Bad idea

In two sleeps I will awaken to a ballroom full of people in delusional Bubble City and hope to emerge alive. Some Vancouver media, I’m told, have already trashed me. It’s likely just the start, given what I have to say.

But it’s not just the Lower Mainland that’s populated with greater fools. Calgary has ‘em too. And Toronto. In fact, across the country millions of people are busy doing things they will regret, like paying off a cheap mortgage, lining up at a new homes sales trailer or swooning over a glass shower stall.

As I will detail Thursday night, there are now 11 irrefutable indicators that the Canadian housing market is in jeopardy. I won’t trouble you with all of them right now, but here’s one:

When do most people first smell smoke? Right. When their foot is on fire. Thus, the primary sign of a housing event is not the latest CREA numbers, not monthly real estate board stats, not a report from Scotia economics and not even this pathetic, nuked-out blog. Instead, it’s the MSM. Only when this stuff actually starts making headlines in newspapers and breathless reports on the TV news do people notice.

And then, it’s too late. Like now.

Yesterday’s line story in the Globe, repeated in papers across the country, that housing woes are coming, was a substantial understatement. Behind this are the themes we’ve been discussing for months, now making the transition from undeniable threat to inescapable reality.

I mean, can the news get much crappier than this?

  • Fifty-nine per cent of Canadians would be in financial trouble of their paycheque was delayed one week (says the Canadian Payroll Association).
  • Record family debt levels have made households vulnerable to any shocks, like higher interest rates (says the OECD).
  • Household net worth dropped in the second quarter, despite higher house prices and a ‘recovery’ (says Statistics Canada).
  • Hundreds of thousands of homeowners are struggling to afford their homes despite cheap mortgages (says the Canadian Association of Mortgage Professionals).
  • The price of an average home in Canada is 35% higher than the long-term average (again, says the OECD).

Actually, it does get worse. A new survey shows 47% of us save less than one-twentieth of what we earn and another 40% don’t even try. Oh yeah, and confidence in the economy is waning.

This matters because (as I learned in politics) perception quickly becomes reality. If people shuck off Bay Street’s apologist economists and stop letting Ottawa blow sunshine up their kilts, then stuff happens. A sense spreads that it’s wiser to wait, than to buy. That prices will be lower in six months than they are now. That caution trumps confidence.

This is the stuff of a self-fulfilling prophesy. It’s why open houses empty of visitors and realtors dream of detonating my web site. With me in it.

Mostly, it’s all a lesson in behavioural finance. Markets and asset prices rarely move because of economic fundamentals, but they always move because of human emotions. When confidence swells, demand overcomes supply and prices rise. When fear shrivels desire, demand slags, supply builds and values plunge. I don’t care if we’re talking stocks, bonds, houses or Rogers Clemens ball cards, it’s always the same.

It’s the storyline. It’s why American house prices are still falling after five brutal years. And it now suggests Canada could travel a similar road.

Well, I have 10 more reasons why the real estate market is toast – at least for a while. And while this will be an agonizing adjustment for millions of family members, neighbours and incredibly irritating people at work who brag about their appliances, it’s sadly necessary. We’re an over-extended, pigged-out, indebted nation of financial losers who gave in to greed, HGTV porn and housing hedonism.

This is the reckoning.

Damn, I just scared myself. Maybe I’ll stay home.


Garth's latest podcast is here.

213 comments ↓

#1 Boombust on 09.13.10 at 10:02 pm

Funny, isn’t it, how all these people are coming out now and spouting off?

Where were they these past few years?

And, why now? Because the tide has clearly turned and they’d look like fools, otherwise?

There. I just answered my own question.

#2 Patz on 09.13.10 at 10:04 pm

Garth: “Mostly, it’s all a lesson in behavioural finance. Markets and asset prices rarely move because of economic fundamentals, but they always move because of human emotions.”

I don’t entirely disagree but there is a crap load of fundamentals to go along with the emotions. People do get tapped out; they lose jobs and they can’t indulge themselves in granite porn even if the heart is willing.

There may be a chicken/egg element to the argument. But Marx also had a good point: that the end result of capitalism is when the system has produced so much it can’t ingest any more. Likewise, to cite but one example: the offshoring of jobs weakened the middle class/working class to the point it clipped their spending.

Looking forward to seeing you this Thursday; maybe we can go for a beer and pick bugs out of our teeth. (For the literal minded that was a joke referencing an old post.)

#3 Boombust on 09.13.10 at 10:04 pm

Oh, BTW, what is really sickening too, is how F is urging “caution”.

Saw that idiot on the Gobal early News blabbering on about high debt ratios/mortgages, etc.

#4 S.B. on 09.13.10 at 10:06 pm

Here is a juicy piece for the ‘Blog Dawgs to chew on:

:P 8O

“Economists at National Bank Financial have altered their interest rate forecast in response to the latest communiqué from the Bank of Canada.

They now see the overnight rate rising to 1.5% by the end of the year, and then holding at that level through the third quarter of 2011, before rates resume their march higher, to 1.75% in the fourth quarter, and 2.25% in the first quarter of 2012. ”

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=54891&IdSection=148&cat=148&BImageCI=1

#5 Calgary Illusion on 09.13.10 at 10:07 pm

Your forecast for a 20% correction in RE prices seem a little conservative for tonight’s blog.

I’m just a liberally conservative guy. And a libertarian vegan. — Garth

#6 andrewS on 09.13.10 at 10:15 pm

Posted yesterday, #120 Ronaldo

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

About the ridiculous housing costs in Hong Kong.

Most telling is a comment with the article. I quote:

—-
haggis on Sep 9, 7:13 AM said:
You’re obviously completely unfamiliar with the HK property market if you’re surprised by this.

$250K would probably buy you the same thing in 1997. Five years later it would buy you a 1000 sf in an upscale neighbourhood after prices took a 65% tumble. After a sharp dip in 2009, prices look as though they’ve climbed back to more or less 1997 levels of stupidity. Rent yields are about 4%. Cue, next downturn and the whole thing repeats.

People in HK speculate on property like no other place. They’re also momentum traders rather than analytical. All this is fueled by low transaction costs, estate agent fees of 1.5%, and no capital gains or property taxes.

It’s fantastic.
—-

“People in HK speculate on property like no other place”.

Um, what’s the biggest source of foreign investment in Vancouver? One the realtors like to wave around?

sigh.

#7 Blunt on 09.13.10 at 10:26 pm

CTV News just opened their newscast with bad news housing market story. Over a billion dollars worth of housing was seized/about to be seized last year.
3 Times higher than previous year, 4 time higher than forecasted.
MSM is finally catching on…

#8 SpaceMonkey on 09.13.10 at 10:27 pm

I just read the following over on the REIN forum…

I just had a very relevant conversation with our realtor in Squamish, who is on of the top realtors here locally, but also works with the North Van office.
He currently has our house listed, and has listed his own residence as well (that should say something). In a nutshell, he expects a major (20%-30%) price adjustment over the next year or two.
As for the sale of our place in Squamish, we have now had it listed for 3 mos, and haven’t had any recent offers (the last 2 were about a month ago and fell through because they couldn’t get the financing). We did get a couple of showings, although that’s way fewer than before we dropped the price about 2 weeks ago…(!?)
I just had a really interesting strategy talk with our realtor, and he has already lowered the price on his own house twice within a month! He went on to tell me they are at the highest # of (new) listings in 7yrs in their NVan office, and the lowest # of sales in about 3yrs. A week ago, his assistant had shared with me the fact that her collegues in their team had had a bit of a jolt when they reviewed their weekly stats, which showed 37 new listings (in Squamish), with only 2 sales! Not surprisingly, he confirmed that prices have started to come down in general in Squamish.
There definitely seems to be smoke on the horizon, and I think we will now pretty soon start smelling it too… although, I am not looking forward to it…
That is before we’re in a position to buy!

#9 45north on 09.13.10 at 10:31 pm

And then, it’s too late. Like now.

yeah like now

Here’s Carlos4:
Example in my development: 3/2 brick ranch house for sale at 224K ….reduced to 195….goes into foreclosure…..bank takes back at 185….bank sells at 160…new FB puts in 20K, lists at 195….sits 8 months….sells at 165. Neighbor to this house, 3/2 1/2 brick ranch lists for 222K….sits for 6 months, sells for 180K two months ago.

http://thehousingbubbleblog.com/?p=6201#comments

he is talking about the US – notice neighbour is spelled wrong!

This matters because perception quickly becomes reality. Then stuff happens.

It’s about to.

#10 45north on 09.13.10 at 10:38 pm

talking about CMHC A more appropriate wording of its mandate might be, “To provide artificially cheap mortgage rates for borrowers who may not otherwise qualify for such rates and to ensure that the banks have no reservations about lending to said individuals”.

http://www.zerohedge.com/article/guest-post-primer-4-cmhc-enabler-canada’s-housing-addiction?source=patrick.net#inner-content

#11 Dan Mc on 09.13.10 at 10:50 pm

I love reading this blog and find Garth to be right on the money. This is not rocket science as long as people are able to pay attention to the arguments as to why such high prices are unsustainable. Its a question of when. Well, I’m paying attention, and I say buckle up.

#12 Tom on 09.13.10 at 10:56 pm

Hey Garth,
When you visit Van, maybe, just maybe the weasly marketers who are pimping Olympic Village can get you a good deal on a condo there lol!

#13 T.O. Bubble Boy on 09.13.10 at 11:02 pm

Toronto mayoral candidates are all bending over for the RE developers:

http://news.nationalpost.com/2010/09/13/mayoral-candidates-try-to-woo-building-industry/

Most of the candidates are saying that they’ll repeal or change the land transfer tax, and look at the “community development” dollars that developers must put into a neighbourhood where they build high-density housing.

Hmmm… a mayor in cahoots with the RE industry… where have I heard that before….

oh ya, Hazel McCallion:

http://news.nationalpost.com/2010/09/13/mccallion-settlement-involvment-crossing-the-line-inquiry-hears/

#14 Wise Guy on 09.13.10 at 11:12 pm

My Mom actually texted me to read the front cover of the Globe today, my parents of course sold their house three months ago and now are renting. The funny thing is that it was their Real Estate agent out of all people that texted her to tell her to read the front page of the Globe.

The real estate agent was saying three months ago that there are far too many real estate agents around (Dental secretary’s, unemployed assembly line workers, bartenders, maitre D’s…and the list goes on). He actually welcomes a downturn to get rid of them!

I made a bet with my best friends wife back in May, who works for a major mortgage insurance company that house prices in Toronto would be 20% cheaper in two to three years. She ridiculed me at a BlueJays game, because after all, she was the so called expert working with mortgages? Anyways, I stood by my conviction of course from reading this blog and made a small $100 wager with her. I don’t want the money, I just want her to feel shame!
http://www.youtube.com/watch?v=n_w4MV_LwMw

#15 T.O. Bubble Boy on 09.13.10 at 11:15 pm

oh ya – Garth, make sure to repeat your statement that “it’s not about the latest CREA numbers”… you might win a few friends in the rabid audience — especially with the mid-month numbers looking pretty brutal for Vancouver.

#16 Get Real on 09.13.10 at 11:17 pm

Hi Garth
I have great respect for you and your web site
Now that we’ve reached the tipping point, in the housing market as you say, perhaps you should consider staying closer to home, especially if its getting ugly out there, we will all understand.
Take some time off, and get some popcorn, like the rest of us

#17 junius on 09.13.10 at 11:18 pm

Garth,

My Mom called from Edmonton and she wants you to tell everyone that things will be OK and that in the long run everything in the housing market leads to gains for buyers and pain for renters.

Now you know why I moved to Vancouver!

I’m looking forward to your presentation in Vancouver, I’m taking my iPhone4 and will record the entire show!

Luv always, junius

Enjoy the presentation, but it is intellectual property. — Garth

#18 Taxpayer like everyone else on 09.13.10 at 11:25 pm

“In fact, across the country millions of people are busy
doing things they will regret, like paying off a cheap
mortgage…..” – Garth

I don’t understand. Why is paying off a mortgage a bad
idea? I actually paid mine off when it was cheap so I
wouldnt have to renew at a higher rate. Turned out it
didnt matter but who was to know?

I said a ‘cheap’ mortgage. Don be in any rush to pay off a below-prime loan. — Garth

#19 Mean Gene on 09.13.10 at 11:30 pm

Given the recent events with your blog are you going to have a security presence at your speaking events??

Are you volunteering? — Garth

#20 Timing is Everything on 09.13.10 at 11:33 pm

Garth said – “When confidence swells, demand overcomes supply and prices rise. When fear shrivels desire, demand slags, supply builds and values plunge. I don’t care if we’re talking stocks, bonds, houses or Rogers Clemens ball cards, it’s always the same.”

Who? What? When? Where? Why? How?

WHEN?!…. The rest are inconsequential .

#21 Bailing in BC on 09.13.10 at 11:34 pm

SpaceMonkey

The realtor in question has now sold. Hopefully the other guy got out too. Those comments were posted in May and that the market is tanking here, has become obvious, to all but the most dim witted.

Garth what happened to the puppy and the kitty?

#22 mab on 09.13.10 at 11:37 pm

http://www.time.com/time/business/article/0,8599,2013684,00.html

The Case Against Homeownership

#23 nonplused on 09.13.10 at 11:40 pm

I have hopes that at the end of this we will realize the premise behind banking that we currently use (and have experimented with of and on since John Law) is wrong. You cannot create money by “monetizing” assets. Well, you can, we’ve been doing it, but it ends badly. The current system, through the creation of loans against assets, allows a bank to “create” however much money, let’s say $400,000 just by taking a house that currently trades at $400,000 as security for the creation of the loan (very little actual money is lent, most of it is “created” in the process of making the loan. The idea is that the bank could come up with the money if required, so they lend multiples of cash on hand, call the loan an asset, and no actual money trades hands.)

The system we know is only stable if asset prices are stable, and they are anything but.

A simple system is always more robust than a complex system, even if that system is less efficient. For example a bow an arrow is much less likely to jam than a gun, even if a gun is better at killing. It’s also easier to repair in the field and the supply chain in much less of a factor. In the 60’s and into the 80’s, we could all repair our own cars if we wanted to. Now even the mechanics need the onboard computer to tell them what’s wrong. Complexity is great, but it’s not resilient. I fixed a problem with my 1997 Ford Fiesta carburetor one time sufficient to get me home with a piece of bubble gum. Not going to do that if the computer that runs the fuel injection goes.

I had a fridge that cost $1500 shut down when the “control card” went. Sure, it got good energy efficiency, but it was out of warrantee and the new card was $350 installed. That fridge was 2 years old. My landlord put a new dishwasher in this place, and months after the warrantee expired it’s “control card” went too. Another $175 on a $375 dishwasher.

Complexity kills.

The current economic environment is very complex. If the control card goes, we’re toast.

That is why the currency system is failing. It’s very complex, and we are in unsettled times. We will, at least for a short time, have to revert to a system where the medium of exchange is tied directly to a known asset of some type, immediately convertible. Gold? Silver” Copper even? Probably not, the money isn’t worth enough now. More likely the current monetary metal, which is zinc. Yes, believe it or not, we are still on a metal system, but the metal is zinc. The major component of most of our coins. Loose the coins, and you have no metal, and no monetary base.

#24 Joseph [Original] on 09.13.10 at 11:41 pm

Your view of a steep decline in real estate holds true everywhere except for Fortress Ottawa? Is this correct?

Yes, of course. It’s different there. ;-) — Garth

#25 Mike on 09.13.10 at 11:56 pm

“We’re an over-extended, pigged-out, indebted nation of financial losers who gave in to greed, HGTV porn and housing hedonism.”

Garth, I’m putting that on the back of my business card to leave with all the smug, boomer, mostly government -employed clients who treat us like we are their personal servants.

#26 Vancouver_bear on 09.14.10 at 12:06 am

Troubling number of foreclosures

http://watch.ctv.ca/news/ctv-national-news/sept-13/#clip347743

#27 Nostradamus Le Mad Vlad on 09.14.10 at 12:10 am


Guess yer gonna get yer butt whipped from the RE Daleks (Doctor Who). Exterminate! Exterminate! Be assimilated into The Borg instead.

Yes, it is a bad idea to buy in a deteriorating economy, with jobs being outsourced all over the world. Gonna be a lot of pain.

Regarding the world’s economies, DMX’s version of In The Air Tonight (esp. the lyrics) are rather apt.

Now the IMF is getting caught back-pedalling about the high worldwide unemployment figures. Dan was right — NO JOB — What was that? Pop!

Things may be getting out of hand. Never fear! C-H-F will lead us on to the Pot Of Gold somewhere!

Depopulation New bill bought in. “. . . begins a worldwide campaign for massive hunger and starvation. . . . is intended to bring ALL vitamin and mineral supplements and natural health remedies and technologies to an end.”

45 min. audio Theoretical hyperinflation. Then again, no one could have foreseen the takedown of Garth’s site a few days ago, so — NO ONE KNOWS FOR SURE.

One more. This sentence is rather curious: “…reduce the population with innovative “health care and vaccines.” Is this why Obama just rammed his health bill through?

Inflation in China; along with debt Overloads.

Links in. I don’t drive, so I’ll never have a carbon goofball cap–and-trade tax. I wonder how many technologies are out there which are being crushed by big oil.

Silver – Gold is / is not money. WTF is it then?

#28 bps on 09.14.10 at 12:13 am

I think it would be totally inappropriate for me to even contemplate what I am thinking about.
Don Mazankowski , former Candian Minister of Finance
Garth,

What are you contemplating?

The unthinkable. — Garth

#29 Chaos on 09.14.10 at 12:26 am

It’s all fun and games until…

somebody gets crushed by a slip sliding bull and takes a horn up the wazoo.

Oy vey! That’s gonna leave a mark!

#30 Jane on 09.14.10 at 12:31 am

The price of an average home in Canada is 35% higher than the long-term average (again, says the OECD).

Huh? Garth, please explain this.

Houses are 35% more expensive than they have traditionally been, based on contemporary incomes. — Garth

#31 I am an Idiot on 09.14.10 at 12:38 am

Has anyone else seen this yet….?

http://www.numbeo.com/property-investment/

It is a database of worldwide housing indicators where you plug and play the data. It is helpful, even fascinating as it allows you to compare your own city/country against data sets from around the world.

Major cities are represented, many medium sized ones are not though. It is worth a look and you can add info on your own region if it is not present y et which is how they are building a data base without actually hiring people to do the paid work.

It says the Vancouver income-to-price ratio is 6.6, when it is 9.3. Useless. — Garth

#32 John hs on 09.14.10 at 12:46 am

I’m always amused, and angry, when the “people who know” suddenly discover things that others have been talking about for years.

Buying RE with nothing down is now a bad idea
Spending every last penny of the paycheck is a bad idea.

Not saving for retirement is a bad idea.

Maxing out the plastic is a bad idea.

And so it goes; they’ve discovered what others have been saying and now it becomes a screaming headline.

The reality is that lots of folks live in houses they can pay for, save money, go without the toys, etc but they quietly went about their business and nobody noticed them.

Now they’ll get tapped to help pay for the recklessness of others because there’s a “crisis” brewing for the ones who didn’t.

#33 PPP on 09.14.10 at 12:52 am

“…incredibly irritating people at work who brag about their appliances…….”. Love it, Garth.

#34 joseph on 09.14.10 at 12:56 am

Garth I wonder if you are aware that Calgary prices have actually been falling for 3 years. We peaked in 2007 and the market has been pretty crappy ever since then (with a bit of a recovery last year).

You seem to only look at the CREA and CREB numbers which show our average at or near the peak but this is very very misleading.

Places that were selling for $305,000 in 2007 are now going for $259,000. Condos that sold for $310,000 have sold recently for $260,000. Houses in nice NW communities near the University are listed $100,000 lower than their selling prices in 2007. In my opinion prices are already down 15% or more in Calgary (despite the number CREB reports).

If prices fall another 10% that means a condo that sold for $305,000 in 2007 will be selling at $240,000.

Given that prices actually have been falling in Calgary already for three years how much more do you envision them falling from THIS point. Surely not 20%. That would equate to a 35% drop from 2007!

Also I can tell you from professional experience that people are buying rental properties and they are cash flow positive, and the rental market seems quite healthy, this presumably will help provide a bottom I suspect.

#35 The Original Dave on 09.14.10 at 12:57 am

G Man, this all means that you’re suddenly going to become popular to a lot of people. I remember this blog when there were 30-50 comments a day. We hit 200 sometimes now!

That’s it, for your Sept.29 engagement in Toronto, I’m getting a t-shirt made that says:

“Original Blog Dawg”

Looks like that date has to change to early Nov. for a larger venue. — Garth

#36 cornstars on 09.14.10 at 1:34 am

Garth you turned the spot light on , live in it bro . I said I would buy after 11 and it’s looking good ! Rural . and Garth you do not need defence as you have the best Offence !

#37 Thetruth on 09.14.10 at 1:48 am

How will 632,000 new immigrants per year affect housing in Canada’s major cities?? These are 2009 numbers.

I was amazed at the statistics. Not at the 252,000 who became permanent residents but the whopping 382,000 that became temporary residents (workers and students) in 2009 alone.

My source is below. Look for the heading “Canada -permanent and temporray residents” midway down the page.

http://www.cic.gc.ca/english/resources/statistics/data-release/2010-Q1/index.asp

Now imagine these numbers year after year adding to those before. The temporary residents do not go back. They find a way of becoming permanent residents (if you don’t believe this, then i don’t know what to suggest to you).

Anyways, you be the judge of how these numbers have affected Canada’s real estate and how it will in the future.

Your immigration musings have been debunked in the past. Overall, real estate is impacted only marginally. — Garth

#38 Thetruth on 09.14.10 at 1:57 am

For 2010, numbers from the quarterly statistics project 340,000 permanent and 376,000 temporary residents for a grand total of 716,000 new residents for 2010.

It is important to note that only recently was there a limit put on temporary workers on how long they could stay in Canada (4 years) , so this will stabilize things in 2015…but not after millions of temporary workrs have arrived…Then you’re going to have an ‘illegal immigrants refusing to leave canada’ problem.

As for the students… well lets just say that a friend knows a friend who has been studying english as a second language for the last 5 years in Canada…and probably intends to do it for as long as it takes.

#39 Hosehead on 09.14.10 at 2:05 am

Garth – help me out here. When the MSM is pumping up real estate, we say, “what a pile of crap… they are just mouthpieces for the Real Estate industry that buys their advertising, yadda yadda…”.

Then when they publish a headline that says real estate is doomed, why doesn’t the same criticism apply?

That’s the point. This news comes too late to be helpful. — Garth

#40 Aussie Roy on 09.14.10 at 2:29 am

Garth once again you sum it up nicely.
It is peoples emotions that drive prices, as I’ve mentioned before here in Aussie land housing is almost a psuedo religion.

Aussie Update
Negative gearing now costs $5B a year and is one of the reasons for high house prices, finally some sense.
http://www.smh.com.au/opinion/society-and-culture/ownership-out-of-reach-20100913-1598d.html

But, but, but its different in Oz-tralia.
http://globaleconomicanalysis.blogspot.com/2010/09/australian-lenders-learn-nothing-from.html

Told you its different our top banker says so, we all know that they are never wrong, lol.
http://www.smartcompany.com.au/economy/20100913-fresh-claims-of-property-bubbles-off-the-mark-experts-say-as-auctions-remain-steady.html

***From yesterday, Yes Jess, I have even heard of speculators renting their units to one another to claim the tax break (no money changes hands), of course they never live there and these places sit empty. There is no shortage here, just too many speculative buyers. I’m yet to see large groups of people camped out under bridges or living in Kanagaroo pouches.

#41 Aussie Roy on 09.14.10 at 2:53 am

No I’m not an Aussie who can’t spell Kangaroo..

#42 gold bugger on 09.14.10 at 3:57 am

“Fifty-nine per cent of Canadians would be in financial trouble if their paycheques were delayed one week.”

Holy moley, how can those people sleep?

#43 caesarcaesar on 09.14.10 at 4:41 am

Mr Turner, one day you are predicting Armegedon, the next day you issue there will be no Armegedon.

Where did I predict Armageddon? — Garth

#44 Devore on 09.14.10 at 4:50 am

#149 Timing is Everything

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.

Allocating resources fairly/equitably was never the problem. That’s the easy part. It is developing them in the first place. This requires work, without which there is nothing. And something for nothing is not a principle you want to build on. Those willing to do that work, should be rewarded at least proportionately, no?

As for the quoted part, well, that is a whole philosophy on the human condition that can’t be summed up in a post.

Hmmm, last person standing wins? Is there a better way?

I did not mean winners and losers in the “there can be only one” sense. The game can be played indefinitely. There is more than enough for everyone willing to contribute.

#45 SaraBeth on 09.14.10 at 5:12 am

#2 Patz wrote:

“There may be a chicken/egg element to the argument. But Marx also had a good point: that the end result of capitalism is when the system has produced so much it can’t ingest any more. Likewise, to cite but one example: the offshoring of jobs weakened the middle class/working class to the point it clipped their spending.”

Indeed. The MegaCorps have cut their own noses off to spite their face… They have forgotten that those who used to work for them were also their customers…

#46 Danforth on 09.14.10 at 5:31 am

Garth – food for thought for future columns. Your comments about us “pigging out..on house porn”, tell us that in the aggregate, recent buyers have been spending too much, but it doesn’t indicate how much is sensible to spend on a primary residence (as a multiple of household income).

Was chatting with a customer of mine in Alabama. Local rule of thumb there is two times annual income. Toronto, 3.5+

#47 FLT on 09.14.10 at 6:05 am

In fact, across the country millions of people are busy doing things they will regret, like paying off a cheap mortgage, lining up at a new homes sales trailer or swooning over a glass shower stall.

____________________________________
why will I regret paying off cheap mortgage? I have one that I’m trying to pay down right now and will like to know why that may be a bad idea.

Thanks

#48 Andrew on 09.14.10 at 6:09 am

Latest bubble story in Toronto:

An old industrial site on the east side of Highway 400 between Wilson and Sheppard is being redeveloped into crappy overpriced townhouses/detached houses called “Oakdale Village” (from about $350000ish). It is in full view of the highway where about 182000 cars and trucks pass by every day, which means high noise and air pollution. It is in a BAD neighbourhood (near Jane & Finch), and there are virtually no amenities nearby.

See for yourself on Google Street View:

http://maps.google.ca/?ie=UTF8&ll=43.727103,-79.523613&spn=0.007102,0.01929&t=h&z=16&layer=c&cbll=43.726844,-79.523558&panoid=Z8JFIW0kKlYwu34SOYnhtw&cbp=12,151.54,,0,3.3

#49 BOB on 09.14.10 at 6:41 am

This morning two articles in the Toronto Star. This is Toronto’s most read newspaper.

http://www.yourhome.ca/homes/realestate/article/860524–canadian-housing-looks-overpriced-oecd

http://www.thestar.com/business/article/860229–canadians-precariously-close-to-financial-instability-study-finds

#50 David B on 09.14.10 at 6:44 am

Not to worry about security at Garth’s Events, remember Garth has said there is money to be made it’s not all doom and gloom for all. Soooh even the bad guys like making money …. they just wear fuzzy blue sweaters some times.

#51 House_Buster on 09.14.10 at 6:59 am

Well, Garth, I picked up the Oakville Beaver again and saw a column in there about real estate. It was more like a paid advertisement made to look like a column by one of the more famous Oakville real estate agents. He was saying that real estate is still a good investment today.

He tries to come across like he really cares about people. Gimme a break… what else is he going to say when selling houses pays for his Ferrari? If he really cared he would tell the truth.

#52 goldenfox on 09.14.10 at 7:01 am

Deflation Inflation debate. Is Mike Shedlock a coward?

http://www.zerohedge.com/article/gonzalo-lira-proposes-open-debate-mish-topic-xxflation

#53 Moneta on 09.14.10 at 7:39 am

The reality is that lots of folks live in houses they can pay for, save money, go without the toys, etc but they quietly went about their business and nobody noticed them.

Now they’ll get tapped to help pay for the recklessness of others because there’s a “crisis” brewing for the ones who didn’t.
—————

The reality is that people who saved and invested over the last couple of decades benefitted incredibly thanks to the spendthrifts. We have an asset bubble thanks to consumerism and overspending, so if you’re in the market your portfolio is overvalued.

If you are smart you will manage to save this free lunch. If not, the value of your assets will go to where it would have been had everbody been fiscally responsible.

It takes 2 to tango.

#54 Moneta on 09.14.10 at 7:46 am

Indeed. The MegaCorps have cut their own noses off to spite their face… They have forgotten that those who used to work for them were also their customers…
———-
They didn’t care about them because they would find new clients in emerging markets.

#55 S.B. on 09.14.10 at 7:52 am

Based upon anecdotal evidence here, it looks like Squamish will be savaged by the real estate Sasquatch?

“It’s the beer out here”. Oh wait that is just an ad slogan.

In Toronto, having built condos directly beside the Gardiner/QEW and train tracks all the way West now the developers are focusing on new condos located beside Hwy. 427. Valhalla something they are named. Who wishes to leave within range of the airport?
Whatever happend to the ‘wrong side of the tracks’? Who wishes to live beside train tracks or a major highway – but these are considered ‘prime’ locations these days.
Paging all greater fools…I hear there is still prime land available located beside Pickering Nuclear Plant…

#56 Smoking Man on 09.14.10 at 7:55 am

You hit the nail on the head regarding the herd, they never pay attention to fundamentals. If one masters predicting there direction and act on it, money falls from the sky..

Now being a well know Real estate bull it is intuitively difficult for me to switch teams to the bubble head gang.

Now I really sense the sentiment of the herd has changed, but there are three factors that I don’t hear any bubble heads logically addressing.

Now I am not trying to burst anyone’s bubble, and would love a nice correction for my kids, but.

One: is affordability, historically we are in good shape..
Last chart on this link
http://www.torontorealestateboard.com/consumer_info/housing_charts/index.htm

Two: The Bond Market, we have had a massive rally in equities over the last few weeks, yields should have gone through the roof, it did not happen.

http://www.bankofcanada.ca/en/rates/bonds.html

Three: In late 2008, Gloom and doom dominated the headlines, jobs where dropping like flys, Armageddon was in the air. What did the Canadian home owner Herd do.
Rather than capitulate, the just took inventory off the market creating a shortage.

So with affordability at very favorable levels and long term fixed rates to stay low, and a fearless herd, what will be the catalyst and motivator that will drive a owner to take a big hit by selling low?

#57 Elena C on 09.14.10 at 8:01 am

Okay, seriously, will you come to France, if we invite you? We’re renting a place here, if this makes you more comfortable.

#58 S.B. on 09.14.10 at 8:07 am

My suggestion for the Toronto event is to rent a hall in Metro Toronto Convention Centre. It is easily accessable by GO or TTC especially for those who have to commute homwards after the weeknight event. If we have to pay at the door to defray costs this is fair.

#59 Northern_dirt on 09.14.10 at 8:18 am

#45 SaraBeth on 09.14.10 at 5:12 am

#2 Patz wrote:

“There may be a chicken/egg element to the argument. But Marx also had a good point: that the end result of capitalism is when the system has produced so much it can’t ingest any more. Likewise, to cite but one example: the offshoring of jobs weakened the middle class/working class to the point it clipped their spending.”

Indeed. The MegaCorps have cut their own noses off to spite their face… They have forgotten that those who used to work for them were also their customers…

Look up “creative destruction” in Joseph Schumpeter’s
“Capitalism, Socialism and Democracy” written in the 1940’s. It pretty much destroys the self devouring Marxist notion of capitalism’s self destruction, and has proven to happen in market swings and industrial retoolings since “das capital” was written.

#60 T.O. Bubble Boy on 09.14.10 at 8:25 am

Realtor Anthem for September:

Listings, Listings Everywhere
Over here, Over there
Semi, Condo, or Detached
Buy ’em now, Cause they won’t last!

For one specific area of the GTA on realtor.ca:

2350 Listings (End of August) –> 2670 (Today)
+13.6% in 2 weeks

Historically, September does have a jump in listings:
2009: +1.3% from August
2008: +9.2%
2007: +12.7%
2006: +9.7%
2005: +2.2%

Also, in all of those Septembers, average price and median price also rose from August… should be interesting to see if September 2010 is the first September in 6+ years to actually see a price decline from August.

#61 Jane54 on 09.14.10 at 8:29 am

What happened to all the Vancouver pumpers that used to people this blog? You know the Van is world class, the Van is the center of the universe, Van will never go down. Especially West Van.

Let’s hear from you guys.

#62 Grrrr on 09.14.10 at 8:31 am

“Markets and asset prices rarely move because of economic fundamentals, but they always move because of human emotions. ”

So why are you so confident the stock market will hold up?

#63 CTO on 09.14.10 at 8:33 am

Garth
I just wanted to comment on the statement you made in todays blog…
• “Record family debt levels have made households vulnerable to any shocks, like higher interest rates (says the OECD)”.
You missed stating that the same report by the same organization also recommended raising the bench mark rate to normal levels estimated at 3.5 – 4.5% by end of next year! Yikes, that’s at least 2.5% higher than right now!
As I understand it, this is a French based international organization started after WW2 that is mandated to collect their info from the perspective governments and then recommends to those governments. In other works (call a spade a spade with no crap/sunshine injected).
I THINK THEY ARE SAYING, RAISE THE RATES AND LET THE CHIPS FALL WHERE THAY MAY!!!!

#64 Grrr on 09.14.10 at 8:40 am

Congratulations Garth, you’re a gadfly!

“Gadfly author and former Member of Parliament Garth Turner has long sounded the alarm. Since the 2008 release of his book, “The Greater Fool,” Turner has been telling anyone that will listen that Canadian housing is vastly overvalued.”

http://money.ca.msn.com/banking/bankrate/article.aspx?cp-documentid=25559346

#65 Got A Watch on 09.14.10 at 8:58 am

“Looks like that date has to change to early Nov. for a larger venue. — Garth”

LOL, The Air Canada Centre – 20,000 screaming Garth fans, it’s Garth-mania. Next up, your own show on MuchMusic. I told you you’re a rock star, you need to get some big hair, shades and black leather. Ride the Harley right out on to the stage. Pump the fist and get some call and response going: “real estate will fall, real estate will fall, yeah!”

Bullion.bunny & Another Albertan – thanks for the great replies and the links. I’ll be working on that over the winter.

The Original Dave – TD- Bank bought ‘Think or Swim’ recently, they are re-organizing now, should re-open it for new accounts soon: Think Or Swim Canada, home of the famous ‘Prophet Charts’ by Tim Knight of ‘Slope of Hope’ Trading Blog, and are used by many options traders, are known for fast trade executions. You can download the software now for paper trading, to learn the features etc, which is a good idea.

Or you can try Questrade Canada I have heard they are easy on smaller accounts, I have no personal knowledge there.

In general, the bigger the account, the more favorable terms you can get anywhere. Over $100 K is good, over $250K you can be demanding. Less than $25K, you don’t have any power to get a deal. I have 3 accounts, TSFA, RRSP and general trading – if you say you will open or transfer all 3, you should get a better deal. Obviously a TSFA can’t have a $100K+ balance yet, so to get the best deal you will have to bundle the 3 accounts together and be demanding, all they can say is ‘no’. I think they are hungry for new accounts, be a hard negotiator.

#66 Bill ( Peterborough) on 09.14.10 at 9:01 am

Right now the general populous is in the denial stage of ” This won’t/ can’t happen to us. ( in regards to what is happening in the N.A. economy)

They still believe/hope that things will get better.

When they start to awaken from their dreamlike trance; as some are now, slowly beginning to realize that they have been hoodwinked by the puppet medias/ governments… they will start getting angry.

The snowball effect has two sides to it. Once it gets to a certain point it is irreversable. The downside is that it usually ends with a big crash.

The ” So called elitists” know this and are trying to steer it in the direction best suited to their plans.( NWO, one world currency, one police state…)

The U.S.A is still the last free stong hold that must be broken.

No matter that they are so patriotic, that they will go at a drop of a hat, have some of the most biased newspapers that I have read… All in all I would not want any other neighbour.

I do not like alot of their policies, which have been instilled through the deception of the puppet medias/governments controlled by the self serving “Select Few”.

From talking to alot of my Friends/Clients, south of us slowly I am sensing an awakening to reality/underlining causes , as to what is really going on. For those silent ones that knew they are starting to become vocal.

How can we on this side of the world, who have pretty much everything that is required to be self sufficient be in such a mess. Selling all our resources off to foriegn investors. This is my country too, should we not have a say in what goes on.

How can the politicians be this stupid.

They can’t, so the logical conclusion is that have been bought and payed for. Selling us out. They are all Judas’

Why does history keep repeating itself, when we are supposed to be intelligent enough to learn from our mistakes.

The only way this can happen is through the orchestration of “select few” ( who have been playing this game for a long time ) Followed by the standard smoke and mirror show to distract us from the root cause of all this.

Unfortunately Garth’s Blog ” The Greater Fool” may not only pertain to those who bought real estate at the wrong time might have another meaning to it as well.

To my nieghbours south of the border ” Thanks”.

In God we trust, but keep you powder dry.

#67 jed on 09.14.10 at 9:08 am

don’t worry, you can do like we did and throw some young people under the bus, then hope like hell things start inflating.

http://tasmanianrealestatetrouble.blogspot.com/2010/09/cannon-fodder.html

#68 JM in London on 09.14.10 at 9:18 am

#13 T.O. Bubble Boy on 09.13.10 at 11:02 pm

Developers in bed with the Mayor you say??

In London, that’d be considered lucky it was JUST the mayor as the majority of the council is on the take. This town is actually almost classically American in the sense the downtown is just gutted all for our beloved developers…

#69 ken on 09.14.10 at 9:29 am

You tell em like it is Garth, you are about the only one that does. Thanks and I hope you keep up the good work.

#70 dark sad person on 09.14.10 at 9:41 am

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

Almost everything contributed by DSP is copied and regurgitated material written by other people

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

So-why don’t you show everyone-where i copied someone’s words-
I know you can’t–
Some of us paid attention in class-others only halfassed their studies and listened to the likes of Sinclair or Murphy and all the rest of the hyper-inflationists-that watched all their readers get taken to the cleaners in Gold when they faithfully promised them-hyper-inflation was right on the doorstep and Gold would buck the sell off in 08 and then had the nerve to blame “mysterious dark forces” for the sell down-

When people like you and Devore and others on this board start replying-without first accusing me of smoking dope-or-calling me an idiot and a fool-because i have a different opinion-or twisting my words around to make their case-they might find that i do treat them in a civil manner-

So there’s your offer Garp-prove it-or you are a liar and a loser-but-I’m sure you’ll be back-using the name of Sam one day and someone else the next-or whatever-
People like you Garp-are cowards-nothing more-

#71 JM in London on 09.14.10 at 9:53 am

One thing about us Mortgage guys is we actually see the credit reports. Since I’ve been in the industry I’ve always found it fascinating how much debt people not only carry, but also how much they deny/lie/or outright don’t know about their debts. IMHO, the Globe stats are about spot on. The number of refinances we’ve done in the past while do speak to it. There are so many people living paycheque to paycheque out there. What’s even more frightening is when after getting the debt to one (right now really really cheap) payment, is how willing they are to go out and run em up all over again. It happens in all income brackets..

Denial is a river in Egypt for most I think…

#72 Old_is_Gold on 09.14.10 at 9:53 am

Garth: Can you please tape your Van presentation and upload it to You Tube? It is a smart idea even from a business perspective because it will generate more books sales etc. for you especially as the market tanks.

#73 Timing is Everything on 09.14.10 at 9:58 am

#44 Devore – There is more than enough for everyone willing to contribute.

Agreed…And for that contribution, they should be rewarded….with limits. Greed is always lurking.

#74 Dan on 09.14.10 at 9:59 am

As you all know I have been scraming for years about NO MONEY and what they have done. NO MONEY not only rises prices of homes but also goods and services since NO MONEY uses (credit) to buy without having NO MONEY. You see these NO MONEY idiots everywhere living the life with NO MONEY while people with money are not foolish to over pay on a house or over pay for goods and services. This is why I love recessions and with some luck we will have a depression. Why would I hope for something like that……The reason is simple when NO MONEY has no more (credit) then prices of everything comes down houses , goods and services. Right now everything has already been hyper inflated. Those who hare screaming about hyperinflation well we have already had hyperinflation and now we will have deflation to get back to normal. I can not wait until the day NO MONEY will be the losers that they should be and people with money who work and save win. It makes me sick to see people who have no understanding of economics or money, talk about how smart they are with NO MONEY. This is why the economic world is in trouble……….NO MONEY, NO MONEY, NO MONEY doe anyone understand how stupid and crazy that sounds. People with NO MONEY out bidding people with money for houses, good and services.

#75 Carruthers on 09.14.10 at 9:59 am

Hey Garth/Dawgs. The other day I saw my bank account manager with whom I have had a business relationship for 15-years. For years she has tried to convince me to take on a mortgage (I have rented since becoming divorced 3-years ago). At the end of our meeting I teased her as to why she didn’t ask me about a mortgage this time. Her reply was that there was no point as “mortgages haven’t been moving for months”. She then volunteered that her husband, a mortgage broker for 20-years, told her that he has “never seen it this bad”. She works for the bank that is Canada’s largest residential mortgage lender.

Anecdote I know. But qualitative data is still data.

#76 Old_is_Gold on 09.14.10 at 10:02 am

#47 Andrew / “Latest bubble story in Toronto:

An old industrial site on the east side of Highway 400 between Wilson and Sheppard is being redeveloped into crappy overpriced townhouses/detached houses called “Oakdale Village” (from about $350000ish). It is in full view of the highway where about 182000 cars and trucks pass by every day, which means high noise and air pollution. It is in a BAD neighbourhood (near Jane & Finch), and there are virtually no amenities nearby.”

It’s only a matter of time before we see unoccupied subdivisions with unkempt lawns (if there is a lawn) and half finished houses and unfinished condo towers. This scene will play out in the GTA for sure if not elsewhere in Canada. I have asked for many years seeing the madness of the building craze from Niagara Falls to Kingston, where will will all the people come from, the answer is that they won’t!

http://www.galesburg.com/news/business/x223022858/After-the-bubble-ghost-towns-across-America

#77 Calgary Girl on 09.14.10 at 10:11 am

#34 Joseph,

I think the calgary market will continue its decline – to what I don’t know. Calgary seems to have changed since 2006 – people are just not buying as they once did. Two friends have had their condos on the market for 1 year now. No offers, few looks. I suspect people are getting tired of paying high prices. I mean really, who wants to pay $260K for a 600 sq ft condo that is prone to floods?

I don’t look at MLS anymore. I will look once people get realistic.

#78 blobby on 09.14.10 at 10:18 am

The globes story was hilarious. It starts with saying the problem was caused by low interest rates encouraging people to borrow more than they can afford.

It then concludes that the government should step in and help over mortgaged people by lowering interest rates.

.. erm.. duh!

#79 Evangeline on 09.14.10 at 10:26 am

#45
(9Indeed. The MegaCorps have cut their own noses off to spite their face… They have forgotten that those who used to work for them were also their customers…))

so their customers get laid off when companies go offshore to take advantage of lower labour costs or their customers can’t afford the steep price of goods produced by higher labor costs, so the company goes broke

six of one half dozen of the other

#80 Bottoms_Up on 09.14.10 at 10:29 am

#37 Thetruth on 09.14.10 at 1:48 am
———————————————
In my experience, temporary residents and students are RENTERS, and frequently they live together in order to save money.

It has previously been stated that 20% of our residential real estate market is attributed to ‘immigrants’, but my question for you is:

How, in any way, will ‘immigration’ save the real estate market?

If it’s a bad time to buy (rates are going up and prices are coming down), or prices are too high, why would any ‘immigrant’ catch a falling knife?

In fact, if ‘immigrants’ are smarter than the average ‘greater fool’, then we could actually expect their buying of real estate to freeze, and this would have a negative impact on the market.

#81 TheBigLebowski on 09.14.10 at 10:30 am

Stage two of a 4 or 5 stage bull market began today

#82 Bottoms_Up on 09.14.10 at 10:37 am

#42 gold bugger on 09.14.10 at 3:57 am
——————————————–
Come on, are you telling me you’ve always had ‘surplus’ funds in your bank account?

If so, you come from a very wealthy (and lucky) family.

There was a point in my childhood where my father had to draw a Christmas tree on the wall because we couldn’t afford to buy one.

Us plebians down below live hand-to-mouth. That’s why Garth’s message is so pertinent, rising interest rates will decimate a lot of people, and, if this ever happens, the Canadian economy will be toast (it will be a self-reinforcing spiral downward). It will not be fun and I pray it doesn’t happen.

#83 dark sad person on 09.14.10 at 10:41 am

#69 Dan on 09.14.10 at 9:59 am

Those who hare screaming about hyperinflation well we have already had hyperinflation and now we will have deflation to get back to normal.
******************

You are correct-
Hyper-inflation has happened and Deflation is what’s happening now-
Hyper-inflationists missed the Hyper-inflation–

#84 BrianT on 09.14.10 at 10:42 am

What was Warren Buffett, that cagey old grifter, going on about the other day? Something like bullish on US equities-maybe he should tell all these insiders-quite the listing from Bloomberg for the week ended Sept 10 http://www.bloomberg.com/news/2010-09-13/weekly-insider-buying-and-selling-by-s-p-500-companies.html

#85 bullion.bunny on 09.14.10 at 10:44 am

Gold $1270 and going up…….well? Get ready for the next credit meltdown.

#86 Mean Gene on 09.14.10 at 10:45 am

Just expressing a concern but maybe someone else would volunteer for a set of your books??

Given the recent events with your blog are you going to have a security presence at your speaking events??

Are you volunteering? — Garth

#87 rory on 09.14.10 at 10:45 am

#23 nonplused

Very interesting comment on the complexity and our ability to right “the ship” if something goes wrong….where did you read the basic premise or did is it yours?

I was lamenting my lack of basic skills the other day. Sad, but I know not how to garden, fix my car, build a house, defend my property, shoot a gun well, kill and gut a chicken, and so on and on and on. Can I push paper – you bet.

It is amazing how vulnerable we have all become (specialized) and how much we depend on things to stay the same.

#88 What about Waterloo on 09.14.10 at 10:45 am

Does anyone have any insight into the Kitchener-Waterloo real estate market?

Everyone I talk to locally says that Waterloo is ‘different’ and won’t be affected by the down turn in the real estate market because of the universities (Laurier and Waterloo) and RIM. Everyone seems to think these big employers will keep the are insulated from a down turn.

Thoughts?

#89 thecomingdepression on 09.14.10 at 10:47 am

Unfortunately I would have loved to come and listen to the idiots in the crowd proclaim how real estate will keep going up, but no tickets left. The maniacs are going to cut you up and throw you out onto hastings st. incidentally how is that $850 gold bubble doing?

#90 Dan on 09.14.10 at 10:48 am

#47 Andrew / “Latest bubble story in Toronto:

An old industrial site on the east side of Highway 400 between Wilson and Sheppard is being redeveloped into crappy overpriced townhouses/detached houses called “Oakdale Village” (from about $350000ish). It is in full view of the highway where about 182000 cars and trucks pass by every day, which means high noise and air pollution. It is in a BAD neighbourhood (near Jane & Finch), and there are virtually no amenities nearby.”

It’s only a matter of time before we see unoccupied subdivisions with unkempt lawns (if there is a lawn) and half finished houses and unfinished condo towers. This scene will play out in the GTA for sure if not elsewhere in Canada. I have asked for many years seeing the madness of the building craze from Niagara Falls to Kingston, where will will all the people come from, the answer is that they won’t!

———————————————————-

The funny thing is you can see that whole “Oakdale Village” will turn into the oakdale ghetto. You know alot of those buyers are NO MONEY. Anyone with money would not be so stupid to buy facing a busy highway. The builder has lowered the price by only $20,000. During the 2008 crash the same builder lowered it from 329,000 all the way to $249,000 during phase 1 build. $249k is still overvalued for that area plus right in front of the highway.

#91 rory on 09.14.10 at 10:56 am

#37 The Truth

Video on immigration numbers in the US using gumballs as a visual. I have no opinion on the validity of his argument but it is visually stimulating and does make one think.

His premise is based on exponential growth (that damn rule of 72, math is math), just like our economy is based on unsustainable exponential growth…enjoy.

http://www.youtube.com/watch?v=n7WJeqxuOfQ

#92 InvestX on 09.14.10 at 11:00 am

According to the recent OECD report stating Canadian home prices were overpriced, here’s an interesting stat:

“And lastly, subprime mortgages never made up more than 5 per cent of new issues, compared with 33 per cent in the United States at the peak.”

I guess it’s “different” up here in that respect.

http://www.yourhome.ca/homes/realestate/article/860524–canadian-housing-looks-overpriced-oecd

Who needs sub-prime when you’ve got 5% down, 35-year amortizations and interest rates which reset every five years or sooner? It was cheap teaser rates and selling houses to people without money that brought down US housing. Sound familiar? — Garth

#93 Joey Labone on 09.14.10 at 11:11 am

GOLD THE BEST ASSET CLASS TO BE IN

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7995084/Gold-is-the-best-asset-class-to-be-in.html

#94 Rachelle on 09.14.10 at 11:15 am

Dearest Garth,

I would be honored to invite you to submit an article to the very first edition of the Canadian Real Estate Blog Carnival.

I would also love to invite any other small Canadian real estate bloggers to submit their favorite article. There’s lots of us toiling away writing quality articles in relative obscurity. Those of you I know will be getting a special invite.

Readers can also submit their favourite post as well.

Submissions are made via

[email protected]

All you have to do is submit the link.

Thanks in advance, Garth, I can’t wait to see your favorite.

#95 CTO on 09.14.10 at 11:19 am

#77 blobby on 09.14.10 at 10:18 am

“The globes story was hilarious. It starts with saying the problem was caused by low interest rates encouraging people to borrow more than they can afford.

It then concludes that the government should step in and help over mortgaged people by lowering interest rates”.

That may be what the Globe said, but that sure as hell is NOT what the OECD said. Even though people are over leveraged, they recommend raising rates to normal levels. Why?…To Stop over leveraging.

#96 CTO on 09.14.10 at 11:27 am

#47 Andrew / “Latest bubble story in Toronto:

Andrew

I see that Sh*t hole development every time I go up north on 400. I haven’t even read the link you sent because I know exactly the property you are talking about.
It’s right next to 400 on the east side, right?, it’s a disgusting eye sore! and I can’t imagine who would pay even $50000 for one of those chicken coupes! That property and the houses in it should be used as a U-Store. Of course you would have to erect 10ft fences around it due to its location…

#97 Devore on 09.14.10 at 11:31 am

#82 dark sad person

Hyper-inflationists missed the Hyper-inflation–

Missed it because it never happened.

Do you even know what hyperinflation is? Hint: nothing to do with inflation, or deflation. Stop with the hysterics.

#98 Joe The Plumber on 09.14.10 at 11:39 am

#10 45north

Comments like yours is why I enjoy this blog so much.

#99 LastMan on 09.14.10 at 11:40 am

Like everyone else who saw this coming years ago, there is a certain relief knowing the housing and debt madness is ending. I never bought an overpriced house or took out a home equity credit line, but will those of us who didn’t indulge remain unscathed? I doubt it. That is why I am grateful for blogs like Garth’s that give solid advice and guidance. But I now feel a strong sense of foreboding and I do wonder how a depression can be avoided now that we are at the end of the biggest credit binge in history – that or I’m just depressed that summer is over.

#100 CTO on 09.14.10 at 11:43 am

#38 Thetruth

The Truth = The Desperate

Immigrants are just as smart as everyone else…when it becomes clear that there is no value in todays real estate prices, they will stop buying as well, just as they did in America. Which leads me to think that maybe, just-maybe they will soon start eyeing up U.S or European markets again when they appear to reach bottom.

#101 Bill ( Peterborough) on 09.14.10 at 11:50 am

Re #55 Smoking Man

So with affordability at very favorable levels and long term fixed rates to stay low, and a fearless herd, what will be the catalyst and motivator that will drive a owner to take a big hit by selling low?
——————————————————————-

Further loss of jobs, people having pay cuts in order to keep same job, taxes steadily rises to pay for debt, cost of living going up, more social programs.

Sort of like the commercial on TV: should we pay or bills or eat tonight.

Get the drift.

___________________________________________

Re #69 dark sad person

One of my favourite breeds, courageous, determined ,intelligent , no nonsense, gentle unless provoked… wish alot more people had these qualities.

“Glad to know people who do have such qualities.”

http://www.youtube.com/watch?v=DZUFSKSxzFA&NR=1&feature=fvwp

#102 CrowdedElevatorfartz on 09.14.10 at 11:57 am

A week ago I went to a dinner party with some visiting relatives and was stuck sitting next to a late 20’s-ish gal who had completed her MBA a few years ago and finally got a job as an office assistant at a vancouver real estate firm.
Anyway, I listened to her prattle on nonstop to all the other 25-45 year olds at the table about “…how the summer is slow but its picking up…” ( she’s an assistant not a realtor)
Finally I asked her, ” Dont you think that $1 million for a tear down house is absolutely ridiculous? $400 k for a bachelor condo is totally ludacris?”
Her answer, ” Well if you cant afford it….!”
My reply to her was I was the only person at that table that owns their residence !!!!!!!!! And if I think its unaffordable what about somebody staring at a 500k mountain of debt????? Silence, the whole table stopped talking. I told eveyone that they were like a frog in a slowly heated pot of water. The prices arent so bad………….hey, its getting a little over heated !
Long story short, she admitted condo sales we dead and housing sales were flat :)
I gave everyone at the table your web blog, hopefully some of the knowitalls at the table checked you out.

#103 dark sad person on 09.14.10 at 12:05 pm

95 Devore on 09.14.10 at 11:31 am

#82 dark sad person

Hyper-inflationists missed the Hyper-inflation–

Missed it because it never happened.

Do you even know what hyperinflation is? Hint: nothing to do with inflation, or deflation. Stop with the hysterics.

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

lol–this coming from someone who gauges inflation by the price of eggs–
daft-to the max

#104 BrianT on 09.14.10 at 12:06 pm

Insightful summation of the current state of affairs by Jim Willie http://news.goldseek.com/GoldenJackass/1283372764.php

More tinfoil than insights. — Garth

#105 kitchener1 on 09.14.10 at 12:12 pm

#87 what about waterloo

Kitchener-Waterloo-Cambridge things are not looking good.

Problem is jobs and incomes.

Here is a fact about RIM– They hire new immigrants from over seas, via a temp agency, these guys work in the manufacturing side for a whopping $11.00 an hour, after a few months they get $12.00 an hour, I know a few indidan immigrants that have and some still do work there.

Companies are very relucant to hire new full time workers with the economy the way it is, rather hire temp/part time people so they can adjust production at a moments notice.

Even when hiring full time workers RIM pays very low compared to Toronto. I know, I received a job offer when I moved here from RIM and turned it down. I was asking for the same pay I recevied in Toronto, they offered 18% less and wouldnt budge, I respectifully declined.

Kitchener lost thousands of great paying labour jobs (Lear closed, BF Goodrich, tons of machine shops etc..) These jobs are not coming back.

Just check MLS.ca for Kitchener market, tons of houses that are not moving and new ones coming on the market everyday.

Pretty much SFH that are under 250K move, under 300K they also move but take much longer. Over 300K they tend to sit for a long time.

Just driving around the region on a daily basis, there are vacancy signs all over the place, when I moved here 2 years ago, the apartment I wanted to rent had a 3-4 month waiting list. Right now, they had 15-16 new move ins last month. And they still have 7 empty units.

Big change in 2 years.

If you have a steady job, its a great place to live, for 350K you can get a really nice SFH in Waterloo, comparable to what one would pay approx 500-550K in the same type of area in Toronto. The only problem is that its a one trick pony. If you lose your job you are SOL out here.

#106 CrowdedElevatorfartz on 09.14.10 at 12:17 pm

@60 Jane54
….where are all those Van pumpers……
+++++++++++++++++++++++++++++++++
I’ve lived here for 30 years, it USED to be a nice city but when it exceeded about 1.5 million that was the beginning of the slide. 3 million peopl now and ‘gridlock”
Anyone visiting from any large eastern city would burst out laughing at our “freeway system”, our “rapid transit”, our “nightlife”( sorry but Granville Mall is a beggar infested dump, actually all dwntwn Vancouver is a beggar infested dump).
The majority of the tourists are “day trippers” that arrive/depart on the Alaska cruise ships. But hey they get to check out “Historic Gastown” another tacky joke.
” The Best Place on Earth” license plates are the most arrogant, self important, jingoistic, drivel I have ever seen on a license plate ( excluding perhaps New Hampshire’s Live Free or Die , but thats another rant). They should be ripped off every car and melted into road signs to actually let people know where they are driving( dreadful signage)
And if ANYONE says, “…in Vancouver you can ski in the morning and golf in the afternoon…” . Ask them if they have done it OR know anyone that has. I’ve lived here 30 years and havent met anyone yet that has.
Yup, its better here. cant wait for a 8.5 earthquake to bury the bullsh#t

#107 winnipegger on 09.14.10 at 12:20 pm

Is the hacking of a contrarian real estate blog a sign (like headlines in the Globe and Mail) that the tide has turned?

#108 Jeff Smith on 09.14.10 at 12:23 pm

According to the G&M (make up your own acronym here please), the bad time is behind us: “The recession may be officially over” (quote.. unquote). They must have gotten the news from those godly power to be. (F , C and H ??). F probably declared “let there be light!”, then couple seconds later, he says “Let the recession be over!”. Always good to know recession is over.

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

#109 Devore on 09.14.10 at 12:28 pm

#72 Timing is Everything

Agreed…And for that contribution, they should be rewarded….with limits. Greed is always lurking.

No, although that’s uncouth to say today. Should not the system itself naturally impose limits, instead of a “down from above” dictum? But today we have a political, legal, economic, financial, heck, even cultural frameworks that favor and reward the formation of large corporations and monopolies. So is it any wonder greed is always lurking. I don’t think that is… “natural”, or inevitable.

#110 Moneta on 09.14.10 at 12:30 pm

“And lastly, subprime mortgages never made up more than 5 per cent of new issues, compared with 33 per cent in the United States at the peak.”

I guess it’s “different” up here in that respect.
————————-
Ownership rate in US went from 65 to 69%
Ownership rate in Canada is now 70%.

Nope. No subprime in there. Canadians are just better people.

#111 Republic_of_Western_Canada on 09.14.10 at 12:32 pm

Heh.

Toneguzzi must be choking on all those black crow feathers…

http://www.calgaryherald.com/business/Mortgage+arrears+soar+Alberta+consumers+live+cheque+cheque/3517631/story.html

#112 pjwlk on 09.14.10 at 12:33 pm

#47 Andrew on 09.14.10 – “An old industrial site on the east side of Highway 400 between Wilson and Sheppard is being redeveloped into crappy overpriced…”

It’s also pretty sad when city planners have decided that there is no longer a need for local industry – or jobs for our people… Let’s just pave and build over it all …

#113 Calgary Illusion on 09.14.10 at 12:42 pm

I’m just a liberally conservative guy. And a libertarian vegan. — Garth

– just about blew coffee out my nose. Thanks for the humour on a rainy day in Calgary:) It would be great to see you in Calgary again

#114 Canayjun on 09.14.10 at 12:50 pm

I’m sure Garth always aspired to be a gadfly.

#115 dark sad person on 09.14.10 at 1:08 pm

#100 Bill ( Peterborough) on 09.14.10 at 11:50 am

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

Bill–

appreciate the words-
all you need in life is one person who loves you and i think you might be the only one–lol

http://www.youtube.com/watch?v=RlgYxbtJb1Y

#116 InvestX on 09.14.10 at 1:13 pm

Who needs sub-prime when you’ve got 5% down, 35-year amortizations and interest rates which reset every five years or sooner? It was cheap teaser rates and selling houses to people without money that brought down US housing. Sound familiar? — Garth
—————————————————–

Garth, subprime refers to the buyer’s credit worthiness (score.) Someone can have a higher (prime) credit score and still just have enough to pay the minimum downpayment. There’s a difference.

Did as many buyer’s in Canada obtain mortgages with subprime/poor credit scores as in the States?

I guess we’ll find out, won’t we? — Garth

#117 Mister Obvious on 09.14.10 at 1:31 pm

#81 Bottoms_Up:

There was a point in my childhood where my father had to draw a Christmas tree on the wall because we couldn’t afford to buy one.

Pardon me for laughing out loud but that sounds a lot like the BS my Dad used to make up about how destitute his family was as a child. The poor fellow had to walk 5 miles to school in a blizzard every day. Uphill, both ways. All they could afford for breakfast was a bowl of steam.

#118 Pat on 09.14.10 at 1:32 pm

From yesterday:

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

How much do $800,000 houses rent for?

#119 Joe Q. on 09.14.10 at 1:33 pm

#55 Smoking Man writes: “What will be the catalyst and motivator that will drive a owner to take a big hit by selling low?”

Loss of job, pay cut, relocation of job, retirement, health issues dictating need to move to smaller residence or to warmer climate, etc.

#120 fancy_pants on 09.14.10 at 1:37 pm

dang, i’m afraid to make the leap to sell my house (no mortage left), rent for a couple years and then buy back in once prices have fallen.

I know mathematically I would be equal off if prices fell even a measly 6% over the next two years (which I for the most part expect them to and then some) but still this lingering fear.

thats it. I’m afraid of my better half’s reaction more than the assessed market risk.

if I was single I wouldn’t think twice, the sign would be on the front lawn.

#121 JET on 09.14.10 at 1:41 pm

#55 Smoking Man
——————
Wow, your spelling is pretty good in that post!

Do you really believe that TREB affordability chart? It has lots of assumptions, such as basing the chart on a downpayment of 20%, which I don’t think is realistic.

What will drive sellers to sell is that, contrary to what you say, they won’t think prices are low. They can sense that the value of their house has increased tremendously over the past decade or more. If they think prices will be lower in the future than now, they will want to sell now. That explains why a seller would want to sell. What explains why they won’t be able to sell is the fact that there are fewer buyers today – a lot of this year’s demand had been brought forward last year with overkill stimulative measures. Any buyers left will also want to wait because they think prices will be in the future than now.

This is why industry pundits have to instill a sense that prices always increase.

#122 Stampede Sam on 09.14.10 at 1:43 pm

Re:#75 Old_is_Gold :
That story you posted a link to is 2 years old. Since then a lot of those “ghost” sub-divisions and developments in the States have been bulldozed.

#123 Bill ( Peterborough) on 09.14.10 at 1:44 pm

Re # 114 dark sad person

Bill–

appreciate the words-
all you need in life is one person who loves you and i think you might be the only one–lol
——————————————————————-

Your Welcome.

Enough of this mushy stuff, lets get back to enlightening people. lol

#124 Hell in a Hand Basket on 09.14.10 at 1:46 pm

@ nonplused

It isn’t complexity that kills, it is planned obsolescence. Consumption has to be cyclical to keep the economy pumping so things are not designed to last.

#125 Risk on 09.14.10 at 1:48 pm

#84 bullion.bunny “Gold $1270 and going up…….well? Get ready for the next credit meltdown”

WARNING: RANT ON :WARNING

(not directed at anyone in particular here)

Money. It’s what is truely wrong with the world today. You need money to survive, but dedicating your life to it is just wrong. There is so much more to life than just making money. In fact, the most valuable things in life you can’t buy. You can collect all the money and gold you want, but you don’t get a free man at the end, there is no one keeping score and even if you are buried in a gold coffin, you can’t take it with you.

Then we have people who’s desire to make money overrights their morals and the lives of others. The “I don’t care, I want x% a year” attitude be it investing in food, gold, wal-mart, things that greatly affect others negatively around the world, and for what? Do you know what would happen if gold, food or water went to unaffordable levels due to speculation?

You make lots of Money and millions of familes will die.

Sure, you can bet against humanity and win, but in the end, what did you win?

Think about that.

:RANT OFF: RANT OFF:

Thanks, for letting me rant.

#126 Hell in a Hand Basket on 09.14.10 at 1:51 pm

@ Nostrodamus le Mad Vlad

Technological unemployment is a term I’m sure you’ve heard. A good book about it is “The End of Work” by Jeremy Rifkin. Employment will never be fixed in our country or any country as technology is advancing on an exponential curve. Automation has already devestated the agriculture and manufacturing sector and is making inroads into the service sector. Only the knowledge sector has any real growth but it is too small to absorb all of the job losses from the other sectors.

Unions lost their way back in the 1930’s when they gave up on the 30 hour work week and allowed business to convince them that all productivity gains should accrue to upper management and to the shareholders. We need to return to that discussion today.

#127 Calgary Rip Off on 09.14.10 at 1:59 pm

Until prices for a house in Calgary are pre 2005 costs this post seems to exaggerate the problems. Houses are still $200K overpriced in Calgary. Yes they arent selling. But there arent any drastic cost measures as $100K off list price. Same with the new builders. A “starter” still is around $350K.

So what’s the big deal? Calgary, Toronto, and Vancouver are still the biggest rip offs for real estate Ive ever seen.

Unless everything implodes with a 75% off assigned to the mls listing, what’s to be excited about?

#128 grumpy on 09.14.10 at 2:01 pm

This market has been in slow motion collapse for ten years…its just that the cheapo credit has been bouying the disaster. Now that the lid has blown off the bubble and we see the extent of peoples unsustainable indebtedness…oh how ugly reality is….the pig in lipstick is the ugly chick you picked up after the tequila bash……..and she brought her Mom with her to sleep over.

Its only been the artificial credit bubble, invisible because everyone wanted to pretend how rich they were, has now achieved orbit…150% of income…not good.

Naughty squirrels like me started loading up on gold in the early 2000’s……as i saw the economy doing just what is is doing. ( Macro trends in motion are a bitch to turn back) and I see I’ve clocked in my profit for ten straight years….right under the noses of the deniers.

A bubble is invisible to those inside it….well said.

http://www.bloomberg.com/news/2010-09-14/yen-rises-to-15-year-high-on-speculation-kan-to-win-vote-stocks-fluctuate.html

The inflation in housing prices has masked the collapse in the value of the currency pretending to be valuable….so sad for the unwary. Prices didn’t go up……the value of the currency has gone down…its the same with everything…..bought groceries lately?

The perfect Keynsian trap laid by a greedy government…..whose revenues have skyrocketed because of increased receipts…but in fact they have sucked the unwary into a false sense of well being.

What good is having a million dollar house if a bananna costs a thousand? You see…you’ve been duped by your your greed.

#129 bridgepigeon on 09.14.10 at 2:03 pm

Your Toronto venue is being changed from Sept. 29 to early Nov. ? That is Nov. not early Oct. ? I need to buy some time here while I sell. I imagine the press will be all over this like trailer trash on Velveeta cheese. Hopefully some idiot will threaten to burn a Bible or Koran that day or something to make front page news.

I’m on the road in Atlantic Canada, BC again and the prairies in October, so circle Nov. 9. Burn what you want, baby. — Garth

#130 Hell in a Hand Basket on 09.14.10 at 2:09 pm

@Kitchener1 #107

You are very right, all those jobs that have disappeared are not ever coming back. In fact the trend of hiring temps in place of fulltime workers is going to become more prevalent. Why would a company pay full time wages AND benefits when they can hire a temp for half the wages and NO benefits?

#131 Hell in a Hand Basket on 09.14.10 at 2:14 pm

@ Risk

Dude you hit it on the head with your rant. Money is the only source of all the inequality and scarcity we are now faced with. In a time in history when we can produce more products, more efficiently than ever before, we seem all that much more poorer. Where has the promised been fulfilled that technology was to free us from useless labour? Corporations have taken those fruits and distributed them among themselves and left an ever increasing number of former employees out on the street.

#132 Devore on 09.14.10 at 2:20 pm

#55 Smoking Man

One: is affordability, historically we are in good shape..
Last chart on this link

Lets see, 20% down, 5 year fixed, 25 year amortization. While this may have been the case 20 years ago, today’s 5/35 variable mortgages are a whole different beast. People are looking at the monthly payment, and that’s not affordability.

Two: The Bond Market, we have had a massive rally in equities over the last few weeks, yields should have gone through the roof, it did not happen.

We have also had significant outflows of capital from equities (MFs and ETFs) the last few months, which should have been very negative for the market, yet wasn’t. Short term rates are up, long term falling. Do you believe this is a normal market? Equities and bonds aren’t linked at the hip, and equities are not representative of the general economy.

Rather than capitulate, the just took inventory off the market creating a shortage.

Are you trying to imply it was this shortage which caused prices to break out in 2009? Really?

There was no shortage. Demand did not outstrip listings, there was still significant inventory.

So with affordability at very favorable levels and long term fixed rates to stay low, and a fearless herd, what will be the catalyst and motivator that will drive a owner to take a big hit by selling low?

The herd heads in a direction, until it doesn’t. Read Garth’s posts the last couple of days? They illustrate how the herd is changing direction.

There is always someone that has to sell. There are many reasons why they might have to. In the downturn in 2008, there were still plenty of owners that had to take a big hit, yet they did not pull their listings. They sold anyways.

Prices are set at the margin. The sellers who have to sell will lower their price until they have a sale. This will set the price for comparables.

Lower prices impact not just sellers, but also those refinancing and depending on LOCs.

#133 Hell in a Hand Basket on 09.14.10 at 2:21 pm

Considering the amount of productivity we can generate, why is deflation such a scary thing?

Bear with me:

In addition to reducing the length of the work week, although you get paid less money for working less hours, your standard of living would remain the same because deflation would push up the purchasing power of your remaining dollars. Work less, make less, but be able to buy the same amount of goods.

#134 betamax on 09.14.10 at 2:31 pm

#101 CrowdedElevatorfartz: “My reply to her was I was the only person at that table that owns their residence !!!!!!!!! And if I think its unaffordable what about somebody staring at a 500k mountain of debt????? Silence, the whole table stopped talking. ”

LOL. Nicely done. I would have liked to have been there.

——————–

Smoking Man — no overnight catalyst required; at this point, affordability limits have been met/passed and the bubble will collapse of its own weight. Once sales dry up long enough, everyone in FIRE industries will start chasing the market down and defaults will rise. Virtuous circle becomes vicious.

#135 eddy on 09.14.10 at 2:31 pm

10 reasons why it is still a terrible time to buy (USA)-

http://www.veteranstoday.com/2010/09/05/housing-crash-continues-why-now-is-not-the-time-to-buy/

#136 InvestX on 09.14.10 at 2:33 pm

Did as many buyer’s in Canada obtain mortgages with subprime/poor credit scores as in the States?

I guess we’ll find out, won’t we? — Garth
——————————————————-
We already have according to that OECD report: “5 per cent of new issues [Canada], compared with 33 per cent at the peak [in the US]”.

A distinction should be made between subprime loans and no/little money downpayment loans.

It is the consequence that matters, not the labels. You have no point. — Garth

#137 Bill ( Peterborough) on 09.14.10 at 2:36 pm

Re # 124 Risk

Well put. Unfortunatley people, in general, have been conditioned to the point of judging each other by materialistic wealth, through constant media bombardment. ( keeping up with the jones’).

Generally alot of morals and principles go out the window with that formula.

I personally don’t give a shit what a person is worth. Tend to look at their actions/reactions.

Alot of times people have intelligent conversations, debates. The most important thing being; to listen and be open minded, you might learn something which you did not know before, and maybe change your perspective on certain issues.

A closed mind can mean a couple things;

a) hidden agendas

b) the ever dangerous “pride”,( not willing to admit you were wrong

c) not being able to grasp what you are saying ( using big words trying to impress somebody)

probably alot of other variables as well.

I can work with any body in life except a LIAR. You never know where they are coming from. Always have that self serving hidden agenda.

#138 Roial1 on 09.14.10 at 2:43 pm

#40 Aussie Roy on 09.14.10 at 2:29 am

Well Roy, you’d better “duck and cover”.

“I” arrive in Aus. on Tuesday your time.

“It” will never be the same.

aka. Al in lotus land.

#139 Bill Gable on 09.14.10 at 2:56 pm

Quote: “Fifty-nine per cent of Canadians would be in financial trouble if their paycheques were delayed one week.”

Holy moley, how can those people sleep?

BINGOLA, fellow Blog Dawg.

Mr. Turner has been talking this up for over a decade. People think there is a Deux y machina, like a Lottery win, that will pull em out.

One week from death? No wonder they are blowing the doors off sleeping pills, tranks and Scotch.

S C A R Y.

Say – why don’t we make Blog Dawg Shirts and sell them for Charity, Mr. Turner?

Name it, I will help set it up.

Your work needs an even wider audience and we can add to your already generous Charity work at the same time!

How about CREA? — Garth

#140 dale on 09.14.10 at 3:01 pm

8 SpaceMonkey

Hi, I live in Victoria, I have been looking at listings for 3 years, alas they kept going up out of my reach.

The average house i look at is 4-5 BDR with a suite. Even now they are listed at 500-550K (but not moving)

A 5BR house with suit was listed at $430,000. Realtor had six bids within 3 days. House went for… $430,000
to the neighboor. Moral of story, you can guess it, price it well and it will sell.

Good Luck

#141 Sam on 09.14.10 at 3:01 pm

whadda effin joke.

Half the builders or more will go out of businesss soon. And the rest won’t have slush funds to toss around.

__________
#13 T.O. Bubble Boy on 09.13.10 at 11:02 pm

Toronto mayoral candidates are all bending over for the RE developers:

#142 bullion.bunny on 09.14.10 at 3:02 pm

#127 grumpy on 09.14.10 at 2:01 pm

Gold is just a way of cashing out, it’s like taking your chips off the casino table and out of the system. That’s all! I heard a funny thing on the way to the opera last night. Bonds issued by our loving Canadian banks have a “regulatory call option” that allows banks to purchase them back at par! The talk is that the “Basel agreement” may trigger this option…………..Now that’s so NICE!

#143 bullion.bunny on 09.14.10 at 3:07 pm

#132 Hell in a Hand Basket on 09.14.10 at 2:21 pm

Very good point…………but how are you going to pay the outstanding debt back?

#144 Future Expatriate on 09.14.10 at 3:08 pm

Two words… bulletproof vest.

The new fashion statement.

#145 BigAl (Original) on 09.14.10 at 3:10 pm

Absolutely no letup in sales in Milton, Mississauga, or West Brampton. Every agent called with a half-decent home for sale….sold, sold, sold, sold, sold-conditionally, sold, sold, sold sold.
Mattamy’s new home project opened Aug. 28….over 80% sold in a few weeks.

I didn’t claim there would be an outbreak of sanity. — Garth

#146 Alan on 09.14.10 at 3:10 pm

Fear and Greed
Greed and Fear
Fear and Greed
Greed and Fear
Fear and Greed
Greed and Fear
Fear and Greed
Greed and Fear

That’s what the market is all about! What axe are you grinding?

#147 Future Expatriate on 09.14.10 at 3:13 pm

Be careful Garth. Libertarian in the US means Fascist Racist Conservative. Fascist because they’re under the complete control of the fascist Koch Brothers out to gut the gov so they can buy it on the cheap and go about their polluting and wall street follies with no oversight and regulation, and racist because they’ve broken away from the GOP solely because a black man is the head of the Conservative/GOP.

#148 Smoking Man on 09.14.10 at 3:18 pm

#131 Devore

I appreciate your points they are all valid.

But the point that most people on this blog fail to appreciate and it’s a big one.

In 2008 things where far worse, The news was much more terrible, Jobs where disappearing before out eyes. The stock market mega crashed, Armageddon was in the air, Yet, the real estate holding cattle did not throw in the towel.

Today, Jobs market is still growing be it slowly. Affordability is good. Long term rates are not going up, and may come down further.

Why would the herd throw in the towel now, rather than back in late 2008 and early 2009. when the meteor was heading on a direct path to the driveway. And all this happened before BOC dropped the rates, sparking an up tic.

Ya see this is the one point that no one can give me satisfactory answer for.

#149 What about Waterloo on 09.14.10 at 3:25 pm

#104 Kitchener1

Any thoughts about the potential decline in real estate prices in the K-W Region? 10-15%?

Also, do you know of any good resources for current stats on the KW real estate market (something similar to those that have been posted on here previously for Vancouver and Calgary)? I have been searching the net without much luck.

#150 tkid on 09.14.10 at 3:35 pm

#132, it’s not that all goods will cost less, the luxury goods will cost less, the essentials like food, heat, etc will cost more. Heck, the essentials already cost more.

#28 What are you contemplating?

The unthinkable. — Garth

Uh oh.

#151 Elizabeth on 09.14.10 at 3:37 pm

Hi Garth:

I was watching CBC last night and “F” was on. He decided to grace Canadians with his thoughts:

F: “Canadians need to be cautious and weigh the risks when buying a home because interest rates will go up”.

Gee F, thanks for that.

The other piece of the news was that Bank Foreclosures in Canada are high. I was waiting for some media person or Real Estate “talking head” to try and spin that bit of news into a positive…but nothing…huh.

I’m going to crash your Vancouver chat because I grew 10 years older waiting for confirmation. I guess using the word “crash” was not a good choice considering the attack on your website. May that person get a really nasty itch that lasts for weeks and is visible to everyone!

See you soon.

#152 Drake on 09.14.10 at 3:47 pm

#146 Future Expatriate – Firstly, the Koch brothers don’t represent the entire libertarian movement. Faster growing is the Mises wing of the movement. You’re view overall is fanatically one-sided and narrow minded.

#153 Northern Dirt on 09.14.10 at 3:57 pm

#146 Future Expatriate

This isn’t the USA..
Im more afraid of him being a Vegan..

#154 VICTORIA TEA PARTY on 09.14.10 at 4:09 pm

#19 PATZ

You’re right about the death toll in the Mideast, a lot of it at the hands of the American Empire.

That’s what empires do, they kill people. It’s a by-product of their inner angst, outer aggression or just plain screw-ups. It’s just plain takin’ care of business. Check out Rome, and Britain and China (in the really old days), Greece, the list goes on.

BUT 9/11 was a particularly egregious act since the WTC towers housed worker-bees from many different countries and religions. More than a fair share of muslims were killed as were 22 Canadian citizens.

The Mideast has been a Sh#t Show for eons. Some of the current ongoing violence between Shias and Sunnis goes back 1,200 years for crying out loud, and no resolution in sight. And then what must go on behind the scenes in the Saudi court of potentates, courtiers and various other parasites!

One set of killings by whomever does not justify a counter set of killings.

This whole aspect of human behaviour is disgusting beyond words and, I think you will agree with me, totally unnecessary and should stop once the “right” conditions shows up. Which I really doubt. Terrible. One group of dead is no more santimonious than the other; because they’re all dead! Dreadful.

#155 Timing is Everything on 09.14.10 at 4:27 pm

#108 Devore – “Should not the system itself naturally impose limits, instead of a “down from above” dictum?”

What system and naturally imposed limits are you alluding to, specifically?

#156 Calgary Girl on 09.14.10 at 4:47 pm

For your enjoyment Garth,

Home Equity a Big Advantage for Canadians in Retirement

http://realtytimes.com/nl/nlpages142/CA_4homeequity.htm?open&ID=sandrabrask

#157 Devore on 09.14.10 at 4:54 pm

#147 Smoking Man

Today, Jobs market is still growing be it slowly.

Seems to be flat at best. And it’s about to get whacked by the real estate industry, which is already markedly slower in major centres.

Affordability is good.

You keep saying it, but I have a hard time believing. $300k, $500k or more for a starter house, that is not affordable. But the monthly payments are, if you stretch them out long enough. A monthly payment alone does not make something affordable, not when you’re still paying for it in 35 years. Isn’t buying a house supposed to be about eventually actually owning it? And as sentiment turns, not only is affordability not going to look as good, neither will buying a house.

Long term rates are not going up, and may come down further.

Maybe, but they’re so low already, lower than ever before. Doesn’t really matter, buyers will be squeezed in other ways.

Ya see this is the one point that no one can give me satisfactory answer for.

Just wait and see for yourself?

#158 jess on 09.14.10 at 4:56 pm

Taxpayer-Owned GM Pays New CEO $9 Million
Tuesday, September 14, 2010
=========================
…”said BMO Nesbitt Burns deputy chief economist Douglas Porter. But overall slow productivity growth, as Canada has experienced over the past decade, means “we’re not getting as much out of our workers.”
=============================
=The American productivity myth — and the real truth about real wages
By Henry C.K. Liu with editorial help from Jina Moore

This article appeared in NewDeal20.org on Wednesday, 08/12/2009
http://www.henryckliu.com/page197.html
Prices can rise — with no inflation
http://www.henryckliu.com/page197.html
===========
Record Increase of Americans Living in Poverty – Tuesday, September 14, 2010When income data gathered by the U.S. Census Bureau is released for 2009, it’s likely to show the poverty rate jumped to 15% from 13.2% the year before—the single highest increase since the government began recording such information in 1959.

A 15% poverty rate means that about 45 million Americans were poor last year, an addition of 5 million
http://www.allgov.com/Home
=
The wealthiest members of Congress grew richer in 2009 even as the economy struggled to recover from a deep recession.

The 50 wealthiest lawmakers were worth almost $1.4 billion in 2009, about $85.1 million more than 12 months earlier, according to The Hill’s annual review of lawmakers’ financial disclosure forms.
=

#159 kitchener1 on 09.14.10 at 4:57 pm

#129 Hell in a handbasket.

Thats the problem, without full time stable work, people will not commit to purchases that require financing– autos homes etc…

#148 What about Waterloo

I dont have any public links for info, I have friends who are RE agents/mortgage brokers that I reach out to for that info.

As for declines, my dart says 20%-30% decline. Worse for condo-townhomes or anything with maint fees.

Kitchener is a very localized market, Waterloo might do better but I doubt it. I dont have any stats to back this up but from my perspective, the population is not growing, maybe even falling a bit, from 12-18 months ago levels. Once again just going by personal experience.

Here is the end deal for RE.
Prices have to go were ever wages go, wages go down, RE values must follow. only reason they havent yet is because of very lax lending standards and 0-40 then 5-35 mortgages. Without those, prices would be much lower.

At some point, peoples attitudes towards debt are going to have to change, wiehter its voluntary or forced. People in Canada are already at peak credit.

At the end of the day, its banks and their willingness to offer credit on lax terms that drives the market. CHMC underwriting is what has drove the market. BUT, at some point demand is going to be exhausted. And we are there now.

No doubt lots of people sitting on the sidelines that want to buy, but these people will buy only at a large discount.

#160 captlou on 09.14.10 at 5:24 pm

What are these guys smoking???

Residential sales across B.C. improved in August

Times Colonist September 14, 2010

Residential sales across B.C. improved in August compared with July, but remain well below the number of houses sold through the multiple listings service at the same time last year according to the B.C. Real Estate Association.

Sales dropped to 5,590 units in August 2010 compared to the same month last year, while on a seasonally adjusted basis, unit sales in the province increased seven per cent in August from July.

The average sale price also increased four per cent to $487,804 in August compared to the same month last year.

“August home sales posted the first month-to- month increase since March of this year,” said Cameron Muir, the BCREA’s chief economist. “Lower mortgage interest rates and an improving labour market are inducing additional consumer demand.”

Muir also noted the province’s housing inventory has been reduced by 30 per cent since April.

“With fewer new listings, total active listings are now on the decline, signaling that an end to the buyer’s market may be on the horizon,” he said.

Year-to-date, B.C. residential sales dollar volume increased eight per cent to $26.9 billion, compared to the same period last year and residential unit sales rose two per cent to 53,717.

The average residential sale price has climbed 10 per cent to $501,226 over the same period.

© Copyright (c) The Victoria Times Colonist

Read more: http://www.timescolonist.com/business/Residential+sales+across+improved+August/3523365/story.html#ixzz0zXoCkzUe

#161 Oakville Owner on 09.14.10 at 5:31 pm

Garth:
What happened to the Mortgage Rate Supermarket banner ad on the blog?

I have been using it to keep an eye on 5 year closed mortgages as our prime – .50% fully open mortgage is getting closer to the five year rate.

Any idea from you or the dogs if now is a good time to lock it in for the next five years?

The ad was nuked with the rest of the site and will be restored shortly. — Garth

#162 Bill ( Peterborough) on 09.14.10 at 5:36 pm

Re # 101 CrowdedElevatotfartz
——————————————————————-

That’s the entightment generations way of logical thinking which has been instilled in them through marketing/schooling. Most not knowing any better.

Sad things alot of that crowd would think your a dinosour with your way of thinking.
___________________________________________

Re # 127 grumpy
——————————————————————–

Excellent!!!

Talk about giving the north western hemishpere a
reality slap up side of the head.

___________________________________________

Re# 142 bullion.bunny

#132 Hell in a Hand Basket on 09.14.10 at 2:21 pm

Very good point…………but how are you going to pay the outstanding debt back?
——————————————————————–

Simple;

Tell the International Banking Cabals ” To Screw Off’. “We’re Not Paying Our Debt To you Anymore”.

They have no armies , except when they manipulate other countries into war: so as further their wealth.

If we all did this we would put those serpants back into their holes from which they crawled out off; for awhile at least. Until they dared to venture out again and try to start all over again their decieptful/ corruptive way of exist.
___________________________________________

#163 Paul Sandhu on 09.14.10 at 5:41 pm

#124 Rant

Good rant bro!

For evrey winner there’s always a loser. In our case there are a couple billion laborers in China and India. I was at a tea plantation in Southern India this past winter where they grow ‘premium – for export only tea’…The women that pick the tea carry 20 kg. (almost 50 lbs.) bags on their heads from sunup to sundown and get paid $2.5 a day. They don’t even get to sniff export quality tea let alone drink it. But it sure is marked FAIR TRADE on those bags its shipped in.

There is a reason why MADE IN CHINA flat panels and computers are so cheap, there are next to zero labor costs in the final price. Our houses are financed by low interest costs, our goods are paid for by the labor of the third world. The beneficiaries of the ‘system’ are the first world nations, and the greed of the citizens of these nations does not permit them to question the disparity in the price of their labor and that of a third worlder.

These things however have a way of balancing out, and it may be time to pay the piper!

#164 jess on 09.14.10 at 5:41 pm

An American company, Hyperion Power Generation, has developed the world’s first miniature nuclear power plant. Emphasis on the past tense of “develop.” These nuclear Hyperion Power Generators (or HPGs) are real! Each one is not much larger in size than a person and is designed to be buried deep underground. Conceptually an HPG is more like a really powerful battery—an HPG has no moving parts and requires no human monitoring.

Hyperion claims that the HPGs are completely safe and that there is no risk of them melting down Chernobyl-like (a claim Spot Cool Stuff isn’t in a position to evaluate despite that nuclear physics class we took in college). The first HPGs are scheduled to be installed in areas of developing countries currently without electricity. Other markets include large factories, industrial zones and even small towns in the United States and Europe. Once deployed an HPG is not designed to be opened—if an HPG needs to be refueled it is shipped back to Hyperion. If unsavory types were to open an HPG the nuclear material they would find inside would, thankfully, not be weapons grade.

Obtaining an HPG will set you back around $25 million (about €20 million), which is pretty cheap considering that a single module can power about 20,000 homes; the cost comes out to about $0.07 per kWh. Get in line for yours now—Hyperion plans to manufacture around 4,000 nuclear power modules over the next 10 years

#165 Captlou on 09.14.10 at 5:43 pm

Has anyone else seen the following article in the Times Colonist today – am I missing something?:

http://www.timescolonist.com/business/Residential+sales+across+improved+August/3523365/story.html

Cameron Muir also states in this article: “With fewer new listings, total active listings are now on the decline, signaling that an end to the buyer’s market may be on the horizon,” he said.

Read more: http://www.timescolonist.com/business/Residential+sales+across+improved+August/3523365/story.html#ixzz0zXs61HD2

Mr. Muir has his own special planet. — Garth

#166 john m on 09.14.10 at 5:46 pm

Good luck in Vancouver Garth :-) (the over extended capital of Canada)….but you tell it like it is and your honest which more and more seems like a diminishing commodity in Canada. I remember when you were an MP and you said once that perhaps it would be better if our country was ruled by independent MPS …i think you were bang on right!!! Our whole political system is a disgrace all influenced by vote buying ,partisanship and big money supporters….id love to see a change with all (or a majority) of MPS as independents and an elected leader…that would end a hell of a lot of corruption.

#167 goldenfox on 09.14.10 at 5:53 pm

Deflation! Not according to this insider

http://www.economicpolicyjournal.com/2010/09/inside-jackson-hole-meetings-central.html

Are you gold bugs now rooting for a war with China? This is repulsive. — Garth

#168 InvestX on 09.14.10 at 5:54 pm

InvestX:
We already have according to that OECD report: “5 per cent of new issues [Canada], compared with 33 per cent at the peak [in the US]“.

A distinction should be made between subprime loans and no/little money downpayment loans.

Garth:
It is the consequence that matters, not the labels. You have no point. — Garth
————————————————–

My point is being accurate with statistics when people claim Canada wasn’t any different regarding “subprime” loans specifically.

Besides, the consequences are a result of these factors.

I’m not disagreeing with the bleak predictions of Canadian real estate.

#169 Old_is_Gold on 09.14.10 at 5:59 pm

#131 Devore

I appreciate your points they are all valid.

But the point that most people on this blog fail to appreciate and it’s a big one.

In 2008 things where far worse, The news was much more terrible, Jobs where disappearing before out eyes. The stock market mega crashed, Armageddon was in the air, Yet, the real estate holding cattle did not throw in the towel.

Actually they were starting to throw in the towel, and if allowed to continue, prices would already have been 25% lower at least. When you think about it rationally, when did you ever ever ever see a RE boom turn to bust in ONE YEAR. This lowest possible interest rate fed RE boom is already bursting after just one year, the ’09 boom was not a fundamentals based boom nor has there been any fundamentals based economic recovery. Any economy that is based on governments continually throwing trillions to prop it up is an economy without a foundation.

The housing industry has been propped up, so has the banking industry (worldwide), the auto industry, the insurance industry, and the list goes on. What happens when the props are removed? Hasn’t Chrysler been bailed out 3 times already in the past 25 years? How about GM and Ford, how much have governments thrown at them not just in ’08 but every five years it seems in bigger and bigger tax breaks and other scams? From ’08 to ’10 some 7 million more people in the States have gone on welfare (they call it food stamps).

Everywhere I look in the GTA there are signs of businesses shutting down, I don’t see any manufacturing plants / any big hydro projects etc. etc. lining up to start up in the GTA, and I’m sure its the same across the country.

WHAT RECOVERY?

Haven’t you heard that one about statistics? Unemployment in the US is closer to 20% than the official BS rate, whatever it is. And I’m sure the Canadian statistics are not much better. About this time next year, all facade of recoveries, full employments, booming economies will seem like a Disney movie unless the politicians continue to waste trillions to keep the illusion alive – The question is for how long?

#170 Reasonfirst on 09.14.10 at 6:02 pm

#147 Smoking Man

“Why would the herd throw in the towel now, rather than back in late 2008 and early 2009. when the meteor was heading on a direct path to the driveway. And all this happened before BOC dropped the rates, sparking an up tic.”

I’m confused by this comment – the herd did throw in the towel..sales dropped hugely. And as you said the BOC rate drop caused the up tic. The herd is now more indebted, the front runners are gettting jittery and there ain’t much room for BOC intervention at this point (the overnite rate was at 3% late 2008 and dropped by 2.75% during that time)

..the herd will follow.

#171 Old_is_Gold on 09.14.10 at 6:05 pm

PS. / My last comment was meant for SMOKING MAN not Devore

#172 S.B. on 09.14.10 at 6:13 pm

Realtors seem sloppy these days. I see so many garbled and mis-written MLS listings. Here is a perfect example, a 1/2 million house – they do not even proof read!

http://www.realtor.ca/propertyDetails.aspx?propertyId=9930097&PidKey=-1708139574

“Beautiful Waterfront home located on the historic Hillsborough River in Stratford. Only 5 minutes from Down town Charlottetown. This family home flows perfectly for everday living to a more formal where you can entertain. An extraordinary panoramic view of the hugh yard and wonderful water view from all the oversized windows in the back of the house. This home is completely repainted and the interior has be tastefully decorated by an Island decorator. The kitchen is a Chef’s paradise or the hub for entertaining. Quartz counter tops highlight the kitchen. The upstairs has 4 bedrooms with a master bedroom ensuite that has it all! The outdoor living space is wonderful from the mature tree, 2 tier cedar deck, paved basketball pad, waterfront patio and a green space that is large enough for a full baseball or soccer game. Located a couple of blocks from the local library and the historic Robert Cotton Park! “

#173 Anon on 09.14.10 at 6:14 pm

I don’t see why it is an emotion-driven event at all. Government-controlled interest rates and policies have distorted market signals once again, and created yet another bubble. Only once people see this bubble do emotions come in, and people do the only thing they can think to do after finding themselves in a fox hole: panic.

#174 goldenfox on 09.14.10 at 6:30 pm

Are you gold bugs now rooting for a war with China? This is repulsive. — Garth

Because I posted an article about central bankers and deflation, what makes you think i’m rooting for war with China. Speaking of gold, It made a new all time nominal high today and my portfolio went up another 3%.

#175 dark sad person on 09.14.10 at 6:31 pm

#153 VICTORIA TEA PARTY on 09.14.10 at 4:09 pm

That’s what empires do, they kill people. It’s a by-product of their inner angst, outer aggression or just plain screw-ups. It’s just plain takin’ care of business. Check out Rome, and Britain and China (in the really old days), Greece, the list goes on.

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

Yes-that is what Empires do-eventually-but first-they “must” debase their currency
(like Rome and Greece and every other Empire has)

Then they can suck the real wealth out of their own country-via Inflation and build huge Armies and go bankrupt-but instead of dealing with the consequences-they invade and occupy weak-resource rich Countries-sucking away their wealth-for the greedy narcissistic rulers–

But-there is/was–a way of stopping this-
You cannot fight foreign Wars-with Gold as a money base-you simply run out of Gold and throw the Country into a Deflationary/Depression-

This below isn’t about that-it is about-how we ended up in this godawful situation-
It also describes-how we can get out of it-
I like Hugo Salinas Price-the honest money advocate and self made Mexican Billionaire-
I believe he is correct–100% correct about this-

**********************
The Gold Standard: generator and protector of jobs

The current malaise: financial crisis, industrial crisis, crisis of unemployment

Today the situation is far worse. China, with a population of 1.3 billion, has become a formidable power. No one can compete with China in price. China sells vast quantities of goods to the rest of the world, without the rest of the world having any chance of selling similar quantities to China, and China can do so, because today trade deficits are “paid” not in gold, but in dollars or euros or pounds sterling or yen, which will never be scarce: they are created at will by the USA, the European Central Bank, the Bank of England, or the Bank of Japan.

A fearful monster has been created as a consequence of the elimination of the gold standard, which imposed a limit: “You can only sell to those who sell to you; you can only buy from those who buy from you.” This limit no longer applies; everything is disarray, inequality, imbalance; “structural imbalance” prevails because we no longer have the gold standard.

The credit expansion boom has ended, and in its place we have a global financial crisis. Today the problem of “structural imbalance” and the de-industrialization and unemployment it has produced in formerly industrialized countries acquires greater relevance with every passing day. What is to be done with the masses of jobless men and women? No one knows the answer, because the answer is not acceptable to the thinkers of today: the correction of “structural imbalances” and re-industrialization, in other words the creation of new jobs, lies in restoring the gold standard worldwide.

http://www.plata.com.mx/plata/articulos/articlesFiltPrint.asp?fiidarticulo=161

Of course G-will give his usual answer-

#176 goldenfox on 09.14.10 at 6:40 pm

Commodities are surging, inflation dead ahead

http://jsmineset.com/wp-content/uploads/2010/09/September1410CCI.pdf

Arousal by chart. Must be a sad life. — Garth

#177 Nostradamus Le Mad Vlad on 09.14.10 at 6:46 pm

Say Garth, I printed the e-ticket out for Kelowna Sept. 19 but I wasn’t able to print a second one.

The PC had a case of the whoopsies. Should the better half come anyway (she is far more intelligent that I ever will be)?

#65 Bill (Peterborough) — “The U.S.A is still the last free stong hold that must be broken.”

Which is why the elite put Obama in charge, knowing full well the populace wanted change which Obama provided.

Not that long before the US runs its’ course.

#75 Old_is_Gold — Good post. One needs look no further than the US and parts of the UK and Eurozone to witness ghost towns.

Chernobyl is a great example, ‘tho there is a different reason for that.

#80 TheBigLebowski — Are all five stages necessary before the plug is pulled?

#124 Risk — “There is so much more to life than just making money.”

Agreed. One needs just enough to live a relatively simple, stable life but any more than that is a headache.

#125 Hell in a Hand Basket — “. . . as technology is advancing on an exponential curve.”

Correct, and therein lies the karmic speed of time, becoming faster each moment so there will be many more technological breakthroughs, which will lead to new areas of work, stuff being invented that we haven’t even conceived of.

The next lifecycle will be quite fascinating (depending on where we are). There are many changes coming forth.

#127 grumpy — “The perfect Keynsian trap laid by a greedy government . . .”

Right on the money! Add a bucketful of collusion between govts., bankers and similar types, one clearly knows we’re we are now headed, regardless of whether we like it or not.

#178 Dan in Victoria on 09.14.10 at 6:47 pm

Post #81 Bottoms up,
There was a point in my childhood where my father had to draw a Christmas Tree on the wall because we couldn’t afford one.

Yep, I remember similar times. Made you pretty tough on the inside. I’ll never ever forget where I came from.
I can remember giving my old winter jacket to my friend Joe, they had a family of 7 ? Wasn’t enough to go around at home, he was so embarrsed, but he was also freezing cold that morning. He cried when I gave it to him. Hell we were maybe 10 or 11 back then.
Almost 50 years later he remembers.
Still miss all the old realitives from back then though, man they were a tough bunch.

Post #116 Mister obvious, Just keep believing it was BS from your Dad.

#179 POG on 09.14.10 at 6:47 pm

# 167 Invest X (and other posters about subprime lending)

What don’t you people understand – 5% down / 35 year amortizations ARE SUBPRIME BY DEFINITION in a market where people tend to put down as much as they can as a downpayment. If you can only muster 5% down, you are by definition a sub (read less than) prime credit risk.

“A rose, by any other name, smells as sweet”

#180 jess on 09.14.10 at 6:54 pm

The recent economic and financial crisis has pushed unemployment in many countries to the highest levels in 40 years. Indeed, the problem of employment, including the quality of employment, has become the most pressing social and economic problem of our time. This is of special importance in developing countries because it is closely related to poverty.

It is widely believed that capital and labour are substitutes for one another. According to this view, the use of these factors of production depends on the relative price of labour, and unemployment is due to labour market rigidities. But the idea that job creation requires lower wages is erroneous.

It is important to look at wages from the microeconomic perspective but also to pay attention to their macroeconomic role in spurring growth. Wages have a double dimension:

As a production cost.

As mass purchasing power, and therefore as a potential for consumption and aggregate demand increases.
Moreover, empirical evidence suggests that fixed investment, i.e. the enlargement of productive capacity, is closely associated with employment creation. And it is the expectation of rising demand and favourable financing conditions that drives investment, rather than reductions in unit labour costs.

Over the past three decades, in many developing countries that pursued export-led growth strategies based on wage compression, employment problems often persisted due to two major reasons:

Exports did not grow as expected; or

Productivity gains were used to lower export prices rather than to increase wages and therefore domestic demand.

Experiences with employment creation varied in each developing region:

In Latin America, per capita GDP virtually stagnated, unemployment increased and average productivity declined during the 1980s and 1990s.

Africa has been characterized by the persistence of a large informal sector. More than 20 years of orthodox macroeconomic policies and policy reforms had limited success in creating conditions for rapid and sustainable growth. Production consists overwhelmingly of agriculture and mining.

In Asia, GDP and productivity have grown rapidly for many years. But there is still a need to strengthen domestic forces of employment creation to provide decent jobs for a large share of the labour force.

Export-led growth strategies cannot be successful for all countries at the same time because:

Some countries have to be net consumers of the exported goods;
Global export markets are likely to grow much more slowly than during the years preceding the recession;
Competing for export success by keeping labour costs low leads to a “race to the bottom” in wages that is counterproductive to creating jobs and reducing poverty.
Policies for sustainable economic growth, job creation and reductions in poverty should be based on establishing a balanced mix of domestic and external demand.

In this context, many developing countries that became overly reliant on exports for development will need to strengthen domestic demand for growth and employment creation.

However, this should not be viewed as a retreat from integration into the global economy. Developing countries need to earn foreign exchange to finance required imports, especially of capital goods. Moreover, international competition among firms can spur innovation and investment by producers in their tradable goods industries.

http://www.unctad.org/Templates/WebFlyer.asp?intItemID=5606&lang=1

#181 bullion.bunny on 09.14.10 at 6:57 pm

161 Bill ( Peterborough) on 09.14.10 at 5:36 pm

Tell the International Banking Cabals ” To Screw Off’. “We’re Not Paying Our Debt To you Anymore”.

Yes, that’s what will happen in the not to distant future. As bond revulsion becomes the next phase of the credit crisis……..lets see if you like the results!

There will be no sovereign bond defaults in North America. At least try to pretend to be credible. — Garth

#182 Mike on 09.14.10 at 6:57 pm

“Mortgage approved. Condo docs signed. Move in date, sept 24. G2G”

A buddies facebook status. And so far 20 or so compliments, pats on the back and congrats from friends. And I’m just shaking my head…sheesh.

#183 POG on 09.14.10 at 6:58 pm

$ 148 What about Waterloo

1. Kitchener is a shithole, period.

2. Waterloo is pleasant enough, but unfortuately directly borders Kitchener.

3. You do NOT get a well built nice home for 350k in Waterllo, you get mass-produced, barely-to-code, cookie cutter shite with 90.00 dollar toilets and linoleum floors.

4. Neither place has anything approaching culture or even fashionable shopping and a drive to Toronto is 1.5 to 2 hours minimum.

In short, good places to raise a family of blue collar slugs.

#184 nsqt on 09.14.10 at 6:59 pm

RE slow down has begun here….driving through the area between Kingston Nova Scotia and Bridgetown there are a lot of house for sale…3 and 4 in a row in some areas….I have noticed a lot of these for sale signs now have the reduced sticker on them……

#185 CanadaGeese on 09.14.10 at 7:08 pm

BCREA said today sales in August in Metro Vancouver down 35% from last year while prices are up 4% YOY. Clever spin, that, because a) it disguises the fact that gains have eroded from peak earlier this spring and b) average price can still trend higher because sales have dried up faster for cheaper units than more expensive homes, resulting in a higher average.

The truth has never been more misleading.

#186 CanadaGeese on 09.14.10 at 7:09 pm

Before this site was crashed, someone posted a site where day-to-day MLS sales figures are listed on the weekend. Can you repost the link?

#187 dark sad person on 09.14.10 at 7:17 pm

166 goldenfox on 09.14.10 at 5:53 pm

Deflation! Not according to this insider

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

The Fed is “worried” about Inflation-
OMG-that is so funny-
Bernanke has wet dreams about Inflation-
If only people would spend dammit-velocity has collapsed-and the Fed is Worried about Inflation-

The China thing?
I suspect it’s more about looking for an excuse to slap on trade tariffs-

#188 dd on 09.14.10 at 7:29 pm

#145 Alan on 09.14.10 at 3:10 pm

…Fear and Greed….That’s what the market is all about! What axe are you grinding?..

The one that buys on fear and sells on greed.

#189 The Original Dave on 09.14.10 at 7:43 pm

I’m on the road in Atlantic Canada, BC again and the prairies in October, so circle Nov. 9. Burn what you want, baby. — Garth
==================================

dude, this is Toronto we’re talking about. In some respects we are different. Biggest city in Canada with one of the biggest housing bubbles and most are oblivious.

Shouldn’t you maybe have an event in September and November? Heck, I’ll go out and try to book a venue, advertise, and book you for the event

#190 The Original Dave on 09.14.10 at 7:55 pm

by the way people, don’t bother arguing with Smoking Man. You can have a dispute with a door in your house, and the door will agree and understand faster than he will.

The guy was praising Canadian real estate just a few weeks ago and ridiculed anyone who thought real estate was over priced. It’s only a matter of time before his comments are blocked.

#191 Aussie Roy on 09.14.10 at 7:55 pm

Roial1 on 09.14.10 at 2:43 pm

I hope you enjoy your time here, down under. With the lack of houses here should you need a tent and a quite bridge I’m able to assist. LOL
Seriously its a great place unless you want to buy a house. I hope you are able to strike up a conversation with the locals to gauge for yourself how the house religion is worshipped “Aussie style”.

Aussie Update

Well here is the latest folks, Aussie RE not over priced.
DRUM ROLL PLEASE.
Its because we all live by the coast and everyone knows that coastal land is always a premium. This article makes it sound as if we all have our own private beaches and that our cities don’t extend into the cheap nasty interior. Of course its all crap..

The debate over our largest banks house price data rages on.
http://www.smh.com.au/business/cba-takes-the-advice-of-the-agency-it-parodies-20100914-15b0o.html

http://www.smh.com.au/business/debate-rages-over-property-data-20100914-15avs.html

http://www.smh.com.au/business/cba-raises-eyebrows-on-global-roadshow-20100914-15avx.html

#192 BrianT on 09.14.10 at 8:04 pm

#116Obvious-I find it hard to fathom that you are unaware that the average person on this planet in 2010 doesn’t even get the bowl of steam for breakfast. I can only assume your father did very well financially (to keep you so insulated from any awareness of poverty).

#193 Nostradamus Le Mad Vlad on 09.14.10 at 8:04 pm


Jobs going “America and Europe face the worst jobs crisis since the 1930s and risk “an explosion of social unrest” unless they tread carefully, the International Monetary Fund has warned.” May well lead to civil disobedience, social unrest in the west and a larger takedown.

China Add to the above, mix together and what is the end product?

The Rothschilds are laughing (all the way to their bank.

Unfortunately, Buffett is off the mark on this one.

Gold Confiscation For goldbugs here, there and everywhere. “. . . there have been clear signs of late that the U.S. government is taking an unhealthy interest in your gold.”

Illegal Immigration “But, today, 15 million Americans cannot secure a job. At the same time, somewhere between eight to 10 million illegal alien migrants hold down full time jobs.”

Not economic, but the headline tells the story.

Eiffel Tower and the Fictitiously Created Numbnutz.

Look at the headline and realize we’re living in a dictatorship.

#194 char on 09.14.10 at 8:07 pm

Go Mish !

http://www.globaleconomicanalysis.blogspot.com/

Don’t y’all get a pathetic little thrill when the Yanks notice us ?

#195 BrianT on 09.14.10 at 8:10 pm

From YahooFinance: out to crush the USA: the tag team of Goldman and China http://finance.yahoo.com/banking-budgeting/article/110665/goldman-conspiracy-helps-china-defeat-us?mod=bb-budgeting&sec=topStories&pos=4&asset=&ccode=

#196 Old_is_Gold on 09.14.10 at 8:19 pm

Good Article below – puts things in perspective for those who have removed their rose colored glasses.

Quote:
The labor market is in dire straits. The Great Recession has left behind a waste land of unemployment.”

So exactly what is going to turn that around?

Are millions of jobs going to suddenly hop up and return home from overseas?

Is the U.S. government going to suddenly eliminate a whole raft of taxes and regulations and are U.S. workers going to suddenly become much cheaper?

Is the U.S. trade deficit crisis suddenly going to reverse and turn into huge trade surpluses for the United States?

Of course none of those things is going to happen.

America is going to continue to bleed jobs, wages inside the United States are going to continue to be forced down and the standard of living for most Americans is going to continue to deteriorate.

Plus, if the American people don’t have good jobs, they can’t buy homes. In fact, a growing number of Americans are finding out that they can’t even afford the homes they are in right now. CNBC is reporting that the nation’s banks repossessed a record number of homes in August.

Complete article here: http://theeconomiccollapseblog.com/archives/where-are-the-jobs

I wouldn’t bet against America. BTW, I see your web site only has 100 days left in this apocalypse. You might want a new URL soon. — Garth

#197 dd on 09.14.10 at 8:22 pm

#180 bullion.bunny

“There will be no sovereign bond defaults in North America. At least try to pretend to be credible. — Garth”

True. The government has the printing press.

#198 dd on 09.14.10 at 8:25 pm

#175 goldenfox
“Commodities are surging, inflation dead ahead.” Arousal by chart. Must be a sad life. — Garth

Oil sands construction costs have risen over 10% this year. Some parts of the economy have inflation.

#199 Another Albertan on 09.14.10 at 8:40 pm

#163 –

More like $50M. Probably well over $60M by the time it’s in. We discussed this HPG concept at the office today. The rub is that burying it in the ground would put the cell in the middle of our oilsands production zone. ;-)

If we could reschedule a business trip to the south-central US, we would take a side trip to talk with Hyperion in NM.

I can’t imagine the regulatory gongshow that would ensue if we filed an application for one of these…

Everyone else’s mileage may vary.

#200 Mark on 09.14.10 at 8:41 pm

#178, yup. Canadians have a really delusional view of what ‘subprime’ is. It literally is, “less than prime”, which means that all CMHC-insured loans are subprime loans.

But you wouldn’t believe the number of nutjobs I’ve talked to who run around saying that CMHC-guaranteed mortgages aren’t subprime.

#201 Kaganovich on 09.14.10 at 8:48 pm

116 Mister Obvious

Your ignorance/pompousity is astonishing….or…your sarcastic ‘wit’ needs some work. Maybe both.

#202 Bill ( Peterborough) on 09.14.10 at 8:50 pm

Re # 180 bullion.bunny

Yes, that’s what will happen in the not to distant future. As bond revulsion becomes the next phase of the credit crisis……..lets see if you like the results!

There will be no sovereign bond defaults in North America. At least try to pretend to be credible. — Garth

——————————————————————

Guarantted the future does not look too promising.

Never liked to be led around in life like a bull with a ring in his nose.

Have a pretty good idea whats in store for alot of people.

Can I individually change it . No.

Can we collectively slow it down yes. ( chances of this happening are slim to none)

What is very possible in the future are wars , greater famines, man made plagues to bring the world population down by a third.

So no I won’t like the results, but I will do my best to prepare for what is about to come.

Re Garths comment;

You could be right in a round about way. But then there is that mass mentality.

People do not like to be lied to or manipulated. Usually they just shrug it off and keep going.

However you take a persons right away to exist and try to oppress them , through decietfullness/ manipulation, over taxation well thats a different tune.

They usually don’t take that lying down.

#203 CrowdedElevatorfartz on 09.14.10 at 9:28 pm

#163 Jess
Selling Hyperion Stock are we????????/
++++++++++++++++++++++++++++++++++
#182 POG
Wow ! Someone had a traumatic experience in Kitchener Waterloo. Thanks for the heads up. Niagra falls here i come.
+++++++++++++++++++++++++++++++++++
#188 The Original Dave
Dude, read between the lines. Maybe Garth dont “Wanna go to Tarrana”

#204 Consider This on 09.14.10 at 11:34 pm

LOL BrianT is an a total flake giving a bad name to Canadians. For the record BrianT does not represent Canadians as a whole. We are NOT American-hating, paranoid, hypocritical, tin-foil-wearing morons.

#205 Bobby on 09.15.10 at 12:37 am

For#164. If it is the end of the buyers market here in Victoria, they haven’t told the sellers in my neighborhood. Lots of houses for sale with no sold signs. A few open houses this past weekend and I certainly didn’t see many cars

Perhaps what Muir meant was, it is possibly the end of having any buyers in the market.

It’s getting ugly out there.

#206 InflationNation on 09.15.10 at 1:04 am

The Inflation/deflation debate is confusing people. Rising prices are not inflation itself, just the end result of it.
To all those who argue that we’re headed into deflation, I agree if you’re talking relative to the price of gold.
If you think we’re going to see inflation, I also agree if you mean relative to the price of US dollars.

Simply put, the monetary policies of central banks around the world can only create inflation in terms of the currencies they support.

The US and Canadian dollar have both lost 95% of their purchasing power since the creation of a central banking system and adoption of a fiat currency.

Massive increases to the money supply creates inflation.
The argument that we’re at risk of a deflationary spiral is such nonsense and defies even the most simple logic.
Are we really to believe that people will stop spending in anticipation of falling prices? How long can people hold off buying groceries before they have to eat? I’ve never heard of someone waiting to fill up their car with gas in anticipation of lower prices down the road!
Technology also defies the deflationary spiral logic. If people really delayed buying things until the prices fell, they’d never buy flat screen TV’s, iPods, or other gadgets. Heck, these things are obsolete before they leave the factory that produced them in some cases.

My point is that the whole notion of a deflationary spiral is nonsense. When a Central bank can “print” money at will, prices will always rise faster than they fall in terms of the currencies purchasing power.

The amount of inflation that can be created is unlimited. Heck, the Fed could mail everyone $1 million dollars if they wanted! The problem is that the money supply would increase, and although prices and wages would also increase, the purchasing power of that cufrency becomes worthless. Thing Germany during the world war.

#207 TheBigLebowski on 09.15.10 at 3:48 am

There will be no sovereign bond defaults in North America. At least try to pretend to be credible. — Garth

Then the laws of economics would state that the only other option for the U.S will be to inflate away their debt. They sure the heck aren’t going to grow their way out when 1.9 trillion in stimulus only pushed the economy sideways for 18 months. Next stop is 5 trillion over two years.

#208 TheBigLebowski on 09.15.10 at 3:53 am

#161 Bill ( Peterborough)

Are you trying to tell me the Gulf of Tonken event was staged ? Now that is just tin-foil material hehe . Next you will be saying 9/11 was planned as a pretext to invade the middle east. I never hear any of that stuff on the 6’O Clock’ news so it can’t be true.

#209 TheBigLebowski on 09.15.10 at 3:59 am

#176 Nostradamus Le Mad Vlad- #80 TheBigLebowski — Are all five stages necessary before the plug is pulled?

Nope, they will pull the plug at a time they choose. More than likely timed with another war to distract the zombified masses. This will extricate them from any blame since the war will be blamed for causing the collapse. Their plan has been foisted on us more than once this century

#210 Taxpayer like everyone else on 09.15.10 at 9:15 am

206 Inflation nation. See dark sad persons posts for the strongest arguement for deflation. It deosnt defy logic, in fact, it is rather simple. If the “printed” money doesnt
make it into the credit market in some form, there is no increase in the money supply. The behaviour of consumers you refer to is typical of an inflationary environment. I have actually delayed filling up my tank,
and purchasing electronics in anticipation of lower prices,
though I wouldnt call either a true example of deflation.

#211 Bill Gable on 09.15.10 at 3:19 pm

Holy Cow – maybe Mr. Turner is awakening some of the RE vamps – to whit:

“In an environment characterized by highly-indebted Canadian households, a moderation in job growth and personal income, and the fact that demand was frontloaded in 2009, we expect the cooling in the housing market to continue through the remainder of 2010 and throughout the entirety of 2011. TD Economics forecasts for existing home sales to decline by more than 20 per cent in 2011 and existing home prices by more than 7 per cent in the same year.” Francis Fong, economist, Toronto-Dominion Bank.

#212 grumpy on 09.15.10 at 3:29 pm

10 year bull in gold intact. Canadian government shorting $CDN can’t last…it would be interesting to find out what kind of money its costing us to keep the $C under the plunging USD.

Meanwhile it appears that the USD will continue to devalue and adversely gold rising.

Barrons says it all.

http://online.barrons.com/article/SB50001424052970204878604575492853898315796.html?ru=yahoo&mod=yahoobarrons

#213 Randman on 09.15.10 at 5:00 pm

Then the laws of economics would state that the only other option for the U.S will be to inflate away their debt. They sure the heck aren’t going to grow their way out when 1.9 trillion in stimulus only pushed the economy sideways for 18 months. Next stop is 5 trillion over two years.

Flawless logic Big L