: What your financial advisor doesn’t want you to know

#132 dd on 09.24.09 at 5:48 pm

#83 Eduardo on 09.24.09 at 11:34 am http://www.muchmormagazine.com/2008/07/average-canadian-family-income-now-70400/

“Calgary at 90-95 k in 2009, at an average house price of 450 Calgary is high at ~5 times.”

Actually this acticle pulls numbers from 2006. Maybe in 2009 family income is around a $100K.

Calgary average household income is $90,500. — Garth

#133 jess on 09.24.09 at 5:51 pm

ASSOCIATED PRESS
09/23/2009

CAIRO, Ill. — The sheriff of cash-strapped Alexander County in deep Southern Illinois says his crime-fighting efforts won’t be deterred by the fact that he’s recently lost three-quarters of his staff and five patrol cars.

David Barkett’s job got a bit tougher Tuesday when his department surrendered the patrol cars to First National Bank in Cairo because of nonpayment.

That left Barkett’s force with just one county-owned car. But he got some help Tuesday when he met with federal and state officials in Springfield and brought back a government-surplus 2004 Ford SUV to keep.

Barkett expects more donated vehicles to be headed his department’s way.

Barkett’s department recently laid off 11 employees, or three-quarters of its work force, because of budget restraints. Ten of those displaced workers were deputies

#134 dd on 09.24.09 at 5:52 pm

#87 Keith in Calgary

“RE, what a great investment.”

Actually it is one of the best investments if you are levered to the hilt, demand is great, and supply is less. But it sure sucks when it reverses.

#135 Vancouver_Bear on 09.24.09 at 6:09 pm

#28 Sylvia on 09.24.09 at 1:17 am

I am shocked, I was considering relocating to Europe at some point, now I see it may be the time …. Hongcouver is really the most stupid place on earth.

#136 Vancouver_Bear on 09.24.09 at 6:12 pm

#48 Nostradamus jr. on 09.24.09 at 8:24 am

As usual you forgot to add….

Nostradamus jr. will the main clown of the lala land once he leaves the blog.

#137 Live Within Your Means on 09.24.09 at 7:00 pm

My hubby & I were chatting this eve about various things & I happened to mention the name Enola Gay. Damn him, he knew immediately what it was & thought the name might have been the name of the pilot’s mother ???

#138 Jeff on 09.24.09 at 7:02 pm

calgaryrocks,
you really miss the point. I have owned for many years. Currently renting for the first time in 17 years. I know where Keith in Calgary is coming from. He has 275k cash, you have a mortgage with limited liquidity.

Cash is far superior to “equity”. You are one of those who obviously thinks you are a junior Donald Trump. One of many in Calgary.

And to add, there are many many thousands of companies to invest in on stock markets, not just Lehman, and Nortel. These same thousands of companies also have far superior liquidity than your mortgaged house does if the need for cash arises, or if the share price drops suddenly.

Keep bragging. Guys like you, who feel the need to brag about what you have done (if you have really done it), always end up broke in the end. Why? because you become complacent, think you are all of a sudden smarter than everyone else, and lose sight of what is real due to pure 110% greed.

#139 Bird in the Hand on 09.24.09 at 7:09 pm

129

I dunno..

275 cash in hand vs 250 paper equity are two very different things.

Just as their house could be worth 350 now, it could be worth 225 in 5 years time. Unless you are prepared to sell, your paper equity gains are not realized.

He said his dad’s house was paid off after 30 years. I am sure that during those 30 years there was another period that was the “biggest boom in history” (for the time), and where the value if sold was fantastic.

Yet at the end of it, it took him 30 years to pay for an asset that has close the value of what they saved in 8 years. Kinda sad in my mind….

“The point is that it is false to say that renting during the biggest RE boom in history is somehow a great strategy.”

Guess that depends on whether or not you think prices will stay at these levels. Because if they dip, or “crash,” then they will be in a fantastic position to buy outright. So while maybe disadvantaged during the boom, in any crash/correction, IF it happens, they will be sitting pretty by renting. They don’t need to count on paper gains as part of their net worth.

#140 MOC on 09.24.09 at 7:17 pm

“Greed propelled Nortel to $130 a share”.

Also short sellers that got caught on the wrong side of the trade.

How does a short augment an equity value? — Garth

#141 Jeff Rocks on 09.24.09 at 7:31 pm

138

Bang on Jeff!

#142 Jeff on 09.24.09 at 7:35 pm

“Unless you are prepared to sell, your paper equity gains are not realized.”

Exactly!!! Too bad people cannot understand such simple logic.

The poster who has 275k in hand is much!! better off than debtor homeowners.

#143 dave99 on 09.24.09 at 7:46 pm

#126 Calgary Rocks,

It takes a big man to admit a mistake. Thanks for confirming you’re a dimwitted little weasal.

#144 Nostradamus jr. on 09.24.09 at 7:50 pm

Vancouver Bear
…Sorry u sold ur Vancouver home 20 years ago…

#145 Herb on 09.24.09 at 7:56 pm

Evangeline @ #99,

no, it means that Dubya could not run again in any case, and that the Republican goose was cooked anyway. The lack of success in absolutely everything had become palpable, so it was clear which way the electoral parade was heading. The media and other private sector elites merely made sure that the next administration, too, would further their interests.

I highly recommend a reading of Howard Zinn’s A People’s History of the United States (N.Y., Harper- Collins, 2003) for an understanding of how power and politics work in North-American democracy. You can even read it on the internet for free at http://historyisaweapon.com/zinnapeopleshistory.html

If you don’t want to tackle 700 pages, get a taste by clicking on “Chapter 21 – Carter-Reagan-Bush: The Bipartisan Consensus” on the above link.

#146 BCing You on 09.24.09 at 8:08 pm

#66 Live Within Your Means on 09.24.09 at 9:45 am

The worksheets in the Money Sense magazine and their website is not to determine ‘overall financial health’. It is to compare your income and net worth to other Canadians in various groupings.

It makes sense to use the value of your house TODAY when determining your current net worth because what else could be used? Besides, isn’t that the definition of CURRENT net worth. The article did issued the 3 warnings about debt and real estate to indicate that there is risk in our future.

#147 45north on 09.24.09 at 8:10 pm

#29 vantown: How about some actual predictions, with dates? I’m a Canadian who until recently read only the American blogs like patrick.net and thehousingbubbleblog.com They predicted that housing would fall in the US. Few posters gave actual dates. September 2008, Henry Paulson, Secretary of the US Treasury demanded that Congress pledge the wealth of a generation and give it to the banks and the lending institutions. The Congress did as he asked.

I’m not making this up.

Best article I’ve seen on inflation/deflation:
http://www.financialsense.com/fsu/editorials/2009/0921.html

The Event

#148 CalgaryRocks on 09.24.09 at 8:16 pm

#143 dave99 on 09.24.09 at 7:46 pm
#126 Calgary Rocks,

It takes a big man to admit a mistake. Thanks for confirming you’re a dimwitted little weasal.

Ok, get back on your meds though. You sound overly excited.

#149 anortherJohn on 09.24.09 at 8:17 pm

#125 to Garth “Immigration (in total) amounts to 0.007% of the Canadian population annually. Dream on.”

Garth,
Between 1984 and 2008, Canada received 5,143,723 immigrants and that represents 16% of today’s population. Just about 100 times more than your estimate :)

http://www.cic.gc.ca/english/resources/statistics/facts2008/permanent/01.asp

And btw, the peek of the immigration was in 1993. Do you know who the heck was the minister of revenue that year?

Our immigration quota is about 235,000 people a year. Figure it out. — Garth

#150 dd on 09.24.09 at 8:23 pm

Squeeze play. We have all heard about second wave of foreclosers in the US. This is just a reminder what is coming.

http://watch.bnn.ca/squeezeplay/september-2009/squeezeplay-september-24-2009/#clip216912

#151 jmcanuck on 09.24.09 at 8:53 pm

When dept grows exponentially, collapse is a mathematical certainty. Try as you might, once you can’t make your interest payments…poof you’re done! That’s what will happen to the global economy. We are now on the steep end of the hockey stick curve. The next few years are going to be interesting indeed. It may not matter if you own a house if you don’t have a job and can’t get enough to eat. Exponential curves are a bitch.

#152 Ottawa Friend on 09.24.09 at 9:02 pm

Ottawa is booming without the jobs. It is really hard to find decent work right now. But houses are selling at a furious rate and for more than they ever have. Houses are being built 1000 at a time. This could posibly go one for quite a while because no matter how bad it gets people never think it is really all that bad. They keep spending and borrowing.
And when banks run out of people willing to buy they just lower the bar because they know CMHC or tax payers will always bail them out.
I rent because I can only just afford the $1600+/month it would require to own. I rent for $1000 thinking I am banking the rest but really I am spending it on life.
So, I would say don’t buy. But get used to the idea of renting for a very long time.

#153 TheFirstRick on 09.24.09 at 9:35 pm

#88 taylor192 on 09.24.09 at 11:52 am My broker recently gave me this real example:

A couple in their early 20s with no education both work at Loblaws. They each make $25K and have a household income of $41K after tax. This means they can afford a mortgage of $1450 at 4% over 35yrs, or a house worth $330K. This is 6.6x their total income, or 8x their after-tax income.

He would not give this couple a mortgage, cause its a recipe for disaster if rates increase or prices drop. He did note that many other brokers would be more than willing to give them a mortgage, and one did. So they went out and purchased a $300K single home in the burbs.

Arg.

This screams for more regulation. More and more new buyers are maxed out with no room to breathe.
===========
I don’t doubt this scenario for a moment. It illustrates clearly the cult of home ownership and Canadians skewed priorities.

With this couples availability of credit, one can only wonder why they wouldn’t go back to school? The longterm costs of owning this house and the inherent stress of working in the grocery business will put them in an early grave.

#154 TheFirstRick on 09.24.09 at 9:43 pm

#93 Chaostrology on 09.24.09 at 12:49 pm

===========

Give your head a shake. Vancouver’s high priced housing industry is driven by BC’s 8 Billion dollar a year drug industry. This and this alone is the primary reason for the insane and potentially sustained prices.

#155 TaxHaven on 09.24.09 at 10:27 pm

Isn’t that John Turner?

#156 taxpayer like you on 09.24.09 at 11:11 pm

[email protected] – Now be nice to C-rocks, no need to go ga-ga over this.

If we just re-read Rocks post @129 I think you’ll get his point. Keith could have bought that cheapo $100k house in 01 and had $$left over to invest. He could have sold that house at any time along the way for good profit and come out ahead of his $275k total he has now. Rocks acknowledges its “coulda woulda” and doesnt seem to be recommending anybody buy in an overpriced market.

[email protected] I dont see where C-Rocks is bragging. He flipped a house, and has kept the money in cash, all while paying down his own debt. He admits RE “has been good to us” and doesnt seem to be taking any more chances in this market. I could say much the same thing.

The only thing I dont agree with is that “Calgary rocks”…
but that’s JMO….

#157 Peter on 09.25.09 at 2:41 am

As just like your first post, these young boys and gals will NEVER NEVER realize they should be living within their means as they are young, got a degree, drive great luxury cars and these corps paying them overly excessive high wages (that make them fly up to the moon) and of course they will shop around and listen to those remax or coldwell boys without thinking is this a good time to buy or I will be glad to choke more debt as long as my paycheck getting higher pay and higher pay !

#158 CalgaryRocks on 09.25.09 at 8:51 am

He has 275k cash, you have a mortgage with limited liquidity.

Our punny mortgage does not stop us from saving money each month. Renting would cost us more.

Cash is far superior to “equity”. You are one of those who obviously thinks you are a junior Donald Trump. One of many in Calgary.

Since we’re playing this game, having both cash and equity is superior to having only one.

And to add, there are many many thousands of companies to invest in on stock markets, not just Lehman, and Nortel.

I only mentioned these 2 because they were highly respected companies that would have been part of any balanced portfolio before they disintegrated.

Reality is FAR WORSE in that most Gordon Gekko wannabes lose their shirts in the stock market. This is why having your house money in it is such a dumb idea.

As far as I am concerned the only correct way to calculate opportunity costs for your housing money is by using the risk-free rate not some imaginary returns that the stock market may have produced if only you invested in the ‘right company’ at the ‘right time’.

The other reality is that most renters do not ‘save’ their imaginary 3K difference between renting and buying (realistically, it’s more like a few hundred dollars, if that) but rather blow it on other things like car leases, drinking, restaurants, stock market losses etc…

#159 c-ro on 09.25.09 at 9:05 am

I know a couple who recently got a 400K mortgage for a new house in Vancouver and the lender said to them ‘Wow, you have a low mortgage!”. Something just didn’t sound right when I was heard that.

#160 Generalist on 09.25.09 at 10:20 am

“Our punny mortgage does not stop up from saving each month. Renting would cost you more.”

The out of whack rental to ownership cost ratios in bubble cities for the last several years means that renters have been able to put more money aside than many owners.

In over extended cities like Vancouver, where 70% of incomes go towards mortgages, owners have had to put all their eggs into one basket. Zero savings rate. Zero liquidity.

When the cost of renting is frequently 1/2 the cost of owning, many, many renters have put away real money while homeowners put whatever tiny amount that is left over from paying the bank rent into costco lawn furniture, house parties, rising property taxes, repair bills, leased vehicles, etc

#161 Johan on 09.25.09 at 11:30 am

What irks me the most about the Re/Max Bricks and Mortar report (specifically the market appreciation chart for major centres) is that even they don’t state this anywhere, it looks like their values don’t factor in inflation!

When you correct for inflation the % increase column is overstated by over 4 times! Yikes! The sad thing is that the media gobbles it all up without question and spews it out to the masses. Most of whom will, sadly, not even consider the difference between nominal and real rates of return!

#162 TJ on 09.25.09 at 12:24 pm

The book “Freakonomics” by Steven Levitt just RIPS Real Estate agents.
The Award winning ‘echo boomer’ economist has these words for Real Estate buyers ” Cui Bono”.
In Jedi terms = “Follow the (money)INCENTIVE, Luke”.
The Agent has ONE incentive – to make as much money heshe can off your BUY or SALE. They have absolutely NO INCENTIVE to have your best interests at heart.
The ruthless, rampant and disturbing ethics breaches in the Real Estate Industry are becoming alarming.
This gets swept under the rug when everyone is making money and living high on the hog. Next will come recrimination.

The pitchforks and torches are being stored and readied.

There are

#163 Keith in Calgary on 09.25.09 at 12:33 pm

#158 Calgary Rocks…..

In my case it is either rent our place for $1,500 or buy for $4,500……..I’ve run the numbers here before. When you get a clue about what you are talking about, please come back. Until then…….

#164 CalgaryRocks on 09.25.09 at 1:34 pm

#163 Keith in Calgary on 09.25.09 at 12:33 pm
#158 Calgary Rocks…..

In my case it is either rent our place for $1,500 or buy for $4,500……..I’ve run the numbers here before. When you get a clue about what you are talking about, please come back. Until then…….

It’s pretty freaking dumb to not have bought at least a house in Calgary for the past 8 years. Once you admit that, then we can go over your numbers.

#165 Vancouver_Bear on 09.25.09 at 3:38 pm

#144 Nostradamus jr. on 09.24.09 at 7:50 pm

20 yeasr ago I was not even close to this stupidiest place on earth.
The only advantage of Vancouver to me is close proximity to the US border so I can scoop bargains there…..I would rather own something in Europe than in this chinese village.

#166 robert on 09.25.09 at 3:45 pm

Love the Enola Gay reference. Wonder how many get it? Anyway that last little linked piece is a hoot. Real estate often moves like an ocean liner at turning points and I had to laugh when most of the prices cited are down a “nominal” 5% to 7% from last year. That’s a fair amount of coin for the greater fools who bought last year isn’t it?

The real joke is the prairie prices and Newfound(greater fool)land. I remember reading that real estate prices were higher on average in Saskatoon than in Miami not that long ago. The story appeared with a picture of Saskatoon in the winter and Miami in the winter. Need I say more? I spent nine years in Regina and while it is a very nice city, when I left it nine years ago real estate was deader than a doorknob with average prices half what they are today. What has changed? There’s still tons of land. Winters are long and brutally cold. Potash and ag related commodity prices are falling again.

I have a theory about Halifax and St. Johns. Prices are exploding because a lot of smart maritime expatriates sold their overpriced shacks in the west and have returned east with granite countertops on the mind. Those aspirants to homeownership without oil patch and real estate profits in their jeans have got to be more than a little po’d.

#167 taxpayer like you on 09.25.09 at 4:49 pm

Keith/C-rocks. Good blog but lets not fight. Keith I would like to know your numbers too. Here’s mine.

Built in 02 app cost with land $260k. Paid off in 7 years. Interest, taxes, insurance, maintenance maybe $70k. ie
7 years about $800/mo of homeowner cost ie “rent” I
wont get back. That’s pretty cheap. Principal repayment equals investment. House peaked over $450K, now slightly less. That’s 8-10% per year on “investment”. Tax free if I sell. Without selling now have even cheaper “rent” (no interest anymore), and hedge against inflation or rising rent.

Still managed to contribute to RRSP and have cash on roughly same scale as you. Good timing? Sure. You coulda done it too, maybe even better in Cowtown.

#168 Mark on 09.25.09 at 8:35 pm

The scary part about Saskatchewan/Calgary/Vancouver/Edmonton is the amount of leverage those economies have to residential real estate construction.

Take away the residential RE construction, and how much of an economy is really left in those places? Not much of one. Is that sustainable? Of course not. Its an unsustainable, out-of-control feedback loop, that will eventually hit saturation, and then, ‘wham’ it goes, right down.

#169 Jeff on 09.26.09 at 10:38 am

“The other reality is that most renters do not ’save’ their imaginary 3K difference between renting and buying (realistically, it’s more like a few hundred dollars, if that) but rather blow it on other things like car leases, drinking, restaurants, stock market losses etc…”

So do those who rent money from the banks through their mortgage and their new found “wealth” via a HELOC?????. lol.

You have just confirmed my statment though of how complacency clouds reality. All of your comments assume that everybody loses in the stock market and real estate market except for you. It’s a recipe for disaster. Of course we will never know the result of that disaster since this is the internet and people can be anything and say anything they want.

The bottomline is you have nothing right now calgaryrocks and you never will if you plan to live in any real estate you purchase. You live in your house, mortgaged or paid for means zip. You cannot live in an “investment”.

There is a time to own, there is a time to sit on the side, just like the stock market. Now is not the time to be buying real estate.

#170 CalgaryRocks on 09.26.09 at 2:27 pm

#169 Jeff on 09.26.09 at 10:38 am
There is a time to own, there is a time to sit on the side, just like the stock market. Now is not the time to be buying real estate.

You’re a dolt full of cliches. This wasn’t even the topic of discussion so why don’t you learn how to read and make some real counter-points. Maybe go back to school and get you high school diploma first.