The human condition

condo lineup1

The condo wars in downtown Toronto yesterday may or may not have meant something. The chanting, the cops, the jabbing elbows, the TV cameras, the melee – it might all have been orchestrated, or at least enhanced, by the developers of the unbuilt 40-storey slab called X2. I have my thoughts.

This much is known: By confusion or design, three separate lines of panting buyers (some may have been plants) formed in proximity to the condo sales office. Some people camped out for a week. Some arrived at 11 pm Tuesday and stayed the night. They fought. Most of them were billed as real estate agents and brokers, but that’s a stretch.

And it was all demeaning. The developer showed a face at 8 am and started handing out numbers, giving the cold, wet, disoriented, pavement huggers the right to come back Wednesday night and buy a unit, or ten, while they last. Meanwhile both prices and floor plans were yet to be released. So nobody actually knows what they’re buying.

“I was here for 10 days,” one condo refugee told the media. “My friends helped pick up my kids from school. I know some agents have a baby, three months, seven months, they carry their baby in the line.”

Pathos on Bloor Street.

It had all been wonderfully pumped in a viral marketing campaign that had “early bird” and “VIP” registration forms on scads of web sites and Tweeted to the masses. Without a doubt, the developers timed everything – the lineups, the tipped-off media, the units release, the pre-registration blitz – to maximize chaos, attention, exclusivity and sales.

However it all would have failed without the necessary ingredient of human greed. People scuffling on the sidewalk to obtain something they perceived had value. Agents lured by the X2 promise of big commissions. Flippers and speculators and frenzied first-timers.

This may mean nothing. But I quite doubt it.

So, weary of the human condition, I will hand over the rest of this post to two visitors, from the planets GTA and Vantown.

B.N. in Thornhill writes:

Past month.  Our neighbourhood, 3 houses sold for approx. 10% over asking price.  We’re talking about 25 year old modestly upgraded homes that are going for 650-800K.

We looked at a house yesterday that was listed last week.  Entertaining offers tomorrow.  listed at 740K, will bet my right nut it’s gonna go over 800K.  Sorry, no home inspection allowed.  What would an inspector find anyways?   Wife wants the house, I want a drink.  Current residence is paid off and at todays ‘take what you want’ rates were good for a 1.5M house.  Wow, I’m rich.  Wife doesn’t understand why I’m hesitant over a possible 50K mortgage.  “Honey, I’ve spent more time inspecting  a $5000 used car than this three quarters of a million dollar house.  What part of this process seems normal to you?”

Plan a- Want to sell and go rent for a while.   Darling wife/3 kiddies aint gonna let that happen.

Plan b- there’s a raging inferno out there, where’s the fire department.  Isn’t somebody responsible for putting this out of control mess out?  What?  the fire dept. is pouring more gas on the fire?  clean up in aisle 8, calling mark carney.  that was so sweet of him to ‘remind’ everybody that they’re responsible for their debts.  how did that work out for greenspan/bernanke?  what?  you can’t just walk away from a house in Canada?  hello debt slave lifer.

Plan c-wait until our house hits 1M, sometime next year I guess.  Sell, buy an entire neighbourhood in florida, california, (hate having neighbours that I can see/hear) and invest the rest in goldman sachs.  I hear they’re taking over the U.S treasury dept and the federal reserve.  Oh wait, they already own both.  my bad.

Plan d- sit back, relax, and suffer a bit more in your 2100sq/ft house and move up another 1000 sq/ft when things calm down (when it crashes and burns?).  oh the horror, how will we make do in our 25 year old, paid off, 2100 sq/ft house before we can really live it up in our new, 25 yr old, 3000+sq/ft house?

Frightening how ridiculous it all seems when you actually read it back to yourself.

Mark in Vancouver writes:

I have a hypothesis about the CMHC.  I’ve been saying for years that Vancouver left market fundamentals behind around 1986-87 but I had no indication really of WHY that happened.  Then, about a month ago I learned that the CMHC only started offering MBS (mortgage backed securities=mortgage insurance) in 1986.  So now I’d like to compare market volatility/rise in the pre and post 1986 time periods.  I can’t find any Canadian graphs that give useful information before the ’70s so there’s not a lot of material to look at but you CAN see a distinct pattern in many Canadian cities AFTER 1986, there is a sharp rise which doesn’t appear to reflect other factors and more importantly the prices have yet to return to the pre 1986 baseline.

The upshot, if I am correct is that the CMHC has had the opposite effect of their mandate, they’ve made housing less affordable for Canadians AND it means that many Canadian markets have a lot farther to fall than most people believe is possible.

VanChart

Right click and 'View Image' to enlarge Mark's chart
of house prices in Vancouver. Don't toss your cookies.
 

156 comments ↓

#1 Piccaso on 11.25.09 at 9:02 pm

Vancouver went stratosphere when China took back Hong Kong causing a mass exodus of rich and has never looked back.

And being from Toronto, you’d know that how? — Garth

#2 Calgary_rip_off on 11.25.09 at 9:10 pm

Nice chart Garth.

It says despair near the bottom? For who exactly? The persons who purchased at the top?

Yes 15,000K-30,000K on a 90K income is pathetic for a downpayment on a house. The key is to wait and keep accumulating. Act like you are buying a house in Beijing, where in China it is very very difficult(my coworker she is from Beijing and says buying a house is a serious serious purchase). He who lacks patience will learn patience. It’s just a question of how and when, not if. Self discipline is the steel that will crush this down payment barrier. As it stands I continue to save. As my work buddies in their 50’s tell me: Just sit tight and wait. You got nothing to worry about. While the entrepreneurs, oil dependent people are sweating, Im just sitting, waiting. I could have been one of those 30 something person’s who are getting tanked on their houses. But I chose to rent in Calgary-more house for more money. My rent raises about 1% a year, and the large shack is probably worth around $400K, although when the thing was built in 2000 it was probably $180K. Inflation? No. Bubble. Sure my rent pays off the guys mortgage. Im all for socialism though. Im helping off the less educated landlord who bought luckily when it was a lot less. He got lucky. The added benefit is that if I want to leave, Im not locked into the insecurity of owning a mortgage, he’s stuck with the dump.

People in Calgary should wait. Go educate themselves. Look at some real estate in Houston, Texas, then question whether the real estate here adds up. It doesnt. Best to wait.

This site lists some prime property in Katy, Texas. Shows that Calgary blows. http://www.garywander.com/Sugar_Land_listings.shtml

#3 Anon on 11.25.09 at 9:33 pm

A bit off topic:

I think a few weeks/months (?) ago, a list of Preferred bank shares was posted on this blog.

I was hoping to investigate this a bit further, but cant seem to find it.

I am not sure if they were posted by GT or in the comments section.

If anyone happened to bookmart it, would they kindly post the link?

Thanks

#4 Onemorething on 11.25.09 at 9:44 pm

Garth, the insanity clearly continues which is again a further sign of the stupidity we live with in Canada.

Firstly, when our PONZI governement hints to JOE PUBLIC to be careful and take responsibility, you know there’s trouble and admittedly for some time.

When these SHEEPLE dont listen, then you know the top is about to be put in and especially in Canada will the drop be massive.

B.N. in TORN Hill, I feel for you brother, if there was only a way to short term sabotage your credit rating so the banks couldnt accept the new mortgage to protect you from your wife! There’s quite a few lads looking for this silver bullet! Since the banks are making house calls these days, the only answer may be to declare yourself temporarily insane, then come out of it in the next 24 months.

Mark in VAN, good on ya bro, it is always refreshing to hear someone from VAN step up and get it straight. The bigger the bubble the farther the drop, then the quicker the recovery.

This could happen OR longer decline with 2 mph recovery!

Maybe somewhere in between, as a bottom back to 1988 might be extreme, but what the heck, extreme times we are in today!

#5 Emma on 11.25.09 at 10:00 pm

Didn’t CMHC also stop inspecting new builds around the same time? I thought it was 85/86 ish!

Interesting, indeed!

#6 The truth on 11.25.09 at 10:06 pm

Mark in Vancouver: In 1986, Immigration numbers were increased about 250%. Thats why Vancouver’s prices went up!

Remember if there is ever some minor turbulence, privatize profits and socialize losses. The same people predicting a correction are the ones that predicted it 5 years ago…and look where they are today. For all those waiting, keep waiting for a correction. For others, this is not a bubble…ITS SUPPLY AND DEMAND. 500,000 new immigrants per year! Incresed to around 200,000 in 1987 and then to 500,000 around 2004/05.

Immigration levels are at 265,000, not 500,000. That is fewer than 90,000 families, of whom about 20% buy real estate within a year – or 18,000 units. There are 480,000 or so resale housing transactions a year, plus another 200,000 new homes . So, immigration would account for, at best, 3% of sales. Try making something else up. — Garth

#7 Shawn on 11.25.09 at 10:14 pm

Well, got the letter from RBC…our line of credit interest rate to increase by 1% Jan. 1st. due to “the cost of borrowing increasing for all banks “. Garth is spot on.

LOCs are funded in the bond market. Gotta watch that sucker. — Garth

#8 The Great Gazoo on 11.25.09 at 10:37 pm

The way my wife stopped bugging me about buying a house, me using arguments found in this blog:

Give in:
Tell the old lady if real estate is a good thing to buy right now, work out a deal with people pressuring to buy (ie. in-laws, other friends) as so: guarantee my negative equity, whenever the house sells in the future, if it sells for less – they cover the difference, if it goes up in value we give them 50% of the delta increase in value when sold.

Result: she convinced a friend not to buy a 500 sqft Vancouver condo for 320K

#9 dd on 11.25.09 at 10:38 pm

WOW. With an uptick in unemployment this month and the highest it has been in years the housing bubble is sure a head scatcher.

#10 Devil's Advocate on 11.25.09 at 10:41 pm

Has this crossed your desk yet?

QUOTE;

“As you know, I am already dead. This little known fact is immaterial… It may surprise you to learn that I have, in fact, always been dead. I am here on a mission. We are all here on a Mission… this is mine. I haven’t a fucking clue what yours is… but trust me… you do have one… and yours is important. You are the FIRST…

There is something you MUST do for me… please.

This Christmas Season please watch “It’s a Wonderful Life”.

What the world needs most right now is a modern day Jimmy Stewart. Someone who we can believe in, someone we can trust, someone we know is looking out for us even though they themselves have as much, or more, to loose as we simply by doing so.

Never has such a movie as this been so timely. I can not believe that anyone who might watch “It’s a Wonderful Life” ,THIS year in particular, would not be deeply touched by what a profound statement it makes on our current state of affairs.

Please, encourage as many people as you can to watch this film this Christmas. Better yet buy them a DVD copy as a Christmas Gift. (Pass that along to everyone you know and see the result next year.)

This is THE MOTHER of all chain letters man.

Please pass this along to as many people as you know within 24 hours of receiving it and I promise you will be rewarded beyond comprehension and so too will your children and their children and theirs and theirs…

Just DO IT!

#11 T.O. Bubble Boy on 11.25.09 at 10:42 pm

@ #3 Anon: here is a list of some Canadian companies with preferred shares:

http://investingincanada.info/2009/11/preferred-shares-in-canada.html

Garth – I know you’re a major fan of bank preferred shares right now (who wouldn’t be with the 5-10% dividends), but isn’t it getting a bit riskier to buy into these if interest rates might head higher in Q3 or Q4 2010?

My basic understanding of preferred shares is that they behave much like bonds: price goes up when interest rates decline, and price goes down when interest rates go up. So, wouldn’t the benefit of the extra dividend cash be wiped out by the decline in the share price?

#12 Responsible Government? on 11.25.09 at 10:42 pm

Garth, what is your theory on why the government is allowing this housing insanity to occur? Allow me to put my tinfoil hat on, if I didn’t know better I would swear the government is setting our economy up for a crash. How else could you bring in the North American Union or a single Currency such as the “Amero” which has been talked about quietly in the background, unless people are in a panic such as after an economic meltdown? What else explains the logic of a government that sits by and watches as sane people pay insane prices on what amounts to a tiny square of land with 4 walls?

Surely the government officials have to realize that when the inevitable happens, and interest rates head higher, you have taken a whole generation of consumers out of the economy as most of them will have nothing left to spend after their monthly mortgage payments. It would be so easy for the government to pour water on this housing irrational exuberance without raising interest rates by lowering the maximum amortization period or increasing the down payment requirements.

Why are they not doing anything to stop this mess? I am not worried about prices going higher and higher, I am worried about the carnage that we the Tax payer will have to clean up when this CMHC backed mess crashes.

#13 T.O. Bubble Boy on 11.25.09 at 10:57 pm

To B.N. in Thornhill:

I think Plan D (staying put with the paid off house and waiting for the implosion) is your most realistic option, since you already ruled out Plan A (selling and renting).

This isn’t the worst option in the world from a risk perspective, since whenever you do move up, you’ll be buying and selling in the same market — and the bigger place that you’d be buying should in theory have dropped by a bigger $ amount if your place and the new place decline by the same percentage.

I’m sure that Garth would tell you: if you have a $800k-$900k paid off home, make sure to diversify a bit by taking an investment loan against the house (interest on that loan is tax deductible) and buying some more liquid investments.

Another option: given that the 5% realtor fees on a $1M sale would be $50k — could you spend that $50k on an extension to your current place and make it easier to stay put for 5-10 years while the market works itself out?

Oh – and it does sound a bit ridiculous when you read it back… who ever heard of a $1M house in Thornhill???

#14 Finanzkrise on 11.25.09 at 11:01 pm

Mark’s graphic, overlaying the Vancouver real estate market (historical and prediction) on the classic bubble – bust cycle, is very well done.

Further to that classic bubble – bust cycle, the authors of a new book have gone back 800 years in financial history, and hypothesize that this time (the most recent credit hyperexpansion) is NOT different.

http://www.theglobeandmail.com/report-on-business/commentary/is-this-time-different-not-with-all-the-debt/article1376584/

And as for this on-going counterargument that immigration will drive up prices: Houses really don’t have an intrinsic value. Prices are based on willingness and ability to pay, and the ‘market’ is like any other – based on investor psychology and emotion (read: herd bevavior, and often irrational). The willingness may be there, but the ability is not always there – falling employment and more expensive credit will take for that. Immigration may drive up demand, but it is very possible for that relative demand to exist at much lower absolute prices than we have today…

#15 InvestorsFriend on 11.25.09 at 11:01 pm

Garth said:

However it all would have failed without the necessary ingredient of human greed.

Why is greed a bad word?

Greed in the sense of wanting more is largely what motivated humans to accomplish so much.

I think a certain amount of greed is good, but I don’t condone stepping over others to grow your wealth.

By all accounts Warren Buffett has a certain amount of greed for money and yet he is known as an extremly ethical businessman. He is extremely competitive and enjoys his position as one of the top 2 or 3 wealthies people in the world.

Ultimately though he spends little and is giving his fortune away…

Long live greed, but down with stupidity…

Buffett buys when others are scared to buy… the last think Buffett would ever do is line up to buy anything when the market is in a frenzy.

Greater Fools indeed…

Theirs is not greed but stupidity…

#16 InvestorsFriend on 11.25.09 at 11:09 pm

Garth if 20% of immigrants buy in 1 year, How many buy in year 2, 3, 3, 5…

You would need to account for the total number of immigrant purchases per year…

But anyhow, I don’t balame immigrants for high house prices… Supply of houses was easily increased to cover population growth. Otherwise U.S. houses might be 10 times more expensive than Canada.

Low interest rates begat high house prices… end of story…

#17 Joshua on 11.25.09 at 11:12 pm

Yes, a lot of Canadians are spending big bucks on houses right now but by the way things are going in Canada, it seems like the price of houses is going up. Now thats frustrating when I feel that the increase in price is truly artificial.

But Garth, youve been talking about this correction stuff for a good 9 month and the housing price keeps going up, regardless of what everyone on this blog thinks.

I just hope that my gut about you is reading right because I feel that this correction could happen in 2 or 3 years from now, and how does that help people like me who have kids and dont want to rent forever.

Im just venting and Garth never leaves me a comment…I guess I need to add something unique.

#18 Joseph on 11.25.09 at 11:20 pm

NOW I AM TOTALLY CONFUSED. If you think we are contrarians on real estate in this blog, think again. David Dreman is already counting on the next upcycle in real estate prices. If he is correct, we are all working from a faulty premise on this blog.

“David Dreman says investors should be prepared for high inflation rates — as high as 10 percent — to start within the next three years, and that the Obama administration is powerless to stop it.

Dreman, the well-known contrarian investor and CEO of Dreman Value Management, advises investors to stay out of long-term bonds because they will take a hit.

Instead, investors should go for very short-term bonds, equities, and REAL ESTATE.”

WOOHHHHHH!

Dreman basically explained that he sees inflation resurging upwards in dramatic fashion within 3 to 5 years and real estate is one asset that will rise in conjunction with inflation. He actually even goes a step further (if you can STOMACH this next sentence), and states that if you are able to carry the costs of a second home, to purchase one now as it will be worth alot more in 6 to 8 years after the inflation cycle sets in, where you will end up paying only 50 to 70 cents on the inflation adjusted dollar later for that house! I’M TOTALLY CONFUSED NOW.

David who? — Garth

#19 greyhound on 11.25.09 at 11:27 pm

Mark’s chart also looks like the dotcom excitement, the Japanese stock market crash, & the US housing bust. Is that also where we’re going with gold and (again) the TSX?

#20 Future Expatriate on 11.25.09 at 11:33 pm

Real estate :(
US Dollar 8o
Equities :/
Gold 8D

#21 edmonton_yahger on 11.25.09 at 11:47 pm

CMHC isn’t making housing affordable – quite the opposite. It’s annoying that my tax dollars are supporting a counter productive institution.

Another delusion – so many rental properties are way over priced… in Edmonton at least.

#22 Best place on meth on 11.26.09 at 12:05 am

When are we getting rid of this conservative government?

This is torture.

#23 Soju on 11.26.09 at 12:07 am

#2

Good analysis… You just called your rental a dump. Enjoy!

#24 JET on 11.26.09 at 12:09 am

Basic human instinct is so fascinating (and stupid if you think about it).

When the market was on the way up, what got ingrained into people’s minds was that times were so good that it did not seem remotely possible that prices could drop. After the brief drop between late last year and early this year, the possibility that the market could drop had entered people’s psyche (whether they want to believe it or not). With the current up tick, people once again remember the good times and are reacting like everything is fine again, since their most recent memory of the good times was an ever increasing market. However, on any movements downwards, what will creep back into their minds will undoubtedly be what happened between late last year and early this year – that the the market can drop. I will argue that the recent memory that a drop can happen, will cause a greater reaction than the first time when such a memory was either nonexistent or very distant. This is likely an explanation for why double tops happen.

#25 desert dweller on 11.26.09 at 12:17 am

I’m still waiting for my letter from RBC announcing that my deposit interest rate is going up by 1% (or one-tenth of 1% for that matter) on Jan 1.

#26 TJ on 11.26.09 at 12:29 am

At last…something I have been searching for – the CONNECTION between reality and this politicized ‘Real Estate Con’.
Mr. Turner has explained the huge increase in backing of CHMC’s float by YOUR tax Dollars and now we realize, thanks to this diligent blog dog, why we went down this path.

I live in Vancouver and in my building the 1040 square footer goes for, standby, $1.13 million. Your monthly maintenance is $550.00 bucks, and Gosh knows what the taxes are – but come on!!!

Three up for sale in this building alone, and they aren’t moving.

#27 Jsan on 11.26.09 at 12:34 am

Here is a long but good article. It pretty much sums up most Canadians. As the economic “winter” approaches, instead of preparing for it, we see a segment of our country diving into mortgage debts that would have been unthinkable during more rational times. It’s so hard to comprehend why so many people as Garth has stated on many occasions, are not looking at whether they can afford the house they want to buy over the long term but are only looking at whether or not they can afford it for this month.

You just know this is going to end badly as the oh so willing new home buying sheep are being led excitedly to their financial slaughter.

ALL YOU ZOMBIES

http://theburningplatform.com/economy/all-you-zombies

#28 viewwest on 11.26.09 at 12:46 am

re#6. Garth, does your “20% buy real estate within a year” factor in that many immigrants (in Vancouver anyway) purchase multiple properties as a way of getting money out of their origin country? E.g. our neighbours from Indonesia own six $million+ homes in our neighbourhood.They don’t even bother to rent them out. Sometimes family members who are students at universities stay in them during the school year(and no, they aren’t grow ops, we’ve been in them). They just want a chunk of cash out of Indonesia and bought into the speculative market here. That is not unusual in Vancouver. We know many Chinese industrialists who have multiple properties too. Paid cash. This doesn’t mean they won’t lose money if the property prices decline, but it does speak to an offshore source of speculation which has contributed to driving up prices.

Re #1. Yes, the transfer of HK to China did have an impact on the RE market here in Vancouver.It wasn’t the sole reason for property increases(think Expo 86) but it did factor in, largely for higher end properties initially. The agreement to transfer HK to Chinese sovereignty was signed in 1985 . In 1985 the Canadian Gov’t expanded the policy of admitting business immigrants to include investors, entrepreneurs and self-employed persons. Vancouver was a very attractive place for wealthy Hong Kong investors to invest. Tian-an-men square happened 1989.The panic for HK citizens to find a ‘safe country for second citizenship’ was huge. And then HK transferred in 1997. Note the bubbly upswing and then drop-off in home prices during that same timeframe in Mark from Vancouver’s chart? Lots of people (Canadian and non) purchased speculative properties at that time thinking they’d make an ROI from the Asian influx. Vancouver’s first taste of speculative bubbles – but just an amuse-bouche for the condo mania that started in the late 90’s and the bubble of all bubbles of the 2000’s.

#29 MBS-guru on 11.26.09 at 1:04 am

bond rates have fallen hard in the last week or so …… look for rates to fall further ………….. the bubble continues ….. for now.

#30 Jet Pilot on 11.26.09 at 1:13 am

Bubble? Did someone say bubble? No really a shocker but here’s one from our “No really, it’s different this time!” file.

Nothing spells despair like the following passage from the story below…

“Home prices in Dubai plummeted 47 percent in the second quarter from a year ago, the steepest drop of any market, according to Knight Frank LLC.”

Thank the good lord I didn’t listen to my colleagues and stayed the hell away from Dubai!

http://commoditytradealert.com/blog/?p=4010

#31 nonplused on 11.26.09 at 1:14 am

Mark in Vancouver is probably on to something with CMHC being public enemy number 1. Any time the government introduces a program to “make something more affordable” the price of it goes through the roof. They did make mortgage lending more affordable for the banks, but so far it appears to be all harm to the taxpayers and voters.

When the price of something you need goes up, it’s a bad thing folks. Even if it gives you more equity to borrow against (the only advantage really), why in the heck do you need to borrow so much money? How are you going to pay it back?

#32 A kid from oversea on 11.26.09 at 1:23 am

Speaking of population in Canada, will more immigrated family return their home since housing is less affordable than before? I guess this applies to whom are not under heavy mortgages…?

#33 Lucky C on 11.26.09 at 1:32 am

Well Garth,

When you were here in Victoria you could have looked at something to rent rent vs buybuy . Bubble, what bubble?

#34 BAD on 11.26.09 at 1:35 am


Oh, the human condition…

A snippet from the Planet Miami 2005:

Long lines greeted the first day of sales Thursday at a Hollywood apartment complex that went condo. Realtors, prospective buyers and investors, lined up at the Hollywood Parc complex, 500 S. Park Rd., for a chance to buy one of the 272 units.

(…)

”This is all crazy. It’s crazy,” said Gus Rivero, an investor who waited in line for a chance to buy. “Some people screaming, but no guns yet!”

Potential buyers keen on condos

Calling Planet Toronto 2009…

#35 Nostradamus Le Mad Vlad on 11.26.09 at 1:48 am

The human condition is akin to the financial condition — both are neatly screwed any which way we turn.

Playing around with words again: “. . . without the necessary ingredient of human greed. People scuffling on the sidewalk to obtain something they perceived had value.” — can be viewed as —

“People had value on the sidewalk without the necessary ingredient of greed.” — Oh well, I tried.
——
The Four Ponies Of The Apocalypta.
——
If CMHC stops buying Cdn. packaged mtgs., is the same going to happen here? — Rates
——
Apparently GS knows something most of us don’t — Surge

#36 Dave on 11.26.09 at 2:22 am

at the end of the day, some nice ways of gauging prices is looking at 3.5 times household income which should tell you how much house you can afford. This is the historical average (3-3.5 times) from what I understand

The average household income in Toronto is between $60,000- $65,000. The average price of a home in Toronto is now over $410,000. Well, we’ll say $63,000 X 3.5 and we get $220,500. So the average family can afford to financially support a home of $221,000. Using this as a measuring stick, the average family is spending 40% above livable standards to maintain their home.

There are those that love to argue that the U.S was so different from us. Well, the average U.S home price at the peak of the housing bubble was $61,000 (Canada’s is roughly $59,000), and the peak average price was roughly $380,000 (less than Canada). So we’re paying for more house than the U.S did during the peak of their bubble. By the way the average home price in the U.S is now roughly $200,000 (hello 3.5 times household income).

Careful of the mania. Read stories about tulip mania of the year 1637. The behaviour is the exact same as those that are lining up at “the last chance to get in to real estate”

This bubble is the same as every other. It’s almost comical playing this game. Buy at a discount and sell full pop to the angry people with pitch-forks. The herd never learns.

Wasn’t it the great Sir John Templeton that said “the four most dangerous words in investing are: it’s different this time”

#37 The truth on 11.26.09 at 2:45 am

Post #6 Garth: Where do the other 72,000 families live? Won’t they end up eventually buying a house? Based on your logic, after 5 years 90,000 families would buy 90,000 units (18,000 per year). What about the other 360,000 families that would have come over the 5 year period (80%)?? Will they never buy?? Your logic assumes that immigration is a one year phenomena.

And also, go to the Citizen and Immigration ministry website and look up the publication called ‘the monitor’. 265,000 permanent residents per year and about 230,000 temporary workers/students per year. Once their permit expires, there is no tracking whethr they leave. Most don’t. So total about 500,000 per year.

So demand for around 180,000 units per year my friend…and that my friends is the primary cause of high housing prices in Canada. Garth, I’m not trying to be confrontational. I just want all the bloggers to understand the importance of population increase.

You are wrong. — Garth

#38 jungberg on 11.26.09 at 3:25 am

I think I’m finally starting to get you, Garth. Despite popular misinterpretation by the bullish, you’ve never say as a rule, NO ONE should buy real estate. You have to know what you’re doing and what you’re getting yourself into.

There’s a time for speculation, and it’s not when it’s a single asset that’s worth 90-100% of your portfolio, and not when the investment is more than 5x your income.

But you see that irrational behaviour everyday. If you don’t view RE as an investment but as a utility, then you don’t even care about 20%, 30% or 50% drops in value. (To the extent that you can make the payments.)

In Vancouver, $80-100k cars and cross-over SUVs everywhere on the streets point to this fact. Sure it’s not that much to some, but it’ll buy you a small bungalow in some Canadian cities. A vehicle is almost guaranteed to drop 10% per year in value, yet people don’t blink a second at dropping $100k in cash (or borrowed money) to buy one.

Values will rise and fall. A lot of people won’t care.

#39 Rob in busted bubbleland on 11.26.09 at 4:31 am

This reminds me of when my wife and I bought our Condo in Waterloo in 89 at the hight of the last bubble. We put in a cash offer, outbidding 3 other people on a condo that the previous owner had bought only 3 months before. Due to financial pressure we increased the mortgage in order to put in a basement appartment. In the end we ended up with a mortgage of $110,000 on a house latter valued at $75,000, we finally sold it in 2002 for $119,000. The lucky ones will be those who won’t get the chance to buy an X2 condo.

PS I remember people flipping offers to purchase, not even planning on closing so I figure the bubble has at most a few months to a year to run.

#40 Rob in busted bubbleland on 11.26.09 at 4:33 am

Another point I wanted to make is the problem with bubbles they can take a long long time to bust. I’ve seen comments here about people who’ve been waiting for 4,5,6 years for the bubble to burst only to see prices keep going up and up and up. If your lucky and bought your house early in the bubble count your blessings and for god’s sake don’t take out a HELOC!!!

#41 Mike (Authentic) on 11.26.09 at 4:46 am

““I was here for 10 days,” one condo refugee told the media” … “Meanwhile both prices and floor plans were yet to be released. So nobody actually knows what they’re buying.”

A great definition of the greatest fool or the greedist fool. 10 days wait for a product you have no clue about in either price or description.

Just wait till the/a developer does something more desperate to sell air.

Mike

#42 TheBigLebowsky on 11.26.09 at 5:01 am

Hey, those are the same people who camped out to get their swine flu shot. The sheep will always lead themselves to the slaughter in the end. Whether the government hypes the sheep into thinking they need a flu shot for a fake pandemic . Or the media whips them into thinking that they will have to wait 100 years if they don’t buy now. Its a collective stupidity and a herd mentality that is our biggest downfall.

#43 Munch on 11.26.09 at 6:59 am

Fools rush in where Angels fear to tread!

Try this one for size – atoms are so empty that if it were possible to squeeze out all the space in matter, the entire human race would fit into the volume of a sugar cube!

S’true! :o

#44 NOBODY on 11.26.09 at 7:11 am

After being told here for almost TWO years now that a bubble is imminent, I still do not see any bubble here…
Of course the discourse from the posters has changed over that time but AS long AS interest rates stay down, you will see no bubble.
When folks who have MAXED out on a mortgage @2% come to re-sign at, say @5% (2012), then the bubble will burst.
Then expext a flood of listings and happy buyers who will enjoy the new RE market now set at peak prices -35%
Oh… and for those who’ll have a maxed out HELOC @prime +4% in 2012 will kill you.

Doesn’t take Garth to know this…

#45 SaraBeth on 11.26.09 at 7:25 am

B.N. in Thornhill writes:

“Sorry, no home inspection allowed.”

Are they out of their minds? Makes one wonder just what it is they have to hide, eh? Crumbling foundation? Leaking roof? Electircal or plumbing “issues”?

#46 Kash is King on 11.26.09 at 7:38 am

Mark from Vancouver: “The upshot, if I am correct is that the CMHC has had the opposite effect of their mandate, they’ve made housing less affordable for Canadians AND it means that many Canadian markets have a lot farther to fall than most people believe is possible.”

Brilliant work and observation.

The CMHC and other Crown Corps are OWNED by the Crown Temple in The City of London. They were created FOR the Dominion of Canada, but are owned and controlled by the International Bankers who own and control the Crown Temple.

This is why you see a disconnect between the elected government du jour, and the everyday policies of the nuts-and-bolts running of what you could call the Shadow Gov’t, which is filled with bureaucrats and mandarins placed by, and loyal to, the Crown Temple.

Maybe PM Harper doesn’t agree with CMHC policy personally? I don’t know. But it isn’t necessarily his place to call the shots. By the looks of it, we the voters don’t seem to be able to call the shots over fiscal policy at all.

Going back to Marks comments, high house prices dovetail wonderfully with a banker’s goal of a big mortgage, to be paid back over the serf’s lifetime.

#47 Kash is King on 11.26.09 at 7:50 am

#16 Jsan: Here’s an interesting essay on the “Recovery”.

Here’s a snip:

“The “recovery” is a lie. Rip off the mask placed over it by the financial services industry, corporate america and the banksters whos mantra is to keep everyone in as much debt as possible for as long as possible at as high a cost as possible and all you have left is a bee line return to the exact same set of behaviors and dynamics that set up the fall in the first place. There is no recovery, it is a bus trip by the alcoholic to the first pub having free nachos and happy hour.”

Here it is:
http://messages.finance.yahoo.com/ETFs_%28A_to_Z%29/ETFs_P/threadview?m=tm&bn=41611&tid=989625&mid=989625&tof=2&frt=2

#48 Piccaso on 11.26.09 at 8:10 am

#1
I’m from Edmonton, working in Toronto at the moment.
Remember the comment about coming in from the airport and TO’s skyline (condo’s and cranes) reminding me of Miami?
Still, you don’t have to be from Hongcouver to know that one.

#49 Herb on 11.26.09 at 8:47 am

Headline of the times:

End in sight for homebuyer bargains

That’s the lead in to-day’s Ottawa Citizen business section at http://www.ottawacitizen.com/business/sight+homebuyer+bargains/2267423/story.html

What I can’t figure out is whether the article is intended to be a deterrent warning of the real cost of home ownership, or to encourage buying while home purchase still is a “bargain.”

#50 prairiegopher on 11.26.09 at 9:32 am

Phil Soper was on Canada Am pumping real estate again. Says prices and sales are hot. Could get even hotter with limited supply. Sorry I don’t have the link.

#51 robert on 11.26.09 at 9:44 am

#29 MBS – guru

I don’t know what the stats are for Canada but I do know from reading David Rosenberg that Americans in droves are socking what’s left of their savings into the Treasury market. And yet bond holdings are still at near record lows in most households.

No asset peaks in price in an atmosphere of revulsion and Treasuries are still widely doubted/despised. I see ten times more comments/articles expressing disdain or claiming bubble status for this asset class than I do those recommending it. Sort of like gold in 2000. This “bubble” will surprise as it continues to run for years and not the months most are expecting. Don’t worry though, real estate prices will still drop because of unemployment/falling incomes.

#25 desert dweller

Thanks for the laugh. We’re more likely to see the sun rise in the west.

I would not be surprised if the sale of safes picks up as people decide to keep what little cash they have at home. Especially if they knew exactly what the banks were doing with it while paying them virtually nothing for the privilege of holding it.

#52 Al B. on 11.26.09 at 9:48 am

Garth,
Censorship is for wimps…

People who post the same political message and useless drivel here eight times in three days are best ignored. On average I reject one posted comment a week. You are screwing up my Tolerance Index. Buzz off. — Garth

#53 Paul on 11.26.09 at 9:58 am

#45,

Sounds like our place. We took Garth’s opinion in the spring. Sold and am now renting. Now were dealing with all those problems as renters. Very stressful. So if you are considering selling and renting think long and hard. For us it’s been a huge mistake so far. We didn’t have to sell until 2011/12. Once my retirement kicks in it would have been a little to tight for comfort with the mortgage we had.

Sorry Garth. Just calling a spade a spade. In 2011/12 and things are different like you claim i’ll gladly say I was wrong and you were right.

What renting problems? Too small a place to store your cash?

By the way, in September you posted this: “We did sell after 2 1/2 months with lots of interest but only 1 offer after a $30,000 price reduction. Across the street has tried to sell but failed, similar house and price,down the street still listed but no sales, started 40,000 above us and recently reduced to still 28,000 more then what we sold for. So I’d say things are not as rosy as some want us to believe.”

You seem to have the conviction of a windmill. — Garth

#54 Oakville Owner on 11.26.09 at 10:05 am

#17-Joshua

If Garth won’t leave you a comment I will. Sorry to hear the frustration in your post. The time to buy was in fall/winter of 2008, if you plan on being in the game (owning) over the next 15 to 20 yrs, which with a young family it sounds like you will be. Even Garth bought during this time. Not sure I would be buying now though, if you do just remember location,location,location. My take is that prices will drop perhapse 10% after July 01 2010(HST and BOC rate increase) and then flat line for several years. Interest rates will go up, * a bit* but anyone expecting the return of 10% to 18% is nuts. Just like housing prices will flat line so will historic low rates. My plan is to get the mortgage paid off and enjoy the low rates over the next 10-15 years.
Just my take.

I bought a POS in the winter. Never pay retail. As for your prediction of a 10% decline then a flatline for years, explain the economic rationale behind that please. If rates stay low, as they did in Japan, best prepare for a Japanese real estate experience. No? — Garth

#55 Popeye on 11.26.09 at 10:10 am

With downpayments that low they could be in negative equity with even the most mild of market corrections. Sad commentary that people in their thirties making six figures can only muster $15,000 to $30,000 cash. — Garth
——————————————————-
Well to their defence these are highly educated people who only landed decent paying jobs within the past couple of years (and some still have student debts). It’s interesting the banks would have given them 500,000 to $600,000.

And you do make a good point–most of the couples got the down payment as a loan or gift from their parents/grandparents…

Owning a house is not a right. — Garth

#56 pjwlk on 11.26.09 at 10:13 am

B.N. Plan “D” is your best bet… short of growing some balls and telling your family what’s going to happen that is.

Since you’re essentially trapped, the best time to buy up is when the market is down – if you can get the money that is. You’ll also save the beating you’d get from your family and satisfy your own needs buy getting a better value on a bigger home.

In the end your patience will be well rewarded, and your wife will think you’re brilliant…

#57 Fred Barker on 11.26.09 at 10:14 am

Here it comes…
http://ca.news.finance.yahoo.com/s/26112009/2/biz-finance-toronto-stock-market-set-open-lower-amid-fears.html

#58 Paul on 11.26.09 at 10:15 am

Yes Garth I did post that and at the time I was still onside. But come on Garth things have changed. I’m speaking for us and it’s proven to be the wrong move…so far.

Hindsight. The investor’s worst friend. — Garth

#59 PeckedToDeathByDucks on 11.26.09 at 10:28 am

@Anon Preferred Share List

Go to the globeinvestor.com site and use their Filter to get a list of all preferred or just those from a sector.
http://www.globeinvestor.com/v5/content/filters

Under the Secuity selection box choose Preferred. You will have temporarily allow popups.

#60 Dean on 11.26.09 at 10:34 am

Wow. They should have at least thrown in an H1N1 shot for a lineup that long.

Last post you suggested that a 35 or 40 year mortgage you pay virtual no principle in the early years. I had a 25 year with 5% down that I’ve paid down in an accelerated rate to get to approx 16 years. I got news for people, that morgage felt like it was going nowhere for the first 5. It’s only about year 10 of that one that I really started to feel like it was dropping.

I don’t get it. I think that anybody giving out a mortgage should have to list the full price people are paying right above the signature line in big bold 16 point Times new roman, along with different rate scenarios, +-5%. So these morons can see what they’re really paying.

After all we’re all in the same boat. And it’s leaking. And these people have decided to have a water fight.

#61 David Bakody on 11.26.09 at 10:34 am

Plan d- sit back, relax, and suffer a bit more in your 2100sq/ft house and move up another 1000 sq/ft when things calm down (when it crashes and burns?). oh the horror, how will we make do in our 25 year old, paid off, 2100 sq/ft house before we can really live it up in our new, 25 yr old, 3000+sq/ft house?

Most times the correct path is so obvious we can not see it “SIT BACK AND RELAX” this is what 99.9% of the people on this earth dream about every day!

#62 Calgary_Rip_Off on 11.26.09 at 10:37 am

#23 Soju: Look a little deeper. A rental no matter what it is, is a dump. You cannot own it. Why get emotionally attached? Are people to think always of everything positively even when it is lousy? That doesnt add up. Keeping an even emotional level is needed to protect ones sanity and finances. If people did Calgary would have imploded long ago, as no one in their right mind would buy because everything is overvalued. That’s right everything.

#63 Toronto C9 Renter on 11.26.09 at 10:39 am

#53 Paul on 11.26.09 at 9:58 am

“….if you are considering selling and renting think long and hard. For us it’s been a huge mistake so far.”

For balance, I guess I’m the counterpoint to Paul’s post. We’ve never looked back — renting has been wonderful. I still live in a 90 year old house in Mid-Town Toronto, but now my “landlord” lays out the thousands of dollars annually to trim the *&#!*$ giant oak trees, repair the furnace, clean the eavestroughs, roto-router the tree roots out of the drains, etc! (Not to mention paying the 10k tax bill!

We just spend our time getting and staying fit, dining out, going on vacations etc.

Plus now all that home equity is earning money and available, not stuck in a house. Also, my experience since selling the house has been that my non-real estate investments have appreciated faster than my real estate.

Needless to say, I am in favour of renting rather than owning for the present

#64 wondering on 11.26.09 at 10:41 am

Re: Garth’s comment on #53

What renting problems?

Speaking for myself:

– Insurance companies that treat you like costly, irresponsible scum because you don’t own where you live
– Needing tons of documentation just to get renter’s insurance in a place with a wood stove, even though the owner’s insurance doesn’t require it.
– Owners who keep saying that they will fix something, but don’t
– Owners who try to raise the rent in the middle of the lease because you request repairs
– Noisy landlord/homeowners who do laundry next to your bedroom at 1 am and won’t knock it off
– Noisy children of landlords. I don’t know where they hid them when we viewed the place before renting, but we sure as hell wouldn’t have signed a lease below screeching hippopotami if we had known
– Landlords who don’t clean up their dog’s crap in the yard, you know, now that we’re in and signed a lease.

Renting isn’t all rainbows and wads of cash in the mattress you know. I live in Victoria. My rent for a 2 bdrm basement suite is far more than the monthly mortgage people pay in other cities. Especially if they bought before 2000. But hey, I’m saving money.

My comments were aimed at renting an equivalent property. — Garth

#65 David Bakody on 11.26.09 at 10:44 am

RE Bubble Burst ?

Dubai debt ‘standstill’ sounds alarms

In total, the state-backed networks nicknamed Dubai Inc. are $80-billion in the red and the emirate needed a bailout earlier this year from its oil-rich neighbour Abu Dhabi, the capital of the United Arab Emirates.

Markets took the news badly – with the Dubai woes and the continued fall of the U.S. dollar giving investors twin worries.

ref:

http://www.theglobeandmail.com/globe-investor/dubai-debt-standstill-sounds-alarms/article1378116/

This we know when the big boys take a hit …. we all loose and loose plenty!

#66 pbrasseur on 11.26.09 at 10:46 am

“The upshot, if I am correct is that the CMHC has had the opposite effect of their mandate, they’ve made housing less affordable for Canadians AND it means that many Canadian markets have a lot farther to fall than most people believe is possible.”

What? A socialist policy that ends up achieving the exact opposit of what it was intended to do, well I’ll be damned!!!! :-)

#67 Jake on 11.26.09 at 10:48 am

#17 Joshua,
You make no sense man. Are you trying to say that if you knew a “correction” would occur in 2-3 years vs the next few months, you would buy? Do you only plan on staying in the place for 1-2 years? You have a choice to make; rent from your current landlord, or rent from the bank for more. Keep in mind, the bank will not come and fix your washing machine if it breaks down. The city will also want property tax…..it adds up. Bottom line, if you can comfortably purchase a home (money left over after all expenses) maybe consider buying. If you have to stay in a rental, don’t be ashamed. Your kids will still love you.

Btw, don’t come here and blame Garth and the dogs for your indecisiveness. Grow a set and take a stand.

#68 Oakville Owner on 11.26.09 at 11:01 am

Garth,

Wish I had the knowledge on how to buy POS, can you make that your next blog post so I am ready after July 01 2010? As far as the place we bought it may as well have been a POS. Used a few vulture tips to score a great deal. House is in great location,#1. Had been on market for over 60 days,#2. Asking price had been reduced $40 000 when I got involved,#3. Knocked on a few neighbours doors and learned that owner had lost his job,#4. Put in low ball offer and met the home owner in the middle. Everyone was happy. Home is now up in value approximately $100 000 from what we paid in 2008. Don’t expect this to continue going forward but it will be a nice buffer during next few years. As far as my economic rationale, I do read other financial books. The pig and the python, by David Cork, pg#138, “The demand for money is going to lessen and that’s going to affect interest rates, keeping them nice and low”. Boomers are entering their prime saving years= less demand for $$$= lower interest rates. Pg#139, “By and large, interest rates will likely stay low for the rest of your adult lives”. Pg#91, Garth this should be your favorite pg in the whole book as it is how I found your book and this blog,”Here’s your reading assignment. First, The Wealthy Barber by David Chilton. Next is Garth Turner’s book, 2015: After the Boom.

Garth, I think you have alot of good points in your books and this blog but in the end I have to educate myself and come to my own conclusions otherwise you are likely to become a “greater fool” and follow the heard. I suggest other blog dogs do the same.

How about that info on POS?

Cork’s book was written 15 years ago. Suggest you try a book store instead of the library. It’s a new world. — Garth

#69 Jake on 11.26.09 at 11:02 am

#12 Responsible Government,
You are not alone in your confusion. This makes no sense to me either. There has to be a method behind the madness. Our leaders are not as stupid as they seem. The system is being destroyed in order to introduce change. Of course the recklessness of the masses will be blamed for its demise. From the ashes will arise a solution we will be conditioned to embrace. We will be offered this solution by the same powers that caused the problem in the first place. Look back through history, it happens all of the time. What’s happening now is a lot bigger than real estate. But hey, this real estate is a great distraction in the meantime. It certainly beats watching the Leafs.

#70 Kent on 11.26.09 at 11:08 am

Devil’s Advocate – Potterville was far more interesting. :-)

#71 Dave on 11.26.09 at 11:09 am

“David Dreman says investors should be prepared for high inflation rates — as high as 10 percent — to start within the next three years, and that the Obama administration is powerless to stop it.

Dreman, the well-known contrarian investor and CEO of Dreman Value Management, advises investors to stay out of long-term bonds because they will take a hit.

Instead, investors should go for very short-term bonds, equities, and REAL ESTATE.”

WOOHHHHHH!

Dreman basically explained that he sees inflation resurging upwards in dramatic fashion within 3 to 5 years and real estate is one asset that will rise in conjunction with inflation. He actually even goes a step further (if you can STOMACH this next sentence), and states that if you are able to carry the costs of a second home, to purchase one now as it will be worth alot more in 6 to 8 years after the inflation cycle sets in, where you will end up paying only 50 to 70 cents on the inflation adjusted dollar later for that house! I’M TOTALLY CONFUSED NOW.

David who? — Garth

—————————————————-

Dreman is a big man, but you the guy who wrote this comment is forgetting that real estate in the U.S took a massive hit and is now at 3 times household income. Dreman is American and could care less about Canada. He believes in market fundamentals as well and wouldn’t be advising for people to buy real estate in Canada under these ridiculous conditions.

#72 BAD on 11.26.09 at 11:11 am


More on Planet Dubai:

It’s also a very important warning that you can’t trust governments. They’re prone to covering things up for the “greater good” – which is government-speak for “covering our backsides”. Given the role of the state in markets across the world right now, that’s not very reassuring.

We’ve been wondering when investors would get the nasty shock that reminds them that the world is a dangerous place. This could be just the beginning.

Dubai’s grim warning to unwary investors

Calling Planet Canada…

#73 Jake on 11.26.09 at 11:18 am

The only reason people in that line up do not own a hippopotamus is because they haven’t been offered one at 5% down with record low interest rates.

#74 wondering on 11.26.09 at 11:19 am

My comments were aimed at renting an equivalent property. — Garth

The equivalent property to me is a condo, townhouse, or duplex. You could still be paying $400,000 for such things in Victoria. They all have sharing a wall/ceiling/floor/yard/whatever-with-the neighbours issues.

#75 Downsized and Delighted on 11.26.09 at 11:31 am

“”#53 Paul

Sounds like our place. We took Garth’s opinion in the spring. Sold and am now renting. Now were dealing with all those problems as renters. Very stressful. So if you are considering selling and renting think long and hard. For us it’s been a huge mistake so far. We didn’t have to sell until 2011/12. Once my retirement kicks in it would have been a little to tight for comfort with the mortgage we had.

Sorry Garth. Just calling a spade a spade. In 2011/12 and things are different like you claim i’ll gladly say I was wrong and you were right.
(Garth’s comments follow)
What renting problems? Too small a place to store your cash?

By the way, in September you posted this: “We did sell after 2 1/2 months with lots of interest but only 1 offer after a $30,000 price reduction. Across the street has tried to sell but failed, similar house and price,down the street still listed but no sales, started 40,000 above us and recently reduced to still 28,000 more then what we sold for. So I’d say things are not as rosy as some want us to believe.”

You seem to have the conviction of a windmill. — Garth””

Garth – you seem to be a “do as I say, not as I do” kind of guy lately. When I tried to post YOUR comments that you made back in Feb. you deleted them. Now YOU are posting our prior comments. Is your theory so weak that you must selectively censor to make your point? Again you are bragging about buying your POS back in the winter at the same time that you told these blog dogs to wait until summer 2009.

Giving advice on buying is actually pretty easy. Find something that you can hang onto for 10 years or more, don’t pay too much for it, don’t overimprove it, and learn the secret of happiness which is not having what you want, but wanting what you have.

Everybody here realizes now that they missed a buying opportunity this past winter. Learn from that and recognize the next buying opportunity when it arrives.

You are a consistently negative poster. Too bad. Actually I think the time to buy a distressed property is 24/7/365, and that’s what I did. The time to buy retail is probably a year or two away. And if you treat residential real estate like the stock market, thinking last winter was a buying opportunity and this Spring will be a selling one, well, good luck. That’s a loser’s game. The costs of entry and exit are far too high. — Garth

#76 Jake on 11.26.09 at 11:31 am

For those SNL fans out there. This skit deals with real estate bubbles, politics, and banker bailouts. Apparently the Chinese president thinks his country is going to get screwed out of all the money it is owed by the US. There is some difficulty in translation though.

http://www.youtube.com/watch?v=yZorJZ5ixOo

#77 Downsized and Delighted on 11.26.09 at 11:41 am

#63 Toronto C9 Renter:

Your non real estate investments have paid more than your previous real estate investment? I’d love to hear how you calculate that???? Sounds like you have forgotten a few small items like “leverage” and income/capital gains tax.

Most people use the example of blowing money on eating out and vacations as a reason to buy real estate
(forced savings and all that). I have found that when I live in the home of my dreams that suddently I don’t feel the need to get away from it the way that renters obviously do. That’s just my experience.

#78 Future Expatriate on 11.26.09 at 11:44 am

And you thought the US Dollar was in big trouble…

Canadian cash really burns a hole in your pocket

NOW we know why everyone is so hellbent on throwing their cash away in favor of real estate!

#79 Future Expatriate on 11.26.09 at 11:47 am

#22 – “When are we getting rid of this conservative government?”

When Christians finally figure out that, as Jesus taught, lived, and died it, Christianity has NOTHING to do with seeking political power, and never did.

On the contrary, Christians are to eschew political power in every way imaginable as Jesus Himself did.

Power seeking religious extremists are ChristianISTS, NOT Christians.

#80 Bill-Muskoka (NAM) on 11.26.09 at 12:06 pm

Well, at least they are not standing in the welfare line!

Although, I laugh at calling what these ‘people’ do a real job!

Unbelievable gullibility! Oh, and I see the MSM is ‘helping’ out the RE industry again by ‘reporting’ how ‘wonderful’ things are!

What a completely insane joke! How many projects have been front end sold and never built?

And people wonder how scumbags like Bernie Madoff and Earl Jones are able to sucker some into their scams? Easy as pie, Gooseberry Pie (the feeling they will have later), actually it should be called Greedberry Pie, that is!

Funny how the word ‘speculator’ and ‘speculum’ are so close in meaning, eh?

#81 The Great Gazoo on 11.26.09 at 12:12 pm

#65 David Bakody

You brought up an important article, these types of debt disaster stories will become more common as the market maniacs have borrowed way to much cheap money and are inflating asset and investment values.

Repeat “Dubai” events will trigger the stock market bubble to pop in a panic, causing the double dip and then the inevitable housing market bubble pop.

Cheap money has overinflated the stock markets AND the housing market.

Heck even the Russian Finance minister said: don’t buy russian stock the market is overinflated due to cheap money.

Please see:
http://www.theglobeandmail.com/globe-investor/cheap-money-sparks-bubble-warnings/article1377981/

I really do appreciate honesty in politicians, unlike Jim-bo who is too interested in making money for his banker buddies through CMHC

#82 The VULTURE on 11.26.09 at 12:15 pm

THE FULL MEAL DEAL

– THE REAL DEAL –

Forget this ‘condo’ nonsense, lining up to buy a box in the sky with no property so to speak of.

Forget main stream media and the constant media “blasts” about real estate going through the roof and either buy now or never.

I recently had the opportunity to walk through a real property investment resale listing at $359,999.00.
This place was a real dump but the agent boldly stated to all that had attended the open house that day that “there will be multiples on these fine bones, better put your offer in or lose the chance forever!”

I ran as fast as I could out of the place and this so called “gem” of a property recently sold for $315,000.00!! That is a haircut of $44999. This is reality folks. Happens all the time in the real estate market.

That is the “REAL” real estate market; not the subterfuge that is going on in the media.

The value of a property is what someone is willing to pay for it and a what a seller will accept at a particular moment in time. Not a penny more.

Don’t believe the hype or the planted phony people….

#83 Ken on 11.26.09 at 12:29 pm

Low interest rates eg. free money re greenspan got us into this mess and they still have not learned anything so far.This is going to be a problem that we will be trying to rectify years down the road .Read your history low interest rates have always created more problems than cured.

#84 Bill on 11.26.09 at 12:32 pm

What about the impact of 2010 Winter Olympics? Is this built into the chart? Will this not be a factor in house prices in Vancouver?

#85 CalgaryRocks on 11.26.09 at 12:38 pm

I got a notice of a 25% increase in my house insurance yesterday to 48$/month.

Fortunately 1 call was enough to convince them to giggle things around and drop it to even below what it is now, 36$/month.

Moral of the story, call your insurance company if your bill gets too high. Deal with a broker that will feel the pain when you move everything to the competition.

It doesn’t always work but I’ve had good luck in the past as long as I remain inquisitive rather than confrontational while on the phone with them.

#86 young & oblivious on 11.26.09 at 1:08 pm

consider the price for an average car …

1990 new VW Golf $12000
2009 new VW Golf $26000

then consider the average price of housing

1990 average house in GTA $250,000
2009 average house in GTA $400,000

#87 Bulls eye on 11.26.09 at 1:21 pm

We Rent a new home – If we like it we stay, if we don’t we move. Renters hold the cards – I don’t see a problem with that. If you are not happy renting where you are – move!

#88 TheComingDepression on 11.26.09 at 1:33 pm

This is Frightening…Canada’s real debt is 2 TRILLION and 131% of GDP….and you want to buy a condo?
http://thecomingdepression.blogspot.com/2009/11/canadas-real-debt-is-2-trillion-or-131.html

#89 Keith in Calgary on 11.26.09 at 1:55 pm

#64 Wondering…….

I am a renter too.

-Insurance was cheap and easyily obtained in one phone call without any supporting documentation necessary.

-Call the resident manager and a subtrade is at my place within 24 hours to effect whatever repair I needed. Done that 3 times in 2 years so far……all items were minor…..but probably $200-400 per service call.

-No rent increase in the middle of my lease, it is a lease after all and I rent from a large national corp. Never ever, rent from an individual. Got a significant reduction in rent last renewal time though and expecting another reduction next year.

-Never had noise issues, as our building is adult only and has high minimum income levels and debt ratios that must be met in order to move there.

-The sudden appearance of cigarette butts on our huge balcony was resolved permanently after I talked to the resident manager.

-No kids or pets allowed where we live.

Renting is all rainbows is you make the appropriate choices…..and we still have wads of cash.

#90 jess on 11.26.09 at 1:59 pm

The Rules change too fast for my little brain!

…going after the ‘unbanked’ was extremely profitable for the innovators who created Providian, and this
industry standard word AND the rest of the associated ‘tricks and traps.’ The herding banks followed their lead and the subprime became the sublime. So the repos time bomb will now reverse and who is asking for accounting changes before the exit…the herders are now the hoarders. IF most countries need to raise money and sell their debt are there not more sellers than buyers? Would this not force the cost of money up?
I am confused?

June 12 (Bloomberg
European government’s commitments. All figures are in billions of euros and include capital injections, guarantees granted, effective asset relief and liquidity interventions

United Kingdom___781.2
Denmark________593.9
Germany________554.2
Ireland_________384.5
France__________350.1
Belgium_________264.5
Netherlands______246.1
Austria__________165
Sweden__________142
Spain___________130
A majority of new member states including Slovakia, the Czech Republic, Estonia and Lithuania have not taken public measures to support their financial markets, the draft said. Many banks in the region are foreign-owned. More than 80 percent of bank loans in central and eastern Europe come from lenders owned by six western European EU countries, according to Moody’s Investors Service.
All together, the EU paper said that 18 member states have introduced bank liability guarantees, 15 have approved recapitalization measures, and 11 have given liquidity support.
===================

Non-current loans rose more than 10% during the quarter to $366.6 billion or nearly 5% of all loans, the highest rate on record. Banks charged off nearly $51 billion in bad loans last quarter, the 11th straight quarterly increase and up more than 80% from a year earlier. “Loan losses will continue to climb as long as foreclosures keep rising and homeowners, builders and developers continue to hurt,” says Kate Monahan, banking analyst at Aite Group.

Banks don’t expect things to get better anytime soon: Two out of three banks set aside more reserves for losses during the quarter, reserving a total of $62.5 billion, 22% higher than last year. Banks are hoarding money in super-safe Treasury securities, and, “Businesses were not as eager to take on debt,” says FDIC chief economist Richard

#91 artisuseless on 11.26.09 at 2:03 pm

@BN in Thornhill:
Plan a- Want to sell and go rent for a while. Darling wife/3 kiddies aint gonna let that happen.

Bribe them with a condo in Florida in exchange. Tell the kiddies that means a week in Disney World every year. The kids will work on mum.

#92 Kate on 11.26.09 at 2:03 pm

I’ve been renting for a long time. From my experience, it is the best to rent an apartment in rental building. They cannot kick you out, superintendents have to do what you tell them or you complain to the management and you never see your landlord. You also can complain about the neighbors if something is wrong and you all are equal like under communism. We rented a condo at some point but the guy decided to sell and forced u to move, that was inconvenient. I know that apartment is not a house but now we have a nice and big two story and from the inside it is no different than a house;) Besides, it is close to everything and a lot cheaper than owning anything.

#93 andrew S on 11.26.09 at 2:09 pm

Vancouver is “different”. Because it’s in a mountainous area and what little flat land there is is extremely difficult to get rezoned for development, house prices can only go up. It’s also paradise on earth so people are willing to pay for it. Never mind the Chinese interests in Lower Mainland property.

In fact the mid-80s boom really also marks the point when people realized Vancouver’s land supply would be an issue – the Agricultural land reserve had been in place for a decade, greenfield space was getting tight, and in the intervening decades restrictions on developing flat land have gotten stricter even as the developable hillsides have gotten steeper. It is conducive to a long term upward trend in house prices.

It makes sense, doesn’t it? I mean , the costs for building on hillsides is expensive – you have to terrace them, and the water supply is a nightmare, often requiring a dozen pressure ‘zones’ each with its own pump and reservoir, so it’s logical that prices would be a bit higher there.

BUT: this does not explain condo prices in Lotusland, as they are not limited the same way. The land shortage thing is purely speculative; go take a look at Surrey, which is happily sprawling away. People take a “fundamental” and start rationalizing.

Of course, this doesn’t explain Calgary at all, and Saskatoon even less – especially compared to Montreal which does have some constraints in land supply and river crossings. We’re so far from the “fundamentals” used to justify a lot of increasing value

One really scary thing I noticed the last time I was out there was a disturbing trend for developers to build houses before they had sold them. Does anybody actually know how many of these empty houses are out there? Are they going to be dumped on the market when the current frenzy dies down? I have heard similar concerns about condos in Toronto, sell 70% to get financing, but how many of those other 30% are sitting empty and waiting to be dumped if the market sours? Is there a similar overhang of detached in the GTA? How about Calgary?

#94 dave99 on 11.26.09 at 2:15 pm

#53 Munch, you wrote

” – atoms are so empty that if it were possible to squeeze out all the space in matter, the entire human race would fit into the volume of a sugar cube”

That would precipitate major crash in RE values throughout the world (except for the sugar cube).

Where is this sugar cube? Are there condo fees? I’m interested in investing.

#95 Oakville Owner on 11.26.09 at 2:20 pm

• Respectful, wide-ranging discussion on the topic of the posting is encouraged, and will not be censored.

Garth, if the above line is true, please don’t censor my response to your question just because I threw out some names of other books/authors. Most of these books have view’s like your own. If you wont post this then please send me your response at the email address I provided when I signed up.

Regards

#96 jess on 11.26.09 at 2:32 pm

wealth by stealth

November 25, 2009
TORONTO — A law governing foreign investment in Canada is too vague to allow a company facing big fines for breaking the law to adequately defend itself, says a major American steelmaker accused of failing to meet job guarantees made to Canadian workers.

U.S. Steel Corp. is being sued by the federal government for allegedly breaking employment and production promises it made under the Investment Canada Act. But the company filed a court challenge arguing that the act violates its constitutional rights.
..

Ottawa is taking U.S. Steel, which acquired Hamilton-based Stelco two years ago, to court over allegations the company broke promises when it shut most of its Ontario operations this spring

#97 David Bakody on 11.26.09 at 2:54 pm

Just in time for Christmas more RE listings…..

Rogers Communications cutting about 900 jobs, company says

Bombardier to lay off 715 workers in Montreal-area facilities

These sad headlines while Harper/Flaherty/Carney have once again stated Canada’s economy is good.

Could they only be looking at the 200 + government appointments they created (full time pay and benefits)

#98 Soju on 11.26.09 at 3:01 pm

#62

Nice analysis… There you have it people, if you’re renting , you must be living in a dump. Calgary_rip_off just summed-up your lifestyle.

#99 pjwlk on 11.26.09 at 3:02 pm

#63 Toronto C9 Renter: Amen! We’re in pretty the same boat. My land lady owns 3 homes in Halton Region, and let me tell you the crying never stops about how much she spends for repairs and upkeep. I figure over the last 1-1/2 years she’s put out about $35k. (two pools) It’s great watching her hired guy, who happens to be our next door neighbour, do all of the chores around the place too! Lots of time to relax… My investments are growing too…

#100 pjwlk on 11.26.09 at 3:13 pm

#64 wondering: My cousin rents a nice 1 bedroom apartment in Victoria for about $750/month. It’s an older but well kept building and yes she’s been there for a long time so that’s part of the reason for the lower rent.

What I’d like to know is who’s holding you prisoner at the place you rent now? You’ve made the bed you’re sleeping in. If it’s that bad then why don’t you leave and find a better place? I’m sure the laws in B.C. are pretty clear regarding protecting tenants against a number of the things you mentioned.

#101 LetsGetOurFactsStraight on 11.26.09 at 3:40 pm

Mark in Vancouver:

1986 was the year Gordon Campbell (as mayor) declared that it was time for Vancouver to become known as a “world class city.” We had Expo ’86, and since then, there’s been no lookin’ back, baby! World class all the way. Woo hoo!

#102 Gord In Vancouver on 11.26.09 at 3:43 pm

#65 David Bakody

RE Bubble Burst ?

Dubai debt ‘standstill’ sounds alarms
________________________________________

America yesterday, Dubai today, Vancouver/Toronto tomorrow.

#103 HouseBuster on 11.26.09 at 3:44 pm

November 26, 2009 – US Thanksgiving -> End of the Bubble

#104 bill on 11.26.09 at 3:51 pm

There are some rental horror stories ,however there are plenty of good experiences as well. And this is the town [vancouver] that has more tarps on condos than anywhere. That alon stopped us from buying . Nothing is built for the climate around here and PAY for it too?We sure dont complain about our landlord or apt manager. we pay $960 a month around the 8th and vine area. pet friendly no bugs nice garden out front and lots of longtime tenants. it could be worse.

#105 Dark Wettler on 11.26.09 at 4:25 pm

Love the chart. I recently saw a similar one of US median home prices from 1955-present. It presents a very similar bull market blowoff top but after the capitulation the contraction lasts 26 years. This makes more sense from a demographic perspective, and usually contractions last half as long as the run-up.

Interesting times.

#106 My_View on 11.26.09 at 4:25 pm

Garth,

I mentioned awhile back that the prime-discount will return and you said bah hum bug. Well now it’s down another .5, seriously rates will not cause the “crash/correction”. (Long term rates, i.e. 5 year) Lets not forget how the bond market is doing, tanking!

5 Year Variable rate mortgage at Prime – .15% (2.10%)

Fool’s gold. — Garth

#107 jess on 11.26.09 at 4:26 pm

ben’s housing blog 2005

“developers have learned a new trick after the last local real estate price bubble popped in 1989. It’s called controlling the ‘absorption rate.’ It goes like this: A builder gets the land and zoning approvals to build new housing subdivisions, but only builds in small numbers of new homes. That is done for two reasons. One is to make sure that housing prices remain high by limiting the supply of new homes, and the other is to ensure that they can sell all the homes in each partial release of homes before they invest in the next.”

“The San Diego Building Industry Association has done a very slick public relations job of linking the problem of a lack of affordable housing and regulatory restraints on unlimited homebuilding in the public’s mind. The argument is that we could build a lot more homes if the regulations didn’t get in the way.”

“The truth is that builder actions to limit the number of homes they release into the market at any one time is a key factor driving up home prices, along with all the young speculators who are getting in with nothing down. Many of the speculators are going to go bust when the price bubble bursts, but the builders will continue to profit as much as they can.”

#108 greyhound on 11.26.09 at 4:33 pm

“If rates stay low, as they did in Japan, best prepare for a Japanese real estate experience. No?”

Real estate in the Ginza district of Tokyo reached almost US$ 1 million per square metre in 1989. Maybe even Garth’s neighbourhood won’t reach those heights…

#109 bill on 11.26.09 at 4:36 pm

Oh I almost forgot. On our street it is very easy to spot a place that is owned,be it apt or condo. They look like no one is taking care of the place. I suppose there is a third look to them as well. A very spartan ,zero maintenance sort of place with no lawns or plants.
For some reason they refuse to put the kind of cash into their places. In the last two years our apt block got a new roof at 300,000 and replumbed hot and cold water slightly under 300,000. I can here that condo council now argueing the merits of the low ball offer.

#110 CM on 11.26.09 at 4:38 pm

New post over at Edmonton Housing Bust…

http://edmontonhousingbust.blogspot.com/2009/11/survey-of-employment-payroll-and-hours.html

Some good analysis of the Survey of Employment, Payroll and Hours for Edmonton.

#111 Toronto C9 Renter on 11.26.09 at 4:44 pm

77 Downsized and Delighted on 11.26.09 at 11:41 am

“Your non real estate investments have paid more than your previous real estate investment? I’d love to hear how you calculate that???? Sounds like you have forgotten a few small items like “leverage” and income/capital gains tax. ”

Not sure why I’m responding, but here goes….

What I said is: “Also, my experience since selling the house has been that my non-real estate investments have appreciated faster than my real estate”

Its a simple fact. Since selling my house in feb ’08 (deal closed July ’08), I’ve earned about 20% in my portfolio (including dividends). I’m much richer now than I was them. In fact, I basically live off my investrment portfolio. I don’t know how much my remaining real estate has appreciated, but its certainly not 20%.

In a sense, you could say that I am “downsized and delighted”

#112 omg on 11.26.09 at 4:45 pm

Anyone else old enough to remember Toronto back in 1988 – I recall the same thing going on with people lining up around the block to pay deposit on unbuilt condos. The party went on for a couple more years before things turned down.

Will history repeat is anyones guess.

#113 Ian on 11.26.09 at 4:45 pm

Finanzkrise – I respectfully disagree that houses do not have intrinsic value. If home prices drop too far then the materials too build end up costing more than the value. When that happens people stop building, when people stop building then there is a supply issue and prices go back up, and back and forth till the true value is found. this is somewhere between the peak now and the bottom sometime in the next 18 months. A basic 1700 sq.ft. house costs around 300,000 to build today for material and labour then land cost on top. I know this because I am building one right now and I will do much of the work myself. Of course the price of labour and materials will fall as well but not by an extreme amount. While I accept a crash is imminent it will bounce back somewhat after that in say 1 – 10 years, lol

#114 T.O. Bubble Boy on 11.26.09 at 4:46 pm

@ #107 jess:

Replace “San Diego” with Milton or Stoufville, and you’ve got the 2009 version of the same story. I think I remember Garth posting something about Mattamy lineups in farmers’ fields in Milton this summer.

#115 kc on 11.26.09 at 4:53 pm

I see Garth is ruffling the feathers of the talking heads (Mr. M. Levy) here in Vancouver. He was stressing the fact that can RE prices are just the new norm. He was asked srtaight out and was asked about Garth’s web site, Garth’s opinions and the state of the BUBBLE. Mr Levy’s main answer… no bubble and all he can say is… Garth is just out to SELL books….

you can listen to the show here…. 11.am thursday 26

http://www.cknw.com/other/audiovault.html

Cheers…. and all the talk about Dubia…. LOL where have you been for the last year????? I was talking about this over 8 months ago on this blog….

CKNW was in touch with me today. I will be on Bill Good’s show Friday at 10:30 PST. — Garth

#116 Mark on 11.26.09 at 5:06 pm

#46 “Kash is King”

“Maybe PM Harper doesn’t agree with CMHC policy personally? I don’t know. But it isn’t necessarily his place to call the shots. By the looks of it, we the voters don’t seem to be able to call the shots over fiscal policy at all.”

He and his government have increased the maximum insured limit of the CMHC twice in two years, in 2007 it was 350 Billion, in 2008 they increased it to 450 and in 2009 to 600 Billion. Sounds to me like he agrees with the way they’re running things.

#117 Mark on 11.26.09 at 5:08 pm

Oh and I forgot, the Conservatives lowered the minimum requirements for home-owners to qualify for CMHC insurance as well…

#118 Devil's Advocate on 11.26.09 at 5:08 pm

People who post the same political message and useless drivel here eight times in three days are best ignored. On average I reject one posted comment a week. You are screwing up my Tolerance Index. Buzz off. — Garth

You seem to have the conviction of a windmill. — Garth
I bought a POS in the winter. Never pay retail. As for your prediction of a 10% decline then a flatline for years, explain the economic rationale behind that please. If rates stay low, as they did in Japan, best prepare for a Japanese real estate experience. No? — Garth

Owning a house is not a right. — Garth
Hindsight. The investor’s worst friend. — Garth
Cork’s book was written 15 years ago. Suggest you try a book store instead of the library. It’s a new world. — Garth

You are a consistently negative poster. Too bad. Actually I think the time to buy a distressed property is 24/7/365, and that’s what I did. The time to buy retail is probably a year or two away. And if you treat residential real estate like the stock market, thinking last winter was a buying opportunity and this Spring will be a selling one, well, good luck. That’s a loser’s game. The costs of entry and exit are far too high. — Garth

Fool’s gold. — Garth

– – – – – – –

RIGHT ON! It is comments like those which keep me coming back. Keep telling it like it is Garth.

Your editorials are much appreciated as is the opportunity for the public to comment on them. But it is your entertaining rebuttals which are most often appreciated all the more.

#119 Oakville Owner on 11.26.09 at 5:08 pm

Garth,

Will my post be moderated, or have I been given the boot?

Your posts have been published without alteration. — Garth

#120 Kurt on 11.26.09 at 5:25 pm

RENTAL PROBLEMS: we’ve got a bungalow for much less than a mortgage in the same neighborhood. The landlord leaves us alone except when we’ve got problem (same-day replacement for a busted fridge, for example.) Repairs are done by an experienced tradesman. The neighbors are nice and quiet. If you want a nice rental, shop for one and don’t try to cheap out – it’s cheaper than interest on a mortgage, but the key word is “cheaper”, not “negligible”. As well, try to make it clear that you are a premium tenant – secure income, no pets nor smokers, good references that say you’re easy on the property – this is all part of what it takes to get a nice rental for a nice price.

#121 kc on 11.26.09 at 5:27 pm

CKNW was in touch with me today. I will be on Bill Good’s show Friday at 10:30 PST. — Garth

I won’t be able to listen live, however, I sure will be listening to the audio vault!!!!!!!!!! is this friday 27 @10:30?

10-4. — Garth

#122 wondering on 11.26.09 at 5:34 pm

I’ve rented houses and not just suites in Victoria several times before. Rented one house for 5 years – had 3 different landlords as the house kept getting sold. Landlords got progressively worse until we left. Other houses we lived in for less than a year because they were sold and we got the “new owners want to move in” eviction notice.

I do due diligence, but when the landlords change on you midstream or they deliberately mislead you, it does make things difficult.

I agree with one of the posters above – the one time I rented a somewhat expensive apartment the living situation was better than renting a house or a suite in a house. What I can say is that we will not be living here after the lease expires. But I am so tired of moving. Vacancy rates in Victoria for apartment buildings are less than 1%, which is why we often end up renting houses or suites. But with the real estate frenzy in Victoria, too often the rental situation changes suddenly and unexpectedly because of a sale.

Anyway, I too look forward to a correction so that I can get myself out of this. I’ve got a 20% downpayment saved up – even at current Victoria prices – but as has been said here many times, now is not the time to buy.

(BTW, this wood stove thing was nuts. I called 4 different insurance companies (deliberately chosen for different underwriters) and they all had the same reaction when I explained that we were renters with a wood stove. The agents would happily set up a insurance for us – then contact us within the week to say “Sorry, the underwriters denied it”. We had to have the landlords hire a city inspector to certify it – and they only did it because we told them we were prepared to break the lease and move.)

Saanich is lovely this time of year. — Garth

#123 Oakville Owner on 11.26.09 at 5:44 pm

Cork’s book was written 15 years ago. Suggest you try a book store instead of the library. It’s a new world. — Garth

If that’s the case do you then suggest that 2015 After the Boom is not relevent anymore? It must have been written prior to Cork”s book for him to refer to it. May have to pick up 2015 at the library now that you mention it, will save me $20 or so. Good old common sense never gets old!! Chilton’s book is 20 years old, is it out of date and out of touch as well?? Only thing that has changed is the speed of information and this effects the ups and downs of the markets (including homes) more then anything.

Nobody ever suffered from being current. Even when it costs twenty bucks. You bill for today’s blog access is in the mail. — Garth

#124 Calgary_Rip_Off on 11.26.09 at 5:55 pm

#98 Soju-Tofu:

What exactly does disengaging emotionally from over priced property have to do with lifestyle? Speak for yourself: Your house defines your value. How pathetic. Last time I checked it’s a place to live in. That is all. It doesnt define a person. You think a trashed house after a heavy metal party defines a rockstar who makes a couple million a year? Faulty logic dude. Also, a $400K house in mint condition, the one I am renting with the huge Italian columns in the living room, the cathedral ceilings is still a dump. It’s an overpriced shack. Grateful to have it, but see it for what it is. My housing money spent on rent could better be spent in taxes supporting the NDP party. Get it yet? Next time tofu-soju think a little before you post, or ask if you need more information. Dont assume. Dont forget to vote conservatives like the other morons. :)

#125 Josh on 11.26.09 at 5:59 pm

Thanks for a response oakville and Jake.

You know, speculating when a correction is going to happen is like an inexperience person investing in stocks for the first time. Too much stress.

As for me, Im in a good position but Id like to own. Its just BS how a country is in a supposable recession, and yet the price of houses goes up. Then all you read is how everything is so great because a house truly worth 200 grand is selling at 400 grand in some provinces…one in particular is Calgary. Van and To…thats another story.

Does anyone on this blog have any good knowlegeable evidence that Garth could be so wrong and the opposite will happen. And, if Garth is correct about this correction, and it happens in like 5 years…so what. Any Joe blow could make that prediction.

P.S. My prediction: Within the next 5 years…Gold and or Oil will be at their highest point…oh wait, anyone could have made that prediction.

For divine guidance, go to church. The discussion here is among consenting adults. If you are neither, there’s always prayer. — Garth

#126 The Great Gazoo on 11.26.09 at 6:03 pm

WOW, the great “its different here” Van City… one of the hottest real estate markets has one of the highest increasing unemployment rates.

“EI benefits grew by 7.1% in Canada from August to September, but it was 12.8% in British Columbia… B.C. now has more people on Employment Insurance than Alberta, Saskatchewan, Manitoba, and Ontario. ”

And this is WITH upcoming Olympics, DARN they are in trouble over there!

Written by a Vancity local to boot:
http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/11/26/adrian-macnair-spinning-unemployment-b-c-style.aspx

#127 kitchener1 on 11.26.09 at 6:05 pm

#82 The Vulture

Right on.

For every house that has a bidding war on it, there are 2-3 properties that are sold way, way below asking price.

Or properties that are listed to high that sell for 20-40K less then original asking.

But, you don;t here about those properties. Like I have said before, perspective buyers are just going to turn away from the market and WAIT. When that happens, only homes in good locations will be selling and those that brought in “up and coming” hoods are going to be wishing they did’nt.

#128 Youngster on 11.26.09 at 6:09 pm

Great blog, thanks for the dedication and insight. However, I can do without the consistent blame for high housing prices on ignorant thirty-somethings. It’s tough to defend blaming one group of people for the problems of today. Dangerous. I deal with enough ageism at work.

I do sincerely love the blog. Also, I’m not a bitter house-owner. I rent and am just waiting. Thanks again for the advice.

#129 wondering on 11.26.09 at 6:10 pm

Saanich is lovely this time of year. — Garth

Beg pardon. Apparently I should have been saying “Greater Victoria” instead of “Victoria”. I do live in Saanich. The location is great, within walking distance of work. We moved here after the last rental house was sold out from under us. It’s just unfortunate that we’re in a year lease with landlords who deliberately mislead us.

Parksville is also lovely. — Garth

#130 Toronto C9 Renter on 11.26.09 at 6:12 pm

#120 Kurt on 11.26.09 at 5:25 pm

“… make it clear that you are a premium tenant – secure income, no pets nor smokers, good references that say you’re easy on the property”

Kurt, you are a wise man — I agree totally.

Find a really excellent place to rent, do not compromise. But once you have it, do what it takes to keep your landlord happy and worry free. This is a win-win, you are happy, landlord is happy

#131 Downsized and Delighted on 11.26.09 at 6:18 pm

111 Toronto Renter:

Your portfolio earning 20% less income tax (capital gains on the dividends) assuming you are in a 40 % marginal rate nets you 12 %.

Your real estate holdings (let’s say $200,000 Condo with a $150,000 mortgage- pretty conservative – could be more like 190,000 equals $50,000 investment. Real estate has gone up 10% since last year. $20,000 return on $50,000 investment equals a 40% return. If it is your principal residence, it’s tax free.

#132 Soju on 11.26.09 at 6:28 pm

#124

How funny it is to hear you rant! Where do you get those crazy ideas from?

#133 Josh on 11.26.09 at 6:34 pm

Thanks Garth for the advice,

I will pray that your correct and that the CORRECTION happens sooner than anticipated. If it doesnt, living with no mortgage feels good.

By the way, consenting adults…well I like to hear other view points because there’s a lot of Bias on this blog however with a lot of evidence to back it up. Just like to hear both sides of the world.

#134 ManfredSteyn on 11.26.09 at 7:14 pm

Hello Garth,

Having read your books and done some additional homework, we sold our house in Burnaby recently for an outrageously high price compared to what we picked it up for back in ’02. Subsequently found a great place to rent back in the city – a place we could never afford to buy.

My question to you is, once this crash has occurred, what can we expect from you, your publications and your blog? Oddly enough, your popularity is somewhat contingent on a pre-crash environment. I was hoping the discussion will turn to analyzing the debris, ways to best capitalize upon the carnage, etc.

Anyways, thanks again for this most entertaining of web sites and your books.

Hey, I’m a debris kinda guy. Wait and see. — Garth

#135 My_view on 11.26.09 at 7:19 pm

Just imagine, that day, 8 months from now. BoC raises rates in 8 months, the shock waves, the headlines, the horror.

#136 Ralphie on 11.26.09 at 7:33 pm

Yes, as I’ve said before, renting in some locations isn’t an option (or at least, a good option). I’ve lived in Victoria BC and the supply of good rental housing with over two bedrooms is hard to find. Here in Kingsville Ontario, its even more rare.

We happen to have found a nice house on the water with terrific landlords, but it’s a two bedroom house unless you include a room in the basement. We have two kids, and would really like to get our son out of the ‘dungeon’, that will probably mean buying within the year (unfortunately).

#137 Downsized and Delighted on 11.26.09 at 7:55 pm

It’s interesting that you find my comments negative Garth given your position on real estate. But I came into this blog agreeing with you. The market did in fact dip, but not for long. I recognized the turn in sentiment, and obviously you did also. I started to talk about the market picking up, but nobody wanted to hear it. C’est la vie.

I made my move before the downturn. My motivation was typical babyboomer – I didn’t want the big property anymore. But I liked my neighborhood, so I ended up moving into the first time buyer’s area. I worried about moving down, but guess what? I really like my neighbours! They are all young families. I hope that they do well with their real estate investment in their homes, but more importantly I hope that they continue to live their lives to the fullest. They are not deferring their children’s childhood because the market might face a downturn in the future. I applaud them.
We could all be dead tomorrow.

What I do personally is of no consequence to anyone here. I could lose my house tomorrow and it wouldn’t affect my life at all. I am far more conservative in all of my investments than anyone here. On the other hand, you need alot of money at age 60 to carry you to the other side. So frugality is my mantra and my nature
but not a necessity.

But Garth, because I urge young people to live their lives fully does not make me a negative person. I just know from personal experience how precious life is….. and, nothing is worth putting your life on hold. More marriages are ruined by husbands trying to make the big return than have ever been ruined by buying a house at the wrong time. And why should we assume that everyone here is buying at the wrong time? Hopefully, they will use the knowledge that they gain here to recognize when the right time comes along. If not, what’s the point?

Your female side is showing . Gotta watch that. — Garth

#138 jess on 11.26.09 at 8:03 pm

In a effort to combat inflation, rein in lending and bolster its currency, Vietnam raised its benchmark interest rate Wednesday and reset its official exchange rate. The move devalued the Vietnamese dong by more than 5 percent.

The interest-rate hike — from 7 percent to 8 percent — makes Vietnam one of only a few countries to have raised the cost of borrowing this year as the global economy has begun to stabilize
In Vietnam, rising prices of things like housing and food — in other words, inflation — have undermined the dong.
==============
cross border speculation / the u.s. low dollar /carry trade
http://www.newdeal20.org/?p=6614
Risky Business: Cross-Border Flow of Speculative Funds Cries Out for Regulation
Tuesday, 11/24/2009 – 4:51 pm by Henry Liu
==================

#139 Nostradamus Le Mad Vlad on 11.26.09 at 8:04 pm

#72 BAD — “More on Planet Dubai: It’s also a very important warning that you can’t trust governments. They’re prone to covering things up . . .” — and — #81 The Great Gazoo — “Repeat “Dubai” events will trigger the stock market bubble to pop in a panic, causing the double dip and then the inevitable housing market bubble pop.”

Agreed, so a look at Cereal Politicians, / Dubai 1 / Dubai 2
——
#90 jess — “The Rules change too fast for my little brain!” — Point noted, and it also applies to me. Maybe this will help — Mr. Gumby
——
#97 David Bakody — “Could they only be looking at the 200 + government appointments they created (full time pay and benefits)”

See above link re: Politicians. Here in British Kaliforna, there is a prov. govt. about to spend $450 mln. on a retractable roof, for a stadium (BC Place) that most of us will never see or use.

By the same token, top brass at Interior Health (IH) have had their wages go up for the past eight years, while the min. wage has remained around $8 / hr. or less, BC has the largest number of hungry street kids and different social programs are being cut left, right and centre.

Gordon Campbell is doing an utterly magnificent job of increasing the street numbers, but the RE market is still white hot!
——
Guess ClimateGore is feeling a tad uncomfortable these days!
——
Don’t forget this or this.
——
Money — Lending / Borrowing “Remember when science fiction writers warned that computers w9ould control your lives? You’re looking at it. Starting Dec. 12, the automated system that Fannie Mae uses to approve loans will reject borrowers.” (Comment by wrh.com).
——
The cost of War to date.

#140 CalgaryRocks on 11.26.09 at 8:12 pm

My housing money spent on rent could better be spent in taxes supporting the NDP party. Get it yet? Next time tofu-soju think a little before you post, or ask if you need more information.

What a hypocrite. There are plenty of places in Canada where you can support stupid socialistic policies with your taxes. Yet you chose to live in low tax, high wage Alberta. Change your name to Calgary_Leftie_Hypocrite.

#141 Paul on 11.26.09 at 8:18 pm

Devils Advocate.

Your too funny. It was you that told me to drop my price another 10k to sell it quick! Luckily we didn’t. A comparison just sold on Ladner for 18k more last week. The other recently raised their asking price from 345.000 to 379.750 and it’s much smaller. I do appreciate the little pms we had on Castanet before we moved.

Garth, Like I said I’m only speaking for ourselves. It would have been much smarter not to have sold, renew our mortgage 1.5 % lower which we had the ok to do that and then sit tight for 2 years until the big retirement. Now I honestly feel that unless prices drop by at least 25-30% were priced out. Since prices have risen so much since we sold we’ve screwed ourselves. Like I said last week (you didn’t post it) were not feeling like genius’s like you claimed we would.

See how you feel next year. — Garth

#142 Dave on 11.26.09 at 8:37 pm

Cork’s book was written 15 years ago. Suggest you try a book store instead of the library. It’s a new world. — Garth

———————-

haha, lovely. I was reading through that guy’s comment and knew a nice response would follow.

#143 Oakville Owner on 11.26.09 at 8:49 pm

Nobody ever suffered from being current. Even when it costs twenty bucks. Your bill for today’s blog access is in the mail. — Garth

True… Just picked up After the Crash and 2015 After the Boom at the library tonight. Looks like I just saved myself $21.95 on After the crash and $19.95 on 2015. Looks like books have only increased $2.00 in the last 13 years.No boom there eh! I’ll watch the mail box and put the $41.90 I saved in my RRSP because according to the back of 2015 “By the year 2015, the Canada Pension Plan will be bankrupt” Looking forward to see if this one comes true. If it does glad I have only paid into it for approx 14 years and not 47 years like some of the boomes have.

#125- Josh
Your welcome, dont forget there are two sides to every story and the truth is somewhere in the middle. Educate yourself and you will be fine.

Garth,
Thanks for the witty remarks and entertainment today. I truly do respect alot of your thoughts, just not all of them. Hey we both bought our homes about the same time we can’t be that far apart on our views.

#144 Dave on 11.26.09 at 8:58 pm

Anyone else old enough to remember Toronto back in 1988 – I recall the same thing going on with people lining up around the block to pay deposit on unbuilt condos. The party went on for a couple more years before things turned down.

Will history repeat is anyones guess.
—————————————-

yes, I remember this. I remember very average, non-risk taking Italian relatives (not very close ones) jumping into the market to buy additional houses. These were people that knew nothing about investing and market cycles. They lost their shirts by 1991. The mid 1990’s then emerged as a wonderful opportunity to purchase real estate. Bubbles are always the same. The people in them don’t know they’re in one. You’ll always hear “it’s different this time”. lol

#145 Paul on 11.26.09 at 9:11 pm

I suppose we have no choice. Since i’ve bought your last 3 books then the next should be free and we won’t hold it against you. :)

This past spring I even sold my 2000HD Heritage Softail, the one I proudly rode with 9999 others in the HD Anniversary parade in 2003 in Milwaukee.

Hey, don’t hang the Harley thing on me. I’m getting buried with mine. — Garth

#146 Dave on 11.26.09 at 9:14 pm

Garth takes a lot of slack on here from some of you. I just thought I’d let some of you know, Mr. Turner just about called the stock market bottom, almost to the day in March 09 on this blog. Give him some credit. I know of institutions and newsletters that charge boatloads of cash and still they weren’t as accurate as him with their call. It had to be said.

Although in one of Garth’s responses he said that in 1 or 2 years we could have an opportunity to buy real estate at reasonable prices (not sure what exactly was said). I think he’s definitely wrong. Yes, crashes do fall faster than the rise of a bubble but that is a very short time frame considering U.S real estate has been in free fall for 4 years and countries like Japan had a real estate bear market from 1989 to mid 2000’s after their bubbled real estate market.

i guess only time will tell. My money is on my prediction though ;). It will take 3+ years of falling prices for me to start rubbing my chin.

#147 rory on 11.26.09 at 9:49 pm

#132 Soju

Hey Soju & others ….keep up the good fight on this guy.

So let me review his posts in a nutshell for you …BC and the Island suck, police suck, Calgary sucks, house prices suck, poorly educated landlords suck, everyone sucks, NDP rocks, cons are idiots, right wing anything are idiots, people delivering credible criticisms are idiots …anyone getting a theme here. …appears to be everyone else’s fault ….’nuff’ said…. did I miss anything!!!!!

#148 Dan in Victoria on 11.27.09 at 12:32 am

Man, after reading some of these replies/comments today I would have to call this “Blogging For The Hard Of Hearing”

#149 steven rowlandson on 11.27.09 at 6:33 am

Comment on #12s comment
Frankly as terrible as the situation is the tax payer isn’t going to clean up the mess and of course the the govenment won’t. They may talk a great game but when all is said and done the government won’t clean up their own financial mess for very long if at all.
As to why? Well thats simple. There is no responsible government and nothing has come close for a very long time if at all. That is why people with smarts around the world are buying gold and silver and squirreling it away. How did we get here?
Well it started out with gods and warrior kings as leaders and that went on for while and then the intellectuals and business types took over and organized larger goverments, funny money and debt
as well as loose morals to suit their tastes. All done in the name of responsible government. They wanted to become the new kings and gods with out being qualified.
To get to where they want to go all that went before has to be torn down and trashed in such a way as to give the perps plausible deniability and their critics must be financially ruined by debt and lousy pay or no pay and to top it off the excess population must die in such a way as to look natural and reduce the population to about 500 million chipped slaves for the new kings and gods to rule. The term conspiracy theory was invented by them to protect the conspiracy
from being believed in and thwarted. These new kings and gods use democracy, communism, crony capitalism and media brain washing methods to advance their agenda while they gradually rework the world to pursue their agenda. It has to be gradual or you might wake up and make trouble for them via escape or rebellion.
So when you vote, buy real estate, get vaccinated, pay taxes ,lose your job and listen to environmentalists remember what I said. Try not to be a sheep.

Steven

#150 Joan on 11.27.09 at 9:41 am

Mark in Van RE historical stats:
The Statistics Canada publication Historical Statistics of Canada provides tables that cover (derived) dwelling construction costs and valuations of various sorts… might not be exactly what you were looking for but it is contextual (and free) and pre-dates your figures.
http://www.statcan.gc.ca/pub/11-516-x/sections/4057757-eng.htm#S225_231

Also, there has been a question about the value of dwellings in the long form of the Census of Canada back to 1941… but you might have to visit a library to see those. :)

If you’re really energetic, you could talk to a reference librarian at the Vancouver Public Library and tuck into their historical newspapers and Statistics Canada publications. Lots of good stuff out there that hasn’t been digitized yet.

#151 Calgary_rip_off on 11.27.09 at 2:41 pm

#147 Rory: If you are an owner, why are you here? You lend no credible ideas to your arguments. Do you have any solid reasons why those responsible for this current financial and political mess shouldnt be held responsible? Therefore they all are idiots, arent they?

#152 Finanzkrise on 11.27.09 at 8:39 pm

Garth – will your video clip from the Bill Good show be posted on the web? Thanks.

It was radio, not TV. You can find it here on CKNW’s site. Go to the 10:30 am time slot. — Garth

#153 Evangeline on 11.28.09 at 12:24 pm

#147 rory

((did I miss anything!!!!!))

Yes you did: the U.S. of A. in general, Republicans specifically , and, of course, Fox, the most evil entity on the face of the earth.

:-)

#154 Evangeline on 11.28.09 at 1:11 pm

#147 CRO

((Do you have any solid reasons why those responsible for this current financial and political mess shouldnt be held responsible? ))

I personally think those responsible should be drawn and quartered. Where we differ is in whom we think is responsible. IMV reducing the financial crisis to being an issue of partisan politics is an overly simplex diagnosis of the problem. I have no faith whatsoever that Layton or Dionne would have navigated through the crisis any better than Harper. Everyone hoped Obama was going to bring change; to mostly everyone’s disappointment he didn’t. Easy money is still flowing and real solutions to the fundmental problems that caused credit crisis are still not forthcoming. The recovery is all stimulus based not based on changed economic policies.

#155 Barb on 11.29.09 at 3:18 am

The most convincing thing to me that prices in Vancouver are totally out of whack is comparing Main st prices in Vancouver to prices in Williamsburg, Brooklyn, which is an easy commute to get a NYC salary, and Williamsburg is Main street time 100 in terms of amenities and coolness. This place here – and many more like them – are cheaper than what the equivalent costs in Vancouver : http://www.trulia.com/property/1088016633-69-Stagg-St-3B-Brooklyn-NY-11206

#156 Yorkville vs ‘Yorkville’ « TORONTO PROPERTY REVIEWS on 12.16.09 at 11:32 pm

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