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 Zillow.com. 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.

Wendy

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?

Gretchen

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.

Harry

192 comments ↓

#1 S.B. on 02.06.11 at 11:12 pm

DA is just here to collect leads and greater fools! He is the wolf in sheep clothing.
Watch as he re-hashes every line from his Zig Ziglar and NLP tapes.

Kelowna is a dying resort/service town at best, with no industry to speak of. Hundreds of realtors fight over a few dozen listings. MLS supply is at scary levels.

Yet, he fights to mantain the façade, that thin veneer, of success.

Calling clients is he? WHAT CLIENTS?? Combing the daily obits. to pick up estate sale listings is not “finding clients”.

I’d imagine the area’s many many realtors have already called their bankers for arranging a HELOC. Those toys, the Ipad and X5, are not gonna last…

#2 S.B. on 02.06.11 at 11:21 pm

Finally, an interior picture of your Hummer!

#3 dd on 02.06.11 at 11:21 pm

ahhhhh … you were saying …

#4 Devil's Advocate on 02.06.11 at 11:40 pm

#1 S.B. on 02.06.11 at 11:12 pm
DA is just here to collect leads and greater fools! He is the wolf in sheep clothing.

Watch as he re-hashes every line from his Zig Ziglar and NLP tapes.

Kelowna is a dying resort/service town at best, with no industry to speak of. Hundreds of realtors fight over a few dozen listings. MLS supply is at scary levels.
Yet, he fights to mantain the façade, that thin veneer, of success.

Calling clients is he? WHAT CLIENTS?? Combing the daily obits. to pick up estate sale listings is not “finding clients”.

I’d imagine the area’s many many realtors have already called their bankers for arranging a HELOC. Those toys, the Ipad and X5, are not gonna last…

How? I am anonymous. Of course I am never too busy for your referrals S.B. just flip me an email to my anonymous email [email protected] ;-)

Kelowna is not “dying” and never will… you can bet on it. “Hundreds of REALTORS® fighting over a few dozen listings”… fighting – yes, a few dozen – hardly. MLS supply is just fine.

“Thin veneer of success”? If my success was so thin that veneer would have been pealed away years ago.

The obits are lost clients not a source of new.

X5? Question: What’s the difference between a BMW and a rose? Answer: BMWs have the pricks on the inside. The iPad is a work tool as is the car I drive for work both bought with logic not emotion.

But you are right as I too “imagine the area’s many many realtors have already called their bankers for arranging a HELOC.” Difference between you and me is, as much as it will benefit my business, I’m just not finding such gleeful pleasure as you in seeing their painful failing. But then I am happy and secure in where I am at and wish only the same for others. You clearly are not.

#5 Tim on 02.06.11 at 11:41 pm

Kelowna being a dying resort town is an understatement. We skied at Big White last week and rented a relatively new condo right near the lift. The building was about ten percent occupied! The hill was almost deserted until the weekend, when the locals from Kelowna showed up (it was still very quiet). Many yanks bought condos there five years ago when their dollar was high, before they reaped the pain of president pin head’s tax cuts to the wealthy, which did nothing to stimulate the economy. One condo owner was desperate enough to drop the rental rate by more than $50 per day, and still had trouble renting the place out. Now that construction is toast, what’s left? Wineries and golf courses? How many jobs do these create?

#6 SmithBarney on 02.06.11 at 11:44 pm

VaVaVa Voooooom
Yekity yekity nyuk nyuk globble globble…..
I’m in love!

#7 T.O. Bubble Boy on 02.06.11 at 11:44 pm

Of course, Vancouver is not Charleston. Phoenix is not Calgary. Toronto’s not Chicago. America is not Canada.

If Toronto were Chicago, Barack Obama would live in a place like this $850k dump:
http://www.realtor.ca/propertyDetails.aspx?propertyId=10296022&PidKey=1221696867
or, this tear-down:
http://www.realtor.ca/propertyDetails.aspx?propertyId=10313098&PidKey=474800054

Instead of his $830k mansion:
http://www.zillow.com/homedetails/5046-S-Greenwood-Ave-Chicago-IL-60615/50904051_zpid/

#8 T.O. Bubble Boy on 02.06.11 at 11:47 pm

… and – someone should tell that innocent-looking girl in the pic to wear a seatbelt!

#9 McSteve on 02.06.11 at 11:48 pm

Your illustrations were slipping. Nice recovery.

#10 herbie on 02.06.11 at 11:50 pm

May I be the first to say it, Garth you have outdone yourself with this blog entry…Well specifically the pictures….dynamite….excellent work…keep it up!

#11 Kevin on 02.06.11 at 11:55 pm

Comparing the United States and Canadian housing markets with some economic measurements

A few economic housing measures show that the Canadian housing market is worse than the Americans were at the peak. Granted, Canada should not fall as hard as the Americans, but previous housing market busts in Canada had stricter lending and households did not have the debt load as they do now.

The only big difference between Canada and the US is consumer sentiment. Americans will barely touch a median priced house at $170,000 while Canadians are falling over each other for a house at $330,000 even though incomes and interest rates are close in both countries

The trigger to bust the housing bubble: Consumer Sentiment

#12 Elmer on 02.06.11 at 11:56 pm

Hubba hubba! You could do Shakespeare off of that balcony!

#13 TS on 02.06.11 at 11:57 pm

I understand Vancouver also has the highest personal bankruptcies. Hmm, wonder if there is any correlation.
Probably not according to Ozzie Jurock who apparently does not care about anyone but himself.

#14 vicguy on 02.06.11 at 11:58 pm

Hi fellow bloggers, I must admit my patience has been reaching a point of depletion, since the anticipated housing prices correction scheduled by our mentor 2 years behind the US one has been stretching to an unbearable length. Just as I was ready to throw in the towel, the latest Garth’s posting miraculously energised me and you can count me in for another few months of participation. Hopefully, more quality pics will show up when my patience gets reduced again.

#15 Herb on 02.07.11 at 12:00 am

I’ve seen those big, lovely eyes on this blog before.

To warm the cockles of DA’s heart, here is a real estate story that happened to-day. Daughter of a friend listed her condo on a Sale-by-Owner site for a price that we thought totally unrealistic and insane. After months of open houses without nibbles, a realtor pops in to-day with an offer $2,500 below the outrageous asking price on behalf of a young couple. Seller grabs pen. Happy end?

Yes, and no. Buyer’s agent tells seller that the young couple is pre-approved for a lot more than necessary for the purchase, and to sign the offer back at the $2,500 higher, then pay him 1% commission on the sale and commit to using him as buyer’s agent in a future purchase. Seller agrees since it’s no skin off her nose and she still gets more than she had any right to expect.

Everything you’ve heard about real(wh)ores seems to be true. It used to be “buyer beware”, but sellers better look out too.

#16 Ron S on 02.07.11 at 12:04 am

http://www.curriebarracks.com/main.html#singleFamily.swf

Open house is a weekend sport in Calgary. I was looking “Currie Barracks” this weekend and cheapest single family ( no backyard/front yard) is 800K+ and 2 feet away from your neighbor home. There are more than 20 cars in 4 open house (by builder). My offer is 400k.

#17 Rick in Japan on 02.07.11 at 12:05 am

Hello Garth,

It is a sunny 15ー here in Kobe (western Japan — city of 1.7 million, surrounded by mountains and a harbor), and I had a friend of mine recently wish to purchase a house here ask me for advice. The price was six times his income. Oh, that was his monthly income. So, that means that he would be buying a fixer upper for about half a year’s salary. Should he buy it? Well, I told him he was stupid if he didn’t.

This was to illustrate what 20 years of declining economy and real estate prices look like. I’m not saying that it will happen in Canada, but I am saying it’s happening where I’m living right now. But, an interesting phenomenon seems to be taking place. There are mainland Chinese buyers in the market for high-end and commercial properties in the city. All that seems to be rather familiar (!?)

By the way, haven’t had time recently to contribute to the blog, but I do try to read it when I get a chance.

Rick

#18 House Horny on 02.07.11 at 12:06 am

I do agree that this will be slow and painful. But the issue is far more complicated for some depending on how much they plan to borrow. Just waiting for the bottom is not necessarily the best time to buy. You have to factor in both price and interest rates. The best 5 year fixed right now is 3.46% which is really really good.

Here is an over simplified example. I have assumed ZERO down, full value of the house is mortgaged, interest rates will stay the same for 30 years, and the average GTA house price is $450,000, and interest rates are 4% today. Your monthly payment will be $2139.83 for 30 years and the house will cost you $770,338 dollars principal+interest.

Next lets assume the market is slow and painful and the market corrects 25% and the same house is now worth $337,500 but interest rates have skyrocketed to the moon and are now 7%. The same house bought at a discount will now carry for $2222.79 per month for 30 years and will cost you $800204.40

In this case Garth is 100% right but by waiting for prices to fall and interest rates to rise it will cost you $30k more plus what any have spent on rent while you waited

If the correction is slow and painful than it will be like robbing paul to pay peter. Whether you will be further ahead all depends on interest rates when the market hits bottom. If other things remain equal and 2 years from now interest rates on a 5 year fixed are still 4% and there is a correction most on this blog will be much further ahead. If on the other hand prices have fallen 25% and interest rates have moved higher there was no advantage to waiting.

Currently I am mortgage free but live in a very very small house and want to upsize. A friend of mine who works at a bank says the banks can’t raise interest rates or the foreclosure rate will rise. The Bank of Canada plays to its own tune so you never know what they will do with rates.

On the subject of full service vs discount agents you have to really do your homework. A discounted service will end up costing you far more if they have low balled your house. Obviously they have to cut corners some where and price is usually where they do it.

With thinking like that, no wonder you’re horny. — Garth

#19 Cory on 02.07.11 at 12:06 am

I come here for the articles.

#20 Outlier on 02.07.11 at 12:07 am

Hey, you finally posted a picture of DA’s wife!

#21 Real Estate Deal or No Deal on 02.07.11 at 12:15 am

I tell my wife I read your blog for the content … honestly, honey. I do.

#22 Ross on 02.07.11 at 12:17 am

OMG, she’s not wearing a seatbelt!!!

#23 EJ on 02.07.11 at 12:22 am

“are smoking deals. Outstanding deals.”

Only for the seller and the agents. The buyer takes it in the stinkhole. But who cares about them, right?

#24 Antonio on 02.07.11 at 12:23 am

Is it my imagination or has there been an explosion of open houses this week? I live in the Beaches in Toronto. There were hardly any signs last weekend and this weekend they are every where!!! The big question is whether the buying hordes were there as well. February data will be interesting. I want prices to go higher very quickly. The higher they go the further the fall.

#25 Jay Currie on 02.07.11 at 12:23 am

Down my leafy Victoria street there is a rancher up for 1.3…Been on the market for at least a year. But walking the hound, I ran into the next door neighbour who also wants to sell. And three doors down another house is at the edge of the market. And two doors past that are a couple in their early seventies who have to be looking at selling their 4500 square footer.

Price is the inverse of supply. Supply is about to rise.

#26 Mean Gene on 02.07.11 at 12:25 am

CKNW is BC’s Bitch Whine and Bellyache radio station & I don’t listen to them.

#27 City Slicker on 02.07.11 at 12:25 am

Good post Garth. I like hearing people’s stories from the US, gotta love the power of the internet! Whats the likely scenario with smaller Cities in Alberta, think they’ll be hit harder than Calgary/Edmonton, or less harder cause they weren’t as inflated as much due to the oil boom?

#28 Throwstone on 02.07.11 at 12:28 am

Garth,

I agree. Can you speculate on what factors will cause consumer sentiment to significantly turn the market?

Thanks

#29 BC Bring Cash on 02.07.11 at 12:30 am

Come on Garth. You’ve been warning us about this bubble for more than 2 years. How about at least since 2005. I heard you being interviewed on CBC radio about this issue back then. However, how could you have predicted the 0/40 and almost free int. rates. It’s taken a little longer to tank than you predicted, however you were right on the money. At the time I was considering an investment property in Kelowna and chose not to based on your advice. I could have been another Greater Fool. 2005 prices were way off the mark, now even more wacho.

#30 SophieZombie on 02.07.11 at 12:36 am

There is absolutely no problem on the West Coast !
:)
”No mortgage payment for six months” , living in Maple Ridge state-of-the-art home is free up to 2012 ! So buy now, pick your colours and options then move in this June and Epic H. funds the value of your mortgage payments until 2012*

If it is so cheap and popular , why do ”Epiclowns” need to pay a full page advertising in the Province and Vancouver Sun ? Maple Ridge is surely better than Milton. Further away from it’s closest center, and having his own very active ghetto.

http://www.epichomes.info/p2blog/2011/02/a-great-start-to-2011-2/

http://www.abbotsfordtimes.com/news/Ridge+drug+dealer+sentenced+five+years+sexual+assault/4232969/story.html

#31 City Slicker on 02.07.11 at 12:42 am

I saw a guy on BNN talking how Canadian banks are so stable they are the envy of the world. Lets see how they look 6 months from now. And he’s not the first to say something like that.

#32 nonplused on 02.07.11 at 12:48 am

Is that one of the girls who details your Harley and Hummer? OMG, you are paying way more than me! No wonder you spend so much time supervising their work.

No worries on the timeline Garth, the economic collapse in 2008 SAVED the Canadian housing market, whish was showing severe signs of stress and price reductions in all cities including Vancouver. But then came near zero interest rates combined with the previously installed 0/40, then 0/35, no limit CMHC loans verified by current interest rates rather than multiple of gross income. It was heavy handed interference in the market that you could not have predicted and that the Fools gobbled up.

It did kick the can down the road a few years, but that’s all it did. Sooner or later, you always run out of new Ponzis. It’s the nature of the beast. I don’t know what the maximum sustainable home ownership rate in Canada could be, but it isn’t 200%. It isn’t 100%. It’s going to be less than 80%, I think. Since we are at an all time high at 70%, history would indicate we might be over the maximum now. But either way, somewhere out there in reality lies a maximum even if it’s hard to put an exact number on it notionally.

This is why I disagree with your premise that a recovery in the economy will finally kill the housing bubble. Not that I dispute the logic. IF we get a strong economic recovery, rates WILL rise, and you will be CORRECT. But I don’t see said economic recovery just yet. So I think the housing bubble is going to die on its own, of old age. If interest rates do rise, either to tame inflation or in response to a recovery, that could hasten the go down, but the go down will happen either way. Continued zero interest rates and no economic recovery is just as potent a game changer as your economic growth scenario.

But you cannot be faulted for missing the economic collapse. A few people, Mish, Roubini, Schiff, Sinclair, Celentee, Rogers, and maybe a few more were adamant something nasty was coming, but they were for the most part ridiculed and included on CNN as a position for other commentators to mock because things were going so well, DOW to 36,000 baby!

#33 Jeff Smith on 02.07.11 at 12:50 am

Holy Smokes!

#34 Lexie on 02.07.11 at 12:55 am

My dilemma: Talked to my tenants about possibly selling the house and they were talking to a neighbor who offered them his house so they gave me notice for the end of February. My chance to find a greater fool. Similar houses are listed for $440K, went through two open houses yesterday to check out the competition, spotless, showhome condition. House is in a new urban sprawl type community. My house is on a ¼ acre lot, nearly three times the average lot size for the area which allows it to offer a little something extra than all the other cookie cutters. The condition of my house isn’t the greatest. It’s only 8 years old but it needs paint and new flooring. I listed it privately for $380K and have had a lot of interest, and possibly a reasonable offer this week and one lowball offer yesterday (claiming the house needed alot of work). Should I sell for $380K (take it and run) or do the painting and new flooring myself and stage it to look like a showhome after the tenants leave and try to sell for $415K privately? (still under the competition but with a huge backyard). This would give me an extra $19K in my pocket for my troubles but the house probably wouldn’t be ready till end of March. Any opinions or experiences to share?

#35 Benji on 02.07.11 at 12:57 am

Daaaaaaaaaaaaaaaaamn are those leather bucket seats?

#36 buylow on 02.07.11 at 12:59 am

the SUV is not moving – no seatbelt needed and if she doesn’t get some support, she is going to sag like house prices

#37 Devil's Advocate on 02.07.11 at 1:00 am

#20 Outlier on 02.07.11 at 12:07 am
Hey, you finally posted a picture of DA’s wife!

Nope… my wife has a more “athletic” build than that. “The Survivalist” reminded me of her for more reasons than you guys can know. Not a boob man, but you boys have fun with that.

#38 Kitchener1 on 02.07.11 at 1:03 am

You would think that Canadians would have caught on by now, but no. Guess we must be a dense bunch.

Lets see

Waterloo is different because of the universities/tech
Milton is diff because its close to Mississagua?
Guelph is different because its close to Milton?
Winnipeg is different cause?
Everyone want to live in Van city
Calgary is diff because of oil?
Montreal, Halifax etc.. are all different.

Reminds me of

Nortel is diff because its got assets
Bre x is diiferent because its got minerals
Pets.com is diff cause 100 PE is the new paradigm

LOL

Its always diff when your invested in the asset class, but no matter what all bubbles end the same way.

#39 Dave in Victoria on 02.07.11 at 1:03 am

#18 House Horny on 02.07.11 at 12:06 am

For that analysis to work you’d need to factor an interest rate rise after 5, 10, 15, 20, 25 years following the initial cheap rate mortgage.

I that case it takes only 5 years for the cost of a cheap mortgage renewed at future higher rates to surpass current costs and the overall carrying cost of the mortgage.

Bottom line is that housing is not affordable, and renting for the average Joe not currently in the market still makes more sense than purchasing. The scales to seem to be heading toward a tip though.

Either way, your taking it in the place described by #23.

#40 Einsam Solo on 02.07.11 at 1:13 am

Ozzie Jurock is a guru alright. A guru of delusion.

#41 Junius on 02.07.11 at 1:18 am

Wow. Great dress.

I just need to figure out how I can screen grab the picture before the political correct crowd freaks out and Garth changes it tomorrow.

#42 Burnt Norton on 02.07.11 at 1:19 am

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.

——————————————————————-

Could an affordability multiple of 13.6 suggest that there are less tangible although still highly relevant factors bearing on the Vancouver market beyond just the average (local, declared, present generation) family income, lax lending and low rates?

Everyone here keeps dissing the offshore / undeclared / dirty money theories (for which there are by definition no stats). So where else is the friggin’ money coming from? Rich mommies and daddies? Asian bubble? QE2?

BTW, sweet pic. Definitely worth a sideways glance, although plastic surgery is no different from real estate in that gravity always wins (hat tip to Radiohead).

#43 Patz on 02.07.11 at 1:20 am

Getting antsy for the plunge? Don’t worry when the skids are truly greased time’ll speed up to a blur. You’ll be saying, “Seems like just yesterday the market was just grinding along.”

#44 Junius on 02.07.11 at 1:27 am

Live within your means (from previous blog),

Yes, I was being facetious with the real estate will save us line but was also being serious as well.

The entire credit binge of the past few decades has hypnotized our entire society into thinking everything was great and we were all getting rich. Meanwhile the fundamentals of our economy were being destroyed, our productivity and innovation was being curtailed and we were allocating our resources to the wrong things.

The despotic monopolies we have created in media and technology will now become another impediment to moving our society back towards a road to recovery. We should be up in arms about this and so many issues that will impact our ability to recover but we just don’t see them as important. Not yet.

Meanwhile people are sitting around fixated about the price of their homes and arguing about who has a bigger HELOC all the while believing “it is different here.”

A society of deer looking into multiple headlights.

#45 Memories on 02.07.11 at 1:31 am

“That’s a multiple of 13.6. The American real estate market collapsed in 2006 when the multiple touched 4.6.”

I think this just demonstrates that making Canadian economic forecasts using foreign countries as benchmarks doesn’t work very well.

Why don’t we compare mortgage debt ratios between Canadians and the Chinese? Oh yeah, the Chinese don’t have mortgage debt.

http://www.businessinsider.com/chinese-mortgage-debt-2010-12

“Of course, Vancouver is not Charleston. Phoenix is not Calgary. Toronto’s not Chicago. America is not Canada.”

Apparently that statement isn’t that obvious since everybody seems to be making the unfounded comparison.

“Did I start this warning more than two years ago? You bet.”

The boy who cried wolf is an interesting childhood story. Lots of investment lessons in there.

This blog tells a tale of U.S. residents who love Canadians. What is not to love? Canada is the best! We are clearly the economically strongest of the G7 nations – not even the rising CAD or unemployment was able to stop the upward climb of our GDP.

Some cite how bond yields are rising so those with fixed rate mortgages might feel the pinch. So what? I don’t think I know anybody who isn’t variable and Carney and Flarhety won’t allow short rates to rise any time soon. All my co-workers have ridiculously low variable mortgage rates; if they have any mortgage at all.

As I menitoned before, my peers in the late 90s were able to purchase one or two (sometimes three for a friend who was particularly brazen; we should have been smart enough to do the same) condos for $250-$300 p sq ft. We lived in one and rented out the others to individuals who felt that real estate was ‘over priced’.

We didn’t argue with their assessment – hey, if they wanted to rent because they ‘felt’ that real estate was ‘overvalued’ that helped put more rent money in our pockets.

Inevitably we aged, found partners, had babies and needed a place to live so we sold all the condos that were symbols of our supposed ‘success’ and hunkered down to focus on more important things – like time with our new families. In short, all those ‘over valued’ condos helped provide for a very nice mortgage-free life for our new families.

Canada is a great country and will continue to be great far into the future!

Comparison with the US is logical and valid. There are no two countries more similar. You epitomize self-deluding, ‘it’s different here’ thought. — Garth

#46 totalchaos on 02.07.11 at 1:39 am

#34 Lexie

I would take the offer and run. I sold a rental at the beginning of September. The realtor said I should list for between 645K – 665K and I opted for 640K. Sold fast for 635K. My sweetie thought we should have held out for more, but since then other houses in the ‘hood sat until very stale. They are all off the market now and being renovated to re-list down the road. One house similar to mine listed in November for 599K had a “sold” sign in January, but now the “sold” sticker is off, the sign is still in the ground – and the price has been reduced by 10K.

BTW, the shack I sold is now a hole in the ground awaiting a 4000 sq ft palace. I hope to buy it back in a few years (after it has been forclosed) for about 635K.

#47 Nostradamus Le Mad Vlad on 02.07.11 at 1:41 am


“Accident waiting to happen. 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.”

That para. shows how delusional many Cdns. (not the couple interviewed) have become.

Sold their box in the sky, paid cash for a nice property and rent in The Big Smoke. The couple is very smart.

“. . . it’s time to leave town.” — Canada is approaching that Nortel spot when shares cost $120; shortly after, it crashed and burned. BTW, did the pilot lower the landing gear or are we headed for a belly flop and / or nose dive?
*
THOUGHT FOR THE DAY!
“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” — Louis Brandeis, Supreme Court justice from 1916-1939
*
The falling snow here has been caused by AGW, MaiTais, Pina Coladas, sex, drugs and geritol. There’s no escaping this madness!
*
1:40 clip Japanese company invents pretty much any liquuid powered car.

Egypt in chaos — interest rate hiked plus oil importer.

Just as someone filled China’s gold bars with tungsten, so China is filling coins with something other than silver. 2:53 clip. Plus NASDAQ hacked.

On track China to become gold buyer, and Rising Food prices here for good?

Comparisons The Super Bowl and ancient Rome. Don’t forget, the Roman Catholic Church has one more pope to go after Pope Benny. When he is finished, Rome falls.

Evil Obama exposed for what the WH is. Scroll down a little.

Comparisons Two US and Africa’s infrastructure both collapsing.

Killer Mosquitoes Served alongside b-b-q’d SPAM.

Pizza Hut New Orleans closing eleven outlets.

5:03 clip Banks running outta money?

False Flags A couple of links further down detail whether Celente is a Futuristic Fraud or not.

0:35 clip Serbia and Cambodia / Thailand border.
Unseen Guides “You can include the shifting of the magnetic poles by the latter into the equation.”

After these two superstorms lambasted the planet, one can only surmise that a magnetic pole shift is happening, and none know it — Storm Two.

#48 Jsan on 02.07.11 at 1:44 am

Canadian new home buyers are beyond delusional, they are reaching into the realm of schizophrenic. Do they have any grasp or clue of what is normal? For anyone to think that a shack in Vancouver is worth 1 million plus, well, what can you say, they get what they deserve.

It’s always been said that here in Alberta, Oil is the excuse for garbage being sold for 500,000 dollars. Yet, when you take a look at what houses cost in a very predominant Oil city in the US, you shake your head wondering why we pay so much for utter crap here in Alberta? Again, is it delusion or schizophrenia?

Houston Texas, 4,000 square foot gorgeous custom built home, granite floors backing onto a golf course.
425,000 dollars.

http://www.realtor.com/realestateandhomes-detail/2707-South-Southern-Oaks_Houston_TX_77068_M81263-52173

Here is another golf course community one for you. Truly luxury living for a mere 445,900. The ones that are not on a golf course are considerably cheaper.

http://www.realtor.com/realestateandhomes-detail/7602-Holly-Court-Est_Houston_TX_77095_M78938-81232

There are so many houses like this I couldn’t even begin to list all of them. Texas prices never crashed but they also never went into a bubble like so many places in the US did.

I won’t even bother trying to compare these houses to the utter crap that you would get in Edmonton for the same price. I’m talking 1300 sqft, extremely cheaply built, crammed into a tiny lot in a tiny crowded neighborhood but comes with granite counter tops so is sold as “Luxury” living. Again, the Canadian Greater fools fall for that one hook line and sinker over and over again.

#49 Steve from Calgary on 02.07.11 at 1:47 am

All we need now is a bumpy ride…in real estate. What’d you think I meant.

#50 Peter Pan on 02.07.11 at 1:53 am

“Vancouver is not Charleston.”

So true Garth… Big Difference?

Charleston has head offices…

#51 wetcoaster on 02.07.11 at 2:00 am

Follow up on my family members rental, the place sold, a “duplex” for almost $500,000 and it isn’t anywhere near Victoria central.

No doubt now the bubble is about to pop when agents are letting their clients buy shithole rentals with condemed decks, mold in walls and garage, no insulation and an ancient heating system on top of 20 year old carpets, not to mention other expensive upgrades as in everything except the roof…. and it even went somewhere close to 10% above assesment. It needs at leask 50K work to bring it up to snuff. Oh yeah, no electrical or furnace inspection since 89 and these idiots bought it as if it was the last duplex left in town.

Almost forgot the airport runway nearby where the planes land and take off from 6 AM to midnight that shake the walls and interupt conversations. Stupidity is at it’s peak in Vic town and ruthless agents on both sides of the deal doing everything they can to close the deal so they eat tomorrow. Disgusting.

#52 Tim on 02.07.11 at 2:01 am

Garth,
you listen to CKNW? Maybe you would vote for Christy Clark… soon to be implicated in the BC Rail scandal…lol

#53 Devore on 02.07.11 at 2:08 am

#18 House Horny

Your math is confused, and so are you.

Why don’t you follow your own example for a few years? If rates rise to 7% (hardly “shoot to the moon”, still ridiculously low), how high will be the payments of your 0 down $450k buyers? Possibly just a little higher than 2200? Hmm?

Buying low at higher interest rates is way better than buying high at low interest rates. The high interest rates scenario is much more likely to see declining interest rates and rising prices (lowering payments and increasing equity). Your low interest buyer is more likely to see rising rates and falling prices, wiping out whatever meager equity they have.

Everything else being equal, people will have a downpayment. The downpayment will be a higher percentage of the price at lower prices/higher rates, even if the dollar amount is the same, putting the buyers in a safer position, plus, waiting another few years for prices to decline will give them a chance to accumulate an even higher downpayment.

Higher interest rates will also be very motivational to paying the mortgage down faster, instead of constantly adding to it by rolling in consumer debt into it and refinancing.

Each 1% of interest rates decreases affordability/increases payments by roughly 10%. Rates don’t even need to go up for prices to tumble (see south of the border) all it takes is a change in sentiment. But if sentiment turns, and rates also start moving, expect real estate to become highly toxic and buyers to be limited to the very picky bargain hunters.

Looking at only the monthly payment is no way to be planning your finances.

#54 bridgepigeon on 02.07.11 at 2:10 am

shouldn’t be driving with the high beams on…

#55 wetcoaster on 02.07.11 at 2:12 am

Ozzie conveniently failed to mention the fact Garths call was panning out til Carney lowered rates to emergency levels. Ozzie is an effing goof. I wonder how many real estate deals he is tied to with the disgraced ex-premier and clan ?

Funny how Ozzie can say that when he was video’d on HoweSt.com back in that 2008/09 era looking like he had a couple of drinks in him talking about “the greater fools” when the interviewer was asking him about the high condo prices in Vancouver and whose going to buy them. Two faced bastard is all he is.

#56 realpaul on 02.07.11 at 2:32 am

Jen and bruce must be idiots. Foreclosures in the US are expected to increase 300%. The markets will be flooded with inventory.

http://reason.com/blog/2011/02/03/coming-soon-a-300-percent-incr

#57 Hoof Hearted on 02.07.11 at 2:45 am

In the land of ” OZ ” … click your heels

Class Action Lawsuit Filed Against Ozzie Jurock And Partners

http://classactionozzie.com/

The lawsuit alleges misrepresentation, wherein the Defendants signed a disclosure statement under REDMA (Real Estate Development Marketing Act) stating that the buildings were free of material defects. The Plaintiff alleges that there were significant material defects discovered subsequent to the sale of the condos which the investors believe the Defendants knew existed and did not disclose to them. The owners/investors have asked the developers to remedy the defects in the buildings but Ozzie Jurock and his partners have declined so the owners asked Mr. Bosworth to launch this claim on their behalf.

At the first Annual General Meeting just a month after these properties were sold to the investors the new owners were presented an annual budget by the Defendants which included no allocation for anything other than normal repairs. After the first year of operations it became evident that the cash flows achieved through the rentals of the condominium units were dramatically less than the projections AMG Investments provided to the investors during the sales process. Furthermore, the continual unexpected repairs caused additional budget shortfalls which resulted in investors having properties that were immediately cash flow negative.

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

Ozzie loves to use the word gold as a noun

ie buy land in the interior….log the trees “green” gold

or

create a gravel pit……”gray” gold

After a while these shameless pumpers lose credibility with their total lack of obectivity.

Buyers are dumb….buying in a town with a poor economy…but then again that’s what clowns like Jurock do….find these type of long distancee suckers.

#58 john on 02.07.11 at 2:50 am

If interest rates rise and correction happened the extra money will go to the bank, if interest rates are low and the price of the house is high, the extra money will go to developer/seller, in both cases ur paying the same, end of story.

#59 Carlyle on 02.07.11 at 2:51 am

So as most of you know i sold my house here in Milton … Close April 1st. Today I went downtown in toronto to look at condo rentals with an agent.

Interesting thing … The condos right in the core were about 1400 for a 1 bedroom … But then we went to see condos on harbourfront … Near liberty village south of Bathurst and king (on stadium and fleet st). It’s the damnedest thing … Brand spanking new condos completely empty. It was eerie how quiet the building was. Stainless steel everything hardwood floors … Nice units but still a streetcar ride away to get to queen west or the financial district …

My agent showed me 3 units in this building, all never lived in and all brand new. She told me that if my wife and I chose to rent in this building we might be able to negotiate a better price …. I realized quickly that the owners are probably speculators that are having a difficult time renting them out …

Thing is I don’t want to rent there … Why rent in the core if you still have to drive or take a streetcar to get to the action?

Anyways completely anecdotal but ties into Garth’s post today. There are a lot of empty units downtown.

#60 Hoof Hearted on 02.07.11 at 3:03 am

It’s really folly to enter into relativity RE…as the example Toronto versus Charleston comparison outlines.

It’s like those $30,000 Arizona condos…WTF is the real value ? A friend of mine is currently Arizona condo horny…..he’s a guy that bought a Van in Illinois, flew out to drive it back to the west coast and feels it was worth it ?????

Once you have title, you have a shitload of responsibility. Taxes, insurance, liability, borders, passports, etc etc.

Another friend of mine’s daughter won a scholarship to play at an Arizona college….her room-mate got raped…..she got the hell out of there and is now in Florida.

#61 West Coast on 02.07.11 at 3:18 am

Holy Jesus!

#62 Brynn on 02.07.11 at 3:24 am

oh puhleeze..

there is always someone on here who knows a guy somewhere, who has house somewhere that no one will buy..and apparently there are massive condo complexes hidden from view in toronto that no one will rent….so it means all property has no value and people who own houses are idiots….geez..dont you guys get sick of all this? you’ve been singing this tune for ALOT more then 2 years…yes at some point you will be right…in another 5 years…by that point the vancouverites and torontonians will have made so much cash WHO CARES?

oh and…QUIT COMPARING THE US to CANADA! The banking system is night and day different…this is a sneaky way to mislead your blind followers!
Compare breast sizes of your photo model with dolly parton or something…now that makes sense….

#63 London Calling on 02.07.11 at 3:56 am

Amazing how people buy when prices are at historic highs but don’t buy when prices were 50% less. It is like people are just sheep, following the herd with no mind or direction of their own. The strangest things, Gold, homes, stocks, you name it, if it’s over valued, people want it. If it’s undervalued it might as well be chopped liver.

“Most people will never come here, read this, or even consider themselves at risk.”

Remembering back when I first bought a home I believed to be educated in the matter and each week read the local realestate news paper and listening to a house salesman, thinking they was unbiased… well, I know better now.

“Unemployment down to 9% in the USA”

Garth, there is more behind those numbers. US jobs only grew +36,000, markets were expecting +150,000. The employment rate is now at – 57.6%, falling below the 57.8% of December 2010.

1.5 million people fell off the 99 week UI benefits, thus making the number look better than it was.

http://www.bls.gov/news.release/pdf/empsit.pdf

#64 TheBestPlaceOnEarth on 02.07.11 at 4:04 am

Richmond might one day surpass Hong Kong in price. Less land and the best Asian restaurants in the World!
Whistler is on firesale prices. 1 trillion dollars of inheiritance coming down the pipe for Canadians. Where do you think that money is going? In the most God darned beautiful place on Earth Vancouver. Folks even Garth is posting the record high numbers and we are only in the first inning. Long and Strong folks we are going Hiiigher. Don’t be like Junius left on the docks – this ship is sailing away to vast untold riches, just ask his lawyer friends who bought in Dunbar a few years back and are no stinking rich. Everyone is stinking rich out here. C’mon jump in and get stinkin rich while the money lending is easssyyyyyyyyyy

#65 Aaron - Melbourne on 02.07.11 at 4:07 am

Hi from (tropical) Melbourne Australia. Featured in our respected broadsheet newspaper today was an article about the Property Development spruikers working their magic in China. The article featured newly arrived Chinese immigrants (>1yr) rubber stamped for citizenship. They own three houses, a pizza shop and a corner store already.

http://www.theage.com.au/business/property/developers-court-overseas-buyers-amid-fears-of-greater-urban-sprawl-20110206-1aihd.html?comments=210#comments

The comments are well worth a read for an insight to the seething disgust about Australian house prices, lax immigration policies, poor planning and a taxation scheme that benefits loss making investors.

Of course, the paralells with Vancouver are astounding.

#66 Bilbo Bloggins on 02.07.11 at 4:26 am

One phrase.
Best picture EVER!

#67 The Original Dave on 02.07.11 at 4:26 am

My dilemma: Talked to my tenants about possibly selling the house and they were talking to a neighbor who offered them his house so they gave me notice for the end of February. My chance to find a greater fool. Similar houses are listed for $440K, went through two open houses yesterday to check out the competition, spotless, showhome condition. House is in a new urban sprawl type community. My house is on a ¼ acre lot, nearly three times the average lot size for the area which allows it to offer a little something extra than all the other cookie cutters. The condition of my house isn’t the greatest. It’s only 8 years old but it needs paint and new flooring. I listed it privately for $380K and have had a lot of interest, and possibly a reasonable offer this week and one lowball offer yesterday (claiming the house needed alot of work). Should I sell for $380K (take it and run) or do the painting and new flooring myself and stage it to look like a showhome after the tenants leave and try to sell for $415K privately? (still under the competition but with a huge backyard). This would give me an extra $19K in my pocket for my troubles but the house probably wouldn’t be ready till end of March. Any opinions or experiences to share?

—————————————-

I wish I was you just for this one predicament. Take profits! There’s nothing wrong with making money and not getting out at the absolute maximum price. You’re gonna go through all that to fix it up and list it to make a few more thousand? Let’s say you run out of time as the market will likely start seeing supply rise?

Take your money. It’s yours. Your asset has increased in price. You know what comes next. Do you lack entertainment in your life? Is a Sunday drive for you similar to car scenes in a ‘Die Hard’ movie? I don’t want to be condescending, but you’re in a situation that most other 2nd home owners are not. You have the information that they’re not aware of.

Take your money off the table is my suggestion. The difference between what you get and what you think you could get if you were to do that project can be made up in another asset class that is much more under priced. Easy decision.

#68 Chris in Langley on 02.07.11 at 4:31 am

To #1 S.B. on 02.06.11 at 11:12 pm

Notice how DA hides behind his moniker all the while claiming he is an expert on equal footing with Garth.

If he’s so transparent, why not tell us his real name?

The reason…he would then have to be accountable for the stupid and outlandish behaviour he exhibits.

Garth has credibility because he puts his real name and face on his blog and products. DA is a chicken who won’t stand behind the content of his posts.

If others who come to this blog from Kelowna found out his real identity, he would have little to no chance to have them as clients.

Mind you, consider how much time he spends rambling and reading ever post like his life depends on it, even if the posts aren’t addressed to him, he clearly isn’t much of a sales rep anyways.

Sybil lives!

#69 Pining for Phoenix on 02.07.11 at 4:49 am

House Horny,
You could at least declare your conflicts.
Only cartel realtors whine about discount realtors. And all that mumbo-jumbo with a calculator about houses costing more if interest rates rise won’t mean jack squat when houses are selling for less than half and interest rates are STILL low, as they were in the U.S.
You’re a shill. Admit it.

#70 confused and a little crazed on 02.07.11 at 5:07 am

Hey Garth,

Ozzie not that bad…he’s just a good salesmen. I met him He told me rents do not cover the costs of a mortgage in lower mainland jus be careful when rates go up. he is not forcing me

he did not tell me not to buy of course ..but buy carefully. he is a salesmen. he going ride this wave for as long as he can

by the way, love the pic. she is absolutely stunning :). i ‘m sure she is very nice to

#71 Taipan on 02.07.11 at 5:08 am

Your best picture yet Garth. LOL

Did you actually get to talk about anything.

Kept scrolling up to make sure i saw the title to todays blog, but i always seem to get stuck between the heading and the text.

(Vancouver 13x WEG)

#72 Marco on 02.07.11 at 5:41 am

In the Vancouver western sub of Shaugnessy, I have seen the same “for sale” signs on the same houses for over 6 months. I have driven by several “Open House” signs to see how many asians were lining up – none…

I went in to see the open house. Realtor jumping to her feet (was facebook-ing) opening up with “you have to hurry, the going offer is (8% over asking) and there are people lining up to beat it”. I asked where these people are, and she says “people with money don’t want to be seen walking around homes”.

I called her hand and said “I think no one has bid, I think no one has been here to look at the place and I think you have lost your only interested party” and walked out.

I walked slowly enough to see her scramble for the cellphone and then haul a$$ to catch up with me at the car door.

Then the gem “if you have a sensible offer to close with now, the owner would consider it”. I asked her for a business card, wrote an offer 15% below asking price and said “give me a call”.

3 hours later, I got a call by someone suggesting he was another realtor. He suggested the previous young lady screwed up and that my offer would be considered if I upped it to 10% below asking.

I laughed and said “too late”. His response was some stock “sales 101” pitch he must have picked up at Realtor ed.

I suspect there may be some unethic ethics going on in the media sensationalizing what is not a sensation… In every market with dynamic pricing you will find some idiots who overpay, some average who pay averages and some smart who will underpay. I think the media is reporting only what keeps the ad revenues coming in.

Sales volumes are coming down, listings up, average prices are being skewed and we’re seeing the end of the cheapest money in history.

Something has to give…

#73 Marco on 02.07.11 at 5:51 am

Funny how real estate behavior is similar to that of an aircraft wing.

For a given speed and weight, when you increase the angle of attack, you increase lift.

When the Angle of attack reaches a critical point, the airflow separates from the wing creating a stall.

In a stall the airplane could just as well be a brick.

I wonder if the analogy holds when you factor in the increasing cost of money, the historically highest home ownership rate, boomer retirement starting, miserable state of retirement readiness, exceedingly high income:home value ratios (think of a stock’s P:E ratio) and increasing supply of property.

Oh yes, I forgot, look at the panicky look in the Realtors, how they scramble for every listing (I think of them as panicking stewardesses)…

I think we’re pretty damn close to that stall, not there yet, the RE industry is trying to squeeze every last degree of lift, until …

#74 leopotato on 02.07.11 at 6:46 am

I have been coming to this site everyday for awhile now and I have to say thank you to Garth. I was able to talk my daughter into selling her house by linking to this site. LSM wasn’t helpful at all.

As for you DA, I was around last time this happened. I worked for a gov’t agency that gave out money under Canada’s RRAP (Residential Rehabilitation Assistance Program) in an interior BC town. In order to quality, the home had to have serious deficiencies such as a leaky roof and you could not make over a certain amount of money.

I RRAP’d a real estate agents house that year. She had made around $5000.00 all year. I could see that never in her wildest dreams had she thought she would ever be in the position she found herself in.

So start selling your toys DA, cause Kelowna is going down for the count!

#75 sunburned canuck on 02.07.11 at 7:09 am

So, THIS IS THE REALTOR who works the Richmond B.C. market that I have been hearing about!! It all makes sense now.

#76 housedoc on 02.07.11 at 7:24 am

I know that girl.
You naughty boy.

#77 bullion.bunny on 02.07.11 at 7:35 am

Oh to be twenty five again.

#78 Madame Guilotine on 02.07.11 at 7:36 am

Ozzie Jurock?
Sounds like a heavy metal bathroom renovator!

#79 Steven Rowlandson on 02.07.11 at 8:28 am

Hello Garth.
It is not different in Canada. Real estate will bottom out with a 90 to 95 percent loss largely due to low pay, under employment and unemployment among those in need of a place to live. The rich, well paid and foolish already have their roof over their heads. Those that have a functioning brain cell in their heads and are underpaid know they can not afford existing prices and will wait for the crash and buy for pennies on the dollar. Banksters and real estate profiteers will just have to eat the loss or write it off.

Low pay means that affordable real estate is priced between 30 and 60 thousand for a house and lot together. Any one who offers more is either rich or being foolish.
It’s time for canadian real estate fanatics to wake up out of their dream world and smell the coffee.

Steven

#80 Bob on 02.07.11 at 8:29 am

Garth,

OK, now. Here’s the question we really want answered on this blog.

Where did you get that photo of your driving instructor????

#81 London Calling on 02.07.11 at 8:30 am

#53 Devore on #18 House Horny

“Buying low at higher interest rates is way better than buying high at low interest rates.”

Devore is correct here. If you buy a $450k house at low rates you STILL OWE $450k in total DEBT. A $250k house at high rates, you owe $200k less in total debt.

Debt is not wealth and never will be.

#82 OttawaMike on 02.07.11 at 8:33 am

Wonder what realtor professionals do for their 6%?

Well besides explaining what the kitchen, bath and bedrooms do, they also arrange flowers in every room. Before snap pictures with their 100$ digital camera and uploading them. Phew..All that work is making me tired just thinking about it.

http://swamplot.com/old-braeswood-house-of-bouquet/2011-02-04/

#83 T.O. Bubble Boy on 02.07.11 at 9:08 am

Not to be picky, but Bank of America’s Head Office is in Charlotte North Carolina:
http://en.wikipedia.org/wiki/Bank_of_America

But, Piggly Wiggly grocery stores are headquartered there, and they have better T-Shrits:
http://pigstore.thepig.net/

#84 T.O. Bubble Boy on 02.07.11 at 9:16 am

Garth – will you join the Huffington Post in selling your blog to a major media company?

http://www.theglobeandmail.com/globe-investor/aol-to-buy-huffington-post-for-315-million/article1896766/

Maybe you wouldn’t be getting $315M for greaterfool.ca, but you could at least enough to pay for gas for the Hummer for a few years!

#85 Moneta on 02.07.11 at 9:39 am

Price is the inverse of supply. Supply is about to rise.
——-
I bought in Ottawa in 2008. Choice was not superb. I have been talking to a lot of Gen-Xers and many share the same experience.

Kids have been moving out but boomers have been clinging onto to their oversized homes when it would have made sense to sell it to the next generation.

My parents are ’45 and ’46. Early vintage boomers. It took quite a bit of convincing to get them to downsize before the herd. They wanted to stay put and enjoy a few years of retirement before going through the hassle.

But no amount of convincing worked until financial realities struck… the roof and windows needed to be redone and they had no intention of doing these renos if they were not staying in this house for the long term.

The writing is on the wall. A large number of boomers are going to try to off-load their monster houses to a group that has already gorged on debt and bought overpriced houses because there was no supply when they most needed it.

#86 Rusty1 on 02.07.11 at 9:42 am

#39 Dave in Victoria on 02.07.11 at 1:03 am

Good catch, Dave. As well, if you’re not saving a nice cash downpayment while waiting for the prices to fall, then you can’t afford to buy a house, in any case.

Prices here in Ottawa will likely stay fairly firm until the gov’t decides to cut the public sector. Hopefully sooner than later, because we simply can’t afford the PS being such a large fraction of the economy…

#87 Vancouver is a great town .... to be from on 02.07.11 at 9:47 am

#34 Lexie

OOOH Ahhhh … Take the money and Run!

The last train to Greater Fool town leaves in 27 days. You don’t have time to do reno’s and try to pick up the last few pennies.

#88 Moneta on 02.07.11 at 9:51 am

At a family gathering near you….

Had the parents and the in-laws over for dinner yesterday.

Of course the conversation turned to the health care system. The lack of doctors, the waiting lists, the rudeness of the health workers….

I made the mistake of mentioning that that’s what we get when we put all out national energy and money into real estate and forget to invest properly in the health care system.

Well the consensus was that if they had to listen to money talk nonsense one more time, they’d all throw up. This situation has nothing to do with money, of course, it’s all about a lack of respect for the elderly.

#89 AACI-Okanagan on 02.07.11 at 9:51 am

People the boom is over, it has been for 2 years, prices have adjusted downward within most “sub-markets” with a few “sub-markets” still trying to find a new price point. The average house price in Vancouver has gone up because the upper end is more active than it has been in 2 years. Stop trying to figure out the Vancouver market, it is anomaly.

#90 Ben on 02.07.11 at 9:53 am

San Antonio, Texas
SFH – 5 years old
Asking $55,000
http://gosahome.com/jbarfield/homesrch.htm
Enter – MLS ID# 876959

#91 Dodged-A-Bullit-in Alberta on 02.07.11 at 10:05 am

Greetings: #64-TheBestPlaceOnEarth, re Richmond–

“-this ship is sailing away to vast untold riches-”

Does this ship have a name? Maybe starting with T.

#92 young & foolish on 02.07.11 at 10:06 am

So, too many new condos sitting empty in Toronto, but the newspapers claim that thousands are waiting in line for “affordable” housing ….. looks like some people will be taking a “haircut” soon and us renters will be reaping the rewards of cheaper living expenses!

Garth is right …. housing is just shelter ….. beyond that it is all about emotions!

#93 bridgepigeon on 02.07.11 at 10:09 am

34 Lexie
Hire a painter, it’s the middle of winter, most of the trades are underemployed now, make a deal, and fluff the place. Your time is worth money too. Easiest reno for the most return imho.

#94 Gord In Vancouver on 02.07.11 at 10:12 am

#13 TS

I understand Vancouver also has the highest personal bankruptcies.
_________________________________

Do you have a link to back up this claim?

#95 Pr on 02.07.11 at 10:17 am

With the real estate situation right now …DONT BE THAT GUY! http://www.youtube.com/watch?v=Ubsd-tWYmZw&feature=player_embedded

Next hogged you gonna received, is from your layer to tell you your case is close!

#96 Big Al (new) on 02.07.11 at 10:32 am

Walks in and slaps the money on the counter, “I’m out”.

#97 Another Albertan on 02.07.11 at 10:37 am

Moneta –

Stories in a similar vein…

I have a number of single, professional females in my cohort (roughly the 35-to-45 age range). A fair number of them decided to buy fair-sized SFHs out in the burbs in the last 5 or 6 years. Last time I checked 1800 to 2000 sqft (before the basement) is a lot of area for one person.

What has been occurring in the past year is an increase in the lamenting that they “need to get out of the house and back closer to downtown”. Everything under the sun is cited. Huge utility bills. There’s nowhere to go to meet eligible, single males. I liked doing small repairs and now I hate it. Too much to vacuum and clean. Too much driveway and walk to shovel. There’s nowhere to go to meet eligible, single males. Neighbours who don’t feel comfortable inviting attractive, single female neighbours over to socialize. Horrendous commute times. There’s nowhere to go to meet eligible, single males. There’s nowhere to go except family-oriented destinations. A general sense of malaise that they worked so hard to be able to afford a house of their own and they come home late to an empty space (save for the obligatory dog or cat to keep them company). There’s nowhere to go to meet eligible, single males.

And now the kicker in just about every case… “Wow, it really does take two people and two incomes to make homes like this work.” You don’t say. That concept didn’t register before you moved into a neighbourhood only populated with dual-income earners and their offspring?

So the obligatory question has to be asked – “Why don’t you sell and move into a condo closer to downtown?”

“I wouldn’t be able to sell my house for what I paid for it.”

I bet I’ve heard this story directly almost 10 times and indirectly another dozen. Self-induced purgatory.

Everyone else’s mileage may vary.

#98 Big Al (new) on 02.07.11 at 10:40 am

Can’t happen here folks absolutely different were not the US.

http://www.windsorrealestate.com/displayListings.aspx?ID=1012517

#99 bill on 02.07.11 at 11:11 am

So the enigmatic smile denotes the uncertainty of buying in the states?

#100 Ray on 02.07.11 at 11:33 am

Haven’t heard anything about Montreal, or any other market in Quebec. What’s the deal?

#101 SquareNinja on 02.07.11 at 11:34 am

Garth… don’t be so modest! I have been following your blog since the start, and you were totally right about the 2008 – 2009 downturn. Nobody could have foreseen that for the very reason that real estate went down, it went back up.

Let me explain, ye-comers-to-this-blog: The end-of-year-2008 real estate downturn happened because of a worldwide financial crisis… and then the BoC instituted emergency interest rates because of that crisis… and those rates, in turn, propped real estate back up!

That was some kind of perpetual motion machine thingy there.

#102 Timing is Everything on 02.07.11 at 11:40 am

No seat belt!

#103 Utopia on 02.07.11 at 11:46 am

#68 Chris in Langley

Notice how DA hides behind his moniker all the while claiming he is an expert on equal footing with Garth.
If he’s so transparent, why not tell us his real name?
———————————————————

We do know his real name Chris. You just have not been around long enough to know it. Actually, DA is one of the very few who is NOT hiding behind a handle.

You?

#104 Kaganovich on 02.07.11 at 11:47 am

The Irish parable courtesy of Michael Lewis:

http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all

Enjoy

#105 Tripp on 02.07.11 at 11:47 am

#86 Rusty1

Rusty, it is easy to point to the Public sector reduction as the universal panacea to solve Canada’s problems; please do not forget it includes healthcare, education, social programs etc.

You can’t just fire people and expect all the programs to work as well as before. Where would you start, doctors, teachers, firefighters? They are public servants too. Or maybe cut the old age security, roads, infrastructure, drugs? Ask a fixed income 70 year old with high blood pressure and cholesterol, depending on their drugs what do they think about it? Or maybe a young family with a couple of kids paying a third of their income on daycare, what do they think about subsidies ?

No doubt there is lots of room for improvement in PS, however that applies everywhere. If you believe the private sector is the answer, look at Enron, Nortel, blocks of Wall Street, BP, Madoff etc. What is to be learnt from them? Have you noticed any record of mismanagement or corruption in the Public Sector that comes even close to these guys? Highly doubtful.

Please check the links for some relevant data.

http://www.cihi.ca/CIHI-ext-portal/internet/en/Document/spending+and+health+workforce/spending/RELEASE_28OCT10

http://www.statcan.gc.ca/pub/68-213-x/2007000/4094541-eng.htm

#106 Stop complaining about forecasts on 02.07.11 at 11:51 am

So Garth’s forecast was wrong, or as I have stated many many times, no one can forecast exactly when something will happen because economic conditions change, like zero interest rates. So perhaps the forecast is delayed? I do not know when a decline will happen maybe this year maybe a few years from now? it might be 25% might be more might be less.

The big difference between Canada and the US is unemployment. Very very different; and I believe Americans mortgage bindge was far greater and deeper than Canada. I have read up to 40 million Americans got mortgages that should never have been approved, are there 4 million Canadians in the same boat?

No matter what after any long bull run in anything, there is a day when a correction will happen

As for Long term trends in the boomer selling the big house and downsizing, all I can say while that is logical thinking’ no-one has predicted the boomer generation with any certainty yet.

#107 The American on 02.07.11 at 11:51 am

At #11: Kevin, I agree with you. But, as Garth has pointed out, the U.S. began this process about five years ago, where Canada is at its very beginning of the downtown. True, the average American now will not spend above $170,000 for a new home. But I ask you to look back five years ago at what Americans were willing to spend on housing at that time. Yeah, its a lot more, right? About double that in most cases. This is where Canada is TODAY. So, Canadians may be willing to spend $330,000 on average now, but that will undoubtedly be changing in the very near future.

Honestly, the pattern that Canada has followed and is following is so remarkably similar to the U.S. that it is like deja vu. I am actually able to make money in the markets on this deal as I know how basically each step plays out. Everything I see in Canadian media from newspapers to the evening “news” is a mere repeat of what was going on in the U.S. just five years ago. Antagonists in the U.S., much like Garth in Canada, were making the same predictions for the state of U.S. real estate. It was only when the “experts” from the real estate boards realized the predictions were starting to come true that they began combating contrarian opinions with their own counterpoints (this is where Canada is today). It is going to be interesting.

I look at Vancouver, and I have friends living there who can “feel” IT coming. We’re already seeing listings sit much longer and prices are actually being slashed with certain legacy properties. All of this is done very quietly, of course, as not to alarm potential idiot buyers. Vancouver is probably the largest bubble of all cities in North America. Period. Time will tell, but as has been proven in the U.S., and as it is clear Canada is beginning to do the copy cat of an American style downturn, no market has escaped the real estate fall.

No city has averted crisis: Not New York City, not Boston, not Washington DC, not Charlotte, not Atlanta, not Orlando, not Miami, not Sarasota, not Boca Raton, not Philadelphia, not Baton Rouge, not New Orleans, not Nashville, not Chicago, not OKC, not Tulsa, not Dallas, not Houston, not Austin, not San Antonio, not Phoenix, not Santa Fe, not Minneapolis, not Salt Lake City, not Las Vegas, not San Francisco, not Las Angeles, not San Diego, not Seattle, and not Portland.

With the pattern of the fall within the U.S., there was clearly a distinct pattern demonstrating a larger downturn in markets where the income to price ratio was greater. This, compounded with lower GDP from a city was certain ruin in prices. Vancouver is to Canada what Miami is to the U.S. Only worse. Much, much, much worse. Vancouver has significantly higher price ratios, yet it also has significantly low GDP. Hell, Vancouver’s GDP is so incredibly low, it is a ticking time bomb of sustainability. Also, areas that experienced the largest gains have experienced the largest drops. If it does not make sense, it will not last. This is the lesson learned. Vancouver… 40% + correction GUARANTEED. Don’t say it can’t happen, because it does happen in much healthier markets with better affordability and truly sustainable economies. Vancouver has none of that. Vancouver is desirable to Canadians, much like Miami was to Americans trying to escape the cold and snow. If you don’t like using Miami as an example, please plug in any city you’d like. Look at San Francisco or Seattle if you want a similar-city comparison. Yeah, doesn’t look good, does it?

#108 Junius on 02.07.11 at 12:08 pm

#62 Brynn,

I see the pumper has returned. You said, “QUIT COMPARING THE US to CANADA! The banking system is night and day different.

Not as different as you think as we will soon see. Once again you have this ass backwards (as you would). US prices did not fall because of the poor lending standards so much as they fell because of affordability and then we discovered how many bad loans were out there. It will be the same in Canada.

Most of our high risk loans didn’t start being made until after 2005 so we will start seeing them over the next few years. As they begin to reset at higher interest rates we will see how different we are. Not much at all.

#109 TS on 02.07.11 at 12:10 pm

#94 Gord In Vancouver on 02.07.11 at 10:12 am

Brother in Law who lends to rentals and retirement homes. Link does not show Cities.

http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02522.html#tbl4

#110 Carpe Diem on 02.07.11 at 12:16 pm

Ahhhhh come on people, don’t you get Garth’s humour with the pic – it’s eye Candy – plain and simple, a eerie paradox to the housing bubble. If we treated a home in the sense of shelter – does stainless steel, granite countertops make any difference – absolutely not. High maintenance – and over time watch as the firm foundation sags.

I wanted to add to a previous noted post about increased filings in bankruptcies in Vancouver – working in a Trustee’s office – at least in Ontario, Bankruptcy filings are down year over year – but proposals have increased. The changes in the Bankruptcy Insolvency Act in 2009 requires Trustee’s to consider a viable proposal filing before bankruptcy – and guess what – the media screams that bankruptcy filings have decreased – but not even a mention of how proposals have skyrocketed up…

The media has played the vast majority as fools – is it because reporting the truth will bring on a sense of panic – or will their revenue streams dry up – its sad that so few know the truth, and I tip my hat not only to Garth, but to those who share economic news links…

I saw where the economy was heading in2005, and took a drastic career change and now work in the Bankruptcy field. If some of your readers shake their heads at how some people are so blind to their own greed – try working in our office – when the credit taps finally are turned off – those who gingerly walked into our office – filing 100K – 180K of unsecured debt – lets see how they manage in the years to come when credit history will actually make a difference again.

What we have here is the eye of the hurricane, a temporary sense of calm, that things are rebounding – the longer the calmness, the greater the impact from the back part of the hurricane –

#111 stepenharping on 02.07.11 at 12:18 pm

She doesn’t need to use the seatbelt. The airbags will save her.

#112 Stevermt on 02.07.11 at 12:23 pm

#34 Lexie
fix er up and go for the extra money..you can always drop back a bit later.. good luck..the fools are waiting and will love that big lot especially with green grass showing in April.

#113 Rick in Japan on 02.07.11 at 12:24 pm

#64 TheBestPlaceOnEarth: You need to get out more “the best Asian restaurants in the World!” Huh? You sound like another ‘Asian expert’ because you live in (what was it, Hongcouver?). Sorry, take-out egg rolls aren’t even available in Hong Kong or Japan (I’ve lived in both). Richmond to surpass Hong Kong real estate prices? haha. . . sure, now go back to your Timmy’s. . .you’ve trolled enough for one day.

#114 Carlyle on 02.07.11 at 12:27 pm

#62 Brynn “oh puhleeze..

there is always someone on here who knows a guy somewhere, who has house somewhere that no one will buy..and apparently there are massive condo complexes hidden from view in toronto that no one will rent….so it means all property has no value and people who own houses are idiots….geez..dont you guys get sick of all this? you’ve been singing this tune for ALOT more then 2 years…yes at some point you will be right…in another 5 years…by that point the vancouverites and torontonians will have made so much cash WHO CARES?.”

Hey man I’m just saying what my experience was on Sunday. Huge condo complex located at 90 Stadium Rd in Toronto:

http://www.toronto-condos-lofts.com/4a_custpage_14829.html

http://www.flickr.com/photos/[email protected]/sets/72157625534192600/ (unit pics)

The building was EMPTY. Like devoid of life aside from the security guard at the front desk. The realtor I was with had 5 units to show me that day … 3 of which were in this building. All brand new never lived in 1 bedroom units.

My realtor’s face fell when I started listing all the reasons why this was a terrible location (being cut off from city by the Gardner being the main one).

See that’s the thing … all these investment units have been bought without really thinking through why many people choose a downtown condo lifestyle in the first place … usually it’s so that when they walk outside they are “there”. Not “have to take a bus to get there”.

So you’ve got all these units sitting empty and unrentable at a price that will cover the mortgage … I may still bite on this building if I can get a better price, I’m tempted to go in with a super lowball offer.

But I also saw some nice units in CityPlace … much better location on Front and Spadina with alot more action outside.

Basically from my experience it’s a renters paradise right now in terms of choice … and if 90 Stadium is any indication it will soon be a renters paradise in terms of crumbling prices.

#115 The American on 02.07.11 at 12:28 pm

Here’s some perspective… In August, 2003, I bought a presale condominium in downtown Seattle for $334,990. This is the time the market was just beginning to take off, but nobody knew it yet. Additionally, it was the first all-residential highrise condominium to have been built in downtown Seattle in a decade. So, this was at the forefront of the uprise in prices. Over the next couple of years, crazy things happened in the real estate market that weren’t really explainable. All of a sudden, this tangible asset that had typically been viewed as shelter was now viewed as precious as holding gold in your palm.

The home was a 1 bed / 1.5 bath + Den at 887 square feet. I waited nearly two years for the highrise condominium to be completed. I closed on it and moved into it in May, 2005. My dues were $412/month, property taxes were $317/month, and principal & interest $1,857/month. Grand total… $2,585/month. No worries in the world. I could afford it. I was living well within my means as I had a good job making $220,000/year.

The industry in which I worked afforded me the luxury of understanding the rate market, real estate market, and where markets were heading in general. No, I was not connected to the real estate industry in any way, shape, or form. So, understanding what I believed to be a forthcoming downturn, I decided to sell the condo. I placed the condo on the market in July of 2007, and I had a contract on it nearing the first of August. It closed for the new buyer August 14th, 2007. She was moving to to Seattle from New York City. The price she paid? $655,000. Yes, I damn near doubled my money in slightly over two years. If you consider the fact she also wrote me a separate check for all of its contents, I did double my money. She gave me $20,000 for the furniture in the home. After all brokers’ fees and excise tax was paid, I cleared $281,000 on the transaction, and of course another $20,000 for the furniture. That’s not a bad return in 27 month.

I should tell you she and I became good friends. Today, what is her condo worth? Well, the “Zestimate” on Zillow is $425,500. Yes, since she bought it she has lost 35% of her purchase price in value, or some $230,000 in value. This is an example how quickly a home can lose value in an extremely (and I do me extremely) healthy local economy. Seattle has GDP and an economy 2.5 times that of Vancouver with a population that is only slightly larger than that of Vancouver. Seattle’s economy actually did not get hit nearly as significantly as most all other economies in the U.S., yet even in a healthy place, bad things still happen.

I was a little smart and a lotta lucky. Sure, the value of the condo is still nearly $100,000 more than I had originally paid for it, but I chose to do the smart thing and liquidate at the right time. The right time for Canadians to liquidate is yesterday. Because you cannot rewind time, that leaves you roughly 9 hours more left in the day to get your home listed. Seriously, be smart. Don’t wait. Liquidate the asset and understand you should probably rent for the next 5 to 7 years as values decline. It is a process for values to hit bottom – not instant and nothing that happens in a year or two. Be patient once you’ve liquidated.

#116 $froma$ia-The mother of all Bubbles on 02.07.11 at 12:35 pm

Nice photo Garth, “Dairyland”

I seen her on Facebook!

$

#117 Tre on 02.07.11 at 12:36 pm

Garth I can’t resist the title of the blog entry is just too funny.

#118 House Horny on 02.07.11 at 12:42 pm

There are “Lies, damned lies, and statistics”. Very unlikely a debt ridden Canadian economy could withstand higher interest rates for a prolong period of time. What is more likely to happen is interest rates move up and then move back down with some getting caught in the squeeze. The Canadian dollar is extremely strong today and this makes it extremely difficult for the Bank of Canada to raise the interest rates further as this would strengthen the Canadian dollar yet again. Upward pressure on oil also puts appreciation pressure on the dollar and that puts downward pressure on interest rates. If the Bank of Canada were too suddenly raise interest rates there would be a tremendous purchase of Canadian dollars which would push the Canadian dollar further high against the greenback. Most of the new jobs in Canada are created by small business so any upward pressure on interest rates has a huge impact on job creation. The Canadian economy is far from rosy, just ask any manufacturer. Most manufactures I know had a very hard January as compared to a year ago. When a home is foreclosed a new owner will eventually take possession. When manufacturing jobs are lost they are lost for good. This is why the USA is so screwed as those manufacturing jobs they lost took decades of investment never to be seen again.
Rather counter intuitive to use a discount agent when you are faced with listing your home for say 200+ days. Again you have to look at the whole picture, the selling price and the agent’s commission not just the lowest commission. When times are tough I would prefer to buy a home listed from a discount broker and sell a home with a full service agent as I don’t want to be stuck with my home I can’t sell. That being said the current system of remuneration is far from fair from a sellers perspective.

#119 Moneta on 02.07.11 at 1:04 pm

Another Albertan on 02.07.11 at 10:37 am
——
Depressing.

I’m at the point where I’d be better off being a recluse. I dread social events because there is absolutely nothing I can bring to the table except nod in approval and listen to bad reno or bad health stories and the analysis of The Biggest Loser episodes.

Sigh.

#120 Hoof Hearted on 02.07.11 at 1:13 pm

#72 Marco

Re: Shaughnessy

My observations of Shaugnessy as that it is still an old money Caucasian enclave.

Years ago, the wealthy and well connected citizens took it upon themselves to demand the City develop architectural guidelines for the area.

it got to the point that it often took over a year for any plans submitted to be approved. I know one developer that , in an ironic twist, would build spec homes costing over $10 Million to cater to wealthy clients (often Asian)who didn’t have the time to fight City Hall.
However, the downside is that homes are expensive, and hence a limited buyer pool. As I’ve said before, during the Depression, this area of rich homes was turned into rooming homes, so it certainly has quite of mix of rich and poorer.

#121 rory on 02.07.11 at 1:15 pm

#104 Tripp you said:

“You can’t just fire people and expect all the programs to work as well as before.”

Thanks for the lead-in, has been awhile since I stated this – No need to fire anyone, just reduce their wages and pensions by 20% across the board at all levels with no exceptions. And cap pensions.

It is starting to look more realistic here given the unravelling that has to happen because of the sorry state of muni and state budgets in the US. Many are broke.

#122 Got A Watch on 02.07.11 at 1:29 pm

http://www.businessinsider.com/governments-food-price-inflation-2011-1?slop=1

“The 25 Countries Whose Governments Could Get Crushed By Food Price Inflation”

The next likely outbreaks of revolutionary contagion. Not to mention of almost all Arab & Muslim nations, from ‘Egypt Disease’.

Personally, I think the biggest threat is the nations with the largest populations and thus the greatest masses of poor: India, China, Indonesia and on down. When they start rioting, look out. Starving people don’t negotiate.

Meanwhile, under the surface, the ‘Great Financial Crisis’ rolls on. The first effects of the ‘sub-prime’, as we called it back then, crisis erupted around June 2007. So it will be a 4 Year Anniversary for ‘The Great Recession’ this summer. And counting. Throw a party.

It all still comes down to the same basic situation, and that is the greatest risk now. Because nothing but ‘extend & pretend’ has been done, mostly in the USA and Europe and Japan. Their Budget deficits are staggering, yet they can’t seem to cut anything, and even want to lower taxes some more. If the present level of support by the Federal Reserve Bank and US Treasury for the long underwater Banking system and the economy was removed, the whole thing would go down the drain instantly.

The rotting financial fish have been swept under the rug, and everyone pretends they don’t smell it. I estimate this worthless global pile to be about $15-$20 Trillion, maybe more, the bad credit that has gone to credit hell, and isn’t coming back. Mostly related to the real estate boom then subsequent bust in so many places. Caused by ‘Easy Al’ Greenspan and Ben ‘Zimbabwe’ Bernanke and a financial system run amok.

Europe will likely crumble first, but the USA will be next right after. I think a US $ rally will be on for a while, but eventually it will seek new lows, unless the US debt monster can be slain, which is improbable. The Euro is probably on the way out in the medium term.

See this excellent Euro area Blog, very good analysis:

http://www.eurointelligence.com/article/article/aftermath-of-a-surreal-summit.html?tx_ttnews%5BbackPid%5D=901&cHash=7822491d34aad9e9ffbe7020049700f2

#123 mr mike on 02.07.11 at 1:33 pm

Pop! What was That?

#124 betamax on 02.07.11 at 1:53 pm

#45 Memories: “The boy who cried wolf is an interesting childhood story. Lots of investment lessons in there.”

Despite some early bad calls, the wolf eventually shows up.

#125 betamax on 02.07.11 at 1:54 pm

I crashed looking at that picture and I’m not even driving.

#126 thecomingdepression on 02.07.11 at 2:23 pm

I am going to post the real truth (again) on the mess that our banks really are. As for “Jawzie” he is right 50% of the time. GOLD he is right and Housing he is making a complete fool of himself.
Read it and weep:
Royal Bank ($624 billion assets) ; $4.8 trillion total derivatives ; $4.3 trillion OTC derivatives

TD ($432 billion assets) ; $2.4 trillion total derivatives ; $2.1 trillion OTC derivatives

BMO ($387 billion assets) ; $2.7 trillion total derivatives ; $2.0 trillion OTC derivatives

Scotiabank ($429 billion assets) ; $1.3 trillion total derivatives ; $1.2 trillion OTC derivatives

CIBC ($344 billion assets) ; $1.2 trillion total derivatives ; $1.1 trillion OTC derivatives

#127 vreaa on 02.07.11 at 2:26 pm

Is Vancouver A Fringe Of The China Property Bubble? – “It sounds like a criminal or insane or whatever you want to call it, a total misallocation of capital.”

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

Quotes from Financial Times interview with Jim Chanos.

“There are lots of things that people say about China that, when you examine the data, falls apart”.

#128 BigAl (Original) on 02.07.11 at 2:38 pm

THE SWEET SPOT?

From: http://www.cnbc.com/id/41370476
Re: US Housing Market

“Two primary areas that drive the housing malaise—in close, out far. The sweet spot belt in nearly every city is seeing a significantly better housing market than broad numbers show. Fortunately, this is where most of today’s qualified buyers want to live.”
… “The ‘sweet spot belts’ around the country have not seen nearly the foreclosures nor the price drops that the close-in and far out bands have seen, so we don’t need so much demand there.

Also covered in the same article, rising rents in the U.S.:

“The reason rents are rising so much is because there is not enough stock, unlike the single-family market. During the housing boom, many developers did condo-conversions, turning apartment rental buildings into condos to meet the over-exuberant demand. Now developers are rushing to build as fast as they can. Reis Inc. predicts 51,314 units will be completed in 2011, and 82,971 units in 2012, and CoStar predicts over 100,000 will be completed in 2012 (many of those likely starting now). All because the inner-city ownership society is no more.”

So, as per this very blog, if it ain’t different here, then downtown TO/Van/Calgary plus Maple Ridge, Mission, Outer Cowtown burbs, Milton, Newmarket, Durham are all toast.
But, Etobicoke, Mississauga, East York, Scarborough, North York, Burnaby, Richmond are all, relatively, safe?

#129 bill on 02.07.11 at 2:39 pm

nice smile
a modern mona lisa..

#130 The American on 02.07.11 at 2:48 pm

At #45: I have to agree with Garth on this one. The Canadian real estate collapse will be as a result of delusional people. People believing the Canadian banking system is actually “healthy” is a result of propaganda fed to the masses in order to thwart a real estate collapse and banking slide. On paper right now, the Canadian banking system is “healthy.” By year’s end, it will be a completely different story. Canadian banks have acted more poorly than most with respect to lending standards. They have continued to hand money to most anyone who would ask for it. They allowed 5-year money with 0-5% down at rates that are insanely low. Rates will reset, higher of course. This is what happened in the U.S. Canada is lagging the U.S. by about 5 years in this example. If you look back 5 years ago, where were the U.S. banks? They were considered “extremely healthy.” The primary difference is that Canadian banks apparently did not get the memo there was a global real estate collapse, they turned their noses up at it, and instead they LOWERED rates and eased lending standards even more. Problem is they’ve been doing this in excess of five years since that memo was posted. What goes up, must come down. In this case, they’ve ran it up higher than most could imagine. It is no different in Canada, except I must admit I do foresee a larger correction taking place in Canada than what happened in the U.S. I know it sounds unbelievable, but the downtown is only at its beginning there. Wait five years from now.

#131 Junius on 02.07.11 at 3:16 pm

#105 Stop complaining about forecasts,

You said, “The big difference between Canada and the US is unemployment. Very very different; and I believe Americans mortgage bindge was far greater and deeper than Canada.”

Again. What is most different is the timing. The US easy money started a few years earlier. Canada was late to the party which contributed to the “wealth effect” and all the spending of the past few years.

We are now at the beginning of the unwind in Canada. In a few years we could find ourselves out of sync the other way with the US economy strengthening while ours is weakening.

#132 Junius on 02.07.11 at 3:23 pm

#128 The American,

You are absolutely correct.

This is classic, “The primary difference is that Canadian banks apparently did not get the memo there was a global real estate collapse, they turned their noses up at it, and instead they LOWERED rates and eased lending standards even more.”

Dead on although more than the banks it was the government that didn’t get it. The guarantees provided by the CMHC moved much of the risk off the bank’s balance sheets and onto the Canadian tax payers.

It is amazing that they did this while the evidence was already before them of what happened. Greenspan may have miscalculated but our leaders were just plain idiotic to follow.

#133 City Slicker on 02.07.11 at 3:24 pm

#105 Stop complaining about forecasts on 02.07.11 at

The big difference between Canada and the US is unemployment. Very very different; and I believe Americans mortgage bindge was far greater and deeper than Canada. I have read up to 40 million Americans got mortgages that should never have been approved, are there 4 million Canadians in the same boat?
———————————————————-
When the crash or correction hits unemployment will go up right? I believe 1 in 5 jobs are related to RE.
The US also had a 4.5% unemployment score in 2006. So was it the unemployment that caused the demise of housing, or the housing collapse that caused the 9%+ unemployement?
Garth if you can provide insight that would be great.

#134 jess on 02.07.11 at 3:26 pm

can’t raise interest rates or the foreclosure rate will rise.

…from what i read in the usa market putting people into foreclosure was profitable !

#135 jess on 02.07.11 at 3:33 pm

Not the recovery we wanted?

Dominique Strauss-Kahn, the IMF’s chief, said the economic rebound across the world is built on unstable foundations, with many rich nations still strapped in job slumps while the rising powers of China, India and Brazil already facing the threat of overheating. “It is not the recovery we wanted. It is a recovery beset by tensions and strain, which could even sow the seeds of the next crisis,” he said.

#136 City Slicker on 02.07.11 at 3:36 pm

#125 thecomingdepression on 02.07.11 at 2:23 pmI am going to post the real truth (again) on the mess that our banks really are. As for “Jawzie” he is right 50% of the time. GOLD he is right and Housing he is making a complete fool of himself.
Read it and weep:
Royal Bank ($624 billion assets) ; $4.8 trillion total derivatives ; $4.3 trillion OTC derivatives

TD ($432 billion assets) ; $2.4 trillion total derivatives ; $2.1 trillion OTC derivatives

BMO ($387 billion assets) ; $2.7 trillion total derivatives ; $2.0 trillion OTC derivatives

Scotiabank ($429 billion assets) ; $1.3 trillion total derivatives ; $1.2 trillion OTC derivatives

CIBC ($344 billion assets) ; $1.2 trillion total derivatives ; $1.1 trillion OTC derivatives
———————————————————-
Does this mean they have a bunch in high risk high speculation investment? I heard the derivatives market is one thing that will lead to the undoing of the global economy.

#137 Shamwow on 02.07.11 at 3:44 pm

China is key driver for Canada, if China slows and some hedge funds that have very good track records are notably short China right now.

Canada and Oz, will get hit very very hard if China slows, the Canadian consumer debt levels will double the pain. It is not a risk I would take owning hard assets in Canada. China’s construction industry is 60% of it’s GDP, USA was 18% of the peak of it’s housing bubble.

If China can keep it going, Canada can keep it going or stay elevated, if China cannot look out, it will be as ugly as the states got.

Canadian media seem to think they have this dynamic ecomomy, they do not. They did have RIM, which as been over taken now and Bombardier is ok but lags, the have resources that’s it’s not dynamic, it’s not innovative, it’s not anything but dig it up or chop it down.

China is key driver here for Canada.

#138 Western Canadian on 02.07.11 at 3:46 pm

“I live in North Central Calgary in a pretty nice area of starter and move up homes. ”

“North Central Calgary”

I’m not sure what that means, but there are no “starter” homes anywhere near “central” Calgary.

But yeah, if you bought up in Evanston, or another new community that is 30km North of downtown Calgary, and you bought in 2007 you’re probably down 10-15%.

As for these foreclosures, there are a tonne of them in Calgary right now, we actually lead the country.

UNLIKE in the US however these foreclosures by and large are not from people using their house as an “ATM”, rather are a result of the huge mortgage fraud that took place.

Check the past sales history on these foreclosures and the vast majority of them we’re bought by straw buyers in 2008-2009 WAY over market value, and are now in foreclosure. Genworth, CMHC and the banks have hundreds of these. However the market in Calgary is absorbing them as they come on.

#139 Brad on 02.07.11 at 3:53 pm

That chick in the picture; with the hall-of-fame cleavage; do you have her number?

#140 fools rush in on 02.07.11 at 4:12 pm

Don’t fall for it everyone; something tells me she’s a real estate agent….

#141 Alex on 02.07.11 at 4:15 pm

TD raises fixed mortgage rates a quarter point.

http://www.nationalpost.com/news/canada/Canada+Trust+raises+mortgage+rates/4237864/story.html

#142 poco on 02.07.11 at 4:24 pm

did i hear right–fixed morgage rates rising today????

#143 Irrational Exuberance on 02.07.11 at 4:36 pm

TD raised their mortgage rates today… why? No BoC changes forthcoming, and if they believe their own rosy forecasts of the economy and RE, then no need for a hike. So what gives?

#144 jess on 02.07.11 at 4:42 pm

beat the truth out or beat a person and they will lie just to stop the beating.

http://www.allgov.com/ViewNews/Source_for_Colin_Powells_Fake_UN_Claim_of_Iraq_al_Qaeda_Connection_Dies_in_Libyan_Prison_90513

#145 Form Man on 02.07.11 at 4:45 pm

The facts are clear. Flaherty and Harper lowered the lending standards for CMHC mortgages in 2006 in order to juice the economy, and hopefully buy themselves a majority. Even though it was shown over 2007 and 2008 in the U. S., that this policy was idiotic, The Feds kept the taps open. When the banking crisis hit, Ottawa took billions in toxic mortgages off the books of the Big Banks, and continued to provide insurance for almost all new mortgages. That, combined with low interest rates is causing a housing bubble exactly like what happened in the U.S. No formal bailouts will be needed as the Canadian taxpayers are already on the hook via CMHC. Our banks are healthier because the taxpayers aren’t. Definition of a Canservative ” one who keeps trying solutions that have never previously worked, in hopes of a different result” I cannot imagine any scenario where this ends well.

#146 Old timer on 02.07.11 at 4:48 pm

I live on the west-side of Vancouver (always have) and the myth about Shaughnessy being the last white enclave in the city is just that, a myth. The area around Commercial Drive or Main Street is more obviously white than the west-side. Many of the big mansions have put “in-fill” housing in their yards so the big leafy area is now just another housing development, albeit a very expensive one. By the way, my Chinese next-door neighbours who bought new five years ago are now renting out rooms as a B & B to supplement their income.

#147 New Era on 02.07.11 at 4:58 pm

TD raises interest rates.

Canada risky mortgages. Wonder if this will be a trend

http://www.nationalpost.com/news/canada/Canada+Trust+raises+mortgage+rates/4237864/story.html

#148 Gord In Vancouver on 02.07.11 at 4:59 pm

#108 TS

Thank you for the link.

#149 goldbum on 02.07.11 at 5:02 pm

Comparing real estate to gold is ridiculous. Real estate bubbles are the worst bubbles, because real estate is bought with borrowed money. The same can’t be said for gold.

BTW, can someone show me an example in history of a real estate “soft landing” so I’ll know if it happens… I think not.

#150 Hoof Hearted on 02.07.11 at 5:12 pm

#109 Carpe Diem

Re bankruptcies.

It has always been my understanding that under the old bromide ” you can’t get blood out of a stone ” no -one wants to force a bankruptcy.

Reading Garth’s blog, and comments from those in the financial sector….banks would much rather get say 30 cents on the dollar than ZERO.

Banks are always WINNERS….. ” win or lose for the REST of us “.

However, in Canada, they have gotten too cosy with the politicians via the CMHC….they are stuck co-accomplices , and there is not enough Vaseline between here (and Garth’s 10 acre soft porn warehouse) to extricate them from each other.

The banks were always the middlemen, and in such a relationship the banks are simply one degree of separation for the elected officials.

The banks will sweat, and the politicians feel the heat.

The backwash I foresee is the banks ever-increasing liberal policy on foreclosure, because it wouldn’t take much for a few disenfranchised “SOB’s” with nothing to lose to create a koombaya “WE dare you to foreclose on us ” critical mass.

I vividly recall one party in BC , prior to the 2010 Olympics, that sold all their possessions in order to democratically attack the Olympic movement with the message “Go ahead, sue me VANOC, IOC etc., you can’t get blood out of a stone, I own F*ck all”.

#151 BigAl (Original) on 02.07.11 at 5:23 pm

#126 vreaa on 02.07.11 at 2:26 pm
“There are lots of things that people say about China that, when you examine the data, falls apart”.
=======================================

I too am highly skeptical about the China Miracle.

Still a controlled society and economy when you get right down to it. With no free press, not even a limited one, getting reliable information can be difficult.

There are lots of other low-cost labour markets in the world that have greater free flow of information, etc. But they hold all of that U.S. debt, so noone can really stick their necks out to call them on some of the stuff.

Interesting.

#152 Kitchener1 on 02.07.11 at 5:30 pm

The American, you are correct.

My thesis is based on math. Law of mean revivision.

Whatever the income multiple has been in the past– the mean is were it always reverts too.

Its a constant as we have not have income/wage growth.

So, if the average over the last 25 years has been 3.5- in toronto, now its in the 5.0 range, well, that tells me it must go revert below mean for as long as it has been above.

My target is 2.8 incomes. best case is 3.5 income and even that is a huge drop.

The other point that people forgot on here is the IRD. Interest rare differencial.

People with 5 years at 3%, should they sell and the rate at the time is 5-6-7%, will wipe them out.

#153 Form Man on 02.07.11 at 5:37 pm

sorry, meant to type ‘Conservative’……..

#154 Moneta on 02.07.11 at 5:37 pm

TD raised their mortgage rates today… why? No BoC changes forthcoming, and if they believe their own rosy forecasts of the economy and RE, then no need for a hike. So what gives?
———-
Why did the chicken cross the road?

Because it could.

#155 prollywrong on 02.07.11 at 5:52 pm

anecdotally, listings in chilliwack (eastern fraser valley) just exploded over last week. tonnes of new stuff plus at least ten or so re-lists from last autumn. several price drops in the 10-30 grand range, but these seem to be the exception rather than the rule, for now.

#156 Mr. Plow on 02.07.11 at 6:19 pm

141 Irrational Exuberance…

Bond Market is the answer to your question.

BoC’s rate will affect VRMs not fixed rates which are usually related to the activity in the Bond Market.

Nothing too tricky about it really, I’m sure rest of the banks will follow suit later today or tomorrow.

Forecasts and BoC I doubt will have little to do with it, but think what you wish.

#157 jess on 02.07.11 at 6:22 pm

“There are lots of other low-cost labour markets in the world ”

low cost labour !!!!!!!!!indeed watch this and perhaps you will think beyond your portfolio

http://www.guardian.co.uk/environment/video/2011/feb/07/food-spain-migrants
Salad slaves: Who really provides our vegetables – videoThe Costa del Sol is famous for its tourists and beaches but just behind them is a hidden world of industrial greenhouses where African migrants work in extreme conditions

#158 jess on 02.07.11 at 6:25 pm

Allied Irish owns 70 percent of Zachodni, one of the largest banks in the country. The deal with Santander, which will give Allied Irish nearly 3.1 billion euros, was announced in early September, and includes a sale of Allied’s 50 percent stake in BZWBK AIB Asset Management.

The Irish bank got into the Polish market in 1995, when the region was still opening after the disintegration of the Soviet Union, with the purchase of Wielkopolski Bank Kredytowy. WBK merged with Zachodni in 2001, the year it listed.
===========================
http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103

hum ….migrant poles hired to do construction left their cars at the airport i wonder who financed the cars?

#159 Debtfree on 02.07.11 at 6:28 pm

@137 brad I have her number it’s 10

#160 hobbygirl on 02.07.11 at 6:31 pm

Mine are bigger…which is why my back is killing me. She’s not gonna be standing straight for much longer.

#161 Debtfree on 02.07.11 at 7:06 pm

re pic too big to fail ?

#162 It's Time on 02.07.11 at 7:19 pm

79.9 % APR Credit Card and yet 700,000 people sign and have a balance…. Seriously ???? Where is US headed ???

http://money.cnn.com/2011/02/07/pf/credit_card_interest_rate/index.htm

#163 Devore on 02.07.11 at 7:30 pm

#123 betamax

Ah, good point, isn’t it. While everyone remembers the obvious lesson from Boy Who Cried Wolf, not everyone remembers the other one, just as important (or perhaps even more so): the wolf does show up.

#164 Devore on 02.07.11 at 7:47 pm

#141 Irrational Exuberance

TD raised their mortgage rates today… why? No BoC changes forthcoming, and if they believe their own rosy forecasts of the economy and RE, then no need for a hike. So what gives?

What gives? Nothing gives. The BoC has nothing to do with these rates. Here again, for your viewing pleasure:

http://www.bloomberg.com/apps/quote?ticker=GCAN5YR:IND

You think 1/4 point is the end?

How many times does this have to be repeated? The BoC, government, have little control over rates.

#165 Devore on 02.07.11 at 7:52 pm

#147 goldbum

BTW, can someone show me an example in history of a real estate “soft landing” so I’ll know if it happens… I think not.

Sure, Japan. Of course, still landing 20 years later.

#166 anonymous on 02.07.11 at 8:10 pm

Does it really matter if TD or other banks increase fixed rates? Isn’t everyone still going for variable rates?

#167 Solitario on 02.07.11 at 8:50 pm

She has beautiful eyes…

#168 AxeHead on 02.07.11 at 8:54 pm

152 Moneta.

Chickens are smart, they cross the road to get rocks for their gizzards. Banks…well not so smart, if only they had gizzards, a brain, a heart, the nerve … to make sound decisions.

#169 Jeannie on 02.07.11 at 9:02 pm

That picture Garth…. can anyone say ‘seduction’?

A good metaphor for those easily suckered into lusting after something that’s gonna spell trouble down the road.

#170 eddy on 02.07.11 at 9:25 pm

here is an excellent educational video by the late Joan Veon

‘When Central Banks rule the world’

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

#171 carol on 02.07.11 at 9:32 pm

Gravity will take a toll on those knockers

#172 Nostradamus Le Mad Vlad on 02.07.11 at 9:34 pm


Plenty of great posts today. Damn, I luv retirement! An interesting 30-second clip — not posted here — on whatreallyhappened.com, near the top.

Honeybee Collapse One possible reason for exorbitant food prices, but what (or who) was behind their demise? A virus, or the implant by someone of a virus? Which leads to this. One thing leads to another . . .

Along with the honeybee collapse, 9:54 clip Benny and the Press also contributes.

Nostradamus Jr. was correct — the US is about to bankrupt the world. BTW, he says hello and is doing well.

No Pilots Needed New USAF jet taking off by itself. Gene Roddenbury’s Star Trek is manifesting into real life.

Eminem (Marshall Mathers) Chrysler 200 Super Bowl ad with “Lose Yourself” as background music.

Dumbed Down Further civil rights eroded from the Brits. NWO? Plus Muslims won’t be overly happy with this.

Re: the preceding questions: This is possibly one of the reasons. Revolutions all over?

Super Vixens Would these cuddly, furry creatures be related to the young lady in the pic?

3:09 clip Was this the reason ObamaCare was bought in, then subsequently tossed?

2:21 clip Inside Job, and it’s not 9-11 (most already know). Wall St. is the govt. now.

What goes around comes around. Payback (karma) is a bitch!

Hmmm. “Secretary of State Hillary Rodham Clinton is convening an unprecedented mass meeting of U.S. ambassadors.” Have dubya’s non-existent WMD been found? Or those Navy ships bound for the Suez Canal?

#168 eddy — Great link! 10:12 clip From 2009, WW3 in 2011. A whole lotta stuff has to be cleared out and thrown away, so ponder the real meaning of Spring Cleaning. Probably goes with the preceding.

Mexico GW causes animals to freeze to death.

Sillybillies I flock into TFSAs and make real returns. Also — Gold Robbery.

Oops! “Alarm quickly spread among foreign holders of US debt. They asked the obvious question. If US debt was not convertible to gold, what was its value?”

Egypt and Wall St. There had to be a connection, and here it is.

Hitler’s freedom from debt slavery (the west are slaves now). Although Prescott Bush (dubya’s grandpappy) was instrumental in setting Hitler and the Third Reich up for a thousand-year reign which lasted a dozen years, this is a good read.

#173 HouseBuster on 02.07.11 at 10:03 pm

#141 Irrational Exuberance on 02.07.11 at 4:36 pm
TD raised their mortgage rates today… why? No BoC changes forthcoming, and if they believe their own rosy forecasts of the economy and RE, then no need for a hike. So what gives?
——————————————————-
Ever heard of the bond market? Yields are rising.

#174 HouseBuster on 02.07.11 at 10:11 pm

Devore, are you tired of using your Devil’s Advocate alias?

I guess you have to mix it up a bit.

#175 mr mike on 02.07.11 at 10:16 pm

#159 Debtfree
“re pic too big to fail ?”

Thanks for busting my left nut laughing my head off.

#176 Cognizant on 02.07.11 at 10:17 pm

#143 Form man. You nailed it. The banks are ok because the taxpayers aren’t. This is not going to be pretty.

#177 Utopia on 02.07.11 at 10:24 pm

#88 Moneta

Of course the conversation turned to the health care system. The lack of doctors, the waiting lists, the rudeness of the health workers….

I made the mistake of mentioning that that’s what we get when we put all out national energy and money into real estate and forget to invest properly in the health care system.
———————————————————-

Moneta, I have to agree with you though probably not in the way you expect. I believe we have actually already over-invested in health care insofar as wages and salaries go.

Doctors, nurses and all the miscellaneous health care providers have hijacked our system. They are of the opinion that they are gold plated and worth every single penny of what they get.

This is a system out of control.

Down South and in the land of our best neighbor, the US, the system is reeling under the burden of health care costs run amok. Same as it is here.

Lay-offs and firings, closures of hospitals and clinics, cutbacks in equipment procurement and elimination of the administrators who run it all is becoming all too common. There is just not the money to pay many of these people anymore. So who suffers now as services are reduced instead of pay rates?

Of course, for those individuals who can afford to cover the outrageous costs of health care in the US there is always good service. Polite too. Private rooms and flatscreens galore.

Yet down at the city and state funded facilities where multitudes go it is a different world. Cuts are the order of the day. This is an outgrowth of a system gone mad where a limited number of practitioners gobble up all the funds and bring the whole system to a near standstill due to labour shortages while they screech louder for more money yet.

Of course, if the rules were to be relaxed just a little we could easily import thousands upon thousands of medical recruits into this continent from overseas and thereby reduce wait times, lower the costs of service, create some much needed competition (yes I mean that wholeheartedly) and reduce the tax burden.

I am frankly disgusted by the strategy of the medical profession and nursing unions to limit access to those from outside North America who are equally qualified and capable.

Did you know that as an individual you can put a fully trained medical doctor on your private payroll in Africa for example? Or that Doctors in many parts of the Third World earn wages as low as three or four hundred per month? That’s right. You can have a private doctor in some countries who does nothing at all but just sit around and wait for you to develop a sneeze. Incredible really.

It makes me sick when I hear stories about some of these specialists pulling down salaries of six and seven hundred thousand dollars (and sometimes much, much more) when I know that similarly represents all the funding for a college of hundreds in another far flung place.

And then we get rudeness to boot? Sickening.

Time to break the medical monopoly in this country of ours and spread the wealth around a little more fairly. Sane wages and salaries equal an expanded workforce.

I am not saying our medical professionals are not skilled and very talented. I am saying though that it is time we drew a line in the sand on wage and benefit demands and opened up our restrictive system so that foreign trained professionals can more easily join the labour force.

God knows, none of our own Canadian doctors want to work in Weyburne or small town Saskatchewan anyway. Until they start showing up for the many available positions here they don’t have a leg to stand on and no good argument against opening the system up.

OK, now I am in a bad mood.

#178 Dan on 02.07.11 at 10:26 pm

The shift has started as housing in Canada and it’s going to fall and will continue to fall for years and years to come until you see 50% and more drop. Smart money has sold out of RE and now investing in the stock market. Watch for the stockmarket to make higher highs and higher lows until a repeat of 2000. How these suits get this info is beyond me but it was good to hear. RE sales down for 7 months straight will now be the start of price drops just like garth said. Garth still rubs elbows with the suits.

#179 mr mike on 02.07.11 at 10:29 pm

Even the best of men couldn’t survive those things!
You would never be found again!
Mayday, Mayday, Mayday…Please Help!

#180 joycer on 02.07.11 at 10:32 pm

House Horny

If you purchased at 450k for 30 years (zero down) and secured 3.46% for 5 years, at the end of the term, you will have paid down 46813.25 in principle (and 73456.15 in interest). Leaving a loan value of 403,186.75 when you renew at 7% for the next 25 years. After those 25 years at 7% you will have paid a further 444007.25 in interest making for 490,820 in interest + 450,000 in principle for a total cost of 940,820.50.

Your explanation is probably one that mortgage brokers and realtors would use to try to get you to sign on the dotted line. You’re better off by almost 150k given your example to wait. In the mean time you’d be able to rent for much less than the cost of ownership, adding to your savings and/or quality of life.

#181 joycer on 02.07.11 at 10:35 pm

Slight correction: Total cost should be 517,463.40 + 450,000 = 967,463.40… I added the principle instead of the interest from the first 5 year term @3.46

#182 edmonton mortgage broker on 02.07.11 at 10:37 pm

i cannot 100% guarantee that this chick is Jessica Lopez of simracing fame, but who cares, maybe they’re sisters. there is definitely a resemblance :p

http://www.youtube.com/watch?v=KmY9l4KMEoM&feature=related

#183 Cellar Dwellar on 02.07.11 at 10:43 pm

Ozzie Jurock…. This is the guy that NEVER has a bad thing to say about Real Estate. This is the guy that pumped the Lower Mainland until even he couldnt do it anymore. For the past 2 years its been Nevada, Arizona, Florida, Kelowna, blah,blah blah.
This is the guy that charges $495.00 for you to ‘take his seminar’ on how to recognize great deals. ( where is Tom Vu when you need him?)
Ozzie is all about Ozzie.
Your money is needed in his pocket.
should be tarred and feathered right next to BestPlaceonEarth.

#184 House Horny on 02.07.11 at 10:47 pm

Nice quote in the Globe today, one that is sure to titillate some. “People looking for a home face astronomically high prices in some cities, but they benefit hugely from very low mortgage rates. What a dilemma these people face – buy now to lock in manageable borrowing costs for a while, or risk higher mortgage rates while hoping for housing prices to fall.”

Variable rates are tied to your bank’s prime rate, which is based directly on the Bank of Canada rate. Fixed-term rates, such as long-term mortgage rates, by contrast, are based on the bond market. Bond yields are up because the Asian economy ( tide) is moving them up. Take copper prices today as an example of Asian demand. China is going through what the USA went through in the 1950’s. In the near future Chinese demand for consumer goods will outpace USA demand.

The TD and CIBC banks raised 5 year fixed rates on Feb 6 by 25 basis points. Always take what the banks tell you with a grain of salt. If they tell you that interest rates are going higher go variable, if they tell you to go variable go fixed. They are in it to win it and don’t care about you the customer.

Canadian manufacturers are getting throttled and as of 2012 all Canadian companies exporting to the USA will have to file taxes with the IRS or face 30% of their USA revenue to be withheld and shuttled off to Uncle Sam courtesy of new health care reform rules in the USA where any payment over $600 requires the USA company to have a valid IRS tax number of any firm outside the USA. Sweet. The easiest way to comply is for usa cmpanies to stop importing from Canada. Manufacturer sediment is a good indicator of what lies ahead in this country and things are looking pretty grim for the mafacturing sector.

#185 Dan in Victoria on 02.07.11 at 10:55 pm

Sabado por la noche estaba
en el centro de la ciudad

Trabajando para
el FBI

sentado en un nido
de hombres malos

botellas de whisky
que se apilan
el bebedor contrabandista
de licores en el lado oeste

Lleno de personas que estan
haciendo lo incorrecto

apunta de llamar al
fiscal de distro
Cuando eschuche a esta mujer
cantando una cancion

un par de 45’s me hizo
abrir los ojos

Mi temperatura em pezo
a subir

Ella era la mujer del largo
Y fresco vestido negro

De unos hermosos
1.70 de alto……….

http://www.youtube.com/watch?v=lP94PlEtsEQ&feature=related

#186 Cellar Dwellar on 02.07.11 at 11:06 pm

#72 &73 Marco
EXCELLENT story and EXCELLENT analogy

#187 .9999 Silver on 02.07.11 at 11:41 pm

Hey ..you want to slow down the market…
How about the stupid idiots socialist welfare bums that purchase stupid $1,000,000.00 pay property tax’s based on the purchase value and stop expecting me to subsidize their retarded claims of free market capitalizim.

I purchased at $315,000.00, $75,000 down. 5 years ago
current assessment rate(try and get your assessment authority to provide paper work showing how they came up with it and sign a paper guaranteeing value)

is $754,000.00 for a building predating 1958.
Oh and for the last 10 years the assessment authority(a private company that refuses to show you their legal authority) has never seen the building.

and I do not have the $439,000.00 dollar claimed increase in my pocket as cash so should i be taxed on it, and if real where the hell is that money anyway….I want it from whomever has it …so I can spend it.
As is my right.

p.ssed of in van
Rae

#188 Marcus on 02.08.11 at 3:15 pm

Ummmm…..couldn’t get to the words. Stuck on the pic.

#189 whibur on 02.08.11 at 3:52 pm

Garth,
you talk about being liquid which is cash and cash equivalents, savings, money market fund etc. but then you talk about purchasing real reeturn bonds which are not liquid and are at the top of the spectrum on an investment portfolio and would be classfied as a speculative investment. What is your ratio?
1/3 speculative, (real return bonds) 1/3 moderate risk investments (blue chip stocks, income producing properties) and a 1/3 liquid (cash equivalents)?

Time you read my book. Or any finance book. You are lost. — Garth

#190 Larry on 02.08.11 at 7:17 pm

Garth, are you giving any odds for March being the month when the bubble bursts?
The combination of higher interest rates and new mortgage rules, coming into effect March 18, could devastate the real estate market this year.

http://www.vancouverpropertynews.com/march-the-month-of-the-great-canadian-property-crash/46/

#191 Alister on 02.08.11 at 7:29 pm

Do you think that you need inflation or a good economy to take bond interest rates higher? Guess again.

http://www.moneyandmarkets.com/the-most-dangerous-bubble-of-all-42612

#192 I. Muvrini on 02.08.11 at 9:51 pm

Hold the press.

WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices

http://www.guardian.co.uk/business/2011/feb/08/saudi-oil-reserves-overstated-wikileaks