The escape

“We’re both 34,” Cindy told me on the phone, “Bob and I. We have two children. And this is the best day of our lives. I want you to tell people on your blog that. Remember the words… The. Best. Day.”

It took but one open house, on a snowy Saturday, too. Three hours. Five offers. “It was crazy stupid. Five of them. Nobody even asked for a house inspection,” she said, laughing. “They’re all nuts.”

Full price. Closes in sixty days. Cindy and her husband had already arranged for a rental – a better house, same GTA hood, $2,400 a month, two-year lease. “We’re not going to even think about buying for a long time, this just feels too good.”

Why the giggles? Before last Saturday the two of them had RRSPs totaling $15,000, twelve thousand in an RESP, no tax-free savings accounts and zero savings. In two months they’ll have another $500,000, which they’re planning to invest in government and corporate bonds, real return bonds, preferred shares, income trusts, a specialty high-yield bond fund, sector and index exchange-traded funds, across Canada, the US and international markets, spanning sectors and commodities, and among large, medium and small-cap companies.

The target is 8%, which gives them the choice of living rent-free, or reinvesting and having $1 million in liquid assets before they’re fifty. By 65 it’ll likely be two million, with the goal of spinning of $150,000 a year in retirement. Forever. And not touch the principal.

“There’s no way,” says Cindy, “that my house was ever gonna do that.”

On a decent street on Vancouver’s west side sits a small, nondescript bung that was purchased in the high fours five years ago. The smart people who own it – a couple in their forties, also with two kids – are now the geniuses who sold it. In fact, I told you about the feeding frenzy two months ago as a hundred people shuffled through, leaving a dozen offers, all for more than the asking of $1.1 million.

I heard from her yesterday: “Well after going back and forth with the new owner, he’s agreed to a 2 year lease at $3,300 a month.  I am SOOOOOOOOO happy.  It’s been a bit stressful the last couple of months as he’s just taken forever to come to let us know what they were thinking and then come to an agreement.

“Thankfully I’ve been printing out Craigslist ads for the past 4-5 months and so put a package of comparables together with a long letter explaining our position.  This place is worth about $3000 – $3200, but told him we’d pay $3300 and sign a 2 year lease, give him a $6600 deposit, and do all minor maintenance and lawn.

“Anyhow, I can’t believe how well this has all worked.  Spend $12,000 fixing the place up, sell it for top dollar and get to rent back, your lipsticked place for a bit more than market, for 2 years and likely as long as we want.”

Here’s the bottom line on this deal: The buyer spends $1.3 million, then collects $40,000 a year in rent. That’s a return of 3%. The seller nets $1 million after payouts, invests it professionally and anticipates $80,000 a year, or a return of 8%.

And who lives in the house, enjoying the neighbourhood and not having to move? The seller.

Five years from now the seller plans on having liquid assets of about $1.4 million. She also expects her house will be worth far less than what she sold it for. But even if the property jumps to $1.5 million – a patently absurb value in a city where families earn $83,300 – she’s set for life. By age 60 this couple will have a low-tax investment income of about $200,000, while their little house continues to change hands among fools.

These real-life stories are being repeated more often than you might imagine. With housing values in many cities (Toronto, Vancouver) at historic highs, while others start to stagger, the smart money is getting out while the lemmings rush in. If there ever was a time to harvest gains, this would be it. Time and again I’ve told you why. Rising rates. Demographics. Credit restrictions. Gas, food and energy prices. Stubborn unemployment. And sheer unaffordability.

The Canadian real estate market is now being propelled by pixie dust, fumes and hormones. The actual fuel ran out last June, and for eight long months sales have shown annual declines. Realtors like LePage’s Phil Soper and economists like BMO’s Sherry Cooper can spin it all they want, but there’s no reason left – none – to expect prices will continue to rise.

Seventy per cent of families own houses. Only 50% have retirement savings. Thirty per cent have a pension. Attached to those homes is $1 trillion in mortgage debt, most of it due to reset higher. And incomes are flatlined.

A most wise dude once said buy low, sell high.

This is high. Low is next.

202 comments ↓

#1 Torquemada on 03.06.11 at 11:28 pm

A home ownership rate of 70% sound high. However, if we all do what the Phil Sopers, Don Campbells and HGTV would have us do, we should all own a principle residence, a vacation home and an investment condo. There’s no reason we can’t push the homeownership rate to 300%!

#2 Willend Badly on 03.06.11 at 11:30 pm

How can this end any other way?

#3 Birdieman on 03.06.11 at 11:34 pm

First????? LOL

#4 Birdieman on 03.06.11 at 11:41 pm

Seriously, I visited a new townhome development in Georgetown today. Prices around 325-375k, I asked when the occupancy was and asked her what happens if prices drop… she told me these will be worth over 400k when built??? Prices in Gtown have dropped easily over 10% since last summer and places are sitting for months!!! You all say Brampton is ground zero but your wrong Georgetown is!!!

#5 Mr. Reality on 03.06.11 at 11:42 pm

The day of reckoning is slowly approaching. I love watching the ignorant flounder in their pathetic debt ridden existences.

Mr. R.

#6 Timing is Everything on 03.06.11 at 11:44 pm

Well, 2011 is a much better time to ‘harvest’.
Of course hind sight is 20/20 ain’t it, Garth. Good thing some folks are sloooow to ‘get it’.
Just think of all those ‘losers’ that sold in 2008-2009.

“What a bunch of maroons.” – Bugs Bunny

A balanced portfolio increased more last year than real estate did. I fail to see your point. — Garth

#7 Sort of smart on 03.06.11 at 11:47 pm

Just a note. 70% of people have mortgages. Only 30% of these “home owners” actually own them outright. That trillion dollars in mortgage debt isn’t spread out so far…

#8 Tim on 03.06.11 at 11:56 pm

invest in government and corporate bonds, real return bonds, preferred shares, income trusts, a specialty high-yield bond fund, sector and index exchange-traded funds, across Canada, the US and international markets, spanning sectors and commodities, and among large, medium and small-cap companies.

—————————
Over diversification, which will result in a lackluster return. Stay out of bonds and preferreds now, they only have one way to go…down, unlike this housing market which you predicted would correct last year, last fall, this spring…

You sure have a lot to learn about fixed income. As for my housing calls, checked out Edmonton, Calgary or the Okanagan lately? — Garth

#9 kc on 03.07.11 at 12:01 am

Did anyone catch this 60 minutes article about the homeless in florida? Green shoots and USA recovery anyone???

Homeless children: the hard times generation
Scott Pelley reports on the growing number of children who are falling victim to the financial crisis

http://www.cbsnews.com/stories/2011/03/06/60minutes/main20038927.shtml

or

Watch this and try to keep a dry eye:

http://www.knoxviews.com/node/15847

Powerful and poignant. At least America still has real reporters. — Garth

#10 LH on 03.07.11 at 12:05 am

8% with current G7 demographics is highly unrealistic. 2009 and 2010 were great years, but over the long term 5-6% is more realistic. I own a few prime downtown T.O. houses that yield 5-6%, and ALSO the principal is indexed for inflation (in the long term houses generally follow inflation, no more, no less). Where do Canadian inflation-linked bonds yield right now? Last I checked, the 15Y linker was priced at 144.934, for a real yield of only 1.125%!! (CAN 4.25 maturing Dec2026) I’m not a big fan of VanKong myself, but in my books, 3% beats 1.125%!

Garth, does your portfolio contain any Canadian inflation-linked bonds?

REITs last year returned 20%. High-yield bonds 22%. Blue chip preferred dividends 6%. My portfolio 14.89%. So 8% is no stretch. Good luck with those illiquid bricks. — Garth

#11 mf on 03.07.11 at 12:07 am

I thought high yield bonds were too risky?

Not in an appropriate weighting, well diversified and professionally managed. — Garth

#12 Not Fooled By Property Spruikers Hype on 03.07.11 at 12:12 am

In Perth western Australia Realtors are holding up Canada as a Beacon or shining example as to why Australian house prices will never crash … we are told on a daily basis …” Just look at Canada next door to the USA & see how strong their housing sector is” …. Gee you guys have a lot to answer for when our market crashes … we can all then Blame Canada for being a false Messiah!!! … Here are some examples of the Greater Fools we have in the Perth market who thought property can only ever go up,{ http://nfbpsh.blogspot.com/2011/03/how-to-lose-money-buying-property-in.html } hopefully Canada can learn from us ?… But I fear we will both meet at the bottom of a Train Wreck?

#13 Timing is Everything on 03.07.11 at 12:14 am

A balanced portfolio increased more last year than real estate did. I fail to see your point. — Garth

My point is, NOW is a better time to cash in your RE chips, in Vancouver & Richmond anyway. All frothy now. The market was not ‘ripe’ in 2008-09. Now it is.

A triple is nice, a home run is good, but a grand slam is ‘ooooh so great’.

Sounds like Cindy and Bob hit a grand slam ; they were patient. Timing IS everything.

“A most wise dude once said buy low, sell high.”

Bulls make money. Bears make money. Pigs make bacon. — Garth

#14 LH on 03.07.11 at 12:24 am

Past performance is no guarantee of future results!
But then again in 2010 my four houses in downtown T.O. returned approx 19%! How?

6% yield after all expenses + 5% appreciation = 11%, levered 50% with average mortgage (mix of fixed and floating) of ~3%, so 11 + (11-3) = 19%

Velut Arbor Ita Ramus, as they say :)

Whoops, you forgot the opportunity costs. BTW, why do you post the same comment every night? You should see someone about that insecurity. — Garth

#15 Timing is Everything on 03.07.11 at 12:26 am

Bulls make money. Bears make money. Pigs make bacon. — Garth

Patient Bulls make more money. Patient bears make more money. They are still bulls and bears. Oink. ;)

#16 Rainbird on 03.07.11 at 12:29 am

“The target is 8%, which gives them the choice of living rent-free,”

I’ve seen this line repeated hundreds of times. Does that mean that a financial adviser can’t make a mistake?

What most people what to know is: how can you trust anyone with your money? Witness the recent frauds.

So, the question is: what do the statistics say about the success of financial advisers? What percentage do well and what percentage are losers?

Find a good one. You’ll be surprised. — Garth

#17 LJ on 03.07.11 at 12:32 am

Timing IS everything: 2007 was a good year to get out of housing in Calgary. So was 2010 and even now it is not too late, but it will be soon. Too bad for those trying to catch the falling knife.

Get the banks to pay you!!!

Get the oil companies to pay you…..

#18 Hoof-Hearted on 03.07.11 at 12:34 am

Re: the Photo…….

The tree makes no sense.
Where is the top?..If it actually fell….the white SUV would’ve smoked it…you wouldn’t see intact suspension.

The Hummer drove in “after the fact” as did the small car in the middle

#19 Crazy on 03.07.11 at 12:34 am

Powerful and poignant. At least America still has real reporters. — Garth

——-

Hey Garth, do you recommend Orlando?

#20 Hoof-Hearted on 03.07.11 at 12:37 am

A most wise dude once said buy low, sell high.

This is high. Low is next.
=======================

To all the smug types.

If you don’t think the Gov’t won’t close loopholes, engage in clawbacks, and re-set or initiate new taxes…..I have Bre-X shares for ya…

#21 Spiltbongwater on 03.07.11 at 12:40 am

So is Cindy one of the Greaterfools who bought a house 5 years ago?

Not at that price. — Garth

#22 Maxamillion on 03.07.11 at 12:42 am

#9 kc

One comment keeps coming to remind when reminded of this financial crisis. “What America has done to itself is a terrorists dream.” They spend billions fighting an enemy overseas totally ignoring the real enemy which is at home.

#23 Jon B on 03.07.11 at 12:43 am

Although I do appreciate the strategy being employed by these former home owners, I don’t like the amount of counting chickens before they hatch going on here. So they are counting on an 8% return on their invested cash. Vancouver Real Estate isn’t the only casino out there.

There’s a big difference investing in 15 assets as opposed to one. Surely you can see that. — Garth

#24 Patz on 03.07.11 at 12:50 am

I don’t doubt that Cindy and Bob did the right thing and are in much better shape than before they sold. I would also say they are very, very lucky to have put their house up when they did. I think the time margin is razor thin.

Right now there can be no better position than having high 6 figures all of it liquid, unless it’s 7, 8 or 9 figures. But I wouldn’t be so optimistic about the next 15 to 25 years when they hope to have a mil and 2 mil respectively.

Put it this way: it’s way more fun to drive say a Maserati than a beat up old Pinto. But if you couldn’t buy gas the difference becomes nostalgia.

#25 Mackie on 03.07.11 at 12:55 am

I agree about being over diversified. Often ETFs and mutual funds will have 3 or 4 stocks I don’t want any part of and several others I like. I’d prefer invest, for the most part, in individual stocks. Mutual funds and ETFs are great for lazy investors, but if you are willing to do some homework and take some risks, you can do a lot better than 8 per cent.

#26 LH on 03.07.11 at 12:58 am

“Whoops, you forgot the opportunity costs. BTW, why do you post the same comment every night? You should see someone about that insecurity. — Garth”

What opportunity costs? The fact that buying stocks on margin would’ve been even better in ’09 and ’10? Did you buy your “balanced portfolio” on margin? Do you realize that borrowing money, even at P-0.9% to buy Canadian short-term government bonds yielding <2% is a sure money loser? I hope your portfolio has been exorcised of any short-term CAD govt bonds!

Back into my cave I go, armed with my 300k each in stocks and cash. Gotta love liquidity!

Sounds like you have 100% leverage. You have no advice to give. — Garth

#27 westcoastroller on 03.07.11 at 1:16 am

garth…
can this really be happening?
http://www.cbc.ca/news/canada/british-columbia/story/2011/03/06/bc-richmond-real-estate-rise.html
14% gain in one year…. it must be the guys in the helicopter

#28 West Coast on 03.07.11 at 1:16 am

Father in law just read that Van and Richmond are increasing and he was going on about “told you so!” Vancouver being different.

Fact is – regardless – I cannot responsibly buy.

#29 wes_coast on 03.07.11 at 1:18 am

Love the graph. What the hell are people thinking. A child could tell you where this market is going. Oh well. Congrats to those that milk this sucker. You deserve your riches for not having your head up your arse.

#30 Kitchener1 on 03.07.11 at 1:19 am

I watch the RE market pretty closely as it is somewhat related to my day job (on the commercial side).

What I am just starting to see, and I dont know when this happened as I dont check MLS all that often– is the kind slow, slow desperation that i saw just prior to the meltup in 08-09.

Stuff like bring any offer, etc… and im starting to see some small declines in prices for SFH in Durham/brampton/barrie/kitchener/waterloo. Just small declines and non choice so to speak properties.

All is not well in RE world.

March 18 is here real fast, what happens after? even with demand forward, sales volume is still down! what happens in Aug, after inventory rises and interest rates rise?

gas at 1.50/liter for 2 months steady and 08 is kid stuff.

Remeber Nov/Dec/Jan– all the commodities were hitting their lock up limits?? well that inflation is for contract delivery in 60-90 days out. Either way we are already at 9 months inflation if things stay the same.

Loblaws raising food prices by 5% april 1. Gas prices up 15-20%, energy-gas-property taxes etc.. up for most people. House prices up etc… me thinks there are some heavy interest rake hikes in the pipeline.

#31 groundzeropat on 03.07.11 at 1:20 am

My friend sold one of her 2 condos and was about to use the 200K profit to pay off a large chunk of her daugthers mortgage of 300K. The realtor told her to sit on the cash because her daughter only has 5% down. The realtor said the property will be worth under 200K by next year. She called me and asked why the realtor would says something like that and I directed her to your website. She called back and said she is going to sell her other condo and ask her daughter to sell hers too. The tide is turning and people are starting to see that 1.173M for a average home is insane.

#32 Timing is Everything on 03.07.11 at 1:24 am

wrt financial advisers…
Find a good one. You’ll be surprised. — Garth

Just like realtors and mortgage brokers.

#33 Wendy on 03.07.11 at 1:32 am

Well we listed our house on the east coast, right now we’re hoping it sells quickly if for even close to asking. Hubby still thinks in the back of his head that perhaps we’ll buy land out here on the island but I think we’ll wait for now. I’m not in any hurry and I’d really like to have some money put away for the future first.

#34 bill on 03.07.11 at 1:35 am

nemesis
I didnt have time to post this on the other blog but once upon a time just after trev deeley sold his yamaha franchise back to yamaha he had a small shop on capstan way in richmond [trev deeley imports] and they needed some extra guys to run some new bikes just brought in via airfreight [!?!] down to 606 east broadway …two of them looked a lot like this:

http://www.bikez.com/motorcycles/moto_guzzi_v7_750_sport_1973.php

except with a black megaphone .

and a comment on the more recent blog is perhaps in order.

garth could you make the graph a little smaller I could still read it with my glasses.
oh and good on the kids for doing it right.

#35 Dave in Victoria on 03.07.11 at 1:36 am

Better yet for the two examples, sell in big smoke and move to a small or medium size town. Live off your bounty, take time to find a job you like, and grow your own food. With that much cash why stick around the ‘shitty’ paying $2400 and $3300 respectively in rent, for what would cost a third in a more humane environment.

#36 marcus aurelius vero on 03.07.11 at 1:38 am

TORONTO PIXIE DUST

Snapshots from one semi -decent (central, just S or N of 401) area:

-Lord Seaton : Chinese purchaser bought a $1,089M listing (for somewhat less) about 2 years ago and relisted – without improvements – this week at $1.488M. Street high for a chopped-up 1960s older home (on a decent lot). At least he had the decency not to add that extra $888.88 to the list price.

– Carnwath : street price for these 1960s-era houses never went much over $1M, even in the latest insanity – Chinese agent listing is about 2 weeks old – $1.6M.

– Owen – class street in the ‘hood. 2008 listing at $1.39M (1980s build). Chinese agent relist in early 2010 for $1.999.

Wilfred – busy North-South street- listed 2007 for just under $1.2M. This area N. of 401 is basically now Little Tehran. Relisted a few days ago (after a paint job that involves 6 different primary colours per room – i.e., the classic ‘Persian whorehouse’ look) for $1.648M .

Welcome to the 2011 Toronto Casino. Don’t tell a Toronto market-watcher that immigration does not distort certain resale micro-markets. Garth is probably still under-representing the effect of higher-end immigrant gambling on certain segments of the two most patently ‘immigrant’ Canadian markets – the City of Toronto and Vancouver. It may well be true that immigration does not effect macro-economic trends that will ultimately drive the general and predictable negative outcome in Canada – but it sure has a direct and palpable effect on certain neighbourhood comparables, as both investors and civilians can see every day.

Chi-Ranian money has the dice in Toronto, enabled by the real estate racket. Those subcultures will be blowing on those dice right up until the last possible flip. And why not? If lead in your kids’ toys and particleboard in your pharmaceuticals is OK, why not a little market manipulation and flipper’s nerves of steel? Good for them (unless you actually want to buy a house to raise your kids, that is). The last-flipper-in-the-pyramid (or worse, the jackass who isn’t a flipper) that pays a 40% bump-up over just a couple of years deserves to be fleeced. (And a special shout-out to the Gwei Lo Canadian banks for the 2% money on the 35- or 40-year amortizations, and the CMHC insurance scam that keeps it all in play: “CMHC – we’re here to help carpetbagger speculators wherever the banks can locate a pulse and 5% table stakes!”)

It may be interesting to see who the actual buyers and sellers are in this late-stage Toronto casino phase – more than anecdotal evidence should be adduced to reveal the extent to which immigrant agents and immigrant gamblers are bringing a ‘different cultural outlook’ to the City That David Miller Built. The cant about the absence of speculators driving the (bubble) this time is just hooey.

Toronto …….meet Vancouver…for another few months, at least.

#37 Diffrent on 03.07.11 at 1:41 am

Garth,

You do a good job out of making lemonade out of lemons, but fact is, prices are going higher and those who held when you said sell over the past three years are now realizing much higher gains, while those who didn’t buy are now even more screwed. Fact is, you were looking south to the states and north of sixty five when you should have been looking east. Even the nutty Nostradamus Jr. knew that. Want to talk about game changers? How about 300 million newly affluent people looking for places to spread around their new-found wealth?

http://www.cbc.ca/news/canada/british-columbia/story/2011/03/06/bc-richmond-real-estate-rise.html?ref=rss

There are losses ahead for the Lower Mainland. Wake up. — Garth

#38 AA on 03.07.11 at 1:42 am

Went to check out an open house townhouse in Etobicoke…similar one sold for 485k last year in Jan…this one was listed for 545K….seriously!!….i just laughed at the realtor…here’s how the coversation went.

Realtor : 545k is a decent price..theres a townhouse down the street that sold conditionally for that much.

Me : Wow!..still some greaterfools around!

Realtor : Well i’m telling you the bidding wars are back and by spring its going to be crazy like last year

Me: Really…this is insane..this isnt going to end well

Reatlor : No…our Banks are different ..very prudent

Me : Smile…oh well i’ll continue saving like crazy and buy one from you in 3 years

Realtor : Well you better be saving a LOT…because prices are going up really fast.

Me : Walked out…went to TD…opened an brokerage account and buying some ETF’s with my savings and diversifying.
…oh yea…also thinking of getting rid of my Condo….

This was all from a really snazzy..sharp looking realtor…the only thing i thought was….8 yrs of university and after consulting for the biggest firms in the country…..i gotta be smarter than a dude who passed 3 lousy exams and wets himself every night calling himself a “professional”

AA

#39 bill on 03.07.11 at 1:47 am

kc
that was very grim. thanks for bringing it to my attention

#40 JD on 03.07.11 at 1:50 am

Bring back Chad!!

#41 Jeff on 03.07.11 at 1:56 am

Re #9
Did anyone catch this 60 minutes article about the homeless in florida? Green shoots and USA recovery anyone???

Homeless children: the hard times generation
Scott Pelley reports on the growing number of children who are falling victim to the financial crisis
——————-
That’s America, looking after it’s people…the greatest polarization between the rich and poor of any developed nation. Thanks to corporate tax cuts, a massive military budget and a highly dysfunctional tax system. If the filthy rich and the Republicans didn’t have so much influence then these people would have homes and jobs.

#42 Jeff Smith on 03.07.11 at 1:57 am

Canada might have to settle for number 2 spot!

http://www.theaustralian.com.au/business/markets/australian-homes-prices-the-worlds-most-overvalued-the-economist/story-e6frg926-1226015956075

#43 Nostradamus Le Mad Vlad on 03.07.11 at 2:06 am


#5 Mr. Reality — “The day of reckoning is slowly approaching.”

For plenty, that day is long gone, with plenty more people added to it; see #9 kc’s post — Excellent links and good post.

#18 Hoof-Hearted — “The tree makes no sense.”

Ahhh, if yours is the middle car, the tree makes perfect sense. It’s the two wingnuts (Property Virgins) that have taken the pummeling, but the middle one has taken on The Escape, and that is the point of Garth’s post.

Siddartha Gautama (The Buddha) — “Neither too much nor too little, the middle path is enough.” He was born into a fabulously wealthy family, deliberately put himself through hardships of all kinds and ended up balanced.
*
Great post about being liquid (either through home selling or unexpected inheritance), and then knowing what tools to utilize to better one’s own life and subsequently, helping others.
*
Canada has a few rich people left (not me).

Cdn. Food Inflation via Canadian Capitalist.

Hyperinflationary Deluge of Benny’s Knickers-In-A-Knot.

Politicians Love ’em or hate ’em, they’re all tantamount to treasonous bastards. Look at Ireland. Vote one party out, bring a new one in (a couple of weeks ago), and they bring in the same policies that got the first lot thrown out. They are pleasing their masters (EU – IMF).

Egypt’s Stock Market and Mea Culpa by GS. Do they know something we don’t?

Inflationary Debt Spiral and Sea (Oil) Change.

Sexy Pix Hawaii’s volcano in the process of a long, undiluted fart.

Link in at end. Thirteen states to have a combination of fiat (paper) money, gold and silver coins, But . . .

Heaven vs. Hell More work for the lawyers on a per diem basis.

!Chaos! — March 11 onward. “. . . this astrological movement also signals the beginning of the greatest amount of political and economic turmoil the world has ever known.”

#44 Tim on 03.07.11 at 2:08 am

Over diversification, which will result in a lackluster return. Stay out of bonds and preferreds now, they only have one way to go…down, unlike this housing market which you predicted would correct last year, last fall, this spring…

You sure have a lot to learn about fixed income. As for my housing calls, checked out Edmonton, Calgary or the Okanagan lately? — Garth

——————–
Oh sure, pick the places people are dying to move to…not many will move to Alberta unless it is for a job. Besides, these markets are still much higher than they were even four years ago.

Int rates can only go up, so bonds are not the place to be

Additional posts will likely only embarrass you further. — Garth

#45 Cato on 03.07.11 at 2:09 am

In BC it contravenes the tenancy act for a landlord to accept more than half a months rent for either pet or damage deposit. In Cindy’s shoes I probably wouldn’t trust a specuvestor to hold such a large damage deposit, take the overpayment off the rent at some point in the future. New owner probably won’t even see a cap rate of 2.5% once you account for taxes/maintenance, pure gambling.

8% portfolio return is certainly realistic provided helicopter Ben sticks to the plan. By all indications (barring real estate) this should be western Canada’s decade. The house poor fools will miss the boat, gains don’t count until the cash is in the bank.

Question for rest of us will be what to do when governments on all levels hit the wall after leeching off housing boom for so long. Ontario is more of a financial basket case then California, imagine how bad things will be in a housing downturn. Curious to see how many fair weather residents pull up stakes to warmer, tax free jurisdictions when crap really hits the fan.

#46 The Original Dave on 03.07.11 at 2:10 am

The Toronto Sun is a great indicator for me. Call me an idiot if you’d like. When I see advertising from the same businesses over and over, well, I assume those businesses are doing well. Lately, I’ve noticed a lot less real estate ads in the paper. Tons of car dealerships and vacation ads, but the real estate ads are much less than before.

#47 Thetruth on 03.07.11 at 2:16 am

Geniuses I tell you, just like the people who sold in 2008. I guess those ones don’t read this blog anymore….

#48 bridgepigeon on 03.07.11 at 2:21 am

9kc Good post.
1 in 4 American children living in poverty.
Over half the US budget goes towards the military’s endless wars, keeping millions of other children, that survive, in poverty…

#49 Devore on 03.07.11 at 2:27 am

#13 Timing is Everything

You time those markets buddy. Oink! Oink!

No only has “paper” grown more than bricks in 2010, you would have bought all your income generating assets at a much lower price in 2010 than today. ROI.

#50 Jimmyz on 03.07.11 at 2:36 am

Thanks Garth! Sold my house in the okanagan last summer and broke even after 3 years of ownership. I now live in a fantastic waterfront rental and enjoy a Low stress lifestyle ! This week saw a significant increase in listings in some areas we are watching. Unfortunately for the sellers, most new listings have unrealistic prices and sit on the market for a long time. This spring is going to be very interesting ! Great post Garth !!

#51 Shoggy on 03.07.11 at 2:37 am

Your post tonight is leading people down the garden path. 8% return is above the long-term average of 6 to 7% in a well diversified portfolio. I agree with #15 Rainbird, that 8% leaves no margin of error.

Also telling people to get into bonds at the current time without the provisio of staying away from long term bonds is dangerous because there’s real chance that while bond yields are going up, it’s because the underlying value of the bond is going down. Therefore, people buying into long-term bonds stand a very real chance that when their bonds mature they will actually be underwater were they to buy it in the current market. It’s all fine and good to give real estate advice, but some of the financial planning advice is akin to getting stock market tips from your grocery bag boy, not that i’m calling YOU a bag boy, Garth. lol The time to buy preferreds was 2008/09, as was the time to buy stocks. Froth is coming to the stock market from the bond market. People are going to make the same mistake of buying high and selling low. The time to have bought bonds was at the height of the pre-crash stock market frenzy. And any time is a great time to buy Montreal Squirrel seasoning!

Nobody buying a bond and holding it to maturity can be underwater. — Garth

#52 serge on 03.07.11 at 2:51 am

I love how bmo’s latest analisys of the housing market is “if jobs and growth are good, we will avert a crash”. Like the two are not linked?! It’s like saying a gun shot wound is avoidable if we don’t get shot!

I found it interesting that bmo say’s the over valuation has been higher in the past (1989) … speaking in income to resale value …

#53 vreaa on 03.07.11 at 2:52 am

Anybody At Global BC TV Still Consider Themselves A ‘Journalist’? – Another RE Infomercial Run As ‘News’

Transcription and Images of recent ‘Village On False Creek’ First Buyer piece.

see
http://wp.me/pcq1o-1Wz

Breathtaking images of all the shiny appliances.
Be sure to check out the “view through a building”.
“Half the units sold out” [ROTFL]
Hurry!
Before we consider broadcasting actual news again!

#54 BrianT on 03.07.11 at 2:52 am

#9KC-With his lead in the reporter tries to imply that the USA is going through a painful yet temporary economic downturn-nothing could be further from the truth. The general public somehow cannot grasp what the out of control government debt represents, which is money already wasted, not able to fund the country’s future. The trillions of dollars created out of thin air and transferred to Wall Street are a bill that is going to be paid one way or the other by the average American and not one penny has been paid yet-this is far closer to the top than the bottom economically-far closer.

#55 crabby in mcmurray on 03.07.11 at 2:53 am

Re: buying in the States

I miss the point of buying a house you can only live in 6 months a year. At least if you buy something in Canada and you couldn’t sell it you could still live in it. The price of oil is going to cool the jets of people who fly back and forth a few time a year to sun homes. That and a few more American notions like having to have visas, water becoming such an issue it costs more than your mortgage or only US citizens get to buy water. No thanks…..

#56 Honest George Nigeria on 03.07.11 at 2:58 am

Canadian Perth Property Investors I would like to talk to all of you on a personal level.____ I have recently come into some money from my uncle, the Governor of Nigeria. In order to access it I need to prove to him that I have been successful in my work in Australia. If you can transfer $100k to me I will use it as proof to my uncle and I promise to split my inheritance with you.I have every confidence a astute investor as yourself will recognise a sure fire opportunity as this is as strong as any property investment in Perth.

Don’t confuse me with those other Nigerian scammers – they are related to the Foreign Minister of Nigeria, not the Governor.

#57 Gord In Vancouver on 03.07.11 at 3:01 am

The Canadian real estate market is now being propelled by pixie dust, fumes and hormones.
___________________________________________

I agree – the Kool Aid is still being chugged heavily here on Canada’s west coast.

#58 March of the Pigs on 03.07.11 at 3:13 am

Just finished watching Inside Job last night. Are we securitizing mortgages in Canada the same way that they are in the States?

#59 Crybaby on 03.07.11 at 3:58 am

KC post 9..

Wow…I cried like a little baby when I saw that story. We have the same problem in Canada, just not as concentrated. Lots of poverty here.

All I wanted to do was follow Garth’s advice and buy a house so one of those families could live there for cheap rent….not much of a business guy eh?

#60 Nogg on 03.07.11 at 4:07 am

This post makes me wish I had a chance to cash in on more of the boom. Even so we were lucky enough to get into and out of real estate with a small profit after 3 years. DEFINITELY feels good to have the cash in the bank making money.

There were 3 other units for sale in our complex when we decided to get out. We undercut everyone and sold in 3 days – maybe left a bit of money on the table but it was quick and easy. Checked MLS tonight and there are now 7 units for sale listed at the same prices that were around a year ago – much harder to move with all the competition!

#61 Calgary Hat on 03.07.11 at 5:33 am

I was sad to read your comments Garth (and trust me, I’m not picking solely on you). This is excatly what is wrong with the world these days… There IS more to life than Facebook, twitter and money. Please consider talking about some stuff that really matters in life rather than just making money…

REITs last year returned 20%. High-yield bonds 22%. Blue chip preferred dividends 6%. My portfolio 14.89%. So 8% is no stretch… — Garth

Bulls make money. Bears make money. Pigs make bacon. — Garth

#62 Brian1 on 03.07.11 at 5:56 am

Timing is Everything: Your name bothers me and your statements. They imply that you can time these markets. So tell us oh wise one, wiser than Garth, when was it that you were right? I’m always looking for such a person that even the best are unable to find. When are things going to happen? Why don’t you stop bragging after the facts. Tell us when things will happen. You can’t, can you. Who have you ever stuck your neck out for? When and where have you stood up to the powers that be?

#63 Honest George Nigeria on 03.07.11 at 6:07 am

Remember a Realtor has a vested interest in convincing you that everything is OK & now is the perfect time to buy. Because if they don’t they Starve!! Just think about this or keep it in the back of your mind when you read stories from Banks / Developers / RE Agents / Newspapers etc they all form part of what I call “PROPERTY INC” ……

The biggest players in “PROPERTY INC” are Newspapers & property Websites …..

Property advertising revenue sways what they report & how they report it !!!

In 2006 Sales in the American Real Estate Markets had slowed down & were STAGNATING.

The National Association of Realtors decided it was time for action. The Mainline Press were no longer reporting the Property Myth as the would like it reported.

Facts or Reality were starting drown out the REHTORIC put out by the NAR so they decided to pay millions to put out the MYTH that now was the perfect time to buy property? Really?

In 2006 USA property was falling & 5 years later in 2011… 80% of commentators expect US property prices to fall a further 10-15% ….

but this is the PAID ADVERTISING the NAR placed in all the major US Papers. …

Link: https://lh5.googleusercontent.com/-qp9nPGtoJvo/TW5M0sx8PoI/AAAAAAAAAAs/Q6n4RJdyXaY/s1600/Americian+Realtors+2006+Spruiking+Property.jpg

Why pay? … Newspapers could no longer credibly report the RHETORIC that the NAR wanted or desperately needed them to report so the had to resort to PAID ADVERTS??

But I am sure their property bubble would still be inflated today if they were are creative as a Canadian Realtor? ;-)

#64 Mortgage girl on 03.07.11 at 6:08 am

I love this story. We did the exact same thing. Sold everything…..1.2m worth of real-estate.

#65 Jas Girn on 03.07.11 at 6:15 am

As I learn more about the financial web and day-to-day dealings of people, I have come to the conclusion that we human beings are all motivated by returns of bigger money. We all want to live a grand life and what is happening is that risk is just transferred from one person to another.

Yeah, the homeowner who sold her house and then now rents on it is happy. But what about the fool who bought it. It feels nice to make money on the foolishness of others (and there will be an abundance of fools – especially immigrants), but in the long run society as a whole decays. Families are torn apart by financial ruin, children growing up as out of control teens, and partners becoming emotionally dysfunctional.

This whole society is running on a platform of endless growth. It’s a ponzi scheme of grand proportions, especially that the environment has to over-compensate for the “growth” activity of human beings. At one point, this kind of predatory financial activity by humans to each other has to end. But when?

I have nothing against you Garth, but I think that just because a politician served in the government, does not entitle them to ridiculous yearly amounts of compensation. Sorry, but that is another form of a ponzi scheme. Working people, especially the young ones are strangled by this kind of platform.

I love your blog, but I do not find much dignity in finding another fool to transfer stupidity to. I am not a homeowner and have no debt, but I believe that sustainable living and caring for the environment is the way to go. Not a tree-hugger, just a budding social seer.

#66 Brian1 on 03.07.11 at 6:44 am

The realtor’s mantra has been ‘ buy now or be priced out forever’. Here it is ‘sell now or be priced out of retirement’. although the first is b.s. the second is possible but not that dire (if you don’t own a house in the first place). It probably will be that we will work longer than we like, but if things get bad we will simply tax the richest 1% at 70 % and they will never miss it, unless they are accountants.

#67 Aussie Roy on 03.07.11 at 6:59 am

Great article today Garth, the stories are very telling. Finally a retired friend of mine has come around, he has all four of his units currently listed for sale. The current rental return is 2.75% each cost him around $80k in 2000 (they were yielding 9% when purchased). He plans to walk away with $1.6m this should yield him 8% invested wisely. He has gone from living on the rental income of 60k pa to 128K pa less expenses and tax. Kinda nice to convert this one eyed house investor, all it took was to show him the numbers.

Aussie update – Spruiking at its best.

NO BUBBLE HERE.
The median house price in Northgate, the biggest growth area, leapt 403 per cent, from $99,750 in 2000 to $502,250 in 2010.

http://www.adelaidenow.com.au/property/news/the-suburbs-sitting-on-real-estate-gold/story-e6frefgc-1226016782359

News
http://www.moneymorning.com.au/20110307/urgent-australian-property-update.html

http://smh.domain.com.au/real-estate-news/blogs/property-values/abolish-negative-gearing/20110307-1bknz.html

#68 Brian1 on 03.07.11 at 7:00 am

I would like to ask the bloggers if any have found value in newsletters. It seems to me you need some kind of an edge in investing.If Goldman Sachs has all of those professionals then so should a small investor. Presently I am being pursued by the Motley Fool and they are starting to become pursuasive.(Better watch out for the Nigerian prince). I would like to get Harry Dent’s newsletter but his logic is don’t buy anything till after the crash, so what’s the point? Even all of his stocks are long term dividend paying, so what is his strategy? Is he going to get out at the right time?Please help.

#69 wkwillis on 03.07.11 at 7:15 am

Who would ever have thought that house lot prices would get so ridiculously, outrageously, overvalued?
Who would ever have thought that dollars would get so ridiculously, outrageously, overvalued?

#70 observer on 03.07.11 at 8:15 am

Over the past 8 years I have purchased 5 brand new houses in the GTA. One I live in (we call it our home). I flipped 2 of the houses on closing, took the proceeds and purchased 2 more houses that I currently rent out.

My principle residence is mortgage-free after years of accelerated mortgage payments and dedication. The two rental properties are also on accelerated amortizations with almost 50% equity. The rent covers PIT for both homes now and both will be paid off in ten years (by the tenants).

Because we are mortgage-free we have money to invest in other financial assets as we build toward retirement and we are diligently doing so. The plan in ten years is to have a steady monthly income coming in from our two paid-for rental properties as well as our retirement savings.

I don’t care if interest rates or the real estate market goes up or down. Our variable rate mortgages have fluctuated over the last decade, but due to accelerated ammortizations, our monthly payments never changed. Some years we paid off more principle than others – I just don’t worry about it.

Real estate, like many investments is a long term plan. I got in to the market 24 years ago. Is it the only way to go – absolutely not. Could I have done better with some other financial plan – maybe. But I’m not looking for perfection.

The key thing in my mind is to find a plan that makes sense to you personally. You are much more likely to buy into the concept and stick with it. Diligence is more important than the search for perfection.

You are banking on continuous future real estate appreciation at a time when there is no reason to do so. Also, sounds like you are grossly overweight in one asset class. Danger. — Garth

#71 Northern_dirt on 03.07.11 at 9:25 am

#53 crabby in mcmurray
……………………………………………………………………………

Some of us have Dual citizenships.

#72 The American on 03.07.11 at 9:26 am

At #57: Crybaby, I hear you. That story is very sad. Honestly, no country is immune. I was recently in Nanaimo on Vancouver Island. Believe me, I certainly saw some poverty there, which surprised me. It breaks my heart. Adding to that mix, my friend who lives North from there is putting her home on the market. She bough three years ago for $430,000. She put nearly $100,000 into a remodel for the kitchen and three baths. She honestly thought she’d put it on for $590,000. Her realturd told her she couldn’t list for over $480,000, or she wouldn’t get any offers. Funny what a reaturd will or will not say, depending on which side of the transaction you sit. After she sells, and paying all reaturd costs and closing, she’ll be in the hole, owing nearly $100,000 just to get the deal done. Are people really that out of tune with the REAL market?

#73 WINNIPEGER on 03.07.11 at 9:49 am

http://www.winnipegfreepress.com/local/home-ownerships-lustre-gone-117507863.html

The USA experience—-Canada pending !

#74 makes u wonder on 03.07.11 at 9:53 am

The video in this co.’s page does get you thinking. Who knows how far this real estate thing will go?? Will the rest of Canada be next?? It’s anybody’s guess I suppose.

http://www.concordpacific.com/condominium-for-sale/about-concord-pacific.htm

#75 jen on 03.07.11 at 10:02 am

The latest government propaganda piece in the Globe and Mail:

http://www.theglobeandmail.com/news/politics/ottawa-notebook/is-jim-flaherty-the-first-great-conservative-finance-minister/article1931865/

#76 Moneta on 03.07.11 at 10:10 am

I love your blog, but I do not find much dignity in finding another fool to transfer stupidity to. I am not a homeowner and have no debt, but I believe that sustainable living and caring for the environment is the way to go. Not a tree-hugger, just a budding social seer.
————-
A point that resonates with me.

Any nation where households have to prey on others to get rich or protect their families, leading to a zero sum game is setting itself up for failure.

It’s all about playing musical chairs instead of working to add a quality chair.

#77 Fractional Reserve on 03.07.11 at 10:19 am

Interesting comments on the US by Marc Faber.

http://www.youtube.com/watch?v=rcY6bP7gFko

#78 observer on 03.07.11 at 10:22 am

You are banking on continuous future real estate appreciation at a time when there is no reason to do so. Also, sounds like you are grossly overweight in one asset class. Danger. — Garth

You are correct that I am probably overweight in real estate. That is why we are currently putting the money that was previously being used to pay off our principle residence into other financial instruments.

But I have to disagree with you that I am “counting” on continuous appreciation of real estate. While I don’t believe that there is going to be a crash – I really don’t care. I love the home I’m in and while it has almost doubled in value since I bought it 8 years ago, it is mortgage-free and if it dropped back in price by 50%, I wouldn’t lose any sleep over it.

Same thing goes for my rental properties. Whether they go up or down in value doesn’t change the cash-flow situation one iota. They will be paid off in ten years and providing pure income by that time.

You see, I lived through the last crash and it was brutal, but I hung on to my house, paid down some principle, built up some equity and sold it at a small loss eight years later in 1996. But I was able to parlay that house into a larger home at what turned out to be a bargain.

I learned that move-up buyers can actually take advantage of a price drop. While you may get less for your current home, you will also be paying less for the larger one. In many cases it works out to your advantage because the larger homes tend to drop even more precipitously than the smaller ones.

Bubble-shmubble. Been there-done-that. Survived and thrived.

#79 The Original Dave on 03.07.11 at 10:32 am

Geniuses I tell you, just like the people who sold in 2008. I guess those ones don’t read this blog anymore….

——————————————————–

yeah but, the problem with people like you is: you assume those that sold burnt their money. You don’t see any alternative other than real estate to make money. If someone sold in 2008, took the cash and invested in some undervalued assets, they’ve done real well as of now.

Everyone knows that real estate had a great run. Those that sold and invested have the same amount of equity, while waiting for real estate prices to come down.

#80 Matthew on 03.07.11 at 10:33 am

Dear Garth,

“Bulls make money. Bears make money. Hogs get slaughtered”

Pigs make bacon is far too tame.

Cheers,
Matthew

#81 Throwstone on 03.07.11 at 10:36 am

I think builders doing their due diligence have learned a little something….and have decidingly backed out….

Particularly like the difference in forecasted numbers compared to the real numbers.

http://www.financialpost.com/news/Building+permits+fall+unexpectedly/4394991/story.html

#82 Moneta on 03.07.11 at 10:53 am

Brian1 on 03.07.11 at 7:00 am
———-
There are many ways to skin a cat.

You have to invest according to your beliefs and comfort level. If you can’t make good decisions, then you’ve got to choose an advisor. And if you can’t fully trust him/her, split it up. And if that still does not feel safe, use a 3% ROR in your long term portfolio return expectation. It will force you to keep your lifesestyle inc check and save more. If you are disciplined and have a good head on your shoulders, you’ll make way more than 3% and after a few years, you’ll have more money for more luxuries.

But my worldview is not popular. Most people expect 8-10% return and set their lifestyle choices accordingly. IMO, most will fail to reach their goals.

I am one of those who has succeeded with market timing. When Nortel was peaking, I went to cash for a year. I love cash when I feel disoriented. I don’t like to stay there for long but it give me time to get my bearings. While in cash, I don’t have to look at my tickers. I can focus on research and redefine my strategy without the effects of cognitive dissonance.

After the tech crash, I went into diversified. In 2005-2006, I went to 100% bonds.

Every time I have gotten a huge bonus, I have put it into fixed income because they have always seemed to coincide with market peaks… which is normal because strong earnings were contributing to higher valuations and bonuses!

When the market tanked in 2008-2009, I bought some energy, golds and materials. Not enough. I have to admit that I have not participated in the rebound but I still have more money than before the crisis.

Since my portfolio is much larger now than it was in 2000, I have started to get more disciplined, questioning the value of my market timing. I back tested it to see how much I would have today if I had been more aggressive with equities and better respected diversification rules. In fact, I would have much less money today because most of my money inflows happened just before a market crash!

The most underestimated variable today in portfolio management is the impact of cash flows on one’s portfolio.

I have to admit that I am warming up to equities. At these rates on fixed income, I believe credit spreads are out of whack and investors are not being priced for the risk they are assuming. And equities are riskier than bonds. If credit spreads expands, I don’t see how stocks could do better. I think there will be a lot of volatility in the market and I’ll keep on market timing.

Rates are at all time lows. All they could do is stay flat or rise. With every rise, bonds will tank and so will stock valuations. For the last 30 years, every rate drop helped raise the PE multiple and earnings. Higher rates will shrink the PE multiple. If stocks are to rise, earnings will have to increase faster than multiples are dropping. It’s like swimming against the tide.

Unfortunately, I don’t think most investors have what it takes to market time.

#83 Moneta on 03.07.11 at 10:58 am

I think one debate we should have going is whether or not we’ll be getting more inflows than outflows in security markets over the next decade.

And arguments should be backed with data.

#84 Timing is Everything on 03.07.11 at 10:59 am

#60 Brian1 – said “Your name bothers me and your statements. They imply that you can time these markets.”

I do not time markets. Can anyone? A bull is just a bear in waiting and vise versa, as far as I can tell. It is a timing issue. RE is different because it is a home (shelter) for most folks. In fact, I do not ‘gamble/invest’ much at all, on my own. As I said before, when the timing is right, I will hire someone like Garth. No chasing this stock or that or this metal or that. I do not have time to dedicate to be my own ‘investor’. We have our careers and pensions and ‘bunker’. I think Garth’s advise/methods is/are correct wrt a ‘balanced portfolio’ approach for most folks, especially if they do not have a pension plan. This is/was a RE blog, but is slowly morphing into something else…Investment blog? Dating service? ;)

One of my very first posts on this ‘pathetic blog’ was that I would email Garth for advise/guidance when the time comes for us to select a top-notch fee-based financial adviser and use that information (if any is given) as part of our decision making process.

RE prices in Vancouver and Richmond are at a high now. Hind sight is 20/20. And in general, the time is not right to purchase a house in Canada for most folks. But is the time to sell for quite a few.

Still, timing is everything and at the end of the day, it is your life and your decision(s) on how you ‘spend’ your days and money.

You are easily bothered. It’s just a name.

#85 Moneta on 03.07.11 at 11:08 am

The most underestimated variable today in portfolio management is the impact of cash flows on one’s portfolio.
————-
I am not talking about the CF generated by the securities in one’s portfolio but the deposits and withdrawals that are made throughout the years.

#86 Utopia on 03.07.11 at 11:13 am

#26 westcoastroller asked…..

“Can this really be happening?”

http://www.cbc.ca/news/canada/british-columbia/story/2011/03/06/bc-richmond-real-estate-rise.html

“a 14% gain in one year….”

———————————————————

It is happening alright Westcoastroller, and it is a huge, huge, red flag. A warning of major trouble to come. It does not get any more obvious either that the top is in.

Take a close look at the YatterMatters chart that Garth put up for todays blog post. Note the red line representing average detached home prices from 1977 to present.

Notice anything odd about it?

Seems to be spiking almost on the vertical right at the very end is it not? You can easily observe that there has been a massive upward surge in prices. This is clearly the final leg-up of a multi-wave pattern since 2009.

That picture is telling everyone who will listen to get the hell out of Dodge. Most won’t hear it though. They are too busy ruminating about all the wonderful reasons real estate is so high and getting higher.

Even the realtor in the article you linked marvels how Richmond homes look cheap to international buyers. That is a ridiculous statement though and it only tells us she has no real idea why prices have gone so high.

What most fail to see is that from a technical standpoint the game is already over and that last final thrust is the one that will make fools of all the so-called experts. Do not think even for a moment that the banks and economists at the real estate boards are not aware of this technical picture. They are. They follow it closely.

The correction, likely beginning in Vancouver, will be brutal too if wave theory proves itself correct (and I have no doubt it will). The old expression, “the bigger they are, the harder they fall” can not even be improved upon in this respect.

We were never so close to a real estate correction in this country as we are at this moment in time. So get the hankies out, the crying and gnashing of teeth is about to begin in earnest.

Vancouver and some of the other major centers, as they decline, will merely be the triggers that kill confidence for everyone else all across the country. Nobody will have immunity once the big cities begin to unravel.

Have a look at the following paragraph.

It is a description of Wave Five behaviour that describes investor psychology and outcomes. It will be very familiar to everyone who comes to this site regularly even though it has not been stated explicitly before. This one short paragraph sums up everything we know about our own R/E market over the last 6 months.

“Wave 5: Wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is often lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high but the indicators do not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how forecasts for a top in the stock market during 2000 were received)”.”

Those of us here on this site are of course the bears that are referred to in the above. We are ridiculed all round even though we know intuitively we are correct in our assessments. We also know it from a technical standpoint now. This is almost undoubtedly why Paul Krugman has just recently weighed in on the topic of Canadian real estate.

The real genius is to call the top within a month or two of it’s occurrence and be proven correct for the world to see. Paul knows that well. He has a big reputation on the line. Hell, I don’t even need to read Elliot Waves to know we have trouble. All I needed was the quotes from Paul out of the New York Times!!

So while it is now too late for most to sell and get out, those of you who just waited and saved will soon be vindicated in your views. If you are interested in a more in-depth explanation of Elliot Wave Theory then here is link presented by Wiki.

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

#87 ash on 03.07.11 at 11:18 am

Great article!

#88 kilby on 03.07.11 at 11:28 am

We listed our Okanagan lake view home last summer. Had it professionally appraised at $619k. Listed at $597k and came down $20k every month until we settled on a final offer of $497k, completed in January. Of the 10+ lake view homes, ours was the only one that sold. I just noticed one of the others that is still for sale. They started 325 days ago at $639,900, January 13th came came down to $550k and on February 25th to $510k……It will probably sell now, people are slow to reduce their prices, after ours this seems like the only other that will actually sell. Might start a trend? Feels good to be liquid.

#89 Kitchener1 on 03.07.11 at 11:30 am

#36 marcus aurelius vero

I disagress, RE is not driven by immigration in the least.

Really China, Iran etc.. the majority of the population in those countries live in what we would call squaler here in Canada. Look at there income levels as a percentage compared to our and look at were we draw our poverty line. Even pro rated to their incomes the majority of people living there live under our defination of the poverty line.

What you are talking about is generational money that is being leveraged.

Big difference.

This is a myth– on the commerical end, why is’nt all of this money going into opening new business? companies? etc.. Thats were the smart-real money invests in. Not RE, real estate is poor man’s game, its what the less savy investor will do.

No other asset class in the world– if anyone knows of any– please do tell. Can you leverage 200-300-400k….. on a 0/40 or 5/35. Its Free money.

Canada, since about 2007 has the most lax lending standards I have ever seen in my travels to europe etc..

#90 Throwstone on 03.07.11 at 11:38 am

Jas Girn ….and Moneta…I also agree.

The lust for $ is pathetic and is destroying the values of empathy and equality …values most needed in difficult economic times.

Its actually sad.

#91 Utopia on 03.07.11 at 11:53 am

#30 Kitchener1

“What I am just starting to see, and I dont know when this happened as I dont check MLS all that often– is the kind of slow, slow desperation that I saw just prior to the meltup in 08-09.

Stuff like bring any offer, etc etc……”

———————————————————-

I agree Kitchener. It is early signs of stress you are seeing.

Don’t forget the sudden plethora of “Rent to Buy” offers we are now seeing which will soon be followed by “Vendor Financing” incentives as the wheels fall off the market and those who must get out resort to any and all other means to attract buyers.

In the US, homeowners threw all kinds of incentives into the mix for purchasers as times became more difficult.

Free cars for example. Two homes for the price of one was offered by more than a few developers. There were deals where the homes came fully furnished and one I saw even included the family cottage!

It is not so tight here yet but it will come. I expect rural homes, cabins on the lake and RV country to crash. Who the hell will keep up payments on resort property when the family home itself is under threat.

But wait you say..! That can’t happen here Utopia because our employment levels are improving.

The caveat is that housing activity and all its related parts of our economy represent roughly 20% of GDP and if housing takes a dive into correction territory then the whole economy will take a hit and with it will go thousands upon thousands of jobs.

That is just a precursor to further declines in housing prices as employment levels recede and this sets up a situation where one kind of loss feeds back into all others. In other words, as jobs are lost, housing prices decline further which brings on more job losses.

Exactly as it did in the US.

#92 theletterM on 03.07.11 at 11:54 am

Sobering stuff.

Thanks Garth. Keep up the good fight.

#93 Brian1 on 03.07.11 at 12:01 pm

Since I wrote this morning I have found interesting comments at Arabian Money (concerning Harry Dent) and Amazon. I am really grateful to Amazon that they allow so much negative opinions about any of their products. I am trying to play the game of timing and there is only one way and that means staying out of the stock market until it crashes. Pretty soon I am going to get tired and just give in to bonds and American dollars because we all know Canadian houses are going down.

#94 Kevin in Winnipeg on 03.07.11 at 12:08 pm

REITs last year returned 20%. High-yield bonds 22%. Blue chip preferred dividends 6%. My portfolio 14.89%. So 8% is no stretch. Good luck with those illiquid bricks. — Garth

An investor last year would have to be pretty unlucky to not make 10-15 % on their portfolio. It’s going to be a lot harder to find consistent returns this year and next.

Real estate is the only “investment” besides Forex and options where someone can leverage 20-1. Most investors would be very reluctant to plop down $300,000 in a good company’s stock because of the inherent risks with comments like the company could go bankrupt, stock could plummet and you never put all your eggs in one basket. Mortgage a $300,000 house with $15,000 down and most would say this is a great investment. This is very disturbing and the current reality which needs to change.

Where did I say “stocks”? — Garth

#95 Dean on 03.07.11 at 12:14 pm

I kind of feel it’s a shame that buying a home to live in isn’t a worthwhile pursuit in terms of a balanced strategy. But with the numbers I see these days, I can’t find any holes in what you’re saying without reaching to the ridiculous.

It’s actually quite astonishing to see that it makes sense for people to lock into renting at $2-3k per month. That alone to me shows how unusual things have become.

#96 Crash on 03.07.11 at 12:29 pm

“On a decent street on Vancouver’s west side sits a small, nondescript bung that was purchased in the high fours five years ago.”
I find it hard to believe this (high fours purchase in 2006) is the case. I sold an older Delta rancher in early 2007 for $420K and westside Van prices were at least 2X higher on average generally than Delta prices even back then.

#97 Cellar Dwellar on 03.07.11 at 12:37 pm

“…..as the wise dude said, “Buy low, sell High”……

Where IS that little reptile Tom Vu these days ? Still rotting in a US prison ?

He also said, ” “If your friends tell you not to take my seminar, your friends are losers. You dont want to hang around with losers.”

Yup, good old Tom Vu. Late 80’s early 1990’s TV huckster. GONE

#98 Jamie on 03.07.11 at 12:52 pm

Downsize – don’t rent. I don’t normally write comments like this but I feel like I have a strong opinion about this GTA family. I can definitely understand why you would want to downsize your realestate if it’s costing too much but for you to hand over a large sum of money to an investment advisor and then pay a ridiculous amount of rent to maintain your lifestyle may not leave you so well-off in the end. First of all let’s deal with renting – either you rent from a corporation or from an individual owner. My experience is corporation is better – it’s stable, you don’t have to usually worry about them selling your home out from underneath you. But corporations generally only rent out high-rise buildings or townhouse complexes. When you rent a house it’s usually from an owner – some owners don’t maintain their properties well at all – filthy carpets, mould, bad plumbing, ex.. other owners are paranoid and constantly find excuses to check up on their house – in the summer, for example, they are over on the weekends to trim bushes and sweep the sidewalks – goodbye privacy. I rented a condo in Miss. from an owner who put the unit up for sale the instant our one year lease was up – and we already had a trip booked to Europe – so we didn’t have too many options other than to buy it from them. We sold and moved out a year and a half later while losing money on the deal. I learned that renting from an owner is definitely not for me – you should be prepared to have to move every 2 or 3 years and pay rents that could go much higher. If this place you’re renting is in a popular neighbourhood in Toronto then it will only be a matter of time until the owner realizes they can break the house into a multiple unit rental and make $3000 + a month. The second part of this story is the 8% per year – good luck. The simplest math to achieve that return would be 50 % stocks – assuming 12 % per year and 50 % bonds – 4 % per year. This leaves you vulnerable to interest rate risk on the bonds (or bond ETFs) and any kind of market shock on the equities. You have to ask yourself – if in 2 years from now the housing market hasn’t collapsed but your $500 Thou is now worth $350 Thou how would you feel? If you can stomach that then you may not be so bad off – but it’s something to think about. If I were you I would find cheaper realestate that you can be satisfied with and put down something like $250T and invest the rest. Also be careful on your investments – high-yield bonds are just a fancy name for junk bonds. Would you buy a junk car? I also feel somewhat confident in letting you know that a big portion of small cap Canadian companies are virtually scams. The TSX Venture (informally known as the Vulture) market is full of liars and cheats – and it’s all legal. I know, I’ve worked for one…I would never put one dollar of my own money in it. Lots of things can happen in any market – the U.S. seems to bounce from crisis to crisis nowadays. Liquidity at some level is a matter of perspective: if you buy an S&P 500 ETF and it drops 40 % due to the next world crisis how liquid are you really? If you buy a stock a $10 and the market price drops to $1 and even if you feel like the company will payoff in the longer term you’re still stuck with those shares until it happens. I’m not trying to defend realestate but I think market timing is a dangerous sport and to claim the other markets are rosy is guess at best. A big drop in the housing market is bound to affect the banks’ share values – which make up a good portion of the S&P TSX 60. I own a 3 bdr fh townhouse in Oakville. My property tax + mortgage interest is about $600/month. If I spent $2400/month on rent that would be about half my after-tax income. crazy.

That comment is so rife with misinformation I may have it bronzed. — Garth

#99 AG Sage on 03.07.11 at 1:01 pm

>#45 Cato on 03.07.11 at 2:09 am

RE: large deposit
That’s a really good point. If they insist on that much, put it in an escrow account.

#100 Victor on 03.07.11 at 1:08 pm

Why the bank won’t hike rates until October: Scotiabank

Paul Vieira, Financial Post · Monday, Mar. 7, 2011

OTTAWA — The improving economic backdrop has strengthened some economists’ view that the Bank of Canada will begin raising its benchmark rate in the second quarter – either in April or May – or at the very least in July, once the U.S. Federal Reserve is scheduled to end its US$600-billion asset purchase plan.

Not so the Bank of Nova Scotia. It is among the few research houses on Bay Street that believe the Bank of Canada, led by governor Mark Carney, will wait much longer – to October to be more precise. (Meanwhile, analysts at Capital Economics have reiterated their view the central bank remains on hold for all of 2010.) The main culprit: A weak U.S. dollar which could drive the loonie to US$1.08 by the end of the year.

http://www.financialpost.com/news/bank+hike+rates+until+October+Scotiabank/4395686/story.html

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

Garth, do you continue to think that we’ll see multiple hikes between April-July as you’ve posted in past; or do you think recent events are changing that outlook?

That is not what I said. Multiple hikes by the end of the year adding at least a point to the prime and increasing VRMs by a third. — Garth

#101 Shoggy on 03.07.11 at 1:08 pm

Garth, you are right a person holding a bond to maturity will not be under water in terms of the face value of the bond. We know that. What I was referring to is this. The current yield on the 10 yr CDN govt bond is 3.33%. Inflation is currently at 2.3%. But if we are to believe the pundits (including yourself) that inflation is set to rise, then that inflation will eat into the return on the bond. Furthermore the lost opportunity costs of holding a 3.33% bond till it matures in 2021 will add up. Now one could make the argument that the person does not have to hold the bond till maturity i.e. hold it and clip the coupon while it goes down and sell it went it goes above par. But when and if that will happen is anyones guess. It is no better that buying real estate right now and saying that one should hold it through the downturn and wait till it goes up again. And yes I know at least with the bond you will be getting a regular interest payment. Furthermore, one would have to hold the bond in a registered account to prevent paying taxes on the interest (and further going under water). Unless a person is willing to hold the bonds in the TFSA, which is not recommended, then the lost opportunity costs on the current long term bonds, in an RRSP, do not make them worth while and a person stands the real chance of being under water when keeping the total picture in mind. Bear in mind that the historical avg of the 10 yr bond is about 6.04% with the high in the 1990 being 11.91 and the low in 2009 of 2.56%.
http://www.tradingeconomics.com/Economics/Government-Bond-Yield.aspx?Symbol=CAD

We are just off the low level currently. I still say, holding long term bonds currently especially till maturity is not advisable. But then again I am just a layman not an advisor.

In times of volatility bond prices often rage higher as yields fall, giving investors a dramatic capital gain. Bonds are generally inversely correlated to stocks, this the wisdom of a balanced portfolio with the right asset allocation. As I said, you have much to learn about fixed income. — Garth

#102 Tony on 03.07.11 at 1:10 pm

Good sermon Father Garth. . .

And just like the Bible your little parable is filled with flawed logic. . .

I don’t trust real estate at these prices. . .so I would not buy. But I trust the “investment game” even less. One needs only to look back a year or so to see how many people lost all their retirement funds in the market on investments that were considered “safe” and “stable”. I’d rather have a small overpriced house and a small mortgage then a lot of money in stocks that go “poof”. At least you can live in the house when times are bad.

Buy a place you can afford–that usually means saving for few years. Close your own doors, be frugal with your money, don’t use credit if you don’t have to.

#103 No crystal ball... on 03.07.11 at 1:14 pm

Thanks for a great post Garth. This really illustrates what you have been talking about, and it totally hits home for me.

We were among the “losers” that sold in 2009. Sold in Oakville to one of six competing offers and got 40K over asking price. None of the offers had any conditions.

Am I missing something? Is it not absolute insanity to buy a 23 year old home, built during the building boom of the late 80’s (some very poor quality stuff built then), with no inspection?

This kind of dangerous buying has got to change. I cannot even imagine wanting a house that badly. Wait until interest rates go higher and people realize that they are too maxed out to fix all the problems in the uninspected houses they are paying top dollar to buy.

Yes the value of our old house has gone up, but do we have any regrets about not waiting a year or two for the maximum cash-out? Don’t think so! The invested proceeds of the sale have done far more for us than the house ever would have – even at today’s prices. Plus the longer we stayed, the more we would have had to spend to keep the house saleable.

For us it was one of the best decisions we ever could have made.

#104 CalgaryRocks on 03.07.11 at 1:28 pm

Homeless children: the hard times generation
Scott Pelley reports on the growing number of children who are falling victim to the financial crisis
——————-
That’s America, looking after it’s people…the greatest polarization between the rich and poor of any developed nation. Thanks to corporate tax cuts, a massive military budget and a highly dysfunctional tax system.

Lack of education, lack of savings and lack of employable skills is what happened in most situations. And honestly, when you earn so little, should you really have that many kids?

Ah regarding corporate tax cuts. The income eventually flows to the individual where it gets taxed at the individual rate.

High corporate taxes is a job and investment killer as it takes cash out of the company where it is needed. Anyone that has ever owned a corporation rather than listened to Jack Layton can tell you that.

I agree however that the US tax system is very generous to the 100K+ crowd especially since there are states where there is no state income tax, just the federal portion. Those states usually have asset taxes however, like Florida.

#105 bystander on 03.07.11 at 1:31 pm

to Jas Girn #65 who wrote:

“Yeah, the homeowner who sold her house and then now rents on it is happy. But what about the fool who bought it. It feels nice to make money on the foolishness of others (and there will be an abundance of fools – especially immigrants), but in the long run society as a whole decays. Families are torn apart by financial ruin, children growing up as out of control teens, and partners becoming emotionally dysfunctional.”

I share your pain for indebted families, the concerns about unsastainable path of ‘growth’ we have chosen to take. Right on!

I do not agree, however, with your view of immigrants.

I’m an immigrant myself and I sold my property in 2007 to a Canadian born (suppose to be smarter than average immigrant, eh?) girl, a nurse, who put zero down on a condo. That condo is 20K down since. I feel sorry for her, but it was her decision to “save”. Perhaps “she was Richer than she thought” ( (c) ScotiaBank ) So my point is: Reality is not what you think it is. Better reasses your filters of the reality.

You must be one of those people who quitely hate people from other countries (yet forgot where your ancestors came from), while keep voting for the same old conservative politicians contriving these immigration policies. Before I finish here here is some food for thought:

“Immigrants arriving in Canada in recent years are more educated than were immigrants who arrived in the past and are twice as likely as the Canadian-born population to have a university education”
the source:
“Education in Canada: Raising the Standard, 2001 Census ”
http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=96F0030XIE2001012&lang=eng

To Garth: Thanks for not censoring this comment.

#106 45north on 03.07.11 at 1:34 pm

kc: 60 Minutes documentary: Hard Times Generation – very powerful

kitchener1: March 18 is here real fast, what happens after? even with demand forward, sales volume is still down! what happens in Aug, after inventory rises and interest rates rise?

I think we’re looking at the hardest steepest fall in real estate. Ever. I sense that economic hard times will lead to political and social change.

GroundZeroPat: She called back and said she is going to sell her other condo and ask her daughter to sell hers too.

But it’s like somebody flipped a light switch and people stopped buying.’”

February 2006 – like 5 years ago

http://thehousingbubbleblog.com/?m=200602

#107 tkid on 03.07.11 at 1:36 pm

Jamie, are you really suggesting I should not rent because you booked a vacation while knowing your lease was up?

My favourite part was where you implied your mortgage payment minus ‘interest’ wasn’t really an expense to be counted against your paycheque. Oy vey.

But I have a tip: to avoid the perils of renting a house with filthy carpets, visit the house first. It is amazing how many places I decided I didn’t want to live in just by looking those places over.

#108 Mister Obvious on 03.07.11 at 1:42 pm

#75 (Moneta)

“It’s all about playing musical chairs instead of working to add a quality chair.”

Musical chairs is a game humans will always want to play. Collectively, we can’t seem to get enough. You can pout in the corner or you can get with program.

It’s blogs like this one (few and far between, I might add) that offer an inside track. Take the advice and prosper. It will put you in a much better position to exercise charity to future losers.

#109 wetcoaster on 03.07.11 at 1:50 pm

” I love the home I’m in and while it has almost doubled in value since I bought it 8 years ago, it is mortgage-free and if it dropped back in price by 50%, I wouldn’t lose any sleep over it.

Same thing goes for my rental properties.”

Sure dude, you’ll be popping Zantax like candy as you have never experienced a 50% drop in your Trump wannabe overlevaraged play.

If the prices drop 50% then good luck trying to find someone reliable with a job who will pay even 70% of what you are renting them for now. It will eat your guts to pieces losing 50% of anything, especially over a million plus according to your property holdings.

#110 Azza4 on 03.07.11 at 1:53 pm

//#9 kc on 03.07.11 at 12:01 am
Watch this and try to keep a dry eye:
http://www.knoxviews.com/node/15847
//

Actually, look at 3:34 in that clip. There is BMW X5 just after the school buss. It’s probably no fun to be in that school for kids from motels.

http://www.cbsnews.com/video/watch/?id=7358670n&tag=contentMain;contentAux

#111 Scare Crow on 03.07.11 at 2:01 pm

So she smile’s ear to ear (picturing the Grinch in that scene). Reminds me of a buddy in school who admitted his father checked obituaries so he can find the grieving widow and help with the financial costs by buying at cents on the dollar – taking advantage of those – despite some here will interject that the buyer should have been beware – if you had any conscience – you would feel a touch of shame – I am not saying that to make a profit is sinful – but you gained immensely from the backs of others who sadly did not see the warning signs – “kicking a guy when he’s already down – nice sportsmanship”…

Maybe all those iron clad investments – those preferred shares (banks?) maybe take such a hit from this pending housing meltdown – just might stop issuing dividends, those muni bonds – default – shares in precious metals (once China implodes) commodity prices fall – any maybe – just maybe – massive inflation and holding hard assets – may have been the smartest move of all – all those certificates look good on paper – but do little if worthless – see how that keeps you warm in the winter…brrrrrrrr…lol!!

Okay blog dogs – let me know that holding securities is best – just as we enter the Greatest Depression –

Give me shelter, give me food – all the rest is meaningless!!

No Canadian bank has ever missed a preferred dividend payment. Ever. Sheesh, this blog is a swamp of fear and insecurity. — Garth

#112 Alex on 03.07.11 at 2:11 pm

“The target is 8%, which gives them the choice of living rent-free, or reinvesting and having $1 million in liquid assets before they’re fifty. By 65 it’ll likely be two million, with the goal of spinning of $150,000 a year in retirement. Forever. And not touch the principal.”

Sound right but they will hit 65 in 31 years and if real inflation is 8% annually ( and it is!) then their $150,000 in 2042 will have a purchasing power of the present day $13,800. And it is not even aftertax!

Obviously returns will rise with inflation. — Garth

#113 pjwlk on 03.07.11 at 2:17 pm

#46 The Original Dave: “I assume those businesses are doing well. Lately, I’ve noticed a lot less real estate ads in the paper. Tons of car dealerships and vacation ads, but the real estate ads are much less than before.”
———-
Actually Dave, I beleive the opposite to be true. I work in automotive and can tell you that the ads increase as the business drops off. January/February especially. I think a lot of people are also finding travel difficult to afford these day, hence the ton of travel ads and vacation deals.

#114 Tim on 03.07.11 at 2:26 pm

BNS doesn’t see rate hike until fall due to high CDN dollarhttp://www.financialpost.com/news/bank+hike+rates+until+October+Scotiabank/4395686/story.html;

Real estate owners continue to benefit from low rates and correction will be further prolonged

#115 Dodged-A-Bullit-in Alberta on 03.07.11 at 2:30 pm

Greetings: Here is an example of what I consider a “black swan” event. The city surived the Sept quake relatively well only to have the second create destruction and loss of life. The economic impact on the whole nation is still unknown.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10710820

#116 Two-thirds on 03.07.11 at 2:30 pm

#30 Kitchener1

“Loblaws raising food prices by 5% april 1. Gas prices up 15-20%, energy-gas-property taxes etc.. up for most people. House prices up etc… me thinks there are some heavy interest rake hikes in the pipeline.”

That is amply evident to us sentients, but aren’t food and gasoline prices excluded from the BoC core index? The obtuse reason is because of their “volatility”!

Way to hide your head in the sand, Carney:

“The Bank of Canada’s core index excludes eight of the Consumer Price Index’s most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; heating oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies) as well as the effects of changes in indirect taxes on the remaining components.”

http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm

#117 HouseBuster on 03.07.11 at 2:41 pm

Garth, do you still think you can get the 8% return with all that’s going on in the world?

#118 jess on 03.07.11 at 2:57 pm

As mayor you decide to lease (long 75 years) the parking meters in your city. You are cash strapped. Bid out to tender and financial groups around the world collectively pool and bid 1.b. for your city parking meters.
a new vehicle LLC is created and is registered in Delaware (private ownership)All arranged by the expert “infrastructure” banker at the global investment bank. Next hire asset manager called A – since local no longer collect fines. So several groups own the infrastructure funds called Parking Meters, LLC.
In the meantime, the investment banker needs new investors to provide additional capital and reduce their investment exposure.
And 2 months later the structure changes again only the investment banker locates a minority investor called B bailout investors , to accept 49.9% ownership, a sovereign wealth fund and 50.1 percent to a company owned by a company called Tax avoidance address in Luxembourg.

…. it’s all so confusing for my woollen brain /bonds were so much easier to follow!

Toronto mayor could sell of all the parking meters but first get the Government to hire the outsourced personal with taxpayers money to install hydro time of use meters and/or plugins at the lots/parking garages for all that future potential $. Sell off all of them to the monopoly fund in the cloud .

Is there downside…public events for festivals , no changing time schedules on streets, or close off streets for repairs your taxpayers will have to pay the asset managers fees for lost revenue. The UPside rate/hr. You can bet for sure that it goes UP.

#119 Devore on 03.07.11 at 3:10 pm

#77 observer

But I have to disagree with you that I am “counting” on continuous appreciation of real estate. While I don’t believe that there is going to be a crash – I really don’t care. I love the home I’m in and while it has almost doubled in value since I bought it 8 years ago, it is mortgage-free and if it dropped back in price by 50%, I wouldn’t lose any sleep over it.

That’s very confident of you. Knowing what you will do and how you will feel in such a dramatic scenario. Must be comforting.

But, I can assure you, if your houses lose 50%, you will be losing lots of sleep over it. Especially over those rental properties, some of which will go vacant after your tenants lose their jobs, a likely scenario in an economy where real estate is down 50%.

#120 Jamie on 03.07.11 at 3:25 pm

tkid,

Obviously anyone should checkout a place before renting it..although it can be hard to be that thorough. After a 2 year lease you’ll likely be on a month-to-month. In your lease you’ll have a 30 or 60 day notice if the property is sold to someone who is not going to continue your contract. I know people who have gone back and forth between renting and owning. Neither is perfect for sure and should keep an open mind that you may return sooner than you think. I’m sorry I was comparing property taxes plus mortgage interest to rent. (since most house renters pay their own utilities). I know this comparison isn’t completely fair because the money I have in my house could be invested somewhere else if I were to sell.

#121 Utopia on 03.07.11 at 3:30 pm

A transitional government now forming in Benghazi in Libya is reportedly asking (if not begging) the West to establish a no-fly zone over Libya as they struggle against the better armed and loyal forces of Mr Gadaffi.

It is important that the new government have legitimacy with the majority of the people in the country though. Should that be the case then it would be within their power to unilaterally act as a governing body and establish direct lines of communication with neighboring countries and the West.

There is no reason in that case that they could not, for example, suspend the constitution during hostilities, try Gadaffi in absentia or even take the reigns of the financial system and its payment systems.

As a first step though they will need to prove they have the legitimacy to rule during a transition period. There is a lot of money at stake and who gets it may well define who comes out on top.

Billions held by governments in frozen accounts across Europe and America could be thawed and legally channeled to a new government if public support there shows without doubt that Benghazi has the authority and the rights to govern.

For that matter, the transitional body could revoke the existing currency and substitute it with one of their own thus choking off the Gadaffi family who is using its treasury to buy and pay mercenaries.

Sounds crazy right? Well, all is fair in love and war and who controls the purse strings controls the flow of goods, armaments and payments to the public service and populace at large.

It is always about the money.

#122 Hell in a Handbasket on 03.07.11 at 3:47 pm

I did it Garth! I got out. After about 30 showings in the last tense month we got an offer and it was decent. paperwork is signed and the buyer is waiting for his house to close as well. We are now looking at rentals to wait out the coming storm. I feel lucky, knock on wood.

#123 Realtors are worried on 03.07.11 at 3:58 pm

Many worried realtors and home owers who are looking to sell on here. Whats happening… no sales? Sales have dropped for over nine months in a row? Wow looks like the housing crash continues to pick up steam. Prices are falling regardless of the propaganda of lies from realtors. Brampton is finished as prices and sales have crashed so bad that the brampton RE board refuses to post the numbers. Powers of sales have now spread through Brampton and now hitting other cities near by and the crash continues to spread from Brampton. make no mistake about it the crash is horrible and many are losing their homes. Use your own brain……if sales have crashed for over nine months what does that tell you?

#124 HouseBuster on 03.07.11 at 3:58 pm

#113 Tim – Real estate owners continue to benefit from low rates and correction will be further prolonged
——————————————————
Demand is going to fall off a cliff. Interest rates will not matter.

#125 debtified on 03.07.11 at 4:09 pm

Looks like the comments defending the merits of RE as a good investment in today’s market have increased in frequency in the recent days. I wonder why.

I’ve been watching the RE market in Fort McMurray since late 2008 (I have screen shots of listings and prices). My observation is that it is anemic at best. I think this is mostly a problem of sentiments, not lack of money. The local RE Board have not been publishing stats for several months.

Thousands of brand new condos (two hundred for one developer alone) are unsold and empty (some for over two years!). Condo prices are down around 8% (i.e. $40K for a $500K 2-bedroom). SFHs prices are fairing better but it’s only tracking inflation at best. At least half a dozen people I personally know have extended their “3-year” plans because they cannot sell their houses at break even prices – several more similar stories in the rumour mill. All sellers are waiting for the next “boom”!

#126 613 Happy where I am on 03.07.11 at 4:11 pm

Only one problem with renting… I agree with the economics of buying low, selling high, but most people buy a house to live in it themselves… so while the greater fools are flipping houses, there may come a time when the people who owned the house/rent the same house may be out on the street pounding the pavement trying to find a new rental…

I would look into cooperative housing if this is any bit of a concern. I am currently on the waiting list of a coop in downtown Ottawa and will sell my house and move when I get in.

I could afford a condo but can’t see myself spending a huge amount for such a small space (plus condo fees), so I am looking at the alternatives.

#127 Alpha Bravo on 03.07.11 at 4:12 pm

“While housing may be a drag on overall economic growth this year, Scotia Capital sees no evidence that the market is about to come crashing down.”

There will be a soft and gentle moderation only. Everyone please remain calm. In case of fire please walk, don’t run for the nearest exit.

http://ca.news.yahoo.com/value-building-permits-issued-canada-falls-unexpectedly-january-20110307-060940-487.html

#128 Jason on 03.07.11 at 4:17 pm

You win, Garth!

Just put up the house we brought last Feb when the market was super hot for sale this week. We plan to invest the money in a balanced portfolio to help out on the rent.

Well, guess deep down our hearts we knew this may come and that’s why we were reading your blogs for the past four months and finally surrender…

#129 Shoggy on 03.07.11 at 4:35 pm

As I said, you have much to learn about fixed income. — Garth

Lucky for me I have another 30 years to learn. :P

Best start now. — Garth

#130 bystander on 03.07.11 at 4:37 pm

Is commodities making a major top?
http://finviz.com/futures.ashx

#131 BrianT on 03.07.11 at 4:42 pm

The price premium of physical silver over paper silver has hit an all time high of 20%-using that measure an objective observer would conclude that silver is currently in whatever the term for the opposite of a bubble is http://www.zerohedge.com/article/physical-silver-pslv-premium-nav-surges-record-high

#132 The Econoom on 03.07.11 at 4:46 pm

To #37: 300 million newly affluent? Please define affluent, as there are only approximately 10 million millionaires on the planet, and only 477,000 of those are in China:

In terms of population, China, with 477,000 millionaires, ranks fourth in the world, following the United States (2.87 million), Japan (1.65 million) and Germany (861,000) in succession.
Only in Hong Kong, the millionaire population climbed 104.4 percent last year.

Source: http://business.globaltimes.cn/china-economy/2010-06/544662.html

#133 jess on 03.07.11 at 4:57 pm

renowned philosopher Slavoj Zizek investigates the surprising ethical implications of charitable giving. View the original lecture on RSA Vision

http://www.youtube.com/watch?v=hpAMbpQ8J7g&feature=player_embedded

http://comment.rsablogs.org.uk/2010/07/29/rsa-animate-tragedy-farce/

#134 BrianT on 03.07.11 at 5:01 pm

Now the Fed in the US is talking about QE3 if oil prices reach $150-the logic is expensive gasoline will slow the US economy so the need for taxpayer capital to be funnelled to the connected is even greater-then it can trickle down through the kidneys to help the schmucks on the street-this isn’t a joke-this is what they are planning-Charlie Sheen makes a lot more sense-maybe Charlie should be heading the Fed.

#135 LB on 03.07.11 at 5:06 pm

@77 Observor

What are your contingency plans when your rental properties cannot be rented out due to an oversupply of rental options available which now include houses,condos and apartments in addition to the increasing number of basements suites available in virtually EVERY purchaser’s own home?

#136 Azza4 on 03.07.11 at 5:07 pm

Nobody buying a bond and holding it to maturity can be underwater. — Garth

Well, unless they are buying it over the face value (like, 1.13 ratio to face value).

#137 poco on 03.07.11 at 5:08 pm

#121 Hell in a Handbasket–and you were going to wait til spring to list–good on ya

#138 Pat on 03.07.11 at 5:15 pm

“Sheesh, this blog is a swamp of fear and insecurity. — Garth”

Given the subject of the blog, of course you’ll get these type of people + a few smart ones, but they are a rarity to begin with.

Here’s something useful you can tell us (the smart ones :) ) – how do you recommend one invests large proceeds (e.g. $500K) of a house sale over time – value averaging over a couple of years?

#139 Brian1 on 03.07.11 at 5:24 pm

Thank you, you gracious generous people. Timing: thank you for answering the angry young man, but isn’t Moneta intriguing. I believe her when she says she time the market.I suppose its the kind to wait for a particular stock to go down 3% and then buy. You would have to be on that computer a lot, but I think now is one of those times to stay in cash if you think that there will be a Dent crash. I would buy his newsletter if only to know when to get out because I want to play in the markets too. If Moneta can time the market then so too can Harry Dent, but I’ve read that his letter is repetitive. I’ve only read his free one for October and did learn a few things, but there is only the one reason to buy it. However, there is Gary Shilling who puts a lot of weight towards Garth’s approach, I think, and, dear Mr. Timing, this blog has always been about money (something I don”t have).

#140 CalgaryRocks on 03.07.11 at 5:25 pm

You must be one of those people who quitely hate people from other countries… same old conservative politicians contriving these immigration policies. Before I finish here here is some food for thought:

“Immigrants arriving in Canada in recent years are more educated than were immigrants who arrived in the past and are twice as likely as the Canadian-born population to have a university education”

Surely you realize that it is the conservatives that have been working towards letting in, and targeting, educated immigrants, based on our needs as a country ‘in recent years’.

#141 Zenith on 03.07.11 at 5:30 pm

Just like the examples in this blog, myself and my peers have all made a ton of money from real estate and now live mortgage-free.

Those who never bothered to own real estate over the last decade have made nothing.

It’s a shame.

Is there only one asset class on your planet? — Garth

#142 Mr. Reality on 03.07.11 at 5:32 pm

Can people please stop posting about how much money you have or how many properties you own? Noboday cares because you are most likely lying. Bragging on the internet is stupid heads….

Mr. R.

#143 Azza4 on 03.07.11 at 5:41 pm

//
#82 Moneta on 03.07.11 at 10:58 am
I think one debate we should have going is whether or not we’ll be getting more inflows than outflows in security markets over the next decade.
And arguments should be backed with data.
//

This is great question I’m asking myself continuously.
I think Garth’s view (not putting words in his mouth, no) is that boomers will need to cash out of RE and hard assets and go into equities to live through their golden years. However, I think opposing argument could be made that boomers would withdraw funds from (thin) RRSPs and mutual funds they admired and that will put stock markets in downturn spiral. Pension funds of all sorts will need to make increased payouts as population gets older and that will add to down pressures. I fail to see how boomers would sell their home before they spend all their cash and have no other option.

What do people think?

#144 Devore on 03.07.11 at 5:46 pm

#130 BrianT

The price premium of physical silver over paper silver has hit an all time high of 20%-using that measure an objective observer would conclude that silver is currently in whatever the term for the opposite of a bubble is

An objective observe would read and understand the article he is linking. There is no 20% premium for physical. Like all ETFs, PSLV units always trade at a premium or discount to its NAV. Funds like CEF and SBT have traded at a discount for a while not too long ago, and many times in the past.

You can go to your local coin shop or a major bank and see what the premium is first hand.

#145 Alpha Bravo on 03.07.11 at 5:49 pm

#122 Realtors are worried

“Many worried realtors and home owers who are looking to sell on here. Whats happening… no sales? Sales have dropped for over nine months in a row? Wow looks like the housing crash continues to pick up steam. Prices are falling regardless of the propaganda of lies from realtors.”

———————–

Homes which I have observed in central Toronto over the last 9 months have declined between 10 to 15% in price to achieve sale. These homes were in the 600k to 1.2m range when first listed. DOM between 2-4 months and these homes were not overpriced, they were in line with comparables. There is definitely a downward trend.

#146 Devore on 03.07.11 at 5:52 pm

The “coin shop” link has special characters in it and the blog software dropped (or maybe I just f** up, we’ll never know with no preview function!), here it is for your reference.

http://www.vbce.ca/index.cfm?fuseaction=fx_services.Gold&Silver

#147 SOLD....what a greaterfool on 03.07.11 at 5:54 pm

Can not believe I found a sucker to buy my condo. Sooooooo happy to be out with a tiny profit. Now over 30 condos sit emply in my building as no one is buying or renting. Three months to look for a rental which shouldn’t be a problem as empty rentals hit the GTA market like crazy. Going to make a forced landlord my beeach as I rent for nothing while they eat the loss. BTW it’s a stupid twenty something 35 year mortgage no money loser. The wheels are falling off the housing market and so many are going to get hurt. thanks greaterfool.

#148 Jebus on 03.07.11 at 5:55 pm

#77 observer on 03.07.11 at 10:22 am
Same thing goes for my rental properties. Whether they go up or down in value doesn’t change the cash-flow situation one iota. They will be paid off in ten years and providing pure income by that time.

—————–
Wow, so your tenants signed 10-yr leases? Amazing.
If not, I guess they’ll probably pay you the same rent out of the kindness of their hearts….. even if property values dip by 50%.

#149 jess on 03.07.11 at 6:10 pm

Argentina: Agricultural corporations cross with Argentine President Cristina Fernandez and justify tax evasion Tiempo (In Spanish)
Mar 3 – Just 24 hours after President Cristina Fernandez affirmed that corporations no longer manage the government, one of the biggest players in the corporate sector, agriculture, demonstrated clear signs of unwillingness to accept the loss of power and influence. According to President Fernandez, the agricultural sector contributed just 2.8% of total taxes paid by all economic activities. Hat tip Markus Meinzer

See also:
Major agricultural exporters accused of tax evasion in Probe Targeting Argentine Exporters Bloomberg Mar 4 – On probe revealing ADM, Bunge, Cargill, Toepfer dodging possibly billions – Exporters “used tax havens and financial operations abroad” to evade taxes. Argentina is the world’s second-largest exporter of corn and the third-largest soybean shipper.

http://taxjustice.blogspot.com/

March 4 (Bloomberg) — Archer-Daniels-Midland Co. and Cargill Inc. may be prevented from shipping grains from Argentina after the government stripped them of their status as registered exporters amid a dispute over taxes.
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=acawQwz2A4YE

#150 Coho on 03.07.11 at 6:10 pm

I love your blog, but I do not find much dignity in finding another fool to transfer stupidity to. I am not a homeowner and have no debt, but I believe that sustainable living and caring for the environment is the way to go. Not a tree-hugger, just a budding social seer.
————-
A point that resonates with me.

Any nation where households have to prey on others to get rich or protect their families, leading to a zero sum game is setting itself up for failure.

It’s all about playing musical chairs instead of working to add a quality chair.

And that is what those in the halls of power are relying on. As long as people have that false hope of getting ahead or funding a 20 or 30 year retirement when most are going backwards each day, is good for those whom politicians and central bankers work for.

I do agree that for those concerned about their retirement should sell at these historic bubble prices and realize a once in a lifetime capital gain — a gain that the vast majority will never realize because of fear through propaganda and programming. The chart above shows attached units and apartments having more than doubled in 8 years and detached units having tripled and many still claim this isn’t a bubble? Have wages tripled? Has optimism on what the future holds for our children and their children tripled?

Unless one class jumps, which is far beyond “getting ahead” by attaining a few million or several million $ in assets, they will get brought down with the rest. In my opinion, a society cannot have a needy majority without it affecting those who have faired better financially through good timing, smart investments, luck or cheating others.

A derby style “every man for himself”, pointing fingers at others, “my heart pumps piss for the less fortunate”, etc attitude will sink everybody except for those which have the most to gain by this sort of infighting and distraction. As they say, a rising tide lifts all. Unfortunately the greedy power behind world affairs works like water catchment feeding into a damn which hordes wealth and rations it out. It used to be a trickle down situation as Reagan put it, but now it has reduced to a drop. People can only take so much. Soon the policy makers will have run out of time and schemes to keep the majority placated.

#151 betamax on 03.07.11 at 6:20 pm

#141 Azza4: “I fail to see how boomers would sell their home before they spend all their cash”

Sure but, on average, they’re house rich and savings poor. The cash will soon be spent, hence more money must move from RE to equities than will be sucked out via RIFs etc.

Pension funds will be in trouble and there may be a correction, but the market will continue afterward because it’s the only game in town.

I was talking to two people at work who fit perfectly into the deadbeat boomer demographic. Both have white-collar careers, one has made six figures for 30+ years, but neither have any savings. Virtually none. Both have teenagers, some in college, and they spend every penny they make. They’re both banking on their houses, even though both have second mortgages and would be lucky if they had $200k in equity at today’s inflated prices (they used to have more but got divorced and kept the house).

They’re the ones who should be selling right now. But they’ll hang on to the house, hoping it’ll be worth a fortune when they retire 10-15 years from now. Because they don’t have enough time left to start saving enough now, even if they radically changed their lifestyle, which they won’t. I don’t know what’s going to happen to them, but it won’t be a golden retirement.

#152 VICTORIA TEA PARTY on 03.07.11 at 6:29 pm

#9 kc; #103 Calgary Rocks; others

That Sunday 60 Minutes item was amazingly heart-breaking, from a number of stand-points, but mostly because of the bravery shown by those deprived children whose hopes for a piece of the American Dream lie shattered at their feet.

The greatest tragedy, however, is that the US’s decline has reached the point where its citizens are willing to let 25 per cent of their future (their children) plunge into potential permanent poverty, by becoming entitlement zombies of the state, and a drag on any hopes for an economic recovery any time soon.

Also, the disparities between those young kids and that complete idiot Charlie Sheen are gut-wrenching. How can one country have the pure gall to enable both “events” to co-exist under the same flag? Alienation is probably the answer; lots of it.

From Florida’s motel busted-families’ hells, to the armed Libyan desperadoes in the deserts of North Africa, THIS earthshaking empirical shift creates victims everywhere. More to come.

Let’s take a brief look at some other breakdowns today:

-The US is planning to spring oil from its Strategic Reserves. Oh, joy. That’ll bring down gas prices to 39 cents a gallon by sundown! NOT! All the Yanks will get is a 6-week hit of slightly cheaper gasoline before it skyrockets once again. This time around the US consumer has no control over pricing. China and India do(!);

-NATO Knobs are mulling over military action against Libya’s head-case leader. They’ll get another Vietnam of of that;

-Saudi Arabia’s aging leaders prepare for their own Armageddon from their restive masses starting this Friday;

-The US dollar is still cratering on currency markets;

-US real estate foreclosures continue as break-neck speed.

-In Canada, house-horny idiots patrol the burbs looking for the worst deals possible. They’ll get what they deserve;

It is fairly obvious that the US elites, so-called, seem to have no clue of what’s going on around them.

In case they were wondering, it’s kinda like the prelude to the 21st Century’s version of the French Revolution, which means it’s now “1788.”

This new epoch JUST needs its own 1789-style Bastille Day followed by a Reign of Terror (guillotine) courtesy of the mob.

And, of course, some cake. Lots of cake.

In fact, it’ll be a piece of cake!

#153 Moneta on 03.07.11 at 6:35 pm

Musical chairs is a game humans will always want to play
——-
I guess so. It’s probably one of the first games we learn to play by the age of five… after pin the tail on the donkey.

Sure goes to show what we teach our kids at an early age.

LOL!

#154 bigrider on 03.07.11 at 6:38 pm

#70 – Observer.
50% paid off rental proerties. Hmmm.

Wonder what a measly 30% drop in Real estate values and a 2-3% increase in mortgage costs will do to your plans.
Wonder what declining rents will do to your long term intentions of real estate rental ownership. Remember 70% ownership rates already and everyone fancies themselves a condo/triplex tycoon.

Not picking on you by any means but the slump in the nineties in real estate here sure took out a lot of you RE believers behind the wood shed for a thrashing.

#155 HouseBuster on 03.07.11 at 6:41 pm

#137 Pat – Here’s something useful you can tell us (the smart ones ) – how do you recommend one invests large proceeds (e.g. $500K) of a house sale over time – value averaging over a couple of years?
———————————————————
You’re not very smart asking that question on a blog. Do you expect free advice? Well, you get what you pay for.

#156 GregW, Oakville on 03.07.11 at 7:00 pm

Hello Garth, re: your, ‘My portfolio 14.89%.’ comment.

I was wondering if your new book will have or maybe here, if you could tell us how your portfolio did each year in the past 5 or more, as a %. We did have that market melt down in ~2008 and equities got hammer, thankfully they have come back up.

I ask because of two reasons; past performance may be an indicator of future performance, but not a guarantee of course.

Also My Father seemed to be in disbelief when I mentioned you had an almost 15% return last year, and he wonder if it was just a recovery from the market loses. I couldn’t tell him much more and I don’t recall seeing the info on your blog site (I may have mist it?)

I suppose I should buy my father a copy of your new book for his Birthday!
Thanks in advance.

#157 BrianT on 03.07.11 at 7:06 pm

#141Azza-The USA deficit just came in at 223 billion for Feb 2011-an all time record. This number exceeds the deficit recorded FOR THE ENTIRE YEAR 2007. IMO most don’t understand that the endgame is coming into view.

#158 Moneta on 03.07.11 at 7:22 pm

Brian1 on 03.07.11 at 5:24 pm
——–
I don’t do much trading actually. I go for table pounders… situations that are 2 or more standard deviations away from normal which could generate over 50-100% returns.

Returns are lumpy since I’m value but I’ve never lost money.

For me, losing money is the worst thing. You lose your mind and start swinging for the fences.

#159 Been There, Done That on 03.07.11 at 7:31 pm

Too bad my cousins didn’t take your advice when they bought in Victoria last year.

They both had nice big rentals in town and traded down to small, old condos 25-45 minutes away because “It’s always cheaper to buy than rent!” This, despite the fact that their new mortgage payments plus strata fees plus property taxes plus maintenance (what? the landlord won’t fix it?!) plus $100-$200 per month in extra gas plus extra car maintenance (and time away from the family every single day) is costing them an extra $500+ per month.

It has gotten so bad that I can’t even suggest we go out for coffee any more or I’ll get a lecture on how expensive coffee is compared to the cost of making it at home blah blah blah. Bottom line: they’re stupidly broke and too proud to admit it. They put themselves in a position where they literally do not have $1.45 to spend on a cup of coffee. The only thing they talk about is their money problems. Life savings gone. Credit cards maxed out. Bald tires on the car and the fridge is broken — oh well. Now they’re looking at second jobs and only eat bulk warehouse food. All clothing is second hand. They’ve got no cable (can’t afford it) for their $5000 home theatre system. It’s pathetic.

And this is to live in dumpy fixer condos in a neighbourhood they don’t even like! And they’re committed until the year 2045.

Think about that: locked in with over $300000 of debt to live in a crappy condo until 2045.

There are so many others out there just like them who had no idea what they were getting into that I know for a FACT that Victoria will see major prices drops in the next couple of years. My cousins won’t last through 2012. No way. They’re already ruined with no ability no maintain the condo they bought. All it takes is one repair bill and they’re toast.

I’ve already seen nicer, newer places come up for less money than they paid and it’s only March 7. A unit in their building just went for $30000 less than they paid — and it didn’t need $20k in repairs.

Panic time!

#160 observer on 03.07.11 at 7:39 pm

@77 Observor

What are your contingency plans when your rental properties cannot be rented out due to an oversupply of rental options available which now include houses,condos and apartments in addition to the increasing number of basements suites available in virtually EVERY purchaser’s own home?

I don’t spend a great deal of time worrying about things. I have a great wife, two terrific kids and all the the paper gains I’ve made in real estate are nice but not the most important aspect of my life. i don’t dwell on it.

I started with nothing, been through lots of ups and downs and frankly outside of a nuclear holocaust, nothing scares me.

Answer the question? — Garth

#161 45north on 03.07.11 at 7:42 pm

Jess: As mayor you decide to lease (long 75 years) the parking meters in your city.

this was a topic in today’s thehousingbubbleblog.com

Blue Skye thought of Cool Hand Luke:
http://www.youtube.com/watch?v=pV1yHrqXA88

#162 Moneta on 03.07.11 at 7:47 pm

Returns are lumpy since I’m value but I’ve never lost money.
——
On a total portfolio basis.

#163 Coho on 03.07.11 at 7:48 pm

An extension to this derby style self service approach to life is our political culture. After all, politicians are people too…I guess. :)

What is really a public servant job has transformed or perhaps has always been about “me”, particularly at federal and provincial levels, I‘d imagine. Some react to being elected to office like they’ve won the lottery. And this for a “service oriented job”? We know how service oriented most people are, don‘t we? Isn’t it usually about me me me? And of course the political party comes first, far before politicians and way far before the rest of the citizens.

Streamers and confetti, music and speeches, balloons and laughter fill the headquarters of the elected party. It is like they won the 6/49! They are so happy to win so they can get to “serve you…!”

And the cabinet ministers really deserve to get paid the big dolleros and receive golden pensions, particularly when they introduce policy which creates bubbles –bubbles like the housing bubble which creates the illusion of wealth so people will spend on the premise of free money and real estate wealth on paper. And of course realtors and the MSM propaganda machine do their part assuring people their home’s value will continue to rise in perpetuity. Spend an extra 50K this year. Travel the world, buy a new car and redo the kitchen. Hey, don’t worry ‘bout it. Your house will rise by 75K this year! And so it goes.

Bringing future spending to the present is what keeps the economy going, but it likely is just a matter of time before it is decided by “them” when the spending has served its purpose or can no longer be supported and the time for the people to begin paying the debt is the new game in town. Austerity!

#164 allister on 03.07.11 at 7:52 pm

KC #9

I saw the 60 minutes homeless story, about the couple who made $40/hr between them and are now homeless. It said they had vacations and a home etc.

My guess they never had a home. It was mortgaged to the max to get tax deductibility and a HELOC to buy the vacations.

People never get it – if you’re making payments – you don’t own it. And if the debt can’t be serviced – you lose what you thought you owned.

#165 Nostradamus Le Mad Vlad on 03.07.11 at 8:02 pm

#22 Maxamillion — “What America has done to itself is a terrorists dream.”

Nicely said. They have managed to continually shoot themselves in both feet and there is no skin covering the bones.

All the WH and Pentagon are capable of doing (not for much longer) is to declare everyone terrorists, and thus declare war on the world.

#133 BrianT — “. . . QE3 if oil prices reach $150 . . .”

In Kelowna, gas prices are at a buck thirty one.9 / litre. When or if oil reaches US$150-$200 / brl., that would jack up the price to a buck fifty or two bucks a litre, and a lot of that is taxes, not gas.

It is cheaper for me to pay a taxi driver, with a healthy tip to drive to and from Vernon or Penticton than it is for me to own, maintain and pay insurance for a car (I’m partially blind in both eyes and paralyzed down the right side anyway).

#121 Hell in a Handbasket — Well done!

#166 Moneta on 03.07.11 at 8:04 pm

Azza4 on 03.07.11 at 5:41 pm
———
I think the same but I have never really sat down and played with those numbers. I think I will.

My gut tells me most boomers won’t be able to sell their homes at the price they want so they’ll use up their RRSPs before touching the equity in their homes.

And if real estate tanks, people will be using money to develevage, never mind invest.

I wouldn’t be surprised if the last 2 crashes plus the next one will make many boomers realize that they can never retire. So they’ll stop saving the 5K-10K per year they were saving and just keep on working. Those who are forced out of the worforce will just liquidate their retirement funds to make ends meet.

#167 Been There, Done That on 03.07.11 at 8:05 pm

Oh, and as a post-script to my earlier comment (#142), I should note that neither of these two people were in the market for a home last year.

You see, it turns out they went to a class reunion and ran into a buddy who is now a REALTOR. Mr REALTOR was all blinged out with a (fake) Rolex, expensive suit and leased Eurocar. As Charlie Sheen would say, Mr REALTOR was “Winning!”.

At the time of this class reunion, my cousins were looking for slightly larger rentals. But Mr REALTOR kindly explained to them that their retirement plan should consist entirely of a massive debt in the form of local real estate speculation. He referred to this an an “investment”. Hmmm. Not so winning. Anyway, within a few weeks I was being bombarded with “You should talk to Danny” (names have been changed to protect the guilty) and “Danny says stocks can go to zero but real estate can’t go to zero!” You get the idea.

Mr Danny was not acting as a REALTOR but (illegally) acting as an estate planner and retirement investment adviser. Danny is 28 years old and lived with his mom until 3 years ago. Danny has no clue whatsoever about retirement planning, but he’s out there every day telling gullible 20 and 30-somethings to spend as much as they can, as fast as they can on whatever they can afford.

I would not be the least bit surprised if there are lawsuits in the not-so-distant future regarding unlicensed investment advisers (read: REALTORS) urging young people to go for broke in the housing market.

After my cousins bought in they acted brainwashed like a new Amway sucker. Anyone who knows someone who has been sucked into a MLM scam will know what I’m talking about.

“You’s be stupid NOT to buy!”, etc.

#168 S.B. on 03.07.11 at 8:16 pm

Makes ya go hmm, things for today:

DJ MARKET TALK: Rate-Hike Estimates Rise Some After Friday’s Rout

9:51 (Dow Jones) Fed-funds futures traders price in higher odds of an early 2012 rate increase as higher stocks act as a market-moving catalyst. The February contract, measuring expectations for the late-January FOMC meeting, sees a 66% chance for committee to raise rate to 0.5% by then. That’s up from Friday’s sharply curtailed estimates, when odds fell to 58%. Chance by end of 2011, measured in January contract, rises to 32% from 26%.

AND:
DJ UPDATE: Canada January Building Permits Decline Unexpectedly

(Adds analysts’ comment in paragraphs 4, 5, 10 and 13.)

OTTAWA (Dow Jones)–Canada’s monthly building permits in January fell unexpectedly to the lowest level since September 2009, dragged down by declines in the non-residential sector in Alberta and British Columbia, and multi-family residences in Ontario.
The total value of permits issued by municipalities shrank 5.1% to C$5.37 billion (US$5.53 billion), Statistics Canada said Monday. The market had expected a 1% gain. December’s increase was revised up to 2.6% from the originally estimated 2.4%.
Building permits fell in six of the 10 provinces, led by Ontario and Alberta.
Scotia Capital was expecting a decline in housing permits, but only a 2% decline. The “magnitude of the decline surprised us as well,” Scotia said.
“We believe that the Canadian housing market is at cycle tops on a number of variables, and that it will moderate through 2011,” Scotia added.
Permits in the non-residential sector fell for the third straight month, down 13.3% to C$1.66 billion, which was the lowest level since February 2009. The industrial component plunged 33.5% from lower planed construction of utilities and transportation buildings in Alberta and Ontario.
Permits in the institutional component fell 19.4% from lower planned construction of religious buildings in Ontario and Saskatchewan, and daycare and nursing homes in Ontario, Alberta and Saskatchewan. The total value of permits in the institutional component was C$346 million, the lowest since February 2005.

#169 Devore on 03.07.11 at 8:31 pm

#159 observer

I don’t spend a great deal of time worrying about things.

A common attitude. But things always work out in the end, right?

#170 ballingsford on 03.07.11 at 8:33 pm

We rent, love the neighborhood, all the neighbors are friendly, the kids all play together outside once spring arrives, close to all shopping, 10 minute drive to downtown, gatherings of neighbors in the summer in the warm evenings to share some wine, outdoor salt water pool for the community in the summer (1 minute walk), etc.

Once in a while she says she wants to get our own home.

Asked my wife just now if she wanted to watch an interesting video from the link #9 provided about the US kids who are homeless.

She replied “No”.

I said “Do you think it’s different here?” She replied “Yes”.

What can I say?!?!?!

Man, I can’t wait until March 18th gets here!!!

#171 observer on 03.07.11 at 8:42 pm

@77 Observor

What are your contingency plans when your rental properties cannot be rented out due to an oversupply of rental options available which now include houses,condos and apartments in addition to the increasing number of basements suites available in virtually EVERY purchaser’s own home?

I don’t spend a great deal of time worrying about things. I have a great wife, two terrific kids and all the the paper gains I’ve made in real estate are nice but not the most important aspect of my life. i don’t dwell on it.

I started with nothing, been through lots of ups and downs and frankly outside of a nuclear holocaust, nothing scares me.

Answer the question? — Garth

Well since you asked Garth, let me be frank. I’m not expecting that even if there is a real estate crash, that everyone will be living in the streets. That would be alarmist.

During the last crash (1989), the default rate on residential mortgages hit an all-time high in Canada of 1.6%. The current default rate is 0.44%. There is statistically a long way to go yet.

So despite the worst real estate crash since the 1930’s, a virtual real estate armagedon, most Canadians (including me) hung on to their homes to the very last breath.

Many who who did lose their homes in the last crash were forced to rent. So if there is a real estate crash, the demand for rental properties will increase not decrease (and sadly so will the number of homeless).

The vacancy rate is already very low in the GTA and there is a steady supply of immigrants flowing in to the country annually (285,00 last year, 250,00 projected for next year), the majority of which land in the GTA and typically rent for a few years before they buy.

The building permit numbers released today by StatsCan were surprisingly low, which indicates that supply may be weakening at just the right time.

So while I don’t waste much time worrying, it’s because I spend a great deal of time analyzing.

#172 Brian1 on 03.07.11 at 8:48 pm

Moneta: I don’t understand ‘Table Pounders’. Is that shorting stocks? While I’ve been researching and jabbering today the TSX lost 160. I’ve saved money today. May as well quit while I’m ahead.

#173 pigeon patties on 03.07.11 at 9:08 pm

#137 Pat – Here’s something useful you can tell us (the smart ones ) – how do you recommend one invests large proceeds (e.g. $500K) of a house sale over time – value averaging over a couple of years?
—————————

grow a set of crystal balls. You will be able to see way into the future. Then take the whole 500k and swing for the fences.

Buy Yellow pages paying a 12% dividend and hang on for your life.

Who knows, your crystal balls might be right?

#174 Brian1 on 03.07.11 at 9:12 pm

Moneta: Your standard deviations measure what exactly. They seem quite large.

#175 S.B. on 03.07.11 at 9:17 pm

About the 60 Minutes story about homeless kids in USA, well we are always told propaganda that, say , Palestinians get the government they deserve and it’s their own fault.

Well what about the USA? They spent 20-40hrs a week watching the tee-vee. Where is their day of rage?

Their government spends billions each day on war and occupation, and in “aid” to foreign countries like Israel.

Yes, the USA has the government it deserves.

http://www.knoxviews.com/node/15847

#176 kc on 03.07.11 at 9:22 pm

163 allister on 03.07.11 at 7:52 pm

You said what I also thought while watching, however, there is a great deal of pain in the show, and guess what?? That can be Canada’s future in a heartbeat. I am sure that 3 years out things are going to be a different picture in your hometown.

#177 jess on 03.07.11 at 9:32 pm

45North
how about playing with these?

—————————————————-
,..”Eurobonds is that they are, unlike many other types of bonds, not taxed at source. In other words, when investors in a bond receive interest payments (which is a form of income) they aren’t taxed on that income.”(tjn)
…a US company with one subsidiary in the UK and another in the Caymans can get its UK subsidiary to issue Eurobonds on the Caymans stock exchange, and get its Caymans subsidiary to buy those Eurobonds. The Caymans subsidiary receives the interest income – but pays no tax on that income, because it’s in the Caymans! Meanwhile, the UK company deducts its Eurobond interest payments from its income there, and cuts its tax bill! And because of this loophole designed to make the City of London more attractive as a tax haven, there’s no witholding tax involved .”

http://www.hm-treasury.gov.uk/d/ots_review_tax_reliefs_final_report.pdf

..simplified for the holder

Eurobond interest
P.79 This relief exempts interest paid on Eurobonds from deduction of tax so that the holder of
the Eurobond receives interest gross rather than net of tax.
P.80 A quoted Eurobond is a security, including shares (in particular any permanent interest
bearing share), listed on a recognised stock exchange, and carries a right to interest. Some of
the major issuers are supranational organisations (such as the World Bank or the European Bank
for Reconstruction and Development)49.
Is the policy rationale still valid, does the relief achieve it and what might be the impact of
repeal?
P.81 The original policy rationale is to encourage the growth of the UK Eurobond market, as
London is one of the centres of the worldwide Eurobond market.
P.82 If it were repealed, it could reduce investment in this area, and also reduce investment in
the UK.
Taxpayer take up and awareness
P.83 This relief is targeted at any holder of Eurobonds.
P.84 In the year to November 2010, funds raised through Eurobonds issued on the main UK
market totalled £393billion in over 3,300 issues50.
Complexity, compliance costs and administrative burden
P.85 The relief is a simplification to the taxpayer as it removes the need to account for
withholding tax.
Summary
P.86 The policy rationale remains valid and it is a simplification for the holders.

#178 Pat on 03.07.11 at 9:33 pm

#154 HouseBuster wrote:

“You’re not very smart asking that question on a blog. Do you expect free advice?”

No, just some free entertainment. Thanks for obliging.

#179 Jeff Smith on 03.07.11 at 9:43 pm

Those big spender guys!

http://www.theglobeandmail.com/news/opinions/editorials/the-feds-are-spending-billions-without-looking-at-the-bill/article1933052/

#180 observer on 03.07.11 at 9:46 pm

So let’s analyze thefacts.

New listings on TREB for February were the lowest since 2004. The latest building permits report is the lowest since September of 2009.

Translation: Current supply of re-sale properties low. Future supply of new properties falling.

The exact opposite signs of a real estate bubble.

There are 17,000 condos in 35 new buildings coming to market in 2011. Their permits were issued long ago. Nice try. — Garth

#181 Diffrent on 03.07.11 at 9:50 pm

#131:

Affluent –adjective
1.having an abundance of wealth, property, or other material goods; prosperous; rich: an affluent person.

But if you want to say millionaires, that’s fine.

And last time I checked, Hong Kong was in China.

#182 Nostradamus Le Mad Vlad on 03.07.11 at 9:51 pm


TSA Scanners Like vaccines, avoid them. One is better to be fondled and groped (oooohhhhlalalala!). Plus this.

Big Pharma taking one on the chin for humanity.

29:51 clip Michael Moore in Wisconsin. “America is not broke. Contrary to what those in power would like you to believe so that you’ll give up your pension, cut your wages, and settle for the life your great-grandparents had, America is not broke. Not by a long shot. The country is awash in wealth and cash. It’s just that it’s not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

“Today just 400 Americans have the same wealth as half of all Americans combined.” wrh.com. However, this may coincide with the link from last night, about various parts of TSHTF from 11 March on.

GS “Gold in My Sacks is living in the 19th century. Even if they succeed in shutting down Mike’s website, 20 more will take its place the very next day.” wrh.com.

Tyrants Charlie Sheen (fired today) is not a tyrant. Rolling black outs? Not in Limeyland, surely!

Freak Out Farmers “The farmers understand that this government-enforced poverty for the sake of the bankers will not stop with teachers.” wrh.com. Don’t forget: Obama and Soros are students of Karl Marx.

Google “Google announces web search results will be cleansed and censored to only show censor approved sites.” Then who controls Google? The m$m? They are already bought and paid for. Switch to new browsers — skip Google, Yahoo! and Bing.

2:16 clip Generally, women are the smarter and more realistic of the two sexes. This one not so much.

2:40 clip Defrauded and evicted.

Ethanol So much for the BS about ethanol, which uses 40% corn. Heard of rising food prices?

4:39 clip Don’t use large bills for tolls — be grondled and foped instead, by your friendly local TSA!

Pic only “Photo taken at the airport on Kauai minutes before boarding our flight back to Oahu. In all my years here in Hawaii I have never seen tourism this low.” wrh.com. The TSA — All in a day’s groping and fondling!

High Gas Prices US$7 / gallon? And Oil Profits Gotta keep those profits rolling in!

What sectors increased the number of permanent, high-paying jobs? Hint: None.

Reason For those who are unclear on the concept . . . Tapping In won’t work.

7:02 clip BP — remember? New pix. and footage.

Biflation Not sexual, just money (boring).

Looting The last thing a corrupt govt. does is loot the sheeples, all over the world.

#183 Timing is Everything on 03.07.11 at 9:58 pm

#138 Brian1 – said “dear Mr. Timing, this blog has always been about money (something I don”t have).”

Perfect, you have no money ; you can buy a house.

;)

#184 Reg on 03.07.11 at 10:01 pm

Apologies for being off topic – QUESTION – What might be the true value of a 3,000 sq. ft. home in Oshawa? It is in a good neighborhood in the north end and backs onto a drainage pond section of land. Bsmt unfinished. Current asking price is 599,900

#185 observer on 03.07.11 at 10:19 pm

There are 17,000 condos in 35 new buildings coming to market in 2011. Their permits were issued long ago. Nice try. — Garth

That may be true, but wouldn’t it be far more convincing evidence of a bubble if supply was increasing instead of decreasing?

I refuse to argue further with you. It’s just not fair. — Garth

#186 Azza on 03.07.11 at 10:25 pm

//
#65 Jas Girn on 03.07.11 at 6:15 am
This whole society is running on a platform of endless growth. It’s a ponzi scheme of grand proportions, especially that the environment has to over-compensate for the “growth” activity of human beings. At one point, this kind of predatory financial activity by humans to each other has to end. But when?
//

Isn’t it the same with all kind of thing that surround us? On stock market your win is someones loss. Majority imposes taxes on rich and soon everybody is taxed and then rich find a way to pay less tax and all should pick up the tab, not to mention that taxpayers pay for sports venues that are owned by for profit businesses and give other giveaways. Recently I came across freedomainradio.com. I think main problem with society today is lack of ethics other than religious ones. Mankind loosing religion in high tech society and there is nothing that can fill the void emerges.

#187 Utopia on 03.07.11 at 10:42 pm

# 170 Observer

“Many who who did lose their homes in the last crash were forced to rent. So if there is a real estate crash, the demand for rental properties will increase not decrease (and sadly so will the number of homeless)”.
———————————————————

On the surface that makes perfect sense; that demand for rentals should rise as home ownership levels fall.

Unfortunately in the kind of an environment where there are large numbers of jobs lost, homes in foreclosure and bankruptcies on the rise, the exact opposite has been the case.

The reason for this is actually pretty straight forward. We do in fact have a huge excess supply of housing in this country if you compare how it is utilized to that of poorer nations. Ask any immigrant about density levels of homes where they came from.

Homes are too large by a half here. Millions live alone with no more company than a cat or a budgie and conversions of basements and attics is quickly adapted as economic circumstances change for the worse.

This is exactly the kind of situation that has arisen in the US where we have seen large numbers of families break from the solitary life and combine resources. They now share space. Children move back in with parents and home-owners begin letting out spare rooms to students and those on restricted incomes. Something that would have been unheard of in better times.

Why? Demand for cheaper digs of course. Big demand.

It happened fast too. So fast that within just a couple of years there was a large surplus of vacant properties and foreclosed homes dotting the landscape of the US. Even banks could not secure tenants on favourable terms to rent the homes and keep them from falling into disrepair.

So they just sit empty, the grass grows too long, pipes burst, vandals damage them and some have fallen victim to arson.

The situation remains accute and is one of the most notable features of the housing crisis there. The credit crisis has compressed families back together and resulted in more people sharing less space. America was in fact overbuilt and under utilized.

The crisis that resulted when cracks began to appear over the high levels of personal indebtedness and high levels of homeownership in a rising rate environment exposed just how much excess supply there really was in America.

So don’t count on tenants if we experience a similar crisis in Canada unless you are prepared to offer healthy rent reductions and absorb the losses yourself.

#188 The Phantom on 03.07.11 at 10:44 pm

ref: post #100. Bonds are a great way to go, Shoggy! For example, I purchased a Nova Scotia Power Bond a few years back and paid a premium for it-$12,600 for a $10,000 bond but it paid 9.75%/yr. I sold that same bond on the open market a year later for over $14,000 and it paid me $975 in interest for the year that I held on to it. Shoggy, there are all kinds of great corporate bonds out there that pay various rates (mine for instance range from 5.7% to 10%). While these bonds may fluctuate in value, Garth is right because if you hold onto them until maturity, they will revert to the face value of the bond when it was issued AND they will have paid a rate of interest that far exceeded anything the banks of the G of C would pay.
The Phantom…

#189 Moneta on 03.07.11 at 10:57 pm

Moneta: I don’t understand ‘Table Pounders’. Is that shorting stocks? While I’ve been researching and jabbering today the TSX lost 160. I’ve saved money today. May as well quit while I’m ahead.
———
I also call them no brainers…

For example, buying TRP when they cut their dividend in 1999. They had a load of assets they could sell before anything happened to them.

In 1999, when oil went below 10$, I suggested to my boss that he drastically overweight oil in our portfolios and had the gall to tell him that I’d be his most productive employee while on mat leave. He didn’t listen to me so I ended being a cost. LOL.

I bought some BetaPro ETF in 2008 to short the market.

If there are no table pounders or strong convictions, then I stick to ETFs.

#190 observer on 03.07.11 at 11:39 pm

I refuse to argue further with you. It’s just not fair. — Garth
——————————————————————–
Your’re right, it’s not fair. I have the facts.

The new condominium market in the Greater Toronto Area is remarkable. Last year was phenomenally successful, with the 20,349 new high-rise condominium sales representing a 30% increase over 2009.

The only year that surpassed 2010 for sales was 2007, which was before the recession. To say that we have rebounded is an understatement. In fact, new high-rise condominium sales took 55% of the overall GTA market in 2010, which broke all previous records. And approximately four out of five sales in both 2009 and 2010 were in projects located in the City of Toronto.

And I note you had no rebuttal for the drastic drop in new re-sale listings. An inconvenient truth that doesn’t jive with your thesis perhaps?

When a third of all condo sales are to speckers and flippers, this is anything but a healthy market. Stop pumping your industry. You know as well as I where this is headed. — Garth

#191 observer on 03.07.11 at 11:53 pm

#187 Utopia: You make some valid points and you have given me a very viable contingency plan, should the RE market take a serious dump.

If I take my rental properties and put basement apartments in them, I will be able to collect at least as much total rent, if not more, than I was before the hypothetical “proposed-mythical-crash”. Brilliant!

Thanks

#192 Timing is Everything (But talk returns nothing) on 03.08.11 at 12:00 am

Timing is Everything (But talk returns nothing)

Have not paid to much attention to your past comments, but based on some of today’s:

“think of all those ‘losers’ that sold in 2008-2009”
I sold RE in summer 2008.

“when the time comes”
You will invest, but to date, have done nothing.

I invested my own hard earned $ in metals, big time in 2008.

Guess what? My REAL returns kick the crap out anything RE or the market did since then.

Even Garth advised against an all in position, but hey nothing ventured, nothing gained.

Anyone can snipe from the sidelines, but it takes balls to put his/her money where your mouth is.
I will leave it at that.

#193 Devore on 03.08.11 at 12:19 am

#186 Azza

Isn’t it the same with all kind of thing that surround us? On stock market your win is someones loss.

Please explain. Do you believe the stock market is a zero sum game?

#194 HouseBuster on 03.08.11 at 12:50 am

#184 Reg on 03.07.11 at 10:01 pm

Apologies for being off topic – QUESTION – What might be the true value of a 3,000 sq. ft. home in Oshawa? It is in a good neighborhood in the north end and backs onto a drainage pond section of land. Bsmt unfinished. Current asking price is 599,900
———————————————————-
Reg, I haven’t been up there in some time but come on, Oshawa? Are you kidding me or what? 599,900 is way too high.

#195 Sharon on 03.08.11 at 2:09 am

No Canadian bank has ever missed a preferred dividend payment. Ever. Sheesh, this blog is a swamp of fear and insecurity. — Garth

_____________

It all starts at the top.

#196 Not Wondering Anymore on 03.08.11 at 4:53 am

#191 Observer

Yours is not analysis but blind faith when you neglect to consider that you may not be able to rent out your properties at all, at any price.

The question remains: What is your contingency plan when you cannot rent out or sell your rental properties due to market oversupply? Investing money to create even more rental units in your existing ones would seem to only compound this risk, while incurring further losses.

It is not about “worrying”. As an investor, it is about planning for worst case scenarios such as this, which can adversely affect all other aspects of life, and which does appear to be evolving now in markets across Canada.

This current INCREASE in properties for rent may also be the correlation between the concurrent DECREASED supply of properties for sale.

Reluctant, underwater landlords, everywhere.

#197 observer on 03.08.11 at 8:11 am

#194 Not Wondering Anymore:

“The question remains: What is your contingency plan when you cannot rent out or sell your rental properties due to market oversupply?”

——————————————————————–
Let me get this straight. It is your contention that we are not only going to have a crash – but it may be potentially so devastating, that nobody will be able to sell or rent their properties at any price? Wow! You’re right, I didn’t see that one coming.

Let me try to respond. If the economy ever gets to such a horrible place, (which would be a first in the history of mankind), I don’t believe any contingency plan would suffice.

I might be tempted to burn my two rental properties to the ground, collect the insurance and retreat to my long ago paid-for principal residence and hide under the bed.

#198 Azza4 on 03.08.11 at 12:03 pm

#186 Azza
–Isn’t it the same with all kind of thing that surround us? —On stock market your win is someones loss.

//Please explain. Do you believe the stock market is a zero sum game?//

It supposed not to be, but in current realities it very well may be. Too much compensation is paid to CEOs, fund managers, advisers, lost to fraud, etc. Also all “appreciation” is in fact portion of work of others (employees, Chinese, etc.) that is violently taken from them and “distributed” to shareholders. So stock gain is someone loss nevertheless. I kind of agree with freedomainradio that only “fair” way to deal is value exchange, but it’s so big utopia with complexity of the world today. Just IMHO.

#199 The Econoom on 03.08.11 at 12:49 pm

#182 Diffrent on 03.07.11 at 9:50 pm:

Last time I checked, 477K millionaires in CHINA doesn’t make 300M newly affluent. And the other three countries in the BRIC didn’t even hit the radar with these stats.

But alas, you can continue to believe that Chinese wealth is flooding the country and buying houses with loads of cash. Men lie, women lie, numbers don’t lie. And the numbers tell a different story. There aren’t that many Chinese with the money required to prop up a bubble in a single country on the other side of the world.

Keep dreaming. Reality will be here when you wake up.

#200 Reg on 03.08.11 at 1:04 pm

#184 Reg on 03.07.11 at 10:01 pm

Apologies for being off topic – QUESTION – What might be the true value of a 3,000 sq. ft. home in Oshawa? It is in a good neighborhood in the north end and backs onto a drainage pond section of land. Bsmt unfinished. Current asking price is 599,900
———————————————————-
Reg, I haven’t been up there in some time but come on, Oshawa? Are you kidding me or what? 599,900 is way too high.
——————————————-

Agreed 100% Was just getting a 2nd opinion. IMO, this is priced about 100,000 over what it should be. No finished basement, 10 yrs old. Nice location, though it isn’t the Bridle Path. lol. Of course, we passed on even viewing the thing.

#201 super dave on 03.08.11 at 2:53 pm

A balanced portfolio increased more last year than real estate did. I fail to see your point. — Garth

Did it ever, when you have the TSE rising 30% in the last 6 months, and Real Estate has averaged what?

Bonds are the interesting commoditiy, they did’nt really drop as equitys rose, at least mine didn’t, the distributiions actually have kept them rising, but not a lot.

Keeping a balanced Portfolio, in dividends paying and preffered share mutual funds. Balance with an assortment of long Bond, short Bond, and T-Bill funds, has worked well for me. And very little risk.

I now have my 50K in RRSP money for the HBP, just waiting until Garth gives me the green light.

#202 Steady Eddie on 03.08.11 at 10:27 pm

Boomers and Zoomers won’t be a problem. Thanks to peak oil and our reliance on fossil fuels for food production (pesticides, fertilizer, transportation) 4 billion people should be dead by the year 2100 due to famine and world population will revert to early 1900s numbers…

Mother Nature cures all ills. Just be patient.