Accident waiting to happen

About the time Saturday morning I was being trashed on BC’s flagship radio station, Jen and Bruce were landing in Charleston. It made for an interesting contrast.

On CKNW’s business show, local real estate guru Ozzie Jurock was talking about multiple offers in Richmond and Vancouver, comparing housing to gold (both ‘undervalued’) and dismissing a report last week warning Canadian property could lose a quarter of its value. “This happens every year,” Ozzie snorted at pliant host Michael Campbell, brother of the now-toast premier. “Garth Turner wrote a book two years ago forecasting dire things to happen in 2009 and 2010 that of course did not happen.”

By the way, a single family home in Vancouver last week hit an average of $1.14 million. The average family income in that city is $83,300. That’s a multiple of 13.6. The American real estate market collapsed in 2006 when the multiple touched 4.6.

After cabbing it downtown Bruce and Jen walked a few blocks through this pleasant South Carolina city of 124,000. It was sunny, 15 degrees, and it took ten minutes to arrive in front of the home they had researched back in Toronto on It took twenty-eight more minutes to buy it in a private deal, for $365,000 US. The arts-and-crafts bungalow is totally renovated, in a superior neighbourhood, with polished concrete counter tops. a guest cottage and a double lot adjacent a major park.

“The owners were really relieved to sell,” Jen says, “and after 900 days on the market, no wonder. But we fell in love with the place and were able to pay cash after selling our inflated suburban box in Mississauga. We have enough cash left to rent a condo in downtown Toronto for about twenty years, to boot.”

Jen says the best part was when they were leaving, the owners gave them an appraisal for the property, dated July of 2007. It was for $528,700. They also said, “We are very grateful for Canada.”

Over the last three years the average house price in Charleston, has declined by about 20% and now stands close to $200,000. Over the same period, Vancouver real estate has inflated by 25%, making it one of the most unaffordable cities in the world. North of the city, in Whistler, where property values have fallen about 10% since the Olympics, the average place now costs about $800,000. “Some of these resorts,” Jurock said on the radio, “are smoking deals. Outstanding deals.”

Of course, Vancouver is not Charleston. Phoenix is not Calgary. Toronto’s not Chicago. America is not Canada. But we would be incredibly unwise not to use the American experience to prepare for what comes next in this country. Those who listen to people like Jurock, or Royal LePage’s Phil Soper, or the Re/Max dude, Michael Polzler, do so at their peril. There’s little doubt what the coming months will bring.

Did I start this warning more than two years ago? You bet. And since then the danger has augmented. We’re now more in debt, less liquid, more leveraged and less diversified than we were when the financial crisis hit. Instead of learning lessons at the edge of the abyss, we turned our back and repeated every misstep American families took. Goaded on by cheap money, irresponsible lenders, dumbass politicians and sheer herd instinct, we’ve become the materialistic, greedy house porn addicts we once disdained.

Most people will never come here, read this, or even consider themselves at risk. How they react to the inevitable is an open guess. But when the majority of people believe something, it’s time to leave town.

Among my correspondence of the last few hours are these three notes. I suggest you read them. We are an accident waiting to happen.

Garth – I thought you might be interested to know about this:

I live in North Central Calgary in a pretty nice area of starter and move up homes. In the circle next to ours, there are 6 vacant homes – those houses have been vacant since at least last fall (that’s when I first noticed them and started paying attention). A couple are for sale, a couple are signed as “Rent to Own”, and two are in foreclosure according to signs posted on the door. Our circle has at least two more vacant/abandoned? houses and there’s a couple more out on the main street. Everywhere I look is a “For Sale” sign popping up or another empty house. I’ve never seen anything like it here.

However, it is familiar. I was in Indianapolis about 6 months before the SHTF in the housing market there. It looked an awful lot like my neighbourhood does right now. We didn’t know what we were seeing the first time around in Indianapolis – there just seemed to be an awful lot of houses for sale and a lot of vacant properties. This time, I think we know what we’re looking at.


Hello Garth,

I live in the US; however my husband is from Toronto, Canada.  When we go to visit Canada, our friends and family always ask about the housing crisis in the US and tell us how different it is in Canada; I can’t believe how naïve they are.  I have tried to tell them, but what’s the point, they don’t listen.

I stumbled across your blog a few months ago and I couldn’t believe what you were saying; you are 100% right on target.  I remember in 2006 seeing the same news paper articles I am seeing in the Canadian papers now; housing will soften and there is no bubble.   I wish I had a dollar for every time I heard this in the US, for I would be a millionaire right now.

I have tried to explain to my friends and family that Canada is no different than the US.  You can’t continue to use your house as an ATM machine and expect you can pay it off by selling your house in the future.  Does no one look at what is still happening on the south of the border? Does no one learn from other people’s mistakes?


Garth : I hold a couple of rental houses in greater Portland, Oregon, from my days there. Just rented a custom built 1800 sq ft home on 2 acres in one of the distant burbs there, for 1250/month, slightly below market price (1300). There was a feeding frenzy of calls to my agent and it rented in less than 24 hours. – Market price is about 260,000. Plenty of able renters, but fractured financing and fear prevents many from being buyers. Indeed, the previous tenant told me he never wanted “to take on the risk of owning a house again.”

In GTA, I rent a 600 sq ft. one bedroom new condo for 1200 and a quarter of the building is empty, unrentable and probably held by “investors”(in these times, the greatest of the greater fools), with more coming on the market in a new series of buildings next door. Current retail asking price is 250,000. Plenty of able (and foolish) buyers, but few able renters to fill them.

I’m lucky in that I’m at the stage where 1000,1200,1400/month, doesn’t really make that much difference to me, but I’m sure that’s less than 1 out of 10 renters of the available pool. And no doubt, by switching floors in six months, my rent will be going down.

Guess which way prices are going to go in both markets. Oh I forgot, things are different here.