Lost decade?

Nightmare on Fungi Drive

Mouldy house
Well, here's one heck of a deal for the
rubber-glove set in Ottawa.
For just $219,000 this beautiful home,
complete with a few billion bacteria,
can be yours. Sez the realtor,
Thanks to Blog Dog Todd, who says, 'just add water!'
Mouldy house inside

A recurring message of this blog is that the mess we all stepped into last autumn ain’t over yet.

The threats I’ve outlined here, and which underscore the urgency of my new book, will come to dominate the investment choices of those who are serious about avoiding the pitfalls of rising interest rates, an inflated yet stagnant economy, government debt, higher taxes and millions of Boomers making bad and emotional decisions, ruining the housing market while they usher in history’s greatest retirement crisis. This will mean long-term drifting stock markets, rising commodity prices and the necessity of crafting a diversified portfolio stressing growth and capital preservation at the same time. No easy task. So forget the index funds and the ETFs.

Trying to achieve security through no-risk GICs or savings bonds will be hopeless. Jumping into a few stocks or sectors will be downright dangerous. And riding the market higher on a surge of new economic growth – the kind politicians talk about – is a non-starter.  In case you missed it, that myth was laid to rest in major report this week written  by TD Bank economists Grant Bishop and Derek Burleton.

According to them, the country’s growth rate will crash to just 1.6% between 2010 and 2012, and just edge up to 2.1% all the way through to 2019. This will be the result of factors I’ve already mentioned, namely a rapidly aging population and a massive debt overhang for both families and governments. What it means:

  • Less government spending, and an obvious end to the kind of stimulus programs which helped rescue us from a deflationary spiral.
  • An uncompetitive economy as we become comparatively less productive.
  • A non-stop government debt crisis, since GDP growth won’t be enough to goose tax revenues and pay down deficits quickly. So, more taxes. Hello HST.
  • Danger for families than don’t curtail their borrowing. “Households cannot continue to borrow at rates exceeding income growth and prospective asset accumulation,” the economists said, since this will lead to “heightened household vulnerability and credit risk.”
  • And here’s a chart showing just where the bank thinks the economy’s headed over the next ten years. Don’t show it to your kids. It raises the question of whether or not this could turn into Canada’s lost decade.

TD Chart
The implications for people serious about investing and achieving financial security are clear.

  • There’s no way a real estate asset bubble will be able to withstand this onslaught of moribund growth, with little room for income increases and even moderately rising interest rates.
  • As the Boomers hit an average age of 65 – about 2015 – the flood of house listings should be taking a serious toll on real estate values.
  • Barely-alive growth in the economy, an aging workforce and productivity lags will all drag on corporate profits, suggesting stock markets will be range-bound for years to come.
  • As growth shifts out of Canada (and the US) and into other countries with younger workforces and less debt, smart investors will be looking to put their wealth there.
  • Governments will be unable to grow out of their deficit woes, and taxes will rise. Tax minimization and tax avoidance are therefore essential strategies.
  • Commodity prices will likely rise as the twin realities of peak oil and climate change become major economic forces over the decade.
  • For the first time in the lives of most Canadian investors, their standard of living may decrease, or at least stagnate, as the economy sputters, inflation returns, prices and taxes rise, but incomes do not.
  • This will make it harder still to build wealth and achieve security.

Finally, for those who think this might be cool because a Japanese-style lost decade means your mortgage stays cheap, chew on the chart below. I’d say those folks know something about real estate we have yet to learn.

Chart Japan


Garth's latest podcast is here.


#1 Mel on 11.10.09 at 10:19 pm

By “ETFs”, do you mean Exchange Traded Funds?

Yep. The regular kind or the new double-double. — Garth

#2 shane on 11.10.09 at 10:35 pm

garth, what do you mean by suggesting stock markets will be range-bound for years to come?


Moving sideways. Think 1970s. — Garth

#3 omg on 11.10.09 at 11:05 pm

Ok – I went to university in the early 1980s and took some economics classes. My dim recollection was that governments’ printing of money always lead to inflation and interest rates had to be a couple of points above inflation to give investors a real rate of return. Why then does nobody (such as banks, governments) seem to be worried about inflation and rising interest rates. I seem to see more headlines about the dangers of deflation? Is my memory of basic economics that wrong?

#4 Devil's Advocate on 11.10.09 at 11:07 pm


#5 Bob on 11.10.09 at 11:18 pm

So where are we going to invest our money if all goes to shits?

#6 Typhoon on 11.10.09 at 11:28 pm

In the past few month’s we’ve seen just about all of our non-owning friends jump into the market and buy their first home. This is driving my wife crazy.. to the point where we’re in marriage counselling because she wants to buy and I don’t. With her, it’s the emotional attachment to pride of ownership. With me, it’s not buying so that we don’t devastate our future enjoyment of life. I can’t seem to negotiate with her on this. Is there any middle ground you can think of? I’ve suggested splitting the difference and buying half a house, but that doesn’t make any sense to either of us. Do you have any suggestions for me?

#7 Onemorething on 11.11.09 at 12:08 am

Okay so went back to the 70’s on how to make money.

I agree with Garth on this and the lost decade upon us, with RE demand falling off a cliff and rates rising over the next 24 months.

I found that you had to play commodities, metals and grains.

I would add that oil stocks, oil services companies and any major global tech players might do well given growth will be in the BRIC.

Intersting tidbit, Silver has the highest REAL compounding yield of 16% from 1970-1980.

By REAL I mean after inflation.

Here’s how it plays out, our stock market runs out of stream (again the only one’s who made 20%+ from the bottom you would be hard pressed to even know, they were extremely wealthy & wasnt that the whole PONZI plan by government and banks anyhow to recover their losses). Wake up if you dont get this!!!!

Okay so they all get out just before the next wave down (you dont and you are still sucking back koolaid at the PONZI Bar). And I repeat, the stimulus was responsible for putting a fake bottom under the GREAT GLOBAL RESET so we still have to find it….it will come!



Then you simply want to cash in all USD denominated investments and move into those 70’s investements above. NOTE: Any growth in the 70’s were hammered just as the 80’s began so you want to think this decade out further to cash in your AVG. returns.

People buying RE in the 70’s were estimated to have over 30% down as that was the min. limit. Most I have spoken to lately had 50% or more as interest rates were not in their favour.

If we get an acceptable reset in RE then it might make sense to buy into it, but if we in Canada dont see an reach back to at least 2003-03 levels…dont buy!

Create a picture for yourself during the 70’s, oil prices peaked, one car families, affordable housing, one FT income and maybe a PT one if needed.

You saved to put in a new driveway or roof, maybe some new windows. Jimmy got a new bike, second car was run down but used by the kids, they paid for the gas they used.

Gas guzzlers replaces by compacts, this time compacts replaced by hybrids. Oil Heating replaced by Nat Gas, now Nat Gas replaced by alternatives.

Protectionism and deadly taxes will be the last straw for the Western world. Boomers will have no choice to move to lower cost regions, Asia will not come out unscathed as the dependance on the West will come out but long term where you want to be, you can start yesterday for positioning.

We all need to slow down here! We are going back to the days of long term investing, the Gen Xer Y’s have no concept of this so they will spiral through the decade with moneyless Boomers trying to help, but it wont be nearly enough.

High Risk & Moderate Risk will no longer exist.

Good Luck!

#8 Steve on 11.11.09 at 12:11 am

“As growth shifts out of Canada (and the US) and into other countries with younger workforces and less debt, smart investors will be looking to put their wealth there.”

Peter Schiff was right huh?

#9 rory on 11.11.09 at 12:33 am

GT …do you think Govt’s in their zeal to top up tax revenue will go after RRSP’s over a certain minimum or would it be political suicide given that public pensions do not yet seem to be on the hit list …i.e. will they both go hand in hand as in if gov’t pensions get reduced then RRSP’s will be targeted or vice versa …any guess or knowledge.

#10 rHab on 11.11.09 at 1:12 am

Dear God, WTF happened to that house?

That stuff doesn’t just spontaneously appear. Kill it, kill it with fire!

#11 Pitaking on 11.11.09 at 1:15 am

Garth, great post, this should be a must read for all perma bulls. We are no where near the end of this crisis and I think you’ve painted a picture of a very probable future.

#12 nonplused on 11.11.09 at 1:20 am

Right now stock markets are moving with an almost 100% negative correlation to the US dollar. It’s the only inflation hedge most people know. Unfortunately you have to pay capital gains taxes on your inflation hedge, so even if you stay even with inflation you loose to taxes.

I’m a firm believer that the future is inflation. We have had inflation for 40 years now, with some brief respites, and I can’t see why things would change now or in the future. It is the way of all unregulated paper currencies. The temptation by the issuing authority to print more to fund expenses is just too overwhelming.

However, that doesn’t mean we can’t have a whole bunch of deleveraging right about now that will devastate asset prices. Not seeing any decreases at Costco though, the price of food is up at least 25% over the last few years, and some items 100%. I sure do like the maple syrup they carry, but a bottle that cost $7 two years ago is $14 now. Oh well I guess there is always corn syrup, also up but not as much.

Computers have sure dropped though, holy heck. I guess that has been an ongoing trend.

The whole key to understanding money is as a unit of measure. When something has a price, it means it has a measure of value compared to other things. It’s a way of trading dissimilar items via a common medium. It’s like an “inch” (cm in Canada).

Most governments have some sort of “Weighs and Means” committee which is responsible for ensuring a unit of measure is consistently applied in their jurisdiction. For example, to make sure you get a litre of gasoline for $0.99 (used to be $0.49), they actually go around to the gas pumps and test them. Service stations are obligated to periodically calibrate their pumps and they are expected to be within a fairly tight tolerance.

Same thing with packaging. If the box says “1000 grams” it had better be pretty close to that or the government gets all cranky.

The US government in particular was very concerned with such things around the time of the revolution, because British merchants had the habit of repackaging stuff in smaller quantities for profit. That is why the US gallon is smaller than the Imperial gallon. I think the ratio is around 5 US gallons to 4 Imperial gallons, or a 20% extra profit to the merchant of the time.

So gallons are gallons, litres are litres, kilometers kilometers, inches inches, a Kilowatt is a Kilowatt, and a GJ is a GJ. All tightly measured and monitored.

But what is a dollar? In the US example, the constitution only says that US money must be made of either gold or silver. At the time, the dollar was defined as 360 grains of silver, which was about the weight (grains are a measure of weight) of the Spanish coins that circulated commonly at the time. 360 grains is pretty close to 1 ounce, which is how we got the original US dollar coins which were 1 ounce of silver and 90% pure (alloys were used to make them stronger). People actually carried these things around to buy coffee or gasoline. Many people alive today remember the old coins, as they did not go out of circulation until 1967 (1968 in Canada). Quarters, and dimes were also made of silver, and pennies were pure copper.

The Canadian silver dollar was only 0.8 ounces, perhaps enforcing a weaker Canadian dollar right from the start or something.

I have a pile of these old coins, many quite masterfully designed to commemorate certain anniversaries, but the bulk of the Canadian dollars have 2 guys in a canoe on the back. Remember them? I am sure many of you do.

Ok, so where we have got to is that a “dollar” was originally defined in the US as one ounce of silver equivalent and a dollar in Canada was 80% of that amount. Cool. So we know what a dollar is.

Paper money for large amounts is fine in principle, the principle being that the paper money is redeemable for the face value in silver or other goods and services of equivalent value. And maintaining that convertibility was role of the central bank up until 1973 (but they had been planning the disconnect earlier, which is why they stopped minting silver coins and moved to 100% alloys.)

Everything could have in theory continued to work just fine with a paper money system, had the central banks been charged with maintaining price stability only. Sure, silver could have risen if in short supply (or fallen) but if they managed the money supply such that prices in general were constant, the only thing that would have changed is that the mint would have a higher “seniorage” (profit) on alloy coins.

However, that is not what happened. The central banks were not given a “zero inflation” mandate. They were given a ”low inflation & full employment” mandate, a contradiction in objectives if there ever was one.

Add to that a social democracy, where everyone was trying to vote themselves a free lunch at the expense of the state, and a couple of military adventures that the public would not fund through higher taxes due to unpopularity (WW2 was the last popular war that the public was willing to finance, probably with good reason), and the central banks were forced to accept 2% inflation as about the best they could muster. Keep in mind 2% inflation doubles the price structure every 35 years due to compounding. And at times the inflation rate has been much higher than that. CPI is widely believed to understate the real inflation rate by as much as 4% due to “hedonic adjustments” and other substitutions even in normal times. Although directionally it’s still a good measure. It can tell you if inflation is rising or falling, but not the actual amount.

So, where we are now is a state where the lowly dollar will buy about 5% of the goods and services it would in 1920. And this in a “capitalist society”, which Adam Smith thought should experience gradually falling prices as improvements to capital infrastructure would lower the cost of production. But Adam Smith had no experience with unbacked paper other than as a fraud. The inflation has been so bad that even the lowly penny is now an alloy as the copper is too expensive. And most humorously, even the tin and zinc they use now is growing too expensive such that the melt value of these debased coins is higher than the face value.

This is the real reason you hear talk now and again of “scraping the penny”. The penny costs more to make than it’s worth.

People worry about hyperinflation. I say it’s already come and gone in a controlled manner. And there will be more of the same but since it’s exponential, it will appear more and more dramatic.

Of course, house prices still cannot continue to rise until the inflation flows through to wages. They are using distorted lending rules/rates to cover up that little problem. But since money is created right now by writing debt against an asset, they need asset prices to rise in order to have something to monetize. Well, except for quantitative easing, which is the process of calling new government debt money and is no different than just printing it long term, since it cannot be paid back in anything other than new government debt when the old debt comes due. Any mass attempt by the holders of government debt to trade that debt for goods and services would quickly lead to the most profound global inflation the world has ever seen or outright default. But this post has been long enough, so we’ll save how that works for another day.

#13 Joshua on 11.11.09 at 2:08 am

Garth, YOu comin to calgary

#14 TheBigLebowsky on 11.11.09 at 5:15 am

If people don’t think Governments with free access to printing presses won’t try to print their way out of this mess, then they are niave. There will be inflation globally as more and more fiat money chases tangible assets like commodities and gold/silver. The U.S and other countries will default on their debt between them and their will be a currency crisis. Confidence will be lost in paper assets and a new reserve currency partially backed by gold will be introduced. The great ponzi scheme that has been in existance since 1971 when Nixon took the dollar off the gold standard, will be over. The U.S economy will colapse and there will be a major war to distract the world from the mess these private bankers have caused. History will always repeat because sociopaths have no imagination.

#15 Piccaso on 11.11.09 at 7:21 am

12 nonplused on 11.11.09 at 1:20 am

In Canada we have a $750,000 lifetime capital gains exemption. Enjoy!

#16 David Bakody on 11.11.09 at 7:26 am

1. The Dollar Meltdown by Charles Coyette
Good/Bad reading Garth?

2. Chinese credit card debt mounts November 11, 2009 — Updated 0633 GMT (1433 HKT)

3. My last post wrt to world oil shortage …. there was a quick report by IEA boss …. not true … hello? and then he went on to say the world better look at putting several Trillion into Climate Control …… A BIG HELLO, Stephane Dion was way out in front on that and well y’all know what happened. Now we are not even in the ball park let alone on the field.

#17 David Bakody on 11.11.09 at 7:28 am

Addendum to 2. above


#18 Taipan on 11.11.09 at 7:46 am

Note to Typhoon.

I really feel for you. We have seen a lot of reports on a number of forums about women who must buy a house – reasons….. nesting behaviour, hormonal, status, opposite of the brain – take your guess.

I feel for those males who understand the horrendous financial mess that buying a house in this bubble will cause, yet there wives are basically demanding their house.

Incomes wont increase, and when she wants time off to have children, how is one income going to cope? It wont, and future years there will be a lot of marriages fail because of financial pressures, and unrealistic expectations.

#19 latinlife on 11.11.09 at 8:14 am

Buy Gold, Silver and Platinum.

All available over-the-counter at BNScotia on Bay.

#20 somecatchphrase on 11.11.09 at 8:19 am

This market has been driving me batty.

Risk assets have had a tremendous run this year, so a correction should surprise nobody, regardless of the economic data and go forward outlook. At the same time, things may well continue to go higher with all the free money that’s sloshing around thanks to ZIRP and QE in a rally that defies all the traditional metrics of fundamental analysis.

So-called safety assets such as fixed income and cash have risks of their own. Even with modest inflation, ‘cash is trash‘ at current interest rates. Worse, there is considerable reason to believe that inflation soon will be more than modest.

At the end of the day, there are substantial risks, no matter where you invest.

My best guess is that risk assets will continue to appreciate so long as rates remain low, as money has nowhere else to go. I’d venture to guess that a modest increase in rates might even cheer the markets.

This rally will probably be brought down by some type of “black swan” event. The type of event that nobody’s even talking about. For example, I caught a piece the other day about the North/South Koreans exchanging naval fire. I bet this is very disconcerting to the Chinese. The infinitely complex “real world” will make a mockery of all those who attempt to predict or control it’s direction.

In fact, foreigners may continue to buy our debt for some time, as an abrupt crash in the USA is in nobody’s best interests. Maybe the Chinese recognize that they too benefit from America’s hyper-power. If the Iraqi’s ever get their act together, the US will have done the whole world a huge favor, bringing new oil supplies into production.

Peace and security are absolute prerequisites for economic prosperity. A world without the US would be like a city that doesn’t have a police force. Maybe the Chinese elite sees a quid pro quo that economists and investors are ignoring. On the other hand, I’m sure there are differences of opinion amongst the Chinese. I’m sure that wealthy and influential exporters have their seat at the table. Maybe there are solid reasons why they continue to buy USA debt.

Sidebar – Thanks to both Garth and #12 nonplused for their excellent postings today.

#21 robert on 11.11.09 at 8:58 am

That’s a pretty funny looking sideways move the last eight months. Whereas a serious debt deleveraging washout would be painful, a prolonged range bound market will eventually bankrupt everyone, bull and bear alike. Aren’t the bulls bogarting their turn?

#5 Bob

Canned goods and shot guns.

#12 nonplused

“…the future is inflation. We have had inflation for forty years now and I can’t see why things would change now or in the future.”

This is the type of linear, inflation expectant thinking the powers that be hope to instill in us all. They are terrified of deflation (as it will expose them as frauds and destroy their political power) but desperately hope we will all be kept in line via an irrational fear of inflation. So far they seem to be doing a fairly good job.

The first two lines in your second to last paragraph are closer to the truth than most know.

#22 ca on 11.11.09 at 8:59 am

For anyone who gets Bloomberg (may be available at the website)….Charlie Rose is interviewing Ken Rogoff tonight. Rogoff indicates that the US has enough money to pay its debts provided the government has the will to raise taxes high enough.

#23 David Bakody on 11.11.09 at 9:04 am

#14 TheBigLebowsky on 11.11.09 at 5:15 am

Your words are true, unfortunately there is a much bigger picture …. The US of A is the World’s Police Force with over a million troops and established bases around the world … and yes outer space. No country to date is willing to step to the plate. Yes China has more troops and is building at an alarming rate …. but deployment and countries willing to let them occupy their soil quite a different matter. Add to this the lure of Wall Street with established investor savoy people with long and reaching arms will allow the the US to operate for a many years yet. Will power change hands, of course but for now most countries with the will to do so would rather ride on America’s skirt tails. Think? there are still ways and means for the US to extract world profit’s for the rich an powerful and they all but control the entire government. The only fear they have is mass revolt and they still that Ace in the hole ….. the mighty US dollar which is still accepted world wide as the standard. Will it change? do you think so? If you or anyone thinks so …. cash your chips in and buy and work for the new stuff. Hint, the big boys have not and no plans to do so any time soon.

Bottom line …. they are not finished with driving the middle class down and can play them like yo yos world wide at a drop of hat. Hello bi elections in Bloc country were promised Stimulus money by who?

Off to Point Pleasant Park …… if these brave service people only knew what they gave their lives for, or should I say who or what. In any rate such is history.

#24 ClaudiusEmperor on 11.11.09 at 9:16 am

You don’t fight debt by getting new loans.
Money printing can cover 1/4 of the needs of the governments.
The rest has to come through borrowing (increased debt) or taxes.

The picture that we see currently is skewed.
Due to the easy money spend recklessly by the governments.
That is why we see price increases instead of decreases.
But this is only temporary.
Once the governments run out of money to borrow then will come the taxes (HST..)

Currencies are week as the investors short them. This creates the mother of all bubbles (Nuriel Roubini) on the stock market, housing market (only in Canada as we are different…), commodities.
All these bubbles will eventually collapse.

The best place to keep you savings in the next 3-5 years is cash. There will be no real inflation in the next 3-5 year, the money will be worth more and more when the real nature of this crises becomes evident.

What worries me about Canada:
1. We borrowed huge amount of money to keep spending and inflate further the assets and commodities bubbles.
US spent the money they got on mitigating and fighting the crises, we spent them on creating a bigger crises through borrowing
2. The habit of the Canadian governments (federal, provincial, municipal) to maintain irresponsible spending and creating revenue by taxing.
US would not allow half of the taxes we are getting, people will revolt.
3. With more taxes we will see less services. Pay European taxes to get US (and less) level services. This looks like our future.
4. The risk that the government is imposing on taxpayers by backing up the CHMC.
Yes, the banks will continue lending as they take no risk, the risk goes to the taxpayers thanks to CHMC.
5. The last nail in the coffin – the baby boomers.
If we have inflation all the baby boomers will be screwed.
Houses will cost close to nothing as the boomers see their savings (the few that have them) evaporate.
You would get a decent house on credit for 2 times your yearly income. Well the interest rate will be 10 percents.
But will still be way more affordable.

The most important thing in the years to come is to have a job.

#25 Compromise on 11.11.09 at 9:33 am


No offence, bud, but if you’re in marriage counselling over this then you likely have bigger fish to fry. Before buying anything, make sure you get the bigger issues figured out.

Sort out this disagreement between the two of you — a marriage counsellor can’t help with these types of things.

Here’s a proposal for a compromise: Get her to plunk down her cash on the house and buy it. You pay the equivalent of what you’re paying in rent into the mortgage (ie, rent your portion of the house from her) and let her pay the difference.

Get an agreement written up that says that if the house realizes a capital gain, she gets to keep it all. If it goes underwater, she is responsible for all of the debt.

When it comes to primary residences, marriage law makes it tricky, but a clever lawyer can probably find a way.

You may not need to go that far… Once she hears that you’re willing to put your money where your mouth is, she might back down.

If she starts pulling the “we’re in this together” and “I thought this was a 50/50 partnership” thing (which is the inevitable outcome of the conversation above) explain to her in gentle terms that you view it that way too and in any 50/50 partnership, if both people don’t agree, they need to come to a compromise and this is the compromise you’ve come up with that gives both of you what you want.

Does she have a better compromise that works for both of you?

Good luck.

#26 Hiteclowtec on 11.11.09 at 9:36 am

Just got my home insurance renewal 12.6% increase, add an auto increase of 14% and you can see where we are headed. These SOB`s are going to bleed us dry !!!! Even the socialist NDP didn`t have the balls to stop them.
So get a tent, hitch hike and invest in Banks and Insurance companies for dividends !

#27 Alex on 11.11.09 at 9:52 am

#5 “So where are we going to invest our money if all goes to shits?”

The answer is here:

#28 Maurice on 11.11.09 at 9:57 am

Just compare the Residential REITS of Residential Real Estate Corps as per TSX share price versus the private residential real estate market to see how much of a bubble we are in. The Residential REITS are still below their 52 week highs. Therefore there is no money in owning residential real estate. If rental income won’t pay the “freight” it is a bad investment. Period!

#29 pbrasseur on 11.11.09 at 10:01 am

“As growth shifts out of Canada (and the US) and into other countries with younger workforces and less debt, smart investors will be looking to put their wealth there.” – Garth

I disagree with that. Growth is a global phenomenon (it doesn’t “shift” from one place to another), growth in India, Indonesia or Vietnam will impact growth here and in the US also. For example I own stock of IBM, Cisco, GE and others and I think chances are pretty good these companies will make a lot of money in the future even if (big if) their home markets are more quiet and that will spark growth everywhere including here. Globalization is still ongoing and that’s a very big train coming (…), it could balance many of the other variables you rightly talk about.

That’s why predictions are so hard to make (and economy so interesting…).

Af for Japan, indeed a genuine disaster, it’s an extreme story mostly about demographics, very rigid economic structures and very bad management by the state. Canada and the US despites their many problems are nowhere near those extremes in most aspects. I you believe so you will be misslead. That being said a default from Japan could trigger a crisis. But we already know there will be other crisis, that’s human nature.

#30 Schroedinger's Bull on 11.11.09 at 10:19 am

The $750,000 Capital Gains Exemption only counts if you’re holding QSBC shares (i.e. NOT publicly traded, and carrying on an active canadian business), farm, or fishing property…

Not sure how that’s useful for most of us.

#31 Grey on 11.11.09 at 10:22 am

#6 Typhoon

Did you ever see this fun survey done about Men’s and Women’s House Buying habits:


I am a woman and I disagree with the majority of women in that survey. I am not an emotional buyer. My bottom financial line of affordability is just as important to me as a backyard for the kids. I’d need several trips to that house to see if it’s really worth living in at different times of the week no less to asses traffic, neighbourhood vibe, etc. And I’d much rather have a shorter work commute than live close to my family (*shivers*).

I understand your wife’s desire to own a home because we’re in the same boat. Only we have a child and are beyond squeezed in our tiny cubicle of a condo. So we need (vs want) to buy for our growing family. And we can’t afford a thing right now even though Mr. Carney and everyone in the mainstream media tells us they’ve done what they’ve done to help improve affordability for first time buyers. HA. HA. HA. As if. They’ve made it a million times harder to get into the market and made house prices skyrocket. So what’re we doing? Sucking it up and sitting put. We do not have a choice because we don’t want to commute 2 hours each way to the City to get to work and because of the type of work my husband has, there’s no option to live far away and get a new job. Let alone in this economy.

Tell your wife that if it’s just the two of you right now, to sit back and just save your bigger downpayment. If it was just the two of us, I’d be laughing at the all the idiots getting into the market right now. My issue is that I feel like we live in a sardine can and it’s grating my nerves (and I don’t even want a McMansion, just an extra bedroom with a small patch of grass in the backyard). We got offered a 5/35 mortgage and I refuse to touch it. As for your friends, which seem to be the same as our friends, some of mine have already lost their jobs after buying and most are holding down the fort with the kids on one salary. And she wants to risk home ownership for that?

#32 Brainsail on 11.11.09 at 10:24 am

#24 ClaudiusEmperor

Your point #1 is an important observation. The US injected stimulus money into the banking system AFTER falling real estate prices were known and Canada injected money BEFORE any drop in real estate prices. What bullets are left for the obvious future drop in values? It was a dumb, ass backwards move!

#33 Soylent Green is People on 11.11.09 at 11:20 am

#6 Typhoon on 11.10.09 at 11:28 pm

Go to the Beer and Liquor store and load up your truck with cardboard boxes. Bring them home and start sorting and packing up your stuff. Don’t say a word to her. Start labelling the boxes. Leave computer sheets around re one bedroom and bachelor apartments lying around your place.

If she’s stubborn, you may have to move into a short term rental for a month or two before she gets the message.


#34 Toronto C9 Renter on 11.11.09 at 11:23 am

Lots of posts mentioning gold today…

As an investor, I don’t get Canadian’s excitement over gold. If you’re buying it in C$, are you really making any returns??

Yes, gold is up in terms of the depreciating US$, big deal, so is everything else.

But in C$ terms, gold is still well below its high reached in Feb.

And don’t even get me started on gold miner stocks! I’ve been holding Kinross since last fall and it just bounces endlessly around 20$. ABX is similar. Plus no dividends. This money is basically wasted. (Although I concede they are good day trade prospects given the volatility)

#35 Devil's Advocate on 11.11.09 at 11:43 am

Most of us are nothing more than cattle to be herded in manners that would most benefit the few. There are those who consider us something quite unworthy of concern. Take for instance the Vancouver 2010 Winter Olympics; box seats at some of the events $68,000.00! These are their more popular tickets to that event. This according to a BCTV News story last night. Can you imagine?!?

The whole Olympic Games is nothing more than an elaborate party put on to entertain the worlds super rich at the expense of the host City/Province/Country. Yes there could be some economic spin-off… could be… if the host does such a fine job of impressing the guests… super rich, powerful and influential super rich. But lets face it they are here to be entertained… not scope out business opportunities. The will be busy with things of social nature business might happen only to be consequence through their social networks. Do you think such networking toward business prospects would not be done otherwise?!?

Investigate the real purpose of the Olympic Games, investigate the cost, investigate the PRIVATE functions of sport and investigate the cost of attendance of those events open to the public and you will surely see that this is nothing more than an elaborate party for the rich and powerful.

Oh and how about that new “weapon” the Vancouver Police department has just recently acquired in time for the games.




Ultra high pitched sound emanating crowd control device which has not been thoroughly tested, f which the three units sold; two were to the US Military and one the Vancouver Police Department. But it doesn’t shoot bullets so it’s lethal nature is questionable. Check it out… It IS VERY dangerous if not lethal and, despite what they say, obviously has been bought to use potentially against crowd control at the Vancouver Winter Olympics… Wouldn’t want to dampen that party for the super rich and powerful… that party WE are paying for.

Hey GORDO… I’m your target market… I’m the mainstream guy who’s vote you campaign for. Hey GORDO… Stick it… not next time as not this last!

#36 Future Expatriate on 11.11.09 at 11:43 am

#2 “Moving sideways. Think 1970s. — Garth”

Don’t you mean moving DOWNWARDS (adjusted for inflation) as it APPEARS to be stagnating OR moving “up”?

Think 1930s’.

#37 Future Expatriate on 11.11.09 at 11:48 am

RE: Nightmare on fungi drive

May it happen to EVERY house built before 1970 and every house built AFTERWARD in a style prior to 1970.

Frank Lloyd Wright WILL be avenged!!

Ayn Rand too, for that matter.

Bring out yer bulldozers…

#38 David Bakody on 11.11.09 at 11:50 am

As a retired RCN vet and son of a RCNVR WW II vet I was most pleased of the record numbers of people who took the time and effort to attend this morning. On leaving and noticing that cars were parked well up on to Young Street there effort to walk a good distance is even more gratifying.

Thank you ….. and we can only hope and pray our brave troops are all home safe and sound by 2011.

#39 Devil's Advocate on 11.11.09 at 11:51 am


#40 rory on 11.11.09 at 12:00 pm

The article referenced below talks about reducing public service salaries by 20% (something I said needed to happen a few months ago)…insert the country Canada where you read Ireland and see if it is not eerily similar.

According to domino theory – once one tile falls all fall …if one country has the balls to do this then it will be easier to others to implement.

This is one more way for Gov’ts to get a handle on their debt versus just raising taxes on the private sector…this will be good for all if it happens …again a 20% cut across the board for salaries and pensions in the public service is just one step toward fiscal sanity in this country.

Note: Of course, a minimum gross salary will be needed in case one fall below a certain range + a salary reduction is better than layoff’s when no jobs are available.

All IMO.

P.S. – remember the public service in Canada (including pensions) is paid 7 to 45% more than the private sector equivalent.

Thank you to http://fairpensionsforall.blogspot.com/ for this article: http://www.irishtimes.com/newspaper/opinion/2009/1110/1224258481010.html

#41 Dan in Victoria on 11.11.09 at 12:10 pm

Lets not forget today to pause and give thanks to the men and woman who gave their lives for our freedom.

#42 Devil's Advocate on 11.11.09 at 12:18 pm

BCCLA demands policy for VPD Olympic sonic gun
A representative for the Vancouver Police Department confirmed to the BCCLA last week that the VPD has acquired an LRAD (Long Range Acoustical Device) crowd control weapon for the 2010 Olympics. He advised that the VPD would be using the device to ensure that police instructions were clearly heard. The sonic gun fires a concentrated beam of sound at its targets that can cause hearing damage and temporarily disrupt vision.

BCCLA President Robert Holmes pointed out that even as the Taser inquiry has not yet reported back, police are acquiring another high tech device that could be used to cause grievous pain. “This crowd control weapon was obtained without any public discussion and without any defined policy for its safe and proper use being set in advance. Tasers were also brought in through such an ill-considered and backwards approach.”

To the knowledge of the BCCLA, there have been no public discussions around the purchase and use of an LRAD in Vancouver or British Columbia, no Canadian safety testing of the device, no Canadian approval of the device’s use by any agency independent of Canada’s police services, and the device has never before been used in a protest scenario by police in Canada.

“On October 22, Vancouver Police Chief Jim Chu said that ‘No extraordinary effort will be made to restrict protest because of the Olympics,’ but his force is buying new and untested weapons,” said Holmes. “A City Councillor said that we were out of line for noting the parallels with Beijing, but Vancouver joins China in embracing these devices. The secret purchase and implementation of the LRAD, in conjunction with Vancouver passing a bylaw that suppresses free expression, reduces the credibility of blandishments from city officials about not interfering with lawful and peaceful demonstrations.” BC Civil Liberties Assoc.

Is it just me or are our governments becoming something quite apart from that which we have been led to believe they were for decades. This is scarry stuff!

#43 Men With Hats on 11.11.09 at 12:43 pm

I’m investing,heavily,in Tulip bulbs. See how that works out .

#44 Stessed on 11.11.09 at 12:43 pm

I know exactly what you are talking about. I am in the same situation as you. Counselling and the whole bit.
I have managed to delay the purchase pressure for a year by agreeing to rent a similar place to what we would buy in the area we want to live for one year. After the year is up who knows but it gives me a year to come up with a new plan.
Good luck

#45 Evangeline on 11.11.09 at 1:13 pm


I always appreciate your posts …
Are you a self-directed investor?

#46 Nostradamus jr. on 11.11.09 at 1:18 pm

Japan, Germany & the rest of Europe are in tremendously worse fiscal shape than is the U.S. and certainly Canada.

…Makes Canada’s primo location, Vancouver Proper, as the safest, absolutely dirt cheap compared to Hong Kong RE, and therefore making it the future Capital of Finance, Trade, Culture and Leisure of North America.

Unfortunately, Eastern Canadians cannot see the forest from the trees as they continue to own a “Centre of the Earth” attitude.

Nostradamus jr.

#47 Evangeline on 11.11.09 at 1:20 pm

#35 Devil’s Advocate

I read a post once that said a nation is totalitarian in proportion to how highly it is taxed. As our tax burdens increase, expect liberty to decrease proportionably. At 100% tax we are 100% owned slaves.

#48 HouseBuster on 11.11.09 at 1:42 pm


Time to get serious here, are you going to let some jackass with a blog (sorry Garth) ruin your marriage? If you really love her just compromise and buy a small condo or townhome and wait it out. Money isn’t everything.

No, being a bully is much more satisfying. — Garth

#49 Alex on 11.11.09 at 1:46 pm

to #34 Toronto C9 Renter

I’m afraid you didn’t do your homework properly.
The growth of GOLD in Canadian Dollars:
6m – 6.72%
1y – 31.37%
5y – 122.17%
10y – 172.17%

Please check out http://www.kitco.com for future reference, there are graphs in CAD at the very bottom of the front page, just click on ‘Canadian dollars’

#50 jess on 11.11.09 at 1:47 pm

…salesmanship that looks through rosy coloured glasses is not a crime.

“Dane Butswinkas, Mr. Cioffi’s main lawyer, told jurors during the trial that prosecutors had taken e-mail messages out of context and provided “misleading sound bites” to try to prove a criminal conspiracy. “When you look at the world through dirty glasses, everything looks dirty,” he said in closing remarks last week.”

Caveat Emptor


estimate of future losses – a “provision”
Provisions by definition are estimates – whereas charge-offs are real and mostly final.

The difference between provisions and charge-offs goes to a “reserve for future losses” or more commonly just “reserves”.

It would seem that reporting potential /actual still seems to have blurry myopic vision.

#51 TheBigLebowsky on 11.11.09 at 1:50 pm

Moving sideways. Think 1970s. — Garth
Care to expand for the people here what gold did during that time period ? If the comparison is going to be made to the 70’s, gold went from $35 an ounce to $850 an ounce. That was a 24x increase on a person’s investment. The average gold mining share out did that performance by 40x . Adjusted for 1980 official government scewed numbers, gold should be trading at $2700 U.S today . Real inflation numbers puts it at $6700 . But hey its just a relect and a commodity as you say…… My plain jane precious metals mutual fund is up 70% since january. People should hold at least a good portion of their assets in gold/silver and related shares. This paper fiat experiment hasn’t even begun to blow up yet

Gold actually spent most of the 70s in the $200 range, after being artificially pegged at $35 an ounce by the US government following the Bretton Woods agreement. Can’t you bullion bunnies be truthful about anything? — Garth

#52 robert on 11.11.09 at 1:59 pm

Two things about that house. Either the water heater busted or a toilet tank cracked and leaked for a period of time before it was discovered. If the house was closed up and any heat on, presto, major mold formation. I used to work in insurance and I have seen way worse. And someone expects to get 200K plus for this? I suspect a tear down in the making and would therefore offer the value of the lot less the cost of demolition and debris removal.

#53 David Bakody on 11.11.09 at 2:32 pm

Fr. to-days MSN money reports

SINGAPORE – Asia-Pacific ministers warned Wednesday that signs of recovery in the global economy are merely a respite, and future growth hinges on freer trade and improved social safety nets in Asia.

It also states the the Dow is too high by about 25% !

“Stand to the gun’s crew ”

Both of the above statements (again) are words Garth has said and echoed by many here.

In plain language …. the recovery is based on a false economy and bad stimulus spending. Freer trade means more jobs shipped overseas to where labour is cheap and then goods shipped back at high prices. dah!

Bin some time before I have read as many bad indicators as what is being printed now. The TD Bank is just one that has started to protect itself with the truth. Why? because it is just too close to last big fall and not one person feels comfortable.

Just returned from taking my wife to lunch at a the Ramada Inn …. prices up about 35-40% and she told me she was not surprised because groceries are up. So if you think you are getting a cheap meal some place , stop and think Why?

So when Harper’s Sales Tax hits Ontario & BC along with more Federal and Provincial taxes all couched in higher interest rates ….. Remember that 2% GST cut and the promise of better days? Give Harper full control soon because he has spent (still not finished) well into 2020 anyway. “To the victor go the spoils”

Canadians just could not stand prosperity anyway …. they had it and threw it away in a heartbeat.

#54 Bottoms_Up on 11.11.09 at 2:34 pm

If we are facing a lost decade, does it make sense to burn $150,000 in rent, or spend a bit more toward paying off a house?

Methinks it will depend on the micromarket/bubblelishusness of each city.

FYI, mould is not bacteria (in fact, some moulds produce antibiotics which kill bacteria). And there are good bacteria out there (probiotics):


#55 Toronto C9 Renter on 11.11.09 at 2:39 pm

to #48 Alex, thanks I’m aware of Kitco.

No, my facts are correct. Your post is exactly the kind of hype to which I’m referring.

People seem to believe that, just because a commodity rises in terms of a depreciating currency, that the commoditiy is increasing in value.

In reality…

1. Gold hit a high in C$ in Feb at roughly $1,235 CAD per oz. It is currently at $1,160 CAD or thereabouts. i.e down, not up.

2. Kinross, one of the biggest Canadian Gold miners is at $20.50 today, well off its highs of 2008. Same for Barrick, Goldcorp etc

#56 Downsized and Delighted on 11.11.09 at 2:43 pm

It was the 70’s stock market stagnation that led to the huge run-up in real estate in the 80’s.

#57 pbrasseur on 11.11.09 at 3:00 pm

Evangeline #44

“I always appreciate your posts …
Are you a self-directed investor?”


And yes, for the most part. I’ve become allergic to fees (which are often outrageous) and realized I can do just as well on my own than with most advisers.

#58 Alex on 11.11.09 at 3:05 pm

to #54 Toronto C9 Renter

Yes, you are right that February values are higher than today’s – but please look at the big picture that I provided above, and it is not hype by any stretch of the imagination. It is actually all about printing press….

#59 Calgary_rip_off on 11.11.09 at 3:07 pm

That house would be $500K in Calgary. And what’s really funny is the realtor/seller would find some complete moron to buy it.

#60 pbrasseur on 11.11.09 at 3:10 pm

Downsized and Delighted #55

“It was the 70’s stock market stagnation that led to the huge run-up in real estate in the 80’s.”

Could the reverse be true in the next decade?

#61 latinlife on 11.11.09 at 3:21 pm

Garth downplaying gold again.

Funny that he’s on gold radio FM weekly.

He’s like that Nadler dude at Kitco.

A bear in gold clothing.

#62 Lost in the Okanagan on 11.11.09 at 3:26 pm

A few years ago we used to hear often about the amount of wealth that was going to be handed down as people started to pass on in large numbers due to ageing etc. This included life insurance money, real estate, stuff such as antique cars and good old hard cash. I recall the number being $10 or 11 trillion. I wonder to mix things up if there is any information available that you could do a blog article on this topic. I am guessing that some people are going to inherit vast sums of wealth, some will inherit nothing and some will inherit a lot less than they might think… I am curious about this as it may effect our future world in several ways.

#63 AM on 11.11.09 at 3:26 pm

#55 downsized

and what happened to that hude run-up at the end of the 80’s?

#64 Zaza on 11.11.09 at 3:28 pm

Ultimately some sanity comes
Real estate recovery will be weak in Canada due to limp demand, report shows

#65 JO on 11.11.09 at 3:31 pm

Garth, you say maximize tax avoidance and minimize tax period. Sounds great, but i fI use up all my cash to put into an RRSP, what are your thoughts on the HBP if i decide to buy ? Also, what is to stop the Gov’t one day (when the bond market gives em the middle finger) forcing all RRSP to hold only gov’t of Canada TBills to help pay bills..watch the value of your CAD $ drop to under 50 cents in that case.

Outside of RRSP, a low cost preferred share ETF or mutual would be great but there is risk as 2008 showed..some dividend funds dropped 20 % or more. You can’t own anything non CAD or complicated outside an RRSP without needing a CA to do your taxes and even then, you will likely get audited…the tax system and monetary policies are designed to punish savings…trapping all my money in RRSP scares me…gov’t could also limit withdrawals by adding a surcharge and the like in a fiscal crisis.


#66 Devil's Advocate on 11.11.09 at 3:50 pm

Nixon Ends Bretton Woods International Monetary System


#67 Chaostrology on 11.11.09 at 3:52 pm


We all feel your pain. You obviously love this woman, otherwise you would have hit the road.

Time to put your heart away and think your way out of this dilemma.

On the one hand, if you purchase real estate with your wife, you will make her happy for a while. Until her next non-negotiable want appears.

On the other hand, if you don’t purchase real estate with your wife, she will make your life a living hell and probably threaten to leave you.

You are not the Typhoon, you are caught in a typhoon.

We all know what Katrina did to New Orleans.

Think about what the stress of being a prisoner to that huge mortgage will do to you and your marriage if something unexpected happens and you can no longer afford the house. Splitzville buddy.

As I see it, make your stand now, because sooner or later, that real estate purchase will blow-up in your face.

10 minutes later…

OMG Typhoon, I think I understand now,


If your wife was average or just a liitle over-weight, you’d have already left. No, no, there is some perceived value to you remaining with the TYPHOON.

You think that you are lucky being married to this woman, and that you’d never be able to find someone that good looking again.

Get out your own way buddy, LET HER FATHER BUY HER A HOUSE.

#68 Jake on 11.11.09 at 3:53 pm

#6 Typhoon.
Don’t listen to #47. I mean seriously, as if the only way to prove your love to your wife is to commit financial suicide. The spell of insanity is trying to take hold of your wife. Continued resistane is your best hope. Take a couple thousand of the dollars you will save by not buying a house this year and take her to on a trip. A house is not the key to a happy marriage.

ps, Aren’t you glad the your marriage counselor is not a part time realtor?

#69 OnlyTheBankersLaugh on 11.11.09 at 3:58 pm

Downsized. Stock markets in 70’s led to RE run up in 80’s? Didn’t massive python of baby boomers coming into the RE market hard and strong drive housing… DINKS and YUPPIES?

Nostradamus Jr – having lived in Kits, East Van, Burnaby for over 11 years (never NVan or even silly, snootier WVan) and lived in Toronto for another 15 years after university, careful what you continue to say about generalizations on centre of universe attitudes and general knowledge of places outside their own. Every town has their opinionated idiots. I can’t tell you how many people (even great friends in Van) said that they hated Toronto and they have never even been there. That’s laughable! For the record, I love both places for different reasons and still own property out there in Whistler. If you don’t think history of boom and bust will happen even in mighty Vancouver, you may catch an awfully sharp knife if you’re too far invested in RE alone.

As far as this boom in real estate, it is a bear market rally similar to stock market based on huge debt being devoured. As real estate is a slower moving market, it may last another 2 years – maybe more, maybe less – if USA keeps printing cash and CMHC keeps printing as well – which they need/want to do respectively.

Bond investors will eventually demand more interest for their bonds when currency continues to drop with fast increasing money supply and those homeowners 5 year rates for most 35 year amorts will now be much higher and you have hardly touched principal. This free money is creating major generational gaps especially if there is a major period of deflation splattered over it all. As many have seen over the years and it will be even more true in future, REAL income will fall while taxes will go up. It is not the last chance to get into the market. I guess we will see but betting odds are on a correction with boomer selling adding a catlayst to the downside. Unfortunately, it may be a while to see these drops, though…. and some of you have wives to placate and negotiate with…not an easy spot when markets continue to climb on free money.

#70 Jake on 11.11.09 at 4:00 pm

#6 Typhoon
If your wife is this soccer player, do whatever she wants.


#71 tjmikey on 11.11.09 at 4:03 pm

Makes me laugh….the German Gov’t is telling GM they MUST be responsible to re-finance and restructure Opel.

Yeah, right.

Or else….what?

You will soon see whom is running the asylum….Opel is to big to fail and GM knows it.

The German’s will cave just like all of the sucker governments around the world…..because they have to and these huge corporations and banks know it.

The point has been proven over and over and over, to big to fail is running the world economies into the septic tank (we have already been flushed).

#72 Devil's Advocate on 11.11.09 at 4:05 pm

Milton Friedman on The Gold Standard

Alan Greenspan on Gold Standard


#73 John Galt on 11.11.09 at 4:19 pm

Who am I?

#74 Kate on 11.11.09 at 4:26 pm

Now they are talking

#75 hal smith on 11.11.09 at 4:27 pm

#61 Lost in the Okanagan

Buy now and wait for the inheritance to bail you out is a strategy many are using. They know that they will never pay off their mortgages …..

#76 Into The Sunset on 11.11.09 at 4:36 pm

“This will mean long-term drifting stock markets, rising commodity prices and the necessity of crafting a diversified portfolio stressing growth and capital preservation at the same time. ”

Maybe someone addressed this question up above, however some of these comments are so long I’m not going to read their attempts at writing a novel!

Garth – as quoted above: If you predict rising commodity prices why would someone not invest in ETF’s such as HNU & HON for the long term?

Sector ETFs are fine if you pick the right ones. Index index ETFs are not. — Garth

#77 Typhoon on 11.11.09 at 4:47 pm

#25 – Compromise

Regarding my wife’s NEED to buy a home and my strong opposition to RUINING our financial future.

No, she hasn’t come up with any ideas that we can compromise on. She won’t compromise at all. I feel like I’m competing against a bunch of bricks and morter and loosing the battle (am I really that ugly? hehehe). Your idea is interesting, but to be honest I’m trying to protect us both and it’s not like I would feel good to see her loosing money on the home. I’m sure she’d ask me to help out and I would have to do that, so either way, I’d be on the hook for the bad decision.

I wonder if this exists. I am very familliar with stocks and options and I know if I feel that my stock is going to go down, I can buy protective put options which make money as the stock goes down. I wish there was an option market for real estate so that I could buy protective puts. That way we could buy the house and I’d buy the protective puts. Does something like this exist???

#78 Gord In Vancouver on 11.11.09 at 5:04 pm

PricewaterhouseCoopers and the Urban Land Institute Study

Real estate losses to average 10-20%: report


#79 Evangeline on 11.11.09 at 5:06 pm

#56 PBrasseur

((which are often outrageous))

I find the transaction fees charged by full service brokers bordering on criminal ..

#80 Typhoon on 11.11.09 at 5:33 pm

RE: Wife wants to buy, I don’t.

I didn’t realize I’d get so many responses so thanks to all for their response.

Someone suggested that I rent an equivalent house. I have already tried suggesting to her to rent the exact same house we would otherwise buy, but she thinks renting is for poor people. I think buying is for poor people (or future poor people anyway).

Someone else suggested pulling the bluff card where I would pack my stuff and leave possible rental papers lying around, well, that would either work to scare her or piss her right off so that she finishes the job for me. I’m not sure whether I want to gamble on that.

Someone suggested just getting up and leaving her.. well, we have such a long history and although I’m sure I can find someone else, I really want to stay with her, I just want the markets to start this correction already so that I can calm her down that we’re the smart ones by waiting. So far, while I’ve been saying the markets are going to correct, I’m watching prices rise almost 10% since August, according to Toronto Real Estate Board. I know I’m right on this (and I know Garth is right too), but I just don’t know if the timing is going to work in my favour or not. Will all of you guys start suggestign your friends read Garth’s blog and stop buying at these bubble prices. There are tons of morons buying houses now that will ruin their financial futures. I’m sure of it. I’m just not sure as to whether my own future will be ruined by then too.

#81 Lest we forget on 11.11.09 at 5:46 pm

In honour of Remembrance Day


My husband worked with Terry’s wife and had met him. He has a great sense of humour. Terry came into a bar where a neighbour worked and said Hi Terry. Terry said Hi Greg, sorry I didn’t see your car in the parking lot. Didn’t know you were working tonight :-) He has a fabulous sense of humour. But the song says it all.

#82 ca on 11.11.09 at 5:49 pm

Garth —

when will your next book be available?

1.02.10. — Garth

#83 Lest we forget on 11.11.09 at 6:17 pm

Even though I totally support our soldiers & verterans , I do not support extension of the mission in Afghanistan. This war is not winnable. The govt. is corrupt and no amount of Canadian, UN/NATO infusion of $$$ will ever correct it. Change can only happen within.

#84 Remembrance Day on 11.11.09 at 6:49 pm

#80 Lest we forget on 11.11.09 at 5:46 pm

War changes everything and touches everyone. In fact every one of us may not even be aware of how close war comes to us.

Until recently I did not know the details, that two of my own cousins were indirectly killed by wars. One was abandoned by her father when he returned from WWII – they called it shell shock then, but he was delusional with PTSD, and rejected his family and never spoke to his daughter again. She grew up and fell into a life of dejected despair and died too young of a broken spirit. Another cousin of mine was brutally murdered, her fate at the hands of a former soldier who came to Canada, still affected from torture during the Iran/Iraq war. Yet these were just average people. Within one degree I can count a few more relatives who also died directly or indirectly as a result of wars, some from the health problems caused during their service. I never thought of it that way before, the broader and long-lasting devastation of war and it’s domino effects, affects everyone, probably more so than we like to think, or remember.

#85 Calgary_rip_off on 11.11.09 at 6:57 pm

Typhoon: “Will all of you guys start suggestign your friends read Garth’s blog and stop buying at these bubble prices. There are tons of morons buying houses”

Good luck with that. Especially in Calgary. Everything is proconsumption here.

Marriage counseling because she wants the house and you dont? And you think buying the house is going to fix this? Marriage is about love, not finances. What so you lose your job, now she divorces you? How much does she value you and your relationship? One of the best ways to deal with the woman in your life, hear her, and then dont try to fix it. Ignore it. Oftentimes there’s nothing you can do to fix it. Are you getting what you want out of the relationship? If you are happy, dont worry about her being happy, that’s a deep pit. Some women are never happy. In my relationship my wife thinks we’ll be priced out forever and that I’ll never take steps to buy a house. Problem is, I dont have enough of a big down payment and it’s a very very bad idea to buy right now. Possible unemployment, overpriced crap, increasing interest rates, and double what they are worth houses are all valid arguments in Calgary. My marriage isnt dependent ultimately on whether I own a shack/house. If you love the other person finances dont dictate whether you stay married. If they do, I’d lose this chick, whoever she is. It’s very very hard to find a good woman these days, and most of them will take a guy for all he’s worth. Better to remain as you are dude.

#86 jess on 11.11.09 at 7:31 pm

David Bakody

It is all in the geometric weighting! ;)

“cheaper fish are being substituted for pricier “species. “The bottom line is that there is a lot of market fraud.”

#87 Barb the proof reader on 11.11.09 at 7:49 pm

“Sector ETFs are fine if you pick the right ones. Index index ETFs are not.”
— Garth

Just curious Garth, can you explain why for those of us who don’t know? thx

#88 Oleksandr on 11.11.09 at 7:52 pm

Don’t blame the house. Blame the builders and people who used to live in it.
Even genuine bricks/concrete may get fungus, let alone american-style particle-board boxes.
The slackers obviously deserve this economic disaster.

#89 Taxpayer like you on 11.11.09 at 8:03 pm

85 Rip-off

“Marriage is about love, not finances”

Whoa. Marriage is about a lot more than love. If you’re not on the same page with money, kids, family, you’re in for a world of hurt. Not saying you’ll see eye-to-eye, just looking at the same goals and general approach. You may work together, or one partner may yield to the other, but if there is a direct conflict, bad news!

Now we return to our regular programming……

#90 Just a Girl on 11.11.09 at 8:11 pm

#12 nonplused

Thanks for all the time and thought that went into your very nice plain English post on the dollar unit of measure. A keeper for me to reread and understand.

I value all the good advice shared here. I’m coming out of a 15-year marriage and have no pension or other assets, but I do have $100K to invest for my future. And still a few decades to work. So, I’ve not made any decisions yet, but taking everything in, digesting, and deciding what will be good directions and places to plant my faith, given the current state of economic affairs, and future likelihoods … oil, GDP, Boomers, RE, ETFs, equities, interest rates, national debt, management fees …. I have a lot to learn before I can make an informed decision. Thanks all for sharing your perspectives. Thank you Garth for this forum and the fearlessness to ‘tell it like it is’ (and take a few buns in your face).

#91 Herb on 11.11.09 at 8:13 pm

Lest We Forget,

thanks for you #80. It is one of those rare Remembrance Day tributes that is moving without being maudling.

#92 Emma on 11.11.09 at 8:34 pm

#6 Typhoon
There are more costs to home ownership than just an outrageous mortgage…basic maintenance, payments to the municipality, the value of your own labour plus roofing, pointing and perhaps completely overhauling the plumbing, electrical and heating systems. Then there are the ‘aesthetic’ renos that ‘pride of ownership’ often bring – update the kitchen every decade, add a bathroom, remove a bathroom, move the laundry to the second floor, move the laundry back down to the basement due to floods…etc. etc.

Get a spreadsheet going and tally up ALL home ownership costs over a 40 year period. Divide to get annual and monthly averages and show these to your wife. Start with a basic mortgage calculator http://www.bloomberg.com/invest/calculators/mortgage.html

In one unlucky year, a series of maintenance issues cost us $35K in total! Since we borrowed some of that, the true cost was probably closer to $45K. Rough year.
Our base rate (just the purchase price of the house + 25 years of interest) over 40 years is about $1200. Add in all the extras and we could totally be renting a house for less. A friend that just bought is looking at a base cost of $2200 per month for 40 years – yet, the assessed values of our homes are the same.

Alternatively, ask your wife to get a second job and save like mad for a year – because that’s what the rest of your lives are going to be like if you buy today.

Third option: ask her to choose between a house and having kids. Seems you can’t have both these days.

#35 Devil’s Advocate
You are right! The Olympics never brings profit to the host city. And that weapon sounds terrifying.

#93 Onemorething on 11.11.09 at 8:36 pm

#80 Typhoon,

Yup, if there is no comprimise on this then you better walk away. I would for sure as it would at least force some safety towards my childrens future.

You cannot walk away from RE debt in Canada like the USA so it will be even worse.

Where I have lived, and live now, house rentals have ranged from $5000-$9000 USD/month however purchasing these homes would mean double that.

This keeps us from buying for sure, but I dont live in Canada but made a bucket of cash in RE there upto 2003.

Maybe take this tact, see if she will rent in a location that is equal to the location you want to buy in but with and false increase in interest rate to 8%.

Although you may no save any money, you do understand the value of it each month. Give this a go for a year, she wont even care about renting when she walks through that door each day, has a view, has a swim and you have your first dinner party.

So buying (I should say renting) time, and the market corrects she sees everyone looking to sell and get out, she finally feels the pain first hand of if you had bought.

For the next year, your rent goes down with home prices, she forgets the whole thing, and then you start talking about buying, not her! Your a freakin’ star!

It’s trading 2 years of your life with the do nothing approach vs. a life of absolute pain.

And Bro, both of you need to be working through this whole period, no haircuts in wages, just to afford the tax hikes coming.

If you loose a job, you can at least muttle through the rental payments for a year. If you owned at home, you would be toast!

#94 Soylent Green is People on 11.11.09 at 8:40 pm

#80 Typhoon on 11.11.09 at 5:33 pm

Well, I guess you can just keep ragging on about the “woman you love” rather than doing anything concrete.

Do you really think she’ll leave you if you pack up your auto magazines after pressuring you so hard to buy a house?

Let me tell you guys something… most women don’t leave that easy, women tend to get emotionally attached to things and even faced with cold hard facts it can take sometimes decades to figure out you need to leave a man.

So what have you got to lose by bringing home a few LCBO boxes. You don’t even have to bluff by saying you’re packing up to leave. Just say your organizing your clutter.

At least try something instead of just complaining for God’s sake. I thought marriage was about supporting and being a cheerleader for your spouse?

#95 Just a Girl on 11.11.09 at 9:02 pm

Um, regarding the speculation that Boomers will sell their city centre homes to buy cheaper homes in smaller, more rural towns ….

I think with an aging population, proximity to health care and hospitals (and perhaps, one’s family and support system) will be a prime consideration.

If you live in a rural or more suburban area, you will need a car, and you’ll burn a lot of gas, going to all your appointments. Hello triple digit oil.

#96 Lest we forget on 11.11.09 at 9:09 pm

#84 Remembrance Day on 11.11.09 at 6:49 pm

My condolences to you and your family. Its so true that PTSD (formerly known as shell shock) affected the lives of not only those who fought wars, but also, unfortunately, their loved ones. I don’t really know why, but I’ve always been intrigued and watched documentaries on the great wars. I lived in an area as a young child where refugees of WWII would debark from a train with a small suitcase and be put up in hostels. As a child, I also lived in part of that hostel and got to know them and years later most of my teenage friends were from war torn Europe. My father, a European, wanted to fight in WW2, but the Cdn. govt. said his expertise was more needed here to fight the battle. His & my mother’s relatives in Europe fought in the underground. My PIL’s lived under the occupation. I SHALL NEVER FORGET. Though there are fewer and fewer veterans of WWII, I’m pleased to see more young adults attending the ceremonies & recognizing those vets.

#97 Calgary_rip_off on 11.11.09 at 9:14 pm


You’ve got it all wrong. You are putting materialistic stuff instead of love. Love is a choice. When you get married you vow to love your partner for better or worse do you not? And you are contradicting that directly by saying other little variables matter more. What a bunch of crap.

Little things are little things. “Typhoon” needs to grow a pair and decide if he loves his wife enough to withstand her tauntings and tell her how it is going to be. It sounds like he fears her. What the hell kind of marriage is this? Did he get castrated when he got married? WTF?

“Soylent Green” assumes that it is the woman that walks away. This “Typhoon” dude should grow a pair and seriously decide if he is willing to deal with an angry female by ignoring her and doing his own thing, or whether he should just bail. I say get rid of her. I remember distinctly being single for a long long time because most women are a pain in the ass financially, you end up buying the house just so you can get in their pants and then you become like “taxpayer” where you worry about every little thing, not the things that matter like caring about her, not what her wants are. I listen to my wife, hear her, if I can I try to make her happy, but ultimately I’m more concerned with pleasing God than I am with pleasing my wife. It is clearly pointless from what Typhoon has said that his wife has any clear logic going on in her head. A man would always be better off trying to please God than pleasing any woman anywhere at any cost.

#98 Downsized and Delighted on 11.11.09 at 9:40 pm

And the retreat from the stock market in the late 90’s led to the current run up on real estate. But in the earlier 90’s you couldn’t give real estate away.

The masses follow the money.

#99 Downsized and Delighted on 11.11.09 at 9:47 pm

Typhoon: Marriage is about values. People first, then money, then things (credit to Suze Orman). You need to make a personal plan of where you want to be in 10 years; then make two contingencies of how to get there (her’s and yours) Then you need to tell her that even though you think your plan is the wisest, it would mean nothing without her. Then go out house hunting.

#100 Lest we forget on 11.11.09 at 10:11 pm

#95 Just a Girl on 11.11.09 at 9:02 pm
Um, regarding the speculation that Boomers will sell their city centre homes to buy cheaper homes in smaller, more rural towns ….

I think with an aging population, proximity to health care and hospitals (and perhaps, one’s family and support system) will be a prime consideration.
Totally agree with you. Know many people my age and much older who want to be within a short driving distance of a major hospital. Many rural hospitals don’t have 24 hr. emergency services. Both I & my husband (in our 40’s then) have had to use EMR late at night.

#101 Lest we forget on 11.11.09 at 10:21 pm

#97 Calgary_rip_off on 11.11.09 at 9:14 pm

Gee, I agreed with your first & maybe part of your 2nd para. But, your last para was a total rant. You sound like a religious right wing nut from Harper’s territory.

#102 Typhoon on 11.11.09 at 10:24 pm

Wow.. I didn’t expect this conversation to get into marriage advice.. heheh. I’m still hopeful I can knock some sense into her before this ends badly (doesn’t Garth say it always ends badly.. uh ohh..).

I need more amunition. Keep writing Garth! Lol.. if you guys want, we’ll continue the conversation on the new blog update.

#103 TheFirstRick on 11.12.09 at 12:00 am

#52 robert on 11.11.09 at 1:59 pm Two things about that house. Either the water heater busted or a toilet tank cracked and leaked for a period of time before it was discovered. If the house was closed up and any heat on, presto, major mold formation. I used to work in insurance and I have seen way worse. And someone expects to get 200K plus for this? I suspect a tear down in the making and would therefore offer the value of the lot less the cost of demolition and debris removal.
Dumb de dumb dum.

For sakes peolples, sheelples, whatever, it is called a GROW OP!!!

#104 GTA001 on 11.12.09 at 12:38 am


Here is my recommendation. You and your wife sit down at the kitchen table in your dwelling with lots of coffee, pencil, paper and a laptop. If you have friends who are into computers, they can obtain an old copy of MS Money (from 2004-2008) or buy the 2009 edition to help you create a household budget. It’s not as hard as you think and the software will walk you through each step of the process. First, are you both secure in your jobs at present and are reasonably sure that you will have it 5 years from now? Second, what is your combined income minus your fixed costs (rent, utilities, insurance) and debt (credit cards, student loans, dept store cards and line of credit) Third, how much disposable income do you have at the end of each month? Fourth, do you have any savings in an account at the bank? What kinds of investments do you currently have such as a TFSA, GIC, RRSP or money market fund?

Fifth, how much do you spend on basic necessities such as food, clothing etc? Sixth, what are your “latte” factors in terms of miscellaneous expenditures? Do you eat out a lot, or go to entertainment events or travel too much? Is there anything you can do to reduce or eliminate these expenditures? Do you have a rainy day fund for emergencies? Seventh, do you live and eat as cheaply as you can? Do you stockpile canned foods, grains, milk and meat to save money?

If you can get to the end of this part of the exercise, you will need the help of a chartered accountant for the next phase! At this point your C.A. can begin a financial analysis scenario on the amortization of a mortgage of lets say a $250,000 home for 35years depending on the size of the down payment and interest rate of 4%, 5%, 6%, 7% and 10% over 5 years. The accountant can now show you your mortgage payments for each scenario. He or she can now add your fixed cost and debt obligations as well as to calculate disposable income to give you and your wife a realistic picture of what it will cost you both to have a home. Your C.A. could enlist the help of a financial planner/inv advisor to calculate the growth of strategic investments in the markets based on an investment of X amounts of dollars. It will not take long to determine if you can or cannot afford to buy a house right now. If you can buy a house, sit down with a good realtor to find one you are able to really afford. If you cannot afford to buy a house ,rent now and ride out the bubble till at least 2013-14.

If you heard of or seen the TV program on Family Channel called “Till Debt Do Us Part”, the host of the show take you into the living room of a family in a city or town in Canada each week who is struggling with debt. There is no guarantee that she can help them get out of debt(for couples who own a home) and prevent a divorce, but she succeeds better than 60% of the time. The financial exercise that I recommended to you and your wife was pioneered on this show. If you have not done it at this point, staying together as a couple is the least of your problems. You especially your wife must learn good personal financial management! You can also read David Bach’s book “Start Late and Finish Rich” for Canadians (published in 2005). It is one of the best self help personal finance books on the market today. It is easy to read with good exercises and contains financial strategies that you and the wife can put to work immediately.

Your wife is making a decision to buy a house based on emotion and peer pressure and not on the actual state of the family finances. It is like flying blind and not knowing your position during a storm. She is pressuring you to buy a home during the largest housing bubble in Canadian history. If interest rates increase many first time buyers will be wiped out as their mortgages will be worth more than their home if the market crashes in 2010-11. The situation will be even worse if people experience cuts in job hours and if an unemployment rate stays high as companies either cut back staff or go out of business.

If your wife does not believe you tell her to go on the computer, log onto the internet and Google subprime mortgage crisis. Right now there are 19 million homes that are vacant in the US with another 17 million facing foreclosure. The values of all homes in the US have dropped by almost $2 trillion dollars. She can read the horrible stories of Americans in California, Nevada, Arizona, Florida and Michigan who bought homes during the boom, used them as ATM’s then could not pay their mortgages as they lost their jobs or became sick as the RE market collapsed. They fell behind their mortgage payments; debt servicing and fixed bills as their severances; 401K and EI ran out leading to foreclosures, evictions, power of sale and bankruptcy. The US Legal System allows people to walk away from their mortgages if they fall too far in their payments. You can’t do that in Canada. The lucky ones moved in with friends and families. The unfortunate ones became homeless. There are and estimated 54 million American that are unemployed out of a workforce of 153 million. The real U6 (unemployment rate) is 22.1% not 17.1 % as reported by the US Census Bureau. This is a simplified explanation of the subprime mortgage crisis in the US that contaminated the general economy. She has to understand that you are trying to protect her from this kind of economic crisis that is affecting the US right now and threatens to engulf us between now and 2014.

A realistic financial analysis undertaken by a C.A. and financial planner will give you and your wife a clear picture right now about the affordability of a home and what kind of sacrifices will be necessary to keep it. If she can step back for a moment, put aside the constant pressure from the MSM, the RE industry and first time home buyer friends and look at the analysis she may understand your point of view. She can also talk to her parents about the sacrifices they had to make to buy and pay off their home. Good personal financial management will help the both of you make better informed decisions without emotions now and in the future. Good luck whatever you and the wife decide to do!

#105 nonplused on 11.12.09 at 2:00 am

#15 Piccaso

We do? I thought that only applied to houses. Here I have been paying capital gains the whole time (only had capital losses on some puts I bought to offset a huge exposure but the gains ended up eating all that). And I’ve been using Quick Tax! I’m going to phone those bastards and give them a piece of my mind…..

#21 robert

I agree with you, but as long as we let these jokers change the rules when it suits them they will get more inflation. People have to realize, as they have in Argentina, Russia, and countless other countries, that until you refuse to hold the currency the inflation will continue. So far nobody seems reluctant. Not even Garth the contrarian.

#30 Schroedinger’s Bull

Oh. Well maybe I won’t call Quick Tax then.

#34 Toronto C9 Renter

Don’t worry, Carney’s on the job and he’ll fix it. Every time the loonie has gotten within striking distance of parity (I mean 1 for 1, not the funny accounting definition) he’s managed to put it back down, and he’s made it clear that is his intent. He will not let housing prices, fuel costs, food costs, or general poverty slow him down or even give him a second thought. It will be $0.80 USD to the loonie no matter what, damn the torpedoes.

#48 HouseBuster

Why is it that the modern North American male, called by a certain love doctor “wimpus americanas”, thinks that the best way to deal with a woman is to always concede? I tried that once and all it got me was 2 great kids and a very large child support payment. Now, I don’t concede unless she can convince me otherwise. Logically and with facts not allegories. Probably means one more set of child support payments coming soon but I know that is always the cheapest way to raise children, and there are always more fish in the sea. But I say: Always pay your child support payments, happily, and promptly. It’s your kids. Ya sure she is siphoning some of it off to fly to Hedonism 2 with her girlfriend, but whatever. Then you get the kids that week so it’s a double bonus.

Tom Petty was right:

“I won’t back down
I will stand my ground
You can stand me up at the gates of hell
But I won’t back down”

Unless of course you are of the opinion that god gave you your brain so that you could disregard it.

#90 Just a Girl

I am standing on the shoulders of giants, to borrow the quote. I suggest starting with the Ludwick von Mises institute online for those who want an alternative view of money to the Orwellian garbage we are fed by the state.

#102 Typhoon

See my response above to HouseBuster. Whether you are going out or not is impossible to tell, because there is another person involved here. But go in or out on your terms. Women aren’t victims. They are master negotiators. Not counting violence of course, which is despicable and is not part of your vocabulary or I will disown you. Your only power is what you will commit to and what you won’t. But that is a lot of power.

And if she gets all crazy then you learned something about her. Run! Run Forest run!

There is always another woman out there who is willing to negotiate fairly, and some of them are hot! They have to deal with irrational males too you know. A lot of men are outright morons. You don’t stack up as badly as she is telling you.

#106 Taxpayer like you on 11.12.09 at 2:33 am

Oh silly rip-off. I didnt say material things matter more. I said finances, family, children, careers are all part of the
BIG picture! Marriage is a partnership. Love is easy,
marriage maybe not. I had loved others, but married my
wife to build a life together.

Anyways, we should all go to Dr Phils blog……

Good luck Typhoon!

#107 Typhoon on 11.12.09 at 9:19 am

I guess I should have given some background. Actually I am an accountant, and I’ve done a full cash flow under different scenarios of interest rates and number of children. We have a combined family income of over 100K and have over 100K in savings. I know that we have the money to buy a house, but I just don’t want to see it dwindle away. Besides, the house we’d end up getting would probably be 600K or so and I won’t sleep well with a 500K mortgage, particularly if interest rates rise.

Thanks again for the advice guys. Let’s continue this on the newest blog update.

#108 Sylvia on 11.12.09 at 9:43 am

Home Insurance rates soar

My solution: Sounds like the insurance companies
are donning their robber baron masks. We once ran into a situation with our boat building business that insurance companies wouldn’t sell us product liability insurance. We got around it by telling our customers that our boats were NOT insured for manufacturing defects. Our clientel trusted our reputation for building quality boats to the extent that they bought out product knowing they couldn’t sue us on the off-chance they weren’t perfect. Five years down the road the insurance companies hit us again with high premiums for fire insurance on our cement block building which they upped to outrageous sums. Then we had to tell customers they had to provide their own insurance on boats under construction or in the process of being repaired. The last five years we were in business, we carried NO product liability NOR fire insurance on the building–thereby saving more than $500/month in ‘new’ premiums.

Since we don’t have a mortgage on our house, we’ll resort to not carrying insurance, thereby we won’t get angry at their outrageous increased premiums! My advice…if you can manage it… tell your insurance company to get lost! You can’t image the freedom you give yourself by not being indebted and making oneself subject to being scared. There are lots of benefits to owning a house without owing a dime on it!


To the gentleman having a marital dispute with his wife about buying/not buying a house: I’ve been married one year short of fifty years and never at any time during that period had major differences of opinion with my hubby about spending “large sums of our combined incomes.” There surely has to be something the two of you enjoy doing together which I strongly suggest you engage in that activity and refuse to fight about ‘major’ decisions. If you can’t come to agreement, then dissolve the marriage because the two of you obviously won’t be together in five years time. People who have successful marriages don’t waste their time fighting each other–they formed a workable team relationships during courtship that was enhanced by the marriage ceremony.

#109 TheBigLebowsky on 11.12.09 at 3:00 pm

chart of the relec a certain moderator on here seems to belittle at every turn. The facts speak lowder than dis information

#110 Soju on 11.12.09 at 4:22 pm


You can never time your entrance into the market. The first purpose of owning a home is for comfort. Look for a fixer upper that both of you can have a good time renovating together. If you’ve been renting for a while you must have saved something???

Your wife is right in some respect… A good renter would have saved money and that being the case at some point would have enough money to buy a place even with today’s prices. Do you really want to fork out 30% of your income while being retired towards rent or own and have 30% more money towards your last days off.

#111 jube jube on 11.12.09 at 4:29 pm

Suprised the “Fire Sale” brothers did not jump on this one.

#112 somecatchphrase on 11.12.09 at 9:24 pm


If you think the Americans have gone off the deep end, this video on “China’s empty city” is a must see! Central planning at it’s finest.

“Nobody has really ever lost money investing in real estate in China…”


#113 GTA001 on 11.12.09 at 10:01 pm


I did not know that you were an accountant.My sincere apologies if my post seemed blunt or hard nosed. I am glad that you did a cash flow analysis. Did it shed some light on your ability to afford a house over a 10 year period especially if interest rates increase between 8-10% after 5 years. What is the average rent in the area that you live in?. What is the average prices of homes in your neighborhood?. Is your wife coming around to your point of view?

#114 Typhoon on 11.12.09 at 11:39 pm

The cash flow didn’t help. She’s fixated to the point that it doesn’t matter what logic says. And I assumed that we would only take a 350k mortgage.

To answer your question. We live in a small 1 bedroom appt that is probably 580 sq feet and pay 1550 per month. K granted the building is brand new in a high demand area. The same unit sells on mls for 320 k. I can’t imagine the stupidity of anyone paying that much to buy so little space. My buddy just bought in the distillery district for nearly 600 per sq foot. Wowee!

#115 GTA001 on 11.13.09 at 11:49 pm


I am beginning to understand the nature of your dilemma. It would be really nice to find a place between 800-900sq feet in the city for the price that you are paying now. Unfortunately it is very hard to find such a place in Toronto right now. Where I live in Leslieville the average price for a small two story home (about 1000sq feet) is $460k while a semi detached two storey(1200sq feet) unit with its interior renovated was $550k. If you want to know how ridiculous the RE market has become in this city and the effect that it has on our street, there is a family that bought a 2500+sq foot home for 300-350k a few years ago and took out a $300k HELOC to completely renovate its interior (I think they put some cash down to reduce the size of the loan!). Construction has gone on for 6 months and won’t be completed till early February 2010. A neighbor of mine told me that in order for the family to recover its investment, the house would have to sell between $850k-$1,000,000 dollars. This is happening on a street where the median price of a home in 1991 was a mere $182-200k!!

Last year I checked the Toronto Real Estate Board (TREB) Multiple Listing Service for the average price of homes in Metro Toronto. It seems that the most affordable homes in the city were in the north-west quadrant near Brampton at $255k. In fact all the homes in the outer suburbs of Metro bordering Vaughan, Richmond Hill and Markham were approaching $300k. It’s almost safe to say that these homes have appreciated between $50-75k in value in 2009. If you work in Downtown Toronto then buying a home in this part of the city is definitely a no go decision! If you are looking for an area of the city that is at least 35min from downtown then Etobicoke is a “possible” option. I have to agree with the comment that one blogger posted to you over the last two days. You might have to consider a fixer-upper in the $300-350k range that is close to were you work. Try not to pay too much for that place and if you are going to stay there for longer than 10 years, spend between $25-50k to renovate the place. We put about $25k to fix and renovate our house over a 7 year period.

If you are looking for a place for $350k in Toronto it will be hard, but not impossible to find. It’s just that you will have to find a good real estate agent that is very determined to undertake the legwork to give you a number of good properties to see. I cannot say as to which part of the city that you would like to live in, but you do have choices. Last night my brother told me that the President of ING Canada was on CFRB1010 yesterday and wanted to warn Canadians that he was noticing troubling signs in the RE market that he had seen in California in 2007-08. He said that people are taking on too much debt when buying real estate. He said that first time home buyers that purchase a home (at 95% debt) can get low rates for the next 5years. However rates are set to increase in the middle of next year and will reach 8-10% within 5 years. When people have to renegotiate their mortgages their payments could increase 40-50%. That means that people will be scrambling to keep up with the payments when incomes as a whole are stagnant. If you read my previous post I have already outlined a simplified version of the subprime mortgage crisis. The President of ING feels that when the housing bubble burst people who bought houses from 2007-2010 will be underwater(for homes between 300-550k) and if wage cuts and unemployment gets worse people will lose their homes because the mortgage that they carry will significantly eat into their incomes and then they will struggle to keep up with the payments. If they lose their jobs or become sick, they fall behind in their house payments, face warnings from the banks, then foreclosure and eventually bankruptcy. TD Bank economists are warning Canadians of slow growth of 2% from 2009-2019 and that the RE market faces a slow recovery. This means that all of us have to save more money and cut the cost of our bills and debt .Real estate comprises 20% of Canada’s $1.1 trillion dollar economy. If the housing bubble burst’s it could also affect commercial properties if service business cut back, close or go out of business resulting in hundreds of billions in losses.

From the last post you wrote to me, it’s clear that your wife is ignoring the financial analysis that was done. She is basing her decisions on emotion and peer pressure not on reason or hard facts. You have to let her know in a subtle way that you are trying to save money and create a sound financial plan for the future. It will require hard work and sacrifice. Taking on too much debt to buy a house is a recipe for disaster and must be avoided. If you want her to understand the impact of such a decision go onto the internet to the PBS Frontline website and watch the 1 hour show “Close to Home”. It is the story of a woman who owns a hair salon in New York’s well to do Upper East Side and how the recession is affecting the lives of her patrons who pay $40 for a hair cut. Some of the personal stories are truly heartbreaking and even when some people did things right the recession brought them to the brink of ruin especially for those who bought property in 2006. Look, she does not have to believe the facts you give her about the fragile state of the economy in this recession, but if she watches these personal stories of the financial crisis on PBS.com or Youtube.com it has a chance of changing her view.