Darwin

Imagine taking your spouse to a financial advisor and buying a portfolio of corporate and government bonds, preferred shares and blue chip trusts with an annual yield of 5% and extremely little risk. It costs $800,000.

Now imagine suggesting you borrow 90% of the money at 3%, and put just $80,000 down.

Would you still have a spouse? Probably not. The perceived risk would be enough to blow away most relationships.

Now imagine the two of you went and saw a nice house that also costs $800,000. You want it. She wants it. You have only $80,000. No problem. You arrange 90% financing at 3% and move in.

Think about this for a moment. The financial portfolio costs $21,600 a year to own, and pays you an income of $40,000. Not only are you making money, but the interest on the loan is tax-deductible. The diversified portfolio is guaranteed to throw off 5% a year, has minimal risk, with the potential for capital gains, and can be converted into cash with a phone call.

The house costs $40,000 a year to own (a three-year fixed term mortgage at 3%, 25-year am), and pays you nothing. The interest is not deductible from your taxes. Your investment has zero diversification, a high risk of losing value if purchased in 2010, is immobile and very illiquid. It could be converted into cash, but only by finding a buyer – a process that can take months – at a value to be negotiated, and after paying roughly 5% of the overall value to an agent.

Oh yeah, the portfolio costs nothing to purchase except maybe $600 in trading fees. The house costs $16,000 to buy. The portfolio carries itself, while the house demands property taxes, insurance, utilities and maintenance. If you sell the portfolio at a capital loss, you get to apply this to gains somewhere else, wiping out taxes. If you sell the house at a loss, you can’t use this in any way. If you sell the house for a profit, you keep 100% of the gain. If your financial portfolio gains, you keep about 80%  – and all of the income.

I make this little comparison because the Age of the House is ending. The sooner Canadians understand real estate is no path to financial security, and in fact can lead to heartache, the better. Other than hormonal lust and the pathetic social need to live beyond your means, there are few reasons to buy real estate with a whack of borrowed money. Like Americans, we’ll soon understand this way better.

In fact, over the last few days more and more people to the south have been signing on to the theory that real estate should be allowed to crash. This comes amid realization Washington has spent billions trying to stop foreclosures, modify mortgages, keep families in houses and prevent prices from sliding more – and nothing’s worked.

As you know, 68% of the people in Arizona and almost half in Florida have mortgages bigger than the value of their homes. Foreclosures are surging everywhere. House sales are crashing. Millions of people have simply stopped making mortgage payments and nationally a quarter of all households are in negative equity. So, the thinking goes, all artificial housing stimulus should end. House prices should be allowed to plunge even further, until they are so cheap buyers will move in and establish the stability that governments cannot.

Of course, this would wipe out remaining equity for millions of families who foolishly put all their net worth into houses, but won’t that just be eroded anyway? Weren’t they the fools who paid too much, borrowed too much, didn’t get diversified, bought beyond their means and gambled? Why should taxpayers bail their underwater asses out now?

That’s the theory. This would benefit future homeowners – those who could buy at the bottom – at the expense of those who bought at or near the top. Darwinism. Natural selection. Survival of the fittest. How can you argue with that?

Reader Chris Roddan got me thinkin’ about this after he posited a similar question: Did Ottawa (aka F) deliberately drop mortgage rates and have CMHC coax banks into doling out endless high-ratio loans to inflate real estate now at the expense of the future? Was this deliberate?

“Does this explain in part why then Flaherty targeted real estate?” he asks. “Was it the only way to drag billions of dollars of citizens earning forward – pump up the economy today instead of taking a correction?”

Poor, sweet, innocent little naïf Chris. Of course F did this.

He knows all about retail politics, creating a real estate bubble in the middle of a job-killing, salary-sucking recession. By ushering in emergency interest rates, declaring the bad times over and lowering lending standards he unleashed the hormonal gush which swept so many couples over the brink of indebtedness. Now they have no liquid assets, no diversification, no investment income, no deductible debt, a depreciating asset and a mortgage which ain’t going anywhere.

And, like Washington, Ottawa’s billions will prove to be for naught.

“The impact of this will be profound,” says blog dog Chris. “If we look just 10 years out the average income buyer here in BC will have spent over $400,000 on their mortgage, $300,000 in  interest.  They will still be owing hundreds of thousands of dollars in principal.

“At this rate , to realize any net return on their investment after interest, the market will have to provide at least an annualized appreciation of 4% per year.  That is just to break even.  Given the base price of 2010 real estate in Vancouver there is no way we can realize these continued gains. It is mathematically impossible. The curve simply gets to steep with 4% gains. As you correctly point out it will flatten then drop.  Math and stats ensure this will happen.

“My point is our future peak earning years are already accounted for thanks to these mortgages and debts.  Then what happens to us in the future?”

We’re screwed, Chris.

But what are hormones for?

154 comments ↓

#1 luke on 09.12.10 at 9:07 pm

quick story.
i am 27, living at home with little to no expenses, and working FT @ fortune 500 company…

last year i had house fever, and took 20K cash i had, and bought a 20K RRSP to use it for a “down payment” on a house (to take out under the first time home buyers program)

now i am having cold feet about what to do. i dont want to buy a house/condo that will keep falling in value
but have this 20K sitting in an RRSP

what should I do ??

is there a way to get my rrsp money out without paying a penalty? any tips would be great!

Invest it, of course. It’s called an RRSP for a reason. — Garth

#2 Weevie on 09.12.10 at 9:07 pm

“The diversified portfolio is guaranteed to throw off 5% a year, has minimal risk, with the potential for capital gains, and can be converted into cash with a phone call.”

Your use of the word “guaranteed” is borderline fraudulent. Guaranteed by whom? If what you say is happening to real estate continues to happen (I believe you when you say prices are going down) then what does that do to the asset side of bank balance sheets? Suppose 10% of homedebtors stop paying their mortgages and/or can’t refinance (roll over their debt) due to insufficient equity? Your beloved preferreds will stop paying dividends permanently if bank owned assets decline in value by fiveish percent. I guarantee it. You are leading people off a cliff.

Fixed income is called that for a reason. Bonds pay interest. Preferreds pay dividends. They are fixed. Trusts with track records are little cash engines. Your words are fearful and empty. — Garth

#3 sk76driver on 09.12.10 at 9:26 pm

Now hold on Garth….I am debt free with a 500K LOC I can use any time…..

I give you that $$$$ and you can guarantee to make me 5%? (minus some costs) At almost no risk???

It’s Sunday night and I’m a couple glasses in but…….

It looks even better sober. — Garth

#4 dark sad person on 09.12.10 at 9:27 pm

#180 goldenfox on 09.12.10 at 6:56 pm

dark sad person on 09.12.10 at 1:23 pm

Actually the $ is not getting stronger, it is just not falling as fast as the other fiat currencies. There are many ways of measuring money supply, and the experts disagree among themselves as to which one is valid. Deflation, the bad type when asset prices collapse, and cause multiple debt defaults and concomitant money supply drop is something all govt will fight tooth and nail. Inflate or die. Bernake is and will continue printing, quantative easing etc until the cows come home

***********************

Nice try-but it ain’t gonna fly-

Gary North is delusional-
First-he confuses prices-with Deflation and Inflation and thinks because the Fed is printing/QE that it proves deflation can never happen and that lending and borrowing is “happening”
If it was-then what’s gone wrong?

I notice North does not show one single piece of evidence that his ‘theory”-is in fact happening-other than prices are not falling in the grocery store–
***********************
North–
Beginning with a false view of capital – “at zero price, there is greater supply than demand” – the hard-money deflationists write that the Federal Reserve is powerless to get commercial banks to lend. They ignore the obvious: the FED can impose fees for commercial banks’ excess reserves. That will get them lending.

There is no shortage of borrowers. If this were not the case, then the commercial bond rate would be at 0% today: no borrowers at any price. It’s at 6%.

********************

Lets see how all the lending and borrowing and spending is going–

Look at the wild anomaly on that 40 year chart–

http://3.bp.blogspot.com/_nSTO-vZpSgc/Sy3kmzbYuoI/AAAAAAAAHeU/2pq-Br3q02k/s1600-h/total+loans+and+leases+Percent.png

Here’s a ratio chart of non performing loans vs asset values–
(meaning-the “price” of the asset-has “fallen” below the amount owing)

http://3.bp.blogspot.com/_nSTO-vZpSgc/Syxm7vUmZFI/AAAAAAAAHdU/daioOP38wiM/s1600-h/alll.png

If people had money-or could continue borrowing-loans would be serviceable-this is not happening-

http://research.stlouisfed.org/fred2/series/NPTLTL

Spending can be seen here–

http://research.stlouisfed.org/fred2/series/MULT

and here–

http://4.bp.blogspot.com/_nSTO-vZpSgc/Sj-6sYetHKI/AAAAAAAAGWQ/IBuL1pkFAfc/s1600-h/personal+savings+rate.png

Looks to me-like people are moving away from spending to saving/paying down debt–

Here’s an example of how effective QE is-in halting deflation-

http://3.bp.blogspot.com/_nSTO-vZpSgc/Sy22TSX6HjI/AAAAAAAAHds/LAzct2QBnrA/s1600-h/QE+vs.+Lending+-+Japan.png

**************************
lending and borrowing will drive up prices?

Home prices in the US have fallen across the US by 40% since the peak-
Do people lose more money by falling home prices then if Grocery’s go up a few % points?

http://4.bp.blogspot.com/_nSTO-vZpSgc/THa1pxNowJI/AAAAAAAAJOA/L9Okyxu5LiQ/s1600/housing+starts.png

http://3.bp.blogspot.com/_nSTO-vZpSgc/THa2cBSaujI/AAAAAAAAJOI/jBgKpACyk2Y/s1600/Single+Family+Home+Sales.png

http://4.bp.blogspot.com/_nSTO-vZpSgc/THa32hWN5RI/AAAAAAAAJOQ/p48bS-_zl-8/s1600/Building+Permits.png

Inventory is up–sales are down–banks wont lend except to high credit score borrowers-who-we can tell by the data above–are not borrowing-

Prices have nowhere to go–but down–
These are economic facts-(Austrian)

Pray tell-where are all these hyper-inflated $ to come from?
Helicopters?

Gary North-is clueless–

#5 Calgary Rip Off on 09.12.10 at 9:31 pm

Garth this blog is best viewed by the herd. The majority of people do buy real estate for the financial advantage. This is exactly what has ruined the opportunity of home ownership for those who want only to have the opportunity to not pay rent and own a place.

There are no starter homes in Calgary. They all are $300K and more. The days of buying a house then upgrading in 5 years are gone.

All this nonsense is good advice for the herd. The idiot masses. What about persons just wanting to buy a place only to live in?

Here’s an idea: You have a good downpayment. You like the place. You can afford the payments even if and when interest rates go up. You plan on living in the house when you are retired.

But these ideas are seen as ridiculous and stupid by the majority. At the same time these same ideas will prevent the prospect housebuyer from getting screwed financially for their lifetime.

Take the case of the boomers. That same generation that thought the peace symbol really represented peace, unaware that the ancient death rune had links to satanism and the fallen cross. These same folks who need to move to retire to sell their house and live somewhere else. What is so bad about reaping the rewards of hard work over many years and living in the place? You can always go on vacations, right?

In Calgary, the mood is now tense. New builders in the northwest almost harbour resentment when prospective buyers walk through show homes. This is shown in the blank stares from some, aggressive follow up from others, others denying that the homes will still be there unsold in six months. And others offering pizza and burger king coupons to entice. There is a competition from sellers selling 10 year old houses worth the same as a new place vs. the new places. What moron would buy a house that is 10 years old for the same price as a brand new house?

Will it be a new home builder vs. present old home seller(realtor) battle?

The next 6 months should be fun to watch. Some say sales should pick up in December. Right. When it is -30 c.

#6 PR on 09.12.10 at 9:33 pm

Look at this picture : http://www.chpc.biz/index.htm

I am stil laughing!!!!!!1

#7 Dan in Victoria on 09.12.10 at 9:35 pm

You can talk and argue about bubbles, sales, demand, seasonal doldrums, etc, etc.
Exponential function- Doubling time- 70.
Thats all you need to know.
Confused?
http://www.guba.com/watch/3000053112/Arithmetic-Population-Energy

#8 obert on 09.12.10 at 9:39 pm

The scheme worked well for the last 4 years: maintained employment in construction industry, supported banks and the illusion that we are different.
The banks have no risk with the mortgages they distributed with the CMHC and government backing. This is all great, except if the scheme collapses and the 500 billion dollars liability of CMHC starts dragging the whole country down. The scheme has been really dangerous and reckless.

#9 Nostradamus Le Mad Vlad on 09.12.10 at 9:43 pm


“. . . government bonds, . . .” — Only speaking of US bonds, these are quite interesting:

Benny & The Bonds As per sheeple, US bonds seem a little unstable, out-of-sync. “When termites eat your house, you don’t notice a thing.” Plus First para. is rather telling. What will C-H-F do here?

Agree with the portfolio, ‘tho. Good monthly / yearly income to add to CPP / OAS. That is Tim’s Treats money!

“Think about this for a moment.” — Critical thinking doesn’t apply to TNG. When us boomers have broken on through to the other side, critical, or just plain old thinking will leave with us.

Never mind. They are now indentured serfs / slaves to their masters.
*
Laugh of the day. The headline (and the editor) are beyond stupid.

Two quotes from Einstein and Hank Paulson are similar but different. Stumped?

Hmmm. Strange markets, strange days.

That is one HELLUVA storm!

Vaccinations The quickest way to become a true NumbNutz!

The only thing that keeps the US running — perpetual wars.

wrh.com has an interesting way of collating reports. “Michael Moore’s agent is Ari Emmanuel, Rahm Emmanuel’s brother! ”

Remember Greece? Debt is US$250,000 per person.

T.O. Bubble Boy Here is one reason I don’t subscribe to m$m: “It’s one thing to lie to the people for free, Rupe, and quote another to ask them to pay to be lied to! If you started telling the world the truth, they would pay. Hell, if you started telling the world the truth I would even pay!” wrh.com.

18:48 clip Black holes of incomprehensible size.

The Lost Horse Nothing to do with economics, the NWO or anything like that. Just a short story.

#10 Contrarian Canuck on 09.12.10 at 9:47 pm

http://financialinsights.wordpress.com/2010/09/12/weekend-round-up-sunday-september-12-2010/

#11 Dan in Victoria on 09.12.10 at 10:07 pm

Had to chuckle yesterday, we need a couple of things done here at the ranch, things better left to the pro’s.
(Code for young guys who are strong and flexible)
After all the pleasentaries salesman was saying they are really busy blah blah blah I asked how much? Okay fair price. Do it.
When?
How about Tuesday?
Ummm how about Thursday?
Okay .
Guy phones me back today ( Sunday) all over it. Can’t do enough for the job.
This is for a couple of grand.
Busy?
Yeah Right.

Had an open house across the street NADA, NOone,
Last year you couldn’t move for people.
They were parking on our lawn, in our driveway etc.
And the realtor isn’t a bad guy, good salesman, known him for years, things are diffrent for sure.

#12 goldenfox on 09.12.10 at 10:09 pm

dark sad person on 09.12.10 at 9:27 pm

I give up. You win.

#13 Gary In Alberta on 09.12.10 at 10:18 pm

Great post Garth. Don’t know how you keep them coming and they are getting better and better. In any event here is a real great video on the Vancouver real estate market crash that is likely unfolding:

http://www.youtube.com/watch?v=hqOn5XEm86A

I agree that Harper and his crew have likely been totally culpable in the real estate scam in spades and don’t think the (ex Goldman Sachs) Bank of Canada Governor is any less culpable.

They ALL need their asses kicked and they ALL need to be held accountable for the rape and destruction of our economy.

#14 blobby on 09.12.10 at 10:28 pm

I’m sure Mr F doesnt mind. By the time this REALLY kicks off up here, the tories probably wont be running the country any more, and they can blame the libs for all of this.

(same as in america)

#15 TheBigLebowski on 09.12.10 at 10:32 pm

….Renting will be considered trendy again and only fools will carry the monthy costs of a mortgage and expenses. A house will be something you buy only if you have to.
As fare as the 5% a year thing, I’de rather invest in the biggest bull market in history and own funds like this and other select shares as we head into stage two of a 4 or 5 stage bull market.
http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/summary/?id=66162

#16 Sitting on a fence in Ottawa on 09.12.10 at 10:43 pm

For my fellow Ottawans (but others as well), I went to a number of open houses this weekend and I had an interesting conversation with an RE agent. I had just come from seeing a house that was similar to the one she was showing and she asked what I thought of the previous house. I said it was overpriced and she agreed as well. She then voluntarily said that the market is definitely changing in Ottawa, asking prices are definitely coming down and that I was only her second visitor the entire day (with only 25 minutes until the open house closed). It was refreshing to hear straightforward talk from a RE agent instead of the usual “it’s a hot market…Ottawa is different…real estate always goes up in Ottawa”, blah, blah, blah.

I would have to concur with her statements. The houses that I have my eye on are coming down in price, usually 10k at a time. For prices to really come down in this city, the feds would have to do more than stop hiring, they would need to let current employees go (contractors, temps, casuals, students). That could happen with a majority govt (left or right). Budgets are already frozen, wage increases are capped, you would think the govt would do more if they held a majority.

#17 Devore on 09.12.10 at 10:47 pm

#4 dark sad person

I notice North does not show one single piece of evidence that his ‘theory”-is in fact happening-other than prices are not falling in the grocery store–

You have an amusing definition of deflation/inflation.

Prices of things I need to buy and pay are going up. Prices of things I don’t need are falling. This is deflation?

#18 dark sad person on 09.12.10 at 10:57 pm

#12 goldenfox on 09.12.10 at 10:09 pm

dark sad person on 09.12.10 at 9:27 pm

I give up. You win.

********************

Golden fox–
This is just a debate–
It’s not about winning or losing–its about understanding-if we can look at the facts and data and the Psychology of the herd and agree on that–then-we can move on-to a higher level-

#19 Patz on 09.12.10 at 11:11 pm

Oh puhleez! Victoria Tea Party #114 (from the previous comments—too outrageous to let pass) were you being ironic; you surely couldn’t be serious. God Bless America in her unending grief over 9/11? 3,000 people died there. Do you have a clue of how many thousands of innocent civilians in Afghanistan and Iraq have died in bombings, shootings and strafing from US military forces.

In the 10 year period of the sanctions against Iraq the UN estimated 600,000 children died because of embargoed goods such as chlorine to purify water. Call it exaggerated and say it was only 60,000. Doesn’t it tell you it’s time for the US to stop playing the victim?

#20 BrianT on 09.12.10 at 11:15 pm

Of course, this would wipe out remaining equity for millions of families who foolishly put all their net worth into houses, but won’t that just be eroded anyway? Weren’t they the fools who paid too much, borrowed too much, didn’t get diversified, bought beyond their means and gambled? Why should taxpayers bail their underwater asses out now?`

This is the spin being sold by Obama and other politicians but nothing could be further from the truth-the attempts to elevate RE values had the intention of bailing out financial institutions that had screwed up. Who knows what further schemes or scams will be attempted.

#21 BrianT on 09.12.10 at 11:17 pm

9Nost-last quote for the US total debt is about 2.1 million per income taxpayer (makes Greece look cautious).

#22 pablo on 09.12.10 at 11:21 pm

While I’m in agreement with the information and sentiments expressed here, I have to note the following in my area; durham region. Go to the shopping malls or costco and people are still buying and spending like no tommorrow. Go to the builder sites, and while they’re not busy, their prices aren’t dropping and they’re all talking like nothing’s changed. Can all these people be dillusional or are they still in denial?

#23 T.O. Bubble Boy on 09.12.10 at 11:25 pm

Officially, F didn’t drop rates — Mark Carney did. (ok, in coordination with Harper, F, and the rest of the G8)

But, F did a lot of risky things on his own during the last few years:

1) Kept the CMHC bullsh*t going, even when the Fannie/Freddie implosion made it clear that government-backed mortgages are a bad idea — why on earth can people still can get $800,000 loans insured by the government under the false premise of “helping to create affordable housing”. Why we still have 5% down/35-year amortization government-backed mortgages is baffling.

2) Doubled-down on housing with the Home Reno Tax Credit (your “action plan” tax dollars, hard at work!). Why he wouldn’t hedge his bets a bit with at least a few different industries is something I still don’t get.

3) Told banks to approve more mortgage applications.

4) Bought billions in mortgages off the banks’ books through the IMPP, making it possible for them to approve more mortgages and still keep their capital ratios at reasonable levels. (I guess that means he “tripled-down” on housing?)

5) Denied the existence of a housing bubble (and even the debt bubble), when it was clear it was becoming a problem.

6) Invested in dead industries (automakers) instead of R&D for new/growth industries.

#24 Bailing in BC on 09.12.10 at 11:46 pm

#151 S.B. on 09.12.10 at 2:00 pm
To #115 Bailing in BC or anyone who knows:

Do people live in Squamish and commute to Vancouver daily? Is this possible?
Or are prices high simply due to Whistler’s proximity – Is there a bubble in Squamish?
Will natural resources sustain the town or is this on the decline?

S.B.
Lots of people commute daily to Vancouver from Squamish. Now that the highway has been improved due to the Olympics, the drive to downtown Vancouver with good traffic is about 45 minutes, which I believe compares favourably with the Fraser Valley. Most of the drive is clear sailing until you get to North Van and of course the scenery is spectacular.

Many people also commute the other way, up to Whistler.

Squamish is smack between what I believe are the two highest priced areas in Canada, Whistler and West Vancouver. That said Squamish is hardly a poor mans Whistler or West Van, I don’t think many people are moving to Squamish because they are priced out of West Van mansions.

It could be argued that Squamish pre 2002ish was under priced considering it’s close proximity to Whistler and Vancouver. With the possibility and then the announcement of the Olympics, we really took off and many would say overshot due to speculation.

Squamish did not come back with avengence after 2008 like many areas did and property prices seem to have come down a lot, which perhaps puts them where they should be compared to other places, North Van for example. Now that it looks like we are in for a more general correction, I’m sure that Squamish will fall in line with the rest of the lower mainland. Are we in a bubble? Of course! Just like everyone else.

The economy of Squamish for the last 10 years or so seemed to be running on real estate. The pulp mill closed down, as did the rail yards and forestry has had a major decline. Those making money seemed to be developers, real estate agents, surveyors, construction workers. Many people here have not only all of their wealth but also all of their income tied up in real estate.

Now real estate is sloooow. I have heard multiple real estate agents talking of how this is the slowest they have been in their careers, some of which have been 20 years plus.

Construction of new developments has also slowed considerably.

Sorry for the lack of hard evidence, stats for Squamish are hard to come by and this is just my view as a person on the ground.

Just curious, why the interest in Squamish? If I am not mistaken you are in Ontario.

#25 Timing is Everything on 09.12.10 at 11:48 pm

Many will not “have spent over $400,000 on their mortgage, $300,000 in interest”… and “still be owing hundreds of thousands of dollars in principal.”
A good number of these hormones will simply tire and walk away. Ya can’t get blood from a stone.

“It is mathematically impossible.”…to get ahead this way, they will figure out soon enough…Hmmm, now where did I read that before?

—————————————————————–
“Darwinism. Natural selection. Survival of the fittest. How can you argue with that?”

Well, we are not foraging for food on the Serengeti anymore. Are you saying that our society will have only winners and losers, have and have nots, masters and slaves?

We’ve been there done that…all kinds of messiness.
I’m sure the losers, have nots, and slaves will do something about that situation, one way or another…if you catch my drift.

Sooner or later we will have to kick over the house of cards and start re-building society with a better, moral based foundation. For the good of us all.

Also, these portfolio’s?….What corporations are in them?, What banks?, what governments? Is it an “I don’t care where or how the returns come, as long as I get returns. No questions asked. Just get me at least a 5% return on my investment, damn it!”

Is it a ‘win – win’ investment? Does the portfolio have a moral compass, so to speak?

I’m not against anyone investing and making a buck on the their risk. I do think that folks should scrutinize those corporations/banks/governments etc.

#26 Rachelle on 09.12.10 at 11:50 pm

What gets me going is the number of “investors” who have bought real estate to rent it out to tenants and who are actually creating vast amounts of subsidized housing.

It isn’t “investment” without a return. Feeding your property money is not a good idea. I for one will breathe a giant sigh of relief when the country as a whole returns to fundamental valuation of real estate.

http://landlordrescue.ca/wordpress/counting-appreciation-speculation/

#27 EJ on 09.13.10 at 1:23 am

So if F knew he was robbing the future to play the hero now, what explanation was he going to give when the future arrived? I can only think of 3 options:

1) He wasn’t going to be around when it imploded in the face of the whoever is in charge. Therefore the fool public will incorrectly blame that gov’t and not him.

2) He hoped there’d be some sort of magical fairy that erased the gap caused by him, therefore avoiding having to face the music.

3) “Nobody could have seen this coming.”

#28 Mark on 09.13.10 at 2:08 am

#2, obviously you don’t understand how Canadian banks have laid off all of their risk of a Canadian housing collapse to the CMHC to be making such an ignorant comment.

#29 DM on 09.13.10 at 2:46 am

Someone from the Gordon Group contacted us weeks ago about tickets for your Vancouver seminar – they haven’t arrived in the mail as promised and I can’t seem to get back onto the link to reregister. Should we just show up and hope our names are on a list?

Absolutely. — Garth

#30 bullion.bunny on 09.13.10 at 4:36 am

Poor, sweet, innocent little naïf Chris. Of course F did this.

If this is true, it is a criminal act! The following says it all for the U.S.A.

http://www.youtube.com/watch?v=2I0QN-FYkpw

#31 Brian on 09.13.10 at 5:16 am

In the Saturday Star they show 3 houses sold every issue, what they asked and what they got. First time I ever saw all 3 got less than what they asked. I was looking for harder and faster proof but it will come. Harry Dent continues to rework his forecasts and admits that short term calls are weak in a recent interview. He calls for a bottom in stock market around 2014. He, like Garth, has an impressive track record.

#32 Aussie Roy on 09.13.10 at 5:22 am

Aussie Update – What bubble no bubble here Australians aren’t that silly…

http://www.theaustralian.com.au/business/industry-sectors/analyst-blasts-cba-for-denying-home-bubble/story-e6frg96f-1225919848419

http://www.moneymorning.com.au/20100913/what-does-the-commonwealth-bank-have-to-hide.html

http://www.news.com.au/money/property/banks-are-lending-into-a-housing-bubble-research-firm-warns/story-e6frfmd0-1225919995729

#33 Crazy Eddy on 09.13.10 at 5:26 am

how about some disclosure Garth? you recommend those government bonds. preferred shares and blue chip trusts… which ones do you got?

#34 Brian on 09.13.10 at 5:33 am

Nostradamus; concerning Cuba. Yes it is a military dictatorship but it was before Castro as well. Even worse it was run by the Mafia.

#35 mikef on 09.13.10 at 5:38 am

To Garth:

A quarter of HOUSEHOLDS are in negative equity?
Shouldn’t that be: A quarter of all MORTGAGES are in negative equity.

C’mon Garth,cross the river Styx and give a talk in the
Ottawa/Montral area for once.
Ole Winnie(Winchester) will keep Harper’s goons at bay.
Promise.

To #5 Calgary ripoff:

You buy an older house for the same reason you hire
a prospective employee with ten years experience.
It has a track and it/he/she has taken care of itself.

Just because it is brand new doesn’t mean it is perfect.

I took a home inspection course and the teacher a
prominent inspecter said that the crappiest building
materials go into residential construction.

#36 Jack the Lad on 09.13.10 at 5:43 am

I like that..

Borrow at 3 percent, get a 5 percent return… make 2 percent…

Borrow $10,000,000 and I’ll never have to work again…

Can someone lend me $10,000,000 pls :-)

#37 Barfly on 09.13.10 at 5:56 am

Calgary Rip Off: There is a competition from sellers selling 10 year old houses worth the same as a new place vs. the new places. What moron would buy a house that is 10 years old for the same price as a brand new house?

You got it the wrong way around. What moron would pay for a new house when a 10 year-old house with a satisfactory inspection report has had time to settle and show its warts to the world. Sure, a new house comes with a generous 1 year ‘warranty’, but good luck trying to get the cowboys who built it to honour that. Buying a new house in Calgary now is like playing Russian roulette with 5 loaded chambers, even discounting the free-falling prices.

#38 Suburban John on 09.13.10 at 6:15 am

#2 Weevie

Agree completely with you. Look at CPD-T. (Claymore Preferred ETF) Began trading on April 10 2007, at $20.11. It has never traded above that value and it crashed like all other equities in autumn 2008. Guaranteed? Not in my dictionary.

What drivel. (a) When the stock market crashed 60% last winter, this EFT was down 27% – less than half, and it recovered 100%. (b) You buy preferreds for dividend income, not capital gains. (c) Investors continued to receive all their income at all times. (d) Not a single bank cut a dividend – common or preferred – during the financial crisis. (e) Why buy an ETF when you can buy preferreds? (f) Dividend income is taxed at 20%. Money from the orange guy’s shorts is taxed at 100%. (g) You are a fearmonger. What’s your agenda? — Garth

#39 Jane54 on 09.13.10 at 6:23 am

Very interested in anyone else’s experiences with Open Houses this weekend.

What are the agents saying?
How busy does it seem out there in your area?
Are we going to get the Fall lift that all the agents are counting on?

If there is an Open House near you, please check it out and then report back to the group.

#40 bigrider on 09.13.10 at 6:50 am

Pete at #104 yesterday about the builders and RE agents wasting time coming to Garth’s TO event…
Pete they will come as they will see it as but one stop on a night out. No big deal to them.

Bill at #169 yesterday about builders and RE agents going bankrupt. Yes some will but not the ones that will be attending that is for sure. The RE agents own multiple rental properties fully paid for as well as substantial investments in stocks and bonds. RE could fall 90% and these guys would still be millionaires.
As for the builders , not these ones, not a chance, think hospital wing donators

#41 Moneta on 09.13.10 at 7:09 am

#2, obviously you don’t understand how Canadian banks have laid off all of their risk of a Canadian housing collapse to the CMHC to be making such an ignorant comment
————
It takes at least 24 months for CMHC to pay out. So even if the banks get the money back, they might have plenty of time to take huge write-offs before the coffers get filled up again. Bank stocks are not wihout volatility.

I don’t understand why people are still clinging to these blue chip ratings when the last decade has shown us that ANYTHING can happen. AAA companies have been some of the most dangerous.

Too much complacency out there if you ask me.

#42 DJ on 09.13.10 at 7:16 am

Maybe F Thought he could delay the bubble bursting until the U.S. picked up it’s boot straps, and thus carry our economy (which is inexorably linked to the US economy). A gamble which might have worked. Can you say double or nothing?
Or worse; maybe he doesn’t know what he’s doing.

#43 Colin on 09.13.10 at 7:27 am

Re: Sitting on the fence in Ottawa.

Having a majority government in Ottawa will have little impact on the prices of homes. Ottawa has gone through the exact same housing cycle as the rest of the country. Cheap money and life long amortizations have driven up the prices of homes. Just like the rest of the country, the party is also over for Ottawa.

Prices are coming down, albeit, slowly. That though is just the nature of the beast. Everyone in Ottawa thinks that it is different here. Sellers just cannot understand why their homes are not selling. It’s the price. It is always the price. Lower the price and it will sell. Sellers are always the last to realize and accept where the current housing market is. Buyers know damn well. Wait a couple more months and the reality for sellers will finally sink in. The light will go on and prices will come down even more.

Hopefully next year we can get back to some sensible reality. Keep your fingers crossed that next year we will not be paying $350K for a 20 foot townhouse that is a 45 minute commute to downtown, that 3 years ago was only $250K.

#44 Daniel on 09.13.10 at 7:51 am

Calgary Condo Prices are down $40k since May, that’s over 15% in 4 months … SFH Prices are down 60k since the peak – 15%. People are in for a big surprise if they want to sell.

http://www.findcalgary.ca/page_content-19.html

#45 Bill ( Peterborough) on 09.13.10 at 8:08 am

Re # 180 45north

Bill (Peterborough) No different than the sinking off the Lusitania. The Germans posted constant warnings that the ship was an armament supply shipped with passengers aboard it.

In the Guns of August, Barbara Tuckman shows that the German military had only one plan which was to invade France. They did and they lost (World War I).

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

Just like the politicos knew that Pearl Harbor was going to be bombed, before it happened. In order to bring the U.S. into the WWII.

The American military knew that it could be bombed. The probability was a matter of opinion. The attack was actually planned and carried out by the Japanese military under the command of Admiral Isoroku Yamamoto and not by a group of American conspirators.

http://en.wikipedia.org/wiki/Isoroku_Yamamoto#The_Attack
——————————————————————-

From Author / reasercher Andrew Hitchcock:

1941: President Roosevelt takes America into the second world war by refusing to sell Japan any more steel scrap or oil. Japan was in the midst of a war against China and without that scrap steel and oil, Japan would be unable to continue that war. Japan was totally dependent upon the United States for both steel scrap and oil. Roosevelt knew this action would provoke the Japanese to attack America, which they subsequently did at Pearl Harbor.

Also most people know that the lusitania was running armament while carrying passengers. The Germans posted many times warning passengeres not to board the ship becaause they would sink her.

I personally find your source of media to politcally mainstream, like alot of media out there. Try looking at other sources and cross reference them with others.

#46 Johnny Cakes on 09.13.10 at 8:10 am

Hey Garth,

When are you coming to Calgary???

Working on Oct.21. — Garth

#47 drdolittle on 09.13.10 at 8:18 am

#31 Brian. Dent called for the DOW to be 40,000 and he has a great track record?

#48 Consider This on 09.13.10 at 8:38 am

AT #23: So, T.O. BubbleBoy, what you’re saying is we did EXACTLY the same thing as the Americans, but we did it for an even prolonged period of time. We did this for a period of up to FOUR YEARS EVEN AFTER witnessing the repercussions these choices had on our neighbours to the South. Un-f*cking-believable. We’re different? HELL YES! We’re borderline retarded!

Like I’ve been saying, our banking system HAS to be in the sh*tter, regardless of what reports have indicated in the past. Robbing Peter to pay Paul is all we’re doing at this point. In my opinion, we’ve been the WORST behaved economy of the G20 (well, maybe Australia too), given the fact we had it all in the palm of our hand, yet we wouldn’t take warning from the U.S. This, my friends, makes us a real culprit of greed and excess spending. Our PRIDE of “we’re different” is what is bringing us to our knees.

#49 Bill ( Peterborough) on 09.13.10 at 8:39 am

Re # 182 Nostradamus de Mad Vlad ( yesterday)

Excellent Clip; The sooner people start realizing it’s he same old game, the sooner we ” MIGHT” be able to change things as a group.

Thanks for clip, so much good info out there still , just have to look for it.

Here’s one for you and The Big Lebowski.

Funny how these things all do tie in with the economy
( All things that our sour usually come from a lemon, no matter how much you try to mask it’s flavour by sugar coating it)

http://buildingwhat.org/

#50 jess on 09.13.10 at 8:41 am

7 Dan in Victoria

…”The figures have exposed antiquated methods of record-keeping and fueled fears that some families are deliberately hiding the deaths of elderly relatives in order to claim their pensions.

The nationwide survey was launched in August after police discovered the mummified corpse of Sogen Kato, who at 111 was listed as Tokyo’s oldest man, in his family home 32 years after his death…”

#51 Got A Watch on 09.13.10 at 8:42 am

headline just now: “OECD says debt is a problem for the Canadian economy” who knew? LOL> ” Government should take steps to keep marginal buyers out of the real estate market” – did I just hear that correctly – ha ha ha ha, F just fainted.

I see Mish has clarified his thoughts after this weeks dust-up,
Debating the Flat Earth Society about Hyperinflation
. Still making more sense than the inflationists, on most issues. I read Mish for his economic predictions, the rest of his views are a bit eccentric, shall we say.

golden fox, dark sad person – I would not waste much time talking about Gary North and his views. File him under “idiot” and move on. He has made so many nonsensical posts, he lacks any credibility. There are a lot of more qualified pundits on both sides of the inf/de debate than him.

The fact is, we are IN deflation now in North America and most Western economies. So when a statement like “Here is what those who predict inevitable price deflation lack” is made, it only proves to me North in fact lacks any of the very factors he cites in others. He just won a debate with himself.

# 26 Rachelle – I’ve read your Blog, good work. For those who have not heard of it, her site (link in # 26) is all about the business of commercial rental properties in Ontario, and it is a great source of free and informed info for landlords and those who are thinking they want to be one.

Da Bull – thanks for reply. From what you are saying, the “hack’ can be blamed mostly on poor practices at the web-host, no. I was referring to the “brute force attack” in relation to Garth’s own password, or some password protected program on the server. The ‘3 tries, you’re locked out’ would prevent those, at least.

“It all depends on how the FTP server was set up. Also there are many other possible means to gain access to a server but you need a program or service running on said server to access it.”

Those services have to be locked down tighter. Run less programs on that server. Don’t use Microsoft OS on your server. Etc. Somebody screwed up somewhere.

The hackers are out there, the server operators job is to make it as hard as possible for them. Some customers will complain, you can’t satisfy everyone. But leaving holes wide open, like services that can be easily exploited, is not the way to do it.

A script error on the server side is a bit easier to take than the knowledge that a hacker was able to have free reign on the server. Could be a combination of hardware and software failure. I have seen instances where an intermittent hardware fault in a drive controller caused errors in stored data, and it took a while for the problem to become apparent. Too long, as the recent backups were corrupted too, and a restore to a far earlier date had to be done, resulting in some data loss that could not be retrieved. Things happen.

Lots of storage, distributed, and very frequent backups are the best defense I guess. No system is entirely secure to network attack, unless it is not connected. That’s it, we need to get rid of this pesky internet, problem solved!

brainsail – thx for reply.

bullion.bunny – Thanks for link to OpenBSD. It is secure, no doubt, but how well does it play with applications designed for other OS, have you worked with it? I am playing around with Ubuntu, booting from CD, and trying to lock it down tight, then using WINE to run a couple apps. So far mixed results, it works, after I cleared up a few issues. A work in progress.

#52 Consider This on 09.13.10 at 8:44 am

At #27: F will simply blame the Liberals for the implosion when he is no longer in the game. This is EXACTLy what the Republicans did in the U.S. to the Obama administration. It is unbelievable how quickly people forget the ones who actually created the mess. It is very easy to blame someone else and have the masses believe you, especially when those people are in dire need of something to believe. This is exactly what F will do.

#53 Prof ANON on 09.13.10 at 8:47 am

@21 Brian T.

US Debt is NOT 2.1 per tax payer. It’s a little over $121,000.

http://www.usdebtclock.org/

Also, check the Debt to GDP ratio if you want to compare to Greece. (Don’t forget to click the “external” tab).

#54 Consider This on 09.13.10 at 8:50 am

At #36: This is precisely why it is not even legal to borrow funds for the purposes of investing in the markets, bonds, etc in the U.S. It is a gambler’s game where ultimately someone has to lose. I, for one, believe it shouldn’t be legal here. If you want to invest, the GREAT – but use your OWN MONEY to do it. Don’t use the bank’s funds.

Explain how it is different to buy an illiquid, depreciating piece of real estate. — Garth

#55 Prof ANON on 09.13.10 at 8:56 am

Oops….correction to my last post. TOTAL US debt per citizen is about $174,000. The previous number I mentioned ($121,000) refers to national debt only.

#56 pbrasseur on 09.13.10 at 9:13 am

“The impact of this will be profound,” says blog dog Chris. “If we look just 10 years out the average income buyer here in BC will have spent over $400,000 on their mortgage, $300,000 in interest. They will still be owing hundreds of thousands of dollars in principal.”

This is a textbook negative equity issue and for any household a complete financial disaster.

There is good and bad news:

The bad new is you can’t get out of this unless you win the lottery or (far more likely) you declare bankruptcy.

The good new is, if you got yourself into such a mess you probably don’t have much in terms of other savings, everything you have goes for the house, so you don’t have that much to lose by going bankrupt.

Will the CMHC (or even Canadian banks) need a bailout. If there is a nasty crash I’d say the odds are pretty strong.

#57 Ryder on 09.13.10 at 9:19 am

Garth,

Don’t you think 4% growth is possible for RE if the inflation in the near future gets high?

Sure, that means a Vancouver house would cost $2,000,000 in 18 years. Very credible. — Garth

#58 dark sad person on 09.13.10 at 9:23 am

17 Devore on 09.12.10 at 10:47 pm

#4 dark sad person

I notice North does not show one single piece of evidence that his ‘theory”-is in fact happening-other than prices are not falling in the grocery store–

You have an amusing definition of deflation/inflation.

Prices of things I need to buy and pay are going up. Prices of things I don’t need are falling. This is deflation?

*****************************

You keep repeating this same-lame-question to me-
I’ve answered you-with the same “simple” definition-of deflation-
Do you have a problem absorbing-or what?
********
“Gary North is delusional”
“First-he confuses prices-with Deflation and Inflation”
*****************

What part of this -do you not get?
My definition is clear and has never strayed-
Either rip it apart-or stfu–

#59 David B on 09.13.10 at 9:27 am

Hello ?

Tavia Grant

Globe and Mail Update
Published on Monday, Sep. 13, 2010 8:54AM EDT

Last updated on Monday, Sep. 13, 2010 9:21AM EDT

.The recession may be officially over, but six in 10 Canadians are still surviving from paycheque to paycheque, a national survey showed Monday.

And this did not happen over night and guess who’s hand was on the money flow taps …. yup Flaherty. All this cheap money buy now pay later was never mentioned by the MSM and we here who dared question Ottawa ‘s ploicies were …. well lower than snakes for questioning Canada Grestest Prime Minister and Polical Party Ever! Sad news we all will pay for his insights …. as mentioned higher taxes, HST and new and improved service costs> Thank you 36 er’s .

#60 BrianT on 09.13.10 at 9:36 am

#53Prof-At this point literally millions of persons are aware that the number you reference is a small % of the actual debt load-here is one that has written a book on the subject http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html

#61 Gord In Vancouver on 09.13.10 at 9:37 am

Still more proof that Garth was right

Canadians feeling stressed about their finances: Survey

http://www.canada.com/business/Canadians+feeling+stressed+about+their+finances+Survey/3516444/story.html

#62 CTO on 09.13.10 at 9:38 am

Garth and Blog dogs

This bit of news from OECD is a must read!
By REUTERS, , Updated: September 13, 2010 4:57 AM

Here’s a snapshot…

The OECD estimates that the Canadian economy won’t be able to expand more than 1.6 percent a year between now and 2017, more than a full percentage point less than over the past decade.

The OECD said the central bank should continue to raise its policy interest rate at a “measured pace” toward neutral rates by the end of 2011. The Bank of Canada does not comment on what it considers a neutral rate but economists estimate it to be between 3.5 percent and 4.5 percent.

“Wow” that will kill a lot of new home owners!

ONTARIO, QUEBEC DEFICITS

“The two largest provinces, Ontario and Quebec, face especially challenging fiscal situations,” it said. “Many jurisdictions have relatively high debt levels, and their windows of opportunity to bring indebtedness down are closing as demographic pressures on public purses are set to intensify.”

And household debt-to-income ratios and debt-to-asset ratios remain at near historic highs, the OECD warned.

“Household credit needs to slow down, which may well moderate private spending and residential investment in the coming quarters.”

Not much there to prop up an over inflated housing market!

http://money.ca.msn.com/investing/news/breaking-news/article.aspx?cp-documentid=25553222

#63 Risk on 09.13.10 at 9:46 am

“guaranteed (return in stock investment X)”

No risk is guaranteed to always be good, that’s why it’s called risk.

A house is a poor investment today, but IMO so are stocks. With a house in the USA people lost 50-60%, with stocks, people lost 50% or more in 2008/09.

For us, what works (for us) is cash in the bank. I’ll gladly take a tiny loss to inflation over a the risk in RE or stocks today. Tomorrow might be different.

Pay attention. (a) I did not suggest an equity portfolio in this example, but rather fixed income. (b) Nobody lost 50% on stocks last winter unless they were dumb enough to sell. (c) Cash is not an investment strategy. — Garth

#64 $froma$ia on 09.13.10 at 9:56 am

gARTH,

You still didn’t spell out the “F” situation motiviation….

Why did he do it in the first place….

Simple: If he (the party) is the reason peoples houses(100% of peoples wealth) rising and are high, (the party) will have the popular vote.

Political popular vote=Bubble house prices= Poltical longevity.

The Price is on CHMC=The TAX payer!!!

No other PARTY will dare prick the bubble!!!

#65 Kevin on 09.13.10 at 10:03 am

If people are going to invest in bonds they would probably be best to stick to the short to medium term. This of course rules out the borrowing option. The long bonds can be a very dangerous place to put your money. People have been underestimating this because they have been in a 20 year bull market but in the 1970’s a lot of people got burned badly. They were described as Certificates of Confiscation. As long as interest rates remain low no problem but if interest rates start to rise then the market value of the bonds will fall. You may be stuck with 30 year bonds that are paying 5% when the current market rate is 7% or higher. When the loan that you used to buy them resets you may then be paying more in interest then the bonds are paying. Your choice will be to keep them till maturity at 5% or or cash them in at a capital loss to pay the loan.

Everyone has been putting their money in bonds.
This looks like a very crowded trade to me.

#66 Bottoms_Up on 09.13.10 at 10:22 am

#39 Jane54 on 09.13.10 at 6:23 am
——————————————–
I didn’t attend an open house (Ottawa), but a townhouse in my neighbourhood just got listed.

This place is about 1/3rd smaller than mine, it is asking ~$274/sqft, it’s a middle unit, land is 30 x 55, and it directly backs onto a very busy road.

One year ago I paid ~$203/sqft, I have a decent lot for an endunit townhouse in the city (50 x 85), no direct rear neighbours and not backing onto the busy road.

Using their metrics, I’ve made 35% on my place in 1 year. However, I think I’d be lucky to get a 10% increase, so something doesn’t add up here.

Does this indicate that as prices go up, people will always pay around the same absolute price, not taking into account $/sqft, and therefore just ‘settle’ for a smaller home? So, for example, 10 years ago in Ottawa $300k got you a single, 5 years ago a semi, 1 year ago a decent townhouse, and today a small, smushed, mid-unit town. What’s next?

I think we should all be looking at prices in $/sqft. If it rubbed off on society at large, it could help bring some sanity into the whole market, and empower buyers not to make bad decisions.

Essentially, it could lead to ‘Greater Fool’ genocide. (and this is what we’re all trying to accomplish, correct?)

#67 jess on 09.13.10 at 10:24 am

32 Aussie Roy

what about the vacancy rate …counting units rented when in fact they are empty. How accurate are these numbers?

#68 L.A.K. on 09.13.10 at 10:29 am

Re: Comment #1

Hi Garth.

In the past you’ve said that RRSPs are not an investment, but a tax shelter so I’m a little confused here.

I have money in RRSPs, and I also make a small monthly contribution for the tax benefit. All the money is in mid-risk mutual funds that, at one time, did quite well, but now rarely hold their own. I’ve moved the money around a little bit over the years, but have generally remained a conservative investor.

I know that I can’t take money out of my RRSPs without incurring a huge tax penalty, so how do I manipulate them to earn a better return?

#69 WINNIPEGER on 09.13.10 at 10:42 am

Garth,

Are you ever planning on coming to The Peg?

I know our real estate market here is peanuts compared to other major Canadian cities, but I think a lot of people would like to hear what you have to say.

Our market is pegged for a downturn like the rest.

Thanks!

#70 WINNIPEGER on 09.13.10 at 10:48 am

http://www.calgaryherald.com/business/Buyer+market+bubble/3511084/story.html

No Bubble in Calgary! What a pathetic list of excuses.

#71 Not so negative on 09.13.10 at 10:53 am

It takes at least 24 months for CMHC to pay out. So even if the banks get the money back, they might have plenty of time to take huge write-offs before the coffers get filled up again. Bank stocks are not wihout volatility.

——–

Where does this stat come from? Because its totally wrong. They pay the banks fairly quickly actually. Maximum of 3 months.

#72 ken on 09.13.10 at 10:54 am

I think everyone knows by now the real culprit in all this mess has been emergency interest rates eg.free money,I believe this was a big mistake the govt. made ,why did the BOC go along with this sceme for so long,I wonder. There is one hope of returning to normality Gov Carney is trying to raise interest rates to a more neutral level even with great opposition from the usual scources that would not benefit from this and no concern for the country other than their own greed and self interests.

#73 Ottawa S. on 09.13.10 at 10:57 am

#16 Sitting on a fence in Ottawa

Did you go to the open house for this one?

http://www.realtor.ca/PropertyDetails.aspx?&PropertyId=9910297&PidKey=82027402

I went and was disappointed. I mean, I wasn’t expecting much, but was expecting more for $300K. The listing description is, well…. Realtor BS at its finest. You get a lot with enough tandem parking for 1.5 cars (or two Smarts – not sure where the parking for 3 cars comes from). I kid you not, everything is original 1941 except some electrical and the furnace. There is even an original fridge in the basement. Roof will need to be reshingled soon and probably some of it replaced, so might as well rip it up and build an addition. But it needs EVERYTHING. Crumbling plaster, needs new kitchen and bathroom, terrible insulation. Oh yeah, and it’s <900sq ft. The more detailed description on the realtor's site talks about full height basement that you could turn into living space, but my 6'3" husband couldn't walk upright down there without bumping is head. Sad thing is – the open house was busy. Most notable there was some middle aged couple walking around commenting on how they loved this and that. This is a starter fixer-upper home at its best. Middle aged shouldn't even have to look at this.

This one a few streets south supposedly needs very little – renovated. The agent told me that the owners refused an offer for $425K already. In my opinion, they should have taken it. It was for sale by owner for a long time and didn't go anywhere. Not sure how much better an agent will do. $500K for 1200 sq ft lot?

http://www.realtor.ca/PropertyDetails.aspx?&PropertyId=9879270&PidKey=-1175531379

This city is ridiculous.

#74 Ottawa S. on 09.13.10 at 11:01 am

I forgot to add this one that I saw from the outside last week but my parents went to see the inside at an open house yesterday

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=9875828&PidKey=-1494420148

$100K more than the 1941 fixer-upper from my previous post, and it gets you a slightly bigger lot, a decent roof, and decent windows. But the rest needs work. $400K for a fixer-upper. Sheesh.

Please market, correct yourself! I want to buy a home wtihout going half a million into debt!

#75 CREA Circle Jerk on 09.13.10 at 11:02 am

(Writing from labtop so IP Address may be different)

Six in 10 live pay to pay

Tavia Grant
Globe and Mail Update
Published on Monday, Sep. 13, 2010 8:54AM EDT
Last updated on Monday, Sep. 13, 2010 10:56AM EDT
The recession may be officially over, but six in 10 Canadians are still surviving from paycheque to paycheque, a national survey showed Monday.

Fifty-nine per cent of Canadian workers say they would be in financial trouble if their paycheque was delayed by just a week – the same proportion as last year when the economy was still mired in a downturn, according to a poll of 2,766 people by the Canadian Payroll Association.

The survey comes as the OECD today warned that record high debt levels have left many Canadians vulnerable “to any future adverse shocks.” Also Monday, a Statistics Canada report showed household net worth fell 0.6 per cent in the second quarter, largely due to falling stock markets. Liabilities of households increased, meantime, led by mortgages and consumer credit.

Canada remains a debt nation, owing partly to a flurry of home-buying in this year. Eight in 10 Canadians in the poll say their first or second priority if they were to win a $1-million lottery would be to pay off their debt – an 11-per-cent increase from last year, “indicating that more Canadians are concerned about their debt load than they were a year ago,” the survey said…..

http://www.theglobeandmail.com/report-on-business/economy/six-in-10-live-pay-to-pay/article1705096/
___________________________________________

And my favorite comment comes from ‘Tax Me I’m Canadian’:

9/13/2010 9:49:24 AM
Ah yes, we the middle class are taxed into being the working poor.

47% income tax
5% property taxes
1% vehicle taxes
5% sin taxes (fuel is taxed at 33%)
13% HST
1% Ontario Hydro debt recovery, income taxes and dividend payments to the Ontario government.

72% and counting.

Coming soon, Environment fee, new toll highways (if we’re lucky), more creative user fees.

As long as it’s not labled a tax, are we so stupid to beleive that it’s not a tax??

Apparently, some of us are.

#76 Gasolia on 09.13.10 at 11:14 am

“The house costs $40,000 a year to own (a three-year fixed term mortgage at 3%, 25-year am), and pays you nothing.”

uhhh…

The house “pays” what it would other wise cost to live somewhere. It’s really f-ing stupid to pay an $800K premium for the necessity of a place to live. You shouldn’t have to be intellectually dishonest to make that point.

#77 MIKEF on 09.13.10 at 11:22 am

@61 CTO

No arguments here CTO,good catch.
Please complete this sentence for me.

Despite budgetary pressures and a whole raft of social
urgencies,Premier Jean Charest pledged to give $175
million dollars to build a hockey arena even though it has no
tenants and no private money has come forward to
assist in this project,because __________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________.

#78 Don on 09.13.10 at 11:23 am

One complaint about your math, Garth:

“The financial portfolio costs $21,600 a year to own, and pays you an income of $40,000.

…….

The house costs $40,000 a year to own (a three-year fixed term mortgage at 3%, 25-year am), and pays you nothing.”

The house “pays you” whatever the offset in rent is, as well as the $18,400 (in year one) of decreased debt. Make no mistake, I’m completely in agreement that the risks far outweigh the rewards of house ownership right now. I just think your readers deserve a fair comparison between these two examples.

From the “rent offset” you can deduct the property taxes, insurance and maintenance. And I think most people coming to this site are quite capable of understanding this. But thanks for the crayon. — Garth

#79 Prof ANON on 09.13.10 at 11:39 am

@ #59 Brian T

If you would have referenced that material, I wouldn’t have taken issue. I am familiar with that commentary/perspective, and I agree with it to some extent. But simply stating that debt per tax payer is $2.1 million without acknowledging the assumptions/source/rationale behind such an inflated number is misleading. To top it off, it is impossible to draw comparisons without recalculating the debt ratio for all countries.

#80 Jeff Smith on 09.13.10 at 11:40 am

>#27 EJ on 09.13.10 at 1:23 am
>So if F knew he was robbing the future to play the hero
>now, what explanation was he going to give when the
>future arrived? I can only think of 3 options:

>1) He wasn’t going to be around when it imploded in the
>face of the whoever is in charge. Therefore the fool
>public will incorrectly blame that gov’t and not him.

>2) He hoped there’d be some sort of magical fairy that
>erased the gap caused by him, therefore avoiding aving
>to face the music.

>3) “Nobody could have seen this coming.”

If you want an example. There was a guy called Alan Greenspan who created a gigantic bubble. Which didn’t blow up until he was far far from the scene. Hey you are safe and your reputation is intact if you make sure you are not holding the bag.

#81 mattbg on 09.13.10 at 11:40 am

#1, what is the appeal of saying you work “FT @ fortune 500” company? I know a lot of people do it, but I don’t understand why it means anything.

Because Wal-Mart is at the top of the Fortune 500.

#82 Grant Hammond on 09.13.10 at 11:50 am

Markets are cyclical, I am really not worried about the market fundamentals any longer as I have learned that National Governments will correct however need be to encourage home ownership. It’s too large a part of the country’s economy…too big to fail.

#83 fancy_pants on 09.13.10 at 11:52 am

bleep.
..set crystal ball to destination America 2025 …
conversation of the day: “give you four chickens, two blankets, this axe and these her e seeds for that there cow.
“sure, but only if you trade me that stack of $bills for this chunk of cheese so I can light my wood stove”
bleep.
bleep. Roger, Roger? did you set that dial reading to Germany 1923 in error?
bleep. Negative. settings confirmed.

#84 Jeff Smith on 09.13.10 at 11:53 am

>#52 Consider This on 09.13.10 at 8:44 am
At #27: F will simply blame the Liberals for the implosion
>when he is no longer in the game. This is EXACTLy what the Republicans did in the U.S. to the Obama administration. It is unbelievable how quickly people
>forget the ones who actually created the mess. It is very easy to blame someone else and have the masses
>believe you, especially when those people are in dire need of something to believe. This is exactly what F will
> do.

However the history books are precise though. Contemporary society might be misled by crafty politicians , but history books present accurate records of what happens.

#85 FW on 09.13.10 at 12:01 pm

Hi Garth, I signed up for your event in Vancouver very early on. Got a call from the Gordon Group, answered their survey questions and they told me I would receive my ticket via e-mail. Now it’s a few weeks later and your talk is on Thursday. I haven’t heard back. What’s the deal? Communication from these guys has been pretty terrible.

Just come. Bring attitude. — Garth

#86 Will on 09.13.10 at 12:11 pm

@Calgary Rip Off: There are a lot of costs associated w/ a new house: fencing, yard, finishing basement, etc. A lot of those 10-year old homes have been reno’d already (i.e. new kitchen) and they’re probably better built than the current boom homes. So you may be better off buying the 10-year old home instead.

My realtor once told me to always buy in neighbourhoods built during busts: better built quality and larger lots…

#22 pablo – Prices are sticky on the way down. And keep in mind that throughout the summer prices still went up. It’ll be at least another 2 months before significant price declines will kick in.

On another note – new listings in Calgary are shooting up again and average/medium is starting to drop further. If it wasn’t for the daily million $ home sales, both’d be much lower already. Of course t’is the season – interesting nonetheless.

#87 Mark on 09.13.10 at 12:11 pm

#41, but banks can simply make up for any short-term cash crunch by raising “Prime”. Since defaults would be systemic and affect every bank, they’re not necessarily weakening their competitive position by doing so.

Also, quite unlike the USA, in Canada, roughly 1/5th of the outstanding loan issuance must roll over each year (ie: 5-year mortgages). So the banks have plenty of opportunity to adjust rates and spreads to match current market conditions. Whereas, in the USA, the banks were trapped, to wit: because people had locked in for long-term loans, the banks themselves had no ability to adjust their pricing.

The banks, which, for the past decade, have been ‘giving’ equity to homeowners, are now going to be sucking all that equity (+ interest) out of homeowners. Houses don’t change value, only money does!

#88 Bill ( Peterborough) on 09.13.10 at 12:13 pm

Re # 17 Devore

Prices of things I need to buy and pay are going up. Prices of things I don’t need are falling. This is deflation?
——————————————————————-

This is done to further destroy what is left of the working middle class.

We will not get a break in costs of the nessecities in life which we require. However we will see huge sales of the so-called toys, and be subconciously bombarded through marketing to acquire such items. It will make the general populous feel good, while taking their minds of the real problems around them.

Example;

” Rumours are starting to spread that we will have a shortage of beef through out the world shortly.”

The smaller Beef Farmers are getting low prices for their cattle at the auctions to the point of not being feesable to raise beef cattle. The middle men are making large profits on it. We in turn are not getting big savings .

This is all being created to further wipe out whats left of the working middle class. Same game has been done in other parts of the world.( 2’nd, 3’rd world countries.)

Remember truth is stranger than fiction : that’s why alot of times it’s hard for people to believe these things go on all the time. Hard to believe for the general populous that people would even do this to one another.

In order to expose these “So Called Elitist’s” you have to think like them. After all they did tell us that there are too many people on this planet.

#89 Dave in Victoria on 09.13.10 at 12:16 pm

Here’s a good one from a realtor on Saltspring Island, just northeast of Victoria. As much as people crap on realtors (salespeople essentially) within this blog, he’s actually quite honest and provides helpful perspective. Here’s his take on the current Saltspring Island market.

“Something to think about; 430 listings on Salt Spring approx 100 building lots/acreages. Basically 300 houses for sale on the island. Out of the 300 homes I would guess 90% of the home for sale need work. ie dated kitchens, old decks, rough yards, old style bathrooms, etc… That would leave 30 pristine homes on the market. If you broke the market down to 100k ranges basically there would be 2 homes per range from 500k to 2 mil mark that are in pristine, updated, totally staged and in move in shape.
Market research suggest 90% of the buyers want a perfect home to buy not a DIY project. So basically 90% of the buyers are looking at 10% of the homes (30 homes). If the home for sale is not perfect only 10% of the buyers will even glance at it. The buyers in the 10% range are the DIY buyers who will buy a project but only if they get it well below market price. These DIY buyers have to buy it cheap so that after they have poured in their sweat equity they are not buried in the home. If you are selling a home that is not perfect you can only sell on one term a low PRICE. Anyone can list a home at any price they want but it will not sell until the numbers work for the buyers.
At a rough estimate 270 of the homes for sale on Salt Spring will not sell in this market unless the owners cut their price and jump out in front of the competition. In this market sellers have to realize they are competing for a limited number of buyers.”

#90 LB on 09.13.10 at 12:16 pm

Again, the monetary and financial policies and bail outs recently put in place are not the result of any particular party or politician. This belief obscures the reality that these policies would have been put in place by ANY political party in power. It is the special interests of corporations, businesses and their lobbyists who BOUGHT AND PAID for these individuals to get into office, with the singular intent of emptying public coffers to benefit only these special interests, rather than the masses, who should be identified and held accountable,not politicians or their parties, who are merely the front men.

It is our system itself which we are recognizing as being no longer democratic, but representative of only an elite.Like other inequitable systems throughout history,whether they be monarchies,communism or military juntas, it is now clear that unbridled capitalism has failed and requires change.This is most effectively initially done through circumvention and non-participation by the majority.

The best means to quickly facilitate systemic financial change right now is for individuals to WITHDRAW their cash, and HOLD it in their own personal reserves,which will force corporations,banks and government to introduce and promote policies to increase their capital ratio reserves which are currently unsustainable. The resulting deflation and demand for this privatey held cash will INCREASE its value (buying power). This is the new kind of “investment”,regulation and oversight.

Contrarians: unite, WITHDRAW and rule.

#91 dark sad person on 09.13.10 at 12:21 pm

Poor, sweet, innocent little naïf Chris. Of course F did this.

He knows all about retail politics, creating a real estate bubble in the middle of a job-killing, salary-sucking recession. By ushering in emergency interest rates, declaring the bad times over and lowering lending standards he unleashed the hormonal gush which swept so many couples over the brink of indebtedness.
***************

G-are you sure he “knows” this?
I have a really hard time-believing this guy can comprehend anything-other than-perhaps reading a script written by Carney-
You give him too much credibility-imo-
I would sleep better at night-if I could believe he was a slick crook and knew what he was doing-like Carney-
This guy would get his face ripped off-by any economist with a half-assed clue–

#92 Mark on 09.13.10 at 12:26 pm

#54, not legal to borrow funds to invest in the market in the USA? Not true at all. In fact, they have a far greater selection of useful instruments in which they can borrow to invest in the financial markets that are simply not available (or not competitively priced) in Canada.

#93 Calgary Rip Off on 09.13.10 at 12:26 pm

#71 Winnipeger:

Another story from Marty Hope of the Calgary Herald to boost used home sales in Calgary.

Interesting the number of comments saying to buy a used place. That may happen if prices drop more, considering that many of these used places have appliances and roofs that will need replacing in short time. Problems with new places include cracked foundations, crappy materials, etc. Either way in Calgary if you are a first time homebuyer there is no reason to buy right now. Best to just look at what is out there. Most of the sellers will still make a profit even if $150K drops off their asking price. Chances are they bought before the boom when a decent place was $180K.

Compare new vs. used. There are drawbacks to both. If you buy used you wont have to do the lawn. But you may end up fixing the roof and other parts of the house in short notice. If the place is only 5-6 years old, this may be a non issue.

#94 Devore on 09.13.10 at 12:36 pm

#25 Timing is Everything

Well, we are not foraging for food on the Serengeti anymore. Are you saying that our society will have only winners and losers, have and have nots, masters and slaves?

We’ve been there done that…all kinds of messiness.
I’m sure the losers, have nots, and slaves will do something about that situation, one way or another…if you catch my drift.

Well, yes. That was my intention back when I said that life IS a struggle, and is supposed to be, in the sense that we are all competing for resources, all of which are scarce to one degree or another, and we all cannot be winners. There will always be losers. Even if it is just those unwilling, unmotivated, uninterested in competing or even participating. The alternative is for all of us to be losers equally (or at least inversely to our need and proportionately to our ability), and we already know how those ideologies are working out.

And just like you said “you can’t get blood from a stone”, you can’t get something for nothing either.

At the end of the day, someone has to do the work, someone has to put in the effort, someone has to sacrifice the present for future benefit (saving, investing), someone has to take the first (risky) step, someone has to think about the future, and they should not be penalized for having done so by becoming more of a loser. We cannot keep bringing those people down to the lowest common denominator, or they will eventually come to resent and resemble it.

Whatever system we have, needs to justly reward (and not just with the warm fuzzies) those who want to get more out of life, and are willing to risk and work for it, and those who do not want to do the work need to not get their panties in a bunch over it. Is humanity capable of it?

#95 First Time poster on 09.13.10 at 12:46 pm

You have finally summed up what I have known all along. A home is a place to live and not an investment. It never has been and never will be. Even in the past sellers have never taken into account all of the interest payments to the bank that they have made when they go to sell their house. A true accounting for making money on a sale would be to take you original purchase price, add on __% per year increase in housing prices and add all of the mortgage interest paid to your bank (not to mention fees for selling). Then see if this number matches what you actually sold your house for (probably not).

#96 mattbg on 09.13.10 at 12:58 pm

#93 Calgary Rip-Off:

Regarding new vs. used, this seems like an outdated analysis. Even 15 years ago, people were finding that, having just bought a new, large $400K house, the windows needed fixing and the roof needed to be re-done after 10 years or so because of the quality of materials used. I knew people that this happened to, and many couldn’t even afford to do the necessary repairs because they were so expensive on larger houses.

I doubt the quality of materials is any better now that there is excessive rush to finish properties and deliver them to buyers.

I would always buy a used house — you can see the issues, and it’s at least proven itself capable of standing for some time. On top of that, any neighbourhood needs time to “cook” before it takes on a more permanent character.

#97 Bottoms_Up on 09.13.10 at 1:10 pm

#74 Ottawa S. on 09.13.10 at 10:57 am
—————————————
Both those places are on the ‘right’ side of Vanier parkway (nothing against Vanier of course!). 100k less for each (or more), if they are located a few more blocks east.

You get walking distance to a huge park and beautiful river, Loblaw’s, even downtown. The 2nd place is sitting on an acre, which probably factors in to it’s higher price.

Decent places in a decent location, for decent-prices-for-Ottawa, so those are not bad at all!

#98 Risk on 09.13.10 at 1:15 pm

#64 Risk “Pay attention. (a) I did not suggest an equity portfolio in this example, but rather fixed income. (b) Nobody lost 50% on stocks last winter unless they were dumb enough to sell. (c) Cash is not an investment strategy. — Garth”

A. Ok, truce on that. Let’s call it “almost-safe fixed income” as it’s not backed by the Gov’t or prov, but rather by corporations and banks with no taxing power.

B. I am sure there were a lot of people that sold out. It was very scary times and no one knew at 50% down if the market was going to go up or down. A 50% loss is better than a 60% one, etc. We all act upon emotions. Dumb or smart, sometimes it is just luck.

C. I generally agree with you there Garth. I think it is a very situational call. Some have a little cash and need to take risk. Others have more than enough to last their lifetime, and don’t need to take the risk. Time and place for everything. I am fortunate enough to afford to stay in cash for a very long time, others can’t. I will move into dividends, ETFs and fixed income when I start to read on here your suggestions to do so. But right now, I’ll wait till after October 7th and see what fruits fall off the tree.

#99 JM in London on 09.13.10 at 1:18 pm

#39 Jane54 on 09.13.10 at 6:23 am

Just had a conversation with a local RE agent I know. They had just come from one of the now twice weekly mandatory meetings (this used to be twice monthly – and “mandatory” was a wink wink nudge nudge affair for producers) where there was apparently a lively debate about the merit of having a finance person on sight for quick pre-approval. The reason? Traffic across all open houses down 30-70% here compared to same time last year with # of open houses held up 20% and everyone trotting out their pet theories on how to “maximize” the traffic you get. The agent I was speaking with had the observation that with traffic down at the 2 they held, a full 1/2 were curious/nervous neighbours trying to figure out what would happen if they listed…The agent in question said that number never used to rise above 20ish %. Something else noticed by said agent? The first time they have heard of people asking if the seller would entertain lower offers in the past few years…

The last question is the most telling I think.

I respectfully declined the offer to attend an open house if anyone’s wondering.

#100 Bullion.bunny on 09.13.10 at 1:23 pm

bullion.bunny – Thanks for link to OpenBSD. It is secure, no doubt, but how well does it play with applications designed for other OS, have you worked with it? I am playing around with Ubuntu, booting from CD, and trying to lock it down tight, then using WINE to run a couple apps. So far mixed results, it works, after I cleared up a few issues. A work in progress.

Yes that is the problem with OpenBSD, however there are library ports of the most popular packages…..you can find some of them here.

http://www.openbsd.org/ports.html

I have used OPenBSD for personal projects and yes it’s not windows or even Linux……its hardcore all the way!

Also take a look at bastille linux….it’s all about closing ports and hardening your system…..it truly is difficult work……running applications on Openbsd is difficult but is does make a kick ass firewall!

http://bastille-linux.sourceforge.net/

Good luck.

P.S. Similar to understanding credit markets and financial systems, open source is not for the intellectual light weights. In the hands of the art students it melts down, in the hands of the tech masters it’s a fortress. It takes work, depth and understanding; you have to be willing to put in the time and energy in order to reap the rewards………..otherwise just use windows, its crappy but it works.

#101 Devore on 09.13.10 at 1:26 pm

#91 dark sad person

G-are you sure he “knows” this?
I have a really hard time-believing this guy can comprehend anything-other than-perhaps reading a script written by Carney-

Of course he knows this.

But it’s much easier to believe our politicians are stupid.

#102 JM in London on 09.13.10 at 1:28 pm

#91 dark sad person on 09.13.10 at 12:21 pm

It’s not often we see eye to eye on anything, but in this I’m inclined to agree with you that F is just one big H/Carney finger puppet…exactly the reason another “great leader” *COUGH COUGH* “gave” him the job I think…

#103 NeedAHouse on 09.13.10 at 1:46 pm

More bad news for alberta

http://www.edmontonjournal.com/business/Mortgage+arrears+soar+Alberta/3517631/story.html

#104 nikon_d40 on 09.13.10 at 1:52 pm

Hi,

Here is a real life rent vs. buy decision made from a former Calgarian, currently living in the US and planning to move back to Calgary:

House price, say $450,000 (a very typical home in Calgary) Vs. rental of $1400 per month Condo (all inclusive including utilities). If we invest that $450K (i.e going for the rental), with, say conservatively, 3% return (opportunity cost), Interest income would be $1125 per month, less tax would be around $850~$900. Add property tax around $200 per month, Insurance $150, normal maintenance $100, utilities $200, etc, total cost of the HOUSE ownership = $1500~$1550 per month. This compare to the $1400 condo rental, financially I will be getting ahead. As a bonus, I can set up a chair in the Condo balcony to watch the housing market unfold….

Yes, the house will give me few hundred more sq. ft. to live in, but I think the Calgary housing market is over-valued. Moreover, the larger the house, the more it cost to heat, thus more money would come out of your pocket. By the way, how much of a house you NEED to live??

#105 Sam on 09.13.10 at 1:54 pm

I’m not persuaded that runaway self-reinforcing deflation is impossible.

The inflationists have their faults, but since we’re discussing deflationists: in addition to your list of what they lack, here is what some deflationists DO HAVE:

an ability to forget their past predictions

another ability to declare a lost fight as won

another ability to continually re-define the terms being used so the deflationists always “win”

another ability to point to one small subset of numbers to “prove” that the deflationists have “won”

an overwhelming need to write “I win”, regardless of truth
____________________________
#181 goldenfox on 09.12.10 at 6:56 pm

dark sad person on 09.12.10 at 1:23 pm

Actually the $ is not getting stronger, it is just not falling as fast as the other fiat currencies. There are many ways of measuring money supply, and the experts disagree among themselves as to which one is valid. Deflation, the bad type when asset prices collapse, and cause multiple debt defaults and concomitant money supply drop is something all govt will fight tooth and nail. Inflate or die. Bernake is and will continue printing, quantative easing etc until the cows come home.

See Sam on 09.12.10 at 12:34 pm
http://www.lewrockwell.com/north/north803.html
Here is what those who predict inevitable price deflation lack:

1. An understanding of what money is
2. An understanding of capital: it isn’t money
3. An understanding of consumer goods pricing
4. An understanding of central banking
5. An understanding of commercial banking
6. An understanding of Keynesianism
7. An understanding of Austrianism

This puts them at a disadvantage when they make economic forecasts, especially their forecasts of consumer prices in the following year. They have been correct twice since 1940: in 1949 and 1955. That is not what I call an impressive record.

#106 Devore on 09.13.10 at 2:05 pm

Greater Victoria leading the way in BC, with 11 MoI, that’s even higher than Okanagan I believe. Those fall listings sure picked up, the sales not so much. Buyers must be busy doing their kids homework. Wait till Christmas. But then that’s winter, and there’s always the chance of winter weather happening in winter (hey, economists in the US seemed to be shocked by this earlier in 2010, anyone still remember?), so we should just call it a year and wait for sales to pick up next spring again.

#107 Devore on 09.13.10 at 2:11 pm

#104 nikon_d40

Moreover, the larger the house, the more it cost to heat, thus more money would come out of your pocket. By the way, how much of a house you NEED to live??

Ah, that is the question, isn’t it? Contrary to popular belief, not a lot, although the trend in Canada (and even more so in US) has been for bigger. Personally, I prefer smaller, easier and cheaper to take care of, less stuff to buy, and less temptation for trinkets to fill up the space. If you haven’t used something in over a year, it is probably time to sell/donate/throw it out.

#108 WINNIPEGER on 09.13.10 at 2:13 pm

https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?csid=1&cat=107&itm=9&lang=en&fr=1284403845921

Spring CMHC forecast for Winnipeg.

The graphs are very interesting :-(

Anyone willing to comment on the report?

#109 dark sad person on 09.13.10 at 2:16 pm

#105 Sam on 09.13.10 at 1:54 pm

************************

Do you have an example that shows proof of what you’re saying-or whatever it is-you’re trying to say?
If so–let’s here it–
Otherwise–its just babble–

#110 Murray F. on 09.13.10 at 2:27 pm

Lot’s of reasons for not buying a home.

But, many people buy a home TO LIVE IN!! Yes, house investing alone may not be the best idea, but owning your own home to live in for the long term is not a bad idea. Instead of paying rent to someone else where ALL your money goes down the drain, you are paying down your mortgage eventually.

Yes, I know that most of the cost of your mortgage in the first 10-15 years goes to interest, which is not tax deductible, but eventually, you have a home that will be paid off, and even if it’s not the best financial investment, it sure is nice to own your own home outright!

So I’ll take home ownership over renting any time, given the choice, and I won’t worry about buying at the market bottom. I’ll buy when I have the down payment and be able to afford the mortgage even when rates go up. This way I won’t have to rely on my landlord to keep my place in good repair and I won’t have to worry about how much of a rent increase I’ll have to suffer every year.

Maybe you’ll save a few dollars, but I’ll be happy on my own private lawn drinking a nice cool one!! And when my mortgage is paid off, who’ll be laughing then!!

#111 Devore on 09.13.10 at 2:28 pm

#58 dark sad person

What part of this -do you not get?
My definition is clear and has never strayed-
Either rip it apart-or stfu–

I don’t need to rip apart anything, and you need to settle down.

Deflationistas have been making the exact same argument for 50 years, which is how long they’ve been losing their shirts. Meanwhile, excuse me, but I’ve got to make a quick trip to the grocery store, before all this rampant deflation causes the price of eggs to go up again next week.

#112 april on 09.13.10 at 2:29 pm

Garth, your post has 103 comments and when I click on comments I only gt 10 coming up. Just wondering if it’s my computer or what?
Thanks

#113 Another Albertan on 09.13.10 at 2:44 pm

#100 –

Running applications on OpenBSD is only difficult when said applications that claim to be multi-platform really aren’t. There are more “Linux-isms” out there that only someone who has hand-ported code can really attest to. I’d be extremely surprised to find a common backend application that hasn’t been successfully ported and packaged. If you’re talking about a necessity to run graphical applications under X with heavyweight libraries, yes, you might have a bit more trouble. But anything else in the classic “headless server” sense, no way. There is preciously little that can’t be made to work.

Disclosure: Theo is a very good friend of mine and I am involved with the project.

Everyone else’s mileage may vary.

#114 C on 09.13.10 at 2:44 pm

Garth, another blog I love to read is David Rosenburg’s.

He had a great quote today which I think is perfect for you especially after last weekend’s hit.

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,

He said it is from Rudyard D Kipling’s “If”.

Beauty!!

#115 dale on 09.13.10 at 2:54 pm

“The diversified portfolio is guaranteed to throw off 5% a year, has minimal risk, with the potential for capital gains, and can be converted into cash with a phone call.”

Sure check this out http://www.fisgard.com

It is a garunteed cash flow instrument, but be careful, this puppy invests in the securest of all assets… Canadian Real Estate… ok that was a joke, but if you have a balanced portfolio, in relatively safe investments as Garth suggests, and you have a long term horizon, by all means borrow your heart away, deduct the interest, and make money. However I believe you are not able to put the money into RRSP’s or TFSA’s is this correct?

Good to see the Blog survived, you should be honored Garth, you have ruffled a few feathers, good on ya…

#116 Consider This on 09.13.10 at 3:21 pm

At #55: Prof Anon., I agree with you that BrianT just pulls numbers out of the air, and he is clearly anti-American as he is continually posting misinformation. Actually though, each CITIZEN of the U.S. owes a little over $43,000 with respect to the U.S. National debt.

Compare that indebtedness per U.S. citizen to the indebtedness of each Greek citizen, relative to the GDP per capita of Greece, and the U.S. looks like an absolute sweetheart.

http://www.usdebtclock.org/#

#117 Resource Clips » Good Reads on 09.13.10 at 3:23 pm

[…] Canadian houses are lousy investmentsby Garth Turner […]

#118 dark sad person on 09.13.10 at 3:27 pm

111 Devore on 09.13.10 at 2:28 pm

#58 dark sad person

What part of this -do you not get?
My definition is clear and has never strayed-
Either rip it apart-or stfu–

I don’t need to rip apart anything, and you need to settle down.

Deflationistas have been making the exact same argument for 50 years, which is how long they’ve been losing their shirts.
********************
Why ask me the same lame brained question all the time-when I’ve already gave you my answer?

Show us who has called for deflation for the last 50 years-

Please don’t drag out Prechtor-

The best ones I know of–said in 2001-
Once this credit expansion finds a ceiling (it did) Deflation will occur-(it did)
I’ve proved it–you don’t like it–so what-

And stop trying to control the tone of the board-
That’s G’s job–not yours–

“If you want to be free, there is but one way; it is to guarantee an equally full measure of liberty to all your neighbors. There is no other”

#119 Ronaldo on 09.13.10 at 3:48 pm

http://www.businessinsider.com/hong-kong-property-record-price-2010-9

The above from Hong Kong. And we think we have high priced condos.

#120 bullion.bunny on 09.13.10 at 3:49 pm

#114 Another Albertan on 09.13.10 at 2:44 pm

Cool! You guys have done a great job on OpenBsd. It’s complete hardcore! My comments are directed at newbies only, most IT people consider windows and windows related products a difficult install. It really depends on your skill level and your objectives, yes you are correct anything can be ported! Depends on how much time you have. Anyway great job on OpenBsd, really love it!

#121 jwkimba on 09.13.10 at 3:52 pm

#5 I am with you on the ‘I just want a place to live’ rant . Funny that emploed peopel with savings are are priced out of the market by unemployed people with no money.

BUT

“What moron would buy a house that is 10 years old for the same price as a brand new house? ”

I would. It will be a lot closer to town, and much better built. I am especially leery of anything built in the lastt 5 years. Fake stone mini-mansions with creaky floors and paper walls. yuck!

#122 FormerVanCityOwner on 09.13.10 at 4:10 pm

And if you need $2,000 to $3,000 a month to pay rent, you must watch HGTV. — Garth

…or live in Vancouver.

Oh, really? — Garth

#123 pablo on 09.13.10 at 4:16 pm

Hi Garth; a very long time ago, your column in the tor sun published a graph showing economic trends over the past 100-200yrs, apparently someone found it stuffed in an attic somewhere. Any chance you’d republish here in the blog, Then we could settle the debate on an old house versus a new one; just don’t buy one built in a boom realestate market as that’s when the quality of materials and workmanship really sucks.
I’ve long since lost my copy of that column, yes; I’m that old that I read your column, back then.

#124 Bid it Up on 09.13.10 at 4:37 pm

*Sniff, Sniff*

Agent Will’s stats brought a tear to my eye. So beautiful. MOI went over 8 and only a 36% sales to list! This is the moment we’ve been waiting for!

I just hope it continues and wasn’t a “bad week” – realturd speak. There’s some debate on that going on (just ignore Larry)

http://agentwill.com/weekly-stats/

#125 Brian on 09.13.10 at 4:38 pm

Well, we all may have to repeat ourselves again since all the records seem to be lost. One more time. Dr. Dolittle; Harry Dent revised his prediction to 25,000. Then Greenspan lowered interest rates to almost zero and therefore created subprime, are you still with me? So how can someone maintain endogenous variables when the exogonous variables are rampant.
By the way he predicted the Japan bust and the boom of the 90’s.

#126 jess on 09.13.10 at 4:44 pm

risktank

Governments put up $20M for international risk centre

#127 Bill( Peterborough) on 09.13.10 at 4:50 pm

Food for thought:

The only type of gold I like is the real stuff: where I can touch it and look at it. No stocks/ paper, thank you.

What are the chances of going back onto the gold standard with no gold.

http://www.youtube.com/watch?v=dECbnIP1l0Y

Zero. — Garth

#128 FormerVanCityOwner on 09.13.10 at 4:58 pm

And if you need $2,000 to $3,000 a month to pay rent, you must watch HGTV. — Garth

…or live in Vancouver.

Oh, really? — Garth

…really. To rent an $800K house in Van will cost you at least $2K a month. Our current 3bed townhome is $2200/month.

Did you follow the link? I thought an $800K Van house was called a ‘garage.’ — Garth

#129 Bubble 'n Fizzle on 09.13.10 at 5:09 pm

You are a fearmonger. What’s your agenda? — Garth
——————-
That’s a bit rich, even coming from you, Garth.

I tell you to be wary of the patently dangerous, not the dragons under the bed. — Garth

#130 VICTORIA TEA PARTY on 09.13.10 at 5:09 pm

A GOOD DAY IN THE STOCK MARKET CLOUDS

It was another good day on the Dow; the 8th “up” trading day of the last nine; still about 4-K below the all time high in late 2007, mind you, as the Dow (and other stock markets) plugs away for starry-eyed and yield-starved investors across the world, since that’s about the only option left for retirement plans everywhere.

So, the smug creeps back into markets everywhere in the industrialized world. What’s there to be worried about? Apparently nothing.

Overnight in EuroLand it was announced that banks there will have to raise their loan loss reserves from 2 per cent to 7 per cent….over the next eight years! That’s why banking stocks were up everywhere today.

It means that the increased money banks will have to hold back against further future losses will not have to be set aside for years, if ever. Therefore investors will take the higher dividends, presumably, and to heck with the risk. Stupid.

At some point the Dow and its cohorts across the world will pack it in. That’ll be the day when the rich should hide because the poor will be after them with their knives and forks, for a little sustenance, after they’ve first dispensed with the family pets.

Meanwhile back at Canada’s Consumer Central, El Rancho Broko, the “wealth-effect” fantasy, promulgated by those markets, hits a granite mountainside with this news: the Financial Post reports that “Canada’s consumer-led economic recovery is quickly fading…”

Slumping RE markets, ubiquitous LOCs and credit card debts are plaguing Mr. and Mrs. Canada, and their various and sundry offspring and other hangers-on, who will be forced to reassess their mall shopping addictions.

Many stats accompany this report which is being reported all over the MSM. Two examples: household net worth per capita is $174-K while debt to personal disposable income is 145.57 per cent! Also, Americans’ savings rates are at 6 per cent while we here save JUST 2 per cent!

Mr. Flaherty commented that Canada is fiscally better off than its major trading partners, in terms of deficits. True, but Canada leans heavily on the sales of our non-renewables and banking activities. There should be more to “economic prosperty” than that.

What would be a good-news day in the economy and markets at some point?

Perhaps the one when we are prepared to accept that less should be more for some time to come as we tidy up debts and deficits and return to basics. At least that is happening in the US right now. Good on them.

#131 Patrick on 09.13.10 at 5:14 pm

@ Garth, #38

Garth:
(e) Why buy an ETF when you can buy preferreds?
————————————————————

OK, I’m confused here. You recommend buying ETFs over mutual funds, and preferreds over equities. Doesn’t it make more sense for diversification to combine these strategies into purchasing an ETF index fund that invests in Canadian preferreds?

Or have I misunderstood?

Why diversify when a preferred pays you a fixed dividend? Where’s the advantage if you purchase a top-quality issuer such as a bank? — Garth

#132 The Original Dave on 09.13.10 at 5:47 pm

anyone know good rates when it comes to trading stocks with financial institutions? Scotia charges $29 per trade and even worse, charges something like .03 cents per share if you’re selling more than 1000 shares. Craziness.

I’d like to know some alternatives. If I lose money on a trade, they don’t reduce their fee. I’m not sure why they take more when I do well.

Any insight would be great. I’d rather deal with a major financial institution though.

Why not choose Surething in the fourth to show? — Garth

#133 Jeff Smith on 09.13.10 at 5:55 pm

Wow, Europe might have their own subprime mess?

http://www.financialpost.com/news/business-insider/subprime+Europe+about+blow/3518398/story.html

#134 Consider This on 09.13.10 at 6:04 pm

At #131: Victoria Tea Party, agreed. Good on them (the U.S.)! They’re acting more responsibly than we are by FAR.

Also, in other news… Buffett rules out a double-dip recession…

http://finance.yahoo.com/news/Buffett-Rules-Out-DoubleDip-bloomberg-2228875511.html?x=0

#135 Rain8 on 09.13.10 at 6:15 pm

Lots of discussion about the price of real estate in Vancouver but never a mention of the drug industry there. The money coming into that city through the drug trade must have an effect on real estate. Garth I would be interested to know if you think the government will ever look to legalize pot for a big tax grab.

#136 Aaron on 09.13.10 at 6:31 pm

Hi Garth,

My only question is who will lend you the money at 3% to invest in securities ? What kind of loan are you talking about ? thanks.

Ever heard of a LOC? — Garth

#137 Nostradamus Le Mad Vlad on 09.13.10 at 6:34 pm

#38 Suburban John — “What’s your agenda? — Garth”

Cinnamon buns loaded with creamy topping, Health food at its finest!

#21 BrianT — Thanks. According to Garth, we’re all screwed anyway, but those who had the foresight to work their butts off so the mortgage could be fully paid off, then having a set amount withdrawn per paycheque and put into investments, RRSPs, non-registered accounts etc. leaves one in a slightly better position than many others.

#34 Brian — Obama and the elite have quietly turned the US into a military dictatorship as well, ‘tho many will vehemently oppose that POV. It doesn’t matter who is running things, whether it is Marx, Hitler, Pinochet, Sarkozy or Obama.

They were all put in place by the elite to drive their respective countries into the ground.

#39 Jane54 — Slowed down considerably in Kelowna, and most of the Okanagan.

#41 Moneta — “Too much complacency out there if you ask me.”

Agreed, with complacency being the key word. The shit is already flying, but sheeple are focused on the NFL, CFL, NHL and junior hockey to be bothered with reality.

That’s where false flags come in mighty handy — to wake bozos up when everything else is falling to pieces around them.

#49 Bill (Peterborough) — Thanks for the clip. Interesting now that Larry Silverstein admits that WTC7 was deliberately pulled, the clip shows it going straight down.

In other words, a pre-planned implosion, just like the others. Anyone should know by now why the WH and Pentagon want ‘net control — to prevent the truth from getting out.

It will never happen, ‘tho.

#63 CTO — “ONTARIO, QUEBEC DEFICITS”

Nostradamus Jr., my client / patient is correct. Central and Eastern Canada will take a major punch to the stomach (like Harry Houdini), but it will take them generations to recover. Good post.

#65 $froma$ia — “Why did he do it in the first place….”

Good chance that this, like 9-11, was a pre-planned set-up. Bill (Peterborough) said so many things revolve around the economy, but the west’s economy is sinking fast. The less sheeple know, the better.

#91 LB — “. . . to WITHDRAW their cash, and HOLD it . . .”

Interesting POV. We have just enough cash in the bank to pay monthly bills and an emergency fund, but that’s it.

The bulk of our assets are in investments with monthly DRIPs, so it wouldn’t be necessary for us. But I get your drift, ‘tho.

#116 dale — “. . . you have ruffled a few feathers, . . .”

Good point. Would be interesting if Canada had several million Garth Turner in the population — would sure change the face of things to a far more positive view.

Links and clip in. Just as the true version of 9-11 is not going away, neither will the recent G20 meet in Toronto.

Basle and the G20.

Obama and the elites’ change — not so good.

BTW, are all of us Blog Dogs going to be nominated for The Darwin Awards? It would be great to have some public recognition!

#138 BrianT on 09.13.10 at 6:41 pm

#135Con-we have heard it all before (repeatedly)-what is good for Warren Buffett is good for America-blah blah blah. I wonder how this old grifter’s pronouncements of “let them eat cake” are being received in Phoenix or Detroit.

#139 S.B. on 09.13.10 at 7:10 pm

Bailing in BC: I appreciate your answers. I used to visit BC often and drive up Sea to Sky when ever possible. I was keeping an eye on Squamish as an alternative to Whistler maybe for an “investment property” if prices pull back. But just watching at this stage of the game.

#140 Mark on 09.13.10 at 7:51 pm

#137, there are a number of options available.

a) One could ‘borrow’ at very low rates by purchasing, with their capital, in-the-money call options on the stocks and preferreds that they want to borrow, up to the notional amount of exposure they want.

b) Interactive Brokers, a broker that offers brokerage accounts to Canadians, on $800k, charges 2.2% interest (for CAD$ borrowing) on their margin accounts.

c) One can buy futures contracts with as little as 5% down by opening up a futures account with any of a number of brokers.

d) And, as Garth indicated, one can do a HELOC if they have access to one.

Plenty of options for borrowing to invest in the securities markets.

#141 T.O. Bubble Boy on 09.13.10 at 8:10 pm

Can’t wait for those anti-OECD articles from various Canadians “economists” tomorrow!

#142 T.O. Bubble Boy on 09.13.10 at 8:10 pm

Don’t tell us why we can’t have housing prices at 5x-10x incomes!

I can’t wait for those anti-OECD articles from various Canadian “economists” tomorrow!

#143 garthfan on 09.13.10 at 8:12 pm

I’m more than a little bummed. I was planning to investigate a comment made a few posts back – a response to “Fan of Mises” – on the nuts and bolts of betting on the RE bubble, but all is now erased???

Ratz!

We are digging around in the rubble for the missing 12,000 comments. Most of them are still radioactive. — Garth

#144 Nostradamus Le Mad Vlad on 09.13.10 at 8:23 pm


#136 Rain8 — “. . . the drug industry there.”

Portugal has legalized drugs, Holland is on the verge of following their lead, Mexico is looking at it so the US and Canada may not be that far behind.

Portugal’s crime rate has dropped substantially, so less policing costs. The pusher has been eliminated, and it appears anyone can get just about anything they want on the open market at a fair price. All legal, straight up stuff.

Hence, lower operating costs with less police needed. Further unemployment?

5:22 clip US money is going abroad. Where and why? Humans are livestock being sold off, that’s all.

US Taxes “If Federal workers, who are paid 1/3 more for the identical work done in the private sector, cannot afford their taxes, then that tells you all taxes are way too high!” wrh.com.

RCMP Anyone seen this?

The Doomsday Cult Well, it’s gaining traction!

Fried Beets Food wars heating up.

Farmland “The neo-colonial rush for global farmland has gone exponential since the food scare of 2007-2008.” Now India is starting to push into Africa to grab their land and wealth.

Goldbugs For the goldbugs here.

2:35 clip The controlled m$m are beginning to show 9-11 in its true light.

This is the govt. we elected, so we got what we deserved.

Executions for banxsters. Do we vote Yea or Nay?

Professor Obama views most Americans as spoiled brats.

Sadaam + Monsanto If Sadaam is still alive (he may be living in Russia), this would be a match made in heaven!

#145 Old_is_Gold on 09.13.10 at 8:26 pm

# 43 Colin / “Hopefully next year we can get back to some sensible reality. Keep your fingers crossed that next year we will not be paying $350K for a 20 foot townhouse that is a 45 minute commute to downtown, that 3 years ago was only $250K.”

A townhouse 45 minutes from downtown should be 150K at best, even at 250, its way overpriced. We need to get back to mid 90’s prices as has already happened in places in the US, and I believe it will happen in 3-5 years

#146 Whistler Dude on 09.13.10 at 8:29 pm

#151 S.B. on 09.12.10 at 2:00 pm
To #115 Bailing in BC or anyone who knows:

To SB and bailing in BC, re Squamish

Squamish aka Squampton, “is” a poor mans Whistler, as is Pemberton. People moved there to have backyards, and raise kids when the expensive Whistler dream died. Now Whistler has an abundance of Social housing (if you can stand the smell of Asphalt- for more on that check out the battle at http://www.piquenewsmagazine.com ). Many people who have moved to these burbs are now moving back. Why drink Dude beer when Kokanee costs the same. Why commute to Vancouver from Squish when N. Van is affordable.
A generation from now Squamish will be nice (with the big box stores it’s ambition seems to be becoming the next Port Moody). Squamish will fall further and harder like all surburbs. And Whistler will fall further than Vancouver due to all the speculators who failed to get rich from the Olympics..

#147 goldenfox on 09.13.10 at 8:56 pm

Nostradamus Le Mad Vlad on 09.13.10 at 6:34 pm

#49 Bill (Peterborough) — Thanks for the clip. Interesting now that Larry Silverstein admits that WTC7 was deliberately pulled, the clip shows it going straight down.

If true, interesting that it takes weeks if not months to set up a building for a “pull” and this happened only hours after the world trade centers went down.

compelling interview with Arron Russo before his death
http://video.google.com/videoplay?docid=-1656880303867390173#docid=5420753830426590918

#148 Timing is Everything on 09.13.10 at 9:45 pm

#95 Devore said – “That was my intention back when I said that life IS a struggle, and is supposed to be, in the sense that we are all competing for resources,…”

Hmmm…What is struggle? It is effort constricted by emotion and desperation. Ones struggle is mere effort for another. Remove the emotion and desperation….life will be much easier. Simple, but not easy for most. It takes patience and practice.

—————————————————————–
Winner(s) and all the losers….and resources…

Agreed, a winner should be rewarded. However, what is the limit of the reward for an indvidual? How many billions of dollars is ‘just’ (insert definition here)? How much power? Earth’s resources are finite, the current economic system requires infinite growth (resources). There are limits…to everything….on this planet anyway.

Hmmm, last person standing wins? Is there a better way? Can human life on this planet be balanced,
like good portfoloi?

#149 Devore on 09.13.10 at 11:04 pm

#119 dark sad person

(left for end of day, so as not to pollute a useful blog)

And stop trying to control the tone of the board-
That’s G’s job–not yours–

I’m hardly controlling anything. When you’re talking to me, you’re dealing only with me, I don’t have a nanny, “G” does not speak for me. And when you’re talking to me you will be civil. Or, you can tell me to “stfu”.

“If you want to be free, there is but one way; it is to guarantee an equally full measure of liberty to all your neighbors. There is no other”

Read that again, and look in the mirror. No, I will not “stfu”.

You’re fast becoming more righteous and self-important than even DA could hope to. It’s why I said you should settle down. You’re taking things way too seriously.

#150 The Original Dave on 09.14.10 at 12:47 am

Why not choose Surething in the fourth to show? — Garth

——————————————

I’m not sure I follow. I plan on being less aggressive in the future, but I’ve done well with the junior stocks. Looking to unload some for nice profits as the market seems pretty happy these days.

#151 Garp Says I am an Idiot on 09.14.10 at 1:55 am

#12 Goldenfox

“I give up. You win”.
————————————————————

Are you kidding? DSP is a bully and an arrogant A$$. Don’t give in to his nonsense. Almost everything contributed by DSP is copied and regurgitated material written by other people. Very little original material is ever added except some superious “I know better than you” attitude which is always attached. It adds little to the debate here. The guy needs a real job besides being a greater fool concubine.

#152 ralph on 09.14.10 at 9:44 am

Mortgage arrears soar in Alberta; consumers live cheque-to-cheque
Monday, September 13, 2010
By Mario Toneguzzi, Calgary Herald

#153 Weevie on 09.14.10 at 11:23 am

“#2, obviously you don’t understand how Canadian banks have laid off all of their risk of a Canadian housing collapse to the CMHC to be making such an ignorant comment.”

Mark, “laid off all their risk to CMHC” is untrue. Laid off SOME risk to CMHC is more like it. They banks are exposed to the economy broadly. Consumer and corporate debt and commercial real estate are not insured/guaranteed by CMHC.

#154 wetcoaster on 09.14.10 at 8:55 pm

Garth,

GlobalBCTV is announcing the buyers market is now offically ending via Cameron Muir, the BCREA pumper. Best you answer to this nonsense before presenting on Thursday as the media who trashed you will be hanging Muir’s words as they say The Lords Prayer tonight.

http://www.globaltvbc.com/Home+sales+drop+prices+climb+August/3524234/story.html