End of days


Home: 1,000 square foot bung in Toronto
Listing price: $380,000
Showings (1 week): 170
Offers: 35
Selling price: $550,000

After I spoke in Halifax this week, making it clear what I think of recent homebuyers in Toronto’s Koreatown and North Van, a guy stood, with a damn good question.

If family income in Halifax is about the same as those places, he asked, then why can we buy a fine house here for $300,000 and they think they need a million? The crowd hub-bubbed and guffawed, and waited for something profound from the speaker.

I looked at the toes of my boots, trying to find a nice way to put it. But, how? There’s no delicate way of saying that millions of people have lost it, or that real estate’s turned from a shelter and stable investment into a public ponzi scheme. Buyers in the GTA, the Lower Mainland and hideous pockets of Alberta have deluded themselves into believing that housing can be any price it wants to be, because it’ll only be higher next month.

This is why mortgage debt’s exploding while disposable incomes are falling. It’s akin to the addict losers in the lobby bar of my Winnipeg hotel last week, sucking drinks while they stuff money into the VLTs. Well, maybe that’s too harsh. Those guys were actually having fun and getting wasted. Current bidding-war homebuyers, on the other hand, are turning into stressed-out, over-extended victims of their own biting fear and rapacious greed. Who needs booze when you’re already delusional?

I’ve said on this blog time and again this will not end well. I’ve told you why. The recession’s not over. Mortgages will jump. The asset bubble will pop. Taxes will increase. Boomers will dump. Debt will overwhelm.

It’s now apparent we’ll not get to the summer of 2010 without rates pulling a Cialis. It’s also quite likely today’s extraordinary real estate numbers represent the top of the curve. And as deficit-dripping governments take away the punch bowl, this party’s going to fizzle.

And that’s why we need more Nova Scotia.


Had so much fun watching you blog dogs gnaw, chew, rip, lick, bite, bark and slobber your way through that letter from spoiled brats a few days ago, that I thought I’d hand the bone over to you once again. Actually, the advice flowing from this site is staggering. And some of it’s even good.

So, what do you have to say to Jasmina and Kirk?

Hi Garth: Thanks so much for some truth in a world of hype. Anyway, my mom, who is almost 70, just paid off for her home. She cried with joy. She bought at about $170,000 and the neighbour just sold a similar home for 485,000. Homes on the street sold this year from $450,000 to 540,000. Today the U.S. dollar declined to 70 something, our dollar went to 94 something, gold went to 1114 something. I am aware of the economic disaster about to hit the U.S., and in turn us.  I am afraid my mother’s joy will turn to despair when the real estate bubble we are in collapses…and I cannot sleep.

What advice can you give her to do with all this money sitting in her home? Naturally, she is very risk adverse, but I just bought some silver, so I am not, and she will listen to my advice. — Jasmina

* * *

Hi Garth,

Well I have been following you blog for a while now and must say I find the information pretty relevant to the current economic situation we are faced with.  Anyways with that said entering the real estate market is something I would like to do.  My situation is modest to say the least.  I am 30 years old in a good career job that pays close to 80,000 before taxes.  I live in Durham Region and would like to remain here close to work.  I have just over 30,000 in savings and just over 20,000 in equities.  I do not have any major debt and still live at home.  My mortgage budget I figure would be around 190,000.  I am sure I already know your answer.  I personally feel there needs to be a correction in housing prices that’s why I plan on low balling everything that is of interest to me, can this strategy work right now?  Have you seen it happen  lately?  If so any good tips for low balling in real estate?  Thanks for your time, Kirk.


#1 Iain on 10.07.09 at 9:46 pm

Check this out, very interesting: http://fora.tv/2009/09/01/Financial_Fiasco_The_US_Infatuation_with_Home_Ownership#fullprogram

#2 atrax on 10.07.09 at 9:58 pm

The only thing we can be sure the G-7 will do is keep spending money until there is a recovery.

The US, China, Japan, and UK are all in on that act. However, major cracks have appeared in the dam. Switzerland has intervened in the Forex markets with Japan and the ECB waiting in the wings. Canada is clearly unhappy about both the US dollar and the Renminbi.

Indeed no one seems happy about anything, yet the G-7 managed to put together this meritorious and flowery conclusion:

“We will continue to promote the fundamental norms of propriety, integrity and transparency, as agreed in the Lecce Framework and the Core Values of the Charter for Sustainable Economic Activity.”

For anyone late on the boat, should he consider this?

#3 Ian McDonald on 10.07.09 at 10:00 pm

550k, pocket change for some. You might just sqeek by at that price in Vancouver. [ lot value here ]

#4 Arthur Kurwa on 10.07.09 at 10:08 pm

Jasmina, your mom is risk adverse. And she won’t listen. Amazing how old people will argue over a penny at the till, but let the big numbers slide. And I bet you’re suffering from insomnia, because you know at 70 she will not be around forever and that this is your inheritance! And you’re going to get a shack you don’t even want, for half the price it is now. Why don’t you just leave the old lady alone, and let her enjoy her home!

Kirk, low-balling it in this market? Are you high? Prices are still steady or going up in most markets. What are you planning to say?

Kirk: I will give you $100 000 below listing.
Home owner: Are you high?
Kirk: That’s my final offer!
Home owner: Get off my lawn. Take your vacuum cleaners and attachments with you.

#5 Dan in Victoria on 10.07.09 at 10:13 pm

Jasmina,Im going to defer to my wife on this one she says let your mom live in the house and enjoy it.She probably worked hard to pay it off.Can she afford it,and does she need to sell?Myself,I remember how hard my grandparents worked so they could retire in comfort in their own home,and I remember how we did everything we could to make sure they could stay in their home.They were both well into their eighties when they passed on but the “house “was so important to them.Only you and your mom know what is best.The answer you want is in your question.Good Luck.

#6 Jim on 10.07.09 at 10:19 pm

Low balling works best if you’re the only buyer.

#7 Morla on 10.07.09 at 10:21 pm

Wow wait Canada is doing this now too? Did the U.S. finally find the “greater fool” we’ve been looking for this last year?

#8 Jim on 10.07.09 at 10:22 pm

I like how speakers repeatedly give commentary on the U.S. real estate cash…

Hello? 2007 called, they want their news back.

#9 Noriko on 10.07.09 at 10:25 pm


I personally don’t think the low ball strategy will work in this market, because there will be always someone else who offers higher, even if your offer is low. If you like the house, someone else will do for sure, so you will be involved in a bidding war, whether or not this is what you want. The low ball strategy would work in a downturn period when there is no other offer, maybe in a few years, but not now.

#10 Another Opinion on 10.07.09 at 10:27 pm

Sorry one last word on gold and silver.
To the believers of paper curriences I hope you are right cause if you are wrong, best deal you lose the value of your purchasing power, worst deal you end up with nothing but a fancy looking of paper.
I guess I believe in Gold and Silver as a store of value (which to me seems like the definition of money) because of;
– historical reasons (it’s been acting as money for a lot longer then any paper currency today has
– I don’t like the idea that a gov’t or central bank can just create more $ with the hit of the button (stealing your store of value)
-blah blah I guess right.
Well do your self a favour Canadians and at least have a bit of gold and silver in your posession in case history does come back with a vengance and as the qoute goes;
Voltaire (1694-1778) “Paper money eventually returns to its intrinsic value —- zero.”
But it’ll be different this time right!

Garth you are right that gold is not what we use as a mechanism for trade today, but does that mean a fiat currency system is better?
The US Dollar has declined by 50% since the 80’s (95% SINCE 1913) Gold is setting new records today as more people begin to lose faith in a mechanism for trade that can and does get manipulated for the advantage of those in power (Central Banks and Governments).

If I can I’d like to challenge your idea of investing in financials. I believe you are right in your assesment of Canada’s Real Estate bubble and the seriousness of it’s crash. Two things though
1) That money is still in the system and it’s gotta go somewhere (short term I can see how $ strengthen, but with a monetary system that can create more paper $ to stimulate – paper $ can only continue losing purchasing power as they have done since thier founding)
2) Canadian Banks are going to find themselves in the same circumstances as US Banks or at least as bad (maybe with a decade worth of lawsuits they can recoup thier losses at the cost of the Canadian Economy). Will a big Canadian Bank fail? Who knows, but you are a greater fool if you think there is a zero chance of it not happening.

All things cycle, Gold and Silver has been used as money in our history. Can you say with great certainty that they will not be used as money again or atleast as some form of limiting paper $ creation in the future.

I have sought the answer to that question over the last year now and although nobody knows for sure I have to believe that if we do not go back to using either gold and silver as money or at least as an assest to limit the creation of paper $ then these issues with debt, bubbles and inflation will only get worse. And history teaches us those issues lead to the collapse of countries, wars and hardship.

I’m putting the $ that I work for today into an asset that will always be part of any type of civilized trade we can have going further into the future. Can you say for sure that the US Dollar or for that matter the CND dollar will be around in 2,5,10, 20,40 years?

Worst case you treat as a type of currency insurance which will always have a value.

Thanks for your work on this website Garth.

#11 Samantha on 10.07.09 at 10:39 pm

Hi Jasmina –

“What advice can you give her to do with all this money sitting in her home?”

The money is indeed sitting in her home, but not for much longer. When mortgage rates rise and buyers leave the pool, among other factors, property values will sink. Selling will become a more lengthy and difficult process.

As Garth said “It’s now apparent we’ll not get to the summer of 2010 without rates pulling a Cialis. It’s also quite likely today’s extraordinary real estate numbers represent the top of the curve.”

If your Mom sells now, she will benefit from the increased value of her home which is further supported by comparable property values in her neighborhood (as in the neighbour who just sold a similar home for 485,000), and buyers frantic to buy before rates increase.

At 70, your Mom is entering a stage of life where home maintenance can become difficult, and in some cases costly.

If she waits until her age or health precludes staying in her home, then she may miss the opportunity of her lifetime to realize a serious gain on her property.

Please respect her risk aversion, Jasmina, when you advise her. Your Mom is at an age where there is no time to recover or recoup losses from an unwise investment.

A certified financial planner could help her plan what to do with the proceeds of her home.

Proper planning means that she can live out her days in comfort in a lovely seniors rental apartment where someone else can take of the chores while she enjoys this next phase of her life.

Congratulations to your Mom, Jasmina, and I wish her much happiness in the years to come.

#12 Jiminy Cricket on 10.07.09 at 11:00 pm

What is up with all these late twenty/early thirty somethings with good, high paying jobs, living at home? As a fellow thirty something myself, I cannot imagine burdening my parents with my presence, nor can I not imagine a giant parental boot up my behind were I to stay at home past the age of 18 without a compelling financial reason. Are there any parents in this e-community who can explain this to me, because I sure as hell don’t get it.

#13 Samantha on 10.07.09 at 11:09 pm

Hi Kirk,

“I personally feel there needs to be a correction in housing prices that’s why I plan on low balling everything that is of interest to me, can this strategy work right now?  Have you seen it happen  lately?  If so any good tips for low balling in real estate?”

You could just continue to save and wait for the correction to progress, and the shift to a buyer’s market.

From my experience, low balling only works if you are negotiating with a desperate seller. For example, sellers with financial problems or who are divorcing.

At the starter home level, you could find a couple who must sell quickly because they need more space due to the birth of a child. Or, you might find a single person with a starter home who must sell due to a pending marriage.

If I want to low ball a house (which I did with my current home), then I note the cost of necessary upgrades in the interior and life span of roof , furnace, appliances, age of plumbing, wiring while I am touring the house. The same applies to any exterior issues (yard, garage, driveway, sidewalk).

I then tally it all up and base my offer on that number against the asking price. My philosophy is: if I have to clean it, replace it or repair it, then you (the seller) will pay for it by reducing your price. If the seller doesn’t like it, too bad, if they want top dollar, then do the work before listing it.

In my case, I found a single man who wanted to move for work. The house had sat on the market for about a year or so because he did not do the necessary work on his house to ready it for sale.

It pays to check listings and watch for any taken with seasonal clues as in the house for sale in the winter but the photo appears to have been taken the year before in the spring/summer.

The interior shots can also give you clues if the house is worth low balling. Empty house (moved and need to sell quickly). Partial furnishing (divorce).

If you watch the listings in your preferred area over time, you can track price drops and the length of time a property has been on the market.

Hope this helps and good luck.

#14 Too Old Bob$ on 10.07.09 at 11:10 pm

“I am afraid my mother’s joy will turn to despair when the real estate bubble we are in collapses…and I cannot sleep.”

This is a tough call. She bought at 170K so even after a price drop, she should be ahead. Sounds like you may want to capitalize while the price is high, then use the funds to provide for her. The information is thin. It is hard to help someone when you don’t have all the details. How’s your health, what’s your income/savings. Are you attached to the house/neighbourhood. I feel for her though, 70 and determined to pay up to the last bill. Good for her. Our elders should be respected and assisted if and when needed, not rejected or discarded.
Of course some of them have prospered during these economic times legally and illegally. Lets just pick on the crooked ones, they get what they deserve.

Kudos to you Jasmina.

#15 Nostradamus jr. on 10.07.09 at 11:13 pm


…She should update her will so all the t’s are crossed, all the i’s dotted and that my name is spelt N-o-s-t-r-a-d-a-m-u-s j-r.


…Marry someone rich.

#16 nonplused on 10.07.09 at 11:36 pm

To Jasmina I would say:

A paid off house is a good thing to have at 70. She has little risk if she views it as a residence and not a liquid asset. So what’s the big deal? She’s too old to be speculating on real estate either long or short, but she needs a place to live. So unless there are some pressing health issues that might mean moving to a home earlier than one would expect, she should enjoy the rent free living for the next 15 years or more.

To Kirk I would say:

What’s the rush? If you want your own place rent an apartment so you don’t have to deal with lawn and house maintenance when you should be out wheelin’ babes and playing sports or whatever it is you like to do. Lots of time to be domestic later. And don’t buy a condo because you’ll have to flip it later when Ms. Right decides it’s time to nest.

As a side note:

I don’t understand why so many young singles are getting into the single detached or even condo markets. I do understand that lots of people are putting off marriage and children until fertility drugs and chromosome tests are all but inevitable, but all this house owning just means more buying and selling with the resulting fees and taxes. Whatever you buy now almost certainly won’t be what you need later.

#17 Dan in Victoria on 10.07.09 at 11:40 pm

The story
A son asked his father”Dad willyou take part in a marathon with me?”
The father who despite having a heart condition said “Yes”So they went on to complete the marathon together.
Father and son went on to join other marathons,the father always saying yes to his sons request of doing it “Together”
One day,the son asked his father to do the” Iron Man “together to which his father said yes.
For those who don’t know ,the “Iron Man” is the toughest triathlon ever.
The race encompasses three endurance events of 2.4 mile ocean swim,112 mile bike ride,and a 26 mile marathon.
The father and son went on to complete the race together.
I guess this is why I get frustrated with some posters who only think of money and especially themselves.

#18 sabb on 10.07.09 at 11:50 pm

“my mom, who is almost 70, just paid off for her home. She cried with joy. She bought at about $170,000 and the neighbour just sold a similar home for 485,000.”

No offense, but what should she care if housing goes up or down, her house is paid off, and it has appreciated well above its original value, so even if housing dropped by 50% she is still ahead by almost 60K. Give your head a shake and worry about something meaningful like what your going to get her for the holidays or planning a nice outing with her. Gold, dollar value, etc, what does that have to do with the price of tea in china? Nothing when it comes to her house, go outside and breath some air, I think you seriously are in need of some.

Kirk… 30 and still living at home. If you can still stand living at home, live at home, if not go rent a place for the next 12 months and revisit your plans to buy, by that time things will be a lot clearer. Don’t jump in front of the bus.

#19 Chris L. on 10.08.09 at 12:54 am

Kirk, here is my advice. Lowballing can work at anytime, but works best when the waters aren’t froth with other eager sharks (or is it beavers). Anyway back to the human species and baseball errr I mean lowballing. Have your trusty agent pull all listings that exceed 90 days, the stale old dusty ones and then select the ones that best suite your needs. Make conditional offers on anything of interest (inspection, approval of partner, whatever). Now also important is that you choose your agent properly and I speak from experience. I’ve had agents flat our refuse to work with me (for me) on the grounds that they would embarrass themselves with my offers. I promptly ditched them, made a 20k off offer and ended up scoring the next house at a 15k discount. His loss I suppose, but not all agents like to do all this leg work for no potential gain so plan to do your own research and work. Keep at this strategy until you find something that suites you, don’t bend up to the market. Eventually you’ll find a good deal, but of course when the waters are a bit calmer, you’ll have more opportunity. Good luck and most importantly, have fun.

#20 nonplused on 10.08.09 at 12:55 am

#1 Iain

Watched a substantial part of that link. Here is the deal, in Canada, CMHC is actively attempting to be all of the major US players rolled into one, and I don’t know if the government is collaborating with them or they are acting independently, but they are clearly acting on the assumption that they can prevent a price decline by approving new loans, and thus avoid a crises. If they are wrong, it goes down faster here.

If (and if always means “when”) CMHC fails, everything now from home prices to the Canadian dollar to employment now goes with them. They are too big to fail. But too big to fail does not mean they can’t, it only means that when they do, they will take the rest of us down too.

It’s too bad CMHC doesn’t trade. I’d like to short them.

#21 M I K E on 10.08.09 at 12:59 am

I’d have to agree with you Garth.
I believe This Is The Beginning Of The End.

My neighbors who were on the brink of losing their home due to their financial situation just listed their 1991 – 1455 sq ft home in Ajax with original roof, windows, carpet etc… etc….sold the home in 2 days for 290k…one thousand more than their asking price…and no there was not multiple offers…that was the very first offer…

Am I missing something here?

I think the END of the bubble is very very VERY near

#22 Future Expatriate on 10.08.09 at 1:04 am

I don’t know which is worse… real estate boards and agents thinking they can keep a bubble afloat by lying about EVERYTHING, or stockbrokers and other paper pushers thinking they can keep a panic from happening by pooh-poohing the rest of the world (including US allies like Saudi Arabia and Japan) uniting against the US to end the hegemony of the US Dollar by agreeing to purchase oil with ANY currency AND/OR commodity OTHER than the US Dollar, including gold.

Both are just as endlessly irritating and as hopelessly futile. One can only hope and pray every last one of the jerks follows their own advice to the letter and reaps that which they richly have sown.

#23 rp on 10.08.09 at 1:10 am

Jasmina: Sell, Sell, Sell! It’s hard to say since I’m sure this is a source of duly earned pride, but tell your mom to take the money and run. She is getting old and won’t want to deal with the hassle of maintenance or moving when she’s 80. She could get a nice apartment now if she’s living on her own, or you could plan to have family stay with her if she wants to pass the house down. Either way it’s better to prepare and plan 10 years in advance. It just gets too hard to do things when you’re old, and the change happens fast. Sitting on a big pile of cash is not a bad idea! Plus she could travel and do all kinds of things now!

#24 Bogdan on 10.08.09 at 1:10 am

I can make fun of the “crying with joy” part that happened to your mother when she turned 70s (unfortunately this will happened to more and more people from now on), but I’m not going to do it from respect to your mother. Having said that, I think there are two problems for you to fix before thinking on what the RE is going to do.

“I am afraid my mother’s joy will turn to despair when the real estate bubble we are in collapses…and I cannot sleep.” – are you sure you can’t sleep because of her despair and not yours? Are you sure it’s not you the one that’s going to cry without joy after the inheritance may decrease in value? After all I don’t imagine your mother browsing all day long on mls.ca and checking on how much her home’s worth.

“I just bought some silver… and she will listen to my advice” – good you bought silver, probably because Cobs were out of bread. Don’t try to be smart with her shelter, wait 10-20 more years and you can enjoy a fully paid paid house, instead of trying to get rich by buying and keeping one of the most useless commodities.

With you I’ll be short, not that you asked for my advice though.
The following two parts don’t work together:
“I have been following you blog for a while now and must say I find the information pretty relevant to the current economic situation” and “entering the real estate market is something I would like to do” – well, obviously you didn’t pay attention to what the Freaking Blog says or you are masochistic with your financials.
You are right, your situation is modest, but far from worse. Why do you want to spoil it? Do you want to cry like Jasmine’s mother in 40 years from now?
Keep making money (maybe rent something), you’re on the right track. The longer you’ll wait, the sadist you’ll be ;-)

#25 Nostradamus Le Mad Vlad on 10.08.09 at 1:13 am

“End of days . . . this will not end well.” — an excellent lead-in to the science side of life, because we’re screwed fiscally, whether we like it or not.

Concerning cycles, this is a good summary and is where Garth’s line — “. . . we’ll not get to the summer of 2010 . . .” — arrives on cue.

The US will enjoy its 234th birthday on July 4, 2010 (summer 2010), and as all cycles have a start, middle and end, the present “Cycle of Empires” could be in its twilight in the not-too-distant future.

Trouble is, there is so much ill-will from impoverished folk, especially in western civilization, mostly toward govts. / big biz that most can’t, or won’t even see what is taking shape; an “Age Of Disharmony” is a moniker worth remembering. The following is a list of empires which have come and gone:

Assyria (859-612 B.C.) — a 247 year reign; Persia (538-330 B.C.) — 208 years; Greece (331-100 B.C.) — 231 years; The Roman Republic (260-27 B.C.) — 233 years; The Roman Empire (27 B.C.-180 A.D.): 207 years; The Arab Empire (634-880 A.D.): 246 years; The Mameluke Empire (1250-1517 A.D.) — 267 years; The Ottoman Empire (1320-1570 A.D.) — 250 years; Spain (1500-1750 A.D.) — 250 years; Romanov Russia (1682-1916 A.D.) — 234 years; Great Britain (1700-1950 A.D.): a 250-years, etc., etc. As said before, the US will be 234 next July 4.

Without the majority even realizing this is happening, the planet is also playing a significant role.

Within the last 14 days, several ‘quakes have occurred; two this past weekend (6.3 off the coast of Taiwan, 6.6 in the south Philippines, combined with the cyclone in the north), along with smaller ones along the Ring of Fire.

Two more in the Pacific yesterday, 6.7 (Celebes Sea) and 7.8 (Vanuatu). Payback is a bitch, ‘coz L’earth is alive and well!

A new kind of junk food (for those who sometimes enjoy it) is here — http://smallsizeurl.com/burgers/ , but for those who are too squeamish, glance quickly to avoid a trip to the local vomitorium.

Re: Climate Change / Global Cooling and Warming — http://smallsizeurl.com/ice/ — Forecast for Kelowna early Sat. morning is -8C, rising to 6C. The Winter(s) Of Our Discontent are at hand!

#26 Munch on 10.08.09 at 1:16 am

So WHO won the PRIZES???


#27 Potato on 10.08.09 at 1:44 am

The short answer first: Kirk, every downturn begins with a single motivated seller. However, you’ll probably find yourself lowballing a ton of properties, and most of the time the owners won’t even bother to respond to a vulture — lately many of them probably are going over asking in bidding wars. It can be a real PITA to continually put in lowballs, so it’s probably a lot easier to just wait until there’s at least the smell of blood in the streets.

Jasmina: you’ve given us virtually nothing to go on. Does your mom have a pension coming, any other investments or income? If not, then she probably does need to sell her home so she can have some financial assets providing an income stream for her to retire on. Using the basic 4% rule of thumb, netting $450k on the house (assuming a sale price of $500k, less fees) would mean she’d have an income stream of at least $18k/year just from selling it. Tight to be sure, but grad students live on less, and don’t have GIS/OAS/CPP supplements or discounts at Shoppers. Plus that rule of thumb is quite conservative — drawing that nest-egg down rather than just living on dividends and interest would let her spend more per year.

If she does have other financial assets and/or a pension, then it becomes a question of risk tolerance and emotions: if she might need the additional money in her house, then it makes a lot of sense to sell now at the top of the market. If she wouldn’t, well, the optimal thing financially might still be to sell now, but as long as her retirement is assured by other means, then maybe the best thing for her would be to stay in the house where she’s comfortable and has decades of fond memories, etc. Even after the market crashes she can look back and say it was only a paper gain anyway.

#28 Lance on 10.08.09 at 1:47 am

One of my employees asked for a reference letter for the bank today so that he can go out and get a mortgage.

He makes $35k a year, wife makes $25k and the bank is willing to hand them a $350k, 2.5% VRM.

This is all going to end so, so badly. Even a slight uptick in interest rates and he’s toast.

#29 Daystar on 10.08.09 at 3:08 am

I’m beginning to think bankers read your blog Garth, even the ones found talking to MSN! (either that, or they still want their jobs a year plus from now or both) I do like that candid banker diatribe mix of denial and warning mixed together as evidenced in this link:


Hi, Jasima:
Tell your mom to dump the house at the peak. Buy low, sell hi. The time is now. Tell her it will make her a very happy woman to know that she won’t have to worry about money for the rest of her life if she does. If she doesn’t and watches her home sweat a couple hundred G’s over 3 years, she will have regrets over inaction… so act! Follow the gut. We only live once.


Ola, Kirk:

Your low ball strategy won’t work now, but you will learn more about real estate if you do… so I won’t try to hard to talk you out of it. Low ball strategy generally works when there is no demand for real estate, i.e., a dead market where homes take on average longer than 6 months to sell. If you see low turnover in markets, lowballing has a good chance of success, but remind yourself that the RE market is correcting when this happens, so… where is the bottom? Oh… just a guess, 3 years away. So chill and save, dude. Stay on the sidelines, observe and learn as time is on your side.

#30 tf on 10.08.09 at 4:37 am

Unless you pick a winner from the dog blog game, and award the two books, I’m not playing.

The winner was selected. What, you need to know who it was? — Garth

#31 TomOfMilton on 10.08.09 at 4:45 am

Advice for Jasmina? Be sure you are only thinking of your mum. I know that my parents are quite content to leave things “as they are”.
Sure there are big economic benefits to her selling her home and renting…heck…even buying something in Florida if she is still up to flying. The point is…you can let her know what you know…but be careful about too much consideration about money. It’s not suppose to be the main thing in our lives…and when we get that age…w usually figure it out. Her happiness might be found in selling the house and renting and enjoying grandkids, but what if the house is the focal point for seeing family? Who will visit with Gramma in a small apartment in a bu lding somewhere?

#32 Onemorething on 10.08.09 at 5:20 am

Jasmina, interesting call. I have 80 year parents living in the same house in Burlington paid off in 1957 for $13K, yes back when the option for a garage was $800 CAD.

The house is a traditional ranch but on the biggest lot in five blocks 40 full growth mixed trees maples elms perfect for that two story McMansion. Asking would be 350K+ could sell for $400K likely but they loose the family home, their independence.

There are so many maintenance free townhomes, and retirement communities that rent. It would be a sweet deal for them no doubt but again they are sharp as a tack, and to insult them at this time of their life is not a good thing.

The only thing I can do is give them the raw facts and if a desperate push was needed, play the grandchild’s education card. Tough Call as they were massive savers, poor immigrants with nothing, living in Hamilton and supporting the family under the shadow of the GREAT DEPRESSION. Those who landed in Burlington (over the bridge) had made it!

I worked hard starting part time when I was 10 years old, put myself through school and have never been a draw on them either!

My call, leave them alone! They have fought long and hard to get where they are! In the twilight, they should just not have to even consider things, but again, my parents have a massive portfolio of safe investments and more money than 99.9% of this demographic.

Captain Kirk – set your phazer on neutral pal. Stay in the rental market and watch it unfold in front of you bro!
Dont be a Dick, remain a Kirk!

#33 David Bakody on 10.08.09 at 6:25 am

For the this 30 year old and all others ….. do your homework and get on with life …. why sweat it, if you now have assets you have do something right …. your life is ahead of you.

Jasmina ….. l will try to kind ….. “Stop being a Jerk” your Mum worked hard and is now full of joy ….. did you take her out and spring for the bill to celebrate her long time accomplishment. I suspect “NO” she will do just fine …. my mother stayed in home until she was 99! many times I asked how are you doing Mum knowing the costs of owning a home in all respects, she said I am doing just fine David …. and she was …. older people spent money much more wisely and they save for a rainy day …. what you must do now …. Is live your life do not be any type of burden on her and take time to visit call and remember all those special days …. and forget about her money!~ Oh and it would be nice to help out around her place cutting grass, a little painting and Spring cleaning …. and an few other chores.

#34 Eggy on 10.08.09 at 6:48 am

There is some degree of truth in what you’ve said about Halifax and Nova Scotia in general. But, overall it is a false comparison. Halifax’s population is about 360K, Toronto’s is about 2.5 to 5 million (depending on where you draw the line) and Vancouver is about 2 million.

This is comparing apples and oranges. A fairer comparison would be between Halifax and somewhere like St. Catharines, Ontario which is about 400K people. And yes, you can still get a fine house in St. Catharines for $300K.

Not a fair contrast at all. St. Ctaharines is caught in the rust belt syndrome, is not a capital city or a major ocean port with a 300-year history. Get out more. — Garth

#35 tf on 10.08.09 at 7:43 am

Unless you pick a winner from the dog blog game, and award the two books, I’m not playing.

The winner was selected. What, you need to know who it was? — Garth

I was curious but since it obviously wasn’t me I’m less interested. – TF

#36 The Vulture on 10.08.09 at 7:56 am



An email from my real estate agent today…Says everything and yet nothing…The more things change the more they stay the same…

“The market has definitely picked up considerably and things are booming, you had better move really fast or you will be boxed out. As soon as a home is listed it is snapped up within a few hours. I am outside a home re-sale right now as I type this on my Blackberry and there are 7 offers, multiples up the wazoo. You had better have your cash on the barrel head or you will get smoked. Pull the trigger or blow your load. It is your call.” HST coming sooner than later and any decent RE is going to get really expensive. Get your properties before the s–t hits the fan next July. Text me, lets roll the dice. I love my job” (“Steve”)

Sent from my BlackBerry device on the Rogers Wireless Network

He is right, it is my call… WORK TO LIVE OR LIVE TO WORK

#37 dave99 on 10.08.09 at 7:56 am


Get a reverse mortgage. It will allow your mom to continue living in her home as long as she likes, and allows you/her to cash out 100% of the equity now. You didn’t mention how much else she has in income, and I’m going to presume that like most seniors she is low income. Therefore with various deductions, she’ll be paying relatively little tax on the reverse mortgage income. Take the excess and put it in bank preferreds.

Kirk, any tips for lowballing you ask? Garth wrote about this a while back. But in the current market you’ll not have much luck. Wait it out.

#38 Toronto C9 Renter on 10.08.09 at 8:02 am

Jasmina — Your mother doesn’t need your advice. SHE bought the house and paid it off. Doubt she’s obsessed with short term fluctuations. You, on the other hand, not so sure. Hoping for a handout from Ma, are we??

Kirk — Face the reality of Realty. You can’t afford a house yet. Lowballing today will just waste your time (P.S. and any agent that is willing to do that today is incompetent so dump them.)

Garth — agree, most Nova Scotians haven’t yet become greedy and superficial like the rest of us. (Although this summer I did notice a new snooty wine bar, plus spotted an MB SL550 which surprised me. I guess all good things end eventually)

#39 Kris on 10.08.09 at 8:03 am

#12 Jiminy – I see nobody’s responded to your question…maybe the parents of these spoiled brats are too embarrassed or maybe they are afraid they will hurt their precious kid’s feelings if they respectfully request them to get a life.

I believe that allowing your adult kids to live at home is the worst life lesson you could possibly teach them. Listen up boomer daddies – time to grow some huevos and kick those little buggers out so they can start learning some real life lessons.

#40 Kash is King on 10.08.09 at 8:16 am

Here’s a nugget.

Looks like our major banks truly are sound. They have been Basel II compliant since Nov 1 2007.

My question is: how come they aren’t shouting this wonderful fact from the rooftops?


#41 Jim on 10.08.09 at 8:42 am

All you guys predicting that rates will rise and mortgage holders will get killed need to look at government bond yields. Get a clue. The yields are low regardless of how badly you don’t want them to be.

VRMs? The chartered backs set the prime rate to follow the BoC’s overnight rate and Mark Carney isn’t raising that any time soon.

Go outside, get some sunshine. The real estate bust isn’t coming anytime soon.

#42 robert on 10.08.09 at 8:51 am

I am curious. Presuming one does not have cash in hand how does one go about financing a purchase price that is 45% higher than ask? The house must have been appraised or gone through some sort of official assessment to arrive at the ask. What bank/mortgage purveyor in their right mind bases the loan on mania driven bids? Not mine I hope.

#43 Riveted on 10.08.09 at 8:57 am

So how will Halifax home prices react to rising interest rates? I’ve been watching and waiting for the day that the market corrects so that I may have a chance at sane, affordable home ownership. People I know in this city are still going 0/35 on war-time bungalows over the $300K mark – most need another $50K to get rid of the smell of cigarette smoke and two generations of boiled dinner. A bargain at twice the price in Van, but still undesirable to anyone who works hard for their money – I rent bigger than that in the same neighbourhood for $1200 a month all in.

But are you telling me this is it? That this market is correctly valued? I’m heart broken and disappointed I’ve spent all this time sharpening my vulture talons, not to mention all the pints I’ve bet people that prices will decline.

#44 Ottawa Mike on 10.08.09 at 8:59 am

The POS deal is still in the works. I’m now dealing directly with the trust company. Luckily they are a little one office mortgage company and are willing to deal directly with my unsolicited proposal. Unlike the big banks where they sit on the property for months and insist you go to the assigned agent.

Sad part is “Percocet Greg” could have walked away free and clear if he had just let me redeem the place before the bailiff arrived.

Here’s my post:

Re: Yesterdays discussion on the demise of the US $.
Perhaps the biggest reason behind the worlds hostility towards the greenback is the overt manipulation that results in the relative pricing of commodities. Oil would be the prime example but other staples rise and fall with the manipulation of the US currency and many nations want off that roller coaster.

In other news Alcoa posted surprising earnings results yesterday and analysts mention in this article that increased demand for tin foil hats from Garth’s blog dogs is part of the reason ;>)


#45 robert on 10.08.09 at 9:20 am

#43 Riveted

Your description of the additional renovations required gave me a good laugh.

“I rent bigger than that in the same neighbourhood for $1200 a month all in” = sign of above average intelligence. It will serve you well going forward.

#46 Riveted on 10.08.09 at 9:44 am

#45 Robert

If you’re from here, you’ll know it as a distinctly Nova Scotian house hunting experience. 5 different floral patterns on the walls, stained carpet, musty furniture, and the distinct smell of corned beef and cabbage with Player’s Navy Cut undertones. And all of it can be yours to gut and rebuild for a scant $289K plus $50K on your HELOC.

#47 Devil's Advocate on 10.08.09 at 9:48 am

Your Mom, like others of her generation, likely views her house more as a home than an investment. Leave her be in her joy not to be indebted anymore, which is another goal of that generation. She is 70 and has, hopefully, another 20 years or so during which she can enjoy that liberty. I assume she is retired and has the means to live a comfortable, if modest, lifestyle. I am assuming you are not so concerned about preserving your inheritance as your Mom’s joy?

Low-balling is not a particularly successful tactic right now as it will be in days to come. Don’t expect values to drop like most on here hope for but for some areas where unrealistic bidding wars are happening. As Garth points out, we must most certainly be at the top of the housing price curve with no higher likely to go. So bide your time, watch the market closely for that perfect opportunity on a house that would make a great “Home” and then offer what you think it’s worth. If you get it great, if not – houses are like everything else – there’s another just down the street.

#48 Jim on 10.08.09 at 9:49 am

Housing Market on the Rebound

Instead of repeating yourself incessantly, why don’t you gather other evidence-names of economists etc. that support your point of view?


They can collect my name. — Garth

#49 X on 10.08.09 at 9:51 am

Welcome to Detroit:


#50 robert on 10.08.09 at 9:59 am

#46 Riveted

I’m not but please stop before I bust a gut. By the way my love affair with the Maritimes stretches way back to regular family vacations in the 60s. My folks had friends in Moncton and every summer it was Shediac (ah the fried clams at Gould’s were the best), Parlee Beach and Cavendish Beach after taking the smoke belching Abegweit over to the Island. Saw a lot more of your neck of the woods as a dissipated youth (Split Crow, City?Hotel) and more recently (and responsibly) with my own young family.


#51 Onemorething on 10.08.09 at 10:00 am

#36 VULCH, great news! The end is near! IB’s and REA’s will be deviants in our society!

Watch them all try and become farmers!

#52 smw on 10.08.09 at 10:15 am





ECB’s Inflation Gauge Returns to 2005 Rate Rise Level, UBS Says

Europe is even tire-kicking rate rises.



A rise in rates is a rise in economic confidence, so those talking out of both sides of their mouth, “hoping” for rates staying low for a decade a la Japan, yet expecting home prices to continue to rise really don’t know WTF they are talking about.

You can’t have high home prices and “no” or “stagnant” growth.

Credit is about to contract, again, get your half million in debt while your still able. Homes are going one for the price of two as per above, hurry!

PS Whoever mention “Breakfast with David A. Rosenberg”, thank you, priceless tidbits of info.

#53 Shawn on 10.08.09 at 10:15 am

If the 70 year old with the paid off house was in Alberta she could:

Take a 79.9% mortage 5 year (no CMHC) invest that in dividend stocks that cover the mortage.

If it ever came to it that the house was worth less than that at her death just give it back to the bank. I don’t see it as reneging on the mortage since that is legally your right to do so in Albeta (when CMHC type insurance not involved).

A more serious answer: Why should she give a crap about house price fluctuations. Let her live in the house and never ever mention this “risk” of value fluctuation to her. No one deserves an inheritance and to suggest Mom sell the family home just to protect an inheritance is rather despicable.

Houses are not stocks to buy and sell on a whim. As I have said before the transaction costs alone are huge. Imagine the stress of moving at age 70. Forget about it!

#54 Bogdan on 10.08.09 at 10:20 am

#17 Dan in Victoria – Thank you for posting the story, I didn’t know about it.

#35 tf
Unless you pick a winner from the dog blog game, and award the two books, I’m not playing. – You didn’t get it, it’s just a scam… elections are coming up, people are encouraged to submit their real email addresses :-)

The winner was selected. What, you need to know who it was? — Garth – Garth, I think you got it wrong. Don’t be a tight ass, make the #number public, otherwise the child-biting dogs may not be so many and so fun. I know you’re not OLG, but the principle is the same: http://www.olg.ca/lotteries/faq.jsp#7

Must all winners have their names published?

The publishing of winners is important in demonstrating the integrity of our lottery games…This is necessary for us to demonstrate that people do win… For every prizewinner there are a number of other players who did not win but have a legitimate desire to know that someone won.


#55 Eggy on 10.08.09 at 10:22 am

Not a fair contrast at all. St. Ctaharines [sic] is caught in the rust belt syndrome, is not a capital city or a major ocean port with a 300-year history. Get out more. — Garth

But you believe that comparing Halifax to Toronto is fair? Crazy stuff. The differences you mention are relatively minor factors. There is an order of magnitude difference between the two provincial capitals. Try commuting and Halifax and then in Toronto. That will give you a direct measure of the value of central real-estate to individuals.

Now compare Toronto and Chicago, or Houston. — Garth

#56 Herb on 10.08.09 at 10:38 am

C’mon, people, get with the program:

Buy a house; you’ll single-handedly turn the economy around.

That’s the only partially tongue-in-cheek money line in the Ottawa Citizen‘s editorial “The Path to Prosperity.” Explore the details at http://www.ottawacitizen.com/opinion/Path+prosperity/2080139/story.html

In other parts of to-day’s issue you can puzzle over how there could be pent-up demand when there were ever-increasing monthly sales, or why September housing starts sudenly would fall 18.9%. With its ability to reconcile the irreconcilable increasing sales, pent up demand and falling starts, the Citizen should be in politics. Wait, it already is …

#57 Keith in Calgary on 10.08.09 at 10:42 am


Calculate the mortgage amount you are going to borrow based on for what you can afford in the parameters stated below…..might as well try to use your brain, even if you are going to do something really stupid while doing so…….

1- Assume the property you buy drops in price by 35% and you need to make the payments for 12-18 months while trying to unload it in a falling market and you are unemployed. In other words, be prepared to accept that what is happening all around you, may in fact happen to you, and that you may very well possibly lose your downpayment in full, as well as 12-18 months of savings to make the payments. How much can you borrow and afford to pay per month on this basis ?

2-Lift up your skirt, grab your balls, and move out of your parents house you fan boy. Go rent somewhere, you will still be warm and dry, yet you’ll still have all that money in the bank and no worries about losing something you worked so hard to gain.

Geezus…..when I was 22 years old I was sitting the cupola of my Leopard C1 tank in the Fulda Gap in West Germany…..anything I could see within 2 kilometers was dead if I made the call…..and you’re f-in 30 years old, make $80K a year, have $50K in the bank and you live at home and are unable to decide what to do after reading Garth’s blog ? What is our world and school system coming to when turds like this exist ?

#58 Judy from SW Ontario on 10.08.09 at 10:50 am

Thank you for wisdom provided by both Garth and the folks providing comments.
Many people commenting are younger considering first time home purchases.
My husband and I are early 50’s empty nesters wanting to sell country home and rent appartment in Toronto.
Home would sell in 300s ( if fortunate enough to sell it).
We do not have a mortgage and combined income of 90s. 2-4 more years to “help” daughter with education in Halifax.
We do not have a pension and few savings.
Want to securely invest proceeds from house sale.
Will landlords be affected by bubble burst and hit renters hard with increases?

Appreciate your guidance.

#59 Just a Girl on 10.08.09 at 11:22 am

I guess I have this to look forward to, my children losing sleep over my big fat equity balance!

Good grief. I’ll just make them a nice warm cup of milk and tell them to go to bed earlier :)

#60 Lucy on 10.08.09 at 11:37 am

To Dan in Victoria, #17

I very rarely click on links but your comment was exactly what I was thinking….now I have to pull myself together and go fix my face, then call and check on Mom. None of it matters except that I know I did my best to help her live her last years the way she wants.

Munch – missed your comments, glad your back.

#61 taylor192 on 10.08.09 at 11:52 am


I’ve had the unfortunate situation of losing our family home to bankruptcy. It sucked to have to sell it cause we ran out of money.

Thus my advice is to check your mother’s other finances:
– If she has enough to live well without selling the house, and she’s still capable of taking care of the house, then leave her be.
– If she’s struggling financially, then its time to sell before she has to sell. Its much better to walk away under your own terms than being forced to.

I understand that many view a house as their home and are unwilling to part with it for sentimental reasons. Going bankrupt was a great lesson that a home is what you make it: its not the house you grew up in, its not the house you raised your kids in, … its the place you live (whether you rent or own).

Hopefully this housing bubble will help more people realize this and stop the infatuation with “home” (not house) ownership.

#62 S. on 10.08.09 at 12:14 pm

# 12 Jiminy Cricket

It is strange to read that grown children residing at their parents home is perceived as such a burden. With the exception of North America and Western Europe this is the norm. It is very common to see three generations living under the same roof. Grandparents, children and grandchildren all benefit by that arrangement. Daily multi-generational interaction is the cornerstone of most societies.
On the practical side think how many of our societies problems would be solved should this, once again, become a standard practice in Canada.
1. Daycare problems would be solved. Given half a chance most parents would chose leaving their kids with the grandparents rather than strangers anytime.
2. Teenagers returning home from school would actually have someone wise to interact with rather than planting themselves in front of TV or a gaming console.
3. Home cooked meals rather than the take out swill we sometimes refer to as food might once again become the norm thus reducing the rate of obesity and a slew of other health problems our society now deals with.
4. Grandparents would retain an active role in the family – they are central to the concept of living in a home rather than a house. The sense of loneliness and abandonment so often felt by our elders would be once and for all eliminated.
5. The assets that grandparents acquire throughout their lifetime would stay in the family rather than be passed on to the retirement home industry. Family wealth is something that is built over many generations. (This is a very important point. Some of you here wonder how the newcomers to Canada can afford those overpriced Vancouver houses. That‘s how.)

I could go on here but I think you get my drift.

And of course I am talking here of all the members of a household making a contribution and not mooching their way through life.

#63 ValueHunter on 10.08.09 at 12:42 pm

Garth, the banks seem to be eager to dish out mortgages to anyone who want them. Are the banks keeping these new mortgages on their books? Or are they securitized and sold as AAA investment to the Chinese?

If the banks are not required to keep these mortgages on their books, I see no reason why they should stop making these mortgages and anyone and their dogs.

#64 morris gawalko on 10.08.09 at 12:56 pm

door #! sell and enjoy your profit and life and earth, as we are headed for a collision course with nature…we will dearly pay for that one

Door #2 why get stressed out fighting with realters wait like a vulture for the himno{crap} to hit the fan, which should be soon, then go in for the feast for free.

corrected spelling, gotta learn to type

#65 George on 10.08.09 at 12:57 pm

You know it’s really funny Garth how the date rapists (lowballers) begin by saying how much they’ve been reading your blog. Politicians and flattery. So please allow me to uncork Kirks nose from your back side. Since his name was Kirk I was originally going to suggest the Vulcan Mind Meld. Spock has been known to have good numbers with that one.

Back to Lowballing strategies for Kirk. Since orphans usually are not high demographic homeowners it would be unwise to target this particular crowd. Widows are good and yes with patience, hard work and discipline you might be able to find a very very old man or woman to dick plow financially (Canada is a same sex legal marriage country after all) I think you can figure it out from there. I too have lowballed and I have never felt good about many years later. It’s like an infection that never away. I might be wrong on this one but something leads me to believe that we’re here to care about one another rather than poach their things for our gain. If you have to lowball, bring as much heart to the table as you can because at the end of these weaker hands to stronger hands exchanges we’re all just headed in the exact same direction – to become one of those old flaccid pizza dough looking men and women.

#66 somecatchphrase on 10.08.09 at 12:58 pm

Warning: You may find this post is inflammatory. You may be offended. If the truth hurts, so be it.

To understand why inflation is the natural consequence of mass democracy, you only need to have a little empathy. Join me for a little “thought experiment.”

Consider the situation from the perspective of a prime minister, president, member of parliament, or member of congress . You hope to be re-elected . It doesn’t matter if you’re a liberal or a conservative, republican or a democrat. The party affiliation is irrelevant.

The economy tanks. Various “interest groups” such as banks, automakers, lobster fishermen, underwater homeowners, logging companies, CUPE, pensioners, baby boomers, etc, etc, etc, all scream “help me” to their elected representatives.

If you do the right thing, say “no” to bailouts, then you’ll be crucified by your political opponents and derided as a heartless fascist. Always thinking about the next election, you do the wrong thing. You take the easy way out. The solution, from a politician’s perspective? Borrow or print up some “money.” Offer a bailout.

The negative consequences of your borrowing/money printing will take years to develop. More than enough time for plausible deniability. The best solution, again from the politician’s perspective? If it feels good, do it. Steal from unborn future generations, as they won’t be voting in the only election that matters, the next one.

The prime minister is like a father with 30 million spoiled brats. The president is like a father with 300 million spoiled brats.

Kevin O’Leary for PM.

A little tough love is what this country needs. Money doesn’t grow on trees. The government is not your sugar daddy.

Moral of the story? Gold and silver up. Paper currencies down.

#67 Vancouver Old-timer on 10.08.09 at 12:59 pm


Sounds like you’re the one hoping to profit from the rise in house values. Leave your mother alone, 70 is not old and she should be able to enjoy her house for many years to come. A school pal of mine was itching to sell her mother’s house (mom being 87) in Kitsilano this past year and finally got her mom to agree to it – what with reverse mortgages and deferred property taxes for the last 20 years, mom had been living well with help in the house and a feeling of independence, but daughter not so well. Imagine the spawn’s shock when she realized less than $200,000 from the sale of a million dollar house. So in short, let your mom live how she wants, not in anticipation of what you want. She may need your help in the future so deal with it.

#68 Munch on 10.08.09 at 1:16 pm

Okay, I give up!

I didn’t win – now I will have to work on accepting that!

SNOT fair!

{face-plant into desk, sobbing gently, shoulders heaving}

#69 jess on 10.08.09 at 1:19 pm

Irony -your profit becomes your loss

I wonder if these same people who purchased these homes also had investments in china ? INteresting that insurance companies are not responsible for pollutants.
…”But whether the Florida builders who brought the class-action lawsuit could ever collect on any future judgment remains unclear, because of the difficulty of gaining jurisdiction and enforcing rulings against foreign companies, especially in China. In other cases, many of the Chinese companies cannot be found or have disbanded.

Homeowners, insurers, home builders, drywall suppliers and Chinese manufacturers, if they can be identified, are often suing each other. Drywall installers and suppliers are also expected to be targets of the next wave of litigation. Many lawsuits need to be translated into Mandarin and follow rules of international law, adding layers of difficulty.

Among the homeowners filing suit are the lieutenant governor of Florida, Jeff Kottkamp; and Sean Payton, head coach of the New Orleans Saints, who has moved out of his Mandeville, La., home.

The product safety commission has received more than 1,300 complaints from 26 states, but the bulk are from Florida, Louisiana and Virginia, where hurricanes led to an unprecedented housing boom in 2006 and 2007.

In 2006 alone, nearly seven million sheets of drywall were imported from China. The federal court in the Eastern District of Louisiana has identified 26 brands of drywall, but 11 others had no markings other than variations of “Made in China.”

…Insurance companies, in particular, have become a popular target of lawsuits over their refusal to pay claims filed by homeowners and home builders, stating that their policies do not cover problems caused by pollutants. ”

#70 Jim on 10.08.09 at 1:29 pm

“Jiminy Cricket” you were a PITA for your parents so they wanted you out of the house. Some parents actually like their children. See what I did there?

#71 taylor192 on 10.08.09 at 1:49 pm

#67 Vancouver old-timer

Consider what you said: “may need your help in the future”

A person sitting on a half-million dollar asset may need the help from a struggling family trying to afford their own home and retirement savings. Its akin to seniors asking for handouts and tax-breaks while living in paid off homes.

This is why I recommended look at her mother’s finances to make the decision. No child should have to bear the expense of taking care of perhaps the wealthiest generation to ever live. Great pensions, real estate assets, and savings during 3 of the largest increases in history. If your generation needs help after all that, then my generation is f***ed.

#72 dd on 10.08.09 at 1:50 pm


She is 70 and the house is paid for. If she has stable income why do anything?

#73 DG on 10.08.09 at 1:52 pm

Does anyone actually have recent, accurate data on the following:

(a) The average downpayment in Canada, expressed as a percentage of selling price.
(b) The percentage of all buyers who are using 35-year amortizations.
(c) The average multiple of gross household income of the average Canadian mortgage.

Everyone, literally everyone, whom I communicate with outside of this blog believes that virtually no-one in Canada is getting 35-year mortgages, or mortgages for more than 32% of gross household income. In turn they also believe that the number of people buying with tiny downpayments is very small.

Garth: I’m generally very sympathetic to your views on the subject of Canadian real estate, but I think it’s time for some data that goes deeper than the broad brush strokes of household debt-to-income ratios. What, leaving anecdotes aside, does our housing and mortgage market actually look like?

I’ve looked for but can’t find this information.

The info can only be ascertained from industry sources, since it is not accumulated by any one independent body. As for 35-year ams, virtually 100% of new originations have that amortization. The average down is now less than 12% nationally, on all homes, new and resale. The average multiple can only be determined using current average income and resale levels, and that all has been published here. — Garth

#74 Nostradamus jr. on 10.08.09 at 2:17 pm

“”Now compare Toronto and Chicago, or Houston. — Garth””….Halifax, St Catherines etc etc…

…Kool, guessing you finally agree that Vancouver “really” is different.

Nostradamus jr.

#75 Ian on 10.08.09 at 2:19 pm

Gold, the new defacto world reserve currency. Paper money, RIP, the rest of the world (even Japan) wants to drop the USD now. They deny it publicly (as usual) but most of the worlds press who were honest and reported on it are definitly standing by their story. They plan to end all commodity transactions in USD by 2018 but I don’t think the USD will last that long.



#76 David Bakody on 10.08.09 at 2:37 pm

Halifax vs other cities ….. many years ago the same type of questioned was asked and addressed by the RE people. They said Halifax is not unlike any other major city in Canada they just seem to take a long time getting there due to their laid back life style ….. Remember ladies and gentlemen this city was almost leveled in the worst natural disaster in history. Many people here still be believe less is more and bigger does not mean better. Perhaps times will change and they have as far as RE alongside lakes and ocean fronts but plain ode homes on a city lot just remains that and people know it. Having said that people here feel if they are going to pay big bucks for a home it better have water frontage and then many say who needs it for we have many miles of free clean beaches with the fresh salt air from the greatest ocean on the planet.

#77 Cheap bastid on 10.08.09 at 2:39 pm

Garth just send me your books! I’m tired of going to Chapters to read them!

#78 Jeannie on 10.08.09 at 2:58 pm

Hi Jasmine…I haven’t had time to read all the responses to your question, sorry if this is a repeat of other’s advice.

First of all…your post is all about you, your anxiety about the shaky real estate future.
70 is not ‘old’ by to-day’s standard…. if your Mom is healthy she has many good years ahead of her. Have you actually asked he if she WANTS to move out of her house? Has she said that she want’s to live in a seniors apartment?
Mom has a mind of her own, she’s raised a family, paid off her home, and by all accounts is reduced to tears of joy by this accomplishment.
Jasmine, why not leave Mom alone, stop worrying about her money, and let her enjoy her mortgage-free home, as well as the extra spending money that she’ll enjoy.
If she needs someone to shovel the snow, there’s always some kid down the street glad of the extra cash. Many here will disagree with me, but in this situation money truly isn’t everything.
You’ll inherit the house one day Jasmine, and who knows what the future holds, you might be glad to walk in to a mortgage-free house. Let Mom enjoy her HOME.

#79 glw on 10.08.09 at 3:04 pm

#44 ottawa mike

RE: Alcoa – although your foil hat comment is amusing please reference Market Ticker.


Now we got a wee problem. This rather strongly implies that the actual shipped volume was down sequentially. Does it prove this? No, as we don’t have product mix shifts in the report, but this sure as hell suggests a decrease in shipped tonnage sequentially, not just year/over/year, and is a big fat flashing yellow light that I bet you don’t see talked about.

All is not as clear as it would appear.

#80 Repatriated Expat on 10.08.09 at 3:21 pm


A very pragmatic and very English woman I know, who is herself in her 70’s, advises her friends to sell their homes and simplify their lives “Before it’s too late”.

“Before it’s too late”, as she defines it is not in response to market conditions but to one’s capacity to manage one’s own affairs. 70 may not be old for many people, nor may 80, but really – if one waits too long the opportunity for her to make the decision is lost.

It is up to your mom to decide when her own “before it’s too late” time will be. And some may never be able to admit it or decide that, so it will fall to you again to take care of her.

It’s all kinda futile as in the end we really don’t own anything, but I have to agree with the idea that there are periods in our lives to own homes and times we shouldn’t.

#81 Fuzzy numbers on 10.08.09 at 3:37 pm

It looks like the “average” household isn’t the household that’s applying for mortgages these days.

Looking at the stats:

Average applicant income, ~72K
Average co-applicant income, ~53K

Total average household income: ~125K

With those numbers, Toronto’s housing prices are bang-on in line with regular multiples. In fact, the “average” house is affordable by the “average” Torontonian who is applying for a mortgage these days.

I’ve been sitting this one out waiting for prices to decline, but those numbers are making me re-think.

They look to me like folks in TO aren’t biting off more than they can chew, as I originally thought.

Garth, thoughts?

That does not indicate in what % of cases the application is based on one or two incomes. It also does not indicate if it is census Toronto, or GTA, since recent demograohic shifts have been pronounced. Not a very stable stat. — Garth

#82 The Vulture on 10.08.09 at 3:42 pm

#51 Onemorething…

Yes, I understand…you made me laugh as well!

#83 confused and A little crazed on 10.08.09 at 3:44 pm

62 #,

that’s only if the kids aren’t moochers but unfortunately that not the case
I made a previous post on a couple. they move in with the parents . they get the parents to pay for most of the renovations in the basement. orig 60’s decor but clean and intact.

The new couple pays no rent/ tax/ insurance. etc. yells at the old parents( owners ) for not deadbolting the door because parents are old and forgetful 70s – 80 years old and don’t help around the house…no lawn …no painting…not even an occassional grocery pick up…sad huh

#84 X on 10.08.09 at 3:49 pm

RE#79….I think alcoa reported profits up 9%….however the price of aluminum was up 18.3%….and yes shipments were down something like 50,000 metric tonnes.

But all anyone reads is that profits were up…woohoo…

Not sure how they can forecast 11% growth for the next Q either…

But back to RE…I don’t think the Canadian RE market will make it to the HST introduction before it starts to peter out….

#85 robert on 10.08.09 at 4:19 pm

#62 S

You make some good points (#2 and #3 are especially relevant in our home). Both my kids attend a local university so financially, living with us is a no-brainer. And you know, I don’t mind having them around at all because they are way more responsible than I was at their age. They know they are always welcome to stay with us as long as they need to given the economic shit storm we are going through.

#86 Daystar on 10.08.09 at 4:34 pm

#41 Jim on 10.08.09 at 8:42 am

Perhaps we need to read more, other than spending time advising those to get out more. Thoughts of rates rising by March of next year are becoming mainstream now, for the most obvious of reasons.



And while its not in a bankers interests to call a spade a spade or a bubble a bubble, we’re in one. Rapid asset inflation, valuations compared to other nations and credit expansion in the mortgage industry from an est. 650 Billion in early 2006 to what is expected to be a 1.1 trillion dollar value by mid 2010 can be seen as nothing other than highly bubblicious in a climate that has not seen incomes rise during the same period.

Perhaps one simply cannot percieve a federal government’s lust for a majority to the point of making everyone richer through credit (CMHC regs) in an effort to win a majority government regardless of the future consequences to its own people. Certainly, not everyone can see the inherent dangers of policy that runs up massive consumer (mainly through mortgage) debt with loose mortage lending regs in a near zero interest rate environment while simeotaneously running up massive governmental deficits. Even and especially so, bankers can be consumed by their own greed.

It does not surprise me that large numbers won’t see whats coming. They certainly didn’t in the U.S. with their own rapid asset inflationary policies and major credit expansions brought on by loose federal mortage regs and low interest rates while simetaneously running massive federal deficits… a good number of americans dumbly couldn’t see a sub prime melt down occurring there either. Nor could they, their governments and their banks predict the obviousness of what this would do to bond markets world wide.

Some of us simply can’t be told the truth. Its just how it is and its bred mainly by ego. Knowitalls in effect, have stopped learning. But for those who are…. humbled, seek and ye shall find. Knock… and the door will open.

Readers come here for the truth knowing that other views will find themselves along side to contrast and compare with. People who tell the truth will claim it be so. People who tell lies will claim lies to be true. People who tell fallacies will claim it to be anything from truth, to opinion or guess. Regardless of what one is told, the FACTS do speak for themselves.

Bubbles are measurable and their identification and damage done, as reduntantly predictable as a MATHEMATICAL EQUATION. For me now, the question of whether or not Canada is in a real estate bubble is not something I still have to guess or think about. The only question is how much bigger this bubble will get or how much longer the policies feeding it will go on for and the longer this credit expansion continues without increases in income driving it, the worse it will get. It’s already going to end badly but there is such a thing as damage control and I as yet, don’t see any solutions coming from our current players. Someone like myself can only assume that they aren’t acting on the best interest of this nation and its people for the same reasons self interests introduced identical policy in the U.S. .

In the meantime try this from someone who has spent a great deal of time in a basement:


#87 Grumpydawgs on 10.08.09 at 4:52 pm

In my line of work we’d call Jasmina a ‘granny basher’. It describes the person who’s only upward mobility has been to move up from their parents basement when the old folks die.

I’m always surprised by the entrepenurial zeal and acumen suddenly aquired by these basement dwellers when it comes to the high finance of a parents money.

70 is young these days and its very likely the old girl will live for another 20 years or more. She ( the mother) has finally secured a comfortable retirement, away from the vagaries of interest rates or rent increases. All seniors in Canada should be that lucky.

If nothing else Jasmina and her husband should be maintaining the mothers property and paying her property taxes in grateful appreciation for having been well fed, loved and educated.

#88 basement dweller on 10.08.09 at 4:58 pm

I moved back into my parents’ house after over a decade of ekeing out a living as a poor student in pricey Vancouver. by the time I returned back to my hometown the boom had arrived and housing tripled in price. I am now priced out of the market (according to me, the bank may have a different POV).

First I rented a place, but the landlord put it on the market 5 months later in spring when it looked like the peak was in. Sorry, but I cannot stomach having to rent from someone who clearly views me as a mortgage payer, rather than someone who wishes to put down roots again and live a stable life, contributing to the community and all that. I had to fight through residential tenancy to get my deposit back (apparently landlords consider it an entitlement that tenants must ‘work at’ to receive back).

IN comparison, life with mom and dad is good. We enjoy each others’ company and I have a short walk to the office from their house. Is it ideal? No. But I’d rather pay down my significant student debts and swallow some pride than be a slave to the bank or some asshole landlord. Its not a permanent situation – none of us expect it to be – and mom and dad are happy to help me in my obvious predicament. Plus I still buy stuff for the house and pitch in when work needs to be done. I am in my mid-thirties. The quid-pro-quo is mom and dad get to go away to Mexico for three months and not worry about a house and dog-sitter. win-win!

A society that forces young people to take on massive amounts of debt to prove they are “responsible” is nothing more than a manufacture of the financiers who profit from such actions. What is irresponsible about living frugally? Nothing, but the banks don’t make record profits that way.

People with monster mortgages are jealous of the unindebted and call them ‘losers’ to make themselves feel better while they add up another property tax bill/repair bill. They are nothing more than slaves to the bank and would like nothing more than to see everyone else shoulder a heavy burden also.

My parents bought a rental before the boom here and charge a reasonable rate to responsible tenants. They are too nice to kick them out for my sake (I won’t ask them to) so I stay in the basement until I can take over the rental. Good plan, no? Maybe in five years the market will be sane again, maybe not. Maybe I will purchase the rental from the folks. I feel fortunate to have that option. Many do not.

#89 OttawaMike on 10.08.09 at 5:09 pm

Re:Posts #79 & 84
Didn’t smell right to me either that is why I mentioned it.
It seems like the only economic figures we can trust these days are the ones coming out of China… Oh wait.. never mind.

Back to real estate:
Did I mention that most 400k$+ houses are taking 6 months to move here in Ottawa?

#90 Shawn H on 10.08.09 at 5:22 pm

I am 100% in support of Samantha’s comment #11. Garth is absolutely correct in everything he is predicting, in my opinion, based on common fundamentals.

I am absolutely amazed at how stupid so many Canadians are when the very same nightmare has already so recently unfolded in the USA, and is still carving the heart out of that country.

People need to wake up and realize that when credit dries up (and it will) we have nothing left to support and maintain our relatively tiny Canadian Economy.

#91 MikeB on 10.08.09 at 5:28 pm

Finally someone asks a good question from the Halifax folks…. why if incomes in their city and Toronto are similar are houses 300K in Halifax and 750K in Toronto. Answer …GREED dude…GREED… from the young uns to the old kodgers … Just look at the price of a freakin condo… crazy… 300k for a box… you gotta be out of your mind…. The market here is governed by folks with low IQs and big bank accounts. the really world is a giant fixed system forcing people to list and be assimilated through the system…
Even if you give T.O. a 30% boost because of its concentration of Financial might that still makes the fair value of homes in the 400K range….Fat chance of that happening.
And people ARE getting in over their heads ….way over their heads…. Carney better pull in the reigns now before we live through way the Yanks have been living through for years now.
We have some major hurt coming…super high canadian dollar…. high unemployment…. sour manufacturing …. no media business to speak of…. being a realtor is the place to be… at least for now.

#92 artisuseless on 10.08.09 at 5:41 pm

@Jasmina – as someone who’s mother is 83 and who’s grandmother lived in her own house until her mid-nineties, the best advice I have is to let her be. The only reason she should sell and take advantage of current market prices at all is if she has no income beyond a really meager pension and serious health issues that could merit moving within the next decade.

If she were to invest anything at all, it should be in something very safe like a good bond fund or GICs.

No one past ‘retirement age’ should have more than a tiny portion of their savings in anything speculative and yes, silver, gold and other PMs ARE speculative. They’re extremely risky and are NOT an inflation hedge or a genuine store of value or anything else except according to people selling PM funds, or who have some other vested interest. Yeah, silver went to $40 once before but that was two guys basically cornering the market and intentionally driving up the price.

@Kirk – just rent an apartment already – vacancy rates are in the renters’ favour right now & you can get a place for way less than it costs to buy.
Low-balling doesn’t work in a market where there’s still bidding wars going on – unless you pay cash and attach no conditions (forgoing a home inspection is just plain dumb).
Independent living is a great learning/growing experience and you’re too old to live with your parents.

@#62 – In those societies, the kids who do live at home help pay the bills – they aren’t mooching in order to ‘save’. They also pay for their parents’/grandparents’ healthcare costs as there’s no pensions or gov’t healthcare. They are also capable of making grownup decisions instead of looking for approval from everybody.

#93 Watched Bubble Never Pops on 10.08.09 at 5:56 pm

#86 Daystar

Instead of linking to articles with “could” (coulda woulda shoulda) in their titles and quoting fortunetellers (aka economists), you should look at what government bonds are are doing – which is nothing.

Mark Carney has said that he isn’t going to raise the overnight rate either regardless how badly you or the bank fortunetellers want him to.

I love the title of your source “House market bubble could bring quick end to low interest rates”. For somebody who believes that, “Bubbles are measurable and their identification and damage done, as reduntantly predictable as a MATHEMATICAL EQUATION. ” you seem to conveniently forget that “House market bubble may not bring end to low interest rates” is just as likely an outcome.

A bust isn’t going to happen just because you want it to or because you can cite meaningless sources of information that have no value in predicting anything (you do realize that the future is unpredictable don’t you?)

Be less angry that the bubble hasn’t burst and go out and enjoy the sunshine before winter hits.

“A watched bubble never pops”.

#94 Mike (Authentic) on 10.08.09 at 6:01 pm

Q3 Earnings…

It seems the companies that reported making a profit for Q3 their profits didn’t exactly come from sales, they came from cuts.

So when these Q3 earnings come out, look a little closer at where that “profit” came from…


#95 artisuseless on 10.08.09 at 6:06 pm

@88 – you’ve at least lived on your own and are paying your own way (student debt, helping out etc.). You’re currently making a very sensible decision but you’ve also had adult responsibilities – which is why you have the sense to know you’re priced out of the current market even if you say the bank may not say so.

Seriously, I’ll bet if you look around at some of the friends you have who are like ‘Brat’, you’ll realize that they live in a bubble.

What we’re making fun of are the moochers who work in professional jobs, having savings rather than debt but can’t seem paralyzed when it comes to major life decisions and sneer at renting as something utterly degrading like asking them to apply for welfare.

It’s not about jealousy but the truth is, most of the people I know who still live at home rent-free & have professional incomes & no debt are really immature. Their tastes and hobbies are childish, they don’t seem capable of being in a mature relationship, they’re overly indecisive – in short they’re just not grown up.

#96 moneyman on 10.08.09 at 6:08 pm

To Judy from SW Ontario.

My advice, is “Do not sell, since you are approaching retirement. With little savings, as you get older, life will be nicer in your own home. I believe taxation might also favor you.

Good apartments cannot be counted on at a reasonable price. In Ottawa, without big dough, it gets tiresome to rent.

Although it should be a renter’s market, it isn’t. There is distortion somewhere; plenty of apartments must be kept empty. Renting in TO might not be great either. Remember, our governments have favored home ownership.

Do not sell; if the place is paid out, you will feel richer and your little money will go further. Selling and waiting out for a huge correction is a bit risky; but it can also be a drawn out affair that will eat away at you. The interest rates are so low.

#97 Doug from Calgary on 10.08.09 at 6:21 pm

#81 Fuzzy Numbers: When looking at the market as a whole the “rule of thumb” of 3x average income has to include everyone – all incomes, otherwise it doesn’t mean much. Maybe upper middle class are willing to pay 3x their income at the moment, but they are not getting the value they should for the price they are paying, effectively lowering their own standard of living. They worked so hard to get into this income bracket and are now buying the same house that the average Joe was able to buy just a few years ago.

#98 Gordon on 10.08.09 at 6:30 pm

What percentage of the general population have some form of psychiatric problems? 3 or 4 percent?

What percentage of housing sells in Vancouver each year?
3 or 4 percent.

If you were to only look at people with mental problems, would you then say all the people in Vancouver are deranged? No, of course you would not. The same with real estate.

Only a small and almost insignificant percentage of the population are playing the real estate game and most players are trading amongst themselves.

The coming catastrophe is not the people that have bought but those that have used a home equity line of credit, these make up a significant portion of the remaining 96 or 97 percent. And this is where past real estate bubbles differ from the current goliath. We did not have billions of dollars in home equity loans in past markets hinging on the paper wealth created by real estate speculation.

Hence, a reason why CMHC has opened up the mortgage gates, tripling the amount of Mortgage Backed Securities in the last three years.

Hopefully, the manure will not hit the fan in Canada, until the USA starts pulling out of its recession. Then we can piggyback on their recovery and minimize this mess. But, we are still going to have to pay in higher personal taxes, reduction or elimination of the capital gains tax exemption, higher property taxes and an inheritance tax. And you thought the HST was bad.

#99 jess on 10.08.09 at 7:47 pm

LOAN TO OWN – who really owns the country?
Imagine they don’t like the arthimetic …who said derviatives was about arthimetic

Latvia’s spending spree came to an abrupt halt last year when one of the world’s biggest property bubbles, relative the size of the economy, burst. House prices have collapsed by up to two-thirds. Almost all mortgages are in euros, most supplied by the big Swedish banks, which own half the Latvian banking sector outright and hold €80bn of assets in the three Baltic states….

But an IMF report on Latvia last weekend was pessimistic, while the Swedes and the European commission reacted with uncharacteristically fierce criticism of the proposed budget arithmetic.

Latvia threatens foreign banks with huge lossesCrisis-hit Baltic state proposes emergency law to slash mortgage holders’ liabilities to lenders

#100 davers on 10.08.09 at 7:53 pm


It all depends on how much savings your mom has. If she has enough money to live comfortably then by all means she can stay in that house for until she turns 140. However since she just paid it off I will assume she does not have huge savings and she should probably get some money out of this place.

If she is willing to move I would recommend selling it and getting a nice condo in a 55+ building. She should not spend more than 250000 on said condo though. Normally I would say just rent but I would imagine someone of her age would want somewhere that will be permanent. Even though renting can be, there is probably more chance than she would like that she will be forced to move again in the future.

Another possibility would be a reverse mortgage if she wants to stay in the place. I am not sure of all the ins and outs of this move, so do lots of research if this is what she would prefer.


Good luck lowballing right now. Low ball offers are best done when sellers are desperate. This will usually happen when the place has been on the market for a while. Right now the only places on the market for over 60 days are probably over-priced so lowballing would just get you down to what other simmilar places are going for.

Wait it out, but rent in the meantime. Give the folks a break and live on your own. This will help you decide what you like and dont like in other accomodation. This will help you pick the right place for you when you do buy.

#101 Jen on 10.08.09 at 7:59 pm


Tough Love? Last time I checked, it was OUR tax money running the government. Kindly stick your foot where it belongs!

#102 kw on 10.08.09 at 8:45 pm

i for one can’t b

#103 POL-CAN on 10.08.09 at 8:49 pm

And so it begins:

California Bond Issuance = FAIL

When demand for debt is not high enough, then interest rates must rise to attract bidders. That happened today in California for their 20 year bond issue as reported by MarketWatch.


#104 Future Expatriate on 10.08.09 at 9:27 pm

#93 “A watched bubble never pops”.

Untrue. All bubbles pop. Sooner or later.

Just like water doesn’t boil any slower if it is watched, neither do bubbles pop any later if they are watched.

You applied an untrue “old wives'” tale to economics.


#105 Daystar on 10.08.09 at 9:43 pm

#93 Watched Bubble Never Pops on 10.08.09 at 5:56 pm

#86 Daystar

Instead of linking to articles with “could” (coulda woulda shoulda) in their titles and quoting fortunetellers (aka economists), you should look at what government bonds are are doing – which is nothing.

If you want to criticize fortune tellers (aka economists), knock yourself out. You might run into some headwind however, criticizing the likes of Mish who accurately predicted the U.S. housing bubble collapse in early 2005. As for what’s happening in the bond markets, I can hardly call over $200 billion worth of government bonds issued by this Conservative government as bond markets doing “nothing”. Its appropriately called secondary governmental credit expansion and it carries with it, a major price to us all.

“Mark Carney has said that he isn’t going to raise the overnight rate either regardless how badly you or the bank fortunetellers want him to.”

Did you read the links I provided? Did you not get the tone of what our chartered banks are saying? They are already poised to criticize Bank of Canada low rate policies if real estate continues to rapidly appreciate while credit expansion in business declines and the Conservatives don’t tighen mortage regs.

“I love the title of your source “House market bubble could bring quick end to low interest rates”. For somebody who believes that, “Bubbles are measurable and their identification and damage done, as reduntantly predictable as a MATHEMATICAL EQUATION. ” you seem to conveniently forget that “House market bubble may not bring end to low interest rates” is just as likely an outcome. – Watched Bubble Never Pops

You are missing it. Badly. The U.S. has just left us a failed blueprint of what happens when massive credit expansion/rapid asset inflation is created by loose lending mortage regs combined with record low interest rates and ballooning federal deficits… the likes of which Canada has experienced since early 2006 and is now accelerating. This bubble didn’t just appear overnight. Such massive credit expansions don’t just… happen. They are pre-planned for very specific reasons. The motives should disturb anyone who seeks to know what they are. Its obvious to me that you either have yet to look for them, are too blinded by your own ego to bother to look, or are simply misleading the facts, contributing to the endless propaganda we must all endure and if its the last 2, I assure you, its a bore.

“A bust isn’t going to happen just because you want it to or because you can cite meaningless sources of information that have no value in predicting anything (you do realize that the future is unpredictable don’t you?) – Watched Bubble Never Pops on 10.08.09 at 5:56 pm

If your earlier statements haven’t inflamed me, this one will. The last thing I want is for my fellow Canadians and humanity world wide to suffer from failed governmental/banking policies. I find it offensive for you to insinuate that I want my fellow Canadians to suffer from negative equity, poverty and recessions that last years on end. Such outcomes will destroy a good number of peoples lives and breed broken homes, hardly a thing I wish for.

Contrary to what you also think, the future outcomes of todays actions are quite predictable. To suggest otherwise is to dismiss entirely the laws of causal effect. For all actions there truly are predictable reactions. I’ve got news for you. The laws of karma exist and are quite predictable, often instant. In the case of Canada’s RE bubble bursting, its not if… its when.

It truly is as boring as a mathematical equation when it comes to this nations economy. The net effect of running governmental deficits and trade deficits will be a tumbling currency and rising interest rates will surely follow. The net effect of rapid asset inflationary policies the likes of mortgage’s with no money down will always be a bad one as it encourages too many first time homebuyers to enter a market without knowing the true consequences of buying something they cannot afford. Mortage regs that force banks to ask for 10% down or more forces home buyers to think far more seriously about what they can or cannot afford. Clearly, todays mortgage regs are not created with consumer/buyer awareness or protection in mind. It begs the reader to ask why.

The net effect of rapid asset inflation caused by loose lending regs and low interest rates will always be a recipe for disaster regardless of the environments that create them should they be allowed to run together for any substained period of time. Only a complete and total fool would think otherwise, especially after the U.S. subprime meltdown example is so fresh to remind us. The simple dangers of rising interest rates will leave all buyers of mortages who came in late at the top facing negative equity combined with skyrocketing debt service to their mortgages if they don’t lock in for 5 years and many will be caught with VRM’s. It doesn’t matter whether this nation has recourse loans or not. Two missed payments and the house is gone. What this nation is breeding now, especially so if left unchecked, is an environment that will fill the courts with bankrupcy filings and lawsuits from lenders passed onto their own customers as bankrucy laws presently stand, mark my words.

It is highly irresponsible of any government to run substained,loose lending regulations particularly in real estate at a time when interest rates are at an all time low. We are facing a 50% credit expansion in just under 4 years with no fundamentals to justifying it. There is no rise in personal/corporate income, no measurable pop in GDP or economic expansion to justify such credit expansions of this magnitude. This same government, with a 1.2 trillion dollar economy is going to the bond markets with hat in hand for over $200 billion in one short year. Hello!!! such failed governmental policies are “measurable” and carry consequences that are extreme.

Unless there is a true and measurable rise in personal incomes/corporate profits and predictable long term currency strength driven by federal surplus’s to support rapid asset inflation, loose lending policies should never be allowed to occur in the mortgage industry unless governments inherit a busted bubble mess like the U.S. example and then, well… all bets are off.

Otherwise, the only time I see the feds introducing rapid asset inflationary policies through CMHC is at a time when interest rates are high and at or near their peak during a recession that has caused rapid asset depreciation. Otherwise, credit expansion/asset inflation can and should be justified through sound fundamentals if at all, not rapid asset inflationary policy and such sound fundamentals simply presently do not exist.

“Be less angry that the bubble hasn’t burst and go out and enjoy the sunshine before winter hits.” – Watched Bubble never pops/Jim/and all other alias’s I use

You’ve got the angry part right but thats about it. We are in a bubble and all it will take to pop this bubble is rising rates sure to be followed by successive record deficits. Wake up, whoever you are. Some individual domestic banks by their own accord are getting nervous with grossly unjustified/unchecked asset inflation that will later breed not only severe losses to CMHC but to our chartered banks as a whole if record low interest rates and loose lending regs further continue to escalate valuations. And to moronically believe that interest rates won’t rise in the face of record federal deficits, fresh trade deficits, stagnant earnings/incomes and the possibiliy of a U.S. greenback bounce from Chindia within 2 years from debt expansion failures by other world superpowers is to live a life in economic fantasyland.

Sadly, and just as ironically, one can watch an unsubstainable bubble all one wants but they always pop. Your words, your moniker and your opinions will go down on record as being nothing more than false conclusions at best, and propaganda, at worst. As the present fades into the past, history will reveal this well and no amount of emotion, want or will from you or I or anyone else is going to stop it. It doesn’t matter what you and I “want” or “wish”. Things have already gone into motion years ago and have been allowed to play themselves out. No one can take back the 400 billion dollar credit expansion that has taken place in real estate since Harper has begun to govern in the face of flatlined incomes, record low interest rates that have nowhere to go but up and record deficit spending that will surely force rates to rise. In case you haven’t gotten it yet, the outcome really is that mathematically predictable. The only thing that isn’t entirely predictable is the timeline itself. Otherwise, only deniers of logic and truth will fail to see this now.

#106 nonplused on 10.08.09 at 11:00 pm

#37 dave99

Reverse mortgages are for suckers. If she needs the money that bad she should sell. But my guess is if she managed to pay the house off, she has more disposable income now than before.

I don’t know exactly how all reverse mortgages are structured, but I do know the company makes money on it, so it’s a cost to you. Plus in the US there have been foreclosures on reverse mortgages so they are not without risk.

#40 Kash is King

US banks were compliant too, until they had to put the assets in their SIV’s back on the balance sheet because nobody else would fund them, hence the bailout.

CMHC is already helping the Canadian banks out to the tune of $75 billion, likely to rise.

#41 Jim

You could be right. Maybe the Bank of Canada can hold rates at 0.25% for 100 years. I think it’s unlikely. So then the question is, what do you mean by “any time soon”? It better be 35 years or there will come a day that is “too soon” regardless. Things that cannot go on forever eventually don’t go on anymore.

So let’s say that rates normalize to 5% in 3 years. What do you do then?

#48 Jim

There is only so much demand per year for houses, and it’s driven by the job market and new household formation. I.e. population growth. When the central bank collaborates with something like CMHC to reduce interest rates and lower lending standards, all they do is move future demand back. If they keep going, eventually there will be very little future demand left. Which is ok, until we get to the future.

All those kids buying houses with zero down, 2.5% VIR’s, and 35 year ams are unfortunately not going to be in the market for another house next year.

It’s “cash for clunkers” all over again. Only we should call this one “cash for cardboard”.

Garth on #55 Eggy

Houston isn’t a fair comparison. First, zoning bylaws in Houston are much more market driven. In other words, if you want to subdivide, you can! It’s easy. Second, they have lots of Mexican labor, and I am told that for $10/hour, the quality of workmanship is outstanding, even if they aren’t moving terribly fast.

#58 Judy from SW Ontario

Landlords will be hit by the coming storm and hard. But they can’t just up and raise rents because rent is set by the market. If your landlord sees his financing go up and decides to pass it along, you just move to another place.

The biggest risk you face as a renter is that your landlord gets foreclosed. The banks have hardly any respect for tenant’s rights and they will not rent the place to you even if you had a lease. I’ve heard of them giving 5 days notice mid month before they trash out your belongings, with a sheriff to help serve notice. God help you if you are away on business or vacation.

Contrast that with the 90 days notice a landlord needs to give on a month to month contract and something smells like a pig barn. Or should we say a bank.

#63 ValueHunter


#103 POL-CAN

Good point. With insolvent governments all around the world rushing to issue more debt, something has to give. There probably isn’t enough private money out there to meet the rising debt offerings so rate competition and default risk premiums are going to be the new order of the day.

California has a larger economy than Canada, and most of the same resources. Plus high tech and sunshine. If they can’t sell their bonds, what of us? They don’t produce as much oil right now but that’s because off shore is off limits. They had lots of production in the past and still have some. They have trees, mountains (mines), and can grow as much on their land crop wise as we can on ours (Californian farm land is way more productive than the prairies, and will host a much larger variety of crops). So what is our advantage? The Canadian Shield? How much are the Chinese really going to pay for a 100,000 square miles of barren rock? I’m betting about what it’s worth: zero.

#107 Watched Bubble Never Pops on 10.08.09 at 11:13 pm

#105 Daystar

“Contrary to what you also think, the future outcomes of todays actions are quite predictable. To suggest otherwise is to dismiss entirely the laws of causal effect. For all actions there truly are predictable reactions. I’ve got news for you. The laws of karma exist and are quite predictable, often instant. In the case of Canada’s RE bubble bursting, its not if… its when.”

Is this news? Booms and busts have happened repeatedly over history. There’s no point to discuss it beyond that.

“Your words, your moniker and your opinions will go down on record as being nothing more than false conclusions at best, and propaganda, at worst.”

But bank employed economists are independent, have no conflicts of interest and offer solid actionable conclusions of course.

“In case you haven’t gotten it yet, the outcome really is that mathematically predictable. The only thing that isn’t entirely predictable is the timeline itself.”

Genius. As I said, anybody can predict that a boom/bust will come. Here, let me try: real estate will bust because I went for a jog tonight. See? I will be right and my reason no less plausible.

Individuals who say, “the boom will continue” or “the bust will come” are equally valid because since the timeline is unknown, both are correct.

If the ‘when’ cannot be answered any explanation of the ‘why’ that is given is no more valid than the next.

The only meaningful discussion is what is happening now – and right now…

canada government bond yields are low…

the BoC’s overnight rate is really low…

and the inflation rate is negative…

A (insert financial genius name here) predicts that these will change? That’s awesome. I’m sure predictions are difficult to sell to the media.

“Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” – Peter Lynch

California’s bond issue will spur everybody to raise rates? Yeah right. Let me know what then happens. Until then, just change the title to, California bond issue MAY spur everybody to raise rates.

#108 nonplused on 10.08.09 at 11:25 pm

PS, all.

The other big risk Canada faces in the not too distant future is the “US brain drain”. We heard about this in the past, but it has been forgotten.

Yes, US unemployment is high, but not markedly higher than here and we are catching up. Canadian layoffs are not being announced. I just had dinner with a good friend how works for a major Canadian O&G independent, and he said they laid off 600 people but did not announce it. Mostly engineers and support staff.

My former boss, on the other hand, just got a sweet deal on the US west seaboard, and wants me to come down for “meetings”. It’s all fine I work for this company as a consultant already, but what if he offered me a job? If I can get through the green card process, well, I can buy 2 or 3 times the house there for the same money as here and the only thing I would miss economically is health care, which Obama (bless his soul, the lone non-boomer in US politics) is working on.

Already much of the BC vacation property demand provided by Albertans is heading for Phoenix, Las Vegas, and Montana. I expect that trend to continue for a while. You can get so much more for your money. Border delays aside, and I think they will eventually subside, why in the heck wouldn’t you look at the US as an alternative?

The only downside to living in the US is that their government is all screwed up. But I would ask Garth to comment on whether ours is all that much better. It’s a beautiful country, mostly good people, and the cost of living is getting to be much better if you can get a job there. Which you can’t get here either.

#109 Tom on 10.09.09 at 1:01 am

Regarding the RE market in Halifax – in my opinion it is significantly overpriced. Especially on and close to the Peninsular. It might not be as unreasonable as in Toronto and Vancouver, but this does not mean that it is reasonable. The increase of home prices since ~2000 has outpaced the growth in wages by a lot.

Any other Haligonians with similar or different opinions?
I am curious what others think about Halifax.

#110 Alexis Jameson on 10.09.09 at 4:43 am

very nice! I always wanted to find something like this .
Thank you!

#111 robert on 10.09.09 at 9:38 am

A theme running through many of the posts on this blog is higher interest rates will pop the real estate price bubble and will be administered for our own good. However when I look south to the example of the US I do not see evidence of this. Certainly the fools running the banking system were never more accommodative , and yet prices began to fall in many areas as far back as 2005-6. What happened? Was there a shortage of greater fools? The actions of the Federal Reserve did not seem to have been the catalyst. If anything they seemed intended to maintain high prices, not lower them (which they still do in the eyes of this humble poster).

Going forward, Australia certainly bears close watch in the quest to prove or disprove the efficacy of central bankers. Anyone seriously interested in this should read RBA Gets it Wrong Again by Steve Keen http://www.debtdeflation.comblogs/

#112 pjwlk on 10.09.09 at 10:47 am

#4 Arthur Kurwa said:

“Why don’t you just leave the old lady alone, and let her enjoy her home!”

Ya know, my first inclination was to tell mom to get a reverse mortgage or something of that nature, but I’ve realized after reading your comment that you are 100% right! Mom is already happy and to do any different would be appealing to somebody else’s interests and not moms! Hat’s off to you Arthur for telling it like it is!

#113 Investor on 10.09.09 at 8:44 pm


It really makes you question this report. Sweden #2 and they have serious liabilities in Latvia. Unreal



1. Canada

2. Sweden

#114 Oh My on 10.09.09 at 10:48 pm

Jiminy Cricket I too am baffled by these self-made kids that continue to live at home and have wondered why anyone, anyone with the means would consciously live in a way that is harmful to one’s development. I left home when I was 17…for university…paid for by me…but NEVER, NEVER, NEVER would I consider moving home to save up and build my career and nestegg. How can you develop character unless you leave the comfort and safety of the family? I might be interested in my parents views, enjoy visits, but treat them as free board and continue to share my everyday adult life with them??? Who are these babies with their eyes on the bottom line? Is this site breeding them or simply attracting them? Are they the new “young fogies”? Actually it’s kind of amusing to read these two posts against each other. Furthermore, why can’t a 70 year old make her own decisions? Does she have dementia?

#115 Dorf on 10.11.09 at 1:18 pm

Good advice from a Canadian.

Don’t bother with gold and silver…..

….if you want REAL negotiable currency in the event that paper money is worthless, stock up on BEER.
You will never find an economy where you cannot get people to do things for you for BEER. Especially when the breweries are all locked up.

I cannot imagine what I would do with gold and silver, when my family needs to eat, paper money is worthless anyway, and I’d love a beer.