Child’s play

Steve was driving through one of the GTA’s soulless northern burbs on the weekend after visiting his in-laws when he came across a sales office and a long line of people snaking towards it.

“I actually pulled a u-turn to go back and see,” he said. Steve snapped a picture and emailed it to me. It shows people shuffling into a Paradise Homes trailer, lining up to buy semis on 28-foot lots, on a sunny October afternoon.

One day later the Toronto Real Estate Board announced that sales of existing homes in the first two weeks of the month – traditionally one of the best of the year – plunged 17% from the same period in 2009. If the pattern holds, this will be the fifth consecutive month of substantial declines – a highly unusual occurrence. So, what’s wrong with this picture?

Meanwhile a dismayed reader of this blog, Riki, sent me these words after trying to buy a new Mattamy home in distant Milton.

“People started lining up on Wednesday afternoon. At this point they did not even know the pricing and were ready to buy. By Friday there was about 200 to 300 people in line. Due to the large amount of people they opened early on Friday. When I arrived on Saturday the line was numbering in the 600’s with a Police escort on site.

“At this point I was out of luck for my First home purchase, and since I could not leave my work to line up I was shout out of the market. There were real estate agents on site handing out new hone prices which were lower and compared to current resale value which was 40000 to 50000 more. All me any spouse got from this event was a free hot dog.

“I then learned the line by Monday was numbering 800 and Mattamy sold the whole subdivision of 400 to 500 homes in 4 days.  This never used to happen in the past, what is going on. All I can do is rent for now and wait for not my dream house, but dream of owning a small roof over my head.”

Hey, wait a minute. How can we have month after month of crashing resales, while desperate first-timers form a mob so big the cops come out? And how can official sales levels fall at the same time prices go up?

Welcome to the HGTV generation, where everyone’s entitled to granite and stainless. Where 95% to 100% financing is still freely available. Where wildly successful developers target the young, especially those with ethnic backgrounds in which real estate is worshipped. And where there’s a significant and growing divide – a chasm almost – moving the overall market in a disturbing direction.

First, sales. They are dropping and this will likely continue. The reasons are obvious since most informed people understand housing is too expensive, jobs are hard to find, everybody’s in debt and this could be a suicidal moment to buy a house that could be cheaper next year, with a wad of borrowed money.

Second, prices. So why is the average price holding or even (as in Toronto over the last two weeks) going up? Well, that’s the bitch with average prices. When buyers on the lower end of the price range back off (as they are), then a smaller number of sales in the middle and the top end skew the numbers. This even happens if prices of houses over $500,000 or $800,000 are 20% cheaper than they were last year – the average price still rises.

Moreover (as I say about once a day on this pathetic blog) prices are hugely sticky on the way down. It takes delusional, greedy, Global TV-watching sellers months to understand nobody wants their houses at bubble levels. So, both price reductions and a whole lot of listings will be greeting us with the new year.

Third, the lineups. Every fire needs fuel. In a world where Tweets replace news there are enough clueless, hormonal young couples to be manipulated into competing for an unbuilt house, developers can hardly be blamed for having their way with the virgins. So, blissfully unaware they may soon drown on negative equity, the kids plunge. Almost as if they never heard of the US housing crash, weren’t warned about taking on 95% leverage at rates bound to reset higher, or failed to learn real estate can falter but the debt lives on.

Finally, danger. The more kiddies who buy, the more potential over the next five years for market mayhem. A large number will be wiped out in the first weeks of price corrections. We have yet to know how they’ll respond – keep beavering away making payments on mortgages worth more than their houses, or capitulate? And how many suburban houses will it take under power of sale/foreclosure to bring down the values of all the identical homes on a block? Ten, or perhaps just one?

Maybe somebody should think about going to Markham or Milton (or Surrey or Airdrie) and telling the kids this: The buy/rent ratio in Canada is now 1.85x. It means it costs twice as much to live as an owner as it does as a renter. Factor in property taxes and maintenance costs, and it makes even less sense to own if you happen to be, say, a young couple without any money.

But, they ain’t listening. And I’m tired of telling.

Let slip the hounds.

204 comments ↓

#1 dd on 10.18.10 at 8:37 pm

“The buy/rent ratio in Canada is now 1.85x.”

Wow. I didn’t know it was this out of whack.

#2 canuckme on 10.18.10 at 8:52 pm

Historically low interest rates and CMHC guarantees are what is fueling the new home market. People with no money see owning a home as a way to make money. But then even our Governments which have no money, just create money by printing more and more. So why should young people worry about debt, they just want a home so they can get their hands on hundreds of thousands of dollars for which they would not normally qualify for. As you keep saying this will not end well but unfortunately all Canadians will pay.

#3 cody on 10.18.10 at 9:05 pm

Agreed with first post. Where does one find this number, or even reliable stats on average rents. I’ve been browsing the web for a while looking for these with no luck.

#4 Jen on 10.18.10 at 9:29 pm

Yes. We would like the puppy please.

#5 Old_is_Gold on 10.18.10 at 9:30 pm

This bubble in RE is unlike any seen in Canada in the past. There is nothing ‘Normal’ about this bubble if there ever is such a thing as a normal bubble.

I suppose we are where the US was in 2006 – people were still going nuts over housing and look what happened in a few short months so that by 2008 Bear Stearns, Lehman, AIG, GM, Chrysler, Wachovia, and so many others were toast. Even Goldman, JPM etc. survived only because their charter as investment banks was changed to commercial banks, and it all began with the bursting of the RE bubble.

The bubble in Canada keeps getting bigger and bigger so that it now resembles the marshmallow man that nearly swallowed NYC in Ghostbusters. The bursting of this bubble next spring beginning in Vancouver will spread like a mushroom cloud all the way to Nfld. And it will be bigger than in the US because our bubble is way bigger – so I suppose we are different up here – how different we will soon find out!

#6 Maxamillion on 10.18.10 at 9:31 pm

“GTA’s soulless northern burbs” When people drive through these new sub divisions, aren’t they scared? These places give me the creeps. They are just blinded by everything.

#7 SpaceMonkey on 10.18.10 at 9:34 pm

I’d like to know the source of that 1.85x number too. If I compare the cost of ownership (taxes, interest, repairs included) vs renting, it works out to be almost identical for me in Hamilton.

#8 Tripp on 10.18.10 at 9:36 pm

“It’s almost as if they never heard of the US housing crash…”

They did hear about it but can’t believe it will happen here in Canada. Their agent, their broker and the daily newspaper told them so.

#9 l dubya on 10.18.10 at 9:36 pm

i am looking to live in a condo in downtown T.O ( as my job is downtown )

a 1 bedroom in harbourfront goes from 1400-1800 for something i like in rent costs….

when i look at buying something in the same area the average price is 250-300k
based upon 20 % down (50k)/25 years/ 3.59 %

the mortgage payment is about $1050 a month….
add in your condo fees (say 400/month) you are around $1500/month

by my calculations it is the same price (give or take a C note)

so why would i not buy now?

#10 joseph on 10.18.10 at 9:39 pm

“The buy/rent ratio in Canada is now 1.85x”

Garth PLEASE provide the source for this statistic. In Calgary this is flat out not the case. One of my most recent clients are purchasers of 2 rental properties, with 20% down they bought townhouses for $260,000. They rent for $1450. After mortgage, condo fees, taxes and insurance and management fees they are cash flow positive by a couple hundred bucks.

Its not even close to your 1.85X ratio! Are these properties anomalies? Where on earth do you get your numbers from?

Ever hear of Google, cowboy. — Garth

#11 McLovin on 10.18.10 at 9:41 pm

SpaceMonkey,

It might be even in Hamilton but where I live (a 3 br in Yaletown) my rent is 32% the cost of owning.

In Kelowna I know someone who just rented a brand new high rise 2 br condo for 40% of the cost of owning.

#12 Genghis on 10.18.10 at 9:46 pm

Here is one property virgin’s story, from Dublin. She bought a condo with the help of here parents for 525,000 euros. Now, 2 years later, she looks through her window and sees brand new, comparable units, on sale for 190,000. To say that she is disappointed would be understatement.

http://www.irishtimes.com/newspaper/property/2010/1014/1224281058402.html

This is a 65% drop. It would not be too hard to imagine a drop not too far from that in Vancouver. It may end up taking more than two years to get there, however that won’t lessen the pain any. The question in Ireland now is if this represents the bottom.

#13 Cowboy_aka_My_View on 10.18.10 at 9:46 pm

I can’t wait till all hell breaks loose! 2011 maybe 2012, for sure 2013. 2015 will be the bottom. Live long and rent!

#14 Ben on 10.18.10 at 9:49 pm

Could any of those in that long line up speak English?
LOL

#15 blase on 10.18.10 at 9:57 pm

Child’s play. Nice. Great pic btw.

#16 rain8 on 10.18.10 at 10:03 pm

I went shopping for a new vehicle on the weekend. In all the dealerships I went to there were far more sales persons than customers. In one dealership there were no 2011 vehicles – still trying to get rid of the 2010 models – unbelievable at this time of the year. Deflation.

#17 Jake on 10.18.10 at 10:06 pm

#10 Joseph,
These prices may make sense in your head, but you and your type are quickly becoming the minority in Calgary. Check Truman’s stats when you get some time. Your clients may be pocketing a “couple hundred bucks” a month but when you take into account the fact that they are losing a few thousand/month in equity I would say they are net losers. There’s no better way to lose a 20% down payment than to buy condos in Calgary right now. Please tell me you didn’t convince them that buying right now was a good idea.

What most people fail to take into account is the lost investment income on money put into real estate equity (their homes). This opportunity cost almost always tips the scales in favour of renters. — Garth

#18 Junius on 10.18.10 at 10:07 pm

Wow. Toronto appears to be even more insane than Vancouver. I didn’t think that it was possible for anywhere to be more zombie like than Vancouver.

Perhaps it is because the prices were already higher here. I don’t know. In any event Toronto may get its wish and reclaim centre of the Universe again – at least in respect to the housing bubble.

#19 Bill on 10.18.10 at 10:07 pm

Hi Garth,
I am no economist, but I believe that maybe people should all learn some basics of the ‘market’. The monthly sale number for an average Canadian may be too difficult. The biggest motive (or fear) for buyers in this market is the ever increasing ‘listing price’ which makes them think that if they don’t buy now, they never will. The truth is, most of the listings can not turn into cash they ask for. One can ask for $1M for a fish. It will be worth that much ONLY if someone buys it. Otherwise, it is just a fish. That is the market, a one way road for all buyers. This market needs greater fools and more of them to pull the real estate market out of upcoming trouble.

#20 Junius on 10.18.10 at 10:09 pm

#9 i dubya,

You asked, “why would I not by now?”

Because the price of your place will drop over the next year, and the next, and the one after. You will be stuck in negative equity instead of saving for a better place while investing along the way.

Stay awhile. You might learn something.

Like spelling. — Garth

#21 Donzo on 10.18.10 at 10:10 pm

http://www.lmgtfy.com/?q=1.85+buy+rent+ratio+canada

#22 EJ on 10.18.10 at 10:11 pm

I’d be interesting to do a little survey with the folks standing in these lines. They’re waiting there, lots of time on their hands. Of course, the builder would have someone ask you to leave as soon as they found out what kind of questions you were asking, since you’re jeopardizing sales and decades worth of financial brainwashing. Questions like:

1. Are you a first time buyer?
2. Are you buying a house to live in it, or for spec purposes?
3. Are you aware of the aberrant conditions in Canada’s housing market at this time? (ie. Price/rent ratio, Price/income ratio, historical price trends)
3b. What factors do you think have caused these aberrations in the past decade?
4. Are you familiar with other countries that have experienced massive real estate run-ups and subsequent price crashes? (ie. USA, Ireland, UK)
5. Do you believe Canada is different? Why?
6. What do you think “prudent lending standards” are?
6b. Do you know what Canada’s lending standards were, historically?
6c. Do you know what they are now?
7. If the market price of your new house were to drop 30% in the next two years, how would that affect you?

You can guess how most people would answer these questions based on the fact that the majority of people get their information from the MSM, which are all aligned in the interests of selling more debt (ever noticed that the two big indicators of the direction of the economy that get talked about ALL the time, cars and houses, happen to be the two items that nearly every person has to go into debt to obtain?)

#23 $fromas$ia on 10.18.10 at 10:14 pm

Look, if you don’t like it too bad. As long as theres trees to cut down to print money you whiners are $hit out of luck. I don’t like this B.S. anymore than you do.

You got three choices:

1-Buy a house with stimulous and ride out impending inflation with rates held artificially low regards of inflation. (Iflation will cause the homes to drop in devalued dollars because people wages will be the last to come back after the eco turns around)

2-Wait and invest in the markets. Get paid to wait in debased dollars.(Garths advice)

2.5- Make sure you have a hedge in Gold. Iam not talking 10% nor am I talking 50%. Your choice is somewhere in there.

The G20 is inflating equally with no sign of willingness to take it off the table.

Lets face it China and the rest of the world has the same Real Estate problems.

The answer is inflation.

Enjoy the ride, the answer is somewhere in these three.

Garth can you give us a different perspective to the same ol’ same ol’

Thanks

$

3-

#24 artisuseless on 10.18.10 at 10:15 pm

The other factor people forget about when renting out is that it isn’t that easy to get or keep a reliable long-term tenant. People might make ‘an extra couple of hundred’ for a year or two, then have to carry a vacant place for a month or two and lose all of that in a very short space.

Particularly with basement apartments – not something any sane person would like to live in long term.

#25 Jsan33 on 10.18.10 at 10:15 pm

” #14 Ben on 10.18.10 at 9:49 pm

Could any of those in that long line up speak English?
LOL”

====================================

When you drive through the new areas I have noticed that many of the people appear to be new immigrants. It’s sad because most of them don’t understand how Real Estate has been pummeled in the past here in Canada and that was at levels much more reasonable than they are today and with homeowners who had far less debt.

They unfortunately most likely take the word of their realtor and the Canadian Real Estate Association as words of advice and don’t realize like the rest of us that they are nothing more than lying opportunistic shysters.

#26 nonplused on 10.18.10 at 10:20 pm

For those looking for the 1.85 own to rent ratio, check the Globe and Mail:

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/buyrent-ratio-no-cause-for-alarm/article1762062/

This article was top of the business section this morning and had a more alarming title, but they’ve burried it and rewritten it by nightfall.

More alarming to me is what’s going on in France:

http://www.theglobeandmail.com/report-on-business/france-taps-reserves-as-strike-hits-pumps/article1761349/

Don’t those damn fools know that shortly after they shut down the whole country the grocery stores are going to run out of food? For them too? They are going to strike themselves into a food shortage! And you don’t restart the whole system in a week either! This could snowball out of control. I wouldn’t be surprised to see the police shooting people soon, and riots against the riots, complete with violence. Solidarity won’t survive empty grocery stores.

On the Canadian home front, I have long argued that the home builders were going to undercut the resale market as one of the first steps on the way down. They did it in 2008, they are going to do it again now. Why? Because they can build for less than people want for old run down houses. They might give up some margin, but they have inventory to move, baby! Good for Mattemy getting rid of the whole subdivision before things derail. That’s protecting shareholder value!

#27 Foggy on 10.18.10 at 10:21 pm

Isn’t the Federal gov’t responsible for this? They sunk rates to zero to encourage people to start spending – and they succeeded. They also created massive personal debt, the highest in Canadian history. So now it is incumbent on them to get back to basic 10% down at a higher interest rate. Otherwise they are just piling on more indebted people to the huge masses that exist now. People are obviously too stupid to control their own spending so put some hard rules back. This prolongs the Greater Fool real estate market and makes the situation even worse a few years down the road when retired boomers meet declining market.

#28 Rent vs Own on 10.18.10 at 10:23 pm

I am renting in Bloor West Village in Toronto. Detached 3 bedroom house w/garage for $2,300/month. Ravine lot, super quiet, really comfortable. Don’t have to pay water/sewer, taxes or maintenance – just utilities.

The house is worth about $800K.

Let’s say I buy it with $100K down, mortgage is $700K and I opt for 5 year closed term with 20 year amortization (yes yes I know I could put less down or stretch the payments longer but hey I’m over 50 now!)

Monthly mortgage would be $4,710. Add property taxes ($5,500 p.a.) water/sewer and maintenance (conservative say $3,000 p.a.) and the monthly nut is about $5,400.

Hm $5,400/$2,300 is 2.35 times more expensive. And that’s only if it’s still worth $800K in 5 or 20 years.

Renting is sweet. Especially if this house will be worth $600K in a few years. Gosh, if it’s worth $600K in five years, I better add $40K depreciation per year to those calculations….hm the $5,400 per month cost just jumped to $8,700 per month.

$2,300 is looking even better now…..

Bring it on.

#29 JSP on 10.18.10 at 10:23 pm

@ # 9

You’re not that smart…you forgot property taxes in your calculation (insurance is pretty much a wash when buying a condo vs renting since you are responsible for your contents)…and you have a job…hopefully not in financial services…

As for Joseph…man you are annoying…I’ve read many of your posts and all you do is try and prove Garth wrong…you are getting pretty annoying and probably pretty desperate…I guess you are just worried about your job as a real estate agent…

#30 InvestorsFriend (Shawn Allen) on 10.18.10 at 10:23 pm

Where on earth do you get your numbers from?

Ever hear of Google, cowboy. — Garth

Well, so there, Garth got his 1.85 number from Google and the Internet.

Well, that certainly narrows it down doesn’t it?

Click on the word for the link. And try reading the news. — Garth

#31 Alan on 10.18.10 at 10:28 pm

Junius

What lipstick, what pig?

#32 Alan on 10.18.10 at 10:35 pm

A group of scientists have finally determined how long before the earth finally ends. It’s exactly 3.7 billion years. Real estate will not only recover but in all likelihood be worth far more than it is worth today. –Think intergenerational weatlh.

http://ca.news.yahoo.com/s/afp/101016/top_news/science_us_japan_astrophysics

#33 Don on 10.18.10 at 10:36 pm

Logic dictates: If everyone is a home owner who is left for you to flip your house to. I have lost faith in the 20 somethings to change this world, then I think it’s not their fault they have been cuddled and misled.

I was talking to a recent graduate, a finance major with an idea that a house is a great investment, especially now – then I realize that the Real estate industry donates to the business school. University was supposed to teach critical thinking using the past as a guide to the future.

In my off time I have started to call local realtors to low ball their clients. It’s the least I can do – you know get them prepared for colder waters. One thing I have noticed, is that realtors are for the most part week minded and can’t handle the “Sell now or loose alot of money” phrase I give them.

Y

#34 Patz on 10.18.10 at 10:46 pm

Genghis #12. Sad but common story. It is what will happen to those people who lined up so hopefully in Mattamy and in Vancouver.

With apologies to Elizabeth Kubler–Ross here’s the stages of buying a condo in a market on the edge.

1. Exuberance, hope & joy, they’ve “accepted” our offer, whoopee we’re homeowners.
2. Confusion, sales slow then prices drop.
3. Bargaining, listening to MSM and pols, it’s temporary; it’s nothing to worry about—even though that’s all you do.
4. Bargaining Stage 2. For some who haven’t completed their condo purchases they try and wiggle out. No go for most.
5. Anger. This wasn’t supposed to happen; nobody told us; what are we supposed to do?
6. Depression. It sinks in that you’re stuck in a box that’s sucking your net worth away like a receding tide.
Here’s the bad news: the depression stage may last a very long time!

#35 Jody on 10.18.10 at 10:47 pm

Sorry but I have to do a gold rant, I had to explain today to someone that inflation is not a rise in prices, it’s an increase in the supply of money. I then went on to explain that paper is not money, it’s a money substitute, money can be gold/silver/shells etc., money has to have intrinsic value, paper has none. What enables paper to work is that it’s backed by gold or some other commodity like oil, it’s redeemable into gold, thats what the US had up until 1971, but when America left the gold standard it left the money standard. They substituted real money for little pieces of paper, and the problem is politicians can create money at will, out of thin air, to spend as they please to buy their votes. The problem is when you do that money is no longer scarce, it’s abundant, and once it’s abundant it has no value, just like anything else, as a result prices go up. This is the mad morality of the modern age, if we do it it’s counterfiting, but when the government does it then it’s sound fiscal policy.

On another note, #10 Joesph, where the hell did someone pick up a townhouse in Cowtown for under $250,000? I think you’re telling a porky. Cheapest is in Tuscany for $340,000, unless of course your friends bought in Abbeydale and have to deal with shootings every night, even then there is no bloody way they would be paying only $250,000. I rent for $1100 in Cowtown, the place I’m in was on the market 4 months ago for $465,000, I’d be a retarded wanker to buy it, what a stupid move that would be. I swear to God that if all the Goddamn idiots who are buying now cry to the government in the future to bail them out I’ll shove their heads so far up their own arses they’ll be able to watch themselves swallow.

#36 dark sad person on 10.18.10 at 10:53 pm

#3 cody on 10.18.10 at 9:05 pm

Agreed with first post. Where does one find this number, or even reliable stats on average rents. I’ve been browsing the web for a while looking for these with no luck.

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

We have to keep in mind–this is “just” starting-i doubt we will see much variation in the rent/buy spread for the next 6 months-then it will fly–
We should track the US-because they are 3 or so years ahead on this–

Here’s how it will look here–a few years out–
You need patience-these events carry a pile of whip–as Sentiment is all over the place for awhile-people naturally want to shift back to the easy days of credit and rising home prices-but-
It’s like trying to re-visit a wet dream-you woke up from–

******************
http://4.bp.blogspot.com/_pMscxxELHEg/S1oPEXSCBzI/AAAAAAAAHUE/X6AMpwaLKjI/s1600-h/PriceRentNov2009.jpg

http://calculatedriskimages.blogspot.com/2010/04/homeownership-rate-q1-2010.html

http://calculatedriskimages.blogspot.com/2010/04/rental-vacancy-rate-q1-2010.html

#37 Jody on 10.18.10 at 10:54 pm

I believe the original quote beneath the photo was something along the lines of

Girl Guides

“Next time they’ll buy the cookies.”

#38 Debtisforever on 10.18.10 at 10:55 pm

Maybe they were talking about Vancouver. The lonely realtor who’s been hanging out in front of my building on weekends for the past few months doesn’t seem to get it. He looked so hopeful when we pulled up one day, too lazy to park in one of our parking spots underground. I wanted to tell him “Why would we buy when we can rent? It would cost us $1000 more a month to buy that place you’re flogging rather than what we pay in rent, even with $50k down”. His price: $440k. Our rent: $1350. And WE have two parking spots, unlike his unit with the measly one. Ha!

#39 Old_is_Gold on 10.18.10 at 11:18 pm

BTW this idea of new immigrants buying up a lot of the new subdivisions is not without merit. I am in Winnipeg this week and out in the south end by U 0f M the new subdivisions seem entirely populated by immigrants. It even looks like Brampton with ethnic folks walking around the parks etc. Being that I am of the same ethnicity no disrespect is intended here.

However the immigrants are already paying a heavy price sure to get heavier. A relative who knows practically the entire community told me that this year alone there have been 6 suicides among the ethnic population, mostly related to financial stress caused by taking on unmanageable debt. These tragic stats do not make it into the RE section of the Free Press or the Toronto Star.
And I know this person ain’t exaggerating for one of the young fathers who took this extreme route was her own brother, and another one was a policeman with the city. I would hazard a guess that this is going on in places like Brampton and Mississauga, and Vancouver in numbers greater than people would believe. The shame of perceived failure in certain ethnicities and cultures is very extreme, like the Japanese they resort to Harakiri rather than face the community as a bankrupt. Little do they realize that they have been conned into a nightmare that only looks like a dream.

#40 Boomer62 on 10.18.10 at 11:20 pm

#9 i dubya

If I agreed with you, we would both be wrong.

Even at 3.59% you will have paid about $26k in interest on your $250k mortgage after just 36 monthly payments. What makes you think the value of your unit will go up by the same amount?

Other costs include taxes, parking (for bicycle/tricycle), appliances (beer fridge, Coleman stove), furniture (sleeping bag, foamy, backpack, toothbrush*), communications (walkie talkie or CB radio, firewood for smoke signals from balcony)
Turner…get spell check on this sorry ass blog of yours.

By Buy Bye

* = if needed

#41 concessionman on 10.18.10 at 11:27 pm

So if people are lining up to buy new homes, would that not partially explain why “sales of EXISTING homes…plunged 17% from the same period in 2009.”?
Maybe this new breed of fools just want new homes over resale?

How do the number compare if you including existing AND new? And how do they compare to 2008? 7?

If 2009 was an extraordinary year, maybe this is just a return to normal and not necessarily the beginning of the end?

I’m a firm believer the Gospel of Garth, but a broader perspective would help keep the Garth Bashers at bay….

#42 The Original Dave on 10.18.10 at 11:32 pm

G Man, who cares. Let them learn their own lesson. There’s only so much you can do. I’ve done exceptionally well in the stock market the past couple of years. I’ve been lightening up lately and have been getting into cash. In about a month I’m going to take a nice position in U.S dollars as all I”m hearing is how the U.S dollar will keep going down!! (I’ll obviously go opposite the herd).

It’s everyone’s responsibility on this blog to take what they read and apply it in their lives. For instance, the 1.85 times the cost of buying vs renting – if people neglect that, they deserve to get pummeled. The countless statistics like 70% ownership, 5 times household income to purchase instead of the average 3-3.5, way above 100 times rent price, double digit years of gains and last year having huge price gains. These are all market fundamentals. If you’re turning your back on that information and are joining the line – up to buy, you deserve what’s coming to you.

I don’t mean to brag, but I’ve done well with stocks and the reason I did was because I researched and I applied what I learned in my research. There’s always noise and battles when you’re making the right investment, that’s what makes a good investor. The majority end up losing their money while the few who stood at the opposite end are rewarded, that’s just how markets work.

The more noise you hear, the more people that tell you you’re off, the more people laugh at you, the more they get mad and are convinced you’re crazy……….the more right you are. Stick to your guns. When I tell people I rent, I already know the words that will come out of their mouth, “you’re nuts, just go buy a house – you’re throwing your money away”. Talking to these people just tells me the severity of the situation

#43 ted23 on 10.18.10 at 11:33 pm

“They unfortunately most likely take the word of their realtor and the Canadian Real Estate Association as words of advice and don’t realize like the rest of us that they are nothing more than lying opportunistic shysters”

Jsan33 Pay attention!

The Garth Man stated
The ethnic’s worship Real Estate and you can’t blame the Developers for taking advantage.

#44 ted23 on 10.18.10 at 11:40 pm

Buy Rent ratio no cause for alarm:
The problem with the rent/own ratio is that half of the provinces control the market through rent control, so that prices can’t rise along with the broader housing market. House prices in some Toronto neighbourhoods have gained 30 per cent in the last year, for example, but Ontario limits increases to 2.1 per cent.
it’s skewed by the fact that rents are subject to rent control.

#45 On the sidelines from Calgary on 10.18.10 at 11:43 pm

Just saw this …
Customer default sale at Riverpoint Real Estate in Calgary

The ad in the online Herald said something like other people’s problem is your opportunity …

http://www.riverfrontpointe.com/?utm_source=calgary%2Bherald&utm_medium=catfish&utm_term=default&utm_campaign=riverfront%2Bdefault (see little triangle on right hand bottom)

#46 Grandpa Grinch on 10.18.10 at 11:43 pm

What a BS post Garth. Everyone here knows – (according to several “contributors” on here) that as long as the mortgage to income ratio is 3.5 or less everything will be just fine. I was told this very thing just a few days ago on this site.

You need to pull up the chart you posted a year or so ago showing the stages of investment. I shared that with several people……worth a thousand words.

#47 Nostradamus Le Mad Vlad on 10.18.10 at 11:50 pm


“Finally, danger.” — It is somewhat curiously amusing to read about hordes of sheeples who are in a permanent trance, transfixed by something that is only temporary.

There are alternatives, but as you say, it’s getting stale repeating the same old, same old storyline with hardly anyone listening.
*
#5 Old_is_Gold — There is nothing normal about anything anymore — normal went out the window when Clinton masterfully paid off the US deficit with the SS system via taxpayers’ money. It’s been downhill from there.
*
8:47 clip 1977’s winter. Eight people froze to death one night. Mr. Spock narrates.

Skills needed post-crash and pre-ice age.

Obama sure needs an excuse big time, to stay in power and declare martial law. With Europe on the verge of civil war, the US Fed might be able to provide him with one.

Garth disagrees. Is gold a currency?

BoA — Plump scapegoat, ripe for the pickings!

Fire Waterfall Stunning pix. Not quite sure why it happens.

Food Shortages This is what the economic downturn, HAARP and a whole host of other things will lead to. “In Korea, over the past 12 months, the price of cabbage—the main ingredient in kimchi, the country’s national dish—has risen over 400% to 11,500 won ($10) from 4,000 won two weeks ago and 2,500 won a month ago.”

Interesting how times France conveniently turns up in the most unsuspecting places.

#48 Crash Callaway on 10.18.10 at 11:50 pm

Like the fire depicted in the photo the brain dead stand in line crowd continue to suck the life (hope) for better days
in this God forsaken country.

Keep piling into the boat you bastards.
Keep piling on the rabbit.
Bring it all down around your latte dreams.

#49 Jeff Smith on 10.18.10 at 11:58 pm

>#18 Junius on 10.18.10 at 10:07 pm
>Wow. Toronto appears to be even more insane than
>Vancouver. I didn’t think that it was possible for
>anywhere to be more zombie like than Vancouver.

>Perhaps it is because the prices were already higher here.
>I don’t know. In any event Toronto may get its wish and
>reclaim centre of the Universe again – at least in
>respect to the housing bubble

It’s different here. I always knew we were special. Yay!

#50 gold bugger on 10.19.10 at 12:07 am

“They unfortunately most likely take the word of their realtor and the Canadian Real Estate Association as words of advice and don’t realize like the rest of us that they are nothing more than lying opportunistic shysters.”

Or maybe, unlike you spineless babies, they make a decision of their own free will.
Check it out some time. Interesting concept.

#51 MARK on 10.19.10 at 12:09 am

Hi everyone

I am not much into economics but do try to make an objective and informed opinion about spending my hard earned money. I am in a totally unrelated field (health care) and do fairly well in life.

This is how I look at the present situation. Any constructive and objective advice will be greatly appreciated.

1. The real drop in RE will happen only when the interest rates go up. I do not foresee that happening soon, so it may take anywhere from 15-18 months (in my opinion) before there is any substantial gain from playing the waiting game.

2. The US was a sudden crash; it may not happen to that extent in Canada because the federal government/CHMR (as opposed to Lehman Bros etc.) is the one taking all the responsibility behind the scenes. The tax payers will have to bear all the brunt and it becomes a “collective responsibility” in the end. No one really cares about the average joe

3. I would rather invest my down payment (170K) in a GIC for a year (3-4 percent), rent and then decide after a year.

4. There is a better chance of surviving “negative equity” in places like Surrey, Abbotsford than Vancouver; or Brampton, Guelph than Toronto

Thanks

#52 andrewS on 10.19.10 at 12:14 am

Re 1.85x cost to rent

A one -bedroom in a relatively mid-range walkup in midtown Toronto goes for maybe 1000, 1100 per month.

Meanwhile the carrying costs for the newer condos in the area are about 1800/month or so. (Desireable area, units are expensive). Of course if you rent that unit you’ll pay the same as cost of owning, but renting an equivalent unit in a somewhat older building will usually save you a pretty big chunk of cash.

There’s one of those newish condos down the street. Carrying costs again, 1800/month. Rents on Kijiji? 1500. Someone’s probably losing money at that level, unless they paid a large downpayment (and then, return on investment is low, so low). Judging by the fact that there are about 2 lights on in the entire building a year after it registered even 1500/month is pretty optimistic of what the market will bear.

#53 realpaul on 10.19.10 at 12:22 am

I believe I read the buy rent ratio as it was published in one of the local rags. The fact that it takes this figure rather than the price income ratio to tweak someones freak bone is rather silly. In Vancouver the p/i ratio for a sfh is 14 X’s……is that so scary that disonance won’t allow it to resonate whereas the b/r ratio at 1.85 is still comprehensible?

#54 For Sale: Canada on 10.19.10 at 12:25 am

“The buy/rent ratio in Canada is now 1.85x. It means it costs twice as much to live as an owner as it does as a renter.”

So, Garth, are you going post a link to a reliable source on this stat? Or are we to assume you pulled it out of a hat?

I did. Is this Internet J-K? — Garth

#55 realpaul on 10.19.10 at 12:28 am

The story published on the buy rent ratio is here…source G&M from Desjardins

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/buyrent-ratio-no-cause-for-alarm/article1762062/

#56 blase on 10.19.10 at 12:29 am

CALGARY has elected Canada’s first MUSLIM mayor! Yes, you read that correctly.

Garth, you might have to stop referring to Calgarians as redneck cowboys. Can you imagine this happening in a major U.S. city, let alone a European one?

Big, good changes ahead for cowtown!

#57 This is Wonderland on 10.19.10 at 12:34 am

People started lining up on Wednesday afternoon. At this point they did not even know the pricing and were ready to buy. By Friday there was about 200 to 300 people in line.

Id say there is a large amount of speculators in that group, meanwhile homes on MLS are moving ever so slowly. This is getting very interesting.

#58 joseph on 10.19.10 at 12:57 am

“Ever hear of Google, cowboy. — Garth”

This is the most absurd response I think I’ve ever read from Garth. Google is a search engine, I asked for a reference. I thought you started out in journalsm. I don’t care about APA, but a link would work. Who talks like that, you sound like a rude, petulent child…

“Ever heard of google cowboy”?… You feel the need to denigrate people who ask for a reference to fact check your statement? Ludicrous.

By the way Jake, as I’ve stated many times before, I’m not in the business of convincing anyone of anything. I don’t give investment advice. If an individual CHOOSES to purchase investment real estate then I provide guidance on managing it after the fact. Lastly WHERE did I say even once, or even suggest that $200 a month was a good return or made up for potential lost equity. GARTH claimed it costs 1.85x to own vs rent on average, I asked him for a reference which evidently he has no intention of sharing, the fact that there is abundant rental properties available across Calgary that are cash flow positive contradict his assertion. That was the point. What is your reading comprehension level??

R U serious? I provided the link by clicking on the word ‘Google.’ Ask your horse to explain. — Garth

#59 Hosehead on 10.19.10 at 1:09 am

Home ownership has become so entrenched in us 30 somethings it scares me. Ontarians seem to be the worst offenders. “Must buy house!” It’s all people care about. It is insane!
Since moving from Toronto to Vancouver, (btw #18 what are you smokin, obviously not bc bud, as TO is nowhere near as insane as vancouver), I’ve had to re-socialize myself and this blog has helped immensely. My new goal is to spend as little disposable income on shelter as reasonably possible and I have to say it is great. I live in (one floor of) a multi-million dollar home 2 blocks from the beach and a 7 minute bike ride from the office downtown. Rent is $1600 a month. Why would I possibly want to give that up to buy a dump in a far worse location at a cost of 50% of my take home… not to mention transportation costs?
What bugs me the most is the thought of what lies ahead for my kids. If Garth is wrong (unlikley) and Real Estate does what it did in the last generation (double or quadruple in value) where does that leave my kids, 30 year from now? Will entry level wages be 200K per year to support such prices?

#60 Bilbo on 10.19.10 at 1:10 am

#10 joseph

I have to call your bluff. Even after 20% down, there’s not a chance in Cowtown heaven your clients are positive cash flow. I’ve owned more rental property in Alberta than you’ll probably sell this entire decade and you’re either full of it or just don’t know better.
Guess i shouldn’t be too hard on you since I know guys who’ve been in the business for decades who still grossly overestimate their cashflow.

#61 Midas on 10.19.10 at 1:30 am

Milton??? — A pit stop on the way to the Stratford Festival from Pearson. Lining up??? They should have run screaming to Guelph for free rent.

#62 Jojo on 10.19.10 at 1:38 am

Finnaly Garth!
Game is over for real estate in Canada for next 5-10 years,because of NEW IMMIGRATON POLICY(exept new 100k refugees from Iraq and Tamils).
No more landed immigrants with so easy conditions like 2010.PERIOD.(Only working visas with difficult proces of Job Offer)
Now is the new page of RE history in Canada, Total RE CRASH next five years or Hyperinflations with skyrocketing taxes,much higher car,house,etc insurances, higher bills,education costs and food,energy prices.
Any Solutions?
-Hyper-inflatory salaries $1 mil -5 mil. income next 5 years.
-debt forgivness or
-RE CRASH and The Worst recession in Canada like never before with much higher CRIME and
Big Social Problems.
However you missed the timing the market and RE bubble just for 2 years! (I told you so from 2008 about RE Bubble in GTA and Gold prices will skyrocket till Sept/Oct 2010)
Health Care sistem in Ontario is collapsing in debt and today we have very poor emergency diagnostics(MRI) or surgery services( alredy line up 6-8 months) and much worst (cheap)educational primary and secondary programs.
Unemployment again will skyrocket because goverment can’t any more Stimulate the economy with new $60 billions and 0.25% interest.
Feds have projected alredy for 2011 $ 16 bil. for new military aircrafts, ?? bil. for refugees and maybe $ 2 bil. for new G-20 meeting in Toronto.
Do you know what is next bubble?
Gold/Silver and Green Energy bubble.
Welcome to “RECOVERY SHOWTIME” from 2011 to 2014. )

#63 Cash Heavy on 10.19.10 at 1:53 am

You have to laugh at those in line. In fact, it would be a perfect time to pull up in your truck, lower the flat bed, start a BBQ with some chairs and laugh at them. Those being laughed at in line won’t dare get out of it and lose their place, heven forbid they lose out on a “deal”!

Ok, seriously, WTF are they thinking? First of all, if you want to lose money on RE that bad there are lots and lots of great resale homes piled up on the MLS for sale at much better values/deals than new. By the time you wait for your “new home” to be built, it’s almost a year away, then another to put in a fence and some grass, another to do the basement and another to add a garage. By that time, it’s 3 years old and people around you will laugh at the price you originally paid for it when you new next door neighbour just bought for 25% less than you paid, and they didn’t have to pay taxes, landscaping, fencing, garage, basement development or 3 years of property taxes.

“This never used to happen in the past, what is going on”

Sure it did. It’s happend before, not 20 years ago as the RE market crashed in Calgary, Vancouver and Toronto (amoung others). Look it up. 20 years isn’t that long ago to forget the pattern.

#64 ulsterman on 10.19.10 at 2:13 am

Remember, the vast majority of people DO NOT read bear blogs. They get their info from the MSM. Why would they have any inkling that the market is having problems? Even if it were, they have watched it powered upwards despite the financial meltdown of 2008 and the collapse of jobs in the US. Our economy really does appear to defy fundamentals. This is the picture 99.8% of Canadians are receiving. Throw in variable rates still at 2.2% and it is possible to buy for the same as “paying your landlord’s mortgage”. It’s gonna take something pretty significant to change this mindset. And by that i mean something happening this decade. Sorry, but i’ve been watching this gong show for way to long to have any confidence in a significant Vancouver correction.

#65 henrigolo on 10.19.10 at 2:19 am

#3 cody on 10.18.10 at 9:05 pm
#7 SpaceMonkey on 10.18.10 at 9:34 pm

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/buyrent-ratio-no-cause-for-alarm/article1762062/

#66 Blackberry guy in durango on 10.19.10 at 2:39 am

#10 Joseph

What part of Calgary are there townhouses that rent for 1450 but cost 260k??? Both those numbers seam off…

Im seeing numbers in calgary that make the 1.85x look like a blip.

I just sold a condo in Calgary and moved out into a rental – moving to an older building 11 blocks away, I get more space, better parking, and the rent is only about $150/month more than the condo fees, taxes, depreciation on appliances / finishings / etc. (operating cost) was BEFORE interest on mortgage was even taken into account.

When all those condo listings turn to rentals, and those rentals turn to desperate landlords looking to drop prices to get a tenant in there, I see the Calgary situation getting really ugly really quick.

#67 HouseBuster on 10.19.10 at 2:51 am

They pulled the same stunt in Oakville on the weekend. I drove by and saw so many cars parked on the side of the road with a police car there too that I thought Stephen Harper had come for a visit. Well, if it was Stephen Harper I don’t think that many people would’ve showed up.

The big buzz was created by new townhomes being released. Turns out these townhomes are 900 to 1100 sq. ft. in size. So yeah, targeting 1st timers.

#68 gordon on 10.19.10 at 3:52 am

All you have to do is put down a deposit on your credit card to buy an option to purchase next year. If prices go up, then you flip your option. If prices go down then you get your deposit back. You don’t have to qualify at a bank until the home is built. If you don’t have the 5% down by then, the developer can leave some work unfinished, like the landscaping, for you to finish and that will be your sweat equity 5% down. All the options are a full list price, so there is never a problem with the appraisal (if one is even asked for) as the developer tells the appraiser the option prices. Worst comes to worst, you can always rent the home out for more than the cost to buy. Ask the developer they will tell you what the market rent is for the homes. You can take the option to your lawyer to read, but we can’t guarantee that your home will still be available when you come back. Best to secure the property with a signature and a deposit now rather than lose out on owning a home, because the developer will be increasing the prices tomorrow.

………… a good portion of these sales will come back to the developer, but by then the developer will have enough pre-sales to qualify for bank financing to build the complex. And the developer will have “salted the mine” with enough pre-sale buyers to get new buyers later on. The amount of the option is equal to the commission of the marketing company, so the developer has no additional costs.

And as long as prices stay stable or increase every ones a winner.

#69 Dan in Victoria on 10.19.10 at 4:11 am

Those with the best information, are the most likley to suceed.

#70 New Renter on 10.19.10 at 5:57 am

Our rental unit is very close to the Windsong. I saw the line ups on Saturday, on grand opening day. I dropped in on Sunday to see what all the fuss of all about. I can tell you that not all buyers in there were property virgins. Many of the Chinese were repeat buyers or buying for their kids.

Prices are approximately 5% higher than comparable, new-ish re-sale units. Even so, Paradise Homes have sold more than half of their Phase 2 units. I did notice that Phase 2 is a lot smaller than Phase 1. They could have made it bigger as they have more land but cleverly kept it small.

I do not know why people “have to by new”. It’s more expensive. Builders are definitely taking advantage.

Garth, I bothers be to see the average price go back up almost up to peak reached in the spring. What happens if the supply doesn’t shoot up in the spring? What if sellers take their homes off the market like they did in July/August 2010? What happens if smart builders like Paradise release a limited number of units to react to the smaller number of buyers? Will prices still plummet as you say they will?

#71 Cow Man on 10.19.10 at 6:17 am

Amigos: The home ownership cost to ownership ratio, pales in relation to the farmland rental rate to ownership cost, in Ontario. That ratio is 50 x., to own versus renting. Sometimes things just don’t make sense and never will.

#72 Moneta on 10.19.10 at 6:35 am

161 Brandon
*Doesn’t have kids and doesn’t want to pay for other people’s babysitting*

…………………………………………………………………………

Exactly. If you can’t afford them, don’t have them.
Isn’t the Morgantaler clinic still covered by OHIP?
——————-
Fair enough. But then we should institute a system that stops those who refuse to help with the younger generation from getting services, from people younger than them.

#73 rapid_robert on 10.19.10 at 6:37 am

and there’s a .00006% chance that the Standard of Life in Canadian real estate will be saved by alien immigration to Vancouver, GTA, Calgary, Kelowna …. yada yada yada !!

#74 MO on 10.19.10 at 6:40 am

How far can housing fall? I think the reason so many people second-guess housing collapses is because they take years to unfold.

Check out this chart comparing the US housing bubble/bust to the Japanese bubble/bust.

http://www.planbeconomics.com/2010/10/19/chart-comparing-the-us-and-japanese-housing-crashes/

#75 PR on 10.19.10 at 6:47 am

#32 Alan on 10.18.10 at 10:35 pm
….Real estate will not only recover but in all likelihood be worth far more than it is worth today. –Think intergenerational weatlh.

Well thanks ! Very soon i will buy your house at 50% rebate. Its gona be 2 for 1 for my fammilly generation. Good advise!

#76 Brian1 on 10.19.10 at 7:17 am

Cash Heavy; Why do you think the police are there in the first place. To stop people like you and us from warning others. You can be jailed for putting signs in the street of Toronto. They don’t bother with small business and garage sales, just keep your opinions to yourself and, thankfully, to this blog. If Garth wasn’t who he was he’d be in jail for this. To prove it put signs in the street and see what happens.

#77 joseph's horse on 10.19.10 at 7:28 am

Hey Joseph,

Hover your cursor over the link and you’ll see that Garth implies searching on google before asking, but provides the link to a Report on Business article outlining the rent to own ratio.

Next time, do the following:

1) breath
2) read and understand
3) resist the urge to type more

#78 Steve from Calgary on 10.19.10 at 7:30 am

So, Calgary elected a new mayor last night. It was a race between a white man, a white woman, and an Indian man. It was the closest civil election with over 50.3% of eligible voters turning out. And guess who “racist, conservative” Calgary elected. Yup, MRU Professor Naheed Nenshi.

Meet Calgary’s new mayor and watch him talking about housing in this Tedx Talk clip:

http://www.youtube.com/watch?v=qNAMH2_CLfo

#79 Moneta on 10.19.10 at 7:37 am

Sorry but I have to do a gold rant, I had to explain today to someone that inflation is not a rise in prices, it’s an increase in the supply of money. I then went on to explain that paper is not money, it’s a money substitute, money can be gold/silver/shells etc., money has to have intrinsic value, paper has none.
———-
From the dictionary you will find multiple definitions for inflation. One of them is a general price increase and another is an increase in the money supply. The definition is not set in stone. That’s why those who use the word should make it clear which uses is intended.

As for the definition of money, this one is set in stone. Money is a medium of exchange. Anything can be used as money in an exchange, paper included.

#80 Boomer62 on 10.19.10 at 7:38 am

Vulch101

A bank is a place that will lend you money, if you can prove you don’t need it.

and

The early bird may get the worm, but the second mouse gets the cheese.

P.S. This blog is internet J-K. Turner, are you subsized?

#81 Boomer62 on 10.19.10 at 7:40 am

Vulch101

A bank is a place that will lend you money, if you can prove you don’t need it.

and

The early bird may get the worm, but the second mouse gets the cheese.

P.S. This blog is internet J-K. Turner, are you subsidized?

#82 cautious on 10.19.10 at 7:42 am

Garth, you have a responsibility to your readers to cite your sources and not get all angry when we don’t do the digging ourselves – if you’ve ever read reputable publications/journals, they constantly cite every claim they put forth. Without this, your blog seems more amateurish and I’m sure you don’t want that.

I’m too busy making up well-publicized and easily-discovered facts to provide all those pesky references. — Garth

#83 dandy on 10.19.10 at 7:42 am

My Buddy listed a good looking property in the burbs on Saturday they had 5 people visit on Sunday they received 3 low ball offers, then they had 2 more viewings on Monday, 1 made an unconditional offer and he sold. I’m sure the low ballers will get a house eventually but the house won’t be so nice. This market still isn’t ready to head down and all people on this blog hoping to buy a house in the next couple of years better start enjoying the condo they are renting.

I’ve noticed that everyone is comparing sales to last years data which I believe were abnormally high. does anyone know what the previous years sales were or the long term average sales are? Sales down 17% from last years abnormality doesn’t sound so bad.

#84 buylow on 10.19.10 at 8:05 am

My god, if people get so bent out of shape over not being able to click on a link, how are they going to react when their house price crashes?

#85 Got A Watch on 10.19.10 at 8:06 am

“you forgot property taxes in your calculation”

Maybe, but I doubt your landlord did. I was in the rental business at one time, in a small way, and as the landlord, I don’t recall paying the property tax. I cut a check to the City for it, but it was paid for by the tenants, we just divided the yearly property tax bill by 12 months by the number of units, and added it to the monthly rent.

That was a long time ago, before the Government was so involved in setting rents and allowable expenses, but the principle remains the same. The landlord ain’t paying the property taxes.

So if you are considering renting vs buying, either way you will be paying the property taxes. Remember, the only sure things in life, death and taxes. Somebody pays.

Now there is a consideration of location in the property taxes. If you want to live in a bigger place in a swanky area with yupscale aspirations, you’ll pay a lot more in municipal taxes for the privilege of drinking your double latte elbow to elbow with your fellow wannabe property nouveau riche. But a renter in that neighborhood is still paying their share too.

Or the city will seize your property. Ever buy a property at a “tax sale” in Ontario? I have, several. It takes not paying for a few years before they will move on it, but eventually they will. If you have a mortgage, the mortgage company would probably pay the back taxes and then add it to your mortgage amount, before they boot you out and sell the property.

If you want to buy a property cheap, there is not much cheaper than a “tax sale”. Unheard of during a boom period, just wait a couple years, there will be lots of them. They are published monthly in the “Ontario Gazette”, an Ontario Government publication of new laws etc. They may be accessible online these days, I used to have to go down to the “Government Book Store” near Queens Park (Bay & Grosvenor area) to get it, I think I was paying $4 or so for the monthly booklet.

#86 CTO on 10.19.10 at 8:11 am

THEY ARE THE NEW GENERATION. Many like my nephew, don’t want to work anfter graduation.
He feels he has earned the right of wealth just by finishing University.

He will buy his condo investments and earn his wealth quickly and effortlessly has he is “educated” to make the right choices!

I would think most in that line-up think the same way, (easy money is new smart way). “Only losser fools waste their life acting patient and prudent, trying to use worn-out old wisdom and fundementals as a guide”!

#87 TorontoBull on 10.19.10 at 8:18 am

to summarize:
1. we have record revel of private and public debt
2. Home ownership at record levels (more than 70%)
3. High Unemployment and even higher among first time buyers (20-35, and immigrants)
4. Young people moving back to live with their parents (boomerang generation)
5. record low interest rates
6. Stagnating/declining incomes
7. Expiring global stimulus programs in 2011
8. Dollar at par, gold at 1350, oil over 80, etc.
it seems to me that the RE industry is scraping the bottom of the market right now. I would imagine that a lot of fraud is going on re income verification, which may come to haunt the banks in 3-5 years as CMHC will not cover fraudulent defaulted mortgages. From a regional perspective it seems that Western Canada should be better off than Ontario/Quebec, so prices might come down faster in the Central region.
At the end of the day, in my opinion the largest determinants of housing prices is credit availability and confidence (some may argue it is the same thing). So watch the money supply for clues of what is going on. Also persistently high uneployment will affect confidence…eventually…

#88 Daniel on 10.19.10 at 8:22 am

Article in the Calgary Herald that references Garth a lot …

http://www.calgaryherald.com/business/Home+sales+decade+levels/3693116/story.html

#89 takloo on 10.19.10 at 8:34 am

Garth – you need to see seasonality patterns like this:

http://takloo.wordpress.com/2010/10/19/gta-housing-update-sales-average-price-seasonal-pattern/

Sales always plunge in in October and peak during the summer months

As for prices – I hope you are right because GTA prices are following seasonal pattern… i.e. rise in October over previous month…

however the shocker is that so far Oct average price is close to the all-time high in May 2010!

Sales may be lower in October, but that is a meaningless curiosity when the point was a 17% decline over last October. — Garth

#90 SpaceMonkey on 10.19.10 at 8:39 am

#9 IDubya said: “the mortgage payment is about $1050 a month….
add in your condo fees (say 400/month) you are around $1500/month”

Dubya, you forgot to include property tax, insurance, and the income you could be earning on that $50k down payment. The numbers are much more favourable to ownership here in Hamilton and I just break even compared to renting.

#91 Carruthers on 10.19.10 at 8:45 am

Newsitem: US housing starts up in September.

Check out the use of statistical noise to prop up the idea that the housing problem is coming to an end in the US. Millions of houses in foreclosure, millions more empty due to owner abandonment, real unemployment up near 14%, another trillion or so for QE. Yet housing is in a recovery?

Whatever. They are going to lie at every turn. There is a secular change in the way the Western world works economically and rather than be truthful and help us prepare, our political betters are going to lie, deceive, cover-up. Grifters and confidence men every last one of them.

http://money.cnn.com/2010/10/19/news/economy/housing_starts/index.htm

http://calculatedriskimages.blogspot.com/2010/10/housing-starts-short-sept-2010.html

http://calculatedriskimages.blogspot.com/2010/10/housing-starts-sept-2010.html

#92 Junius on 10.19.10 at 8:46 am

Alan,

The pig is the Canadian mortgage situation. Over the next few years we will increasingly see more bankruptcies, more house poor people, more foreclosures and negative equity.

The lipstick is the “it is different here” view of Canadian banks and our mortgages. You are trying to mask the fact that the gov’t here still stoked the industry through the CMHC.

It doesn’t matter if our banks are relatively healthy because our tax payers take the hit directly versus the US situation where the banks take the hit and get bailed out by the tax payers. In the long run it is similar enough.

The banksters get away with it. The gov’t screwed up and the middle class gets destroyed.

Lipstick on a pig.

BTW – your “buy now the earth has 3.7 billion years left” crap is perhaps the most desperate argument I have seen yet.

#93 sotrue on 10.19.10 at 8:48 am

What’s wrong with all you people??? All of you??? Who told you that houses should sell as fast as warm bread coming out of the oven???….Who told you that you have to make tons of money selling your house???….Who told you houses should increase in price just because is sunny outside??…We are entering what’s normal for many other countries: a house is just a house; people sale because children leave and now is time to downsize. Fewer sales, slower sales. What happended from 2000-2007 should had never happened!!!.

#94 Be A Man on 10.19.10 at 8:56 am

Apparently we’re talking about the buy/rent ratio now. Anything to distract from the fact that the Canadian RE market is chugging along quite well… for the last 15 years.

Now that fall is approaching perhaps we can look at the colour of leaves near rented homes compared to those of mortgaged homes.

#95 dandy on 10.19.10 at 8:57 am

That what I wanted to see Takloo, thank you. As I thought the sales for the September period look quite normal when you look at the previous 5 years. Sure there is a difference from last year but going back to more normal years the difference is actually more modest. Perhaps someone has details from over the last 20 years?

#96 Devil's Advocate on 10.19.10 at 9:00 am

”I can’t wait till all hell breaks loose! 2011 maybe 2012, for sure 2013. 2015 will be the bottom. Live long and rent! .” #13 Cowboy_aka_My_View

”Could any of those in that long line up speak English?
LOL.”
#14 Ben

”When you drive through the new areas I have noticed that many of the people appear to be new immigrants. It’s sad because most of them don’t understand how Real Estate has been pummeled in the past here in Canada and that was at levels much more reasonable than they are today and with homeowners who had far less debt.” #25 Jsan33

Yes, yes Jsan33… those poor ignorant immigrant bastards know nothing. It’s not like they have real estate markets in Europe or India or China. This real estate phenomena is unique to North America. Many of those immigrants still use sticks to eat with. Can you imagine?!?! Sticks?

Grow up… North American experience is infantile compared to much of the world. Read a book, open your mind up Jsan33. Here’s a start The Accent of Money by Niall Ferguson. You can read can’t you Jsan33?

Here’s a novel concept… maybe, just maybe the vast majority of those immigrants have more than your level of education and experience and look at you with the same inquisition you do them.

Economics and real estate market ups and downs existed long, long before we took this land from the First Nations people and started desecrating it. Now it is someone else’s turn to take it from us. Be thankful they are paying us for it instead of taking it by force. You are going to need the money to pay them the rent they will be charging you.

#97 Jeff Smith on 10.19.10 at 9:03 am

According to Royal Lepage, Canadian real estate is back on the rebound.

http://www.ctv.ca/CTVNews/Canada/20101019/house-prices-101019/

#98 Spiltbongwater on 10.19.10 at 9:04 am

Ever hear of Google, cowboy. — Garth

Just go to lmgtfy.com and do it for them Garth?

#99 Jake on 10.19.10 at 9:11 am

Joseph,
For the love of Buddha, stop embarrassing yourself on a national blog. You admitted yourself that you only have a few years experience in the RE investment world and it is showing in abundance. You are probably young enough to get out now and start a new life. I sold my investment condos, that were cash flow positve, in 2007 and it was the best financial decision of my life. Being just barely cash flow positive on a depreciating asset at the lowest interest rates in history is not good news for anyone.

#100 sotrue on 10.19.10 at 9:12 am

Are Houses overpriced….yes! But where are we going to place the hundreds of new inmigrants that come to this country every year??? In our basements?? I dont think so…….many factors are equal to what happen in USA….however here in Canada, we have an uncontrolled-unplanned migration of people. See how bad is to drive in T.O. we need new roads to place all those new drivers, same with homes.
It is not much more expensive to build a house today than 6 years ago. Goverment, Banks, Builders all of them take advantage of this.

#101 Devil's Advocate on 10.19.10 at 9:14 am

”Garth – you need to see seasonality patterns like this:
http://takloo.wordpress.com/2010/10/19/gta-housing-update-sales-average-price-seasonal-pattern/
Sales always plunge in in October and peak during the summer months
As for prices – I hope you are right because GTA prices are following seasonal pattern… i.e. rise in October over previous month…
however the shocker is that so far Oct average price is close to the all-time high in May 2010!”
#89 takloo
Sales may be lower in October, but that is a meaningless curiosity when the point was a 17% decline over last October. — Garth

Are you blind? Look again at that graph. It appears to me that GTA sales volumes are much like that of our area and September and October volumes rise over that of mid summer. Think lag time. Sales that take place in July and August before the school year begins go firm and complete in September and October.
September and October volumes are down 25 to 50% over last year. Did you not see the stats I posted a few days ago? I do post some valuable information from time to time ya know…

But before you get all excited 2009 was an anomaly. Way too much stimulus effect to consider it a valid comparison. Still we are trending down and price does follow volume up and down. There too there is a “lag effect”. But just because volumes fall 50% does not mean prices will fall by an equal percent.

#102 Jeff Smith on 10.19.10 at 9:20 am

Yup! It’s totally confirmed, straight from the fox’s mouth. The chicken in the hen house must feel really safe that things are back to normal.

http://www.vancouversun.com/business/Canadian+housing+sales+rise+second+straight+month/3676797/story.html

#103 CTO on 10.19.10 at 9:23 am

Garth

Canadian Int Rate stays steady but China raises its rate for 1st time in 3 yrs. May raise rates again…

Garth, I think this may be a signal of great significants reflecting what you have said in the past. Counties all over the world competing to finance debt by raising interest rates. The great “rate war” Begins?

Am I right here or is this just a false signal, what do you think? (insignificant)????

#104 Jeff Smith on 10.19.10 at 9:29 am

>#35 Jody on 10.18.10 at 10:47 pm
> I swear to God that if all the Goddamn idiots who are
>buying now cry to the government in the future to bail
>them out I’ll shove their heads so far up their own arses
>they’ll be able to watch themselves swallow.

I hate to disappoint you, but that’s exactly what they will do. See what happens in the US? All these programs were set up to bail out the same kind of people you are ranting about. Government in Canada is more or less a copy cat of the US, so they will do the same thing. Haha, you loser responsible tax payers! :P

#105 Trino Tuta on 10.19.10 at 9:39 am

House prices on healthy rise: Royal LePage

http://www.vancouversun.com/business/House+prices+healthy+rise+Royal+LePage/3693688/story.html

…..sigh…..

#106 VancouverGoinUP on 10.19.10 at 9:40 am

Another OUTSTANDING year for Best Place on Earth Vancouver. Just keep repeating those words 10 times a day and you’ll start to get it. BEST PLACE ON EARTH!
How much would you pay. Here’s the latest greatest news on a “down year”
****
There were stronger-than-average price gains in some local markets, according to the report. For example, the average price of bungalows were up 14 per cent in St. John’s, 9.2 per cent in Winnipeg, 9.1 per cent in Montreal and 8.8 per cent in Vancouver.

#107 The Original Dave on 10.19.10 at 9:44 am

By the way Jake, as I’ve stated many times before, I’m not in the business of convincing anyone of anything. I don’t give investment advice. If an individual CHOOSES to purchase investment real estate then I provide guidance on managing it after the fact. Lastly WHERE did I say even once, or even suggest that $200 a month was a good return or made up for potential lost equity. GARTH claimed it costs 1.85x to own vs rent on average, I asked him for a reference which evidently he has no intention of sharing, the fact that there is abundant rental properties available across Calgary that are cash flow positive contradict his assertion. That was the point. What is your reading comprehension level??

____________________________________________

#58 Joseph, you’re an idiot!!!!!!!!!!!!!!!

Just letting you know on behalf of everyone. You had the time to write out 200 words of bull and slander, yet you’re one of the few that couldn’t find the friggin link to the Globe article.

You keep asking for him to post a link. I’m not sure you’re reading the comments section. Maybe you’re blindly posting without reading what was typed by others.

Did I mention, you’re an idiot? Read through things again and maybe you can come out without the finger pointing

#108 Cash Heavy on 10.19.10 at 9:47 am

#106 VancouverGoinUP “Another OUTSTANDING year for Best Place on Earth”

You keep that, but what you don’t say is.. “Best Place on Earth for ___________”

I think it’s days of rain, or days of cloudy skies or maybe the worst real estate prices?

#109 wetcoaster on 10.19.10 at 9:50 am

Alan,

What about all those scientists who can see the real potential for a mutated flu bug that would wipe out half of the world’s population ? That would be a lot of listings wouldn’t it ?

#110 wetcoaster on 10.19.10 at 9:54 am

Vangoinup,

Yep, great place if you like spending an hour and half to go anywhere in No Fun City, and that is just to get there. Three hours of life wasted stuck in a car being cut off by psychotics and bikers goin 200 K thru red lights. My kinda place at 10 times income.

#111 $fromas$ia on 10.19.10 at 9:58 am

#106

How much would you pay. Here’s the latest greatest news on a “down year”

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

There cutting down and consuming more trees to print the money to buy the house than the required wood to make a house….

Keep talking.

#112 april on 10.19.10 at 10:20 am

Jeff Smith # 97

And you believe that? Were you born yesterday?

#113 bullion.bunny on 10.19.10 at 10:20 am

House prices still rising……but for how long

http://www.vancouversun.com/business/House+prices+healthy+rise+Royal+LePage/3693688/story.html

#114 Mtl RE Observations on 10.19.10 at 10:22 am

I’m too busy making up well-publicized and easily-discovered facts to provide all those pesky references. — Garth

============

Love the response. I think people forget that this is a blog, not a magazine or journal where the writer has the luxury of time to produce lengthy pieces with all the academic citations. The benefit of blogs is that they enable people to share their opinions in short form and solicit feedback, response, etc. in a timely manner. Keep up the great work, Garth. I look forward to your blogs each day!

#115 Alan on 10.19.10 at 10:24 am

Junius,

Your presumption that the next few years will see more foreclosures, bankruptcies and house poor people is only a theory.

Housing prices are more a reflection of employment and interest rates. In this regard, we will see Carney not encorporate policy that could derail the consumer by hiking interest rates to fast or too high.

Canada is in a unique position over the next decade as we have all the things that expanding countries require. It was only reported yesterday that BC has seen a record lumber export year. Tax policies for corporations are low and the environment for business in BC is exceedingly favorable.

Lastly, you underestimate the willingness of the home-buyer in BC. Home ownership is engrained in the psyche and it would take massive shifts in interest rates or unemployment to dislodge this phenomenon.

I am not suggesting prices are going to rise today and or anyone should buy real estate that they cannot afford. The POINT is; The panic that you seem so assured of happening, is only a theory, not based on anything other than economic postulation on your part.

If you point the the US example as a source of your fear, I will respond with a diatribe of my own.

Best you understand that it is different out here. There I said it. Bring it on.

#116 SCalgary on 10.19.10 at 10:39 am

#58 Joseph,

You exposed your ignorance by blaming Garth for not providing the link…

Its that simple… If you don’t trust Garth, dont come to this site!

If you are very curious to know more about his stats then make a request. Hate your lamenting…

Garth,

I am excited to hear you this thursday!

#78 Steve,

Thanks for sharing the link… Now, there is a chance that Calgary will come to reality and those greedy builders can’t steal our money that easy…

Cheers…

#117 DJ Vibe on 10.19.10 at 10:41 am

Gregory Klump’s logic is laughable and the Globe just follows suit. Apparently for them reality is a ‘problem’ and is ‘skewing’ things. Guess they’re not fans of the inconvenient truth of rent increase limits.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/buyrent-ratio-no-cause-for-alarm/article1762062/

Garth, I’ve been enjoying your blog for almost two years, thanks, you’ve helped me and many others.

#118 Joe Realtor on 10.19.10 at 10:42 am

#83 Dandy

Good points.

Everyone keeps forgetting that last year was setting records in several months.

Based on information available to anyone (who can be bothered to click and do some math) at:
http://www.torontorealestateboard.com/consumer_info/market_news/index.htm

Sales in the GTA in September 2008 were about 6,400 – compared to 6,310 in 2010.

Sales in the first 2 weeks of October 2008 were 2,709 – compared to 3,012 in 2010.

So we are slightly below sales for September 2008 and slightly ahead of sales for October 2008.

October 5, 2009 — In September 2009, Greater Toronto REALTORS® reported 8,196 sales, up 28 per cent from September 2008.

October 19, 2009 — In the first two weeks of October, Greater Toronto REALTORS® reported 3,631 sales – up 34 per cent compared to the first two weeks of October 2008.

October 5, 2010 — Greater Toronto REALTORS® reported 6,310 sales through the Multiple Listing Service® (MLS®) in September 2010.

October 18, 2010 — Greater Toronto REALTORS® reported 3,012 sales through the Multiple Listing Service® (MLS®) during the first two weeks of October 2010.

#119 Soylent Green is People on 10.19.10 at 10:47 am

I think as soon as HarperCon’s cat Cheddar dies, Canada is in for a very big shock.

p.s. Did someone say there’s a link somewhere for the rent to buy ratio thingy ma jig?

#120 Devore on 10.19.10 at 10:49 am

#44 ted23

it’s skewed by the fact that rents are subject to rent control.

It’s skewed by the fact that renting is a cash business. You don’t finance rent.

#121 CTO on 10.19.10 at 10:54 am

#58 Joseph

The factor of 1.85X rent vs own is all over the internet!!!! everywhere!
FACT!!!

#122 Joe Q. on 10.19.10 at 10:58 am

#89 takloo on 10.19.10 at 8:34 am writes: “Sales always plunge in in October and peak during the summer months”

In the GTA, monthly sales numbers for June, July, August and September were the lowest recorded since at least 2004.

http://www.guava.ca

October will be interesting — I’m not sure we’ll be at 2008 (recession panic) sales levels, but it’ll be close.

#123 Nancy on 10.19.10 at 10:59 am

U never come to Kingston.

We sad.

#124 Mr. buy/rent ratio on 10.19.10 at 11:06 am

1.85x: No Globe & Mail readers here

#125 Coraline on 10.19.10 at 11:08 am

I don’t know if I’m going to be able to get over how many people couldn’t find the source for Garth’s reference to the rent/own ratio. If you’ve been reading Garth for awhile, you should realize that he often uses a news item to spark his daily blog. Pretty much all of the stories he draws on are easily located. Internet J-K indeed.

#126 april on 10.19.10 at 11:25 am

Read online, “Home buyers: Beware the Pumpers”.

#127 Devore on 10.19.10 at 11:28 am

#104 Jeff Smith

I hate to disappoint you, but that’s exactly what they will do. See what happens in the US? All these programs were set up to bail out the same kind of people you are ranting about. Government in Canada is more or less a copy cat of the US, so they will do the same thing. Haha, you loser responsible tax payers!

And despite the massive bailouts, the ones who were responsible are still far better off. Don’t lose sight of the big picture. Would you rather be broke, than paying big taxes?

#128 DaBull on 10.19.10 at 11:33 am

#93 sotrue on 10.19.10 at 8:48 am

What happended from 2000-2007 should had never happened!!!.

BUT IT DID!!!

#129 Ron S on 10.19.10 at 11:33 am

#100 sotrue ….many factors are equal to what happen in USA….however here in Canada, we have an uncontrolled-unplanned migration of people.
It seems you have no idea how Canadian immigration system works. We have limited immigration quota in every category. USA is first choice for all best talent including Canadian – how many have you see pass out from Ivy schools, London School of Economics, Indian institute of Technology who immigrate to Canada?
USA give more legal green card than any other country in the world and top of that illegal border crossing who also need the place to live…

#130 Alexander on 10.19.10 at 11:42 am

I would agree with this 1.85 statistic. I am living it.

Brand new, high-end condo development minutes from DT Calgary. My rent is $1,825. Owning the place with a 30yr, 3.8% note would run about $3,300 with fees and taxes.

There is just no way the rents are going to be able to rise enough to come close to generating positive cashflow. I will be gone long before my rent tops $3,300! Renters have the luxury of being able to react quickly to changing market conditions. This will ALWAYS put a rational limit on rents. Rents too high? Get a housemate… Move cities… Downsize physical space… Live with mom & dad for a while. All these things kill demand and force rents back down to attract tenants.

My place was for rent for several months before I came along and I am sitting here looking out the window at another vacant unit that has been for rent since July 1st (I’ve seen the listing on a popular rental website). Heck, the rent for that place is even cheaper than mine, though it is a smaller unit. The demand is by no means off the charts.

Me thinks there will be a real estate price correction coming soon… not to mention a real buying opportunity for used Durango’s.

#131 Devore on 10.19.10 at 11:55 am

Carney leaves rates at 1%, with no near term prospect of raising them. The overheated economy is cooling just fine, says he.

Although good news for real estate, in the sense that money remains cheap, it could also be very bad news, as there is no rush to buy real estate due to rising rates and being priced out forever, because money will still be cheap a year from now.

#132 blobby on 10.19.10 at 12:08 pm

Sheesh! I’ve just had the misfortune of reading all these comments!

Im not from around here, but what do they teach in schools in Canada?

First you had a guy who didnt understand simple concepts like – just because rates are low now and his monthly paybacks are currently low – that makes it better than renting… Because property value ALWAYS goes up, and rates always stay low… right.. RIGHT?!??

Then you had the guy who was unable to follow garths link to the globe and mail.

Then rounded off by some guys who dont understand that comparing sales to the sales from the same period last year is better than comparing it against other months in this year, and still going “ooh – but the prices are going up! These sales figures mean nothin’.. durr!”

I didnt think this would be rocket science, but for some of you it really does seem to be quite hard concepts to grasp! But on the other hand, some of you are realtor “professionals” (cough!) with a whopping few weeks of training – i expect no less.

#133 MKUltra on 10.19.10 at 12:25 pm

Those READERS who are asking for a reference from Garth are a F%$#’in joke!

This is a blog you morons – not a journal publication.

If you are taking investment advice from a blog WITHOUT doing your OWN homework – you are no better than the pinheads who line up for un-built homes. You listen to other people blindly without reading up on s%$# for yourself.

So please, will all the morons quietly exit this blog and go to CREA for all the referenced help they need. If you don’t know what CREA stands for….use Google.

#134 Debt's Dark Embrace on 10.19.10 at 12:27 pm

#114 Alan

BINGO !
………………………………………………………………………
Lastly, you underestimate the willingness of the home-buyer in BC. Home ownership is engrained in the psyche and it would take massive shifts in interest rates or unemployment to dislodge this phenomenon.

#135 jjpetes on 10.19.10 at 12:45 pm

Garth,

I have to say this. Imagine this, if all the idiots from the comments above that I read cannot find this 1.85x rent ratio statistic from the link provided, hey and these are people that visit this blog. Then what the hell chance do you have in informing the greater fools about the real estate problems we are soon to face?

Which is why I keep mentioning it to you sir, what a kind soul you have, why bother helping out these tools?

jj

#136 betamax on 10.19.10 at 12:53 pm

#96 Devil’s Advocate: “The Accent of Moneyby Niall Ferguson. You can read can’t you Jsan33?”

Apparently, you cannot. Does money have an accent? Do pesos sound Mexican? Maybe you should read that book yourself a few more times.

#InvestorsFriend (Shawn Allen) – You can’t figure out a mouseover or, worse, read an article from yesterday’s financial news. Wow, I really want your advice on my investments.

All it takes is one URL for the resident know-it-alls to out themselves as being several steps down the IQ ladder than they pretend. Perhaps they should try reading and thinking instead of imagining that they already know it all. Clearly they don’t.

#137 JM in London on 10.19.10 at 12:55 pm

#80 Boomer62 on 10.19.10 at 7:38 am

J-K is thinking a bank is the only source of funds when it comes to real estate.

#117 Joe Realtor on 10.19.10 at 10:42 am

doing a numbers dance is one way sure but we’re heading for a correction – the stampede started with the stories boiling up in the MSM… denial, denial, denial

#138 Foggy on 10.19.10 at 12:55 pm

This is where I get my gold advice from. If people miss the opportunity, well then I pity the fool:

http://www.youtube.com/watch?v=pWAu7FmKbYc

#139 Jeff Smith on 10.19.10 at 12:59 pm

>#112 april on 10.19.10 at 10:20 am
>Jeff Smith # 97
>And you believe that? Were you born yesterday?
>.

Yup! I swallowed it, hook, line, and sinker. Was about to go out and join one of those Mattamy line up or participate in a bidding war. Buy now or be priced out forever :(

#140 rory on 10.19.10 at 1:01 pm

#35 Jody you said:
“I swear to God that if all the Goddamn idiots who are
buying now cry to the government in the future to bail
them out I’ll shove their heads so far up their own arses
they’ll be able to watch themselves swallow.”

I think I love you.

#119 Soylent Green is People you said:
“I think as soon as HarperCon’s cat Cheddar dies, Canada is in for a very big shock.”

And then we get this from your web site.

“No hate comments toward any group. If a comment borders on hate it is not acceptable.”

In other words what you spew does not apply to the above comment… I have no idea what is happening with Cheddar but it seems nothing is off limits to you if it achieves your goal…. hmmm and how are you “better for that”…kisses.

#141 Jeff Smith on 10.19.10 at 1:02 pm

>#127 Devore on 10.19.10 at 11:28 am
>#104 Jeff Smith
>And despite the massive bailouts, the ones who were
>responsible are still far better off. Don’t lose sight of the
>big picture. Would you rather be broke, than paying big
>taxes?

I hope it will continue to remain true.

#142 betamax on 10.19.10 at 1:04 pm

#115 Alan: “Lastly, you underestimate the willingness of the home-buyer in BC. Home ownership is engrained in the psyche and it would take massive shifts in interest rates or unemployment to dislodge this phenomenon.”

Where did I hear that before? Oh yah, Florida.

And considering employment as a driver of house prices works fine till bubblenomics turns construction into the primary driver of employment growth. Then it only takes a flat housing market to precipitate a death spiral of job loss and price drops, followed by more of the same of both. Wakey, wakey, sleepy head.

#143 Devil's Advocate on 10.19.10 at 1:26 pm

#136 betamax

Yes I was so busy fighting with my iPad’s spell check on the spelling of Naill I missed that. But despite that I am a terrible speller. And what, may I ask, is your excuse for being such an anal prick who would rather nit-pick than ponder the point?

#144 Devore on 10.19.10 at 1:33 pm

It is very misleading to say that 2009 was a banner year, and there is no way that 2010 will measure up, so YoY comparisons are useless.

Here are a couple of sales charts for BC that I dug up (using Google even! yes, I’m in the 21st century, please join me here!):

http://i52.tinypic.com/2uf6b9y.png
http://1.bp.blogspot.com/_N-0wuUDptgw/S1E8pe9oOyI/AAAAAAAAAE0/XA62_LpzK24/s1600-h/2009-11chart.gif

The Victoria 2010 projected is now closer to the 400 line.

So no, historically 2009 was not head and shoulders above other years, to call it an anomaly and discard. It was good compared to 2008, which itself was not anomalously disastrous.

#145 grantmi on 10.19.10 at 1:47 pm

Former Vancouver mayor buys into Millennium condos

I love SENATOR CAMPBELL’s comments here!!!

“I’m perfectly happy. I’d do it again,” he said.

http://bit.ly/bh8RU7

The Millennium condominiums of Vancouver’s former Olympic Village are not selling despite their prime waterfront location.

Former Mayor Larry Campbell is one of few people who have bought into the development.

#146 tran, Calgary on 10.19.10 at 1:48 pm

http://www.thestar.com/article/877053–gta-home-sales-slide-again-in-early-october

“Sales were down by 17 per cent in the first half of October to 3,012 sales, compared with 3,631 sales in 2009, according to figures released by the Toronto Real Estate Board on Monday.”

#147 abc on 10.19.10 at 1:50 pm

#58 Joseph
Ha..ha..finally Joseph keep his mouth shut..

Dumb is still dumb.. never change and more embarrassed day after day..

#148 dark sad person on 10.19.10 at 1:56 pm

C–

The economic outlook for Canada has changed. The Bank expects the economic recovery to be more gradual than it had projected in its July Monetary Policy Report, with growth of 3.0 per cent in 2010, 2.3 per cent in 2011, and 2.6 per cent in 2012. This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending.

The inflation outlook has been revised down and both total CPI and core inflation are now expected to converge to 2 per cent by the end of 2012, as excess supply in the economy is gradually absorbed and inflation expectations remain well-anchored.

***************
July the Con-
October the sting-

So-from only 3 months ago-he’s been proven wrong-
The outlook forecast has now changed-
Yet-he has the audacity to make another call-2 years out and can refine it into fractions-
Even as the spreads on this ratio continue to blow apart-
“excess supply in the economy”
“more subdued profile for household spending”

The net is full-
Time to pull-

GSF-FGS

Goldman Sachs Forever-Forever Goldman Sachs

#149 vancouversuburbanite on 10.19.10 at 2:03 pm

re: buy/rent ratio

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/buyrent-ratio-no-cause-for-alarm/article1762062/

#150 brainsail on 10.19.10 at 2:04 pm

#132 Blobby

Please don’t disappear after this experience. Watching the children play everyday is quite entertaining, especially from across the border. There are so many Canadians who just don’t get it and that explains why the housing bubble hasn’t quite popped yet.

Sure, there are some idiots on this blog and you just have to learn to ignore them and look beyond. For example, the idiot that started the war today, joseph, told us a couple of months ago that he worked in a high end Calgary restaurant and today we find out he is some sort of real estate financial investment guru. Just another wacko!

Garth, I respect because he is a very good teacher. He listens to his audience and everyday prepares another continuing education lesson for adults. Some are somewhat repetitive but he knows that tactic is necessary to teach slow learners and those that just don’t get it.

#151 prairie gal on 10.19.10 at 2:09 pm

#72 Moneta: congrats on posting the most bone-headed comment of the day.

#152 bill on 10.19.10 at 2:17 pm

Alan
”Your presumption that the next few years will see more foreclosures, bankruptcies and house poor people is only a theory.”

which makes your thoughts on the matter …a pipe dream? or is yours a theory too?

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

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

#153 tran, Calgary on 10.19.10 at 2:18 pm

http://www.businessweek.com/news/2010-09-26/chinese-real-estate-bust-is-morphing-into-a-slow-leak-andy-xie.html

“It’s Shanghai hairy-crab season.

To cook them, you put them in a container with cold water. They feel like they’re back in a lake and get comfortable. You then cover it with a heavy top and light a fire below. You can hear scratching sounds. They start faintly, then furiously, then faintly again, then nothing. When it’s quiet for a few minutes, you lift the top and see the crabs all golden brown. Dip them in vinegar and ginger for a delicious meal.

China’s property speculators are like crabs in cold water already. They feel good, kicking their legs once in a while. They don’t see any danger. Little do they know the heavy top has been lowered over their heads and a fire is lit below. They will be cooked, but they just don’t know it yet.

Like crabs in cold water, property speculators are getting cooked, but the smart ones still have time to escape the slow hot-pot treatment.”

#154 Alan on 10.19.10 at 2:26 pm

Betamax

Florida is not BC or Canada.

The mortgage debacle in the US that has been widely reported in the media bears no resemblance to Canadian recourse mortgages. CMHC while beholden to guarantees, is not the same as the US mortgages guaranteed by the US agencies, repackaged, sold as triple A and now defaulting mortgages.

In order to duplicate the US problem in Canada we will have to write mortgages to people who have no jobs or income for starters. CDN homeowners would have to walk away in significant numbers from their homes.

The mortgage problems in the US will take another interesting downturn now that they’ve uncovered that defaulted mortgages were not registered properly thus making millions of mortgages “unforeclosable” and in fact questions the legalality of the mortgageholder all together.

Canada does not have these massive problems with mortgagees. We do have foreclosures and we do have people unable or struggling to make payments but these numbers can easily be absorbed by the marketplace. We may have higher numbers in the future but this is still no comparison in pure numbers to the US.

No doubt the real estate market needs to pause and or retrace some of it’s gains in some cities. I see no reason to expect a crash unless we have a major event like an Asian lead market meltdown or reason to see very high interest rates (which usually a condition of a healthy economy) or high unemployment. I see mini-crashes in small one horse towns that shut down factories or come under economic stress lead by layoffs.

#155 Nostradamus Le Mad Vlad on 10.19.10 at 2:32 pm

#28 Rent vs Own — “Renting is sweet. Bring it on.”

Absolutely agree. The older I get, the less material stuff there is cluttering my life the better.

At some point, if I end up living by myself, I would just as soon turn the home over to someone who actually needs it for nothing and would put it to better use.

A home is not an investment, it’s a place to live — four walls and a roof, nothing more, so easy come easy go. To have one’s own investments ticking along (as Garth says) is much better than having a millstone tied around one’s neck.

#29 JSP — “. . . you forgot property taxes in your calculation . . .”

Briefly read an article on Mish’s site last night that said Chicago will double its property taxes in order to fund the city’s pension plans. Another reason to live well within one’s means and also to rent.

“Ever hear of Google, cowboy. — Is this Internet J-K? Ask your horse to explain. — Garth” — Yes. I finish K in my next lifecycle!

#62 Jojo and #103 CTO — “. . . this may be a signal of great significants . . .” — Nicely summed up!

#93 sotrue — “What is wrong with you people? What happended from 2000-2007 should had never happened!!!.”

Only if people were sensible and realistic, but they’re not. Unpredictable and off the cuff, yes.

#133 MKUltra — “This is a blog you morons – not a journal publication…use Google.”

Which is why we’re all still in J-K!

#156 tran, Calgary on 10.19.10 at 2:32 pm

http://www.roubini.com/emergingmarkets-monitor/259374/andy_xie_on_china_s_empty_apartments

“How many flats in China are sitting empty? The media recently floated a story — denied by power companies — that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people….

What especially distinguishes China’s property bubble…is an unprecedented amount of living space. This huge stock of empty flats equals the nation’s quantity bubble.

Quantity bubbles are less common than price bubbles, and they don’t last as long…A quantity bubble is sometimes a construction bubble, and it fizzles out when a building cycle turns over, crashing prices as soon as new supply becomes available….”

#157 Boomer62 on 10.19.10 at 2:33 pm

#137 JM in London

Vulch102
Borrowed bank money is the easiest to trace.

Always borrow from a pessimist. He won’t expect it back.

Buy Bye

#158 jess on 10.19.10 at 2:35 pm

Steve thanks for that link on the new Calgary mayor …I enjoyed listening to his lecture. He seems to talk a lot about intergration of communities. Does Calgary’s change to the charter system(1994) for education had an effect on that?
http://www.avenuecalgary.com/articles/page/item/looking-at-charter-schools-in-alberta

Here is one example:
” Almadina Language Charter Academy in southeast Calgary and you’ll only see students who speak English as a second language, moving through each grade with two report cards — one for academics and one for language acquisition. The dance between the two — known as Learning by Design — is part of that school’s unique learning philosophy.”

#159 Jake on 10.19.10 at 2:46 pm

****
* *
* *
* RIP *
* Joseph *
* *
* Owned *
* on blog *
* Oct 19 *
* 2010 *
********

#160 Jake on 10.19.10 at 2:46 pm

Damn, that looked like a great tombstone until I pressed enter.

#161 Ottawa S. on 10.19.10 at 2:51 pm

Riki, be glad that you did not buy a Mattamy house. My husband did some work for Mattamy, and they build complete and utter garbage. He fled that site as quickly as he could. You would have been robbed spending your hard-earned money on a Mattamy home. Fortune was on your side, even though you don’t realize it yet!

#162 Jake on 10.19.10 at 2:51 pm

—-****
–*——-*
*———-*
*—-RIP—*
*–Joseph-*
* ———-*
*–Owned-*
*–on blog-*
*–Oct 19–*
*—2010–*
**********

Sorry, but I just had to find a way to make it work.

#163 betamax on 10.19.10 at 3:19 pm

#143 Devil’s Advocate: “And what, may I ask, is your excuse for being such an anal prick”

I was parodying you.

#164 realpaul on 10.19.10 at 3:32 pm

QE2 keeping you up at night…….you ain’t seen nothing yet

http://www.counterpunch.org/hudson10112010.html

#165 Behavioral Finance on 10.19.10 at 4:07 pm

#35 Jody,

You are talking about money stock. Inflation is a raise is prices. This has to come from firms and individuals selling goods.

If you increase the money supply you hope you have inflation, it may not happen as you can see in Japan. You can have an increase in money supply on banks books, but a decrease in money supply in real economy (the access to credit by people). You can print all them money you want but if no one borrows it, it will not do anything to the economy. Most of the money will got into traded assets stocks, bonds, commodities and etc.

#166 VICTORIA TEA PARTY on 10.19.10 at 4:14 pm

CHICKENS AND ROOSTS

This item, scalped from CNBC’s Website today, says it all about the current debacle unfolding, in the US, over the truthfulness of millions of real estate foreclosure-related documents.

This story shows that some Wall Street elites are now going after other elites to protect their respective interests. The moral of the story is that it’s not just the little guy who’ll get hosed, the biggies are getting theirs’ too, out of this matter.

“The New York Federal Reserve Bank is part of a consortium of eight large institutional investment firms that is suing Bank of America over failures related to mortgage securities…

…the New York Fed (has) joined with the Pacific Investment Management Company (Pimco) and investment management firm BlackRock in an attempt to force BofA to buy back $47 billion in mortgage bonds…the group holds more than 25 percent of the voting rights in more than $47 billion worth of Bank of America securities.

A law firm on Tuesday filed a suit alleging failures by Countrywide Financial to properly service loans that were part of certain mortgage-backed securities. Countrywide was acquired by Bank of America in 2008.

“We want to enforce the holders’ contract rights,” Kathy Patrick, the lead attorney representing the bond holders, told CNBC…

“There were representations made to my bond holders when they purchased these securities. They are contractual representations about the credit quality of these mortgages…,” Patrick added, “that the mortgages in question did not, at the time they were securitized, conform to those representations.”

…The New York Fed has an interest in the mortgage securities by virtue of the Maiden Lane Partnerships, which the reserve bank set up in 2008 as a financial vehicle to manage transactions involving Bear Stearns and AIG.”

The immediate issue that crops up, while this litigation and I’m sure that more will follow soon, is what will ANY US real estate be worth pending settlement of what will be millions of claims? And JUST WHEN will this mess be “properly” cleared up?

Also, will there be any washover effects in Canada, other than our local idiots who’ve already bought US real estate?

A little “piece of paradise”, as some might call their homes, has turned into Hell on Earth for so many down there.

Meanwhile, the Dow tanked 165 points this date because of investor doubts about America’s big banks’ credibility.

A side issue today of note: the US dollar rose AFTER China announced a quarter point increase in its central bank interest rate. Rose! Probably it’s a side effect from China owning so much US dollar-denominated paper that it breathed some, albeit temporary, life into a basic room temperature fiat currency.

#167 Behavioral Finance on 10.19.10 at 4:20 pm

How about this one?

http://www.youtube.com/user/VancouverPenthouse#p/a/u/0/IlTC3KSjsfM

#168 Live within your means on 10.19.10 at 4:25 pm

Just had a rep visit us to give us a quote on Electric Thermal Storage (ETS) Room Units made by Steffes. He estimates to put one down in the basement (family room, guest room, etc. but seldom used) and upstairs it would be about $5K plus HST. We have a split entry (not our preference at the time). We do have a wood stove downstairs which we use all winter, but go through 3 full cords at $240 a cord now.

Our power rates are the 2nd highest in the country. We just received rebate cheques from the Prov. & Fed govts. of $3,425.00 from the Eco-energy pgm. so we wouldn’t have to lay out much cash.

If we go with 1 or 2 units (likely) everything that consumes electricity during off peak hours is included. So, hubby would set a programmable unit on the dishwasher and dryer for off peak hours.

The warrantees are 1 year labour on installation and 5 years parts.

Tried to do some research re recommendations & drawbacks on such units, but was unsuccessful. This technology has been used in Europe for 40 years.

Would appreciate any comments from those who’ve had experience with these units.

#169 Willy H on 10.19.10 at 4:25 pm

“I then learned the line by Monday was numbering 800 and Mattamy sold the whole subdivision of 400 to 500 homes in 4 days …”

Interesting. I am just curious if these folks have any idea what the commute is like on the 401 into and out of the GTA from Milton? Milton to my knowledge is not teeming with high paying jobs.

No, I am not about to bitch about the ETR 407 – Garth gave me several severe paddy-whacks in the comments section of yesterday’s post. I am still tending to the welts.

That aside, these folks are not just going to protect their net worth by renting vs buying, they might actually have a better quality of life by living near their workplaces until we hit bottom.

My family moved north of the GTA and commuted southward, only to find the house savings eaten up by car and a gas expenses. Eventually we found work closer to home but it took several years.

#170 Behavioral Finance on 10.19.10 at 4:26 pm

People are leaving Vancouver? I guess the Chinese are not coming huh?

http://www.youtube.com/user/VancouverPenthouse#p/u/3/rfOwUbs-UMw

#171 Behavioral Finance on 10.19.10 at 4:29 pm

Wow Fairmont Condo…

A condo price went from 8 mil to 5 mil. Amazing.

http://www.youtube.com/user/VancouverPenthouse#p/u/5/i-XAMTYg1Jc

#172 Tonguestump on 10.19.10 at 4:33 pm

#152 Biglebowski – “mandate to standardize society” truly brilliant observation thanks for original word sequencing to test drive in mouth. Good stuff.

#173 Morgan on 10.19.10 at 4:42 pm

I am now convinced that RE prices are staying where they are until rates reach a reasonable level or policies change to 10%/25y.

Every month we keep losing FT jobs while creating PT jobs and nobody pays attention, as long as the banks keep lending free money, the sheeple will gorge.

#174 Devil's Advocate on 10.19.10 at 4:45 pm

”I was parodying you.” #165 betamax

I get that, but to what end? Do you disagree with me? Do you in agreement with #25 Jsan33 and think immigrants a bunch of dumb assed greater fools?
Parody my paltry spelling error yet ignore the more significant topic of my post that maybe, just maybe those “immigrants” know more than you give them credit for…

Come on now… cat got your tongue? Can’t intellectually walk the talk?

Do you condone or condemn the ignorance exemplified in those boarderline prejudicial comments made by #25 Jsan33? Or is the “black and white” of spelling the only prejudice you are willing to condemn?

#175 Behavioral Finance on 10.19.10 at 4:45 pm

No doubt this should be interesting going forward. So are most people flippers in Van City?

“Last week, Business in Vancouver reported 75% B.C. homeowners do not plan to live in their current residence a decade from now”

http://www.bivinteractive.com/index.php?option=com_content&task=view&id=3132&Itemid=32

#176 jess on 10.19.10 at 4:53 pm

tax lien investing
packaging tax liens as securities – and selling them to investors.

…”There is no oversight at all,” said District of Columbia Attorney General Peter Nickles, who is suing a tax lien investment firm for charging homeowners what he alleges are exorbitant fees to get their homes out of hock….In a separate matter, the U.S. Department of Justice’s antitrust division is investigating allegations of possible tax-sale bid rigging in two states. The ongoing probe began in Maryland, where three men pleaded guilty to criminal charges earlier this year. A federal grand jury in New Jersey has subpoenaed records from several major tax lien investors, including a JPMorgan subsidiary, and a Virginia company that serviced the Bank of America tax lien portfolio in Florida this year. No charges have been brought in the New Jersey investigation.

http://huffpostfund.org/stories/2010/10/new-tax-man-big-banks-and-hedge-funds

#177 dark sad person on 10.19.10 at 5:04 pm

Here’s what happens when you don’t let something die-that needs to die–
Fk the Bond holders-risk is risk and when you take it-there needs to be consequences-when you’re wrong-
Reward or loss–
Someone “needs” to lose-or we have nothing but a deficient corrupt system–
And ohhhhhhh my-should faith be lost-
Katie bar the door–
I shoulda been a Lawyer instead of a Rig pig–

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

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP

Recoveries for her clients, who own at least 25 percent of so-called voting rights in the deals, may reach “many billions of dollars,” she said.

Banks’ costs from repurchases of mortgages in securities without government backing may total as much as $179.2 billion,

http://www.bloomberg.com/news/2010-10-19/pimco-new-york-fed-said-to-seek-bank-of-america-repurchase-of-mortgages.html

******************
So-if BoA et al can’t handle the losses from their (cough) reserves-then they must die or be bailed out–again–
Taxpayers yawn and rollover-who knows-who cares-

#178 groundzeropat on 10.19.10 at 5:32 pm

Has anyone heard of a straw buyer. That’s probably what started the line up of the first 100 or so people then the herd fell in line. A customer who owns a drywall company just told me he has 6 unsold completed new homes that have been advertised for the past 4 months. He also has 6 that are 80-90% complete and will be on the market soon. On top of those the city has granted him permits to build houses on 4 more lots that he owns. Meanwhile, he was complaining about the $5 increase in the cost of our engine oil and filter changes. I hear an echo, “This will not end well”

#179 Live within your means on 10.19.10 at 5:41 pm

A PPS to my previous 2 (?) posts re ETS systems.

When the eco energy guy did an energy efficiency valuation on our house after we did the majority of our energy retrofits, our house rated in the top 5% percentile of homes of our age – 30 yrs which uses electrical baseboard heating.

As I said earlier, if anyone (Dan in Victoria?) has any experience with these units, I’d really appreciate hearing from them.

#180 timbo on 10.19.10 at 5:45 pm

#179 dark sad person,

We shall see what we see.

Again I agree with some of what you say but bailout will be the norm. I hate the fact but unless you see another way to stabilize credit markets it will be a print-fest by all until debt is destroyed and growth is realized. And all fake equity that was gained in the bubble will reset.

#181 Alister on 10.19.10 at 6:04 pm

It’s called herd mentality – put a bunch of people together and watch the stupidity come alive.

NEVER line up with the herd.

#182 betamax on 10.19.10 at 6:04 pm

#176 Devil’s Advocate: “Do you in agreement with #25 Jsan33 and think immigrants a bunch of dumb assed greater fools?”

Jsan33 referred only to their lack of historical context re. the Canadian housing market. Your interpretation is too extreme.

I generally ignore typos in internet posts, but seeing yours in the same sentence in which you mock Jsan33’s ability to read was too rich to pass up.

Don’t take yourself so seriously. No one else here does.

BTW, check out Atomic Web, PowerOne calc, Dropbox and Note Shelf for the iPad. Great apps.

I’d like to chat more, but I have to get back to my 9-5 shift in the salt mines. Hi-ho, hi-ho, it’s off to work….

#183 dark sad person on 10.19.10 at 6:08 pm

#182 timbo on 10.19.10 at 5:45 pm

#179 dark sad person,

We shall see what we see.

Again I agree with some of what you say but bailout will be the norm. I hate the fact but unless you see another way to stabilize credit markets it will be a print-fest by all until debt is destroyed and growth is realized. And all fake equity that was gained in the bubble will reset.

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

btw-from yesterday–

********************
#197 timbo on 10.18.10 at 6:55 pm

while i agree with part of what you are saying I ask that you give an answer to the current situation because you seem to feel that the current course does not work

***********************
you’re welcome for the effort i suppose-or do you just “expect” your questions to be answered-because you’re special-

I gave you a detailed answer-with a gazillion data points-
You touched none of them and now you’re back today-with nothing but more speculation and “theory”
I don’t waste a lot of time with those useless-go nowhere debates-

#184 Jeff Smith on 10.19.10 at 6:09 pm

>#152 TheBigLebowski on 10.19.10 at 2:17 pm
>Looking at all the pictures of people lining up to buy
>housing in the midst of one of the biggest bubbles in
>history, many things come to mind. I think of how
>public “standardized” education has produced a
>generation of kids who have absolutely no financial
>savvy . The government through mandated
>standardized education has created millions of
>conformist producers and consumers . [snip]

Sounds like a group of epsilon created recently by the “world” government using the Bokanovsky’s process.

http://en.wikipedia.org/wiki/Bokanovsky's_process

#185 betamax on 10.19.10 at 6:15 pm

#155 Alan: “The mortgage debacle in the US that has been widely reported in the media bears no resemblance to Canadian recourse mortgages.”

Even in non-recourse states, HELOCs are recourse, but that didn’t stop people from walking regardless.

Similarly, many in BC walked in away in the early 80’s, recourse or no.

You are arguing in good faith and make some pertinent points, but I disagree that employment will maintain the current housing market. The tail’s now wagging the dog, and it won’t take much of an upset to turn the virtuous cycle vicious.

#186 junius on 10.19.10 at 6:17 pm

#115 Alan,

You said, “The POINT is; The panic that you seem so assured of happening, is only a theory, not based on anything other than economic postulation on your part.
If you point the the US example as a source of your fear, I will respond with a diatribe of my own. Best you understand that it is different out here. There I said it. Bring it on.”

I see. It is different here. Yet, it is not.

I don’t postulate panic or run with the doom and gloom crowd. I am worried. I believe people will be hurt and that the middle class and young adult population will take it on the chin the hardest.

What I “postulate” is that we live in a world that is interconnected to such an extent that we cannot escape the global ecomonic climate. When your largest trading partner is suffering then you suffer. When your second, third, fourth, fifth through 43rd do as well then you have problems.

Add in the high debt levels of our govt’s, corporations and consumers along with the current demographic shift and you have a recipe for a tough decade ahead.

Even a return to historical interest rates in the 6-8% range over the next 3-5 years would bring down house prices by double digits and put hundreds of thousands of Canadians in negative equity.

There is no way out Alan. You are delusional. Interest rates cannot stay low forever. As credit contracts globally there will be serious pain in this economy.

Canada is not an island.

#187 junius on 10.19.10 at 6:22 pm

#173 Behavioural Finance,

Interesting that he says there are 24 units for sale in this building for more than $3 million dollars and NOT ONE has sold since the Olympics.

How can this be? Where are all the Chinese buyers? Do they not know?

Alan – better get a new theory.

#188 jess on 10.19.10 at 6:32 pm

…. this is the sickest form of greed

http://huffpostfund.org/stories/2010/05/investors-made-millions-people-facing-eviction

A six-year conspiracy by veteran real estate investors to rig bids and stifle competition at tax sale auctions made two chief organizers at least $10 million, largely from fees homeowners paid to keep from losing their properties, according to federal prosecutors

#189 junius on 10.19.10 at 6:37 pm

#177 Behavioural Finance,

You asked, “So are most people flippers in Van City?”

It is the most popular local sport soon to become a bloodsport before dying a harsh death for another generation.

In short, Yes. Either directly engaged through the purchase of multiple properties or with a single property that hold the VAST majority of their net worth.

#190 Westsider on 10.19.10 at 6:56 pm

Just talked to a friend who had his house for sale in Westside Vancouverfor $2.6mil. On the market for a month or so, had it staged and it sold on the first open-house to Asian buyer for $2.45mil. Still wealthy Asian buyers out there.

Here we call them wealthy Asian greater fools. — Garth

#191 sue on 10.19.10 at 7:09 pm

Hi Garth…newbie here.
I’ve been reading your blog for a week now. I keep telling my live-in bf that his 200K of equity in his house is going to melt away and we should sell/rent and then buy our dream home in the next 2 years.
He gives me the “you gotta live somewhere” argument and it’s annoying! Couldn’t he invest that 200K to generate income to pay his rent? How much could he expect?
I will have him read the response.
Thanks!

Enough to make you happy. Reward enough for any man. — Garth

#192 OttawaMike on 10.19.10 at 7:17 pm

It has been a while since we have had any squirrel talk here on the Garth Field and Stream blog.
Here’s a main stream local US newspaper that provides a map, bag limits, recipes and discussion on the squirrels role.

Hard times or just a cultural thing, I’m not sure?

http://www.mysanantonio.com/news/local_news/squirrels_cute_nuisances_or_dinner_105151364.html

#193 john m on 10.19.10 at 7:28 pm

Well “C” never raised interest rates …damn fool ..the madness must be cooled..more and more greater fools are getting sucked in…where this leads will not be pleasant!

#194 just wondering on 10.19.10 at 7:36 pm

To everyone who thought the stock market was making a recovery, well the shit is about to hit the fan. Double dip coming (or did we really get out of the recession?). Hang tight!!!
And may we bow our heads and say a prayer for the Real Estate Professionals (:( sarcasm) and their Real Estate Surveys, etc., and whatever tools they might use to create false optimism using daily media reporting to skew the facts.
I guess a lot of people have SUCKER tattoed on their forheads.

#195 S.B. on 10.19.10 at 7:59 pm

Garth should have named his blog: Granite & Stainless – the epitome of what’s wrong with this housing market.

History is littered with fads:

– Tail Fins on car in the 1950’s
– Green shag carpet
– Fake wood panelled walled
– Asbestos!
– Neon

How long will this current fad last?

#196 Nostradamus Le Mad Vlad on 10.19.10 at 8:08 pm


#179 dark sad person — “So-if BoA et al can’t handle the losses from their (cough) reserves-then they must die or be bailed out–again–Taxpayers yawn and rollover-who knows-who cares-”

Goes back to the link a few months ago, which said that BoA had agreed to absorb any toxic or bad mtgs. in return for other goodies.

With Obama’s VAT coming in next year, dubya’s tax write-offs ending at the conclusion of this year, the future does not seem to be overly optimistic for Americans.
*
1:12 clip ATMs will be cashless soon in France. “Listen very carefully to the following video at 44 seconds into it.”

Oh oh! Better get Maaco! A judge in NY has seen through the phoney BS from one bank.

Looting the nations? “. . . the global tax to fund the expansion of world government will be implemented . . .”. Along with GW, of course.

2:41 clip Buy Buy Chimerican Pie. Great song!

Inquiring minds would like to know if the IMF had anything to do with this. “If that one move spooked the DOW down 200 points, then our stock market is fragile indeed!” wrh.com.

The Not So Very Imperfect Storm It’s happening across the world!

Getting a little uppity, are we?

This is a trick question.. Answer yes, and all will be fine!

California Sinkin’ “Shoot the old people! Shoot the old people!” wrh.com.

Happy Birthday, DesertPeace!

Goes with what I posted earlier, about Chicago doubling property taxes.

4:25 clip “The US real estate market which drove the world economy is not only a weak it’s on the verge of a truly massive collapse.” Incl. commercial RE.

Curious only because of this.

9:57 clip Poor, misguided souls. There isn’t going to be a rapture. Probably WW3, but that’s all.

I’m as mad as hell and I’m not gonna take it anymore!

2:04 clip Sept. 11, 2008 — that’s when this fiscal mess started!

Hackers can cause jets to crash, so stay away from flying bathtubs.

Hmmm. Would this have anything to do with this? “Ahmadinejad’s visit to Lebanon has sparked off loud debate within Lebanon and clearly provoked the United States, although this is not the first time an Iranian president has visited Beirut and come so close to its borders with Israel.”

16:24 clip “When even cool, calm and collected pundits like Jim Grant fall into murderous paroxysm of blind rage when discussing the Fed, you know it is only a matter of time before the world’s most destructive organization is eliminated. AWESOME CLIP!!!”

#197 Thetruth on 10.19.10 at 8:31 pm

Can anyone answer the following question?

Why are you not allowed to collect EI or welfare bbenefits outside Canada but are allowed to collect GIS (gauranteed income supplement)?

I thought GIS was for seniors who are struggling and living in Canada ? Not for funding 5 Month vacations. Are you reading this F? H?

#198 S.B. on 10.19.10 at 8:48 pm

The investment forum that I follow, mainly Americans: as mentioned people living in middle/upper class areas in both New Jersey and Ohio report many of their neighbours are many months behind on mortgages and taxes.

This is serious stuff.

Tonight’s report from one of them:

“had dinner with a fellow fitness coleague last night…no joke. he says to me

i am upset? i say why?

he says my house is in foreclosure…..and they are throwing me out, and i have no where to go

i say….how long have you not paid your mortgage?

he says…are you ready…42 months!….wow i told him, you should be happy!!!

i would be estatic! to take 40 months of payments and put them in my pocket!!!

and he is not my neighbor…like i said…5-6 of them have not paid for two years

this cant end nicely……how can these people ever pay any mortgage again”

#199 Devore on 10.19.10 at 9:03 pm

#177 Behavioral Finance

“Last week, Business in Vancouver reported 75% B.C. homeowners do not plan to live in their current residence a decade from now”

What percent of properties get sold every year? I think 75% over 10 years is not too far off the mark for a normal market.

And of course planning does not equal reality.

#200 Devil's Advocate on 10.19.10 at 9:10 pm

#184 betamax

You are right, I gotta lighten up. Unfortunately when I do the DAWGs start barking. It’s my warped sense of humour.

iPad apps – try Evernote… and if you are a boater Navionics (outstanding app)

#201 dark sad person on 10.19.10 at 9:17 pm

#199 Nostradamus Le Mad Vlad on 10.19.10 at 8:08 pm

Goes back to the link a few months ago, which said that BoA had agreed to absorb any toxic or bad mtgs. in return for other goodies.

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

I’m wondering now-after reading more-
Have they decided to throw BoA under the bus-similar to Bear Sterns-
You know–let GS “absorb” them and they will again-pick all the good pieces out of the gut pile and then shift all the toxic crap onto the taxpayer
-via-level 3 assets-or perhaps expand the Fed balance sheet-again-backed by taxpayers–

This board is a good example of how the fraud will never stop-until something blows up big-
Anyone who steps over the invisible line is branded a doomer and so the truth of the crime is ignored and with it-goes the future of the next 3 generations-down the drain-
Some here will be able to look their kids/grandkids in the eye and honestly say–
I tried my best to bring it to light-

#202 InvestX on 10.19.10 at 9:32 pm

MKUltra on 10.19.10 at 12:25 pmThose READERS who are asking for a reference from Garth are a F%$#’in joke!

This is a blog you morons – not a journal publication.
———————————————————

That’s a cop-out.
If you’re going to state facts and figures, be ready to back them up.

#203 Alan on 10.20.10 at 1:33 am

Bill,

I speak of the status quo in the real world that I live in; Real estate is holding up reasonably well, volume has softened and like any other asset class that has experienced a parabolic rise in price, it needs a correction, NOT a crash as you speculate and Theorize based on your chosen economic presumptions.

You and others deal in fear, gloom and doom which is an admirable position as it is the second oldest profession in the world. But in reality all this conversation is really about how you feel the real estate market is going to react to a particular economic set of parameters today and how they will play out into the future. At best you can only speculate and I appreciate high level of speculation and this is notable but lets not make any serious bets on any of your ideas actually coming to fruition. The world and those that hold it’s purse strings have their own ideas and we need to recognize things like QE2 and governmental actions to thwart certain outcomes seem to lay waste to many ideas that on the surface seem reliable predictions. The real estate armegedon that seems to be the core topic of this blog and those followers that preach to it’s small herd are the true religious theorists. I say once again, I see softness in real estate and nothing that would lead me to believe the end is nigh.

#204 BrianT on 10.20.10 at 3:05 am

#199Nost-Quantitative easing and “money printing” understates the situation. This incredible transfer of wealth from the overall economy through the actions of the Fed is literally sucking the USA dry.