balls 1

In the Spring of 1989 the average house in Toronto cost $261,000, which was 250% higher than in 1980. What started as a boom, fuelled by inflation, turned into an asset bubble, propelled by emotion. Shortly after that, interest rates rose, the economy tanked and we were in recession.

In 1993 the cost of the average Toronto house had plunged $189,000 – for a peak-to-trough decline of 27.5%.

Now, there are a few points worth remembering (all you kids in your twenties and early thirties sit up and write this down):

  • That decline in Toronto (and it happened in Vantown and Cowtown, too) was equal in magnitude to the crash US housing is now going through. Guess it can happen here, too.
  • The collapse in prices did not take place in a few steamy weeks, or a number of months, or even in a couple of years. Instead it was a slow, grinding, torturous and relentless deflate that sucked equity out of homes every week, year after year.
  • House prices did not regain their 1989 level until 2002 – a staggering 13 years, and even then homeowners had nothing to show for more than a decade of inflation and rising ownership costs but compounded losses.
  • In 1988 and 1989 the Toronto real estate scene was rife with multiple offers, hormonal bidding wars, young couples camping out in front of sales trailers, condo towers springing from every vacant lot, and an overwhelming sense anyone who did not buy then, would forever be priced out. Any of this sound familiar?

It should. And it will. If you have little equity, or have yet to buy, be happy you’re reading this while there’s still time make the right choices.

And now we go to…

Hi Garth: I’m from the land of 80k trucks with 6” lift kits and metal bumper testicles – Red Deer, Alberta.

I just sold my house because I don’t like the location and am looking for another.  I put a 3 month possession on it and had the buyer put a $20k down payment to secure the deal.  My house was paid off and I have the money to buy again but I think the prices are inflated.  Here you need to spend minimum of $450k for a nice house (1400 sq ft, 5 years old, good location).  I stumbled on your website, bought your books at chapters and now regularly read your blog for education and entertainment.   I’m thinking of waiting now and not purchasing until prices deflate.

Here’s my question.  What could possibly cause prices to rise and keep me out of the market (inflation, oil prices)?  I’m no economic expert and agree with you that  the odds are against this, but housing -  isn’t inflation a risk to driving up housing prices?

Dear Swinging Testicles: Four and a half large is way too much to pay for a house in Red Deer, unless it’s next door to Hooters. See what I mean? You don’t have one. This is a city of 90,000 people with marginal growth and a wholly-inflated real estate market. Of course houses are over-valued and, yes, you should wait  – but the decline will not happen in three months.

Lots of posters here think inflation will come along and rescue their over-mortgaged lives by spiking real estate values. Will not happen. While inflation will increase, certainly enough to get the cost of money moving higher, it won’t save the housing market from the ravages of higher mortgage rates, persistently high unemployment and a moribund economy that has even Alberta running red.

As for oil, yes, it’s on the way to $100 a barrel and beyond, based on rising global demand, mostly from Chindia. But I have yet to understand how oil at $100, as opposed to $77 oil, makes life any better for average families in Edmonton or Red Deer. Do household incomes rise? Are Albertans immune from higher home heating costs or $1.30-a-litre gas for those testo trucks?

No, ST, no reasons other than emotion to justify $450,000, 1,400-foot houses in RD.

And I’ll be there in January to swing with you.


#1 kid from oversea on 11.22.09 at 10:26 pm

Going to Red Deer at January? Will you stop by Edmonton or Calgary? I want to attend your speech event.

#2 Nestor on 11.22.09 at 11:01 pm

Garth. I well remember the collapse in the late 80’s/early 90’s in Toronto’s real estate market. There was plenty of talk at the time of how prices could only go up, Toronto was a world class city and prices would reach London levels… that sort of thing. Wasn’t soon after that the recession hit, and prices collapsed. Boy, do i well remember how people were depressed about real estate for many years.

It’s always difficult to predict these things as they are happening. I’m currently under pressure to purchase a home in Toronto, as I am recently married, and hear how i’m an idiot on a weekly basis. However, i will not budge. I would rather make some short term “lifestyle” sacrifices for now, and wait this out.

Best of luck to all these people making quick money flipping houses, or making a killing selling their homes at inflated prices. Sadly, when the music stops, and there aren’t any chairs around, you get caught with and over inflated house that you can’t unload, and take a bath on the sale. Not for me.

#3 homeless on 11.22.09 at 11:29 pm

The unemployment is already on the rise with no effect on RE. I wonder why low interest rates has different results in two different countries. US RE is going down with historical low rates and Canadian market is red hot.

#4 contrarian on 11.22.09 at 11:33 pm

Mr. Turner,

WOW….. I was thinking , I would be the only one from Red Deer reading your great site.

I have a six figure income , with 2 growing kids (10 and 5) . I would like to buy a house , but cant afford in my budget…..anything good is way above 375K .So I am waiting and happily renting. I don’t want to spend more than 25 % of my gross income on shelter.But , I am not worried that I don’t own a house….day by day my savings are growing for a potential down payment and the best part is the liberty to spend on things we like such as vacations across Canada and mini-vacations to the Mountains. Also, this TFSAa are a boon for people with cash.I started investing this year in June only and my account is up by 50 % already…though it seems its time to book profit now.

Garth, You would not believe the level of smugness and utter cluelessness in people of central Alberta.They still think that 100+ barrel oil would save all of them.Despite the fact that province is staring right at billions of dollars of budget deficit in coming months, which might wipe off so called Heritage fund.In addition, talks are on re job cuts in education and health care.

I agree with you that a sudden crash in the RE is highly unlikely. It would be a slow and steady decline as you mentioned above.I would jump in when the cost of renting and buying are comparable and for other social reasons such as kids’ school and friends etc….

Until then, I am staying on the side.


#5 Ottawa Smwhattawa on 11.22.09 at 11:45 pm

#121 Herb on 11.22.09 at 5:56 pm
I hear your (Ottawa) pain. 5 minutes from downtown:

1100 sqft 2 bedroom 2 bath townhouse (53×83 land), recently paid $305,000 (not sure of assessed value), taxes $3350. Not looking forward to the 10% (green bin) increase. Worst case scenario, sell our car (would be a savings of $850/mo) to pay for these crazy taxes….

#6 Einsam Solo on 11.22.09 at 11:51 pm

Red Deer’s local TV station CKRD was set adrift by Canwest/Global at the same time as CHEK in Victoria, mentioned in your previous blog entry. Seems no one could save CKRD, not even for two dollars, so it went off the air in August.

Red Deer is a nice enough place however I’d expect a $450,000 house to be sitting on a few acres of rolling foothills.

#7 Davinci on 11.23.09 at 12:01 am

If the government hold interest rates down and start’s handing out tax credits for buying a home regardless of first time or not. I expect prices of homes to continue going up until they change over the money.

Got Gold?

#8 nonplused on 11.23.09 at 12:12 am

Garth, I notice you don’t come to Calgary very often. Are you afraid of cleavage? But I suppose I already get your message, so no need to go out of your way if Nikki has the goons looking out for you.

I get a kick out of those swinging cast iron thingies people put on their hitches. It really does show how people personify their possessions much the same way a 4 year old does, only the personification is base don their own self image. “My truck is a big bad dog with huge balls because I am a big bad dog with big balls as exemplified by my big bad truck with big balls and my big bad dog in the back only he’s neutered.”

Hey I got a truck too, but I use it to pull trailers and haul soccer equipment for a bunch of 15 year olds. It doesn’t have balls, it came from a factory. And it doesn’t have a lift kit because even if I wanted to drive it off road, that only increases the risk of a roll over. Plus you can’t tow with a lift kit, unless you lift the trailer too, and then you are going to flip them both just going around a corner.

Anything set with a higher lift to width ratio than an H1 is ignoring physics. They built the H1 the way they did for a reason, after much testing. H2’s and 3’s of course are impractical “image” products and don’t count as far as serious off-roading goes.

And in the end of the day, if you want serious off road maneuverability and survivability, you need tracks, not clearance. But those are expensive.

I remember many outings in my youth on dirt bike (that’s the way to learn to ride folks) passing a truck stuck in the mud with the winch out rapped high up around some poor tree bent like a bow. We’d then pass the same truck and 2 others still stuck on the way back at the end of our ride.

The serious off roaders don’t lift to that extent and have a sling system under the vehicle such that they can pull themselves backwards. Why would you want to go even deeper into the mess? In the old days some guys actually mounted the winch in the box, figuring backwards is the only way they ever want to go and besides that way you can use it to pull a load up some ramps.

The big “monster truck” lifts are advertising for drug dealers. They don’t help you off road. And the dingle balls are funny, but silly.

Of course you can get a 12,000 pound winch now, but all those do is pull the poor little 8 inch trees we have around here out of the ground.

Oh ya, real estate. Only buy when the cost of ownership (long term) is cheaper than renting. And that ain’t now. Stick 5% in that mortgage calculator and see what you get. 2 things: 1, rent is about 3% or less right now, and 2, at 5%, can you really afford it? You will pay that much soon. Very shortly if you have a variable, and within 5 years if you are locked in (if not right from the get go). Ya sure the renter pays the property tax ultimately, but I am including that in the 3% cap rate, whereas an owner pays that and maintenance on top.

Although most owners do very little maintenance (don’t have the money I presume). I went and looked at a property listed for 1.1 the other month that had no pebbles left on the south facing shingles. 1.1 and you don’t care about the roof? Are you crazy? The roof is the most important part of the house!

Landlords do maintenance because they have to “provide a habitable environment” per the law. Or, if they don’t, they end up with the lowliest of renters and can’t get paid.

If you are a residential investor looking to buy to rent out, buy a nice house in a nice neighborhood. You will attract higher quality renters that way and might actually get paid. Being a slumlord is the same as watching your asset be destroyed by reckless tenants while having to use the courts to get them out of the house because they haven’t paid the rent. In real estate as in all business ventures, you do better when your target market actually has some money.

#9 squidly77 on 11.23.09 at 12:21 am

$100 oil is likely
as is $1,400 gold
will it hold ?
only until interest rates rise
and they will with 100% certainty

house prices will crash directly in line with every 1/4% rise in the BOC rate as speculating fools are the only participating in the feds current low interest borrowing frenzy

on to nikki..
heres her responce to your comments (one of them at least) http://albertabubbleblog.blogspot.com/2009/11/garth-turners-blog-dawgs.html

#10 Bob on 11.23.09 at 12:36 am

what we are gonna have is not inflation or deflation. But stagflation. real economy is going to go down but prices will increase. or maybe we could have hyper-stagflation.

#11 Nostradamus jr. on 11.23.09 at 12:41 am

“””Krugman: See, Other Countries Have Insane Debt, And End Up Just Fine”””


Nostradamus jr.

#12 Expat on 11.23.09 at 12:44 am

Too bad all this cheap money is being used to on non-producing assets instead of building jobs or business, save Realtor commissions and bank interest revenue. All this money is being created by the banks – backed by CMHC – from folks flipping the same homes with no real new assets being created. If (big IF!) you could take a good business plan and get that same $450K loan at rock bottom rates as easily as a mortgage for that 1400 sf home in Red Deer, there may be some future gain to the economy from whatever service or manufactured goods you create. I really doubt buying and holding homes can pass for wealth creation too much longer. It didn’t work in the States, or anywhere else for that matter, and left a big ugly crater when it crashed. Exactly how is Canada – including BC – different?

#13 Calgary_rip_off on 11.23.09 at 12:44 am

Nice post Garth

Red Deer rocks!! Great place to live!!! This dude sounds nonchalant. Didnt like the location-what was it next to a crack house? Says he has been reading your blog and is probably aware of the economy. Why didnt he research a little before he sold? wtf? So what’s the plan, rent a while then buy a house on the drive by Sylvan Lake when and if houses tank? What if they dont? This dude took quite a gamble.

That’s good news that house values will tank for everyone. Less stupid property taxes for owners. Better prices for prospective buyers. It will help to boost the economy. How much will it drop though? The median is what $400K now in Calgary for a detached shack? So is it going to go back to $250K? That would involve some serious implosions. Doesnt seem likely. Maybe if they jack the interest rates to 15% for mortgages that might fix things nicely. 15-20% interest on a $190K shack is far better than 2% on a $450K dont you think?

Albertans arent immune from greater fuel costs. Its just a choice. People here like to drive fast and have big vehicles. The fast driving is a nice change of pace from Vancouver Island where people drive like zombies and the local cops are willing to generate revenue when you drive 5 km/hr over.

Things will get even more interesting once accessible reliable electric cars are available. One of my personal goals is to give the finger to the middle east and other oil producing places. Not to mention avoiding gas stations. Let the petroleum be used for production and medical supplies, not burned. Coal can be used for that readily. Once that Chevy Volt is available and priced right I want one!!

#14 Nostradamus Le Mad Vlad on 11.23.09 at 1:07 am

Dilbert’s pointy-haired boss is a classic example of Swinging Testicles (Balls or hormones) gone horribly wrong.

“Do household incomes rise?” — NBL, or Not Bloody Likely. Energy / Utility / Transportation / Food and Other things rise consistently and, in order to balance that out, median incomes have to go down.
Big pharma will not be happy, but who cares? Possible cure for MS — MS toast?
Global warming is now a proven hoax, just a money-maker for St. Al in The Running Of The Gores. Further evidence in the pix. — Global Bullshit and Al The Gorestar In Action.

Take this a step further — Peak Oil Myth As mentioned in a prior post, it’s simply about who controls Canada (big oil) and their friends (Monsanto, big pharma plus others).
Britain’s new ‘net law(s) — not very nice. Possibly coming to the ‘net on this side of the pond — Big Brother Again
I shoulda linked these together. Then again, I’m a man so don’t expect too much. 7:35 clip on Collapse 1 / Weimar again If this does happen, it would likely lead to Collapse 2 along with Colllapse 3 Note # 2) in the last link: “2) The re-location from the West to the East in the production of goods, principally to China and India to ‘feed’ the developed economies.”

Chindia appears again. Where are all the mfg. facilities from this continent moving to?
The 1:17 clip of Gaza says a lot about Israel, but the commentary from wrh.com tells it nicely:

Webmaster’s Commentary: “Take a good, hard look at this video (after the commercial).

“This attack is allegedly in response to a rocket launched from Gaza from which there were absolutely no casualties. Hamas stated yesterday that they were going to halt all attacks against Israel. (Note the word allegedly — nothing is proven.)

“Look at the medical staff desperately trying to assist the wounded who got caught in the bombing. Look at the destruction of homes and shops.

“Now for one second, try to imagine that this is normal life; because this is what passes as ‘normal life’ for Gazan Palestinians.”

#15 arit on 11.23.09 at 1:24 am

Dear Garth,

In the following link we can see a group of people who apparently do not want their pre-sales.

A long list of greater fools, literally.




“Harper Grey LLP represents individuals and groups of pre-sale purchasers who signed contracts for major lower mainland condo projects including:

33 Pender – Vancouver
Aria 2 – Port Moody
Aura Townhomes – Surrey
Axis – Burnaby
Cosmo – Vancouver
Donovan – Vancouver
Espana – Vancouver
Esprit 2 – Burnaby
Fairmont Pacific Rim – Vancouver
First on First – Vancouver
Fitzsimmons Walk – Whistler
Ginger – Vancouver
H & H – Vancouver
INvue – Kelowna
Mariner – Vancouver
Millennium Waters – Vancouver
Patina – Vancouver
Quattro – Surrey
Silhouette – Burnaby
Sophia – Vancouver
Tangiers Townhouses – Revelstoke
The Breeze at Airdrie – Calgary
The Exchange – Vancouver
Three Harbour Green – Vancouver
TV Towers – Vancouver
Watermark – South Surrey
Watermark Beach Resort – Osoyoos
Westwood Village Edgemont – Coquitlam
Whitetale Lane – Coquitlam
Woodwards District – Vancouver”

#16 Peter Pan on 11.23.09 at 1:25 am

Another particular “Albertism”… They seem to think the price of oil is the Holy Grail driving their economy, when in fact the hydrocarbon production in Alberta is much more “gassy” than “oily”… and the price for natgas has been in the dumps for a while with no prospects for improvement in the near future…

#17 Onemorething on 11.23.09 at 1:56 am

Garth, just need to post this one every other week to remind people not be stupid and get sucked into the RE Votex.

I have been trying to quantify what real unemployment feels like for the Yanks given there are sooooo many channels of employment out their today that keeps the REAL numbers off the government radar.

A. Gary Shilling rarely speaks but when he does I listen and he has always been right. Here’s a timely view partly on what I am trying to quantify to what REAL UNEMPLOYMENT is likely to be based on what it feels like.


As for Canada, we are going to hammered in one long downturn. Sit back and watch as homes to tank initially as everyone will want to sell but the bottom could take 5+ years to find as the intial shock will take 25+% off the avergage and slow paced inflation via interest rates will take it another 10% for sure.

#18 RedneckBear on 11.23.09 at 1:57 am

450k for Red Deer?????
I grew up there and there is no way a house should average for 450k. I wonder how many tulips the garden can grow tho?

#19 Kelly McMae on 11.23.09 at 3:15 am

It’s really quite unreal. I just did the math on some average priced dwellings (500K) that one may lock into a 4% five year term, and assumed that most people would be looking at the 35 year amort, though even looking at 25 years the potential calamity 5 years from now is staggering.

If rates return to “normal”. 7-8%, said “homeowner” would require payments greater than now due to limited equity built up against principle. Couple that with potential deflation in the market and many people will be under water. And Buddha knows wages aren’t showing any signs of increasing in the near future.

Nothing different than what’s being said around here but by looking at the math it’s even more convincing that RE is not affordable, and has the potential to become even less affordable.

Been thinking too what this will do to rentals. Already in Victoria I’m seeing vacancy signs on buildings that normally require wait lists. Is this a trend towards something indicating greater peril or merely a return to historic vacancy rates?

Shiite, at least we’ve got the Olympics! LOL.

#20 somecatchphrase on 11.23.09 at 3:40 am

Incredible post from Chris Martenson today!

This one is a MUST SEE!

“Our Slow-Motion Crisis”


Email this article/link to everyone you know, post it far and wide. Put in on your facebook page, send a copy to your Congressman, tell all your friends. Reference it in your online commentary.

Does the government serve the people, or, do the people serve to government?

#21 wetdog221 on 11.23.09 at 6:23 am

Never mind the insanity of Canadian real estate, who was the mental midget that came up with the idea of hanging fake bollocks on the back of vehicles?

#22 NOBODY on 11.23.09 at 6:39 am

Everything is cyclical. Even real estate…
How come no one sees this RE bubble coming? Or do some do?
Does the government sees this coming how do they care?
Will an RE bubble actually come?
Will interest rates stay stuck at 2%?
BTW PC Financial lowered their 5 year closed mortgage rate from 4.94% down to 4.14% last week…

My house is valued at $275K for a mtg balance of $78K.
So, if the market would deflate over the next 2-3 years and that by then my house would be worth only $200K, do I weather the storm until price re-peak, say, by 2020?
I love the area and I do not have to sell.

#23 TaxHaven on 11.23.09 at 7:03 am

…but what might get housing prices to continue skyward, even in Canada, is the plunging U.S. dollar. Commodities are soaring. Stocks are soaring. I trade in U.S. dollars and I’m fully invested because I don’t want to wake up tommorow with the DX at 60. Beggarized overnight. Housing looks like a safer place to park funds when the dollar is on steady route to the basement…

#24 latinlife on 11.23.09 at 7:57 am

GOLD $1,167.40 and climbing

OIL Still under $79 flatlined

What happened to your inflation hedge Garth?

Oil has gone from $32 to $79 in a year. That’s 147%. I can live with it. — Garth

#25 Onemorething on 11.23.09 at 8:20 am

Once in a quarter, I like to go TREND BEAR and listen to Gerald Celente. Worth a listen to him on King World News!

He did comment on unemployment, Effect UE 17.5%, Long Term Discouraged factor 26% TODAY!

He also commented on the growing underclass and where are the productive jobs gone to feed them!


#26 David Bakody on 11.23.09 at 8:34 am

Strange even in to-days world of instant information that there are so many people who just do not get it. When the price of oil/gas/money goes up everything goes up except wages. For the most part wages have topped out for the working class ( DO NOT COUNT OVERTIME AS WAGES) so how can one survive. Screw them all, pay down debt ( more pocket money, it’s like have a part time job that pays your direct interest free/tax free money) save wisely (same stuff) and live life for freedom and much longer. ( no stress less working hours and healthy)

So ST …… rent and ride the high country and when that bargain hits …. buy with cash …. and plan not to make another mover until it is time hang up your spurs. AND if you have to you will know the drill.

#27 Gonzo on 11.23.09 at 9:04 am

I disagree with Garth/some of the posts. I think the fall in RE will be fairly quick (if you call what’s happened in the U.S. quick?). Remember last fall? What was everyone thinking back then? Everyone thought we were falling off a cliff. Sentiment can turn quickly. Right now people see asset classes rising, however just under the surface the economy is faltering. Once the sentiment turns, we will see all asset classes crash. I think that right now there is too much volatility and underlying economic imbalance for a slow burn.

The US real estate market peaked in the fall of 2005, and it is now November of 2009, with the decline still occurring. That is a four-year process, yet to be completed. Perhaps you did not notice until it had hit Canadian headlines – two years after the fact. — Garth

#28 Nostradamus jr. on 11.23.09 at 9:13 am

“”” The Chinese authorities are “long” the U S Dollar like no foreign power in history, and it makes them very nervous.

Yet there is a strong temptation for both halves of Chimerica to keep this lopsided partnership going. Despite much talk of the need to reduce global imbalances, the biggest imbalance of all persists. This year, America’s trade deficit with China will be about $US200bn, the same as last year. And China has again intervened in the currency markets, buying $US300bn to keep its currency and hence its exports cheap.”””


…The US is BK’ing the rest of the world first….with Eastern Canada going BK first before Western Canada will.

Hence my prediction of Western Canada seceding.

Nostradamus jr.

#29 ATP on 11.23.09 at 9:20 am

Interest rate hikes, plunging US dollar, etc. Perhaps.

Buyer pool exhaustion, anyone?

#30 robert on 11.23.09 at 9:37 am

Your second bullet point is the most important yet most neglected. Too many people conflate stock market behaviour with that of housing. The number of comments here from people either wringing their hands or gloating about the absence of a correction (as you are forecasting) is legion. Face it people, housing is an illiquid “investment” that does not mirror the behaviour of your RIMM shares (which, if you have an online broker, you can buy and sell at a keyboard stroke for $10 or less). The ancillary costs of buying/selling real estate (legal, but especially moving and time related) are far higher and thus the entire process is far slower (including re-pricing due to the operation of various external factors). You want action? Go trade MBS for fun and profit. But the physical market? It’s an ocean liner not a Formula 1 racer.

#31 Munch on 11.23.09 at 9:56 am

Fake Bollocks on the back of vehicles?

I do believe it was a “Blue Bulls” rugby supporter, right here in sunny South Africa!

At least we have got the Soccer World Cup :o

#32 F on 11.23.09 at 10:14 am


Again, I am a big supporter, but you have to admit when you are drawing the comparison to 1989 in toronto you are leaving out a few things.

1) Condos were built LONG BEFORE they were even sold. The city did not control it like now. Today close to 70% of the condo must bes sold, before shovels go in the ground
2) There was 18% interest rates. Getting a mortgage meant sitting down before 3:30PM (when the banks closed) and negotiating a mortgage
3) Which leads to #3. When you can buy your groceries and get a mortgage at the same place, the days of banks holding the cards are over.

Until the government steps in and crimps CMHC AND mortgage rates rise significatly. Nothing is going to change.

Again, I am a firm backer of you Garth, however these 2 points will never be avoided until there is meaningful change.

One would assume that a full year into this recession that this would have changed by now.

Fact is a 5 year is 3.95% right now, for simply applying with good credit.

And so long as the bank does not back the mortgage, why in gods name would anything change.

Moreover how could it-asside from speculation that it will.

Suggest you review the facts. Condos were being built on new sales commitments in the 1980s exactly as they are today. At the moment there are tens of thousands of units under construction in the GTA, and at least 40% of them have not been sold, with at least 25% more having been bought by investors (aka speculators). In 1989 the 5-year mortgage rate was 12%, not 18%. But that actually was a positive compared to today when mortgage money is 2-3%. In 1989 there was reason to believe rates would drop. Today there is certainty they will rise, making real estate less affordable. This asset bubble will end, for 10 overriding reasons. Whether that is rapid or in slow-mo we do not yet know. — Garth

#33 Calgary_Rip_Off on 11.23.09 at 10:20 am

Hey Garth,

what’s your take on this Wong Calgary realtor guy? http://www.calgaryluxuryhomesearch.com/ Any plagiarism or bs there?

What did you think of Nikki’s comments? “I was simply a victim of a cyber bully who is a real estate Extremist trying to sell a book based on nothing but his skewed interpretations. The people that read his blog were not even remotely interested in discussing the article that was posted, instead they developed a mob mentality focused entirely on how I look.” On squids blog.

Last time I checked you were a member of parliament(either formerly or now?) and newspaper writer so when you pointed out her plagiarism she went ape. What is it with these realtors? Are they worried they may have to do this job part time and get a real job? Sorry to those who sell things-Ive been in sales-and think its an actual profession-it isnt. All you are doing is acting as the agent between the producer and the consumer. More or less a glorified beggar.

What’s with the people criticizing you in the Herald these days(see comments)? If these people are/were so successful, why are they even debating with people who have yet to buy in Calgary? They made their money already right? http://www.calgaryherald.com/business/real-estate/Calgary+housing+market+surging/2249137/story.html

What’s with the idiots in Calgary that say real estate is undervalued? Are they insane? The median income is around $90K/year. And the median house price is $400K. Why would anyone choose to buy now? To watch as their assets go down slowly? Seems like a big gamble these days. I wonder what will happen to the city over the next ten years.

#34 Mike B formerly just Mike on 11.23.09 at 10:28 am

To reiterate what was put on the previous blog.. Canaries.. as someone in that media industry… I can hardily tell you it was a bad bad year unless you had solid contracts with clients. Most were retrenching and doing all work internally. Oddly enough though real estate keeps humming along but some homes on our street and around are not flying off the shelves as they are over 700K and in mediocre shape.. But a year ago we were wondering if a depression was on hand and now the economists are predicting growth next year of 2-3 % . I envision another shoe to drop early next year as the US dollar slides… ours rises and unemployment edges higher as well. Look at the price of gold… that is no sign of optimism.. Maybe a good time to become a realtor… certainly not that difficult and tons of coin..

#35 TS on 11.23.09 at 10:36 am

Canadian banks are now beginning to warn consumers that mortgages have hit rock bottom and to expect increases of at least 200 to 300 basis points…


#36 F on 11.23.09 at 10:43 am

Thanks Garth for the info on your reply.

I understand you answerm but you have to admit, the 2 drivers simply have no timetable.

CMHC could do what they are doing for 10 more years, and as far as interest rates go, well, its been 8 years now for me in a VRM mortgage, and I still here the IDENTICAL mantra being spewed from my bank.

“oooooo…..rates are going to rise……oooooooo……lock in…….oooo”

Like a broken record.

Bottom line we are now a “monthly payment” based society.

The levers that control those payments are on a path that simply has no answer as to when it will change.

2 years ago I was all on board, believing rates would rise and foreclosures would happen.

Now, not so much.

One cruise through my area where I live and looking at how few MLS listings there are only seems to solidify the “other side” of the argument.

Again, been a supporter of your for years Garth. You can check my email, but I am seriously second guessing this

#37 Alberta Ed on 11.23.09 at 10:44 am

Here in Canmore, where condo ghost villages abound, prices have dropped and (gasp!) realtors are now offering Air Miles. The cracks are starting to form…

#38 miketheengineer on 11.23.09 at 10:45 am

#14 Nostradamus Le Mad Vlad

Peak Oil – Is a bunch of bull.

Back in 1990, I was taking Geology. The professor who taught the course told all the students. He was considered an “expert” in geology, many awards, etc.

This is what he said.

There is no shortage of energy in Canada. Then he brought up the stats on Coal.

Canada has a 500 years supply of Coal in the ground with the known reserves. Gasoline can be made from Coal. South Africa does this every day. There is no shortage. Canada is a lot like Saudi Arabia, loaded with Resources, especially energy.

Then he went into Natural Gas. Same types of numbers. Then he went into the Tar Sands. Same type of numbers. I wish I had kept the handouts, as the proof. Peak oil is a bunch of poo.

Lets see, cause a panic, limit the refineries that can process gas, create a monopoly, and then rise the price while the sheeple roll over and play dead.

In WWII, Germany could not get fuel. They converted their trucks, into burning wood, instead of gasoline. You see, it can be done. Don’t believe the propaganda.
Remember 50% of all information on the Web, radio, etc is bull. 50% is true. 50% is a bunch of poo.

Don’t you just love the game MONOPOLY, played out in real life.

#39 kitchener1 on 11.23.09 at 11:42 am

#27 Gonzo

I agree, the drop will be hard and fast. Just like last year. In RE drops its the first one-two years that have the largets % drops in realtion to the 5-6 year decline.

The biggest problem (same thing in the US) is that in a bubble, every piece of junk house will sell, sometimes there are even bidding wars. Think of the penny stocks or dot coms back in 99-00.

When the market starts to correct, only the deseriable homes in great areas are going to be moving. The crap shacks will not sell unless heavily discounted. Thats the problem.

Just as there is price disparity on the way up, when a million dollar property (house or cottage) selling distorts the local median price, the same happens when prices drop.

Just like 89-90- I think the first year drop was something like 8% on the books, but that is the average, so, nicer homes dropped less, while crap homes dropped more. After 1-2 years of heavy declines, the market will drop steadily at a rate of 3-4% for a few years.

#40 knucklewalker on 11.23.09 at 11:56 am

Hate to break the news to you mike…..you being an engineer and all…..but the issue at hand is a concept called eroei….look it up…

we passed peak in hydrocarbon production (liquids) in 2005 and total hydrocarbons in 2008……

the super giant fields are collapsing and we are not even coming close to new discoveries needed to fill the void they leave.

how anyone could equate digging bitumen with sucking sweet crude out of the ground with a return to investment in mind…is laughable.

Germany LOST WWII because of their inability to access russian liquid oil fields…they sucked their tanks dry trying the CTL technique…the EROEI was way to high…….

you are making the classic mistake of confusing “energy” availability with “technological capability”..they are completely seperate issues and not in any way inerchangeable

#41 pbrasseur on 11.23.09 at 11:57 am

“This asset bubble will end, for 10 overriding reasons. Whether that is rapid or in slow-mo we do not yet know. — Garth”

Those are wise words. I’m looking forward to your next book.

#42 JeffinPickering on 11.23.09 at 12:09 pm

Perhaps this is a spoiler for the forthcoming book, but what are the strategies going forward for those of us who played the game responsibly, so that we can avoid paying for those that didn’t?
We bought well within our means (meaning that we can continue to afford with one income if one loses a job, even if rates double or triple, are accelerating, etc.).

By no means do I believe the gov’t is going to let folks live on the street following foreclosure (what strategies if the gov. going to employ to save the greater fools?).
We know we have some whopper taxes coming on both consumption and income (c’mon, how else are JF and SH going to pay down those deficits?).

So, I guess my question really is: how do we hide our money and protect ourselves from having to pay for others’ mistakes?

You’re right. This is precisely what the new book is about – crash-proof strategies for the next five tumultuous years. Put twenty bucks aside. — Garth

#43 Oakville Owner on 11.23.09 at 12:26 pm


Have to agree with you. I have only been in a variable rate for the last year( prime -.50%, fully open!!) I’m sure rates will go up a bit next year but even if they rise 300 BP’s you cant beat the fact that we will only be at 4.75% and have paid off a huge amount of principal over the last year and 1/2 to 2 yrs.

I spoke to my mortgage holder a few months ago when I was considering selling and you could almost hear her frothing at the mouth at the idea that I may close out this mortgage. I called a few weeks ago and increased my payments so we are prepared when rates rise a bit. In the mean time I’ll keep blasting away at the principal.

Still feel the key to this crazy market is location, location and getting into the market at the right time. Being a vulture last fall was alot of fun. Any blog dogs out there that missed out on this drop should be looking at Fall 2010 after the HST and rates rise to get in. Remember to get pre approved in June 2010 and look for a great location. Be happy with a 10%-15% drop and don’t expect a 50% plus drop like some folks are looking for.This type of reduction just wont happen in any location that is worth living in for the next xxxx years.

#44 squidly77 on 11.23.09 at 12:26 pm

WW2 logos again in fashion

we were running out of oil in the seventies and the truth is we will always be running out of oil

the question is….when will it run out ?
in ten years ?
in a hundred years ?

The Energy Information Administration released its weekly report stating that oil and gas supplies increased amid refineries decreasing production levels to a 14-month low. From the first quarter until the end of the third, oil prices have doubled despite decreased consumption as investors snatched up other commodities to safe guard their investments.

Additionally, The Internal Energy Agency predicted an economic recovery would stall if energy prices continued to rise. The agency increased its forecast for global oil demand to 85 million barrels a day in 2009, 1.7 percent or 1.5 million barrels less than last year

I would wager that in ten years alternative energy use will be prevalent and oil demand decreases year over year over year

we had electic car 15 years ago and the government along with big oil killed it
Who Killed the Electric Car? is a 2006 documentary film that explores the creation, limited commercialization, and subsequent destruction of the battery electric vehicle in the United States, specifically the General Motors EV1 of the 1990s. The film explores the roles of automobile manufacturers, the oil industry, the US government, the Californian government, batteries, hydrogen vehicles, and consumers in limiting the development and adoption of this technology.

video here

#45 Calgary_Rip_Off on 11.23.09 at 12:30 pm

Here’s a neat calculator about rent vs. buy from the new york times Garth.

I put my rent in and the cost of the property I am renting(400K) At current rent of 1600/mo, with 20K down and 4 % interest I would break even after about 25 years. Notice when the interest rate goes to 7%, the break even period is off the chart. Pretty funny.


#46 pbrasseur on 11.23.09 at 12:33 pm

F #36

There is a flaw in you reasoning. Yes the CMHC could continue its role and yes interest rates can stay low for quite a while.

But what can’t happen is better affordability. It can’t happen for the very reason that artificial schemes to boost affordability such as the CMHC and BoC rates have now been exhausted or close to it. Sure the government could intervene with new means but those would eventually be exhausted as well, in fact they would just delay the inevitable while making the bubble worse.

What this means is that home prices have likely reached their peak because the vast majority of buyers simply cannot afford more and no artificial scheme can change that. Given the economic situation there is little chance that buyer’s finances will permit this market to move higher anytime soon.

So from now on the best case scenario is stagnation where the market simply levels off and stays stable thus preventing thousands of Canadian from falling into negative equity.

But for that you’d need a steady inflow of new buyers willing to buy (new and existing) homes at their current prices, enough for example to keep contractors busy enough not to slash prices. How likely is that, for how long?

If at any point and for any reason the demand falter some, prices will start dropping and when that starts there is no telling where it stops.

Not matter how you look at it we’re standing at the edge of a cliff or at least a very long hill.

#47 Grey on 11.23.09 at 12:36 pm

#35 TS

My favourite line in that article was this:

“We have to realize those are emergency interest rates,” said CIBC economist Benjamin Tal.

Right. Because all the buyers that were persuaded over the past several years thought these were “emergency” interest rates.

Thanks Garth for the great post! I remember 1989. I was in elementary school. It was the year my father lost his job and we had to sell our home.

I’ve noticed this fun theme in comments sections across the web, where people call those of us who are first time buyers “bitter renters” because we’re apparently jealous that we missed the boat to get into the market. Well, I can’t control what year I was born in. I was still in University when this housing market started to boom. I didn’t even have my first job yet, let alone met my spouse, worked my way up the corporate ladder and started to save for a downpayment. I was still trying to pay off student loans when the market positively exploded all while living with 2 roommates to help save money on rent. But somehow it’s my fault that I missed the boat because I was still essentially not born 5 years earlier. I also remember that 1989 time all too well and I don’t want to repeat history for my own adult family based on the chaos going on outside right now.

So I am not bitter. Frustrated, but not bitter. It could be a lot worse and I am very grateful to be where I am despite not owning a home.

#48 Mike (authentic) on 11.23.09 at 12:43 pm

Garth’s topic is more than enough to convince us to hold off for another year and rent rather than buy. Will look how the market is in 2011.


#49 TheBigLebowsky on 11.23.09 at 12:57 pm

#48 Mike. Just remember that when you buy, The housing market may grind along the bottom for a decade or even two. Don’t expect your house to be an investment that will increase any time soon. A house is a place to live and a depreciating asset that needs to be maintained aka money pit. I think prices will edge lower over years and it won’t be hitting a sharp bottom then start rising again.

#50 BAD on 11.23.09 at 1:14 pm

As a side note:

When buying recently build house one should check for Chinese drywall.

The federal government said Monday that it has found a “strong association” between problematic imported Chinese drywall and corrosion of pipes and wires, a conclusion that supports complaints by thousands of homeowners over the last year.

In its second report on the potentially defective building materials, the U.S. Consumer Product Safety Commission said its investigation also has found a “possible” link between health problems reported by homeowners and hydrogen sulfide gas emitted from the wallboard coupled with formaldehyde, which is commonly found in new houses.

Feds find association between drywall, corrosion

Seems houses are not only overpriced by may also be dangerous.

#51 Waiting to buy in Vic on 11.23.09 at 1:18 pm

The entertainment (photos, commentary and advice) on your blog is contageous! Can’t get enough…keep up the great work!

#52 pezzazz on 11.23.09 at 1:26 pm

Garth, I finally got around to reading after the crash this weekend. One point you had in there that I found thought provoking was how technology has certainly greased the wheels when it comes to velocity of change. Since there have been HUGE advances in the speed of communication since the last major housing bust do you anticipate that Real Estate (traditionally a very slow asset to react to price change) will increase the speed of its demise when compared to the last few busts?

#53 tom on 11.23.09 at 1:30 pm

#20 “Put in on your facebook page, send a copy to your Congressman, tell all your friends. Reference it in your online commentary.”

Congressman? You do realise this blog is for Canadians?

#54 AxeHead on 11.23.09 at 1:32 pm

I know someone in Red Deer who bough a LOT for $475k. Yes, just a lot. It is a pie shaped lot, SE facing, and nice size – good. It’s only a lot, worth more than most houses, has some highway noise, and is in eyesite of a former dump (although reclaimed) – bad, really bad.

Garth, when you’re in Red Deer, drive into a subdivision called the ‘Pines’ and you’ll find construction of a house with an estimated cost of 7+ million dollars…it’ll be worth the diversion.

#55 Northeast Canuck on 11.23.09 at 1:33 pm

#47 Grey. You make a really good point there. It is not sustainable to have an entire RE market hogged in this way, by people who bought into it at the right time (by luck mainly). These morons who say that RE can only go up, you’ve missed the boat, etc, don’t seem to understand that you cannot have entire cities where housing is out of reach of average people. That ridiculous statement means that effectively every generation from now until eternity will be priced out! Of course this is impossible. The current activity in the market is almost entirely comprised of people who built equity, often purely by accident, by buying their homes 5 or 6 years ago, and using that equity to move “up the ladder” now. They are relying on that other group of people, the “first time buyers” who absolutely need the 5/35 mortgages to buy those first houses. When the supply of either of these groups dries up, that will be the end of this madness. It’s a frustrating wait though. Here in North Vancouver we are finding that families are simply moving out of the city because they can’t afford to live here anymore and schools are closing as a result. The same is happening in Vancouver. The schools that remain open are desperately short of cash and the result is endless “begging” for donations for everything from playgrounds to paying for books in their libraries. Fundraising is out of control. Pathetic, in a city that is full of supposedly “affluent” people in $million+ houses. This is not sustainable!

#56 Men With Hats on 11.23.09 at 1:37 pm

Entertainment News :

Nic Cage is broke . And not just a little .

#57 Men With Hats on 11.23.09 at 1:46 pm

Entertainment News :

Nic Cage is broke . And not just a little . He has had to sell off his substantial real estate portfolio bought on the adice of his business manager Samuel Levin .
Cage owned properties arounf the world including a castle in Bavaria .
His homes in New Orleans hit the auction hammer this month .
Cage also owes the IRS several million dollars .
For a guy who commands twenty million a picture this is an extreme reversal of fortune .

#58 BAD on 11.23.09 at 1:52 pm

We are different here in Canada after all…

And even when we submit to the nickel and diming, that’s still no guarantee we’ll get what we paid for. A friend told me of his experience with a cable provider who three times scheduled a house call to install an equipment upgrade. Three times, the cable technicians arrived at his house without the new equipment, entirely unaware of what they were supposed to be doing. When my friend called the cable company, he was “escalated from Boston to Bombay,” until he finally reached a supervisor. The response: “Sir, haven’t you found you can’t always get what you want?”

The TTC gouges. We squeak and pay up

Seems overpriced housing is just a piece of the big picture.

#59 Men With Hats on 11.23.09 at 2:14 pm

Sorry ‘ bout the duplicate post .

#60 Mr. D - Ottawa on 11.23.09 at 2:16 pm

#38 Mike

I have to disagree. No matter how much people wish it is a myth, peak oil is real and it will have a very major affect on society. Oil production in the U.S. peaked in 1970 and has been declining ever since. Oil production has also peaked in dozens of other countries too. After the peak, there will still be oil…just less and less each can be extracted passing year. if demand doesn’t drop significantly, prices will skyrocket. This already happened in 2008.

I have copied a good definition for you:

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. The concept is based on the observed production rates of individual oil wells, and the combined production rate of a field of related oil wells. The aggregate production rate from an oil field over time usually grows exponentially until the rate peaks and then declines—sometimes rapidly—until the field is depleted. This concept is derived from the Hubbert curve, and has been shown to be applicable to the sum of a nation’s domestic production rate, and is similarly applied to the global rate of petroleum production. Peak oil is often confused with oil depletion; peak oil is the point of maximum production while depletion refers to a period of falling reserves and supply.

#61 F on 11.23.09 at 2:21 pm

I think what we are now seeing is exrteme examples of excess that simply do not make up the majority of the situations.

“I know someone who bought a lot” and “I know a house on young street” simply does not happen everyday as the norm. And to the person who is talking about the government changing the rules and running out of ideas.

Let me point to Japan for some insight in case you want to see how far it can go.

2 generation ammortization (60 years)
zero percent interest rates for 10 years.

I think the core of this now is getting a bit old, talking about “what is going to happen”, when every year goes by and it simply does not.

Eventually you a have to start wondering if this “great fall” , or “great interest rate spike” will actually every occur.

#62 OttawaMike on 11.23.09 at 2:24 pm

Housing prices are exploding in Kabul:

Here’s some cheap American version of Garth banging his same drum:


#63 JFoo on 11.23.09 at 2:25 pm

We keep on bring up the income to house ratios to determine housing affordability. We then compare the craziness in Canada to what occurred in the States prior to their drop in real estate market in order to show how unaffordable our markets are, however, we fail to include the fact that housing in Canada is paid for in after-tax dollars. Whereas in the US mortgage interest is tax-deductible. This represents a large disparity which further shows how unaffordable housing in Canada has become due to deflated “emergency” interest rates.

#64 EB on 11.23.09 at 2:31 pm

And an American movie star’s personal financial travails are interesting because…?

#65 jess on 11.23.09 at 2:54 pm

“incentive refinance.”

liar loaners /defunct lenders see the opportunity in comeback riskless fees insurer by doing the haircutting paperwork.
buy the junk lower prinicpal and get the FHA (taxpayers)to be insurer.


RIVERSIDE, Calif. — State and federal prosecutors have charged seven people in an alleged securities scam that cheated dozens of people out of $17 million.

The Riverside County district attorney’s office said Thursday that James Duncan, who called himself “the Cash King” in online videos, and Hendrix Montecastro each face 249 counts, including grand theft. Five others were also charged and arrested.

Prosecutors say they used investment seminars, Internet ads and word of mouth to lure at least 75 people to invest in a series of shell companies.

A civil lawsuit also alleges they bought homes on behalf of investors, refinanced them based on inflated appraisals and took commissions.

The U.S. Attorney plans to file a separate complaint alleging mortgage fraud with losses of about $125 million.

The scheme took advantage of homeowners and lenders by using straw buyers, fraudulently obtained loans and inflated real estate appraisals to strip equity from more than 100 homes from 2004 to 2007.
mortgage fraud and liar loans

This from the UK – who is responsible for the fraud watching?

#66 F on 11.23.09 at 2:56 pm

And for those in the cheap seats here is the math:

$500,000 home
Ammortized over 35 years
4% interest rate
$2,213 per month.

prices increase next year by another 10%
$550,000 same house
Ammortization 35 years.
Interest rates at 4.75% (3) .25% increases, and if you really believe that, you have issues.


differnece of $475 a month. Hardly a reason to mail in your house keys.

Then CMHC changes BACK TO 40 year. (not possible right?)

payment is now $2,561 or $348 more a month. Take out the THREE increases for the mortgage rates and OH look….$2,298 per month or a shocking $85 more per month. ($2.83 cents per day)

For something that just increased in value by 10% year on year, further reinforcing the logic of the investment in the first place.

See how there is a difficulty seeing how this will ever end?

And we are not even factoring in the people who are selling their property that went up in value too.

Until there is a CLEAR direction on rates and the CMHC, I am affraid that this conversation will be cut a paste identical a decade from now.

As long as the governement and banks are connected with this financial engineering, I really doubt there will be any realistic counter argument otherwise.

Lets face it, who really knew how much the CMHC was involved in this market till a few months ago?

CMHC is un regulated and does not answer to anyone except the goverment.

They could change the Ammortization to 60 years and there would not be a damn thing anyone could do or say to stop it.

#67 robert on 11.23.09 at 3:01 pm

#8 Nonplused

On the subject of trucks I always laugh at the number of “contractors” I see driving brand new trucks with wheels and exhaust systems that easily cost more than my fifteen year old ride. If I’m going to hire someone based on the truck he drives it will be the guy in the well loved, well cared for beater.

I saw a brand new truck today with the Git-R-Done decal in the back window and Hillbilly Heaven airbrushed on the tailgate. I’m sorry but Hillbilly Heaven connotes visions of some pre fuel injected big block with lots of cracks in the windshield, a few bullet holes in the body and the acrid smell of an engine leaking all the main automotive fluid groups – not polished chrome wheels and pristine clear coat.

#68 robert on 11.23.09 at 3:04 pm

#57 Men With Hats

On the subject of Nic Cage I was in a shop on Beale Street in Memphis a few years ago. The owner was relating how Cage and Lisa Marie had been in the store and that Cage was one of the biggest a$$holes he had ever met.

#69 robert on 11.23.09 at 3:17 pm

#24 latinlife

“What happened to your inflation hedge Garth?”

But how many people bought at $32 as opposed to those still holding tankers of the stuff at over $120?

The smart ones. — Garth

#70 Nostradamus Le Mad Vlad on 11.23.09 at 3:27 pm

#38 miketheengineer — “Don’t you just love the game MONOPOLY, played out in real life.” / #40 knucklewalker / #44 squidly77

Good day, gentlepersons. It is a moot point when we will, or have run out of these items.

Main thing is someone else is controlling us, whether we like it or not, and as long as the debate continues among us, it diverts attention away from the one matter, which is depopulation.

In order for the elite to have a better and more abundant life, an awful lot of us have to be conveniently removed / eliminated.

Hence the intro of H1N1, cancers and other terminal illnesses which are popping up with greater frequency here, plus the onset of wars, civil wars, plagues, etc. — all kinds of trash designed to place our limited attention spans elsewhere.

As #38 Mike said, this is nothing more than a Monopoly game. The NWO (elite) roll the dice, make their own choices and, as Billy Bob Shakespeare said, we are simply actors in the ongoing show of life.

The physical life, like everything else, will end one day. Whether sooner or later is another matter.

#71 Kash is King on 11.23.09 at 3:34 pm

Here’s an innovative company:


Why are you posting various stories about gold, and changing your name on each? — Garth

#72 Alex on 11.23.09 at 3:34 pm

Wow, die-hard paperbugs have started buying precious metals!


#73 kitchener1 on 11.23.09 at 3:49 pm

#46 pbrasseur
What this means is that home prices have likely reached their peak because the vast majority of buyers simply cannot afford more and no artificial scheme can change that. Given the economic situation there is little chance that buyer’s finances will permit this market to move higher anytime soon.

I agree 100%

People forget the fundamentals:
A 450K house that is affordable at 2.25% is way out of reach of most people at 5%, at our historic norm of 7-8% it is out of reach for anything but the top 10% of earners (using the 1/3 rule)

Its just like the stock market, will houses be more in 20 years, sure they will, but there are dips along the way, the question is:
can people who are buying withstand these dips?

On interest rates: Garth/blog dogs can you please provide some guidance on this question:

With all levels of govt running huge defecits, an increase in interest rates, however negligble, will cause a huge increase in interst payable. Gov’ts are going to have to cut spending/jobs/programs etc.. any increase in rates will negate what ever cuts they have/are planning.

Do you guys think that the BoC will try to keep rates low, despite what other countries/market forces are happening around the world? It would be a win/win because the loony would fall back down to the high 70’s/80’s level vs USD.

#74 Real Estate Deal or No Deal on 11.23.09 at 4:05 pm


You just couldn’t resist … could you, Garth?!

#75 Calgary_Rip_Off on 11.23.09 at 4:25 pm


You may be correct about your stability assumptions. Pray that you are for Calgary. Your assumption is no more valid than the bears. You arent including in the other costs of home ownership. If it were this easy, people would rush to buy an overpriced shack. The reality is that hoping and viewing a “silver lining” wont help you as an owner when you simply cannot pay. As a renter you just leave.

#76 Jenkins on 11.23.09 at 4:44 pm

Wow…the Vancouver Sun is on board. This blog is now officially mainstream.


#77 CM on 11.23.09 at 4:45 pm

Hi guys,

I’m trying to show the girlfriend what the premium cost is for renting from a bank (aka owning) versus renting from a landlord, for an average Joe in Calgary, ‘owning’ vs renting an average home


Just wondering if anyone had any feedback on the calculations, or anything else I could add?

Here’s what I’ve come up with for the average Joe in Calgary so for…

price: $410k (median price right now)
downpayment: 10% or 41k
mortgage rate: 4%
+ property taxes + insurance + maintenance + realtor fees (all per month)

rental price: $1575/month (current median price)
premium of ownership: $456/month

If the mortgage rate is 5%…
premium of ownership: $763/month

If the mortgage rate is 6%…
premium of ownership: $1071/month

If the mortgage rate is 7%…
premium of ownership: $1378/month


#78 Kash is King on 11.23.09 at 4:47 pm

Huh? Garth don’t you check emails vs IP addy before you’d say something like that?

I only ever use this name.

#79 Popeye on 11.23.09 at 4:50 pm

#60 Mr. D – Ottawa on 11.23.09 at 2:16 pm
But isn’t maximum capacity a function of capacity to extract and the majority of reserves being found? What happens if the biggest reserve is found in the arctic? ‘Peak oil’ has been and is a means by which to steal money from the masses.

What about peak milk? Instead of 10,000,000 cows producing milk, now there are only 9,500,000? My milk still costs ~$1.00/litre, as it has for many years….

#80 Evangeline on 11.23.09 at 4:58 pm

((And an American movie star’s personal financial travails are interesting because…?

the joy of schadenfreude

#81 CM on 11.23.09 at 5:08 pm

“I may not have been investing for as long as some, but what I do know is that if everybody is saying it – it never happens.”

Incorrect, as has already been shown….

Google News search for ‘Housing Bubble’


^^ graph shows that the MSM peak was summer of 2005…

right before it popped.

#82 David on 11.23.09 at 5:14 pm

Most people don’t realize that Alberta’s Finances are Driven more by NG than Oil. Eventually, oil sands will be big enough to offset NG’s decline…but jobs are bleeding around the oil patch, even with oil creeping up to $80, because NG is down in the dumps. Unfortunately for Alberta, NG will be down in the dumps for YEARS due to the Shale Gas from the US, so things won’t look that pretty. Most drilling activity in Alberta WAS NG drilling, and it ain’t coming back.
Plus, about 2% of Alberta’s population works for the oil companies, and maybe another 10% benefit from indirect spinoffs…so to expect higher oil prices to lift all of Alberta real estate is absurd. It wasn’t oil that drove the Alberta real estate bubble to begin with (everywhere else went up just as much) and oil won’t do anything to save it.

#83 David on 11.23.09 at 5:17 pm

Watched Bubble;

The reason your seeing bubble talk from the media is because its so obvious we are in a real estate bubble of massive proportions, even they get it.

We’ve created our own Subprime Mortgage Crisis here, with “teaser interest rates” that suck people into a place they can’t possibly afford when rates go back to normal…and we’re watching the meltdown continue across the US and most of Europe…while ignorant Canadians are whistling past the graveyard, pretty sure that Maple Syrup and Good Hockey can save us from the laws of economics.

Beauty eh!

#84 Ret on 11.23.09 at 5:27 pm

Prices in Toronto could not go down now. Blasphemy! Ask any real esnake agent. 1990 was different. Toronto is a world class city and the hub of Ontario, if not all of Canada. Blah, blah, blah or should I say Build, Build, Build!
I bought a 1945, 1500 sf home near MixMaster University in Hamilton for $80000 in 1985. That was 2.2 times my gross earnings. By 1990 it was worth 180000. In 1995, I couldn’t get 140000. Similar to mine on this street just sold for 350000. That would be 4 times gross earnings for the same pay grid position today.
In this neighbourhood, many new Canadians from a variety of countries, will pay anything to rent out a few illegal basement rooms to foreign students or sometimes, they just become slumlords and rent out every room in the house. They have taken huge financial risks.
Possibly 20% of Torontonians are post 1990, new Canadians. Most are mortgaged to the max thanks to the BoC policies. They haven’t seen what has happened in the past and frankly they don’t believe that prices will ever go down. It won’t be pretty. It is ironic that the people that the BoC most wants to help will become the victims of short sighted BoC policies.
It will probably be even worse in Hamilton. Very few clean, high value businesses want to set up in a decaying union town. They go to Brantford or Burlington.
I hope to bale early spring and push for an Aug. 2010 close, and move a little farther out into a brand new home, for far fewer dollars.
After the crash, I’ll take advantage of some of the foreclosures to get the bigger home with the granite countertops. With all the new builds done in the last 4-5 years, there will be lots to choose from.

#85 Evangeline on 11.23.09 at 5:30 pm

((and we’re watching the meltdown continue across the US and most of Europe))

foreclosures in the U.S. are now hitting prime mortgages

#86 Cassandra on 11.23.09 at 6:15 pm

#27 Gonzo

I’m with you, at least as far as the Vancouver market goes.

I have bought and sold property both in Vancouver and Hong Kong over the past decade. Hong Kong real estate speculation is not a sport for the faint of heart. When it moves, it moves like a greyhound on steroids, both going up and down.

The run-up in Vancouver RE reminds me of HK before the 1997/98 bust, which was breathtaking in its rapid decline, and left millions in negative equity. Some no doubt still are.

Back in more sedate Canada in 2007 some friends of mine asked my opinion on whether they should buy a four-bedroom 1960’s house in Burnaby for $749,000. I brought out my chart (from the GVREB that I was fond of showing anyone who asked) and showed them the last ten-year real estate run-up compared to the historical averages, pointed to the top (remember, this was 2007 and the line was still moving inexorably upward, no end in sight). I said to them, “Would you want to buy here?”

They would, apparently.

I guess where some see danger, others only see the missed opportunity, all those years where they could have made more money. And we’d better jump in before it’s too late. These were university educated people in their forties. Go figure.

Strap in your seatbelts, Vancouver first-time-buyers, your tummy’s going to be somewhere above you when the silent whistle blows…

(and I currently have a bet with hubby that it’ll start before the Olympics – when speculating, why not go big?)

#87 X on 11.23.09 at 6:27 pm

Niall Ferguson on the markets, economy, bubbles and war:


#88 Emma on 11.23.09 at 6:36 pm

#66 F

Let’s just run with your math in scenario 1: you lock into 500K @ 4% over 35y and you pay $2213/m. After 5 years, you have paid $132,780 but have only reduced the principle by $35,510 so you are left with $464,490 owing. When you pop up for renewal, you need the interest rate to be 4.306% to be paying the same $ amount of interest as the first year.

We have been conditioned to believe that our monthly payments will go down with each renewal but a lot of people are going to be sadly surprised.

More than that, your reduction of $35K represents a 7.1% reduction of the original loan. If the price of your home dropped more than 7.1% over the last 5 years then you risk not qualifying for renewal – hence the mailing of keys.

I don’t need to use my imagination for this scenario because as a youth, I watched with wonder between ‘88 and ‘93 when houses in downtown Toronto dropped 50% – not the average house – huge detached 7 bedroom Victorians!

And as for the rate jump – here’s a link to the average 5 year lending rate (not variable) between 1951 and 2008. There was a 0.75% jump between March and April 1990 and also a 1.54% jump between March and April 1994 – that’s average change over one month!!


#89 jess on 11.23.09 at 6:48 pm

Speculation has risen that other countries will follow Brazil and Taiwan’s their lead.

“Recent measures from Brazil and Taiwan curbing capital inflows send a clear signal: emerging market policymakers are far away from accepting a sustained reallocation of portfolio capital from the west, and its liquidity and currency implications,” said David Bloom at HSBC.

#90 Nostradamus jr. on 11.23.09 at 6:49 pm

….The U.S. is following Canada’s lead….effectively insuring all Residential Real Estate mtge’s…

This can allow both currencies to lose value but gain comptetiveness against the Yuan.

…My prediction is that Residential Real Estate prices will continue to rise in Canda’s major markets…and stabilize Residential Real Estate in the U.S.

Gold will be “CRASHED” at some point….causing a further rebound/recovery of North America’s major market’s Residential Real Estate.

…Garth, you should consider purchasing Real Estate in Vancouver BC.

Nostradamus jr.

#91 jess on 11.23.09 at 6:50 pm


…get foreclosed go to court ,stay in home since no note produced ,remain in home five years and file “quiet title”

#92 Onemorething on 11.23.09 at 6:56 pm

Like said, when it hit’s prime mortgages then everyone knows there is going t be huge problems.

#66 F, guess your trying to justify that overpriced RE you just acquired, then read this blog. I agree with the pace of interest rate hikes, you will never see a 60 year AM same as you wont see fixed low interest 25 year locked.

You will see an intial 20% drop, you will see 10-15% more when interest rates begin to rise 12 months out. If you live in big bubble territory your done.

#76 Whatcha Still Around For

Realization that the RE market is at insane levels is finally occuring, that is all, and the CAN Government likes those headlines, as their very affraid.

The ELITE are now leaving the US, that is the new trend, follow the money or find yourself living in Self Storage!

#93 miketheengineer on 11.23.09 at 6:59 pm

Vaccine issue

In the news today, it said,

” H1N1 flu vaccine after six people experienced severe allergic reactions”

I am sooooooo happy I did not give this soup mix to my children. God knows what is in it.

#94 Mike (authentic) on 11.23.09 at 7:00 pm

I cam currently sitting here at Pearson International Airport in the Executive First Maple Leaf lounge and I can attest the economic recession is on. This place has about 12 travelers in it when it usually is packed. Ah well, more free booze and eats for me. :)

I enjoyed my stay in Toronto, what an economic difference from 2 years ago. Felt like a down right depression here.

Goodbye Canada for 10 month, “I’ll be back”.


#95 Piccaso on 11.23.09 at 7:12 pm

A few weeks back Garth you were pumping a financial portfolio that was full of bank and energy stocks to some hoop that was sitting on cash. I almost fell out of my chair reading that one, WTF ??????????
Nothing like buying at the top!!.

I don’t pump portfolios. People can make their own mistakes. Investing in dividend-yielding bank stocks is not one of them. As for oil, it is half the price it will be. Enjoy your ING high-yield savings account. — Garth

#96 miketheengineer on 11.23.09 at 7:19 pm

To all:

My point.

Who cares about Peak Oil……we should all be swimming in oil, gasoline, hydro etc. We have more people unempolyed than anyother time in history.

When we run out of useable oil, and useable natural gas, we will use coal, like they do in South Africa, to make gasoline. From coal (500 years supply). I say good riddenance to oil, turn on the windmills, turn on the geothermal, turn on the electric cars, turn on the wood stoves. We have options. We have resources. Canada is it’s own world, and the rest of the world wants to destroy it.

We don’t need oil, except to lubricate bearings….that’s it. Don’t believe all the propoganda bull poo.


P.S. Read the book, by Les Stroud, “off the grid”.

#97 informed on 11.23.09 at 7:22 pm


Hello Garth,
I am an avid reader of your blog and support your views.
I am interested in any thoughts/comments on the above link: CIBC senior economist Benjamin Tal
it is an article worth a read.
If the spread over BOC rates remains in the 534 BPS range, I am of the opinion the long end of the mortgage market (5 year rates) will adjust sooner rather than later, as bond yields rise. Tal is talking about the SHORT end of the market for money.
Once bond yields rise, and 5 year mortgage rates rise, mortgage affordability drops exponentially: a 1% rise in rates results in a 10% drop in the amount the consumer can borrow.
A two percent increase in bond yields (not a big jump) means we could EASILY see 5 year rates at 7%, and a 20-30% drop in real estate prices
thoughts? does this seem realistic to you?

#98 Emma on 11.23.09 at 7:31 pm


Sounds like you bought a ‘home’ and your mortgage is low so I wouldn’t worry if I were you. If you can see yourself in the house for 10 years or more and you can pay your current bills and set something aside for future maintenance of the property then I don’t see why you would move now. You could try using a mortgage calculator and putting in a worst case scenario like 10 or 12% just to make sure you can weather a rate hike storm.

It sure is tempting to sell when so many people are making money from this crazy market and I must admit, I’ve toyed with the idea myself but it sounds like you weren’t in it for the investment – other than the personal kind (i.e. owning vs. renting).

I often wonder how this generation of first timers who HAVE to buy so their kids will have a backyard to play in are going to be able to finance their kids’ educations when they still have 20 year mortgages. Similarly, lots of them are using their parents’ money for down payments but it’s a no-brainer that they won’t be in a position to do the same for their own kids.

#99 shifty on 11.23.09 at 7:41 pm

Niall Ferguson says:

Part of the point I’ve been making for years is that it’s a fragile system. It broke down once before. The last time we globalized the world economy this way, pre-1914, it only took a war to cause the whole thing to come crashing down. Now we’re showing that we can do it without a war. You can cause globalization to disintegrate just by inflating a housing bubble, bursting it, and watching the financial chain reaction unfold.”

#100 Ronaldo on 11.23.09 at 7:56 pm

Curious to see exactly what has happened with mortgage rates over the past few years, mainly between 2003 and now, I did a bit of digging and came up with the following:

Firstly, here is a link to the current RBC mortgage rates.


I will discuss these later.

My son purchased a home just outside of Red Deer in May of 2007. At the time prices had come down from their peak of around $315,000 to around $290,000. Since prices were dropping and this was a private deal and no real estate commissions to deal with, he was able to pick it up for $275,000. Great location and only 3 years old. At the time the BOC prime rate was 4.5% and the rate he obtained from his bank was prime minus .75 or 5.25% variable 5 year. (prime was 6%).
The BOC rate went up a further .25% before rates peaked and started to go down to the .25% it is at today. At first, even though both he and his wife were working (still are), the payments on this mortgage ($260,000, low in this day and age) took a fair chunk of their earnings but was manageable. The choice he made to go variable was the right one in this case and they are capitalizing on it with a 1.75% rate and the mortgage is being paid down quite rapidly. House prices have stabalized there although lots of homes for sale with asking prices for similar homes at $289,900. I guess we can say they lucked out and I am certain the bank is not impressed with it right now.

Going back a few years and for the period between 2003 and 2005 the BOC prime varied between 2.25 and 3.50 and the CMHC 5 yr mortgage rate varied between 5.26 and 6.44. Not a lot different from 2007 when my son purchased.

In the above time frame the average price of homes in Vancouver according to information I dug up from my archives were as follows:

2003 – $329,500 an increase of 9.47% BOC rate 3.00 to 3.5 and 5 yr CMHC mortgage 5.62 to 6.44

2004 – $374,300 an increase of 13.6% BOC rate 2.25 to 2.75 and 5 yr CMHC mortgage 5.31 to 6.10

2005 – $445,800 an increase of 19.1% BOC rate 2.75 to 3.50 and 5 yr CMHC mortgge 5.26 to 5.67

Above rates not a whole lot different than 2007.

Now if we look at the RBC rates from the link provided above which you can look at for yourself, you will find that the 5 year closed posted rate is 5.59% which is an increase from the 5.45% rate in May just after the BOC rate hit its lowest level and 10 days ago it was actually 5.74% so they had actually raised that rate by .29 from the rates in May, figure that. The 4 year rate was 4.84% in May and went to 5.29% Nov. 13 (+.45) and back to 5.19% Nov. 23. They do offer special rates as shown with are 1.05 to 1.4% lower but only good to Dec. 31st.

The 6 month open is 6.45% and the 1 yr open is 6.45% but who would ever use that?

So with todays outrageous prices in Vancouver and Toronto and elsewhere I can’t see many first time buyers being able to qualify under the current rates they are offering except for the Variable rates they are offering with the 5 yr closed at 2.29 and the 5 year open at 2.99 but again these are only good to Dec. 31st. I guess these would be renegotiable at that time. Better hope rates don’t go up too high.

So I guess the point I am trying to make is that the banks have already raised their rates. How could they possibly raise them any higher than what they are at present and still stay in business unless of course the price of homes comes back down to the 2003 to 2005 levels when the rates were basically the same as they are offering right now. EXCEPT OF COURSE FOR THEIR VARIABLE PRIME +0% RATE and the 1 yr. closed rate of 3.6% or 3.2% to Dec. 31st.

So what is likely to happen, the BOC raises its prime from .25 to .50 in June and the Banks rates will remain the same (already too high) except for the Prime Plus 0 rate which would then go from 2.54 to 3.24, still affordable for 1 more month anyway. So, by the end of 2010 we could potentially see the Prime Plus 0 rate at 3.79 except that now they would have to raise the other rates as well. I would expect that before we get to that point, house prices will have come down sufficiently in order for housing to be affordable again.

The other point to note is that the Chartered banks rates are generally 1.5 to 2 percent over the BOC prime so you would expect the 5 year fixed rate to be around 4.29 and not 5.59 (the special offer is 4.29). Seems they have a buffer built in already.

So, given the built in buffer they are good with their rates til the end of 2010 even if the BOC prime goes to 1.75%. Going to be fun to watch this whole thing play out. No doubt we will be hearing threats of rates rising over the next few months in order to scare those on the variable rates to run and lock into a long term rate. Problem is they can’t because rates are too high already and they couldn’t make the payments. There is no need to raise them. My thoughts anyway. Would appreciate any feedback.

#101 Nostradamus Le Mad Vlad on 11.23.09 at 8:04 pm

One person who seems to be somewhat angry about the Climategate Fiasco. From the first para. (see how easy it is to spot the elite, or NWO in there). / Fraud / Sun

“. . . . the world’s classe politique proposes to set up an unelected global government this December in Copenhagen, with vast and unprecedented powers to control all formerly free markets, to tax wealthy nations and all of their financial transactions, to regulate the economic and environmental affairs of all nations, and to confiscate and extinguish all patent and intellectual property rights.”

Guess who is the queen of the scam? (Gore is there to look important and answer questions, that’s all). — Persona Non Gratis
Speaking of debt, this. Comment from wrh.com: “The possibility of this country collapsing under the weight of its own insolvency is not beyond the realm of possibility right now.” — and — 1:22 clip.

#91 Nostradamus jr. — “Gold will be “CRASHED” at some point . . .” Seems there is another goldrush on. Bear in mind Nortel and Bre-X. Here today, gone tomorrow. That’s me!
It is well-known the m$m is controlled by ‘non-existent’ MSM-types.

#102 Dan on 11.23.09 at 8:11 pm

#76 Watched bubble

A man jumps off a 100 floor building, gets to floor 25 and isn’t dead yet. Everyone around you thinks he’s going to die, so being a contrarian you would bet he’s going to live? The real estate bubble is similarly obvious. Debt can’t continue to rise faster than income forever. Sooner or later it bites you. The smart money just isn’t going to be on the man (or the housing market) defying gravity. Furthermore, if the vast majority believed the market was due for an imminent fall, it would be falling already. This is what happened at the start of the year. With financial risks this high, sentiment turns on a dime.

#103 Piccaso on 11.23.09 at 9:03 pm

Ya you did, I came back and posted the only bank stock I’d own right now is FINANCIAL BEAR 3X SHARES ETF
Symbol – FAZ

So buy it, and tell is what happens. — Garth

#104 Nostradamus jr. on 11.23.09 at 9:23 pm

#103 Dan

…If the man who jumped from the 100th floor was from Vancouver BC’s North Shore, he survived the fall.

It’s different for Vancouver(ites)…don’t you know.

Nostradamus jr.

#105 Potato on 11.23.09 at 9:34 pm

CM (#78):

A good job of it, you seem to have made a good case for yourself. A few comments:

First, be prepared for the “b-b-b-but owning means we’re building equity” argument. In your spreadsheet, your “mortgage payment” is actually the simple interest on the mortgage. I think that’s a very fair way to do it (in fact, I use the whole purchase price) since even as you pay down principal, there’s the opportunity cost of that money being tied up, which generally would be about what the mortgage rate would be. The actual payment on a 4% mortgage (25 year am) would be nearly $2000/mo — so the renter can save the difference (assuming they can stick to a budget) and build just as much equity, but in a diversified way.

Unless the laws are significantly different in Alberta, your ownership advantages are overstated: you can paint the walls whatever colour you like when you rent, you just have to paint them back before you leave.

Finally, I’ll just say that this is fine for the average joe, but you should also run the numbers for your specific situation. Find a rental or three that you would consider living in — whether that’s high rise, townhouse, or detached — in a neighbourhood you like, and then find units for sale that are as similar as possible to those. Run the numbers comparing the two.

I had to work very hard to win a similar debate. What finally won it for me was the argument “look, we can either afford to own this house, or rent it and buy a new car.”

#106 Dan in Victoria on 11.23.09 at 11:05 pm

Post#105 Nosti,As I said before,The only reason he survived his fall is cause he landed on a taxpayer.

#107 Taxpayer like you on 11.23.09 at 11:27 pm

[email protected] – Havent read Garths book, but it sounds like some kind of “future shock”. Google it. I never read that book either, but did see the documentary when it first came out (yes I am that old). I’ll search it.

NE Canuck @55. Is the conlcusion that people are leaving
based only on school closures? It is well known that as families in neighbourhoods age, the enrollment for schools drops. I also saw where downtown van is experiencing an increase in demand for grade schools, as “Vancouverism” has increased the number of young families living downtown. Sorry, only remember that it was a local TV station running the story.

92 Jess – Cant speak for East of Manitoba, but the western provinces have a torrens-based land registry system. Wont happen here.

#108 Taxpayer like you on 11.23.09 at 11:30 pm

Pezazz – found this:

#109 Soju on 11.24.09 at 5:19 pm

Prices go up then down then up higher then down then up higer… What’s the point. People survive and the sun keeps rising.

#110 Soju on 11.24.09 at 6:23 pm

Gold is only going up due to people hoarding it. Unfortunately, no one is actually using it. The gold still there. I wonder what will happen once everyone decides to sell back the gold… At least with RE, people must live somewhere.

#111 latinlife on 11.25.09 at 11:10 am

R.E. X2

I just got word from my agent who is also my friend, the project is nearing 50% sold out before even opening on the 24th of september because of some serious add-ons that we received such as: guaranteed 2 year lease out if its an investment property and 10% down payment loan by the builder upon closing to make your total downpayment 20% to avoid CMHC insurance premium…..WOOHOO!!

We are there NOW!!

#112 latinlife on 11.25.09 at 11:14 am

#111 SOJU

You don’t understand the nature of gold.

It’s insurance against(amongst other things) a currency crisis.

Smart money is exchanging their paper money for gold.

Google John Paulson, David Einhorn and Paul Tudor to see wht the world’s smartest money is buying and holding gold.

Get yourself some now while it’s cheap or be punished by it!

Gold: The ultimate money punisher