Ethics

clown2

Buy now, or never, Part Trois.

My last post savaged Coldwell Banker as being media manipulators and inhabitants of an ethical swamp. The Re/Max lifeform swims there as well, confirmed by this week’s press release predicting ‘significant gains’ for the Canadian housing market.

Sadly, folks in the real estate business have a knack for ensuring booms become busts, when everyone (them included) would benefit from a balanced market. The correct and ethical statement right now would caution buyers of likely mortgage rate hikes, and encourage larger downpayments with the equity to withstand the inevitable. Instead, housing at its most expensive price point is being sold as a can’t-lose investment, guaranteed to go higher.

If these guys sold stocks and said that, they’d be sealing driveways.

So, we have ideal conditions for a slow death spiral.

  • Investors who think the only risk is not buying.
  • Industry spokespeople doing the dump-and-dump.
  • Lazy, ad-starved, compromised media running advertisements as news.
  • Lenders guiding first-time buyers into the most dangerous of loans, VRMs and 35-year ams. These are not mortgages. This is renting money.

Time to go to a caller: Hi, you’re on…

Hi Garth: My partner and i were under the impression buy now or never.  We’re both 30 and just started our careers…as professionals.  We have big future earning potential.  We thought that the interest rates are so low that we should lock one in at 3.89 for 5 years and enjoy the benefits of building equity.  We fancied ourselves smart and thought we’d get a house with an apartment that we could rent out to offset costs.  Then, we got taken for a ride.

We found a house and made an offer.  The next day our agent advised us that there were multiple offers and if we wanted the house that bad we should offer 5k over list price.  We wanted the house real bad so we took her advice.  Then, the next day, she told us that the soil was contaminated.  It turns out that she knew this before advising us to offer well above the list price because she let it slip that the property that she owns one street over gets the same notices.  She also tried to convice us to remove our financing and home inspection conditions.  We walked away…thank God!

Now i’m all creeped out with the idea of buying.  I feel that it’s a dirty business, and my previous assumptions about the current market have been put into question.  I don’t think i know at all what i’m doing/talking about.

So, my question to you is, would you say that it is always bad to buy now?  What about buying a house with a legal apartment? If we shouldn’t buy now what can we do to make ourselves feel better about knowing that we’re not building equity?  In general, what kind of advice would you give to first time home buyers? I’m really happy that i found your blog. – DL in T.O.

It’s always a good time to buy real estate, if you know what you’re doing. And you don’t. You have grounds to lodge a complaint against the agent on several counts, and I encourage you to do so. Do not get into a bidding war. Do not remove protective clauses from an offer. And find an agent who will work for you exclusively as buyers. Preferably one with morals.

As for buying now, get an income-producing property like a duplex if you must buy. Or a smaller home further out. Or, wait. Another year of rent won’t kill you, and could in fact be the smartest financial decision possible. After all, if you get a house in a bidding war and finance it with a 35-year amortization, all of your monthly is interest – no equity. Then, what if the market drops by 5% or 10% in a year or two? No equity, in fact negative equity. Then, what happens in five years if mortgage rates double? The market will reflect that. No equity.

You just dodged a bullet. Keep your head down.

And on line two, Andrew, also calling from Toronto…

Hey Garth: Love your blogs, and I have totally become a bear on this economy and real estate. I would really appreciate your opinion on a dilemma of mine as it is fairly unique, and everyone seems to be giving me the same spiel. I would like a contrarian view.

I am 26 years old and newly engaged. My fiancee and I make a gross salary of about $200K as we are both professionals. We both live with our respected families and thus, save a lot of money in the process. We have approximately $100K saved up and would like to put a downpayment on a nice detached home in mid-town Toronto where there are shops, restaurants and all the goodies a young couple could ask for.

We obviously do not want to be buying at the peak of this madness, but we need to move somewhere once hitched, and to me, renting is out of the question. Do we wait it out a year, and live happily married but in my parents house? Do we buy a condo, or something a lot cheaper than we can afford, and move up in a few years? Do we take the plunge and buy in a great neighborhood where its value won’t deflate as much? I have very little patience, so I am afraid of doing something rash, like buying a $700K home, even though we can afford it. Your view is greatly appreciated.

OK, so you’re a ‘total bear’ who, at 26, is making 200K with your girlfriend, you have a hundred in the bank and want a nice detached home in mid-town Toronto, which will cost at least seven large. What’s wrong with this picture?

Only that a smart guy like you could be so blinkered. The options are not just (a) living in your parents’ basement or (b) buying a home your parents probably never thought they could afford.

Sounds like you’re paying lip service to the ‘bear’ thing and really want to impress your babe with a $600,000 mortgage. Fine, go ahead. But understand the risk in blowing 100% of your cash on a single asset, bought at its highest price to date, which comes with an inescapable amount of debt six times greater. The only possible way out of that is if the property appreciates, if you can withstand the mortgage renewal, if she doesn’t get pregnant and if the boss doesn’t discover your true nature.

If you’re asking for advice, put half the cash down on an affordable $300K property with a far better chance of selling in any kind of market, and invest the rest in the kind of growth assets which will richly reward you in 20 years.

But, you’ll probably buy a Porsche.

Did I mention this will not end well?

145 comments ↓

#1 Mark on 09.24.09 at 9:08 pm

What kind of job can a 26-year-old get that pays $100k in Toronto?

Sounds like something to do with the financial industry; can those salaries remain artificially high indefinitely?

#2 T.O. Bubble Boy on 09.24.09 at 9:16 pm

“If you’re asking for advice, put half the cash down on an affordable $300K property”…

Garth – I assume that you don’t mean in midtown Toronto, where Andrew said he’s looking.

The only houses at $300k in the GTA are those great Mattamy Home in Milton, ON.

In all seriousness, the midtown Toronto market may be the second most ridiculous place in the country right now (next to Vancouver). Every day, I noticed some new MLS entry for a $600k and $700k “great opportunity to build your dream home” (read: teardown bungalow). Semi-detached homes on 17ft wide lots that have less square footage than condos routinely ask $600k-700k as well. Any detached 3-bdrm house that doesn’t need a complete gut is listed for at least $800k. The sad part is, even those $800k and up homes are advertised as “great starter homes for a young family!”

Andrew does seem to be caught in the same dilemma as most buyers who frequent this blog:

– His $100k would traditionally translate into a 25% down payment for a maximum $400k house.

– But, his $200k gross income would convince banks to lend him and his wife $1,000,000 or more.

( try it on the CMHC calculator: http://www.cmhc-schl.gc.ca/en/co/buho/buho_007.cfm )

So, in midtown Toronto, he’s choosing between:

$400k:
http://www.realtor.ca/propertyDetails.aspx?propertyId=8729577
(1 whole bedroom!)

or $1.15M:
http://www.realtor.ca/propertyDetails.aspx?propertyId=8703079

When every single bank wants to loan you the maximum that you qualify for (at no risk to them, since Flaherty will buy the mortgages off them anyway) Andrew might even get laughed out of the bank when he asks for *only* a $200k mortgage. They might think he’s buying a car, not a house near Yonge&Eglinton.

I hear there is life past the Humber and the Don. — Garth

#3 Calgary_rip_off on 09.24.09 at 9:23 pm

Garth,

Thank you for your site. It’s always updated frequently and interesting. You have lots of fans, you know.

Interesting that the first reader thinks that equity is a touchy feely type of thing. That must be cause she/he is young and deluded.

If all what your blogs have been saying, everything is about to hit the fan.

In Calgary the only thing likely to bring it down is interest rates. People are quite content on buying a house $200K over its real value. Calgary is a big city, so the market price is only seen to go up in the future. That is true, long term, which is why people are still buying. High interest rates will make it slow down a bit because people wont be able to afford the down payment and then the monthly payment. But it will take a lot to make that happen here.

#4 Six Figures on 09.24.09 at 9:33 pm

Garth, you are opening yourself up to a deluge of ticked bear bloggers by posting about “young brats” making “six figures.”

I can just see the comments – “these guys aren’t real” ; “how about postings about real people”, etc

By the way, if they make 200k with more than 5% dow, and are looking to buy a 600-700k house, they are certainly a lot closer to the 3 x income rule than 95% of buyers out there. Just saying….

#5 Alberta Ed on 09.24.09 at 9:54 pm

Speaking of ethical swamps, what about the media which print ReMAx BS press releases without question or alteration?

#6 Boombust on 09.24.09 at 9:57 pm

“Then, what if the market drops by 5% or 10% in a year or two?”

Is that all? You kiddin’ me?

#7 Onemorething on 09.24.09 at 9:58 pm

Caller #1 – agree with Garth, hang this RE agent by the toe nails. Better yet, send her coordinates to Garth, for a longer more brutal sentence!

Caller #2 – test the strength of your relationship and brain in one foul swoop, rent for 24 months! This is the best advice ever…my invoice is going out in the mail today!

#8 Lance on 09.24.09 at 10:02 pm

Let’s see, you want to buy a house at the top of the real estate market for $700k (which even at a lofty $200k/year is still 3.5 times gross earnings!), get a $600k mortgage, which will run you around $2,000/mo in interest and then take the chance that you will lose 20% or 30% or more on the value of your home and take 10 years for you to get your head above water with the equity in your home. Oh, and this includes the $100k that you burned up as a down payment.

Go look for what you can rent for $2,500-$3,500 per month. Lots of selection, you can live in a nice place in that range. You’ll be further ahead monthly after you factor in mortgage interest, property taxes, maintenance, etc.

Let’s do a little math:
1) What are the odds of real estate appreciating a further 20% in the next 3 years?
2) What do you think the odds are of real estate staying flat for 3 years?
3) What are the odds of real estate depreciating 20% in the next 3 years?

Multiply them out… % for #1 times +20%, % for #2 times 0, % for #3 times -20%… now add the three answers together. If your result is an overall negative, then you pouring your money in to the fire and watching it burn and knew that would most likely happen before you even did it. If it’s positive, well, then good luck to you sir.

A smart bear would rent and wait it out. Save your money and drop a nice $200k or $300k down payment on the same house when it’s worth $500k.

#9 Aaron Broad on 09.24.09 at 10:13 pm

I’ve heard the housing market in the maritimes is not as inflated, and will not sink as far. What are your thoughts on this Garth?

thanks,
Aaron

Fredericton, NB

#10 blobby on 09.24.09 at 10:14 pm

Living at home at 26?!? While earning 100k a year?!?

Sheesh! Go rent somewhere – give your folks a break!

#11 Best place on meth (aka NJ's Analyst) on 09.24.09 at 10:30 pm

Where did you find that horrid picture of Lisa Raitt?

#12 golden on 09.24.09 at 10:37 pm

“But, you’ll probably buy a Porsche.”

[email protected]%en classic!!!

#13 Denis on 09.24.09 at 10:38 pm

A smart bear would rent and wait it out. Save your money and drop a nice $200k or $300k down payment on the same house when it’s worth $500k.

-Ding ding ding!

#14 Heather on 09.24.09 at 10:38 pm

Mish – article from 2006 on the Canadian housing bubble… “It Can’t Happen here”

“In what sense of the imagination is that house worth over $400K? One listing does not a city make but some listings I looked at in Toronto and Vancouver are as silly as prices in California or Florida.”

http://globaleconomicanalysis.blogspot.com/2006/06/bubble-trouble-in-canada-and-spain.html

Another great article on “what’s the risk”:

http://americacanada.blogspot.com/2009/09/whats-risk.html

“to keep home prices rising at 4-5% per year, it will take a 56% rise in mortgage debt from January 2010 to December 31, 2012. That would put us at over 1.5 trillion mortgage debt or about 50% more indebted than Americans on a per capita basis (and they’re private debt is now shrinking). To keep real estate growing at this rate until 2015, mortgage debt will have to double that figure, at 3 trillion. In the year after that it will rise almost 1 trillion in just one year (about nine times the rate of borrowing today) . It turns into a ridiculous amount of money and it is a mathematical impossibility. It’s not going to happen. And people aren’t going to borrow even at today’s rates if house prices are falling. They never do. That’s a debt fueled market – we’ve reached a point where we simply can’t grow debt at a rate that sustains the momentum of the underlying asset prices.”

#15 golden on 09.24.09 at 10:39 pm

200k a yr? Everyone here sounds either envious or curious.

What’s that after tax??

#16 ted on 09.24.09 at 10:59 pm

I am skeptical about the 26 year old poster. I made more than 100K last year but i am not 26. When people are vague about what they do and use the term professional it doesn’t sound real. I was a professional when I was 26 and I made squat. I was an engineer. In fact almost all professions make squat. I make more money now that I am not a professional. Advie to the kid you can’t be serious about your question, No one knows you here and know one is impressed. Keep the posts real.

#17 jimmy on 09.24.09 at 11:00 pm

“renting is out of the question”

Why’s that Andrew? Not good enough for you?

I rent a place for 30% less (not counting taxes) than it would cost me to own/make payments on. The value of the place is not going up, it’s going to go down, and I invest the money I save by renting (plus a bunch more) in a diverse portfolio.

You were too kind on that guy Garth! Where’s the tiger?

Here’s a tip Garth. I’m bullish on food for 2020. Look into it. Histroy has shown those with ‘access’ to food producing land fair best in times of crisis. I’ll give you that one for free. Thanks for the blog.

#18 Denis on 09.24.09 at 11:05 pm

#10 blobby on 09.24.09 at 10:14 pm

Living at home at 26?!? While earning 100k a year?!?

Sheesh! Go rent somewhere – give your folks a break!
———-
Why? He’s getting married in a year. Waste of a move if you ask me.

Welcome to Toronto’s reality! I’m 27 and I have a ton of friends that all still live at home (most of them actually – especially the ones that grew up and went to school in Toronto). The ones that don’t live at home are those that went away for University like myself. Like I said … Welcome to our Toronto’s family dynamic reality. We don’t get married at 18, move out and have kids like our parents did back in the day. It’s also rare to move out after High School unless you go away for school.

Drives me nuts when people make fun of the “kids” on this blog for being stupid first time home buyers with nothing down and 35 year ams yet at the same time most are also pushing that they should not be living at home with their parents and are dumb for not moving out… How does it make any sense to move out on your own and throw money away to a landlord, new furniture, houseware, etc. when you can stay at home and save some cash (albeit some idiots blow it on a beamer) for when it’s actually time to move out (i.e. get married, have a good down payment and aren’t buying at the peak or move to a new city).

Also … Don’t knock the “kids” making the 100k salary. Someone’s willing to pay us that much (definitely not the norm though – but you’re looking at decent $50k-$60k salary with (non general arts) degree out of Uni and working in TO these days).

#19 Grantmi on 09.24.09 at 11:08 pm

10 2 1… Mr. and Ms. Midtown… are…. . 26 year olds … and living with mommy and daddy!

Come on! Either they’re Italians (no offense.. some of my best 50 year old friends are Italians) or this story is BS.

Move Along!! Nothing to see here!!

#20 Dave on 09.24.09 at 11:10 pm

Living at home at 26?!? While earning 100k a year?!?

Sheesh! Go rent somewhere – give your folks a break!
————————————-

Why, you afraid he’s too far ahead of you? Good for him. Maybe his parents like him and hopefully he doesn’t get sucked into that $700k home or he’ll be jealous of ppl like you

#21 DrC on 09.24.09 at 11:22 pm

The comments page on the Re/Max infomercial in today’s G&M was hilarious! Truly Garth army of zombie bears was out in force! I wonder when an alleged serious media outlet recognizes that it’s gone too far? Todays sarcasm levels were rather extreme!

Ps andrew should be able to save 50k pa when on 100k – so why not stay at home for a couple more years and pay cash for your 300k house in 2012?

#22 nonplused on 09.24.09 at 11:25 pm

I don’t think caller number 2 can be for real. I was part of the management team for a not so small business unit (sold for 1.5 Billion) not so long ago. No one on the payroll got paid that much fresh out of University. No one. I saw all the salaries save my own, my co-managers, and my boss’s, on the HR sheets every year as we determined as a group what we needed to do to maintain key employees and be competitive in the labor market.

Sure, we had lots of people on the payroll well north of $100K, but all with experience and a proven track record of success. No 26 year olds.

I then took a job at a major company as a manager. There, I only saw direct reports, but there were 15 of them and not a one without a classy university degree. $100K + was not possible unless the individual had seniority, experience, and talent. Combine those and yes, $100+ but no 26 year olds.

I also know about accountants. No dice. The pay is great once you make manager and sweet once you make partner, but that takes years.

Same with lawyers. First you article, then you get paid like crap until you build enough experience to be useful, then money and partnership comes in stages.

Don’t know about plastic surgeons though.

I would have to say the $100,000 26 year old is a myth outside of professional sports and the odd Wall Street trader.

I think you got “binged” by a realturd creating a new myth. The country may have the odd 26 year old pulling down $100k while living in the basement at mom’s, but I have my doubts it’s a force to be reckoned with. I’ve been on the inside at 2 major corporations. They “myth” of the multitudes that are out-earning everyone else is just that. A myth. Aside from Wall Street’s trading floors, companies are very careful how they doll out the doe.

And what about “stock options”? Even in the most egalitarian companies, where everybody gets them, the executives get the lion’s share. Sure, a receptionist gets some. But if the company does well it might get her an extra $4000 to pay off Visa or buy some Christmas presents for her kids. And where the grants are more generous, most employees cash them at the first sign of profit, seldom letting them grow to a substantial boost to earnings. The odd person rides them out to a nice outcome, but most live by the old dictum that “you can’t eat options” and cashes out very early in a potential run.

#23 Jim on 09.24.09 at 11:27 pm

A pharmaceutical sales rep can earn $100K (T4 gross earnings) at the age of 26. Surgical sales reps would earn significantly more (ie double).

#24 Jim on 09.24.09 at 11:30 pm

re: pharmaceutical/surgical sales reps. Welcome to the dark side of Canadian healthcare.

disclosure: my wife and I both work in the industry; albiet in our 30s. We clear $200K gross per year quite easily.

#25 Soylent Green is People on 09.24.09 at 11:48 pm

Living at home at the age of 26 is totally lame!!!!

How does anybody in the dating world take your seriously, it’s ridiculous. Does your mother do your laundry too? Good luck with that marriage. And she lives at home as well… pfft, she’ll be waiting for someone to do her laundry as well.

Pof Profile
“I’m close to my mother and mow their lawn a few times a year”.

#26 David Bakody on 09.24.09 at 11:51 pm

These clowns sound like top of the class young investment bankers …..best stay home as word is out the G-20 just might limit their bonus money …. all of which they added to yearly salary … kinda like overtime pay …. it’s false! In any rate heard that the US of A just might soon have to borrow money just to pay the interest on their National Debt …. Holly Smokes Batman …. even if it is a joke it is not good news ….so where does that leave Canada? Hello Mr. Interest raise hike and payroll taxes.

#27 Dan in Victoria on 09.24.09 at 11:53 pm

Dear Garth,I have a dilemma that is fairly unique.I would like a contrarian view…….Okay,mommy and daddy should kick your sorry ass out.26 years old and making 100 grand a year and living at home.Does mommy still lay your clothes out for you?Sorry kid, you need to go work with some iron workers for a year.Those guys will whip you into shape.Read what you wrote…get married and live at home for a year making 200 grand.And I have very little patience.Thats not the only thing you’re short on……

#28 May on 09.24.09 at 11:58 pm

@#6 Boombust

Yes, that comment disappointed me too. A real “recovery” (as local media likes to call it) in real estate prices will be a greater drop….down to historic norms.

#29 Dan in Victoria on 09.25.09 at 12:08 am

D.L. in T.O. Good advice from Garth.Never ever think that a realtor is working for you,never.There are RARE exceptions.Use your own judgement like you did,if they push, push back.Never EVER rush into buying a house,they are like a bus another one always comes along.ALWAYS have an out of some sort in the contract,inspection,finance,sky has to be blue, you get the idea.Contaimated soil.Sheesh,Say did your realtor drive a 64 malibu?http://www.youtube.com/watch?v=i–Gk0MRWZw&feature=related

#30 Ali Yen on 09.25.09 at 12:40 am

Thanks Garth, we are still very very lucky renters.

This YouTube of famous Donald Duck may open some minds and discussions about the real situation of our world today.

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

Banksters can change the rules at any time now. Yes, we’ll have to follow. And when all buildings are down, right, you may need a bankster to REbuild a new one. Right ?

Enjoy your day !

#31 davers on 09.25.09 at 12:48 am

Hey Garth did you hear?

Flaherty is extending the mortgage buy back program!

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

Just when I think the gov cant do anything more to inflate the RE market they pull another rabit out of their hat. If this keeps up it will take 101% of peoples income to make the payments. (they will get the other 1% from collecting cans, just so they can have that 600sf condo in yaletown)

#32 kansai_92 on 09.25.09 at 12:50 am

I’ll never understand the stigma associated with renting.
Some people think that renting means some dingy basement suite with shag carpet, peeling linoleum, asbestos-laden walls, and 35 yr old furnaces.

If you take the time to actually do a proper analysis of renting versus buying, you will come to only ONE conclusion.
Simply put, the interest ALONE (event at today’s low rates) is more than your rent for the same property.

When you are owning, there are a lot of things that you don’t account for like maintenance, property taxes, and your own valuable time. Add these in and the picture becomes even more obvious.

You think you’re not building equity when you’re renting?
Just take the difference between renting and owning and invest in some hard assets.
Why is that so hard to do????

We’re renting a condo worth $900,000 in Vancouver for $2,300/month. Meanwhile, we’ve been socking away thousands since we sold our primary residence in Feb 2007.
At first, the proceeds were in a GIC at almost 4%.
We slowly dipped into the stock market in early 2009 and then did a lot of heavy buying in March.

So far, renting has been the best decision we’ve made.
We’re miles and miles ahead than our house-rich, cash-poor acquaintances.

#33 Men With Hats on 09.25.09 at 1:19 am

Wow ! Wish I could make up stories like that .

#34 Jake on 09.25.09 at 1:44 am

Caller 2: Two reason’s not to buy my man. First, you will not “miss the boat” by waiting. There will be plenty of great buying opportunities in the future and, with your earning potential, the ball will only be moving further into your court over time. Second, believe it or not, the first few years of marriage are not without challenges. Buying a home and getting into debt of that magnitude will add unnecessary stress and anxiety to your lives at a critical time in your relationship. This is of course my own personal opinion, but it comes from experience. My wife and I started building our first house three months after we got married. We were in our mid twenties. We both look back and wonder what we were thinking. Home ownership has many challenges and responsibilities, only one of which is the financial burden of a bloated mortgage. Since both of you are living with your parents, I’d recommend settling down in a rental and getting a taste of independence before making such a life changing decision. Just my two cents. Good luck with whatever you choose.

#35 Peter on 09.25.09 at 2:37 am

Probably they both are mortgage broker !! Keep helping newlyweds and families to CHOKE more and more DEBT onto their throat while banking on the comm while they sleep…cheers !

#36 kc on 09.25.09 at 3:15 am

Caller #2 sounds like a guy who has bought a canoe, places it tied up to the dock and sits in the thing not wanting to “push off” . so here he sits with the waves lapping safely on shore.

Decides that he must “impress” the girl that is looking at him so he decides to push her off for the “madien voyage”… however, now this little boat isn’t what he thought it was, and opts for the 35 footer with twin inboards….

Buys a 700K job with the throttle locked. leaves the safe shore with the gal … she now wants new buy today pay later 100K furnishings for this boat, new everything, and top it off with the 10K left hand rock. Flip forward 2 years….

bills pile up, credit Maxed, argues all the time over that decision to trade in the canoe for twin inboards. and she sports a third kicker motor that will be needing 18 years of life support.

DUDE, grow up and rent a place, move the girl in test the “calm lapping waves” BEFORE the hurricane crashes your 700K jobby. and remember…. NO JOB in todays enviroment is 100% sound.

Garth I love these baited letters you print in here… they never give all the facts… we earn 200K but they don’t say how… what is it he sells crack and she sells hers?

cheers

#37 Munch on 09.25.09 at 4:34 am

26 year olds should NOT be earnign that kind of money – they can NOT add that kind of value yet, unless they are truly exceptional, so I would suggest that little puppy keeps his money in the bank because his current situation is not sustainble

Ja!

#38 DG on 09.25.09 at 6:12 am

It’s amazing how getting burned will really change the way you look at money and debt. My wife and I make nearly three times what your young couple does right now, but we got severely burned by bad business decisions that required us to dig out from a pile of debt and start over in our mid-30s with zero savings.

We’re like the older, wiser version of the young high earners. We could qualify for a truly enormous mortgage and buy ourselves a fantastic house in Toronto, but all I care about is watching the cash pile up in the bank. Not interested in losing it twice.

#39 Bobby on 09.25.09 at 6:20 am

Why would anyone ask a commissioned realtor for any advice regarding real estate. If you dn’t buy, they don’t get paid. So again, why would they tell you something that could hinder the sale.

In my experience many realtors don’t lie, they just don’t tell the whole truth.

Call the realtor’s company and say you want to file a formal cmplaint. But, jump back quickly as you may get hit as they do the dance.

#40 Other Ben (not #2) on 09.25.09 at 7:05 am

Recommended reading for the young couple – “The Millionaire Next Door”.

People who become millionaires don’t start out with big mortgages – they start with a mortgage no more than 2x their gross income.

Nothing wrong with buying a house , but a $650,000 mortgage is no laughing matter.

#41 MrC on 09.25.09 at 7:27 am

You do realize that on top of a mortgage payment, you are going to have other bills like insurance, heating, electric, cable and phone? Have you discussed with your soon to be wife who will do the cooking, cleaning and laundry? Mom won’t be around now to do all that for you.
I moved out when I was 22, and fresh out of college. I rented for several years and lived in what I could afford. Did without cable for a few years and realized that living away from your parents can be expensive. By the time I bought a home, I had an idea of what to expect – sort of. Buying a home brings more expenses than just mortgage and utility payments. “Toys” such as a ladder, lawnmower, extension cords, rakes etc. At least from renting we could bring our furniture, kitchen supplies etc.
Regardless of where the RE market is, I would encourage people to rent first. It gives you a taste of the expenses you will incur once you move away from mom and dad.

#42 Patrick on 09.25.09 at 7:28 am

To the 26-year-old newly engaged-can’t-stand-the-thought-of-renting, some wisdom from the Clash’s 1979 “Clampdown”:

You don’t owe nothing, so boy — get running!
It’s the best years of your life they want to steal.

#43 Tony on 09.25.09 at 7:29 am

Two questions:

1) You suggest Andrew invest in growth assets for the long-term. Can you give some examples?

2) I enjoy reading your blog and I enjoyed reading Linda Leatherdale until she was let go. Can you suggest any other financial blogs/websites that “truthspeak” or offer sound financial advice?

Thanks Garth, much appreciated!

#44 Glenn on 09.25.09 at 7:29 am

Tell this kid his “babe” will get pregnant, but there is at least a 33% chance he wont be the father. Then, you toss in a 70% chance of divorce, with a 70% chance “babe” will initiate said divorce. Icing on the cake is the 90% probability “babe” will get custody of the kid (and the house, and the car, and the bank account), even though the kid is statistically more likely to be abused at the hands of the mother then the father. If this kid cant figure out these most basic realities, how can he survive the real estate bubble?

#45 The Vulture on 09.25.09 at 7:53 am

Hi Garth and fellow bloggers:

Here is some more media headlines to check out (Today’s Globe and Mail):

“Back To Boom: For home buyers, the recessions is so yesterday. Today, prices are up, sales are setting new records and buyers have to act fast if they want that home that’s just right in a tight market” (Source: Globe Real Estate, September 25, 2009)

“Buyers have returned with a vengeance, but experts predict the upswing is partially fuelled by the pent-up demand of those who waited for the economy to improve.”

“Market dynamics have reversed since the early months of 2009 when buyers were scarce and sellers were nervous. Now, buyers are the ones who are anxious that they won’t find somewhere to land.”

“If I hadn’t won that bidding war, I would have been in a panic every day,” says Ms. Ukrainec, a marketing manager.

“The current flurry is partly caused by the pent-up demand from all of the potential buyers who scattered last winter and spring. Eventually that excess supply of purchasers will be exhausted.”

The title should be “Back To Doom”

#46 Makeorbreak on 09.25.09 at 7:58 am

Maybe this couple could appear on Property Virgins?

Even these silly shows are feeling the pain:

http://www.theglobeandmail.com/report-on-business/tv-networks-tune-in-to-housings-new-reality/article1300479/

#47 gwcanuck on 09.25.09 at 7:59 am

Plenty of people in automotive made 100k, some in their 20’s. It’s called overtime.
Caller #1 file a complaint about that agent. They’re scum.
Caller #2 it’s your money, do what you want. But if you want validation for a 600k mortgage I think you asked the wrong guy.

#48 Samantha on 09.25.09 at 8:14 am

DL –

Good to hear that you followed your instincts and walked away. Garth already said this, but I will reiterate – never remove conditions, especially a home inspection a deal. Watch Holmes on Homes reruns for episodes of no home inspection or worse, a home inspection from an incompetent home inspector.

“We’re both 30 and just started our careers…as professionals.”

There are some factors you might want to consider when budgeting and planning for a house purchase.

A professional designation does not give you and your partner immunity to job loss.

There is the possibility that one or both of you might discover that the profession (job) you chose is not what you thought it would be once you begin working in that field. If this were to occur, then further education might enter the picture, with reduced income (and possibly more student loan debt) impacting your budget.

Just starting out in a career can very often mean moving to accommodate career advancement and further learning related to your profession. It might be wiser to rent and remain mobile so you can take advantage of professional development opportunities.

You are not at the top of your salary ranges because you are just starting out. If you both went to University, then student loan repayment needs to be factored into your budget, if applicable.

“We have big future earning potential.”

That’s great DL, but right now you aren’t earning those big incomes. You may have debts to pay off. Have you been saving money? Get those affairs in order by making a budget that allows savings and debt repayment. If you become financially disciplined now, just think of how well you will do once your earnings do increase.

And as regarding future issues, if children are in your future, their impact on family income/finances would also need to be factored.

“and my previous assumptions about the current market have been put into question.  I don’t think i know at all what i’m doing/talking about.”

Assumptions have their place, but it isn’t anywhere near making the biggest financial decisions of your lives. So, it’s great you wrote to Garth for help.

When I buy a house, I am polite to agents,but tend to ignore their sales pitch. I have eyes, I can see.

I go armed with a pen, paper, tape measure and flashlight (so I can see if a light is out in an area like the basement, then I want to examine closely).

I let the house and neighborhood (particularly the condition of the houses around the potential house) ‘speak to me’.

There is much a house and neighborhood can tell you.

Is it a carefully staged cosmetic ‘flip’ type house? Then I would want to see permits and inspection sign off on anything like electrical, plumbing or any structural changes.

Be very careful of buying homes with existing suites. Many of these renovations were done without properly upgrading the electrical to handle the additional power demands. This neglect can cause a fire, so please check it out carefully.

Measure the rooms yourself. I never take agent measurements as accurate. You need to know if your furniture will fit and if this is the amount of space you can live with comfortably.

I stand outside and look closely at the condition of the houses flanking the prospective house. Are the houses and yards well maintained? What about the houses across the street and back lane?

I drive around the neighborhood slowly and get a feel for the condition of other homes. I even look at vehicles. They might be old but are they clean? Is there a sense that people care about how they live?

When selecting a neighborhood to live in, I always visit several times, and include a Friday or Saturday evening drive. Neighborhoods can be deceptive. Quiet in the day time does not necessarily mean quiet or safe at night.

Most areas have crime statistics that you can get from the local law enforcement. You can look at how many break and enters, theft, vandalism or other types of crime occur in that neighborhood. This is another way to evaluate a prospective house and it’s neighborhood.

One last point, just because you can ‘qualify’ for a particular amount, does not mean that you need to spend that amount.

People who truly get ahead financially, live not at their means, but below them. They save money for emergencies. They use a budget to allocate their resources. And, when they buy a house, they are equipped with knowledge, a financial plan, and their criteria for the type of house they require.

Good luck happens when planning meets preparation.

#49 Toronto C9 Renter on 09.25.09 at 8:45 am

Midtown Toronto is an excellent place to live, granted. But “Andrew” needs to wait until he can properly afford it.

For one thing, you can’t truly buy a house here for under $1M. While it’s a nice dream, you would be limited to perhaps a crappy semi on a high traffic cross-street like Davisville, Manor road, Balmoral etc.

Moreover, renting is also expensive. Nice homes start at 4k – 5k per month. From there, the sky is the limit.

So my suggestion: slow down, enjoy life, rent some condo downtown that you can afford. When you are truly established and if all goes well income-wise, then but something nice in Midtown.

Perhaps by then prices will be lower! (but I doubt it)

(Plus by then you’ll know if the marriage is going to work. — seems like you’re counting on both salaries to service whatever debt you get yourself into!)

#50 Samantha on 09.25.09 at 8:53 am

Andrew –

Congratulations on your engagement.

“My fiancee and I make a gross salary of about $200K as we are both professionals.”

Please refer to my comments to DL regarding professional designation.

“…but we need to move somewhere once hitched, and to me, renting is out of the question.”

Why is renting out of the question? Most young couples do start out as renters. It gives them a chance to deal with the stress of adjusting to married life with it’s inherent demands and responsibilities. It gives them time to live with a budget in order to plan for the future.

You also need time to plan for purchasing a home and get to know each others’ expectations.

You will need to know hidden expenses associated with homeownership – maintenance for example. Some things you can do yourself, but you will require the tools to do these tasks. Anything you cannot do for yourselves will have to be paid for.

“I have very little patience, so I am afraid of doing something rash…”

Patience is a good virtue to cultivate. A rash and impulsive decision can be disastrous, particularly when it concerns one of the biggest purchases you will make in your lives.

Don’t let the money you have saved burn a hole in your pocket. You are both in a better position currently than many people your age, but a wrong choice can blow it all.

Living with your parents has afforded you the opportunity to save. Now, with marriage pending, it’s time to assume adult responsibilities, rent for a while, draw up a household budget to manage your finances, save some more money, educate yourselves about home ownership, enjoy newly married life and adjust to it, and plan for your future, so that when you do buy a home, it will be a wise choice.

#51 Devil's Advocate on 09.25.09 at 9:07 am

DL in T.O.

As a REALTOR I agree with Garth when he says “You have grounds to lodge a complaint against the agent on several counts, and I encourage you to do so”.

Please call your local real estate board’s ethics officer and lodge a complaint against the agent. They will take it from there and very seriously so with little more required from you.

There are a good many ethical REALTORS of integrity who would like to see such members of our profession made aware their actions will not be tolerated, or better yet, removed from membership from our profession.

Please… do it we can not take action against those who breach our Code of Ethics without a complaint upon which to take them to task.

#52 Cybil on 09.25.09 at 9:12 am

Stop mocking those who make the intelligent life choice of living at home for as long as they possibly can. I took this path and was fortunate enough to have a substantial down payment, with no student loans after university. This ridiculous north american attitude of tossing your children out on the street at 18 to fend for themselves is incredibly selfish on the part of the parents. And no I’m not Italian!

#53 Mel Eager on 09.25.09 at 9:14 am

#38 DG

$600,000! Wow, amazing!

How old are you and your wife?

What are your professions, that allows you to earn that much? CEO? Doctor?

Mel.

#54 artisuseless on 09.25.09 at 9:18 am

@Denis on 09.24.09 at 11:05 pm

Parents used to do this thing called ‘building character’. A few still do, but not many, it seems.

It meant that facing some actual hardship in life once in a while made one a better person – more compassionate towards others, more resourceful and better prepared for any unexpected crisis.

So yes, people my age see people your age as spoiled, entitled mooches with a rotten attitude. If ever there are really tough times, people like you WILL have the harder time coping. And frankly, we don’t want to have to hear your whining when it does.

There’s nothing wrong with renting just like there’s nothing wrong with an entry level job – something else your generation disdains. It shows a level of both ignorance and arrogance that will NOT help you if you are ever at a point in your life where you might have to rent (and don’t think it can’t happen – life might seem all mapped out right now for you, and caller 2, but that can change at any time)

You start small, learn the basics and move upwards as you gain more skills and experience. Heck, living with room mates (the horror!) can make you a more compatible person to live with and even improve your relationship skills with any future wife.

As for the knocks about the salary? Sure, it’s possible but not terribly likely. There are plenty of people who boast of making ‘six figures’ who don’t in reality come anywhere near making that.

#55 Kurt on 09.25.09 at 9:18 am

Caller #2 – pay attention to Jake & Onemorething. Like it or not, you are young and inexperienced in life – don’t kid yourselves. Stack the deck in your favor, rent a place that provides what you need, not what you want, and spend the next 3 years learning how to be with the one you love and stashing all your spare money. The two of you will never regret it. If after that three years the two of you want to buy a house and fill it with kids, great! You’ll still be young enough, and the houses will be much cheaper. $200k seems like a lot of income, but if you don’t treat it with care, it’s tiny. BTW, shop for landlords. We found a good one who was absolutely delighted to have a couple of DINKs to give her a break from the revolving door of not-so-good tenants. We get top-notch service, and I assume it’s because she wants us to stay. My sweety lived for 12 years in an apartment operated by an old geezer with the same business model.

#56 Makeorbreak on 09.25.09 at 9:25 am

3 million unsold properties in Spain…in a country geographically smaller than most provinces, but with a 40 million population

http://www.emerginvest.com/GlobalEconomyMattersSpain/9/21/2009/Three_Million_Unsold_Properties_In_
Spain.html?ref=patrick.net

#57 Makeorbreak on 09.25.09 at 9:26 am

No 2 : Don’t kid yourself. Do not take your $200,000 income for granted unless you work for the feds.

#58 Fred on 09.25.09 at 9:35 am

Haters will be haters. You think that a fresh grad needs to be kicked out of the house to become a “man”? Living with parents is a great way to pay down loans, and save money for a big downpayment. Some people actually have good relationships with their parents and aren’t repulsed by living at home.

Also, there are lots of jobs that can make $100K at 26. ibankers, pharmacists, plumbers/electricians/other skilled trades (with unions and get overtime). Jobs with crazy overtime are not rare, so it could be a factor of how hard you work, not your age.

#59 Oakville Owner on 09.25.09 at 9:45 am

$200 000 k gross per year for an educated GTA couple is not out of the ordinary folks. My own family as well as three of our closes friends are all in the $180 000 to $2?? ??? plus range and are all in our very early 30’s. I do not post this to brag in any way and I am well aware that this is not the norm across this country but it does show why some of these McMansions are able to sell in the 1/2 million plus range. What worries me is the people and (banks that lend) out there that buy a place like that with 5% or less down. As a side note Garth, I just won my request for reconsideration from MPAC last night. Bought our McMansion in Aug 2008 for $585 000 and shortly after found out MPAC had it assessed at $705 000. Looks like even MPAC realizes that home prices can’t stay at this level. Really feel that the time to buy was summer/fall of 2008 when most sellers were in a panic, otherwise I would be waiting until after July 1 2010 when the HST and higher interest rates kick in.

#60 Mr. D - Ottawa on 09.25.09 at 9:47 am

Speaking of unethical real estate agents:

The last home I purchased (in Ottawa, 1996) was a real challenge. It seems the selling agent only intended to sell the home to himself. We didn’t realize this at first but it makes sense once you put all the pieces together.

– he showed up 20 minutes late for our initial appointment to view the property (dressed like a garage mechanic)

– although the sellers were very desperate to sell and were on the verge of bankruptcy (they did go under), the agent did ZERO advertising, no open houses, and even had the property listed as SOLD on his web site. Luckily the MLS site showed the property as for sale. We found the property by accident when we went to an open house for another property on that street.

– he didn’t disclose that he already owned the other half (semi-detached) and rented it out. He already had renters lines up and offered them to us after we closed the sale.

– he didn’t disclose that he held the third mortgage on the property ($20000). This mortgage was added after he was hired as agent. I assume he might have the option of buying out the other two mortgages under a power of sale.

– after an offer was made he missed the deadline to respond. We then said you pick a deadline, he did, and then missed his own deadline! Our offer was $10000 under list price (the price had just been reduced by $10000). If a deadline is missed, usually you can walk from the deal!

– finally our initial offer was accepted, but this was done only after our real estate office closed for the day. We had only ONE hour to respond. Luckily my office is open 24/7 so we could fax the documents from there.

Who misses two deadlines (more than 24 hours each), then gives you ONE hour? We were the ONLY potential buyer (the other one wasn’t qualified). It took only an hour for us to clear financing conditions and get approval as we were putting 50% down. Never had to pay CMHC fees.

Our agent had never encountered such resistance from a selling agent before. Our agent was really helpful, or we would never had been able to buy that home.

In a way because the agent didn’t want to sell (except to himself) we benefited because virtually no one knew it was for sale. The home is really nice. Built in 2002, near transit, close to many shops and services (not in a suburb) it easily passed inspection and we would have had to outbid other parties.

I kept a detailed journal of what happened. So I called the local real estate board with my concerns and they really didn’t care one bit. I can see a clear conflict of interest of an agent trying to sell a home, but also trying to buy the same home (at the same time).

We hope our next buying experience will easier.

#61 Robert1 on 09.25.09 at 9:48 am

Reality Cheque:

1968 – salary $ 600.00 / month
Age – 18
Residence – Mom and Dads Hacienda

Rent – $90.00 / month ( room and board )

What a deal. ” If the student hasn’t learned, the teacher hasn’t taught “. I learned !…. Have the off-spring of todays parents learned ? or has the teacher failed to teach ?

BTW – Thanks Dad

#62 Cybil on 09.25.09 at 10:03 am

#54, who says character can’t be built in your late 20’s? why must parents force their “children” to build character at 18 when they are still immature, impresionable and likely to make foolish decisions? I left home at 26, now i’m 39 and have had many many years to build character. And yes I did go through many bumps and financial pitfalls, and no I did not whine and crumble, i dealt with it just like everyone else. If forcing your children to suffer in the name of character and independance, then why not throw them out at 16? or even 12? Life is hard right, you may as well learn young.

#63 dave99 on 09.25.09 at 10:06 am

A 26yr old lawyers or actuaries would earn $100k in Toronto.

I earn more than that, and I’m a bargain to my company wrt my impact to the bottom line as compared to the next best employee alternative available to them in my highly specialized field.

Shifting gears, there is a reason that a boxer can make millions for a single fight. Or an pro athlete can make 10’s of millions a year. Ultimately it’s about leverage and influence over large amounts of capital. If a pro athlete can influence the consumer habits of millions of people (watching television, buying products, etc), then a tiny piece of that pie results in a seemingly exhorbitant salary.

Similarly for a lawyer/actuary or other professions. When millions (Billions?) of dollars are at stake, employers pay a premium for the best of the best to provide them a small competitive advantage.

Think of a brain surgeon who will be operating on you or a loved on. Money is time, and time is life.

How much more would you pay to get someone whose skills place them in the top 0.01% of their demographic, rather than someone at the 50% mark.

Let’s try to refrain from the envious howls of disbelief when someone who earns more money than you posts to the board. After all, earning more money has little (if any) correlation to happiness.

#64 Living in Ottawa on 09.25.09 at 10:08 am

TO Kurt:

I hope I find one of these landlords with the business model of attracting/keeping good tenants. Those “I speak to” just want the money (i.e.to keep the rental price going up, up & away).

To pay the rent you have to have THE BUCK. But, they want all you have. The greed is nauseating.

#65 miketheengineer on 09.25.09 at 10:37 am

Garth et al:

Real Estate Sales is a deal with the DEVIL. They are snakes, out for the kill.

Looked at my first house 12 years ago. Very similar to the one I grew up in. I had helped my old man renovate the entire structure. I know how it was built, I knew where to look for the issues. The Real Estate Turd, told me that the street sales average was 220 and this one was listed at 210, which was a good buy. After walking through the home, I found damaged hard wood floors (replacement required), Kitchen destroyed, and bugs under the sink, Roof shot, bathroom functional, but needed updating. In all about 20,000 to replace everything, if I did it myself. He told me to put in an offer. I told him, that I could not afford the price, good by.

I called the Real Estate Turd about a month later. I asked him, how much the home sold for, get this 160k. I was thinking of offering 180k, but the bank would only give me 160k (they still had ethics back then).

The real estate turds know how much it would cost just by looking at the home. Especially if they have grey hair. This guy should have said to me, it is listed at 210, it needs 40 to 50k to make it liveable again, put you offer in at 170 or so.

I could have dove in at 210k….what a disaster that would have been. It is buyer beware with real estate. Don’t count on the real estate turd to give you advice. Don’t count on family to give you advice. Don’t buy at the peak of a bubble.

In the end, I bought a new place, built by Mattamy, for 160k. I am happy with my purchase, and can afford to live in it. Screw the McMansions.

#66 Live Within Your Means on 09.25.09 at 10:41 am

#24 Jim on 09.24.09 at 11:30 pm
re: pharmaceutical/surgical sales reps. Welcome to the dark side of Canadian healthcare.

disclosure: my wife and I both work in the industry; albiet in our 30s. We clear $200K gross per year quite easily.
……

Not sure where you live Jim. My SIL worked as a sales rep (a former chemist) for 2 French pharma cos in Mtl. She made 70K. Unfortunately, she became stressed/depressed (under Dr.’s care) & ended up, IMHO, milking her disability plan. Because of her past history, she’s not been able to find another job in her field. Heard last week she took a 2 month contract as an Admin Assistant at $14 an hour. WOW – what a come down, but at least she willing to take a job at that rate. Her hubby earns $70K and their house is paid off, but they have always spent more than what they earned & I doubt they have planned for their childrens’ future education – one in CEGEP (from her first marriage) and a 6 yr old (current marriage). BTW, she’s about 44 and her hubby will soon be 53. My BIL said the other week that he didn’t know where he was going to find the money for such and such. Yet, the previous week he bought a widescreen TV, 0 down for 2 yrs. BUT, it was a good deal! Hubby did not offer to loan him money again & told him to stop spending & living beyond your means.

#67 Jmack on 09.25.09 at 10:42 am

Amazing how everyone feels young people are not worth their salt!. why is it so unheard of for a 26 year old to be making 100G’s?. Hell, that income would almost qualify you to buy a teardown on the westside of Vancouver. Living at home has become one of the only viable options of saving these days, with everyone gouging everyone and rents that are insane. Gone are the days when you could drop out of Highschool, get a GED and still go to University and become a professional. Or drop out and make enough doing labour at the mill to buy a house and raise a family. “If you think I’m gonna pay 20 thousand dollars for a house in Vancouver, you’re out of your f*^$#* mind” my uncle 1970.

#68 Downsized and Delighted on 09.25.09 at 10:43 am

I’m glad to see you acknowledge that it is always a good time to buy real estate if you know what you’re doing Garth. But everyone (except moi) on this blog just skips over that part. Risk is a two-sided equation. Not buying is often a bigger risk than buying.

But for those “bears” waiting for the big real estate plunge – you have to ask yourself why is there such a shortage of listings?? Anyone close to the edge would (should) be selling right now. But they aren’t. Why is that?

And why hasn’t everyone who really wanted a house already bought last year when they were so cheap and available?

Human nature my friends – dictated by greed. Those who truly wanted a home for their family HAVE BOUGHT.
Those who were simply motivated by greed – have NOT.

#69 Matt on 09.25.09 at 10:46 am

“What kind of job can a 26-year-old get that pays $100k in Toronto?”

Exactly what I was thinking – must be at some brokerage house advising people how to lose money.

#70 PeckedToDeathByDucks on 09.25.09 at 11:00 am

One hell of an adjustment ahead,
:-) going forward :-)

Just consider for a moment…the combined income of this couple in Toronto is $200k.

In comparison, Chairman of Industrial and Commercial Bank of China, the World’s largest bank was $235k in 2008

That’s 2% of Jamie Dimon, CEO of the fourth largest bank who was payed $19.6 million

(info from Daily Reckoning)

#71 Popeye on 09.25.09 at 11:03 am

#32 kansai_92 on 09.25.09 at 12:50 am
——————————————–
so what’s your ONE conclusion in my scenario?

Rent a 1985, well maintained, 3 bedroom townhouse, 50 minutes from work, for $1335 plus all bills (hydro, utilities, gas).

Buy a 1995, well maintained, 2 bedroom townhouse (with a large family room), 15 minutes from work, for $1391 plus all bills. ($1056 mortgage, $335 taxes/fees)

Everyone’s in a different boat; you CANNOT say there is only one conclusion rent vs. buy. Maybe in Vancouver, perhaps.

#72 The Great Gazoo on 09.25.09 at 11:05 am

So whats with all the ridicule about living at home when you work?

I got married when I was 30 years and lived at home till then, thats how some cultures (ie. Eastern Europeans) roll. Am I any less a man for doing so? I dare you to challenge me on that. I went to a top Canadian university, have 200K in savings and I had alot of fun in my youth.

So lets see:
– move out at 18 years of age, if you either rent or buy you will be in debt cause the best job you could get is at Foot Locker
– now that you’re moved out, you wanna pimp the ladies big time, so you need a ride, new clothes, money for booze and restaurants, more DEBT
– you need to go to college/university so you have to pay tuition, books etc. even more DEBT
– once you graduate, you GOTTA upgrade to a home cause the Globe and Mail and Toronto Star and RE advertisements says you have to, BTW that lady that you brought back from the bar to your bachelor’s pad? now she wants a diamond ring and a baby bump..

Did you even pay back your OSAP yet?

Living at home with a loving family is a no-brainer in being the best financial advice for our youth. But heck living your entire life in debt cause you watched one too many episodes of Melrose place… doesn’t make you more of a man…

Those that mock people living at home with parents are truly the greatest fools!

#73 NoFreakinClue on 09.25.09 at 11:16 am

Sir,

Would you please write a bit on health of Canadian banks and your confidence in their finances, if you have not done so before? Are they as robust as they are portrayed?

Thank you
AA

#74 Live Within Your Means on 09.25.09 at 11:22 am

I live on a street where several families have over 27 yr old kids still living at home. Are they really pleased? NOT – but they don’t want to kick them out as they can’t afford to live on their own and get ahead. One home on the street has a rental unit on the street. Another neighbour laughed and said she’d gladly pay to rent it, were it available, to see her daughter move out. She’s 35+ with a son. SonIL lives with his elderly Mom a couple blocks away as my neighbour’s hubby can’t stand him. He’s an electrical engineer, worked for 2 major IT co’s in the US but somehow can’t find a job here for the last 4 yrs. :-) When my neighbours go to the cottage, SonIL stays at my neighbour’s home while his wife works 2 low paying jobs. I could go on, but I hope you get the drift. Many parents of my generation have ‘let down’ their children by giving them everything they thought they deserved without teaching the value of a dollar.

#75 taylor192 on 09.25.09 at 11:25 am

I’d like to know what cultural background Caller #2 is from. Cultures with arranged marriages often have the kids living at home until marriage, then they move into their first house. This could explain the comment:

“renting is out of the question”

As it would show great disrespect for the arranged marriage and families involved if the husband cannot provide a suitable home for the new couple.

#76 Finanzkrise on 09.25.09 at 11:28 am

Caller #2: Why not rent a condo around Young and Eglinton or a similar uptown neighbourhood? There must be a number of ‘investors’ who have sunk money at or near the top of the market into a box in the sky,
You’ll get all the goodies (granite / stainless, etc.) and in a nice neighbourhood with shops and restaurants, and still have cash in the bank, with no DEBT.
If renting is out of the question because it feels like throwing money out the window, consider that a highly leveraged condo investment is probably cash flow negative (rent minus interest minus tax minus maintenance) and can only yield gains if real estate continues to appreciate. If real estate values decline, you essentially have a negative dividend on a declining equity.
Buying a $700k house with $100k down could put you into negative equity within a year or two, given probable fiscal and monetary trends which Garth has discussed.

Suggestion: Rent a nice place, bank the rest and put it towards a good deal on a house in a couple of years when a herd of sellers are swamping buyers.

#77 taylor192 on 09.25.09 at 11:29 am

Please stop the silly comments on here about Caller #2’s salary.

Its very possible as a software engineer to make close to $100K after 5 years of work.

#78 Barb the proof reader on 09.25.09 at 11:46 am

Caller #2, Andrew, I also agree with Kurt, Jake & Onemorething for many reasons.
Take this one leap of faith –> “Change” is difficult no matter who you are and no matter how much money you can throw at it. Change, can and will be both stressful and invigorating. Don’t mess it all up by muddling everything into one big massive Change.

Firstly, your marriage deserves the respect, calm and consideration of taking things one at a time.

Secondly, living with each other deserves that same learning curve, free from overlapping stresses.

Thirdly, living under your “own roof” and those ensuing responsibilities deserve a different learning curve. Rent now. Get to know that freedom first. Enjoy it. Slow down. It’s important. There will be plenty of opportunities to buy. Plenty.

Fourth in line is ownership.

Kids fit in anywhere with a bit of planning.

Each step should feel natural and easy, not forced. Andrew, you said you have very little patience and are afraid of doing something rash. One word: Wait. Wait, because patience is a “learned behaviour” that you admit you don’t have. You don’t have it yet but you will. You can learn it simply by making yourself wait.

And as far as renting, it can be great if you do even just a tiny bit of homework. Even in the tightest Calgary rental markets, with nearly zero vacancy, we found three fantastic rental homes. And when we had to move, it was easy. You can use renting as a tool. It let’s you improve your responsibility & maintenance skills and it’s the best way to test drive a neighbourhood.

Our last rental was this home. We put an ad in the paper specifying everything we wanted and got it. It was not for sale and we never expected it would be, so buying years later was an unexpected bonus. But at least we were fully ready by then.

#79 RJAG2034 on 09.25.09 at 11:50 am

Jeez, I waited till I was 45 and cleared the mortgage before I bought my Porsche, even then it was 3 years old and 1/2 the price of new. Its much cheaper than a mistress!!!!

#80 arit on 09.25.09 at 11:51 am

Ted:

“I was a professional when I was 26 and I made squat. I was an engineer. In fact almost all professions make squat. I make more money now that I am not a professional.”

Have to agree! After 11 years of “professionalism”, most in one of the “best” engineering companies in Canada, I still don’t make six figures.
We were lied to as kids… Study hard and you’ll have the house and the dog. Yes, right.
It’s much safer to be a “non-pro”.

Best regards

arit, Vancouver

#81 Sam on 09.25.09 at 11:56 am

Real estate is not a dirty business, provided you employ the right Realtor to work for you. Your Realtor will allow sufficient time to achieve complete satisfaction with respect to your purchase such as:
– Financing (insure you understand your mortgage commitment)
– A Proper Home Inspection – deal with any and all issues
– Home Insurance
– Grow Up Problems, past and current if any
– Seller Information Statement (SPIS) – must have
Extremely Important on any purchase
– Survey and taxes – required
– Title Insurance (you must must have it)
– Legal (time to consult with your lawyer)
– Protect your deposit (properly documented in the offer)
– Schools – the list is long

Andrew does not want to rent, but it is the best option. With their combined incomes they can rent an inexpensive and fantastic apartment, save, invest, grow the finances and buy when no-one is buying. It is not a new idea … people have just lost sight of reality. Why? Everyone wants what everyone else has: debt, and no savings. Rent is a taxable deduction.

#82 Kenken on 09.25.09 at 12:03 pm

Cut the guy some slack!!

they are making 200K/yr…and can afford to buy and even lose some equity… imagine the pressure on the guy’s shoulder from his gf and family to buy…esp since he can afford
Moreso,… readers of this blog are mostly renters or those who want to sell high, wait and buy low
Dont we need stupid young high income earners like this to bail us out? Go ahead my friend… BUY BUY BUY now
you can afford… and even with increasing int rates, taxes,etc… you can afford!

Garth – it would be better to advise families with lower family incomes about the buying now and facing higher rates/taxes later…they are the ones who need advice
…not cash rich young brats who can afford!!

#83 Ottawa_Tradesguy on 09.25.09 at 12:07 pm

As a young professional (consultant) in Toronto I earned $75,000 starting salary at 24 and a bonus which was usually between 20k and 25K for your first year. Total annual compensation was approximately $100K.

Bonuses increased every year to the point where a 26 year old could easily earn 150K+ after a couple of years of work.

Just because you haven’t figured out how to actually make a living wage don’t hate on those that have…..

#84 jube jube on 09.25.09 at 12:28 pm

D.L In T.O

to report a Realtor:

http://www.reco.on.ca/ComplaintEnf.aspx?section=HaveComplaint

Defanetly failed her fidutiary duties as a Realtor. SCUM

#85 Jake on 09.25.09 at 12:32 pm

Since we are all making our guesses…..I think caller 2 and his fiancee are both Dentists and they met in dental school. They could definitely clear $100K each at 26. Or maybe they are optometrists at met at Waterloo. Oh do tell caller #2.

#86 van house hunter on 09.25.09 at 12:42 pm

#51 Devil’s Advocate…ethical realtors are a myth can you provide us references from your happy clients? How many pissed off clients do you have versus happy ones? I purchased my property on the condition that the kitchen countertop was changed, new sinks, new fixtures, new appliances etc etc….I thought I got a sweet deal and even paid below market value the jerk realtor/contractor gave my keys to another incompetent jerk he hired to do all the work…..I took possession but the jerk still had not finished (what he did was crap) and had kept my keys…..I’m a single mother and asked the realtor to make sure my keys are returned before we move in. Never returned my phone calls went AWOL, work not completed. Filed a complaint and the realtor called me and flew insults at me eg..”How old are you?” If you want the keys back go get it yourself! etc.etc.. But emails were on the lines of “I’m always ready to help you and make sure you’re satisfied” because he cc’d his bosses…At the end of the day talking to Cameron Muir (Vancouver Real Estate Board honcho) did crapola for me. Anyone ever successful in launching complaints against these scum bags and getting any kind of justice? Think NOT. When I sold my house the buyers agent told his clients NOT to get a house inspection!!! And sadly they listened.

#87 Gary on 09.25.09 at 12:46 pm

The only worthwhile comment from the Globe&Mail’s “expert” discussion:

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

“[Comment From Stuart Dunstable, Vancouv]
What will happen in the real estate market when interest rates inevitably go up? Isn’t it very possible that the market will be flooded with sellers who have been holding out for a sale at a high price the moment rates start heading north? Wouldn’t it be prudent instead of buying at peak prices (and at temporarily low interest rates) to wait until rates rise and prices inevitably fall as a result? Plus, buyers will have more choice and so be less likely to be caught up in a bidding war? The risk of renting and waiting (FTBers) for a year or so is surely lower than the risk of buying now and hoping rates don’t rise too much or too fast?”

“John Pasalis: Hi Stuart. Low interest rates are definitely improving affordability in Toronto’s housing market which is fuelling the demand we are seeing from buyers. Given repeated signals from the Bank of Canada, which is aware of the role it plays in consumer and business decision-making, we don’t expect interest rates to rise high enough in the short- and medium-terms to cause a crash in the real estate market. When the economy returns to more stable ground, and reports are globally consistent that a slow recovery is now taking place, a rise in interest rates would actually be very welcome news. Once low rates have done their job in sparking economy activity, higher rates would serve to bring the market back to a more balanced level. Having said that, buyers should not stretch themselves gambling on the hope that today’s market situation will last forever. The financial turmoil we just experienced has taught us a lesson. Leave some room to deal with potential changes in the future. ”

Short version paraphase: Rates will slowly “balance” the market… BoC won’t be raising rates at a rate that will affect the market too much…

#88 confused and a little crazed on 09.25.09 at 12:47 pm

Well… everyone has there own reason.

i know someone who got married and moved backed to the parents place lived rent free and did nothing to help maintain the place. He just took up the basement did n’t allow the parents to enter w/ o his permission because of privacy…that i understand but he can wander up anytime to upstairs.

he then complaains to his parents about the place not good enough. Of course he didn’t mentioned about any conditions (his standards) before moving in…did I mentioned …rent free.
and get this his parents are 80 ish and 70 ish.

what does he expect them to do ? The parents are old and can barely speak english…can you say leech or parasite. By the way the guy is in his late 30’s.

so no Living with parents is not a good option…most of the time. But if you get aalong and it ‘s not a one side relationship then ok …but respect iss key

#89 ted on 09.25.09 at 12:55 pm

#70 its also morelikely to make less than $50K as a software engineer. Seriously I don’t know any engineers unless they work for a crown corporation that makes over $100K since the dot com days.
Only young people who make big dough are i bankers and traders. And I don’t think they are emailing garth for advice.

#90 Blobby on 09.25.09 at 12:56 pm

“Don’t knock the “kids” making the 100k salary. ”

I wasnt. I was knocking kids making 100k salary.. and STILL live with their parents!

And what i find even more shocking about that, is that they’re both earning that sort of money, both live with their parents, but yet jointly they ONLY have 100k saved! What on hell are they spending their money on?

#91 ted on 09.25.09 at 12:58 pm

#83 I make a good salary but if you are a consultant why call go by ottawatradesguy. Let me guess you are a professional traderperson consultant. wow you are great. I am a businessman I would love to give you my businesscard and meet at my business to talk business. Look at me I am impressing people anonymously on the internet.

#92 Nostradamus jr. on 09.25.09 at 1:01 pm

Detroit!….Is Windsor next?

“”Desperate Detroit Man Sets Up Website To Help Him Escape Detroit””

http://www.helpmeleavedetroit.com/

#93 Six Figures on 09.25.09 at 1:04 pm

54 Artisuseless

Excellent post! My sentiments exactly!

The trend of living at home until your late 20s and early thirties, and then moving straight into a marriage and house, fosters social retardation in our society. At one time, our society valued independence, sacrifice, and perseverance. It has been replaced by instant gratification and a lack of strength of character.

This generation that has been coddled by their parents are not only incapable of handling difficult situations, they are incapable of providing the support to themselves, their significant other, or the broader society.

When a 20 year old has a hard luck lesson, they have many years to recoup. When a 40 year old has one, it can be devastating. I dread the day when these coddled individuals are actually in decision making positions.

They spend their formative years in a protected environment, sheltered from experiences which add to one’s wisdom and character building.

As an employer, I try to determine whether prospective employees live at home prior to hiring. It drastically affects my assessment of their work ethic, ability to read situations, and handle crisis situations. Generally speaking, because there are always exceptions, those that live at home have faired poorly at all the above, even those that have professional designations.

For all those individuals claiming that they have to live at home because RE is too expensive, and that renting is not an option, that is pure hogwash. Face it, you would rather live at home at face zero responsibilities, have access to a range of amenities (dinners, laundry), and enjoy a large house, rather than rent some dingy apartment, take transit, and cook for yourself.

It is primarily a values issue not a financial one, as clearly articulated by the referenced six figure chap.

#94 The Great Gazoo on 09.25.09 at 1:08 pm

#88 your argument does not really prove that living at home is unacceptable.

Your example just proves that a loser is a loser.

Moving out will not turn him into Gandhi.
It is not because he lives at home that he became selfish, stupid and not respect his parents or anyone.

#95 maureen on 09.25.09 at 1:10 pm

OK, wait a year to buy, but why not get a mortgage pre-approval/rate hold for 120 days. Renew the preapproval every 120 days and let the lender pay what they have to for your future business.

#96 rory on 09.25.09 at 1:11 pm

Something scary since the ‘G’ lives off the private sector …if this is not disconcerting I don’t know what is…is US # but Canada #’s would be in the ball park…also lists 4 other core problems…all effect the economy.

The #1 Core Problem: INCREASED GOVERNMENT-DOMINANCE OF OUR ECONOMY …a little excerpt for those not wanting to read the link.

“Increased government (at all levels) not only consumes national income by its spending but their employees continually issue new regulations aimed at the reduced private sector, with the cost of compliance passed to the private sector as unfunded mandates to the tune of 15% of national income. Adding this 15% to the above graphic’s 45% spending ratio increases government’s control-share of the economy to 60% – – as per the regulation cost compliance report chapter.

America is a significantly more socialized, government spending-dependent nation (and less a free-market society) than before. But government does not create living standards – – it consumes national income. It’s the private sector, not government, upon which we must depend for generating real long-term improvements of inflation-adjusted family incomes, which have barely moved in the past 2½ decades for 2-wage-earner families and have fallen for the traditional single-wage-earner family – – yet in the past most families were just fine with one wage-earner and nil debt. The private sector also depends on growing family savings with minimal household debt – instead of today’s near zero savings and soaring debt.”

He goes on the say that many think G should maybe only be 20% of the overall market …that is a 50% drop …think about it …unless big G changes to little G we will be squeezed to death by arrogance and ignorance.

http://mwhodges.home.att.net/summary.htm

#97 ted on 09.25.09 at 1:23 pm

correction to one of my posts should read only young professionals making money are ibankers etc. If the kid said he was in trades I would believe him. Nothing wrong with trades its honest work and if your good in a construction bubble you get paid loads.

#98 dd on 09.25.09 at 1:23 pm

“like buying a $700K home, even though we can afford it”

We can all afford a $700K home at todays rates. But if you double or triple the rates, through in a couple of kids, sickness, taxes …. YA. Affordability will not look too good in a decade.

#99 Jason on 09.25.09 at 1:25 pm

LOL, now Future Shop is jumping on the “now or never” bandwagon. Why not, it’s worked so far for RE.

From mailing list:
“Now or never! Amazing, one time-only deals on HDTVs and home theatre”

#100 Live Within Your Means on 09.25.09 at 1:25 pm

#64 Living in Ottawa on 09.25.09 at 10:08 am

Kurt – I’ve lived in many rentals when I was young – Ottawa, Mtl & Hfx. For the most part, the owners were good back then and I & my roomies had respect for the property we rented. Maybe its a question of the ‘times’. I’ve heard many horrendous stories from landlords who’se properties have been trashed, tenants have fled in the middle of the night, and they’ve been out many months of rent.

#101 Nathan in Edmonton on 09.25.09 at 1:29 pm

100k in the bank at 26-year old and Living at home with parents…. loser. I think it’s great that parents help out thier adult kids when they really need it, but I guess this guy just likes mommy’s cooking.

#102 Rob in Nvan on 09.25.09 at 1:37 pm

#21 DRC

Good eye on those G and M re/max comments – very telling – the mood drives the market, not the other way around . . . and perception is shifting . . .

#103 jess on 09.25.09 at 1:47 pm

Ontario posts $6.4 billion deficit

…the predictions of balance seem to have a shortfall
since corporate tax revenues are not what expected.

corporate tax revenues fell 48.1 per cent from the previous year, down to $6.7 billion for the year ending March 31, compared with $13 billion the previous year.

0.5 per cent contraction in real gdp due to global events

So much for projected expectations !

#104 Eduardo on 09.25.09 at 1:48 pm

26 year old engineers in Alberta make close to 100k.

#105 Matticus on 09.25.09 at 1:50 pm

$100k+ as a 26 year old working in Toronto is not out of the question. It may not be common, but it is far from unheard of.

I graduated from undergrad business school at 22 and was offered jobs at 75k+ starting. Many of my friends went into investment banking and made well over 100k in their first year out. By 26, the (few) that were still in the industry were well above 150k. That said, they also worked 80 hours a week…

#106 ruraldude on 09.25.09 at 1:52 pm

Garth!
I don’t know if you’ve heard of this but apparently you can build a house in Phoenix Az say for say $300,000 and the US government will cut you a cheque for half the amount. I know at least four people locally that are planning on or have started to build. Is there any validity here, or is this scheme to good to be true. Anybody know anything or have a link I’d appreciate hearing. I’d like to know what the catch is!

#107 Jim on 09.25.09 at 2:01 pm

If you are on the revenue-generating side of a company’s income statement you will get paid more than a similarly intelligent individual on the expense-accruing side.

Sales individuals, consultants, financial planners, attorney’s (yes even physicians) etc. are all sale-side workers and, in general, they will make more than engineers, customer support, legal assistants, secretaries, in-house accountants, etc. even though some of the latter have crazy workloads and demanding hours.

The closer an individual is involved in bringing in revenue (the higher the better) to a company the more they will be paid. Capitalism has been around for a long time. This shouldn’t be surprising.

#108 Marc on 09.25.09 at 2:20 pm

Caller 1, 42% of marriages end in divorce, the other end with death. Think things thourgh before taking the plunge. I am part of the 42%.

#109 Jay on 09.25.09 at 2:25 pm

Only two of my friends in their 20s make 100K+ per annum. One is 27 and works as a commodities trader; the other one is 25 and is a financial analyst at an investment bank. Besides them, none of my other friends make close to that.

However, I’m trying to figure out how this girl at my company makes $130K as a consultant. I don’t know her personally, but I hear she is finishing up her business degree (which would make her 21-3 years old) and really has no relevant work experience to speak of. Initially I thought she must be extremely smart and talented, but then a co-worker that worked with her was appalled by how little she knew about our industry and the type of dumb questions she would ask. Apparently, all she does, or attempts to do, is some technical writing and document editing. Boy, only if I could figure out how to make >$100/hour while still in undergrad…

#110 steven rowlandson on 09.25.09 at 2:42 pm

Hello Garth.
To me it looks like the few super earners are helping to support insane real estate prices by being at the very least too compliant with the wishes of those with something to sell. Given the low interest rates and the sky high prices one has to ask the question: How are people going to live should taxes rise, interest rates rise and real estate prices and or wages level off or collapse?

Sounds like an accident looking for a place to happen to me. As for bankers and real estate agents its the interest and the commissions they are after and the bigger the price the better for them. Its all about profit at any price….

Steven

#111 Peter Wiener on 09.25.09 at 2:43 pm

I don’t care what anybody says they make as it has no effect whatsoever on what the AVERAGE person or first time homebuyer makes. They drive the market, not some lucky duck or other who makes an above average income.

The ONLY REASON house prices have gone up so much is because people have been able to borrow the money to purchase (and in most cases) in a larger quantity than their circumstances would dictate is prudent.

It is the perfect storm as Garth has pointed out repeatedly on this blog from low rates to inexperienced buyers to scumbag realtors and complicit banks not lending their own money.

Simply put;

No discipline in lending standards
+ no financial sense by buyers
+ lifetime low interest rates

= housing bubble.

Historical fact: Bubbles burst.

Its that simple.

Anything else on the topic is basically conversation.

#112 GregW., Oakville on 09.25.09 at 2:45 pm

Hi Garth,

Any plans/chance of tape your talk and post a link on the blog for others that can’t get there to see?
I’m assuming your talk contains some newer stuff that may be of interest?

#113 Peter Wiener on 09.25.09 at 2:53 pm

My only concern going forward is the level of inflation that we may be subjected to as governments the world over try to stave off deflation.

If governments were trying to prevent deflation from somewhat normal price levels, I’d have no worries about inflation, but unfortunately they are TRYING TO DEFEND BUBBLE PRICES and their math is consequently all wrong.

Hey, maybe all these housing bulls are right and prices will continue climbing without downside respite. They better hope not or they might have a tough time eating and living as the price of everything else skyrockets.

#114 nonplused on 09.25.09 at 2:55 pm

Wee! http://www.chartoftheday.com/20090925.htm?T

Guess where we are on the Canadian charts? still exactly 2 years behind!

#115 EssGee on 09.25.09 at 3:05 pm

Why are people hating on the guy for making over $100K.
It’s not that hard to make that kind of money in Toronto at 26.

I’m 27 now but I’ve been making $150k+ since I was 24. And no, I don’t work in financial services. I work in the software industry. Again I’m not saying that to brag…just stop thinking that everyone who makes good money is necessarily a crook.

What I do is not too difficult. Just network, find out where people are making money, bring your skills up to date, and apply for a job.

#116 jess on 09.25.09 at 3:18 pm

google put life magazine on line for free

LIFE Jan 4, 1937
check out page 30 and 31 which is a map that represents infrastructure builds of that time
The text on the map reads:

“With borrowed billions franklin roosevelt put millions of idle to work on thousands of projects. The map shows a few of the more important things they did with their time and the public’s money. Mountains were tunneled,rivers were dammed, aqueducts were laid, canals were dug. Battleships were contructed, landmarks were restored, slums were cleared and 6,201 school houses were built or repaired. Never had the country had such a construction spree. Yet, the number of unemployed failed to decline proportionely.”

http://books.google.com/books?id=lUsEAAAAMBAJ&source=gbs_all_issues_r&cad=2

#117 Vancouver_Bear on 09.25.09 at 3:39 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.

#118 Vancouver_Bear on 09.25.09 at 3:41 pm

Europe is more progressive from every prospect…..NA is going through the phase of great retardation.

#119 Another Albertan on 09.25.09 at 3:52 pm

26-year-old engineers in Alberta making $100k/year is uncommon, unless you are figuring on bonuses and living allowance if they are up north. Graduating nominally at 22 would make them only close or barely able to get the experience standard to move from being an Engineer-In-Training to a full Professional Engineer. There are a lot of P.Eng. holders in this province with a lot of experience that make in and around $100k. All the world is not a downtown office job for an oil & gas owner/operator.

It’s a known issue in Human Resources circles in Calgary that new-grads were over paid heavily in the past 5 years, to the point where the grads of 2000-2004 complain that their experience over a grad from 2005-2007 was not being compensated properly.

If you graduated in 2005/6/7, you probably started anywhere between $58k and $70k, depending on your discipline. If you graduated in 2008, you’d be lucky to get a job that paid $65k. If you graduated in 2009, you are likely unemployed and can’t even get an interview.

Here’s the APEGGA salary survey. http://www.apegga.org/pdf/SalarySurvey/VPS2009.pdf

A 26-year-old would be a high A or solid B level engineer. A level median = $65000, A level mean = $65215, B level median = $74880, B level mean = $74474.
So we’ll take the mid-point and we’re now sitting at $70k.

Now I won’t disagree that many 20-somethings live like they make $100k/yr, but the universe of individuals who can actually show a T4 slip with a 1 as the first of 6-figures before the decimal does exist, but it likely decidedly smaller than the number of people who talk like they make $100k/yr.

#120 robert on 09.25.09 at 3:58 pm

#73 NFC
I suspect you will hear they are best of class (ie. when compared to their counterparts stateside and overseas, especially the nightmare that is Chinese banking). For my money I would suggest not betting too heavily on the healthiest horse in the glue factory.

#121 TrueGritCalgary on 09.25.09 at 3:59 pm

26 and making 100k is very plausible. First year associates at big law firms in large Canadian cities make around that figure.

#122 North of 100k on 09.25.09 at 5:06 pm

i worked with a huge slimey 27 year old, that was paid 95k, plus commission – he had 1 1/2 years of corporate experience and a super-lame expensive car to hide his small manhood to boot.

in sales it’s over 100k is easily possible, if that’s the “profession” writer is referring to.

#123 Keith in Calgary on 09.25.09 at 5:16 pm

Only problem…….all those first year associates at law firms and engineering companies are being outsourced to India for 1/10 the cost.

GOOGLE it……

#124 dd on 09.25.09 at 5:35 pm

#92 Nostradamus jr. on 09.25.09 at 1:01 pm Detroit!….Is Windsor next?“”Desperate Detroit Man Sets Up Website To Help Him Escape Detroit””

Hey that looks like Wally.

#125 dd on 09.25.09 at 5:37 pm

#105 Matticus

…well above 150k. That said, they also worked 80 hours a week…

So really they are making 60-75 at most for a 40 hour work week.

#126 PopThatBubble! on 09.25.09 at 5:45 pm

#22 nonplused:

I agree:

One wonders about all those braggers who claim to make the big $$$ (ie $100,000+) in their early to mid 20’s when barely out of university.

If they don’t state their occupation, I’d deem them as trolls.

In addition, when TSHTF, they are often the first ones laid off.

#127 Nostradamus jr. on 09.25.09 at 5:48 pm

“””It compares the prices charged for 2,200-square-foot, four-bedroom, two-and-one-half bath, single-family homes in more than 300 markets around the nation.

The overall U.S. average for such a house is $363,401,

La Jolla, is the most expensive; a comparable house there goes for a cool $2.125 million.””’

…..La Jolla = West Vancouver, which is Cheaper by a country mile with a way better lifestyle than La Jolla.

Nostradamus jr.

#128 TheComingDepression on 09.25.09 at 6:37 pm

Eviston said it’s also because of lack of supply. He said sellers aren’t putting their homes on the market because they are anticipating prices to rise further. That leaves less inventory for buyers, and drives up demand, and in turn price.

“Would you sell a stock if you thought it was going up?” Eviston said. “It’s the same thing in the real estate market.”

Can you believe this remark? If the stock went up and I made money yes I would SELL IT! Majority wait until it goes down THEN THEY SELL. It will be the same in Real Estate except THEY WILL LOSE IT. Its called GREED DUMMY!

#129 kt on 09.25.09 at 6:58 pm

Re: salaries: schmucks with no professional designation working for the Ontario Lottery Corporation make over $100,000! And we taxpayers pay those salaries. PLEASE go read everything on this website: http://www.fin.gov.on.ca/english/publications/salarydisclosure/2009/

“#2 – I hear there is life past the Humber and the Don. — Garth”
Hilarious!!

However, to return to Garth’s “Reliable Sources” post of Sept 23rd …

# 78 and #115 from BDG YYC – Hmmm … ?

Your first post’s link proves what everybody already knows – both Vancouver and Toronto have ridiculous numbers of residents with more money than brains. The opposite is true for the rest of us — who had the good sense to buy outside of both those areas.

You wrote:
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.

I was making less than $32K per year when I purchased my first detached home outside of Toronto, but still “GTA” in 2002. I was already in my 30’s because it took that long to save my approx $12K down payment. In keeping with today’s post from Garth, I’m one of those who left home at 18 to fend for myself. I don’t regret it for an instant, I highly recommend it, and sorry – I really do have more respect for people who have done so, than those who haven’t – unless they were staying at home to help care for or to financially support seriously ill parents/siblings. I’ve been working for the same company for almost 20 years, my credit rating has always been flawless, even when I was a teenager making minimum wage. I had a decent enough down payment on both my first and second home purchase, I wisely chose accelerated weekly mortgage payments both times, I have $50,000 in credit available to me via my LOC and my one and only credit card, and I owe nothing on either of those. So your sarcastic statement that “poor homeowners are financially very resiliant ” spelling notwithstanding, is actually correct.

Some of us “poor homeowners” in general, are accustomed to living on next to nothing, and with zero disposable income all our lives, whether renting or owning, and whther or not you choose to believe it, we’re pretty damned happy too! Speaking for myself and for friends and family in similar situations as myself, the recession has been a boon to us. Lots of prices on essential goods and services (this does NOT include LCD TV’s, granite, stainless steel, etc!!!) have dropped, and our standard of living in general has improved. I know that the majority of those who have fallen for idiotically-priced homes in Toronto and Vancouver, etc, are most certainly not in the same situation. Good luck to them.

I would bet my own home that the *majority* of people who are going to crash and burn once the market corrects and mortgage rates rise, are NOT the ones that one would normally term “low income” homeowners, who wisely purchased modest homes within their means outside of T.O. or Vancouver, costing far less than $200K. They will instead be the ridiculous numbers of first time buyers with more money than brains who blindly/brainlessly bought into either the Toronto or Vancouver $500K+ and even $1M+ markets this past year with 30 year amm’s and zero down.

#130 North Van Dude on 09.25.09 at 7:19 pm

I think Detroit is a good place to buy right now. You can get a house for $20k.

When oil hits $200, then $300 then $400 a barrel (and it will in our lifetime) then people will need to move back into the cities they abandoned for sub and exurbs.

#131 North Van Dude on 09.25.09 at 7:26 pm

i employed several people around the age of 26 who made $100k plus. The average was about $80k but most made more than that.

It is sales, and it is indeed a profession, probably the safest of all professions (except the oldest one of course, which is still sales, the only difference being the seller is also the product).

Figure out how to game the system and you can indeed make a mint at a young age.

I am proud to say that i have successfully steered my high earners away from real estate.

#132 North Van Dude on 09.25.09 at 7:30 pm

I would have rather lived in squalor (and often did) than live at home during my 20s. It taught me to live beneath my means and that like many people I was just 1 paycheque away from the street . I had no credit card, or access to credit, so if I did not have the dosh to buy something, well then I had to save up for it. What a concept.

#133 HouseBuster on 09.25.09 at 7:42 pm

#22 nonplused – Don’t be so fast to say at 26 he can’t be making 100K.

I was making 200K at 28 and this was a few years ago so 100K today at 26 is more than possible.

#134 JoeCalgary on 09.25.09 at 7:43 pm

Cheerful headlines for a Friday:

“Spain Tips Into Depression”

http://www.telegraph.co.uk/finance/economics/6228390/Spain-tips-into-depression.html

And I hope our security people are aware of this story:

“Explosives ‘inside’ suicide bomber”

http://news.bbc.co.uk/2/hi/middle_east/8276007.stm

#135 D from London, ON on 09.25.09 at 8:16 pm

# 48 and # 50 – Samantha

Back in excellent form!

Your usual dose of common sense adds much to these discussions (at least for me, and I suspect there must be many others).

D.

#136 eddy on 09.25.09 at 8:35 pm

Garth said : If you’re asking for advice, put half the cash down on an affordable $300K property with a far better chance of selling in any kind of market

I agree. There are always buyers for the lower end. especially with TOs punishing home buying tax. combined with the Dolt on e-Guilty tax=

send 300k pay $5700

spend 700k pay $20200

that’s not a typo. for a few minutes of data entry, that’s not fair. Miller said the city’s share of the skim was way below his expectations. no surprise there. his tax helped kill trade, people stay put and do additions etc if they need more space.

most businesses hate to raise prices because they know the negative result from experience, miller has no business experience, he thought “I’ll just mirror McGuinty’s tax, dollar for dollar” then acts surprised when trade dies, can you believe it?

thankfully he’s checking out. but the damage is done.

#137 Mark on 09.25.09 at 8:39 pm

EssGee, $150k in software? That’s ludicrous! Even degreed software engineers with 5+ years of experience in the Toronto market are having major problems finding jobs for any more than $60-$65k/year. Don’t know what your magic skill is, but that’s a seriously major amount of exxageration.

#138 NKVD Black Raven on 09.25.09 at 8:39 pm

Andrew try 113 Niagara Street, Toronto. Backs nicely onto a slaughterhouse. Or anything in the Bathurst/Strachan from King down to the tracks.. Inhale heartily my boy and don’t mind the smell – it’s organic not your contaminated. And yes you can share-waft your friendly neighbourhood abattoir with those new condos on Stafford. I’ve been in them and whiffed.

It’s been a cutting site > 100 years and pre-dates city planning. 100 M to buy them out. And folks moved-in and didn’t know anything until they smelt it.

#139 Jonathan on 09.25.09 at 8:48 pm

200K

What do you want to bet that

a) one is on an hourly contract and as such getting $50 an hour, the other lands 60K.

b) 40K in stock market gains.

=200K.

#140 frugalistas.blogspot.com on 09.25.09 at 10:52 pm

I know several people who are that age who earn 200K+. They worked hard to get there. No, they don’t sell drugs or do anything illegal.

You just have to be in the right field.

#141 confused and a little crazed on 09.26.09 at 3:39 am

94 # gazoo

thanks man…i can see ur point. doesn’t matter whether he rents/ buys or squats he still be a loser

#142 Don't Believe the Hype on 09.26.09 at 11:32 am

Ronald McDonald really creeps me out – the red Doc Martens make that clown particularly sinister.

#143 Ben on 09.27.09 at 9:01 am

Pretty sad showing from the crowd today – all the guy wanted was financial advice, and he got jealousy for making a good income at a young age.

#144 marcus aurelius on 09.27.09 at 11:09 am

#2 TO Bubble Boy – and Garth’s response:

For the record, this is a misstatement. There is no life in Toronto west of Bathurst or east of Bayview. This is called the ‘last outpost of civilzation’. Even then, north of 401 is Irantown/Koreatown etc. and south of St.Clair, it’s all drugs, Hoes and granola-munchers. So… the reason that shack in the last outpost of civilzation now costs a minimum of $ 1.5 million is FEAR. Fear informs every aspect of human existence, as all salesmen (including ratty real estate salesmen) know. Fear that you will be mugged. Fear that some junkie will stick a needle into your kids at the park. Fear that sullen immigrants with a few million dollars in ill-gotten money (smuggled out of the armpit of a third world country they came from, and needing a good real estate ‘spin cycle’) won’t be too neighbourly. So that’s why the last, shivering, non-David Miller-voting, Dalton-McGuinty distrusting taxpapers with visions of private schools and a Glenfiddich after work, jonesing after the new model overpriced German cars, congregate in their shabby little Lawrence Park living rooms – afraid of the future, but willing to throw the Mies chair into that lovely woodburning fireplace, just to make next month’s mortgate payment and keep Junior in the ballet program at the Granite.

#145 Jane on 11.09.09 at 5:03 pm

It’s amazing how many people deny that a 26 year old can legitimately – or should be making 100K.

Unfortunately for all those who don’t, this although rare, does happen. 26-year old hubby alone cleared 150K last year. Yes. Last year. When he was 25. He doesn’t work illegally. He doesn’t work in pharmaceuticals, financials, or anything. Just a bright computer engineer in a company that cannot afford to lose him.

Software Engineers continue to be in demand. For those who don’t have a job – it’s because they lack the appropriate skill set. We have many applications for job postings in our department, and a handful of interviews. It took us 2 years to find ONE qualified guy.

The money is there. The skills are what’s missing.