Welcome home!

In a magic place.. near a ditch & an enchanted ramp...

RC

...349 square feet for $180,000

Hot on the heels of realtors bashing each other and throwing elbows over a new condo development in mid-town Toronto comes more evidence dark forces have taken over the GTA. It’s called River City.

The ‘river’ in question is a channelized concrete ditch full of dead water called the Don. And in a crook of roadway, where the six-lane divided Don Valley Parkway leaps skyward to join the elevated Gardiner Expressway, on acres which sat for decades as an industrial wasteland, will rise River City.  I will let you imagine.

One feature of this oasis of five buildings and 6,000 suites to be built over the next three years, is a four-acre park. But not just any park – this is the world’s first park built under highway ramps. Yes, under the Richmond-Adelaide ramps, which are choked with rush hour traffic and form one of the main arteries into The Big Smoke, will be bucolic bocci courts, children’s playgrounds and all the pigeons you’ll ever want to meet.

In any case, prices start around $180,000, (lucky buyers to be selected by lottery) for which you can get the 349-square-foot beauty above. No bedroom, No closets. No space. But a balcony with a lovely view of a ditch and bumpers. Better units are available in the $500,000 range. Enjoy kids. This is the big time.

RCC

Letter of the day:

My name is Jamie from Sherwood Park, AB. Your posting on Nov. 27 really hit home. You came up with a hypothetical scenario whereby a guy loses 120 G’s on a bad housing guess. I can tell you, this actually does happen. Although not to the same extent, I did get burned by the housing bubble just like you described.

What’s worth noting is that at 22 years old and just finishing school I too was told that you couldn’t lose with housing. I purchased a starter home in Sherwood Park in Oct. 2006 at $310k. After stumbling onto your blog in Jan. 2009, I sold this past May for $305k. Just a modest decline in principle $5000, I quickly realized that this was the worst “investment” I ever made. The criminal realtors and crazy closing cost to break my 5 down/25am 5.19% mortgage was a real shock.

This is just another real example you can use to back up your statement that the low-down payment crowd can only win if prices continue to rise. If their bet is wrong, it’s worth noting that the downside risk can cost you REAL DOLLARS as I lost $30 G’s on just a 1.6% correction. That money could have gone a long way towards the debt incurred during my education. Anyways here’s my stats, in a format that you posted today.

Thank god I got out when I did and I won’t be purchasing again until I have at least 25% down. Thanks for your advice

Purchase Price (Oct 2006)  — $310,000
Closing Costs (CMHC, etc)  — $8000
5% Down Payment — $15,500
Total Cash In — $23,500
Mortgage Debt — $302,500

Selling price (1.6% decline) — $305,000
Commission (7/3) + Legal –14,150
Net Proceeds — $290,850
Less Mortgage Penalty (IRD) — $7,850
Less Mortgage Principle — $289,000
Less Cash In — $23,500

Net Loss — $29,500
Loss as % of cash invested — 125%

Cheque required to close sale (paid May 2009) — $6,000

145 comments ↓

#1 ManfredSteyn on 11.27.09 at 10:18 pm

$180,000 = $515 psf

No bedroom? No problem – you won’t need it when you are losing sleep watching your “investment” disappear!

Garth, good job on CKNW today.

#2 Aizlynne on 11.27.09 at 10:23 pm

I’m sorry, but if you are dumb enough to sell your home just because Garth tells you too then you deserve what you get.

#3 Onemorething on 11.27.09 at 10:26 pm

Wow, good example Jamie of how only a small percentage equates to a signifcant net loss.

It still amazes me how challenged people are when calculating what they can afford and how shopping for a monthly payment today seems to give them the green light on the future.

It just shows how for the last 30 years (the money printing and stimulus years) how much risk we have been given to play with and accept.

If you are looking to at least do something for protection (peace of mind), calc with a 15% drop in value, AND 10% mortgage rates renewal in 5 years.

Add at least 30% down so you can carry on no more than 3x income and then see what’s available. This will show you how inflated your neighborhood is.

This will push you to rent OR move!

Have still not accounted for salary haircuts or job loss but its a good start!

#4 HouseBuster on 11.27.09 at 10:36 pm

Wow, that’s in unbelievably horrible location. Who would even think of buying there?

#5 Anschutz on 11.27.09 at 10:38 pm

Not that I doubt the statistics, but sometimes you just have to see it to believe it…

This afternoon I decided to stop at Robin’s Doughnuts in Winnipeg for a coffee. While sitting alone enjoying my coffee and getting caught up on email, I couldn’t help but notice the young 20 something couple sitting next to me.

From their conversation I picked up enough to learn they had just bought a house. Shortly thereafter another 30ish woman showed up with papers in hand. From the conversation I was able to pick up she was a mortgage broker and paperwork was the contract to be signed.

Two signatures later and the couple had committed to a $385k mortgage with 25 yr amortisation. As if that wasn’t enough when asked if they wanted life insurance the wife simply replied “yes”. They didn’t even bother to ask questions about cost, coverage, fine print, etc.

It’s one thing to hear and read about 25/5 mortgages… it’s somewhat surreal to see it happen for real.

#6 Michael on 11.27.09 at 11:04 pm

Wow. I lived a bit West of this… Aehm. Development area.

I admit I liked runnig up the Don Valley into the park which was a nice one once you got a bit north of Queen Street, but in that area down there? Nothing to see (literally) but lots of traffic I am sure.

My last job had me commute out to Markham every day, going AGAINST all the people trying to get into town and in the evening of course back. This place must be rocking (from all the cars outside).

#7 Ronaldo on 11.27.09 at 11:39 pm

And complete with ear plugs and gas masks…..this is way to much……when will the madness end?

#8 Robert1 on 11.27.09 at 11:41 pm

Land ( read real estate ) …… always a good investment ? Yes ….. it was a generation or so ago before the banking and speculator “pigs” got involved. Those nasty immigrants from years gone by, the Polish, the Irish, the Ukrainians etc. recognized the value of “land” as they emmigrated from countries where it was virtually impossible for them to have ownership of land…… fast forward to 2009…….. the masses are being manipuated by the “pigs” ….. not the immigrants as some profess.

Buyer Beware ………….

#9 Peter Pan on 11.27.09 at 11:54 pm

Garth, you forgot to mention the dead bodies floating down the Don River…

#10 Too Old Bob$ on 11.28.09 at 12:09 am

Wow! that condo is a beauty. Just be glad there is a door and a window/sliding doors. I guess they had to follow the fire rules. I wonder what the condo fees will be. Maybe they will let you park on the freeway shoulder, great access to work.

As for Jamie, “Thank god I got out when I did and I won’t be purchasing again until I have at least 25% down.”
You go girl!
Now if only we had done this all the time, we probably wouldn’t have this overprice mess.

#11 nonplused on 11.28.09 at 12:10 am

Wow. There are RV’s that big, for a lot less. And you can head to Florida for the winter! You certainly don’t have to park it under a freeway in any case.

#12 Increasing that 1% on 11.28.09 at 12:27 am

Re: Jamie’s calculations and loss, add on

….+ stress, + noose of mortgage, +pita (pain-in-the-a**) of selling and buying and time spent, +probably some sort of fix-ups or worries to do in order to sell,
+ certain lack of freedoms +, + = price-less

… but you had ‘pride of home ownership’

#13 vreaa on 11.28.09 at 12:57 am

Bob Rennie, the poster boy for the Vancouver RE boom has now come up with a large outdoor ‘poster’ that may well end up becoming the ultimate ironic visual anecdote:
“EVERYTHING IS GOING TO BE ALRIGHT”

see here –
http://tinyurl.com/yg2vcyt

#14 Dave on 11.28.09 at 1:14 am

the same people that are scrambling to buy real estate, were scrambling to buy nortel stocks in late 2000. It’s always the same casualties. They move with the herd into the next slaughter. They saw the stock market got clobbered in oct 2008, cashed out at a loss, put their money into the next absolute sure shot that has been working for so many years consecutively, real estate. Always buying in at the peak and always selling during the panic. Even after the crash of 2008, people flock to the bank in herds, well, what incentive do banks have to pay a premium on any saving/chequing account when herds of people want to open one? You always get the least or pay the steepest price by following the herd!!! The herd cannot recognize the mania. They’ll recognize the trend but will disregard signs of climactic points. It just turns out that everyone was saying to stay the heck out of the stock market in march 2009, and those that listened lost again because that was possibly the greatest buying opportunity of our lifetime. This has happened thousands and thousands of times. The asset or mania always change but more importantly people’s behaviours don’t. Recognize manic behaviour and you always win.

The public is right with the trends but wrong at both ends

#15 David #3 on 11.28.09 at 1:24 am

http://www.cknw.com/Episodes.aspx?PID=1116

Check:
Bill Good Show – Fri Nov 27 – Hour 2

Around -17:20

#16 AxeHead on 11.28.09 at 1:37 am

Sherwood Park is like the rest of Alberta. Our bubble formed and peaked about 18 months ago. Since then, prices are down about 20%. I don’t see any prices going up here like GTA, Van, Sask, or Man. In fact, they have either leveled off or very slowly going down. Garth – do you see the drop in Alberta to be less drastic than the bubble locations in Canada since we’re already down somewhat?

#17 Keith in Calgary on 11.28.09 at 2:13 am

How much money did the realtors lose on the transaction for giving you their “professional” advice ?

Was his name”Nikki” by chance ?

#18 Expat on 11.28.09 at 2:37 am

I had an uncle who had a place in Vancouver, just slightly larger than this, probably similar cost in constant dollars – he purchased in late 1980’s on a killing he made from a condo at Whistler (he bought when the place was bankrupt, sold much later when it wasn’t). Guy very happily lived out his days there as a divorced bachelor.

His place, however, was on a quiet street a couple of blocks from the Sylvia, looked out at English Harbor, and was a block from Stanley park. The place you have shown above, on the other hand, has all the location charm of a truck-stop in Mississauga, with similar highway access.

I have to hand it to you, you have used about every angle in your blog I can imagine to show how ridiculous the Canadian real estate run-up is. Predicting timing of a correction, on the other hand, is a mugs game for the average person. How about starting a pool on the first monthly drop of 5% or more, just for fun, and open it to realtors only? Kind of like those games the Pentagon plays with retired generals to coax out the odds of an outcome without naming names and embarrassing contributors?

#19 Another Albertan on 11.28.09 at 3:02 am

New house = $310000
HP-12C RPN financial calculator = $100
Knowing that, in a world of liars, numbers don’t lie = priceless.

Now people will snicker at the idea of using a calculator instead of using a spreadsheet, but who really wants to fire up a computer to do some arithmetic?

I’ve been in enough situations where people are mashing their fingers into their iPhones or Blackberries to do some calculations to “prove a point”. I’ll take a sheet of paper, a pencil or pen and my HP 12C for financial calculations (or my 32S for engineering calcs) any day. For whatever reason, nobody seems to want to mess or argue with anyone who will actually write out even a rough derivation on paper. It doesn’t even need to be exact. The process of putting pen to paper seems to instill sheer terror in most people. This is probably due to the fact that most people are functionally innumerate. Having something on paper also makes the concept more concrete. It’s an excellent method for shutting people up good and tight.

People will toss around “rules of thumb” all the time, but have little to no idea about what they’re talking about… or the estimations will be so obtuse and off-the-mark as to be totally useless. This is especially so when dealing with people whose livelihood depends on a high degree of mathematical ignorance in the other party.

It’s sad to say, but in this case, Jamie didn’t buy a house – Jamie was sold a house. At least Jamie figured it out in the end.

#20 Calgary_rip_off on 11.28.09 at 3:22 am

Sherwood eh?

I remember when I moved to Calgary. I talked to a guy named Sheldon at Empire Citi, its a rent to own outfit. He tried to persuade me to allow him to give me a loan for the down payment, wouldnt tell me what the interest rate was. Said, dont worry about that, you’ll make a profit when you sell the $500,000 house, which still hasnt sold, two years later, its up in Sherwood off the main drag-nice house, but not functional floor plan, and worth about $190K for what it is. For his other rent to own properties he wanted around $1900/month, of which $100-$200 of that rent would go towards owning the place. Right. I couldnt believe what I was hearing. He was really slimy and obviously couldnt be trusted. What’s nice about the economy now is that people like Sheldon are likely to be driven into the ground. Look at some of the prices on these rentals: What he does is jack up the rents so he can make a profit: http://www.empireciti.com/empire_citi_rentals.asp

Please someone phone this guy and tell him he will soon need a job at Burger King cause people wont have cash to pay him and their interest and the housing costs all at once.

People are going to lose a lot more than the young dude mentioned in Calgary above in the months to come. And the government is powerless to stop it. Oh well, the people got what they wanted for the caring party currently in power.

#21 ralph on 11.28.09 at 3:35 am

Did Jamie include the monthly interest he paid on the $302,500 mortgage from 2006 to 2009?

I’m guessing his monthly payments were about $1750/month and most of it would have been interest on the loan. Then there is property taxes and insurance.

To me it would make sense to rent and save the difference. With discipline you should be able to achieve 25% down at least.

#22 Einsam Solo on 11.28.09 at 3:44 am

The River City condo development is eerily reminiscent of Soviet era apartment blocks. The centerpiece of the park could be a giant bronze statue of our beloved leader, for the pigeons of course.

#23 Repatriated Expat on 11.28.09 at 3:52 am

That is one tiny apartment; 600 sq ft is minimum required living area without going nuts.

If anyone in the GTA is that desperate, why not just live at an extended stay hotel for $60/night? 0% down, $0/month in utilitities, $0 in annual property taxes, no closing costs, no realtor fees, 1 day notice of vacancy. Oh ya, housekeeping, cable and coffee included.

http://www.staystudio6.com/accormaps/S6ProximityResults.aspx?searchtype=C

#24 Charlie go surf da ReVoLuTiOn on 11.28.09 at 3:54 am

Unreal!!!!

pay your condo fee at the tollbooth laundry room under tower4, beneath the electrical room, lol
they should have the access lane through the lobby!!
maybe
you can have a slush splash spa on the fifth floor,

honk
and airbrake meditation therapy
on the ninth!

top floor,
flash and moon the automobilist, yoga session
if they crash you get a

Garth’s Fool Doctors consultation,lol\

why dont they space real estate in Cubic feet, since you could have a nice pad in this type of jail cell if you could loft it…

rent your fltscreen for a billboard to offset your mortage, startthe first drive by outdoor theater onyour blding walll,lol,

lol, being a gnome or an elf you could had a floating second floor, and market it for double the price, ask Nikki to add a hobbit pro service, to her website, man ohman, you could even add another park on top of the highway, nuts!!!!!!!!
http://images.google.ca/imgres?imgurl=http://media.point2.com/p2h/user/c539/5760/ed60/14d9eb6af5a8ab6d4e59/featured.jpg&imgrefurl=http://homes.point2.com/CA/Alberta/Calgary/Elboya-Real-Estate.aspx&usg=__7gTb9glD6Z2Xz6SRdowuxRap0i8=&h=165&w=110&sz=4&hl=en&start=34&um=1&tbnid=gTyZ8iPB85PJnM:&tbnh=99&tbnw=66&prev=/images%3Fq%3DNIKKI%2BHARRISON%26ndsp%3D18%26hl%3Den%26rlz%3D1T4GGIT_enCA311CA311%26sa%3DN%26start%3D18%26um%3D1

#25 jungberg on 11.28.09 at 4:35 am

Doesn’t Jamie’s breakdown neglect interest paid over 3 years? My calculations show a total of ~$45k paid in cumipmt at a mortgage payment of ~$1800/mo.

Doesn’t that mean a total net loss in the investment of $74.5k over those 3 years?

(Haven’t added in property tax yet, but we’ll leave that out right now.)

And please, someone, feel free to tell me if I’m doing this ROI wrong.

Say for argument’s sake, similar lifestyle space = $1200/mo rent.

Invest the original (down payment) cash on hand $23,500 very conservatively at 3%, with the “extra” $600/mo saved by renting going in as well.

After 36 months, FV = ~$48,200 in savings.

Total rent paid = ~$43,200.

Net gain = ~$5000, but you also have a much larger down payment now.

Comparing ROI in this particular example, Rent = +$5000 vs. Buy = -$74,500.

Does this look right?

#26 solipsist on 11.28.09 at 4:54 am

Ha! Your “River City” commentary was your warmest, plus droll yet.

‘There is no beginning, there is no end,
there is only the infinite passion for life’

Fellini

Oh, the passion that can be had in 349 sq. ft.

Hey! what is with the red font? Am I flagged?

Will my HTML tags work?

Is that another car wreck on the on-ramp?

Is this the “property ladder” that the Brits speak of?

Are we home yet?

#27 David Bakody on 11.28.09 at 6:59 am

Jamie, you still have the great gift of youth and now a bag full experience. Enjoy life and ensure your next move is on your terms only. Bon Chance, good luck and Happy Holidays.

#28 SaraBeth on 11.28.09 at 7:31 am

Let’s see,

$180,000 for a “magical” shoebox…or…

$160,000 for 141 acres + house, barns, outbuilding, oh…and some equipment…

http://homes.point2.com/CA/Ontario/Central-Ontario/Algoma-District/Plummer-Additional/Plummer/4843948-Real-Estate.aspx

Decisions, decisions…. ;-O

#29 John In Jim's Riding on 11.28.09 at 8:50 am

Garth, unless this is part of the #$%@ for the PanAm Games (a WASTE that we don’t need) it will never be built. Ever. Condos are dead. Lamb has stopped development on 3 of his projects now. And Shangri-La? Stopped. Oh, they have construction crews there fooling people, but after 4, yes FOUR years they have yet to even finish the foundation? Like 1 Yonge the oversupply has assured that lots of deposits will be taken and returned.

BTW, nice job on your analysis for X2. Spot on! It was all hype and the media bought it. The worst was CP24 having Cam Wooley on scene throughout the day reporting on this. Cam Wooley? Maybe they were doing RIDE checks on the drunks that would purchase fiction. It is to wonder. . . .

#30 John In Jim's Riding on 11.28.09 at 8:51 am

Auugh sorry, I meant 1 Bloor.

#31 PTDBD on 11.28.09 at 9:01 am

Dear Dr. Freud Garth:

Do chickenlittles dream of mother and child reunions?

In a dream early this morning, I opened the door of a huge hanger and peered inside. A wall of eggs, stacked layer upon layer, not in cartons, but resting on top of each other, floor to ceiling. I crouched down and looked at one of the eggs. It had a small hole in it and looking back at me, blinking, a small fetus. “Oh my”, I thought. It’s struggling to get out. Just imagine the chaos if it tries to hatch from the bottom of that pile.

I still wonder what it means.

Buy two condos and call me Wednesday. — Garth

#32 David Bakody on 11.28.09 at 9:11 am

349 sq feet for $180K = $515.57 per sq foot

Here is a cool place in what was rated Canada’s #1 place to live. Bedford Nova Scotia.

1456 sq feet for $279,900 = $192.23 per sq foot.

http://www.homesinhalifax.ca/listings/Listings_All.html

#33 CalgaryRocks on 11.28.09 at 9:23 am

And please, someone, feel free to tell me if I’m doing this ROI wrong.

The way I see it, total outflow is 2000/month (P&I+Taxes) * 30 months + cash at closing = around 66,000$ for 30 months or about 2200/month.

That’s 1000/month extra for owning (based on renting @ 1200/month) or 30K for 30 months. Therefore total loss = 30K. (Difference between owning and renting)

8000 CMHC could’ve been avoided with 25% down but where it really hurts is the 22,000$ in Realtor fees and bank penalties. Those could also have been avoided had Jamie done his/her homework.

#34 Devil's Advocate on 11.28.09 at 9:37 am

That’s not a condo… that’s a coffin.

#35 Edmonton_Yahger on 11.28.09 at 9:49 am

Jamie,

Thanks for your warning. It’s interesting to live in a province where you can’t lose on a real estate investment. You’ve reinforced my decision to continue renting for at least another year or two. By that time my wife and I will have at least 25-30% down – and hopefully that correction will begin…

#36 Jake on 11.28.09 at 9:50 am

#2 What about those who are dumb enough to buy because real estate pumpers tell them to? Do they deserve what’s coming? Just interested in your opinion. Take a minute to respond if you get some downtime at the showhome today.

#37 Herb on 11.28.09 at 9:58 am

Sorry for your loss, Jamie. Yours is our first victim-impact testimony, but it won’t be the last. And you have limited the damage.

I know of a Canadian grandparent couple happily retired in Florida who lost their home due to increased mortgage rates and negative equity in the Florida crash. They lost the savings they had sunk into the house as well. In their eighties, they have returned to Canada and will live out their lives shoehorned in with a son and his family.

There is a bright side to this story: sometimes virtue is its own reward. Being childless, they adopted a number of children, who now have turned into their old age security. But that sure as heck was not the plan!

#38 Piccaso on 11.28.09 at 10:03 am

I’m from Sherwood Park. lol
To think Jamie could have bought a starter home in 2004 for $180,000

#39 Devil's Advocate on 11.28.09 at 10:08 am

People buy on emotion and later justify their actions with logic… what logic they can find. The purchase of a home is likely the single largest investment one will make in their lifetime yet many today rush into it with less due dilligence than they paid toward the purchase of their first car.

There have long been three words which best describe the three single most important considerations one should factor into their real estate purchase decision… “Location, location, location”. Over the past 8 years or so these most important consideration have been ignored by many… most I would say. They have taken a back seat to “new”, “granite”, “home theatre room” “stainless steel” so much so that if a developer can pack the later into a 349 sq. ft. coffin in the sky under a freeway ramp greater fools WILL buy into it.

There will always be a market for a strategically placed piece of bare land… always. A coffin sized box in the sky will only fall in relative value to that which the original purchaser paid for it.

#40 Real Estate Deal or No Deal on 11.28.09 at 10:32 am

Garth,

You said it would happen … and now others are starting to believe.

http://www.theglobeandmail.com/report-on-business/a-world-awash-in-debt/article1380944/

#41 Grey on 11.28.09 at 10:33 am

Let’s re-post that article again because this is important:

Rates can stay low through 2015: David Dodge

http://www.financialpost.com/news-sectors/story.html?id=2277574

Garth, want to take this on? Because this is beyond depressing for first time buyers who aren’t willing to do a 5/35.

There’s an entire generation of people out there who are completely being priced out of owning a home right now. Never mind 5 years from now.

David Dodge does not run the BoC. — Garth

#42 Real Estate Deal or No Deal on 11.28.09 at 10:33 am

This could be the other shoe dropping which will cause another leg down in the double dip depression.

http://www.theglobeandmail.com/report-on-business/dubais-debt-a-wild-card/article1380866/

#43 Edmonton_Yahger on 11.28.09 at 10:35 am

Garth – I can tell Alberta is your favourite province, so why not pick on Edmonton RE? We don’t really care about Calgary up north… (except for their hockey team).

#44 The Great Gazoo on 11.28.09 at 10:48 am

Garth – please remember this is David Miller’s vision of a new Toronto:

Meaning being in the back-pocket of selfish unions and big businesses including building contractors and re swine.

The only end result is suckering in the highly naive citizens of Toronto into paying higher taxes to accomodate his projects (ie see his “vision” for a new Toronto waterfront).

To pander to his lobbyists, this guy looted the middle class as much as he could and Torontonians let it happen.

#45 The VULTURE on 11.28.09 at 10:49 am

ROIDS RAGE ROY TAKES ON THE BIG MUDDY

You know what lives in that river and comes out to feast every morning?

Rats, big smelly fat rats with rabies. Rats that are really hungry after feasting in the sewers of downtown Toronto at night; they come into day light during the day to munch on stuff. They make great pets for the kids and great gift ideas for mother-in-laws. You have to be careful not to squish one with your SUV on the way to work.

Beware though, if a rat gets too big it might eat one on your toddlers or the family cat.

Enjoy my car horn honking at 3:00 AM in the morning. My way of saying hi to everyone at Rat River City. A little wake up call (pun intended!!)

Enjoy the early morning fumes of the frantic traffic not to mention the odd bum that is looking to snatch a purse or do a little break and enter. Eating rats all the time upsets the stomach you know.

You had better have the biggest alley cat on the block or your children will get eaten alive.

Look on the bright side dark side and your teens can take target practice with their BB guns at the river rats…

When the children are outside be sure to observe them at all times. River rats leave behind messy, stinky surprises that toddlers and young children might put in their mouths and eat or drunken adults after a river rat party at 5:00 am.

A close friend of the river rat is the poisonous river snake. No not your ex-wife, a real slimy, long river snake that likes to bite and choke. Much like your ex’s lawyer. The river snake tastes great cooked up along side a side dish of a couple of river rats. Be sure to remove the fur first before cookin’ up. Makes great gravy as well. The smell is rancid but you will get used to it.

You get to see car-jackings and drive by shootings all the time and if you can swim, you can retrieve the odd tire, microwave, washer/dryer, stove, TV, clothes etc from the river. Be careful of the odd body floating jetsam and flotsam. Be sure to check the body for a gold watch or current credit cards.

“Going down the rat river in a river boat fantasy”…David Wilcox was ahead of his time when he penned this memorable tune.

Rats! The prices are too damn expensive for me.

Drat the rats you spoiled brats.

#46 dd on 11.28.09 at 10:52 am

Wow,

Go a just south of the boarder and this is what you get for 260KUS.

http://www.jeffscofield.com/MyHomeDtl.asp?lstPages=1&HomeID=967662

#47 OnlyTheBankersLaugh on 11.28.09 at 11:06 am

Dodge supporting low rates until 2015 as if they can control rates? They are trying to take your perch, Garth! Keep the real estate and stock market fires burning for 5 years longer. But, take away unconventional stimulus like 5/35… so, try to protect prices and totally lock out the kids and really magnify the generational gap. Is all of this simply to get a majority, Garth? When will common sense prevail?

#48 Ken on 11.28.09 at 11:16 am

What a sick,greedy,stupid society!

#49 robert on 11.28.09 at 11:20 am

I think a lot of these young buyers need to get reacquainted with Ben Franklin:

‘Experience keeps a dear school, but a fool will learn in no other.’

#50 Taxpayer like you on 11.28.09 at 11:29 am

38 Herb

Retired in their 80s with a mortgage on a house in
Florida?? That’s not only dumb, its suicidal.

33 Dave B – nice house, wrong link?

34 Crock (oops) – I would take the principal repayment
out of your calc. Jamie shows it as $13500.

#51 Downsized and Delighted on 11.28.09 at 11:43 am

What does Jamie’s example show?

1. At age 22 you should be buying your first car, not your first house.

2. Even if your house has not lost any money ($5,000 in 3 years on a new house equals depreciation on finishes – not much more) using the financial acumen of a 22 year old it can be turned into a colossol loss.

But because there are lots of “Jamies” out there, developers come up with new products like the 300 sq ft nightmare Garth illustrates above.

Bottom line – if you’re 22 years old you don’t need a house! Stay mobile and enjoy the last few years of freedom that you have. Save your money for a downpayment when a house will actually mean something to you.

#52 Shawn on 11.28.09 at 11:49 am

I’m from Sherwood Park too. Bought a starter home for 14300 in 2001 and looked at a lot of older homes in 130,000’s. I am sorry Jamie that you lost out but at least you realized when you did since prices are still going down. And you have a wealth of experience at a young age. All the hype around RE is confusing yet prices still continue to slowly slide… – 2% November.

#53 mariaboombah on 11.28.09 at 11:50 am

Just to follow the train of thought of Jungberg et al..on the Jamie situation…here is my humble analysis…

At 5.19 interest, a 289,000 mortgage accumulates approx $40,000 over 32 months (Oct’06-May’09). Conservatively taxes would be an additional $7500, utilities $15,000, insurance $3200, maintenance $3200, bringing the cost of this home ownership to at least 68,900.
Upon moving, he spent $14,150 commission, $7850 in penalties, and lost $5000 on the house price for an additional $27,000 expense. This in addition to the $68,900 makes a total of $95,900 cost to live in this place for 32 months.
This does not even factor in the lost earnings on investing the cash over 2 and a half years. Though people lost so much in the crash of Oct 08, this is a difficult variable to calculate.

For this, about $14,000 of the mortgage principal was paid.

Conversely, renting for $1200 per month for 32 months costs $38,400.

So $95,000 cost to buy vs $38,400 to rent in my mind means a loss of $56,600 over the 32 months..which is a loss of well over 200% on his original cash investment. Not to mention a lost opportunity to pay off student debt!!

I hope he enjoyed living in the house, at least, and next time has some assistance to look a the cost/benefit ratio in advance.

#54 Downsized and Delighted on 11.28.09 at 11:55 am

#33 David Bakody

That link looks beautiful but it’s not in Bedford – it’s just north of Chester. Despite your claims about Bedford I’d rather be in Chester anyway.

#55 T.O. Bubble Boy on 11.28.09 at 12:11 pm

@ #16 Watched Bubble Never Pops:

That is somewhat surprising that Mark Carney would arbitrarily project 5-6 years in the future. This is even more surprising given how accurate our government has been with predictions recently (even a 6 month forecast is impossible to predict within +/-10%).

My guess is that he’s trying to talk down the CDN dollar.

Either that, or the government is convinced that we are headed for a double-dip recession, and the Japan 10-yr deflation scenario is more likely than the inflation-from-too-much-money-printing scenario.

A 0.25%-2% BOC prime rate through 2015 would definitely keep the credit bubble going, which is the Harper/Flaherty wet dream (keeping sheeple believing they are rich until after the next election).

Too bad if the economy is really that bad to warrant this type of never-ending BOC stimulation, deflation will take hold and bring down salaries and asset prices. Also, cash will be king, and the giant debts of the 5%/35-yr crowd will be even harder to pay.

#56 Dean on 11.28.09 at 12:12 pm

The thing that is problematic is that most people will not cut their losses like Jamie did when they realize that things are starting to go South. They try to ride it out hoping prices will go up again. It doesn’t take long for them to be locked into a mortgage they can’t afford to pay and can even less afford to sell. This is what has happened to a lot of people in the US.

Alberta could be in a tight spot for some time. Climate change may stifle the oilsands development and the price of natural gas may stay low for a long time due to huge new supply. It could be another decade before things start to move again like in the 80’s.

#57 Don't Believe the Hype on 11.28.09 at 12:15 pm

Wow. Garth, I thought you were punkin’ us. Then I Googled this development and found this funny website:
http://truecondos.com/x2-condos-and-river-city-live-blog
This guy is hilarious! In another blog entry he laments the new ban on driving (crashing) and texting/talking on a phone. http://truecondos.com/does-this-mean-i-cant-text-drive-anymore#more-2182 Brilliant!
This reminds me of a friend of mine who bought his condo in downtown TO in 1996 for $110k – previous selling price was $205k in 1989. He sold for $210k in 2007. It seems agents like this guy Andrew were still in diapers during the last boom so they really don’t know what they’re getting themselves and others into.
At least he eats his own dog food – he’s buried himself along with his clients – http://truecondos.com/x2-condos-and-river-city-live-blog
Awesome. Truly awesome.

#58 Future Expatriate on 11.28.09 at 12:16 pm

Garth, didn’t you mean “All the pigeons you’d ever want to EAT?”

Considering the slum tenement tower “projects” these are destined to be…

#59 Bottoms_Up on 11.28.09 at 12:46 pm

Jamie, thanks for sharing.

I would think you probably over-paid for that home in Oct. 2006. What was your realtors name and affiliation?

#60 Jamie on 11.28.09 at 12:56 pm

Jake,
I didn’t listen to the “Real Estate Pumpers”, I listened to my friends, family, coworkers – most of whom made hundreds of thousands of dollars from 2004-2006.
I don’t blame them, I should have done my own risk analysis back then. Garth’s blog would have been helpful back then but simply — I didn’t know what I didn’t know.

Don’t feel too bad for me. What I didn’t mention is that this was a joint investment with a friend, so my portion of the loss was 15 G’s. Now I rent and have been able to save 10% for a future downpayment in 6 months. Thanks all for your comments/advice.

#61 GregW., Oakville on 11.28.09 at 12:57 pm

Hi Garth, FYI, Artica ice levels (slush) & Maple reactors info.

This Week on Quirks & Quarks – November 28: CBC radio
You can down load to lisen to show.
http://www.cbc.ca/quirks/archives/09-10/qq-2009-11-28.html

#62 homeboi on 11.28.09 at 1:20 pm

Garth,
I must lament you for not ever teaching your flock to remove their money from the lending institution and storing it in a place where it cannot be used under the guise of the fractional reserve system.

The banks are paying less than 1% interest to borrow the money and then lending it out for a nice return.

The best method to bring this ship down is to ‘starve the beast’.

Move you money into institutions such as brokerages that cannot lend the money out.

Sit back and watch how fast the banks start raising interest rates.

#63 Kurt on 11.28.09 at 1:42 pm

Hey Jamie,

There’s an old pilots’ saying that “Experience is that enlightened state of being that we attain about twenty seconds after it would have done us the most good.” As investment learning experiences go, yours was pretty cheap, and you probably learned a lot about home ownership into the bargain. Thanks for sharing and best of luck in your future endevours!

#64 Rob in busted bubbleland on 11.28.09 at 1:50 pm

His biggest mistake, outside of perhaps buying, was selling. If you don’t sell you don’t have to pay all those fees. Yes he would have been in negative equity but unless he’s way over stretched he would have been better off to sit it out work on paying off the mortgage increasing his income and not worring about house prices. Yes it may take (quite ) a few years for the price to catch up but as I said unless your way over streched does it really matter.

#65 David Bakody on 11.28.09 at 1:54 pm

So, really how strong is our Canadian Shield wrt to Real Estate given this sad news south of border?

In light of a weakening Case Shiller housing index, fears rise that Home Prices May Be Nearing a New Dip.

The housing market is confronting an abundance of inventory, high unemployment, fearful consumers and devastated family balance sheets.

“There is no clear, easy way out for housing,” said John Silvia, chief economist at Wells Fargo. “Contrary to my hopes, housing prices and the housing market in general will weaken again.”

He forecast a new decline in prices of as much as 10 percent, which he expected to shave a half-point off the nation’s economic output just as it emerges from the recession.

Full article:

http://globaleconomicanalysis.blogspot.com/

#66 Confused on 11.28.09 at 2:03 pm

Who is buying?

I live in Calgary and unemployment is rising. Yet it seems $400+K homes are selling like hot-cakes. My question is this:

What industry do the new house owners work in?

Thanks and congrats on your new purchase.

P.S. Jamie, my friend recently sold her house in Calgary for a $100K loss, if that makes you feel better.

#67 Evangeline on 11.28.09 at 2:19 pm

#66 David B

((So, really how strong is our Canadian Shield wrt to Real Estate given this sad news south of border?))

It’s becoming clearer every day that making real estate the foundation of personal or national prosperity is a bad idea. Witness Dubai, all its financial problems are linked to bubbllicious real estate.

#68 Herb on 11.28.09 at 2:39 pm

#51 Taxpayer,

they didn’t retire with a mortgage in their ’80s, so it wasn’t suicide. They had lived well in Florida for years until killed by negative equity and higher rates.

Just pray that it won’t happen here!

#69 Internal Exile on 11.28.09 at 3:21 pm

I think Vulture is just being negative. The promoters obviously have so many selling points they can’t even fit them all in: River City has EVERYTHING: it’s just a stone’s throw from the SPCA house of horrors, an abandoned shipping canal (the Keating Channel, not the Don)…I think there’s a concrete depot just around the corner…oh yeah, dumptrucks hauling recycling to the depot on Commisioner’s Street…oh, and I almost forgot: the abandoned power generating station full of pcbs! And if you want to take the kids on a day trip, there’s the sewage treatment plant within easy walking distance.

If memory serves, I think they built a new Police Station around there a few years back, and the soil was so toxic they had to dig it out and haul it away en masse. Then they had to line the entire foundation with some sort of space age fabric to keep the toxins in the soil from leeching in later.

…and rats…

#70 kc on 11.28.09 at 3:25 pm

1st. Nice job on the CKNW show Garth. I did notice thou that your nemises was pretty vague as to talking about the true future of Van. RE market…. keep the gerbils on the fence and hope they buy into the ____ add your own shlick here… olympics, land scarce, boomers popping off, etc. It only takes a second to blow the smoke out of the way to see the real problems, heads in the sand….

here is a nice little article I had found this morning from G&M about the true valuations of buying a “condo” and trying to retire in 30 years… a bit of an eye opener… and the purchase price? 180K

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-facelift/condo-purchase-possible-but-barely/article1380906/

Condo purchase possible – but barely

2nd. DUBAI … for all this talk about how can this be happening, how it will shake up the markets and the costs of the problems… I have kept an eye glancing over this place for the past while. Not in depth for the last few months, however, I had done some research into a few things there over the past, and have posted links to up and coming RE problems there.

If you were living there and decided to purchase into the “Palm” were you aware of the fact that because you were not a true citizen you are 100% in debted to the purchase? You can not “jingle mail” the keys. Many of the “investors” who speculated into the sand built digs are caught with the hot potatoe. Poeple like Brad Pitt, Beckem, and many others who wanted that bragging right of I own…. These guys owe millions. The next ones who are stuck are the expats who worked on many of the billion dollar projects who felt they had hit the lotto and purchased into the “RE lotto” they too are “tits up” over the full spectrum RE crash is at 50% in Dubai. (and still falling)

If you were born there you pay no taxes and are of the “elite” (so to speak) that you have what is known as first come rule. Many, if not all, the major projects there are built with slave labour, immigrants who are stripped of passports when they get off the plane, then assigned their new work areas.

The goverment controls everything. Speculation and change will conquer … sure it will only conquer during a booming era, however, take away the boom and you are left with exactly what you started with… SAND.

I remember an investigated piece I found a while back that showed BMW’s parked in condos parking with 2 inches of dust on them. Owners up and left the glory of the dream behind and fled the country. It only takes the chain reaction to set off the ball of unpaid bills and losses.

This country faulted to think of the down side of the boom. That old addage… build it and they will come is falling back to the grains of sand for wich it was built.

cheers

#71 Nathan in Edmonton on 11.28.09 at 3:34 pm

Madness… who in their right mind would pay 180k for a shoebox? Hopefully that ugly thing won’t get built.

Thanks for sharing Jamie — that’s a tough life lesson, but one you can recover from, wait until people realize they’ll lose 100+K if they sell.

I’ve notice lots of home in my area with for rent signs — these are people who refuse to take a lose and will be hanging onto a depreciating “asset” for years.

#72 rory on 11.28.09 at 3:36 pm

#47 dd

Nice house …did you happen to notice the property tax …a whopping $9400 bucks/yr or $783 bucks a month …no money left to pay for a mortgage …why so high …anyone know?

#73 tech4monkies on 11.28.09 at 3:46 pm

Nasa finds evidence of life on mars! …at last the source of my arch nemesis has been found. Yes, I’m talking about realtors, bankers, used car salesmen, lawyers, harper. We all knew they weren’t from this planet…

the real question now is: How do we ship them back to the mother planet that spewed them forth?

http://www.tgdaily.com/space-features/44844-nasa-finds-new-evidence-for-life-on-mars

P.S. Just because I’m paranoid, doesnt mean that THEY aren’t ACTUALLY out to get me.

#74 Jody on 11.28.09 at 3:49 pm

All this was inevitable. Governments are little more than oppressive, self-serving instruments and finally it’s crashing down. This is what happens when people surrender most of their life’s earnings to bureaucrats and politicians by way of oppressive taxes expecting to be taken care of for life. Next up, even higher taxes, worse service (or no service at all) and a debt we’ll hand down for a few generations. Absolutely shameful.

Won’t people ever wake up and take back their lives?

and for those of you who have difficulty understanding why metals are money I recommend you read Good Money by George Selgin, it talks about how factory workers in industrial England started to make their own coinage because the government could not be bothered with making coins for them. Once our fiat currency hyperinflates the market will respond.

#75 Barb the proof reader on 11.28.09 at 4:10 pm

#67 Confused recently sold her house in Calgary for a $100K loss

Confused,
It’s crazy isn’t it? Amongst our closest circle of friends here, many still march forward, even now, despite sitting way underwater in their beautiful new homes, despite holding unsellable speculative rental properties that are losing them further money. Yet they are as we speak, still actively buying investment properties, (albeit a little nervous), still buying vacation investment properties, future retirement investment properties.

And in answer to a question posed earlier, who are these buyers, they work in banking, housing, oil, insurance…. perhaps they are naively influenced by the self-deluding talk from co-workers surrounding them. They certainly aren’t being cautious enough and I’m a bit worried some of our pals’ futures are at stake here in this tipsy-turvy province.

Speaking of tipsy, Grey Cup fun’s in town.

#76 CM on 11.28.09 at 4:15 pm

@ Confused:

“Who is buying?

I live in Calgary and unemployment is rising. Yet it seems $400+K homes are selling like hot-cakes. My question is this:”

http://www.bobtruman.com/blogs/bob_truman/archive/2009/11/25/calgary-vs-edmonton.aspx#comments

To Nov 26, sales of SFH in Calgary are up 4.6% compared to last year.

Sales of homes priced above $600,000 are unchanged from last year(less than 1% difference).

Inventory is pretty much as stale as can be. When a decent house comes on the market it is definitely going quickly.

But when you think about it, interest rates dropped by half in autumn of 2008, and houses became twice as affordable, and sales only went up by less than 5%. Prices increased marginally (about 5% as well).

I think the real stat to look at here is inventory. How long will it remain this stale?

#77 The VULTURE on 11.28.09 at 4:44 pm

Internal Exile #70

Can’t forget the “rats” in suits as well!

You made me laugh my backside off today!

Thanks…

I am eating some rat soup right now and I am having some fried rat for supper while listening to “Rat Salad” by the Prince of Darkness himself; Ozzy Osbourne.

#78 The VULTURE on 11.28.09 at 4:50 pm

Be sure to snag an abandoned shopping cart from the rat river to put the rats in that you collect. Much easier than a 5 cent plastic shopping bag.

You can get 10 cents for each rat that you find or better yet, after paying this kind of money, all you will be able to afford is the free rats from rat river.

At Christmas your banker will be filling his fat face with Christmas turkey and counting his money after dinner while burping hot sauce in his wife’s face all night long and cracking jokes about how stupid and foolish some home buyers are acting right now. Wait…maybe his not joking….maybe…….he……knows something that we don’t.

Flog the hog you dirty dog.

#79 LOLz on 11.28.09 at 4:54 pm

This “loss” works out to approx. $1,100/mo., or roughly what you’d spend on rent. In that light, it’s not so bad.

That’s nothing to whine about, considering the bath that’s been taken by American homeowners over the last couple years.

#80 robert on 11.28.09 at 5:22 pm

#66 David Bakody

The parallels today with Canadian’s attitudes in the early 1930s is striking. There seemed to be the same sense then that we were immune to America’s and the world’s troubles. Failure of Credit Anstalt in Austria in 1931 and the serious banking crisis that ensued in the United States (particularly after Roosevelt took office) effectively quashed those pollyannish views.

#81 Taxpayer like you on 11.28.09 at 5:33 pm

69 Herb

I re-read your original post. I’m still confused. These
people were Canadian, grandparents, retired, in florida
right? So they were what 60+? And they wound up with
negative equity? Even if the florida house lost 50%, that
means they had a mortgage on it of more than 50%?
When you’re retired?? And they have to move back with the kids because they have no savings?? That makes no
sense to me.

#82 Mike Turner on 11.28.09 at 5:41 pm

Peter Schiff did a good video blog on real estate: http://www.youtube.com/watch?v=GCiFjkgZM3k

Anytime you sell your home before 5-7 years you won’t see much of a “profit” you need time to build up equity in your home.

Having front row seats last year in California for the economic collapse was a good eye opener. Buying a house and expecting to get rich is foolish.

To be fair though Jamie should subtract the amount she would have paid in rent.

#83 Jurgen on 11.28.09 at 5:51 pm

Sir,the processes you describe about new houses complex builed in the middle of industial zone is similar in Russia Moscow,here in Israel -Tel Aviv,Jerusalem and other israelies cities-in most cases Russia and Israel going in parallel,same lottery to compensate the price discount looks logically,but all thoose deals coming when most potential buyers is out of box to bid for,thats why you have lottery for the appts builded in place in wich no one will puts nose just 5-6years back-why?Because prices did not rich speculative rates as now-many people left without their dream house hardy working and being put money aside,this last saver wave ready to take every offer ,but,at discount because they never will pay principally for things which in their minds fixed as 200k$ ,but requested at 500-600k$.Others can not dream even about 200k$ because most have a cash burn being left without work and pay crazy hiked rates of rent followed by government policy of the “Never before development of Economy”(no members of the government may explain what benefits of the people from this economical development,no one can respond since 2005).If you pay attention in TV going same programs after the 23-24.00,card guesses,fortune tellers,sweet half naked girls asking the “word” wich is hidden under the tablo which you can find by calling to the number wich cost 2$ per minute and you can not reach this number in studio spending around 1.5$,2$ ,50rubbles or 10NIS,depend on you country(USA apply too).This is some international concern wich permanently crush into our lifes offering combinations wich any way leading you if you buy into it into the huge losses.There is many sighns of same manipulations around the world,super markets which manipulating prices of food on the hourly basic and so on.
Just keep this in mind,also no one as US government has access to the market dates,quantity of the long/short/whatever you want positions,they can intervine on the name of private institution which if need disappear in one hour,so,you never will know who’s that big guy who shorted your company stock and later had buy the same company stock at 90% discount prices,all parties excluding you was sighned and happy..It’s very big disorder going through all the world systems and start to be too ugly as governments stop to care about thoose who had make them choosen,i think Bush young had stated that era of irresponsibility claiming in 2007 to all pension funds money to invested into stock market in USA just before market pick.Same as international community and government went together against Big business names:the start was Hodorckovskij Yukos in Russia,Bill Gates Microsoft in courts for monopoly,Lev LEvaev in Israel,Gujdamak in Israel and similar processes in other countries down to the chain.I knew its agreement as USA had “help” brother Putin to put Hodorkovskij who was 3-2d wealth man by market cup of Yukos by printing in US press suggestion that “he” is next candidate into presidensy in Russia,the electricity went on and processes of shutting big businesses started,parallels followed all the world.I waiting for the world revolution as greek georgian taxy driver expresses to me same opinion as 20years econimics student in Moscow in the same year with half year difference-“We will crash all thoose governments till the ground,that no one will be left,but it will be two-3years later” ,i had talk with them in 2006-7.
All best from Israel,Jurgen

#84 Men With Hats on 11.28.09 at 5:58 pm

Way too much for a particle board palace .
Someone saw you coming .

#85 kitchener1 on 11.28.09 at 6:00 pm

RE: Jamie’s letter

Its not all that uncommon, but its not widely reported in the MSM. My wife and I were having dinner with a couple last night in Milton. They just met a few months ago and she was telling us how she sold her condo in Toronto in August and had to borrow over 10K on her LOC to bring to closing.

It turns out that she brought a condo before it was built, then a year later, refinanced to pay of her other debt. Well, this year, she had to sell due to losing her job, it sold for a lot less then she thought it would.

She figured she lost over 30K on the deal over 3 years because her mortgage was $300 more then what she could have rented a comparbale for, plus property tax, legal, realtor, land transfer fees etc…

She borrowed money on her LOC to use as a downpayment, 35 year ARM.

She said she was lucky she sold because in another month or two, the bank would have taken it. So after 3 years of paying property tax, condo fees, etc.. she has 10K in debt. This was in Toronto. The condo market in Toronto is done, they over built. All of these people waiting in line at the X2 project where ether paid shills or RE agents looking to flip the condo. How many where actually sold to people that would live there.

Miami, Las Vegas, here we come with our very own condo crash. Just wait, there is nobody left to buy these “starter” shoebox condos, as with this economy, the 18-25 crowd is getting slaughtered, they can;t pay 250K plus, they will just move out of the city.

To all of those people on here who are saying they made over 100K since last year when they purchased, I call BS. Sell it and then tell me how much you really made. If you did, then awesome, i am happy for you, but I;ve heard people bragging about how much they made on the stock market, but they never took gains and lost their shirts last year.

#86 Men With Hats on 11.28.09 at 6:01 pm

In a magic place.. near a ditch & an enchanted ramp…

And a magic dumpster . Complete with a homeless hobo.

#87 Ret on 11.28.09 at 6:08 pm

I am not too concerned about the limited size of the unit. The wife and I don’t need a lot of space. We’ll just get bunk beds to maximize the square footage a little.
I was hoping to get a suite under the Enchanted Ramp. I guess I’ll have to wait until City of Toronto planners approve Phase 2.

#88 john m on 11.28.09 at 6:39 pm

Small but adequate…..location kind of questionable but>>that’s the future our economy is deteriorating at an alarming pace and our lifestyle will follow…wages are dropping and they must to remain competitive…we have to seriously downscale…the future is for the survivors..wanna be’s will be eaten up……… taxes,utility bills and mortgage payments will be the destruction of many who bought a dream to impress a lot of plastic people with little thought for the obvious future.

#89 Terry on 11.28.09 at 6:43 pm

Garth … Pls delete if recently posted …

I wonder if Summers wishes he had never wrote this in a memo … He has since claimed it was all tongue and cheek … I like it as Economic Practices Sans Ethics.

DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP

‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.

#90 Nostradamus Le Mad Vlad on 11.28.09 at 6:43 pm

#14 Dave — Nicely said. The herd mentality is one brick short of the full slegehammer effect of The Bovine Excrement Meter!

#49 Ken — “What a sick,greedy,stupid society!” — See above. As well, 5:29 Clip. The US borrowed 43 cents for each dollar it spent in 2009.
——
Canada is not in the Top 10 List for Cuddles!
——
Does this have anything to with the Summit Series?
——
The Gaza Strip is now a Concentration Camp. So much for ‘poor old Israel’.

Questions following from wrh.com hit the nails on the heads. — Foodbanks. “And how much taxpayer money got sent to Israel this year? How much got spent on Afghanistan? How much got spent on Iraq?”
——
There always will be Cimate and Change; both will be consistent in their own ways. The comment from wrh.com is better — Crooks “In other words, when Obama goes to Copenhagen and signs away your money and your freedoms, he is putting much of that money into his own pockets.

“This is why going after the CRU and IPCC scientists is a diversion. The real crooks are the politicians.”

Climategate won’t go away.

Further, Floating Icebergs “And it’s the start of SUMMER down there!” (Courtesy wrh.com).
——
Other stuff. “If true, this would be a real game-changer for any possible Israeli-led attack against Iran. If they’re going to do such an attack, it has to be before this anti-aircraft system arrives in Iran.” (Courtesy wrh.com).

#91 Jake on 11.28.09 at 7:12 pm

#80 Lolz
If Jamie is to subtract the rent from the losses, shouldn’t Jamie also add the mortgage interest paid?
I think factoring in the rent he/she would have paid would be nullified by the interest paid to the bank. After all, owning a mortgage is kind of like renting from the bank.

#92 Boombust on 11.28.09 at 7:19 pm

“This could be the other shoe dropping which will cause another leg down in the double dip depression.

http://www.theglobeandmail.com/report-on-business/dubais-debt-a-wild-card/article1380866/

I think we’re in for a whole new game of whack a mole.

#93 Dan in Victoria on 11.28.09 at 7:24 pm

That floor plan reminded me of the Borealis Lodge at Suncor in Fort Mac. Ah yes, the striking green decor. Battleship lino, your built in bed with the drawers underneath. The nice sink in the corner, the beautiful desk and chair, and over here your wardrobe, and…you can put your tv on top. Turning to the the right you can open you decorator curtains (green what else) Wait, what a view!!! of the parking lot, with the beautiful picnic tables in the fore ground. You can see the seasons change from your glourious views, The sun goes down for a few hours in the summer,the snow is piled high in the winter, What a treat to come home to after a ride back to camp on one of [email protected]%$#%&^& buses.
Not much diffrent by the sounds of it except you get to pay for it.

#94 CalgaryRocks on 11.28.09 at 7:31 pm

This is an interesting writeup from someone that lives in Denmark. Some people on this blog seem to be in love with high Scandinavian taxes and brand of socialism. This is just a bit of an opposite view from someone that lives there, although admittedly, he is a foreigner.

It squares pretty much with what I remember my parents going through while they lived in a communist hell-hole although to their defense, my parents were coerced into it. The Danes, on the other hand, seem to, and I quote, ‘love their servitude’

http://tinyurl.com/y8qxr3r

#95 Cory on 11.28.09 at 7:44 pm

I don’t know, I am and have been totally onside with what “should” happen and I saw it coming several years ago. The problem now is politics. Politicians are single handedly destroying the world all for power and vote getting….don’t upset the voters even though this is what needs to happen.

Governments have gone completely backwards by floating irresponsible borrowers. If you give out free money such as they are, what do they think people are going to do? politicians know exactly what is going on and the devastating effects that will or should happen. The problem is they can and are changing the rules as they go. Savers and those who are responsible are being punished and will continue to be.

Now the US gov’t is planning cash for appliances to stimulate this part of the economy…..big mistake…..the point is it will never end, I don’t see how it will anyway.

We will be sitting here on this blog a year or two from now talking about the same things and watching more bid wars for overpriced real estate and watch realtors like Nikki Harrison talk about how smart they are when we all know this is far from the truth.

And so it goes……

#96 Sotiri on 11.28.09 at 8:31 pm

“Attention Builders,Renovators,First Time Buyers – $500K”
http://www.realtor.ca/propertyDetails.aspx?propertyId=8915228

This is not going to end well.

#97 David on 11.28.09 at 9:00 pm

A while back I made a post about the smell of death in Alberta and some guy dismissed me as a crank and crackpot. The poster from Sherwood Park sounds like an actual human being not making $200K family income, like so many of the letter writers here. A small price shift can be disastrous, which is correct. A correction to “normal” will ruin millions of Canadian families.
Today is a good day to sell and those that can should do so immediately. Those determined to buy at any price are fools and criminals.

#98 Sincere in SK on 11.28.09 at 9:22 pm

My husband reminded me that this condo bears a striking resemblance to the floor plan of an Airstream.
However, an Airstream would only be $100,000 and you could move it any time the smog got too thick!

#99 Heinz Skitzvelvett on 11.28.09 at 9:28 pm

Just saw the latest “yup, we’re in a bubble again” signal on CTV BC 6pm news. Here’s the gist of it

-Realtors waiting overnight in line-ups
-Claims by reps of the development that, to paraphrase, Vancouver is different than anywhere else in the world, there is no bubble, blah, blah, blah.
-The kicker…real people are buying, people who aren’t flippers.

Where have I heard this before? Hmmm

Thankful not the be a sheeple, Heinz

#100 The Great Gazoo on 11.28.09 at 9:35 pm

#95 –
Interesting article man, you seem to have a grasp on the requirements to form a socio-economic utopia.

I decided to embark on a similar venture, but I could only find:
http://www.calgarysucks.com/

Thanks for staying on subject on the blog.

#101 jess on 11.28.09 at 9:43 pm

…interesting how the sentence by financial innovators keep repeating,” rates are historically low” ….how come everyone including whole countries /citizens are struggling to pay. This so called cheap money era has created more problems.

Is this legal in Canada Garth? The idea to buy life insurance policies on your employees without their knowledge for the tax break/ income tax free money
Imagine how the bankster flip these things for extra leverage on stock.

#102 Not Garth on 11.28.09 at 9:44 pm

check out http://www.yattermatters.com for confirmation of the following:

Vancouver housing market is seizing up. Crash has started. How it unfolds only time will tell. Quick 2 years down 50%, or a gradual 30-40% decline that takes years? Your guess is as good as mine….

What say you?

#103 David Bakody on 11.28.09 at 9:54 pm

Downsized and Delighted on 11.28.09 at 11:55 am

Indeed it was ….. tis a beauty in Chester. I have often wondered what the city attractions are most people never really use them. I suspect most Canadians have grown up in the city and they find it hard to live with their spouse in peace and tranquility.

In any rate here is the listing:

http://www.homesinhalifax.ca/listings/Listings_All.html

I here Gibsons BC is nice and there are reasonable places to purchase similar to Bedford.

#104 aj on 11.28.09 at 9:58 pm

The gov’t and other powers that be will keep interest rates low for decades to come and there will be no real estate crach. Period. Next topic?

#105 Ronaldo on 11.28.09 at 10:03 pm

#47 DD Yep, you can buy the house and they throw the land in for free….heck of a deal

#106 ATP on 11.28.09 at 10:21 pm

Are interest rates going to stay low?

http://dailyreckoning.com/freak-show-2/

“Taken all together, the world’s governments will need $1 trillion per month, in financing, over the next 12 months, according to an estimate in the Financial Times. Who has that kind of money? Total US savings are only $700 billion. Even the Chinese, if they put their entire cash pile to it, could only fund the deficits for about 67 days’ worth. Warren Buffett? Less than 48 hours.”

I’m not so sure …

#107 Not Garth on 11.28.09 at 10:26 pm

Hienz you dunce, the market in Vancouver is slowing – don’t worry my friend, the stats will back us up toute suite.

check out http://www.yattermatters.com – tell all your friends (both of them), as this is gonna get ugly fast.

#108 kc on 11.28.09 at 11:06 pm

Further to what I was saying above about Dubai… here is John Mauldin’s take on the whole crack up bust….

if you are wondering what is happening there or wondering whats coming next… this is an insightful little read.

The Subprime Dubai Debt Default Crash

http://www.marketoracle.co.uk/Article15400.html

#109 Dave on 11.29.09 at 2:28 am

Governments have gone completely backwards by floating irresponsible borrowers. If you give out free money such as they are, what do they think people are going to do? politicians know exactly what is going on and the devastating effects that will or should happen. The problem is they can and are changing the rules as they go. Savers and those who are responsible are being punished and will continue to be.

———————————-

i understand your frustration totally, but, how many times historicallly have governments stepped in to alter markets? Price fixing has happened time and time again. If a government steps in and fixes the price of corn for example, well, the price of corn will remain cheap – under the fixed price. Eventually though, farmers will simple opt to plant something else as the margins in planting corn are no longer profitable or fundamentally sound. The price fixing/manipulation would actually cause the price of corn to skyrocket as the supply/demand imbalance progresses.

Wasn’t it Roosevelt that fixed the price of gold at $35 in the 30’s? What happened afterwards? Price fixing does not work. Gold skyrocketed

The same goes for real estate. The government has interferred this time to prop up the market. They’re doing everything possible to keep the borrowing going – the same idea as fixing a price extremely low. A supply / demand imbalance is occurring and it is going to cause a disaster like any other situation where price fixing occurred. You cannot manipulate markets. Governments can monitor, but markets cannot be altered to this extent without severe reprocussions.

Those of you with little ones around who are considering purchasing a home, really think about what you’re doing. If your actions are to improve the lives for those little ones, you best do your homework. Some people will be having religious experiences if they make the wrong move. Purchasing at the peak of a bubble can set people back 10+ years and can really alter the way your life plays out.

Many people that bought homes in 1989 (at the peak of the last housing bubble and horrible time to buy). Do you know any that are now living very simple modest lives? I know plenty of them. They put their neck out and followed the crowd for the first time at the absolute worst time. They paid for that mistake for years and are guaranteed to work extra years…..How many people you know that bought in 1995 (bubble bursted, real estate bottomed, nobody wanted to buy), are now living lavishly? I know plenty of those too. Some people I know who’ve been in several businesses and hold lots of real estate made their biggest and best fortunes purchasing real estate after the bubble burst in the mid 1990’s. They ran great businesses but their best investments were real estate post bubble investments. These people now have boatloads of cash. Did they buy when everyone was telling them to buy in 87,88,89????? No way!! They let the herd purchase and took it all back for pennies on the dollar only a few years later. They bought multiple properties. They made up for the properties they didn’t purchase in the 80’s.

Sorry for going off. The idea of this all is to simply let those new to investing to be careful of their timing, and be careful of what the herd is telling you to do! Avoid doing what the herd tells you to do.

#110 Terry on 11.29.09 at 2:59 am

Morning coffee for the blog dogs … Gerald Celente’s future trends interview

http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2009/11/20_Gerald_Celente.html

#111 The truth on 11.29.09 at 3:31 am

Jamie, i think the realtor’s relatives may have bought your condo. You could have sold it this month for a profit. Should of held on and not sold on a dip.

#112 gold bugger on 11.29.09 at 3:33 am

Why is it a realtor’s fault Jamie was a greedy retard too lazy to do his own homeowork about what constituted a suitable investment?

Look in the mirror, whiner. You have nobody to blame but yourself.

#113 The truth on 11.29.09 at 3:36 am

Plus jamie, u are ahead considering you didnt pay rent for 2.5 years. $6000 loss divided by 30 months is $200/month. That was your rent…so you were out ahead.

#114 miketheengineer on 11.29.09 at 8:23 am

Garth et al:

They have been talking about this for a while. Interesting interview with Bob Chapman, ABOUT THE STATE OF THE USA BANKING INDUSTRY. Mainly doom and gloom, but a timeline for the dollar collapse, banking collapse and FDIC (For the USA ).

Take what you want out of this…..very interesting.

http://www.youtube.com/watch?v=K2_l8JY4Kzw&feature=related

#115 Bill-Muskoka (NAM) on 11.29.09 at 9:53 am

So, maybe this explains Vancouver’s RE prices? It certainly explains how Canada’s government covets criminals and applauds corruption as a normal way of life…for the unscrupulous and elite at least!

China’s public enemy No. 1 built a cartel, beat the system and moved to Canada

#116 Heinz Skitzvelvett on 11.29.09 at 10:13 am

Not Garth,

I think I laid my sarcasm on too thick – I’m a permabear on Van RE, I was paraphrasing the deluded RE pumpers who want to spread their gospel of misinformation. Watch the report and you’ll see a table of spiked kool-aid in the back corner of the presentation centre.

I’m looking for a 40-50% decline as well as the “CMHC carry trade” unwinds.

#117 Cory on 11.29.09 at 10:54 am

My in laws had been renting for several years, couldn’t afford a house. They were paying reasonable rent for what they had. They fgured now was a great time to buy so they did. Rent was $1200, mortgage is $1800.00/mth. Now they are selling a car and not buying much for Christmas this year since they can’t seem to afford it. Lots of “pennies in a jar” going into the house.

They also rely on income they shouldn’t rely on when buying. (i.e. overtime, which has now become non existent)

It is frustrating to watch all of this madness continue. But hey, our rent dropped 6% with more to come. We sold and are renting since we thought this very thing would happen, at least we were right on one thing!

#118 Confused on 11.29.09 at 11:17 am

Garth,

Help! Can the Bank of Canada really hold interest rates at 0.25% till 2015?

http://www.reuters.com/article/companyNewsAndPR/idUSN2743222720091127

I was hoping reasonable rates would finally start bringing house prices back to affordable levels.

@CM @Barb – thanks for the responses; glad I’m not the only tipsy one in this forum – to my Grey Cup beer party I go!

You’d better hope emergency rates do not stay until 2015, or you will be living through a deflationary economic nightmare. — Garth

#119 Ralphie on 11.29.09 at 11:25 am

I’m expecting fall of the Roman Empire collapse. But I’m known for my pessimism.

#120 jess on 11.29.09 at 12:06 pm

WAR TAX
bring back the draft and then see who really wants to play war games.

from cnn:

The White House estimates a troop increase will cost $1 billion a year for every 1,000 troops. So if Obama chooses to increase troops by as much as 40,000, that’s $40 billion a year. That would be on top of the costs incurred for the troops and operations already on the ground, including the costs of any drawdown in Iraq.

“That’s in addition to what we already spent in Afghanistan and Pakistan. That also does not include training and it doesn’t include maintenance of a security force,” Gibbs said.

Enter David Obey, D-Wis., chairman of the House Appropriations Committee, and other leading Democratic congressmen who have proposed a graduated war surtax beginning in 2011 to pay for U.S. military efforts going forward. The amount of tax collected would have to be sufficient to cover the full war costs of the previous year.

The surtax would start at 1% for anyone with taxable income and increase gradually up the income scale to as much as 5% for the highest-income households

#121 X on 11.29.09 at 12:32 pm

As the economy is still sputtering, BOC rates could stay low past mid 2010. Assuming inflation doesn’t take hold, and assuming China et all continue to buy US treasuries at the current rates, but what else could affect our rate here?

Not that I think rates will prurely be the factor in this housing market, nor the HST. Simply it will eventually come to supply and demand, and these low rates really have drawn out all of that demand.

How easily we forget. We watched the Americans drink the RE kool-aid, and yet we continue to get drunk on it.

#122 Ronaldo on 11.29.09 at 1:24 pm

#110 Dave

Excellent post

#123 swm on 11.29.09 at 1:24 pm

#112 “The Truth”……”Plus jamie, u are ahead considering you didnt pay rent for 2.5 years. $6000 loss divided by 30 months is $200/month. That was your rent…so you were out ahead.”….

Why can’t anyone do a simple rental to ownership comparison without conveniently leaving out variables? I guess because that would reveal “The Truth” that more money is ‘thrown away’ with ownership than with renting (UNLESS there is appreciation)

So on the ‘calculation’ above, interest on the mortgage is 0%, the downpayment money would have earned 0%, Property taxes+extra insurance+utilities+…..

#124 OnlyTheBankersLaugh on 11.29.09 at 1:44 pm

If these rates stay in place, we are all screwed as taxpayers (CMHC) loads up its risky portfolio subprime style. Crazy that Harper can manipulate things this bad with hardly any media….. this should be front page news every day as we have our own Dubai mountain of risk in CMHC but we’re too prudent according to brainwashed media…. pathetic

http://www.globalresearch.ca/index.php?context=va&aid=16170

#125 Bill-Muskoka (NAM) on 11.29.09 at 1:55 pm

#120 Ralphie on 11.29.09 at 11:25 am

I’m expecting fall of the Roman Empire collapse. But I’m known for my pessimism.

That will be Part Deux! They never learned the first time, so, as usual, history WILL repeat itself. Maybe it will/should be called Part Douche?

#126 TJ on 11.29.09 at 2:15 pm

Congratulations on coming up with the PERFECT illustration of Real Estate lunacy, next to Dubai.

I guess living in a Closet on an exit ramp is a way to divine happiness, but it reminds me of the Japanese madness that swept the Island nation in the 80’s.

The Lands that the Imperial Palace sits on, was valued at more than the ENTIRE STATE of California. People were buying BOXES under exit ramps for millions of yen.

Then one day, the band stopped.

Japan crashed. TWENTY years later and Real Estate is still in the dumper, as an AGING population rejects new homes, and so things stagnate.

Canada is facing a Boomer bulge, and what’s started is the avalanche of boomers all trying to sell to EACH OTHER, to fund their pipe dream of life in St. Pete’s and on the Golf Course.

The Greed, stupidity and absolute FRAUD that has run up Real Estate and then crashed it in other jurisdictions, is going to create havoc in Canada.

I have also noted, with some chagrin; Canadians are the smuggest Real estate investors in the World, now that the cretins that designed the Dubai debacle have been reduced to dumping their Mercedes at the Airport and getting out of the Emirates, before the strict debt laws throw them in the slammer.

OK.
You miss these warnings, you miss what some of the tuned in Blog dogs say here, you disregard honest scriveners like Mr. Turner – and you are going to be missing a whole lot more come about July 2010.

Hottest rumor of the weekend is from Robert Chapman who publishes the “International Forecaster”.
US FED knows their printing plan is hyper inflationary – in the offing will create a NEW DOLLAR by Fall 2010.
Three OLD for one NEW.

Have a swell Grey Cup Sunday.

#127 CalgaryRocks on 11.29.09 at 2:58 pm

Hey Gazoo,

Not every post can be about Nikki the bombacious Realtor from Calgary. But in case you wonder, YES!, all of our Realtors look like Nikki! LOL

Regarding the original post. The advantage is that I have first hand experience of both ‘socio-economic’ systems therefore I know which one is more likely to be real:

http://tinyurl.com/y8qxr3r

The part below stood out to me as it is a common way for dictatorships to enforce their power and is not usually found in free societies.

For a recent comparison, look at Iran and their secret police, of which, we’ve had a vivid demonstration last summer.

http://en.wikipedia.org/wiki/Basij

Certainly denunciation is not something a democratic society would be proud of no??

Then there are the `neighbors` and the `community groups` ever watchful that no one raises his or her head above the ramparts, or breaks ranks, ceases to conform or displays any unnecessary signs of individuality.

Always ready to pick up the telephone and be the `good citizen, `informing on the neighbor who dares to contravene even the most minor of the countless rules and regulations which press down ever more heavily upon the Danish people.

#128 Dark Wettler on 11.29.09 at 3:27 pm

You’d better hope emergency rates do not stay until 2015, or you will be living through a deflationary economic nightmare. — Garth

Could you please expand on this Garth? It certainly was not high interest rates and tough credit policy that created the housing bubble and illusion of wealth this decade.

#129 CalgaryRocks on 11.29.09 at 3:44 pm

Danemark: A Case Study in Social Democracy

http://www.freerepublic.com/focus/f-news/950515/posts

Sorry Gazoo, another article not about Nikki the realtor.

#130 eddy on 11.29.09 at 3:51 pm

Stephen Harper is not interested in chickenshit problems like real estate bubbles. He’s too busy pamphleteering about 2000 year old land claims.
http://www.cbc.ca/montreal/pdf/conservative-letter111909.pdf

#131 Gord In Vancouver on 11.29.09 at 4:18 pm

Normally, I don’t pay much attention to long posts but yours was worth the time. I agree that the government should not interfere with the housing market but it’s easy to see why they did:

1. Construction Jobs:
High or increasing home prices encourage developers to restart or create construction projects which generate jobs that pay much more than those in the service industry.

2. Retiring Baby Boomers:
Many baby boomers, Canada’s largest demographic group/voters, now want to unload their homes at a decent price as they’re holding empty nests.

3. Property Tax Revenue:
High real estate prices ensure that property tax revenue doesn’t decline significantly at a time when tax income from other sources is disappearing.

#132 Internal Exile on 11.29.09 at 4:55 pm

I almost did a spit-take of my morning coffee reading this one.

http://www.theprovince.com/business/Condo+lineups+return/2282391/story.html

Bullet points to remember:
“The buzz is back”!
“Vancouver is back in boom times”!
“The real estate strength in Vancouver is unlike anywhere in the world!”

I am speechless.

The best part is the unintentionally ironic name: “The Mark”!

In all fairness, though, while River City has rats and pcbs, Toronto can’t really compete with a thriving hard drug scene:

http://www.theprovince.com/health/City+hard+drug+trade+thriving/2263314/story.html

Abandoned Crack shacks:

http://www.theprovince.com/news/Home+forfeited/2282387/story.html

…and gun blazing gang wars:

http://www.theprovince.com/news/Warring+gangsters+appear+court+drugs+charges/2282382/story.html

It really is different here!

#133 Nostradamus Le Mad Vlad on 11.29.09 at 5:03 pm

#96 Cory on 11.28.09 at 7:44 pm — “Now the US gov’t is planning cash for appliances to stimulate this part of the economy…..big mistake . . .”

Jump starting a corpse? Anyone remember GE or Dubai?

I didn’t know, but the first sentence reveals that Dubai is more broke than Iceland. How broke does one have to be before the writing is on the wall?

#128 CalgaryRocks — “. . . ready to pick up the telephone and be the `good citizen, `informing on the neighbor who dares to contravene even the most minor of the countless rules and regulations . . .”

Isn’t this what Nazis, totalitarian regimes and the like encourage their citizens to do — spy on one another?

Good post.
——
In tune with the documentary on CBC — Pilots
——
Joke Of The Day
——
Proof positive that tony is a true phoney!
——
Don’t panic! CMHC will bail Dubai out!
——
Headline says it all — Brouhaha

#134 Jake on 11.29.09 at 5:08 pm

#124 SWM,
Exactly man. “The Truth” must not be a home owner because he does not seem to know what he is talking about. Everyone who thinks you only throw away money when you rent is clearly confused. There are a lot of costs to home ownership that the mortgage calculator does not factor in. There are advantages to owning your own property but, for first time buyers, those advantages just do not justify today’s prices.

#135 wondering on 11.29.09 at 5:27 pm

CalgaryRocks – Very difficult to take any article seriously when the author gets his knickers tied into knots because women aren’t getting married in high numbers. (No mention of whether men are, just whether the ladies are. For all the comments we read here and thereabouts about how the evil wimmenz force men to spend their hard earned cash on houses and shoes – only to divorce them and take the kids and all the cash – you’d think folks would be happy that there are fewer marriages. Can you guys please make up your minds, I’m getting whiplash.)

#136 freewaytoserfdom on 11.29.09 at 5:44 pm

This one’s got it all:

http://bit.ly/8Usreh

-Camping out over night for 900k Yaletown shoeboxes
-Reserving the upper half of the tower for “international investors” expected to appear during the Olympics
-bankrupt municipality praying for an indefinite RE bull market when they try to unload the athlete’s village

[shakes head]

#137 NKVD Black Raven on 11.29.09 at 5:58 pm

That River City complex is going to have to watch out for accelerated corrosion from road salt spray. Local history lesson: Back in the old, old days when the Don was clean it was a swampy haven for mosquitoes.

#138 JoeCalgary on 11.29.09 at 9:20 pm

#136, wondering,

One of the best posts on this blog ever! Its need to be said is long overdue. :)

#139 Dave on 11.30.09 at 12:26 am

#110 Dave

Excellent post

————————

thank you sir

#140 Dave on 11.30.09 at 12:47 am

You’d better hope emergency rates do not stay until 2015, or you will be living through a deflationary economic nightmare. — Garth

Could you please expand on this Garth? It certainly was not high interest rates and tough credit policy that created the housing bubble and illusion of wealth this decade.
—————————————

i think it’s impossible for rates to stay this low regardless of the economic environment. Regardless, high rates or low rates, the consumer is maxed out. Even though people are purchasing with 5% down, its not like these people have buckets of cash. They’re living on a budget. I know this because they’re my colleagues and I see their spending patterns and know they’re living on very tight budgets.

Rates and currencies move together. Garth can explain this better. You have to figure, if we have extremely low interest rates, well, the value of our currency will be extremely low. If our currency is extremely low, you better hope interest rates in places like China, Singapore, Japan or anywhere else we might import from are low as well or we’ll be purchasing goods from them for much higher prices.

So lets say rates stay low in Canada because our government wants to continue running our economy, what happens to the over-leveraged consumer then? I’ll tell you, they’re still doomed! Virtually everything we buy is produced in another country. We’d be paying a premium for these goods from countries with higher rates/ stronger currencies. How would this effect consumer expenses in Canada considering the massive debt load that exists amongst the average citizen?

You see, there’s no win here. Raise rates, people stop “buying” real estate. The market drops along with demand. Panic sets in, real estate is yesterdays news, people want out, and the herd loses. Keep rates low, well, most of the goods we purchase are from other countries. Surely, we can’t depend on emerging markets to be non-productive and consumption based just because we are. We will be paying higher prices for goods from them. Again, this hits people’s pocketbooks.

Those with tight budgets will be introduced for experiences they never planned for.

Oh yeah, umm, how about taxation?

#141 Rusty1 on 11.30.09 at 11:22 am

re: #141;

Dave; it’s a game of ‘beggar thy neighbour’ by all governments. If we raise our interest rates faster than other countries, then our dollar rises, causes our goods to be less competitive than our neighbours.

According to Mish Shedlock, governments are trying to reinflate the bubble by keeping interest rates low. It’s a race to the bottom. Yeehaw!

#142 Dave on 11.30.09 at 12:15 pm

Dave; it’s a game of ‘beggar thy neighbour’ by all governments. If we raise our interest rates faster than other countries, then our dollar rises, causes our goods to be less competitive than our neighbours.

According to Mish Shedlock, governments are trying to reinflate the bubble by keeping interest rates low. It’s a race to the bottom. Yeehaw!
——————————————-

Understood. This is why I mentioned emerging markets. There’s incentive to keep rates low when you don’t have anything going on. Some countries have been reasonably fiscally responsible and can bail out of that game sooner than we can. A stronger dollar makes our exports less attractive, but a weaker dollar makes our imports more expensive.

#143 Mr. D - Ottawa on 11.30.09 at 2:27 pm

Reply to #119
“Garth,
Help! Can the Bank of Canada really hold interest rates at 0.25% till 2015?”

The article in the Financial Post and Reuters both stated rates could stay at 0.25% until 2010. By 2010-11 the bank rate could rise to 2%. This would mean the prime rate would rise to 4%. These rates are still very low, but no where did I see the 0.25% rate lasting beyond 2010.

Personally, I don’t see how rates can remain that low for a very long time due to the amount of debt that will need financing and refinancing around the globe. Higher rates will be needed to attract sufficient capital.

#144 Soju on 11.30.09 at 11:59 pm

Why did this fool sell his place?

#145 Tony on 12.08.09 at 8:31 pm

Sounds to me Jamie like by the time you have 25 percent to put down in say 10 years time the place you sold in May will be selling for triple what you sold it for. Alberta is seriously undervalued compared to the rest of Canada. You sold when you should’ve been buying streets full of townhouses and apartment buildings… the two things that fell the most in price. When something falls 50 percent in price while the rest of the country sees real estate appreciate 10 percent per year that’s an all out buy signal not a sell signal. Also when the mortgage payments are less than half of what rent is a month that also is an outright buy signal. Bye-bye and in life you rarely get a second chance.