Prophetic shorts

No bust1
America, circa '05: But, of course, it's different here.

Will wonders never cease? CREA’s chief economist has joined the instant cabal of Establishment types now uttering those two words which strike terror into the hearts of 5/35ers everywhere: ‘housing bubble.’

klump But, good for him. Takes balls. Of course, not wanting to be the David Lereah of Canada is doubtless also a  motivation. After all, CREA’s Gregory Klump is not a bad egg. I remember in the Spring of 2008 when he and a bunch of lobbying realtors came to see me in my Parliament Hill office to pitch for higher RRSP homebuyer limits (they later got them). Klump hung back for a minute, then whipped out his copy of my book ‘Greater Fool’ and asked me to autograph it.

Can a man with impeccable literary tastes be all evil?

As you may recall, David Lereah held the same position with the US National Association of Realtors, where he steadfastly refused to acknowledge the house crash even as it destroyed millions of families. He also wrote a few books, the most famous being ‘Are you Missing the Real Estate Boom,’ published in 2005 when the market was imploding. (Copies of the hardcover are now available through for 2 cents.) A later version of the prophetic bestseller was titled, ‘Why the Real Estate Boom will not Bust.’

Anyway, Greg buddy, welcome. Here, have a hug. Beer?

OK, meanwhile in Milton:

I’ve been enjoying your blog and educating myself on financial matters for some time now. Given how much money CMHC is essentially backing up I am greatly worried as to what will happen when this current housing  bubble bursts.

As far as I know: CMHC has its debt ceiling raised to 600 Billion. CMHC is a federal entity. Our federal govt and CMHC have been issuing bonds on the market to support this. Canadian homeowners are on the hook for the money that is loaned to them for a mortgage. Canadian tax payers support the federal gov’t and CMHC through the tax base.

What could/will happen when such a huge debt becomes unmanageable? Will CMHC start suing people in order to collect on mortgage money that is owed when people go into default? Never mind the paper loss of so much money when these “houses” plummet in price.

Will CMHC have to step in and give people some sort of bridge mortgage rate to keep people in their homes?   (never mind the fact that these people shouldn’t be owning homes in the first place given the 0/40 and 5/35 stupidity taking place)

What will the repercussions be for the federal tax base, the value of our federal bonds, our credit rating and our CAD dollar value?

In closing I know that this is speculation on your part however I would enjoy hearing your comments and then thinking things through for myself.

Secondly I would greatly appreciate being pointed in the right direction as to how I can “short” the Canadian housing bubble when it bursts. Anyone that I have tried on this subject is too busy trying to sell me their own products rather than giving me the financial service I want.

Hunkered Down in Milton

Hey Hunkered: Without a doubt, Canada Mortgage and Housing Corp. Has been playing a giant role in carrying out the feds’ policy of pushing wind into the housing bubble. Yes, it has recently seen its lending limit raised dramatically. Yes it securitizes high-ratio and high-risk mortgages (the 5/35s and 0/40s especially) and then sells those repackaged assets to investors (does any of this sound familiar?). Yes, taxpayers are totally on the hook as CMHC takes the risk away from the banks and lays it on us.

Also germane is the fact that by shouldering this burden, the government body allows high-risk borrowers at the chartered banks and other lenders to get the same rock-bottom interest rates that people who actually have money are offered. Otherwise, of course, this would never happen – since in any housing correction of more than 5%, people without equity and at the end of their financial leashes are the first to fold. Clearly one way the market protects everyone is to charge a risk premium on money lent to those without assets. But, thanks to CMHC, no more.

What might happen if we had a US-style housing crash, Hunky? Probably a US-style solution – shovel more money into the market, prop up CMHC, backstop the losses and protect the banks’ mortgage portfolios. But bailing out individual homeowners? Hardly. Unlike America, this is still a capitalist democracy run by meateaters from Alberta.

As for shorting the housing market, well, I have already made some shocking suggestions for people with houses to sell. And there are a bunch more (equally brutal) in my forthcoming book.

But let me mention a couple of stock plays some people have been contemplating. For example, Canada’s largest realtor – Royal LePage, which trades as Brookfield Real Estate Services Fund on the TSX (BRE.UN). The shares have recently been close to 12 bucks, at the upper end of its 52-week trading range, and currently the company has a P/E of almost 30 – or about three times that of the banks. Draw your own conclusions as to what might happen there if a 74% annual housing sales surge became, say, zero.

And investors might also want to contemplate other companies directly tied to the mood of home owners, like The Home Depot, or Canada’s main boy-toy retailer, Rona (symbol RON). This outfit is also flying high with shares above $15, also close to the 52-week high, of $16.25. But this company has a P/E of just 13 (about the same as the Royal Bank) and with a beta that tells us it’s got a history of being a defensive stock with low volatility.

Of course, Rona actually sells stuff. LePage makes it up.

Hey, Greg. Stop giggling. Beer’s coming out your nose, man.

Garth's latest podcast is here.


#1 Aizlynne on 12.15.09 at 10:10 pm

Now now Garth, don’t forget it’s the very capitalist meat eaters that allow you and many of your brethren to have a 1/2 decent existence thanks to our more than generous transfer payments.

Now while I enjoy some prime A beef, you can chew on some of that new HST fat coming your way!

#2 Real Estate Deal or No Deal on 12.15.09 at 10:25 pm

Looking forward to the new book Garth. Too bad it isn’t ready for the holidays, I will have some time for reading.

#3 The Great Gazoo on 12.15.09 at 10:48 pm

Well Garth –

It looks like Ontario found a solution to solve its debt problem: sell its crown corporations (the only ones that make money… LCBO, casinos). To boot they are getting advise from Goldman Sachs on how to privatize them.

Not to mention mayoral candidates in Toronto saying as their campaign message they would sell off Toronto Hydro do recoup debt.

Naomi Klein “Shock Doctrine” is prophetic and a must read to understand this.

Renting out that bunker?

#4 Sluggo on 12.15.09 at 10:52 pm

CMHC financials

Note – the yoy cash component, the Montreal Accord on pages 112-113, definitions for fair market value and the 182 billion in interest rate swaps.

2009 we have 126 billion in MBS

and we’re up to 631 billion total with the majority of the pools being issued in the 975 pool which is a 5 year fixed rate.

We’re screwed. Won’t take much to break the vector at this point.

#5 Sluggo on 12.15.09 at 10:54 pm

Total MBS

#6 curious to know on 12.15.09 at 11:14 pm

To Hunkered down in Milton:

For shorting the housing market, Robert Shiller of the Shiller Housing Index (US) has recently launched a product to short the housing market in Canada (as well as in the US).

It would trade like an option. You may want to google it and get ready.

#7 blobby on 12.15.09 at 11:30 pm

But surely that’d mean that the government will just bail everyone out, revert back to “emergency” interest rates.. and start it all happening again?

#8 Schroedinger's Bull on 12.15.09 at 11:54 pm

Are you suggesting that Central Canadian Elitism is due to a lack of adequate dietary protein?

#9 nonplused on 12.16.09 at 12:17 am

Let me understand this:

The banks lend money to home buyers and lay all the risk off on CMHC. CMHC repackages the mortgages and sells them to investors, but insures them. The insurance aspect is backed by the government. The government gets their money from the taxpayers, eventually. Even if they borrow the tax payers is responsible for the debt. The taxpayers are mostly home owners.

Doesn’t this make the insurance kind of circular? The home buyer’s taxes ultimately insure the home buyer’s mortgage? Seems like a Ponzi scheme to me.

I the US it’s even worse because the home buyer gets to deduct mortgage payments, so the insurance isn’t even backed by the taxes since there are none, or at least they are reduced. My bet is that is the next step the government takes in trying to keep the bubble alive until after the next election. More home buyer/owner deductions.

But either way, this cannot end well. It’s a perpetual motion machine where a home buyer’s future tax payments are pledged as insurance against his present debt servicing costs. It is illogical to assume this system can be sustained to infinity.

Since the government will not raise rates or tighten lending standards until we have the loonie at $0.80 USD, unemployment trending to 5%, and a majority government, there can only be inflation in the near term (living expense inflation, not asset inflation, and CPI is only useful as to which way it’s trending, not for absolute values). Unless we have a major debt service crises in which case we will have Pandora’s box opened upon us.

#10 $fromA$ia ( o Y o ) on 12.16.09 at 12:29 am

(never mind the fact that these people shouldn’t be owning homes in the first place given the 0/40 and 5/35 stupidity taking place)-Garth

Thats what I am talking about, let em’ have it Garth!


#11 Garth Vader on 12.16.09 at 12:31 am

Question… (please ignore closing costs, CMHC fees, etc)

Suppose Mr X buys a $100 home, with CMHC backing, on 10% ($10) down. Thus, he takes out a $90 mortgage.
Mr X pays off $5 of the mortgage before he loses his job, and the bank forecloses on him. So he has $5 of $90 paid off, owing $85.
Does CMHC payout the remaining $85 to the bank and take possesion of the home.
Or does the bank take possesion of the home, sell it for, say $70, and collect the remaining $85-$70 = $15 from CMHC?

Or, none of the above?


#12 vreaa on 12.16.09 at 12:46 am

Nice idea, HOWEVER –
BRE.UN trades ‘by appointment only’ (= very, very low volume of ave 7,000 shares per day).
I couldn’t find info about current short interest, or the number of days it would take the shorts to cover at these low volumes, but it is prudent (there’s that word again!) not to short a stock that trades at such low volume. Otherwise, one could find oneself in a bizarre end of bubble short-squeeze blow-off as BRE.UN doubles in price in a day, contrary to all fundamental valuation. The cost to ones psyche would perhaps eclipse the cost to one’s portfolio.

#13 Garth Vader on 12.16.09 at 12:52 am

We are at the point of the froth starting to boil over. Even the ‘Everything is OK’ gang is starting to sound bearish on the rediculous RE valuations in much of Canada. And when THAT gang starts talking about a turn of fates, it’s usually to help cushion the blow of what is right around the corner. Of course, the BoC’s recent comments are likely going to cause one last stampede through the gates by the GREATEST fools, as they make the jump on the ‘smoking’ low rates, before they are gone for good.

I’ll call for one final push upwards, through the Olympics, before it all starts crashing down sometime between Spring and Fall 2010.

All this talk about ‘pent up demand’ pushing the RE market up is nonsense. It is ‘pent up naivety’ that is the real culprit.

#14 K Smith on 12.16.09 at 1:03 am

Thank you for your ongoing updates.
I hope everyone is learning from your insight and that they are taking appropriate steps for their own situation whatever that may be.
I hope people make some time over the next 3 weeks to enjoy all that we have in Canada ( family / health / extremely high quality of life / food & relative peace compared to many places in the world ).
I know that many things are going to change in our world – some we can control and several we cannot.
Canada will be a great place to be over the next several years even if my real estate does drop. Would not trade what we have for any other place on earth.

#15 Watched Bubble Never Pops on 12.16.09 at 1:20 am

“David Lereah…also wrote a few books, the most famous being ‘Are you Missing the Real Estate Boom,’ published in 2005 when the market was imploding.”

Don’t you mean INFAMOUS?

#16 LB on 12.16.09 at 1:30 am

Between CMHC insuring borrowers (or rather, the banks) and CDIC insuring depositors, how can the Federal government possibly cover both when the bubble inevitably bursts? Where should our cash be?

#17 nonplused on 12.16.09 at 1:30 am

More CMHC bashing:

Folks this is a big problem. If (which is the same as when, since all ifs are condition dependant and all conditions are eventually realized) the CMHC Ponzi scheme breaks down, the government finances are screwed and so is the Canadian dollar.

#18 Mike (Authentic) on 12.16.09 at 5:10 am

“CREA’s chief economist has joined the instant cabal of Establishment types now uttering those two words which strike terror into the hearts of 5/35ers everywhere: ‘housing bubble.’”

Good for him, I applaude his words and actions. It is about time the CREA actaully starts looking out for their clients first rather than their employee’s commish$ first.

2010 will be very interesting, you have the Olympics ended in Van, bursting housing bubble, Canadian mortgage and prime rates going up, new taxes, cut backs, higher household debts, high gov’t debts, high job losses… makes you not want to take the medicine to cure the greed and debt sickness.

Interesting days.


#19 ca on 12.16.09 at 6:54 am

In the overview of your new book, you say that it contains investment recommendations specifically for Canadians. To what extent will this investment advice be of benefit to those in the U.S.?

Thank you

#20 David Bakody on 12.16.09 at 6:59 am

Banking on housing vs good Banking Practices.

By Talbot Boggs,, Updated: December 15, 2009 Canadians living on a financial precipice

Once again we have mentioned it many many times.

All this of course will throw fuel on the RE Balloon Bauble so it says on the ground for a long, long time. But wait Alberta has multi billions in reserve funds and the tons more in the ground so we can all relax. They will cut their boy cheque like he did for his pal Dubya only bigger and all will be fine.

WRT existing housing, I am not sure if Mr. Harper pulls his second consecutive early new year Hank Snow and killing all the Bills in the Senate it will take down those housing/property fixer upper rebates?

#21 Genghis on 12.16.09 at 7:15 am

According to this Canada Newswire press release,
Office of the Superintendent of Financial Institutions (OSFI) will begin taking action to begin unwinding the CMHC securitization, starting Dec 31, 2009. The result if this goes ahead: a shortage of mortgage funds and possible higher interest rates.

#22 Nostradamus jr. on 12.16.09 at 7:36 am

“Housing Bubble” should read.

…”Toronto, Ontario Housing Bubble”…

You throw Hongcouver into the pot, just to stir up the “stew”.

Nostradamus jr.

#23 JO on 12.16.09 at 8:08 am

CMHC and CDIC are the great debt bubble/RE bubble enablers. By offering artifically low priced mortgages with easy terms, the speculators and weak hands get into the housing market and drive up prices for all of us – including those prudent enough to avoid the ponzi scheme. The rate of debt growth has been over twice the rate of income growth for the last few years – and completely out of whack in the last year. By various measures (Price / disposable income, or price/gross household income / price/rent) housing is about 30-40 % overvalued from its long term trend line.

When the bust comes, many poliiticans will scream for help for these “homeowners”. We must say no to this. These homeBUYERS cannot be bailed out of their stupidity. The government can jawbone or otherwise attempt to influence rates – but at the end of the day, the bond market owns the house. And that my friends, will bring about the reckoning. These 0/5/10 % down BUYERS are playing roulette with their lives. Come renewal time, they will know if they won or lost. For many, a move in the 5 yr rate to its long term average of 7.5/8 % will increase monthly payments hugely and put them out.

Markets never give the majority what it expects, but always what it deserves.

As for the CAD $, who knows ? I think it will at some point touch the low 60’s again. Measure the CAD $ against gold bullion to determine what is happening to your purchasing power. Our real economy will, at best, be weak – with “growth” barely above 0 and occasional flirting with recession, and maybe even a quarter here and there showing 2-3 % growth, but nothing sustainable. Structurally high unemployment too.


#24 ally ally oxycontin free on 12.16.09 at 8:23 am

Too big to fail, or an “IN WITH GOVERNMENT?

U.S. gave up billions in tax money in deal for Citigroup’s bailout repayment

The psychological secret of post-partum … as it relates to Income Trusts.

Bank the embers, re-examine periodically and wait for a defined opportunity for retaliation.

#25 Gord In Vancouver on 12.16.09 at 9:05 am

You’ve Got To love This Article

From Great Depression to ‘bubble of a bubble’

One senior real estate industry veteran, who asked not to be identified, wonders whether economists are now calling for a crash to grab themselves headlines. “They are all piling on the bubble story now,” he said.

#26 Josh on 12.16.09 at 9:19 am

Want to beat down the deficits? Levy a 50% import duty on all products arriving from China. Deficits would be done in lightning speed!
Further, any attempts by chinese money to buy our resources cos. should be met with a flat no by the fed dept that has responsibility for such matters.

#27 kw on 12.16.09 at 9:37 am

More support for Garths views

#28 Rick on 12.16.09 at 9:41 am

Canadian housing mentioned in the Market Ticker blog.

“Let me be clear, strictly on the numbers:
Canada is in for a housing bust WORSE THAN OURS”

#29 Phil on 12.16.09 at 9:43 am

#23 JO

I agree ! BINGO !

#30 How to do it on 12.16.09 at 10:24 am

Garth – In reference to Brookfield (BRE.UN)
How would you invest in this equity to participate in the bubble burst?

#31 pezzazz on 12.16.09 at 10:26 am

Is there any way to go long foreclosure lawyers?

I love to cheer for pain in the Canadian homeowner (so I can become one) but what I am concerned about on a broader view is the ramifications of this impending bust. Since there is so much money, albeit paper money, buried in housing what happens to the economy when that gets vapourized. I would love to see you discuss the potential (inevitable) double dip that is forthcoming and how bad you think it could get.

On another note there seems to be a ton of Mark Carney bashing here. I would simply like to say that Mark is not a dumb guy who is going to get taken by surprise. He knows whats going on and is simply caught between several unpalatable options. He’s ruthless and I think he has that Volckeresque edge to him that will enable him to make unsavory decisions when it comes to that time.

#32 capitalofalberta on 12.16.09 at 10:51 am

for some one ready to get into the market—-have a growing family and have a good chunk to put down—when is a good time to get in. Is now the time to get in at lower rate or if/when they rise in 2010 and renwers will be hit hard — will you get more house for better price –but with our own bigger morgage to look after ??

I am finding that inventory is moving here in ALBERTA.

#33 Ng on 12.16.09 at 10:52 am

I see Canada turning socialist when the RE crashes. The chorus of ‘save the poor houseowners’, and ‘it wasn’t their fault’ will rise and govt will try its best to socialize the losses.

I am more worried about the savers who have cash in the bank than people who have imprudently bought expensive houses.

Govt/banks cannot go about confiscating/foreclosing thousands of houses if there are no buyers. They will soon find out it is cheaper to keep people in their houses than foreclosing the house.
Savers will have opportunity to buy a house much cheaper….(provided Govt does not decide to attach their savings account or charge a hefty ‘wealth tax’ on it)

#34 Goldhairybear on 12.16.09 at 11:02 am

Oh, look Garth.

Golds going back up again. Back into bubble territory.

You better go check that line at BNS.

Ahhh, the life of a bubble watcher.

#35 wise on 12.16.09 at 11:07 am

I am glad that bankruptcy decrease in canada in October data, but hte negative impact is the housing will keep on bubble since people confident is increase.

#36 Gerry on 12.16.09 at 11:28 am

Hey Josh (#26), the real problem with a big import duty is, as Garth and our illustrious finance minister both pointed out, we don’t make things we really need here anymore. Like shoes, pants, underwear, red Olympic mittens, the list goes on. I guess we could tape Blackberries to our feet…not sure how they would work as underpants, though.

Funny how Garth saw the situation as a bad thing and Jimmy F thought it was great…go figure.

#37 Ret on 12.16.09 at 11:31 am

#16 Where should our cash be when it blows apart?

Probably in at least 2 or 3 different bricks and mortar type banks in case one goes under, you will have spread the risk. Also you will need a secret stash in the Sealy Bank in case you are locked out of all the banks while the BoC “intervenes.” Those plastic debit and credit cards in your wallet may be useless for some time until the smoke has cleared.

#38 BDG YYC - on 12.16.09 at 11:38 am

#26 Josh …

And … a Darwin Award Nomination for you.

Good you squeezed this one in before year end – it could stand up as best of the year.

#39 POL-CAN on 12.16.09 at 11:46 am

Not sure if anyone posted this yet.

10 minutes with Karl Denninger on BNN and yes he talk about the Canadian housing bubble:


#40 Herb on 12.16.09 at 12:10 pm


where’ve you been? The actual and potential losses have been well socialized already, thank you. Only the profits, renumeration, bonuses and dividends remain in private hands.

#41 omg on 12.16.09 at 12:21 pm

Forecasters Herd Mentality

We are watching how corporate and government forecasters revise their expectations – it is a herd mentality. Now that a couple of mainstream economists have said the “B” word more mainstream economists feel comfortable in jumping on board and forecasting a bubble.

No mainstream economist want to be too far out in forecasting a major change to the generally accepted economic premise – like Canada has no bubble – because you come across as a bit alarmist.

By the time this is all over in 10 years the generally accepted history will be that RE in Canada was clearly out of control and everyone knew it.

#42 Tim on 12.16.09 at 12:25 pm

Watched the interview.

Who funds the BNN? They seemed to more or less lie about the income/cost issue, saying that the average price is only 2X average household income.

Now, I’m no Mathematics Professor, but I’ll bet my 11 year old niece would figure 54000 (2005 median household income, or when things were going REALLY good) x2 = 108000.

So, I guess that means that the average house in Canada is 108000. Obviously someone is lying, when they say that the average house price is… what… 320 big ones. There MUST be a newspaper that I’ve been missing that lists all the cheaper houses… that’s probably it.

Now, I just have to dig that up.

#43 Popeye on 12.16.09 at 1:08 pm

This is a quiz for “Hunkered down in Milton”:

You have rented for 10 years, finally have $25,000 cash and a decent job so the banks will finally look at you.

Do you:
A) continue to rent, and by rent I mean spending $1300/mo for a split level terrace home, no entranceway, no garage, parking spot on the other side of the building, plus pay all bills;

B) continue to rent, spending $1400/mo on a falling apart 1960’s bungalow, nice neighbourhood, overgrown nasty backyard, $hitty old appliances, still pay all the bills

C) ‘buy’ a house with the so called 5/35 plan, the one that you despise, but live in a good neighbourhood, better location than choices A or B, mortgage payments of $1050/mo and tax $300/mo?

You see, the 5/35 ain’t all that bad, it actually serves a purpose allowing people to have CHOICE, and to avoid the greedy a$$ landlords asking astronomical rents.

Of course I’m a 5/35’er, and given my position (rental choices, security of employment, stage of life) you would likely be a 5/35’er too.

Thank you GoC and CMHC, you have freed me from the misery of rent and having to bow-down to slumlords. I’d rather bow-down to a banker any day.

#44 PeckedToDeathByDucks on 12.16.09 at 1:14 pm

Daffy Duck News
News so ridiculous that it can’t possibly be true

– Western World Governments have agreed to unify their currencies to once and for all solve their deficit problems. In a brilliant, bold move they have decided to use money from a popular board game as the medium of exchange. As every houshold has at least one game, it’s considered an instantaneous wealth move for their populace. As for counterfeiting the popular game, the boyz have taken control, so feggit about it.

– Time Magazine has nominated Mr. Bernanke as “Man of the Year” for his artful re-distribution of taxpayer funds to create record profits for supposedly insolvent banks. What a magic act that was.

– The term of American unemployment benefits has been extended again. Eligible “workers” can now collect up to 999 weeks.

– The American debt ceiling was quietly extended by another 300 Billion. This will get them into the New Year.
Thereafter, if will be raised in increments of 5 trillion a month to be funneled directly to foreign debt holders as hush money. The “tr” is trillion will be smudged to look like “bi”llion which the MSM will confuse with million. Denninger will fume, but whose listening?

– Prime Minister Harper will perogue Parliament until the Queen’s visit because all they seem to talk about is foreign stuff. That one special day should be long enough to handle any Canadian business after which they will perogue until final assimilation.

– Canadian Real Estate Prices are predicted to triple and Garth will be quoted as saying “I told you so.”

#45 JeffinPickering on 12.16.09 at 1:43 pm

What course of action will the CMHC/banks take in 4 years when the 5/35 (who’s kidding who, many are 0/35) crowd go to renew with negative equity?

Will they decline to renew on the basis of negative equity?

Will they renew and say “what do we care? you owe us the original purchase price? tough s*@t on your equity loss!”

Will they decline to renew on the basis of “sorry, with the growth in interest rates, you no longer qualify because you can’t make payment due to your stagnated income. You could barely make payments at 2%, nevermind 6-8%?”

#46 Mike (Authentic) on 12.16.09 at 1:45 pm

#43 Popeye – “Rent and die”

That isn’t fair, there are lots of great landlords and rentals out there, many of which are well below what you would pay to own the house. We owned 2 homes too.

For example, our last rental was $2000 a month. House sold for $807,000. You do the math.

CMHC might “free” renters to become “owners” but you are still renting from the bank and paying CMHC a fee to do so. Plus pay electricity, gas, sewer, property taxes, mortgage bills, maintenance, renos, house insurance…


#47 Mike (Authentic) on 12.16.09 at 1:48 pm

#32 capitalofalberta “I am finding that inventory is moving here in ALBERTA.”

Take a look closer and you will see it’s actually piling up historically high in some communities. Take Scarboro, weathly, innercity, just 300 homes, usually 2 listings, now 10+ listings. Inventory has never been 500% higher.


#48 Nestor on 12.16.09 at 1:52 pm

You see, the 5/35 ain’t all that bad, it actually serves a purpose allowing people to have CHOICE, and to avoid the greedy a$$ landlords asking astronomical rents.

of course, a 5/35 commits you to paying a massive amount of interest over the term of your mortgage to your lender..

someone with a $300,000 mortgage at 4% amortized over 25 years, will pay $473,000 total ($173000 in interest)

same mortgage amortized over 35 years, will pay $555,000 total ($255,000 in interest)

this of course assumes interest rates will not rise over 4%…

#49 jess on 12.16.09 at 1:56 pm

to believe or not to believe

“Astroturf” campaigns

Artificially created grassroots coalitions are referred to in the industry as ‘astroturf’ (after a synthetic grass product). Astroturf is a “grassroots program that involves the instant manufacturing of public support for a point of view in which either uninformed activists are recruited or means of deception are used to recruit them.”(FN11) According to Consumer Reports magazine, those engaging in this sort of work can earn up to $500 “for every citizen they mobilize for a corporate client’s cause.”(FN12)
Citation: Sharon Beder, ‘Public Relations’ Role in Manufacturing Artificial Grass Roots Coalitions’, Public Relations Quarterly 43(2), Summer 98, pp. 21-3

Health care insurance companies have been caught with their hand in the cookie jar, sending virtual cash to gamers on Facebook. Known as ‘astroturfing,’ which means that it is a fake grass roots campaign by the insurance groups.”

#50 Mrs Loquacious on 12.16.09 at 2:06 pm

@#43 – Popeye

Options A and B, though perhaps not ideal, offers the flexibility of moving out and moving up at any point. If, God forbid, one should lose their decent job, one can simply give a month or two’s notice and move somewhere more affordable.

Option C keeps people on the hook even after they’ve lost their jobs or had their hours cut. In Canada, they cannot simply walk away. And that cushy little bit of nest egg that people work so hard to save? Also gone. Even if a 5/35’er tried to sell, they’d be looking at closing costs that would set them back many more dollars than they actually have.

We are renters by the very choice that you value. Our choices afford us savings in the bank and the peace of mind to know that, should we lose our jobs, we can simply downsize our lifestyles and move somewhere less costly. We do not worry about having our credit scores decimated and names blacklisted after defaulting on our 5/35 loans. We are not concerned about losing our savings to a down payment, or dealing with maintenance costs on a home and the closing costs of trying to sell a home that we haven’t even paid off a dollar of the principal on.

Freedom is in the eye of the beholder, I suppose, but we certainly find it liberating to know that our hard-earned savings are safe, our home is comfortable, and any maintenance costs on our dwelling can be paid for and handled by its owner. We like the assurance of knowing that all of our assets are not pooled into one piece of real estate, and we can move anywhere we want at a month’s notice. We enjoy the freedom of not having to worry about losing our job and ruining our credit.

You may thank the GoC and CMHC now, but who knows what you might say should you find yourself in the unlucky position of experiencing job insecurity in the next 2 years? At that point, options A and B will not look nearly so bad. Guaranteed.

#51 Tim TodlleHeimer on 12.16.09 at 2:27 pm

Carney warns
“Canadians have taken on more debt even during the recession, which is unusual”, Carney said.

Unusual? I get really mad when the BOC gov says this is unusual. I hate liars.

“The combination of sustained growth of household debt relative to income and a rising interest rate environment could increase the vulnerability of households to an adverse shock,”

Carney said there are already signs that Canadians are getting in over their heads.

The Canadian economy is particularly vulnerable to household defaults since consumers are expected to be the key driver of economic recovery

“Financial institutions should actively monitor risk stemming from households and not take comfort from mortgage insurance and past performance of household credit”

“As our simulations suggest, the overall credit profile of Canadian households could well shift if debt continues to grow at current rates.”

Obviously all liars, covering there butts

#52 PeckedToDeathByDucks on 12.16.09 at 2:32 pm

Ben and the rigged Casino – the ball falls on black again. The croupier announces that the ball will fall on black for an extended time. In fact, there will be no need to spin the wheel for the next 50 iterations… just assume black.
Interst rates will never go up because they just cannot shut off the paperprestidigitizer.

#53 pete on 12.16.09 at 2:35 pm

#43 Popeye

How about another option:

D) Rent a nice apartment in a lovely building in a great area with a fantastic landlord for $1100 and no utility bills, taxes, fees or maintenance costs. Meanwhile save for a good downpayment that means you don’t end up renting the home you “own” from the bank. That’s my choice and indeed my current life. I could buy and I choose not to while prices remain this high – low rates or no low rates.

As a 5/35-er don’t kid yourself. You don’t own your home and you may still not own it in your 60s. The way to find out who DOES own your home is to stop meeting your monthly payments – maybe because rates go up, maybe you lose your job, get divorced, who knows – but then you’ll very quickly find out who really does own your home.

Even if you do hold on to your job and your home, as someone else said by not using a good downpayment you will end up paying a huge amount over the actual purchase price of “your” home.

#54 I Got Gold on 12.16.09 at 2:41 pm

Don’t Bank on the Banks
Luc Vallée

The average leverage ratio of the Canadian banking system is higher than that of the largest US banks in all periods we reviewed. It serves to note that each of the top ten US banks received common equity injections by both shareholders and the US government, thereby improving their respective leverage ratios.


Don’t just dump a research doc here. Explain its relevance and your position. — Garth

#55 CM on 12.16.09 at 2:54 pm

“Take a look closer and you will see it’s actually piling up historically high in some communities. Take Scarboro, weathly, innercity, just 300 homes, usually 2 listings, now 10+ listings. Inventory has never been 500% higher.”

@Mike #47: That seems to be a pretty sample size you’re taking, one community in Calgary.

From what Mike’s (the other Mike) stats show, inventory remains pretty low:

Currently 2500 SFH for sale on MLS in Calgary.

Compare that to Dec 2008 when it was 3860.

I’m not suggesting your observation is false, but just wondering if you’ve seen this marked increase in listings in any other community?

#56 David Bakody on 12.16.09 at 2:55 pm

From CBC’s On line news ….

Carney: Don’t be seduced by low interest rates
Debt poses risk to economic recovery
Last Updated: Wednesday, December 16, 2009 | 2:19 PM ET

But he say he will keep rates low until at least June 2010

That statement is akin to saying “Do Not Drink and Drive” but we extending happy hour until midnight from the usual 5-6 pm.

Bottom line Harper & Co do not want to go to the polls prior to the Harper Sales Tax, combined with much higher interest rates couched in higher personal taxes (everyone) and social spending cuts.

Get it Greater Fools … y’all been told, well after Garth Turner told you not once but many times I might add.

Stand by the guns crew, a new housing war just might begin ….. who can put in the lowest bid and win!

#57 The power of inflation on 12.16.09 at 3:07 pm

Let the masses take on debt, and let the govenment continue to spend. We are fundamentally based on the power of inflation. The weight of our debts will erode once due time and inflation take it’s course.

The only way the government historically has known to get out of their troubles is to “Print mo Money” and they will continue to do so….

#58 T.O. Bubble Boy on 12.16.09 at 3:12 pm

@#43 Popeye:

You’re ignoring many many costs in your calculations:
1) House Insurance
2) Repairs
3) CMHC fees ($25k is less than 20% on a $300k-$400k home)
4) dollars you could have earned by investing that $25,000 elsewhere
5) dollars you would lose when the house you “bought” with the $25k goes down in value
6) Closing costs on the purchase
7) Future costs needed to sell the house — commissions, etc.

Basically, if you only have $25k and every house costs $300k-$400k, keep saving and wait for prices to drop.

#59 Finanzkrise on 12.16.09 at 3:19 pm

Carney is warning again about rising household debt:

Mark must be really worried about something that he is not telling us directly… Canadian bank risk exposure higher than we think? Realization that CMHC is no different (or perhaps worse on a per capita basis) than Fannie, Freddie and the FHA in the US?

Should we add BMO, CM, RY, TD and BNS to the short / put option list?

#60 Kash is King on 12.16.09 at 3:36 pm

timmy? Timmy??!!

#61 Popeye on 12.16.09 at 3:59 pm

#53 pete on 12.16.09 at 2:35 pm
Sorry, an apartment is not the greatest option, married and starting to have children. Besides, been there, done that, and once (in Hamilton) I even shared the elevator with an (ex)-convict that was still in his orange jump suit (fresh out of the slammer). It was also great when my car’s back window was smashed in in the underground parking, the criminals were after my textbooks (they thought it was a laptop). And I also don’t miss the 2am fire alarms in January, the early-morning noises, pigeon shit, nests and eggs all over the balcony, the bloody noses and dust from extremely dry electric heating, the furniture re-arranging every night at midnight by neighbours overhead, lugging groceries from car to elevator to apartment, the closet-sized kitchen, the lack of land to call my own etc.!!

I realize 5/35 largely means renting from the bank. Hence the use of quotation marks around ‘buy’ in post #43.

And all this talk about ‘renting gives me flexibility’, and ‘see what happens if you don’t make your payments’. I’m sure if you don’t make your payments as a renter you get kicked out on your arse. And at $1100/mo, if you had to move due to lack of finances, where exactly would you go? To me it would be shacking up with family until finances can get back in order. As a home ‘owner’, I can still sell, take my loss, and I have the luxury that I can shack up with family until the storm blows over and I can pay off any debts I might owe. Might actually be a great chance to revisit family and family values. No difference renting vs. owning here.

Renting might permit peace of mind to some, but owning does the same! I love my new backyard compost, look forward to starting a garden in the spring, enjoy sitting on my back deck in the sun sipping a beer etc., not worried about lining some landlord’s pockets.

And even though I could only muster an 8% downpayment, I am confident that I can make a significant dent in the mortgage over 5 years, especially by taking advantage of double-up payments.

All I’m trying to say is that this 5/35 label is being used in a derogatory manner, which I feel is likely inappropriate for many who have bought. Personally I know many couples that are 5/35, highly educated with good jobs, and did not get into a mortgage that they couldn’t handle (even with rates resetting at 6 to 8%). If these people ever cannot make their payments, well, then I guess unemployment will be at 50% and we’ll have larger things to worry about.

#62 My_View on 12.16.09 at 4:00 pm

Oh well, all this bubble talk is over for now. Unbelievable what 24 hours can


#63 Another Albertan on 12.16.09 at 4:09 pm


BNN = CTVglobemedia = CTV News = Globe and Mail

#64 surferbob on 12.16.09 at 4:15 pm

BC vacancy rates triple but rents still rising?

#65 kabloona on 12.16.09 at 4:16 pm

Nouriel Roubini on Gold:

“Beware the gold bubble. If you fear a global meltdown, stock up on commodities you can actually use.”

Actually, that sounds a bit like Garth’s advice. Squirrel jerky, anyone?


#66 My_View on 12.16.09 at 4:26 pm

This may answer a lot of questions the blog dogs have. Good piece done by CMT.

#67 Popeye on 12.16.09 at 4:32 pm

“inside the CMHC”, Mortgagetrends calls up the CMHC and asks the tough questions.

#68 confused and A little crazed on 12.16.09 at 4:44 pm

43 # popeye,

With a little research and a little luck… you can find a good place to rent
my placecosat $600/ month but it wouyld cost $280 k to buy with adding all the additional cost of maintenace fee $220 plus utilities

280k/ 600=
467 monthes of rent/ 12 monthes in a year= approx 39 years of rent

given the dividends of large corps ie EXXOn, general mills etc…2-4 %
280 k x 3 %= $8400/ yr exceeds rent ..
difficult but possible to at least cover most of rent with modest investments and still max out on RRSP an TFSp


#69 Cory on 12.16.09 at 4:44 pm

I was just looking at some listings in North Vancouver. I came across one listing at $749,900. It was advertised as a starter home.

Last year we moved up into a 670K home. It just about broke the bank and it’s our 3rd house….

#70 T.O. Bubble Boy on 12.16.09 at 4:50 pm

Not sure if anyone posted this link yet… an interview with the CMHC by canadian mortgage trends:

All I have to say is: this interview made me even more sure that the bubble will burst in 2010 (assuming no more intervention to prop this sucker up). All of the answers from CMHC were ridiculously scripted, and didn’t seem to genuinely reflect the reality of this whole situation.

You’d think that SOMEONE at CMHC would admit that having their insurance program grow 5x-10x in just a few years is troubling.

#71 Tim TodlleHeimer on 12.16.09 at 4:52 pm


What exactly does this mean?

“Financial institutions should actively monitor risk stemming from households and not take comfort from mortgage insurance and past performance of household credit,”

Can banks fail? Isnt the rist now with CMHC(taxpayer)?

why should the banks “not take comfort” then?

I also cant reconcile these two statements. Made in the same day (today) by Mark Carney.

“It is the responsibility of households now to ensure that in the future, when the recovery takes hold and extraordinary measures are unwound, they can still service their debts.”

“Growth in our economy is going to pick up. That growth is going to be principally the result of strength domestically: consumption, housing, government,” he said.

#72 Christopher on 12.16.09 at 5:06 pm

we are all for this circulation of capital although it turns out to be circulation of I O U’s so just keep it going.

#73 Soldin08 on 12.16.09 at 5:06 pm

#59 Finanzkrise – People like Mark Carney do not get really worried, period. Come on..

His statements are to formally add some uncertainty to an already FOR CERTAIN 2010 Canadian real estate spring blast and as a parochial move to signify that prudence is still in fashion at the BoC, i.e. “I get it, lemme keep my job”.

That said, TIME WARNER’s person of the year is staying pat with rates well into next year, preferring perhaps to deal with the obfuscation/corruption of the Fed balance sheet. But seriously, quantitative easing is turning into a long-term affair, and as in Japan, and it won’t be reversed overnight. And since BoJ-style Fed rates will continue to control our bond market, so is Carney dancing a lone jig (with no rational worry of sustained real inflation on the horizon, give or take a commodity-based speculative mania here or there).

Seriously, if you bought this year, no worries–Denninger can rant all he wants… like Garth, Rosenburg etc… “Contrarians” are inadvertently blowing the bubble up by being ever more marginally and hysterically bearish. Our MSM can just point to the crazy guy in left field who thinks you’re all crazy, and is getting more exposure for being crazy. Real estate prices must be uncrazy therefore.

Check back in 2011… maybe some fireworks. And another book!

#74 D in Calg on 12.16.09 at 5:15 pm

Our landlord has decided to sell — and is listing it about $50-60k overpriced (according to another realtor) for $449k. I offered her $350k for it, but she told me she owes more than that on it (used HELOC to buy another place), so she would move back in before selling it at that price.

Been on the market for a month — three showings, one open house where three ppl showed up.

Could be the cold weather, though. It’s too damn cold in this city. But really? Who lists/buys a house in December?

We’ll see what the spring brings.

#75 Josh on 12.16.09 at 5:55 pm

#36 Gerry
We would soon start to make thngs we need if the chinese didn’t have the unfair advantages they now enjoy.
Just think…more jobs, more tax payers to help pay the debt and buy the RE!

#76 Coho on 12.16.09 at 5:56 pm

From Mish’s site

Bernanke Trots Out The Boy Scout Motto

Reading through the Fed’s December FOMC Statement the words that most stand out are “anticipation”, “appears”, and “expect”.

Snippets from article:

“…Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions…”

“…the Committee expects that inflation will remain subdued for some time…”

“…the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010…”

“…The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30, 2010, for loans backed by new-issue commercial mortgage-backed securities…”

It’s interesting the content and timing of BoC Carney’s warning of Canadians taking on too much debt and the Fed’s Bernanke issuing a report on the appearance, anticipations, and expectations with respect to the US economy and that the stimulus will be withdrawn.

Translation: Next leg down…big time…is coming.

Fast forward to summer 2010 and the start of HST: Carney saying he warned Canadians about getting too far into debt. And Bernanke, by careful choice of words used above will pretend his team of experts truly “anticipated” and “expected” the US economy to be able to stand on its own without further stimulus by how things “appeared” to be going in late 2009…

#77 Nostradamus Le Mad Vlad on 12.16.09 at 5:56 pm

Well that was exciting. I endured 22 seconds of Dr. Phil, following which I received deep psychological therapy for a day. Now I’m all better no I’m not I thunk.
#56 David Bakody — Your comment should probably go with this link: It has been said consistently that interest rates only have one way to go, so Garth is Right.
Back to basics, which hurt banks and big pharma. 1 — Use Cash. 2 — Flu Remedy.
Volcano goes postal — quote from — Carbon Credits For Volcanoes “… and more Carbon Dioxide than all the cars in the US for a year. But volcanoes, although dumb as a rock, are too smart to fall for Al Gore’s guilt tripping scams. You don’t see volcanoes buying carbon credits, do you? Actually, the main greenhouse gas is water vapor.”
Mish’s site spells out the Cap and Trade BS. Remember, Ken Lay (Enron) is behind Al Gore, the frontman for this so what’s in it for Lay? — Cap In Hand
This is not Monty Python’s Spam.

#78 swm on 12.16.09 at 6:00 pm

#61 Popeye

I have a lot of questions about your 5/35 logic. Most have already been well covered by other posters but I also wonder:
-How does lining bank profits (rather than landlords) shield you from crime. When a crime is committed near a condo does the criminal ensure that renting occupants see while owning occupants do not? In many of the best and lowest crime areas, rent is possible for an average income earner, ownership-no chance.

-Regarding selling and moving in with family, actually there are differences, big ones:

1-How will you sell at a big loss? Or even a small one, not that easy. With all equity sunk in a downpayment (more accurately, closing costs, cmhc, LTT), where will you get the check for closing out the mortgage, paying commissions, and all the other things assumed to be free in the rent vs. own calculations?
2-As a renter you do have a choice because the downpayment money when not used is still available. It can pay rent for a long, long, long time before the renter needs to move in with family (as an owner could have to do for a long, long time)

#79 The Vulture on 12.16.09 at 6:00 pm

Hide The Weasel

When you buy a house you make the following rich people even richer and yourself poorer:


Bank and bankers
Government (Municiple/Federal)
Real Estater Brokerage
Home Depot


Morgage Specialist

#80 Mike (Authentic) on 12.16.09 at 6:11 pm

#55 CM “if you’ve seen this marked increase in listings in any other community?”

I follow the true $1m+ communities,

Yes, quite a few like:

Eagle Ridge has 4 listings now, they usually only have 1 or 0. A 400% increase.

Bel-aire 4, usually 1 or 2, a 200% increase.

River Park/Elbow Park (south side of river), they have 6, usually 2, 300% increase.

Roxboro, usually 2-3, they have 6. 200% increase.

Mount Royal has 10. Usually 8.

Lakeview Village, 6, usually 3.

Pumphill, 9, usually 4.

Maybe the $1m+ prestige communities are not selling and starters are? Inventory here has never been so high.


#81 Rob in NVan on 12.16.09 at 6:21 pm

#s 28, 39, 42, 63

For clarity – the BNN interviewer screwed up when he described Rosenberg’s chart re. home price to income ratios.

The actual chart (chart 1, page 2, here: is presented as “standardized” via standard deviations from the mean, and does NOT present Canadian house prices as only 2 times income, but rather about 2 standard deviations away from the norm – i.e., the current conditions are very atypical statistically.

Granted, home price to income ratios in 1989 per the chart were apparently even more unusual (about 3 standard deviations away from the mean), but such information is of low relevance, as it’s an apples to oranges comparison – back then the average home owner had much less total debt. And it still took over a decade for “real” home prices to recover following the predictable crash.

Side notes:

‘Anyone else see an Elliott Wave ( . . . page 4, figure 5 is particularly interesting, considering recent market psychology) in Rosenberg’s Chart 2 (first link, above)?

Strangely, an identical wave form exists within Vancouver’s price trends:

5 waves up, an A wave down, a reflexive B wave . . .

‘Just coincidental, data-mined psycho-babble . . . or do we ignore waves of “social-mood” (which suggest an ensuing relentless bear market “C wave” with retracement to approximate year 2000 levels) at our peril . . . ?

#82 soju on 12.16.09 at 6:29 pm

Ohhhh… I’m getting scared! Damm the CMHC and all that ra ra ra. If you take on a loan, best make sure you can pay it. That’s about it. If you can’t plan ahead than you’re the problem no matter what the government does. Why is the government at blame and not the sheeple. No one forces you to take on a mortgage. It’s the people that are at fault not the system.

#83 dan on 12.16.09 at 6:34 pm

To all the bubble heads

Carney is warning again about rising household debt:

1….2 the bubble is coming for you. 3……..4 going to lose your home. 5…….6 the depression is going to stink. 7……..8 bankruptcy awaits. 9…………..10 going to buy your home for 50% less.

#84 Kurt on 12.16.09 at 7:03 pm

Blog dogs, thanks for the link to the CMT interview. It looks to me like they are just fine as long as there’s no systemic weakness. However, most folks on this board seem to believe there *is* a systemic weakness created by the combination of cheap money and CMHC itself. I wonder if their models capture the distortion of the market caused by their own actions?

#85 Nostradamus jr. on 12.16.09 at 7:14 pm

“”Analyst Dennis Gartman explains how the United States is becoming increasingly reliant not on Saudi Arabia for oil, but rather, Canada.””

…Garth, so what in the heck does that all mean to Canadians?

#86 jess on 12.16.09 at 7:51 pm

nationalizing continues….

HGAA was said to have been close to collapse several times, which would have had far-reaching consequences for the Austrian and the southeast European banking sector, in particular.

The finance ministers of Austria and the southern German state of Bavaria both said on Monday that the nationalization of HGAA was unavoidable, as the troubled lender was again on the verge of bankruptcy.,,5011630,00.html

#87 Wondering on 12.16.09 at 7:54 pm

Enjoy reading your blog and it looks like you have a cult following. I hope you don’t poison the punch (Jonestown) at the end. `joking `

#88 just a guy on 12.16.09 at 7:58 pm

#83 dan

That post was absolutely juvenile. You should be embarrassed of your inability to act like an adult, not to mention your inability to rhyme worth a damn. You’re as bad as that “Vulture” donkey.

#89 Onemorething on 12.16.09 at 8:09 pm

I agree with June 2010 as a timeline for the CA RE Bubble to finally pop. Keep an eye on those boomer listings coming early new year in TO and VAN as they will get the ball rolling.

Test your highly ranked Fed or Banking buddy on what they are doing if you know any. They have either already sold or to be selling in Jan/Feb.

Protect your family, protect your wealth, but hey Canadians as always will cry foul and expect someone else to take the blame & be bailed out…not this time I fear!

This one will be a major game changer for Canada!

#90 lgre on 12.16.09 at 8:13 pm

“Why is the government at blame and not the sheeple. No one forces you to take on a mortgage. It’s the people that are at fault not the system.”

absolutely, the problem is just that, SHEEPLE..they follow each other regardless of circumstance and so government needs to hold their raising rates they are taking the cookie jar away..otherwise it would be eaten all at once.

Nobody understands the sheeple effect better then the government, that’s why they make certain decision, they know what the outcome will be.

#91 Herb on 12.16.09 at 8:57 pm

It’s the same the whole world over,
It’s the poor what gets the blame,
It’s the rich what gets the gravy,
Ain’t it all a bloody shame.

The refrain from “She was poor, but she was honest …”, by way of explanation for past and future moves in the world of government and high finance. It will be sung by the Greek Chorus that will take the place of the Fat Lady who will not be allowed to sing because the game must go on.

#92 lgre on 12.16.09 at 8:58 pm

#61 Popeye on 12.16.09 at 3:59 pm

I dont get how you can only muster up an 8% dp but are able to double up on your mortgage payments, something doesnt add up here. Also, you mention you dont want to line the pockets of landlords..well you’re lining the pockets of banks..which I find even worse, I would rather pay a landlord as long as they take care of the property instead of some oligopoly of a bank.

I can understand your point on not wanting to live in an apartment, just realize that at todays prices, you are paying a high price/risk to have your own backyard.

#93 dutch4505 on 12.16.09 at 9:08 pm

just started reading the blog about a month ago. us/cdn citizen planning to purchase retirement condo near my work in canada. keeping my farm on the us side. told my cdn realtor that i will hold off for at least 10 months. I am in no hurry. Who knows the future, but I believe the probability rate is greater for prices to go down. I can “make money” by just sitting back and waiting. I do not want to be the greater fool!.

#94 Herb on 12.16.09 at 9:11 pm

May I remind certain hounds of this blog, such as Ng soju and igre, that it wasn’t sheeple that were bailed out in the ‘States or will be bailed out in Canuckistan, but banksters and speculators of the purest capitalist wool?

The sheeple are merely expected to pay the bill.

#95 Evangeline on 12.16.09 at 9:16 pm

((“”Analyst Dennis Gartman explains how the United States is becoming increasingly reliant not on Saudi Arabia for oil, but rather, Canada.””))

But they already are reliant on Canada … we are currently the U.S.A.’s largest supplier of oil, Mexico second, and Saudi #3

#96 Evangeline on 12.16.09 at 9:19 pm


oops sorry … I didn’t read your link before I posted …

#97 Taxpayer like you on 12.16.09 at 9:32 pm

64 Surfer – Thanks for the link. It was very interesting reading the comments. Some people think their rent is too high so they should buy. Others think the rent is too
high and it should be controlled. Either way, it seems to contradict what almost everybody on this site says – renting is far cheaper than owning.

Further to this, many are assuming rents will go down if RE goes down. While this may make sense intuitively,
I’m not so sure, as in many instances rents have not
gone up proportionately to housing prices. Also, those
landlords that have to re-mortage at a higher rate will be
looking to recover any extra cost. Thirdly, even if housing
corrects, higher rates may wipe out any reduction on the monthly mortgage payment, meaning fewer can purchase and will continue to rent.

#98 Hunkered Down In Milton on 12.16.09 at 9:45 pm

To Popeye # 43

Thanks for posting its always interesting to see what Garth’s blogs generate in terms of comments and ideas.

As a long time renter I can say I really do understand the first half of your comments. I was extremely motivated to stop having money go up in smoke. I am equally lucky to have a partner in life who is smart parsimonious and prudent.
That said I will add to my email in the blog with the following: There *might* possibly be a case for 5/35 IF the cost of housing were not surging well past the 4 x gross earnings point and interest was at near term historical averages closer to say 10%. If the oft quoted rent/own argument could hold up in those conditions and you can get yourself out of a roach hotel… hey GO FOR IT!

On another note thanks to the blog dogs who posted regarding short strategies!

In closing lets keep the discussion going! To quote the past there really is no wealth like knowledge and no poverty like ignorance.

Cheers all

Hunkered… AKA Hunky.. but only to my wife Garth! :)

#99 absinthe on 12.16.09 at 9:58 pm

@Soju, 82 – it may be that it is the “sheeple” and not the system, but any system that contains people must work for those people. Design: it matters.

Living in and loving a “perfectly logical system” which is human unfriendly is a good way to find chaos. People are what they are; it’s no use wishing we were computers. We aren’t, and won’t be anytime soon.

People are specialists, with areas of ability and areas of ignorance; the physiotherapist may be brilliant at physio but bad with numbers. Many trust other experts; constant suspicion and relearning the wheel would be a huge waste of time. So, there are many who trust the experts in their lives – maybe getting two opinions, but after that trusting the docs who say it’s nothing or the banker who says, “sure, you’re good to pay off 5X income, that’s the new normal.” They’re the experts. This blog, sad to say, has been the fringe – although finally the story is changing and people are coming to their senses.

#100 Tony on 12.17.09 at 3:28 am

Next year around the 5th or sixth of january you have to be short stocks. The P/E ratios are a complete joke and will *not* improve over the next two years. Rona is as close to a sure thing as you can get. The government grant runs out i think February the first 2010. Rona instead of closing stores has actually built more. Well very soon they’ll be closing plenty i guarantee that. I peg the move on the stock down to the 5 dollar area at which time i would take half profits and hold the rest until the stock falls to the 2 dollar area.

#101 soju on 12.17.09 at 3:09 pm

#94 Herb

The banks got bailed out because too many ignorant individuals couldn’t pay for the loans they applied for which created a credit crunch for financial institutions. If not for the number of fools the system would have been fine. A mortgage is a 25 to 35 year responsibility. The same could be said for all the animals at the SPCA. If it wasn’t for the need of immediate satisfaction and ignoring the 10 to 15 year responsibility we woudn’t need these shelters.

Every action has a reaction. Unfortunately these days people blame and expect the government to pay for their actions.