Here we go

Adios 35-year mortgage! F turns bubble-pricker. Here.

Two years ago this blog was non-stop squirrel recipes and overrun with doomers. Stocks were racing towards their moment of capitulation on March 9th. The real estate market was moribund. Governments were panicky, slashing interest rates and bailing out car factories. The media was rife with stories of a new depression.

In the middle of January, sales of houses in Toronto fell by 54%, and prices crumbled 12%. In Calgary, they dropped 17.5%. The dollar fell to 78 cents. A barrel of oil was close to thirty bucks. Every day the media was wall-to-wall layoffs, losses and bailouts.

I mention this to remind you stuff happens fast, Nobody should be under any illusion that today presages tomorrow. The world doesn’t work that way any longer and risks at this moment are immense. So, good idea to mug a Boy Scout and steal his badge. Be Prepared.

Here are 11 things to make sure you do in 2011. I wouldn’t wait.

(1) Invest, don’t save. And the very first money should go into your TFSA. You and your spouse are allowed $30K now, with the ability to catch up on missed contributions from the past two years. Don’t let the bank open a plan and stick your money in a HISA or a GIC. Instead, get a self-administered plan, and load the sucker up with growth assets, like exchange-traded funds. Take investments you already have and slide them over into the tax-free account as a contribution in kind. And open plans for your 18-year-old children, to allow for family income-splitting. Don’t even think of making an RRSP contribution until this is done.

(2) If you’ve been musing about selling your house, get the lead out. This might be the last Spring in many (depending on the market) where you still have a shot at landing a greater fool. Mortgage rates will be relatively cheap for a few more months, realtors and politicians are still blowing sunshine up the public’s rear and if you list early enough (like this week), you might miss the tsunami of new listings ready to flood the market. Get an ace realtor instead of being a cheap FSBO, and price it below market value. If you’re in Vancouver or the north GTA, hire some Asians to queue up on your lawn.

(3) Get out of cash. It’s no strategy. While interest rates will steadily creep higher, so will inflation, which means interest-bearing deposits will continue to give a negative real return (which is 100% taxed). The real risk we all face is running out of money, not losing it. If you’re a woman, read that last sentience again. And again.

(4) This is the year to get balance in your investments. Remember, if you’d had a 40-60, fixed-equity mix two years ago, your wealth would have dipped 15% in the meltdown, instead of the 50-60% dump taken by an all-equity portfolio. By the end of 2009 the losses had been reversed, and in 2010 the balanced account gained 14%. Could another stockAgeddon happen? Of course. This is why Allah made the bond market, preferred shares, real estate investment trusts and other cool assets. If you can’t do this, hire a dude who can.

(5) Stop reading doomer web sites. Seriously. The world is not going to end. The United States will not default on its bonds. There will be no hyperinflation. The US dollar won’t end up as bathroom tissue. There are no FEMA concentration camps. There’ll be no food riots in North America. Gold ain’t going to $5,000 an ounce. You do not need a weapon, and stop hoarding Spam.

(6) Don’t buy stocks. Unless you have lots of money, like a million. Given the world today, individual equities carry excessive market risk. And equity mutual funds cost far too much money, with 70% of managers failing to beat the indexes, while sucking up your money in management fees. Yes you need growth and exposure to the equity markets, but do it with ETFs, exchange-traded funds. They’re cheap to buy and own. They’re highly liquid. They pass through dividends. They can provide narrow sector exposure or the whole market, here in Canada or anywhere in the world. Mostly, they give diversification. If you need to remember one word above all in 2011, that was it.

(7) Lock in your mortgage. Chances are you might not see home loan rates at this level again in your lifetime. The Bank of Canada will start jacking sort-term rates (lifting VRMs) soon – maybe March. The bond market selloff is not over yet, which will raise yields and force the banks to jump five-year mortgages as well. So expect increases in both short and long-term money. Someday you will tell your incredulous grandchildren there were once five-year fixed-rate mortgages with prepayment privileges at 3.5%. They will spit up pablum on you in disbelief.

(8) Use your home equity to create more wealth. Besides drowning in debt, the second biggest mistake homeowners make is paying off their mortgage and then sitting on hundreds of thousands of dollars in do-nothing equity. Worse, if real estate does turn into a depreciating asset (it’s coming), then chunks of that money will simply disappear. Better to get a SLOC for a third or so of the home’s value, invest it in a balanced portfolio (see 4, above), start making 8% instead of zero, have the portfolio pay the interest payments for you, while you get to deduct them from your taxable income. Duh.

(9) Beware the RRSP tax bomb. When you contribute you get a tax deduction but simply kick your tax obligations off into the future. Bad idea for most middle-class people. Marginal tax rates have only one direction in which to head in Canada and the US given the fact our governments have just spent more money than God. You could easily end up paying more in retirement taxes than you saved when working, or become an old fart forced to liquidate your plan through a RRIF, kicking you into an even higher tax bracket. Remember what I said – TFSA first.

(10) Made big bucks on gold? Take ‘em. With the US economy showing gains in employment and manufacturing, European debt woes easing a little, rates rising in China and the North Koreans looking like pansies, precious metal prices are smelling mighty overvalued. Smart investors will take profits and redistribute them over various asset classes in a balanced portfolio. Numbnuts investors will skulk doomer blogs, tell each other gold is money and wonder where their friends went.

(11) Be liquid. That doesn’t mean a savings account or the orange guy’s shorts. It sure ain’t GICs or having 80% of your net worth in a house. Liquidity means being able to turn constantly-growing investment assets into cash within a few days in order to avoid brewing trouble or exploit new opportunities. Don’t forget what it felt like two years ago, when real estate turned illiquid and the guys running your equity mutual fund were playing golf as the hurricane hit. And remember the time will come when you want access to wealth for a good vultch.

Okay, there’ll be a test later. I have several boxes of Garthy decoder rings for those who do well. Those who fail can join Bullion Bunny, RealPaul and Nosty in their new place of torment. You have no idea…

The F-bomb dropped today

I told you on the weekend that Ottawa was about to tighten up on the country’s lax mortgage regs in an attempt to slow down the housing market, and I detailed some of the changes being considered. That announcement came this morning.  Among the changes will be shortened amortizations and changes to HELOCs. Aren’t you glad you decided not to be a realtor? More in my next post.

252 comments ↓

#1 T.O. Bubble Boy on 01.16.11 at 11:00 pm

Nicely done — a straightforward post that even a Vancouver realtor couldn’t disagree with.

Let’s see what the gold bugs and RE pumpers decide to post about their strategies for 2011…

#2 NeedAHouse on 01.16.11 at 11:01 pm

Great post for the new year! Simple and effective.

#3 Jon B on 01.16.11 at 11:02 pm

Cash IS a strategy. To say it is not is to assume all investment vehicles like ETFs, individual stocks and mutual funds that are publicly traded never produce negatives yields. Today, cash is only a very slight loss when comparing the taxed interest gain from the rate of inflation.

Cash loses purchasing power daily to inflation and earns a fully-taxed and piteous negative return in near-cash assets. I hope you have lots and lots of it. — Garth

#4 Jaymus (RealizedReturns) on 01.16.11 at 11:13 pm

Great post. Nice to see you talking general finance. I agree with just about everything – but don’t buy stocks? ETFs are great and are a wonderful way to invest, but nothing wrong with investing in individual securities. Not for the faint of heart though..

I’ve done #8 and it can be nerve-racking.. I am thinking about pulling a chunk of equity out again for investment purposes..

#5 T.O. Bubble Boy on 01.16.11 at 11:14 pm

One other comment:

(6) Don’t buy stocks

I assume that the opposite is true for Bonds, Preferreds, REITs, etc.? Not only do you lose some of the tax advantage when buying Bond ETFs or Preferred ETFs vs. individual holdings, but with Bond ETFs you also can’t just “hold until it matures” (i.e. you lose principal as yields rise vs. getting 100% of the principal back at maturity).

#6 Mister Obvious on 01.16.11 at 11:20 pm

First, there was Ocean’s 11, now there’s Turner’s 11. Makes great sense to me. But I gotta say…

“If you’re in Vancouver or the north GTA, hire some Asians to queue up on your lawn.”

Man, that’s funny!!! My wife had to peel me off the floor and put my pants in the laundry.

#7 April on 01.16.11 at 11:20 pm

Garth, some bloggers have asked you to recommend a fee based adviser and you asked them to write to you. I have written to you a couple of times about a recommendation but have never heard from you. I believe your mighty busy and maybe your reply is still coming though sometimes I wonder if your receiving my emails?
Even if I never hear from you I admire you for what you do and for saving me from making a big financial mistake.

I wrote to you on the weekend. — Garth

#8 JP on 01.16.11 at 11:25 pm

From what I have read lately, some analysts are saying that Mark will not pull the trigger on a rate increase until near the end of this year – so why the rush to lock into a fixed rate mortgage?

Did you not understand? The BoC affects VRMs. Bond yields set 5-year money. Go argue with the bond market. — Garth

#9 Behavioral Finance on 01.16.11 at 11:26 pm

Cash is a strategy if you expect recession that will bring all other assets down, but governments are doing everything to cause inflation which like Garth said diminishes the purchasing power, if your money is not beating inflation it is losing value.

ETFs are still tied to stocks or other market related instruments, so besides the fees how are they less risky than mutual funds?

I said they were cheap to buy and own and more liquid. — Garth

#10 dark sad person on 01.16.11 at 11:33 pm

#204 Oasis on 01.16.11 at 8:28 pm

credit is NOT decreasing “big”… last you looked, since you’re obvioulsy pretty blind. where’s the collapse? the “collpase” has already ended.

********************
Your charts are blank-no wonder you can’t see it-

I believe you were trying to show TOTALSL YOY change?
http://bit.ly/hQOhde

If you’re trying to make mileage with that tiny uptick-in the broad scope of the obvious crash-you’re dreaming-think-cash incentives-buy backs-clunkers etc.
All forward demand sucked into today-where will the demand be as we move farther out on the curve?

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I’m not sure what the other one was supposed to be-

But here’s some more for you-

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

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

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

No idea where you see credit being expanded-i see the opposite-

**************************
where’s the deflation. why are stock prices skyrocketing? margin debt rising. oil at $92, gold at $1350? Soy, corn, wheat, coffee, all exploding. copper at all time highs.

if we were in a deflation, oil would be at $10, gold at $200, and copper at $0.50.

sorry……. no deflation. just lots and lots of money printing and inflation. better luck next life time. maybe you’ll have learned something this time around.

*******************
You sound like Prechtor and his screwed up call on gold in deflation-

Here’s some prices-not sure what your talking about there either-prices are back at 2007 levels-
Don’t expect or be foolish enough to think this will continue when China cooks off and melt it will-

http://bit.ly/hV14gN

http://bit.ly/ikB5Ik

http://bit.ly/fXhCWV

http://bit.ly/eNwaaU

You hyper guys make me laugh-
All of you were pointing at M3 until it went the wrong way on you-which is assbackwards anyway and has no measurable bearing on money supply-

The stock market
Read ZH and learn about the giant quants full of stimulus cash and about HFT

#11 McSteve on 01.16.11 at 11:37 pm

Garth:

Time for a little XRB yet? Still too early?

#12 Victor on 01.16.11 at 11:42 pm

Ottawa to tighten mortgage rules

Ottawa is clamping down on the mortgage market with a package of measures to deal with Canadians’ record levels of household debt.

The Finance Department is expected to announce that Ottawa will stop backing mortgages with amortization periods longer than 30 years, cutting off support for the 35-year mortgage. In addition, the announcement by Finance Minister Jim Flaherty is also expected to reduce government backing for home equity lines of credit.

http://www.theglobeandmail.com/news/national/ottawa-to-tighten-mortgage-rules/article1872323/

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

Big changes coming…

#13 Laurenda on 01.16.11 at 11:42 pm

I really needed to read that. Thanks.

#14 OttawaLuke on 01.16.11 at 11:42 pm

My fiancee and I have been contributing large sums of money into our RRSP’s with the intention of pulling $50,000 with a Home Buyers Plan and placing a large down payment on a $200,000 condo near the bottom of this crash (3-5 years from now I’m hoping)

I know Garth’s not a big fan of the HBP but after reading this post about using home equity to invest, could the same not be done with the HBP?

The rules state as long as you buy a house/condo you can use the HBP for anything, so theoretically could you not pull the $50,000, put a minimal down payment on the house and invest the rest in a balanced portfolio within a TFSA? Then use the investment returns to slowly pay the HBP back over 15 years while earning growth on both your HBP loan and the fat tax return. Seems like you would be getting the best of both the RRSP and TFSA worlds.

I guess the question would be whether you could earn more in the balanced portfolio then the extra interest you would pay on the mortgage having not made the large down payment.

What am I missing here?

Money removed under the HBP not used to buy a home with will be added to your income and taxed. — Garth

#15 Claudius Emeperor on 01.16.11 at 11:42 pm

Abosulutely agree with Garth on the state of the housing market. And absolutely disagree on the invest/no cash strategy.

We must realize that the world and the economy is in it’s current shape as of unrealistic expectations, specially based on 6-8 percentage annual returns. (adjusted 4-6 percents after inlfation).
We see strange things now as speculative bubbles form based on captial expecting higher and unrealistic returns than the current economy can provide.

By my humble opinion we are really in a deprecion and are facing deflation.

Does somebody really think that the curent state of the stock market and the comodities is sustainable?
We can’t borrow our brains out, and we can’t print more than 1/3 of what we need.

I have not seen anyone distinguishing a fire by pouring gazoline into it.

And by the way I can honestly and humbly say (without making a single penny out by selling books or pretending that I am a genius) that I saw what is coming to the US house market in 2005.

It is surpsing how the mainstream media is brainwashing people’s mind. Don’t watch TV and don’t listen to investor advisors.

By the way, of inflation is really coming, this won’t be my problem, but a problem of all baby boomers with no savings. You must realize that in the current conditions we can not raise taxes to feed the babyboomers and provide them with health care withouth negavite implications to the GDP which measn we must borrow more.. Which we can’t afford.

My strategy is: cash and investemnt in education, healthy life style.
And no extremes. No dept for sure.

The true time for investing will come. For the patient. When the deflation is over.

#16 Timing is Everything on 01.16.11 at 11:43 pm

#194 Devore

Have you seen the taxes on alcohol recently? They’re over 100% in BC.

So, make your own…just like Gran-dad did 50+ years ago. At least my grandpa did. I also made my own beer and wine for years. Dad still does. Get off the grid…that includes guv liquor stores. Starve the beast.

#17 Min in Mission on 01.16.11 at 11:44 pm

Great post Garth. Easy to read, makes a lot of sense. It is really interesting how a person can read something, think that they understand it, and still not know how to go about it. I can appreciate the idea of selling the house. In our neighbourhood, there is one house that has been on the market for over 290 days. Several price reductions. This week, two new listings (all three of these houses are within a four block radius), the new prices are higher than the first house.
I really wish that I had learned more about investing, ETF’s, etc. A working life of “just getting by” hasn’t left much for investments.

Thanks for all your info, and your sense of humour.

#18 squidly77 on 01.16.11 at 11:45 pm

Cash loses purchasing power daily to inflation

Very true, but so are houses, for the younger generation that resists gambling and are saving for a home in which to raise their families in, cash at this moment, ain’t so bad.

Think back to when you were twenty two, were investments important, or was baby formula important ?

#19 don bool on 01.16.11 at 11:48 pm

When push comes to shove you,ve got to appreciate a gift that has been handed to you..An individual who,s been there and nows how the game is played.Someone who has the cajones to let you know what the true story is without being afraid of consequences from the powers that be. An opportunity to get information on how our system works. The guts to take this on takes more then some poor slob beating his brains out in the middle of the Hecate straits trying to make a living. This guy gives the opportunity to gain knowledge that you,ll never in a life time get the opportunity to aquire. .

#20 squidly77 on 01.16.11 at 11:49 pm

The looming housing bust is going to be nasty enough, when giving advice we must remember our age, and more importantly our youths age.

#21 David on 01.16.11 at 11:49 pm

I know your policy…this isn’t a gold blog. But: 1) this time, you brought it up, and 2) think of this comment wrt today’s theme of “things can change fast”….

Three years ago, portfolio manager Brian Acker smugly trumpeted on TV that “my grandchildren will never see $500 gold”. He was totally gung ho on US stocks, the US dollar, and wanted to ridicule any gold bug he could find in a debate.

Three years.

#22 Soylent Green is People on 01.16.11 at 11:51 pm

.
.
.

from Emily’s blog: Did You Ever Wonder How Don Cherry Became the Mouthpiece for Neoconservatism?

Does it not seem odd to anyone that Don Cherry, who always played the average Joe, got so wrapped up in neoconservatism, the revolt of the rich against society?

I mean he’s everywhere. Campaigning for Julian Fantino, endorsing Rob Ford. He’ll probably be lending his blubber to Kingston’s local conservative candidate.

Many are just calling him a senile old crank, trying to capture a bit of the limelight, and while that may be true, there is another reason. Stephen Harper and the boys made this man a lot of money. More money than I’ll ever see in a lifetime. And now he owes them.

How you ask? Pull up a chair. I want to tell you a story.

The Backroom Deal of the Century…

http://pushedleft.blogspot.com/2011/01/did-you-ever-wonder-how-don-cherry.html
.
.
.

#23 Pat on 01.16.11 at 11:54 pm

We have you. What else matters? — Garth

Ah, you are so modest (and/or sarcastic :)), just like me.

#24 Willa on 01.16.11 at 11:55 pm

The part about “be prepared” stands out.

With government and media blowing sunshine up our butts (as you say), then it’s hard for the average Canadian to see why they should be prepared.

When the housing market finally tips over, it will come as a complete shock to most people.

I can’t tell you how many people I’ve pointed to this blog who still can’t see, don’t want to see. Some even get angry that I’d try to poke a hole in their dreams.

I guess it’s just human nature to believe the fantasies.

#25 dark sad person on 01.16.11 at 11:59 pm

10) Made big bucks on gold? Take ‘em. With the US economy showing gains in employment and manufacturing, European debt woes easing a little, rates rising in China and the North Koreans looking like pansies, precious metal prices are smelling mighty overvalued. Smart investors will take profits and redistribute them over various asset classes in a balanced portfolio. Numbnuts investors will skulk doomer blogs, tell each other gold is money and wonder where their friends went.

****************
Huh?
European debt problems haven’t even started-
Where in hell do you see the US economy improving?
Stimulus and China over-inflating is the only thing propping up any sort of growth

I expect gold “might” correct back to its 65 WMA around 1150 or so and if it does-i would be buying gold miners-until then i will hold with a hedge–
So-i think your wrong-

******************
European Central Bank council member Axel Weber said it’s too soon to assume Europe’s debt crisis has been contained as the ECB steps up its purchases of government bonds to ease market tensions.

“The optimism of some observers seems premature to me,”

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aqKJjcj_86dw

**********************
http://4.bp.blogspot.com/_nSTO-vZpSgc/TSdVZIqSWcI/AAAAAAAAKOw/fxmaynYBRW8/s1600/Household-Data-2010-12.png

http://4.bp.blogspot.com/_nSTO-vZpSgc/TSdcossMMJI/AAAAAAAAKPA/IHDTsu3leds/s1600/table%2Ba15%2B2010-12.png

#26 CREA Circle Jerk on 01.17.11 at 12:00 am

Don’t agree with #10, but mostly good advice Garth. World governments have no choice but print money because the debt situations for developed countries is untenable, and are past the point they can be solved even if the economic cycle normalizes. Interest rates will have to rise eventually and cost-push inflation will materialize IMO. I still think there are fairly good odds nominal real estate values don’t decline much because of rising inflation, but will nonetheless make a very poor investment in such a situation.

If you think precious metals are in a bubble, wait until the next cycle up. Stocks will probably do fairly well too but will under perform precious metals on a 5 year timeline. Precious metals may do poorly in 2011 if the Chinese economy sputters are speculators sell them in anticipation of this temporary U.S. economic recovery.

#27 Claudius Emeperor on 01.17.11 at 12:02 am

Money printing is not solving the problem, it is making it bigger. And there is no evidence of any money printing in Canada, we mostly sell bonds at this point.

Spending the money for no reason for the sake of spending is a stupidity. we are borrowing from the future generations to support our current lifestyle.

The current ‘inflation’ is caused by excessive borrowing and cheap credit. Which flows into the system based on the taxpayer’s backup of the government.
Note that this is very temporary, take away the stimulus, any cut in spending or interest rate increase would kill the borrowing and result in deflation.

Watch for the moment the governments run out of options and realise the debt can not be increased any more.. And we are not even factoring the baby boomers and their health care in the current picture..

#28 dark sad person on 01.17.11 at 12:05 am

#1 T.O. Bubble Boy on 01.16.11 at 11:00 pm

Nicely done — a straightforward post that even a Vancouver realtor couldn’t disagree with.

Let’s see what the gold bugs and RE pumpers decide to post about their strategies for 2011…

*********************
Better yet-let’s see what your strategy is-
Or is it G’s steps 1 through 11?

#29 UrbanCowboy on 01.17.11 at 12:09 am

I know we don’t want to turn this into a doomsday website but how can we say for sure the US will not default and there won’t be runaway inflation.

Peter Schiff says there will be riots in the streets. Off course he is famous for calling the housing collapse and it doesn’t mean he’s always going to be right. But here he is making a good point in this video showing the riots in Greece, and they only have a fraction of the debt the US does:

http://www.youtube.com/watch?v=Zn7cJuJOz2A&feature=related

#30 Claudius Emeperor on 01.17.11 at 12:09 am

minimizing today’s loss is a gain.

#31 LJ on 01.17.11 at 12:11 am

Great post: Diversify, Stay liquid.

But, there several issues at stake in your strategy (and I won’t go into them all).

First, ETF’s are just derivatives (Buffet’s famous “Weapons of mass destruction”) and have no underlying value except being able to track something. You really own nothing except a bet on the holdings and a lot of ETFs are horrible at tracking the actual value. Be careful.

Second, in the bond field, if interest rates were to climb from the current 3.26%, up to 5% (not unprecedented) on the 10 year bond (Canadian issue), the investor would lose 31% of the principal which would take the entire time to recoup. At which point it still might not be very liquid.

If history is any guide, the bond market will be the one to explode this year which will sideswipe the housing market in a big way – along with anyone holding fixed return investments (read: the majority who are trying to play it “safe,” including those close to or in retirement).

Lastly, your point #8 is contrary to the thesis of staying out of debt. By the time you pay the banks their “vig” and the government gets it’s cut, you are basically even – and exposed to any market gyrations, with your house now on the line (whatever it might be worth in the future). Too risky. If you want to book the profits, do it! All or nothing.

Anyhow, in general, it works, although we could see some real fireworks in the bond market later this year which would be extremely good for equities, so your “ideal portfolio” should still show decent gains.

And, you misspelled “sentence” at the end of #3 (unless that was intended…).

Cheers

ETFs are a superior vehicle and mirror equity performance but with greater diversification. I have no hesitation buying or recommending them. Canada ten-year bonds will not hit 5%, nor will they ever become illiquid. You need to learn more about the bond market. As for home equity, it is tax-deductible debt and far less risky than keep equity in an asset with a dim future. You sure sound like a scardypants. — Garth

#32 The word is Out & Official now: Buying a home about to get tougher on 01.17.11 at 12:16 am

Buying a home about to get tougher

http://www.financialpost.com/news/Buying+home+about+tougher/4117356/story.html

#33 Stevermt on 01.17.11 at 12:17 am

step #5 would be a tough one to accomplish except that my fave doomer site, LATOC, stopped posting daily blogs back in December….come to think of it I have been feeling a bit more positive these days..huh
Thanks G

#34 Stevermt on 01.17.11 at 12:22 am

Oh and on my last point you can still check out LATOC for info on Peak OIl and how it will impact our life in a monumental way in the near future. Oh crap, now I’m feeling less positive.. I’m gonna need a sleeping pill tonight.

#35 LS on 01.17.11 at 12:26 am

What I think is very interesting is how so many people think a correction can’t happen when in 2009 we had the beginning of a huge correction.

Houses in my neighbourhood on the west side of Vancouver were NOT selling and when they did, the two I can think of sold for $1.5 million would now easily sell for over $2.0 million. I can think of another almost new house at 12th and Trutch that was on a 40 foot lot, that would not sell. It likely sold for $1.7 or $1.8 million and now would go for $2.5 million. This was just two years ago. I’m not thinking about the 8 years or so from mid 90’s to early ’00s when real estate went nowhere in Vancouver.

Garth is so right. Things can change in a heartbeat. They did in late 2008. If you need to get out, get out now while the going’s good.

I will tell you one thing guaranteed, RE is not doubling or tripling in the next 10 years in Vancouver… I don’t know how people can watch the world implode and think we’re immune…

#36 Mister Obvious on 01.17.11 at 12:32 am

#14 Timing is Everything:

“So, make your own…just like Gran-dad did 50+ years ago. At least my grandpa did. I also made my own beer and wine for years. Dad still does. Get off the grid…that includes guv liquor stores. Starve the beast.”

My Dad made his own beer too. Tasted like turpentine. Nobody could drink it but him and he only choked it down to save face. Learned a lot from Dad. Some things are better left to the pros.

#37 Michelle on 01.17.11 at 12:35 am

Check out the latest posting at the “Financial Insights” blog entitled…

“Housing: A bug in search of a windshield”.

Best title ever :)

#38 Abitibidoug on 01.17.11 at 12:37 am

In response to post #23, I agree with Garth that gold is probably in a bubble. With most predictions calling for gold to go higher, it reads a lot like this time of year in 1980, when gold peaked at slightly over $800 (equivalent of at least $2000 now) and many people were lining up to buy it. Strange, why weren’t more people lining up to buy gold in 1999 when it was dirt cheap?

For the most part I agree with Garth’s idea of keeping out of cash, but believe that keeping some on hand may be a good idea should any good buying opportunities come our way. Sooner or later another crisis will shake up the markets and create another good buying opportunity, it’s just a matter of when.

#39 Memory on 01.17.11 at 12:40 am

I still think Canadian real estate, specifically Toronto real estate, will look great in 2011. Sorry to disagree with you folks.

2 ORCHARD CREST RD., Toronto
SELLING PRICE $1,801,000
PREVIOUS SELLING PRICE $646,300 (2005)

http://www.theglobeandmail.com/real-estate/jane-and-bloor/article1868664/

#40 Basil Fawlty on 01.17.11 at 12:49 am

“Numbnuts investors will skulk doomer blogs, tell each other gold is money and wonder where their friends went.”
There is a fair chance of consolidation in the gold market this year, but this is normal after a 10 year record run, which was missed by everyone except the “numbnuts investors”. Sounds like sour grapes to me.
I still believe gold is money, but admit it’s best not to tell this to your friends, unless they are Eric Sprott and John Embry.
In regards to the US economy improving, trillions have been spent and still 1/7 Americans are on food stamps.

What on earth is wrong with taking profits? Is that not the point of investing, or do you worship this metal? — Garth

#41 Tom from Mississauga on 01.17.11 at 12:56 am

An excellent post Garth.

My problem is with the (9)RRSP part. For younger persons juggling bills it’s all about cash flow. The life blood of a company/family balance sheet. Ever wondered where this weeks payroll is coming from? ie. Gee, I hope that customer’s check comes in! Show some calculations on this before your book goes to print (preferably in crayon).

If you need an RRSP refund to live on, you live wrong. — Garth

#42 Best place on meth on 01.17.11 at 1:01 am

F. just shaved 7% off Vancouver real estate prices with his move to 30 year ams.

It’s a start.

#43 nonplused on 01.17.11 at 1:07 am

I’m not sure I understand the idea that inflation will go up and gold will go down. The last time we had rising inflation and rising rates, gold went from $100/ounce to $850, although admittedly once inflation was tamed gold went in the doldrums for the next 20 years.

It does look frothy though. I expect it to trade down until at least the summer, and probably down to the $1200 level. And I expect that the reason it’s looking to do that says something about the economic news over the next 6 months.

I will agree though that gold at $5000 is a long shot. But it’s also not much of a prediction. I could say gold won’t trade at $10,000 in my lifetime and I’d be just as accurate. Those folks calling for $32,000 gold are out to lunch. First, some of the future depreciation of the dollar is likely already priced in because people are buying it as insurance. Second, the dollar will continue to devalue, but not that fast! The current rate of about 2-8% per year depending on how you measure it is probably what we get.

Funny how the writers that are still around in their 80’s like Richard Russell or Harry Schultz think one should have almost all your savings in gold, whereas boomers think now is the time to sell all your jewellery for less than melt value. Maybe the old folks have gone senile. Maybe the boomers are still always right about everything in spite of the evidence. I am going to continue to treat precious metals as an asset class that gets a certain allocation just like stocks, bonds, preferreds, real estate, and cash. It’s served me well to do so and I don’t see why it should suddenly stop doing so. But I’m not going all in. I’m over weight now, just because it’s run so hard, so I might sell some and get back down to 10%.

Gold might not be money for the middle class, but central banks still think it is! Well, they think it’s an asset anyway.

I also agree that you don’t need a weapon for defence. If things get that bad, you need to bug out! But even in countries that have recently suffered huge depreciations like Brazil or Argentina, shooting at people to protect your spam was never necessary. Society isn’t going to break down.

I also think no food riots in North America. All we have to do is stop making so much damn ethanol and any future problem is solved! However, the floods in Australia and drought last summer in Russia will keep pressure on prices.

I have to keep investing in RRSP’s or I loose the company match portion. So not all this advice is one size fits all.

By the time I retire most of the boomers will be dead or dying, so the CPP problem will resolve itself and thus it’s totally impossible to predict tax rates that far out. What I will say is that if tax rates are higher than my marginal rate now, only government sponsored industry won’t have gone offshore. That scenario will be nightmarish beyond the potentially debilitating taxes on the $60,000/y or so I expect my RRSP to generate starting at 65 (in real dollars). I’ll be living in Argentina.

And what’s wrong with hording spam? Its good eatin’.

TFSA? Our family is half way there, and I won’t let any contributions expire, but my NPV (which I track daily and plot, you can use a variety of online tools to monitor your portfolio these days) swings that much in a week, so it really isn’t priority one. Although it is a priority. I like the idea of gifting your children some money in a TSFA too, but my kids aren’t old enough.

As for bond defaults, the government of Canada isn’t going to default, the government of the USA isn’t going to default, but Europe has troubles, and state and municipal level defaults are all but inevitable. They probably won’t be widespread, but there will be a few Orange Counties for sure in the next few years. Maybe even Illinois or California. And Ontario, their finances are a study in absolute basket case.

The real estate call seems pretty good. But I am not sure when a price you are looking at is good or not. My brother in law just offered me his rental for 10% less than he paid for it to get out from it. Is that enough? Will it go 20? And at what point do you help someone out?

#44 Timing is Everything on 01.17.11 at 1:15 am

Ha! Garth, you’ll like this one…

‘No Solid Basis for Home Scare’

“Of course, we know this now. Canada’s hot housing market has settled down without any serious slump in either prices or sales. It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two.”- TC

http://www.timescolonist.com/solid+basis+home+scare/4118024/story.html

#45 TaxHaven on 01.17.11 at 1:17 am

“The United States will not default on its bonds.”

Yes it will. Only questions are when, how much and what they default on.

THE MINUTE you see European-style austerity, even the merest HINT of it, come to the U.S., you’ll know a surreptitious default of some kind is going on.

…and of course “Made big bucks on gold?” should be re-phrased as “Picked up a lot of gold for your bucks?”…

“With the US economy showing gains in employment and manufacturing, European debt woes easing a little, rates rising in China and the North Koreans looking like pansies, precious metal prices are smelling mighty overvalued.”

Actually, the U.S. economy is still bumping along the bottom at the new normal level. Any temporary illusions of gains in employment can be easily removed by checking the % in workforce, the federal deficit and QE2 spending…

Lastly, “Don’t buy stocks”??

There are no substitutes for learning how to personally manage your portfolio on a daily basis! I would agree that mutual funds are a dead loss, but ETFs do not allow for individual stock-picking: we’re in a low-return, speculative investing environment now (at best!) and nimbleness will be at a premium.

#46 HouseBuster on 01.17.11 at 1:19 am

The F-bomb drops today
————————–
This is just like when some bad news release comes out for a stock. It tanks the next day.

This will cause an instant 5% to 10% drop in prices tomorrow.

#47 HouseBuster on 01.17.11 at 1:22 am

I mean house prices.

#48 Timing is Everything on 01.17.11 at 1:26 am

@ #43 Timing is Everything

Sorry forgot this paragraph Garth…

“Where was the talk coming from? The most prominently quoted source wasn’t an economist or a real-estate expert; it was Garth Turner, a former politician who had been promoting a book predicting a housing collapse.”

http://www.timescolonist.com/solid+basis+home+scare/4118024/story.html

#49 nonplused on 01.17.11 at 1:40 am

#37 Abitibidoug

I don’t think gold is in a bubble. People are mailing their jewellery in for less than melt. Almost nobody has significant exposure (although a few responders on this blog seem to have some), and it’s constantly derided in the media and by financial gurus like Garth (although Garth is on record as saying you should have 5% or so. Strange he doesn’t bring that up much, I assume the guidance has changed.)

The sign of a bubble (think dot.com or houses) is everybody being all in, some people leveraging to buy even more, teachers with 3 rental condos, and such. If gold is in a bubble, it’s the Chinese and the Indians doing it, not us. But the Chinese and the Indians have good reason to be fearful of their government money.

Remember, it’s not a bubble until Cramer tells you to go all in. Right now everything in the media says “get out”, and the media is almost always wrong medium to long term. It’s advertising after all.

#50 LB on 01.17.11 at 1:44 am

#3 Jon B is correct.

Having a good portion of assets in Cash (on hand,NOT in banks) IS a strategy,as it will increase in value (tax free) in deflationary times and will also be advantageous in times which are concurrently deflationary/inflationary.

#51 Rantanplan007 on 01.17.11 at 1:46 am

I’m not sure to understand why you are very bullish on oil ($140+) and not on gold and silver.

An ounce of gold has historically bought approximately 15 barrels of oil, so if oil goes up it would make total sense for gold to follow at least a little. And silver will also follow that trend. Working in the oil patch I agree with your forecast of oil.

I am very confident most commodities (precious metals, energy, agriculture) will keep rising. In 1980 during the huge gold bull market, most gold & silver investors were from North America and Europe. Now, with new emerging markets like China & India, adding roughly 2.5 billion people to the equation, I see huge potential in gold & silver.

I also see big problems for the US dollar, as unfunded liabilities will make the US debt an unsolvable problem. This is bullish news for precious metals, even from a CAD perspective, because both economies are still way too dependent.

With that said, I think keeping 10-15% of my portfolio in precious metals (miners, physical, ETFs) is a good idea. I also like my monthly income ETFs, XTR (iShares Diversified that yields 6%) and FIE (Claymore Financial Monthly Income that yields 7%), they are good options for a balanced portfolio.

Oil is useful. Gold is speculative. — Garth

#52 Jane on 01.17.11 at 1:47 am

Garth, is there any correlation between rising interest rates and increases returns in your recommended portfolio?

#53 Mike on 01.17.11 at 1:47 am

This was one of your better posts Garth.

Always love it when you take a swipe at the doomers/goldbugs.

Gold in small quantities is a nice way to make your portfolio more robust since it has a low correlation coefficient with with global equities, but that’s the extent of it.

#54 Devore on 01.17.11 at 1:48 am

#30 LJ

First, ETF’s are just derivatives (Buffet’s famous “Weapons of mass destruction”) and have no underlying value except being able to track something. You really own nothing except a bet on the holdings and a lot of ETFs are horrible at tracking the actual value. Be careful.

Eh? Do you even know what ETFs are, and how they work?

#55 pablo on 01.17.11 at 1:49 am

If you’ve been musing about selling your house, get the lead out. This might be the last Spring in many (depending on the market) where you still have a shot at landing a greater fool. Mortgage rates will be relatively cheap for a few more months, realtors and politicians are still blowing sunshine up the public’s rear and if you list early enough (like this week), you might miss the tsunami of new listings ready to flood the market. Get an ace realtor instead of being a cheap FSBO, and price it below market value. If you’re in Vancouver or the north GTA, hire some Asians to queue up on your lawn.= GARTH; I FEEL LIKE YOU’RE SPEAKING DIRECTLY TO ME, omg; that sounds weird. Well I may not have any time to spend on this blog, unless my insomnia stays the course. Time to put some fresh makeup on this pig and see what we can get. giddy up. Where would one rent those lawn asians?

#56 pablo on 01.17.11 at 1:50 am

P.S. FYI; I forget who the players were, but the investors in xceed were some of cda’s big five banks.

#57 Nostradamus Le Mad Vlad on 01.17.11 at 1:55 am


Re: The sacreligious taunting of one of the world’s best-known Vitamins-In-A-Can — SPAM MarziSPAM. Can’O’Whoopee SPAM and many others are all rich in nutrients, and should be b-b-q’d, roasted with Christmas Turkey, chopped – sliced – diced SPAM can be added to Rice Puddings with Worcester Sauce, etc., etc. All helpful eating hints courtesy of this blog!

“I mention this to remind you stuff happens fast.” — Main word is fast, as it will catch the majority asleep at the wheel, heading directly into the path of an oncoming train.

We already know what the outcome is, as most here have our heads screwed on the right way round. But we’re in the tiny minority — it is the vast majority who, even now, are yelping for bailouts, help from govts., etc.

“(3) Get out of cash.” — On the verge of doing that, maxing out TFSAs and RSP contributions, while keeping just enough in a chequing acct. to pay monthly bills.

Question for everyone: Where should net profits from TFSAs be placed? Non-registered plan?
*
#206 VICTORIA TEA PARTY — “. . . aging Hollywood fibreglass and metal prongs . . .”

Wotever happened to Stainless Steel Thongs? Ha! The worms ate into my brain . . .
*
3:55 clip Cougar vs. Bear with unexpected end. Human voices add to the flavor.

3:38 clip Grocery stores (Albertsons) are closing doors. 2011 food riots.

Mandatory Vaccinations prelude to martial law?

Tekkie numbers for the Dow. Way beyond my Thought Control Centre!

Yes is the answer to the question posed on the heading.

Property Taxes in Shanghai and Obama’s Deficit baby steps.

The previous link said silver was largely made up of fake materials. Does the US Mint know?

USDA recommends co-existence with Monsanto (Bills S-510 and C-36).

Sovereign Debt Crisis Can it happen here? Or am I really too sexy for my body?

The Toilet More Cdn.-made Islamophobia made right here courtesy of the CPC.

Animosity over Russia – BP deal. Add to the previous mix . . .

Baby Doc This is why the US so conveniently helped Haiti after the ‘quake. “A massive quake, a US invasion, Cholera, and now the US puppet tyrant returns. Those poor Haitians!” wrh.com.

#58 Popeye the sailor man on 01.17.11 at 1:57 am

#19 don bool on 01.16.11 at 11:48 pm

I second your comments

PS;
I am …”some poor slob beating his brains out in the middle of the Hecate straits trying to make a living”…

#59 doomer web sites on 01.17.11 at 2:18 am

(5) Stop reading doomer web sites. Seriously.

======

This is a doomer website. Seriously.

#60 pablo on 01.17.11 at 2:49 am

There is a house price index in Canada, called the Teranet-National Bank House Price Index, but individual investors can’t access futures based on that index.
Simon Côté, managing director of property derivatives at National Bank, says the index was set up to allow forward contracts to be bought and sold based on Canada’s home prices (forward contracts are like futures, but they are sold over the counter). However, right now, only big institutional players can buy such products.

I gotta wonder how many of our haloed chartered banks are playing this game and betting against the consumer while encouraging more borrowing against that equity in their homes?

#61 gold bugger on 01.17.11 at 3:09 am

“Let’s see what the gold bugs … decide to post about their strategies for 2011…”

Hold.

#62 Dark Sad Monster Bunny on 01.17.11 at 3:10 am

10 fellow Dark Sad being – just to be clear on your first link, it shows the change in credit year to year, so only at points where the graph goes below zero is credit contracting. Since the end of WW2 credit has almost always been expanding. There is now a slight contraction at a rate of a few % per year.

#63 Thetruth on 01.17.11 at 3:27 am

Mortgage changes:

Nothing will happen with these changes; Too Much demand from new residents (500,000+/year). Mark my words and come back in April to tell me if i’m wrong!!!

look at other places in the world where demand is high and down payments have gone up to 40%….nothing happened!

You will see, just like you’ve seen over the last 18 months. Until demand is affected, nothing will happen.

#64 TheBestPlaceOnEarth on 01.17.11 at 3:39 am

Your future wealth is in the hand of China. China determines your future wealth not puppets in Ottawa. 2011 and Vancouver is exploding folks. Renters are left holding the bag. Get educated and understand what is happening in the new world. God it’s great. You should max out credit lines now and buy Vancouver before marginal higher interest rates cause banks to claw back your credit lines from Canadians. Canadians have no business being in Canada. Although Canadians no longer belong here there is a window of opportunity to max out credit before the door closes. Killer profits around the corner folks.
http://www.vancouversun.com/health/Asian+community+fears+being+tainted+protesters+Chan+says/4118115/story.html

#65 TheBestPlaceOnEarth on 01.17.11 at 3:43 am

Print this posting of Garth’s and put up on your fridge. 10 years from no re- read and see the fact are the opposite. Many of you are ignorant that before this blog Garth was a pioneer internet blogger posting doom and doom about real Estate before Vancouver went parabolic. Folks gold is going to $5000 and as much as Garth has ridiculed watch the return of junior uraniums in 2011
——-
(5) Stop reading doomer web sites. Seriously. The world is not going to end. The United States will not default on its bonds. There will be no hyperinflation. The US dollar won’t end up as bathroom tissue. There are no FEMA concentration camps. There’ll be no food riots in North America. Gold ain’t going to $5,000 an ounce. You do not need a weapon, and stop hoarding Spam.

#66 Anon on 01.17.11 at 4:08 am

“What on earth is wrong with taking profits? Is that not the point of investing, or do you worship this metal? — Garth”

Well, Garth, I’ll explain to you what is wrong since you asked nicely. Here is a partial list of what is wrong with taking profits by exchanging gold to paper or electronic dollars:
1. by doing so you give up something precious and lasting.
2. your “profits” are measured in what exactly? It is only because of that measurement that you realize “profits”.
3. on top of that you get taxed for realizing fake profits.

So the only good thing you get from buying gold and then selling it is that you do not get nailed for GST or HST on it in the process. Unlike palladium for example where you get taxed on buying maple leafs which are legal tender in this country by the way…

I think the key point is that many folks aren’t buying gold as an “investment”.

Even worse. — Garth

#67 Mark in Edmonton on 01.17.11 at 4:09 am

I still can’t believe our conservative government allowed a 40 year no down payment mortgage and supported it 100% during a boom! What was that all about. They should apologize to the people for creating a unsustainable housing boom/bubble. At least the decision to tighten up this mistake will be better for everyone in the long run. If/when the real estate market plunges to levels not seen since 2005 or earlier it will give some relief to millions, and a nightmare for millions!

#68 PeeGee on 01.17.11 at 6:18 am

The company I work for laid off some people last week. Afterwards, 5 of us lucky survivors discussed what one laid-off employee should do: wife, young child, purchased a house 4 years ago. I was the only one to suggest selling the house. The others thought I was completely bonkers. Amazing! Guess where the 4 hail from?

#69 Melissa on 01.17.11 at 7:25 am

It looks like Australia’s ANZ Bank are at their property spruiking best. They have just released a bubblicious report that has been widely condemned by the blogosphere.

http://www.unconventionaleconomist.com/2011/01/never-trust-bank-economist.html

No doubt we will hear more of this rubbish from the property establishment after the Demography Annual Housing Affordability report is released this weekend.

#70 OttawaMike on 01.17.11 at 7:34 am

With the recent banning of so many troublesome posters from this blog recently, the ratio of Good Posters to Nincompoops has risen to 5:1.
As we all know this ratio always reverts back to its mean of 3.5:1. I will continue to do my best to restore back the old balance to the blog.

We don’t know all the details yet on the Tory mortgage rule tinkering but I bet they leave a window open before the rules kick in and we see another feeding frenzy in RE sales this coming spring to beat the changes.

#71 boomer62 on 01.17.11 at 7:51 am

Great post Garth!

Jesus saves but Moses invests and,

Dark Sad Person,

Goodbye Yellow Brick Road.

#72 Tim on 01.17.11 at 7:56 am

Stop reading doomer web sites. Seriously. The world is not going to end. The United States will not default on its bonds. There will be no hyperinflation. The US dollar won’t end up as bathroom tissue. There are no FEMA concentration camps. There’ll be no food riots in North America. Gold ain’t going to $5,000 an ounce. You do not need a weapon, and stop hoarding Spam.

Famous last words, give it a year or two….

#73 Worldwide on 01.17.11 at 8:00 am

.#3 Jon B “Cash IS a strategy. Today, cash is only a very slight loss when comparing the taxed interest gain from the rate of inflation.”

I will second that (sorry Garth) to fully support that strategy. But like Garth says, you need quite a lot of to it make any type of decent return (not ROI but income) at today’s 2.25% bank accounts or in a 3.45% GIC.

https://www.happysavings.ca/rates.aspx

If you think about this, if you have a lot of cash (say over a million) I bet it’s a smarter idea to be risk adverse in the long run. A 15% drop in an ETF of $1,000,000 isn’t chump change. And a 15% rise in the following year doesn’t break you even either.

$1m x .85 = $850 x 1.15 = $977.

#74 Worldwide on 01.17.11 at 8:06 am

I wanted to add:

Garth, I really appreciate and enjoyed reading (and agreeing with (your 11 points).

Thanks for posting them, they will help me and many others I’m sure. :)

#75 The Raj on 01.17.11 at 8:11 am

people,
the 30 year max mortgage is only for high ratio = < 20 percent down- does anyone still have a downpayment less than that–with credit sooo loose you'd be nuts to pay the 10 grand(roughly) to insure- just borrow it from a different bank or hell even the same bank — after the credit check for the mortgage application ofcourse.

plus– if you own your shelter did you know….

wait for it…

–at the start of your mortgage ,each months payment about half goes to interest and the other half =-well its yours – and further behold each month that percentage increases meaning the interest going to the bank decreases–

as opposed to renting…

and just where do you think the land LORD is getting the money for : taxes & upkeep –wanna hint ?

my advice –its never a bad time to buy your primary house/condo unless you have no one to pass anything on 2 and you don't really care about money

#76 Moneta on 01.17.11 at 8:53 am

Well, with mortgages going from 35 to 30, house prices just went down at least 10% overnight.

And that’s not even calculating the change in HELOC rules.

#77 Moneta on 01.17.11 at 8:57 am

I wonder how many people over the next couple of years will have to sell their income securities to fund their cash downs when they refi their 40 year mortgages down to 30.

#78 Moneta on 01.17.11 at 9:09 am

Money printing is not solving the problem, it is making it bigger. And there is no evidence of any money printing in Canada, we mostly sell bonds at this point.
——
The deficit is money printing.

And investors getting their money back for ABCP was money printing.

Money printing is alive and well in Canada but for some strange reason Canadians are blind to it.

#79 David B on 01.17.11 at 9:11 am

And guess what most posting to the blogs do not know what has happened or who caused it or who will pay????

But they who is fixing it …. Canada’s if nit the world’s finest Finance Minister ….. Take a bow Jim

Harper majority …. 100% sure thing!

#80 Timing is Everything on 01.17.11 at 9:16 am

#58 doomer web sites – said “This is a doomer website. Seriously.”

Touché

#81 Timing is Everything on 01.17.11 at 9:40 am

#35 Mister Obvious

Well, sorry to here your Dad was not adept at brewing.
Why do you know what turpentine tastes like?

#82 Lonely Limey on 01.17.11 at 9:49 am

Nice one Garth. Looks like BC and north GTA are going to have problems finding asians to queue up.

They’re all busy buying up Blighty.

http://tinyurl.com/4olbely

#83 TheBestPlaceonEarth on 01.17.11 at 9:58 am

Sales volumes lower but no need to worr folks that will all be changing. Speaking of doomer websites alot of negative press about Real Esate is what has caused sales to slow (key word) slightly. Once interest rates directions are given its up up and away. Lots of cahs waiting on the sidelines. Burnaby up over 6% on what the newspapers call a so – so year!
By Charlie Smith, January 5, 2011
The local real-estate market had its ups and downs last year.

The Real Estate Board of Greater Vancouver revealed today (January 5) that the median benchmark price for residential property rose by 2.7 percent in December 2010 over the same month in 2009.

For the region, the benchmark price was $577,808. However, that’s 2.6 percent below the 2010 peak of April, when the median benchmark price reached $593,419.

Detached properties recorded the greatest increase, rising four percent in December 2010 over the same month in the previous year.

The biggest increases for detached properties by area were Richmond (18.3 percent), West Vancouver (10.5 percent), the West Side of Vancouver (8.8 percent), and Burnaby (8.2 percent).

The median benchmark price for attached properties went up 2.7 percent last month over December 2009, with the biggest increases in Burnaby (6.3 percent), Richmond (5.4 percent), the East Side of Vancouver (5.3 percent), and Port Moody (4.6 percent).

Overall, apartments posted a 1.2-percent hike in the median benchmark price iover the same period. Leading the pack were West Vancouver (8.1 percent), Richmond (7.2 percent), and Burnaby (3.2 percent).

The REBGV does not include Surrey, Langley, and North Delta.

Sales volume fell 14.2 percent within the REBGV in 2010, dropping from 35,669 in 2009 to 30,595 in the recent year. In December 2010, sales volume fell 24.5 percent over the same month of 2009.

#84 boomer62 on 01.17.11 at 9:59 am

HERE WE GO, January 16th, 2011

GT said,
” So, good idea to mug a Boy Scout and steal his badge. Be Prepared.”
…these guys know when to pitch a tent or build a lodge for the pups.

GT said,
“Aren’t you glad you decided not to be a realtor?”
…depnds if Realtor(s) will accept squirrel to supplement commission(s)?

Boomer62 says,
“Always expect change…except from a vending machine.”
and,
F’s announcement should be bullish for $CDN?

#85 Utopia on 01.17.11 at 9:59 am

#12 Victor

“Ottawa to tighten mortgage rules”
———————————————————-

It is early where I am and the announcements have not come out yet. If you are correct though Victor, then I think the government has chosen a good package of changes. There is nothing there that gives me serious concerns about the mortgage market hitting a wall and bringing on serious damage to the economy.

We understand of course that even small changes can have serious adverse impacts. This suggests how small changes can be leveraged heavily against a small class of first time buyers.

What I mean by that is this…..The government can bring in almost any change it chooses at a time when there is significant pent-up demand and large numbers of first time buyers. It is quite a different scenario when those exact same changes are enacted at the moment of a sales eclipse and when the market has peaked.

That is why I am happy to see that the amount of down payment required for CMHC insurance purposes has not been tinkered with at this time. On the other hand I am disappointed that the government seems not to have taken a firm position against cash-back mortgage lending and other zero down practices that continue to thrive despite CMHC regs. and requirements.

As far as changes to HELOCs go….well that is a market generally dominated by longer term owners, seniors and those with considerable equity. Change there is not expected to have any immediate effect on new home purchases. If anything, the fraction of borrowing against equity is still too high at 85%. Any sustained correction will put those people underwater too. Perhaps in the next year or two that number will be reduced again.

Last point. I will be curious to see what the effective date of the changes will be. If they are immediate I would be heartened as no rush into new debt would result from directives.

If, on the other hand, the changes are being announced 3 months in advance of being phased in then my cynical self will be on high alert as we can expect a further rush into the market before the new changes become a fact and a deepening level of indebtedness.

#86 Timing is Everything on 01.17.11 at 9:59 am

#20 squidly77 – said “The looming housing bust is going to be nasty enough, when giving advice we must remember our age, and more importantly our youths age.”

Good point…But remember Garth’s target audience.
It ain’t 20 year olds….and it ain’t 70 year olds.
It’s me!

#87 Devil's Advocate on 01.17.11 at 10:04 am

RE: Changes in lending

Timing has a lot to do with the outcome of a good rain dance.

Best thing to do when you find yourself in a hole is to stop digging.

Lettin’ the cat outta the bag is a whole lot easier than puttin’ it back in.

#88 TheBestPlaceonEarth on 01.17.11 at 10:09 am

BREAKING NEWS FLAHERTY SAYS BUY!!!
News Release today is great news folks. 30 years vs 35 no big deal. Please read the statement carefully. It says Canadians debt not investors debt from US, Germany , South America, Asia and the rest of this world.

Finance Minister Jim Flaherty has announced new mortgage regulations aimed at reducing Canadians’ soaring household debt.
Flaherty has unveiled 3 new rules including mortgage amortization periods being reduced to 30 years from 35 years.

#89 boomer62 on 01.17.11 at 10:29 am

#72 Worldwide on 01.17.11 at 8:00 am

Your math is incomplete….choose an ETF that ‘DRIP’s.

#90 Devil's Advocate on 01.17.11 at 10:34 am

The changes in lending announced this morning will not significantly impact the real estate market. At best all they will do is cause people to buy a little less of what they want and more of what they need. Nothin wrong with that.

#91 fancy_pants on 01.17.11 at 10:36 am

I dunno, I didn’t see the F-bomb as that explosive. Although all that is needed is a trigger of sorts to set the wheels in motion.

Isn’t Winterpeg or Elliot Lake still a fantabulous place to hang one’s hat? What about the wet coast, that surely still makes a lot of folks wet? I’ll stop tantilizing you with hot questions before I make folks sweaty.

I suppose RE may still go the course of a slow drawn out drain in prices instead of anything dramatic like we say in spring of ’09.

Time will tell.

#92 GregW, Oakville on 01.17.11 at 10:37 am

Is this more of the MP H’s Canada that you won’t recognize when he gets done?
http://news.sympatico.ca/oped/coffee-talk/crtc_to_ease_ban_on_false_or_misleading_news/bacc4291

“The proposed legal structure is said to more closely resemble current broadcasting laws in the U.S., where the news media is currently the subject of considerable controversy.

Critics of the CRTC proposal are concerned that relaxed laws might lead to a more confrontational and openly ideological news media climate – the kind of thing you see on Fox News or MSNBC.

What’s more, it’s been suggested that a more lax stance on factual reporting would benefit incoming network Sun TV News, which pundits say will lean sharply to the right.

Others, including Sun TV chief and former communication director to Prime Minister Stephen Harper Kory Teneycke, argue that Sun TV News will serve to balance a Canadian media landscape that has always favoured the left.

I don’t think anyone is under the illusion that the news media are unbiased.

But in the case of that network, as well as all its purportedly loony-left competitors, it just doesn’t seem like a lot to ask that they refrain from distributing “false or misleading” information – what folks in the street call “lies.”

It’s hard to imagine under what circumstance it might make sense to relax a rule against lying. Especially when it’s in the context of the news media, where there is still at least a faint expectation that something like reality is being represented, or at least reported on.

I cannot tell a lie: this proposal makes me uncomfortable.

According to the Canadian Press, the CRTC is accepting comments from the public until February 9th. If like me, you want to weigh in on the matter, you can do so here.

For the record, that link was nearly impossible to find on the CRTC’s craptastic website unless you knew to look for a “Notice of Consultation,” and the date it was filed.

And these are the folks we’ve entrusted with our communications industry? Eek.”

#93 Smoking Man on 01.17.11 at 10:46 am

#75 Moneta on 01.17.11 at 8:53 am
Well, with mortgages going from 35 to 30, house prices just went down at least 10% overnight.

…………………………………………………………………………

10% overnite now if only the sellers saw it that way…..

#94 Victor on 01.17.11 at 10:47 am

Forget the Feds’ 30 amortization change, BMO is on record as urging Canadians to go for 25 years. How times have changed!

http://finance.yahoo.com/news/BMO-Bank-of-Montreal-Strongly-iw-2507830242.html?x=0&amp;.v=1

#95 UrbanCowboy on 01.17.11 at 10:50 am

Will a 35 going to 30 amortization period really make that big a difference in who can buy and who can’t? Doesn’t sound significant enough.

#96 boomer62 on 01.17.11 at 10:50 am

#65 Anon on 01.17.11 at 4:08 am
Good luck using your gold coins at the grocery store…

and
#58 doomer web sites on 01.17.11 at 2:18 am
You have revealed Your personal bias only.

#97 Ret on 01.17.11 at 10:59 am

Who determines the “Value” component in the new 85% Loan to Value rule for renewals?

Please don’t tell me the bank or a RE professional.

You can bet that the banksters are plotting as we speak to subvert any of F’s new “rules.”

#98 AACI-Okanagan on 01.17.11 at 10:59 am

“(8) Use your home equity to create more wealth. Besides drowning in debt, the second biggest mistake homeowners make is paying off their mortgage and then sitting on hundreds of thousands of dollars in do-nothing equity. Worse, if real estate does turn into a depreciating asset (it’s coming), then chunks of that money will simply disappear. Better to get a SLOC for a third or so of the home’s value, invest it in a balanced portfolio (see 4, above), start making 8% instead of zero, have the portfolio pay the interest payments for you, while you get to deduct them from your taxable income. Duh.”

Do you know how many people gave me that theory and reason into why they were refinancing during the boom. Way too many Garth, and many today are in hot water because they did it when home values were at a peak and now they owe more than what the house is worth. My advice, pay off your mortgage and treat your home as a home and not a bank.

Borrowing against equity to secure money to spend is idiotic. Borrowing to gain investment funds which are securely placed, liquid and professionally managed, yielding tax-deductible interest and the ability to pay the home loan off at any time, is quite wise. You hang with the wrong folks. — Garth

#99 Got A Watch on 01.17.11 at 11:02 am

Now we’ll see just how “strong” our “no bubble here!” real estate market really is. Somehow, I suspect it won’t prove any “stronger” than the early ’90s, or the early ’80s, our last 2 regularly scheduled real estate busts.

You know, that part on the price chart, after the peak, when the price moves on a line that slopes down and to the right. It’s called F A L L I N G P R I C E S. I spelled it out for the history challenged.

As I have said many times on this Blog: a long term study of real estate markets in many places over long periods found they all behave pretty much the same. Prices rise for about 6-7 years on average, top out, and then decline for 4 1/2 years to a flat market for 2-3 more, before they start to rise again.

Over 100+ year periods, real estate values track CPI inflation more or less, at about +2 to +3% average yearly gain. The stock market does better, a bit. So the historical significance of the past decade should not be underestimated. We will probably not see another decade+ like that for several, when prices rose year over year by double digits, and ran up for 13 years. It was an outlier, not the usual pattern.

Clearly, the best time to buy real estate was…..1997. Today, not so much. If you missed it, you missed it, that ship has sailed.

Those averages were during “average” recessions, which is not what we are seeing now. Take the US example, real estate peaked in 2006, probably won’t hit bottom till 2014-2015 or 8-9 years downstream. If you are in any doubt about our current little recession, US home prices have now fallen farther and for longer than in the 1930s, aka ‘The Great Depression’ – this is ‘The Great Recession’ now, because the D word is too disturbing today for public consumption.

I predict prices will return to year 2000 levels, more or less, at the bottom, which will be about 2016 in Canada. You can watch the US market for clues, when they do manage to bottom out, we will follow about 24 months later – when the US recovers, Canada will follow.

Or if you are a pessimist, how about Nevada (Las Vegas), where a recent CNN report predicted “No recovery in Nevada real estate until 2032” – a 26 year market decline. That would be a worst case, and it don’t get much worse than that.

#100 AxeHead on 01.17.11 at 11:06 am

Garth,

I just read your post on GOVERNMENTS. This post has a better picture, but the previous post was most insightful, especially from one who has been there. One word…thanks.

#101 GregW, Oakville on 01.17.11 at 11:07 am

Sorry about that ‘MP’ reversal in #76. It was most certainly was meant to be, PM H’s Canada

#102 Duke on 01.17.11 at 11:14 am

Garth Knows Gold?

Garth, I appreciate your advice. But if the markets rise gold will rise with them. That’s the trend we’ve seen for the last 10 years. Why would that change. If you are bullish for commodities and the market you should be bullish for gold and silver too. All metals have risen since late 2008/ early 2009. Why would that stop now if the market keeps rising. Plus annual gold production peaked in 2001 and has been dropping ever since if you believe the US Geological Survey. There have been no significant gold finds in the last 10 years and most of the major gold companies have flat stocks because of reserve depletion. Garth you are wrong about gold. It’s not the fear trade or inflation that’s pushing it up but declining production and falling proven reserves. This ain’t the 1970s dude.

All irrelevant. Investors take profits on any gain. Gamblers don’t. History shows who consistently wins. — Garth

#103 bigrider on 01.17.11 at 11:15 am

#67 PeeGee- ” Guess where the four hail from ”

Is it Italy?

#104 David on 01.17.11 at 11:21 am

Well, for those of you who don’t actually appreciate what just happened with Canadian mortgages….or, more importantly, why it happened now:

F. & H. know there’s a very good chance of a Spring election. They also know there’s a very real chance that housing in Canada is finally about to break. So they are trying to get in front of a potentially game-losing scenario where the meltdown starts just before a campaign, which would leave voters in a surly mood and the opposition with ammunition (oppo-nition?).

Now they can say that they acted proactively and took courageous action….it is hard to keep a straight face whilee I type that, but it is what it is.

When it comes to politics, the cynical answer is usually the right one.

#105 boomer62 on 01.17.11 at 11:28 am

HERE WE GO, January 16th, 2011

GT said,
“That announcement, F’s office has leaked to the Globe, takes place today (Monday)” – Martin Luther King Day in the US.

“F”…is he a modern day Martin Luther (1483-1546) against the church of unlimited credit?

Ref: http://www.pbs.org/empires/martinluther/about_driv.html

#106 bigrider on 01.17.11 at 11:30 am

Garth yours thoughts on Flaherty Mortgage rules changes?

I say they are not far enough.

Anyway I’m guessing that will be the highlight of your post this evening.

#107 boomer62 on 01.17.11 at 11:34 am

#86 Devil’s Advocate on 01.17.11 at 10:04 am

I like what you said – Cheers!

#108 Lonely Limey on 01.17.11 at 11:36 am

Please be aware the new limit of max 30 year am is for insured mortgages only ( high ratio). If you have 20% or more to put down then 35 am is still on the table.

True enough, but that is a small element of the market. — Garth

#109 T.O. Bubble Boy on 01.17.11 at 11:39 am

@ #28 dark sad person

Better yet-let’s see what your strategy is-
Or is it G’s steps 1 through 11?

Not quite: I think you’ve got to educate yourself and take pieces of advice that you feel apply to your own situation…

1) Invest, don’t save… I’m keeping some cash on the sidelines, because I don’t trust the QE2 rally or any numbers that come out of China.

2) Sell the house – already sold last year… mainly because we needed more space, but also because the market stopped making any sense.

3) Get out of cash — I’m keeping some on the sidelines, but still believe in staying invested.

4) Balance your investments — definitely.

5) Stop reading doomer websites — some might call greaterfool.ca a doomer site! I think you’ve got to read more than just the MSM, given that all major sites simply re-publish press releases like they are news.

6) Don’t buy stocks – I’m mostly in agreement with this, but I think that there are exceptions. If you have a company stock plan, you’re obviously getting an individual stock. Also, sometimes a stock fits an investment objective better than its industry.

7) Lock in your mortgage — N/A

8) Use home equity – N/A

9) Beware RRSP Tax Bomb… mostly agree with this, but I try to max out both the TFSA and RRSP anyway. The one related point that I’d take from this is to put the right investments in the right tax shelter.

10) Take profits on gold. Mostly agree, but I’m keeping some Silver/Gold/Lithium stocks for the “doomer” hedge. I’d say: “rebalance precious metals holdings” instead. Also — it’s a good time to check your ETFs to see if they are now overweight in Gold, given the run it has had. Barrick and others make up huge %’s of certain ETFs because of that growth.

11) Be liquid: agree – I was a sucker with an all-cash TFSA in 2009… and missed out on a year of growth because of it. 2009 showed that locking up cash means that you’ll miss some great opportunities (like 10% yields on many blue chip dividend stocks!)

#110 bigrider on 01.17.11 at 11:40 am

Garth as the financial planner you are and being subject to OSC guidelines you should know , borrowing to invest using home lines of credit are being viewed with greater scrutiny than ever before by dealer compliance departments. Many barriers and road blocks being placed in order to make the process difficult. Nobody(dealers) wants the liability.

Funny though, people can borrow all they want for depreciating assets(cars furniture etc) and can finance investment property purchases to the hilt without anyone batting an eye but heaven forbid they try to borrow for financial, fully liquid assets..then the financial planner is guilty of selling for purposes f increasing his revenue and not the betterment of said client.

At least this is what I hear form the field.

Not my experience. Those who borrow with adequate knowledge, existing portfolios and well-managed assets have few hurdles. Beats the pants off buying equities on margin. — Garth

#111 kitchener1 on 01.17.11 at 11:42 am

Nothing to serious in the way of new changes. Its looking more like an election year every day………

35 ammort down to 30

5% down stays

no effect on condo fees and the way they are caculated

No more CMHC insured HELOC

85% max value of new HELOC if the banks approve.

No big deal, the 35-30 only means $200-300 more a month, people still have to qualify at the 5 year rate. When that rate moves up–watch out.

Also kills the HELOC cash cow for pretty much any buyers that have less then 20% down. That means there will be more power of sales and foreclosuers as people who in the past would have defaulted would borrow against there house, no longer can.

My prediction– those that are close to the wire will list ASAP. This will only effect the really marginal buyers.

Most telling are his statements about interest rates will be rising in the medium and long term.

#112 poco on 01.17.11 at 11:48 am

Boy oh Boy—i guess with all the predictions of a 10% drop overnight because of the new mortgage rules, I imagine these recent sellers in the tri-cities won’t feel so bad
V#845479 bought May 08-728k
sold Jan11–675k
V#861888 bought Dec 07-510k
sold Jan 11–459k
V#838907 bought Feb 10-380k
sold Jan 11-358k
V#857230 bought Aug 10-353.6k
sold Jan 11-325k
the downward slide has been ongoing since last Mar/Apr in the tri-cities–soft landing –my ass

to all the posters who are positive about RE in Canada and think 2011 will be fine, you better do a little research and wake up to the real numbers

#113 T.O. Bubble Boy on 01.17.11 at 11:52 am

Based on my math, the 35-yr >> 30-yr change would mean a 7.3% price reduction on a $400,000 mortgage:

$400,000 @ 4% w/ 35-yr = $1763.21/month
$370,800 @ 4% w/ 30-yr = $1763.22/month

(92.7%, or -7.3%)

#114 Victor on 01.17.11 at 11:56 am

#84 Utopia

Last point. I will be curious to see what the effective date of the changes will be. If they are immediate I would be heartened as no rush into new debt would result from directives.

From what I’ve read online, the Feds typically give financial institutions 60 days to implement changes.

#115 garth fan on 01.17.11 at 11:56 am

garth…

there must be SOME cases where it is beneficial to first take the rrsp tax deduction…rather than sinking that same money into a TFSA.

for example, what about a self-directed spousal rrsp…where one spouse has no income and the other has a high income?

wouldn’t this strategy work if the lower income spouse controls the contribution after the required three years? and then potentially withdraws the contribution at her or his own nominal tax rate?

maybe even sinking the original tax deduction for the higher income spouse into a self-directed TFSA in the meantime?

yours from financial confusion.

#116 AACI-Okanagan on 01.17.11 at 11:57 am

Borrowing against equity to secure money to spend is idiotic. Borrowing to gain investment funds which are securely placed, liquid and professionally managed, yielding tax-deductible interest and the ability to pay the home loan off at any time, is quite wise. You hang with the wrong folks. — Garth

I have seen people do both Garth, and I understand the theory behind borrowing to gain investments, as you state, “if” securely placed, liquid and professionally manged, yielding tax-deductible interest, etc… those “if”s are not guaranteed also.. and before you mention REIT’s , I believe those will also take a hit. I stand by what I say, go back to the old way, pay off your mortgage.

#117 Junius on 01.17.11 at 12:00 pm

BPOE,

We haven’t seen much of you over the past weeks. However 4 postings on the day the Feds announce some changes. Must be pretty nervous over there at your realty office.

This is perhaps my fav all time quote from you,

“Canadians have no business being in Canada.”

What more needs to be said about your special brand of BS?

#118 throwstone on 01.17.11 at 12:03 pm

#40…Garth…

“if you need a RRSP refund to live on, your living wrong.”

Garth alot more Canadians will be living this way….I’m sure they all can’t be ‘wrong’.

#119 Ret on 01.17.11 at 12:07 pm

New rules for RE mortgages don’t apply to March 18 and April 18 for LOC’s.

Perhaps we will have one last RE feeding frenzy this spring before the new rules take effect. RE agents will be pumping this for all it is worth. “If you don’t buy now, you will never get a home!”

You might as well top up those HELOC’s too before April 18, just in case you decide to take another vacation or need some extra cash for whatever. It’s Bimmer time Canada!

The banks will be wanting to pull forward any new LOC business that may occur after April 18 to before April 18 to get the loans insured by CMHC as a HELOCs.

The banks will need to put their robo-approvers on double shifts just to keep up with the demand for new RE loans/LOC augmentations before the March 18 & April 18 deadlines.

http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/new-mortgage-rules-will-bite/article1872711/

#120 bigrider on 01.17.11 at 12:08 pm

#109 Garths response ” Not my experience….beats the pants off buying equities on margin”

Totally agree with all you’ve said but your team around you must be dealing with compliance issues.

I know that in a market meltdown the first investors with greatest probability of formal complaint will be leveraged ones. Also, lawyers are very well trained at picking advisors apart when it comes to such complaints.

One lawyer back in 2008 was holding seminars in the Markham area training other lawyers how to attack such cases and advertisements were springing up looking for investors who had been “wronged” by their advisors. Adds like ” have you lost money in the stock market..find out how you can recover your losses”

Leverage was key element lawyers were licking their respective scummy chops over.

Be careful with it is all I say.

Such a decision is that of an investor, not an advisor. The real risk comes with people acting on their own. When interest rates are near historic lows, secured and cautious borrowing can make major sense. — Garth

#121 PTDBD on 01.17.11 at 12:08 pm

The Conservatives are starting their anti-Ignatieff campaign today.

F says the budget is not imminent.

…this sounds like they want to call an election before we get to see the numbers.

#122 expat_engineer on 01.17.11 at 12:13 pm

This move only REDUCES the rate of growth of the debt mountain. This doesnot DECREASE the DEBT .The banks will find other creative ways of keeping their debt issuance going.

#123 $froma$ia on 01.17.11 at 12:13 pm

Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.

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

Did they headline that they were the reason for intro’ing 40 year and zero down?

Talk about washing the hands clean of the situation!!

#124 T.O. Bubble Boy on 01.17.11 at 12:14 pm

One loophole related to HELOCs in the new policy:

“If a loan or a segment of a multi-segment loan is in the form of a revolving line of credit that does not amortize over time, it will no longer be eligible for government-backed insurance. However, with established scheduled principal and interest payments, a loan will continue to be eligible for government-backed insurance, provided it meets the underwriting standards set by the mortgage insurer.”

http://www.fin.gc.ca/n11/data/11-003_1-eng.asp

I believe what this is saying is: HELOCs with at least some regular principal paydown are still insurable by CMHC!

I’d look for the cost of standard HELOCs to skyrocket (since they can’t be insured by CMHC), but the Banks will start pushing people towards new forms of HELOCs that they can still flip the risk over to CMHC.

#125 Junius on 01.17.11 at 12:14 pm

#91 Gregw, Oakville,

Thanks for pointing this out. This is a ridiculous change the gov’t is proposing. The Cons hate the CRTC and the CBC. They are firmly behind the 5-10 companies who now rule the industry.

It was the elimination of the Fairness Doctrine in the US that lead to the expanse of Conservative talk radio and eventually Fox News. The left was slow to respond but eventually they did as well.

Terrible idea. It has no basis in policy. Just politics.

#126 Mike on 01.17.11 at 12:16 pm

Talk about coming to the Halloween party on November 1st. I guess F is better late than never but maybe not. I think it fair to say the damage has been done and it really only takes a couple years and small percentage of buyers to roll the dice, bet the farm for the system to get some hole punched in it.

#127 Junius on 01.17.11 at 12:18 pm

#62 thetruth,

You have been posting this crap about elevated immigration levels for months now. Canada averages between 240,000-265,000 immigrants per year. The policy is to average 250,000. It has been that way for years.

Why don’t you publish some proof of your claims. If not change your name to “TheUninformed” because you don’t know what you are talking about (again).

#128 boomer62 on 01.17.11 at 12:22 pm

#103 David on 01.17.11 at 11:21 am

Question is:

Will GT poke his head out from the bunker on February 2nd to make a run for the Hill?
and
GT, can I be MoF?

#129 Basil Fawlty on 01.17.11 at 12:23 pm

“What on earth is wrong with taking profits? Is that not the point of investing, or do you worship this metal? — Garth”
No, it is not that I worship gold, it’s that I abhor what is happening to the world financial system, with the unprecedented debt and especially money creation. I believe there will be severe consequences associated with the total failure of our monetary leaders and that the credit crisis has not been solved and will only get worse as the can gets kicked down the road.
Consequently, the portion of my portfolio that rests in gold will remain there as long as they keep printing. Gold is insurance against financial calamity and as long as the US prints $100B per month, there is a problem.

#130 AACI-Okanagan on 01.17.11 at 12:27 pm

Borrowing against equity to secure money to spend is idiotic. Borrowing to gain investment funds which are securely placed, liquid and professionally managed, yielding tax-deductible interest and the ability to pay the home loan off at any time, is quite wise. You hang with the wrong folks. — Garth

a lot of “if’ s in your theory Garth. You are telling people to borrow against a commodity that you yourself say is in for a major collapse or price correction; borrowing means you also have to service the debts , not sure if that is great advice especially when you also predict that interest rates will go up; great now I have a mortgage and line of credit to pay off. Yea I know, the money invested will pay off the mortgage, but if interest rates are going up and house prices are falling, where is the win fall? yea I know, in a perfect world your advice would be great, but we all know that it isn’t a perfect world.

So, don’t do it. But most investors let their invested portfolios handle the interest payments while they write the loan interest off taxable income – increasing personal cash flow. And if real estate will decline in value, why not take equity out and put it to work, mitigating the fall? If this scares you too much, so be it. — Garth

#131 dark sad person on 01.17.11 at 12:33 pm

#61 Dark Sad Monster Bunny on 01.17.11 at 3:10 am

10 fellow Dark Sad being – just to be clear on your first link, it shows the change in credit year to year, so only at points where the graph goes below zero is credit contracting. Since the end of WW2 credit has almost always been expanding. There is now a slight contraction at a rate of a few % per year.

**************
DSBM-

We might be related-
Actually that isn’t my chart-it was posted by my buddy O-who was trying to show me rampant hyper-inflation-

A better picture of credit contraction using the same chart-just not % chng-yoy

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

***************
boomer 62-
best you stick with the one liners-
I be watching-

#132 Bottoms_Up on 01.17.11 at 12:34 pm

#66 Mark in Edmonton on 01.17.11 at 4:09 am
—————————————-
Exactly. I paid 20% too much for my place due to government intervention. I can now get 30% ‘too much’ for my place, again thanks to government intervention.

Now they are intervening and may cause the market to move in the other direction. They may eliminate what little equity I have.

If it ain’t broke, don’t fix it. And it wasn’t broke in 2005, prior to the implementation of 0/40 mortgages.

#133 Sad on 01.17.11 at 12:39 pm

Jimmie F playing God once again. The CMHC policies since 2003 have totally distorted a healthy housing market. F giveth and now F taketh away further distorting the market. Suspect there will be flood of new listings. What goes up will now go down. Dead Cat bounce. I think not. Just the bounce.

http://www.theglobeandmail.com/report-on-business/video/flaherty-unveils-new-mortgage-rules/article1872675/

#134 dark sad person on 01.17.11 at 12:43 pm

#108 T.O. Bubble Boy on 01.17.11 at 11:39 am

*****************
Sounds good to me-

What i don’t get here-is all these people who think because you’ve been in a winning trade for 10 years that you’re too stupid to lock in profits and buy the dips-
Last i heard-that is how you make money in a bull market-works for me-

#135 mattbg on 01.17.11 at 12:45 pm

What is F doing to his face these days? He is starting to look like Sylvester Stallone.

#136 David B on 01.17.11 at 12:46 pm

Well the “Fat Lady” is about to be called on stage …. and soon the “New Song” will be sung to crown King Steve.

Stand by the RNC is about to hit Canada and win what it failed to do in 1812.

#137 kitchener1 on 01.17.11 at 12:48 pm

#112 T.O bubble boy

About 7% drop when someone in fully extended. I did the same calculations but you beat me too the punch.

Thats a 7% drop, without any rise in rates or any move in the supply/demand paradigm.

Those that are on the wire will now list ASAP. Watch for listings to explode in the next 4-6 weeks. Buyers will be on strike as they watch more and more supply come online. Declines in sales volume will continue, by June we will be at 12 months of constant sales volume decline. With significant inventory.

#138 kitchener1 on 01.17.11 at 12:51 pm

From http://www.fin.gc.ca/n11/11-003-eng.asp

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

Folks still have 2 months to get a 5/35 year high ratio and 2 months to refi.

#139 Hell in a Hand Basket on 01.17.11 at 1:00 pm

Damn, I have to put my house on the market earlier. March 18th! I was expecting mid-April. I’m going to get caught with my pants around my ankles, with F and H bringing up the rear.

#140 jean on 01.17.11 at 1:20 pm

F Withdraws government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs.
OK, but Garth, is it only for new mortgage/contract ? or does it involve all the existing ones ? Because, it makes very a big difference for tax payers and banks !

New. — Garth

#141 Kevin in Winnipeg on 01.17.11 at 1:28 pm

What was the reasoning behind changing the amortization length from 25 to 40 years in the first place?

The end result was an increase in perceived affordability for buyers who had no business buying a house and real estate which is unaffordable for future buyers.

The auto industry is in for a shock with amortization lengths as well.

#142 Devil's Advocate on 01.17.11 at 1:29 pm

#112 T.O. Bubble Boy on 01.17.11 at 11:52 am
Based on my math, the 35-yr >> 30-yr change would mean a 7.3% price reduction on a $400,000 mortgage:
$400,000 @ 4% w/ 35-yr = $1763.21/month
$370,800 @ 4% w/ 30-yr = $1763.22/month
(92.7%, or -7.3%)

Yes and good luck trying to convince sellers of that. Their response? “Oh I sorry dear you have the wrong address. I think you are looking for that mobile home on East Street this is West Street. You need to go down there to the other side of the tracks.

Again, all this is going to do is force people to buy closer to what they can afford instead of what they want. Might knock out a few First Time Buyers but not so much as it brings that demand forward of the 18th. Prices have been capitulating since 2008 and will continue to but not nearly so much as so many believe or hope for.

Hey I want a penthouse in Manhattan too… but I can’t afford one.

#143 Subversive on 01.17.11 at 1:31 pm

Is there a way to move RRSP money to a TFSA without paying a big penalty? I’m guessing not, but I thought someone here would know for sure.

No. — Garth

#144 confused and financially illiterate on 01.17.11 at 1:35 pm

can anybody help me out with Comment #114?

aren’t RRSP self-directed spousal contributions SOMETIMES better than TFSAs?

especially if one spouse has no income?

see above.

thanks!

#145 HouseBuster on 01.17.11 at 1:36 pm

#133 mattbg – It’s called ageing. Enjoy your youth while you still can.

#146 Business Unusual - the BUN on 01.17.11 at 1:42 pm

Out of curiosity…

Does anyone have a short, sweet and punchy standard response for family and friends to the question “why are you renting?” I feel like I’ve worn out the old “Market’s going to crash” line.

(I live in Vancouver)

#147 Duke on 01.17.11 at 1:47 pm

Garth Knows Gold?

Garth, I appreciate your advice. But if the markets rise gold will rise with them. That’s the trend we’ve seen for the last 10 years. Why would that change. If you are bullish for commodities and the market you should be bullish for gold and silver too. All metals have risen since late 2008/ early 2009. Why would that stop now if the market keeps rising. Plus annual gold production peaked in 2001 and has been dropping ever since if you believe the US Geological Survey. There have been no significant gold finds in the last 10 years and most of the major gold companies have flat stocks because of reserve depletion. Garth you are wrong about gold. It’s not the fear trade or inflation that’s pushing it up but declining production and falling proven reserves. This ain’t the 1970s dude.

Oil actually has a use. — Garth

#148 bigrider on 01.17.11 at 1:48 pm

#117 garth’s response “secured and cautious borrowing makes sense”

You would think so. I certainly agree.

Here’s hoping some dirtbag lawyer representing one of your clients does not try to prove you otherwise.

Anyway your advice to borrow as outlined is completely sound.

#149 boomer62 on 01.17.11 at 1:55 pm

#129 dark sad person on 01.17.11 at 12:33 pm

We heard you like to watch.
Cheers!

#150 malbadon on 01.17.11 at 1:56 pm

How does this affect the people who were on the 0/40 bandwagon in 2008 when they now need to renew their mortgage?

Say they bought for 400k on a 3 year at some great 2.5% rate but now this year they will be needing to renew.
Technically their outstanding amortization would be 37 years and they’d still owe like 390k (CMHC fees and all).

Do they have to qualify that 390k for a 30 year now?

That is going to destroy those people, it takes their monthly rate from $1360/month to more like $1800.

Are there rules I’m missing or are we going to see the double-whammy of less sales to new buyers plus existing buyers getting turfed cause they can’t make the higher payments (already noting we are seeing people booted due to Xceed)

#151 brett on 01.17.11 at 2:01 pm

GARTH- “The United States will not default on its bonds.”…… Yeah they will just print more money to service their debt.
Garth-“There will be no hyperinflation.”…. the banksters will win huge if there is, dont bet against it. Garth-“The US dollar won’t end up as bathroom tissue.” it has lost 98%+ of its value since inception, perhaps it already is crap paper.
Garth-“There are no FEMA concentration camps.”
-… the entire country is a concentration camp, borders are tightening.
Garth-“There’ll be no food riots in North America.” -….. 50 million or so americans on food stamps right now., i think food riots are a SURE THING!
Garth-” Gold ain’t going to $5,000 an ounce. -….marked to market it should be $100 000 an ounce, i would think marked to model at 5% of that is a more then reasonable target.
Garth-” You do not need a weapon, and stop hoarding Spam.” -…..da gubermint will save us.

#152 AM on 01.17.11 at 2:04 pm

#112 T.O. Bubble Boy on 01.17.11 at 11:52 am
Based on my math, the 35-yr >> 30-yr change would mean a 7.3% price reduction on a $400,000 mortgage:

$400,000 @ 4% w/ 35-yr = $1763.21/month
$370,800 @ 4% w/ 30-yr = $1763.22/month

____________________________________

You also have to look at it from the monthly payment point of view since that seems to be the way it works these days…I came up with about 8% difference when you change the am to 30 from 35. I gues it doesn’t matter how you look at it, the point is that buyers who have been driving this market needing the 35 yr am will soon be looking for less house.

What’s hard to predict at this point is how this will affect the market psychology.

#153 Brad in Cowtown on 01.17.11 at 2:07 pm

An excellent list of things to do.

They all make perfect sense, except #10.

Taking profits is fine on any investment.
But there has to be a better alternative for those proceeds. Putting them in a 7 to 10% ETF doesn’t make a lot of sense if you believe gold will outperform that target. And it definitely should.

People forget gold is priced in a currency that is falling against almost every other currency.
And gold spiked to 750/oz thirty years ago, when the US buck was inherently much more valuable than it is today, simply because there were FAR fewer of them. So at 1300 or 1400 today, gold doesn’t seem expensive to me at all. All things considered, it should already be at 2000.

#154 Onemorething on 01.17.11 at 2:12 pm

all we need is a small game changing catalyst to put the emotional RE market on it’s ear.

The BS has been in play for 18 months now. The haze of stupidity always has it’s day.

Let the ugly self serving manipulation run is course and you cant not wonder how this badly this will play out.

#155 poco on 01.17.11 at 2:22 pm

#136Hell in a Hand Basket
I warned you several weeks ago that listing in the spring was going to be too late–if you were expecting a quick sale, that is.
new listing for the first 2 weeks of Jan outpacing sales 4 to 1 on an average day (30min from delusional west side of Van)

ps–pull your pants up F and H have come (sp) and gone

#156 Carlyle on 01.17.11 at 2:23 pm

How do these mortgage changes affect sales of homes in the short term? Last rush of buyers trying to get “in” before the rules change in March? Possible push up even higher in prices due to this last rush?

I ask because I listed today.

#157 Bottoms_Up on 01.17.11 at 2:23 pm

#144 Business Unusual – the BUN on 01.17.11 at 1:42 pm
——————————————–
“I choose to rent from a person rather than a bank”

“I may move soon; you?”

“How much did your X (insert: roof/furnace/floors/driveway etc. as applicable) cost again”?

#158 It's Time on 01.17.11 at 2:24 pm

In my opinion, F didn’t go far enough…I guess CREA got to him a little bit. Downpayment should have been increased to atleast 7% if not 10%….Maybe he will do it in the budget or later.

Its going to be a painful slow melt.

#159 Devil's Advocate on 01.17.11 at 2:25 pm

Actually, you have to ask yourself; who was the largest driving force behind these most recent changes?

Absolutely consumer debt has gotten out of hand and it needs to be brought back in line. But the worst consumer debt is credit card debt. What is the interest rate on those credit cards which the indebted might want to flip into a consolidation mortgage but now will not be able to? Not that they should do so, but for many that was a last lifeline which has now been withdrawn.
And for those who would like to get out of their mortgage… consider the penalty the bank charges to do so. Do you have any idea how many thousands of dollars that can be? Those early payout penalties can very often well exceed all other selling costs are combined.

What these changes do is whack those who need the protection most. It’s not going to slow down the market so much as push the marginal over the edge into foreclosure. Granted these people are masters of their own destiny but “F” was the pusher of the drug that caused them to become addicted. Now he pulls it from them most marginal, they who are closest to loosing it all. This isn’t going to do what he thought. It’s going to hurt the greater fools he made most.

The banks are not going to be hurting one iota on this one folks… doesn’t that tell you something?

Think you’ve got until March 18 to beat this… not likely. The banks are already complying well in advance as it is in their best interest to do so.

This doesn’t hurt people like you and me or those thinking of getting into the market who now know the new rules. It hurts the overextended already in who got in under the rules “F” enticed them with and now, like a mousetrap, he’s slamming the bar down on them and breaking their backs.

This is the wrong policy change. If he wanted to curtail rampant precarious household debt levels he should have looked at the most sinister source – credit cards and made it easier for those who should never have bought a home in the first place to be able to dispose of it easier by capping prepayment penalties. Hell for those in such dire straights I’d even be willing to reduce my commission to get them out of debt.

#160 Prof ANON on 01.17.11 at 2:26 pm

My faux crstyal ball says:

Higher than expected sales in late January, February, and early March, as house buyers once again try to “beat” the rules changes.

Followed by large year over year sales drops in late March, April, and May. This will coincide with statements by CREA stating that this is fine/normal because demand was pulled forward and that now is an even better time to buy than ever before because it’s a buyers market.

#161 HouseBuster on 01.17.11 at 2:33 pm

I’m expecting the Euro to go to 1.52 this year which means both gold and oil will rise.

If only things were that simple. — Garth

#162 OttawaMike on 01.17.11 at 2:40 pm

I’m sure this has been posted here before but the G&M did a story on Canadian subprime in March 09:

http://www.theglobeandmail.com/report-on-business/canadas-dirty-subprime-secret/article317737/

#163 Live Within Your Means on 01.17.11 at 2:41 pm

#131 Sad on 01.17.11 at 12:39 pm
Jimmie F playing God once again. The CMHC policies since 2003 have totally distorted a healthy housing market. F giveth and now F taketh away further distorting the market.

………….

Can you provide me a link that CMHC policies changed in 2003 ’cause from what I’ve read, it was H & F who changed the rules to 0/40 then 5/35. Now they are trying, as pre-election propaganda to the uninformed, to look like they are out for the best interests of Canadians, when in fact they created this mess.

#164 a prairie dawg on 01.17.11 at 2:44 pm

Saw a Stats Can story yesterday on CBC website that said “the recession was over in 8-12 months.” (guess they counted stimulus spending?)

Now that the ‘Fbomb’ has dropped we’ll see what this does to the economy, stock market, etc.

#165 Koochi on 01.17.11 at 2:45 pm

1 Starting Jan-1-2011 EVERY DAY 10,000 americans baby boomers are going to retire until 2028, meaning they will not be paying taxes, instead they will collecting social security, this will cost 10 Trillion US dollar to support their pension

2. Nov-2007 Official un-employment was 4.7% 2011 9.4% unemployement (Double)

3. 2007 there was only 1 million unemployeed Today 6 million unemployeed

4. Since 2007 American have lost 10.5 million of Jobs

5. 2007 US government was holding $ 725 Billion mortages debt. 2011 US government holding 5.148 Trillion mortages debt

6. 2008-2010 There are 314 banks failure in America

7. 2007. There was only 26 people were collecting food stamps, today there are 43.2 people collecting food stamps.

8. 2007 Federal Budget was 161 Billion, Today 1.3 Trillion

9. 2007 National Debt was 8.7 Today is 14 Trillion

#166 jess on 01.17.11 at 2:50 pm

The wealth effect
… if most Americans didn’t own stock etc then I one can start to see why Q easing doesn’t have any effect on their (main street )lives.

Robert Shiller noted in 2001:

“We have examined the wealth effect with a cross-sectional time-series data sets that are more comprehensive than any applied to the wealth effect before and with a number of different econometric specifications. The statistical results are variable depending on econometric specification, and so any conclusion must be tentative. Nevertheless, the evidence of a stock market wealth effect is weak; the common presumption that there is strong evidence for the wealth effect is not supported in our results. However, we do find strong evidence that variations in housing market wealth have important effects upon consumption. This evidence arises consistently using panels of U.S. states and individual countries and is robust to differences in model specification. The housing market appears to be more important than the stock market in influencing consumption in developed countries.”
=============
Another point of view

The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

Wealth, Income, and Power
by G. William Domhoff
September 2005 (updated December 2010)
This document presents details on the wealth and income distributions in the United States, and explains how we use these two distributions as power indicators.

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

#167 fancy_pants on 01.17.11 at 2:52 pm

The changes by F are a similar analogy to giving your kids the option to have candy for supper and then giving them a timeout for taking it while you lecture them about the health risks.

what a joke really, either they have as much foresight as a rock garden or they just don’t give a $hit. not even sure which is worse.

#168 Pat on 01.17.11 at 2:53 pm

Regarding RRSP vs. TFSA.

I can easily think of several very common situations under which contributing to the RRSP is better.

#169 jwkimba on 01.17.11 at 2:58 pm

Do the 40yr holders have to refi at at 30 years? If those were allowed in 2008, they would expire in 2013? Yikes.

#170 Junius on 01.17.11 at 3:03 pm

#158 Prof Anon,

I think you are correct. However it is very possible that we see a huge flood of listings over the next 3-4 months. This would set the stage for the first wave of major prices decreases as sales slowed in the Spring/Summer period.

#171 vreaa on 01.17.11 at 3:04 pm

Flaherty Tightens Another Smidgen;
How Will Vancouver RE Respond? –
Faucet or Tipping-Point?

http://wp.me/pcq1o-1KE

#172 Duisburg on 01.17.11 at 3:05 pm

Garth, Are you not yourself a bit of a Doom’er?? Like your blog, but I read your (5th point) and I would say that the bulk of your blog is a doom blog about Real Estate…is it not???

Rising prices = normal, correction = doom? Sad. — Garth

#173 Carlyle on 01.17.11 at 3:11 pm

Globe and Mail Jan 17th — Will New Mortgage Rules Trigger Winter Buying?

The Canadian Real Estate Association is concerned that changes to mortgage rules will force Canadians to buy homes through the traditionally slow winter market rather than waiting until the spring ….

http://www.theglobeandmail.com/report-on-business/economy/housing/will-new-mortgage-rules-trigger-winter-buying/article1872727/

Is this correct Garth? I just listed, could this cause a short term rise in prices?

#174 BDG-YYC on 01.17.11 at 3:19 pm

The F-Bomb effectively oblitterates the supply of first time buyers. At 5% down that buyer with $17K can look at that $350K home. In a few month that buyer will have to find an extra $35K-ish to look at the same house. That’s a huge hit to the market. A first time buyer with $25K will in a few months be able to look at something around $285 considering CMHC fees. Now in some markets … Calgary & Edmonton for example pretty well all of the 0/40 and 5/35 buyers are already under water on their mortgages. They are already trapped and won’t be helping the move up market any time soon. Furtther … anyone with less than about 20% equity in thier current home can barely come out with enough to cover a lateral move.

I through some chainsaw numbers out last week that made the case that something around half of all mortgages had less than 20% equity.

This is looking like the edge of an abyss, me thinks .. although some may argue its only a slope of hope … the only real question is … how steep?

The psychology is about to change big time as all the wannabies start hearing and seeing their newbie friends crying in coming months.

#175 Live Within Your Means on 01.17.11 at 3:22 pm

I don’t follow the Dartmouth RE market and little is discussed on this blog about it. Reason I ask is that a next door neighbour is now seriously thinking about selling and moving this year. Last summer she said NO way. They have no mtg. & are retired. Assessment value in 09 was $260,500K. Realize ass. value and sales price are 2 different things. House is way too big for them anyway. They plan on putting wood floors in 3 bdrooms before putting it on the market. It would prolly go for at least $1.5+ mil in Vcr. :-) Should they sell Asap?

#176 GregW, Oakville on 01.17.11 at 3:23 pm

Hi Garth, This was talked about for a few minutes today on BNN at the end, they were also talking about those ETFs things. 10 rules… Article if anyone is interested.

Bob Farrell’s 10 rules for investing
http://www.bnn.ca/Blogs/2011/01/17/Bob-Farrells-10-rules-for-investing.aspx

#177 CandleFish on 01.17.11 at 3:23 pm

“Better to get a SLOC for a third or so of the home’s value, invest it in a balanced portfolio”

What’s a SLOC? Not that it matters. There’s no way the wife will allow us to borrow against the house and put it at risk.

SLOC = secured line of credit. And it can actually reduce the risk of real estate ownership. Buy your wife a subscription to this blog! — Garth

#178 s on 01.17.11 at 3:23 pm

I think the new rules will have little effect on the overall market, 35 – 30 years will probably only add around $100 in additional cost for families trying to buy a home, now if you changed the rules to increase the down payments from5% to 10% that would have made a huge difference, but I think this like the last change will be too little to change anything.

#179 BDG-YYC on 01.17.11 at 3:43 pm

Just to re-iterate the rough numbers …

$1Trillion in mortgages
9 Million households about a third of which don’t own homes.
About 1/3 of homes (2million households) are mortgage free.
Leaves 4 million households with mortgages.
Average mortgage therefore is about $250,000
About half (2,000,000) might be more than half paid for so the average mortgage for this half would be about $125,000 for a total of about $250Billion.

That would leave 2Million mortgages totalling $750Billlion for an average mortgge of $375K

Now … if you take an average home value of say $400K … nomatter how you slice it … it ain`t pretty on the equity front.

#180 OnlyTheBankersLaugh on 01.17.11 at 3:54 pm

Day late, dollar short. It doesn’t stop the no money down mortgage. Craziness will continue another year as you can see DA’s slippery mind manipulating the poodles already. Love the mortgage broker comments. It is a clear sign that they did not go far enough.

Boomer62, isn’t it “Jesus Saves, Mohamad whacks in the rebound?”

#181 John on 01.17.11 at 3:57 pm

Dear Garth. I’m new here. Excellent advice. Was wondering what is your long-term opinion on multi-family residential in Toronto going forward? Thanks.

Apartment buildings? Triplexes? — Garth

#182 Junius on 01.17.11 at 3:57 pm

#161 Live Within Your Means,

Here is a good primer on the CMHC: http://financialinsights.wordpress.com/2010/09/10/primer-4-cmhc-the-enabler-to-canadas-housing-addiction/

#183 dark sad person on 01.17.11 at 3:59 pm

Always blocking my posts that aren’t favorable to your opinion-
Typical controlling Canadian Socialist-who thinks he knows what’s best for others-

I’m done here-
Oh and don’t worry-i know enough not to let the door hit me in the ass on the way out–

The same rules apply to you as anyone else. You are free to express any opinion, but when it is couched in simple ad hominem terms, it adds nothing to the conversation and is struck. Posting here is not a privilege, not a right. — Garth

#184 Herb on 01.17.11 at 4:03 pm

Barndoor, meet horse!

The worst part is that those who screwed up the housing and finance markets now will claim credit for trying to fix their screw-ups.

And the absolutely worst part is that the voting sheeple will let them get away with it.

Which “pop” will come first, the deflation of the housing bubble, or the drop of the election writ? My money is on the election writ – to void the fallout from the housing bubble.

#185 It's Time on 01.17.11 at 4:11 pm

Flaherty said the insurance had become “particularly risky” because some Canadians were using the lines of credit to buy things like boats, cars and big screen televisions.

“That’s not the business that mortgage insurance was designed for,” he said.

You think so Mr.Obvious ???
Someone was sleeping on the wheel….LOL

#186 OttawaMike on 01.17.11 at 4:12 pm

Re:DSP’s Untimely Departure.

Good Poster to Nincompoop ratio just rose to 7.5:1.

He counted as 3 Nincompoops and skewed the ratio downwards.

That is all.

#187 John on 01.17.11 at 4:15 pm

Apartment block. Say 8 to 15 units. Thanks.

Most are very expensive now, but this is far superior investment to SFHs. Plus you have the added future benefit of refinancing and pocketing tax-free gains. — Garth

#188 big_cheese on 01.17.11 at 4:21 pm

Well this seem to be Phase I
I’m glad they finally shut the door on the Zero Down
via banks giving out loans. Now that the banks has to own up to this loan, I’m sure they are going stop this process.

Reading between the lines, I looks like they will move interest rates up and the down payment % up in the nearby future.

Wonder how this will affect the “WEALTH EFFECT”?

#189 John on 01.17.11 at 4:25 pm

Thank you very much.

#190 dave in calgary on 01.17.11 at 4:26 pm

Devil’s Advocate said “Again, all this is going to do is force people to buy closer to what they can afford instead of what they want.”

And what they can afford is less $$ than what they want, so you’re basically saying real estate prices will drop. Took you long enough.

#191 prollywrong on 01.17.11 at 4:29 pm

great post. i love this pathetic blog.

#192 prollywrong on 01.17.11 at 4:39 pm

here’s an RRSP question.

if I have 100,000 grand in cash, is it worth it to max out my wife’s RRSP contribution for the next four years, thus generating around 40,000 in total tax savings that can then be added to our TFSA investments?

i’m hesitant to lock up the cash in RRSP’s for a number of reasons, the first being my wife works in healthcare and has a good pension (if it’s not bust in 25 years).

but saving 10 grand in tax every year for four years, which can then be invested, also seems hard to pass up.

#193 kitchener1 on 01.17.11 at 4:42 pm

#172 BDG-YYC

Prices will come back to whatever people can afford or are willing to pay.

It will not take out first time buyers, prices will move to were the first time buyers are.

#194 Antonio on 01.17.11 at 4:53 pm

Just got this email from a mortgage broker. They are running scared.

“The federal government announced planned changes to hi-ratio mortgage guidelines this morning. This is an attempt to control our appetite for debt and keep Canadian consumers from getting into deep debt trouble. The attached article explains the new rules.

Perhaps these changes are responsible however I believe the government just doesn’t get it. It seems to me home owners are generally responsible when it comes to home financing. My huge concern is with how consumers get into trouble with credit card debt. Credit cards are easy to come by, the rates are very high and it takes a very long time at significant cost to pay them off.

It seems Mr Flaherty would rather see consumers continuing to pay their department store credit card at 29.9%, instead of fully consolidating credit card debt into a mortgage at under 4%. I would like to see the Minister seriously focus on financially dangerous credit card reform instead of tinkering with mortgages.”

#195 Lonely Limey on 01.17.11 at 4:54 pm

@144

Out of curiosity…

Does anyone have a short, sweet and punchy standard response for family and friends to the question “why are you renting?” I feel like I’ve worn out the old “Market’s going to crash” line.

…………………………………………………………………….

Yeah, Mind your own f—-ing business.

#196 Patiently Waiting on 01.17.11 at 4:54 pm

Tighter mortgage rules are good for consumers, as it puts downward pressure on housing prices. They should tighten further to 25 year amortizations as 30 year ams pay down little principle anyway.

#197 Devore on 01.17.11 at 5:10 pm

#140 Devil’s Advocate

Yes and good luck trying to convince sellers of that. Their response? “Oh I sorry dear you have the wrong address. I think you are looking for that mobile home on East Street this is West Street. You need to go down there to the other side of the tracks.

Of course buyers disappearing will have no effect whatsoever on sellers. Nope, not in the best place on earth. Everyone knows Chinese buy with cash.

The market is what the market is. If you need to sell now, then you will get the price the market will pay. It is driven by what buyers can afford, and what they are willing to spend. Chopping off 10% from the top line for new buyers (most of whom are 5/35 today) means move up buyers will be getting less money from their current house.

The equity, where did it go??

#198 Gord In Vancouver on 01.17.11 at 5:13 pm

That ugly smell in Vancouver isn’t the city dump.

Thousands of overextended Yaletown condo owners just soiled their underwear simultaneously after hearing about the new mortgage rules.

#199 John on 01.17.11 at 5:14 pm

BTW: Is multi-family residential investing covered in one of your books?

#200 Bill Grable on 01.17.11 at 5:15 pm

Well – you can’t say Mr. Turner didn’t warn you – but once again, ‘el spinneroo’ boys are at it again.

Those HELOCS are going to go the way of the dodo.

Here we go –

“Toronto-Dominion Bank projects the new mortgage rules unveiled today will knock annual home sales down by about 20,000 and shave a further percentage point from prices.

The requirements announced by Mr. Flaherty could also pull forward sales by prospective home buyers hoping to beat the changes.

“The impact is not expected to be large, nor does it lead us to alter our annual forecast,” said TD senior economist Paul Gauthier.

“Existing home sales were already forecast to weaken by about 8 per cent compared to 2010, and prices to slip by a modest 1 per cent. On aggregate, our calculations suggest that 20,000 sales (annually) may be impacted by the amortization change, with the average price likely to weaken a further percentage point.”

http://tinyurl.com/4tgmdcw

#201 GregW, Oakville on 01.17.11 at 5:19 pm

Hi #182 Herb, That sounds like a good guess to me.

#202 Devil's Advocate on 01.17.11 at 5:34 pm

#187 dave in Calgary on 01.17.11 at 4:26 pm

Devil’s Advocate said “Again, all this is going to do is force people to buy closer to what they can afford instead of what they want.”

And what they can afford is less $$ than what they want, so you’re basically saying real estate prices will drop. Took you long enough.

Not nearly as much as you think. Most will lower their expectations; Buyers that is, Sellers… not so much.
As I mentioned in a previous post, this isn’t going to hurt the real estate business so much, not nearly so much as it is going to hurt those who overextended themselves on the monetary policies of the past. There is going to be a lot of hurt in that “barely hanging on” segment of those who recently bought. The “Greater Fools” who bought into the policies of yesteryear.
Obviously these changes are long overdue. But the reality is the loose money policies which lured those Greater Fools in in the first place should never have been. Lettin’ the cat outta the bag is a whole lot easier than putting it back in.

Am I worried? Not so much… certainly not at all about how these recent changes which will affect me. But there are some overextended people who have their backs up against the wall and this is going to that final straw which will push them over the ledge.

#183 It’s Time on 01.17.11 at 4:11 pm

Flaherty said the insurance had become “particularly risky” because some Canadians were using the lines of credit to buy things like boats, cars and big screen televisions. “That’s not the business that mortgage insurance was designed for,” he said.
You think so Mr.Obvious ???
Someone was sleeping on the wheel….LOL

And who actually lent them the money, be it a consolidation refinance of an existing mortgage or a HELOC? Think they didn’t know what the money was going to be used for? Who should be cracked down on here the borrower or the lender? Who ought to have seen it coming they who’s business it is or they who have been bombarded with advertisements saying the likes of “You’re richer than you think”?
Wake up people… the banks are not your friend.

If these changes are going to screw you and you need some help getting that home sold email me at [email protected] and I will ensure that who ever you use to help you unload that home gives you at least a 25% discount on the commissions. Just title your email ““F” is for…

#203 Mister (really) Obvious on 01.17.11 at 5:39 pm

I heard a pumper on Vancouver news radio this morning regarding new tighter mortgage restrictions. To paraphrase:

“No real problem here. Its just that now you will have to buy a slightly crappier condo than you might have otherwise been able to qualify for…”

People who can’t look on the bright side have no business in Real Estate.

#204 Bottoms_Up on 01.17.11 at 5:44 pm

#154 Carlyle on 01.17.11 at 2:23 pm
————————————
I would think if you’re relying on a buyer who can afford 35 yr am. but not 30 yr am. that you’re potentially in for some hurt (i.e. what is the likelihood of that type of buyer actually getting the financing in this market?).

#205 R on 01.17.11 at 5:46 pm

No doomer blogs? …ummm wait, I thought this was a doomer blog!

#206 john on 01.17.11 at 5:46 pm

What date are the new changes announced by F effective?

#207 Mikey the Realtor on 01.17.11 at 5:51 pm

I can hear the rumbling in the ground, the sheeple are picking up speed. Agents, bankers and brokers are licking their chops as they smell the aroma of the upcoming feast. Are you ready DA?

#208 Anotherlowlyrenter on 01.17.11 at 5:58 pm

@ #144 (Business Unusual)

Because even with interest rates at all time lows, my rent is lower than the interest-portion only of a mortgage payment.

Or

I may be throwing my money away to the landlord but you are throwing more away to the bank – and interest rates haven’t even gone up yet.

#209 Angela on 01.17.11 at 5:59 pm

I hope the banks are doing the math, because I doubt that Average Joe will be calculating exactly what will happen to him upon refinancing in five years.

Sale Price: $475,000
down payment: $25,000, roughly 5%
Amount of mortgage: $450,000
35 year am, 4% interest rate
I figure this is a realistic scenario in Vancouver, but you an correct me if you think this is too out there.

Assuming no extra payments, 5 years from now they’ll have paid their mortgage down to $417,000. And also assuming the bank doesn’t do an appraisal and agrees that it’s worth the same in five years, 85% of value is $403,750.

Sooo, seriously? Average Joe has to come up with roughly 15,000 to close the refi deal? Owie owie ow ow ow!

#210 Live Within Your Means on 01.17.11 at 6:03 pm

Why Canada’s Housing Bubble Will Burst

‘The largest sub-prime lender in the world is now the Canadian government.’

By Murray Dobbin, 22 Oct 2009, TheTyee.ca

http://forums.beyond.ca/showthread/t-289137.html

I know it’s late to be posting this, but just came across it. I’ve posted similar articles later than this on other forums, but the RE pumpers & those so called economists/financial experts keep the MSM from going under. Unfortunately, this country’s media is mostly controlled by global and canwest. When one checks National Newswatch, the majority of articles are from the Sun. NP and their ilk. Odd one from from the Hill, but most Canadians don’t read that. God help us.

#211 bigrider on 01.17.11 at 6:10 pm

#199 -Zenith Foretold said ” 2011 RE prices to eclipse 550 sq foot easy”

Thank you Brad Lamb for your point of view.

#212 jess on 01.17.11 at 6:12 pm

unbanked?

II. WHO ARE THE UNBANKED?

BY JOHN P. CASKEY
PROFESSOR OF ECONOMICS
SWARTHMORE COLLEGE
Fringe Banking
http://www.microfinancegateway.org/gm/document-1.9.27767/3133_03133.pdf
=====================

http://www2.fdic.gov/idasp/

Key Statistics
FDIC-Insured Institutions
Number as of 1/13/2011 7,665
Assets as of 9/30/2010 $13,410,978
Deposits as of 9/30/2010 $9,293,940
Data for records processed through: 1/12/2011
Dollars in millions; adjusted for mergers
=======
As of Sept. 30/2010
Bank Holding Company Name JPMORGAN CHASE & CO. New York NY
Number of Insured Subsidiaries1 – 5 Combined Total Domestic Deposits of Insured Subsidiaries ($000)footnote1 – 665,698,064
Combined Total Assets of Insured Subsidiaries ($000)1 -1,788,094,947

http://www2.fdic.gov/idasp/main.asp?formname=bhc

from the New York Times :
We don’t want to raise fees on our customers,” a company (Chase) spokesman said. “But unfortunately, regulation is forcing us to do it. And as a result, some customers may end up unbanked.”
===============================
The bank posted a $17.37 billion profit in 2010

#213 It's Time on 01.17.11 at 6:19 pm

#200 Devil’s Advocate on 01.17.11 at 5:34 pm

And who actually lent them the money, be it a consolidation refinance of an existing mortgage or a HELOC? Think they didn’t know what the money was going to be used for? Who should be cracked down on here the borrower or the lender? Who ought to have seen it coming they who’s business it is or they who have been bombarded with advertisements saying the likes of “You’re richer than you think”?
Wake up people… the banks are not your friend.

—————————————————-

Neither are the realtors…who said “Buy now or be priced out forever…”
There by scaring the first time buyers to take more debt than they can using the current low interest rates (primary use for stabilizing the economy and not to boost the real estate)….. Which greatly increased the house prices along with low interest rates…
Now the existing home owners use their new found equity to finance their boats….. See I can keep going….

Whatever you say… realtors are part of the problem. PERIOD

#214 GregW, Oakville on 01.17.11 at 6:19 pm

Anyone know what the cost might be to ‘we the tax payers’ to make and run six television attack ads?

Conservatives target ‘opportunistic’ Ignatieff in ads
http://news.sympatico.ctv.ca/home/conservatives_target_opportunistic_ignatieff_in_ads/7430727c

‘Who’ are the ones wanting to force an election soon is the first thing I thought of. But what do I know?

#215 prollywrong on 01.17.11 at 6:22 pm

@144

Out of curiosity…

Does anyone have a short, sweet and punchy standard response for family and friends to the question “why are you renting?” I feel like I’ve worn out the old “Market’s going to crash” line.

________________________________

I say, “Yeah, I’m looking at a nice place over on Piss Off Street tomorrow.”

Actually, I lie and tell them I’m saving for a larger down. Completely avoids all ‘get in now’ lectures.

#216 prollywrong on 01.17.11 at 6:23 pm

If these changes are going to screw you and you need some help getting that home sold email me at [email protected] and I will ensure that who ever you use to help you unload that home gives you at least a 25% discount on the commissions. Just title your email ““F” is for… “

————————-

“F” is for FISHING?

#217 Another Albertan on 01.17.11 at 6:28 pm

#144/BUN:

Here are two of my favourites that can also apply outside of housing. I’m a big fan of using the Hammer of Thor, albeit politely.

“I didn’t realize that my bills were showing up at your address with a request for you to pay them! Sorry about that!”

“If my spending habits are affecting you that much, you might consider getting some professional counseling ’cause it’s not healthy to have obsession about someone else’s lifestyle.”

People are ultimately looking for others to validate their own decisions – past, present and future. People don’t want to hear rational responses, either short and sweet or long-winded. They want soundbites to salve their inner self. The question isn’t really about you. The question is really about them.

Back before Christmas, I was at a party and this one young jackass was bragging about his new (and large) Canon digital SLR camera kit. “With a camera like this, you can practically see the women wanting to pose in front of it” was his line.

My slam-the-door response was “If you had bought a 40-year-old, used, beat-up, fully-manual Hasselblad and could develop your own black-and-white film, they might pose for you without clothes.”

That shut him up and the girls in the room laughed and nodded.

Everyone’s mileage may vary.

#218 Junius on 01.17.11 at 6:31 pm

#205 Mick,

You said, “Agents, bankers and brokers are licking their chops as they smell the aroma of the upcoming feast.”

That is not what is smelling around here Mick. Check your shorts and those of the realtors in your office.

#219 wetcoaster on 01.17.11 at 6:31 pm

miley,

Why would they rush in and have their heads handed to them ? Only a few will be that stupid. It’s all over the media how prices are coming down no matter how hard you keep your lips planted on the pig.

#220 wetcoaster on 01.17.11 at 6:41 pm

For all those wanting to move/retire to sleepy Victoria, it’s turned into such a lovely place these days. Homeless guy slices a policewoman in the throat this morning, totally unprovoked. 6 months ago a kid on his way home from his afterschool job gets sliced to death by a similar nutjob, again out of the blue.

Three days ago, three guys start doing random home invasions even stabbed their Dobie in broad daylight and about to do a number on the wife when the hubby comes to the rescue. Fantasy Island it is not.

But load up on your dreams while there’s still time, you’ll soon be priced out forver according to mikey.

http://www.timescolonist.com/news/Female+Victoria+police+officer+stabbed+neck/4120974/story.html

#221 groundzeropat on 01.17.11 at 6:49 pm

Boomers getting ready to liquidate

http://www.theglobeandmail.com/news/opinions/opinion/pop-goes-the-housing-bubble/article1867849/

#222 doctore on 01.17.11 at 7:06 pm

That is great and all, provided the watches the clients accounts and does not leave a large portion in cash doing nothing, and does not take on so many people they become bogged down neglecting existing clients.

#223 Ben on 01.17.11 at 7:17 pm

Double and Triple ETFs Decay Their Value Faster – By Design

http://ezinearticles.com/?Double-and-Triple-ETFs-Decay-Their-Value-Faster—By-Design&id=2095978

#224 Alister on 01.17.11 at 7:41 pm

I read somewhere – probably on this site – that 30% of new mortgages are 35 year amortization.

Affordability = how much the monthly nut is (not the selling price) = 30% fewer buyers. Ot they swallow higher payments, if they can.

Most purchasers to give a dam what the asking price is, all they want to know is how to meet the payments. 35 yr ams were their ticket to keeping up with the Jones’.

Using other peoples money to pretend their rich. HAHAHA

#225 Mr. Plow on 01.17.11 at 7:47 pm

#207 Angela…

Nope.

Providing you are financed with a major lender, and have been making your payments, they will just send renewal papers in the mail. You can sign them off and send them back. If anything they will make them go to the 30 year AM, but after 3-5 years of payments they will basically be on pace for that.

If they are with a ‘B’ or ‘C’ lender, haven’t been making their payments, change banks etc… All bets are off.

#226 Mr. Plow on 01.17.11 at 8:02 pm

#154 Carlyle…

Just be happy if you sell your house. I would think that there will be a bit of rush to get in before March 18th, but I don’t know that it will push up prices that much as a lot of area seem to have high numbers of listings.

If your area is different, you can always roll the dice, but based on the info. you have provided previously I’m not sure that is the best idea…. no pun intended.

#227 Mr. Plow on 01.17.11 at 8:15 pm

#222 Alister…

Yeah all 30% of them could not afford a change in the AM.

Except maybe me, I have a rental with a 35 year amort so I can fluctuate the amount I pay on the mortgage every month. So if I lose my renter for a period of time I can revert back to the original 35 year amort payment and minimize my costs.

So maybe 29.99999999999999999999999% of 35 year mortgages can’t afford the change.

#228 Kaganovich on 01.17.11 at 8:23 pm

Here is an interesting article examining the links between the far right and gold lust:

http://www.alternet.org/teaparty/149550/what%27s_behind_the_right_wing%27s_bizarre_obsession_with_the_gold_standard?page=1

Interesting, that.

#229 boomer62 on 01.17.11 at 8:26 pm

#144 Business Unusual – the BUN on 01.17.11 at 1:42 pm

Grow some. Why not be honest with family and friends?
“You are doing what you believe is best for you and your family”. After that….it only gets better.

#192 Lonely Limey on 01.17.11 at 4:54 pm
Not very helpful.

#212 prollywrong on 01.17.11 at 6:22 pm
Your friends and family will lie back to you and tell you how smart you are.

#230 Jim on 01.17.11 at 8:47 pm

I thought Canada stood for “peace, order, and good government”, the good government needs to be replaced by bad government.

I am appalled at the # of errors that have been made by the R.C.M.P in British Columbia several cases of R.C.M.P brutality. Time we heard from the leader, PM Harper on what he is going to do about it. A proper leader would address the people of Canada and BC on this fundamentally important issue. What is going wrong? Who is accountable for the actions of the force? Can people be disciplined, fired, etc. What happened to the officers involved with Robert Dziekanski?

The new leaders of BC may decide to send the R.C.M.P packing and leaving the Province of BC forever as a Provincial police force.

#231 Concessionman on 01.17.11 at 8:59 pm

From todays release….

“Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.”

HAHAHAHAHAHAHA!!

Sad part is, people will actually believe it…

#232 Keith in Calgary on 01.17.11 at 9:00 pm

Food for thought……

A $400K mortgage @ 5.0% amortized over 35 years is $2,005 PI per month……..

Amortized over 30 years that $400K is now $2,134 PI per month…..or to put it another way, that very same payment of $2,005 that was once able to be amortize $400K of debt over 35 years now only carries $375K of mortgage debt over the new reduced amortization 30 years. Which incidentally if amortized over 25 years, is only $345K of mortgage debt.

Shave and a haircut…..two bits !!

Houses just dropped 6.25% in value today.

#233 tonguestump on 01.17.11 at 9:17 pm

The realtor I’m using says new rules don’t affect him. 2/3rds of his sales involve land and rural residential properties. Not many minimum down sales for rural residential because of the rules about acreage size, servicing etc. Most under writers have too many rules to be of any use. In town there are a few more but CMHC has a ceiling on price minimum down payment transactions in rural bc 425k-450k. He says he has never put together a sale with 30-35 year amortizations.

#234 Fred on 01.17.11 at 9:30 pm

I disagree about the don’t buy stocks advice. As long as they are dividend paying stocks rated at least 4 stars.

I am actually quite puzzled by Garths advice here as he has been touting preferred dividends which are simply part of owning a certain class of stock.

I am also puzzled by the advice to stay away from doom and gloom sites seeing as how this site can easily be put in that category by many.

Maybe you should see someone about the puzzlement. Sounds serial. — Garth

#235 S.B. on 01.17.11 at 9:36 pm

“Happy New Year from the ELITE”

One of those short, funny do-it-yourself videos. It is clean, I watched it.

http://www.youtube.com/watch?v=2ohG2H_BnQM

#236 Nostradamus Le Mad Vlad on 01.17.11 at 10:01 pm


Here we go . . . we ain’t seen nuthin’ yet. This is the calm before the storm.

Scotch A fine wine never ages afore its time! GW was the cause behind this!

Juggling Deutschmark to save Euro. 5:38 clip.

Gold Paper scheme is another Ponzi scheme. Tungsten in gold bars, lead alloys making up silver — I feel all hot, sweaty, sultry and sexy now! Plus — Ultrasound Test for fake gold and silver bars. Plus — 3:52 clip “The precious metals paper ponzi will collapse suddenly and with little warning.”

JPM — Surprised? Families denied cash as the rich get richer.

Life Gets Tougher “Things are not getting any easier for cash-strapped state governments.” Or provinces.

Tunisia — This is what may happen here. People there became thoroughly pissed off with their govt., so dumped them. Iceland, too. These people put their money where their mouths are. They DO have a set.

Digital Failure “That’s the problem with digital,” says Steve Webbon, head archivist of the Beggars Group. “When it goes, it’s just blank. It’s gone.” But clay tablets from 4,000 years ago can still be read, CDs burnt five years ago cannot.

SS and CPP Slight accounting problem.

CC — Money Well Wasted!

Global Food Riots “We have been hit with a double-whammy. As seen by the US, in which Wall Street bankers chow down on $150 hamburgers while the homeless eat dead birds from the streets, the money-addicts are willing to starve the masses to satisfy their own gluttony. Second, the money addicts in Washington DC, eager to swindle us all out of carbon taxes, created a propaganda impression of mild winters, leaving farmers wholly unprepared for the killing cold even now destroying critical bumper crops.

“Thanks a lot, money-addicts. You did a really great job of screwing the planet.” wrh.com. As the climate will always change no matter what, it means that GW is an utter hoax, a con-job.

10K 4Closures tossed out in one sitting!

US Bank Earnings “Unemployment: Still the same. National Debt: On the rise. Bank Customers: Paying more fee to banks charged to their accounts. Bank bonuses for the greedy banksters: Way up.” wrh.com.

Stuxnet Virus No need to say who created this (and the after-effects).

Venezuela The US will try to find a reason for invading. Desperate govts. usually do idiotic things.

The elite Prepping minds for war with China.

WW3 “In the late 1990s Brzezinski wrote up the design for America’s imperial project in the 21st century in his book, “The Grand Chessboard”.”

Currencies Relics of the past, dinosaurs.

#237 walter safety on 01.17.11 at 10:20 pm

Garth ;you need to give your readers some insight on how to pick good Eft’s -oops can’t be done. The 5 year data from the US shows investors do worse than mutual funds because like all financial instruments they are open to system abuse . Eft buyers pay on average almost 2 % more on the buy side and get 2 % less when they sell than NAV.This is easily accomplished by market players who use daily trading ranges to accomplish this abuse. I am sorry I can’t find the link but the numbers were published by Morningstar or possibly Boomberg.

#238 Hoof Hearted on 01.17.11 at 10:22 pm

Oh well….6 PM PST

Too late to comment today….I just caught the F Bomb

Interesting…they said moving from 35 year mortgage to 30 years will knock out approx 1/3 of the potential buyers.

Also on our 6 PM News…well known Financial Advisor clients look like they are screwed. This is one classic warning sign…when things in economy go South this happens a lot….$$$ go missing……check wher YOUR money is.

Finally….word is out Federal Spring election …Flaherty pre-emptive strike…air out s-l-o-w-l-y ?

#239 Hoof Hearted on 01.17.11 at 10:29 pm

Digital Failure “That’s the problem with digital,” says Steve Webbon, head archivist of the Beggars Group. “When it goes, it’s just blank. It’s gone.” But clay tablets from 4,000 years ago can still be read, CDs burnt five years ago cannot.

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

Not at all surprised. When able, I transfer DVD (movies)to VHS unless encrypted.

8 track…cassette…VHS….YES !!!
CD’s…. DVD etc are fragile…..not much different than old vinyl….vulnerable flat exposed surface…duhhhh!

Disks were promoted as indestructible….they once had a news item about burying them and saying they last….BUT they can be more tempermental than a PMS’er.

#240 S.B. on 01.17.11 at 10:37 pm

Sell now, avoid (some) regret later.

That was Steve Harney’s advice recently to a roomful of real estate agents. Harney is a housing industry consultant who told the assembled agents of John Greene Realtor in Naperville, Ill., that they should tell clients who have been sitting on the fence about selling that the time is now — if they want to sidestep more marketplace competition in a few months.

Or, as he put it, the cork in the dam is about to pop.

That “cork” is banks’ indecisiveness. The “water” behind the dam is their stockpile of foreclosed homes, which has been growing with a vengeance for a couple of reasons, Harney said

http://www.chicagotribune.com/classified/realestate/sc-cons-1223-home-selling-umberger-20101223,0,537906.column

#241 eddy on 01.17.11 at 10:49 pm

Flaherty is just trying to cover his rear in case SHTF. Nothing he announced today will help. Now that the debt ‘slave ship’ is full, he figures we need fewer ‘passengers’, or we might sink! LOL. The amortization schedule is the slave drivers whip! For anyone who hasn’t noticed, you buy a house for 500k; after 25 years you’ve paid about 1 million P+I; but the guy who gave you the loan has a deflated million ( it buys what 500k bought 25 years ago). Inflation is Guaranteed. So when people say ‘prices will drop’ these are minor fluctuations and adjustments. Put yourself in the shoes of the lender. If you hand over 500k today for 25 years, you KNOW FOR A FACT, that 25 years hence, 1 million will be what 500k used to be. Go through the sale prices, today minus 25 years is 1985. Compare what folks paid then with the same house today.

#242 Mikey the Realtor on 01.17.11 at 10:53 pm

Junius

Nice to see you around, I knew my comment would get your panties in a knot, keep working on that online law course and even you may one day own some RE.

Just imagine F riding on Garth’s hog with a stick in his hand and attached is a carrot with a herd of sheep running behind them full throttle, the first part of the equation was introduced today, the second is coming very shortly.

#243 EJ on 01.17.11 at 10:58 pm

CMHC insured HELOCs?? Canadian “sound lending” indeed…

#244 Dark Sad Monster Bunny on 01.17.11 at 11:09 pm

Hmmm. Good thing I’m not a Dark Unhappy Monster Bunny. (DUMB?) – DSP I will miss you……

144 – this sounds like fun. How ’bout “I’m between houses”, Just don’t say how far between or maybe “I’m saving X% of my income renting. You?”

189 Pollywrong – why not take $15K of your cash and put it in wifes TFSA (and another $15k for yourself)? You
still have $70K left for RRSPs. Dont know if that works better for you, just another way to do it.

215 AA – that guy was an Ahole – Nikon all the way.

But everybody has to have their “thing”. I’ll spend $4K on a bicycle. I have friends that spend almost twice that, but I stop at $4k because of diminishing returns and insurance. And I will keep it for years. What’s your “thing”?

#245 Claudius Emeperor on 01.17.11 at 11:10 pm

After Flaherty’s announcement today:
The house market is offically dead. 20 percents downpayment, 30 years mortgage, this is equivalent to at least 10-15 percents drop in the spring prices just as a beginning.

I expected 10/30. 20/30 is a big surpise, now with the expected interest rate increases the house market is more than doomed.

#246 Dark Sad Monster Bunny on 01.17.11 at 11:34 pm

237 Hoof hearted – I guess you missed the whole Blockbuster collapse then? DVDs are dead. PVRs man! Wait til its on regular hi-def cable. Record it whenever.
Watch it whenever. Erase it. It will be on again. CDs? Their almost dead too thanks to compressed music formats. But I still buy them, especially classical, but also store them on home and work computers for music anytime as well as backup should they ever need replacing.

#247 Dank Castle on 01.17.11 at 11:45 pm

The property doomsayers want to live in a low cost country with low cost housing. We could solve the house shortages by converting huge amounts of park land into subterranean housing. Build underground and let dumb property bears live there. I don’t know how good the technology will be, it doesn’t exist yet, there are very major technical problems with the scale of what I am proposing, but this is no la-la lollipop idea. I propose converting all park land, including golf courses, in Vancouver into multi-story underground cities, leaving the parkland above intact for sensible people willing to pay for real housing. Let the bears live in the caves where they belong! Check out this article for a better approach to simple and sustainable housing…

http://s4.zetaboards.com/Australian_Property/blog/main/3206333

The reason population is booming is we have more land, and towns and cities sprung up all over the continent using today’s technology, now imagine how many people will come here with my future technology for underground dwellings. Its even possible to settle the deserts using this technology. 2/3 of the continent is uninhabited, another 1/4 is arid grasslands with marginal soil. The population could boom even more easily than it has been booming for decades, if it is not limited by real physical constraints of having to live above-ground. Also, 70% of Canada’s mining interests are overseas owned – there are a few local mining jobs too, so many engineers could be employed, increasing the wealth of the whole world. The govt has only just realised it should be taxing the wealth outflow more, most of the vestigial wealth that has remained in the country from mining concerns has been pissed up against the wall by property bears whinging on Zetaboards Australian Property Forum and buying plasma TVs and foreign holidays. My idea will solves these problems making real estate investment more successful than ever.

Dank!
Global House Price Crash Forum

#248 Hoof Hearted on 01.18.11 at 12:44 am

Also on the news

U.S. is anticipating 1- 1.5 Million Americans will be foreclosed on this year.

You almost wonder why someone just doesn’t organize a major no mortgage pay day….force the issue back to Washington.

A recession or two ago, I recall when Farm foreclosures were quite rampant…when a foreclosed -on farmers farm and equipment was going to be auctioned off….the neighbouring farmers would “make sure outsider strangers would NOT bid”….then make sure the auctioneers got literally nothing but lowball bids…then gave everything back to the farmer so they could start over.

#249 Utopia on 01.18.11 at 12:50 am

#47 Timing is Everything wrote…

Sorry forgot this paragraph Garth…

“Where was the talk coming from? The most prominently quoted source wasn’t an economist or a real-estate expert; it was Garth Turner, a former politician who had been promoting a book predicting a housing collapse.”
———————————————————-

Oh Please!!! That article by Jay Bryan has been running for way too long now. It is fluff as we well know. Add the Times Columnist to the list of newspapers that do not deserve a subscription for being part of the mob that perpetrates and promote house porn and denial of the facts.

Of course there will be a correction. Only an Ostrich can be blind to that. How deep is anyones guess but demographics alone assure us the future of real estate is nowhere near as bright as the past and this decline will happen concurrent with rising interest rates.

Bad combination.

Jay incidentally has pigeon holed our host as a merely a “former politician” which is a disservice to his readers as it does not do justice to the mans credibility and many credentials.

There is not a more honest broker of open discussion, debate and information on the problems with real estate in this country than Garth Turner nor a more focussed group of commentators who tune in daily to discuss the latest news.

Jay knows it. Just ignore him.

#250 Sue on 01.18.11 at 5:30 am

Thank you for your insight. Very helpful.

#251 Not Wondering Anymore on 01.18.11 at 12:19 pm

These CMHC changes are all smoke and mirrors to make it appear this Conservative government is doing something and is to preface an early election call, which they have no intention of winning. They have done what they set out to do – give their corporate masters unfettered access to public funds, cleaning the cupboards bare and leaving individual Canadians highly leveraged and with a massive national deficit.

Having served their purpose, they will now happily exit, leaving the carnage for another party, and all Canadians, to suffer and deal with for years to come.

Fait accompli. Judicial recourse, anyone?

#252 The Original Dave on 01.18.11 at 9:42 pm

G Man, someone raised a good point in the comment section. Maybe Flaherty announced this which could spark a rally and then he’ll make another announcement about increased downpayments in a few months which could spark another little rally.

I know the buyers are thin now and everyone is in, but who knows. I know the train derails soon, but these guys might be playing these tactics.