Bunkerville

The Cayenne is gone. In its place is an F150 with yellow ladders on top. Guys trying to lay bricks and stone in the frigid cold huddle under plastic sheeting. At the road is a new For Sale sign. All black with gold letters. Classy.

“Imagine,” said the lady with the geriatric German Shepherd, staring at the construction rubble, “they want a million and a half for it.”

And so they do. For a suburban-style house on a nice lot with a country view where a year ago sat a cottage worth maybe three bills. Actually I told you about this house a few weeks ago. It sits down wind from the Bunker, so they have to put up with Hummer fumes and Harley throbs, not to mention a few hysterical realtors who occasionally escape. The build was started by a guy who owned a string of appliance stores and apparently ran out of luck and credit, lost his Porsche SUV, then the house. Now the contractor’s trying to score.

I mention this in passing because there are now two houses for sale in Bunkerville. This is one. The other’s on for two million. Suddenly the peasants are all walking around with dollars in their eyes. It’s the classic wealth effect. And that never ends well.

As I wrote hours ago, F’s moves this week will slow the real estate market (after a 60-day buzz), and so will Carney’s rate hikes in a few months. Too few jobs and too much debt will also shove a stick in the economy’s spokes. There’s no doubt in my mind 2011 will end in worse shape than it began. But those two houses, and the way my neighbours are reacting – along with what I read daily on this blog about real estate in the Lower Methland or gold and silver – just reinforces the reality that most of our friends, neighbours and idiot relatives simply don’t get it.

And why should they? I mean, look at the reaction to F’s big mortgage-slaying announcement. The media worked hard to downplay it, telling people it meant “$100 a month extra” for new buyers, while economists predicted it might reduce national prices by a whopping 1%. Big yawn. There are forces working to slow the housing market down, but desperately trying to cover up the fact virtually all new mortgages lately by property virgins have been 5/35s.

Why? Because it’s a bomb. And it will blow. That’s why F – who told us months ago, “there is no evidence of a housing bubble” is desperately peeling back his own government’s pro-real estate policies. This was the crew that gave us 0% down and 40 year amortizations. Then 5% down and 35-year loans. Now it’s a max of 30, with new clamps on home equity loans, spec loans and first-timer qualifications. Barn door. Horse.

But that’s just the easy stuff. It gets worse.

This comment, posted here by an Alberta mortgage broker, gives a hint why: “I can’t remember the last time i did a 25 yr am mortgage. I’d say at least 90% of the mortgages I place are 35 yrs. Even those who know and understand the long term savings of a 25 yr am, can’t do it cause they wouldn’t qualify….”

It’s about credit, and it’s serious. The feds are far more worried about debt than house prices. Canadian families owe more than American ones, have a trillion in mortgages and sucked $46 billion out of their houses last year to spend. Without an increase in equity, due to the bubble which cheap rates created, those billions would not have been gorged on renos, giant TVs, miles of granite, credit card debt and vehicles. But as the Americans showed us (who did the same), equity ebbs and flows, while debt remains. All Canadians are doing is digging themselves into a leveraged hole with the potential to suck the economy in after them.

F and Carney have no choice but to try and slow the inevitable. But in doing so, they risk hastening the very crisis they seek to stem.

What now?

Well, the unsuspecting, stainless-loving, horny debtaholics we share this society with will keep doing what they’re doing. They’re all too invested in this HGTV thing to quit now. House prices are not going to collapse in the next few weeks, or the media fill with stories of empty condos and jumpers in Yaletown. We’re just in for a long and slow unwind which one day makes enough people realize they’re hugely at risk. Then things will happen far more quickly.

This was largely the American experience. Housing decelerated for a year before most people noticed, by which time it was too late to sell without a ‘loss’, so people waited. Four years later, many are devastated, living in illiquid homes they can no longer sell, since debt exceeds equity.

That’s what 5/35 means. It’s why F moved, reluctantly. Too late. It’s why you need to proselytize for me. Here’s the plan: spread out to all the office yaks and cocktail parties, to  family dinners and Saturday mornings at Tim’s, to the hockey practices and the dog park, to the grocery aisle and the subway, to your parents and your spouse and the useless BIL.

Tell them, seriously, we’re about to deflate. Tell them to come here tomorrow for a plan.

But first, I am off to save Bunkerville.

193 comments ↓

#1 Houston on 01.18.11 at 11:39 pm

This is about to happen in Australia too. The brick pimps are running out of ways to pump the real estate always goes up mantra. Record listings in 2010 and below 50% clearance rates. Apparently we are undersupplied…love the blog.

#2 Mississauga Reader on 01.18.11 at 11:45 pm

Garth,

You mention that home sales may be busy for 60 days (“I’ve only got a 60 day window until we get the 30 years” mentality). Do you think people may anticipate the effect of mortgage tightening (prices will be lower down the line) and delay purchasing, thereby keeping sales flat in the next 60 days? Or maybe people don’t think that far ahead……

FYI to all: US home prices peaked in July 2006 and deflated a tad but did not start plunging until Sept. 2007.

#3 dogman01 on 01.18.11 at 11:47 pm

Watched Global’s version of Local News in Calgary tonight…three back to back Real Estate stories…”it is all fine here pay no mind to the man behind the curtain”.
The Calgary Herald’s fluff was the same stuff…straight from that unbiased font of wisdom and sophistry..The Calgary Real Estate Board.
Surprisingly the Herald allowed comments …a noticeably rare event on Real Estate stories. The Comments were universally sceptical.

http://www.calgaryherald.com/business/Slow+recovery+forecast+Calgary+real+estate/4125861/story.html

#4 cendrine on 01.18.11 at 11:50 pm

Sorry Garth, I cannot proselytize anymore…BTDT.
Family just won’t listen. SIL says she doesn’t want to hear “negative stuff”. BIL thinks I’m crazy. Husband might be coming around slowly but he keeps reminding me that he is “a skeptical guy”. The adult children seem a little more open to this but they are nowhere near to buying real estate so I am educating them to keep their eyes open to opportunities (daughter is studying finance, isn’t that cool?).

Financial natural selection, that’s what this is…..

Enjoy your blog every day – thanks!

#5 bsallergy on 01.18.11 at 11:53 pm

Damn it Garth! It is different here, our prime minister is an economist! F is a financial genius helping us buy houses by dropping lending requirements until we could all afford granite and stainless. We are so much better because we had a surplus, first thing Stevie and F pissed away when the rubes gave them more seats. Now we’ll have the best fighter jets in the world. Damn it must suck to be an american homeowner.

#6 TheBestPlaceOnEarth on 01.18.11 at 11:56 pm

Now that the “big event” is finished we can move forward. Check out the local Vancouver papers nobody is even talking about the “event”. Even the comment sections yesterday were sparse. Onwards and upwards folks. The sun will rise tommorow as surely as Vancouver Real Estate. There is no debt problem in Vancouver period.

#7 Willa on 01.18.11 at 11:58 pm

Well, now how’s that for a teaser for tomorrow’s blog. Way to build things up, Garth.

I’ll help you with a title: “How to Survive the 5/35 Dive and Come Out Alive”.

Catchy, no?

#8 rightiswrong on 01.19.11 at 12:03 am

It will come to pass that the bozos who irresponsibly cut the GST and allowed 0/40 mortgages will run on a platform of fiscal responsibility and crow about how they reined in the housing bubble with these weak actions. And the sad part it, the electorate will buy it.

#9 I. Muvrini on 01.19.11 at 12:08 am

Ooh, a call to arms. Let me get my musket.

#10 Jeff Smith on 01.19.11 at 12:22 am

omg, love this pachyderm. lol

#11 Crash Callaway on 01.19.11 at 12:25 am

The above photo illustrates the truncated version of an airport pat down.

#12 Cory on 01.19.11 at 12:26 am

GLOBAL TV must get huge revenues from real estate in various forms. They just will not stop the pumping. This was on the news tonight:

http://www.globaltvcalgary.com/money/Slow+recovery+forecast+Calgary+real+estate/4126650/story.html

It just will not end. These “changes” need to happen asap and not be dragged out time and time again. I am sick sick sick of these outright lies and fabrications of stats that end up sucking in the stupids. I dont know why I worry though. It seems stupid is in.

#13 Anon on 01.19.11 at 12:28 am

Garth, enough with bashing gold already. It is a global asset that is far more liquid than real estate. And it is not manipulated by CMHC or Fannie Mae. It played its role for a very long time and it will continue doing so.

With deflation the value of money rises. Get ready. — Garth

#14 BC Bring Cash on 01.19.11 at 12:28 am

Excellent vision Garth. In the Jan. 18. Globe & Mail TD Bank Guru’s quote, expect that average house prices will slip a whopping 2% and that 20,000 fewer sales will result because of the change. Craig Alexander the bank’s Chief Economist, said the housing market ended 2010 better than expected, but mortgage changes will keep a lid on growth. Sounds a little more optimistic than reality suggests. What do you think? I already know your answer.

#15 TX66 on 01.19.11 at 12:35 am

Widows and orphans, eh Garth?

#16 tiffa on 01.19.11 at 12:53 am

Here is a reasonable article about “hot asian money.”

It includes a graph, for those of you inclined towards facts rather than anecdote. No graph of asian buyers as a percentage of overall property sales – which I couldn’t find – and the info is for the metro area of Vancouver specifically, but it’s none-the-less interesting… showing the total of foreign-owned properties, broken into subcategories by country/region. Worth a read.

http://financialinsights.wordpress.com/2010/11/25/chinese-investors-in-vancouver-is-the-ham-story-more-than-just-hogwash/

#17 Outlier on 01.19.11 at 12:53 am

You have to read some of the comments to the Calgary Herald that dogman01 posted. Only about 20, but none of the people who posted believed the BS about the real estate forcasts for Calgary. Some were downright hostile. Good line about these stories actually being “repeatings” rather than reportings.

BTW, thanks for all the work you do Garth. Look forward to your next book.

#18 LG on 01.19.11 at 12:58 am

I’m with you cendrine. Pass the message on but falling on deaf ears… It is interesting watching it all unfold though.

#19 Soylent Green is People on 01.19.11 at 12:59 am

We can all agree on one thing: our Prime Minister has not one cell within his body that would voluntarily cede power to a coalition of opposition parties. You enjoyed Harper’s “first prorogation” (2008) and his “second prorogation” (2009)?

You’re going to love his “building a fort in his Centre Block office and refusing to leave” (2011-2018).

http://www2.macleans.ca/2011/01/18/let%E2%80%99s-try-to-follow-harper%E2%80%99s-thinking-why-not/

Mike T. • 40 minutes ago
We’re still trapped in a 20th century paradigm, where words are supposed to have meaning, and to keep the same meaning a split second after theya re spoken. Harper’s outpacing us all with his new approach to language.

.
.
.
.

#20 Timing is Everything on 01.19.11 at 1:02 am

Today’s RE ‘news/house porn’ from Victoria…Basic shelter…Ha!

http://www.timescolonist.com/Gallery+Some+Greater+Victoria+priciest+homes/4059936/story.html

http://www.timescolonist.com/Photos+What+Victoria/4128122/story.html

#21 On_The_Edge on 01.19.11 at 1:05 am

Mr. Garth
Do you have any plan to ever list the balanced portfolio of etfs here that can give 6% in return. Forget about the 8% which you talk about all the time, even 5% is more than enough in a long run.
Enlighten us with the name of those ETF, your so called balanced portfolio that increased 15% last year, or you want to charge people for that advice. I do not mind if that is the case and I totally agree if that is your business secret.

#22 Nostradamus Le Mad Vlad on 01.19.11 at 1:06 am


“Why? Because it’s a bomb. And it will blow.” — Further to that . . . US home price drops exceed GD1.

“Suddenly the peasants are all walking around with dollars in their eyes.” — Yes, I too are a pleasant peasant. But we’re not selling, ‘tho that hasn’t taken the million-$ figure out of my eyes.

“The feds are far more worried about debt than house prices. What now?” — What of the fed. debt which has to be paid off? Who led Cdn. sheeples into this orgy of debt? Was it not C-H-F that cut their own throats by taking the GST to 5%, instead of upping the ante to 10% and cutting income tax rates instead? Why should taxpayers be left holding the bag for their constant f&#*-ups? They caused it, the CPC can pay it back.
*
Roberto Carlos How to score a goal directly from a corner kick. Brazilian commentator. Clip further down.

Mish One; Mish Two; Mish Three. Good stuff tonight.

Disinformation The m$m continues to fool sheeple on the economy.

Intervention in food prices. Almost guaranteed to bring down a govt.

Dead octopi (thousands of octopuses) in Portugal, thousands of dead sea lions in Labrador, birds and other denizens of the deep mysteriously dying off.

HAARP and the LHC Cern Hadron Collider Plus other goodies which govts. have here on earth. Also — Owning The Weather.

Looks like this could lead to forced vaccinations then martial law.

Chaos — Info. on Odiuchus, the Serpent Bearer (new zodiac sign).

Six Months (or so). Food riots, higher prices and civil disobedience.

China’s T-Bill holdings have modestly declined.

#23 Min in Mission on 01.19.11 at 1:11 am

Personally find it difficult to believe that the difference between 35 and 30 (or 25) would be enough to dis-qualify purchasers. I have no problem believing that most people don’t even realize that things are slowing down. I also agree, too little, too late. “Barn door / Horse”

#24 Kurt on 01.19.11 at 1:15 am

Thank you Tiffa! That blog post actually contains facts.

#25 bridgepigeon on 01.19.11 at 1:24 am

237 nostman I believe Ted Haggard wrote the forward to that book…

#26 604genX on 01.19.11 at 1:25 am

Here’s the other important angle on the deferral of real action on the bubble: the Tories want to rush a quickie election through in 2011 before the real estate collapse. This recent CMHC tinkering prolongs the bubble long enough to pull off the election in the Spring if the February budget is defeated.

Harper on CBC this evening:
“…the prime minister was pressed by CBC News anchor Peter Mansbridge on whether his “gut” tells him an election will occur this year.

“My gut tells me I don’t know,” responded Harper.

“It’s 50/50. We take the threats from the Opposition very seriously. I don’t think it’s in the country’s interest, I don’t think it makes any sense to have one right now, but if we’re forced into one, we’ll be ready.”

Read more: http://www.canada.com/news/chance+election+2011+Harper/4129108/story.html#ixzz1BSFWr7s0

#27 shayre on 01.19.11 at 1:30 am

If they didn’t want the bubble to happen, all they had to do was demand that banks decrease the Gross Debt Service Ratio during these times of abnormally low interest rates, they could have left the amortization period at 25 years, and they could have demanded that any loan requiring CMHC insurance must have income supported by income tax returns, with certain expenses eligible for add back.

But this is not what they wanted. They wanted a housing inventory to be built. This will provide social housing for all. The whole plan was to redistribute wealth through a bubble capitalism would buy into (with the a little help from regulators turning a blind eye to fraud).

The only reason Canada’s bubble has lasted longer than the US is that we have more skin in the game (and therefore, more to lose).

#28 debtified on 01.19.11 at 1:30 am

This is a little dated and must have been mentioned here before. It’s a report from Vanier Institute titled: The Current State of Canadian Family Finances – 2009 Report (published Feb. 2010).

http://www.vifamily.ca/sites/default/files/Current_state09.pdf

I thought it would be a good refresher to post it here again. Being able to review observations and predictions made from a year ago by one of the least bias organizations in the country (when it comes to the economy and real estate, at least) allows for a better analysis of what is really happening – giving us a better perspective of what can be rationally expected in the future. Just like most, I am here for education. May we learn something from each other and other people’s mistakes (in case of TBPOE – mistakes of your kind).

I think the follow-up yearly report for 2011 must be forthcoming.

Enjoy!

P.S. Yeah, I think we’re screwed and I am terrified. The good news is, good times always follow bad times (eventually). I just can’t stand prolonging the agony by denial. Let’s just face it already and get it over with. H, F & C, if you are reading this… Please, let’s do the right thing for our future – NOW. We’re already suffering, why not just deal with it already and get it over with. The sooner we face our demons, the sooner we’re able to correct our mistakes; so we can move on and build a better future for ourselves and the generation that follows.

#29 danno on 01.19.11 at 1:43 am

I have been reading your blog for some time. Love the fact that there are some people who have some sanity left! If someone can find me a real estate agent that will play along with me, I will place a $100k wager that sales and prices will be down by year end! Any takers?

#30 Devore on 01.19.11 at 1:43 am

But first, I am off to save Bunkerville.

Forget saving Bunkerville, it’s lost. Just reinforce the Bunker.

#31 45north on 01.19.11 at 1:45 am

It sits down wind from the Bunker

sister and her husband live near the Bunker (Kettleby), I asked him “are your neighbours highly leveraged?” “Some of them” he answered.

It’s why you need to proselytize for me.

the last family gathering, I stayed focused on the chili and the wine. on the other hand when the topic comes up with the younger generation like my children and the young kids at work, I tell it like it is.

#32 Jeff Smith on 01.19.11 at 1:54 am

http://dailybail.com/home/man-beats-bank-and-creates-mortgage-banking-mers-bomb-lost-p.html?utm_source=patrick.net#siteTitleWrapper

I wonder if FCH & CMHC kept good paperworks? What are the chance of Canadians getting to keep the houses since the lenders lost all the mortgage papers? LOL

#33 Brynn on 01.19.11 at 1:57 am

oh give me a break..smoke and mirrors from the media/realturds but smoke and mirrors from histrionic Garth as well.
Carney and F are idiots for giving cheap money however, Dont make it look like 5/35 mortgages comprise the majority because they do not. The free money craze saw 5/35’s go from 18% to 22% of mortgages. 22% is a significant number, but not startling enough to destablize a market as everyone of them is certainly not going to default.

sorry henny pennies…the market is (sadly) going to stay level in the places anyone wants to live in ( oh and that DOES NOT include Bunkerville)

#34 Hoof Hearted on 01.19.11 at 2:00 am

Well…..a few weeks back I submitted a link that showed the Cons agreed last summer to delay any vote that might force an election….so that a number of MPs from all Federal parties could reach MP pension hump….I seem to recall the delay allowed quite a large number qualified for their MP pension…(and Yes Garth stated his MP pension went to “charity”….I don’t know her last name though )

Now that the snouts are in, F can do his dirty work, on Parliament Hill they are all bought and paid for. Wouldn’t be surprised if Harper consulted with Jack and Iggy on what day is mutually convenient to have an election.

PS good soft porn site…I don’t know if the lady is shocked or enjoying it….keep em guessing eh?

#35 Agio on 01.19.11 at 2:07 am

#6 @ TBPoE – The ‘big event’ in the US got nary a word but now, oh how the snivelling is on.

#13 @ Anon- You’re right, gold is not manipulated by CMHC, Fannie or Freddie. It’s manipulated by ginormous hedge funds , too big to fail financial institutions, Russian porn queens and end of the world whackjobs. No sorry, the last are the followers. As for liquidity, real estate is not liquid. I think Turner may have mentioned that at some point on here.

#36 Hoof Hearted on 01.19.11 at 2:08 am

Nobody wants to talk about the ” event” because they realize they were scammed. As per usual, a few benefitted and the rest got the bills

Who really gives a shite that Crosby scored that fluky goal…I am tired of Chris(where’s my nuts???…the squirrel musta grabbed them !!! ) Cuthbert high pitched voice proclaiming it.

Speaking of Gold….watch Gold start to tank…all those nervous investors wanting to cash out..it’ll be a quicker dump than 1/2 price burrito night at the old cantina.

#37 Sasquatch on 01.19.11 at 2:19 am

The one shoe has been taken off and about to drop. It’s going to be awhile before the other shoe drops. Probably longer for the masses to hear it.

#38 Hoof Hearted on 01.19.11 at 2:22 am

Chinese New Year is coming soon

For those denialist re the Vancouver bubble…drive around and see the Asian decorations and do your census via that parameter.

#39 Harry Cho on 01.19.11 at 2:24 am

I seriously doubt we will get a “60 day buzz” like we got last Feb-April.

This time it’s a buyers market and sellers are being convinced to list in droves before the new rules hit in the spring/summer season.

More likely we will get a flood of listings hitting the market with desperate sellers and by the time the summer comes most of these homes will still be on the market.

#40 Deadmonton on 01.19.11 at 2:25 am

I have been reading your blog for a while and thanks for all your wonderful efforts to educate us.

I remember your words in Oct/Nov 10 – Asset deflation, Price Inflation.

In reply to poster #13 you say deflation. With all the QE’s going on around the world don’t you think there is going to be serious inflation. The price rise has been quite serious in Asia/UK for food and energy.

Any thoughts?

#41 john on 01.19.11 at 2:29 am

so we shall keep paying for rent for 2 more years until the housing correct….so we will be paying more for rent for 2 years plus the more expensive interest rates… what a strategy

#42 sluggo on 01.19.11 at 2:43 am

With deflation the value of money rises. Get ready. — Garth

Exactly. Ergo post credit bubble contractions and reflationary efforts to fight deflation are why gold is 14 hun. You need to have it whether you like it or not.

Just as the contrarian Carney says RE is not in a bubble, he also says gold has no role in the monetary system.

Of course he does because the pinhead that ran the country over a decade ago puts our nation’s reserves behind that of Tunisia among other questionable dictatorships.

#43 Off-Gridder on 01.19.11 at 2:54 am

My friend made an offer on a house 60 years old next to a highway in a small isolated town that relies on logging and mining to get by. Locking in 10 yrs 6.4% 25 yr amortization weekly payments. I couldn’t convince them to wait, rent, live in a trailer…but at least talked them out of a 35er and locking the interest and not an open mortgage. Too bad they’ll only be putting 5% down. Working out a plan to have it paid off in 10 years. Worked their budget and it’s $2600 after the mortgage etc. Is it all that risky?

#44 Dazed and Confused on 01.19.11 at 2:58 am

Just watched Alberta Primetime. CREB has already mobilized and is on the airways downplaying the impact of the changes. My former RE agent Sano Stante spewing comments like “we didn’t have the bubble they had in the US”.

The Calgary herald reports a slow recovery of 20%???

I’ve already done a small poll of those around me to determine how the messaging is being received. Its all, “I told you, its different here”.

If this game continues, I’ll be renting for a very long time. They say all good things must come to an end but nobody in Calgary seems to agree. As long as oil prices continue to rise, the stupidity, ignorance and naivity will continue. This will not end well, I just hope I’m still around to see it.

#45 Catalyst on 01.19.11 at 3:02 am

I’m not one for proselytizing to people who don’t want to get it. I’ve been telling people that the housing market is overinflated and unsustainable since before the US crashed. Me? 33, ~$110k in the bank, $0 debt. At this point I just want to watch the idiots burn.

#46 Utopia on 01.19.11 at 3:08 am

#210 Ballingsford on 01.18.11 to #64 Utopia…….
———————————————————
No problem Ballingsford. I had it coming to me anyway.

#255 Prairie Gal….

It is cold out here and the land is frozen but a warm heart makes all the difference. I could learn to be a little kinder to my fellow man and I might then be less regretful the day after I leave a remark here. Thanks gal.

#47 confused and a little crazed on 01.19.11 at 3:46 am

it’s not gonna matter ….people won’t real estate will go down. but once bills start piling up and oil/ gas (good for stocks) / taxes / fees escalate then we will see change

only then will people ponder …holy Shi#@%^ i pay this much just to own a house
while diversified people …oh good more dividends, lees taxes arfter RRSP/ TFSA

but it’s tough…oh well

#48 Thetruth on 01.19.11 at 4:14 am

Invest in bank stocks?

These banks know what they’re doing, especially when they have F’s ear. They talked openly about lowering amortizations, protecting consumers blah, blah, blah, all while sneaking in regulations they wanted!

They will now raise rates on home equity lines of credit (HELOC) because they will be uninsured by CMHC. Higher rates on heloc debt mean people will look for cheaper financing. Homeowners will be encouraged to pay off their HELOC’s by refinancing their homes to below 20% equity. This is what the banks want!

They will “nudge” people with HELOC’s to refinance their homes to just under 20% equity. Then these homeowners mortgages will be covered by CMHC insurance all while transferring HELOC debt into mortgage securities.

The bulk of the mortgages in Canada will be backed by the taxpayers. Other non-mortgage loans backed by the banks will have high rates (hefty profit margins).

IMO, banks will do very well in Canada whether there is a RE crash or not. They’ve just totally relieved themselves of any risks. The whole debacle is already being set up as being solely the govs fault!

Aside: Will existing HELOC’s still be covered by CMHC insurance????? or are those grandfathered?

#49 Worldwide on 01.19.11 at 5:51 am

I heard a good joke today:

Q. What is the difference between a pile of red bricks and a pile of gold bricks?

A. Nothing. Both owners are sitting around hoping the bricks gain value just by sitting there.

#50 Bruce on 01.19.11 at 5:53 am

Mr. Carney, sir. There *IS* no recovery. You and your “friends” know this. I’m not buying it anymore–and neither are some of my friends. Oh sure the rates will rise, just as soon as you think you can get away with it. It’s a game, folks. It’s all a friggen’ GAME. For crying out loud, what’s it going to take for people to WAKE UP?

#51 boomer62 on 01.19.11 at 8:00 am

Has anyone seen INCEPTION (2010), by Christopher Nolan?

#52 OttawaMike on 01.19.11 at 8:16 am

CBC radio here made a comment this morning on how a staffer from the finance dept. had called them to clarify that existing mortgages of 35 yr. terms would be renewed under the same conditions not under the new regulations.

#53 Shane on 01.19.11 at 8:22 am

Garth, Are you still predicting a 15% correction this year?

Shane

#54 OttawaMike on 01.19.11 at 8:25 am

A vid from one of Detroit’s ‘burbs illustrating the decay as a fellow goes back to where he grew up and visits an old friend. This looks like any old neighbourhood in Ottawa, Hamilton or Scarborough:
http://www.youtube.com/watch?v=28-a7xQ90tc

Here is a photo essay of the ruins of Detroit:
http://www.guardian.co.uk/artanddesign/gallery/2011/jan/02/photography-detroit#/?picture=370173054&index=0

The former wealth and opulence is clear.

#55 pbrasseur on 01.19.11 at 8:45 am

Garth – Now I know why you left politics.

It’s because you could’nt stand the idea of driving a Prius :-)

#56 Montrealer on 01.19.11 at 8:49 am

One of the very popular personal finance blog… just bought a vancouver house… You must read this… please.

1- buys the house. http://youngandthrifty.ca/real-estate/taking-the-plunge-and-putting-an-end-to-home-envy/

2- tells us what good and bad debt is. http://youngandthrifty.ca/taxes/good-debt-vs-bad-debt/

3- updates her net worth.. with a $310k mortgage for her alone. http://youngandthrifty.ca/net-worth/net-worth-update-december-2010/

4- Jan net worth.. pulled even more money out for.. renovations! http://youngandthrifty.ca/net-worth/youngandthrifty-net-worth-update-january-2011/

so, blogs about showing people how to save.. just do the opposite and spend a fortune on mortgage. No wonder it’s hard to get valuable insight on RE these days.

#57 Mike on 01.19.11 at 8:50 am

30 danno on 01.19.11 at 1:43 am

I have been reading your blog for some time. Love the fact that there are some people who have some sanity left! If someone can find me a real estate agent that will play along with me, I will place a $100k wager that sales and prices will be down by year end! Any takers?
——————————————————

Why don’t you just drop your pants and ask for a dick measuring contest?

Who the hell does unsecured $100,000 bets with unknown counterparties?

If you’re so bright you’d find ways to short or buy long dated puts. But no, you want to measure dicks.

#58 David B on 01.19.11 at 9:02 am

10% per of a $100K is a killer, who could handle 15% or 20% ? very few. AND, those that can will in a heartbeat.

So goes the new Real Estate market in Canada.

#59 pbrasseur on 01.19.11 at 9:04 am

Garth – You’re thinking deflation?

I think to be more precise we should talk about loss of wealth and slow economic growth.

Which should bring deflationin some sectors, of course in housing but also in many local services.

But at the same time we might become poorer via inflation in other secteurs, such as food and energy, not to mention taxes…

In any case the picture in not pretty for Canada, hopefully other sectors of our economy will be able to pickup some slack.

#60 Harry on 01.19.11 at 9:05 am

#23 john on 01.19.11 at 2:29 am
so we shall keep paying for rent for 2 more years until the housing correct….so we will be paying more for rent for 2 years plus the more expensive interest rates… what a strategy

If you live in an area of the country where rent is more expensive than mortgage payments, taxes, utilities, maintenance then buy if you want.

My rent is less than the principal amount of a mortgage on the same house, nevermind the other costs. I invest the difference which is $800 a month. The risk I have is losing part of my portfolio but the risk is not a leveraged asset.

This new rule change to 30 years will make it more appealing to keep renting as the spread between renting and a mortgage has increased by over $100 a month. After these changes, there will be less incentive for a renter to get a mortgage.

After these changes, obtaining a mortgage (especially as a first time buyer) will be like throwing money away each month.

Name an area of Canada where rent exceeds the cost of ownership. — Garth

#61 fesnaris on 01.19.11 at 9:09 am

Soylent green is people

Isn’t there a political blog you can spew your venom on?

We get it Harper evil Blah, Blah Blah. How about something relating to the housing.

Try getting laid and loosen up a little.

Cheers,

#62 bigrider on 01.19.11 at 9:13 am

On Gold

Fights on.

In the bullish corner, Eric Sprott and John Embry.

In the bearish corner, Norm Lamarche and our gracious host.

Fights on !!

#63 Moneta on 01.19.11 at 9:23 am

Do you think people may anticipate the effect of mortgage tightening (prices will be lower down the line) and delay purchasing, thereby keeping sales flat in the next 60 days?
————-

Buyer: Mr. Banker, each month I’ve got 1600$ burning a hole in my pocket that I really need to put to work in real estate before I’m forever priced out. What’s the max mortgage this monthly cash flow can get me?

A few days ago…

Banker: With a 35-year mortgage at 3%, we can lend you 415K.

In a few months….

Banker: With a 30 year mortgage at 4%, we can lend you 335K.

That’s how buyers are going to react. It’s not very complicated.

People live on a cash flow basis. What they could buy for 415 will suddenly go down to 335K. That comes to a 80K loss for those who paid 415K or a 20% decline… just with a tweaking of the rules and a slight increase in rates.

#64 bigrider on 01.19.11 at 9:25 am

Sikhs denied access to legislature because of wearing ceremonial
kirpan.
http://www.thestar.com/news/canada/article/923739–sikhs-carrying-daggers-denied-entry-at-quebec-legislature?bn=1

Story is infuriating.

#65 Moneta on 01.19.11 at 9:28 am

It’s not magic. Over the last decade, they’ve built more houses than household were created so house price increases were basically due to 4 factors:

1. Falling interest rates
2. Mispricing of risk thus pretending there is no subprime and not incorporating the right credit srpead in mortgage rates… thanks to CMHC.
3. Longer amortization period.
4. Increasing size of homes.

All you need is a reversal in this trend and the house of cards collapses.

#66 Marco on 01.19.11 at 9:34 am

“This was largely the American experience. Housing decelerated for a year before most people noticed, by which time it was too late to sell without a ‘loss’, so people waited. Four years later, many are devastated, living in illiquid homes they can no longer sell, since debt exceeds equity.”

I understand Garth that you state that there will be a reduction and then a slow melt in housing values….but if the Canadian sentiment changes…as it’s starting too and people begin to see similarities to what happened south of us will this not accelerate the process…and we could find ourselves at the same place as our American brothers considerable sooner?

#67 Moneta on 01.19.11 at 9:42 am

The innumerate do not get that we went from:

1. a 25 to 40 year amortization period.

With cash flow of 1600$ per month, the loan a household could get went from 275K to 330K based on 5%.

2. 25 to 40 year amortization including rate decline from 5% to 3%.

Would increase the loan from 275K to 445K.

And that does not even include the drop in cash down requirements or the impact of easily available HELOCs.

Convince me that all these variable will stay in place and then I’ll believe you if you tell me house prices won’t go down.

#68 T.O. Bubble Boy on 01.19.11 at 9:43 am

@ #21 On_The_Edge:

For understanding the “magic investments” that Garth describes, buy Money Road and/or read a few of Garth’s previous posts like This One: “How To Invest”

And then, realise that there are only a handful of ETF providers in Canada, mainly:
– iShares
– Claymore
– BMO
– Horizons Alpha/Beta (mostly leveraged ETFs)
(I’d add that TD eSeries low MER funds are fairly close to certain ETFs in terms of fees)

And, there are only 5-6 Big Banks to consider when Garth talks about Bank Preferreds or Bank Bonds:
TD/BMO/Scotia/CIBC/RBC/National

#69 boomer62 on 01.19.11 at 9:44 am

#45 Catalyst on 01.19.11 at 3:02 am

said,
“I just want to watch the idiots burn”

Burning idiots are of no benefit to anyone just a cost to everyone. Besides, the smell is horrible.

and

#49 Worldwide on 01.19.11 at 5:51 am

Wrong. Bricks are useful, their market is much wider and their price is well positioned.

#70 Moneta on 01.19.11 at 9:51 am

With deflation the value of money rises. Get ready. — Garth
———–
More than 80% of the wealth is own by the 55+ or the top 15%. Wouldn’t deflation concentrate wealth even more?

Does this mean we are going Banana republic?

#71 T.O. Bubble Boy on 01.19.11 at 9:55 am

Listings are definitely on the rise (TBD if they are exploding beyond what you’d normally see in January)…

VCI Forum tracks the daily stats for Vancouver, where listings went from the low 9000’s (9300-9400) at the start of January to over 10,500 now:
http://vancouvercondo.info/forum/topic/january-2011-data

I also noted a few condos with insane numbers of listings in Toronto… for example: 215 Fort York Blvd (Lakeshore and Bathurst) has 64 listings on realtor.ca! And, those units are all in competition with the hundreds of CityPlace condos that are perpetually on the market (one CityPlace building has 34 units, and several others have 10-20 units each).

January-February-March stats should be interesting, given the YOY comparisons to last years record sales, and the 30-yr amortizations kicking in March 18.

#72 Cookie Monster on 01.19.11 at 10:06 am

The crash will be bad, my best friend Oscar lost his house years ago and he now lives in a garbage can, it’s brutal, it turned him into a real grouch!

#73 C on 01.19.11 at 10:09 am

As a Financial Planner I met with a couple the other night at their home in Milton, Ont. Ironically they had HGTV on when I arrived and had it on mute during the appointment. Casually I said HGTV? The wife perked up and said yeah. I said it’s a great show eh (being positive) and she said yeah I love it. It makes you want to get a bigger house. I thought yep. Then I said, some people call HGTV house porn. She thought that was hilarious and yes very true. People are infatuated with HGTV and I believe the stereotype is true in regards to women that they have serious house lust.

Later on during the appointment they asked, so how’s the house hunting going right now, you’re renting right? I said yeah, our lease is up in June, and then we’ll see. I didn’t tell them that my wife and I already plan to rent for 2 more years minimum and see how the market is then.

As for Carney, for goodness sakes man, raise interest rates. 1%………………still!??!! Are you kidding? Don’t you know why they call Greenspan “Bubbles”? Clearly he believes our economy can’t handle higher rates. What a strong economy we have. Bahh.

I agree what Garth and other blog dogs are saying. H F C have let this real estate carnival go on for wayyy too long and now it is beyond control. Containment is the goal now and to try to avoid maximum hurt.

#74 grantmi on 01.19.11 at 10:21 am

You should have heard Cameron Muir(on) on the Bill Good show on CKNW yesterday!

It was all lollipops, cotton candy, and Popsicles for the BC house market!!

(whistling)
Here’s a little song i wrote,
you might want to sing it note for note,
don’t worry, be happy

in every life we have some bubble,
when you worry you make it double
don’t worry, be happy

dont worry be happy now
dont worry be happy
dont worry be happy
dont worry be happy
dont worry be happy
aint got no place to lay your head,
somebody came and took your bed,
don’t worry, be happy

the bank say your loan is late,
he may have to litagate,
dont worry (small laugh) be happy,

look at me im happy,
don’t worry, be happy

i give you Garth’s phone number,
when your worried, call me,
i make you happy

don’t worry, be happy

aint got no cash, aint got no style,
aint got no gal to make you smile
but don’t worry, be happy

cos when you worry, your face will frown,
and that will bring everybody down,
so don’t worry, be happy

don’t worry, be happy now…

don’t worry, be happy
don’t worry, be happy
don’t worry, be happy
don’t worry, be happy

now there this song i wrote
i hope you you learned it note for note
like good little children

dont worry be happy

listen to what i say
in your life expect some bubble
when you worry you make it double
dont worry be happy
be happy now

dont worry, be happy
dont worry, be happy
dont worry, be happy
dont worry, be happy
dont worry
dont worry be happy
don’t worry, don’t worry, don’t do it,
be happy,put a smile on your face,
don’t bring everybody down like this

don’t worry, it will soon pass whatever it is,
don’t worry, be happy,
i’m not worried

#75 BDG-YYC on 01.19.11 at 10:30 am

For those who like charts and indexes … here you go … A canadian housing index.

Soooo … comforting … but don’t look at Calgary … see in Calgary you can see that prices are back where they were 4 or 5 years ago … and … well … anyone who’s bought in the last 5 years are below break even after fees and expenses. A lot are way below.

http://www.housepriceindex.ca/

These charts aren’t quite as serene and comforting … though …

http://housepriceindex.ca/admin.aspx?mode=voirHTML&nonews=54&qui=244&langue=EN

Enjoy :-)

#76 AM on 01.19.11 at 10:35 am

#33 Brynn on 01.19.11 at 1:57 am

“Dont make it look like 5/35 mortgages comprise the majority because they do not. The free money craze saw 5/35′s go from 18% to 22% of mortgages. 22% is a significant number, but not startling enough to destablize a market as everyone of them is certainly not going to default.”

___________________________________________

What part of ‘the majority of NEW mortgages’ don’t you understand?

Going to 30 from 35 does impact those first time buyers with little down payment and the move up’rs that want to get more bang for their (the bank’s) buck. Life’s a monthly payment…shorten the am and that payment goes up, or the principal goes down (less mortgage/less house).

#77 Wayne on 01.19.11 at 10:58 am

It would seem to me that ‘anyone’ with at least two functioning brain cells could see that our present housing situation is unsustainable. This being said, there are a ‘lot’ of people with sh++ for brains. Why … well, as one young couple told me “Everyone is doing it … everyone has a large mortgage”. This mantra epitomizes the ‘I want’ generation. A sorry state. In the old days you worked bloody hard to get something WHEN you could afford it … not now.

#78 $froma$ia on 01.19.11 at 11:03 am

Not impressed with your hacks against gold & silver Garth. It’s not like people are taking out 5/35’s to buy it or even lining up for that matter. The Gold mining stocks are not tracking the spot price. You could argue that the metals are over valued or undervalues at this point. I would say that people are trusting even the markets less and going straight to bullion.

Bullion is not for worship, neither are houses. Please curtail your comments. Theres still allot of moderate people here that believe gold is a hedge not a budah.

BTW, the copper in the penny is worth more than 1 cent.

Smarten up, would ya? I am beginning to think that deep down your still a politition that hates old fundamental guidlines like our oldest currency and would probably love to medal like Flaherty if you had the chance. 10-15% of your portfolio is not worship.

$$$

#79 Antonio on 01.19.11 at 11:08 am

Toronto mid month numbers. Average prices still rising.

#80 thirsty on 01.19.11 at 11:11 am

Calgary area Foundation Contractor here:

Stick a fork in it. Last spring’s change in mortgage rules created a small summer rush and the phone has been quiet since the start of fall. Few market niches are left unexposed to what is obviously a pronounced trend, downward in volume and in price. The suburban volume “cookie cutter” is dead in the water, no amount of price cutting and/or efficiency measures gonna make those any less inexpensive to the already over-leaveraged working/middle class. Without volume in the ‘starter’ home sector the rest of the folks on the property ladder have no ‘greater fool’ to sell to. Hence the complete lack of volume across the board in new and exsisting home sales.

Going to be a very tough couple years for the debtheads.

#81 45north on 01.19.11 at 11:12 am

OttawaMike: I thought the Detroit pictures were interesting but in Oct 2008 and 2009 I was at 16 Mile (up I 75 from Detroit). Everything looked very normal. Kind of like Kanata.

#82 Antonio on 01.19.11 at 11:13 am

Some here think that the next 60 days will see heady sales and another mini boom. Maybe. However on a year on year basis it would drive flat sales at best because last year’s numbers also had jacked up sales anticipating new regulations.

But there is one key issue that is unknown. Will sellers sitting on the sidelines jump in as well to beat timing on new regulations? If they do then there could be an explosion of listings. If that is the case we could see price declines before the 60 days are up. Stay tuned. Crazy 60 days ahead of us.

#83 Devil's Advocate on 01.19.11 at 11:16 am

“Name an area of Canada where rent exceeds the cost of ownership.” — Garth

Eventually it must for without a return on their investment what incentive would a landlord have to enter into such a venture?

Many a landlord has sold, taking those profits because rents are too low and the profits too enticing. Many more hold because they bought low but even they are being seduced by knowing that each day they do not sell they are in effect buying it again themselves but at todays rate. In that logic the venture does not make sense so they cave and sell.

Eventually though Garth, both you and I know, the business or renting MUST show a profit or there will be no rentals. And then where will you stand on the “excessive” 70% home ownership issue?

Yes this is going to end badly isn’t it?

#84 Geology Joe on 01.19.11 at 11:24 am

I drill oil wells for a living. There is a myth that high oil prices will result in another Calgary real estate boom. It is just that, a myth. The wells that are being drilled are extremely expensive, highly technical and prone to large cost over runs. Hardly a recipe for instant riches. My guess is that below $65 – $70/bbl, the economics of these wells just won’t pay. Hard to make windfall profits when your cost of production is so high. No windfall profits means no Boom in Calgary.

I sold my house in Calgary last year, and I won’t be buying another one for a goodly long time, maybe ever. Calgary real estate prices are vastly over inflated and it was time to leave. Far too much of our net worth was tied up in the house.

At the end of the day, $500,000 or $1 million is still an unfathomable amount of money to most people, far more than they can really gasp. Is that why people pay so much; they really have no schema in their brains as to how much it actually is?

Personally, I’ve made and lost that and much more several times over my career and I can tell you that it is a VERY LARGE PILE OF $$$$!!!! From my experience, it is very disheartening and extremely stressful to lose a couple of $$ million in paper gains, knowing that you had the opportunity to lock in a profit, but that the oinks got the better part of you.

I can’t even imagine the stress to your life and marriage to be on the hook personally for a debt of several hundred thousand real $$ (as debts are real, not just paper gains or losses) and not be able to sell the house to clean up the mess.

Yes, I’m making money hand over fist right now while the oil companies are continuing to drill, but I’ve been in the oil patch long enough to know that this can all end within 30 seconds or less, so we are banking every penny that we can.

The point that I’m making is that the commodity spike is all that is separating Canada from the U.S. If China and India have even a slow motion train wreck, we will be back with the Yanks in a heartbeat. And unfortunately, that is always where we seem to end up, usually 18 months after them.

#85 Kermit on 01.19.11 at 11:25 am

#72 Cookie Monster on 01.19.11 at 10:06 am
The crash will be bad, my best friend Oscar lost his house years ago and he now lives in a garbage can, it’s brutal, it turned him into a real grouch!

Miss Piggy insisted we buy a fancy new McMansion in White Rock. Lot’s of Snuffleufagusses moving to the West Coast pushing prices into the stratosphere. Bank told us we are richer than we think. I don’t have pockets so I might as well spend it. ;-) Happy Miss Piggy Happy Kermitt.

#86 thirsty on 01.19.11 at 11:28 am

Carney can’t raise rates because he just plays follow the leader to the bond market, as does every other Central Banker. As long as foreign Central Banks continue to view the loonie and Canadian Govt debt as an asset to be hoarded on their balance sheets our interest rates will stay where they are for the time being. Russia admitted last year to swapping US dollar esposure for Loonie bonds, and I suspect the Chinese have been in that market for just as long, if not longer. That is why the CDN ten year has a lesser yield than the US ten year, and it is the bond market more than anything that determines interest rates anywhere-including mortgage rates.

Furthermore, as long as Canada remains in the top 15 of oil exporters, the loonie will continue to trade as a ‘petro-currency’. And as long as oil prices remain high, the loonie will be sought after as a means to hoard and to facilitate further purchases of CDN resource extractors. It is the commodity sector, and the demand for commodities which has the loonie at these lofty heights. While I agree that one of the horse’s left the barn long time ago (in regards to mortgage rule changes), the real trainwreck would be another decade of stagnate global oil production and/or increased demand out of the emerging markets in regards to commodity consumption. One could literally see long term low interest rates due to foreign demand (canadian loonie and loonie debt), and that is a problem that would quickly lead to a really, really big housing bubble unless the market was tamed with rules to take the froth out of the bottom end.

We shall see.

#87 Memories on 01.19.11 at 11:34 am

As I mentioned in my previous post, in 2011 will see the non-event of inconsequential rate hikes (if any). Carney held off yesterday.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/further-rise-in-canadian-dollar-could-delay-rate-hike/article1874993/

Not sure why some posters were talking about rate hikes like they were a foregone conclusion. I guess they don’t understand currency and trade. Anyway, I hope oping for said rate hikes aren’t holding their breath.

Anyway, mortgage debt for Canadians stands at a cool trillion dollars, but so does our cash balance. Sorry to burst reader’s mortgage mountain arguments.

http://www.financialpost.com/Canadians+sitting+trillion+cash+mountain/2044036/story.html

This is all old news. The all eyes on housing there is virtually no chance of a downturn, let alone a crash. A crash, by definition, is unexpected by the masses and with everybody and their uncle talking about a potential ‘crisis’ in Canada – well, lets just say that if downturns worked that way, there would be a lot more rich folks out there.

By the way, here’s a nice little home in the GTA that recently sold for a pretty penny.

92A Alcorn Ave., Toronto
SELLING PRICE $1,130,000
PREVIOUS SELLING PRICE $290,000 (1986)
DAYS ON THE MARKET five

http://www.theglobeandmail.com/real-estate/yonge-and-summerhill/article1868662/

The stock market continues to be strong and real estate will continue to get stronger in 2011. It’s a great time to be Canadian!

#88 thirsty on 01.19.11 at 11:37 am

Red bricks/Gold bricks.

The biggest difference I could tell between the two would be that I could stick one big gold brick in a backpack, jump on a plane/boat/train and sell it in any country in the world upon landing, without negotiation at spot, and lead a comfortable exsistence there after. I could not do the same with red bricks. In fact, the liablilities and various infringements on red bricks penalizes the possessor like no other ‘asset’ I can think of.

#89 kitchener1 on 01.19.11 at 11:47 am

People should go back to year 2001. Interest rates were at 7%, houses were 3.5 times income and that was a strong economy in the sense that it could support 7%.

Really, a healthy recovery that is dependant on the lowest interest rates in history?? thats an oxymoron.

Carney et all are playing a somewhat risky game. Its all pre election semantics. Inflation, even by the govt own figures is running at 2% right now.

Remeber the commodity boom of Nov/Dec. Well those are all on 60-90-120 day contracts out for raw material delivery. add another 30-60 for production and transport to retail and your looking at some serious inflation in commodity products in April/May.

The companies will either have to eat that increase– lower margins or pass it on to the consumer.

All of those folks that are cheering the interest rate staying put, better realize that it will just go up that much more later in the year.

#90 Devil's Advocate on 01.19.11 at 11:48 am

TOP 10 Tips To Make Money In A Recession

http://www.youtube.com/watch?v=o1F9u3sPep4&feature=related

Cameron Herold – BackPocket COO

#91 Bottoms_Up on 01.19.11 at 11:51 am

Name an area of Canada where rent exceeds the cost of ownership. — Garth
——————————————————
Ottawa’s close, if not a good example of this. Rents anywhere near downtown go from $1600-3000/mo. My place could rent for $1800/mo, and it costs me about that for ownership.

#92 Geology Joe on 01.19.11 at 11:53 am

Memories #87

I see…. wow….. I want twice as much as what you took!

#93 Ret on 01.19.11 at 11:59 am

#54 Ottawa Mike -Thanks for the Detroit video.

On my visits to Flint and Detroit I have been struck by the similarites with Hamilton. Is this a foreshadowing of Hamilton’s future or is it different here?

It is all so sad. Perfectly fine houses on 1950’s sized lots, that would not be out of place in West Hamilton or Westdale, just sitting there abandoned, vandalized, and finally burned out. All three cities are icons of a magnificent industrial past. I grew up in Hamilton and still live here after 58 years so I have seen the steady deterioration in a once great city.

At the rate Hamilton continues to lose industrial jobs every year, one has to wonder what Hamilton’s future holds. Every year one or two major employers on Burlington Street leave or just close up.

The government funded universities, hospitals and stadiums that the local politicians are always touting up have not saved Detroit and they won’t save this city either.

#94 Got A Watch on 01.19.11 at 12:04 pm

If you ever worked with real bulls (on the farm) you know they are the namesake for the “________ always goes up!” philosophy. Having a head that is mostly bone will do that. They only have 1 tactic, charge.

Real estate, over long periods of time, under-performs (yes, under) the stock market.

Don’t believe me? Well, never let any facts get in the way of your cherished delusions. Big Picture Blog – ‘Macro Tides’ Jan ’11:

“…the 30% decline in median home prices since mid 2006 as measured by the Case-Shiller Index is larger than the home price decline during the Depression. Unfortunately, home prices are likely to decline further. According to research by economists Robert Shiller, Karl Case, and Allan Weiss, home prices averaged an average annual increase of 3.35% between 1900 and 2000. In order for home prices to return to their 100 year long term average appreciation line, home process would have to fall another 20%….”. Those are US stats, but I doubt Canada is much different, we have always followed the US experience with a lag time.

Another post there showed, with some arguing about inflation indexing, dividends etc, that oil (1st) and gold (2nd) out-paced the stock market over very long periods, which in turn out-performed real estate. So real estate was 4th in that race. Now there is much to debate there about how to calculate the exact % gains, and volatility etc. Certain asset classes will out-perform during specific 10-20 year periods – that would be real estate, since ’97, for instance. And under-perform at other times, like gold from ’81 to ’98. But the rankings and returns don’t really change much over long periods, the wider time frame just makes it more apparent.

Bottom line: like most things in life, timing is everything. And clearly, the best time to buy real estate in Canada was 13 years ago. Which makes it almost certain to underperform during the next decade. Reversion to the mean is a fact, and it hurts the biggest bubble the most. The higher the balloon soars, the farther it falls.

Every market needs the ‘Greater Fool’ to buy at the top, so the smart money can take profit and get out. If you are bullish on real estate now in Canada, please, go out and buy as much as you can, and lever it up as much as possible. Just don’t come crying later when it ends in tears.

Personally, I think it will be healthier for our economy over the long term if we kill the real estate mania stone dead. It is after all, just another useless “service industry” that provides no meaningful economic growth, and cannot be a means to national prosperity. A lot of people are employed, in what amounts to a massive mis-allocation of productive resources.

Consider Germany, where they never really had a real estate bubble. There, enterprising small and medium businesses (the backbone of economic growth) would be manufacturers, producing value-added quality niche products, the kind you can’t easily find elsewhere. Not building houses.

Wonder why North America is in economic decline? Why young people can’t find good jobs? Etc. Look no further than the real estate mania charade, one of, if not the, primary driver of decline. “Service economy” = totally unproductive waste of time. At the pinnacle of that would be the “service industries” who helped blow the real estate bubble: developers, builders, Realt(ho)rs(TM), mortgage brokers, home stagers etc. The economic flotsam and jetsam of misaligned priorities.

#95 greg kinear on 01.19.11 at 12:10 pm

With deflation the value of money rises. Get ready. — Garth

Hate to break the news to you garth but gold rises in deflationary environment….and goes ballistic in high inflation (relatively speaking)

but the chances of hard deflation are same as the survival of certain snowballs in hot places……
all indices point to …..(you can roll your eyes if you wish)……strong inflation and then “sudden” hyperinflation….(at least stateside)

25-27 % unemployment stateside now (not 9.9 like is commonly reported)…….massive QE…..

all things linked to true wealth…energy based (food fuel) are heading up hard…..

there is no way any of the promised long term programs (safety nets) will survive the combination of demographics and REALITY based economics (peak oil driven)…

but not to worry, as garth says…there is no need for doomer thinking ;)

With all due respect, 99% of folks simply cannot begin to envision what is really happening….and so you lean back and pontificate about how “logical and wise” you are …..just before your butts pass through your gray matter……..the windscreen of the world is rapidly approaching

so no RRSP, TFSA or other clever investment strategy based on paper and government promises are going to save you.

But I am just a “doomer” …..everyone knows that we are always wrong …..I’ll go back to cooking my snowshoe bunny stew now…..squirrel is in short supply

There will be no hyperinflation. Nor would gold be as useful as shelter, food or fuel in the world you incorrectly envision. — Garth

#96 BDG-YYC on 01.19.11 at 12:15 pm

Real estate requires a steady stream of new buyers to support pricing. There is no move-up the ladder without someone willing/able to step in and take the entry level property off a sellers’ hands at a price that enables the necessary down payment for the move-up transaction.

The relaxation of lending standards that eventually took us from a 25/25 environment to 0/40 removed the down payment barrier entirely while at the same time reducing the income barrier. The concurrent reduction in interest rates to the 2-4% range essentially halved carrying costs. As a result we’ve had a utopian combination of: 1. A newly enabled “class” of previously financially incapable first time buyers and … 2. A massive reduction in “waiting time” associated with the necessary accumulation of down paynments and income development associated with career advancement – Demand simply being brought forward.

To a large extent we’ve had an excessive trend of rising prices supported by 1. The artificial creation of a new pool of “subprime/dodgy” buyers and demand borrowed from the future.

There is very clear evidence of these conditions being unwound. So we looking forward we can might ask ourselves … “now that the least financially able first time buyers (from all age groups) have entered the market … and … almost all of the upwardly mobile demographic from 25 to 35 ish have come into the market as 20 to 30 year olds … WHO”S LEFT TO SELL TO at any price ?

The trend is in place … rising down payments, rising carrying costs, rising income qualification, with warnings of rising interest rates simply boils down to the trend from hell … the first time buyer is about to go on the list of Endangered Species … expect a lot fewer going forward … they are all in … and many could be about stuck and in trouble.

Or maybe a stampede of rich immigrants, offshore investors, and 15 year olds with lucrative flyer roots and a few extra hours flipping burgers are about to over-run the market ! :-)

#97 Worldwide on 01.19.11 at 12:17 pm

#49 Worldwide “I heard a good joke today:

Q. What is the difference between a pile of red bricks and a pile of gold bricks?

A. Nothing. Both owners are sitting around hoping the bricks gain value just by sitting there.”

I read it and laughed out loud again. It’s quite the “deep joke” The Greater Foolishness of each group is uncanny!

What a classic joke! Please share it.

#98 CrowdedElevatorFartz on 01.19.11 at 12:24 pm

@#6 TheBestPlaceOnEarth.
What alternate reality do you call “Earth”?

#99 T.O. Bubble Boy on 01.19.11 at 12:24 pm

An interesting statistic in those mid-month Toronto numbers:

Average Price of a Detached Home in the 416 (core GTA) was down 1% from 2010.

#100 Fuzzy on 01.19.11 at 12:33 pm

All the bullion doomers should carefully read what John Williams, head of Shadowstats.com, and main poster-boy of hyperinflation is doing: diversifying into $Canadian, $Aussie and Swiss Francs. So he doesn’t believe all currencies will go to 0. Another reputable doomer, Marc Faber, has been very clear in his presentations that stocks can be a good hedge against a currency crisis or strong inflation. Stocks and foreign currencies are far more liquid than bullion.

Having said that, it’s not a bad idea to have 5-10% of your portfolio in precious metals. Secular trends are favoring a likely increase in value. The problem with doomers is that they bet the entire ranch on it.

#101 Pr on 01.19.11 at 12:45 pm

You think all this mess happen by accident, think again! Here are a few quotes of some historical figures.

“In politics, nothing happens by accident. If it happened, you can bet it was planned that way.” Franklin D. Roosevelt, US President 1933 – 1945

“Some of the biggest men in the U.S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.” Woodrow Wilson, US President 1913 – 1921

“The individual is handicapped by coming face to face with a conspiracy so monstrous he cannot believe it exists”. J. Edgar Hoover, FBI Director 1924 – 1972

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford, 1923

#102 Mr. Lee on 01.19.11 at 12:45 pm

Mr. Turner is correct and I feel we will see bi-flation. Increases in fuel, food, and taxes, defaltion on debt purchased items.

As for gold and silver, in my opinion, hold no more than 15% in precsious metals. Use the silver ratio if 1 to 16 (16ozs of silver to 1 oz of gold) ….. by this ratio silver is either undervalued or gold is over valued.

#103 wetcoaster on 01.19.11 at 12:48 pm

As per previous comments about GlobalBC TV continuous pumping the real estate market via the Liberal party influence, here’s an intersting tidbit this morning on the former solicitor general possibly facing criminal charges and how they used GlobalTV to promote him into the limelight to get that position. Talk about disgusting and shady !!

“The warrant also exposed a revealing email exchange between Sall and Global TV reporter Catherine Urquhart.”

“I can honestly say Kash would not be SG [solicitor-general] today if it hadn’t been for some key people behind the scenes,” Sall wrote to Urquhart on June 10, 2009.

“There were only truly 3 people that played a major role: Me, Peter Dhillon and yourself and Kash knows this,” he added.

“Peter was the money guy, I’m the brown tanned James Bond strategy girl chasing guy and you were like the communications director … your stories, coverage and timing gave Kash a lot of profile and built him a following from day 1 at West Van and then leading into the election.”

In response, Urquhart wrote, “Hey … that’s really sweet of you ….

“I’m truly glad it worked out!”

“Global News director Ian Haysom said on Tuesday he had not spoken with Urquhart about the email exchange and declined to comment.”

Yesterday a Global news reporter charged with child sex crimes, today evidence of another for political influencing ! What a cesspool !!

http://www.timescolonist.com/news/Former+solicitor+general+Kash+Heed+facing+possible+criminal+charges/4132041/story.html#ixzz1BV1Ayqpd

#104 Devil's Advocate on 01.19.11 at 12:54 pm

#97 Worldwide

RE: “Nothing. Both owners are sitting around hoping the bricks gain value just by sitting there.”

It isn’t the bricks which gain in value it is the place you need to store them while waiting as more and more do the same demanding more bricks (gold or mud) to store which in turn puts pressure on the limited resources used in their production and places to store them. And in the face of that increasing demand and limited resources prices rise. Get it?

Until world population abates expect such apparent irrational behaviors to continue. But peel away the thin veneer of that seemingly irrational behavior and you will find an infallible and ever present logic.

#105 doctore on 01.19.11 at 1:04 pm

The desparation from the mortgage brokers and real estate agents is coming to ahead. They see their revenue drying up, and like any person that will see their $ income decrease due to gov they will fight back. However this is the good for all not just a small special interest group like them.

http://news.ca.msn.com/top-stories/cbc-article.aspx?cp-documentid=27314442

#106 Bill Muskoka (NAM) on 01.19.11 at 1:05 pm

Garth,

That picture is truly priceless. ROFLMAO!

#107 young & foolish on 01.19.11 at 1:15 pm

Had a conversation with my landlord …. the property was bought years ago, with little down, and has been nearly paid off by us renters ….
I asked him why he does not sell and take the profits. He said “But I am getting returns on my initial investment now that I could not dream of achieving in any other market”. His advice: Buy where people will want to live (not always easy to predict), and get someone else to pay for your mortgage. Oh, and Real Estate investing is a long term plan, much like building a small business …. as a landlord, you are providing a necessary service (housing).

#108 Kevin in Winnipeg on 01.19.11 at 1:21 pm

Everyone gets into excessive debt at one point or another and learns from their mistakes. Canada is obviously not learning or listening. I think this is the first time in Canadian history in which a majority of the population is binging on credit at the same time.

This even pails in comparison to the over-leveraging of the stock market in the 20’s and 30’s when leverage was 10 to 1. Today, mortgage rules allow 20 to 1. We all know how that story ended. I think we are in for a gradual major decline of wealth in Canada.

#109 Dave on 01.19.11 at 1:22 pm

#72 Cookie Monster: http://i.imgur.com/7OIQi.jpg

#110 Mean Gene on 01.19.11 at 1:22 pm

Richer than you think = Dumber that you know.

#111 BigAl (Original) on 01.19.11 at 1:25 pm

#45 Catalyst on 01.19.11 at 3:02 amI’m not one for proselytizing to people who don’t want to get it. I’ve been telling people that the housing market is overinflated and unsustainable since before the US crashed. Me? 33, ~$110k in the bank, $0 debt. At this point I just want to watch the idiots burn.
=====================================

Not that great.
My friends bought a house when they were 24 in 2000. More than half paid off now and fully paid in another 5 years, and then no rent forever.
Keep enjoying your constant moving and landlords. 110K is not a great cushion.
Don’t let the talk on this site fool you. Renting and staying out of housing is not the right decision, every time, for all people. Sometimes buyers lose, sometimes renters lose. Size up your own situation, and seek opportunities. Never run with any pack.

#112 calgary64 on 01.19.11 at 1:37 pm

is it time to get out of bonds as everyone is suggesting? rates will surely rise so bond prices will surely fall. it does seem reasonable to sell bonds now and then buy when rates have stablized. sticking to asset allocation does not seem right when the above is a foregone conclusion?

If you are not an experienced bond trader, be careful. It is way more complicated than that. — Garth

#113 pablo on 01.19.11 at 1:50 pm

“The cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canada’s current account deficit to a 20-year high,” the bank said, reiterating the statements issued in its interest rate announcement one day earlier.At a press conference Wednesday morning, Bank of Canada Governor Mark Carney said turning that situation back in Canadians’ favour amounts to, “a big hill to climb.”

Talking to reporters in Ottawa, Carney said, “We have not made the productivity gains that we would need in order to retain market share, let alone gain market share.”

How will bofc be able to raise the overnight borrowing rate with this kind of analysis in place?

He raised them three times last year, amid similar conditions. Rates will rise. The credit bubble will be addressed. — Garth

#114 BigAl (Original) on 01.19.11 at 1:58 pm

#97 Worldwide on 01.19.11 at 12:17 pm#49 Worldwide “I heard a good joke today:

Q. What is the difference between a pile of red bricks and a pile of gold bricks?

A. Nothing. Both owners are sitting around hoping the bricks gain value just by sitting there.”

I read it and laughed out loud again. It’s quite the “deep joke” The Greater Foolishness of each group is uncanny!

What a classic joke! Please share it.
=======================================

So nobody has ever made money on real estate…ever?

#115 prollywrong on 01.19.11 at 1:58 pm

john on 01.19.11 at 2:29 am

so we shall keep paying for rent for 2 more years until the housing correct….so we will be paying more for rent for 2 years plus the more expensive interest rates… what a strategy

————————————-

well, if you’re in the lower mainland of BC and can’t find a comparable house to rent with monthly saving of 40% or more over owning it…then yeah, your strategy sucks.

#116 pablo on 01.19.11 at 2:05 pm

#11 crash callaway. oh snap! nice one.

#117 Junius on 01.19.11 at 2:11 pm

#16 tiffa,

Thanks for the Post. Ben Radioux is very smart. He makes a good case that the chances of Chinese immigrants holding up the market are not good.

#118 Junius on 01.19.11 at 2:13 pm

#38 hoof hearted,

Re: Chinese New Year.

You have yet to learn that the plural of anecdote isn’t evidence.

There are many Chinese immigrants in Vancouver that have less than is required for a down payment and normal working jobs.

#119 Western Canadian on 01.19.11 at 2:20 pm

“With deflation the value of money rises. Get ready. — Garth”

If deflation is occuring as you suggest, than the Bank of Canada’s inflation target rate of 2% will not be reached, and the Bank of Canada will not raise rates.

The mandate of the Bank of Canada is to target an inflation rate of 2%. If inflation is less than 2% rates are cut, if its above rates are increased.

Once again Garth contradicts himself.

#120 Paolo on 01.19.11 at 2:28 pm

Pump! Pump! Pump!

“Home resales strong despite January slide”

http://www.moneyville.ca/article/924425–home-resales-strong-despite-january-slide

No Kidding!

“Fewer Canadians 18 to 34 have RRSPs, bank poll finds”

http://www.moneyville.ca/article/924476–fewer-canadians-18-to-34-have-rrsps-bank-poll-finds

#121 Devil's Advocate on 01.19.11 at 2:28 pm

Today is the First Day of the Rest of your Life

Those who are familiar with Kelowna know only too well how the winters can be predominantly overcast and grey. Big White ski hill isn’t called “Big White” for no good reason and it isn’t necessarily the snow.

This winter has brought us many bright sunny days and today was is one of the better of them. Speaking with someone about this recently it was commented “oh but you can be sure we’re gonna pay for it” as they expounded upon the environmental downsides of global warming or climate change. This person completely ignored the here and now benefits of such a glorious day. What a waste.

Who knows what tomorrow will bring? All that we have is here and now today. You may not be here tomorrow to enjoy it so appreciate what you have, there is always someone somewhere who would gladly trade places with you.

Enthusiastically embrace each new day as the First Day of the Rest of your Life and respect, appreciate and live it as were it the Last Day of your life.

#122 Business Unusual - the BUN on 01.19.11 at 2:29 pm

Garth, living Vancouver do we have a lifetime of renting to look forward to or just another 10 years?

Which post/book can I read more about that? What’s the formula?

Is the formula as simple as – IF it costs you less to rent than buy then rent?

Because the “I’m not buying because the real-estate market is a bubble” line I’ve been using has backfired on us big time for the last 5-6 years.

#123 Devil's Advocate on 01.19.11 at 2:34 pm

And if you are so content with your life that it neeed needs no improvement, maybe take a moment and help someone less fortunate see what value there is in their life too. Do that and you will be surprised to learn how lacking your day had been until then.

#124 Carlyle on 01.19.11 at 2:53 pm

Update — townhome in Milton listed yesterday, 1 buyer came through

Day 2: 6 Buyers coming through today

Not sure what’s going to happen but happy at least buyers are still out looking.

#125 Mikey the Realtor on 01.19.11 at 2:55 pm

slow melt = waiting forever to buy your house, and while you wait keep paying that landlord, I’m sure he appreciates it. On the other hand you can always gamble your house money in the casino market and make that 6% while the downside it 30. I know, I know, get an experienced advisor, who will find ways to remove 50% of your profits in the name of fees.

#126 Devil's Advocate on 01.19.11 at 3:08 pm

“He raised them three times last year, amid similar conditions. Rates will rise. The credit bubble will be addressed.” — Garth

Interesting; “The credit bubble will be addressed”. That is an interesting approach. A peeling away of another layer of veneer exposing mechanisms which drive and are driven behind the face and hands we see as marking the passage of time. We plan our day in accordance with what we see not what is. For even a broken clock tells the right time twice a day.

It’s not the house; it’s the land hidden beneath it. It’s not the land; it’s the demand for a place to put the house. It’s not the price but the willingness to pay. It’s not what you see but what makes the illusion appear reality.

Who caused the “credit bubble”? Why? And what card do they have still up their sleeve? ;-)

#127 Devil's Advocate on 01.19.11 at 3:10 pm

And “no”…

I haven’t smoked any BC Bud in years. Months anyway. ;-)

#128 terry D on 01.19.11 at 3:32 pm

After the Budget an election will be called for this Spring 2011
Its a done deal “Fed Election Spring 2011”
Liberals want a fall election but NO Way. wHY…
ECONOMY IN 2011 WILL BE HIT HARD DUE TO PERSONAL dEBT AND Housing Correction. Harper is No Idiot. This Spring is the last Kick at the Can….

#129 C on 01.19.11 at 3:37 pm

# 86 Thirsty,

Carney can raise short term rates, the bond market sets mid to long term rates.

1% is below the rate of inflation creating negative real rates which is very inflationary. We have the hottest housing market in the world (in a nutshell), therefore he should raise rates at least above the current level. Manufacturing in Canada has left the building and therefore catering to it with concerns of an elevated Loonie is an 80’s mindset. Raise them rates Carney…..raise em. Mind you keeping short term rates low and watching longer term rates rise, gives his banking buddies big lending spreads = big profits. He is after all Golden Slacks alumni.

#130 UrbanCowboy on 01.19.11 at 3:37 pm

Not sure if anyone saw this but here’s a cool little simple to use mortgage calculator:

http://www.usdebtclock.org/mortgage-loan-calculator.html

#131 Hoof Hearted on 01.19.11 at 3:40 pm

#114 BigAl (Original) on 01.19.11 at 1:58 pm#97 Worldwide on 01.19.11 at 12:17 pm#49 Worldwide “I heard a good joke today:

Q. What is the difference between a pile of red bricks and a pile of gold bricks?

A. Nothing. Both owners are sitting around hoping the bricks gain value just by sitting there.”

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

New punch line:

….and they shite bricks when they find out the truth.

#132 VICTORIA TEA PARTY on 01.19.11 at 3:47 pm

HU’S COMING TO DINNER? YEP…

When the Head Shed of the world’s newest empire rides into Dodge, the first thing to do is ya gotta do whatcha gotta do, Pilgrim.

Waiting outside the White House Hotel (now laundering cash and cheques for pennies a piece) was Mr. Genuflector himself, the current resident Mr. O.

Oh my, what a day for Mr. Hu as he checked out his latest colonial outpost and its population of overfed spoiled brats and bellyfloppers.

What’s the new Emperor to do? Well, how about reading the Riot Act. Yahoo News has all the details!

WASHINGTON – Chinese President Hu Jintao says the U.S. and China must respect each other’s sovereignty, territorial integrity and development interests.

Hu’s opening comments…at the White House focused on areas of cooperation between the two world powers, their common interests and mutual economic and security benefits to be gained.

But Hu’s emphasis on China’s sovereignty was an indication that there are areas where China will be unwilling to bend to U.S. interests.

Hu referred without elaboration to “some disagreements” in the economic and trade area, which he said the two countries would aim to resolve. The U.S. believes China’s currency remains undervalued and is concerned with the trade imbalance between the two countries.

Other news reports say some of America’s most influential “leaders” are trying to cut deals with China’s new and growing elite.

As for that new J20 Chinese stealth fighter/bomber (as in where the Hell did THAT come from?), the technology is Russian apparently…apparently.

The US dollar has been doing poorly against that other currency stomach-ache, the Euro, possibly due to the China visit. And a host of other things.

On top of that Mark Carney our central banker whines about Canada’s low productivity and high dollar opining that US GDP willl outstrip Canada’s this year, or next, by a full percentage point!?

How can that be? Where will the US find new growth? From federal government spending? More food stamps? Corporate American profits made in China (hello GM)?

Eveything’s turned upside down and backwards.

And in Canada, we have the young and the feckless dashing into their mortgage brokers to tie themselves down to more 5/35s.

Talk about financial Armageddon coming shortly.

The only good news is the high Canuck Buck, driven by commodity prices, until the great deflation occurs after, first, the great inflation.

Oh, BTW, the Baltic Dry Index indicates high seas container ships are travelling empty across the great oceans, one way, after dumping their Chinese made stuff on Western Shores.

Hu’s watching this, too, I expect.

#133 fancy_pants on 01.19.11 at 4:17 pm

I am not going to pump doom and gloom, but for heavens sakes, there are those who simply continue to pump sunshine.

Many posts on this blog portray clear evidence that some folks refuse to take of the rose coloured glasses.

#134 Cookie Monster on 01.19.11 at 4:19 pm

A good talk on the best years of the gold standard in the USA “The Gilded Age and the Gold Standard Thomas DiLorenzo The Gold Standard Revisited”

http://mises.org/MediaPlayer.aspx?Id=3783

I like how he refers to the opponents of the gold standard as ‘lying scoundrels’!

The gold standard is about sound money and honesty. Image how much trouble we could save ourselves if we had sound money once again, no more FX worries, no more inflation/deflation bickering (at least much less), no more adjusting for inflation, real returns, adjusted returns, destruction of the penny, naturally falling prices resulting from productivity improvements etc.. on and on.

#135 Hoof Hearted on 01.19.11 at 4:23 pm

As bubbles deflate as pre-emptive move to stop a sudden burst, one can see more and more stories of slimeballs and corruption ooze out of the Bullshite dyke(that fragile wall between the general population AND the vested interests and people we previously thought were on OUR side)

Caught the story re Kash Heed and the Global reporter. A bit shocked, but after about 5 seconds…add it to the shelf.

Yeah I know, “innocent until proven guilty”, but is this just sheer arrogance? A reporter who’se career is to publically out other people and yet has this secret life….don’t they understand “karma”?

Heed , a few yars ago,was a trophy catch for West Van PD…seemed to be a good reform -minded artist( though West Van cops have the lowest work loads via stats )…..least amount of crime.

However Heed apparently forewarned a colleague that one the West Van citizens they both knew would be up on child porn charges….Heed then left…..and went into politics which wasn’t exactly his best career move. The article discusses the cops have it in for Heed, as there seems a lot of glee in RCMP investigating Heeds last campaign.

What this is continually exposing is the old boys club, either OBEY the rules…or you are out.

That begets the question, of what we do NOT see behind the often taxpayer funded walls of CLUB( ” old boys ” )PRIVILEGED I sense the dyke wil burst with all sort of more sordid things forthcoming ……as old scores get settled…… and lawyers go fishing in this uncharted water… So eithe rmore rot gets exposed or it sends a message to the rest of the club to STFU and thus the rot gets worse and deeper.

#136 Hoof Hearted on 01.19.11 at 4:30 pm

#131 VICTORIA TEA PARTY

Hu’s on 1st

….Wah’s on 2nd

…..and Ido-Gno is on 3rd.

#137 gary on 01.19.11 at 4:49 pm

Garth I’ve got a TFSA question for you. Could I transfer shares I have In my cash account to my wife’s TFSA I know about the capital gains trigger if i transfered it into my own, but mine is already maxed out
thanks

Sell them, give her the money and she can repurchase in her TFSA. — Garth

#138 Shawn Petriw on 01.19.11 at 4:53 pm

From G&M story – Fewer aged 18 to 34 have RRSPs: poll

“The bank says 56 per cent are more focused on regular payments to reduce or eliminate debt, 45 per cent save for a rainy day and 44 per cent prefer home ownership.”

A lot of kids are going to pay.

http://www.theglobeandmail.com/globe-investor/personal-finance/fewer-aged-18-to-34-have-rrsps-poll/article1875285/

#139 Hoof Hearted on 01.19.11 at 5:03 pm

118 Junius on 01.19.11 at 2:13 pm#38 hoof hearted,

Re: Chinese New Year.

You have yet to learn that the plural of anecdote isn’t evidence.

There are many Chinese immigrants in Vancouver that have less than is required for a down payment and normal working jobs.
=============

If you are going to pontificate based on stats(ie like Landcor) that are easily misinterpreted, what deabte ensues.

In the early to mid 1980’s(Pre EXPO 86 ) I worked with a lot of SFH builders on Vancouvers West Side. One builder, Asian, was a small East Side builder. Most of these buiders were ma and pa…build 2 -3 houses a year.

However, post Expo…building took off exponentially. The builder I mentioned, within a few years, ended up being one of THE biggest West Side builders. Ond day they should me their projects list and they had about 20 on the go….between start and near completion.

They were up front and said they worked for “investors”. I met one who lived in a very humble looking house built in the 1950’s. They would “fund” the projects and sell them to new Hong Kong immigrants. I wasn’t sure if the Investor was using their own $$$ or simply ” laundering it “. This company simply built for Asian investors who flogged and flipped them.

I personally knew the past president of the Vancouver Homebuilders Association, who was a banker and probaly never swung a hammer in his life. He always took offence at the Asian money issue, and claimed it was racism. He is a very nice guy, but not stupid, and simply wanted to deflect the issue ie he never denied the Asian money aspect.

Since 1997, post H/K , IMHO, the market to cater to Asian money(mostly Mainland China) has shifted to Hi Density. Call it what you will…maybe a “quasi stock-split ?”….condos versus SFH…can be flogged more easier, and a cheaper capital investment to get into the country.

That’s why pre-sale is used…I am sure that buying a condo 1-2 years before its built is another version of a investment qualification for entry into Canada.

SFH aren’t flogged like this…its CASH ASAP…No SFH builder is going to take 10% down and wait 1-2 years, its a much quicker process demanding more REAL cash up front.

That UBC “Hospice” protest resonated to me as a rare chance to see who actually lives where via the demographics of the protest group. The news stories suggested Condos near $1 Million.

So, Expo 86 brought in a wave of foreign investment via scared money from Hong Kong. After mainland China made it pretty clear ” Business as Usual “, many more newly rich Asians taking advantage of China’s capitalist system simply followed the lead of Hong Kong pioneers and the supply line has continued unabated.

Expo Land sale to Li Kai Shing was debated as a scam….
, but in hindsight connect the dots. MOST people in Metro Vancouver had no real clue of the wave of Hong Kong expats arriving here. However, Li Kai Shing’s blessing of Vancouver via his purchase of Expo lands for $50Million was likely a pre-meditated catalyst negotiated in the back rooms to lure his countymen to BC.

This nouveau riche culture is so entrenched in Metro Vancouver its like whats the difference betweem here and the old country ,simply a Cathy Pacific flight?

#140 jess on 01.19.11 at 5:04 pm

Mr Harper made me nervous about the extra cops on our city streets. Watch frontline and you will see why. Fusion centers costing 420m. dollars. Wow the wrongly labeled fed into the databases here sound worse than the robo signing data bases that correlate

================
stock market security bubble terrorist industrial complex. Watch this and you will see why catholic nuns are now considered terrorists.

…fusion centers (security) boom in real estate. Hey those buildings are like icebergs …four stories above with most of the skyscraper below.

http://www.pbs.org/wgbh/pages/frontline/are-we-safer/?utm_campaign=homepage&utm_medium=bigimage&utm_source=bigimage

#141 boomer62 on 01.19.11 at 5:18 pm

#127 Devil’s Advocate on 01.19.11 at 3:10 pm

DA, this bud is for you;

To be sure of hitting the target, shoot first and call whatever you hit the target.

Cheers
by bye, buy

#142 Edmontonian on 01.19.11 at 5:19 pm

Reality setting in here in Edmonton.
Elite MORTGAGE investor in Edmonton losses tens of millions of Edmontonians money…

http://www.vancouversun.com/news/Tens+millions+missing+from+Edmonton+mortgage+firm/4128831/story.html

#143 calgary64 on 01.19.11 at 5:25 pm

Garth, I am not a trader at all. And I am being careful! I am just trying to preserve my savings first and foremost and then grow them conservatively (after tax) if I can. Hence the question. I know there are other factors (such as relative risk reward of all opportunities around the world) and in current heavily manipulated markets old common sense principles do not seem to work. My money if with Beutel Goodman and PH&N bond funds who have returned over 6% over the last 10 plus years but as someone suggested that it was in a declining rate scenario. Current YTM is close to 3% which a GIC can match. Is it better to add cash to preferreds and stocks even though they are close to their all time highs? Thank you.

I suggest you read my book. Without balance, you invite tears. — Garth

#144 totalchaos on 01.19.11 at 5:27 pm

# 38 Hoof Hearted

Re: Chinese New Year

I laughed when I read your “evidence” of the Chinese take-over. My block is covered in New Year’s decorations, but all the “Chinese” are born and bred in Canada and married to non-Chinese. I don’t think any of them have even stepped foot in China. Another little factoid – none of us are planning multi-million dollar purchases, nor do any of us have granite counter tops.

The racism of some posters is only matched by the misogyny of some others. Perish the thought if you are a Chinese woman of child-bearing years who works in banking! They are really the ones who have caused this bubble!

#145 pablo on 01.19.11 at 5:41 pm

Economists expect the central bank to resume hiking its rates this year. But the communique from the bank signalled that it won’t be moving until around the middle of 2011 at the earliest.
From Malcolm Morrison, The Canadian Press, January 18, 2011 – 4:52 p.m.

It’s not a matter of if but when they’ll be able/willing to raise rates.

#146 Bill Grable on 01.19.11 at 5:44 pm

This is exactly what Mr. Turner is talking about – check this from the USA – *dedicated to ‘the best place on earth’ dweeb:

The single biggest problem in the U.S. real estate market is simple: There are very few homebuyers.

That seems obvious, but the “buyers’ strike” has caused house prices to drop, along with an epidemic of foreclosures. What’s worse, the long depression in real estate is probably not over. S&P has forecast that home prices will drop by 7% to 10% this year.

The S&P Case-Shiller Index has dropped for most of the 20 largest real estate markets over the last several months. RealtyTrac recently reported that more than 1 million homes were foreclosed upon in 2010.

Many economists argue that the housing market may take four or five years to recover.

Even if that’s proven to be true, the all-time highs of 2006 may never be reached again.

http://tinyurl.com/5rgqsk6

#147 Paolo on 01.19.11 at 5:46 pm

Yes, our present lending standards are already too tight, I agree. It’s Canada, it’s different here.

“Lending standards may already be too tight: Mortgage group”

http://www.cp24.com/servlet/an/local/CTVNews/20110119/110119_mortgage_debt/20110119/?hub=CP24Home

#148 Still waiting on 01.19.11 at 5:46 pm

This vulture is dying waiting for the market to die. Don’t listen to Garth, renting sucks unless you’re in a major market.

#149 Herb on 01.19.11 at 5:54 pm

Election? Whot election?

Brampton-Springdale MP Liberal Ruby Dhalla’s campaign suffered a major setback yesterday when several of her core team members crossed the floor to join Conservative candidate Parm Gill’s growing camp of dedicated and loyal supporters.

The core team that once embodied Ruby Dhalla’s campaign now supports Parm Gill, stating that he is the right individual to represent their community and Brampton. They now stand behind Parm in the next election – forced to cross the floor because of the false promises, community mistreatment and overall failure of Ruby Dhalla to represent her constituents.

And the source for this political bombshell? Parm Gills’ website, brought to national attention by http://www.nationalnewswatch.com/

Boys oh boys, this is gonna be the best election yet! Richard M. Nixon is grinning in his grave.

#150 SRV ES339 on 01.19.11 at 5:55 pm

“With deflation the value of money rises. Get ready. — Garth”

The only deflation will be in home values and wages. It seems much of Big Ben’s “free money’ is going to commodity investment (JPM has cornered the Cu market) instead of the prefered taget (stocks and bonds… bankers woul eat their young for a buck). Prices will continue to rise until the printing stops (not likely)… especially food and grains.

Oh, and gold and silver of course… the Sprott Silver Bullion Fund was selling at an amazing 25% premium to NAV two weeks ago… the metal market (not the Comex paper) is very thin, keeping pressure on the prices (the paper market is all that’s holding PM prices down… for now).

“The only deflation will be in home values and wages.” With most people’s net worth in a house and families already strapped for cash flaw, isn’t this bad enough? — Garth

#151 john m on 01.19.11 at 6:15 pm

H.F. and C have created this mess–no one else! Now they are sweating trying and praying they can ease us out of this mess and save face…it’s not going to happen, “things are different here” is no longer coming from their mouths…. H..will do anything to push an election now and keep power before it becomes apparent to all what a total mess they have made and the hardships they have created for so many. Real estate which was always a pretty solid investment in Canada is no longer…….Propaganda,easy credit and outright lies from the people we should be able to believe have created this.

#152 hobbitt on 01.19.11 at 6:22 pm

This is an interesting thought I hadn’t considered before. I have always heard that the American market had fallen by 24%, but that only counts houses that have sold.

The US has an unprecedented inventory of hundreds of thousands of homes, often empty, sitting on banks’ books, unsold and unsellable. If there was a way of charting the value of these, and incorporating it into average US house prices, the falls from the peak would be much greater.

#153 Herb on 01.19.11 at 6:27 pm

Pst, fesnaris (#61)

Harper IS the housing bubble, via Flaherty’s compliant fiscal “management”.

That’s the relation to housing.

#154 Vancouver_bear on 01.19.11 at 6:29 pm

#6 TheBestPlaceOnEarth on 01.18.11 at 11:56 pm

Sure, the Sun will rise and shine on the Neverland RE King’s (aka Nostri) naked bottom…so the world will see that the King (aka Nostri) has no clothes…..Pot is dangerous, I predicted it 1,000,000 years BC.

#155 Mtl RE Observations on 01.19.11 at 6:51 pm

How the Government Caused Overinvestment in Housing, from The Atlantic

http://bit.ly/eNV8Zs

#156 SRV ES339 on 01.19.11 at 6:55 pm

“The only deflation will be in home values and wages.” With most people’s net worth in a house and families already strapped for cash flaw, isn’t this bad enough? — Garth

———————————————————-

I agree, it is absolutely catastrophic Garth, and this PC government must shoulder much of the blame… your story about the AIG rep lobbying you in your House of Commons office (literally) sent a chill down my spine.

BTW, sent an email to F yesterday asking when we would get his apology for inflating the bubble (and hurting so many) after admitting the error of his ways… don’t worry, to ease his conscience (?), I let him know I wasn’t holding my breath.

#150 Hobbit:

Bingo… the only reason it wasn’t well over 50%! And of course the banks get to keep the original sale price value on their books…”the better to pay bonuses my dear”… no problem, just a little accounting rule change done over a weekend for the poor bankers.

#157 Live Within Your Means on 01.19.11 at 7:21 pm

#107 young & foolish on 01.19.11 at 1:15 pm
Had a conversation with my landlord …. the property was bought years ago, with little down, and has been nearly paid off by us renters ….
I asked him why he does not sell and take the profits. He said “But I am getting returns on my initial investment now that I could not dream of achieving in any other market”. His advice: Buy where people will want to live (not always easy to predict), and get someone else to pay for your mortgage. Oh, and Real Estate investing is a long term plan, much like building a small business …. as a landlord, you are providing a necessary service (housing).
………………

We’ve known a contractor for 20 yrs who has 11 rental properties, some just around the corner from him. He’s quite the character. Portrays himself as a reg. joe but is really savvy. Told us about problems he’s had with tenants and took them to court and won. His main biz is digging foundations, etc. with large equipment. Also contracts w/the muncipality for snowplowing. Has a grandfather clause on his property to house his heavy equipment. He works hard & long hours, but you’d never meet a more cheerful guy.

#158 Nostradamus Le Mad Vlad on 01.19.11 at 7:36 pm

#121 Devil’s Advocate — Excellent post, and so very true! “Who caused the “credit bubble”? Why?”

There are forces far superior to us tiddly-little humans. In this case, it is better the devil we don’t know, because if it were the devil we do know, none of this would have happened in the first place, and we would already have our ownn Bunkers.

Nothing like being caught flat-footed. The Gods Must Be Crazy!

#131 VICTORIA TEA PARTY — “HU’S COMING TO DINNER? YEP…”

Only fair. After all, China owns this continent, so it makes for cordial relations to invite the boss over for dinner!

#139 jess — dubya started the basics of the Police State in the US when he trashed their constitution, and Obama has taken it much further far more quickly than anyone expected.

While sheeple were sleeping at the wheel, the head honchos have turned their country into a prison camp. Harper and his followers are in the process of doing the same here.

“With deflation the value of money rises. Get ready. — Garth”

Is this statement a hint to ever-increasing inflation which could lead to hyperinflation? HI seems to be a politically-motivated event, deliberately engineered to keep the present party in the driver’s seat.

It is not particularly good for humanity but, as said before, we sheeples are just collateral damage and are expendable (see depopulation).

One can never say never, because as DA said in post #121, nothing (except death and taxes) can be taken for granted in life.

If HI should come about as a result of unknown forces, it will hit hard and quckly, and some stand to gain plenty from it.

#159 Daniel on 01.19.11 at 7:52 pm

I just spent 15 min writing a comment and when I finally finished Chrome crashed and my comment was lost. So now I will keep it short and straight to the point. I find something interesting to read on your blog every time I visit it. Respect!

#160 Two-thirds on 01.19.11 at 7:53 pm

#48 Thetruth on 01.19.11 at 4:14 am

This is truly frightening… increasing the CHMC balance sheet to now secure boatloads of debt accumulated by Canadians who used their houses as ABMs in the last decade.

There seems to be no place to hide, we are all taxpayers and when the inevitable unravels, both financially responsible and irresponsible alike will pay for the latter’s mistakes.

Truly depressing, if you have avoided becoming a debt slave by choice, you will become a tax slave to pay for everyone else’s unbridled, unearned largesse.

How to protect oneself against this? Other than the goldbugs, what are people with actual money and no liabilities to do?

#161 Junius on 01.19.11 at 7:58 pm

#151 hobbitt,

You are assuming the US has hit bottom. Most analysts think it has a further to go. In some markets another 20% or more.

#162 Markey on 01.19.11 at 8:04 pm

Ohmygosh! Did you see the latest on moneyville? Apparently we should be more like the pre-Hindenburg Americans, not less: http://www.moneyville.ca/blog/post/924090–an-easy-way-to-lower-household-debt

#163 Roial1 on 01.19.11 at 8:18 pm

#111 BigAl (Original) on 01.19.11 at 1:25 pm

My friends bought a house when they were 24 in 2000. More than half paid off now and fully paid in another 5 years, and then no rent forever.

Yes Al, your friends did well——— in 2000.

It is a VASTLY differant price world out there now.

I bought, in 2001, an apartment building. It has been a great investment, up till now.
I sure as hell would not do it in todays price climate.
Further, I can’t sell it today (illiquid) because the price to rent ratio is so out of whack.
I do get a fair return on my initial investment ONLY because I bought in 2001 at the price of that time.

“Never run with any pack.”

Especially if the rest of the “Pack” consists of real estate agents.

#164 cellar dweller on 01.19.11 at 8:33 pm

@#138 Hoof Hearted
Sorry to disappoint you.
Li Kai Shing didnt “buy” the former Expo 86 lands he borrowed the money ( remember, he was a Billionaire!)from the BC Govt for 25 Years INTEREST FREE. Then he immediately sold half the property to offshore investors( read “More Asian Billionaires” here) for the same price he”bought” the land for. He then took that money and invested it elsewhere instead of paying off his INTEREST FREE LOAN.
Meanwhile the taxpayers of BC had to pay to clean up the old Expo site due to the 75 years of toxins dumped into False Creek from the old pulp mills, smelters, etc. that had originally occupied the site.
Unfortunately, Bill Vander Zalm, the premier at the time, was too busy defending himself in the media and eventually the courts due to HIS “real estate” deal selling a tacky tourist “fantasy land’ to another Hong Kong millionaire. Paper Bags of money changed hands at a restaurant during that particularly tawdry affair. His interpreter was Fay Leung , his realtor for the whole sale. He then refused to pay her commision when it all became public………. She sued.
So, as you folks out there can see…. not much has changed in 30 years of BC politics.
Corrupt corrupt corrupt.

#165 ballingsford on 01.19.11 at 8:35 pm

Renting does not suck while I wait for the housing correction. I don’t have any credit card debt that I can’t pay off at the end of the month. The only debt I have, I guess, is the payments on a new AWD for the next 5 years at 1.9% interest. Easy to handle for me. Also able to save 20% of Net pay bi-weekly. Able to eat lavishly since I like cooking healthy and hearty meals on the stove and in the oven that I don’t have to pay hydro for. Landlord pays for the electricity and heat so my big screen or cranking the heat to keep warm comfortably is not a concern.

I was once $25,000 in credit card and Line of Credit debt and it wasn’t a nice feeling even though I managed to pay off that debt eventually.

What gets me though is the folks who are in deep debt and barely getting enough cash together to scrape by pay their mortage, heat, hydro, groceries, gas, etc.

I went to fill up the car the other day, cost about $60 and then I bought eight items at the grocery store and it cost me another $60 bucks.

Fuel and Food must really be becoming a burden on some folks.

I feel more for the elderly who are living on fixed incomes than for the young and reckless who think they are entitled to everything!

#166 cellar dweller on 01.19.11 at 8:41 pm

And now we have the other half of False Creek costing us a cool $800,000,000.00 for more condos. Does False Creek have some old Indian curse attached to it?
Geez! fill the fricken thing with cement from the plant at Granville Island and be done with it……. at least the skaeboarders will be happy.

#167 cellar dweller on 01.19.11 at 8:43 pm

Hey Devils Advocate !
Any Kelowna cops pull ya over and kick ya in the face ?
just askin.

#168 ballingsford on 01.19.11 at 9:00 pm

One thing I forgot to mention is that I don’t have a lot of money. The money is sitting in CSB’s paying .65% interest. Garth, I know this would provoke a “I’m losing money with that investment” approach, but I’m OK at the moment that it isn’t losing money and it’s liquid. I’m just trying to find out what ETF to invest in a TFSA. Can you help with that? No way am I going to go into RRSP’s. The tax deferrals now won’t benefit me or my survivors in the future.

BTW, I’m also putting $2500/year into an RESP in mutual funds for my 3 year old son. I probably should be putting them into something else, such as an ETF.

I read ‘Money Road”, but I’m not the sharpest tool in the shed.

#169 Hoof Hearted on 01.19.11 at 9:07 pm

#107 Kris on 01.18.11 at 10:55 am

Anyone thinking there will be mini boom until the new 30 year max takes effect is essentially saying that buyers are complete idiots.

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

They are …..

F , Harper Re-Max , MSM etc. etc.are probably pulsing the situation as they have laid the economic bait with an expiry date.

They’ll see the reaction….and react accordingly. They may have projections re the demand, but this will rattle the last few potential buyers sitting on the fence.

The election and future FED strategies will hinge and/or be laid out via what happens .

In Metro Van…the numbers may be skewed via the Chinese New Year…..where there may be a surge of sales and MSM claims all is well…thus baiiting others to join in…

#170 Nostradamus Le Mad Vlad on 01.19.11 at 9:11 pm


Time Magazine Another reason to not waste money on this pathetic rag. GC and GW covered from 1970 to 2010. Plus — The cause of GW and GC, aka CC.

3:43 clip This is what we are paying our military’s top brass to do?

Drought and Oz floods “Australia was told to prepare for droughts as a result of climate change, and let down its guard against flooding, writes Christopher Booker.”

WW3 What will cause the next recess- depression.

Urban War Curious heading. Are the joint militaries preparing for a lock-down of this continent?

0:55 clip
“The vast majority of gun-owning citizens are pretty cool people.” wrh.com. Interesting; the store owner stopped a robbery by holding a gun to the robber, then gave him $40 and bread.

Fairy Tale there go flu jabs!

FOX News Far and balanced lies, distorting and / or rearranging facts.

3:56 clip Politicos are the problem, not China or anyone else.

JPM, Foodstamps and GS. CitiGroup Oh dear. The bonuses may not be that great after all.

Diary of The Exorcist In the very early ’80s, someone between N.Y. and Philadelphia found one of the copies of the diary, then went public with it. There were less than a handful of made, and it is possible that the Vatican still has the original.

The demonic possession of the boy didn’t last long, but the first Jesuit priest was carted off to a mental hospital for quite a while. After all the publicity was over, the copies were burned, but it seems someone forgot to burn this letter! (Garth was a gigolo at the Toronto Telegram then.)

GMAC Cancels some foreclosures. “This is a big win against bank fraud…”

Evidence At last, Phoney Tony Blair (and his dodgy dossier) are caught out.

Forged Commercial Paper “Maybe China has their own bubbles, or maybe someone who is even now declaring the US is at economic war with China, and unable to improve the US economy, has decide to sabotage China’s!” wrh.com.

Brazil “Brazilian oil deposits below a layer of salt in the Atlantic Ocean hold at least 123 billion barrels of reserves, more than double government estimates, . . .” Next US invasion!

Shelf Life of Food “Those sell-by dates are when the food STARTS to lose quality and in many cases the food inside is still good. In these hard economic times it is wise never to waste food when you do not have to.” wrh.com.

Backup Plan for when the dollar collapses. Virginia.

Monsanto Detrimental to good health. Avoid it like the plague.

2011 Fiscal Meltdown “The US economy is a boat with ten holes in the bottom and only five corks, and the only thing the politicians do is yank a cork from one hole and pound it into another in full view of the press cameras while screaming, “I am working on the problem!” wrh.com.

#171 Hoof Hearted on 01.19.11 at 9:20 pm

#143 totalchaos

I still don’t you denialists get out much.

There is a distinct difference between Asians that have arrived here post Expo 86 and those who were in BC before that(with the exception of those born here post Expo 86 and have blended in nicely).

The new comers have a derogatory term for the more established 2nd ,3rd , 4th etc. generation Asians…they call them ” Railway Workers” ie old CPR railway labourers.

In the political realm, I’ve seen up close during campaigns the catering done to sequester ethnic votes….

Anyway…you (and other denialists) and I may as well agree to disagree

#172 Pete on 01.19.11 at 9:23 pm

Realtor are running scared as they know Canada is in the biggest housing ponzi in the world. Word is sales are down over 40% mid-January for the GTA which is why they refuse to release the numbers. All vested interests are crying and hoping they can produce as much propaganda to sucker in the last sub-prime greater fools. Canada housing ponzi is BIGGER then the tip top US housing bubble and C , F , M all know it. Talked to realtors and mortgage buddies and the feeling inside is worry .

#173 pablo on 01.19.11 at 9:28 pm

http://www.youtube.com/watch?v=L2lOigsnzH0&feature=player_embedded#!

Watch this piece from presstv regarding increased/ing unemployment in the u.s. now 5 prospects/job vacancy vs less than 2 prospects/job vacancy in 2007.

Doesn’t look like their economy is improving despite the rhetoric (read as b.s.) coming out of the whitehouse.

#174 Anotherlowlyrenter on 01.19.11 at 9:35 pm

@ two-thirds

I love your question – it’s a fear of mine since I moved to Canada. I’ve got capital but unwilling to compete with the 0%-down crowd cuz I’ve got something to lose.

There are ways to (try to) hedge yourself, but you need to either be financially astute or work with somebody who is b/c if you don’t know what you’re doing you will be crucified from the following suggestion: I am talking about hedge funds and option strategies.

Another option is to adopt a little of the ‘if you can’t beat them, join them’ with a twist. You can consider putting a bit of money that would have gone into a house into assets that are affected by similar factors. For instance, when people ask me why I rent and not own. I tell them that I took the money that would have gone into a property and put it into REITs and bank stocks. If you do the math, you’ll see that the dividend yields are still higher than you would achieve if you bought a property and rented it out. They actually look jealous when I spell out my positive cash flow and my capital gains YTD. Of course no hedge is perfect … the correlations are not perfect – and there are other risks. One risk to remember is that REITs do carry leverage so $1 of equity exposure would get you more than $1 of asset exposure.

#175 Devil's Advocate on 01.19.11 at 9:37 pm

#165 cellar dweller on 01.19.11 at 8:43 pm

Hey Devils Advocate !
Any Kelowna cops pull ya over and kick ya in the face ?
just askin.

One bad apple and… and he hasn’t been proven as guilty as that quite yet although that video is quite damning.

You got any idea what any given cop puts up with in the performance of his/her duties day in and day out? There is a seedy side of our society you haven’t a clue about. I am sorry about what happened to Buddy Tavares and I am sure Constable Mantler will pay a price, but let’s not paint the rest of the force with that prejudgement brush.

#176 Edmontonian on 01.19.11 at 9:37 pm

To #147-still waiting
You say renting “sucks”. Where are you from. Not Edmonton I imagine. Nice 1 bedrooms DT near LRT from $725 month. I choose to live in a highrise with huge balcony large storage space, stunning dt & rivervalley views. Beautiful hot tub, amazing workout room with TVs on all the equipment $924 per month on a 1 yr lease. I can’t buy a 1 bedroom in a building that’s this well run anywhere in the city. And, any comparable buildings to buy are looking at a $200,000 price tag plus $1800 in taxes a year & $350+ in condo fees.
I sold my old place for $239,000 exactly 1 year ago. It’s worth $211,000 according to the city. I am making about $550.00 a month on the $200,000 cash I’ve invested to I’m saving more money renting than owning with no mortgage!
I may never buy again! Rent went up about 90%-100% in Edmonton over the last 20 years, but housing prices went up 400%. It was ridiculous. Prices will errode for years in the city-if not a whole decade. They’ve over built so much in the city-you should see all the empty units in buldings built 4 or 5 years ago that have never even had a tenant yet!
Real Estate has peaked in this city. SOme people are going to learn a terrible lesson!

#177 Devore on 01.19.11 at 9:44 pm

#160 Markey

Ohmygosh! Did you see the latest on moneyville? Apparently we should be more like the pre-Hindenburg Americans, not less: http://www.moneyville.ca/blog/post/924090–an-easy-way-to-lower-household-debt

Of course! The way to throw the little guy a bone is to increase the federal deficit by making mortgage interest tax deductible, which will be ultimately bridged by increased taxes on everyone, effectively subsidizing home owners. Don’t these guys get enough tax breaks already?

If the little guy is feeling the squeeze, he should start by downsizing his lifestyle perhaps.

#178 Junius on 01.19.11 at 9:50 pm

#169 Hoof hearted,

What is it that you don’t “get” about us denialists? Or better yet – What is it that we should get?

Your stories meander around through the decades and contain anecdotes but they don’t establish a point.

Your implication seems to be that the financial character of the new Asian immigrant is such that they will continue to support Vancouver’s inflated housing market forever and a day. Is this what you believe? Or is it something else?

So far you have been far from persuasive.

#179 tran, Calgary on 01.19.11 at 9:58 pm

End of Euro? … Ireland Prints Own Notes

http://www.thedailybell.com/1690/End-of-Euro-Ireland-Prints-Own-Notes.html

Did Ireland learn from U.S. Fed?

#180 Carlyle on 01.19.11 at 10:01 pm

Update: have an offer. Will find out in 20 min what that offer is. Possible 2nd offer too.

8 buyers through today 1st day on market. 3 more scheduled for tomorrow.

#181 TheBestPlaceOnEarth on 01.19.11 at 10:02 pm

Downtown eastside will be bulldozed and sold offshore. Finally. This is creme de la creme downtown land. So many people want to live in BPOE and land is like the dinosaurs non existent. Watch before your eyes as billions and billions of dollars pour into this SuperStar location
http://www.vancouversun.com/business/Highrise+towers+will+damage+Downtown+Eastside+Mike+Harcourt+group+says/4134997/story.html

#182 Carlyle on 01.19.11 at 10:13 pm

My realtor was shocked at the activity … Guess the new mortgage rules spooked some buyers.

#183 Another Albertan on 01.19.11 at 10:21 pm

#141/Edmontonian:

Just an FYI, in case there is some confusion…

Peers didn’t live in the Glenora mansion mentioned in the article. I grew up with the Peers kids and lived about 200 feet away in Middle Class Suburbia on the south side of town.

My mom called me about this story last night. Interesting to say the least!

Everyone else’s mileage may vary.

#184 dradak1 on 01.19.11 at 10:23 pm

#91 Bottoms_Up on 01.19.11 at 11:51 am

” Name an area of Canada where rent exceeds the cost of ownership. — Garth
——————————————————
Ottawa’s close, if not a good example of this. Rents anywhere near downtown go from $1600-3000/mo. My place could rent for $1800/mo, and it costs me about that for ownership.”

I hate liars – personally – renting place in Ottawa 3BR for $1,200, adding a bit more you can cherry-picking.

#185 BDG-YYC on 01.19.11 at 10:28 pm

159 Junius on 01.19.11 at 7:58 pm
#151 hobbitt,

“You are assuming the US has hit bottom. Most analysts think it has a further to go. In some markets another 20% or more.”

:-) Chicken feed … the first 20% to come off was $100K-ish … the last 20% is $15K ish in some markets. Half of nothing rule is in effect at this point :-)
.

#186 T.O. Bubble Boy on 01.19.11 at 10:31 pm

Vancouver wants to be Macau now?

http://www.vancouversun.com/business/Vancouver+city+council+gives+initial+approval+massive+casino/4131028/story.html

#187 S.B. on 01.19.11 at 11:14 pm

I wonder if these types tried a take down of the blog?
Or maybe they stick to the tried and true ‘concrete shoes’, in the foundation of a new condo…

Crime rife in Que. construction industry: union
Last Updated: Wednesday, January 19, 2011 | 10:21 AM ET Comments41Recommend30.
CBC News
Organized crime has infiltrated every level of the construction industry in Quebec, according to the head of the construction wing of the Quebec Federation of Labour.

Yves Mercure said Tuesday that only a public inquiry can solve the problem, and he will not be running for re-election when his term ends next fall.

In an exclusive interview with Radio-Canada, Mercure was unequivocal about crime.

“It exists at all levels,” he said in French.

Read more: http://www.cbc.ca/canada/ottawa/story/2011/01/19/mtl-contruction-criminals.html#ixzz1BXZqSK1f

#188 Ignorance on 01.19.11 at 11:21 pm

#97 – A. Nothing. Both owners are sitting around hoping the bricks gain value just by sitting there.”

Reminiscences of a stock operator – “It was always my sitting that made me money not my trading”

I’ve been sitting on my gold for over 7 yrs. I am laughing out-loud actually.

Ignorance

#189 BigAl (Original) on 01.19.11 at 11:40 pm

Is it just me, or does anyone else see China as another “too good to be true” story? There’s just something about that whole economy that doesn’t seem right. Kind of like the same feeling about the Canadian housing market.

#190 Increasing that 1% on 01.19.11 at 11:51 pm

178, 180. Carlyle,

Wouldn’t that mean it may be priced too low?, according to agent who put my place on MLS, and ‘sold’ it, said that situation would be an indicator. But, otoh, agents say the first offer is usually the best…hmm, which one’s correct…
Let the agent do their nasty tricks now, earn their commission, and reputation–(sorry to any ‘good ones’)
Stick with your gut though, so you make a decision without regrets
Goodlllluck!

#191 youngandthrifty on 01.20.11 at 12:41 am

#56-
Hey guys, thanks for considering my blog popular! I understand that there may be conflicting/confusing information out there about real estate. I’m planning to live in my place for 10+ years.

I guess comments like the one you just posted compels me think twice about posting my “net worth” for the public to see anymore.

#192 Agio on 01.20.11 at 10:34 am

BigAl @ 111
#45 Catalyst on 01.19.11 at 3:02 Me? 33, ~$110k in the bank, $0 debt. At this point I just want to watch the idiots burn.
——————————————————————–
Not that great.
My friends bought a house when they were 24 in 2000. More than half paid off now and fully paid in another 5 years, and then no rent forever.
Keep enjoying your constant moving and landlords. 110K is not a great cushion.
Don’t let the talk on this site fool you. Renting and staying out of housing is not the right decision, every time, for all people. Sometimes buyers lose, sometimes renters lose. Size up your own situation, and seek opportunities. Never run with any pack.
====================================
BA-You make some good points, most of which will be overlooked given the overall tone by posters here. Not Turner’s by the way-he targets a very specific group, those maxed to the nuts. Why people don’t read what he writes before typing is an interesting interweb disease.
First, I’d say that 110k @ 33 is nothing to sneeze at given the majority of peoples situation. That being said, by stating his financial position and that others who disagree with his philosophy etc. are idiots Catalyst types with the exuberance of youth where you’re so stupid you think you’re smart. I’ve been there.
I agree with you- good points(probably because I agree with you) Every persons situation is different and they should adjust and act accordingly. Real estate isn’t evil, owning a home isn’t evil, provided you are intelligent about it. I’ve seen many who aren’t and are either underwater or a sprained ankle away from going broke. It is a huge mistake to assume anything about the value of any real estate just as it is paper profit in any investment be it gold or etf’s or high quality Russian porn DVD’s. You haven’t made squat until you’ve sold.
Principal residences are a different animal given they are highly illiquid-a non-performing asset at best and many many people today consider it their investment. Turner always speaks to this and the ridiculous debt many are carrying. Many posters ignore this of course and only seek validation from like-minded individuals or want to spew bullshit. Odds being they neither have the resources or brains to execute their grand stratgies. Everyone will get different mileage and opportunities come in many forms.
It was a sensible commentary you made. A rarity.

#193 Tony on 01.20.11 at 4:05 pm

#40 Deadmonton

No inflation just deflation like in the city of Deadmonton
http://homes.point2.com/CA/Alberta/Edmonton/Calder/22863260-Real-Estate.aspx